Custom Search

Monday, November 22, 2010

Taxes: Studies Find Politicians Spend More Than They Take

Wall Street Journal reports what is glaringly obvious to anyone who has paid any attention to the tax and spend discussions over the years.

The higher politicians raise taxes, the more those politicians spend, to the point that they spend even more than what is taken from Americans.

We've updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.

We also looked at different time periods (e.g., 1947-2009 vs. 1959-2009), different financial data (fiscal year federal budget data, as well as calendar year National Income and Product Account data from the Bureau of Economic Analysis), different lag structures (e.g., relating taxes one year to spending change the following year to allow for the time it takes bureaucracies to spend money), different control variables, etc. The alternative models produce different estimates of the tax-spend relationship—between $1.05 and $1.81. But no matter how we configured the data and no matter what variables we examined, higher tax collections never resulted in less spending.

The next time you hear a politician claim that they need to raise taxes on anyone so that the debt can be lowered, remember they only want more of your money so they can spend more of your money.

They only way to lower our deficit is to force politicians to stop spending more money than we have.