In 2015, the United States spent a staggering $3.2 trillion on health care, or nearly $10,000 per capita–amounting to 17.8 percent of U.S. gross domestic product. Health care is one of the most expensive components of the federal budget, and health spending comes in a variety of different forms, including major public programs, direct subsidies, and a number of different provisions in the tax code.

While big insurance programs like Medicare and Medicaid tend to be the focus of most health care discussions, and account for most of the spending, the government provides and subsidizes health care in ways that many might not realize. Given the rising prominence of the health care industry in our budget and in our economy, it’s important to look at the current role played by the federal government. Read on to see how the government provides and incentivizes health insurance coverage and how much these efforts cost.

Government Health Care Programs

Two government programs account for a large portion of health care spending, and federal spending in general. Medicare and Medicaid are two entitlement programs that together account for roughly 25 percent of the federal budget. In 2016, the U.S. government spent a net total of $588 billion on Medicare, the health insurance program covering all Americans over the age of 65. Federal spending on Medicaid, which provides health insurance to people with disabilities, the elderly, children, and people with low incomes, totaled $368 billion last year. Because Medicaid is a federal-state partnership, states also account for a notable portion of health care spending. In 2016, federal funding covered about 63 percent of all Medicaid spending, excluding administrative costs. The remaining 37 percent, or about $204.5 billion, was held by the states.

It’s worth noting that along with Social Security, Medicare and Medicaid are the largest mandatory spending programs–spending that is built into existing laws and is not subject to annual appropriation bills. Forecasts predict that these programs will grow as a share of the federal budget in the coming years as the Baby Boomer generation retires. In its most recent forecast, the Congressional Budget Office (CBO) predicts, “outlays for mandatory programs increase as a share of GDP by 2.4 percentage points from 2017 to 2027–mainly because of the aging of the population and rising per capita health care costs. Social Security and Medicare account for nearly all of that increase.” Last year, Social Security amounted to 4.9 percent of U.S. GDP and spending on major health programs amounted to 5.4 percent of GDP.

In addition to Medicaid and Medicare, the government provides subsidies for people with incomes between 100 and 400 percent of the federal poverty level and who do not get health insurance through their employer. According to the CBO, the government spent $42 billion in 2016 on subsidies and other costs related to the individual insurance market.

The video below from the Brookings Institution gives an overview of health care spending trends over the past several decades:

The Tax Code

While the various provisions of the tax code that encourage individuals and companies to buy health insurance might not sound all that interesting, tax policy is a crucial part of the current health care system, and accounts for a significant amount of spending, or more precisely, foregone revenue.

Employer-provided Insurance

The government uses the tax code to encourage and discourage a wide range of behaviors. To encourage individuals and businesses to do certain things, the government uses tax expenditures, more commonly known as tax breaks. These provisions in the tax code forego tax revenue when people or businesses engage in certain activities. The largest of the existing tax expenditures deals with health care spending by employers. Specifically, the tax code excludes all spending toward employees’ health care premiums from taxation. This exclusion encourages employers to provide certain benefits to their employees because they can use pre-tax dollars to do so–if the same amount of money was given to employees in the form of traditional wages, it would be taxed. The exclusion is projected to cost about $260 billion in 2017, based on what the government would otherwise receive in payroll and income taxes. That annual cost makes the health care exclusion the third largest health care program, following Medicaid and Medicare.

The tax exclusion of employer provided health care dates back to World War II and emerged almost accidentally. In an effort to control inflation, the federal government froze wages, which prevented companies from paying their employees more. Instead, employers took advantage of an exception that applied to certain benefits–they started providing health insurance plans. Then in 1954, the IRS determined that payments toward employee health insurance are exempt from taxation. Over time, employer-subsidized health care became quite common, and today, most Americans get health care from their employer or a close family member’s employer.

While the tax exempt status of employer-provided health care has become particularly popular and politically durable–efforts to eliminate or even cap the tax benefits have not gotten very far–many economists believe that it has a distortionary effect on the health care system as a whole. The most frequent criticism of employer-subsidized health care is that it can spur growth in medical costs. Because premium payments are excluded from taxation, employers are incentivized to offer very generous health insurance plans instead of simply paying their employees higher wages. Economists argue that if more of the cost burden was placed on consumers when they use medical services, they would try to reduce those costs by searching for lower prices and avoiding unnecessary care. But when most of the cost of health care is masked by generous insurance plans, there is little incentive for individuals to cut costs.

Other criticisms of employer-subsidized health care focus on concerns about equity and progressivity. People with high incomes are more likely than those with lower incomes to benefit from health-related tax expenditures, of which employer-subsidized health care is by far the largest in value. Moreover, the nature of the tax exclusion makes it more valuable to people with high-incomes than those lower on the income scale. Because income tax is progressive–those with higher incomes pay higher tax rates–pre-tax money spent on health care is worth more to those with higher incomes because it would otherwise be taxed at a high rate. In 2015, about 45 percent of all benefits from health tax expenditures went to individuals with incomes in the top 20 percent, while just 0.5 percent of all benefits went to those in the bottom 20 percent.

Efforts to eliminate or curtail the tax preference for employer-sponsored health care date back to Reagan’s presidency, but few have made any notable progress. One notable exception is what’s known as the “Cadillac tax,” which was a part of the 2010 Affordable Care Act. The Cadillac tax, formally known as the high-cost plan tax, sought to rein in health care cost growth by discouraging employers from providing extremely generous health insurance plans. Health insurance premiums payments in excess of $10,200 for an individual or $27,500 for families will face a 40 percent excise tax. The tax was originally scheduled to take effect in  2018 but was pushed back to 2020 after widespread opposition in 2015. Both businesses and unions strongly protested the tax, which may be one issue that both Republicans and Democrats can agree on. While it is still scheduled to go into effect in a couple years, questions about its fate loom as recent health care legislation would push its implementation back even further.

Conclusion

Peter Fisher, a former under secretary at the Treasury Department, once famously advised, “Think of the federal government as a gigantic insurance company […] with a sideline business in national defense and homeland security.” When you look at the federal budget, you can see that Fisher’s comments are rooted in an important truth–health insurance is one of the most expensive aspects of the federal budget.

The government plays a large, if sometimes unnoticed, role in the American health care system. From major programs like Medicare and Medicaid, which together add up to roughly one-quarter of the entire budget, to tax provisions that encourage employers to provide insurance to their workers, the government has a hand in nearly everyone’s insurance. Rising health care costs have led to notable budgetary issues in the long term, particularly as the American population ages, which have led some to argue that entire programs need to be revamped to keep spending sustainable. While many agree that health care spending has gotten unusually high in recent years, actually controlling costs has proven challenging.

Kevin Rizzo

Kevin Rizzo is the Crime in America Editor at Law Street Media. An Ohio Native, the George Washington University graduate is a founding member of the company. Contact Kevin at krizzo@LawStreetMedia.com.

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For anyone who has ever taken an intro to economics class, the phrase supply side economics should be familiar. Supply side economics essentially argues that economic growth happens through capital investments and lowering the barriers of production. The idea behind supply side economics is that you can stimulate growth by encouraging capital investment and lowering the barriers to production. Supply-siders argue for lowering tax rates across the board to reduce the tax burden on businesses and high-earners in the hope that they invest more to boost the economy. It’s a conservative theory and it was largely implemented during the Reagan years (dubbed Reaganomics). Depending on who you ask, it was considered a success or a failure. But one state may have taken Reaganomics a little too far, and is now paying the price.

In 2011, Kansas Governor Sam Brownback attempted to fully embrace a supply side economic policy, on steroids. He has called it “a real live experiment” in conservative economic policy.

Since 2011, he has drastically reduced income taxes across the board. A fellow from the Show-Me Institute, a right-leaning think tank, called it “the biggest tax cut of any state, relative to the size of its economy, in recent history.” Brownback’s policies allowed for 300,000 businesses to become tax exempt, eliminated many deductions–including ones on child care–and significantly decreased public spending in all sectors. It got to the point where the Kansas supreme court ruled unanimously that public school spending was unconstitutionally low. While Brownback claimed these policies would stimulate economic growth and bring private sector jobs to the state, the budget did just the opposite. Kansas now has a $900 million dollar deficit and lags behind in job growth compared to the rest of the country.

Unfortunately for Brownback, this experiment seems to be coming to an end. Last week the Kansas state legislature overrode the governor’s veto in favor of a progressive tax increase across the state. What makes it even more surprising is that this occurred in a state where Republicans have a two-thirds majority in both the house and the senate. The measure will bring $1.2 billion in revenue over the next two years to combat the $900 million shortfall in the budget, and most of the tax revenue will go toward funding the vastly underfunded public schools. It will also reverse a policy that made over 300,000 businesses tax exempt.

According to data from the Bureau of Labor Statistics and the Kansas Center for Economic Growth, since the tax cuts were introduced in 2012, Kansas has significantly lagged behind in terms of GDP and personal income growth compared to neighboring states and the rest of the nation. Furthermore, job growth for private and non-farming jobs measures at approximately half the rate of their six state neighbors.

But what’s shocking is not just that the Kansas Republicans turned against their Republican governor, but that a Republican led legislature voted for an increase in taxes. Not raising taxes has been a staple among the GOP since the days of President Reagan and President George H.W. Bush. President George W. Bush implemented tax cuts during his presidency in 2001 and 2003, and every single GOP candidate for President during the 2016 election, except for Trump, signed the pledge promising to never raise taxes.

For Kansas Senate majority leader Jim Denning, who voted for the tax cuts back in 2012 hoping that they would bring a spike to economic growth, reality set in. He admitted that he couldn’t vote for more cuts that they weren’t working and worked with Democrats to find a solution. “I’ve always backed up and mopped up my mess. That’s what I’m doing now,”

Of course this one example does not prove that supply side economic theory or cutting taxes is harmful. Supporters of the governor’s tax plan argue that the plan wasn’t effective because it didn’t go far enough. But it will certainly be a point of interest to see if it’s an isolated incident or the beginning of a long trend against conservative economics–specifically the promise to never raise taxes under any circumstances.

James Levinson

James Levinson is an Editorial intern at Law Street Media and a native of the greater New York City Region. He is currently a rising junior at George Washington University where he is pursuing a B.A in Political Communications and Economics. Contact James at staff@LawStreetMedia.com

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Over the past few weeks, as Russia-related revelations dominated the discussion in Washington, it has been easy to forget about actual governing. But things are happening. For instance, Republicans have been waiting in the wings for years, eager to pass tax reform legislation. When President Donald Trump–who has been busy swatting away rumors regarding his ties to Russia and jetting to Riyadh–took the White House, and Republicans maintained control of the House and Senate, Republicans could finally take a crack at a tax overhaul. Let’s take a look at their progress so far:

For one, it appears the border tax, favored by House Speaker Paul Ryan (R-WI), is all but moot. In a House Ways and Means committee hearing on Tuesday, a number of Republican members voiced their concerns about the tax, which would levy a 20 percent tariff on imports, while getting rid of export taxes.

Rep. Mike Kelly (R-PA) said he does not want funding for tax cuts, which would ultimately come from the consumer, “to be on the backs of everyday hardworking American taxpayers.” To another Republican member of the committee, which would have to approve any tax bill before hitting the House floor for a vote, supporting the border tax is out of the question. “I cannot support the border adjustability provisions as introduced last year in the blueprint,” Rep. Erik Paulsen (R-MN) said at the hearing, which included testimony from Target CEO Brian Cornell.

The Trump Administration also appears to oppose the border adjustment tax. “One of the problems with the border adjustment tax is that it doesn’t create a level playing field,” Treasury Secretary Steve Mnuchin recently said. “It has the potential to pass on significant costs to the consumer.”

At the end of April, Trump unleashed a one-page tax reform plan. The plan’s key features included severe tax cuts and a steep reduction in the corporate tax rate, from 35 to 15 percent. The 2018 budget the administration released on Tuesday did not include any substantial changes to the April plan.

According to a recent report by the non-partisan Center on Budget and Policy Priorities, the administration’s tax plan “contains specific, costly tax cuts for the wealthy and profitable corporations but only vague promises for working families.” Using IRS data, the report estimates the plan would provide the top one percent with an average annual tax cut of $250,000 per household.

In addition to the administration’s plan, and the House proposal backed by Ryan and Kevin Brady, the Ways and Means committee chairman, the Senate is reportedly developing its own tax blueprint.

Alec Siegel

Alec Siegel is a staff writer at Law Street Media. When he’s not working at Law Street he’s either cooking a mediocre tofu dish or enjoying a run in the woods. His passions include: gooey chocolate chips, black coffee, mountains, the Animal Kingdom in general, and John Lennon. Baklava is his achilles heel. Contact Alec at ASiegel@LawStreetMedia.com.

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Despite protests in the street and pleas from Capital Hill, President Donald Trump has yet to reveal the amount he has–or has not–paid in taxes. But he plans to overhaul the U.S. tax code, and on Wednesday, he announced a one-page tax plan to accomplish that. Here is what you need to know.

What’s New?

In short: a range of tax cuts and some efforts to simplify the filing process. Trump’s tax plan, which will likely receive heavy edits as it makes its way through Congress, would reduce the number of individual tax brackets from seven to three–10 percent, 25 percent, and 35 percent. The proposal does not yet specify the income thresholds for each bracket. Currently, people in the top income bracket are taxed at a rate of almost 40 percent and those in the lowest bracket pay 10 percent, which would remain the same under Trump’s plan. While Americans overall would likely receive some sort of a tax break, the wealthiest Americans would benefit the most.

In addition, Trump’s plan would lower the corporate tax rate–and make it apply to small mom-and-pops and giant multinationals alike–from 35 percent to 15 percent. That would put the U.S., which currently has the highest corporate rate of any industrialized nations, in line with Germany and Canada, and slightly below Britain.

Another major change included in the plan: killing the “death tax,” aka the inheritance or estate tax. As of 2014, the U.S. inheritance tax–up to 40 percent for some estates–was the fourth highest in the world. Trump’s plan would scrap that tax–which supporters say is a key tool for redistributing income, and critics say unfairly steal from the rich–entirely.

What About the Debt?

Under Trump’s proposed tax overhaul, the national debt would skyrocket. At a press conference unveiling the plan, Treasury Secretary Steven Mnuchin said the plan “will pay for itself with growth.” Since the revenue from taxes would drop, the government would need to find other ways to obtain money to pay for its various obligations. But a variety of nonpartisan budget think tanks and analysts projected that previous versions of Trump’s plan would cause the federal deficit to balloon.  

The Committee for a Responsible Federal Budget–a think tank that focuses on fiscal responsibility–predicts that the plan would add $3 to $7 trillion to the deficit over a decade. That would contradict Trump’s vociferous critiques of the rising debt under the past few administrations. History does not bode well for self-paying tax cuts–the idea that tax cuts would spur enough economic growth to balance out revenue lost due to lower rates. President Ronald Reagan’s tax cuts in 1981, for instance, contributed to the deficits that would follow.

What Do the Experts Think?

Bernard Baumohl, the chief global economist at the Economic Outlook Group: “The effort to introduce more fiscal stimulus into the economy is genuinely underway […] But the bare bones plan we saw unveiled [on Wednesday] is already conceptually flawed and unlikely to go far in Congress. The final product will bear no resemblance to the principal points highlighted in today’s meager release. Certainly, the first step in this process was unimpressive.”

JPMorgan Chase Analyst Jesse Edgerton: “Although the plan’s lack of detail makes estimating its revenue effects uncertain, we suspect the plan would be scored as dramatically increasing deficits, making likelihood of its passage through Congress slim […] the recent announcement is likely best viewed as an opening offer in a negotiation with many rounds to go.”

