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?
THREE thousand years of advance, and still the moan goes up, "They have made our lives bitter with hard bondage, in mortar and in brick, and in all manner of service!" Three thousand years of advance! and the piteous voices of little children are in the moan. We progress and we progress; we girdle continents with iron roads and knit cities together with the mesh of telegraph wires; each day brings some new invention; each year marks a fresh advance — the power of production increased, and the avenues of exchange cleared and broadened. Yet the complaint of "hard times" is louder and louder; everywhere are men harassed by care, and haunted by the fear of want. With swift, steady strides and prodigious leaps, the power of human hands to satisfy human wants advances and advances, is multiplied and multiplied. Yet the struggle for mere existence is more and more intense, and human labor is becoming the cheapest of commodities. Beside glutted warehouses human beings grow faint with hunger and shiver with cold; under the shadow of churches festers the vice that is born of wants.
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.)
It is not proposed to confiscate any value that has been created by human industry. This would be robbery. But when the community creates wealth it is entitled to it as much as the individual is to the wealth he creates.
-- from the first issue of The Standard, 1/8/1887.
The post below this one, "Mitt Romney's 'Fair Share' " refers to his fair share of the costs of providing public goods.
But perhaps an equally important question is the nature of one's fair share of the output of our economy and the output of the earth. Some of the former output is the result of individual efforts, and one ought to be able to keep that portion. But at the same time we must recognize how much comes from the division of labor, from drawing down on the non-infinite supply of non-renewable natural resources on which all of us today must depend and on which future generations of human beings must rely. Those who draw down more than their legitimate share owe something to the rest of the community. Our wealthiest tend, we suspect, to use many, many times their legitimate share, and the median American likely draws far more than their share, when one considers the planet as a whole.
Perhaps "legitimate" is not the right word here. It refers to what is permissible under current law. (The word gets misused a lot -- see the discussion on "legitimate rape," which seemed to be about the circumstances under which a woman has a right to make a specific very personal, decision, and when it is considered by some to not be left to her and is the province of government, legislators or others.)
What is one's "fair share" of natural resources? America is using a hugely disproportionate share of the world's resources. Are we entitled to it because we're somehow "exceptional"? Because "our" God is somehow better than other nation's Gods? Or do we genuinely believe that all people are created equal, and intend to live our lives accordingly?
Our output of greenhouse gases exceeds our share of the world's population. This is not without consequences for the world, and for peace on earth.
We ought to be re-examining our incentives so that they move us in the direction we ought to be going, which is, to my mind, using less. We can build transportation infrastructure which will permit many more of us to move around with less impact on the environment. We can fund that through collecting the increases in land value that infrastructure creates. We can correct the incentives which cause us to use today's inferior technologies to extract natural resources from the earth in ways which damage the environment, as if ours was the final generation, or the only one worth serious consideration.
Better incentives could reduce, eliminate, even reverse urban sprawl. I refer specifically to land value taxation as a replacement for the existing property tax, particularly in places where assessments are for one reason or another not consistent with current property values -- e.g., California and Florida, parts of Delaware and Pennsylvania which currently use assessments from the 1970s, and many other places where assessments are simply out of whack with current reality!) We should be replacing sales taxes, wage taxes, building taxes with taxes on land value and on natural resources. Most of that value is flowing generously into private or corporate pockets, to our detriment. It concentrates wealth, income, and, of course, political power.
Collecting the rent, instead of leaving the lion's share of it to be pocketed by the rent-seekers, would go a long way to making our society and our economy healthier. Eliminating the privilege of privatizing that which in a wisely designed society would be our common treasure would make our society a better place in which to live, a place in which all could thrive and prosper without victimizing their fellow human beings.
A major theme of the underlying political debate in the United States is the role of the state and the need for collective action. The private sector, while central in a modern economy, cannot ensure its success alone. For example, the financial crisis that began in 2008 demonstrated the need for adequate regulation.
Moreover, beyond effective regulation (including ensuring a level playing field for competition), modern economies are founded on technological innovation, which in turn presupposes basic research funded by government. This is an example of a public good – things from which we all benefit, but that would be undersupplied (or not supplied at all) were we to rely on the private sector.
Conservative politicians in the US underestimate the importance of publicly provided education, technology, and infrastructure. Economies in which government provides these public goods perform far better than those in which it does not.
But public goods must be paid for, and it is imperative that everyone pays their fair share. While there may be disagreement about what that entails, those at the top of the income distribution who pay 15% of their reported income (money accruing in tax shelters in the Cayman Islands and other tax havens may not be reported to US authorities) clearly are not paying their fair share. ...
I have to disagree with the second sentence of this next paragraph. And I think Stiglitz knows better, if he stops to think about it:
Democracies rely on a spirit of trust and cooperation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme. Both alternatives are unacceptable.
We don't need intrusive or coercive; we just need to start collecting the lion's share of the rent! Well, I suppose some rent-seekers would find this extremely intrusive -- it intrudes on their habit of self-enrichment by privatizing of what is rightly and logically our PUBLIC treasure, the logical way of financing PUBLIC goods. And Professor Stiglitz is quite aware of the value of natural resources; he may not be quite as conscious of the value of urban and other well-situated land.
Our national recordkeeping doesn't even collect the valuations of land and natural resources on any consistent basis! (One could reasonably argue that this failure-to-measure is a form of corruption!) What we don't measure we can't do anything about. And the powers that be are quite content with how we do things; the benefits accrue to them! And several generations of college-educated people know nothing about the issue, which was well known and widely discussed 100 years ago. (Look into the extensive Single Tax literature and the ideas of Henry George.)
Some more excerpts:
The billionaire investor Warren Buffett argues that he should pay only the taxes that he must, but that there is something fundamentally wrong with a system that taxes his income at a lower rate than his secretary is required to pay. He is right. Romney might be forgiven were he to take a similar position. Indeed, it might be a Nixon-in-China moment: a wealthy politician at the pinnacle of power advocating higher taxes for the rich could change the course of history.
But Romney has not chosen to do so. He evidently does not recognize that a system that taxes speculation at a lower rate than hard work distorts the economy. Indeed, much of the money that accrues to those at the top is what economists call rents, which arise not from increasing the size of the economic pie, but from grabbing a larger slice of the existing pie.
Those at the top include a disproportionate number of monopolists who increase their income by restricting production and engaging in anti-competitive practices; CEOs who exploit deficiencies in corporate-governance laws to grab a larger share of corporate revenues for themselves (leaving less for workers); and bankers who have engaged in predatory lending and abusive credit-card practices (often targeting poor and middle-class households). It is perhaps no accident that rent-seeking and inequality have increased as top tax rates have fallen, regulations have been eviscerated, and enforcement of existing rules has been weakened: the opportunity and returns from rent-seeking have increased.
Today, a deficiency of aggregate demand afflicts almost all advanced countries, leading to high unemployment, lower wages, greater inequality, and – coming full, vicious circle – constrained consumption. There is now a growing recognition of the link between inequality and economic instability and weakness.
There is another vicious circle: Economic inequality translates into political inequality, which in turn reinforces the former, including through a tax system that allows people like Romney – who insists that he has been subject to an income-tax rate of “at least 13%” for the last ten years – not to pay their fair share. The resulting economic inequality – a result of politics as much as market forces – contributes to today’s overall economic weakness.
A bale of cloth, a machine, a house, owes its value to the labor expended upon it, and belongs to the person who expends or employs the labor; a piece of land owes its value, so far as its value is affected by the causes I am now considering, not to the labor expended on it, but to that expended upon something else — to the labor expended in making a railroad or building houses in an adjoining town. . . . How many landlords have their rent rolls doubled, by railways made in their despite!
— PROF. J. E. CAIRNES, Essays in Political Economy (1870), VI., p. 193.
It is certain, however, that a large part of the improvement is due to the increasing value of advantageous sites, an unearned increase of value such as Mr. Mill speaks of, and therefore a kind of profit which the State may restrict with least harm.
— ROBERT GIFFEN, Essays in Finance, 1st Series (1871), Chap. X., p. 244.
The rise in value which the industry of others providentially gives to the land of the wise and good.
— W. D. HOWELLS, A Hazard of New Fortunes, Part IV., Chap. 3.
This quote is attributed to the Irish landlords, in an 1835 piece by Thomas Ainge Devyr entitled "Natural Rights: A Pamphlet for the People."
The statement bears thinking about: when private landlords collect high rents, they force their tenants to work quite hard -- keep in mind that they still have to pay taxes on various things in order to support local spending -- while the landlord has provided them NOTHING that he has made (and nothing he has bought from the fellow who made it, either).
But at the same time, it is worth considering what happens when the community collects reasonably high rents on the land, particularly urban land. When the community collects high rent, there are no vacant lots. There are relatively few underused lots. There is housing for all who want it. All this economic activity creates jobs -- for those who would design, those who would build, those who would maintain, those who would improve, those who would expand, those who would protect. All those workers' needs and spending create more jobs. Wages rise, as jobs chase workers.
So the phrase is not simply an 18th century rural one, but highly relevant in 21st century U.S. cities, towns and rural areas. When the community collects the land rent and recycles it to serve local needs -- schools, parks, well-maintained roads, public transportation systems, police, ambulance, fire protection, courts -- communities become good places to live. When we permit private landlords (be they individual or corporate, universities or trusts) to pocket those funds -- and perhaps "invest" the excess in acquiring more land on which to pocket the rent, those good things, if they happen at all, must be financed by high taxes on productive activity.
One is a virtuous circle; the other a vicious one. Which one is consistent with our ideals? If Life, Liberty and the Pursuit of Happiness are for ALL of us, then I think we have to opt for the virtuous circle.
40. Studies have confirmed the common wisdom that people who live in cities do more walking than those who live in suburban and rural areas, and tend to be in better shape. What economic policies might help promote the kind of density that will encourage the development of affordable housing -- for people all across the income spectrum -- near the centers of activity?
A. Land value taxation, which will cause urban landholders to put their underused land to better use, replacing vacant lots and obsolete buildings with taller modern buildings, approaching the highest and best use for that land.
B. Land value taxation, which will capture the increases in value that are the result of public investment in new transportation systems: subway stops, bus stops, etc., instead of leaving it to raise the selling price of sites served.
C. Land value taxation, which produces the kind of density that makes public transportation systems feasible.
D. Land value taxation, which will allow people who would like to live closer to their work to afford housing there
E. LVT, which will bring down the selling price of land -- without reducing its value at all -- to make it appealing to developers who can put it to use
F. LVT, which will allow people to afford housing with smaller and shorter mortgages to live where they want to live.
35. He worked hard. He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high lease prices for generations. Is it right to exact an estate tax of 50% or so on the true market value of that estate?
A. No! Widows and orphans must be protected! We wouldn't want them to have to depend on the social safety net.
B. No! The dollars he spent to buy that land decades ago were already subject to an income tax -- maybe two (federal and state) -- and the heirs are entitled to keep all the increase from the purchase price, even if that is a 20% increase, or a 200% increase, or a 2000% increase, over the purchase price.
C. No! The man had foresight, and we ought to honor, reward and encourage that!
D. No! The interstate highway could have been re-routed, and the man and his widow and children could have been left high and dry. They took a risk, and we ought to reward them for their brilliance!
E. An estate tax is a good way to capture this socially-created windfall once per generation. After all, he can't take it with him. Half for the heirs, half for the community that created the value. Seems fair, and keeps them out of the social safety net.
F. An estate tax is better than nothing, but it is a poor alternative to collecting some significant portion of the rental value of the land, month in and month out, whether that rental value be low (before the interstate highway's route is determined) or high (after it is announced and built, and the community grows up around that highway).
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.
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?
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.
20. What is the best way to insure that affordable housing -- for people of all ages and stages, all income levels -- is available, both for ownership and for rental, both near the center of activities and, if needed after the desire for housing near the center of activities is satisfied, on the fringes?
