By THE ASSOCIATED PRESS AUG. 20, 2014
By THE ASSOCIATED PRESS AUG. 20, 2014
Posted on August 23, 2014 at 02:27 PM in common good, commons, cui bono?, Earth for All, economic rent, financing services, government's role, land includes, land monopoly capitalism, Natural Public Revenue, natural resource revenues, natural resources, privatization, windfalls | Permalink | Comments (0)
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I posted this comment elsewhere, and thought it worth sharing here:
I've not read far into the book yet -- and it is available online as a PDF file -- but by the time I was into the first chapter, it was clear that Dr. Piketty's economic education, extensive as it might be, entirely omitted the ideas of the classical economists who described a 3-factor economy: land, labor and capital. Piketty, like nearly everyone educated in economics in the past 40 to 80 years, writes as if there were only two factors -- labor and capital -- treating land as if it were a mere subset of capital, with no reason to recognize it as differentiated.
Land -- not only urban sites, but also the other things the classical economists would recognize as Land, such as water rights, oil, electromagnetic spectrum (our airwaves which we all say belong to the American people, but which are in reality owned by corporations), landing rights at busy landlocked airports, geosynchronous orbits, urban street parking, the value of dozens of other non-renewable natural resources -- is completely different in character from that which is created by labor. To fail to recognize that difference lies at the bottom of our inequality problem.
That which individuals and corporations produce is rightly individual property. That which the community and nature produce is rightly common property, belonging to all of us. Conflating Capital and Land leads us to permit the privatization of that which is rightly our common treasure.
You might be interested to know that the Landlord Game, invented by 1902, was intended to teach this concept. You have probably played Monopoly, which was based on this game, played with very different rules.
Explore the ideas of Henry George. Between 1885 and 1900 or so, everyone knew the name and many well understood his ideas. You might start with "Social Problems" or the more analytical "Progress and Poverty," or his speeches, "The Crime of Poverty," "Thou Shalt Not Steal," among others, online at http://www.wealthandwant.com. See also http://lvtfan.typepad.com.
Dr. Piketty and others whose education in economics has omitted George's ideas should not be treated as experts; they've mixed apples and oranges and not noticed that what they've created impoverishes the vast majority of us -- and enriches a few. (Parenthetically, consider who donates heavily to our universities.)
Posted on August 08, 2014 at 10:31 PM in a wedge driven through society, capital gains are land gains, classical economists, Earth for All, ecosystem services, fixing the economy, Henry George, income concentration, inherited wealth, land different from capital, land value created by community, land, labor and capital, location, location, location, make land common property, Monopoly and The Landlord's Game, Monopoly and The Landlord's Game , one solution for many problems, Piketty, privatization, Progress and Poverty, reaping what others sow, rich people's useful idiots, socializing risk and privatizing profit, special interests, trickle-down economics, urban land value, wealth distribution or concentration | Permalink | Comments (1)
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I was listening to Bob Edwards interview Ralph Nader, on the occasion of the latter's publication of a new book, and Nader was talking about things the left and the right might be able to agree on. I was in traffic, and only half listening, but when Nader spoke of corporate subsidies, it hit me that one of the biggest corporate subsidies, and one which the average person isn't at all conscious of, is the unearned increment, the possession of unearned wealth.
It isn't that some individuals don't get to collect some, too -- particularly those who own land (with or without a building on it) in or near the major coastal cities, but the lion's share goes to corporations, and their shareholders, who tend to be the 1%.
For more about the unearned increment, start here.
"Our plan involves the imposition of no new tax, since we already tax land values in taxing real estate. To carry it out we have only to abolish all taxes save the tax on real estate, and abolish all of that which now falls on buildings or improvements, leaving only that part of it which now falls on the value of the bare land, increasing that so as to take as nearly as may be the whole of economic rent, or what is sometimes styled the "unearned increment of land values."
Can we get the leaders of the left and right to look at this, or are they owned by the corporations?
Better Insurance Against Inequality
APRIL 12, 2014
Economic View By ROBERT J. SHILLER
Paying taxes is rarely pleasant, but as April 15 approaches it’s worth remembering that our tax system is a progressive one and serves a little-noticed but crucial purpose: It mitigates some of the worst consequences of income inequality.
If any of us, as individuals, are unfortunate enough to have income drop significantly, the tax on that income will plummet as well — and a direct payment, or negative tax, might even be received from the government, thanks to the earned-income tax credit. In this way, the tax system can be viewed as a colossal insurance system, guarding against extreme income inequality. There are similar provisions in other countries.
But it’s also clear that while income inequality would be much worse without our current tax system, what we have isn’t nearly enough. It’s time — past time, actually — to tweak the system so that it can respond effectively if income inequality becomes more extreme."Respond effectively if"???
"There are a thousand hacking at the branches of evil to one who is striking at the root."
DCJ doesn't say it explicitly, but in general, it is mostly people in and near the major coastal cities (mostly the blue congressional districts) which reap the benefits. But he -- rightly -- comes close to pointing out that the benefits flow not to buyers of such homes, but to the sellers.
Imagine you make $50,000 to $75,000. Statistically you would save $75 a month in federal income taxes if you bought a house, the congressional study shows. Now which option would you prefer?
• Pay $300,000 for your house, the median for Sacramento in late 2013, and save $900 annually on your federal income tax by deducting the mortgage interest?
• Pay $200,000 for your house, but without being able to deduct your mortgage interest?
Assuming you borrowed the entire purchase price at 4 percent interest the initial mortgage interest savings would be $4,000 per year. Not only would you have more than $250 more cash in your pocket each month, you would have a much smaller debt to pay off. Of course, if you own that home, this is not such a good deal, which is why Camp proposes to phase in his modest change over several years, a change that would only affect new mortgages of more than $500,000.
Which brings me to a larger point. Suppose that, instead of paying $300,000 for your home, of which $150,000 is for the site, and $150,000 is for the home itself, under the tax design this blog proposes, you would pay the seller the $150,000 for the depreciated home and then pay your community approximately 5% of the $150,000 selling price of the site each year -- and that would be INSTEAD of paying income or sales taxes, and there would be no tax on the value of the building.
The downside? None of us would be treating our home as an "investment" or a "savings account" or an ATM machine. Offset that with the many benefits, including the reduction or elimination of the land-based ~17 year boom-bust cycle we are currently stuck with.
(In Bermuda, as I understand it, when young couples buy a home, both work two jobs for a few years to pay off the mortgage, and then live mortgage-free thereafter.)
Posted on March 16, 2014 at 03:39 PM in boom-bust cycles, bubble, buildings depreciate, capital gains are land gains, cost of living, economic rent, financing services, FIRE sector, free land, home equity, income tax, land appreciates buildings depreciate, land share of real estate value, land value created by community, land value taxation, make land common property, Natural Public Revenue, one solution for many problems, paycheck to paycheck, savings rate, untaxing buildings, untaxing production | Permalink | Comments (0)
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LibriVox recording of Progress and Poverty, by Henry George. Read by Tim Makarios.If you'd like to listen to the unabridged Progress and Poverty, you might like this webpage. You can download MP3 versions of P&P. So far, over 2,000 downloads have occurred.
Beating an Elephant With a Feather By Steve Hyle | Feb 12, 2014
LEWES, DE — Ever notice how many times we read or hear about the Demopublicans "Slamming " Obama for his latest blatant attack on the Constitution? I guess they're too stupid to realize that "slamming" Obama has about as much effect as beating an elephant with a feather. So they're really not serious in their sanctimonious outrage. They conveniently forget that they too took an oath to protect the Constitution which reads as follows:
The Congressional Oath of Office: I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.
The key words are "support and defend the Constitution of the United States against all enemies, foreign and domestic." Therefore, I contend that the Demopublicans, on a daily basis, fail to honor their oath and are therefore derelict in their most critical duty…defending our Constitution. This applies to Members on both sides of the aisle. By their inaction, they are all complicit in the destruction of the Constitution of the United States.
It's human nature to want more, and to attempt to receive it in the easiest ways. (Henry George expressed it: "The fundamental principle of human action -- the law that is to political economy what the law of gravitation is to physics -- is that men seek to gratify their desires with the least exertion.")
But we don't have to structure our economy to allow some of us to receive significant shares of the total production of society that they didn't create, to steal from those who do produce, to privatize the value of natural resources or of that which the community as a whole creates.
It is easy to become addicted to taking for oneself that which others create. We imprison some people for it; others we permit to call themselves "self-made" men.
Asking some to share 25% with others, out of the goodness of their hearts, seems to be a very shallow substitute for restructuring the entire system.
Mr. Polk seemed to be on the right track when he raised the question, “ 'But isn’t it better for the system as a whole? I asked. The room went quiet, and my boss shot me a withering look. I remember his saying, 'I don’t have the brain capacity to think about the system as a whole. All I’m concerned with is how this affects our company.' ”
We need the brain capacity to think about the system as a whole.
I've not found any analysis of "the system as a whole" that was more relevant and descriptive than that of Henry George.
“Families born by accident, rather than design, are bad for men, bad for women and really bad for kids,” said Kathryn Edin, a poverty researcher at Harvard.
“Rising inequality and declining prospects for people at the bottom have created a situation where it doesn’t matter that much for these teenagers,” she said of the very low-income teenagers who are more likely to have a child. “It does not seem like their life prospects are going to be significantly harmed by having a child, because they’re so disadvantaged already.”
Land Value Tax Land value taxes of one form or another already exist in this country as well. Pennsylvania seems especially fond of them. Most recently, the city of Altoona, Pa., switched over to a pure land value tax, replacing the more conventional property tax it used to levy. The proposal to levy a land value tax should be the most non-controversial on the list. Municipalities already tax land value to some degree because property taxes are levied against land value as well as the buildings that sit on top of the land. Obviously it is not absurdly impossible to change from assessing taxes on land plus buildings to assessing taxes on just land.
Implementing this tax has some normative appeal insofar as nobody makes land and so taxing its value does not run afoul of any notion that people should not be deprived of the product of their labor. But more than that, most arguments for the land tax center around its ability to encourage economic production and growth. Taxing land allows you to reduce taxes on things like the construction of buildings (subjected to property taxes), work (subjected to income taxes) and investment (subjected to capital gains taxes). If conservatives believe their own arguments about how devastating to growth such taxes are, switching to a land value tax should be a huge priority for them.
As with the UBI, this proposal has also scored substantial support from those on the right side of the political perspective. The person credited with coming up with and popularizing it, Henry George, was a libertarian.
By Charles Kanjama firstname.lastname@example.org
Sometime in the 19th Century, somewhere in Europe, a busy town was separated from a poorer residential quarter by a river crossed by a footbridge built by the town authorities. Any person crossing the footbridge had to pay some money, say ten shillings, to cross one way or the other. Then a benevolent town council decided to ease the situation of the poor labourers by abolishing the bridge levy.
After several months, it was noticed that the rents in the poorer quarter had generally increased by about five hundred shillings, thus absorbing the labourers’ monthly savings gained from the abolition of the bridge levy. In 1879, American writer Henry George wrote his groundbreaking work, “Progress and Poverty” to explain this phenomenon. His main economic idea was that growing population as well as infrastructure investment raises the value of adjacent land regardless of the economic activity carried out on the land itself. Henry George was a brilliant writer and an incisive thinker, and he inspired fervent disciples, though mainstream economics treated him largely with contempt. He was derisively called ‘a single-taxer’ due to his proposal to abolish all forms of taxation save for land value taxation.
What George really supported was an intelligent approach to capturing the resulting value from public investments for the whole society. For example, in the European town above, the footbridge had been a form of economic value creation. Once the levy was abolished, the value was captured, not by the labourers as planned, but by their thriving landlords. This was a perverse form of value capture. A century later, the impressive economist and Nobel Prize laureate Joseph Stiglitz supported George’s insight, now called the Henry George Theorem. Stiglitz demonstrated that spending by government on infrastructure often increases aggregate land values by a proportionate amount. So for example, land values along Thika Road increased substantially due to the construction of the modern super-highway. These increases in value were captured mainly by the adjacent land owners and by transporters.
Likewise, a substantial injection of value from the Mombasa-Nairobi-Malaba standard gauge railway project, as well as from the proposed Lamu-Garissa-Isiolo-Moyale/Lodwar LAPSSET Corridor Project, will be captured by landowners within a certain radius of the service points or railway stations to be established along the line. Of course, the improved efficiency in transportation will create value in other areas, including job creation, and relative reduction in the cost of both industrial and consumer goods.
If government was clever, it would include a value-capture approach in project financing. The economic speculation in the land adjacent to the proposed Lamu port, to the planned Isiolo Resort city and to the Mlolongo railway exchange is a pointer of the anticipated value creation from these public investments. Value capture uses multiple approaches to allow government to recoup a portion, say half, of the returns from its investments.
One acceptable approach is land value taxation, or alternatively government land-purchase-and-resale schemes. The former is more legally apt, but under Kenya’s Constitution can only be levied by county government (art.209(2,3)). Another acceptable approach, which is now overdue considering the state of our economic development, is the reintroduction of capital gains tax. This tax was suspended in 1985, the idea at the time being that Kenyans should be encouraged to save and invest, including in the securities market.
However, from the perspective of tax equity today, it is scandalous that capital gains tax, which mainly affects the wealthy, still remains suspended. Of course Kenya must avoid going down the path of European socialist nations like France, which has recently introduced a top-bracket 75 percent income tax for the ultra wealthy. We cannot afford ‘to sock the rich’, as it will discourage investment and trigger capital flight, as well as entrench greater tax evasion. This does not mean that a well-designed capital gains tax cannot work for both property and equity investments.
Still, there is a need to avoid an obsession with traditional but costly approaches for funding Kenya’s mega infrastructure projects. Importantly, the electromagnetic spectrum that is now the focus of government-media disputes over digital migration is a potentially large source of public funds. Also the issuance of oil and other mineral exploration and extraction licences, which should be backed by a credible mining royalties and taxation regime that allows government to recover a substantial portion of mineral value. My New Year wish is that both national and county governments can progress useful infrastructure projects through creative financing that does not unduly stretch our debt leverage ratio but which directly contributes to our economic and social welfare.
"Your great city church stands yonder — your grand cathedral. It is named after a tent-maker — after the man who said "If a man will not work, neither shall he eat." Let us suppose the Apostle Paul coming amongst us and seeing how people lived. We will not suppose his going to the West-end and seeing how those got on who never did a stroke of work in their lives, but we will imagine him paying a visit to certain of our societies, and finding them engaged in devising means to help the poor. "Why do they not work?" would be the Apostle's first and natural question. If he were told that there was no work for them to do, what would he say? 'No work? Why do they not go out and catch some fish?' 'Oh the fish are PRESERVED -- and the game is PRESERVED.' The Apostle might go on to ask, 'Then why do they not cultivate the land?' 'Oh, the land is OWNED,' would have to be the answer. I thought of this, could not help thinking of it, as I traveled over miles and miles of land in coming here. 'The land is owned,' would be the answer given to the Apostle, and what would he say to such a state of society?"
HENRY GEORGE at St. James's Hall, London.
Nov. 19, 1884.
quoted in The Church Reformer, January 15, 1885
The ground lessor’s position at 625 Madison Avenue, in Manhattan’s Plaza District, has been purchased by Ashkenazy Acquisition Corp., of New York, for $400 million from 625 Ground Lessor L.L.C., Cushman & Wakefield, which represented the seller, announced last week.
The site is occupied by a 17-story, 563,000-square-foot Class A office building, with retail, that spans the entire block on the east side of Madison Avenue between 58th and 59th streets. Polo Ralph Lauren occupies 70 percent of the building.
The price represents a going-in yield of 1.15 percent based on contractual ground lease payments through June 2022, according to Cushman, “reflecting historically low interest rates, escalating land values due to the strength of the residential and retail market, and the scarcity of ground lease offerings.”
The leasehold at 625 Madison is owned and operated by SL Green Realty Corp., of New York. The ground lease expires in June 2054.
The building’s website indicates that the office space is fully leased.
The Cushman & Wakefield team consisted of Brian Corcoran, Helen Hwang, Steve Kohn, Frank Liantonio, Marc Nakleh, Nat Rockett, Karen Wiedenmann and Sujohn Sarkar.
“The investment benefits from strong sponsorship, long-term upside and a truly irreplaceable location at the core of one of the most luxurious commercial, residential and retail corridors in the world,” Hwang, an executive vice president, said in a release.
“Leased fee/ground lessor positions are rarely offered in Manhattan, so the opportunity was of great interest to investors around the world,” said Steve Kohn, president of Cushman & Wakefield Equity, Debt and Structured Finance.
The contract that culminated in the deal was signed in late September, The New York Post reported on Oct. 1.
One key to the sale, according to the Post, is that SL Green’s current $4.6 million rent will reset in 2022 and 2041, with the rent reportedly expected to soar to about $50 million a year at the next reset.
Formerly known at the Revlon Building and the Plaza Building, 625 Madison Ave. was completed to its current height in 1956 and extensively renovated in 1988.
John Rawls, the brilliant 20th-century philosopher, argued for a society that seems fair if we consider it from behind a “veil of ignorance” — meaning we don’t know whether we’ll be born to an investment banker or a teenage mom, in a leafy suburb or a gang-ridden inner city, healthy or disabled, smart or struggling, privileged or disadvantaged. That’s a shrewd analytical tool — and who among us would argue for food stamp cuts if we thought we might be among the hungry children?
As we celebrate Thanksgiving, let’s remember that the difference between being surrounded by a loving family or being homeless on the street is determined not just by our own level of virtue or self-discipline, but also by an inextricable mix of luck, biography, brain chemistry and genetics.
For those who are well-off, it may be easier to castigate the irresponsibility of the poor than to recognize that success in life is a reflection not only of enterprise and willpower, but also of random chance and early upbringing.And perhaps Mr. Kristof might consider also that the same forces and structures which make some people poor make others rich, very rich. Henry George described a wedge being driven through society. Random chance may help determine whether one falls into one group of the other. I take the liberty of lifting a long list of quotes from Henry George's book "Progress and Poverty:"
Yes, in certain ways, the poorest now enjoy what the richest could not a century ago. But this does not demonstrate an improvement – not so long as the ability to obtain the necessities of life has not increased.
Poverty is a diabolical predicament that not only makes scarce one’s physical comforts, but drains away one’s spiritual strength. It damages hopes and dreams, and having deficits among those things is when the soul begins to die.This is a single paragraph from an excellent piece by Charles Blow.
By Catherine Cashmore | Monday, 25 November 2013
There’s been a lot of debate around property taxation in Australia - significantly negative gearing, which allows an investor to use the short fall between interest repayments and other relevant expenditure, to lower their income tax.
The policy promotes speculative gain meaning the strategy is only profitable if the acquisition rise in value rather than holding or falling - therefore, in Australia, investor preference is slanted toward the established sector – the sector that attracts robust demand from all demographics and as such, in premium locations, has historically gained the greatest windfall from capital gains.
Aside from the impact this creates in terms of affordability (pushing up the price of second-hand stock, burdening new buyers with the need to raise a higher and higher deposit just to enter ownership), it also negatively affects the the new home market, which traditionally struggles to attract consistent activity outside of targeted first home buyer incentive; albeit, the headwinds resulting from planning constraints and supply side policy should also not be dismissed.
Additionally, capital gains tax and stamp duty have also received much debate. Both are transaction taxes, and therefore have a tendency to stagnate activity, acting as a deterrent to either buying and selling.
Stamp duty, as modelled by economist Andrew Leigh, is shown to produce a meaningful impact on housing turnover, leading to a potential mismatch between property size and household type – a deterrent to downsizing and therefore selling.
Additionally, it burdens first time buyers by increasing the amount they need to save in order to enter the market and frequent changes of employment concurrent with a modern day lifestyle, are hampered as owners, unwilling to move any meaningful distance outside their local neighbourhood, search for work in local areas alone.
But, outside of academia and intermittent articles, there is scant debate in Australian mainstream media regarding land value tax and it’s practical impact.
The theory is taken to its extreme and best advocated by American political economist and author, Henry George, who wrote his publication Progress and Poverty - an enlightened and impassioned read - and subsequently inspired the economic philosophy that came to be known as ‘Georgism.’
The ideals of Henry George reside in the concept that land is in fixed supply, therefore we can’t all benefit from economic advantage gained from ‘ownership’ of the ‘best’ sites available without effective taxation of the resource.
George advocated a single tax on the unimproved value of land to replace all other taxes – something that would be unlikely to hold water in current political circles. However, his ideals won favour amongst many, including the great economist and author of Capitalism and Freedom, Milton Friedman, and other influential capitalists such as Winston Churchill, who gave a powerful speech on land monopoly stressing:
“Unearned increments in land are not the only form of unearned or undeserved profit, but they are the principal form of unearned increment, and they are derived from processes which are not merely not beneficial, but positively detrimental to the general public.”
In essence, raising the percentage of tax that falls on the unimproved value of land has few distortionary or adverse affects. It creates a steady source of revenue whilst the landowner can make their own assessment regarding the timing and type of property they wish to construct in order to make profit without being penalised for doing so.
However, when the larger percentage of tax payable is assessed against the value of buildings and their improvements – through renovation, extension or higher density development for example – not only can those costs be transferred to a tenant, there is less motivation to make effective use of the site. This has a flow on effect which can not only exacerbate urban ‘sprawl’, but also increase the propensity to ‘land bank.’
The Henry tax review commissioned by the government under Kevin Rudd in 2008 concluded that “economic growth would be higher if governments raised more revenue from land and less revenue from other tax bases,” proposing that stamp duty (which is an inconsistent and unequitable source of revenue) be replaced by a broad based land tax, levied on a per square metre and per land holding basis, rather than retaining present land tax arrangements.
