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Airbnb to Collect Taxes from Los Angeles Users

in Economic Liberty, Liberator Online, News You Can Use, Personal Liberty, Property Rights, Taxes by Alice Salles Comments are off

Airbnb to Collect Taxes from Los Angeles Users

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

Airbnb, the short-term rental app, has recently agreed to go along with officials in Los Angeles by requiring users to collect hotel taxes from their clients. The three-year agreement was signed early this week. And according to LA city officials, money collected by Airbnb in Los Angeles would bring $5.8 million in annual revenue.

ProtestThe agreement follows the city’s efforts to regulate Airbnb and similar companies locally.

As City Council members discussed what to do with Airbnb in the past few months, the company lobbied its users to stand up against suffocating regulations in a series of emails sent out regularly.

In one of these emails, Airbnb explained that the LA City Planning Commission was considering putting a 90 day cap on the number of nights Airbnb hosts can list their space, a rule Airbnb called “restrictive and arbitrary.” City officials were also considering limiting the number of listings hosts can have, which could affect users who have more than one room to rent, and instituting a registration procedure that would render the process of hosting through Airbnb difficult and expensive.

Another rule LA city officials had considered would also force Airbnb to turn over users’ personal information to the authorities, giving them information on how many nights a host books through the site and how much money renters make. Airbnb warned its users that the city did not detail how this information could be used.

Accusing property owners of evicting tenants to turn their properties into “commercial hotel and motel businesses,” Councilman Mike Bonin was one of the first in Los Angeles to propose Airbnb regulations. But while it is true, many users have, in fact, evicted their tenants in order to list their properties on Airbnb, that alone is not an excuse to regulate Airbnb out of existence. After all, the system works because it’s still affordable.

To tourists looking for an affordable accommodation option, the extra financial burden tied to the hotel tax could mean that renting through Airbnb might not be that affordable after all. To those who use the service as renters to make ends meet, being part of Airbnb may not be as appealing if rates are high because of the new rules.

In an article for US News, Mercatus Center’s Matthew Mitchell urges regulators to “deregulate traditional industries” if their goal is to help all industries and local businesses thrive. Instead of regulating the sharing economy and stifling competition, deregulation could also make it easier for visitors to stay and spend money locally.

Airbnb’s decision to go along with Los Angeles city officials may represent the company’s willingness to compromise, but a real solution to this dilemma will only be produced when lawmakers are honest about their goals.

After all, regulation will always makes things difficult for the consumer and the businessman, no matter how you slice it.

What Happens When Demand Increases?

in Conversations With My Boys, Economic Liberty, Liberator Online by The Libertarian Homeschooler Comments are off

What Happens When Demand Increases?

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

How will I explain the phenomenon of rising prices after a disaster to my seven-year-old son? I’ll say something like this.

You know there was a big storm in the Northeast. We saw it on television. There was flooding, there was a big fire, trees were down, and now there’s no electricity in a lot of places. It’s pretty miserable.

Supply And Demand Analysis Concept

People want clean water, food, and gasoline. They want to be able to clear away the trees that fell and they want to be able to run their generators if they’re without power. Normally, they could get these things, but because of the storm not only do they need more, but it’s hard for these things to get in. The normal supply lines are cut. So they want more and there’s less than usual around.

We’ve talked about scarcity before. It’s when there is a limited amount of the things we want. Right now, the things that they want are scarce. Demand has increased.

We’ve also talked about what happens when demand increases. When demand increases, prices go up. Prices just tell us how much of this thing is available. It’s information. Like when there’s a bad drought, the price of tomatoes goes up because there are fewer tomatoes to sell. The opposite is also true. When there is a lot of something, the price goes down. If I have a tomato farm and I have twice as many tomatoes one really good year, the price of tomatoes will go down. You can tell how much of something there is by its price.

This is the situation in the Northeast right now. Demand for gas, clean water, generators, and things like that has increased. What happens to prices when demand increases? Right. Prices go up.

You’ve seen this happen in daddy’s ebay business. When he’s down to the last ten of an item, he hikes up the price. It’s still available if someone really wants it, but those last ten are really really valuable. When he gets more in stock, he lowers the price again.

Remember how your brother asked you what you would do if you only had one cup of water each day? You said you’d drink that water. And if you only had two cups, you would use the second cup for keeping clean. And if you had three cups you would use the third cup for growing plants. And if you had four cups you might use the fourth cup for playing in the sprinkler or something. You understand when things are scarce, you use them differently. You economize. They are more valuable when there is less. Everyone understands that.

Anyway, back to the storm. Let’s say daddy sold things that would be important in an emergency. He has a store that sells gas, water, ice, and flashlights. He knows that as a storm approaches the demand for these things will increase and that perhaps his supply line will be severed for many days. He won’t be able to get more for a while. He will have a limited supply–like when you only have three cups of water. When demand increases, he’s going to raise prices. People won’t be able to buy as much. They’ll have to think about how they use what they buy. This keeps things on the shelves longer and when someone desperately needs a thing, it is more likely to be there for them. That’s really important during an emergency. It can even save people’s lives. Now, some people would say that it’s mean of daddy to raise prices when demand increases. But that’s not true. He’s simply letting people know that it’s time to economize. They need to think hard about how they want to use things. He’s just passing along information. And there’s good reason for him to do it. He’ll make more money if he’s doing the right thing. It also makes it worth his while to go to the store and keep it open for the one guy who really, really needs something. When the prices go up, he’s not going to sell as much, but he still has to be there. If he keeps his prices low, he’ll sell out and close his store.

