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Reflections

Taxes, Drinks and Econ 101

by Ralph R. Reiland,
Professor of Free Enterprise

SEA ISLE, N.J. --- The Pittsburgh metro region in the news here, with Allegheny County Chief Executive Dan Onorato labeled in The Press of Atlantic City as "public enemy No. 1 in some quarters" because of the recently enacted 10 percent drink tax.

There's a drive to put two referendums on the November ballot in Allegheny County, explains The Press, an anti-tax referendum by the Friends Against Counterproductive Taxation asking voters to repeal the drink tax, and a pro-tax referendum by the county asking voters to pick between a drink tax and a property tax increase.

There should be a third referendum, asking if we should throw politicians out of office who say that our only choice is between different kinds of tax increases. What leadership! Ignore the waste and corruption in local and county government and just demand that more money be tossed at the inefficiencies, just tell voters to head for the polls like good sheep and pick which way they want their pockets picked.

In other drinking news, Sea Isle's city council voted to allow us to partake of outdoor restaurant dining on the town's sidewalks -- but we can't drink, not even BYOB. It was almost perfect: a sidewalk table with a view of the ocean, some non-lethal Jersey tomatoes, a flounder on the plate that was caught the same day in local waters -- except no Bud, no pinot noir, just water, or Coke.

Sea Isle's mayor, Leonard Desiderio, said that allowing the consumption of alcohol on city property would open the city up for liability.

"Let's face it," said council president Michael McHale. "It's a litigious society and once you allow alcohol on city property, things happen when people drink and it's sad" – sad, that is, when lawyers shift the blame to the sidewalks, to the city, to the taxpayers, i.e., "I was doing nothin' wrong and that city sidewalk just came right up out of nowhere and hit me square in the face, causing this dental bill and a big loss of consortium."

McHale has it right about the litigiousness. We're on an island here, surrounded by fish, and the local Cape May County Yellow Pages has two pages of fishermen's supplies and fishing charters and 26 pages of lawyers.
In gas news, the Tropicana Casino in Atlantic City is giving away $26,000 in free gas cards in hourly drawings on July 6. Additionally, for a grand prize, rather than awarding the usual Mercedes, the casino is giving away a 2008 Smart Car, a tiny two-seater that cruises with 55 miles-per-gallon fuel efficiency.

At the Showboat Casino, every Friday in June is "Fuel Up Friday," with invited gamblers receiving free gas cards of between $20 and $200 – with the denomination of one's gas card, a curmudgeon might say, directly correlated with how big a loser you've been. Once at the casino, customers can also earn fuel bonuses on their level of play that day, winning as much as $1,000 in "free gas." Again, "free" excluding the minuses at roulette.

The gas comps will probably work. Cut the price and the people will come. That's the basic demand curve in Economics-101. It's why low-priced McDonald's is the world's largest restaurant company, now earning nearly $1 billion per quarter – McDonald's net income in the first quarter of 2008 rose to $946 million, up from $762 million in last year's first quarter.

Similarly with low-priced Wal-Mart, America's largest retailer, with business up and profits of $3.02 billion in the first quarter of 2008, up 6.9 percent over the first quarter of 2007.

It's the opposite in Pittsburgh and Allegheny County, where high costs, high taxes and shrinkage are the politicians' way of doing business. While population in the U.S. doubled since 1950, from 150 million in 1950 to 301 million in July 2007, Pittsburgh lost more than half its population during the same period, dropping from 676,806 residents in 1950 to a population of 312,819 in July 2006.

Bottom line, Pittsburgh's in the basement, with the region losing more residents since 2000 than any other U.S. metropolitan area except New Orleans. Without Katrina, the Pittsburgh region would be first in the nation in decline.

What doesn't work is to raise taxes, build a stadium, raise taxes, build an airport, raise taxes, build a convention center, raise taxes, build a tunnel, and raise taxes and raise taxes.

"Ralph R. Reiland is the B. Kenneth Simon Professor of Free Enterprise at Robert Morris University, the owner Amel's Restaurant, and a columnist with the Pittsburgh Tribune-Review."