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Banned
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Originally Posted by KMA-628
Pan -
You know this isn't true.
The "crunch" felt by the cities/states happened because of the recession & 9/11. It happened because cities/states spent more than they were taking in, way more....and thought they could get away with it.
They assumed that revenue for them (which doesn't come from the income taxes that were cut) would continue to increase like it was in the 90's. They spent like revenue was going to increase like it did, even when all of the experts told them that the bubble would burst.
Then, when revenue fell, they weren't prepared.
Revenue from income taxes and corporate taxes to the federal gov't are at all time high's--at or surpassing Clinton's highest levels (I have posted the evidence here many, many times). If the tax cuts were hurting gov't revenue, then the numbers would be going down, not up, as they are and have been since 2001.
The bigger problem, closer to this issue, is our-of-control spending, not tax cuts. The money is coming in just fine, the problem is in the outlays.
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KMA-628, how should Pan....or anyone else react to you assertion that "you know this isn't true", solely because you say so? I cannot confirm or refute
your assertions, you offer only your strongly worded opinion.............
This is a subject well suited for posts containing well researched findings,
facts, and figures from sources with reputations for publishing non-partisan,
timely, comprehensive reports on the effects of government tax policies.
My research indicates that the problem appears to be tax cutting that a majority of states did in the late 90's, that have not been restored to make up for declining revenue, aggravated by Bush and the Republican Legislature's tax policies:
Quote:
<a href="http://www.cbpp.org/9-13-04sfp.htm">http://www.cbpp.org/9-13-04sfp.htm</a>
<b>About My Source, "The Center on Budget and Policy Priorities"</b>
<a href="http://www.cbpp.org/info.html#unique">What Makes the Center Effective
In a 1998 Aspen Institute survey of members of Congress of both parties and Administration officials, the Center was identified as the single most influential non-profit organization in Washington on federal budget policy. Of the six policy areas covered by the survey, the Center was the sole organization rated “one of the 10 most effective” in at least four areas: budget policy, family and welfare policy, health policy, and housing and community development. The other two areas covered by the survey are areas in which we do not work.</a>
September 13, 2004
A BRIEF UPDATE ON STATE FISCAL CONDITIONS
AND THE EFFECTS OF FEDERAL POLICIES ON STATE BUDGETS
............... State taxes now make up a smaller share of the economy than at any time in the last thirty years, with the exception of the double-dip recession of the early 1980s.
The decline in state revenue would have been even worse had not a majority of states raised taxes. Since late 2001, about 31 states have expanded their tax bases or increased tax rates to lessen the decline in revenues. Such tax increases have been enacted in states with Republican leadership, Democratic leadership, and bipartisan leadership. These net tax increases are raising some $20.2 billion annually, about 3.6 percent of total state tax collections.
Nevertheless, the tax increases enacted during this downturn are far fewer and smaller than the tax cuts enacted during the economic expansion of the 1990s. From 1994 to 2001, some 44 states enacted significant tax cuts. The economic boom of the late 1990s, and in particular the large increase in capital gains during those years, temporarily offset the revenue loss resulting from those tax cuts. Those temporary economic conditions have ended. Yet most of the tax cuts of the 1990s remain in place and are costing states some $40 billion or more per year.
It also is worth noting that while most of the tax cuts of the 1990s were in progressive taxes (taxes that fall most heavily on higher-income households), most of the recent tax increases have been in regressive taxes. In other words, lower-income households benefited less from the tax cuts of the 1990s and now are being hurt more by the tax hikes of 2001-2004...............................
<b>Federal Policies Are Worsening the State Fiscal Crisis[5]</b>
Federal policies are contributing significantly to the state fiscal crisis by reducing state revenues and imposing additional costs on states. We estimate that federal policies are costing states and localities more than $175 billion over the four-year course of the fiscal crisis (state fiscal years 2002-2005). These policies include:
* Tax cuts. Some of the federal tax cuts enacted since 2001 are reducing state revenues because of linkages between the federal and state tax codes.
* Restrictions on state taxation. For example, the federal Internet Tax Freedom Act, first enacted in 1998, bars states from taxing the access fees that people pay for Internet service. In addition, two Supreme Court cases prevent state and local governments from collecting sales taxes on most catalog or Internet purchases, even though sales taxes apply when the very same items are purchased in retail stores. Federal legislation has recently been introduced to correct this problem but has not garnered significant support from Congress or the Administration, and its passage is not expected anytime soon.
* Unfunded mandates. In several policy areas, such as special education and the No Child Left Behind education initiative, the federal government has placed requirements on state and local governments without adequately funding them.
* Shifting health care costs. For more than a decade, the cost of health care for low-income elderly and disabled people (in other words, people who are eligible for both Medicare and Medicaid) has been shifting from Medicare to Medicaid. A prominent reason is the increasing use of prescription drugs, which Medicaid covers but Medicare has not. Because Medicare is fully federally funded, while states pay nearly half of all Medicaid costs, this shift in costs from Medicare to Medicaid has increased the financial pressure on states.
The recently enacted Medicare drug bill will leave states responsible for the bulk of these drug costs even after the new Medicare drug benefit takes effect. Under the drug bill, seniors and disabled individuals eligible for both Medicare and Medicaid will receive drug coverage through Medicare. But, while this will produce significant savings for state Medicaid programs, states will be required to return most of these savings to the federal government.
These federal policies have hit the poorest states especially hard. This is partly because the populations of these states have the greatest need for government services, and partly because these states are the least able to raise their own funds to pay for services.
The $20 billion in fiscal relief Congress provided in 2003 has helped states cope with the fiscal crisis, but it pales in comparison to the size of the problem, and the large deficits faced by the federal government prevent it from doing more. It is worth noting that a significant part of the projected federal deficits is caused by the 2001, 2002 and 2003 tax cuts, which primarily benefit households least in need of assistance. For example, as a result of the tax cuts, households making over $1 million a year are receiving an average tax cut in 2004 of $124,000 each, according to the Urban Institute-Brookings Tax Policy Center.
<b>Conclusion</b>
Having closed large budget deficits for three consecutive years through spending cuts and tax increases (as well as a variety of budget gimmicks), many states are facing continuing budget problems in fiscal year 2005 and beyond. The duration of the fiscal crisis means states are being forced to take increasingly painful steps, such as cutting back on important services on which many low- and middle-income families rely — cutting child care and health care programs, raising college tuitions, and the like.
The federal government could alleviate the state fiscal crisis by scaling back the costly tax cuts of the past few years and using the freed-up funds to support more positive policies toward states. Otherwise, the low- and middle-income families that are subject to state tax increases and service cuts will, in essence, be paying for the very generous federal tax cuts for the highest-income Americans.
[5] See Iris J. Lav and Andrew Brecher, <a href="http://www.cbpp.org/5-12-04sfp.htm">Passing Down the Deficit: Federal Policies Contribute to the Severity of the State Fiscal Crisis, Center on Budget and Policy Priorities, May 2004.</a>
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