B. Community Land Trusts
C. Affordable Housing Regulations that require that for every 10 new condos built, 1 must be affordable to people earning less than the local median household income
D. Rent control
G. Habitat for Humanity
H. Relaxed mortgage lending rules and more private mortgage insurance
I. Land value taxation, to encourage the redevelopment of underused sites near the center of things
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.
13. Electric utilities have long been regarded as "widows' and orphans'" stocks. Safe, if not high income. A few years ago, they were deregulated. A recent study has shown that retail electricity prices have increased faster in states that adopted competitive pricing than in those where rates continue to be set by government agencies. We all need reliable electricity. Should we permit the licenses to generate and distribute electricity to be an opportunity to make a windfall profit? (Or should we encourage municipal ownership of vital utilities?)
A. Sure! People and businesses are quite free to move from states without regulation to states with regulation if they choose. They may not mind paying 20% more for their electricity, if other conditions are good. And didn't the utilities earn it?
B. Sure. If local regulatory agencies decide that local best interests conflict with the interests of the corporate shareholders, they can re-regulate. After all, the corporations don't vote.
C. No. Electricity is important and we ought to do what we can to keep the price down so that poor people can afford electricity and still have funds for other costs of living.
D. No. Electricity is vital to the economy, and we ought to do what we can to keep it affordable to ordinary people, and not a source of corporate windfalls.
E. No. Natural monopolies ought to be publicly owned, the prices kept low, and any excess revenue accrue to the public treasury, not to the benefit of private investors.
11. Foreign corporations and governments are seeking to buy some of our ports from the American corporations that own them. Large shares of the goods we consume come through these ports, and the ports set the price that the shippers pay for access to the ports. The possibility of weapons, invasive species, etc., entering the US through these ports is frightening. Ports are unique locations, on sheltered waterfronts, served by elaborate rail and highway systems. Is foreign ownership acceptable?
A. Sure! No problem! The costs to shippers are the same whether the owners are American or foreign!
B. Sure! No problem! These corporations have long term contracts with the local Port Authorities, and the PAs are smart bargainers who make sure that they collect the economic value of these unique sites from whoever has the contracts or owns the ports, for the entire term of the contract.
C. It is acceptable for foreign corporations to "own" the ports, but they must pay into the US treasury the economic value of the site. They must not be permitted to privatize what is rightly common property.
D. It is not acceptable for foreign corporations to own the ports, but okay for US companies to privatize that value.
E. We ought to be collecting the annual rental value of the site itself, month in and month out, as our common treasure. It shouldn't be privatized by anyone.
One might be led to wonder how our Senators and Congressmen increase their wealth during a period of their lives where they're being paid $200,000 a year and most maintain two homes, one in Washington and another in their home district. (A few sleep in their congressional offices, showering at the gym, and some rent inexpensive rooms at lovely mansions maintained by various special interest groups, in order to conserve funds -- read Sharlet, Jr., on this one.)
One wonders why a wealthy person will spend $10 million or $20 million or more of their own funds in an attempt to be elected to a job which pays $200,000 a year -- plus lifetime medical care and a few other goodies.
Part of the answer came a few weeks ago, when we learned that insider trading laws do not apply to Congress.
Interestingly, I think Land Value Taxation might largely "defang" this problem. Were we to be collecting the lion's share of the annual (monthly) value of all the sites in the U.S., we might begin to get some of the money out of politics. This is natural public revenue, and today we let individuals and corporations keep it for themselves, to our detriment \.
We all know the old saw -- the three most important things about choosing real estate are ... location, location and location! We're so used to hearing it that we don't stop to think about its larger implications -- and particularly its implications for public revenue.
Those who are thinking about buying a home as an investment may hear a related piece of advice: buy the worst house in the best neighborhood. You can't change the neighborhood, much (the infrastructure and schools which serve it are relatively fixed, in the short-term at least), but you can improve or replace that old house, at your leisure, or sell the land to someone who will, at a profit.
This article, from a California residential real estate agent, summarizes "location cubed":
Location, Location, Location is an adage you will hear over and over.
It's like the real estate agents' mantra: location, location, location. You've certainly heard the phrase enough and may wonder what possesses agents to say it three times. Or you might think it pertains to three different types of locations -- perhaps an excellent location, a mediocre location and a lousy location.
I'll put your mind at ease. It means identical homes can increase or decrease in value due to location. It's repeated three times for emphasis, and so you will remember the phrase. It's the number one rule in real estate, and it's often the most overlooked rule.
The Epitome of Location, Location, Location
You can buy the right home in the wrong location. You can change the structure, remodel it or alter the home's layout but, ordinarily, you cannot move it. It's attached to the land. The best locations are those in prime spots such as:
Within Top-Rated School Districts Home buyers with children are concerned about their children's education and often will pay more for a home that is located in a highly desirable school district.
Close to Outdoor Recreation and Nature Homes abutting the ocean, rivers, lakes or parks will hold their value because of the location, providing they are not in the path of a possible natural hazard. People want to be near water or visually appealing settings.
Homes with a View Some homes sell quickly and for top dollar because they provide sweeping panoramic views of the city at night, but even a small glimpse of the ocean out one window is enough to substantiate a good location. Other sought-after views include mountains, greenbelts or golf courses.
Near Entertainment and Shopping In many cities, you will find homes that are located within walking distance of movie theaters, restaurants and boutiques are more expensive than those located further outside of town. Many people would rather not drive if they can walk to nightlife.
In Conforming Areas People tend to gravitate toward others who share similar values and their homes reflect it. Home buyers mostly prefer to be surrounded by similar types of properties in age and construction, where people just like them reside.
In Economically Stable Neighborhoods Neighborhoods that stood the test of time and weathered economic downfalls are more likely to attract buyers who want to maintain value in their homes. These are people who expect pride of ownership to be evident.
Near Public Transportation, Health Care and Jobs Most people do not want to endure long commutes to work, the doctor's office nor the airport. They prefer to be located close to emergency services and conveniences, so naturally homes in locations that shorten travel time are more desirable.
In the Center of the Block. I prefer corner locations, but most home buyers want to be in the middle of the block. I suppose they feel less vulnerable with neighbors around them, but they definitely enjoy less traffic.
It's almost easier to talk about what constitutes a bad location than to discuss good locations. That's because the qualities that make a good location desirable can vary, depending on whether you're looking in the city, the country or the mountains. Bad locations, by their general nature, are easier to pinpoint:
Next to Commercial / Industrial Unless you live downtown, commercial buildings on your block will diminish value. Part of the reason is because home owners cannot control those who loiter in front of their home. Homes next to gas stations or shopping centers are undesirable because of the noise factor, and nobody really wants to listen to truck engines idling at night or during early morning hours.
Near Railroad Tracks, Freeways or Under Flight Paths When I take the El through Chicago, I often wonder how city dwellers with homes right on the railroad line put up with the rumbling and racket. I've also owned a home under a flight path and moved within a year. The noise was so loud I couldn't hear a caller on the phone, much less sleep in on the weekends.
In Crime Ridden Neighborhoods People want to feel safe. If your neighbor covers the windows with sheets instead of regular window coverings, and you hear cars coming and going at midnight, you might be living next door to a drug house, especially if the flashing lights of police cars are readily visible at any given time.
Economically Depressed Areas If your neighbors show zero pride of ownership in maintaining their homes, evidenced by lack of maintenance, poor landscaping or you spot discarded mattresses, junk car parts or old appliances lying in the yards, you might want to think twice about moving into such an area. On the other hand, some areas like this are on the edge of development and going through rehabilitation. But you're taking your chances.
Close to Hazards Name me one person who wants to live next door to a nuclear power plant, and I'll show you a mutant moron. Few home buyers want a transformer in their yard, either. If the neighborhood was built on a landfill or was recently swampland, nix it. Always order a natural hazard report when buying a home.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
"Identical homes can increase or decrease in value due to location." While construction costs vary remarkably little from city to city (explore the geographical variance chart at saylor.com, on which, if memory serves, costs range from 74% to 106% of the Los Angeles metro costs on which the rest of their costs are based), while the price of a building lot can vary from $20,000 to $1,000,000 or more, depending on its location. (And the $20,000 one is probably a good deal larger than the $1,000,000 one, and with fewer constraints imposed by the local community.) A well-maintained 30-year-old 4BR, 2.5bath builder's colonial of, say, 2500 square feet can sell for $125,000 to $1,300,000 or more depending on the local land values.
Harvard Law School professor Elizabeth Warren, some years ago, co-authored a wise book entitled "The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke." She recognized that a part of it related to chasing houses in school districts where they felt their children could receive a solid education. I don't think she saw the larger implications of this truth.
How to Bring The Cost of Housing Back within Reach of All American Families C. Lowell Harriss, et al. [A pamphlet published by the Robert Schalkenbach Foundation, 1978]
Introduction by Dr. C. Lowell Harriss, Professor of Economics, Columbia University
1. Land Supply Constraints in the United States Excerpt from the Final Report of the Task Force on Housing Costs, William J. White, Chairman
2. The High Price of Land by P. I. Prentice, Chairman, National Council for Property Tax Reform
3. Modernize, Don't Abolish, the Property Tax From a report by the Subcommittee on the City of the House Committee on Banking, Finance, and Urban Affairs of the U. S. House of Representatives, Rep. Henry S. Reuss, Wisconsin, Chairman
Introduction by Dr. C. Lowell Harriss
The number of Americans who lack adequate housing is much too high. While both opportunity and promise life in the long-established principle of providing satisfactory shelter for everyone, many are still not well housed. Population grows, and the existing stock of housing grows older. For years to come, much new construction, expansion, and modernization will be needed.
Rapidly rising costs, however, present formidable obstacles. One of the heaviest costs is one which also rises most rapidly. And it is the cost of something created not by sweat and thrift, but by nature.
It is land.
The rising prices paid for land itself must be distinguished from the portion of the price of a building site which represents cost of preparation for use. The land elements alone go up and up in price. But land price increases do not change the quantity of land in existence. Here is a rising price which does not add to supply.
Land is different.
In these three articles on land value taxation, the first, "Land Supply Constraints in the United States," points out that the sharp rises in land prices result in part from man-made factors. Arbitrary, artificial, and unconstructive restrictions on land supply boost prices and threaten our housing future. New building will therefore be kept below levels which unfettered economic conditions would otherwise achieve. But tax policy which would encourage use, rather than underuse and withholding of land can increase the effective supply. Need more be said?
Yes. And in the second selection, "The High Price of Land," Mr. Prentice says more. He points to many avenues by which the harmful effects of restricted land supply spread through the economy. Developers and builders, laborers, supplier, subcontractors, and others all suffer. They have less work, operate under conditions of disadvantage, and receive poorer rewards because of essentially needless obstructions to the optimum use of land. The full and true price of land includes burdens above and beyond the dollar prices of building lots. We shoulder burdens of lost opportunity of many kinds. They are largely hidden but indeed real. The quality of too much new construction deteriorates instead of improving as an advancing society should expect. And, to repeat, the tragedy is that the rising prices for land do not create an more surface on the earth.
What to do? The third article, "Modernize, Don't Abolish, The Property Tax," points to the reform outlined generations ago but here presented in modern form: reduce the property tax burdens on structures and make up the revenue by higher tax rates on land value.
The benefits from relying more fully on taxation of land values, rather than taxation of buildings, would include greater pressure on landowners to put land to better use. Withholding land -- which reduces the current effective supply -- would become more costly if land value taxes were higher. Thus some land formerly held for speculation would be sold, and new building would be encouraged on the increased supply of land.
A careful study of probable results in Washington, D. C., showed, among other things, that taxes on present homeowners would generally fall. But this result is not the one which most justifies support for reform. More significant and constructive would be a combination of forces producing incentives for better land use. Upgrading of housing in older urban centers would be expected. Positive incentives at many points would contribute to improving America's housing.
