Former President Ronald Reagan explained complex concepts in brilliantly simple terms.
“If you want more of something, subsidize it; if you want less of something, tax it,” Reagan said, summarizing a principle contained in millions of pages of scholarly economic tomes.
It is an exact science. A kid with $10 can buy 10 Skittles packets at $1 each. Add a 10-cent tax, and the same consumer can buy only nine. Add a 20-cent tax and the child affords only eight, ad infinitum.
That is the least a tax can do to control human behavior. Beyond imposing absolute limitations, taxes discourage activities that might otherwise occur. A consumer wanting 10 packs of candy at $1 each might decide $1.10 is too much for one pack alone, let alone 10. The consumer might decide to live on less sugar.
Reagan’s cause-effect explanation of taxes can be seen in the soaring jobs growth and rising wages after the federal income tax cuts of 2017.
When the government increases taxes on income, it slows growth in wages and jobs. By reducing taxes on wages and jobs, it gets more jobs and rising wages. Tuesday’s election in Colorado was a referendum on taxes.
Voters statewide soundly rejected a proposal to weaken the state constitution’s Taxpayer’s Bill of Rights. In doing so, they sent the rest of the county a message: Colorado will remain a state of stable, reliable taxation for the foreseeable future. TABOR, the country’s only law of its kind, is not going anywhere. The law authorizes people to determine the size and scope of government. It prevents runaway taxing and spending by a governing class that controls other people’s money at little personal risk.
By salvaging TABOR from the latest attack, voters chose less government growth. They declined to subsidize politicians they don’t trust. They reminded politicians who they work for. Coloradans want the governor and Legislature to use record-breaking surpluses of cash to fix roads and fund education. Until politicians comply, they aren’t getting a tax increase or permission to keep revenues that exceed limits set by TABOR. A majority of voters do not trust them.
Colorado’s reputation as a state in which voters control government plays a major role in our economic success. By most standard measures of the past three decades, Colorado’s economy has consistently ranked among the top in the country.
Our economic success results largely from first cousins known as economic growth and population growth. Our state’s economic growth comes largely of oil and gas production, agriculture, tourism, other export industries, and new or relocating employers. Economic growth incentivizes population growth. The two increase demand for houses and other goods and services traded in the market. They incentivize all variety of voluntary transactions. They increase the velocity of currency and spread the wealth.
“A record-setting spring and summer for local home prices have given way to a record-setting autumn,” explains the lead of a Gazette news article Tuesday by business writer Rich Laden about Colorado Springs housing trends.
Laden interviewed Re/Max Properties real estate agent Rick Van Wieren, who explained part of what makes Colorado a top destination for relocation.
“They’re people who are basically coming from areas, generally the coasts, where the mindset of tax-and-spend has gotten so far out of control that people don’t feel like they want to live in that environment any more,” Van Wieren said. “And they’re looking for places like Colorado where there is still pushback on tax increases.”
A home is the single largest investment for most middle-class Americans. Rising demand on homes, encouraged by low taxation, increases the net worth of average homeowners.
Just as Coloradans voted for the Taxpayer’s Bill of Rights and against more government, they chose less of a deadly vice in eight cities and counties.
Voters in Boulder, Crested Butte, Glenwood Springs, New Castle and Vail — and in Pitkin, Eagle and Summit counties — want less smoking and vaping of nicotine. Toward that goal, they raised taxes by up to $4 a pack for cigarettes and up to 40% on vaping products. The certain outcome: less consumption of nicotine than would otherwise occur.
Despite some libertarian and socialist claims to the contrary, we don’t live in a culture of moral equivalence. If we did, society could make no distinction between health food and cigarettes; alcohol and tea; mercenaries and missionaries; criminals and cops.
In the real world, voters and politicians use tax policies to encourage the public good and discourage the bad. That is why Colorado voters are wise to leave taxes in control of the people who pay them. In doing so, they let the governed — not the government — shape the world with subsidies and taxes.