What’s the Half-Life of a “Temporary” Tax Increase?

Milton Friedman famously noted that, “Nothing is so permanent as a temporary government program”and Ronald Reagan sagely observed that “a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”

Two great Americans

They’re both right, but they should have included the other half of the fiscal equation. Repealing a tax, even a “temporary tax,” is just as difficult as getting rid of wasteful spending.

Simply stated, once politicians get access to a source of additional revenue, it’s feeding time at the zoo and good luck getting them to give the money back. Here’s a sobering example from Philadelphia.

Skeptics say there’s no such thing as a “temporary” tax. Like the two-year property tax increase City Council passed in 2010 that, lo and behold, is still with us. Or another dreaded levy: the wage tax. It was passed in 1939 as a short-term fix for the city’s finances, but succeeding generations have nonetheless been forced to accept its bite in their paychecks. The latest tax under consideration for immortality is the 1 percent sales-tax increase the state allowed Philadelphia to impose in 2009 as a bridge through the recession.The increase – which raised the tax on most goods and services in Philadelphia from 7 percent to 8 percent – is slated to expire next June. City and state leaders are now talking about making the increase permanent, with the extra money being put toward one or both of the city’s greatest needs: the struggling School District and the vastly underfunded public employee pension fund.

The bulk of that excerpt is a straightforward recitation of how temporary tax hikes become permanent tax hikes, but I have to object to the final sentence. The “city’s greatest needs” are replacing the failed government education monopoly with school choice and reducing the excessive pensions for over-compensated government bureaucrats – such as the city’s former “managing director” (whatever that is), Camille Cates Barnett.

I also can’t resist commenting on the craven behavior of the city’s Chamber of Commerce. I though the national Chamber of Commerce was bad when it endorsed TARP and the faux stimulus, but the local Chamber may be even worse.

Joe Grace, director of public policy at the Greater Philadelphia Chamber of Commerce, said, “We have not seen any evidence that extending the 1 percent is going to have any negative impact on the local businesses.” The chamber is also backing a $2-a-pack cigarette tax dedicated to the schools. “Our belief is the School District needs resources,” Grace said. “We’re working, along with many others, to close the school-funding gap, really by any means necessary.”

So Mr. Grace thinks more funding for a failed education bureaucracy should be achieved by “any means necessary.” Well, I think a 100 percent tax rate on Mr. Grace should be at the top of the list.

Heck, if France can tax at 100 percent, then so can the City of Philadelphia, and Mr. Grace is a deserving recipient of such a levy.

But there are some opponents of the tax, though they’re not exactly libertarian heroes.

…members of the nearly all-Democratic Philadelphia delegation have raised concerns about using the 1 percent to help fund the schools because it lets the state off the hook for its share of education funding. Danilo Burgos, president of the Dominican Grocers Association, argued that giving sales-tax revenue to the schools was “a Band-Aid.” The state, which has control of the city’s schools, should be responsible for devising “a real solution for our schools.”

In other words, they want more money to waste, but they want to take it from people in the rest of the state.

Sort of reminds me of what the great Frederic Bastiat wrote more than 150 years ago, “The state is that great fiction by which everyone tries to live at the expense of everyone else.”

But if enough people act as if that fiction is reality, then you get too many people riding in the wagon and not enough people pulling the wagon. That’s a good description of what’s happening in places such as Philadelphia and Greece.

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The Obamacare Problem Isn’t Messaging, It’s Statism

The political elitists in Washington are worried that the American people are lukewarm – or even downright hostile – about Obamacare.

You can imagine two of them having a conversation, with the first saying, “Don’t these stupid peasants realize we’re giving them stuff?!?” and the second responding “We need the riff-raff in flyover country to feel grateful so they’re more likely to vote in favor of continued dependency!”

It never occurs to them that maybe, just maybe, people value freedom. Or, even if they don’t care about liberty, perhaps they object to the fact that government costs a lot and delivers very little. Nobody likes paying for a steak and getting a hamburger, after all.

But the statists think it’s just a matter of messaging, and this mindset is even seen in news coverage.

Here’s some of what Politico wrote today.

The Obama administration and its health-law allies are gearing up this summer to slice through three years of confusion and opposition to Obamacare. They’ve got their work cut out for them. Obamacare won’t have a shot at success unless millions of people sign up for insurance — the healthy as well as the sick. …Organizing for Action, spun off from President Barack Obama’s campaign operation, went up with a seven-figure TV ad buy in June, touting the new benefits and promising to offer “the truth” about the law. Enroll America, a nonprofit group with ties to the White House, wants to leverage the grass roots across the country and engage big-name celebrities for the cause.

To put it mildly, they have their work cut out for them.

Thanks to absurd regulations and mandates that prevent the insurance market from working properly, young people and healthy people will have to pay far more than the market rate to obtain insurance.

Needless to say, not that many people will be dumb enough to take that deal, regardless of how many empty-headed Hollywood millionaires take part in a PR campaign telling them it’s the “cool” thing to do.

Especially when another brainless part of Obamacare basically allows people to wait until they get sick and then get insurance. If you’re wondering how that will work, just imagine how auto insurance would work if you could wait until after your DUI accident to get a policy – and you got subsidized by all the responsible drivers!

Obamacare defenders may delude themselves into believing that the mandate will work, but the penalty for noncompliance (oops, apologies Chief Justice Roberts, I meant the “tax” for noncompliance) is a lot less than the cost of an insurance policy.

And I don’t think the American people will be pleased when the army of new IRS agents starts harassing them to sign up for a bad deal.

It’s almost enough to make me feel sorry for the hacks at OFA and elsewhere who are trying to sell this lemon.

Simply stated, it doesn’t matter how much lipstick you put on a pig.

Let’s close with some amusing Obamacare cartoons, starting with one by Bob Gorrell which sort of shows how the IRS will enforce the new law.

By the way, my favorite IRS-related Obamacare cartoon can be seen here.

Here’s a good cartoon by Steve Breen about the cost of the new law.

For what it’s worth, some of us were predicting runaway costs even before the legislation was enacted.

Let’s finish with this amusing cartoon by Gary Varvel. Technically speaking, Nancy Pelosi was right.

Though I imagine she thinks we just need some clever messaging so we understand why it’s okay that bad things are happening to children, retirees, and low-income workers.

Let’s conclude with some optimism. Click here to read my six-part hypothesis on why this bad law can be repealed.

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