Land Value Taxation will solve many of the 21st century's most serious social, economic and environmental problems, and promote justice, fairness and sustainability. We CAN have a world in which all can prosper.
Progress and Poverty, by Henry George Here are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!
Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It! This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm
Where Else Might You Look?
Wealth and Want The URL comes from the subtitle to Progress & Poverty -- and the goal is widely shared prosperity in the 21st century. How do we get there from here? A roadmap and a reference source.
Reforming the Property Tax for the Common Good I'm a tax reform activist who seeks to promote fairness and reduce poverty. Let's start with the enabling legislation and state requirements for the property tax. There are opportunities for great good!
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.
another excerpt from Dawson (1910 -- see an earlier post, below) -
IT is necessary now to consider more fully than hitherto the question, cannot society with right claim the increased value given to land by distinctly social causes? We have seen the various factors which tend to create what is generally known as "unearned increment." In one sense this term is very inaccurate. The increment is by no means unearned; what is meant, when the phrase is used, is that the landowner has not earned it. Society, however, has; and earned it honestly by heavy toil, by exertion of body and brain, by plodding industry, by bold enterprise, by culture and enlightenment, by progress in numbers, in wealth, and in morality. There is not a yard of land in the country — be it used for the growing of corn, the pasturing of cattle, or the habitations of men — whose value has not been enhanced by these social causes. It was the settlement of men with their various activities upon the land which originally gave it value, and the increase of population has been a constant and potent factor in value-growth since the primitive communities first established the institution of private property in the common soil. And yet, while society has for centuries been growing and labouring to increase the value of the land it required for its food, its industries, and its habitations, it has ever done so to its own detriment. While enriching the landlords it has impoverished itself.
This, indeed, is the greatest anomaly presented by the social increment problem. As a community develops and prospers, owing to its energy, enterprise, and enlightenment, it is all the time preparing a rod, armed with which the landlords will sooner or later turn upon it. A town's residents are punished for their industry and merited success by having to pay the landlords more and more money for the land they use. Did not tradesmen, by dint of perseverance and pluck, succeed and thrive, the demands made upon them would not increase; but simply because they reap in prosperity the reward of exertion, the landlords require growing tribute in the form of higher rents. And so it is in all departments of social life. In the eyes of the owners of the soil, human communities become, in fact, simply value-creators, rent-producers. The landlords reap where they have not sown, they gather where they have not strawed. Little of the value of that land which they lend and sell, at prices which are often so fabulous, has been created by them, yet they appropriate it all.
The remarkable thing about this story, to my eye, is that the size of the lot isn't even mentioned! It is worth $1 million land rent per year, and one might infer from the information provided that the lot is about 10,000 square feet, or less than 1/4 acre.
Capitalized at 5% (also known as "20 years' purchase") the lot would sell for about $20 million.
I assume that in addition to the land rent, the tenant pays the property tax on the land. So the entire $1 million annual land rent flows out of NYC, to the property's owner, in Marshall, Virginia.
What, pray tell, has the land owner done to earn that land rent?
Consider how many people's wage taxes and sales taxes could be lifted, and what that additional spending power could do for the local economy. Consider what would happen if there were no taxes to be paid on the apartments or on people's condo structures.
Or NYC can just keep letting the land rent leave the city, and even leave the country, continuing to flow into private pockets, just as if they'd rendered someone some service and earned it!
Land rent is natural public revenue, and we permit landlords to privatize it. Aren't we generous with our patrimony? (Leona told us the truth!)
The developer of a nine-story Karl Fischer rental apartment building planned for a corner site in the East Village signed a 99-year ground lease that requires payments each year of about $1 million.
The development company, YYY Third Avenue, signed the long-term lease for the vacant site at 74-84 Third Avenue, at 12th Street, April 27, 2011, however, a memorandum of the lease was not recorded in public records until last Wednesday, city property documents show.
A source citing city property records said the lease payment, which is not specifically recorded, could be inferred to be about $1 million per year. Prior to the document’s release, the annual lease cost was not known.
The prolific and controversial architect Fischer filed plans to build an 82,000-square-foot, nine-story residential building with 94 units, city Department of Buildings online records show. The permit has not been approved and is pending, DOB data indicate, and is to include nearly 9,511 square feet of retail, as well.
You might also be intrigued by the URL for the story ... I'm not sure what to make of it.
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).
36. He worked hard. He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high -- and rising -- lease prices, for generations. Is it right to change our tax code to tax -- heavily -- year in and year out, the economic value of that land?
Does the Single Tax discriminate between earned and unearned income?
It is the scientific way of doing what we have been feebly attempting to do in an unscientific way, that is, to distinguish between what Dr. Scott Nearing called "property income" and "services income," or between that form of wealth which is the result of individual effort in production and that which is purely the result of the collective effort of society; or between the two forms of wealth which Dr. Ellwood, of the University of Missouri, in a seemingly unwilling recognition of an unwelcome truth, calls "earnings" and "findings."
In the case of the great majority of us (whether as individuals or as partners in corporations) our incomes are so inextricably compounded of earnings and findings, of privilege income and service income, that it is hard for some of us to know whether we belong to the privileged or unprivileged classes, to the slave owners or the slaves, to the confiscators or the victims; and perhaps only those absolutely property less men at the bottom of the social scale can be said to have no share in the "findings" that spring from privilege. On the other hand it is equally true that all industry up to its highest strata, has to pay toll to privilege and provide those "findings" which distribute themselves with more or less inequality over almost the whole of society. How to distinguish between and separate these entirely different kinds of wealth is what all sincere sociologists and honest taxation commissioners have wanted to do and have hitherto failed in the doing.
If we take a handful of sand and a handful of iron filings and mix them thoroughly, and then set a man with the sharpest eyesight and the nimblest fingers to separate the particles, it will take him long to accomplish his task and he will never do it with more than an approximation to completeness. But apply a strong magnet to the mixture and the separation will be accomplished in ten minutes. Then see how the analogy applies to the economic problem in society. Let us imagine the return that should naturally flow to land in the form of rent to take the shape of blue coins made of steel. Let us fancy that the natural reward that goes to capital as interest takes the form of red coins made of wood. Finally let us figure the natural return to human service of all grades as being represented by white coins also made of wood. On examination it will be discovered that in the case of almost every member of society above the rank of the day laborer, his income is tri-colored or composed of all three coins. There are countless "captains of industry" among us who complacently assume their large incomes to be the rewards freely given by a free world in return for their invaluable services, who will be surprised to find how large a proportion of blue their income coins contain. There are multitudes of livers upon what they have called "interest" who will expect to find their coins red, who will be equally surprised to discover that they are almost entirely blue. To complete the parable, the taxation of land values will be like the application of the magnet which will draw away the blue steel coins in whatever stratum of society they may be found, and lay them aside for social purposes, being socially created wealth; leaving the red and white coins to be competed for in a world of free opportunity, without deduction or diminution by taxation or in any other way.
27. A new subway line costs $2 billion. Suppose that its construction increases the surrounding land values by $2 billion. (Assume 5 miles long, 10 stations, 0.5 mile radius, average lot size of 0.10 acre. How should the new subway line be financed?
A. Taxes on sales of groceries, clothing, etc. within those 1/2 mile radius areas
B. Taxes on sales of groceries, clothing, etc., all over the city the subway line connects to
C. Taxes on sales of services within those 1/2 mile radius areas
D. Taxes on sales of services of all kinds, all over the city the subway line connects to
E. Taxes on wages of those working in those 1/2 mile radius areas
F. Taxes on wages all over the city the subway line connects to
G. Taxes on wages of those living within the 1/2 mile radius areas
H. Taxes on capital gains and dividends of those living within the 1/2 mile radius areas
I. Taxes on capital gains and dividends of those with residence anywhere in the city
J. Taxes on all real estate within those 1/2 mile radius areas
K. Taxes on all real estate, all over the city the subway line connects to
L. Taxes on just the buildings within those 1/2 mile radius areas
M. Taxes on all the buildings, all over the city the subway line connects to
N. Taxes on the land value within those 1/2 mile radius areas
O. Taxes on the land value, all over the city the subway line connects to
P. Transfer taxes on either or both of buyers and sellers whenever a property within the 1/2 mile radius is sold
Q. Transfer taxes on either or both of buyers and sellers whenever a property anywhere within the city is sold
R. An inheritance tax when a house or commercial property is transferred from a decedent to a survivor.
This is from Joseph Dana Miller, the editor of the Single Tax Year Book (1917), and it is a concise statement which might help make clear why I think this such an important reform in the 21st century.
Men have a right to land because they cannot live without it and because no man made it. It is a free gift of nature, like air, like sunshine. Men ought not to be compelled to pay other men for its use. It is, if you please, a natural right, because arising out of the nature of man, or if you do not like the term, an equal right, equal in that it should be shared alike. This is no new discovery, for it is lamely and imperfectly recognized by primitive man (in the rude forms of early land communism) and lamely and imperfectly by all civilized communities (in laws of "eminent domain", and similar powers exercised by the State over land). It is recognized by such widely differing minds as Gregory the Great and Thomas Paine (the religious and the rationalistic), Blackstone and Carlyle (the legal and the imaginative). All points of view include more or less dimly this conception of the peculiar nature of land as the inheritance of the human race, and not a proper subject for barter and sale.
