Self-Interest Properly Understood–and Taxes

Since at least the late 1980s, policy disputes in the United States have largely revolved around the actual and perceived deficiencies of government. It has been an article of faith among self-styled fiscal conservatives that wasteful state and federal governments are imposing excessive and unnecessary tax burdens on the American public.

Engaging in this line of argumentation is particularly  appealing to candidates for public office, since it plays to widespread resentment of the obligation to pay taxes while avoiding the pesky need to identify specific instances of the “fraud and waste” that are widely supposed to exist.

There are certainly situations where tax dollars are misspent. Most of those situations involve poor management practices, since voters tend to base their support for political candidates on ideology rather than perceived managerial competence. But more often than not, assertions of “waste” are based upon disagreement with something that government is doing–a belief that services being provided or programs being supported are unnecessary (especially when such services or programs are primarily seen to benefit others).

What government should do, and how it should fund what it does, are persistent and entirely legitimate issues. The problem is, too many of us have imbibed the Kool-aid; we want the services, we want to live in thriving communities with a good quality of life, but we don’t want to pay for the services and amenities necessary to produce that quality of life.

Worse, we frequently don’t recognize the ways in which we benefit even from government programs and services we don’t personally use. A couple of examples:

When voters are asked to support bond issues or tax increases for public education, people who do not have children in the system (usually a majority of those voting) often oppose the measures, because they see no personal benefit, no immediate “return on investment.” What they fail to recognize is that the quality of local public education systems affects their property values, enhances (or diminishes) job creation efforts, and makes their communities safer and more attractive. In the long run, good schools are in their personal self-interest.

Similar metrics apply to taxes for public transportation. Even people who will never use transit benefit personally from public transportation systems that reduce congestion, improve air quality, connect low-income workers to their places of employment, and improve mobility for the elderly and disabled.

Even people who care only about minimizing their personal tax burden will ultimately benefit, because long-term, the ability to hold down tax rates  (especially here in Indiana, where constitutionally-imposed tax caps severely restrict municipal governments’ revenue options) will depend upon a city’s ability to grow its tax base–its ability to entice people to move in, buy homes and start businesses. Cities that successfully market themselves do so based upon quality of life measures–good schools, well-maintained parks, excellent public transportation.

Often, sound investments take time to generate returns. That’s particularly true of investments in our communities.

Sometimes, “self-interest properly understood” (as De Tocqueville noted many years ago) is the opposite of immediate gratification. That doesn’t mean the investments aren’t necessary and worthwhile.

31 Comments

  1. I think opposition to the Indygo tax increase has more to do with the quality of the transit plan than with personal gain or lack thereof. Using BRT to make the bus lines more permanent is a good way to encourage development, yet the first BRT line is being run mainly through areas that do not need or want development assistance. This first line, Redline, provides almost no improved access to well-paid jobs or other useful destinations for the majority of bus riders, and the majority of its route lies outside high bus ridership areas. Indygo studies showed the most pressing need for better service to be along 10th and Washington and 38th, yet Redline instead connects Broad Ripple to downtown. The money spent to provide people who mainly have good jobs and cars another nice amenity is money that is not being spent helping transit-dependent people get where they need to go and improving their lives. I am someone who rides the bus, but I don’t need to. The Redline will make my life easier and more pleasant, but I don’t think that providing for my convenience is a good use of scarce taxpayer money. In this case, money spent for my benefit is money not spent meeting the needs of people who depend on transit for work, education, health care, and other basics. I am very willing to support a plan that serves the needs of our community in a way that is fiscally responsible, equitable, and sensible. I have yet to see that plan.

  2. Differentiation between spending and investing is hard to sell to the angry mob. Many politicians play to the anger and ignore the benefits of investing – and they keep getting elected. Somebody needs to create the sound bite that promotes the benefits of investing, e.g. Voice over says: Todd Young doesn’t recognize the benefits of investing in our infrastructure. He takes the short view that money spent on our infrastructure is “wasted” (roll the You Tube video of his speech). You can substitute anyone you like for Todd Young.

