One Regulation Is Painless – A Million of Them Hurt
bloombergview.com
bloombergview.com
Both with taxes and regulations, it's death by a thousand cuts. If you try to fix it, you'll hear "but soy farmers need tax breaks" and "but workers need to have good office chairs". Individually, each claim sounds reasonable. Collectively, it's a mess.
I sometimes fantasize of ways to limit this. Eg, have all laws sunset, so we have to prioritize renewing the most important. Or set absolute size limits on areas of regulation - like a one-page tax code (with specified font and margins). But likely none of it would work, humans being so good at exploiting systems for personal gain.
At the moment they are trying to harmonize income tax and National Insurance (which is not entirely unlike income tax (especially because it all goes into the same pot), but it has exemptions for various groups which income tax does not (e.g. seniors collecting their pensions). So any change will invariably throw some group under the bus, which is why it's politically hard to do.)
Our US federal and state forms tax forms were more than 30 pages long last year, downloaded completely blank. During the two weeks we'll spend in Wisconsin this summer, our main job will be to get our taxes done.
I'll wade through stacks of bank and credit card records line by line, documenting all professional income beyond our wages and scanning for every possible business or charitable deduction. Once this is done, we — like the majority of US taxpayers — will hire a tax professional who charges us $500 to review and co-sign our work.
Tax-preparation services cost American taxpayers more than $32 billion per year. My wife, Betty, and I each have a PhD, but that's not enough to understand IRS instructions. Finally, with a great sigh of relief, our marriage still intact, we'll sign the forms and send them to the IRS.
Of course, despite our great efforts, we don't know whether the IRS is going to be happy or not. We might get audited and have to dig up all this stuff again, because the government has three years to check and revise our returns.
In Sweden, the four-page tax form comes in the mail already filled out. On a Saturday morning, Betty and I take our coffee to the couch and review the forms. Seeing they look reasonable, as they always do, we "sign" with a text from our phones. In 15 minutes we are done. We don't have to hire a tax consultant, and we avoid fights about whether a print cartridge bought at the drugstore is a business expense or not.
With that said, if we could nail down the authentication process, we could do here (and should). It wouldn't improve everyone's situation -- e.g. if you have a lot of income from hard-to-track sources -- but for most people it would be a godsend.
As a Norwegian, I think sending a text is a little too much work. Here, silence is a confirmation in itself. That said, if you have foreign bank accounts or own foreign shares then you still have to do your taxes here too. I think they should get an information sharing agreement with other governments in place to get rid of that. Should be doable within the EU at least.
By the way, in Portugal we download a cross-platform Java app that fetches the data over HTTPS and lets you fix it (if needed) and submit. Of course, that has its own problems, so paper submissions are still allowed.
However, many people still send in their forms by mail.
In fact, what extra information would be on this pre-filled form that isn't already being sent via mail? Bank statements, retirement statements, pretty much all financial info is sent in the mail every day.
That's because opening someone else's mail is a federal felony. https://www.law.cornell.edu/uscode/text/18/1708
I don't think that the Swedes track his ink consumption -- nobody forced the guy to deduct his print cartridge expenses.
I have a reasonably complex return. I think it's like 10 pages long if printed. I pay about $30 for software and spend 2-3 hours, unless I've had a year with an unusual volume of capital gains/losses or some weird delay in getting partnership forms.
Like itemizing vs the standard deduction in the USA.
Literally no one thinks that would be a good idea.
As a practical matter, individuals do mostly get to offset the costs of producing income. Individuals who own houses effectively get to deduct the cost of housing through the mortgage interest deduction. Individuals who don't own their own house probably don't itemize either, and get the standard deduction. At $12,000 for a family, it probably a reasonable proxy for the component of living expenses attributable to the need to work to produce income.
There are some obvious gaps, child care being the main one, which is almost entirely attributable to working rather than consumptive.
The complexity doesn't kick in unless you hit higher income brackets, need to declare income from a business you run, or want to itemize rather than take the standard deduction.
What kind of business person waits until their personal taxes are due to find their expenses? This should be done quarterly if not monthly. Use a separate account for business expenses. Hire a bookkeeper.
Initially, every time a soy farmer support bill died due to a sunset time it could be a media issue. Some big bills will continue to die or be renewed amid a media frenzy; however, our capacity for sensation is limited. Many bills would die quietly. A delightful side effect could be the generation of enough actual news to keep the media busy reporting on useful topics.
