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Well...I might exaggerate. But not by much!

OK, that may be a bit of a stretch, but now that we have your attention, you should be aware of the connection between the continuing tax battle at the Federal level, and the safety of your house. And mine.

The fact is, those who resist raising Federal taxes a bit (like the restoring the Bush tax cuts), are placing the security of our houses at risk; not to mention the safety of our streets, the education of our children, and the rehabilitation of our infrastructure at the local level.  That’s because local governments are highly reliant on Local Government Aid (LGA) from their states…and the states rely heavily on Federal aid, grants, and support. So, shrinking taxes at the Federal level has a direct bearing on the viability of local governments to provide needed services. That fact is often lost when national officials argue about tax increases and/or reductions.

Case in point, the recent revelation in the Minneapolis Star Tribune that my own Minneapolis Fire Department “…is burdened with low morale, aging equipment, and nearly half its stations in ‘poor’ condition.”  The story noted: …concerns about steadily declining personnel from 483 in fiscal 2001 from 483 to 408 in fiscal 2011. But, we are not the only city, nor is the fire department, the only municipal entity in trouble.  The problem at the local level is the limited sources of revenue available to local governments. Basically, for cities it is pretty much property taxes and fees; and property tax revenue is down because of home valuations.

Regarding fee revenue, those are not only onerous and annoying, but on occasion designed to bring in money rather than mete out justice. A recent story in the NY Times tells of a woman named Gina Ray, who is now 31 and unemployed, who was fined $179 for speeding. She failed to show up at court (she says the ticket bore the wrong date), so her license was revoked. When she was next pulled over, she was, of course, driving without a license. By then her fees added up to more than $1,500. Unable to pay, she was handed over to a private probation company and jailed — charged an additional fee for each day behind bars. Her attorney notes, “With so many towns economically strapped, there is growing pressure on the courts to bring in money.” The companies they hire are aggressive.  It is less about legal administration, and rather about  mushrooming of fines and fees levied by money-starved towns across the country, and the for-profit businesses that administer the system. The result is that growing numbers of poor people, like Ms. Ray, are ending up jailed and in debt for minor infractions.

States, on the other hand, have a much broader base for taxation. Income (personal and corporate) taxes, sales taxes, and a variety of special taxes (like a gas tax), licenses, and special fees. Those would give great help to the local governments – except the states are in trouble too. In fact, thirty-one states (including my state of Minnesota) have addressed or are addressing shortfalls totaling $55 billion for FY2013.  These totals may be down somewhat from the budget gaps of the last several years, but they are still very large by historical standards.  Thus, local governments have a tough sell in getting additional state LGA; and state reliance on Federal help is essential.

Which brings us back to the Federal government, and how and why former President Bush has in an oblique and (to be honest) obscure way eroded our local Fire Department. The Federal government has the best tools to provide supplemental funding for all levels of government – including the city of Minneapolis. Indeed, there is substantial  flow-through of money from the Federal government to the states, into counties and right into our own towns through a variety of block grants, and various cash assistance programs. This is especially true of funding for roads, highways, bridges and transportation infrastructure (the national gas tax).  In fact, the Federal government has provided about $700 million to Minnesota over the next two years for transportation improvement.  But, the Federal government has its own debt issues now, and the Bush tax cuts have exacerbated that as well. And that puts the entire “trickle down” funding process at risk.

Moreover, the amount of the Federal budget available for state and local aid was exceedingly slim to start with. When you analyze the Federal budget, and extract four “given” components, very little is left. Social Security (34%); Medicare (24%); the military budget (18%); and interest (7%) consume 83% of the budget before any funding can be done for state and local needs. Even at that, the 17% remaining on “discretionary” spending is the likeliest target for cuts – and within that small remaining portion is all spending for such things as education, human services, parks, and block grants for state and local general purposes. Like our Fire Department.

So next time you call for reducing taxes at the Federal level, be careful what you ask for; and just hope your call to 911 doesn’t come first.

Originally posted to myles spicer on Fri Jul 06, 2012 at 08:17 AM PDT.

Also republished by Community Spotlight.

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