Tuesday, September 07, 2004

Concentrated costs, diffused benefits

There's an economic "model" to explain why taxpayers allow themselves to be slowly sucked dry by taxes: Concentrated benefits, diffused costs.

Quite simply, members of a small special interest group who stand to gain millions of dollars from a ten-cent tax on widgets have a greater incentive to pursue the tax than the multitude of taxpayers (who stand to lose ten cents on each widget) have to defend against it.

Well, it seems to me the model can be enlightening when pondered in reverse as well, and that it might behoove some tax-happy politicians to do so: Concentrated costs, diffused benefits.

I recently calculated my visible monthly tax bill, which turns out to be almost $1,000. Here's an itemization:

Income tax: $440.00
Social Security: $220.30
Medicare: $51.52
Property: $160.00
Phone tax/fees: $15.00
Sales: $50.00
Total: $936.82

That's probably not comprehensive.

So let's just suppose for a minute that government is not as efficient and effective as it could be. Let's suppose there's some waste, fraud and mismanagement. Let's suppose some government programs are unnecessary and illegitimate (i.e. they can and should be provided in the private sector).

Let's suppose we could cut the cost of government in half by eliminating waste, fraud and mismanagement, and by limiting it to its constitutionally defined boundaries. (My guess is we could cut it even more, but let's just say half. I'm already thinking wishfully as it is.)

That would mean I could keep an additional $500 of the wages I earn each month.

Concentrated Costs
What is $500 to someone like me? How about: A car payment ($250), a college loan payment ($125), a car insurance payment ($100), and a three-month supply of cat food ($25)? (The cat food is for the cat, but if government gets any bigger, I might be sharing it with him.)

Or how about: A cell phone payment ($60), a mortgage payment ($300), a utility bill ($50), a month's worth of gas ($70), and a dinner out with a friend ($30)?

I kind of like the thought of being able to use my money for those things. (Gasp! Greedy capitalist pig!)

Diffused Benefits
What is $500 to a big, wasteful government with a multi-trillion dollar budget? Nothing, nada, not even a blip on the radar. Which is why politicians and bureaucrats who are used to throwing that kind of money around seem to think it doesn't matter when they take it from us.

It's why the people pushing so hard for a new billion-dollar sales tax increase in our state act like it's no big deal. Since many of them get paid with the money they take from us, I suppose to them it isn't. (Coo. Sympathetic generous liberals.)


At 6:54 PM, Blogger Josef said...

Tsarina Marsha;

I just read your... thrust on I-884 and I am thrilled that you are slaying the beast. I think the state gov't is becoming more of an elitocracy and less of a democracy - hence the need to send in the Dino! Because I am short on time, I will just post selections from a press release I sent out last month to try to stop a SVC BofT Retreat:


“I made a campaign issue in my trustee bid last autumn these retreats. I even went so far as to last November give the ‘trustees’ during public comment some Marsha Richards pith to stew on. That was then.

“Now, thanks partially to SVC ‘trustee’ ignorance, the same Marsha Richards is leading the I-Throwmoremoneyatit opposition, even going so far as to say that, ‘We cannot afford to mistakenly or lazily assume that by throwing more money at the system we're going to solve the problem’ (2). Thanks to the continuation of the 'trustee' retreat policy and the movement of public comment to the end of the board meeting, I am forced into the thankless position of joining this fiery host of Republican Radio in opposition to what could be desperately needed new money for SVC because campaigning against I-Throwmoremoneyatit is the only way my independent voice for a Cardinal renaissance will be heard,” Kunzler fumes, noting that he is speaking solely for himself and his shared causes with Ms. Richards.


(2) http://www.king5.com/upfront/index.jsp?action=dsp|episode&fldid=147


Wish I could opine more - I-884 is just plain WRONG.


P.S. The comment I gave the trustees last Nov. in re you was this:


You know, in fact I’ve brought this to the attention of a good friend of mine, Marsha Richards of the Evergreen Freedom Foundation and if she weren’t too busy saving the state from fellow wastrels after they pulled a few fast ones while she was on jury duty last week – she would have come here on her own accord. If she were here, she would almost certainly say something along the lines of quote, “The money our state officials spend - every penny of it - comes from the pockets of working, taxpaying citizens” and therefore, “There is a crucial economic need to spend taxpayer money as efficiently as possible.”


Just please don’t bill the taxpayer because I’m going to have to serve you with a FOIA because as my friend Marsha would say: “It's extremely important because it allows citizens to identify waste in government, and keep government officials accountable.”


I have served SVC with a FOIA in re this retreat situation. When I know the scoop, you'll know.

At 11:06 PM, Blogger Stefan Sharkansky said...

I have an idea along these lines -- how about a campaign to give tax refunds to parents of school age children who choose to educate their children outside the public school system?

Okay, the hardest part might be to figure out exactly how much the state spends per child in the public education system. But lets say we arrive at a dollar figure, say, $9,000 a year. If my 3-year-old David enters public school in 2006, it will cost the state taxpayers about $9,000 that year. If I send him to private school, I'm doing the state a favor by saving the treasury $9,000. (I'm also sending the school officials valuable information that their schools don't meet my standards, giving them an incentive to improve so they can earn David's $9,000 in a future year). So why shouldn't the state give me a refund? Heck, I'd even be happy with $8,000.

I imagine that if all of the state's private school parents were organized to demand their fair refund, it would be a pretty serious lobbying force... Similar ideas are proposed from time to time, but I'm not aware of any such program that has actually been adopted. Has this been tried in WA state before?

At 9:40 AM, Blogger Marsha Louise said...


