Last week I attended a political meeting about local economic issues. Those present were predominantly right-leaning in their views and probably would identify themselves as conservatives or republicans. Consequently, I was surprised to learn that one of the items on the agenda was a proposal to entice a business into the city by using tax increment financing. Tax increment financing involves manipulating property taxes.

Property taxes are calculated as a percentage of the assessed value of the property. For example, if your property is worth $100,000 and your property taxes are 5%, then you have to pay $5,000 in property taxes each year. Normally, as the assessed value of a piece of property increases, the property taxes increase as well. So, if the value of your property increases to $200,000, then you would have to pay $10,000—assuming taxes stay at 5%.

Property taxes go into a pool of money which the city council then divides up among various local government services. These services include schools, police departments, fire departments, road maintenance, city government, and so on. Since no one likes to pay taxes, there is a natural tension between the desire for more of these services and the desire to lower property taxes. Consequently, city councils are limited in what they can afford to do. A city council that chose to raise taxes to build a new building for Walmart, for example, would probably become unpopular very quickly. The people’s natural aversion to being plundered helps restrain local government power. But like weeds growing up through the cracks in the sidewalk, creative government employees have found ways around this restraint. One of these is tax increment financing. Tax increment financing gives the city council significant power to influence development and business within the city.

Despite its technical-sounding name, tax increment financing is quite simple. It is just a way for the city council to spend future property tax revenue to promote or pay for present development projects. Usually, when property is developed, its assessed value increases. Normally, this would mean that the owner of the newly developed property would owe higher property taxes, which would help fund local government services. But tax increment financing changes this. Instead of going into the general city fund, the additional tax money is earmarked to pay for the development itself. Usually this means that the city borrows the money to pay for the development up front and then slowly pays off the loan with the additional property taxes from the developed property. Alternatively, the developer fronts the costs of the development and the city freezes the property taxes at the pre-development level for a time so that the developer can recoup development costs in the form of lower taxes. Either way, property taxes that would otherwise go into the general fund to pay for local government services are instead set aside to pay for the development.

Advocates of tax increment financing argue that it is a win-win situation for the city because it doesn’t use any money from the pre-existing tax revenue, and because, in the end, the city’s tax income will be higher than it was before the project. But even if true, these assertions don’t address the consequences to the rest of the city outside of the project area or the consequences to the rest of the economy.

City councils like tax increment financing because it expands their power; it allows them to pay businesses to relocate within city limits without having to raise property taxes. But when a city council uses tax increment financing to pay for an incoming business’ property development expenses, all other businesses are suddenly placed at a disadvantage. Essentially they must compete with a business whose real estate expenses are paid by the city government. Obviously any business in direct competition with the subsidized business will suffer, but other businesses will suffer as well as they compete—at a disadvantage—for high quality human capital and other scarce resources.

Other businesses aren’t the only ones negatively affected; all consumers of city services suffer. When a new business moves into the city, it uses city resources in the form of increased traffic, demand for police and fire department protection, parking, and general wear and tear. But if a new business moves in under the protection of tax increment financing, it doesn’t pay for these services through its property taxes. Consequently, other property owners must either pay more taxes or the city will have to divert funds from other areas.

But the most serious problem, in my opinion, is that tax increment financing gives the city council power to intervene in the city’s economic development. This increases the likelihood of malinvestment by distorting the market forces that prevent inefficient companies from consuming resources that they cannot afford, and it opens the door to corruption.

Conservatives across America are furious about bailouts and stimulus packages originating in Washington D.C.—as they should be. But to me it seems terribly inconsistent to rail against the D.C. bureaucrats for their intervention in economic affairs and yet support local politicians who intervene in fundamentally the same way on a much smaller scale. If we believe in economic liberty, then let’s apply it consistently.

A short time ago, my wife and I were blessed with the birth of our third child. Those who have had children recently may remember the extensive battery of medical tests that a hospital-born baby suffers through during the first days of life. Since my wife and I are not medical experts, we usually trust the attending doctors’ and nurses’ assurances that these tests are effective and helpful and that the benefits outweigh the risks. But after a conversation with one nurse, we had some concerns about the PKU test. The nurse advised us that the PKU test often had to be needlessly repeated because the maternity ward staff regularly performed the test too soon after birth—precluding reliable results. The PKU test, also called newborn screening, is unpleasant: a nurse cuts the baby’s heel with a razor blade and dabs blood on a card. So we thought it would be good to wait and have the test done only once.

Shortly before being discharged from the hospital, the test was done, and we thought that would be the end of it. But due to some mix up, the hospital told our pediatrician that the test had not been done. It was during the ensuing efforts to clear up the confusion and transfer the necessary paperwork that we learned that the PKU test is more than just another precautionary medical test; it is mandated by state law. In fact every state in the union forces parents to subject their kids to a local variety of the newborn screening test.

Now, let me be clear that I don’t oppose PKU testing. Left perfectly free, I would probably still choose to have my children tested. From my layperson’s perspective, it seems to make sense: for the cost of a small cut and a couple of hundred dollars, the test can identify several devastating potential medical problems, some of which can be successfully treated. But some people, including some doctors, disagree. There is ongoing debate about what disorders the newborn screening should test for, and there is also disagreement about whether the disorders identified by the current tests are even treatable.

One critic, Norman Fost, professor of paediatrics and bioethics at the University of Wisconsin in Madison notes that when PKU screening was put into place more than 40 years ago it was assumed that if a child had high blood phenylalanine they had PKU and should be fed a strict diet. But there were few data to support that assumption, says Fost. “It turned out that 95% of people with an abnormal screening test had no disease, and it turned out the diet was lethal. It caused brain damage in we don’t know how many kids, and killed we don’t know how many kids.”

