Thanks to inflation and other factors, gas prices have been on the rise over the last several months. In Mississippi and other Gulf Coast states, the gas prices have been traditionally lower than in other parts of the country. Nevertheless, the price rose in November up to about $3.05 per gallon. This puts gas prices on track to be the highest holiday prices in nearly ten years.
Gas prices play a significant factor for people seeking to travel during the holidays. It also places a burden on farmers and those dependent on machinery for a living during the regular seasons. Gas prices play a significant part in the United States economy, which is why government policymakers have to make it a top priority when considering the issues they face with inflation.
When considering this issue, one may wonder how the price of gas fluctuates so much over time. Only a couple of years ago, during the Trump administration, the gas prices had dropped to under $3, sometimes under $2. Now, it has skyrocketed to a record-high in some parts of the country. How can there be such a difference?
According to the U.S. Energy Information Administration, gas prices fluctuate based on four different factors: the cost of crude oil, refining costs and profits, federal and state taxes, and distribution/marketing costs. The “weight” of those factors also changes over time. Compared to the average price in the last ten years, federal and state taxes, for example, make up a much higher role in gas prices in 2021. In fact, the percentage of the gas price comprised of federal and state taxes rose from 16 percent to 22 percent.
Robert Rapier of Forbes seems to suggest that the biggest factors contributing to the price of gas are outside of the government’s control, such as the international price for crude oil, limitations on refining, and the seasonal element of supply and demand. While these certainly can be contributing factors, the analysis avoids the ultimate issue that government administrations have a significant ability to change the prices of gas, based upon their policies.
Elizabeth Warren recently blamed the issue of gas price inflation on corporate greed. The reality is that a system of highly complicated factors influences the price of gas. No one company is going to be able to raise the prices singlehandedly. Rather, free-market principles of supply and demand promote the true prices that gas is worth. The problem is when other factors step into the picture and negatively influence the natural price of gas. Such factors can include international markets, supply chain issues from bad government pandemic restrictions, and government policies heavily regulating the energy sector, as Brad Polumbo with the Foundation for Economic Education has noted.
The rapid increase in gas prices can ultimately be attributed to a rapid transition in government policy. Biden represents this transition from the Trump administration, saying that America does not need to boost its domestic production of oil and gas. Unfortunately, the outcome of this kind of transition can only mean an increase in prices. Thus, while some attempt to explain away the rapid rise of gas by blaming external factors that are outside of the government’s control, such discussions are merely a smokescreen to cover the root causes.
What then should be done in Mississippi? Mississippi has an opportunity to lead the charge in this area. State taxes and regulations play an additional factor in the price of gas that only compounds the problem into a much greater issue. Counteracting the federal government’s role in the price of gas would greatly help manage the inflation that is so rampant throughout the United States -even during the holidays.
One of the most challenging aspects of taxes is finding the balance between limiting taxation to ensure it does not choke out economic innovation and growth while taxing enough to keep the government functioning well. Despite having less expenses, many rural county governments in the state have higher property taxes than urban counties.
It is a balance many governments fail to meet, which is why many tax policies are often miswritten. Property taxes comprise most of Mississippi’s revenue in each of its 82 counties. In fact, over a quarter of the Mississippi government’s revenue comes from property taxes. This source of revenue is used for a variety of different purposes; however, a third of municipal governments and public schools’ budgets rely on property tax collections.
Mississippi exercises a system of five classifications of taxable items when pursuing property taxes. There is a different assessment ratio in each of these classifications, ranging from 10 to 30 percent of the total value: Class I consists of single-family, owner-occupied residential property, and its assessment ratio is 10 percent. Class II consists of any property that is not Class I property nor property used for public service assessed by the state or county and is assessed at 15 percent. Class III property entails personal property except for motor vehicles and public service property assessed by the state or county. It is assessed at 15 percent. Class IV property is any public service property assessed by the state or county except railroad and airline property, and it is assessed at 30 percent. Finally, Class V consists of motor vehicle property, and it is assessed at 30 percent.
Despite the specific parameters for the state-mandated rates, there is a large degree of arbitrary inconsistencies on the county-level, which is where the actual taxes are levied. In order to get a grasp on these specifics, MCPP conducted an analysis of average property tax rates per county divided by the per capita income, population, and average property values.
