Tuesday, March 28, 2006

Progressive Fallacy Number One

1) We can afford things we really can’t afford if we can get a millionaire to pick up the tab.

Here is an illustration of the fallacy plucked from a story written by Paul Bass for the New Haven Independent, a blogpaper:

“John DeStefano is not waffling when it comes to Gov. Jodi Rell's plan to wipe out the estate tax and further enrich the state's richest 2 percent. DeStefano's opponent for the Democratic gubernatorial nomination, Dannel Malloy, has been waffling on the issue. (He's from Stamford, after all.) So DeStefano continued pressing the issue Monday at a senior center in Hartford; he called for tax breaks to help seniors afford long-term care instead of an estate tax rollback. Click here to read Christine Stuart's report. The issue, first raised on this site, represents the one real policy difference between DeStefano and Malloy.”

New Haven Mayor DeStefano wants to give tax breaks to seniors – a political group both more numerous than millionaires in Connecticut and more likely to vote in favor of giveaways. DeStefano wants to “pay for” the loss in tax revenue incurred by the breaks by collecting it from millionaires. DeStefano’s plan is in answer to a plan offered by Gov. Jodi Rell, who wants to abolish the estate tax.

Now then, if Rell is successful in abolishing the estate tax, the state may suffer a loss in revenue. Rell wants to abolish the estate tax – or, indeed, any tax – because she perceives a connection between high government expenditures and job flight from Connecticut to other states. Businesses leaving the state take jobs and tax revenue with them; lost taxes that, incidentally, might be spent servicing the needs of the seniors whose health care DeStefano is concerned about.

The chief thing to notice about Rell’s plan to abolish the estate tax is that it is not likely to come to fruition. Millionaires and others affected by the estate tax even now continue to pony up; and so, at the present time, there has been no decrease in state revenue. There will be no decrease in state revenue if – assuming the tax is abolished – streams of new tax revenue mysteriously appear owing to the abolition of the tax. Although it may appear counter intuitive, it occasionally happens that net tax revenue increases when specific taxes are either lowered or abolished. Estates and taxes attached to them are portable. When a millionaire moves from Greenwich, Connecticut to any other state where the millionaire’s assets are not exposed to raids by the revenuers, Connecticut loses taxes. When the process is reversed, Connecticut becomes a net tax revenue gainer, because millionaires and others attracted to the state by the abolition of the state tax also pay other taxes; and, Lord knows, there are plenty of those around, thanks to DeStefano and others who are concerned about the financial assets of seniors.

In any case, the thing worth noticing in Bass’ story is that, at present, no tax has been abolished. The estate tax is still there, pitched at an angle that creates a flow of tax payers from high tax to low tax states. Employment opportunities have been flowing down that ramp to other states for some time, and the flow will not be reversed until the angle of the ramp is adjusted. It was a Democrat, John F. Kennedy, who said that a rising economic tide “lifts all the boats.” That would include life rafts occupied by seniors.

Nothing has changed. The estate tax has not been repealed. It is there, along with a bevy of other taxes, increasing the pitch of a ramp that, numerous reports have shown, threatens to become a superhighway conducting employers and taxable asserts away from Connecticut. Since the state legislature is controlled by Democrats who think like DeStefano, there is virtually no chance that Rell’s plan will go forward.

So then, why is Destefano proposing to increase the cost of government by giving “tax breaks to help seniors afford long-term care” when he knows that the breaks will raise the ramp rather than the tide?

This is where Progressive Fallacy Number One comes to the rescue. As long as Connecticut is rich in plunderable millionaires, there is no need to worry about ebb tides – or the certain consequences of extravagant spending.

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