Monday, November 29, 2010

This is discouraging: More taxes just means even more spending

In a column for The Wall Street Journal Stephen Moore And Richard Vedder explain that Higher Taxes Won't Reduce the Deficit. Here are two key paragraphs:

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In the late 1980s, one of us, Richard Vedder, and Lowell Gallaway of Ohio University co-authored a often-cited research paper for the congressional Joint Economic Committee (known as the $1.58 study) that found that every new dollar of new taxes led to more than one dollar of new spending by Congress. Subsequent revisions of the study over the next decade found similar results.

We've updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.
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Read that line again:

"... we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending."

We really need to vote out of office any politician who proposes increasing spending.

(Hat tip: TaxProf Blog)

1 comment:

Luke said...

Sadly, that appears to be universal problem. Fascinating... and, yes, discouraging.

Of course, I think the idea of spending rising to match your budget is a fairly common problem. Unfortunately for us, the government does not appear to have as much accountability as I do with my budget. And that government accountability appears to have not been there for a long, long time.

~Luke