New Excise Tax in Pinal County

     A group of Republican politicians in Pinal County will submit two propositions to the voters in November having to do with the establishment of an excise tax meant to fund transportation infrastructure in the county.
     Why is a new tax necessary?
According to Steve Miller (R), Casa Grande,

“(What we’re) asking the citizens to really understand is, [state and federal] revenues for transportation have virtually dried up, particularly for new projects. There’s just not money that’s gonna be available.”

And Craig McFarland, mayor of Casa Grande, says:

“I’m not a pro-tax guy . . . I don’t like taxes, but I don’t see any other alternative … From my perspective, if we do nothing, our roads won’t change. In fact, they will continue to get worse . . . We all benefit from that spending.”

Well, OK. But below are some questions you might want to ask, plus my comments.

How are roads in Arizona funded?
     Some localities (mainly Maricopa and Pima counties) fund their road projects with local excise taxes.
     In general, roads are funded by the state via the Highway User Revenue Fund (HURF). The idea is that highway users should pay for the highways they use.
Comment: A state entity like the State of Arizona can't manage a highway system efficiently. Resources will always be wasted and apportioned according to political factors. Furthermore, it's not possible to know how many resources should be allocated to a certain use outside of a market structure.
     Smaller government entities (such as counties) might be able to apportion resources more efficiently than the State.

Where does the HURF get its money?
Gas tax of $0.18 per gallon goes to HURF. Vehicle license and registration fees also contribute to the HURF.

Who steals money from the HURF?
     HURF revenues are raided to fund the Department of Public Safety. The governor and legislators do this.
Comment: Laws that punish victimless "crimes" and enforce bureaucratic regulations are expensive to administer. The War On Drugs and Securing Our Borders has sucked resources away from maintenance of the transportation system.

What is the argument for a hike in the gas tax?
     Some legislators have proposed a $.10 hike in the gas tax, arguing that since there has been no hike in the gas tax since 1991, fiscal realities and present-day technology are not being taken into account. Since 1991, electric cars have become a reality, gas- and diesel-engine cars get better mileage, and inflation has lowered the value of tax revenue.
Comment: Although inflation has increased the prices of goods that consumers buy, incomes have not necessarily increased proportionally.

Will all residents of Pinal County benefit equally from the proposed transportation scheme?
     This topic is seldom brought up, but occasionally a politician will claim that tax money spent on roads benefits everyone.
Comment: Apportionment of tax resources for transportation is done on the basis of "need," i.e., who can muster enough political pressure. The greater the population, the greater the political power. Under a democratic system, one would expect resources to flow from sparsely-populated areas to populated areas.
     There is no objective way to measure whether or not resources are apportioned efficiently, since coerced resources (taxes) can never be an indication of the tax-payer's utility. Therefore, it's actually impossible to prove that anyone will benefit from government spending on transportation infrastructure.
     Transportation is important. But does that mean that anything labelled "transportation" is good? How is the bureaucrat to decide between roads and railroads? If roads, by what calculus does he decide between two- four- or six-lane highways? If he decides wrong, what does it matter to him? He still draws a salary and a handsome pension. And what is the metric that would show whether a right or wrong decision had been made? Traffic jams ostensibly prove that road capacity is insufficient. But if the resources to build the road were coercively extracted, then everyone has an incentive to use the road that might not have existed if resources were allotted according to market forces.

Kent Volkmer, Civil Asset Forfeiture, and the War on Drugs

     Civil Asset Forfeiture has been and will continue to be a significant factor in the erosion of justice in American society. Nonetheless, prosecutors and law enforcement agencies have lobbied ceaselessly to retain these laws in their most virulent form. Case in point is this recent article about Kent Volkmer's reaction to the passage of HB2477, which mitigated some of the worst features of Civil Asset Forfeiture in Arizona.

"Prosecutors must now prove before a judge there is 'clear and convincing evidence' to seize criminal assets, a more rigorous standard than the previous 'preponderance of the evidence' measure. Volkmer compared the former standard to tipping the scales of justice by at least 51 percent, and said the new standard raises that threshold to 75 percent."

      First of all, 75 percent of what?
       Secondly, if Civil Asset Forfeiture in its most extreme form tips the scales of justice "51 percent," then the scales of justice must be terribly out of kilter. A scale is supposed to be set at zero. Can't quite understand the analogy.

"It won’t have much impact on his office, he said, because his staff already aims to meet the 'clear and convincing' standard."

     It may sound reassuring to some that they "aim" to meet the "clear and convincing standard," but remember: there are no metrics for "aiming!"

 "But raising that legal burden does lower a barrier for drug cartels to do business in Arizona, according to Volkmer. He compared it to any other type of business decision; when a barrier to entry is lowered, then the more activity there will be in the market."

     Many barriers to entry in the illegal drug market have been erected, yet the "War on Drugs" goes on and on. How many barriers and of what kind would have to be erected in order to win the War on Drugs? Meanwhile, our justice system has begun to resemble that of a banana republic.
     What Volkmer either forgot, doesn't know, or purposely didn't mention is that barriers can be surmounted if demand is great enough. All that has to happen for a market to exist is for the supply curve to intersect with the demand curve at some point. If the reward for supplying the demand is great enough, suppliers will come into existence.
     Given that the War on Drugs has failed so far, we can assume that the barriers to market entry haven't been great enough.
     Civil Asset Forfeiture has been a leading tactic in the War on Drugs since the 1980s. Politicians, prosecutors, and law enforcement agencies revived the idea (which had previously been used during Prohibition) as a way to strengthen the barriers to illegal drug market access. Funny thing was that they arranged for the seized assets to fall under the control of law enforcement and prosecutors' offices. In fact, their range of control was such that they could be said to be the new owners of these assets. The new legislation does little to curb the incentive for corruption, as Volkmer himself admitted.
     If people wanted to help drug-users not to use drugs, this is obviously not the way to do it. The War on Drugs is the way to strengthen governmental and bureaucratic power in society at the expense of the taxpayer and the rights of the citizen.
     Legislation is the problem, not the solution.

Out of the Woods on RICO Seizure in AZ?

The ABC15 website carried an article about the signing into law of HB2477. When signing the bill, Gov. Ducey stated:

"Reforms have been needed in this area for some time. As public servants, we are entrusted with not only protecting public safety, but also the rights guaranteed to every citizen of this great state and nation, . . .Today’s important legislation strikes an appropriate balance between enabling law enforcement to do their jobs while upholding civil liberties. I commend Representative Eddie Farnsworth for his work on this legislation, and lawmakers on both sides of the aisle for supporting it. This bill will allow law enforcement to take appropriate action against drug cartels and other criminal enterprises, while ensuring citizens do not have their property seized without proper due process.”

The article went on to explain:

"The new law strengthens the burden of proof required before a person’s money or property can be seized from a 'preponderance of the evidence' to 'clear and convincing evidence.' In addition, the law will allow property owners to recoup their legal fees if they prevail in getting their property or money back. Also, the legislation adds another layer of oversight by requiring prosecutors to receive approval from their county board of supervisors before RICO funds can be disbursed."

The struggle against asset forfeiture laws has been waged almost single-handedly by the libertarian Institute for Justice. Concerning the passage of HB2477, the IJ had this to say:

"Today, Arizona Governor Doug Ducey signed bipartisan legislation to meaningfully reform Arizona civil forfeiture laws. . . Arizona’s civil forfeiture maze is the greatest threat to property rights and due process today,” explained Institute for Justice Senior Attorney Paul Avelar. “HB 2477 makes incremental but important reforms to Arizona’s forfeiture laws to protect innocent property owners and ensure that government powers are not abused.”

    And: 

"Arizona has some of the worst civil forfeiture laws in the nation, and we applaud the Arizona Governor and Legislature for curbing many abusive practices,” noted IJ Attorney Keith Diggs. 'But we will keep fighting until Arizona’s rigged system is completely abolished, once and for all.'”

