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Out of Control Policy Blog Archives: 8.4.13–8.10.13

Yet Another Pointless Contractor Sting Operation In California

The Contractors State License Board (CSLB) has announced that it had successfully busted 15 unlicensed contractors in a two-day sting operation in Concord, California. The announcement comes just ten days after they boasted that the Statewide Investigative Fraud Team (SWIFT) ensnared 79 home improvement contractors working without government permission in a “summer blitz.”

The investigators posed as home owners seeking "bids for painting, concrete, fencing, landscaping, HVAC, and tree work from suspects who were contacted through business cards, ads in online bulletin boards, including craigslist.org, and complaints filed with CSLB." All contractors who showed up to the sting house were issued notices to appear (NTAs) in court for "contracting without a license," a misdemeanor that could result in jail time and/or a heavy fine. Unlicensed contractors who are found through online advertisements were also charged with "illegal advertising."

One contractor, who had been previously busted, was charged with resisting arrest for warning others about the sting.

The CSLB mandates that people offering to work on projects with a combined worth (including the cost of capital and labor) exceeding $500 get a government license. Licensing requirements for contractors in California have been cited by the Institute for Justice and the Reason Foundation as being particularly onerous in comparison to the rest of the country.

As I previously attempted to summarize concisely in an article on occupational licensing in California, the requirements for becoming a licensed contractor in California are as follows:

To apply for a contractor’s license, individuals must have more than $2,500 worth of operating capital (defined as assets minus liabilities), submit an application along with $300, as well as at least four years of experience. To meet this four-year requirement, individuals may take three years of schooling, followed by one year of work experience under the supervision of a CSLB-approved contractor. Once applicants meet this requirement, they must submit fingerprints for a background check. Applicants must disclose any criminal history, even if the record was sealed, expunged or reduced; failure to do this is grounds for being rejected at this stage. Applicants then must take two exams: a Law and Business examination, and an exam covering the specific classification being applied for...This is just the licensing part, and speaks to no other regulations, insurances, permits and certifications they may need.

Given the frequency of these sting operations, one would think that the CSLB is aggressively going after a significant source of harm to consumers. The problem with this idea is that the CSLB sting operations are primarily (if not entirely) aimed against those willing to work on home improvement projects. The idea that homeowners can’t decide for themselves who they voluntarily contract with on “painting, concrete, fencing, landscaping, HVAC, and tree work” projects without government meddling and petty sting operations flies against any recognizable notion of a free society.  

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California Legislators Propose $11 Billion In Higher Taxes And Fees

While refusing to take responsibility for over $100 billion in unfunded pension and retiree health care obligations, California legislators spent the current legislative session coming up with new ways to extract money from their constituents. According to recent research by the California Taxpayers Association (CalTax), California legislators have introduced approximately $11 billion in tax increases and new or higher fees.

CalTax identified 66 pieces of legislation that have been introduced this legislative session that would increase monetary burdens on Californians. Fortunately for taxpayers, only five tax and fee increases of the 66 proposed have been passed so far. The five increases amount to $355.6 million in additional burdens to taxpayers. The largest of these is SB 78, which “imposes a sales tax on gross receipts of a Medi-Cal managed care plan, as defined” in the statute. This one-time tax is estimated to cost taxpayers $340,000,000.

As a sampling of pending legislation:

  • SB 391: “Imposes a new $75 recording fee for every real estate instrument, paper, or notice required or permitted by law to be recorded. The funds would be used for affordable housing, and for administering housing programs.” (Cost: $300,000,000)
  • AB 8: “Extends and authorizes increases in several vehicle-related taxes and fees to fund various programs to encourage use of alternative and renewable fuels.” (Cost: $264,000,000)
  • SB 700: “Imposes a new 5-cent tax on every single-use carryout bag provided to customers at any retail establishment…” (Cost: $169,900,000)
  • AB 187: “Imposes a new 10 percent tax on ammunition…” (Cost: $92,400,000)
  • AB 760: “Imposes a new tax of 5 cents per bullet on ammunition sold in this state.” (Cost: $55,000,000)
  • SB 782: “Requires owners of sexually oriented businesses to pay a new $10 tax for every customer entering the business. The tax would be administered by the Board of Equalization, and funds would be deposited into a new fund to pay for sexual assault prevention programs. The tax would sunset in 2024…” (Cost: $35,000,000)

The 66 pieces of legislation by CalTax does not include a group of proposed Constitutional Amendments proposed in the Senate and Assembly that would make it easier for local governments pass tax increases and/or bond measures. More on that in a previous blog post here.

