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!
This appeared in the Freeport News, and I thought it worth sharing:
Why is it so hard to understand the justice and benefits of capturing the community created value of land for the community?
Classical economists such as Adam Smith and Henry George, defined land as all free gifts of nature (urban land, harbors, etc.).
These get value because people, both local and foreign, want them for personal or commercial use.
So, no matter who 'owns' the gift of nature (land) there is a location value called economic rent which is exclusive of any production on or from that location.
When economic rent goes into private hands (i.e., beaches are given away to corporations, land values are uncollected) legitimate government revenue is lost and taxes like the proposed VAT are applied to the production process.
Not only is land speculation rewarded but building houses, trading goods and services, etc. are punished by taxes.
Naturally people try to avoid these taxes by smuggling and other forms of corruption.
When economic rent goes to honest government it encourages better use of locations as there is no tax penalty to build or work.
It reduces pollution and pays for infrastructure that helped create the economic rent in the first place.
Why is this so difficult to understand? Why is there so much ignorance of it and opposition to it?
Quite belatedly, I found an interesting article on Taxi Medallions and Rent-Seeking. I particularly like the juxtaposition of the sidebar and the article's primary content; read the sidebar first.
Why did I include in the "categories" for this post "all benefits go to the landholder"? Because a taxi medallion is a privilege, which, in classical economics, is another form of "land." Read the sidebar!
There is an easy solution: auction off those privileges for limited periods of time. Lather, rinse, repeat!
The sidebar quotes Adam Smith "... the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce," which leads me to think about Henry George's axiom that
"The fundamental principle of human action — the law that is to political economy what the law of gravitation is to physics — is that men seek to gratify their desires with the least exertion." [Progress & Poverty Book III, Chapter 6 — The Laws of Distribution: Wages and the Law of Wages]
One quote from the body of the article:
Studies of economic losses due to rent-seeking and the resulting
monopolies have produced figures ranging from 3 to 12 percentage points
of national output for the US.
All of these are possible reasons why the city of Milwaukee might want
to limit the number of cab permits, but they do not imply that the
existing owners must have a permanent right to them.
The city could simply auction 321 licences every year or two and capture
all of the economic rents for itself. Another argument is that a permit
acts as a pension for drivers that would otherwise not have a business
they could sell on retirement. But that is true only for the first,
lucky generation of owners.
Here are the opening paragraphs of a recent article about the complexities of Ground Lease contracts. I commend the entire article to your attention. It helps flesh out why and how the entire FIRE sector -- Finance, Insurance and Real Estate (as well as their attorneys) -- is receiving such a large share of the profits produced by the productive sectors of the economy. The owner of land, and the entities which lend on land, and insure the buildings and the revenue flow, all reap significant shares of what the tenants labor to create. Modern sharecropping. And the recipients of the ground rent get to parade as self-made men, people of awesome foresight and wisdom -- and even philanthropists (think Brooke Astor, the Fishers, and others in your own community) when they donate a small share back to a charity! As you read this, think both of Manhattan land and of land in your community's central business district, and along its major roads. (Location, location, location!)
If one wonders why (true) small business struggles, one might consider the complexity and expense of their ground leases, and contrast that with the Georgist alternative: that one's taxes would be simply the current rental value of the land, while the value of the building remains one's private property, not subject to taxation or going pouf! at the end of a ground lease.
The land lord is "supplying" something he didn't create. We ought to ease him out. Land value taxation is the obvious tool for reducing, and -- slowly or not -- eliminating, his "take" on those who do create. Think what it would mean if working people had that spending power, instead of the lords of the land.
All that land rent could be used to fund our community's needs, instead of lining the pockets of a few very "lucky" -- privileged -- duckies. (The analogies to chattel slavery are not a long stretch, once one starts to think about it. We should all own ourselves, and reap the fruits of our own labors.)
A lease is a lease is a lease – or so you may think. Yes, real property leases grant an estate in land to a tenant for a period of time. And yes, the tenant pays for that right of possession. But the action in a lease isn’t in the conveyance provisions; it’s in the contract provisions. Multiply out the rent and other annual monetary obligations by the length of the lease term (in years), and you’ll see that it might be (and often is) a big dollar contract. Even more important, unlike the vast majority of contracts whose obligations are satisfied in days or weeks, a lease contract goes unfulfilled for 50, 75, “99,” and even 500 years. That takes it beyond the life of the parties involved in its creation, and the future brings surprises. Neither Nostradamus nor Jules Verne got everything right.
Why a Ground Lease?
If a tenant has to build its own building (as is often the case), and has all of the burdens of ownership, why would it lease a property knowing that at the end of the lease term it has nothing left to show for its money and efforts? There are a number of common reasons, principal among them is that the owner won’t sell the land and the tenant has no alternative.
Real property often carries a long term unrealized gain, waiting to be taxed upon its sale.
Not every landowner is interested in making further active real property investments. This makes a like kind exchange unappealing.
Ground leasing the same land keeps ownership in the family. At the owner’s death, because of the current estate tax “stepped up basis” arrangement, the built in gain may never be taxed.
The hospitals (of England) are full of the ancient. . . . The
almshouses are filled with old laborers. Many there are who get
their living with bearing burdens, but more are fain to burden the
land with their whole bodies. Neither come these straits upon men
always through intemperance, ill-husbandry, indiscretion, etc.; but
even the most wise, sober and discreet men go often to the wall when
they have done their best. . . The rent-taker lives on the sweet
morsels, but the rent-payer eats a dry crust often with watery eyes.
—Robert Cushman, Plymouth, 1621, in Young's "Chronicles of the
We worked through spring and winter,
through summer and through fall.
But the mortgage worked the hardest
and steadiest of them all;
It worked on nights and Sundays, it
worked each holiday;
It settled down among us and it never
Whatever we kept from it seemed almost as bad as theft;
It watched us every minute and it
ruled us right and left.
The rust and blight were with us
sometimes, and sometimes not;
scowling mortgage was forever on the spot.
The weevil and the cutworm they went
as well as came;
The mortgage stayed forever, eating
heartily all the same.
It nailed up every window, stood
guard at every door,
And happiness and sunshine, made
their home with us no more;
Till with falling crops and sickness
we got stalled upon the grade.
And there came a dark
day on us when the interest wasn't paid.
And there came a sharp foreclosure,
and I kind o' lost my hold.
And grew weary and discouraged and
the farm was cheaply sold.
The children left and scattered, when
they hardly yet were grown;
My wife she pined and perished, and I found myself alone.
What she died of was a mystery, and
the doctors never knew;
But I knew she died of mortgage — Just
as well as I wanted to.
If to trace a hidden sorrow were
within the doctors art.
They'd ha' found a mortgage lying on
that woman's broken heart.
Worm or beetle, drought
or tempest, on a farmer's land may fall.
But for a first-class
ruination, trust a mortgage 'gainst them all.