Economist Doug Holtz-Eakin, head of the Congressional Budget Office under former President George W. Bush: “Passing genuine tax reform would include structural changes. As long as those are not included, it is not reform. This bill as presented would add to the deficit. Growth alone cannot account for the loss of revenue from tax cuts. This means it cannot pass the reconciliation process and will not be able to become law.”

Alec Siegel

Alec Siegel is a staff writer at Law Street Media. When he’s not working at Law Street he’s either cooking a mediocre tofu dish or enjoying a run in the woods. His passions include: gooey chocolate chips, black coffee, mountains, the Animal Kingdom in general, and John Lennon. Baklava is his achilles heel. Contact Alec at ASiegel@LawStreetMedia.com.

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Yesterday, in a $1.8 billion deal, the Canada-based fast food company Restaurant Brands International (RBI), acquired Popeyes, one of the largest chicken fast-food chains in America. The deal is expected to close in April.

“With this transaction, RBI is adding a brand that has a distinctive position within a compelling segment and strong U.S. and international prospects for growth,” RBI CEO Daniel Shwartz said in a statement. “As Popeyes becomes part of the RBI family we believe we can deliver growth and opportunities for all of our stakeholders including our valued employees and franchisees.”

This acquisition makes Popeyes part of the RBI “Family of Brands” that includes Burger King as well as the Canadian coffee and doughnut chain Tim Hortons. RBI is majority-owned by the Brazilian investment firm 3G Capital and was formed in 2014 after the Burger King and Tim Hortons merger. Since the merger, Burger King has expanded around the world with much success.

The deal seems to be good news for Popeyes investors and shareholders. Since news of the deal emerged, Popeyes stock has been soaring, according to Business Insider.

While the deal is being applauded as a good business call by RBI, some people are calling foul, bringing up the fact that RBI has been a prominent perpetrator of tax inversion, which will become even more significant now that RBI is making strides toward becoming one of the largest fast food companies in the world.

Tax inversion is a way for companies to dodge American corporate tax by rerouting their revenue to a so-called “tax haven.” In the Canadian-based RBI’s case, the Burger King merger with Tim Hortons allowed for Burger King’s revenue to be taxed at the Canadian corporate tax rate rather than the American one, which, according to CNN Money, was projected to save Burger King shareholders over $800 million in capital gains taxes and the company itself about $400 million in corporate tax.

Projected tax savings for Popeyes have not been reported yet, but, according to ThinkProgress’ Alan Pyke, being a smaller firm, Popeyes’ tax savings are probably going to be much smaller than Burger King’s. However, with the new Trump Administration, questions about tax/corporate inversion have been growing, as the administration is expected to take a much different approach towards quelling its effects than the Obama Administration did.

Per ThinkProgress’ Alan Pyke:

Inversions were all the rage in corporate management in the second term of the Obama administration, which sought to curb them through new Treasury Department rules. The bankers who helped complete those deals raked in close to a billion dollars in fees for their assistance.

Republicans in Congress are widely expected to gut the Obama-era restrictions on inversions. President Donald Trump’s administration has signaled it would prefer to slash the U.S. corporate tax rate rather than combat corporate tax avoidance through regulation — even though rates are not what drive American-made companies to pretend they live somewhere else.

Pyke cites a report from Reuters that looked at six companies that were known to have completed or were in the process of completing “inversion-type” deals. The report finds that, while the U.S. corporate tax rate is high, many large companies use elaborate strategies to cut tax costs, which reduce the effects of the country’s 35 percent statutory rate and allow companies to pay well below the actual rate. These elaborate loop holes within the U.S. tax code suggest that companies may be practicing tax inversion for a variety of incentives offered abroad, which shows that “Washington’s current debate over business tax reform may be too focused on the statutory rate, neglecting effective rates and the incentives that companies have to shift profits abroad.”

As Pyke points out, President Donald Trump and many other Republicans still prefer to slash corporate taxes to stop companies from making tax inversion deals. Trump has frequently stated that he will lower the corporate tax rate to 15 percent.

On the Bloomberg Politics show “With All Due Respect” in November 2015, Trump said that “other candidates don’t even know what corporate inversion is. I do know, I really know,” Trump said. “You are going to lose hundreds of thousands of jobs to other countries because of corporate inversions. What you are going to do is lower the taxes bring the money in and they are going to use that money to build and do things in the United States.”

Austin Elias-De Jesus

Austin is an editorial intern at Law Street Media. He is a junior at The George Washington University majoring in Political Communication. You can usually find him reading somewhere. If you can’t find him reading, he’s probably taking a walk. Contact Austin at Staff@Lawstreetmedia.com.

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The debate regarding taxes always seems to end in a convoluted discussion. Who should pay taxes? How much should one pay in taxes? What type of tax plan is fair to all citizens? The list of questions for how to best regulate and reform taxes goes on and on.

While on the campaign trail, President-elect Donald Trump touted his tax plan as the answer to working-class families’ financial struggles. As Trump prepares to take office, many people wonder how his administration will implement tax reform. How will Trump’s proposed alterations to America’s highly complex tax code actually function? And will it benefit citizens other than the top one percent?

The History of Taxes

It is no secret that the U.S. tax code is an extremely long and complicated document. Many Americans feel that the code has become increasingly difficult to decipher, leading many to hire a professional or use tax-preparation software to do their taxes for them each year. Interestingly, for most of early American history, there were no taxes–at least not in the form of direct taxation, like the federal income tax. Thus, the government began to collect tariffs and duties on specific items in order to generate revenue for public programs.

The Taxing and Spending Clause of the U.S. Constitution specifies Congress’ power to impose taxes and duties. There was, however, no permanent federal income tax until the early 1900s. During the Civil War, Congress passed the Revenue Act of 1861 to help pay war expenses, and in 1894 it enacted a flat rate federal income tax, but both taxes were eventually repealed or ruled unconstitutional. The 16th Amendment to the U.S. Constitution, which was passed in 1909 and ratified in 1913, finally gave Congress the ability to levy an official federal income tax.

The U.S. government currently levies taxes in a variety of ways including: income taxes, sales taxes, excise taxes, payroll taxes, property taxes, estate taxes, and gift taxes, to name a few. Each state has the authority to employ taxes differently; in some states, like Florida, there is no personal income tax.

Current Federal Income Tax Structure

Notably, the U.S. government relies mainly on income tax for its revenue to fund public programs and services. America utilizes a marginal tax rate structure for federal income tax, meaning that the tax rate for an individual increases as income increases. Marginal tax rates aim to tax individuals fairly based on upon annual earnings. The marginal tax rate breaks down income into seven different tax brackets: 10 percent, 15 percent, 25 percent, 33 percent, 35 percent, and 39.6 percent.

“Tax Time” Courtesy of Manchester City Library : License: (CC BY-SA 2.0)

Those with the lowest income are placed in the lowest bracket, while those with the highest income are placed in the highest bracket. Income taxes are progressive, meaning only a specific amount of income is taxed at each rate. Someone who makes $100,000 a year will have some of the income taxed at 10 percent, some taxed at 15 percent, and so forth.

Other taxes, such as sales and excise taxes, are considered regressive rather than progressive. Goods are taxed at the same percentage, regardless of income. So, those with lower incomes end up paying a larger percentage of their income via sales and excise taxes.

Tax Reform

While the U.S. economy is based on a free enterprise system, it does not necessarily produce all the services and revenue needed by society as a whole. Thus, taxes give the necessary revenue for government agencies to provide specific programs and services to the general population. Since everyone benefits from these services, levying taxes on citizens is thought of as the most practical way to pay for them. Education, transportation, retirement, disability, and veteran’s benefits are just a few examples of the litany of programs that operate because of taxes.

The impetus for tax reform occurred in the 1950s. Taxes were increasingly seen as a tool for increasing revenue and stabilizing the economy. In 1964, individuals in the highest bracket were being taxed at a staggering rate of 91 percent, so lawmakers started creating various exemptions to make the rates more palatable to citizens. The creation of Social Security and Medicare programs required additional tax revenues, and slowly increased the payroll tax rate.

1980s Tax Reform

The most notable tax reforms occurred in the 1980s, during President Ronald Reagan’s administration. Many were convinced that lowering the marginal tax rates for all were absolutely essential to a strong, stable economy. In 1981, Reagan signed the Economic Recovery Tax Act into law, which included a 25 percent reduction in marginal tax rates for individuals, phased in over three years, then indexed for inflation. Then came the Tax Reform Act of 1986, the broadest revision of the federal income tax in history. When the measure finally passed, it produced a simpler code with lower rates and fewer tax breaks. The changes were widespread, affecting every family and business in the country.

While the Tax Reform Act of 1986 was considered one of the most significant pieces of legislation ever passed, its overwhelming success was relatively temporary. The legislation closed tax shelters for particular individuals, but it did little to close all of the exemptions that prevent overall economic growth. Additionally, many of the tax loopholes that disappeared in the ’80s have been added back into the tax codes.

Bush-era Tax Reform

Since the 1980s, the tax code has been altered numerous times. An analysis by the Huffington Post in 2013 showed that the tax code has had 4,680 changes since 2001, more than one a day on average. In 2001, President George W. Bush reversed the trend of tax increases with tax cuts when he signed into law the Economic Growth and Tax Relief Reconciliation Act of 2001. The tax bill stemmed directly from Bush’s campaign promises to return the country’s budget surplus to the American people in the form of tax relief.

Bush’s temporary tax cuts, which were set to expire at the end of 2010, became permanent after Congress voted to extend them in 2013. Research has shown that these tax cuts drove the deficit, fueled income inequality, and benefited the wealthy over the middle-class. According to the Tax Foundation: “The bill cut the rates of the top four tax brackets by 3-4 points, added a new 10 percent bracket for low-income households, increased the standard deduction for married couples, and doubled the child tax credit.”

Trump’s Proposed Tax Plan

Trump’s tax plan has been compared to the 2001 Bush tax cuts. Trump plans to simplify the U.S. tax code by combining the seven tax brackets into three, with individual tax rates at 12 percent, 25 percent, and 33 percent. Moreover, Trump also wants to repeal the death tax, and increase the standard deductions for joint filers and single filers.

Trump’s tax plan would eliminate Obamacare’s net investment income tax, an additional tax on investment income, as well as the Alternative Minimum Tax. The original goal of the AMT was to ensure that a small number of wealthy taxpayers pay some tax; however, now it ensnares millions of taxpayers because the threshold of the AMT has not increased at the same pace as taxpayer income.

The top one percent of earners in the country will likely gain the most from Trump’s tax plan. Top earners would see the largest tax cuts–up to 7.3 percent–and middle-class families are poised to see their taxes rise under Trump’s plan, particularly single-parent families. Lily Batchelder, visiting fellow at the Tax Policy Center, noted that a single parent earning $75,000 annually with two school-age children would face a tax increase of over $2,400, as the Trump plan eliminates the $4,000 exemption for each person in a household. Additionally, a study by the Tax Policy Center found that three quarters of the total tax cuts would go to the top one percent of earners. Even the Tax Foundation, a more conservative D.C. think tank, found that all taxpayers would see an increase in after-tax income of at least 8.4 percent, but the top 1 percent would see a jump of 13 percent.

Steve Calk, a Trump economic adviser, argues that there will be large tax cuts for middle-class families. Calk contends that the Trump proposals will boost economic growth by reducing the corporate tax rate from 35 percent to 15 percent. The Tax Policy Center estimates that the government is poised to lose roughly $6.2 trillion in revenue, but economists are still in disagreement as to whether the Trump tax plan will be positive or negative for the economy. The Trump plan seeks to eliminate the federal estate tax completely; thus, the wealthiest taxpayers, the only people who pay this tax in the U.S., are likely to save even more under the Trump administration.

Conclusion

Without levying taxes, it would be difficult to generate the necessary revenue to fund government programs and services. As Supreme Court Justice Oliver Wendell Holmes once said, “Taxes are what we pay for a civilized society.” The nature of such taxation, however, is certainly subject to interpretation.

Trump’s tax plan is likely to cause controversy as the months unfold in his administration. Moreover, Trump’s proposed alterations are subject to approval by Congress, so it’s highly likely that some aspects of Trump’s plan will be different after negotiation. Congressional Democrats have stated that they will try to prevent Republican plans to overhaul the tax code, noting that the proposed changes are a massive benefit for wealthy citizens, not working-class Americans. On a positive note, there are elements of Trump’s plan that may improve incentives to work, save, and invest. Whether this plan will generate positive changes for the economy and for working-class families, however, is still up for debate.

Nicole Zub

Nicole is a third-year law student at the University of Kentucky College of Law. She graduated in 2011 from Northeastern University with Bachelor’s in Environmental Science. When she isn’t imbibing copious amounts of caffeine, you can find her with her nose in a book or experimenting in the kitchen. Contact Nicole at Staff@LawStreetMedia.com.

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Environmental taxes and “ecotaxes” are not a new phenomenon. Proponents of sustainability have advocated for environmental-impact taxes for a variety of products and activities. By requiring a tax, the goal is to drastically change behavior and encourage a more “green” lifestyle. Until recently, no significant research had been completed to determine the global environmental and health impacts of an environmental tax on food. Now, the journal Nature Climate Change has published the first global analysis of such a tax. Read on to learn more about these taxes. 

Environmental Taxes

Environmental taxes, or “ecotaxes,” are taxes on products or activities that are considered harmful to the environment. One of the central goals of a more “green” economy is having prices reflect the true cost of certain activities. The purpose of ecotaxes is to change people’s behavior and promote environmentally-friendly activities. Because the free market fails to address environmental concerns and sustainability, ecotax policies are meant to force the market to consider environmental impacts.

These policies are known as the “green tax shift.” Examples of these taxes include carbon taxes, waste disposal taxes, and taxes on pollution and other hazardous wastes. Generally, ecotaxes can fall into two distinct categories: revenue-motivated and incentive-motivated. Revenue-motivated ecotaxes are designed to actively change behavior by putting or increasing taxes on products or activites that are deemend harmful to the environment. Incentive-motivated ecotaxes instead take a different approach, offering tax credits and relief in exchange for consumers engaging in more environmentally-friendly behavior.

Currently, many products externalize environmental costs. This means that prices are placed at an artificially low value on non-renewable resources. Effects on the air, water, and soil are not taken into account when determining the price of a product. Thus, ecotax reform encourages internalizing these costs, so the long-term environmental consequences of economic activity are not completely ignored.

Agriculture’s Impact on Climate Change

Curbing climate change is of the utmost importance as the world moves further into the 21st century. At the forefront of mitigating the damaging effects of climate change is the agriculture industry. Perhaps what’s even more critical than regulating agriculture as a whole is focusing efforts on the meat and dairy industries. The global livestock industry contributes more greenhouse gas emissions than cars, planes, trains, and ships combined, though most people still mistakenly believe that transportation is the biggest contributor to climate change.

Changing consumer perception regarding meat consumption, however, is a difficult task to complete. Researchers and scientists across the world agree that changing dietary habits is crucial to curbing climate change. In a landmark report from the Intergovernmental Panel on Climate Change from 2014, researchers found that dietary changes have the ability to substantially lower emissions, despite very little global action to achieve those goals. Many calls to reduce meat consumption have been met with controversy and significant pushback.

Also, the rising demand for meat across the globe, including rapidly increasing meat consumption from heavily-populated countries such as China, may push climate change over the tipping point. Thanks to a rising population and more affordable meat prices, these products are being consumed at a higher rate than ever before. Recent peer-reviewed studies have shown that agricultural emissions will take up the world’s entire carbon budget by 2050, meaning every other industry like transportation and energy would have to be zero carbon.

An Environmental-Impact Tax on Food?

