Saturday, December 20, 2008

The Schwartzeneger Plan and It's Implications

In California, Gov. Schwartzeneger is contemplating forcing state employees to take a de facto pay cut, by requiring them to take a certain amount of pay without leave. Laying off employees is also being considered. I understand that there are shortfalls, but I wonder how state employees of California feel about them taking the hit because others made bad economic decisions.

I'm sure this will also come to Utah. The past several years, with budget surpluses and a booming economy, our legislature has cut taxes, primarily to the well to do, but not entirely, also reducing the sales tax on food. When revenues are down, does the legislature restore the old tax structure, or do they decide to put the burden of the economic downturn upon Utah's public employees?

Let me get this out of the way first, and it is a perception I get from talking to so many conservative legislators over the years, that they consider public employees as inherently lazy, with bureaucracies that are top-heavy and inefficient, with plenty of fat that can be cut if they can be prodded through accross the board budget cuts.

I have spent some time around those in state government, and I can say unequivocably, that this perception is grossly exaggerated. My wife worked for the state for some time, and found herself overwhelmed with a caseload she couldn't possibly handle, and when there was a failure to meet all the impossible legislatively mandated requirements, that were inadequately funded, the blame never fell upon the legislature, but upon "those evil bureaucrats."

My wife works for the state, and so my position is biased. I'll admit that. But putting the full burden of budget shortfalls upon state employees, who are only trying to do their jobs the best they can seems short-sighted. Also consider, that state employees who are laid off, will take their accrued leave with them, creating a short-term cash-flow problem, increase the cost of their unemployment insurance, as well as further exacerbate our economic problems by increasing the unemployment rate and causing fewer people to be able to spend money to buy cars, houses, appliances, etc.

Utah legislators would be wise, to find solutions to their budget woes short of layoffs or reductions in the effective pay to their employees, many of whom have made sacrifices to remain in their jobs when better opportunities were available to them. Many came to believe strongly in the efficacy of the services they were providing and felt a considerable degree of job satisfaction in serving the public and making a difference in their lives.

Anyway, something to consider.


Anonymous said...

There is sort of a mathematical identity here we are talking about. If revenues go down then either expenses have to go down, or you need to raise tax rates, or both. So if in your post you have just taken off the table all compensation of all public employees, then all that's left is to cut only non-compensation expenses or raise tax rates. My guess is that there isn't enough room in non-compensation expenses to make up the shortfall, so what you are really suggesting is we should raise tax rates. Why don't you say so?

Obi wan liberali said...

Ok, I'll say so. The Utah legislature and governor gave away huge amounts of tax revenue based upon irrational projections. I would suggest that tax cuts should be rolled back.

The reality is, you'll see Utah's legislature look for more regressie measures, since poor people don't count to them. Any proposed revenue increases will be fees, fees that will hurt the poor when their ability to pay is substantially repressed.

So yeah, my post was meant as a firing accross the bow to the Republican mindset of legislators in Utah. Some of us will be watching closely what they do and will be speaking out about who they decide to harm and who they decide to leave alone during an economic crisis.

Anonymous said...

I've always wondered what is the maximum marginal tax rate lefties think that anyone should pay.

If you start adding up the promised Federal statutory tax rate of 39.6% plus the marginal impact of deduction phase outs of 1.5% plus FICA/Self Empoyment/Medicare tax of 15% plus a Utah state tax rate of 5%, it is easy to get to marginal tax rates over 60%.

Nevermind sales taxes, property taxes, corporate taxes, the double taxation of corporate income on dividends, estate taxes, etc.

So what is the maximum number? What is the maximum marginal tax rate anyone should pay?