Archive for the ‘Economics’ Category

Now that the supposedly tech-friendly Austin has banned Uber, what comes next?

Saturday, May 21st, 2016

Originally published at Rare

Austin, Texas is a youthful, entrepreneurial city, known for its tech startups, food trucks, and innovation. Although a liberal bastion, it still isn’t the type of place you’d expect residents to reject technological advancements.

Yet recently, Austin voters rejected an arguably misleading ridesharing proposition that claimed its aim was to enhance safety. But the regulations were so overly onerous and based in cronyism that ridesharing companies Uber and Lyft had to leave.

As John Daniel Davidson wrote at The Federalist:

“The story of how Uber and Lyft were driven out of Austin is a textbook example of how government-backed cartels force out competition under the guise of creating a ‘level playing field’ or ensuring ‘consumer safety.’

In this case, the cartel is the local taxi cab lobby, which successfully saddled Uber and Lyft with cab-like regulations that shouldn’t apply to ridesharing companies.

The result is that thousands of enterprising Austinites have been deprived a source of income, while thousands more have been deprived of ridesharing services that were reducing congestion and drunk driving while expanding transportation options to underserved parts of town.”

Due to this, Austin is now the only major city in the country without Uber. Even Las Vegas, which has arguably the most powerful taxi cartel in the country, acquiesced to Uber last year under public pressure.

And now, Austin is needlessly suffering.

As tech entrepreneur Courtney Powell noted at, “If we estimate the total wages earned by part-time Uber and Lyft drivers in 2015 using … 10k drivers in Austin multiplied by 60% part-time drivers, multiplied by 5 hours per week … multiplied by $19 per hour — that’s $29 million in part-time yearly earnings alone that will no longer be fed right back into the local economy in the form of income, spending, and taxes.”

And this doesn’t even touch how consumers are affected. In fact Greg Hamilton, the Sheriff of Travis County, has expressed support for ridesharing, because it has reduced instances of drunk driving. As he explained, the arrival of Uber and Lyft to Austin had a positive impact.

“The number of DWI arrests [in Austin] fell 16-percent in 2014. DWI-related crashes fell even more citywide, decreasing by 23-percent last year,” said Hamilton.

This begs the question, what’s next for Austin? Ellen Troxclair, one of Austin’s few libertarian-conservative councilmembers, had this to say about the future of ridesharing in her city:

“I continue to believe that a fair and limited regulatory environment for transportation providers benefits all consumers, and I hope we can work toward that outcome … I remain hopeful that the Council will work on solutions that will allow Uber and Lyft to return to Austin as soon as possible.”

The battle isn’t over. And as Troxclair has noted, Austin is entirely unprepared to even enforce its new regulations. “Uber and Lyft left Austin because they were unable to comply with the city’s new fingerprinting rules,” wrote Troxclair.

“Meanwhile, the city is bending over backwards to encourage customers to use Get Me and Wingz, who not only arenot fingerprinting their drivers, but may not even run any kind of background checks before passengers get in the car.”

Sadly, this goes to show that, as is typical, government is using “public safety” as a stand-in for their desire to control an economy absent unwanted competition. And as usual, people continue to defy these unnecessary regulations.

View From the Wing, a travel blog, had a smart tip for Austin area residents and visitors: Simply drop your location pin outside of the city limits, then immediately call your driver and ask if he or she will pick you up where you’re actually located.

Talk about a smart market solution to a silly law! While this workaround might be a good temporary solution for some, Austin does need to allow Uber and Lyft back into their city indefinitely.

Halting progress for the sake of cronyism is bad policy, and I have faith that Austin’s consumers will fight alongside their pro-ridesharing city council members to eventually undo this travesty.

Hey small business owners, the IRS just hired 700 new agents to come after you

Friday, May 6th, 2016

Originally published at Rare

Bad news for those of us who think we spend the money we’ve earned more efficiently than government bureaucrats can: the IRS is about to hire several hundred new “enforcement workers.”

And the news is even worse if you’re a self-employed small business owner – these “agents” are allocated for you!

As Richard Rubin at the Wall Street Journal reported, “The Internal Revenue Service is hiring up to 700 employees for tax enforcement in what Commissioner John Koskinen calls the agency’s ‘first significant enforcement hiring in more than five years.’”

Great. Because we all needed that in our lives, right?

But maybe it isn’t all bad.

Said Rubin, “The agency had 17,208 employees doing tax enforcement in 2015, down 24% from 2010, and audits of individuals are at an 11-year low … Despite the new hires, the IRS will still end fiscal 2016 with 2,000 fewer workers than it started.”

While that could be considered a silver lining, it really isn’t when you consider the magnitude of our $19 trillion national debt. Instead of using our tax dollars to hire more people dedicated to stealing from us, how about reducing the $161,000 per taxpayer burden our national debt breaks down into?