The analysis revealed that many of the poorest counties with the lowest property values have the highest per capita property tax burdens. In addition, many of the counties with the lowest incomes and the lowest populations have even higher taxes than urban counties with higher property values, larger populations, and more government services to pay for.
This reveals that many counties are placing their citizens at a higher risk of tax forfeiture while also driving down incomes. Not only does this affect individuals simply seeking to keep their property, but it is also a distinctive for investment and growth. If property taxes are high, this can also lead many to sell their property and live elsewhere. At the end of the day, county governments ought to tax their people fairly. Local tax rates that arbitrarily tax the property that their people already own without due consideration of actual population and actual government budgets should drastically reformed. If county governments truly want to treat their citizens fairly and encourage growth, property tax overhauls could be a crucial step.
The Christmas season represents a major source of cultural optimism that encourages people to spend more freely, sparking quick and, at times, unsustainable economic vitality. While this usually provides a boom, economic circumstances aggravated by government actions could mean a leaner holiday for thousands of Americans.
Due to current economic hardships like inflation, the consumer price index reported that the price for goods and services have increased 6.2 percent over the last year (that number increased by 0.9 in the last month alone). Things are getting more expensive and under normal circumstances, people would be much less likely to consume more expensive items beyond what they need to buy out of necessity. Additionally, supply chain problems have led to a shortage of items one can buy. Meanwhile, the federal government of 2021 had a consistent pattern of policies that discouraged labor participation and increased monetary inflation.
However, despite economic challenges, consumer spending still occurs. This should not be surprising as the Christmas season generally represents a period in which people are not as concerned about the price tag. The data shows that even though holiday spending is less than previous years, people are still spending more than they typically do in other parts of the year.
This should be encouraged. Regardless of what economic theory you hold, consumer demand and spending are an essential part of boosting the economy. Even in the supply-side framework, cutting taxes for businesses to create jobs only works if those businesses have a demand for their product. The biggest problem that stands in the way is if companies can keep up with the demand when they themselves are running into a supply shortage. The ultimate solution to this is having the government come alongside businesses and help them make it easier to make goods by cutting red tape.
Mississippi is far from avoiding this problem during the Christmas season. Gas, food, and other consumer products are rising making it more difficult to travel and celebrate. Cultural optimism certainly helps with the state’s ability to maintain the economy. However, the true and sustainable solution to promote a healthy economy is by continuing to promote the free exchange of goods and services. Mississippi has already taken a step in testing this by creating a tax free holiday in the month of July. However, it can take further steps in promoting free market principles this holiday season by simply allowing companies to operate freely and becoming a help, rather than a hinderance, to them.
Ultimately, both businesses and consumers should be free to pursue what is most prudent for their interests. One of the greatest myths people believe regarding the economy is that simply because the nation is entering into economic hardships does not mean that government intervention is warranted.
This Christmas season may exhibit a time in which people will sacrifice, spend, and travel less, but that conclusion must be made by the consumers themselves, rather than government policymakers. As we enter the Christmas season, the choices of the people, rather than the government’s central planners and regulators, should be at the forefront.
Mississippi has a challenge in front of them as it continues to address the economic problems that face our nation. One factor that needs to be addressed in this complex issue is the number of regulations within the state. As an underlying cause of these regulatory excesses, the state has dozens of regulatory boards and agencies, with many barely even cataloged by the state government itself.
The number of regulatory boards has become bloated to the point that it is hard to keep track of what board oversees what regulation. To date, there is not even a comprehensive list of all the agencies, boards, and commissions that exist within the state.
Ultimately this reflects on government inefficiency and excessive control of the economy. Given the right context and purpose, regulations can serve as a helpful tool in ensuring fair and open competition. Now, however, regulations are often used as a political weapon to stomp out competition and economic progress. The proliferation of new rules, boards, and agencies is commonplace. In fact, this is so much the case that the legislature has no standardized system in place to notify stakeholders in government and the populace when a board is created or repealed.
Having so many regulatory boards has practical consequences. In 2018, the George Mason Mercatus Center and the MCPP reported a snapshot of Mississippi’s current regulatory scheme. We found that Mississippi’s Administrative Code is far more expansive in terms of regulations than it needs to be. In fact, it totals 117,558 restrictions, is comprised of 9.3 million words, and if you sat down and read it, it would take 13 weeks to read!
