In the late 1980s, one of us, Richard Vedder, and Lowell Gallaway of Ohio University co-authored a often-cited research paper for the congressional Joint Economic Committee (known as the $1.58 study) that found that every new dollar of new taxes led to more than one dollar of new spending by Congress. Subsequent revisions of the study over the next decade found similar results.Starving the beast seems the only way.
We've updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.
Monday, November 22, 2010
Another Reason To Oppose Tax Increases
I'm not reflexively anti-tax, as I recognize the government needs revenue to carry out its legitimate functions. There are two parts of the problem, though. The first is that the government, at both the state and federal levels, is spending money on functions in which it should not even be involved; no one wants their taxes raised so that more money can be wasted. The second is that when government does get more money from taxes, it always spends even more money than the taxes bring in: