Rent is not a tax. It is payment for the use of a location, determined by the higgling and haggling of the market, and it makes no difference to the land user whether he pays rent to the city fathers or to a private owner.
Rent is not a tax. It is payment for the use of a location, determined by the higgling and haggling of the market, and it makes no difference to the land user whether he pays rent to the city fathers or to a private owner.
Many are familiar with John Dewey's 1928 "An Appreciation of Henry George," which prefaced the book "Significant Paragraphs from Progress and Poverty," but this 1933 essay is worth knowing, too, and it is harder to find online. [See also Dewey's 1933 radio address, "Steps to Economic Recovery".]
I like his summation, in the first paragraph: "Practical Idealism."
John Dewey's Foreword to The Philosophy of Henry George
by George Raymond Geiger
THE life history of Henry George is typically American even though it has few parallels in this country. There are many instances of rise from poverty and obscurity to wealth or fame or both in the realms of business and politics, and there have been many self-made thinkers in various fields. But Henry George stands almost alone in our history as an example of a man who, without a scholastic background, succeeded by sheer force of observation and thinking that were dictated by human sympathy, and who left an indelible impress on not only his own generation and country but on the world and the future. He is an outstanding example of something of which we hear a good deal, but mainly in the way of unjustified boasting, since the quality in question is more marked in talk than evident in conduct: Practical Idealism. He is an example of what may be accomplished by unswerving devotion and self-sacrifice to a dominating idea. He was, we might say, a man of a single idea, but the statement would be misleading unless we also said that he broadened this one idea until it included a vast range of social phenomena and became a comprehensive social philosophy.
Henry George is typically American not only in his career but in the practical bent of his mind, in his desire to do something about the phenomena he studied and not to be content with a theoretic study. Of course he was not unique in this respect. The same desire has been shared by many British economists. John Stuart Mill's theoretical writings were ultimately inspired by interest in social reform. But there is something distinctive in the ardent crusade which George carried on. His ideas were always of the nature of a challenge to action and a call to action. The "science" of political economy was to him a body of principles to provide the basis of policies to be executed, measures to be carried out, not just ideas to be intellectually entertained, plus a faint hope that they might sometime affect action. His ideas were intrinsically "plans of action."
Unfortunately, in some respects, the American public was practical-minded in a much narrower sense and shorter range than was Henry George himself. It is perfectly true that the culmination and indeed the meaning of his social philosophy is to be found in his proposals regarding taxation. It is also true that many persons accept and are justified in accepting his taxation scheme without having knowledge of or interest in the background of principles and aims with which this scheme was organically associated in the mind of Henry George himself. But nevertheless the connection between the theoretical part and the practical part was vital in the thought of George himself. Something vital in acquaintance with his thought is lost when the connection is broken. One may understand the plan of tax reform by itself but one comes far short in that case of understanding the idea which inspired Henry George.
In spite, therefore, of the immense circulation of George's writings, especially of Progress and Poverty (which I suppose has had a wider distribution than almost all other books on political economy put together), the full sweep of George's ideas is not at all adequately grasped by the American public, not even by that part which has experienced what we call a higher education. Henry George is one of a small number of definitely original social philosophers that the world has produced. Hence this lack of knowledge of the wider and deeper aspects of his thinking marks a great intellectual loss. In saying this, I am not speaking of acceptance of his ideas but of acquaintance with them, the kind of acquaintance that is expected as a matter of course of cultivated persons with other great social thinkers, irrespective of adoption or nonadoption of their policies.
I should hesitate to write in this way, lest I might be thought to depreciate the practical importance of his plan of social action were it not for two things. One of these things is the fact which I have already stated. His theoretical conceptions and his program of social action are so closely united that knowledge of the first will inevitably lead on to a better understanding of the second. The other reason is more immediately applicable. Actual social conditions (like those for example of the present) are bound to raise the problem of reform and revision of methods of taxation land public finance. The practical side of George's program is bound in any case to come forward for increased attention. It is impossible to conceive any scheme of permanent tax reform which does not include at least some part of George's appropriation by society for social purposes of rental value of land. For instance, we are just beginning to understand how large a part unregulated speculation has played in bringing about the present crisis. And I cannot imagine any informed student of social economy denying that land speculation is basic in the general wild orgy, or that this speculation would have been averted by social appropriation, through taxation, of rent. To a large extent, then, some knowledge of the directly practical side of George's thought is bound, in the long run, to result from the movement of social forces. A corresponding knowledge of George's theory of the importance of land -- in the broad sense in which he uses the word -- in social development, of the causes of moral progress and deterioration, cannot be secured, however, without an understanding of his underlying philosophy.
The importance of a knowledge of this underlying philosophy is urged in spite of the fact that the present writer does not believe in the conceptions of nature and natural rights which at first sight seem to be fundamental in the social philosophy of Henry George. For, as I see the matter, these conceptions are symbols, expressed in the temporary vocabulary of a certain stage of human history of a truth which can be stated in other language without any serious injury to the general philosophy implied. It has repeatedly been pointed out that the real issue in the "natural rights" conception is the relation of moral aims and criteria to legal and political phenomena. Personally, I have little difficulty in translating a considerable part of what George says on nature over into an assertion that economic phenomena, as well as legal and political, cannot be understood nor regulated apart from consideration of consequences upon human values, upon human good: that is, apart from moral considerations. The question whether a "science" of industry and finance, of wealth, or of law and the State, can exist in abstraction from ethical aims and principles is a much more fundamental one than is the adequacy of certain historical concepts of "nature" which George adopted as a means of expressing the supremacy of ethical concepts, and on this fundamental question I think George was in the right.
This statement brings me to the connection which exists between the foregoing remarks and the work of Dr. Geiger to which the remarks are introductory. In connection with every topic he discusses, Dr. Geiger makes it clear that a vital connection between ends, human values, and economic means is at the basis of George's distinctive treatment. This fact alone gives a distinctive and timely color to this book. Moreover, the significance of Dr. Geiger's treatment does not stop at this point. There is no phase of the work and the influence of Henry George which is not considered. The account of his life and development forms a personal thread which binds all the parts together. Dr. Geiger has given us a book which meets the contemporary demand for an adequate interpretation of the thought and activity of Henry George regarded as a vital whole and not as an aggregate of isolated parts. It will enable the reader to obtain a clear and comprehensive view of one of the world's great social philosophers, certainly the greatest which this country has produced.
and, more to the point, is there a better way to do things, if an efficient economy, more jobs, less income concentration are things we value?
Interesting that, according to these articles, the lords of NYC land will collect 6% or 8% of the land's value when the rent resets. 6 or 8%! (Typical property taxes in NYC for condos run less than 1% of the total value; see http://www.nytimes.com/2012/10/16/nyregion/many-high-end-new-york-apartments-have-modest-tax-rates.html, which includes this paragraph:
"In a study of 2010 nationwide property tax rates, the average homeowner paid a median of 1.14 percent of home value that year, according to the Tax Foundation, a research group. In Manhattan, that figure was 0.78 percent. For the $88 million apartment at 15 Central Park West, 0.78 percent would be $686,000. But this year, the property taxes due on that penthouse were $59,000."
Just think how much productive activity we could untax were we-the-people to collect some portion of that annual land rent for public purposes. And consider how unproductive the Lords of Land are. What have they done to earn that land rent? Is our "tradition" -- to let them keep it -- a wise or just one, or is it part of our wealth concentration structure?
Here are the two articles, with a couple of calculations added: (Notice that acreage is not even mentioned!)
NYC Trump Co-Op Dwellers Face Million-Dollar Bills
By Oshrat Carmiel Nov 6, 2014 4:16 PM ET
The ground beneath Trump Plaza, at 167 E. 61st St., is up for sale as land prices break records.
Manhattan’s surging land costs are leaving the shareholders of an East Side luxury co-operative with a tough choice: pay a hefty price to buy the land under the building, or face increasing bills to keep renting it.
The ground beneath Trump Plaza, at 167 E. 61st St., is up for sale as land prices break records. The co-op board has offered to buy the property for $185 million, a cost that would saddle residents with assessments that, for some, would top $1 million, said Adam Leitman Bailey, a New York real estate attorney who has been contacted by owners concerned about the deal before it goes into contract.
“People are calling me to stop this from happening,” said Bailey, who has reviewed board documents but hasn’t been officially retained. “People want to stop the assessment.”
The 31-year-old co-op, which makes annual rent payments to the family that owns the ground, is weighing its financial future at a time when rising prices for land make it attractive for investors to buy such property for a reliable stream of rental income. The board opted to put in a bid as it otherwise faces the prospect of a steep rent increase when the lease resets in 2024, Bailey said.
“The fact that the family put it up for sale should terrify the co-op,” said Joshua Stein, a Manhattan real estate attorney who isn’t involved in the transaction.
“Whatever opportunistic investor buys the land will probably be way more aggressive about the rent reset than either an estate or a group of heirs,” he said. “Someone who is buying it, is buying it specifically to squeeze out every last dollar of rent.”
Marc Cooper, president of the co-op board and vice chairman of investment-banking firm Peter J. Solomon Co., didn’t return a phone call left at his office yesterday seeking comment on the plan to purchase the ground.
Co-op residents buy shares in a corporation that owns the building, rather than getting a deed to the apartment itself, as they would in a condominium. Shareholders make monthly maintenance payments that collectively cover building costs such as mortgage payments, ground rent and operating expenses.
A Trump Plaza shareholder with a 1,000-square-foot (93-square-meter) one-bedroom apartment whose monthly maintenance fee is now about $2,100 would pay about $9,800 after the rent is recalculated in 10 years, Bailey said, citing a projection by the building’s co-op board. The rent increase would be about 8 percent of what the land value is in 2024, he said.
Buildable lots in Manhattan sold for an average of $657 a square foot in the third quarter, up 29 percent from a year earlier and an all-time high for the period, according to Massey Knakal Realty Services. Three purchases completed in the quarter were for more than $1,000 a square foot, the firm’s data show.
LVTfan here: That $657 per square foot is NOT per square foot of land (at 43,560 sq ft per acre, that would be just $28.6 million per acre, laughably low in Manhattan). Rather, it is per buildable square foot. Quick and dirty, if a, say, 20 story building can be built on a 10,000 sf footprint, constituting 200,000 sf, the calculation would be 200,000 times $657, or $131.4 million, for that 1/4 acre, which works out to over $500 million per acre. $500 million per acre -- compared to an acre of good agricultural land, at $5,000 per acre, that's 100,000:1. (And for those 3 purchases over $1,000 psf, add 50% to that ratio.)
Possibly difficult for those of us who see land which sells for $5,000 or $50,000 or even $500,000 per acre to fathom $500 million per acre. But that's reality!
Trump Plaza’s situation is different from most other co-operatives in Manhattan, which do own the land on which the building sits and make no rent payments. Co-op units with ground leases tend to sell at a discount because they have higher maintenance costs and buyers sometimes face challenges getting mortgage financing. Other ground-lease co-ops in New York include 995 Fifth Ave., the Excelsior at 303 E. 57th St. and Carnegie House at 100 W. 57th St.
The ground beneath the 324-unit Carnegie House was purchased for $285 million to a group that includes Rubin Schron’s Cammeby’s International and real estate investor David Werner, Christa Segalini, a spokeswoman for Cammeby’s, said today. The 21-story building, with an entrance on Sixth Avenue, occupies an entire block front from 56th Street to 57th Street, according to real estate website Streeteasy.com.
For shareholders at Trump Plaza, buying the land beneath them means coming up with large sums of cash up front. Each owner was assessed a fee of about $2,329.40 a share, according to Bailey.
A resident of a two-bedroom unit who holds 440 shares in the corporation, for example, would be charged $1.02 million, Bailey said. A 1,600-square-foot three-bedroom apartment, worth 671 shares, would get a $1.56 million assessment. Residents get more shares the higher up their apartments are in the 39-story building.
The 154-unit Trump Plaza, at 61st Street and Third Avenue, was completed in 1983, according to StreetEasy. A 2,800-square-foot unit on the 32nd floor with views of Central Park is listed for sale at $3.95 million. The monthly maintenance charge for the three-bedroom, four-bathroom apartment is $7,228, according to the website.
LVTfan here: One might reasonably wonder how much (a) the sellers of the land were paying NYC in property taxes; (b) how much of the monthly "maintenance charge" for the condo is paid by the condo complex to the city in property taxes (which pay for the schools and lots of other public services) and how much is for the building and its services to the condo owners; and (c) how much the land share of that 32nd floor unit is. If a 1600sf apartment gets a $1.56 million assessment, the 32nd floor apartment, at 2800sf should be roughly twice that, or about $3 million. Thus, the $3.95 million asking price on the 32nd floor is about 4/7 of the total value, or 56%; the other 44% is land value.
The sale of the ground beneath the tower hasn’t gone into contract yet. Douglas Harmon and Adam Spies, brokers at Eastdil Secured LLC, are representing the owners, who are listed in public records as the estate of Donald S. Ruth and members of the Ruth family. Spies declined to comment on plans for the sale.
A purchase of the land by the co-op ultimately would add resale value to the building’s apartments, Stein said. Extinguishing the ground lease permanently removes the threat that rents will reset to unaffordable levels. With that uncertainty gone, future buyers would be willing to pay more for a unit in the tower, he said.
“If you’re the co-op, getting rid of that threat is a really good thing,” Stein said. “There’s a lot of value being created.”
To contact the reporter on this story: Oshrat Carmiel in New York at firstname.lastname@example.org
To contact the editors responsible for this story: Kara Wetzel at email@example.com Christine Maurus
Here's the second article
November 06, 2014 11:30AM By Adam Pincus
David Werner, a Borough Park investor who has wowed New York City with a series of big buys this year, partnered with Rubin Schron and the Cohen family to pay $285 million for the land under 100 West 57th Street, sources told The Real Deal. The 324-unit Carnegie House cooperative building is the ground tenant on the property.
A person close to the deal said the investment group closed yesterday on the purchase of the property, which is located at the corner of Sixth Avenue and 57th Street.
This is the third major acquisition by David Werner this year. He purchased 5 Times Square for $1.5 billion and the leasehold for the Mobil Building at 150 East 42nd Street, for $855 million. Werner, Schron and the Cohen family’s Carlton Associates did not immediately respond to requests for comment.
Insiders expect to see more pricey sales of land under co-op buildings with resets looming.
In fact, the sale is being mirrored nearby with the marketing of the ground under the Trump Plaza at 167 East 61st Street, which has a rent reset in 2024. Eastdil Secured brokers Doug Harmon and Adam Spies have that listing.
The co-op building has a ground lease that runs for another 51 years with the property owner, currently paying about $4.4 million per year. In approximately 10 years, the rent for the ground lease payments will reset. That reset will be based on market values.
|an average of $13,600 per year per family -- ignoring the commercial tenants|
Ground resets typically price the new rent at about 6 percent of the current market value.
Investment sales broker Robert Knakal, chairman of Massey Knakal Realty Services, estimated the value of the land to be at least $1,200 per square foot and up to $1,500 per foot, if the value of the retail is taken into consideration. Knakal is not involved in this property.
At that value, the land with 377,000 square feet of development rights, would be worth $452 million. That could work out to an annual rent payment of $27 million per year, if reset today, according to an analysis by TRD.
|An average of $83,300 per family -- ignoring the commercial tenants|
To help fund the purchase, the group obtained a $180 million loan from Natixis Capital Markets in a deal arranged by Drew Anderman, a senior managing director at the mortgage brokerage firm Meridian Capital Group, insiders familiar with the deal said.
Posted on November 09, 2014 at 08:50 PM in a Manhattan acre, absentee ownership, all benefits go to landholder , better cities, cui bono?, financing services, income concentration, inherited wealth, land rent, land share of real estate value, land value created by community, leased land, Natural Public Revenue, NYS Property Tax Reform, Occupy Wall Street's values, popular ignorance of land economics, property tax, reaping what others sow, taxation, urban land value, wealth distribution or concentration | Permalink | Comments (0)
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It appears that someone in Congress -- probably multiple someones -- feels that we're not giving away the Commons fast enough, and that the federal government ought to rely on other kinds of income rather than collecting the fair market rent on the land on which individually owned cottages sit within Forest Service lands, those rents ought to be reduced! They've asked the CBO to estimate the costs of this gifting.
A bit of calculating reveals that the owners of the 14,000 cottages are paying, on average, $2,142 in land rent annually, at 5% on older valuations of the land, suggesting that the average lot is currently valued at about $43,000 for land rent purposes. Interestingly, these are apparently longtime owners; average turnover is 400 per year, or 2.9%.
When we-the-people lower the rent below market value, what happens to the selling price of the homes? The selling prices go up. In other words, the leaseholders who want to sell can charge buyers more for the house. Aren't we nice to provide those homesellers such a gift?
Not only that, our gift is to be retroactive to the beginning of 2014, it appears!
They propose to cap the fees at $5,600, no matter what the updated valuation of the land might be. That is, no matter what the real value of the cabin's site might be, for land rent purposes, the impolite fiction would be that it is worth no more than $112,000. No matter what the view is, what the location is, how good the infrastructure is, what services the federal employees provide to keep the lot accessible. This sounds a bit like California's Proposition 13, which detaches property taxes from current valuations.
More typically, if a tenant gives up a lease, they are expected to remove their cottage from the lot and leave it clean for the next tenant. The landlord -- we the people -- shouldn't have to deal with abandoned cottages.
Below is a copy-and-paste of the PDF at http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4873.pdf; I've not bothered with the formatting of the tables.
