For those who missed the application deadline for the Koch Summer Fellowship, there is still an opportunity to work at the Show-Me Institute this summer! Today, the institute announced its summer 2010 internship program, which will take place at our new central west end office location, and will run from approximately mid- to late May until late August.

As a “small-shop” think tank, interns at the Show-Me Institute have the opportunity to be involved in all sides of the organization: assisting scholars with research, writing op-eds, blogging, and event planning. Internship positions are full-time and interns are paid on an hourly basis.

Show-Me Institute staff writer Audrey Spalding interned at the institute for a year before being hired as a full-time staff member. She credits the institute with giving her valuable job skills. “I can confidently say that without my Show-Me Institute internship, I would not have the research skills I now have. I filed more than 500 freedom of information requests as an intern.”

Applications are due by April 15, and applicants will receive notification by late April.

I’ve noticed that some journalists assume it’s normal for the government to license occupations and restrict entry to them. When states don’t license an activity, these writers point it out as an aberration. An example of this bias appears in today’s Wall Street Journal article about anger management seminars:

There are no licensing requirements for anger-management trainers—anyone an open a business.

Let’s hope it stays that way. I’d hate to see Missouri create a Board of Anger Management Professionals (which would probably hold very calm, boring meetings).

A judge refused to dismiss the state lawsuit against a family that was caught selling raw milk from its distribution stand in a parking lot. The state claims that it’s illegal for farmers to set up any raw milk pickup locations away from their farms.

In a Springfield News-Leader article, the assistant attorney general explains why selling milk “from a farm,” as state statute requires, should preclude off-site pickup spots:

“A farm is not anywhere defined in Missouri statutes as a vehicle in a parking lot away from the farm premises,” Blome argued.

Of course, no one would define a farm as a vehicle temporarily parked in a lot. But that isn’t a good definition of a food establishment, either — and the state, calling this family’s parked vehicle a food establishment, says it should be subject to the same regulations as a mini-mart or a grocery store.

If you can’t pick up raw milk from a farmer’s vehicle, what can you do with it? You can pick it up yourself at the farm. But suppose you drive your car to a parking lot, meet a friend there, and give him a gallon of the milk. Does your car now become a food establishment? Or maybe you bring your milk home, invite guests over, and serve them milk with dinner. Does your house turn into a restaurant?

Here at the Show-Me Institute, we have been following the North Face / South Butt lawsuit with great interest. Many of us know the father of the South Butt founder’s line of fine clothing, and think the entire lawsuit by North Face to be ridiculous. So, last month on my annual family ski trip to Colorado, I could not resist getting a few pictures taken of me in my South Butt T-shirt. Needless to say, the North Face store in Beaver Creek seemed the perfect location to snap a few photos. Enjoy, and I hope everyone at the South Butt keeps up the fight for truth, justice, and humorous relaxation.

Click to enlarge.

There is an ironic tension between two health care bills currently pending in the Missouri Senate. One seeks to create an amendment that would increase health care freedom, while another would add to an already lengthy set of health insurance mandates. The latter bill, S.B. 618, would require state-regulated private health insurance companies — approximately 40 percent of the Missouri market — to cover expensive screenings and therapy for children with autism spectrum disorders. (The House version, H.B. 1311, recently passed.) Although well-intentioned, this mandate would necessarily raise the cost of premiums for Missourians, making it more difficult for individuals and small businesses to keep health insurance plans.

S.B. 618 would require insurance plans to cover up to $55,000 annually for autism diagnosis and treatment for children up to the age of 21. A mandate of any amount increases health insurance costs, and the bill’s substantial commitment would assuredly have a noticeable effect. Its proponents argue that it would increase the price of health care premiums by less than 1 percent, while insurers believe it could raise premiums up to 3 or 4 percent. Although the bill would exclude small businesses if it raised their premiums by more than 5 percent, any increase would necessarily price some marginal number of people and companies out of the insurance market, forcing them to cut coverage or reduce hiring.

Autism is a problem in Missouri, and it is not difficult to be swept up by the heart-wrenching stories of families with autistic children. But there are many disorders and diseases that afflict people — children and adults alike — and mandated coverage of all or even most of these problems would make insurance prohibitively expensive. These kinds of mandated coverage makes insurance more expensive especially for those with diseases that are not given state protection.

It’s important to note that some forms of autism aid already exist. Although not as comprehensive as an insurance mandate, there are publicly and privately funded resources for Missouri children with autism spectrum disorders, including Medicaid waivers for families who would not otherwise qualify for assistance, and a nonprofit private school for children with severe autism.

A large part of the argument in favor of the mandate lies in the unpredictability of health insurance when it is attached to employment — a problem only exacerbated by the current economic climate — and the difficulties involved in obtaining a plan that covers autism. Instead of government-imposed mandates about coverage, families should be free to choose an insurance plan that best fits their needs. Politicians cannot know the optimal equilibrium point between price, risk, and security for any type of insurance coverage, let alone for autism, because that equilibrium will differ for everyone.

The bill in question adds a much-needed amendment allowing Missourians to purchase out-of-state insurance that does not mandate autism coverage, although Missouri already has a mechanism that would help all families find affordable health insurance. Health savings accounts (HSAs) allow policyholders to become consumers, giving them the power to choose an appropriate coverage level. HSAs are portable, and therefore less dependent on job stability that may not always be available in an uncertain economic climate. Both employers and employees can contribute pretax funds to HSAs, which can then be used toward paying most basic health expenses. With an HSA and an accompanying high-deductible plan, consumers can budget their health care expenditures more effectively than bureaucratic cost-cutting is able to do.

State mandates raise health insurance costs across the board, and decrease people’s access to affordable coverage. In the long run, the most effective solution for families with autistic children — or any other disorder — is to open the insurance market to further competition, giving them a practical economic incentive to cater to such niche markets. Small businesses — at any point, but especially during a recession — are extremely cost-sensitive to changes in premiums like the one that would assuredly occur following a large mandate on autism treatment and diagnosis. Although this insurance mandate aims to help families with autistic children, it would simultaneously hurt another group of Missourians who would face significant cost increases, or even the potential loss of their own health insurance coverage.

On Friday’s CBS “Early Show,” I saw a segment about a new government program that offers consumers cash rebates to replace their energy-inefficient appliances with new Energy Star–rated ones — “Cash for Appliances,” if you will. Sound familiar? Just like “Cash for Clunkers,” this program probably won’t increase the volume of sales significantly, but rather just shift the timing of these sales forward.

