LA Times Editorial Takes on ATR’s Tax Pledge

December 31, 2008

In yesterday’s Los Angeles Times, the editorial board rails against Grover Norquist and his famous “pledge” that elected officials often take, promising not to raise taxes.

Republican members of the Assembly and state Senate signed pledges to oppose any tax increase, and so far they have not moved from that position. One result is that California has a budget billions of dollars out of balance. Schools must cut education programs, physicians who treat patients eligible for Medi-Cal are going unpaid, many bond-funded construction projects have been halted and the state’s credit rating is in jeopardy.

GOP lawmakers don’t bear the sole blame for these catastrophes, because higher taxes are not and should never be deemed the automatic government response to an economic downturn. In fact, Republican lawmakers are correct when they argue that higher taxes can slow recovery at just the time the state needs to juice the economic machinery. But that argument frames what ought to be Republicans’ main point: not that taxes must be avoided at all costs but that Sacramento must protect Californians and get the economy moving.

The no-tax pledge, or, more formally, the Taxpayer Protection Pledge — originated and monitored by Republican lobbyist Grover Norquist’s Americans for Tax Reform — blindly promotes one policy position over the interests of the economy and even taxpayers. It’s the wrong pledge.

It is true that ATR’s pledge blindly promotes one policy position; but in ATR’s opinion, such a never-changing view is in the interest of the economy and taxpayers.

Such a blind view that it’s never beneficial to raise taxes is not an optimal first-best policy, however, despite what anti-tax advocates may say. If we had politicians who were truly concerned with the well-being of society in general, then such a pledge would actually never be productive. But that of course is not true as politicians aren’t always seeking to pursue the public interest. So the question becomes: Is a “no new taxes” rule a second-best alternative? (TABOR-style provisions face the same question.)

In many cases, the pledge likely improves societal well-being. But in some cases, it’s possible that it decreases societal well-being. Given how much California spends on government, I’m dubious of the claim that its government (on whole) is too small. (There are some things in California government that the state is spending too much on and there are some on which it is spending too little, but on net, they’re probably spending too much.)

But that brings us to the question, What are the downsides to “the pledge” even if you believe that politicians systematically favor an excess of government? First, while it may not sound sexy, a “no new spending” pledge would be more appropriate because, as Milton Friedman once said, “to spend is to tax.” Due to the fact that politicians are concerned mostly with the short term, a “no new taxes” pledge as opposed to a “no new spending” pledge can encourage deficit financing and do little to control spending and thereby the long-run tax burden. (This is an empirical question of the degree to which ‘starve the beast’ actually works.) But one other problem with limiting politicians’ choices (even through a spending control provision) is that they may make matters even worse. A politician who is seeking to institute some policy can do so through tax policy, spending policy, or regulatory policy. For example, a pledge may stop a politician from redistributing income through a tax-and-spend welfare program, but it may lead the politician to try to redistribute income via barriers to trade or, say, an increase in the minimum wage, which could have even worse consequences for societal well-being.


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