Coyote Blog

It is amazing how certain institutions remain true to their DNA.  I have already written twice about petty, mindless bureaucratic management in Mono County, California.  They have yet again surpassed themselves with absurd inflexibility.  I have occupancy licenses for each of our campgrounds there, about 12 sites.   We are entirely current and have been punctilious about paying our County taxes on all sites month after month for 10 years.

Then, recently, apparently they sent out renewals on the licenses that somehow did not get to our mail box.  So we missed the renewal deadline.   Of course their position is that we are still responsible for renewing, but realize I have 175 locations across the country with zillions of license registrations.  They admit we are entirely up to date on our taxes, we just did not submit the renewal fee for the licenses.  There is no approval or regulatory process with the licenses, its just a way for them to collect  a fee.

Well, without any second notice or phone call or any other such normal business courtesy, they canceled all the licenses.  I now have to fill out pages of license applications 12 times, and submit 12 penalty fees, all for a total cost of over $1,000 and hours and hours of my time.

Can you imagine the outcry if the phone company or electric company or your landlord turned off service after one missed payment without any kind of second notice?  But of course these guys are the government so we can be sure that they are public-spirited, lol.  Seriously, they could not even turn the licenses back on with a payment, I have to start entirely from scratch with new applications.  This is like 14 days after the payment due date.  I called them 1 hour after receiving the 2nd notice to sort this out, but for these guys the second notice is a termination notice.  Nice.

A month or two back, I was participating in the California Regional Council of Rural Counties annual meeting.  At this conference, I was there to have a sort of informal debate on climate change with Joe Nation, a former California State legislator and currently a private consultant on climate issues.

To some extent my role was frustrating for the audience, because they were already stuck with complying with California's AB32 (a sort of state CO2 cap and trade system) and arguing that such legislation was pointless only served to upset them  (my presentation, both in powerpoint and video is here).  By the way, we often lump "government" together, but I can tell you that while the governor and the legislature of California may be 100% behind CO2 alarmism, the county commissioners were very sympathetic to the skeptic position.

Anyway, towards the end of my presentation I made a plea for a carbon tax over cap-and-trade, and said in fact that California's AB32 was living proof of my argument.  The California Air Resources Board (CARB), which is tasked with implementing the plan, has already added hundreds of people to its staff and worked for over two years, is still no where near finished with rule-making.  The complexity, and the battling political constituencies, is simply mind-boggling.  It is already clear that the result is going to be a Byzantine, Rube Goldberg structure of detailed industry-specific reporting and permitting rules.  Nearly 100% of CARB's time is taken up today with various groups running to them begging for some sort of special treatment (think "carbon bailout" and you will get the idea).  No one thinks the process is fair or rational.

Under cap-and-trade, every single industry will report greenhouse gasses, have industry and firm-specific limits, myriads of permits, etc.  For example, we had detailed discussions that day of how cattle flatulence will be treated and measured.  The alternative is a carbon tax, which is dead simple.  There is one single rate to set - the tax per weight of carbon in fuel.  Fuels with more carbon per BTU, like coal, thereby get higher taxes.  The system works like a sales tax, and could be administered by the BOE (who runs the California sales tax system) in its sleep.

The cap-and-trade system is far more expensive than a carbon tax.  By the basic laws of supply and demand, both systems have to raise the cost of burning certain fuels by about the same amount to get about the same reduction in use.  But the cap-and-trade system brings a huge overhead burden, both in government bureaucracy as well as compliance costs, that make it far, far more expensive for the same amount of benefit.  Until he started sitting on the boards of companies who depend on these inefficiencies in the cap and trade system to make money, Al Gore advocated a straight carbon tax over cap-and-trade.

But we had an opportunity that day.  Because the man who claims to be the author of AB32 is none other than Joe Nation, who was right there in the room.  So we asked him why he took this approach.  Here is what he said, really a civics lesson in one sentence:

I tried pass a carbon tax first, but there was absolutely no support for it among legislators [the same ones who overwhelmingly supported AB32]

If you can understand why this is, you can understand a lot about government.   Because all these concerns that you and I might have about crafting rational public policy are not important to legislators.  Here is how they think about it:

• Private implementation and compliance costs are meaningless to legislators.  There is no public measurement or accountability for these costs, and most of these costs fall on businesses, who can be ignored as unsympathetic in political discourse.  I operate in Mono County, California, and they put out a new set of reporting requirements driven, they said, by the needs to save a few hours a year of their auditors' time.  But compliance with these new rules costs our company 10-20 hours, at least, a year.  And we are just one of many, many companies reporting.  I complained that it was crazy for them to ask taxpayers to spend hundreds of hours of labor to save them just a few, but they could not have cared less.

• For legislators, particularly in California, creating large new bureaucracies is good.  It creates a patronage relationship between the legislators and these new government employees that is almost quasi-feudal.  Public employees are an enormous source of support for incumbent politicians, and these bureaucracies also offer future employment opportunities for legislators once they leave office (nice article here).

