IRS Commissioners Should Have to Do Their Own Taxes

Posted on by David Stokes

The Drudge Report linked to a story from The Hill about the not-surprising admission that the new IRS commissioner does not do his own taxes. I think the law should require whoever holds that job to do their own taxes. It would be like how the Federal Reserve has restrictions on stock ownership for certain board members — just a side rule that people have to abide by if they choose to accept serving in that position position. Maybe whoever heads the IRS would fight harder for tax simplification if they had to deal with their own rules.

I have always done my own taxes, even when I had a small business in the ’90s, but that will end in 2010 because my wife and I decided to go with an accountant for the first time. Our taxes are not particularly complicated, but they are not particularly easy, either, and that is as much detail as I’ll bore you with. I always liked fighting through the details as a matter of pride, but now the benefits of that hard work are losing out to the time costs as the returns get more complicated.

More disturbing in the article is this ugly nugget:

The IRS this month announced it will be scrutinizing the tax preparer industry. Shulman said the IRS is looking to set “a minimal level of competence in the preparer community.”

Terrific. Now we get federal licensing rules for one more profession. That will raise the costs of using H & R Block, etc. I’ll admit that this is one field where more people doing their own work (as in their own tax preparation) might bring the great side benefit of leading more people to be upset about the tax code, but I still don’t want that benefit caused by higher costs imposed by the IRS.

The simple fact is that a lot of people can and should be doing their own taxes. If you have one job where taxes are withheld, you can work through it without too many headaches. The head of the IRS should be one of those people.

A Rebuttal to Ray McCarty’s Rebuttal

Posted on by Christine Harbin

Ray McCarty of the Associated Industries of Missouri recently wrote an op-ed, “Film tax credit needs a real shot,” in the Springfield Business Journal as a rebuttal to my op-ed on the same subject. I realize that I have already written extensively about this, but I’d like to take this opportunity to respond to the points that McCarty made.

First, it is more than likely that the money spent by filmmakers via tax credits would have been spent anyway in the market, by private individuals. If a hotel hadn’t rented a room to a member of the film production crew, they could have rented it to somebody else. If the restaurant hadn’t seated the producers at a table, they could have given the table to another party. I think that it is fallacious to assume that, had it not been for the tax credits, these Missouri resources would have been unemployed.

McCarty writes:

Harbin also misses the fact that the movie industry is nontraditional.

Saying that something is a fact does not make it a fact. The only thing that makes an industry like filmmaking “nontraditional” is the fact that the government has intervened to such an extent that it has distorted the market. Health care is another industry that is often described as nontraditional, but as I have described previously on this blog, health care is subject to the same market mechanisms as any other industry.

McCarty also writes:

Lastly, Harbin mentions that it may be better for Missouri to leave the filmmaking to other film states “like California.” She may not know this, but California found itself weakened between 1998 and 2000. Between those years, the U.S. lost $10 billion worth of film productions to Canada, which passed film tax incentives. Southern California alone lost about 35,000 jobs due to the shift to Canada.

It makes economic sense that California would produce fewer films because it had to compete with states and other countries. Filmmakers like Jason Reitman are smart businesspeople, and they will go wherever they can get the best deal. I disagree that this refutes my statement that Missouri shouldn’t feel that it has to compete with other states for filmmaking, however.

Michigan has pursued the filmmaking industry particularly aggressively, and its state legislature is already discussing repealing the program. Missouri would be smart to specialize in producing according to its comparative advantage (i.e., in products that aren’t filmmaking), and then realize gains from trade with those states. Missourians will still be able to enjoy the benefits of the product (i.e., film), and at a much lower cost (i.e., the price an admission ticket at a movie theater vs. the price of subsidizing the production).

As another advantage of producing according to its competitive advantage, Missouri would have an opportunity to differentiate itself. Instead of producing the same products and services as other states do, Missouri could produce the goods and services that are uniquely Missourian.

Furthermore, McCarty did not dispute my argument that targeted tax credits hurt businesses in non-favored industries. By providing special advantages to a select industry, targeted tax credits force everyone else in the market to compete at a disadvantage. In a previous blog post on Show-Me Daily, Dave Roland explains this better than I do:

True economic development happens best when governments allow businesses to compete on a field that offers no special advantages to any of the players. The government does a grave disservice to its citizens when it assumes the responsibility for picking winners and losers in the market, rather than letting businesses succeed or fail on their own merit.

Another argument of mine that McCarty does not address is the one relating to the supreme opportunity cost associated with film tax credits. What else can Missouri do with this money? What is so special about the film industry, in contrast to other industries? Why doesn’t Missouri target hog farmers or economic research analysts or education or infrastructure?

Maybe in a couple of years, each state in the union will offer tax credits that are targeted to filmmakers, thereby negating the artificial comparative advantage that currently exists in states like Missouri. I can only hope.

Local Food Policy Branches Out

Posted on by Sarah Brodsky

When locavores enter the policy arena, they usually focus on education: On school districts’ purchasing decisions, or on initiatives like the University of Missouri Extension Program. Now a public health agency in New Mexico is pushing local food to a wider audience:

With the grant, the Health Council will work toward increasing the availability of fresh, locally grown produce and to help transform the eating habits of the community.

There are two things wrong with the Health Council’s plan. First, there’s the assumption that the government ought to transform an entire community’s eating habits. It’s one thing to say that if a public institution like a school district happens to serve lunch to kids, the food might as well be nutritious. It’s altogether different to set out to engineer a lifestyle change for all of a city’s residents.

The Health Council points to the obesity “epidemic” to justify its plan, but obesity isn’t some kind of contagious disease that the state needs to protect us from. You won’t gain weight from coming into contact with an obese person. While the government might have to take action to prevent the spread of a virus or bacteria, it should leave the choices that can result in obesity up to individuals. They won’t put anyone else in danger if they gain weight.

Second, this is another instance of the government endorsing the idea that locally grown produce is superior to food from other sources. Anyone is free to hold this conviction; however, their belief has no place in policy until they come up with evidence for it. Supporters haven’t demonstrated a connection between local food and health. In fact, some dietitians even recommend frozen produce over fresh:

“[F]rozen produce actually can be healthier than the fresh variety. It is on the plant or tree longer than the fresh variety, so it’s packed with a higher nutrient value.”

If a public school near you is giving preference to food grown nearby, watch out. Your government might begin advocating local food as the correct choice for you, too.

Don’t Write Too Many Details Into Urban Chicken Laws

Posted on by Sarah Brodsky

Urban chickens are up for debate in Columbia. I hope the city decides to allow people to keep at least a few chickens. Ideally, the law should allow a certain number of chickens for anyone who wants them, without a lot of fine print.

When laws include too many qualifications, they lead to absurd predicaments like this one in Sacramento. Chickens are legal there, but only on large plots of land. So, a family that’s renting a smaller property will have to get rid of its chickens — despite the fact that the landlord is happy for the birds to be there, and that bevies of quail, wild turkeys, and wood ducks move through the neighborhood on a regular basis.

There are wild turkeys running down the street but residents can’t raise a few chickens in an enclosed yard? All because the property isn’t spacious enough by an arbitrary standard? If someone were trying to cram hundreds of chickens into a tiny parcel, I would be the first to say the government should step in. But the family in Sacramento keeps just four hens. That’s the kind of case local governments should let alone.

A Land Tax Is Preferable to the Earnings Tax

Posted on by Christine Harbin

Thomas McClanahan of the Kansas City Star explains in an editorial that Kansas City would benefit if it repealed the earnings tax and instituted a land tax.

So many of the taxes we pay are levies on productive effort, which tend to discourage activities and endeavors we should welcome. We want an economy that rewards wealth creation, development, hiring and trade, but we tax incomes, structural improvements, payrolls and sales. […]

The key point: A land tax would encourage investment. Property owners would be penalized for hoarding acreage and doing nothing. For example, speculators who own parking lots downtown — where land taxes would be highest — would have to develop their parcels or sell them to entrepreneurs capable of putting up profitable buildings and realizing the full economic potential of the location.

He cites a 2006 study by Prof. Joseph Haslag, executive vice president of the Show-Me Institute, How an Earnings Tax Harms Cities Like Saint Louis and Kansas City. This study demonstrated that the earnings tax reduces personal income.

The Show-Me Institute has produced several other pieces of scholarly work demonstrating that the earnings tax is too burdensome for Missouri cities.

Gardens Vs. Blackboards

Posted on by Sarah Brodsky

Is a fad robbing students of their right to an education? According to Caitlin Flanagan, the answer is “yes,” and school gardens are the culprit. Flanagan denounces school gardens in an essay in the Atlantic, arguing that for disadvantaged children, every minute spent in school can potentially be used to gain knowledge that will help them escape poverty, but some of that time is instead being wasted on manual labor (i.e., gardening) for the sake of politicians’ whims.

I agree that gardening should not be a top priority for most schools, but I think Flanagan overstates her case. For one thing, students don’t spend that much time in gardens. Flanagan gives the example of a school where students spend an hour and a half per week on gardening and food preparation; that translates into less than 20 minutes per school day. Supposing students spend twice as long on the cross-curricular activities Flanagan condemns so bitterly, there still remain several hours in the day for all the sound academics she believes students miss out on when they’re working with plants.

Second, gardening needn’t be as demeaning and stultifying as it is in Flanagan’s portrayal. Flanagan likens a gardening curriculum for immigrants’ children in California to a sharecropping curriculum for African-American children in the South. This is an unduly harsh analogy. I’m sure schools don’t send children out to the gardens when weather conditions would make the work difficult. And tending to a variety of plants is a small plot can be far more interesting and rewarding than picking a single crop in a vast field. Also, in the event that students don’t like the gardening, they’re free to slack off without fear of retribution from a taskmaster, or of losing their livelihood.

Flanagan is right that some students would gain more from books in the library than from plants in the garden. The problem is not gardening but the monolithic public school system, which mandates that if an activity is beneficial for some children, everyone has to spend time on it. For children who want to work in botany or landscaping when they grow up, or whose parents value gardening experience, offering gardening in school would be worthwhile. (So the garden at Clyde C. Miller Career Academy is entirely appropriate, because some students there study biotechnology and plant science.) Everyone else should be free to opt out. Whenever a public school incorporates gardening, or any task besides basic academics, parents should be able to choose whether their children participate.

Online Education Can Be a Boon for Districts

Posted on by Sarah Brodsky

A school district in Michigan finds that partnering with K12, Inc. is beneficial both to students and to the districts’ finances. The director of the district’s virtual academy describes its profitability with candor:

“The district makes money whether we enroll one student or 160,” Prescott said. “K12, Inc. charges a fee for each course. It might be $400 a semester. For a student who takes six classes for both semesters, that’s $4,800 a year. We count that student as full time and we get $7,000 from the state, which nets the district about $2,000 per student.”

I wonder whether the St. Louis Public Schools’ Virtual School, which also contracts with K12, is equally lucrative. I would guess not, because SLPS requires students to meet with a district teacher in person at regular intervals. Those meetings could bring up staff costs.

Given that districts can earn a profit from teaching students online, why don’t more of them form virtual schools? I can suggest a couple of explanations. Most districts probably don’t know much about online courses or what they could gain by enrolling students in them. Until recently, distance learning was the domain of old-fashioned correspondence schools, online charter schools, and state-level virtual schools. Traditional districts weren’t involved. Districts are used to a system in which they get revenue based on how many students are sitting in classrooms. The concept of earning more by sending students to a different environment goes against their experience.

It could also be that some districts view virtual schools as an admission of failure. If students choose virtual instruction over in-class learning, maybe that means that the brick-and-mortar component of the district wasn’t so great all along. I don’t think that’s an accurate analysis, because no single educational method is right for everyone. But I can see how districts might reach that conclusion in a school system of few choices.

