Category Archives: Public Policy Radar

Marriage and Family, Public Policy Radar, Commentary, The Vote

YES On State Issue 5

This entry is part 4 of 5 in the series 2008 Election Issues

Voting MachineOne of the two most contentious issues on Ohio’s Fall 2008 ballot is Issue 5. In 1995 Ohio’s legislature foolishly repealed the existing usury laws. In the wake of that action hundreds of so-called “payday” lenders popped up all over the state, usually in or near areas where predominantly lower- to lower middle class workers reside.

Just a few years ago, Ohio passed very tight new bankruptcy laws. The combination of tighter bankruptcy laws and the repeal of usury laws have created an economic atmosphere in which usurers can flourish. And have they ever flourished. The number of payday lenders grew by more than 1500% since 1996 from 107 to 1638 in 2007. Between 2006 and 2007 the number of Ohio’s payday lenders grew by 76 or over 5%1.

Taking advantage of Ohio’s current law which allows a 391% Annual Percentage Rate (APR) ceiling (this is for a two-week loan. A 10 day loan can be as high as 548% APR2 due to the decreased loan duration and subsequent increase in annual repayment periods ; to be fair a loan at the $800 cap is “only” 367% APR3) and an $800 borrowing cap, Ohio’s virtually unregulated payday lenders are reaping huge revenues from their chosen targeted customer base. And just who is that base? Those who can least afford it, naturally. People who have limited or no access to other kinds short-term credit- credit cards, equity in real property, acceptable credit rating (or in the case of young people new to the job market and college students, any credit rating) people in low-income jobs (seasonal employees, etc) or on a “fixed-income (retirees, injured and disabled workers4).” A favored target of payday lenders is families of enlisted military, whose pay rates tend to be dismally low. In many states payday lenders cluster near military bases. Or they used to. The federal government recently (2006) capped loans to soldiers and their immediate families at 36% and most payday lenders have moved on to greener pastures like subsidized housing.5 So much for noble payday industry claims of “just being there to provide a necessary service.” Only if the interest rate is in the triple digits as we will prove later.

What payday industry watchdogs say about the industry-

Morgan Stanley IPO Analysis of Advance America:

The Georgetown study reveals the long-term nature of much payday lending. At a 300 percent APR, the interest on a payday advance would exceed the principal after about four months. In these circumstances, the loan starts to look counterproductive: rather than bridging a gap in income, the payday advance may contribute to real financial distress. Advance America’s disclosures show that repeat borrowing is important. [emphasis added]

FDIC Center for Financial Research:

‘We find that high-frequency borrowers account for a disproportionate share of a payday store’s loan and profits.

Ernst & Young Analysis of Payday Lending Business Model:

The survival of payday loan operators depends on establishing and maintaining a substantial repeat customer base.’

Michael Stegman’s “Payday Lending: A Business Model that Encourages Chronic Borrowing” – Economic Development Quarterly:

The financial success of payday lenders depends on their ability to convert occasional users into chronic borrowers.

What the Payday lenders themselves say-

Stephen Winslow–Former Harrisonburg, Virginia Payday Store Manager:

This industry could not survive if the goal was for the customer to be ‘one and done’. Their survival is based on the ability to create the need to return, and the only way to do that is to take the choice of leaving away. That is what I did.6

My customers were not stupid or ignorant – they were in crisis. I ended any ability they may have had to overcome that crisis by putting the final nail in their financial coffins.7 [emphasis added]

Rebecca Flippo – Former Virginia Payday Store Manager:8

These companies feed on the people living on a paycheck-to-paycheck basis.The customers who do come in and repay the loans take out another loan right then almost every time.They want to create a dependence on their services so the customer is forced to reissue the loan on every payday.

We saw most of our customers every month.

We really played down the APR. We disclosed it, but we played it down.[emphasis added]

What the Bible has to say about deliberate gouging those who can least afford it-

If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him. Ex. 22:25 ESV

Take no interest from him or profit, but fear your God, that your [poor] brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit. Lev. 25:36, 37 ESV

You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. Deu. 23:19 ESV

Whoever multiplies his wealth by interest and profit [That is, profit that comes from charging interest to the poor] gathers it for him who is generous to the poor. Prov. 14:31 ESV

Though the exegesis of this is well beyond the scope of this article (see Gary North and R.J. Rushdoony for an expansion), the Bible doesn’t condemn interest bearing loans for commercial purposes. The Institute For Principled Policy believes in the basic economic premise that market forces should set interest rates for commercial loans under normal circumstances. However, the Bible does strongly condemn the lending of money at interest, especially at rates that are condemned as usury under any circumstances except extreme hyperinflation, to those in society least able to repay the loan for reasons that are obvious. Truly, the book of Proverbs states it most eloquently

The rich rules over the poor, and the borrower is the slave of the lender [emphasis added] Prov. 22:7 ESV

Compare the verse above with the highlighted part of Steven Winslow’s quote above. The payday lenders know they are a lender of last resort (i.e., the bad players are little better than loan sharks) and they are fully aware that most of their customers are unable to repay within the normal 2 week window without creating either a severe financial hardship or taking out another loan at the same usurous interest rate. That is why payday lenders specifically target a specific demographic of borrower. Why would anyone with a credit card or home equity loan capped at no more than 36% APR borrow from a payday lender at 391% APR in an emergency?

Currently there is no mechanism for making 0% bridge loans to needy borrowers. The Progressive movement and its influence on policy making, has resulted in the takeover of church functions like charitable loans, feeding, clothing, housing and educating the needy through the old church tithe agencies by the government, complete with gross over-taxation, nearly completely. Therefore, the biblical concept of equity provides for the private-enterprise establishment of a system to provide loans at reasonable cost and under reasonable repayment conditions for those who have fiscal emergencies but have no other recourse.

