Sales Tax

Robert H. Frank spoke at New America last Thursday about the guiding principles of his book, The Darwin Economy, and the policy proposals that stem from his model of economic thought. Reid Cramer started the event off connecting Frank’s ideas to recent trends: tax policy is at the forefront of recent political debates and the Occupy Wall Street movement is focusing attention on rampant economic inequality.

Rourke O'Brien and Katherine Newman presented on their new book,Taxing the Poor, yesterday at New America. The book examines state and local tax structures in the United States and their impact on poor Americans and comes to some surprisingly strong findings.

The facts are ugly. The federal debt, which has averaged less than 40% of the total economy, now represents more than 60%. It's likely to hit 100% in a little over a decade.

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Pretty much every impartial analyst has declared the situation unsustainable. And many European countries have already been hit by nervous credit markets worried about their debt levels.

Bottom line: If Congress and the president fail to make changes to current policies, the United States will experience some form of a fiscal crisis.

Here's an interesting bit of news from Sioux Falls, South Dakota. The city needs to borrow money -- about $38 million -- to pay for levee repair and other flood control programs. But there's an initiative on the local ballot to cut sales taxes. What does one have to do with the other?

Los Angeles Times columnist George Skelton has an interesting idea for stimulating the economy: Have the federal government restore the tax deduction for state sales taxes.

In a news conference, a frustrated and angry Gov. Arnold Schwarzenegger blasted legislators of both parties for failing to reach a budget compromise ("shameful") and offered another budget proposal. This is unusual. California governors typically release two budget proposals -- one in January, and one in May. But the governor has put forward a compromise plan that includes a temporary sales tax increase -- violating his promise not to raise taxes -- in exchange for budget reforms. He said he was taking a risk: "I'm stepping over the line here," he said.

A gubernatorial spokesman predicts a "total meltdown" in the Capitol if there's not a deal for a new California budget by Saturday, the deadline for adding measures that would be part of any compromise to the November ballot. At Blockbuster Democracy, we're adopting "Total Meltdown" as a way to distinguish California posts from news from other states.

In Total Meltdown news...

DON'T TAKE PERATA'S WORD: The Senate Democratic leader said a deal was close. It wasn't.