Abstract
As government spending increases, more and more people will experience a loss of well-being in that less valued public goods and services are substituted for more valued private consumption. Eventually, such people will outnumber those for whom increased government spending is a net benefit. Even prior to this, there will be some diversion of resources from more productive to less productive activities as people attempt to avoid taxes. These attempts to escape taxation will lessen tax revenues relative to what they would otherwise be and, eventually, may cause the overall tax yield to fall. The different measures of taxation and tax capacity provide different pictures as to the relative cost of government, and the relative burden of state and local government in 6 New England states is illustrative. The comparison is done according to 1. general revenues relative to personal income, 2. taxes relative to income, 3. taxes relative to tax capacity as estimated by the National Institute of Education, and 4. the tax burden on a hypothetical family with a before-tax income of $17,500, as estimated for the Kentucky Department of Revenue.