Spending Reform Must Be First

Posted: 20/06/2007 in Uncategorized
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To continue on with my comments on tax reform, I’d like to strengthen my arguments steering towards spending reform. This last round of bond questions were clearly approved by the people of Maine. While I doubt that it even came close to a clear majority, it disturbs me that the proponents of these issues were able to convince the public to debate in favor of passage. Infrastructure improvements need to be paid for through taxation. One way to attain the needed funds immediately is to issue bonds to raise the money from private investors. These investors are paid back with interest. These two packages approved on the 12th amounted to a lot more than the one hundred thirty one million asked for. With the federal funds we will be getting, we are adding over 440 million to our tax burden.

The problem I have is that there has not been one shred of information as to what this money is going to be used for. How is nearly half a billion dollars going to be spent in Maine? Who is going to decide where to direct the funding to? How many special interests are going to be served by this windfall of cash?

Tax reform is desired by every person in this state. Well, almost everyone. People are becoming more and more disgruntled with the tax situation in Maine every year that passes. But every year more new taxes are imposed. We keep allowing our elected officials to spend our money without requiring them to answer for, or be responsible for these expenditures. Tax reform is a necessity, but it will come to nothing if spending reform does not precede the tax reform. Skyrocketing costs of government can be curbed only by first curbing the government.

Things have changed over the last few decades in the State of Maine that has caused us to lose our position as a leader in the nation that we once held. We need to return to square one, a rebuild our state government. Part of the reason for passage of the term limit bill was to begin this rebuilding. We were supposed to get rid of ineffectual leaders who were easy prey to the special interest lobby’s. so where do we begin? We begin with the past. We find out what worked right before and try to recreate those conditions.

 

    Take a look at this table from the Tax Foundation. This describes how much was collected in taxes, and how much went back to the state in federal dollars. If you were to look at the tax situation as though it were your own household budget, you’d be in a lot of trouble. As you can see, for each of the years, we have spent more in federal funds than we have contributed in taxes. It is interesting to see that from 1981 to 1989 the ratio was declining.

    In 1990, the ratio started to increase. In 2004 we received back $1.40 for every $1.00 that we paid to the Feds. Why is this happening? When you look at your own budget, you cannot spend more than you earn. If you do, your debt burden increases. If the burden is not eliminated, bankruptcy is sure to be the outcome. Because we take in more Federal dollars than we contribute, we are taking from other states. This makes us a beneficiary state, or welfare state, as I discussed in my post of 16 June. This same set of tables shown here shows that New Hampshire received $ .67 for every dollar of Federal taxes they paid in. Massachusetts received $ .77 and Connecticut received $ .66. what are these states doing that we are not?

    New Hampshire has no income tax, and no sales tax. Their roads generally seem to be in better shape, and the have a smaller percentage of the population on welfare. High tech businesses flock to the state, increasing the employment potential. Tourism is a bigger industry. On a per capita basis, New Hampshire seems to better Maine every way. Granted, they have their problems, who doesn’t, but the point is still there.

    Why does it seem to be a better state, even though their taxes are lower? Could it be that lower taxes are the answer? And if so, how can we, as a state, lower our tax debt burden? The answer is simple. We learn to control our spending, and make sure it does not exceed our ability to collect taxes. Increasing taxes will merely serve to lower our ability to enjoy income, which will reduce spending, lowering collected taxes, causing the state to raise the tax rate and institute new taxes, which will continue to decrease our spendable income.

    It’s a vicious cycle that needs to be broken now. This desire to spend and not be responsible on what we as a state spend money on is crippling our economy. In the next few posts I will be sharing some comments on what I, as a taxpayer would like to see done in the State of Maine. One of the first things, however, I would like to see is for the voters of this state to take a greater interest in the political affairs of the state. We should be paying closer attention to our local governments, and begin attending town council meetings and the like. See what is going on in your own town. Is your community going to share in this nearly half billion dollar payout we are going to be enjoying? If not, why? After that, start paying attention to the county and state level officials. And don’t forget the people we are paying to represent us in Washington.

The solution has to start now, and it has to start with you and I. don’t rely on someone else to reduce your taxes. They are not going to do it. Special interest groups are only interested in spending your money. Let’s see if we can eliminate this aspect of politics, and try to return to and era of fiscal responsibility. Believe me, I know from personal experience what can happen when you are not fiscally responsible. It ain’t pretty. Till next time, hold on to your wallets.

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