Monday, December 07, 2009

A tax doesn't yield the expected revenue - big surprise!

In the Daily News:
Straphangers face service cuts as state makes $200M error in tax revenue forecasts

Straphangers could see service cuts next year after all because the state apparently miscalculated how much money the payroll tax would generate for the MTA, officials said Monday.

The tax revenue appears to be 20% below what the state forecast for the Metropolitan Transportation Authority -- $200 million less than what the agency based its financial plans on, MTA Chief Financial Officer Garry Dellaverson told authority board members.

"This is a shocking development both because of the magnitude of the under-run and the late date of its discovery," Dellaverson wrote.

"As recently as last week, the state was continuing to advise us of their comfort with the forecast."

The shortfall is on top of a $143 million the state Legislature cut from other transit funds to the MTA last week.
This is partially because of the increase in unemployment (falling tax revenues), but also the nature of increasing taxes: politicians promise the world when stealing others' property. The "luxury tax" of 1990 actually lost revenue. (Even PBS admitted it!) Clinton's tax increases in 1993 supposedly produced a 9% increase in federal budget revenues from 1993 to 1994 -- supposedly, because of the important factor that the economy was recovering from recession. Now consider that despite the 1997 tax cuts, revenues still grew 9% from 1997 to 1998. Was the increase because of the tech boom at the time? Of course, and I'm simply being fair to point that out. I'm not pulling a Paul Krugman by claiming that the tax increase created the good economy, let alone was the source of increased revenues.

"The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else." Bastiat's words are exemplified here, because the payroll tax affects all wage earners in New York's lowest 12 counties (the five boroughs and Long Island, going up to Orange and Dutchess), whether or not they use the MTA. So people from the Hamptons, all the way to Poughkeepsie and Goshen, must pony up even if they don't ride the subways, buses or commuter railroads.

Think about the huge payrolls being stolen from people. The payroll tax is 0.34%, and the MTA reckons the reduced revenues at $200 million. That means they "overestimated" payrolls by $59 billion. Since that $200 million is a fifth of originally calculated revenues, that in turn means the state was planning to shave 0.34% off nearly $300 billion of other people's money.

Tony Soprano couldn't do it better. Coincidentally, one of Sunday's "Sopranos" reruns was where two young soldiers had to kick up to Tony, and while Furio and a friend were collecting, Furio demanded another thousand for himself. Whether it's mobsters or the government, it's all based on force.


Blogger jk said...

You'd almost think incentives matter or something...

Tuesday, December 08, 2009 11:32:00 AM  

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