Unfortunately, the lenders have completely failed to govern themselves, as illustrated by the earlier quotes and, more importantly, the statistics which show that unscrupulous lenders know a cash cow ripe for milking when they see one.

Here are some interesting numbers9. Statistically, the average Ohio payday loan is $328. The average interest rate is 391% with a two-week interest due payment of $49.33. But as we have noted, the payday industry thrives on and cultivates repeat business. The average payday borrower visits a single location 7.4 times per year. This means that the average borrower pays out $365.01in interest alone on top of his original loan amount of $328 or more than 111% of the original. But that doesn’t end the story. That same borrower doesn’t just visit one payday store front. On average, he visits 1.7 per year. That means that the 7.4 times he visits a single shop has to be multiplied by 1.7 to get his total number of loans taken each year at the average $328. That brings the total to 12.6 loans of $328 each with an interest payout of $49.33 each, bringing the total interest only to $621.51or 189%  total interest paid. This also means that the average payday borrower is indebted to a payday lender for nearly 6 months per year!

But the situation is worse than it looks at first blush. Using data from Michigan , the state closest to Ohio’s demographic and economic numbers, we find that 94% of the entire revenue generated by payday lenders came from borrowers who had 5 or more transactions per year (pretty close to our example above and the equivalent of 75% interest only repayment). Seventy-seven per-cent of their revenue came from borrowers who had 12 or more transactions per year (very close to the example). Eight per-cent of Michigan customers had 30 or more transactions but they accounted for 27% of the revenue of Michigan payday lenders. In other words, a small but significant percentage of borrowers were indebted with one loan for the entire year, and a second loan virtually certainly with at least one other payday lender for at least part of the year and paid 450% or more in total interest. That’s $1476 or more in interest alone for a $328 loan. If that’s not usury then what is?

Here’s the bottom line. Low-income payday borrowers are easily trapped in a cycle of debt by extremely high interest rates and very short pay-off times from which there is virtually no escape.10 It’s designed that way by testimony of former and present industry insiders and industry analysts

The financial success of payday lenders depends on their ability to convert occasional users into chronic borrowers.11

Irrespective of whether the repeat transactions are cast as “renewals,” “extensions,” or “new loans,” the result is a continuous flow of interest-only payments at very short intervals that never reduce the principal.12

– Michael Stegman, “Payday Lending: A Business Model that Encourages Chronic Borrowing,” Economic Development Quarterly

Having put to rest the false industry arguments that it “isn’t really 391% interest” by showing that, indeed it can be 391% interest and more and that the APR is a reasonable description that allows loan comparisons with credit cards, banks and credit unions, we now must deal with the question that seems to have ruffled so many libertarian feathers- the loan registry.

An analysis of HB 545 shows the following information: Under the new law loans are capped at 28% APR and borrowers are permitted only 4 loans per year, only one at a time and only 2 in a given 90 day period (this final requirement is waived for borrowers who complete a state-approved “financial literacy” course to be offered at low cost at local community colleges). The repayment period must be longer than 30 days.

And, to insure that these requirements (and a number of others borrower safeguards including seriously restrictions to the loan shark-style harassment collection methods often used by payday lenders against those whose finances they have had a significant hand in ruining) are adhered to there is a provision for the creation of a loan registry. BUT, and this is important, the registry CANNOT be used by law for any purpose other than tracking the transparency of the loan transactions, CANNOT by law contain any private financial identity information (e.g., the Social Security number of the borrower, bank ID numbers, etc.) and CANNOT by law even be created if there are less than 400 licensed payday lenders. Industry sources have made it clear that 90-95% of lenders will leave the state if the law passes.

Taking the best case scenario given by lenders would leave 10% of the current number of lenders or about 164 proprietors left to pull licenses, well under 400. Therefore, no registry.13 And if there ever is one, it will most likely be under the supervision of a contractor with experience handling sensitive records- just like a bank, credit card company or credit union!

The loan registry is recommended by groups like The Ohio Coalition For Responsible Lending because it keeps the more predatory payday lenders from playing the corporate shell game of moving loans around to corporate subsidiaries and partners to hide them from regulators, hardly an unimaginable scenario for companies who have no qualms about targeting low- and fixed- income borrowers with 391% APR interest rates. The experience of other states proves the necessity of the registry.

Frankly, we’ve left out a lot of information regarding details like interest rate and cost deception and collection methods employed by the payday industry but you can research these yourself, especially by reading Stephen Winslow’s blog site and The Center For Responsible Lending website (see footnotes below).

It is clear that the current payday lender regulation is completely inadequate to control the rampant greed and usury that creates a cycle of debt in the low- and fixed-income community which the industry targets. While the Institute For Principled Policy applauds initiative and vehemently supports the right of businessmen to conduct their chosen business, we cannot sit on our hands and say nothing as social Darwinists actively work to allow the poor to be trapped into penury and wage slavery by unscrupulous lenders. To do so would be a dishonor and curse on our own heads.

The legislation which will be approved by a “YES” vote on the Issue 5 referendum will go a long towards keeping low- and fixed-income families from disintegrating due to debt and bankruptcy and the downward spiral of family despair and destruction that often follows. It will also allow the principled players in the industry who really do want to provide a needed service stay and run an efficient and profitable business to continue to operate. It is not an outright ban, as the industry has claimed. We know this from the several other states which have been forced, as has Ohio, to regulate corporations who have allowed themselves to become no better than the loan sharks the usury laws were passed to stop originally.

VOTE “YES” ON ISSUE 5

_____________________________________________________________________________________________________________________

1 Rothstein, David & Jeffrey D. Dillman, The Continued Growth of Payday Lending, Policy Matters Ohio, The Housing Research & Advocacy Center, Mar., 2008, p. 1

2 Rothstein, p. 3f

3 Rothstein, P. 3, table 1

4 Rothstein, P. 8

5 Rothstein, P. 8

6 King, Uriah & Leslie Parish, Center For Responsible Lending, Springing the Debt Trap: Rate caps are only proven payday lending reform Dec., 2007, P. 12

7 Winslow, Stephen, Payday Lending: A practice whose end has come, Conservative Viewpoint blog entry for May 25, 2007

8 Center For Responsible Lending, Payday Loans Trap Borrowers, video at http://www.responsiblelending.org/issues/payday/inside-the-payday-industry.html

9 Ohio Coalition For Responsible Lending Trapped By Design: Payday Lending By The Numbers, Sept. 19, 2007

10 Rothstein, P. 10, Table 5

11 King, P. 11

12 King, P. 12

13 Gakh, Max, Ohio General Assembly Legislative Service Commission Final Analysis Sub. H.B. 545 127th General Assembly

Gambling, Commentary, The Vote, Public Policy Radar

NO on State Issue 6

This entry is part 5 of 5 in the series 2008 Election Issues

Four times. November 4 will mark four times in the last 18 years that gambling advocates have tried to persuade Ohio citizens to allow them to set up to play in the Buckeye state. Normally, in a ballgame, three strikes is an “out”. Three swings of the electoral bat, and the gamblers have a perfect average: .000. That’s three “NO” votes, by resounding margins, one each in 1990, 1996 and 2006. Now they are swinging again.

This time the bat (or should I say bait?) is a single “resort destination” casino which, if approved, would be located right in the middle of southwestern Ohio farm country: Chester Township in Clinton County. Why there? Easy access to I-71, and within 50 miles of three major population centers (Columbus, Dayton, Cincinnati).

The team this time trying to break out and be the winners of the Gambling World (Ohio) Series is MyOhioNow, a collaboration of a retired podiatrist and a business liquidator from Cleveland, and a professional gambler from Minnesota with a history of taking the money and running. With tens of millions of dollars invested in this initiative, mainly in advertising, from television to drop mailers, they seek to assure the suckers (er, citizens) of Ohio that the odds are stacked in their favor and not the House’s.

Promises of jobs, jobs, jobs and money, money, money have flowed as freely as cheap alcohol to a high roller at the blackjack table. When one reads the material supporting their claims, one reads the words “up to” before each promise of money and jobs…”up to” meaning “we won’t be held to any hard numbers, but we will be using them to fool you into supporting this con job.”

The Institute for Principled Policy has already posted a position paper on the Biblical admonitions against gambling, which can be found here. Focus on the Family has an excellent brochure about the social costs of legalized gambling here.

Additionally, a study conducted by the Buckeye Institute for Public Policy Solutions shows that the license for this casino is worth $1 billion on the open market, but that MyOhioNow will get it for a mere $15 million, all of which is reimbursed to them upon startup by the state. Additionally, there is nothing, either in law or in the proposed amendment to the Ohio Constitution, to keep this license from being immediately sold to another interest (think Eastern Shawnee tribe).

If Ohio voters fall for this bluff, then Ohio will become, for purposes of federal gambling laws, what is known as a Class III state. This is one of the three pieces of the puzzle that the Eastern Shawnee tribe need to open a casino in the state. One other piece is the recognition of a land claim to establish a reservation (and this tribe already has or is in process of having intergovernmental agreements with numerous cities in Ohio, such as Monroe, Botkins, and Lordstown). The last piece is two signatures: one from the Secretary of the Department of the Interior, and one from Ohio’s Governor. All of these have a realistic possibility of being obtained by the tribe in the near future.

A peculiarity about Indian tribal casinos is their immunity from taxation, at the federal, state and local levels. As a sovereign nation, they cannot be taxed by another government. That makes a tribal casino’s tax rate ZERO. Accidentally, according to MyOhioNow, language was written into the amendment proposal of Issue 6 to set the tax rate for their casino at the lesser rate of either 25% or equal to any other casino that would operate in Ohio. Should voters approve Issue 6, and a tribal casino be authorized, long gone will be the promised “estimated” annual payday for all of Ohio’s 88 counties: Zero divided by 88 is still Zero.

Conveniently, Lakes Entertainment, one of the MyOhioNow partners, specializes in managing Indian tribal casinos in other states. This sounds less like a coincidence or an accident and more like a plan being executed by a savvy operator who is looking to fleece a mark who can’t read the cards.

Time to fold MyOhioNow’s hand and vote a resounding, resonating, reverberating “NO” on State Issue 6 on November 4th.

Then, on November 5th, let’s get to working on an initiative to make sure that Ohio voters don’t have to say “NO” again.

Public Policy Radar, Private Property, Commentary, The Vote

YES on State Issue 3

This entry is part 3 of 5 in the series 2008 Election Issues

Voting MachineState Issue 3 on the November 4 ballot in Ohio has been given little attention during this tumultuous election season. No one seems to be focusing on what is possibly one of the most important issues the voters will decide next month.

This proposed amendment to the Ohio constitution would secure private property rights of Ohio citizens in relation to the use of ground water or the use of the waters of lakes or watercourses that flow through or are adjacent to their land.

This seems like a pretty inocuous, potentially superfluous, amendment. Historically, property owner rights to water were held in common law. However, given the bend to judicial activism in all levels of the judicial branch, “common” law isn’t common nor is it an adequate protection of fundamental, nigh unalienable, rights.

