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?
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.
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.)
If, then, successive generations of men cannot have their fractional
share of the actual soil (including mines, etc.) how can the
division of the advantages of the natural earth be effected? By the
division of its annual value or rent; that is, by making the rent of
the soil the common property of the nation. That is (as the taxation
is the common property of the State), by taking the whole of the
taxes out of the rents of the soil, and thereby abolishing all other
kinds of taxation whatever. And thus all industry would be
absolutely emancipated from every burden.
— PATRICK EDWARD DOVE, Theory of
Human Progression (1850), Chap. III., Sec. 3.
no class of reformers do we find more clear thinking or a sounder
political economy than among the "single-taxers." Following the writings
of the late Henry George there is a considerable and important
literature upon this subject. Land monopoly and speculation should be
stopped. Labor should not be taxed. The resources of nature should be
made to minister equitably to the whole people. Now the weakest pay the
most tax. It should be the strongest and they whom the government most
A Baltimore Instance
single tax man of Baltimore, Mr John Salmon, expresses no little
surprise that Senator Hanna's candidate for governor of Ohio supposes
that the single tax has been a disastrous failure wherever tried. Of Mr
Herrick and his notion Mr Salmon writes: This stamps him as being a
twisted thinker and a loose observer. The single tax is in operation all
over the United States, flowing into the pockets of private
individuals, which is what single taxers object to. Here in Baltimore
more than in any other section of the country, it is strongly apparent.
We have the ground rent system in operation, 90 percent of the real
estate being held on leaseholds. The custom is an old English one
grafted on the Maryland colonies by Lord Baltimore and his English
compeers, and it has grown and flourished like a green bay tree. When
one buys a home here it is in nine cases out of ten subject to a ground
rent. These ground rents are dealt in as a form of investment the same
as a mortgage or any other form of investment; but the point to observe
is that they are a single tax, pure and simple, the price paid for the
use of the ground per se and for ground only.
last assessment separated the value of the land from the value of
improvements, and it is done every day in our community. Baltimore has
more houses per capita than any city in the country, due to the ground
rent system; and a house costing $1,200 to build is very often sold for
$800 or $900 in order to create a ground rent ranging from three dollars
a front foot to $20 and $40 a front foot. To explain more fully: Bonus
buildings are run up on plats of ground split up into lots of 15x90, and
a ground rent say of $6 per front foot is put on the lot, making $90 a
year ground rent, which the buyer agrees to pay, and in his ground rent
is a clause that he will also pay all taxes. This $90 is essentially a
single tax. The agreement to pay it is exactly the same kind of a
contract that is in vogue in Fairhope, Ala. With this extremely
important exception, that whereas we in Baltimore bind ourselves to pay
all the taxes, in Fairhope the company or lessor, agrees to pay all
taxes. Talk of its being a disastrous failure! Not on your life. Ground
rents are as scarce as hen's teeth, and can only be bought on a three
percent basis. They command as good a price as government bonds, and it
is estimated that $14,000,000 at least is raised in Baltimore alone from
this source — nearly twice as much as the city and state taxes amount
to. And what is this tax of $14,000,000 paid for? Why, merely for the
privilege of living in the city of Baltimore. That's all the payers get
for it. And the only kick we've got coming is that the private
individuals get that money instead of the city and state.
-- found in "The American Cooperator" (1903); "The Public" was a weekly newspaper, out of Chicago, edited by Louis F. Post, who went on to serve in Woodrow Wilson's administration.
StarWatch investigation: State paid twice what some I-69 land was worth
To secure path for I-69, INDOT offered $7M for property appraised at $3.34M Written by Ryan Sabalow and Tim Evans | 7:47 PM, Nov 10, 2012
BLOOMINGTON, Ind. -- In 2006, Barry Elkins paid $850,000 for about 200
acres in Monroe County owned by former Indiana University basketball
coach Bob Knight.
$4,250 per acre
Elkins told a local newspaper he had no plans to develop the land. He
said he also was quite aware state officials planned to acquire at least
some of the property for the new I-69 freeway project.
Nonetheless, Elkins told a reporter: "It's a heck of a piece of ground."
Turns out, it produced a heck of a profit, too.
In July, state highway officials paid Elkins $2.41 million for an
easement covering 140 of the 200 acres. That's almost four times the
$658,800 that state appraisers said the easement was worth.
$17,214 per acre for the 140 acres.
$658,800 is $4,705 per acre.
The $2.41 million represents a profit of $1.56 million since 2006, still
leaves the owner with 60 acres with no easement and 140 acres with an
easement. The $1.56 million profit in 6 years on an $850,000 investment
is 84%! Quite a return! For what effort?
What did society get in return?
According to I-69 cost estimates INDOT provided this summer, $162.6
million in state and federal funds were spent on right-of-way purchases
along the new stretch of freeway.
He said the property payments also haven't caused the project to go over
budget. He said the I-69 project is 25 percent under budget estimates.
Officials this summer pegged the cost of the Evansville-to-Bloomington
project at $1.5 billion.
The land Elkins bought from Knight wasn't the only Monroe County
property along I-69's path that he sold to the state for far more than
its fair market value. He and two co-owners also got $348,600 for a
27-acre property appraised at $194,625; and $795,956 for 58 acres
appraised at $278,295.
As for the former Knight property, the state purchased the easement to
create an "environmental mitigation site" to make up for damage to
forests, wetlands, wildlife habitat and other natural resources caused
by the new freeway.
After the $2.41 million payday -- which was nearly three times the
amount Elkins paid Knight for the entire 200 acres -- Elkins still owns
the picturesque expanse of undeveloped pasture and woods about eight
miles southwest of Bloomington.
The easement forbids any development on 140 acres of the land but allows
Elkins to use it for "low-impact" recreational activities such as
hiking, photography and hunting.
And he doesn't have to pay property taxes.
One might reasonably ask what valuation Elkins was paying property taxes on before the transactions.
One might reasonably ask how much the labor costs on this project were -- what men and women got paid for their hours of labor put into building the highway, and then compare that to Mr. Elkins' and others' receipts as passive landholders!! Quite amazing that we treat the "rights" of landholders as more sacred than we make the rights of the community or of those who work.
One might reasonably wonder how soon the communities along the route of this new highway will revalue their land, and whether the communities will collect more from those whose land benefited from the presence of this highway (and less from those whose properties were in reality negatively impacted, should that be the case). In general, the aggregate benefits will far exceed the aggregate negative impacts, and would likely be enough to pay all the costs of the construction.
Mr. Elkins' free lunch did not come out of thin air. And likely, his heirs will continue to enjoy the benefit of it.
THIS is how wealth concentrates. This is why we are forced into taxing wages, and sales, and other things we have no business taxing!
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.
Henry George is the most famous American popular economist you've never heard of, a 19th century cross between Michael Lewis, Howard Dean and Ron Paul. Progress and Poverty, George's most important book, sold three million copies and was translated into German, French, Dutch, Swedish, Danish, Spanish, Russian, Hungarian, Hebrew and Mandarin. During his lifetime, George was probably the third best-known American, eclipsed only by Thomas Edison and Mark Twain. He was admired by the foreign luminaries of the age, too -- Leo Tolstoy, Sun-Yat Sen and Albert Einstein, who wrote that "men like Henry George are unfortunately rare. One cannot image a more beautiful combination of intellectual keenness, artistic form and fervent love of justice." George Bernard Shaw described his own thinking about the political economy as a continuation of the ideas of George, whom he had once heard deliver a speech.
