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Sunday, February 15, 2009

Stimulating What?

It’s time for a little perspective on Obama’s stimulus bill. Do you have any idea just how much a billion dollars is? How would you like to spend the rest of your life operating on a budget of $1,000 a day? At this rate, even if you were born yesterday, and even if you spent every penny of it everyday, you wouldn’t even come close to spending $1 billion in your lifetime. In fact, spending $1,000 a day, it would take you over 2,000 years to spend $1 billion.

Okay, are you ready for some real money? With a trillion being 1,000 billions, spending $1,000 a day, it would take over 2 million years to spend $1 trillion. Now let’s put a trillion in terms of volume. The dimensions of a $1 bill are: 2.61 inches wide by 6.14 inches long by .0043 inches thick. Multiplying length, width, and depth we get a volume of about .07 cubic inches for each dollar bill.

Take one trillion dollar bills (and sparing you more mathematics) we get a volume of almost 40 million cubic feet. The average U.S. home is about 2,500 square feet. Figure in eight foot ceilings, and the average home is 20,000 cubic feet. Stacking them wall to wall and ceiling to floor, it would take around 2,000 such homes to hold 1 trillion dollar bills.

It truly is staggering. We hear millions, billions, and trillion of dollars tossed around so often by politicians, it can be easy to lose sight of how much money is actually being discussed. “Why quibble over $200 million?” New York Democratic Senator Chuck Schumer recently asked. Americans really don’t care about all of those “porky amendments,” he later added. Good points, Charles. It’s not your money, so why worry about it? This kind of reckless thinking is part of the reason the country is in such a financial mess.

President Obama recently said, “Only government can provide the short-term boost necessary to lift us from a recession this deep and severe.” On Thursday, January 8, after Obama announced his vast government spending plan, Time magazine ran a piece (seen here) entitled, The Case for Bigger Government.

In it the authors note that “By spending more through government and treating government as a partner rather than an enemy of the private sector, we can potentially save vast sums in the long run through a more efficient health-care system, safer climate, more competitive economy and more secure country.” With Obama’s stimulus plan, “Bigger Government” is exactly what we will be getting.

Writing for National Review Online, Michael G. Franc recently pointed out (here) just how bad Obama’s nearly trillion dollar stimulus really is. Among other things, he notes that, “The House and/or Senate stimulus bills would undo the 1996 welfare reforms, explode entitlement spending by a cool quarter trillion dollars, lay the groundwork for the federal government’s takeover of our health care system, double Uncle Sam’s already overbearing role in education, require taxpayers to pick up the bail tab for potentially dangerous felons, allow unemployed Wall Street executives to qualify for Medicaid, and reignite the fires of trade protectionism, thereby risking a global trade war.”

Also contained in the House version of the stimulus bill is $200 billion to bail out state and local governments who are up to their eyeballs in debt. Of course this is like robbing Peter to pay Paul, because, as Franc points out, “state taxpayers are also federal taxpayers. Hiking federal taxes to keep state taxes from rising is like running up your Visa card to keep the MasterCard balance from rising. Either way, you will pay.”

And pay we will, eventually. Sooner or later all of this debt is going to come due, and almost certainly taxpayers will foot the bill. It is amazing to me that so many smart (so-called) people believe that the solution to a country drowning in debt is more debt! As South Carolina’s Governor Mark Sanford recently put it, “A problem that was created by building up of too much debt will not be solved with yet more debt.”

Or, as Chuck Bentley, CEO of Crown Financial Ministries, recently wrote, “It is illogical to think that the cure for excessive borrowing is more excessive borrowing, but that is exactly what is under way.” Mr. Bentley adds that, “The largest economic bubble in history is being created right now. It is the bubble of the ever-expanding federal debt…New financial obligations of the U.S. government are currently estimated to be at $5 trillion dollars and growing since the bailout legislation passed in October 2008.”