This does not necessarily mean regulations do not have their place. Regulations are, after all, enumerated powers given to state legislatures as a tool to govern. However, such power must come with limits. For one, overregulation stifles innovation and economic growth, a necessary component to society, especially during these times. As Broughel notes, such a system of regulations, over time, has a detrimental impact on the economy. In fact, if a cap on regulations was established and the state simply kept that number for a couple of years, the economy could grow substantially.
On another note, overregulation places a greater burden on the government to ensure that various provisions are met. When a government grows, it becomes harder to manage it efficiently. The net result is an economy that is snuffled out by too much oversight and a government that is overwhelmed with too many rules and regulators to keep track of.
If Mississippi desires to become a top state that provides incentives for families and businesses to come and settle there, the state has to get a handle on its regulatory schemes. In previous legislative sessions, policies have been proposed to do just that. However, there have not been enough significant policy reforms that would manage this problem effectively. As we move into the next legislative session, it should be a top priority to lessen the state government's hold on the economy by diminishing the extensive nature of its state regulations. While the government uses regulations as a context to insist that the people are accountable to its authority, how can the people themselves hold the government accountable if the state itself does not even know how many regulators there are? Rather than having a system that lacks accountability and burdens its people, the Magnolia State needs a regulatory overhaul. Meaningful reforms would ensure that every regulation serves a legitimate purpose and that every regulatory authority has transparency before the people it serves. It’s time for Mississippi to move forward.
It is clear that the United States is facing a significant crisis in relation to inflation. This problem has existed for a variety of reasons that cannot be boiled down to one or two issues. Instead, this problem has multiple influencing factors and variables. Despite these elements, central planners have continued to make predictions that are often proven wrong.
The factors that have pushed inflation upward will likely linger into 2022, especially if the Omicron variant comes into play. In his recent remarks to Congress, Federal Reserve Chairman Jerome Powell noted that despite its prior predictions of limited inflation, the Federal Reserve no longer viewed the recent inflation growth as “transitory.” Instead, the Fed is now considering raising interest rates to mitigate the increasing growth of inflation as the prospects of its long-term effects continue to expand.
In response to this crisis, various states are seeking political action, trying to mitigate the negative effects of this inflation. While some try to open up the free market, trying to provide some organic solution to the problem through tax cuts, others policymakers try to provide an artificial solution through monetary policy. While the former actively seeks to resolve the issue, the latter denies the true problem at hand.
In November, Mississippi Senator Roger Wicker expressed the nature of the current economy and the problems with President Biden’s efforts to fix it. The reality is that the inflation problem is far worse than experts had predicted. Prices of goods have risen by 6.2 percent, the greatest margin since 1990. Gas prices are being driven through the roof (nearly 50 percent), placing a great burden on Mississippi agriculture, a critical element of the state’s economy. As a whole, Mississippi has suffered from the effects of inflation, and the reality is that this simply could not be reflected in the predictions of experts.
Senator Wicker’s remarks demonstrate the very reason why monetary policy often does not work. Artificial solutions to economic problems often assume that economic phenomena can be accurately predicted and centrally planned. Various government policies like setting tax rates, printing currency, economic regulations, and government spending merely serve as a manipulative tool to change how the economy works, but they are useless if people cannot predict and prescribe what the economy needs in the near future.
Unfortunately, the inflation crisis rose at a rapid pace, making it nearly impossible to predict. Perhaps the better option is to simply let the free market take its course than sweat over what is the best way to approach monetary policy.
Is concerning is that such policies of government involvement, are often lazy in nature, putting more of an emphasis on the government simply “buying out” the economy rather than establishing good monetary policy. The Heritage Foundation examined the nature of the economy within the Covid-19 context. It explained that while appearing to be helpful and compassionate in a crisis, government spending only postpones the inevitable. It appears that the nation is now reaping what it has sown in its zealous attempt to “protect” the United States economy.
Mississippi faces a hard road ahead, and as much as it is tempting to step in and solve for a wavering economy, it is all the more critical to let free market solutions simply take their course. As useful as studies and expert predictions can be, the whole economy cannot rely on them entirely. After all, no one can predict the future – not even the “experts.”
Precious metals like gold and silver have an interesting relationship with state economies and currencies. While the federal government has moved away from precious metals in favor of fiat currency, some state governments have also put policies in place that discourage gold and silver investment. Unfortunately, Mississippi is no exception.