The Australian Housing and Urban Research Group attempted to mimic the proposed changes using their AHURI-3M micro-simulation model in a report entitled The spatial and distributional impacts of the Henry Review recommendations on stamp duty and land tax .
And whilst it’s difficult to qualify how purchasers may factor an abolition of stamp duty into their price analysis, perhaps adding the additional saving into their borrowing capacity, and therefore not lowering prices enough to initially assist first homebuyers. It does demonstrate how over the longer-term falls in house prices have the potential to exceed the value of land tax payments, assisting both owner-occupier and rental tenant as the effects flow through.
Additionally, increasing the tax base would provide developers with an incentive to speed up the process and utilise their holding for more effective purposes.
And importantly for Australia, it can provide a reliable provision of revenue to channel into the development of much-needed infrastructure.
The rational for this is coined in the old real estate term ‘location, location, location.’ Everyone understands that in areas where amenities are plentiful – containing good schools, roads, public transport, bustling shopping strips, parks, theatres, bars, street cafes and so forth – increases demand and therefore land values, invoking a vibrant sense of community which attracts business and benefits the economy.
The idea behind spruiking a ‘hotspot’, such a common industry obsession, is based on purchasing in an area of limited supply, on the cusp of an infrastructure boom such as the provision of a new road or train line for example, enabling existing landowners to reap a windfall from capital gains and rental demand for little more effort than the advantage of getting in early and holding tight whilst tax payer dollars across the spectrum fund the work.
Should a higher LVT be implemented, the cost and maintenance of community facilities could in part, be captured from the wealth effect advantaging current owners, compensating over time for the initial outlay. Imagine the advantage this would offer residents in fringe locations who sit and wait for the failed ‘promises’ offered, when they migrated to the outer suburbs initially.
Take New York for example – between the years 1921 and 1931 under Governor Al Smith, New York financed what is arguably the world’s best mass transit system, colleges, parks, libraries, schools and social services shifting taxes off buildings and onto land values and channelling those dollars effectively.
The policy influenced by Henry George ended soon after Al Smith’s administration, and eventually lead to todays landscape - a city built on a series of islands, with limited room to ‘build out’ facing a chronic affordable housing shortage with the population projected to reach 9.1 million by 2030.
More than a third of New Yorkers spend half their pay cheque on rent alone yet like London, there is little motivation for developers to build housing to accommodate low-wage workers concentrating instead on the luxury end of market, broadening the gap between rich and poor as land values rise and those priced out, find little option but to re-locate.
New York’s Central Park is the highest generator of real estate wealth. The most expensive homes in the world surround the park with apartments selling in excess of $20 million, and newer developments marketed in excess of $100+ million.
Like London it’s a pure speculators paradise – in the 10 year period to 2007, values increased by 73% - owners sit on a pot of growing gold and there’s little to indicate America’s richest are about to bail out of their New York ‘addiction’ with an expansive list of A-list celebrities, high net worth individuals, and foreign magnates, owning apartments in the locality.
New mayor-elect, Bill de Blasio, who won his seat, based on a promise to narrow the widening inequality gap - preserve 200,000 low and middle income units, and ensure 50,000 affordable homes are constructed over the next decade, will struggle to subsidize plans whist facing a deficit reputed to be as much as $2 billion in the next fiscal year.
Yet economist Michael Hudson has recently assessed land values in New York City alone to exceed that of all of the plant and equipment in the entire country, combined.
Currently more than 30 countries around the world have implemented land value taxation - including Australia - with varying degrees of success not only based on the percentage split between land and property, but how those funds are channelled back into the community and the quality of land assessments in regularly updating and estimating value.
Pennsylvania is one such state in the USA to use a system which taxes land at a greater rate than improvements on property – I think I’m correct in saying 19 cities in Pennsylvania use land value tax with Altoona being the first municipality in the country to rely on land value tax alone.
Reportedly, 85% of home owners pay less with the policy than they do with the traditional flat-rate approach. When mayor of Washington county, Anthony Spossey, who also served as treasurer from 2002 to 2006 and under his watch enacted an LVT, was interviewed on the changes in 2007, he commented:
“LVT ..helps reduce taxes for our most vulnerable citizens. We have an aging demographic, like the county, region and the state. Taxpayers everywhere are less able to keep up with taxes, and that hurts revenue. LVT helps us mitigate the impact both to them and the city. It’s a win/win.”
Until fairly recent times, another good example to cite is Pittsburgh. Early in the 1900s the state changed its tax system to fall greater on the unimproved value of land than its construction and improvements.
Pittsburgh’s economic history is a study in itself, and has not been without challenges. For those wanting to research further, I strongly advocate some of the writings of Dan Sullivan - (former chair of the Libertarian Party of Allegheny County, (Pittsburgh) Pennsylvania) - who is an expert on the economic benefits of LVT and has written extensively on the subject.
Sullivan demonstrates that Pittsburgh not only enjoyed a construction boom whilst avoiding a real estate boom under a broad based LVT system, but also effectively weathered the great depression whilst maintaining affordable and steady land values along the way.
In comparing it to other states struggling to recover from the recent sub-prime crisis he points out:
“In 2008, just after the housing bubble broke, Cleveland led the nation in mortgage foreclosures per capita while Pittsburgh's foreclosure rate remained exceptionally low. Since then, the foreclosure rates in Las Vegas and many Californian cities, none of which collect significant real estate taxes, have passed Cleveland's foreclosure rate. However, on September 15, 2010, The Pittsburgh Post-Gazette reported that while at the end of the second quarter of 2010, 21.5% of America's single-family homes had underwater mortgages (the American term for negative equity), only 5.6% did in Pittsburgh. As a result Pittsburgh was top of a list of the 10 marketswith the lowest underwater mortgage figures.”
When land value tax is implemented - with the burden taken of buildings and their improvements, ensuring good quality assessments and sensible zoning laws – it not only assists affordability keeping land values stable, but also benefits local business through infrastructure funding, discourages urban sprawl, incites smart effective development of sites, reduces land banking, and as examples in the USA have demonstrated – assists in weathering the unwanted impacts of real estate booms and busts.
Despite the numerous examples across the world where a broad based land value tax has been deployed successfully, changing policy and bringing about reform is never easy and rarely without complication.
Additionally, the implications of a yearly tax on fixed low-income retirees must be handled with care and understanding, as there are ways to buffer unwanted effects whilst changes are implemented.
Therefore, the process adopted in the ACT which is abolishing stamp duties over a slow transitional 20 year period to phase in higher taxation of land is not altogether unwise.
With any change to the tax system, the headwinds come convincing the public that it’s a good idea. In this respect balanced debate and conversation is necessary, as questions and concerns are brought to the fore.
The increased tax burden also falls on those who have significant influence across the political spectrum; therefore strong leadership to avoid lobbying from wealthy owners with vested interests is essential.
Albeit, as I said last week, we have a new and growing generation of enlightened voters who are well and truly fed up with battling high real estate prices, inflated rents, and care not whether it’s labelled as a ‘bubble’ – but certainly care about their future and that of their children.
Therefore – I do see a time when all the chatter around affordability, will finally evolve into real action – and a broad based LVT should form an important part of that debate.
At present, neither party advocates the tax code so elegant it can reduce inequality, mitigate poverty, stimulate productivity, prevent asset price bubbles, stem community-shredding gentrification and drain the distended Wall Street cabal of its ill-gotten gains – in just one tax.
Land value. If we want a real overhaul/simplification of the tax code, the way to do it is to tax land value. It might be the only tax we need. No sales tax. No income tax. No payroll tax to fill a Social Security trust fund. No corporate income tax that, as we can plainly see, offshores profits. No need to tax labor and industry at all. Just tax the stuff that humans had nothing to do with creating, and therefore have no basis to claim ownership over at all. You’ll find that almost all of it is “owned” by the fabled 1 percent.
With Connecticut following Pennsylvania’s century-long lead by enacting legislation this year that applies the work of the Gilded Age economist and reformer Henry George, it is timely to look back at similar efforts in the U.S. of his Progressive Era followers, known then as Single Taxers. Author of the world-wide 1879 best-seller Progress and Poverty, Henry George — following in the line of the classical economists Francois Quesnay, Adam Smith, David Ricardo and John Stuart Mill — argued that land and natural resources should be rented out by the community to those holding title to them and the resulting revenue used in place of taxes on wages and production. Single Taxers took their name from Henry George’s proposal that all taxes on productive activity should be replaced with a “single tax” on the value of land and natural resources, and they often simultaneously worked for public ownership of natural monopolies to keep their prices at or below costs.
The basic principles of the Single Tax program were illustrated in “The Landlord’s Game” a Progressive Era precursor to the board game “Monopoly,” which was developed by a Single Taxer named Elizabeth Phillips (nee Magie). Under this game’s alternative Single Tax rules, individual players were paid rent for any buildings they had on their properties but all land rent for the properties was paid into the kitty and divided among all the players instead of concentrating in the hands of a single winner. Also, once cash in the game’s Public Treasury from land rents reached a sufficient amount, it was paid to the holder of the railroads, trollies and utilities for the purchase (through condemnation) of their operations, which were then publicly owned and operated so they could provide their services free of charge.
New York City
Compared to their peers, cities following the Single Tax program in the Progressive Era grew in notable spurts, most impressively in New York City as the era ended. NYC’s growth had been slowing down just before the “Al Smith Act” of 1920 let NY City, County, and Schools exempt new housing construction (but not land values) from the property tax from 1921 until the end of 1931. The law applied to all the five “boroughs,” in New York County, and also to its coterminous school district taxes. The Act authorized ALL units of local government to exempt building values below a modest cap. This thoroughgoing “root and branch” attitude in New York reveals the existence of a strong, long-standing political movement. The New York Act sprang from a political history that links it to the movement Henry George left behind in New York, as well as to other Single Tax strongholds like Cleveland, Detroit, Toledo, Jersey City, Milwaukee, Pittsburgh, and Chicago. Gov. Al Smith took the visible lead, but he, like most political leaders, had to be pushed.
Who was it that pushed? A major force was the group of single-tax clubs of NYC, the enduring legacy of Henry George’s runs for Mayor of NYC in 1886 and 1897. After George’s death, his influence survived him in his adopted home.
Before Smith was governor, Albany had blocked several single-tax bills in the years 1909-16. Earlier, as majority leader of the Assembly and a Tammany wheelhorse, Smith himself had blocked a 1911 Single Tax effort (the Sullivan-Shortt Bill) along similar lines. Smith turned around after 1911, his change triggered by the awful incineration of 150 people trapped in the Triangle Shirtwaist Company workroom—a traumatic, watershed event of the times. When first elected governor in 1918, Smith was a changed man with a new power base. We may surmise, also, that his success in reviving NYC helped boost him to the Democratic nomination for U.S. President in 1928, and that was on his mind.
