One of the most basic principles of economics is that there is no such thing as a free lunch; however, some people buy into the lie that the government can provide just that.
The Covid-19 pandemic has changed many aspects of the American way of life, but a major component of that change is how people respond to temporary economic hardship, cultivating an expectation for the government to solve their problems. In the midst of the pandemic, the government-imposed lockdowns brought about job losses, decreased spending, and economic hardship. As a short-term effort, the federal government issued direct payments to Americans. But many wanted this short-term effort to become permanent. In 2020, a Change.org petition arose, gaining support for making stimulus checks a permanent monthly occurrence. This demonstrates the apparent ignorance of what stimulus checks actually do and how they affect the economy.
As Brad Polumbo of the Foundation for Economic Education contends, stimulus checks really do not stimulate anything. Instead, all that stimulus checks do is redistribute wealth that the government has already attained because it does not have the power of a mystical Santa Claus to grant money for everyone out of thin air. It has to come from somewhere, and it just so happens that taxpayers, the very people that receive the stimulus check, are the ones responsible for paying for it. However, the truth of how “free” money from the government really is not free typically gets overlooked. The immediacy and novelty of the concept of receiving the money you did not have to earn somehow entices people enough to want to continue.
The irony is that despite the intention of stimulus checks to stimulate the economy, they never actually did so. A report by the Opportunity Insights Economic Tracker predicted that households earning more than $78,000 would only spend $105 of the $1400 stimulus check they receive. The whole purpose of the program was to get people to spend more so that the economy would continue to function at a somewhat normal capacity. However, many people took the stimulus check and instead saved it as the future of the pandemic remained uncertain at the time.
Thus, in effect, all that the stimulus check program provided was an immediate security blanket that will likely cost us much more down the road with inflation and other factors. In fact, Wayne Winegarden of the Pacific Research Institute released a study indicating that the economic trajectory will likely lead to higher pressure on interest rates, higher inflation, and growing economic distortions, especially as the Biden Administration pushes for higher taxes and increased regulation.
This evaluation of the stimulus program gives us insight into how government and free markets operate. Whenever a national crisis arises, the government’s automatic reaction is to bring itself into the situation and try to remedy the problem with some artificial solution.
Long-term prosperity does not come from stimulus checks. Prosperity comes when free markets are permitted to ebb and flow. Instead of imposing economically restrictive lockdowns, and then redistributing taxpayer dollars when economic breakdown ensues, government should allow people to fix problems themselves as they create new and innovative ways to meet new challenges, build markets, and improve their lives.
According to the 2020 census, Mississippi experienced an overall population decrease from 2010 to 2020. As state leaders attempt to determine the cause and implement policies to encourage people to move to Mississippi, repealing the income tax could be a good place to start.
The Mississippi legislature is currently holding hearings on an initiative to repeal the income tax. As the legislature considers the potential implications of an income tax repeal in Mississippi, it is vital to consider the implications of tax policy on population growth.
Mississippi ranks lower than many of its neighbors when it comes to the total tax burden. Meanwhile, other states in the Southeast have better rankings. It is important to note that of the top 5 states that Mississippi has lost population to in the last couple of decades, all of them have a lower tax burden than Mississippi.
These competing states include Texas, Georgia, Alabama, Florida, and North Carolina. Texas and Florida have no income tax at all, while North Carolina has a flat tax on income. Georgia and Alabama both have an income tax, yet both of these states have a sales tax of only 4 percent. Meanwhile, Mississippi currently has both the second-highest sales tax rate in the nation (7 percent) and a graduated-rate state income tax.
Repealing the income tax provides a foundation for the citizens of other states to consider moving to Mississippi. Economic growth in Mississippi is dependent on its people. There are several keys ways that repealing the income tax would directly encourage people to move to Mississippi.
According to the 2021 edition of the “Rich States, Poor States” report, published annually by the American Legislative Exchange Council, states with low or no income taxes saw greater economic growth. A review of the data reveals that tax burdens are a direct factor in the economic growth of states.
