A Mainstreet Scam

A commenter to yesterday’s post on unemployment insurance appears to believe that I misunderstand the way the system works. He or she is wrong.
The point is that the system is not able to address times of economic hardship. Since the federal government won’t allow the state to hold off repayment of the relevant loans when it meanders into a good economy at some undefinable point in the future, the missing resources can come from one of only three places: 1) cutting the benefits to the unemployed, 2) increasing the tax on businesses, or 3) looking elsewhere in state government for the money.
Something similar to number three is done as a matter of course across government. Consider the telephone tax/fee in Rhode Island:

The money raised by the phone surcharge is used to provide and upgrade Internet access at 460 public schools and libraries across the state, but revenues have dropped by 35 percent since 2004, forcing the state to contribute out of the general fund, said Carolyn Dias, chief of operations at the state Department of Education.

So here’s a program in which a tax was sold to the people of Rhode Island as a relatively painless way to finance school technology (rather than using the money that we’ve already provided for such things by way of our regular taxes). The model turns out not to work, so the government takes the money from something else.
Of course the phone surcharge is in the news because Governor Carcieri has a plan to decrease it as a trade-off for creating a similar surcharge on cell phones:

The cell phone proposal would add a 16-cent monthly surcharge to all cellular phones (or numbers), while reducing the existing surcharge on landlines to 16 cents from 26 cents.
With the number of cell phones rising and landline accounts dropping, the measure could boost revenues by $300,000 in the current budget year and $600,000 during fiscal 2011, according to the governor’s budget office.

Given the ubiquity of cell phones, one is tempted to argue that this is merely another broad-based tax disguised as a user fee, but it’s actually worse than that. It’s a tax on the productive and fruitful, benefiting those who are neither. The only people who would actually benefit by the shift toward cell phones are people who don’t have them, probably the elderly, most prominently. Young families and businesses often have more than two. And:

… speakers from Verizon and T-Mobile opposed the new surcharge, saying Rhode Island already has among the highest cell-phone fees in the country.

The sentence before that, in the report, points toward another indication of the scam that is big government: “The state receives two federal dollars for every dollar it contributes to the program.” In other words, the federal government uses taxpayer dollars to create incentive for states to take taxpayer dollars in order to fund some preferred program.
If a program is worth funding, officials should be honest and straightforward and pay for it from the general tax base. Carcieri should be ashamed to perpetuate this government card trick, which disproportionately harms the demographics that the state should favor… if it wants to survive.

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14 years ago

But if you don’t have the hidden tax scam going to cover the cost of technology, then school committees would have to tell the help they can’t have big raises and the best in benefits!
Of course, if we would only require that these “special” funding programs go away to force honest budgeting, then we might not be in such a mess.
Who’s running the pool on the chances that the GA will overestimate revenue to get through the election and have another budget disaster only arrive after the election?

14 years ago

It is not out of the realm of possibility that Congress will lessen the burden of UI loan repayments, given the fact that a vast majority of states are in a negative fund balance. Interest on these loans is already waived. A new round of (“stimulus” if you will )funding designed to waive UI fund loan repayments would spread this burden among a larger base of taxpayers since unemployment is so widespread at this point. Taxing another entity, i.e. telephone service, airline tickets, dog food, to repay restricted insurance pool debt is unlikely. Barring Federal legislation, employers will pay for the debt with higher UI rates for now, compared to the lower rates they enjoyed during low unemployment periods. While this may not be ideal, it is after all an insurance rate based system like any other. Higher exposure to claims; higher contribution rates.
Lowering benefit rates to the unemployed takes additional monies out of the economy and simply forces more folks collecting benefits into deeper debt. Recepients after all did not ask to be unemployed. Benefits are not available for the asking…as stated in my previous post regarding eligibility.

14 years ago

“Who’s running the pool on the chances that the GA will overestimate revenue to get through the election and have another budget disaster only arrive after the election?”
Oo, I want in on that! Five bucks says they over-estimate revenue by the widest margin to date.

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