Plain and simple a budget is considered balanced when what goes out (expenses) equals what comes in (revenues). I think I learned the economic input-output model when I was fourth grade. As if we haven't heard it a hundred times, there is a budget shortfall of over $600 million in the City, i.e. our expenses exceed our revenues by over $600 million. In order to balance the budget one can reduce expenses (output) or increase revenues (input).
Mayor Fenty is proposing a budget that reflects reducing expenses. According to the Washington Examiner, some of the City Councilmembers want to increase revenue via taxes. Moving on to the next lesson.
On the very first day of Economics 101, everyone draws a supply and demand curve. Focusing on the demand curve, the fundamental principle is as the price per unit decreases, the demand increases. The reverse is also true, as the price per unit increases, the demand decreases. All clear on that? Council is proposing the following: "The council’s collective decision to jack up the sales tax from 5.75 to 6 percent, the cigarette tax from $2 to $2.50 a pack and the gas tax from 20 cents to 23.5 cents a gallon would generate an estimated $34 million combined, according to the finance office." (Directly quoted from the Washington Examiner).
Pop quiz: If the price per unit increases, the demand will? If you guessed decrease, you are correct!!! You win higher taxes. YEAH!!!
The other flaws in this whole little scheme are:
- DC is already leaking $1 billion in sales to neighboring jurisdictions
- The cigarette tax in VA and MD are $1.50 and $1.00 per pack, respectively. Um... won't people just drive across the border?
- The sales tax in VA and MD are 5% and 6%, respectively. Maryland isn't the issues, since no one shops in MD. But Virginia... that's a big deal. Did I mention that we are already losing sales to neighboring jurisdictions?
The gas tax thing is a little messier and I don't have time to calculate, but based on general observation gas is cheaper in Arlington than in my neighborhood. I'm only buying gas in my neighborhood now because of my Buy Wards 7 and 8 Challenge.
Common Sense 101
Now, what I'm about to show you will shock and amaze you. These are quotes from members of the City Council. Some of it will be completely logical... and some of it... not so much.
At-Large Councilmember David Catania: “We tax the things we want to discourage.”
Sigh... cigarettes I get. Even gas I get. Let's apply this sentence to sales tax. All of a sudden this sentence loses something. I sincerely hope that we aren't trying to discourage sales. Careful there Mr. Cantania. Aren't you up for reelection in 2010? (Raises brow)
At-Large Councilmember Michael Brown: “We’re breaking the backs of the poor, so let’s level the playing field.”
(Side-eye) Just to put this statement in context the paragraph before was referring to all the social programs that assist the poor that have been impacted by budget cuts. However, poor people smoke (I think they may be the biggest smokers), poor people buy gas, and guess what poor people buy things. It's a good thing we aren't going to raises taxes so the poor people won't have to pay more... oops.
Ward 2 Councilmember Jack Evans: "Tax increases are “like cocaine” — if the government allows expenses to continue rise it will be back for more." (not exactly a direct quote)
PREACH, brother, preach. What a logical statement. If you don't fix the government waste, which by the way Fenty admitted to this morning on Fenty on FOX... if you don't address the inefficiencies... if we don't rethink expenses.... we will be revisiting this issue the same time next year.
Ms V's Advanced Class in Logic 301
I don't mind paying taxes. Even Jesus said, "Give to Cesar what is Cesar's" [Luke 20:25]. Here are my real issues:
- Don't insult my intelligence, Mr. Brown and Mr. Cantania. Kindly do not give faulty logic to justify the increase. Just say you are going to increase taxes and leave it at that.
- Address government waste. How much money have we wasted investigating Councilmembers and Fenty's appointees? How much money have we wasted on ineffective ANCs? How much money have we wasted on that baseball stadium? (Yes I went there with the baseball stadium).
- Address government inefficiencies. I'm a big proponent of consolidating some of the City Departments. There is way too much overlap between the mission of agencies and departments.
- Let's not try to stop the hemorrhaging with a band-aid. Let's sit down, think strategically, and stop the bleeding with a long term, forward thinking sustainable solution.