Later, she writes,
George found most mysterious about the economic consequences of the
industrial revolution was that its failure to deliver economic
prosperity was not uniform -- instead it had created a winner-take-all
society: "Some get an infinitely better and easier living, but others
find it hard to get a living at all. The 'tramp' comes with the
locomotives, and almshouses and prisons are as surely the marks of
'material progress' as are costly dwellings, rich warehouses and
magnificent churches. Upon streets lighted with gas and patrolled by
uniformed policeman, beggars wait for the passer-by, and in the shadow
of college, and library, and museum, are gathering the more hideous Huns
and fiercer Vandals of whom Macaulay prophesied."
diagnosis was beguilingly simple -- the fruits of innovation weren't
widely shared because they were going to the landlords. This was a very
American indictment of industrial capitalism: at a time when Marx was
responding to Europe's version of progress and poverty with a wholesale
denunciation of private property, George was an enthusiastic supporter
of industry, free trade and a limited role for government. His culprits
were the rentier rich, the landowners who profited hugely from
industrialization and urbanization, but did not contribute to it.
had such tremendous popular appeal because he addressed the obvious
inequity of 19th century American capitalism without disavowing
capitalism itself. George wasn't trying to build a communist utopia. His
campaign promise was to rescue America from the clutches of the robber
barons and to return it to "the democracy of Thomas Jefferson." That
ideal -- as much Tea Party as Occupy Wall Street -- won support not only
among working class voters and their leaders, like Samuel Gompers, but
also resonated with many small businessmen. Robert Ingersoll, a
Republican orator, attorney and intellectual, was a George supporter. He
urged his fellow Republicans to back his man and thereby "show that
their sympathies are not given to bankers, corporations and
I commend the entire post, adapted from Freeland's new book, Plutocrats. It ends with these paragraphs:
today urgently needs a 21st century Henry George -- a thinker who
embraces the wealth-creating power of capitalism, but squarely faces the
inequity of its current manifestation. That kind of thinking is missing
on the right, which is still relying on Reagan-era trickle-down
economics and hopes complaints about income inequality can be silenced
with accusations of class war. But the left isn't doing much better
either, preferring nostalgia for the high-wage, medium-skill
manufacturing jobs of the post-war era and China-bashing to a serious
and original effort to figure out how to make 21st century capitalism
work for the middle class.
and the technology revolution aren't going away -- and thank goodness
for that. Industrialization didn't go away either. But between 1886,
when George lost the mayoral race, and the presidency of FDR, American
progressives invented, fought for and implemented a broad range of new
social and political institutions to make capitalism serve the whole of
society -- ranging from trust-busting, to the income tax, to the welfare
are living in an era of comparably tumultuous economic change. The
great challenge of our time is to devise the new social and political
institutions we need to make the new economy work for everyone. So far,
that is a historic task neither party is taking on with enough energy,
honesty or originality."
Along the same lines, you might find interesting an earlier post here, an article by Thomas Shearman entitled "Henry George's Mistakes." (He was a co-founder of Shearman & Sterling, and went on to write some excellent articles on plutocracy in The Standard, October, 1887.)
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.
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.
The following list comprises the most commonly asked questions about the concept of making land and resource rentals the source of revenue for government. As you continue this study, you will see the value from giving resources the respect they deserve and the benefits resulting from the freeing of labour, production and exchange from taxation. If you have any questions which are not covered here, or observations you would like to put to our panel, please feel free to do so by sending your question as an e-mail query and we will attempt to respond.
The inclusion of land and resources in the economic equation is central to any solution for revenue raising. A taxation solution which does not consider the nature of taxation itself and allows the continuing private monopolisation of community land and resources fails to recognise the essential role land plays in the economic equation and will not work. Land is the only element in the economic equation which is both fixed and finite. It can be monopolised. It is a unique class of asset which must be treated accordingly. If we were to wrest not the land itself, but its unimproved value from private monopolies and return the value to the community — whose very presence creates it — then we would have reduced many problems in one stroke with great benefit to production, to the environment and to the cause of individual freedom and justice.
On the subject of land and resource rents, Henry George said this:
The tax upon land values is the most just and equal of all taxes. It falls upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by nature be attained.
In the ocean-front Delaware town of Rehoboth Beach, seasonal parking fees provide a major revenue source:
In Rehoboth Beach, parking meters -- at $1.50 per hour -- are big business. They bring in $2.58 million for the city's $14.75 million operating budget.
Fines on expired meters add another $667,000, bringing the total to more than $3.2 million. More comes from parking permit fees, fines for parking without a permit and collections from a lot the city operates at the north end of the community. All told, parking is the largest single segment of the city budget.
Meters, some say, are one way the city can capture a revenue stream from the thousands of summer visitors who don't rent a cottage or stay in a hotel room, or who rent accommodations outside the city limits.
City Manager Gregory J. Ferrese said he believes meter and parking permits eliminate the need for beach fees, which are routinely charged in New Jersey resorts.
This is not to say that one can't use the beaches without paying for parking; Resort Transit brings people in by bus from the Coastal Highway, and the Jolly Trolley has been transporting tourists and others from nearby Dewey Beach for many decades.
But parking revenue is a great example of a user fee. One pays for what one takes, and if one doesn't need, one doesn't pay.
A few years ago, the price of parking varied according to location; more recently, they seem to have returned to a one-price-at-all-meters system, which puzzles me a bit. But after late September, the parking meters disappear until late spring, because there usually is plenty of parking to meet the demand.
I seem to recall reading that on-street parking is properly priced if about 15% of spots are available at any particular time. I suspect that that rule of thumb may not hold in RB in season, though I suspect that RB could charge more for ocean-block parking. (I suspect that nearly 100% of RB's parking spots will be occupied during most hours of peak season, at any reasonable price.)
Rehoboth is from the Hebrew for "space for all." One source says "City of Room" "Big City" "Broad Places, Streets" "Streets, Wide Spaces." Interestingly, when Rehoboth Beach was first laid out, by the Methodist diocese of Wilmington, as a camp meeting ground, the streets were designed to be wide and become wider as they approached the ocean, so all could have some view and access.
As a society, how do we create "space for all?" By structures and policies which encourage all of us to take only what we'll use. No land speculation, for example. (Rehoboth Beach fails on this count; its low property tax and use of 30+ year old assessments encourage people to hold onto empty land and unaltered cottages as a low-cost nest-egg; a new home far from the beach may pay far more in taxes than an older one close to it which sells for twice the price). And a 3% tax on transfers -- half to the city, half to the county -- discourages transactions.)
Some of RB's revenue comes from a 3% tax on rental income. I'm intrigued to know that parking brings in more than the tax on rentals.
Delaware, wisely, does not use a sales tax. Rehoboth Beach has 3 large outlet malls just beyond its borders, which attract shoppers from nearby Ocean City, Maryland, and even from southern New Jersey; the latter arrive by ferry for a day of tax-free shopping.
And of course the Federal government is generous with paying for beach replenishment, which helps keep the renters and beachgoers coming, at little or no cost to the property owners in RB.
In any case, parking fees are Natural Public Revenue
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."
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.
The remarkable thing about this story, to my eye, is that the size of the lot isn't even mentioned! It is worth $1 million land rent per year, and one might infer from the information provided that the lot is about 10,000 square feet, or less than 1/4 acre.
Capitalized at 5% (also known as "20 years' purchase") the lot would sell for about $20 million.
I assume that in addition to the land rent, the tenant pays the property tax on the land. So the entire $1 million annual land rent flows out of NYC, to the property's owner, in Marshall, Virginia.
What, pray tell, has the land owner done to earn that land rent?
