In Defense of the Christmas Tree Tax that Isn't a Tax at All

(Photo: Lynn Friedman)

Millions of Christmas trees will be hauled away this week — some will enjoy a useful life after death and many others will end up in the dumps. But record numbers of Christmas trees will also be boxed up and stored in closets till next year. And that has many Christmas tree growers feeling in the dumps, ever more so after anti-tax crusaders trashed a plan to rescue their declining industry by labeling it “Obama’s Christmas Tree Tax.”

The $0.15 fee on the sale of fresh Christmas trees hardly seems like the stuff of political scandal. But announced in November—just days before many Americans would make the trip to tree farms in search of the perfect tree—and branded by conservatives as an assault on Christmas and a sign of government overreach, the story quickly gained traction, with the Drudge Report driving nearly a million visitors to the Heritage Foundation, which broke the story. Before long, mainstream news outlets were reporting that the administration had caved to conservative backlash and decided to delay the “Christmas tree tax” indefinitely.

Regrettably, while the Heritage Foundation is taking a victory lap, many agricultural economists are shaking their heads. They know that, far from a conventional tax, the proposed tree fee would be one among dozens of similar programs grounded in economics and shown through numerous studies to bolster domestic farmers’ incomes. Several such campaigns have entered the pop culture lexicon with phrases that are instantly familiar to consumers, like “Got Milk,” “Beef. It’s What’s for Dinner,” “Pork, the Other White Meat,” and “Happy Cows Come from California.”

All of these programs are voted in by the respective growers, themselves — often a supermajority of them, in fact — and funded by assessments on themselves. The programs are also subject to periodic renewal by these same growers, and are almost always voted back into effect with overwhelming support.

Despite sunny assurances from the Heritage Foundation that “the American Christmas Tree has a great image that doesn’t need any help from the government,” Christmas tree growers have been losing market share in recent years to factories in China that mass-produce trees made of metal and plastic. The L.A. Times reported during the week of Christmas that the domestic live-tree industry has “declined sharply” as “wrenching changes have reshaped the $1.5-billion-a-year industry.” Artificial tree sales have doubled to 17.4 million from 2003 to 2007. It was precisely this problem that the Christmas Tree Marketing Board was supposed to fix, supported by about $2 million in revenue from the tree fee.

Agricultural commodity marketing boards are designed to resolve market failures that result in farm commodities being under-promoted relative to products from other more highly concentrated sectors of the economy wherein firms can appreciably affect demand for their products with individual promotional efforts. Generic commodity marketing suffers from a classic free rider problem. An individual Christmas tree grower could reap benefits from his investment in promoting live Christmas trees only in proportion to his market share, which, is naturally near zero for most of the family operations. Other growers would also reap the benefits of his investment according to their market shares and yet incur none of the costs. Why, then, would any grower undertake marketing on his own?

Heritage notes that, in the past, voluntary Christmas tree marketing programs collapsed after three years, as increasing numbers of growers declined to make contributions and funds dried up. But whereas Heritage suggests past failures as a reason to oppose the new fee, they, in fact, highlight the perniciousness of the free rider problem and the need for compulsory grower support to ensure success. And don’t forget, the Christmas tree fee only survives if it garners support from a majority of Christmas tree growers.

The question now is whether mom-and-pop Christmas tree operations will survive the threat imposed by imported, fabricated imposters that, while short on tradition and ceremony, offer convenience: no tree sap, no pine needles, and no saws. Virtually every grower-approved check-off, as the fees are called, has been approved by the USDA, which administers the programs but has never in recent history deviated from default approval because of political exigencies. And though the check-offs have been challenged in court as a form of compulsory speech, the U.S. Supreme Court has affirmed their constitutionality, even its conservative members.

Heritage is right about one thing, though. As with a tax, a portion of the grower-assessed fee, which equates to roughly 0.4% of the price of a typical tree, will be passed on to consumers according to the price responsiveness of Christmas tree demand. But that is about where the similarities end. Unlike a tax, the fee won’t raise a dime for Uncle Sam.

One can imagine an intelligent debate on the merits of commodity check-offs, in general, and the Christmas tree one, in particular. But after the alarmist rhetoric from the anti-tax right, we are, regrettably, left only to imagine.


Yeah, I've found this to be a fascinating issue as well. Regardless of the merits of artificial trees vs natural, there are many interesting issues here.

First off, is the issue that the rise in the sales of artificial trees is of course closely tied to the falling price of artificial trees due to Chinese production. So, at the outset what we have here is an issue of domestic American small farmers fighting against Chinese imports, and the "conservatives" have taken the side of the Chinese!

Now I'm not a nationalist or even a patriot, but I find the position of the conservatives to be quite ironic. Here they are attacking an industry that's as American as American can get and effectively taking the most "un-American" side possible.

In addition however, what's really instructive about this issue is what you address here, which fundamentally is why this type of program makes sense and why these types of programs are used. The problem for radical libertarian types, however, (I really can't call these people "conservative", since radical "free-marketism" is really anything but conservative, its really radically liberal in the true sense of the word) is that acknowledging the merits of the Christmas tree marketing program (from the economic perspective of the farmers) fundamentally undercuts the very core of free-market ideology.

Its a clear example of how and why collective action is sometimes not only needed, but economically beneficial directly to the individuals and how market theory itself shows that individual actions aren't optimal.

This is what kills libertarians. They constantly complain about free-riders, accusing the recipients of tax dollars of being free-riders, but the fact is that without compulsory taxation for certain types of things, first off everyone who didn't pay but still benefited would be a free-rider, and of course as a result, just as happened with the Christmas tree marketing issue, the entire system would breakdown and no one would pay to do anything because anyone who payed for the benefit would be "selected against" by the free-riders, who wouldn't have to pay but would still get the same benefits, thus getting a market advantage and running those that pay out of business, then eliminating the benefit, or basically everyone will just stop paying due to the anticipation of this effect. This is WHY we have to have compulsory system, to PREVENT free-riders.