Some argue that this shift is the type of “stimulus” that the economy needs; after all, the money for this program was allocated from last year’s stimulus package. But will the effect of this program be worth the $300 million in taxpayer money that is being spent to finance it? I know “million” doesn’t sound like a big number anymore, with all of the billions and trillions being thrown around lately, but $300 million is still a lot of money — other people’s money. Using tax dollars to help people buy more energy-efficient machines is likely an inefficient use of funds, because purchases of these machines will become much more common within the next few years anyway, as older machines start to die. The fact that people can save money on energy costs by upgrading their appliances is already a significant incentive.

Each state has its own program, and Missouri has allotted $5.6 million in federal funding. The program will start on April 19 to coincide with the annual Show-Me Green sales tax holiday. If the funding only lasts for one day, which is likely given that Iowa’s $2.7 million ran out by 3 p.m. on the first day, no sales tax revenue would be generated. So, what genuine benefit will this expenditure have for our state? It will not add to the net state wealth, but is instead a mere transfer. Any benefit to appliance retailers will likely be very short-lived, and any arguable benefit to the state economy will be small at best. And, all the while, taxpayers will be able to watch their hard-earned money disappear down the drain into another ill-advised government program.

This AP story is one of the most enjoyable articles about the Census I’ve ever read. It explores how residents of very small towns respond to inaccuracies in Census tallies.

Many reports about the Census (like the Springfield News-Leader article I wrote about) stress the connection between Census data and funding for government programs. They include quotes anticipating dire things if participation is low and funding falls short. From this point of view, the larger the total the Census Bureau arrives at for your area’s population, the better.

What sets the AP’s article apart is that the people quoted in it are focused on accuracy. Whether the Census records eight or nine residents in a town doesn’t change federal appropriations. The difference matters only to people who want the numbers to be exactly correct, for truth’s sake. One woman is actually quoted complaining that the Census Bureau states there are two residents in her town, when in fact she alone lives there. I haven’t seen any other calls for the Bureau to revise its numbers downward.

The Center on Budget and Policy Priorities released a report last week about state budget shortfalls, “Recession Continues to Batter State Budgets; State Responses Could Slow Recovery.” (Link via an article on the Wall Street Journal: Real Time Economics blog).

This made me wonder the the following: Are income taxes correlated with a higher mid-year budget gap as a percent of the FY2010 General Fund Budget? Do states that have no income tax have a lower incidence of mid-year budgetary shortfall?

In an attempt to answer this, I took Table 1 from the CPP report, and added the states that do not have a budget shortfall (Alaska, Delaware, Michigan, North Carolina, Oregon, Texas, and Wisconsin) and those that have a surplus (Montana and North Dakota). I sorted this table by the percentage of budget gap over the 2010 general fund budget. Next, I added the top marginal tax rates for personal and corporate income for each state. The green cells indicate states that assess zero income tax, and the red cells indicate states that have income tax rates of  9.0 percent or greater.

Projected Mid-Year FY2010 Budget Gaps as a Percentage of FY2010 Fiscal Budget by State

(Modified to Include Income Tax Rates and States With Zero Shortfall)

* Washington is reflected low in the list because the amount shown is for the two-year budget, ending in FY2011.

The states that have no income tax are disproportionately aggregated at the top of the list. This graph indicates that states without an income tax may be better at predicting their revenues in the future. I can think of a few reasons why this is, and I invite our blog readers to suggest additional reasons in the comments.

• Sales taxes are a less volatile source of revenue than income taxes.
• Income taxes are closely tied to the job market, and sales taxes are not. When a person loses her job, she then has zero earned income, and therefore generates zero income tax revenue for the state. During this period of unemployment, however, she continues to make purchases and pay sales taxes (either by using personal financial reserves or unemployment compensation).
• Sales taxes are more effective than income taxes in addressing budget shortfalls more immediately, because they are collected at the point of transaction. Income taxes, in contrast, are collected only once per year. States do not have to wait until residents file their income taxes in order to collect revenue.

Notice that Missouri is ranked 37. This means that 36 other states were able to forecast their budgets better than Missouri. Perhaps if Missouri repealed its income tax in favor of a broad-based sales tax, it could predict its revenues better, and it wouldn’t face such a shortfall in the future.

Sorry for the late notice, but two Show-Me Institute staffers will be making appearances later today — one on the radio, and one in person.

Research assistant John Payne will be a guest on the Freeman Bosely Jr. morning show on KATZ 1600 AM, once again talking about the St. Louis–area Metro transit system. His segment is scheduled to start somewhere between 11:00 and 11:15 a.m. If you want to listen but are not in St. Louis (or don’t have a radio), you can listen online at www.gospel1600.com. You can also read John’s op-ed about MetroLink expansion and watch his recent appearance on Fox 2 news.

Also today, policy analyst Dave Roland will be the keynote speaker at the Missouri Libertarian Party Convention in Jefferson City! He’ll be speaking about the importance of capturing the hearts and minds of Missourians in our efforts to spread the ideas of liberty and take practical steps toward increased freedom. The Show-Me Institute doesn’t engage in electoral politics, but we’re always happy to share our ideas with others — so, Democrats, Republicans, Greens, what have you, be sure to let us know when you’d like us to speak at your events, as well. We’d love to talk to you.

The state of Missouri has extended unemployment benefits for up to 20 weeks. This is undoubtedly a temporary boon to the people who receive the benefits, but it can only hurt the economy. In particular, it will cause more people to stay unemployed longer. A fundamental rule of economics is that if you subsidize something, you will get more of it, and unemployment is no exception.

You might be tempted to dismiss that idea as little more than armchair theorizing, but there are solid numbers to back it up. For instance, take this blog post from University of Chicago economist Casey Mulligan about unemployment in Pittsburgh from 1980–1985:

Unemployment rates got quite high in Pittsburgh in those days, reaching 16 percent at one point, and staying over 10 percent for two and a half years. The chart below shows some of the results. It graphs weeks from unemployment benefit exhaustion against the fraction of unemploy[ed] people either finding a new job or being recalled to a previous job in that week. “Exhaustion” refers to the time when benefits cease being paid to the unemployed person, regardless of whether they have found a job.