How much of a farmer's mortgage is for the value of the land itself, and how much for the present value of the improvements which previous owners have made, such as clearing, draining, fencing, irrigating, building structures, plus, perhaps, equipment purchased with the land and buildings?
For that matter, how much of a homeowner's mortgage is for the value of the land itself --including its access to community-provided services such as city water and sewer, fire hydrants, and the like -- and how much for the purchase price of the landscaping and structures on the property, built by any of the previous owners?
To what degree is the modern buyer including in his formal calculations or his underlying assumptions the notion that the land will increase in value during his tenure? (See Case & Schiller, 2003.)
The use of a certain area of the earth's surface is a primary
condition of anything that man can do; it gives him room for his own
actions, with the enjoyment of the heat and the light, the air and
the rain which nature assigns to the area; and it determines
his distance from, and in a great measure his relations to, other
things and other persons. We shall find that it is this
property of "land" which, though as yet insufficient prominence has
been given to it, is the ultimate cause of the distinction which all
writers on economics are compelled to make between land and other
— PROF. ALFRED MARSHALL, of the
University of Cambridge,
Principles of Economics, Vol. I., Book 4,
Chap. 2, Sec. I.
As you read this, recall that a single acre of urban land can be worth $250,000,000 or more -- over 23,000 times what the recently-doubled farmland described in this article sold for!! Also, it seems worthwhile to point out that 160 acres (one quarter of a square mile), at $10,700 each, works out to $1.7 million -- currently well below the threshold for the federal estate tax!
Consider, too, what it is that the land speculator brings to the process of production, and what he is rightly entitled to in a fair and just society, and what society is entitled to, and what the workers -- the farmer and his employees -- are entitled to, and what the capitalist -- the fellow who pays for the buildings and equipment -- is entitled to. Seems like the land speculator is making out awfully -- awefully! -- well but isn't producing or creating anything!! Why do we do things this way? Did the absentee landlord deserve a share of the crop the farmer created? If the farmer has to pay rent to someone, shouldn't it be the community? Wouldn't it be better if America's investors were motivated to put their funds into better equipment (capital) or employing people (labor)?
November 8, 2012
Howard Audsley has been driving through Missouri for the past 30 years to assess the value of farmland. Barreling down the flat roads of Saline County on a recent day, he stopped his truck at a 160-acre tract of newly tilled black land. The land sold in February for $10,700 per acre, double what it would have gone for five years ago.
Heading out into the field, Audsley picked up a clod of the dirt that makes this pocket of land some of the priciest in the state.
"This is a very loamy, very productive, but loamy soil," Audsley said. "A high-clay soil will just be like a rock and that's the difference between the ... soils. And the farmers know this and the investors know this. That's why they pay for it what they do."
A Steep Surge In Prices
not just the value of Missouri cropland that's rising. Corn Belt
farmland prices from Iowa to Illinois and Nebraska to Kansas have been
sky-high lately, boosted by $8-a-bushel corn.
paid about $3.3 million for [about 650 acres] in Southeast Illinois in
2009," said Diggle, who is the CEO of Singapore-based Vulpes Investment
Management. The company handles $250 million of investor money, about 15
percent of which is in farmland.The
high commodity prices have helped encourage investors like Steve
Diggle, who have no connection to farming, to compete for their very own
acreage in the Heartland.
year we sold it at auction and we got $5.1 million," he said, referring
to the Illinois farmland. "That's 55 percent higher than we paid. Plus
we got two yields — one of 3.5 percent and one of 5 percent. So, you
know, as an investment, that's 63 percent over three years. [It] is
great and we're extremely happy with it."
says his firm also purchased a 1,400-acre tract in Illinois two years
ago. The company plans to hold on to it to make money through cash rents
and land appreciation.
value of your land may go up or down. But as long as bond prices remain
where they are, it's very hard to see how we'll have a sustained bear
market for agriculture," Diggle said. By comparison, he said, the
extremely low returns in the bond market are "just so inferior."
A Safer Investment
You don't have to be a billionaire to invest in farmland.
professor Andy Trupin, who lives in Delray Beach, Fla., bought a
155-acre tract of farmland in Lebo, Kan., two years ago because it
looked like it would make him more money than gold or the stock market.
He also owns another tract that's primarily pastureland.
seemed like a much safer vehicle to get an income stream even though
... it's not a high-income stream. At least it's more than you would get
on Treasuries at any duration," Trupin said. "And at the same time,
[farmland offers] price appreciation or to at least [holds] its value in
the event of an inflation period."
investment has paid off so far, Trupin said. He rented out the land to a
local farmer who grows corn, soybeans and wheat. Even the brutal
drought failed to knock down the investment.
we managed to get 20 bushels to the acre of corn even though the place
was as dry as Las Vegas last year," Trupin said. "I'm willing to let the
income from this thing fluctuate. In bad years, it's a slight loss —
maybe a couple of thousand on the year — and in good years, you gain up
to $10,000 on it."
found the land online and got help purchasing it by Realty Executives
of Kansas City. The company says 90 percent of its new customers are
investors like Trupin, and it holds seminars for investors that walk
them through the process of evaluating and buying farmland and how to
find local farmers to rent the land.
probably a higher percentage now of people who are strictly investors,
stock market people, money-market-type investors, and ... they're buying
all types of land," said Dale Hermreck, a broker for Realty Executives
who says he sold $21 million worth of farmland in Kansas last year.
have a lot of outside interest from Texas, Chicago, New York," Hermreck
said. "I get calls and inquiries all over the United States."
The Specter Of A Bubble
to University of Missouri agriculture economist Ron Plain all of this
sounds a bit like the housing bubble burst of 2006. He is concerned a
similar bubble could be happening in farmland.
get several years going up faster than that long-term trend of 6
percent [annual increases] and you're then in a situation where you're
sort of due for a correction," Plain said. "And the way you correct is
pull those land values down — or 'pop the bubble' ... and so there's
concern about that and it's kind of reasonable to worry."
said that with mortgage rates at their lowest in 60 years, it's
reasonable to expect the cost of borrowing to go up eventually. And if
crop prices retreat from record highs, he said, that means "less income
per acre and therefore less ability to pay for farmland."
a bubble burst, farmland might be harder to sell, especially compared
with other more liquid investments. But investors argue that any bubble
is still far off, and they believe that farm acreage will remain a solid
long-term investment so long as the demand for food continues to grow.
remains to be seen whether investors will be able to compete with
farmers for the small supply of high-quality cropland available in the
Midwest, says broker Hermreck.
have people call me all the time and I just don't have what they're
looking for," Hermreck said. "Simply supply and demand. It's just not
there. I could sell an awful lot more of this land if it was available.
And people seem to hang on to something that's making some money and
real popular. It's just real popular now to own land."