Repealing the income tax is a proven component of economic growth that has worked in other states. For example, in the wake of Florida’s repeal of the income tax several years ago, the state has seen growth in its workforce and immigration levels, particularly for high-earners. Similarly, the state of South Dakota has seen incredible growth as a result of economically friendly policies, including its lack of a state income tax.
People follow the opportunity that economic growth generates by moving to states with successful job growth. In fact, a study found that approximately 52 percent of all relocations are for economic reasons. Mississippi should notate these facts and encourage people to move to the state by creating an environment that leaves more money in its citizens' pockets.
If Mississippi wants to get competitive with other states and see an increase in its population instead of a decrease, repealing the income tax is an important place to start. While other factors play into people moving to Mississippi, the bare minimum that state leaders can do is enact policies that leave money in the people’s pockets. It’s time to axe the tax.
As Mississippi’s free-market organization, we have led the way on the campaign to abolish the state income tax. We are delighted that the state legislature is taking evidence on how best to do this.
Abolishing state income tax would mean:
- Workers get to keep more of what they earn each month. Instead of handing over $1 out of every $20 they make in their pay packet to the state of Mississippi, they would get to decide how to spend that money on their priorities and families.
- A boost for Mississippi’s competitiveness. Having a state income tax makes Mississippi a less attractive place to do business, which is why so many young Mississippians move to states like Tennessee, Texas, and Florida states with low or no state income tax.
The problem, however, is how to abolish the state income tax?
In 2020, Governor Reeves proposed phasing out the income tax over time. Then, earlier this year, House Speaker Gunn proposed the largest tax break in our state’s history, removing the requirement to pay any income tax on the first $40,000 anyone earned ($80,000 if you are a married couple).
But how can we do this and ensure that the sums still add up?
Concerns have been raised about the idea of paying for income tax eliminating by raising taxes on other things, and the Speaker’s proposal involved a 2.5 percent rise in the state sales tax.
Since an agreement could not be reached, the Speaker’s proposal stalled in the legislature.
Now, however, there is a real opportunity to bring all sides together and find a way of making this work.
For years, politicians in Jackson have found ways of spending your money. If we can find an agreement to abolish the state income tax, we will be committing future increases in tax revenue to give people tax breaks, not more public sector fat cats.
With the state budget almost $1 billion in surplus, now is the time to make this happen.
Individuals should be skeptical whenever the welfare state is invoked. As a general principle, because the government is funded using other people’s money, it can be highly prone to inefficiency and waste. But it can be hard to measure how far the inefficiency goes. This is especially true of the welfare system.
The cost of fighting the War on Poverty is very hard to quantify because it has been fragmented into a myriad of programs. Some of these programs may aid in certain cases. However, the government’s general approach to welfare is to simply pump money into such programs with the hope that some of them will work. This is a problem.
For example, last year, it was revealed through a 104-page audit that nearly $94 million in welfare money was spent in ways that were not above board through the Mississippi Community Education Center.
This included hiring lobbyists without describing the work they were set out to do, making lump-sum payments to family members of agency directors (in some cases totaling over $1 million), and spending welfare funding on projects that have nothing to do with welfare. There were even instances of funds being used for college football tickets. This has constituted what some have considered Mississippi’s largest embezzlement scandal.
However, this goes beyond merely the misappropriation of funds. In 2018, the most recent year of reliable data, Mississippi ranked 10th in how much money is spent on healthcare, allocating 76.6 percent of its health budget to public welfare. Per resident, the state of Mississippi spent approximately $2,561. Yet, Mississippi remains one of the poorest states in the country and contains among the highest number of residents dependent on welfare.
Continually pumping money into systems that have already proven to be ineffective is not good policy. Instead, good policy is driven by a trajectory of good leadership and principles that keep in mind that the government works for the people.
If the welfare state is incapable of stewarding taxpayer dollars in a manner that is honest and efficient, then there really is no justification for taking those funds from taxpayers in the first place.
Robert Rector and Vijay Menon of the Heritage Foundation even strengthen this concept as they single out cutting wasteful and directionless spending as one of the biggest ways of bettering our welfare system as a whole. If the government is going to get involved, make sure it has a workable plan.
