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Business Support for Prop 104 is Self-serving

August 7, 2015

Since most of us assume that business people are conservative, that is, they prefer smaller government and lower taxes, one might logically ask why any business people would be supporting Prop 104, the 31 billion dollar transit tax increase. To answer that question one need only look to the year 1946 when Leonard Read formed the first-market think tank in the United States. At that time Leonard was the president of the Los Angeles Chamber of Commerce and he had become frustrated with his members because they all stated strong support for conservative principles,….except when some new government program would benefit their business. Leonard decided that more education in free-market principles was needed and he left the chamber to start the Foundation for Economic Education-FEE-which is still in existence today. The fact that business people support Prop 104 in Phoenix would suggest that such education in the value of free markets is needed just as much today.

There is one more reason why pork barrel projects like Prop 104 escape public scrutiny. That is something generally referred to as the principle of concentrated benefits and dispersed costs. It is simply the notion that, whenever the government spreads around billions of dollars on construction projects, there are a few business who will benefit greatly and a very large number of taxpayers who will only get hurt by a small amount. Therefore, the favored businesses have a large monetary incentive to promote the project (look at supporters of Prop 104) and the taxpayers have insufficient incentive to oppose it.

Even though Prop 104 is an extremely wasteful project (mostly because of the billions of dollars going into light rail), it is quite likely that it will pass. The fact that City Council rushed the measure onto an off-election year ballot in August in Phoenix is also a reason. Phoenix voters should be mindful of the fact that this measure brings our sales tax up to a level so high that it probably cannot be raised again, even if a worthy cause should arise.

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