According to the U.S. Treasury the total U.S. Federal debt stands at $10.8 trillion. This is a pre-stimulus number. Obama’s stimulus plan will only grow this massive debt. This level of indebtedness is simply unsustainable. “We the People” must come to our senses and bring to an end this madness. We have the power to do so, if we can only muster the will.

Copyright 2009, Trevor Grant Thomas
At the Intersection of Politics, Science, Faith, and Reason.
Trevor and his wife Michelle are the authors of: Debt Free Living in a Debt Filled World
tthomas@trevorgrantthomas.com

There’s Nothing ‘Logical’ About Continuing SPLOST

So the Times editorial board thinks that continuing the extra 1% Special Purpose Local Option Sales Tax is ‘logical.’ What is logical about government, at any level, continuing to tax and spend at the same, or higher, rate when its citizens are suffering under a recession and must reduce their own spending? When the public is cutting back, governments should be as well. Of course, governments should be operating with the tightest budget as possible at all times, but this is especially the case when the economy slows down.

Also, the argument that “40% of money paid into SPLOST will come from people who live outside of Hall County,” (as the Times put it) as another reason to support SPLOST, is not very logical. Presumably, governments in surrounding counties present this same argument when proposing their own SPLOST. (All nine counties bordering Hall have a 1% SPLOST. Gwinnett has only a 6% sales tax rate. It contains a SPLOST but not a LOST.) Therefore, whatever we may save in taxes by having non-Hall residents support our SPLOST, we probably spend supporting theirs.

Also, there is hardly a mention of how the 40% number is figured. “Officials estimate” is the phrase that is always used, but we’re never really told where they get the number. I’ve heard that the number comes from the fact that 40% of the daily workforce in Hall County is non-residents. If this is the case, I doubt very seriously that this number is anywhere close to accurate.

Along with the Times editorial in Sunday’s paper, Emily Bagwell and Cooper Embry of Hall Progress, who are both on the executive committee of the Hall County Chamber of Commerce, also had a column in support of SPLOST. One suspicious argument they use in favor of SPLOST is the fact that the millage rate in Hall County has decreased by 18% “from 2002 to today.” This is very misleading.

It is true, according to my own records, that the 2008 millage rate, at 24.43 mills, was less than the 2002 rate of 25.22 mills (although not by 18%). However, if we look at the millage rate year by year, along with the property tax that was actually paid, we get a more accurate picture. The following table, created from my own personal records, shows the overall millage rate for Hall County for the years 2002 to 2008, along with the rate of increase in what I actually paid:

Year
Millage Rate
% Increase in Amount I Actually Paid
2008
24.43
2.7%
2007
23.77
6.6%
2006
25.55
3.5%
2005
24.66
4.8%
2004
23.50
14.0%
2003
22.80
--
2002
25.22
--


(I didn’t include the 2002 to 2003 increase because our home was not complete during those assessments.)

As you can see, even though the millage rate decreased in some years, it rose in others. Yet even with millage rate decreases in some years, due to higher assessments I continued to pay more in property taxes. Some of these assessment increases came during times when home values were plummeting.

SPLOST supporters will argue that my increases would have been more if not for the SPLOST. However, it is unlikely that voters would have supported many, if any, of the SPLOST projects through increases in their millage rates.

Governments at every level will usually spend whatever the electorate will allow them. It is time for the frivolous spending and the ridiculous over-spending at all government levels to cease.

Philosopher and teacher Adam Smith, widely regarded as the father of modern economics, said “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.” In other words, if my family is required to live within its means, even when times turn for the worse, this should be true of government as well.

Copyright 2009, Trevor Grant Thomas
At the Intersection of Politics, Science, Faith, and Reason.
Trevor and his wife Michelle are the authors of: Debt Free Living in a Debt Filled World
tthomas@trevorgrantthomas.com

Sunday, February 1, 2009

Too Many Taxes

The great philosopher David Hume said, “It is seldom that liberty of any kind is lost all at once.” It is generally lost about 1% at a time—usually through taxes. One of the surest ways to take away the liberties of a free people is to over-tax them. The great English jurist and professor, Sir William Blackstone, upon whom our Founding Fathers relied greatly when setting up our system of government, said “A power over a man's resources is a power over his will.”

