Monday, October 13, 2008

Trouble for Local Governments

As if local governments didn't already have enough burdens; their troubles are about to grow. Check out this article in the Philadelphia Inquirer. The summary is that local governments are also in real trouble with the current state of the economy - prices continue to rise while revenues decrease. The revenue decrease is for a couple of reasons: primarily, it is because the real estate transfer tax (tax due to governments when homes are sold) is dramatically decreasing due to a slow real estate market. Furthermore, as homes are forecloused, people do not pay their property taxes.

Local governments are under seige from a variety of different sources - increasing expenses, inflation, decreasing revenue and an increasing demand on their services. To balance the books, look for governments to cut back on services, increase taxes, or both, and this at a time when services and low taxes are needed most.

This is unquestionably one of the major crises facing America today, and it is one of the quieter ones as well. It will be interesting to see how local governments respond.

No comments: