The pandemic has caused so many problems for state and local governments…..the biggest problem is yet to come.
The budgets and and revenues will be a insurmountable problem that needs a solution that will benefit everyone and crap on none.
US local and state governments are reopening the economy as the pandemic continues to spread, although mass testing for COVID-19 and contact tracing programs are absent. At the same time, new state and local budget projections for the coming fiscal year paint an even grimmer picture than what was expected at the beginning of the month.
The Center on Budget Policy and Priorities (CBPP) has reported a 25 percent decline in revenues for some states in April alone. The CBPP now predicts that US state budget shortfalls will reach $765 billion over the next three years due to the economic impact of the COVID-19 pandemic. The report points out the strong relationship between unemployment rates and shortfalls in state budgets, which are critical for providing health care, housing, education, infrastructure and social welfare programs.
According to CBPP, several states have already predicted major reductions in revenue for 2020, including Massachusetts ($4.5 billion, or 15 percent of the state budget); Michigan ($3.2 billion, or 13 percent); and Utah ($1.4 billion, or 18 percent). For the next two years, some states are projecting even steeper drops, such as California ($32 billion in 2021, or 21 percent of its state budget); New York state ($12 billion in 2021 and $16 billion in 2022, or 14 and 17 percent of its annual budget); and Colorado ($3.2 billion in 2021 and $4 billion in 2022, 24 and 17 percent of its annual budgets, respectively).
There is a solution that has been around for over 100 years…..it is called Land Value Tax….
Land Value Taxation is a method of raising public revenue by means of an annual charge on the rental value of land. If you do not want to read through this text, you can watch this ten minute video by Dominic Frisby.
The below advantages are from http://www.landvaluetax.org/
- A NATURAL SOURCE OF PUBLIC REVENUE. All land makes its full contribution to the Exchequer, allowing reductions in existing taxes on labour and enterprise.
- A STRONGER ECONOMY. If we tax labour, buildings or machinery and plant, we discourage people from constructive and beneficial activities and penalise enterprise and efficiency. The reverse is the case with a tax on land values, which is payable regardless of whether or how well the land is actually used. It is a payment, based on current market value, for the exclusive occupation of a piece of land. In the longer term, this fundamentally new and different approach to revenue raising will stimulate new business and new employment, reducing the need for costly government welfare.
- MARGINAL AREAS REVITALISED. Economic actitivities are handicapped by distance from the major centres of population. Conventional taxes such as VAT and those on transport fuels cause particular damage to the remoter areas of the country. Land Value Tax, by definition, bears lightly or not at all where land has little or no value, thereby stimulating economic activity away from the centre – it creates what are in effect tax havens exactly where they are most needed.
- A MORE EFFICIENT LAND MARKET. The necessity to pay the tax obliges landowners to develop vacant and under-used land properly or to make way for others who will.
- LESS URBAN SPRAWL. Land Value Taxation deters speculative land holding. Thus dilapidated inner-city areas are returned to good use, reducing the pressure for building on green-field sites.
- LESS BUREAUCRACY. The complexities of Income Tax, Inheritance Tax, Capital Gains Tax and VAT are well known. By contrast, Land Value Tax is straightforward. Once the system has settled down, landholders will not be faced with complicated forms and demands for information. Revaluation will become relatively simple.
- NO AVOIDANCE OR EVASION. Land cannot be hidden, removed to a tax haven or concealed in an electronic data system.
- AN END TO BOOM-SLUMP CYCLES. Speculation in land value – frequently misrepresented and disguised as “property” or “asset” speculation – is the root cause of unsustainable booms which result periodically in damaging corrective slumps. Land Value Taxation, fully and properly applied, knocks the speculative element out of land pricing.
- IMPOSSIBLE TO PASS ON IN HIGHER PRICES, LOWER WAGES OR HIGHER RENTS. Competition makes it impossible for a business producing goods on a valuable site to charge more per item than one producing similar goods on less valuable land – after all, producers and traders at different locations are paying different rents to landlords now, yet like goods generally sell for much the same price and employers pay their workers comparable wages. The tax cannot be passed on to a tenant who is already paying the full market rent.
I wrote about this here on GSFP……https://gulfsouthfreepress.wordpress.com/land-value-taxation/
This will be hard to convince the politicians of this….but as they struggle to balance the budgets this will be a good solution ….but will legal bribes prevent a solution?
I Read, I Write, You Know
“lego ergo scribo”
2 thoughts on “The State And Local Crisis”
We used to have rateable value tax on properties here, and it was replaced with something called Council Tax. This is based on the estimated sale value of your house, and is paid to the local authority, not the government,. It pays for refuse collection, policing, schools, some road works, and street lighting. Also libraries, parks, and other community services. Everyone has to pay, whether you rent or own, but you get a discount if only one person resides in a property.
Best wishes, Pete.
I see Scotland has had some success with LVT…..I like the concept….and I think it could solve a lot of social ills…..chuq