A maximum word length or similar requirement sounds good; however, it might not be practical. If you prevented disparate pieces of legislation from being voted on as a single law, a limit on length might work and promote transparency.
But, beyond that, I'd like to see the law be self-repairing. There's a legal concept that goes back to the Romans that ignorance isn't a valid defense. Maybe it worked well back then, but not when the legal code expands as it does in modern democratic countries. The law should be a manageable size that is largely understood and agreed to by everyone. In that vein, I've always wanted a built in system to 'garbage collect' laws that were dated or misunderstood. In a simple implementation, a government department would poll the citizen body for understanding or agreement with a law. If the polling doesn't reach a threshold, then the law is purged.
If they spend more than about ten minutes on the whole exercise I'd be shocked.
Doesn't make the length boundary sharp, but still provides a limit of sorts.
Less restrictive than the one in Gulliver's Travels!
edit: whoops someone already said this
That should simply not be allowed. It's the legislative equivalent of handing out an inspection sticker without actually inspecting the car.
But the IRS has no data feed to tell them what I did for rental property (schedule E), my side business (schedule C), my charitable deductions (schedule A), nor other schedule A items, nor gift tax return information, nor many other cases that arise from tax law complexity.
You could possibly calculate my "most-pessimal" tax liability automatically.
a) high (enough) rates, and
b) taxation of business income (where you must allow deduction of legit business expenses like inventory)
This spawns sort of an arms race where businesses try to classify consumption as a "business expense" so they can deduct it, and the tax authority has to respond with ever-longer lists of "no you can't do that".
One naive scheme might be for the boss to go around and say "hey, what would you spend your next $50 on" and then buy it, classify it as a business expense, and silently give it to them. Then the worker doesn't show up as having that income, but the company has the expense to deduct. Now think about the regulatory apparatus necessary to prevent that, and any clever variant, from happening. (It's also why fringe benefits were so lavish for high earners in the high-tax 50s.)
The higher the rate, the more activity is diverted into this (socially wasteful) activity. Do you want high-IQ people designing self-driving cars or outsmarting the tax code?
Tell that to the oodles of lawyers and accountants managing Irish subsidiaries at Apple and Google. There is literally nothing with a better ROI than pushing papers around to save tens of billions.
This is actually fairly cheap and straightforward for a multi national to pull off. But, that's just the tip of the iceberg. Eventually you get into things that impact day to day operations for ever more marginal savings.
Can't do tariffs, those are bad for trade and bad for the economy. Consumption tax is hard because it encourages people not to spend money, which is bad for the economy. Income tax is bad because it makes income (and thus hard work and productivity to the economy) less valuable. Overall, income tax is something that works with some pitfalls, and better solutions are actually surprisingly hard. In the end taxes are necessary but difficult to do right.
But the bigger problem is that even if a simpler and less distortionary tax system were adopted, governments if permitted to will just gradually add all the other kinds of taxes on top, purporting to need to in this modern world.
I feel like most businesses would probably prefer to pay workers more because of collective bargaining and worry less about compliance, but a variety of legal and social changes keep collective bargaining from happening. Unions in California were criticized in a recent forbes opinion piece I read for wanting to exempt union run shops from the minimum wage, but frankly, that seems like a sensible position to take.
Unfortunately most advocates of the free market seem to hate unions, so any advantage collective bargaining might have over government regulation in terms of giving employees a fair deal while keeping regulatory costs low gets downplayed.
edit: I put a space between any and advantage to fix a typo.
I can sort of see that, because those employees (supposedly) have the union to take care of them. But if below minimum wage isn't enough to live on, below minimum wage plus having to pay union dues isn't enough, either. And "it's legal to do that to union employees but not to non-union employees" reeks of double standard.
From a naive perspective, it has historically been ironically anti-union politicians who have backed worker protections, precisely because it takes ammunition away from unions. Why do you need a union if all the benefits are already written into law? Less union shops mean less union voters.
But, to argue for the unions, not only do they negotiate wages, but also benefits. Maybe you aren't getting the minimum wage, but you might be getting better health care, a retirement account, overtime, paid vacation, sick time, flex time, etc. Whereas a non-union employer can say "We're paying a $15 minimum wage so we can't afford health insurance, vacation, etc." With a minimum wage, all you're guaranteed is that wage (other state laws aside).
