We all know what venture capitalists are but few are familiar with the exploits of the more widespread but lower profile class of investor known as venture marxists. These entrepreneurs are found in government where they try to pretend they have business acumen and use your money to prove it. They are actually pretty easy to spot. The first time you hear someone talk about the government “investing” in something or the other you are most likely talking to a venture marxist.
Sometimes amusing things happen when their activities get gobsmacked by the free market, or as much of a free market as exists in Maryland.
This cautionary tale comes from my home county, Washington County.
More below the fold.
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Washington County, like so many counties, uses school funding as a stalking horse to raise funds that the voters probably would not approve as a bond issue. “For the children” is the battle cry of protaxation forces across the nation as though taking money from the parents of children to spend on various harebrained schemes was a noble concept.
The county came up with the idea of creating an excise tax on new construction in the county to replace the previous system of a fee based on the square-footage of the building. Effective 1 July 2003, if you wanted to build a house in Washington County you were slapped with a $13,000 fee. Developments with more than 25 homes were charged $26,000 per single family home and $31,000 per multfamily unit beginning with the 26th unit constructed.
This money was supposed to go into a fund, a “lock box” if you will, with the funds allocated:
(1) 70% for schools;
(2) 23% for roads;
(3) 2% for public libraries; and
(4) 5% for parks and recreational facilities, public safety, water and sewer infrastructure, and agricultural land preservation.
In the course of creating this tax they created a few exemptions. First, homes under 1500 square-feet were exempted. Home additions were exempted. Replacement homes that did not increase either the number of units or the square-footage were exempted.
The county projected this would bring in $15.3 million in FY 2007.
Anyone care to predict what happened?
Economics 101 jumped out of the tall grass and affixed itself to the County’s fourth point of contact.
Washington County’s excise tax revenues fell sharply in fiscal year 2007, coming in at $11.5 million below budget projections, Washington County Budget and Finance Director Debra Murray said Wednesday.
The county budgeted $15.3 million for excise tax revenues in fiscal 2007, which ended July 1, but received only $3.8 million, Murray said. The county earned $7.1 million in residential excise tax in fiscal 2006.
Murray said she knew in September that excise tax revenues for fiscal 2007 would not meet budget projections. She sent a memo to the Washington County Commissioners, who shifted about $5 million from other areas to help cover the projected shortfall.
The remaining $6.5 million will hopefully come from surplus funds generated in fiscal 2007, Murray said. […]
Murray said a slowdown in the housing market is to blame for the shortfall in the tax, which is charged on new homes built in the county. She said permits for new residential construction in Washington County fell 40 percent between 2006 and
Anyone could have written the ending to this movie. $13,000 is a lot of money. The housing market didn’t necessarily slow down but the county created incentives to remodel your existing home, to demolish your current home and rebuild, and to ensure your new home was under 1500 square-feet. People respond to economic stimuli as surely as markets. The fact that the county apparatchiks are suprised speaks more to their lack of… of… gosh, mental wattage than anything else.
And these are the people who are making “investments” with our tax dollars.