December 4,,
2009
GUEST EDITORIAL
Math Problems in Goffstown
By IVAN BELIVEAU
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For some Goffstown residents, high school math was sometimes difficult. This difficulty, especially with percentages, has followed them in life and has led to a few false conclusions.
Take for instance the stock market that peaked at Dow Jones (DJ) 14,000 recently and then dropped by 50% to 7,000. Today the Dow Jones is around 10,000 and people feel much better off.
Notice that it would take a 100% gain from 7,000 just to return to 14,000. In actuality, 10,000 is where the DJ was in 1999…and the $ has lost a lot of purchasing power since 1999. Where is the wealth creation in that scenario? Some people even have a greater problem with compound numbers.
A number that grows “exponentially” will double every few years depending on the % rate of growth. A 10% “rate” of return in a savings account would cause it to double in 7 years…a good thing. A budget that is growing at 7% will double every 10 years…a bad thing…especially over the decades. Try doubling in your head any number and observe where it goes after many “doublings.”
Do the same “thought exercise” with the $50,000,000+ Goffstown town and schools’ budget! This mathematical certainty is problematic, to say the least, and is a “show stopper” for retired people.
“It makes no difference to a widow with her savings in a 5% passbook account whether she pays a 100% income tax on her interest during a period of zero inflation or pays no income tax during a year of 5% inflation. Either way, she is “taxed” in a manner that leaves her no real income whatsoever. Any money she spends comes right out of capital. She would find outrageous a 100% income tax
but doesn’t seem to notice that 5% inflation is the economic
equivalent.” - Warren Buffet, “How Inflation Swindles the Investor, Fortune, May 1977.
The 5 % increase in the national price inflation rate from previous years is apparently the justification for 4-5% increase in the “contractual agreements” with town/schools’ employee representatives negotiated several years ago. That may be fair increase for people also getting “cost of living” increases at work; at least they aren’t going backwards financially. Everyone else who doesn’t get a raise, like social security recipients, is going backwards.
What about residents without jobs?
Did you get a 5% raise this year? Are you getting 5% on your savings account; do you have one?
How big must a savings passbook account be in order to pay for all that property tax price inflation?
Now do you understand why a property tax isn’t exactly a fair tax to a person on “fixed” or reduced income for whatever reason – young or old?
In these current economic circumstances with factual wage/housing price deflation, is there any reasonable justification for any increases in property taxes at all? Most of the budget increases in the town and schools’ budgets comes from “contractual wage/benefit price increases.”
Why does it make sense not to “level fund” a budget that increases mostly from “inflation taxes?”
What is going to happen locally when/if price increases from Washington policies really start?
“No new spending!”
I just thought that you had a Right to Know (R2K.)
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