Things that Make you Go "What the ..."

CNN reports that the first-time home buyer tax credit program, designed to stimulate the economy, has a few problems (HT: Elaine Phillips):

According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.

The confusion comes because home buyers were eligible for two different credits, depending on when their homes were purchased.

Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home's purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.

It isn't surprising that a government program would cause mass confusion. Nor is it surprising that the IRS is struggling to sort this mess out. But what really makes one shake his head is this little tidbit:

The inspector general reported that 1,326 single people listed as dead by the Social Security Administration claimed more than $10 million in credits. The IRS threw out 528 of those 1,326 claims, saving $4 million.

Are we supposed to celebrate the fact that the IRS "saved" 40% of the money obtained fraudulently? What about the other 60%? The article implies that those claims weren't thrown out, even though they have been identified.

I must admit that I was briefly tempted to claim the tax credit for the two rental properties I bought in 2009. Given the IRS's record, I might have gotten away with it.

Who is Getting Hammered?

I previously addressed issues with Sheltering Arms Senior Services (SASS), a local outfit that is using taxpayer loot to make private homes more energy efficient. At the time SASS was under fire for performing sub-par work and Chronicle columnist Lisa Falkenberg was whining that SASS officials were not being held accountable. In my post I wrote:

I can only assume that Falkenberg wants SASS to be held accountable to the government officials overseeing the program, and ultimately the taxpayers who are footing the bill. That might sound reasonable--no sensible person wants to see government waste the money it has stolen from the citizenry. 

It now appears that someone might be held "accountable" for the crummy work. Texas Watchdog reports (HT: blogHouston) that the weatherization director for SASS has been canned. Falkenberg might be happy, but I'm not impressed.

Texas Watchdog reports that SASS is the state's second leading recipient of stolen money--$22.3 million--for weatherizing private homes. The Alamo Area Council of Governments in San Antonio is getting $14.5 million, while the city and county of Dallas each are receiving more than $13 million. But the "winner" in the race to fleece taxpayers is the city of Houston, coming in at a cool $23.5 million.

I am sure that a lot of people feel better now that an incompetent manager has been fired. But that won't change the fact that the money being spent by SASS was taken from taxpayers without their consent, for purposes that they may or may not agree with. It doesn't change the fact that many taxpayers will be unable to afford their own weatherization projects because they had money forcibly removed from their wallets so that Granny Smith could have her windows caulked.

If Granny Smith marched over to her neighbor's house with a shotgun and took his money so that she could pay to have her windows caulked, she would rightfully be regarded as a thief. That doesn't change simply because the government does the taking.

It has been reported that SASS spent 60% of its "revenues" on administration for the weatherization program. That money is gone, consumed by parasites sucking the life out of productive, tax paying citizens. If that isn't bad enough, we are being told that this parasitism will "stimulate" the economy. Granny Smith might have gotten her windows caulked, but taxpayers are getting hammered.

The Chronicle Gets it Right--For Now

It is rare that I find myself in agreement with a Chronicle editorial. On Sunday the paper accomplished this feat, at least in part, in chastising city council for its refusal to cut its budget:

The defense offered by some council members is that the cuts would have come out of salaries and health care benefits for staff members. And so they would have. We sympathize with the hardships these cuts would cause, limited as they are. But we're also left to wonder: How are those hardships any different than the ones borne by so many in the private sector in these days of benefit cuts, wage and salary freezes and layoffs? That's what too many of the people who pay for city government are facing.

Of course, it is easy for the paper to take the side of taxpayers on this issue.So I'm not going to give it too much credit, particularly when it evades the implications of its own statements.

From France to Washington, D.C., to Sacramento, Calif., public sector employees have for too long been insulated from the realities faced by those in the private sector. They have more vacation time, better pensions and more job security than most in the private sector. It's starting to break the bank in Europe and in parts of this country.

If this is true--which it is--then why does the paper continually advocate for expanding the number of public sector employees? If more government is breaking the bank, then why does the paper consistently call for more government? From local to federal, from land-use regulations to health care and everything in between, the paper urges more government controls and regulations.

Apparently the paper believes that such controls and regulations do not require more public sector employees to monitor and harass the citizenry. Apparently the paper believes that there are no costs associated with enforcing these edicts. Apparently the paper can't see the connection between more government control over our lives and bankruptcy. To make such a connection, one would have to look beyond concrete details and think in principles.

Economically, government is a consumer--it produces nothing of value. (It's proper purpose is the protection of our moral right to produce values.) To feed its voracious appetite, government must take money from the private sector, which reduces the money available to invest in expanded production. In addition, government controls and regulations place additional burdens on producers, forcing them to spend enormous sums to comply with the demands and dictates of politicians and bureaucrats. This too is money that cannot be invested in production.

These facts are true no matter the intention of any particular government intervention. These facts are true in Athens, Sacramento, Washington, and everywhere else on earth. These facts are true no matter how many people support a particular regulation. These facts were true in 1776, they are true today, and they will be true in 2176. These facts are true in principle--always.

The Chronicle can't have it both ways. The paper can't chastise politicians for spending money while it consistently urges them to spend money. It can't lament the cost of expanding the public sector while regularly calling for an expansion of the public sector. The paper can't warn of impending financial ruin while simultaneously advocating the actions that lead to that ruin. At least, it can't do these things if it wishes to be consistent and to be taken seriously.

Ma Strikes Again

The Chronicle reports:

A Travis County state district judge has said he will declare the city's sharp water and sewer rate increases valid, giving Mayor Annise Parker the legal blessing she hopes will head off efforts to force the issue to a public referendum.

The odd thing about this is the city sued itself in a court in another jurisdiction as a pre-emptive strike. Ma Parker ran for office on a pledge to not raise taxes. So far she has kept that pledge by forcing us to use more expensive lawn bags in lieu of a tax increase, and now she is trying to ram a water rate increase down our throats. Technically, neither qualifies as a tax increase. Practically and morally, we are being forced to pay more money for city services.

