If this pre-filed bill becomes law, red-light cameras will be with us forever. H.B. 1229 would send all revenue from the cameras to school districts. Anyone who opposes cameras at intersections would then appear to be an enemy of education.
Food Protectionism in Europe
The Wall Street Journal reports on the strange predicament of an English village named Stilton:
The bar on producing Stilton cheese here is a curious consequence of EU efforts to protect revered local foods by limiting the geographical area where they can be made.
Here is the ponderous statute. It looks like the people of Stilton, the village, could make Stilton, the cheese — but they couldn’t market it as such, so it wouldn’t do them any good. The law also forbids them to label their cheese “Imitation Stilton” or “Stilton Style,” proof that the regulations enforce a monopoly for producers without helping consumers at all. Were the goal to protect consumers from misleading advertising or inferior products, it would be fine to label products as imitations and let consumers choose between them and the “real thing.”
As more Americans become interested in where their food comes from and in giving preference to products from certain areas, I hope the United States doesn’t model any legislation on Europe’s detrimental policy.
MoDOT, Traffic On 64/40, and the Fundamental Law of Road Congestion
I have heard some complaints from people, via talk radio and message boards, that after two years and more than a half billion dollars, I-64/40 still has traffic jams at rush hour. I have news for the complainers: They could have expanded it to 10 lanes in each direction, and eventually it would still get backed up (I exaggerate, but only a bit). First, let’s all admit that we can’t properly judge the new highway’s traffic issues after only three rush hours, and this morning’s took place in poor weather. Beyond that, however, there is something called the Fundamental Law of Road Congestion. In short, as you expand capacity, which MoDOT did for part of the new project, you release latent demand that fills up that capacity.
Dr. Ken Small is one of the leading urban and transportation economists. He wrote a study for the Show-Me Institute that we thought was terrific. He’s also written extensively about road congestion. If the people of Missouri want reduced traffic jams, there is only one way to do it, and it isn’t capacity expansion. (Don’t take this as indicating a blanket opposition to capacity expansion. There are plenty of reasons that such expansion is often needed.) The only way to reduce congestion in Missouri is through pricing. If you want your roads to be “free,” you’ll get high traffic at peak times. On the other hand, if you want free-flowing traffic on highways at 5:30 p.m., the only way to do it is to charge a toll that continually adjusts pricing as demand changes.
MoDOT did an amazing job with the project, and so did the private contractors involved. But MoDOT does not control the laws of economics, and there is nothing they could have done to eliminate congestion.
More on Missouri Film Tax Credits
When recently questioned about why he chose to film Up in the Air in St. Louis, Jason Reitman curiously didn’t say that it was because of the $4.5 million in tax credits that he received from the state of Missouri. Instead, he said that it was because of the sheer amount of vacant office space (emphasis added):
In location scouting in St. Louis and Detroit, I walked into empty building after empty building. I realized that I was surrounded by the realities of this recession.
I find this to be poignant, but for a reason different than Reitman probably intended.
Perhaps businesses could afford to staff those office buildings if Missouri weren’t redistributing their money to filmmakers and property developers via tax subsidies.
But then, Reitman would have to find other things to exploit explore than “real people who really lost their jobs.”
Hat tip to David Stokes!
See Something You Don’t Like? Call the Government!
Someone in Texas had the idea to put a replica of Michelangelo’s “David” in his yard, wearing only a Santa cap. Tacky? Yes. Criminal? No. Still, the government had to get involved:
Then, parents started calling Big Spring city officials saying their children were asking why Santa was naked.
The city attorney determined that the statue did not violate any ordinances, but she called the owner anyway and asked him to put clothes on it.
If this is what happens when you erect a little replica, imagine what kind of complaints the city of Florence must get about the real statue, which is much bigger and more visible — and doesn’t even wear so much as a Santa cap.
Small Businesses Can’t Drive Job Growth if They’re Saddled With Higher Taxes
With high unemployment rates continuing to plague the nation, there has been a renewed federal focus on the “engine” of economic recovery — small businesses. The president has pledged to crack open credit markets to help these struggling enterprises grow and expand hiring. But the real remedy for small business stagnation is much simpler: The president and Congress must reject any and all health care reform proposals that will end up soaking small business owners.
The most immediate concern of small businesses is that many of them have been conveniently lumped in with “rich” Americans filing personal tax returns with net income greater than $250,00–$350,000. These are the taxpayers who will incur surtaxes and other indirect tax increases in order to finance coverage for the uninsured.
