A Promising Sign Regarding Sign Desecration

Results of a new poll of North Carolina voters shows that when it comes to provisions of a new billboard bill, legislators who have felt insulated may finally be risking support at the ballot box.

As smoothly and many feel deceptively crafted as SB 320 and HB 304 were  by the billboard lobby, North Carolinians are overwhelmingly opposed to its provisions.

But bi-partisan voter opposition to bills that favor out-of-state billboard companies isn’t new.  More telling this time is that the opposition is strong regardless of gender and geography.

Historically, men have been less protective of scenic preservation but this time they poll even more opposed to these bills than women.

Opposition to provisions such as permitting digital even where they are now prohibited runs 2 to 1 in the northeast and southeast and 3 to 1 along the mountains and metro areas where cities have already permitted them.

Of course, opposition is also high across the age groups billboarders and their remaining advertisers are trying hardest to reach.  The poll shows 5-to-1 opposed for those between age 30 and 45, increasing to 8-to-1 opposed among those age 46-65.

Of particular note to the few advertisers still using billboards is the high turn-off to turn-on ratio they have among consumers they are hoping to reach.

But most revealing is how voters plan to hold supporters accountable.

For a decade now, studies have found that elected officials are rarely held accountable at the ballot box, in part, because “the voices of American citizens are raised and heard unequally,” opening the door for special interests.

This is why a tax loophole, one of the six largest, permits billboard companies to escape paying their share of taxes by claiming their profits are only “rents.” 

Ironically, “rent-seeking” is also the word economists use to describe when companies such as these work the political system to gain favorable treatment rather than working to create economic value in the marketplace.

Similarly, this new legislation would also create another big loophole, permitting thousands of illegal billboards to become legal overnight, further desecrating the North Carolina brand.

To further assault North Carolina taxpayers, if passed and signed by the Governor, this new legislation will also guarantee billboard companies millions of dollars for each one that is removed when it comes time to widen the roadway.

This, even though the courts have ruled the billboards parasitic property because they would have no value in the first place were it not for the taxpayer funded roadways.

However, according to the poll, Tar Heel voters recognize that this is essentially a tax increase on them to benefit out-of-state billboard companies, not exactly the kind of tax-shifting voters like.

This provision in the proposed North Carolina legislation made voters overall less likely to support a legislator who votes for the bill by almost 5-to-1, including 4-to-1 among Republican voters.

If voters remember and follow through come election time, this would represent a sea-change where elected officials are held more accountable for actions they felt were safe in the past because they harmed only those who were not their constituents.

It is a mistaken calculus often used by organizations such as chambers of commerce and more passively, some tourism organizations, which align with the 1/5th of Carolinians who ally with the billboarders, including some doing so in direct opposition to the wishes of businesses and residents in their communities.

This latest poll may reveal not just overwhelming opposition but emergence of a resentment that could drive North Carolina voters to ban billboards altogether one day as voters have in some other states.

Changes at the Margins for Local Businesses

A new study published last month by researchers at Ohio State University Fisher College of Business found that finally requiring online retailer Amazon to pay state and local sales taxes in some jurisdictions results in a two percent shift in purchases back to local “brick and mortar” stores.

The study confirms several things about the effects of such taxes even at the margins.

One of my ongoing challenges during a four-decade career in community marketing representing three different areas was trying to help those in local government understand that increasing a sales tax, even by a point, is not free money.

Many elected officials were quick to grasp that at the margins even a one point increase has consequences.  It was the professional administrators preoccupied with only “pie-slicing” who were often the thickest.

Maybe price elasticity isn’t taught in public administration or public policy schools.  One manger even blew off the $40 million my organization spearheaded in annual tax revenue for local governments at the time by quipping that his job was only to worry about how it gets spent.

He went on to say to a room full of onlookers that revenue is  generated only when elected officials increase the rate of taxation.

This man was the quintessential poster child for why a fifth of small enterprises obsess about taxes and ridicule peers who support increases even when assured the expenditure will be used to offset any impact.

When I retired almost five years ago, a friend and former elected official suggested to the Sanford School of Public Policy at Duke here in Durham and the Institute of Government in nearby Chapel Hill that they seek my pro bono advice on how to better integrate revenue-generation in curriculums, but there was no response.

A momentary breakthrough in Durham, North Carolina, the last stop in my now-concluded career was when the DMO there commissioned for the benefit of local and state officials an economist to compute the impact of sales taxes on lodging, retail, foodservice, transportation and entertainment, all industries in the tourism sector.

