Editor’s note: Jon Margolis is VTDigger’s political columnist.
[A]s a plain economic fact (to the extent that there are plain economic facts), a purchase is a purchase is a purchase, meaning that a sale is a sale is a sale.
To the economist, it’s all private consumption, one of the four components of Gross Domestic Product, the total value of the economy. The others are government spending, investments and net exports (which means exports minus imports).
In the formula they use to measure gross domestic product, economists forget about the personal part and just use the letter C for personal consumption. They distinguish between personal and government spending and consumption. They do not distinguish between buying a book about accounting and buying the expertise of an accountant, between buying a television set and streaming a movie to watch on television. It’s all consumption.
Vermont distinguishes. Consumers pay sales tax on the book and the TV, but not on the accountant’s advice or the series they binge watch. This would appear to make no sense, which no doubt helps explain why the establishment-oriented, pro-business, Blue Ribbon Tax Commission a few years ago suggested broadening and lowering the sales tax. Apply it to the accountant’s advice as well as to the accounting book, the commission effectively said, and Vermont could lower the sales tax rate from six percent to 4.5 percent.
Broaden the base; lower the rates. It’s the tax policy embraced by experts across the political/ideological spectrum from Ronald Reagan to Barack Obama.
So in a sane world, the musings (she made no actual proposal) by Democratic candidate for governor Sue Minter that the Blue Ribbon Tax Commission’s suggestion be given another look would evoke only the calmest reaction, if any at all.
In this world, you’d a thunk she’d proposed spreading cholera germs.
Jeff Bartley, the executive director of the Vermont Republican Party said (falsely) that Minter was proposing “higher” taxes. The web site of Lt. Gov. Phil Scott, Minter’s Republican opponent, said “Minter has indicated she will support new sales taxes” which is technically accurate but leaves out the important qualifier that the “new” tax rate would be lower.
And what did Minter do?
She turned tail and ran.
For whatever reason, the key element in this not very enlightening debate turned out to be the haircut.
“Sue Minter will tax your hair cut,” was the title of Bartley’s missive.
“I will not tax my hair cut or yours,” Minter insisted.
Why not? A haircut is economic activity no less than is buying a toy, a power tool, or a telephone. Nor would taxing haircuts impose a noticeable burden on either the barber or the customer. A typical Vermont men’s haircut is about 15 bucks (less in the small towns, higher in bigger cities). Adding 4.5 cents to that would increase the cost to a whopping $15.68 (actually $15.675, but let’s round it up a penny), hardly enough to dissuade a fellow from his monthly tonsure.
Especially considering that in that month he no doubt spent at least 15 bucks on a toy, a power tool or a telephone, on which he would have paid only 68 cents in sales tax instead of 90, so the net increase would be all of 46 cents, adding up to an economic impact of roughly zero.
Taxes, to be sure, are a pain, and should be as low as possible. But they are “the price we pay for civilization,” as Justice Oliver Wendell Holmes, Jr., put it, and they should also be as high as necessary. The proper spot between as high as necessary and as low as possible is what ought to be debated and decided in a constitutional democracy.
In the last few decades, though, a bizarre, subversive, and anti-democratic notion has been inserted into the discussion, the notion that taxation itself is somehow invalid. That notion was inserted into the 2012 national Republican Party Platform, which stated that “taxes, by their very nature, reduce a citizen’s freedom.”
This is arrant nonsense. On the surface, taxes might be said to limit the citizen’s bank account. But by paving roads for the citizen to get to work and running schools that taught the citizen to read, write, and cipher, they also enable the citizen to have a bank account to begin with.
This effort to demonize taxes is downright un-American. The first tax levied by the first Congress was a tax on whiskey. The grain farmers of western Pennsylvania, who converted much of their corn into booze (easier to store, more fun to consume) did not merely object, which was their right. They rose up in armed rebellion, which was not.
President Washington himself rode out at the head of the troops to quash that rebellion. The president had a personal vested interest; that was his government whose authority was being challenged. But he also had what we would now call an ideological interest (the word did not then exist). As firmly as Washington held that taxation without representation was tyranny, he believed that taxation with representation – taxation voted in open process by the elected representatives of the people – was democratic liberty, the opposite of tyranny.
None of which proves that the whiskey tax was a good idea (collecting it was never very easy), only that it reduced nobody’s freedom. Extending Vermont’s sales tax to haircuts and other services might not be a good idea, either. But it ought not be a subject reasonable people cannot reasonably discuss. The fact that one political faction in the state seems to have bought into the nonsense that any discussion of raising or extending taxes is somehow improper and that the other one lacked the courage of its convictions is not very encouraging.