Almost no one started working during the 2-3 weeks prior to the exhaustion of their unemployment benefits (weeks “-3″ and “-2″ in the chart). Miraculously, more than one quarter started work a week later (19% started a new job, 10% returned to a previous job). Economists agree that a huge reason for this behavior is that people are more willing to remain unemployed when unemployment itself generates a paycheck. (The job they take may not be great, but the data show that often there is a job to take).

If incentives mattered in Pittsburgh in the early 1980s, why wouldn’t they matter in the United States today? Or why did employment increase almost 1,000,000 last summer?

Not only would this decision cause more unemployment in Missouri, it would also further stretch an already overextended budget. It’s a bad idea all around.

(Casey Mulligan link via Marginal Revolution.)

Rent seeking has been a major topic around here recently. I don’t need to provide links — if you’re reading this on the main page of the blog, you can just scroll down a bit for some excellent posts. Now we are going to do a little bit more rent seeking as a nation, by charging international visitors without visas (I guess this means residents of Windsor going to Detroit for a Red Wings game) a new $10 fee that will be used to market the United States internationally. Basically, it will be a national version of what just about every city (including St. Louis and [probably] Kansas City) does with hotel taxes: charge an extra fee and use it to promote the local travel industry. I think we can admit that there are plenty of worse examples of rent seeking than this, but it still entails private enterprise using the government and taxation in order to benefit one sector of the economy at someone else’s expense. (It makes it a lot easier to do this if the expense is borne by someone who does not live here.)

Now, I want to get into their numbers:

The association says the U.S. welcomed 2.4 million fewer overseas visitors last year than in 2000. And that, the group says, has cost it an estimated $509 billion in total spending and $32 billion in direct tax receipts.

We can presume that 2.4 million is for one year, and $509 billion is for 10 years. Taking 2.4 million a year for 10 years, and dividing that into the total spending amount, yields an average amount spent per visitor of just more than $21,000. This article states that the average spending per visitor is $4,500. I don’t think I believe the number put out with the bill signing, but the alternative would be to accuse the PR and lobbying group behind this effort of inflating their numbers. And we all know that would never happen. …

In the beginning of Economics in One Lesson, Henry Hazlitt describes classic rent-seeking behavior:

While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

To see this lesson applied, check out the personal blog of Jason P. Hunt, a film and television producer in Kansas City. He uses it to voice support for H.B. 1587, which would increase the cap of film production tax rebates from $4.5 million to $10 million. Although I’m getting bored of blogging about the production incentives program in Missouri, I want to refute the specific points that Hunt made in his most recent post, “An Open Letter to the Missouri Senate”:

I understand several in the legislative branch would question why we need to increase this cap.

I question this, too, especially since only one single production in Missouri has ever come close to the $4.5 million cap during the last 10 years. (That production was Up in the Air, which was awarded $4.13 million.) The second-highest amount ever awarded was $786,800. The “Show Me: Tax Credits” web tool shows that the average amount awarded is only $369,347.

I suppose Hunt’s implicit argument is that glamorous, large-scale productions won’t be motivated to film in Missouri unless the state coughs up even more cash. If Missouri awards more money to an activity in which it has a comparative disadvantage, it faces an increasing opportunity cost. This is money that the state could otherwise devote to other programs and/or return to the pockets of taxpayers.

Consider that for every dollar allowed as a tax credit under the program, three have to be spent within the state.

From what I understand, an economic multiplier of 3 is unrealistic. In estimating the activity generated from its film incentive program, Louisiana uses a demand earnings multiplier of 0.3982. Here’s a math problem: How much wealth do a $61,000 Range Rover and a $68,000 Mercedes generate in a state? Using Hunt’s logic, they would create $387,000 of economic activity within the state’s borders. I disagree that this is realistic.

That’s found money.

That money comes from other states. If a person is walking to her car in a parking lot and finds $20 lying on the ground, she may consider herself to be $20 richer. However, the person who dropped the $20 on the ground in the first place is $20 poorer. No wealth was generated. When a production company from another state spends $1,000 in Missouri, the money is not created out of thin air; it’s $1,000 that the company would have otherwise spent in a different state.

When states regard each other as antagonistic economies, it is a mutually detrimental situation. Targeted incentive programs result in dead-weight loss and restrict overall growth. In order to increase overall economic growth and prosperity, Missouri should focus on the activities for which it has a comparative advantage, and then trade amicably with the states that have a comparative advantage in producing films.

There’s another reason it’s a bad idea to regard this out-of-state spending as “found money”: Missouri doesn’t get to keep 100 percent of it. States that offer film production incentives get a raw deal, because they are poorer by the amount of money that they allocate in tax credits. For every $1,000 that a film production company spends in Missouri (up to the cap), the state economy only keeps $650. In other words, Missouri government pays the film company $350 for every $1,000 that it spends here. Raising the cap, as Hunt supports, would exacerbate this loss.

The National Center for Health Statistics has released a report on out-of-hospital births. In 2006, 64.7 percent of such births occurred in homes. Another 28 percent took place in birthing centers.

The report includes a few maps that allow readers to compare states; one categorizes states according to percentage of home births in 2005 and 2006. Missouri’s percentage was above the national average, and ahead of all neighboring states’ percentages with the exception of Iowa. (Wisconsin and Oregon, two other states I’ve written about a lot, had higher percentages of home births than Missouri.)

The next map shows each state’s change in percentage of home births between 2003–2004 and 2005–2006. Missouri saw no significant change during this period. This is not surprising, considering that Missouri’s General Assembly didn’t pass a bill legalizing midwifery until 2007. I would expect to find an increase in Missouri’s percentage of home births after that bill’s midwifery provision finally became law in 2008.

Now that Columbia permits residents to own chickens, it’s a good time for the city to look into the next trend in urban agriculture — miniature goats:

The Carbondale, Ill., Planning Commission was debating this month whether to allow residents to keep chickens when Priscilla Pimentel, a member of the city’s Sustainability Commission, added goats to the mix.

“If you can have a 250-pound dog in town, why not a miniature goat that can produce milk?” she says. “It’s just common sense.”

Miniature goats are about as big as medium-sized dogs, and can be led around on leashes. Like chickens, they’re domesticated animals that don’t threaten anyone. People should be allowed to own them in cities.

As the latest egregious example of economic illiteracy to come out of Washington, Sen. Mike Johanns (R-Neb.) has proposed banning Japanese-made cars. This is a knee-jerk reaction that would be ineffectual at making American drivers safer, and would have many unintended negative consequences.