It was beneficial and hailed as a best practice.  Some took note of recommendations on how to offset such increases.

But it was not enough to relieve the preoccupation by some elected officials and administrators with budget pie-slicing, a distraction from what should be an equal concern with revenue-generation and cost-benefit metrics.

Of course, there are also a few surprising enablers.

Ironically, the very businesses who oppose levying a tax on their own customers are often the most engaged in pushing for government incentives or tax breaks or even increased taxes to be levied on some other businesses but for their benefit.

Too often the governments paying heed to these requests can’t seem to be bothered to detail stipulations to fully benefit the local economy and ensure that these breaks aren’t used to displace business from existing concerns.

So subsidized businesses often seem to be invested instead in securing non-local vendors or formula stores that will hollow out the very local, independent concerns that make a place a place.

This isn’t the only way local and state governments seem aloof to the plight of truly local businesses, most micro businesses or entire organic districts.

Often without any strategic plan for enabling these place-based assets so critical to sense of place, they enact ordinances that often undermine them by driving up the cost of doing business such as parking and rental rates.

Recent studies show that these factors are of far greater concern to truly local businesses, more than most concerns, especially regulations.

Even leveling the playing field after granting 15 years of de facto tax advantages to online retailers, won’t be enough. While restoring tax coffers, the change has ten times the benefit to other online retailers than it will to local “brick and mortar” stores.

Local governments are the beneficiaries of local, independent businesses because when leveraged by community marketing they are far better for visitor-centric economic and cultural development than formula stores, but their ecosystem is oh so fragile.

This is why it is so bewildering when those in communities such Durham where sense of place still thrives, are so oblivious to the need for indepth strategic plans to guide the nurturing of pillars such as urban forest, local-independent retail, wayfinding and general upkeep.

One was done here for the cultural aspect at the insistence of Durham’s DMO when a new tax on visitor businesses was sought.  But plans, of course, amount to nothing without aggressive, energetic and disciplined long-term execution.

Well-meaning elected officials need to connect the dots for themselves and administrators between these factors, revenue optimization and quality and sense of place – before it is too late.

The $7 Billion Cheeseburger

Nearly two-thirds (63%) of spending on public benefits goes to working families, according to a study released last week by researchers at the University of California and the University of Illinois.  These families make up 73% of enrollments in these safety net programs.

Working families are defined as those where at least one member is working.  While probably unintended, low wage industries are shoving costs off on to government, which is one of the rationales behind passage of the Affordable Care Act.

A high proportion of these low wage workers - a whopping 87% - do not receive health benefits.

In the case of fast food giants, more than half of their front-line workers, including the 28% fortunate enough to get 40 hours of work a week, are enrolled in one or more public assistance programs.

This is twice as much compared to 1-in-4 Americans nationwide.

This amounts to a $7 billion taxpayer subsidy each year for fast food businesses alone.  The proportion of Americans in low wage jobs has ballooned to 4-in-10 nationwide, according to another study.

Yet another recent study of U.S. food policy shows that “…huge subsidies are lavished on crops that become the ingredients for highly processed foods — including “junk” foods,” and other high margin staples in the fast food business model.

The result is a significant part of the $11 trillion diet-related heath issues and lost productivity is pushed off on taxpayers and higher premiums for those lucky enough to have health insurance.

Another report finds that the agriculture subsidy per taxpayer supports just over half an apple compared to 20 Twinkies, a junk food favorite where 17 of the 37 ingredients are taxpayer subsidized elements directly related to obesity, which burdens the economy with $150 billion in hidden costs annually.

Fast food giants and suppliers also make up 1-in-4 of the top 100 businesses keeping outdoor billboards on life support ever since use by tobacco companies were outlawed.

There is now an established link between prevalence of outdoor billboards and obesity.  And billboards themselves require the sacrifice of trees and vegetation, robbing taxpayers of not only these publicly owned assets but their public health benefits, such as screening noise and particulates as well as purifying air and storm run off of pollutants.

All of this amounts to a public subsidy of an unsustainable business model that relies on subsidized ingredients paying workers as little as possible while letting taxpayers pick up the costs.

Recently, it was estimated that for fast food companies to pay a livable wage it would require adding only 68 cents to a popular hamburger, but economists countered that to please investors, the companies would most likely just trim labor costs.

The not so veiled threat is that if required to do the right thing, they would hire fewer people, cut hours and push even more costs off onto the general public and taxpayers.  It is not unlike the hubristic mentality that just ripped $24 billion out of the economy in 16 days.

