The State Lives up to its Name

There’s a new report out arguing that even a modest school choice program in South Carolina that improved access to private schools would reduce the dropout rate and lead to significant savings for taxpayers. In covering that study, SC’s State newspaper tells us that

The dominant public education policy debate in the Legislature since 2004 has been whether the state can afford to provide incentives to parents who want to send children to private schools….

Two obvious implications of this sentence are that a school choice program would provide a net fiscal incentive for parents to choose private schools, and that it would add to the net cost of education in SC. Both are false.

At the moment, SC provides an enormous incentive for parents to choose public schooling over private schooling. It spends roughly $10,000 of compulsory tax dollars per pupil per year on families who choose public schools, and nothing on families who choose private schools. The tax credit programs that have been suggested in SC would only moderately reduce that existing incentive to choose public schools. The net financial incentive under such programs would STILL be to choose a public school, because the funding available per pupil would remain larger. 

And, as Clemson professor Cotton Lindsay’s fiscal analyses of the SC tax credit proposals showed (see here and here), the programs would actually have saved taxpayers money. Those reported savings, by the way, did not count the fiscal benefit of reducing the dropout rate, which was the subject of the recent State story. So, in fact, the total savings would likely be larger than Lindsay estimated.

Too much to ask that a newspaper called The State would correctly inform readers of these points?

Tax Code Industrial Policy

Millionaire football fans are among the beneficiaries of supposed emergency hurricane tax relief according to an AP report. The only positive aspect of this story is that the special tax breaks deprive politicians of extra money to waste (though they will continue to borrow and waste, so don’t get too excited). Actually, this corrupt form of tax-code industrial policy also has another positive attribute – it is an excellent example of why the internal revenue code should be junked and replaced with a simple and fair flat tax:

…federal tax breaks designed to spur rebuilding are flowing hundreds of miles inland to investors who are buying up luxury condos near the University of Alabama’s football stadium. About 10 condominium projects are going up in and around Tuscaloosa, and builders are asking up to $1 million for units with granite countertops, king-size bathtubs and ‘Bama decor, including crimson couches and Bear Bryant wall art. …And they intend to take full advantage of the generous tax benefits available to investors under the Gulf Opportunity Zone Act of 2005, or GO Zone, according to Associated Press interviews with buyers and real estate officials. …The GO Zone was drawn to include the Tuscaloosa area even though it is about 200 miles from the coast and got only heavy rain and scattered wind damage from Katrina. …The GO Zone investor tax breaks are credited with contributing to the condo boom in Tuscaloosa.

Now Who Looks Stupid?

People who argue that patients are too dumb to make their own health care decisions rarely consider how dumb government is.  According to yesterday’s New York Times:

In a significant policy change, Bush administration officials say that Medicare will no longer pay the extra costs of treating preventable errors, injuries and infections that occur in hospitals, a move they say could save lives and millions of dollars.

That’s right.  For the past 42 years, the federal government has paid hospitals to give grandma an infection, drop her on the floor, or leave a sponge inside her – and then paid the hospital more to put her back together again.  That is, if the infection didn’t kill her.

Does anyone really believe that if each patient controlled the health care dollars that employers and the government now control, that it would take patients 42 years to stop rewarding hospitals for medical errors?  In other areas of your life, how often do you give more money to a business that screwed you over?

British Tories Bungle Tax Cut Message

The Conservatives in the United Kingdom have been lost in the wilderness ever since the Thatcher years, and recent efforts to recapture the tax issue illustrate the Party’s incompetence. As reported by the BBC, a working group has proposed some decent tax reforms, including an attack on Britain’s death tax. The head of the group even made a pro-growth argument for the reform, but the Party’s Shadow Chancellor then confuses the message by stating that any tax cuts must be financed by tax increases (the Tories, like American Republicans, are unwilling to control the size of government):

A Conservative government should abolish inheritance tax because it penalises too many middle-income families, a policy group recommends. …Led by former Cabinet minister John Redwood, the Competitive Challenge working group says the government has introduced many “stealth taxes” since Labour came to power 10 years ago. …Mr Redwood told BBC Radio 4’s Today programme his proposals would not require cuts in public services because they would help the economy grow. …”Any reductions in specific taxes will have to be balanced by tax increases elsewhere, most notably green taxes,” [Shadow Chancellor George Osborne] added.

The Labour Party instantly seized on the mistake. As noted in the Guardian, the Tories are now being criticized for supporting “crippling” tax hikes:

A bitter war of words has broken out over Tory proposals for £21 billion in targeted tax cuts. Labour warned that the plans, put forward by former Cabinet minister John Redwood, would require “crippling” increases in fuel duty and other charges for homeowners, businesses, holidaymakers and motorists.

Making $600 Toilet Seats Seem Like a Bargain

Like other parts of government, the Pentagon is famous for wasting money, but a recent Bloomberg report makes $600 toilet seats seem like a good deal from the discount bin at Wal-Mart:

A small South Carolina parts supplier collected about $20.5 million over six years from the Pentagon for fraudulent shipping costs, including $998,798 for sending two 19-cent washers to an Army base in Texas, U.S. officials said. The company also billed and was paid $455,009 to ship three machine screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451 to ship an 89-cent split washer to Patrick Air Force Base in Cape Canaveral, Florida, Pentagon records show. …The scheme unraveled in September after a purchasing agent noticed a bill for shipping two more 19-cent washers: $969,000. That order was rejected and a review turned up the $998,798 payment earlier that month for shipping two 19-cent washers to
Fort Bliss, Texas, Stroot said.

NR Condemns Fair Tax Proposal

In a move that is sure to generate feedback, National Review is urging Republican candidates not to support the Fair Tax. The editorial is somewhat disconcerting since NR should be happy that at least some Republicans are talking about free-market ideas. The same logic could be used, after all, to argue that Republicans should not support Social Security reform or advocate the elimination of the Department of Education.

I’ve always thought the flat tax is a politically better way of getting to a system that taxes economic activity only one time and at one low rate (see here for more information), so I don’t have a dog in the Fair Tax fight. But I am nonetheless disappointed that the flagship publication of the conservative movement is discouraging GOPers from bold proposals:

The tax code needs major reform to become fairer, simpler, and more efficient. The Fair Tax is one instantiation of those goals, but its political impracticality makes it fatally flawed. If conservatives force a choice between a Fair Tax and no tax reform at all, the latter is what they are likely to get.

…The great, undeniably attractive selling point of the Fair Tax is that it would allow the country to dispense with the IRS. But the sad truth is that if the federal government is going to collect as much money as it currently does — which the Fair Taxers say their system would — its methods of tax collection will inevitably be intrusive. …[E]very country that has ever tried to impose retail sales taxes this high has quickly moved to a Value Added Tax levied at every stage of production. Consumers rarely see or keep track of these taxes, and they seem to be fairly easy for governments to raise.

…A candidate who ran on the national sales tax would be able to run on nothing else. He would have to spend all of his time defending the idea. Off the top of our heads, we can think of three devastating lines of attack an opponent could use in television ads. One ad could argue that getting rid of the mortgage deduction would send home prices into free fall (something that voters are going to find especially worrisome now). Another could ask why senior citizens, having paid taxes all their lives as they made income, should have to spend their retirements paying taxes on everything they use that money to buy. A third could simply ask voters if they look forward to paying a brand new tax.
There are answers to each attack. But no Republican candidate, especially in the daunting environment of 2008, is going to want to have to make them. Republicans cannot win a national election without the tax issue. If they ran on the national sales tax, Republicans would be taking one of their natural strengths and making it into a liability.