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States Raising Taxes Like MadMost people focus on the federal government when discussing tax rates. This misses the point at the moment because it is the states that are raising tax rates like mad.
There is a huge difference between the financial situation with states and the federal government. While the federal government can sell treasuries and run up deficits, the states cannot. The states must balance their budgets each and every year. This often leads to juicy political jousting, but the Great Recession has change the situation dramatically.
The Great Recession is killing states and municipalities in two big areas. The first is income tax revenues. The real unemployment rate at the moment is in the 16 percent range, not the 9.5 the government reports. The 16 percent figure included people out of work for longer than a year and those who are underemployed because they’ve had to take temporary jobs to try to make ends meet. The end result is fewer people are working and that means the states are receiving much smaller income tax revenues.
Property taxes are the second problem. You already know that housing bubble burst like the Hindenburg. The massive inventory of homes just sitting empty has cut a swath through property tax revenues like a rhino in a glass shop. It hasn’t been pretty and all indications are the housing market is not going to improve dramatically for many years.
All of this is putting politicians in a tough position. How do you maintain services that the voters demand when you don’t have money to pay for them? You could raise taxes, but that will get you voted out of office. A better idea is to not raise income taxes, but go after smaller items that most people will not give two hoots about. The feds did this with the 10 percent sales tax on tanning salons to pay for healthcare. The states have followed right along. I am not a smoker, but even I find it amazing that a pack of cigarettes in New York now costs over $11 with most of the cost being tax.
What should you be taking from all of this? This is the beginning of a period in time that will see dramatic tax increases. It is no longer a political issue. The national debt is over $13 trillion dollars and headed to $20 trillion by 2020. At that point, we will face the same situation as Greece unless taxes are raised dramatically.
You must get your financial house in order today. The way to beat the upcoming tax assault is to plan for it. Contact us today for a free consultation to learn more at (888) 720-3909.
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