Hicks: Sometimes it's about spending, not taxes

October 5, 2013

No matter the result of last week’s budget debate, we are in need of a serious discussion about tax and spending policy. It would come as no surprise to our founders that such an examination is in full swing at the state level, where the nexus of tax rates and public-service quality changes electoral outcomes.

In many states, there is growing frustration with government. This fuels tax reform such as that in Indiana circa 2007.

This phenomenon is widely misunderstood to be anger at high taxes, but it seems increasingly clear that taxpayer revolts are motivated by an equal share of disgust with the low quality of public services.

From 2004 through 2007, I lived in an Ohio town that, by its federal electoral patterns, was fiscally conservative. President Obama lost both elections there by whopping margins, and fiscally conservative GOP members held safe seats in a racially mixed community with high levels of educational attainment.

Yet, in two referendums in three years, this community voted overwhelmingly to increase local income taxes to pay for school improvements, including such things as AstroTurf on high school football fields.

Local taxes were already among the highest in the nation, and the schools would easily rank among the top 2 percent nationally.

Folks who wanted the federal government to spend much less were perfectly content to hike their own taxes to support local spending on first-rate public services.

The same phenomenon has happened here in Indiana, with school building referendums in high-quality school districts. I predict much more of it in years to come.

Quality public services seem likely to attract taxpayer investment, but the link between taxes and spending isn’t just a matter of trust with local officials.

The places in the United States that cry out the loudest for immigration reform are not places with racial or cultural problems. Anger over immigration is hottest in the states where the failures of U.S. government policy hoist the responsibility of border security onto local taxpayers.

The U.S. Department of Education provides another clear example. Established by the hapless President Carter, DoED actually educates no one. Except for the maintenance of a few million dollars of statistical services, the agency simply redistributed almost $90 billion to schools last year.

Indiana’s share is some $1.8 billion, or roughly one-third of our total state spending on K-12 education. This is a great stimulus for bureaucrats and grant writers, not so much for students.

The lesson is not that taxes don’t matter, but that actually being good at basic government is just as important to thoughtful taxpayers.•


Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.


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