Traditionally, currencies were managed on a fixed basis, meaning that governments print and distribute money based on the amount of gold and silver that is available. However, as time has moved on, these standards have been neglected and governments now operate on a more “flexible” monetary system. This means that the federal government can print money at its discretion. The problem is that the more the government prints, the less valuable American currency becomes, which causes serious economic problems like inflation.
It is no secret that the nation is suffering a crisis of inflation currently. This is due to a variety of reason that can be found elsewhere. However, state responses to this problem have started going in the right direction as governments begin to release controls like taxation on precious metals. The reason why this is a good thing is because, while precious metals are also good used for trade, it is effectually a currency. When states tax the sale of precious metals it is essentially taxing money itself. It simply does not make sense and is akin to going to the grocery store and being charged a tax for breaking out a five-dollar bill. This causes individuals to not engage in the precious metals market and distances the economy even more from a grounded monetary system.
A couple of days ago, the Money Metals Exchange and Sound Money Defense League released an index ranking the states on their precious metal policies. Each state is evaluated based on 12-criteria system that primarily examines whether states levy a sales tax against precious coins and bullion. On this point system, Mississippi ranked one of the lowest (7th worst) overall. This indicates a specific problem that can be remedied within the state by removing government taxation on precious metals.
As it stands, Ohio is the only state that has establish policies allocating a percentage of state-held pension funds to physical gold. Additionally, the majority of states throughout the country have either significantly decreased or removed altogether sales taxes on precious metals altogether. This is a good policy in returning to an economy that is grounded in something fixed. This is achieved by treating things like precious metals as distinct from the rest of the economy.
Mississippi is one of only nine states that imposes sales tax on precious metals, thus, it levies a 7% tax on gold and silver purchases. However, it is currently part of a group of states that are considering lessening or removing the sales tax on gold and silver. In the 2021 legislative session, a bill was introduced that would have repealed the sales tax on gold, silver, platinum and palladium bullion. However, the bill died in committee.
Repealing the sales tax on precious would be a good change for the economy. Prices for precious metals, and the inflation rate that comes along with them, should be able to fluctuate naturally without states artificially interfering. This is the essence of how free market economies are supposed to operate.
Friendly precious metal polices on the state level could lessen the burden for individuals like investors engaging in the market and including physical metals as part of their portfolios. Such reforms could also help citizens seeking to protect their savings and retirement from the erosion of inflation.
As Ron Paul describes it when he testified before the Arizona Senate Committee when it considered gold and silver monetary reform: “It makes no sense to tax money.” Mississippi should follow this commonsense principle and remove taxation on precious metals.
It goes without saying that the post-pandemic world will (at least initially) operate differently than how we are used to. We are essentially in this state of limbo in which many aspects of society have returned to normal, and yet we still see the effects of the pandemic in effect in areas like schools, cities, and public spaces. Economically, the world is placed in a precarious position as stocks continue to fluctuate as fear of the rise of different Covid variants comes into play.
However, this precarious situation has had several impacts on society beyond just the stock market. Due to the fear of some variant rising or more government restrictions being instituted, the percentage of people leaving the workforce for retirement has significantly increased in recent years, and the average retirement age is now 55. The Peterson Institute for International Economics demonstrates numbers that suggest that even those people that are not old enough to retire are less likely to return to in-person employment because doing so may negatively affect their kids' ability to go to school. The net result of this is exactly what America is experiencing at the moment: slow labor-force recovery.
Yet, as Niall Ferguson notes, the U.S. labor market is facing an inflation surge that cannot simply be attributed to fear of Covid exposure. For one, the Biden Administration erred in providing a $1.9 trillion stimulus package earlier in the year when support had already been provided in 2020. The effect of this policy is that people now have excess savings that have provided that extra cushion needed for retirement to become a reality.
However, Ferguson also errs in his assessment that tax credits and cuts in marginal personal income tax rates negatively affect the incentive for people to return to the workforce. The assumption is that those with more money in their pockets will have less of an incentive to work. While this may be true within the context of giving people “free” paychecks in the form of stimulus packages, the effect of tax cuts helps (or at the very least contributes to) economic recovery.
When people receive tax cuts, it does not mean that they can now live with excess money. They still must pay taxes and still have additional expenditures in which to pay. However, the difference is that they now have an incentive to engage in the economy in a much freer manner and that in turn requires them to have jobs to maintain that same level of engagement.