Posted on September 12, 2014 at 09:43 PM in assessment, buildings depreciate, capital gains are land gains, common good, commons, cui bono?, economic rent, land appreciates buildings depreciate, land rent, location, location, location, Natural Public Revenue, pay for what you take, special interests, user fees | Permalink | Comments (0)
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I came across an interesting article from 1908, with what strikes me as a well-described concept:
MUTUAL TOWN-BUILDING IN ENGLAND
"GARDEN CITIES" OF INDIVIDUAL, DETACHED HOMES BUILT WITHOUT THE AID OF PHILANTHROPY — A BETTER PLAN THAN REBUILDING THE SLUMS
BY WILHELM MILLER
(who visited these cities to make a first hand study of them)
LETCHWORTH, "the perfect city," less than five years old but with 6,000 inhabitants, is thirty-four miles north of London and is reached by the best trains in fifty minutes. It has 3,818 acres and its population is limited to 35,000 inhabitants, so that there will never be any crowding. The factory quarter can never be enlarged; it is situated as far as possible from the residence quarter and the prevailing wind carries the smoke away from the homes. Nearly one-sixth of the town site, or two hundred acres, is perpetually reserved for open spaces, including parks, jjlaygrounds, and a golf course.
And even if the surrounding country should build up as solidly as London, the people of Letchworth are always sure of enjoying a beautiful rural scene because a large belt is perpetually reserved for agriculture. This belt comprises 2,500 acres, or 65 percent of the whole estate. It will undoubtedly be occupied by market gardeners and dairymen, for gardens yield about eleven times as much profit per acre as farms.
A man can buy a house at Letchworth or he can rent one, but he cannot buy the land. He cannot even lease it for 999 years, because that would enable him to sell or lease his property in such a way as to make a profit from the unearned increment. He can lease the land for ninety-nine years without revaluation and the improvements will not revert to the landowner. In any case, he has every advantage enjoyed by the man who owns the land outright — save one. He cannot get rich from what Henry George called the "unearned increment" but which in Letchworth is called the "collectively earned increment." Even if he rents his house and land from week to week he cannot be dispossessed by some one who offers more money. In the agricultural belt, the tenant is allowed to continue in occupation as long as he is willing to pay as much as anyone else, less 10 percent, in favor of the present tenant.
Letchworth has been built upon a plan whereby people in any part of the world can make a city that is practically perfect without asking any rich man to give money, and without facilities for borrowing any large amount. The essence of the scheme is to preserve to the people the "collectively earned increment." The Letchworth people take some pride in the use of this phrase, and justly. For, merely by moving to Letchworth and living there they created in four and a half years a net increase of half a million dollars. They do not get that half million now, but some day they will get 95 percent of it in the form of abolition of taxes. And that day, in my opinion will come in about twenty years, for by that time the city should be able to pay back all that its public works have cost.
THE TWO OTHER "GARDEN CITIES "
There are two other successful "garden cities," Bourneville, a suburb of Liverpool built by the Cadbury Cocoa Works, and Port Sunlight near Birmingham created by the Lever Brothers, soap manufacturers, solely for their employees.
Port Sunlight is the most beautiful because the Messrs. Lever have gone to the unnecessary extreme of making no two houses alike. Also, they have spent more upon ornamentation of
houses than is necessary and they plant and care for all the front yard gardens.
The tenants at Port Sunlight get more for their money than elsewhere for two reasons. First, the rents are too low, because they are calculated only to pay expenses. Second, the social institutions, though more elaborate than elsewhere, cost the people nothing originally and they can and do manage them so as to keep expenses down to the mininum.
THE "taint" of philanthropy
The one great drawback to the Port Sunlight idea is that it involves too great an expenditure on the part of one man or one firm, and it is hard to prove to a factory owner that the investment is worth while. In this case, the factory owners disclaim all idea of philanthropy and are positive that it pays, because their employees are healthier, happier, more prosperous and therefore more efficient.
The Lever Brothers rejected all direct profit-sharing schemes because they thought this the only plan that would benefit the wives and children of the men. There is the keenest competition for a chance to work in that factory and live in one of those houses. But all the profits to the firm are indirect. Rarely, if ever, can they be expressed in dollars and cents and indirect profits can never be expected to weigh in the mind of the average employer against the appalling fact that Lever Brothers have put about $1,700,000 into their paradise at Port Sunlight and have never directly gotten back one cent.
In other words, if this is not philanthropy, it is too much like it to be generally copied. Humanity cannot look to great employers for the solution of the housing problem. And employees do not want philanthropy.
And at Bourneville there is less of the philanthropic spirit. The employees of the Cadbury Cocoa Works get a normal social life, which the people of Port Sunlight do not have. The cocoa workers are not obliged to live in Bourneville and only 42 percent of the tenants at Bourneville are employed at the Cadbury factory. Thus Bourneville is a mixed community and the ideal community must be mixed — not merely industrial, or suburban, or composed exclusively of any one class. It is sad to see the magnificent clubs, lecture halls, baths, and other social features at Port Sunlight languish for attendance, but it is only human nature. On getting home after a day's work, a man wants to forget thoughts of his work. And if he lives in a city where every house and every person he sees on the street suggests the workroom, he is bound to escape to the next town where he can get a drink or otherwise forget his daily routine. The only serious complaint which the tenants at Port Sunlight have any right to make is that they live in the atmosphere of a single class.
Mr. Cadbury gave Bourneville to the people. How then does it escape the "taint" of philanthropy?"
A GREAT FUND FOR PROPAGANDA
It is true that Mr. Cadbury gave the property to a trust which administers it for the benefit of the people, but eventually this trust will be able to finance hundreds of other garden cities that will be purely cooperative. For instance, people wishing to live in a "garden city," where all the "collectively earned increment" benefits all alike instead of going to the building up of individual fortunes, can form a stock company with shares as low as $25. If the Bourneville trust approves of their plan, it will lend them enough money to start a town. But the company must pay it back, so that the Bourneville trust can use it again and again.
How does the Bourneville trust hope to get this fund? Its income, which is almost wholly rent, doubles every five years. At this rate, in fifty years it will have an annual income of five million dollars. Long before that, Bourneville will have reached its limit of population. And since the trust never has to pay back the cost of the houses, roads, or other public works, it will be able to roll up a vast sum for the propagation of the "garden city" idea.
The all-important point is that the Bourneville trust will never give anyone something for nothing. It will merely lend money to people who are building "garden cities."
THE HEALTH AND BEAUTY OF THESE CITIES
These are far healthier and more beautiful than cities that have grown up normally; healthier because crowding is prevented by a limit to the population and because more and better provision is made for outdoor sports — to say nothing of architecture in which health is the first thought. The average town death-rate in England is 15 per 1,000. Letchworth has cut this down to 2.75. The birthrate at Port Sunlight is twice the average for the rest of England.
The greater beauty of these garden cities lies chiefly in the architecture and gardening. The houses and stores all conform to one general style of architecture, but are never monotonous. Every building must be approved by the city's architect. The houses are all of brick and built to last. There are no long rows of houses just alike. The first idea was to have no two houses alike but that is a needless waste of money. For poor people it is impossible to get good houses cheap enough without building three or four in a row and this row can be duplicated in another part of town without harming the total effect. Moreover, Bourneville has shown how much can be saved on ornamentation. The plainest houses are transformed in three years by the use of climbers. Bourneville's head gardener sees that every house has a different set of vines. Not merely is the plainness soon hidden thereby, but also the individuality of each home is notably increased.
Gardening is compulsory at Bourneville and Letchworth. If a tenant neglects his garden at Bourneville and will not hire some one to weed it, the estate notifies him that he will forfeit his lease unless he makes his place look decent. But there have been only two cases of neglect.
The estate plants a hawthorn hedge all round each man's place, digs and manures his vegetable garden, lays down the lawn, sets out dwarf fruit trees, plants the climbers on his house, and digs his flower-beds. These expenses are considered part of the cost of building and the rent is based thereon. The tenant must keep it in good condition but he can buy plants from the estate cheaper than from a nurseryman and he gets instruction for nothing. There is no chance for a beginner to get discouraged.
A FIVE-ROOM HOUSE FOR $7.80 A MONTH
I am almost afraid to tell how much a tenant gets for his money at one of these garden cities. The cheapest houses at Bourneville rent for only $7.80 a month, which includes taxes and water rates. Such a house contains five rooms and a wonderful "folding bath" which stands up like a cabinet when not in use. Clerks and artisans, however, generally pay about $12.30 a month for seven rooms and an eighth of an acre.
The ideal amount of land at Bourneville is one-eighth of an acre, and the average value of the fruits and vegetables produced on such a plot is about $32.24 a year, or sixty-two cents a week the year round. The smallest lots at Letchworth are a twelfth of an acre, which is the same as 25 x 145 feet, and is 45 percent larger than the typical New York lot, on which many families are allowed to live. In addition to these direct benefits the tenant gets a chance to play cricket, tennis, bowls, quoits, and hockey near by at no expense or at less cost than in an ordinary club.
All rents at Bourneville are figured at 8 percent of the cost. Taxes, insurance and repairs cost 3 percent, leaving a profit to the Bourneville estate of 5 percent. With this 5 percent, it employs a permanent staff of about one hundred builders and has about fifty houses under construction all the time.
OBSTACLES OVERCOME AT LETCHWORTH
The Letchworth company had its hands full with public works, for it had to construct eight miles of road, eleven miles of sewers, and seventeen miles of water main. Also it had to build a reservoir for water, a gas making plant, and an electric power station to supply the factories, of which it now has twenty-four. Another difficulty overcome was transportation. The company has cooperated with the railroad so well that its "commuters" can make their thirty-four miles to and from London daily in less than an hour, though most trains require an hour and a quarter.
The income of the land company is partly from the sale of water, gas, and electricity, but chiefly from ground rent. It never sells any land or houses. Ground rent may seem a very small source of revenue, but every man, woman and child in England contributes for ground rent an average of $10.50 a year. The Letchworth company can, and doubtless will, raise the ground rent as its limit of population approaches, but even if it should raise it as high as the average for England, the tenant will pay less than elsewhere, for taxes will eventually be abolished.
Postscript -- a few hours after I posted this, a google alert on ground rent brought me a story about Letchworth, at http://www.thecomet.net/news/letchworth_businesses_finally_land_meeting_over_rent_rise_1_2311500
Posted on August 01, 2013 at 05:40 PM in common good, commonwealth, economic rent, free land, infrastructure, is this socialism?, land appreciates buildings depreciate, land monopoly capitalism, land rent, land speculation, leased land, make land common property, municipal ownership of utilities, Natural Public Revenue, one solution for many problems, private property in land, unearned increment | Permalink | Comments (0)
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They said also that this king divided the country amongst all the Egyptians and from thence he drew his revenues, having required them to pay a fixed tax every year.
—Herodotus, Euterpe, II, 109.
PUBLISHED: JANUARY 7, 2013
A lease is a lease is a lease – or so you may think. Yes, real property leases grant an estate in land to a tenant for a period of time. And yes, the tenant pays for that right of possession. But the action in a lease isn’t in the conveyance provisions; it’s in the contract provisions. Multiply out the rent and other annual monetary obligations by the length of the lease term (in years), and you’ll see that it might be (and often is) a big dollar contract. Even more important, unlike the vast majority of contracts whose obligations are satisfied in days or weeks, a lease contract goes unfulfilled for 50, 75, “99,” and even 500 years. That takes it beyond the life of the parties involved in its creation, and the future brings surprises. Neither Nostradamus nor Jules Verne got everything right.
Why a Ground Lease?
If a tenant has to build its own building (as is often the case), and has all of the burdens of ownership, why would it lease a property knowing that at the end of the lease term it has nothing left to show for its money and efforts? There are a number of common reasons, principal among them is that the owner won’t sell the land and the tenant has no alternative.
Real property often carries a long term unrealized gain, waiting to be taxed upon its sale.
Not every landowner is interested in making further active real property investments. This makes a like kind exchange unappealing.
Ground leasing the same land keeps ownership in the family. At the owner’s death, because of the current estate tax “stepped up basis” arrangement, the built in gain may never be taxed.
Posted on January 13, 2013 at 11:30 AM in a Manhattan acre, a wedge driven through society, absentee ownership, all benefits go to landholder , capital gains are land gains, common good, cui bono?, economic rent, estate taxes, facilitating commerce, financing education, financing infrastructure, financing services, FIRE sector, fixing the economy, fruits of one's labors, income concentration, inherited wealth, land appreciates buildings depreciate, land monopoly capitalism, land rent, land speculation, land value created by community, land value taxation, Landlord's Prayer, landlordism, leased land, location, location, location, monopoly -- not the game, Natural Public Revenue, Occupy Wall Street's values, popular ignorance of land economics, private property in land, reaping what others sow, rent-seeking, sharecropping, slavery, special interests, toll-takers, triple net leases, unburdening the economy, unearned income, unearned increment, untaxing buildings, untaxing production, urban land value, wealth distribution or concentration | Permalink | Comments (0)
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The hospitals (of England) are full of the ancient. . . . The almshouses are filled with old laborers. Many there are who get their living with bearing burdens, but more are fain to burden the land with their whole bodies. Neither come these straits upon men always through intemperance, ill-husbandry, indiscretion, etc.; but even the most wise, sober and discreet men go often to the wall when they have done their best. . . The rent-taker lives on the sweet morsels, but the rent-payer eats a dry crust often with watery eyes.
—Robert Cushman, Plymouth, 1621, in Young's "Chronicles of the Pilgrims."
Posted on January 12, 2013 at 12:45 AM in a wedge driven through society, all benefits go to landholder , Earth for All, economic rent, ending poverty, fruits of one's labors, income concentration, land rent, landed gentry, Landlord's Prayer, landlordism, monopoly -- not the game, poverty, poverty machine, poverty's cause, private property in land, privilege, reaping what others sow, toll-takers, unearned income, wealth distribution or concentration | Permalink | Comments (0)
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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 went away.
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;
The dark-browed, 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.)
Posted on December 30, 2012 at 09:42 PM in buildings depreciate, capital gains are land gains, cost of living, economic rent, ecosystem services, ending poverty, facilitating commerce, financing education, financing infrastructure, financing services, FIRE sector, fixing the economy, free land, free trade, income concentration, infrastructure, land appreciates buildings depreciate, land includes, land rent, land value created by community, location, location, location, make land common property, Monopoly and The Landlord's Game, Monopoly and The Landlord's Game , natural resource revenues, Occupy Wall Street's values, one solution for many problems, urban land value, wealth distribution or concentration | Permalink | Comments (0)
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If, then, successive generations of men cannot have their fractional share of the actual soil (including mines, etc.) how can the division of the advantages of the natural earth be effected? By the division of its annual value or rent; that is, by making the rent of the soil the common property of the nation. That is (as the taxation is the common property of the State), by taking the whole of the taxes out of the rents of the soil, and thereby abolishing all other kinds of taxation whatever. And thus all industry would be absolutely emancipated from every burden.
— PATRICK EDWARD DOVE, Theory of Human Progression (1850), Chap. III., Sec. 3.
Posted on December 30, 2012 at 12:33 AM in Christian ethics, commons, commonwealth, Earth for All, equal opportunity, financing education, financing infrastructure, financing services, fixing the economy, free land, government's role, justice of the single tax, land rent, land value taxation, make land common property, Natural Public Revenue, natural resource revenues, rent, defined, untaxing production | Permalink | Comments (0)
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Among no class of reformers do we find more clear thinking or a sounder political economy than among the "single-taxers." Following the writings of the late Henry George there is a considerable and important literature upon this subject. Land monopoly and speculation should be stopped. Labor should not be taxed. The resources of nature should be made to minister equitably to the whole people. Now the weakest pay the most tax. It should be the strongest and they whom the government most benefits.
A Baltimore Instance
A single tax man of Baltimore, Mr John Salmon, expresses no little surprise that Senator Hanna's candidate for governor of Ohio supposes that the single tax has been a disastrous failure wherever tried. Of Mr Herrick and his notion Mr Salmon writes: This stamps him as being a twisted thinker and a loose observer. The single tax is in operation all over the United States, flowing into the pockets of private individuals, which is what single taxers object to. Here in Baltimore more than in any other section of the country, it is strongly apparent. We have the ground rent system in operation, 90 percent of the real estate being held on leaseholds. The custom is an old English one grafted on the Maryland colonies by Lord Baltimore and his English compeers, and it has grown and flourished like a green bay tree. When one buys a home here it is in nine cases out of ten subject to a ground rent. These ground rents are dealt in as a form of investment the same as a mortgage or any other form of investment; but the point to observe is that they are a single tax, pure and simple, the price paid for the use of the ground per se and for ground only.
Our last assessment separated the value of the land from the value of improvements, and it is done every day in our community. Baltimore has more houses per capita than any city in the country, due to the ground rent system; and a house costing $1,200 to build is very often sold for $800 or $900 in order to create a ground rent ranging from three dollars a front foot to $20 and $40 a front foot. To explain more fully: Bonus buildings are run up on plats of ground split up into lots of 15x90, and a ground rent say of $6 per front foot is put on the lot, making $90 a year ground rent, which the buyer agrees to pay, and in his ground rent is a clause that he will also pay all taxes. This $90 is essentially a single tax. The agreement to pay it is exactly the same kind of a contract that is in vogue in Fairhope, Ala. With this extremely important exception, that whereas we in Baltimore bind ourselves to pay all the taxes, in Fairhope the company or lessor, agrees to pay all taxes. Talk of its being a disastrous failure! Not on your life. Ground rents are as scarce as hen's teeth, and can only be bought on a three percent basis. They command as good a price as government bonds, and it is estimated that $14,000,000 at least is raised in Baltimore alone from this source — nearly twice as much as the city and state taxes amount to. And what is this tax of $14,000,000 paid for? Why, merely for the privilege of living in the city of Baltimore. That's all the payers get for it. And the only kick we've got coming is that the private individuals get that money instead of the city and state.
