Privatization Can Work

This article was originally published in the “CAPITOL BUSINESS : The Business-Government Connection” section of the Sacramento Union on June 6th, 1991.

If you are like most businesspeople, you like a good return on your dollar.  If so, then I have a success story to tell you.  I’m delighted to report about Francis House of Sacramento which demonstrates that the answer to all problems is not necessarily government funding and increased taxes.  Francis House is an agency designed to meet the needs of low-income or homeless individuals and families in the Sacramento area.  The primary difference between Francis House and typical government welfare programs is precisely that it is not a government program.  It is fully and totally supported by the private sector, and fulfills an important niche in serving the Sacramento community.

Located on 17th Street between Capitol and L in Sacramento (phone – 443-2646), Francis House operates seven days a week, rain or shine, in offering charity and counsel to those in need.  Be it meals, clothing or shelter, Francis House can provide it.  Furthermore, through its own initiative, Francis House has developed model, computer software to coordinate the resources of 208 agencies within the area to help the needy.  Previously, there was no comprehensive coordination of church, government and community-based agencies for helping the impoverished, be they single parent families parents or men living on the streets.

In the last eight months, Francis House has counseled over 1,230 different people in need, provided over 7,150 complete meals and given out over 17,800 servings of breakfast food.  In the month of April alone, they placed 28 people into permanent housing and 23 people into full-time jobs.  That’s fairly impressive, especially when you consider that it was primarily all accomplished by a core of 30 volunteers (6 of whom were previous clients) and another on-call group of volunteers/advisors also equaling about 30 people.  It is even more impressive when you realize that this was accomplished on a total monthly budget of $8,000 – which covers rent, insurance, food, maintenance, compensation of a full-time director and every other conceivable type of operating expense.

In the public sector, the monthly share of meals alone at a conservative $5.00 per meal would cost over $4,450.  The hours and hours of counseling time would cost public programs at least $15.00 to $25.00 per hour, which would have cost Francis House at least $7,000 per month in itself.

As you look at it, the benefits become obvious of private sector involvement over public sector operations.  Most apparent are the economic values.  Francis House is providing a great value for each dollar invested into it, especially since it is not constrained by the bureaucratic encumbrances of the public sector.  Relatedly, it is seemingly providing much greater productivity for the dollars invested into it.

Furthermore, there are some intangibles which must be considered.  As a completely private agency, it has much greater freedom and creativity in how to solve the problems of its clients, and attention is very personalized.  Its volunteers bring a degree of care and concern which cannot be purchased, or legislated or mandated in any way.  It is the true desire to serve others and to fill a need – it’s not just a job.  Therefore, it is true to say that Francis House not only serves the needs of the needy, but also helps those who need to serve.

It would cost a public agency hundreds of thousands of dollars to do what Francis House does on a fraction of the cost, and it doesn’t cost the taxpayers a dime.  As a taxpayer that makes me feel good, and as a person it makes me appreciate the fact that we don’t have to leave everything to government.  As a businessperson, I like the fact that privatization does work and that there is a place where I, as a responsible businessman, can help meet the needs of my community while knowing that I’ll get an excellent return on my dollar.  As the government budget crisis worsens, the need for private action will increase and Francis House can serve us well as a model.

Bruce Lee expresses the views of the California Business League, a trade association dedicated to restoring quality government.  His column appears Fridays in The Union.  If you have comments or an item for the column, write Capitol Business, P.O. Box 60267, Sacramento, CA  95860.

Taxes Must Have a Rhyme and Reason

This article was originally published in the “CAPITOL BUSINESS : The Business-Government Connection” section of the Sacramento Union on May 30th, 1991.

Tax, tax, who gets the tax?  Like a deviation of the traditional children’s game of “button, button” – the business community, as all California, is trying to guess who is going to get stuck with the new taxes which are virtually inevitable as the legislature tries to balance the $14.3 billion budget deficit.  All sorts of tax ideas are being thrown into the legislative pot as our elected representatives scramble to pluck enough money out of our pockets while offending as few people as possible.  Last weekend’s Assembly and Senate Joint Budget Conference Committee resurrected all manner of proposals and no agreement is in sight.

To name just a couple of ideas, the committee proposed reinstituting an inheritance tax in California (a tax which was disbanded years ago by the voters), and they proposed limiting the mortgage interest deduction for California homeowners.  Of course, ideas from other quarters also abound, such as Governor Wilson’s desire to tax certain types of food.  There is a head over heels rush to increase the state’s income through new or increased taxes.  And with a $14.3 billion deficit, the motivation is reasonable.