The fact is, most Houstonians have no choice but to use city services. Confiscatory taxes and prohibitions on private competitors grant the city a coercive monopoly on many services and make those open to competition generally too expensive. If we want our leaves carted away or want running water, we have little choice but to use the city's services. And the city can charge whatever it damn well pleases, because it's "customers" have no recourse except to yell at council members and write blog posts.

To date, opposition to the rate increase seems to be focused on a referendum. Apparently, opponents to the increase aren't opposed to the city being in the water business. They just want the "people" to have a voice in the matter.

If the city sold the water system to private companies the people would have a voice. They would have a choice in which company they patronized. Competition, and the fact that individuals would have choices, would drive costs down. In contrast, Ma claims that the city is losing $100 million a year on water services. By her own admission, the city sucks at the water business, and yet she wants to stay in it. And who can really blame her--she has millions of captive customers who must pay whatever she demands.

Interestingly, one of the arguments made in favor of municipal utilities is the fact that utilities are "natural monopolies". The nature of these services allegedly precludes competition, and therefore the city should provide the service in order to promote the "common good". Look at where that has gotten us. The city's infrastructure is in shambles and it is losing money faster than a drunken sailor in Vegas.

The solution isn't lawsuits and referendums. The solution is for the city to get out of the water business. And I don't mean some Mickey Mouse sham like retaining ownership of the assets and letting a private company manage the system. I mean sell everything and get out of the water business entirely. We don't depend on the government for our food, thank God. Why should we depend on it for our water?

Another Bad Idea for the Dome

One idea being floated for the renovation of the Astrodome is a public-private "partnership". Such "partnerships" have grown more popular in recent years, as governments seek to provide "public" goods without taxing citizens into oblivion. But these "partnerships" are a bad idea.

Consider the nature of the "partnership". One side--the government--holds a gun. It can, at any time, force its "partner" to concede to its demands, or else. And we know what "or else" means when government is involved. Such deals might seem good to a business, and they might be profitable in the short-term. Paying protection money to the local street gang might also seem like a good deal, but in the end the "partner" with the gun can demand more. And the business must pay, or else.

Consider also the nature of the projects proposed for public-private "partnerships". These invariably involve activities that are outside of government's proper functions, such as roads, parks, and sports stadiums. If these alleged "public" goods truly are a proper function of government, then why is it necessary or even desirable for private companies to be involved?

The fact is, such "partnerships" are an attempt by government and businesses to have their cake and eat it too. Government can provide "public" goods while gaining greater control over a private business. And the business can invest in an asset without bearing the full cost. Government uses the "partnership" to encourage investments into projects it can't afford; businesses get to rape the taxpayers who subsidize the project. Government can "encourage" investments in "public" goods; businesses get to profit while being backed by government coercion.

If these goods are truly desired by the public, and businesses can truly profit by providing them, then they should be provided entirely by the private sector. If they are not desired (or individuals are not willing to voluntarily pay for them) then government is simply wasting taxpayer money. If profits can be made, then businesses should be willing to pony up the investment without relying on taxpayer subsidies.

The Astrodome has the potential to become many things, all of which are expensive and risky. I do not care to invest my money in such endeavors, and I should not be forced to do so through my tax dollars. Those who are willing to take that risk should do so, and they should benefit accordingly. But government should not be involved.

Sell the Damn Thing

I love the Astrodome. Before I moved to Houston it was the one symbol of the city that stood out the most. I have attended baseball games, football games, rodeos, concerts, and trade shows there. I have fond memories of "Dome dogs" and gigantic beers. But I am tired of paying for this massive monument to the past.

The Dome has been sitting idle for years, and despite occasional debates over its future, nothing has been done. And during this period taxpayers have had the privilege of paying about $4.4 million a year for insurance, debt, and interest. Now, the Chronicle reports that we will get to pony up some more money:

The Astrodome's future could range from a $128 million teardown to its renovation as part of a $1.35 billion makeover of Reliant Park, leaders of the stadium complex said Monday.

Whatever the option, the public is almost certain to be asked to pay a big portion of the price.

Before I comment on the actual proposal, consider the dishonesty of the wording in the last sentence above. We will be "asked" to pay for whatever plan is adopted. This is like a mugger claiming that he "asked" for your wallet. And what happens if you don't comply? Both the mugger and the taxman will bash your head in. Now back to our story.

For years, taxpayers have been paying for the debt and interest on a vacant building. Our esteemed leaders have been so wise that we have been continuing to pay on this building long after it quit being used. And now they claim that they have a good idea for the property. Just like they claimed that all of the other sports stadiums were a good idea. Lest anyone forget, it wasn't that long ago that the city unloaded one if its previous "good ideas"--the facility formerly known as The Summit--in a fire sale because it needed to reduce its budget deficit.

Fool me once, shame on you. Fool me twice, shame on me. Fool me five, six, ten times, I'm a damn idiot. Government officials are playing taxpayers for idiots, and with good reason. Taxpayers (or at least voters) have continued to buy into the claptrap that we must pay for these playgrounds or else we won't have major leagues sports teams. And then we won't be a "world-class city". I have news for the whiners who make such claims: There isn't any class in forcing taxpayers to "invest" their money into these boondoggles.

I have a suggestion that won't cost taxpayers a penny. In fact, it will help reduce taxes. Sell the damn thing.

Non-taxes are Taxing

Few politicians campaign on a promise to raise taxes. Indeed, they frequently state that they will not do so. For example, last fall Mayor Ma Parker said,

I have stated on a number occasions on the campaign trail that I don't plan to raise taxes in this economy — that's the wrong thing to do to struggling taxpayers and business. My pledge is not to raise the tax rate — certainly not in the near term. That's not necessary.

So far, she has "kept" this pledge--she hasn't raised the tax rate. However, Houstonians are finding that despite no tax increases, more and more of their money is going to support the city government. On Wednesday city council passed the largest water rate increase in the city's history. Retired city workers had their health insurance premiums increased nearly 50 percent. And home owners are now forced to use biodegradable lawn bags, which can cost ten times more than other bags.

While Houstonians are poised to see their water rates soar, the city's $140 million budget deficit will not be affected by the rate increase. Which means that we had better hold on to our wallets, because Ma will be coming for more money. Following the water rate increase the Chronicle reported:

The mayor compared the “tough vote” to eating “a healthy dose of vegetables,” something she promised the city has only begun to do as the budget process heats up for next year. 

