By William Tucker on 11.10.04 @ 12:06AM
Teresa and a lesson on how government builds on itself.
I know it's a small point, but I want to make it here before we
move on to other things.
Do you remember when Teresa Heinz released her tax returns and
it turned out she paid only 12 percent of her income? And do you
remember how she did by investing in municipal bonds?
There's a point I wanted to make here, although it was obviously
too trivial for the election. But it shows how government works --
and how Teresa and her millions are part of the whole problem.
A couple of years ago I worked for a publication called the
Bond Buyer. (Joe Mysak, former saloon correspondent for
the Spectator, was editor.) All my liberal friends said,
"Hey, you're finally down on Wall Street. You're going to meet some
conservatives for a change." That's what I thought, too.
Instead, the place was a liberal ghetto -- an Irish liberal
ghetto, to be exact. Everybody was down there because they had
grown up in a family of Irish civil servants and everybody
loved bonds. "Built by Bonds" said signs hanging all
around the newsroom, next to pictures of bridges and tunnels and
subways. By bonds, of course, we meant municipal bonds. The
corporate bonds that Michael Milken was peddling -- those called
"high-risk" -- weren't on anybody's radar.
Municipal bonds were another term for government spending. And
everybody loved it. New York City itself was the crown jewel. In
New York City, the government builds everything -- hospitals,
health clinics, day-care centers, apartment houses, you name it.
New York City has more debt than any of the 50 states yet
still Wall Street keeps lending it money.
New York State tries to keep up as well. Governor Nelson
Rockefeller created a whole alphabet soup of bonding authorities --
the State Dormitory Authority, the Urban Development Corporation --
and they have so much debt nobody can really keep count. The state
has the lowest bond rating in the nation, except for Louisiana,
which is still recovering from Huey Long.
Anyway, the point is this. Why do people buy municipal bonds,
giving governments more and more money to play with? Because
they're tax-free. It's supposed to be some old interpretation of
federalism that one level of government can't tax another, but it's
really "I'll scratch your back, you scratch mine." This is the way
governments work. They pal around and do favors for each other. And
that way they both get to grow.
So here's how it works. When the federal government raises taxes
and tax rates, it makes municipal bonds more attractive.
People try to "shelter" their money so they pull it out of the
private sector and put it into government. New York has so many
taxes that the bond sellers have invented something called
"triple-tax-exempt," which means income from the bond is exempt
from federal, state, and local taxes -- which can amount to 50
percent of the average income.
So this is the way government builds on itself. The idea when
you're in government is you want government to grow, because the
more money there is to play around with, the more you're likely to
collect some yourself. Government raises taxes. That makes
municipal bonds more attractive. People buy more municipal bonds,
which makes it easier for governments to borrow. Governments borrow
more, which allows them to hire more people, who become public
employees, who become unionized public employees, who vote
90 percent Democratic, who elect Democrats, who raise taxes.
In New York City, public employees and their families come close
to representing a majority of the electorate, which is why New York
City residents pay the highest taxes in the country and almost
never complain. (They do move to Jersey as soon as they can.)
So it isn't just that Teresa Heinz only pays 12 percent of her
income in taxes. (Newt Gingrich has suggested the "Teresa Heinz
amendment" -- nobody should have to pay more than 12 percent.) It's
the way she avoids taxes that also matters. And it's why
John Kerry's huge constituencies in the public employee unions
aren't upset about high taxes, either.
Thank god we don't have to worry about that anymore. Now back to
that matter of a mandate
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topics:
Taxes, Unions
