In 2005, the U.S. Supreme Court ruled, in case of Kelo v. New London, that the U.S. Constitution is no bar to cities seizing property from one private landowner and giving it to another. Following that decision, a number of states changed their laws to restrict the powers of eminent domain.

Minnesota was one of those states, though it allowed existing projects to proceed. One of those was the Cedar Grove project in the south metro suburb of Eagan.

In the words of mayor Mike Maguire, who recently wrote an op-ed on the subject,

“The area went into a steady decline over two decades. Restaurants became engine repair shops, a gas station became a truck rental facility, a grocery store became a paintball range and the old mall housed fewer and fewer shops.”

My first thought upon reading this was “what’s wrong with engine repair shops?” In recent years, some members of the city council have complained that the city’s northern section has “too many” trucking companies and not enough “quality” development.

City government has invested seven years in an effort to redo the area. It used its power of eminent domain to forcibly acquire properties in the area. Together with a commercial developer and community activists, it developed grand plans. In other words, it substituted the political process for the free market.

During these seven years, the city has incurred carrying costs for the project, which it had hoped would someday pay off. But now, thanks to the tanking of the economy, those plans are had to be altered, once again.

Some city residents have recently complained about these changes, which cut back on green space. (Arguing against greens space is like arguing against every American having a 50-inch TV. The question, in both cases, is “Who’s going to pay for it?”) They don’t like the mix of land use in the current plan, and want the city to hold back on its current development plans until the economy improves.

Mayor Maguire argues that the city should go forward with its revised plans, citing further costs to the city from delay.

It’s certainly not an easy situation for Eagan officals or taxpayers. But the seven wasted years, and the costs incurred during that time, could have been saved had the city stayed out of the business of land speculation. After all, that’s what the free market is for.

PARKING LOT FAVORITISM
The Dakota County Regional Rail Authority has been busy with several new transit stations going up in recent years. The first “Bus Rapid Transit” station in the state was opened in Apple Valley this month, though required modification of the road system won’t begin until 2012.

There are a lot of things to be said about the service, including the effects of federalism (local officials have gone, hat-in-hand, to Washington) and whether the system will actually improve personal mobility.

But I was struck by the following description from a local newspaper:

“The primarily glass structures will have wave-like roofs and level boarding platforms for smooth entry onto buses. Other features include six hybrid vehicle-only parking stalls in the ramp, 10 bike lockers and three bike racks.”

Did you catch that symbolism? Six “hybrid vehicle-only parking stalls.”

Some people call the Toyota Prius the “Toyota Pius,” for the alleged good feeling that you get from driving a “green” car. That’s a little harsh. I say, if you want to spend more on a car for whatever reason, go for it; it’s your money.

Reserving spots for the handicapped is all and good. But reserving them for specific cars based on their method of propulsion? Gimme a break.

TAX THOSE PEOPLE!
My column last week on the morality (or lack thereof) of whacking the rich with punitive marginal tax rates drew some angry responses.

Here’s one:

“At what point, Mr. LaPlante did you stop doing what is best for this country and the people of this country? At what point did you become a syncophant of a small minority group of people who are driving this country into the ground just because they can’t stop their massive greed?”

Nothing like a little character assassination to advance your argument, right? And by the way, have you checked out the growth of government (and government-fueled non-profits) lately? Who’s being greedy?

The DFL majorities in both chambers of the Minnesota Legislature have proposed adding yet another tax bracket to the state’s income tax system, targeting the highest-earning households. That’s an unfortunate turn of events, though I’m certainly not surprised—“Soak the rich” must be the unofficial state motto. But for economic, moral, and political reasons, Minnesota and the nation need to end the obsession with income tax “progressivity.”

First, some numbers. According to the Tax Foundation, in 2006 the top decile (10 percent) of households by income earned report 47 percent of all AGI (adjusted gross income) in the nation. They paid 71 percent of federal income taxes. In Minnesota, the top decile earned 43 percent of all AGI but paid 66 percent of all the federal income taxes that Minnesota sends to the national government. The Congressional Budget Office, meanwhile, says that nationally, the top decile earned 39 percent of pretax income and paid 71 percent of all income taxes.

You can find a similar pattern in state income taxes. According to the 2009 Minnesota Tax Incidence Study, produced by the Minnesota Department of Revenue, the top decile earned 42 percent of all household income, but paid 57 percent of all income taxes.

The highest-earning taxpayers, in other words, already pay an outsized portion of the income tax.

Rather than making our so-called “progressive” income tax systems even more so, Minnesota and the nation should move towards some form of flat-rate system.

There are a lot of economic arguments against a progressive, or as I call it, graduated tax system, but I’ll stick with moral and political ones.

First, at some point, graduated tax rates resemble involuntary servitude. A 100 percent tax would be morally wrong—even if government in turn provided that person with food, housing, clothing, transportation, and every other need in life. Such an arrangement would be a form of slavery.

What percentage of personal income can government take before it gets to that point? I don’t know, but the logic behind raising taxes on the wealthy (“we need it, they don’t”) is troubling.

Placing extraordinary taxes on high-income earners is bad for another reason: That fuels majoritarian impulses that imperil our political system. The majority rules, but our national and political institutions do have checks on majority rule, including the U.S. Bill of Rights. These checks are useful—it’s a fact of human existence that small groups of people are vulnerable to rough treatment at the hands of the majority.

Indeed, our political history has been marred by majoritarian excesses, including vigilante justice, lynchings, wartime internment of American citizens and, at our worst, slavery.

By definition, people in the top decile of income earners are a minority vulnerable to being plundered for the benefit of the majority. It is true that a new marginal income tax rate is not as objectionable as mob violence. But it is an attack on the freedom of some people to reap the rewards of their labor.

A graduated tax system invites bad policy. To paraphrase the late economist Milton Friedman, you’re going to be a careful shopper if you buy something using your own money—and rather careless if you’re spending other people’s money.

And our governments spend far too much of other people’s money. According to the Tax Policy Center (a joint program of the Urban Institute and the Brookings Institution), 43 percent of the American population (65 million) pays no federal income tax. And, according to the Tax Incidence Study from Minnesota, households in the two lowest deciles here pay no income tax.

Some government programs work well. Others work at cross-purposes with each other, or have long since ceased to be useful. Too few people apply political pressure to fix or scrap dysfunctional programs. If a large portion of the public has little skin in the game, it’s not surprising that government doesn’t receive the scrutiny that it should.

But, you may ask, what about payroll taxes? The Center on Budget and Policy Priorities says these taxes are a larger burden for most Americans than federal income taxes. That may be true, but they fund two grossly underfunded programs—Social Security and Medicare—that the top decile will eventually be called upon to pay for. And if few people pay that little in federal income taxes, perhaps we’ve cut federal taxes too much at the lower end of the income scale.

Isn’t a flax tax regressive, meaning that lower-income people will pay more as a percentage of their income? Yes. Then again, a Toyota Prius, a Big Mac and a subscription to basic cable also claim a smaller portion of someone’s income as they earn more. In short, life itself is regressive.

Even with a flat tax—or even if the state doesn’t impose a new income tax bracket—the top decile will still be paying more than the rest of us. They buy more stuff, which means they pay more sales taxes. They buy more expensive houses, and thus pay more in property taxes. When people produce and consume more, they’ll pay more. In short, if “soak the rich” is your theme, you don’t need a graduated income tax.

This article was first published in a slightly different form in the April 23 edition of the Saint Paul Legal Ledger.