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Home > Social Issues
Taxes: 2C or Not 2C?
by Bob Powell, 10/27/09
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11/4/09: Got a call from Ralph Routon; the Independent will publish this letter this week. The second sentence in the second paragraph is changed slightly to make it clearer. See my note appended below the letter.

Letter to CS Indy, 10/27/09: Appeared 11/5/09 as Ponzi promotion

Sean Paige's appointment to City Council wasn't just a jolt ("Turn the Paige" 10/22); it adds insult to injury. It's exactly libertarian ideology that's led to Colorado Springs' economic collapse.

How? By promoting "free market" growth that doesn't come close to paying for itself. While near-term costs are covered -- plus some, as people move into new development in later years, the cost of the extra burden on infrastructure is even greater. So, the mentality goes, we need even more growth to pay for that. Call that either addiction or a Ponzi scheme. 

The city is in a big financial hole, but that should be no surprise: you can't sell a product (new development) at a loss and make it up in volume. But Council keeps trying, because without impact fees, those who profit from growth can fund true-believer Council candidates who approve even more growth.

Both capitalism and socialism engage in redistribution. It's just that capitalism inherently redistributes costs from rich to the poor, as opposed to socialism that redistributes income.

As costs were passed on to taxpayers, they rebelled with misguided TABOR, rather than demanding impact fees to internalize the costs of growth and allow market forces to properly regulate supply and demand. That's what should have been done with 2C: marry it to impact fees.

The HBA developer lobby would oppose that, of course; but as the Indy points out in "Taking sides on 2C", they oppose 2C anyway. Even taxes to help pay for the infrastructure to support the product they sell might slow the Ponzi growth that's gotten us into this mess.

The idea to sell city assets is a way to keep the scheme going for a few more years. But long term we'd remain in the same fix.

Note 11/4/09:

Had city leadership instituted impact fees for new development as the city grew, the region wouldn't be in this mess. They haven't because they're either directly in the pocket of developers, have bought into building industry lies, or have an irrational belief in the infallibility of the "free market" and "free trade".

With 2C (to raise taxes) failing and 300 (to eliminate "fees")passing, this city is going down the tubes. I voted the other way on both, even though I theoretically agree with them, because I don't want to live in a failed city.

Attributing the wrong causes to problems, leads to policy failure; and that's what we've got. Colorado is going the way of California for the same reasons ...

To blame is what's known as the "growth machine", those who profit from growth. Now those working for developers, home builders & realtors -- and everyone else -- will suffer. On the"growth machine" and the big picture of what's happening, see the Growth Facts of Life.

What's known as "free market" economics fails because of effects that prevent "market forces" from acting properly to bring supply & demand into equilibrium. It also fails to supply "public goods" and properly care for the commons: see Invisible Hand Drops Ball & Economics 101. Also, see Jobs & 'Trade' Data Update Jun09 on the damage the "free market" and "free trade" have done to the region and the nation.

The "Libertarian Menace" is more dangerous than the "Communist Menace" ever was ... and it's destroyed this nation, which communism could not do.

A diagram that I included in The Tangle of Growth showing what to do:

The figure below shows that the rate at which impact fees and/or excise taxes on development are collected can be set equal to the rate at which infrastructure costs are accumulated due to new development. The overall backlog, now at $1 billion and rising in Colorado Springs, can then be drained by taxes. Attempting to cover infrastructure costs without impact fees and/or excise taxes that counteract the build-up is dangerous. Doing so encourages continuing current policies that are creating the ever-increasing infrastructure backlog.

On the other hand, there should be no attempt to pay off the total infrastructure backlog by way of impact fees or excise taxes on new development. This would be too great a burden on the industry and pose a real threat to the economy. Eventually, we must all pay for the "sins of the past" and pay the taxes necessary to drain the backlog. Impact fees and excise taxes should simply stop the infrastructure backlog build-up.

Systems diagrams, like this "stock & flow" diagram can help us examine and understand issues what's necessary for infrastructure sustainability.

URL: http://www.exponentialimprovement.com/cms/taxes2C.shtml

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