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A way to increase dollar power of cities & schools

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POSTED March 29, 2009 4:43 a.m.
There is a way that the City of Manteca and Manteca Unified School District both could each save well over $100,000 a year without cutting back services or laying off personnel.

It is simple solution but thanks to our bizarre federal and state tax codes that have the logic and sensibilities of the Winchester Mystery House it won’t happen unless people like Congressman Jerry McMerney or State Sen. Lois Wolk can get the ball rolling.

If both the state and federal government lifted fuel taxes on gasoline and diesel used by municipal governments and school districts it would help ease budget concerns. The combined taxes in California are 63.9 cents on gasoline and 72 cents a gallon on diesel.

Manteca budgeted $362,000 for fuel costs for the police department. Granted, it assumed fuel costs would be much higher but for the purpose of an illustration divide that by $4 a gallon – the worst case scenario in budgeting the city employed – and that comes to 90,500 gallons. Multiple that by 63.9 cents per gallon and the city is paying the state and federal governments $57,829 just to keep police cars rolling.

It gets worse. Both the school district and city pay taxes on everything they buy just like you and me. One might argue that is only fair but the logic is completely warped. They are using taxes to pay taxes that – in many instances - are then returned to them in the form of gas tax for the city for road maintenance or state funding for classrooms in the form sales tax.

By regurgitating the same money you are taking away buying power each time it passes through a government agency’s hands.

It doesn’t take a masters in economics to impose a solution. Wholesalers get sales tax exempt permits for buying things that they are going to retail. Cities and schools should be able to get similar permits that allow them never to pay sales tax.

Will it reduce state and federal revenues? Yes. Will it cripple either one? No.

The reason is simple. Every time a dollar passes through Sacramento or Washington, D.C. and is returned to where it was collected at the state or local levels anywhere from 7 to 20 percent – it depends on which organization is doing the analysis and the specific program – is skimmed off the top.

It is the height of government waste for Sacramento to tax people a dollar for schools, then send it to school districts, and then take part of it back again in paying sales and gas taxes.

Much adieu has been made about how you can’t overhaul the tax system because everything is interconnected in such a complicated manner. Reform must start with small steps.

Perhaps McNerney will use his position in the House of Representatives to fight the good fight and try to bring sanity back to our tax system one small measure at a time. Wolk could pick up the crusade in Sacramento.

Crusade is an appropriate word. There is no doubt that taxes can do good. At the same time too many taxes and those taxes that cripple need to be indentified and weeded out.

It may not be possible in one fell swoop to eliminate virtually all taxes and go to a straight 30 percent consumption tax, but you can make headway.

And if you think a 30 percent flat tax is outrageous, think about it for a second. If you were able to drop state and local income, existing sales taxes, property taxes, and eliminate all deductions the odds are you will be better off and so will government.

Taxpayers can be weaned off deductions over a 10-year period. That would address concerns about pulling the plug on the mortgage deduction since its biggest effectives of lower tax burdens is on the first 10 years of a 30-year mortgage. Corporations would be treated like individuals. No tax exemptions, no tax deductions, and no tax breaks.

Tax credits need to be used sparingly. That’s why Congress needs to require a two-thirds vote to put any tax credit in place. It would make it difficult to use the tax code for social engineering.

Government will have an easier way to project rises and dips in revenue and adjust spending accordingly. (OK, so it might be a bit Pollyanna to think Congress would ever reduce spending downward when revenues drop.)

There is nothing glamorous about such reform work. You aren’t tossing around billions of dollars and pontificating about changing the world. You won’t see screaming headlines or hear talking heads debate it on TV or the instantaneous generation Twittering about it.

You are, however, improving, government. What a concept.
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