Cut this, cut that - America has a budget crisis - excuse me??!

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That's right. They would have to travel to the boat store in another state, make the purchase and then the cost of driving the boat from that location back to Texas. Unless they can order it from Amazon and get free shipping.

Since I live fairly close to Galveston, we have these boat stores in our area. In fact, I have done business with a few of them [computer sales]. Here'a the way it would work from a sales guy's point of view:

A customer comes into the store and says that he/she is in the market for a new boat. However, that customer tells the sales person in the showroom, "I can go to NO and get this boat for X amount, because the local sales tax is less. CAN YOU MATCH IT? I would rather buy here, where I live, if I can." Suppose they actually buy it in New Orleans and something needs adjustment or goes out on it after a few spins around Galveston Bay? It may have to be taken back to point of puchase for repair. Maybe, but it is something to consider when making a purchase like that.

But I can tell you that no dealer/salesman in his right mind is going to let a $300,000.00 sales just walk out the door over a sales tax issue. No way. This about the dealers not wanting to take the hit on their bottomlines and rather pass the hit onto the Texas taxpayers. That makes far more sense then a few rich people complaining to the Texas House over sales tax. Trust me. I was in sales way too long not to see this coming. Also, watch out when a salesman says "trust me."

Even when I sold computers I had the same issue. Customer comes in and says, "I can order this computer online and not have to pay sales tax; can you help me out on that?"

"Well, of course I can. No problem."

It's how sales are made everyday.

Well, maybe somone in the family was a smart guy. At least at some point in time.

 

Chandos, you make it sound as if the 'loss of sales to another state' argument is just a lame excuse. Perish the thought!

Hey, just an idea, if the US States weren't enthusiastically engaged in that idiotic race to the bottom, tax wise, fuelled by dogmatism, but instead had a common nationwide tax level, maybe the problem wouldn't exist in the first place.

It is pretty clear that businesses, very successfully, play out states against each other. The result is that states try to outbid each other by offering lower taxes, in an attempt to attract business, ruining their budgets in the mistaken hope that increased business and business related taxes for instance through consumption taxes, employee income tax etc pp) will fill their coffers and make up for the tax revenue so lost. It has almost always not played out that way.

Iirc the California budget relied heavily on capital gains taxes (BTA, correct me if I am wrong), and rode high on the wave of the boom, but utterly crashed when capital gains suddenly vanished. With their 2/3rd requirement for raising new taxes they were incapable legally to adjust to the changed realities. If they had adjusted their tax revenue in a more reasonable way they would have weathered the recession far better. In business they iirc call that 'diversification'. Think of it as taxing rich and middle class people alike, and not give the former a free ride. Alas, that was and apparently is not to be.

 

I think a minor thing like The Constitution may cause a problem with that.

 

That's true - you could legally place a national sales tax on things, but sales taxes for individual states would still vary from one to the next. There is nothing in the Constitution that gives the federal government authority to set the tax rate for states, and since it clearly states that the powers not delegated to the federal government are retained by the states, the states have the power to set their own tax rates (both sales and income).

 

Snook,
I know that it is unlikely to happen, but do not tell me that the US constitution, as if it was cast in stone, forever precludes any possibility of such a rule. Because it doesn't. Think of a constitutional amendment to such an effect, or some other binding agreement in which all states consent so such a rule. It's not about the law. Nobody is standing in the way of the US coming to an agreement like that but the US themselves and their politics.

 

But that's the whole trick, innit? In order to amend the Constitution, you'd need a 2/3 majority of both the House and the Senate (good luck with that), and 3/4 of the states agreeing to the change (good luck with that one too). I agree that the Constitution does not forever preclude the possibility of such happening, but there is a reason why there have only been 15 amendments added to the Constitution in the past 200 years - it's not an easy process. (And there really were only 13, as two of them were Prohibition and the repeal of Prohibition.)

 

BTA - I feel your pain. Texas has a shortfall that makes most other states look like small potatoes. And it has been run by Republicans for years. But they have been buying on plastic, and not taxing us very much, whereas in Cali they have taxed you death and still not been able to manage things well.

That's like extortion. "Oh, yes, we will use your roads, your local services, fire service, police protection, whatever, but don't ask US to pay for it."

Sorry that's just not right in my opinion, BTA.

 

I've said it before -- reasonable people don't have a problem with taxes going towards:

but what crawls under my skin is when they are spent towards art exhibits featuring statuary made out of genuine pig crap, sports teams subsidies, useless studies like toothpaste usage rates amongst some tiny minority group, corporate bailouts that seem to only benefit fat cats, pork barrelling of all sorts, and other such nonsense. As a taxpayer, when I see this sort of crap occurring, I get extremely upset!

Put bluntly, there may well be a need to increase taxes from time to time, but before that's done, I want all the programs that only benefit the few or the elite to be trimmed, and I want to know that the money I'm paying into the system is being used to help the majority of the population, or at least a plurality!

Roads, fire services, police services, schools, hospitals, health services and regulations, a functioning legal system that is responsive to the needs of everyday citizens . . . . . these are the kinds of things I want to see our tax dollars going toward, and when I see them going elsewhere, I want that stopped before the tax rates go up.

 

BTA - I ran across this while doing a bit of research:

http://articles.latimes.com/2011/mar/10/business/la-fi-california-texas-20110310

LKD - I agree. BTW, generally it is big business that pushes local funding for stadiums, at least that was true here in Houston, where the new stadium was named after Enron. It's not anylonger.

