Hardly a day goes by without a story in some newspaper discussing some state’s dire financial straits. And there is almost always a state legislator being quoted saying if the state doesn’t find a way to increase revenues — i.e., raise taxes — soon, thousands, or even millions, of poor people will lose essential services.
The goal is to soften up the public’s natural resistance to tax increases so that when state elected officials say they must raise taxes, the public will acquiesce.
The claim would be more believable if we didn’t have umpteen years of facts and history testifying against it.
Yes, most states are facing a real budget crunch, and some may even be approaching financial collapse. But it’s not because they tax too little; it’s because they spend too much.
In good economic times liberal state legislators, and perhaps the governor or other statewide elected officials, claim the state needs to spend more because it has the additional money. It would be immoral — IMMORAL — for the state to sit on a pot of cash when there are people who could be helped by that money.
(Note: Mentioning that the state could return some of that money to the taxpayers, as a Taxpayer Bill of Rights would do, is usually considered uncouth in elite, politically correct society.)
However, in bad economic times those same people claim that the state must spend more because people are hurting more. It would be immoral — IMMORAL — for the state to refuse to spend more with so many needy people, even if it means raising taxes.
You’ll notice that the latter argument is hitting its stride in Washington, DC, these days.
However, the Mercatus Center at George Mason University recently published a graph comparing state and local government spending versus private spending. Between 1950 and 2009 (60 years), private spending increased by five times its 1950 level. State and local government spending, by contrast, increased by a factor of 10 — essentially doubling the private sector.
The joke is told that hubris is when a son kills his parents and then throws himself on the mercy of the court because he’s an orphan. In politics, hubris is when a state spends much faster than the private sector and then throws itself on the mercy of the taxpayer because it’s broke.
Today’s TaxByte was written by IPI Resident Scholar Dr. Merrill Matthews.