By Scott Reeder, Illinois Policy Institute -
A Chicago alderman wants to tack $5 onto monthly utility bills to hire more cops. [See IR 9/21/12 story HERE]
It’s always to [sic] easier to sell folks on a tax or fee increase if it is going to “prevent murders,” “educate children,” “fight obesity” or some other noble cause.
The problem with selling tax hikes this way is something called: “fungibility.”
That’s a fancy accounting term for money being interchangeable.
Imagine a giant bucket labeled “government” and a group of people standing around it ladling in money and saying in loud voices: “This is for education.” “This is for health care.” “This is for police.”
And now imagine a different group of people coming back to that same bucket four years later and ladling out money and announcing how they will spend it: “This is for pensions.” “This is for pay raises.” “This is for prisons.”
The only thing assured in such a scenario is that people will put money into the bucket and people will take it out. What changes over time is allocation.
When a tax or fee is raised, it is essentially funding the overall size of government – not necessarily a particular program.
