The poor need more economic freedom. | California has empowered anti-development zealots. | Can states discriminate against religious organizations? | Our corporate taxes are not low enough.
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April 22, 2017 |
If we want to create more opportunities for the poor, then we need a lot less government and a lot more economic freedom. California is a terrible place to try to buy a home, and the reason is all the people who already own homes. A case about grants for coating playgrounds with rubber could have a big impact on school choice programs. Canada’s corporate tax rate is lower than that of the United States, yet produces more revenue as a share of the economy.
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What would really help the poor is less government and more economic freedom. In a new report, Daren Bakst and Patrick Tyrell show that government is very good at doing two things: (1) foreclosing opportunities for the poor by raising the costs of employing low-skilled labor and the costs of starting a small business; and (2) making basic consumer goods that everyone needs—and that the poor spend a disproportionate share of income on—more expensive. Restrictions on trade are a prime example of the second problem. Bakst and Tyrell write: “Import restraints, such as import tariffs on food and clothing in the U.S., impose a large financial burden on the poor by driving up prices. Americans paid a 20 percent import tariff on some dairy products in 2016, a whopping 131.8 percent import tariff on certain peanut products, and up to a 35 percent import tariff on canned tuna. “A 2013 report by the International Trade Commission estimated annual welfare benefits from liberalization of import restraints for various sectors, including food. Liberalization of import restraints would benefit U.S. consumers annually by an average of $50 million for cheese, $277 million for sugar, and $8 million for tuna between 2012 and 2017. “Tariffs on imported clothing were 8.9 times as high as those on imported goods overall in 2015. Such restraints on imports are a hidden tax hitting the poor’s pocketbooks each month. “Import restraints on food and clothing are regressive in nature. […] [A] greater share of income from low-income households goes to food and clothing than from higher-income households. In 2015, those in the bottom 20 percent of income spent 33 percent of their after-tax income on food. This compares to 11.6 percent for all consumers and 8.7 percent for those at the highest income level. “The lowest-income households spent 6.8 percent of their after-tax income on clothing in 2015. This compares to 3.1 percent for all consumers and 2.8 percent for the highest-income households. “It is not merely imported goods that are affected. Import restraints on imported goods also raise the price of domestically produced goods because import prices do not reflect demand. The poorest Americans are hit the hardest. They have to spend more for food and clothing, and every dollar that is spent as a result of these import restraints means that they cannot use that money to buy something else they need. By removing these import restraints, Congress would significantly help individuals at all income levels, especially the poor.” [Internal citations omitted.] [The Heritage Foundation]
Africa needs more economic freedom. Iain Murray and Daniel Press write: “One of the development community’s most often cited priorities is the need for African economies to ‘formalize’ their economies. This means shifting business activities from operating outside a country’s legal framework toward a status recognized and protected by law. There are many benefits to formalization. Registered companies have greater productivity and investment, create more jobs and growth, and enjoy legal protection against fraud for both themselves and their customers. They also have access to credit and capital, which provide s opportunities for growth. “Studies conducted across Sub-Saharan Africa estimate the informal economy accounts for some 50 to 80 percent of the region’s GDP, 60 to 80 percent of employment, and as much as 90 percent of new jobs. This shadow economy is a natural response to the stifling restrictions governments place upon businesses. As Nigerian political commentator Olumayowa Okdediran notes: ‘Without the rule of law, it’s quite difficult to make a living, but people do it. They rely, not on the state, which is often a failure, but on traditional African customary law.’ So while informal economies may be a necessity, driving so much economic activity underground creates insecurity that stunt s development, distort s the rule of law, hinder market formation, and impede s growth. “While thousands of pages have been written lamenting the prevalence of economic informality in the developing world, few have attempted to tackle the root cause of the problem. Experts often blame lack of infrastructure, education and skills training, and limited access to technology. Overwhelmingly, however, informality is due to government policies that restrict economic liberty. By imposing burdensome barriers to marketplace entry, many governments prevent formalization. As Huzaifa Shabbir Hussain of the Center for International Private Enterprise (CIPE) argues: ‘When taxes are too high, business regulations too onerous, and private property rights inaccessible for many, businesses that would otherwise enter the formal economy cannot.’ What Africa needs is a dose of economic freedom.” [Internal citations omitted.] [Competitive Enterprise Institute]
Californians need more economic freedom—especially in the housing market. A new report by Kerry Jackson catalogs all the ways the state has made it hard to build new housing—leading to Californians facing the third highest median home price in the country. The barriers include California’s Environmental Quality Act, which imposes onerous environmental impact statement requirements and allows opponents of development to litigate against construction; affordable housing mandates; density controls; rent control; minimum parking space requirements; and excessive permit fees. On top of all that, a mindset of NIMBYism and BANANAism pervades the state, writes Jackson: “NIMBYs: Not every CEQA challenge is based on environmental concerns. Hoover’s Kaye says CEQA ‘provides an easy litigation path to almost anyone who wants to block a development project.’ The Not In My Back Yard (NIMBY) special interests who simply don’t want further development in or near their neighborhoods commonly use CEQA to thwart projects. “The Legislative Analyst’s Office reports that opponents employ not only CEQA but local land-use policies to block new housing. This ‘opposition to new housing appears to be heightened on the California coast’ where hesitancy ‘about new housing can lead residents to pressure local officials to use their land-use authority to slow or block new development or may result in residents directly intervening in land use decisions via the initiative and referendum process.’ “NIMBYism isn’t limited to coastal areas. Carson Bruno, an assistant dean at the Pepperdine School of Public Policy, says ‘communities up and down the Golden State have successfully prevented countless new development projects.’ Much of the NIMBY opposition is directed at infill housing and therefore doesn’t affect the state’s housing stock, but in many instances, the opposition is targeted at new development and therefore restricts needed increases in the supply. “BANANAs: Members of this group want to Build Absolutely Nothing Anywhere Near Anyone. They will use any means they can to block development. A report from the Center for California Real Estate says BANANA tactics ‘often include writing news releases, letters to the editor, and op-eds; soliciting support from elected officials; testifying at public hearings; calling radio talk shows; organizing and publicizing town hall meetings; conducting petition drives; placing postings on social media sites; (and) establishing coalitions of like-minded citizens.’ Like NIMBYs, BANANAs help drive the anti-growth policies that in some jurisdictions cap new development and/or give wide latitude to review boards that hold the future of development in their hands.” [Pacific Research Institute]
A case about grants for coating playgrounds with rubber could have a big impact on school choice programs. Anne Ryland explains: “When the Trinity Lutheran Child Learning Center applied to a state grant program to help resurface its playground, its application was denied on the basis of a provision in the Missouri state constitution that prevents public aid from going to religious institutions. […] “Today, despite their origins in bigotry, Blaine Amendments or similar prohibitions remain in 38 state constitutions, including Missouri. The Supreme Court has already acknowledged and disavowed the discriminatory history of Blaine Amendments, most notably in Mitchell v. Helms, where the court found it permissible for public funds to be distributed in the form of loans to both public and private schools. “Based on oral arguments from Trinity Lutheran v. Comer, the Supreme Court is once again preparing to issue a decision on the question of state aid to a religious institution. “As Elizabeth Slattery, legal fellow in The Heritage Foundation’s Edwin Meese III Center, notes: ‘If Trinity Lutheran wins the day, it will be a signal to states that they may not discriminate against churches under the guise of Blaine Amendments.’ “While Blaine Amendments have long threatened the exercise of religious liberty for schools and churches, they have also presented a particular obstacle in the area of school choice. “School choice opponents have repeatedly used the pretext of Blaine Amendments to challenge the constitutionality of school choice legislation. “School choice opponents argue that the public funds used in voucher or education savings account programs violate Blaine Amendments, since the money can be used at private, religious schools. “However, several state supreme courts have already determined that Blaine Amendment challenges do not affect private school choice programs because public funds are given to individual parents and not directly to religious institutions. “As a result, a decision in favor of Trinity Lutheran could have an advantageous effect for the growth and introduction of school choice programs across the country.” [The Daily Signal]
Our corporate taxes are not low enough. Chris Edwards notes: “While Canada’s 15 percent federal corporate tax will raise 2.1 percent of GDP this year, the 35 percent U.S. federal corporate tax will raise just 1.7 percent. Thus, the Canadian corporate tax raises relatively more than the U.S. tax—even though the rate is less than half the U.S rate.” |
 The Heritage Foundation |
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