NYC, in granting this tax holiday for new housing, was not “racing to the bottom” in terms of public spending. NYC financed one of the world’s best mass transit systems, and the nation’s best city college system (the “poor man’s Harvard”) with an impressive roster of graduates in the professions. Its parks and libraries were outstanding; its schools and social services above the national norm. NYC was not lowering taxes, but shifting them off buildings and onto land values. Exempting buildings had the effect of raising land values, thus preserving and even augmenting the overall tax base.
After 1932, the forces of tax limitation rallied, financed by the likes of the Rockefeller Brothers, the Seth Low family, A.A. Berle, and others. And so New York City’s remarkable growth spurt tapered off, leaving it larger, but otherwise much like many other older cities.
In Cleveland, the city’s population grew by 109% from 1900 to 1920. For most of this time it was under the administrations of single-taxers Tom L. Johnson, 1901-09, and Newton D. Baker, 1911-16. In 1906, Mayor Johnson inaugurated a low 3-cent trolley fare which entailed possible deficits he intended to meet by taxing real estate. To this day a bronze statue of Johnson stands in downtown Cleveland, holding a book out for all to see, and on it engraved so clear, Progress and Poverty.
Johnson’s City Solicitor and ally, Newton D. Baker, was another remarkable leader, who later nearly edged out FDR for the Democratic Presidential nomination in 1932. Baker won the mayoralty in 1911, after an interregnum of just two years. Baker implemented single tax policies until President Wilson appointed him Secretary of War in 1916. This high-level appointment recognized the political power of the single-tax movement in that era, a power that later historians and economists have wrongly trivialized. After 1916, though, Cleveland slowly fell into old-line Tory hands.
The soaring growth experienced by Detroit from 1890 to 1930 obviously involved the auto industry, but why did that industry focus on Detroit? There was no St. Lawrence Seaway—that opened in 1959. Growth began under Mayor, then Governor Hazen S. Pingree. Pingree had called Tom Johnson to Detroit in 1899 to help beef up its street car system and lower fares, under public ownership. It is one of the great ironies: The Motor City, whose auto firms did so much to destroy mass transit, originally attracted them by providing cheap mass transit for their workers. The sensational collapse of Detroit came after 1950 when Detroit’s leaders, auto-oriented, forgot the Pingree policies that had launched Detroit earlier.
Milwaukee grew fast for 30 years under its Socialist Party Mayors Emil Seidel (1910-12) and Daniel Hoan (1916-40). Hoan’s tenure was the longest of any Mayor of a large American city; he was nationally recognized as the best mayor in the country, and Milwaukee under Hoan was the best-governed city. Hoan’s brand of what others labeled “sewer socialism” consisted in keeping transit and utility user-rates low, and meeting deficits by raising property taxes.
The formula for growing and revitalizing cities seems to be the same, whether under a “socialist” like Hoan or a colorful populist like Johnson: supply infrastructure, keep user-rates low, raise land taxes, attend to the details of assessment, and go easy on taxing buildings.
From 1890-1900, Chicago grew by 54%, but it did not just spread, it pioneered the skyscraper, and centralized its transit system as few other cities ever did. From 1900-30 it continued to grow at higher percentage rates than most other cities, and much higher absolute rates, confirming its status as America’s second largest city. Who was Chicago’s Tom Johnson? It was not one person, but a large and shifting group. Chicago lawyer John Peter Altgeld, humanitarian and reformer, was Governor of Illinois, 1892-96. His administration contained several single-taxers, including young Brand Whitlock, future Mayor of Toledo, whom Altgeld inspired. Altgeld directly corresponded and worked with Henry George, and, according to Whitlock, “understood” George’s ideas like few others.
Today’s infuential “Chicago School” of economists at the University of Chicago take it on faith that unions obstruct economic growth, but one could not illustrate it from the City of Chicago, a major center of union activity during its period of fastest growth. These unions supported Altgeld, and Single Tax ideas.
Chicago’s low transit fares and utility rates were an integral part of single-tax ideology in those days. At the same time Chicago, like San Francisco and New York, pioneered city parks and public spaces on a grand scale, laid out in the Daniel Burnham Plan, developed while the Single Taxer Edward F. Dunne was Mayor.
Born-again San Francisco, 1907-30, makes an edifying case study in regenerative tax policy. Historians have focused on the earthquake and fire of 1906, but blanked out the recovery. We do know, though, that in 1907 San Francisco elected a reform Mayor, Edward Robeson Taylor, with a uniquely relevant background: he had helped Henry George write Progress and Poverty in 1879. It was a jolt to replace the lost part of the tax base by taxing land value more, but small enough to be doable. This firm tax base also sustained S.F.’s credit to finance the great burst of civic works that was to follow. Taylor retired in 1909, but soon laid his hands on James Rolph, who remained Mayor for 19 years, 1911-30, a period of civic unity and public works. “Sunny Jim” Rolph expanded city enterprise into water supply, planning, municipally-owned mass transit, the Panama-Pacific International Exposition, and the matchless Civic Center.
Population growth is not always a goal of civic policy. But it is vital to the interests of labor to have cities vie to attract people by fostering good use of their land. That is, indeed, the main point of Henry Geroge’s thesis in Progress and Poverty. A healthy economy generates surpluses that belie the Chicago School slogan that “There is no free lunch.” Land rents are the free lunch, and perhaps Connecticut’s move this year indicates that this time-proven wisdom is beginning to spread once again.- See more at: http://onthecommons.org/magazine/forgotten-idea-shaped-great-us-cities#sthash.WKn4gQm7.dpuf
Interesting comments on a number of things, including doctors, slaves, soldiers, income inequality, sobriety, thrift, poverty,
Bad as we are, I believe that if we all understood how we are living, and what we are doing daily, we should make a revolution before the end of the week. But as we do not know; and as many of us, forseeing unpleasant revelations, do not want to know; I can only assure you that I am in perfect concord with standard economists when I state that competition is the force that makes our industrial system self-acting. It produces the effects which I have described without the conscious contrivance or interference of either master on the one hand, or slave on the other. It may be described as a seesaw, or lever of the first order, having the fulcrum between the power and the weight.
The so-called right of private property is a convention that every man should enjoy the product of his own labour, either to consume it or exchange it for the equivalent product of his fellow labourer. But the landlord and capitalist enjoy the product of the labour of others, which they consume to the value of many millions sterling every year without even a pretence of producing an equivalent. They daily violate the right to which they appeal when the socialist attacks them. Nor is their inconsistency so obvious as might be expected. If you violate a workman's right daily for centuries, and daily respect the landlord's right, the workman's right will at last be forgotten, whilst the landlord's right will appear more sacred as successive years add to its antiquity. In this way the most illogical distinctions come to be accepted as natural and inevitable. One man enters a farmhouse secretly, helps himself to a share of the farm produce, and leaves without giving the farmer an equivalent. We call him a burglar, and send him to penal servitude. Another man does precisely the same thing openly, has the impudence even to send a note to say when he is coming, and repeats his foray twice a year, breaking forcibly into the premises if his demand is not complied with. We call him a landlord, respect him, and, if his freebooting extends over a large district, make him deputy-lieutenant of the country or send him to Parliament, to make laws to license his predatory habits.
MR. G. BERNARD SHAW ON SOCIALISM.
Posted on November 03, 2013 at 08:18 AM in a wedge driven through society, all benefits go to landholder , best and brightest, Christian ethics, commons, cui bono?, Earth for All, fruits of one's labors, income concentration, is this socialism?, land different from capital, landed gentry, landlordism, middle class, population growth, poverty machine, private property in land, privilege, property rights, reaping what others sow, savings rate, slavery, Social Problems, socialize, special interests, time making wrongs into rights, wealth distribution or concentration | Permalink | Comments (0)
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What more generous boost to the pay-day loan industry could Congress offer than a government shutdown, when so many Americans live paycheck to paycheck?
First it will affect the government employees, particularly those in the early years of their careers, who might not have a whole lot in the way of liquid savings, and those who have high fixed costs like mortgages, student debt, or children in college.
And then it will affect all those who depend on their patronage, including a lot of small businesses and their employees.
What a brilliant plan for forcing so many Americans into the hands of the pay-day loan industry!
And most of us are aware how difficult it will be for the latter group to dig themselves out. The government employees may eventually get paid -- they'll still owe the pay-day lenders exhorbitant interest, for the month or two. But it will be the second group that falls into the clutches of the legal loan sharks.
Brilliant. Simply brilliant. I wonder what the campaign contribution picture looks like.
How far is the saying true that "Every one lives either by working, or by begging, or by stealing."' Observe: This is primarily a question merely of fact, and not of right or wrong. There may be (1) Right Work and Wrong Work; (2) Begging that is justifiable, and Begging that is unjustifiable; (3) Stealing which is pardonable, and stealing which is unpardonable. In simply placing, therefore, any class of persons under one or another of these three heads, I am not necessarily either praising or blaming the individual members of that class. Again, of two paid workers one may be greatly underpaid, and the other as greatly overpaid. But neither is this consideration embraced in the question before us. We have not to do, tonight, with the merits of any individual, nor with the value or valuelessness of any kind of work, nor yet with the equitable assignment in any particular case of the reward of work. Let us, in the first place, classify the members of English society by dividing them simply into — I. Workers, and II. NonWorkers. I. Workers, e.g.: — Manual labourers, skilled and unskilled; domestic servants; soldiers; sailors; farmers; clerks and overseers; professional men; retail and wholesale dealers; merchants and manufacturers; bankers (sleeping partners are excepted); teachers and preachers; artists, authors, and editors; high officers and Ministers of State; the Sovereign; housewives. All these are doing work, and are receiving pay in coin or kind in return for their work. Some of them may be doing unpaid (honorary) work as well as paid work; and others may be getting interest (on a capital for which they never worked) in addition to those wages of superintendence which are strictly the reward of a merchant's or manufacturer's work. Again, some of them may be working in appointed places for definite salaries, while others may be working, so to speak, "on their own hook," or, in more elegant language, "paddling their own canoe." By what mark, then, shall we distinguish the type of man who lives by his work? What is his definition? He is the man who lives upon pay, in coin or kind, which is given him in return for his personal services. And only in proportion as his means of living are derived from such pay, or from his personal labour on the soil, can he properly be said to "live by working.'' We have next to consider who are the (II.) Non-Workers of Society, and whether they may all, without exception, be properly included in the two classes, "Beggars," and "Stealers" — whether, in fact, this two-fold division of them is an exhaustive one. Now, Beggars and Thieves are alike in these respects, that they, both of them, consume without producing, enjoy without labouring, are served but render no service to others, receive but give not in return, are clever in subtraction, but failures in addition. Wherein, then, do they differ from each other? They differ, for the purposes of the present argument, only in the different dispositions of their respective victims towards them. The victim of the Beggar is a willing victim; he is influenced by custom, or by compassion for weakness, pain, or privation. On the other hand, the victim of the Thief is an unwilling victim. It may be that he is unconscious of the spoliation that is perpetrated upon him.