The citizens of Mississippi ought to consider if the state’s welfare system has truly improved their way of life. If it has not, as the data suggests, then perhaps it’s time for meaningful change. Viewed as a whole, the current state of welfare programs demonstrates that individuals are the ones best equipped to take hold of their livelihoods. As the legendary Ronald Reagan quipped, “the most dangerous words in the English language are ‘I’m from the government, and I’m here to help.’”
Attacking our recently published Fat Cat Report, the Columbus Dispatch invoked Babe Ruth. Curiously, they cite the fact that a legendary baseball star was once paid a lot of money to justify the soaring salaries of education bureaucrats in Mississippi today.
Babe Ruth was indeed once handsomely paid. But he was paid a lot because he possessed rare talents, for which there was tremendous demand. It isn’t quite so obvious what rare talents many of our school district superintendents on six-figure salaries have.
Babe Ruth famously justified being paid more than the US President on the basis he’d “had a better year.” The same can hardly be said of the school superintendent in the Dispatches’ own Columbus district. Despite the superintendent getting $150,000, the school district was D-rated.
The Dispatch insists that school superintendent salaries are market-driven and competitive. Really? If such salaries were market-driven why was F-rated Holmes County’s superintendent paid $170,000, while A-rated Lafayette county’s school superintendent was paid $42,000 less?
How does a competitive salary process explain the fact that the superintendent of Corinth’s district with 2,645 students enrolled was paid $210,000, while Jackson Public School district with over ten times the number of students was paid $39,000 less?
The Dispatch suggests that our report hurts Mississippi’s image.
No, what really harms our state are cozy cartels running public services without accountability to the public, and local newspapers doing nothing to expose the consequences.
The Dispatch suggests that our report is “another attack on K-12 education.”
Perhaps what really harms public education are underperforming education bureaucrats, who are able to carry on presiding over mediocrity as some in the local media look the other way.
The Dispatch glibly dismisses our finding that dozens of education bureaucrats are paid more than the State Governor on the grounds that it has been this way for decades. So why has the Dispatch not exposed the fact? What have they been doing for all those years as top public sector salaries soared, but teachers’ pay stagnated? It’s hardly Woodward and Bernstein when it comes to holding the powerful to account, is it?
The Dispatch claims that we are calling for “state-level approval for any local school district salary that exceeds that of the governor.’ Nowhere in our report do we propose that.
What we do suggest is that “parents living within the School District should have the power to trigger a public vote at the board meeting to confirm or reject any portion of the salary over and above that of the State Governor.”
Having attacked our report for calling some officials ‘fat cats,’ the Dispatch criticizes our report for not calling others ‘fat cats.’ If you read our report, we take care to say that not every highly paid official is a fat cat. We present the facts and compare what top officials are paid to what teachers, nurses, state troopers, and average Mississippians make. We let the reader decide who deserves their salaries, just as we believe the public has a right to know what public officials are paid.
In our report, we make it very clear that our report does not cover university salaries, which lie outside its scope. In their haste to attack, the Dispatch uses this omission against us. Perhaps if they had spent a few minutes researching the topic, they would have discovered that university pay was the subject of a very detailed 50-page report we produced last year.
Perhaps one fact that we did not include in our report but should have is that the per-person income in Columbus, where the school superintendent was paid $150,000 a year, is less than $25,000.
Public interest journalism should have no problem in pointing that out, and certainly not attack those that do.
We think most folk in Columbus and Lowndes County would agree.
Before Mississippi blindly accepts the checks flowing from the politicians and bureaucrats of Washington as benevolent gifts from Uncle Sam, it is vital to scrutinize federal monies that include conditions to bring problematic federal policies to our state.
It’s no secret that the federal government has expanded its spending at exponential levels in recent years. Much of this spending has gone to the states in the form of grants and direct payments, while other funding proposals are built into state programs with a combination of state and federal oversight, such as Medicaid.
Granted, there are several key channels that the federal government uses to distribute monies to the states. Many of these channels are perfectly legitimate functions that reflect the normal processes of a federal system of government.
For example, states are not constitutionally expected to provide for their military security independently. In light of this, the federal government provides adequate funding to build military bases and other defense assets.
