If you`re wondering why your taxes keep going up, it`s because your taxes were cut.
Illogical? Sure, but true.
Well, sort of true. Actually, unless you are quite wealthy, your taxes-total-haven`t been cut at all. The only thing that`s gone down is the quality of public life surrounding you.
But no complaints, please. This decline was required in order to reduce the taxes of your most affluent fellow citizens, who must need the money.
Unless you have been living under a rock, you have noticed that state legislatures have been having trouble passing their budgets while cities and towns either increase their taxes or do less for their citizens or both.
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The immediate cause of this is the recession, which reduced government revenue. Another reason is that governments, like the rest of us, tend to be profligate. To take one example, the Chicago school district, some $300 million in the red, has 50,000 fewer students but almost 3,000 more employees than it did in 1980. This would be defensible, perhaps admirable, were the additional employees teachers. They are not.
But there is another reason why state and local taxes have gone up even as the quality of schools, roads, parks, police protection and other services has gone down. That reason is that the federal government gives those states and localities much less money than it did a decade ago. How much less?
Almost $60 billion more, that`s how much less. Illogical? Yes, but still true.
In 1980, Washington gave states and localities $91.5 billion. This allowed them to pay teachers, cops, firemen, etc. without raising taxes even though some 35 percent of the money really just went through the states and cities directly to poor and sick individuals in welfare and Medicaid payments. In 1981, at the behest of President Ronald Reagan, the federal government cut everybody`s income-tax rates. Reagan proclaimed this an ”across the board” reduction. By one calculation, it was, but that description obscured this salient fact: The richer you were, the more your taxes got cut.
Those tax cuts were supposed to stimulate the economy so much that even with lower tax rates government revenue would go up. The economy got stimulated, but not enough. As a result, the feds had to spend less.
This year, the federal government will give states and cities roughly $144 billion. Yes, 144 is more than 91. But let`s adjust for inflation and turn everything into 1982 dollars, courtesy of the Advisory Committee on Government Relations, the provider of these statistics. By this measure, federal aid fell from $105.9 billion in 1980 to $100.7 billion in 1991.
And now most of those federal grants go to Medicaid, welfare and similar direct payments to individuals, leaving only $62.5 billion for everything else, just about the same nominal dollar figure the feds contributed in 1980, meaning far less in real money.
So to fill potholes, buy police cars and pay teachers, states and localities had to raise taxes. As advertised, this change placed more responsibility on ”government closest to the people.”
Also, not so incidentally, on government paid for by people closest to the middle range of income. Even after the 1981 tax cuts, the federal tax system is more progressive than most state income tax codes, not to mention sales and property taxes. The wealthy, who got the biggest share of the federal tax cut, pay a smaller share of state and local taxes.
As the state and local taxes of less wealthy folks rose, they objected. So their governments stopped raising taxes and started cutting services.
The upshot is that if you are part of that vast majority that lives on less than $75,000 a year, your total tax bill (including state, local and Social Security) has almost surely gone up while the quality and range of services you get from government has gone down.
As, to be fair, did the services available to the very affluent. But what do they care? If summer school is canceled, they can hire a tutor for their kids. If there are not enough cops, they can install a more elaborate security system. If the parks nearby are dirty and crowded, they can fly off to Montana for the summer. They don`t need public transportation.
So if your property taxes have gone up, if there are too many other kids in your child`s class, if it takes two minutes for the ”911” dispatcher to answer, if you`re waiting longer for the bus and if the nearby lake is getting dirtier, please understand that this is the cost of cutting taxes, somebody`s if not yours. You are paying for the tax cut that had to go to that guy in the Lincoln Town Car who just zoomed by taking his kid from their privately guarded subdivision to a private school. Like all other benefits, government closest to the people has its price.