Don’t tax you, don’t tax me. Tax that feller behind the tree.
Or better yet, don’t call it a tax at all: Call it a fine, forfeiture, fee. Really, any word except “tax” will do.
Such is the unifying philosophy behind many recent inflammatory fiscal developments on the national stage — Obamacare included — and within our state and local governments.
Jonathan Gruber has been vilified for (among other things) noting the “tortured” way that sections of the Affordable Care Act were written in order to stay in the good graces of both the Congressional Budget Office and the public. But such budgetary gamesmanship has long been an open, and bipartisan, tactic in Washington. When “spending” became a dirty word, Congress phased out earmarks. In their place, it doled out treats to special interests through the tax code, now awarding more than a trillion dollars each year in federal tax breaks, carve-outs and loopholes. Arithmetically, letting someone pay less in taxes is identical to spending money on them, but voters don’t see things that way.
If the political toxicity of spending and tax hikes encourages obfuscation at the federal level, it has led to far more destructive and distortionary policies at the state and local levels.
Voters hate taxes and will punish any politician who threatens to raise them (or, in many cases, does not accede to cutting them). But schools, roads, police forces, garbage collection, firefighters, jails and pensions still cost money, even when you cut them back as much as voters will tolerate. So instead of raising taxes, state and municipal governments have resorted to nickel-and-diming constituents through other kinds of piecemeal, non-tax revenue raisers, an outcome that is less transparent, and likely to worsen the economy, inequality and social injustice.
Think of recent, infuriating stories on civil asset forfeiture, in which law enforcement seizes cash and other property from people who are never charged with crimes. Often the departments that do the seizing get to keep the proceeds, which leads to terrible incentives. Officers around the country now attend workshops that offer tips on the best goodies to nab (go for flat-screen TVs, not jewelry).
Forcing cops to remit forfeiture proceeds to the state or local treasury, rather than allowing an eat-what-you-kill policy, might discourage bad behavior to some degree. But at heart, the reason why such actions are so commonplace is that government revenue has to come from somewhere , if it ain’t coming from taxes.
Onerous traffic fees and court fines — which have been blamed for long-simmering tensions in places like Ferguson, Mo. — often have a similarly mercenary motive. They disproportionately afflict the poor, but hey, the poor don’t vote, and besides, extracting more money from people who have the gall to drive around with a broken taillight sure sounds more politically palatable than raising property taxes.
In the midst of widespread budget crunches, states and cities are also increasingly trying to monetize other behaviors seen as sinful or wayward, like marijuana use, strip club patronage, and gambling. Hence the explosion of state-sponsored lotteries, which prey on (mostly poor) people’s mathematical illiteracy and desire to Help the Children, even though lottery revenues earmarked for education are often offset by corresponding cuts to other funding sources, like taxes. States have also been jockeying to expand casinos and other venues for legalized gambling, which voters seem to see as generating free money.
Then there are the expensive occupational licensure requirements for jobs that don’t seem to require state-level gatekeeping, like hair-braiding. These kinds of barriers to entry are opposed by both the right and the left, and their proliferation over time — now covering about a third of workers, up from 5 percent in the 1950s — has mostly been blamed on industry protectionism. But presumably state legislatures also find it hard to ignore the revenues these policies deliver to government coffers. The average licensure fee for a low-income occupation is in the $100-$200 range in most of the country, and in some states reaches north of $400.
Miscellaneous charges, fees, forfeitures and other “non-tax” revenues currently represent about a third of state and local own-source revenues, according to census data, and these totals are rapidly rising. Meanwhile the power abuses, market distortions and regressivity these policies incentivize and then inflict upon the public are piling up. Money may be fungible, but not all government revenues should be treated equally. It’s time to take off the fiscal blinkers and start rewarding politicians who have the courage to advocate raising revenues the old-fashioned way: through taxes.
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