One could also argue that because the federal government has jurisdiction over interstate commerce, it should additionally provide a sizeable portion of the major road infrastructure funding. But what about the myriad of other federal funding mechanisms that trickle down money to states like Mississippi?
According to the Mississippi Office of the State Auditor, the Mississippi state government had $10.1 billion in federal funding expenditures for the fiscal year in 2020. To put this into perspective, the total Mississippi general fund receipts for the 2020 fiscal year derived from state-based taxes were approximately $5.6 billion. The influence of federal funding is far-reaching and carries a large portion of the government funds that flow through the state.
Of the billions of dollars and federal funding, much of it is not subject to direct oversight from the state legislature. Instead, most of this money goes through the state bureaucratic system.
Compounded with this, the priorities of the federal grantors are often out-of-touch with the needs and priorities of the state. Though coffers of state bureaucracies could fare nicely from such grants, certain non-mandated federal priorities should not just be accepted so that state agencies can “qualify” for more federal money. For it is essential to recognize that from critical race theory education grants to the funds that come through Medicaid expansion, the potential for damaging federal dollars abound.
All of these facts point to the necessity of state legislative oversight and accountability. All federal grants going to state agencies should be subject to as much legislative and statutory oversight as possible. This is vital so that practically every dollar of federal money coming into Mississippi is accountable to the citizens' elected representatives.
With Washington pumping out policies that are dominated by the priorities of big government, the state legislature must maintain its responsibility to protect Mississippi’s public policy from being polluted by the poisoned wells that dot the landscape of federal funding.
In the wake of bad government policies, it can be fairly easy to focus on the “big picture” effects of arbitrary regulations, high taxes, reckless spending, and runaway inflation. When the cost of such proposals is billions and even trillions of dollars, the impact on the individual common man can get lost in the noise.
It is critical to recognize the macro-effects of these bad policies, but just how much is being taken from Americans’ wallets and shopping carts?
Perhaps there is nothing more economically significant to working Americans than the cost of the goods they need to purchase for themselves and their families. The rising cost of consumer goods is a direct result of shortsighted government policies with effects that are ultimately felt by Americans at the grocery store, in the hardware store, and on the internet. While the issues are complex and impact a variety of sectors, some basic building blocks contribute to the rising cost of consumer goods that hurts hard-working Americans.
Rising taxes are one of the key elements that cut into the affordability of consumer goods. While income taxes are a direct form of taxation that the government uses as a means to take from Americans’ incomes, other rising taxes ultimately increase the cost of what Americans are able to buy at the grocery store.
One of the key taxes that raises the cost of consumer goods is the increase in corporate tax rates. As President Biden has introduced tax reforms to raise taxes, he has insisted that the tax increases would only affect those who make over $400,000 a year. But the tax reforms also include measures to raise the corporate tax rate from 21 percent to 28 percent.
According to a study conducted by the Cato Institute, increases in the corporate tax rate directly lead to an increase in retail prices as businesses attempt to offset their losses by passing it on to consumers.
As if higher taxes are not enough, runaway government spending ultimately leads to inflation. Inflation causes the value of the dollar to go down and causes the price of consumer goods to go up. Thus, as the dollar has less purchasing power, the buying power of an individual is compromised. In fact, in the wake of unprecedented government spending, inflation has directly contributed to an increase in the consumer price index of more than 5 percent.
Finally, expanded government regulations contribute to an increased cost in the price of consumer goods. As regulations increase, so too does the cost of production for businesses.
In turn, the cost of goods goes up as businesses pass on the cost of these regulatory burdens to consumers. The cost of regulations on consumer goods disproportionately impacts lower-income families. This occurs because many of the consumer goods that have the highest price increases from regulations (such as electricity and health care) make up a higher percentage of lower-income family incomes than other goods that are not burdened as much by excessive regulation.
Rising corporate taxes, inflation, and increased regulation; all of these elements increase the cost of consumer goods for Americans. The nation is already reeling from the effects of a global pandemic, expanded income taxes, and a government in Washington that is all but disconnected from the interests of its people.
While the politicians and bureaucrats of big government pour billions and trillions into the government machine, the citizens who make up this great nation's very fiber are working to provide for themselves and their families. A return to sound public policies of fiscal responsibility, limited government, and the success of the free market is critical for the cost of consumer goods to not be manipulated by further blunders.
