Wednesday, September 25, 2002
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Wednesday, September 25, 2002 |
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Shell game: Gov. Barnes borrows billions to fund flashy tax 'cuts' By MITCHELL KAYE Congratulations to Gov. Roy Barnes for receiving a "B" rating on the Cato Institute's 6th biennial "Fiscal Policy Report Card for America's Governors." Through smoke and mirrors and creative bookkeeping, Barnes succeeded in fooling Cato in giving the illusion that he is a fiscal conservative. The spin doctors triumphed again, and for that I offer congratulations. Cato's report card was based on 17 short-term measures of spending and taxes, without considering what these policies do to the longer-term economic health of a state. For example, Cato lauds the cumulative $250 million deduction in property taxes, but fails to recognize that the tax is only temporary and must be reenacted by the legislature each year for continued reduction. They also don't understand where he got the money for the cut (read below). More importantly, has anyone actually seen a reduction in their property taxes? Like most, the tax on my house continues to increase. Likewise, Barnes' sales tax holiday, exempting many school items from sales tax also is a temporary one-year cut (now, just before election time, he wants to make it permanent). I do appreciate the meager savings on school supplies, but continue to wonder why a $21 textbook is not also tax exempt. By comparison, when you look at Gov. Zell Miller's record, you will see permanent tax cuts. This included the repeal of the sales tax on food phased in over four years as well as increased standard and personal income tax deductions. Sen. Miller is also a strong advocate of making the 2001 federal tax cuts permanent against the wishes of many pseudo-fiscal conservatives like Sen. Max Cleland. With Georgia experiencing 14 consecutive months of revenue decline and suffering the largest job loss of any state in the nation over this period, the moderate slowing of state spending is more a function of external factors than any government policy decision. The primary reason why the state can continue this uninterrupted spending is due to Barnes' insatiable appetite for borrowing more money. Instead of tax and spend, Barnes has adopted the new philosophy of borrow and spend. Over the past four years, Gov. Barnes has borrowed and borrowed to fund his increased spending as well as to pay for his temporary and modest tax cuts. According to the Georgia State Financing and Investment Commission, in Barnes' first two years of office, he obligated the state and her taxpayers to over $1.3 billion in new debt. These past two years the new debt obligation increased by another $2 billion, bringing total state debt to almost $7 billion, a new record. Funding a one-year tax cut with a 20-year loan does not make for sound fiscal policy. That is exactly what Governor Barnes is doing. There has not been one annual balanced budget since Gov. Barnes has been in office. Each year practically every dime of taxpayer money is spent (there is a nominal rainy day reserve fund) and then the state borrows hundreds of millions of dollars on top of that. Spending is done based on funds available, rather than on actual need. Political insiders argue that there is a balanced budget requirement in the state constitution, but in reality, it does not exist. The only constitutional hedge from excessive debt is the provision capping debt service (annual repayment of principal and interest) at 10 percent of net revenues. Barnes is proving that you cannot establish economic security on borrowed money. We will all find out on Nov. 5 whether you can fool all of the people all of the time. [Rep. Mitchell Kaye is a financial analyst by profession, holding a C.F.A. designation and is the ranking Republican on the House Ways and Means committee where all tax legislation originates. He ran against Fayette Rep. Kathy Cox for state school superintendent in the August GOP primary and lost.]
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