An article in the NYT a few weeks ago described some proposed changes in the zoning for midtown Manhattan.
The accompanying map says, "Around Grand Central Terminal, towers could be up to twice the size now permitted. Development could also take place along the Park Avenue corridor, where towers could be more than 40% larger. Elsewhere in the district, towers could be 20% larger."
But New York’s premier district, the 70-block area around Grand Central Terminal, has lagged, Bloomberg officials say, hampered by zoning rules, decades old, that have limited the height of buildings.
Mayor Michael R. Bloomberg wants to overhaul these rules so that buildings in Midtown Manhattan can soar as high as those elsewhere. New towers could eventually cast shadows over landmarks across the area, including St. Patrick’s Cathedral and the Waldorf-Astoria Hotel. They could rise above the 59-story MetLife Building and even the 77-story Chrysler Building.
Mr. Bloomberg’s proposal reflects his effort to put his stamp on the city well after his tenure ends in December 2013. Moving swiftly, he wants the City Council to adopt the new zoning, for what is being called Midtown East, by October 2013, with the first permits for new buildings granted four years later.
His administration says that without the changes, the neighborhood around Grand Central will not retain its reputation as “the best business address in the world” because 300 of its roughly 400 buildings are more than 50 years old. These structures also lack the large column-free spaces, tall ceilings and environmental features now sought by corporate tenants.
The rezoning — from 39th Street to 57th Street on the East Side — would make it easier to demolish aging buildings in order to make way for state of-the-art towers.
Without it, “the top Class A tenants who have been attracted to the area in the past would begin to look elsewhere for space,” the administration says in its proposal.
The plan has stirred criticism from some urban planners, community boards and City Council members, who have contended that the mayor has acted hastily. They said they were concerned about the impact of taller towers in an already dense district where buildings, public spaces, streets, sidewalks and subways have long remained unchanged.
Mr. Bloomberg has encouraged high-rise development in industrial neighborhoods, including the Far West Side of Manhattan, the waterfront in Williamsburg, Brooklyn, and in Long Island City, Queens. But with the proposal for Midtown, which is working its way through environmental and public reviews, he is tackling the city’s commercial heart.
“Unlocking the development potential in this area will generate historic opportunities for investment in New York City,” Deputy Mayor Robert K. Steel said.
The initiative would, in some cases, allow developers to build towers twice the size now permitted in the Grand Central area. The owner of the 19-story Roosevelt Hotel at Madison and 45th Street could replace it with a 58-story tower under the proposed rules. Current regulations permit no more than 30 floors.
See also http://lvtfan.typepad.com/lvtfans_blog/2008/03/hotel-roosevelt.html , which discusses this in terms of value of land per buildable square foot.
When zoning changes increase the value of land, who should reap the benefit? The current landholder, or the community? What did the landholder do to earn that windfall? Do you think it comes out of thin air? Do you think it is paid him by other rich people?
Or do you recognize that it is part of the structure which enriches a few and impoverishes the many?
It is easy to fix this one. One just has to recognize the structure, and value the land correctly, and start collecting the lion's share of the land rent for the community. If it is more than NYC can put to use -- and it will be -- then apply the excess to reducing our federal taxes on productive effort. Use it to fund Social Security, or Medicare, or universal health insurance, or something else that will benefit the vast majority of us instead of an undeserving tiny privileged minority. Don't throw it in the ocean, and don't leave it in private pockets, be they American or not.
Collect the land rent. Repeat next year, and the next, and the next. Natural Public Revenue.
Posted on October 21, 2012 at 05:36 PM in a Manhattan acre, all benefits go to landholder , better cities, classical economists, commons, corporations, cui bono?, economic rent, financing education, financing health care, financing infrastructure, financing services, financing Social Security, fixing the economy, free lunch, government's role, income concentration, justice of the single tax, land appreciates buildings depreciate, land rent, land value created by community, land value taxation, location, location, location, make land common property, monopoly -- not the game, Natural Public Revenue, Occupy Wall Street's values, one solution for many problems, pay for what you take, payroll tax, popular ignorance of land economics, privilege, special interests, time making wrongs into rights, toll-takers, unburdening the economy, underused land, unearned increment, untaxing production, urban land value, wealth distribution or concentration, windfalls | Permalink | Comments (0) | TrackBack (0)
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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.
Posted on September 04, 2012 at 11:30 AM in all benefits go to landholder , America in the world, as much and as good, common good, commons, commonwealth, corporations, cui bono?, Earth for All, economic justice, economic rent, ecosystem services, environment, equal freedom, equal opportunity, equality, fruits of one's labors, greenhouse gases, incentive taxation, incentives, income concentration, infrastructure, inter-generational equity, land includes, land rent, land value created by community, land value taxation, Natural Public Revenue, natural resource revenues, natural resources, oil, pay for what you take, payroll tax, popular ignorance of land economics, privatization, privilege, property tax, property tax reform, Proposition 13, prosperity, special interests, sprawl, tax reform, toll-takers, unburdening the economy, unearned income, untaxing buildings, untaxing production, user fees, wealth distribution or concentration | Permalink | Comments (0)
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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.
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.
Posted on September 04, 2012 at 09:58 AM in common good, commons, cui bono?, economic rent, ecosystem services, financing education, financing health care, financing infrastructure, financing services, financing Social Security, FIRE sector, fixing the economy, government's role, highest salaries, income concentration, infrastructure, land includes, land rent, land value created by community, money in elections, Natural Public Revenue, natural resource revenues, natural resources, political economy, popular ignorance of land economics, privatization, privilege, public spending, reaping what others sow, rent, defined, rent-seeking, socializing risk and privatizing profit, special interests, Stiglitz, tax reform, time making wrongs into rights, toll-takers, unearned income, urban land value, wealth distribution or concentration | Permalink | Comments (0)
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I can easily imagine a great proprietor of ground rents in the metropolis calling attention to the habitations of the poor, to the evils of overcrowding, and to the scandals which the inquiry reveals, while his own income is greatly increased by the causes which make house-rent dear in London, and decent lodging hardly obtainable by thousands of laborers.
— PROF. THOROLD ROGERS, Work and Wages, Chap. XX., p. 550.
Efforts should be made to prevent the increase of value which is occasioned by the growth of the population of towns enriching private individuals.
— The REV. W. MOORE EDE, Honorary Canon of Durham, The Church and Town Problems, p. 88, note.
Posted on August 07, 2012 at 12:01 AM in a Manhattan acre, a wedge driven through society, absentee ownership, all benefits go to landholder , better cities, buildings depreciate, congestion, cost of living, cui bono?, Earth for All, fixing the economy, housing affordability, human nature, income concentration, land monopoly capitalism, land rent, land value created by community, landed gentry, landlordism, location, location, location, playing by the rules, popular ignorance of land economics, privatization, privilege, reaping what others sow, rich people's useful idiots, toll-takers, urban land value | Permalink | Comments (0)
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Let it be observed that when land is taxed, no man is taxed; for the land produces, according to the law of the Creator, more than the value of the labor expended on it, and on this account men are willing to pay a rent for land.
— PATRICK EDWARD DOVE, Theory of Human Progression (1850), Chap. I., Sec. 2, p. 44
(American Edition of 1895).
Posted on August 05, 2012 at 06:56 PM in direct taxation, Earth for All, economic rent, fixing the economy, free land, justice of the single tax, land rent, land value taxation, location, location, location, Natural Public Revenue, natural resource revenues, no victims, pay for what you take, rent, defined, rent-seeking, unburdening the economy, unearned increment | Permalink | Comments (0)
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The ordinary progress of a society which increases in wealth is at all times to augment the incomes of landlords — to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer as it were in their sleep, without working, risking or economizing. What claims have they, on the general principles of social justice, to this accession of riches?
— JOHN STUART MILL, Principles of Political Economy, Book V., Chap. 2, Sec. 5
Posted on July 31, 2012 at 12:07 AM in absentee ownership, all benefits go to landholder , cui bono?, Earth for All, economic rent, FIRE sector, income concentration, justice of the single tax, land appreciates buildings depreciate, land rent, land share of real estate value, land value created by community, landed gentry, landlordism, location, location, location, Natural Public Revenue, Occupy Wall Street's values, poverty machine, private property in land, privatization, privilege, reaping what others sow, rent-seeking, socializing risk and privatizing profit, technological advances, trickle-down economics, urban land value, wages driven down, wealth distribution or concentration | Permalink | Comments (0)
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When I came across this article, 111 years old, I thought of the Ipswich, Massachusetts, trust established in 1650 by the gift of a fine 32-acre piece of land by a forward-thinking resident. His stated intention was that the land be kept by the town, forever, for the benefit of the public schools. Alas, it was poorly managed for a number of years, perhaps decades, and this appears to have been transformed, remarkably, into an excuse for the eager TENANTS to buy the land (and at less than half what I calculate it to be worth -- click on the "Little Neck Feoffees of Ipswich" link at left to see all my posts on the topic).
The tradition of school lands has served many communities very well. Part of Chicago was rented out to tenants and the revenues used to fund the city's schools.
But some fast-talkers appear to have convinced the powers-that-be in Ipswich, Mass., (including, remarkably, some judges and perhaps the state A.G.!) that "forever" is just temporary, and other investments are superior to the revenue from land and natural resources for funding public spending. (Not!) And the land will be there forever; a few decades of poor management is, in the long run, a triviality; the same would not be true of any of the substitute investments the Feoffees and their highly-compensated investment advisors will come up with.
(The first-quoted writer was the president of the Massachusetts Institute of Technology.)
Star, Putanga 7209, 21 July 1901, Page 7
The Land and the People
The Lands Sub-Committee submitted the following report at the last annual meeting of the Progressive Liberal Association: --
General Francis Walker, in "First Lessons in Political Economy," says: -- "It certainly is true that any increase in the rental value or selling value of land is due, not to the exertions and sacrifices of the owners of the land, but to the exertions and sacrifices of the community. It certainly is true that economic rent tends to increase with the growth of wealth and population, and that thus a larger and larger share of the products of industry tends to pass into the hands of the owners of land, not because they have done more for society, but because society has greater need of that which they control."
On the same subject Thorold Rogers has expressed himself thus: -- Every permanent improvement, every railway and road, every bettering of the general condition of society, every facility given for production, every stimulus applied to consumption, raises rent. The land owner sleeps, but thrives."
The observant thinking man must admit that the above opinions are borne out by facts, but the importance to the community of the nationalisation of the land is unfortunately realised by comparatively few. If people would endeavour to understand its importance, there is little doubt that the majority would be forced to the conclusion that the private ownership of land is beyond question decidedly against the best interests of the State.
Cardinal Manning has said: -- "The land question means hunger, thirst, nakedness, notice to quit, labour spent in vain, the toil of years seized upon, the breaking up of homes, the misery, sicknesses, deaths of parents, children, wives, the despair and wildness which spring up in the hearts of the poor, when legal force, like a sharp harrow goes over the most sensitive and vital right of mankind. All this is contained in the land question." The opinion of the late Cardinal, expressed in such a forcible language, should at the very least induce people to study this question thoroughly. As a proof of its importance many object lessons are to be found -- as bearing upon it from a municipal point of view two may be mentioned. Doncaster in Yorkshire has no borough rate. Why? Because it is the owner of certain remunerative land; and Durban, in South Africa, for a rate of 1½d in the £ obtains the usual municipal services such as we possess in Christchurch, and in addition enjoys several others which we much desire to have. The difference is because in Durban its founders made reserve round the town which have not been alienated and have so increased in value that the rentals therefrom very nearly provide for all municipal requirements. The founders of Canterbury made a similar wise provision for Christchurch, but in an evil day the Provincial Council, when it took over the affairs of the Canterbury Association, sold the city's inheritance for a mess of pottage. It will doubtless be interesting to many to lean something of the history of the
CHRISTCHURCH TOWN RESERVES.
When constitutional government was established in Canterbury the Provincial Government took over the property of the Canterbury Association, including the town reserves of Christchurch and Hagley Park, the total area of these two being 897 acres, which, five years previoiusly, had been considered of the value of £2700. The Association had got into debt to the extent of nearly £29,000, which the Provincial Government paid with money raised on debentures, and proceeded to sell the reserves situated inside the belts. To prevent any misunderstanding as to the then estimated value of these town reserves, it is desirable to state that for the £29,000 mentioned the Association transferred to the Provincial Government all the property it possessed in Canterbury, which included other reserves than those in Christchurch, also plant, tools, survey maps and field books, which must have been value for a considerable portion of the sum named. By the deed poll of the Association these lands were to be held in trust for the purposes for which they were reserved, but a special Act of the Assembly was obtained to permit of their alienation. It has been truly said that the price of liberty is eternal vigilance. It is equally true with regard to reserves of land made for the benefit of the public; the people (every individual) should be ever on guard and watchful that no tampering with public reserves be allowed.
At the present day it is particularly interesting to consider what would now be the position of Christchurch if the reserves inside the belts had not been sold. What income would now be derivable therefrom?
Excluding twelve acres which were set apart by the Provincial Council as endowments for various religious bodies, the frontages of the reserves on the main streets of the city, as originally laid out in the extensions of these streets to the belts, amount to about 92,400 ft, after deducting 1¼ chains at each corner to avoid reckoning double frontages at corners. At 4s per foot frontage it would be £23,100. Bearing in mind that more than half the frontages have a depth of 5½ chains, it is estimated that if these lands were now let on building leases they would average a return of not less than 4s per foot, possibly more, and it is probably safe to say that the income therefrom would be £20,000 a year.
The statement of accounts of the City Treasurer shows that for the year ending March 31, 1901, the rates assessed amounted to £28,526 --
|General rate (omitting shillings and pence)||13,680
|Special drainage rate
obtained by a total assessment of 2s 7½d in the pound, whereas, had the town reserves not been alienated, all the municipal services rendered would probably have been obtained for a modest rate of less than 9d. in the pound.
This is surely an object lesson which should be laid to heart by every inhabitant of the colony, as well as by the citizens of Christchurch, and should demonstrate how very desirable it is in the interests of the people as a community, that all land should be owned by the community, seeing that increased values of land are derived from the exertions and sacrifices of society. It will serve to show what enormous sums society thus pays to individuals to state that it is estimated that the value of land in London is increasing at the rate of 7½ millions annually; under the system of private ownership of land this large sum is accruing yearly in London alone to private individuals, and the public who must use the land, necessarily pay interest on that sum.
The Progressive Liberal Association earnestly commends these facts to the consideration of the people of New Zealand in the hope that they will insist upon a stoppage being put to the sale of Crown lands; and as regards the granting of leases in perpetuity, which, in parting with the possession for 999 years at a rental based on the present value, hands over to individuals the unearned increment for that unconscionably long period, it is hoped that a mandate will go forth from the electors of the colony insisting upon a periodical revaluation of the unimproved value. When these have been accomplished, there will be the question of the nationalisation of all the lands in the colony to be dealt with.
"That which was created for the use of all, the use of which is absolutely necessary for the existence of every individual, should be owned and controlled for the benefit of all. The private control of land is dead against the common welfare. Justice demands this, and what justice demands must sooner or later be conceded.
Christchurch, July 29, 1901
Posted on July 29, 2012 at 09:35 AM in all benefits go to landholder , cui bono?, economic rent, financing education, land rent, land value created by community, Little Neck Feoffees of Ipswich, location, location, location, Natural Public Revenue, popular ignorance of land economics, privatization, rent-seeking, socializing risk and privatizing profit, special interests, time making wrongs into rights | Permalink | Comments (0)
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Has no one in California figured out that when the calf is deprived of mother's milk, starvation is inevitable?
It has taken 34 years, but it is coming about.
Feeding calves grain, or seaweed, or sunflower seeds isn't as smart as letting it consume its natural food.
Taxing wages, sales and buildings isn't as smart as collecting the lion's share -- calf's share, if you will -- of the land rent for public purposes.
Proposition 13 was designed to make sure that the cows' milk was kept for the Irvines, the big landowners, the commercial property owners, and the longtime homeowners, while providing a diminishing fifth of it to the calf and supplementing with grain, seaweed and sunflower seeds.
The calf's digestive system has blown up because it was deprived of its proper food, and "nourished" with stolen fake food.
Posted on July 14, 2012 at 01:56 PM in absentee ownership, all benefits go to landholder , better cities, boom-bust cycles, bubble, connect the dots, cost of living, cui bono?, direct taxation, fixing the economy, government's role, indirect taxation, land rent, land speculation, land value created by community, land value taxation, little people pay taxes, Natural Public Revenue, one solution for many problems, paying twice, popular ignorance of land economics, privatization, privilege, Proposition 13, reaping what others sow, rent-seeking, sufficiency of land rent, tax reform, teach your children well | Permalink | Comments (0)
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I'll leave it to you to go read the rest. (Registration is free.)
"The rent of land and government expenses are both caused by population. Let one pay the other."
--Henry Chase, M. D.
Posted on June 28, 2012 at 06:45 PM in better cities, direct taxation, economic rent, financing education, financing infrastructure, financing services, fixing the economy, government's role, immigration, justice of the single tax, land rent, land value created by community, land value taxation, location, location, location, Natural Public Revenue, one solution for many problems, population, population growth, public spending, rent, defined, socializing risk and privatizing profit, tax reform, taxation, teach your children well, urban land value | Permalink | Comments (0)
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Petitions asking for a referendum vote upon the question of reducing gradually the tax rate upon buildings in New York to one-half the tax rate upon land, through five consecutive reductions in as many years, were signed yesterday by several thousand persons at a mass-meeting held in Union Square under the auspices of the New York Congestion Committee. The meeting was announced as a public protest for lower rents.