  3. The original Boston Tea Party action was taken to fight “taxation without representation”; the current Tea Party states the same cause but…they, themselves, are the representation of those abusing our taxation system.

    I don’t like paying taxes; no one really “likes” it but I do understand the NEED. We cannot provide our own transit system, street and sidewalk maintenance, trash hauling, sewer service (although we are paying taxes and maintenance for sewers in our property tax bill and through taxation on our utility bills), build schools and pay teachers, administrators and maintenance. And the list goes on; look at the many taxations on your cable and utility bills…and your paycheck stubs.

    Our taxes are also paying rather high salaries to the current Congress which has not worked for US for the past six years or so. This is where my anger lies. The Congressional “self interest” is like stalling by holding the ball till the buzzer in a basketball game when you are one point ahead. They have stayed “one point ahead” of this entire country since 2010.

  4. I like daleb’s video idea. Too bad we don’t have video clips of Hoosiers slogging through mud-choked roads we could show when Young or whoever is talking about the evils of government spending, then juxtapose the muddy road with vehicles whizzing along taxpayer funded roads.

  5. It sounds like we all need to do more to educate our friends and neighbors about the benefits that taxes provide. As JoAnn said, no one likes paying taxes, but we all must realize that life will continue to be more difficult if we keep harping on reducing our tax bills. I will be compiling facts about my local and state taxes to share with others in an effort to help them understand the benefits that we all reap from them.

  6. Regarding property taxes: Indiana’s formula is extremely complicated and Daniels’ tax caps did benefit upper income people.

    I called Mike Boehjle (sp) at Purdue several years ago when I realized that the highest valued houses in a local subdivision were paying $0 in property taxes. Yes, absolutely zero! These are $500,000 and up houses.

    He explained to me as well as he could about how the taxes were now figured. The problem that I took away was that property taxes for houses are tied to LOIT and another income tax (can’t remember what it is right now). Many of these people are retired and living on very nice retirement incomes. Their stock portfolio income doesn’t count towards regular income so their income looks low, even though they have higher incomes than most in the area.

    The formula for our property taxes needs to be simplified and more fair. The problem is, how do we common citizens get our legislature to do this? I am guessing that ALEC was involved in creating the changes that Daniels and his legislature made.

  7. That’s what we should all be doing Nancy. Great Idea and I’m one of those childless couples that doesn’t mind paying taxes to educate the children. That’s the price you pay to live in a civilized society. If you don’t educate the children, what future do you have?

  8. Mary,

    While the Red Line is a potential magnet for Millennial talent, it also serves today’s transit-dependent population – Hoosiers living along the proposed route earn $14,000 less than the metro median, are 30% more diverse (African-American and Hispanic residents) than the region as a whole.

    The planned route would serve:
    o Workers and employers within ¼ mile of route: 170,000 jobs (20% regional employment)
    o A diverse, transit-dependent population (average income along the route $14,000 below
    metro median).
    o Along Phase I (Broad Ripple to the University of Indianapolis) one of every four households
    lives in poverty, 23% of families don’t own or lease a vehicle, and the average household
    earns just $.65 for every dollar earned in the typical metro home – the immediate social
    and economic benefits will be significant.
    o 4 major campuses (Butler, IUPUI, Ivy Tech, UIndy) within ¾ mile of route, 94% of all college
    students in Indianapolis.
    o Overall, the proposed route connects 1 of every 5 workers in the region, while serving 90%
    of its college students.

    North Meridian by far the most intensely used corridor in the city. It accounts for only about 1% of IndyGo’s service area, but significantly 15% of our ridership boardings.

    The Red Line corridor has the most walkable, urban development pattern, with the tightest street grid and the most established sidewalk infrastructure. The streets and surrounding neighborhoods were originally designed to have good access to transit stations.