This is the philosophy, the principle. The end to be sought is the establishment of the principle -- equal right to land in practice. We cannot divide the land -- that is impossible. We do not need to nationalize it that is, to take it over and rent it out, since this would entail needless difficulty. We could do this, but there is a better method.
The principle, which no man can successfully refute or deny even to himself, having been stated, we come now to the method, the Single Tax, the taking of the annual rent of land -- what it is worth each year for use -- by governmental agency, and the payment out of this fund for those functions which are supported and carried on in common -- maintenance of highways, police and fire protection, public lighting, schools, etc. Now if the value of land were like other values this would not be a good method for the end in view. That is, if a man could take a plot of land as he takes a piece of wood, and fashioning it for use as a commodity give it a value by his labor, there would be no special reason for taxing it at a higher rate than other things, or singling it out from other taxable objects. But land, without the effort of the individual, grows in value with the community's growth, and by what the community does in the way of public improvements. This value of land is a value of community advantage, and the price asked for a piece of land by the owner is the price of community advantage. This advantage may be an excess of production over other and poorer land determined by natural fertility (farm land) or nearness to market or more populous avenues for shopping, or proximity to financial mart, shipping or railroad point (business centers), or because of superior fashionable attractiveness, (residential centers). But all these advantages are social, community-made, not a product of labor, and in the price asked for its sale or use, a manifestation of community-made value. Now in a sense the value of everything may be ascribed to the presence of a community, with an important difference. Land differs in this, that neither in itself nor in its value is it the product of labor, for labor cannot produce more land in answer to demand, but can produce more houses and food and clothing, whence it arises that these things cost less where population is great or increasing, and land is the only thing that costs more.
To tax this land at its true value is to equalize all people-made advantages (which in their manifestation as value attach only to land), and thus secure to every man that equal right to land which has been contended for at the outset of this definition.
From this reform flow many incidental benefits -- greater simplicity of government, greater certainty and economy in taxation, and increased revenues.
But its greatest benefit will be in the abolition of involuntary poverty and the rise of a new civilization. It is not fair to the reader of a definition to urge this larger conclusion, the knowledge of which can come only from a fuller investigation and the dawning upon his apprehension of the light of the new vision. But this conclusion follows as certainly as do the various steps of reasoning which we have endeavored to keep before the reader in this purely elementary definition.
The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.
The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.
"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.
21. The creation of a new subway line raises the land values near each of the stations. Who should pay for the building of the subway line?
A. Riders of the new subway line
B. Riders of all subways in the system.
C. Riders of all mass transit in the metro area.
D. Drivers of cars and trucks, all over the metro area, via taxes on their fuel purchases (that is, in proportion to miles driven and the fuel efficiency of their vehicles)
E. Drivers of cars and trucks, all over the metro area, via an annual surcharge on their registration
F. Drivers of cars and trucks, all over the metro area, in proportion to the value of their cars, owned or leased
G. Drivers of cars and trucks, via tolls when they use bridges and tunnels, or HOV lanes, or certain highways
G. The taxpayers, via increased sales taxes on their purchases
H. The tourists and business travelers, via hotel occupancy taxes and taxes on rental cars.
I. Passengers in taxis, via a surcharge on their fares.
J. The homeowners, via taxes on their homes
K. Drivers, commercial and individual, via taxes on fuel purchased within the city
L. Employees all over the metro area, via a payroll tax
M. The tenants of commercial buildings in the heart of the central business district
N. All landholders, paying equally (a parcel tax)
O. All landholders, in proportion to the size of their lots
P. Landholders, in proportion to the value of the land they hold, without regard to the buildings or their contents. Those whose land values are raised by their proximity to the new line will see a proportional increase in their share of the tax burden; those far from the new line will not.
20. What is the best way to insure that affordable housing -- for people of all ages and stages, all income levels -- is available, both for ownership and for rental, both near the center of activities and, if needed after the desire for housing near the center of activities is satisfied, on the fringes?
B. Community Land Trusts
C. Affordable Housing Regulations that require that for every 10 new condos built, 1 must be affordable to people earning less than the local median household income
D. Rent control
G. Habitat for Humanity
H. Relaxed mortgage lending rules and more private mortgage insurance
I. Land value taxation, to encourage the redevelopment of underused sites near the center of things
19. Storms continue to erode the resort beaches up and down our coasts. Who should pay for beach restoration every few years?
A. The federal government, from income tax revenues. (why?)
B. Taxes on pollution should be used to pay for this, on the basis that pollution produces the climatic conditions that make storms slower moving and more destructive.
C. State governments along the coasts.
D. Local governments, town by town, paid for by sales taxes.
E. County governments along the coasts.
F. Local governments, town by town, paid for by taxing wages.
G. Local governments, town by town, paid for by summer parking revenue, hotel bill taxes and taxes on rental properties' revenue;
H. Local governments, town by town, paid for by property taxes, taxing both buildings and land, in proportion to current market value
I. Local governments, town by town, paid for by land value taxation. Land values close to the beaches rise and fall with the sand, and properties further from the beaches are far less effected by the presence/absence of beach sand than those near the beaches.
J. Local governments, town by town, paid for by transfer taxes on sold properties, so as not to burden long-time owners who aren't selling.
I came across this rather good letter to the editor, from 1938. (Trinity Church Corporation, a major landlord in downtown Manhattan, was the subject of a NYT article this past week, as well as the subject of a major series in the NYT in December, 1894):
1938-09-03 Letters to The Times
Collecting Ground Rent Single-Tax System Regarded as No Detriment to Building
TO THE EDITOR OF THE NEW YORK TIMES:
Fabian Franklin, in his letter to THE TIMES discussing the demolition of John D. Rockefeller's Harlem tenements in order to save taxes, writes:
"That objection is simply that virtual abolition of land ownership, which the single-tax plan is designed to effect, would make the building of houses in a city an extra-hazardous business, because, under the single-tax regime, in the great majority of cases the investment would result in a disastrous loss to the owner of the building. I was neither blaming nor praising Mr. Rockefeller for the demolition of Harlem tenements."
What is the so-called single-tax system? It is the collection by the government, through the taxing officials, of the entire economic or ground rent of land and the repeal of all taxes on buildings and other products of labor and capital. That ground rent is estimated to be 9% of the capital value of the land. New York City is now collecting one-third of this ground rent. The market value of the lots is the remaining two-thirds, capitalized. Dr. Franklin's thesis is that if the entire ground rent is collected no one would erect buildings, because "in the great majority of cases the investment would result in a disastrous loss to the owner of the building."
Some of the finest buildings in New York City are erected on leased land and the lessee pays the ground rent 100% besides a tax on the building. There are hundreds of buildings erected by lessees of lots owned by Trinity Church, Astor estate, Rhinelander estate, Sailors Snug Harbor and others. The lessees must pay all the taxes, both on land and building, amounting to 3% of the assessed value of both, and to the landlord 6% of the market value of the land.
Thus the entire ground rent is paid by the lessee, but only one-third to the government representing the people who made that value by their presence and activities, the remaining two-thirds to the landlord. Notwithstanding that they are thus obliged to pay 100% of the economic rent, bankers and business men erect buildings costing millions. Under the Henry George plan they would have to pay less, for the taxes on these costly structures will have been repealed.
Perhaps if Mr. Rockefeller had not been obliged to pay taxes on the buildings he might not have pulled them down; or, if he had, would have erected better buildings in their place in order to get a return on his investment in buildings. The ones who will benefit most from the adoption of the Georgian philosophy are the owners of humble homes. The average small homeowner's house is assessed for at least twice the assessed value of the lot. If the house is relieved from taxation and the lot taxed the entire ground rent, his tax will be less than it is now. The difference will be made up from vacant lots and lots that are worth more than the improvements.
After all, the building of houses is like any other business. The builder takes the risk of lessened demand because of changes in fashion, obsolescence, competition. It is estimated that 95% of new businesses ultimately fail. With the adoption, however, of the philosophy of Henry George, commonly called the single tax, failures in the housing and other businesses will be much fewer. This is because neither houses nor goods nor anything else will be taxed. The collection of the entire ground rent will not lessen the area of the surface of the earth one inch. On the contrary, it will open to occupation and use land that is now held for speculation purposes.
The taxation of any product of labor and capital will add the amount of the tax to the price, lessen demand and thus curtail production. The result is unemployment and misery.
Frederic Cyrus Leubuscher Essex Fells, N. J., Aug. 31, 1938
David Brooks suggested in a recent column that the country needs a national service program to unite the diverging classes in society. He’s right.