Benjamin Clark Marsh, Executive Secretary of the Committee on Congestion of Population in New York, was Chairman. Dr. John Haynes Holmes of the Church of the Messiah said that the Legislature "in the wisdom of the Big Sachem at Fourteenth Street has decreed that the people are not fit to register their judgment as to this bill. I, for one, desire to protest against the boss or set of bosses who presume to forbid the people to express their will on any question."
Frederick Leubuscher, representing the New York State League of Savings and Loan Association, said:
The purpose of the law was explained in a letter from Assemblyman Michael Schaap, who introduced the Salant-Schaap bill in the lower House of the State Legislature.
The Rev. Alexander Irvine said that one family out of every 150 in New York City was evicted for non-payment of rent, because of the unjust taxation of improved property as contrasted with vacant land. Only 3% of the residents of the city own land, the speaker asserted.
John J. Hopper, Chairman of the New York State Independence League, said:
Frederick C. Howe, Director of the People's Institute, said:
C. N. Sheehan of the Twenty-eighth Assembly District Board of Trade, Brooklyn, and J. P. Coughlin of the Central Labor Union of Brooklyn also spoke.
Posted on June 27, 2012 at 01:10 PM in a Manhattan acre, all benefits go to landholder , capital gains are land gains, capitalization, commonwealth, cost of living, cui bono?, economic rent, financing education, financing infrastructure, financing services, fixing the economy, housing affordability, incentive taxation, land appreciates buildings depreciate, land monopoly capitalism, land rent, land speculation, land value created by community, land value taxation, landlordism, Natural Public Revenue, NYS Property Tax Reform, population growth, property tax, property tax reform, reaping what others sow, special interests, supply and demand, tax reform, taxation, toll-takers, underused land | Permalink | Comments (0)
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When people remind us, next April, of the so-called "Tax Freedom Day," perhaps it is worth bringing this aspect to their attention. However, few of them will have the economic education to understand what this poem is saying, on a first reading. (Maybe they'll take the time to explore this blog.)
It was Winston Churchill who brought the term "Mother of all Monopolies" to prominence, in a series of speeches he gave in the fall of 1909.
You may tinker with the tariff and make some simple gains,
You may put on tolls or take 'em off, inducing party pains;
You may monkey with the money, but the lack of it remains,
For the Mother of monopoly is laughing as she reigns.
Rent! rent! who is it pays the rent?
A dozen days in every month the worker's back is bent;
Figure it in dollar bills or work it by percent,
But with his dozen days he pays just rent, rent, rent.
You may "minimum" the wages, you may let the women vote,
You may regulate the railroads with a legal antidote,
You may jail some Rockefeller, or may get a Morgan's goat,
But the Mother of Monopoly is laughing in her throat.
Rent! rent! who is it pays the rent?
A hundred days in every year a business profit's spent;
Figure it in "overhead," or state it by percent,
But all your hundred days are gone for rent, rent, rent.
You may institute Foundations, you may educate the dubs,
You may librarize the Bread Line, and establish Slumy Clubs;
You may ostracize the Demon Rum and eugenize the cubs,
But the Mother of Monopoly is smiling at your snubs.
Rent! rent! who is it pays the rent?
A score of years in life you spent to get one document;
From your cradle to your coffin you must bow to its assent,
And that's your little, old receipt for rent, rent, rent.
I look across the rented world and idle land I see,
Whose owner doesn't work it, for he's working you and me,
And on the first of every month all tenants bow the knee,
And pay the rent of vacant land, in great or small degree
Rent! rent! who is it pays the rent?
The worker's hands are busy and the business back is bent;
The idle lands advance in price and every single cent,
Of that advance is paid by us in rent, rent, rent.
As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.
— ADAM SMITH, Wealth of Nations, Book I., Chap. 6.
Posted on May 12, 2012 at 12:17 AM in absentee ownership, all benefits go to landholder , commons, enclosure, fruits of one's labors, human nature, income concentration, land monopoly capitalism, land rent, land value created by community, land, labor and capital, landed gentry, landlordism, make land common property, monopoly -- not the game, popular ignorance of land economics, population growth, private property in land, privatization, privilege, property rights, reaping what others sow, rich people's useful idiots, socializing risk and privatizing profit, time making wrongs into rights, toll-takers, unearned income, unearned increment, wealth distribution or concentration | Permalink | Comments (0)
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For ages sorcerers and magicians kept their secrets, their charms and enchantments to deceive the simple and unwary. At length most of such marvels are relegated to jugglers and sleight-of-hand performers, and we are amused to be deceived. We expect to see things come out of nothing; to see the unbroken eggs come out of the beaten scarf; the guinea pigs come out of the empty silk hat, the ducks come quacking out of the empty box; silver dollars come out of the boy’s ear or empty pocket. But there is yet one piece of magic in which many still believe. That is the magic of land values materializing from a vacant rubbish-covered lot or tract of land on which not a lick of work has been done.
Our modern sorcerers do the trick and roll up the hundreds of thousands of dollars out of nothing, and we look with gaping mouths, wondering where the big roll of bills came from. No question is asked. Something came out of nothing; that is all. Ah! if we could all learn the trick! No more work for anybody! Why should we work when we can produce money from nothing? Nobody investigates; we have the money on us, but sleep with untroubled mind, for no man can say “That is mine.” True, no man can say “That rake-off is mine”; but all the community could rise and say, “That rake-off is ours. We, all together, created the demand for the lands of the community by our presence and industry. Before we came, the values were not. If we should all go, they would disappear. Your money does not come from nothing, as some suppose. The whole community contributes to your roll. It should be ours to pay our taxes with. For lack of it we are ﬁned for our houses, furniture, machinery, crops, merchandise, etc.”
Oh, come off with your magic of getting something for nothing! Take your chances with the rest of us, who earn our money by work. We have been shown, and are on to your magic. We are going to vote for Amendment Number 20.” Thus will sorcery fade before reason. —Lona I. Robinson, in The Great Adventure, October 23, 1920
Posted on April 13, 2012 at 10:52 AM in a wedge driven through society, absentee ownership, all benefits go to landholder , land rent, land speculation, land value created by community, land value taxation, landlordism, little people pay taxes, Natural Public Revenue, popular ignorance of land economics, population, population growth, reaping what others sow, special interests, tax reform, untaxing buildings, untaxing production, wealth distribution or concentration | Permalink | Comments (0)
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"The land is common to all. All have the same right to it; but there is good land and bad land, and everyone would like to take the good land. How is one to get it justly divided? In this way: he who will use the good land must pay those who have got no land of the value of the land he uses," Nekhludoff went on, answering his own question. . . . "Well, he had a head, this George," said the oven builder, moving his brows. "He who has good land must pay more."
— COUNT TOLSTOY, Resurrection, Book II., Chap. 9.
Tolstoy has rightly discerned the evils which follow the uprooting of the people from fostering Mother Earth, and the incubation of a day-wage-earning, urban, industrial proletariat.
— MAX NORDAU, Degeneration, p. 163.
Posted on April 03, 2012 at 10:01 PM in commons, Earth for All, justice of the single tax, land rent, land value created by community, land value taxation, landlordism, make land common property, Natural Public Revenue, pay for what you take, political economy, private property in land, privilege, Tolstoy | Permalink | Comments (0)
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A tax upon ground-rents would not raise the rent of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist and exacts the greatest rent which can be got for the use of the ground.
— ADAM SMITH, Wealth of Nations (1776), Book V., Chap. 2, Art. I.
Posted on March 31, 2012 at 12:52 AM in all benefits go to landholder , classical economists, cost of living, cui bono?, direct taxation, Earth for All, economic justice, economic rent, fixing the economy, government's role, housing affordability, human nature, justice of the single tax, land different from capital, land monopoly capitalism, land rent, land value taxation, landed gentry, landlordism, location, location, location, political economy, popular ignorance of land economics, private property in land, property tax, property tax is two taxes, Proposition 13, reaping what others sow, single tax, tax caps, tax reform, toll-takers, unearned income, urban land value, wealth distribution or concentration | Permalink | Comments (0)
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Land, which nature has destined to man's sustenance, is the only source from which everything comes, and to which everything flows back, and the existence of which constantly remains in spite of all changes. From this unmistakable truth it results that land alone can furnish the wants of the state, and that in natural fairness no distinctions can be made in this.
— EMPEROR JOSEPH II., in Oestreichische Geschichte fur das Volk, Vol. XIV. (Vienna, 1867).
Posted on March 30, 2012 at 12:43 AM in common good, commons, commonwealth, Earth for All, economic justice, ecosystem services, enclosure, equality, government's role, justice of the single tax, land rent, landed gentry, make land common property, Natural Public Revenue, natural resource revenues, natural resources, private property in land, privilege, socialize, sufficiency of land rent, unburdening the economy | Permalink | Comments (0)
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Every proprietor, therefore, of cultivated land owes to the community a ground rent (for I know of no better term to express the idea) for the land which he holds.
— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 329 (1795-6).
If all men were so far tenants to the public that the superfluities of gain and expense were applied to the exigencies thereof, it would put an end to taxes, leave never a beggar and make the greatest bank for national trade in Europe.
— WILLIAM PENN, Reflections and Maxims, Sec. 222, Works V., pp. 190-1.
Posted on March 27, 2012 at 12:26 AM in common good, commons, commonwealth, cost of living, Earth for All, economic justice, economic rent, employment, enclosure, ending poverty, equal opportunity, equality, facilitating commerce, financing education, financing infrastructure, financing services, FIRE sector, fixing the economy, free trade, government's role, land rent, land value created by community, leased land, make land common property, Natural Public Revenue, no victims, pay for what you take, Philadelphia, poverty's cause, private property in land, privatization, public spending, socialize, sufficiency of land rent, The End of Poverty?, unburdening the economy, user fees | Permalink | Comments (0)
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Let the fields and all the soil, and, if possible, even the houses, belong to the state, that is, to him which is the depositary of the right of the state, so that he may let them out for an annual rent to the inhabitants of the cities and the cultivators. This will exempt all citizens from extraordinary taxes in time of peace.
— SPINOZA, Tractatus Politicus, Chap. VI., On Monarchy, Sec. 12.
Posted on March 26, 2012 at 12:19 AM in commons, commonwealth, Earth for All, economic rent, financing services, fixing the economy, land rent, land value taxation, make land common property, Natural Public Revenue, public spending, sales taxes are wrong, socialize, sufficiency of land rent, unburdening the economy, untaxing buildings, untaxing production | Permalink | Comments (0)
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The remarkable thing about this story, to my eye, is that the size of the lot isn't even mentioned! It is worth $1 million land rent per year, and one might infer from the information provided that the lot is about 10,000 square feet, or less than 1/4 acre.
Capitalized at 5% (also known as "20 years' purchase") the lot would sell for about $20 million.
I assume that in addition to the land rent, the tenant pays the property tax on the land. So the entire $1 million annual land rent flows out of NYC, to the property's owner, in Marshall, Virginia.
What, pray tell, has the land owner done to earn that land rent?
Consider how many people's wage taxes and sales taxes could be lifted, and what that additional spending power could do for the local economy. Consider what would happen if there were no taxes to be paid on the apartments or on people's condo structures.
Or NYC can just keep letting the land rent leave the city, and even leave the country, continuing to flow into private pockets, just as if they'd rendered someone some service and earned it!
Land rent is natural public revenue, and we permit landlords to privatize it. Aren't we generous with our patrimony? (Leona told us the truth!)
The developer of a nine-story Karl Fischer rental apartment building planned for a corner site in the East Village signed a 99-year ground lease that requires payments each year of about $1 million.
The development company, YYY Third Avenue, signed the long-term lease for the vacant site at 74-84 Third Avenue, at 12th Street, April 27, 2011, however, a memorandum of the lease was not recorded in public records until last Wednesday, city property documents show.
A source citing city property records said the lease payment, which is not specifically recorded, could be inferred to be about $1 million per year. Prior to the document’s release, the annual lease cost was not known.
The prolific and controversial architect Fischer filed plans to build an 82,000-square-foot, nine-story residential building with 94 units, city Department of Buildings online records show. The permit has not been approved and is pending, DOB data indicate, and is to include nearly 9,511 square feet of retail, as well.
You might also be intrigued by the URL for the story ... I'm not sure what to make of it.
Posted on March 23, 2012 at 06:55 PM in all benefits go to landholder , better cities, capital gains are land gains, capitalization, cui bono?, economic rent, financing infrastructure, financing services, FIRE sector, fixing the economy, government's role, housing affordability, income tax, land rent, land value created by community, land value taxation, leased land, little people pay taxes, middle class, Natural Public Revenue, pay for what you take, payroll tax, popular ignorance of land economics, privatization, property tax, property tax is two taxes, public spending, reaping what others sow, special interests, time making wrongs into rights, toll-takers, unearned income, untaxing buildings, untaxing production, urban land value, wage taxes | Permalink | Comments (0)
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THE QUESTION OF MISERY
At the outdoor mass you held in Wroclaw in Poland during your recent visit to that country, you said the following very true and sincere words:
It was the same concern about the greed of the wealthy and the plight of the poor, that your predecessor, Pope Leo XIII, expressed in his Encyclical Letter of 1891, 'Rerum Novarum'. Yet, in the more than hundred years that have past, if there has been a change, it has been for the worse!
The wealth is there. The growth of industry and the discoveries of science about which Pope Leo spoke, are even more fantastic and surprising than he would have imagined in his most inspired dreams. The enormous fortunes of individuals, of which he also spoke, have become more enormous. Yet the poverty is still there. Even in countries that are considered wealthy, people are homeless and live in cardboard boxes; people die, not just by the thousands as your Holiness said in Wroclaw, but by the millions, from poverty related diseases, malnutrition and starvation. You are indeed right to ask the question:
THE EXCLUSION FROM THE GIFTS OF GOD
As your Holiness will know, the Encyclical Letter of 1891 was not only an attack on socialism, but also a strong defence of the right to hold land as private property, a right that Pope Leo XIII claimed to be natural.
But the right to hold land includes the right for the owner to exclude other people from it, and, as all usable land in industrially developed countries is owned in that way, people without such a right will be unable to enjoy the gifts of God unless they accept the conditions exacted of them by a landowner. Neither can they work, reside nor relax without land, and again they have to accept conditions exacted by a landowner.
Normally the landowner will ask people to pay the market-determined site rental, which is high because of the many excluded people who want land, or he will offer to let them work at a market-determined wage, which is low because of many excluded people wanting a working place.
Some people, in fact -- as a consequence of the many excluded -- a growing number of people, can neither qualify for a job nor afford to pay the site rental, and they have to live on the streets, on the roads, at the dumping grounds or wherever they can find a poor shelter, some clothes and a little to eat. Some of them find that crime and prison give them a better life than there is available through the legal opportunities open to them.
In some countries Social Security is implemented to mitigate the cruel consequences of the exclusion of people from the gifts of God. The Social Security bill is not paid by landowners, but by entrepreneurs, wage earners, pensioners, savers and consumers.
In other countries only private charity is available to relieve the hardships.
But neither Social Security nor charity will change the basic injustice that causes the horrible conditions of the people excluded, that increases the site rentals to be paid for the use of land, and reduces net-wages, widening the gap between poor and rich. The basic cause of these evils has to be destroyed.
Political leaders from all over the world, including representatives of the Holy See, agreed at the United Nations conference on Human Settlements (Habitat II) at Istanbul last year, that:
LETTER TO POPE LEO XIII
Allow us, your Holiness, to point to the Open Letter of September 11th, 1891, written in New York by Henry George and sent to your predecessor his Holiness Pope Leo XIII, as a response to 'Rerum Novarum'.
Published as a book this Open Letter has been read by many thousands, and still today the book is sold and read.
Henry George did consider 'inalienable human rights' and 'unrestrained thirst for profit and ways to handle laws of trade'. On exactly this background he spoke for all people's equal rights to the gifts of God.
To maintain this right for everybody and at the same time to allow exclusive right for some to own land as private property, he advocated that people who are given the exclusive right to own land -- and thereby the right to exclude other people from the gifts of Nature -- should pay a compensation to the people they exclude (in fact to all citizens).
The compensation, as a duty to be paid by the landowners, should be the market-determined rentals of the sites from which they can exclude others. This being a fair charge of justice as the rentals are not due to efforts or investments made by the landowners, but due to the development of society and to the growth of the population of human beings, all wanting a place to work, and a place to reside.
The rentals should be collected from all landowners by society, and the revenue should be used to the benefit of all citizens. In that way, Henry George emphasized, all citizens would be able to get their equal share of the gifts of God.
HOLY INCENTIVES OR HOLLOW FALSEHOOD
We do agree with your Holiness and with Henry George that people have private right to property created by man, the right to the fruits of their labour; and also that people can achieve private right to exclusive possession of land, from which they can exclude other people.
But we find it logically inconsistent to believe that people have equal right to life and to be on the Earth, when at the same time some of them have exclusive right to own land as private property without paying compensation to those people whom they exclude from their land.
Your Holiness' sincere words, as quoted initially in this letter, accord with Rerum Novarum of 1891 and with the Habitat II statement quoted above, but they will only become true if your Holiness will succeed in urging on the rulers/governments of this world to collect the annual market-determined Site Rentals of all land in their countries, and distribute the revenue thus acquired to the benefit of all their citizens.
