Revenue shortfalls defy easy solutions

As local government entities adopt their budgets, and as state officials contemplate their projected budget shortfall, perhaps everyone will realize that stable revenue sources don’t exist.

Government’s revenue source is the taxpayer, and the taxpayer can’t pay more in taxes except by earning more or taking it out of any disposable income or personal savings.

Unless one advocates raising taxes when economic activity slows or shrinks, there is no way to avoid a reduction in tax revenue.

How many taxpayers desire to pay more during a recession or slowdown in economic growth in order to maintain the previous pace of government spending?

The result would be to hand government a greater share of taxpayers’ earnings, leaving the taxpayers to figure out how to make do with less.

Of course, we can pay higher taxes to support essential functions during a slowdown, but there is a limit to how much more can be paid.

The South Kitsap School District maintenance and operations levy for the next four years was approved by voters this year at higher amounts. Knowing that funding from the state would be reduced, voters agreed to pay more at the local level to offset some of the reduction.

South Kitsap Fire and Rescue won voter approval for an increase in the emergency medical services levy this year, too. The increase will be used to improve the service being provided.

Taxpayers do understand that funding for some functions has to be maintained, even in a recession.

Something resembling stable revenue when the economy slows can only be attained in this way — increasing what we pay despite greater unemployment and lower personal income.

Even if we changed our tax structure, as some of those who yearn for stable revenue advocate, the situation would be unchanged.

Take a look at the decline in state and federal government revenues from income taxes. The states with an income tax experienced a bigger drop in revenue than occurred in Washington.

No broader tax base than that of the federal government is possible, yet federal income tax revenues dropped more than our state and local revenues.

Lower revenues collected by our state and local tax structure occur because there is less economic activity to generate income from which taxes can be paid.

Adding an income tax to our state’s tax structure wouldn’t eliminate this decline in revenue, unless, of course, you want a system in which income tax rates go up whenever income goes down.

Rather than merely try to increase government’s share of total personal income, our elected officials also need to pay attention to their spending habits.

When government leaders say their costs are rising faster than revenues, voters have to substitute the word “spending” for “costs” in order to focus on what may be changed.

If we are to make rational decisions about approving higher taxes to support essential functions, we have to look at the spending decisions made by our elected officials.

Some decisions made in the past at both the state and local levels will have an unavoidable impact in the near future.

The obligation to pay pensions to retired government employees is an example. Insufficient amounts are being put into those pension funds right now, so much greater payments have to be made soon.

Long ago, the discretion to set the pay of law enforcement personnel and firefighters was taken away from local officials by a state law requiring arbitration when an agreement with employee unions could not be reached.

The effect of that law on the costs of local government results from our legislature’s action, not local officials.

Whether one looks at the revenue or the spending side of the problem, there are no simple and painless ways to make the two balance.

Past decisions constrain what can be done to reduce overall spending, and the absence of an infinite source of personal income restricts the ability to increase revenue by raising taxes.

Bob Meadows is a Port Orchard resident.

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