WRAL.com has this short articleabout the sales and “sin” taxes going into effect today. Aside from kicking myself that I didn’t make a beer run yesterday, I took note of this sentence:
Democrats say they aren’t happy with higher taxes but said it was better than laying off more workers.
It should read “…they aren’t happy with higher taxes but said it was better than laying off more government workers.”
That’s a key point, because government workers are an organized, politically influential group. Politicians certainly wouldn’t want to make them any more upset. No, much better to stick it to those poor saps in the private sector than to upset the protected political labor class.
Let us not forget that the higher taxes will necessarily cost jobs in the private sector. So in the end, the politicians are choosing to raise taxes in order to protect government jobs at the expense of private sector jobs.
For politicians, however, the choice seems easy. Its a classic case of concentrated benefits vs. dispersed costs. When more government workers are laid off, it is easily detectable, it makes headlines and a powerful political lobby becomes upset. Conversely, the private sector jobs lost or never created due to the tax increases are widely dispersed – the pain is spread out across the state and not concentrated among an organized lobbying group.
So politicians will choose in favor of the concentrated benefits (protecting government jobs) at the expense of the dispersed costs (lost private sector jobs).