National Debt. — "A national debt, like any other, may be honestly incurred in case of need, and honestly paid in due time. But if a man should be ashamed to borrow, much more should a people; and if a father holds it his honour to provide for his children, and would be ashamed to borrow from them, and leave, with his blessing, his note of hand, for his grandchildren to pay, much more should a nation be ashamed to borrow, in any case, or in any manner; and if it borrow at all, it is at least in honour bound to borrow from living men, and not indebt itself to its own unborn brats. If it can't provide for them, at least let it not send their cradles to the pawnbroker, and pick the pockets of their first breeches. A national debt, then, is a foul disgrace at the best. But it is, as now constituted, also a foul crime. National debts paying interest are simply the purchase, by the rich, of power to tax the poor." — John Ruskin, quoted in The Christian Socialist (London), December, 1883.
One might be led to ask, how many is enough, and how we might go about encouraging our best and brightest into careers that serve others instead of rent-seeking. Two generations ago, many became doctors, engineers and teachers.
Shiller: Too Many Graduating Seniors Go Into Finance
Too many of the our brightest people may be choosing careers in finance,
undertaking economically and socially useless — and even harmful —
activities, Robert Shiller, a Yale University economics professor,
writes in an article for Project Syndicate.
A survey of elite U.S. universities showed that 25 percent of Harvard graduating seniors, 24 percent of Yale graduating seniors and 46 percent of Princeton graduating seniors were going into financial services in 2006, notes Shiller, co-creator of the Case-Shiller home price index.
While those proportions have fallen more recently, he explains that might only be a temporary effect of the financial crisis.
And more are going into speculative fields like investment banking rather than traditional finance such as lending, he says, citing a study by Thomas Philippon of the Stern School of Business, New York University and Ariell Reshef of the University of Virginia.
We need some traders and speculators, Shiller concedes, as they provide some useful service — sorting through information about businesses and trying to judge their real worth.
"But these people's activities also impose costs on the rest of us," he explains. Much of their speculation and deal making is "pure rent-seeking."
"In other words, it is wasteful activity that achieves nothing more than enabling the collection of rents on items that might otherwise be free."
Those working in speculative finance fields are like a feudal lord installing a chain across a river to charge fees on passing boats, he argues. Making no improvements to the river, the lord does nothing productive and helps no one but himself. Few people will use the river if enough lords put chains across it to collect fees.
Those working in speculative fields, he says, "skim the best business deals, creating a 'negative externality' on those who are not party to them."
For example, they can reject bad assets, such as subprime mortgage securities, offloading them to less knowledgeable investors.
The repeal of the Glass-Steagall Act, which blocked commercial banks from investment banking, allowed bankers to act more and more like those feudal lords collecting fees.
"In fact, the main advantages of the original Glass-Steagall Act," he says, "may have been more sociological than technical, changing the business culture and environment in subtle ways. By keeping the deal-making business separate, banks may have focused more on their traditional core business."
A paper by economists at Columbia University and Princeton published on the Social Science Research Network website showed that over-the-counter (OTC) traders allowed informed dealers to extract excessive rents and to undermine organized exchanges by "cream-skimming" the best deals.
"The informational rents in OTC markets in turn attract too much talent to the financial industry, which would be more efficiently deployed as real-sector entrepreneurs," the paper asserts.
Plus, OTC dealers' rents tend to increase "as there are more informed dealers, because the greater cream-skimming by dealers worsens the terms entrepreneurs can get for their assets on the organized exchange, and therefore their bargaining power on OTC markets."
Posted on September 28, 2013 at 12:42 PM in best and brightest, common good, commons, cui bono?, economic rent, Film: "Inside Job", FIRE sector, fruits of one's labors, government's role, Occupy Wall Street's values, political economy, poverty machine, privilege, reaping what others sow, rent-seeking, socializing risk and privatizing profit, stock ownership, tax reform, theft, toll-takers, unearned increment, wealth distribution or concentration | Permalink | Comments (1)
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This appears in the current issue of the University of Chicago Magazine:
Recently at a coffee shop near my home, a scruffy young barista looked at the University of Chicago T-shirt I was wearing. His face soured and he disdainfully said, “I don’t know about the University, just their economics department.” It’s a reaction the shirt has been getting more frequently the last few years. He was more or less implicating me by association with creating the economic crisis many of us are still slowly clawing our way out of. I felt stung. I’m a social worker, and not only do my politics not agree with that of the Chicago school’s libertarian bent, but in the wake of the crisis, with the state and federal budgets that pay for my work being slashed, I certainly haven’t reaped any financial rewards from my association with the University or its economics department.
Now, sure, maybe Surly Barista Guy is a die-hard radical leftist and feels the Original Sin of Chicago’s having propagated free market neoliberalism across the globe is so great that all the good done by other alums in the many fields of study and practice the University produces is rendered irrelevant. Maybe, like a lot of millennials, he just feels salty because he’s been stuck doing barista jobs since the recession hit and can barely cover his student debt, let alone save for retirement or buy a home. Maybe he’s upset that the Chicago school he’s read about advanced theories and policies that would ultimately make a very small number of people extraordinarily rich through financial business practices of at least questionable ethics if not legality while everyone else was left struggling to keep their homes. Perhaps he’s also aware that former Treasury secretary Hank Paulson was hired by—the University of Chicago. Paulson’s migration to Chicago remains a direct link in many minds between the free market economic policies that emanate from the University and the global financial meltdown that nearly resulted from them.
When I applied to Chicago, the school’s reputation was for its Great Books curriculum and producing top-notch teachers, not global finance Masters of the Universe. Over the 16 years since I graduated, I’ve been able to watch how reactions have shifted when I tell people where I went to school. Whereas the U of C used to be considered closer in character to schools like Reed or Saint John’s Colleges, it’s now more associated with places like the University of Pennsylvania’s Wharton School. People are surprised to find that I work directly with poor communities and have used my Chicago education to serve the public good.
The University has never addressed its role in forming and advancing the economic policies that destroyed trillions of dollars in wealth during the financial crisis and created epic human misery across multiple continents. It has heavily publicized and promoted its many Nobel Prize for Economics winners, driving the public’s perception of Chicago as a one-dimensional institution. I doubt I’m the only alum who would appreciate the University making a statement addressing the economics department’s role in creating the crisis and articulating a plan for how its policies can benefit the greater good by expanding opportunity and prosperity for all. I also doubt that I’m the only alum who would support the University shifting its focus back to producing graduates who want to live the “life of the mind” rather than to conquer the global marketplace. We would appreciate it, frankly, because we’re getting tired of the guilt by association thing.
Jeff Deeney, AB’97
In the same issue, in the classifieds, appeared this:
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Sussex County recently passed their 2014 budget which began July 1st, 2013. Part of the budget includes keeping the property taxes in Sussex County some of the lowest in the country. While other regional governments are trying to look for every dollar, Sussex County will be keeping the tax rate the same as it was in 1990.
Officials pointed to the strength of the local housing market as a contributing factor to an uptick in revenue. 2014 will be the 24th year where the county has kept the tax rate to 44.5 cents on $100 dollars of assessed value. The average tax bill for Sussex County residents in a single family home will remain approximately $100 annually.
Beyond the good news for home owners, the 117.7 million dollar budget also includes rate reductions for some 57,000 public waste-water customers. County Administrator, Todd Lawson explains:
Low tax rates and efficient government are very good thing, but it is time to update the assessments, which, as this article points out, are more than 24 years old. Relative land values have changed, particularly with the huge investment in widening the Coastal Highway, and our valuations are way out of date.Assessing land value well is not difficult or expensive to do. In some states, revaluations are mandated every 4 years.Sussex County needs to bring its valuations into the 21st century.
I received an inspiring email today from Paul Martin, director of the Henry George International Education Center (USA/Nicaragua)
. He prefaced it with this:
Dear fellow georgists,
What if John Lennon had read Progress and Poverty before he wrote the song "Imagine"?
Might the lyrics not have come out something similar to what you can see in the attached document?
Lennon’s original version
Imagine there's no heaven
It's easy if you try
No hell below us
Above us only sky
Imagine all the people
Living for today...
Imagine there's no countries
It isn't hard to do
Nothing to kill or die for
And no religion too
Imagine all the people
Living life in peace...
You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And the world will be as one
Imagine no possessions
I wonder if you can
No need for greed or hunger
A brotherhood of man
Imagine all the people
Sharing all the world...
You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And the world will live as one
Georgist versionImagine there's no taxes
At least not on your work
No confiscation of labor
Affordable to be a clerk
Imagine all the people
Keeping what they earn...
Imagine no land hoarding
It isn't hard to do
Nothing to kill or die for
And no resource wars too
Imagine all the people
Living life in peace...
You may say I'm a dreamer
But my dream is nature’s truth
I hope someday you read Progress and Poverty
And then your dreams can be real, too
Imagine taxed land values
I wonder if you can
No need for greed or hunger
A true sharing of the land
Imagine all the people
Sharing all the world...
You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
So the world can live as one
I came across an interesting article from 1908, with what strikes me as a well-described concept:
MUTUAL TOWN-BUILDING IN ENGLAND
"GARDEN CITIES" OF INDIVIDUAL, DETACHED HOMES BUILT WITHOUT THE AID OF PHILANTHROPY — A BETTER PLAN THAN REBUILDING THE SLUMS
BY WILHELM MILLER
(who visited these cities to make a first hand study of them)
LETCHWORTH, "the perfect city," less than five years old but with 6,000 inhabitants, is thirty-four miles north of London and is reached by the best trains in fifty minutes. It has 3,818 acres and its population is limited to 35,000 inhabitants, so that there will never be any crowding. The factory quarter can never be enlarged; it is situated as far as possible from the residence quarter and the prevailing wind carries the smoke away from the homes. Nearly one-sixth of the town site, or two hundred acres, is perpetually reserved for open spaces, including parks, jjlaygrounds, and a golf course.
And even if the surrounding country should build up as solidly as London, the people of Letchworth are always sure of enjoying a beautiful rural scene because a large belt is perpetually reserved for agriculture. This belt comprises 2,500 acres, or 65 percent of the whole estate. It will undoubtedly be occupied by market gardeners and dairymen, for gardens yield about eleven times as much profit per acre as farms.
A man can buy a house at Letchworth or he can rent one, but he cannot buy the land. He cannot even lease it for 999 years, because that would enable him to sell or lease his property in such a way as to make a profit from the unearned increment. He can lease the land for ninety-nine years without revaluation and the improvements will not revert to the landowner. In any case, he has every advantage enjoyed by the man who owns the land outright — save one. He cannot get rich from what Henry George called the "unearned increment" but which in Letchworth is called the "collectively earned increment." Even if he rents his house and land from week to week he cannot be dispossessed by some one who offers more money. In the agricultural belt, the tenant is allowed to continue in occupation as long as he is willing to pay as much as anyone else, less 10 percent, in favor of the present tenant.
