OCEAN ISLE BEACH – Never let a public official tell you that he or she “has no choice.” That’s a sure sign that the government is about to reduce your choice, at least a bit.
There are plenty of city, county, and state officials claiming right now that they have no choice but to raise taxes. Without more revenue, they say, we won’t be able to deliver the services that you, the citizens, have come to demand from government.
This is, of course, correct as far as it goes. The population is growing in most of North Carolina. In parts of the state, in the major metropolitan areas and coastal communities such as my Brunswick County locale this week, a better word than growing would be “exploding.” More people means more demand for services: more kids in school, more neighborhoods to be policed, more cases in the courts, more people on Medicaid.
More people also means more tax revenue, it is important to remember. Ultimately, all taxes are paid out of people’s incomes. The larger the population, the more income there is to tax when it is received, spent on real property, or spent on taxable goods.
Still, it is possible that the cost of government will, at some times and places, grow more quickly that revenues to government. For example, health care and education services have for decades seen higher-than-average price increases, partly because it is harder to achieve productivity gains in these services (this is sometimes called the Baumol hypothesis, after the economist who popularized it) and partly because they are often paid for by third parties, such as tax-advantaged insurers or governments, that lack the information and incentives to make efficient choices.
There’s that word again: choice. When the cost of current government is growing faster than the existing tax base, many politicians exclaim that they have no choice but to jack up taxes to compensate. Town officials in Shallotte, just a few miles from where I’m staying at Ocean Isle Beach, are saying they can’t help but impose a 10 percent tax increase this year. That’s the same rate of increase nearby Pender County taxpayers will shoulder. A majority of commissioners in Lee County say they were compelled by inevitable pressures to adopt an increase nearly twice as large, at 18 percent. Mecklenburg, Guilford, Union, possibly Wake – in all of these jurisdictions, the story has been pretty much the same.
And it’s been misleading. There is always an alternative. Davidson County Commissioner Fred McClure offered one in his county that would head off a tax hike. In Gaston County, fiscally conservative commissioners not only rejected an initial tax-hike proposal from their manager, but then asked for a list of options for enacting a tax cut to stimulate economic growth. These are hard choices, certainly, but they are choices.
Given how far most governments have grown beyond their proper, limited scope, choosing higher taxes is going to be the wrong course to take. Higher taxes mean that people keep less of their own money to spend however they see fit.
Public officials, make the right choice.
Hood is president of the John Locke Foundation.