Ma previously warned us that she would make us eat our vegetables. As I pointed out at the time, while her threat might have been made facetiously, the fact remains that her edicts can and will be forced upon all Houstonians. If we don't "eat our vegetables" or do anything else she demands, we risk going to jail, having our property seized, or both.

To date, Ma's non-taxes have been very taxing and she hasn't made a dent in the budget deficit. There are only two ways to balance the budget--cut spending or raise more revenues. Since politicians seem to be genetically incapable of cutting spending, my money--literally and figuratively--is on increased taxes. When that occurs Ma will once again trot out the "tough decision" line in an attempt to make us feel sorry for her.

Given Ma's track record, the only "tough decision" will be deciding which Houstonians to rob so that the city can continue its profligate spending. Cut spending and returning city government to its proper function--the protection of individual rights--would be the really tough decision, for it would require Ma and her cohorts on city council to question their most basic premises. Sadly, that isn't going to happen.

Force and Fraud

KHOU recently reported that Metro "cooked" its books in order to secure federal funds to build light rail that nobody will ride. Not surprisingly, Metro officials deny the accusation. Congressman Ted Poe worries that taxpayers may get hit with another bill when Metro can't finish the rail lines:

Down the road, Metro's gonna come and say, "Oh well, we don't have the money to finish this project. We need another penny, two cents on the sales tax to make the poor taxpayers in the Houston area pay for this project we started. We gave bad information to the federal government. We need more taxpayer money. All of that is fraud and deceit."

Apparently Poe doesn't have a problem with the use of coercive government power to fund mass transit. He just thinks that Metro should be up front about it. Metro can use force to fund its operations, but fraud is going too far.

The fact is, force and fraud are two sides to the same coin:

Fraud involves a[n]... indirect use of force: it consists of obtaining material values without their owner’s consent, under false pretenses or false promises.

While Poe is decrying Metro's alleged attempt to defraud the federal government, he ignores where that money came from and how it was obtained. The money that Metro is accused of attempting to steal was in fact stolen from taxpayers. That apparently doesn't matter to Poe.

It is acceptable for one government entity to stick a gun in our face and take our money. But if another government entity resorts to "cooking" the books to get some of that loot, it is doing something wrong. With this kind of double standard, it is little wonder that conservatives aren't being taken seriously. Until conservatives can stand on principle and oppose all forms of government initiated coercion, they will continue to present no meaningful opposition to the Leftists.

A Necessary "Evil"

Yesterday I looked at the moral premise that underlies the belief that taxation is necessary. Today I will look at an implication of that view--that government is a necessary "evil".

On a daily basis we can observe individuals voluntarily purchasing the values that their life requires--such as food, cell phones, gasoline, and furniture. No government mandates are required. The self-interest of individuals--their desire to sustain and enjoy their lives--provides the only motivation necessary. Why then, is it believed that coercion is required to pay for the service provided by government?

Certainly, the fact that government has expanded far beyond its proper role of protecting our rights plays a part. Many, if not most, individuals would not voluntarily pay for welfare programs and other interventions. Coercive taxation is necessary to fund these illegitimate operations. But this is not the context to which I am speaking.

Most people believe (if they have thought about the issue) that even if the size of government was greatly reduced taxation would still be necessary. They claim that even if government was a fraction of its current size, individuals would not voluntarily provide the financial support required. Unlike bread, I-Pods, and vacations, individuals would not voluntarily pay for government. Government, they imply, is not a value--it is a necessary "evil".

Government is certainly necessary, and, while government can be evil, it is not inherently so. Government has a legitimate and proper purpose. Indeed, government is literally a matter of life and death. A proper government establishes and protects the social environment in which individuals can pursue the life-sustaining values that their life requires. An improper government turns the individual into a slave, whose life is disposed of as the state sees fit.

Absent government, individuals would have to arm themselves to protect their property and person. Each individual would be judge, jury, and executioner, with no recourse but to defend himself from criminals. The result would be gang warfare, or Somalia.

Those who claim that government is a necessary "evil" fail to identify the proper, life-sustaining purpose of government. They see the harm that government can inflict, accept this as a fact that cannot be changed, and then want to quibble over the victims of that harm. While numerous ideas contribute to this conclusion, two are worth mentioning.

The first pertains to man qua individual. Rather than view man as an independent, sovereign entity, they see the individual as a cog in the wheel, a cell in the organism of society. "No man is an island," they claim. "Each must contribute his "fair share" to society." According to this view, the individual has no right to his own life, but is subservient to the needs of "society". This flawed view of man's nature logically leads to altruism--the belief that it is proper for the individual to self-sacrificially serve others.

In one accepts these premises, one must conclude that government's purpose is to reign in man's selfish desires. The individual must be compelled to put aside his own self-interest for the good of "society" and government's role is to insure that all serve the "common good".

Consider the moral inversion that occurs: A necessary "evil"--government--is required to achieve the "good". It is hard to imagine a greater perversion, yet this is the fraud that most people accept. And it is repeated as a mantra that is above question--for to do so is to be selfish.

Flawed premises lead to flawed conclusions. Those who believe that government is a necessary "evil" have drawn an erroneous conclusion. To correct that error, they must begin by checking their premises. They must begin by correcting their view of the individual.

The Fair Tax: Creating More Victims

Yesterday I looked at the flat tax, one of the proposals to make the federal tax system simpler and more equitable. Today I will look at another such proposal--the fair tax.

The fair tax is simply a national sales tax that would be collected by retailers. As with the flat tax, the fair tax would replace the income tax, estate tax, gift tax, and other taxes collected by the federal government. Proponents of the fair tax also cite numerous benefits:

• Progressive—Since the rich spend more, and each retail purchase is subject to the tax, the rich would pay more than the poor.
• Encourages savings—Because only consumption would be taxed, the “non-rich” would reduce consumption in order to build wealth.
• Those in the underground economy would pay.
• Tourists would pay.