Not long ago, we had one that did so very well. It was the draft. Every young man — regrettably, only men — shared a potential obligation to his country.
Any serious discussion of comprehensive national service means talking about a draft. It’s hard to imagine the Supreme Court upholding nondefense conscription, but if civilian service were an alternative to military duty, the prospects would improve.
The all-volunteer military is exemplary for its professionalism, sacrifice, meritocracy and diversity. (I have a son with two college degrees who enlisted.) But the benefits and burdens need to be shared more widely. There have been too many multiple deployments of regulars and reserves, and if draftees were in the mix once again, perhaps there would be no more wars of choice.
Many domestic needs could be served by a comprehensive national service program. Like the Depression’s best idea, the Civilian Conservation Corps, it could involve people from all classes in repairing our parks, roads, bridges and other infrastructure. It could also bring fresh ideas and talent to teaching, law enforcement, social work and other underpaid public services. The benefits to our national character, as Mr. Brooks suggests, would be immense.
There are past and present models of a national service program in more than a dozen other nations. It is time we gave it a try.
MARTIN A. DYCKMAN Waynesville, N.C., Feb. 14, 2012 The writer is a retired associate editor and columnist for The St. Petersburg Times.
Editors’ Note: We invite readers to respond to this letter for our Sunday Dialogue. We plan to publish responses and Mr. Dyckman’s rejoinder in the Sunday Review. E-mail: email@example.com
LVTfan's observation: Every investment in improved infrastructure creates land value. Most projects that have value -- education, law enforcement, social work, improved public health -- will also increase land value.
A project is, by definition, worthwhile if it creates more in land value than it costs to do,* and, it could be argued that, when comparing two infrastructure projects that cost the same amount, say, $100 million, if one creates $200 million in land value and the other creates merely $150 million in incremental land value, the $200 million project should probably take priority, all other things being equal.
*which isn't to say that many public spending projects which don't create increased land value aren't worthwhile, too, for other reasons.
Pork barrel is the appropriation of government spending for localized projects secured solely or primarily to bring money to a representative's district. The usage originated in American English. In election campaigns, the term is used in derogatory fashion to attack opponents. Scholars, however, use it as a technical term regarding legislative control of local appropriations.
The term pork barrel politics usually refers to spending that is intended to benefit constituents of a politician in return for their political support, either in the form of campaign contributions or votes. In the popular 1863 story "The Children of the Public", Edward Everett Hale used the term pork barrel as a homely metaphor for any form of public spending to the citizenry. After the American Civil War, however, the term came to be used in a derogatory sense. The Oxford English Dictionary dates the modern sense of the term from 1873. By the 1870s, references to "pork" were common in Congress, and the term was further popularized by a 1919 article by Chester Collins Maxey in the National Municipal Review, which reported on certain legislative acts known to members of Congress as "pork barrel bills". He claimed that the phrase originated in a pre-Civil War practice of giving slaves a barrel of salt pork as a reward and requiring them to compete among themselves to get their share of the handout. More generally, a barrel of salt pork was a common larder item in 19th century households, and could be used as a measure of the family's financial well-being. For example, in his 1845 novel The Chainbearer, James Fenimore Cooper wrote, "I hold a family to be in a desperate way, when the mother can see the bottom of the pork barrel."
Typically, "pork" involves funding for government programs whose economic or service benefits are concentrated in a particular area but whose costs are spread among all taxpayers. Public works projects, certain national defense spending projects, and agricultural subsidies are the most commonly cited examples.
Greatly exceeds the President’s budget request or the previous year’s funding;
Not the subject of congressional hearings; or
Serves only a local or special interest.
The last of these seems as if it might be the most important one.
So here's the question: How should we finance these projects, if they are to be done? How would we pay for a modern CCC? (Ah -- this sounds like The Land Questions ...)
A. By a local tax on land value. This would necessitate regular reassessment of the land value in every community in America, say, every 3 years, which could be done for well under $40 per parcel. It would probably also require some state and/or federal oversight, checking values against transactions to verify that all municipalities or assessing units are doing high-quality market-based assessments. [In Maryland, they're already doing assessments every 3 years. In Connecticut, assessments every 4 years are required. In southern Delaware, the assessments are 30+ years old. In California, the assessments are meaningless, due to Proposition 13. It would take a few years for some of these entities to update their assessments.]
B. By a state tax on land value. [same issues apply]
C. By a national tax on land value.
D. Let's just use the federal income tax. It's there. It's easy.
E. Let's use a national sales tax.
F. Let's use a tax on imports.
G. Let's tax buildings.
H. Let's tax services.
It seems to me that a national service corps of some sort has a lot of merit. It could promote a lot of highly desirable goals. It could provide a lot of home-front protection in the event of natural disasters. It could get some important projects done, including the maintenance of existing infrastructure currently under-maintained,and the provision of services we believe are important (particularly when we are the beneficiaries).
But the financial benefits ought not to fall into private or corporate pockets; they ought to accrue to all of us, and ease the burdens of financing other kinds of federal spending. Land value taxation strikes me as the answer to so many of our supposedly intractible problems.
We all know the old saw -- the three most important things about choosing real estate are ... location, location and location! We're so used to hearing it that we don't stop to think about its larger implications -- and particularly its implications for public revenue.
Those who are thinking about buying a home as an investment may hear a related piece of advice: buy the worst house in the best neighborhood. You can't change the neighborhood, much (the infrastructure and schools which serve it are relatively fixed, in the short-term at least), but you can improve or replace that old house, at your leisure, or sell the land to someone who will, at a profit.
This article, from a California residential real estate agent, summarizes "location cubed":
Location, Location, Location is an adage you will hear over and over.
It's like the real estate agents' mantra: location, location, location. You've certainly heard the phrase enough and may wonder what possesses agents to say it three times. Or you might think it pertains to three different types of locations -- perhaps an excellent location, a mediocre location and a lousy location.
I'll put your mind at ease. It means identical homes can increase or decrease in value due to location. It's repeated three times for emphasis, and so you will remember the phrase. It's the number one rule in real estate, and it's often the most overlooked rule.
The Epitome of Location, Location, Location
You can buy the right home in the wrong location. You can change the structure, remodel it or alter the home's layout but, ordinarily, you cannot move it. It's attached to the land. The best locations are those in prime spots such as:
Within Top-Rated School Districts Home buyers with children are concerned about their children's education and often will pay more for a home that is located in a highly desirable school district.
Close to Outdoor Recreation and Nature Homes abutting the ocean, rivers, lakes or parks will hold their value because of the location, providing they are not in the path of a possible natural hazard. People want to be near water or visually appealing settings.
Homes with a View Some homes sell quickly and for top dollar because they provide sweeping panoramic views of the city at night, but even a small glimpse of the ocean out one window is enough to substantiate a good location. Other sought-after views include mountains, greenbelts or golf courses.
Near Entertainment and Shopping In many cities, you will find homes that are located within walking distance of movie theaters, restaurants and boutiques are more expensive than those located further outside of town. Many people would rather not drive if they can walk to nightlife.
In Conforming Areas People tend to gravitate toward others who share similar values and their homes reflect it. Home buyers mostly prefer to be surrounded by similar types of properties in age and construction, where people just like them reside.
In Economically Stable Neighborhoods Neighborhoods that stood the test of time and weathered economic downfalls are more likely to attract buyers who want to maintain value in their homes. These are people who expect pride of ownership to be evident.
Near Public Transportation, Health Care and Jobs Most people do not want to endure long commutes to work, the doctor's office nor the airport. They prefer to be located close to emergency services and conveniences, so naturally homes in locations that shorten travel time are more desirable.
In the Center of the Block. I prefer corner locations, but most home buyers want to be in the middle of the block. I suppose they feel less vulnerable with neighbors around them, but they definitely enjoy less traffic.
It's almost easier to talk about what constitutes a bad location than to discuss good locations. That's because the qualities that make a good location desirable can vary, depending on whether you're looking in the city, the country or the mountains. Bad locations, by their general nature, are easier to pinpoint:
Next to Commercial / Industrial Unless you live downtown, commercial buildings on your block will diminish value. Part of the reason is because home owners cannot control those who loiter in front of their home. Homes next to gas stations or shopping centers are undesirable because of the noise factor, and nobody really wants to listen to truck engines idling at night or during early morning hours.
Near Railroad Tracks, Freeways or Under Flight Paths When I take the El through Chicago, I often wonder how city dwellers with homes right on the railroad line put up with the rumbling and racket. I've also owned a home under a flight path and moved within a year. The noise was so loud I couldn't hear a caller on the phone, much less sleep in on the weekends.
In Crime Ridden Neighborhoods People want to feel safe. If your neighbor covers the windows with sheets instead of regular window coverings, and you hear cars coming and going at midnight, you might be living next door to a drug house, especially if the flashing lights of police cars are readily visible at any given time.
