Archive for November 14th, 2006
It is good news that Buffalo ended the 2005-06 budget year with a $56.1 million surplus. The wolves are already licking their chops while trying to come up with ways to spend the money. A bit of a reality check is needed.
The City is still carrying approximately $500 million in debt. The economy stinks. Employment in the city is lagging behind most other areas.
The responsible thing to do would be using half of the surplus to pay down debt, creating further budget savings on interest expense. The other half should be applied to reducing taxes for city residents. A tax reduction puts more money into the private economy. That will increase spending, which in turn will increase investment by private businesses. A tax reduction will increase economic growth and raise the standard of living. These steps will ultimately lead to an increase in revenue for the City which could be used for further debt reduction and property tax decreases.
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Former Treasury Secretary Robert Rubin is urging the incoming Democrats to raise taxes. This is not a smart move. Government revenues have actually increased since the 2003 tax cuts. Only recently have revenues dropped off due to the housing slump.
Raising taxes during a housing slump and a period of an increasingly tight money supply is almost a sure-fire guarantee to trigger a recession. Cutting spending would be the much more prudent thing to do.
Mr. Rubin’s “fiscal problems” riff is really a rhetorical sleight-of-hand, using future entitlement problems to justify a tax increase today. He knows all too well that not a dime of new revenue raised today would be “saved” or otherwise devoted to paying for future Social Security or Medicare benefits. They would be spent on other things by the current Congress, just as today’s surplus payroll tax revenues are spent, and just as they were spent when Mr. Rubin was at Treasury in the 1990s.
Read the rest of Rubin’s Tax Gambit.