Therefore, the voters of Ohio have before them an opportunity to protect one of these rights through the adoption of state Issue 3. This language explicitly spells out the water rights of Ohio citizens, and prevents such rights from being impaired or limited by any other provision of the state constitution. This is an important proviso, as it trumps the “home rule” authority which Ohio’s local governments can exercise.

Language in this amendment would subordinate such property rights in the ground water to “the public welfare”, which indicates that such rights can be abrogated, but not without similar eminent domain action and compensatory payment for the loss of such property rights by the owner as currently exists for the land over which the ground water is located (already secured by Article 1, section 19 of the Ohio Constitution).

The protection of these fundamental rights to the productive use and valuation of a basic resource such as ground water is a proactive step to ensure that as Ohio’s government enters into future compacts or agreements with other Great Lakes states or as part of intergovernmental treaties with neighboring countries over water rights, Ohio property owner rights will be protected in our Constitution.

The Institute for Principled Policy encourages Ohio voters to support their water rights, and vote “YES” on State Issue 3.

Taxation, Public Policy Radar, Commentary, The Vote

NO on State Issue 2

This entry is part 2 of 5 in the series 2008 Election Issues

Voting MachineOhio State Issue 2, which voters will be deciding on November 4, is a proposal to allow the state of Ohio to issue and spend an additional $400,000,000 in bonds for conservation and environmental revitalization purposes. $200,000,000 would be issued for conservation puposes and $200,000,000 for revitalization. The Institute for Principled Policy urges Ohio voters to cast a “NO” vote and reject this expansion of the state’s bonded indebtedness.

In an economic environment that would best be described as “toxic”, especially as it relates to Ohio’s economy, the proposal to push for more debt so the state can use it to buy up farmlands and other private property under the guise of “conservation”, is foolhardy. The state would in effect be taking those properties out of the tax bases of communities and creating a double tax burden. Other landowners will have to assume the burden of the lost tax revenue base as the state gobbles up more land, and the bonds, once matured in 25 years, will have to be repaid with interest.

This represents hoisting an additional tax burden on the next generation, as the bonds for conservation are backed as “general obligations of the state, and the full faith and credit, revenue and taxing power of the state.” This means that these obligations will be paid first out of the public treasury, including interest and debt service, as they mature. Given the economic catastrophe that is Ohio, this is nothing more than a future tax increase on our children.

The “revitalization” package, although not general obligations of the state and thus not a guaranteed tax increase for future years, has it’s own significant drawbacks.

These bonds may be used, as authorized in this constitutional amendment, for the support of privately owned lands, in a number of ways classified as “revitalization.” This aspect of “public-private partnership” is nothing more than central planning and favoritism toward private parties utilizing public taxpayer funds (which will have to be used to pay off the $200,000,000 in bonds that may be issued under this proposal).

There are many promises made by the committee who drafted the argument in favor of Issue 2, the most repeated of which (and in actuality in the language, bolded, italicized, underlined and written in all capital letters) is the claim that passage of this “DOES NOT RAISE TAXES.” Yeah. Right. Sure. What the committee, Rep. Barbara Sears, Senator Mark Wagoner and Senator Sue Morano, neglected to add was the phrase “RIGHT NOW.” The whole truth is that yes, indeed, this is an all-but-guaranteed tax increase on future generations, just not on those who are “living for the moment.”

A long-term vision includes providing economic opportunity and security for our children’s children. State Issue 2 militates against that vision. For this reason, we ask Ohio voters to vote “NO” on State Issue 2.

Commentary, Public Policy Principles News, The Vote, Public Policy Radar

Voter Fraud? Here in Ohio? Naw…

1 Comment

There have been numerous concerns about possible voter fraud here in Ohio.  The following news interview shows what I believe is just the tip of the iceberg and, believe me, the Titanic is going down on this one.  There is a reason we have laws that REQUIRE county Board of Elections offices to verify a voter address BEFORE they are allowed to vote.  This “5 day window of opportunity” that occurred here in Ohio is going to blow up in all our faces.

Secretary of State Brunner, in a second article says,

“Like so many recent controversies, this issue has been raised less than one month before the election — and it was only raised by one political party.”

Well, of course it happened in the past month. That is when this whole fiasco with early registration/voting began. Now, the SOS office is stating that there are possibly 200,000 voter registration forms that may have discrepancies. That is 1/3 of all new voter registration forms received this year.

So, why is Secretary Brunner so “concerned” that she is persistently fighting this issue all the way up to the Ohio Supreme Court?  If she is so concerned about problems this close to the election, would she not just let the process work and verify that ALL the registration forms are valid?  God only knows…

I would not be surprised at all if this presidential election is decided by the United States Supreme Court. Hang on…we are in for the ride of our lives.

Public Policy Principles News, The Vote, Public Policy Radar

NO on State Issue 1

This entry is part 1 of 5 in the series 2008 Election Issues

“This past May, the Ohio General Assembly passed House Joint Resolution 3, which placed Issue 1 on the ballot.  Previously, taxpayers have paid more than $300,000 to advertise information about initiatives that ultimately did not qualify for the ballot.  But, in an effort to build voter confidence in elections, ease elections administration and save valuable taxpayer dollars, Issue 1 seeks to establish clear timelines for filing and reviewing initiative petitions, thereby avoiding the aforementioned problem.”

Or so says Ohio State Senator Larry Mumper. Mumper claims that the purpose of Issue One is to “save taxpayer money” and to “establish clear timelines for reviewing petitions.” The reality is far less flattering to state legislators.

Several citizen initiative petitions and constitutional amendments which have proven to be embarrassing to state legislators have been not just successful, but have passed by wide margins, often despite legislators efforts to sabotage them.

