T Nation

Cash-Strapped States Resort to Odd Taxes

Cash-Strapped States Resort to Odd Taxes

By MICHAEL GORMLEY

Associated Press Writer

http://www.guardian.co.uk/worldlatest/story/0,,-7264401,00.html

It's the idea that you can get away with raising taxes as long as you don't say the word 'tax,''' said New York Assemblyman Richard Brodsky, a Democrat who represents affluent suburbs north of New York City.And the consequences are disastrous for the average middle class or poor people, and a boon to big business and the wealthy.’’

Not many people are paying attention to this issue. Some states are so cash-strapped, they may not be able to make good on their bonds. When a big state, like Michigan, goes tits up, THAT is when the shit will hit the fan.

Someday soon, the states in the direst condition will have to choose between dissolution and screwing the bondholders. Guess which they’ll choose.

[quote]Headhunter wrote:
Not many people are paying attention to this issue. Some states are so cash-strapped, they may not be able to make good on their bonds. When a big state, like Michigan, goes tits up, THAT is when the shit will hit the fan.

Someday soon, the states in the direst condition will have to choose between dissolution and screwing the bondholders. Guess which they’ll choose.[/quote]

I’m sure there’s a third alternative there somewhere…

[quote]lixy wrote:
Headhunter wrote:
Not many people are paying attention to this issue. Some states are so cash-strapped, they may not be able to make good on their bonds. When a big state, like Michigan, goes tits up, THAT is when the shit will hit the fan.

Someday soon, the states in the direst condition will have to choose between dissolution and screwing the bondholders. Guess which they’ll choose.

I’m sure there’s a third alternative there somewhere…[/quote]

The problem is that pensions of teachers, state police, and other state employees are defined benefit pensions. The liabilities that the states signed on to are absolutely massive.

Several years ago, after Arnold became ‘govenator’, he said: “If I fired every employee of the state, we could still not pay off the debt of California.”

So, yes, they could slash pensions, but it probably still would not cure the massive problems.

Gee, I wonder how the states got so cash-strapped - it couldn’t have been from caving in to unions and special interests to spend the money flowing into their coffers from the taxes associated with the real-estate bubble, could it? And now they don’t want to back off from any of that pork-barrel spending, so why not just try to trick Joe Taxpayer with some well placed fees?

California — the ticking time bomb:

Total State and Local
Total Debt Issued: $83,782,330,242
(43.4% increase from 2006)
Total Long-Term Debt Issued: $70,563,400,242
(37.0% increase from 2006)
Total Short-Term Debt Issued: $13,218,930,000
(91.1% increase from 2006)

http://www.treasurer.ca.gov/cdiac/

This state also lost a LOT in the CDO massacre. One day, it will appear more prudent to them to declare bankruptcy or ‘Our debt needs to be refinanced.’ Watch the shit hit the fan then.

[quote]Headhunter wrote:
California — the ticking time bomb:

Total State and Local
Total Debt Issued: $83,782,330,242
(43.4% increase from 2006)
Total Long-Term Debt Issued: $70,563,400,242
(37.0% increase from 2006)
Total Short-Term Debt Issued: $13,218,930,000
(91.1% increase from 2006)

http://www.treasurer.ca.gov/cdiac/

This state also lost a LOT in the CDO massacre. One day, it will appear more prudent to them to declare bankruptcy or ‘Our debt needs to be refinanced.’ Watch the shit hit the fan then.[/quote]

On the plus side, this situation killed the Governator’s plan to put government-enforced single-payer health care in place… too expensive.

ADDENDUM: http://online.wsj.com/article/SB120165320966126977.html?mod=opinion_journal_main_stories