If your Holiness could succeed in persuading the governments to do so, all people on Earth would gain equal access to the gifts of Nature, and true solidarity would become a reality. If not, all statements about equal right to life, to work, to education and to residence, will continue being hollow and false; and our successors will not see a change for the better; on the contrary, they will see the gap between very rich people and alienated poor people grow bigger, and the problems of poverty grow more serious than they are today.
We pray your Holiness may succeed in convincing the governments of this world of the importance of public collection of the annual market rental of all land, and the revenue to be used for equal benefit of all the citizens, thus to provide far all human beings, equal rights to the gifts of Nature.
Let this become the manifestation of the new Millennium, the 2000 year anniversary of the birth of Jesus Christ. Let it become a Jubilee in the original meaning of the word, striking unjust shackles from society; thereby preparing a new age of humanity, a social life in friendship and peace.
Posted on March 19, 2012 at 01:20 PM in all benefits go to landholder , charity and justice, Christian ethics, commonwealth, Earth for All, economic rent, ending poverty, equal opportunity, equality, fruits of one's labors, land different from capital, land rent, land value taxation, landlordism, leased land, Natural Public Revenue, population growth, poverty, poverty machine, poverty's cause, private property in land, The End of Poverty?, wage taxes, wages, wages driven down | Permalink | Comments (0)
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While I was in the wood alone by myself a gathering of nuts, the forester popped through the bushes upon me, and asking me what I did there, I answered, "Gathering nuts."
"Gathering nuts!" said he; "and dare you say so?"
"Yes," said I. "Why not? Would you question a monkey or a squirrel about such a business?"
. . "I tell you," said he, "this wood is not common; it belongs to the Duke of Portland."
"Oh! My service to the Duke of Portland," said I; "Nature knows no more of him than of me. Therefore, as in Nature's storehouse the rule is, First come, first served, so the Duke of Portland must look sharp if he wants any nuts."
— THOMAS SPENCE, Pig's Meat (1793)
in Land for the Landless (Wm. Reeves, 1896), pp. 7-8.
Posted on March 09, 2012 at 02:02 AM in absentee ownership, all benefits go to landholder , commons, commonwealth, Earth for All, economic rent, ecosystem services, equal opportunity, equality, free land, fruits of one's labors, land rent, land, labor and capital, landed gentry, Landlord's Prayer, landlordism, make land common property, pay for what you take, private property in land, property rights, reaping what others sow, sharecropping, special interests, time making wrongs into rights, toll-takers, unearned income, untaxing production, windfalls | Permalink | Comments (0)
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38. Mining companies which mine on public lands pay far less to the Federal government than they pay on privately held lands.
A. That's fair, because the private landholders are better negotiators
B. That's fair, because the 1872 Mining Act set the price, and it wouldn't be fair to change the business environment after setting the rules.
C. That's fair. Corporations need subsidies to create jobs.
D. That's unfair, and the federal government should be getting just as much from the miners as the private landholders are getting
E. That's unfair, and not only should the federal government be getting more from the mining companies, but the federal government should be collecting a significant portion of the royalties now privatized by private and corporate landholders, since we're all equally entitled to nature's bounty. This would permit us to reduce other taxes on wages and production, and perhaps lead to a citizen's dividend, similar to the Alaska Permanent Fund
F. That's unfair, because the 1872 Mining Act was based on old prices and old mining technology.
G. Your reactions?
Posted on March 08, 2012 at 02:15 AM in all benefits go to landholder , as much and as good, common good, commons, commonwealth, conservatism, corporations, corruption in government, cui bono?, Earth for All, economic rent, enclosure, financing education, financing health care, financing infrastructure, financing services, financing Social Security, financing war, government's role, justice of the single tax, land includes, land rent, make land common property, Natural Public Revenue, natural resource revenues, natural resources, oil, pay for what you take, privatization, privilege, special interests, subsidies, the land questions, wealth distribution or concentration | Permalink | Comments (1)
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a bit out of sequence ...
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).
G. Your suggestions?
Posted on March 07, 2012 at 10:16 PM in absentee ownership, all benefits go to landholder , capital gains are land gains, cui bono?, economic rent, estate taxes, FIRE sector, fruits of one's labors, income tax, infrastructure, justice of the single tax, land appreciates buildings depreciate, land rent, land speculation, land value created by community, land value taxation, location, location, location, Natural Public Revenue, pork spending, private property in land, public spending, reaping what others sow, the land questions, unearned increment, widow's skirts, windfalls | Permalink | Comments (1)
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37. Our ancestors bought or stole the land which the ancestors of some of those now identified as "Native Americans" relied on. How should we and our children pay back them and their children?
A. By giving them the privilege of selling cigarettes without taxes, forgoing revenue that could help meet the health costs associated with smoking, both for smokers and for those who live with them.
B. By giving them the privilege of running casinos, even if a percentage of that revenue must be contributed to the state, and even if gambling is creates tremendous problems for some individuals in society, beyond those who actually gamble.
C. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever. (Similar to the Alaska Permanent Fund)
D. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever, and providing a double share to those who are starting from a disadvantaged position for some fixed number of years
E. By collecting from everyone who owns land and natural resources the annual economic value, paying the costs of government and common spending from that source, producing equal opportunity for all.
F. Your suggestions?
Posted on March 07, 2012 at 02:50 AM in Alaska Permanent Fund, common good, cui bono?, Earth for All, economic justice, economic rent, ending poverty, equal freedom, equal opportunity, equality, facilitating commerce, financing education, financing health care, financing infrastructure, financing services, financing Social Security, franchises, government's role, inter-generational equity, is this socialism?, justice of the single tax, land rent, make land common property, Natural Public Revenue, natural resource revenues, natural resources, one solution for many problems, private property in land, privilege, Social Problems, special interests, the land questions | Permalink | Comments (0)
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30. What should we do with our public lands?
Posted on March 01, 2012 at 09:54 AM in commons, corporations, corruption in government, cui bono?, economic rent, government's role, land rent, leased land, make land common property, marginal land, Natural Public Revenue, natural resource revenues, natural resources, pay for what you take, popular ignorance of land economics, privilege, special interests, subsidies, the land questions, underused land, water | Permalink | Comments (0)
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Does the Single Tax discriminate between earned and unearned income?
It is the scientific way of doing what we have been feebly attempting to do in an unscientific way, that is, to distinguish between what Dr. Scott Nearing called "property income" and "services income," or between that form of wealth which is the result of individual effort in production and that which is purely the result of the collective effort of society; or between the two forms of wealth which Dr. Ellwood, of the University of Missouri, in a seemingly unwilling recognition of an unwelcome truth, calls "earnings" and "findings."
In the case of the great majority of us (whether as individuals or as partners in corporations) our incomes are so inextricably compounded of earnings and findings, of privilege income and service income, that it is hard for some of us to know whether we belong to the privileged or unprivileged classes, to the slave owners or the slaves, to the confiscators or the victims; and perhaps only those absolutely property less men at the bottom of the social scale can be said to have no share in the "findings" that spring from privilege. On the other hand it is equally true that all industry up to its highest strata, has to pay toll to privilege and provide those "findings" which distribute themselves with more or less inequality over almost the whole of society. How to distinguish between and separate these entirely different kinds of wealth is what all sincere sociologists and honest taxation commissioners have wanted to do and have hitherto failed in the doing.
If we take a handful of sand and a handful of iron filings and mix them thoroughly, and then set a man with the sharpest eyesight and the nimblest fingers to separate the particles, it will take him long to accomplish his task and he will never do it with more than an approximation to completeness. But apply a strong magnet to the mixture and the separation will be accomplished in ten minutes. Then see how the analogy applies to the economic problem in society. Let us imagine the return that should naturally flow to land in the form of rent to take the shape of blue coins made of steel. Let us fancy that the natural reward that goes to capital as interest takes the form of red coins made of wood. Finally let us figure the natural return to human service of all grades as being represented by white coins also made of wood. On examination it will be discovered that in the case of almost every member of society above the rank of the day laborer, his income is tri-colored or composed of all three coins. There are countless "captains of industry" among us who complacently assume their large incomes to be the rewards freely given by a free world in return for their invaluable services, who will be surprised to find how large a proportion of blue their income coins contain. There are multitudes of livers upon what they have called "interest" who will expect to find their coins red, who will be equally surprised to discover that they are almost entirely blue. To complete the parable, the taxation of land values will be like the application of the magnet which will draw away the blue steel coins in whatever stratum of society they may be found, and lay them aside for social purposes, being socially created wealth; leaving the red and white coins to be competed for in a world of free opportunity, without deduction or diminution by taxation or in any other way.
From The Single Tax Year Book (1917)
Posted on February 27, 2012 at 03:20 PM in a Manhattan acre, a wedge driven through society, absentee ownership, all benefits go to landholder , capital gains are land gains, connect the dots, cui bono?, Earth for All, economic justice, economic rent, equality, FIRE sector, fruits of one's labors, income concentration, justice of the single tax, land appreciates buildings depreciate, land different from capital, land rent, land value created by community, land value taxation, land, labor and capital, Natural Public Revenue, pay for what you take, privilege, reaping what others sow, sharecropping, single tax, slavery, socializing risk and privatizing profit, special interests, toll-takers, unearned income, unearned increment, untaxing production, wealth distribution or concentration, windfalls | Permalink | Comments (0)
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This is from Joseph Dana Miller, the editor of the Single Tax Year Book (1917), and it is a concise statement which might help make clear why I think this such an important reform in the 21st century.
Men have a right to land because they cannot live without it and because no man made it. It is a free gift of nature, like air, like sunshine. Men ought not to be compelled to pay other men for its use. It is, if you please, a natural right, because arising out of the nature of man, or if you do not like the term, an equal right, equal in that it should be shared alike. This is no new discovery, for it is lamely and imperfectly recognized by primitive man (in the rude forms of early land communism) and lamely and imperfectly by all civilized communities (in laws of "eminent domain", and similar powers exercised by the State over land). It is recognized by such widely differing minds as Gregory the Great and Thomas Paine (the religious and the rationalistic), Blackstone and Carlyle (the legal and the imaginative). All points of view include more or less dimly this conception of the peculiar nature of land as the inheritance of the human race, and not a proper subject for barter and sale.
This is the philosophy, the principle. The end to be sought is the establishment of the principle -- equal right to land in practice. We cannot divide the land -- that is impossible. We do not need to nationalize it that is, to take it over and rent it out, since this would entail needless difficulty. We could do this, but there is a better method.
The principle, which no man can successfully refute or deny even to himself, having been stated, we come now to the method, the Single Tax, the taking of the annual rent of land -- what it is worth each year for use -- by governmental agency, and the payment out of this fund for those functions which are supported and carried on in common -- maintenance of highways, police and fire protection, public lighting, schools, etc. Now if the value of land were like other values this would not be a good method for the end in view. That is, if a man could take a plot of land as he takes a piece of wood, and fashioning it for use as a commodity give it a value by his labor, there would be no special reason for taxing it at a higher rate than other things, or singling it out from other taxable objects. But land, without the effort of the individual, grows in value with the community's growth, and by what the community does in the way of public improvements. This value of land is a value of community advantage, and the price asked for a piece of land by the owner is the price of community advantage. This advantage may be an excess of production over other and poorer land determined by natural fertility (farm land) or nearness to market or more populous avenues for shopping, or proximity to financial mart, shipping or railroad point (business centers), or because of superior fashionable attractiveness, (residential centers). But all these advantages are social, community-made, not a product of labor, and in the price asked for its sale or use, a manifestation of community-made value. Now in a sense the value of everything may be ascribed to the presence of a community, with an important difference. Land differs in this, that neither in itself nor in its value is it the product of labor, for labor cannot produce more land in answer to demand, but can produce more houses and food and clothing, whence it arises that these things cost less where population is great or increasing, and land is the only thing that costs more.
To tax this land at its true value is to equalize all people-made advantages (which in their manifestation as value attach only to land), and thus secure to every man that equal right to land which has been contended for at the outset of this definition.
From this reform flow many incidental benefits -- greater simplicity of government, greater certainty and economy in taxation, and increased revenues.
But its greatest benefit will be in the abolition of involuntary poverty and the rise of a new civilization. It is not fair to the reader of a definition to urge this larger conclusion, the knowledge of which can come only from a fuller investigation and the dawning upon his apprehension of the light of the new vision. But this conclusion follows as certainly as do the various steps of reasoning which we have endeavored to keep before the reader in this purely elementary definition.
Posted on February 26, 2012 at 04:05 PM in civilization, commons, commonwealth, Earth for All, economic justice, economic rent, ending poverty, equal opportunity, equality, financing education, financing health care, financing infrastructure, financing services, income concentration, land appreciates buildings depreciate, land different from capital, land rent, land value created by community, location, location, location, Natural Public Revenue, Occupy Wall Street's values, population, population growth, poverty, rent, defined, small government, wealth distribution or concentration | Permalink | Comments (0)
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Save the rent for Society.
That's short and sweet. I came across it in The Single Tax Year Book for 1917, in a chapter about the Single Tax in Germany.
Posted on February 26, 2012 at 02:53 PM in all benefits go to landholder , ecosystem services, equality, financing education, financing infrastructure, financing services, land rent, land value created by community, landed gentry, landlordism, make land common property, natural resource revenues, pay for what you take, popular ignorance of land economics, private property in land, privatization, privilege, reaping what others sow, rich people's useful idiots, sharecropping, single tax, socialize, special interests, toll-takers, unearned income, user fees, windfalls | Permalink | Comments (0)
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The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.
The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.
"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.
excerpt from The Single Tax Year Book (1917)
Posted on February 22, 2012 at 10:22 PM in all benefits go to landholder , better cities, capital gains are land gains, capitalization, civilization, commonwealth, corruption in government, corruption of economics, cui bono?, economic rent, financing education, financing health care, financing infrastructure, financing services, government's role, immigration, income tax, justice of the single tax, land appreciates buildings depreciate, land rent, land value created by community, land value taxation, landlordism, little people pay taxes, location, location, location, make land common property, Natural Public Revenue, popular ignorance of land economics, population, population growth, private property in land, privatization, privilege, property rights, property tax, property tax "relief", property tax is two taxes, property tax reform, reaping what others sow, rent, defined, socializing risk and privatizing profit, special interests, sufficiency of land rent, tax reform, toll-takers, trickle-down economics, unearned increment, urban land value, windfalls | Permalink | Comments (0)
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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.
Q. Your suggestions?
Posted on February 21, 2012 at 04:35 AM in a Manhattan acre, absentee ownership, all benefits go to landholder , better cities, capital gains are land gains, congestion, corporations, cui bono?, direct taxation, economic rent, facilitating commerce, financing infrastructure, fruits of one's labors, income tax, indirect taxation, infrastructure, land appreciates buildings depreciate, land rent, land value created by community, land value taxation, landed gentry, landlordism, little people pay taxes, location, location, location, middle class, one solution for many problems, paying twice, popular ignorance of land economics, population growth, property tax, Proposition 13, public spending, reaping what others sow, sales taxes are wrong, socializing risk and privatizing profit, special interests, subsidies, tax reform, taxation, the land questions, transportation, triple net leases, unburdening the economy, unearned increment, untaxing buildings, untaxing production, urban land value, windfalls | Permalink | Comments (0)
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I had the pleasure of watching part of a marathon of the second season of Downton Abbey yesterday, knowing that I'd missed a few shows -- and want to watch them all in sequence.
The setting of the show raises some questions one might want to think about.
1. What sort of wages do all the "downstairs" employees receive?
2. What employment alternatives are available to them?
3. How does the owner of Downton Abbey afford to pay for the services of all those workers, in addition to the non-wage costs of maintaining the castle and the surrounding land, which is an overwhelming job -- and passion -- for him?
4. Is there a middle class in that town? On what are their fortunes dependent? How are they different from the staff at Downton Abbey?
5. What are the opportunities for the children of the house staff at Downton Abbey to have a different life from their parents?
6. Can others prosper?
7. What sorts of ideas, particularly on public policy, maintain the status quo?
8. Why is having the property pass intact to one person so important? What would happen if it were divided among several heirs?
9. Do you think there are small holdings in the same area, where individual families can live, work and prosper, or a series of large holdings like DA?
10. Are people unemployed or underemployed? Are their opportunities limited by the system, particularly if they care about staying close to family?
This is off the top of my head. I'm charmed by the series, and at the same time, am puzzled by how much I enjoy watching it. (Good writing, of course.)
Posted on February 20, 2012 at 08:38 PM in a wedge driven through society, all benefits go to landholder , buildings depreciate, cui bono?, equal freedom, equality, income concentration, land appreciates buildings depreciate, land rent, landed gentry, landlordism, opportunity, popular ignorance of land economics, private property in land, property rights, prosperity, rich people's useful idiots, sharecropping, the land questions, time making wrongs into rights, underused land, unemployment and underemployment, wages driven down, wealth distribution or concentration | Permalink | Comments (0)
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In the files I've been digging through, from the late 50s to the early 80s, I found an early draft of a fine paper by Mason Gaffney about California's Proposition 13, for presentation at an August, 1978 conference. I dug around and found a published copy of that paper, and think it worth sharing here. Original title, "Tax Limitation: Proposition 13 and Its Alternatives"
I see that there continue to be people who see the stupidity of Proposition 13 -- see http://www.dailyrepublic.com/opinion/letters-editor/time-for-a-petition-against-proposition-13/ Perhaps they will find this of use. Georgists recognize Prop 13 as the antithesis of logical and just taxation.