2. Some of our busiest airports do not have sufficient runways, landing slots at preferred times, gates, tarmac, etc., to meet demand. Flights end up circling and arriving late, producing cascading delays for passengers across the country. Many airports are constrained by surrounding communities not to expand their acreage. It takes time to build a new airport further from the city, and is expensive to add the transportation infrastructure to serve it. How should scarce resources at existing busy airports be allocated?
a. The airlines who currently own a gate ought to be able to sell it off to the highest bidder, or rent it for whatever they can charge their competitor.
b. Landing rights ought to be sold once and for all to the highest bidder. When they no longer want them, or can no longer use them profitably, those rights should be theirs to auction off at whatever price they can get, even if it is double or triple -- or more -- what they initially paid.
c. Leases for landing rights at peak hours should be auctioned off, with a term of a few years, and the revenue should first support airport costs and air-traffic control expenses. Should there be an excess, it should not be returned to the leaseholders: it belongs to the community at large and should go into general revenue.
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.
"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.
I found this article in my grandparents' files. It comes from about 1962. Still seems timely.
Land Speculation, and How to Stop It
Too much valuable land in this country is tied up by speculators who merely sit on it and wait for an easy profit. This is economically unhealthy, nonproductive - and readily cured.
A Springboard for Discussion An editorial review by Wolfgang Langewiesche
The home building industry faces a crisis: in many areas it can no longer buy land at a price that makes building profitable. This is the conclusion of House & Home, in a special issue on which this article is based. House & Home, a Time Inc. publication, has examined the problem of land prices in terms of the housing industry, but it is a problem that touches every one of us, whether we rent or own or want to own. As the magazine points out, "A cutback in homebuilding throws more men out of work than a like cutback in autos, or steel, or oil."
Here are the key reasons behind high land prices, plus an examination of the radical remedy which House & Home proposes.
ON LONG ISLAND, builders are paying $16,000 and more for raw acreage they could have bought for $3500 in 1950. In San Francisco a builder paid $580,000 for a tract that was offered for $15,000 in 1948. North of Albuquerque a builder paid almost $1000 an acre for land that sold 10 years ago for $4 an acre. Since 1950, while building-material prices have climbed 21% and wages 68%, land prices have risen 100% in many areas, as much as 4000% in others!
These figures might give the impression that we are running out of land. But there is plenty of vacant and under-used land left close to our cities, even inside them. It is merely being held out of use, or kept in under-use, by speculators who are holding out for absurd prices.
For example: in 1961 only about 40% of the "suitable" land in the 22 counties of the New York metropolitan area was developed for "urban" use. The 6,500,000 people of greater Chicago use only one sixth of the land within the metropolitan boundaries. In Indianapolis, a special study by House & Home inside the city limits showed nearly seven square miles of level land, zoned for homes -- unused! Right around the city (well inside the present far-sprawling suburbia) are some 125 square miles suitable for housing -- enough, at the present growth rate, to accommodate the needs of Indianapolis for the next 35 years!
Operation Leapfrog. So the land is there. But speculators have it, and are holding out on us. The result is that developers have to leapfrog the closer-in, too-expensive land, and go well out in the country to find land cheap enough to build on. Then prices rise there, and further development has to leapfrog again and go still farther out. The result: suburban sprawl; millions of miles of wasted driving, at eight cents a mile, between home and work; extra highways at $500,000 a mile.
Speculation by the "investors" who buy 20 acres or 2000 acres outside of town and won't sell until they can triple their money, takes land out of the market. And when it is finally sold, much still has to be done to get it ready for building roads, schools, zoning, sewers, etc. -- and it takes years. This further strengthens the impression that land is scarce.
Room to Grow. But the land is there, and cities don't have to sprawl. Suppose, House & Home points out, you have a built-up city, more or less round, with the outskirts eight miles from the center. Suppose now you extend streets, bus lines, water and sewers outward by one mile -- putting the outskirts nine miles from the center. Well, in that one-mile addition all around, there will be space for 400,000 people in single houses at four families per acre. So why go 30 miles out?
Cities could even grow inward. There is lots of space downtown and right around it; we don't see it because much of it is covered by old buildings -- low-cost buildings known as "taxpayers": warehouses, decrepit factories and slums. In downtown Fort Worth the underused or derelict land had space for: a belt highway; parking garages for 60,000 cars; a 300% increase in office space; a new civic center; a convention hall-all that, and "green belts" too!
House & Home says that the land now being held speculatively far exceeds any possible demand for building land for generations to come. A lot of speculators are going to be left out in the cold! But, meanwhile, some of the blocked-out land is very much in our way.
Tax the Land. And how can we pry this land loose? House & Home says: Tax it loose.
It's not how much we tax, but how we tax. Most cities now tax land and buildings at the same rate. This is wrong. We should tax the land more heavily, the "improvements" more lightly or not at all.
The average homeowner might even be better off. He would save on house tax what he'd pay extra in land tax. The town treasury would come out even: the total tax take would be the same. But the system would radically change the climate in which our cities grow and sprawl.
The way it is now, it costs almost nothing to hold land as speculation. Taxes on it are low. As a matter of fact, a lot is usually assessed lower while vacant than the same lot is after it has a building on it! If land were heavily taxed and buildings lightly taxed, the owner of vacant land would find it less attractive to hold onto. Taxes year-by-year would eat too much of the profit he hopes for in the end; and taxes would be sure, the profits not. So he would be far more likely to put his land on the market, and at a price at which it would move.
Or perhaps he would use the vacant lot himself. For instance, instead of renting it out as a parking lot, he might build a ten-story parking-garage on it. He would not be penalized for building it by having to pay more tax; we would have ten times as much parking space!
Do Nothing. To make such taxation by cities effective, some federal tax regulations would also have to change. If you just own land and finally sell it, your profits are capital gains, taxed low. But if you do anything to your land, such as subdividing, building roads -- then your profits are "income" and are taxed twice as high or even higher. So, the smart man will sit on land like a bump on a log. And the only one who can afford to buy it from him is a rich man who will do the same!
The very idea of taxing "improvements" is a paradox -- just to say it slowly makes you stop and think. It's strange. That stern old Uncle in Washington seems to favor speculation, idleness and waste, and to penalize enterprise and creativity. Local real-estate taxes are deductible for federal income-tax purposes. This means the rich land speculator in the 75% income-tax bracket can deduct 75% of his land tax from his income tax.
Taxing the land, un-taxing the building, would also clear slums, House & Home claims. Slums are largely tax-made. The ratty old buildings are taxed low; so is the high-value land underneath. The "slumlord" is best off by leaving his slum a slum. Even if he merely did decent maintenance, his taxes would go up! Anyway, his real objective is to sell the underlying land someday at a big, low-taxed capital gain. In the end, because the rundown downtown neighborhood doesn't "renew" itself, it is bought up for "urban renewal" by the federal government, then resold to "re-developers" at about one third the cost. We taxpayers get hit for the difference.
The Power to Build. If land were more heavily taxed and buildings more lightly, the slumlord's situation would be reversed. He would no longer get a tax break from his ratty buildings; all buildings, ratty or not, would be tax-cheap. He would no longer find it tax-cheap to hold his high-value land for future gains; he would have to sell, to someone who would put up good buildings. Thus, by taxing land we could actually tax slums out of existence! The power to tax could be the power to build.
The idea is old. It has been tried and found to work. Pittsburgh taxes land value at twice the rate of building value. Pittsburgh is the example of an American city that has revitalized itself, especially downtown. In Brisbane, Australia, buildings are tax-free, while land value is taxed up to 10% per year. That's enough to make it unattractive to hold land you are not using; it keeps land available and keeps land prices down. There are no slums as we know them. In Denmark, increases in land value are taxed so high that they are practically confiscated. You can't make money by land speculation in Denmark, so you don't try.
House & Home does not mention the most successful use of the land-value tax. This is in California, in connection with irrigation; it started about 1880, but it's still going. An irrigation district is formed; and a stiff tax (used to finance the building of dams and canals and bring water) is laid upon all land in the district, while buildings and crops are totally exempt.
This tax broke a speculative blockage much like the one that now troubles our cities. Before the tax, it had been more profitable to hold irrigable land as speculation than to irrigate it and grow crops. The land was held in big blocs, and farmers could not find farm-size parcels to buy at prices that made economic sense. There was water, and there was land; the two did not get together!
Then came the land-value tax. The tax made it expensive to hold irrigable land idle, or to under-use it it as cattle range. Farmland appeared on the market, in small acreages, at economic prices. Farmers came, water started to flow and crops grew. The whole of California's immense irrigation agriculture stems from this one application of the land tax.
A LONG TIME ago, House & Home notes, young Winston Churchill put the case for the land tax succinctly. In a thundering speech he made in 1909 in Edinburgh, when he was president of the Board of Trade, he described "the landlord who happens to own a lot of land on the outskirts of a big city, who watches the busy population around him making the city larger, richer, more convenient every day, and all the while he sits still and does nothing. Roads are made, services are improved, electric light turns night into day, water is brought from reservoirs hundreds of miles off in the mountains-and all the while the landlord sits still. While the land is what is called 'ripening,' the artisan going to his work must detour or pay a fare to avoid it" -- just our present trouble.
Finally, the land having risen 20 or 50 times in value, Churchill's landlord sells. What is the moral difference, Churchill asked, between the land speculator's activities and those of the man who buys and sells, for instance, old masters?
Churchill: "Pictures do not get in anybody's way."
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.
This comes from The San Jose Letter, July 11, 1896. It speaks to a couple things of interest today: changes in buying power; public-sector employment vs private-sector; the value of good infrastructure in making life/business easier. As noted in an earlier post, "road" in this era is likely to be a reference to railroads, not a paved highway. Today, a well-designed, well-paved highway will use less fuel and do less damage to one's car or truck, not to mention get one to one's destination faster.
SQUANDERED PUBLIC MONEY.
Why will men, as soon as elected to office, commence to squander the public money? Why cannot these chosen officers transact business for the county just as they would for themselves? Twenty-one years ago the supervisors of Santa Clara county allowed $2 for a day's work on the road. This was not materially different from the common wages of the day. Road work is reduced to 8 hours per day, while field work remains at 10. In parts of the country the pay for field work is reduced to one-half what it was, while road work remains unchanged except in time. In good old times the road worker got 20 cents per hour; in these pinching times he gets 25 cents. This 25 cents will purchase from two to three times as much food and raiment as the 20 cents would 15 years ago. Right here the taxpayer is pinched. Ten years ago two pounds of prunes would pay for an hour's work on the road; now it takes five pounds of the best prunes to pay for the same time. Only a very few of the favored ones can get work on the road. For the same wages almost any man had rather work 8 hours on the road than 10 hours in the field.
If the supervisors would hire labor as others hire it, they would be able, with the same amount of money, to double their force on the road. Hundreds of men would delight to get this work, even at the reduced rates. Our roads are good, yet they are not what they might be. No team can take a good load from here to Los Gatos without almost pulling the life out of them. With the amount of money now spent every hill could be leveled and every low place filled.
I alternately find it amusing and very sad that commentators reason from such observations to "gee, there's nothing wrong with our structures! It is just a law of nature!"
No! We've set things up so that a relative few benefit greatly from the value of natural resources, and another (likely overlapping) group* benefit greatly from the results of federal, state and local spending on infrastructure and services, and then we consider it a "mathematical law" that 1% of us get such a large share of the pie!
*I refer to the owners of urban and suburban land, well-served by infrastructure and a myriad of services, many of whom make more from land value increases than they do from their labor. An acre of Manhattan land can be worth 50,000 times what an acre of ordinary agricultural land is worth -- and its owner didn't contribute any more than anyone else to that value! Great fortunes are based on such "activity."
And rich people's useful idiots bless such analyses and give them a gloss of "scholarship."
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 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 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?
In my inbox this morning, a blast-from-the-past from Mason Gaffney, one of the most respected Georgists and a wonderful writer. Unlike many of us, he came to these ideas as a young person, having read Henry George while still in high school.
Mase's cover note: It was November 1942. I had just turned 19, and received Greetings from Uncle Sam. Funny how fast one catches on, with the evidence lying outdoors all around you; and funny how southern California today replicates Chicagoland in 1942. Funny, too, how economics profs had their ways of signaling you that looking into land speculation was, well, just not done in elite circles. How little progress we have made since then in understanding and coping with this phenomenon and its derivative ills.
