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Responsibility #81
To the People of the United States of America:
6th postscript, April 1994. In this 9th paper on
Taxes/Appropriations/Organization Reforms, we continue the exploration of some 1993-1994 examples that illustrate how far we have to go, in appreciating the needs for reforms.
12. In the 5th postscript, Responsibility #71, we used for discussion a newspaper article of August 20, 1993, with the headline "Michigan's big gamble on education funding--State kills property taxes, lacks new source of cash". We can now update that material through extracts from two tandem articles published March 16 and 17, 1994. They were headed "Michigan voters opt for increase in sales tax" and "Michigan reshapes school financing--Closely watched plan to fund education with sales tax is approved".
"Michigan voters overwhelmingly chose a sales tax over an income tax Tuesday to generate $10.2 billion for public schools and cut property taxes." "The sales-tax increase was backed by Engler, a first-term Republican who campaigned in 1990 on a promise to cut property taxes. Engler said the challenge was to get voters to understand their choices." "A foe of the sales-tax plan, [a] Democratic gubernatorial hopeful, said voters will soon feel cheated."
"The experiment also includes provisions to begin equalizing the spending gaps between rich and poor districts throughout the state ..." "Michigan is leading a national movement to fundamentally alter the financing of public education. It is being examined by a number of states; 28 are now mired in lawsuits about the inequities of financing by property taxes." "The Wisconsin Legislature last month approved two competing proposals that would limit a school district's reliance on property taxes. Officials in Vermont, South Carolina, Rhode Island and New Hampshire have asked for detailed projections of the financing plan."
Did the Michigan voters really "understand their choices"? The 1st article went on to say: "Before Tuesday, voters had rejected five sales-tax increases since 1978 and had turned down seven other plans dealing with school finances or property taxes since 1972." Indeed, nine months earlier, "On June 2, voters [had] rejected an Engler-backed sales-tax increase to cut property taxes and boost school spending. However, this election was different. Voters knew if the sales-tax increase lost, the backup plan to raise the income tax would take effect."
Isn't this just another case of political expediency--shifting sources of revenue where the political cost is least? Keep the peons happy, or at least sedated by placebos. Certainly don't raise the issue, of where it is most just to levy the costs of elementary through high school education!
Granted the replacement by sales taxes (of that major portion of education funding that had been provided by property taxes) is in the right direction. It falls far short of being the most equitable. Unless the powers-that-be can make a convincing case, that the most equitable means of paying for any government provided or mandated outlay, has been enacted; it is as the Democratic opposer said. In a matter of time, the placebo will wear off, and the voters will resent (feel they have been cheated by?) the heavier burden of sales taxes. Then the next gubernatorial candidate will come riding in on his steed, holding high his banner "I PROMISE TO REDUCE SALES TAXES!"
Where do sales taxes fall short as a source of education funding? Answer: PROPORTIONALITY. Relative to direct business taxes and personal income taxes, sales taxes are not as directly proportional, to the benefit of (and the need for) education, as an input to human factors of production, and distribution of a product or service. In the case of services, many (most?) States do not apply the sales taxes to (some or all) services. Thus professional services businesses (such as doctors, dentists, accountants, consultants, et al), whose existence is predicated on quality education of its employees, would pay no sales taxes and thereby contribute naught to education funding.
Please refer to Responsibility #71. There the case is made for elementary and high school education to be funded by two sources. Businesses should pay a direct tax, based on a percent applied to the total wages and benefits paid to employees. The other would come from individual income taxes.
As cited above, Michigan did resolve the disparity problem of educational funding levels among school districts. In #71 it was stated that this pooling could, perhaps, be even better done on a nationwide basis. With a number of predications, it was proposed to have the federal government collect the education taxes from both businesses and individuals.
In the March 17, 1994 news article, it was further stated that additional education funds will come from tripling the cigarette taxes. Here Michigan is far afield of a just levying of taxes. There is no correlation of tobacco products with the benefit of (or the need for) education, beyond that for business products and services generally as above noted.
Everyone who has an axe to grind (a social problem to solve) wants to do it for free (no direct pain). So whether it be the federal government, the State, or on down to those who govern the "Burgs", everyone wants to do it with tax deductions, tax credits, punitive or "sin" taxes, or shares of the proceeds from government run lotteries.
Before the days of extensive turnpikes, freeways, interstate highways, etc., there would be an occasional news story alerting drivers to steer clear of such and such Burg. The reason was that such Burgs employed speed traps, as the prime or only source of revenue, to run their government. In light of the unprincipled and unbridled ways that our politicians at all levels today levy taxes, perhaps those small town shysters weren't so bad!
In fact, that example is still with us in altered form, with our biggest cities. In the editorial cited in a previous essay, dated December 1, 1993, entitled "D.C.'s tough on crime, parkingwise", the following quotes are taken: "Washington collects nearly $70 million a year from traffic violations, making them the third-largest source of revenue after income and property taxes." "California cities regularly tack unrelated levies onto traffic tickets. One state senator wants to add a 50 percent surcharge ... to pay for public-school security." "Chicago Mayor ... recently recommended that the city close a $35 million deficit by jacking up parking penalties."
If you think those examples are bad for abuse of taxes, check out the next essay.
Publius IV
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