Issue one reduces the amount of time available to petitioners to get approval by 35 days. An examination of the history of these initiatives and referendums reveals that some of the true grass roots efforts would have failed had they not had those 35 days. You can know with a confidence approaching metaphysical certitude that legislators know it. And they are also aware that a number of them were embarrassed by their lack of support for and efforts to defeat the issues which passed by those wide margins. They also want a monopoly on what laws and amendments are passed.

The passage of Issue One would make it much more difficult for local activist groups with limited resources to get issues that the legislature refuses to move on or passes in error on the ballot for an initiative or referendum. It also makes certain that heavily resourced groups, often from out of state (e.g. ACORN) have an advantage in the initiative and referendum arena.

In short, Issue One will seriously weaken an important weapon in the arsenal of truly local citizens groups, while giving heavily resourced outsiders an advantage. It will allow state legislators to ignore the will of the electorate in controversial issues and pass half-way measures without fear of citizens embarrassing them at the ballot box with an initiative or referendum.

Vote “NO” on Issue One

Taxation, Public Policy Radar, Commentary, Public Policy Principles News, The Church

…And News Outlets Who Want To Be Partisan Should Give Up Freedom Of The Press

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For 54 years the first amendment of the US Constitution has been suspended for a very specific cultural demographic. That group has been singled out to be effectively gagged because many group members had a voice that corrupt politicians found too difficult to overcome in election races. So the grafters cooked up a way to silence their critics in the most effective way possible. By threatening their cash flow. The crooked politicians created a clause in the tax code that required members of this special group remain silent in political matters or to lose both their own tax-exempt status and the deductibility of any donations made to them. The group whose freedom of speech has been so obviously violated is the Church. The politician who led the effort to strip churches of their right to be heard on political matters was Senator, later President, Lyndon Johnson. This information about who did this to the Church and why it was done is a well known matter of historical fact. To everyone, that is, except the Columbus Dispatch editorial writers.

Their editorial for Wednesday September 10, 2008 titled Preaching Politics; Churches that want to be partisan should give up tax exemption displays either gross historical ignorance, a terrible naivete regarding politically motivated abuses of the tax code or a blatant disingenuousness designed to hide political partisanship. Or maybe it’s a combination of all three.

The subject of the editorial in question is the Alliance Defense Fund’s (ADF) Pulpit Freedom Sunday event on Sunday Sept, 28, 2008. The Dispatch editors begin their political speech restriction rationalization tour de force with this gem-

The idea behind a 1954 IRS rule that bars tax-exempt organizations from direct involvement in partisan politics couldn’t be clearer: Tax exemption is a privilege for those organizations whose work benefits society and is nonpartisan. It preserves the resources of these groups for the good works they do, and that includes churches.

It is difficult to believe that supposedly savvy newspaper editors could be this politically naive. It is as if they allowed a high school journalism class write this section of the editorial. The idea behind the change in the tax code was to shut the mouths of pastors who were making it clear that politicians like Lyndon Johnson were crooks and unworthy of their congregations’ votes- for biblical reasons.

What is easier to grasp is that the Dispatch editors do not understand that churches are not just exempted from taxes they are immune from them. This is a key point that is being overlooked by Christians, many of whom will loudly insist that their pastor shouldn’t endorse or disparage candidates from the pulpit. Churches are immune from taxation because the Church and the state are separate and co-equal realms of Christ’s Kingdom each with a distinct non-overlapping authority sphere. The civil realm is the realm of justice while the Church is the realm of grace.

Then Jesus came near and said to them, “All authority has been given to Me in heaven and on earth. (emphasis added)- Matthew 28:18

And He said to them, “Whose likeness and inscription is this?” They said to Him, “Caesar’s.” Then He said to them, “Then render to Caesar the things that are Caesar’s; and to God the things that are God’s.”- Matthew 22:20, 21

As committed secularists, the editors deny that the Church has any authority whatsoever. This declaration in light of Christ’s proclamation above is futile and meaningless, like an angry man that shakes his fist at and curses the wind in a storm. Hence the false notion that tax exemption is a “privilege for those organizations whose work benefits society and is nonpartisan.” The Church is tax exempt because the state has no authority over it. The Church needs no “privileges” from the state. The Church answers to Christ alone (note that this does not mean that churches can violate civil law at will and expect no consequences).

The editors go on to proclaim from on high

…every political season, the false complaint rises anew: Pastors are being denied freedom of speech and religion because IRS rules forbid them from preaching for or against candidates from the pulpit.

Imagine it! These pastors actually believe that their freedom of speech, not to mention the free exercise of religion have been violated just because they (and their parishoners) will be punished by the IRS for endorsing candidates! This is the height of hypocrisy from a profession that proclaims itself the guardians of freedom of speech, press, expression, etc. But this pretzel logic gets worse.

The rule doesn’t prohibit members of the clergy or anyone else from espousing personal political views away from the pulpit. It doesn’t prevent any organized group from supporting or opposing a political candidate. It simply says a group engaging in partisan politics has to pay taxes.

In other words, keep the fact that a candidate is anti-Christian or a corrupt grafter to yourself or face the wrath of the federal tax authorities.

So let’s look at this from a different perspective. Lets say Congress tires of dealing with pesky newspaper editors who constantly point out the pecadillos of politicians. The politicians pass an amendment to the tax code which taxes a media outlet whenever they express an opinion about a sitting government representative or a candidate for office. It’s not really an infringement of freedom of the press because no one is prohibited from printing anything. They just have to pay the tax. How long do you suppose it would take for the Dispatch and other news outlets to begin civil disobedience under these circumstances? Instantly, perhaps?

Realizing that the case is exceedingly weak the Dispatch editors try to appeal to the Christian sense of propriety.

