Taxation is not the same as investment
Friday, June 27, 2014 10:00 PM
Government officials and bureaucrats sometimes claim that government spending on projects and programs should be thought of as an investment by the taxpayers. "Quality of life requires we invest on a government level to grow our community," they will say. Taxpayers should strongly reject this claim.
Legitimate investment happens when a person freely decides to give some of his savings to someone else, with the hope it will benefit him more than just keeping it stuffed in his mattress. This investor might loan the money to a business with the understanding that the business owner will pay the investor back with interest (e.g., a bond). Or, this investor might buy a share of a business (e.g., stock), with the promise that the business will pay him a portion of the its earnings (e.g., dividend), or with the hope that the value of the business will increase and the investor can later sell his share for a higher price.
But what is most important is that the investor is free to choose. He must be free to choose whether to invest or not, how much to invest, and by what method to invest. He must be free to decide for himself if the investment is worth the risk before he hands over his money. Is it likely the business will be successful and be able to pay back on the bond? In the opinion of the investor, does the business seem to have a good plan? Will it likely earn more money than it spends? Will it grow in value? He must be able to decide for himself if it's worth it or not. It must be voluntary.
Not so with taxes. Taxes are not voluntary. It doesn't matter if you as a taxpayer disagree with how the government spends your tax dollars or not. It doesn't matter if they're spent on projects or programs that you believe are poor decisions. If you decide not to pay your property taxes, the government can take your property away from you and auction it off to the highest bidder. Taxes are collected by force or by the threat of force.
For this reason, public officials have a grave responsibility to only spend taxpayer money within the limit of legitimate governmental purposes (e.g., securing the rights of its people and other constitutionally-authorized purposes). When it is spent beyond this limit, government is wrongfully taking people's money against their will. It's interesting that the dictionary defines theft as taking the property of another without right or permission.
Additionally, the bureaucrats who are making these "investment" decisions with taxpayer dollars don't suffer the consequences of their poor investment decisions. When government-funded projects fail, or programs don't achieve their stated goals, the taxpayer is stuck with the bill. So there is no incentive for these bureaucrats to change their behavior. In fact, usually the opposite is true. They will usually ask for even more money to fix problems caused by the original project, throwing good money after bad. The classic example in Montgomery County was when the city and county funded the entire construction of a Commerce Park building after the Commerce Park project itself failed to attract any tenants.
Oftentimes our local bureaucrats like to point to the counties around Indianapolis as shining examples of how government investment is working to improve quality of life. I wonder if they have also investigated how much those same counties have put themselves in massive debt to beautify their county. Have they taken into account how much this debt will depress the quality of life in the future? What happens when we have to pay the piper? The city of Crawfordsville recently defaulted on over $14 million worth of bonds due to the failed AccelPlus experiment. That "investment" was made two mayors ago, a classic example that bureaucrats who make bad decisions today rarely have to suffer the consequences in the future.
If our local public leaders are so sure their "investment" decisions will lead to a stronger economy, more jobs, and better quality of life for everyone, then why do they have to force people to support their grand plans? If these are such good ideas, they should have no problem persuading people to voluntarily invest in them. That's what venture capital and entrepreneurialism is all about, marketing a sound enough business plan so that people are excited and willing to help fund it privately. That would be true leadership.
John Pickerill is chairman of the Montgomery County Republican Party. His columns appear regularly in The Paper of Montgomery County.