Initiative Killers

In leading up to a story about American expatriation, I’ll start with a personal encounter with bureaucracy.

I’m starting up a small-scale side business that involves mail order. While mail order outside of Colorado poses few problems, mail order within Colorado is a royal pain. There’s actually a web page called TaxColorado.com, sort of the antithesis of FreeColorado.com, that takes you to the Colorado Department of Revenue.

One of the documents there describes the sales-tax nightmare in Colorado. If you’re selling everything from a set location, you can figure out all of the relevant sales taxes, then charge all your customers the same tax rate. But if you’re trying to ship items elsewhere in Colorado, matters are considerably more difficult.

Sellers are supposed to charge sales tax for all regions in common between the buyer and seller. I live in Westminster. Westminster spreads over two counties. Thus, several rates apply: Colorado, the RTD region, the football stadium region, the cultural tax region, the county tax, and the city tax. If I sell to somebody else in Westminster who lives in the other county, that’s a different tax calculation. Here’s a description of the RTD tax region:

The Regional Transportation District (RTD) levies a sales/use tax of 1.0% effective January 1, 2005. The RTD boundaries include the counties of Denver, Boulder, Broomfield (except certain areas immediately adjacent to I-25 and Highway 7 interchange), Jefferson, Adams (west of Box Elder Creek), Arapahoe (south of I-70 west of Picadilly Rd. to Jewell, then west of Gun Club Rd. to Quincy, then generally west of Monaghan Rd. including Arapahoe Park and Aurora Reservoir), and Douglas (northern portion plus Highlands Ranch), and parts of Weld County that have been annexed by the City of Longmont and the Town of Erie since 1994.

In the northern portion of Douglas County, the RTD boundaries consist of the city of Lone Tree (original Lone Tree), all annexed areas of Lone Tree, the Acres Green area, and the Park Meadows Mall (in unincorporated Douglas County and not in the city of Lone Tree).

You’ve got to be kidding me. In addition to all of the work of starting a new business, I now have to figure out which buyer does and which does not live the district described above. When I called the Department of Revenue to explain that this creates a logistical nightmare, the woman on the phone said, in essence, that’s the way we do things around here.

I seriously considered two alternatives to starting this small-scale business, a venture that will probably lose me money for at least a couple of years. The first and most appealing alternative was simply to not start the business. Why spend so much effort and risk so much money only to put up with so many hours of bureaucratic hassle? It almost wasn’t worth it to me. The second alternative I considered was to set up shop in a state with no sales tax. How many other small-scale operations have been shut down or driven out of state because of Colorado’s tax hassle? And Colorado is considered to be relatively business-friendly!

As I’ve reviewed in the past, other things equal, people tend to move to states with more economic liberty. It should come as no surprise, then, that U.S. economic controls inspire some people to set up shop outside of the country. It’s not that other countries are necessarily more free, but other regional attractions, coupled with increasingly stifling controls in America, can encourage some people to leave.

U.S. News reports:

…Matt Landau appears very much at home in Panama. One might even be tempted to call him an old hand were he not, at age 25, so confoundingly young. Part owner of this lovely boutique hotel in Panama City’s historic Casco Viejo, he is also a travel writer (99 Things to Do in Costa Rica), a real estate marketing consultant, and editor of The Panama Report, an online news and opinion monthly. Between fielding occasional calls and text messages, the New Jersey native is explaining what drew him here, by way of Costa Rica, after he graduated from college in 2005. In addition to having great weather, pristine beaches, a rich melting-pot culture, a reliable infrastructure, and a clean-enough legal system, “what Panama is all about,” he says, “is the chance to get into some kind of market first.” …

In his recent book Bad Money, political commentator Kevin Phillips warns that an unprecedented number of citizens, fed up with failed politics and a souring economy, have already departed for other countries, with even larger numbers planning to do so soon. … [M]any… are entrepreneurs, teachers, or skilled knowledge workers in the globalized high-tech economy.

If American economic controls become more stifling, we’ll lose more of those people who drive our prosperity. The possibility of getting “into some kind of market first” has little to do with the region and much to do with the economic controls of the region. It’s not as though Americans have run out of markets: it’s that high taxes and increasing controls have made getting into new markets more difficult or, in many cases, illegal.

Our “souring economy” is due to two main things: the housing crisis and high fuel costs. Notably, both of these problems were caused by politicians. Yaron Brook explains how politicians mucked up the housing market. High energy costs are the direct result of a decades-long campaign by environmentalists to shut down energy production and divert resources to “alternative” fuels such as corn gas (which has also increased food prices).

We still live in a vibrant and relatively strong economy, filled with opportunities. I love Colorado and I love the U.S. Still, the more politicians here trample economic liberty, the more free-spirited creators and producers will look elsewhere to fulfill their dreams.