Imagine you are the head of a company that loses a multi-million dollar lawsuit. Then imagine the public outcry if you announced that you were going to raise your prices to pay off the lawsuit. Would the public get incensed? Would you lose business? Likely both. It’s even somewhat likely in this litigious climate in which we live that the decision to raise prices to payoff the lawsuit would spawn yet another lawsuit against you. Ah, but we are talking business, aren’t we?
Now imagine that you are a city government and a court finds out that you’ve ripped off hundreds of thousands of your city water customers by wildly overcharging them for installing new fire hydrants. Imagine that you’ve been ordered by the courts to rebate $22 million to those city water customers. And then imagine that you announce that the rebates will be paid for by taxing the city water at an even higher rate than before.
In other words, you, the city, will be expecting the water customers to pay for their own rebates by charging them higher rates to fund that same rebate. Yes, the same “customers” that have no competition for water and no choice but to pay through the nose will be paying themselves their own rebate.
Well, then welcome to Seattle where this is precisely the case. And also welcome to a perfect example of why government is legalized theft.
Now, let’s understand exactly what a court ordered rebate, or the loss of a lawsuit is supposed to be. A rebate is the idea of refunding money to a customer fraudulently charged. The loss of a lawsuit is supposed to be a punishment.
If you as a customer are told you are getting a “rebate” but are then told that your prices are going up to pay for the “rebate” then you simply are not getting a rebate. You are paying more in to get it right back in the form of a “rebate.” This is no rebate at all.
And worse, does anyone really expect that once this faux “rebate” is “paid for” by the higher rates that the city will then lower the water bills? Or isn’t it far more likely that the rates will stay artificially high forever more?
In the world in which real people live, a lawsuit is paid by profits. Prices aren’t wildly raised to pay for a punishment. Competition would preclude such a measure, in any case. If one company raises prices to pay off a lawsuit, it would lose business to competitors that have retained the lower prices. So, the loss of a lawsuit is suitable punishment by hurting the bottom line and teaching the company a lesson against doing whatever it was that caused the lawsuit in the first place. This is the ideal situation or the way it is supposed to work.
But not if you’re government. If you’re government and you get sued no lesson need be learned at all. You’ll just force the very people who you wronged to pay for your transgressions, further wronging them.
Government is pernicious in the most pure definition of the word.
(Image credit: mylegaladvance.com)