However, I must ask if there is any rhyme, reason or logic behind these various tax proposals.  Is it really just a pell-mell rush to tax anything which the legislature thinks it can get away with?  Whichever wheel squeaks the least gets the tax?  Or, are there guiding principles being used as to what makes a reasonable tax and a fair tax?  Unfortunately, I am inclined to believe that it is more of the former, and this leads the general public and business community to further distrust our system of taxation.

I once asked a state senator who has gone on to higher office whether the 120 members of our legislature used any guiding principles in their decision making processes.  He hesitated a moment, and then responded that perhaps a handful do.  The others just make decisions and cast votes based on what seem opportune or workable at the time.  Many vote for something, just because someone else voted against it or to get even with another legislator.  Reasoned principle was certainly lacking in the process.

How unfortunate this is when it comes to taxation – the most potentially tyrannical and dangerous aspect of government.  For indeed, the unlimited power to tax is equivalent to the power to destroy.  And, of course, arbitrary, excessive taxation was the primary provocation for the American revolution in 1776.

Elected representatives must realize that when government takes a portion of a person’s earned income for its own uses, that it is in effect confiscating a proportional percentage of that person’s working time.  Taxation is a form of impounding a share of person’s time and his life.  Furthermore, he is deprived of the fruit of his labor.  Excessive taxation becomes tantamount to a form of slavery.

Therefore, even with the obvious need for money, our lawmakers should take great care in how they choose and implement taxes.  Taxes should be equally and fairly applied.  They should not be arbitrary.  Recognizing that taxing authority comes from the People, the legislature should not flaunt the public will.  Furthermore, taxes should only support the mandated, constitutional duties of government.  Therefore, the scope of our government should be rigorously reviewed so that only enough money is collected to meet the limited functions of our government.  Broad, generous interpretations of governmental duties should be first scrutinized, before increased taxation is liberally applied.

Ben Franklin commented in 1758 that a government would be considered hard if it commandeered more than 10% of its people’s time (ie – earned money).  In combined government taxation, we have well exceeded that mark, and the strain is showing.

Bruce Lee expresses the views of the California Business League, a trade association dedicated to restoring quality government.  His column appears Fridays in The Union.  If you have comments or an item for the column, write Capitol Business, P.O. Box 60267, Sacramento, CA  95860.

Food Tax Will Be a Business Headache

This article was originally published in the “CAPITOL BUSINESS : The Business-Government Connection” section of the Sacramento Union on May 22nd, 1991.

Remember the good ol’ days when you could walk into a grocery store to buy a quick goodie to stave off starvation until dinner time?  Maybe you picked out something healthy like a granola bar, or maybe you got (as I do sometimes) a delicious twinkie with a shelf life of twenty years.  Whatever your habits, going to your store and making a decision as what to buy is going to be a little more difficult for consumers (and a lot harder for retailers) if SB 5 passes the legislature.

SB 5 includes the proposal to help balance the budget by taxing certain food items, commonly referred to as “snack foods”.  The legislation is being carried by Senators Ken Maddie (R, Fresno) and Wadie Deddeh (D, Chula Vista) for Governor Pete Wilson, who dug up the idea in 1990 from a dormant, 1983 piece of legislation.  While proponents claim the tax will raise $270 million dollars, it is certain to be an administrative nightmare and a huge headache for business, which raises the question of how much of that $270 million will be gobbled up by bureaucratic requirements.  If simple tax administration is good tax administration, then SB 5 doesn’t look so good.

The basic problem is that the proposal about what foods are to be taxed is vague and arbitrary.  There is no guiding principle which insures consistency and therefore SB 5 tends to discriminate against many different products and consumer groups.  For example, if you decide to buy raisins, you’re safe – no tax.  But with fig bars, add another 6.25% (7% if you live in Los Angeles).  Crackers and popcorn, normally considered healthy food, are also tax-targeted items, but ice cream is okay.  Granola snacks are taxed, but loose granola isn’t.  Peanuts are untaxed, but pretzels are.  A snack-size apple pie is taxed, but a regular-sized apple pie is not.  There seems to be no basis in nutritional value or caloric content or any other rationale as to why some foods would be taxed and others not.  The main distinction simply seems to be packaging.

What a headache for the stores.  Thousands of minor transactions with some taxed and some not.  In addition, every snack food on the SB 5 list qualifies for food stamp purchases and federal law mandates that food stamp purchases cannot be taxed!  Retailers will go nuts trying to keep up with who and what gets taxed and when.  While some states do place a tax upon food, such as New Mexico; no state in the union taxes just certain foods and not others.  

