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!
As I listen to and read about attempts to reduce pollution, reduce reliance on foreign oil, reduce energy usage, I find myself frustrated by the lack of radicalism in the answers people propose. Their answers aren't wrong, but they don't go to the source of the problem, and so merely nibble around the edges. Nibbling is fine and admirable, and definitely has its place. And nibbling will make a bigger difference if they are nibbling at a circumference of 2X instead of X, though a larger percentage difference if we can get to a circumference of X.
The current Vice President asserted a few years ago that the American way of life was non-negotiable.
Well, if that means that what is is good -- the ultimate conservatism -- keep things just as they are because we live in the best of all possible worlds -- or -- it works just fine for my and my kind thank you very much -- a case one might reasonably make if one were in the top 1% of the wealth and income spectra, which, as I frequently mention here, receive a very disproportionate share of the productivity in this country:
The top 1% of income recipients -- and I'm using income excluding capital gains for the moment -- have received 36% of the aggregate income gains from 2000 to 2006.
The next 4% of income recipients have received 17% of the income gains between 2000 and 2006.
The next 5% of income recipients have received 14% of the income gains between 2000 and 2006
The bottom 90% of income recipients have received 33.1% of the income gains between 2000 and 2006.
For comparison: in 2000, the top 1% had 16.5% of the income excluding capital gains; the next 9% had 26.6%, and the bottom 90% had 57.8% of the income; by 2006, the corresponding figures are 18.2%, 27.0% and 54.7%. [Source, my calculations from Tables A1 and A0 of Piketty and Saez's spreadsheet through 2006.]
Is this the non-negotiable American way of life to which the Vice-President was referring? I suspect that, at bottom, it is.
So why should we change anything, if the machine is working so well for those at the top?
So what if this machine uses excessive amounts of the world's natural resources?
So what if it produces more than our legitimate use of the world's carrying capacity for dealing with pollution of air and water?
So what if, in order for us to be rich, others must be poor -- very poor?
So what if, in order to us to continue to drive our cars everywhere we need or want to go, we need to import oil drilled in other parts of the world?
So what if, in order for our powerful to maintain their privileges, we impinge on the rights of our own people, the rights of our contemporaries in other countries, and on the rights of future generations both here and abroad?
Ah - I've not answered the initial question. I'll come back to that in a future post, I guess -- because I think there are some very obvious answers to that question -- obvious to Georgists, anyway -- whose widespread understanding could make a big difference.
ABC News reported this evening that gun sales had jumped significantly since Tuesday's election, because many people think that the new administration and/or Congress will seek to limit gun sales.
This led me to wonder whether some significant part of the recent gyrations in the stock market might be a function of an expectation that the new administration will raise capital gains taxes from the current low rates. If it is true that there are significant unrealized capital gains in non-retirement accounts, and not a whole lot of cash in retirement accounts, there may be far more sellers than buyers.
If we look at holdings of Stocks (line 08), Non-Money-Market Mutual Funds (line 09) and Retirement Assets (Line 10), by wealth quantile, here's what we see for 2004: (trillions of dollars) .................. Stocks ....... NMMMF ..... Retirement Assets ... Ret Assets as Pct of Holdings Bottom 50% . 21 ............ 23 .......... 226 .................84% Next 40% ..... 382 ............ 564 ......... 2,587 ................. 73% Next 5% ...... 375 ............ 332 ......... 1,321 ................. 65% Next 4% ...... 1,045 ............ 1,016 ........ 1,701 ................. 45% Top 1% ....... 1,888 ........... 1,169 ......... 917 ................. 23% Total ..........3,711 ........... 3,101 ......... 6,752 ................. 50%
The folks who have holdings of individual stocks and non-money market mutual funds in retirement accounts don't have enough to buy up all that those who hold their stocks and mutual funds in non-retirement accounts might choose to sell before anticipated increases in capital gains taxes. They certainly don't have enough cash sitting around to buy up the stock that the top 5%, or even just the top 1%, might put up for sale if they were concerned about a change in tax laws. [For an estimate of holdings of unrealized capital gains, see "Capital gains and wealth" in the SCF study Currents & Undercurrents: Changes in the Distribution of Wealth, 1989-2004, particularly for the top 1%.]