Taking the Professor for a Ride The Freeman, November, 1942
The writer of this article, MASON GAFFNEY, is a young Chicago Georgist who recently matriculated at Harvard. Perusal of the piece suggests that Freshman Gaffney's chances of becoming teacher's pet in the economics class are decidedly slim.
UNRUFFLED, composed, like a patient father straightening out a wayward son, he said, "You see, my boy, this Henry George lived at a time when the country was growing rapidly, when land values were skyrocketing and great fortunes were being made from speculation. Not being a 'trained economist,' George attached disproportionate importance to this . . . er . . . er . . . land question. Land is, of course, of minor importance in 'economics,' and speculation, well, . . . of trifling significance."
I should like to take this man, my "economics" teacher at Harvard, for a ride from the North Shore area near Chicago straight west on Illinois 58. A well-built-up residential district, one-half to a mile deep, runs far north along the lake shore, to end abruptly in a wilderness of sidewalks, street signs, fire plugs and weeds -- but not buildings. Along the roads which gridiron this wasteland speed trucks and pleasure cars, burning gas, tired and time to bridge the miles which, to no purpose, stand between the metropolis and outlying communities.
"Yes," my boss told me as we were riding to work one day, "there was a time when we thought there would be a lot of building out here. Guess I've still got some Land Company bonds in the Wilmette Bank. The company gave the farmer one-third down and agreed to pay the rest when the land was sold. Lots of poor farmers have got the land back now, with stiff taxes to pay on the improvements. Improvements, hell! Those fire plugs don't even have water pipes attached to them."
Ten miles of this and we reach Des Plaines, an oasis called by the natives a "successful development." "Thirty-one minutes to the Loop," boasts the Northwestern R. R. "These Homesites Best Speculation in Chicago Land," exults the land promoter.
Five miles farther west, about fifteen miles from Lake Michigan, the land is at last completely given over to farms. The speculator fires a parting shot at us as we reach the junction with Arlington Heights Road. "The Idle Rich of Today Bought Acres Yesterday," reads his sign.
Yes, I would like to ride with this "economist" out here. He would have trouble then convincing me that speculation is of trifling significance. Probably he would say: "But the men who hold this land are men of great foresight, very valuable men. You can't refuse to reward foresight; it's a virtue. Of course a little planning might alleviate these dreadful conditions, but, tut, tut, my boy, do you want to destroy free enterprise?"
Reward foresight indeed! Foresight in itself deserves no economic reward. Hitler and Baby-face Nelson at times showed great foresight, yet their loot is by no means sanctified on that account. Only one kind of exertion deserves an economic reward, and that is exertion directed toward the gratification of human desires. Foresight, an attribute of labor, exerted in producing wealth, deserves a reward, and in the free market will bring a reward. But foresight no more justifies speculation in land than superior firepower justifies conquest.
Perhaps it is asking too much to expect a Harvard man to understand this, however. His salary, after all, is paid in part from the proceeds of the foresight of certain friends of the institution who bought up much of the land on which the slums and business districts of Cambridge now stand.
Re “Poverty Rate Soars to Highest Level Since 1993” (front page, Sept. 14): I know this is heresy, but why don’t we increase taxes on the wealthy and spend this money on infrastructure projects to put unemployed people to work?
ROBIN LEVIN San Francisco, Sept. 14, 2011
And consider what would happen: the infrastructure projects would increase the value of the land served by them, and make things work better in those communities, as reliable streets and bridges and other worthwhile projects do.
Who owns that land? Is it local folks, who one might hope would spend their infrastructure-created windfall locally (but who might simply use it to buy additional land, benefiting the seller, be he absentee, local, corporate, whatever)? Is it REITs? Sovereign wealth funds?
Now suppose that instead of leaving all that infrastructure-created wealth in the pockets of the landowners, local communities wised up and collected some significant fraction of it (without raising taxes on buildings in the process: the really wise communities would take this opportunity to reduce or eliminate the taxes on the buildings!) for public purposes. What do you think would happen?
I suspect that the vacant lots in town would soon start to disappear. They wouldn't leave town. They'd get built on, when their carrying costs as vacant lots rose and the disincentive to build was decreased or eliminated. That would create jobs.
Depending on what the market wanted, it would also create housing, and creating housing also leads to creating jobs to service those homes -- plumbers, electricians, painters, home improvement of various kinds.
But it might not be the high-end housing we're used to seeing; not McMansions, but more modest homes. Not luxury condos but housing for people of all ages and stages, and not just for the highest-income people but for people of more modest means.
Sounds like a virtuous circle to me. Natural Public Revenue.
But if you like the current approach, by all means tell us why we should stick with it. (California's Prop 13 is an extreme case of suppressing this wise form of taxation. Look where it has gotten them!)
Are public sector jobs by definition a drain on the economy?
Some would say that they are. But I think there might be a false assumption in there -- one which comes from an unexamined assumption.
When a public sector job is funded via a tax on wages, or a tax on sales, or a tax on buildings -- things which are produced by human effort -- there is a burden to the economy.
Employers must pay far more than their employees receive in wages and benefits;
purchasers must pay more for goods than the producers (including those in the distribution chain -- distribution is part of production) receive;
owners of buildings and other improvements must pay an annual penalty in proportion to the value of those improvements.
All these taxes reduce the demand for what is taxed: work, goods (and, in some places, services), buildings. Fewer jobs are created, fewer goods produced, fewer buildings built and maintained well, less expensive technologies are favored over more expensive ones.
And these are the taxes most of us think about when we think about how to finance public goods.
But suppose we got ourselves outside the smallish box of taxes we're used to thinking about -- those advocated by the neo-classical economists -- and looked more closely at the wisdom of the classical economists -- Adam Smith, David Ricardo, John Stuart Mill, Henry George.
Suppose we thought about the effect of our public spending: effective public spending on goods and services that people value increases land value.
Good schools. Paved streets. Well-maintained streets. Lit streets. Plowed and cleaned streets. City water. Sanitary sewers. Stormwater runoff. Police, with well-equipped cars. Fire departments, with trained professionals and the best of equipment. Ambulances (ditto). Hospitals with life-saving equipment and professionals. Other public-health services. Courts and jails. Libraries. Public health services. Social services. Parks. Playgrounds. Highways (ideally with maintenance taking place at night or at least not during rush hour). Bridges, well-maintained. Buses, subways, railroads (passenger and freight). Airports. Beaches. Utilities (more commonly owned by shareholders, but quite realistically municipally provided). Preschools. Community colleges. Colleges and universities. Perhaps after-school activities for children. A social safety net. This list is incomplete, but each item on it is a fair example of what makes communities good places to live and worth paying to live in and conduct business in.
The presence of each of these things increases land values within the area served. It increases what landlords can charge tenants; it increases what houses and commercial buildings will sell for, without the building owner improving the building or providing additional services.
So does it make any sense to finance these things via taxes on wages? On sales? On buildings? On imports? On personal possessions? On cars? On trucks and business equipment? On business inventory? None of these things are increased in value by the provision of public services and goods.
What increases in value is land -- as everyone can chant, the three most important things in real estate are location, location and location! Much of that is the availability of publicly-funded services. (The rest can be attributed to the presence of the community -- drawn in large part by those services, but also by the beauties of nature, the harbors and rivers, the climate, other favorable conditions; to opportunities seen by entrepreneurs and nonprofits to provide commercial ventures and cultural amenities; to advances in technology and science such as air conditioning, mosquito control, fiberglass pleasure boats, etc.)
How can raising taxes put more money in your pocket? By increasing efficiency.
This year we paid $210 in higher property taxes to finance trash collection and sidewalk snowplowing. Purchased retail, those services would cost about $600. So we spent $210 to save $390. That translates into a savings of $1.86 for every dollar of increased tax. As an added bonus we have just one garbage truck a week down our street, not a different company’s truck everyday, and garbage cans on the street only on Thursday mornings.
What matters in public finance is not how much government spends, so much as what it buys with our tax dollars. But don’t count on the new “Super Congress 12″ committee to undertake serious cost-benefit analysis because cutting spending has become dogma and reality-based policies would be economic heresy.
I don't think DCJ has yet seen the cat, but he's certainly recognizing whiskers.
Would you be willing to pay $210 more in property taxes each year to have these services delivered to you by your community? I'd guess that you might be very willing to pay $210 more in property taxes AND be willing to pay the seller -- and for 30 or 15 years, a mortgage lender -- more for the privilege of living in a place where these things are provided by the community, rather than just outside of town. (If we paid for this via a tax on land value, the selling price wouldn't rise; and the cost of living would be held down. If we pay for it by taxing wages, or sales, or buildings, we do burden the economy, just as the "small government" people tell us. But they don't seem to consider the possibility of taxes which don't burden the economy.)
There are some who would complain that private trash collectors and the people who specialize in shoveling the sidewalks ought not to have competition from the public sector. They should all live in communities which feel this way. And they might concede that others might choose to live in communities which provide these amenities efficiently, with people paid from the public treasury.
I thought this presentation -- made nearly 100 years ago, in December, 1911, to County Assessors in California -- worth sharing. (Merriam-Webster defines plunderbund as "a league of commercial, political, or financial interests that exploits the public.") That such a paper would be delivered to such a body gives one a hint of how widely understood and appreciated Georgist ideas were 100 years ago. The notes say:
"Mr. Edmund Norton presented a paper entitled "What is Single Tax?" Upon conclusion of the reading, which was interspersed with many extemporaneous remarks by the speaker, a very free discussion of the subject was held, and many interrogatories propounded to the author of the paper."
I'll give you the final paragraphs first, and then the whole talk.
Never, while the world lasts, will mankind become "Masters, lords and rulers" of themselves till these public values are publicly absorbed in taxation. The Single Tax is the most feasible, practical, expedient, simple, natural and just way of making the necessary, rational change without the violence of revolution. It stands "four square to all the winds that blow" — in economics, and politics; in ethics, morals and religion; in principle, science and philosophy; it is the practical application of Christianity to social affairs. "Equal Rights to All and Special Privileges to None," is the translation of the Golden Rule of the Nazarene to an economic and political formula. Therefore, fulfilled democracy is applied Christianity to governmental affairs.
"Do unto others as ye would that they should do to you," "Equal Rights to all and special privileges to none"; the Single Tax: these are synonymous.
Here we have the great Eleventh Commandment of the Master of Nazareth — the sum total of all "the Law and all the prophets" — we have its Jeffersonian formulation into a politico-social maxim of "Equal rights to all," and its scientific practical application in the Single Tax of Henry George. This is applied Christianity; this is democracy; this is Georgean philosophy; this is the Single Tax; different expressions of the one Unity.
and here's the whole thing:
WHAT IS THE SINGLE TAX?
The Georgean Philosophy and the Jeffersonian Formula. By Edmund Norton.
Never in the history of the world have there been so many inquiring minds asking: "What is the Single Tax and the Georgean Philosophy?" In England, Germany, Australia and Canada, as elsewhere, the constructive work of the leading statesmen is all being developed along the lines laid down by Henry George. To my mind, "The Prophet of San Francisco," as he was derisively dubbed by the Duke of Argyle, is, measured by his influence on the world of statesmanship, present and future, and as a sociological thinker, the greatest personality in the Western world between the North Pole and Patagonia since Columbus found the land. Henry George has found more continents than did Columbus by uncovering monopoly-submerged lands in the presence of which we hungered and died.
This paper is meant to merely outline the principles and philosophy of the great school of thought that has grown up in the last thirty years around its teachings that now has a literature of its own that will fill a library.
The Single Tax is the popular name of the great fiscal reform and social philosophy most powerfully promulgated by our great American, Henry George, sometimes called "the Prophet of San Francisco."
WHAT IT PROPOSES TO DO.