It hasn't been tried in Washington to my knowledge, but then, we're usually behind the times (ala The Soviet Republic of Washington). Other states have adopted voucher programs, though parents don't get anything near what taxpayers pay for each child in government schools. The vouchers might be $2,000 or $3,000. Tellingly, even with this small supplement, more parents are clamoring to take advantage of vouchers than there are slots available.

There's a really interesting new report out from the Manhattan Institute. It shows that disadvantaged children in states with strong accountability and more school choice are learning more than their peers in other states. Requiring public schools to compete works. Go figure.

Here's a link to the report:

At 10:42 AM, Blogger Josef said...

Yeah, well Tsarina :-) I totally agree with what you told Stefan. To take the discussion a bit farther, you know what the new trend is in re state "community" colleges: Have them pool together and argue as a region. This lack of competition is bad.

What's even worse is that there is a state board of community & technical colleges that decides the specific level of tuition and then the trustees of the individual community colleges have to approve or not the tuition level. The current trustee at Skagit Valley College (SVC) up for renewal, namely Elizabeth Hancock, has never said NO to those votes. And she, as chair during the 2002-03 fiscal year had the following unbudgeted expenditures in her board's end-of-year budget:

$6,747 on advertising

$2,054 on private auto mileage

$1,798 on “other transportation,”

$1,740 on out-of-state lodging

$932 on out-of-state air transportation

$1,856 on “college memberships”

$774 on printing and reproduction

$343 over-expenditure on supplies & materials out of a $3,000 budget

$250 on “Entertainment/Bands”

$250 on “Grants & Client Serv”

$200 on “motor pool services”

Don't tell me there's stuff to cut. There is. And this tale is not limited to SVC... When I get the SVC BofT budget for the 2003-04 fiscal year a week from Monday, I totally expect more of the same.

My point is this, I-Throwmoremoneyatit aside, isn't it time the boards were elected and allowed to set tuition & property tax as they saw fit AFTER performance audits? Once that is done, then shouldn't we have some genuine competition among community & technical colleges to make them efficient?

At 3:08 PM, Blogger GullibleCity said...

FYI, Phil Gramm made a really good speech on this very topic at the '92 convention. Just Google on "Dicky Flatt." Here's a link I found to just the raw text of the speech:

As for vouchers, let's just shoot for $1000 to start. Not much to ask, but enough to create a strongly motivated constituency. So reasonable... so Fabian... :)

At 4:25 PM, Blogger Josef said...


Please check out my previous posting. Then check out http://edtrustfund.blogspot.com/. Note the picture of signatures being unloaded is titled, "i884pets.jpg". Doesn't that sound Orwellian to you?

But, this gets good. This opposing character wrote about "Grassroots Activism all over WA State" and I decided to "give it 'em back" at < http://edtrustfund.blogspot.com/2004/08/grassroots-activism-all-over-wa-state.html#comments > referring them back here. Read it and enjoy a great weekend.

Josef "Watchdog" Kunzler
josef_kunzler AT hotmail.com

At 11:03 AM, Blogger Stefan Sharkansky said...

I wouldn't call my proposal a "voucher" plan. When the issue is framed in terms of vouchers, the discussion immediately shifts to the parents' other school choices. But the real issue here is not other schools but the success of the public schools at satisfying parental needs.

The message is that public schools should be good enough to win the parents' business, and offer a refund to those parents whose business it does not earn.

At 8:35 AM, Blogger Josef said...

This comment has been removed by a blog administrator.

At 8:36 AM, Blogger Josef said...

First my apologies to Stefan for not letting Marsha reply before I post. But this is FLAMING HOT!

[NOTE: This is cross-posted at http://edtrustfund.blogspot.com/2004/09/making-college-affordable.html#c109517604276787443(and if you reply here, please copy it over there. The I-884 crowd needs to hear us more than ev-er.)]

This just in (and yet another reason to vote NO on I-884 - I feel so, so sorry for those duped buisnessfolk because when they read the below, they'll ask: WHY ARE WE NOT DOING THIS HERE, FIRST???):

Efficiency Review Identifies $2.1 Million in Savings for Richmond City Public School Division
— Initiative part of Governor Warner’s Education for a Lifetime program —
RICHMOND - Governor Mark R Warner announced today that a voluntary efficiency review launched as part of his Education for a Lifetime initiative last fall has documented $2,139,292 in potential savings within the Richmond City Public School Division -- the equivalent of the starting salaries of 47 new teachers, with benefits.

Shouldn't this come BEFORE higher taxes? As Governor Warner is quoted at http://www.ndol.org/ndol_ci.cfm?contentid=252870&kaid=104&subid=116, "We're going to show taxpayers that public education will do its part to achieve savings, accountability and efficiency." We being Virginia.

We should also be Washington State. Maybe the initiative should be resubmitted with the State Auditor's Office able to duplicate Virginia's success.

At 12:35 PM, Blogger Josef said...

This comment has been removed by a blog administrator.

At 7:16 PM, Blogger Josef said...


This is probably the best conclusion I could come up with:

   But money isn't everything. The I-884 campaign spent nearly $3 million, dwarfing the paltry $13,000 spent by opponents. It wasn't enough to sway voters.

   "In the case of 884, voters saw through the rhetoric," said Marsha Richards, education reform director at the Evergreen Freedom Foundation, a conservative think tank. She said voters didn't trust that the education tax would be spent well.

   "Every year we hear we need more money for kids, and there's a disconnect," Richards said. "I don't think it can be fully explained by just an anti-tax mood."

I think you ARE a gift!


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