The Road to Serfdom

A radio interview this morning involving a Michigan GOP apparatchik reminded me of the abysmal economic knowledge and preening disingenuity of the average politician. I think the perp was Senator Ron Jelinek, but I didn’t actually note who this faceless ignoramus was. If I am wrong on this, I apologize. Whoever it was was from Three Oaks.

In any event, the looter in question was advocating floating the idea of an extension of the Michigan sales tax to include services, and a reduction in the rate to 5% from 6%. He attempted to make it sound confiscation revenue neutral, but was forced to acknowledge that it would represent a tax increase. The interviewer noted that advocating tax increases was an atypical Republican position. Wouldn’t this increase costs for consumers, the host asked?

The response was (I paraphrase), “No, we’re talking about a tax on business.”

This does make sense if we assume that every service business required to charge the new 5% tax decides to cut its prices by 5%. Otherwise, I’m afraid consumers will be paying it.

I know it is fashionable for Liberals to talk about taxing business as if this was somehow entirely divorced from taxing individuals, but the fact is that businesses do not pay taxes – taxes simply form part of the cost of their products and services. You pay their taxes when you buy those products or services.

For example, all the services that General Motors, Ford and Chrysler buy in Michigan, including health care for retirees, will go up by 5%. Let’s not expect the Shrinking-Three to absorb the increase.

The radio host noted that a services tax would hurt businesses in border communities. The response was that most Michiganders don’t live close enough to a border to be able to avoid such a tax. That this contradicts the idea of a “business tax” went unremarked. that it holds Michigan citizens in contempt is obvious. Maybe a change of this nature could contribute to a more effective tax regime, but when discussed in the terms above it is obvious that that is not the objective.

I think the real question is how many Michiganders will decide to relocate to another side of the State border – or be forced to.

It is certainly disappointing to hear a putative Republican talk this way, but that’s not the worst of it. At the National level we have the Democrats promising to raise both taxes and the minimum wage. A tax increase has the same effect at the National level as it does at the State level.

The increase in the minimum wage, however, has far more insidious effects. Minimum wages set above the value of the labor disproportionately damage small business, because small business provides most of those jobs. The truly damning point, though is this:

… only 5.3 percent of minimum wage earners are from households below the official poverty line; forty percent of minimum wage earners live in households with incomes $60,000 and higher; and, over 82 percent of minimum wage earners do not have dependents.

That last is excerpted from Amy Ridenour’s National Center Blog. The whole thing is worth reading, and you can do so here.

Update: 8:42PM
H/T BizzyBlog

…states that lacked an income tax saw stronger economic growth, stronger personal income growth, stronger population growth, and stronger job growth, than states with the highest income tax rates. States without income taxes also, shockingly enough (not!), had fewer budget problems than the states with the highest income taxes.

But income taxes are just one part of the tax equation. Let’s now turn to a comparison of the ten highest taxed states and the ten lowest taxed states. The Texas Public Policy Foundation crunched the numbers (.pdf), taking income taxes, sales taxes, property taxes, gasoline taxes, alcohol taxes, and all the other state and local taxes to determine the overall tax burden in each state.

Read it all, and find more at WILLisms:

1 thought on “The Road to Serfdom”

  1. Raise taxes in a faltering economy.. sounds like Hoovernomics to me.. all they need to do is restrict trade and it’ll be the 30’s again in Michigan.My answer is you want the sales tax change – fine, if you repeal the SBT and income tax.