Government Efficiency

Why do I read The Lantern? I am constantly met with misinformation such as this article titled Taxes needed. This anonymous editorial suggests that without the additional 1% in state sales tax that is scheduled to expire next year, Ohioans will not get college education. I am going to quickly try to examine this situation, but this is another of my pet peeve issues that I would love to have time to study in detail.

This is absurd. I know that I don't need to explain the economics of tax to you, preaching to the choir as it is. In this state where liberals continue to plead for lower unemployment, they need to realize that taxes creates unemployment! Period. A sales tax specifically taxes consumer purchases from companies typically hiring lower wage and middle-class employees.

However, think about money loosely in terms of Einstein's relativity, it can be neither created nor destroyed (I realize this is a loose concept.) So the supposed $1.25 billion can either be spent by the Government or saved and spent by the citizens. Approximately $200 per citizen per year. The question is not can one do without $200, the question is who can better decide how to use the $200. This is an issue of efficiency.

Many charities are rated for their efficiency. Usually it terms of how much money ends up spent on the purpose at hand and how much is spent on bureaucracy, salaries and other extraneous expenses. The Government, like any charity, should be measured in terms of efficiency.

A dollar spent for a dollar worth of goods is 100% efficiency. As an individual my efficiency is 100% minus the taxes I pay. Federal income tax reduces this by 30%, state income tax extracts 8%, city income tax takes 2% and sales tax brings it down another 7%. This brings an individual's efficiency to 53%. Charity donations might bring this down another 10%, now I am less than 43% efficient.

So what happens to the 57% consumed by the government and charities? A good charity will spend 75% on the actual charitable cause, so 25% of my lost 10% is a total of 2.5% of an individual's total efficiency lost to a charity, but an individual regains 7.5%. Now the total of an individual's efficiency is about 50.5%. The only remaining question is how much of the government budget is spent efficiently and how much is wasted on salaries and other bureaucracy. I doubt the government can beat 75% efficiency. Let's give them the benefit of the doubt and assume the Government is 50% efficient. Therefore 50% of the Government's 47% is a total of 23.5% loss. Individual (100%) - Charity (2.5%) - Taxes (23.5%) = 74% total efficiency. This is probably the most generous measure I could make since it fails to account for capital gains and lots of other factors. However it is easy to see the difference between losing 2.5% of my income by allowing a charity to spend my money and losing 23.5% of my income by allowing the Government to spend my money.

The fundamental economic assumption is that the best way to make economic decisions is in a market. As a market for charity & taxes, the Government extracts HUGE portions of this market through their monopoly. In the market for charity the Government has excessive market power.

Take control of your money and donate to your favorite charity.
Reduce taxes at every opportunity.

Who knows how to best spend YOUR money? You or the Government?