Imagine if your tax rates had fallen by this much since 1978.

When politicians want to create new government programs, they tell us that economies of scale mean that one government monopoly will be higher quality and less expensive than hundreds of personal choices.

And yet, taxes don’t go down when population goes up. Why not?

Well, when politicians want more money for existing government monopolies, they tell us that growth does not pay for itself.

These cannot both be true.

If economies of scale make government programs more efficient than letting people choose what services they want, from whom, at what price, then having more people means that those services will be less expensive. That’s what economies of scale means. It is the entire point of handing most such services over to local, state, or federal agencies.

But when it comes time to raise taxes, we’re told that “growth doesn’t pay for itself”. That’s literally what Mayor Craig Morgan said at the September 26, 2019 Round Rock City Council Meeting. They voted to raise taxes by the maximum allowed by law without asking permission from residents. Texas has a new law that drops that limit from 8% to 3% for cities, and the council wanted to get in under the deadline.

Mayor Morgan was, in fact, correct—with government programs, which are a monopoly, growth doesn’t pay for itself. It doesn’t have to. In any sane institution, of course growth pays for itself. If it didn’t, a 12-pack of Coca Cola would cost more than 12 single cans. An airline ticket across the United States, which cost $200 one way in 1978, would be over $5,000 today taking inflation and increased air travel into account.¹ But it doesn’t, because growth, in an environment of competition for customers, does pay for itself, and more: even just taking into account inflation, $800 one-way would buy a pretty comfortable trip today.

Any organization that doesn’t see that will go out of business in favor of their competitors who do see that.

Unless, of course, they don’t have competition, as local, state, and federal governments do not. Growth paying for itself requires competing choices, which is why it is almost always wrong to remove services from the competitive market where people have choices into a government program where people have no choice.

When people choose, they choose what’s best for them at what it’s worth to them. When bureaucrats choose, they’re choosing for other people with other people’s money. Neither of those forces matter to the bureaucrat, so the other people the bureaucrat is choosing for get bad service at bad prices.

The logical end result of needing an 8% tax increase for every 4,000 new residents—the growth that Round Rock faced in 2018—is that taxes on each person double for every 50,000 new residents. And if they could figure out how to do that, every government would. We already have governments in California going bankrupt because they are exceeding the ability of their residents to pay taxes.

It’s a dangerous incentive to have governments only go bankrupt after they bankrupt the rest of us. The only growth that doesn’t pay for itself is cancerous growth. The expanding grasp of government means higher costs and worse service.

Multiple competing businesses will always be less expensive and provide better service than a single unaccountable government agency. Government programs really are an upside-down world where growth, even with well-meaning politicians, is an excuse for higher and higher taxes. It’s why government must be kept small and out of our way. We can’t afford anything else.

The mayor’s statement that “growth doesn’t pay for itself” is exactly why Texas’s new law was necessary, and why it should be made even stronger. They’re already talking about an emergency exemption to raise taxes above the legal limit because of COVID-19. This is exactly the time when we do not need higher taxes.