Who Sent In The Clowns

In a recent issue of the Landowner, I pointed out the gradual erosion of ordinary citizens individual economic freedom which flows from heavier and heavier taxes. Simply stated, the more money the government takes from you in taxes and spends or give to somebody else, the less economic freedom you have. You have to work harder or one or both to maintain your standard of living and this government taxing and spending increases, individual freedom to influence the economy is reduced. As taxes increase, whether impose directly on individuals or which have their taxes increased, individuals have less money to spend. Take a simple example. You may want (and may be saving) to buy a river-front lots on which to build a cabin you and your family and friends can use and enjoy. If Uncle Sam (or Uncle Bob) takes more money from you in the form of increased taxes, you may be deprived entirely of the opportunity to spend your hard-earned money for what you want. What is worse yet is that Uncle Sam (or Uncle Bob) may decide to acquire, with taxpayers’ money, that river front lot (and a lot more) for himself. And you can bet today’s world that Uncle Sam (or Uncle Bob) probably won’t be making their riverfront property available for your use and benefit. More likely he will be saying that the property can be used for anything.

It doesn’t take an economist or a philosopher to recognize the compound-involved here. You’re out the tax money and collectively, we’ve all lost a little more freedom to choose and influence how all economic decisions are to be made. The ultimate result always is that the more Government takes in taxes the less freedom you have.
I recently suggested in these pages (somewhat optimistically it turns out) that Government may be reaching the outer limits of our collective tolerance to more taxes and the resulting expansion of government control over our lives. I warned at that time that an assault on another of our fundamental freedoms-this one more subtle-was occurring. This is the individual’s freedom to own, it use, buy and sell land.

I may have been wrong about our tax tolerance. If the polls cited by the new Administration are accurate, the perception (at least on the part of President Clinton) is that we’re willing to shoulder in even greater tax burden. Admittedly, he doesn’t call it “Taxes.” he calls it “Shared sacrifice” or “Contribution to” to the nation’s well-being. Whatever you call it, the effect is the same. You don’t get the riverfront cabin and the government buys the riverfront for itself, pays for someone else’s health insurance, British and a boatload of illegal aliens or does whatever else you (through your elected representatives) allow it to do.

Although I may have underestimated our collective tolerance to even more taxes, let’s say we will decide at some point that enough is enough. We won’t tolerate more direct taxes unless we get something we want. Let’s also assume that senators Wofford and Specter and our representatives in Congress agree that enough is enough and refuse to vote for more taxes (any smiles forming on your faces?), and we stop the direct assault on our individual economic freedoms. Can we simply go back to normal lives and resume our efforts to save enough for the cabin of the river? A resounding NO is the answer!

As I warned earlier, the institutionalization of the anti-development/preservationist philosophy in our government manifested by intrusive environmental regulations continues unabated and our freedom to own and use land is under attack. This phenomenon can also be viewed as a “hidden tax” being levied by Government.

We all know that the value of privately-owned land diminishes as the uses to which it may be put to are restricted. In the hands of the ordinary citizen, a river-front lot is not so valuable if he can’t build a cabin. The oil and gas deposit or gravel bed is worthless if you can’t recover it. The “back forty” that can’t be used unless drainage is re-established becomes a liability rather than an asset if some agency objects to drainage. We may recognize that our economic freedom is being eroded by taxes but we must also recognize that Government, by imposing substantial restrictions on land-use, is also increasing costs to ordinary citizens and landowners. In the typical situation, the ordinary citizen can’t pass the increased costs on to someone else (like utilities and producers of consumer goods can) and so he has to absorb them. In a very real sense, when government restricts your freedom to use your land, it is for effect imposing a new tax, albeit an indirect tax, by taking from you the amount by which the value of your land is diminished by the particular government regulation or action involved. Economists may refer to this effect as “Ran to” love for all practical purposes it is a tax in this form of taxation usually falls into the category of “Taxation without representation”.

