Sunday, December 6, 2009

Random Thoughts on School Budgets and Taxes

Random Thought #1:
Detroit Public Schools asks each teacher for $10,000 interest free loan.

The Detroit school system is teetering on the brink of bankruptcy.  If the system does end up declaring  bankruptcy, will the teachers ever get that loan money back?  Plus I'm not sure if I was a teacher in Detroit how I'd feel about loaning money to a district that has been so corrupt and mismanaged for so long including the fact that Detroit Public Schools overpaid millions for real estate after middle-man markups.

In addition, the Detroit school system has taken other major voyages on the Failboat which includes the dispute that mothballed state of the art equipment at the $122 million Detroit School of Arts and the infamous school book depository.

Random Thought #2:   
Should Michigan tax pensions to help fund schools?

I found one particular quote in that article very interesting, from the state's budget director, Bob Emerson. "My son, who works his butt off as a chef in Oakland County, he makes in the mid-$30,000s," Emerson said. "He pays 4.35% in state income tax. I get a public pension that's greater than his salary, and I'm not taxed on that. Someone explain the fairness of that."

Yes, I agree with Bob that it is not fair.  However my solution to the unfairness is to not to tax the pensions, but to consider eliminating the state income tax altogether and replacing it with a system similar to the "FairTax" that has been proposed for the entire country .  The state of Michigan is now at a crossroad that will require a major overhaul to its tax system.  

I realize that a "FairTax" system relies heavily on a variation of a sales tax.  Plus I realize the current problem with Michigan's revenue shortfall is due to a dip in sales tax receipts.  However a "FairTax" system would also collect taxes on services, unlike the current sales tax system.  Wouldn't it be an acceptable trade off for a higher sales tax on purchases, including services, if the state income tax was eliminated? Plus, wouldn't it make Michigan a very attractive state for new residents and businesses alike? 

Random Thought #3: 
Deadline Nears on Michigan School Budget Cuts.

It seems that the lawmakers in Michigan are now more worried about qualifying for "Race to the Top" funds than they are about fixing the current funding crisis.   And why is the "Deadline" so near?  Because the legislature breaks for Christmas vacation in a couple of weeks.

I don't guess we should expect them to give up any of their vacation time to fix a crisis that is a direct result of their neglect, huh?