Consider how many people's wage taxes and sales taxes could be lifted, and what that additional spending power could do for the local economy. Consider what would happen if there were no taxes to be paid on the apartments or on people's condo structures.
Or NYC can just keep letting the land rent leave the city, and even leave the country, continuing to flow into private pockets, just as if they'd rendered someone some service and earned it!
Land rent is natural public revenue, and we permit landlords to privatize it. Aren't we generous with our patrimony? (Leona told us the truth!)
The developer of a nine-story Karl Fischer rental apartment building planned for a corner site in the East Village signed a 99-year ground lease that requires payments each year of about $1 million.
The development company, YYY Third Avenue, signed the long-term lease for the vacant site at 74-84 Third Avenue, at 12th Street, April 27, 2011, however, a memorandum of the lease was not recorded in public records until last Wednesday, city property documents show.
A source citing city property records said the lease payment, which is not specifically recorded, could be inferred to be about $1 million per year. Prior to the document’s release, the annual lease cost was not known.
The prolific and controversial architect Fischer filed plans to build an 82,000-square-foot, nine-story residential building with 94 units, city Department of Buildings online records show. The permit has not been approved and is pending, DOB data indicate, and is to include nearly 9,511 square feet of retail, as well.
You might also be intrigued by the URL for the story ... I'm not sure what to make of it.
38. Mining companies which mine on public lands pay far less to the Federal government than they pay on privately held lands.
A. That's fair, because the private landholders are better negotiators
B. That's fair, because the 1872 Mining Act set the price, and it wouldn't be fair to change the business environment after setting the rules.
C. That's fair. Corporations need subsidies to create jobs.
D. That's unfair, and the federal government should be getting just as much from the miners as the private landholders are getting
E. That's unfair, and not only should the federal government be getting more from the mining companies, but the federal government should be collecting a significant portion of the royalties now privatized by private and corporate landholders, since we're all equally entitled to nature's bounty. This would permit us to reduce other taxes on wages and production, and perhaps lead to a citizen's dividend, similar to the Alaska Permanent Fund
F. That's unfair, because the 1872 Mining Act was based on old prices and old mining technology.
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?
29. The states need money. Should they sell their toll roads to private companies?
A. Sure! That would provide a nice pot of money that would help with this year's budget and next year's, and after that, we can leave the problem to a future group of legislators and a new governor!
B. Sure! The private sector will take better care of them and turn a profit to boot!
C. No. The taxpayers paid for those roads to be built, and have a right to more control over them than would exist after privatization.
D. No. The taxpayers own that land, a unique right of way, and selling it off forever is irresponsible and wrong!
E. No. Our society -- any society -- is highly dependent on our infrastructure, and control over it must remain in the public sector.
F. No. Those highways are built on land that was bought or taken from individual property owners for the public good. To turn them over to the private sector, for profit, would be wrong.
G. No. Those highways will increase in value over the coming decades and centuries, and should not become anyone's private property, at any price. Both their economic value and the control over them belongs in the common sector.
H. No. Even if it looks as if it might make sense for our generation, what of future generations? Should we permit the privatization of a common asset they will likely be dependent on?
I. No. Future taxpayers will build more highways intersecting with these current tollroads, and increase their value; were these to be privatized, it would be the private corporation who would reap the benefit of that future public investment.
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.
23. Fares on local public transportation may not be high enough to finance all the costs of providing the transportation. Does that mean that it is a poor investment, or are there other logical and just ways of funding it?
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: firstname.lastname@example.org
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.
This quote came across my inbox today, and I thought it worth sharing:
“We operate from the concept of ‘shalom,’” Forrister said when he reported on that meeting to The Huntsville Times. “’Shalom’ means more than the absence of war, it means the well-being of all. Ezekiel said to seek the ‘shalom’ of the city you’re in – and he was writing to people in exile in Babylon. We’re to seek the good of the whole community, of all of society.”
I came very slowly to the point of view that the nature of the ways we fund our common spending is at least as important as the spending side of the budget. That taxation can be destructive or constructive. That it can be used to create vital healthy communities or ones in which wealth and power concentrate into a few hands.
I grew up with the benefit of grandparents who understood this, and I still didn't "get it" until well after they were gone. Certainly my college education didn't provide me any glimpses of it, despite being concentrated in fields in and around it. I hope that others who are seekers after peace -- after Shalom -- will investigate what Henry George's "Remedy" -- land value taxation -- has to offer for their community and their country.
And here's the final paragraph from the email that the first quote came from:
Taking care of each other is simple kindness, not something sinister, said Forrister, who was trained as a Church of Christ minister.
“Thinking about looking out for the common good is not socialism,” Forrister said. “Capitalism has to be tempered by social policy that responds to human needs that capitalism won’t respond to.”
Our current form of capitalism is, among other things, land monopoly capitalism. Were we to remove the land monopoly aspect, through land value taxation, we would have a purer capitalism, one which I think would better serve the ideals we claim to hold dear.
The reader of a book review will rightly want to know the ideology of the reviewer. Very well: being of Georgist persuasion, I divide the "means of production" into two categories: those that can be produced or reproduced by competitors, and those that can't. On the former category, I'm as far Right as you can get, believing that such assets should be privately owned and exempt from tax, to encourage capital formation.
That brings us to the other category of "means of production" -- assets that can't be produced or reproduced by competitors. Georgists contend that the market values of such assets, being publicly created, are the proper source of public revenue. The most important example is land, whose value can be tapped by means of rates, "land tax" and "capital gains" tax.
Hazlitt doesn't have "land" in the index.
In three places in the text (ss. 11.4, 15.2 and 16.2), he lists the factors of production as land, labour and capital, but doesn't distinguish between them for purposes of argument. In s.16.2 he also mentions the "poorest land", "least competent farmers" (labour) and "poorest equipment" (capital), but again doesn't distinguish further.
Similarly in the chapter on credit, he doesn't care whether borrowed funds are spent on farms (land) or tractors (capital).
In s.15.2 he adds that for an economy in "equilibrium", these factors are limited "at any moment", thus glossing over the fact that the supply of capital can build up or decay. Although Hazlitt is usually said to be of the Austrian school, this snapshot view of "equilibrium" is neoclassical, not Austrian; it was pioneered by J.B. Clark for the purpose of making capital look like land, so that land could be called a form of capital. Hazlitt includes Clark in his recommended reading list.
Earlier (s.6.2), Hazlitt cites the "limited" supply of capital as an argument against government-guaranteed home mortgages, claiming that they cause "oversupply of houses as compared with other things" -- not that they pump up land prices.
But he mentions the need for capital accumulation elsewhere, especially in the chapter on saving, where his examples of "capital" include schools, colleges, churches, libraries, hospitals, private homes, and "the most wonderfully equipped factory", all of which include land components. This conflation of capital and land is neoclassical.
In contrast, Austrian economists emphasize that capital, unlike land, must be constantly renewed, that its life cycle may be long or short, and that loose monetary policy causes overinvestment in long-life capital, whose value then collapses, contributing to recessions.
Meanwhile Georgists notice that recessions follow bursting "property bubbles", which are really land bubbles because land prices, unlike prices of buildings (prime examples of "long-life capital"), are not constrained by construction costs.
Hazlitt's failure to make these distinctions may explain why his explanation for depressions (s.23.5) is so vague: "the real causes, most of the time, are maladjustments within the wage-cost-price structure... At some point these maladjustments have removed the incentive to produce, or have made it actually impossible for production to continue... Not until these maladjustments are corrected can full production and employment be resumed." All clear now?
Those who call themselves free-traders too often fail to apply their own standards to trade within their own countries. Witness those misnamed "free trade agreements" in which each country promises to impose the other's monopolies on its own citizens.
