Wednesday, January 03, 2007

Creative Accounting 101

A big appeal when I first considered moving to Texas was the lack of a state income tax. As a former beneficiary of that policy when I was moved by the Air Force for a couple of years to Texas, I appreciated the idea that government wasn’t getting paid even more of my hard earned dollars. Yet, way down deep inside I know in my heart of hearts that there is no such thing as a free lunch. If you want to have schools and roads and police and parks and the other niceties of living in society, you’ve got to pay somewhere and somehow. It could be property tax or sales tax or licensing fees or excises or something. Yet, it won’t have that progressive tax stigma of demanding more of my money the harder I work. I really stumble over being penalized for success. I like to pay my share and I may even accept the social responsibility of a bit of contribution for the benefit of those less fortunate. But it ends there.

That’s why I had to read this piece in Dallas Morning News a couple of time to try to understand it:

Riddle Me This

You might not see it at first glance. But let me simplify. The “budget mess” that is reported on is that tax cuts enacted last year to reduce the fairly heavy ad valorem property taxes for homeowners are listed in the budget for the coming year as an expenditure. And, despite those cuts, revenue projections are indicating a huge surplus based on the booming economy with rises in sales tax returns and new levies on sinful activities that government is trying to (tongue-in-cheek) discourage, like smoking. Lots of money coming in despite tax rate cuts—remember Reaganomics? Remember David Laffer? Remember that voodoo about letting people keep more of their money and the economy booms sending tax revenues skyward? Still works!!!

So, a simple mind like mine would say no problem here. That’s where we stumble across the illustrative insight of the legislative mind. See, there’s a budget cap imposed by the voters on the legislature. They can’t spend more than a pre-established increased each year. Fine, you think. No problem really if revenue is up, you’ve got the money to cover the necessities. But, alas, there is the rub. Under the convoluted thinking of the bureaucratic mind, the tax cut is AN EXPENDITURE! That’s right; the legislature is making a payment. They are spending by letting us keep our money in the first place.

They just don’t get it. It isn’t their money to spend. It isn’t their largesse that lets us keep what we already own. Reduced tax rates aren’t a payment. They shouldn’t be in the budget anywhere. The budget should list expected revenues based on tax rates in effect for the period. Then the expenses should reflect payments out of the funds. Money in on the assets side. Payments out on the obligations side. Revenue that doesn’t come in because taxes don’t exist anymore shouldn’t by any convoluted thinking be considered as a payment. It can’t be a payment because it isn’t their money to pay!

But, they roam the hallowed halls of Austin befuddled by how to “pay for our tax cuts” and still spend the excess revenues from a booming economy. What am I missing here?

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