The Center received fresh email invective from Michigan futurist Lou Glazer, who points out fresh evidence from Alabama that lower taxes are not going to lead Michigan’s economy to the promised land…
For everyone who thinks low taxes are the answer and Alabama is the model think again!” Lou writes. Places like Alabama, Indiana and much of the South which we are constantly being lectured on as the places we need to be like are collapsing in the downturn. They now have high unemployment to go along with low income and low education attainment. In the south — not Indiana — a lot of their growth this decade was housing/cheap money bubble driven. Not the way to build a sustainable, prosperous economy.”
Lou goes on to cite this New York Times story illustrating ‘Bama’s recent downfall…
Jefferson County, which includes Birmingham, could be compared to a
person who has lost his job, watched his retirement investments
evaporate and is stuck with a house that is worth less than what he owes the bank. Some of the county’s woes stem from the financial crisis that has pounded so many communities: its sales and property tax revenues are down by $40 million, and it borrowed billions in a sewer bond boondoggle that is the municipal equivalent of a subprime mortgage, using failed exotic bond deals and swaps concocted by investment bankers…
But the county has additional troubles: the sewer project was riddled
with corruption, and in January a court ruled that a tax the county
relied on for more than a quarter of its general fund was illegal
because the Legislature repealed it in 1999…
State lawmakers could easily fix that problem by re-enacting the tax,
but deliberations have dragged on even as the county has halted road
maintenance, delayed opening a courthouse, announced plans to close half its customer service locations and asked department heads to submit the names of those who would be laid off on Saturday…
Probate Court will shrink to 13 people, from 54, to process wills, adoptions, and commitments of the mentally ill. There used to be 488 people repairing roads and bridges; there will soon be 89…
3 Comments
So Lou–tell me why low taxes were the problem with Jefferson County? All you have explained to me is that government was spending too much, that officials were operating illegally, and that they borrowed in short term(variable rate) markets to fund long term projects. How are any of these facts the fault of low taxes?
So Charles–what don’t you get about the Alabama tax problem? When states collect straight-up income and sales taxes to fund things, they don’t have to sneak around (or even across) the margins of the law or deal in unfavorable credit markets. That’s the siren song of low taxes you’re hearing, enticing states to fund things in shady ways and then crash on the rocks, or plug their ears and not fund anything at all.
The problem is not taxes that are too low, it is spending that is too high. Granholm said back in November that she needs to make budget cuts. This is exactly what needs to be done. In 2008, tax receipts were up over 12%, tax and lottery revenues up 8%, business taxes up over 40%, while Other taxes were Down 2%. All told, revenue to the state increased from 2007 to 2008 by about $1 Billion. Do not raise taxes, cut spending.