Land Value Taxation will solve many of the 21st century's most serious social, economic and environmental problems, and promote justice, fairness and sustainability. We CAN have a world in which all can prosper.
Progress and Poverty, by Henry George Here are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!
Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It! This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm
Where Else Might You Look?
Wealth and Want The URL comes from the subtitle to Progress & Poverty -- and the goal is widely shared prosperity in the 21st century. How do we get there from here? A roadmap and a reference source.
Reforming the Property Tax for the Common Good I'm a tax reform activist who seeks to promote fairness and reduce poverty. Let's start with the enabling legislation and state requirements for the property tax. There are opportunities for great good!
Wherever there is in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on.
— THOMAS JEFFERSON (1785), Ford's Writings of Jefferson, Vol. VII., 36.
"Instead of subduing poverty by helping and inducing the poor to go out and inherit the earth, many of us wish to keep them crowded here, because their poverty is their inducement to labour for us rich."
— JEAN INGELOW, Words spoken by Giles Brandon; Off the Skelligs.
A tax upon ground-rents would not raise the rent of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist and exacts the greatest rent which can be got for the use of the ground.
— ADAM SMITH, Wealth of Nations (1776), Book V., Chap. 2, Art. I.
another excerpt from Dawson (1910 -- see an earlier post, below) -
IT is necessary now to consider more fully than hitherto the question, cannot society with right claim the increased value given to land by distinctly social causes? We have seen the various factors which tend to create what is generally known as "unearned increment." In one sense this term is very inaccurate. The increment is by no means unearned; what is meant, when the phrase is used, is that the landowner has not earned it. Society, however, has; and earned it honestly by heavy toil, by exertion of body and brain, by plodding industry, by bold enterprise, by culture and enlightenment, by progress in numbers, in wealth, and in morality. There is not a yard of land in the country — be it used for the growing of corn, the pasturing of cattle, or the habitations of men — whose value has not been enhanced by these social causes. It was the settlement of men with their various activities upon the land which originally gave it value, and the increase of population has been a constant and potent factor in value-growth since the primitive communities first established the institution of private property in the common soil. And yet, while society has for centuries been growing and labouring to increase the value of the land it required for its food, its industries, and its habitations, it has ever done so to its own detriment. While enriching the landlords it has impoverished itself.
This, indeed, is the greatest anomaly presented by the social increment problem. As a community develops and prospers, owing to its energy, enterprise, and enlightenment, it is all the time preparing a rod, armed with which the landlords will sooner or later turn upon it. A town's residents are punished for their industry and merited success by having to pay the landlords more and more money for the land they use. Did not tradesmen, by dint of perseverance and pluck, succeed and thrive, the demands made upon them would not increase; but simply because they reap in prosperity the reward of exertion, the landlords require growing tribute in the form of higher rents. And so it is in all departments of social life. In the eyes of the owners of the soil, human communities become, in fact, simply value-creators, rent-producers. The landlords reap where they have not sown, they gather where they have not strawed. Little of the value of that land which they lend and sell, at prices which are often so fabulous, has been created by them, yet they appropriate it all.
I'm reading a 1910 book by William Harbutt Dawson entitled "The Unearned Increment." I found these paragraphs particularly compelling. I think about the 2003 Schiller and Case article about the expectations of home buyers that their purchases would rise in value. The homebuyers of the last decade didn't understand why land should rise in value -- indeed, most of them weren't conscious of it being land appreciating, not the houses themselves -- but they seemed sure that it would rise forever, and they thought it essential to their own well-being that they get in on that appreciation.
100 years ago, there seemed to be a much better popular understanding of land economics than we have in 2012. It was widely discussed in quite a number of popular journals read by ordinary people. One might speculate on why we in the 21st century aren't better informed than we are on the subject. In whose interests is it that ordinary people not understand the importance and the dynamics land economics?
And here it will be convenient to refer to the plea often advanced that speculation in land is legitimate, and that there is no difference between making profits from the sale of land and making profits from the sale of ordinary commodities. Those who hold this view forget or ignore the fact that land differs from every product of man's hands in that, besides being a necessity of existence — the maintainer of life, it is a monopoly article. God made the earth as big as it is, and man cannot make it any bigger. There is so much land in the world, and no one, not even a Rothschild or a Vanderbilt, can add an inch to it. Hats, boots, and coats — manufactured goods in general — can be multiplied indefinitely. The supply is only regulated by the demand, and almost invariably the cost decreases as the demand is augmented. With the land it is otherwise: the absolute supply cannot be increased, and the cost grows with the growth of the demand. Moreover, in paying for the goods offered by the manufacturer, we pay largely for labour; but no amount of labour can produce land. It existed before man existed, and is not produced. Landed property is the one commodity of exchange in respect of which civilised society refuses to recognise absolute rights.
It may be granted at once, however, that it is impossible to artificially prevent the value of land from increasing. It would be absurd to try to check the operation of social forces which act from necessity. If there were no private ownership of land, but the State were the custodian and grand lessor, the value of that commodity would inevitably tend to increase owing to a multiplicity of causes which act independently of private and collective possession of the soil. Yet while it may not be possible artificially to prevent value-growth, it is possible and expedient to check artificial value-growth. Were the unearned increment secured wholly or even in part to society, there would be less inducement to speculation in land, and the increase in its value would be dependent upon healthier and socially more desirable causes. Men do not speculate commercially for amusement or the mere love of excitement, but for money, and if there were no prospect — or little prospect — of contingent gain, the great inducement to land speculation would be taken away.
At the idea of resistance to speculation the individualist will raise his hands in alarm and remonstrance. But these pages are written on the assumption that the interests of speculators cannot claim any partial consideration in the adjustment of the important problem under discussion — or, indeed, of any problem affecting the well-being of society. Those who hold the views here expressed would not dream of prohibiting speculation in land; all they say is, that society is not called upon to sacrifice its interests to the speculators, or to offer to the latter any facilities for doing it mischief. It cannot surely be considered a social advantage that a small class of men should be able, owing to their possession of a monopoly in land, to force up its value to fictitious and fabulous heights; nor can it be regarded as desirable that the value of land should be increased in order to allow of speculators enriching themselves. The result is to create extortionate rents, which, so far as trade and industry are concerned, make production dearer, and thus injure the consumer, and, so far as concerns dwellings, compel the householder to disburse an excessive proportion of his income in the mere sheltering of himself and his family within stone walls. Apart from the gains which fall to the intermediary speculator who does not buy land to keep, but to sell, the owners of the soil pocket the public tribute paid in the form of increasing rents. For their part, the house occupiers suffer in two ways by the growing value of land: they must pay more for the dwellings they live in, and more for the articles they use and consume. It cannot be to the interest of society that the rents of town dwellings should average, say, £20 instead of £15, and should increase 5% or even 2% every year. If such an increase fell to the whole community, the evil would not be so great, for those who paid it would in one way or another reap the benefit; but, as matters are, it all goes into the landlords' purse.
The remarkable thing about this story, to my eye, is that the size of the lot isn't even mentioned! It is worth $1 million land rent per year, and one might infer from the information provided that the lot is about 10,000 square feet, or less than 1/4 acre.
Capitalized at 5% (also known as "20 years' purchase") the lot would sell for about $20 million.
I assume that in addition to the land rent, the tenant pays the property tax on the land. So the entire $1 million annual land rent flows out of NYC, to the property's owner, in Marshall, Virginia.
What, pray tell, has the land owner done to earn that land rent?
Consider how many people's wage taxes and sales taxes could be lifted, and what that additional spending power could do for the local economy. Consider what would happen if there were no taxes to be paid on the apartments or on people's condo structures.
Or NYC can just keep letting the land rent leave the city, and even leave the country, continuing to flow into private pockets, just as if they'd rendered someone some service and earned it!
Land rent is natural public revenue, and we permit landlords to privatize it. Aren't we generous with our patrimony? (Leona told us the truth!)
The developer of a nine-story Karl Fischer rental apartment building planned for a corner site in the East Village signed a 99-year ground lease that requires payments each year of about $1 million.
The development company, YYY Third Avenue, signed the long-term lease for the vacant site at 74-84 Third Avenue, at 12th Street, April 27, 2011, however, a memorandum of the lease was not recorded in public records until last Wednesday, city property documents show.
A source citing city property records said the lease payment, which is not specifically recorded, could be inferred to be about $1 million per year. Prior to the document’s release, the annual lease cost was not known.
The prolific and controversial architect Fischer filed plans to build an 82,000-square-foot, nine-story residential building with 94 units, city Department of Buildings online records show. The permit has not been approved and is pending, DOB data indicate, and is to include nearly 9,511 square feet of retail, as well.
You might also be intrigued by the URL for the story ... I'm not sure what to make of it.
38. Mining companies which mine on public lands pay far less to the Federal government than they pay on privately held lands.
A. That's fair, because the private landholders are better negotiators
B. That's fair, because the 1872 Mining Act set the price, and it wouldn't be fair to change the business environment after setting the rules.
C. That's fair. Corporations need subsidies to create jobs.
D. That's unfair, and the federal government should be getting just as much from the miners as the private landholders are getting
E. That's unfair, and not only should the federal government be getting more from the mining companies, but the federal government should be collecting a significant portion of the royalties now privatized by private and corporate landholders, since we're all equally entitled to nature's bounty. This would permit us to reduce other taxes on wages and production, and perhaps lead to a citizen's dividend, similar to the Alaska Permanent Fund
F. That's unfair, because the 1872 Mining Act was based on old prices and old mining technology.
35. He worked hard. He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high lease prices for generations. Is it right to exact an estate tax of 50% or so on the true market value of that estate?
A. No! Widows and orphans must be protected! We wouldn't want them to have to depend on the social safety net.
B. No! The dollars he spent to buy that land decades ago were already subject to an income tax -- maybe two (federal and state) -- and the heirs are entitled to keep all the increase from the purchase price, even if that is a 20% increase, or a 200% increase, or a 2000% increase, over the purchase price.
C. No! The man had foresight, and we ought to honor, reward and encourage that!
D. No! The interstate highway could have been re-routed, and the man and his widow and children could have been left high and dry. They took a risk, and we ought to reward them for their brilliance!
E. An estate tax is a good way to capture this socially-created windfall once per generation. After all, he can't take it with him. Half for the heirs, half for the community that created the value. Seems fair, and keeps them out of the social safety net.
F. An estate tax is better than nothing, but it is a poor alternative to collecting some significant portion of the rental value of the land, month in and month out, whether that rental value be low (before the interstate highway's route is determined) or high (after it is announced and built, and the community grows up around that highway).
37. Our ancestors bought or stole the land which the ancestors of some of those now identified as "Native Americans" relied on. How should we and our children pay back them and their children?
A. By giving them the privilege of selling cigarettes without taxes, forgoing revenue that could help meet the health costs associated with smoking, both for smokers and for those who live with them.
B. By giving them the privilege of running casinos, even if a percentage of that revenue must be contributed to the state, and even if gambling is creates tremendous problems for some individuals in society, beyond those who actually gamble.
C. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever. (Similar to the Alaska Permanent Fund)
D. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever, and providing a double share to those who are starting from a disadvantaged position for some fixed number of years
E. By collecting from everyone who owns land and natural resources the annual economic value, paying the costs of government and common spending from that source, producing equal opportunity for all.
A. The outlawing of abortion so that all embryos that implant are permitted to mature to full term.
B. The outlawing of some sorts of birth control so that all fertilized eggs have rights
C. The provision of full pre-natal care and healthy foods, air and water to all pregnant women until birth, so that all babies born have as good a start as possible
D. The provision of affordable healthy food, clean air and clean water until age 18, so that all young people have as healthy a start as possible
E. The provision of good schools, without regard for one's parents' ability to pay, for all children, including those with special needs
F. The provision of some reasonable income so that the families of children can afford to meet all of each child's most simply defined needs, including health care, education, nutritious good, a safe home
G. The provision of healthy air and water to all, of all ages
H. The acknowledgments that (a) every person has a right to himself or herself; and (b) that all persons have equal rights to the gifts of nature, even after they reach the age of 18 or 21
I. The notion that the born have more rights than the unborn if one comes into conflict with the other
A. Sell them off at the current price, about $5 per acre, per the 1872 Mining Act, even if they contain minerals worth billions of dollars.
B. Sell them off to the highest bidder, as soon as possible
C. Sell them off to any bidder, as soon as possible
D. Lease them for fixed terms, to the highest bidder, with future lease prices to be calculated with an eye to making it profitable for the tenant
E. Lease them for fixed terms, to the highest bidder, and then repeat the auction in 10 years. Maintain extensive online databases so that the lease descriptions are visible to all, and the lease expirations are well advertised to all who might be interested in bidding. Make it the landlord's business to get high quality unbiased appraisals of tenant improvements, so that tenants can make sensible improvements and be secure in them. Use the revenue to reduce other taxes which burden the economy.
F. Lease them out, at market rates, with the proceeds used to generated a citizen's dividend. If there is a monopoly or oligopoly, break it up so that there is a genuine market.
G. Keep renting them out at whatever price they're now receiving; we don't want to upset anyone's plans or privileges.
29. The states need money. Should they sell their toll roads to private companies?
A. Sure! That would provide a nice pot of money that would help with this year's budget and next year's, and after that, we can leave the problem to a future group of legislators and a new governor!
B. Sure! The private sector will take better care of them and turn a profit to boot!
C. No. The taxpayers paid for those roads to be built, and have a right to more control over them than would exist after privatization.
D. No. The taxpayers own that land, a unique right of way, and selling it off forever is irresponsible and wrong!
E. No. Our society -- any society -- is highly dependent on our infrastructure, and control over it must remain in the public sector.
F. No. Those highways are built on land that was bought or taken from individual property owners for the public good. To turn them over to the private sector, for profit, would be wrong.
G. No. Those highways will increase in value over the coming decades and centuries, and should not become anyone's private property, at any price. Both their economic value and the control over them belongs in the common sector.
H. No. Even if it looks as if it might make sense for our generation, what of future generations? Should we permit the privatization of a common asset they will likely be dependent on?
I. No. Future taxpayers will build more highways intersecting with these current tollroads, and increase their value; were these to be privatized, it would be the private corporation who would reap the benefit of that future public investment.
Does the Single Tax discriminate between earned and unearned income?
It is the scientific way of doing what we have been feebly attempting to do in an unscientific way, that is, to distinguish between what Dr. Scott Nearing called "property income" and "services income," or between that form of wealth which is the result of individual effort in production and that which is purely the result of the collective effort of society; or between the two forms of wealth which Dr. Ellwood, of the University of Missouri, in a seemingly unwilling recognition of an unwelcome truth, calls "earnings" and "findings."
In the case of the great majority of us (whether as individuals or as partners in corporations) our incomes are so inextricably compounded of earnings and findings, of privilege income and service income, that it is hard for some of us to know whether we belong to the privileged or unprivileged classes, to the slave owners or the slaves, to the confiscators or the victims; and perhaps only those absolutely property less men at the bottom of the social scale can be said to have no share in the "findings" that spring from privilege. On the other hand it is equally true that all industry up to its highest strata, has to pay toll to privilege and provide those "findings" which distribute themselves with more or less inequality over almost the whole of society. How to distinguish between and separate these entirely different kinds of wealth is what all sincere sociologists and honest taxation commissioners have wanted to do and have hitherto failed in the doing.
If we take a handful of sand and a handful of iron filings and mix them thoroughly, and then set a man with the sharpest eyesight and the nimblest fingers to separate the particles, it will take him long to accomplish his task and he will never do it with more than an approximation to completeness. But apply a strong magnet to the mixture and the separation will be accomplished in ten minutes. Then see how the analogy applies to the economic problem in society. Let us imagine the return that should naturally flow to land in the form of rent to take the shape of blue coins made of steel. Let us fancy that the natural reward that goes to capital as interest takes the form of red coins made of wood. Finally let us figure the natural return to human service of all grades as being represented by white coins also made of wood. On examination it will be discovered that in the case of almost every member of society above the rank of the day laborer, his income is tri-colored or composed of all three coins. There are countless "captains of industry" among us who complacently assume their large incomes to be the rewards freely given by a free world in return for their invaluable services, who will be surprised to find how large a proportion of blue their income coins contain. There are multitudes of livers upon what they have called "interest" who will expect to find their coins red, who will be equally surprised to discover that they are almost entirely blue. To complete the parable, the taxation of land values will be like the application of the magnet which will draw away the blue steel coins in whatever stratum of society they may be found, and lay them aside for social purposes, being socially created wealth; leaving the red and white coins to be competed for in a world of free opportunity, without deduction or diminution by taxation or in any other way.
27. A new subway line costs $2 billion. Suppose that its construction increases the surrounding land values by $2 billion. (Assume 5 miles long, 10 stations, 0.5 mile radius, average lot size of 0.10 acre. How should the new subway line be financed?
A. Taxes on sales of groceries, clothing, etc. within those 1/2 mile radius areas
B. Taxes on sales of groceries, clothing, etc., all over the city the subway line connects to
C. Taxes on sales of services within those 1/2 mile radius areas
D. Taxes on sales of services of all kinds, all over the city the subway line connects to
E. Taxes on wages of those working in those 1/2 mile radius areas
F. Taxes on wages all over the city the subway line connects to
G. Taxes on wages of those living within the 1/2 mile radius areas
H. Taxes on capital gains and dividends of those living within the 1/2 mile radius areas
I. Taxes on capital gains and dividends of those with residence anywhere in the city
J. Taxes on all real estate within those 1/2 mile radius areas
K. Taxes on all real estate, all over the city the subway line connects to
L. Taxes on just the buildings within those 1/2 mile radius areas
M. Taxes on all the buildings, all over the city the subway line connects to
N. Taxes on the land value within those 1/2 mile radius areas
O. Taxes on the land value, all over the city the subway line connects to
P. Transfer taxes on either or both of buyers and sellers whenever a property within the 1/2 mile radius is sold
Q. Transfer taxes on either or both of buyers and sellers whenever a property anywhere within the city is sold
R. An inheritance tax when a house or commercial property is transferred from a decedent to a survivor.
The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.
The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.
"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.
21. The creation of a new subway line raises the land values near each of the stations. Who should pay for the building of the subway line?