Fentress Swanson reports from Missouri for Harvest Public Media, an
agriculture-reporting project involving six NPR member stations in the
Midwest. For more stories about farm and food, check out harvestpublicmedia.org
... many Americans are facing the likelihood of not having sufficient income in retirement unless they increase their savings, work longer, or significantly decrease their expenditures in retirement if they hope to make ends meet.
The Employee Benefits Research Institute recently published an analysis of 2010 Survey of Consumer Finances data. It demonstrates how few people have the traditional defined-benefit retirement plans, and the account balances people of various demographics have in their individually-directed retirement accounts.
Here are some statistics worth considering as we think about the effects of a system which permits a few of us to capture a large share of the nation's net worth and a large share of its income, and to unduly influence our elections with advertising which works to conceal and reinforce the structures of that system:
38% of all families -- of all ages -- had a family member with a retirement plan. [Figure 2]
of those 38%, 18% had only a defined benefit plan; 61% had only a defined contribution plan; 21% had both. 82% had a 401(k) type plan, and of that 82%, 22% also had a defined benefit plan
Among those families whose head was 55-64, 43% had a member with a retirement plan; among those 45-54, 53% did.
Interestingly, the top 75% of the net worth spectrum all had rates in the 41% to 46% range; in the bottom 25%, only 21%.
Among families whose head was under 65 and working, 52% had a member participating in a retirement plan [Figure 3].
Among households with income abov e $100,000, 76% had retirement plans; in the $50,000 to $100,000 income range, 64%; in the lower income groups, the rate ranged from 44% down to 9%
In the 55-64 age group, 59% had a retirement plan; in the 45-54 group, 61%.
Within this working-age universe, similar trends held: the top 50% had roughly 61-67% availability of employment-related retirement plans; for the next 25%, only 53%; for the bottom 25% of working families, only 29%.
IRAs and Keogh plans: 28% had one or both; median value, $40,000 (up from $34,574 in 2007). Among those 55-64, 41% had one or both; median value $60,000 (down from $68,101); among those 45-54, 29% had one or both; median value $40,000, up from $37,717. [Figure 5]
Even among those in the top 10% of the net worth spectrum, only 77% had IRA or Keogh accounts, median value $200,,000, up from $142,487 in 2007; in the next 15% of the net worth spectrum, median value was $60,000.
Of all families, 64% had some sort of retirement account from a current or previous employer (down from 66% in 2007)
Retirement assets in Defined Contribution plans and IRAs typically [that is, at the median] represent 61% to 66% of total financial assets, which is to say that most have less in mutual funds, stocks, checking and other accounts than they do in their retirement accounts. [Figure 8]
Only in the top 10% do retirement assets represent less than half of financial assets.
As is typical of median/average ratios, average holdings are considerably higher -- that is, the holdings of the top few are huge, and most of us are below average. The average balance is $173,232; in the top 10% of the net worth spectrum, average balances are $519,034. For the next 15% of us, the average balance is 147,061 -- well below the average of all of us! [Figure 9] Recall from Figure 6 that 64% of us have such a plan; the other 36% have no balance at all (and likely a significant percentage have very small account balances).
For those in the 65-74 age group, the average balance is $324,199; for those in the 55-64 group, the average balance is $297,903.
For those in the top 10%, average account balance is $519,034. One might reasonably guess that the top 5% have the lion's share of this.
It might be worth noting that a 70 year old must withdraw at least 1/27 of his IRA per year. Based on that 65-74 age group average balance, that's $12,000 per year. (Another rule of thumb says that if one only withdraws 3% per year, one's account should last forever. That would be $9,725 per year, for that "average" -- not median -- family in the 65-74 age group.
Enough said. Time to circle back to the study's conclusion:
... many Americans are facing the likelihood of not having sufficient income in retirement unless they increase their savings, work longer, or significantly decrease their expenditures in retirement if they hope to make ends meet.
What public policy reforms might one suggest based on these data points?
Find a way to raise wages for ordinary workers
Find a way to lower the cost of living for ordinary workers and retirees
Find a way to reduce the sum of the taxes we pay and the costs of housing without reducing the public goods which those taxes provide (unless it is by reducing the demand for social safety net
If you have other suggestions, I'd like to hear them.
But the reason for this blog is that I believe I have found the public policy reform which would accomplish these goals, in collecting the lion's share of the annual rental value of our land, and in collecting for the commons certain other kinds of natural public revenue which our current system permits to accrue to individuals and corporations. I didn't invent it. Henry George is the clearest exponent of it, but not the first or last. Is it perfect? No, but it is vastly superior to what we've got now, and I believe it is consistent with the ideals to which Americans pay the most honor.
The accompanying map says, "Around Grand Central Terminal, towers could be up to twice the size now permitted. Development could also take place along the Park Avenue corridor, where towers could be more than 40% larger. Elsewhere in the district, towers could be 20% larger."
New York’s premier district, the 70-block area around Grand Central
Terminal, has lagged, Bloomberg officials say, hampered by zoning rules,
decades old, that have limited the height of buildings.
Mayor Michael R. Bloomberg wants
to overhaul these rules so that buildings in Midtown Manhattan can soar
as high as those elsewhere. New towers could eventually cast shadows
over landmarks across the area, including St. Patrick’s Cathedral and
the Waldorf-Astoria Hotel. They could rise above the 59-story MetLife
Building and even the 77-story Chrysler Building.
Mr. Bloomberg’s proposal reflects
his effort to put his stamp on the city well after his tenure ends in
December 2013. Moving swiftly, he wants the City Council to adopt the
new zoning, for what is being called Midtown East, by October 2013, with
the first permits for new buildings granted four years later.
administration says that without the changes, the neighborhood around
Grand Central will not retain its reputation as “the best business
address in the world” because 300 of its roughly 400 buildings are more
than 50 years old. These structures also lack the large column-free
spaces, tall ceilings and environmental features now sought by corporate
rezoning — from 39th Street to 57th Street on the East Side — would
make it easier to demolish aging buildings in order to make way for
state of-the-art towers.
it, “the top Class A tenants who have been attracted to the area in the
past would begin to look elsewhere for space,” the administration says
in its proposal.
plan has stirred criticism from some urban planners, community boards
and City Council members, who have contended that the mayor has acted
hastily. They said they were concerned about the impact of taller towers
in an already dense district where buildings, public spaces, streets,
sidewalks and subways have long remained unchanged.
Mr. Bloomberg has encouraged high-rise development in industrial neighborhoods, including the Far West Side of Manhattan,
the waterfront in Williamsburg, Brooklyn, and in Long Island City,
Queens. But with the proposal for Midtown, which is working its way
through environmental and public reviews, he is tackling the city’s
the development potential in this area will generate historic
opportunities for investment in New York City,” Deputy Mayor Robert K.
The initiative would, in some cases, allow developers to build towers twice the size now permitted in the Grand Central area. The
owner of the 19-story Roosevelt Hotel at Madison and 45th Street could
replace it with a 58-story tower under the proposed rules. Current
regulations permit no more than 30 floors.