Food production and agriculture are massive contributors to greenhouse gas emissions. Recent research demonstrates that the global food system is responsible for roughly 25 percent of all greenhouse gas emissions. However, agriculture has never been included in American plans to reduce emissions. A brand new study suggests using an environmental-impact tax on food to combat this problem.

A study recently published in the journal Nature Climate Change states that if taxes were applied to food products based on the environmental impacts of their production, the environmental costs of agricultural activity could be substantially lowered. Specifically, climate taxes on meat and milk could lead to vital cuts in carbon emissions. The study is the first of its kind; the first global analysis of both the environmental and health impacts of a greenhouse gas on food.

The study runs through the environmental impact of each food type, figuring out the tax required to compensate for damage caused. Beef has the largest footprint, due to deforestation and massive methane emissions. Taxes of 40 percent on meat and 20 percent on milk would be substantial enough to account for the damage the production of these products causes people through climate change, the authors contend. Additionally, increasing the price of beef by 40 percent would likely result in a 13 percent drop in consumption. Some other taxes needed to compensate for climate change are 15 percent on lamb, 8.5 percent on chicken, 7 percent on pork, and 5 percent on eggs. Vegetable oil would require a 25 percent tax increase, but mostly because the initial price of the product is very low.

Some countries are already considering environmental impact taxes on food products. Denmark is one country that has already considered implementing a tax on red meat to fight climate change. The Danish Council of Ethics has recommended a tax on beef this year, coming to the conclusion that “climate change is an ethical problem.” Denmark views climate change as a direct threat to the country. Since it can’t rely on ethical consumers, it believes society must send a clear message regarding climate change through regulation. 

Optimum Tax Arrangement

The authors also took their study one step further, assessing the optimum tax arrangement for both emissions and health. After examining different tax regimes, the authors determined that the ideal policy would combine these taxes with subsidies for food, specifically healthy food such as fruits and vegetables. Moreover, maintaining a broad tax coverage–meaning many countries adopt such policies–would have the most beneficial effects.

This tax plan would reduce emissions by 1 billion tonnes a year, which is the total of the global aviation industry. The researchers were also surprised by the ability to cut emissions on such a massive level, especially when looking at the heavy impact of the dairy industry. Successful food tax policies take money generated through higher taxes and use the revenue for positive outcomes. Here, researchers advocate for utilizing tax revenue to ensure people can afford healthier diets.

Image Courtesy of Robert Couse-Baker : License (CC BY 2.0)

Many of the products that could have the greatest climate change impact also tend to be products that should be consumed in limited quantities. In the U.S., people on average consume three times the recommended amount of meat products, likely due to the relative ease of accessibility as well as a penchant for meat and dairy products. The most deadly and widespread diseases, such as heart disease, strokes, and cancer, may be curbed immensely by reducing meat and dairy consumption. Just last year, the World Health Organization classified processed meat as a carcinogen, while simultaneously classifying red meat as a probable carcinogen–specifically colorectal cancer. Thus, this new published research even noted that imposing an environmental impact tax on food products could end up saving more than half a million deaths each year in the U.S., Europe, Australia, and China. Saving significant money on health costs is a distinct possibility through these policies, as healthier diets would be both encouraged and subsidized.

Conclusion

Environmental impact taxes on food products are certainly controversial, just as the highly-debated soda taxes being implemented across the U.S. have been over the past few years. However, changing habits and behavior simply through marketing and advertisements can be nearly impossible to do. Public sensitivity regarding food choices has led to very few changes in how food is produced and consumed. Sometimes, financial incentives can be the ideal method for encouraging better and more responsible consumption.

As the global population increases, feeding the world will likely become a more daunting task. Currently, many food and tax policy issues are tied up in political knots, with governments hesitant to interfere in what is viewed as more “personal” choices. The powerful sway the food and agriculture lobbying industry has in shaping food policy cannot be ignored either. Additionally, this new research was not all positive, as there are potential negative impacts of adopting such tax regimes. Reductions in food availability and security is a possibility but could be mitigated by tailoring tax plans to each region of the globe. 

For now, environmental impact taxes on food may just be an idea rather than a reality. Such policies would impact more than just climate change, they would impact human health as well. Scientists and researchers across the globe seem to be coming to the same conclusion: to have a substantial impact in reversing climate change, dietary changes are essential to keep global warming below two degrees Celsius. This is a burgeoning field of research in both food and tax policy areas, but the current results are certainly compelling.

Nicole Zub

Nicole is a third-year law student at the University of Kentucky College of Law. She graduated in 2011 from Northeastern University with Bachelor’s in Environmental Science. When she isn’t imbibing copious amounts of caffeine, you can find her with her nose in a book or experimenting in the kitchen. Contact Nicole at Staff@LawStreetMedia.com.

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About a decade ago, public health researchers started advocating for implementation of a soda tax to combat consumption of sugary drinks. Soda intake has long been linked to the exacerbation of a series of potentially avoidable health problems including: obesity, diabetes, and tooth decay. After the recent election, four more U.S. cities voted to adopt a soda tax, spreading this new “sin tax” to more areas across the country. With more than one-third of American adults currently classified as obese, soda taxes could become a go-to method for combatting obesity, while simultaneously generating revenue for state budgets to fund local programs.

What are Sin Taxes?

Sin taxes are state-sponsored taxes that are added to specific products that are generally seen as vices, such as gambling, alcohol, and tobacco. In essence, by utilizing financial means, the government attempts to discourage individuals from engaging in a specific activity or using specific products without actually making those products or services illegal. Sin taxes are often compared to Pigovian taxes, which are taxes that generate negative externalities. In tax policy, a Pigovian tax is a fee assessed against private individuals or businesses for engaging in a specific activity; a negative externality occurs when an economic actor does not fully internalize the cost of activity. A simple example of a Pigovian tax is a pollution-related tax.

Currently, sin taxes are employed in a variety of sectors. Typically, they are added to liquor, tobacco, gambling, and other non-luxury items. There tends to be a decent amount of public support for sin taxes, as they are indirect and only affect those who use the specific products. Sin taxes are also extremely popular when trying to close large state budget gaps. Employing sin taxes for soda and sugar-sweetened beverages can help generate revenue and encourage public health initiatives. One research economist from the Research Triangle Institute has modeling data that suggests a six-cent tax on a twelve-ounce bottle of soda would lead consumers to drink 5,800 fewer calories from sugary drinks per year.

Using Soda Taxes to Combat Obesity

In 2014, voters in Berkeley, California passed the nation’s first soda tax, which went into effect in 2015. Additionally, in 2014, Mexico passed its own soda tax. After one year, sales of soda in Mexico fell as much as 12 percent, while bottled water purchases rose four percent. The researchers also found that while decline was seen across all socioeconomic groups, it was greatest among those who were low-income, with consumption falling 17 percent.

In the U.S., Berkeley’s tax was largely successful; research showed that soda consumption dropped in the city a staggering 20 percent. Philadelphia was the next city to follow suit, passing a soda tax earlier this year–thus becoming the first major city in the U.S. to do so. The tax, which is expected to generate $91 million annually, will be spent on pre-kindergarten programs in the city, creating community schools, improving parks and recreation centers, and libraries.

The beverage industry has fought extensively to keep soda taxes from passing elsewhere in the country. Advocates from the American Beverage Association, which represents all major soda brands, responded to the Philadelphia policy by arguing that the tax was regressive and unfairly singled out “low” and “no-calorie” beverages. In an effort to combat the tax, companies in the roughly $100 billion industry have focused their efforts on reformulating existing drinks to make them more healthy for consumers. However, even “diet” sodas are experiencing a sharp decline in sales, particularly because of increased suspicion regarding artificial sweeteners.

Soda Taxes Passed in November 2016

The World Health Organization recently recommended that governments impose soda taxes in order to combat a variety of diet-related diseases exacerbated by high soda consumption. Soda taxes were on the ballot in early November of this year in  three California cities–San Francisco, Albany, and Oakland–as well as Boulder, Colorado. The soda taxes passed in all four cities with fairly large margins of support, much to the dismay of the beverage industry. The American Beverage Association spent upwards of $9.5 million on an ad campaign opposing the measures entitled “Don’t Tax Our Groceries.”

The amount of tax in each city, however, varies. In San Francisco, Albany, and Oakland, the tax is one penny per ounce of soda. In Boulder, the tax is two pennies per ounce of soda, and the soda tax that passed earlier this year in Philadelphia was set at 1.5 cents an ounce. The disparities in the amount of tax per ounce are likely to continue as more jurisdictions follow suit.

These laws are also coming into effect at a time when soda consumption is down among Americans. In a 2014 Gallup poll, nearly two-thirds (63 percent) of Americans reported avoiding soda in their diet; in 2002 that number was only 41 percent. Moreover, over the last 20 years, sales of full-calorie soda have dropped by more than 25 percent. “Big Soda” is experiencing a substantial and sustained decline, while bottled water remains on track to overtake soda as the largest beverage category. The changing soda consumption patterns are noticeable in schools, where cafeterias and vending machines have stopped carrying regular sodas, and in many workplaces and government offices that have similarly limited sales. Soda, it seems, has now become the new tobacco: an unhealthy product that should be limited, if not outright banned, and taxed significantly.

“Soda” Image Courtesy of Rex Sorgatz : License (CC BY 2.0)

Issues with Soda Taxes

Not everyone is a fan of soda taxes. While the American Health Association has touted the win as a huge victory, many argue that the taxes affect low-income populations the most. Sin taxes arguably have a disproportionate effect on poor and less educated communities. Since sin taxes are typically regressive in nature, the less money a person makes, the larger percentage of his or her income the taxes take. Essentially, if comparing two “pack-a-day” smokers–one lower-income citizen and one high-income citizen–one can see that the two are spending the same amount of money on cigarettes and taxes each year. The taxes on those same cigarettes, however, are taking up much more of the lower-income citizen’s paycheck.

Additionally, the beverage industry contends that more taxes are not ideal when pursuing public health initiatives. Susan Neely, CEO of the American Beverage Association, stated that consumers don’t want these taxes. She also added that the industry is committed to reducing the amount of calories and sugar in these beverages and combating diet-related issues in a variety of manners. This includes partnering with Alliance for a Healthier Generation in order to try to change behaviors of people who may be receiving far too many calories from beverages. Other strategies include an ad campaign called “Balance What You Eat, Drink & Do” that encourages people to think more readily about the calories they are consuming. The beverage industry is also working with retailers to put more low-calorie choices at eye-level, so consumers will be more likely to pick those choices.

Conclusion

Whether you see soda taxes as a necessary movement or not, the U.S. is certainly grappling with an obesity epidemic. Educating the public about calorie and sugar consumption is critical to combating this public health crisis, in addition to making a myriad of low-calorie, no-calorie, and low-sugar choices more readily available in a variety of communities across the country. Sometimes, the easiest way to help people make changes is by utilizing financial means, and soda taxes may be an effective way to incentivize healthier behaviors. The law of demand works in practice, not just theory: when prices go up, people buy less.

For now, soda taxes seem to be here to stay, as they find their way into more cities across the country. “Big Soda” does appear to be in serious decline, and unless the industry can find a way to keep up with the public’s changing preferences, the downward trend may continue into the future. While the amount of a given tax will continue to vary depending on the jurisdiction, the long-term effects of taxes may be even more effective if taxes are increased and become more widespread. The amount of money generated from soda taxes has the potential to be large, and using the revenue to fund desperately-needed or underfunded programs, like Philadelphia intends to do, may be an ideal solution.

Nicole Zub

Nicole is a third-year law student at the University of Kentucky College of Law. She graduated in 2011 from Northeastern University with Bachelor’s in Environmental Science. When she isn’t imbibing copious amounts of caffeine, you can find her with her nose in a book or experimenting in the kitchen. Contact Nicole at Staff@LawStreetMedia.com.

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Donald J. Trump previously confessed that he tries to “pay as little as possible” when it comes to taxes. Therefore, it came as no surprise when a partial report of the Republican presidential nominee’s 1995 tax records confirmed his financial outlook.

The New York Times published Trump’s 1995 income tax returns on Saturday, which explain how the former reality TV show host and real-estate mogul could have avoided taxes for nearly two decades. That year Trump declared a $916 million loss, a loss that could have allowed him to legally avoid paying federal income taxes for up to 18 years.

Trump was recently criticized by Democratic nominee Hillary Clinton during the first presidential debate for not being forthcoming about his tax returns. Clinton suspected that the businessman didn’t pay his federal income taxes–a claim Trump said made him “smart.”

Former New York City mayor Rudy Giuliani agreed with Trump’s statement and called him a genius after the tax records were released.

“The reality is, this is part of our tax code. The man’s a genius. He knows how to operate the tax code to the benefit of the people he’s serving,” Giuliani told CNN’s Jake Tapper on “State of the Union.”

Legal, yes. Genius, not so much.

The Washington Post’s Allan Sloan, a seven-time winner of the Loeb Award (business journalism’s highest honor), didn’t offer the same sentiments as Giuliani. Sloan’s op-ed said:

Sure, the $900 million-plus of losses reported by the New York Times–losses that could be used to offset income for a total of 18 years–are totally shocking. Legal, yes. But shocking.

But there’s something I consider even more shocking–although it involves a much smaller number.

By my read of the Trump tax return published by the New York Times, he would have been tax-free because of a $15,818,562 loss reported on Line 11 of the return under “Rental real estate, royalties, partnerships, S corporations, trusts, etc.” It looks to me that this loss reflects the outrageous, special tax break that real estate developers that people like Trump can get, but that the rest of us can’t.

In the current election cycle Trump has refused to release his returns, unlike every other presidential candidate in modern history. As the candidates begin to bridge the gap between voters, it is imperative they remain honest and forthcoming–a common complaint for both of their campaigns.

Trump declined to comment on the documents. Instead, he tweeted a personal attack at the Times.

I know our complex tax laws better than anyone who has ever run for president and am the only one who can fix them. #failing@nytimes

— Donald J. Trump (@realDonaldTrump) October 2, 2016

The Trump campaign released a statement that neither challenged nor confirmed the $916 million loss.

“Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required,” the statement said. “That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes, along with very substantial charitable contributions.”

Bryan White

Bryan is an editorial intern at Law Street Media from Stratford, NJ. He is a sophomore at American University, pursuing a Bachelor’s degree in Broadcast Journalism. When he is not reading up on the news, you can find him curled up with an iced chai and a good book. Contact Bryan at BWhite@LawStreetMedia.com.

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On Monday afternoon, a billionaire prescribed angry American workers a path to the middle class in a city the recession pummeled harder than pretty much any other. Donald Trump, the Republican presidential nominee, gave his most detailed speech on his economic plan yet, in front of protestors, supporters, and press at the Detroit Economic Club.

As protestors punctuated his hour long speech, in which he was introduced by his running mate Governor Mike Pence (R-IN), Trump aimed to shift the focus from his recent blunders to his beliefs on how America should move forward. Here is what you need to know about where Trump plans to steer the economy, with some fact-checking for good measure:

Taxes

For one, Trump railed against the estate tax: “American workers have paid taxes their whole lives, and they should not be taxed again at death,” said the man who inherited undisclosed millions from his father. He promised to abolish the estate tax, which he said “is just plain wrong.”

Trump’s tax plan seemed to try to placate disillusioned low-income earners without completely ignoring those who are in the highest tax bracket. Private income, under Trump’s plan, would be taxed in three brackets: 12 percent, 25 percent, and 33 percent. “The rich will pay their fair share, but no one will pay so much that it destroys jobs or undermines our ability as a nation to compete,” he said, promising that many Americans–presumably those who earn below a certain threshold–would not pay any income taxes.