  9. Nancy, it makes no sense to me that someone told you that property taxes are tied to income taxes. I’d like to see the property record card and tax bill for these properties.

    There are deductions and cap credits, including supplemental deductions that could apply. And veterans get various deductions as well. But income tax offsetting property tax? That doesn’t make sense to me, and property tax and local government finance is what I do for a living.

  10. Those who would like to see more government operations privatized because they think it will be cheaper don’t realize that the overhead costs at private companies more than make up whatever reduction in the cost of providing the services. POGO did a fairly comprehensive study of this several years ago and found that privatizing most government operations doubles the ultimate cost to the government. So, privatizing does not lower taxes.

  11. When I was in graduate school, my macro-economics professor asked who in the class thought they were paying too much in taxes. Every hand but mine went up. When he asked what my thoughts were, I began by listing the things we all get for our tax dollars. When I finished he acknowledged that I had made a pretty good point and that he, himself had never thought of it that way. So, if an economist hadn’t thought of it that way, why should we expect others to do so?

    As to the Congress, the salaries for members are not outrageous. The lack of time spent doing the actual work of governing is outrageous. Perhaps we should put them on an hourly wage.

  12. Peggy: The salaries of Congress are way out of control considering that we don’t pay them by how many actual bills they pass which is how I would put it forward in the future. They spend half their day going off site to make phone calls to people to give them money for their re-election campaign. I don’t think they are working ENOUGH.

    We need to redefine congress’ terms and make a constitutional amendment to get money out of politics once and for all. Then we can maybe have a congress that actually works for us and not the corporations or millionaires and lobbyists.

  13. Pat; private business is in the business of making money. Why do politicians think we should believe they are saving us money by privatizing, out-sourcing or whatever name they apply to it? Under Goldsmith’s administration; so much of Indianapolis business contracts went to Ohio companies I wondered if we had been annexed into Ohio and just hadn’t been notified yet. We are also rarely aware of the interconnections between elected officials who make these privatization decisions and themselves, their family members or friends. Or, of course, connections to Citizens United comes into play now. Gerrymandering is also part of this game.

  14. How come those who scream “we are over taxed” never want to look at out bloated, inflated, wasteful military budget. By some measures, it represents more than half of all discretionary federal spending. And has, evidently, made us no safer. Multi-billion dollar planes, ships, and bases are where the waste is.

  15. Pat, I agree with you.

    Those military contracts have made many corporations filthy rich and continue to do so. The executives at those corporations lobby congress members and give generously to them in order to keep those lucrative contracts flowing their way.

    Rolls Royce in Indy has government contracts and employs many people with higher than average wages. I am guessing that Rolls Royce has been benefited from military contracts that the department of defense never wanted but is forced to accept. Their current contracts may involve making engines for some equipment that is not needed or wanted. If those manufacturers keep the money flowing to Congress they are basically guaranteed contracts.

  16. Beth, it may have changed by now, but when Daniels’ tax plan was first implemented the tax bills for the homes in the area that I mentioned were zero. I called the state and no one there could explain how the taxes were computed because it was so complicated. They referred me to Mike Boehjle at Purdue as the most knowledgable person regarding the formula. I definitely recall him speaking of LOIT and maybe COIT taxes. I asked why income tax deductions were considered and he explained to me at that time that the formula assumes if you pay higher income taxes, then you should receive deductions towards your property tax bill. Maybe this was also specific to certain counties. It is quite possible that those deductions no longer exist.

  17. My brother used to work for Rolls in Indy until a month after 9/11. Then he got laid off for a few weeks/months until he tracked down an outsourcing company that hired him as a contractor to do his old job. He lost all of his benefits and was paid a higher hourly wage but never got his ‘old’ job back. That’s the way these huge multi-national companies screw the worker and make sure their share holders get more of the pieces of pie that they STEAL from the employees that served them.

