Tuesday, February 19, 2008
Jefferson County: $4.6 billion in the hole
“Shhhhh. Someone might find out!”
The Birmingham News recently reported that many Jefferson County Commissioners don’t want their colleagues to discuss county finances publicly because it might “rattle” investors. Jefferson County has the distinction of being $4.6 billion in debt, 43% of this debt carrying variable interest rates—you know, the kind responsible for sinking the housing market and triggering our present recession.
Naturally, few in government want this news to get out. People may get the idea that one county racking up $ billions in debt and charging it to future generations may be bad economic policy for the present time as well.
Investors know that a county close to $5 billion in debt will eventually have no choice in the future but to raise taxes—substantially. And when local governments need more revenue, they tax businesses first. But the problem with raising taxes (especially on businesses) is that it drives businesses and residents away, thereby hurting the overall tax base.
Businessmen have longer memories than politicians, and a much better grasp of history. That is why people always beat their governments. If they can’t find loopholes, they create them. If they don’t have enough clout in government to create them, they vote with their feet. No people, no taxes.
But Jefferson County does not have a revenue problem anymore than a compulsive gambler has a revenue problem.
The only long-term solution for any failed government is to drastically cut spending, privatize (and preferably eliminate) government services where possible, and cut—not raise—taxes. Cutting taxes and spending is the biggest draw for investors Jefferson County could make.
In his book, For Good and Evil: The Impact of Taxes on the Course of Civilization, historian Charles Adams points out that virtually every struggling government in history became successful and prosperous when it drastically lowered taxes. But the flip side is also true throughout history: every prosperous government that raised taxes weakened and ultimately collapsed.
The Jefferson County Commission must take drastic measures to save the county from inevitable bankruptcy. I suggest turning the county into a “tax haven” in the South. For it is certain that if the Commission does not act, Jefferson County will become a desert island.
Posted by Editor at 2:51 PM