Capital gains are taxed at a maximum of 15%, and the next president may raise that to 20%, a 33% increase, for SOME taxpayers. Some sources say that the rate might be as high as 25% -- a 67% increase. Might that be enough to cause some who hold stocks and mutual funds in non-retirement accounts to choose to sell? Possibly.
Keep in mind, however, that many kinds of capital don't appreciate. Buildings depreciate. Cars depreciate. Machines depreciate -- even with the best of maintenance. What appreciates? Something that isn't "capital": the classical economists called it LAND. Not just sites, but also natural resources and many other things not of human production. And through our laws on residential property appreciation and 1031 exchanges, we exempt much of the appreciation in land from taxation. To our detriment. But that's another story.
The people who are offended by the concept of "spreading the wealth" are offended at the idea that income they might receive might be "redistributed" downwards, and assume that they would be the logical targets, the folks from whom income would be taken in order to provide more income to people below them on the income spectrum -- people they suspect do not work as hard as they do, or display virtues they feel they excel in. But I suspect that most of those who boo on cue are not in the top 1%, or even the top 10%, who receive a significant share of the wage income and in fact all kinds of income.
2006 Top 1%: 12.00% of wages Next 9%: 23.82% of wages Bottom 90%: 64.18% of wages
For comparison, we might look at 1968: Top 1%: 5.24% of wages Next 9%: 20.36% Bottom 90%: 74.40%
Top 1%: 5.61% of wages Next 9%: 18.52% Bottom 90%: 75.87%
1928: Top 1%: 8.87% of wages Next 9%: 20.24% Bottom 90%: 70.89%
2. Income excluding Capital Gains* (P&S, Table A1):
2006: Top 1%: 18.24% of income excl capgains Next 9%: 27.04% of income excl capgains Bottom 90%: 54.70% of income excl capgains
1968: Top 1%: 8.35% of income excl capgains Next 9%: 23.63% of income excl capgains Bottom 90%: 68.02% of income excl capgains
1953: Top 1%: 9.08% of income excl capgains Next 9%: 22.30% of income excl capgains Bottom 90%: 68.62% of income excl capgains
1928: Top 1%: 19.60% of income excl capgains Next 9%: 26.49% of income excl capgains Bottom 90%: 53.91% of income excl capgains * Note: Capital gains are excluded both from the income and from the rankings. That is, one can't compare directly the top 1% ranked by income excluding capital gains and the top 1% ranked by income including capital gains.
3. Income including Capital Gains
2006: Top 1%: 22.90% of income incl capgains Next 9%: 26.79% of income incl capgains Bottom 90%: 50.34% of income incl capgains
1968: Top 1%: 11.21% of income incl capgains Next 9%: 23.63% of income incl capgains Bottom 90%: 65.15% of income incl capgains
1953: Top 1%: 9.90% of income incl capgains Next 9%: 22.41% of income incl capgains Bottom 90%: 67.69% of income incl capgains
1928: Top 1%: 23.94% of income incl capgains Next 9%: 25.35% of income incl capgains Bottom 90%: 50.71% of income incl capgains
4. Capital Gains income as a percentage of income excluding capital gains: (calculated from Table A0)
5. Capital Gains Income as a percent of total income, by income fractile, 2006 (P&S, Table A8, panel B -- including capital gains income in defining the fractiles):
90th to 100th percentile: 17.3% of income is from capital gains [income above $104,696] -- 10% of us, who get 49.66% of the aggregate income
90th to 95th percentile: 3.9% of income is from capital gains [income $104,696 to $148,423] -- 5% of us, who get 11.27% of the aggregate income
95th to 99th percentile: 8.6% of income is from capital gains [income $148,423 to $382,593] -- 4% of us, who get 15.51% of the aggregate income
99th to 100th percentile: 29.3% of income is from capital gains [income above $382,593] -- 1% of us, who get 22.90% of the aggregate income
Looking at that top 1% more closely, we can break it into its bottom half, next 40%, next 9% and top 1%:
99th to 99.5th percentile: 12.9% of income is from capital gains [income $382,593 to $597,584] -- 0.5% of us, who get 4.29% of the aggregate income
99.5th to 99.9th percentile: 20.9% of income is from capital gains [income $597,584 to $1,898,200] -- 0.4% of us, who get 7.05% of the aggregate income
99.9th to 99.99th percentile: 32.9% of income is from capital gains [income $1,898,200 to $10,659,283] -- 0.09% of us, who get 6.13% of the aggregate income
99.99th to 100th percentile: 49.6% of income is from capital gains [income above $10,659,283] -- 0.01% of us, who get 5.46% of the aggregate income
[The income thresholds come from Piketty and Saez's Table A6; the percentages of aggregate income are from Table A3. Notice that the 17.3% of income in the top decile coming from capital gains does not relate directly to the 9.38% figure for 2006 shown in Section 4, above. The corresponding figure would be 9.38/109.38, or 8.56%]
Somewhere I read that the one party's derisive references of "spread the wealth" is intended to conjure up thoughts of "welfare queens." They've found a way to divide working people. But the unemployed and the working poor and our lower- and middle- middle classes are not the problem here. Rather, the problem is a system that funnels such a large share of our production into the pockets of so few of us. We've created a poverty machine.