Politics, as anyone can see today, often is a hateful and divisive business, while churches traditionally have been devoted to peacemaking, healing and reconciliation.

Politics is a dirty business. You nice Christians need to stay out of it and leave it to us grizzled news types. This is a thinly veiled and cynical attempt to maintain the main stream media’s tenuous control of public opinion and therefore policy.

The truth is that Christians have a bad habit of bringing Christian ethics to bear when they become involved in something. Truly Christian ethics are based on absolutes; truth, right and wrong for instance. Humanistic politics often deals in situational ethics and “gray areas.” This allows opinion manipulators to often act as brokers in shady political deal making and to do this means that concessions must often be made regarding what is and isn’t true. Politics has become dirty precisely because Christians have withdrawn from it for so long. A strong Christian political ethic preached from a well-informed pulpit threatens the status quo and therefore the entrenched power structure, including the compromised media. That’s right. Well informed pastors willing to speak truth about corruption in the civil realm is dangerous!

The Dispatch editors then wander off to a sort of journalistic fantasyland where tax-exempt organizations flex their new found political muscle and dive into the deep end of the political pool, actually endorsing candidates! Apple carts might be upset! Groups could demand the freedom of speech, press and assembly that other entities have! Why, they might lose donors! People might stop giving blood! They can’t believe anyone would risk donors!

More important, if churches are released from this obligation, other tax-exempt organizations, too, could rightfully challenge the law, upsetting even more apple carts. Donations to tax-exempt organizations could rise or fall based on donors’ feelings about a group’s political activities, or simply because donors might not know a group’s viewpoint and don’t want to risk supporting a view they might oppose. Think about the complications if the Red Cross endorsed politicians. Does anyone want politics to enter into the decision of whether or not to donate blood?

This is nothing more or less than a desperate attempt to appeal to the tax-exempt groups’ pocket books and, in reality, is a thinly veiled threat. And again we see the insistence that Christ’s Church bow to Caesar, as if that was biblically required. Of course, the Church answers only to God.

The editors wrap-up with a complete misstatement of the argument.

Tax-exempt charitable organizations are given a tax break because they do good works that transcend politics. The Alliance Defense Fund’s initiative would put this fine system in jeopardy.

Of course, this statement is debatable for non-church entities which are accountable to the state, though the “transcendence of politics” statement is high-sounding but meaningless drivel. But as for Christ’s Church, it must, like Peter and the Apostles “…obey God not men”-Acts 5:29. And when there is no jurisdiction, there can be no taxes.

Education, Public Policy Radar, Commentary

A Fresh Look At John Freshwater

Schools In RuinsFinally! A balanced look at the Freshwater case! And it took a California based para-church ministry to get the job done.

The Chalcedon Foundation has run an article on the matter that seems to cover all of the bases, something the local news media and some Christian para-church ministries have tried with varying success. Most media outlets, among them the Columbus Dispatch and local TV station news, have taken the Mount Vernon school board yarn as gospel and disseminated it as unquestionable fact. Other self-styled unofficial spokesmen for Freshwater walked into the lion’s den of tabloid cable infotainment programs only to emerge badly mauled by hosts bent on crucifying John Freshwater as someone who would purposefully “burn crosses into childrens’ arms” in the most sensational way possible. None of these “news” outlets has bothered to let facts get in the way of a good story.

The Chalcedon article does what the so-called “mainstream media” has completely failed to do- cut through the rhetoric and the sensationalism to get at the facts of the story. They also expose the underlying motivation of the Mt. Vernon school board for trying to fire a teacher so accomplished that he was the 2007 teacher of the year and his students, which included a large number of special education students, outscored not only all the other teachers in the district on the science standards test, they also beat the national average.

Read the article here.

Taxation, Public Policy Radar, Commentary, The Vote

Black Eye On Westerville- The “Tax Fairness” Argument

This entry is part 2 of 3 in the series Black Eye On Westerville

As this is being composed it is the weekend of the Fourth of July. Independence Day is always a good time to both reflect on the history of the Declaration of Independence and compare these past events with those in the present to see if we’ve got it right.

Currently, the most prominent argument being used by Westerville, apparently with some success judging by by the letters to the editors of the local newspapers, is the “tax fairness” argument.

The core of this argument is that the 60% income tax increase isn’t really about enhancing the city’s revenue, but about “being fair.” This is absurd on its face because in the next breath the same city leaders cry crocodile tears about the city’s infrastructure and the need for additional revenue to pay for it. But more about this blatant falsehood in a later post. In detail, the argument sounds like this; many surrounding communities have a 2% income tax and a large portion of Westerville residents work in those surrounding communities and must pay those taxes plus Westerville’s 1.25% additional resident income tax less a credit for taxes paid to other municipalities of 0.95% or, currently, 0.3%. So those Westerville residents are paying municipal income taxes that add up to 2.3% of their income.

The city also does some mathematical sleight-of-hand in claiming that they will, with this 60% increase, “recapture” millions of dollars in revenues that are currently “going to other municipalities.” Of course, they are recapturing nothing. They are actually increasing the overall tax burden and taking the millions of dollars that residents would have formerly had in their pockets to spend on things like books, hardware, housewares, meals out, etc. at local businesses and pouring it into the governmental black hole. The other municipalities would continue to confiscate the same amount of money (if not more) as they did before the increase. It is a well known economic maxim that a private dollar goes around 7 times but a government dollar only goes around twice. More money paid in taxes means less money for buying things. It’s a zero-sum game.