As it turns out, more than 2.5 million personal income tax filers with incomes of $200,000 or more declared income from farms, businesses, partnerships, or “S corporations” in 2005 (the latest year for which we have data). Of these entities, almost 2 million had net business income that was taxed as personal income. Lurking among these high-income filers are numerous S corporations, including businesses in the “Education, Health and Social Assistance” industry (an IRS classification). An IRS study of 1999 filings by S corporations (the latest available) reported that S corporations in the educational services category generated more than $645 million in net income; those devoted to health care and social assistance generated another $7.6 billion. Among the businesses in this latter category are virtually all of the private medical practices in the United States. In fact, federal tax initiatives aimed at stimulating small business employment have led a vast number of small businesses to incorporate as Chapter S entities.
As a Chapter S corporation, the net income of the business passes directly through to its owners for tax purposes. At the end of each tax year, this income is divided up and reported on each owner’s personal income tax return. These owners tend to be actively engaged in the business — doctors who provide patient care, for example — rather than passive stockholders.
All of the net income is taxed in the year during which it is earned, whether it has actually been distributed to owners or is retained by the business. Why would businesses retain earnings? The answer is simple: To avoid the vagaries of the small business credit market, many retain earnings to self-finance the acquisition of new plant and equipment. Small businesses that fill highly specialized market niches often require highly specialized equipment. In the case of my OB-GYN, a 3-D mammography machine that costs $500,000 promises earlier detection of breast cancer and lower mortality. Is this the type of collateral that outside lenders truly wish to loan against? And what about the $150,000+ electronic medical records system that Medicare will first encourage (through small grants) and then foist upon my OB-GYN by 2012? Sure, there are accelerated depreciation opportunities, but unless there is 100-percent depreciation during the first year of use, self-financed capital expenditures must be spread out over several years.
Clearly, increasing personal income tax rates to finance health care reform will have a depressing effect on small business investment and growth. Along with this, there are more subtle tax implications for small businesses in the current health care proposals. Take, for example, the plan to tax Cadillac employee health care plans. Businesses with a small number of employees tend to pay substantially higher medical insurance rates than large, self-insured corporations. It is not unusual for a small employer to pay an annual premium of $22,000 or more for family insurance coverage, with a $500 deductible and a 10-percent copayment. Any dollar cap on the tax deductibility of employer-provided health insurance would likely snag a disproportionate number of small businesses. The end result would be to increase the tax liability of small businesses, putting them at a competitive disadvantage relative to large companies. This disadvantage would be further exacerbated if those who are happy with their self-insured policies win their battle to be exempted from most of the insurance regulations included in the current federal reform proposals.
A more recent proposal that would negatively impact small businesses is the one that finances health care reform by increasing payroll taxes. At least some of these taxes will be passed backward to small business owners, especially those who are at a competitive disadvantage, relative to large corporations, when it comes to hiring.
Finally, many small businesses struggle to provide their employees with some type of health insurance. By and large, however, this coverage is much less extensive than the plans offered to employees of large self-insured companies, at least in part because of the higher cost of providing coverage to a small group. Should the minimum benefits package dictated by Congress be richer than what small businesses can reasonably offer, those business owners would be forced into a “pay-or-play” scenario that would undoubtedly raise their costs and reduce their competitiveness.
To promote the true survival and growth of small businesses, the first step to take would be to see to it that these companies are not saddled with higher tax burdens as a result of health care reform. The second thing would be to focus less on policies that encourage “easy credit” (isn’t this what got us into our current financial mess?) and more on policies that create incentives for small business owners to invest in themselves. Rather than increasing the tax rate on the net income of S corporations, why not instead exempt retained earnings from taxation altogether? In this way, policymakers would create a much needed incentive for small businesses to self-finance their capital needs and resume their historic role as the engine of employment growth in our economy.
Susan K. Feigenbaum is a professor of economics at the University of Missouri–St. Louis.
Education or Indoctrination?
[In the interest of transparency, please allow me to post this note to indicate my change of perspective. I agree with Sarah and Donald in the comment section below that the use of President Obama’s campaign logo in classrooms was just a mixup and had nothing to do with Mr. Obama. My apologies. — CDH]
Apparently, President Barack Obama’s presence in public classrooms is not limited to songs or writing assignments.
According to an article in the Columbia Daily Tribune, supplies that display Obama’s 2008 presidential campaign logo have been sold in public schools in Columbia, Mo.
Link via Drudge Report.
Missouri Helps Microsoft Advertise With Dignity
If a software company announced that it would teach, for free, tens of thousands of people how to use its products, people might view that as a ploy to snag customers. Every business wants people to be comfortable with its products so they’ll buy more. The company could put out a press release saying that it wanted to teach people out of the goodness of its heart, but customers might discern a profit motive.
Microsoft has found a solution to this public-relations dilemma: It will conduct the free training, and people will have to go through the Missouri state website to sign up. (The program is coming to other states, too.) Microsoft claims that its selfless intention is to grow the economy.
There’s no good reason for people to go through the government to collect their vouchers for training — they could just as well apply on the Microsoft website. All that this “partnership” with the state accomplishes is that it makes Microsoft look noble. The state should not be recruiting people for this training, just like it shouldn’t give out pizza samples in a grocery store or perfume samples at the mall.