Taken together with California’s already high income, sales, corporate, and property taxes, the extensive proposals to increase taxes and fees on Californians indicate that California legislators have yet to get a grip on reality. While legislators continue to ignore over $100 billion of debt, it insists on treating taxpayers like  ATM machines while maxing out the credit cards.

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More Thoughts on Plastic Bag Bans

A couple of months ago, I wrote a column for the U-T San Diego on the proposed statewide plastic bag ban in California (which, thankfully, ended up going down to a narrow defeat in the state Senate). The article discussed how such an arbitrary government ban would harm individual and economic liberties by violating consumers' and stores' right of contract by dictating stores' business practices, preventing people from using goods they want, and significantly harming the plastic bag industry, costing many their jobs. In addition, the piece noted how those in the anti-plastic-bag crusade tend to ignore inconvenient environmental facts about how paper and reusable bags consume more resources than plastic bags, and how reusable bags can even be harmful to public health.

The claims that plastic bags are worse for the environment than paper bags or cotton reusable bags are dubious at best. In fact, compared to paper bags, plastic grocery bags produce fewer greenhouse gas emissions, require 70 percent less energy to make, generate 80 percent less waste, and utilize less than 4 percent of the amount of water needed to manufacture them. This makes sense because plastic bags are lighter and take up less space than paper bags.

Reusable bags come with their own set of problems. They, too, have a larger carbon footprint than plastic bags. Even more disconcerting are the findings of several studies that plastic bag bans lead to increased health problems due to food contamination from bacteria that remain in the reusable bags. A November 2012 statistical analysis by University of Pennsylvania law professor Jonathan Klick and George Mason University law professor and economist Joshua D. Wright found that San Francisco’s plastic bag ban in 2007 resulted in a subsequent spike in hospital emergency room visits due to E. coli, salmonella, and campylobacter-related intestinal infectious diseases. The authors conclude that the ban even accounts for several additional deaths in the city each year from such infections.

In addition, I made a quick mention of the fact that a plastic bag ban would bring with it a new bureaucracy and regulatory costs that would ultimately fall upon consumers and taxpayers. On this point, I received a message from Anthony van Leeuwen, who runs the Fight The Plastic Bag Ban site. In his note, he confirmed my suspicions and detailed how such bag ban bureaucracies are affecting consumers and taxpayers who shop and live in the many local governments in California that have imposed such bans:

One of the aspects of most ordinances in California requires retailers to send quarterly, semi-annual, or annual reports to the local jurisdiction on the number of paper bags issued, the money collected from fees, and efforts the store made to promote reusable bag use.

These reports must then be processed by the local jurisdiction to ensure the ordinance is enforced, and data analyzed and reports made to the city council or board of supervisors. This then becomes a burden for the life of the ordinance unless the ordinance is amended to remove the reporting required after five years or so.

In addition, complaints and reports of non-compliance must be investigated—including site visits to stores—incurring local jurisdiction costs borne by the taxpayer.

Moreover, the costs of a forced switch from plastic bags to paper bags (for a fee) and reusable bags are quite large. An article on FightThePlasticBagBan.com reports that a statewide plastic bag ban would cost California residents more than $1 billion a year (see the full study here).

There is already talk of reviving the statewide bag ban in the next legislative session, but in the interests of individual freedom, economic prosperity, and sanity, let us hope that this idea is trashed instead of recycled.

See my full U-T San Diego column, "Bag ban bad for freedom and environment," here.

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Oregon Leading the Way with Mileage-Based User Fees

For more than a decade, Oregon has been at the forefront of efforts to find a replacement for declining gas tax revenues. Earlier this month, the legislature passed a groundbreaking bill to begin charging volunteers based on how much they drive on state roads, instead of how many gallons of gas they buy in the state. The bill, passed by the legislature and awaiting the governor’s signature, establishes a program that will test the feasibility of transitioning away from gas taxes towards mileage-based user fees (MBUFs), which charge travelers based on how many miles they drive.

This legislation, building on years of research and multiple demonstrations by the Oregon Department of Transportation, will provide 5,000 Oregonians with the option to pay 1.5 cents for each mile they travel on state roads, rather than paying the state’s 30 cents per gallon gas tax. Participants will be refunded their share of the gas tax each time they fill up, in exchange for paying the fee on miles traveled. Oregon recorded over 19.4 billion vehicle miles travelled in the state in 2011.

This is not only a more logical and fairer method of paying for state highway needs, it is also inevitable. As far back as 2001, state officials began investigating ways to offset declining gas tax revenues with other methods of paying for roads. Over the next few decades, federal fuel economy standards will increase average fleetwide fuel efficiency, encouraging more driving while collecting less tax revenue for each mile traveled. The rise of hybrids and electric cars has brought the issue to a head, as many citizens have noticed that electric car owners are literally free riding on the state’s highways, which are still maintained in large part by gas taxes.