Inaccuracies

It’s no secret at this point that Trump throws falsehoods around often and enthusiastically. That’s not to say Clinton doesn’t do her share of fibbing, but per PolitiFact, an independent fact-checking website, the two are hardly in the same stratosphere: 53 (or 22 percent) of Clinton’s statements this campaign season have been completely true, while only nine of Trump’s (four percent) statements could be considered foolproof. His speech on Monday, though prepared, treated facts lightly at some points.

A touchstone of Trump’s success so far has been his stance on trade deals, namely that they are “terrible” and he’d “rip them up” if elected president. NAFTA, drafted by President George H.W. Bush and supported by Bill Clinton, is one of Trump’s go-to targets.

“According to the Bureau of Labor Statistics, before NAFTA went into effect there were 285,000 auto workers in Michigan. Today, that number is only 160,000 auto workers,” Trump said on Monday.

Auto manufacturing jobs have indeed been on a decline in America, especially in the “Motor City,” Detroit. But Trump implies NAFTA is the sole culprit of those job losses. The Congressional Research Service conducted a study in 2015 on NAFTA, and found that while certainly some auto industry jobs were lost to cheaper labor in Mexico, it’s also certain that many of the job losses can be explained by increased productivity due to technological advancements.

For more fact-checking on Trump’s speech, click here.

Clinton

Here is how Trump framed the two options Americans will face in November: “She is the candidate of the past,” he said of Clinton. “Ours is the campaign of the future.” While they both are technically candidates of the present, Trump looked to portray Clinton and her platform as tired, worn out, and his own as bold, ready to “jump-start America.”

Again, some of his criticisms aimed at Clinton were related to trade. He mentioned her support for NAFTA and said she would likely support the Trans-Pacific Partnership–her official stance is against the TPP, but she did support it in the past–a 12-nation trade deal that is stalled in Congress at the moment.

Trump dismissed Clinton’s economic vision, which she will flesh out on Thursday, also in Detroit. Clinton, during a rally in St. Petersburg, Florida, shot back, saying his plan equated to a re-packaged version of Ronald Reagan’s trickle-down economics: “Now, you know that old saying, ‘Fool me once, shame on you, fool me twice, shame on me?'” she said. “Trickle down economics does not help our economy grow. It does not help the vast majority of Americans.”

With Clinton set to unveil her economic vision for America on Thursday, hopefully the focus will shift from lofty rhetoric to detailed ideas so voters can focus their energy on the things that matter.

Alec Siegel

Alec Siegel is a staff writer at Law Street Media. When he’s not working at Law Street he’s either cooking a mediocre tofu dish or enjoying a run in the woods. His passions include: gooey chocolate chips, black coffee, mountains, the Animal Kingdom in general, and John Lennon. Baklava is his achilles heel. Contact Alec at ASiegel@LawStreetMedia.com.

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Nearly 70 percent of American adults are overweight or obese. We spend trillions of dollars every year on healthcare and about half of that budget is spent treating so-called lifestyle diseases like diabetes and heart disease, types of which are largely preventable. The traditional image of a person in poverty being thin with hunger no longer rings true in the West and the developing world. The phenomenon of “fat with hunger” is now on the rise–people who can only afford cheap, processed carbohydrates that are bereft of nutritional value. They are consuming enough calories to live but they aren’t getting the appropriate nutrients to live well.

The problem is both cultural and personal. Americans have become more inactive in our jobs and our leisure activities and many people find it difficult to incorporate exercise into their schedules on top of their other responsibilities. In many areas, people are trapped in food deserts, where they have no access to nutritious options, or they simply cannot afford the types of foods they should be eating or a gym membership. These realities prevent many Americans from living a healthier lifestyle. But like other unhealthy habits, the structure of society can only take so much of the blame. Individuals still have a personal responsibility for their health.

If that is the case, how far should the government go to promote healthy choices? There are several tools that the government can use to encourage citizens to make certain choices. It can provide tax breaks or cash incentives, advocate, re-design cities, and punish those who don’t comply. But how much do we want the government to “help” us make good choices?

Carrots and Sticks

In policy making, as in diplomacy, there are carrots and sticks–where “carrots” are rewards and “sticks” are punishments. Both are used to incentivize positive behavior. Ideally, people will behave in such a way as to avoid the stick and/or get the carrot, and that behavior will benefit them and society. Mexico, which now has a rate of obesity similar to the United States, uses the carrot approach in Mexico City, where riders who do 10 squats are able to ride the subway for free. It’s a direct and immediate incentive to do some exercise. Mexico is also using the stick approach by taxing highly caloric food and beverages.

Take a look at this explanation of what Mexico is doing from PBS:

The program in Mexico is a good example of the four tools governments have at their disposal: direct policy and physical changes, financial rewards, financial punishments, and advocacy. Mexico gives free subway rides to participants, taxes products it doesn’t want citizens to consume, builds new public gyms in cities, and uses the bully pulpit to promote healthy lifestyles.

The United States is using some of these methods as well. In her Let’s Move campaign, First Lady Michelle Obama takes advantage of her unique ability to communicate with the public to advocate for increased physical activity and healthy eating, particularly for children and adolescents. She has taken some flak for her efforts but many Americans are supportive of public figures using their stature to promote healthy living.

Cities in the United States are also taking their own steps to change behavior. For example, Washington, D.C. is going to eliminate fees for residents in city gyms. It cuts revenues for the city, but officials believe that in the long run it will save money in terms of costs for treating chronic diseases that are associated with obesity. If free access to a gym encourages individuals to exercise who otherwise would not, those individuals will be healthier and it will cost less to treat diseases. Free gym access is not as direct a financial benefit as a free subway ticket, but it is an example of a direct financial reward that a city can offer to mold behavior. In Chicopee, Massachusetts, city employees can earn $25 dollars a month for walking 7,000 steps a day, five days each week. The cash incentives seem to work as participation increased significantly after a financial reward was put in place.

D.C. is also considering adding more bike lanes in areas where residents are commuting to work via bicycle, to further encourage this behavior. These changes are sometimes met with tension–bike lanes can reduce available street parking and may favor one group of citizens over another–and sometimes these proposals are viewed along racial and socio-economic lines. In D.C., altering the city’s landscape could adversely affect older, black residents in those neighborhoods who do not tend to bike to work. On the other hand, the understanding of who is actually biking to work may be mistaken.

Repeat Users

Companies actively market products that contain high levels of salt, sugar and fat to consumers. They have tapped into a delicious, deadly, and biologically motivated combination of chemicals that keep consumers coming back for more. Anyone who has ever had fast food can appreciate the unholy alliance of the salty and the sweet and food companies profit from the natural human tendency to seek out highly caloric food as a means of survival. The marketing of these products is part of the issue with the rise of obesity, according to Michael Moss the author of “Salt, Sugar, Fat: How The Food Giants Hooked Us.“

Watch the video below as Moss talks with a former CDC official on PBS NewsHour.

It is precisely the “heavy users” who we want to dissuade from purchasing fast food or unhealthy food in grocery stores. Taxes on these foods, like the ones used in Mexico, can alter these consumption patterns. But they might just be making it more expensive for people to purchase the foods they want or the only kinds of foods they have access to. These taxes are also difficult to achieve politically, with backlash from both consumers and the food industry.

Oklahoma City, a community where obesity rates have tripled in two decades, has made some progress in combatting obesity, but it did not have the political will or ability to do so by challenging the fast food industry. The principle way that Mick Cornett, the mayor of Oklahoma City, chose to combat obesity in his city was through the encouragement of individuals to take personal responsibility for their actions and to make better choices. Instead of taxing soda, or limiting the amount that can be sold, the emphasis was placed on encouraging people to not order a 40-ounce soda, even though they can.

The argument of personal choice also applies to school lunches. For example, in Oklahoma City, officials need to determine options to offer children. Kids want to eat burgers, pizza, and other unhealthy foods, which parents may not want their children consuming on a daily basis. But those are often the more affordable options to make, and what the kids will eat. Big businesses like Tyson, which supplies the chicken for Oklahoma City schools, have a stake in school menus. There are also cultural clashes that make encouraging healthier options more difficult.

Oklahoma City faces the same problems that America in general faces when combatting this issue: a powerful and well-organized lobby that fights against taxing sugar and fat as well as an addiction not just to their products but to the profits and tax revenue that they generate. Oklahoma City relies on fast food companies like Sonic to provide jobs that produce sales tax revenue because their budget is entirely made from sales taxes. Cities that are funded this way want fast food restaurants to move there, which means not having additional vice taxes on their products. Then they also have the added incentive to encourage people to eat there; creating a tug of war between the desire to keep citizens healthy and keep city coffers full.

Conclusion

Placing a prohibition on the consumption of sugar and fat may not be the answer to the obesity epidemic. In New York City, the court rejected a ban on how many ounces of soda a business can sell in a serving and Americans find restrictions on freedom when it comes to food to be unpalatable. But there are other means that governments can use to incentivize people to make different decisions when it comes to their food and health-related habits.

Given the political headwinds that cities face when taking on food companies it may be more effective to address the issue of exercise more directly rather than taxing unhealthy foods. These taxes are unpopular and can punish the very populations that these policies seek to help, even if they do have some success. By contrast, making it easier for people to have access to fitness classes and exercise in their communities can help save money in the long run. Doing so may also feel less invasive to people worried about the extent to which government is trying to govern our choices.

Resources

Slate: You Should Get A Tax Deduction For A Gym Membership

Quartz: Mexico City Is Offering Free Subway Rides In Exchange For Doing Squats

PBS: Did You Know? The Story of Theodore Roosevelt

White House: Let’s Move

Washington Post: DC Will Eliminate Fees At City’s Fitness Centers In 2016

WAMC: City Offers Employees Cash Incentives To Keep Fit

Washington Post: More Than 20 percent Of Residents Bike To Work in These Three D.C. Neighborhoods

GoodReads: Salt Sugar Fat

Politico: How America’s Top Junk-Food City Went On A Diet (And Fattened Its Economy)

NY Post: Highest Court In NY Refuses To Reinstate Big Soda Ban

Mary Kate Leahy

Mary Kate Leahy (@marykate_leahy) has a J.D. from William and Mary and a Bachelor’s in Political Science from Manhattanville College. She is also a proud graduate of Woodlands Academy of the Sacred Heart. She enjoys spending her time with her kuvasz, Finn, and tackling a never-ending list of projects. Contact Mary Kate at staff@LawStreetMedia.com

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Update: We Have Winners

The three winning tickets announced so far were sold in California, Tennessee, and Florida. In these states, the winners will be asked to reveal their name to the public, meaning they are most likely planning out how to escape the country and ensuing media blitz. All three winners will have the luxury of paying no additional state taxes on their jackpot, so they’ll have more money to put towards their great escape.

The Powerball lottery has worked the country’s ‘temporarily embarrassed millionaires‘ into a frenzy with an unprecedented jackpot that estimates put at around $1.5 billion. The next closest jackpot, from a Mega Millions lottery in 2013, lags behind at a measly $590 million.

So how did we reach this astronomical number? It turns out to be more than just pure luck: Powerball actually reduced the already minuscule chance of winning by about 40 percent last summer (from 1 in 175 million to 1 in 292 million). By lowering the chance of a winner in each individual drawing, the jackpot rolls over to the next drawing leading to unprecedented windfalls.

Han Solo won’t let the Powerball changes stop him from his chance at fortune

1. #NotAllStates

Still, even if you refuse to be daunted by how slim the chance of a win is, you’re not going to have the same Powerball experience in every state or even all states–six states do not participate in the national lottery. In many states such as Utah, gambling is illegal, which bars stores from even selling tickets. For others, like Nevada and Mississippi, the lottery is seen as competition for the states’ well-established casinos. Residents of those states, plus Alabama, must visit neighboring states to purchase their tickets. For the remaining residents without access to Powerball–Hawaiians and Alaskans–a visit to another state isn’t an easy option.

So, if you’re in one of the remaining 47 states and territories (including D.C. and the Virgin Islands) you’re able to buy a ticket. The trouble is, even then you’ll have a different lottery experience depending on where you purchase your ticket.

2. Staying Anonymous

One much-heralded piece of advice from former winners is “Don’t tell anyone you’ve won. Anyone.” While a brief moment of celebrity may seem appealing, the intense media scrutiny as well as relatives, friends, and acquaintances coming out of the woodwork for their piece of the pie are enough to drive any winner crazy. Only six of the participating states and territories allow winners to remain anonymous: Delaware, Kansas, Maryland, North Dakota, Ohio, and South Carolina. For other states, winners’ names and hometowns are a matter of public record.

Importantly, these rules apply to the place where you purchase your ticket, not your state of residence. That means that if you really do believe in your lucky numbers, it may be worth visiting another state to buy your tickets, lest you become an unwitting overnight sensation.

3. The Money

A representation of the winner’s first day with their money, even after taxes.

Lottery winners have the choice between a lump-sum payment, or an annuity paid out over 30 years. The lump-sum is cut down from the advertised billion-plus to $930 million, and that’s before taxes. Factor in the two taxes you’ll have to pay on this total–a federal tax of 25 percent and additional state taxes.

Your winnings will also look a lot different depending on where you live because state tax laws on lottery winnings vary widely. Your lump-sum total could wind up anywhere from $615,474,000 in New York to $697,500,000 in California (New York taxes 8.82 percent while California has no tax on lottery winnings). If you decide to take the annuity a ticket purchased in a high-tax area like Washington, D.C. would net you a yearly payment of $33,250,000, while a ticket from a tax-free lottery haven like Texas earns you $37,500,000 each year. California and Texas are joined by Wyoming, Washington, Tennessee, South Dakota, Puerto Rico, Pennsylvania, New Hampshire, Florida, and Delaware.

This means that if you’re looking to maximize profits while staying anonymous, buying your lottery tickets in Delaware is your best bet. However, if you’re really looking to be smart about it, the best option is to not buy a lottery ticket in the first place.

Sean Simon

Sean Simon is an Editorial News Senior Fellow at Law Street, and a senior at The George Washington University, studying Communications and Psychology. In his spare time, he loves exploring D.C. restaurants, solving crossword puzzles, and watching sad foreign films. Contact Sean at SSimon@LawStreetMedia.com.

The post A Billion Dollar Powerball? It Depends On Your State appeared first on Law Street.

As many Americans continue to move toward more conscious eating that places an emphasis on consuming responsible, organic foods, we’ve seen more labels in our supermarkets. The country-of-origin labeling rule (COOL), first authorized in 2002, mandated that our meat labels list the country where the product was produced. However that provision was repealed in the budget bill passed by Congress and signed by President Obama late last week–which means that country-of-origin labels will no longer appear on meat, specifically beef and pork, sold in the United States.

But this move on Congress’s part isn’t about a departure from increased labeling–it’s about the possible international affairs and economic side effects of continuing the labeling. The COOL labeling has been controversial on the world stage from the beginning, because other countries feared it could cause American consumers to discriminate against their meat products for no reason other than that competitors’ products were produced in the United States. Last week, the World Trade Organization (WTO) authorized Canada and Mexico, two of the U.S.’s major trading partners, to tax American products to make up for the cost of the COOL regulations.

The concerns over those costs, as well as the fact that these taxes could be extended to other products, caused Congress to repeal the provision specifically on beef and pork, but labeling will remain on other products. Any meat that comes into the United States from another country will still be inspected by the USDA before it makes it into consumers hands. However, many Americans are unhappy with Congress’s choice to change the labeling requirements overall. Most notably, this comes in contrast to what Americans seemingly want. According to a 2013 study by the Consumer Federation of America:

Eighty-seven percent (87 percent) of adults favored, either strongly or somewhat, requiring food sellers to indicate on the package label the country or countries in which animals were born, raised and processed. Similarly, ninety percent (90 percent) of adults favored, either strongly or somewhat, requiring food sellers to indicate on the package label the country or countries in which animals were born and raised and the fact that the meat was processed in the U.S.

