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Reaching Consensus on Taxes

By John Guy on May 15, 2014 in Civic Blog
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LandscapeIndianapolis Star columnist Matthew Tully reported that a bipartisan consensus appears to be developing around a “radical” idea: raise taxes.

His topic was police protection, but the important element is consensus, a magical, hard-to-understand, almost-impossible-to-predict process by which a civil society arrives at resource allocation and social priorities.

History is loaded with political decisions, positive and negative, that arose from years of consensus building. Some amaze. For example, the Sixteenth Amendment to The United States Constitution facilitated creation of the federal income tax. It was first suggested in 1812 as a means to finance war but did not become a permanent part of public finance until 1913 when the amendment was passed. I cannot imagine that such an amendment would pass today.

Passage of the 18th Amendment in 1920 was preceded by years of attempts to prohibit and regulate use of alcohol, including in the Xia dynasty, 2070 B.C. Though creating prohibition in the U.S. required more than 100 years of advocacy, removing it took just a year or two (1933, the 21st Amendment).

The civil rights acts of the mid sixties were preceded by several hundred years of advocacy commencing with efforts to eliminate slavery. The United States now is arriving at a consensus regarding same-sex marriage. A consensus that legal abortion is the way to eliminate dangerous procedures took place in the late 1960s, but presently the trend appears going in the other direction with tough restrictions passed in many states.

Our society appears to have large and beneficial consensuses to govern ourselves and to provide basic services such as highways, but we occasionally stub our toes with attempts to regulate personal behaviors. Prohibition was an example. The effort today is the war on drugs. Throughout history, such programs have failed, but they appear again and again through advocacy by so called moral authorities.

The evolving consensus to hire more police officers in Indianapolis has appeared rather suddenly in response to horrific murder stories. It is “radical” because no one dares to propose a higher tax for other purposes. No authority argues that more officers will reduce crime, or stop murders. No one states that police and emergency response time is slow. Instead, they find justification in rather intangible hypotheses that “community policing” will treat the underlying, fundamental causes of crime. In any case, in the present milieu of Indianapolis’ political thought, “everyone” (Republican and Democrat) favors more officers.

Positioning more officers might be practical and positive. However, we never will know, because no measure will be taken, and elected officials in the future will not vote to reduce the future higher staffing. Meanwhile, increasing taxes for education is off the table, except in a few districts threatened by removal of transportation or by closing of schools. Higher taxes for other purposes are not discussed, although efforts to reduce specific taxes and related revenues are part of the day to day fabric of public life.

At least we arrive at decisions (consensuses), while part of our population says the process is too slow, another part says too fast. Such is the modern body politic.

John Guy is a certified financial planner, is author of “Middle Man, A Broker’s Tale,” and president of Indianapolis-based Wealth Planning & Management LLC. He regularly writes for the Indianapolis Business Journal and contributes to the Civic Blog.

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