Lawn Care for America Now

This weekend, I witnessed a modern American Tragedy. My neighbor, a single mom with two kids, was forced to send her son across the street to our Hispanic neighbors to borrow their lawn mower. She then spent nearly two hours drudging up and down her front lawn, suffering more each time she had to go into the front ditch to mow.

When all was finally done, dark had fallen. She shutdown the lawnmower, called to her son, and instructed him to return the mower to our Hispanic neighbors.

How, I ask you, do we allow someone of these tragic circumstances be forced to mow her own lawn and to beg the use of a mower from immigrants to our great country?

Clearly the free market is not functioning properly. This woman could not afford to pay for what is fundamentally a basic human right: she was unable to hire a professional lawn service, with their superior lawn care knowledge and equipment, to ease this strain on her existence.

That's why I am founding Lawn Care for America Now. Don't let this overburdened single mother suffer, nor the infirmed, nor the elderly, all for want of a few dollars to hire someone to mow their lawns!

The mission of Lawn Care for America Now is to lobby Congress to recognize the fundamental human right of every person to live with dignity by getting access to quality lawn care. Like the recently passed Patient Protection and Affordable Care Act (PPACA), Congress should pass the Homeowner Protection and Affordable Lawn Care Act (HPALCA).

The HPALCA, like the model PPACA, would provide means-tested subsidies to low-income, disabled, and other disadvantaged citizens so that they can exercise their basic right to quality lawn care.

This bill is very important to the continued vitality of America. Many advantages immediately become obvious:

More Jobs: Lawn care jobs cannot be outsourced. This bill would directly reduce unemployment by increasing the number of lawn care specialists, and increase investment in lawn care capital equipment and durable goods and create related manufacturing jobs (in the U.S.A., naturally).

Improved Health: So many people suffer from lawn-related allergies that the cost of treatment and prevention is measured in the tens of billions. Expensive drugs from profit-seeking drug companies are regularly dispensed to suppress allergic reactions and to thwart asthmatic illness. By reducing the number of people regularly exposed to lawn allergens, this bill would reduce health-related expenditures related to unfortunately allergic people being forced to provide their own lawn care. Further, by shifting the labor to those who are more physically fit for the job, this bill will reduce the incidence rate of heat- and stress-related injuries and illness, which needlessly shorten the lives of those most at risk.

Increased Efficiency: Each year, Americans spend hundreds of millions of hours performing lawn care with inefficiently utilized equipment such as mowers, trimmers, edgers, and more. With low utilization rates, much of the maintenance of this equipment is forgotten, shortening the useful life of these assets. Additionally, ordinary Americans must individually bear the expense of purchasing this equipment, paying a relatively high cost for equipment of minimal effectiveness. Professional lawn care equipment does not suffer from this last penalty, as a little more outlay often brings significant benefits. Sadly these benefits are beyond the means of ordinary Americans. This bill will lower the cost of lawn care by efficiently allocating professional-level equipment to lawn care professionals who will achieve high utilization rates, thereby reducing the risk associated with investment, and will allow lawn care professionals to offer access to more services at more affordable prices.

This bill would necessarily require all homeowners to subscribe to lawn care services provided by licensed lawn care professionals. This requirement would benefit consumers in two ways. First, it would spread the cost of lawn care across a larger subscriber base, making it more affordable to lower income homeowners. Second, it would ensure that the lawn care received by homeowners meets minimal quality standards, providing a form of necessary consumer protection.

The bill would also create new and minor taxes on lawn care equipment and services in order to fund the subsidies for lower income homeowners. These taxes will be borne by the equipment manufacturers and lawn care professionals and their profit-seeking shareholders.

There are some who will say that they enjoy performing their own lawn care. There are others who will say that the subscription requirement will cost them more than their lawn care presently costs. Still more will say that they do not need the level of service anticipated by the bill, being willing to accept a lower standard of lawn care. These are half-truths spread by the opposition, who would leave single mothers like my neighbor to fend for themselves in a harsh and unforgiving world.

