High Prices, Higher Taxes

March 29, 2007

The best indicator of wealth in society is an abundance of goods and services. On the contrary, high prices are definitively not an indicator of wealth. That settled, raising prices will not increase wealth. Furthermore, no government ever taxed itself or its people into prosperity.

The Detroit Free Press reports that Michigan is trying to do just that:

In return for the [State's two largest elctric companies] agreeing to the tax, [Michigan] would change the law to effectively eliminate competition for the two major utilities — DTE and Consumers Energy — to encourage them to build new power plants, said people familiar with the plan who spoke on condition of anonymity. One expert said the utilities would expect to pass the tax cost along to customers.

One expert? How about anyone who’s taken an intermediate course in microeconomics?

I will scream until my lungs are sore: “Businesses do not pay taxes!” Sometimes, through an accounting identity, it looks like they are paying taxes. They sell goods and services to consumers, individuals, who pay the taxes. Businesses collect taxes on goods & services they sell. And they sell their goods and services to consumers - individuals like you or me - who pay a price that includes the tax. A tax, “paid” by businesses is an absolute fiction. Make no mistake: this is a $1 Billion tax on the citizens of the shittiest economy in the union.

But the grant of pseudo-monopolistic privilege is what really gets me hot. It is well-settled that under monopoly, all else being equal, service and quality will be poorer, and prices will be higher. So the legislature is not only asking taxpayers to take it in the rear to the tune of $1B - they’re also asking us to settle for crappy service and prices that are higher than they ought to be.

This isn’t a mere change of the rules, midway through the game. This is changing the game itself:

The concept is certain to be opposed by smaller companies that built power plants since a 2000 law opened the state’s electricity markets to competition. Other Midwest states with so-called energy-choice laws are Illinois and Ohio.

In an economy struggling as much as Michigan’s is, well, I just can’t imagine how this idea could even get past the drawing board - we’re not exactly clipping along at full employment, and most real-estate markets have seen marked declines in average sales and volume. Has the Legislature considered what will happen to the jobs of the employees at these smaller companies? Blank-out.

“Shutting down the government is not even an option,” said Sen. Michelle McManus, R-Lake Leelanau.

Maybe it ought to be.


Posted in: Economic Fallacies

Comments

2 Comments so far

  1. WCTaxpayers March 30, 2007 10:26 pm

    It is now even more important than ever to spread the word to all taxpayers about the Taxpayer Protest Rally! Everyday taxpayers need to show up at the Capitol in Lansing on April 18, bring a teabag that we will deliver to the Governor, and tell Lansing politicians to balance their budget by cutting spending and enacting reforms; NOT BY RAISING TAXES ON CITIZENS! Get to the Capitol around 10:00am. Rally starts at 11:00am, but you will need time to park

  2. …no third solution » Blog Archive » Spending Money Like A Teenage Arab April 10, 2007 8:25 am

    [...] I’m not sure how else to describe the situation - the State is staring at an impending $1B budget deficit, yet there is a proposal to buy iPods for every [...]

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