July 25, 2006
Is State Spending Going Up or Down?
You’ve heard the sound bite: “We don’t have a revenue problem. We have a spending problem.”
A few days ago, Bill Cooper and Michael Wigley of the Taxpayers League hauled out some numbers to support this claim, saying state revenues have grown by 8.7%.
First, we question their figure. They say the state collected $15.5 billion in FY 2006. The state general fund current resources were $14.65 billion for FY 2005. That’s a difference of 5.8%, which is less than the inflation rate on what government needs to buy during that period. Figured an alternate way, growth could be as high as 7.6%.
More important, look at state expenditures over the past four years. After adjusting for inflation and the state takeover of general education and transit, which increased state costs but lowered local costs, the effective difference between FY 2002-03 and the coming fiscal year is a per capita decline of 6.8%.
With all the state cost shifts and funding cuts to local government, comparing numbers gets confusing fast. And that’s what anti-tax advocates want – for voters to gravitate to the simple message that spending is out of control.
So let’s keep it simple.
While demands on state government keep increasing*, real per capita state general fund spending has been falling.
Minnesota does have a spending problem: State spending has not kept pace with demand.
*Growth in the number of special ed kids and those with limited English, new federal testing requirements on schools, new homeland security costs, increasing healthcare costs due to an aging population, etc.
Comments:
<< Home
[Moderator note: I received this commentary directly from Miles Spicer, a retired ad agency owner. It is posted with his permission.]
Surprise, surprise! In a July 23 editorial, William Cooper (chairman of TCF Financial Corp) and Michael Wigley of the Taxpayers League, claim tax cuts have lifted the economy and sent "gushers" of money into state (and national) coffers. Huh?
Well, starting at the Federal level, if tax collections have risen so dramatically, why are we running record deficits that are empowering foreign governments who lend us money; and encumbering our next generation(s) with horrendous amounts of debt and interest? Indeed, the strong rationale of the first Bush tax cuts, were we told, was we could afford them because of the generous surpluses created during the Clinton administration. Well, the Bush people surely solved that problem. They evaporated those surpluses in a very few years – then went on to send us into serious negative territory.
And, at the state level, if we are so flush with bucks, why are so many of our facilities and services still so underfunded? In the Star Tribune on Monday the 24th, there was a major article about the inability of the state to improve vital Highway 53 in northern Minnesota, due to lack of funds; and everyone driving the mess on the Crosstown wonders why that project is stalled. As a third generation Minnesotan, it is clear to me that this state's services have declined in many dimensions under the present leadership.
But that is not the worst part of the Cooper premise. The worst part is that the tax cuts have been incredibly unfair, disproportionate and favoring the wealthy. In 2004 (the latest year numbers are available) the real average income for the top 1% of households (those making $315,000+) grew by 17%. For the remaining 99% the average gain was less than 3%. And that is on top of a gain for the wealthy of over 20% in 2003, according to data, mostly from the Census Bureau. What is more, the top 10% of households last year had 46% of the nation's income; with the bottom 90% sharing about 56%. The top 1% alone had 19.5% with the other 99% of us sharing the rest; and they accounted for over 33% of the total net worth (wonder why they oppose the estate tax?). Exacerbating this maldistribution of wealth in our country is the aforementioned tax cuts.
Here's the data on tax cuts according to recent government data. The average tax cut for households of more than $1 million (the top two tenths of 1%) is $112,000 – or a boost of after tax income of 5.7%. The middle fifth of households gained 2.5% in tax relief (about half that of the very top earners). But sadly, the poorest fifth gained only 0.3%. No wonder rich folk like these new Bush tax laws! And there is not much relief for the poor in our country with other Bush policies; earlier this year he signed into law cuts of $39 billion in domestic programs like Medicaid and food stamps. I do not see the "money-spending machine in Congress" Messers Cooper and Wigley refer to – unless they are referring to the outrageous cost of the Iraqi war.
Now if this seems like I am assaulting capitalism, nothing could be further from the truth. I owned my own successful businesses for over 45 years. Capitalism has been good to me. Egregious as this inequality is, capitalism works. But, it works best when there is a more fair distribution of wealth; when the middle class has a stronger position; and when the poor have reasonable disposable income. Indeed, the minimum wage ($5.15) has not been raised since 1997 – a fact that is not only unfair, but does not appear to me to foster economic vitality.