The city claims that to “be fair,” Westerville residents who both live and work in the city and non-resident employees of businesses located in the city must be forced to pay a 2% tax. Under the plan, Westerville residents who work in other cities will be given 100% credit for taxes paid in other municipalities, thus cutting their municipal tax outlay by about 13% from 2.3 to 2%. But, of course, someone has to pay the piper and that means Westerville residents and non-residents who work in Westerville are slapped with the 60% increase. It also means that Westerville residents who work in cities like Columbus would pay nothing for Westerville city services.

If you find yourself asking “how exactly is this fair?” then welcome to the club. There’s nothing “fair” about a tax plan that shifts the burden of taxation to a targeted minority of taxpayers, especially those who have no voice in how it is spent or vote on its imposition. And this is where comparisons to past events become very important to understanding what is wrong with not only the attempt to increase Westerville’s base tax rate but the way the entire municipal tax system is structured.

The Declaration of Independence issued on July 4, 1776 was the culmination of many years of abuse of power by Parliament. All of the complaints the Continental Congress made against Parliament are included in the Declaration of Independence, a document you will find most useful in this discussion, available here. As mentioned in the previous posting, the complaint we will focus on is no. 17, “For imposing taxes on us without our consent,” though other complaints on the list will also come into play.

How is it that only 232 years after the issue of a document that is foundational to the understanding of the concept of liberty (a concept now lost to the “spirit of democracy;” these are not the same by any stretch or deconstruction of the definitions), the operation and the limits of our government, so little of it is known or understood, especially by government servants? One of the fundamental principles of government in the United States of America is the idea that no one without a representative voice in any government should be required to pay taxes to that government. Another fundamental principle of government in the United States is the concept that the majority is prohibited by law from tyrannizing the minority. And yet, these two fundamental principles of liberty are being not only ignored but disparaged by government bodies eager to grow their own power and control and to do so by creating and exploiting class envy to raise revenue and create a class of tax slaves.

Think the “tax slave” accusation is too harsh? Think about the city’s argument for the increase. Most, they say, will actually enjoy a tax reduction and they are correct if they mean most voters. And that’s exactly what they mean. Non-resident non-voters don’t count in the equation. They are a voiceless non-entity to the city. They are perceived by city government as a convenient deep pocket which can be picked at the will of the Westerville voter. The fact that some of these non-voting taxpayers will now be subjected to combined municipal taxes in the 4% range (or more depending on where he lives and what kind of work he does) doesn’t phase them. Why should it? These unfortunates can’t vote the city leaders out. They can only pay and complain to… well, no one. When a man with no voice or power is coerced to surrender the hard earned fruits of his labor to an entity which has the power to impose financial harm or ruin and imprisonment for refusal to pay, he is a slave. That was the point of the Continental Congress way back in the late 18th century. The more things change the more they stay the same.

A man is also a slave if he has a voice in the system but can be forced to surrender the fruits of his labor to subsidize the services that others receive from the entity collecting the payments by a vote of the majority. This kind of system, in effect, gags his voice within the taxing entity. That’s what is happening in Westerville and has been since 1998 with the PROS 2000 tax increase. The city wants the majority of voting taxpayers who work outside the city to vote their own self-interest by promising them an overall tax cut.

In effect, Westerville residents who work outside the city will receive a net tax cut under the city’s new tax plan. All they have to do to accomplish this is shift their personal tax burden onto the backs of their neighbors who are foolish enough to both live and work in Westerville and the completely powerless non-resident taxpayers. Thus, the city increases tax revenue by using the lever of tax-relief and the fulcrum of taxation class envy to shift the burden to a powerless minority taxpayer base. The chains of tax slavery are being forged on the anvil of “tax fairness.”

The city’s argument for a tax shift and increase is shown to be among the grossest and most cynical kinds of propaganda, designed to play on the emotions of self-interest and tax-envy rather than the abstract intellectual concept of liberty. It is clear that true tax fairness can only be achieved by fairly and equally spreading the legitimate costs of city government on the residents of the city and on the businesses which own property here, exempting non-residents from the burden of paying for the services residents enjoy.

Large businesses should pay their fair share of taxes because they are large consumers of city services in the form of water, sewer, garbage collection, streets and sidewalks, etc. What about their voice in government? That’s pretty easy actually, and it’s a matter of personal choice. Any large business, if they want a voice in local government, could require some of its management personnel to live in the city limits. That would be good both for the business and the city. City residents are far less likely to propose hare-brained schemes which will, in the long run, harm their own property values or the city’s environment. Absentee ownership doesn’t have the same incentive. The government of the city of Westerville seems incapable of making this elementary political calculation.

And yet the city of Westerville, as discussed in the first article in this series, clings to the failed paradigm that businesses must be bribed with 50-100% tax abatements in order to remain “progressive” and keep the businesses “in the tax base.” Of course what they really mean that they want to keep the businesses’ employees in the tax base. The city leaders don’t seem to realize that large, often absentee owned and operated businesses that aren’t willing to pay their share of the tax burden don’t really care for the city at all. They care for big quarterly profits which impress stockholders (by the way, nothing wrong with profit when it is gained legitimately. Accepting a pay-off in the form of a tax abatement is not legitimate, especially when it is gained on the backs of your employees). That’s what makes the slap in the face of a 60% tax increase for local owners of small local businesses such a travesty; the small local business owner is the backbone of the community socially and economically. The large absentee business is a disproportionately expensive and subsidized consumer of city services. And yet the city, in the interest of additional revenue for the purpose of growing city government beyond its legitimate bounds, is willing to shift the tax burden to the local businessman.

We will be expanding on the concept of what a legitimate cost of government in the next entry.

Public Policy Radar, Commentary

Black Eye On Westerville- Part 1

This entry is part 1 of 3 in the series Black Eye On Westerville

Many of the thinkers reading this might ask the questions a journalist is supposed to be trained to ask, though most don’t anymore because it’s more satisfying to try to steer the events than to just report them. So what questions do I mean? They are: who?; what?; where?; when?; why?; how?

