Are 4th of July Parades Wasteful Government Spending?

Stan Collender

I posted back in April about how some businesses in Colorado were doing the equivalent of voluntarily paying additional taxes when the sequester spending cuts forced Yellowstone National Park not to do its customary spring snow removal on park roads. Waiting for the snow to melt rather than plowing it off the roads threatened to reduce the number of visitors to the areas surrounding the park and, therefore, the amount of business the very tourist-heavy stores, restaurants, hotels, etc. would do.

To deal with this, many in the business community decided to pay for the snow removal themselves. As I said in my post, this was the equivalent of an increase in taxes. There was no increase in service and no reduction in the amount these businesses paid to the federal government, they just an additional amount to a different entity — the snow removal services.

Lydia DePillis reported much the same thing in The Washington Post this past weekend when she wrote about how businesses and some individuals were paying for the 4th of July celebrations — especially parades — that previously had been provided by local governments. In some cases the reduced local government spending was the result of the recession. In other cases it was the result of the sequester reducing federal aid to state and local governments.

Either way, federal spending cuts led some businesses and communities to directly sponsor the Independence Day events by writing checks or contributing to foundations that then paid for them. In both cases the payments were in addition to state, local and federal taxes that were not reduced to go along with the reduced services. They therefore qualify as the equivalent of a voluntary increase in taxes.

There are two ironies to this situation.

First, it demonstrates quite conclusively that some government services that many might classify as frivolous, wasteful or simply unnecessary — like parades, fireworks and military bands — are actually very, very popular and will always be hard to eliminate.

Second, the companies and individuals that contributed to qualified nonprofit foundations to pay for the parades and fireworks may have gotten a tax deduction for doing so. That means that, in spite of the effort to reduce costs and the deficit, the events may have cost federal, state and local governments anyway through reduced revenues.

Originally posted at Capital Gains and Games.

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