Last week I wrote of the disastrous 2010 revenue grab by the Legislature. Faced with a 1.2 billion dollar budget deficit, they attempted to shake down the vending machine industry through the enactment of an increase in the vending machine tax.
The Governor and legislators of that time wrote a budget with the expectation that their massive increase would increase vending machine revenues from 3.9 million to over 8 million dollars each year.
They won approval for their fee increase by utilizing all the usual scare tactics used by the "increase taxes and fees" crowd. The spokesman for the Governor was actually quoted as saying: "The question is simple; do you raise fees or do you lay off teachers?”
Those who understand how the free market works did not give in to this simplistic logic and scare tactics. We knew that government cannot simply dictate new revenue, and when government taxes more, it sometimes receives less -- including less money for "teachers."
Unfortunately, our advice was not heeded and government pressed forward with the new tax. They wrote their new budget with the expectation of generating the $8 million from the tax.
They made a huge mistake!
Not only did the new tax fail to generate any new revenue, the government lost hundreds of thousands of already existing revenue.
In 2011 the tax generated just $2.1 million -- down from 3.9 in 2009 and certainly nowhere close to the $8 million of expected revenue upon which the budget had been developed.
This massive reduction in revenue testifies to the fact that government's punitive action on this industry likely killed jobs and businesses and hints at an additional impact -- the loss of income taxes from those who perhaps left the state to work in a more business friendly venue.
In 2011, government leaders were forced to backtrack and cut the fee in half. But the damage had been done and the industry has not recovered. To this day, this fee generates less revenue than it did in 2009 before the increase. Government has likely lost out on millions of revenue due to their greed and lack of knowledge of how the private sector and free market actually work.
Here's something even more shocking to learn.
Faced with a similar budget deficit, government leaders once again seek to increase the fee.
A House committee put the new fee on the fast track and it looks as if it could pass soon.
They are literally going to write the state budget around a revenue stream that will likely fail to materialize and will probably create a new revenue shortfall.
I have been shocked to realize that many do not remember the events of 2010/2011. They have suppressed the memory of their costly mistake.
The capitol is filled with numerous spreadsheets, each containing various schemes to raise taxes and fees.
Legislators would be well advised to remember that those spreadsheets do not represent reality, and their effort to take more of your cash will likely not work out as intended.
When they raise taxes, they will discourage free enterprise and drive away the very taxpayers who are providing current revenues. This will create another budget deficit and a self-repeating cycle.
Instead, lawmakers should re-route their currently misplaced energy to the concept of streamlining, efficiency, cost-cutting, and applying best business practices to state government.