This is the same threat some of these businesses make about the Affordable Care Act and the requirement for health insurance to lower the burden on taxpayers.

I’ve personally sat on legislative committees for two state restaurant associations.  I’ve learned that there are many good people who want to do the right thing in these types of businesses but they are shouted down by small cadres of condescending extremists all too aware that they can’t go it alone or less honorable competitors would cut them to pieces.

So this is where the free market breaks down because it rarely requires full-cost accounting.  The minimum wage today is much lower than in 1955 when adjusted for inflation.  We’re paying for the cost of subsidized burgers and fries whether we like it or not, whether we realize it or not.

The low wage, taxpayer subsidy is not unique to fast food businesses, that’s just where I have the most familiarity having worked for forty years in visitor centric cultural and economic development.

Similarly, a report updated last spring found that in another segment of the tourism sector, a typical 300-employee Wal-Mart Superstore shifts more than $5,815 per employee onto taxpayers each year or a total of between $1 million and $1.7 million in corporate subsidy per store.

The tourism sector cannot make excuses by pointing just to how many employed there are students.  Nearly 7-in-10 frontline fast food workers are not in school and are single or married adults with and without children.  Two-thirds rely on that income as an essential component of family income.

In my opinion this status quo isn’t working.  We need to experiment with things like requiring health insurance and a livable wage rather than pushing costs off on taxpayers where anti-government types want to “drown it in a bathtub” as a way of controlling costs.

The “drowning” metaphor is horrible when people’s lives are at stake. It is also bad for business.  I’d rather start paying the “real” costs of things even if it takes a while to get things right.

If you missed it, the reports cited are linked where noted in the text.

Don’t take my word, click through and read for yourself, maybe while eating at a fast food business.  Look in the faces of the people serving you and ask yourself if you would pay a little extra at the counter so they can make a livable wage.

Reflect on the fact that more than 7-in-10 are women, more than 2-in-5 are minorities.  Only 13% receive health benefits through their employer compared to 59% of workforce as a whole.

You’re paying hidden costs in taxes anyway.  Isn’t it time for the free market to incorporate a triple-line approach to cost-benefit analysis?

An $11 Trillion Diet Deficit Hawks Can Munch On

A friend and I have recently started walking an additional 12-15 miles a week up and down the many hills in my neighborhood in Durham, North Carolina.  Coupled with eating out half as much, it not only feels great but researchers note it should be expanding my hippocampus.

This is the part of the brain thought to be the central processing area for memory and learning which gets a workout during the 6 or so hours a day I spend researching and writing essays to post on this blog.

At the risk of offending my Tea Party friends who still can’t seem to come to grips with the fact that health insurance is not only for their benefit but to prevent uninsured costs from being shifted on to other people, I recommend a report published last month entitled The $11 Trillion Reward.

That is how much would be saved each year if Americans just increased their consumption of fruits and vegetables and yes, it would ultimately lower the deficit.  No, I don’t just mean those living in Red States which tend toward higher rates of obesity.

I was only saved from the genetic tendency toward being overweight by the fact that doctors discovered in my early 20s that I can’t metabolize sugar very well, including refined carbohydrates.

If they didn’t make me sick, I’d still be binging on my mom’s homemade cinnamon rolls and a big bag of glazed Spudnuts.

But all my life I’ve eaten way too much red meat, not just because I grew up on a cattle ranch, but because a high-protein diet suits me.  But recently I began to substitute poultry or fish four or more times a week.  I know, not very Idahoan.

The report is not only about quantifying savings if Americans increased our individual fruit and vegetable daily intake on average by 1/12 cups of fruit and a mere cup of vegetable, although just that change would save 127,261 lives a year and public savings of $54 billion a year in medical costs.

The scientists and public policy experts who authored the report include proposals for overhauling our entire public farm and food assistance policies by things like:

• Recalibrating programs to increase R & D and production of fruits and vegetables by shifting incentives to help diversify growers and gearing them to local markets.

 

• Grants to spur greater availability of farmers markets and grocery stores in low-income neighborhoods including moving “helping hand” food programs to more healthy choices.

Don’t go all “nanny state.”

This is simply about protecting innocent Americans from the hidden costs related to the actions of others.

Edmund Burke, considered the father of modern conservatism and a mentor to our founding fathers wrote that “whatever each man can separately do, without trespassing upon others, he has a right to do…”

I agree, and I suppose that means that anyone should be free to binge on whatever foods they wish, and businesses should be free to cater to those binges with junk.