Its purpose is to increase wages to the full returns or earnings of labor; to shorten the hours necessary to earn a living; to leave to capital, which is secondary labor, its full returns, which are secondary wages; to abolish monopoly, which is the thief that is robbing both labor and capital, and thereby prove the unity and remove the apparent antagonisms which have no place in a natural order where monopoly does not exist. It will free production, including all trade, barter and exchange, which are but processes of production, and will equalize the distribution of wealth into the possession only of those who can earn it. It will destroy privilege by substituting equal natural rights, remove the dead hand from the control of living men; throw open the limitless natural resources of the planet to willing labor, and, by taking all social creations of value into the social treasury, will conserve all natural resources forever to the people and make private appropriation of public values impossible. This condition will start a boom that will never stop till every human want is satisfied.
It will make internecine and international wars impossible by destroying all trade and monopoly privileges which are the chief causes tempting the crafty, cunning and unscrupulous to create or encourage these sum totals of all vices, crimes and horrors against humanity for personal power and profit.
THE METHOD OF ATTAINMENT.
The Single Tax does not intend to add to or multiply the already almost infinite statutory enactments now confusing and befuddling the social state, but rather means to abolish, one after the other, every law on the statute books granting a special privilege to any one man or body of men that is at the expense of the unprivileged mass of society. This will destroy the petty and grand larceny now preying upon the social body.
Aside from the million of petty privileges granted by municipalities, states and the nation to individuals, the great and glorious pillage shows itself in privileges and monopoly in labor-saving inventions, trade restrictions and the private ownership of natural resources, the major part of which is a matter of taxation; therefore, the Single Tax would abolish all taxes on barter, trade, exchange, personal property and improvements, commensurately raising all taxes from the value of land alone, till there was in existence but one single tax upon the value of bare land exclusive of improvements. This would be a single tax on land value — not on land, for some land would pay no tax while other land would pay much tax.
For instance, one acre of land worth a million dollars would pay as much tax as a million acres worth only one dollar per acre.
SQUARES WITH THE MORAL LAW.
The Single Tax is ethically sound in application for the simple reason that all labor-created wealth is the result of individual effort and leaving that wealth untaxed would be leaving to the individual only that which belonged to him by his right to himself and to that which he himself creates; while taking into the public treasury only those values which society creates in its collective capacity would be leaving to society only that which belongs to it, for no individual on earth, by himself, can create land values.
At present we compound injustice by permitting private individuals to appropriate what society creates and then society turns about and deprives the individual of his private creation to support the governments whose existence makes possible the public values privately appropriated.
This basic injustice results in a fundamental disturbance of the equilibrium of society, showing itself in numberless evils — economic, social, political, physical, mental and moral.
Mistaken symptoms for disease, effects for causes, we have numerous social quacks pressing forward with innumerable nostrums — palliative, alleviative, suppressive or curative of the particular symptoms they have noted — each claiming he has found a remedy and each ready to cure the world with a salve, bandage, pill or liniment.
The diseased social body can be cured only by removing the cause and restoring it to a normal condition. Monopoly and Special Privilege is all that the social body suffers from today, and destruction of Monopoly and Special Privilege will cure it. Equal rights to All and Special Privilege to None is the only magic remedy. Apply this, make man free and equal before the law and the Divine Mind operating through nature will do the rest.
Thomas Jefferson's was probably the greatest democratic mind of his age and the equal of any age. If we examine the Jeffersonian formula we will find it the square, level and compass, without which no nation can ever be permanently founded., The natural rights of man, "life, liberty and the pursuit of happiness," we must take for granted, and the right of revolution — also put forth in the immortal document — "the Right of the People to alter or to abolish and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness" we must also take for granted.
The constitution — itself a reactionary document, taking away from the people perhaps 75% of the liberties gained in the war of 1776 — still leaves us the power to apply the golden rule of democratic thought to our government without violence — for which we may be thankful.
EQUAL RIGHTS; NO SPECIAL PRIVILEGE.
If we view the recent, present and past history of Los Angeles, San Francisco, Colorado, Springfield, New York, Albany, Pittsburg, and the nation at large, we will have to confess that now and for fifty years past, at least, municipality, state and nation have been passing through a Saturnalia of public pillage by Special Privileges working through varying forms of oligarchic, partisan and political control. The government has been wrested from the hand of Democracy by Plutocratic privileges.
Applying the rule of Equal Rights to All, we clearly see that while these rights exist, the power to exercise them has been nullified; therefore, all of these reforms such as the Initiative, Referendum, Recall, Commission Government for cities, Direct Primaries and Popular Senatorial elections, are democratic efforts for the restoration of the Mechanics of Government into the hands of Equal Citizens.
I say the Mechanics of Government, for in no sense will the people be at all benefited permanently, even by the perfection of these reforms, which are but tools of government to develop efficiency of popular expression, unless they grasp these economic truths and change or readjust economic conditions. Indeed they might be worse off, for having captured these means completely, they might mistake them for ends, and believing their victory full, might slumber while being worse pillaged, which has been the case in the past.
I wish to inject here one pertinent suggestion — cities, within themselves, should have absolute right to exert self-government in all things within their borders that do not infringe upon the equal freedom of other cities, the state or nation, especially in matters of taxation.
SOME FISCAL FACTS OF LOS ANGELES (1910).
Having eliminated, then, the mechanics of government, suppose we apply our rule to the fiscal and economic conditions existing in our city of Los Angeles, and nearly every other city.
During the last fiscal year we raised about $5,000,000 in taxes imposed on land values, improvements, personal property and license — fines, which amounted to some $650,000. Now, there is no civic, fiscal or economic excuse for license, business and occupation fines other than police regulation or revenue raising.
Police regulations have no reason for existence except to protect the citizens from infringement on his equal rights, and to grant a special privilege under any name whatever for some persons to possess to the exclusion of other persons, is a wrong that breaks our golden rule of Democracy and should be abolished on that ground alone.
For Government to grant these powers of wrong doing on receipt of a stipulated share of the profits of the wrong, is to participate in, sanction and legalize the wrong and thereby corrupt society at its fountain head by official and statutory enactments.
Again, varying the cost of these granted privileges from $1.00 to $200.00 or more per month is absurdly unjust, unequal and discriminative, for or against certain businesses, making another breach of the rule calling for their abolition.
The effect of these fines is to act as trade restrictions, as interference with production, and to centralize business in the hands of a dominant privileged class. They are national protective tariff superstitions localized for the benefit of civic plunder.
Here I wish to call your attention to a vital, absolute, commercial and economic law: ''All taxes on things produced by human exertion enter into the cost of production and are paid for by the ultimate consumer."
If we grasp this fact in its fullness we will see that these fines and taxes effect not so much the middlemen who are compelled by this inexorable law to add them to the price, as it does the ultimate consumer, who is the whole body of society. Thus we do not hit the one we imagine, but simply strike ourselves.
To abolish them would be to free trade, diffuse business, accelerate its activity and lower prices to the ultimate consumer, permitting him to retain a greater amount of his earned wealth.
If we could so emphasize this one law as to make all see it, the ideals of democracy would be here.
I have laid particular stress on this all-important law because it applies not only to license fines but to all personal property and improvement taxes — on everything made by man. Therefore, in all forms of wealth in course of production there are no real taxpayers but the ultimate consumers — the intermediary is only a tax shifter. This is vital.
The Single Tax would abolish all these taxes; so would the Jeffersonian formula. In the two we have a principle and a method for its practical application.
To extend this practical application of the Democratic Principle to all things — including the international tariff — would immediately destroy the nightmare of high prices and flood the world with limitless possibilities of trade. This trade is now stifled and vast amounts of wealth are wrongly diverted to the possession of those who do not create or earn it.
The question arises: Where would you get the money to run the government if the Single Tax theory were put into operation? Of course! Why, there would be no place to get it except from land values. Here is something fastened to the world — possibly by the "Big Nail" of the North Pole — anyway it is where it can be seen; it can't run away, hide in a hole nor be loaned to a convenient friend in an adjoining county when the assessor comes around.
The millions of varieties and values of other forms of property being eliminated, scientific simplicity would be possible in taxation. Taking into the public treasury publicly created values in the form of a tax and leaving in the possession of private individuals their private creations, by tax exemptions, would square with the moral law. Incidentally, "Conservation of natural resources" would become an accomplished fact in city, state and nation; for the taxing power involved in the private possession of the "Unearned Increment," "Land Values," "Economic Kent," or "Ground Rent," is a governmental power now privately possessed, obtained by grant, theft or tax evasion. It is a special privilege held only by land owners — the abolition of which is necessary to the restoration of equal rights to all.
The private possession of a governmental privilege is, moreover, the prime motive — the chief incentive — to all the speculative holdings of idle city lots, agricultural, mining, timber, coal and oil lands, and all other natural resources. It is responsible for 90% of the speculative gambling that is prostituting city councils, state legislatures, the national government and even threatening the judiciary itself.
In fact, this basic injustice is at the bottom of 90% of all the vice, crime and graft — public and private — from which society is now suffering. The removal of the cause by the socialization of land values through the application of the Single Tax, would destroy the incentive, divert the evil tendencies to the best instead of the worst in society, displace an abnormal condition by a normal one, and cut out, eventually, the 90% of evil which we now deplore. The victories opening to us under these possible conditions are only picturable by the poet or the seer.
The Single Tax will remove unjust conditions by a rational, expedient process of readjustment. It will restore to the individual his freedom and to the state its own values.
The right to "Life, Liberty and the Pursuit of Happiness," "Equality of Opportunity," "Equality of Rights," and destruction of Special Privilege, all demand its enactment as the only natural and perfectly sane method of squaring these demands.
The equal right to life can never be guaranteed until equal right to the natural opportunities upon which that life depends is also guaranteed. A denial of one is the denial of the other.
The opening up of the limitless storehouse of nature on this continent alone, by the destruction of its monopoly, would be equivalent to discovering several new continents.
Labor and capital, unrestricted, would flow to these opportunities as the sparks fly upward. Relieved of the pressure at the bottom and congestion of trade restriction removed from the top, who can tell the wonderful possibilities of America?
Here, toward the last, we come in contact with another vital related problem: that of the functions and ownership of highways — national, state, county and municipal.
These highways are, in organ and function, to the social body, what veins, arteries and nerves are to the human body. They are the channels of communication and transportation for persons, property and intelligence. Interference, restriction, congestion — all tend to varying disorders in the social body. Perfect freedom to normal action is the solvent. Private control of a public function is privileged ownership of a governmental power which should never be tolerated in a state of equal freedom. In fact, equal freedom is impossible where special privileges of government are farmed out to private individuals.
It will be noted that practically all private possessions of land on the continent, except those facing free waterways, are criss-crossed, intersected and separated by these highways. Theoretically we can easily see that, should we grant absolute ownership of highways to one individual — even were every other adjustment on earth perfected — that one individual would be master of the continent, for no possible intercommunication of persons, property, or intelligence could take place on, by, through or across these arteries and nerves without his consent, which condition, if submitted to, would make him sole arbiter of the world.
What is true of the whole is fractionally true of any part. We can never establish Equality of Right till absolute freedom of highway is guaranteed. Private possession of highways is no more necessary to private possession of property than is private possession of the ocean necessary to private ownership of ships.
In fact, the rights of private property are abrogated when governmental power to exact tribute from private property is granted to a privileged few; therefore, "Equal Rights to All and Special Privilege to None,'' demand the application of the Georgean philosophy to highway functions as a democratic and not a socialistic measure.
When we remember that these privileges now controlled (facts of 1900 since accentuated) by the national steam railways alone are capitalized at $8,000,000,000 in excess of the $5,000,000,000 of actual cost, we can see the enormity of one form of special privilege and the corresponding abrogation of natural property rights.
In passing, I will say that there are three practical methods by which these rights may be restored.
(1) Government control, ownership and operation of entire systems;
(2) Government control, ownership and operation of roadbeds only through official control of despatching service — leaving free operation of untaxed capital in all else, or:
(3) Public taxation of all incomes and values in excess of current rate of interest on actual capital — said capital otherwise untaxed.