Economically Depressed Areas If your neighbors show zero pride of ownership in maintaining their homes, evidenced by lack of maintenance, poor landscaping or you spot discarded mattresses, junk car parts or old appliances lying in the yards, you might want to think twice about moving into such an area. On the other hand, some areas like this are on the edge of development and going through rehabilitation. But you're taking your chances.
Close to Hazards Name me one person who wants to live next door to a nuclear power plant, and I'll show you a mutant moron. Few home buyers want a transformer in their yard, either. If the neighborhood was built on a landfill or was recently swampland, nix it. Always order a natural hazard report when buying a home.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
"Identical homes can increase or decrease in value due to location." While construction costs vary remarkably little from city to city (explore the geographical variance chart at saylor.com, on which, if memory serves, costs range from 74% to 106% of the Los Angeles metro costs on which the rest of their costs are based), while the price of a building lot can vary from $20,000 to $1,000,000 or more, depending on its location. (And the $20,000 one is probably a good deal larger than the $1,000,000 one, and with fewer constraints imposed by the local community.) A well-maintained 30-year-old 4BR, 2.5bath builder's colonial of, say, 2500 square feet can sell for $125,000 to $1,300,000 or more depending on the local land values.
Harvard Law School professor Elizabeth Warren, some years ago, co-authored a wise book entitled "The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke." She recognized that a part of it related to chasing houses in school districts where they felt their children could receive a solid education. I don't think she saw the larger implications of this truth.
How to Bring The Cost of Housing Back within Reach of All American Families C. Lowell Harriss, et al. [A pamphlet published by the Robert Schalkenbach Foundation, 1978]
Introduction by Dr. C. Lowell Harriss, Professor of Economics, Columbia University
1. Land Supply Constraints in the United States Excerpt from the Final Report of the Task Force on Housing Costs, William J. White, Chairman
2. The High Price of Land by P. I. Prentice, Chairman, National Council for Property Tax Reform
3. Modernize, Don't Abolish, the Property Tax From a report by the Subcommittee on the City of the House Committee on Banking, Finance, and Urban Affairs of the U. S. House of Representatives, Rep. Henry S. Reuss, Wisconsin, Chairman
Introduction by Dr. C. Lowell Harriss
The number of Americans who lack adequate housing is much too high. While both opportunity and promise life in the long-established principle of providing satisfactory shelter for everyone, many are still not well housed. Population grows, and the existing stock of housing grows older. For years to come, much new construction, expansion, and modernization will be needed.
Rapidly rising costs, however, present formidable obstacles. One of the heaviest costs is one which also rises most rapidly. And it is the cost of something created not by sweat and thrift, but by nature.
It is land.
The rising prices paid for land itself must be distinguished from the portion of the price of a building site which represents cost of preparation for use. The land elements alone go up and up in price. But land price increases do not change the quantity of land in existence. Here is a rising price which does not add to supply.
Land is different.
In these three articles on land value taxation, the first, "Land Supply Constraints in the United States," points out that the sharp rises in land prices result in part from man-made factors. Arbitrary, artificial, and unconstructive restrictions on land supply boost prices and threaten our housing future. New building will therefore be kept below levels which unfettered economic conditions would otherwise achieve. But tax policy which would encourage use, rather than underuse and withholding of land can increase the effective supply. Need more be said?
Yes. And in the second selection, "The High Price of Land," Mr. Prentice says more. He points to many avenues by which the harmful effects of restricted land supply spread through the economy. Developers and builders, laborers, supplier, subcontractors, and others all suffer. They have less work, operate under conditions of disadvantage, and receive poorer rewards because of essentially needless obstructions to the optimum use of land. The full and true price of land includes burdens above and beyond the dollar prices of building lots. We shoulder burdens of lost opportunity of many kinds. They are largely hidden but indeed real. The quality of too much new construction deteriorates instead of improving as an advancing society should expect. And, to repeat, the tragedy is that the rising prices for land do not create an more surface on the earth.
What to do? The third article, "Modernize, Don't Abolish, The Property Tax," points to the reform outlined generations ago but here presented in modern form: reduce the property tax burdens on structures and make up the revenue by higher tax rates on land value.
The benefits from relying more fully on taxation of land values, rather than taxation of buildings, would include greater pressure on landowners to put land to better use. Withholding land -- which reduces the current effective supply -- would become more costly if land value taxes were higher. Thus some land formerly held for speculation would be sold, and new building would be encouraged on the increased supply of land.
A careful study of probable results in Washington, D. C., showed, among other things, that taxes on present homeowners would generally fall. But this result is not the one which most justifies support for reform. More significant and constructive would be a combination of forces producing incentives for better land use. Upgrading of housing in older urban centers would be expected. Positive incentives at many points would contribute to improving America's housing.
The historical fact that land values have been privately appropriated and that this practice has been sanctioned for many generations does not alter its inherent inequity: an ethical wrong is not converted into a right by the benediction of time or of social sufferance.
If the present generation becomes conscious of an old injustice, is it powerless to seek redress? "New time" it has been said, "oft makes ancient good uncouth."
This was in a booklet published in the early 1960s.
The Ethics of Land-Value Taxation
Louis Wasserman, Ph. D., Professor of Philosophy and Government, San Francisco State College
The question, briefly stated, is this: Should the owners of land whose rent and increments would be partially or wholly confiscated by a program of land-value taxation be compensated for their losses?
We are not bound here by what Henry George thought about the matter; nevertheless, there is probably no better position from which to launch our consideration. The answer given by the father of the Single Tax was clear and explicit: No, the landowners should not receive compensation.
Why not? Since George made so much of social justice -- asserting it as the basis of his whole scheme -- upon what grounds could he justify the confiscation of landed wealth? The answer is implicit in the very essence of his social analysis. Let us turn to his argument.
What, George asks, is the moral basis of property -- any kind of property? And he replies that this basis is to be found in the use of a man's powers to produce something of value; once he has done so, the product is henceforth his to use, to dispose of, to exchange into any tangible or intangible form. The right to property, then, is the right to the fruit of one's labor.
But this, he continues, is precisely not the situation with regard to landed property. The raw land is not produced by any man's labor: it was there before the advent of man, it is the bounty of nature to all men in common, and it is literally the foundation upon which they exert their labors. And just as the raw land is created by nature, so the value it acquires as real property is due to society as a whole -- to the growth of the community with its services, its needs, and its uses. As community-created value, then, the rental and increment derived from the natural land ought to be appropriated by the community at large and used for public purposes.
Just as a man, then, has the full right to the products of his own labor -- say a house he has built or has purchased with his earnings -- so no individual has the right to the land itself, which he has had no hand in creating and whose value is due to the aggregate of community efforts rather than to that of any single person within it. The historical fact that land values have been privately appropriated and that this practice has been sanctioned for many generations does not alter its inherent inequity: an ethical wrong is not converted into a right by the benediction of time or of social sufferance.
This, in brief, is the rationale of Henry George's appeal for the socialization of land values. It is couched in terms of natural rights, and its fundamental premise is the labor theory of property, viz., that the only true source of private property, its ethical justification, rests in the labor by which it was produced, whatever direct or indirect form it takes.
That there are practical weaknesses in this view is, of course, apparent. The labor theory of property has been shelved, since the nineteenth century, in favor of more complex and sophisticated analyses of wealth production, and it can no longer be accepted as a self-evident proposition. Moreover, the theory of natural rights upon which it rests -- although stubbornly recurrent in Western thought -- enjoys at present only a limited vogue among moderns; there is too much disagreement on specifics and, no matter what its form, such a concept is regarded as too rigid for social purposes.
Nevertheless, if we are to seek for an ethical justification for private property it is unlikely that we can find anything better than the labor theory. It is no argument against the ethical rightness of that theory that it has been historically superseded by another, or that it is insufficient to account for the complexity of the productive process, or that the division of labor has made unintelligible the product of any individual worker. No matter how greatly production has become socialized or in what manner its rewards have come to be partitioned, the irreducible element remains that of individual labor, the contribution of the hand or brain of each producer to the material and equipment at hand. It is not enough for a theory of property simply to describe its character and distribution; there must be an explanation to account for the phenomenon and some social ethical criterion to justify it. I am aware of no ethical theory, ancient or modern, religious or secular, which would deny explicit or implicit approval to the labor theory of property.
But perhaps it will be argued against any such ethical contention that private property is simply what a society has caused it to be, and that since a society is the sole source of its own ethics, the matter ends there. What then, it may be asked, is used to justify the institution: force, fraud, custom, tradition? Each of these may have its weighty explanation, but what can be said of its ethical sanction? At worst, that it has been imposed, willy-nilly; and, at best, that it represents a social arrangement sanctified by age, legality, and expectation. But the history of property, as idea, usage, and institution, is so heterogeneous among so many cultures of the past and present that the term itself can be taken to mean only that which current convention decrees it to mean. Perhaps, then, property may be best conceived, to use the phrase of Walton Hamilton, as "a conditional equity in the valuables of the community."
If -- setting aside the natural rights theory -- the ethical test of land-ownership and increment is taken to be a matter of social convention or utility, the whole issue is, of course, thrown open for social evaluation by each generation.