How do we retool that machine? Henry George has some good analysis and advice for us.
When we listen to one party complaining that the other's candidates want to "spread the wealth," it behooves us to pay attention to how concentrated wealth is. In 2004, it looked like this:
Top 1% of wealthholders: 33.38% of the net worth
Next 9% of wealthholders: 36.12% of the net worth
Other 90% of wealthholders: 30.50% of the net worth [source]
I'll venture the guess that most of those who turn out at the campaign rallies and boo when the words "spread the wealth" are said fall into the bottom 90%. We can split out the bottom 50% and the next 40%:
Bottom 50% of wealthholders: 2.54% of the net worth
Next 40% of wealthholders: 27.95% of the net worth [source]
We can look at income for the same groups (note that this is different from looking at a ranking of households by income level)
Top 1% of wealthholders: 13.62% of the income
Next 9% of wealthholders: 22.56% of the income
Other 90% of wealthholders: 63.83% of the income
We can split out the bottom 50% and the next 40%:
Bottom 50% of wealthholders: 23.80% of the income
Next 40% of wealthholders: 40.03% of the income
The preceding data come from the Federal Reserve Board's triennial Survey of Consumer Finances. That study suggests that the concentration of wealth may actually be understated in their data.
You might look at the line in the tables (line 19) which reports "business equity," which represents privately held companies and what we fondly refer to as "small businesses." (it represents about 20% of aggregate net worth.)
Bottom 50% of wealthholders: 0.3% of the business equity
Next 40% of wealthholders: 9.2% of the business equity
Next 5% of wealthholders: 5.7% of the business equity
Next 4% of wealthholders: 22.4% of the business equity
Top 1% of wealthholders: 62.3% of the business equity
The forces which have concentrated that wealth so narrowly are not the benign workings of free market capitalism, and those who turn out to loudly boo on cue the concept of spreading the wealth are not net beneficiaries of our current system. Wages are low, and most of us struggle.
It need not be this way, and I don't think that the party talking about spreading the wealth knows how to do it justly or well, and that the party deriding the idea has serious concern for the interests of the bottom 95% of us. What wonders me is that so few of us and so few of our talking heads seem to know or care.
A bit of reading and study of Henry George's ideas about what is rightly private property and what is rightly the common property of the community as a whole would do wonders: start with Progress and Poverty or Social Problems. Or explore wealthandwant.com. We can have the society we say we are.
I hate the idea of voting for the lesser of two evils because the other candidate scares me more. I like the rhetoric of one party better than that of the other, but I don't regard either one of the parties or the presidential slates as being good choices.
I am unable to vote for the libertarian candidate because they pandered
to the people who think they should be able to insert themselves into
the relationship and decision-making between a woman and her doctor.
They aren't serious about what they claim to stand for.
When I cast my vote, it will because of the sort of Supreme Court nominations I think each is likely to make. It will be because one candidate seems less likely to fly off the handle than the other. It will be because I am far more comfortable with one VP nominee than the other, and with the sort of judgment that went into the choice. It will be because I think one candidate is likely to be consulting people who mean somewhat better for the ordinary American's interests than does the other party, despite both being largely ignorant about how things actually work and how we might intervene to make things more just and more efficient. It will be because one presidential candidate is a high-stakes gambler, a man who called his wife names he acknowledges are offensive (google "trollope" with his name for more detail), a man with little foresight or depth. It will be because I prefer a president with a grasp of and respect for constitutional law, particularly after one who abused us with his signing statements. It will be because one candidate may have some serious health problems which to date he has not considered the business of the voters. It will be because I care about how the other 95% of the world regards us. It will because I think one slate is more likely to be reality-based
than the other, even if neither of them have really good lenses through
which to understand reality.
