L.A. Mansion Tax Has Yet to Pay Off

See Los Angeles Tried to Tax Mansions. Apartment Construction Tanked. Developers say the levy is making L.A.’s housing shortage worse. The city is considering changes by Paul Kiernan of The WSJ. Excerpts:

"In 2022, Los Angeles voters approved a new levy on sales of the city’s most expensive properties. Proponents dubbed it a “mansion tax.” Revenue was earmarked to help struggling renters and build low-income housing"

"Opponents of the tax—including some former supporters—said the levy is making Los Angeles’s housing shortage worse. Local and state policymakers are now considering whether to modify the tax and ease some of its complicated requirements."

"“There have been some unintended consequences,” said Miguel Santana, chief executive of the California Community Foundation, a nonprofit that supported the tax"

"The tax makes no distinction between a Bel-Air mansion and a market-rate apartment building. So far, 61% of its revenue has come from single-family home sales, city data shows. The rest has come from commercial, multifamily, vacant and mixed-use properties."

"The levy claims 4% of the gross value of most property sales starting at $5.3 million and then jumps to 5.5% for sales at or above $10.6 million."

"Because the property-sales tax applies whether or not a project is profitable, developers said it has led their investors and lenders to bypass Los Angeles projects."

"The city issued building permits for 7,363 multifamily housing units last year, according to federal data. That was down 46% from 2022"

"Sales of multifamily-zoned parcels above the $5.3 million threshold have fallen by nearly two-thirds in the three years since the tax passed, compared with the three years before"

"A study from Harvard Business School and others estimated that the drop in sales caused by Los Angeles’s new tax will offset 80% of the money it raises by reducing property-tax revenue."

"City officials initially projected the transfer tax would bring in $600 million to $1.1 billion in annual revenue. Over three years, city figures show total collections of $1.19 billion." 

What Would Jefferson and Madison Make of Musk and Altman?

America’s Founders and Adam Smith knew better than to entrust the future to philosopher-kings

By Jason Riley. Excerpt:

"Theories about the need for a “philosopher king” or “great man” to advance society date back centuries. Intellectual figures from Plato to Machiavelli and Thomas Carlyle emphasized personal traits such as superior wisdom and exceptional moral character in choosing leaders. The idea was to find these extraordinary men, put them in charge, and align policies with their understanding of the common good. Adam Smith, by contrast, argued that free enterprise and the uncoordinated pursuit of individual self-interest would lead to better outcomes for more people. Societies should rely on market forces and voluntary exchange rather than on do-gooders.

March marked the 250th anniversary of Smith’s seminal text, “The Wealth of Nations,” published the same year as the Declaration of Independence. As we reflect on America’s milestone, it’s worth noting that the Founders shared Smith’s skepticism of philosopher-kings and the approach to choosing leaders that today’s AI poohbahs seem to have embraced.

“What the American Constitution established was not simply a particular system but a process for changing systems, practices, and leaders, together with a method of constraining whoever or whatever was ascendent at any give time,” Thomas Sowell wrote in his book on social theory, “The Quest for Cosmic Justice.” “Viewed positively, what the American revolution did was to give the common man a voice, a veto, elbow room and a refuge from the rampaging presumptions of his ‘betters.’ ”" 

Think $6 Gas Is Bad? It’s About to Get Even Worse in California

Golden State depends more on crude-oil shipments from Middle East than any other U.S. state

By Collin Eaton of The WSJ. Excerpts:

"U.S. drillers have fled the state and dozens of refineries have closed since the mid-1980s, forcing California to import 75% of the oil it consumes. Almost one-third of that comes from the Middle East"

"The energy crunch in California is worsening by the day. Gasoline prices averaged $6.16 a gallon Friday, the highest in the U.S. and about $1.61 above the national average. Diesel cost $7.48 a gallon, about $1.82 over the U.S. average."

"two of the state’s major refineries closed in the past six months, cutting off almost one-fifth of its fuel-making capacity."

"In mid-March, the Trump administration issued a 60-day waiver of the Jones Act, a rule put in place by then-President Woodrow Wilson in 1920 that prohibits foreign vessels from carrying goods between American ports. The waiver allows companies to ship oil and fuel to California on bigger tankers"

"The Trump administration also used the Defense Production Act, a Cold War-era law allowing presidents to speed up the flow of goods in emergencies, to allow oil producer Sable Offshore to restart an offshore pipeline. California regulators had kept the pipeline closed following a 2015 oil spill that fouled the coastline. It is now pumping 50,000 barrels a day of crude into the state." 