First, the ban wouldn’t even solve the problem, because all of the Toyotas that were recalled in January for malfunctioning gas pedals weren’t manufactured in Japan. They were manufactured in the United States:

As for banning Japanese-made vehicles: All 2.4 million Toyotas recalled Jan. 21 due to sticky gas pedals, and most of the 5.6 million vehicles recalled because floor mats might jam pedals, were assembled in the USA.

Would this ban have anything to do with the fact that the U.S. government has a large financial stake in GM, a major Toyota competitor?

Banning Toyotas would have many negative consequences. For example, the men and women who work in Toyota dealerships and Toyota manufacturing plants would have to join the ranks of the unemployed. This would have a noticeably negative effect in Missouri, which has a high-enough unemployment rate already — 9.6 percent as of December.

Banning foreign imports like Toyota would hurt consumers because it would limit their choice of cars. When free trade is restricted, a people can only consume what their country is able to produce. In an adapted excerpt from their book Free to Choose: A Personal Statement, Milton and Rose Friedman elucidated what this means to consumers:

We cannot eat, wear, or enjoy the goods we send abroad. We eat bananas from Central America, wear Italian shoes, drive German automobiles, and enjoy programs we see on our Japanese TV sets. Our gain from foreign trade is what we import. Exports are the price we pay to get imports. As Adam Smith saw so clearly, the citizens of a nation benefit from getting as large a volume of imports as possible in return for its exports or, equivalently, from exporting as little as possible to pay for its imports.

The ban would also increase consumer prices on all cars by decreasing the total supply. Domestic car producers do not have the capacity to make up for the shortfall in the short run, which would aggravate this effect. In the aforementioned excerpt, Milton and Rose Friedman explained that “‘Protection’ really means exploiting the consumer” because she has to pay more for goods.

The ban would also decrease the quality of vehicles that are available to American consumers, which is the very problem that this policy is intended to alleviate. When a country attempts to protect certain industries, it removes their incentive to innovate in order to compete in the global market. By banning foreign imports such as Toyota, the United States would do the American car industry and American consumers no favors. GM and Ford have difficulty competing with foreign firms like Toyota and Honda in the status quo world economy because they have “benefited” from American protectionist policies on cars for so long. Furthermore, bans on foreign imports become even more disadvantageous in the future if/when the trade restriction is lifted, because domestic car companies would have lower-tech, lower-quality products than their foreign competitors.

Government intervention in international markets hurts business and discourages economic growth. When a country slaps protective measures on its trade policy, it is probable that other nations will retaliate in kind, leading to increased consumer prices. Impeding free trade is very dangerous policy when international economies are so intertwined. We only have to look to the recent past for evidence of this. Last September, Obama placed a 35-percent tariff on tire imports from China. This was effectively a tax on Americans who drive cars, who were predicted to experience a 20- to 30-percent increase in the cost of tires as a result of the policy. China responded the following Sunday in retaliation by placing its own tariffs on imports of American poultry and automobiles.

I have an alternative suggestion: Instead of banning foreign imports, each U.S. senator should complete a refresher course on macroeconomics before assuming office. Based on Sen. Johanns’ proposal, I see no evidence this the former secretary of agriculture ever took one in the first place.

The U.S. Postal Service doesn’t want to deliver mail on Saturday anymore. Facing a large budget gap, the USPS is lobbying Congress to allow the agency to deliver mail only five days per week, a cost-cutting measure it has advanced for more than a year.

As I said back in August, the Postal Service’s decline seems to be inevitable. USPS is subsidized not by tax dollars but by regulatory capture: The Private Express Statutes limit private mail carriers from delivering mail to mailboxes and from charging less than $3 to deliver a letter.

Luckily for the USPS, it doesn’t have to compete in a free market, where its work schedule would be drastically insufficient to compete successfully with others. UPS and FedEx don’t have the same regulatory luxury, and consequently have some locations that are open 24 hours a day and on weekends, because that is what customers want. Private delivery companies also price shipments based on distance traveled, which makes more sense than the flat rate that the USPS levies for first-class letters. Mailing a letter to one’s landlord in the next town over has a lower marginal cost for a postal service than mailing a letter to a cousin across the country, but first-class USPS prices don’t reflect that.

Unlike private delivery services, the USPS does not face direct competitive pressure, and so has found it difficult to adjust to changing technology and market conditions. This has left the agency well past its prime, if that prime ever really existed. James Bovard pointed out in a review of USPS history that government-provided postal services were originally conceived as revenue generators, and that regulators had to actively stamp out competitors who were providing more reliable, trustworthy services at lower prices:

The early colonists inherited the tradition of government postal monopoly from Britain. In sixteenth-century England, the Tudor monarch outlawed private post in order to hinder communication between potentially rebellious subjects. Later, the monopoly was justified as a revenue raiser for the Crown. But even 270 years ago, private carriers were breaking the law and providing the public with better service than the government:

In 1709, Charles Povey used bell ringers to collect letters, which he delivered anywhere in London for a halfpenny. The Post Office prosecuted Povey, who was convicted and fined, and then it adopted his system for the government service.[2]

Since 1709, not much has changed in how governments run their postal monopolies.

In 1789 the Constitution granted the federal government the right to set up a post office, but it did not prohibit competition from private services. However, the first postal act, in 1792, did effectively outlaw private competition.

The first postage rates were extremely high, as Congress tried to force easterners to subsidize the more expensive service to outlying settlements on the western frontier. As the Postal Service’s official history notes, “Until 1851, the cost of sending a single sheet letter 40 miles was either 6› or 8›. When the letter traveled over 400 miles, it cost 25›. These prices doubled, tripled, or quadrupled with each additional sheet.”[3] In 1843, “it cost 18 1/2› to send a letter from New York City to Troy, New York, but only 12 1/2› to send a barrel of flour the same distance.”[4] The government charged 25› to deliver a letter from Philadelphia to New York.

Henry Wells (later of Wells-Fargo fame) entered the market, charged 6› a letter, and delivered faster.[5] In the Boston area alone, over a hundred private express companies carried the mail. Private companies delivered letters directly to addressees’ homes, while the government still required people to pick up their mail at the nearest post office.