As with the flat tax, the fair tax accepts the idea that government can properly take our money by force. Unlike the flat tax, expanding the number of victims is a central part of the argument for the fair tax:

How can the FairTax generate lower net tax rates for everyone and still pay for the same government expenditures? The answer is two-fold. Firstly, the tax base is dramatically widened by including consumer spending from the underground economy (estimated at $1.5 trillion annually), and by including illegal immigrants, that is, those who escape their fair share today through loopholes and gimmicks. In addition, 40 million foreign tourists a year will become American taxpayers as consumers here. Secondly, not everyone's average net tax burden falls.  For households whose major economic resource is accumulated wealth, the FairTax will deliver a net tax hike compared to the current system.

Rather than combat the inherent injustice in coercive taxation, the fair tax seeks to expand the reach of the taxman. And because the cause of government spending is not addressed, the fair tax, like the flat tax, will be subject to continued political pressures to increase the taxed items, create loopholes or exceptions, and otherwise modify the code.

So long as government is in the business of redistributing wealth, regulating businesses, "protecting" the environment, providing health care and education, and every other rights-violating activity the government engages is, there will be pressure to manipulate the political process. And as we have seen countless times, politicians are more than willing to cave to political pressure.

The issue is not how government gets its money. (And that is why advocates of liberty are misguided to actively call for abolishing taxes at this time.) The issue is the proper role of government, and until that--along with its moral foundation--is understood, calls for tax reform are at best premature.

The fair tax is not tax reform in any meaningful sense, for it is nothing more than a continuation of the same fundamental premises as our current system.

Every individual has a moral right to enjoy the fruits of his labor without anyone--including government--taking his property. Indeed, it is government's sole purpose to protect that right. The advocates of the flat tax and the fair tax may have their "heart" in the right place, but until they get their head--and their morality--in the right place, their efforts are wasted.

The Flat Tax: A Superficial "Solution"

In recent years two proposals—the flat tax and the fair tax—have been presented to simplify the tax code and make it more "equitable". Each makes similar claims. Each is based on similar premises. And each is lacking, for neither addresses the fundamental cause of the current system’s complexity and "inequity".Today I will look at the flat tax; tomorrow I will examine the fair tax.

The flat tax proposes that income be taxed at a flat rate—less than 20 percent being the most common. All tax payers would pay this rate, regardless of income. The flat tax would eliminate all deductions, credits, and loopholes, and with it the myriad forms currently required by the Internal Revenue Service. Advocates of the flat tax generally claim five benefits to their proposal:

• Faster economic growth
• Simplification
• Equity
• Increased freedom
• Increased economic competitiveness

On the surface, these alleged benefits certainly seem attractive. Who would be opposed to economic growth, or a simpler tax system, or increased freedom? But the flat tax will not achieve these ends, for it is founded on the same premises as the current system--your property belongs to the government.

The complexity and inequity of the tax system is not the cause of the nation’s economic ills, or the decrease in freedom, or America’s declining competitiveness in the global economy. The cause of these problems—as well as the complexity and inequity of the tax system—is the fact that government has expanded beyond its proper functions. More fundamentally, the cause is altruism--the belief that morality requires self-sacrificial service to others.

According to altruism, we have a moral duty to help others, and if we refuse to do so "voluntarily", then government may properly force us to "volunteer". Taxation is but one manifestation of altruism. Social Security, Medicare, public schools, public libraries, mass transit, and myriad other government programs are others.

When government operates on the premise of altruism--forcing individuals to sacrifice for the "public welfare"--politicians and bureaucrats become a magnet for individuals and interest groups to seeking special favors from the government. The tax code is no exception. Loopholes, special deductions, credits, and other preferential treatment in the tax code are designed to encourage/ reward certain types of behavior while discouraging/ punishing others. The result is an increasingly complex tax code that provides tax authorities with unilateral discretion to interpret and enforce that code. While removing the complexity is certainly a step in the right direction, it does not begin to address the underlying cause.

Consider a paper backing the flat tax published by The Heritage Foundation, a conservative think-tank, which stated:

There will never be a tax that is good for the economy, but the flat tax mores the system much closer to where it should be—raising the revenues that government demands, but in the least destructive and intrusive way possible.

In other words, proponents of the flat tax accept the premise that a destructive institution should be a part of society. Rather than call for its elimination, they seek to minimize its destructiveness. They cannot imagine a government support solely by voluntary contributions.

Proponents of the flat tax believe that government has a right to forcibly take our money, that everyone must pay his “fair share”. They simply want to dicker over what is “fair”. In conceding that government may take our money without our consent, proponents of the flat tax will be powerless to dispute claims that a particular percentage is not fair. They will be powerless to counter political pressures for additional credits and loopholes.

In short, by failing to address the fundamental issue, the flat tax will be left open to the same political considerations that have created our current complex and “inequitable” tax code. By failing to defend the individual's right to his property, and demanding that government be limited to the protection of that right, advocates of the flat tax have conceded morality to the statists.

Similar objections pertain to the fair tax, which I will look at tomorrow.

A False Alternative in The Woodlands

On January 1 the Houston suburb of The Woodlands will become a quasi-government entity. This move, which will replace the collection of homeowner associations that have been in place for thirty-five years, is intended to avoid annexation by the city of Houston.

According to the Chronicle, the new body--The Woodlands Township--is a special creation of the Texas legislature and will have some of the powers of a municipality:

The township, for example, can collect property and sales taxes to provide services, but it can't adopt ordinances. It can maintain parks and trails, but it can't fix potholes or build new streets.

I will admit that I have not given much thought to the issue of forming new government bodies. But there are specific principles that we can apply to this situation to determine its appropriateness. What follows is an exercise in "thinking on paper", and I won't claim that these are my final thoughts on the subject.

I will begin by stating two premises:

1. The proper purpose of government is the protection of individual rights, including property rights. This is true at every level of government--local, state, or federal.
2. Individual rights can only be violated through the initiation of force or the use of fraud. Such actions compel an individual to act contrary to his own judgment; they force him to act against his own values. Government protects our rights by identifying those actions that constitute a use of force or fraud, and then prosecuting those who engage in such actions.

