Frontlines

TAX AND TAX, SPEND AND SPEND

The states of New Hampshire and Vermont are similar in climate and geography, the populations are similar, and culturally they have a common heritage. New Hampshire is more industrialized than Vermont, and its rate of economic growth is higher. New Hampshire has a lower rate of unemployment than Vermont, and its rate of real wages is increasing more rapidly.

Another important difference between New Hampshire and Vermont is that taxes are lower in New Hampshire. Vermont has both a state income tax and a sales tax (along with the local property tax). The wise citizens of New Hampshire have neither.

Profs. Colin and Mary Campbell of Dartmouth College recently published a study of public services in the two states. The focus of the study was to determine whether the people of New Hampshire are suffering starvation in the public sector, or whether the people of Vermont are getting their money's worth.

The study raised a storm of controversy in Vermont, because it shows that very little more in the way of public benefits are generated by taxes which are 50 percent higher (as a proportion of the income in each state). The Vermont sales tax, for example, was imposed originally because of an enormous miscalculation in the cost of a highway program. The tax, of course, was never repealed and today it finances many other "needed" services in the state.

The Campbells' study has stimulated others to investigate their own states. In Boston, one of the local newspapers prepared a comparison between New Hampshire and Massachusetts. A criticism which had been directed at the original study does not apply in the case of Massachusetts, namely that Vermont is an agricultural state and New Hampshire is more industrialized (as if the backwardness and relatively higher unemployment in Vermont have nothing to do with its tax rates).

The results of this critical look at Massachusetts' taxing and spending pattern reveals the same answer as in Vermont: expenditures rise to meet all available revenue, and there is no connection between the cost of government services and their quality. In addition, the Massachusetts study shows that an industrialized area can be adversely affected by higher tax rates, both in terms of the level of real wages and the level of unemployment.

ALTERNATIVE BUDGET ISSUES

Governor Dan Walker of Illinois was awarded a prize by the National Taxpayers Union in 1973 for his high visibility on the tax question. Walker had defeated the candidate of Mayor Daley in the Democratic primary in 1972 because of the tax issue, and defeated the incumbent Republican Governor that November because the Illinois income tax had been imposed with his complicity at the beginning of his term. Although he did hold the line on taxes, Dan Walker emptied the Illinois treasury and promised more than he delivered. Mayor Daley easily smashed him in the Democratic primary this year. Because Walker had put himself into a corner on the tax question, but continued to expand "needed" government services, there was not enough money to keep everyone happy.

The fiscal crisis in Illinois was a major issue in the election campaign. Both Mayor Daley's candidate and the Republican, James Thompson, evaded the issue at every opportunity. They spoke in generalities about "efficiency in government" or "taxing the corporations" instead of the people. An increase in the state income tax is predicted although it could mean the political death of Mr. Thompson, who wants to run for President in 1980 and has to get himself re-elected in 1978 first.

The Libertarian Party of Illinois seized upon the Walker budget which was published in the spring. The campaign for Governor was the keystone effort. Libertarian candidate Joe McCaffrey issued his "alternative budget" in August, which proposed cuts in spending sufficient to eliminate the Illinois income tax.

Chairman Richard Suter of the L.P.I. and Douglas Bragan, with assistance from other members of the Chicago organization, systematically studied all of the programs in Walker's budget. They identified those which were financed by the income tax, and proposed cuts, eliminations, and alternative methods of financing, such as user charges.

The Illinois Department of Mental Health was to be eliminated and its facilities sold. The University of Illinois was to be converted into a private institution. The elementary and secondary schools were to be cut down to half-day sessions teaching only the 3 R's (the Illinois constitution precluded total elimination) with a proposal that teachers could set up private sessions in the afternoons for additional courses, with tuition payments by the students and parents.

A copy of the Libertarian Party's alternative budget was mailed to every newspaper and media outlet in the State. At one point in September, the Democratic candidate for governor was asked by a newspaper reporter what he intended to do about taxes, quoting Joe McCaffrey's name in connection with the Libertarian Party's proposal. When the Democrat came out for increasing the corporation tax, Suter issued a press release for McCaffrey which cited the example of New Hampshire and Vermont and said that the idea meant increasing unemployment and economic stagnation.

The alternative budget concept is a highly effective technique for Libertarian Party candidates. Among other benefits, it prepares the candidates and the party leaders for serious discussions of the nitty-gritty elements of state and local government. It lends much substance to interviews with the press, because anyone who has actually read a government's budget knows more about the issues than anyone who hasn't—which includes the typical major party contender as well as most of the press. McCaffrey was very successful in getting interviews on radio by telephoning the stations following the announcement of a news conference. Often no one would show up at the news conferences, but every station knew that it had missed something and was eager to get some coverage cheaply.

A copy of the Illinois Alternative Budget can be obtained from the Libertarian Party of Illinois, Box 1776, Chicago, IL 60690 in exchange for a donation of $10.00 or more.