Saturday, January 24, 2009

Taxes Going Up

There are signs in the wind, Managing Editor of the Journal Inquirer Chris Powell writes in one of his columns, that the powers that be in state government are in the process of reverting to the usual template now that the economy has tanked in Connecticut.

That template involves lots of talking the talk about spending cuts. But when push comes to shove, the ladies and gents in state government ultimately reach an accord that allows for tax increases.

“It may be easiest for Rell to start conceding by agreeing with Democratic legislators to increase the state income tax on the rich. A tax system's progressivity is usually a fair issue. But the degree of progressivity should be fixed as a general rule and determined on its own merits, not adjusted opportunistically whenever, as now, the government class wants to fend off pressure to restore some relationship between the government's income and the public's.

“Of course no one advocating raising taxes on the rich in Connecticut is seeking a revenue-neutral progressivity. No, as usual raising taxes on the rich is being advocated only to reduce interest in examining all the special-interest elements of spending policy. In effect the tax-the-rich-more folks are saying: Don't worry about the waste, failure, and extravagance of government, for we'll get the money from someone else.

“If the status quo of public expenditure in Connecticut could be protected by imposing a special tax on the poor, then most advocates of taxing the rich more, being members of the government class themselves, would be perfectly satisfied, as they were perfectly satisfied when the state income tax was enacted in 1991, the product of a deal between the rich and the government class, whereby the state capital gains and dividends taxes then paid by the rich were largely subsumed into their new general state income tax payments and the middle class suddenly had to pay a lot more on its wages.

“The campaign for more progressivity is conducted in the name of helping the poor by employing an ever-larger government class. Yet this campaign never notes the long failure of poverty policy. As Ronald Reagan joked, the country had a "war on poverty" and poverty won. It's still winning, especially in places like Hartford, Bridgeport, and New Haven. But Connecticut's advocates of more progressive taxation couldn't care less.

“A reasonable progressivity in taxation is good not only for raising revenue but also for democracy, for keeping the rich from becoming too powerful, a means of social control. Indeed, on the federal level, where the government issues irredeemable money -- money backed not by any commodity, such as gold and silver in olden times, but backed only by the government's power to require its acceptance "for all debts, public and private" -- social control is really the only purpose of taxation. But if taxation is too progressive and not broad enough, it can destroy civic virtue, which is exactly what Connecticut's advocates of greater progressivity mean to do.

“For American government has become a massive, cynical, and convoluted scheme of cost shifting, what the French economist Frederic Bastiat called "the great fiction by which everybody tries to live at the expense of everybody else." When people realize that they can use the government to vote themselves more and more benefits for which they don't have to pay, they lose incentive to pay attention to government generally. Just to maintain their attention and their civic virtue and to maintain the government's own virtue, all but the destitute should have to pay a clearly identifiable tax that is large enough to be felt, and resented when it's wasted.”

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