I also fail to see why other benefits that a union could get should exempt them from minimum wage laws. Employers could give non-union employees benefits, too, but that doesn't exempt them from the minimum wage laws. I fail to see how a union being in the mix should change anything.
There's nothing to guarantee any kind of break from work for an employee, unless it's a law or it's part of the agreement between the employer and the employee. So if the state makes it a law, that is one less benefit a union can negotiate for their members.
But that's not to say that unions are favoring the exemption for this more noble reason, and we have to be on guard against abuses of it e.g. a consultant who charges a fee to get your workers classified as being in a worthless, token union so you can pay them less but without giving them enough bargaining power to ensure that the lower amount is still a good deal.
In regard to the article, regulation is starting to be used more as a barrier to entry than what it's advertised for protecting worker/environment/etc... When you slap a new regulation on any industry, the large players just add another lawyer/accountant/operations staff, while the small business owner has to personally work an extra amount of hours. Once the compliance reaches a level it can no longer be brute forced, this becomes an obstacle that'll effectively bar new entrants.
The employer has ALL of the power in the employer/employee relationship without unions. If the employer hints or suggests that you work through lunch for no pay and you don't want to get fired, you skip lunch. Regulations are the only way we have left to ensure employers don't abuse their employees.
Employers have worked very hard over the last century to destroy unions entirely (in the public eye with a very powerful propaganda campaign, with intimidation and physical violence, with lobbying and changes in legislation) and they've largely succeeded. Well, you decided you don't want to negotiate on even terms with your employees and find some reasonable compromise, you want to treat your company like a dictatorship, so now the government has to come in and set ground rules since you couldn't play nice. Sorry, no sympathy.
I think exempting businesses from most regulation if their workforce is unionized is a reasonable compromise. As a business owner, you can choose; the negotiating table or the government can come in and tell you exactly what you can and cannot do in great detail and force you to prove that you are compliant. If you have a good relationship with your employees and treat them well, this is a win-win no brainer.
http://www.wsj.com/articles/SB100014240529702034064045780705... (google the headline for the full article)
"I also wish that during the years I was in public office I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender."
and
"The problem we face as legislators is: Where do we set the bar so that it is not too high to clear? I don't have the answer. I do know that we need to start raising these questions more often."
So yes it's burdensome but it shouldn't be something that you as a business owner should deal with. You have lawyers and financial advisors and staff for that when your business become too complex.
On the flipside you have access to a huge huge market which every other country in the world is envying.
The problem is that because employees don't have proper representation as most unions have been wiped out, or have too much representation through too powerful unions, the government is forced to go in and implement regulation.
Denmark have something called the Danish model which basically ensures that the employers and the unions on their members behalf negotiate the basic terms only with the government as an intermediary.
It's not perfect and it's showing signs of erosion because unions across the world are loosing the battle against the employers. But it would probably be a good thing for the US system to implement something like that on a state basis.
But how do the lawyers and advisors get the information? Someone has to collect it.
Then, as someone collects it, it must be validated and/or reviewed in some way to be considered "trusted" in some regard.
Then the other side - regulators - must have a way to spot check and confirm/validate the information which implies investigators and potentially field investigators. Since most companies aren't going to allow strangers to roam around the office, these investigators probably need to be escorted while on site.
Unless your underlying goal is really "full employment via regulatory burden" and then this is on the right track.
It's actually in many ways a feature not a bug.
And there are opportunity costs to spending time and money on tax / regulatory compliance vs. the actual business.
If your above statement was true, then wouldn't it be more true the more complexity we added to the system?
Maybe instead of working till the middle of April [1] to pay the government our tax bill, we could be working half the year.. or longer? Surely all of that complexity would create even more openings for businesses wanting to solve the complexity problem...
[0] https://en.wikipedia.org/wiki/Deadweight_loss
[1] http://taxfoundation.org/article/tax-freedom-day-2015-april-...
But technology allow us to take a lot of that cumbersome complexity and make it trivial.
Denmark has one of the most streamlined and optimized tax-reporting systems yet you don't see it nourishing because of that.
"Ten Thousand Commandments, points out: regulations impose enormous burdens on American consumers, businesses, and the economy. Unnecessary and meddlesome overregulation and intervention create uncertainty that slows innovation and economic growth. But unfortunately, regulations get little attention in policy debates. Unlike taxes, they are difficult to quantify because they are unbudgeted and often indirect."
