Potholes in Our Tax Philosophy

There are too many striking things--many good, some bad--about California to allow a visiting European to make easy, sweeping judgments. But one impression troubled me almost as soon as I left Los Angeles International Airport.

As my rented car jolted into its third suspension-wrenching pothole on the trip downtown, the question asked itself: How is it that one of the richest and most resourceful areas in the world, with a culture centered on the automobile, cannot maintain its roads properly?

In two months here I have put the question to a dozen or so people. They all had ready explanations for the gradual decay of perhaps the best-engineered road and freeway network ever built. Budget priorities, bureaucratic waste, Proposition 13 or the need to hold down taxes to promote incentives were the favorite responses in this admittedly most unscientific of private polls. I cannot help feeling that the answers miss the point.

Of course, I see the superficial logic that says that a city or state government cannot spend more on repairing the roads if the education system has even greater problems. It is no use having superb roads if no one can read the signs. I also appreciate that budgetary arithmetic in California is shaped by Propositions 13 and 4, with their severe constraints on additional taxation and spending.

It is here, though, that I get puzzled. Do I conclude that California, the most affluent part of the world that I have ever visited, cannot afford to invest in both good roads and excellent schooling without cutting back on prison building or welfare?

Of course it can, but the voters are too selfish to pay the price, said the most cynical respondent in my sample. The average well-off Californian, this city official argued, cares about having a swimming pool in the backyard and two cars in the driveway, not about what happens to public services. As long as the roads do not actually collapse and there are enough police to protect his property, Mr. Average will vote down a tax increase to improve public provision. After all, what use are public libraries to someone who can afford a twice-weekly visit to Crown Books?

From the other end of the political spectrum came the reply that it was all the fault of the bureaucrats. If waste could be eliminated, if officials spent more time serving the public rather than feathering their own nests, there would be ample funds for all essential services.

I find it hard to believe either that Californians are driven only by selfishness or that public officials here devote their energies to frittering away taxpayers’ dollars.

There seems to me a much simpler explanation--one equally as applicable to what has happened over the past few years in my own country, Britain, as to California.

Voters here, as elsewhere in the industrialized world, have been tricked into believing that taxation is by definition wasteful; that by cutting taxes governments will somehow unleash an explosion of private-sector energy that will quickly fill the vacuum left by the state; that it is better to pay a private contractor to take away your garbage even if costs you twice as much as the public service.

The economics of such arguments have long been discredited. Arthur Laffer’s napkin curve ended up as a $200-billion federal deficit. The private sector has not used its higher profits to repair roads, revitalize ghettos or invest in the future by improving schools.

It must also be clear by now that the provision of some services is not susceptible to individual rather than cooperative action. It is pointless to fill the pothole outside your own house if your car is going to fall through the pavement in the next block.

A much more fundamental fraud has been perpetrated by the tax-cut fanatics: They have entirely misrepresented the role of taxation in a democracy as the wicked confiscation by the state of the fruits of its citizens’ labors.

That is what taxation is in tyrannical regimes, in which revenues are used to enrich a dictator or ruling oligarchy without the consent of the people. Britain under George III and more recently the Philippines of Ferdinand Marcos spring to mind.

In a democracy the philosophical basis for taxation is altogether different. It represents the shared commitment of the majority of citizens to a set of values and goals and the recognition that they can best be achieved through cooperative action. It also reflects an acknowledgement that some public services--be they the provision of education, defense or health care--are vital to a society’s future well-being.

Democratic governments do not steal the wealth of their people, but spend part of it on their behalf. If they do not, they can be voted out of office. Some of the officials and politicians charged with this task will undoubtedly be corrupt or inefficient--but no more so than in any other walk of life, and probably a great deal less so than the average broker on Wall Street or in the City of London.

It is of course perfectly reasonable for voters in such a democracy to decide that they would prefer lower taxes to better public services. But they must acknowledge that the choice is just that. In the public sector as in the private, you get what you pay for.