No, I cannot agree with any premise in the July 23 editorial. Tax cuts have not necessarily improved the economy; they have created terrible national debt; nor have they improved the lot of average Americans. And worst of all, they have decidedly made the rich richer, and the poor poorer; and that does not serve our state well, nor the Federal government – or capitalism for that matter.
Myles Spicer
Minnetonka,
Retired Ad Agency Owner
Surprise, surprise! In a July 23 editorial, William Cooper (chairman of TCF Financial Corp) and Michael Wigley of the Taxpayers League, claim tax cuts have lifted the economy and sent "gushers" of money into state (and national) coffers. Huh?
Well, starting at the Federal level, if tax collections have risen so dramatically, why are we running record deficits that are empowering foreign governments who lend us money; and encumbering our next generation(s) with horrendous amounts of debt and interest? Indeed, the strong rationale of the first Bush tax cuts, were we told, was we could afford them because of the generous surpluses created during the Clinton administration. Well, the Bush people surely solved that problem. They evaporated those surpluses in a very few years – then went on to send us into serious negative territory.
And, at the state level, if we are so flush with bucks, why are so many of our facilities and services still so underfunded? In the Star Tribune on Monday the 24th, there was a major article about the inability of the state to improve vital Highway 53 in northern Minnesota, due to lack of funds; and everyone driving the mess on the Crosstown wonders why that project is stalled. As a third generation Minnesotan, it is clear to me that this state's services have declined in many dimensions under the present leadership.
But that is not the worst part of the Cooper premise. The worst part is that the tax cuts have been incredibly unfair, disproportionate and favoring the wealthy. In 2004 (the latest year numbers are available) the real average income for the top 1% of households (those making $315,000+) grew by 17%. For the remaining 99% the average gain was less than 3%. And that is on top of a gain for the wealthy of over 20% in 2003, according to data, mostly from the Census Bureau. What is more, the top 10% of households last year had 46% of the nation's income; with the bottom 90% sharing about 56%. The top 1% alone had 19.5% with the other 99% of us sharing the rest; and they accounted for over 33% of the total net worth (wonder why they oppose the estate tax?). Exacerbating this maldistribution of wealth in our country is the aforementioned tax cuts.
Here's the data on tax cuts according to recent government data. The average tax cut for households of more than $1 million (the top two tenths of 1%) is $112,000 – or a boost of after tax income of 5.7%. The middle fifth of households gained 2.5% in tax relief (about half that of the very top earners). But sadly, the poorest fifth gained only 0.3%. No wonder rich folk like these new Bush tax laws! And there is not much relief for the poor in our country with other Bush policies; earlier this year he signed into law cuts of $39 billion in domestic programs like Medicaid and food stamps. I do not see the "money-spending machine in Congress" Messers Cooper and Wigley refer to – unless they are referring to the outrageous cost of the Iraqi war.
Now if this seems like I am assaulting capitalism, nothing could be further from the truth. I owned my own successful businesses for over 45 years. Capitalism has been good to me. Egregious as this inequality is, capitalism works. But, it works best when there is a more fair distribution of wealth; when the middle class has a stronger position; and when the poor have reasonable disposable income. Indeed, the minimum wage ($5.15) has not been raised since 1997 – a fact that is not only unfair, but does not appear to me to foster economic vitality.
No, I cannot agree with any premise in the July 23 editorial. Tax cuts have not necessarily improved the economy; they have created terrible national debt; nor have they improved the lot of average Americans. And worst of all, they have decidedly made the rich richer, and the poor poorer; and that does not serve our state well, nor the Federal government – or capitalism for that matter.
Myles Spicer
Minnetonka,
Retired Ad Agency Owner
Growth and Justice takes the position, too, that capitalism benefits from an economy that benefits people at all levels, and raises money for public investment fairly from all levels.
Post a Comment
Subscribe to Post Comments [Atom]
<< Home
Subscribe to Posts [Atom]
