The political class has been very busy this month so let’s get right to it:
1) We are going to talk a lot today about how politicians both in this country and around the world are lousy economists and horrible money managers. We have talked recently about how screwed up the state of Illinois is when it comes to fiscal insolvency of its state government’s finances. It has not had a workable budget in three years, it has untold billions and billions of dollars in unfunded future liabilities, it currently has unpaid bills totalling about $15 billion, and its bond rating is about to sink to junk bond level.
But Illinois is not alone. Many liberals and Democrats in this country want us to assume the economic model of Denmark where the fallacy is everyone is healthy and happy and the government efficiently and effectively takes care of everyone’s needs.
A recent article from the American Journal Review talked about the reality of life in Denmark, based on the experience of a Danish school teacher:
- The school teacher claims to be a school teacher in Denmark who earns about $61,000 a year.
- She does admit that there is free education for anyone who wants it and they do not have to pay for medical costs.
- But this “free stuff” is not really free since the minimum income tax in Denmark is a whopping 40%.
- Anyone earning over $80,000 a year pays an income tax rate of 68%.
- The national sales tax is 25%, somehow buying a car is taxed at 180%, and gas is taxed so high that it costs $10 a gallon, with the last two taxes precluding just about anyone in Denmark from owning their own car.
- All of these taxes add up so that about 80% of every Danish citizen’s earnings is paid out in taxes.
- The Danes average the highest amount of individual debt in the world.
- The suicide rate in Denmark is 20.8 per 100,000 residents, one of the highest in the world and almost double the suicide rate in the U.S.
- 11% of Danish adults are using anti-depressants, hardly a good sign for a happy population.
Overtaxing people has NEVER been a way to improve society or the lives of those that live in that society, just ask the Danes and those that live in Illinois, the home of some of the highest taxes, that are about to go even higher, in the country.
2) Let’s stay with high taxes and intrusive government and review a recent report from the fact checking organization, Politifact. It has been my experience that while Politifact claims to be non-partisan, in my opinion it definitely leans left and liberal. Thus, when it comes out and is critical of anything liberal you know it is really bad.
No one would argue that California has been dominated by the Democrats for decades so anything that goes right or wrong in that state is the result of Democrats having overwhelming control of the state government. California also has some of the highest tax rates in the country so that under taxation is not an excuse for anything that goes wrong in the state.
But finally a California politician has stated what is probably taboo among the state’s politicians, that California has the highest poverty rate in the country despite some of the highest taxes in the country: State Assembly Republican Leader Chad Mayes recently called poverty California’s No. 1 priority during a recent meeting of legislative types: "If you look at the official poverty measure in California, we’re about average with the rest of the country. But if you use the supplemental poverty measure, we are in the lead. We have the highest poverty rate in the nation -- higher than New Mexico, higher than any of the southern states, Louisiana, Alabama, higher than Idaho."
Politifact decided to fact check this assertion and their verdict: Mayes is right and he used the most accurate measure of poverty, the Supplemental Poverty Measure, a measure that not only looks at income levels and such but also considers the cost of living in the state.
But this should not surprise us. We recently reported on how 40% of Los Angeles residents are on Medicaid, indicating at least 40% of LA citizens have extremely low income levels, low enough to qualify for Medicaid under their low income thresholds.
Thus, a state government and state political class that has taxed its citizens at some of the highest rates in the country for decades and have racked up over $100 billion in unfunded liabilities, still has not been able to not be the most poverty stricken state in the union.
Okay, two stories and two stories that show how higher and higher taxation results in worsening impacts on the citizens that have to pay those higher and higher taxes.
3) Okay, still not done on how badly politicians handle our financial matters and economies: Illinois almost at junk bond status, Denmark crushing incentive and stealing 80% of everyone’s income, and California driving its citizens into poverty.
Let’s turn our attention to my original home state, New Jersey. In a recent blog post we showed how New Jersey’s bond rating is the second worst in the country, with only Illinois having a worst bond rating. New Jersey also has some of the highest property tax, income tax, and sales tax rates in the country.
Consider my history of property tax. Back in 2005, just before I sold my middle class home in New Jersey, I was paying about about $4.00 in property tax per square foot of house (Lord knows what that tax rate is 12 years later). I moved to Florida into a middle class house and have yet to pay over $2.00 in property tax per square foot of house. In Florida I also pay no sales tax vs. the 7% in New Jersey.
And yet, New Jersey has the second worst bond rating in the country, has billions in unfunded pension liabilities, and still has some of the highest taxes in the country.
Consider that what the next governor will be faced with according to an article from the NJ 101.5 website by Michael Symons on July 9, 2017:
- A non-profit group has analyzed the state’s financial situation and has come up with some recommendations for the next NJ governor.
- Just to get close to being fiscally sane the state government may have to both reduce health benefits for retired public workers by $1.4 billion a year and raise taxes by $5 billion in taxes.
- The group was honest in their analysis and correctly predicted that given how badly the state politicians had screwed up the state’s financial situation, everyone in the state was going to feel the pain of the cuts in spending and increased taxes.
- But not taking these painful steps now would make the future realities even harder for the state citizens to swallow.
- The group’s tax change recommendations include increasing income taxes to boost revenues by 10 percent, undoing a law exempting more retirement income from taxes, raising the sales tax to 8 percent and expanding it to more services, reinstating the estate tax, taxing legalized marijuana and more.
- As an example of how bad the retirees benefit financial situation is that while the state will put $2.5 billion in the fund for the benefits this year, in reality experts say that $5 billion should be put away, a shortfall that will make the current dire situation even worse and still short fund education, Medicaid, and other state government costs.
More insanity to follow.
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