Wednesday, April 15, 2009

Tea Party Tax Nuts Have it all Wrong

Today is the day of the Republican Tea Parties to be held throughout the land. I know; some of you may be saying it's not the Republicans, but it is. In city after city, dozens of people will show up to scream at the Obama administration because of their taxes; taxes by the way, that were just lowered for 95% of the population. OK, you're mad as hell and you're going to do something about it; right?

Today on Republican radio and on the news tonight, we will hear citizens saying that government is at fault and is always in the way of business. Truth be known; we are actually in the mess we are in because government was not in the way of business, and I mean big business (I'm not talking about small business here). We will hear talking heads try to educate us about the importance of growing the economy, lowering business taxes and personal taxes, so freedom and liberty is saved. What most people still don't understand is that whenever the economy grows and businesses grow, so do your taxes.

If you are thinking that Donald Carcieri in Rhode Island has it right by eliminating corporate taxation, and if you think that this will improve your personal economic situation, you are sorely mistaken. I think most people attending the tea parties live by this creed as if it were a religion. They are wrong.

Around the year 2000, the Southern New England Forest Consortium, Inc. (SNEFCI), commissioned a study to address common misconceptions regarding commercial and industrial development and the impact it has on community taxation. The study took all Rhode Island communities, ranked them according to fair market value of commercial and industrial taxable property and divided the state into 4 equal-sized groups. The effective tax rates were then calculated for these groups and compared to commercial and industrial tax base.

As you can see in the graph from the report (Figure 5.), the communities with the smallest commercial and industrial tax base had the smallest effective tax rate of $15.62. As the commercial and industrial tax base grew, so does the effective tax rate. We all want to see business flourish and we need jobs for our children. I'm not arguing this point. I just want people to stop fooling themselves. As communities grow and business grows, so do your taxes. People need to stop making claims that turning this economy around and growing business will lower our taxes. It never has and it never will.

From the same report, SNEFCI compared open land in the aggregated communities and compared that percentage with the effective tax rate. As you can see from the graph in the report (Figure 8.), communities with very little open land had the highest tax rate of $26.02, compared to the communities with the most open space, that enjoyed an effective tax rate of $18.11. Think about it logically, the highest taxes in this country are found in New York City, the most populated business capital in the world. I don't know where the community is that enjoys the smallest property taxes in this country, but I'm sure it's a rural community that has been able to avoid the infrastructure costs associated with commercial and industrial development. We need business, we need jobs, we want our kids to have a secure future, but stop dreaming of a world with no taxes. As the economy grows, your taxes will grow.

SNEFCI commissioned another well known study, The Cost of Community Services study that won regional awards as well as a national award. The Executive summary explains the details. If you want to track back to my March 10, 2009 post, please do so. In this post I describe in detail exactly why costs in communities increase with commercial and industrial development. Enjoy the tea parties, but understand that you have diminished the history of the country. The Boston Tea Party was all about, "taxation without representation". You all have plenty of representation; that we don't need more of. (You can click on the graphs to expand them)



  1. Hey Tom, sorry I haven't got back to you sooner, the best part of your most recent blog, to me, was the use of the term "big business". Big Business is the "they" word when all of us "supposed conspiratorial believers" try to explain the "hidden agenda" which runs our country!!! "They" run all aspects of business, and now have made gov't complicate in the solution!! Don't know where the end is, but it scares the hell out of me!! The only word that comes to mind is "fascism"!!
    Can't wait to play golf with ya!!!!!
    Say hi to Sandy!!!!!!M.H.

  2. M.H. Good to hear from you. Thanks for the comment. I had quite the experience on tea party day which I'll explain in a new post.

  3. Barack Obama did not invent taxes! He is trying in fact to make them more equitable. Unfortunately the extremists and "party of no" are using this to try to create a populist outcry. Of course no one likes to pay taxes but they are "necessary" to a country that provides us with education, services, and a good quality of life. (Where were Limbaugh and the rest when Bush gave breaks to all the very rich and increased our deficit hugely?)