    We have to outlaw this practice and make sure that people like my brother (a family man trying to get his college kids through college) isn’t left to drain their retirement funds to survive and make it to retirement without completely losing their dignity and voting for Trump because of the betrayal of our corrupt system. The same kind of con that fired him, rehired him as a contractor with no benefits and made him feel thankful to even HAVE A JOB. Only to fire him again when he gets too expensive to continue paying him when they don’t meet their quarterly profit margins in another year. It’s rigged folks…against us all. You may be next.

  18. Chris: Butler University is NOT within 3/4 mile from College Avenue–I personally checked the distance– unless Toyota is lying, it is 1.2 miles from College to just the eastern edge of Butler University, and the campus spreads out westerly from there. IUPUI is also too far away. Even IndyGo’s own statistics say that 1/2 mile is the most people would walk to take a bus. Much of what IndyGo has to say is exaggerated to say the least. So, if you’re counting Butler and IUPUI jobs and riders, subtract them from the equation. Where are the jobs on College Avenue between 66th and 38th Street? The few bars and restaurants at some corners? Where are the grocery stores and other shopping for the transit-dependent on College Avenue? Why was the line moved from Keystone in the first place, where there are jobs and shopping?

    Unless one lives in New York, San Francisco or other areas of the country that are more compactly developed and which have a culture of public transportation, studies show that public transportation is not a major factor in deciding whether someone wants to move to an area. Education and parks are such considerations, and Indianapolis’s schools are mostly failures. Parks do not receive necessary funding and don’t have much to offer. The $75 million would be better spent on parks and schools, or just generally improving public transportation, starting with areas of greatest need.

    No one has ever been able to explain to me how having a an expensive, heavy, excessively polluting electric bus running up and down College Avenue every 10 minutes for 20 hours per day, at the cost of $75 million, is a good investment, especially since current College Avenue buses are mostly empty except during rush hour. I know this because I’ve lived on College Avenue for 37 years. Also, since 75% of bus stops will be eliminated, and since Red Line would turn west at 38th Street, bypassing the majority of current College Avenue riders, I’d like IndyGo to explain how they’ll increase ridership by 51%. That is one basis for asking for a tax increase. They claim they have an algorithm. I have common sense.

    Why not spend the $75 million improving the whole system, instead of tearing up College Avenue to put in a median and bus stations in the middle of the street, calculated solely to prevent IndyGo from abandoning Red Line when the 51% increase in ridership doesn’t happen? Why is the public being forced to vote to support Red Line AND general improvements to public transportation instead of dividing these questions on the ballot? If you support improving public transportation generally, you’re forced to also support Red Line, which will be a dismal failure and waste of money. Red Line won’t even benefit current College Avenue riders–it bypasses Bishop Chatard and Broad Ripple High School.

    Answers to these questions involve protecting the return on investment for developers who want to qualify for grants to construct tall apartments on College Avenue. If you’ve lived in Indianapolis for any substantial length of time, this shouldn’t surprise you.

  19. While considering taxes, especially state income taxes, there are seven U.S. states that currently don’t have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. And residents of New Hampshire and Tennessee are also spared from handing over an extra chunk of their paycheck on April 15, though they do pay tax on dividends and income from investments. I suppose these states ultimately receive revenue from uber high sales tax, gasoline taxes, etc and etc, items that are taxed on a user basis.

    http://www.bankrate.com/finance/taxes/state-with-no-income-tax-better-or-worse-1.aspx

  20. Piketty in his book Capital in the Twenty-First Century posits that taxes are essential to civilization but that how much and on whom is a democratic decision to be made by a political process. Our problem is that we have not been electing people who understand that the government is us, and that “us” needs education, infrastructure, medical care etc. They prefer to make what taxes we collect first available to those who least need a tax cut, i.e., the rich and corporate class. Piketty also writes that Denmark is the most heavily taxed country in the world and is prospering. Danes trust their government to deliver vital services to all and are not disappointed. Indeed a recent poll to determine a happiness index showed the Danes to be in the first five in the world. Here we do not trust government as the right wing has successfully poisoned the well of public trust in order to make more of what is collected as tax available to their sponsors, the rich and corporate class, while the rest of us live in a world of decaying infrastructure, inadequate health and education programs etc., a situation unknown to the Danes. They are happy and we are not. The solution? Elect people who care about all the people and who vote accordingly.

