Saturday, April 20, 2013

Winning Today can mean Losing Tomorrow

When Government wins approval to raise taxes or allows a utility to increase rates it often means that they will lose tomorrow. The public school system in the city where I live won voter support to increase taxes in a recent election with the money to be used for school building renovation. The primary election had very light turnout, and substantial amounts of money was spent by companies that stood to benefit, the media also supported the referendum. Those behind the school building renovation wanted more money to be spent, thus they talked about how it would create jobs in the companies doing the work and provide a better environment for the children.

Few talked about how as the taxes, utilities and other hidden cost rise in an area it losses its ability to attract new businesses. This points to a delicate balance and a reason for prudence, government should spend the tax payers money with eyes and recognizing the need for a positive long term return. This is not an isolated event, we see this type of decision playing out time and time again, year after year. Often it has to do with sport complexes, stadiums, or poorly planned infrastructure projects. Irresponsible governments and voters not looking forward to see the ramification of their actions down the road, is why governments across the world are going bankrupt and unable to pay their debts.

It can be high taxes, water rates, or the cost of power, any of these things can make an area more or less competitive. In the case of my local school renovations, how necessary were they? Will business in the city gain by better educated and healthy children or will jobs be lost as companies leave the city when taxes and cost go up? Most people do not look into the future. When  consumers move purchases to online exploiters like Amazon and away from local brick and mortar stores they often think they are saving a few pennies, and not the big loss in local jobs represented going forward.

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