Remember my neighbor, your parents and grandparents, the wounded veteran, and those with special needs. Join our cause! Donate generously to our group, so that we can work to influence more with our common cause! Contact your elected officials, and make sure they understand how important the passage of this bill is to the welfare of millions of disadvantaged American homeowners.

Together, we can win!

[EDIT: Added heat- and stress-related injury and illness.]

Quote of the Day

"The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with most unnecessary attention but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it."

-- Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Volume 1

The Law and the Profits: Part 4

Finishing up Chapter 1. This is such a rich chapter that I don't mind having spent four posts getting through it and the preface.

To summarize all that went before, "the public revenue is regarded as limitless[,] and expenditure rises eternally to meet it, and the various devices which are supposed to check expenditure fail to do so, being wrongly conceived and imperfectly motivated."

What to do? "[R]e-motivate the people actually concerned, penalizing the extravagance we now reward and rewarding the economy we now penalize."

The crux of it is this: "Ministers should not begin by ascertaining what the departments need. They should begin by asking what the country can afford to spend." Much like household budgeting.

Without specifying a value for the ideal tax revenue to GDP ratio (more in chapter 6), he identifies this as a critical metric. "What proportion of the national income should the government demand? What proportion of the individual's income can the government safely take? And what happens when that proportion is exceeded?" He asserts that economists have been actively shying away from this problem, which has the unfortunate side effect of letting government believe that "where government expenditure is concerned, the sky is the limit." I have read many news articles recently where the ratio problem is accepted as true and bearing real adverse consequences. Perhaps this is a sign that economists are not shy about this problem any longer.

The natural advantage of this method of tax revenue budgeting is that it necessarily limits expenditure. This makes it easier for the legislature to allocate funds, under ideal circumstances. This is a consistent grain of salt that must be applied while reading this book: Prof. Parkinson sounds a lot like an idealist, and may very well have been. This can undermine his suggestions on grounds of impracticality, although he often anticipates this response (especially from the civil service) and offers advice on how to get round the opposition.

The second advantage is that expenditure can (should?) become flexible within each department and sub-unit. The reason for this is as follows: Ministers are responsible for achieving goals; more goals can be accomplished on a fixed budget if ministers economize; if promotions are based jointly on economy and goal achievement, then ministers (and subordinates) are competitively prodded in the direction of less inefficiency and waste.

To oversee the ministers, the Treasury department, instead of "divided control", can employ the "strong leash of account and audit." (This creates an efficiency in and of itself by eliminating a lot of overhead.) The minister is then "compelled to accept responsibility, free to display initiative[,] and forced to recognize that cost and value are but two aspects of the same idea."

As mentioned in an earlier post, enlisting the public (as the ultimate overseer of government) is vital in the prevention of waste. He suggests an official tribunal, composed of private citizens and at least one government representative, to receive all proposals for saving money. Upon detailed review of each proposal, including hearings with the public and with the affected departments, they can conclude the feasibility. Each favorable decision would lead to a "ministerial order to the department concerned to reduce its future allocation by the amount to be saved." The tribunal would also reward each successful applicant, such as through tax credits proportionally related to the amount of the saving. He also suggests that all savings be used to repay the national debt. It seems clear that the savings that would go through the tribunal are sizeable compared to the savings that each minister might find within their own department as part of the goal achievement competition.

To combat the "formidable opposition"-- "a closed phalanx of civil servants representing one of the strongest vested interests in the world"--there is not yet in the book a suggestion for victory. There is a history of rebuffed reform attempts from 1570 onward, a brief chronicle of the rise of "esoterrorism" (a blend of "esoterics" and "terrorism"). "Let no one imagine that this citadel will yield to the first assault. Let no one doubt, however, that it will yield to the last."

Next time, the types of taxes through history.

The Business, Professional, & Occupational License (BPOL) Tax: Facts and Economic Considerations

I wrote this analysis back when Stafford County was debating swapping their Merchants Capital Tax for the Business, Professional, & Occupational License Tax. I've tried to be as qualitative as possible regarding effects, and I must caution in considering effects that any one effect rarely occurs in isolation. Other effects can reinforce or mask any effect I mention below. That does not mean that the effect did not happen. It just means that our ability to measure it independently may be limited or non-existent.

I am accustomed to paying the BPOL as a business owner. I am well aware of the effects of this tax and other taxes on my ability to adjust prices. It is important to remember that prices are related to costs, but that prices are pushed down by external factors like competition, substitution effects, and individual assessment of benefits. That is to say, the market determines the price. My analysis touches on this problem by separating goods and services according to their "price elasticity of demand". The bottom line is that some businesses are hurt by the BPOL, and some are not. My own business is not hurt by the BPOL, but I am also a consumer of goods and services and understand the costs of providing them.

Jerry Logan (Spotsylvania Supervisor) is not a fan of the BPOL and has been trying to build support for changing or eliminating it (ht Dan Telvock, here). Supervisors and citizens should be well-informed of the characteristics of this tax before they speak for or against it and before they suggest modifications. In politics, it seems that Unintended Consequences are rarely considered, even though they are easily forseeable (e.g., making food into fuel causing food prices to spike around the world). At least do the homework and try to limit the Unintended Consequences!

The BPOL Tax is similar to the Retail Sales Tax, except

• It taxes services as well as goods;
• The rate differs according to the type of business; in Spotsylvania County,
• 0.0025% for wholesale merchants
• 0.08% for contractors
• 0.10% for direct sellers, itinerant merchants and peddlers, and retail merchants
• 0.18% for amusements, business services, developers, miscellaneous, photographers, personal services, rentals, and repair services
• 0.29% for financial, real estate, and professionals
• The tax is not shown on invoices or sales receipts;
• There is a threshold below which taxes are not collected nor returns filed;
• Spotsylvania: $200,000
• There is a standard deduction that reduces the tax liability;
• Spotsylvania: $50,000 [1]
• It does not matter whether the business is profitable or not;
• Annual limits on the amount a business is liable to pay reduces the effective tax rate for that business;
• Spotsylvania: $150,000 [2]

Consumers ultimately pay the BPOL Tax.

• Cash flow in a business ultimately comes from only three sources:
• Investment by owners
• Borrowing from creditors
• Revenue from consumers
• Owners do not add new money to pay the BPOL;
• The business does not borrow from its creditors to pay the BPOL;
• Therefore, the BPOL is paid from revenue, just like all other business expenses.
• Not all consumers are county residents. This is an important part of the decision whether to tax capital or revenue.
  

Businesses and Government in the County incur additional cost to collect the BPOL tax if it does not replace an existing collection effort.

• Businesses must file annual returns stating their revenue derived in the County;
• These returns must be handled, processed, and stored by the government;
• The government must send out reminders to report revenues;
• The government must send out invoices to collect the tax;
• Businesses must pay the tax invoices;
• The government must pursue late or missing payments;
• The government must pursue and prosecute non-filers;

The BPOL tax system collects data on business activity for every business over the filing threshold.

• The government can derive measures of economic activity from the collected data;
• The measures of economic activity can be combined with other sources such as Retail Sales Tax reporting to obtain estimates of economic activity in below-threshold retail goods businesses;
• Service-businesses below the filing threshold must be measured in one or more other ways;

To the extent that the BPOL tax is greater than the tax(es) it replaces, micro-economic activity might fall, in some cases temporarily, in others, permanently.

• To pay for the net tax increase, businesses will raise prices and accept lower profits in varying proportions;
• Prices have variable measures of elasticity:
• Sales revenue of relatively inelastic goods and services will rise when prices rise;
• “Goods and services that are more essential to everyday living, and that have fewer substitutes” are inelastic; [3]
• Lower profits are less likely to result, since prices may be increased to cover a greater share of the BPOL tax without causing an equal or greater magnitude adverse effect on demand for goods and services;
• Sales revenue of relatively elastic goods and services will fall when prices rise;
• “Goods and services with many substitutes, or that are not essential [to everyday living], have higher elasticity”; [4]
• Lower profits are more likely to result, since prices may not be increased due to the adverse impact on demand for goods and services;
• To the extent that sales revenue of inelastic goods and services is greater than sales revenue of elastic goods and services, net tax revenues will increase;
• To the extent that sales revenue of inelastic goods and services is less than sales revenue of elastic goods and services, net tax revenues will decrease;
• Producers of elastic goods and services will suffer the greatest adverse effects, since the market will not readily bear higher prices, with lowered demand reducing sales revenue more than higher prices would have increased it; (P_i x Q_i >P_f x Q_f, where “P” is price, “Q” is quantity, “i” is initial value, and “f” is final value).
• Reductions in aggregate demand reduces the growth rate of producers;
• If the growth rate becomes negative, then producers must shrink;
• Producers that must shrink will choose from a variety of methods to reduce costs:
• Substitute lower-cost supplies or labor;
• This can result in reduced consumer choice or product quality;
• Reduce labor hours or staffing;
• Sell non-productive assets
• Sometimes at a gain;
• Sometimes at a loss;
• Delay purchase or lease of new or replacement assets;
• Those producers that must shrink below their ability to remain viable will close;
• This will result in
• Reduction in consumer choice;
• Less price instability as a new equilibrium point is reached;
• Lower employment within a given industry;
• To the extent that laid-off workers are immediately unable to find re-employment,
• The government will incur the cost of unemployment benefits;
• Retail sales tax revenue (and similarly BPOL tax revenue) growth will fall while laid-off workers curtail discretionary spending;
• Property tax revenue growth will fall while laid-off workers curtail durable goods spending;
• The risk of foreclosure and eviction will increase for laid-off workers;
• Foreclosures adversely affect property values, thereby reducing real estate tax revenue growth;
• If, as in the past, aggregate wages increase at a greater rate than prices, then macroeconomic activity will recover; however, the change in the makeup of producers and consumers and the level of innovation that occurs in the interim makes the specifics of this recovery less predictable. It might or might not result in increased employment or increased business and tax revenue.

The BPOL Tax is willfully ignorant of the business's profitability

• This is likely due to the difficulty of taxing businesses that do not derive 100% of their revenue (and therefore profits) within the county.
• For instance, big boxes like Walmart and Target are multi-national companies. How do you tax their profits derived solely from doing business in Spotsylvania County?
• Revenue is the only measure other than assets that can be allocated accurately to the county level.
  

Maximum Revenue Taxed Under the BPOL

• The maximum revenue taxed differs according to the type of business; in Spotsylvania County,
• $60 billion (in gross purchases) for wholesale merchants
• $187.5 million for contractors
• $150 million for direct sellers, itinerant merchants and peddlers, and retail merchants
• $83.3 million for amusements, business services, developers, miscellaneous, photographers, personal services, rentals, and repair services
• $51.7 million for financial, real estate, and professionals
• The rationale behind the differing amounts and the differing rates is not clear, and are subject to manipulation by special interests.
• In New Mexico, which has a had a statewide BPOL for more than 40 years, there are concerns over special interest carve-outs and “tax pyramiding”, wherein taxes are levied again on goods or services on which taxes were already levied at an earlier stage of production. [5]

[1] For businesses with less than $1 million in gross receipts.

[2] Certain types of businesses have lower annual limits. Palm Readers, for instance, pay no more than $1,000 annually.

[3] http://www.mackinac.org/article.aspx?ID=1247

[4] http://www.mackinac.org/article.aspx?ID=1247

[5] http://www.heartland.org/policybot/results/20927/New_Mexicos_Gross_Receipts_Tax_Offers_a_Cautionary_Tale.html