Hazlitt falls into this error in chapter 4, where he considers an extra bridge between Easton and Weston and declares that "For every dollar that is spent on the bridge a dollar will be taken away from taxpayers." Not necessarily, because any such bridge will lower barriers to trade between Easton and Weston, especially the indispensable trade between employers and employees.
The benefit of the additional trade, net of any bridge tolls, will be shown in prices of access to locations served by the bridge -- in other words, land values. If the benefit exceeds the cost, it will be possible to cover the cost by clawing back a sufficient fraction of the uplift in land values, in which case the cost, although clawed back through the tax system, will not be "taken away from the taxpayers" but will be part of the new value created by the bridge.
The rest of that new value will be a net windfall to the property owners.
Hazlitt then turns to the Norris Dam (a New Deal project) and rubbishes the claim that "private capital could not have built it", because it was indeed built by private capital "expropriated in taxes... taken from people all over the country", causing the loss of "the private power plants, the private homes, the typewriters and television sets" that the expropriated funds might otherwise have bought. Thus the people of one district got richer at the expense of the rest of the country.
But it didn't have to be done that way. The earlier Don Pedro dam (completed 1923) was built by two Californian irrigation districts and financed entirely by local land-value taxes. The affected land owners were fiercely in favour of it because they knew the increase in their land values would outweigh the taxes. Even if the land-value taxes had been imposed by a higher level of government, the financing of the dam would still have been local, because only the local land values would have been affected by it. Private capital did not build it, because the uplift in land values that paid for it would not have occurred without it. Private agencies could not have organized it, because they would have had no way of tapping the uplifts in land values.
With an eye to current debates, I should conclude by praising Hazlitt for an insight that his latter-day admirers have ignored.
In explaining why "Taxes Discourage Production" (chapter 5), he says:
"When a corporation loses a hundred cents of every dollar it loses, and is permitted to keep only 52 cents of every dollar it gains, and when it cannot adequately offset its years of losses against its years of gains, its policies are affected." If individual investors "lose the whole dollar when they lose, but can keep only a fraction of it when they win," they are less likely to take risks.
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.
"One sure way to determine the social conscience of a government is to examine the way taxes are collected and how they are spent. And one sure way to determine the social conscience of an individual is to get his tax-reaction. Taxes, after all, are the dues we pay for the privileges of membership in an organized society."
-- Citation: Franklin D. Roosevelt: "Address at Worcester, Mass.," October 21, 1936.
Here are some more extended quotes; the full speech will follow.
In 1776 the fight was for democracy in taxation. In 1936 that is still the fight. Mr. Justice Oliver Wendell Holmes once said: "Taxes are the price we pay for civilized society." One sure way to determine the social conscience of a Government is to examine the way taxes are collected and how they are spent. And one sure way to determine the social conscience of an individual is to get his tax-reaction.
Taxes, after all, are the dues that we pay for the privileges of membership in an organized society.
As society becomes more civilized, Government—national, State and local government—is called on to assume more obligations to its citizens. The privileges of membership in a civilized society have vastly increased in modern times. But I am afraid we have many who still do not recognize their advantages and want to avoid paying their dues.
It is only in the past two generations that most local communities have paved and lighted their streets, put in town sewers, provided town water supplies, organized fire departments, established high schools and public libraries, created parks and playgrounds—undertaken, in short, all kinds of necessary new activities which, perforce, had to be paid for out of local taxes. ...
New obligations to their citizens have also been assumed by the several States and by the Federal Government, obligations unknown a century and a half ago, but made necessary by new inventions and by a constantly growing social conscience.
The easiest way to summarize the reason for this extension of Government functions, local, State and national, is to use the words of Abraham Lincoln: "The legitimate object of Government is to do for the people what needs to be done but which they cannot by individual effort do at all, or do so well, for themselves."
Taxes are the price we all pay collectively to get those things done.
To divide fairly among the people the obligation to pay for these benefits has been a major part of our struggle to maintain democracy in America. ...
(Readers new to this website might be surprised that Georgists will take issue with "ability to pay," as the phrase is commonly used, as a good criterion on which to judge taxation, and those same readers may have a visceral negative reaction. If you're among that group, you might take a look at this page.)
Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.
Before this great war against the depression we fought the World War; and it cost us twenty-five billion dollars in three years to win it. We borrowed to fight that war. Then, as now, a Democratic Administration provided sufficient taxes to pay off the entire war debt within ten or fifteen years.
Those taxes had been levied according to ability to pay. But the succeeding Republican Administration did not believe in that principle. There was a reason. They had political debts to those who sat at their elbows. To pay those political debts, they reduced the taxes of their friends in the higher brackets and left the national debt to be paid by later generations. Because they evaded their obligation, because they regarded the political debt as more important than the national debt, the depression in 1929 started with a sixteen-billion-dollar handicap on us and our children. ...
For the average American we have reduced the individual income tax. Any family head who earns an income of less than $26,000 a year pays a smaller income tax in 1936 than he paid for 1932. That means that less than one percent of the heads of American families pay more than they did; and more than 99 percent pay less than they did, for more than 99 percent earn less than $26,000 per year. If you want the answer to this talk about high taxes under this Administration—there it is. Taxes are higher for those who can afford to pay high taxes. They are lower for those who can afford to pay less. That is getting back again to the American principle—taxation according to ability to pay.
You would think, to hear some people talk, that those good people who live at the top of our economic pyramid are being taxed into rags and tatters. What is the fact? The fact is that they are much farther away from the poorhouse than they were in 1932. You and I know that as a matter of personal observation.
A number of my friends who belong in these very high upper brackets have suggested to me, more in sorrow than in anger, that if I am reelected they will have to move to some other Nation because of high taxes here. I shall miss them very much but if they go they will soon come back. For a year or two of paying taxes in almost any other country in the world will make them yearn once more for the good old taxes of the U.S.A.
One more word on recent history. I inherited from the previous Administration a tax structure which not only imposed an unfair income tax burden on the low-income groups of this country, but also imposed an unfair burden upon the average American by a long list of taxes on purchases and consumption- hidden taxes.
In 1933 when we came into office, fifty-eight cents out of every dollar of Federal revenue came from hidden taxes. Leaving out of account the liquor tax—for liquor was illegal in 1933—we have reduced these indirect taxes to thirty-eight cents out of every dollar.
Continuing through some old files, I came across this eloquent statement in the minutes of an executive committee meeting for the Robert Schalkenbach Foundation:
"Middle income homebuyers, especially, are having to pay a lot more for their homes because of the inflation in land prices. They are having to pay more for their financing, too, because financing also reflects land prices.
What land speculators can get for their land, they can get because of the enormous expenditures of tax money to make that land usable.
I do not think the American conscience is sufficiently sensitive to be aroused because land speculators get rich at the expense of the government, because the public has come to regard the government as a cow to be milked. It would, therefore, be unwise to place the emphasis on how speculators get rich at the government's expense. Rather ... we should emphasize that the homebuyers are the ones who have to pay, have to dig deep into their savings to pay speculators more for the land, not because the speculators did anything to earn a higher price, but because taxpayers spent millions to make it better."
-- Perry Prentice, 3/5/1965
California, with Prop 13, should take note. Anyone who wants a more stable economy should take note. Anyone who would like to see the cost of living for ordinary people be stabilized and reduced should take note.
New York’s transit system, like those here on the U S mainland, finds
itself in a financially unsustainable position. Despite huge subsidies
from taxation of productive activity, its managers claim a need for $10
billion additional capital funds, and the current year’s budget assumes
a docile union as well as $35 million that appears imaginary.
