Taxes

By John P. Williamson

If you drive a car, I'll tax the street; If you try to sit, I'll tax your seat; If you get too cold, I'll tax the heat; If you take a walk, I'll tax your feet.

So why is it that taxes have become so invasive, and intrusive? Economist Milton Friedman points out that Taxes always EQUAL Government Spending plus Interest on Unbalanced Budgets. If we understand this reality, we understand that the reason we have higher and higher taxes is that we have out-of-control government spending. This is the first concern that I will address in lowering taxes: Cut Wasteful Spending.

Pennsylvania's state government has + for too long + voted for unnecessary expenditures, on the excuse that "Well, that was only $50 million. What difference does that make in a $29 Billion budget?". "Well", to paraphrase Everett Dirkson, "when you take a couple of hundred million here, and a couple of hundred million there + before you know it, you're talking about some real money." Just to illustrate this point of wasteful spending, I will point to a list compiled by the Commonwealth Foundation, a respected Harrisburg Government Watchdog group, who has listed $4 Billion in wasteful spending in this year's proposed budget alone. Their report can be accessed at: http://www.commonwealthfoundation.org/research/detail/a-taxpayers-budget-2010-responsible-spending-for-pennsylvania

So the elimination of wasteful spending is the first way that will allow for lowering of taxes. And, as the referenced report will show, there is no shortage of wasteful spending to target for elimination.

The second part of my strategy to reduce taxes has to do with designing a tax policy which will attract new businesses to Pennsylvania, and discourage existing businesses from leaving. Let me offer a simple model as a way of explaining how this business-friendly climate works to lower taxes.

If a woman owns a business, and she generates $1,000 per day in revenue, with $800 in expenses, she enjoys a 20% profit margin. This would indicate that the pricing of her product is just about right to insure optimal sales. But if the Government decided that she was too profitable, and decided to take an additional 10% from her, her profit would drop to only 10%. She would then have the choice of raising her price to offset that tax loss - probably resulting in fewer sales, or, letting one or more of her workers go - thus reducing their participation in the economy. Either way, the tax is a drag on the economy.

A smart business owner searches for ways to avoid taxation, and sometimes that might include moving to another state where taxes are lower. Each time we lose another business, it reduces the size of the economy - and often times, it reduces the amount of taxes to be collected.

Business is good! Having more corporate citizens in Pennsylvania reduces the tax burden on the working people, and small business owners. By lowering taxes on businesses, Pennsylvania can induce more companies to operate in Pennsylvania. More companies mean more jobs for Pennsylvanians. More working Pennsylvanians mean a larger tax base of tax paying workers. Even with lower tax rates, more revenues - from healthier economies - can be collected by state government.

To summarize, my plan is to aggressively seek to eliminate wasteful spending, and to design favorable corporate tax policies which will encourage businesses to operate in Pennsylvania.