Tuesday, July 28, 2009

Why I oppose the Columbus income tax increase

Update 8/7: The income tax levy passed 52%-48%. Again, I suspect that the scare tactics worked. However, a headline in the Aug. 6 Columbus Dispatch almost suggests that the city is looking for ways to spend the money: "City starting on wishlist of services." *sigh*.

If you're not a Columbus resident, don't tune me out. What I am writing has to do with tax increases of all kinds, not just those for the city in which I live and work.

A little background: Columbus, like many large cities, has trouble balancing its budget; but like the State, it is legally obligated to do so. Mayor Coleman and the City Council have determined that the problem is now so severe that they see the need to increase the city tax rate from 2% to 2½% of income from wages and rents. The issue is coming up for a vote next Tuesday, August 4.

First, let me make clear that I am not a strict libertarian. I acknowledge that the public safety and general welfare require some government; albeit considerably less than what we now have. I also understand that the proponents are fearful of catastrophic cuts in public safety, public services, economic development, and/or parks and recreation if this tax increase fails.

The proponents also want to impress on us the fact that this is the first rate increase Columbus has requested in 27 years. I, for one, am not impressed.

Let's take a moment and see where this kind of logic is taking us. For the sake of argument, let's say that the city, the State, and the Feds each add 1% to their income/sales tax rates each year (in reality, the State will ask for less, so we'll include the county and special sales taxes, such as COTA, as part of the State share). So, the three levels of government, each getting a 1% higher tax rate*, will be adding 3% to the overall percentage collected for Federal, State, and local taxes. Most middle-class taxpayers are currently paying 35-40% of their income in taxes. Let's split the difference and say 37%. In eleven years, government will consume half of our income. In 32 years, government will consume all of it.** Somewhere along the way, government will have destroyed any incentive we would have for bettering ourselves. There clearly would be no reward for doing so -- the government is taking that reward away from us.

As to the predictions of doom if it fails -- proponents of the income tax are using exactly the same technique that school districts use to hike up the property tax (you don't want to deny your children a good education, do you? -- but that's a post for another time) .

Belt tightening is painful, no matter who does it; but sometimes we have to. Governments that increase taxes in hard times are taking money away from investment in the private sector, which is precisely what we need to end this recession.

Yes, I know, tightening the belt will cost government jobs, something to which I am personally sensitive; but you know what, the private sector is losing jobs, too. Even with 11% unemployment, there are jobs to be had -- maybe not the nicest ones, but something that will put bread on the table. I was laid off at the age of 38, having had a master's degree from a prestigious Eastern school. For 2½ years, I worked as an office temp. Did I make as much as I would have liked? No. Did I get depressed about my self-worth? Yes. But you know what? I eventually did find a better job, and am a stronger person for the experience. If I lose my job again at the age of 59, I will get through it again.

The real problem is that we have added so many luxuries to the basic necessities of government (and public education), that we have lost sight of just what those necessities are. City government is in the business of providing police and fire protection, and maintaining streets. If the city does nothing else for its tax dollars, it is doing enough. The city can charge for refuse collection -- most cities do. Even better, the city could let private enterprise compete for residential refuse collection, just as is done for commercial. The city can charge for using its recreational facilities. The city can lengthen its maintenance schedule for vehicles and parks for a year or two until the emergency is over. The city can put off some capital improvements for a year or two. Such decisions are not politically expedient, but they do reflect leadership and an understanding of reality. In the unlikely event that the city is run so efficiently that it cannot "do more with less" (as Gov. Voinovich famously said to State employees in his 1991 inaugural address), then it needs to do less with less.

Columbus, let's face reality, and set an example for our elected officials. Vote no on Tuesday.

* I am calling a "rate increase of 1%" a change in rate from say, 5% to 6%, which will increase the taxes themselves by a different percentage. Just in case you were beginning to think I was trying to lie with statistics. For the sake of illustration, I am also ignoring the impact of steadily rising property taxes.

** Is this a reduction to the absurd? Perhaps, to make a point. I cannot envision government taking all of our income, but I suggest to you that the point it illustrates is still valid. Factoring in property taxes will reduce the number of years it would take for government to seize all of our income.

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