By Michael Stack
When Rep. Brian Cina (P-Burlington) told the rest of the House to “Read My Lips: Yes! New taxes!,” he demonstrated the truism, “belligerence is the truest sign of lack of ability.”
There are two types of power in this world: “People Power” and “Position Power”. People Power is real because people respect you and want to follow the way you walk through life. Position power is fleeting. As soon as you lose your position your initiatives become moot. My guess is Rep. Cina is confusing his position power with people power.
Whenever politicians start to believe their own propaganda (another colloquialism applies), they overplay their hand and, please bear with another metaphor, “get out over their skis.” Vermonters know how that ends, thud!
Big tax and spenders, beware Hauser’s Law
Here’s more sobering news for the supermajority. Before you start to spend all those tax dollars you’re anticipating, take a quick look at Hauser’s Law. While not an economic theory, I would choose seven decades of empirical observation over an academic exercise. William Hauser posited tax revenues at the Federal level have always been about 20% of GDP (see chart below) regardless of wide fluctuations in marginal tax rates. Simplistically, incomes and assets are mobile and if the peasantry believes the governing class is taking too large of a slice of the pie they legally avoid or shift income to reestablish this equilibrium.
The super wealthy pay the lion share of taxes and they can afford tax advisors. The less wealthy, well, they have their ways. Barter and cash transactions grow as the taxpayer sees what they believe to be an overreach by “social engineers hell bent on spending Vermonters hard earned money,” to quote Alison Despathy.
Only a quarter of Vermont property taxes are income sensitive. When you raise taxes on business (non-Homestead), they just pass that back onto the taxpayers in the form of higher prices. These are the stealthiest and most regressive taxes because they crush what little disposable income the lower income cohorts have left to spend. See my op-ed: Stack: The Vermont Taxpayer Wakes Up! – Vermont Daily Chronicle
Hauser’s Law says that dropping tax rates creates positive ripple effects. While the tax rate percentage declines, you actually take larger tax dollars into the treasury. As a wise old Portfolio manager told me in my investment career, “you take dollars to the bank not percents”.
Running out of Other People’s Money
As predicted by the “Iron Lady” Margaret Hilda Thatcher (MHT), It appears the super majority is running out of other people’s money. Train wreck legislation like Act 127 has accelerated the problem. The cost of unfunded mandates such as ACT 127 hit directly. Spoiler alert – those new property tax bills will be arriving in mail boxes in less than 5 months, in plenty of time for the next election.
The dead giveaway the social engineering punch bowl is running low is the recently introduced bill H.827. Specifically, this bill gets the camel’s nose under the tent of not only your earnings, but the next generations (your children’s) earnings.
It proposes to tax the unrealized capital gains you may have worked all your life on to accumulate and pass onto your children. Spoiler alert #2 the Super majority thinks they have a better plan for your children’s inheritance. Bill H.827, combined with a plethora of other business and high net worth taxes, are taking a state that already ranks poorly from a taxing regime perspective to dead last.
Face it folks, as Hauser law shows us there is only so much abuse a populace will accept. There is only so much that maple syrup, foliage and bucolic scenery can buy you. We are watching the destruction of a unique ideal and brand “Vermont”, historically a symbol of what is right, pragmatic and sensible. Unfortunately, it is being replaced by a set of “beggar thy neighbor” behaviors that you would more likely expect from a state like New Jersey.
Prediction time
What we are witnessing is the behavior that accompanies a peaking in political power. That peaking results from the elimination of healthy checks and balances. The feeding frenzy of bad legislation and more importantly the blatant attitude, accompanying the rush, is textbook.
The best current analogy I can make is the immigrant caravans that have accelerated pace and ramped the ferocity with which they are approaching our boarders. They know the door is closing. Belligerence is not only a sign of lack of ability it is a sign of lack of confidence. My prediction, the average Vermonter regardless of party has had enough. The end to the tax and spend circus act in Montpelier draws near.