The drama unfolding in Wisconsin is a collision between the generous salary and pension benefits of government employees and the ability of the average taxpayer to afford them.
The unions parade thousands of teachers, police and firemen who try to portray this battle as rich versus poor. But the reality is these workers are not paid from our progressive federal income tax. These workers are paid by local and state taxes and fees that are assessed on the average taxpayer.
This battle is between civil servants and the taxpayers who pay their salary.
The truth is, every penny of local and state government spending comes out of the wages and income of our workers and taxpayers. Milton Friedman, the Nobel Prize winner and most quoted economist of the 20th century, said, The total tax on a society is the sum of all government spending. We tend to see only the taxes we pay directly, like property taxes. But most taxes are hidden, or embedded, in the cost of the items you consume.
Think about embedded taxes on your next trip to 7-Eleven. The real estate taxes on the building are $50,000 a year. The impact fees to build the building were $500,000. The tax on utilities is $1,000 a month. The tax on fuel is 50 cents a gallon in most areas. Payroll taxes, sales taxes, and other taxes dwarf the profit the store makes. And you, the consumer, are paying for all of them. Not 7-Eleven, you.
Taxing corporations instead of people may sound appealing, but a consumer pays the tax in the cost ofitems purchased. The Americans for Tax Reform calculated the amount of tax in the items you purchase:
- Taxes account for 43 percent of the average hotel room rate.
- Taxes account for $63.60 of a $159 airline ticket.
- A $153 utility bill includes $40 in taxes.
The corporations are merely collecting the tax; you, the consumer, are paying it. If the average taxpayer had to walk down to city hall and pay these taxes, they would throw out the elected officials who approved all of this spending. But since the taxes are hidden, people are misled into believing someone else is paying taxes.
And the beneficiaries of these taxes are government labor unions. Sure, there are lots of hard-working classroom teachers who deserve to make more. But there are also thousands of government workers who make far more in pay and benefits than their work dictates. The highest annual pension in Florida is $283,000 a year, for not working. A firefighter in Orange County can make $150,000 a year (with benefits) and only show up to work 58 days in a year (which means you need six people for that one position).
There are three reasons why government at all levels needs wage parity between the public- and private-sector workers. First, it is an issue of fairness. Why shouldprivate citizens work two jobs so the civil servants they support can enjoy retirement? Second, the high cost of government is lowering the standard of living of taxpayers. The taxes citizens pay are going up much faster than their income, making it harder and harder for taxpayers to maintain their standard of living. And finally, high taxes equal high unemployment. Increases in government spending reduce the disposable income of consumers and starve our small-business economy.
The battle in Wisconsin is not about left versus right. It is about returning to sound economic policy. We can no longer operate our governments with the same business model that brought down General Motors. The time has come to accept that government labor unions have driven the cost of government to a level that is harmful to our economy and our standard of living.
The time has come for our government to serve the people, not its employees.
Matthew Falconer is an Orlando-based commercial real-estate owner and broker who ran for Orange County mayor in 2010.
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