Letchworth has been built upon a plan whereby people in any part of the world can make a city that is practically perfect without asking any rich man to give money, and without facilities for borrowing any large amount. The essence of the scheme is to preserve to the people the "collectively earned increment." The Letchworth people take some pride in the use of this phrase, and justly. For, merely by moving to Letchworth and living there they created in four and a half years a net increase of half a million dollars. They do not get that half million now, but some day they will get 95 percent of it in the form of abolition of taxes. And that day, in my opinion will come in about twenty years, for by that time the city should be able to pay back all that its public works have cost.
THE TWO OTHER "GARDEN CITIES "
There are two other successful "garden cities," Bourneville, a suburb of Liverpool built by the Cadbury Cocoa Works, and Port Sunlight near Birmingham created by the Lever Brothers, soap manufacturers, solely for their employees.
Port Sunlight is the most beautiful because the Messrs. Lever have gone to the unnecessary extreme of making no two houses alike. Also, they have spent more upon ornamentation of
houses than is necessary and they plant and care for all the front yard gardens.
The tenants at Port Sunlight get more for their money than elsewhere for two reasons. First, the rents are too low, because they are calculated only to pay expenses. Second, the social institutions, though more elaborate than elsewhere, cost the people nothing originally and they can and do manage them so as to keep expenses down to the mininum.
THE "taint" of philanthropy
The one great drawback to the Port Sunlight idea is that it involves too great an expenditure on the part of one man or one firm, and it is hard to prove to a factory owner that the investment is worth while. In this case, the factory owners disclaim all idea of philanthropy and are positive that it pays, because their employees are healthier, happier, more prosperous and therefore more efficient.
The Lever Brothers rejected all direct profit-sharing schemes because they thought this the only plan that would benefit the wives and children of the men. There is the keenest competition for a chance to work in that factory and live in one of those houses. But all the profits to the firm are indirect. Rarely, if ever, can they be expressed in dollars and cents and indirect profits can never be expected to weigh in the mind of the average employer against the appalling fact that Lever Brothers have put about $1,700,000 into their paradise at Port Sunlight and have never directly gotten back one cent.
In other words, if this is not philanthropy, it is too much like it to be generally copied. Humanity cannot look to great employers for the solution of the housing problem. And employees do not want philanthropy.
And at Bourneville there is less of the philanthropic spirit. The employees of the Cadbury Cocoa Works get a normal social life, which the people of Port Sunlight do not have. The cocoa workers are not obliged to live in Bourneville and only 42 percent of the tenants at Bourneville are employed at the Cadbury factory. Thus Bourneville is a mixed community and the ideal community must be mixed — not merely industrial, or suburban, or composed exclusively of any one class. It is sad to see the magnificent clubs, lecture halls, baths, and other social features at Port Sunlight languish for attendance, but it is only human nature. On getting home after a day's work, a man wants to forget thoughts of his work. And if he lives in a city where every house and every person he sees on the street suggests the workroom, he is bound to escape to the next town where he can get a drink or otherwise forget his daily routine. The only serious complaint which the tenants at Port Sunlight have any right to make is that they live in the atmosphere of a single class.
Mr. Cadbury gave Bourneville to the people. How then does it escape the "taint" of philanthropy?"
A GREAT FUND FOR PROPAGANDA
It is true that Mr. Cadbury gave the property to a trust which administers it for the benefit of the people, but eventually this trust will be able to finance hundreds of other garden cities that will be purely cooperative. For instance, people wishing to live in a "garden city," where all the "collectively earned increment" benefits all alike instead of going to the building up of individual fortunes, can form a stock company with shares as low as $25. If the Bourneville trust approves of their plan, it will lend them enough money to start a town. But the company must pay it back, so that the Bourneville trust can use it again and again.
How does the Bourneville trust hope to get this fund? Its income, which is almost wholly rent, doubles every five years. At this rate, in fifty years it will have an annual income of five million dollars. Long before that, Bourneville will have reached its limit of population. And since the trust never has to pay back the cost of the houses, roads, or other public works, it will be able to roll up a vast sum for the propagation of the "garden city" idea.
The all-important point is that the Bourneville trust will never give anyone something for nothing. It will merely lend money to people who are building "garden cities."
THE HEALTH AND BEAUTY OF THESE CITIES
These are far healthier and more beautiful than cities that have grown up normally; healthier because crowding is prevented by a limit to the population and because more and better provision is made for outdoor sports — to say nothing of architecture in which health is the first thought. The average town death-rate in England is 15 per 1,000. Letchworth has cut this down to 2.75. The birthrate at Port Sunlight is twice the average for the rest of England.
The greater beauty of these garden cities lies chiefly in the architecture and gardening. The houses and stores all conform to one general style of architecture, but are never monotonous. Every building must be approved by the city's architect. The houses are all of brick and built to last. There are no long rows of houses just alike. The first idea was to have no two houses alike but that is a needless waste of money. For poor people it is impossible to get good houses cheap enough without building three or four in a row and this row can be duplicated in another part of town without harming the total effect. Moreover, Bourneville has shown how much can be saved on ornamentation. The plainest houses are transformed in three years by the use of climbers. Bourneville's head gardener sees that every house has a different set of vines. Not merely is the plainness soon hidden thereby, but also the individuality of each home is notably increased.
Gardening is compulsory at Bourneville and Letchworth. If a tenant neglects his garden at Bourneville and will not hire some one to weed it, the estate notifies him that he will forfeit his lease unless he makes his place look decent. But there have been only two cases of neglect.
The estate plants a hawthorn hedge all round each man's place, digs and manures his vegetable garden, lays down the lawn, sets out dwarf fruit trees, plants the climbers on his house, and digs his flower-beds. These expenses are considered part of the cost of building and the rent is based thereon. The tenant must keep it in good condition but he can buy plants from the estate cheaper than from a nurseryman and he gets instruction for nothing. There is no chance for a beginner to get discouraged.
A FIVE-ROOM HOUSE FOR $7.80 A MONTH
I am almost afraid to tell how much a tenant gets for his money at one of these garden cities. The cheapest houses at Bourneville rent for only $7.80 a month, which includes taxes and water rates. Such a house contains five rooms and a wonderful "folding bath" which stands up like a cabinet when not in use. Clerks and artisans, however, generally pay about $12.30 a month for seven rooms and an eighth of an acre.
The ideal amount of land at Bourneville is one-eighth of an acre, and the average value of the fruits and vegetables produced on such a plot is about $32.24 a year, or sixty-two cents a week the year round. The smallest lots at Letchworth are a twelfth of an acre, which is the same as 25 x 145 feet, and is 45 percent larger than the typical New York lot, on which many families are allowed to live. In addition to these direct benefits the tenant gets a chance to play cricket, tennis, bowls, quoits, and hockey near by at no expense or at less cost than in an ordinary club.
All rents at Bourneville are figured at 8 percent of the cost. Taxes, insurance and repairs cost 3 percent, leaving a profit to the Bourneville estate of 5 percent. With this 5 percent, it employs a permanent staff of about one hundred builders and has about fifty houses under construction all the time.
OBSTACLES OVERCOME AT LETCHWORTH
The Letchworth company had its hands full with public works, for it had to construct eight miles of road, eleven miles of sewers, and seventeen miles of water main. Also it had to build a reservoir for water, a gas making plant, and an electric power station to supply the factories, of which it now has twenty-four. Another difficulty overcome was transportation. The company has cooperated with the railroad so well that its "commuters" can make their thirty-four miles to and from London daily in less than an hour, though most trains require an hour and a quarter.
The income of the land company is partly from the sale of water, gas, and electricity, but chiefly from ground rent. It never sells any land or houses. Ground rent may seem a very small source of revenue, but every man, woman and child in England contributes for ground rent an average of $10.50 a year. The Letchworth company can, and doubtless will, raise the ground rent as its limit of population approaches, but even if it should raise it as high as the average for England, the tenant will pay less than elsewhere, for taxes will eventually be abolished.
Postscript -- a few hours after I posted this, a google alert on ground rent brought me a story about Letchworth, at http://www.thecomet.net/news/letchworth_businesses_finally_land_meeting_over_rent_rise_1_2311500
Posted on August 01, 2013 at 05:40 PM in common good, commonwealth, economic rent, free land, infrastructure, is this socialism?, land appreciates buildings depreciate, land monopoly capitalism, land rent, land speculation, leased land, make land common property, municipal ownership of utilities, Natural Public Revenue, one solution for many problems, private property in land, unearned increment | Permalink | Comments (0)
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What we have is a crisis of imagination. Albert Einstein said that you cannot solve a problem with the same mind-set that created it. Foundation dollars should be the best “risk capital” out there.
There are people working hard at showing examples of other ways to live in a functioning society that truly creates greater prosperity for all (and I don’t mean more people getting to have more stuff).
Money should be spent trying out concepts that shatter current structures and systems that have turned much of the world into one vast market. Is progress really Wi-Fi on every street corner? No. It’s when no 13-year-old girl on the planet gets sold for sex. But as long as most folks are patting themselves on the back for charitable acts, we’ve got a perpetual poverty machine.
It’s an old story; we really need a new one.
But perhaps Buffett's most important observation is this one:
"Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left."
I hope Mr. Buffett will take the time to read Henry George's "Progress and Poverty." He might be better able to identify the particular structures that create and maintain poverty and the concentrations of wealth, income and power. And, based on that last sentence, I think Buffett would appreciate the final section of P&P. (Bob Drake's 2006 abridgment is a fine starting place, but the unabridged is a pleasure of its own.)As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.
Posted on July 27, 2013 at 03:41 PM in charity and justice, common good, connect the dots, economic justice, ending poverty, equal opportunity, equality, Henry George, income concentration, Occupy Wall Street's values, paycheck to paycheck, poverty, poverty's cause, privilege, radical, reaping what others sow, rich people's useful idiots, special interests, wealth distribution or concentration | Permalink | Comments (0)
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"If you wish to test the merits in point of certainty of land value taxation as compared with other taxes, go to a real estate agent in your community and, showing him a building lot upon the map, ask him its value. If he inquires about the improvements, instruct him to ignore them. He will be able at once to tell you what the lot is worth. And if you go to twenty other agents their estimates will not materially vary from his. Yet none of the agents will have left his office. Each will have inferred the value from the size and location of the lot.
But suppose when you show the map to the first agent you ask him the value of the land and its improvements. He will tell you that he cannot give an estimate until he examines the improvements. And if it is the highly improved property of a rich man he will engage building experts to assist him. Should you ask him to include the value of the contents of the buildings he would need a corps of selected experts, including artists and liverymen, dealers in furniture and bric-a-brac, librarians and jewelers.
Should you propose that he also include the value of the occupant's income, the agent would throw up his hands in despair. If without the aid of an army of experts the agent should make an estimate of these miscellaneous values, and twenty others should do the same, their several estimates would be as wide apart as ignorant guesses usually are. And the richer the owner of the property the lower as a proportion would the guesses probably be.
