A Temporary Tax Hike? Please...

Something is seriously wrong in politics.

Either:

a) Politicians think the voters are stupid;

b) Voters actually are stupid;

c) Politicians are stupid;

d) Politicians and Voters are typically uninformed and have no 'political memory' and only think in the short term.

Many citizens might shout with glee that the answer is "c" or most pundits would jump to answer "a" in a more sober, reasoned manner. But the answer is "d".

What is "political memory"? The failure of a political memory is forgetting past policy decisions and their later impact, or policy failures, or assuming that things are "different" today. Politicians and voters routinely fail to have any political memory.

Look at the current plan to temporarily raise income taxes to get through the Commonwealth's budget crisis. Once again, politicians fail to acknowledge the real problem. Much like an addicted gambler or heroin user, addicts spin elaborate stories and fantasies to justify their behavior and to explain that they don't really have a problem.

The addiction in government is spending. In government, when times are good and the treasury coffers are full it is time to spend a lot of money. Times are good, so it is time to expand government to do more good things! When times are bad and the cupboards are bare, it is time to spend a lot of money because people need it and it will "help" the economy. The addict always has an excuse to justify their continued behavior.

So Governor Rendell and other addicts call for a temporary 'quick fix' just to get them through a tough time.

Here are some examples to refresh your political memory:

1) Allentown "needed" the EMS Tax ($52 a year from all who work in the city) and the $2.5 million a year to help "fix" its fiscal troubles. This year, we face a $9 million dollar deficit. Of course, the structural deficit and exploding bureaucracy is not the problem. I often joked during the EMS debate that if you "gave City Hall two and a half million dollars, they will spend all three million of it". Budget numbers show this to be the case.

2) The Sales Tax was introduced in Pennsylvania in 1953. It was 1%. It was to be used solely for education funding. Today it is 6%. Most is not used for education. Education relies heavily on property taxes. So to ease this property tax burden, we "need" casinos. And now we need table games because the slots don't provide enough revenue.

3) When the Federal Income Tax was established by the 16th Amendment to the Constitution, some advocated that a cap of 6% be placed into the amendment. This provision was laughed off as unnecessary because the tax would never exceed 6% and, in fact, it might lead to all the tax brackets to be raised to 6%! (OH! The lost opportunity! Could you imagine a flat tax of 6%? Our economy would be exploding!) Well, maximum tax rates peaked at over 90% for a number of years. Today, the maximum is 35%. In 1913, the corporate tax rate was 2%. Today, it is 39% and the second highest in the world. Also, the complexity of the tax has exploded. In 1913, the tax form was two double sided pages. This INCLUDED the instructions to complete the form.

from Taxhistory.org

So the first 1040 form was two pages, including instructions and worksheets. Today, the 1040 form is only one double-sided page. According to the Tax Education Foundation, in 2005 the instruction booklet was 142 pages long.

The 1913 law was only 14 pages long (the whole bill was 27 pages but the other portion dealt with tariffs) and the regulations were 400 pages long. In 2005, the tax code, the law, is now an incredible 1.3 MILLION words long and the IRS Regulations are just under 5.9 MILLION words - around 55,000 pages.

4) And let's look to Massachusetts which also enacted a temporary income tax hike. They face the same situation as Pennsylvania. Bad economic conditions and a decline of revenue. (Again, spending is not the issue, remember?) They also faced a $619 million dollar deficit, so state politicians looked to a temporary tax hike as an emergency provision to plug the hole until conditions get better. According to the Middlesex News, "Rep. David P. Magnani yesterday emphasized that the hikes would only be in place for 18 months and that revenue generated would only go towards past bills."

The Boston Herald reported "The Democratic House leadership yesterday agreed to plug last year’s budget deficit with a temporary, 18-month hike in the state’s income tax".

The Boston Globe reported, "House leaders plan to push for the state to deal with the fiscal... deficit and pay old Medicaid debts by temporarily increasing the state income tax from 5 percent to 5.75 percent, sources said yesterday."

Ironically, The Globe & Herald articles were published on July 4th. How could that be? For newspaper trivia fans, you might know that the Middlesex News became the MetroWest Daily News in 1998.

However, these articles appeared in 1989.

And, two decades later, the 18 month 'temporary' tax hike is still in place. And it is still in place despite the "unusually harsh language" from the Chair of the Massachusetts House Ways and Means Committee, "I speak for the Democrat leadership on this issue. Governor, you are not getting permanent new taxes out of the House. Do you get it?” - The Boston Globe, July 7th, 1989

Beware the false and empty comments and promises of politicians. They are quite adept at word games. Voters must learn that if it ain't in the law, it ain't gonna happen. According to the Beacon Hill, June 23, 1997:

House Speaker Thomas Finneran disputes Anderson’s contention that Beacon Hill promised to roll back the 1989 tax increase once the debt was paid.
“Maybe somebody at the time said, ‘Well, gee, maybe we should or maybe we could consider rolling it back,’ but Barbara has been around long enough to know statements come and go and language is statutory. I don’t know how someone would attach legitimacy to a comment made in the hall, in a hearing, or even on the House floor.”

When will politicians and voters learn? The EMS tax should have only been used for property tax reduction or to free up money for debt reduction by relieving the police and fire budgets. The 6% tax cap on federal income tax should have been added to the amendment language. And if you are gonna pass a "temporary" tax hike, make damn sure there is a statutory sunset provision in the law.