However, most regulations I encounter are more of the Baptists and Bootleggers variety. They both want highly regulated liquor for totally different reasons. Just like many large businesses are fine with extra regulations that well intentioned Do-Gooders suggest because the big businesses know it will block small innovative competitors from entering their market.
It's so frustrating to see the anti-Corporate crowd cheer for more regulations. They're just cementing their place in society.
I have never seen any actual evidence for this. There is strong reasoning to say markets are bad at handing tragedies of the commons, but it does not follow from that that government is good at it.
For example, if the goal is a cleaner river, the inefficient way of solving the problem would be mandating a certain cleaning technology or giving a tax break to companies that install specific purification systems. That leads to a mindset of box checking compliance and the most politically well-connected companies winning out.
The better way is to impose a fine or maximum on the externality -- water pollution in this example -- and let the market work. Now the polluting company has an incentive to find the best anti-pollution techniques at the lowest cost and other companies can compete by developing different anti-pollution methods.
Consider the case of a lake fished by several fishing boats. Each fishing boat consumes a percentage of their daily catch and sells the rest for profit. The nature of the lake makes it a zero-sum resource: if one fishing boat catches more fish, it means less fish for the others.
The problem: every fishing boat has a short-term incentive to overfish, since more fish lead to more profits. This incentivizes every fishing boat to catch as much fish as possible, until there's no more fish. That's the tragedy of the commons, and there's nothing the market can do to fix this.
By the way, I didn't make up this scenario. There's a ton of examples of this exact same thing happening all over the world, not just with fisheries but with any kind of shared resource ("the commons"). You can read more here: http://www.dummies.com/how-to/content/ten-reallife-examples-...
What I was saying is that just because markets are bad at solving a problem does not mean that government is good at solving that problem. It doesn't even mean that government isn't worse at solving it.
https://www.libertariannews.org/2012/07/15/the-state-is-a-tr...
In light of this it's pretty amusing that it keeps being discussed as a reason states are great/acceptable/necessary/tolerable.
I guess all propaganda is funny if you don't take it for granted.
Companies bribe politicians who hate regulations to remove regulations they hate. Companies bribe politicians who like regulations to add regulations that they can comply with more easily than their competitors. Centralized democracy is fundamentally flawed because votes can be bought.
Not only is it frustrating, but even in principle such regulations are definitely overstepping the bounds of government; no government should regulate how a business should operate. The market will decide that.
Fair enough. Building codes being what they are, that's fine with me. I suggested a modified free-standing frame and took plans to the office. Same employee said: "Yep, that works. No load on the ceiling, no permit needed."
Perfect. Contacted the local welder and paid X tens of thousands of dollars to have it designed and built for me. Go back to the local bureaucratic office and say "Hey, thanks for the help. Here's some pictures, it turned out great."
Office now says: "Oh no. That's too tall. You need permit X, Y, and Z now. Estimated cost is now $10,000 for those permits (instead of $0)."
"What? I gave you the plans ahead of time, you approved them, and it had the height on there and everything."
"Yeah, I misread them apparently. Sorry. You still need the permits."
So, there you go. Just one of about 10 hassles I've had with city government here. I could go on and on, but ironically enough I have permits for something unrelated to fill out.
Seriously doubt this would stop any government bureaucracy from enforcing what's on their books. Additionally, there's no way they'd sign such a letter.
You haven't gone through permitting much, have you? The rules are intentionally vague.
Awww, that's cute. Have you never dealt with an American civil 'servant' before? They can lie, cheat and steal and not get fired. They can browse porn during the work day and not get fired. They can drive drunk, refuse to resign and get a sitting governor indicted for refraining to send them more money. Being a public employee in the United States is tantamount to being a demigod.
BTW, building code inspectors in Los Angeles are also surprisingly inconsistent.
Contractor makes request for final sign-off from city. First inspector checks the work and says 'No. You need X or I won't sign off.'
Contractor does nothing. Instead, contractor requests another inspection for the same exact work. A different inspector comes the next week and says 'Ok. Fine. No problem. I'll sign off on this right now.'
Eventually, those things will get fixed, but when the damage is done (see asbestos), i.e. when it's too late.
