We Owe, So Off to Tax We Go

I read a lot of bond and fixed income reports to try to better understand the world of credit. The Lord Abbett Muncipal Income Fund report is interesting because it gets into what governments borrow for and how they pay for that debt.

People like to say we need the government because we need to pay for “things like roads and schools and hospitals.” A lot of the money does go to those. But some also goes to things like sport facilities. And it’s not just Brooklyn paying for a new NBA arena, but smaller cities like El Paso paying for a minor league baseball park. There are also the vague areas of improvement and development. Maybe that money is well spent, maybe not.

Either way, the money must be repaid. Much of the money comes from taxes, but some comes from more specific sources, such a New Jersey’s surcharges on drivers  "who have excessive points for traffic violations or have been convicted, in court, of specific offenses such as driving while intoxicated (DWI) and driving while suspended." Does that sound like some of your customers?

The state also requires new-car dealers to collect "a 0.4 percent surcharge on the new sale or lease of vehicles priced $45,000 or greater or on vehicles having an EPA rating of less than 19 miles per gallon." In essence, the state is saying rich people should pay for what it considers unnecessary extras. Then the state will have money to help really, really rich people pay for basketball arenas.

 

 

Last modified on Thursday, 16 August 2018 18:11

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