Budget & Tax

Never Enough Revenue

February 2, 2017

Trent England

Samsung knows how much it cost to produce my phone (I have an older, non-exploding one). I’m sure someone at Toyota could search the archives and tell me how much it cost to make my car. Down at The Oklahoman, they know how much it costs for each step in the process of creating the newspaper and getting it into my driveway in the morning.

There is also a calculation made by each company when it comes to pricing those items. Revenue must exceed expenses, at least in the long run, or they’ll go bust. Prices and quality must be competitive or people with either buy another product or just hold on to their money.

Government is different. Nobody can decide not to buy it—we have to pay for it. In many ways, we also have to use it. This makes it nearly impossible within government to know what things really cost or what they are worth. This is true for big, socialist governments and it is true for smaller, limited governments. It is also true across all areas of spending, from public safety to social welfare to filling potholes.

This is a part of the explanation for why high-tax states often face revenue shortfalls. The Wall Street Journal on Monday ran a story on state budget shortfalls in 2017. Oklahoma, along with other oil and gas states, is on the list. But so are Minnesota and Vermont, two high-tax states that benefit from low oil prices. In fact, New York faces a budget shortfall this year despite the highest corporate income taxes and second-highest personal income taxes in the nation.

What does government cost? Often the only real answer is, Whatever politicians can convince us it costs. Maybe the politicians themselves are convinced. After all, without competitors and consumers making choices, it’s hard to say for sure.