 

I guess that "tax climate" probably considers a larger number of factors rather than just a straight percentage.

Our governor is such a dick.

 

I'll say!

I thought this was amusing as well:

If I was king I would abolish the states, all 50 of them. Who needs them?

 

Tax competition within EU is certainly a problem. Ireland for example got themselves a huge boom to their economy because of the low corporate tax. Of course the boom turned out to be largely a bubble that eventually burst. Now when countries with higher taxation are forced to bail them out, there's obviously quite a lot of demands for them to raise taxes as a condition for the bailouts, and I think tax hikes are a part of their recovery program.

I don't really see the central regulation of taxes being a very good idea within the EU and I'm sure the same applies for US states. There are too big differences between individual states and each have their own needs and reasons for their specific tax code.

 

I agree. I would like to see much more local control at the county and city level. For instance, there are large communities where I live that have populations of over 50-75K and are not even allowed to form a local government, or have local representation.

 

On the other hand a common tax level creates a level playing field. As a result ...

... companies will be forced to be more creative than to move to Ireland, or Texas for that matter, to gain that extra on their bottom line as a result of taxes saved. Moving to Texas because taxes there are lower is simply the domestic equivalent to outsourcing production to Mexico or Bangladesh. It improves nothing; it doesn't drive innovation either.

... states can't just wh*re around, being cheap, and have to think seriously about their budgets. They can't leave it at: 'We'll be cheap and attract a lot of business, and the resulting boom will do the rest and sweep revenue into our coffers' (throw in a Hail Mary for good measure). It has been compellingly refuted in Ireland. Curiously, they have a debt and revenue problem in Ireland now. But they had such low taxes!

I don't think either of the two consequences is undesirable.

And while at it, Texas has been held up as an example of a successful state that is doing well. I wouldn't be too sure about that: Texas: The Huge State Budget Crisis Nobody Is Talking About

Spoiler

But there's one state, which is fairly high up on the list of troubled states that nobody is talking about, and there's a reason for it.

The state is Texas.

This month the state's part-time legislature goes back into session, and the state is starting at potentially a $25 billion deficit on a two-year budget of around $95 billion. That's enormous. And there's not much fat to cut. The whole budget is basically education and healthcare spending. Cutting everything else wouldn't do the trick. And though raising this kind of money would be easy on an economy of $1.2 trillion, the new GOP mega-majority in Congress is firmly against raising any revenue.

So the biennial legislature, which convenes this month, faces some hard cuts. Some in the Texas GDP have advocated dropping Medicade altogether to save money.

So why haven't we heard more about Texas, one of the most important economy's in America? Well, it's because it doesn't fit the script. It's a pro-business, lean-spending, no-union state. You can't fit it into a nice storyline, so it's ignored.

But if you want to make comparisons between U.S. states and ailing European countries, think of Texas as being like America's Ireland. Ireland was once praised as a model for economic growth: conservatives loved it for its pro-business, anti-tax, low-spending strategy, and hailed it as the way forward for all of Europe. Then it blew up.

This is the sleeper state budget crisis of 2011, and it will be praised for doing great, right up until the moment before it blows up.

 

I'm not sure I agree. Taxes are of secondary in importance for most companies. Wages are by far the biggest consideration followed by logistical concerns. Taxation comes distant third. Policy decisions on matters such as healthcare might also be of greater concern to a company than taxation (if say the law forces companies to pay mandatory health insurance). The point being that a single tax percentage won't erase the competition between states, it simply puts priorities elsewhere. Low taxation also gives the opportunity for states to compensate for other disadvantages they might have in attracting companies compared to other states.

This is not to say there's no advantage in trying to negotiate or adjust taxes so that tax competition does not reach excessive lengths, especially to the point when the deficit starts to spiral out of control. I do not, however, think that using a single central percentage is a good idea since I'm sure every state has a different idea about where that percentage should be.

 

What if that, as it does in some US states, results in them having to discontinue what is commonly assumed to be some basic core functions of government - such as school services, Medicaid and stuff like that - which they could do if they maintained a responsible level of taxation?

Mind you, I am not for high taxes, or a fix tax, but an agreement what a minimum reasonable tax level is. Texas, with its refusal to raise taxes, even though it could, with an economy of $1.2 trillion, would be such a case of irresponsibly and unreasonably low taxes.

Their level of taxation cannot sustain even the aforementioned basic core functions of government, and their refusal to raise taxes and generate revenue to be able to do so suggests that their tax level is not only insufficient, but that, if taken as a guideline or reference, it severely distorts the picture.

I think that the (ultimately anti-government) philosophy underlying it is utterly wrong headed. I mean, if folks run on a platform that government is the problem, how can one expect them to constructively address problems? STB is alive and kicking in Republican minds. Their idea of governance is to privatise it, unsurprisingly resulting in a style of governance akin to a bankruptcy liquidator.

 

I'm not too concerned about Texas not affording key services, I'm sure the people would notice eventually and make the choice of electing a different kind of government if it went too far, or they might not. Whatever the case in democratic forms of government people usually get the policy they deserve and if they wish to privatise everything and their mother then that's quite frankly their choice.

As for Texas or the US (or Europe for that matter) suffers from a spending or a revenue problem is really an age old debate between supply and demand side economics. Usually the common way of saving money is doing a bit of both. If you make drastic tax hikes you kill growth and if you cut massive amounts of spending you usually kill essential services. It's more of a question of values really than economics.