As private business flourished, government postal revenues declined. The postmaster general admitted in 1843 that many people thought the government’s monopoly was “odious,” but insisted that it had to be preserved for the good of the country.[6] In 1845, Congress tightened the laws prohibiting competition and increased the penalties for violators. In 1851, Congress lowered postal rates and began providing a direct subsidy for postal operations.

An 1844 competitor, the American Letter Mail Company, was founded and operated by notable proto-libertarian Lysander Spooner. This competition was so effective and efficient that “The end result was that in 1851 Congress again had to lower the postal rates to a uniform 3 cents” from previous prices “of 18 3/4 cents or 25 cents.” Lawmakers simultaneously put Spooner out of business for good by strengthening the USPS monopoly laws.

The notion that government postal services may have been necessary to provide a crucial public service in the absence of trustworthy private alternatives doesn’t stand up to the historical record, and is even less justifiable in today’s electronic information age, in which private companies are the primary means by which most people send and receive sensitive communication.

Missourians — and the United States in general — would greatly benefit if the USPS lost its monopoly protection so that costs could be reduced through the efficiency of competitive pressure, rather than through elimination of services.

Mayor Francis Slay is once again talking about St. Louis city and county once again considering the idea of reuniting in various capacities. I totally support the readmission of the city into the county, where it would be the 92nd, and largest, municipality. This would have two primary results, in my opinion: lower taxes in the county and fewer employees on the public payroll in the city. Both of those are, obviously, very good things to me. For a bit more detail, check out this op-ed on the issue.

Also in the Post, the county police chief is concerned about police officers within the county being properly licensed. Now, as regular readers know, I hate occupational licensing, but police work is one of the exceptions for me. Doctors (including dentists), cops, and (most) nurses are the main exceptions on my list to keep full licensure. Lawyers, accountants, and some other medical professions could keep some of it, too, but at a reduced level of licensing. (Lawyers should be licensed more like CPAs. Basically, if you can pass the test — in this case, the bar — you are in.) But back to the police.

I don’t necessarily think licensing agencies instead of individual police is the answer, but I’m not sure. If agencies are licensed, rather than the police themselves, that might reduce the ability of individual police to market themselves and change jobs. Also, if the citizens of small municipalities want to get rid of their own police forces, they are fully capable of doing that now via contracting out the service or disincorporation. As much as I would like to see many of those cities do just that, I don’t support forcing them if their citizens don’t want to. I admit I need to research this issue more, but at first review I don’t see positive change coming from just changing the licensing system.

Are farm-to-school initiatives a response to parents’ and students’ demand for local food? This program coordinator in the Oregon Department of Education doesn’t seem to think so. In her interview with the Oregonian, she talks about local food as if it were something constituents had to be cajoled into accepting. Regarding students, she said, “We’re going to [...] educate students to support those changes in the cafeteria,” implying that students don’t support the changes now and wouldn’t come to support them on their own, even once the new policies are established. This reminds me of the coaching some parents give little kids during holidays: “Tell Grandma how nice the toy is and that you like it soooo much!” If local food preferences bring superior fare to cafeterias, as advocates claim, students should welcome the tastier meals without explicit instructions.

Perhaps their parents are more enthusiastic? From the program coordinator’s description, I don’t think so. She suggests that parents, too, require a lot of education. When asked whether parents are learning about local food, she responds:

Not as much as they could be or should be. [...] They need to go to school lunch and share it with their kids [...] And then parents and caregivers, if they could purchase, serve and talk about Oregon foods with their family, phenomenal.

She would love it if parents could do those things, meaning that they aren’t doing them already. The parents have to be won over. It’s a far cry from, “They are educating me with their phone calls and petitions begging for more local food” — the reply I would expect if local food preferences really were implemented at the behest of parents.

I don’t blame Oregonians for their indifference. After all, as the program coordinator correctly states, local foods are not necessarily healthier than foods from other places. Parents might be more supportive if schools focused on procuring nutritional meals, without regard to locality.

One policy I especially hope Oregon will abandon is the preference that the program coordinator affirms for canned and frozen foods from local sources. Local canned and frozen foods have no nutritional advantage over canned and frozen foods from far away; you can’t argue that one is fresher than the other.

Charles Jaco just finished taping an interview with Show-Me Institute research assistant John Payne, about the Metro mass transit system in the St. Louis area. At least some portion of it is slated to appear in tonight’s FOX 2 news broadcast at 10:00. Be sure to tune in. [UPDATE: The video is now online.]

For more information about St. Louis transit, read Payne’s recent op-ed about MetroLink, which also ran on the Riverfront Times blog and in the St. Louis Business Journal. His commentary attracted some attention from a Metro board member, who responded on our blog, followed by a short rejoinder by Payne.

The Show-Me Institute ran a trio of pieces in October 2008 about transit funding in St. Louis, considering the problem from different angles. We’ve also been fortunate enough to publish a few pieces analyzing Kansas City light rail plans, by transit scholar Randal O’Toole and policy analyst David Stokes. Although these latter pieces considered the issue specifically as it relates to the Kansas City area, many of the broad observations about light rail costs and efficiency apply just as well to St. Louis.

I wanted to note that Alderman April Ford-Griffin called me today to discuss the proposed open space map that NorthSide Regeneration Regeneration LLC submitted as part of its plan for a $8.1 billion development of the city of Saint Louis.

I have written about how owner-occupied homes appear to be slated for open space, as are some area businesses.

When I asked Ford-Griffin about the fate of Fehlig Brothers Box & Lumber, a 137-year-old area business that, according to NorthSide’s plans, will become open space, she said that much detail can’t be read into the company’s plans.

“That is a concept,” she said. “That is not a document where you take it and say this is what’s going on this block and this is what’s going on that block,” she said.

You can read the updated report, with Ford-Griffin’s comments, here.

The homeschooling family I wrote about here and here is now featured in the New York Times. The article recounts the events that led the family to leave Germany and seek political asylum in the United States:

Working with a curriculum from a private Christian correspondence school — one not recognized by the German government — they expected to be punished with moderate fines and otherwise left alone.

But they soon discovered differently, he said, facing fines eventually totaling over $11,000, threats that they would lose custody of their children and, one morning, a visit by the police, who took the children to school in a police van. Those were among the fines and potential penalties that Judge Burman said rose to the level of persecution.

Reading these details of their story reminds me how fortunate homeschooling families in the United States are today. Some states impose more regulations than others; depending on where they live, parents may need to hold college degrees, to submit their curriculum for approval, or to agree for their children to take standardized tests. But it’s unheard of for the government to remove children from their homes forcibly and send them to school.