When zoning changes increase the value of land, who should reap the benefit? The current landholder, or the community? What did the landholder do to earn that windfall? Do you think it comes out of thin air? Do you think it is paid him by other rich people?
Or do you recognize that it is part of the structure which enriches a few and impoverishes the many?
It is easy to fix this one. One just has to recognize the structure, and value the land correctly, and start collecting the lion's share of the land rent for the community. If it is more than NYC can put to use -- and it will be -- then apply the excess to reducing our federal taxes on productive effort. Use it to fund Social Security, or Medicare, or universal health insurance, or something else that will benefit the vast majority of us instead of an undeserving tiny privileged minority. Don't throw it in the ocean, and don't leave it in private pockets, be they American or not.
Collect the land rent. Repeat next year, and the next, and the next. Natural Public Revenue.
Equity, therefore, does not permit property in land. For if
one portion of the earth's surface may justly become the
possession of an individual and may be held by him for his sole use
and benefit as a thing to which he has an exclusive right, then
other portions of the earth's surface may be so held; and eventually
the whole of the earth's surface may be so held; and our planet may
thus lapse into private hands.
— HERBERT SPENCER, in 1850, Social
Statics, Chap. IX.
That any human being should dare to apply to another the epithet
"pauper" is, to me, the greatest, the vilest, the most unpardonable
crime that could be committed. Each human being by mere birth
has a birthright in this earth and all its productions; and if they
do not receive it, then it is they who are injured, and it is not
the "pauper," oh, inexpressibly wicked word! — it is the well-to-do
who are the criminal classes.
— RICHARD JEFFERIES, The Story of
My Heart, Chap. X., p. 122.
The post below this one, "Mitt Romney's 'Fair Share' " refers to his fair share of the costs of providing public goods.
But perhaps an equally important question is the nature of one's fair share of the output of our economy and the output of the earth. Some of the former output is the result of individual efforts, and one ought to be able to keep that portion. But at the same time we must recognize how much comes from the division of labor, from drawing down on the non-infinite supply of non-renewable natural resources on which all of us today must depend and on which future generations of human beings must rely. Those who draw down more than their legitimate share owe something to the rest of the community. Our wealthiest tend, we suspect, to use many, many times their legitimate share, and the median American likely draws far more than their share, when one considers the planet as a whole.
Perhaps "legitimate" is not the right word here. It refers to what is permissible under current law. (The word gets misused a lot -- see the discussion on "legitimate rape," which seemed to be about the circumstances under which a woman has a right to make a specific very personal, decision, and when it is considered by some to not be left to her and is the province of government, legislators or others.)
What is one's "fair share" of natural resources? America is using a hugely disproportionate share of the world's resources. Are we entitled to it because we're somehow "exceptional"? Because "our" God is somehow better than other nation's Gods? Or do we genuinely believe that all people are created equal, and intend to live our lives accordingly?
Our output of greenhouse gases exceeds our share of the world's population. This is not without consequences for the world, and for peace on earth.
We ought to be re-examining our incentives so that they move us in the direction we ought to be going, which is, to my mind, using less. We can build transportation infrastructure which will permit many more of us to move around with less impact on the environment. We can fund that through collecting the increases in land value that infrastructure creates. We can correct the incentives which cause us to use today's inferior technologies to extract natural resources from the earth in ways which damage the environment, as if ours was the final generation, or the only one worth serious consideration.
Better incentives could reduce, eliminate, even reverse urban sprawl. I refer specifically to land value taxation as a replacement for the existing property tax, particularly in places where assessments are for one reason or another not consistent with current property values -- e.g., California and Florida, parts of Delaware and Pennsylvania which currently use assessments from the 1970s, and many other places where assessments are simply out of whack with current reality!) We should be replacing sales taxes, wage taxes, building taxes with taxes on land value and on natural resources. Most of that value is flowing generously into private or corporate pockets, to our detriment. It concentrates wealth, income, and, of course, political power.
Collecting the rent, instead of leaving the lion's share of it to be pocketed by the rent-seekers, would go a long way to making our society and our economy healthier. Eliminating the privilege of privatizing that which in a wisely designed society would be our common treasure would make our society a better place in which to live, a place in which all could thrive and prosper without victimizing their fellow human beings.
A major theme of the underlying political debate in the United States is the role of the state and the need for collective action. The private sector, while central in a modern economy, cannot ensure its success alone. For example, the financial crisis that began in 2008 demonstrated the need for adequate regulation.
Moreover, beyond effective regulation (including ensuring a level playing field for competition), modern economies are founded on technological innovation, which in turn presupposes basic research funded by government. This is an example of a public good – things from which we all benefit, but that would be undersupplied (or not supplied at all) were we to rely on the private sector.
Conservative politicians in the US underestimate the importance of publicly provided education, technology, and infrastructure. Economies in which government provides these public goods perform far better than those in which it does not.
But public goods must be paid for, and it is imperative that everyone pays their fair share. While there may be disagreement about what that entails, those at the top of the income distribution who pay 15% of their reported income (money accruing in tax shelters in the Cayman Islands and other tax havens may not be reported to US authorities) clearly are not paying their fair share. ...
I have to disagree with the second sentence of this next paragraph. And I think Stiglitz knows better, if he stops to think about it:
Democracies rely on a spirit of trust and cooperation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme. Both alternatives are unacceptable.
We don't need intrusive or coercive; we just need to start collecting the lion's share of the rent! Well, I suppose some rent-seekers would find this extremely intrusive -- it intrudes on their habit of self-enrichment by privatizing of what is rightly and logically our PUBLIC treasure, the logical way of financing PUBLIC goods. And Professor Stiglitz is quite aware of the value of natural resources; he may not be quite as conscious of the value of urban and other well-situated land.
Our national recordkeeping doesn't even collect the valuations of land and natural resources on any consistent basis! (One could reasonably argue that this failure-to-measure is a form of corruption!) What we don't measure we can't do anything about. And the powers that be are quite content with how we do things; the benefits accrue to them! And several generations of college-educated people know nothing about the issue, which was well known and widely discussed 100 years ago. (Look into the extensive Single Tax literature and the ideas of Henry George.)
Some more excerpts:
The billionaire investor Warren Buffett argues that he should pay only the taxes that he must, but that there is something fundamentally wrong with a system that taxes his income at a lower rate than his secretary is required to pay. He is right. Romney might be forgiven were he to take a similar position. Indeed, it might be a Nixon-in-China moment: a wealthy politician at the pinnacle of power advocating higher taxes for the rich could change the course of history.
But Romney has not chosen to do so. He evidently does not recognize that a system that taxes speculation at a lower rate than hard work distorts the economy. Indeed, much of the money that accrues to those at the top is what economists call rents, which arise not from increasing the size of the economic pie, but from grabbing a larger slice of the existing pie.
Those at the top include a disproportionate number of monopolists who increase their income by restricting production and engaging in anti-competitive practices; CEOs who exploit deficiencies in corporate-governance laws to grab a larger share of corporate revenues for themselves (leaving less for workers); and bankers who have engaged in predatory lending and abusive credit-card practices (often targeting poor and middle-class households). It is perhaps no accident that rent-seeking and inequality have increased as top tax rates have fallen, regulations have been eviscerated, and enforcement of existing rules has been weakened: the opportunity and returns from rent-seeking have increased.
Today, a deficiency of aggregate demand afflicts almost all advanced countries, leading to high unemployment, lower wages, greater inequality, and – coming full, vicious circle – constrained consumption. There is now a growing recognition of the link between inequality and economic instability and weakness.
There is another vicious circle: Economic inequality translates into political inequality, which in turn reinforces the former, including through a tax system that allows people like Romney – who insists that he has been subject to an income-tax rate of “at least 13%” for the last ten years – not to pay their fair share. The resulting economic inequality – a result of politics as much as market forces – contributes to today’s overall economic weakness.
We -- WE! -- built that -- and we ought to be collecting it, month in and month out, and keeping our hands off what the individual or small business or corporation DID build. (Of course, this presumes that each of us is expected to compensate the community for the pollution we create, and the non-renewable resources we take.)
Let it be observed that when land is taxed, no man is taxed; for the land produces, according to the law of the Creator, more than the value of the labor expended on it, and on this account men are willing to pay a rent for land.
— PATRICK EDWARD DOVE, Theory of Human Progression (1850), Chap. I., Sec. 2, p. 44
The wood of the forest, the grass of the field, and all the natural fruits of the earth, which when land was in common, cost the laborer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the license to gather them, and must give up to the landlord a portion of what his labor either collects or produces. This portion, or what comes to the same thing, the price of this portion, constitutes the rent of the land.
— ADAM SMITH, The Wealth of Nations, Book I., Chap. 6.
The ordinary progress of a society which increases in wealth is at all times to augment the incomes of landlords — to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer as it were in their sleep, without working, risking or economizing. What claims have they, on the general principles of social justice, to this accession of riches?
— JOHN STUART MILL, Principles of Political Economy, Book V., Chap. 2, Sec. 5
When I came across this article, 111 years old, I thought of the Ipswich, Massachusetts, trust established in 1650 by the gift of a fine 32-acre piece of land by a forward-thinking resident. His stated intention was that the land be kept by the town, forever, for the benefit of the public schools. Alas, it was poorly managed for a number of years, perhaps decades, and this appears to have been transformed, remarkably, into an excuse for the eager TENANTS to buy the land (and at less than half what I calculate it to be worth -- click on the "Little Neck Feoffees of Ipswich" link at left to see all my posts on the topic).
The tradition of school lands has served many communities very well. Part of Chicago was rented out to tenants and the revenues used to fund the city's schools.
But some fast-talkers appear to have convinced the powers-that-be in Ipswich, Mass., (including, remarkably, some judges and perhaps the state A.G.!) that "forever" is just temporary, and other investments are superior to the revenue from land and natural resources for funding public spending. (Not!) And the land will be there forever; a few decades of poor management is, in the long run, a triviality; the same would not be true of any of the substitute investments the Feoffees and their highly-compensated investment advisors will come up with.
(The first-quoted writer was the president of the Massachusetts Institute of Technology.)
The Lands Sub-Committee submitted the following report at the last annual meeting of the Progressive Liberal Association: --
General Francis Walker, in "First Lessons in Political Economy," says: -- "It certainly is true that any increase in the rental value or selling value of land is due, not to the exertions and sacrifices of the owners of the land, but to the exertions and sacrifices of the community. It certainly is true that economic rent tends to increase with the growth of wealth and population, and that thus a larger and larger share of the products of industry tends to pass into the hands of the owners of land, not because they have done more for society, but because society has greater need of that which they control."
On the same subject Thorold Rogers has expressed himself thus: -- Every permanent improvement, every railway and road, every bettering of the general condition of society, every facility given for production, every stimulus applied to consumption, raises rent. The land owner sleeps, but thrives."
The observant thinking man must admit that the above opinions are borne out by facts, but the importance to the community of the nationalisation of the land is unfortunately realised by comparatively few. If people would endeavour to understand its importance, there is little doubt that the majority would be forced to the conclusion that the private ownership of land is beyond question decidedly against the best interests of the State.
Cardinal Manning has said: -- "The land question means hunger, thirst, nakedness, notice to quit, labour spent in vain, the toil of years seized upon, the breaking up of homes, the misery, sicknesses, deaths of parents, children, wives, the despair and wildness which spring up in the hearts of the poor, when legal force, like a sharp harrow goes over the most sensitive and vital right of mankind. All this is contained in the land question." The opinion of the late Cardinal, expressed in such a forcible language, should at the very least induce people to study this question thoroughly. As a proof of its importance many object lessons are to be found -- as bearing upon it from a municipal point of view two may be mentioned. Doncaster in Yorkshire has no borough rate. Why? Because it is the owner of certain remunerative land; and Durban, in South Africa, for a rate of 1½d in the £ obtains the usual municipal services such as we possess in Christchurch, and in addition enjoys several others which we much desire to have. The difference is because in Durban its founders made reserve round the town which have not been alienated and have so increased in value that the rentals therefrom very nearly provide for all municipal requirements. The founders of Canterbury made a similar wise provision for Christchurch, but in an evil day the Provincial Council, when it took over the affairs of the Canterbury Association, sold the city's inheritance for a mess of pottage. It will doubtless be interesting to many to lean something of the history of the
CHRISTCHURCH TOWN RESERVES.
When constitutional government was established in Canterbury the Provincial Government took over the property of the Canterbury Association, including the town reserves of Christchurch and Hagley Park, the total area of these two being 897 acres, which, five years previoiusly, had been considered of the value of £2700. The Association had got into debt to the extent of nearly £29,000, which the Provincial Government paid with money raised on debentures, and proceeded to sell the reserves situated inside the belts. To prevent any misunderstanding as to the then estimated value of these town reserves, it is desirable to state that for the £29,000 mentioned the Association transferred to the Provincial Government all the property it possessed in Canterbury, which included other reserves than those in Christchurch, also plant, tools, survey maps and field books, which must have been value for a considerable portion of the sum named. By the deed poll of the Association these lands were to be held in trust for the purposes for which they were reserved, but a special Act of the Assembly was obtained to permit of their alienation. It has been truly said that the price of liberty is eternal vigilance. It is equally true with regard to reserves of land made for the benefit of the public; the people (every individual) should be ever on guard and watchful that no tampering with public reserves be allowed.
At the present day it is particularly interesting to consider what would now be the position of Christchurch if the reserves inside the belts had not been sold. What income would now be derivable therefrom?
Excluding twelve acres which were set apart by the Provincial Council as endowments for various religious bodies, the frontages of the reserves on the main streets of the city, as originally laid out in the extensions of these streets to the belts, amount to about 92,400 ft, after deducting 1¼ chains at each corner to avoid reckoning double frontages at corners. At 4s per foot frontage it would be £23,100. Bearing in mind that more than half the frontages have a depth of 5½ chains, it is estimated that if these lands were now let on building leases they would average a return of not less than 4s per foot, possibly more, and it is probably safe to say that the income therefrom would be £20,000 a year.
HOW WOULD CHRISTCHURCH BE AFFECTED.
The statement of accounts of the City Treasurer shows that for the year ending March 31, 1901, the rates assessed amounted to £28,526 --
General rate (omitting shillings and pence)
Special drainage rate
obtained by a total assessment of 2s 7½d in the pound, whereas, had the town reserves not been alienated, all the municipal services rendered would probably have been obtained for a modest rate of less than 9d. in the pound.
This is surely an object lesson which should be laid to heart by every inhabitant of the colony, as well as by the citizens of Christchurch, and should demonstrate how very desirable it is in the interests of the people as a community, that all land should be owned by the community, seeing that increased values of land are derived from the exertions and sacrifices of society. It will serve to show what enormous sums society thus pays to individuals to state that it is estimated that the value of land in London is increasing at the rate of 7½ millions annually; under the system of private ownership of land this large sum is accruing yearly in London alone to private individuals, and the public who must use the land, necessarily pay interest on that sum.
The Progressive Liberal Association earnestly commends these facts to the consideration of the people of New Zealand in the hope that they will insist upon a stoppage being put to the sale of Crown lands; and as regards the granting of leases in perpetuity, which, in parting with the possession for 999 years at a rental based on the present value, hands over to individuals the unearned increment for that unconscionably long period, it is hoped that a mandate will go forth from the electors of the colony insisting upon a periodical revaluation of the unimproved value. When these have been accomplished, there will be the question of the nationalisation of all the lands in the colony to be dealt with.
"That which was created for the use of all, the use of which is absolutely necessary for the existence of every individual, should be owned and controlled for the benefit of all. The private control of land is dead against the common welfare. Justice demands this, and what justice demands must sooner or later be conceded.
It will be thought an intolerable thing that men shall derive enormous increments of income from the growth of towns to which they have contributed nothing — that they shall be able to sweep into their coffers what they have not produced — that they shall be able to go on throttling towns, as they are well known to do in some cases. It is impossible to suppose that the system will not be vigorously, powerfully, persistently and successfully attacked.
—JOHN MORLEY, Speech at Forfar, October 4, 1897. The Times, October 5, 1897, p. 5, column 3.
This quote is attributed to the Irish landlords, in an 1835 piece by Thomas Ainge Devyr entitled "Natural Rights: A Pamphlet for the People."
The statement bears thinking about: when private landlords collect high rents, they force their tenants to work quite hard -- keep in mind that they still have to pay taxes on various things in order to support local spending -- while the landlord has provided them NOTHING that he has made (and nothing he has bought from the fellow who made it, either).
But at the same time, it is worth considering what happens when the community collects reasonably high rents on the land, particularly urban land. When the community collects high rent, there are no vacant lots. There are relatively few underused lots. There is housing for all who want it. All this economic activity creates jobs -- for those who would design, those who would build, those who would maintain, those who would improve, those who would expand, those who would protect. All those workers' needs and spending create more jobs. Wages rise, as jobs chase workers.
So the phrase is not simply an 18th century rural one, but highly relevant in 21st century U.S. cities, towns and rural areas. When the community collects the land rent and recycles it to serve local needs -- schools, parks, well-maintained roads, public transportation systems, police, ambulance, fire protection, courts -- communities become good places to live. When we permit private landlords (be they individual or corporate, universities or trusts) to pocket those funds -- and perhaps "invest" the excess in acquiring more land on which to pocket the rent, those good things, if they happen at all, must be financed by high taxes on productive activity.
One is a virtuous circle; the other a vicious one. Which one is consistent with our ideals? If Life, Liberty and the Pursuit of Happiness are for ALL of us, then I think we have to opt for the virtuous circle.
Thousands Sign Petition at a Mass Meeting Held in Union Square
Pastor Flays Legislature
Dr. John Haynes Holmes Says Bosses Have No Right to Stop the Expression of the People's Will
Petitions asking for a referendum vote upon the question of reducing gradually the tax rate upon buildings in New York to one-half the tax rate upon land, through five consecutive reductions in as many years, were signed yesterday by several thousand persons at a mass-meeting held in Union Square under the auspices of the New York Congestion Committee. The meeting was announced as a public protest for lower rents.
Benjamin Clark Marsh, Executive Secretary of the Committee on Congestion of Population in New York, was Chairman. Dr. John Haynes Holmes of the Church of the Messiah said that the Legislature "in the wisdom of the Big Sachem at Fourteenth Street has decreed that the people are not fit to register their judgment as to this bill. I, for one, desire to protest against the boss or set of bosses who presume to forbid the people to express their will on any question."
Frederick Leubuscher, representing the New York State League of Savings and Loan Association, said:
"It was admitted by some of the land speculators at the hearing of the Lower Rents bill at Albany that they were unable to answer our arguments. Nevertheless, a Democratic majority stifled the bill. As a savings and loan association man, I am interested particularly in the enactment of this proposed law. The stimulation of the erection of buildings and the making of improvements generally will be more market in the suburbs, where modest homes, costing from $2,000 to $5,000 to erect, are most in demand."
The purpose of the law was explained in a letter from Assemblyman Michael Schaap, who introduced the Salant-Schaap bill in the lower House of the State Legislature.
"If the tax rate on buildings had been half that on land this year," he wrote, "the rents of the average tenant would have been at least one month's rent less than it was; owners of small houses would have paid $15 to $25 less taxes than they do, and there would be fewer than 9,000 evictions for non-payment of rent.
"The taxes on all adequately improved property would have been reduced and the city would have recovered almost $20,000,000 more of ground rent which now goes to a few people of New York and to absentee landlords. This ground rent at 6% is over $273,000,000. The people of the city have created and maintain these values, but they get less than $84,000,000 of it -- the land owners get the other $189,000,000. Rent and taxes on homes and other buildings would have been reduced by at least $20,000,000."
The Rev. Alexander Irvine said that one family out of every 150 in New York City was evicted for non-payment of rent, because of the unjust taxation of improved property as contrasted with vacant land. Only 3% of the residents of the city own land, the speaker asserted.
John J. Hopper, Chairman of the New York State Independence League, said:
"A tax upon anything tends to lessen the supply of that commodity. By the same principle a tax upon buildings tends to lessen their number. A bill tending to reduce the tax upon buildings will bring about the construction of more buildings, and as a result there will be more competition and a corresponding reduction in rents.
