Why should state and local taxes be deductible at all?

Excerpt:

SALT does create distortions of its own, however. SALT was the largest itemized deduction, allowing itemizers to export a portion of their burdens onto Americans elsewhere through the federal tax code. And it is substantial. If I faced a 30% federal marginal tax rate, paying $100 more in SALT lowers my federal tax bill by $30. It only costs me $70. Further, because that subsidy rises, the more property is owned and the higher the income, the distortion overwhelmingly favors the richest, with the middle-class (who own less property, earn less, and face lower marginal tax rates) getting far smaller benefits and non-itemizers getting no subsidy at all.

If citizens do not get their money’s worth from SALT spending, federal deductibility allows state and local governments to export some of the burdens of their waste and inefficiency to others, increasing their incentives for such inefficiency. That is, state governments are subsidized. No wonder Democrat politicians in high budget-high tax states are so strident in their support.

In the example above, federal income tax deductibility means that so long as local citizens get more than 70 cents of value per dollar of spending, and they don’t recognize the added federal burdens they must bear from those similarly subsidized elsewhere, they think they gain.

That encourages those governments to do more of what they should not and what they do badly, not more of what their citizens want them to do.

Author(s): Gary Galles

Publication Date: 19 April 2021

Publication Site: Orange County Register

Rising costs of CalSTRS debt takes money from students, classrooms

Excerpt:

The California State Teachers’ Retirement System (CalSTRS) recently reported a 26 percent increase in early teacher retirements in the second half of 2020 relative to the previous year. CalSTRS officials suggest that the COVID-19-driven spike in retirements will not affect the pension plan’s long-term solvency. But even if that holds true, CalSTRS is currently only 66 percent funded and has $100 billion in unfunded benefits. The costs associated with paying off this pension debt are skyrocketing and siphoning hundreds of millions of dollars from classrooms each year.

Like many states, California has made decades of legally ironclad promises to teachers regarding retirement benefits that, for a variety of reasons, have become massively underfunded.  The most notable factors contributing to growing debt are underperforming investments, inaccurate actuarial assumptions, and politicians’ longstanding preference to spend money on sexier things than retirement plans. When a public pension plan accrues debt, states and school districts need to start paying down that debt in addition to covering the normal operating costs associated with pensions. While California’s ledger would indicate it has been making pension debt payments, CalSTRS funding has only gotten worse over the last decade.

Author(s): LEONARD GILROY and ZACHARY CHRISTENSEN

Publication Date: 5 March 2021

Publication Site: Orange County Register

Great Variation in Counties’ COVID-19 Vaccine Distributions

Link: https://www.governing.com/now/Great-Variation-in-Counties-COVID-19-Vaccine-Distributions.html

Excerpt:

California is pushing shots into arms at a much faster clip than it was just a month ago — closing in on the national average, with vows to accelerate even further — but the pace of COVID-19 vaccinations varies greatly from county to county within the Golden State.

A Southern California News Group analysis of state data found that smaller counties with fewer people and less complicated logistics are leading the pack in vaccinating their residents: Little Mono, with 14,526 residents, ranked No. 1, managing to vaccinate one out of every three residents. On its heels was tiny Alpine, population 1,209, getting shots into 27 percent of its residents.

Author(s): TERI SFORZA, THE ORANGE COUNTY REGISTER

Publication Date: 11 February 2021

Publication Site: Governing