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A
sharp decline in state revenues this year and the
resulting budget shortfall of $1.5 billion have
brought tax-raisers out of the woodwork. Some of them have reacted with apparent
glee to the Commonwealth’s fiscal plight
because, in their minds, it provides them with an
opportunity to urge once again that taxes be
increased.
Virginia’s
tax-raisers won’t be satisfied until the
Commonwealth moves from a low-tax status to what
they believe is its rightful place among the
nation’s highest-paying states. “Responsibility” to these folks means
enactment of budgets and new laws that greatly
expand the role of government in our lives. “Leadership” means advocacy of more
taxes.
These
tax proponents are activated by a philosophy at
odds with the Commonwealth’s tradition and the
attitude of most Virginians. The generation of George Mason and James
Madison believed that people have an obligation to
be self-regulating to the greatest extent
possible. That
means not only that individuals should exercise
self-reliance and initiative, but also that
private institutions such as family and religious
organizations undertake to address needs that
individuals can’t meet.
The
famous Scot, Adam Smith, was of that same
generation. He
concluded that economic behavior was better
organized and regulated by an Invisible Hand than
by the detailed commands of government. That Invisible Hand, of course, is the
marketplace.
For
more than two centuries, Virginia has done well by
following the course laid out by Mason, Madison
and Smith. The
fact that Virginia is a low-tax state and does
things differently from the other states should be
a badge of honor, not evidence that the
Commonwealth should change to resemble Maryland or
Massachusetts.
Raising
taxes is not simply a matter of adding and
multiplying. The
relative size of the tax bite on citizens reflects
the share of the economy taken up by government. This is a statement about the prevailing
political philosophy in Virginia.
When
taxes increase at a rate faster than the rate of
growth of the economy, the burden of government
becomes an economical drag. There is no longer any substantial argument
about this effect. At
some point, raising taxes can retard economic
activity and yield no net increase in tax
revenues.
Tax-raisers
refuse to confront this possibility. Their assumption is that a tax increase
always produces a net income in revenues that can
be applied to new or expanded programs. They also refuse to recognize that some
social programs which high taxes are intended to
fund often have their own negative economic
effect. Well-meaning
programs calculated to aid the needy can undermine
self-reliance and industriousness by creating
long-term dependency on government.
Even
increased taxes and expenditures for public
schools — perhaps the most sacred of government
programs — must be looked upon with skepticism
and a cold business eye.
There
is entirely too much wishful thinking among the
tax-raising elites. A budget downturn forces elected officials
to consider seriously how the results we agree
upon can be achieved at lower cost and in a
radically different way than in the past.
Governor
Mark Warner recently illustrated this kind of
hardheaded thinking when he highlighted the
commendable performance of a school that was able
to improve dramatically by a change in the
attitudes of faculty, administration and students.
All this was done without spending
substantially more.
Before
we allow government’s role to expand even
further in Virginia, we should insist that our
elected officials undertake a thoroughgoing
consideration of how state government goes about
its business. The
private sector is forced to do this periodically.
Unless
we learn to improve government’s productivity
and efficiency without constantly demanding more
and more funding, we will soon be living with an
economy that is dominated by the public sector. We will have dramatically changed the
political philosophy of Virginia without
consciously undertaking to do so.
--
Sept. 3, 2002
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