"The Legislature refused to let us decide this question for ourselves, asserting that we did not know enough to vote on the subject of taxation. When we realize that for the expenses of the National Government each one of us pays $7.50 a year; for the state expenses, $5.50 and for the city expenses $38.50, making a total of $51.50 per individual, or $255 for a family of five, then we understand that we must think upon this subject of taxation.
Frederick C. Howe, Director of the People's Institute, said:
"Think of the stupidity of New York citizens. We talk about bankruptcy and lack of city credit and yet we give away each year at least $100,000,000 in the speculative increase of land values which the growth of the community creates. That is, the increase show by the tax valuation of the city. New York could pay a large part of its present budget out of the land speculation profits alone, if it taxed land and exempted buildings."
C. N. Sheehan of the Twenty-eighth Assembly District Board of Trade, Brooklyn, and J. P. Coughlin of the Central Labor Union of Brooklyn also spoke.
Here's a piece from a 90 year old journal. There are acres in Manhattan whose value is far higher today -- and the landlords are still reaping what the working people and visitors to New York are sowing.
APPROPRIATING THE GIFTS OF NATURE By Walter Thomas Mills.
There are portions of New York City in which the land is valued at $40,000,000 an acre. That means $8000 each day from each acre for the landlord, and that entirely unearned by him, before there is a penny for any other purpose. Probably not less than two and one-half million dollars a day, or almost a billion dollars a year, must be earned by the people of New York City and turned over to landlords for permission to use the island, which is a gift of nature, and for the advantages that are protected and maintained by the industry and enterprise of all of the people.
In The Great Adventure, April, 1921
Think what NYC -- and America -- would be like if that "permission to use the island" money was treated as our logical public revenue source, instead of as individuals', corporations' and trusts' private revenue source.
Recall the wisdom of Leona Helmsley: "WE don't pay taxes. The little people pay taxes."
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.
Every proprietor, therefore, of cultivated land owes to the community a ground rent (for I know of no better term to express the idea) for the land which he holds.
— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 329 (1795-6).
If all men were so far tenants to the public that the superfluities of gain and expense were applied to the exigencies thereof, it would put an end to taxes, leave never a beggar and make the greatest bank for national trade in Europe.
— WILLIAM PENN, Reflections and Maxims, Sec. 222, Works V., pp. 190-1.
Let the fields and all the soil, and, if possible, even the houses, belong to the state, that is, to him which is the depositary of the right of the state, so that he may let them out for an annual rent to the inhabitants of the cities and the cultivators. This will exempt all citizens from extraordinary taxes in time of peace.
— SPINOZA, Tractatus Politicus, Chap. VI., On Monarchy, Sec. 12.
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.
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.
At the outdoor mass you held in Wroclaw in Poland during your recent visit to that country, you said the following very true and sincere words:
"The Earth is capable of feeding everyone. Why therefore -- here at the end of the 20th century -- should thousands of people die from starvation" -- "Pray solidarity will prevail over the unrestrained thirst for profit and ways to handle laws of trade, which do not take into consideration inalienable human rights".
It was the same concern about the greed of the wealthy and the plight of the poor, that your predecessor, Pope Leo XIII, expressed in his Encyclical Letter of 1891, 'Rerum Novarum'. Yet, in the more than hundred years that have past, if there has been a change, it has been for the worse!
The wealth is there. The growth of industry and the discoveries of science about which Pope Leo spoke, are even more fantastic and surprising than he would have imagined in his most inspired dreams. The enormous fortunes of individuals, of which he also spoke, have become more enormous. Yet the poverty is still there. Even in countries that are considered wealthy, people are homeless and live in cardboard boxes; people die, not just by the thousands as your Holiness said in Wroclaw, but by the millions, from poverty related diseases, malnutrition and starvation. You are indeed right to ask the question:
THE EXCLUSION FROM THE GIFTS OF GOD
As your Holiness will know, the Encyclical Letter of 1891 was not only an attack on socialism, but also a strong defence of the right to hold land as private property, a right that Pope Leo XIII claimed to be natural.
But the right to hold land includes the right for the owner to exclude other people from it, and, as all usable land in industrially developed countries is owned in that way, people without such a right will be unable to enjoy the gifts of God unless they accept the conditions exacted of them by a landowner. Neither can they work, reside nor relax without land, and again they have to accept conditions exacted by a landowner.
Normally the landowner will ask people to pay the market-determined site rental, which is high because of the many excluded people who want land, or he will offer to let them work at a market-determined wage, which is low because of many excluded people wanting a working place.
Some people, in fact -- as a consequence of the many excluded -- a growing number of people, can neither qualify for a job nor afford to pay the site rental, and they have to live on the streets, on the roads, at the dumping grounds or wherever they can find a poor shelter, some clothes and a little to eat. Some of them find that crime and prison give them a better life than there is available through the legal opportunities open to them.
In some countries Social Security is implemented to mitigate the cruel consequences of the exclusion of people from the gifts of God. The Social Security bill is not paid by landowners, but by entrepreneurs, wage earners, pensioners, savers and consumers.
In other countries only private charity is available to relieve the hardships.
But neither Social Security nor charity will change the basic injustice that causes the horrible conditions of the people excluded, that increases the site rentals to be paid for the use of land, and reduces net-wages, widening the gap between poor and rich. The basic cause of these evils has to be destroyed.
Political leaders from all over the world, including representatives of the Holy See, agreed at the United Nations conference on Human Settlements (Habitat II) at Istanbul last year, that:
"The failure to adapt, at all levels, appropriate rural and urban land policies and land management practices remains a primary cause of inequity and poverty".
LETTER TO POPE LEO XIII
Allow us, your Holiness, to point to the Open Letter of September 11th, 1891, written in New York by Henry George and sent to your predecessor his Holiness Pope Leo XIII, as a response to 'Rerum Novarum'.
Published as a book this Open Letter has been read by many thousands, and still today the book is sold and read.
Henry George did consider 'inalienable human rights' and 'unrestrained thirst for profit and ways to handle laws of trade'. On exactly this background he spoke for all people's equal rights to the gifts of God.
To maintain this right for everybody and at the same time to allow exclusive right for some to own land as private property, he advocated that people who are given the exclusive right to own land -- and thereby the right to exclude other people from the gifts of Nature -- should pay a compensation to the people they exclude (in fact to all citizens).
The compensation, as a duty to be paid by the landowners, should be the market-determined rentals of the sites from which they can exclude others. This being a fair charge of justice as the rentals are not due to efforts or investments made by the landowners, but due to the development of society and to the growth of the population of human beings, all wanting a place to work, and a place to reside.
The rentals should be collected from all landowners by society, and the revenue should be used to the benefit of all citizens. In that way, Henry George emphasized, all citizens would be able to get their equal share of the gifts of God.
