When I moved to Los Angeles two years ago, I decided not to buy a house but to rent in hopes that the frightfully high prices would retreat soon. Sure, I could have bought a home back then, what with all the crazy mortgage options and low teaser rates that would have let me step into a house I otherwise couldn't afford. But it seemed like a gamble and not the wise move.
Silly me. I should have grabbed one of those low teaser-rate mortgages knowing that the government would bail me out of my bad gamble.
President Bush's plan announced last Thursday could, among other things, temporarily freeze those low teaser interest rates for many fairly recent home buyers. The announcement helped the stocks of some local companies; Countrywide Financial Corp., Fremont General Corp. and KB Home were among those that rallied. And it surely will help some borrowers keep their homes.
But I can't help but think of the dispiriting effects. Among them: The buyer with good credit may well spend years paying a higher interest rate than a less creditworthy borrower who took a flyer on a teaser rate.
Though it can be painful, the correction in home prices needs to be made. And any mortgage plan may slow the fall in home prices. That means people like me may have to pay rent for longer than we otherwise would.
The government, once again, has sent this message to those who made prudent decisions: Silly you.
Gasoline consumption in California was down 0.6 percent through August as compared to the same span last year, the state's Board of Equalization announced recently. And last year, gasoline consumption was down a bit from the year before. Maybe all those Priuses are having some effect.
With consumers buying a little less gasoline, you'd expect the taxes that the state collects at the pump would be down a bit, too, right?
Nope. It's up. Way up.
That's because as the retail price of gas goes up, the state gets a bonus as the state charges a sales tax of 6 percent. County and local governments jump on the sales-tax bonanza, too. So in Los Angeles, you pay 8.25 percent in sales taxes on each gallon of gasoline. The result: Even if you're buying the same amount of gas, you're paying more tax. A lot more.
Example: If a gallon of gasoline sells for $1.50, you'd pay about $1.80 in sales taxes in Los Angeles to fill up a standard sized tank. But if a gallon sells for $3, you'd pay twice as much $3.60 in sales taxes to buy the identical amount.
I've written about this before, so excuse me for repeating, but the state is gouging consumers more than oil companies. Unlike oil companies, the state does not have to spend the extra money to extract harder-to-get oil from the ground. The state is getting a lot more money for doing absolutely nothing.
How much more? The Board of Equalization estimates sales tax revenue for the state was $3.3 billion last year, almost twice as much as the $1.7 billion it got in 2002.
Sales taxes are fine for goods whose prices don't vary all that much. A fairer way to tax a commodity with a volatile price like gasoline is a simple per-gallon tax.
Charles Crumpley is editor of the Business Journal. He can be reached at email@example.com .
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