  21. Natacha:”Answers to these questions involve protecting the return on investment for developers who want to qualify for grants to construct tall apartments on College Avenue. ”

    That’s the truth!

  22. I question that Pikkety, a Frenchman, can link Dane’s lack of displeasure with a high tax rate with the Dane’s supposed level of happiness. If you’re familiar with Scandinavian culture (Danish, Swedish, Norwegian, and Icelandic), you’ll realize that ‘happiness’ is a uniquely American entitlement type idea enshrined in our Constitution; whereby, the Scandinavians would simply say they are ‘satisfied’ or ‘content’ with their lives.

    Additionally, Scandinavian culture has this belief, Janteloven, that is unspoken but is practiced widely, both on the continent and by those who’ve migrated to the US. This societal cultural belief is expressed in a few behavioral expectations: 1) don’t act in a way that makes you seem better than others, 2) don’t boast of your individual accomplishments, 3) don’t behave as if you’re smarter than others, 4) don’t behave as if you know more than others, 5) don’t laugh at others, 6) don’t act like you are special.

    As an aside, Trump’s boastful attitude would be unwelcome in Denmark, and Ms Clinton’s ‘deplorable’ remark would set her aside as believing she is better and smarter than others.

    The attached link to a PBS show (April, 2016) does a good job explaining the mindset of the Danes and of Scandinavians in general. http://www.pbs.org/newshour/bb/does-denmark-live-up-to-its-title-as-the-happiest-nation/

  23. DeToqueville made a lot of analyses good for prisons and Pennsylvanians, not in England or in French property areas or those in communion with Catholics already by 1492 Earth-around as teachers of individuals, not blood classes. What students need to learn is how to use bank accounts to store the dollars, especially those they MUST set up for SSA:IRS custodial (parent) annual reports, then on their own or added onto the parents’ but in their own spellings, signatures, numbers for telephone operators to proof first by precision work. Picketty addressed Capital… not fiscal year 1040 reports.

  24. Chris, the Meridian corridor from 38th downtown does have a lot of riders, and your categorization of their incomes seems realistic. But, that corridor currently has several parallel routes that are, for able bodied people, are already somewhat of a de-facto frequent bus. For example, I have a choice of taking the 17, 18, or 28 because all are close enough that I just choose whichever will get to me more quickly. If I lived south of 38th in that corridor, I would have even more options. I think that Indygo actually pooled the data from those parallel routes to come up with the numbers used to justify the Redline route. My understanding of Redline is that a lot of the parallel routes will be eliminated, but service on the Redline itself will be quicker. Seems like somewhat of a toss-up for able bodied people traveling within that area, and maybe actually a problem for those who can wait for a less frequent bus more easily than they can walk to a frequent bus station. What makes a lot of sense are the longer hours of Redline, but that’s easy and cheap to fix without building a BRT. I think that really good bus service between 38th and downtown could be a great investment. We want to make sure service provides maximum benefit to the riders in that area at a sustainable cost, but that section of the city is a very reasonable priority. Where Redline loses my support is where it veers north with an expensive and rigidly frequent line (BRT) into empty bus land. The current 18 tends to run very full with lots of people getting on and off south of 38th, then essentially nobody gets on or off all the way up to a few getting on and off in Nora. The 17 has the same pattern of being busy south, then essentially nobody getting on or off between 38th and the few who are getting on and off in Glendale. Redline vastly overshoots the heavy ridership area south of 38th (diluting scarce transit funds away from the heavy need area) and fails to go to either Nora or Glendale. It also fails to cover the reasonably heavy ridership area south of 38th on College. I don’t think that it will improve service much for those who currently ride within the 38 to downtown part of the corridor, and will make it harder for people to get between that area and Nora or Glendale. It seems to be designed primarily as a commuter line to connect Broad Ripple and Downtown. That’s a nice amenity for Broad Ripple, but shouldn’t be a transit priority when we have transit dependent citizens needing investment in more practical routes elsewhere.

