Thursday, October 18, 2007

The market for taxes

I spent the day in Fargo testifying in an asbestos case. I was the corporate representative for a defendant who never made or sold anything with asbestos but such are the vagaries of litigation. I had never been in Fargo and certainly did not have a comprehensive tour. But the part that I saw seems to have been oddly frozen in about 1959. I couldn't decide whether I liked that or not.

But back home, I see that Paul Soglin wasn't much impressed with the AFP rally in Madison and thinks that those who oppose more and more taxation in Wisconsin are penny wise and pound foolish. He notes that private firms certainly invest in the future, even when the return on that investment is not immediate and he is, of course, right about that.

But there are problems with the analogy. First, they invest in the hope of a return and the market will eventually tell them whether those hopes were realized. Government is not as readily disciplined.

Second, they do not simply decide what revenue is required to go out and do what they think is wise. They can't repeatedly raise prices. They can't charge more than their competitors without providing something that is worth the difference.

In other words, there is no market to tell them that their decisions are good or bad. You may say that, with government, it is the voters who impose this discipline.
Probably so, but that is what the AFP rally was about. People opposing taxes are the faces of discipline.

It seems to me that in a high tax state, the notion that citizens might believe that their government ought to be able to do what it needs to do without new revenue is hardly outrageous.

Businesses make that kind of decision every day.

15 comments:

mickey said...

Rick, businesses DO invest in the future. And if they invest unwisely they close their doors.
If government invests unwisely they TAKE MORE of your money.
You and I have been paying into Social Security for decades.
How has government invested those funds? Wisely??
Diamond Jim Doyle told us that the problem has been "too much spending". Then he creates the biggest State tax increase in the history of the United States.
At what point do the well meaning Democrats and liberals among us acknowledge Doyle's dishonesty and ethical failures?
I won't hold my breath for them to do so.
Soglin pines for the 60's.
He was relevant then.

Anonymous said...

I thnk that it's important to save government money and why not save a bunch by giving state assistance to students who want to attend private universities in the state. What say you Rick -- should Marquette continue to suck off the public teat?

Anonymous said...

CORRECTION!

"I thnk that it's important to save government money and why not save a bunch by NOT giving state assistance to students who want to attend private universities in the state."

Anonymous said...

I read a good suggestion the other day where the State could save some money. The writer asked if we really need courthouses in every county now that were not in the horse and buggy days.

I would think that with modern technology we could do away with most (have only regional courthouses) and have a system that maybe would be more just.

ps you really should change the security settings of this site.

Anonymous said...

I wonder what kind of compelling story the TV media could make if they researched how much money state and local governments could save by privatizing a great deal of the services provided by public employees? Not everything could or should be privatized but there would be significant savings and the Capitol would be free from the well mannered folks in the green shirts.

Anonymous said...

There is a market -- there are multiple markets -- that tell government whether its decisions are good or bad. When GE Healthcare chooses to expand its Wisconsin presence, it is making a business decision based on such factors as the presence here of an educated workforce, proximity to the University of Wisconsin, and the desirability of Wisconsin as a place to live -- all factors that government decisions hugely impact. GE Healthcare could, of course, choose to move, lock, stock, and barrel, to Fargo, where state taxes are much lower, and where you'd have proximity to the University of North Dakota, in Grand Forks. Haven't seen that happen yet. Another way in which economic actors make market decisions that tell government whether its decisions are good or bad is where individuals choose to live. Five million or so of us have made the choice to move to or stay in Wisconsin. If you don't like our relatively high level of taxation, our good schools and universities, our pretty competent if from time to time annoying public sector employees, our parks, our highways, our beaches, you are, of course, at liberty to move to Fargo. Your taxes will be a lot lower there! Last time I checked, however, there hasn't been a great population influx to North Dakota.

Anonymous said...

Anon 11:57 -

Your take it or leave it approach is not going to solve anything.

There is alot of room for improvement and as you wish to refuse to see it some see it and want to make it happen.

Do you think we should still have a courthouse in every county? I think its worth looking into... as well as other things. It's not only your state, its our state.

Dad29 said...

GEMed's decisionmaking equasions are a bit more complex than you'd have us believe, there, Anony.

First off, the business has been in this State for ...oh...about 50 years. That means that the labor force has some 'rolling stock' skills which are useful to GE.

Further, GE Healthcare, as part of GE, has a certain worldview which is different from a "local outfit." GE has a vast number of constituencies to satisfy, unlike a local outfit. You may get the drift.

Finally, with 50+ years in the area, there are lots of correspondent-professionals and scientists which work well with GE's staff in areas like R&D.

No point trying to build all that in Fargo. It would be a 50 year process.

Rick Esenberg said...

I thnk that it's important to save government money and why not save a bunch by giving state assistance to students who want to attend private universities in the state. What say you Rick -- should Marquette continue to suck off the public teat?

Well, I am not a radical libertarian. I don't oppose scholarships or loans for people who can't afford higher education and, while private funding is better, I don't think it's realistic to think that government can get out of that business. And, since we are going to be in the business, we ought to give people the same choices that their wealthier classmates have.

But, if I were a radical libertarian, I would respond by saying that it should. And so should the UW.

Rick Esenberg said...

GE Healthcare could, of course, choose to move, lock, stock, and barrel, to Fargo, where state taxes are much lower, and where you'd have proximity to the University of North Dakota, in Grand Forks. Haven't seen that happen yet.

One of the things that I like to do when I travel is read the local paper. Apparently there are quite a few high tech firms in Fargo and jobs that go begging. Local business organizations were undertaking a campaign to try to attract North Dakota State grads living in the Cities back to Fargo in conjunction with NDSU's game today against Minnesota in the Humpty Dome. They're passing out NDSU Bison towels with a URL of a site listing available jobs.

jp said...

Move from the Cities to Fargo!
They can't be serious.

Anonymous said...

"But, if I were a radical libertarian, I would respond by saying that it should. And so should the UW."

You should do a little research before you pound the keyboard, Ricky.

Thirty years ago, the state paid roughly 50 cents on the dollar for operating the Madison campus. Today the state's contribution is down to less than 20 cents on the dollar.

How is it possible that the academic reputation of the Madison campus has risen even as state support has fallen so precipitously? It's because the various Chancellors (Shalala, Ward, now Wiley) have operated the campus more like a business enterprise in recent years. As state support has fallen, what is called "enterprise income" has quadrupled.

Dad29 said...

Move from the Cities to Fargo!
They can't be serious.


I can tell you from experience that people will not move from the Cities to St. Cloud (about 50 miles west), nor will they commute the trip.

And St. Cloud ain't exactly Fargo.

Rick Esenberg said...

You should do a little research before you pound the keyboard, Ricky.

Actually I think I did comment - in connection with the Lasee dustup - about the percentage of the budget of the UW Law School that comes from state tax revenue. But the prospect of losing that amount was met by Gorean predictions of disaster.

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