A. Riders of the new subway line
B. Riders of all subways in the system.
C. Riders of all mass transit in the metro area.
D. Drivers of cars and trucks, all over the metro area, via taxes on their fuel purchases (that is, in proportion to miles driven and the fuel efficiency of their vehicles)
E. Drivers of cars and trucks, all over the metro area, via an annual surcharge on their registration
F. Drivers of cars and trucks, all over the metro area, in proportion to the value of their cars, owned or leased
G. Drivers of cars and trucks, via tolls when they use bridges and tunnels, or HOV lanes, or certain highways
G. The taxpayers, via increased sales taxes on their purchases
H. The tourists and business travelers, via hotel occupancy taxes and taxes on rental cars.
I. Passengers in taxis, via a surcharge on their fares.
J. The homeowners, via taxes on their homes
K. Drivers, commercial and individual, via taxes on fuel purchased within the city
L. Employees all over the metro area, via a payroll tax
M. The tenants of commercial buildings in the heart of the central business district
N. All landholders, paying equally (a parcel tax)
O. All landholders, in proportion to the size of their lots
P. Landholders, in proportion to the value of the land they hold, without regard to the buildings or their contents. Those whose land values are raised by their proximity to the new line will see a proportional increase in their share of the tax burden; those far from the new line will not.
I had the pleasure of watching part of a marathon of the second season of Downton Abbey yesterday, knowing that I'd missed a few shows -- and want to watch them all in sequence.
The setting of the show raises some questions one might want to think about.
1. What sort of wages do all the "downstairs" employees receive?
2. What employment alternatives are available to them?
3. How does the owner of Downton Abbey afford to pay for the services of all those workers, in addition to the non-wage costs of maintaining the castle and the surrounding land, which is an overwhelming job -- and passion -- for him?
4. Is there a middle class in that town? On what are their fortunes dependent? How are they different from the staff at Downton Abbey?
5. What are the opportunities for the children of the house staff at Downton Abbey to have a different life from their parents?
6. Can others prosper?
7. What sorts of ideas, particularly on public policy, maintain the status quo?
8. Why is having the property pass intact to one person so important? What would happen if it were divided among several heirs?
9. Do you think there are small holdings in the same area, where individual families can live, work and prosper, or a series of large holdings like DA?
10. Are people unemployed or underemployed? Are their opportunities limited by the system, particularly if they care about staying close to family?
This is off the top of my head. I'm charmed by the series, and at the same time, am puzzled by how much I enjoy watching it. (Good writing, of course.)
19. Storms continue to erode the resort beaches up and down our coasts. Who should pay for beach restoration every few years?
A. The federal government, from income tax revenues. (why?)
B. Taxes on pollution should be used to pay for this, on the basis that pollution produces the climatic conditions that make storms slower moving and more destructive.
C. State governments along the coasts.
D. Local governments, town by town, paid for by sales taxes.
E. County governments along the coasts.
F. Local governments, town by town, paid for by taxing wages.
G. Local governments, town by town, paid for by summer parking revenue, hotel bill taxes and taxes on rental properties' revenue;
H. Local governments, town by town, paid for by property taxes, taxing both buildings and land, in proportion to current market value
I. Local governments, town by town, paid for by land value taxation. Land values close to the beaches rise and fall with the sand, and properties further from the beaches are far less effected by the presence/absence of beach sand than those near the beaches.
J. Local governments, town by town, paid for by transfer taxes on sold properties, so as not to burden long-time owners who aren't selling.
I came across this rather good letter to the editor, from 1938. (Trinity Church Corporation, a major landlord in downtown Manhattan, was the subject of a NYT article this past week, as well as the subject of a major series in the NYT in December, 1894):
1938-09-03 Letters to The Times
Collecting Ground Rent Single-Tax System Regarded as No Detriment to Building
TO THE EDITOR OF THE NEW YORK TIMES:
Fabian Franklin, in his letter to THE TIMES discussing the demolition of John D. Rockefeller's Harlem tenements in order to save taxes, writes:
"That objection is simply that virtual abolition of land ownership, which the single-tax plan is designed to effect, would make the building of houses in a city an extra-hazardous business, because, under the single-tax regime, in the great majority of cases the investment would result in a disastrous loss to the owner of the building. I was neither blaming nor praising Mr. Rockefeller for the demolition of Harlem tenements."
What is the so-called single-tax system? It is the collection by the government, through the taxing officials, of the entire economic or ground rent of land and the repeal of all taxes on buildings and other products of labor and capital. That ground rent is estimated to be 9% of the capital value of the land. New York City is now collecting one-third of this ground rent. The market value of the lots is the remaining two-thirds, capitalized. Dr. Franklin's thesis is that if the entire ground rent is collected no one would erect buildings, because "in the great majority of cases the investment would result in a disastrous loss to the owner of the building."
Some of the finest buildings in New York City are erected on leased land and the lessee pays the ground rent 100% besides a tax on the building. There are hundreds of buildings erected by lessees of lots owned by Trinity Church, Astor estate, Rhinelander estate, Sailors Snug Harbor and others. The lessees must pay all the taxes, both on land and building, amounting to 3% of the assessed value of both, and to the landlord 6% of the market value of the land.
Thus the entire ground rent is paid by the lessee, but only one-third to the government representing the people who made that value by their presence and activities, the remaining two-thirds to the landlord. Notwithstanding that they are thus obliged to pay 100% of the economic rent, bankers and business men erect buildings costing millions. Under the Henry George plan they would have to pay less, for the taxes on these costly structures will have been repealed.
Perhaps if Mr. Rockefeller had not been obliged to pay taxes on the buildings he might not have pulled them down; or, if he had, would have erected better buildings in their place in order to get a return on his investment in buildings. The ones who will benefit most from the adoption of the Georgian philosophy are the owners of humble homes. The average small homeowner's house is assessed for at least twice the assessed value of the lot. If the house is relieved from taxation and the lot taxed the entire ground rent, his tax will be less than it is now. The difference will be made up from vacant lots and lots that are worth more than the improvements.
After all, the building of houses is like any other business. The builder takes the risk of lessened demand because of changes in fashion, obsolescence, competition. It is estimated that 95% of new businesses ultimately fail. With the adoption, however, of the philosophy of Henry George, commonly called the single tax, failures in the housing and other businesses will be much fewer. This is because neither houses nor goods nor anything else will be taxed. The collection of the entire ground rent will not lessen the area of the surface of the earth one inch. On the contrary, it will open to occupation and use land that is now held for speculation purposes.
The taxation of any product of labor and capital will add the amount of the tax to the price, lessen demand and thus curtail production. The result is unemployment and misery.
Frederic Cyrus Leubuscher Essex Fells, N. J., Aug. 31, 1938
David Brooks suggested in a recent column that the country needs a national service program to unite the diverging classes in society. He’s right.
Not long ago, we had one that did so very well. It was the draft. Every young man — regrettably, only men — shared a potential obligation to his country.
Any serious discussion of comprehensive national service means talking about a draft. It’s hard to imagine the Supreme Court upholding nondefense conscription, but if civilian service were an alternative to military duty, the prospects would improve.
The all-volunteer military is exemplary for its professionalism, sacrifice, meritocracy and diversity. (I have a son with two college degrees who enlisted.) But the benefits and burdens need to be shared more widely. There have been too many multiple deployments of regulars and reserves, and if draftees were in the mix once again, perhaps there would be no more wars of choice.
Many domestic needs could be served by a comprehensive national service program. Like the Depression’s best idea, the Civilian Conservation Corps, it could involve people from all classes in repairing our parks, roads, bridges and other infrastructure. It could also bring fresh ideas and talent to teaching, law enforcement, social work and other underpaid public services. The benefits to our national character, as Mr. Brooks suggests, would be immense.
There are past and present models of a national service program in more than a dozen other nations. It is time we gave it a try.
MARTIN A. DYCKMAN Waynesville, N.C., Feb. 14, 2012 The writer is a retired associate editor and columnist for The St. Petersburg Times.
Editors’ Note: We invite readers to respond to this letter for our Sunday Dialogue. We plan to publish responses and Mr. Dyckman’s rejoinder in the Sunday Review. E-mail: email@example.com
LVTfan's observation: Every investment in improved infrastructure creates land value. Most projects that have value -- education, law enforcement, social work, improved public health -- will also increase land value.
A project is, by definition, worthwhile if it creates more in land value than it costs to do,* and, it could be argued that, when comparing two infrastructure projects that cost the same amount, say, $100 million, if one creates $200 million in land value and the other creates merely $150 million in incremental land value, the $200 million project should probably take priority, all other things being equal.
*which isn't to say that many public spending projects which don't create increased land value aren't worthwhile, too, for other reasons.
Pork barrel is the appropriation of government spending for localized projects secured solely or primarily to bring money to a representative's district. The usage originated in American English. In election campaigns, the term is used in derogatory fashion to attack opponents. Scholars, however, use it as a technical term regarding legislative control of local appropriations.
The term pork barrel politics usually refers to spending that is intended to benefit constituents of a politician in return for their political support, either in the form of campaign contributions or votes. In the popular 1863 story "The Children of the Public", Edward Everett Hale used the term pork barrel as a homely metaphor for any form of public spending to the citizenry. After the American Civil War, however, the term came to be used in a derogatory sense. The Oxford English Dictionary dates the modern sense of the term from 1873. By the 1870s, references to "pork" were common in Congress, and the term was further popularized by a 1919 article by Chester Collins Maxey in the National Municipal Review, which reported on certain legislative acts known to members of Congress as "pork barrel bills". He claimed that the phrase originated in a pre-Civil War practice of giving slaves a barrel of salt pork as a reward and requiring them to compete among themselves to get their share of the handout. More generally, a barrel of salt pork was a common larder item in 19th century households, and could be used as a measure of the family's financial well-being. For example, in his 1845 novel The Chainbearer, James Fenimore Cooper wrote, "I hold a family to be in a desperate way, when the mother can see the bottom of the pork barrel."
Typically, "pork" involves funding for government programs whose economic or service benefits are concentrated in a particular area but whose costs are spread among all taxpayers. Public works projects, certain national defense spending projects, and agricultural subsidies are the most commonly cited examples.
Greatly exceeds the President’s budget request or the previous year’s funding;
Not the subject of congressional hearings; or
Serves only a local or special interest.
The last of these seems as if it might be the most important one.
So here's the question: How should we finance these projects, if they are to be done? How would we pay for a modern CCC? (Ah -- this sounds like The Land Questions ...)
A. By a local tax on land value. This would necessitate regular reassessment of the land value in every community in America, say, every 3 years, which could be done for well under $40 per parcel. It would probably also require some state and/or federal oversight, checking values against transactions to verify that all municipalities or assessing units are doing high-quality market-based assessments. [In Maryland, they're already doing assessments every 3 years. In Connecticut, assessments every 4 years are required. In southern Delaware, the assessments are 30+ years old. In California, the assessments are meaningless, due to Proposition 13. It would take a few years for some of these entities to update their assessments.]
B. By a state tax on land value. [same issues apply]
C. By a national tax on land value.
D. Let's just use the federal income tax. It's there. It's easy.
E. Let's use a national sales tax.
F. Let's use a tax on imports.
G. Let's tax buildings.
H. Let's tax services.
It seems to me that a national service corps of some sort has a lot of merit. It could promote a lot of highly desirable goals. It could provide a lot of home-front protection in the event of natural disasters. It could get some important projects done, including the maintenance of existing infrastructure currently under-maintained,and the provision of services we believe are important (particularly when we are the beneficiaries).
But the financial benefits ought not to fall into private or corporate pockets; they ought to accrue to all of us, and ease the burdens of financing other kinds of federal spending. Land value taxation strikes me as the answer to so many of our supposedly intractible problems.
13. Electric utilities have long been regarded as "widows' and orphans'" stocks. Safe, if not high income. A few years ago, they were deregulated. A recent study has shown that retail electricity prices have increased faster in states that adopted competitive pricing than in those where rates continue to be set by government agencies. We all need reliable electricity. Should we permit the licenses to generate and distribute electricity to be an opportunity to make a windfall profit? (Or should we encourage municipal ownership of vital utilities?)
A. Sure! People and businesses are quite free to move from states without regulation to states with regulation if they choose. They may not mind paying 20% more for their electricity, if other conditions are good. And didn't the utilities earn it?
B. Sure. If local regulatory agencies decide that local best interests conflict with the interests of the corporate shareholders, they can re-regulate. After all, the corporations don't vote.
C. No. Electricity is important and we ought to do what we can to keep the price down so that poor people can afford electricity and still have funds for other costs of living.
D. No. Electricity is vital to the economy, and we ought to do what we can to keep it affordable to ordinary people, and not a source of corporate windfalls.
E. No. Natural monopolies ought to be publicly owned, the prices kept low, and any excess revenue accrue to the public treasury, not to the benefit of private investors.
"I suppose at the smallest average for the making of a single rich man, we make a thousand whose lifelong is one floodtide of misery. The charnel houses of poverty are in the, shadow of the palace, and, as one is splendid, so is the other dark, poisonous, degraded. How can a man grow rich except on the spoils of others' labor? His boasted prudence and economy, what is it but the most skilfully availing himself of their necessities, most resolutely closing up his heart against their cries to him for help?"
— J. A. FROUDE, Nemesis of Faith (1848), Letter VII. (Words spoken by one of the characters).
This quote came across my inbox today, and I thought it worth sharing:
“We operate from the concept of ‘shalom,’” Forrister said when he reported on that meeting to The Huntsville Times. “’Shalom’ means more than the absence of war, it means the well-being of all. Ezekiel said to seek the ‘shalom’ of the city you’re in – and he was writing to people in exile in Babylon. We’re to seek the good of the whole community, of all of society.”
I came very slowly to the point of view that the nature of the ways we fund our common spending is at least as important as the spending side of the budget. That taxation can be destructive or constructive. That it can be used to create vital healthy communities or ones in which wealth and power concentrate into a few hands.
I grew up with the benefit of grandparents who understood this, and I still didn't "get it" until well after they were gone. Certainly my college education didn't provide me any glimpses of it, despite being concentrated in fields in and around it. I hope that others who are seekers after peace -- after Shalom -- will investigate what Henry George's "Remedy" -- land value taxation -- has to offer for their community and their country.
And here's the final paragraph from the email that the first quote came from:
Taking care of each other is simple kindness, not something sinister, said Forrister, who was trained as a Church of Christ minister.
“Thinking about looking out for the common good is not socialism,” Forrister said. “Capitalism has to be tempered by social policy that responds to human needs that capitalism won’t respond to.”
Our current form of capitalism is, among other things, land monopoly capitalism. Were we to remove the land monopoly aspect, through land value taxation, we would have a purer capitalism, one which I think would better serve the ideals we claim to hold dear.
So those who understand the past ought to be well paid to share their understanding with society.
One of the current presidential candidates claims to understand his claims to a fabulously high income in this light.
His payment came from an entity which thought his intellectual offerings, or something he had to offer, worth the price.
The question is, who is paying the larger price for this? And why should it be this way?
And we need to be thinking about what those who teach history -- and other subjects -- to our children and young scholars ought to be paid. What do we value?
Financial engineering, or physical engineering of various kinds?
Medicine or Corporate Finance?
Understanding history, or the fine points of real estate speculation?
Enriching oneself, or acting in ways that create a more prosperous and stable economy for all of us?
What fields should attract our best and our brightest? And what should the rewards be?
I heard a snippet on the radio this morning -- something about waking up in the morning trying to figure out how to provide for one's family. It wasn't about providing trust funds for one's family, but about providing the basics.
Shouldn't our society's best minds be encouraged to examine our history in search of better ways to structure things so that life is not such a struggle for the ordinary human being?
(And maybe a critical mass would discover that Henry George had some useful and relevant observations and recommendations toward that goal.
In the files I've been digging through, from the late 50s to the early 80s, I found an early draft of a fine paper by Mason Gaffney about California's Proposition 13, for presentation at an August, 1978 conference. I dug around and found a published copy of that paper, and think it worth sharing here. Original title, "Tax Limitation: Proposition 13 and Its Alternatives"
First, a few of my favorite paragraphs, which I hope will whet your appetite for the whole paper. I won't attempt to provide the context (you can pick that up when you continue to the paper, below).
"There is a deferment option for the elderly, bearing only 7% interest (which is about the annual rate of inflation). In California, as also in Oregon and British Columbia, hardly anyone takes advantage of this deferment option. This fact, it seems to me, rather calls the bluff of those who so freely allege that the woods are full of widows with insoluble cash-flow problems, widows who are losing their houses to the sheriff and whose heirs presumptive, will not help keep the property, which they will eventually inherit."
We hear a lot these days about cutting the fat out of the public sector; but there is fat in the private sector too. I interpret "fat" to mean paying someone for doing nothing, or for doing nothing useful. Most economists agree that payments to people. for holding title to land is nonfunctional income, since the land was created by nature, secured by the nation's armed forces, improved by public spending, and enhanced by the progress of society. "Economic rent" is the economist's term, but in Jarvis-talk we may call it the fat of the land or "land-fat." It has also been called unearned increment, unjust enrichment, and other unflattering names. Howard Jarvis has said that the policeman or fireman who risks his life protecting the property of others has his "nose in the public trough." But it has seemed to generations of economists that the owner whose land rises in value because public spending builds an 8-lane freeway from, let us say, Anaheim to Riverside, and carries water from the Feather River to San Diego, is the first to have his nose in the trough. Nineteenth-century English economists who worked this out were more decorous. They said things like "landlords grow rich in their sleep" (John Stuart Mill), or the value of land is a "public value" (Alfred Marshall) because the public, not the owner, gives it value.
Some 43% of the value of taxable real estate in California is land value. When we lower the property tax we are untaxing not only buildings, but also land-fat.
The ownership of property is highly concentrated, much more so than the receipt of income. Economists in recent years are increasingly saying that the property tax is, after all, progressive because the base is so concentrated, and because so little of it can be shifted. But this message has not yet reached many traditional political action groups who continue to repeat the old refrains. Two remedies are in order.
One is to collect and publish data on the concentration of ownership of real estate. The facts are simply overwhelming and need only to be disseminated.