The present condition is that most of the usable raw land in the United States is held privately; it has been obtained by purchase, gift, or inheritance; it enriches its owners by way of direct use, rental income, or profitable sale; the community siphons off part of this income in the form of an annual property tax or, when the land is sold at a profit, by a capital gains tax.
Now, the most extreme land-value tax proposal provides that this levy upon the rental value of the raw land be increased gradually until it approximates the full rental income; at the same time, tax levies on personal property, improvements, and as many other taxes as possible would be abolished.
What ethical considerations are involved in this proposal? If we are to reject any "higher law" criteria, such as that of Henry George, we must revert to the test of "social utility" or some restatement thereof. How are the ethics of social utility to be tested in our society? The answer is quite simple: Social approval of any established practice is expressed by sheer inertia or by the rejection of proposed change; the reform of any established practice is engineered by the majority through democratic procedures. To put it starkly, the ethical judgment with respect to any social change is transformed into a political decision.
We are all, of course, familiar with the democratic political process, but it is worth recapitulation to see how a social consensus may be reached on such an issue as land-value taxation. We start with the theoretical foundations of popular sovereignty and government by consent of the governed. The working machinery includes representative bodies, public-interest groups, freedom of expression, and the media of communication employed to shape public opinion. Since every tax proposal is a matter of public policy, it must necessarily be discussed and legislated by the appropriate public body -- i.e., the state legislature, county board of supervisors, city council, or the like. Sober attention must be paid in all such cases to the variety of interests, needs, motives, preferences, and other relevant factors in the affected community in order to shape a policy which attains its purpose and yet does not alienate too seriously any important segment of the population. The final result, as registered in the legislative chamber or at the polls, is what we come to accept as public policy.
It would be too harsh a judgment to infer from the foregoing description of the democratic process that the sheer weight of numbers over-rides all consideration of private preferences. What happens instead is that personal convictions, individual ethics, and material interests are mingled and measured and tested against each other in the give-and-take of public controversy; the result is a kind of rough-hewn, but acceptable, consensus which alone can make a community viable. It is this broad consensus -- the specified or implicit assumption that the policy to be enacted is a contribution to the common welfare -- which defines the realm of social ethics in public policy making.
Nor is this political approach to be regarded cynically or derided as unworthy of decent folk. The social ethic of American society is tightly bound to the prescriptions of our prevailing Judeo-Christian and democratic-humanistic traditions, and we may draw from that source as much in the form of ideal moral principles as we are humanly able to practice. If we cannot agree upon common aims, we are at least the inheritors of a tradition of fair play as to means; and if the nature of justice is a matter of great dispute among us, we are still guided by what Edmond Cahn describes as the "sense of injustice" -- that is, a consciousness of wrongdoing and the commitment to abstain therefrom.
The social ethic of a democratic society is continually being created and revised through public dialogue, political action, and law. It is necessary only to mention such illustrations as our attitudes regarding crime and punishment, treatment of our Negro population, the status of labor unions, sex information and birth control, the training of children, the prerogatives of women, and indeed the ameliorative role of taxation, to have us realize its progressively changing character. Through the use of the democratic process the social ethic emerges as a sort of mean between the extremes of private ideals and private irresponsibility. And it is worthy of mention that not infrequently the law itself nudges us into forms of behavior more ethical than we would exercise if left to our own dispositions.
Now, taxation policy inherently affects the general welfare of a community; and the social ethics of our society have for a long time recognized a distinction (despite certain weaknesses in definition) between earned and unearned incomes. Taxing policies in the form of differential rates and other incentives have been used here and in many other countries deliberately to foster, or to discourage, certain social-economic developments. A strong case can be made, in general, for taxation as a social instrument.
There was a time when the income tax did not exist at all in this country; then it was voted in, first as law, later as a constitutional amendment. At its present steeply progressive rates, the income tax may "confiscate" up to 91 percent of excessively high earnings. But, whatever the rate applicable, it is levied predominantly upon wages, salaries, and other forms of productive enterprise. Would an increased tax upon the socially created value of the natural land be less equitable or less lacking in ethical propriety?
I am, accordingly, unable to find any ethical barrier -- either of higher law principles or of social utility -- raised against the proposal to recapture more fully the rental income and increased increment of the land. There is, indeed, a strong rationale in its favor, especially since it would lead to the reduction of more burdensome taxes. The problem is one of social engineering; it is a decision to be reached solely upon its merits in the political realm.
That there is now, and will be, strenuous opposition to such a program is of course only too clearly evident. Without assuming the mantle of righteousness in prejudging the conduct of others, I would nevertheless venture to say that the main difficulties in enacting land-value taxation will stem principally from the following groups. First, and most importantly, opposition will come from those who derive their incomes wholly or primarily from landholdings and from speculative profits thereon. No argument concerning indirect, long-range benefits to them and others would suffice to soften their antagonism unless they stood to gain equally from a lightening of other taxes. Then there is the large group whose simple inertia would inhibit any such contentious reform in taxation policy. It is difficult to enlighten and energize this inert portion of any community unless the immediate benefits are made clearly, directly, and concretely self-evident to them. For this group there is no sharp sensitivity to the ethics of land-value taxation, pro or con. Finally, there are those in every community who have no vested interest in the change one way or the other but whose notions of propriety, of ethics, of the right to profit-making, or of general antipathy to government and reform would lead them to reject such a proposal on what are essentially ideological grounds.
If the result at the ballot box is to approve a measure to increase the tax rate on land values, it could not be denied that the social ethics had thus been expressed in a democratic manner. Similarly, if the tax increase is defeated (as has been true most often in the past), it would properly imply that the social ethics of the community did not then sanction such a proposal.
But we have so far left untouched the critical issue with which we began this discussion: that is, whether compensation should be paid to landowners whose rental incomes or increments are seriously impaired or expropriated as a consequence of the increased tax. Even if it be granted that land values ought, ab initio, to have been recaptured in full by the community for public revenue, the fact remains that they were not. And upon this practice of private ownership and appropriation there has been reared an institutional complex long approved and sanctioned by law. The present owners of land, it may be assumed, received or purchased their land in good faith and contractual expectations, often with capital acquired through alternative income channels. Are they, then, to be penalized for an ancient wrong -- if wrong it was -- which has been sanctified by the common usage of earlier generations?
But the counterquestion to this is even more cogent: If the present generation becomes conscious of an old injustice, is it powerless to seek redress? "New time" it has been said, "oft makes ancient good uncouth."
The answer, in practical terms, is to be found in the equity which can be extended to those who suffer most from social-political innovations. This is a matter to be determined by a commission of inquiry into the effects of the legislation; it should be in the minds of the legislators who draft the reform proposal; the nature of the equity to be granted will depend upon the provisions of the tax measure; and it will be affected by the give-and-take of the political process in which opposing groups make themselves heard.
Every public policy confers differential advantages and disadvantages upon those who are touched by its provisions. A decent respect for equity in the present matter, then, requires that the proponents of land-value taxation exercise their utmost ingenuity and technical skill -- not to provide direct compensation as such, but rather to devise fiscal and administrative measures to cushion the shock and to ameliorate the condition of those who stand to lose most severely by the action contemplated.
I do not make this suggestion in a spirit of vague and wishful penance for what is not certain, in practice, to be realized. Rather, I would recall to us all the wide range of creative and imaginative variations already proposed or practiced in fiscal policies and their administration, through which provision might be made without penalty to the community, for economic equivalents, direct or indirect, to landowners adversely affected by proposed land-value taxation.
The adoption of such provisions, I believe, would not only satisfy our social conscience but would do much to make land-value taxation politically possible.
The reader of a book review will rightly want to know the ideology of the reviewer. Very well: being of Georgist persuasion, I divide the "means of production" into two categories: those that can be produced or reproduced by competitors, and those that can't. On the former category, I'm as far Right as you can get, believing that such assets should be privately owned and exempt from tax, to encourage capital formation.
That brings us to the other category of "means of production" -- assets that can't be produced or reproduced by competitors. Georgists contend that the market values of such assets, being publicly created, are the proper source of public revenue. The most important example is land, whose value can be tapped by means of rates, "land tax" and "capital gains" tax.
Hazlitt doesn't have "land" in the index.
In three places in the text (ss. 11.4, 15.2 and 16.2), he lists the factors of production as land, labour and capital, but doesn't distinguish between them for purposes of argument. In s.16.2 he also mentions the "poorest land", "least competent farmers" (labour) and "poorest equipment" (capital), but again doesn't distinguish further.
Similarly in the chapter on credit, he doesn't care whether borrowed funds are spent on farms (land) or tractors (capital).
In s.15.2 he adds that for an economy in "equilibrium", these factors are limited "at any moment", thus glossing over the fact that the supply of capital can build up or decay. Although Hazlitt is usually said to be of the Austrian school, this snapshot view of "equilibrium" is neoclassical, not Austrian; it was pioneered by J.B. Clark for the purpose of making capital look like land, so that land could be called a form of capital. Hazlitt includes Clark in his recommended reading list.
