Sunday, July 22, 2007

Letter From A Caveman

Milwaukee Journal Sentinel columnist Gregory Stanford compares State Assembly Speaker Mike Huebsch, unfavorably, to a caveman. Huebsch's mistake, in Stanford's view, is to fail to account for the modest spending by the state of Wisconsin, instead focusing solely on the high taxes. The following is my response to Mr. Stanford:

Dear Mr. Stanford;

Please allow this caveman to take a crack at the economic issues you brought forward in your commentary today. I think you have made several mistakes.

"Wisconsin- which taxes on the high end in comparison to other states- spends in the middle. The widespread assumption has been that Wisconsin, a big time taxer, must be a big-time spender", you write. Yet this caveman is not the least bit surprised by this news. High rates of taxation result in less economic activity. Less economic activity means the government has less money to confiscate from the private sector. Even with high rates of taxation, total government revenue can decrease because of the reduced economic activity. With less revenue, there must be reduced spending or more borrowing. Of course this phenomenon is well known among my cave-mates. There is nothing more discouraging than when we return home triumphantly with a juicy whooly mammoth only to have government take all but the scraps. Sometimes I don't even want to get off my rock in the morning.

"Yet that bogus assumption (that we are big spenders) guides policians to lower Wisconsin's high tax ranking by driving down spending" you write. Unfortunately, nobody in elected office is trying to drive down spending. At best they are trying to limit the increases in spending. In either case, the way to lower our tax ranking is not by reducing spending but by reducing taxes. Reducing spending without lowering taxes will simply result in a government surplus, not that that is all bad.

Another mistake that you make is to compare high taxes, or the high rate of taxation, with spending, in dollars. This is like comparing a sabre tooth tiger to one of your domesticated canines, or as the more evolved might say, comparing apples and oranges. Wisconsin's modest spending is the result of our high tax rate, and the corresponding decrease in economic activity and ultimately government revenue, certainly not frugality on the part of your elected officials. I think you will find that your government officials will spend all the money that they get from the private sector, and then some, regardless of the tax rate. As such, spending rankings are irrelevant. The key to economic growth is for your citizens to prevent the charlatans from taking too much of your money in the first place, thereby spurring more economic activity. You may borrow my club.

And finally, my cavemates and I no longer use ad hominem or ad bipedinem attacks when arguing, recognizing it as the weakest form of argument. Perhaps you could have been more charitable towards Speaker Mike Huebsch.

I suggest you rethink your whole argument. But what do I know?


In the Know said...

Denis -
While I don't diagree with your premise about taxes and spending, everyone seems to forget about the other part of the equation - that being "per capita income" Our tax rating is based on per capita income and around the Great Lakes, Wisconsin ranks second from the bottom in per capita income.

In the 70's, businesses were granted tax reductions to remain in Wisconsin. And we all know where the tax-shift ended up - on the property tax rolls.

Now I find it interesting that when you compare business profitability, Wisconsin ranks in the Top 10! Perhaps, if business would support increasing the per capita income, the legislature would control spending and reduce taxes, we could easily get out of the upper quartile of taxing states (as measured by per capita income).

Just my thoughts.

Nemo said...

I feel Denis has missed the point. There is little (read nothing) the state government can do to force the market to pay a higher per capita income without incurring predicted and unpredicted economic disasters on Wisconsin’s economy. Wisconsin is on the inverse end of the Laffer Curve. We need to lower taxes to increase revenue.

Denis Navratil said...

In the know, if I understand you correctly, you are saying that "we could easily get out of the upper quartile of taxing states" if businesses would pay people more money, then somehow politicians would control spending and reduce taxes. So it is businesses to blame for our high tax rate? Nonsense. Politicians, not businesses, deterimine our tax levy.

Denis Navratil said...

And Nemo, I agree with everything you said except that "Denis has missed the point." Did you mean in the know missed the point?

Nemo said...

Sorry, the lighting in my cave bad. Replace "Denis" with "Just my thoughts".