Begging the Question: How Conventional Wisdom Leads to Higher Taxes

by Wyoming Liberty Group Staff

Whenever politicians write bills about taxes and government spending they do so based on a an idea of how government relates to the private sector. This idea is rarely spelled out, and most of the time the politicians themselves are not even aware of how it affects their work.

More often than we might want to admit, legislation on taxes and government spending is defined by conventional wisdom and habitual thinking.

When nothing bad comes out of that thinking, we can just dismiss it with an eyeroll. The problems begin to amass when politicians routinely jogtrot through bills that raise our taxes and expand government. Probably without realizing it, this is precisely what the Revenue Committee is doing, and there is no better example of this than the tax-revenue analysis they asked for from the REMI consulting group.

Under the title "Economic and Fiscal Diversification in Wyoming", the REMI group delivered a presentation to the Revenue Committee at its meeting here in Cheyenne. They produced a concise conclusion:

Under its current tax structure, Wyoming's effort to stimulate non resource sectors in the state presents fiscal challenges. Only growth in resource sectors has significant positive fiscal impacts.

The way the presentation is structured it gives the impression that REMI reached this conclusion based on dispassionate, analytically astute research. I am not questioning the modeling behind their analysis, although as I have explained elsewhere, any use of proprietary methodology in evaluating tax policy is a violation of basic scholarly standards and the transparency rights of taxpayers. But even if we accept their methodology, we still have the problem with a de facto ideological bias in their analysis.

In plain English: their conclusion that government needs more tax revenue is based on an ideological premise that narrowed their scope of possible conclusions.

The REMI group did not choose this ideological preference. It was given to them by those who paid for their work: the Joint Revenue Committee. The analysts explain the goal with their work as an analysis of the "fiscal impacts of economic diversification efforts in Wyoming".

As with all consultants working for the state, REMI had to play with the cards they were dealt. I have no reason to suspect that their contract contains any clause regarding their expected conclusions, but it is rather obvious from their report that such a clause would be redundant. The goal, namely, with their work is set so narrowly that they could not reach any other conclusion.

And right here, in the goal they were handed by the Committee, we find a clear pro-big government ideological bias.

The key phrase is "economic diversification efforts". The REMI analysis never explains who is supposed to make the effort – but they really don't need to do that. The ones making the effort are you and I. The taxpayers. Our effort, of course, is to take some time out of every day at work, produce economic value for government and hand it over so that the state can engage in "economic diversification".

Which brings us to the term "diversification". Since the term "economic development" has become controversial, it is becoming increasingly popular to call it by another name. In this case, "economic diversification". Since linguistic pirouettes do not help transparency and accountability, it would have been better if the Committee has restated the goal with the REMI report in more accessible language. For example: "an analysis of the work taxpayers need to put in so we can spend more on economic development and get at least some of that money back."

With the goal reformulated this way, how could the REMI analysis reach any other conclusion than that government needs more tax revenue?

We are now back where we started, namely at the conventional-wisdom type of thinking that says government is the beginning and the end of all economic activity. Without explicitly saying as much, the Revenue Committee did in fact tell the REMI consultants that

1. Government must spend money on economic development;
2. Spending on economic development costs money;
3. Government needs to make up for that spending in the form of more tax revenue; therefore
4. The REMI consultants are getting paid to explain that we need a new tax structure so that our state government can get the money it needs to keep spending on economic development.

This may sound a bit cynical, and if it were an express preference of the Revenue Committee, it would be cynical. However, it is not the result of intelligent deliberations within the committee. Instead, it is an example of how habitual policy thinking taints economic analysis and builds seemingly unbiased support for a highly controversial conclusion regarding tax policy.

Bluntly: in the goal they gave the REMI group the Revenue Committee confined the outcome of the analysis to the conclusion that only government can grow the economy and that it can only do so by spending more money on economic development.

Sadly, this is not an isolated example of question-begging in government policy making. As I noted in my recent article on economic development, when government pays consultants and gives them a narrowly defined assignment, it is impossible for those consultants to reach any other conclusion than what government is asking for. When government then relies on that analysis for its policy making, the conventional wisdom about government being the start and finish of the economy, is baked into its policies without a shred of critical thinking in the process.

And who ends up with the thin end of the wedge? We the taxpayers.