Supporters of COOL have floated particular concerns about Brazilian beef, because the country has had an outbreak of Mad Cow Disease as recently as 2014. According to Willy Blackmore, of TakePart, “there could soon be between 20,000 and 65,000 metric tons of fresh or frozen Brazilian beef—about 1 percent of U.S. beef imports—coming into the country annually.”

So, the vote was kind of a lose-lose for Congress–either way it was going to make some people mad. But for now, we won’t be seeing country-of-origin labels on our beef or pork–we’ll have to see how long that change lasts.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post Where’s Your Meat From? Congress Repeals Country-of-Origin Labeling appeared first on Law Street.

Tumultuous alcohol regulations speckle America’s past. Prohibition alone demonstrates our sometimes love/hate relationship with liquor. Some people loved alcohol enough to succumb to criminal behavior. Others hated it enough to dream of scourging it completely from the nation. Extreme feelings on both sides only led to fleeting Prohibition policies, blemishes on the Constitution, and a case study in alcohol regulation.

Today, we enjoy more balanced alcohol policies, but the system has yet to achieve the perfect balance of  freedom, safety, and economic gain. From a public health perspective, alcohol consumption still presents a regulatory challenge in avoiding preventable alcohol-induced illness and death. Alcohol has unflattering ties to illness, death, and economic burden. Every year in the United States, alcohol consumption causes 1.6 million hospitalizations and 80,000 deaths. Alcohol-related liver cirrhosis alone kills 26,000 a year.

Many interventions place focus on the individual, with programs to treat heavy drinkers or educate people who might become heavy drinkers. Unfortunately, many accidents result when habitually moderate drinkers engage in uncharacteristically risky behavior. To make sure everyone benefits from interventions, many experts seek changes in alcohol regulations that could benefit the entire population. Some recent studies have yielded compelling results on how increasing taxes and adding breathalyzers to cars could yield enormous benefits to our overall well-being.

 Regulation of Alcohol in the U.S.

You can strut around certain streets of Savannah, Georgia clutching an open container with no questions asked. Try that in any city in Virginia and you could face misdemeanor charges. Alcohol policies vary–sometimes dramatically–from state to state.

Alcohol regulations fall into four major subject areas:

• How alcohol is sold and distributed
• How alcohol is purchased and served
• Taxes, usually in the form of excise taxes on wine, beer, and hard liquor
• Blood alcohol content (BAC) laws for operating cars and machinery

Recent studies on the effects of taxes and BAC laws scrutinize current policies and call attention to possible changes. Keep reading to learn about the findings and how they could mix things up.

Higher Alcohol Taxes

One action that could potentially reduce alcohol-related deaths and boost the economy? Sounds like a great idea. Unfortunately, the idea is raising taxes, which immediately puts a sour taste in many mouths. Unpopular or not, the researchers assessing the relationship between alcohol and taxes have found tax increases could yield major benefits.

Increasing Taxes Decreases Alcohol Consumption.  

Raising alcohol taxes decreases alcohol consumption, and therefore indirectly reduces alcohol-related disease and death. Research has proven many times the inverse relationship between alcohol consumption and higher taxes and prices. Compared with other prevention policies, taxation tops the list of the most effective ways to reduce drinking. Models have found increasing alcohol taxes could reduce alcohol-related deaths by about 35 percent, lower crashes by 11 percent, and even reduce transmission of sexually transmitted diseases by 6 percent.

Increasing Taxes Could Actually Create, Not Destroy, Jobs

People who oppose an increase in alcohol taxes often cite job loss and other economic concerns to justify their positions. But researchers have found that the opposite might be true, and increased alcohol taxes could actually stimulate the economy. Researchers from University of Illinois at Chicago and the Center on Alcohol Marketing and Youth (CAMY) at the Johns Hopkins Bloomberg School of Public Health created an online tool that tests how different alcohol tax rates could impact the economies of all 50 states.  According to the model, a $0.05 alcohol tax increase in California could create about 21,500 jobs if the tax revenue goes into the government’s general fund. You can check out the tool here and even find out what increased alcohol taxes could do in your state.

Let’s give a possible increase in alcohol taxes some perspective. Alcohol taxes have pretty much avoided being adjusted for inflation since the 1950s. Since alcohol taxes didn’t adjust with the rest of the economy, in relative terms alcohol costs significantly less than it did in the 1950s. Take beer for example; most states calculate beer taxes per quantity, not based on price. By the year 2000, state beer taxes amounted to relatively about a 1/3 of what they were in 1968 as inflation spiked beer prices but taxes stayed stagnant. While some states adjusted for inflation, most states saw tax profit dwindle by over 50 percent since 1968.

That’s why Alexander Wagenaar, a professor at University of Florida, believes taxes should be raised and automatically adjusted for inflation. He estimates that every drink consumed costs society about $1.90 in healthcare and other burdens, but points out that alcohol consumers aren’t responsible for the extra costs incurred by their actions.

Will it happen?

Any attempts to raise taxes on alcohol have been met with firm opposition from liquor lobbies and the hospitality industry. As a result, most attempts at increasing alcohol taxes have failed, at least 335 out of 364 major attempts since 2001 in New Mexico, Minnesota, Maine, and Hawaii, just to name a few. In 2012, it’s estimated that the liquor industry spent $16 million on political candidates, solidifying their place in regulatory affairs.

Mandatory breathalyzers in our cars?

Had enough of grim DUI-warning commercials and high school “Grim Reaper” days? One policy could put an end to them by physically stopping would-be drunk drivers from starting their cars. One possible alcohol intervention involves installing alcohol ignition interlocks (a.k.a in car breathalyzers) that connect to the car’s ignition and lock it if the driver’s BAC is above a pre-set limit. This might seem extreme, but shine a spotlight on the problems with alcohol-involved motor vehicle crashes (AI-MVCs) and you’ll see why it’s appealing from a policy angle.

AI-MVCs rank as a major public health threat mostly because the dangerous actions of a few can end up hurting many innocent people. Awareness campaigns and laws have decreased the problem since the 1980s, but in 1994 AI-MVCs accounted for 30 percent of all traffic fatalities and since then that percentage hasn’t really budged.

Policies like BAC limits, zero tolerance laws, and license suspension work, but they place the burden of finding and penalizing perpetrators in the hands of police officers. Without a magical drunk radar, this means some people slip through and cause devastation. Some estimates find that repeat offenders often drive drunk as many as 80 times before they’re discovered and apprehended. Even license suspensions don’t stop them, as 50 percent to 75 percent of offenders keep on driving anyway.

Interlock devices cause prevention-minded experts to salivate at the idea of nipping fatal accidents in the bud.  But would interlock devices actually help in the real world?

In 2008, the National Highway Traffic Safety Administration (NHTSA) started a five year test to determine the viability and effectiveness of widespread use of the devices. The Driver Alcohol Detection System for Safety (DADSS) program sought to find out if mandatory adoption policies would have an impact on fatal and non-fatal AI-MCVs and if they could decrease economic costs associated with AI-MCVs.

Here’s what they found out:

Interlock devices would prevent deaths and injuries: 

Using a 15 year implementation model, the DADSS program estimated that 59,000 (83 percent) deaths and 1.25 million (84 percent-88 percent) of nonfatal injuries could be prevented.

Interlock devices would reduce AI-MCV costs: 

Again, assuming a 15 year implementation model, costs associated with fatal injuries could be reduced by $260 billion and costs associated with nonfatal injuries could be reduced by $83 billion. In perspective, if the devices each cost $400 and worked 100 percent of the time, the reduction in injury costs would outweigh the implementation cost after 3 years.

A required interlock device program has already been implemented in France, the wine mecca of the world. Drivers in France need to have breathalyzers on hand or face fines. After implementing the program, France went from having one of the highest alcohol-related traffic fatalities in the world to having one of the lowest.

Will it happen?

The researchers acknowledged that mandatory interlock devices would be a drastic change, would take many years to implement, and would need to pass through the National Highway Traffic Safety Administration as a new safety standard. They recommend strengthening current policies in the interim, such as having all states require interlocks among first time DUI offenders, requiring the device use for longer periods of time, and requiring their use in the pre-conviction time frame. The DADSS found the public receptive to the idea, with 64 percent of people surveyed saying they thought it was a good idea.

 Prevention instead of Punishment  

State alcohol regulations change constantly.  With an alcohol tax system that’s stuck in the 1950s and an AI-MCV rate that hasn’t budged since 1994, more changes are certainly in order. New policies would shift our alcohol intervention system from one of punishment, to one of prevention.

If either of these ideas seem extreme to you, remember that there are already some odd alcohol-related laws on the books. For example, in Massachusetts, discounted alcohol, even during happy hour, is prohibited. When dining at a restaurant in Utah, all alcohol bottles on display must be empty. We’ve endured these and other strange alcohol laws throughout the history of the United States. Surely interventions that could reduce alcohol-related fatalities, disease, and injuries will prove more palatable to many Americans. 

 Resources

Primary

US National Library of Medicine: Effects of Beverage Alcohol Price and Tax Levels on Drinking: a Meta-analysis of 1003 Estimates from 112 Studies 

Additional 

Science Daily: Alcohol Taxes Can Improve Health, Lead to More Jobs

Association of State and Territorial Health Officials: Reducing Alcohol-Impaired Driving Through Ignition Interlock Policies

Mothers Against Drunk Driving: Ignition Interlock Frequently Asked Questions

Pew Charitable Trusts: Liquor Lobby Fights Off Tax Increases on Alcohol

American Journal of Public Health: Modeling the Injury Prevention Impact of Mandatory Alcohol Ignition Interlock Installation in All New US Vehicles

American Journal of Public Health: Effects of Alcohol Tax and Price Policies on Morbidity and Mortality: A Systematic Review

Public Health Law Research: Raising Alcohol Tax Levels to Reduce Drinking

Public Health Law Research: Effects of Alcohol Taxes on Alcohol-Related Mortality in Florida: Time-Series Analyses From 1969 to 2004

Yale Law School: Liquor Laws and Constitutional Conventions: A Legal History of the 21rst Amendment

Ashley Bell

Ashley Bell communicates about health and wellness every day as a non-profit Program Manager. She has a Bachelor’s degree in Business and Economics from the College of William and Mary, and loves to investigate what changes in healthy policy and research might mean for the future. Contact Ashley at staff@LawStreetMedia.com.

The post Breathalyzers in Cars? Changes in American Alcohol Policies appeared first on Law Street.

President Obama gave his second-to-last State of the Union address last night, and it’s being lauded as a great one. He laid out a long to-do list, including addressing net neutrality, his education plan, a minimum wage hike, a tax code overhaul, and a fight against ISIS, despite the fact that he enters this year having to stand against a Republican-controlled Congress. In fact, much of the speech seemed like a challenge to a Congress made up of the very people who have consistently tried to stall Obama’s polices for the last seven years. Whether or not they decide to play nice will be up to the Republicans.

The Republican response to the speech, of course, was rather negative. The main criticism seemed to be that Obama didn’t focus enough on the middle class. Rep. Cathy McMorris Rodgers (R-WA), who actually gave the Republican response to last year’s SOTU, commented:

You know, I was disappointed. I was disappointed that I didn’t hear more from the president as far as how we were going to help those middle-class families. I thought he painted a little rosy picture of how things are, at a time when people continue to see their wages actually shrink, take-home pay shrinking. Job opportunities are not enough.

That quote from McMorris Rodgers is pretty consistent with a lot of GOP responses to Obama’s SOTU speech last night–that he doesn’t understand the middle class and do enough to help the citizens who fall into that bracket. Most Democrats are insisting that the plans that Obama laid out–particularly those to give middle class families a tax break, as well as help ease the burden of college payments, are going to be great for these segment of the country.

As I sat here trying to work my way through all of the plans, all of the political rhetoric, all of the buzzwords that got thrown around last night, I had a realization. It’s not just that Democrats and Republicans can’t seem to agree on how to help the middle class. It might be that we can’t agree on what the “middle class” is. 

It sounds silly–we all know what the middle class is, right? It must be that chunk of the population between those in poverty, and those who live in mansions. Is it blue-collar workers, or white-collar workers, or a little bit of both? Or is it more of a heritage–are we middle class because of the values that are instilled in us? I honestly don’t know anymore.

What I do know is that pretty much everyone thinks they’re middle class. In a 2012 Gallup Poll, 42 percent of respondents said they were middle class. Another 13 percent said they were upper-middle class. Then another 31 percent said they were “working class,” which makes this entire thing even less clear, given that working class is sometimes viewed as middle class. Most importantly, there were a plurality of people in every income bracket from $30,000-$100,000 who defined themselves as “middle class.”

The concept of the middle class has long been hailed as a bedrock of American society, and I’m not saying that’s a bad thing. But I think it does make it incredibly difficult to design policies for the “middle class” because when you’re talking about well over half the population, one size doesn’t even fit most. What I, as a 20-something living in Washington D.C., need, is significantly different than what a family in Iowa needs, which is different than someone about to retire in California needs, even if we all make about the same amount and identify as “middle class.”

To bring this back to last night’s speech, it’s that very definition problem that makes it easy for both the Democrats and the Republicans to point to their plans and say “look, it’s for the middle class.” For example, Obama’s statement last night:

That’s why this Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work. Really. It’s 2015. It’s time.

To me, that sounds like a tangible thing that would help the middle class. Given that it’s now pretty close to the norm for both men and women, even those married and/or with families, to work, ensuring that they both get fair pay seems like it would help the middle class to me. But then the Republicans see that Obama is also proposing a tax hike on the richest Americans, and will argue that that’s going to slow job growth, so paying men and women equally isn’t helpful if neither of them can find a job. It’s a messy, cyclical argument that’s more about politics than actually trying to help the middle class, no matter who we may be. And that’s a shame.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post SOTU All About the Middle Class, But Who Exactly is That? appeared first on Law Street.

It’s official. Two more states — Oregon and Alaska — have joined Colorado and Washington in legalizing marijuana.

Oregon’s Measure 91 had a convincing victory, winning approximately 54 percent of the vote. Like Washington and Colorado, Oregon will now allow regulated and taxed sales of marijuana to adults. Stores will probably come sometime in 2016, a timeline consistent with those that Colorado and Washington set for themselves previously.

Ballot Measure 2 passed in Alaska by a margin of roughly 52-48 percent. In 90 days it will become the law of the state, and the state will create mechanisms to regulate the use and sale of legalized recreational marijuana. Alaska has long had a lax view on marijuana laws — a 1975 court decision legalized very small amounts in the home, although it was incredibly narrow and not really followed. In addition, Alaskans have tried a few times to get legal marijuana on the ballot, voting on the issue in 2000 and 2004. While both measures obviously failed, Alaska has certainly had a storied and complicated history with marijuana legalization.

And then, of course, there’s D.C. Our nation’s capital legalized recreational marijuana use, although not the sale of marijuana. There’s confusion over what this actually means, though. Congress technically has oversight over the District, and it can take measures to basically make sure that nothing ever comes out of the passage of this initiative. D.C.’s ability to actually govern itself and the people who live within its borders is notoriously limited. No one can do anything to stop the 735,000 people who live in Alaska from legalizing marijuana, but D.C.’s 650,000 are prohibited by officials they didn’t even elect. That’s why there’s a big question mark next to D.C. — no one really knows what will happen here.