And, like private-sector corporate managers, its chief has departed
the troubled system for triple the compensation at a more prosperous
organization, in this case the Hong Kong Mass Transit Railway. Would
you blame him?
For those of us who seek reliable transit funding from a source which
does not burden productivity, the important point is what this
relocated executive calls Hong Kong’s “sustainable financial model.”
And what is that? Simple, and no surprise to those who have been paying
attention here. The Hong Kong Mass Transit Railway Corporation “earns
millions of dollars from real estate developments along its rail
lines.” That’s all it takes. Collect some of the land value, which
public transportation supports, to fund the operation at reasonable
fares. [Oh, yeah, and get competent managers for the transit operation,
but they don't mention that here.]
When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?
Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:
I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.
The 99% need to start identifying the laws and structures that must be adjusted. This is not easy work.
What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures. We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist. It won't be easy. We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.
Labor should get its share, and capital should get its share, and we-the-people should get land's share. That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create. That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.
I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund.
In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong. Letting it be "there for the taking" is insanity and injustice. And don't we pledge "liberty and justice for all?"
Our ancestors may have granted some privileges to some lucky folks for one reason or another. That doesn't mean that we can't, politely and firmly, revoke those privileges. A couple of centuries is plenty. Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them. Will the privileged give up those privileges graciously? Quite possibly not. But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."
In the parish of St. Peters, Island of Guernsey, marketing was carried on in illy-protected stalls around the church square.
The losses to venders by rain, and the inconveniences to buyers, made the needs of a covered markethouse keenly felt; and some public spirited citizens took the matter in hand to have one built.
An estimate of the size of the house required brought its approximate cost in money to $22,000, and to raise this amount of money became the question with the promoters of the scheme.
It was a question, however, of easy solution, as they had thousands of precedents.
They drew up a petition setting forth the need of a market house, and desiring the Governor to issue interest-bearing bonds, to be negotiated in Paris or London, for the money wherewith to erect the building.
To said petition were offered the signatures of some 300 house-holders in the parish, and a committee was appointed to present the same to Governor De L. Isle Brock.
It happened that, while the people were money worshippers, that is, believed in the omnipotence of money, Governor Brock, on the contrary, was a money infidel, that is, did not believe that money was able to do the least thing.
Consequently, when the committee presented the petition, superstition and science came in conflict.
The Governor set to work with arguments to prevent the citizens from going into debt and becoming tributary to bankers in Paris or London.
"Will you permit me," he asked the committee, "to place before you some very simple questions?"
"Have we the necessary number of mechanics among us to build said house?" he asked.
The committee replied that they had, adding that, owing to dull times, many workmen were out of employment and would be glad of a job. "We have the men." He then asked about the material— rocks, bricks, lumber, lime, and about tools, teams, as well as all the requisites to maintain men and teams while the work was being executed.
"Here you tell me," he said, "we have among ourselves everything needed to build the markethouse, yet you desire me to bond you to bankers for material which is of no manner of use in the construction of the house; strange anomaly."
"It is true," remarked one of the committee, "that we have men and material, but we lack the money to pay the men and buy the material."
"Friends," replied the Governor, "when a man gets paid for work done or material furnished, it means that he has worked for others and sold the material. Is it your intention to build a house for bankers? If so, then you are right in demanding pay from those banks. But, in such a case, you should not place yourselves under bondage besides. If those bankers pay you for the house, and hold you in bondage also, demanding annual tribute, they will soon have both the house and the money they paid you.
"It will be no relief to say that we make the renters of the market house pay that tribute to the bankers.
"The renters will be part of us, and they will demand of their customers that tribute in higher prices for goods.
"Allow me, gentlemen, to propose a better plan for building our market house.
"This can best be done by means of a money which lays no claim to interest. Instead of bonds, I will issue $22,000 Market House Script, of different denominations (as money), and with these pay the men and purchase the material, then make these scripts receivable at par with legal tender money for the rent of the stalls."
The scripts were issued, the material procured, the men put to work, the building erected, and the stalls rented.
The scripts circulated in the Island at par. Every month's rent reduced their quantity, and, in less than 10 years all were back in the public treasury and stamped cancelled, and thus ended the life of the Guernsey Market House scripts.
If every business man, and laborer, in the city of Vallejo would pledge himself to receive such scripts at par, for goods sold, or services rendered, we, too, could build a new City Hall, or improve our water system, or erect electric light plants without the aid of the banker or bond holder. This is the plan proposed by the Labor Exchange, submitted for the consideration of the citizens of Vallejo.
Governor Brock did not let this monetary event pass into obscurity. Accordingly he appointed a special day to celebrate. When the day arrived the market house was festooned with garlands and streamers, with a large flag bearing the inscription: "As good as if built with borrowed gold."—Richard Caverly in S. F. Star.
Here's another item from an 1896 California weekly. It is a little difficult for the 21st century reader to remember that "road" at that time was shorthand for "railroad" or sometimes "streetcar line."
Incidently, only a rather small portion of the material in The San Jose Letter strikes me as particularly Georgist. (You'll see most of it here!)
The First Street Road and Single Tax
The San Jose Letter, May 30, 1896
A very good illustration of the unfairness and unjustness of our land system was furnished by the failure of the First Street Electric Road Company. Jacob Rich, practically the company, has been a pioneer in local street car building, has failed, and stepped aside for others to reap the benefits of his toil and experiments.
It would be better for the community if the roads were all owned and operated by the city, but since they are not, and could not be, under existing conditions, the individual whose enterprise secures them is entitled to the gratitude of the people.
Rich spent thousands in experimenting on the San Jose and Santa Clara road. At the moment it began to pay, he found himself so situated, financially, that he was obliged to dispose of the property, thereby sinking a large fortune. Along the line of this particular road are situated many building lots. These lots doubled and trebled in value on account of the road. But Rich was not benefited. Individual owners, who stayed quietly at home, laughed at Rich as a crank, and condemned his road, found their fortunes doubled on account of it, but Rich got nothing. He was obliged to dispose of even the road itself, when it began to pay, a poorer man by many thousands of dollars. But I have not heard of one land owner whose property was benefitted by the road offering to help him out.
After getting free from the Santa Clara road tangle, Rich mortgaged his real estate, and hypothecated his securities to raise money to build the First street line, and the numerous extensions of the system. He then bonded the property to improve it, and eventually came to the end of his magnificent fortune. He failed then, disastrously.
The building of the First street line and its extensions have made many holders of suburban property wealthy. Rich does not get the benefit of this. He built the lines that have made the property more desirable for building purposes; has put the extra value upon them in fact, but he gets nothing for it, and the very people who have been benefited are now condemning him for losing his money in such an unprofitable venture.
Under a system of single tax the benefit of the increased value of the land to the community, which was occasioned by the new lines of street cars, would have been enjoyed by the whole people and not by individuals. Had the car lines been built by the municipality, by the people, the money lost in establishing and perfecting them would have been made up by the increased amount the community, the whole people, would have received from their outlying lands.
For instance, if the rent, which the people received for the lands before the roads were built, equaled 5% of their value as agricultural lands, when their value became doubled or trebled on account of the new demand for them as residence lots, caused by the building of the car lines, the rent or single tax would become double what it had been before the improvements were made. Thus the increased revenue from the land would make up the deficit that might result on account of the road before it became established. In a word, the losses growing out of the first few years' expenses of the road would be borne by the whole community who would in return be benefited by the increased value of the suburban lands. One man would not be ruined by the experimental line, while another had his fortune doubled or trebled, but the advantages and disadvantages would be shared by all.
