Saturday, February 27, 2010

On new taxes - A letter to the editor

The writer does not go far enough, and a prior commenter picked up on a basic reality - setting loose the legislature without restraints such as were imposed by the now-suspended Initiative 650 is a perilous thing indeed for voters and the economy.

When an economy is stressed (say, in a Depression, as is now the case) it has entered a cycle where fewer folks are buying, leading to unemployment all along the production path as demand for products fall, and this in turn leads to yet less buying as unemployed folks spend what little they have on basic food and shelter rather than new cars, houses, and baubles.

Taxation increases prices - driving down consumer demand even further, and in turn shifting many businesses from lay-offs to bankruptcies, which in turn sends yet another wave of unemployed into the marketplace.

Today, businesses that were "doing ok" during better times have already collapsed. Businesses that were somewhat prosperous, are hovering on the edge of collapse and many have already laid off staff and cut expenses to the bone in an attempt to weather out current conditions. Businesses that were comfortably profitable are laying off and cutting costs as well, as it's difficult not to feel the bankruptcy judge breathing down your neck when good people and successful businesses are going under all about you - and these concerns, and the logical decisions based on them, only build the sense of economic panic in yet others.

Adding taxes, at this point, is a great way to assure we remain enmeshed in our current economic mess for the forseeable future, at absolute best. More likely, new taxes will drive an additional wave of layoffs and shutdowns in the face of consumer demand yet further reduced.

The answer, grim as it is, is an all-cuts state budget - where, for once, our legislators and our spendthrift governor learn to live within their means while attempting to avoid penny-wise/pound-foolish over-broad decisions.

It will, without doubt, be absolutely no fun for anyone involve. State employees will be laid off, state services will either vanish or be privatized, and state assets will be sold.

But with cuts taking State Government down to a level current taxes can pay for, we take the best action we can to at least not make things worse.

Further, if we actually *reduce* our taxes, we can draw businesses struggling in the essentially hostile environment of California, Massachusetts, New York and other over-regulated and heavily taxed states to Washington - where they can grow, prosper, hire people, and pay taxes.

We can return to prosperity. We can, eventually, regain our footing and the level of services we've grown accustomed too. But we need a prosperous economy to do that, and new taxes (even a failure to reduce taxes to compensate for stressed business conditions) are a path away from that prosperous economy.



Old NFO said...

Excellent post, but I don't see them having either the personal or political will to actually DO the right (downsizing) thing...

Gay_Cynic said...

Neither do I, but to give up hope is to surrender to despair...