Can anyone explain to me why so many municipalities around here are facing budget problems? I know the economy is struggling, but cities/towns get money from property tax, not income tax. Are forclosures on subprimes hitting this hard, or is it something else?
it is a combination:
- property tax is based on home value. values have dropped precipitously = lower tax base. due to foreclosures, few housing starts / new developments, excess inventory, etc.
- the towns and municipalities get substantial funds from state governments which ARE funded by income tax and sales tax. if people aren\'t earning, that revenue goes down. if people aren\'t spending, the revenue goes down as well. ct has been especially hurt by substantially decreased revenues from fairfield county.
- this whole state & local gov\'t fiscal crisis actually started with the first round of bush tax cuts. most state taxation algorithms are based on the federal formulas. when all of those taxes were cut, there was not enough time to evaluate on the part of states how to amend those algorithms and pass through the legislatures tax hikes to make up for the lost revenues.
- this has been further exacerbated by state & local politics - ie not raising taxes to keep former levels to remain competitive as compared to states with lower costs of doing business.
- ct has a higher cost of doing business and higher individual cost of living and as such has lost some of its business base in that way too.
- through expanded state spending on programs and construction during the "boom years" it has been nearly politically impossible to cut back to lower levels. people love their gov\'t programs but hate to pay for them.
- increased payments on gov\'t debt
these are all factors in most states. ct has not fared as badly as most states in the country and for that we are inordinately lucky (knock on wood) but incompetent management at any level can cause a crash as we are now witnessing in west haven.
incompetence in gov\'t grinds my gears - especially the GWB budget directors and the congresses that rubber stamped his failed policies.