The people recognize that something is decidedly wrong in our economic system. They all turn doctors of economics to remedy the matter, and set up economic cure-alls, warranted to make everybody sick. Apparently sane men tell us that "high protection" will result in all the economic reforms on the list. Others are for low tariff, others for single standard, others for free silver, others for prohibition, and so on and so on to the end of the chapter. Everything is tried, and has been tried over and over again, but the only thing that will ever permit men to enter the struggle of existence unhampered will be a system of single tax by which natural resources would be turned to the use of the whole community, and not to the benefit and advantage of individuals.
A progressive, energetic man like Jacob Rich would not then be beggared by his endeavors to improve conditions in the community, while the non-progressive Silurian of a land-holder has his fortune doubled and trebled through the efforts of another.
How does this strike you? If this is the first thing you've read here, it may seem very odd to you. I invite you to explore the ideas involved, through the tags (below this post) and in the cloud, at left. Comments welcome, of course!
Single Tax Platform
The single taxers of Delaware are conducting a red hot campaign. The single tax will be the issue in that state this fall, and Justice, the state single tax organ, published the following as their Single Tax Platform:
We assert as our fundamental principle, that all men are equally entitled to the use of the earth;
Therefore, No one should be permitted to hold land without paying to the community the value of the privilege thus accorded; and from the fund so raised all expenses of government should be paid. We would therefore abolish all taxation, except a tax upon the value of land exclusive of improvements. This tax should be collected by the local government and a certain proportion be paid to the state government.
This system of taxation would dispense with a horde of tax-gatherers, simplify government and greatly reduce its cost.
It would do away with the corruption and gross inequality inseparable from our present methods.
It would relieve the farmer, the workman and the manufacturer of those taxes by which they are unjustly burdened, and take for public uses those values due to the presence of population.
It would make it impossible for speculators to hold land idle, and would open unlimited opportunities for the employment of labor and capital, which is essential to the solution of the labor problem.
"ARE WE SOCIALISTS?" Thomas B. Preston, in the Arena, December, 1899
It is socialistic to make the revenues of the government a burden on industry. Revenues there must be, but they should not bear upon industry. In fact, the taxation of any product of labor is simply taking from the laborer part of his earnings. To such an extent we are socialists. Any other form of taxation than that on the value of land is essentially socialistic because any other tax is passed on from the seller to the consumer, and takes part of the latter's earnings without compensation, for use by the community. Any tax on earnings is socialistic, although it may not go so far as to take all a man earns. The substitution for our present system of a single tax amounting to the full rental value of land would sound the death-knell of socialism.
While we sin so deeply in our present bungling, socialistic way by forcing individuals to give up part of the proceeds of their labor, by fining a man who builds a house more than if he were maintaining a public nuisance, by tariffs which hinder trade with foreign countries, and add millions to private fortunes at the expense of the people, and by a thousand indirect taxes which make life harder for men without their being able easily to see the reason, on the other hand we foolishly leave to individuals those great agencies which are the outcome of social growth — the product of the inventive genius of a few men, if you like, but which after a time grow so powerful as to become the very arbiters of life and death. Prominent among such agencies are the railroad and the telegraph. They can crush communities out of existence and enrich the owners at the expense of their fellow men. They have already become the chief source of corruption in government. The ownership of these agencies by the community becomes a necessity for the continuance of social progress. Otherwise these monopolies can go on increasing and concentrating until a few persons are enabled, through them, to appropriate the wealth of a community. In so far as socialism demands the state ownership of agencies of this nature, it is proceeding in the right direction. There are many other agencies besides the railroad and the telegraph, such as the supply of water, gas, light, heat, telephones and means of transit and communication, in which the American idea of free competition is a fallacy. Here we are too individualistic. The right to make war and peace was long ago taken from individuals and vested in the community. So at a later stage was the carriage of letters. National quarantines, boards of health, public schools, are all examples of applied socialism in its legitimate sense. But why should we stop here? The existence of such great monopolies as the railroad and the telegraph is a standing menace to the life of the Republic. Let us munificently reward the inventors or appliances which shall add to the comfort and convenience of the community, but allow these agencies to be owned perpetually by individuals never!
We are socialistic where we should respect the rights of the individual, and we are individualistic when individualism is a crime against the Commonwealth. And so we go blundering on. When our stupid and oppressive system leads men to cry out against it, and riot and murder follow, we hang a few anarchists. When monopolists, grown bold through long years of immunity, attempt to rob a little more openly, by pools and combinations or by direct bribery, we create interstate commissions to watch them, or we send a few to prison, allowing others to escape to Canada; repressing a little here those who complain too loudly, where we should rather rectify their grievances, and lopping off a little there the enormous unearned profits, which we should abolish altogether. Meanwhile our two classes of tramps are increasing — those who travel around the world in flowing palaces, living upon the toil of others, without using their capital in any legitimate enterprise and those who go afoot, pilfering from cornfields and hen roosts — both classes an unjust burden on a hard working, long suffering community. We have arrived at a critical period of our history, where we must meet the demands of social progress, or our civilization will perish as surely as did the fallen empires of former ages. Already the mutterings of revolt are growing louder and louder, while upstart monopoly was never so insolent and imperious as it is today. Let us be warned in time, and, discarding all half measures, face the issue like men, and not go on trusting to luck, foolishly dreaming that somehow, at some time, existing wrongs will right themselves.
The newest issue of Progress, an Australian Georgist publication, is online here. The motto is "Sharing the Earth So All May Prosper."
There is a lot of good material, and I'll share some of the things that caught my eye.
An article about a film entitled "Real Estate 4 Ransom" which I commend to your attention, wherever you live. (I'll keep you posted on the film itself.)
“Economist James Galbraith has noted that only 12 out of 15,000 economists in the US noticed the US$8 trillion dollar housing bubble” (page 6)
We propose a change in the tax mix so that future infrastructure pays for itself by expanding the tax base without increasing the tax burden. (page 9)
Infrastructure adds enormous value to land in prime locations according to proximity and serviceability. Land Value Capture (LVC) is a simple technique to recycle the publicly funded windfall gains that accrue to land owners. Importantly, these windfalls are captured over the life-cycle of the infrastructure, such that one generation is not hit with the total infrastructure costs (ie as per the current preference for Developer charges). (page 10)
Windfall gains from infrastructure add up to several times the cost of the infrastructure to surrounding properties. We propose that a sufficient contribution from this windfall be recycled back to the government so that other infrastructure projects can be funded without substantially burdening one generation over another. At present land speculators baulk at paying barely 10% of the land bounty (windfall gain) back to the community via government’s Land Tax, Council Rates, Stamp Duties and Capital Gains. (Page 11)
“Henry George did more than draw ‘the deadly parallel of riches and misery.’ He recast the science of political economy by working out the natural laws of the distribution of wealth. He destroyed the current academic theory of wages and capital. He amplified and extended Ricardo's law of rent. He dug to the root of the wealth distribution.” (John Dewey, quoted on page 22)
If you could choose the sort of society that you were to be born into, would you choose one in which the distribution of wealth is guaranteed to be equal? (page 28 -- and don't miss the illustration cartoon on "trickle-down economics"!!)
