Wednesday, January 28, 2009

IOU too...

From the Californian:

Who locally could see state IOUs instead of cash?

The Bakersfield Californian Wednesday, Jan 7 2009 6:36 PM
Last Updated: Wednesday, Jan 7 2009 6:38 PM

A local lawmaker said Wednesday he’d fight in court or through legislation any issuing of IOUs instead of cash state tax refunds as officials have warned they might have to.

State Controller John Chiang has projected California will run out of money Feb. 27 and be at least $2 billion in the red without a budget resolution, according to a spokesman. So, Chiang has said, he may have to start issuing IOUs as early as Feb. 1.

The people who’d first receive IOUs include taxpayers expecting refunds, legislators and top appointed aides, California Student Aid Commission grant recipients, about 1,700 judges and court-appointed lawyers. The state must first pay schools and bondholders with any cash on hand.

State Sen. Roy Ashburn, R-Bakersfield, said he may not buy that California coffers are about to run dry because the state takes in money year-round. And he said it would be “offensive” to refund taxpayers in IOUs.

"Offensive" is putting it mildly. How would the state of California respond if a taxpayer were to send an IOU rather than payment in full for a tax bill? Personally, my feeling is that if the state needs more money, they need to justify all their expenses and put a tax increase to a vote.

On the other hand, such a vote probably won't get very far. Check this out:
From Yahoo News:

State and local governments contributed $64.5 billion to pension plans in fiscal
2005-06, according to data from the U.S. Census Bureau. That’s about 57 percent
of the $113.2 billion spent on police and fire services.

Your tax dollars at work. How about getting state employees into a 401(k) program instead?

The state may very well elect to send you out an IOU rather than a refund check. Somehow that doesn't seem right, after you likely have sent thousands of tax dollars (vehicle registration tax, housing assessment, payroll tax and sales tax) over the course of the year. Legality and ethics aside, they can probably get away with this.

One thing a legitimately unhappy taxpayer might do in response: Adjust his/her state withholding to minimum, and go out of state for larger purchases. They can resume pumping massive amounts of tax money into pensions after April 16 of 2010.

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