Time for a Spending Diet

As Pennsylvania taxpayers breath a collective sigh of relief after completing their 2007 tax returns, another tax day is looming. But this is a day to celebrate. It’s Tax Freedom Day.

Unlike April 15—the day we realize that we really work for the Government—Tax Freedom Day is the day we finally begin to work for ourselves and our families. This year, it falls on Monday, April 21.

Every year, the Washington, D.C.-based Tax Foundation converts the percentage of our income going to taxes to a portion of the year. In 2008, the average working Pennsylvanian will labor 111 days just to pay his or her federal, state, and local taxes.

In other words, if we stopped deducting taxes from our paychecks every week, and instead were required to pay all our taxes before we could spend any money on ourselves, we would have to work from January 1 to April 21 (skipping Leap Day) before we paid off our tax liability. In dollar figures, Pennsylvanians pay, on average, approximately $13,000 per person in taxes.

To give Tax Freedom Day a bit more perspective, consider the high and rising costs of housing, health care, and fuel on citizens. Then recognize that Pennsylvanians work almost twice as long to pay their taxes as to pay for housing. Taxes take close to two-and-one-half times what citizens pay for health care, and almost four times the entire cost of transportation.

But Tax Freedom Day shows only a part of the picture of government spending. Tax Freedom Day ignores, among other things, government borrowing. While federal budget deficits and the national debt receive a great deal of attention, borrowing done by state and local governments receives far less scrutiny.

The latest data show that Pennsylvania state government and agencies, municipalities, counties, and school districts have a collective debt of $110 billion—an amount totaling $33,000 for each family of four. Despite this imposing burden, Gov. Rendell has proposed a slew of new borrowing schemes (along with a handful of tax increases) in 2008—money to be spent during his term in office, but to be paid off for decades to come.

It is for these reasons that Pennsylvania state government must go on a three-step spending diet.

The first step is to pass constitutional limits on the annual growth of state spending to a reasonable index of inflation plus population growth. By restraining the growth in state spending, elected officials will allow job creators and families to keep more of their money to better invest, save, and spend as they deem appropriate rather than giving it to Harrisburg politicians and bureaucrats to spend.

The second step is to empower voters with the right to accept or reject any and all tax increases. By empowering citizens with the right to vote on each and every tax increase—like citizens do in many other states—elected officials will receive explicit confirmation from voters about how much government they want.

Finally, the state must seek to reduce Pennsylvania’s overall tax burden, and try to achieve an earlier Tax Freedom Day in 2009 and beyond. Reducing the tax burden on job creators and families will improve the fiscal and economic health of Pennsylvania.

This government diet would slow the growth in state spending, and the growing burden of taxes on Pennsylvania residents. Contrary to those who defend high taxes and more spending, such restraint would not require any cuts in current spending. Of course, there’s plenty of waste in the state budget that should be cut, including the more than $6.6 billion identified in the Commonwealth Foundation’s report, Government on a Diet: Spending Tips 2008.

This wasteful spending—going to private goods, paternalistic programs, perverse incentives, and corporate welfare—represents $2,100 per family of four. This is money that could be returned to taxpayers and used to revitalize our struggling economy rather than feeding Harrisburg’s insatiable appetite to spend other people’s money.

Tax Freedom Day is no holiday, but a harsh reminder of the high cost of taxes and unrestrained spending. It is also an opportunity to demonstrate why it is time to put Pennsylvania state government on a spending diet.

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Nathan A. Benefield is Director of Policy Research with the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.

For more on the Pennsylvania Diet Plan and to read Government on a Diet: Spending Tips 2008, visit www.PADietPlan.com.