Editor's Note: Our Hans Ohanian feature in the Mud Season 2009 issue exploring how taxes would be lower in an independent Vermont has already prompted some discussion and debate, including this lengthy critique from Washington D.C.'s Jeff Hollingsworth. Hans Ohanian's response follows.

To the editor:

Prof. Ohanian makes some excellent points (neo-libertarian) about the smoke-and-mirrors Federal tax system, and kudos to him for citing the authoritative Tax Foundation.  But his analysis omits some key aspects and tosses off unsubstantiated rhetoric as fact.  For example, "trillions of our tax dollars" for the Iraq war.  Actually, trillions have been spent, using wealth not yet created, on bailouts, earmarks, and pet projects (Sanders, Leahy, et. al. guilty as charged) that would never pass the smell test if considered on the merits. "Trillions" haven't been spent on the Iraq war, nor the Afghanistan war, and you can combine the two and still not equal "trillions."  Sidebar: Ohanian speaks to Postal Service expenditures.  They would be much lower if the USPS was allowed to close and/or consolidate money-losing local post offices.  But VT's Congressional delegation, in tandem with the postal unions, prevents that from happening in your state.  It's all about whose ox is being gored. Multiply that by the other 49, there's your answer. But that's a drop in the bucket compared to the bigger picture, mixed metaphors notwithstanding.

Ohanian's main argument for lower taxes in a Republic of Vermont seems to be based on not paying Federal taxes, especially the small percentage that goes to defense (the vast, overwhelming proportion of Your Tax Dollars At Work goes to entitlements, recurring appropriations, and debt service, not bombs, guns and armaments). 

He fails to argue how Independent Vermont would compensate its citizens for Federal entitlements and promises lost as encapsulated in Social(ist) Security, Medi(non)care, Medic (can I get a medic?) aid, AFDC, veterans' benefits, and myriad other transfer payments (spread the wealth around, as President God-King puts it).  Once VT goes indy, all that disappears. Then what? 

That aside, Independent Vermont may need a constabulary.  It may need a militia.  Perhaps it may need a "national" guard. It might even need a small standing army.  You won't have Federal aid to support them.  As an independent entity, VT would stick out like a sore thumb, the North American equivalent of pre-war Albania, a tempting target for terrorists, drug cartel warlords, gangs, and other outlaws.  Would an Independent Vermont be so naive as to think it'll be immune from foreign intrigue?  Do you think you'll be an idyllic oasis in a dangerous world?  Think back to last summer's Russian aggression against the Republic of Georgia, then ask anyone from Georgia about the small & weak being safe against the large & strong (and I know some highly placed Georgians who'll gladly "re-educate" you). 

Nope.  Every country needs some level of defense.  So even an Independent Vermont still will have at least some degree of "military" spending.  If you go independent, what'll you do if the USA demands return of military equipment, weapons, and other public property?  Will you rely on pitchforks and blunderbusses?  Or kumbayah, Wicca, and "come, let us reason together?"

Lower taxes in an Independent Vermont is wishful thinking.  According to a study released last week, VT sits atop the 50 states as having the nation's highest per-capita tax burden.  Yay for you; you worked hard for that dubious distinction all by yourselves.  Almost all of it is due to excessive state and local spending and concomitant heavy taxes imposed by the socialists you keep electing at all levels, not your Federal share.  You're already ruled by ultra-liberals who love to redistribute your money.  What happens if you go independent and are ruled by radical liberals, who want to confiscate?  Talk about taxes!  Learned Ohanian, re-calculate your calculations. 

Jeff Hollingsworth; Washington, D.C.

 Hans Ohanian's response:

Yes, Mr. Hollingsworth, by all means, the facts and only the facts:

My number of “trillions” for the Iraq War is based on the book The Three Trillion Dollar War by Nobel-prize winning economist Joseph Stiglitz. I recommend you read at least a few pages of that book.

USPS wasn’t able to supply me with numbers for their 2005 Vermont revenue and expenditures, but they gave me numbers for 2004 for Vermont and New Hampshire combined, which show that revenue exceeded expenditures by 19%. This makes it clear that all those little local post offices are doing a great job.

The percentage of the Fed budget devoted to defense is not small. In 2005, the defense expenditures were $495 billion, or 20% of the total Fed expenditures.

Veteran’s pensions and other benefits, AFDC, and all other such social programs are included in my calculation of income taxes in an independent Vermont. All these benefits would remain unchanged, and they would be paid out of these income taxes, without a deficit.

Social Security, Medicare, and Medicaid benefits are not included in my calculation, and they would be paid for in the exactly the same way they are now, by payroll taxes (for Social Security and Medicare) and by deficit spending (for the Fed portion of Medicaid). Borrowing money to pay for Medicaid is not, of course, a long-term solution—but it is the solution currently used by the Feds. If we adopt the same solution in an independent Vermont, the sequel would be no better and no worse than it is now.

We already have a “constabulary” in Vermont, our State Police, quite sufficient to protect us from gangsters and drug dealers. If the Feds invade us, resistance by a regular military force would be worse than useless (that’s the lesson to be learned from the Georgia debacle—and I don’t need to be re-educated by highly or lowly placed Georgians to understand this, especially since they didn’t understand it themselves).

We wouldn’t owe the Feds any military equipment. On the contrary, the Feds would owe Vermont about 0.2% of all the existing Fed assets, military and otherwise, worldwide, because we paid for that. As a mnemonic, just remember that $1.25 out of the $600 paid for each of those famous USAF toilet seats was Vermont money.

Maybe some of our state programs are excessively expensive and wasteful, but many federal programs are much worse in this regard. Haven’t you heard of all those outrageous federal pork-barrel projects? A quantitative study of taxation and spending in Switzerland has revealed that the Swiss cantons are frugal and sensible in spending their own tax money, but often prodigal and irresponsible in spending federal tax money. This fatal flaw of the federal tax system arises from a primitive animal instinct. Whenever federal grants are offered for local programs, the spending of federal money degenerates into a feeding frenzy, with everybody rushing to the public trough to gorge on the federal bounty, regardless of genuine need. Pigs at a trough, and diners at a buffet, do not eat in moderation.    

Any other facts you want me to lay out for you?

Hans Ohanian