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TheStreet Open House

Besides Tesla, What Other Products Will New Jersey Ban?

NEW YORK (TheStreet) -- If New Jersey is to be consistent and ban Tesla  (TSLA) from selling products directly to the consumer, the legislature had better get busy. Yesterday the N.J. Motor Vehicle Commission voted to ban the electric car maker from directly selling its automobiles to the public in the state. The list of products being sold direct is long indeed.

Take for example Apple  (AAPL) and Microsoft (MSFT). Both have stores where they sell a long list of Apple and Microsoft products directly to the consumer. Would New Jersey be better if Apple and Microsoft couldn't have their own stores?

Let's say that Google  (GOOG) wanted to open stores to compete with Apple and Microsoft. Would New Jersey seek to ban this attempt?

What about cellular communications services such as those offered by AT&T (T), Verizon (VZ), Sprint  (S) and T-Mobile USA (TMUS)? They are currently sold by a maze of resellers, large diversified stores, online outlets and the cellular network companies themselves, directly. Should their direct sales be banned?

Every New Jersey voter knows at least two things:

1. Computer stores were always a major nightmare before the advent of Apple stores starting in 2001.

2. Car dealers remain a major shopping and service nightmare for the consumer today. Meanwhile, people love buying from Tesla directly.

Computer companies and cellular network operators have two things in common: They sell directly to the consumer, as well as through resellers. The customer can choose. Has this retarded growth in the computer and smartphone industries, or has it been a good thing for the consumer?

Every free-market economist over the decades and centuries had pointed out that existing businesses always try to prevent the establishment of new competitors. Old computer shops and cell phone retailers also didn't like that Apple, Microsoft, AT&T and Verizon opened stores to sell directly to the consumer.

Yet, the consumer is now better off because of allowing diversity in the supply of these products. We always make fun of crazy laws in other countries, that prevent their people from enjoy a higher standard of living. From high taxes to laws restricting store opening hours, consumers in some countries are impoverished compared to us Americans.

It's not as if Tesla and other electric cars have not been receiving significant government support in New Jersey. Electric cars are exempt from New Jersey 7% sales tax. On a $100,000 car, which is close to Tesla's average sales price, you can figure out how significant this is.

I am not only a complainer, however. I propose actual solutions. In this case, I have the solution for how to create a rational automotive market -- in New Jersey and elsewhere.

The solution I am proposing is an exchange: Car companies will be allowed to sell their cars in any manner they please, in exchange for an end to all subsidies.

My solution would create diversity and fairness. You could choose to buy a car directly from the automaker, or through some sort of dealer or any other distribution system that someone might invent. In other words, just like in other industries and for other products.

In addition, you would no longer have neighbors looking at each other with envy and resentment. One person will no longer be subsidizing his neighbor's car purchase to the tune of $7,000 or so.

N.J. Governor Chris Christie could go from free-market villain to free-market hero by switching his two automotive policies from:

1. Prohibiting diversity in car sales distribution.

2. Exempting certain cars from sales tax.

To:

1. Allowing cars to be sold like other products in society.

2. Subjecting all cars to the same sales tax. Subjecting all cars to the same sales tax does not necessarily mean that everyone should be taxed at 7%. It could just as well be 0% for all cars.

You may ask, how could you make it 0% sales tax for all cars in New Jersey? How would you pay for this revenue shortfall for the government? The answer to this question is easy: Fire the bureaucrats, and eliminate their budgets.

New Jersey, like other states, has all too many bureaucrats who sit behind a computer for a few hours almost every week, not doing anything but causing red tape obstacles and general grief for the citizens. This reduces economic growth and employment. By firing these bureaucrats and eliminating their associated budgets, New Jersey's government budget would afford a 0% sales tax on cars.

In any case, by keeping the existing N.J. auto sales tax at a level greater than zero, but making it the same for all kinds of cars would create a level playing field among all kinds of cars and car companies. That alone should make for the one half of the bargain to reform the auto retail industry into something that is exposed to free market forces.

This is a significant opportunity for Christie. Already significantly behind Kentucky Senator Rand Paul and Texas Senator Ted Cruz in the Republican primary polls for the 2016 presidential race, he needs to beef up his free-market credentials. Supporting a mercantilist maze of subsidies and restrictions on selling products, makes Christie more like Fidel Castro than someone who could audition for Republican support in 2016.

Come to think of it, the New Jersey automobile policies of subsidies and red tape look a lot like Obamacare. Think of it: Obamacare for cars! That is not the label Christie needs, if he has any intention of running for office outside of New Jersey. At least not on a Republican ticket.

But perhaps Christie will be seeing the Democrat Party's nomination in 2016? If so, his policies of automobile subsidies and red tape make perfect sense. Obamacare for cars!

At the time of publication the author was long GOOG and AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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