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Tsunami of taxes ahead

Federal woes are just the beginning. States and cities also will have to raise taxes to stay afloat.

By Jeff Schnepper Mar 22, 2010 10:07AM

There are animals that can sense an oncoming earthquake. They instinctively run for safety.

 

I’m beginning to relate.

 

The vibrations keep getting stronger. No matter where I look, every map identifies my location as “see epicenter.”

 

This isn’t going to be a natural disaster. It’s an economic breakdown that was birthed by buffoons playing politics. But I’m more interested in the repercussions than blame.

 

And the number one repercussion is going to be a tsunami of new taxes.

 

On the federal level, there’s no doubt that many of President Bush’s 2001 tax cuts won’t be renewed. With deficits over three trillion dollars over the last two years, taxes will have to go up, and not just on the wealthy.

Back in the ‘80s, I did a study in which I confiscated 100% of the income of those in the then top marginal tax bracket. The money only ran the federal government for three days.

 

The oncoming federal disaster is only the tip of the iceberg. The real problem is going to be with the state and local budgets that can’t be balanced. Bloated bureaucracies and unfunded pension liabilities are drowning state and local governments in a tidal wave of red ink.

The states are already scrambling.

 

Revenues were down 11.1% last year, creating a total shortfall of $170 billion for the fiscal year. Only four states, North Dakota, South Dakota, Wyoming and Montana, are slated for balanced budgets for fiscal 2010. California, Michigan, Florida, New Jersey, Arizona and Illinois all have already made appointments with the fiscal mortuary.

 

Oregon voters in the past have rejected sales taxes, limited property taxes and fought off across-the-board tax increases. But, they just voted to increase state corporate income taxes and income taxes on individuals making more than $125,000. New Jersey raised its marginal rate to more than 10% for those making over $500,000. Governor Schwarzenegger has proposed the legalization of marijuana in California to generate more sin tax revenues.

 

Those at the bottom of the economic chain will lose services, but not be hit with added taxes. But, if you’re in the middle class, staple your pocket closed. The revenuers are coming after your dollars and the politicians are running out of alternatives.

 

Of cause, they could always cut out the waste, the special interest payments, and pare the bureaucracy of redundant and useless jobs. But, that wouldn’t be politics -- it would be common sense.

 

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