Tuesday, May 24, 2011

Relax on tax

Every time I hear a politician or commentator say that any infinitesimal tax increase will "kill jobs," "make people leave" or "drive away business," I just want to scream.

The first thing I want to scream is, "Prove it!" Provide some statistics to back up this claim. Show that people move out in droves when taxes go up. Connecticut instituted a state income tax in 1991. Did Greenwich, Darien and New Canaan suddenly become ghost towns? Not the last time I checked.

Speaking of our wealthy neighbors, people who live in towns like Greenwich do so because that's the kind of town they want to live in, knowing full well the taxes they are going to be paying. Westchester has similarly high taxes (higher, actually), but look at what you get for the money: good schools, safe towns, etc. Let's be frank: if we want these things, we gotta pay for them. Where, traditionally, are the best public schools? In towns with high incomes and relatively high taxes. New Jersey has pretty high taxes, but it also has one of the highest per capita incomes in the country. Why? Because people will live where they want to live or where the jobs are, not just where they'll pay the least in taxes.

Sure, some businesses might search around for the best tax situation they can find, but that search is usually slanted by the ridiculous deals that cities and states throw out there to lure large companies (who all too often meet the minimum requirements of their deals and then skip town as soon as possible). And if low taxes are the main determinant for business location, why are so many global powerhouses located in such high-tax cities as New York and Los Angeles? Because businesses need to be where the people they want to employ are, or near other members of their industry, or near transportation (airports, trains, etc.).

If taxes were the main motivator for choice of residence, then wouldn't everyone live in low-tax states like Tennessee and Florida? Again, people live where they do for a variety of reasons, and while I'm sure some people do look at the tax situation when looking to put down roots, how much influence can that really have in their decision-making process?

Well, I'm glad you asked! I did a completely unscientific survey of some friends, colleagues and relatives, wherein I asked them to name the top five reasons they live where they do.

I received responses from 17 people, and the most popular answers were proximity to work; being near family; and affordability (housing prices). People also cited wanting to be near culture; good schools; proximity to water; good restaurants; they grew up there; and convenient transportation.

Four people did cite lower taxes or the absence of a state income tax, but one Florida resident mentioned that although Florida has no state income tax, it does have lots of local taxes. However, taxes were clearly not the overwhelming factor that some politicians would have you believe.

Yes, it sucks when your taxes go up, but just like when the prices of gas, movie tickets and airline travel go up, we grumble a little bit, then we get used to it, and then we move on. Remember how much pain and suffering opponents said the 5¢ deposit on water bottles was going to cause? Yeah...

Honestly, can you imagine anybody saying, "Honey, we're going to have to pay the state an addition fifty bucks this year. Pack up the house. I'm renting a truck and we're moving"?

Heck, there was even an article recently about how the states neighboring Illinois were gleeful about a (GASP!) 2% increase in Illinois' state income tax. Here's the article: Neighboring states glad to see Illinois raise taxes, and here's a quote: "The idea of competing on state tax rates is hopelessly out of date," said Ed Morrison, economic policy advisor at the Purdue Center for Regional Development. "It demonstrates that political leadership is really out of step with what the global competitive realities are."

Listen, I'd love to pay less in taxes, and of course I want to see every level of government streamlined and made more efficient, but I also realize that the services we need, want and demand aren't free. So please, let's all stop listening to this annoying scare tactic and tell our politicians to get to work fixing real problems.

(Maybe if giant corporations like Fairfield-based General Electric paid more than a whopping $0 in taxes, we wouldn't be in such a mess to begin with.)

Begin typing scathing comments.......now.


Kevin McKeever said...

Stop confounding me with your logic and reasonableness!

Anonymous said...

THANK YOU! I would love to hear the scathing comments, but those people are probably too busy getting their yachts ready for the season to respond.

pastor666 said...

No scathing comments, just a question: How much is "too much" when it comes to taxes?

Do we stop being complacent when the effective rate hits 50%? 75%? 90%?

Streets of Stamford said...

