Tax Refund vs. "Investment"

LaVarr Webb cogently takes the middle ground here (scroll down to Publisher’s Opinion) in the battle for Utah’s historic budget surplus. (I have posted my opinions about the surplus here and here). Without specifically addressing the extreme arguments on both sides – the state should spend it all vs. the state should give it all back – Webb argues for a highly responsible approach.

Citing numerous sources, Webb says, “there is no great clamor for a large tax cut.” He argues that a real need exists to shore up and enhance infrastructure (specifically citing transportation and water), saying that it’s a pay now or pay a lot more later situation. He seems to suggest that while we think we’ve got a population boom now, the real boom is coming over the next few decades and we’d better prepare for it.

Webb uses business terms that liberals like to use in reference to government programs, but almost never use in reference to business. (I’m not calling LaVarr a liberal, I’m merely pointing out a parallel).

“We love the fact that our economy is booming, producing more revenue, which allows money to be invested in transportation and economic development that will pay long-term dividends.”

The Libertarian view, of course, is that all things would be better if the money were spent by individual taxpayers than by the government. Obviously, not a lot of voters actually believe that. The liberal view is that all things would be better if the money were spent by the government. There seem to be a lot more people in this boat, but given government’s track record in effectively spending money, many are somewhat skeptical about this as well.

Webb’s argument for a reasonable tax cut while investing the remainder of the surplus in infrastructure will resonate well with most Utah voters. Webb predicts that this will be what we see when the dust of the current legislative session settles.

People that run businesses know that good infrastructure makes for better business. It is as much of a draw as a favorable business tax climate. Business people also understand how balance sheets and long-range planning work. That, argues Webb, is why it makes sense to invest in infrastructure now. We have only to look at the continually escalating cost of the Legacy Highway to understand how infrastructure investments become more expensive with time.

As part of long-range planning, however, we need to wrestle with future state finances. I have argued that a tax refund is fiscally responsible because it means the government won’t become addicted to a funding level that will not be sustained. California is the classic addiction case. LaVarr has argued that an excessive refund right now will leave infrastructure under funded. The needs will not go away and will only become more costly with time.

I believe both sides of this equation are valid. The delicate job of the legislature, then, is to carefully determine the magic point that achieves the optimal result, and to match cuts and spending accordingly. LaVarr optimistically suggests that we fully trust the legislature. Ethan isn’t so sure that they’re trustworthy (see here, click on Show Original Post).

I would be happier with the legislature “investing” if I could be sure the spending will actually improve infrastructure in a meaningful way, if they cut programs that government shouldn’t be doing anyway, and if they actually had meaningful budget and revenue projections for 10-20 years.

LaVarr will have his wish, of course. We have no option other than to trust our elected representatives to make the right decision. If they mess up, we have the opportunity to do something about it in the next election cycle, although, Ethan argues, “I can't think of anything this legislature could do that would endanger their jobs.”