I was watching an interview with a local big city mayor last night, and he was complaining about local government aid being cut in order to balance the states budget. Since state is hugely in the red, the interviewer asked him if he thought taxes should be raised in order to maintain the level of aid to cities.
He weaseled a bit, and then commented that corporate income taxes where down about 40% this year, and that the state needed to open the dialog about coming up with more stable sources of revenue.
So… Is he right? We peg our government income to the economic state of the country. When the economy tanks, so does tax revenue, and money for government services dries up.
Is this just the reality government? Is it ‘fair’ that social programs (The bulk of our state budget, and arguably so for the federal gov’t as well) get cut when the economy is bad, and increased when the economy is good? What ways can we stabilize government revenue? Does progressive taxation make this worse? (Richer people get more income from investments, which is a riskier source of income) And with the housing market the way it is, even property tax revenue is decreasing, which I would think would be the closest to a stable revenue source.