Governments rearrange deck chairs, push taxes while ships are sinking

There’s an apocryphal tale that, while the Titanic was sinking, dutiful stewards were rearranging the deck chairs for passengers instead of helping them get in the lifeboats. The image is cited as an example of an exercise that does nothing to improve a dire situation or, more precisely, a lack of focus on the real problem. It is interesting that this image comes to mind when I look toward the coming year and what we can expect from our national and state governments.

The key to this crystal-ball gazing is acknowledging that state and federal governments are drowning in debt and the just-finished 111th Congress may be the worst since Reconstruction. This group, in a two-year period, has accumulated more debt than the first 100 congresses of the United States combined. Numerous states are following suit, often borrowing from an insolvent national government to finance their prolonged drowning.

We also have to remember that a drowning victim often will drag down a perceived rescuer. In our case, overspending governments are floundering toward taxpayers, demanding taxpayers rescue them and their constituent groups from Davy Jones’ locker.

In this vein, we can look forward in 2011 to more schemes to drain money out of taxpayers and businesses. While we have an extension of mildly less onerous federal tax rates, states are taking it upon themselves to figure out ways to sock it to those despised producers.

Although most government officials will not listen, there are a couple of cautionary tales. The most recent involves citizens of Oregon voting last year to raise the state income tax to 10.8 percent on combined annual incomes of $250,000 to $500,000, and 11 percent on incomes above $500,000. According to Oregon’s Register-Guardian, the tax rate was pushed by the state’s two largest public-sector employee unions, the American Federation of Teachers and the Service Employees International Union. I wonder where they felt those increased tax dollars should go. Probably to the children.

The state had predicted it would rake in $180 million from these higher taxes. Instead, it collected 30 percent less revenue than predicted. A little research discovered the state had expected 38,000 people to pay the higher tax, but only 28,000 did, as wealthy entrepreneurs and business people either changed their revenue strategies or took their purchasing power and moved away. They may want to check no-income-tax-states Texas and Florida, which gained population over high-tax states.

The same thing happened in Maryland when a higher bracket income tax was imposed there in 2007. The number of high-dollar tax returns in 2008 fell 30 percent and, instead of revenues increasing by $106 million as anticipated, The Wall Street Journal reported they fell by $257 million.

I’m sure Maryland officials cited the bad economy for this — although it’s hard to account for the disappearing people with that explanation — but they are right. They pushed themselves into a worse economy with tax increases that didn’t provide short-term benefit.

Like our oblivious ship steward, who was so fixated on maintaining his deck chairs, national and state governments are obsessed with unhelpful programs, pointless make-work “stimulus” spending and servicing public-sector unions, which are the only groups with any confidence that government will help them.

Electoral repudiation also seems to do nothing to discourage some government types. For example, former Colorado state Rep. Kathleen Curry and former Garfield County Commissioner Tresi Houpt were both rejected in their re-election bids this year by voters in western Colorado, after a history of attacking the oil and gas industry like hungry Visigoths. They are reportedly now trying to find jobs in the Hickenlooper administration, where it’s reported that defeated 3rd District Congressman John Salazar also feels his experience of not listening to constituents may be helpful.

So my prediction — if things maintain this direction for 2011 — is like fictional boxer Clubber Lang’s prediction for a fight: “Pain.” However, if conservative and tea party groups don’t relax into the deck chairs and instead demand some level of response from elected officials and input into their selection of unelected satraps, then there is hope. Having good conservatives run for office might even get the old ship afloat.

On a totally unrelated topic, the time to obtain petitions for candidates to serve on city councils and town boards in western Colorado is coming up. Those for Grand Junction are available right now.

Rick Wagner offers more thoughts on politics at his blog, The War on Wrong.


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