In other words, tax cuts are effectually different from providing stimulus packages. Unfortunately, Ferguson treats them as if they are synonymous. The reality is that the fewer taxes person has to pay, the healthier the economy gets. The labor force is included in that equation. In fact, when Trump cut taxes during the pandemic, it greatly helped the economy. It is when those cuts are removed that recovery becomes stagnate.
Moving forward for the nation and for Mississippi, public policy must be crafted in such a way that encourages people to work and engage in the economy rather than enable them to remain at home, reliant on government money. Ironically, both government interference and an excessive fear of Covid originate from taxpayers giving into a narrative that does not necessarily reflect reality. Relying on the government to return everything to normal is not the answer. Only when people get their hands dirty again and get back to work will the economy eventually return to normal.
Mississippi currently stands as one of the cheapest areas to buy a house. In fact, the state ranks 2nd in the United States in cheap housing at a median value of $144,074 per a typical single-family home. However, that home value only increases at a rate of 9.8%, one of the lowest in the nation.
The state government has instituted policies to make the price higher than it should be while keeping the increase in value at a lower rate. One such policy that has affected the prices of housing is the policy towards lumber. Currently, lumber costs are up, and the demand is high. Mississippi currently has plenty of it to make newer houses. The problem is that production cannot keep up with the demand, and it certainly does not help when the Mississippi government places too much of a burden through regulations and bureaucratic control. Mississippi has, in the past, relaxed these regulations in order to ease the burden. It should do so again.
Perhaps the biggest factor in housing costs, however, is the need to build the Mississippi economy. The housing market is often seen as the indicator of a thriving state economy. This is because people are more willing to move into the state in which business is booming. Due to competition, if the economy is thriving and more people want to live in Mississippi, the prices will find its way to an appropriate level. In other words, if Mississippi wants cheap, quality housing, building the economy and letting the market fluctuate naturally is the best way to go.
When considering policy in this context, thinking about the big picture is often the most effective. Edmund Burke often asserts that policy change needs have a specific justification. Simply throwing things at the wall to see what sticks will bring about unforeseen consequences, ones that are often not welcome. If Mississippi sees a thriving market such as the one it sees currently in real estate, it is best to step back and let the natural benefits of the free market take hold. Increasing taxes or implementing regulations will only stifle the process and either plateau or decrease the market's progress.
If there is anything we must learn from the Great Depression and FDR’s New Deal, it is that throwing policy at a wall to see what “sticks” is never a good idea. This is especially true when those policies involve trillions of dollars.
When FDR put forth his plan to save the nation, the problem in his approach was that policy did not have an indicated, narrowly defined purpose and cost the nation greatly. Coming out of the Covid pandemic, we are facing a similar situation with Biden’s Build Back Better strategy, which would ultimately cost $3.5 trillion despite the president’s insistence that it will cost nothing. Biden believes this because his assumption is that the money will be returned when we “invest in America” in areas such as climate and providing a social safety net for families and small businesses. The irony is that some in his own party do not agree as such a bill will likely add to the already daunting inflation rate.
The reality is that virtually none of the solutions that Biden offers in this strategy is actually free. A study from the University of Pennsylvania confirms this. In fact, the national debt is said to increase by 25 percent over 30 years if Biden’s plan comes into effect.
Mississippi should not follow suit in this approach of governance. As tempting as it is just to throw money or ideas at the wall to try to fix a problem. Good policy must have a specific purpose and not operate on assumptions that “we will just make our money back.” That may be a byproduct, but it is a substantial risk that taxpayers often cannot afford if it falls through. Prudence is key.
This is why the narrative that the government is going to “invest in America” is so dangerous. For one, the government is not an investor as if it has generated its own money. The government only has money because the people have been forced to give it money. The second problem is that “investing in America” is so vague and broad that it boils down to just flowery rhetoric, yet it is treated as some profound justification for large spending. This was FDR’s strategy and it ultimately led to several lawsuits in which the Supreme Court granted relief and put back the nation several years back in recovering from the Great Depression.
Throwing money at a wall to see what sticks might help if you have unlimited resources and no consequences; however, neither President Biden nor the Mississippi government has this luxury. If effective and positive change is to occur, we must depart from this “investing in America” narrative and support the American economy by making government smaller, not bigger.