So are our woes due to over promising or under taxing? Terry....you can get mad over Capitol Gains taxes, you can get mad at anything you want...however, what got us into this mess, what is destroying our country, is over promising (for political benefit...do you get this?), government largess..local, state, federal.
Our problems keep repeating themselves on a local, state and national level (Greece) and your ilk keep trying to blame the "rich". So Terry...now don't obfuscate, don't not answer, try this one (call Beedie and Gorman if you must). Are our problems because we have under taxed the rich or because we have over promised to the elderly, pensions, welfare and unions?
And if you are really vigorous and really want to answer a question, try this one....which political party, Liberal or Conservatives (Socialist or Capitalist) benefits most by promising (over promising) to those groups. Now Terry...don't run away...answer this question. Why are we in this mess?
Budget crunches already have prompted Michigan lawmakers to authorize
emergency fiscal managers, and led the mayor of Scranton, Pa., to temporarily
cut the pay of all city workers to the minimum wage.
In a majority of the nation's 19,000 municipalities—urban and rural, big and
small—stagnant property tax revenues, less aid from states and rising costs are
forcing less dramatic but still difficult steps.
Moody's Investors Service recently said that while municipal bankruptcies are
likely to remain rare, it warned of a "a small but growing trend in fiscally
troubled cities unwilling to pay their debt obligations."
"We need help right now," said William Schirf, the mayor of Altoona, Pa.
Crime in the city of 46,000 rose 11% last year, while the number of police
officers fell 8% over three years because of budget constraints. The city has
reduced the number of streets it is repaving and clearing of snow, and cut down
on leaf pickups and removing dead animals, trash and bicycles from roadways.
Altoona officials projected a $3 million deficit for fiscal 2012. Under state
law, the city can't raise property taxes—its greatest source of revenue—any
higher. In April, Altoona was declared fiscally distressed under a state law,
enabling it to restructure its finances. "We just don't have the income to match
our expenses," said Mr. Schirf.
A study by the Center for Retirement Research at Boston College found that
annual pension payments for state and local plans more than doubled to 15.7% of
payrolls in 2011 from 6.4% a decade earlier.
The Nelson A. Rockefeller Institute of Government said local governments made
roughly $50 billion in pension contributions in 2010, but their unfunded pension
liabilities still total $3 trillion and unfunded health benefit liabilities are
more than $1 trillion.
Local government cuts are one factor slowing the broader economic recovery,
offsetting stronger private-sector growth. State and local government spending
and investment fell at a rate of 2.1% in the second quarter, according to the
Commerce Department, the 11th consecutive quarterly drop. Local governments also
have cut 66,000 jobs in the past year, mostly teachers and other school
"Cities are still going to be facing very rough waters for the next couple of
years," said Michael Pagano, dean of the college of Urban Planning and Public
Affairs at the University of Illinois at Chicago.
There also was a backlash in Michigan after Gov. Rick Snyder won legislative
approval of a measure that allowed him to appoint emergency managers for
troubled cities and school systems—allowing collective-bargaining agreements to
be tossed. Voters will decide in November whether to repeal the law.
To boost revenues, cities are increasing fees and property taxes—where they
can. In Chicago, private investors are investing in public infrastructure
projects. El Monte and Richmond, Calif., want to tax soda.
Towns and cities in energy-rich regions likewise are faring well. Just 100
miles north of Altoona, five hotels have been built in the past four years in
downtown Williamsport, Pa., where natural gas companies have flocked to develop
the Marcellus Shale. A new civic arena, residential housing and an airport
terminal to provide direct flights to Houston are being planned. "Most citizens
you talk to, they're very excited," said Williamsport Mayor Gabriel Campana, who
refuels his natural-gas powered car at home.
But in far more cities, the outlook is darker. Although some suffer from
specific problems—a bloated incinerator project in Harrisburg, Pa., and a bad
real estate bet in Mammoth Lakes, California—most cities face falling revenues
and rising costs.
Indeed, while housing is showing signs of improvement, real estate assessed
values remain depressed, eroding property tax receipts, which provide 29% of
revenue for municipalities, according to a Moody's analysis of census data.
State aid, the biggest source of revenue for local governments at 34%, is
falling and the growth of receipts from wage, sales and other taxes, which
provide 10% of local budgets, is slowing.
At the same time, pension and health-care costs are rising despite efforts to
restructure those benefits. The most vulnerable cities are ones that experienced
drastic reductions in property values or are in states like California that
limit municipal options to increase revenues. In addition, nearly a third of
California cities require collective bargaining and prohibit outsourcing of
administrative and maintenance services.
Since 2008, four California municipalities have filed for bankruptcy
protection—Vallejo, Stockton, Mammoth Lakes, and most recently, San Bernardino,
which declared bankruptcy Aug. 1, in large part because sales and property taxes
fell after the real estate bust. The assessed value of homes in San Bernardino
dropped to $10.3 billion in 2011 from $12.2 billion in 2008.
On top of a declining property tax base, the city has faced a significant
drop in sales tax collections since 2005. Economist John Husing said San
Bernardino's retail sales fell 30% during that period. Likewise, a decline in
construction means less revenue from things like building permits and
While many municipalities nationwide have offset property-tax declines by
raising tax rates, California's 1978 law dubbed Proposition 13 caps property
taxes at about 1% of a home's value and forbids major tax increases unless a
home is sold or rebuilt, though it permits taxes to fall if a home's value
Residents in El Monte, Calif., 15 miles east of Los Angeles, will vote in
November on a soda tax that could raise about $10 million annually. The city,
which lost four major car dealerships that generated a large share of the city's
sales tax revenue, cut nearly 30% of its workforce to help close a $3 million
budget deficit but still faces $2 million deficit for the current year.
Local merchants oppose the measure. "I'm struggling to stay open and here
they want to tax me even more. It's crazy," said Arthur Meier Jr., who owns Arts
World Famous Burgers in El Monte.
Elsewhere, the cost of shoring up underfunded pension plans for public
workers is going slowly. In many states, benefits are guaranteed and difficult
to modify unless a city is declared "fiscally distressed." "Because of the
guaranteed nature of benefits, there's no quick fix," said Thomas Fitzpatrick,
an economist with the Federal Reserve Bank in Cleveland.
Steven Kreisberg, collective bargaining director at the American Federation
of State, County and Municipal Employees, the nation's biggest public-sector
union, said pension problems were caused by investment losses that can be
gradually recovered, rather than due to overly rich benefits. "When you lose 20%
of your assets in a single year that's what created the problem," he said.