A sign of U.S. homeschoolers’ freedom is that when legislation is introduced that would affect them, the right to homeschool is usually not at question. And, secure in their ability to homeschool, parents can ask states for more than the right to be left alone. For example, homeschooling parents in Utah are currently lobbying for public schools to include homeschoolers in extracurricular activities. In Germany, parents fight to take their children out of the public schools; permission to bring them back for activities is the least of their concerns.

Supporters of homeschooling might point out that homeschooling can become an issue in divorce cases like this one in Missouri that Caitlin Hartsell discussed. It’s true; divorce courts do sometimes order a parent to send his or her children to school instead of teaching them at home. However, these decisions are not comparable to the harassment homeschoolers face in Germany and other countries. If divorced parents disagree about their children’s education, whatever the court ruling is, one parent will end up better satisfied and the other unhappy. Parents who want to send their children to public or private schools can be disappointed by these orders, and parents who want to homeschool are not immune from unfavorable divorce court rulings. What matters for homeschoolers in general is that divorce decisions apply only to individual families, and do not create new policies for everyone else.

The U.S. Supreme Court heard arguments today in McDonald v. Chicago, otherwise known as the Chicago gun ban case. The court’s decision in this case will determine whether the Fourteenth Amendment means that the Second Amendment right to bear arms should prevent state and local governments from prohibiting citizens’ possession of functional firearms in their homes.

This is a very, very important case — but maybe not for readily apparent reasons. The central question is not so much the meaning of the Second Amendment — that was largely decided by last year’s D.C. gun ban case. Rather, this case concerns the meaning of the Fourteenth Amendment.

When it was drafted and ratified, the first section of the Fourteenth Amendment was intended to do several things: First, to ensure that United States citizenship would be universal for those born within the country, and that no state could deny state citizenship to someone who is an American citizen; this was a pressing concern given that the recently Confederate states might well have denied citizenship to freed slaves. Second, to ensure that all citizens were assured of a certain baseline of liberty that could not be denied by any state or local government, because some state governments, when left to their own devices, had previously refused to offer the same protections for liberty enshrined in the U.S. Constitution. Under the new amendment, states were required to afford all U.S. citizens the “privileges and immunities” protected under the U.S. Constitution — including a right to travel freely across state lines, a right to earn a living in a common profession, etc. And, finally, the amendment was intended to ensure that all citizens must be treated equally under the law, so that no state could fashion laws that would discriminate against newly freed slaves or other “outsiders.”

Very shortly after the amendment’s ratification, however, the U.S. Supreme Court handed down The Slaughterhouse Cases. At issue was a law in New Orleans that created a butchering cartel controlled by the city, limiting the number of people permitted to practice the profession. The law made it so that citizens could only practice the profession with the city’s permission, and then only at a time and place of the city’s choosing. The city’s butchers sued, claiming that the Fourteenth Amendment prevented a state or local government from infringing upon their right to practice their profession. The Supreme Court responded with a ruling that the vast majority of legal scholars now consider one of the least-defensible in the court’s history (see p. 11 of the brief in the preceding link).

The court couldn’t negate the provision establishing universal citizenship, but its decision in Slaughterhouse completely eviscerated (so to speak) the other provisions of the first section — leaving the states free to limit access to professions, set up sweetheart deals for favored business interests and industries, institute poll taxes or other requirements that disenfranchised targeted segments of the population, and pass the Jim Crow–era segregation laws. Had the Fourteenth Amendment been properly applied from the outset, there might have been no need for a civil rights movement because segregation would never have been permitted in the first place, and freed slaves (as well as new immigrants) would have had easier access to self employment in entry-level professions.

Over time, the Supreme Court realized the evils that states were perpetrating against their citizens and so they came up with the doctrine of “substantive due process” as a way of selectively applying the Bill of Rights to strike down illegitimate state laws. It’s an absolute legal fabrication, but it has allowed the court to address issues of constitutional freedom in the way it has seen fit, without admitting that the court got Slaughterhouse wrong. So, almost the entire Bill of Rights has now been “incorporated” into the idea of substantive due process (meaning that 140 years later, the court has almost completely accomplished the original purpose of the Fourteenth Amendment), but several of the most important “privileges and immunities” — such as the right to earn a living — remain on the outside looking in. For whatever reason, the court has continued to hesitate in taking the final, proper, liberty-respecting step.

Taking that step would mean that federal courts could strike down state laws in violation of the privileges and immunities that have been neglected for all this time – but that is not only what the Constitution requires, it is inherently a good thing for liberty! Getting the history and constitutional theory correct would simply re-anchor the methods of analysis to their historical underpinnings, instead of allowing the unprincipled free-for-all that sometimes becomes apparent in the way the court addresses constitutional freedoms. I can’t help but think it would be a good thing, both at the philosophical and the practical level.

I used the “Show Me: The Spending” web tool to determine how much money that government agencies in Missouri spent on ”Property Damage Settlements” during the last decade. From the resulting graph, we see that the Office of Administration (in blue) and the Department of Transportation (in purple) are responsible for most of the expenditures. In fact, together they account for 98.92 percent of the total — $10,113,764.76, adjusted for inflation.

Trend of “Property Damage Settlements” by Government Agency (2009 Dollars)

The Office of Administration consistently spends $437,964.86 per year on average. The Department of Transportation’s trend of spending, however, is more volatile. It spent $77,637.71 on property damage settlements in 2007, $2,282,899.37 in 2008, and $6,500.00 in 2009. MoDOT made the largest single payment to a vendor in this category in 2008, in the amount of $1,920,556.60.

“Property Damage Settlements” for MoDOT in 2008

Why are these state agencies spending so much on property damage settlements? What property are they damaging, and why do Missouri taxpayers have to cough up $10,113,764.76 for it?

On Feb. 23, I wrote about the proposed “open space” that NorthSide Regeneration LLC, has planned for the company’s $8.1 billion development of the city of Saint Louis. According to NorthSide’s plans and other publicly available documents, at least four owner-occupied homes are slated for open space.

When discussing the possibility of eminent domain, NorthSide representatives, including developer Paul McKee and attorney Paul Puricelli, have stated that eminent domain won’t be used to take owner-occupied residences. The specificity of the qualification “owner-occupied residences” should make anyone looking into the project take pause. After all, there are many types of properties that are important to lives and livelihoods that aren’t owner-occupied residences — for example, businesses. In the latest Show-Me Report, I profile Fehlig Brothers Box & Lumber, a business slated for open space.