As fascinating as the wins were for the future of marijuana legalization, it’s also interesting to look at what they mean for the overall scheme of American politics. Democrats lost last night on pretty much every level. Some marijuana legalization was one of the very few things that Democrats support that made it through. But what’s important to remember about marijuana legalization is that it’s not so much a Democratic value, it’s also a very Libertarian issue. There are reasons for both Democrats and Libertarians to support marijuana legalization, which may have been one of the reasons that it passed. It’s a strange phenomenon, as 538‘s Ben Casselman tweeted:

So voters want a higher minimum wage, legal pot, abortion access and GOP representation. Ok then.

— Ben Casselman (@bencasselman) November 5, 2014

So, the success of marijuana legalization in an election where so many other Democratic measures failed could mean a few things. It could mean that the Libertarian wing of the Republican party is really becoming sort of a dark horse among Millennials who are frustrated with the way that Democrats have been running the country, but aren’t willing to align with the Republican base or the Tea Party on most social issues. Or it could just mean that Oregon, Alaska, and the District of Columbia really enjoy getting high and don’t mind the increase in taxes that comes with the legalization of marijuana. Either way, it will be interesting to see if anything at all comes of the measure in D.C., as well as which states will be next to hop on the marijuana legalization bus.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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I’m going to take a break from feminist issues today and discuss something that is, literally, life or death: America’s horrible healthcare costs.

Recently, just as I had my first run-in with military dress codes, I also got to experience a military doctor’s office. I went in for a physical exam, waited maybe ten minutes all around, and ended up leaving without having to pay a cent for the appointment or prescriptions. The only thought on my mind was: why can’t everyone’s health care be this great?

Outside of the United States, healthcare is that great in several countries. Just last summer while studying abroad in London, my friend rushed herself to the hospital thinking her appendix was bursting. Turned out to be just a pulled muscle, but an ER visit didn’t cost her a pence — and she wasn’t even a citizen!

So what’s wrong with American health care? For a country whose citizens claim it to be number one, we are way behind on things that really matter. According to the World Health Organization, America ranks thirty-fifth in life expectancy and thirty-seventh in healthcare systems.

Yikes.

Why are we so low in the rankings? The answer is not simple.

American healthcare costs are alarmingly higher than in other developed countries. An MRI in the U.S. averages $1,121, while in the Netherlands it’s only $319. Need an angiogram? That’ll be $914, but you could have gotten it for $35 in Canada! Are you on the drug Lipitor? Then you know it’s around $124 a month — it costs $6 a month in New Zealand. Some may argue that we are wealthier than these countries, so it makes sense that we would spend a bit more. Sure, but the amount the United States spends on health care is way above what it should be.

Then there is the argument that countries with free health care pay more in taxes. False. The average U.S. citizen pays more in taxes toward public health care than the United Kingdom, Canada, and a whole list of other countries with free health care.

Some blame insurance. American citizens not having health insurance was a factor in rising healthcare costs, yes. Those who didn’t have it still needed care, then went bankrupt from trying to pay for it, so our tax money ended up paying for it. The Affordable Care Act has alleviated some of the problem, but it is still being fought over in congress.

Still others point to over-utilization and malpractice spending, saying that Americans simply go to the doctor more and therefore spend more, but there is no data to support that either. Plus, who would want to go to the doctor more than they need to, especially when a doctor’s visit will soon cost more than a car?

None of these issues is the one thing that has skyrocketed our health care spending. In fact, all of them are to blame. Therefore, there will be no simple solution. Reaching a fix is made harder by the fact that the topic of health care is gridlocked in our government. Republicans block Democrats because they’re not Republican, and vice versa.

A lot of people like to gripe about Obamacare.

Half of Congress even decided to throw a hissy fit over not getting their way on the subject, and shut down the government. Sure, the Affordable Care Act might not be perfect, but at least it’s something. Those people most vehemently opposing it aren’t offering up any better solutions. Until both parties can get over their pride, sit down and say “what is going to be best, and cost less, for the American people?” healthcare costs will continue to be higher than they need to be.

My opinion? Healthcare should be free and easily accessible for everyone. Period.

Data and statistics for this post came from the WHO website and this article from The New York Times.

Morgan McMurray

Morgan McMurray is an editor and gender equality blogger based in Seattle, Washington. A 2013 graduate of Iowa State University, she has a Bachelor of Arts in English, Journalism, and International Studies. She spends her free time writing, reading, teaching dance classes, and binge-watching Netflix. Contact Morgan at staff@LawStreetMedia.com.

The post Debunking Common Myths About American Healthcare Costs appeared first on Law Street.

In a world where the price of gas is costly for both our wallets and the environment, environmentally friendly cars are becoming increasingly popular. In fact, the United States government is encouraging the purchase and use of environmentally friendly cars by offering tax credits. Read on to learn about the environmental car trend, tax credits offered, and their effects.

 What are environmentally friendly cars?

Environmentally friendly cars, sometimes referred to as “green” cars, are essentially cars that minimize their harmful effects on the environment. They can include, but are not limited to:

• Hybrid cars: While these cars can take many forms, this category of eco-friendly cars include any type of car that uses multiple energy sources to power a vehicle. The most common type is a hybrid-electric vehicle.
• Bio-diesel cars: These cars are powered by diesel, or a mix of diesel and vegetable oil.
• Ethanol-powered cars: This category of eco-friendly cars use ethanol created from a material such as corn, barley, or wheat.
• Electric cars: These cars run on electricity and are plugged in to gain enough charge to function.
• Hydrogen-powered cars: These vehicles use hydrogen for power, in the form of fuel cells. Many versions of hydrogen cars are still in the development processes.

Eco-friendly vehicles make up a relatively small number of the vehicles sold in the United States, but the market is growing. JD Power and Associates has estimated that by 2015 eco-friendly cars that contain some sort of hybrid component could make up as much as 10 percent of the vehicle market share.

What tax credits can you obtain for using an environmentally friendly car?

The Energy Policy Act of 2005 established a series of tax incentives, namely credits, for individuals purchasing or leasing eco-friendly vehicles such as electric cars, hybrids, and alternative-fuel vehicles. This bill was expanded upon by the Energy Independence and Security Act of 2007. Because of the added cost of their fuel-efficient technologies as well as their lack of presence in the current auto market, eco-friendly cars are significantly more expensive than similar cars with engines run on gasoline. These federal tax incentives were aimed at increasing the sales of these “green” cars to make them a larger part of the transportation vehicle market and thus reduce harmful carbon emissions in the United States into the environment.

Currently, individuals purchasing electric cars and plug-in hybrids can qualify for a tax credit of up to $7,500 dollars, which in some cases can significantly reduce the cost of these cars. These incentives are designed to gradually phase out for a given manufacturer after that company has sold more than 60,000 electric cars. Individual states also have their own incentives for purchasing “green” cars. Since their introduction into the car market, there has been debate as to whether these incentives are effective reaching their goals or whether they should even be offered in the first place.

What is the argument for creating these tax credits?

Supporters of these incentives argue that tax credits will increase sales of this type of car and help establish eco-friendly car brands such as Tesla or the Nissan Leaf as economically viable options for consumers. When the federal and state tax incentives are combined with the increased fuel economy, they often become just as cheap, if not cheaper, than standard gasoline-combustion cars. Leases are popular for these relatively-new cars, and in many states such as Washington and Georgia, where state tax incentives for eco-friendly cars are high, individuals are able to lease these cars nearly for free.

Supporters assert that these tax incentives allow fledgling hybrid manufacturers to gain an economic foothold and to become serious competitors in the auto market. Through increased sales due to federal tax incentives, Nissan was able to open lithium ion battery factories in Tennessee to cut down on cars being shipped from Japan, allowing them to drop the price of the Nissan Leaf by $6,400. Price reductions such as this will lead to increased sales and company growth, allowing hybrid manufacturers to gain a larger share of the profit from auto sales. Altogether, as hybrid manufacturers grow and as more people purchase and lease hybrid and electric cars, US emissions will be dramatically reduced.

What is the argument against creating the tax credits?

Opponents of these tax incentives argue that the tax credits do not make these environmentally-friendly cars more cost effective; they do not help reduce emissions; and they only make “green” cars more affordable to already-wealthy individuals while requiring taxpayers and the federal government to foot the bill.

The federal government imposes standards on the average fuel economy of all vehicles each company sells, and mandates that a company cannot exceed this limit. By selling more hybrid cars, car companies are in fact able to sell more low-fuel economy cars while still adhering to these federal standards, thus negating the tax incentives’ effect on improving the environment. And while tax incentives in some states may make eco-friendly cars cheaper to lease, some studies indicate that even with the tax incentives cars such as the Chevy Volt could still take up to 27 years to pay off.

The Congressional Budget Office stated in a 2012 report that it would require tax incentives of about $12,000 — $4,500 higher than current incentives — to have a serious impact upon the price of hybrid and electric cars. According to these reports, hybrid and electric cars still are not affordable to the average consumer. Opponents then argue that the tax incentives only serve to make these eco-friendly cars more affordable for affluent families who can already afford them. Meanwhile, the federal government and taxpayers are forced to cover the money lost by these incentives. The Congressional Budget Office report estimated these incentives would cost the federal government roughly $7.5 billion through 2019.

There’s also some concern about whether or not hybrids are actually good for the environment, as depicted in the infographic below.

Conclusion

Environmentally friendly cars are certainly here to stay, and while their market share increases the government has been happy to encourage it. However, as they become more prevalent among the average driver, the government may not have the resources to continue with the tax credits. For now, it’s a innovative program that could be a good choice for those in the market for a new car.

Resources

Primary

State of Utah: Clean Fuel Vehicle Tax Credit

U.S. Congress: Energy Policy Act of 2005

Additional

Wall Street Journal: To Spark Buyers for Electric Cars, Drop the Price to Nearly $0

Street: Why Electric Cars Are Selling in California: They’re Free

Palisades Hudson Financial Group: Atlanta Turns Over a New Leaf

Seattle Times: Seen a Tesla Today? Electric Cars Turn Up Fastest in Washington State

The New York Times: Payoff For Efficient Cars Takes Years

Fortune: Electric Vehicles Still Struggling to be Cost-Competitive

American Enterprise Institute: Subsidy-Powered Vehicles

Forbes: If Tesla Would Stop Selling Cars, We’d All Save Some Money

Congressional Budget Office: Effects of Federal Tax Credits for the Purchase of Electric Vehicles

Bankrate.com: Tax Breaks For Gas Savers

Green Car Reports: Will Georgia Kill Its $5,000 Tax Credit For Electric-Car Purchases

San Francisco Gate: Car Fuel Efficiency Tax Breaks

Internal Revenue Service: Going Green May Reduce Your Taxes

Joseph Palmisano

Joseph Palmisano is a graduate of The College of New Jersey with a degree in History and Education. He has a background in historical preservation, public education, freelance writing, and business. While currently employed as an insurance underwriter, he maintains an interest in environmental and educational reform. Contact Joseph at staff@LawStreetMedia.com.

The post The Tax Credit Battle Over Environmentally Friendly Cars appeared first on Law Street.

President Obama stirred up an old debate recently by becoming the first sitting president to endorse statehood for the District of Columbia. Obama expressed his full support: “I’m in DC, so I’m for it…Folks in DC pay taxes like everybody else. They contribute to the overall well being of the country like everybody else. There has been a long movement to get DC statehood, and I’ve been for it for quite some time.”

Here’s what you need to know about Washington DC’s contentious battle for statehood, what it would mean for District residents, and what impact it would have on the country.

Why was the District of Columbia created?

To understand the arguments for statehood, you have to understand the history of Washington, DC. The District of Columbia was specifically created to house the federal government. The authors of the Constitution wanted to house the federal government in its own jurisdiction after witnessing the problems of having the nation’s temporary capital in Philadelphia. The decision was made in 1787 following an incident in which the governor of Pennsylvania refused to disperse rioters threatening Congress in Philadelphia. The framers did not want the federal government to be subject to any decisions of a specific state or governor. So, the delegates wrote Article 1, Section 8 of the U.S. Constitution to outline Congress’ control over the district:

“[The Congress shall have Power] To exercise exclusive legislation in all cases whatsoever, over such District (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States.”

Congress moved to a new federal capital in 1800, and the District still stands today on land ceded by Maryland. Residents of the District face a number of unique circumstances because it is not a state.

Originally, DC residents were barred from voting for president. It was not until 1961 that the passage of the 23rd Amendment finally secured three electoral votes for the District. DC residents also elect one non-voting member to the House of Representatives.

The District of Columbia has operated under a system of Home Rule since 1973 as a way to better govern local affairs. Home rule means that DC is allowed a local government, including a directly elected mayor and city council. Still, Congress has the ultimate authority and the power to overturn any laws passed by the local government.

Why do people push for DC statehood?

Right to Vote

Residents of DC express outrage that they pay federal and local taxes, are subject to the same laws as everyone else, fight in wars, and serve on juries, yet they lack the same Congressional representation. The argument is also made that this disenfranchisement comes from a legacy of racism aimed at the District’s majority African-American population. Those in favor of statehood want the full rights of being an American citizen, which includes full representation in Congress as well as full control over local affairs. In addition to lacking voting power, DC’s representative in Congress is denied a federal salary and an office. License plates in DC decry residents’ lack of status with the slogan “Taxation without Representation.” Watch President Obama’s remarks on DC statehood below:

Local Control

Many citizens are fed up with the limitations of DC’s Home Rule. Since Congress can overturn any law, it has exerted its power on a number of issues passed by DC residents. Congress has intervened to restrict abortions, to prevent restrictions on firearm ownership, and even to control marijuana issues. Congress has also barred DC from using local tax dollars on specific things, such as statehood advocacy and needle exchange programs.

Taxes

Citizens claim they do not have enough financial resources to pay for high-quality public services. Although DC is not a state, it has all the financial burdens of one. It provides local services, like public schools and a police force, but it also provides services typically dealt with at the state level, like mental health and Medicaid. DC has limited taxing powers. The District cannot tax income earned within its borders by non-residents, even though all other states have that power. Two-thirds of income in the District is made by people who do not live in the District, yet they pay no income tax.  Additionally, the federal government, embassies, and non-profits that occupy most of DC pay no property, sales, or income taxes. The small size of the city and disproportionate number of low-income workers with higher needs for public services strain the District financially. Still, DC residents pay the highest federal taxes per capita.

Growing Population

Washington DC’s fast-growing population of approximately 650,000 — larger than Wyoming or Vermont — is large enough to make it a state. According to the Washington Peace Center, DC as a state could bring in more than $2 billion a year in additional revenue. This would allow the local government to cut taxes and better fund schools and services. Freeing itself from Congressional oversight would also make the district more efficient. Watch more about the DC statehood movement below.

Shutdowns

The 16-day federal government shutdown during Fall 2013 illustrated issues with DC dependency on federal funds and approval. DC Mayor Grey did not shut down local services but suspended some payments so the city could remain operational. Mayor Grey warned that vital city services were dangerously close to ending as the city’s emergency funds were depleted. Allowing DC the autonomy of statehood would prevent these issues in the event of a federal government shutdown.

Legally, how would statehood be achieved?

Despite President Obama’s supportive statement, making DC a state is unfortunately not within his power. There are a couple of avenues that the District of Columbia could take to obtain statehood.

Constitutional Amendment

There is some debate as to whether an amendment could make DC an official state, but it could definitely give DC’s residents much greater rights and further define the area of the federal district. Two-thirds of Congress would have to approve a matching constitutional amendment. Alternately, two-thirds of state legislatures could call a Constitutional Convention. The amendment would then be sent to the states for ratification by three-fourths. Naturally this process would be very difficult. A proposed amendment in 1985 to give DC more voting power was only ratified by 16 states in the allotted seven-year span. Further, critics point out that any constitutional amendment could later be repealed.