State Recommends Stricter Licensing of Bail Bondsmen

Posted on by David Stokes

Nobody covers the bail bond industry like we do here at the Show-Me Institute. Combest has linked to an AP story in the Springfield News-Leader that details how a state agency is recommending that Missouri tighten its requirements to become a bail bondsmen. Now, I loathe most occupational licensing, but these recommendations (as reported by the article) don’t seem that bad.

I understand the reasoning behind not letting convicted felons serve as bail bondsmen, and that strikes me as a reasonable change. I say this as someone who is very sympathetic to the plight of former convicts getting jobs after serving their time, and I think we have gone too far in limiting the ability of felons to work after their sentences are complete. However, jobs that deal with the court system, like bail bondsmen, seem a reasonable restriction in my opinion. 

The other changes, according to the article, are:

The report also recommends larger fines for violations and requiring that applicants have high school diplomas.

Restricting entry requirements through rules or costs are the biggest economic problem with occupational licensing. Fines levied by regulatory agencies to punish misconduct by those who have done something wrong — after they’ve been licensed — are less of an issue, so I don’t greatly object if such fines are raised for current practitioners.

However, the last rule proposal is just stupid. I realize that getting a high school diploma or GED is very simple and has a low cost, but the main question should be whether performing the job competently requires a high school diploma. I fail to see why the job of bail bondsmen should require a high school diploma. The customers who need you don’t care whether you have a diploma on the wall. They care that you have the money to put up, and they need to know that you are going to find them and harm them (I don’t necessarily mean physical harm; returning them to jail is “harming” them) if they skip out on you and the court. The diploma requirement and the requisite job skills just don’t connect.

This is not in any way an attack on the intelligence of bail bondsman. I don’t think being a policy analyst at a think tank should require any type of diploma if you can do the job without it. (But, yes, the author does have a high school and college diploma, just like I am certain that most bail bondsmen have diplomas.)

Job Advice

Posted on by Dave Roland

After being quoted in yesterday’s Post-Dispatch article about a $3.2 million federal grant to help train workers laid off from the Fenton Chrysler plant to work on hybrid and electric vehicles, someone asked me what I would do to help those workers.

I would give them the same advice I would give any person that doesn’t currently have a job:

  1. Research the job market. Find out which jobs and careers seem to have stability and the prospects of remaining in demand in the future.

  2. Identify a career that seems to suit your skills and personality.

  3. If you have not yet developed some of the skills needed for your chosen career, invest in that sort of development. If you don’t have the money to do so already on hand, persuade someone (such as a relative or a bank) to loan you the money. Be sure that the job you are hoping to get will allow you to repay those loans.

  4. Once you have all the necessary skills, go to where the jobs are — even if that would require you to move.

  5. If, having developed these skills, you are still unable to find a job working for someone else, consider starting your own business in which you can do this job.

  6. If you can’t find a job working for someone else and you cannot successfully operate your own business, you must accept that you chose unwisely and go back to step one.

  7. If all of your best efforts fail and you find yourself to be simply unemployable, then you should rely on your friends, relatives, religious community, or charity — people who assist you because they want to, not because the government is forcing them to.

I completely sympathize with anyone trying to find a job or a career, because I’ve been there. I know how hard it can be. But, at heart, the search for employment must be an issue of personal responsibility. No one is entitled to have any particular job or career. We all have to figure out how to keep providing goods and/or services that generate enough value to entice others to pay for them.

If/when the job or career we pursue ceases to generate sufficient value either for our employer or our customers and clients, we have to look elsewhere — and, unless a worker has made certain contractual arrangements with their employer beforehand, no one owes them any extraordinary help in finding a new job or career. But people struggling like this should also keep in mind that opportunity can arise from unusual circumstances, as is demonstrated by this column by Steve Giegerich, who also happened to write yesterday’s article.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging