The recent bankruptcy in Detroit should terrify you as an example of the steady decay of government competence in America. In 1950, Detroit had the highest per capita income in America. Today 40% of the traffic lights don’t work and one third of the ambulances are not functional. If you compare Hiroshima to Detroit you would think that Japan won the Second World War. Noted author Mark Steyn observes, “forty-seven percent of adults are functionally illiterate, which is about the same rate as the Central African Republic, which at least has the excuse that it was ruled throughout the seventies by a cannibal emperor.”
I have to tell you that I was overwhelmed by my e-mail request to you to weigh in on the split roll taxes and other issues for me to talk to Senator Joel Anderson about in a small roundtable on the 25th of July. I had over 75 replies and 40 that took the time to make well crafted points. The bottom line is that most all of you are fed up an angry with government. All but one of you is against split roll taxes (increasing property taxes on commercial property). My meeting went well and let me assure you that you were heard. I banded all your responses between two red sheets of paper and presented it to the Senator. His eyes popped and he immediately began thumbing through it. I told him to share with all of his friends (and enemies) in Sacramento. I also sent him a PDF version (which I will be happy to send to you if you e-mail me).
With regard to the repeal of prop 13 (split roll tax) the states is that the teachers union have gotten it qualified and it is only a matter of time until you will see it on a ballot near you. Here are a couple of “sound bites” to keep in mind and share with your friends (and enemies).
- This is a repeal of proposition 13
- Sixty percent of property tax revenue is from commercial property
- These taxes will be passed through from owners to tenants to customers
- This is a tax on all of us
- Split roll split your wallet
- Commercial property today, residential tomorrow
- This will raise the price of your Starbucks latte
Whether it is Detroit or California or Washington, DC the biggest concern I have is the collapse of the human capital. Detroit is not unique in its just a warning sign. Our own San Diego City is sinking in a human capital collapse. Weiner for mayor in NYC is another example. But it is not just politics; major league baseball has its own repeat All-Star offenders (Ryan Braun and others). On the other hand why are heroes like Dr. Shakil Afridi who delivered us Osama Bin Laden sitting in a Pakistan prison on a hunger strike after being tortured and sentenced to 33 years for his help?
It doesn’t matter where you stand politically, but George Bush (41) was right when he said that “character counts”. NY Times columnist Mark Leiburich says, “People used to come here to perform public service, now they come for self service and to get rich.”
Enjoy the Pizza!
Why the rant on “character”? Well it does count and it makes a difference and it is something that we at CDC Commercial have at the core of our business. I welcome you to visit our web site (www. CDCCommercial.com) and look at our mission statement which spells out very clearly each of our values.
So how is the market you ask? Getting better every day, I say. Is it a horse race? No. Is it a plow horse? Yes.
So while our economy is being run by the Federal Reserve as our bodies of government continue to be nonfunctional, I thought you would appreciate the economics lesson attached. Enjoyed a pizza,… I mean the story.
Suppose that every day, ten men go out for pizza and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men ate at the pizza parlor every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
‘Since you are all such good customers,’ he said, ‘I’m going to reduce the cost of your daily pizza by $20.’ Eats for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still eat for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to eat his pizza. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so the fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 ( 22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man, “but he got $10!”
Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too … It’s unfair that he got ten times more than I did!”
“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
The nine men surrounded the tenth and beat him up. The next night the tenth man didn’t show up for eats, so the nine sat down and had pizzas without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier. David R.
Kamerschen, Ph.D. Professor of Economics University of Georgia
