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Archive for July 3rd, 2010

The New York Times has a story about the budget debacle in Illinois, which is a classic case of a state with too much government and too many overpaid bureaucrats. Other than being an example of what not to do, the most interesting aspect of what’s happening in Illinois is trying to guess whether it is in better or worse shape than California. According to the credit default swaps market, Illinois is in slightly worse shape. Both states rank below Iraq and above Romania:
Even by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo. He picks the papers off his desk and points to a figure in red: $5.01 billion. “This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office. …For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget. Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up. …signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation. “Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”

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Jacob Sullum of Reason does a great job of exposing the absurd arguments of the anti-Second Amendment bloc on the Supreme Court:
In their dissenting opinions, Justices John Paul Stevens and Stephen Breyer (joined by Ruth Bader Ginsburg and Sonia Sotomayor) worry that overturning gun control laws undermines democracy. If “the people” want to ban handguns, they say, “the people” should be allowed to implement that desire through their elected representatives. What if the people want to ban books that offend them, establish an official church, or authorize police to conduct warrantless searches at will? Those options are also foreclosed by constitutional provisions that apply to the states by way of the 14th Amendment. The crucial difference between a pure democracy and a constitutional democracy like ours is that sometimes the majority does not decide. Likewise, Stevens defends “state and local legislatures’ right to experiment,” while Breyer is loath to interfere with “the ability of States to reflect local preferences and conditions—both key virtues of federalism.” Coming from justices who think Congress can disregard state decisions about the medical use of marijuana because a plant on the windowsill of a cancer patient qualifies as interstate commerce, this sudden concern about federalism is hard to take seriously. Another reason to doubt the dissenters’ sincerity: They would never accept federalism as a rationale for letting states “experiment” with freedom of speech, freedom of religion, or due process protections. Much of their job, as they themselves see it, involves overriding “local preferences” that give short shrift to constitutional rights. …The dissenters’ most frivolous objection is that making states obey the Second Amendment “invites an avalanche of litigation,” as Stevens puts it. Every day we hear about cases in which people argue that the government has violated their rights under the First, Fourth, Fifth, Sixth, or Eighth amendment. Neither Stevens nor Breyer wants to stop this “avalanche.” Only when the Second Amendment is added to the mix do they recoil in horror at the prospect that Americans will use the courts to vindicate their rights. Stevens warns that “the practical significance of the proposition that ‘the Second Amendment right is fully applicable to the States’ remains to be worked out by this Court over many, many years.” But that’s because the Court for many, many years ignored the Second Amendment while gradually defining the contours of its neighbors in the Bill of Rights. There is a lot of catching up to do.

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One of the good features of the Internet is that it gives people more options. But this is bad news for politicians, who like to control – and tax – what people are doing. But it’s not easy for politicians at the state level to impose high sales taxes on consumers when people have the freedom to buy things sold in other states. Politicians do impose “use taxes,” which supposedly require people to pay taxes on goods purchased in other states, but 99 percent of consumers evade this tax since there’s no feasible way to enforce the levy. In an effort to gain more control (and more money), greedy politicians at the state and local level want Congress to impose a nationwide sales tax cartel. I wrote about why this was a bad idea back in 2001, both because it would undermine tax competition between states and because it would be a gross invasion of privacy. Here’s an excerpt from a report on the latest battle in this fiscal war:
The halcyon days of tax-free Internet shopping will, if Rep. Bill Delahunt gets his way, soon be coming to an abrupt end. Delahunt, a Massachusetts Democrat, introduced a bill on Thursday that would rewrite the ground rules for Internet and mail order sales by eliminating the option for many Americans to shop over the Internet without paying state sales taxes. At the moment, Americans who shop over the Internet from out-of-state vendors usually aren’t required to pay sales taxes. Californians buying books from Amazon.com or cameras from Manhattan’s B&H Photo, for example, won’t be required to cough up the sales taxes that they would if shopping at a local mall. …The National Conference of State Legislatures applauded Delahunt’s legislation, saying he should be commended for allowing states to collect as much as $23 billion in new taxes. …the pro-tax forces have offered a proposal that they hope Congress can be persuaded to adopt. The concept is called the Streamlined Sales Tax Agreement, invented in 2002 by state tax officials hoping to straighten out some of sales tax laws’ most notorious convolutions. Since then, some 24 states have signed on, either wholly or partially, to the agreement, meaning they agree to simplify their tax codes and make them uniform. If enough states participate, proponents believe it will be easier to convince Congress to make sales collection mandatory for out-of-state retailers. …State tax collectors haven’t exactly been idle while waiting for Congress. They’ve been trying to force Amazon to turn over purchase records in North Carolina, attempting to force retailers to become tax-tattlers in California and Tennessee, and putting the squeeze on affiliate programs in Colorado.

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