The State And Local Crisis

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).

https://www.wsws.org/en/articles/2020/05/27/budg-m27.html

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”

Future Of Casinos

Back in the day when casinos were coming to the Mississippi Coast I wrote a piece about the Law of Diminishing Returns to argue against an unlimited amount of casinos….it seems that they were building casinos to have something to do……..

Law of Diminishing Returns simply put is if there is a finite amount of casino revenue, say $10 million, then the more casinos there are the more diluted the revenue will be…..now with the slowdown of the economy the casinos have suffered the same fate……when the bill passed the state legislature the deal was that the tax revenue would be used to sure up the sagging education system……well we stilkl have one of the worse systems around and the funds found there way into the “general fund”…….

But could the casino become a burden on the state?  Under normal conditions they should not……but there is nothing usual about the Mississippi gaming system……what could be a possible result of a casino failure?

Well, let’s look at Delaware, shall we………

Lawmakers appear ready to support Gov. Jack Markell’s plan to use $8 million from higher-than-expected state tax collections to bail out the state’s casino industry. But it’s not clear if the state aid will forestall layoffs threatened by casinos that have seen revenues plummet from intense regional competition.Sen. Robert Venables, who chairs the General Assembly’s join Bond Bill committee, said Tuesday $8 million is “better than nothing” for the industry, which has pleaded with lawmakers and the governor in recent weeks for help to reduce its tax burden.

If the proposal makes it into the final draft of the Bond Bill, tied in with hundreds of millions in school and infrastructure spending, it’s likely to pass the General Assembly without debate.

Now how is that?  An industry that makes obscene profits could get a government bailout…….could this be the future of the failing casinos of the Gulf Coast?

Buy And Shop Locally

We have all seen the ads on the tube where local business leaders stand around and tell you that it is your duty to help the local economy during this time of crisis by shopping and buying locally.

But where is the incentive for the consumer to do so?  They will go where they save a buck, not because some overpaid spokesperson is saying to to so.

Recently I read an article about the use of BerkShares, a currency printed by some local people in the Massachusetts area.

BerkShares are a local currency for the Berkshire region. Dubbed a “great economic experiment” by the New York Times, BerkShares are a tool for community empowerment, enabling merchants and consumers to plant the seeds for an alternative economic future for their communities. Launched in the fall of 2006, BerkShares had a robust initiation, with over one million BerkShares having been circulated in the first nine months and over two million to date. Currently, more than three hundred and fifty businesses have signed up to accept the currency. Five different banks have partnered with BerkShares, with a total of twelve branch offices now serving as exchange stations. For BerkShares, this is only the beginning. Future plans could involve BerkShare checking accounts, electronic transfer of funds, ATM machines, and even a loan program to facilitate the creation of new, local businesses manufacturing more of the goods that are used locally.
Click here
for more information about BerkShares.

This is a better idea that needs exploring  if these people are serious about shoppinmg and spending locally.  This concept fulfills all the criteria of shopping locally and helping the establishments.

The problem is that Mississippi is never serious about the local thing….local business do not pay the political bills and buy few friends, real friends.  Coastians need to give with their local reps and force these people to do something for the Coast and its  people and businesses.

I am afraid that my writing is falling on blind eyes….but that is not unusual.

The Market Is The Answer To The Economy

The Dean of the College of Business at the University of Southern Mississippi believes the best hope for the United States is that the stock market begins rebounding next year.

Personally, I think that is just trying to build false confidence.  Consumption is the only way to build the economy….so the creation of demand is the answer….but to insist that banks begin loaning money again is just to start the whole process that put us where we are today, all over again.  The American consumer is a credit addict and making it easy to obtain the drug will not help.

Yes government spending is a necessity for a kick start of economic growth but it should be more consumer based….the more disposable income the consumer has the more spending they will do and then the the more demand will be created.

We can put up graph after graph…but it will make little sense or little difference….it is NOT rocket science….demand creates growth.