It is a fascinating study to watch the psychological ploys that political leaders use to get more of our money. Their method is based on the classical utilitarian principle of reducing pain or, more exactly, our consciousness of pain. The following approaches show this clever, disingenuous use of psychology. Now that the Texas Legislature is back in session, a number of these approaches will come into play.
1. Reduce consciousness of pain. It was a brilliant tax collector, indeed, who thought of the scheme to withhold taxes automatically from our paychecks, thereby reducing the consciousness of payments. Were we instead given the gross amount of our paychecks with the requirement that we pay taxes after the fact, we would be made painfully aware on a regular droning basis of how much tax we pay. But when the government withholds our taxes in advance we don’t miss what we never had.
2. Hide taxes. The policy organization, Americans for Tax Reform, reports that on, for example, the purchase of a gun there are 18 different hidden taxes; on a hotel room, 13 hidden taxes. An electricity bill hides 25.7% in taxes; a loaf of bread, 31% in taxes; a car, 45% in taxes, and a gallon of gas, 54% in taxes.
3. Use the shell game shift. Political leaders tend to tax us to the highest threshold of acceptable pain. Property taxes have reached that threshold in Texas. To reduce our pain, they try to shift some taxes to a new tax (income tax) or to an existing tax (sales tax). This is called “fair tax reform,” but there are two fatal flaws here: one, there is no aggregate reduction in taxes; two, the alternative avenues of taxation eventually rise to the highest thresholds of pain.
4. Change the terminology. Government leaders will reduce or eliminate, for example, homestead exemptions, calling such a “tax shift” rather than “tax increase.” Your taxes increase, but this they argue with a straight face is not a tax increase. I kid you not, this is precisely what happened recently when I lived in the state of Maine.
5. Reduce pain by transferring some taxes to others. Visit Dallas, rent a motel and a car, and you help pay for a football stadium.
6. Make taxation equitable. Get those who don’t pay their fair share of taxes by, say, defining Internet as a telephone line service. Look at the plethora of tax riders on your phone bill. Government spenders would love to add these tax riders to Internet as a phone service.
7. Make it a wash. Now that Texans can deduct sales tax in itemizing for Federal taxes, many Texan officials, always wanting more money, are asking for a percentage increase in the state’s sales tax. Such, they argue, would only be a painless wash.
So what’s the bottom line? It is this: When you combine your federal, state, and local taxes, along with the hidden taxes in the goods and services that you buy, approximately 42% of your gross income goes to governments. This documented percentage is outrageous and, yes, immoral, morality being a matter of how we the people are treated. No one should be guilt-slung in wanting a reduction in excessive taxation.
Ronald Trowbridge, Ph.D., is a fellow at the Texas Public Policy Foundation.