Saturday, December 20, 2008

Where are the tax revenues going to come from?

I have heard almost nothing about the tax revenue shortfalls that are going to occur in 2009 (and beyond). We have heard a little - such as 41 of the 50 states will be over their budgets this year in 2008. I did read this:

The mayor of Detroit says the city's deficit is approaching $300 million and he has ordered all departments to reduce their budgets by 10 percent. (AP news)

This is only the beginning. State, county, city, and other tax revenues are going to crater next year. There are cities in California already going bankrupt. With all the foreclosures and massive devaluing of houses coming next year property taxes are going to crater. Nobody is buying anything so sales taxes are going to crater. People aren't traveling as much so airport taxes, hotel taxes, taxi taxes, and the like are going to crater. Higher unemployment and fewer bonuses and fewer stock option exercises are going to significantly drop income tax revenue. And we know that most government entities do not save up money - they usually spend as much as they can and expect and plan that the next year's tax intakes will be bigger than the year before.

I'm sure we will see big increases in traffic fines (speeding tickets, red light cameras, etc.). We will see attempts to increase property taxes, hotel taxes, gas taxes, and any other type of tax these governments can think of, and I'm sure they will try to get their hands on some bailout money from the US Treasury also (we'll see just how deep that well is next year). Where is all the tax money going to come from?

There will be screaming and crying when these state and local governments start reducing services and laying people off. Too many people think that everything is an entitlement anymore - healthcare, transportation, a house, a job, a college education, you name it. It's going to get very ugly when these local governments cut their budgets. Fewer police, less road repairs, less public healthcare, and everything else.

And charities are going to get cratered as well - and all the services they provide will decrease dramatically too.

Is the US population able to become self-sufficient again and stop expecting the government to take care of all their problems? I have my doubts.

Update: New York State is planning 137 new taxes and fees including "obesity" taxes (e.g. soda), hotel tax increases, state college tuition increases, car registration fee increases, you name it:
http://www.washingtontimes.com/news/2008/dec/23/states-set-to-impose-bevy-of-new-taxes/

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