Can I suggest lenses that will clarify their understanding of reality?
Am I sufficiently indifferent between the two major party candidates that I will write in the sort of candidate I want? No. For me there is enough difference that I must vote for one of them, and continue working to promote my best understanding of how we can transform America into the country we say it is and is meant to be.
Democracy is not enough to produce widely-shared prosperity. And our current form of capitalism, which might reasonably be termed land monopoly capitalism, is a poverty machine, a wealth concentration machine -- but a machine which can be very easily transformed into a machine to produce broadly shared prosperity. All we need is an understanding of the mechanics of that machine, and we'll be on our way to retooling it. We need to understand which sorts of wealth ought to be socialized, and which ought to be privatized, and then to act on that understanding.
The article describes the fact that wages have stagnated for most of us, and that a series of events, including the entrance of wives and mothers into the workplace, and the increasing tolerance for debt, have been what has kept the bottom three quarters of the income spectrum afloat. It ends,
The economy won’t be saved by bailing out Wall Street and waiting for
that day that never comes when the benefits trickle down to ordinary
Americans. It won’t be saved until we get serious about putting vast
numbers of Americans back to work in jobs that are reasonably secure
and pay a sustaining wage.
And that won’t begin to happen until we roll up our sleeves and begin
the immensely hard and expensive work of rebuilding a nation that
unconscionably was allowed to slip into a precipitous state of decline.
We’ll end up spending trillions for the wars in Iraq and Afghanistan
and another trillion, at least, to clean up after the madmen on Wall
Now we need to find the money and the will to put Americans to work
rebuilding the nation’s deteriorating infrastructure, revitalizing its
public school system, creating a new dawn of energy self-sufficiency
and rethinking our approach to an economy that remains tilted wildly in
favor of the rich.
So how do we do that? Herbert's answer is "That's what the presidential campaign should be about."
But I'll submit that neither of the major party candidates, and, likely, none of the third party candidates, have the answer. That isn't to say there isn't an answer. We just haven't heard anything about it yet from any of these candidates.
I think the answer lies in the observations of Henry George, and that the Remedy he laid out in his landmark book, Progress and Poverty (1879). The subtitle to that book, An inquiry
into the cause of industrial depressions and of increase of want with
Remedy," seems pretty timely.
One candidate speaks of spreading the wealth. The other derides the notion as socialism. But I suspect that neither of them have read, or thought deeply, or discussed in any context what sorts of wealth OUGHT to be spread around, and what sorts OUGHT NOT to be spread?
Not all wealth is the same. We can divide it first into that which is created by individual or corporate human effort and that which is provided by nature or by the workings of the community as a whole. The former can rightly be privatized. The latter must not be.
I came across a link to this study, published in April, 2008. It focuses on the middle class in America, and contains a number of interesting factoids. But the reason I'm posting about it is that it seems to me that it ignores perhaps the most important reality -- one which should have underlaid the design of the questionnaire and the selection of additional data sources.
The study defines middle class in two ways. First, it accepts respondents' own assessment of which class they belong to. Second, it sorts people into three groups as a function of family income: those whose income is below 75% of the national median, those whose income is between 75% and 150% of the median, and those whose income is over 150% of the median.
While that 75% to 150% definition might be meaningful at the local level, it is ridiculous at the national level. Local median incomes vary widely, and while those who are at 75% to 150% of the local median are probably middle class there, a family at 100% of the median for, say, Birmingham, would be in a very different situation from the person who is at that same level of income, in dollars, in New York City or its metropolitan area. Omitting local realities from the analysis doesn't work!
Democratic capitalism has given us highly concentrated wealth (source: 2004 SCF, data here):
the top 1% of us have 33.38% of the net worth (29.5% of the assets);
the next 4% of us have 24.13% of the net worth (22.2% of the assets);
the next 5% of us (the remainder of the top 10%) have 11.99% of the net worth (11.4% of the assets);
the next 40% of us (the remainder of the top half) have 27.95% of the new worth (31.0% of the assets) -- offset by 48.6% of the debt;
the bottom 50% of us have 2.54% of the net worth (5.8% of the assets -- offset by 24.2% of the debt.
and highly concentrated income (source: Piketty and Saez, 2006 data, Table A3 -- including capital gains)
the top 1% of us have 22.90% of the income;
the next 4% of us have 15.51% of the income;
the next 5% of us (the remainder of the top 10%) have 11.27% of the income;
the bottom 90% of us have 50.34% of the income.