Now turn the real estate agent into an assessor, and is it not plain that he could appraise land values with much greater certainty and cheapness than he could appraise the values of all kinds of property? With a plot map before him he might fairly make almost all the appraisements without leaving his desk at the town hall.
And there would be no material difference if the property in question were a farm instead of a building lot. A competent farmer or business man in a farming community can, without leaving his own dooryard, appraise the value of the land of any farm there; whereas it would be impossible for him to value the improvements, stock, produce, etc., without at least inspecting them."
-- "The Taxation of Land Values," (pp. 107, 108) Bobbs-Merrill, Indianapolis.
Rent is not earned by individuals ... but is unearned. This is obvious for two simple reasons:
Both come from Broadus Mitchell, the first in a 1931 piece entitled A Blast Against Economists:
And American economists — but, be it noted, economists without the gates of institutionalism — proposed thoroughgoing remedies. Chief among these was Henry George, whose idealism was as high as his testimony was eloquent. It was sought to cry him down as a fanatic with a cure-all, but history will not permit his critics to reach to his knees.
That article begins,
"The business depression points an accusing finger at professional economists. This paper is not an apology for the economists—quite the contrary. At the same time it is proper to point out that when an epidemic disease attacks the community, (a fair analogy in the physiological world) we do not upbraid the doctors. We welcome them into our houses, place our individual sick in their hands, and listen anxiously to their guesses at the source of infection. We recognize that physicians are paid by individuals, and are not conservers of the public health in the strict sense, and so we do not hold them, even collectively, responsible for the spread of typhoid or influenza. They are to lock the individual stable door after the steed is stolen, and so long as they do this with reasonable quickness and accuracy, we do not complain.
American economists have been somewhat less occupied with the ills of the individual than have doctors as a class, and yet the share of their attention demanded by the enterpriser, the lender, the borrower, the speculator as such, absolves them in part from the indictment of neglecting the public interest. Until recently the forces in American economic life have been centrifugal, and students have been invited to become specialists. This direction of their effort was not always the case. The profession of "Political Economy" clearly implies a concern for public, collective problems, and it is only within the last two generations that American economists have departed from the historical tradition. The term "economics" in the narrow sense, and, more explicitly, the term "business economics," indicates the drift toward preoccupation with private economy.
Elsewhere* I found this:
Broadus Mitchell, in his book, The World's Wealth — Its Use and Abuse, pays a high compliment to Henry George, the Economist who first proposed the taxation of rental value, saying that "If America were invited to contribute one name to an international economic hall of fame, the rest of the world would scarcely understand it if we did not nominate Henry George."
*Arthur Otis: Added Revenue Without Burden; I could not find the Mitchell book online.
A third tribute to Henry George from Broadus Mitchell is online at the School of Cooperative Individualism. It describes Mitchell as Associate Professor of Political Economy, Johns Hopkins University.
There are at least four Little Neck homes up for sale: 4 Little Neck Road, $649,999; 30 Plum Sound Road, $489,000; 29 Middle Road, $565,0000 and 18 Baycrest Road, $650,000.
The average price per lot the town received in the August sale was approximately $186,747.
The cottages themselves are quite modest. Most are at least 80 years old, many less than 1000 square feet, many not winterized. Anywhere else, no one would say they were worth more than $75,000.
Posted: Wednesday, June 12, 2013 8:00 am
By Christopher Ketcham, Columnist
“Buy land,” the adage goes, “they’re not making any more of it.” True enough: Land is an economic factor like no other, what economists call an “inelastic commodity.”
Demand for land goes up, yet there can be no increase in supply. According to the law of supply and demand, rising demand produces rising prices, which is offset by manufacturing more supply, which lowers prices.
In the case of land, the iron law of supply and demand is tossed out the window.
One can of course develop more land, but this does not produce more of the basic resource upon which development depends.
Control of the resource, then, is where opportunity lies, an opportunity which involves nothing more than the willingness to gamble that the value of land will continually rise. In Moab all landowners – which is to say all homeowners along with owners of undeveloped plots – know this. In places where population is increasing, where the demand for land is rising, the trick to getting rich is to buy a plot of soil, sit on it, and watch the value grow as demand for the commodity grows.
Ketcham ends with,
I encourage you to go read the original to see the middle section. Ketcham, if memory serves, was the author of a very good article in Harper's about Monopoly.
And therein lies the problem.
Like the speculator with his bare lot, when I sell my property I get to keep for myself, barring a few taxes, the entire increase in value, an increase that resulted in part, yes, from my own labor and upkeep, but also, to a far larger degree, from communal labor and social investment (along with the simple fact of inelastic supply in the face of rising demand).
The homeowner who manages to make a killing upon selling his house minces in the mirror and says, “I earned it, I and I alone!”
Such self-delusion, needless to say, is one of the keystones of the real estate market on which so much of our economy is predicated.
A video of a 1999 interview with Milton Friedman includes this: "Land is an ideal basis of taxation because you cannot take it away."
In 1871, a Tennessee businessman, Enoch Ensley, wrote to his governor in much the same vein:In showing or proving what I have above promised to show, I will proceed thus:
THE GOLDEN RULE OF TAXATION.
First, I will present you with a rule or motto which I think it would be well for the state to adopt and have cut into the stone at the capitol (in large letters and have them gilded), in the senate chamber, the hall of the house of representatives and in the governor's office, for I think it entirely harmonizes with the correct principles of taxation in every particular, to wit:
That Would Be of Value to Your State,
That Could and Would Run Away, or
That Could and Would Come to You.
In 1978, Milton Friedman stated, "the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago" ("An Interview with Milton Friedman,” Human Events 38 , November 18, 1978, p. 14.)
In 2004, interviewed by Joe Matthews about California's Proposition 13,
When the subject turned to Prop 13, which he
had strongly supported in 1978, Friedman said he thought the measure
had proven to be "a mixed bag." He did not regret his vote for Prop 13
because it had sent a tax-cutting message that was important for that
* * *
But as a matter of current policy, he said, Prop 13 was problematic. "It's a bad tax measure because the property tax is the least bad tax there is," he said. "Think of the original and indestructible properties of the soil. The least dangerous and harmful tax is a tax on something of which there is an inelastic supply." He argued that protecting Prop 13 was far less important than cutting other taxes, particularly on the income and sales we need more of.
Friedman in an interview published in the San Jose Mercury a few weeks before his death in 2006:
"Yes, there are taxes I like. For example, the gasoline tax, which pays for highways. You have a user tax. The property tax is one of the least bad taxes, because it's levied on something that cannot be produced — that part that is levied on the land. So some taxes are worse than others, but all taxes are bad." — interview, San Jose Mercury News, Nov 5, 2006
So Friedman could see at least two very good reasons for relying on taxes on land value. One wonders why he never devoted himself to promoting LVT.
Last week, Joe Stiglitz posted a blog piece at http://opinionator.blogs.nytimes.com/2013/04/14/a-tax-system-stacked-against-the-99-percent/, in which, among other things, he wrote:
One of the reasons for our poor economic performance is the large distortion in our economy caused by the tax system. The one thing economists agree on is that incentives matter — if you lower taxes on speculation, say, you will get more speculation. We’ve drawn our most talented young people into financial shenanigans, rather than into creating real businesses, making real discoveries, providing real services to others. More efforts go into “rent-seeking” — getting a larger slice of the country’s economic pie — than into enlarging the size of the pie.
It doesn’t have to be this way. We could have a much simpler tax system without all the distortions — a society where those who clip coupons for a living pay the same taxes as someone with the same income who works in a factory; where someone who earns his income from saving companies pays the same tax as a doctor who makes the income by saving lives; where someone who earns his income from financial innovations pays the same taxes as a someone who does research to create real innovations that transform our economy and society. We could have a tax system that encourages good things like hard work and thrift and discourages bad things, like rent-seeking, gambling, financial speculation and pollution. Such a tax system could raise far more money than the current one — we wouldn’t have to go through all the wrangling we’ve been going through with sequestration, fiscal cliffs and threats to end Medicare and Social Security as we know it. We would be in sound fiscal position, for at least the next quarter-century.
to which I posted a response. The last time I looked, it was the only one, out of about 430, which discussed the issue of rent seeking. Here's what I wrote:
How do we unstack it? Collect the rent. Treat it as our COMMON treasure, not something subject to privatization by individuals, corporations, foundations, universities, etc.
Will it fund everything? We don't know. We can't know. We don't even collect the data that would permit us to calculate its magnitude. (Funny thing about that. Wonder who benefits from that. Could it be the rent-seekers?) Start collecting it, and using it to fund public goods.
At the same time, start reducing, even eliminating the dumb taxes which burden the economy: taxes on sales, buildings, wages, starting with the lowest wages earned. Watch the 99% recover. Watch the economy recover. The 1% will do all right under such a set up, but the rest of us will begin to thrive. Most likely, we'd be able to reduce the amount we need to spend on the social safety net, so that collected rent might cover a large share of our internal revenue needs.
What else might we collect revenue from? How about the privileges we've given out -- the privilege of using the airwaves (think how much a strong radio signal sells for in a large city) and the entire electromagnetic spectrum; franchises of various kinds, landing rights at LaGuardia, particularly at rush hour;
Then there are our nonrenewable and scarce natural resources: water, oil, natural gas, various metals. Royalties on many of these things are trivial, or they are going into private pockets, instead of being treated as our common treasure.
This appeared in the Freeport News, and I thought it worth sharing:
Why is it so hard to understand the justice and benefits of capturing
the community created value of land for the community?
Classical economists such as Adam Smith and Henry George, defined
land as all free gifts of nature (urban land, harbors, etc.).
These get value because people, both local and foreign, want them
for personal or commercial use.
So, no matter who 'owns' the gift of nature (land) there is a location
value called economic rent which is exclusive of any production on or
from that location.
When economic rent goes into private hands (i.e., beaches are given away
to corporations, land values are uncollected) legitimate government
revenue is lost and taxes like the proposed VAT are applied to the
Not only is land speculation rewarded but building houses, trading goods
and services, etc. are punished by taxes.
Naturally people try to avoid these taxes by smuggling and other forms
When economic rent goes to honest government it encourages better
use of locations as there is no tax penalty to build or work.
It reduces pollution and pays for infrastructure that helped create the
economic rent in the first place.
Why is this so difficult to understand? Why is there so much ignorance
of it and opposition to it?
– John Fisher
Hoi oligoi. A new phrase for me, and one which made immediate sense. My Georgist grandparents sometimes referred to themselves as part of the hoi polloi, but at other times also used it to distinguish themselves, in a joking way, from the mass of people who didn't know George's ideas.
By Edgar A. Guest
When they become due I don't like them at all.
Taxes look large be they ever so small
Taxes are debts which I venture to say,
No man or no woman is happy to pay.
