Taxes aren’t the solution!

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Taxes aren’t the solution!

It is that time of year again.  The Massachusetts Legislature is about to begin our annual budget debate on Beacon Hill.  While Governor Patrick and several liberal legislators are suggesting that the only way to solve our current fiscal situation is via new or increased taxation, the fact remains that the State budget is full of earmarks and special interest spending and we have seen very little reform.  Taxes aren’t the solution to this economic situation.

Rather than focus on additional taxes, in this recession, government should be lowering taxes.  It is Economics 101 that when government collects fewer taxes from the citizens, the additional money is put into the stream of commerce.  This will stimulate economic activity, which leads to higher sales and employment tax collections and less people dependent on government programs and services.  This is exactly the logic of the federal government lowering interest rates or sending everyone a rebate check when the economy slows down.

The Majority Party on Beacon Hill does not agree with such a proven economic theory and has proposed more than a dozen new or increased taxes.  The most widely discussed has been Governor Patrick’s proposed 27-cent increase in the state gas tax.  This would give us the highest such tax in the nation, at a total 50.5 cents of taxes per gallon.  An increased gas tax will hurt those who least can afford it.  Many folks of low or modest income are high consumers of gasoline and would bear the brunt of this increase.

In a direct assault to the tourism industry, Governor Patrick has revived his proposal to raise the meals tax and the hotel taxes.  While tourists would be paying a portion of such increases, we all go out to eat and the psychological impact on the restaurant and hotel businesses is potentially devastating.  If the message to would be visitors is that Massachusetts is raising our gasoline, meals and hotel taxes, it is only logical many would consider other vacation destinations.

Other ideas of our tax-happy Governor include increasing Registry of Motor Vehicles fees.  Governor Patrick is proposing to “update and consolidate” fees at the Registry to raise over $75 million in new revenue (taxes).    The Governor has also proposed the sales tax exemption be eliminated on all alcohol, candy and sweetened beverage purchases. This idea would raise over $121 million to fund the growing size and scope of state government.  

Not to focus his ideas on just alcohol, Governor Patrick also wants to add a new 5-cent deposit on noncarbonated drinks, including water, flavored water, coffee-based drinks, juices and sports drinks.  This tax would raise $20 million annually as the state gets to retain the money for uncollected bottle deposits.  We have also heard talk about vacation home rental taxes, higher income and sales taxes, and let us not forgot about those toll increases.

Instead of increasing taxes, I believe by putting more money into the hands of the hardworking American people, history shows that we see more people saving for their future needs (thus less need for government entitlements) and investing or spending into the stream of commerce (to stimulate our businesses and create employment).  It is perhaps an overly obvious point, but one always worth pointing out, every time we get someone off a government assistance program and into a job, we gain in three distinct ways.  First, government no longer has to subsidize the unemployed worker with unemployment or welfare benefits.  Secondly, that same person is now a taxpaying contributor to government via their payroll taxes, sales taxes and social security contributions.  And thirdly, and perhaps most importantly for the long-term, this individual is now a productive member of society with a sense of self-worth and pride.  

If taxes are the answer to our slow economy, it should be to lower them and let the American people stimulate the economy.   Government does not need or deserve any additional tax revenue.  The well publicized ethical and patronage problems within state government need to be corrected rather than additional taxation of the hard working people of Massachusetts.

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