Why I Hate Federal Taxes
The other day on Sirius satellite radio, Howard Stern was complaining about the fact that the merger between XM and Sirius has not yet been approved by US government regulators. The National Association of Broadcasters, which is made up of companies such as Clear Channel who compete against satellite radio, has been lobbying against the merger. Stern was indignant that his competitors would blatantly use the government to harm their competition. It’s hard for me to believe that this was a new revelation for a man over the age of 50, especially one who has been the focus of so much government scrutiny. Maybe he was feigning surprise for his show.
The US government has two things people want – money, which comes from taxes, and power, which comes from the ability to change the laws of the entire country. Both of these products are up for sale by members of the legislative and executive branches of government. The importance of getting a piece of this money and power has given rise to a career – the lobbyist. In fact, many former members of the government become high-paid lobbyists because of their relationships with those still in positions of power.
The US has a long history of people using government power to help themselves and harm others. In the 1800s, private railroads used eminent domain to take property against the will of the owners. For 70 years the federal government has run a milk cartel system with the direct goal of raising milk prices. The sugar industry made more than 900 separate political contributions in 2007 alone (mostly to Democrats) to keep sugar subsidies in the latest farm bill. Thousands of people make their living fighting for a piece of your money and sometimes your property.
Aside from taking tax money directly (through subsidies), taking property directly (through eminent domain), and protecting themselves from competition (through tariffs and other barriers), companies routinely use government regulators to harm their competitors. Last year Microsoft delayed Google’s bid for DoubleClick by testifying against it before Congress. Now Google is trying to derail Microsoft’s bid for Yahoo by appealing to regulators. The resulting political battle will generate thousands if not millions in lobbyist fees and political contributions. The same thing is happening between the satellite radio and terrestrial radio companies. Politicians love this stuff.
It doesn’t really matter whether there are Democrats or Republicans in power. They both cater to special interests. Some, like the sugar industry, are protected by both parties, while other special interests rely more on one party than the other. This is the nature of American democracy, and I doubt that any lobbyist reform or campaign finance reform is going to change it. As long as there’s such a huge reward for having politicians on your side, people are going to fight to have the politicians on their side – and that means more lobbyists and more money flowing to Washington, D.C.
This is what I think about when I work on my tax return – all my money that’s going into a big pot for people to fight over. Maybe I’m a cynic, but I don’t see the federal government as well-intentioned visionaries using my money to do things they see as noble. I see them as vultures feeding on the carcasses of productive people. If you can really believe that any of the presidential front-runners have your best interests in mind, then I envy your optimism.
“I see them as vultures feeding on the carcasses of productive people.”
Bill: This is why I love your posts! You always help me see my money and in this case, my taxes in a different light. That said, I’m less of a cynic because I can’t think of many alternatives to government spending and the wielding of its power.
I agree that both Democrats and Republicans cater to special interests but how do you change this behavior? Does this make me an apathetic and indifferent tax payer? I suspect it does but I’m not sure we have any choice in the matter or the ability to create change.
Nina: The libertarian solution is to neuter the federal government – basically, take away most or all of its powers to regulate business and the economy. Some support such a solution on grounds of federalism – returning powers to the states. Others don’t want to see the states doing similar types of regulation either. Even with the federalist solution, you at least get the benefit of spreading the power out, making it much more difficult to buy favors that affect the entire nation. It also lets different areas with different values make laws that appeal to their citizens – letting Texas stay fiscally conservative while California charges head-on into socialism – instead of forcing the whole nation into one-size-fits-all policies.
Aside from a radical reduction in the powers of the federal government, I think it would help a lot if only people were more aware of the nature of working in Washington, D.C. It’s nice that earmarks are finally getting some attention, but that’s just the tip of the iceberg. Unfortunately, most people are more interested in the NFL than what their government is up to. A lot of people vote, and some even watch the news and the debates. But basing your vote on what you hear in the sound bytes on your news channel of choice is like basing your diet on breakfast cereal advertisements.
Bill: Thanks for elaborating!
“California charges head-on into socialism” — I’ll let you know when I’m moving to Texas.
Rent-seeking and regulatory capture (wiki the definitions) are inescapable consqeunces of interest group politics. When government itself becomes a competitor in the marketplace of ideas as well as the economy, policy really does become a zero-sum affair and someone loses no matter what the action. The only real growth and prosperity comes from individuals endeavors to succeed outside (and often in spite of) those with political power. Instead of trying to unwind all these foolish policies and programs, how about we come up with a new movement to stop the clock on new economic policy completely. At least then we can know the rules won’t change.
Great post! Most commentators come to the conversation with the stance that their side of the political fence is “better” about appeasing moneyed interests than the guys on the other side of the aisle. The reality is that both parties are abysmal, and that “better” is a very subjective and marginal discussion.
Lobbying is one of the consequences of democracy, and it’s important for all of us as taxpayers and voters to remain diligent. Left to their own devices politicians will pursue strategies based on pure self-interest, such as handing out funds and regulatory favors to their big donors and supporting projects that bring money back to their districts.
Companies and interest groups spend so much on lobbying because the ROI for dollars spent on political advocacy is very, very high. If you look at it from a portfolio perspective this is a high-risk (often all-or-nothing), high-return investment.