The practical applications of these principles are mere matters of detail, expediency and policy. The brains that organize and manipulate these gigantic social plunders in all their minutia, can just as well work out the details of public restitution when deprived of activity in private depredations — and would be glad of the job.
Applied, this would mean the destruction of special privilege in national railways, telegraph, telephone, street railways, water, light, heat, power and all other monopolies of highway function.
This, with absolute free trade and the taxation of land-values through all other things being exempt, would mean the complete abolition of "Special Privilege" in all things; the institution of "Equal Rights" the "Conservation of Natural Resources,'' and the restoration of "Equal Opportunity to All." When all this is done — and never until it is done — there will be left nothing but the individual problem for man to solve.
Again let me interject a vital suggestion: Had we absolute free trade — international, state and local — including absolute freedom of highways, which is but an extension of freedom of trade — in truth, had we reached perfection in production — for this all means freedom in production — had we all these things while still leaving the "Unearned Increment, or Economic Rent,'' in the hands of the land-owner — there would be no permanent benefit to society except that incident to the transitional period of readjustment. Eventually all these wonderful benefits would clearly raise nothing but land-values and make the plunderbund richer and mightier than ever. The rise and fall of land values measure all the advances of civilization and their private appropriators are the "Masters, lords and rulers in all lands'' of whom the poet spoke.
Never, while the world lasts, will mankind become "Masters, lords and rulers" of themselves till these public values are publicly absorbed in taxation. The Single Tax is the most feasible, practical, expedient, simple, natural and just way of making the necessary, rational change without the violence of revolution. It stands "four square to all the winds that blow" — in economics, and politics; in ethics, morals and religion; in principle, science and philosophy; it is the practical application of Christianity to social affairs. "Equal Rights to All and Special Privileges to None," is the translation of the Golden Rule of the Nazarene to an economic and political formula. Therefore, fulfilled democracy is applied Christianity to governmental affairs.
"Do unto others as ye would that they should do to you," "Equal Rights to all and special privileges to none"; the Single Tax: these are synonymous.
Here we have the great Eleventh Commandment of the Master of Nazareth — the sum total of all "the Law and all the prophets" — we have its Jeffersonian formulation into a politico-social maxim of "Equal rights to all," and its scientific practical application in the Single Tax of Henry George. This is applied Christianity; this is democracy; this is Georgean philosophy; this is the Single Tax; different expressions of the one Unity.
Governor A. Harry Moore, of New Jersey, in his first inaugural address to the 1927 Legislature, after discussing several methods of financing new highway construction, said: "Lastly, I might suggest to you the wisdom of assessing some part of the cost of the road system upon the land specially benefitted thereby, as is the practice in municipal improvements. A striking illustration of what might be regarded as an evil of having the State at large pay for major improvements and the land peculiarly benefitted by the improvements escape, except in so far as it shares its proportion of the State's expense, is in the increase of land values in Bergen county, which came as a result of the projected Hudson River Bridge."
Notice that this was said before the George Washington Bridge had become a reality: the increase in land values began well before construction began.
Governor Christie could learn from Governor Moore's wise observation in 1927, as New Jersey considers the benefits to be derived from building an additional tunnel under the Hudson River.
And those who are upset about pork spending don't seem to notice that much of that federal spending has the effect of increasing land value in the localities where it is done, and that smart states, counties and towns would collect some significant share of that increase in land value, month in and month out, from those benefited by that federal investment.
This tidbit from a 1926 Single Tax monthly contains an important truth for our era. Today, it would be necessary to add "wages" to the list of things he ought not to be taxed on, since so many states and cities impose wage taxes on their residents. And in California and NYC, a large share of residents are renters. And equally important, it applies to how we tax businesses, many of which are tenants.
LEST WE FORGET
Nothing should be left undone to prevent waste and promote efficiency in government. Public officials should be closely watched to see that they render full service.
But when all is said and done in the way of securing the wisest outlay of tax money, it should not he forgotten that more harm and injustice can be done to the individual citizens in taking money from the wrong persons than in wasting it.
When a new pavement, water, light, or school is put in, it makes the neighborhood a more desirable place in which to live, and rents go up. It is well to have these public utilities constructed as cheaply as possible. But it is far more important that the tenant who pays for the use of the public service in higher rent shall not also be taxed a second time on his personal property, goods, or household furniture to pay for the same service.
Under our present system of taxation the wages of the worker are taken to run the city by the tax on the home being put in your rent. The increase in land-values that would run the city goes to the land speculator. Example and Proof:
Suppose the people build a twenty million dollar subway. The land increases twenty million dollars in value; the increase would pay for the subway, but it goes to the land-speculator and your wages are taken to pay for the subway by a tax on the home which is put in your rent.
-- from The Single Tax Review, March-April, 1909
And 100 years later, we're still financing subways from revenue sources other than Land Value Taxation. Slow learners, aren't we?
WASHINGTON – President Obama on Monday is to call for as much as $50 billion in government spending to start up a long-term public works plan emphasizing transportation projects – roads, rail and airport runways – over the next six years.
Okay. Sounds good. This is what some people have called Pork, when the money has been invested in other people's congressional districts.
Good infrastructure projects are very worthwhile, and, properly conceived, well designed and well executed, will serve the public for decades, perhaps many generations. Look at what the CCC accomplished during the Depression. Look at the Interstate Highway system. Look at the service that commuter rail and, in some places, intercity rail offers.
But local government has failed to follow through. Federal investment in infrastructure is the "1" of the "1-2 punch," but if local, county or state governments fail to respond appropriately, much of the benefit is lost.
Every worthwhile infrastructure project creates (or in the case of necessary maintenance, maintains) far more land value than the cost of the project. Consider:
the George Washington Bridge across the Hudson created how much land value in northern New Jersey?
the Golden Gate Bridge created how much land value in Marin County, California?
the Tappan Zee Bridge across the Hudson created how much land value in Rockland and Westchester Counties?
the Northway created how much land value north of Albany, New York?
the Verrazano Narrows Bridge created how much land value on Staten Island?
Who benefited? The landholders! Federal dollars were poured into these projects, and individual landholders reaped the windfall we created. Their communities and counties and states could have taken two simple steps to recycle that value -- and still can!:
Assess the land value every few years. (Assessing land value is not expensive or difficult to do well, if one sets out to do it. Unfortunately, many assessments are focused on buildings, or on the property as a whole, and only later assign a land value, which may bear little relation to market values.)
Collect some significant portion of the value which results from federal, state, county and local investment in infrastructure and services. Don't tax the buildings. Don't tax sales. Don't tax wages. Just the land value.
And if the local, county and state governments don't see fit to collect that value for local, county or state purposes, the federal government ought to be able to step in and collect it. After all, WE created it. It doesn't belong in private pockets. And if we collected it, we could reduce or eliminate the dumb taxes which burden our economy.
Which is the whole point of stimulating the economy, isn't it?
Unless, of course, we're doing it for the benefit of the 10% of us who receive about 48% of the income, or the slightly different 10% of us who own 71.5% of the net worth, in which case this is a very poor idea. Remember what Leona Helmsley told us: "WE don't pay taxes. The little people pay taxes."
Shall we create more unearned income for them? Or shall we create incentives for localities and states to recycle that value, with the option of collecting it for federal purposes if they choose not to?
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.
As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
It seems as if the suggestion is that we ought to let the housing market crash, and then hope that we will pick up again where we left off, and experience this boom-bust cycle again.
There doesn't seem to be much discussion of the factors that produce the boom-bust cycle, or of the notion that we can actually prevent the next boom-bust cycle through wise policy.
What policy? A tax shift. Shift taxes off wages (starting at the bottom); off sales (starting with essential items); off buildings of all kinds and equipment. What's left to tax?
That which we should have been taxing all along: the value of land. Henry George (b. Philadelphia, 1839; died NYC, 1897) introduced the idea in his 1879 book, Progress and Poverty, which remains 130 years later the best selling book ever on political economy. It sold over 6 million copies by 1900, and George, Thomas Edison and Mark Twain were perhaps the three best-known public figures of their day. George's "remedy" came to be known as the "Single Tax." It was a recipe for small government -- right-sized government, funded by the only legitimate revenue source: value created by nature and by the community. Land, to the classical economists -- Adam Smith, David Ricardo, John Stuart Mill, Henry George, etc. -- was distinctly different from capital. (The neoclassical economists -- and those who only know their sort of economics -- can't seem to see the difference, and conflate them, leading to all sorts of stupid -- and unnecessary -- messes!) Land includes not just the value of locations (on earth, in water, in space) but also electromagnetic spectrum, water rights, non-renewable natural resource values, pollution "rights," and lots of other like things. (Mason Gaffney provides some excellent lists.) Those locations include urban land, land made valuable by favorable climate, water supply, access to ports, to transportation systems, to desirable views, to vibrant cities with jobs, cultural amenities, educational opportunities; geosynchronous orbits; congestion charges; parking privileges, etc. Those of us who claim title to a piece of land ought to be required to compensate the community in proportion to the value of that land, for the right to exclude others from it. That compensation should be paid month in and month out, to the community.
Our current system is perverse. We must purchase the rights to the land from the previous holder at whatever price the market will bear, or what the seller's circumstances require him to accept. Rich landholders can hold out for higher asking prices; poorer ones may be forced to accept lower prices. Few of us enter the market with more than a few percent of the asking price in hand; we mortgage our future earnings in order to pay the seller's asking price.
In most coastal cities, that price is predominately for the location, not for the building itself. A May, 2006, Federal Reserve Board study found that land represented, on average, 51% of the value of single family housing in the top 46 metro markets in 2004; in the San Francisco metro, land represented 88.5% of the value, and in no metro in California did it represent less than 62%. Boston metro was around 75%, NYC metro was about 70% (I'm doing this from memory), Oklahoma City about 20%; Buffalo about 28%. Extrapolating from some of their tables, I found that the average value of a single-family structure across the 46 metros was about $112,000, with a range from perhaps $88,000 in the lowest metro to a high of perhaps $130,000 in the highest. The range of average land values across the 46 metros, though, was much wider, from perhaps $25,000 to $750,000!
Suppose we did let the housing market crash, and then shifted over to George's proposal, collecting our tax revenue first from land rent, and only after we'd collected the lion's share of the land rent, tapping other less desirable revenue sources such as wages, sales and buildings. What would happen?
The selling price of housing would drop to approximately the depreciated value of the structure in which one would live. A large new house would be more valuable than an older house of the same size. A large house would cost more than a smaller one. But one would not pay the seller for value that related to the location of the home.
One would pay, month in and month out, the rental value of the land on which the house sits. Fabulous locations would require high monthly payments; less fabulous ones would have lower monthly payments. Small lots would pay less than larger lots nearby. Owners of condos in a 20-story building would share the cost of the land rent for the site, perhaps in proportion to the quality of their location within the building (fabulous views would pay more than ordinary ones; larger footprints and/or more floors occupied would pay in proportion to their share of the total space).
That monthly payment would go to one's community, and would replace one's property tax, sales taxes, wage taxes. A portion of the payment would be forwarded to one's state, and at the state level, a portion would be forwarded to the federal government.
The selling price of housing would drop, requiring one to borrow far less. The difference would be quite pronounced in San Francisco, Boston, NYC, etc. One's monthly mortgage payment would be significantly lower.
Housing would no longer be an investment, in the sense that one expected to sell a property for more than one paid for it.
Housing would be more liquid; one could own a home, but have a reasonable expectation of being able to sell it if one wanted to move elsewhere.
The credit not used to purchase homes would be available for businesses. Businesses, too, would not be "investing" in land, but would have capital available to invest in equipment and to pay better wages to their employees.
Land which under our current system is both well-located and underused would either be redeveloped by its owners, or come onto the market so that someone else could put it to use. There would be no incentive to keep it underused, as there is today. The redevelopment process itself would create jobs in construction-related businesses, and the resulting buildings would either provide housing or commercial venues -- or both: whatever the market was asking for. And that housing would be at a wide range of points on the income spectrum and the ages-and-stages spectrum: young people starting out, families, retirees, singles, couples -- not just the luxury market. And those newly-created homes would be closer in to the jobs which would support them, rather than separated by long commutes and drive-till-you-qualify.