But other Americans should not have to shoulder the costs of healthcare consequences of these binges or their binge enablers nor should my tax dollars be used to subsidize either the binging or the creating of the foods that are binged upon.

According to Joseph Thorndike, head of the Tax History Project and author of a book published this year entitled Their Fair Share: Taxing the Rich in the Age of FDR:

The original Tea Party “was a protest not against taxes but against tax loopholes.”

Shifting costs onto innocent Americans because you are too stubborn to have health insurance or to eat what is good for you, is a huge tax loophole.

Loophole Entitlements And Upward Mobility

Apparently, Republicans aren’t so opposed to “entitlements” after all.

As an Independent, I found it funny that members of that party in national office office suddenly turned against their own proposal to close tax “loopholes,” labeling it as a “tax increase” once it was endorsed by Democrats along with budget cuts as a as a means of reducing the federal deficit during the debate over alternatives to “sequestration.”

It reminded me of a paper I read that was published the month before I retired on the last day of 2009.  The analysis was published by the Pew Charitable Trusts as part of the economic mobility project.

Tax loopholes predominantly favor the wealthy, households that don’t need them.

Beginning in 1974, two years after I graduated from college, the federal government launched a series of initiatives to incentivize personal savings including preparation for retirement beginning that year with Individual Retirement Accounts (IRAs) and followed by legislation to authorize 401 (k) plans in 1978.

In 2010, these and other tax-favored savings vehicles cost the federal government at least $130 billion in 2010, and as much as $360 billion when homeownership incentives are included.

However, those influencing the rules for these vehicles including lobbyists on behalf of special interests have successfully diverted 70% of the benefit to only the groups with the very highest quintile of income, people who had the means to save anyway.

According to the Pew analysis, only 0.2 percent of the benefit goes to the lowest income group.

Lobbyists also game the system on behalf of the beneficiaries of corporate welfare.  For instance, just before I recently cut the cord entirely on subscription television, I watched as one panelist on a news program in North Carolina could hardly contain his disdain, calling it a subsidy for the state to require utilities here to invest in alternative sources of energy.

Neither the panelist nor, apparently, the moderator was unaware that fossil fuel energy has been subsided by taxpayers nearly from its time of origin or that one of the primarily purposes of our country’s huge naval fleet today is to provide security to oil shipping lanes, free of charge.

The only hypocrisy greater than the vehement opposition from oil and gas interests to granting even a sliver of those incentives to benefit alternative energy research is that of politicians and other sycophants such as that panelist.

Personally, thanks to advice early in my now-concluded career from older members of my governing boards, I started almost immediately after they were created to have as much of my income as possible automatically diverted to these tax favored savings vehicles.

However, until I read that 2009 report a few weeks before retiring, I didn’t realize that only a small share of the population did.  A 2007 Congressional Budget Office analysis estimated that only 29% of workers invested in 401 (k)-type plans and only 7% utilized IRAs (4% traditional IRAs and 4% in Roth IRAs.)

The report documented that only one-third of workers under age 30 participated as I did compared to 63% of 45-59 year-olds.  More telling was that while 80% of those making over $80,000 participated, only 50% of those did who earned $20,000 to $40,000.  Participation fell to 20% for those earning less than $20,000.

The CBO report found that about 17% of workers participated in defined-benefit or pension plans.  Thanks to historical overviews such as one in 1991 by Patrick Seburn, an economist at the Bureau of Labor Statistics, we know that pension plans were first initiated in the U.S. for veterans during the Revolutionary War.

One of the very first private sector pension plans was initiated by American Express in 1875, followed by many railroads and utility companies.

By the 1920s, these plans were common and some were administered by labor unions. In 1921 Metropolitan Life Insurance Company innovated the first annuity contracts, making pensions less expensive.

Businesses struggled with pension obligations during the Great Depression of the 1930s, often because they had been under capitalized which contributed to the evolution of federal Social Security as one of the first contribution-based retirement programs.

However, retirement continued to be both/and and by the end of 1960, half of all private sector workers were covered by pension plans.  The demise of these plans began in the Reagan era as documented so well by Rueters journalist and editor Chrystia Freeland in a book published last fall entitled Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.

Following campaign ads in 1984 promising “it’s morning in America again,” pension-related retirement continued to grow for a few more years but soon met its demise as capitalist, public spirited and self-restrained CEOs gave way to winner-take-all leveraged buy-outs and savaged pension plans.