The problem is that market pushes business to make money, not to be virtuous. That's because when a business must choose between "closing" and "going on but being less than virtuous", the business says "I don't have choice, it's either live or nothing", so I choose "live on".
I understand that not all business operate like this. But many people will make that choice because it's practical. Much like choosing between free software (politically fine but economically broken (that's an approximation)) and proprietary software (ok to enslave people but economically viable).
The key word here is responsability. If businesses are made responsible and have to pay when they behave recklessly, the only measures needed are those preventing unreversible damage.
Also there should be some kind of limitation to what government can regulate and how.
Huh? Without regulation, VW could just claim whatever they wanted about the emissions of the car and it wouldn't be illegal.
I'm part of a small grant writing consulting firm, and the California Franchise Tax Board, along with New York State as a whole, both generate special hatred in my heart.
With any luck everyone in my firm will be out of CA and NYC within a year or so. Austin and Nashville are on the list of potential places to go.
"The market" was happy with sweatshops, child labor, and frequent industrial accidents, among other abuses. No thanks.
I'm trying to put myself in your shoes to understand where such a statement originates. All I come up with is shoes worn by person who is young, privileged, or both. A bit patronizing, I know, but it's all I can come up with. Because I remember a time when we knew that lead in gas was harmful, but "the market" decided that it would cut into profits so it was left as-is for decades. "The market" decided that children working in coal mines was a capital idea. I'd go on, but you get my point. Need I even bring up the tragedy of the commons?
As the son of a contractor, I'm sure that you're aware that regulation also serves as a barrier to entry. "The market" decided that onerous regulations also serve to keep out competitors. That ol' invisible hand can work for you and against you.
Imagine I set up a trash disposal company, and charge people a really cheap rate to dispose their trash. But actually, I just take the trash and dump it on a random persons yard.
The market wont fix this - the person who is hurt by the transaction was never involved in it at all. They can't opt out. The people involved in the transaction are perfectly happy in the deal.
Basically, I am talking about externalities (https://en.wikipedia.org/wiki/Externality)
The inefficiency with which small businesses deal with regulatory compliance is just one example of a general phenomenon. Small businesses are inefficient at pretty much everything. For example, there is no way cab companies, the largest of which may have a few hundred drivers, could ever deploy the kind of software infrastructure Uber has developed. Mom-and-pops can never compete with Amazon's or Wal-Mart's integrated and unified systems for warehousing, picking, shipping, and logistics. As technology makes it easier to manage increasingly-large enterprises and unlocks economies of scale, consolidation will continue apace, with or without the impact of regulatory compliance.
At the end of the day, someone has to make sure workers aren't being abused by being forced to work for more hours than they are paid for. As long we consider that a legitimate burden we put on businesses, we have to face the fact that the relative difficulty of compliance is just one of the many disadvantages of being small.
No, but a small business could build and support the software for many of them, as a service. In fact, there are plenty of startups doing just that. Scale doesn't have to come from building up, it can come from building horizontally, in a web of small businesses supporting each other.
Unless you're facing a stupid number of regulations, which scale linearly with the number of firms, encouraging the centralization and monopolization of markets.
That said, even if the company does host the servers, in what way does that mean they should also vet and hire drivers, handle (non software related) support calls, invest in marketing and advertising, and all those hundred of other tasks that a taxi business needs, all in many countries and languages?
And the reality is that there are already dozens of companies doing just the software and renting it out to taxi companies, they must have some reason for doing so.
Serious question: What kind of software does Uber use that a company with a hundred employees can not afford?
Even developing a relatively simple app (but one reliable enough to be trusted with handling fares), would be out of reach of all but the largest cab companies. Developing the infrastructure to calculate surge pricing, connect drivers with nearby fares, etc, would be completely impossible.
I'm chuckling now remembering how one of those apps was really a big compendium of smartly programmed forms to solve a regulatory problem. It was a big success, but it burned to the ground because the owner, that had managed to hire a handful of very good techies for peanuts tried to squeeze them a little too much and ended up completely alone with customers knocking on the door.
We've had a stagnant economy for the last 6 years (at least). It is my impression that we have also had an increasing burden of regulation in that time. Are they related? I can't prove it, but I suspect yes, at least to some degree.
It's also somewhat based on my perception of how many regulatory hoops I'd have to jump through to start a business. Again, though, I don't know if the hoops were always there and my awareness of them grew, or if the number of hoops increased.
