Bringing Washington Budget Policies to Tennessee

Is Washington in a mess budget-wise because it spends more money than it takes in? Yes. Is that the reason Washington is in a mess budget-wise? No.

Obviously a budget deficit mathematically represents spending in excess of revenue, but is the deficit the problem or a symptom? I confess I don’t know as much about the national budget (of course, they haven’t actually passed one for two years either) as I do the state budget, but it seems to me that a major problem in Washington is that slightly over 50% of Americans no longer pay federal taxes. And when half the people don’t pay taxes, it’s easy for them to want more benefits paid for by other people’s money. And since we like to get things, it’s easy for politicians to succumb to giving us things and before long, they’re giving out more than they’ve got money to pay for.

With President Lyndon Johnson, the war on poverty and the great society really got going, and it just kept growing. And it got out of hand. Perhaps when this mess all started we didn’t see where the premise would lead us or, if we did, the initial cost wasn’t so bad. After all we were a wealthy country, and we had the money. So why not help out the less fortunate. And now look where we are.

Well, if we’re not careful our state politicians are about to start down the same path – if we have some extra money, why not help folks. In this case, the Tennessee Democratic Party has proposed that if state tax revenues continue to rebound that we use part of the extra money to reduce the sales tax on groceries and use the other part to pay for more college scholarships. And, to be honest, many Republicans have clamored for the same thing. In my opinion, it’s bad idea.

I know some conservatives would be shocked to hear me say that. To them we should reduce taxes whenever there is an opportunity and starve the government into submission. I’ve got no problem reducing taxes, and I’ve got no problem putting the government on a diet. So what’s my problem?

My problem is the trend – reduce what people have to pay in taxes while increasing the “goodies” we give away. Lower revenue and increase expenses. Sounds like Washington to me.

You see, we are a sales tax based state and payment of sales tax is often the only thing that keeps those who would want more state government benefits from clamoring for them. Having a sales tax makes them have to pay some of the cost of the benefits they want. It helps us avoid the situation in Washington. Everyone having some “skin in the game” because they aren’t exempt from sales tax helps keep everyone from voting themselves money out of the state treasury.

Furthermore, the tax on groceries is the broadest, most stable part of our sales tax base because we exempt so many other things (that’s also why the sales tax rate we do have is so high). So, in an economic downturn, the tax that keeps the bottom from completely dropping out is the sales tax on those items we have to keep buying. After all, in a bad economy, you will buy food, but you will put off buying the new car, refrigerator, washer and dryer, sofa, etc. These are the big-ticket items that can produce a lot of sales tax in one fell swoop. But they are also the items you put off buying in a bad economy.

So, take the sales tax down or off of food, and we have a fiscal mess that starts to look like Washington. The people who have been getting benefits and will be getting the increased benefits will not want to give them up. They aren’t paying for them anyway. And the politicians who gave them those benefits know that the benefits got or kept them in office so taking away benefits is tantamount to giving up your office. No elected official (or very few) are willing to essentially vote themselves out of office. So, you have Washington.

I, for one, am for leaving the Washington approach to taxation and public benefits in Washington. We don’t need to duplicate their problems here too.