November 29, 2004

Rhode Island Politics & Taxation, Part I

When my family moved to Rhode Island just over seven years ago, we were disturbed to find out that property taxes on our new home here were nearly three times what they had been for our comparably priced home in post-Proposition 13 California.

We received no unusual benefits in exchange for this higher taxation level in Rhode Island. Even more troubling, nobody could explain what made the taxes here so high and kept them increasing at a rate above the growth rates in the incomes of working families and retirees.

Before we delve into Rhode Island-specific details in subsequent postings, let’s take a step back and begin with a big picture question: Are there some guiding principles that lead to sound public policy?

Addressing that question first will define a context in which subsequent postings will explore specific Rhode Island politics and taxation practices.

Lawrence Reed heads the Mackinac Center for Public Policy in Michigan. On October 29, 2001, he gave a speech entitled “Seven Principles of Sound Public Policy” before the Economic Club of Detroit. I found it to be one of the most insightful overviews on guiding principles. While the entire speech can be found online, let me share some excerpts:

The "Seven Principles of Sound Public Policy" that I want to share with you today are pillars of a free economy. We can differ on exactly how any one of them may apply to a given issue of the day, but the principles themselves, I believe, are settled truths…. They are not the only pillars of a free economy or the only settled truths, but they do comprise a pretty powerful package. In my belief, if every cornerstone of every state and federal building were emblazoned with these principles-and more importantly, if every legislator understood and attempted to be faithful to them-we'd be a much stronger, much freer, more prosperous, and far better governed people.

PRINCIPLE #1: Free people are not [economically] equal, and equal people are not free.

PRINCIPLE #2: What belongs to you, you tend to take care of; what belongs to no one or everyone tends to fall into disrepair.

PRINCIPLE #3: Sound policy requires that we consider long-run effects and all people, not simply short-run effects and a few people.

PRINCIPLE #4: If you encourage something, you get more of it; if you discourage something, you get less of it.

PRINCIPLE #5: Nobody spends somebody else's money as carefully as he spends his own.

PRINCIPLE #6: Government has nothing to give anybody except what it first takes from somebody, and a government that's big enough to give you everything you want is big enough to take away everything you've got.

PRINCIPLE #7: Liberty makes all the difference in the world.

Mr. Reed made the following comments during the same speech as he elaborated on the last two principles:

George Washington once said, "Government is not reason. It is not eloquence. It is force. Like fire, it can be a dangerous servant or a fearful master." Think about that for a moment. Washington was saying that even if government is no bigger than he wanted it to be and even if it does its work so well that it indeed is a servant to the people, it's still a dangerous one!....You've got to keep your eye on even the best and smallest of governments because, as Jefferson warned, the natural tendency is for government to grow and liberty to retreat. At the risk of adding yet another quote to this paragraph, it was Alexander Hamilton who wisely told us that "Control of a man's subsistence is control of his will."….

Liberty isn't just a luxury or a nice idea. It's much more than a happy circumstance or a defensible concept. It's what makes just about everything else happen. Without it, life is a bore at best. At worst, there is no life at all.

Public policy that dismisses liberty or doesn't preserve or strengthen it should be immediately suspect in the minds of a vigilant people. They should be asking, "What are we getting in return if we're being asked to give up some of our freedom?" Hopefully, it's not just some short-term handout or other "mess of pottage." Ben Franklin went so far as to advise us that "He who gives up essential liberty for a little temporary security deserves neither liberty nor security."

Rhode Island faces some serious challenges due to public policies that place an enormous tax burden on residents. This has created a disincentive for new economic growth, which translates into further economic hardship for working families and retirees – while certain parties currently in political power live quite well. This hardship is the antithesis of liberty. It is unjust and immoral. And, it does not have to be our future.

Before we can fix the problems here in Rhode Island, it is necessary to be aware of the lack of any public sector incentives to minimize taxation.

Before we can fix the problems here in Rhode Island, it is necessary to better understand the underlying facts. More on those facts in the coming postings.