Surprise: lower tax rates lead to lower tax revenues

Surprise, surprise.  After that substantial tax cuts (overwhelmingly benefiting NC”s wealthiest citizens) the super-charged economic growth the Republicans predicted has not materialized (yes, unemployment has improved, just like it has done pretty much everywhere).  The result, NC is coming in well-short in projected revenues (hey, I could have projected this).  Who will pay the price?  Teachers, those wanting a better education for their kids, the elderly and disabled, etc.  But hey, richer North Carolinians can now trade in their Lexus for a Mercedes.  Hooray!  From WRAL:

— New figures from legislative analysts confirm the 2013 cut to individual income tax rates is costing the state far more than originally projected.

Last year, Republican leaders authored a plan to cut income taxes from a three-tiered marginal system of 6 percent, 7 percent and 7.75 percent to a flat rate of 5.8 percent for 2014 tax year.

According to a memo Thursday from legislative analyst Brian Slivka and chief economist Barry Boardman, the updated cost of the tax cut is $690 million for the current tax year.

That’s $205 million, or 43 percent, higher than the original projection of  $475 million.

The cost for the 2015 tax year is also projected to be $200 million higher than original estimates – $890 million rather than $690 million…

Republican leaders said last summer that lowering taxes would cause the economy to grow, helping more people find work and bringing in more revenue. They expressed confidence that the cost to the state would be actually be lower than initial projections.

But in the memo, Boardman and Slivka explain that North Carolina wages have not grown as quickly as projected last year.

And how’s this for some cogent economic context:

It’s not yet clear what effect, if any, the revision will have on the current budget negotiations.

However, to put the revision in context, the cost of a 7 percent average teacher pay increase, according to the House’s latest offer, is about $265 million.

The cost of a 6 percent average teacher raise, according to an earlier House offer, is about $178 million, while the cost of funding all current teaching assistants for 2015 is about $450 million.

The cost of the Senate’s earlier proposed cuts to the Department of Health and Human Services, including cutting Medicaid eligibility for thousands of blind, disabled, and elderly patients, is about $228 million.

But, gee, who could have predicted this?  Oh, I don’t know, maybe anybody who has actually paid any attention to evidence on tax rates and economic policy in recent years.  Of course, now the Republicans get want they really want– lower taxes for rich people and the ability to throw up their hands and say there just isn’t enough money for teachers, the poor, elderly, disabled, etc.  And this surely can’t be good for higher education, either.

Advertisements

Jon Stewart on the Obamcare ruling

You don’t have to be a great judicial mind to see how dumb the DC Circuit court ruling is.  Though, it is nice to have a great political satirist to show just how dumb it is (as well as how embarrassingly simple-minded the Fox News coverage has been).

Photo of the day

Today’s National Geographic photo of the day:

Picture of a surfer seen from above at Palm Beach, New South Wales, Australia

Surf and Turf

Photograph by Joe Hsu

A surfer rides a wave as it crashes onto the shore at Palm Beach in New South Wales, Australia, giving the ocean an otherworldly appearance. Palm Beach, a northern suburb of Sydney, is home to two Surf Life Saving clubs—one dating back to 1921.

How the FBI manufactures terrorists

Last night I watched a terrific HBO documentary, “The Newburgh Sting.”  It is basically the story of how the FBI completely manufactured a terrorism case.  The FBI offered four ex-cons $250,000 dollars to blow up a synagogue and parked military planes.  The “terrorists” were quite clear they didn’t want to hurt anybody, but they would gladly take a quarter million dollars and pretend to actually be serious Muslims (they were all nominally Muslim at best) for the money.  Guess what, if the criteria for being a terrorist is a willingness to engage in serious property destruction for $250,000 than there are tens of thousands, if not hundreds of thousands of terrorists in this country.  Were these guys stupid?  Absolutely.  Amoral?  Sure.  Terrorists?  Not on your life.  Deserving of 25 year prison sentences for a crime the FBI created out of whole cloth to entice them?  No way.  Damn, damn, damn, I hate that our government behaves this way.

And let’s not forget the opportunity cost.  The FBI certainly does not have unlimited resources.  All those resources turning poor, greedy, ex-cons into terrorists would surely be better off trying to catch real terrorists.  Also, as the film points out, how much better off would we be if the FBI would work with mosques, rather than alienating them by having them wonder if every new member isn’t an FBI informant seeking to create “terrorists” from among their members.  Naturally, this is not a one-off case.  First time I heard about the FBI manufacturing terrorism was this excellent This American Life episode.

If you have HBO, watch this.  If not, here’s some good articles I came across.

%d bloggers like this: