The chairman of Morgan Stanley Asia has an op-ed piece in the NYT which calls for measures which will increase savings by the American people, and promote less consumption:
The Obama administration needs to encourage the sort of saving that will put consumers on sounder financial footing and free up resources that could be directed at long overdue investments in transportation infrastructure, alternative energy, education, worker training and the like. This strategy would not only create jobs but would also cut America’s dependence on foreign saving and imports. That would help reduce the current account deficit and the heavy foreign borrowing such an imbalance entails.
It is difficult, though, to ask people whose income is being eaten up by fixed costs to save. (See Warren & Tyagi's The Two Income Trap.) Many of these fixed costs relate to housing, and, for young families, childcare -- and, I might add, this is a vicious circle: many need the childcare because of the high housing costs
Couple this with the fact that taxes weigh heavily on lower-income and middle-income people, and one might be led to seek a better way.
As we do things now, if one buys a home, one makes a down payment of some size, and finances the rest. For most of us in urban areas, with the possible exception of those who are buying newly built homes, over half of what we are paying is not for the house (or condo) itself, but for the location, the site. The seller didn't create the land value, even if he and his ancestors have owned that property for generations. The community created that land value. But as we currently do things, the hapless buyer must pay the seller for it. And then, to add insult to injury, he must pay property taxes on the house itself and on the land value, and taxes on many of his purchases (in Chicago, the sales tax is now over 10%, surpassed only by a few counties in Alabama), and taxes on his wages.
All effective tax spending raises land value. Pork projects raise someone's land value. So some of us, who own land well-served by government spending, receive back in increased land value, as much as we spend on taxes. Others of us receive far less, or, if we are tenants (either residential or commercial tenants), nothing back. Tenants pay their landlords a pretty penny -- mostly a function of location, not of the building itself or the services the landlord himself provides his tenants.
So if we want Americans to have money to save, perhaps the first place to look is the structure that causes us to pay twice -- to pay the seller or landlord for land value, and then to pay the commons in the form of taxes which burden the economy -- and to replace that structure with one which collects from every landholder the lion's share* of the land value in the form of an annual tax on the rental value of land. Agricultural land might be worth a few hundred dollars per acre per year; urban land can be worth as much $20 million per acre per year. Do we continue to permit its privatization, or should we socialize that economic rent. Collect it, as our common treasure, and stop imposing other taxes. People who work will have money to save and invest toward their own and their families' future needs, and our infrastructure and schools will have the funding they need.
Only the land speculators will be deprived, and I think we can manage without them just fine. So can justice. Workers should not be taxed on their wages, and landholders should be taxed on their landholdings.