• First, last, and always, the vast majority of politicians are gutless.  That means if they can pass the same tax in a way that is more hidden (ie cap-and-trade vs. carbon tax) they will prefer this approach, even if it means the tax is substantially less efficient.  In the case of cap-and-trade, since costs are hidden and spread around like peanut butter rather than easily identifiable, they can pretend the costs don't exist and, if someone starts worrying about rising electricity costs that result, simply blame the rising costs on the evil power/oil/coal/etc companies.  Obama has brilliantly taken this one step further, by outrageously claiming, in the broken windows fallacy of all time, that cap-and-trade will actually boost the economy through green job creation.

• A carbon tax gives politicians very little room to extract personal value from the electorate.  Really, there is only one number for everyone to argue over.  But cap-and-trade is a Disneyland for lobbyists.  There can be special exemptions, industry specific caps, firm-specific caps, geography-specific caps.  Once everyone sees the first few guys giving campaign donations and parading into CARB for special treatment, everyone feels like they have to in order to avoid being the one guy left out.  My guess is that cap-and-trade will spawn more lobbying than any other legislation in US history.  And politicians, no matter what their public stance, love lobbying, because everyone who comes to ask them for something knows there has to be a quid pro quo.

Update:  A number of related thoughts and posts here, at Reason.

I just encountered an absolutely classic bit of government think.  Here is the background.

In Florida, on each night stay in the campgrounds we run in Marion County, we collect a 6% state sales tax, a 0.5% county sales tax, and a 2% tourist development tax, for a total of 8.5%.  Until this month, we reported and paid all three taxes to the state of Florida on one simple return.  The state then divvied the money up to the counties.  Apparently, this latter process could take up to 90 days before the County got their tourist development money.

The County commissioners of Marion County did not like waiting 90 days for their tourist development money.  Remember, this is not general revenue money, but supposedly trust fund money that must be spent on tourist advertising and the like.  Also, recognize that 90 days for a government body to disperse money is pretty normal - I find I often have to wait as long as 6 months to get a check out of the feds.

Anyway, the County wanted its money faster.  So it decided to collect the money itself.  First this involved more staff hours and designing a new online collection system, costs that are completely incremental because the state of Florida was performing these functions before (and still are performing them).  Today, it now requires two systems and clerical staffs to collect money that was once required by just one. 

Already, this seems like idiocy to any business person.  Is adding a whole new staff and systems really worth getting money 90 days faster?  I guess it is possible, but even if one could argue this point, we now get to the real government-think.  Because there is no way anyone in whatever cost-benefit trade-off they ran considered the time and effort that would be required of individual taxpayers.  Even in my small company, this will now require extra clerical labor each month as well as an initial system reprogramming to add the extra tax authority.  If one considers thousands of other businesses in the exact same position, the amount of investment is enormous.

But in my experience, when running cost-benefit trade-offs, the government never, ever considers investment and time required of the citizens who must comply.  I have seen governments make changes designed to save a few man-hours a month in their own clerical departments that cause thousands or millions of man-hours of extra work among taxpayers.   A year or two ago, Mono County, California forced us to go from one to twelve reports each month for our lodging tax payments just to save auditors a few hours work every three years.   And do you know why?  Because the government treats us all as serfs.  As far as they are concerned, our labor is free, because they have the power to compel us to do whatever they ask without compensation.

Postscript:  Here is my other Florida county tax collector pet peave.  All the tax collectors in Florida put their own personal name all over everything.  Their web site is not "marion county tax collector"  but "George Albright, Marion County Tax Collector." Their stationary has this man's name all over it.  When I right a check to them, I am supposed to include this man's name.  I hate this kind of public employee self-aggrandizement.  It is a blatant use of taxpayer money to try to aid one's next election chances, and it is a waste of money when a new person comes in office because every piece of printed material must be thrown out and reprinted.  This seems to be fairly unique to Florida.  Look at the Marion County links for other states in the same search and you don't see the same thing going on in those states.

I am seriously late on this one, but I still want to show my support for Lance Dutson, author of the Main Web Report, who is being sued by an advertising firm and harassed by the state government for uncovering some really dumb activities at the state tourism board.  A summary of what he found is here, and the story of the lawsuits is here.

This story rings absolutely true with me.  Given our significant experience with government agencies, I have seen time and time again that when government bureaucrats embark on an activity out of their traditional comfort zones (in this case, Internet pay-per-click advertising, a new activity for most of us) they tend to combine lack of training with total arrogance that they know exactly what they are doing.  Within my company we have dubbed this "condescending incompetence", and we see it all the time.