First, a few of my favorite paragraphs, which I hope will whet your appetite for the whole paper. I won't attempt to provide the context (you can pick that up when you continue to the paper, below).
You can read more about the Poor Widow by clicking on the "widow's skirts" link at left, in the tag cloud, and by reading Bill Batt's Property Tax Relief Measures: Answers to the "Poor Widow " Argument (or the pdf version)
Here is, perhaps, my favorite:
The land tax does that because it cuts only the fat, not the muscle. It takes from the taxpayer only "economic rent," only the income he gets for doing nothing. If people could grasp this one overriding idea, then the whole sterile, counterproductive, endless impasse between conservatives who favor incentives and liberals who favor welfare would be resolved in a trice, and we could get on to higher things.
The final paragraphs speak directly to us in 2012. 34 years have passed since this was written.
If your appetite is whetted by these excerpts, you can read the entire article below:
Posted on January 22, 2012 at 04:50 PM in absentee ownership, all benefits go to landholder , assessment, buildings depreciate, capital gains are land gains, capitalization, classical economists, common good, corruption of economics, cui bono?, democracy, equality, financing education, financing services, free lunch, government's role, home equity, incentive taxation, incentives, land appreciates buildings depreciate, land different from capital, land rent, land share of real estate value, land speculation, land value created by community, little people pay taxes, location, location, location, Natural Public Revenue, natural resources, popular ignorance of land economics, population growth, privatization, privilege, property tax, property tax is two taxes, property tax reform, Proposition 13, public spending, real estate bubble, reaping what others sow, small government, tax reform, taxation, transportation, unburdening the economy, underused land, unearned income, unemployment and underemployment, user fees, widow's skirts | Permalink | Comments (0)
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I stumbled across this one by accident, and thought some might enjoy it. Arden is a community on the north side of Wilmington, Delaware, USA, near the Pennsylvania border. In more ways than one, it is the high point of Delaware. (For a more contemporary look at Arden, check out the 2007 article in Delaware Today with the tongue-in-cheek title, "Hey, Where are All the Nudists?") Mike Curtis, whose essay, Taxes Kill Jobs, appears a few items below this one, lives in Arden.
The quote about "the land belongs in usufruct to the living" is from Thomas Jefferson. You can read more about the idea here.
Evening Post, Volume LXXXVII, Issue 109, page 10
Florence A. Burleigh contributed to that staidest of American journals, the Springfield Republican, a most interesting article on the Town of Arden, which is in Delaware. In May, 1900, Frank Stephens and Will Price, artists, who had long dreamed of a village colony where love and justice should take the place of strife and injustice, found a piece of land near Wilmington, Delaware, which they immediately secured and started what is now a busy little village of 120 leaseholders, about 60 dwellings and 250 residents, 80 of whom remain all winter.
These two men had for many years believed that "the earth belongs in usufruct to the living," and with Henry George that the only way to secure this was for landholders to pay to the community annually the value of the land they held. They also believed that art, music, and the drama were a very important -- indeed, the most important -- part of life and they agreed with William Morris in his "News from Nowhere" when he said, "We like these pieces of wild Nature and can afford them, so we have them. . . Go and have a look -- and tell me if you think we waste the land by not covering it with factories for making things that nobody wants, which was the chief business of the 19th century." So they set apart a green in the centre of the 160 acres -- a part of which was for sports and an outdoor theatre -- and much of the woodland.
For a few years Arden remained scarcely more than a dream; but one by one little picturesque bungalows appeared and soon an inn or "guest-house" was found necessary in order that visitors might find an over-night shelter and a simple meal. Next came a club house, planned and made by the Ardenites out of an old but substantial barn standing on the place.
Various industries -- carpet weaving, leaded glass, cabinet-making, etc. -- are carried on and many of the leaseholders have little gardens. There are at present a craftsmen's guild, having in charge the village industries, a folk guild, having in charge matters concerning hospitality and entertainment; players' guild, having charge of the dramatics; gardeners' guild, "including tillers of the soil and those who tell others how to"; a housewives' guild, scholars' guild, educational work, and several other guilds.
The woods are kept free from underbrush but otherwise are left untouched and no one is allowed "to hunt or fish on any of the lands of Arden, or cut timber or fence in woodland or keep the land in such disorder as shall in the opinion of the majority of the residents of the community be injurious to the rights of others."
A clearing the form of an ampitheatre with evidence of numerous fires in the centre of it is the place where, every Sunday evening throughout the warm season, the Ardenfolk and their guests go with lanterns and rugs to watch the big fire which is built by some of the young men and boys, and sing from the Arden song book or listen to readings from Uncle Remus or other books for an hour. As the fire dies down, the ghostly folk file slowly back with their lanterns through the dark wood and soon there is no sound but the crickets or an occasional owl.
Saturday night is devoted to the open-air theatre, which is in the centre of the green and has a grassy stage about 20ft long, with a large rock at the back, and exits made by openings in the shrubbery. At each end of the state, which is footlighted by large oil lamps with reflectors, is a white column which gives dignity to the place. The seats are built in a semi-circle -- or, more strictly speaking, the long bench, for everything is quite primitive -- and the "front row" is cut out of the earth and grass-covered. The players file to the theatre and across the stage, already costumed, and the play begins. "Julius Caesar," "The Merchant of Venice," and "Romeo and Juliet" are the favorites; and if this might seem ambitious, the reply would be that the object is not so much the entertainment of the audience as the education of the actors. When the play is over -- and as it begins early it ends early -- those who care to adjourn to the clubhouse to dance. The plays, the sports, the pageants, and the campfire -- all are as much a part of Arden as the industries, and "the spirit of Arden pervades everything."
One of the dreams which has not yet been realized but which is surely going to be is a church on a sunny slope which shall be open at all times for anyone, no matter what his creed, who cares to enter in. The design is already chosen, square-towered and of stone, early English.
But there must be a business side to every such undertaking and Arden is no exception. It is not a community in the sense in which the word is often used, for nothing is held in common except the land, and one of the strongest beliefs is that of individual freedom so far as it is consistent with the equal freedom of everyone else. Even one's time is his own, for it is an unwritten law that no one shall interrupt another in his own domain when the warning white flag is at the door.
One enters Arden from the country road, by means of steps over a stone wall under a rustic arch upon which is cut in graceful letters, "You are welcome hither." The path winds under large oak and chestnut trees past blackberry bushes and, in the fall, goldenrod and asters. The visitor usually arrives in Arden later than the resident, because he has been obliged to stop on the way to pick flowers or admire the beautiful surrounding country.
The visitor passes one or two little cottages right up to the shop, which often is called "the red house," and he has his first view of Arden. He sees the green with the wood at the rear, but otherwise surrounded by "the Admiral Benbow," "the lodge," "the monastery," the picturesque rough-plastered inn, "the Homestead," and other cottages of varying size and architecture.
Land cannot be bought in Arden, but all lots are assessed to "equal as nearly as possible the full rental value of the land, excluding improvements, and the rentals so collected shall be expended in the payment of all taxes, so far as said rentals will suffice, so that the leaseholders shall be exempt and free of all direct taxation to that extent, and thereafter for such communal purposes as are properly public in that they cannot be left to individuals without giving them an advantage over others."
Although Arden is a single tax colony in the sense that no one pays any direct tax except that on land values, among the residents are Socialists as well as Single Taxers, and people of no definite economic belief who go there to enjoy the freedom from conventionality. All the sites are taken for 1914, the rents amounting to £400. Besides the little homes, the inn and the guild-house, are a laundry, a summer school, and the craftsmen's show, which has a dozen rooms for bakery, store, studios, and for rug and furniture making.
The "organic school" is unique in that no desks were used, only tables and chairs, and that the children have to be sent home instead of being sent to school. Occupations take the place of lessons, on the principle that the conscious reasoning into which the children are plunged upon entering school retards the development of the reasoning power for some years. If occupations were substituted for 'lessons' the reasoning power would develop unconsciously and naturally, thus insuring a stronger fine mentality. Children should not consciously strive to know any more than they consciously strive to grow. Singing, dramatisation, stories of literature and history, field geography, and Nature study in the form of walks -- observation and investigation, gardening, creative handwork, art work, and fundamental conceptions of numbers, may occupy the children from six to nine years of age, without the use of books, excepting where the child really desires to learn to read. At nine or ten the child may come into the use of books, not by having 'lessons' assigned, but for the pleasure of finding out what the books can tell with the assistance of the teacher.
The affairs of the town are managed by three men, one of whom is chairman.
I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.
Henry George, Jr., was a U. S. Congressman. His most famous writing is "The Menace of Privilege."
WHO ARE THE CRIMINALS?
BY HENRY GEORGE , JR.
Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York
I. Who are the Criminals? 5
II. French Aristocracy of Privilege 6
III. New York Aristocracy of Privilege 10
IV. Robbery of Masses by Classes 12
V. Nature and Extent of Robberies 13
VI. How to Stop the Robberies 18
VII. The Criminals 23
I. WHO ARE THE CRIMINALS?
In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?
II. FRENCH ARISTOCRACY OF PRIVILEGE.
When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.
Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.
But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery. Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.
The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country. Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.
Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.
But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.
The aristocracy, therefore, were the primary, the real criminals.
III. NEW YORK ARISTOCRACY OF PRIVILEGE.
I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"
That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?
The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?
IV. ROBBERY OF MASSES BY CLASSES.
Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?
I believe that there can be but one answer — yes.
Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.
V. NATURE AND EXTENT OF ROBBERIES.
LET us consider how the classes may be robbing the masses into poverty.
It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.
This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?
Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.
Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them? What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.
Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.
VI. HOW TO STOP THE ROBBERIES.
Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —
|In ground rents||$225,000,000|
|In franchise values||30,000,000|
|While they are compelled to pay in various taxes for the support of local government||98,000,000|
|Which makes in all||$353,000,000|
What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values? Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?
For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?
And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?
What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.
Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?
Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.
Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used. This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.
What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.
The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.
VII. THE CRIMINALS.
That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?
Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?
Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?
Posted on November 04, 2011 at 12:10 PM in a Manhattan acre, a wedge driven through society, absentee ownership, all benefits go to landholder , better cities, corporations, cost of living, cui bono?, economic rent, financing education, financing infrastructure, financing services, franchises, government's role, Henry George, income concentration, justice of the single tax, land appreciates buildings depreciate, land rent, land speculation, land value created by community, land value taxation, landed gentry, landlordism, little people pay taxes, location, location, location, monopoly -- not the game, municipal ownership of utilities, Natural Public Revenue, Occupy Wall Street's values, paying twice, popular ignorance of land economics, population growth, poverty machine, poverty's cause, private property in land, privilege, public ownership of utilities, reaping what others sow, rich people's useful idiots, sharecropping, socializing risk and privatizing profit, sufficiency of land rent, urban land value, wealth distribution or concentration | Permalink | Comments (1)
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I recently came across an 1889 article by Thomas G. Shearman, co-founder of the NYC law firm Shearman & Sterling, entitled "The Owners of the United States." It seems rather timely, and might be of particular interest to the Occupy Wall Street movement. It appeared in The Forum, in November, 1889. It refers to an earlier article in the September 1889 issue of the same journal, which appeared under the title, "Henry George's Mistakes." (Based on its content, it seems to me that it would have more accurately been titled "Henry George's 'Mistakes'.")
It has been and still is the boast of the American people, that wealth is more equally distributed here than in any other part of the world. While every one admits that the old days of New England, in which none was very rich and none was very poor, have passed away, yet it is still believed that the land, buildings, and personal property of this country are owned mainly by the majority of its people, and that there is no danger of any such concentration of wealth in a few hands among us as exists in older and more aristocratic nations. Statistics as to the wide distribution of wealth, shown by the deposits in American savings banks, by the large number of American farms, and by the supposed high standard of American wages, have been consistently set forth as conclusive evidence that American wealth is substantially owned by the mass of the American people. The object of the present inquiry is not to determine whether such a condition would be desirable or not, but simply to ascertain whether it actually exists.
Interesting as such an inquiry must be, especially to that laboring class on whose behalf it was supposed that labor commissions were established, little effort has been made by any of them to solve this problem. The very able gentleman at the head of the National Labor Bureau, after taking statistics of industrial depressions, convict labor, and strikes, seems to have felt that he had exhausted all subjects of special interest to the laboring classes; and he therefore directed the energies of all his assistants to an investigation of the subject of divorce -- the one subject, among all grave social questions, with which the masses of laboring men have the least practical concern. One who desires to investigate the great problem of the distribution of wealth in this country must, therefore, feel this way, without much assistance from the official representatives of the very class which has the deepest interest in the question.
In the "effete monarchy" of Great Britain, where the laborer, deprived of all the blessings of a protective tariff, has no representative in the national government, no bureau, no commissioner, and only five members of Parliament among 1200, there is nevertheless no serious difficulty in the way of forming a pretty close estimate of the distribution of wealth. The income-tax returns, combined with those of the probate and succession duties, furnish the means of estimating, at frequent intervals, the proportions in which wealth is distributed among different classes of the nation; while a return of rent rolls, made in 1872, enables us to determine with considerable accuracy the proportions in which the land of the whole country is owned. Mulhall's estimate is as follows:
||DISTRIBUTION OF BRITISH WEALTH, 1877
||Wealth in Millions
||Wealth per Family
From this table it will be seen that one thirtieth part of the English people own two thirds of the national wealth. With what scorn we have long pointed to these figures; and with what pride have we bade foreign nations to look upon our own beloved land, where such things no only did not exist, but were made impossible by our republican form of government!
Can any light be thrown upon the distribution of American wealth by a study of English statistics? Let us see. By adding to the published returns of the personal estates of British decedents a capitalization of the rental value of their estates, at 4% interest, we may form a tolerably accurate estimate of the aggregate wealth, real and personal, of the richest noblemen and bankers of England who have died within the last quarter of a century. We may then compare these figures with the known wealth of a few American citizens, and thus obtain a starting point for further comparisons.
In this way, we find that the richest of the Rothschilds, and the world-renowned banker Baron Overstone, each left about $17,000,000. Earl Dudley, the owners of the richest iron mines, left $20,000,000. The Duke of Buccleuch (and the Duke of Buccleuch carries half of Scotland in his pocket) left about $30,000,000. The Marquis of Bute was worth, in 1872, about $28,000,000 in land; and he may now be worth $40,000,000 in all. The Duke of Norfolk may be worth $40,000,000, and the Duke of Westminster perhaps $50,000,000.
There is no official classification of British wealth or rents. But incomes derived from the profits of business, exclusive of railways, mines, etc., are classified as follows:
||British Incomes from Business Profits, 1884
||50,000 and over
||10,000 to 50,000
||5,000 to 10,000
||4,000 to 5,000
||3,000 to 4,000
||2,000 to 3,000
||1,000 to 2,000
||400 to 1,000
||200 to 400
The great law of averages may be relied upon as confidently in America as in Europe. We need only find a starting point; then we may safely proceed to calculations based upon general experience as to the average increase in the number of persons owning wealth, in proportion to the decrease of the amount owned by each individual. To find this starting point, it will be necessary to give a list of Americans whose wealth is approximately known. The writer abstains from mentioning in this list a single name concerning which he has any information which might possibly be confidential; and, to make quite sure of this, he omits the names of all gentlemen with whom he has any confidential relations. The names of person who have died (six of them within one year) will be included, more accurate information being obtainable concerning their affairs than in any other cases. Their estates are nearly all either undivided or in the hands of so small a number of persons as to make no practical difference, while the number of names which have been omitted will far outweigh all possible errors in the list. No name is given which is not believed, for good reasons, to represent an individual wealth of at least $20,000,000. The figures indicate the wealth believed to be possessed on the average by each of the persons whose names follow:
||J. J. Astor, Trinity Church
||C. Vanderbilt, W. K. Vanderbilt, Jay Gould, Leland Stanford, J. D. Rockefeller
||Estate of A. Packer
||John I. Blair, Estate of Charles Crocker
||Wm. Astor, W. W. Astor, Russell Sage, E. A. Stevens, Estates of Moses Taylor, Brown & Ives
||P. D. Armour, F. L. Ames, Wm. Rockefeller, H. M. Flagler, Powers & Weightman, Estate of P. Goelet
||C. P. Huntington, D. O. Mills, Estates of T. A. Scott, J. W. Garrett
||G. B. Roberts, Charles Pratt, Ross Winans, E. B. Coxe, Claus Spreckels, A. Belmont, R. J. Livingston, Fred. Weyerhauser, Mrs. Mark Hopkins, Mrs. Hetty Green, Estates of S. V. Harkness, R. W. Coleman, I. M. Singer
||A. J. Drexel, J. S. Morgan, J. P. Morgan, Marshall Field, David Dows, J. G. Fair, E. T. Gerry, Estates of Gov. Fairbanks, A. T. Stewart, A. Schermerhorn
||O. H. Payne, Estates of F. A. Drexel, I. V. Williamon, W. F. Weld
||F. W. Vanderbilt, Theo. Havermeyer, H. O. Havermeyer, W. G. Warden, W. P. Thompson, Mrs. Schenley, J. B. Haggin, H. A. Hutchins, Estates of W. Sloane, E. S. Higgins, C. Tower, Wm. Thaw, Dr. Hostetter, Wm. Sharon, Peter Donohue
Trinity Church is included in this list because it is practically an individual owner. For the purpose of estimating the distribution of wealth, it is obvious that this corporation, which has no stockholders, must be treated as a unit.
