SOUNDING OFF:

The Pilot has often given space to local Republican politicians to repeat the party line against tax solutions to budget problems; most recently, to Sen. Tom Harman (“Tax increases are not the answer for state budget crisis,” March 12).

Harman suggested, among other things, that California’s high taxes forced Volvo to relocate from O.C. to New Jersey. But he ignores the fact that New Jersey is no tax haven or that Volvo may simply have wanted to move three time zones closer to its European parent. Conveniently for Harman, we can’t change our time zone, so taxes seem like a good fall guy.

But what Harman and others don’t want to admit is that their stand against new taxes doesn’t make tax increases go away. It forces them to go underground as hidden taxes, the granddaddy of which is inflation.

Overall, inflation has been low, but everyone has seen selected price increases in energy, gasoline and basic foods. These are hidden taxes. Unfortunately, in the case of energy prices, we’re sending the hidden tax dollars off to the Saudis or Venezuelans rather than to Washington (Hugo Chavez sends his thanks). Now, overall inflation is heating up. Be warned: A rise of only 2 percentage points in inflation in a $13 trillion economy is a $260 billion hidden tax.

If we had the guts to pass an overt tax that size, we could use it to pay down the deficit, fix those bridges, or take care of our returning veterans.

The other big hidden tax at the national level is the decline in the dollar. This too works its way into price increases.

At the local and state levels, the big hidden taxes are fees. Perhaps some fees should go up. The L.A. Times recently editorialized for higher community college fees. Last month, the O.C. sewer system voted to raise fees by some 60%. Instead of raising the gas tax, I-73 is a toll road as is the proposed extension of I-241. You will find four fees at the bottom of your property tax bill for things like fire ant control. You can expect the list to grow.

Harman also referenced business taxes. Let’s hear small business owners sound off on increased fees they’ve had to pay.

Why do the pols like hidden taxes? Well, they’re hidden. There’s no accountability. No angry voters.

And we go along with it. We hate sending a bigger check to Sacramento, so we pay for it a penny here, a dime there, and that feels better.

What’s wrong with hidden taxes? First, they’re inefficient (the “Chavez effect”). Second, they transfer wealth in capricious ways. Some people benefit from hidden taxes. Economists call them the “free riders.” There are ways to avoid hidden taxes or pass them on to others. Finally, most hidden taxes are regressive. They fall most heavily on the people who can least afford to pay them. In Econ 101, they talk of inflation as a tax on widows and orphans.

So next time local politicians such as U.S. Reps. Dana Rohrabacher and John Campbell, Assemblymen Chuck DeVore and Van Tran, and Harman brag about holding the line on taxes, ask them what they’re doing about hidden taxes.

Bob Schmidt is a resident of Newport Beach.