The world faces a series of worsening crises, climate instability, rising energy costs, economic apartheid, and erosion of democratic institutions. What is required is not a set of technical instruments that try to resolve these, one at a time. We need a new social philosophy that addresses all these crises simultaneously. (page 38)
All 17th century authors took it for granted that God had given the earth to all people in common, not just to those who had claimed title to a part of it. Starting with that premise, the difficulty lay in justifying private ownership of nature. They saw that private property in land or ocean or other gifts of nature was an obvious usurpation of the rights of the rest of humanity. Private ownership was deemed a necessary evil to achieve more productive use of nature, but it was clearly an evil, never an institution that was good in itself. (page 39)
The idea of charging a fee for the use of nature and sharing the revenue equally might seem like a proposal that would not be threatening to powerful interests, but it is. The wealthy at present take a disproportionate share of the common stock of resources, both renewable and non-renewable, and they aim to keep it that way. (page 40)
“Ironically, what comes closest to being sacred in modern societies are individual rights, private property, and personal freedom.” (page 41)
“It seems that most people are concerned only with the future of their own children, not with the next generation as a whole.” (page 43)
A lot of good material -- and I've barely mentioned the graphics!
I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.
Henry George, Jr., was a U. S. Congressman. His most famous writing is "The Menace of Privilege."
WHO ARE THE CRIMINALS?
BY HENRY GEORGE , JR. Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York
I. Who are the Criminals? 5 II. French Aristocracy of Privilege 6 III. New York Aristocracy of Privilege 10 IV. Robbery of Masses by Classes 12 V. Nature and Extent of Robberies 13 VI. How to Stop the Robberies 18 VII. The Criminals 23
I. WHO ARE THE CRIMINALS?
In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?
II. FRENCH ARISTOCRACY OF PRIVILEGE.
When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.
Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.
But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery. Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.
The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country. Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.
Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.
But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.
The aristocracy, therefore, were the primary, the real criminals.
III. NEW YORK ARISTOCRACY OF PRIVILEGE.
I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"
That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?
The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?
IV. ROBBERY OF MASSES BY CLASSES.
Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?
I believe that there can be but one answer — yes.
Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.
V. NATURE AND EXTENT OF ROBBERIES.
LET us consider how the classes may be robbing the masses into poverty.
It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.
This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?
Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.
Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them? What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.
Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.
VI. HOW TO STOP THE ROBBERIES.
Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —
In ground rents
In franchise values
While they are compelled to pay in various taxes for the support of local government
Which makes in all
What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values? Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?
For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?
And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?
What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.
Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?
Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.
Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used. This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.
What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.
The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.
VII. THE CRIMINALS.
That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?
Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?
Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?
I have a family member who, when Herman Cain says "9-9-9," plays a sound bite of another voice shouting "nein! nein! nein!"
Georgists have a better proposal for how we ought to fund our common spending.
0% tax on wages
0% tax on sales
0% tax on corporate profits
0% tax on buildings and equipment
100% recovery of our commonwealth
This probably raises several questions in your mind:
what is "recovery of our commonwealth"?
how will it affect me?
Our commonwealth includes the value of land -- not the improvements made by the present or previous owner, but the value of the site itself, which is created by the gifts of nature; by the investment of the local, state and national communities in public goods and services (including most "pork"); by the presence of the community and its economic activity. While good farmland may be worth $5,000 or $10,000 per acre, depending on climate and proximity to markets, suburban residential lots might be $35,000 to $1,000,000 -- or far more! -- per acre, and an acre in midtown Manhattan can be worth $250,000,000 or more. The landholder doesn't create that locational value.
Our commonwealth includes the value of ecosystem services. It includes the value of electromagnetic spectrum (the airwaves which most people would agree rightly belong to the American people, not to corporations). It includes the value of water, particularly fresh water for drinking and water for irrigating crops and for corporate use. It includes the value of government-granted privileges. It includes the value of geosynchronous orbits -- those parking spots in space for satellites whose owners and customers would not want to see crashing into each other. It includes the value of landing rights at busy congested constrained airports, such as LaGuardia or JFK, particularly at their rush hours. It includes the value of scarce on-street parking in congested cities. It includes the value of nonrenewable natural resources extracted from below the earth and the oceans, for 200 miles beyond our land borders. It includes a whole range of other similar things.
As you look at that paragraph, compare it to the 0-0-0-0 list above, and notice that it collects upfront certain values, and leaves the rest to those who produce. It is direct taxation rather than indirect, and one could reasonably argue that it isn't even really taxation; rather it is more in the nature of a user-fee.
It is Natural Public Revenue.
Once one has sat with this idea for a while, it seems quite unnatural to permit the value to continue to accrue to private individuals, or to corporations publicly or privately owned, or to entities other than the community as a whole!
Recall how concentrated wealth is in the US: The 2007 SCF [the Federal Reserve Board's Survey of Consumer Finances] reported that aggregate net worth is "distributed" as follows:
Top 1% of us have 33.8%
Next 4% of us 26.6% [cumulative: 60.4%]
Next 5% of us 11.1% [cumulative: 71.5%]
Next 40% of us 26.0% [cumulative 97.5%]
Bottom 50% of us 2.5%
Recall also that the Forbes 400 families are specifically and intentionally omitted from the SCF, and that Forbes estimates that they represent 2.5% of aggregate net worth. So add that 2.5% to the numerator and denominator. And note, as Michael Moore did, that it is very similar to the value of the Net Worth of the bottom 50% of us.
And it seems quite unnatural to tax wages, and sales, and corporate profits, and buildings at all before we've fully collected Natural Public Revenue.
Will Natural Public Revenue be sufficient to meet all the needs of all levels of government?
Quite possibly not, at least today when we are so reliant on a social safety net because current conditions have kept a significant share of our people from providing well for themselves. But I regard it as altogether possible that within a generation or two, it could be quite sufficient, in part because it would have the effect of redistributing some of the wealth which today is pouring into the pockets of a relative few of us.
How much of corporate profits are coming from (quite legal) privatization of the value of natural resources, the value of being able to get away with polluting air, water and soil, and the value of other privileges which corporations -- public and private -- are used to enjoying? One of the interesting findings in the SCF is that the value of privately held businesses [BUS] actually exceeds the value of publicly held ones [EQUITY] in household wealth -- and the value of both is highly concentrated:
Consider, too, how much more of this value the Forbes 400 have! These two categories represent 21.2% and 23.1% of aggregate net worth held by the rest of us -- a total of 44.3%. Most of the 2.5% is likely in these two categories. I'll leave the math to you.
.... this time because perhaps his targets are the well-situated, those in a position to contribute the funds which political campaigns need. Keep in mind that NYS's former governor, though previously an attorney general, is also the scion of a real estate fortune.
Urban real estate investors live off the fruit of the land, the fruits of the community's sowing, and we praise them as philanthropists when they toss us a few tulips in the median strips or parks.
And notice that the refusal continued even Harry Markopolis testified before a congressional committee about his repeated and data-filled attempts to bring Bernard Madoff's obvious Ponzi scheme to the attention of the SEC (January, 2009). Talk about tone-deafness on the part of those we pay to monitor things for us. As someone else recently wrote, small government or weak government? And government of, for and by WHICH people??
I hope some upstate legislators will push at this issue. Their constituents ought to expect it of them.
The writer is a Reuters columnist. The opinions expressed are his own.
By David Cay Johnston
(Reuters) - Each year New York State lets real estate investors evade at least $200 million of taxes. In peak years the figure likely rises to $700 million, if known tax cheating in another state is any indication. Some of the investors who cheat New York State also cheat New York City out of at least $40 million annually.
Back in the 1990s Jerry Curnutt figured out how to finger such cheats when he was the top partnership specialist at the Internal Revenue Service. Curnutt's computer sifted through tax returns until he learned how to separate thieves from honest taxpayers. The tax-evasion estimates of $200 million and $40 million are his.
Six New York state tax auditors took classes Curnutt taught in June 2000 and gave stellar evaluations. California's top tax auditor praised Curnutt's course as "effective, relevant and most importantly, appreciated and understood by our auditors."