It will be said that these estates could not be readily sold for their estimated value. In a few cases this is true; but it is immaterial, because it is equally true of the property of farmers and other small owners, and so does not change the relative proportion of wealth, which is the only important question. Our estimate of the whole national wealth is based upon the census of 1880, in which the capital and debts of railway, telegraphy, and steamboat companies were included at par. But in the foregoing estimates of individual wealth the current market value is adopted, which is much less than par. For purposes of comparison between different classes the census valuations ought to be adopted all around. But if they were, the wealth of Mr. Gould would be fixed at over $125,000,000, and that of Messrs. Crocker and Huntington at nearly as much; and the proportionate share of the very rich would be greatly increased.
Making the largest allowance for exaggerated reports, there can be no doubt that these 70 names represent an aggregate wealth of $2,700,000,000, or an average of over $37,500,000 each. The writer has not especially sought for information concerning any one worth less than $20,000,000, but has incidentally learned of 50 other persons worth over $10,000,000, of whom 30 are valued in all at $450,000,00, making together 100 persons worth over $3,000,000,000; yet this list includes very few names from New England and none from the South. Evidently it would be easy for any specially well-informed person to make up a list of 100 persons averaging $25,000,000 each, in addition to ten averaging $100,000,000 each. No such list of concentrated wealth could be given in any other country in the world. The richest dukes of England fall below the average wealth of a dozen American citizens; while the greatest bankers, merchants, and railway magnates of England cannot compare in wealth with many Americans.
Lists were lately published of 67 millionaires residing in Pittsburgh, of 63 residents of Cleveland possessing in the aggregate $300,000,000, and of 60 persons residing in three villages near New York whose wealth was said to aggregate $500,000,000. One of the gentlemen included in the last estimate said that if it included one of his neighbors, with whose affairs he is intimately acquainted, it was entirely too low: $750,000,000 would be none too much. The Goelet estate, in New York City, pays taxes on $25,000,000 real estate. The mayor of Chicago says that four gentlemen of that city are worth over $20,000,000 each; but only two are included in the above list. The Boston "Advertiser" lately asserted that there were not 50 millionaires in Boston; but the official tax-list shows that more than 50 families pay taxes on over $1,000,000 each, and 200 persons pay taxes on amounts which clearly show that they are really millionaires.
The facts already stated conclusively demonstrate that the wealthiest class in the United States is vastly richer than the wealthiest class in Great Britain. The average annual income of the richest 100 Englishmen is about $450,000; but the average annual income of the richest 100 Americans cannot be less than $1,200,000, and probably exceeds $1,500,000. It follows, inevitably, that wealth must be far more concentrated in the United States than in Great Britain; because, where enormous amounts of wealth are placed in a few hands, this necessarily implies that the great mass of the people have very small possessions. On the other hand, we know with tolerable certainty what are the average earnings and possible savings of the masses. The earnings of fully fourth-fifths of American families do not average as much as $500 per annum. As the average age of busy men is less than 40 years, their savings cannot spread over more than an average period of 20 years. Farmers being always more economical than mechanics or other laborers of the same income, the savings of farmers, represented by their farms, will afford a maximum standard for the classes to which they correspond. According to the census of 1880, the average value of 25% of farms was $635, of another 25%, $1,750, and of about 35%, $3,500; the remaining 15% being held by wealthy owners. To allow, in marketable property, $750 each to the mass of the community, $2,000 each to the next class and $3,500 each to the small tradesmen, highly-skilled mechanics, and others whose condition corresponds with that of the best class of ordinary farmers, will be quite as much as facts will justify; especially when we take out of this highest class, as we must, a considerable number (say one sixth) who, by saving one third to one half of their income, have accumulated four or five times as much as their fellows.
In 1877 the number of British capitalists possessed of over $25,000 each was about 222,000, while the number of persons deriving profits of over $1,000 per annum each from business was nearly 200,000. The two classes of persons were not at all the same; on the contrary, probably not one third of either class, possibly not even one fifth, was included in the other. Yet, in the absence of any detailed information as to the distribution of wealth, the classification of incomes must be taken, with much reserve, as the only attainable guide. But incomes, in their very nature, are much more equally distributed than wealth. Millions have inomces who have practically no wealth. Therefore, a computation on this basis will greatly underestimate the concentration of wealth in the higher figures, while it will lead to such an overestimate of wealth in the lower figures as to make it gradually quite misleading. Such a computation is indeed of no use whatever outside of the first 250,000 families, and must be greatly modified long before reaching that number.
Bearing these considerations in mind, we proceed to estimate the distribution of American wealth. Judging from the rate of increase in wealth indicated by the last census, it is probably that (estimated by the same method) it now amounts to nearly $1,000 per head, or $65,000,000,000 in all. In 1880, $2,000,000,000 was invested in public buildings, churches, colleges, charitable institutions, etc.; and this item must be about $2,500,000,000 now.
Taking the number of British incomes exceeding 200 pounds as a basis for comparative classification, starting on the basis of known facts about American wealth, and modifying the figures gradually, for the reasons already stated, we arrive at the following conclusions:
||DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BRITISH INCOME RETURNS.|
|Families||Average Wealth in Thousands
||Total in Millions
|Public property, churches, etc.
Condensing this table, so as to arrange it in three great classes, we arrive at this result:
||DISTRIBUTION OF AMERICAN WEALTH
||Wealth in Millions
||Average per Family
On this basis, 50,000 families would appear to own one half of the national wealth.
In this table small farmers, skilled mechanics, foremen, conductors, engineers, etc., are included in the "working class," and $968 has been allowed as the average savings of each family in this class -- more than double the highest claim made on behalf of the same class in England, and nearly treble the average deposit in American savings banks. This amount is certainly too large. The number of the very largest millionaires has been kept down to very nearly the limit of the writer's personal information; while in his judgment there must have been at least as many more, of whom he has never heard. If this surmise is correct, it would add at once $2,500,000,000 to the share of wealth belonging to the millionaire class, and would confirm the writer's rough estimate in the FORUM for September, that 25,000 persons own just about one half of all the wealth of the United States.
Objection will doubtless be made to any estimates based upon British statistics. Fortunately, Massachusetts furnishes a purely American basis for estimates of the distribution of American wealth. A list of the largest individual taxpayers in Boston, published this year, including all (exclusive of corporations and executors) who paid more than $1,000 in taxes, and who were therefore assessed at more than $75,000 (the tax being 1.33%) showed the following results:
||BOSTON TAX LIST FOR 1888
||$50,000 to 75,000
||40,000 to 50,000
||30,000 to 40,000
||20,000 to 30,000
||10,000 to 20,000
||5,000 to 10,000
||1,000 to 5,000
It may be safely assumed that every one who is assessed at $400,000 is really worth $1,000,000; because large estates are never assessed at their full value, and because these assessments include no shares in corporate stock, nor government, municipal, or mortgage bonds, in which a vast proportion of the wealth of the very rich is invested. For the same reasons, an assessment of $75,000 represents in actual wealth not less than $150,000. The wealth of the very rich is always more under-estimated by assessors than that of men in moderate circumstances. Assessments of $400,000 and over are therefore multiplied, in the next table, by two and one half, while those below that line are only doubled. In both cases the increase is too small. Boston has less than a forty-fifth part of the nation's wealth, and less than a hundred and thirtieth part of its population. Multiplying the Boston figures by only 45, it would follow that there are in the United States more than 56,000 persons worth over $150,000 each, of whom at least 8,500 are worth over $1,000,00. Classifying men of wealth in conformity to the proportion in which assessment returns show that their wealth is divided in Boston, but adding the 70 persons who have been specifically named as averaging $37,500,000, we arrive at the following estimate, which errs only on the side of moderation:
||DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BOSTON TAX RETURNS
||Wealth in Thousands
||Average Wealth in Thousands
||Total Wealth in Millions
||Distribution in Classes
||Wealth in Millions
||Average per Family
On this basis, 40,000 persons own over one half of the wealth of the United States, while one seventieth part of the people own over two thirds of the wealth.
It will be seen that in these tables, which are prepared upon the basis of purely American statistics, the concentration of wealth appears to be much greater than in tables prepared upon the basis of British statistics. By either table, 70% of the national wealth appears to be concentrated in the hands of a very small minority of the people; but dividing this wealth in proportion to the English ratio, it is distributed among 235,000 families, while dividing it according to the Boston ratio, it is possessed by only 182,000 families. The truth probably lies between the two; and it may safely be assumed that 200,000 persons control 70% of the national wealth, while 250,000 persons control from 75 to 80% of the whole.
These conclusions are of course very unpalatable to comfortable optimists. But what other results could possibly be expected, in view of well-known facts? No one can entertain a reasonable doubt that there has been an accumulation of wealth in a few individual hands in the United States, during the last 25 years, vastly in excess of any which has taken place in other parts of the world. In no other country have railroad-managers, manufacturers, oil-refiners, mine-owners, bankers, and land speculators accumulated fortunes so rapidly as they have in this. In no other country, and least of all in England, during the last 30 years, has the burden of taxation been cast so exclusively upon the working class, or the machinery of public taxation been used so unscrupulously for private profit.
In Great Britain, although indirect taxation still constitutes the greatest part of the public revenue, a large share of direct taxation has been maintained, and, as far as possible, all tribute levied by the rich upon the poor, under the pretense of taxation, has been abolished. The natural consequence is that the disproportion between the rich and the poor in Great Britain is less today than it was 40 years ago, that wealth is more widely distributed, that the middle class is much more numerous, and that the masses are rapidly gaining in power and influence.
In America the drift has been in precisely the opposite direction. Federal taxation has increased 6-fold since 1860, and the whole of this increase has been taken out of the relatively poorer classes. At the same time, the profit which is secured to the wealthier classes by the adjustment of indirect taxation in their interest has been increased not less than 10-fold. The wealthy classes, collectively, have made a clear profit out of the indirect effects of taxation to an amount far exceeding all that they have paid in taxes, although this profit has been absorbed by a minority of even the rich. But, apart from this, the whole system of taxation is and has been such as to take from the rich only from 3% to 10% of their annual savings, while taking from the poor 75 to 90%. It is true that the same system existed, in form, before the war; but, taxation being light, the amount taken from each individual was far less, and the disproportion between the rich and the poor not so great, while the profit levied from the poor by the rich was much smaller. The amount of the burden has increased, and it has been more and more shifted over upon the poor.
It is childish to imagine that, under such circumstances, the concentration of wealth can go on less rapidly here than in Europe. On the contrary, it has gone on far more rapidly here; and it will continue to do so, at a tremendous pace.
It is intended to confine this paper to a simple investigation of facts, without suggesting remedies; but, to avoid misapprehension, the writer wishes it to be distinctly understood that he is opposed, on principle, to all schemes for arbitrary limitations of individual wealth, whether by a graduated income tax, a heavy succession tax, or otherwise; that he is utterly opposed to communism, socialism, and anarchism; and that he is of opinion that the enormous wealth of the few in this country has been forced upon them by the votes of the very masses who have been impoverished for their benefit. Populous vult decipi. The farmers insist upon throwing away their inheritance; and since they are determined to heap their earnings upon somebody, it is well that the list of their chief beneficiaries should be, upon the whole, so respectable. And, indeed, has it not been clearly explained to us that it makes no sort of difference who owns the wealth of the nation, so long as it is kept at home?
But the facts should be known, without regard to the inferences which may be drawn from them; and we are now prepared to answer the question: "Who own the United States?"
The United States of America are practically owned by less than 250,000 persons, constituting less than 1 in 60 of its adult male population.
Within 30 years, the present methods of taxation being continued, the United States of America will be substantially owned by less than 50,000 persons, constituting less than one in 500 of the adult male population.
Posted on October 06, 2011 at 04:31 PM in a wedge driven through society, absentee ownership, corruption of economics, cui bono?, direct taxation, FIRE sector, fixing the economy, free lunch, income concentration, indirect taxation, land rent, landed gentry, landlordism, privatization, privilege, reaping what others sow, socializing risk and privatizing profit, Thomas G. Shearman, trickle-down economics, wealth distribution or concentration, wobegon | Permalink | Comments (0)
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In September, 1889, Thomas Shearman, co-founder of the NYC law firm Shearman & Sterling, published an article in The Forum, entitled "Henry George's Mistakes." This was ten years after the publication of Henry George's "Progress and Poverty," which was, by that time well known to most Americans and many in other parts of the world; by 1900, P&P had sold something like 6 million copies and been serialized in many periodicals. As the first paragraph shows, George's ideas were controversial, particularly with the vested interests who were more than happy with the current structure, and were in a position to spend to influence public opinion.
Shearman is responding to those who thought that George's Remedy (the subtitle to P&P is "An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy") was unrealistic, and in particular, to an 1887 article in The Forum.
Shearman shows why indirect taxes raise prices and the cost of living, particularly for the poor. Recall Leona Helmsley's statement about taxes: "We don't pay taxes. The little people pay taxes." I don't think she was talking about tax evasion; she was talking about tax structures.
I've taken the formatting liberty of presenting some lists contined in paragraphs as bullet points.
HENRY GEORGE'S MISTAKES.
Since the mistakes of Moses were so triumphantly demolished by Col. Ingersoll, his example has been followed by numerous writers, who, possibly because they concluded that the Mosaic field has been sufficiently occupied, have devoted themselves to an equally triumphant demonstration of the mistakes of Henry George. Space could not be afforded for even an abstract of these brilliant productions. Crushed by the Duke of Argyll, refuted by Mr. Mallock, extinguished by Mayor Hewitt, undermined by Mr. Edward Atkinson, exploded by Prof. Harris, excommunicated by archbishops, consigned to eternal damnation by countless doctors of divinity, put outside the pale of the Constitution by numberless legal pundits, waved out of existence by a million Podsnaps, and finally annihilated by Mr. George Gunton, still Henry George's theories seem to have a miraculous faculty of rising from the dead. For it is certain that his general doctrines are more widely believed in today than ever before; while the one practical measure which he advocates for present and immediate enactment is accepted by a vast number of intelligent men on both sides of the Atlantic. It is, therefore, still worth while to look into this terrible delusion, and to inquire seriously what are these fatal mistakes which, being so often slain, nevertheless live.
Mr. George has devoted a large portion of his famous book, "Progress and Poverty," to the assertion and illustration of his belief that, all over the civilized world, the rich are growing richer and the poor relatively poorer. He undertakes to trace the cause of this assumed evil to the private ownership of land and the steady increase of economic rent. He insists, with admitted eloquence and earnestness, that private ownership of land must be abolished; but he proposes one remedy and only one, the concentration of all taxes upon ground rent alone. He urges that these taxes should be increased to such an amount as will absorb ground rent. This, in view of statements made by all Mr. George's opponents, would seem to be really only a matter of detail, concerning which any one might be at liberty to entertain, as Mr. Disraeli used to say, a "pious opinion." For they all, with one voice, maintain that ground rent would never be sufficient to meet the existing taxes; and so this question, if any of Mr. George's critics are correct, could never arise.
To a practical mind there are only two important questions involved in this controversy.
Let us inquire whether there is any excessive concentration of wealth going on in the United States of America. Leaving mere clamor and unsupported assertions out of consideration, on either side, let us look into facts. As lately as 1847, there was but one man in this country who was reputed to be worth more than $5,000,000; and though some estimated his wealth at $20,000,000, there is no good reason for believing it to have been so great. The wealth of his lineal descendants is estimated at $250,000,000, or over $50,000,000 each. In 1867, in the New York constitutional convention, one of the most prominent delegates stated that he could name 30 men, residing in that State, whose wealth averaged $15,000,000 each. The St. Louis "Globe" recently published a list of 72 persons who were worth, collectively, the whole amount of our national debt, averaging $18,000,000 each. The wealthiest railroad manager in America, in 1865, was worth $40,000,000, but not more. His heir died recently, leaving an estate of nearly $200,000,000; and there are several gentlemen now living who are worth over $100,000,000 each. Within a short period, a number of quiet, unobtrusive men, of no national fame, have died in Pennsylvania, leaving estates of over $20,000,000 each. Twenty living persons, in the oil business, are reputed to be as rich. Forty persons could be easily named, none of them worth less than $20,000,000, and averaging $40,000,000 each. At the lowest reasonable estimate, there must now be more than 250 persons in this country whose wealth averages over $20,000,000 for each. But let us call the number only 200. Income-tax returns in Great Britain and in the United States show that, in general, the number of incomes, when arranged in large classes, multiplies by from three to five-fold for every reduction in the amount of one-half.* For extreme caution, however, we estimate the increase in the number of incomes at a very much lower rate than this. At this reduced rate, the amount of wealth in the hands of persons worth over $500,000 each in the United States would be about as follows:
|200 persons at||$20,000,000||$4,000,000,000|
Let us test the question in another way. Eastern savings banks show an average deposit of $365. This sum represents the extreme savings of the average thrifty workingman of the East. But even estimating that 20,000,000 workers of 1889, earning an average of less than $400 each, of whom 5,000,000 are women and children, have saved, on the average, $600, still, their aggregate savings would not amount to $12,000,000,000, or $1,100 for each average family. Let us suppose that the 1,000,000 workers of superior class, earning an average of $1,000 each, have saved $3,000 — a monstrous exaggeration. This would make their total possessions $3,000,000,000. The result would be to show that 21,000,000 persons had saved up in the whole course of their lives $15,000,000,000, leaving $45,000,000,000 in the possession of not more than 400,000 persons.