The second remedy is to note how strikingly little of the Proposition 13 dividend is being passed on to renters. This corroborates the belief of economists that the property tax rests mainly on the property owner where it originally falls, and not on the renter.
A high percentage of real property is owned from out of state and even out of the country. The percentage is much higher than we may think. It is not just Japanese banks and the Arabs in Beverly Hills. It is corporate-held property which comprises almost half the real estate tax base. If we assume that California's share of the stockholders equals California's share of the national population, then 90% of this property is absentee-owned; the percentage may be higher because many of these, after all, are multinational corporations with multinational ownership.
No one seems to have seized on the fact that half the taxable property in California is owned by people not voting in the state. Senator Russell Long has suggested the following principle of taxation: "Don't tax you, don't tax me, tax that man behind the tree." Property tax advocates have done well in the past and should do well again in the future when they make their slogan: "Don't tax you, don't tax me, tax that unregistered absentee. Don't tax your voters, they'll retaliate; tax those stiffs from out of state." Chauvinism and localism can be ugly and counterproductive, as we know; but here is one instance where they may be harnessed to help create a more healthy society. The purpose of democracy is to represent the electorate, not the absentee who stands between the resident and the resources of his homeland.
California's legislative analyst, William Hamm, estimates that over 50% of the value of taxable property in California is absentee-owned. This is such a bold, bare, and enormous fact it is hard to believe that Californians will long resist the urge to levy taxes on all this foreign wealth. They may be put off by the argument that they need to attract outside capital, but that carries no weight when considering the large percentage of this property which is land value.
Property income is generally more beneficial to the receiver than is the same income from wages or salaries, because the property owner does not have to work for it.
Property, particularly land, has been bought and sold for years on the understanding that it was encumbered with peculiar social obligations. These are, in effect, part of our social contract. They compensate those who have been left out. Black activists have laid great stress in recent years on the importance of getting a few people into medical and other professional schools. Does it not make more sense that the landless black people should have, through the property tax, the benefit of some equity in the nation's land from which their ancestors were excluded while others were cornering the supply?
A popular theme these last few years is that property owners should pay only for services to property, narrowly construed. Who, then, is to pay for welfare — the cripples? Who is to pay for schooling — the children? Who should sacrifice for the blacks — Allan Bakke? Who should finance our national defense — unpaid conscripts? The concept that one privileged group of takers can exempt itself from the giving obligations of life denies that we are a society at all.
Here is, perhaps, my favorite:
We can ask that a single standard be applied to owners troubled by higher taxes and to tenants troubled by higher rents. When widow A is in tax trouble, it is time to turn to hearts and flowers, forebode darkly, curse oppressive government, and demand tax relief. When widow B has trouble with escalating rents, that touches a different button. You have to be realistic about welfare bums who play on your sympathy so they can tie up valuable property. You have to pay the bank, after all. A man will grit his teeth and do what he must: garnishee her welfare check. If that is too little, give notice. Finally, you can call the sheriff and go to the beach until it's over. That's what we pay taxes for. Welfare is their problem.
Anyway, widow B is not being forced out of her own house, like widow A and so many like her. Jarvis said that taxes are forcing three million Californians from their homes this year. But in truth, while evictions of tenants are frequent, sheriff's sales of homes are rare. Those who do sell ("because of taxes," they say, as well as all their other circumstances) usually cash out handsomely, which is, after all, why their taxes had gone up.
Then there is the fruit tree anomaly. Under Proposition 13, a tree can only be assessed at its value when planted, with a 2% annual increment. The value of a seed thrown in the ground or even a sapling planted from nursery stock is so small compared with the mature tree that this is virtual exemption. This anomaly rather graphically illustrates how Proposition 13 automatically favors any appreciating property over depreciating property. The greatest gain here goes, of course, to appreciating land.
Finally, build no surpluses. Surpluses attract raiders and raiders are often organized landowners. "Property never sleeps," said the jurist Sir William Blackstone. "One eye is always open." Even though the surplus was built up by taxing income, Howard Jarvis made it seem the most righteous thing in the world that it should be distributed to property owners. He was geared up for this because his landlord patrons kept him constantly in the field.
Economists of many generations even before Adam Smith and continuing to the present — have preached on the advantages of land as a tax base. Let me enumerate a few of those.
A tax on land value is the only tax known to man which is both progressive and favorable to incentives. One can wax lyrical only about a tax that combines these two properties, because the conflict between progressivity and incentives has baffled tax practitioners for centuries, and still baffles them today.
A land tax is progressive because the ownership of the base is highly concentrated, much more so than income and even more so than the ownership of machines and improvements.
Also, the tax on land values cannot be shifted to the consumer. The tax stimulates effort and investment because it is a fixed charge based merely on the passage of time.
It does not rise when people work harder or invest money in improvements. Think about this. It is remarkable. With the land tax, there is no conflict but only harmony between progressivity in taxation and incentives to work and invest. In one stroke it solves one of the central divisive conflicts of all time.
The land tax does that because it cuts only the fat, not the muscle. It takes from the taxpayer only "economic rent," only the income he gets for doing nothing. If people could grasp this one overriding idea, then the whole sterile, counterproductive, endless impasse between conservatives who favor incentives and liberals who favor welfare would be resolved in a trice, and we could get on to higher things.
The final paragraphs speak directly to us in 2012. 34 years have passed since this was written.
Summing up, Walter Rybeck, an administrative assistant for Congressman Henry Reuss of Wisconsin, and head of the League for Urban Land Conservation, has sagely suggested that we distinguish two functions of business: wealth-creating and resource-holding. A good tax system will not make people pay for creating wealth but simply for holding resources. Most taxes wait on a "taxable event" — they shoot anything that moves, while sparing those who just sit still on their resources.
If we really want to revive the work ethic and put the United States back on its feet, we had better take steps to change the effect of taxes on incentives. Legislatures have got in the habit of acting as though persons with energy and talent, and with character for self-denial, should be punished, as if guilty of some crime against humanity. We cannot study the tax laws without inferring that Congress regards giving and receiving employment to be some kind of social evil, like liquor and tobacco, to be taxed and discouraged by all means not inconsistent with the rights of property. Little wonder the natives are getting restless. If we tax people for holding resources rather than creating wealth and serving each others' needs, we will be taking a giant step toward a good and healthy society.
If your appetite is whetted by these excerpts, you can read the entire article below:
It is frequently pointed out by Georgists that there are no really good rebuttals to land value taxation.
This excerpt from a 1971 letter to my grandfather from a colleague describes where the opposition comes from:
There may be be no "arguments that actually oppose LVT" as Bill says, but there are plenty of people who not only actually but actively oppose it. These are the people who are making hundreds of millions of dollars a year on the unearned increments land speculation gets as a result of land being so undertaxed that the landowner puts up only a trifling share of the enormous community investment needed to make his land reachable, livable and readily saleable. Of 7 million-odd New Yorkers I would guess that perhaps 70,000 people profit by today's misapplication of the property tax while 7 million lose by it, but the problem is that the 7 million have no idea of what they are losing while the 70,000 jolly well know that they have a good thing going for them and fight to keep it.
I've been trying for a year to get my friend, J___ C___, past president of the Realtors and Chairman of the Realtors Economic Research Committee to stop fighting LVT, but he keeps coming back to how his father bought some land near San Diego for $20 an acre before 1900 and sold it for $4,000 an acre around 1950 and his father could not have held it all that time if he had had to pay more than a nominal tax.
I don't think anyone should take the equity argument seriously. Just because the ownership of underused land has been subsidized for years does not entitle its owners to expect the subsidy to be continued forever, and likewise, for those who bought land in the expectation that the subsidy would be permanent. The equity objection to increasing the tax on land would apply almost equally to any other tax increase.
A week later, another letter includes this:
Just because landowners have had a wonderful subsidy racket going for them in the past should not give them any claim on having that subsidy continue ad infinitum. I do agree with Lowell that the transition to LVT would raise problems, and in any area with a high tax rat on property I can see that the transition would have to be staggered over a period of years, probably not less than five or more than ten, dpending on how big a tax rate was to be shifted off improvement values onto location values.
In the same file, a copy of a 1969 letter from the same person to Lowell (Harriss):
I don't see how tripling the tax on land could fail to force almost all owners of underused land to get busy and put it to better use. Conversely, I don't see how taking the equivalent of a 51% sales tax off improvements could fail to be a tremendous stimulant to improvements. If a 7% Federal tax credit on improvements was so effective, what would wiping out a 50% tax do!
Our argument for justice and liberty -- the doctrines of Henry George -- depends upon successfully synthesizing the social sciences and philosophy. Our scientific work in this area builds us a rostrum from which we can teach the fundamental principles of ethical democracy. ...
As Georgists we are interested
in establishing site value taxes and taxes on the economic rent of other resources,
in determining the economic and social impacts of all other taxes and constructing an intelligent tax system that abolishes speculation and unearned incomes and encourages productive labor, progressive entrepreneurship and socially progressive investments, while bearing the least heavily on labor and capital;
in promoting the free flow of goods, ideas and people across all boundaries, local and national;
in reducing State intervention in the economy and society to the minimum and developing effective and socially oriented self regulation in all occupations, professions and industries;
in reviving mutual aid and substituting it for State aid in the solution of economic, social and personal problems;
in establishing equality of opportunity in all areas of economic and social life and in ridding the economy and society of all vestiges of monopoly and privilege.
In a word, we seek to make it possible for each individual to become a free person developing his faculties to the highest in an ethical democratic free society.
Continuing through some old files, I came across this eloquent statement in the minutes of an executive committee meeting for the Robert Schalkenbach Foundation:
"Middle income homebuyers, especially, are having to pay a lot more for their homes because of the inflation in land prices. They are having to pay more for their financing, too, because financing also reflects land prices.
What land speculators can get for their land, they can get because of the enormous expenditures of tax money to make that land usable.
I do not think the American conscience is sufficiently sensitive to be aroused because land speculators get rich at the expense of the government, because the public has come to regard the government as a cow to be milked. It would, therefore, be unwise to place the emphasis on how speculators get rich at the government's expense. Rather ... we should emphasize that the homebuyers are the ones who have to pay, have to dig deep into their savings to pay speculators more for the land, not because the speculators did anything to earn a higher price, but because taxpayers spent millions to make it better."
-- Perry Prentice, 3/5/1965
California, with Prop 13, should take note. Anyone who wants a more stable economy should take note. Anyone who would like to see the cost of living for ordinary people be stabilized and reduced should take note.
This sermon identifies a/the source of something I posted a few days ago. It also fits in well with the "Earth for All" Calendar.
Man and Mother Earth Albert H. Jenkins [A sermon delivered at the Davies Memorial Unitarian Church, Washington, D.C., 7 October, 1962. Published by the Robert Schalkenbach Foundation]
When Khrushchev was here several years ago, he repeatedly said that in the United States "capitalism has replaced feudalism." Our newspapers and most of us accepted that statement as a self-evident fact, but I believe Khrushchev was mistaken.
I believe feudalism persists here in the midst of capitalism, and from this, I believe there flows a moral and economic wrong so enormous and fundamental that it is poisoning our human relations and destroying our civilization as it has destroyed other great civilizations in the past.
Of course, we do not have the outward and visible signs of ancient feudalism -- publicly recognized categories of kings, nobles and serfs. But though feudalism was a social system, it was basically an economic system also. It was the power of some men to command the labor of others through the ownership of land -- the Mother Earth of us all.
Does that power still exist today, right here in our own country as well as in others? If so, to what extent and with what results? Before we attempt to answer these questions, let us be good scientists and get our definitions straight. Let us get our mental feet on the ground and start from there.
For that purpose, we have the simple visual aids you see before you. The first is a global map of the earth. It represents what the economists call LAND.
That term includes not only the earth's surface, which is what most people think of as land, but also all of Mother Earth's other natural resources -- oil, natural gas, ores and minerals, water, and even the air we breathe. Everything on which and from which man lives and without which he cannot live, is LAND.
You will recognize the second visual aid as Rodin's "Thinker." However, I had our cartoonist put a suit of blue overalls on him. That is because he represents man as a worker of hand or of brain, or both. In short, he is what economists call LABOR.
LABOR, working on land - the surface of the earth and its natural resources - produces what is called CAPITAL. This term is represented by the railroad locomotive in the third visual aid.
CAPITAL, in the economic and real sense, is not money, nor stocks, nor bonds. It is factories, machines, railroads, trucks, ships -- anything which, after it has been produced from land, is used for further production, transportation or distribution of either capital goods or consumer goods.
Of this economic triumvirate -- land, labor and capital -- the most fundamental is LAND, because it is the source of everything else. Yet, nowadays, the land factor is almost forgotten in our economic controversies. That is understandable for several reasons.
First, in our complicated civilization, most of us are out of touch with land. It is buried under buildings and pavements in our cities. And everything we buy from outside our cities comes to us so many steps removed from the land that we seldom think of the source -- our Mother Earth.
Second, the most continuous and conspicuous economic controversies today are between labor and what labor thinks of as "capital" --the owners and managers of industry and business. Workers are in direct contact with employers in their daily lives, and winning wage raises and fringe benefits is the "bread and butter" of labor leaders.
Likewise, employers are constantly pressed by "labor problems," which concern them obviously and directly.
So it is natural that workers and employers seldom stop to think that the economic share they are quarreling about is what is left after landowners and land speculators have taken their portion, which comes first because they control the source of all things, and labor and capital can produce only by buying their permission to use the land.
That brings us to our fourth and last visual aid, this sketch. The water pouring into the bucket represents the hard-earned fruits of labor and capital working together in all stages of production. The water going out through the hole in the side of the bucket represents the unearned tribute taken by the modern feudal landlords. They get their share first. What is left in the bottom of the bucket is what labor and capital must divide between them. They quarrel over it, not realizing that both are being robbed by a third party who contributes nothing to production. Obviously, when someone gets something for nothing, someone else gets nothing for something.
Now, as our next step toward answering the question whether feudalism persists in the midst of capitalism, note this well, for it is the first of two key points:
No man created the land -- the earth. It was here millions of years before any man lived. Therefore, no man has a moral or an economic right to say to others: "Pay me for the privilege of living on the earth and using its natural resources."
The second key point is this: No man creates the money value of the land he owns. That value is created by the needs and deeds of all the people in the community and the nation, in both their private and their public capacities.
As more people are born in or move into a community, the price of the land in and around that community goes up because more people need it to live on, to buy for houses, factories, shops and other purposes. The community itself must establish streets, schools, parks, etc.
Federal and local tax money spent to put up a school, a post office, a government defense plant, or to establish or maintain a police or fire department, boosts the value of all nearby land. The man who spends his money to build a house raises the price of the vacant lot next to it. Landowners and speculators reap an unearned and increasing harvest from these activities.
In effect, they command the labor of other men through their ownership of land, and that is the essence of economic feudalism. The same is true of men who charge other men ever-increasing prices for using the oil, gas, minerals and other natural resources which, by moral and economic right, over and above the cost of extraction, should be the free gifts of Mother Earth.
Now let us bring this down to your own experience. Many of you own a house. You remember its price. Suppose it was $15,000. Little more than a decade ago, in 1950, the price of the lot averaged about 10% of the total cost of the new home. Now the lot cost has doubled to 20%, and is still rising.
At the 20% figure, the buyer of a $15,000 house pays $3,000 for the bare land on which it was built. How long does it take you to earn $3,000, or to save it out of your earnings? For that length of time, if you were that home buyer, you were the feudal serf of the man who sold you the land on which your house was built. In return for your $3,000, he gave you nothing but his permission to use land which he did not create, and the money value of which he did not create. He commanded, and if you have not yet paid off the mortgage, is still commanding, your labor for the time it takes your hard-earned savings to add up to $3,000.
And that's not all. That $3,000 was added to your mortgage. If it's a long-term mortgage, the interest you will have to pay will about double the final land cost to you. Therefore, as a result of the persistence of economic feudalism in this country, the former landowner and the mortgage moneylender are commanding your labor for as many months as it takes you to earn and save $6,000, If you live in a house as a renter, you pay the land cost, too.
Here's another example, from my own experience. In 1926 the railroad labor newspaper I work for bought a piece of land on Capitol Hill, right across Independence Avenue from the House end of the Congress building. That was an absolutely unique location having many advantages, but this land cost us only $24,000.
About 30 years later, Congress ousted us in order to put up the third House Office Building. We looked around for a site for our new building, and were offered a piece of land below Capita! Hill, across from the Capitol Plaza, and comparatively distant from the center of things and from the Senate and House office buildings.
That location is not unique in the way that our original one was and is far inferior in all respects. But the price asked was $1.5 million. That was too much for us, but later this same land was bought by the Carpenters' Union and we may suppose that they paid at least what was asked of us.
That huge sum will come out of the dues paid by the union's members. Land costs always come out of someone.
For our new building we finally bought a plot at the corner of First and D Streets, Northwest, still more distant from Congress and still more inferior to our original land, and very little larger. Yet the price was nearly $400,000.
The difference between that price and the $24,000 we paid 30 years before has to be made up by raising the price of our paper to its subscribers.
Now let us look at an example which concerns everyone of us in this room this morning. You know how hard we are trying to pay off the mortgage on the site we are buying for our church. A few years ago we would have faced no such obstacle because the price of suitable land would have been only a few hundred dollars. Ye we had to pay $16,000 for it and were lucky to get it at that.
Why? Because the owners and speculators in land for mile around Washington are holding it for unearned profits and in that way are creating an artificial scarcity of available land. They know that the population of this area is growing and that the need for land for useful purpose is increasing. So, the longer they hold out, the higher will be the prices and profits they hope to get.
What can, and what should be done to end this deadly hang-over of economic feudalism? Most liberals and labor spokesmen, unfortunately, offer no real remedy, only temporary palliatives which make the patient worse in the long run.
What they propose, and often get, are public subsidies and government guarantees to give the economic system a "shot in the arm" when it is being slowed down by rising land costs. Such artificial stimulation boosts land prices still higher, requires ever-increasing doses, and merely postpones the day of reckoning.
The government housing programs, particularly those for slum clearance and urban redevelopment, are good examples of how land profiteers are subsidized with public money supplied by the taxpayers who will take the losses if land speculators and mortgage-moneylenders run wild and cause a crash.
As a matter of fact, more and more urban redevelopment projects are being promoted by smart real estate operators. A public body buys the land at a high price, pays the heavy expense of clearing off the old buildings, then sells the land to a private developer at a fraction of the price the public body paid for it.
There just isn't enough public money to go very far in that kind of program, and slums are spreading faster than they are being cleared. Such a system has not worked and will not work.
Right here in Washington, the Washington Post recently reported that "Nathan Bernstein and his wife became the first individuals to get a piece of the vast southwest redevelopment project." They bought about three-fifths of an acre for $139,000. That's at the rate of more than $230,000 an acre, or $5 a square foot. And, since the report describes Bernstein as a small businessman, it seems obvious he got some of the least costly land in competition with wealthy real estate corporations.
Such huge land costs have two results, among others.
First, even with the public subsidies, apartments built by private redevelopers must, and do, rent for far more than can be paid by the low-income families for whom they are supposedly provided. In Washington's southwest redevelopment area, which is in this category, rents are reported to be as high as $300 a month.
Second, the comparatively low rents in publicly-built and publicly-owned housing require not only public subsidies for buying and clearing high-priced land, but also a continuation of these subsidies to keep the rents within reach of low- or even middle-income families.
Something different -- a real, fundamental remedy -- is needed. What can it be? Let us approach an answer in this way:
Slum property yields its owners profits of between 20 and 25% -- far more than any other kind of stable investment. That is largely because the more the buildings deteriorate, the lower their value is assessed, and the lower the taxes will be. Thus, the owner is rewarded for being a "slumlord" more ruthless than ancient feudal landlords.
But suppose this slumowner spends some of his money to convert his wretched old buildings into decent dwellings, or tears them down and puts up new ones? Either way he has not only increased the supply of good housing but he has also provided employment for workers in the building trades and in industries which fabricate and transport materials for construction. He has benefited manufacturers, merchants, architects, engineers and other professional men, as well as the economy in general.
Instead of being rewarded, however, this owner who redeveloped his slum property is penalized. The assessor comes around and boosts his valuation and from then on he must pay an annual fine in the form of increased taxes. In effect, he is treated as though he had committed a crime.
This tax system is upside down, according to a school of economic and moral thought fostered by the teachings of Henry George, an American, who long ago wrote a book entitled Progress and Poverty. It aroused controversy in its time, but has produced practical results in some parts of the world, and its teachings are now having a revival in our own country.
Those who agree with Henry George maintain that the man who should be encouraged and rewarded is not the one who lets his slum property run down, but the one who does a favor for everyone by improving his old buildings or tearing them down and putting up better ones.
How would this be done? By taxing the land under the buildings at its true economic value, which is usually much higher than the assessed value, and taking taxes entirely off the buildings or other improvements.
At first that may seem to be a startling thought, perhaps even an unjust one. But remember this, there is a fundamental difference morally and economically between land and buildings. No owner created his land, and its money value was created by the whole community. Is it unjust then for the creators of that value -- the people of the community -- to get the annual return on it in the form of taxes?
In contrast, buildings and all other improvements are man-made. They would not exist unless individuals had invested money and labor in them. When the community taxes them, it is taking something the community did not create.
The purpose of the tax system which Henry George advocated goes far beyond clearing slums by reversing the impact of local and state taxes. Its purpose is no less than to end persistent economic feudalism and its attendant evils. It proposes to do that by making it unprofitable to hold land out of use, or to use it inadequately while waiting for increasing population and public need to boost its selling price.
If landowners and speculators had to pay more taxes on their land, they would sell much more cheaply to people who need land for use. Thus taxes on land values tend to reduce land prices and the cost of living. In that respect, land values are unique. All other kinds of taxes in whole or in part operate to raise prices and living costs.
There is an old and true saying that "the power to tax is the power to destroy." Every dollar of tax destroys something for better or for worse. The question is what do you want to destroy -- the productive activities of labor and capital, or the feudalistic obstruction of men who command the labor of others through landownership and speculative profits?
Federal taxes as well as local taxes are full of favors for landowners and land speculators. Here is just one example:
Earned income pays federal tax rates ranging from 20 to 91%. Unearned profits from land pay only the capital gains tax, which ranges up to 25% at the most. What is more, Uncle Sam gives back to the landowner much of the local real estate taxes he has paid, because such taxes are deductible from taxable income. Thus a wealthy land speculator in the 50% tax bracket, in effect, deducts half his real estate tax from his federal income tax.
More and more people are awakening to the problem of economic feudalism and are seeking its remedy. I only wish I could say that the liberals and the laborites of our country were leading the search.
House & Home, a monthly magazine covering all phases of the home-building industry, is a Luce publication, and as such would generally be considered conservative. But on the land and tax question, House & Home is "radical" in the old American sense of that word, meaning that it goes to the root of things, seeks out and tries to remedy causes.
The Reader's Digest, scarcely a liberal magazine, recently published an excellent boil-down of the House & Home material under the title "Land Speculation and How to Stop It."
Feudal lords, big and little, are exacting more and more billions of tribute from the rest of the people. This will get worse as the population explosion puts heavier and heavier pressure on the land and other natural resources.
Warnings of this came long ago from the classical economists. One of them, David Ricardo, put it this way:
Advancing wealth and productivity bring more people, but they do not bring more land. As a result, those who own the land can command an ever greater return for an increasingly scarce resource. Meanwhile, capital and labor conflict with each other for the rest of the product, and get smaller and smaller shares while the landowners get more and more.
Therefore, Ricardo said, "the natural price of labor is that price which is necessary to enable the laborers … to subsist and perpetuate their race." This came to be known as his "iron law of wages."
Ricardo and other classical economists correctly foresaw that in times and places of rapid economic growth and relative scarcity of workers, wages could rise temporarily. But now the population explosion is on full blast and the industrial revolution, instead of creating more jobs, as it formerly did. is resulting in millions of workers who cannot find jobs even at Ricardo's "subsistence wage."
This economic insecurity will continue and grow worse until the land and tax question is answered, and answered right, for it is the inevitable result of the economic feudalism which has cursed mankind throughout the ages and lingers on in our own country.
Things move fast nowadays, and the time is growing short. Dare we delay too long in solving the biggest and most fundamental of our economic and moral problems -- the problem of Man and his Mother Earth?
"... it clothes the naked, it feeds the hungry; it buries its dead ..."
I stumbled across this snippet in a 1000-page book of testimony before a senate committee from 1883, and it triggered some thoughts. Some of my reaction was set off from learning last evening of the death of a Georgist friend, Dan Kryston, who was the president of the board of the Henry George School in Manhattan and who died last week, much too young.
A good society does more than clothing the naked and feeding the hungry: it figures out why people are naked and why people are hungry, and seeks to remedy the underlying problems, so that people aren't hungry, aren't naked.
Yes, a good society buries its dead, and remembers what they did to make life better for those around them -- those they knew personally, and those they never met, in their own generation and future generations.
From time to time, I check the statistics for a website I created a few years ago -- http://www.wealthandwant.com/ -- the URL comes from the subtitle to Henry George's book, "Progress and Poverty" -- and (somewhat to my disappointment!) one of the most popular items is a page based on a bit of poetry -- using the term loosely, perhaps -- entitled "The Ambulance Down in the Valley." The page includes several versions of the poem I collected online, and then the thought that there is a 3rd alternative -- the ambulance in the valley and a fence at the edge of the cliff -- that we ought to consider: examining the nature of the cliff itself, and determining who benefits from the continued existence of the cliff!
What do we owe each other? And what do we owe future generations?
When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?
Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:
I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.
The 99% need to start identifying the laws and structures that must be adjusted. This is not easy work.
What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures. We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist. It won't be easy. We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.
Labor should get its share, and capital should get its share, and we-the-people should get land's share. That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create. That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.
I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund.
In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong. Letting it be "there for the taking" is insanity and injustice. And don't we pledge "liberty and justice for all?"
Our ancestors may have granted some privileges to some lucky folks for one reason or another. That doesn't mean that we can't, politely and firmly, revoke those privileges. A couple of centuries is plenty. Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them. Will the privileged give up those privileges graciously? Quite possibly not. But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."
A civilization which tends to concentrate wealth and power in the hands of a fortunate few, and to make of others mere human machines, must inevitably evolve anarchy and bring destruction. But a civilization is possible in which the poorest could have all the comforts and conveniences now enjoyed by the rich; in which prisons and almshouses would be needless, and charitable societies unthought of. Such a civilization waits only for the social intelligence that will adapt means to ends. Powers that might give plenty to all are already in our hands. Though there is poverty and want, there is, yet, seeming embarrassment from the very excess of wealth-producing forces. "Give us but a market," say manufacturers, "and we will supply goods without end!" "Give us but work!" cry idle men.
The evils that begin to appear spring from the fact that the application of intelligence to social affairs has not kept pace with the application of intelligence to individual needs and material ends. Natural science strides forward, but political science lags. With all our progress in the arts which produce wealth, we have made no progress in securing its equitable distribution. Knowledge has vastly increased; industry and commerce have been revolutionized; but whether free trade or protection is best for a nation we are not yet agreed. We have brought machinery to a pitch of perfection that, 50 years ago, could not have been imagined; but, in the presence of political corruption, we seem as helpless as idiots. The East River bridge is a crowning triumph of mechanical skill; but to get it built a leading citizen of Brooklyn had to carry to New York $60,000 in a carpet bag to bribe New York aldermen. The human soul that thought out the great bridge is prisoned in a crazed and broken body that lies bedfast, and could watch it grow only by peering through a telescope. Nevertheless, the weight of the immense mass is estimated and adjusted for every inch. But the skill of the engineer could not prevent condemned wire being smuggled into the cable.
The progress of civilization requires that more and more intelligence be devoted to social affairs, and this not the intelligence of the few, but that of the many. We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act.
"A civilization which tends to concentrate wealth and power in the hands of a fortunate few, and to make of others mere human machines, must inevitably evolve anarchy and bring destruction."
"a civilization is possible in which the poorest could have all the comforts and conveniences now enjoyed by the rich; in which prisons and almshouses would be needless, and charitable societies unthought of. Such a civilization waits only for the social intelligence that will adapt means to ends. Powers that might give plenty to all are already in our hands."
Think about that one not just with regard to America, but with regard to the entire world.
"Though there is poverty and want, there is, yet, seeming embarrassment from the very excess of wealth-producing forces. 'Give us but a market,' say manufacturers, 'and we will supply goods without end!' 'Give us but work!' cry idle men."
"The evils that begin to appear spring from the fact that the application of intelligence to social affairs has not kept pace with the application of intelligence to individual needs and material ends. Natural science strides forward, but political science lags."
"With all our progress in the arts which produce wealth, we have made no progress in securing its equitable distribution."
"The progress of civilization requires that more and more intelligence be devoted to social affairs, and this not the intelligence of the few, but that of the many."
"We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act."
"Social intelligence." Nearly 130 years have passed since Henry George wrote these words. Nearly every college has a Social Sciences division. Most have a political science department and an economics department. Almost all have history departments. Many have American Studies programs. I'd venture to say that not one in 1000 has a professor who knows these ideas well. Many know the name of Henry George, as they know some other names from his era, but few have had the quality of education that would include exposure in depth to George's ideas.
Some would say that these social questions have no solutions, and move on to discuss some other topic they think more important, or solvable. Some might murmur that any attempt to solve these questions would by definition be somehow socialistic, and therefore is not worth a further thought. (Much depends on what you mean by "socialistic;" the word seems to be a conversation closer in many circles, which is a shame -- though I do not regard George's ideas as remotely socialistic as the term is commonly used.)
Those who have sat with Henry George's ideas know differently. These problems can be solved. Might you join that group? What would it feel like to know these problems do have solutions?
And as we enter a presidential election season, this one bears repeating:
"We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act."
Pointing to the recent declines at the top, Mr. Kaplan argues the Occupy protesters have accused the wrong villain by focusing on inequality, which he called an inevitable byproduct of growth. “If you want to reduce inequality, all you need to do is put the economy in a recession,” he said. “If you want the economy to do well, as all of us do, then you’ll get more inequality.”
Well, maybe at the University of Chicago, that is what is taught, but is it true?
It may be inevitable under our current structures, but if one gets outside that box, and looks deeper, one finds other answers.
I would suggest that Mr. Kaplan, who teaches economics at the Graduate School of Business at the U of C, look beyond the interests of the university's and b-school's founders and big donors and alumni and current students, and consider that we're all in this together, and that when we permit a few to monopolize and privatize things which rightly are our common treasure, inequality is the inevitable byproduct.
Mr. Kaplan might start by exploring the ideas of Henry George. They were in his freshman economics texts, but most likely his instructor didn't lecture on them, or include them in exams (most likely because his own instructors hadn't!)
Read what those textbooks have to say, and then think about whether it is in Mr. Kaplan's personal career interests to speak of an idea that could rock the yachts of alumni and donors and others who like our current structures just fine, thank you! The privileged like their privileges, and would prefer that we not notice that they are privileges, or, if we do notice, think that THEIR privileges are somehow in OUR best interests.
When I heard that Trinity Church was not particularly keen on hosting the Occupy Wall Street protestors, I was not overly surprised. Years of watching Louis Rukeyser's "Wall Street Week" with the opening scenes of Trinity Church, and a reading of Thomas Shearman's 1889 article "The Owners of the United States" (below, posted on October 6),passed through my mind. Shearman was the co-founder of Shearman and Sterling law firm, and was a highly respected legal scholar of the late 19th century. He also wrote some fine books
Here are some relevant paragraphs:
The figures indicate the wealth believed to be possessed on the average by each of the persons whose names follow:
J. J. Astor, Trinity Church
C. Vanderbilt, W. K. Vanderbilt, Jay Gould, Leland Stanford, J. D. Rockefeller
Estate of A. Packer
John I. Blair, Estate of Charles Crocker
Wm. Astor, W. W. Astor, Russell Sage, E. A. Stevens, Estates of Moses Taylor, Brown & Ives
P. D. Armour, F. L. Ames, Wm. Rockefeller, H. M. Flagler, Powers & Weightman, Estate of P. Goelet
C. P. Huntington, D. O. Mills, Estates of T. A. Scott, J. W. Garrett
G. B. Roberts, Charles Pratt, Ross Winans, E. B. Coxe, Claus Spreckels, A. Belmont, R. J. Livingston, Fred. Weyerhauser, Mrs. Mark Hopkins, Mrs. Hetty Green, Estates of S. V. Harkness, R. W. Coleman, I. M. Singer
A. J. Drexel, J. S. Morgan, J. P. Morgan, Marshall Field, David Dows, J. G. Fair, E. T. Gerry, Estates of Gov. Fairbanks, A. T. Stewart, A. Schermerhorn
O. H. Payne, Estates of F. A. Drexel, I. V. Williamon, W. F. Weld
F. W. Vanderbilt, Theo. Havermeyer, H. O. Havermeyer, W. G. Warden, W. P. Thompson, Mrs. Schenley, J. B. Haggin, H. A. Hutchins, Estates of W. Sloane, E. S. Higgins, C. Tower, Wm. Thaw, Dr. Hostetter, Wm. Sharon, Peter Donohue
Trinity Church is included in this list because it is practically an individual owner. For the purpose of estimating the distribution of wealth, it is obvious that this corporation, which has no stockholders, must be treated as a unit.
So which side is the church on? Which side is the Church on? The side of the poor, or the side of the wealthy?
How do we judge it? By its words, or by its actions? The Episcopal Church, in some places, is known as the Frozen Chosen. In many places, it is a very welcoming community, but with some exceptions, it does not seek to find the structures that create poverty, or to challenge them when faced with them. It is good at charity, but not as good at justice. It asks prayers for seekers after justice, but doesn't otherwise encourage them.
"Faith, hope and charity ... but the greatest of these is ... justice!"
I guess I don't expect too much of Trinity Church, a/k/a The Republican Party at Prayer. They know where their bread is buttered, and aren't going to have a lot of interest in the folks who rely on margarine. But I hope their theology works for them; it doesn't work for American society. But that's what freedom of religion is about: give them tax exemptions to spread whatever they call their theology!
PostScript: I'm led to wonder about how there can be vacant land in lower Manhattan, and second, what sort of harm it would do to its owners to permit someone to put it to use for a while. I'm sure the church isn't paying property taxes on that vacant land. Why should that be? And for whose benefit is it being kept vacant?
While I'm glad to see our troops coming home from Iraq, I think we ought to be very conscious that our spending large amounts of money there is continuing. I think it is fair to assume that the private contractors have large amounts of corporate or "small business" profits built into their invoices to we-the-people.
We're paying for their pensions, their life insurance, their health care, and their not-trivial "wages." The lowest-paid contractors are probably receiving wages approaching those of mid-level military, and benefits far superior. Their management is likely taking home compensation many times what we pay our President.
I realize that some will think this is a fine thing, but I submit that its costs to our society are non-trivial.
Sometimes public employees are the best people for the job. There is a lot less fat in our military than there is in private-sector substitutes.
Let's not fool ourselves about Iraq.
"Out of sight, out of mind" sometimes gets translated by the naive as "blind and crazy."
Daddy Warbucks. Daddy "peace"bucks?
We ought to be getting a monthly accounting of the dollars flowing, and to whom they are flowing.
And what is this lowest man who holds the fate of the world in his hands; whom we must lift or perish? He is landless, workless, poverty stricken, degraded, drunken, dishonest. In a word overflowing with plenty, he lacks everything. In a world of brightness, he and his cower in a cellar, or burrow in a sun-abandoned court. With abundance of pure air, they breathe only the foul.
Let us go to this man, whom we have thus painted in somberest hues; loveless, imbruted, dirty, lazy. What shall we do with him?
Let me rehearse some of the favorite processes of the philanthropic tread-mill so amiably worked by the well-meaning, though willfully blind, in their efforts to "raise the fallen":
Preaching Jesus to his soul.
Giving soap and water to his filth.
Compelling him, willy-nilly, to work.
Exhorting him to abstinence.
Giving his children a taste of heaven on earth, with a treat of fresh air (sending them back again to hell of foul air).
Building airy tenements for his occupation.
Providing for his immediate wants in food, fuel, clothing and physic.
Although these do not exhaust the enumeration, they are typical and must suffice. But they are all wrong wrong, wrong.
What! Wrong to preach Jesus to the fallen? Yes, wrong to preach Jesus to them, until we practice Jesus ourselves.
What a mockery to preach Jesus to the fallen man, with the proceeds of his stolen rights in our pockets, in the suit of clothes we wear, and in the meal we enjoyed before we went forth to meet him. The first lesson in religion we can give him is an object lesson in the restoration of his lost inheritance in the earth. The first sermon he hears us preach should be one exhorting ourselves to repentance, confession, and restitution. Having obeyed and thus done the first duty in the premises, it remains for us to aid our fallen and defrauded brother in recovering the ground from which we have thrust him.
And this fallen man is not hurt harmlessly. He is the fly in the ointment of our wealth. He is the barrier to the realization of our social dreams. To secure ourselves we must secure him. The oneness of industry in its best conception is impossible until we have made this our brother one with ourselves. In some sad respects we trace evidences of our relationship. Is he sinful? So are we. Has he fallen? So have we. He was robbed and fell. We robbed and fell. Clearly our first duty is to "restore the pledge, given again that we have robbed." We can restore; he cannot recover; he is helpless; only we can help.
Until the lowest man and his rights are practically dealt with, and his opportunities to rise assured, we shall suffer; depressions, crashes, anxiety, overcompetition, aggravated covetousness, will mar all our industry.
We produce as individuals; we suffer as an organism. No man liveth to himself. The need of one is the calamity of all.
We have taken our brother's inheritance — the right to the use of the earth — and we make merchandise out of it. Let us agree to pay into the public treasury the whole annual value of the land we use in city or county, only retaining the proceeds of our own industry. Having agreed to and carried out this act of simple justice, no one will hold, can hold, land for profit. He must use or abandon it. The abandoned estates will then be available for our brother now landless, hopeless, degraded. Then, and only then, can we preach Jesus to him.
We are many members in one body. Which of us can be hurt and not bring hurt on the rest? In this sense, in the sense of sharing in suffering, the oneness of industry is perfect.
This appeared in a California weekly 115 years ago. Much of it could have been written in 2011. Does this mean that these problems are eternal, necessary and simply can't be avoided?
Or does it mean that when we continue to maintain the structures that create these problems, we ought not to be surprised that the problem continues to show up?
These problems can be solved -- and prevented -- by a simple, logical, just, efficient reform of our tax structure. But almost none of our elected representatives are the least bit familiar with it. You might send yours a copy of Walt Rybeck's book, "Re-Solving the Economic Puzzle," if you think yours might have an open mind.
Young Men and Their Opportunities The San Jose Letter, February 1, 1896
But what are young men to do for a living? Did it ever occur to you that thousands of young Americans between the ages of 16 and 21 are pondering over that very question? What are they to do, indeed? Shall they study for a profession? Scores of young professional men in San Jose are not earning enough to pay their office rent, young lawyers, doctors, dentists, waiting for the practice that does not come.
The professions are overcrowded, some one says, let them learn a trade. What trade, pray? Would you have any of them learn the carpenter's trade, for instance? The valley is over-run with idle carpenters. Would you have them become house painters? Every other tramp one meets appears to be a painter. Would you have them learn the printer's trade? A dozen idle printers are clammoring for every place.
I was talking with a gentleman who is in the hardware business the other day. This question of idle young men came up. The merchant got down a list containing probably a score of names. Applicants, he told me, for a chance to learn the plumber's trade. "I have not a place," he said, "for one in twenty of them. They offer to work for nothing, if permitted to learn the trade. But idle journeymen apply for work every day."
It is so with every trade that may be named. Plenty of young men are fitting themselves for a $20 job, by spending months in learning shorthand and type writing. There was a time when a book-keeper could earn a living-assuring salary. He cannot now. Book-keepers, good enough for any average retail business, are hunting $40 jobs.
What are the young Americans of this generation to do, then? Such as have parents to furnish them with a home can work for $20 a month. Those with no home cannot compete with home-cheapened labor. The result is, San Quentin is filling up with young fellows under 25 years of age. Most of our tramps appear to be under 30.
Since the land is filled with idle doctors one can safely conclude that none want for medical assistance and advice. Since idle carpenters are begging for work, the people of America must have all the houses they want. There can be no more plumbing to do, for plumbers are idle; no houses that need painting for painters are tramping the country seeking work, no one without bread for there is no sale for breadstuffs, and bakers are without employment.
But, strange to say, hundreds of men are suffering for the services of the idle doctors. Families are shelterless, while carpenters are begging to build them houses. Men and women and children are suffering for bread while bread-stuffs rot, and bakers starve to death because they can find no one who can command their services.
Doctor A wants to build a house, and carpenter B is anxious to build it for him; but the house is not built. In the meantime Carpenter B's children die for the lack of medical assistance. Blacksmith C is unable to furnish his family with wood, for he "has no work." However, Wood-dealer D sees his horses go lame because he cannot afford to have them shod.
A very interesting state of affairs, is it not? Work that should be done, and plenty of it; while the young men of the nation are drifting to State prisons and the road because they can find no work.
This condition of affairs is new in America. Hungry men startle the well-fed, until they, too, hunger for the luxuries that once seemed necessities, then they are more than startled.
Along with this an evil is growing up in America that cannot be too earnestly condemned; it is that of the steadily growing custom of giving charity. The recipient of charity is demoralized. The American laborer wants work, not charity. When you give him charity you sink him to a condition lower than that of the negro slave. I know philantropists who employ Chinese, while white labor goes begging for a purchaser, who pompously "pay the white man's butcher bill." The white man wants to pay his own butcher bill, and demands work that will enable him to do it.
The evil results of this charity are doubled when school children are taught to "give to the poor." San Francisco has been turned into a pauper-making, pauper-sustaining educational institution. The papers reek with "charity," and the children are given lessons in pauperizing their elders. A year ago last winter the children were encouraged to feed the men employed at $1 a day in the Golden Gate Park. What did this mean? It meant that the children were made accustomed to see laboring Americans want for food, while the laborers, although working ten hours a day, were obliged to stoop to accept charity, and charity at the hands of children. It is very pathetic, this picture of Susie or Johnnie giving a ham sandwich or a piece of sponge cake to a hungry laboring American — a pretty picture, if you like; but the children are not benefited by it and the laborer can know no greater degradation. But, what are the young men who are leaving schools, colleges and universities each year to do for a living? Must the majority of them become objects of charity, to be given work, charity work, at wages which will not sustain life, only to be helped out of the difficulty by a lot of idle society women, who have nothing better to do than to take up the fad, charity; and by a parcel of school children who are encouraged in doing their little towards the ultimate pauperization of the American laborer?
This was most likely written by Franklin Hichorn, editor of The San Jose Letter.
Paul Krugman's column in the NYT Sunday was entitled "Things to Tax," and I thought it was a bit broad-brush.
"Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions."
I don't disagree with either of those as a starting point, but neither goes to the root of the problem, which I believe to be the sorts of privileges we have given out, or somebody's ancestors put in place and we've not even thought about questioning. They are so familiar to us that we don't question them any more than we think about breathing. So (switching metaphors) we find ourselves barking loudly up the wrong tree -- while the critters in the other trees are smiling broadly!
The best answers I know to which tree we ought to be barking up come from the writings of Henry George. Several speeches were what I was first inspired by:
Whether or not your own orientation is theological, I think you might appreciate these.
We ought not to be taxing indiscriminately. What we tax matters greatly. Some provide Natural Public Revenue -- and we ought to socialize that revenue -- and other possible objects of taxation ought not to be taxed at all -- privatize them!
Should we tax the ones who have bought or inherited or otherwise acquired our very choicest land -- that in our biggest cities, well-served by taxpayer-provided infrastructure and services?
Should we tax the ones who, in effect, own our most valuable natural resources, or have access to resources we send our military to protect on our behalf?
Should we tax those who benefit from monopolies of various kinds, such as owning our water companies, our electric utilities, our cable-tv companies, or monopolies of their own creation?
Should we tax those who benefit from privileges of various kinds, such as the possession of our airwaves, landing/takeoff rights at busy constrained airports (think LGA at rush hour)?
Should we tax those who benefit by taking some fraction of every financial transaction, even if that transaction doesn't create additional value for the economy as a whole?
Should we tax those who benefit from the activity or inactivity of the FIRE sector, which Joe Stigitz says is creaming 40% of the profits made by the productive sectors of the economy?
Or should we just tax all the high-income people, without going to the root of the privileges which produce undeserved wealth for some at the expense of the rest of us.
The answers to these questions matter.
Go to the root. Understand what is privilege, and what is an actual contribution to the economy. Understand what is someone's free lunch, paid for by the labor of others. Understand who reaps what they haven't sown. Correct these things.
An old idea. Look up Henry George's writings from the late 19th century, which kicked off the Progressive movement and still inspire many of us.
Short term, maybe, changing the income tax brackets is appropriate. But it doesn't get at the root of the problem.
"ARE WE SOCIALISTS?" Thomas B. Preston, in the Arena, December, 1899
It is socialistic to make the revenues of the government a burden on industry. Revenues there must be, but they should not bear upon industry. In fact, the taxation of any product of labor is simply taking from the laborer part of his earnings. To such an extent we are socialists. Any other form of taxation than that on the value of land is essentially socialistic because any other tax is passed on from the seller to the consumer, and takes part of the latter's earnings without compensation, for use by the community. Any tax on earnings is socialistic, although it may not go so far as to take all a man earns. The substitution for our present system of a single tax amounting to the full rental value of land would sound the death-knell of socialism.
While we sin so deeply in our present bungling, socialistic way by forcing individuals to give up part of the proceeds of their labor, by fining a man who builds a house more than if he were maintaining a public nuisance, by tariffs which hinder trade with foreign countries, and add millions to private fortunes at the expense of the people, and by a thousand indirect taxes which make life harder for men without their being able easily to see the reason, on the other hand we foolishly leave to individuals those great agencies which are the outcome of social growth — the product of the inventive genius of a few men, if you like, but which after a time grow so powerful as to become the very arbiters of life and death. Prominent among such agencies are the railroad and the telegraph. They can crush communities out of existence and enrich the owners at the expense of their fellow men. They have already become the chief source of corruption in government. The ownership of these agencies by the community becomes a necessity for the continuance of social progress. Otherwise these monopolies can go on increasing and concentrating until a few persons are enabled, through them, to appropriate the wealth of a community. In so far as socialism demands the state ownership of agencies of this nature, it is proceeding in the right direction. There are many other agencies besides the railroad and the telegraph, such as the supply of water, gas, light, heat, telephones and means of transit and communication, in which the American idea of free competition is a fallacy. Here we are too individualistic. The right to make war and peace was long ago taken from individuals and vested in the community. So at a later stage was the carriage of letters. National quarantines, boards of health, public schools, are all examples of applied socialism in its legitimate sense. But why should we stop here? The existence of such great monopolies as the railroad and the telegraph is a standing menace to the life of the Republic. Let us munificently reward the inventors or appliances which shall add to the comfort and convenience of the community, but allow these agencies to be owned perpetually by individuals never!
We are socialistic where we should respect the rights of the individual, and we are individualistic when individualism is a crime against the Commonwealth. And so we go blundering on. When our stupid and oppressive system leads men to cry out against it, and riot and murder follow, we hang a few anarchists. When monopolists, grown bold through long years of immunity, attempt to rob a little more openly, by pools and combinations or by direct bribery, we create interstate commissions to watch them, or we send a few to prison, allowing others to escape to Canada; repressing a little here those who complain too loudly, where we should rather rectify their grievances, and lopping off a little there the enormous unearned profits, which we should abolish altogether. Meanwhile our two classes of tramps are increasing — those who travel around the world in flowing palaces, living upon the toil of others, without using their capital in any legitimate enterprise and those who go afoot, pilfering from cornfields and hen roosts — both classes an unjust burden on a hard working, long suffering community. We have arrived at a critical period of our history, where we must meet the demands of social progress, or our civilization will perish as surely as did the fallen empires of former ages. Already the mutterings of revolt are growing louder and louder, while upstart monopoly was never so insolent and imperious as it is today. Let us be warned in time, and, discarding all half measures, face the issue like men, and not go on trusting to luck, foolishly dreaming that somehow, at some time, existing wrongs will right themselves.
Perhaps you saw "60 Minutes" last Sunday (11/13). Just in case you didn't, here are some excerpts from the transcript. I commend the whole thing to your attention. It begins:
The next national election is now less than a year away and congressmen and senators are expending much of their time and their energy raising the millions of dollars in campaign funds they'll need just to hold onto a job that pays $174,000 a year.
Few of them are doing it for the salary and all of them will say they are doing it to serve the public. But there are other benefits: Power, prestige, and the opportunity to become a Washington insider with access to information and connections that no one else has, in an environment of privilege where rules that govern the rest of the country, don't always apply to them. ...
Most former congressmen and senators manage to leave Washington - if they ever leave Washington - with more money in their pockets than they had when they arrived, and as you are about to see, the biggest challenge is often avoiding temptation.
Peter Schweizer: This is a venture opportunity. This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family.
Schweizer says he wanted to know why some congressmen and senators managed to accumulate significant wealth beyond their salaries, and proved particularly adept at buying and selling stocks.
Schweizer: There are all sorts of forms of honest grafts that congressmen engage in that allow them to become very, very wealthy. So it's not illegal, but I think it's highly unethical, I think it's highly offensive, and wrong.
Steve Kroft: What do you mean honest graft?
Schweizer: For example insider trading on the stock market. If you are a member of Congress, those laws are deemed not to apply.
Kroft: So congressman get a pass on insider trading?
Schweizer: They do. The fact is, if you sit on a healthcare committee and you know that Medicare, for example, is-- is considering not reimbursing for a certain drug that's market moving information. And if you can trade stock on-- off of that information and do so legally, that's a great profit making opportunity. And that sort of behavior goes on.
Kroft: Why does Congress get a pass on this?
Schweizer: It's really the way the rules have been defined. And the people who make the rules are the political class in Washington. And they've conveniently written them in such a way that they don't apply to themselves.
The buying and selling of stock by corporate insiders who have access to non-public information that could affect the stock price can be a criminal offense, just ask hedge fund manager Raj Rajaratnam who recently got 11 years in prison for doing it. But, congressional lawmakers have no corporate responsibilities and have long been considered exempt from insider trading laws, even though they have daily access to non-public information and plenty of opportunities to trade on it.
Schweizer: We know that during the health care debate people were trading health care stocks. We know that during the financial crisis of 2008 they were getting out of the market before the rest of America really knew what was going on.
While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts.
Peter Schweizer thinks the timing is suspicious, and believes congressional leaders should have their stock funds in blind trusts.
Schweizer: Whether it's uh-- $15,000 or $150,000, the principle in my mind is that it's simply wrong and it shouldn't take place.
But there is a long history of self-dealing in Washington. And it doesn't always involve stock trades.
Congressmen and senators also seem to have a special knack for land and real estate deals. When Illinois Congressman Dennis Hastert became speaker of the House in 1999, he was worth a few hundred thousand dollars. He left the job eight years later a multi-millionaire.
Jan Strasma: The road that Hastert wants to build will go through these farm fields right here.
In 2005, Speaker Hastert got a $207 million federal earmark to build the Prairie Parkway through these cornfields near his home. What Jan Strasma and his neighbors didn't know was that Hastert had also bought some land adjacent to where the highway is supposed to go.
Strasma: And five months after this earmark went through he sold that land and made a bundle of money.
Kroft: How much?
Strasma: Two million dollars.
Kroft: What do you think of it?
Strasma: It stinks.
We stopped by the former speaker's farm, to ask him about the land deal, but he was off in Washington where he now works as a lobbyist. His office told us that property values in the area began to appreciate even before the earmark and that the Hastert land was several miles from the nearest exit.
But the same good fortune befell former New Hampshire Senator Judd Gregg, who helped steer nearly $70 million dollars in government funds towards redeveloping this defunct Air Force base, which he and his brother both had a commercial interest in. Gregg has said that he violated no congressional rules.
It's but one more example of good things happening to powerful members of Congress. Another is the access to initial public stock offerings, the opportunity to buy a new stock at insider prices just as it goes on the market. They can be incredibly lucrative and hard to get.
Schweizer: If you were a senator, Steve, and I gave you $10,000 cash, one or both of us is probably gonna go to jail. But if I'm a corporate executive and you're a senator, and I give you IPO shares in stock and over the course of one day that stock nets you $100,000, that's completely legal.
And former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House.
Brian Baird is a former congressman from Washington state who served six terms in the house before retiring last year. He spent half of those 12 years trying to get his colleagues to prohibit insider trading in Congress and establish some rules governing conflicts of interest.
Baird: One line in a bill in Congress can be worth millions and millions of dollars. There was one night, we had a late, late night caucus and you could kind of tell how a vote was going to go the next day. I literally walked home and I thought, 'Man, if you-- if you went online and made-- some significant trades, you could make a lot of money on this.' You-- you could just see it. You could see the potential here.
So in 2004, Baird and Congresswoman Louise Slaughter introduced the Stock Act which would make it illegal for members of Congress to trade stocks on non-public information and require them to report their stock trades every 90 days instead of once a year.
Kroft: How far did you get with this?
Baird: We didn't get anywhere. Just flat died. Went nowhere.
Kroft: How many cosponsors did you get?
Baird: I think we got six.
Baird: When you have a bill like this that makes so much sense and you can't get the co-sponsorships, you can't get the leadership to move it, it gets tremendously frustrating. Set aside that it's the right thing to do, it's good politics. People want their Congress to function well. It still baffles me.
But what baffles Baird even more is that the situation has gotten worse. In the past few years a whole new totally unregulated, $100 million dollar industry has grown up in Washington called political intelligence. It employs former congressmen and former staffers to scour the halls of the Capitol gathering valuable non-public information then selling it to hedge funds and traders on Wall Street who can trade on it.
Baird: Now if you're a political intel guy. And you get that information. Long before it's public. Long before somebody wakes up the next morning and reads or watches the television or whatever, you've got it. And you can make real-- real-time trades before anybody else.
