Christmas Tree Taxes and Big Government

The Drudge Report, Fox News, and other middle-of-the-road media outlets recently trumpeted Mr. Obama's Christmas Tree Tax.  According to reports, the Obama administration will be slapping a 15c fee on each real Christmas tree sold.

What a grinch!  What an emblem of the War on Christmas!  He must be a closet Muslim after all!

Well... no, not actually.  We hate to cite the obsessively-liberal Media Matters, but their explanation is actually helpful for once:

Right-wing media figures are accusing the Obama administration of seeking to impose a tax on Christmas trees; but the Christmas tree industry has been working since 2008 -- before President Obama was elected -- to partner with the Department of Agriculture and establish a marketing campaign funded by tree growers in order to promote the sale of fresh Christmas trees. [emphasis added]

So far as we can tell, this description is accurate.  Not only wasn't the tax Mr. Obama's idea, he probably never even heard of it until he read the headline on Drudge and promptly panicked - we see that implementation has been "delayed," which is Beltway-speak for "run screaming and pretend it never existed."

No, what seems to have taken place is something just as villainous and far more insidious.

Another victim of government bureaucracy.

Finding the Right Villain

We are all familiar with various marketing and growers' associations - the California Raisin Advisory Board, for example, came up with the California Raisins commercials to flog their state's wares.  More recently, tired of associations with old people and explosive diarrhea, the California Prune Board changed their name to the California Dried Plum Board and persuaded the FDA to let "prunes" be sold as "dried plums" - given that prunes are, in fact, dried plums, but don't sound quite so fecetious under their new name.

These "boards" are nothing more than associations of individual companies or farmers with a common interest.  There is no single giant corporation that grows all the plums in the United States, nor which manufactures all the raisins or grows all the Christmas trees; instead, many smallish farmers do.

Yet it's almost impossible to get people to distinguish by farm.  There's probably an apple in your fridge; what farm grew it?  You don't know and don't care, and there's no reason you should.

On the one hand, farmers of any particular product have an interest in getting people to eat more of it - more apples, more raisins, even more prunes.

On the other hand, it doesn't make sense for any one prune farmer to invest in a prune marketing campaign.  Supposing it worked?  You'd go out shopping for prunes, but you would pick up any old prune from any old farmer who never spent a cent on advertising.

Why should one farmer subsidize all the rest?  Farm commodity marketing inherently suffers from the moral hazard of a free-rider problem, an example of the "tragedy of the commons" in reverse.

Enter the Department of Agriculture's Agricultural Marketing Service, specifically the concept of Marketing Orders and Agreements.  The government allows all the growers of a particular product in a specified geographical area - say, the raisin growers of California - to band together in a marketing association.  Then they prepare a marketing plan and budget, while the DoA makes up a list of all the relevant growers in that area.

The plan is put to a vote, and if 2/3 of the growers approve, the government enforces it.  In other words, 2/3 of the California raisin growers can vote to spend $10,000,000 on marketing their commodity.  The government will force 100% of all the growers to pay their share of the cost, even those who voted against the campaign.

That's what the Christmas tree "tax" was all about.  A group of Christmas tree growers wanted to create a joint marketing campaign, though it's hard to imagine why as most Americans already seem fairly well aware of Christmas and its traditional relationship to greenery.  They created a plan, put it to a vote, and apparently won the vote.

Now the DoA merely needs to enforce the necessary collection of funds, set at 15c per tree, which would be spent not by the government but by the National Christmas Tree Association.  When Mr. Obama says it's not a tax and that it's not his doing, he's actually telling the truth, sort of.

From the point of view of a small grower who opposed the fee, or levy, or whatever you call it, if the government forces him to write a check he doesn't want to write, it's a tax.  Even if we don't call it a tax, it surely falls under Thomas Jefferson's condemnation of the Kings officials who "eat out our substance."

Crony Capitalism At Work

Can these agreements help an industry?  Sure they can: California raisin sales shot up when their namesakes were singing and dancing on Reagan-era TV screens.

But who, exactly, did the commercials help?  The larger vendors most of all, obviously, since they grew and sold the most raisins and had distribution networks in places where the commercials aired.  Yet the bulk of the cost was borne by smaller farmers - not individually, but collectively, since there are many more of them.

What's more, who is going to have an easier time collecting and paying the tax - the giant tree farm that sells thousands of trees by the truckload, or the little guy who just does a few hundred?  The big operation already has computerized accounting systems that can easily handle one more calculation and issue a check; for the small farmer, it's one more paper-shuffle his wife has to fill out by hand in the evening right after the last tree is delivered.

What these marketing agreements accomplish is exactly what the Occupy Wall Streeters are complaining about: government-enforced costs spread over the many, but the bulk of the benefits accruing to the comparatively well-off few. Yes, it's business - but it's business using the monopoly powers of government to reap gains at someone else's expense.

But, you ask, surely this is a market failure that government should rightfully work to solve?  After all, the free-rider problem is real.

We forget that there is another way to solve this problem which doesn't require government intervention.  The prime example of this better, more equitable system is on many of our breakfast tables: Sunkist.  Their website explains it well:

We are a leading international citrus supplier, but you might be surprised to know that we don't own a single citrus grove. And although we're a billion dollar a year organization, you can't buy stock-because there isn't any.

Why? Because Sunkist is a cooperative - a not-for-profit company. Our members, consisting of California and Arizona citrus growers, have joined forces to produce the high-quality Sunkist® fruit you've come to know and love. Sunkist is the oldest continually operating citrus cooperatives in America and the largest marketing cooperative in the world's fruit and vegetable industry. [emphasis added]

What makes Sunkist different?  It's a voluntary cooperative that individual farmers can choose to join, or not, as they prefer.  If they do join, they're required to pay dues like any other member of any other organization; or, if they don't think they're getting enough benefits to justify their dues, they can quit.

What do members get for their dues?  The right to market their oranges under the powerful brand of Sunkist.  Can you buy non-Sunkist oranges?  Sure, but they're cheaper and the farmer gets less for them.  Are they just as good?  That's up to you to decide when you visit the grocery.

Joint marketing can benefit the farmer, but with Sunkist he has the free right to participate or not as he sees fit.  As an added bonus, there are no DoA government bureaucrats collecting a taxpayer-funded salary.

Why, then, didn't the National Christmas Tree Association go this route, develop a brand identity, and become a free cooperative like Sunkist?  Because it's harder; you have to persuade growers to join and pay by actually delivering value to everyone, not just to the favored few.  With DoA marketing agreements, the government forces them to pay you.  Shades of the way unions like to operate, using government power to extract dues whether workers want to join the union or not!

Government: Not the Solution To Our Problems

The Department of Agriculture can no doubt point to successful marketing agreements that they've arranged, and they'd be right: many of them do work, do increase overall sales, and do benefit at least some farmers.  That's not the point.

The real question is, why is it the business of government to allow some businesses to force others to participate in anything?  As Sunkist shows, it's perfectly possible to create a voluntary branded marketing cooperative without recourse to the dead hand of government, and no doubt cheaper for the taxpayer too.

It may be that popular outrage over this mooted Christmas tree "tax" will enlighten Americans as to how common these outrageous arrangements are, and show us why we don't need a Department of Agriculture anymore, assuming we ever did.  Now that would be a Christmas present worth putting under the tree!