HOLY INCENTIVES OR HOLLOW FALSEHOOD
We do agree with your Holiness and with Henry George that people have private right to property created by man, the right to the fruits of their labour; and also that people can achieve private right to exclusive possession of land, from which they can exclude other people.
But we find it logically inconsistent to believe that people have equal right to life and to be on the Earth, when at the same time some of them have exclusive right to own land as private property without paying compensation to those people whom they exclude from their land.
Your Holiness' sincere words, as quoted initially in this letter, accord with Rerum Novarum of 1891 and with the Habitat II statement quoted above, but they will only become true if your Holiness will succeed in urging on the rulers/governments of this world to collect the annual market-determined Site Rentals of all land in their countries, and distribute the revenue thus acquired to the benefit of all their citizens.
If your Holiness could succeed in persuading the governments to do so, all people on Earth would gain equal access to the gifts of Nature, and true solidarity would become a reality. If not, all statements about equal right to life, to work, to education and to residence, will continue being hollow and false; and our successors will not see a change for the better; on the contrary, they will see the gap between very rich people and alienated poor people grow bigger, and the problems of poverty grow more serious than they are today.
We pray your Holiness may succeed in convincing the governments of this world of the importance of public collection of the annual market rental of all land, and the revenue to be used for equal benefit of all the citizens, thus to provide far all human beings, equal rights to the gifts of Nature.
Let this become the manifestation of the new Millennium, the 2000 year anniversary of the birth of Jesus Christ. Let it become a Jubilee in the original meaning of the word, striking unjust shackles from society; thereby preparing a new age of humanity, a social life in friendship and peace.
While I was in the wood alone by myself a gathering of nuts, the forester popped through the bushes upon me, and asking me what I did there, I answered, "Gathering nuts."
"Gathering nuts!" said he; "and dare you say so?"
"Yes," said I. "Why not? Would you question a monkey or a squirrel about such a business?"
. . "I tell you," said he, "this wood is not common; it belongs to the Duke of Portland."
"Oh! My service to the Duke of Portland," said I; "Nature knows no more of him than of me. Therefore, as in Nature's storehouse the rule is, First come, first served, so the Duke of Portland must look sharp if he wants any nuts."
— THOMAS SPENCE, Pig's Meat (1793)
in Land for the Landless (Wm. Reeves, 1896), pp. 7-8.
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.
36. 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 -- and rising -- lease prices, for generations. Is it right to change our tax code to tax -- heavily -- year in and year out, the economic value of that land?
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.
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.
This is from Joseph Dana Miller, the editor of the Single Tax Year Book (1917), and it is a concise statement which might help make clear why I think this such an important reform in the 21st century.
Men have a right to land because they cannot live without it and because no man made it. It is a free gift of nature, like air, like sunshine. Men ought not to be compelled to pay other men for its use. It is, if you please, a natural right, because arising out of the nature of man, or if you do not like the term, an equal right, equal in that it should be shared alike. This is no new discovery, for it is lamely and imperfectly recognized by primitive man (in the rude forms of early land communism) and lamely and imperfectly by all civilized communities (in laws of "eminent domain", and similar powers exercised by the State over land). It is recognized by such widely differing minds as Gregory the Great and Thomas Paine (the religious and the rationalistic), Blackstone and Carlyle (the legal and the imaginative). All points of view include more or less dimly this conception of the peculiar nature of land as the inheritance of the human race, and not a proper subject for barter and sale.
This is the philosophy, the principle. The end to be sought is the establishment of the principle -- equal right to land in practice. We cannot divide the land -- that is impossible. We do not need to nationalize it that is, to take it over and rent it out, since this would entail needless difficulty. We could do this, but there is a better method.
The principle, which no man can successfully refute or deny even to himself, having been stated, we come now to the method, the Single Tax, the taking of the annual rent of land -- what it is worth each year for use -- by governmental agency, and the payment out of this fund for those functions which are supported and carried on in common -- maintenance of highways, police and fire protection, public lighting, schools, etc. Now if the value of land were like other values this would not be a good method for the end in view. That is, if a man could take a plot of land as he takes a piece of wood, and fashioning it for use as a commodity give it a value by his labor, there would be no special reason for taxing it at a higher rate than other things, or singling it out from other taxable objects. But land, without the effort of the individual, grows in value with the community's growth, and by what the community does in the way of public improvements. This value of land is a value of community advantage, and the price asked for a piece of land by the owner is the price of community advantage. This advantage may be an excess of production over other and poorer land determined by natural fertility (farm land) or nearness to market or more populous avenues for shopping, or proximity to financial mart, shipping or railroad point (business centers), or because of superior fashionable attractiveness, (residential centers). But all these advantages are social, community-made, not a product of labor, and in the price asked for its sale or use, a manifestation of community-made value. Now in a sense the value of everything may be ascribed to the presence of a community, with an important difference. Land differs in this, that neither in itself nor in its value is it the product of labor, for labor cannot produce more land in answer to demand, but can produce more houses and food and clothing, whence it arises that these things cost less where population is great or increasing, and land is the only thing that costs more.
To tax this land at its true value is to equalize all people-made advantages (which in their manifestation as value attach only to land), and thus secure to every man that equal right to land which has been contended for at the outset of this definition.
From this reform flow many incidental benefits -- greater simplicity of government, greater certainty and economy in taxation, and increased revenues.
But its greatest benefit will be in the abolition of involuntary poverty and the rise of a new civilization. It is not fair to the reader of a definition to urge this larger conclusion, the knowledge of which can come only from a fuller investigation and the dawning upon his apprehension of the light of the new vision. But this conclusion follows as certainly as do the various steps of reasoning which we have endeavored to keep before the reader in this purely elementary definition.
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 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.
But when the rich began to carry it with a high hand over the poor, and to exclude them entirely if they did not pay exorbitant rents, a law was made that no man should be possessed of more than five hundred acres of land. This statute for a while restrained the avarice of the rich, and helped the poor, who by virtue of it remained on their lands at the old rents.
One might be led to wonder how our Senators and Congressmen increase their wealth during a period of their lives where they're being paid $200,000 a year and most maintain two homes, one in Washington and another in their home district. (A few sleep in their congressional offices, showering at the gym, and some rent inexpensive rooms at lovely mansions maintained by various special interest groups, in order to conserve funds -- read Sharlet, Jr., on this one.)
One wonders why a wealthy person will spend $10 million or $20 million or more of their own funds in an attempt to be elected to a job which pays $200,000 a year -- plus lifetime medical care and a few other goodies.
Part of the answer came a few weeks ago, when we learned that insider trading laws do not apply to Congress.
Interestingly, I think Land Value Taxation might largely "defang" this problem. Were we to be collecting the lion's share of the annual (monthly) value of all the sites in the U.S., we might begin to get some of the money out of politics. This is natural public revenue, and today we let individuals and corporations keep it for themselves, to our detriment \.
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:
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.