The Answer!

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We raised the question "What Does Government Do Well?" recently, and today, in the newspaper, were given the answer: plunder!!

The state, as well as its political subdivisions, regards citizens in the same way that a mugger eyes a prosperous-looking pedestrian: a source of plunder. It is displeased if the victim somehow evades its grasp. An example is the treatment of Ford by the St. Louis subdivision of Hazelwood, where Ford has a plant that it considered closing. A cash cow that might dry up!

The story in the newspaper today has the same plot, with different characters. This time the would-be mugger is the city of St. Louis, and the victim that might escape is a large law firm — one of the country’s largest. John Danforth was a partner. Another partner is an executive of the Federal Reserve Bank. The outfit is well connected, in other words. It has over 650 employees, and when the city got word that it might re-locate to the county, the mayor and his henchmen went to them to discuss it. Eventually, the city made a detailed offer in a seventeen-page letter, which was to be kept confidential, because the offer was "out of the ordinary." Of course, it was leaked.

The offer — should we simply be blunt and call it a bribe? — was rather complex, but amounted to 25 million if the firm would sign a 25-year lease at another downtown St. Louis location. It included a 25-year property tax abatement of 50%, with no property tax at all for the first 10 years: a savings of 7.5 million. Payroll and other tax breaks would add another 12.5 million in savings. There would also be some sort of leasing arrangement allowing a savings to the firm of 677,000 in sales tax for construction materials: an offer never made before to any company. And the city would own such equipment as computers and furniture, which it would lease to the lawyers for a saving of 138,000 in property taxes. And there would be a 4.7 million saving in state and federal tax credits. Nice!

It raises some interesting questions. Taxation has become so commonplace that the reason for it is seldom asked, much as one does not ask the mugger why he needs the money. But should one have the temerity to demand a reason for the looting, the answer is that the city (state, feds, etc.) needs money to provide services, such as police, firemen, trash collection, street maintenance, etc. But if the law firm does depart, will it be a total loss, tax-wise, to the city? Hardly, because some other firm will probably fill the vacated space, and also pay taxes. What if the tax revenue from the new company is only half of that now received from the law firm? Will the city’s costs for police, firemen, etc., for that part of town, be halved? Or look at it from another direction. Before the lawyers moved into the building, perhaps the tenants who occupied the space paid only one-fourth the taxes that the lawyers pay. Did that result in a saving to the city for its services? When the lawyers moved into the place, did the city have to spend more on those services? In other words, is there any relationship between what an individual or firm pays in taxes, and what is received in return? Apparently not. Indeed, one could make a strong argument that individuals — I don’t know about companies — who pay the least taxes receive the most services. Companies, of course, can pass the cost of taxation along to their customers. So the idea that taxes pay for city services doesn’t make much sense, even assuming that the services are desired, which may not be the case. No matter: you pay for them anyway. Why, then, does a government tax? Because it can!

There are thousands of firms paying taxes to the city of St. Louis for the privilege (?!) of working there. Are all of them offered tax incentives to remain in the city? Well, some are, some aren’t. The really big ones can bring the city fathers running if they drop a hint that they’re pulling out. Why would a firm want to leave? Maybe because of precisely the sort of corruption we’ve been describing. Think about it: an organization — the government — which has precious little reason to exist in the first place, demands money from productive people or companies for services which may not be wanted or necessary, and charges different victims different fees for the same services. There’s nothing like it in the free, rational, world!

The Constitution of the State of Missouri states: "The power to tax shall not be surrendered, suspended, or contracted away, except as authorized by this Constitution." (Art. X, Sec. 2) I can’t find any section of the Constitution that authorizes St. Louis to negotiate special taxes for a law firm. And the next section reads, "Taxes — shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax." A joke, surely! If one were inexcusably naïve, he might think that the government of St. Louis would give a rap about the Constitution! And if his naiveté was absolutely pathological, he might believe that a gaggle of lawyers would have some concerns about the supreme law of the state. Aw, come on! It’s whitened sepulchers, in the form of perks and power. The boys in power loot and plunder, and their victims shrug it off, because in return for losing their wallets, they can keep their coats and pants and Rolexes. As Bastiat pointed out, when men adopt plunder as a way of life, they develop a moral code that glorifies it, and a legal code that justifies it. Plunder: it’s what the state does well!

Dr. Hein [send him mail] is a retired ophthalmologist in St. Louis, and the author of All Work & No Pay.

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