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The real problem with price gouging is when politicians try to enact laws to satisfy their angry constituents. Legislators try to define gouging and then outlaw it. It never works. In spite of this, dozens of states have “anti-gouging legislation” on their books. What these same politicians don’t want to talk about is “tax gouging.” This term was coined by the eminent economist and author, Dr. Walter Williams. It is used to describe the tendency of politicians at all levels of government to tax us to solve all of society’s problems, real or perceived. And if the tax doesn’t solve a particular problem, the answer is to keep raising the tax until it does. This ends up in the form of high taxes that don’t provide any measurable benefit to the taxpayer. Think of it as “greed.” Examples are all over the place. One interesting case in point is a federal tax on your telephone bill. In 1898 Congress passed a temporary tax on telephones to help pay for the Spanish-American War. One hundred and seven years later we still have the tax, producing about $5 billion a year of revenue to the government. I hate to go out on a limb, but I would venture to say that none of this money goes to paying off the Spanish-American War debt. Another good example of tax gouging is the alternative minimum tax added to the federal income tax code in 1978 under President Carter. Originally intended to prevent wealthy taxpayers from paying too little in taxes, the provision now extends to a significant portion of the middle class and has become an onerous burden on many families. Next time you talk with your congressman, ask him why he continues to “gouge” the taxpayer with these outdated and unfair tax policies. Of course, tax gouging occurs at the state level too. This is Massachusetts, and your representatives and senators have become masters at the art of gouging the taxpayer. At a time when we have record revenues coming into the state, somehow the politicians can’t bring themselves to even take a vote on returning the income tax rate back to its historic 5 percent. This was another promise made and broken by our elected officials. Even when the people overwhelmingly voted to bring the tax rate back to 5 percent in 2000, the legislature decided to “keep on gouging.” Their obvious greed hasn’t diminished a bit since the state income tax was “temporarily” raised in 1989. At the local level, tax gouging has been checked to a large extent by the passage of Proposition 2 ½ in 1980. However, it still exists and more often than not takes the form of fees. The imposition of a trash disposal fee, for example, is a backdoor way to raise more tax revenue for a city or town. This is simply a subtle form of tax gouging. School bus fees, activity fees and many other new fees are being implemented to pay for services that used to be covered by general taxation. These fees free up tax money for other “important” spending actions. Government gluttony is pervasive. Look around you. I’m sure you can come up with many more examples of tax gouging at all levels of government. The real question is: Why do we put up with it? Why do we get so upset at price gouging but not tax gouging? Has the government beaten us down to the point where we don’t care anymore? Are we too apathetic to stop it? These are tough questions that each of us has to address individually if we are to check government tax gouging at all levels. You can email Mr. Tripp at Tripp@gis.net *Send your questions
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North
Andover Taxpayers Association In this “year
of the hurricane” we have heard a lot about
“price gouging” from angry homeowners who have
had to pay higher prices for everything from plywood to
gasoline to motel rooms hundreds of miles away. The
consumer calls these higher prices “gouging”
because he is used to paying a lesser amount based on the
“benefit value” of the item in question.
Economists don’t recognize price gouging because
they say that the price of any item is simply determined
by supply and demand – Adam Smith and the free
market are in charge.