Wrongsizing State Tax Revenue

The State's budget impasse may be near a conclusion but the real issues with the long term budget structure are not going away.

I've been barking about the massive failure of the tax reforms enacted in 2005 and 2007 for some time now. Those changes instituted under the guise of reform may have been politically expedient buy have contributed to the historic crash in State tax receipts.

The latest confirmation comes from an official analysis conducted by Office of Budget & Management. Careful examination reveals just how badly the reforms have buried Ohio government in a sea of red ink. Consider the findings released in this weeks GONGWER NEws Service (s/r) report for July 9th:

Agency spokesman John Kohlstrand said the annual drop is by far the largest in years for which the state has easily researched data, as he personally looked up numbers dating back more than 50 years.

"Nothing remotely like this has happened in the past half century," he said. "Certainly, it is a historic drop."

While not a surprise to officials given the dismal performance of the personal income tax and other revenue sources in the later months of FY 2009, the final year-to-date numbers were dragged deeper into the red by a month that saw Ohio's coffers take in nearly 24% less in tax collections than in June 2008.

State budget administrators have said the biggest factors in the drop are the economic anemia and the tax restructuring of 2005, which reduced income tax rates across the board by 21%, cut or eliminated certain business taxes and made other changes.

The economic impacts became clearer with the close of tax filing season, after which Gov. Ted Strickland's administration revised its already dampened financial projections and later announced the state faced a roughly $1 billion deficit for FY 2009. That hole was filled with the drainage of the Budget Stabilization Fund, which now stands at 89 cents.

Last fiscal year was the third in a row in which the state collected less tax revenue that the year before - a streak that's also considered a record. Mr. Kohlstrand said the agency could only find three other years dating back to 1957 in which such declines occurred.

The changes in fact did not ameliorate the impact of the recession as predicted by the supply side faithful and anti-tax geniuses that had insisted this would be the case. Why not? Tax cuts work in every situation.

It seems event the magic elixir of unbridled tax cuts didn't do the job of protecting the rust belt capital from the effects of the Great Recession. Maybe a more moderate and you know, sensible regime of changes would have left us a more sustainable budget structure.

This latest budget and future budgets will not be made right until someone has the courage to patch the flawed tax reforms of General Assemblies past.

From The Beach To The Moon

Vive Le Tour!

The 96th edition of the greatest of all bike races kicks off in Monte Carlo tomorrow. Free up space on your DVR and settle in for the next three weeks.

This year's TDF offers a time trial in Monaco, a relapse of the notorious team time trial, a slew of classic climbs and of course the penultimate stage finish on Mt.Ventoux. That one will be epic.

The smart money is on 2007 champ Alberto Contador who is a teammate of The Boss, Lance Armstrong. I doubt the seven time winner will be able to contend in this field but I wouldn't be surprised to see him steal a stage or time trial win. My guess is that he will be relegated to super domestique for most of the tour.

My top three in no particular order:

1. Alberto Contador - has to be the favorite even though he missed last year

2. Cadel Evans - cuddles has been quiet so far but look for him to be in the hunt.

3. Andy Schleck - I think the younger of the brothers Schelck has GC potential this year.

I would put the over under on positive doping tests at three.

Divining Truth From The Palinisms

Sarah Palin is stepping down as Governor of AlASka and the talking heads on CNN are actually trying to discern some logical rationale for the move.

CNN also played the rambling ten minute speech given from the unofficial state capital of AlASka, the Palin residence. It went in more directions than a country crossroad at times sounding like a victory speech and then a polemic on Obamanomics. She's was also quick to lash out at the media and critics in her classic paranoid fashion even mentioning past ethics investigations of her administration.

I don't know what is more curious a thing to take away from the event. Trying to divine the actual motive behind Palin's quitting is perplexing enough. Then watching cable news guys assuming there is a calculated and strategic element to the announcement is just as curious.

I'm guessing she has either been offered her own show on Faux News or she is going to be indicted on some kind of ethics charges very shortly. Maybe she sees opportunity in a potential GOP contender for president being taken out of contention by his infidelity. Keep you eye on the ball.

Giant Purple People Movers Invade Akron

Akron METRO had unleashed new purple buses on the highways traversing the Akron-Cleveland highway corridor. The local transit authority has revamped the express bus fleet with newer more colorful rides.

Not only was the nearly $3 million cost of new buses covered with ARRA dollars but the purple machines come with bike drawers and will soon be WiFi equipped. Yet another move towards public internet connectivity in Akron. An email sent by METRO announced the rollout of Molly and her purple friends:

New NCX Buses Are Here

Six new buses are being put into service on the NCX express routes. The new buses have a vastly different look to them and will be eye catching, to say the least. Eventually they will be WiFi enabled. The bike racks are in a "drawer" under the bus and the operator will be able to show you how to use it.

If you haven't seen one yet and would like to see a photo of the bus email Molly at communications@akronmetro.org

Thank you for your patience with our current fleet and we hope you enjoy the new buses. Each bus cost $497,000 and was purchased with stimulus funds.

The use of stimulus dollars is good in a couple of ways. The purchase of new buses demonstrates how the dollars are finding their way down to the local level. And with $3 million freed up METRO can think about dialing back the rate they charge for riding the North Coast Express.

That wold be the rate that was increased even after voters approved a sales tax increase. Did you think we forgot?