  25. well, as is commonly know, much military spending is actually spending on jobs in your state and congressional district, having NOTHING to do with military. Example the C-17 advanced transport aircraft production is shut down, although China is building a high volume clone if they can find a powerful enough engine. We are building a long dragged out military tanker based on a Boeing civil transport, overdue, overpriced, and rejected by many other nations. Airbus build a more popular military tanker, planned to build it in Alabama, but we HAD to buy Boeing. Airbus also build a large military transport, similar to the C-17. New transport AND new engine, both failures, flops, crashes, overpriced delays, etc. Obvious solution, we buy the Airbus tanker OUR air force 1st selected, Europe BUY the C-17 transport and junk the A-400 and it’s loser engine. Really big savings, esp. as both aircraft use a lot of US and British components. A really good trade off that didn’t happen for political reasons. No military reason for doing this. And locally, did IndyGo ever install GPS in busses? Per Aaron Renn Chicago had a system YEARS ago where you could use cheap cell phone to see if you missed the bus. Indy had the system in storage years ago and, to my knowledge, let “customers” stand out in rain and snow to see if bus was near, gone, etc. Did it ever get installed? They claimed no big cash$$$ award, so couldn’t do anything. Local Amateur radio club could have done it pro bono. What we need is a vote to waste more money for inept managers. What would it cost for free taxi cabs and eliminate all IndyGo staff?

  26. j.,

    I will now stop bad-mouthing Jacksonville. We actually have something competitive. Our busses have GPS. You just call 246-2420 on your cell phone and type in the number on the sign at the bus stop. As you said, it really helps in bad weather since you can stay at home until the last few minutes because you know where the bus is located and what time it will arrive at your bus stop. I’m now proud to be a Jacksonvillian. Go Jaguars.

  27. Marv,

    Busses in Jacksonville have GPS capabilities? If one wishes a kiss from you, will you share your GPS location?

    Buses vs busses.

    Too good to resist. 😉

  28. BSH,

    “If one wishes a kiss from you, will you share your GPS location?”

    You should understand my GPS ability better than anyone else because of your son. Growing up on Belmont Terrace in Jacksonville, my two closest friends were Curtis Archer and Ronnie Cherry who both went to college at The Citadel. At Landon High School the football team’s formation was the Tennessee single wing where the quarterback called the signals and was also a major blocking back. The team took the field with a “Rebel yell.”

    Sometimes like your son, an All-American tackle, the blocker doesn’t receive the recognition he deserves. I still remember the statement attributed to Roger Staubach during the successful battle for one man, one vote in Dallas, “I’ll follow Marv Kramer anywhere.”

    At the deepest level of the “political game,” it’s like a football game. The Far Right is still being influenced by the famous sportscaster [Gordon Mclendon, the “old Scotsman”] who has been dead for 30 years and The Far Center is being led by me who REALLY knows how to WIN the game. The Middle Left isn’t in the game. NOW, The only game in town is The Far Center versus The Far Right.

    I also remember the statement attributed to Gordon McLendon [I’ve mentioned before that I was General Counsel of the McLendon Corporation], “Marv Kramer could beat Henry Kissinger with one hand held behind his back.”

    I apologize for speaking this way. But as a SOLOIST, I now understand that you have to be your own publicist or you will be completely MARGINALIZED.

    The Far Right is winning, there is little time left on the clock for an UPSET by The Far Center.

    The only thing missing for a VICTORY by The Far Center is the absence of a spirited cheerleading squad.

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