Law

Article 4, Section 3 of the Constitution outlines the creation of new states.

“New States may be admitted by the Congress into this Union; but no new States shall be formed or erected within the Jurisdiction of any other State; nor any State be formed by the Junction of two or more States, or parts of States, without the Consent of the Legislatures of the States concerned as well as of the Congress.”

Under this section, an act of Congress could make DC its own state with a simple majority vote and signature from the President. This was the same process followed by Hawaii and Alaska as recently as 1959. There is some question as to whether Maryland would need to approve statehood, since DC was formed on land from Maryland. Still, bills are introduced to Congress nearly every year, but none has been brought to a vote since 1993. Most Congressional leaders like the idea of admitting states as pairs, so there is a good chance any vote to make DC a state would also include a bid of statehood for Puerto Rico.

Proposals for giving DC Congressional representation are much more common than bills for complete statehood. These bills have not been met with success. Some contend that giving District residents the right to vote may not even be within Congress’ power.

What are the current proposals?

Previous campaigns for statehood have referred to the new state as “New Columbia,” and the name is still associated with the movement today. The New Columbia Admissions Act was introduced in 2013 before failing to make it out of committee. The Act closely follows the proposed constitution ratified by DC voters in 1982. The plan would create a new state while still keeping a much smaller area of DC a federal district. The area of the federal district would shrink substantially, but would include all important federal buildings like the Capitol, White House, and Supreme Court. The Constitution sets an upper limit on the size of the District at 10 square miles, but no lower limit is set. All of the other residential land currently in DC would then become the 51st state. New Columbia would be granted the same rights as any other state in the Union.

To advance its agenda, the District of Columbia still selects members to a shadow congressional delegation that lobbies Congress to grant statehood and voting rights. The positions were authorized by a “state” constitution in 1982 authorized by voters, but this delegation is still not recognized by Congress. Numerous groups in DC continue to lobby for statehood. Watch DC Congresswoman Eleanor Holmes Norton speak on statehood below.

What are the arguments against statehood?

In Federalist No. 43, James Madison argued that the District of Columbia needed to be independent for maintenance and safety concerns. Madison wrote,

“A dependence of the members of the general government on the State comprehending the seat of the government, for protection in the exercise of their duty, might bring on the national councils an imputation of awe or influence, equally dishonorable to the government and dissatisfactory to the other members of the Confederacy.”

Arguments against statehood today follow similar lines. Americans are concerned that the federal government would be dependent on a single state to cover its security and general operations. With such great power, a state could restrict the federal government in ways that would not be beneficial to the rest of the nation. However, the plan to keep important governmental buildings as a federal district largely mitigates these concerns.

The uniqueness of the DC area makes statehood very difficult politically. Some of the arguments opponents have:

• Similar to all states with relatively small populations, DC’s small size and population would give it an unfair influence in politics.
• The liberal area would be a stronghold for Democrats, and DC would always send Democrats to Congress.
• The interests of the District would be dominated by the federal government, since it would be the state’s largest employer by far.
• The state would be the only one without rural residents. This means the representatives would share none of the interests held by non-urban areas.
• A state could enact a commuter tax on non-residents who come to the state to work. Such a tax is currently banned under Home Rule.
• The constitutional question of whether the state of Maryland would have to consent to the new state, since the district was formed on land granted by Maryland.
• Some people flat out do not want to witness a strange-looking flag with 51 stars. But not to worry, numerous 51-star flags have already been designed, and they don’t look too bad.

Courtesy of jacobolus via Wikipedia

Are there any other alternatives to statehood?

Most citizens in favor of DC statehood oppose settling for anything less. Some propose bills to grant voting representation to members of DC, such as simply allowing DC’s representative in the House of Representatives the power to vote. Others worry these laws could be undone by the next Congress — and Congress may not even have the authority to make such a law.

Others propose some sort of tie with Maryland. This could mean parts of DC being given back to Maryland. However, neither Maryland nor DC really want to merge. A less drastic solution is Congress restoring the voting rights of District residents by allowing them to vote as a part of Maryland while maintaining the integrity of the District. Still, residents want voting as well as increased autonomy over local affairs.

Issues over DC statehood will not soon be resolved unless residents can be better provided some method of true representation. Most recently in the never-ending saga of DC residents, issues arose with DC driver’s licenses not being considered a valid form of ID by uninformed TSA agents. The good news is DC statehood would likely make the lives of TSA agents much easier.

Resources

Primary

Senate: New Columbia Admission Act

The District of Columbia: Statehood

Additional

Week: Obama Endorses Statehood for Washington, DC

Daily Caller: Obama Endorses DC Statehood

Huffington Post: Let’s Settle This Once and for All: DC Statehood is Constitutional

New Columbia: Vision

Brookings: If the District of Columbia Becomes a State: Fiscal Implications

Neighbors United for DC Statehood: FAQs

Mother Jones: DC: The 51st State?

Washington Post: Budget Deal Reminds DC That Congress is Still in Charge

Washington Peace Center: DC Statehood: A Primer

Brookings: A Sound Fiscal Footing for the Nation’s Capital

Hill: Denying DC Statehood Continues Federal Overreach

Smithsonian Magazine: Designing a 51-State Flag

Hill: DC Delegate to Meet with TSA

Leadership Coalition: Why DC Voting Rights Matter

Alexandra Stembaugh

Alexandra Stembaugh graduated from the University of Notre Dame studying Economics and English. She plans to go on to law school in the future. Her interests include economic policy, criminal justice, and political dramas. Contact Alexandra at staff@LawStreetMedia.com.

The post The 51st State: What DC Statehood Would Mean for the Country appeared first on Law Street.

If you liked the debt ceiling debacle and the government shutdown, you are going to love Congress’s fight over funding the construction and maintenance of our roads and highways. Congress has until the end of August 2014 to find a way to fix the billion dollar shortfall in the Highway Trust Fund or they risk the loss of thousands of construction jobs. Here is everything you need to know about the latest battle in Washington that could have direct consequences for the economy and your commute.

What is the Highway Trust Fund?

The Highway Trust Fund was created in 1956 to fund the building and maintenance of the country’s roads and bridges. The fund currently has three separate accounts: Highway Account, Mass Transit Account, and Leaking Underground Storage Tank Trust Fund.

How is it funded?

The Highway Trust Fund is currently funded by a federal fuel tax on gasoline. When it was created by the Highway Revenue Act of 1956, it was funded by a three cent per gallon tax on gasoline. The tax was raised to four cents per gallon in 1959 to keep the fund from going bankrupt. In January of 1983, President Ronald Reagan raised the tax to nine cents. President George H.W. Bush raised it to 14 cents in 1990, but diverted some of the funds to deficit reduction. President Clinton raised the gas tax to its current level, 18.4 cents per gallon, in 1993, but diverted all of the new revenue to deficit reduction. An act of Congress reverted the tax revenue to the Highway Trust Fund in 1997. It has remained at this level ever since. There is also a diesel tax, which is 24.4 cents per gallon.

This video provides a great visualization of how the gas tax works:

Why is the fund going bankrupt?

The gas tax has not been raised since 1993, and it is not indexed to inflation. This means that no matter how high the price of gas rises to, the tax will always remain at 18.4 cents per gallon. So, while the gas tax brings in $34 billion per year, it is paying for projects that total close to $50 billion this year. Also, as car companies are starting to comply with President Obama’s MPG requirement, Americans are driving more fuel efficient cars and purchasing less gas. Couple both of those problems with an American public that is driving less (and therefore buying less gas) and you have a recipe for a shortfall. According to the Department of Transportation (DOT), the fund is on track to run out of money by late August or early September 2014. States have already reacted by canceling future projects or pausing projects currently in progress. For example, the Arkansas State Highway Commission has said they might halt work on the Broadway Bridge and that the state is projected to lose 20,000 jobs as a result. Here’s a report from a local news station in Hawaii about how the shortfall will hurt them:

According to Secretary of Transportation Anthony Foxx, 700,000 jobs are at risk of being lost nationwide. To put that number in perspective, the United States only added 217,000 jobs to the economy last month. And that was a good month.

Why don’t we just raise the gas tax?

Political observers all agree that there is little to no chance of raising the gas tax in this political climate. The UPDATE Act, a bill that would raise the gas tax, was introduced by Rep. Earl Blumenauer (D-OR) this year. It currently has zero co-sponsors and is stuck in committee. Since taking over the House of Representatives in 2010, Republicans have been aiming to cut taxes, not raise them, and neither party wants to raise taxes right before the midterm elections this November.

It does not help that the media will pounce on anyone that argues for an increase in the tax. Watch Fox News’ Neil Cavuto berate Blumenauer for nine and a half minutes over his proposed 15 cent increase of the gas tax:

If the gas tax does not work, what are other possible solutions?

Whenever the fund has reached insolvency in the past, Congress has usually just diverted money from the General Fund of the US Treasury to make up the difference. According to the Congressional Budget Office (CBO), Congress has transferred $41 billion to the fund this way since 2008. In fact, that is what Senate Democrats have suggested doing this year. However, House Republicans have a different idea. They are pushing a proposal that would make the fund solvent by making changes to the US Postal Service, including eliminating Saturday mail delivery. Senate Democrats are not fans of this plan, so it looks like it is time to gear up for another Congressional fight that will last until the final hour.

However, these are not the only two options available to Congress. While Congress only seems to be considering temporary solutions, there are other policy long term options that would fix the Highway Trust Fund permanently.

Tax Reform

President Obama and Rep. Dave Camp (R-MI) have both proposed using the benefits of tax reform to fix the shortfall. Obama wants to use the revenue from “pro-growth business tax reform to address the funding crisis.” Camp, as House Ways and Means Chairman, believes we should use the revenue from a simplification of the corporate and individual tax codes to increase transportation funding for the next eight years.

Obama’s tax plan, as outlined in his FY 2015 budget proposal, has the following attributes in regards to transportation reform:

• Reduces the amount that the wealthy can save on itemized deductions in their taxes and establishes the Buffet Rule

• Proposes a future cut of the corporate tax rate to 28 percent and to 25 percent for manufacturing.

• Dedicates $150 billion to the Highway Trust Fund

• Increases investment in the fund by $90 billion for the next four years

• Works with Congress to possibly create a National Infrastructure Bank to attract private investment.

Camp’s tax plan is different, with less of a focus on getting the wealthy to pay more taxes and more of a focus on getting everyone to pay a lower tax rate:

• Lowers the corporate tax rate to 25 percent

• Gets rid of the current individual tax brackets and replaces them with two brackets: 10 percent and 25 percent.

• Repeals 220 sections of the tax code

• Puts $126.5 billion in the Highway Trust Fund.

As is clear, both of these plans are polarizing; few things get politicians more worked up than changes to the tax code, and the midterm elections will probably prevent any action on these proposals.

Vehicle Miles Traveled (VMT) Tax

Congress could replace the gas tax with a Vehicle Miles Traveled tax. Instead of taxing drivers at the pump, this tax would be based on how far each driver travels. The government would install tracking devices in every car and those who add more wear and tear to the nation’s roads would be responsible for paying more. Remember that problem about fuel-efficient cars generating less revenue? This would fix that. Even if a driver uses a car with a high MPG rating, they would still pay more in taxes if they drove long distances.

Here’s our old friend Blumenauer advocating for a VMT tax on the House floor in 2012:

This tax has been given a seal of approval from the CBO, so, in theory, the plan should work. Oregon recently passed their own version of the law after a successful pilot program, so policy makers can watch them to see how effective this plan is in practice.

There are some downsides to the tax. Commuters probably would not be big fans of paying a plurality of the tax just so they can get to work every day. Critics are also angry that truckers and people who drive for a living might suffer as a result of this tax. Watch Cavuto, who we already know is not a fan of the gas tax, criticize the costs of a VMT tax with Representative George Price (R-GA).

Privacy advocates are upset because the plan involves tracking every American’s driving with an in-car device. While supporters insist that the government would only keep track of miles traveled and not the location of every driver, the Snowden scandal has ensured that Americans won’t trust the government with any more information about them for quite some time. There’s so much concern over this issue that this Fox & Friends segment described the VMT tax as “Big Brother In Your Backseat.”

Instead of installing trackers in every car, the government could send inspectors to check odometers at the end of each year, but that would require hiring enough inspectors to look at every single American car.

Wholesale Excise Tax

Congress could also decide to just switch the target of the gas tax. Instead of taxing consumers when they buy gasoline, the tax could be placed on sellers of oil. As proposed by Senator Barbara Boxer (D-CA), a wholesale excise tax would take revenue from the oil refineries that sell gasoline to gas stations. This proposal does not have the implementation problems associated with a VMT tax, and, as opposed to the gas tax, it would keep up with inflation. Since, also unlike the gas tax, it is not a user fee, it should be popular with the public. Raising the gas tax is unpopular because it results in the average American spending more money. Taxes on corporations, especially oil companies, are preferable.

This plan also has drawbacks. Since gas prices are so unpredictable, the amount of revenue collected from this tax would be difficult to calculate. It would be tough to know how much money is available for future projects. It also could be used as an excuse by oil companies to raise the price of gasoline. This would not be the first time that federal policy had that effect.

Conclusion

While all of these plans would solve the crisis, none are likely to be passed in the next two months. Congress has to come up with a quick solution to the latest cliff before they can tackle a long-term funding system that is better than the current gas tax. Otherwise, you can look forward to a bumpier ride to work, if you still even have a job.

Resources

Primary 

DOT: Highway Trust Fund Ticker

House FY 2014 Omnibus: Transportation, Housing and Urban Development Appropriations

Senate: FY 2015 THUD Subcommittee Markup Bill Summary

Department of Transportation: Secretary Anthony Foxx’s testimony before the Transportation, Housing, and Urban Development Subcommittee of the House Appropriations Committee

Additional

Des Moines Register: Let’s Keep the Highway Fund Strong 

Washington Post: Congress Detours from Common Sense

NPR: 700,000 Jobs Are At Stake If The Highway Trust Fund Goes Broke

Planetizen: Boxer Proposes Wholesale Oil Tax to Replace Fed. Gas Tax

Contra Costa Times: Mileage tax for California drivers proposed in state Senate

Next City: Oregon Phases in Country’s First Pay-Per-Mile Program

Open Congress: Track the bill that would raise the gas tax

CATO Institute: Abolish Federal Gasoline Taxes

CNS News: Former DOT Secretary LaHood: ‘Let’s Raise the Gas Tax’

Forbes: Raise The Federal Gasoline Tax, Yes, But Don’t Then Spend The Cash On The Roads

Wall Street Journal: House GOP Leaders Weigh Tying Highway Trust Fund to Mail-Service Cuts

AHTD: Highway Trust Fund Impasse Could Delay Broadway Bridge Project

Hill: Boxer: Replace gas tax with a wholesale tax on oil to pay for transportation projects

Eric Essagof

Eric Essagof attended The George Washington University majoring in Political Science. He writes about how decisions made in DC impact the rest of the country. He is a Twitter addict, hip-hop fan, and intramural sports referee in his spare time. Contact Eric at staff@LawStreetMedia.com.

The post Congress’ Next Battle: Financing America’s Dwindling Highway Trust Fund appeared first on Law Street.

Law Street writer Anneliese Mahoney recently reported on Airbnb’s developing legal problems and how, frankly, they just cannot catch a break despite their ever-expanding market and wild success. Airbnb has been in a constant legal battle with New York dating back as far as 2010 and continuing well into 2014 (check out: here and here). The trend continued with Portland banning the company’s operations from all residential areas, though the city is now easing those restrictions. There were also issues in Los Angeles and the state of Michigan — truly, the list goes on and on. Now that we’re well into 2014, has Airbnb’s luck changed? The answer is unequivocally no.