The city of Duluth, Minn., made the band Wilco and its members honorary citizens. Not to be outdone, the city of Madison, Wis., my stamping ground of 6 years, has proposed to do the same thing. Last week, Alderwoman Satya Rhodes-Conway and 10 cosponsors filed a resolution in the Common Council in Madison. It goes like this:

WHEREAS, Wisconsinites generally have a love/hate relationship with all things from Illinois but the sold-out crowd at the Overture Center on February 20, 2010 had only love for this band from Chicago; [...]

In an article in the Duluth News Tribune, Madison Mayor Dave Cieslewicz pokes fun at the situation. I realize that he’s joking, but there’s a sad element of truth in his statement.

“If it’s a typical resolution for the city of Madison, it will be referred to 20 different city committees, it’ll be amended and we’ll probably vote on it in August 2012,” the mayor said.

On the one hand, although the Common Council could spend its time more productively, at least it isn’t passing resolutions that limit personal liberties or promote fiscal irresponsibility.

However, as Sarah Brodsky has communicated on this blog, legislating state symbols encourages people to ask the government to affirm their preferences. I happen to enjoy listening to Wilco, but why should it matter to me that Ald. Rhodes-Conway and Mayor Dave do as well? In a recent blog post, Mayor Cieslewicz confesses that he doesn’t like John Mayer. Does this mean that I shouldn’t like him too? If John Mayer is barred from becoming an honorary citizen in Madison, does he face a barrier to performing concerts in Madison?

I hope that Mayor Cieslewicz is only joking about this, too:

There are also questions being raised about where honorary citizens would be allowed to live. Some have suggested a referral to the Zoning Code Revision Advisory Committee to mull that one over, though the City Attorney has hinted darkly that he won’t allow it.

I hope that these cities stop short of providing tax advantages to their honorary citizens. I wouldn’t be that surprised if they did, though; Midwestern states have already demonstrated a willingness to bend their tax codes in an effort to attract glitz and glamour.

Today’s Southeast Missourian asks the above question about Missouri transportation funding in an editorial (link via a certain Mr. Combest). They leave it as an open-ended question, asked as a follow-up to a presentation by the Missouri Transportation Alliance at a recent forum in Cape Girardeau.

This is one question for which the Show-Me Institute has some answers. And, yes, those answers might have to include a gas tax increase. They should also include a dramatic expansion of tolling — and, if that tolling is done via public-private partnership (PPP), then it wouldn’t first be necessary to amend the state’s Constitution (at least, according to MoDOT’s opinion). The important thing, in my opinion, is to keep any tax increases as analogous as possible to user fees, like the gas tax, and away from general taxes that move in the wrong direction by externalizing internal costs. We should be striving to internalize costs to the greatest practical degree, such as through gas taxes, tolling, and license fees, not the other way around.

For more information, read the op-ed I wrote on the subject of private financing for Missouri transportation, the related testimony I provided, and our primary studies of tolling, PPPs, etc.

First, I’d like to thank Hugh Scott for his response to my op-ed arguing against expansion of the MetroLink system. I doubt we will ever see completely eye to eye on the subject, but an informed dialogue can still be illuminating for everyone involved.

Before I respond directly to any of Scott’s points, let me just clarify something that may have been unclear from the op-ed (a 700-word format does not allow for full explanation of every point): I was not arguing against the proposed half-cent sales tax. My point was that we should not expand the MetroLink system into areas with relatively low population densities because the lines would have low ridership and be even more heavily reliant on tax dollars than current lines.

Scott observes that the flexibility of buses is a disadvantage as well as an advantage, a point well-taken. Light rail is undoubtedly better than buses when it comes to understanding routes. However, the question is whether that disadvantage outweighs the advantages of flexibility and lower costs that buses provide, and my answer is that it depends on population density. The denser an area, the more rail should be preferred to buses, and vice versa.

With regard to the possible lines of MetroLink expansion, Scott is perfectly right that Metro does not plan on expanding the system without federal funds to diffuse the costs of constructing the line(s). However, even if a new line would not cost area taxpayers a cent to build, it could still be a bad deal for them if very few people rode it and they were then on the hook for operating costs. Again, my argument is that the best method of forecasting ridership is through population density. Aside from the north-south corridor, none of the proposed lines come close to matching the densities found along the current lines.

Finally, I agree that MetroLink performs well against the light-rail systems of other cities, but that is a relative metric when the question should be an absolute one: Do the benefits justify the costs? Even existing lines do not meet the profit-loss test used in the private sector, so light-rail systems are not efficient by our most common metric for success. Perhaps we need another absolute standard we could use to determine which light-rail lines are successes and which are failures, but for now the best that can be said is that it is unclear whether the benefits of MetroLink expansion would outweigh the costs.

The Show-Me Institute recently released an op-ed by research assistant John Payne titled, “Adding New MetroLink Lines Too Costly, Inefficient.” The piece appeared on the Riverfront Times blog on Feb. 15, along with comment from the paper, and ran in the St. Louis Business Journal on Feb. 19.

We recently received a thoughtful response from Hugh Scott, III, who has been a member of Metro’s Board of Commissioners for nearly five years, commenting on Payne’s op-ed. In the interest of furthering dialogue about important issues like public transit funding, his entire letter appears unedited below:

As even noted anti-tax advocate Glenn Beck acknowledged on his show yesterday, (2/22/10) some taxes are necessary. In the case of public transit, I would maintain that taxes supporting these systems inure to the economic benefit of metropolitan areas. Public transit enables people to commute to jobs and transit centers provide a critical mass of customers for businesses located near them. Not only does Metro employ 2000 St. Louisans but it assists countless thousands of workers to get to jobs in healthcare, retail, manufacturing and distribution. For many of these commuters, no public transit would mean no job.

Show-Me Research Assistant John Payne misses the mark in his article, “Adding New MetroLink Lines Too Costly, Inefficient.” While he tacitly agrees that public transit is important for our community, he advocates opposition to the proposed referendum for a ½ cent sales tax on the April ballot. The focus of his criticism is on the part of the proposal which suggests some the addition of light rail corridors. Extending light rail is however, not the major thrust of the proposal.

