Someone Else Should Pay For It!

This past weekend I was visiting friends that I haven’t seen in a while. We were watching the NFL playoff between the Vikings and Packers that started about 8:30 PM local time in early January, outdoors in freaking Wisconsin. The game was boring, likely attributable to the injury related loss of the Vikings’ starting quarterback, and the conversation drifted to tax policy. I learned that two of my oldest friends, husband and wife, believe that the insatiable tax revenue appetite of the political class can be solved through the increased taxation of so-called “luxury items” to include but not limited to certain cars and firearms.

This plan seems reasonable, right? What possible problem could anyone have with it? First and foremost, this scheme is just another in a long line of having someone else pay for the functions of government. This is a politically sound argument proven by the president who was recently re-elected by demonizing “millionaires and billionaires” who don’t pay their “fair” share without ever defining what that is while ignoring IRS data showing that those with higher incomes actually pay a largely disproportionate share of taxes collected and more as a relative percentage of income.

Second, who decides what is considered a “luxury” item? Politicians, of course, who are human and have as broad a definition of “luxury”, “the basics” and “needs” as the general population. The best retort to the argument “nobody needs that” is “why should anyone care?” Needs and wants are relative to the individual and any official definition of such serves only to divide the citizenry by elevating the relative interests of one group over another. And just because one group may be comparatively small doesn’t mean that their interests may be ignored, tyranny of the majority and whatnot. There is no guarantee that those supporting higher taxes for others one day won’t eventually be on the other side of the argument on another.

It may be emotionally satisfying to consider certain items so essential that they should not be subject to sales taxes and that the forgone revenue should be made up by increasing taxation on less essential items but it is inherently unfair and betrays the notion that “we’re all in it together”. The reason for this is because if the majority of citizens vote for and advocate policies that increase the costs of Government there is a dishonest contradiction in simultaneously advocating policies that assign those costs to others. The bottom line is that if the result of an election is more costly government then that increase should be borne equally across the electorate.

There is nothing unfair in assessing a sales tax equally across like products. And because sales taxes are applied as a percentage of a purchase, an item considered extraneous or luxurious will by definition be taxed more than other things simply because it either costs more or is something that someone somewhere may consider unnecessary and otherwise go un-purchased. One unintended consequence of such a plan is fewer “luxurious” items being purchased resulting in less production of them as artificially inflated prices constrict demand plausibly resulting in less tax revenue being collected than if there were no added “luxury” tax.

At the end of this conversation, my dear friends thought they had me in a Catch-22 because I drive what may be considered a “luxury” car (in truth, it’s a fancy Nissan) and therefore was only dissenting in my own interests. There’s truth to that, in that I don’t think that I or anyone else for that matter should pay artificially higher prices or forced to make purchasing decisions based on the subjective judgment of a self-styled enlightened few. They even agreed to the purported fairness of such a law affecting my fancy Nissan while not applying to a Honda Accord costing the same, relying solely on an arbitrary name-brand classification of “luxury”. In the end, how is it in my self-interest to resist paying more than others for my purchases but not in theirs to tax others more and themselves less? Is there any other argument other than, “someone else should pay for it”?