Hey, Good News, States See Some Revenue Growth. Bad News: Everything Else

I due truly love the spin from the LA Times:

States’ budget picture is brightening – But many continue to face deficits. Tax revenues are rising but demand for social services remains high, and there won’t be a batch of federal stimulus money this year.

Interesting. They destroy their own headline with the sub. Then there is the first paragraph

The good news in a report released Wednesday is that, as the nation’s economy slowly starts growing again, state budgets are finally on the mend after taking their worst battering since the Great Depression.

That”s the “brightening.” Period. Nothing else positive will appear in the next 15 paragraphs (and, no, I shan’t be excerpting them all)

The bad news is that the situation in state capitals is still grim: Even after cutting a combined $84 billion at the start of this fiscal year, 15 states face persistent deficits that must be closed over the next six months. Meanwhile, 35 states project deficits in the next fiscal year, which begins in July 2011.

Don’t know about you, but, to me, that sounds pretty damned bad. You know what would probably help: if people were confident that their taxes would stay where they are for the long term, and there wouldn’t be wacky legislation coming from the federal government.

The state in the worst shape is Illinois, which faces a deficit this year of a staggering 47% of its entire budget, about $13 billion. A sense of despair has settled over the state capital of Springfield, where various desperate measures, including a major expansion of gambling, have been kicked around.

Illinois Gov. Pat Quinn, who took over from impeached Gov. Rod R. Blagojevich and won his own term last month, has been pushing for an income tax hike to help close the gap. But there’s widespread skepticism about the viability of that proposal.

“Why on Earth should the taxpayers support a tax increase when elected officials have not demonstrated they are capable of managing Illinois’ finances and creating a proper budget?” a fellow Democrat, state Rep.-elect Michelle Mussman of Schaumburg, responded to a Chicago Tribune questionnaire recently.

Well, that’s liberalism: create unsustainable spending, then demand that the deficit be closed by the People who actually earn money. To some degree, they are right, since too many people vote for these left side idiots. They listen to all this huggy carey hopey changey feelings based clap trap, stuff that is too good to be true. And you know what the saying is about that. If you vote for a Democrat, you should be the one who pays higher taxes.

Speaking of taxes, the deal, which is driving Obama’s unhinged socialist base bat guano crazy(er), and which had Keith Olbermann telling he 12 viewers mean things about Obama, this deal is really better than nothing, but, I think the GOP is, yes, playing a bit too much politics, though, let’s face it, we do not know all the back room negotiation points. Even the left wing New York Times thinks it is a great deal, calling it a “back door stimulus plan.” Obviously, they do not think that the extension of the current tax rates will help, just everything not associated with George Bush.

It appears as if both the GOP and Obama want a tax cuts fight for the 2012 silly season. Here’s an idea: why not make the rates for those making up to $373,650 permanent, and just extend that higher bracket for 2 years? OK, Obama and his unhinged base do not get their $200k individual/$250k joint filing tax raises, but, they will get a chance to jack up those who tend to fall outside of the small business ownership range in a few years. (BTW, without an extension of the current rates, here is what the 2011 tax brackets will look like.) Make the capital gains rate permanent.

What does this have to do with the States? Well, consider, as I’ve mentioned, they get their revenue primarily through sales tax, property tax, and income tax. If people are assured of keeping more of their own money, they will spend more. Sales tax. As they spend more, companies will see the need for more employees. More income tax. People will purchase more property. Property tax. People and companies will not hold on to their older vehicles as long, and pay higher property tax on newer vehicles than on older ones. Slapping higher taxes on the high earners will not stimulate this. They’ll just shelter their money. But, all those rich Democrats, both in Congress, and their supporters, are welcome to pay the 2011 rates, regardless.

Crossed at Pirate’s Cove. Follow me on Twitter @WilliamTeach. sit back and Relax. we’ll dRive!

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