Look again. Excluding churches, public buildings, etc., from the items of wealth enumerated in the census estimate for 1880, it is reduced to $41,000,000,000. Railroads, telegraphs, shipping, mines, quarries, canals, merchandise, and specie count for $13,500,000,000. These certainly do not belong to $400 workingmen. $5,000,000,000 is charged to household furniture, paintings, and jewelry. Two-thirds of this would be an extreme allowance for the 9,700,000 families of the poorer class; but let us allow them more, and estimate the furniture of the 300,000 richer families at only $5,000 each. Farms stand for $10,000,000,000, of which more than one-fourth were owned by landlords and leased to tenants, while one-fifth were so large as to imply wealthy owners; and mortgages were certainly outstanding for more than one-fifth of the rest. Business and residential real estate, water-power, etc., were estimated at about the same value. Of this, at least three-fourths was owned by the wealthy class, either absolutely or by mortgages. On this basis we arrive at the following estimate of the possessions, in 1880, of not more than 300,000 persons:
Railroads, shipping, mines, merchandise, specie, etc.
|Farms, 45 per cent||4,500,000,000|
|Mortgages on farms, 20 per cent||1,000,000,000|
|Other real estate||7,500,000,000|
A sufficient cause for the immense and growing chasm between the rich and the poor of this country is to be found in indirect taxation. The population of the United States has increased in 25 years from 35,000,000 to 60,000,000. Let us call the average 45,000,000. The average annual taxes for the same period have been about $175,000,000 on imports, $136,000,000 on domestic productions, $14,000,000 on incomes, $25,000,000 miscellaneous, and $300,000,000 State and local taxes, mostly on houses and improvements and personal property. Duties on imports have entailed an average increase of prices on domestic goods to the amount of fully thrice the duties, say $525,000,000. Excise duties, by promoting monopolies, have largely increased prices, as in the well-known case of matches, where a duty of one cent caused an increase in price of' two cents. Let us, however, call this increase only one-fifth of the excise, or $27,000,000. But upon these taxes there are three profits, made by the importers or manufacturers, the jobbers, and the retailers, amounting to not less than 20% in all, or $172,600,000. Two-thirds of the State and local taxes are paid by middlemen, who of course add a profit; but this may be put as low as 5%, or about $10,000,000. The grand total now comes to $1,384,000,000 per annum, as the average annual burden borne by the people for 25 years past. Of this all was indirect taxation, except something over $100,000,000; leaving the average annual burden imposed by indirect taxation at $1,280,000,000.
This burden was distributed as equally as possible by natural laws, in proportion to the expenditure of each income-receiver in the support of his family. As each worker supported, on the average, three persons, including himself, the people may be divided into 15,000,000 families, or rather groups of three.* On the basis of the careful estimate of Mr. Atkinson, 14,000,000 of these must have been supported upon incomes of less than $400 (in my judgment less than $350), 700,000 on less than $1,000, and the other 300,000 on larger incomes. The average annual earnings of the nation during 25 years cannot have exceeded $7,500,000,000. Allowing 15% as savings, destruction, and cost of replacement, and adding to this the tax burdens, which must be paid out of savings, there would remain, as the sum expended in the support of the people, an average of less than $5,100,000,000 per annum. On this the burden of indirect taxation has averaged 25%. We are now prepared to calculate the effect.
What would be the result, at the end of a year, on these two classes? Assume only 200 such very wealthy men; yet their savings would be, under such taxation, $175,000,000. Assume only 600 more, with incomes of $500,000 each, spending $50,000, and taxed therefore $12,500; their net savings would be $437,500 each, or $262,500,000 in all. Thus 800 rich men would save $437,500,000. The savings of the 14,000,000 laborers could not exceed $25 each, or $350,000,000. But, if taxes could be dispensed with, the savings of the millions of poor men would have reached $1,400,000,000, while those of the 800 rich would not have exceeded $450,000,000.
Here is a mathematical demonstration that the mere fact of indirect taxation is sufficient to strip the poor of three-fourths of their natural savings, and to concentrate a majority of the wealth of the community in the hands of an infinitesimally small part of its number.
What, then, is the remedy proposed by the wild fanatic whose blunders we are considering? It is threefold.
The third branch of this proposition is the only one which has brought the penalties of everlasting damnation upon Mr. George's head, from the hand of Dr. Van Dyke. But Prof. Harris and Mr. Atkinson are sure that they have saved his soul, at the expense of his arithmetic, by demonstrating that rent is a very insignificant item, which would not suffice to meet the present necessary taxes. Assuming, for the moment, that Mr. George's arithmetical critics have delivered his soul from Sheol, let us try to rescue his body from the lunatic asylum.
Every form of tax upon personal property or improvements upon land, whether in the form of a tariff, an excise, a license, or a so-called "direct tax" upon their value, is, in the inherent nature of things, an indirect tax. It is and always must be shifted from the original tax-payer to the final consumer. In many individual cases the original tax-payer is unable thus to shift the tax; but in that event he is crippled in business, and, if the difficulty is permanent, he is ruined and driven out of business, to give place to a shrewder man, who makes the customer pay the tax in the end, with a bigger profit than would have contented the weaker man.
There are no direct taxes worth discussing, except the income tax, the succession tax, and the tax on land, valued without reference to its improvements. The income tax opens the door to innumerable frauds, and puts a premium upon perjury and corruption. If adopted in this country as the sole method of taxation, it will open the way to such plunder of the honest rich as will make them sigh for Henry George and his tax on rent. Poor folk and rascals will escape from all taxation whatever. The succession tax will fall exclusively upon the rich. If made high enough to support the cost of all government, it will fail, because it will be evaded. There remains only the tax on land values, or the natural rent of land, irrespective of improvements.
This tax is absolutely direct. It cannot be evaded. It cannot be shifted by the original tax-payer. That is an axiom of economic science. If it were not so, there would not be a particle of the clamor which is raised against it. The thunders of the pulpit would have slept forever, if the land-owner could make poor folk pay his land tax, with a little profit. The adoption of this tax would therefore put an end to all the unnatural impoverishment of the poor and enrichment of the rich, which take place under the present system. It would amount to a total abolition of taxation, as to that vast majority of the poor who own no land. Whereas now they pay both rent and taxes, then they would pay rent alone. This simple fact is a complete answer to the inquiry: "How are the masses to get the benefit of taxing rent?" As to such of the poor as own land, they would be relieved from the taxes which they now pay on personal property and improvements, that is, from more tax than would be added to their land tax. For we need reckon none among the poor who own more than $3,000 worth of land clear, that being more than the average value of improved farms; and those who own less than $6,000 worth of improved real estate are now paying more taxes indirectly than they could ever be required to pay under the single-tax system.
Let us briefly consider "Henry George's Mistake about Land," as set forth by Prof. W. T. Harris, in the Forum for July, 1887. That "mistake" lies in his assumption that ground rent would be sufficient to defray all the expenses of government, national, State, and local. Prof. Harris, finding that the official assessment of real estate in this country, in 1880, was about $13,000,000,000, and estimating that this was two-thirds of the market value, and the value of the land alone about one-half of the whole, or somewhat less than $10,000,000,000, calculates the ground rent at 4% on this sum, or $400,000,000 per annum; which of course is wholly insufficient to meet the taxes of $700,000,000 levied in 1880. He then refers to Great Britain and Ireland, where, he says, land forms only one-fifth of the total wealth, with an annual rental of £65,442,000. As British taxes altogether amount to about £118,500,000, it is clear that, if this estimate is correct, the single tax would not suffice to meet British taxes.
Taking first the case of the United States, the census report of 1880 shows conclusively that assessments are worthless, as a means of estimating real values. They vary from 10% to 70% of the true value of real estate; and no average can be estimated from them. The census of 1880, upon which Prof. Harris relies to show the proportion of land to the aggregate wealth, and which he must not therefore desert for local assessment tables, contains items of real estate, including all privileges over land, aggregating over $28,000,000,000. Adopting the rule of division between land and improvements propounded by him, the lowest estimate of pure land values for 1880 would be between $15,000,000,000 and $16,000,000,000. There is no estimate whatever of wild lands belonging to private individuals, unconnected with farms, the value of which could hardly have been less than $2,000,000,000; but of this we will take no notice. The rental of 4% for 1880, upon which Prof. Harris bases his calculation, is utterly absurd. Strictly first-class mortgages could not be placed at less than 5% in the city of New York in 1880; and such mortgages averaged, the country over, nearer 7% than 6%. It is impossible that the ownership of land, which is no better than a second mortgage, should not, on the average, produce a rate of interest higher than a first mortgage. The lowest rate of interest to be allowed on the value of land would therefore be 6.5%. But to this must be added the amount of taxation which actually fell upon land values in 1880. This could not have been less than 0.5%. Such taxes, being paid by landlords and not by tenants, necessarily depreciate the market value of the land; and this amount should be either added to the rent, or deducted from the amount expected to fall upon lands in consequence of the adoption of the single tax, since this falls upon it already.
It follows that the ground rent of the United States, in 1880, was considerably over $1,000,000,000. The taxes for that year were about $700,000,000. But of this, $100,000,000 was levied only for the purpose of piling up a surplus. The necessary taxation was only $600,000,000; and the land-owners of the United States would have been able to pay all taxes and yet retain a very large surplus. The value of land in the United States is now not less than $20,000,000,000; but the rate of interest is lower, and ground rent has not increased in equal proportion to nominal values.
Turning to Great Britain, the mistakes of Prof. Harris can be readily shown to be vastly greater than any mistakes of Henry George. His fundamental errors are three.
The following are the official figures for 1884, taken from the 28th British Inland Revenue Report; to which we append a very low estimate of the proportion of mixed land values which should be charged to ground rents alone:
||British Pure Annual Land Values, 1884.|
|Lands, returned as such||£65,442,000|
|Manors, tithes, fines, etc.||853,000|
|Fishing and shooting rights||572,000|
|Markets and tolls||607,000|
|British Mixed Annual Land Values, 1884.|
|Houses and lots||
|Canals, water-works, mines, gas, iron, etc||22,381,000|
|One-half of these values as land||£91,241,000|
|Total land values||£158,715,000|
Now the whole net amount of British taxes is £118,500,000. But of this, over £27,500,000 is already assessed upon pure land values. The adoption of the single tax would therefore increase the burden upon land only by £91,000,000. The net rental value of land being over £158,000,000, it follows that the land-owners of Great Britain and Ireland could pay all national and local taxes, and still retain for their own benefit the comfortable margin of £67,000,000. Prof. Harris will do well to study his statistics carefully before he again undertakes to exhibit "the mistakes of Henry George." *
Mr. Gunton, in the Forum for March, 1887, had preceded Prof. Harris in the same field and with about equal accuracy. He calls the entire rental value of real estate in the United Kingdom, including, of course, improvements, £131,468,000. The correct official figure (including £43,000,000 taxes, paid by occupiers) was, in 1884, almost exactly £293,000,000; and the real value is far greater. Instead of being only 11% of the gross produce, as claimed by Mr. Gunton, it is fully 25%. It is not worth while to follow either Mr. Gunton's figures or arguments any further.
I regret that the space allotted for this article will not allow an examination of Mr. Edward Atkinson's calculations on the same general point. His statistics are far more accurate than those of Messrs. Harris and Gunton. Accepting all his statistics as absolutely accurate, I have shown in another place, by his own figures, that two-thirds of the ground rents of Boston would provide for all local, State, and national taxes on Boston.
The single tax, therefore, would be a real, effective, and adequate remedy for the present unjust intervention of the state in favor of the rich and against the poor.
There still remains the question: "Is the remedy just?" Many of Mr. George's critics (notably Mr. Gunton) are debarred from raising this question, since they assert the absolute right of the state to deal with all property as may be deemed expedient. But the majority of them are better represented by Dr. Van Dyke, who thinks the proposition of Mr. George "thoroughly unrighteous." So far as we can make out, this is because the state has in the past allowed private individuals to appropriate land and its rent to their own use, and is therefore estopped from taking away that rent by taxation. But land has always been taxed. In most of our large cities it is now theoretically taxed at least 2% on its value; often 3%. Why should a tax of 2% or 3% be just and righteous, but a tax of 4%, 5%, or 6% incur penalties of everlasting damnation? Is it because land is especially singled out for taxation? Then is there not at least equal wickedness on the part of Congress, which for half a century singled out the business of importation as the only subject of taxation, and still taxes it ten times as heavily as anything else? Does the wickedness consist in taxing land up to its full value? Then is it not equally wicked to tax the poor man's window glass 100% upon its value? Does the wickedness consist in imposing a tax for the purpose of accomplishing some ulterior result? How about our whole tariff legislation, which is avowedly maintained for an ulterior purpose? Is it wicked to tax private property out of existence? How about the tax on bank notes, which was levied for the express purpose of destroying State banks? How about the tax on oleomargarine? Is it wicked to tax property out of existence, without giving compensation? Why do not those who urge this plea petition Congress for compensation for those whose wealth has been destroyed and whose occupation has been taken away by taxes avowedly levied for that purpose? Not one of these critics has ever suggested such a petition; not one of them would sign such a petition; and not one of the many thousands who have suffered from such tax laws ever thought of presenting such a petition.
Judged by any standard which has ever been applied to public affairs, even by clergymen, the proposition of a single tax on land values is perfectly reasonable, moral, and honorable. As to the amount of such a tax, that is a question to be decided by a wise expediency. There is not the slightest moral obligation on the part of the state to make the tax small, or to leave any margin to land-owners, so long as no more is taken than is needed for the honest use of the state.
It is not necessary to follow any further the proposition of Mr. George to increase taxation up to a point which would practically absorb all ground rent. Every one of the critics who has discussed the point at all, has committed himself to the theory that no such artificial increase of taxation would be necessary to absorb rent. Moreover, it is not a practical question at present, and will not be for a very long time to come, if ever. Taxation rises quite fast enough, without artificial efforts to increase it. In 40 years, in Ohio, population increased 100%, assessed wealth 1,000%, and taxation 1,360%. It is sufficient for the present to show that the actual remedy proposed by Henry George for the evils of our present social condition, the only practical measure which he asks to have adopted today, is a real remedy, an adequate remedy, and a just remedy. The criticisms of his adversaries have been directed to mere side issues, to his minor arguments, to his intellectual processes, to his illustrations, to anything except the real pith of the matter in hand. Not one of them has really wrestled with the problem; not one of them (except Mr. Atkinson) has been even approximately correct in his statistics; not one of them has failed to commit mistakes in his reasoning and his calculations far more serious than any which can be fastened upon Henry George.
Thomas G. Shearman.
Posted on October 06, 2011 at 04:20 PM in a wedge driven through society, cost of living, cui bono?, direct taxation, economic rent, ending poverty, Henry George, income concentration, income tax, indirect taxation, justice of the single tax, land rent, land share of real estate value, land value taxation, little people pay taxes, natural resource revenues, private property in land, privatization, rich people's useful idiots, savings rate, single tax, sufficiency of land rent, taxation, Thomas G. Shearman, wealth distribution or concentration | Permalink | Comments (0)
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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.
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.)
A few weeks ago (8/30/11), David Cay Johnston's blogpost at Reuters, entitled "Budget Costs That Raise Costs," ended with this example:
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.
Posted on September 24, 2011 at 11:13 PM in common good, connect the dots, cost of living, financing education, financing infrastructure, financing services, fixing the economy, government's role, housing affordability, infrastructure, land rent, land value created by community, location, location, location, Natural Public Revenue, one solution for many problems, population, population growth, property tax, property tax reform, public ownership of utilities, public spending, sales taxes are wrong, small government, tax reform, teach your children well, transportation, unburdening the economy, urban land value, wage taxes | Permalink | Comments (0)
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Inspired by the energy, rhythm and tune of Kristin Andreassen’s Crayola Doesn’t Make the Color of your Eyes or another version from Prairie Home Companion, my friend Joe Johnston wrote this song. Watch one of the videos first! The tune is infectious, and Joe's words communicate the message clearly.
Taxing work does not create....
I went to see the wise one
our town was such a mess
the longest lines to get in
were at the DSS
He said, I cannot cure your town
But here’s something you can do
write a list and flesh it out
Of why your town is in a stew
Well, we build roads; we run the bus,
We try to control crooks.
We build the parks and sidewalks
We give our streets good looks
To do these things, we need some wealth
And so we tax the things we see
We tax the buildings and what you earn
We tax merchants and sellers with a fee.
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.
We tax the land, that helps ensure
that land is not a wager
It lowers the cost to those who use it
to create more jobs per acre
Collecting land rents means
That the things we as community do
are benefiting everyone and
go to all, not to the few.
And if a person wants to work
she reaps the results of her labor
The benefits of what she does,
Not the out-of-town land speculator
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.
So maybe we’ll shift the taxes off
The labor you and I do, you see
And put it on the land so none
can squeeze the blood from you and me.
That way they’ll be more jobs for those
who put their backs and brains to work
We wouldn’t have to work so long,
To put a roof and walls on God’s good dirt.
We wouldn’t need two jobs to feed
The mouths that we beget,
To house and clothe them and ourselves
And where we need to go, we’d get.
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.
A compact town means we could walk around
to get, to shops, to meet, to work for gain
And even walk to parks nearby
where quiet, joy, and beauty reign.
We wouldn’t need a big back yard,
or front ones with their lawns to mow.
We’d have a share in common land,
Where our souls, spirits, and bodies grow.
I think we’ve solved the problem of unemployment lines
of barely earning what we need.
We may not have the harvest yet,
But we have sown the seed.
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.
Posted on September 04, 2011 at 11:00 PM in a wedge driven through society, absentee ownership, better cities, common good, commons, financing education, financing infrastructure, financing services, jobs, land rent, land speculation, land value created by community, make land common property, Natural Public Revenue, popular ignorance of land economics, property tax reform, prosperity, reaping what others sow, sales taxes are wrong, tax reform, taxation, teach your children well, unemployment and underemployment, wage taxes, wages, wages driven down, wobegon | Permalink | Comments (0)
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