G&G Associates Tax & Financial Consulting
American States on Verge of Default
Imhotep (Wisdom to You) G&G Readers,
“Where were you on July 1, 2010?”
Years from now, someone may ask you that question. And the reason he’ll want to know is…
July 1 marks the tipping point of the Great State Meltdown.
What’s going on?
Forty-eight states have borrowed too much and spent too much– just like the federal government. But the key difference is: they can’t print their own money to pay the bills. And to make matters worse… BY LAW… they must balance their budgets by July 1, 2010.
Sounds simple, right?
But there are two little problems in the way: massive budget shortfalls and plunging tax revenue.
It’s critical that you understand this escalating debt crisis. What it means for your hometown… and your portfolio.
In the coming months, three outcomes are virtually certain:
1.) States will make sharp cuts to social services.
2.) Taxes in the worst-off states will head higher.
3.) At some point the feds will be forced to step in with a bailout.
It all adds up to what the National Governors Association (NGA) calls…
‘A Lost Decade for States'
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Let me explain…according to a recent report from the NGA…
“The states are facing a protracted budget crisis, like none seen in the last 30 years and perhaps not seen since the Great Depression. This raises the vision of a ‘lost decade’ for states.”
The numbers are simply astounding…
“From 1979 through 2007, state tax revenues grew at an average rate of 6.5% each quarter from the year before, with only a single quarter of negative growth. But recently, this trend has reversed.
Starting in the fourth quarter of 2008 through 2009, state tax revenues declined an average of 10.7% each quarter, with no indication…that the bottom has been reached.”
The average American has no clue this is going on.
For years, voters have gone to the ballot box and checked “yes, yes, yes” next to every bond measure that could possibly “help” their hometown. Rising property and income taxes made it all possible.
But nothing goes up forever, does it? Property tax receipts have plummeted. So have income tax revenues – you can’t tax someone who’s out of a job.
And according to ShadowStats.com, 22% of adult Americans are out of work.
Now the bill is coming due and those same voters are about to say, “No, no, no… what have we done?”
Here are a few solutions put forward by the National Governors Association:
• Selling off state assets (surplus equipment and state office buildings).
• Eliminating or permanently altering Medicaid and retiree benefits.
• Increasing the number of people who leave prison and lowering the number who re-offend and return.
• Replacing schoolteachers with “online courses” for middle and high school students.
And that’s just for starters…
End of the world? No!
But…brace yourself folks and take action to protect your family and your financial portfolio.
If you need a personal one-on-one consultation, please feel free to contact us to setup an appointment.
If you missed a past G&G article, click on the link below to visit G&G Associates archive:
Until the next time!
Asante Sana (Thanks)
Tax & Financial Consultant, RFC
866-361-3872 toll free fax
“Words cannot give wisdom if they stray from the truth."
Ancient Kemetic Proverb
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