The key to securing passage for the mileage-based user fee (MBUF) was that it be a voluntary, opt-in program. Other important factors were ease of use, privacy protections and options for participants. The bill does not dictate which technology drivers have to use, but instead allows them a choice between a variety of payment methods.

One possibility, used in Oregon’s pilots, is a GPS device or smartphone app that records the raw number of miles driven in-state, so as not to charge drivers for miles driven outside Oregon. It would not transmit citizens’ specific travel history or coordinates, and by law all personally identifiable information would be erased within a month. Another option is a device similar to an odometer that simply keeps track of total miles traveled; this provides additional privacy but wouldn’t distinguish between in- and out-of-state travel. For those who simply don’t want to think about it, ODOT also allows participants to opt-out and pay a flat monthly fee.

Importantly, revenue from the MBUF would be earmarked exclusively for the state’s highway fund, so that it can only be used for road construction and can’t be raided for politicians’ pet transit projects, such as the wildly expensive light rail line that derailed the Columbia River Crossing project last month. While the program isn’t perfect, it is still a long overdue step towards a realistic, modern approach to paying for roads.

Future improvements to the MBUF could include congestion pricing—varying the fee based on location and time of day—to incentivize driving during off-peak hours. An earlier ODOT pilot used GPS to note when volunteers drove in the Portland metro area, and last year San Francisco also contemplated a variable MBUF to help manage congestion during rush hours. Other changes might include an annual fee for completely electric cars similar to one that Washington State passed in 2012. Another bill to impose a 1.55 cent per mile tax on vehicles with higher than 55 mpg fuel economy died in committee because it lacked the required majority for new taxes.

In 1919, Oregon became the first state in the nation to institute a gas tax to help fund transportation infrastructure. Almost a hundred years later, it is leading the way from that model towards a more fair, efficient and responsible road payment method. This program will provide an ongoing model for policymakers around the country. Thanks to innovative policies such as MBUFs, Oregon will continue to be on the cutting edge of transportation funding in the 21st century.

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Sen. Coburn Cites Reason in CDBG Bill Amendment

Congress may be on recess for the rest of August, but come September an interesting bill worth keeping an eye on will be House bill S.1243, the annual Transportation, Housing and Urban Development, and Related Agencies Appropriations bill.

Before congress went out of session, Senator Tom Coburn (R-OK) cited Reason Foundation's recent policy brief "Crony Capitalism and Community Development Subsidies" in two amendments (viewable here and here) added to the original bill.  Theamendments would require the Department of Housing and Urban Development to report on potential ways to update or replace the current Community Development Block Grant (CDBG) funding formula-which has remained in its current form since 1978-as well as require the funding level of the CDBG program to match the President's FY2014 budget request of $2.798 billion for the program

In both amendments, Sen. Coburn, cited Reason's analysis of CDBG allocations in which 8 out of the 10 highest-income counties in the U.S. were found to have received millions in grants while the 10 lowest-income counties didn't receive any funds.

The bill has become quite controversial because of its substantial cuts to the CDBG program. Those cuts while welcomed, won't end the cronyism and corruption inherent in the program. As we wrote in the Reason brief, HUD hasn't updated its CDBG formula, which factors in things like population, poverty, and pre-1940s housing, in over 30 years. That has led to questionable grants in the past few years, such as $200,000 for a Mark Twain museum in Connecticut, $588,000 for a marina in Louisiana, and $220,000 for a Brewery in Michigan to expand its facilities. Not only are these projects considered non-essential by HUD guidelines for CDBGs, but they are examples of private organizations collecting government subsidies to gain a competitive advantage. Even with funding cuts, wasteful projects like these are still bound to be funded as they have been in the past.  

Still, the Coburn amendment to change the formula on the other hand, might alleviate some of the cronyism which has allowed millions of dollars (for supposedly needy communities) to go towards funding political pet projects that only benefit narrow private interests in some of the richest counties in America at taxpayer expense.

It will be worth watching the progress of S. 1243 when Congress returns. Right before the recess, the legislation was pulled from voting consideration in the House because of the controversial cuts. House Appropriations Committee Chairman Hal Rogers (R-KY) has called the prospects for passing this bill in September "bleak at best", as a result of the vote count on passage before it was pulled.



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If Cities Want More Affordable Housing, Let the Market Work

Across the United States, major cities are experiencing the gentrification of their neighborhoods and city officials are constantly calling for more affordable housing to halt this process. Unfortunately many of these officials do not know -- or refuse to acknowledge -- that their housing regulations are a contributing cause of gentrification.

To read more see the entire commentary here on reason.org.


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