I've never been sure if libertarians just don't understand this, or they understand it and they secretly all just want to be free-riders.



This is horribly confused, but this is fairly typical of someone trying to diagnose confusion because they don't understand how the other side approaches issues. Libertarians oppose enforced taxation for something as trivial as advertising. The inability of the tree-sellers in the US to form an industry group responsible for large-scale advertising (for, strangely enough, a rather localized market) does not mean the FDA should be responsible for advertising for a sector.

Think about what it means if you declare "insufficient advertising" a "market failure". In all seriousness... where does it stop?


sorry "USDA"... should be more careful when I'm reading Lowe's blog and this one at the same time.


The question I'm left with is: At a policy level, why does the government even want to promote real trees? If people prefer artificial trees, why does the government care? Sure, most artificial trees are made in China instead of the US, but they are sold, a at markup, by local shops, providing jobs and tax revenue to the USA.


The government cares because the government represents people. This is not an example of central planning by the government; it is exactly the opposite. Tree growers have a collective interest to sell more trees, so they lobby their representatives and viola! Fake tree producers can do (and probably have) the same thing. That we are hearing about one is not evidence that the other doesn't exist. Public policy is produced in a marketplace of ideas where groups compete for a spot on the public agenda-- "tree taxes" are part and parcel of the political system just as much as when the Heritage Foundation manipulates the story to support their narrative of government run amuck.


Growers are free to organize an advocacy group on their own. Couldn't it simply be that this particular industry has decided they don't want to pay for an advocacy group?

Even if one would have been beneficial, why would it be the government's responsibility to impose, collect, and use the tax?

Mike B

Because standard advocacy groups don't have any legal force to collect money from independent growers. What part of tragedy of the commons don't you understand? It wouldn't be a tragedy if people were naturally inclined to act in their communal best interest. In a situation where no single grower wants to be a sucker and pay dues into an organization his competition can free ride on, coordinated government action may be the only mechanism that allows a super-majority of growers to get the action they want.


This ignores a third large (at least hereabouts) source of Yule trees, which is that you go out in the woods - either your own or a friend's land, or the National Forest (having of course purchased a permit from the Forest Service) - and cut one.


Disparate thoughts:

I don't mean to be dense and I've read this twice but where does the 0.15% tax become an industry promotion campaign?

Where I live, Xmas tree farms are run by a lot of mom and pop operations and in some cases help keep land in ag that would otherwise have a McMansion plopped on it.

Secondly....wait for this a tax on Christians? Would we levy a tax just on Mennorahs? Those Buddhists, Jews and followers of Zeus and Apollo are skating on this one.

Personally, I think all federal nickel and dime taxes ought to be abolished, removing billions in paperwork and government regulation on business, and everyone should have to pay these taxes weekly in cash at their local tax office. We'd see how fast everyone would become small government libertarian Repbulicans then!


There is a free-rider issue.

On the other side of the coin is the forced-rider problem. Some of the so called free-riders don't want the association to be created. That is, they don't want to be free-riders or forced-riders.

This also assumes that a Christmas tree (are they allowed to call it that when the government steps in) is a commodity but there are many types ...

Mike B

The way to deconflict a free-rider problem and a forced rider problem is a little thing called majority decision making. Your right to be left alone doesn't necessarily trump someone else's right not to have their business go under.

Bill Harshaw

The question is whether it's right for the state to devolve a bit of its power to an association of tree growers (or citrus growers or cotton producers, etc.), the power to convert a vote of the growers into a mandatory fee. Of course, the state devolves a bit of its power whenever it requires lawyers to pass the bar exam, or hairdressers to be licensed, or whatever. In each case an economic group is trying to secure larger incomes by enforcement of some mandatory rule. A thorough-going libertarian should reject all such state licensing requirements: let anyone be a doctor by hanging out his shingle.

Nir Kozlovsky

I think we have here a very intersting subject for the Freakonomics team to look at:
The effect of technology on religious rituals in Israel.
When I was a chuld, in the early 70's, the kids in the neighberhood used to build their own sukkah. A few weeks before the weeklong holiday, we began looking for materials, and once collected, the challenge of contructing the sukkah. Once accomplished, we spent most of the holiday in and around it. And we still remember the spirit 40 years later ("see this school, we borrowed timber for the sukkah from it").
But then came the mechanical sukkah, gloriously named "sukkah forever". 10 minutes and it is ready. No hassle, no efforts. And for the kids, taking the fun out of the holiday. The outcome, the sukkah is out. My kids never built a sukkah never enjoyed it, and the holiday spirit is gone!.
Will the Christmas tree go the same way. Will the fabricated imposters kill the holiday spirit?



a tax to protect domestic production while discourage foreign compensation? Thought I stumbled upon a far left blog here.

When did it become the gov't job to decide what tree I buy? More over if this was indeed a tax that domestic tree producers wanted to levy on themselves, why does the gov't have to set in and do it for them? Individuals could just raise the price themselves, and donate to the non profit (ie dairy producers).

Come on Freakonomics


whoops, did not mean to submit already

"The question now is whether mom-and-pop Christmas tree operations will survive the threat imposed by imported, fabricated imposters that, while short on tradition and ceremony, offer convenience"

No the question is, is it the govts job to decide if mom-and-pop tree operators should survive. Next will you suggest a tax on shopping at Home Depot to protect less efficient (and typically better imo) local hardware stores?