Personal vs. Government Finances
The government of the province of Quebec tabled its budget yesterday. Based on what I have read in various newspapers it seems that we have, once again, a government that seems to know only how to do one thing: increase taxes. Now I realize that the budget deficit is out of control and that the province's debt is extravagantly high. Yes something needs to be done.
Basic finance tells indebted individuals that they must either spend less or find a way to earn more to get their personal finances back in order. Since earning more tends to be a harder for individuals then spending less, most of us (who actually choose to address the issue) will tend to spend less. Getting a higher paying job is not easy and can takes months or years. Salary increases are rarer today than they were in the past. So if you want immediate effect you spend less and you prioritize.
So now let us look at government finances. It would seem that different rules apply. Apparently earning (hmm....bad choice of word....do they really earn it?) more money is easier than spending less in the case of running a government. Why might that be? Governments are, after all, supposed to be representative of the population they govern. They manage to behave very differently however.
A government's ability to, with the stroke of a pen, increase its income is a power that most citizens would love. Oh to write yourself an employment contract that would increase your personal revenues by 2 percent. This government's budget has a 2 cent increase in gasoline taxes, a 2 percent increase in the provincial sales tax and two proposed health taxes. While I support consumption taxes over income taxes I believe that their announcement needs to be married with a cut in income taxes. Only then can a finance minister really speak about the fairness of taxation. By just adding to the burden there is no fairness and his words carry no credibility.
So why do governments not look at the alternative, of cutting spending, as eagerly as that of increasing revenues? For one thing, we, their customers, are lackadaisical when it comes to choosing who should represent us. It doesn't help that, our pickings are pretty slim - in this province you can either elect separatists or some other, slightly less balkanized version of narrow-minded policy. In the end these two parties do not have much competition so, in my view, there is not much incentive for them to listen to their market (the voters - assuming they spoke up). There is no need for them to differentiate themselves by innovating some interesting solution to the red ink. It takes work to cut spending intelligently. Increasing taxes on the other hand is a breeze. Why is that?
Well the recipients of the spending tend to be well organized, large organizations such as labour groups and industry groups that, through their large advertising budgets and louder voice, can sway votes. So cutting their budgets or spending earmarked for their projects will be a public relations nightmare for a government.
On the other the recipients of higher taxes are not so well organized. We the citizens, the voters, do not seem to be able to organize ourselves as well as these labour and industry groups. Sure we are part of these two, but don't you think it is time that we stand up for our individual rights as well as those of the groups that employ us?
Just saying...
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