So, what we know is that when demand increases, prices go up. When demand decreases, prices go down. Those are just laws. Like inertia. We just have to know that they’re laws and that they’re always in effect. We shouldn’t be surprised by them.

Some people try to suspend law and make it so store owners can’t increase their prices as demand increases. That’s really bad. It doesn’t work and it leads to more shortages because people won’t economize on their use of the scarce goods and services. If they aren’t properly priced, the consumer doesn’t know how valuable it is. They might buy the last flashlight to entertain their children in the dark when a guy two blocks over needed that flashlight to find something really important–like maybe the gas shut off–in the night. When things cost more or when we have less of a thing we really think about how we use it. If the prices don’t give us that information, that causes more problems in an already bad situation.

Regulations Inhibit Growth, Time to Take The Negative Consequences Seriously

in Business and Economy, Economic Liberty, Liberator Online, News You Can Use by Alice Salles Comments are off

Regulations Inhibit Growth, Time to Take The Negative Consequences Seriously

This article was featured in our weekly newsletter, the Liberator Online. To receive it in your inbox, sign up here.

Regulations are good, some say. They keep evil elements from hurting consumers. But are regulations doing more harm than good?

By definition, regulations are laws that seek to produce pre-designed outcomes. The way they operate is by changing individuals’ behavior. As federal regulations grow, the number of restrictions on individual consumers and businesses also grow. Over time, the increased number of restrictions may completely close the paths to innovation. Who suffers? Both the consumer and the job seeker.

Regulations

According to a 2013 study, the American regulatory system is so crowded and chaotic that economic growth has slowed by about 2 percent per year between 1949 and 2005. While that doesn’t sound as bad as you might have expected, the real impact of the US regulatory system is hard to assess given the lack of a working process that helps to review regulations and weed out what’s obsolete and harmful. Without a system that helps us identify the issues with the regulations put in place, there’s no way to determine how bad these regulations really are.

While it’s hard to assess the cost of regulation now, earlier studies have at least been able to find that the American regulatory environment has been very bad for growth and very good in stifling innovation and keeping entrepreneurs from sprouting from sea to shining sea.

Despite several administrations’ efforts to modify or cut regulations that simply don’t work, all attempts were in vain.

In order to achieve success, future administrations should not take part in the same failed attempts. According to research carried out by the Mercatus Center, the US government should embrace a series of government reforms in order to remove obstacles to economic growth in America instead.

Based on the success of the Dutch Administrative Burden Reduction Programme and the Base Realignment and Closure Commission’s efforts, the Mercatus team concluded that the American government should begin by promoting an independent review of the regulatory system in place so the burden is assessed promptly and effectively.

But the key to success in this case is true independence.

An independent look into what’s stifling innovation must not be effected by crony influences, since once the influence of particular groups or stakeholders are taken into account, review teams will have a hard time assessing what works and doesn’t. Instead, those tasked with the chore of reviewing regulations should simply focus on how effective regulations have been since they were implemented.

While other steps should also be taken if the US government is serious about trimming the burden of regulations, guaranteed independence in the review process is the most important aspect of successful reforms. If future administrations are serious about growing the economy and helping America prosper, they should prioritize this type of reform. Why? Because removing roadblocks promote the growth of businesses, giving Americans the jobs they so desperately need to live their own version of the American dream.

Won’t Big Businesses Abuse Their Power in a Free Market?

in Ask Dr. Ruwart, Communicating Liberty, Liberator Online, Libertarian Answers on Issues by Mary Ruwart Comments are off

(From the Ask Dr. Ruwart section in Volume 19, No. 21 of the Liberator Online. Subscribe here!)

Big BusinessQUESTION: If you free big businesses from government regulations, how do you keep these same businesses from becoming an aristocracy and turning America into a feudal state?

MY SHORT ANSWER: In a libertarian society, you, the consumer, control businesses by voting to buy or not buy their products. You vote to keep them in business or shut them down. You eliminate the “bad guys” by purchasing only from the “good guys.”

In today’s society, government regulates some companies out of business, leaving a monopoly (like most local utility companies) or a cartel (like the banking industry). Limiting your choices limits your control.

Government doesn’t keep big business in check; government keeps big business big.

Business only has two ways to get big: by serving customers better than the competition or by getting Big Brother to regulate their competition out of business. Keeping government out of the marketplace keeps business in its true service role.

* * *

LEARN MORE: Suggestions by Liberator Online editor James W. Harris for further reading on this topic:

* “Big Business and Big Government“ by Tim Carney, Cato Institute Policy Report, July/August 2006.

EXCERPT: “The history of big business is the history of big government. As the federal government has progressively become larger over the decades, every significant introduction of government regulation, taxation, and spending has been to the benefit of some big business. …big business and big government prosper from the perception that they are rivals instead of partners (in plunder). The history of big business is one of cooperation with big government. Most noteworthy expansions of government power are to the liking of, and at the request of, big business.”

* “The Only Way to Get Money Out of Politics“ by Sheldon Richman, Future of Freedom Foundation.

EXCERPT: “It’s a great myth that businesses, especially big prominent corporations, want less government intervention in the economy. On the contrary, they love government power because it provides things they can’t achieve in a freely competitive marketplace where force and fraud are barred. Corporations support and lobby for interventions that benefit themselves by hampering their competitors, both foreign and domestic. You often find companies asking for tariffs and other restrictions on imports that compete too effectively with their products. Agribusinesses welcome government (taxpayer) help in selling their products abroad; they also love subsidies, price supports, and acreage allotments. … In American history big companies were behind virtually ever advancement of the regulatory state.”


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