     The Institute for Justice intends to continue its suit against Arizona, as not all of the abuses of the current law have been remedied:

   

"In Arizona, owners have only 30 days to either petition the prosecutor to reconsider the forfeiture or ask permission to go to court to fight back. But this process requires owners to file a sophisticated legal document—often without the benefit of a lawyer. If they miss the 30-day window or mess up the document, they lose their property forever. And most of the time, it is the prosecutor—not a judge—who decides what to give back and what to keep."

     These laws were bad from their very inception---tools in the War on Drugs, a "war" against people exercising their natural right to control their own bodies.

     The concept of justice implies that the rules should be the same for everyone. There shouldn't be special rules for persons suspected of being linked to a "drug cartel or other criminal organization." And it certainly is ironic that these drug cartels and other criminal organizations could only have come into existence due to the incentives created by previous misguided legislation.

     The passage of RICO seizure laws hasn't produced a definitive victory in the War on Drugs; instead they've given rise to rampant police corruption as law enforcement agencies have used the laws to scam even more money and resources out of unsuspecting citizens. 

     County prosecutors and law enforcement agencies, supposedly constituted to protect their citizens, were the biggest lobbyists against any mitigation of the RICO laws which should be a sobering thought for those who think that government is the solution and not the problem. 

Tax on Gold is a Tax on Money

Mark Finchem wants to eliminate the state capital gains tax on gold coins. Article.
Finchem's argument is as follows:

1. The establishment of the Federal Reserve System in 1913 gave it the power to control the size of the money supply in the form of either printed federal reserve notes or bank ledger entries.
2. The FRS seeks to increase the supply of money by about 2 or 3% per annum, believing that this must be good for the economy.
3. Economics tells us that when the supply of something increases, its price goes down.
4. When the price of money goes down, people experience a decrease in the purchasing power of their money.
5. Ownership of gold, whose price can't be controlled by the FRS, is a way of maintaining one's purchasing power.
6. The state capital gains tax, when applied to gold, prevents Arizonans from using this valuable tool to preserve the purchasing power of their savings.

According to the article, Rep. Ken Clark, D-Phoenix, claimed that "people buy gold coins in hopes of making a  profit." This is not necessarily true. People may buy gold simply to try to protect the purchasing power of their savings from the intended bad consequences of the Federal Reserve System.

Gas Tax Hike

     In a democracy, interest groups can pressure the government to build roads and then attempt to shift the cost of maintaining the roads onto the taxpayers. How does one know how many roads the taxpayers actually want to pay for? Answer: there's no way of knowing. The only way of knowing for sure whether or not a product is demanded is to put it on the market and see if anyone buys it. If the government has the power to force taxpayers to pay for its products, there is no way of knowing if the taxpayer actually wants them.
     HCR 2011 wants to raise the state gasoline tax by $0.10. Article.
Reasons given are as follows:

1. Arizona roads are in bad condition due to lack of funding.
2. Truckers lose over $500,000,000 per year in congestion delays.
3. Rural roads are the fifth most deadly in the nation, due to poor condition.
4. As cars and trucks become more fuel-efficient, a gasoline tax provides less and less revenue.
5. The current fuel tax of $0.18 per gallon was set in 1991. $0.18 no longer buys what it did in 1991 (due to inflation of the money supply by the federal government).
6. Road maintenance funds are diverted to other state programs.
7. Arizona's current gas tax is only 58% of the national average.

     My comments:
     Item 1. Obviously, the current system isn't working.
     Item 2. Since the roads aren't operated as a business, the owner of the road (it could be argued that there isn't any) has no incentive to provide a competitive road service. Not that trucking is necessarily a competitive means of moving freight were the railroads allowed to be run profitably.
     Item 3. Deplorable, and typical of government-provided services.
     Item 4. Obviously, payment for road services should be on the basis of actual use, not purchase of fuel.
     Item 5. Adjusting to inflation is a challenge for all businesses. For a long-term solution, my suggestion would be to legalize gold and silver as money.
     Item 6. This is particularly troubling. If current gas tax funds aren't able to find their way to the road maintenance account, why would anyone expect that a new tax will change the situation?
     Item 7. Don't know why this is relevant. Are other states providing the road services their taxpayers want? If so, how do we know that? What is the average income in other states, and should that be taken into account when calculating what amount of gas tax is appropriate for Arizonans? Also, in light of No. 6, it seems to me that the less money in the hands of government, the better.

     The state has proved itself incapable of managing the roads. The only sane method of providing maintenance fees for public roads is via tolls and users' fees combined with (for example) privatization (for larger highways) and co-operative ownership (for smaller and access roads).
     If roads were run by their owners on a profit basis or as member-maintained co-ops, then we would have an answer to the question of which roads should actually exist, and the roads would be maintained to the degree that users demanded.

Dental Lobby Has Sharp Fangs

     More bad news in Arizona.
     One area of the U.S. economy that has long been almost completely corporativized (regulated by the government) is dental services. Dental services in the U.S. are monopolized by an organization called the American Dental Association, which has been successful in having licensing laws passed in all the state legislatures. These laws have had the effect of restricting supply of dental services, thus boosting price.
     Recently, some legislators tried to introduce a bill to the Arizona state legislature that would have permitted dental therapists to offer some services that presently only dentists are legally allowed to offer. Their position was that the high price of dental services results in many people being unable to afford them and that the licensing of dental therapists would alleviate this problem.
     Unfortunately, the House Appropriations Committee of Reference voted 8-1 against the bill. The sole yea voter was Nancy Barto (R-Phoenix). Aside from Regina Cobb (R-Kingman), who is actually a dentist, the names of the other nay voters are unknown.
   

Caution When Boldness is Required

     The new Pinal County sheriff and county attorney are said to be "cautious" about the use of RICO funds collected by the county. While campaigning for the job, Sheriff Lamb had criticized the former sheriff's handling of the funds, which is believed to have been a factor in Lamb's victory over the former sheriff's chosen successor.
     If that's so, then it seems to me that Sheriff Lamb could afford to be a little less cautious and a little more righteous.
     RICO laws have been a scandalous infringement of Americans' property rights ever since they were first cooked up in 1970 as a tactic in the misguided War on Drugs which has been a useless and expensive policy that has been a factor in our increasing national impoverishment.
     Under the RICO laws, property may be seized by law enforcement officials if either they or an informant alleges that the owner violated a law. Nothing has to be proven in a court of law; an allegation or a suspicion is sufficient legal grounds for a RICO seizure. Since most people would agree that having your property seized is a form of punishment, it follows that RICO sanctions punishment without trial. Surely, this is a very serious regression in the quality of our justice system.
     In the interests of justice, such laws ought to be repealed, or at least not enforced.

The Only Fair Safe Space is a Private Safe Space

     Arizona has come up in the news and not in a good way. Well, what else do I blog about except bad news?
     I choose to critique the article in Reason Magazine as they usually have the best analyses and to find a flaw in a Reason writer's argument would be quite a rare thing. This time, however, I think something more needs to be said.
     A bill, HB 2120, has been introduced in the Arizona House of Representatives by Republican (are there any other kind in Arizona?) representatives Thorpe and Finchem (who I voted for). By the terms of the bill, "courses, classes, events, or activities" that
1. promote the overthrow of the U.S. government
2. promote division, resentment, or social justice toward a race, gender, religion, political affiliation
    social class, or other class of people
3. are designed primarily for pupils of a particular ethnic group
4. advocate solidarity or isolation based on ethnicity, race, gender, religion, or social class
5. violate state or federal civil rights laws
6. negatively target specific nationalities or countries
are to be prohibited in school districts and community colleges and universities subject to the authority of the state (of Arizona).
   
     The author of the Reason article opined that

". . . allowing authorities to legislate what is and what isn't acceptable speech on campus—especially public campuses which are required to respect the First Amendment—is a terrible idea and inevitably comes back to harm whichever party the speech restrictions were designed to protect. The authors of HB-2120 might think they're taking a stand against P.C. culture run amok, but all they're really doing is legitimizing the concept of hiding from challenging ideas rather than confronting them." 

     In other words, schools and universities are supposed to be arenas where competing ideas are debated, and may the best idea win! Perhaps that is what people have in mind when they assert that the state should not have control over educational content:

"The Arizona school boards association said it opposes Thorpe’s bill because the state should not have control over school content. 'It should be up to each district what kind of curriculum should be approved,' said spokeswoman Heidi Vega."

    I don't really have a dog in this fight. The two sides each have their own idea about what should happen (what content should be taught) on public property (the schools). My position is that it's impossible to decide fairly how public property should be used.
     The concept of ownership gives one a solid basis for deciding questions of how to resolve conflict over scarce resources. Ownership entails the following property rights: enjoyment, occupation, possession, rental, sale or other form of alienation, use, or even destruction of a property, and the right to exclude others from the exercise of aforesaid rights.
     All property, including "public" property, belongs to the persons who determine who gets to exercise the property rights. The theory of public property in a democracy entails the idea that public property will be used in a way determined by the majority of the voters. But what if two powerful political factions disagree about how certain public property is to be used? Then the goal of the concept of ownership---to resolve conflicts over scarce resources---is defeated. And indeed, that's what we're witnessing in the fight over what content should be taught in Arizona public schools.
     I think everyone has the right to advocate whatever ideas or theories they believe in, no matter how mistaken I think they are. However, people should not have the right to steal other peoples' money (taxation) and then use that money to erect facilities where their ideas and theories will be propounded at taxpayer expense.
     Therefore, the only just solution to the problem of what content will be taught in schools is that the schools be privatized. One can't complain about what people do on their own property!

Corporate Welfare in Casa Grande

    Lucid motors is planning to build a new electric car manufacturing plant in Casa Grande.

"The future of Casa Grande looks brighter now with Lucid developing 500 acres near Thornton and Peters roads, according to Casa Grande Mayor Bob Jackson. He sees the company’s arrival as a catalyst that will propel Casa Grande into being a leader in technology and advanced manufacturing. There will not be any delays in this development on behalf of the city, Jackson promised, as he expressed a desire to speedily move the project forward."

     I'm so glad to hear the the municpal government won't stand in the way of honest and potentially lucrative economic development. Governments don't always behave rationally or morally.

"Pinal County offered performance-based incentives to attract Lucid to build in Arizona."

     Now, why does Pinal County have to pay Lucid to bu ild a factory in Casa Grande? Is there something wrong with Pinal County that companies have to be paid to build factories here?

"County Manager Greg Stanley said he could not discuss what types of incentives were offered, except to say they were tied to Lucid pledging to create a certain number of jobs."

     Ok, so jobs will be created. All other things being equal, that's a good thing, I think.

The county will be assembling and buying the land, parts of it owned by Saint Holdings LLC, then selling it to Lucid."

     Now, why doesn't Lucid just buy or lease it themselves? Why does the county have to get involved in the deal?

"There is only one problem with the deal — the taxpayers of Arizona are expected to pay for the purchase of the land and contribute a significant amount of money to help it get the factory built and operational. When and if everything goes as planned, the factory is expected to create 2,000 jobs in an area where many are unemployed or underemployed."

 "The land itself will cost $31.8 million. Financing the purchase over 30 years will add another $41.6 million, but Pinal County spokesperson Joe Pyritz says the plan is to lease the land after it is purchased (presumably to Lucid Motors, although the county is not allowed to say so for the record) and then sell it at the end of 5 years. That arrangement would cap the total cost of the deal at $35 million. The sale price is expected to equal the total outlay made by the county for principal and interest."

