Two decades ago, C. Northcote Parkinson formulated his famous first
law: “Work expands so as to fill the time available for its
completion.” Later, he added the corollary: “Expenditure
rises to meet income.”
The just-published “Comparative Study of the Fiscal Systems
of New Hampshire and Vermont, 1940-1974,” by Professor
Cohn Campbell of Dartmouth College and his wife, Rosemary, provides
a striking modern illustration. It would be hard to find a better
pair of states for a comparative analysis.
Vermont and New Hampshire differ in one important fiscal respect.
Vermont has both a state general income tax and state general sales
tax. New Hampshire has neither—indeed, it is the only state
in the country with neither.
Expenditures vs. Services
The result: as Parkinson said, Vermont’s expenditures have
risen to meet its income. In 1974, state and local expenditures
were 50 percent higher in Vermont than in New Hampshire as a percentage
of the personal income of its residents. Vermont was the third most
heavily taxed state in the Union; New Hampshire, the 47th.
Do Vermont citizens get proportionately more or better governmental
services? The authors doubt it, on the basis of a careful examination
of each category of expenditures.
In 1974, education absorbed 9.6 percent of personal income in Vermont
vs. 6.6 percent in New Hampshire. Yet, teachers’ salaries
are higher in New Hampshire, years of school completed are roughly
the same in the two states, and so are mean Scholastic Aptitude
Test scores of high-school graduates. There is no sign of any significant
difference in the quality of education, let alone a 50 percent
higher quality in Vermont.
Welfare absorbed 3.1 percent of personal income in Vermont vs. 2
percent in New Hampshire, and according to the Campbells, “a
principal reason ... appears to be greater leniency in administration
rather than higher welfare payments.”
And so it goes, category after category: Vermont spends more; Vermont
relies more on the state relative to the local community; and Vermont
has little to show in return.
Taxes Are Habit-forming
Does Vermont’s use of broad-based taxes reduce the burden
of property taxes? Not at all. In 1974, property taxes averaged
6.6 percent of personal income in Vermont, 6.2 percent in New Hampshire—though
in most earlier years there is a minor difference in the opposite
Does the use of broad-based taxes mean that Vermont relies less
on handouts from Washington? Quite the contrary. Vermont gets federal
aid equal to 7.2 percent of its personal income; New Hampshire,
Does the use of broad-based taxes reduce the pressure on Vermont
to borrow? Quite the contrary. The state and local debt is more
than twice as large a percentage of personal in-come as in New Hampshire.
Apparently, extra income and sales taxes only whet the ap-petite
of the ambitious public servant. In the private market, you generally
get what you pay for—or you don’t buy. The same force
is present in local units of government. It is fairly easy to move
out of a small community that is taxing much and returning little
in services. However, the larger the governmental unit, the less
the competitive pressure. That is why we get less for our tax money
from the state than from the local government, and even less from
the federal government.
The only way to cut government waste and extravagance is to cut