Earlier (s.6.2), Hazlitt cites the "limited" supply of capital as an argument against government-guaranteed home mortgages, claiming that they cause "oversupply of houses as compared with other things" -- not that they pump up land prices.
But he mentions the need for capital accumulation elsewhere, especially in the chapter on saving, where his examples of "capital" include schools, colleges, churches, libraries, hospitals, private homes, and "the most wonderfully equipped factory", all of which include land components. This conflation of capital and land is neoclassical.
In contrast, Austrian economists emphasize that capital, unlike land, must be constantly renewed, that its life cycle may be long or short, and that loose monetary policy causes overinvestment in long-life capital, whose value then collapses, contributing to recessions.
Meanwhile Georgists notice that recessions follow bursting "property bubbles", which are really land bubbles because land prices, unlike prices of buildings (prime examples of "long-life capital"), are not constrained by construction costs.
Hazlitt's failure to make these distinctions may explain why his explanation for depressions (s.23.5) is so vague: "the real causes, most of the time, are maladjustments within the wage-cost-price structure... At some point these maladjustments have removed the incentive to produce, or have made it actually impossible for production to continue... Not until these maladjustments are corrected can full production and employment be resumed." All clear now?
Those who call themselves free-traders too often fail to apply their own standards to trade within their own countries. Witness those misnamed "free trade agreements" in which each country promises to impose the other's monopolies on its own citizens.
Hazlitt falls into this error in chapter 4, where he considers an extra bridge between Easton and Weston and declares that "For every dollar that is spent on the bridge a dollar will be taken away from taxpayers." Not necessarily, because any such bridge will lower barriers to trade between Easton and Weston, especially the indispensable trade between employers and employees.
The benefit of the additional trade, net of any bridge tolls, will be shown in prices of access to locations served by the bridge -- in other words, land values. If the benefit exceeds the cost, it will be possible to cover the cost by clawing back a sufficient fraction of the uplift in land values, in which case the cost, although clawed back through the tax system, will not be "taken away from the taxpayers" but will be part of the new value created by the bridge.
The rest of that new value will be a net windfall to the property owners.
Hazlitt then turns to the Norris Dam (a New Deal project) and rubbishes the claim that "private capital could not have built it", because it was indeed built by private capital "expropriated in taxes... taken from people all over the country", causing the loss of "the private power plants, the private homes, the typewriters and television sets" that the expropriated funds might otherwise have bought. Thus the people of one district got richer at the expense of the rest of the country.
But it didn't have to be done that way. The earlier Don Pedro dam (completed 1923) was built by two Californian irrigation districts and financed entirely by local land-value taxes. The affected land owners were fiercely in favour of it because they knew the increase in their land values would outweigh the taxes. Even if the land-value taxes had been imposed by a higher level of government, the financing of the dam would still have been local, because only the local land values would have been affected by it. Private capital did not build it, because the uplift in land values that paid for it would not have occurred without it. Private agencies could not have organized it, because they would have had no way of tapping the uplifts in land values.
With an eye to current debates, I should conclude by praising Hazlitt for an insight that his latter-day admirers have ignored.
In explaining why "Taxes Discourage Production" (chapter 5), he says:
"When a corporation loses a hundred cents of every dollar it loses, and is permitted to keep only 52 cents of every dollar it gains, and when it cannot adequately offset its years of losses against its years of gains, its policies are affected." If individual investors "lose the whole dollar when they lose, but can keep only a fraction of it when they win," they are less likely to take risks.
In the files I've been digging through, from the late 50s to the early 80s, I found an early draft of a fine paper by Mason Gaffney about California's Proposition 13, for presentation at an August, 1978 conference. I dug around and found a published copy of that paper, and think it worth sharing here. Original title, "Tax Limitation: Proposition 13 and Its Alternatives"
First, a few of my favorite paragraphs, which I hope will whet your appetite for the whole paper. I won't attempt to provide the context (you can pick that up when you continue to the paper, below).
"There is a deferment option for the elderly, bearing only 7% interest (which is about the annual rate of inflation). In California, as also in Oregon and British Columbia, hardly anyone takes advantage of this deferment option. This fact, it seems to me, rather calls the bluff of those who so freely allege that the woods are full of widows with insoluble cash-flow problems, widows who are losing their houses to the sheriff and whose heirs presumptive, will not help keep the property, which they will eventually inherit."
We hear a lot these days about cutting the fat out of the public sector; but there is fat in the private sector too. I interpret "fat" to mean paying someone for doing nothing, or for doing nothing useful. Most economists agree that payments to people. for holding title to land is nonfunctional income, since the land was created by nature, secured by the nation's armed forces, improved by public spending, and enhanced by the progress of society. "Economic rent" is the economist's term, but in Jarvis-talk we may call it the fat of the land or "land-fat." It has also been called unearned increment, unjust enrichment, and other unflattering names. Howard Jarvis has said that the policeman or fireman who risks his life protecting the property of others has his "nose in the public trough." But it has seemed to generations of economists that the owner whose land rises in value because public spending builds an 8-lane freeway from, let us say, Anaheim to Riverside, and carries water from the Feather River to San Diego, is the first to have his nose in the trough. Nineteenth-century English economists who worked this out were more decorous. They said things like "landlords grow rich in their sleep" (John Stuart Mill), or the value of land is a "public value" (Alfred Marshall) because the public, not the owner, gives it value.
Some 43% of the value of taxable real estate in California is land value. When we lower the property tax we are untaxing not only buildings, but also land-fat.
The ownership of property is highly concentrated, much more so than the receipt of income. Economists in recent years are increasingly saying that the property tax is, after all, progressive because the base is so concentrated, and because so little of it can be shifted. But this message has not yet reached many traditional political action groups who continue to repeat the old refrains. Two remedies are in order.
One is to collect and publish data on the concentration of ownership of real estate. The facts are simply overwhelming and need only to be disseminated.
The second remedy is to note how strikingly little of the Proposition 13 dividend is being passed on to renters. This corroborates the belief of economists that the property tax rests mainly on the property owner where it originally falls, and not on the renter.
A high percentage of real property is owned from out of state and even out of the country. The percentage is much higher than we may think. It is not just Japanese banks and the Arabs in Beverly Hills. It is corporate-held property which comprises almost half the real estate tax base. If we assume that California's share of the stockholders equals California's share of the national population, then 90% of this property is absentee-owned; the percentage may be higher because many of these, after all, are multinational corporations with multinational ownership.
No one seems to have seized on the fact that half the taxable property in California is owned by people not voting in the state. Senator Russell Long has suggested the following principle of taxation: "Don't tax you, don't tax me, tax that man behind the tree." Property tax advocates have done well in the past and should do well again in the future when they make their slogan: "Don't tax you, don't tax me, tax that unregistered absentee. Don't tax your voters, they'll retaliate; tax those stiffs from out of state." Chauvinism and localism can be ugly and counterproductive, as we know; but here is one instance where they may be harnessed to help create a more healthy society. The purpose of democracy is to represent the electorate, not the absentee who stands between the resident and the resources of his homeland.
California's legislative analyst, William Hamm, estimates that over 50% of the value of taxable property in California is absentee-owned. This is such a bold, bare, and enormous fact it is hard to believe that Californians will long resist the urge to levy taxes on all this foreign wealth. They may be put off by the argument that they need to attract outside capital, but that carries no weight when considering the large percentage of this property which is land value.
Property income is generally more beneficial to the receiver than is the same income from wages or salaries, because the property owner does not have to work for it.
Property, particularly land, has been bought and sold for years on the understanding that it was encumbered with peculiar social obligations. These are, in effect, part of our social contract. They compensate those who have been left out. Black activists have laid great stress in recent years on the importance of getting a few people into medical and other professional schools. Does it not make more sense that the landless black people should have, through the property tax, the benefit of some equity in the nation's land from which their ancestors were excluded while others were cornering the supply?
A popular theme these last few years is that property owners should pay only for services to property, narrowly construed. Who, then, is to pay for welfare — the cripples? Who is to pay for schooling — the children? Who should sacrifice for the blacks — Allan Bakke? Who should finance our national defense — unpaid conscripts? The concept that one privileged group of takers can exempt itself from the giving obligations of life denies that we are a society at all.
Here is, perhaps, my favorite:
We can ask that a single standard be applied to owners troubled by higher taxes and to tenants troubled by higher rents. When widow A is in tax trouble, it is time to turn to hearts and flowers, forebode darkly, curse oppressive government, and demand tax relief. When widow B has trouble with escalating rents, that touches a different button. You have to be realistic about welfare bums who play on your sympathy so they can tie up valuable property. You have to pay the bank, after all. A man will grit his teeth and do what he must: garnishee her welfare check. If that is too little, give notice. Finally, you can call the sheriff and go to the beach until it's over. That's what we pay taxes for. Welfare is their problem.