Just a few examples of the kinds of increased costs which result in indirect taxation will illustrate my point.
First, let’s look at something called the Conservation Easement Program (C E P). This program is being implemented by the Farmers Home Administration (F M H A) under a 1987 Memorandum of Understanding (M O U) with the U.S. Fish and Wildlife Service (F.W. S.), tenuously based on an Executive Order issued by President Jimmy Carter in 1977. (As an aside, keep your guard up any time regulatory agencies do business by M O U’s. It usually means either they do not have clear regulatory or statutory authority to do what they’re doing or are trying to avoid public scrutiny of it.) Under the C E P, whenever the F M H A forecloses on a loan made on an agricultural property, it allows the F.W. S to encumber the property with what is euphemistically referred to as a “Conservation easement”, which is really a perpetual set of stringent land-use restrictions on the property including:
A. No dwellings, barns, outbuildings or other structures shall be built within the easement area.
B. The vegetation or hydrology of the described easement area will not be altered in any way or by any means or activity on the property conveyed by this deed, or property owned or under the control of the Landowner, including: (1) cutting or mowing; (2) cultivation; (3) grazing; (4) harvesting would products; (5) burning; (6) placing of refuse, wastes, sewage, or other debris; (7) draining, dredging, channeling, filling, discing, pumping, diking, impounding and related activities, or (8) diverting or affecting the natural flow of service or underground waters into, within, and out of the easement area.
C. “… The Landowner shall be responsible for compliance with all federal, state and local law for the control noxious or other undesirable plants on the easement areas. ”

In conservation easements under the C E P the federal government is given authority “At its sole discretion” to manage the easement area within the following rights:

A. the right of ingress and egress…

B. The right to install, operate and maintain structures for the purpose of reestablishing, protecting, and enhancing wetlands functional values including taking of construction material to and from said sites.

C. the right to establish vegetation…

D. the right to manipulate vegetation, typography and hydrology on the easement area’s 3 diking, Pompeian, water management, excavating, Island construction, burning, cutting, pesticide application, fertilizing, and other appropriate practices.
E. The right to conduct predatory management activities.
F. The right to construct fences …
G. The right to prohibit or regulate hunting or fishing …
H. The right to exclude Landowner and/or public entry …

These conservation easements are forever.
You don’t have to be an economist, engineer or lawyer to understand if the F W S imposes a conservation easement, a former owner of farm property seeking to redeem after foreclosure will require substantially less than he had before the half FmHA for closed (and that won’t affect the redemption price) and the land will be encumbered going forward. If the original owner can’t redeem the property, in many instances the conservation easement will so burden the property that it won’t be purchased by another farmer. The property then moves from private ownership to, in all likelihood, unproductive government ownership. Henry lamb of the Environmental conservation organization reports that the F W S has recommended over 1650 easements affecting more then 322,500 acres and estimates, if current trends continue, a cost to taxpayers (that’s us folks exclamation) of $700 million with 1,400,000 acres of land taken out of productive use.

The C E P was not voted on by Congress or subjected to any public scrutiny informal rulemaking procedures (which are intended to give notice to the public and potentially affected parties an opportunity to comment on and shape regulatory proposals). Rather, it apparently was cooked up by the anti-development/preservationist bureaucrats in the two agencies and foisted off on the farming community and general public without debate or discussion. The net effect of the C E P is more restrictions on land use, more land grabbing by government and more cost to ordinary citizens.

The CEP is a good example of “surreptitious” regulation which imposes a form of indirect taxation. Let me turn now to another example of government “Activity” which imposes additional costs on the ordinary citizen in Landowner. This one we will refer to as “Delayed damages.” some money may be familiar with the concept of personal injury litigation. A court may award a successful plaintiff an extra amount over the awards for pain and suffering in property damage to compensate the injured party for the delay between the time of the injury and actual payment of the award by the defendant. The law recognizes that and authorizes it delayed damages in that kind of situation. It appears to me that ordinary citizens and landowners almost always suffer “delay damages” when they get caught up in government regulatory programs.

Take the well publicized power transmission line proposed by two major electric utilities; the Duquesne Light Company and General Public Utilities, which is known as the “DQE/GPU project.” the DQE/GPU project involves the construction of a high-voltage power line from Shippingport Borough west of Pittsburgh to Londonderry near Harrisburg, a distance of approximately 225 miles. The object is to transmit coal-fired electric power generated in western Pennsylvania for use in the east. It is believed that the new line will create hundreds of construction, mining and related jobs, boost the Pennsylvania economy and provide cheaper electricity on the Eastern seaboard.
A vocal, if unquantified, opposition to the DQE/GPU project has developed. Some of the opposition is based on health and environmental concerns arising from the construction and operation of the power line. Some comes from the no growth, anti-development/preservationist movement which often, it appears, opposes almost everything. Son is based, legitimately, on concerns of landowners and residents who live with the in or near the mile long, and 2,000 foot wide right-of-way “corridor” in which the power line ultimately will be located on a 200 foot wide easement.