Furthermore, sales taxes are inherently regressive by their nature, but this proposal really places the burden on the less wealthy.  Under the proposed food tax, the percentage of income paid for these sales taxes by Californians who earn under $15,000 per year would be nearly three times higher than what is paid by the average family.  And it can be argued that if “snack” foods used by average Californians, such as whole wheat crackers, potato chips, pretzels and tortilla chips are to be taxed, then why shouldn’t more expensive “snack” foods such as Brie and macadamia nuts also be taxed?

Brad Sherman, Member of the Board of Equalization, is pushing hard to see that SB 5 is defeated.  And of course, Nabisco and Frito Lay, among others, are actively funding the work to build a coalition of senior, minority, labor, business and taxpayer groups to fight the proposal.  Our state government unequivocally needs the money as the budget deficit has grown from 10 to 12 to 14.3 billion dollars!  Wilson is scrimping to raise 7 billion in taxes and to cut 5.5 to 6 billion out of the budget.  However, taxes cannot be arbitrary and they must have a basic sense of fairness about them.

Bruce Lee expresses the views of the California Business League, a trade association dedicated to restoring quality government.  His column appears Fridays in The Union.  If you have comments or an item for the column, write Capitol Business, P.O. Box 60267, Sacramento, CA  95860.

Should Business Care About the Family?

This article was originally published in the “CAPITOL BUSINESS : The Business-Government Connection” section of the Sacramento Union on March 14th of 1991.

    The Conference on the Preservation of the Family ended a couple of weeks ago and community leaders from throughout California met with policy makers to discuss the fate of the family.  Considering the increasing emphasis regarding the family, the question arises – why should business be concerned about the family?

    Isn’t family a private matter?  Shouldn’t we focus on items which are more tangible?  Who cares if half of our employees get divorced?  Does it impact us if our women employees are not making ends meet at home because most divorced husbands are not timely with their child support payments?  Is it our concern that these women have to worry about child care?

    As you begin to ask these questions, the original inquiry of whether business should be concerned about the family becomes absurd.  Obviously, if there is strife in our employee’s personal lives, they cannot merely leave those concerns at the door when they come to work.  These issues directly influence their productivity.

    Furthermore, the funding of the new social programs being proposed to help the family will be placed squarely on the shoulders of business, such as a mandated health care system for all Californians.  Yet, there are more subtle reasons why business must be concerned about the welfare of the family.

    “Capitalism sprang from a set of well-defined ideas that were the product of the Western mind in both their intellectual heritage and cultural environment”, as economic Professor Steve Pejovich of Texas A&M observed, “the result was an unheard of degree of individual liberty and economic affluence in the West.”  For example, as our own David Swoap noted when he was the Federal Undersecretary of Health & Human Services, “It was the saving patterns of families, and the virtues inculcated by them, which made capitalism possible by making capital available.  Destroy the one, and you destroy the other.”

    Families are critical to the economy.  Estimates vary, but up to 60% of our gross national product is generated by family firms.  In addition, up to 75% of our private corporations, partnerships and proprietorships are family dominated.  In fact, Allan Carlson in his treatise, “The Family and Free Enterprise”, asserts that “the free enterprise system and the modern family are intimately linked in a complex web of cause and effect. . . . (Democratic capitalism through) its devotion to human freedom, its creation of wealth, and its demand for personal responsibility – made the modern family possible.  And the modern family – by its channeling of the unleashed individual toward natural and necessary social tasks, by it mobility, by its unique motivational psychology, and by its linkage to an inherited moral code – made the free enterprise system possible.”

     As once said, the family is the seedbed of economic skills, money habits, attitudes toward work, and the art of financial independence.  It is our conveyer of traditional values and our front line in the battle to instill those values in each succeeding generation.

    The importance of the family and our stable social order to business is difficult to overrate.  As true today as in 1908, President Theodore Roosevelt eloquently summarized it’s significance:

There are exceptional women, there are exceptional men, who have other tasks to perform in addition to, not in substitution for, the task of motherhood and fatherhood, the task of providing for the home and of keeping it.  But it is the tasks connected with the home that are the fundamental tasks of humanity.  After all, we can get along for the time being with an inferior quality of success in other lines, political or business, or of any kind; because if there are failings in such matters we can make them good in the next generation; but if the mother does not do her duty, there will either be no next generation, or a next generation that is worse than none at all.  In other words, we cannot as a Nation get along at all if we haven’t the right kind of home life.  Such a life is not only the supreme duty, but also the supreme reward of duty. Every rightly constituted woman or man, if she or he is worth her or his salt, must feel that there is no such ample reward to be found anywhere in life as the reward of children, the reward of a happy family life.”

Bruce Lee expresses the views of the California Business League, a trade association dedicated to restoring quality government.  His column appears monthly in the Forum.  If you have comments or an item for the column, write Capitol Business, P.O. Box 60267, Sacramento, CA  95860.