Baird says its taken what would be a criminal enterprise anyplace else in the country and turned it into a profitable business model.
Baird: The town is all about people saying-- what do you know that I don't know. This is the currency of Washington, D.C. And it's that kind of informational currency that translates into real currency. Maybe it's over drinks maybe somebody picks up a phone. And says you know just to let you know it's in the bill. Trades happen. Can't trace 'em. If you can trace 'em, it's not illegal. It's a pretty great system. You feel like an idiot to not take advantage of it.
I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.
Henry George, Jr., was a U. S. Congressman. His most famous writing is "The Menace of Privilege."
WHO ARE THE CRIMINALS?
BY HENRY GEORGE , JR. Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York
I. Who are the Criminals? 5 II. French Aristocracy of Privilege 6 III. New York Aristocracy of Privilege 10 IV. Robbery of Masses by Classes 12 V. Nature and Extent of Robberies 13 VI. How to Stop the Robberies 18 VII. The Criminals 23
I. WHO ARE THE CRIMINALS?
In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?
II. FRENCH ARISTOCRACY OF PRIVILEGE.
When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.
Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.
But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery. Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.
The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country. Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.
Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.
But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.
The aristocracy, therefore, were the primary, the real criminals.
III. NEW YORK ARISTOCRACY OF PRIVILEGE.
I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"
That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?
The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?
IV. ROBBERY OF MASSES BY CLASSES.
Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?
I believe that there can be but one answer — yes.
Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.
V. NATURE AND EXTENT OF ROBBERIES.
LET us consider how the classes may be robbing the masses into poverty.
It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.
This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?
Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.
Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them? What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.
Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.
VI. HOW TO STOP THE ROBBERIES.
Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —
In ground rents
In franchise values
While they are compelled to pay in various taxes for the support of local government
Which makes in all
What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values? Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?
For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?
And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?
What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.
Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?
Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.
Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used. This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.
What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.
The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.
VII. THE CRIMINALS.
That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?
Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?
Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?
I'd read some other things by White, but found this particularly compelling and relevant, in the era after the U. S. Supreme Court's decision in the Citizens United case, and as the "Occupy Wall Street" movement grows.
THE DARTMOUTH COLLEGE CASE DECISION.
John Z. White in the St. Louis Mirror of Oct. 4, 1906 With an Introduction by Wm. Marion Reedy, Editor of The Mirror.
Mr. Bryan's proposal of government ownership of railways; Mr. Folk's proposal of taxing corporations upon the actual value of their property, including franchises, or upon the earning capacity as an estimate of valuation; every proposal to do anything to a corporation that the corporation doesn't want done, is met with the proclamation by corporation lawyers: "You can't do it. Marshall's decision in the Dartmouth College case forbids. That decision holds a charter, or a franchise, is a contract, that no State can impair the obligation of contracts. If the corporations aren't willing to submit to those things you can't do them without impairing the obligation of contracts." This Marshall decision is the backbone, the vitality of all corporate power. It is the secret of corporate tyranny over the people. It is the buttress of every corporation iniquity which reformers try to remedy. It is the fetich of all the courts. It is the gospel of all lawyers. It is sacred because it was formulated by Webster, and embodied in the law by Marshall and Story. It has been so for 87 years. But now the law as laid down by these giants is questioned. Their logic is attacked. The conclusions of the Supreme Court that have been held sacred and binding on all courts forever are denied. They are shown to be absurd. With government ownership and corporation regulation the intensely vital issues they have become, we shall hear much of the Dartmouth College decision being as unassailable as Divine Writ. The war of the new democracy, the true republicanism of this day and the future, must be against this decision, which supports all the corporation iniquities and infamies. This article by John Z. White sounds the first note of the battle cry to which all American radicals must rally, for the law of the Dartmouth College decision is the issue upon which both the great parties are to split in such way that all those in both parties who believe in liberty, in the rule of reason, in freedom from the tyranny of "artificial persons" will eventually be in one party, and all the beneficiaries of the tyranny and corruption of artificial persons will be in another party. Marshall's decision has made for the enslavement of men to corporations. It must be reversed and its logic denounced if this government is to fulfil the purposes of its founders or realize the hope and faith of mankind that found expression in the Declaration and in the Constitution.
EDITOR OF THE MIRROR.
* * *
The people of the United States are much disturbed by private monopolies.
Very many, possibly the majority, appear to view the situation as hopeless.
All manner of remedial measures are proposed.
Kansas attempted a public oil refinery; various municipal enterprises are under consideration; it is even suggested that the amount of business that one corporation may do shall be limited to a given fraction of the total business of the country in any particular line; while a message from the President to Congress informs us that state regulation of railroads has thus far achieved but little.
"How not to do it," is still the distinctive characteristic of American public life.
Is the President not aware of the fact that early in our history the Supreme Court adopted a policy and established a precedent that deprived the people of their natural remedy for corporate aggression?
The doctrine affirmed by the decision in the Dartmouth College case is the source of most of our present industrial abuses.
Instead of seeking the overthrow of that doctrine, our so-called statesmen seem bent on devising schemes that admit its truth, but attempt to dodge its consequences.
* * *
Daniel Webster conducted the case for the college.
John Marshall and Joseph Story delivered the principal opinions.
Those opinions were essentially repetitions of Webster's argument.
On fundamental law Blackstone was favorably quoted.
The case is interesting. Story said so, and in this respect his opinion is sound.
* * *
As told by Wheaton, the story is as follows:
In 1754 Dr. Wheelock began teaching the Christian religion to Indian children. He included some white children, and added educational to religious instruction.
The school was charitable, and contributions were sought. Finally the favorable attention of Lord Dartmouth and others in England was secured.
Originally, Dr. Wheelock intended to bequeath the school and its funds to twelve men with power to fill vacancies, that the trust so formed be perpetual.
The English contributors believed an incorporated organization more desirable, and in 1769 there was secured from the English crown a charter.
The "Trustees of Dartmouth College" is formed in harmony with the plan of Dr. Wheelock, being composed of twelve men who, with other privileges, have power to fill vacancies, and thus is self perpetuating.
The charter declares its provisions unalterable by the crown, and that the twelve trustees may make rules and regulations for the government of the college not repugnant to the laws of Great Britain or New Hampshire.
After the Revolution the State of New Hampshire increased the number of trustees to 21, and appointed a board of 25 overseers.
The college corporation resisted this action, and was defeated before the Supreme Court of that State.
The constitution of New Hampshire (art. 15) reads: "No person shall be deprived of his property, or immunities, or privileges, put out of the protection of the law, or deprived of his life, liberty or estate, but by judgment of his peers, or the law of the land."
The New Hampshire court said: "That the right to manage the affairs of this college is a privilege within the meaning of the bill of rights, is not to be doubted. But how a privilege can be protected from the law of the land by a clause in the constitution declaring that it shall not be taken away but by the law of the land is not very easily understood."
Upon appeal to the Supreme Court of the United States it was held that the charter from the crown is a contract, and therefore that said laws are null and void, because in violation of the Constitution of the United States, which reads (art. 1, sec. 10): "No State shall pass any law impairing the obligation of contracts."
* * *
In his contribution to this interesting case Judge Story said: "It is a principle of the common law . . . that the division of an empire works no forfeiture of obviously vested rights of property."
And of course the division of empire does not destroy sovereign power — that power passes, it does not disappear.
The people of England, through their agent, Parliament, as an act of sovereignty, can, could and did revoke grants made by the crown. All grants issued by the crown were and are subject to this condition.
Webster admitted this power of Parliament, but urged that "in modern times it has exercised this power very rarely;" that "even in the worst times this power of Parliament to repeal and rescind charters has not been exercised;" that "Parliament could not annul charters as a matter of ordinary legislation, but only as an act of omnipotent sovereignty;" that "no legislature in the United States has such power."
The people of New Hampshire, by their sovereign agency (legislative, executive and judicial), declared these laws in full force and effect.
When these agree has not sovereignty spoken? What further appeal is possible — save to the mob?
Therefore, unless the Constitution of the United States delegated to the Federal Government power to annul charters, or prohibited it to the States, it has continued to reside in each State as an inherent sovereign right.
The tenth amendment to the Constitution reads: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
There was no pretense that power to annul charters was delegated to the United States, but it was held the clause declaring that "No State shall pass any law impairing the obligation of contracts," is such prohibition to the States.
In our early history some of the States too readily altered the basis of debt liquidation. For this reason this Constitutional prohibition was inserted, and yet this decision pretends that in it is concealed the destruction of a great sovereign prerogative.
And even a hasty perusal of the proceedings of the Constitutional convention show the subject under consideration to have been private contracts.
Even if a grant be absurd or unjust, or secured through corruption, still are the sovereign people helpless. According to this decision there is no power in the United States that can annul charters -- because of a Constitution ordained "to promote tranquillity," and to secure other "blessings."
* * *
The vital question before the Supreme Court, therefore, was -- Is the charter from the crown a contract?
Chief Justice Marshall disposed of the matter by saying: "It can require no argument to prove that the circumstances of this case constitute a contract."
On the contrary, very energetic argument is required; much more forceful than any advanced by either counsel or court.
* * *
As a point from which to view the matter in hand, let us first perceive the conditions of equitable social adjustment.
Blackstone says truly that: "The laws of nature are coeval with mankind and are binding everywhere and at all times," and that "all human enactments derive whatever force and vitality they may have from their conformity to those great originals," and that "any human laws made in contradiction of the laws of nature must eventually fail and become null and void."
As a condition of nature, then, men live on the earth, and must produce things from its materials in order to continue life.
Some, if able, will rob, or wantonly or carelessly injure others, and to prevent such trespass all the people (strictly, the majority) within a given territory organize the police power.
To utilize the earth efficiently it is necessary that parcels be exclusively occupied by individuals. To this end the whole people ordain a method of holding land.
In other words, each man has the right to peacefully occupy and use the earth, and the only known way to maintain this right (security of person and property) is by the exercise of the supreme force.
This supreme force is sovereignty. Sovereignty is dominion; government its organized agency.
States are not corporate agencies to be compelled. They are sovereign agencies that command. They bow not to the past; they rule not the future; but they control the present.
To yield this power in any degree is, in that degree, to yield the only power in nature whereby civilized society is possible.
To argue that sovereignty can, in part, surrender itself, is to argue that a thing can divest itself of its essential characteristics.
If we argue that sovereignty can partly surrender itself, must we not logically agree that it can do so wholly?
Sovereignty is the arbitrary will of the majority, and finds justification for its exercise in the fact that nature (i. e., the constitution of man, together with that of his environment) compels the assertion of that will.
The supreme force is often used to the disadvantage of some, but such act is in violation of natural equity and "must eventually become null and void."
This is nature's social law. "Conformity to this great original" is the State's duty.
* * *
It will be observed that sovereignty does not originate in the divine right of the King, nor in the legislature, nor in the so-called social compact, nor in the conscious contract that James Wilson tried to deduce from the assertion that governments derive "their just powers from the consent of the governed."
Like the right of each man to peacefully use the earth, sovereignty exists of itself. The State is but the agency of sovereignty, organized to conserve this right to peacefully occupy.
Plainly, while a State may contract with a citizen to build a school house, it cannot contract with him regarding matters of sovereignty.
Such act would be an attempt to "agree" that the greatest force is not the greatest force — an attempt in degree to surrender sovereign agency.
A charter gives power to the possessors as against other citizens, but not as against the State.
A State therefore may create a corporation by permitting a group of persons to exercise sovereign powers, but such act is to delegate, not to surrender power. It is a license, a permit — nota contract.
In short, a State may delegate portions of its power, but it can abdicate no part of its sovereign agency.
Any agent may make contracts as to matters in the conduct of business proper to his agency, but who will urge that he may contract away any part of the title to the enterprise itself? Are we to understand that an agent may absolve himself of his agency, in any degree?
A corporation holds power only because it is sustained by sovereignty. It is not only created by law, but also is sustained by law, and has no being save for law.
To admit the power to grant charters and deny the power to annul them, is like admitting the existence of one side of an object while disputing the existence of the other side; or like asserting the positive and denying the negative pole of electricity; or like disputing the similar conversion of a syllogism.
* * *
The Supreme Court was right, when, in the "Slaughter House" and other cases, it held that no part of the police power may be "contracted" away. Each citizen must submit to this phase of sovereign authority.
But is land-holding less a result of sovereignty than police regulations? One may refuse a particular parcel of land, but cannot refuse all land and live. Either as owner or tenant he must conform to the methods ordained. He may, however, refuse to erect any building.
Men and land include all things social, and if sovereignty be asserted as to these it is complete.
* * *
Webster dimly perceived that to contract, all parties must be free to withhold consent, and he said: "What proves all charters of this sort to be contracts is that they must be accepted, to give them force and effect."
Can we not with equal justice say the relation between master and slave is contractual?
The master grants permission to attend a picnic. The slave "accepts" — and we have a contract.
Or, the master commands a like act, and the slave refuses, even preferring death — and no contract results.
Is not the permission or the command without "force and effect" unless the slave "accepts"?
"Accept," says the master, "and live a slave, or fail to 'accept' and die a man."
Corporations live. Men die. Therefore, says the State, according to this decision, accept this charter and live an artificial, immortal person, or fail to accept and die as the God of nature designed in his "great originals."
* * *
If we are agreed as to the nature of sovereignty and its agency, we perceive the validity of the British rule that the Parliament can annul charters. Also we will be able to note the virtue of the positions taken by the court.
Two principal assumptions were made:
First, that land grants are irrevocable. Second, that corporations are persons.
Some positions were evaded, but, on the important matter of "privileges" there is agreement, as follows:
Blackstone said: "Franchise and liberty are used as synonymous terms, and their definition is, a royal privilege, or branch of the King's prerogative, subsisting in the hands of the subject."
Webster quoted Prof. Sullivan as saying that, "The term liberty signifies the privileges that some of the subjects, whether single persons, or bodies corporate, have above others, by the lawful grant of the King."
Webster then said: "The plaintiffs have such an interest in this corporation."
Privileges, then, are partialities, favoritisms, "grants of the King's prerogative," "advantages that some have above others."
Per contra: They are handicaps, burdens, oppressions, tyrannies upon those same "others."
"What is one man's privilege is another man's right," is a wise saying attributed to Andrew Carnegie.
Of corporations Justice Story said: "An aggregate corporation at common law is a collection of individuals united into one collective body, under a special name, and possessing certain immunities, privileges and capacities in its collective character which do not belong to the natural persons composing it. . . . It is in short an artificial person, existing in contemplation of law, and endowed with certain powers, and franchises, which, though they must be exercised through the medium of its natural members, are yet considered as subsisting in the corporation itself, as distinctly as if it were a real personage."
Marshall said of this corporation: "An artificial immortal being was created by the crown, capable of receiving and distributing forever, according to the will of the donors, the donations which should be received by it."
And said Webster: "A grant of corporate powers and privileges is as much a contract as a grant of land."
"Was it ever imagined," asked Story, "that land voluntarily granted to any person by a State was liable to be resumed at its own good pleasure?"
The nature of privileges is agreed to; also that corporations hold privileges; also that "a grant of franchises is not in principle distinguishable from a grant of any other property," as asserted by Story.
But cannot the State take the physical thing, land, under power of eminent domain; and did not John Marshall say, in Providence Bank v. Billings (4 Peters, 562), referring to a land grant, that: "This grant is a contract, the object of which is, that the profits issuing from it shall inure to the benefit of the grantee? Yet the power of taxation may be carried so far as to absorb these profits. Does this impair the obligation of contracts? The idea is rejected by all," etc.
If the State can take the land under condemnation, and its value (profits) by taxation, what becomes of the contention of Webster and Story that land granted may not be resumed? And we are all agreed that land grants and franchises stand or fall together.
Thus one principal assumption is destroyed. It has no validity in reason, and from a different point of view, as shown in the case cited, even Marshall was able to perceive the truth.
* * *
The second principal assumption was necessary to the conclusion, because if the corporation was not a "person," there was no party with whom the crown might contract.
It is agreed that a contract is "an agreement between two or more persons to do or not do a particular act."
As a corporation does not exist until the charter issues, it would seem that, if the charter is a contract, the corporation must be a party to its own creation.
Perhaps the State creates a corporation, or artificial person, and then contracts with that artificial person to do what it has already done, viz., create a corporation.
Story dealt with this point in the following manner:
"From the nature of things, the artificial person called a corporation must be created before it can be capable of taking anything. When, therefore, a charter is granted, and it brings the corporation into existence without any act of the natural persons who compose it, and gives such corporation any privileges, franchises, or property, the law deems the corporation to be first brought into existence, and then clothes it with the granted liberties and property. . . . There may be, in intendment of law, a priority of time, even in an instant, for this purpose."
The corporation must exist before it is "capable of taking anything."
Certainly; and it must "be" before it can contract to "be." To "be" is one of its liberties, and all of its liberties are in the "contract."
As Marshall said: "A corporation is an artificial being, invisible, intangible, and, existing only in contemplation of law, it possesses only those properties which the charter expressly confers upon it."
One of which properties is to "be." "The law deems the corporation to be first brought into existence and then clothes it," etc. Never mind about clothing it. Get the thing born first — as a contract.
Story said those who oppose his view should "consider whether or not they do not at the same time establish that the grant itself is a nullity for precisely the same reason."
As a contract, we do establish "precisely" that.
* * *
Story had yet another line of approach. He said: "An executory contract is one in which a party binds himself to do or not to do a particular thing. An executed contract is one in which the object of the contract is performed."
The non-professional mind can readily perceive how one may contract to make a pair of boots, or to sell or to deliver a pair, but how can one contract to make a pair that is already made?
Seemingly, in the court's view, a charter is an executed contract. That is, "the object of the contract is performed." But this does not relieve the situation. For, even though the making and the performance of the contract be simultaneous, there can be no contract without parties, and the corporation or artificial person does not exist until the charter issues.
Not only is the "person" artificial but the whole concept is artificial and woodeny and bears no semblance to those "great originals" to which Blackstone rightly declared all permanent law must conform.
One feels impelled to warn the profane reader that this is not a discussion of farce-comedy.
* * *
The facts in the case appear simple enough, before Webster indulged in intellectual gymnastics, or the court applied its alchemy.
It seems that a group of persons applied for, and received, "an advantage above others," a "branch of the King's prerogative," or a privilege sustained by sovereign power, that is, a charter.
The grant being secured, the group thereby becomes an organisation of persons upon whom the State has conferred certain specified favors.
If the corporation is an artificial person "in contemplation of law," it can be very bluntly be asserted that the law assumes as true what is not true, but is absurd.
When told that in the eye of the law his wife supposed to act under his direction, Mr. Bumble replied: "If the law supposes that, the law is a ass — a idiot. If that's the eye of the law, the law's a bachelor; and the worst I wish the law is, that his eye may be opened by experience — by experience."
We are getting experience, and it is to be hoped our eyes will open. Mr. Bumble's estimate of the law was, in some respects, extremely accurate.
The second assumption seems untenable, and with its dismissal the case vanishes.
A corporation is an organization — not an organism, and certainly not a person.
Its charter is but the expression of the grant of authority conferred. If the State has power to confer, it also has power to withhold or withdraw — that is, to annul. Unless, of course, there is some power in government greater than sovereign agency.
* * *
Story suggested that power to annul charters might be reserved by the legislature, either in each charter or a general law.
Such reservation surely cannot give to a legislature a power not already possessed. Otherwise an act may not only tend, as Webster feared, but easily secure, "the union of all powers in the legislature."
And if the legislature cannot so add to its own powers, but can by act secure the reservation, does it not follow that the reservation exists regardless of the act?
Does a legislature possess power through contract with individual citizens, or is its power delegated to it by the sovereign people?
After agreeing to the nature of privilege, and listening to the definition of corporations, and observing Justice Story's assurance that these grants imply on the part of the grantor "a contract not to reassert the right" (although it is agreed that Parliament can annul), and being told that "the only effect of the charter was to give permanency to the design;" in fact, being duly impressed with the solemnity of the whole proceeding (and why should not artificial, immortal beings be viewed with awe?), we are suddenly startled by Marshall's assertion that "From the fact that a charter of incorporation has been issued nothing can be inferred which changes the character of the institution or transfers to the government any new power over it."
If this assertion is true, why do men seek charters?
If the character of the institution was not changed, what contract was made?
And what did Story mean in saying that a corporation possesses "certain immunities, privileges and capacities in its collective character which do not belong to the natural persons composing it"?
We must infer a change in the character of the institution, and that change is the possession of political powers not before held.
It is these political powers that Story said "do not belong to the natural persons composing" the corporation.
These "branches of the King's prerogative" are political because the whole of the King's prerogatives are political. The State is political. It has political power only to give.
It was to this sort of power that Webster referred when, after describing privilege, he declared that his clients "have such an interest in this case."
The character of the institution was changed by the exchange of a private for a public administrator. All corporations are public for the reason that all their powers are derived from the State. Corporate powers are part of the State — (sovereign powers subsisting in the hands of the citizen, — to use our terms in place of the British form).
On the same point Mr. Hopkinson, of counsel for the college, asked: "If the property of this corporation be public property, when did it become so? It was once private property; when was it surrendered to the public?"
The property was not surrendered to the public, but its administration was given to the public by the voluntary act of its owners.
The owners preferred to entrust it to a publicly established agency (viz., the corporation), rather than to leave it by bequest to private parties, in accord with the original intention of Dr. Wheelock.
* * *
Distinguishing between public and private corporations and indicating that the physical property with which a college corporation is endowed is called its "foundation." Story said: "If the foundation be private, though under the charter of the government, the corporation is private, however extensive the uses may be to which it is devoted, either by the bounty of the founder, or the nature and objects of the institution."
And in this class of private corporations he places hospitals, banks, canals, insurance, turnpike and bridge companies.
This conclusion gives to a corporation the character of its physical property, while common sense asserts its character to be that of the source of its authority.
It is a corporation because the State created it. Is it not more in harmony with right reason to say, ''if the grant be from the public, the corporation is public, however slight be the uses to which its political power is devoted"?
Do the privileges of a corporation spring from its foundation, or from the State?
Its power "to be" is of the State; its permanence, or "immortality," is of the same source.
How can we say that the privileges of a corporation are sovereign powers in the hands of a citizen, and at the same time say the corporation is private?
To classify corporations as civil and eleemosynary, or as public and private, is to divide them according to their uses, and is entirely proper as an aid to convenient identification; but to make this classification on the basis of philosophical distinction is merest twaddle.
A corporation is a group of persons holding "privileges," and the nature of privileges is agreed to. Whether the corporation is used to conduct a Sunday school, a great city, a railroad, or a manufacturing plant is immaterial.
A gun, whether a toy pistol or the most improved rifle, is still a gun; and whether in the hands of an honest man defending his home, or in the hands of a highwayman attacking his victim, it is still a gun.
A corporation holds political power. Its power to "be" is political. And all the fancy balancing indulged by counsel and court operates to conceal, not to destroy, this truth.
* * *
The New Hampshire court, as before stated, said it was difficult to understand "how a privilege can be protected from the law of the land by a clause in the Constitution declaring that it shall not be taken away but by the law of the land."
In reply Webster quoted Blackstone as follows: "And first it (i. e., the law), is a rule; not a transient or sudden order from a superior, to or concerning a particular person; but something permanent or universal. Therefore a particular act of the legislature to confiscate the goods of Titus or to attaint him of high treason does not enter into the idea of a municipal law; for the operation of this act is spent on Titus, and has no relation to the community in general; it is rather a sentence than a law."
Webster added, "Everything that may pass under the form of an enactment is not therefore to be considered the law of the land. Such construction would render constitutional provisions of highest importance inoperative and void."
All of which is true, but the case in hand is an instance of the "universal and permanent" rule that sovereignty can annul charters.
Webster seems to have dodged the issue, or begged the question; which reminds us that of one of counsel's arguments Story said, "The fallacy of the argument consists in assuming the very ground in controversy."
This is precisely the method of the court throughout most of this case.
Many eminent authorities, voicing sound doctrines as to the proper relation between sovereignty and the person, were quoted — and then the doctrines were applied to corporations.
Herein lies the plaintiff's need for asserting corporations to be persons — and herein is the lameness of this absurd decision.
* * *
In conclusion, sovereignty is not a subject of contract.
Nature forces the majority to be sovereign. Sovereignty of necessity relates to persons and to land.
These two exist of themselves. All else in the social state is subsidiary.
The whole string of sophistries indulged by the court were to the end that these simple truths be submerged.
It is only as these simple truths are clearly apprehended that social freedom is possible. Marshall was a Tory. His whole career proves it. A Tory is not a friend of freedom.
The truth is that power to regulate corporations or annul their charters inheres in each State — save for this precedent.
Deprived of this power by this invasive rule, the people flounder on, rapidly losing faith in the great American experiment.
Does anyone doubt that our Western States would long since have regulated railroads and other corporations in the interest of common honesty if the group of attorneys called the Supreme Court did not bar the way?
The people think they live under the Constitution, in fact, they live under Marshall's decisions.
If it were not for the slavish submission of the present court to the name of Marshall, would we need to be outraged by the spectacle of sovereign States like Idaho, Montana and Colorado in the West, and Pennsylvania and New Jersey in the East, lying bound at the feet of a lot of soulless corporate pirates, as reckless of human rights as any horde that ever sailed the Spanish Main?
Let the court confine itself to its own affairs, and leave the States to attend to theirs.
The decision was in degree destructive of the rights of the States (which in itself is of no moment), and thereby of the people's rights (which is of great moment).
It was not adjudication. It was usurpation. Thus far it has been endured.
One Judge dissented. Let us revere his name — it was Duvall.
The tax plan being promoted by one of the presidential candidates, Herman Cain, seeks to impose a federal personal and corporate tax rate of 9% and a national sales tax of 9%. The word for "no" in German is "nein." Since the 9-9-9 plan would be neither equitable nor efficient, we can respond in German, "nein, nein, nein!"
The first "nein" is on the 9% business flat-rate income tax. This would impose a tax on gross income minus purchases from US firms, investment in capital goods, and exports. That would be much better for enterprise than the current top income tax rate of 35%. However, recognizing that any taxes on production has an excess burden, the best tax rate of all would be a flat zero.
The second "nein" is on a personal income tax rate of 9% on gross income minus charitable donations. The plan complicates this with special tax rates in "empowerment zones." Such enterprise zones often just shift business away from other areas, and then the land rent in the zone goes up to soak up the locational advantage, so the ultimate gainers are the landowners, especially those who are politically well connected and are able to buy up land in the zones prior to being established.
The poorest workers pay little or no income tax today, or even get cash under the "earned income tax credit". The flat-rate 9% tax would make the poor pay higher taxes. Again, a 9% tax is better for most taxpayers than the current tax rates that go up to 35%, and a flat tax that eliminates real estate deductions and exemptions is also better, but best of all would be a flat wage and profits tax of 0%.
The worst part of the 9-9-9 plan is the 9% national sales tax. While to some extent the effect of the sales tax would be offset by the reduction of income taxes, still, sales taxes get added to the cost of production to increase the price of goods. For companies that were making little profit, they would have paid little income tax, so the tax could end up raising their prices by more than the current tax system. If they employ low-wage labor, those workers would have been paying little or no income tax, and would now have to pay the higher nine-percent income tax, which would further increase costs to those enterprises. The 9-9-9 plan would dramatically increase income inequality at a time when inequality has already been rising rapidly.
The 9-9-9 plan is supposed to be revenue-neutral, but analysts have found that it would generate less revenue than the current system, so the 9-9-9 numbers would probably be raised to 10-10-10 or higher. Once a national sales tax or value added tax is in place, the tax rates could be raised, as they have been in Europe.
It has been pointed out that the tax plan being promoted by Herman Cain is the same as the tax structure in the 2003 video game "SimCity 4". This video game simulates a city, and the default tax rate is 9-9-9. According to some analysts, in this simulation game, the 9% tax rates were not enough to finance the desired public goods.
The favoring of one tax plan implies the rejection of the other systems. The advocacy of a national sales tax implies the rejection of alternatives such as a national land-value tax. So we can ask why a candidate is rejecting a tax on land value in favor of a tax on produced goods.
Herman Cain is correct in saying that the natural state of the economy is prosperity, and that freedom promotes prosperity. He is right in saying that government must get out of the way of production. He is right in saying that production drives the economy. But he does not go to the logical conclusion of the free-market argument: marginal tax rates of zero. To best promote employment, investment, and growth, place no tax on additional production, trade, or consumption.
A land-value tax would best let the economy rise to its natural rate of prosperity. LVT would be levied on the economic rent of all land. Taxing land value is equivalent to taxing its economic rent, also referred to as ground rent or geo-rent. LVT would be based on the most productive use of a plot of land, regardless of current use, and regardless of current rental payments. Thus if a plot of land were not being used as productively as possible, the tax would push landowners to make the best possible use of their lands, or else pay the same as those who do.
LVT would promote equity and greater equality of income and wealth, because it would equalize the benefits from land, and equalize the gains from economic progress as captured by higher rent.
The prices of goods, including wages and interest rates, provide information about their scarcity relative to the desire for those items. Taxes both on production and on goods twist, distort, and skew these numbers, so that the economy is operating on false signals. LVT does not change the market rent, and rather than acting as a tax, it acts to remove a subsidy. Land value gets subsidized as the public goods provided by government, but not paid for by landowners, pumps up rent and land value. If this rent is not collected for public revenue, then it is a gigantic subsidy to land ownership. Thus taxes on goods and on income from production and not on land value end up subsidizing land value and shifting wealth from the poor to the rich.
Thus if the 9-9-9 plan increases wealth, the gains would go to the rich at further expense to the poor. The worst part of the plan is its continuation of the massive subsidy to land value, and even if the plan generates more growth, the benefit will ultimately go to higher rent and land value, generating an even greater real estate boom to be followed by another big crash.
So let's say in German: Nein! Nein! Nein! Let's also say Zero, Zero, Zero! Zero tax on wages, zero tax on goods, zero subsidy to land value. The tax emperor appears to be dressed to the nines, but like in the story of the naked emperor, the cloth is imaginary. -- Fred Foldvary
Copyright 2010 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
.... this time because perhaps his targets are the well-situated, those in a position to contribute the funds which political campaigns need. Keep in mind that NYS's former governor, though previously an attorney general, is also the scion of a real estate fortune.
Urban real estate investors live off the fruit of the land, the fruits of the community's sowing, and we praise them as philanthropists when they toss us a few tulips in the median strips or parks.
And notice that the refusal continued even Harry Markopolis testified before a congressional committee about his repeated and data-filled attempts to bring Bernard Madoff's obvious Ponzi scheme to the attention of the SEC (January, 2009). Talk about tone-deafness on the part of those we pay to monitor things for us. As someone else recently wrote, small government or weak government? And government of, for and by WHICH people??
I hope some upstate legislators will push at this issue. Their constituents ought to expect it of them.
The writer is a Reuters columnist. The opinions expressed are his own.
By David Cay Johnston
(Reuters) - Each year New York State lets real estate investors evade at least $200 million of taxes. In peak years the figure likely rises to $700 million, if known tax cheating in another state is any indication. Some of the investors who cheat New York State also cheat New York City out of at least $40 million annually.
Back in the 1990s Jerry Curnutt figured out how to finger such cheats when he was the top partnership specialist at the Internal Revenue Service. Curnutt's computer sifted through tax returns until he learned how to separate thieves from honest taxpayers. The tax-evasion estimates of $200 million and $40 million are his.
Six New York state tax auditors took classes Curnutt taught in June 2000 and gave stellar evaluations. California's top tax auditor praised Curnutt's course as "effective, relevant and most importantly, appreciated and understood by our auditors."
Why has nothing been done for more than 11 years to make the cheats in New York pay what the law requires?
New York state and city are strapped for cash, slashing services for the poor, disabled and elderly. With penalties of up to 50 percent plus interest at penalty rates, the state is easily due more than $5 billion from years still open to collection, I calculate.
Every state has similar issues, but New York matters most as the epicenter of highly leveraged real estate investment pools.
Curnutt found that real estate investment partnerships with depreciated properties often misreport gains when they sell. That such cheating is widespread screams about tax law enforcement looking the other way when those at the top steal. In contrast, New York State has a well-deserved reputation for going after people whose mistakes cost the state as little as three dollars.
GO AWAY, THEY SAY
Yet in letter after letter since 2001, New York state tax officials told Curnutt to go away, smugly insisting there were no untaxed millions.
As head of audits for New York State, Thomas Heinz wrote Curnutt in 2003 that the state was "not interested in pursuing you or any other consultant on the matter" of systematic cheating by real estate partnership investors. Months later Heinz wrote a second letter that made it clear he had not understood what Curnutt was proposing, while reiterating that there were no untaxed millions to be found.
A year ago Curnutt again was told to go away because there was no money going untaxed.
And yet in Pennsylvania, Curnutt's research "resulted in the taxation of over $700 million in unreported income," the Pennsylvania Revenue Department wrote in a letter to tax administrators across the country in reference to a single instance.
"Without his assistance, our staff would have spent numerous hours getting to the crux of the issues, in that especially complex case," Pennsylvania tax authorities said.
Pennsylvania has relied on Curnutt since 2002, calculating that every dollar spent on his research and subsequent audits was worth $10 of tax.
So why are sightless sheriffs ignoring massive cheating by the most affluent among us?
The likely reason became clear nearly a decade ago when one Kentucky tax official told Curnutt that the governor's office did not want his services because it would uncover tax cheating by influential citizens, meaning campaign donors.
It is time for New York's three top state officials, all Democrats with higher ambitions, to do their duty, especially since the thieves are virtually certain to include some of their campaign contributors.
LAWMEN AND THEIR DUTY
Governor Andrew Cuomo, who harbors ambitions to be president, made his name as a state attorney general who appeared to get tough with Wall Street. Lieutenant Governor Bob Duffy rose from Rochester street cop to chief and would love to be governor. So would Attorney General Eric T. Schneiderman, elected in 2010 on a promise to be tough on white-collar crime.
Mayor Michael Bloomberg, an independent, has a similar duty to go after tax cheats even if these should turn out to include some of his friends.
New York law gives authorities leverage aplenty. The mere threat of public exposure through civil lawsuits would prompt many to write checks. For repeat offenders, the threat of indictment for tax evasion would produce checks even faster. Faced with the prospect of civil or criminal charges, many in positions of public trust would be ruined if their names got out.
The general partners -- those in charge in the partnerships Curnutt investigated -- took calculated steps to cheat and the most serious offenders should face indictment and, upon conviction, years of prison time. But many limited partners may have assumed their K-1 tax statements were reliable. Innocent victims owe taxes and interest, but not penalties. Those with multiple untaxed gains are not innocents.
As lawmen Cuomo, Duffy and Schneiderman all understand leverage. They have enough to lift billions into the state treasury where it belongs just by indicating in letters that failure to pay will result in disclosure of names. Will they?
Until Cuomo, Duffy, Schneiderman and Bloomberg enforce the law, their official inaction lends credence to billionaire Leona Helmsley's remark, quoted by her housekeeper, that "we don't pay taxes; only the little people pay taxes."
This column will keep you posted on whether these officials act or not. (Editing by Howard Goller)
I'm glad to see DCJ quoting Leona Helmsley -- but I don't think he yet fully "sees the cat" or realizes that Leona Helmsley's reference could just as accurately have been to tax STRUCTURES, not to tax evasion.
Buildings do not appreciate. Even with the best of care and occasional renovations, they depreciate, as technologies advance, efficiencies improve. What rises in value is land -- the location -- and it rises for reasons which have nothing to do with the individual or corporate landholder (resident or absentee), and everything to do with the community and with public investment in infrastructure and services. These owners are evading taxes which support that spending. In multiple ways, they are reaping what they do not -- cannot! -- sow. These companies are in it for the so-called "capital" gains, which aren't "capital" at all, but land gains.
Another example of the FIRE sector gobbling up the profits of the productive portions of our economy. Their "free lunch" is at the expense of the rest of us. And the phrase "rich people's useful idiots" comes to mind.
The goal is a fair field and no favor. But I don't think that's what this crowd is looking for.