"However, first someone has to actually buy the land. County supervisors will meet in January to consider how to do that. The leading proposal is to finance the purchase by raising property taxes or imposing a countywide sales tax surcharge. Pyritz says if the supervisors decide on a tax increase, the new tax would only cover the land deal and would end once the tax funding reimburses the county for the purchase cost."

     Oh-oh. Governments don't have any money of their own. The only way they can get money is by taxation. It's their only business plan!

 "Lucid Motors will be eligible for up to $46.5 million in various subsidies offered by the state through the Arizona Commerce Authority over the next five years. Those subsidies will be coupled with certain performance targets" 

"Susan Marie, spokeswoman for the Arizona Commerce Authority is quick to point out that the total amount is far less than the $335 million in tax credits promised to Faraday Future or the $1.3 billion in similar credits promised to Tesla Motors by the state of Nevada."

     Oh-oh. If we don't hurry up and jump on this deal, some other state (or some other county) will steal it away from us! Taxpayers in other locales aren't as dull as I am, probably.
     However, there are always two sides to every story. Could it be possible that paying Lucid to build a factory in Casa Grande with state and county taxpayers' money has a downside?
     First of all, let's sum up the upside. Cui bono? Lucid shareholders will certainly gain from this deal. Lucid management and workers will become employed, which is nothing but an upside for them. The county increases its tax base. No downside for them. Casa Grande businesses may or may not benefit, depending on where and how the Lucid employees spend their money. For sure, the economy will grow, there would logically be an effect on property prices (more taxes for the county), but it's impossible to predict who specifically will benefit and to what degree.
     On the other hand, it's doubtful, for example, that residents of areas far removed from Casa Grande (as many parts of Pinal County are) would benefit much, if at all.
     The downside of what should otherwise be a win-win situation is that taxpayers, both in Pinal County in particular and Arizona in general, will be forced to subsidize the establishment of the Lucid plant.

     "The project involves a significant amount of corporate welfare. Besides the Pinal land deal, Lucid Motors will attempt to collect up to $46.5 million over the next five years in various subsidies offered by the state through the Arizona Commerce Authority."

"The five Pinal County supervisors will discuss the possible land purchase and how it will be funded on January 4 at their regular meeting in Florence. The goal is to a produce a resolution of intent for the agreement, to be voted on no later than January 19."

"'The supervisors will likely consider either a property- or sales-tax hike to pay for the land,' Pyritz says. If they decide on a tax increase, he says, the new tax would only cover the land deal and would end once the tax funding reimburses the county for the purchase cost."

"'We won't make or lose money' on the deal, Pyritz says."

     No, the county will make money, in the long run, if tax revenues increase. And by the way, is the county planning to reimburse the taxpayers for their interest-free loan to the county and Lucid after the five years are up? Nothing has been said about that! Could it be that the county will end up keeping the money? Could it be the tax will remain in place, even after the deal with Lucid has been settled?

Summary:
The new factory will create 2,000 new jobs, which means the economy will grow.
    1. But capital extracted from state and county taxpayers will mean decreased purchases of the products of other producers.
    2. The jobs created will be in Casa Grande. Benefits for Western Pinal residents and property owners? Probably, some (we can't be sure who) will be net gainers. For other parts of the county? Doubtful.
     3. Economic stimulus created by the participation of government constitutes malinvestment (defined as investment that would not have occurred in a free market) and all other things being equal, has to be liquidated in the long run. If government wants to do something to improve the economy, they can remove legal barriers to development by repealing laws that discourage business.
     4. No mention is made of paying back taxpayers for their interest-free loan to the county (and indirectly to Lucid) or of abolishing the tax after the loan to Lucid is repaid.

     Government/business alliances are not a just way to foster development. If Lucid can't obtain the necessary funds to build their factory by consensual means, that is a good indicator that it shouldn't be built.
     The involvement of the county as an economic actor is troubling. Governments, if they serve any purpose at all, are meant to provide a very limited range of functions. A government is not a business and can't be run like one. Financing economic development is for capitalists and entrepreneurs, not county supervisors who have no capital except what they can squeeze out of the taxpayer.