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November 18, 2004

Taxes: Investing In Us All

Chris Charuhas

Folks who get their ideas on tax policy from sources like FOX News and Rush Limbaugh often say, "It's your money! Don't let the government take it!"

Being an entrepreneur, I think: Wait a minute, that's not right. My money isn't all my money. Some of it is yours. You invested your tax money in me, so I should pay back that investment. Here's how it works.

I make money selling books on the Internet. I didn't pay to create the Internet that made my business possible. I didn't pay for the education of the programmers who built my Web site. I didn't pay for the salaries of the cops who keep criminals from stealing my computer. You and millions of other taxpayers did.

Good entrepreneurs pay back their investors. So I pay taxes that enable you to get the same research support, education, and law and order that let me be productive.

Taxes are public investment. They enable our government to fulfill collective functions that private enterprise does poorly or not at all. Here are some examples:

The Internet:
IBM and AOL tried to create networks similar to the Internet. They couldn't do it. Even if they had succeeded, there would have been separate, non-interoperable networks competing with each other. Think cell phones. A network becomes more valuable as the number of people connected to it increases. That's why the Internet, created with tax money in government labs for common use, has been a phenomenal catalyst for economic growth.

A good K-12 education is very expensive. But if you get a good education, you make more money. The reverse is also true: if you get a poor education, you make less money. When education is funded solely by individual wealth, society separates over time into well-educated rich people and ill-educated poor people. If that happens, say goodbye to economic growth and hello to living in a banana republic.

Police Protection
Privately-funded police forces become private armies. Think Medieval Europe. Enough said.

Some investments are better than others. A poor investment results when taxes are spent on welfare handouts, such as agriculture subsidies. A good investment results when taxes are spent on things like scientific research and early childhood education. Give the National Institutes of Health millions, get billions back in biotech and pharmaceutical profits. Give Head Start millions, save billions in crime/incarceration costs.

High taxes are bad: they discourage business. But low taxes are bad, too, because they starve the public investment on which business growth depends. We Marylanders need only look at the tax policies of other states to see what works best.

Last year, Virginia repudiated its "no tax is a good tax" advocates and decided not to cut funding for its public schools and colleges. Businessmen there realized that good education is good business, and that takes taxes. They know it pays off. It takes a balanced, not-too-high, not-too-low tax rate to create a climate that fosters innovation, entrepreneurship, and the high-wage "knowledge work" jobs that result.

Virginia, and to a lesser extent, North Carolina, have figured that out. That's why they're not Mississippi or Alabama, where the taxes are low...and so are the wages.

So, when it comes to taxes, don't think like Rush Limbaugh does. Think like an entrepreneur. Insist on public investment, and then pay back your investors.

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