Throughout its history, BiState (Metro) has not had sufficient dedicated taxes to support its operations. It has relied on the beneficence of the City of St. Louis and the adjoining Missouri and Illinois counties, the States of Missouri and Illinois, and the Federal government to provide operating subsidies. Some of these entities have been generous over the years. Others have been quite parsimonious. In all cases, awarding of funds is arbitrary and Metro must beg for money from its stakeholders on an annual basis. If Metro is expected to operate in a business-like manner, it must have a stable reliable source of revenue. This, in fact, is what the April 6 ballot proposal is really all about.

When the last tax measure failed in a very close vote in November of 2008, Metro was forced to cut 40% of its bus and train service and 400 staff members. This resulted in the loss of at least 5000 jobs in our community. While half of these cuts were quickly restored due to the receipt of emergency funds from St. Clair County and the State of Missouri, deeper cuts will be necessary if the proposed tax is not approved by the voters. With the approval of the new tax, pre-2009 service will be restored and the current system will be able to operate on a stable financial footing for the first time in memory.

Other short term (1-5 year) priorities include implementation of a bus rapid transit system similar to the “higher speed bus routes” advocated by Payne, adding amenities such as a “smart card” fare system, and beginning planning for more light rail. These programs will be implemented only after the pre 2009 service is in place and only when funds are available. The five year plan does not call for construction of new light rail corridors.

Putting a light rail extension in service will take a minimum of ten years. It will also require large amounts of federal funds in order to build. Metro does not believe that the community should “foot the bill” for any Metrolink expansions without the majority of the funds being provided by the federal government. Instead Metro is asking for funds to begin the planning process so that when federal funds become available for light rail expansion, St. Louis will be in line. It only makes good sense to spend some money on planning. Otherwise, federal money for light rail will go to other cities and St. Louis will be left out.

Payne tries to make a case for increased bus service as opposed to more light rail. He asserts that buses are a better form of transit because they are cheaper and provide more flexible route opportunities. This was precisely the argument made by former BiState CEO, Col. Rudolph Smyser in the 1960’s when he ordered the shutdown of the last of the street car lines in St. Louis.

While it may be argued that buses are superior to light rail from an economic standpoint, flexibility of routes is precisely the problem with buses. Businesses which might prosper by being near a transit stop do not locate near bus stops because a bus stop might easily move to another street or corner. Many non-transit dependent customers will not ride buses because it is often difficult to know where the bus is going. With streetcars, subways and light rail, one need only look at a map showing landmarks or look down the track to know where the car is headed.

In some ways, Metro has successfully mitigated the confusion caused by changing bus routes by creating a hub and spoke system integrating buses and light rail. Thus a person who boards a bus that says “Clayton Station” can expect to travel to the Clayton Metrolink station. Similarly, a passenger who boards our most heavily traveled bus route, Grand Avenue, can be confident the bus will travel north or south on Grand without deviating. In a sense, our increased market share in buses may be in part attributed to our lack of flexibility with routes not the reverse.

In conclusion, Metro has built a world class transit system which integrates bus and rail service quite successfully. While our population density might be low for light rail travel our market share compared to peer group cities is very high. Light rail continues to gain popularity from non-transit dependent riders and nationally, our market share is in the top three cities in our ten city peer group. The April ballot proposal is about preserving this fine system. Our first priority must be to stabilize the existing system. Future planning is always important but it comes further down the list of priorities.

A map of the schools and their proposed status, according to the plan released by the Kansas City School District.   Click to enlarge.

Superintendent John Covington has a new vision for the Kansas City School District, and it involves halving the number of schools in the district from 61 to 31 or 30. Initially, the “rightsizing” plan sounds drastic, but Covington is adamant. The school district, which had 75,000 students 20 years ago, now has only has 17,500 students and 50-percent occupancy.

The plan (from what has thus far been released) may bring a much-needed change. By consolidating facilities, the school district can better allocate funds tied up in buildings and redundant administrative costs. The district has faced low test scores and budget deficits, and officials hope that this radical change will improve both. As for the cost:

As it stands, the District receives about $12.8 million net monthly less than what that it needs to sustain operations. Fortunately, the District currently has about $91.2 million in its operating fund to coverage the shortage. The Right Sizing plan will drastically reduce costs and wipe away the $12 million deficit. As with your personal budget, the District’s goal moving forward is to not spend more than the revenue it receives.

Given the reduction in student population, rightsizing looks like it could be a step in the right direction, but a full analysis will have to wait until more details are released.

The purpose of this post is to walk through the math that Dr. Joseph Haslag and Abhi Sivasailam used in their case study, “Previous Estimates Overstate ‘Fair Tax’ Rates, Harms,” in an effort to be completely transparent.

First, they estimated the average family size in Missouri:

average family size = (size of Missouri population) ÷ (number of resident filers)

= 5,778,901.81 ÷ 2,626,773.55 = 2.2

Next, they estimated the size of the average rebate value, using the federal poverty threshold approximation associated with a family of 2.2, which is $15,393:

average rebate value = federal poverty threshold approximation × sales tax rate proposed in HJR 36

= $15,393 × 0.0511 = $786.58

Then, they estimate the cost of the rebate system, which is equal to the amount of rebates awarded:

(average rebate value) × (number of families qualified for the rebate) = (cost of rebate system)

$786.58 × 2,626,773.55 = $2,066,167,540

Lastly, they compute τ, the revenue-neutral tax rate:

τ = (government revenue + cost of rebate program) ÷ (aggregate personal consumption)

τ = ($7,117,761,408 + $2,066,167,540) ÷ $158,531,333,333 = 0.0579313171 = 5.793 %

where government revenue equals the sum of individual income, corporate income, and sales taxes.

We see that the size of the tax base, β, decreases if the amount of exemptions increase. This indicates that the sales tax needs to be assessed on a broad base in order to for the rate to remain low. By decreasing the number of exemptions that exist in the status quo, Missouri can establish a sales tax rate that’s lower than other estimates have suggested.

In their case study, Haslag and Sivasailam explain that expanding the list of services that are taxed would not result in a dramatic increase in the cost of living. In a previous post to this blog, Sivasailam elaborated on this concept:

[I]t’s important to understand that a change in the tax code implies a change in incentives. People and firms alike respond to these changing incentives in many ways, including altering their supply and demand of goods and services. With that in mind, the claim that the prices on all goods and services would increase by the tax rate is misleading.