Tax protests don't happen often enough, but when they do, they seem
to win a greater diversity of hearts and minds than perhaps any other
type of civic expression -- and with good reason. Not only are we all
overtaxed, but we can also easily sympathize with those forced to pay
a tax that affects others more directly than it affects us.
Last week, for example, Mexico City saw one of its largest tax
protests in its history. An estimated 80,000 Mexicans came to the
main street to protest President Vicente Fox's proposal to lift tax
exemptions on food and medicine. Unequivocally, that merits three
cheers for the protestors.
However, Fox is also proposing to sell state-owned assets, which
ultimately would benefit the public, both by reducing the pressure to
raise taxes and by encouraging the assets to be used more
productively, which means, ultimately, to the benefit of consumers.
Assuming that the privatization isn't structured to unduly enrich
political entrepreneurs, the cheers here go to Fox.
Unfortunately, by packaging his privatization with a tax hike, Fox is
shooting himself in the foot -- and tarring the good name of the free
market. An Associated Press story, for example, identifies one
Mexican tax protestor as protesting "the government's free-market
policies." In reality, the tax hikes -- presumably what most upsets
the majority of the protestors -- are the opposite of a free-market
Let this be a lesson for U.S. policymakers -- particularly for
governors of fiscally troubled states. If you wish to contribute to
economic progress (and, ultimately, to your popularity with the
voters), privatize state assets, yes; but impose tax hikes, nada!