And while the top 1% of wealth holders are not precisely the same people as the top 1% of income recipients, there is probably a fair amount of overlap in the top 5% groups. And, more important, it is quite likely that most of the people in the bottom 50% of the wealth distribution (who in aggregate 2.54% of the net worth) are also in the bottom 50% of the income distribution, which in aggregate likely has less than 10% of the nation's income. In other words, these low income people are not living off their wealth.
Tell me again about the virtues of Democratic Capitalism, please.
I'm in favor of democracy, and in favor of free market capitalism. But what we are experiencing is not free market capitalism. We permit some of us to treat valuable land and natural resources, and the economic value of these vital and scarce assets, as their own treasure, rather than as common treasure.
Most of us are aware that a significant -- and growing -- portion of our society lives paycheck to paycheck. Drive near a military base, or many a downtown neighborhood, and you'll see payday lenders cheek by jowl. If any little thing goes wrong, people end giving up their next paycheck to meet the expense, and then, unless they can earn some additional money quickly to make up the difference, they and their families find themselves in a rapid downhill financial -- and life -- spiral. And if not having one's next full paycheck was not enough, interest rates are exhorbitant.
The recent financial turmoil may reveal another layer of society that might become quite sympathetic to the payday borrower. There are people who live, not paycheck to paycheck, but bonus to bonus. Each winter, they have come to expect a bonus check from their employer, which might vary from 50% of their base salary to many -- many -- times that base salary. After a few years of this, it becomes very tempting to start to rely on those annual checks, and to take on mortgages or other commitments (e.g., private school tuition, second homes, expensive cars) that get funded from those annual checks.
I've been intrigued with the bridge story for a couple of years, and this article includes a map which helps flesh out the picture. Here's something I wrote January 2007:
Think about that bridge to nowhere. I have in mind that it was to cost
something like $225 million. (I'm not sure whether that was the federal
portion, or the total cost. But let's say it was the total cost.) Some
family members of the [then - Murkowsky] Alaska governor together own a plot of land on
the Nowhere Island. It is valued at $240,000. (Probably a low
assessment, but that's okay.) Based on its size and the size of the
island, the island's value is $450 million (that assumes that their
site is of approximately average value per acre, which I can't prove).
If all these things are correct, it would only take a 50% increase in the value of that island's land to finance that bridge.
From those data points, I'd make these observations:
1. If building the bridge does not increase land values by 50%, it is probably not worth doing the project.
2. If building the bridge does increase the land values by 50% or more, it may well be worth building that bridge.
3. If building the bridge does increase land values by 50% or more, why
on earth should the federal taxpayer finance it permanently (I don't
have a problem, necessarily, with the federal taxpayer financing it
temporarily, and being repaid), giving a $225 million gift to the
property owners on the island?
4. If the land value will rise by, say, $300 million, it certainly
makes sense for Alaska to do this project, and collect back from the
beneficiaries the cost of the project in the form of taxes on land
value. Don't tax the buildings that private parties build on their
land. Just tax the land value, which they didn't create! We, the
funders of that project, created that value, and we're entitled to
collect it to fund the next such project, and the next, and the one
after that! A fountain of money, to fund public projects, instead of a
fountain of money to line the pockets of the lucky porkees.
A friend sent me a link to a page where one can make policy suggestions to Barack Obama's campaign. Turns out to be a thinly veiled way to harvest emails. But maybe somewhere in the campaign, someone might actually read the suggestions.
One of the fields was a dropdown menu so one could categorize one's proposal. I chose "economy" but made the first line of my policy proposal a list of a number of categories into which mine falls:
Issues: Economy, Energy, Environment, Ethics, Family, Infrastructure, Justice, Labor, Poverty ... and maybe even health --
And neither of them gets it right. They are proposing different arrangements of the deck chairs, and while one may provide a slightly better view of the orchestra, and the other better accoustics for enjoying the music, neither of them understand either what needs to be done or why.