Tuesday, December 22, 2009

A solution to Ohio's budget crisis

Gov. Strickland and the Ohio General Assembly have finally patched the $2 billion hole in the State budget by delaying the tax cut promised for next year. Under the circumstances, I agree that this was the most reasonable and politically feasible solution to the problem.

However, we will face an even worse situation when we face the budget again in 2011, because much of the current budget was supported by one-time Federal "stimulus" funding.

One reason Ohio faces these budget crises is that our State government is not in control of its own expenditures, being subject to Federal mandates related to programs for which Federal funds are provided. Ignoring these mandates, however, runs the risk of losing all Federal funds, which of course come from Ohioans' Federal tax payments.

However, there is a way around this deadlock, suggested by John Bowman, in LewRockwell.com. The State of Ohio can regulate how much of its citizens' tax money goes to Washington!

But imagine if a single State asserted its Constitutional rights and followed its own charters and mandates to protect its own citizens who empower it from theft and fraud. Imagine if that single State refused to collect oppressive
taxes from its own people to ship off to DC, which DC in turn dishonorably doles out as largess to the most supplicant. Imagine if that single State called on its own militia or a temporary posse, comprised of volunteers, to expel any federal tax collector from its borders. Every other State in the union would be forced to follow suit, if not by the power of The People directly, then by rapid and unanimous exodus of individuals and businesses eager to relocate to the nearest "free" State. That is a peaceful solution … The fear then is, will it be met by a Machiavellian response, like was the case in 1860? It won't if we have an educated, peaceful society, which is a goal all Americans, I think, can agree.” (Emphasis added)

Here is my recommendation. It requires a lot of political courage, but as far as I can tell, it is Constitutional:

The Ohio General Assembly will pass an act declaring that, effective January 1, 2011, the Internal Revenue Service shall not be permitted to collect any Federal income taxes from individual Ohio residents (The IRS may continue to collect corporate income and excise taxes). Violation of this statute by an IRS agent will be a felony punishable by imprisonment.

That function will be transferred to the Ohio Department of Taxation, which will collect individual Federal taxes at the rates current on January 1, 2011. The State will remit to the Federal Government the amounts reflecting Ohio’s share of the Federal budget for functions funded by the personal income tax, and properly delegated to it under Article I, Sections 8-9, of the United States Constitution. This share will be calculated, based on Ohio’s percentage of tax year 2009 collections, relative to the nation as a whole. The remainder will be kept in escrow, to be released to the Federal Government when additional appropriations are made consistent with Article I, Sections 8-9 of the United States Constitution; and secondarily to the State to maintain “Federally” funded services at the level current for the previous calendar year. Please note that this even complies with the Sixteenth Amendment, which only grants the Congress the power to lay and collect income taxes, but does not specify how they are to be collected.

Determination of Constitutionality will be made by a joint commission of nine members: one each appointed by the majority and minority leaders of the Ohio House, Ohio Senate, U.S. House, and U.S. Senate, with the ninth member being elected by the other eight, and serving as chairman. No determination will be approved that does not have at least one State and one Federal vote (excluding the chairman); unless the Federal Government refuses to participate, in which case the State of Ohio will make the determination on its own. Invitation of Federal participation in this commission should overcome any objections raised based on Marbury v. Madison or Osborn v. Bank of the United States, in which the argument was made that “the power to tax is the power to destroy;” and should allay concerns that we are proposing a "secession lite." Federal participation implies agreement with the principle; Federal refusal implies an unwillingness to resolve the problem, which should incur political consequences at the Federal level. To ensure that a deadlock does not continue indefinitely, the Ohio General Assembly will stipulate that no funds will be released from escrow to the Federal Government for any purpose until a determination has been made for that purpose.

After three years, the State will have sufficient experience to determine how much actually will be remitted to the Federal Government, and be able to adjust the Federal tax rates accordingly. Any excess in escrow will be refunded to the taxpayers (not all at once, since the infusion of so much money at one time might cause an inflation!). The escrow fund will be maintained to hold each year’s collection of Federal taxes, but only at a level of ten percent in excess of the amount expected to be remitted.

The Ohio General Assembly thus gains complete control over the State budget, since it can operate on the assumption that there is no Federal funding other than what it receives from the escrow fund. It will free State agencies from having to observe Federal constraints on the use of those funds. This should lead to very great efficiencies in operation, which will enable a gradual reduction in personal taxation to Ohioans, greatly strengthening Ohio’s economy.

Most importantly, it will remind everyone that the real source of all funding is the taxpayer! However, the Federal Government will continue to receive all taxes due to it consistent with its Constitutional authority; and the Federal Government can participate as an equal to the State in the determination of what that Constitutional authority is.

As far as I know, this is a new idea, which will undoubtedly require refinement; but it is one well worth pursuing.

Speaker Budish, I am laying down the gauntlet. You don't want to waste time with resolutions, but want to deal with the budget. Here's an opportunity for you to do exactly that.

1 comment:

Anonymous said...

Predatory Lending is a major contributor to the economic turmoil we are currently experiencing.

Here is an example of what I am talking about:
Scott Veerkamp / Predatory Lending (Franklin Township School Board Member.)

Please review this information from U.S. Senator Jeff Merkley regarding deceptive lending practices:
"Steering payments were made to brokers who enticed unsuspecting homeowners into deceptive and expensive mortgages. These secret bonus payments, often called Yield Spread Premiums, turned home mortgages into a SCAM."

The Center for Responsible Lending says YSP "steals equity from struggling families."
1. Scott collected nearly $10,000 on two separate mortgages using YSP and junk fees. 2. This is an average of $5,000 per loan. 3. The median value of the properties was $135,000. 4. Clearly, this type of lending represents a major ripoff for consumers.