I grumble about them, as most of us do.
For it seems that with taxes I never am through.
But when I reflect on the city I love,
With its sewers below and its pavements above,
And its schools and its parks where children may play,
I can see what I get for the money I pay,
And I say to myself: "Little joy would we know
If we kept all our money and spent it alone".
I couldn't build streets and I couldn't fight fire.
Policemen to guard us I never could hire.
A water department I couldn't maintain.
Instead of a city we'd still have a plain.
Then I look at the bill for the taxes they charge,
And I say to myself: "Well, that isn't so large".
I walk through a hospital thronged with the ill
And I find that it shrivels the size of my bill.
As in beauty and splendor my home city grows,
It is easy to see where my tax money goes.
And I say to myself: "If we lived hit and miss
And gave up our taxes, we couldn't do this".
I AM writing these pages on the shore of Long
Island, where the Bay of New York contracts to what is
called the Narrows, nearly opposite the point where our
legalized robbers, the Custom-House officers, board incoming
steamers to ask strangers to take their first American
swear, and where, if false oaths really colored the
atmosphere the air would be bluer than is the sky on this
gracious day. I turn from my writing-machine to the window,
and drink in, with a pleasure that never seems to pall, the
"What do you see?" If in ordinary talk I were asked this, I should of course say, "I see land and water and sky, ships and houses, and light clouds, and the sun drawing to its setting over the low green hills of Staten Island and illuminating all."
But if the question refer to the terms of political economy, I should say, "I see land and wealth." Land, which is the natural factor of production; and wealth, which is the natural factor so changed by the exertion of the human factor, labor, as to fit it for the satisfaction of human desires. For water and clouds, sky and sun, and the stars that will appear when the sun is sunk, are, in the terminology of political economy, as much land as is the dry surface of the earth to which we narrow the meaning of the word in ordinary talk. And the window through which I look; the flowers in the garden; the planted trees of the orchard; the cow that is browsing beneath them; the Shore Road under the window; the vessels that lie at anchor near the bank, and the little pier that juts out from it; the trans-Atlantic liner steaming through the channel; the crowded pleasure-steamers passing by; the puffing tug with its line of mud-scows; the fort and dwellings on the opposite side of the Narrows; the lighthouse that will soon begin to cast its far-gleaming eye from Sandy Hook; the big wooden elephant of Coney Island; and the graceful sweep of the Brooklyn Bridge, that may be discovered from a little higher up; all alike fall into the economic term wealth — land modified by labor so as to afford satisfaction to human desires. All in this panorama that was before man came here, and would remain were he to go, belongs to the economic category land; while all that has been produced by labor belongs to the economic category wealth, so long as it retains its quality of ministering to human desire.
But on the hither shore, in view from the window, is a little rectangular piece of dry surface, evidently reclaimed from the line of water by filling in with rocks and earth. What is that? In ordinary speech it is land, as distinguished from water, and I should intelligibly indicate its origin by speaking of it as "made land." But in the categories of political economy there is no place for such a term as "made land." For the term land refers only and exclusively to productive powers derived wholly from nature and not at all from industry, and whatever is, and in so far as it is, derived from land by the exertion of labor, is wealth. This bit of dry surface raised above the level of the water by filling in stones and soil, is, in the economic category, not land but wealth. It has land below it and around it, and the material of which it is composed has been drawn from land; but in itself it is, in the proper speech of political economy, wealth; just as truly as the ships I behold are not land but wealth, though they too have land below them and around them and are composed of material drawn from land.
— The Science of Political Economy
THAT land is only a passive factor in
production must be carefully kept in mind. . . . Land cannot
act, it can only be acted upon. . . . Nor is this principle
changed or avoided when we use the word land as expressive
of the people who own land. . . .
That the persons whom we call landowners may contribute their labor or their capital to production is of course true, but that they should contribute to production as landowners, and by virtue of that ownership, is as ridiculously impossible as that the belief of a lunatic in his ownership of the moon should be the cause of her brilliancy.
Science of Political Economy
unabridged: Book III, Chapter 15, The Production of Wealth: The First Factor of Production — Land
THE term Land in political economy means the natural or passive element in production, and includes the whole external world accessible to man, with all its powers, qualities, and products, except perhaps those portions of it which are for the time included in man's body or in his products, and which therefore temporarily belong to the categories, man and wealth, passing again in their reabsorption by nature into the category, land.
— The Science
of Political Economy — unabridged: Book III,
Chapter 14: The Production of Wealth, Order of the Three
Factors of Production •
abridged: Part III, Chapter 10: Order of the Three Factors of Production
THE power to reason correctly on general subjects is not to be learned in schools, nor does it come with special knowledge. It results from care in separating, from caution in combining, from the habit of asking ourselves the meaning of the words we use and making sure of one step before building another on it — and above all, from loyalty to truth.
I AM convinced that we make a great mistake in depriving one sex of voice in public matters, and that we could in no way so increase the attention, the intelligence and the devotion which may be brought to the solution of social problems as by enfranchising our women. Even if in a ruder state of society the intelligence of one sex suffices for the management of common interests, the vastly more intricate, more delicate and more important questions which the progress of civilization makes of public moment, require the intelligence of women as of men, and that we never can obtain until we interest them in public affairs. And I have come to believe that very much of the inattention, the flippancy, the want of conscience, which we see manifested in regard to public matters of the greatest moment, arises from the fact that we debar our women from taking their proper part in these matters. Nothing will fully interest men unless it also interests women. There are those who say that women are less intelligent than men; but who will say that they are less influential?
SOCIAL reform is not to be secured by noise and shouting; by complaints and denunciation; by the formation of parties, or the making of revolutions; but by the awakening of thought and the progress of ideas. Until there be correct thought, there cannot be right action; and when there is correct thought, right action will follow. Power is always in the hands of the masses of men. What oppresses the masses is their own ignorance, their own short-sighted selfishness.
WE may be wise to distrust our knowledge; and, unless we have tested them, to distrust what we may call our reasonings; but never to distrust reason itself. . . . That the powers with which the human reason must work are limited and are subject to faults and failures, our reason itself teaches us as soon as it begins to examine what we find around us and to endeavor to look in upon our own consciousness. But human reason is the only reason that men can have, and to assume that in so far as it can see clearly it does not see truly, is in the man who does it not only to assume the possession of a superior to human reason, but it is to deny the validity of all thought and to reduce the mental world to chaos.
We are laying the foundations in this state for a greater
distinction of classes than exists in any state of the Union at the
present day — as great as that which exists in England, where one man
rolls in wealth and another can scarcely keep body and soul
together. We are not much over twenty years old, and have in this
great empire of our own hardly half a million people. Yet, there is
already one man among us who is worth nearly ten million dollars,
and quite a number who are worth from one to seven, while the best
part of our land is divided off into estates, which in a little
while, when population becomes denser, will make their owners as
rich as the Duke of Argyll, or the Marquis of Bute.
There is a constantly increasing tendency to the concentration of wealth. The greater the fortune, the more rapidly it grows; and though the people who hold these great aggregations of money may be constantly changing, as they are changing in England, there will constantly remain the distinction between the very rich and the very poor. These two classes are the correlatives of each other; one man cannot become enormously rich without other men becoming proportionately poor. If not for our own sakes, at least for the sake of our children, is it not time for us to stop and ask what is the cause of this tendency of property to accumulate in a few hands? There is certainly nothing in the laws of Nature which requires the giving to one man of as much as can be had by ten thousand of his fellows.
-- Henry George, March 17, 1873, in the (San Francisco) Daily Evening Post,
quoted by Kenneth Wenzer in Henry George: Collected Journalistic Writings, Volume 1, pp. 69-70
The physical parish church offers not only a place for public worship but also a place for study groups, social and fund-raising events, soup kitchens and the like. Nobody, surely, wants to be like the early Christians, wandering through deserts and hillsides, without a physical place of worship, without roots. We need the Church Physical, just as we need the Church Ethical and the Church Social. Even the modest Quakers, with their great commitment to prayer and social justice, need meeting houses, organization and a network.
But no one launching an attack upon the papal elections, Vatican finances, sexism and the rest should think that they are attacking Catholicism per se. From my perspective, our Catholic Church is vibrant, helpful, intellectual, and working in so many ways to fulfill the message to love God and to love, and reach out to, one’s unknown neighbor. Everything else is, well, footnotes.The op-ed, by a professor at Yale, does not speak to whether the local parish or the worldwide church sees a need, or does anything about, challenging the structures which funnel the world's wealth, power and income into relatively few pockets, and insure that there will always be poor people -- and a growing number of them -- to whom they can render charity.
THE power of a special interest, though inimical to the general interest, so to influence common thought as to make fallacies pass as truths, is a great fact, without which neither the political history of our own time and people, nor that of other times and peoples, can be understood. A comparatively small number of individuals brought into virtual though not necessarily formal agreement of thought and action by something that makes them individually wealthy without adding to the general wealth, may exert an influence out of all proportion to their numbers. A special interest of this kind is, to the general interests of society, as a standing army is to an unorganized mob. It gains intensity and energy in its specialization, and in the wealth it takes from the general stock finds power to mold opinion. Leisure and culture and the circumstances and conditions that command respect accompany wealth, and intellectual ability is attracted by it. On the other hand, those who suffer from the injustice that takes from the many to enrich the few, are in that very thing deprived of the leisure to think, and the opportunities, education, and graces necessary to give their thought acceptable expression. They are necessarily the "unlettered," the "ignorant," the "vulgar," prone in their consciousness of weakness to look up for leadership and guidance to those who have the advantages that the possession of wealth can give. — The Science of Political Economy — Book II, Chapter 2, The Nature of Wealth: Causes of Confusion as to the Meaning of Wealth
IT is as bad for a man to think that he can know nothing as to think he knows all. There are things which it is given to all possessing reason to know, if they will but use that reason. And some things it may be there are, that — as was said by one whom the learning of the time sneered at, and the high priests persecuted, and polite society, speaking through the voice of those who knew not what they did, crucified — are hidden from the wise and prudent and revealed unto babes. — A Perplexed Philosopher (Conclusion)
THAT thought on social questions is so confused and
perplexed, that the aspirations of great bodies of men,
deeply though vaguely conscious of injustice, are in all
civilized countries being diverted to futile and dangerous
remedies, is largely due to the fact that those who assume
and are credited with superior knowledge of social and
economic laws have devoted their powers, not to showing
where the injustice lies but to hiding it; not to clearing
common thought but to confusing it. — A Perplexed Philosopher (Conclusion)
POLITICAL economy is the simplest of the sciences. It is but the intellectual recognition, as related to social life, of laws which in their moral aspect men instinctively recognize, and which are embodied in the simple teachings of him whom the common people heard gladly. But, like Christianity, political economy has been warped by institutions which, denying the equality and brotherhood of man, have enlisted authority, silenced objection, and ingrained themselves in custom and habit of thought. — Protection or Free Trade, Chapter 1