I’ve got nothing against advertising and free training, but don’t ask the government to sign off on it like you’re a Newfoundland seeking official status.
In Which the Author’s Secret Agenda Is Made Plain
As our regular readers will remember, on Nov. 18, the Show-Me Institute published a study that discusses recent research on the impact that charter schools are having on students’ academic achievement. At that time, we sent the study to newspapers across the state, along with an op-ed I had written discussing its findings. As is the case with any op-ed, my ability to address nuances in the research was dramatically limited by the need to keep it short enough for newspapers to consider publishing it. Thus, I was unable to go into great detail about the various studies and instead focused on the primary goal of the piece: making people aware of this new study so they could consider it for themselves.
When the Springfield News-Leader expressed interest in running the op-ed, they asked me to trim it down by 50 words so that it would fit their publishing parameters. As I hope readers will see, an op-ed’s final form rarely allows the author to offer a comprehensive picture of all the information they would convey if space were no constraint. Perhaps as a result of this necessary brevity, some of the News-Leader‘s readers have posted a few skeptical comments about my op-ed, so I’d like to take this opportunity to respond to the points they raise.
The first issue I’d like to address is that of my motives for writing on this topic. The commenter writing under the name “Ray Smith” suggested that I am part of a general effort to “undermine public education,” and that I have simply seized upon President Barack Obama’s “Race to the Top” initiative (which, in part, promotes the expansion of charter schools) as an opportunity to promote my own agenda.
I do have one comprehensive, all-encompassing agenda when it comes to the subject of education, and I don’t care who knows it. I want to make sure that all parents have the greatest possible range of options when it comes to deciding where their children will be educated. While I, myself, am a proud product of an excellent public school system, it does not matter to me in the slightest if parents prefer traditional public schools, charter schools, parochial schools, or secular private schools. All that concerns me is that children get the best available educations — and I firmly believe that the greatest likelihood of achieving that goal is to fashion education policy in such a way that parents can vote with their feet if they decide a school is not meeting their child’s needs.
As should be clear, many parents do not believe that their local traditional public schools are the best educational option for their children — and, with that being the case, it makes the most sense to help those parents find alternatives that will serve their families better. I suggested in my op-ed that, to the extent that charter schools expand the range of options available to parents, they serve as a step toward this goal. Thus, expanding charter school availability represents good policy. In my mind, it is merely a bonus that the best academic research is showing that most (though far from all) charter schools are performing as well as or better than their traditional public school counterparts when it comes to certain measures of academic achievement.
Which brings us to Mr. Smith’s suggestion that I believe charter schools to be a “magic bullet” that will solve the education problems rampant in our state — and his intimation that I was ignoring evidence that I did not like. To the contrary, when writing the op-ed, I wanted to make sure that I pointed out the evidence in our own study that calls into question whether charter schools always generate better results than traditional public schools. Mr. Smith correctly points out that the Stanford study shows that a significant number of the nation’s charter schools appear to be attracting students, even though the schools do not currently appear to measure up to their traditional school counterparts in regard to academic achievement as measured by standardized tests. The reason I addressed the Stanford study in the op-ed was because the authors of the recently released Show-Me Institute study did not have access to research that isolated Missouri’s charter schools, and I believed that it would be valuable to highlight the fact that, in spite of the Stanford study’s broader findings, the data do suggest that Missouri’s charter schools are performing better than most.
Here at Show-Me Daily, I can address the Stanford study’s findings a little more broadly. For charter opponents, of course, the suggestion that some charter schools are not improving their students’ academic achievement is a clear signal that these schools need to close. Maybe … but maybe not. I have previously stated on this very blog that I do not generally oppose the closure of especially bad charter schools. But the facts also bear out that official action is not necessarily needed to close these schools, because in cases where the situation is truly bad, parents will voluntarily move their children to a different school and that bad school will fail for lack of funding (much as any other business would).
Also,as I note in the op-ed, parents consider a wide array of factors when deciding where to send their children to be educated — and, for many parents, academic achievement may not be the most important factor. So, if a charter school lags a little bit behind its traditional charter school counterparts in academic performance, but dozens of parents still want to send their children there, maybe government officials shouldn’t force its closure. After all, we don’t allow government officials to tell wealthy parents what factors they can consider in choosing a school for their children, so why should we assume that government officials are within their rights to tell lower-income parents what factors they can consider?
And, finally, I will add that I would actually prefer that Missouri not seek “Race to the Top” funding. In my opinion, the Tenth Amendment should preclude the federal government from interfering with educational matters, because they have always been reserved to the states. While I do think it would be good policy to expand the availability of charter schools in our state, if Missouri’s legislators are not persuaded that a particular policy is the best idea for our families, they certainly shouldn’t adopt it simply because the federal government is dangling money out there as an incentive.
