May 20th, 2005

Brad @ Burning Man

Poor people are tax cheats

I was riding with someone the other day. There used to be a McDonald's slightly closer to me, but it (and one on the far side of it) both closed down a while back in favor of a new store on the Wal-Mart parking lot between the two locations. Well, the nearer McDonald's lot wasn't empty for, what, maybe a couple of months and already the building's been torn down, and new construction is under way. You wouldn't think that this was that remarkable ... except that it's in a not especially desirable location, in a lower-working-class neighborhood, with some of the worse crime stats in north county. But what really baffled the person I was riding with was that they were building an auto parts place. What's so baffling about an auto parts place in a poor neighborhood? By itself, nothing -- except that there's already an Advance Auto Parts on the same parking lot, and an Auto Zone only a few blocks away. And in fact, I did a Yahoo Yellow Pages search and I see that there are already a total of ten auto parts places within a one mile radius of that parking lot. So what baffled the person I was riding with was, what in the heck did the neighborhood need another auto parts place for?

I wasn't baffled at all, even though it's not my own neighborhood. I glanced around at the architecture, read a few class signifiers from the neighborhood, consulted my mental map of the area statistics from my last search for an apartment, and the answer was obvious. And when I tell you that answer, you'll have another anecdote that relates to an interesting political debate that recurs from time to time in America.

Behind the parking lot in question is a large, decent, and inexpensive apartment complex of 2 to 4 bedroom townhomes, designed and marketed primarily at working class families with young children. Across the street is a residential sidestreet of small, older houses on small lots, the kind of development that was built as "starter houses" in the years immediately after World War II. Surrounding the neighborhood are an awful lot of the depressing businesses that mark a neighborhood on a downhill slide; every other address that isn't an auto parts place is a "check cashing," "title loan," or "payday loan" legal loan-sharking place. And every other block has from one to three grocery stores decorated in red, white, and green with prominent signage in Spanish offering to wire money back to anywhere in Latin America for cheap. Given that, you won't be surprised that according to the census data, that particular city in the metro area is absorbing nearly all of the metro area's illegal alien population. (Judging by what I've seen when I've been up there, I'd guess that they're moving there to be within convenient bus travel of the airport hotels whose cleaning crews use a lot of illegal immigrant labor.)

So OK, it's a former working-class-white neighborhood, mixed light industrial and medium-density residential, that's steadily being taken over by illegal immigrants from Mexico. What does that have to do with auto parts? Well, both working class whites and poor Mexicans have a strong cultural tradition of what, in my neighborhood, used to be called "shade-tree mechanics." Sure, when your car breaks down, you could take it to an actual licensed auto mechanic. But it's cheaper to trade favors and cash with some guy down the street who works on cars "in his spare time" but who often seems to have no other means of support, and an awful lot of "parts cars" up on blocks on the property. Recently, I've been reading in the news about a growing trend in America of the shade-tree mechanics moving from the shade of their trees (where they were attracting complaints from nearby residents who didn't want an industrial business next door to their houses) to the parking lots of ... yes, that's right, auto parts places.

Depending on where you are in the country, the police tolerate this with varying degrees of openness. (The City of St. Louis just cleaned out and evicted a nest of such gray-market businesses less than a year ago, because they got too blatant.) The way it works is that shade-tree mechanics just sort of hang out (with an entire pickup truck full of tools) on the parking lots of cooperating auto parts places, or at least places that look the other way. You pull in, they offer to fix your car for about half what a mechanic would ask. They send you in to the parts place to buy the parts yourself; you bring them out, they wrench them onto your car. Not infrequently, I'm told that the auto parts places pay kickbacks in the form of "referral commissions."

And if you don't think it through, it's hard to criticize this arrangement. It's just the latest in a long series of informal business arrangements by which poor people start businesses and work hard to improve their lives and save up money for their kids' education. Similarly, there are a lot of people who "babysit for occasional money" who are for all practical purposes running unlicensed daycare centers. There are, and always have been, people who sew or mend or wash clothes for people in the neighborhood for a tiny percentage of what a seamstress, tailor, or bulk laundromat would charge. Heck, "taking in each other's laundry" is a cliché example of such a business going back over a hundred years. Or they clean houses for their slightly-better off friends or through referrals, for a fraction of what a bonded house-cleaning service charges.

And there are conservative Democrats and pro-business Republicans who get really, really aggravated about this. Not that they don't take advantage of such businesses themselves from time to time, especially the unlicensed daycare and unbonded, unlicensed housecleaning services. But you can't have a discussion of tax policy in America without some Republican getting up and pounding the podium about how poor people are a bunch of tax cheats, and here's why.

If you want to legally open an auto repair shop, or a daycare center, or a laundromat, or a dry cleaning service, or a housecleaning service, it's going to cost you a bundle of money, and an awful lot of that money is in the form of taxes. There are business licenses to apply for, and pay for. There are quarterly self-employment or corporate estimated tax payments to make. There are sales tax deposits, pre-payments to put up. All of the business examples I listed above also require specialized state licenses, and require that companies post a surety bond to the tune of thousands of dollars to protect customers who might get stolen from or otherwise damaged by you or your employees. Then there's various forms of insurance, from the mandatory (workman's compensation) to the effectively mandatory (liability insurance). Fifteen cents of every dollar of income that comes in is supposed go right back out the door, immediately, to the Social Security Administration. Medium-sized and big businesses pay these taxes and pay these costs because there's no way to get out of them.

Conservative Democrats jump on this bandwagon because those informal business arrangements also evade an awful lot of environmental and consumer-protection law. Is your shade-tree mechanic disposing of used motor oil in a legal and environmentally friendly way? Maybe more so now that most auto parts places collect it, but that doesn't stop them from being a source of other pollutants. Did that unlicensed day care center comply with fire codes, obtain a safety inspection, and background check its workers? Does your neighborhood woman who does laundry keep Material Safety Data Sheets on all the materials she handles, and does the local fire protection district know that those chemicals are there? Given how many solvents the informal housecleaner uses, and the even larger number of household toxic wastes that they might need to clean up, have they undergone legally mandatory safety training in their safe use and disposal? As if.

But the cops and inspectors and tax auditors usually can not be bothered, except very rarely when things get totally blatant, to enforce these laws on poor people. It's terrible public relations to kick people who are already down. It's the American way to admire, and not want to put burdens on, someone who's working that hard to drag their family up out of poverty. But in a sense, this is just as much a form of "corruption" as it was when the public regulators looked the other way while Enron looted half the population of California, and when the SEC turned a blind eye while they cheated all of their investors out of their share of that stolen money. If it's evil to ignore the law when wealthy people break it, why is it less evil to ignore poor people when they break the very same laws? To a conservative, whether Republican or Democrat, the only reason to excuse poor scofflaws while publicly crucifying a Michael Milken or a Ken Lay or a Martha Stewart is just plain old fashioned un-American class warfare.

Any actual sympathy for the poor workers or their working class customers who just plain cannot afford to comply with the law is optional.