The Panic Industry’s New Target

A generation coached to fear climate change is now fretting over AI and data centers

By Barton Swaim. Excerpts:

"Where does Mr. Schmidt think young people got the idea that “the climate is breaking”? Where did the “fear” he laments come from? In part from the scores of climate-panic groups to which the Schmidt Family Foundation’s 11th Hour Project has granted hundreds of millions of dollars over the last 20 years. One detail particularly amuses: When 11th Hour first appeared, in 2006, it funded screenings of Al Gore’s “An Inconvenient Truth,” a documentary designed to terrorize viewers with 90 minutes of bleak prophecies, now happily exploded. The outfit, like scores of others founded and funded by other progressive billionaires, spends its resources opposing fossil-based energy and trumpeting the dangers of a warming world."

"Last year Bill Gates posted an essay on his website purporting to scold alarmists and express his own moderate view of the climate question, namely that it is a “very important problem” but doesn’t doom civilization. You have to wonder, then, why Mr. Gates has sent so much of his money to Arabella Advisors. Arabella, a pass-through entity now called Sunflower Services, funds a dizzying array of groups that exist to alarm the public over an imminent climate apocalypse and to portray carbon-emitting energy as an existential threat to humanity."

"nobody staffing the multibillion-dollar ganglion of climate nonprofits and activist groups plans on taking a more measured view of the coming cataclysm."

"modern data centers first appeared in the 1990s, when companies learned the benefits of fast internet connectivity and information storage."

"the people showing up at county council meetings to protest the construction of a data center . . . got their talking points from national nonprofits supported by some of the same moneyed outfits the Schmidt and Gates foundations spent the last two decades bankrolling." 

Who Is Benefiting From the 340B Program?

States should stop bolstering a broken program, and Congress must close the loopholes that continue to harm patients

WSJ editorial. 

"Your editorial (“The Great 340B Healthcare Grift,” May 8) is exactly right. 340B drug discounts are fattening the coffers of large hospitals and pharmacies at the expense of patients—and it’s a scandal. The judge correctly called it a “coordinated collusion” that’s exploiting “Congress’s inattention to a federal program.”

A growing wealth of data show that profits are soaring for so-called charity-care hospitals, and that 340B hospitals with the highest share of cancer patients pursue aggressive medical-debt collection tactics against those the program was created to support. Yet state lawmakers continue to propose and pass reforms at the behest of hospitals to protect this unintended windfall.

Anyone who lives in a city with a significant hospital presence has likely noticed the steady expansion of hospital names and buildings—often concentrated in affluent communities rather than areas with large numbers of uninsured or low-income patients. States should stop bolstering a broken program, and Congress must bring transparency to 340B to close the loopholes that continue to harm patients.

Sally Greenberg

CEO, National Consumers League" 

The California Grift Goes On

Eighty percent of improper Medicaid payments nationwide reflect failures of eligibility, not bad-actor providers

Letter to The WSJ. 

"The California fraud story is even worse than your editorial points out (“The Great California Medicaid Grift,” May 16). The story’s central theme is that state leaders don’t care about fraud.

According to my organization’s freedom of information requests, California’s Department of Health Care Services referred only 127 Medicaid providers for fraud investigation between January and March. Yet CBS News found 89 hospice providers at a single address, 75 of which have racked up a combined 400 violations since 2021. The federal government has also suspended 800 hospice providers in the state this year. Is California even looking for fraud?

The real fraud story is that 80% of improper Medicaid payments nationwide reflect failures of eligibility, not bad-actor providers. California contributes to this crisis by letting people self-attest to key aspects of their eligibility, which is to say, it tolerates lying. The Trump administration should get California to start caring about fraud—to say nothing of every other state.

Hayden Dublois

Foundation for Government Accountability" 

America’s IPO Mini-Boom

Too bad SpaceX and others didn’t go public sooner, but they are a tribute to the U.S. capitalist system

WSJ editorial. Excerpts:

"Companies are staying private longer because of the 2002 Sarbanes-Oxley Act’s burdensome regulations, shareholder litigation and abundant financing available in private markets. The number of public companies has shrunk by half in three decades.

This means ordinary Americans who invest in the stock market, either directly or through retirement accounts, are sharing less in America’s wealth creation."

"One reason the U.S. boasts the world’s most valuable companies and promising startups is because the government doesn’t seek to punish success—or handcuff entrepreneurs with regulation as the Europeans do. China boasts enormous human capital, but Beijing’s financial markets are stunted by the desire for political control."