A Wall Street Journal article laments the fact that state and local governments laid off tens of thousands of workers to balance their budgets. The article suggests that if these layoffs did not occur, the unemployment rate would be 7.1% instead of 8.1%.
Then by all means let all levels of our government go into gut wrenching, irresponsible debt so we can continue to fund what we cannot afford.
Just kidding of course.
Most state and local governments are acting responsibly. The federal government is not.
But what causes the state and local government revenues to decline to the point where all these layoffs and service cuts were required? Its not as if their populations are smaller, the trash doesn’t still have be collected and disposed of, or that fewer cops are required because crime rates suddenly drop. In fact, crime rates increase due to unemployment.
The problem is the source of tax revenues state and local governments rely on: The value of real estate, aka “ad valorem taxes.” When the housing market gets a cold, tax revenues get pneumonia. The housing market is still in ICU; tax revenues have long passed away.
What would more reliable tax revenues be for state and local governments? Income taxes won’t help much when 15 to 20% (the more accurate unemplyment rate) of the available workforce is not earning any taxable income. The two biggest underutilized options include user fees and impact fees. In both instances, those who benefit pay.
In the case of user fees which include park fees, activity fees, facility fees, library fees and even tolls for the most expensive road networks, those who benefit by using these things, pay. Even those who don’t directly use these types of facilities benefit indirectly, such as the delivery of goods and services that require the use of these facilities. User fees in this instance will originally be paid by the producer or delivery service and will ultimately be reimbursed by the consumer through marginally higher prices.
Impact fees, most appropriate for high growth areas, pay the one time infrastructure costs for additional capacity of new services and facilities (roads, drainage, water, sewer, solid waste, parks, library, etc.) required to service the new development. This is in lieu of taxpayers paying the incremental costs for these new facilities.
Both of these are a form of “user fee”, the most equitable form of revenue known to man. The “safety net” for those who can’t afford squat should be provided by relatives, friends, neighbors, churches, and other not for profit entities. Government should supplement these sources only under narrowly defined and well enforced criteria, something the federal government obviously does not do well.
If only the federal government would adopt a local government fiscal mentality: If you can’t afford it, you don’t provide it. The electorate that continues to demand what we cannot afford is comprised of insatiable, irresponsible and ignorant ravenous wolves.