Anyway, widow B is not being forced out of her own house, like widow A and so many like her. Jarvis said that taxes are forcing three million Californians from their homes this year. But in truth, while evictions of tenants are frequent, sheriff's sales of homes are rare. Those who do sell ("because of taxes," they say, as well as all their other circumstances) usually cash out handsomely, which is, after all, why their taxes had gone up.
Then there is the fruit tree anomaly. Under Proposition 13, a tree can only be assessed at its value when planted, with a 2% annual increment. The value of a seed thrown in the ground or even a sapling planted from nursery stock is so small compared with the mature tree that this is virtual exemption. This anomaly rather graphically illustrates how Proposition 13 automatically favors any appreciating property over depreciating property. The greatest gain here goes, of course, to appreciating land.
Finally, build no surpluses. Surpluses attract raiders and raiders are often organized landowners. "Property never sleeps," said the jurist Sir William Blackstone. "One eye is always open." Even though the surplus was built up by taxing income, Howard Jarvis made it seem the most righteous thing in the world that it should be distributed to property owners. He was geared up for this because his landlord patrons kept him constantly in the field.
Economists of many generations even before Adam Smith and continuing to the present — have preached on the advantages of land as a tax base. Let me enumerate a few of those.
A tax on land value is the only tax known to man which is both progressive and favorable to incentives. One can wax lyrical only about a tax that combines these two properties, because the conflict between progressivity and incentives has baffled tax practitioners for centuries, and still baffles them today.
A land tax is progressive because the ownership of the base is highly concentrated, much more so than income and even more so than the ownership of machines and improvements.
Also, the tax on land values cannot be shifted to the consumer. The tax stimulates effort and investment because it is a fixed charge based merely on the passage of time.
It does not rise when people work harder or invest money in improvements. Think about this. It is remarkable. With the land tax, there is no conflict but only harmony between progressivity in taxation and incentives to work and invest. In one stroke it solves one of the central divisive conflicts of all time.
The land tax does that because it cuts only the fat, not the muscle. It takes from the taxpayer only "economic rent," only the income he gets for doing nothing. If people could grasp this one overriding idea, then the whole sterile, counterproductive, endless impasse between conservatives who favor incentives and liberals who favor welfare would be resolved in a trice, and we could get on to higher things.
The final paragraphs speak directly to us in 2012. 34 years have passed since this was written.
Summing up, Walter Rybeck, an administrative assistant for Congressman Henry Reuss of Wisconsin, and head of the League for Urban Land Conservation, has sagely suggested that we distinguish two functions of business: wealth-creating and resource-holding. A good tax system will not make people pay for creating wealth but simply for holding resources. Most taxes wait on a "taxable event" — they shoot anything that moves, while sparing those who just sit still on their resources.
If we really want to revive the work ethic and put the United States back on its feet, we had better take steps to change the effect of taxes on incentives. Legislatures have got in the habit of acting as though persons with energy and talent, and with character for self-denial, should be punished, as if guilty of some crime against humanity. We cannot study the tax laws without inferring that Congress regards giving and receiving employment to be some kind of social evil, like liquor and tobacco, to be taxed and discouraged by all means not inconsistent with the rights of property. Little wonder the natives are getting restless. If we tax people for holding resources rather than creating wealth and serving each others' needs, we will be taking a giant step toward a good and healthy society.
If your appetite is whetted by these excerpts, you can read the entire article below:
It is frequently pointed out by Georgists that there are no really good rebuttals to land value taxation.
This excerpt from a 1971 letter to my grandfather from a colleague describes where the opposition comes from:
There may be be no "arguments that actually oppose LVT" as Bill says, but there are plenty of people who not only actually but actively oppose it. These are the people who are making hundreds of millions of dollars a year on the unearned increments land speculation gets as a result of land being so undertaxed that the landowner puts up only a trifling share of the enormous community investment needed to make his land reachable, livable and readily saleable. Of 7 million-odd New Yorkers I would guess that perhaps 70,000 people profit by today's misapplication of the property tax while 7 million lose by it, but the problem is that the 7 million have no idea of what they are losing while the 70,000 jolly well know that they have a good thing going for them and fight to keep it.
I've been trying for a year to get my friend, J___ C___, past president of the Realtors and Chairman of the Realtors Economic Research Committee to stop fighting LVT, but he keeps coming back to how his father bought some land near San Diego for $20 an acre before 1900 and sold it for $4,000 an acre around 1950 and his father could not have held it all that time if he had had to pay more than a nominal tax.
I don't think anyone should take the equity argument seriously. Just because the ownership of underused land has been subsidized for years does not entitle its owners to expect the subsidy to be continued forever, and likewise, for those who bought land in the expectation that the subsidy would be permanent. The equity objection to increasing the tax on land would apply almost equally to any other tax increase.
A week later, another letter includes this:
Just because landowners have had a wonderful subsidy racket going for them in the past should not give them any claim on having that subsidy continue ad infinitum. I do agree with Lowell that the transition to LVT would raise problems, and in any area with a high tax rat on property I can see that the transition would have to be staggered over a period of years, probably not less than five or more than ten, dpending on how big a tax rate was to be shifted off improvement values onto location values.
In the same file, a copy of a 1969 letter from the same person to Lowell (Harriss):
I don't see how tripling the tax on land could fail to force almost all owners of underused land to get busy and put it to better use. Conversely, I don't see how taking the equivalent of a 51% sales tax off improvements could fail to be a tremendous stimulant to improvements. If a 7% Federal tax credit on improvements was so effective, what would wiping out a 50% tax do!
Continuing through some old files, I came across this eloquent statement in the minutes of an executive committee meeting for the Robert Schalkenbach Foundation:
"Middle income homebuyers, especially, are having to pay a lot more for their homes because of the inflation in land prices. They are having to pay more for their financing, too, because financing also reflects land prices.
What land speculators can get for their land, they can get because of the enormous expenditures of tax money to make that land usable.
I do not think the American conscience is sufficiently sensitive to be aroused because land speculators get rich at the expense of the government, because the public has come to regard the government as a cow to be milked. It would, therefore, be unwise to place the emphasis on how speculators get rich at the government's expense. Rather ... we should emphasize that the homebuyers are the ones who have to pay, have to dig deep into their savings to pay speculators more for the land, not because the speculators did anything to earn a higher price, but because taxpayers spent millions to make it better."
-- Perry Prentice, 3/5/1965
California, with Prop 13, should take note. Anyone who wants a more stable economy should take note. Anyone who would like to see the cost of living for ordinary people be stabilized and reduced should take note.
I'm reading through some of my grandparents' files of correspondence; they were great correspondents, and kept carbons of their outgoing letters and originals of what they received. This is an excerpt from a 1957 letter from the executive secretary of a foundation which sponsored my grandfather's work, Vie Peterson (also a wonderful correspondent!) and was written in response to a draft of a document he was assembling as an introduction to Henry George. (A much later version of that paper is available here.)
"Should we elaborate why George insisted on one tax? He felt that the economic rent of land was the true national income. He felt any tax on production was a form of penalty on man's industry and thrift. He felt that every step forward that man makes in raising himself and in improving civilization as a whole would be reflected in land values and provide an increasing source of revenue which he believed would be sufficient for the national needs. As a family lives on a set income, George believed that a nation should do likewise. It would be necessary, it seems to me, to indicate that at the present time with the national debt so high and with other complications a tax on land values alone might not be sufficient, but the purpose of this statement is to show what George had in mind in his day which was not burdened with debt as is our own?
In another, slightly earlier, letter, Vie writes,
"... George believed that easy access to land would overcome unemployent, would eliminate reliance on government aid, and therefore simplify government structure, etc. "
This sermon identifies a/the source of something I posted a few days ago. It also fits in well with the "Earth for All" Calendar.
Man and Mother Earth Albert H. Jenkins [A sermon delivered at the Davies Memorial Unitarian Church, Washington, D.C., 7 October, 1962. Published by the Robert Schalkenbach Foundation]
When Khrushchev was here several years ago, he repeatedly said that in the United States "capitalism has replaced feudalism." Our newspapers and most of us accepted that statement as a self-evident fact, but I believe Khrushchev was mistaken.
I believe feudalism persists here in the midst of capitalism, and from this, I believe there flows a moral and economic wrong so enormous and fundamental that it is poisoning our human relations and destroying our civilization as it has destroyed other great civilizations in the past.
Of course, we do not have the outward and visible signs of ancient feudalism -- publicly recognized categories of kings, nobles and serfs. But though feudalism was a social system, it was basically an economic system also. It was the power of some men to command the labor of others through the ownership of land -- the Mother Earth of us all.
Does that power still exist today, right here in our own country as well as in others? If so, to what extent and with what results? Before we attempt to answer these questions, let us be good scientists and get our definitions straight. Let us get our mental feet on the ground and start from there.
For that purpose, we have the simple visual aids you see before you. The first is a global map of the earth. It represents what the economists call LAND.
