Public Money

3 Ways to Bring Taxes Into the 21st Century

‘Tax modernization” was a trending topic in this year’s state legislative sessions. It joins “tax efficiency” and “tax fairness” as the latest benign-sounding way to talk about the thorny issue of who will pay for state and local government.

Modernization is tricky because different sides of tax policy debates deploy it to mean different things. To some, it means state and local governments should collect taxes more efficiently. To others, it means we should apply the taxes we have in new ways. A third group equates a modern revenue system with one that enlists lots of different types of taxes. Each of these groups envisions a unique tax system, but you need them all on board to get meaningful policy change. Tax modernization is a nice way to tie all three perspectives together. READ MORE

The Costly Double Whammy of Aging

For years, we’ve been warned of the profound effect America’s rapidly aging population will have on our services. But there are two areas in particular where an aging population poses the largest threat to the fiscal future of states and localities: health-care costs and tax subsidies.

Let’s start with health-care costs, specifically the increasing costs of providing Medicaid coverage for an expanding population of elderly people in need of long-term care. Baby boomers born between 1946 and 1964 are more likely to live longer and exhaust their resources than previous generations. By 2050, when the youngest boomers will be in their 80s, long-term care for the elderly will devour roughly 3 percent of the U.S. economy, up from 1.3 percent in 2010, according to the Congressional Budget Office. READ MORE

The ‘New Neutral’ Is Here

The great philosopher-turned-catcher Yogi Berra once said, “It’s tough to make predictions, especially about the future.” Apparently he knew finance like he knew baseball. This past decade we’ve seen a parade of financial developments that few people predicted, starting with a real estate crisis and continuing through today’s sluggish and uneven economic recovery.

Even when financial soothsayers are wrong about the future, they force us to think about why it will look the way it will. In other words, they challenge the conventional wisdom. A recent financial prediction -- known as “the new neutral” -- is no exception. READ MORE

The Unforeseen Fiscal Challenges of Uber-Like Services

The explosion of sharing or on-demand services like Uber and Airbnb is the beginning of an economic upheaval every bit as significant as the industrial revolution. The on-demand economy promises to radically reshape the cost of services and change the face of the workforce. These upheavals, in turn, are altering state and local government policies -- imposing unforeseen fiscal risks.

One of the fallouts, for instance, is an upsurge in the growth of temporary or part-time workers, such as Uber drivers, Airbnb hosts and Axiom Law attorneys. These workers are providing on-demand services at rock bottom prices. They are not working in downtown or suburban office buildings or for traditional employers, nor are they eligible for traditional health-care or pension benefits. The challenges for states and localities, therefore, will be how, in light of these changes, they adjust tax policies, revise regulations for zoning and public safety, and provide retirement benefits.  READ MORE

The ABCs of Cost Accountability

There’s an old adage: Politicians are all for efficiency, but only for programs they don’t like. That’s why asking if a program is cost-effective is usually a political nonstarter.

But sometimes what stuff costs becomes a hot political question. In fact, we’ve seen a predictable pattern since the mid-1980s: The economy starts to bounce back from the most recent recession; state and local leaders recall the dreadfully blunt ways in which they cut their budgets during that recession; and they vow that if they ever have to do it again, they’ll get the right information to whittle down spending in a strategic, focused way. Around this time they start to hear about an accounting method known as activity-based costing (ABC) that can solve this problem. READ MORE