In this case, Mr. Dutson points out that by bidding up the price in Google adwords of travel-related terms, they are actually hurting Maine travel businesses, both by driving up their advertising costs and by diverting clicks from an actual tourist business to a government site.  And how could any sensible cost-benefit analysis lead to paying over $15 to get one (1) viewer to the government tourist web site?  The answer is, it can't.  The only thing that can drive this behavior is ignorance combined with a skewed incentive system (e.g. some bureaucrat wanted a line in a performance review or PowerPoint chart that said their web site was top-ranked on every key Google search).  And he rightly points out some disturbing conflicts of interest at the advertising agency, as well as the total bonehead maneuver of putting an adult phone-sex number in the ad copy.

By the way, I despise state tourism agencies.  Most of the money they spend is a waste and the rest goes to directly benefit a few cronies.  Most of our local dollars go to high-profile expenditures that gets the governor some extra media buzz but does zero to get anyone new to the state.   And note that I run a business that depends 100% on tourism.  These state expenditures do nothing for me.  In some cases, my customers pay as high as 12% lodging taxes (e.g. tax and bureaucracy hell Mono County, California) to fund tourist boards who don't even advertise the types of operations I run (campgrounds and marinas).

Wow, was that a hassle.  I just finished moving my corporate office.  Hopefully, now that everything is hooked up again, blogging can resume.

Update: And per the comment, yes I did throw a bunch away, but it is still staggering how much waste paper we have to keep for the government for 3 to 5 to 7 years.  For example, I just got an audit from bureaucracy hell Mono County, California, which wants all my detailed customer campground check-in logs from three and a half years ago. 

I have written a number of times about bureaucratic hellhole and most bureaucratic county Mono County, California.

Today, they confirmed by mail that my 11 campgrounds, all within 3 miles of each other and managed under a single contract as a single complex with the US Forest Service, now need to be registered separately with 11 tax ID's and 11 separate sales tax reports.  I must fill in the same detailed application 11 times, and each application has 3 pages plus 3 carbons for a total of 66 pages of information.  So, in order to collect exactly the same amount of tax that I have been collecting on exactly the same campgrounds for the last several years, Mono County needs 66 pages of paperwork, and apparently needs these same 66 pages filled out again each year.  Also, instead of filing a single consolidated sales tax report each quarter, I now must file 11 separate reports for a total of 44 a year. 

Can you imagine the insanity if the whole state adopted this approach?  That McDonalds in California or Unocal would have to file thousands of reports a month instead of one?  This is what happens when you let bureaucrats run amok.

I got a call today from Mono County, California.  They require us to charge our visitors a 12% lodging tax on campground stays in any of the 11 campgrounds we operate in our county, which we report on a single quarterly filing.  Today, the County has suddenly decided that they need a separate sales tax report filed each period for each campground, so instead of 1 we need to file 11.  If every taxing authority tried to pull a Mono County on us, we would
have to file at least 250 separate sales tax reports each month.

In case you miss the implication of this, consider if the state of California did this for sales tax.  It would mean, say, that Unocal would have to file a separate sales tax report for every single gas station in the state - ie thousands of them each month  Of course, even California does not have the guts to require something so absurd.  We, like Unocal, register all of our separate locations with California but report all their sales and sales taxes in one unified report. 

So why can't Mono County be satisfied with the same approach?  Well, apparently a couple of their auditors had to spend some extra time trying to figure out which campgrounds belonged with which permits in a recent audit.  In order to save their auditors a few minutes of time in the future, they want to require me and others to spend many extra hours with these additional filings.  This is typical of government bureaucracies, which in doing cost-benefit analysis put enormous value on their own time but value taxpayers time at $0 an hour.  If all the reports I file had to be justified while valuing taxpayer's time at even $50 an hour, I would have a lot less feeding of the government to do.  More on my efforts to feed Vol (gratuitous Star Trek reference) here.

Note that this is the newest in my series of "real-world" small business issues.  Other posts in this series include Buying a Small Business and Working with the Department of Labor

One of the things I did not mention in my series on buying a small business was the notion of complexity.  Our business manages over 175 sites with 500 seasonal employees in 10 states.  I have friends who own businesses that have the same sales, and more profit, from working alone from their home.  As I often tell people, I love what I do, working in recreation and spending most of my time in National and State Parks, but it is overly complex for the money we make.

The one advantage of this is that, despite being a small business, I get to observe business practices in many parts of the country.  And one business-related practice that varies tremendously from state to state is sales taxes.  (By the way, before I bought this business, I was a strong Federalist.  Putting most regulatory power in the states slows government encroachment.  It also limits anti-business regulation, because states know that such unilateral regulation will just chase employment across state lines, as California has found out.  However, having to deal with 10 different tax and regulatory regimes every day is causing me to revisit Federalism a bit).

Anyway, based on this experience, I will dedicate the rest of this post to my observations of the good and bad of state sales tax systems.

Continue reading ‘The Good, the Bad, and the Ugly of State Sales Tax Systems’ »