The Incompetence of the Political Class

Actually, the general incompetence of the government is a good thing; it keeps the government, most of the time, from really doing much that harms us. And that was the goal of those who created the constitution. As Thomas Jefferson has been quoted as saying, “The best government governs least.” By dividing the government into three competing branches, the legislative, executive and judiciary and in other ways making the process cumbersome and inefficient, they have forced our elected servants to scramble, compromise, and busy themselves excessively with attempting to accomplish anything. That’s good, because when they actually do accomplish something, nine times out of ten, their good intentions have really nasty consequences.

For instance, the small seminary I teach at has a website, www.theology.edu. When we first acquired that domain name in the early 1990s it cost us nothing to secure the name and nothing to keep it. Then, about ten years ago, the government gave an exclusive contract to a company called Educause to administer all the websites that have a .edu address. So Educause started charging 40 dollars a year for what before had cost us nothing.

Now, forty dollars isn’t a whole lot, but of course Educause, in reality, doesn’t have much to do except to collect that money. They don’t host the website, they don’t maintain the website, and they don’t have anything to do with managing at all; they just collect the money.

My concern with them is the simple fact that they have a monopoly. If you have a .com address, you can find any number of companies to register your domain and keep it alive and it usually costs ten dollars or even less per year to register the name. Sometimes you can get it for free. The only money you pay then is for whoever actually hosts the site on their servers (in the case of theology.edu, we are fortunate in that one of our former students hosts websites as a side business, and so hosts our site for free). Given that Educause is the only game in town—or anywhere in the US—for registering the .edu addresses, they can charge whatever they want. We have no choice if we want to keep our address. We have to pay them annually. What is to keep them from jacking up the price someday if they so choose? Nothing. Already, they charge four times what most places would charge for any other domain ending in .com, .org. or .net.

On June 29, 2011 the State of California passed a budget bill that our governor signed. Buried inside it, was a little item that was designed to raise sales tax from the likes of Amazon.com. Because Amazon.com is located in Seattle, Washington, rather than California, they are not required to collect sales tax. Unless a vendor has a physical location, or nexus, within a state, the vendor cannot be required to collect tax for that state. This limitation was defined as part of the Dormant Commerce Clause by the Supreme Court in the 1967 decision on National Bellas Hess v. Illinois. An attempt to require a Delaware e-commerce vendor to collect North Dakota tax was overturned by the court in the 1992 decision on Quill Corp. v. North Dakota. Thus, the Supreme Court has determined that states cannot force mail order businesses to collect sales taxes if they do not have a “presence” in the state. Therefore, Amazon was exempt from collecting sales tax except in the state of Washington. This has really annoyed a lot of the other states, and several have attempted to do what our legislature attempted to do in June. Amazon has a program called an Associates Program, whereby individuals, nonprofits and corporations can put a banner or link to a particular item on their website and then get five percent (or thereabouts) of any sales that are made by Amazon if someone purchases through that link.

“Aha!” thought our state legislature. “We’ll say that gives Amazon a ‘presence’ in California and now we can make them collect sales tax on anything they sell in the state.”

So what happened? Amazon simply terminated their Associates Program in California. All the owners of websites—such as theology.edu, or your neighbor’s blog—who collected a few dollars from these transactions—our seminary was lucky to make ten dollars a month—are now cut off. So, all the state of California managed to do was to cut the income of countless small entrepreneurs and nonprofits, while gaining no sales tax revenue. In fact, this was probably a net loss for the state of California, since all those countless people lost the income they were making—and declaring on their income taxes (Amazon made you give them your social security or tax id number when you signed up)—from Amazon’s Associates Program, which sadly no longer existed for California residents.

Eventually, Amazon and the State of California negotiated an agreement. But almost always, the amount of money the politicians imagine they will get for a given tax or fee always under-performs. The best example of this can be seen both in most municipal bus companies as well as in the postal service. The politicians notice that the revenue has declined because not as many people are riding the busses or mailing letters. So what do they do? The opposite of what any businessman would do. They raise their fees, calculating that since, for instance 10,000 people are currently riding the busses, and since they are bringing in X amount of money, then, to get the amount they now need, the must raise the rates by say 10 cents per rider. Then their budge will balance.

Of course they are shocked when next time around they find that ridership has declined again, to 9000; so they calculate how much income they need to meet their budget and add an additional amount to the cost of each ticket. The pattern continues, and they are constantly not bringing in enough money. Thus, surprising only the politicians and bureaucrats who run the postal service, the postal service is always losing money and it only gets worse every time they raise the cost of postage because ever fewer people are now using the postal service. The politicians never get wise.

With taxes, it works the same way; raise taxes too much and revenue will decline because a) employers cannot afford to pay as many workers, b) the workers cannot spend money they don’t have because of taxes, and/or c) there is an exodus of businesses, corporations, and individuals to other states that have lower taxes. Today many motion pictures and television shows are made outside of the state because it is cheaper for the movie and television companies to do it that way: other states offer lower taxes and other incentives, while California just piles on regulations, fees, and taxes. And then the government is always puzzled that they are running out of money and can never make ends meet.

I can’t say I’m terribly surprised. Our elected officials generally don’t seem to be gifted with common sense, let alone have any understanding of such things as tax law, human behavior, science, economics, education or history. They know how to run for office. That’s about it. Otherwise, they are incompetent.

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About R.P. Nettelhorst

I'm married with three daughters. I live in southern California and I'm the interim pastor at Quartz Hill Community Church. I have written several books. I spent a couple of summers while I was in college working on a kibbutz in Israel. In 2004, I was a volunteer with the Ansari X-Prize at the winning launches of SpaceShipOne. Member of Society of Biblical Literature, American Academy of Religion, and The Authors Guild
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