Every now and then some things cross our view that are worthy of observation but don’t qualify for a full-blown exploration here.
Today is an important day for Missouri citizens and for Missouri politics. Looking at how something started can sometimes make one wonder, though, how it got to be what it is today.
March 15, 1907. The Missouri House approves a Senate resolution giving Missouri voters initiative and referendum. Three years earlier, Missouri became the first state in American history in which voters rejected initiative and referendum.
One of those who led the campaign in 1908 for voter approval of the two concepts was Doctor William Preston Hill, who told an audience, “This system does not aim to abolish the representative form of government we now have, nor to substitute another in its place. It leaves our representative system just as it is, but guards it from abuse and from becoming misrepresentative. It will perform the same function as a safety valve on an engine; silent and unnoticed when not needed, but most useful in time of danger.”
Several people in government, including those in the offices of the Secretary of State and the State Auditor, might wonder how upside down Dr. Hill’s statement is today. And who is doing the most abusing.
Edonomics. Senator Ed Emery, an engineer by training and by trade, gave the Senate a lesson in economics this week when he supported Senator Will Kraus’ bill cutting personal and corporate income taxes and increasing sales taxes during the next five years. Kraus maintains his bill is not a tax increase or a tax cut despite pretty clear wording. It’s a change in philosophy, he says. .
Dancing with words aside, we thought Senator Emery’s economics lesson was interesting. Understand at the beginning that he does not like the income tax.
“Taxes really don’t pay a state budget. Prosperity does. No matter how high we raise taxes there will be no prosperity, no revenue. This tax billl moves us in the direction of increased prosperity,” he told the Senate. He also told the Senate, “The income tax gives me an advantage if I spend money even if I don’t really need to spend it because it may be deductible, and so it helps me reduce my taxes. On the other hand if I’m taxed on consumption then I’m being frugal. And so the income tax doesn’t really reinforce frugality. The consumption tax does.”
It’s been a long, long time since the legendary University of Missouri economics professor Pinckney Walker lectured an auditorium full of young people in Econ 51. But I think one of the lessons he mentioned is that frugality has a place but it doesn’t do much to make an economy grow. Having sufficient income to buy things does. And having sufficient income so that consumption taxes don’t consume such a great percentage of that income that opportunities to buy other things–even if they are tax deductible–is curtailed is pretty important in a consumption-based economy.
In a government system that falls back too often on questionable slogans, we have been told that if you want less of something, you tax it. If you want more of something, you don’t tax it.
One of the great advantages to being a reporter is that reporters are exposed to great varieties of thinking on a great variety of issues. Sometimes the ideas fit the slogans. Then there are other times.
Speaking of thinking:
Having a conscience is such a burden. If we didn’t have one, we could feel free to ignore reporting the passage of conscience bills in the legislature that are the latest ideas some people have to nullify Roe v. Wade. House Speaker Tim Jones told members his bill fits in with Catholic doctrinal theory.
It’s always good to read something other than the headlines. Attorneys General as far back as we can remember have enjoyed putting out news releases announcing Missouri is going to benefit from a multimillion dollar lawsuit settlement against this or that corporation. We usually discover upon reading farther down on the page that Missouri actually gets about $4.60 or so because dozens of other entities are splitting the proceeds.
The $4.60 is an exaggeration, you know. Well, maybe not. This week Attorney General Koster announced Missouri was part of a $7 million settlement with Google, which had been collecting data from unsecured wireless networks without the permission of the people mentioned in the data. Google has agreed to destroy all of the collected data and not do this kind of thing in the future. And Missouri will get $324,000 or so.
Incidentally, that’s about 4.6% of the seven million dollars.
The legislature wrapped up the first half of the session yesterday and left for its spring break, coming back on the 25th. After that, except for Easter Monday, lawmakers will be working under increasing pressure until the clock runs out on them May 17th. There have been sessions where everybody needed a Spring break more than this one just to restore personal sanity. But Spring breaks are necessary for everybody to unwind a little, get some needed rest, and get some business and family time at home. Those who have not been part of a legislative session don’t realize how hard they can be and how important next week can be.
Where should government get its “cut”? When the wealth is first generated by the producer getting paid for the fruits of his labor, or when he makes a decision to spend some of his fruits on something? If the former, the producer might reduce his tax burden by not producing as much. Excessive and confiscatory taxation is a disincentive to production. This hurts both the taxed and the taxer.
The taxed might be coaxed into spending on something just to reap a tax benefit. If that something isn’t really needed, it hurts the taxed, and at least deprives the taxer if the expenditure is deductible. This is harmful social engineering of the spending habits of the producer…spend on something you really don’t want, just to get that tax write-off. Overspending on a huge house would be the classic example.
If, however, the latter situation applies, and the taxed can use his own free will not to spend on something, and sales tax doesn’t pour into the coffers of the taxer, the taxed will benefit from saving money, and the taxer will be the one who feels the pain. What would be so bad about allowing the taxed a little autonomy? Is he to be derided for frugality? Is that the world we live in now, where careful resource and money management is a negative?
I attended Dr. Walker’s Econ 51 class in the late 60’s and was fortunate enough to have him visit in our home since he was a Mizzou classmate of my father’s from the late 30’s. What I remember learning from him was that frugality led to savings, savings led to capital, capital led to investment, investment led to jobs, jobs led to prosperity, prosperity led to higher incomes, higher incomes led to increased savings and investment, and the cycle continues with a higher tide raising ALL boats. I believe Dr. Walker would be appalled to hear it suggested that economies grow more when income taxes are higher and sales taxes are lower relative to one another. Dr. Walker understood that high taxes of all kinds hurt personal consumption and I believe he would be a proponent today of lower income taxes, especially corporate income taxes which violate the principle of double taxation and used to be recognized as morally unjust. He would also, I believe, be a proponent of lower government spending than the rates at which state and federal governments spend today so that the consumer would have more autonomy over his property and would agree with another old saying that, “Wealth (and therefore capital investment) are created more by how much you save than by how much you earn or spend.”