Wednesday, February 22, 2006

Two Ways To Balance A Budget

Over and over, the approaches our lawmakers have taken to trying to bring about tax relief, which is very popular, has revealed a desire to have it both ways. They also want to maintain ever higher spending levels, because that is also apparently very popular.

Providing tax relief is actually very easy if you don't mind cutting a budget. This is where the brain knots start forming. No elected officials at any level have proven willing to cut a budget. Observe the latest evidence, as provided by the Indy Star:

"If I could get rid of (property taxes), everybody would be happy," said Sen. Gary Dillon, R-Columbia City.

But, he asked, "How do you replace that income for local government?"

Instead, he added a provision to the bill that would give local government the option of raising income taxes in order to reduce property taxes.

Sen. Robert L. Meeks, R-LaGrange, called the bill "a responsible way to eliminate property taxes. It's a first step."


It doesn't really matter to the working man if you cut property taxes but raise income taxes. It would be a wash for him, although while retirees who are no longer drawing an income get a benefit from the property tax cut. If the towns and cities aren't willing to cut spending, those who are drawing an income will be facing a heavier tax burden, making this kind of relief no relief at all.

Actually, municipal taxes are some of the worst kinds of taxes, because those who make the most have the greatest incentive to leave. This policy chases wealth away. Brilliant.

Simple and best solution: Cut spending.

2 comments:

William Larsen said...

Property tax is used for the most part to fund schools. Should retirees fund schools? Many think simply because they no longer have children in schools, they should not have to support them, but is this a valid premise?

The cost of sending one child to school I have seen stated, is at over $5,500 a year. The federal government (us tax payers) contributes about $900 per student. State sales tax and state income tax contribute some amount as well, but the majority comes from property taxes.

The question all need to ask is, did I pay enough in allocated taxes to the schools in one year to pay the cost of one of my children? If 60% of property tax goes to schools and property taxes make up 70% of funding, then $3,850 comes from property taxes. With 60% of property tax going to schools, means you pay $6,416 in property taxes for each one of your children in school for each year they are in school.

It is doubtful many property owners pay this sizable tax amount. When you look at the cost education and treat it as amortization over your life, you would find that what is in fact happening is we are paying for our own education, not our children’s. You begin school at age 5, graduate at age 18 and all this time you have paid nothing towards your education. Now you go to work. If this were a debt at age 18, how long would it take you to pay back this debt amortized till age 80? Guess what, based on the municipal bond rate, it takes until age 79 to pay back your debt.

To change from property taxes to other taxes will be nothing less than a gift to those who have not finished paying their fair share. The cost of this gift will be transferred to those who have incomes or those who are just starting out on their own accumulating furniture, appliances, kitchen ware and more that make a dwelling a home.

Mike Kole said...

That is a complicated formula for considering how to pay for the education of children.

How about a system whereby when the parents bring a child into this world, they pay for the education of their child?

This method makes it easy to track whether or not one's fair share has been paid.