But as we all know, fiscal responsibility hasn’t exactly been a prominent theme of this bizarre election cycle. After all, we have a Republican presumptive nominee who is expressly against reducing military spending or pursuing entitlement reform.

And that’s too bad, because even the nonpartisan Congressional Budget Office realizes we’re veering toward an unsustainable fiscal cliff pretty quickly.

Hey, at least we’ll know through the next economic crisis that the IRS will be sufficiently staffed!

What could possibly be more important?

Punishing Corporations for Seeking Lower Tax Rates Will Kill American Jobs

Friday, April 15th, 2016

Originally published at EveryJoe

It’s hard to believe, but the United States has the highest corporate tax rate in the developed world. At 39.1%, this puts our nation high above the Organization for Economic Co-operation and Development average, which is 24.8%. This inevitably produces stark economic consequences. And for all of the talk we’ve heard this presidential cycle about bringing jobs back to America, the focus has been more on punishing companies for doing business internationally rather than crafting a job-friendly climate at home.

Graphic courtesy of the Heritage Foundation

But the presidential race isn’t the only place we see calls for import tariffs and other protectionist measures that would adversely affect American consumers. Policies aimed at punishing companies that would create jobs at home if the economic climate was friendlier are routinely embraced by federal regulatory agencies; generally with little to no congressional oversight. The latest example of this comes the Treasury Department.

As Diana Furchtgott-Roth, a former chief economist at the Department of Labor recently explained at the New York Times, “[T]he Treasury Department issued new regulations in an attempt to limit ‘inversions’ — in which American companies are acquired by foreign companies, legally lowering the tax burden of American companies.”

To a free market advocate, this practice sounds like a good thing. A lower tax burden means a greater ability to invest in job creation and innovation. And can you really blame American companies looking for a better deal when our corporate tax rate is nearly 15% higher than the developed world’s average?

President Obama – who is no foe of corporate welfare; Solyndra, anybody? – has railed extensively against these so-called inversions. Just this week, he praised his Treasury Department for its new regulations, which ended up killing a $152 billion merger between Pfizer and Allergan, an Irish drug company. (Ireland’s corporate tax rate is nearly 27% lower than the United States’, go figure.)

Said Obama, “I am very pleased that the Treasury Department has taken new action to prevent more corporations from taking advantage of one of the most insidious tax loopholes out there, and fleeing the country just to get out of paying their taxes.” He also said that, “When companies exploit loopholes like this, it makes it harder to invest in the things that are going to keep America’s economy going strong for future generations. It sticks the rest of us with the tab. And it makes hardworking Americans feel like the deck is stacked against them.”

Those are nice sounding talking points, but the logic is backwards. Don’t get me wrong, I’d like to get rid of tax loopholes too. Give me the flattest and lowest taxes possible, for corporations and individuals alike, especially if you don’t want the “deck stacked” against anybody. But very specifically, if you don’t want American companies, which create jobs here, taking drastic measures to avoid a very clearly onerous tax burden, perhaps you should look at making the economic and regulatory environments more friendly – lest the corporations decide to leave all together – taking American jobs with them!

And beyond the absurdity of punishing American companies rather than lowering their tax burden, let’s take a look at the hypocrisy playing out here. What this really means is that Obama, and most of his fellow Democrats, are beside themselves at the notion of a corporation seeking more fertile economic grounds through the lower-tax option of inversions. But they’re totally fine with throwing countless billions of taxpayer dollars at their favored corporate interests. Funny how that works. It must be an “as long as we’re in control” thing.

Here’s my free market proposition, Mr. President. We’ll close the inversion loophole (and all other loopholes, too) just as soon as you and your buddies in Congress give up your corporate welfare, take a hatchet to the tax code, and lower the corporate tax to a competitive level somewhere below Ireland’s rate of 12.5%. Now I will say to the President’s credit that he has at least paid rhetorical lip service to simplifying the tax code, and even lowering the corporate tax rate.

Despite this, it still seems that nearly every action undertaken by the federal government is more stick than carrot. You can’t scold some corporations for doing what they can do lower their tax burden and attempting to keep jobs in the U.S. while on the other hand, you throw billions in corporate welfare at others. Sounds more than a little hypocritical and power hungry, no?

While the concept of a free market coupled with a low tax burden is far from novel in theory, it often seems drastically, if not absurdly, out of reach in the United States. Want more American jobs? Make it profitable to headquarter and produce here. Punishing companies that use foreign labor with an import tax, as has been suggested during this presidential campaign, would do nothing more than pass the cost on to working and middle class Americans.

Similarly, having a corporate tax rate so high that companies are incentivized to headquarter elsewhere, often taking jobs with them, is a disastrous proposition. As Furchtgott-Roth aptly put it, “The solution is not burdensome new rules, but lower taxes. Inversions are increasing because American taxes are out of line with foreign codes. Until that changes, inversions will continue. Rather than trying to block companies from leaving, President Obama would do better by making America more hospitable to global headquarters.”

Did you know you pay more in taxes than for all your basic necessities combined?

Friday, April 8th, 2016

Originally published at Rare

It’s that time of year again: Tax Day is just around the corner! And while some will get a small portion of their money back in the form of a refund, taxes will, for most of us, be the biggest expense we pay this year.

According to the non-partisan Tax Foundation, “Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.” This is a good reminder that middle- and working-class Americans bear the brunt of providing governments with their revenue.

The myth that we can simply “tax the rich” to fund government operations at their current level is just that: a myth.

So just how big are these tax bills? “Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of almost $5.0 trillion,” explains the Tax Foundation.

That amounts to 31 percent of the entire nation’s income!

Of course, our friends on the left believe that taxation is the price we pay for a civil society. And as a limited government-supporting libertarian, I agree with this, albeit to a very small extent. But right now, it doesn’t seem like taxpayers are getting much of a return on our investment.

Given the pervasiveness of corporate welfare—politicians giving their cronies special favors at our expense—the tax burden middle- and working-class Americans bear seems disproportionate and unfair.

And that’s in addition to the basic fact that competition in a market economy almost universally yields better products and results for people compared to what we get from government monopolies.

As this graphic created by the Tax Foundation shows, we really do pay a lot in taxes. And because middle-class wages have stagnated for over a decade, taxation has become ever-more burdensome:

So as Tax Day approaches and you get your refund (unless you’re an independent contractor and you get to write a check), remember that you’re getting back a tiny portion of what the government took—and it’s more than you’ll pay for the basics you need.

Doesn’t that kind of make you want to throw some tea into a harbor?

Why did the government force Richard Branson into a merger he opposes?

Thursday, April 7th, 2016

Originally published at Rare

Virgin America is an offshoot of British entrepreneur Richard Branson’s Virgin Atlantic airline. Known for its distinctively customer-focused brand and fun aesthetic, Virgin America has operated in the United States since 2007 and has gained a loyal following. So when it was announced this week that Virgin America would be merging with Alaska Airlines, many people were disappointed.

One such person was Branson himself.

As he wrote at Virgin’s website:

I would be lying if I didn’t admit sadness that our wonderful airline is merging with another. Because I’m not American, the US Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it.

Admittedly, I wasn’t familiar with this particular regulation until I heard this story. And it turns out that it’s exactly the kind of protectionist nonsense Branson cited in his piece about Virgin America’s history, which includes initial difficulties entering the market due to a regulatory environment meant to stifle competition.

“The commitment to create a truly guest-focused airline and the dedication and will to make it happen – through some of the most challenging economic times and anti-competitive obstacles – has resulted in a financially successful business that achieved record profits last year,” wrote Branson.

He also says that Virgin injected a new competition into the airline market that forced other carriers to improve their service.

“When Virgin America launched, fleetwide WiFi was considered a radical idea,” said Branson. “[S]o was touch-screen entertainment at every seat, and brand new and beautifully designed cabins. Airlines have had to invest in better products to try to compete. That is a testament to the entire Virgin America team.”

Isn’t this precisely what the free market should be about? In theory, yes. But unfortunately, federal regulations, especially the extremely onerous ones that permeate the transportation industry, have made airline travel in the United States a more difficult proposition than it has to be.

As Branson notes, “Today, the four mega airlines control more than 80 per cent of the US market. Consolidation is a trend that sadly cannot be stopped.” Unfortunately, many people wrongfully attribute this problem to capitalism. But as is the case in so many areas of business, the airline industry is rife with regulations that yield government-mandated monopolies. This leads to lower quality options for consumers, while a few well-connected politicians and corporations benefit.

Writing at the New York Times in 2012 about the issue that Virgin America is now facing, the Brookings Institution’s Clifford Winston explained why there’s no good reason to restrict foreign airlines the way the United States does:

[A]llow foreign airlines, including discount carriers like Ryanair and global players like Qantas and British Airways, to serve domestic routes in the United States. Why, after all, should an industry that has ingeniously used free-market principles to squeeze the most revenue out of each middle seat be protected from competing in a real free market?

Sadly, in the nearly four years that have passed since Winston made those observations, the anti-competitive regulatory environment hasn’t improved.

Hopefully, as supporters of more competition, lower prices, and better service are affected by these regulations, we can lobby to have them changed. Richard Branson’s platform will certainly help draw attention to the issue. And regardless of the outcome for Virgin America, U.S. consumers will continue to feel the squeeze if the regulatory environment remains as is.

As Winston aptly says, “By allowing foreign airlines to serve American domestic markets, the process of creating a truly free market in airline services here would be complete and, as in the case of international markets, would provide travelers the benefit of more flight choices and lower fares.”

That’s something we should all support.