I recently came across an 1889 article by Thomas G. Shearman, co-founder of the NYC law firm Shearman & Sterling, entitled "The Owners of the United States." It seems rather timely, and might be of particular interest to the Occupy Wall Street movement. It appeared in The Forum, in November, 1889. It refers to an earlier article in the September 1889 issue of the same journal, which appeared under the title, "Henry George's Mistakes." (Based on its content, it seems to me that it would have more accurately been titled "Henry George's 'Mistakes'.")
The Owners of the United States
by Thomas Gaskell Shearman
It has been and still is the boast of the American people, that wealth is more equally distributed here than in any other part of the world. While every one admits that the old days of New England, in which none was very rich and none was very poor, have passed away, yet it is still believed that the land, buildings, and personal property of this country are owned mainly by the majority of its people, and that there is no danger of any such concentration of wealth in a few hands among us as exists in older and more aristocratic nations. Statistics as to the wide distribution of wealth, shown by the deposits in American savings banks, by the large number of American farms, and by the supposed high standard of American wages, have been consistently set forth as conclusive evidence that American wealth is substantially owned by the mass of the American people. The object of the present inquiry is not to determine whether such a condition would be desirable or not, but simply to ascertain whether it actually exists.
Interesting as such an inquiry must be, especially to that laboring class on whose behalf it was supposed that labor commissions were established, little effort has been made by any of them to solve this problem. The very able gentleman at the head of the National Labor Bureau, after taking statistics of industrial depressions, convict labor, and strikes, seems to have felt that he had exhausted all subjects of special interest to the laboring classes; and he therefore directed the energies of all his assistants to an investigation of the subject of divorce -- the one subject, among all grave social questions, with which the masses of laboring men have the least practical concern. One who desires to investigate the great problem of the distribution of wealth in this country must, therefore, feel this way, without much assistance from the official representatives of the very class which has the deepest interest in the question.
In the "effete monarchy" of Great Britain, where the laborer, deprived of all the blessings of a protective tariff, has no representative in the national government, no bureau, no commissioner, and only five members of Parliament among 1200, there is nevertheless no serious difficulty in the way of forming a pretty close estimate of the distribution of wealth. The income-tax returns, combined with those of the probate and succession duties, furnish the means of estimating, at frequent intervals, the proportions in which wealth is distributed among different classes of the nation; while a return of rent rolls, made in 1872, enables us to determine with considerable accuracy the proportions in which the land of the whole country is owned. Mulhall's estimate is as follows:
DISTRIBUTION OF BRITISH WEALTH, 1877
Wealth in Millions
Wealth per Family
From this table it will be seen that one thirtieth part of the English people own two thirds of the national wealth. With what scorn we have long pointed to these figures; and with what pride have we bade foreign nations to look upon our own beloved land, where such things no only did not exist, but were made impossible by our republican form of government!
Can any light be thrown upon the distribution of American wealth by a study of English statistics? Let us see. By adding to the published returns of the personal estates of British decedents a capitalization of the rental value of their estates, at 4% interest, we may form a tolerably accurate estimate of the aggregate wealth, real and personal, of the richest noblemen and bankers of England who have died within the last quarter of a century. We may then compare these figures with the known wealth of a few American citizens, and thus obtain a starting point for further comparisons.
In this way, we find that the richest of the Rothschilds, and the world-renowned banker Baron Overstone, each left about $17,000,000. Earl Dudley, the owners of the richest iron mines, left $20,000,000. The Duke of Buccleuch (and the Duke of Buccleuch carries half of Scotland in his pocket) left about $30,000,000. The Marquis of Bute was worth, in 1872, about $28,000,000 in land; and he may now be worth $40,000,000 in all. The Duke of Norfolk may be worth $40,000,000, and the Duke of Westminster perhaps $50,000,000.
There is no official classification of British wealth or rents. But incomes derived from the profits of business, exclusive of railways, mines, etc., are classified as follows:
British Incomes from Business Profits, 1884
50,000 and over
10,000 to 50,000
5,000 to 10,000
4,000 to 5,000
3,000 to 4,000
2,000 to 3,000
1,000 to 2,000
400 to 1,000
200 to 400
The great law of averages may be relied upon as confidently in America as in Europe. We need only find a starting point; then we may safely proceed to calculations based upon general experience as to the average increase in the number of persons owning wealth, in proportion to the decrease of the amount owned by each individual. To find this starting point, it will be necessary to give a list of Americans whose wealth is approximately known. The writer abstains from mentioning in this list a single name concerning which he has any information which might possibly be confidential; and, to make quite sure of this, he omits the names of all gentlemen with whom he has any confidential relations. The names of person who have died (six of them within one year) will be included, more accurate information being obtainable concerning their affairs than in any other cases. Their estates are nearly all either undivided or in the hands of so small a number of persons as to make no practical difference, while the number of names which have been omitted will far outweigh all possible errors in the list. No name is given which is not believed, for good reasons, to represent an individual wealth of at least $20,000,000. The figures indicate the wealth believed to be possessed on the average by each of the persons whose names follow:
J. J. Astor, Trinity Church
C. Vanderbilt, W. K. Vanderbilt, Jay Gould, Leland Stanford, J. D. Rockefeller
Estate of A. Packer
John I. Blair, Estate of Charles Crocker
Wm. Astor, W. W. Astor, Russell Sage, E. A. Stevens, Estates of Moses Taylor, Brown & Ives
P. D. Armour, F. L. Ames, Wm. Rockefeller, H. M. Flagler, Powers & Weightman, Estate of P. Goelet
C. P. Huntington, D. O. Mills, Estates of T. A. Scott, J. W. Garrett
G. B. Roberts, Charles Pratt, Ross Winans, E. B. Coxe, Claus Spreckels, A. Belmont, R. J. Livingston, Fred. Weyerhauser, Mrs. Mark Hopkins, Mrs. Hetty Green, Estates of S. V. Harkness, R. W. Coleman, I. M. Singer
A. J. Drexel, J. S. Morgan, J. P. Morgan, Marshall Field, David Dows, J. G. Fair, E. T. Gerry, Estates of Gov. Fairbanks, A. T. Stewart, A. Schermerhorn
O. H. Payne, Estates of F. A. Drexel, I. V. Williamon, W. F. Weld
F. W. Vanderbilt, Theo. Havermeyer, H. O. Havermeyer, W. G. Warden, W. P. Thompson, Mrs. Schenley, J. B. Haggin, H. A. Hutchins, Estates of W. Sloane, E. S. Higgins, C. Tower, Wm. Thaw, Dr. Hostetter, Wm. Sharon, Peter Donohue
Trinity Church is included in this list because it is practically an individual owner. For the purpose of estimating the distribution of wealth, it is obvious that this corporation, which has no stockholders, must be treated as a unit.
It will be said that these estates could not be readily sold for their estimated value. In a few cases this is true; but it is immaterial, because it is equally true of the property of farmers and other small owners, and so does not change the relative proportion of wealth, which is the only important question. Our estimate of the whole national wealth is based upon the census of 1880, in which the capital and debts of railway, telegraphy, and steamboat companies were included at par. But in the foregoing estimates of individual wealth the current market value is adopted, which is much less than par. For purposes of comparison between different classes the census valuations ought to be adopted all around. But if they were, the wealth of Mr. Gould would be fixed at over $125,000,000, and that of Messrs. Crocker and Huntington at nearly as much; and the proportionate share of the very rich would be greatly increased.
Making the largest allowance for exaggerated reports, there can be no doubt that these 70 names represent an aggregate wealth of $2,700,000,000, or an average of over $37,500,000 each. The writer has not especially sought for information concerning any one worth less than $20,000,000, but has incidentally learned of 50 other persons worth over $10,000,000, of whom 30 are valued in all at $450,000,00, making together 100 persons worth over $3,000,000,000; yet this list includes very few names from New England and none from the South. Evidently it would be easy for any specially well-informed person to make up a list of 100 persons averaging $25,000,000 each, in addition to ten averaging $100,000,000 each. No such list of concentrated wealth could be given in any other country in the world. The richest dukes of England fall below the average wealth of a dozen American citizens; while the greatest bankers, merchants, and railway magnates of England cannot compare in wealth with many Americans.
Lists were lately published of 67 millionaires residing in Pittsburgh, of 63 residents of Cleveland possessing in the aggregate $300,000,000, and of 60 persons residing in three villages near New York whose wealth was said to aggregate $500,000,000. One of the gentlemen included in the last estimate said that if it included one of his neighbors, with whose affairs he is intimately acquainted, it was entirely too low: $750,000,000 would be none too much. The Goelet estate, in New York City, pays taxes on $25,000,000 real estate. The mayor of Chicago says that four gentlemen of that city are worth over $20,000,000 each; but only two are included in the above list. The Boston "Advertiser" lately asserted that there were not 50 millionaires in Boston; but the official tax-list shows that more than 50 families pay taxes on over $1,000,000 each, and 200 persons pay taxes on amounts which clearly show that they are really millionaires.
The facts already stated conclusively demonstrate that the wealthiest class in the United States is vastly richer than the wealthiest class in Great Britain. The average annual income of the richest 100 Englishmen is about $450,000; but the average annual income of the richest 100 Americans cannot be less than $1,200,000, and probably exceeds $1,500,000. It follows, inevitably, that wealth must be far more concentrated in the United States than in Great Britain; because, where enormous amounts of wealth are placed in a few hands, this necessarily implies that the great mass of the people have very small possessions. On the other hand, we know with tolerable certainty what are the average earnings and possible savings of the masses. The earnings of fully fourth-fifths of American families do not average as much as $500 per annum. As the average age of busy men is less than 40 years, their savings cannot spread over more than an average period of 20 years. Farmers being always more economical than mechanics or other laborers of the same income, the savings of farmers, represented by their farms, will afford a maximum standard for the classes to which they correspond. According to the census of 1880, the average value of 25% of farms was $635, of another 25%, $1,750, and of about 35%, $3,500; the remaining 15% being held by wealthy owners. To allow, in marketable property, $750 each to the mass of the community, $2,000 each to the next class and $3,500 each to the small tradesmen, highly-skilled mechanics, and others whose condition corresponds with that of the best class of ordinary farmers, will be quite as much as facts will justify; especially when we take out of this highest class, as we must, a considerable number (say one sixth) who, by saving one third to one half of their income, have accumulated four or five times as much as their fellows.
In 1877 the number of British capitalists possessed of over $25,000 each was about 222,000, while the number of persons deriving profits of over $1,000 per annum each from business was nearly 200,000. The two classes of persons were not at all the same; on the contrary, probably not one third of either class, possibly not even one fifth, was included in the other. Yet, in the absence of any detailed information as to the distribution of wealth, the classification of incomes must be taken, with much reserve, as the only attainable guide. But incomes, in their very nature, are much more equally distributed than wealth. Millions have inomces who have practically no wealth. Therefore, a computation on this basis will greatly underestimate the concentration of wealth in the higher figures, while it will lead to such an overestimate of wealth in the lower figures as to make it gradually quite misleading. Such a computation is indeed of no use whatever outside of the first 250,000 families, and must be greatly modified long before reaching that number.
Bearing these considerations in mind, we proceed to estimate the distribution of American wealth. Judging from the rate of increase in wealth indicated by the last census, it is probably that (estimated by the same method) it now amounts to nearly $1,000 per head, or $65,000,000,000 in all. In 1880, $2,000,000,000 was invested in public buildings, churches, colleges, charitable institutions, etc.; and this item must be about $2,500,000,000 now.
Taking the number of British incomes exceeding 200 pounds as a basis for comparative classification, starting on the basis of known facts about American wealth, and modifying the figures gradually, for the reasons already stated, we arrive at the following conclusions:
DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BRITISH INCOME RETURNS.
Average Wealth in Thousands
Total in Millions
Public property, churches, etc.
Condensing this table, so as to arrange it in three great classes, we arrive at this result:
DISTRIBUTION OF AMERICAN WEALTH
Wealth in Millions
Average per Family
On this basis, 50,000 families would appear to own one half of the national wealth.
In this table small farmers, skilled mechanics, foremen, conductors, engineers, etc., are included in the "working class," and $968 has been allowed as the average savings of each family in this class -- more than double the highest claim made on behalf of the same class in England, and nearly treble the average deposit in American savings banks. This amount is certainly too large. The number of the very largest millionaires has been kept down to very nearly the limit of the writer's personal information; while in his judgment there must have been at least as many more, of whom he has never heard. If this surmise is correct, it would add at once $2,500,000,000 to the share of wealth belonging to the millionaire class, and would confirm the writer's rough estimate in the FORUM for September, that 25,000 persons own just about one half of all the wealth of the United States.
Objection will doubtless be made to any estimates based upon British statistics. Fortunately, Massachusetts furnishes a purely American basis for estimates of the distribution of American wealth. A list of the largest individual taxpayers in Boston, published this year, including all (exclusive of corporations and executors) who paid more than $1,000 in taxes, and who were therefore assessed at more than $75,000 (the tax being 1.33%) showed the following results:
BOSTON TAX LIST FOR 1888
Amount of Tax
Average Assessed Wealth
$50,000 to 75,000
40,000 to 50,000
30,000 to 40,000
20,000 to 30,000
10,000 to 20,000
5,000 to 10,000
1,000 to 5,000
It may be safely assumed that every one who is assessed at $400,000 is really worth $1,000,000; because large estates are never assessed at their full value, and because these assessments include no shares in corporate stock, nor government, municipal, or mortgage bonds, in which a vast proportion of the wealth of the very rich is invested. For the same reasons, an assessment of $75,000 represents in actual wealth not less than $150,000. The wealth of the very rich is always more under-estimated by assessors than that of men in moderate circumstances. Assessments of $400,000 and over are therefore multiplied, in the next table, by two and one half, while those below that line are only doubled. In both cases the increase is too small. Boston has less than a forty-fifth part of the nation's wealth, and less than a hundred and thirtieth part of its population. Multiplying the Boston figures by only 45, it would follow that there are in the United States more than 56,000 persons worth over $150,000 each, of whom at least 8,500 are worth over $1,000,00. Classifying men of wealth in conformity to the proportion in which assessment returns show that their wealth is divided in Boston, but adding the 70 persons who have been specifically named as averaging $37,500,000, we arrive at the following estimate, which errs only on the side of moderation:
DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BOSTON TAX RETURNS
Wealth in Thousands
Average Wealth in Thousands
Total Wealth in Millions
Distribution in Classes
Wealth in Millions
Average per Family
On this basis, 40,000 persons own over one half of the wealth of the United States, while one seventieth part of the people own over two thirds of the wealth.
It will be seen that in these tables, which are prepared upon the basis of purely American statistics, the concentration of wealth appears to be much greater than in tables prepared upon the basis of British statistics. By either table, 70% of the national wealth appears to be concentrated in the hands of a very small minority of the people; but dividing this wealth in proportion to the English ratio, it is distributed among 235,000 families, while dividing it according to the Boston ratio, it is possessed by only 182,000 families. The truth probably lies between the two; and it may safely be assumed that 200,000 persons control 70% of the national wealth, while 250,000 persons control from 75 to 80% of the whole.
These conclusions are of course very unpalatable to comfortable optimists. But what other results could possibly be expected, in view of well-known facts? No one can entertain a reasonable doubt that there has been an accumulation of wealth in a few individual hands in the United States, during the last 25 years, vastly in excess of any which has taken place in other parts of the world. In no other country have railroad-managers, manufacturers, oil-refiners, mine-owners, bankers, and land speculators accumulated fortunes so rapidly as they have in this. In no other country, and least of all in England, during the last 30 years, has the burden of taxation been cast so exclusively upon the working class, or the machinery of public taxation been used so unscrupulously for private profit.
In Great Britain, although indirect taxation still constitutes the greatest part of the public revenue, a large share of direct taxation has been maintained, and, as far as possible, all tribute levied by the rich upon the poor, under the pretense of taxation, has been abolished. The natural consequence is that the disproportion between the rich and the poor in Great Britain is less today than it was 40 years ago, that wealth is more widely distributed, that the middle class is much more numerous, and that the masses are rapidly gaining in power and influence.
In America the drift has been in precisely the opposite direction. Federal taxation has increased 6-fold since 1860, and the whole of this increase has been taken out of the relatively poorer classes. At the same time, the profit which is secured to the wealthier classes by the adjustment of indirect taxation in their interest has been increased not less than 10-fold. The wealthy classes, collectively, have made a clear profit out of the indirect effects of taxation to an amount far exceeding all that they have paid in taxes, although this profit has been absorbed by a minority of even the rich. But, apart from this, the whole system of taxation is and has been such as to take from the rich only from 3% to 10% of their annual savings, while taking from the poor 75 to 90%. It is true that the same system existed, in form, before the war; but, taxation being light, the amount taken from each individual was far less, and the disproportion between the rich and the poor not so great, while the profit levied from the poor by the rich was much smaller. The amount of the burden has increased, and it has been more and more shifted over upon the poor.
It is childish to imagine that, under such circumstances, the concentration of wealth can go on less rapidly here than in Europe. On the contrary, it has gone on far more rapidly here; and it will continue to do so, at a tremendous pace.
It is intended to confine this paper to a simple investigation of facts, without suggesting remedies; but, to avoid misapprehension, the writer wishes it to be distinctly understood that he is opposed, on principle, to all schemes for arbitrary limitations of individual wealth, whether by a graduated income tax, a heavy succession tax, or otherwise; that he is utterly opposed to communism, socialism, and anarchism; and that he is of opinion that the enormous wealth of the few in this country has been forced upon them by the votes of the very masses who have been impoverished for their benefit. Populous vult decipi. The farmers insist upon throwing away their inheritance; and since they are determined to heap their earnings upon somebody, it is well that the list of their chief beneficiaries should be, upon the whole, so respectable. And, indeed, has it not been clearly explained to us that it makes no sort of difference who owns the wealth of the nation, so long as it is kept at home?
But the facts should be known, without regard to the inferences which may be drawn from them; and we are now prepared to answer the question: "Who own the United States?"
The United States of America are practically owned by less than 250,000 persons, constituting less than 1 in 60 of its adult male population.
Within 30 years, the present methods of taxation being continued, the United States of America will be substantially owned by less than 50,000 persons, constituting less than one in 500 of the adult male population.