The act was repealed and banks blew up the economy - the same way they did in 1929.
This is often referred to as technical debt and requires that the programmer delve into all of the various conditions that have been added and attempt to understand and simplify them such that the overall behavior is more or less unchanged.
I see this article as not a call for reduced regulation but, instead, as a call to address our legislative debt. We need our representatives to stop simply piling on new regulations and, instead, distill everything we currently have into something that makes compliance easier without losing the spirit of the legislation. This won't be easy for many reasons, not least among them that laws don't have refactoring tools and unit tests to ensure that the simplified version maintains the existing behavior and our combative, partisan system means that refactoring our laws would introduce opportunities for partisan politics and debating over the existing behavior, but that doesn't mean we shouldn't try. Because the alternative is all the bad things listed in the article. And from my experience with technical debt, the longer it's allowed to accumulate, the harder it is to fix and the less likely people are to even attempt a fix.
A smarter strategy would be to see what other countries in the world do that is both effective and efficient.
I don't think our crappy regulations are properly blameable on the people who believe regulations are crappy, but rather on the sort of people we hire and retain as civil servants. 'Good enough for government work,' I'm told, used to be praise; it sure isn't any longer. Nowadays both civil servants and employees of large corporations are bureaucrats first, servants second (if at all).
Of course not. And the same is true for nearly other regulation that is taking up business' time and money.
The people at fault here are those employers that did not let their employees have lunch breaks. And the companies that did not provide safety gear, and that refused to hire non-whites, and that wantonly dumped toxic chemicals in the rivers.
We need regulations because some people are scumbags.
To me it's completely obvious; if businesses could be trusted not to abuse their employees, then nannying regulations mandating lunch breaks wouldn't be necessary. Since businesses repeatedly abuse the power imbalances they have over their workers (including removing lunch breaks), there you have the regulations.
> We need regulations because some people are scumbags.
I'm not certain why we need lunch-break regulations at all. If one doesn't want to work under one set of working conditions, choose a job with another set. After years of hopeless complaining and misery I did so awhile back and I've never been happier.
Be active, not passive.
Or in other words, California is doing the job of government: protecting those who cannot defend themselves from being ripped off.
Mr. Meyer needs to understand that businesses have been engaged in wage theft for a very, very long time. ( read more here: http://www.wagetheft.org/ )
No business owner should cry crocodile tears about the government doing its job of protecting citizens from being forced to work off the clock or being denied lawfully entitled breaks.
The regulations were put in place because businesses ripped off workers. This is the same reason why minimum wage is needed, child labor laws, health and safety regulations, etc.
I am pretty sure everyone company out there violating some kind of regulation. Do you know that it is illegal to throw a dry cell in your usual waste basket ?
In such systems people who have complete disregard for law, who are exploitative who are willing to bribe or threaten government official tend to succeed at faster rate than usual law abiding citizens leading to India or China like situations.
You also have to acknowledge that, just as certain market forces can cause distortions, so too can government actions. Regardless of your school of thought, there’s no escaping the realization that regulation is an incredibly nuanced issue. It’s not black and white, and never has been.
There’s also a ton of room for abuse, both willful and through neglect. In general, this is probably what most people are thinking of when they talk about regulations being bad.
As an example, and apologies in advance for the length, my dad’s family is in the cemetery industry. Over the past few months, a few members of the Pennsylvania Senate have pushed a bill—Senate Bill 874—that changes how cemeteries handle funeral merchandise (caskets, vaults, bronze markers, etc.). Currently, 70% of retail price of pre-need merchandise is put into a trust fund until the merchandise is delivered. It’s been this way since the 60s in Pennsylvania and most other states, and there have never really been any problems. The money sits in trust, earns interest, and when the merchandise is ready to be delivered, is used to pay for the merchandise. Very, very simple stuff.
Among other things, SB 874 would change that funding requirement to 100%. The biggest problem with that is that there are costs associated with the sale—offices, marketing, sales staff, etc.—that can’t be deferred. So you have two options: (1) you quit selling pre-need merchandise altogether, or (2) you raise non-merchandise prices (lots, mausoleum crypts, etc.) to compensate. And you start making significant cuts, starting with the sales staff. The significant hit to a cemetery’s cash flow also means it’s harder for them to pay for maintenance costs without tapping into their perpetual care funds (a big issue for smaller cemeteries and those that are mostly full), meaning that money isn’t there earning interest for the future.
