Taxpayer revolts are partially motivated by the low quality of public services.
No matter the result of this week's budget debate, we need a serious discussion about tax and spending policy. It would come as no surprise to our founders that such an examination is in full swing at the state level, where the nexus of tax rates and public service quality actually changes electoral outcomes.
Growing frustration with government fuels tax reform such as that in Indiana circa 2007. This phenomenon is widely misunderstood to be anger at high taxes, but it seems increasingly clear that taxpayer revolts are motivated by an equal share of disgust with the low quality of public services. Some examples:
From 2004 through 2007, I lived in an Ohio town that, by its federal electoral patterns, was very fiscally conservative. Yet, in two referendums in three years, this community voted overwhelmingly to increase their own local income taxes to pay for school improvements. Local taxes were already among the highest in the nation, and the schools would easily rank among the top 2 percent nationally. Folks who wanted the federal government to spend much less were perfectly content to hike their own taxes to support local spending on first-rate public services.
The same phenomenon has happened in Indiana, with school-building referendums in high quality school districts. I predict much more of it in years to come.
High-quality public services attract taxpayer investment, but the link between tax and spending isn't just a matter of trust with local officials. What economists call “fiscal federalism” also matters to voters. Some examples:
The places that cry out the loudest for immigration reform are not places with racial or cultural problems. Anger over immigration is hottest in the states where the failures of U.S. government policy hoist the responsibility of border security onto local taxpayers. These are not bastions of white supremacists, but places tired of paying for activities clearly obliged to the federal government in the U.S. Constitution.
The U.S. Department of Education provides another example. Except for the maintenance of a few million dollars of statistical services, the agency simply redistributes money to schools. Indiana's share last year was some $1.8 billion, or roughly one-third our total state spending on K-12 education. This is a great stimulus for bureaucrats and grant writers, not so much for students. We have far better uses for $1.8 billion here in Indiana.
Taxes matter, but actually being good at basic government is just as important to thoughtful taxpayers.