America is a living proof of the success of capitalism versus the failure of big government. Despite the nation’s solid beginnings and subsequent success, recent efforts in the federal government are attempting to raise taxes, increase spending, and expand the national debt to ourselves and our posterity.
The nation started out as a fledgling colony and went on to become the greatest economic powerhouse in the world. America's foundations in limited government and free enterprise played that critical role for the nation to have the start it needed to rise as the leader of the world economy.
The factors that drove the American colonists to seek independence were numerous, but perhaps the best known is the issue of taxation. As the British Empire attempted to impose taxes on the colonists without representation, this led to a chain of events that eventually culminated in the colonist successful efforts to independence and the founding of the United States of America.
The story of America’s path to success is grounded in the determination and grit of the Founders to create a nation that would be a place of prosperity for themselves and their posterity. The culmination of this vision did not happen through the power plays of big government bureaucrats and heavy taxes to redistribute wealth, but through the power of the free market working to generate capital and success.
The concept of federal taxes imposed directly on American citizens was rarely utilized in America's early years, all the way up until the Civil War. Instead, the federal government collected revenue through tariffs and excise taxes. These relatively limited tax policies were based on the Founders’ understanding that money is used best in the hands of citizens, not the government. In the words of John Jay, the first Chief Justice of the Supreme Court, “[taxes] should not be so exercised as to impede or discourage the lawful and useful industry and exertions of individuals."
In accordance with the Founder’s principles of limited government and just taxation, annual federal spending of taxpayer dollars in America’s early days only constituted about 3 percent of its total GDP. However, in more recent years, yearly federal spending has run far from the moderation of the early years and now comprises more than 45 percent of the total GDP.
The Washington D.C. mantra of “tax and spend” is out of touch with the roadmap the Founders set forth when they wrote the Constitution. Far from the balance of the Founders, federal leaders are proposing even more taxes, more debt, and more spending, all while promoting the expansion of government programs and handouts.
The preservation of the American republic is dependent on the foundational truths that brought America to greatness. A return to the principles of limited government, low taxes, and fiscal responsibility are critical to safeguarding the prosperity of the nation for many more years to come.
In the wake of the new presidential administration, government spending has increased to never-before-seen levels. Despite the economic downturn brought about by COVID-19, the federal spending budget has only expanded.
Much of the spending has been propounded in the name of economic recovery from Covid. As if the government were a group of benevolent humanitarians, it makes bold promises of help and recovery from the economic downturn -while spending other people’s money and then taking the credit for it.
In the words of Henry Hazlitt, “The government has nothing to give to anybody that it doesn’t first take from someone else.” In line with this simple truth, the very same federal government proclaiming that it will “build back better” has put forth a tax agenda that threatens the jobs and industry that actually bring real prosperity.
The higher taxes that are necessary to pay for such a budget are bad enough, but there is more to such a budget than meets the eye. One need not be an economic analyst to recognize that something is amiss in the American economy.
A simple glance at the rising prices across all sorts of sectors has left consumers with a much higher bill at the gas pump, the grocery store, and the car lot. Companies across the country are warning that prices will continue to rise as a result of inflation. While the government is able to meet its spending goals, it is the taxpayer that ultimately foots the bill for the inflation that results.
To put this in perspective, recall the fact that this inflation is occurring in addition to the high taxes. As if the high taxes themselves weren’t enough to satisfy the federal government’s insatiable appetite to spend other people’s money, they tax the citizens and lower the value of the citizens’ incomes by printing more money and lowering the value of the dollar.
While taxes might be “the front door” for the government to put more of the citizens’ incomes into it its aggressive spending agendas, inflation is the result of such policies. It is “the back door” that government uses to make the citizens foot the bill if their tax money can’t even fund the runaway spending proposals.
The enormous federal spending threatens the economic well-being of Americans by increasing their tax burden and then additionally lowering the value of their hard-earned dollars. Ronald Reagan’s quip about government spending stands true: "We could say they spend like drunken sailors, but that would be unfair to drunken sailors, because the sailors are spending their own money."