Pastor666: That's a straw man argument. No one is proposing taxes that high.

pastor666 said...

Not today, SoS. But of course, there was a day when no one was paying any income tax in this country. The Revolutionary War, even, was fought over a 14% tax.

My question is: When are we allowed to get upset at the size of government (and the taxes that are needed to support it)? If the answer is "never", so be it. I just want to hear someone say it.

Mark said...

You are correct. Planet Money also did a show on this topic recently. http://www.npr.org/blogs/money/2011/04/29/135813061/studies-rich-dont-flee-high-tax-states

Suter said...

You're missing a point comparing increase in taxes and increase in price of gas or tickets. They're not comparable.

Gas and tickets prices are fixed amount. On average they would increase with inflation (gas is not good example here :)). With inflation your income would also increase, which means you'll be paying the same percentage-wise amount for this ticket compared to your income.

Taxes are different. They are already percentage of your income, house value etc. They are not fixed amounts that should be adjusted to inflation etc.

Any increase in taxes (percentage increase) leaves you with less cache compared to your income.

Keep in mind that every time your income increases (i.e. by adjusting to inflation) the amount of money that you pay in taxes also increases with the same tax rate.

If state wants to increase taxes, that means they want to spend more money (or actually they already spent them) that they do right now for additional things. Or someone wants to get a raise higher than adjustment to inflation.

If what we have in this state right now in terms of spending (schools, roads, etc) is enough, than there is no need to increase taxes.

$50/year might not be a lot of money, but I'd like to know how they are spent. I'm putting my time to earn it. Personally, I don't see a need to spend more state money in CT. Heck, we are paving Merritt Parkway probably 5th time in 2 years.

Streets of Stamford said...

Pastor 666: The slippery slope argument (or "Where will it end?") is a logical fallacy and holds no water. One cannot say "If they allow A to happen, then A+B+C are sure to follow" because it's impossible to prove. And, again, no one is proposing precipitous tax increases.

I never said that we shouldn't be upset about the size of our government. In fact, I said in my post that government needs to be streamlined and made more efficient. Our federal government is a bloated bureaucracy that needs to be scaled back. It's also a money trough where contractors and well-connected billionaires feed, and they would be resistant, to say the least, to having that spigot shut off. Parts of the defense budget have become a jobs program, where Congressmen and governors fight to keep the money flowing to their home state while decrying the waste and excess in the other 49.

However, we can't just slash and burn the government until it resembles a lemonade stand because, not surprisingly, people like and demand many of the services that government provides, such as highways, police, schools, libraries, clean air, clean water, safe food and the FAA, to name a few.

Even if the government is brought down to a reasonable, manageable size, the costs of running it and the costs of the services it provides will always increase, thus necessitating occasional tax increases - and that's what people need to relax about.

Streets of Stamford said...

Suter: I wasn't comparing the reasons taxes go up and the reasons the price of gasoline goes up. I was only commenting on people's usual reaction when they do go up.

Again, my point is that even if we get the size of government under control, costs are still going to rise, and people need to relax when they have to pay a little more for the things they want from their government.

Of course we should all demand accountability for how our tax dollars are being spent. However, we also get what we pay for. Trains, airports, municipal buildings, etc., in this country are, by and large, dirty and poorly maintained -- and we seem to be OK with that. If we want to keep paying low taxes (the lowest since WWII), then we'll continue to have crumbling, sub-standard public works.

Unknown said...

I happen to agree with your tax statements, but the real issue is when you pay taxes and do not get much. I think that trubles everyone.
Of course it is an issue of they got something, but i did not many times (or something different),
Gas prices or any comodity can not be put in this since 99% of the issue with them is people doing the speculation thing and getting "hollow" money on the rest of us jokers.
Interesting word verification - did you choose it? Budget

Streets of Stamford said...

Whitemist: I agree that we must demand accountability for how our tax dollars are spent. I think that if people knew that they were getting the maximum bang for their buck, they wouldn't freak out about the slightest tax increase.