Why has nothing been done for more than 11 years to make the cheats in New York pay what the law requires?
New York state and city are strapped for cash, slashing services for the poor, disabled and elderly. With penalties of up to 50 percent plus interest at penalty rates, the state is easily due more than $5 billion from years still open to collection, I calculate.
Every state has similar issues, but New York matters most as the epicenter of highly leveraged real estate investment pools.
Curnutt found that real estate investment partnerships with depreciated properties often misreport gains when they sell. That such cheating is widespread screams about tax law enforcement looking the other way when those at the top steal. In contrast, New York State has a well-deserved reputation for going after people whose mistakes cost the state as little as three dollars.
GO AWAY, THEY SAY
Yet in letter after letter since 2001, New York state tax officials told Curnutt to go away, smugly insisting there were no untaxed millions.
As head of audits for New York State, Thomas Heinz wrote Curnutt in 2003 that the state was "not interested in pursuing you or any other consultant on the matter" of systematic cheating by real estate partnership investors. Months later Heinz wrote a second letter that made it clear he had not understood what Curnutt was proposing, while reiterating that there were no untaxed millions to be found.
A year ago Curnutt again was told to go away because there was no money going untaxed.
And yet in Pennsylvania, Curnutt's research "resulted in the taxation of over $700 million in unreported income," the Pennsylvania Revenue Department wrote in a letter to tax administrators across the country in reference to a single instance.
"Without his assistance, our staff would have spent numerous hours getting to the crux of the issues, in that especially complex case," Pennsylvania tax authorities said.
Pennsylvania has relied on Curnutt since 2002, calculating that every dollar spent on his research and subsequent audits was worth $10 of tax.
So why are sightless sheriffs ignoring massive cheating by the most affluent among us?
The likely reason became clear nearly a decade ago when one Kentucky tax official told Curnutt that the governor's office did not want his services because it would uncover tax cheating by influential citizens, meaning campaign donors.
It is time for New York's three top state officials, all Democrats with higher ambitions, to do their duty, especially since the thieves are virtually certain to include some of their campaign contributors.
LAWMEN AND THEIR DUTY
Governor Andrew Cuomo, who harbors ambitions to be president, made his name as a state attorney general who appeared to get tough with Wall Street. Lieutenant Governor Bob Duffy rose from Rochester street cop to chief and would love to be governor. So would Attorney General Eric T. Schneiderman, elected in 2010 on a promise to be tough on white-collar crime.
Mayor Michael Bloomberg, an independent, has a similar duty to go after tax cheats even if these should turn out to include some of his friends.
New York law gives authorities leverage aplenty. The mere threat of public exposure through civil lawsuits would prompt many to write checks. For repeat offenders, the threat of indictment for tax evasion would produce checks even faster. Faced with the prospect of civil or criminal charges, many in positions of public trust would be ruined if their names got out.
The general partners -- those in charge in the partnerships Curnutt investigated -- took calculated steps to cheat and the most serious offenders should face indictment and, upon conviction, years of prison time. But many limited partners may have assumed their K-1 tax statements were reliable. Innocent victims owe taxes and interest, but not penalties. Those with multiple untaxed gains are not innocents.
As lawmen Cuomo, Duffy and Schneiderman all understand leverage. They have enough to lift billions into the state treasury where it belongs just by indicating in letters that failure to pay will result in disclosure of names. Will they?
Until Cuomo, Duffy, Schneiderman and Bloomberg enforce the law, their official inaction lends credence to billionaire Leona Helmsley's remark, quoted by her housekeeper, that "we don't pay taxes; only the little people pay taxes."
This column will keep you posted on whether these officials act or not. (Editing by Howard Goller)
I'm glad to see DCJ quoting Leona Helmsley -- but I don't think he yet fully "sees the cat" or realizes that Leona Helmsley's reference could just as accurately have been to tax STRUCTURES, not to tax evasion.
Buildings do not appreciate. Even with the best of care and occasional renovations, they depreciate, as technologies advance, efficiencies improve. What rises in value is land -- the location -- and it rises for reasons which have nothing to do with the individual or corporate landholder (resident or absentee), and everything to do with the community and with public investment in infrastructure and services. These owners are evading taxes which support that spending. In multiple ways, they are reaping what they do not -- cannot! -- sow. These companies are in it for the so-called "capital" gains, which aren't "capital" at all, but land gains.
Another example of the FIRE sector gobbling up the profits of the productive portions of our economy. Their "free lunch" is at the expense of the rest of us. And the phrase "rich people's useful idiots" comes to mind.
The goal is a fair field and no favor. But I don't think that's what this crowd is looking for.
This blog-like page contains an interesting economic indicator: despite a tepid economic environment for most home construction, the pace of teardowns in Westport, Fairfield County, Connecticut, seems to be steady to rising.
Westport sits on Long Island Sound, and has a reputation for excellent public schools and good express trains to midtown Manhattan. ($308 for a monthly pass -- 44 miles, about 67 minutes; $5 per day for day parking -- 300 spots -- but a 4 to 5 year wait for one of 1800 parking stickers -- $325/year.)
Many of the entries show recent transaction prices, which readers of this site will know are clearly simply for land value.
It would be interesting to know what the bank appraisals on these properties would show, in terms of the value of the houses and the value of the land itself -- assuming that the buyers needed to take out mortgages.
And it would also be interesting to know how Westport's assessor values these properties, and what adjustments take place in neighborhood land values as the evidence of most of the value being in the land accumulates.
And it turns out that Westport's assessments are online. So let's look at the newest teardown, posted 10/1/2011:
This was the aftermath of the demolition this week of 3 Great Marsh Road in the Saugatuck Shores across from the entrance to the Saugatuck Harbor Yacht Club, Built in 1934, the 1 1/2-story conventional-style house had 1,701 square feet, was situated on a 1.11-acre property and changed ownership in August 2011 for $1,136,174
The assessor's database shows an "appraised" value of $249,800 for the buildings, and $696,400 for the land, or a total of $946,200. (This is the supposed "market value" of the land at the date the valuation was done, October 1, 2010. By Connecticut law, assessed value is 70% of that market value. Peculiar law; one wonders whose interests it was designed to serve.)
The Assessor’s primary responsibility is to find the “full and fair cash value” of your property so that the taxpayer may pay only his/her fair share of taxes.
The record also shows that the property sold in August 2010 for $1,000,000. The previous transaction was in 1973, which suggests that it might have been an estate situation. But 14% appreciation in 12 months is pretty sweet these days.
So that 1.11 acres sold for $1,136,174 in August, 2011, and then the buyer paid an additional amount for the removal of the 1700 square foot building -- say, $10 psf? That's $17,000, for a total of about $1,150,000. And the assessor says the land is worth $$696,400.
And that $250,000 square foot house? Over valued by quite a bit.
The 2010 tax rate for Westport was $14.85 per $1000 of value. (I couldn't find the 2011 figure, but it was expected to be 15% higher.) That's based on the 70% value, which for this property was $662,400. So the 2010 property tax was $10,300.
$10,300 as a percentage of the transaction price, $1,136,174, is 0.91%.
Clearly the town is well run, and people want to live there. They're willing to pay $1.1 million for a lot. And even in these times, financially difficult for many people, there are people who can afford to pay $1.1 million and more for a bit of land on which to live.
How much of the value of these lots comes from excellent schools and good municipal services, and how much from the existence of Metro North, of I-95 and the Merritt Parkway, the presence of Long Island Sound, and the presence of NYC? And how much comes from the presence of hedge funds and other high-paying employers which are skimming the cream from the productive economy and pocketing that value, because we let them do so?