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Less is more

Suppose you owned a convenience store. Suppose you didn't change sticker prices, but you instituted a new policy of "keeping the change," so that when customers paid for $15 items with a $20 bill, you retained the extra $5. Would customers consider this to be (a) a reduction in company expenses, or (b) a price increase? Let me phrase the question a different way: suppose the government put out its annual budget proposal. Suppose that programs weren't eliminated ; suppose further that under this proposal, taxpayers had to give more money to the government at the end of the day. How would you describe this situation?

Well, that depends. If you're a taxpayer, you'd of course call this a tax increase. On the other hand, if you're the New York Times, you might describe it as a "spending reduction." In fact, I can almost certainly guarantee that you'd describe it that way.

New Jersey is facing a large budget deficit for next year. As usual. And to mitigate this problem, our unelected Acting Governor, Dick Codey, has proposed a budget for next year which cancels a property tax rebate program. In other words, they keep more of our money. Astonishingly -- or perhaps not so, knowing the political leanings of the Times -- the paper doesn't seem to realize that this represents a tax increase. Under the proposal, the government will keep about $1.5 billion extra of our money. And yet the Times claims:

The proposed budget for the fiscal year starting July 1 does not raise any of the three major taxes: sales, income or corporate business. And Mr. Codey scrapped a proposal to tax 401(k) retirement accounts.

Rather, the biggest source of new revenue would be $500 million from the sale of state assets.

Taxpayers having to give an extra $1.5 billion to the state isn't a "source of new revenue"?

The minor fiction here is that the property tax goes to the municipality, while the rebate comes from the state so the rebate is a "spending program" because it involves a transfer from one government pocket the state's to another the town's. This is a dual fiction first, because the towns are just creatures of the state anyway and their budgets are intertwined, and second, because from the point of view of the taxpayer, what on earth difference does it make? The fact is that at the end of the day, we're paying $800 extra per year in taxes.

The major fiction, of course, is the oft-repeated liberal idea that tax cuts "cost" money. The Times -- and keep in mind that this was a news story, not an editorial -- wants to convince us that the money belongs to the government, and hence that it is "giving" it to people -- "spending" it -- when it doesn't take as much as it usually does. Of course, from a pure bookkeeping standpoint, a tax cut has the same effect on the deficit as a spending increase does. But no rational person would confuse the two -- just as no rational person would think that a store returning change to a customer is the same thing as a store spending more money (even though, from a pure bookkeeping standpoint, it has the same effect on the bottom line.)


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This page contains a single entry from the blog posted on March 9, 2005 9:11 AM.

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