Land made valuable by public investment in infrastructure and services would provide a continuous revenue stream to the community, providing funding for next year's services, instead of funding for self-selected individuals' retirement.
So if one can't hope to get rich from the appreciation of the land under one's home, how is one to have security? How does one participate in the economy? By investing in businesses that serve customer desires. And when one's housing plus taxes are lower, one has more left over for that. When there is enough housing for all, one isn't paying so much of one's income for it. When no one expects to grow wealthy automatically, people can dream up the business which they will enjoy working in. And with so many businesses competing for workers, wages will tend to rise. With so many businesses competing for customers, services will improve, and specialization increase.
Back to the title of the article: "Grim Housing Choice: Help Today's Owners or Future Buyers?" Maybe economics doesn't HAVE to be the dismal science. Maybe our choices are not so grim after all. Maybe we can put ourselves on a firmer footing, without the boom-bust cycles we've been experiencing so regularly. (See Mason Gaffney's recent book, After the Crash: Designing a Depression-free Economy. And while you're on that site, you might read "The Great Crash of 2008" and "How to Thaw Credit Now and Forever.") Maybe we can leave our children a society in which all can prosper.
Not too much to ask for, is it?
Or shall we leave them a society in which 10% of us are receiving 48% of the income, and 10% of us possessing 71.5% of the net worth.
America's biggest -- and only major -- jobs program is the U.S. military.
Over 1,400,000 Americans are now on active duty; another 833,000 are in the reserves, many full time. Another 1,600,000 Americans work in companies that supply the military with everything from weapons to utensils. (I'm not even including all the foreign contractors employing non-US citizens.)
If we didn't have this giant military jobs program, the U.S. unemployment rate would be over 11.5 percent today instead of 9.5 percent.
And without our military jobs program personal incomes would be dropping faster. The Commerce Department reported Monday the only major metro areas where both net earnings and personal incomes rose last year were San Antonio, Texas, Virginia Beach, Virginia, and Washington, D.C. -- because all three have high concentrations of military and federal jobs.
This isn't an argument for more military spending. Just the opposite. Having a giant undercover military jobs program is an insane way to keep Americans employed. It creates jobs we don't need but we keep anyway because there's no honest alternative. We don't have an overt jobs program based on what's really needed. . . .
The Pentagon's budget -- and its giant undercover jobs program -- keeps expanding. The President has asked Congress to hike total defense spending next year 2.2 percent, to $708 billion. That's 6.1 percent higher than peak defense spending during the Bush administration.
This sum doesn't even include Homeland Security, Veterans Affairs, nuclear weapons management, and intelligence. Add these, and next year's national security budget totals about $950 billion.
That's a major chunk of the entire federal budget. But most deficit hawks don't dare cut it. National security is sacrosanct.
Yet what's really sacrosanct is the giant jobs program that's justified by national security. National security is a cover for job security.
This is nuts.
Wouldn't it be better to have a jobs program that created things we really need -- like light-rail trains, better school facilities, public parks, water and sewer systems, and non-carbon energy sources -- than things we don't, like obsolete weapons systems?
Historically some of America's biggest jobs programs that were critical to the nation's future have been justified by national defense, although they've borne almost no relation to it. The National Defense Education Act of the late 1950s trained a generation of math and science teachers. The National Defense Highway Act created millions of construction jobs turning the nation's two-lane highways into four- and six-lane Interstates.
Maybe this is the way to convince Republicans and blue-dog Democrats to spend more federal dollars putting Americans back, and working on things we genuinely need: Call it the National Defense Full Employment Act.
Suppose, just suppose, that we shifted our federal spending to create those things we really need -- nation building, if you will -- like light-rail trains, better school facilities, public parks, water and sewer systems, and non-carbon energy sources -- but instead of letting the land value that such investment creates be privatized by whoever owns the land they serve, we collected the value WE created, and used it to fund next year's investment in public goods and services?
Sounds like a virtuous circle to me.
And one which we could recommend to the voters in resource-rich countries.
And collecting that value would have a lot of other highly desirable effects, including reversing urban and suburban sprawl, reducing the price of housing, increasing wages, reducing the concentrations of wealth and income, stabilizing our economy. Pick one of those that you don't think would be good for America.
And it isn't pork if it creates value which is then recycled for public purposes. It is pork when we permit it to be privatized
Despite this nation’s rise as a technology titan with some of the best engineering minds in the world, its full economic potential is stifled by potholed roads, collapsing bridges, rickety railroads and a power grid so unreliable that many modern office buildings run their own diesel generators to make sure the lights and computers stay on.
It is not for want of money. The Indian government aims to spend $500 billion on infrastructure by 2012 and twice that amount in the following five years.
The problem is a dearth of engineers — or at least of civil engineers with the skill and expertise to make sure those ambitious projects are done on time and to specification.
Civil engineering was once an elite occupation in India, not only during the British colonial era of carving roads and laying train tracks, but long after independence as part of the civil service. These days, though, India’s best and brightest know there is more money and prestige in writing software for foreign customers than in building roads for their nation.
Our best and brightest ...
Think about it. $500 billion in spending on infrastructure between now and 2012. Those projects are likely to create $1 trillion to $6 trillion in increased land value!
Another $1 trillion in investment in infrastructure between 2013 and 2017. That will create $2 trillion to $12 trillion in increased land value.
So here's the question. How should India finance that $1.5 trillion in investment?
Should they tax the wages of their workers?
Should they tax the purchases of their workers?
Or should they collect some portion of that increase in land value year in and year out?
What might America learn by considering what India's options are?
This is an excellent article which I encourage you to read. I want to share the response which a friend posted to a global listserv we're both on.
Before I do that, though, I think it is worth considering that the much reported downturn in the market for new housing, as opposed to resale, might relate to a flight to quality. New subdivisions are on the fringes. Often they are beyond the fringe, surrounded by farmland -- sometimes described as checkerboard development. (I've even seen townhouses surrounded by farmland!)
If you have a choice between a new home in a distant subdivision and a resale home in an established location, served by established transportation systems, schools, jobs, shopping, cultural amenities, etc., which will you choose? Maybe the explanation of why new houses are not selling is that buyers now have a wider choice of homes they can afford, and are choosing the better locationsover the newly constructed houses on or beyond the distant edge of the community.
If I'm correct, it bodes well for smaller builders who are doing infill and redevelopment of existing neighborhoods. Wise policy can promote infill, while unwise policies lead to sprawl. I suspect the sprawl-folks have a lot more lobbying money than the infill-oriented ones, so can only appeal to good sense.
Here's Ed's response to the sprawl article, which I found to be well reasoned and well stated:
"A colleague of mine forwarded the link of this article to me for
comment, as my professional work in the United States has been in
community revitalization and the development of quality affordable
What I came to understand midway in my career was that land markets are made dysfunctional
by law that favors the landed over those who develop and utilize
locations. There are many issues causing sprawling development
patterns, but one of the most consistent is the struggle to gain
control over land that allows for profitable development. And, of
course, developers are not concerned with the infrastructure costs of
bringing roadways; water, sewer and other utilities, hospitals,
libraries, schools, and other public goods and services to
newly-created subdivisions. These costs are passed on to property
owners, working people and businesses.
There is only one measure that will redirect development inward,
leaving more distant land available for agriculture, recreation and
habitat for other species. This is for government to fully collect the
annual rental value of every location within its geographical
boundaries, while exempting improvement made thereon from the
tax/revenue base. What this change in policy will do is easy to see.
First, profit from speculating in the hoarding of land will disappear.
Thus, investors will acquire control over land only when profitable
development is possible.
Second, existing owners of land parcels will not be able to continue to
ignore land they hold because the cost of doing so will (particularly
if the and parcels are centrally-located) make this costly. They will
either develop land based on highest, best use or sell the land to
someone who will.
Third, the cost of property assessment will fall dramatically once property improvements are removed from the tax base.
Fourth, removing speculation and hoarding of land will bring down the
price (but not the annual rental value) of land parcels. This will make
it far less costly for public agencies to acquire land for needed
public buildings and (if still required given household incomes) to
construct decent, affordable housing units for the housing-deprived.
In summary, what will curtail sprawl is public policy that encourages
the renovation of existing structures and in-fill construction of new
buildings where infrastructure already exists, while at the same time
requiring land owners to compensate the community for the value that
comes to locations because of public goods and services."
The floods battered New England, then Nashville, then Arkansas, then Oklahoma — and were followed by a deluge in Pakistan that has upended the lives of 20 million people.
The summer’s heat waves baked the eastern United States, parts of Africa and eastern Asia, and above all Russia, which lost millions of acres of wheat and thousands of lives in a drought worse than any other in the historical record.
Seemingly disconnected, these far-flung disasters are reviving the question of whether global warming is causing more weather extremes.
The collective answer of the scientific community can be boiled down to a single word: probably.
“The climate is changing,” said Jay Lawrimore, chief of climate analysis at the National Climatic Data Center in Asheville, N.C. “Extreme events are occurring with greater frequency, and in many cases with greater intensity.”
He described excessive heat, in particular, as “consistent with our
understanding of how the climate responds to increasing greenhouse
Theory suggests that a world warming up because of those gases will
feature heavier rainstorms in summer, bigger snowstorms in winter, more
intense droughts in at least some places and more record-breaking heat
waves. Scientists and government reports say the statistical evidence
shows that much of this is starting to happen. . . .
If the earth were not warming, random variations in the weather should
cause about the same number of record-breaking high temperatures and
record-breaking low temperatures over a given period. But climatologists
have long theorized that in a warming world, the added heat would cause
more record highs and fewer record lows.
Recall that the US uses a disproportionate percentage of the world's oil and coal, and produces a disproportionate percentage of the world's greenhouse gases.
As poor people around the world -- and not-so-poor people, too -- contemplate America's place in the world, particularly when they are suffering from the effects of extremes of weather, are they likely to be willing to accept the notion that America is somehow special, and that it is the rest of the world that must adjust to us, or will they come to hold us accountable to the rest of the world's people?
When we wrap our minds around the implications of that question, we will come to the question of how we can reduce the demand for the kinds of energy which pollute the world's air.
Part of the answer will come from reducing, even reversing, urban sprawl, and setting our incentives so that our cities get re-developed more quickly and more effectively. This will also be good for the economy, creating jobs in the ongoing redevelopment process and then again in the new buildings created by this redevelopment.
What incentives? Start with the incentives which promote intense use of land well-served by taxpayer-provided infrastructure (highway systems, rail and subway systems, bridges, tunnels, air travel, etc.; water, sanitary sewer, stormwater management, etc.); and services (schools, police, ambulance, firefighting, street-cleaning, trash removal, recycling, public health, courts and prisons; public parking, etc.) Every one of those services serves to increase the value of land within the area served. Most of them contribute more to the land value than they cost. Yet we continue to fund them, in many places, with taxes not on land value but on wages or sales -- stupid taxes, to be blunt about it!
We can settle down and study the problem, or we can continue to do what hasn't worked yet. But not for long, and not for free. Our neighbors in the other 94% of the world are going to start holding us accountable at some point. Do we want to wait until it hits us, or do we want to get out in front of it?
And if we could, via a simple reform in the US, set an example that would contribute to prosperity in other countries, wouldn't we be wise to pursue it?
In every one of the higher religions, there is a strain of infinite optimism on the one hand and on the other, a profound pessimism. In the depths of our being, they all teach there is an inner light, but an inner light which our egotism keeps, for most of the time, in a state of more or less complete eclipse. If, however, it so desires, the ego can get out of the way, so to speak, can dis-eclipse the light and become identified with its divine source, hence the unlimited optimism of the traditional religions. Their pessimism springs from the observed fact that though all are called, few are chosen for the sufficient reason that few choose to be chosen.