On the local level, a proper government's functions are limited to the police and the courts. Government should not be in the business of building or maintaining roads, parks, schools, or anything other than the police or courts--these goods and services should be provided by the private sector. Residents then have the choice of paying for those services they wish to use, and non-users are not forced to pay for parks, schools, roads, etc. that they do not use.

In a free society--one in which government is restricted to its proper functions--the formation of a new government body (as well as annexation) is a relatively minor issue. Barred from initiating force, government could not forcibly take money from citizens. It could not use taxation to build roads or maintain parks. In fact, it could not use taxation for any purpose, including the provision of police or the courts.

Cities such as Houston often use annexation to expand their tax base. In a free society this motivation would be non-existent. Annexation then would not be forced upon a community, and even if it were somehow done, it would have no financial impact on the annexed citizens. For a city to do so would be to increase its expenses without the ability to compel payment. In a free society annexation would likely be initiated by those outside of the municipality. And if a community wished to be annexed it would likely need to demonstrate that its residents would voluntarily pay for the provision of police and the courts before the municipality would agree to annexation.

In other words, in a free society annexation would have to be mutually beneficial, and neither party would be forced to act contrary to its judgment.

Similarly, a new government body would not have the ability to levy taxes. If citizens did not provide the necessary funds for police and courts, the new body would essentially be pointless. In a free society, the situation in The Woodlands would simply not exist.

Some may argue that this is unrealistic, that we have to deal with things the way they are and can't be positing some Utopian society that does not exist. The fact is, The Woodlands faces the choice of annexation or the formation of a new government body now, and dreams of a perfect society will do the residents no good.

While it is true that the dilemma faced by The Woodlands exists now, we cannot address problems by embracing false premises and abandoning principles. The options available to The Woodlands are the result of a false view of government's purpose. If we wish to resolve that issue and not slap a band aid on it, then we must begin by rejecting the cause of the problem. To do otherwise is to merely treat the symptoms. Just as we cannot cure the flu by stopping the sneezing, we cannot cure societal ills by masking the effects. It might make us feel better in the short term, but it does little to return us to health.

A healthy government, one that fulfills its proper purpose, is the consequence of of healthy principles. (Health being the state necessary for an organism to live according to its nature.) It is the result of recognizing the source of rights--man's rational mind. It is the result of identifying the fact that each individual has a moral right to pursue his own values and happiness without interference from others, so long as he respects their mutual rights.

A physician treats his patient by recognizing the nature of the human body and the nature of the particular ailment. He recognizes the fact that the health of a human is determined by man's nature. He recognizes the fact that he must take a specific course of action to cure the disease. He recognizes the fact that reality, not his wishes, desires, or intentions, determines what is proper. The same principle applies to every realm of life, including politics.

"Obama Phones" and Altruism

On Monday several conservative talk show hosts were in a tizzy over a "new" program from Obama. According to these talking heads, Obama is now using tax money to provide free cell phones to welfare recipients. KTRH radio reports the following:

Low income Americans may have new rights under an old federal program. Welfare recipients and those who meet certain income requirements will be able to get a cell phone and free minutes through a modified federal program. David Williams with Citizens Against Government Waste is outraged. "Right now, it looks like it's being completely government funded."

This would be an outrage, if it were true. But it isn't, at least as it is being presented by the talk show hosts. And it would be rather easy for them to discover this fact. The program, which was mandated by Congress in the Telecommunications Act of 1996, is funded by telecommunications companies. From the FCC web site:

All telecommunications service providers and certain other providers of telecommunications must contribute to the federal USF based on a percentage of their interstate and international end-user telecommunications revenues. These companies include wireline phone companies, wireless phone companies, paging service companies, and certain Voice over Internet Protocol (VoIP) providers.

Of course, these "contributions" are extracted at the point of a gun, and amount to a tax on telecommunications providers. Unless...

Some consumers may notice a “Universal Service” line item on their telephone bills. This line item appears when a company chooses to recover its USF contributions directly from its customers by billing them this charge.

Whether a company recovers the "universal service" as a line item or build it into their pricing structure, the fact remains that consumers are paying this fee. And since this "fee" is imposed by the government, for all intents and purposes it is a tax, albeit a hidden tax.

I can only speculate as to the reason conservatives are presenting this in the manner they are. (The extension of the program to cell phones is new, but that is merely a detail.) My suspicion is that they see it as another opportunity to malign Obama, though there is already no shortage of such opportunities. Regardless of their motivation, they are ignoring the real issue. Host Michael Berry asked his listeners:

Is being wireless a want or a need?

Apparently, if cell phones are a "want" they Berry has a problem with this program. But if cell phones are a "need" then it is a different issue. We should provide for "needs" but not for "wants". And this is the heart of the issue.

According to altruism--which conservatives embrace as eagerly as liberals--one man's need is a claim on others. If one man has a need, others are responsible for providing that need. This is true in regard to food, shelter, health care, and cell phones. Refusing to question altruism, conservatives can only whine that cell phones are not a need.

So long as they refuse to question altruism conservatives will remain powerless to stop the growth of government. They can only argue that a particular program goes "too far" or a particular claim is not truly a need. They cannot defend individual liberty on moral grounds, because they have ceded morality to their opponents.

The issue is not whether cell phones are a need or a want. The issue is that such programs violate individual rights by forcing individuals to act contrary to their own rational judgment.

Until conservatives reject altruism they cannot defend individual rights. Until they reject the premise that the individual must live in service to others, they cannot defend the moral right of the individual to pursue his own values and interests. Until they reject altruism, they will remain accessories to the crime.

We Don't Need Houston Hope, We Need Houston Freedom

Houston Mayor Bill White, who previously proposed using tax dollars to help individuals pay off their debt so that they could qualify for a home mortgage, recently proposed an equally inane idea. He proposed using tax dollars to pay Realtors to sell houses for Houston Hope. (On Thursday White declared the proposal "dead".)

Under the Houston Hope initiative, the city has been foreclosing on tax delinquent homes, selling them to developers to redevelop, and then assisting buyers with their down payment. Qualifying home buyers can receive as much as $45,000 from the city. With the city currently owning 1,000 properties, tax payers could potentially be on the hook for $45 million.

If this strikes you as a gross injustice to tax payers--many of whom cannot afford a home because of programs such as this--you will be happy to learn that this will save the city money. According to the Chronicle:

Chris Butler, special assistant to White for neighborhood development, said the city saves money on each home because it is able to collect taxes, water bills and permit fees and does not have to mow the grass or require police to keep criminal activity away from such vacant properties.

He estimates that for 1,000 lots, the city could generate revenue and save money to the tune of nearly $1.7 million a year.

I don't think one needs to be an accountant to realize that spending $45 million to save $1.7 million is not a very good investment. Yet, this is the justification offered by our "businessman" mayor.

While a number of council members attacked White's plan to incentivize realtors, none questioned the Houston Hope program itself. In principle they have no problem taking money from some Houstonians to give to others. They just happen to think this particular redistribution of wealth is, as council member Pam Holm said, "pretty outrageous.” Mike Sullivan called it "poor public policy.”

Both Holm and Sullivan are correct, but there are certainly stronger and more accurate words to use to describe White's proposal. Immoral is one that comes to mind. But city council wouldn't think to use such words, because they share the mayor's moral premises. They believe that need constitutes a claim on the property of others. And they believe that the city may properly force us to meet those needs.

Programs such as Houston Hope garner lots of good press for White and his cronies. They are helping revitalize poor neighborhoods, and who could be opposed to that? The beneficiaries of their largess are visible and easily identified. They city can cite statistics showing the "good deeds" it has done, such has helping more than 1,500 people buy a home. But what we don't see, and the city ignores, are the hidden victims of these programs.

Every dollar used to fund Houston Hope comes from the pocket of some Houstonian--many of whom are trying to save for their own home. Why should they be forced to subsidize the home purchase of someone else? What about their needs? And more importantly, what about their rights? Of course, we do not hear politicians sob and moan about these individuals, because they are hidden and difficult to identify.

If city officials really wanted to give Houstonians hope, they would unleash the shackles that restrict how we do business. They would repeal land-use regulations, sign restrictions, and controls on where we can build a liquor store. They would get out of our stores and out of our bedrooms. And then they could slash taxes.

But to do that would require the rejection of the idea that we are our brother's keeper. It would require city officials to recognize and embrace the idea that each individual has a moral right to his own life, liberty, property, and pursuit of happiness. It would require men of integrity and courage to fight for our freedom. That such men do exist is what gives me hope.

Freedom for the Fishermen

Earlier this week Chronicle columnist Lisa Falkenberg provided us with a look into the state's food stamp program.

Texas isn't coming close to meeting federal requirements to process food stamp applications within a month. Last month, about 38,000 new applicants were left awaiting approval even though the federal deadline had passed. About one in six applications is processed incorrectly.

The state Health and Human Services Commission cites inadequate funding for the delays, and has requested additional money so that it can hire more workers to process applications.

Not surprisingly, many people are up in arms over this. The Chronicle calls it a "state of disgrace":

It's not as if food stamps are a drain on the state's resources. The program is 100 percent federally funded, with Texas obliged to provide half of the administration cost.

All that is left is a callous disregard on the part of state leaders for the several million Texans who have fallen on hard times.

In this recession, the scarcest commodity of all turns out to be compassion.

In typical myopic fashion, the paper claims that food stamps don't cost Texans anything. Who then, is paying the bill? The last I checked, Texans are still required to send their tax dollars to Washington. But since the federal government is writing the check, the Chronicle evades the fact that Texans are in fact paying for this program. Perhaps the paper would like us to believe that the citizens of Michigan, Florida, and Kansas are paying the bill, and somehow that is proper.

But the paper really doesn't care who pays. There are Texans who need state assistance, and that need is all that matters. According to the Chronicle, we have a moral obligation to provide aid, and the cost is irrelevant. Somehow, the paper would like us to believe, it is compassionate to rob the citizens of Michigan, Florida, and Kansas (not to mention Texas) to provide that aid.

If the paper is so concerned about compassion, what about those whose money is forcibly taken? Why are their needs any less important? And what of the businesses who must deal with crippling regulations?

I certainly empathize with those who find themselves in dire circumstances. But their need is not a claim on the property of others. And we certainly will not see the economy improve if government continues to shackle businesses.

I am reminded of an old adage: "Give a man a fish and he will eat today. Teach a man to fish and he will eat everyday." In focusing solely on the immediate problem--the delays in processing food stamp applications--the paper is literally advocating that we give the needy a fish. That might stave off hunger for the moment, but it does nothing for the long-term.

Rather than calling for more state workers to hand out fish, the paper (and anyone else who is truly concerned about the needy) should be calling for more freedom for the fishermen--the businesses that create jobs.

Solving Houston's Budget Deficit

On Monday the Chronicle reported that the city of Houston will have a budget shortfall of about $50 million. Mayor White is considering a number of proposals to close the gap, including furloughs and a separate fee for garbage collection.

I have previously detailed ways for the city to cut its budget. More than $60 million could be cut simply be eliminating building inspections and sign enforcement. Millions more can be cut by privatizing parks, garbage collection, and repealing the myriad laws that violate individual rights--such as regulations controlling sexually-oriented businesses.

The problem facing the city is not a lack of money. The problem is that it has its nose in areas of our lives that it should not be involved in. The problem is that it is spending money--our money--to control and dictate how we live and work. The budget deficit, and a whole host of other problems, would go away if the city limited itself to its proper function--protecting our rights.

Some might argue that this impractical, that the city must supply parks, libraries, garbage collection, and animal control. The city must control signs, inspect buildings, regulate "gentlemen's" clubs, and provide our water. The city must dictate the number of parking spaces at commercial buildings, mandate the types of trees we can plant, prohibit smoking in private businesses, and stop people from parking in their yards. The city must protect old buildings, monitor the activities of taco trucks, keep liquor stores away from schools, and play nanny to apartment complexes. The city must regulate taxis, keep flood waters out of our homes, help Houstonians buy a home, and make sure that there is no slime in the ice machine. And the list of activities that violate our rights goes on and on.

Those who argue that the city should provide this laundry list of services believe that the alleged "good of society" justifies government controls, prohibitions, and regulations. They believe that somehow individuals will benefit when the rights of those same individuals are violated. They believe that we are better off when government dictates our actions, rather than allowing individuals to act of their own volition.

With such a long list of responsibilities, it is little wonder that the city is running short of money. If a private business tried to provide such an extensive list of services it would go out of business. The city just raises taxes and fees, and cuts the quality of the services it is forcing us to pay for.

What is particularly interesting, but certainly not surprising, is that out of the entire cadre of city "leaders" not a single one has advocated any form of privatization. Not Mayor White, who proposes to stick his hand into our pockets to bail the city out. Not Annise Parker or Peter Brown, who want to use the coercive power of government to control development. Not the members of city council, who seem more concerned about puppy dogs than protecting the rights of the citizenry.

If Houstonians want parks, libraries, inspections of their buildings, no smoking areas in restaurants, or anything else, there are private, non-coercive methods to achieve these ends. We don't need the government meddling in our affairs and controlling our lives and businesses. If city officials truly want to solve their budget crisis, all they have to do is recognize and protect the rights of individuals. All they have to do is begin repealing the ordinances that violate our rights. It really is that simple.

Tax Holidays

I am simultaneously amused and disgusted with politicians who do verbal gymnastics to support a particular position while ignoring its implications. Tax holidays are one example.

Fifteen states and the District of Columbia now offer tax holidays in the weeks leading up to the start of the school year. The tax break applies to most clothing and school supplies. According to one tax analyst:

Although states are facing serious budget issues, they seem to be reluctant to cancel their tax holidays as a way to increase revenue. In fact, ‘hard times’ may be seen as a justification for these holidays, both as ‘relief’ for hard-pressed consumers and ‘stimulus’ for hard-pressed retailers.

This is a common justification for tax holidays--they give a break to consumers and stimulate economic activity. If these claims are true, and I have no reason to doubt that they are, why are they limited to a few days of the year, and only to specific items? If tax holidays are good for businesses and consumers, then why not create more good by expanding the tax holidays?

Part of the reason is that some people don't think that tax holidays are good.

During the Presidential primaries in 2008 John McCain and Hillary Clinton proposed a gas tax holiday. CNN quoted Tom Kloza, chief oil analyst at the research firm Oil Price Information Service:

It's a quick fix for people who believe cheap gas is their birthright. It's not a prudent thing to do.

Kloza said the amount of money motorists would save would do little to stimulate economic growth. The revenue from the gas tax is much needed for road repairs, he added.

This response is typical of critics of tax holidays, and ironically, it is based on the same premise embraced by many advocates of tax holidays.

Tax holidays, whether it is for school supplies, or gasoline, or guns (South Carolina has such a tax holiday), the purpose is the same--to encourage consumers to spend money on certain items. It is a state mandated sale of sorts, albeit a rather marginal sale (in Houston the sales tax is 8.125%).

Tax holidays are used to manipulate consumers; they are an incentive--or more accurately, the removal of a penalty--to engage in activities the government desires. They advocates of tax holidays want to control the behavior of individuals, and they use the carrot of tax holidays--rather than the stick of regulations and prohibitions--to achieve that control.

Critics of tax holidays, such as Tom Kloza, also want to control individual behavior, but to different ends. He prefers to take money from taxpayers to use for specific purposes, like building roads. Rather than dangle carrots, he prefers to use the stick of taxation.

I am certainly in favor of virtually any plan that allows individuals to keep more of their money, and tax holidays are no exception. But I would much prefer to see a general reduction in taxation--and indeed its eventual elimination--rather than the manipulation inherent in tax holidays.

My Brother's Children's Keeper

Barack Obama has repeatedly told us that we are our brother's keeper. Now the state of Texas is telling us that we are also our brother's children's keeper. According to the Chronicle, Texas taxpayers will soon be on the hook for $2.1 billion to pay for the college education of Texas children:

This is not a free education for them. Their parents and grandparents bought state-guaranteed prepaid college education plans between 1996 and 2003 known as the Texas Tomorrow Fund, later renamed the Texas Guaranteed Tuition Plan.

Now the fund is nearly broke, a victim of tuition deregulation at state universities and busts in the financial markets that were supposed to provide the investment returns to keep the fund solvent.

Comptroller Susan Combs, whose office administers the fund, said the plans are guaranteed by the full faith and credit of the state. So, no parent whose child has a college plan has to worry about it being honored.

This means that taxpayers will be asked forced to make up the difference. The fund was created in 1995 at the urging of then-Comptroller John Sharp, who is now a Democratic candidate for the U.S. Senate. While some lawmakers warned that the plan was a train wreck waiting to happen in 1995, Sharp blames Combs for the shortfall, even though her predecessor had cut off new enrollment in the plan in 2003. Combs formally closed the program when she took office in 2007.

Sharp said the original prepaid tuition program has financial problems because Combs closed it to new enrollment. Sharp said pensions and Social Security need new members to remain solvent over long periods.

Combs has correctly responded that this is nothing more than a Ponzi scheme. And as is generally the case in government sponsored Ponzi schemes, the masterminds are off to bigger and better things by the time the scheme falls apart. Putting Texas taxpayers on the hook for billions apparently isn't enough for Sharp, who is now seeking the power to do the same to taxpayers across the country.

But just to demonstrate that Washington doesn't hold a monopoly on repeating its mistakes, lawmakers started a new plan--the Texas Tuition Promise Fund--in 2007. Of course, when that plan goes belly up, and it will, its advocates will also point the finger at someone else. Lawmakers love to throw crumbs to voters in exchange for votes, and both ignore the fact that those crumbs will ultimately be supplied by taking a loaf of bread from taxpayers. To the credit of lawmakers the Texas Tuition Promise Fund is not backed by the state's credit--for now. But what will happen when this boondoggle goes broke?

The entire idea that we are our brother's keeper is founded on the idea that need supersedes rights, that the need of one person is a claim on the property and life of others. So when the Texas Tuition Promise Fund goes broke, the need of the subscribers will be the prevailing concern. And taxpayers will again be asked forced to make up the difference.

Lawmakers continue to make the same foolish mistakes because they believe that the failures result from poor implementation. They didn't charge enough, or the money was invested poorly, or some other nonsense is always offered as an excuse for failure. They never stop to consider whether their proposals are wrong in principle. And the Texas Tuition Promise Fund is wrong in principle.

The proper purpose of government is to protect our rights, not create investment programs for parents. Anyone who wants a "tuition promise fund" can set one up without the state being involved. It's called a savings account, and as far as I know every damn bank in Texas offers them. And if that isn't good enough there are other investment vehicles, such as mutual funds.

Someday we might have lawmakers who don't kiss the butt of every voter they can simply to get elected. But until that occurs, we will continue to witness that gross spectacle. And taxpayers will continue to be subjected to a different kind of probing in the same area of the body.

An Open Letter to Jim McIngvale

Dear Mr. McIngvale,

I recently read a story about the Greater Northside Management District (GNMD) suing you for back taxes. The Chronicle quotes you as saying, “To me, it's taxation without representation. If they were doing something that was benefiting the area, I would pay.”

I have a great deal of respect for your business acumen and admire your willingness to challenge this tax. But this isn't a very compelling argument, for it concedes the moral high ground to the GNMD.

Consider the phrase "taxation without representation". The underlying premise is that if you are represented then taxation is acceptable; that if you have a vote (whether directly or indirectly) then your money can be forcibly taken. This is hardly a defense of your rights, for the right to vote is not a primary. What is primary is your right to life, and the right to property—which includes your money--is the only practical implementation.

Your rights are not subject to a vote. The purpose of government is to protect your rights, no matter how many people wish to violate them.

Apparently you do not agree with how GNMD has spent the money it has received, but this is irrelevant. As a quasi-government entity, GNMD has the power to force you to cede your money for purposes it determines. Indeed, this is the nature of all taxation--government coercion is used to obtain revenues.

The quote I cited above implies that you would gladly pay the taxes if you saw some benefit. But what if that benefit is short-lived? You will still be forced to support GNMD. And what of other business owners who do not see benefits or would prefer to use their money for other purposes? They too will be forced to support GNMD without their consent.

The issue is not taxation with or without representation. The issue is your moral right to use your property as you judge best. And that right applies to all individuals.

The alleged goals of GNMD can easily be accomplished through a voluntary association of businesses. Such associations are common--indeed, you are likely a member of a number of such organizations. Such associations are based on the consent of each member, who is free to sever his membership when he no longer sees benefits. But unlike a government entity, such associations cannot use force against others. Such associations require the voluntary agreement of its members, rather than the forced obedience of GNMD.

If you wish to win your fight, you must seize the moral high ground. You must defend your rights, not on the basis of practical benefits (or the lack thereof), but on moral grounds. You--and all individuals--have a moral right to live your life and use your property as you choose, so long as you respect the mutual rights of others. Nobody--including government--has a right to compel you to act contrary to your judgment (unless of course, you have violated the rights of others).

You are one of Houston's great success stories. You have taken risks that others would not, and you did so because you judged those risks to be worth taking. You were free to act as you deemed appropriate. You have never relinquished that right. Defend it with the same moral certainty and conviction that has helped you build Gallery Furniture.

Sincerely,
Brian Phillips

Don't Sweat the Small Stuff 31

A Pointless Statistic
neoHouston presents a long argument showing that Houstonians pay much higher property tax bills than other major cities. This, he claims, makes housing less affordable. While there is truth in this, he fails to address one significant difference between Houston and other cities.

He uses a $100,000 home to compare tax rates between Houston, LA, New York City, and Chicago. While this is perhaps useful for his purposes, it is pointless. I seriously doubt that anyone can find a home in New York City for $100,000, unless you consider a cardboard box in some alley a home.

While our property taxes may be higher, we get a lot more house for our money. As I wrote in The Objective Standard:

In Houston, a house of two thousand square feet costs about $120,000. In New York City, the average apartment of fifteen hundred square feet costs more than $1.7 million.

As I demonstrated in that article, the primary cause of this difference is government intervention in land-use. So, while property taxes may increase the cost of home ownership in Houston, home ownership is still affordable to the middle class. Statistics are only useful when used in context--the full context.



Tinkering with Details

Earlier this month mayoral candidate Peter Brown held a press conference, during which he called for city council to cut its budget by 2%. He said:

[W]e need to use our resources smarter and more efficiently, but we’ve got to uphold our commitments to the citizens of the City of Houston. It would be completely irresponsible to cut off vitally needed resources for essential services such as police, fire and infrastructure.

I seldom agree with Mr. Brown, and this isn't any different. The city should get out of the infrastructure business. While using its resources more efficiently is always a good idea, the city should be reducing its intervention in the economy and our lives. Doing do would require fewer resources, and allow Houstonians to keep more of their money.

Brown is just tinkering with details, rather than addressing the real issue--the city government has expanded far beyond its proper functions.



Texas Secession

Calls for Texas secession have been going on for a long time. They probably started shortly after Texas joined the Union. While I harbor a teensy-weensy bit of empathy for those who would like to establish an independent republic, secession is not the answer. While Texans might free themselves from the dictates of Washington, the dictates from Austin can be just as destructive.

One secession group, the Texas Nationalist Movement, illustrates the inanity of the secession movement. Their web site states their goals, which include:

• Preserving Texas history and culture


• Educating Texans and the world about Texas history and culture


• Celebrating Texas history and culture


• Defending Texas history and culture


• Improving and supporting the way of life of Texas communities

Texas was a slave state. I don't regard that part of our history to be worth celebrating or preserving. More importantly, this fascination with all things Texas is a crude form of collectivism.

Texas is certainly more pro-business than other states. But Austin is increasingly interfering with businesses, property rights, and the lives of the citizenry. Simply divorcing ourselves from Washington will not change much if current trends continue.

If the secession movement advocated laissez-faire capitalism and individual rights, it might be worthy of consideration. But it doesn't and it isn't. Ideas matter, and the secession movement embraces the same altruist/ collectivist ideas that dominate our culture. The results of those ideas will be the same, whether our masters reside in Austin or Washington.