StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Why Isn't Grover Angry About This? Sequester Causing Voluntary Tax Increases

25 Apr 2013
Posted by Stan Collender

I've been meaning to ask this question for a while: Isn't this the equivalent of a tax increase?

Here's the story.

The sequester spending cuts forced the superintendent of Yellowstone to decide not to clear the winter snow from the park's road as early as it typically had been plowed in the past will eventually melt as the weather gets warmer anyway. That seems like a perfect solution to the sequester-caused spending cut except for the businesses in and around the park. No plowing meant no tourists, and that meant much less business.

According to this story by Mark Barabak in the Los Angeles Times, the prospect of lower sales convinced many of the tourist-related businesses around Yellowstone to pay for the plowing. The Cody and Jackson Wyoming Chambers of Commerce raised $170,000 to get the snowed plowed.

Wasn't this the equivalent of a tax increase for those people who paid to have the snow cleared two weeks early?

Yes, the payents were not required by law. But that's a distinction without a difference. It was money eventualy paid to the state and local governments by businesses and individuals who otherwise would have used the funds for their own purposes.

Yes, there wasn't a legal penalty for not paying into the chamber of commerce plowing fund. But there almost certainly was peer pressure from the others that did, and perhaps perceived or real threats of taking their business elsewhere if you didn't participate. That's at least as much coercion as anything the IRS could do.

And yes, you could call it a user fee instead of a tax. But what's the real difference between the two when the bottom line is the same, that is, it was still money out of the pockets of the businesses.

I'm pretty sure that the businesses that paid into the plowing fund think that their taxes went up because of the sequester. After all, federal taxes did not go down when spending was cut and they still had to pay more to a government to get the snow removed.

So tell me again why we shouldn't consider this a tax increase?

I don't know Grover, but I

I don't know Grover, but I imagine he would be happy with this result. The business owners who receive the benefit are paying the cost. There is no state subsidy. Business owners/citizens who don't receive the benefit aren't paying the cost.

Exactly my thought. And I

Exactly my thought. And I don't know why business owners, unless they are also tax-debaters, would think "this is a tax increase" when they are paying for a service that government failed to provide. If it were me, I'd think "this is a failure of government service, and it's costing me a bundle."

While the underlying point is a good one, I'm afraid Stan has strained his metaphor quite a bit.

Indeed, you could argue that

Indeed, you could argue that this is a "market solution," even if the recipient of the money is a government agency. And, you could argue it's more efficient, since the businesses have (presumably) done the calculation: how much is it worth to us (collectively) to make sure the park is open? Apparently, at least $170,000. Which suggests that having the government pay for plowing is effectively a form of subsidy to those businesses--we pay, they profit.

We ought to keep in mind that

We ought to keep in mind that at the core of "drown government in the bathtub" thinking is that, by driving government services down, fewer voters will feel they benefit from government, so fewer will be willing to support taxes. It was never expected that a persistent, honest anti-tax argument would win the day. The anti-tax types know full well that government programs with any significant impact on the overall budget are extremely popular. The goal is to screw up popular programs so that they lose support, which makes cutting taxes easier. Ending public snow removal is exactly the sort of thing that Gover has always pushed.

How were the contributions decided?

A question that immediately comes to mind is how the $170,000 was split among the businesses. How was it determined who would pay how much? Was that process better than the process we now have for determining tax rates?

Was the plowing really legal?

For many reasons, Congress makes it illegal for the federal government to accept free services from firms. The Antideficiency Act forbids "accepting voluntary services for the United States, or employing personal services not authorized by law, except in cases of emergency involving the safety of human life or the protection of property. 31 U.S.C. § 1342."

As a small business owner I

As a small business owner I would much prefer to be influenced by other local business owners to improve our collective business environment then to be consistently taxed by a large federal government that has enough power to dramatically change my lot in life based on their last whim.

If this weren't times of

If this weren't times of austerity I agree that taxes should decrease when gov't services also decrease. In our case, however, we have a huge federal debt that has to be paid for so it would be irresponsible to cut taxes.

What are you talking about?

Okay Mr. Collender posts thoughtful and readable blogs, no argument about that. What bothers me is that anyone could even reasonably argue that the government should pay for snowplowing at all without it being directly paid by citizens that directly benefit from it. I live in Florida I have been to Yellowstone one time. Why should I pay to snowplow its roads. This is the entire problem with Federal spending. I pay to subsidize postal service in Jarbridge, Nevada. Well those people should have their stamp cost doubled. Most of my taxes go pay for government services that dont benefit me or my family. This is what the 65% to 70% of us that are demanding budget cuts are thinking as we read Mr. Collender´s very thoughtful tripe

A cloaked user fee, perhaps?

One might reasonably expect the businesses who paid for the plowing to pass those costs along to their customers, who I believe are somewhat "captive" in that there is not much choice or competition in the vicinity. It might be argued, then, that the users of the park, who presumably comprise the vast majority of these business' patrons, will ultimately pay for the plowing. It's a nifty way to shift costs to the users, who may presume their tax money is paying for it, without saying so. As for the foregoing comment asking why a Floridian should pay taxes to maintain a park in Wyoming that he might use once in a lifetime (a really tired sort of argument), he might consider the degree to which the taxes paid by all are subsidizing his environment and lifestyle in ways of which he may not be aware. Personally, I loathe Florida, but that really does not matter if one acknowledges any concept of the common good.

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