To me, this older conception of man’s nature and destiny seems more realistic, more nearly in accord with the given facts than any form of modern utopianism. In the Lord’s Prayer, we are taught to ask for the blessing, which consists in not being led into temptation. The reason is only too obvious. When temptations are very great or unduly prolonged, most persons succumb to them. To devise a perfect social order is probably beyond our powers, but I believe that it is perfectly possible for us to reduce the number of dangerous temptations to a level far below that which is tolerated at the present time. A society so arranged that there shall be a minimum of dangerous temptations — this is the end towards which, as a citizen, I have to strive.
In my efforts to achieve that end, I can make use of a great variety of means. Do good ends justify the use of intrinsically bad means? On the level of theity, the point can be argued indefinitely. In practice, meanwhile, I find that the means employed invariably determine the nature of the end achieved. Indeed, as Mahatma Gandhi was never tired of insisting, the means are the end in its preliminary stages.
Men have put forth enormous efforts to make their world a better place to live in. But except in regard to gadgets, plumbing, and hygiene, their success has been pathetically small. Hell, as the proverb has it, is paved with good intentions. And so long as we go on trying to realize our ideals by bad or merely inappropriate means, our good intentions will come to the same bad ends. In this consists the tragedy and the irony of history. Can I, as an individual, do anything to make future history a little less tragic and less ironic than history past, and present? I believe I can. As a citizen, I can use all my intelligence and all my goodwill to develop political means that shall be of the same kind and quality as the ideal ends which I am trying to achieve. And as a person, as a psychophysical organism, I can learn how to get out of the way so that the divine source of my life and consciousness can come out of eclipse and shine through me.
English novelist Aldous Huxley was born into a family of scientists and writers. He is best known for his books “Brave New World" (1932) and “Point Counter Point" (1928), but also wrote poetry, essays, screenplays and children’s books. Huxley died in 1963.
According to the closing words Bob Edwards added after listening to this essay, Aldous Huxley, C.S. Lewis and John F. Kennedy all died on the same day. This radio series came from the 1950s, but I've not been able to tie down the date any closer than that.
My ears perked up when I heard Huxley's name mentioned. In his forward to the 2nd edition of Brave New World, circa 1947, he says that were he to re-write the book, he would include the possibility of a third way. Here's my abridgment:
In the meantime, however, it seems
worth while at least to mention
the most serious defect in the story, which is this. The Savage
offered only two alternatives, an insane life in Utopia, or the life
of a primitive in an Indian village, a life more human in some
respects, but in others hardly less queer and abnormal. ... Today I feel no wish to
demonstrate that sanity is impossible. ... If I were now to rewrite the
book, I would offer the Savage a third alternative. Between the
utopian and the primitive horns of his dilemma would lie the
possibility of sanity -- a possibility already actualized, to
some extent, in a community of exiles and refugees from the Brave New
World, living within the borders of the Reservation. In this
community economics would be decentralist and Henry-Georgian,
politics Kropotkinesque cooperative. Science and technology would be
used as though, like the Sabbath, they had been made for man, not (as
at present and still more so in the Brave New World) as though man
were to be adapted and enslaved to them. Religion would be the
conscious and intelligent pursuit of man's Final End, the unitive
knowledge of the immanent Tao or Logos, the transcendent Godhead or
Brahman. And the prevailing philosophy of life would be a kind of
Higher Utilitarianism, in which the Greatest Happiness principle
would be secondary to the Final End principle -- the first question
to be asked and answered in every contingency of life being: "How
will this thought or action contribute to, or interfere with, the
achievement, by me and the greatest possible number of other
individuals, of man's Final End?"
To return to the excerpt from Huxley's "This I Believe" essay -- "To devise a perfect social order is probably beyond our powers, but I believe that it is perfectly possible for us to reduce the number of dangerous temptations to a level far below that which is tolerated at
the present time" -- This brings to mind something that has run through my head from time to time, that there is huge individual temptation to support -- actively or passively -- the maintenance of an inequitable system, even one by which one is currently victimized, if one thinks one might be able to join the portion of society which benefits from that structure. "I might win the lottery; therefore I should support measures that preserve the privileges of those with huge wealth!" -- or so the thought pattern goes -- and goodness knows the wealthy like that thought pattern just fine! Particularly those whose fortunes have been made based on privileges like the ownership of land well-served by taxpayer-provided infrastructure, or scarce natural resources, or anything the classical economists would recognize as "land."
Henry George starts with the premise that "man seeks to satisfy his desires with the least effort" and it flows from this that there is certainly a tendency to exploit one's fellow human beings if structures permit one to, even if one doesn't understand the mechanism of that exploitation.
From there, my musing takes me to the thought that in that same prayer, perhaps the one most used by Christians of any prayer, we ask forgiveness for our trespasses and agree to forgive those who trespass against us. I wonder how that phrase must have seemed to people enslaved in the American south (or north).
And then my musing leads me into one of my favorites of Henry George's speeches, "Thy Kingdom Come." A lift:
“Our Father!” “Our Father!” Whose? Not my Father — that is not the prayer. “Our Father” — not the father of any sect, or any class, but the Father of all humanity. The All-Father, the equal Father, the loving Father. He it is we ask to bring the kingdom. Aye, we ask it with our lips! We call Him “Our Father,” the All, the Universal Father, when we kneel down to pray to Him.
But that He is the All-Father — that He is all people’s Father — we deny by our institutions. The All-Father who made the world, the All-Father who created us in His image, and put us upon the earth to draw subsistence from its bosom; to find in the earth all the materials that satisfy our wants, waiting only to be worked up by our labor! If He is the All-Father, then are not all human beings, all children of the Creator, equally entitled to the use of His bounty? And, yet, our laws say that this God’s earth is not here for the use of all His children, but only for the use of a privileged few!
There's that word again: privilege.
Back to George:
Why, consider: “Give us this day our daily bread.” I stopped in a hotel last week — a hydropathic establishment. A hundred or more guests sat down to table together. Before they ate anything, a man stood up, and, thanking God, asked Him to make us all grateful for His bounty. And it is so at every mealtime — such an acknowledgement is made over well-filled boards. What do we mean by it?
If Adam, when he got out of Eden, had sat down and commenced to pray, he might have prayed till this time without getting anything to eat unless he went to work for it. Yet food is God’s bounty. He does not bring meat and vegetables all prepared. What He gives are the opportunities of producing these things — of bringing them forth by labor. His mandate is — it is written in the Holy Word, it is graven on every fact in nature — that by labor we shall bring forth these things. Nature gives to labor and to nothing else.
What God gives are the natural elements that are indispensable to labor. He gives them, not to one, not to some, not to one generation, but to all. They are His gifts, His bounty to the whole human race. And yet in all our civilised countries what do we see? That a few people have appropriated these bounties, claiming them as theirs alone, while the great majority have no legal right to apply their labor to the reservoirs of Nature and draw from the Creator’s bounty.
Thus it happens that all over the civilized world that class that is called peculiarly ‘the laboring class’ is the poor class, and that people who do no labor, who pride themselves on never having done honest labor, and on being descended from fathers and grandfathers who never did a stroke of honest labor in their lives, revel in a superabundance of the things that labor brings forth.
and, skipping ahead,
Nothing is clearer than that if we are all children of the universal Father, we are all entitled to the use of His bounty. No one dare deny that proposition. But the people who set their faces against its carrying out say, virtually: “Oh, yes! that is true; but it is impracticable to carry it into effect!” Just think of what this means. This is God’s world, and yet such people say that it is a world in which God’s justice, God’s will, cannot be carried into effect. What a monstrous absurdity, what a monstrous blasphemy!
If the loving God does reign, if His laws are the laws not merely of the physical, but of the moral universe, there must be a way of carrying His will into effect, there must be a way of doing equal justice to all of His creatures.
There is. The people who deny that there is any practical way of carrying into effect the perception that all human beings are equally children of the Creator shut their eyes to the plain and obvious way. It is, of course, impossible in a civilization like this of ours to divide land up into equal pieces. Such a system might have done in a primitive state of society. We have progressed in civilization beyond such rude devices, but we have not, nor can we, progress beyond God’s providence.
There is a way of securing the equal rights of all, not by dividing land up into equal pieces, but by taking for the use of all that value which attaches to land, not as the result of individual labor upon it, but as the result of the increase in population, and the improvement of society. In that way everyone would be equally interested in the land of one’s native country. Here is the simple way. It is a way that impresses the person who really sees its beauty with a more vivid idea of the beneficence of the providence of the All-Father than, it seems to me, does anything else.
I've wandered a bit, but perhaps in a sense come full circle, back to Huxley's "This I Believe."
A friend passed along this excellent piece, from the City Club of New York just over 100 years ago. It is long, but highly instructive, and quite relevant in the 21st century.
Do you want to know the mechanisms by which we concentrate wealth into the portfolios of a narrow slice of our population? Read this. Read Fred Harrison's Wheels of Fortune. Watch Fred's brief video, Ricardo's Law: The Great Tax Clawback Scam:
And consider a town or city you know. Is your experience any different?
Why on earth would we finance infrastructure any other way? Well, California's Proposition 13 is designed to make sure California can't. No wonder the state is in such trouble.
Remember what Leona Helmsley told us: "WE don't pay taxes. The little people pay taxes." She wasn't talking about tax evasion; she was describing tax structure. THIS is how wealth concentrates.
The reference to Spuyten Duyvil is to the point where today the Henry
Hudson Bridge, on the parkway of the same name, crosses from upper
Manhattan into Riverdale, in The Bronx. (It refers to devilish currents
in the rivers, which menace unsuspecting rowers.)
Building of Rapid Transit Lines In New York City By Assessment Upon Property Benefited
A Memorandum Addressed to the Board of Estimate and Apportionment
And The Public Service Commission of New York City.
The City Club of New York
55 West 44th Street
October 2, 1908
The Board of Estimate and Apportionment and the Public Service Commission:
The City Club respectfully submits for your consideration the results of inquiries made through its Transit Bureau with relation to the feasibility of meeting the cost of future subway extensions by means of assessments on the property benefited.
The city urgently needs more rapid transit roads. Private capital seems disinclined, at present at least, to finance the work of building. The city's borrowing power is utterly inadequate to cover the need, and will be until relief may be secured through the slow process of constitutional amendment. If the necessary lines are to be built, it seems self-evident that other methods must be considered.
The Club's investigations show that in the outlying districts reached by the present subway, and to some degree the nearer sections, the value of the property served has increased to an extraordinary degree. This added value would have paid for the cost of the work several times over. While the city as a whole has benefited greatly, the scale of local benefit is naturally much greater. In our judgment, it would not only be helpful as a solution of the problem, but far more equitable to charge a proportion of the cost of constructing a rapid transit line to the property most benefited by such construction.
The argument is elaborated, and the exact results of the Club's investigation given, in the accompanying memorandum. We trust that this may have your examination, and that if the plan commends itself to your judgment, the future policy of the city may be shaped accordingly.
Very respectfully yours,
Homer Folks, Chairman, Transit Committee.
Henry C. Wright, Bureau Director.
BUILDING OF RAPID TRANSIT LINES IN NEW YORK CITY
BY ASSESSMENT UPON PROPERTY BENEFITED
For many years the city has deemed it just to assess upon abutting property the cost of opening streets and building sewers. The theory of such a tax upon property is that it receives almost the exclusive benefit from the construction of a street or sewer adjacent to it. The question naturally arises, does not a transit line, by the benefit that it confers, fall in the same class as new streets and sewers? If a street railroad or rapid transit line be extended into an undeveloped territory, is it not built primarily for the purpose of furnishing transit facilities to future residents in that section? People will buy this property primarily because it has good transit facilities and the value placed upon it is largely based upon its accessibility. This being true and universally admitted, why should not the property thus enhanced in value by the extension to it of a transit line pay for the construction of such line, to the extent that the increased value warrants it, instead of receiving such increased value as a present from the city. This principle, in a modified and unofficial form, is operated in Berlin. The assessment is not collected by the city, but the street car company when extending a line to outlying territory requires the owners of the property benefited to guarantee to the company a certain return upon the cost of such extension.