If they can do this, what’s to stop them from attaching the wages of tax payers who did not withold enough to get a refund. It is, in a way, the same thing.
And they are considering paying state employees with IOUs.
Are any other states thinking of doing the same?
Me? if there’s no real waste (and there doesn’t seem to be), they’re not taking in enough money. Show me, then raise my taxes. Ask nice. 
Peace,
mangeorge
Okay then, what is your cash strapped state doing to face the shortfalls?
I think it’s a stupid move, and not just because I’m potentially going to lose a few thousand dollars. No one has to have their full taxes taken out of their check up front and people can change their withholdings and pay it all when taxes are due instead of as they go along. My guess is that most people are going to change their payroll deductions and not pay until the tax deadline and the state will have even less revenue coming in over the course of the year. Then the next year at tax time everyone that didn’t get their refund this year will have a credit and the state won’t collect much then either. The only way they can win is if they never have to refund that money at all and I think that they’d have a nice tax revolt on their hands if that happens.
Do you have a link to a story?
Here’s one from the Sacramento Bee.
This is a state where they may not be able to cover unemployment checks in the coming months. (at least, I’m pretty sure I heard a news story about it). They are trying to slash the heck out of all budgets.
If they want to give me an IOU, that’s OK with me. Times are tough and people are gonna need help.
I already gave a solution for the budget shortfall. No one has shown how to solve it by eliminating any real waste, so that leaves only one sensible option.
In my opinion, anyway.
Selling Arnold off for spare parts?
But raising income taxes doesn’t provide the kind of immediate relief the state needs. Essentially the state will be out of money in about a month, but likely wouldn’t see much difference in income for several months or more. So how does the state get through it in the meantime?
Last time, the state issued IOUs, which they’ll likely do again. And last time, it wasn’t much of a problem; the banks accepted the IOUs as if they were cash, and then when the cash crunch was over for the state, the banks turned in the IOUs for face value plus 5% (a nice return). But now, of course, banks aren’t loaning money. Which means that there’s a chance that banks won’t honor the IOUs, putting some people into a pretty precarious financial position if they rely on the state for income (i.e., are employed by the state, are on unemployment, etc.). I have less sympathy for people who use their tax refund as a savings account and “rely” on getting a refund every year. Just because there aren’t penalties for overwithholding the way that there are for underwithholding doesn’t make it a good idea.
I thought the banks aren’t loaning money because they can’t tell who/which loans to trust, not because they don’t have the money. If that’s true, they won’t mind lending to the State.
It’s too late for that. This is regarding tax refunds that would be sent out this spring based on 2008 state tax returns which are just beginning to be filed. You would have had to change your withholdings last year.
Ed
I can afford to get an IOU and wait but not everyone can. The last time this happened I was running a nonprofit that had a large contract with the state and when they stopped cutting checks I couldn’t make payroll without taking out a large line of credit for the 50K a month I wasn’t getting. Lots of nonprofits and private businesses hold those contracts and don’t have the cash flow to ride it out.
I know that I’ll get beat up for saying this but I was a government employee and our benefits packages are insane compared to most of private industry. It’s easy for me to say now that I’m retired (at 49 with half of my salary and a token health insurance deduction) but geez - no normal employees gets the benefits that we do. Not that SEIU would ever let it happen but I think that they need to re-negotiate those contracts much more realistically and grandfather in some cuts. It certainly won’t solve the problem but it would help a bit.
Suranyi, I understand that and I did mean that people would change them starting now and that it would effect the next year’s timing of the state revenue stream. Am I missing something?
I find it incredible that when we’re talking about government bailouts, everyone is all like “ooh, we CAN’T give it directly to the mortgage holder, we gotta give it to the financial institutions!”
However, when it comes to gathering money rather than giving it out, going directly to the taxpayer is JUST FINE.
I realize we’re talking fed government versus state government, but still…
Oh, I see what you’re saying.
Ed
What the hell, Karyn! You don’t need to apologize for what you got. Screw that! You don’t hear those corporate mobsters apologizing for their benefits and huge paydays. Take what you can get. Sit back, relax, and enjoy your retirement.
Mangeorge I don’t feel the least bit guilty and even if I did, I’m not giving them back. The only reason that most people endure working for government (unless they’re a political junkie) is for the benefits. I’ve worked in private industry, nonprofits and as a private consultant too and I never had anything like what I had there. I’d rather see everyone have better benefits than see government employees have less but when everything else in the economy is taking a hit I don’t think that wage or benefit cuts should be completely off the table. I know that this isn’t really a significant part of the fiscal problem and there are fatter places to cut money from but I still feel a bit uncomfortable telling people how much I get even though I didn’t wait until 55 when lots of them without pensions just watched their retirement investments go down the tube.
Good!