SB 874 also makes some other changes like ending constructive delivery on caskets and vaults and applies the FTC Funeral Rule to PA cemeteries. There’s an argument to be made about constructive delivery of caskets, but existing regulations still apply and the practice is rare to begin with. So even if you’re worried about a casket “rotting away in a warehouse” as one person put it, the cemetery is still responsible for it as it’s under their care. If the casket is damaged, they have to make good that damage. And as for vaults, they’re large concrete boxes that go in the ground. They’re very tough, hard to damage, and installing them in bulk leads to significant cost savings. By not permitting cemeteries to constructively deliver them, you wind up raising the cost of both the vault and the installation to the detriment of consumers. As for the Funeral Rule, even the FTC says that “[many] of the disclosures required by the Funeral Rule make little sense if they are imposed on cemeteries” and that “there is insufficient evidence that commercial cemeteries, crematories, and third-party sellers of funeral goods are engaged in widespread unfair or deceptive acts or practices.” They advised the PA Senate that SB 874 would “lessen competition, resulting in potentially higher prices and fewer options for consumers, without countervailing benefits to consumers.”
So basically, we have a bill that would make significant changes to the cemetery industry for no verifiable reasons. There’s no evidence of any malfeasance in PA cemeteries over the course of decades, and no benefit to the consumer for the changes. And any benefit there might be would be wiped out by the increased costs elsewhere, to say nothing of the decreased competition as cemeteries exist the pre-need merchandise market. And the other regulations and contract law protect the consumer in the few specific hypotheticals that they’re worried about. So why push it?
Well, that’s where it gets interesting. One of the senators sponsoring the bill happens to own a large funeral home near Philadelphia. With cemeteries not selling merchandise, people would have no choice but to go to the funeral director. The bill originally came up after a public company, StoneMor, signed a lease agreement to operate the Philadelphia Diocese’s cemeteries, including the right to sell merchandise for them. So Philly funeral directors came up with this bill as a means of fighting back, and the rest of the state’s funeral directors went along with it because it would benefit them significantly.
At the very least, it’s a massive conflict of interest and a classic example of political corruption for private gain. Why should any elected representative be permitted to push legislation that would have a direct benefit on their own business’s bottom line?
When people bemoan government regulation and intervention, it’s stuff like this that they’re thinking about. Every time a legislator jumps the shark with something like this, they make it that much harder for legitimate government intervention. The end result is the sort of gridlock we have now, where things are black and white and each side shouts slogans at one another.
Sorry for the length.
• Your filing status is single or married filing jointly. If you are not sure about your filing status, see instructions.
• You (and your spouse if married filing jointly) were under age 65 and not blind at the end of 2015. If you were born on January 1, 1951, you are considered to be age 65 at the end of 2015.
• You do not claim any dependents. For information on dependents, see Pub. 501.
• Your taxable income (line 6) is less than $100,000.
• You do not claim any adjustments to income. For information on adjustments to income, use the Tax Topics listed under Adjustments to Income at www.irs.gov/taxtopics (see instructions).
• The only tax credit you can claim is the earned income credit (EIC). The credit may give you a refund even if you do not owe any tax. You do not need a qualifying child to claim the EIC. For information on credits, use the Tax Topics listed under Tax Credits at www.irs.gov/taxtopics (see instructions). If you received a Form 1098-T or paid higher education expenses, you may be eligible for a tax credit or deduction that you must claim on Form 1040A or Form 1040. For more information on tax benefits for education, see Pub. 970. If you can claim the premium tax credit or you received any advance payment of the premium tax credit in 2015, you must use Form 1040A or Form 1040.
• You had only wages, salaries, tips, taxable scholarship or fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends, and your taxable interest was not over $1,500. But if you earned tips, including allocated tips, that are not included in box 5 and box 7 of your Form W-2, you may not be able to use Form 1040EZ (see instructions). If you are planning to use Form 1040EZ for a child who received Alaska Permanent Fund dividends, see instructions.
As for free offerings, these can also be found via the IRS[1], but generally apply to lower income amounts.
(Yes, "reasonable" is quantifiable. Think about courts awarding reasonable attorney's fees. There are decades of history around this concept.)