Three Cheers For Mexico’s Tax Protests

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 policy. 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!