First things first. Who. The “who” is the City of Westerville Ohio, a suburb of Columbus. “What” it’s all about is a proposed 60% city income tax increase. Yes, that’s what I said. A 60% income tax increase. From a base rate of 1.25% to 2%. The “when” is this November. Normally Westerville likes to run these kind of elections during the off-season primary times or, better yet, special elections when far fewer people vote and often only hear about the issue when they notice there’s less money in their paychecks. That’s exactly what Westerville did in 1998. It held a special election in August 1998, when almost no one was paying attention, for the so-called PROS 2000 tax increase. That one was less audacious, being only a 25% tax increase.

That increase was used for the purposes of buying privately owned land, removing that land from the tax pool, and turning it into park land, eliminating the revenue it formerly generated. The money was also used to build a grossly overpriced white elephant “community center” which is really a fancy subsidized health club. Full memberships (and someone has yet to explain satisfactorily to this author why memberships are required to a “community-owned” facility in the first place) to Westerville’s Community Center are far too pricey for the average Westerville resident, who must pay on a “per-use” basis to use a facility he was forced to provide tax dollars to build and operate via the tyranny of the majority of voters in an election that had an exceptionally small turnout. And some facilities in the community-owned building are only available to members. Like the weight room, for instance.

There’s a name for a system of taxation where a group can force another to provide a portion of the fruits of their labor to subsidize its own lifestyle. It’s called tax slavery. And it’s the result of a “majority” of poorly informed citizens tyrannizing the minority. This is a perfect example of democracy (as opposed to a republican government limited by law) in action. And what about private businesses that must compete in a taxpayer-subsidized market? Ask the owners of the Westerville Athletic Club (WAC) which was driven out of business because it could not compete in this kind of market. The city made sure WAC couldn’t compete by refusing them a tax abatement (not enough non-resident jobs promised, you see) which made the continued operation of the private club untenable. But more on this travesty in a later part of the series.

The “where” is a formerly small and quiet suburban college town northeast of Columbus Ohio. I say “formerly” because the city fathers (and mothers) decided that Westerville needed to “grow and change with the times” and adopted city planning on an Italian model. The model in question has received high praise in the past from officials in the federal government who have employed something quite similar for some time and has been adopted by the vast majority of cities in the United States. In that model, government and business form “partnerships” supposedly for the overall benefit of the residents but, in reality, shifting the tax burden from the large businesses to the employees that those large businesses bring into the city. Those non-residents are then forced to pay city income tax to cover the costs of “necessary services” while the large businesses who hold property, which is worth millions of dollars per year in property taxes, are given large tax abatements of 50-100% for given periods, often 10 or 20 years. At the end of these terms the large businesses are given the opportunity to up the ante with more employees. Faced with the loss of subsidy, many simply leave the jurisdiction, leaving the city and its former employees holding the bag. By the way, small businesses are not eligible for this arrangement. So the small local businessman is at a huge disadvantage in an economic model where the number of non-resident employees brought in equals proportionally larger revenue to the city and, therefore, 50-100% property tax breaks for large businesses which are often absentee owned. What effect does this have on a city? It says to the small businessman, the one who keeps a downtown area vital, “drop dead, we don’t need you.”

The advantage to the government in this model is that thousands of non-residents are forced to contribute a disproportionate amounts of their labor to the city, yet are not allowed representation or a voice in how the money is spent. Taxation without representation, as the the founding fathers shortened the 17th complaint in the Declaration of Independence. The city that hosts the business only provides a fraction of the services to these non-residents that they do for the businesses and residents, so it is quite a boon for the city government which then, usually, uses the extra revenue to grow government, for the “good” of the residents, of course. The burden of the large remainder of “necessary services” is left mostly to surrounding cities which extract yet more of the fruits of labor from their hapless residents who work in other communities, providing a laughably small “credit” for taxes paid to another jurisdiction. Large businesses pay little or nothing beyond normal fees for the privilege of using the cities service infrastructure, a large percentage of which is necessary precisely because of the large businesses themselves.

This system creates tremendous strain on the infrastructure of small to medium-sized cities and when large subsidized businesses accept the income taxpayer funded tax abatement and subsidy bribes offered by other communities to expand their own taxpayer base, cities which cannot offer competing subsidies are left with large unoccupied tracts of industrial and/or office space ghettos which then require even more taxpayer subsidies to “redevelop” the property, which was more often than not originally developed under taxpayer subsidy. Thus, a vicious incrementally increasing cycle of tax-subsidize-tax-subsidize is created to “keep cities growing.” This is where Westerville now finds itself.

By the way that Italian model has a name. We’re sure you’ve heard of it. It was lauded as the model for the Roosevelt administration policy in its early days, by no less than Woodrow Wilson’s “alter-ego” and Roosevelt operative Col. Edward Mandell House. The Italian model in question is the economic fascism of Benito Mussolini’s Italy of the 1920’s-1940’s.

Now the “why” question. There are dozens of cities in Ohio and probably hundreds or thousands throughout the country who will try to get income tax increases past voters this fall. So why Westerville? Because the author of this series lives there. And it’s easier for the author to get information about the shenanigans of Westerville’s city “leaders” from local newspapers and cable outlets than it would in, say, Resume Speed Ohio’s or some other place’s. And the tactics and vacuous arguments we will chronicle here will be nearly identical to those used in your city. So stay in contact and hopefully you will learn how to refute or combat them.

The “how” question is what this series is all about. How the city will fight its end of the the battle and how Westerville residents who oppose the increase will fight the battle. Keep watching this space.