We know now that far from being “morning” this period marked the beginning of a decline in upward mobility and the middle class and a gap in incomes.

I contributed to and participated in both private and public sector defined-benefit pension plans as well as the tax-favored retirement plans that began in the 1970s. Many are jaded on the latter after having much of what they had saved or accumulated wiped out by in 1987 and after.

I know it is vogue for some state governors, especially it seems those who are Republican, to go after pension plans today.  But frankly, as illustrated by the lack of upward mobility and growth of the middle class over the intervening years, I’m not at all sure America wasn’t much better off when defined benefit pensions were nearly universal.

Are you?

Tax-Shift Humor and Climate Change

Distinguished as “systemic causation,” if not direct, in a post last week by cognitive linguistic researcher Dr. George Lakoff, even scientists previously skeptical of climate change at Berkley Earth, who are now able to make assessments as far back as 1753, are confident in the “clear agreement between global land ­‐temperature rise and human-­caused greenhouse gases.”

That’s the same year a 21-year-old George Washington rode across the Blue Ridge Mountains and the upper Shenandoah Valley as an ambassador for the British Crown on a mission to assess the intentions of and convey a warning to the French and their Native American allies along the border of what is now Ohio and Pennsylvania.

Following a route I also partially traveled on one of my four cross country trips over the last three years, Washington cut northwest at the Quaker village of Winchester and up through the Forks of the Ohio River, the site of present-day Pittsburgh.

The fall of 1753 was also when the first steam engine arrived in America.  It doesn’t take a crash course in the Industrial Revolution to understand just how much that single machine has influenced our quality of life, but that doesn’t change the fact that we now need another revolution to ensure that quality of life for subsequent generations.

On Washington’s follow up mission in 1754, the first truly global war was ignited which led to the need for British taxes to fund it on this continent which in turn, led to the American War of Independence also led by Washington and the creation of the United States of America of which he was elected the first President.

As Americans were declaring independence, Scottish professor Adam Smith was publishing An Inquiry Into the Nature and Causes of the Wealth of Nations which upended the notion that wealth could only be achieved by hording and inspired instead our current market economy based on creating wealth.

Ironically, many inspired by Smith have turned to hording wealth and denial of climate change, while, according to public opinion polls, 75% of Americans support regulating greenhouse gases such as CO2 and 60% support revenue-neutral taxes on carbon.

By 3 to 1, Americans believe that protecting the environment “improves economic growth and creates new jobs, while just 17% cling to a notion described by David Jenkins, a Republican conservative and environmentalist (yes they do exist) that:

“we can dig up all of that sequestered carbon from bygone eras, burn it, and send it back into the atmosphere without consequence?”

Jenkins, an official with ConservAmerica then chided a fellow conservative that such a view “is as impious as it is imprudent. It is certainly not conservative.”

Given political will by those elected to office, there is obviously bipartisan support for the ideas promoted fourteen years ago in a book of just 89 pages plus appendix entitled Tax Shift – How to Help the Economy and Improve the Environment, co-written by Alan Thein Durning and a young Reed College research intern named Yoram Bauman.

The now-Dr. Bauman is an environmental economist who teaches at the University of Washington.  He is even more famous as “the world’s first and only Stand-Up Economist.”  Click here for his hilarious five minute explanation of economics textbook author and Harvard professor Dr. Gregory Mankiw’s (pronounced Mank-u) Ten Principals of Economics.

Revenue-neutral tax-shifting has already been shown to work over the last few years in British Columbia, Canada where it was implemented several years ago based on the recommendation of Bauman and others.

It is based on the economic principle that the way to get less pollution is to make polluting expensive.  Revenue-neutral means shifting taxes off of things such as income and payroll and business while shifting them to things such as CO2 emissions.

Beginning in 2008, B.C. began a gradual revenue-neutral tax shift to carbon pollution in 2008 and an assessment four years later by a group of business, environmental, policy and academic leaders shows that it is working by reducing emissions far faster than elsewhere and without any negative effect on the economy there.

The B.C. experiment, while it must to likely be ratcheted up to have the intended impact, is well worth replicating in the United States.  The carbon tax approach is also supported by Mankiw, an advisor on the economy to both President George W. Bush and Republican presidential-candidate Mitt Romney.

In a TED presentation, Bauman quotes conservative columnist George Will, who, when it was noted that he agreed with Al Gore on this issue, paraphrases a quote from 20th-century American newspaper humorist Don Marquis by quipping back that:

“an idea should not be held responsible for the people who believe in it.”