For the Wages of Taxation are Downgrades
Forgive me the transgression of paraphrasing an extremely important Biblical verse. And yet, a truth presents itself that has yet to be learned by so many in high places. President Barack Obama and Senate Majority Leader Harry Reid wasted months in a vain attempt to satiate their hunger for the moneys of wealthy Americans. Months. Like water to rock and stone, the state of the American economy continued to erode as they whiled away the time with vicious diatribes of hate against their fellow Americans in order to agitate the masses into a movement to guilt the peoples’ representatives towards Obama’s and Reid’s will. Thankfully, the people and their representatives were not done in to support the latest travesty sprung forth.
We’ve been told by gleeful economists who support Obama and Reid about how revenues must be increased by the taxation of the wealthy to solve the government’s debt problems and reignite the stagnant economy. And they do this knowing there is evidence proving the contrary; dissuaded they are not. Fortunately, real world object lessons continue to be produced. But will there be learning by this education? Time will tell.
Today, the teachers are the credit ratings agencies, most prominently Standard & Poors (S&P) and Moody’s.
As everyone is aware, the European Union is in shambles as one spend-crazy country after another takes them all down. Only the mighty German economy holds it all together. S&P, which did the unthinkable and cut the U.S. credit rating back in August, nailed the EU’s No. 2 economy France and eight others, along with the European Financial Stability Facility, the EU’s version of TARP. Worse, S&P’s outlook for France is negative and it is very likely France’s credit rating will have to be lowered again. The minutiae of the details of why this occurred need not be discussed here, other than to note that the high taxation practiced by EU countries has not garnered the desired benefits during this global economic downturn.
As with the EU, the leaders of many of the several states have also held to their beliefs, the misconception of higher taxation to solve their states’ economic ills. Two in particular, Connecticut and Illinois, are now reaping what they have sown: a downgrade.
Governor Dannel Malloy…said this week that receipts haven’t met estimates, leading to a $94.9 million revenue shortfall this fiscal year.
Somehow, the following words of this eminent, albeit fictional, soldier-philosopher do not ring hollow to my ears:
SURPRISE, SURPRISE, SURPRISE!!!
As a result, the credit rating agency Moody’s downgraded Connecticut. A wailing and gnashing of teeth burst forth from Gov. Malloy and his office, as is natural when someone’s incompetence is put on display. So of course, Malloy deflected what happened to him on to nearby states whose taxation policies mirror his.
In actuality, Malloy could have easily deflected the results of his incompetence further west. Via Ed Morrissey, the Wall Street Journal proclaims the news from afar:
Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating.
As went Connecticut, so went Illinois:
Though too few noticed, this month Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. The state’s cost of borrowing for $800 million of new 10-year general obligation bonds rose to 3.1%—which is 110 basis points higher than the 2% on top-rated 10-year bonds of more financially secure states.
This wasn’t supposed to happen…
In its downgrade statement, Moody’s panned Illinois lawmakers for “a legislative session in which the state took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays.” An analysis by Bloomberg finds that the assets in the pension fund will only cover “45% of projected liabilities, the least of any state.” And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.
While it pains me to do so, a focus on the mathematics must be included. Gov. Quinn and his fellow Democrats raised tax rates in order to raise $7 billion in revenues and balance the budget as is required by law; yet, the state is still $6.8 billion in the hole after the tax rate increase. So by raising the individual rate 60% and the corporate rate 46%, the state exacted $200 million from its residents, 97% less than what the eminent Gov. Quinn and his Democrats figured.
Yet again, words proceed unbroken to the fore:
SURPRISE, SURPRISE, SURPRISE!!!
Back in the day, Gov. Jim Doyle (D-WI) and his fellow Democrats also raised some of his state’s tax levels in order to raise revenues and maintain a balanced budget as required by law. But a miracle occurred: Doyle was replaced by Gov. Scott Walker (R-WI) and many of Doyle’s loyal Democrats in the legislature became unemployed with their positions taken up by a Republican majority in both of Wisconsin’s state houses. Immediately, Walker set to work as Doyle had left Wisconsin in as perilous a state as the one directly below him, work with which Moody’s took notice:
In contrast to the Illinois downgrade, Moody’s has praised Mr. Walker’s budget as “credit positive for Wisconsin,” adding that the money-saving reforms bring “the state’s finances closer to a structural budgetary balance.” As a result, Wisconsin jumped in Chief Executive magazine’s 2011 ranking of each state’s business climate—moving to 17th from 41st. Illinois dropped to 48th from 45th as ranked by the nation’s top CEOs.
For committing the heinous sin of competency and of having understanding the response to taxation, Gov. Walker and several Republicans find themselves under the tremendous wrath of Wisconsin Democrats, who have proceeded apace and with little haste in a dishonorable attempt to subvert the will of the people of Wisconsin who voted for those presently representing them in Madison.
Lessons learned in Wisconsin may very well garner rewards earned for the people (as well as Gov. Walker and the Republicans), while permitting others to witness the gospel of what works. However, it remains to be seen if Obama and his Democrats will take pause to accept this education, freely available to anyone willing to open their minds, or continue to proselytize his false “Gospel” to bring forth another sinful perpetration of higher taxes on the wealthy.
Cross-posted at Scipio the Metalcon.