Bacon's Rebellion

Democracy Thrives in Sunlight

Bacon Bits: If It Walks, Tax it. If It Still Walks, Regulate It…

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by

James A. Bacon
in ,

First they came for Uber…

First the General Assembly decided to regulate Uber and Lyft after taxicab companies protested, then Airbnb after hotels protested. Now lawmakers are moving to regulate peer-to-peer car sharing after rental-car companies started griping. Roanoker Neil Aneja owns three automobiles that he rents out through car-sharing app Turo. As he explains to the Roanoke Times, “It’s like Airbnb for cars.” Car rental companies (and the local governments that generate taxes fro them) say Aneja isn’t competing on a level playing field. The motor vehicle rental tax in Virginia is 10%. Both sides have valid arguments. If there’s going to be a tax, it should be applied to car rentals across the board. On the other hand, why should the state punish individuals who want to make a little cash from their automobile assets? Does government have to tax everything? I rented a U-Haul van the other day. The rental agency advertised a $25 charge. By the time taxes and fees were added in, the final bill was more like $40. They get you coming and going.

Why do do-gooders hate poor people? Retired economics professor David W. Kreutzer has a great op-ed in the RTD on the subject of payday lenders. General Assembly do-gooders (HB 789, for instance) want to cap the interest rates that payday lenders can charge on their small, short-term loans, a measure that would put the lenders out of business. When states cap interest rates, the payday lenders leave. Where do poor people go when they need small, short-term loans? In states banning payday lending, pawn-shop borrowing is 60% higher than other states, and the rate of involuntary checking-account closures is triple. Writes Kreutzer: “There is no ruby-heel clicking or wand waving that transforms unbanked households into banked ones or increases anybody’s savings when rate caps shut down payday lenders.”

Your government is in the finest of hands: Christian Dorsey, Virginia’s representative on the Washington Metro board, has yet to repay a $10,000 campaign donation he accepted in violation of the board’s ethics policy. Dorsey, a Democrat who also serves on the Arlington County Board, said he is working on a wire transfer to return the money to a transit union that negotiates with Metro. Personal bankruptcy issues are making it difficult to fulfill his pledge, made three months ago, to return the donation. The ethics lapse, reports the Washington Post, follows the resignation of Jack Evans, a D.C. Council member, following revelations that he was receiving money from a parking company that did business with Metro.

— JAB

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4 responses to “Bacon Bits: If It Walks, Tax it. If It Still Walks, Regulate It…”

  1. LarrytheG Avatar
    LarrytheG

    Looking at the terms of service and liability insurance for Turo and wondering what happens if the car has bad brakes or the driver is someone
    the traditional car rentals would not rent to.

    When we start off with the presumption that regulations are interference into the free market from the government – I think something is being missed with respect to the how and why regulations come about in the first place.

    Yes.. there is a bureaucracy there but it’s caused by all the myriad ways that businesses and customers interact in the first place.

    Listening to the back and forth over car inspections, I was struck by the views of many Conservatives who opposed getting rid of the inspections and the most amusing was that getting rid of car inspections would “cost” thousands of jobs! These are the same folk who routinely say that regulations COST jobs!

    so which is it?

  2. LarrytheG Avatar
    LarrytheG

    re: “do-gooders and poor people”

    what the do-gooders are doing is to try to protect poor people
    from predatory businesses – the VERY SAME WAY – we also
    protect non-poor consumers from outrageous credit card fees, gasoline with lower octane than represented, “fake” orange juice , etc.

    Why do we say it’s “okay” to screw the poor because they have “no alternatives”? That’s just plain old hypocritical poppycock – where supposedly we have one set of consumer protections for one class of folks and lesser consumer protections for “po folks”.

    In other words, if you’re “poor” the get a different “free market” than those who are not.

  3. WayneS Avatar
    WayneS

    Yes, poor people really do get a “different free market” from those who are not poor, at least where borrowing money is concerned. People who are poor generally have a lower credit rating because they often pose a higher risk to lenders than those who are not poor. Therefore, they must often pay a higher interest rate than a person with better credit must pay. I don’t think any reasonable person considers that to be “screwing the poor”.

    With that said, in our current economy, 36% is a very high interest rate, and it does not seem to me that such a limit would pose all that much of a burden on “pay-day lenders”. After all , no one is forcing these lenders to lend money to poor people, and if an applicant is too high a risk even at 36% then perhaps that person simply should not be able to borrow money.

    1. James A. Bacon Avatar
      James A. Bacon

      Wayne, remember that 36% is an annualized rate. It’s high not only because of the credit risk but because the per-dollar cost of processing a small, short-term loan is high. If payday lenders didn’t charge high interest rates, they’d have to charge higher loan-origination fees.

      If payday lending is so predatory and presumably so profitable, why aren’t other businesses jumping in to compete for the fat profit margins? Why don’t the do-gooders set up nonprofit lending institutions to meet the need, at less predatory prices, for small, short-term loans? They’re not doing so because the business isn’t that profitable!

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