The DQE/GPU project power line is subject to regulatory jurisdiction of the Pennsylvania Public utility Commission (P U C) which must determine if the project is in the “Public interest.” if it is, the utilities can pass the costs of construction through to electric ratepayers (again, that’s us folks). As part of the regulatory process, the PUC held numerous hearings and the utilities conducted an elaborate public education campaign to address an attempt to assuage the concerns referred to above. Originally, the PUC found the project to be in the public interest and it seemed that the project would move to the next phase, the identification of the precise location of the foot right of way within the foot corridor and the right of way acquisition.

It was to be during this phase the Landowners (hopefully with assistance from their legal advisers) in the corridor would be able to assess accurately how they would be affected. No matter what side you take on the myriad of issues raised by the project, at least during this phase it was thought, the direct impact on affected landowners could be identified and assessed and available remedies pursued.

Unfortunately for everyone involved, except importuning politicians and seemingly feckless PUC bureaucrats, the project has been delayed while the PUC conducts further investigations. Most of us have seen be full-page newspaper ads taken out by Pittsburgh-based corporate and business leaders criticizing the delay. There’s no question that these leaders believe the project is good for business in Pennsylvania and should go forward. But now the project is stalled and its future is clouded with uncertainty.

Little, however, is being said for the ordinary citizens and landowners in the corridor who will bear the actual brunt of the project and may have their properties “Taken” for the right-of-way. Delay clearly harms them. Take our original hypothetical of the guy who wants to buy the river-front lot and build the cabin and assume his site is within the corridor. What does he do now? What about the developer who has acquired a large tract of land to build a new townhouse complex before the corridor was laid out and now finds that his property is in the corridor. Can he proceed? Probably not until he is certain that the project will (or will not) go forward. In the meantime, interest and real estate tax payments must continue. Similarly, do you rotate a crop into or pasture livestock into a possible right-of-way area? The point is that the bureaucratically imposed delay is causing “delay damages” to landowners. This is another cost of government and to me this cost falls clearly within the category of “indirect taxation.” These indirect taxes are imposed because politicians and bureaucrats generally like to avoid making, accepting responsibility for, and following through on tough decisions. The typical reaction of these fellows when faced with a tough choice is to stall and look for some way to deflect responsibility and avoid decisions they are charged by law to make. That’s a “Fact of life,” you may think to yourself, but also think about what government imposed delay in implementing private economic decisions costs the private sector.

As a final illustration of abusive government action the costs us money, let’s focus some light on a new, anti-development/preservationist scheme devised by the Pennsylvania Fish Commission (our old friends!). In a deal between D E R and the Fish Commission-perhaps by M O U (and I warned you about M O U s),-D E R imposes “Special conditions” on all mining permits potentially affecting streams classified as sensitive streams by the Fish Commission. You can take it for me that “Special conditions” means a higher cost of doing business in may be so high that the business can’t be done at all. But what are “Sensitive streams?” as you might have guessed, they are whenever the Fish Commission says they are. Streams designated as “Sensitive” by the Fish Commission unilaterally and arbitrarily, I would say, on a case-by-case basis. A D E R official put it this way:
” We met with the Pennsylvania Fish Commission to develop the list [of sensitive streams] that you requested. It turned out to be more difficult proposition that we had expected. The Fish Commission cannot develop a sensitive stream list because much of the information that goes into designating a stream as sensitive is not collected until the Fish Commission conducts their field reviews in connection with the surface mine permit applications. If they find a stream that contains a native trout population and there is already some impact occurring in that stream in the vicinity of the proposed surface mine permit, they classify that section of the stream and sensitive. The impact could be sedimentation from other mine sites in the area, sedimentation from logging, or any other existing condition that is already creating stress for the native trout population.”

“C’mon” you say, “Government can’t behave like this. Haven’t the courts of Pennsylvania said that requirements like this (i.e. requirements which impose new substantive burdens on the regulated community across the board) must go through the formal rulemaking process before they are enforced by an agency?” You’re right the courts have said that but DER and the Fish Commission must think that there “Noble cause” put them above and beyond the law and that such court imposed restrictions apply only to us “ordinary citizens.” Implementation of this type of program costs plenty. It imposes indirect taxation in the form of higher costs of doing business and inflicts “delay damages” on natural resource developers all while the Fish Commission tinkers around out in the field.

In all three examples, ordinary citizens and landowners have to “Pick up the tab.” I hope you will agree with me that something should be done about this. You might think “What can I do about it?” the answer is we must stop letting the Clowns run the circus! We have to speak-up and put an end to abusive government before it takes any more of our money and land. We have to get organized and get involved. The best place to start is with these legislators we continue to elect and reelect. Tell them to get the Clowns out of management!

Pennsylvania Landowners’ Association, Inc.

P.O. Box 391

Waterford, PA 16441

Phone: 1.814.796.4023