Jonathan Krohn explains why any Federal bailout of California will amount to burning tremendous amounts of cash.
“California’s overspending -- as Grover Norquist put it ‘California does not have a $21.3 billion deficit, it has a $21.3 billion spending problem.’ -- it’s overtaxing -- someone with $50,000 in taxable income is taxed out of more than $2,000 (if there are no possible deductions) -- and its excessive borrowing -- I mentioned $5,000,000,000 (and the number is perpetually growing) -- make it a financial hazard to anyone wanting to loan to it.”
“A VAT certainly wouldn’t be a boost to the economy, since it encourages saving instead of spending. You could argue that shift has already taken place, perhaps for the long-term and for the better. But there’s also this argument against a national sales tax from the group Americans for Tax Reform:
‘’VATs are a gateway drug to more government spending. When VATs first came on the scene in Western Europe in the 1960s, they were modest taxes averaging around 5 percent in rate. In the years since, the rates have climbed to an average of 20 percent (with a 15 percent minimum to get into the European Union).
There are two reasons for this. First, politicians are always tempted to hike the rate and exclude preferred items like food, medicine, and housing. Second, because a VAT is embedded in the price of a good (unlike state sales taxes in the United States), most people are unaware of the tax or how high it is. Raising the VAT rate becomes a relatively-painless political maneuver, especially if it’s linked to higher welfare spending or VAT-based carve-outs.”
Ryan Ellis, ATR’s Tax Policy Director, discusses the failings of the Republican proposed “Patients Choice Act” and offers a bevy of free market adjustments.
“Prominent national conservative Grover Norquist and other anti-tax groups railed against Gov. Pat Quinn’s proposed income tax increase Tuesday at a Statehouse news conference and called for a 10 percent cut in government spending.”