As of April 29, 2014, San Francisco joined the legal battle grounds with a potential city ballot initiative against the home-sharing service. Backed by housing activist, Calvin Welch, former Planning Commissioner, Doug Engmann, and PR professional, Dale Carlson, the proposal calls for the following:

1. Creation of a public mandatory registry of all residents who rent out short-term space.
2. Evidence of landlord or homeowner permission to rent.
3. The right of any citizen to file a complaint against an Airbnb rental, go to court, and receive 30 percent in fines or back taxes as a result, along with compensation for their attorney fees.

The most controversial (and little bit scary) part of the proposal is the ability to financially reward residents for actively spying on reporting neighboring hosts who are not in compliance with these rules. While this section of the proposal may not make it to the ballot, let’s call a spade a spade and recognize that they are calling for Airbnb bounty hunters. In the midst of all these legal scuffles, it appears that the ‘share-economy’ company has yet to lose its stride and will continue to introduce new policies to disrupt the hospitality market.

Ashley Powell (@danceAPdance)

Click here to read the original post published November 6, 2013.

One of the big travel trends right now is a site called AirBnB.com. The company was founded in 2008, and the idea is pretty unique. Essentially, it allows people from cities all over the world to rent out rooms, apartments, houses, or even their couches to visitors. The relative costs are beneficial for both the travelers and the hosts, and AirBnB ensures that both sides involved in the transaction have been properly vetted and approved. Customers are also allowed to leave reviews at places they have stayed, creating a community of recommendations and verified great places to rent. This isn’t really even a new idea; in theory, it’s like hosting a friend of a friend in town for a few days in your home. The only difference is that instead of meeting your houseguest through a friend, you connected through the Internet.

Since 2008, AirBnB has hosted over 8.5 million guests, and this innovative online economy does not seem like it will slow down anytime soon. The business is fairly rewarding. According to an interview in the New York Times, a woman in Brooklyn made about $90,000 renting out two bedrooms in her house. AirBnB overall is very lucrative in the state of New York. Over the last three years, the top 100 hosts in New York have grossed a collective $54 million.

The state of New York is less enamored with the idea, and is instead pursuing legal action against the company. There are a few reasons why certain aspects of AirBnB may be illegal. One issue is that by using AirBnB, tourists are not booking hotel rooms. Included in the price of a hotel room is tax, part of which goes to the state. New York State Attorney General Eric Schneiderman is arguing that the AirBnB industry has cost New York millions in tax dollars. Last Friday, his office delivered a subpoena to AirBnB requiring that they disclose the names, locations, and revenue of all of the hosts in the state of New York. The AG’s office claim that they’re not going after the occasional renter, they’re going after those 100 or so hosts that grossed $54 million. A spokesperson for the office, stated, “we began this process in the hopes of collaborating with Airbnb to recover millions of dollars in unpaid taxes and to stop the abuse of Airbnb’s site by operators of illegal hotels. Airbnb isn’t standing up for average New Yorkers who rent out their apartments from time to time — Airbnb is standing up for highly profitable, illegal businesses that make up a huge chunk of its corporate revenue.”

AirBnB disagrees–they have filed a motion in the New York Supreme Court to challenge the subpoena. They claim that Schneiderman doesn’t have any actual evidence of wrongdoing on the site.

There’s also the question of the legality of AirBnB in regards to lease and zoning laws in New York. For example, it is usually legal to rent out your space for less than 30 days, but only if you are home. Some AirBnB hosts are home while their guests occupy an extra bedroom, but many others rent out extra apartments that they lease, or their own apartments while they are out of town for whatever reason. Rules about having guests are not generic—many are contingent on individual leases, bylaws, or building regulations. For example, some buildings may allow guests, but if they stay more than a few weeks, they need to be registered. Some buildings don’t allow the transfer or loaning of the key fobs that allow entrance into the lobby. There are a wide range of rules that govern housing in New York City and other major metro areas, but most do have some constraints on private short-term rentals of property. The chances are that most of the hosts on AirBnB aren’t breaking the law. But the AirBnB moguls in New York City might want to watch out, because this battle could get ugly.

[New York Times]

Anneliese Mahoney (@amahoney8672)

Featured image courtesy of [OuiShare via Flickr]

Ashley Powell

Ashley Powell is a founding member of Law Street Media, and its original Lead Editor. She is a graduate of The George Washington University. Contact Ashley at staff@LawStreetMedia.com.

The post Latest AirBnB Backlash: San Fran May Offer Cash to Snitch on Neighbors appeared first on Law Street.

Hello loves! How many of you went to CPAC last week?

Hopefully none of you. But! A whole bunch of young people did — obviously as props to debunk the claim that the GOP is full of rich, white men. (I’m just kidding.) (Kind of not really.)

Anyway! As a result of this Millennial pilgrimage to the land of Ted Cruz and Sarah Palin, the NRCC took the opportunity to ask its youngins’ why they identified as conservatives. The results are laughable.

First of all — the most concrete piece of new information we’ve learned from this little exercise is that Republicans can’t count. While the NRCC claims to have asked 37 Millennials why they were fans of the Grand Old Party, there are 45 individuals pictured on their countdown. Likewise, the Independent Journal Review, which reposted the piece, claims 26 individuals in the headline, 37 individuals in the slug, and pictures only 33.

Learn your 1, 2, 3s here, people. What kind of nonsense is this?

No, we’re not giving you one more chance.

So, clearly, we’ve established that this little study is anything but scientific.  Also, not well produced. If the Republican question-askers and statisticians can’t even keep their numbers straight, shouldn’t your standard, run of the mill copy editor notice something’s up? You’d think so. You’d also be wrong.

Anyway, mathematical challenges aside, let’s let these young Republicans speak for themselves, shall we? Here are a few reasons why they’re counting themselves conservative this year.

That’s pretty vague. Courtesy of NRCC.org

Even vaguer. Courtesy of NRCC.org

Courtesy of NRCC.org

Really?

Am I the only one who’s noticing that something’s up here? None of these reasons are actually reasons. They’re just meaningless buzzwords.

You’re conservative because…taxes? Do you mean that you like how the Republican party has rigged the system so that gazillionaires and corporations get tax breaks, while YOU, lowly 20-something, are paying taxes through your nose? If that’s what you meant by, “I’m conservative because taxes,” then I guess you’re in the right place. A self-defeating one, mind you.

Courtesy of NRCC.org

And what about fiscal responsibility? These folks are on the tax train too — as in, they’d like to pay fewer of them. They’re all kinds of pissed off about having their tax dollars funneled into the social safety net, because no one wants to subsidize those lazy, mooching, poor people! The blasphemy!

I’m guessing they all have health insurance, and aren’t particularly worried about falling ill and going bankrupt. Also, they probably aren’t aware that the group who benefits most from the social safety net is, in fact, their grandparents.

Courtesy of NRCC.org

Then, of course, there are the Jobby McJobersons, who are conservatives because jobs. I’m guessing they want more of them? If so, maybe they should be a little more specific about the kinds of jobs they’re looking for.

Because among job creators in the GOP, new positions typically don’t pay a living wage or include benefits. Take Walmart, for example. Owned by the Waltons, an incredibly rich and incredibly conservative family, it’s the single largest employer in the country. Its employees also hold food drives for each other, because they don’t actually make enough money to buy food themselves.

Walmart holding canned food drive for its own underpaid employees http://t.co/SkUrh7tP53 pic.twitter.com/h9ZmJHfekZ

— Scott Keyes (@smkeyes) November 18, 2013

I feel like those aren’t the kinds of jobs that’ll pay off your student loans, young CPAC attendees.

There were a few young people who were more thoughtful in their responses. Take this girl, for example, who’s being really clear about how much she’d like to preserve her privilege as a white, cis-gender, straight, Christian woman, at the expense of queers, people of color, and poor folks.

Courtesy of NRCC.org

Then there’s this guy, who’s affiliated with the GOP because he’s disappointed in Obama’s performance as President. You know what, love? I totally agree with you. Obama hasn’t been able to create the hope and change he promised. A huge factor in that, though, is the unwillingness of Republicans to cooperate with him on literally anything.

Courtesy of NRCC.org

Now, I’m all for listening to young Republicans as the reflect on and explain why they identify as conservatives. But that’s not what’s happening here. These 20-somethings aren’t reflecting on much, and they aren’t explaining anything at all. They’re mindlessly spewing one-word, canned talking points.

And that’s not helping anybody. You need to improve your communication skills here, CPAC’ers! You should take a lesson from these awesome people, who are fabulous at explaining their political alignment. Notice how they all use full sentences and complete thoughts.

PS – Handsome person in the top right corner, give me a call sometime, mmkay? Courtesy of Tumblr.com

So, young Republicans, do me a favor. Get your fucking acts together. Think more critically about why you identify as conservative, and give us more than the same tired, one-word answers a million people used before you. You don’t need to understand a damn thing about life or politics to write “Jobs” on a piece of paper.

And we need you to understand things. Because you’re pretty close to taking over this show yourselves.

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Hannah R. Winsten (@HannahRWinsten) is a freelance copywriter, marketing consultant, and blogger living in New York’s sixth borough. She hates tweeting but does it anyway. She aspires to be the next Rachel Maddow.

Featured image courtesy of [Gage Skidmore via Flickr]

Hannah R. Winsten

Hannah R. Winsten is a freelance copywriter, marketing consultant, and blogger living in New York’s sixth borough. She hates tweeting but does it anyway. She aspires to be the next Rachel Maddow. Contact Hannah at staff@LawStreetMedia.com.

The post Young Conservatives Actually Have No Clue Why They’re Conservative appeared first on Law Street.

This may be the one of the only stories you see about Amazon today that does not involve a mention of drones. But as sexy as that drone story might be, what else is happening with the retail giant has the potential for a much more immediate and far-reaching impact.

For years, Amazon has gotten away with not charging state sales tax. They have a few different tactics to avoid these taxes. The most popular is a constitutional argument. The constitution prevents states from interfering in interstate commerce. Multiple Supreme Court cases, included National Bellas Hess v. Department of Revenue and Quill Corp. v. North Dakota have affirmed this, stating that unless a company has a physical nexus in a state, they do not have to collect sales taxes. Of course, the Constitution, as well as both Bellas Hess (1967) and Quill (1992) were written before something like Amazon could be imagined. During the time of Hess and Quill, mail-order companies existed, but the potential of Internet shopping had not yet been realized.

Jeff Bezos, Amazon’s CEO has said that Amazon would be perfectly happy to collect sales taxes, but has claimed that local sales taxes are outdated and complicated. In 2008, he complained, “that local tax collection was so ‘horrendously complicated,’ that it imposed ‘an undue burden’ on his company.”

Amazon also plays dirty to avoid collecting sales taxes, essentially holding states hostage. For example, Amazon will announce that they are building a distribution center or warehouse in a particular state. But, in South Carolina, unless the state agreed to pass some sort of special agreement or law to exempt Amazon from collecting sales tax, they would cancel plans to build that warehouse. This led to a Catch-22 situation for South Carolina—either they could exempt Amazon and lose revenue, or they could lose much-needed jobs.

Texas had a similar story. When Texas attempted to make Amazon collect sales tax, they fired workers and shutdown their warehouse that employed 119 people. Often states or local municipalities create a deal rather than enter into an expensive fight with Amazon. For example, the three small municipalities in Texas that will be future Amazon warehouse sites have agreed to rebate significant portions of sale taxes collected—up to 85%–back to Amazon.

It is estimated that states lost more than $23 billion last year because of Amazon (as well as other online retailers). Well, this trick is becoming less popular—Amazon does collect sales taxes in 16 states now.

This large debate has turned into a series of lawsuits. Most recently, the New York Court of Appeals ruled that while Amazon had no nexus in that state, Amazon’s affiliations with third-party retailers that are based in New York and receive commissions meet the nexus benchmark and necessitate that Amazon should be collecting sales tax. Today, the case took another twist when the Supreme Court decided not to get involved in the states’ efforts.

Amazon, drones or no drones, has certainly revolutionized the world of not just online shopping, but shopping in general. By not charging sales tax, Amazon is able to undercut the prices of their competitors with physical stores who do have to adhere to state laws. It is clear that Amazon has been cheating states out of millions of dollars. It’s about time they pay.

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Anneliese Mahoney (@AMahoney8672) is Lead Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

Featured image courtesy of [Wvfunnyman via Wikipedia]

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post Amazon Plays Dirty, States Fight Back appeared first on Law Street.

One of the big travel trends right now is a site called AirBnB.com. The company was founded in 2008, and the idea is pretty unique. Essentially, it allows people from cities all over the world to rent out rooms, apartments, houses, or even their couches to visitors. The relative costs are beneficial for both the travelers and the hosts, and AirBnB ensures that both sides involved in the transaction have been properly vetted and approved. Customers are also allowed to leave reviews at places they have stayed, creating a community of recommendations and verified great places to rent. This isn’t really even a new idea; in theory, it’s like hosting a friend of a friend in town for a few days in your home. The only difference is that instead of meeting your houseguest through a friend, you connected through the Internet.

Since 2008, AirBnB has hosted over 8.5 million guests, and this innovative online economy does not seem like it will slow down anytime soon. The business is fairly rewarding. According to an interview in the New York Times, a woman in Brooklyn made about $90,000 renting out two bedrooms in her house. AirBnB overall is very lucrative in the state of New York. Over the last three years, the top 100 hosts in New York have grossed a collective $54 million.

The state of New York is less enamored with the idea, and is instead pursuing legal action against the company. There are a few reasons why certain aspects of AirBnB may be illegal. One issue is that by using AirBnB, tourists are not booking hotel rooms. Included in the price of a hotel room is tax, part of which goes to the state. New York State Attorney General Eric Schneiderman is arguing that the AirBnB industry has cost New York millions in tax dollars. Last Friday, his office delivered a subpoena to AirBnB requiring that they disclose the names, locations, and revenue of all of the hosts in the state of New York. The AG’s office claim that they’re not going after the occasional renter, they’re going after those 100 or so hosts that grossed $54 million. A spokesperson for the office, stated, “we began this process in the hopes of collaborating with Airbnb to recover millions of dollars in unpaid taxes and to stop the abuse of Airbnb’s site by operators of illegal hotels. Airbnb isn’t standing up for average New Yorkers who rent out their apartments from time to time — Airbnb is standing up for highly profitable, illegal businesses that make up a huge chunk of its corporate revenue.”

AirBnB disagrees–they have filed a motion in the New York Supreme Court to challenge the subpoena. They claim that Schneiderman doesn’t have any actual evidence of wrongdoing on the site.

There’s also the question of the legality of AirBnB in regards to lease and zoning laws in New York. For example, it is usually legal to rent out your space for less than 30 days, but only if you are home. Some AirBnB hosts are home while their guests occupy an extra bedroom, but many others rent out extra apartments that they lease, or their own apartments while they are out of town for whatever reason. Rules about having guests are not generic—many are contingent on individual leases, bylaws, or building regulations. For example, some buildings may allow guests, but if they stay more than a few weeks, they need to be registered. Some buildings don’t allow the transfer or loaning of the key fobs that allow entrance into the lobby. There are a wide range of rules that govern housing in New York City and other major metro areas, but most do have some constraints on private short-term rentals of property. The chances are that most of the hosts on AirBnB aren’t breaking the law. But the AirBnB moguls in New York City might want to watch out, because this battle could get ugly.

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Anneliese Mahoney (@AMahoney8672) is Lead Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

Featured image courtesy of [Allen Skyy via Flickr]

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post AirBnB Locked in Battle with New York Attorney General appeared first on Law Street.