Stephen Gordon on good politics and not very good economics
“Don’t tax you, don’t tax me, tax that fellow behind the tree” – Russell B. Long
Anti-tax populism is a powerful force in politics: the Conservatives owe much of their electoral success to their staunch anti-tax rhetoric. And the lesson of three election victories in a row — and of three consecutive elections in which the Conservatives increased their seat totals — do not appear to have been lost on the opposition parties. While they may sometimes denounce the Conservatives’ signature tax cut — two percentage points off the GST, worth about $12-15 billion a year in revenues — neither of the major opposition parties dares suggest that they would reverse this measure if elected.
Anti-tax sentiment has sunk in deep enough that political parties who would like to get elected on a platform of increasing tax revenues seem to feel they have little choice but to promise to only increase taxes that no one has to pay. Magical thinking might be smart politics, but it’s not very good economics. Here are the two most popular themes:
“We will cut your taxes” and “We will increase other people’s taxes” are obverse sides of the same populist coin. It’s simply not possible to counter the starve the beast strategy without broadly-based tax increases.