barriers to market entry
Reader comment on: Tax Notes's Tax Hypocrisy
in response to reader comment: pricing
Submitted by David Cay Johnston (United States), Apr 12, 2010 13:07
That it costs money to start a business is not a barrier to market entry, especially when you can create a nonprofit with no legal fees and less than $100 in state level filing fees, not the absurd figures Stoll cites.
And until revenues reach $25,000 the federal government does not even require a tax return.
Barriers are laws and regulations and huge capital requirements that block entry, as railroads do with "paper barriers" so they can charge monopoly prices (and secret prices too boot) even on seemingly competitive routes or licensing requirements that artificially narrow the labor supply, as with doctors. This is first year textbook economics stuff and not relevant to Stoll's complaint that Tax Analysts is a nonprofit. Again, were it organized as a for-profit, would probably pay little or no tax.
All sorts of enterprises are organized as nonprofits and the price for that is disclosures, no gain for investors and demonstrated public works.
Tax Analysts uses its revenues to support many free offersings including Tax.com, the Tax History Project, seminars it runs and no-fee reprints of many articles in many venues, as well as its decades of hard work to make the tax system public, open and based on public, not private, rules.
I wish I could afford a lot of things beyond my reach or that I choose to go without because of the price, whether it is tax deductible or not. That's market capitalism, which I defend by exposing its faux supporters who want rigged prices and secrecy. (I do not count Stoll among those folks, to be clear, just too in love with his biases.)
Serious journalism costs money, You can make it off ads or off subscribers. But there is nothing wrong with charging a price for subscriptions, even a high one. If readers did not think it was worth it they would not pay. They know it is in fact a bargain compared to some more costly and less informing options available from for-profit enterprises.
Better for Stoll to look at how the law was broken so that the Wilpon and Steinbrenner families could use tax exempt financing for their for-profit sports teams, subsidies worth many tens of millions of dollars (eight figures), compared to the piddling benefit of the tax-exempt notes Tax Analysts got, which have a subsidy value of (back of the envelope) high six figures. However, that said, I dislike tax exempt financing for any buildings, especially those owned by Wal-Mart, Target Lowe's and other for-profit firms that use it all of the time.
Note: Comments are moderated by the editor and are subject to editing.
The Future of Capitalism replies:
I have written against stadium subsidies extensively. See here http://www.futureofcapitalism.com/2009/10/the-yankees-subsidy
and here http://www.nydailynews.com/opinions/2010/01/18/2010-01-18_stop_the_reverse_robin_hood.html?page=1
It used to be the case that if your nonprofit revenues were below $25,000 you didn't have to file but now they changed the rules and you do. Not a full return, but still, you have to file. See here: http://www.irs.gov/charities/article/0,,id=169250,00.html
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