In her latest Washington Post column Megan McArdle makes a charmingly naive claim:
Blue-state taxpayers may finally have to confront the full cost of the government they want. And Democrats will finally have to confront the tension between what those voters want government to do and what they’re willing to pay for.
That reckoning is long overdue.
Blue-state professionals have enjoyed a disproportionate share of the prosperity gains over the past few decades; if they want a bigger government, they’ll have to give up those gains to fund it. But thus far, Democrats haven’t managed to convince these voters that providing lavish government to every state means that they need to be taxed like a Rockefeller — or even like a Dane.
I’ve mentioned this anecdote before. Back at the turn of the 20th century there was a chap named Elbert Hubbard. He and his wife died when the Lusitania was sunk. He was a successful entrepeneur and best-selling author who wrote the famous motivational A Message to Garcia. He founded a utopian community on a creative plan: the inhabitants were craftsmen who owned shares in the community’s profits, earned from selling the works created by the shareholders in the community, or derived them from the earned value of what they created. When asked by an interviewer whether he was a socialist, he responded “When 51% of the people want to give rather than get, I’ll be a socialist.”
There is presently precious little evidence that those who earn 51% of the income (we’re nothing like as egalitarian as Hubbard’s comment presupposed) want to give. High tax states, particularly high tax states without amenities like beautiful mountain vistas and benign climates, are finding that their erstwhile citizens would rather switch than fight—they’re leaving for places with lower taxes like Texas and Florida. The total effective tax rate Americans have been willing to pay has been remarkably stable for a very long time even as what government at all levels has disbursed has risen.
Just about anyone who earns more than $80,000 per year, the top quintile of income earners, is the beneficiary of government or some sort of government-sponsored market intervention. They’re government employees (firefighters, police officers, teachers), protected by occupational licenses or have their goods or services exempted from competition, foreign and domestic, by a variety of means like copyrights and patents.
The bill hasn’t come due yet but it will. Eventually the increase in interest payments will exceed the increases that can be realized by raising taxes. Raising marginal rates isn’t enough—you’ve to increase effective rates to derive additional revenue. That’s when the wheel will hit the road. I’m guessing that those with the money won’t be beneficent to dispense with it. They haven’t been so far.