I'm very frustrated lately with the entire issue of economic stimulus. It seems to be a war completely at odds with itself. The federal level of the government is able to do a few things that can help the American public out (and a few things that screw us over… thanks AIG-fiasco), and they can "finance" that aid through foreign investment and by simply printing more money. Meanwhile, the state and local level governments are running into the same economic "crisis" level as everyone else, yet they don't have the ability to simply make money appear. Instead, they have to take money out of their constituents pockets to make ends meet, who are in turn simply trying to make ends meet.
As an example of why this is frustrating me, let's look at the great state of Illinois. Obama's recent stimulus bill has already started to benefit many of us, myself included, by padding our pay checks with anywhere from $10-25 each pay day. Some say that's just silliness, but really it makes a bit more sense than a lump of $500 or so, even though it adds up to roughly the same. We'll actually spend that money because we consider $20 to be basically negligible. It doesn't make sense to us to throw $20 into the savings account, so we go ahead and go to the movies or buy a t-shirt or something with that money, which helps to fuel the economy. Personally, I'm a fan of this method.
Here's the catch in Illinois though, and probably many other states. Our Illinois State Income Tax is 3% flat. Generally speaking too, with your standard deduction on your yearly taxes, you aren't getting a dime back from the state, and if you are, most of us don't think it's even worth filing for. However, our new Governor has decided that he needs to hike our State Income Tax to 4.5%. Guess how much that tax hike works out to be for the average worker? If you guessed $10-25 a pay check, well then you're a smart cookie!
So Illinois wants to make our economic stimulus work out to a zero sum game. In theory, we'll receive a much higher Standard Deduction, but let's be real, states aren't in the business of giving money back to their people. Being a Liberal, I should be excited that my state wants more taxes, because that should mean more programming or better transportation or a CTA that's worth a damn. But I'm not excited about this measure, because all this does is "balance the budget," which is really another way of saying "raises for state legislators."
The economy will not improve if we get all the money that's coming back to us taken away by another entity. Point blank. Here in Chicago, the city thought it'd be fun sell off all the parking meters in the city to an outside company, who promptly raised the cost to park and increased the hours we are required to pay for those spots. Want to park on a street near downtown? Perfect, that'll be $3.50 a hour please. Want to take advantage of the Sunday parking holidays to go shopping in another neighborhood (and spur the economy…)? Oh, that's cool and all, but now you have to pay to park on Sundays. $2 an hour. Until 10pm.
These aren't things that will spark our economy! Instead of doing what we are asking our major corporations to do, which is cut down on expenses and needless spending to maintain profitability, our local governments are simply raises prices. Ask ANY company what happens when you raise prices in a recession. Go ahead. I'll give you a minute to do a quick Google search and check it out. That's right! Your sales drop and profits disappear! It's like magic! The only difference here is that when it comes to governments and taxes, we don't get the option to not shop there anymore. Well, I suppose we do, but there's a HUGE barrier to doing so.
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