Big Government Groundhog Day
When the government increases a fee or tax it discourages the public from doing business and ironically this can result in an actual decrease in state government revenues.
Those who want to raises taxes and fees are reviewing the tax spreadsheets and scrounging for more revenues. They look at their spreadsheet and do some very basic math such as: “this fee generates 3 million dollars each year, if we increase the fee by 50% it will generate an extra 1.5 million.”
Over the years I have observed that once the tax-increasing state official does this math, it can be very hard to diffuse him of the notion that his logic is flawed.
I can explain, “just because you raise the fee doesn’t mean you will get that much revenue because you will put some people out of business and then they won’t be around to give you any money at all. You might actually see a revenue drop because of this.”
My logic isn’t well received. It’s easier for the tax increasor to believe his simplistic math than the intangible theories of what they perceive to be a free market ideologue.
However, this year is different. I have the benefit of very tangible results to make my case.
In April, state legislators won committee approval for a punitive and massive new fee on the vending machine industry. They proposed a 200 percent increase on the yearly fee for each vending machine’s decal – from 75 dollars per machine to 150 per machine.
Those who have read these articles from previous years will know that this is “groundhog day” as this isn’t the first time this has been enacted.
In 2010, as the state dealt with a large budget shortfall, they made a very similar mistake. They increased the fee on the vending machines by 300%. In 2010, soon after passage of the fee increase, I wrote the following:
“This new law will have a devastating impact on Oklahoma’s vending machine operators, at least one of whom lives in House District 31. He has since informed me that he has already pulled his first machine out of service and may very well go out of business.”
Small business owners are not the only ones affected. Legislators have been informed by Coca-Cola that the change will also impact their business. They may be forced to pull marginally producing machines and lay off employees as a result.
This reduction in the number of machines will reduce the revenue which the fee generates to the state. Ironically, legislators will be in part thwarted in the effort to generate revenue because there will probably be fewer machines to tax. And, as a result of this short-sighted policy, any number of Oklahomans may become unemployed.”
Unfortunately, I was in the minority opinion and the majority of the Legislature voted for the increase.