Governments Need Money And You’re Their Victim

The big story last week was that the city of Detroit filed for bankruptcy. They have one massive financial mess and a whole lot more problems on top of that. The biggest challenge is the over $9 billion of IOUs for retirement plans and retirees medical coverage.

When the economy isn’t growing, government revenues aren’t growing, either. Unfortunately, governments spend way more a year than the rate of inflation and population growth. Politicians also make all kinds of promises to get elected and to tell us exactly what we want to hear: You CAN have it all and your taxes won’t go up. It’s nonsense but it gets them elected. Plus, they won’t be the same people around when the mess hits the wall. It’s evident in every jurisdiction from federal to provincial to cities. It probably isn’t any different than we tell ourselves or our families: We can keep up our lifestyle and won’t have to change a thing, do a budget, or admit we can’t afford something. We should have it all – even if it’s on credit cards.

But for us and for governments, there’s a day when we hit the financial wall and then it’s only radical adjustments that’ll work. For cities, which are the hardest hit, it’s a constant search for revenues. When houses don’t go up in value, the property taxes they collect also go down – or they should.

In the US, millions of homeowners massively overpaid their property taxes because cities were really really slow in adjusting the market values downwards. After all, the last thing any jurisdiction wants to do is to lower what you owe them.

When I drove from New York to Washington, DC last month and back, I paid 17 tolls and over $51. A couple of cities in New Hampshire are actually suing some good Samaritans for plugging expired meters. Yup, wouldn’t want anyone to prevent them from writing a lot of expired meter tickets.

In Calgary, the city overcharged homeowners $51 million last year. Instead of a refund, they’re now debating what to do with the money. I have a $65 overpayment here from a client. What do you think will happen if I don’t refund it?

To renew the registration of my company here in Alberta is one click at a registry office and done. That used to be $20. This year it’s $150, which is an insane rip-off. But every company that wants to stay in business has to pay it.

Photo radar and red light cameras are a huge money maker. Sorry, the story that photo radar is critical in reducing accidents isn’t totally true. Just check the stats Highway Transport Safety Board. In Florida, some counties have now admitted that they’re reducing the time of orange lights after denying it for years. Why? Shorter Orange generates more red light tickets! Longer Orange reduces them a lot. With over $150 million in fines, the State REALLY wants the income.

And last week I drove through a town next to Phoenix called Paradise Valley. I would guess almost every second intersection has a red light camera. That’s in a town of not a lot of traffic.

Governments need money – and there’s only one person they can get it from and that’s you. We vote for these people and I’m looking forward to the day when the promises of politicians for more of this and that gets greeted with laughter and a collective ‘no thanks.’ One day we’ll have to teach the politicians what we want. But maybe first we have to run our own financial life in that way.

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