Harvey Black, “Newborn Screening Report Sparks Debate in USA,” The Lancet, Volume 365, Issue 9469 (2005). The currently recommended newborn screening procedures are controversial as well:

“They did not develop their arguments based on a careful analysis of the literature. The methodology is not strong” says Jeffrey Botkin, professor of paediatrics and medical ethics at the University of Utah in Salt Lake City, Utah. … The ACMG working group, he argues, did not provide data to show that kids will do better as a result of early intervention based on newborn screening.

Id. Aside from concerns about the tests’ effectiveness, some are concerned about privacy violations inherent in corporate and government collection of DNA. See here (lawsuit over Texas’ program), and here (statement by Ron Paul about the risks of a proposed national program). From my perspective, however, the more serious problem is that parents are not free to decide whether to have their children tested. This is an unjustified invasion of parental rights. Take a look at Utah’s laws as a run-of-the-mill example.

The rules governing newborn screening provide, “Each newborn in the state of Utah shall submit to the Newborn Screening testing, except as provided in Section R398-1-11 [exception for religious objectors].” R398-1-3. To ensure compliance, medical providers are required to report parents who refuse the test. “If the medical home/practitioner or institution has information that leads it to believe that the parent or legal guardian is not complying with this rule, the medical home/practitioner or institution shall report such noncompliance as medical neglect to the Department.” R398-1-13 (emphasis added).  If a medical provider fails to snitch on reluctant parents, she will be fined: “Any medical home/practitioner or facility responsible for submission of a newborn screen that violates any provision of this rule may be assessed a civil money penalty.” R398-1-18.

A report of medical neglect is no small matter. It falls under the general definition of “neglect” found in the Utah Code. “‘Neglect’ means: … (iii) failure or refusal of a parent, guardian, or custodian to provide proper or necessary subsistence, education, or medical care, or any other care necessary for the child’s health, safety, morals, or well-being.” 78A-6-105(25)(a) (emphasis added). A finding of medical neglect gives the state the power to take your kids away. “The court may terminate all parental rights with respect to a parent if the court finds … that the parent has neglected or abused the child.” 78A-6-507(1) (emphasis added). In my opinion, these laws are unjust. Laws which give government the power to take away a couple’s  parental rights because they didn’t have their child tested for rare genetic diseases turn the proper relationship between citizen and government on its head.

Advocates of newborn screening trot out the usual wild rhetoric to justify this government-forced medical testing:

These are our children: the single greatest treasure we have as a nation and as a people. … Given the statistical prevalence of treatable metabolic disorders, not using MS/MS [an advanced newborn screening procedure] today to screen babies comprehensively is no different from shooting a gun into a crowded stadium. You cannot know whom you will injure, but it is a safe bet that you will injure someone.

Charles P. Hehmeyer, “The Case for Universal Newborn Screening,” Exceptional Parent Magazine, 88 (August 2001). The analogy to a gunman in a stadium is blatantly false. Someone who shoots at a group of people creates the risk of harm, but a person who declines a medical test simply fails to mitigate a pre-existing risk of harm. These acts are very different morally as well as legally. But even setting aside the blatantly false analogy, the argument fails. It rests on a false assumption. It assumes that children are a national resource to be guarded, guided, and regulated as the majority dictates. In fact, if children can be said to belong to anyone, they belong to their parents and themselves. Neighbors, friends, and community do-gooders have no rightful claim at all. (For a more detailed argument about this point, see my previous post: Whose Kids are They?)

Usually, a medical provider must obtain informed consent to perform any medical test or procedure. Usually, parents are the legal representatives of their children, and have the sole authority to consent or refuse. Newborn screening is a deviation from this usual practice. Consequently, some medical ethicists criticize mandatory newborn screening as unethical:

Does newborn screening policy take appropriate account of fundamental and widely respected American values concerning confidentiality, privacy, and informed consent? The mandatory nature of newborn screening seems inconsistent with these values. The standard rationale for mandating public health measures such as mandated immunization or treatment of infectious disease is that the measure will avert serious, imminent harm to others, but this rationale does not apply to newborn screening. Instead, the justification for requiring screening without parental informed consent has been that the risk is minimal and the child will lose a vital benefit if screening is not done immediately. Even under these circumstances, not all ethicists think that omitting informed consent is acceptable. Broadening the rationale makes the omission even more questionable. If the rationale is a family benefit, such as information that can inform reproductive decisions or help avoid diagnostic odysseys, or a societal benefit, such as identifying potential research subjects for the study of currently untreatable disorders, then the ethical requirement is clear: parents should be informed and allowed to make their own decisions.

Mary Ann Baily & Thomas H. Murray, “Ethics, Evidence, and Cost in Newborn Screening,” Hastings Center Report 38, no. 3 (2008): 23-31.

Lately, political machinations at the national level have excited many people to become involved in protests and movements. This is good. But the reality is that the average citizen has far more control over state policy than over national policy. A little effort to move state policies in the direction of freedom can make a big difference. Mandatory newborn screening is a state program, so this is something we can fix. Regardless of whether you believe newborn screening is good for your own children, it should be clear that forcing others to adopt the same opinion violates individual rights and human equality.

When my wife and I decided to have a third child, we didn’t do so to provide another subject for the state or another unit in a managed population. We want our children to be free individuals, not children of the state.