On March 17 of this year, Hall County voters will again go to the polls to vote on a 1% SPLOST (Special Purpose Local Option Sales Tax). (Why wasn’t this vote held last November, saving taxpayers thousands of dollars?) The current SPLOST, if approved, would be the sixth SPLOST approved by Hall County voters since its inception in 1985.

Let me say right now that I believe that sales taxes are a far superior form of taxation than either income taxes or property taxes. Alan Keyes was right on when in 2002 he wrote that, “Real [tax] reform requires abolishing the income tax and returning to the system our Founders intended, funding the federal government with tariffs, duties, and excise taxes – sales taxes – not with the privacy-destroying income tax.”

However, even sales taxes can overreach and be misused, especially when we still have burdensome income and property taxes, and especially if they are used for “projects” that will require more taxation. My friend, Marine Major Kevin Jarrard, in his letter to the Times (here), recently pointed out the aquatics center as such a project.

Of course, government over-spending almost always results in more-and-more government, which then requires even more spending; this requires more tax revenue, which means more and larger taxes. It is truly a maddening and seemingly endless cycle.

Consider, if you will, all of the taxes paid by most Americans: income (state and federal), Social Security, Medicare, sales (state and local), capital gains, ad valorem (home and vehicle), inheritance, gasoline, unemployment, and so on. In 2007, MSN reported that, “In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%. Most workers will pay about that much on each dollar of income when all taxes -- federal and state income taxes, sales taxes, taxes for benefit programs, etc. -- are considered.”

Most of us are familiar with the Tax Foundation’s (a tax research organization) phrase “Tax Freedom Day,” which is the date to which the average American must work to pay all their taxes. For 2008 the date was April 21. That works out to be 30.3% of the calendar year. As I implied above, many of these taxes are in relatively small amounts (such as 1% sales taxes), but as you can see they all add up to a very significant total.

Governor Sonny Perdue recently announced budget proposals that failed to include the homestead exemption. That means an additional $200 to $400 in taxes for most Georgia homeowners. Needless to say, many are outraged. In reference to a caller’s concern about the removal of the homestead exemption, a local talk-show host correctly noted, “You cannot raise taxes in this environment.” The Chairman of the Hall County Commission recently called the governor’s actions on the homestead exemption “totally irresponsible.”

The 1% SPLOST also amounts to several hundred tax dollars a year for the average taxpayer, yet there is barely a hesitation on the part of most local voters, politicians, and pundits to continuously support and approve any and every SPLOST that comes along.

If conservatives are going to rail against wasteful government spending at the state and federal level, as well they should, we also need to hold our local officials accountable when it comes to spending. In his visit to Gainesville last year, Governor Perdue correctly declared that local governments were too big. “They blame and say we’re going to pass them (tax losses) right on to our citizens, and you’re causing their tax increase,” he said. “I’ve got the facts to prove the state didn’t cause their tax increase. Those are decisions made at the local level.”

As of October 2008, SPLOST VI contains 46 items (Curiously, as of this writing, the itemized list can’t be found on the Hall County SPLOST Web site.) at a cost of about $240 million. The current economic circumstances beg the questions: Are they projects that taxpayers should be funding; if so, is now the time; and would we be better off leaving the $240 million in the local economy?

As Major Jarrard also pointed out, we need to make sure that we are “funding practical, efficient, and necessary government facilities.” I agree. If governments are given more in taxes they are going to find a reason to spend it. We need to begin to wean our governments—local, state, and federal—from the current level of revenue that is required of the average American. That is why I’m voting against SPLOST VI.

Copyright 2009, Trevor Grant Thomas
At the Intersection of Politics, Science, Faith, and Reason.
Trevor and his wife Michelle are the authors of: Debt Free Living in a Debt Filled World
tthomas@trevorgrantthomas.com