That term includes not only the earth's surface, which is what most people think of as land, but also all of Mother Earth's other natural resources -- oil, natural gas, ores and minerals, water, and even the air we breathe. Everything on which and from which man lives and without which he cannot live, is LAND.
You will recognize the second visual aid as Rodin's "Thinker." However, I had our cartoonist put a suit of blue overalls on him. That is because he represents man as a worker of hand or of brain, or both. In short, he is what economists call LABOR.
LABOR, working on land - the surface of the earth and its natural resources - produces what is called CAPITAL. This term is represented by the railroad locomotive in the third visual aid.
CAPITAL, in the economic and real sense, is not money, nor stocks, nor bonds. It is factories, machines, railroads, trucks, ships -- anything which, after it has been produced from land, is used for further production, transportation or distribution of either capital goods or consumer goods.
Of this economic triumvirate -- land, labor and capital -- the most fundamental is LAND, because it is the source of everything else. Yet, nowadays, the land factor is almost forgotten in our economic controversies. That is understandable for several reasons.
First, in our complicated civilization, most of us are out of touch with land. It is buried under buildings and pavements in our cities. And everything we buy from outside our cities comes to us so many steps removed from the land that we seldom think of the source -- our Mother Earth.
Second, the most continuous and conspicuous economic controversies today are between labor and what labor thinks of as "capital" --the owners and managers of industry and business. Workers are in direct contact with employers in their daily lives, and winning wage raises and fringe benefits is the "bread and butter" of labor leaders.
Likewise, employers are constantly pressed by "labor problems," which concern them obviously and directly.
So it is natural that workers and employers seldom stop to think that the economic share they are quarreling about is what is left after landowners and land speculators have taken their portion, which comes first because they control the source of all things, and labor and capital can produce only by buying their permission to use the land.
That brings us to our fourth and last visual aid, this sketch. The water pouring into the bucket represents the hard-earned fruits of labor and capital working together in all stages of production. The water going out through the hole in the side of the bucket represents the unearned tribute taken by the modern feudal landlords. They get their share first. What is left in the bottom of the bucket is what labor and capital must divide between them. They quarrel over it, not realizing that both are being robbed by a third party who contributes nothing to production. Obviously, when someone gets something for nothing, someone else gets nothing for something.
Now, as our next step toward answering the question whether feudalism persists in the midst of capitalism, note this well, for it is the first of two key points:
No man created the land -- the earth. It was here millions of years before any man lived. Therefore, no man has a moral or an economic right to say to others: "Pay me for the privilege of living on the earth and using its natural resources."
The second key point is this: No man creates the money value of the land he owns. That value is created by the needs and deeds of all the people in the community and the nation, in both their private and their public capacities.
As more people are born in or move into a community, the price of the land in and around that community goes up because more people need it to live on, to buy for houses, factories, shops and other purposes. The community itself must establish streets, schools, parks, etc.
Federal and local tax money spent to put up a school, a post office, a government defense plant, or to establish or maintain a police or fire department, boosts the value of all nearby land. The man who spends his money to build a house raises the price of the vacant lot next to it. Landowners and speculators reap an unearned and increasing harvest from these activities.
In effect, they command the labor of other men through their ownership of land, and that is the essence of economic feudalism. The same is true of men who charge other men ever-increasing prices for using the oil, gas, minerals and other natural resources which, by moral and economic right, over and above the cost of extraction, should be the free gifts of Mother Earth.
Now let us bring this down to your own experience. Many of you own a house. You remember its price. Suppose it was $15,000. Little more than a decade ago, in 1950, the price of the lot averaged about 10% of the total cost of the new home. Now the lot cost has doubled to 20%, and is still rising.
At the 20% figure, the buyer of a $15,000 house pays $3,000 for the bare land on which it was built. How long does it take you to earn $3,000, or to save it out of your earnings? For that length of time, if you were that home buyer, you were the feudal serf of the man who sold you the land on which your house was built. In return for your $3,000, he gave you nothing but his permission to use land which he did not create, and the money value of which he did not create. He commanded, and if you have not yet paid off the mortgage, is still commanding, your labor for the time it takes your hard-earned savings to add up to $3,000.
And that's not all. That $3,000 was added to your mortgage. If it's a long-term mortgage, the interest you will have to pay will about double the final land cost to you. Therefore, as a result of the persistence of economic feudalism in this country, the former landowner and the mortgage moneylender are commanding your labor for as many months as it takes you to earn and save $6,000, If you live in a house as a renter, you pay the land cost, too.
Here's another example, from my own experience. In 1926 the railroad labor newspaper I work for bought a piece of land on Capitol Hill, right across Independence Avenue from the House end of the Congress building. That was an absolutely unique location having many advantages, but this land cost us only $24,000.
About 30 years later, Congress ousted us in order to put up the third House Office Building. We looked around for a site for our new building, and were offered a piece of land below Capita! Hill, across from the Capitol Plaza, and comparatively distant from the center of things and from the Senate and House office buildings.
That location is not unique in the way that our original one was and is far inferior in all respects. But the price asked was $1.5 million. That was too much for us, but later this same land was bought by the Carpenters' Union and we may suppose that they paid at least what was asked of us.
That huge sum will come out of the dues paid by the union's members. Land costs always come out of someone.
For our new building we finally bought a plot at the corner of First and D Streets, Northwest, still more distant from Congress and still more inferior to our original land, and very little larger. Yet the price was nearly $400,000.
The difference between that price and the $24,000 we paid 30 years before has to be made up by raising the price of our paper to its subscribers.
Now let us look at an example which concerns everyone of us in this room this morning. You know how hard we are trying to pay off the mortgage on the site we are buying for our church. A few years ago we would have faced no such obstacle because the price of suitable land would have been only a few hundred dollars. Ye we had to pay $16,000 for it and were lucky to get it at that.
Why? Because the owners and speculators in land for mile around Washington are holding it for unearned profits and in that way are creating an artificial scarcity of available land. They know that the population of this area is growing and that the need for land for useful purpose is increasing. So, the longer they hold out, the higher will be the prices and profits they hope to get.
What can, and what should be done to end this deadly hang-over of economic feudalism? Most liberals and labor spokesmen, unfortunately, offer no real remedy, only temporary palliatives which make the patient worse in the long run.
What they propose, and often get, are public subsidies and government guarantees to give the economic system a "shot in the arm" when it is being slowed down by rising land costs. Such artificial stimulation boosts land prices still higher, requires ever-increasing doses, and merely postpones the day of reckoning.
The government housing programs, particularly those for slum clearance and urban redevelopment, are good examples of how land profiteers are subsidized with public money supplied by the taxpayers who will take the losses if land speculators and mortgage-moneylenders run wild and cause a crash.
As a matter of fact, more and more urban redevelopment projects are being promoted by smart real estate operators. A public body buys the land at a high price, pays the heavy expense of clearing off the old buildings, then sells the land to a private developer at a fraction of the price the public body paid for it.
There just isn't enough public money to go very far in that kind of program, and slums are spreading faster than they are being cleared. Such a system has not worked and will not work.
Right here in Washington, the Washington Post recently reported that "Nathan Bernstein and his wife became the first individuals to get a piece of the vast southwest redevelopment project." They bought about three-fifths of an acre for $139,000. That's at the rate of more than $230,000 an acre, or $5 a square foot. And, since the report describes Bernstein as a small businessman, it seems obvious he got some of the least costly land in competition with wealthy real estate corporations.
Such huge land costs have two results, among others.
First, even with the public subsidies, apartments built by private redevelopers must, and do, rent for far more than can be paid by the low-income families for whom they are supposedly provided. In Washington's southwest redevelopment area, which is in this category, rents are reported to be as high as $300 a month.
Second, the comparatively low rents in publicly-built and publicly-owned housing require not only public subsidies for buying and clearing high-priced land, but also a continuation of these subsidies to keep the rents within reach of low- or even middle-income families.
Something different -- a real, fundamental remedy -- is needed. What can it be? Let us approach an answer in this way:
Slum property yields its owners profits of between 20 and 25% -- far more than any other kind of stable investment. That is largely because the more the buildings deteriorate, the lower their value is assessed, and the lower the taxes will be. Thus, the owner is rewarded for being a "slumlord" more ruthless than ancient feudal landlords.
But suppose this slumowner spends some of his money to convert his wretched old buildings into decent dwellings, or tears them down and puts up new ones? Either way he has not only increased the supply of good housing but he has also provided employment for workers in the building trades and in industries which fabricate and transport materials for construction. He has benefited manufacturers, merchants, architects, engineers and other professional men, as well as the economy in general.
Instead of being rewarded, however, this owner who redeveloped his slum property is penalized. The assessor comes around and boosts his valuation and from then on he must pay an annual fine in the form of increased taxes. In effect, he is treated as though he had committed a crime.
This tax system is upside down, according to a school of economic and moral thought fostered by the teachings of Henry George, an American, who long ago wrote a book entitled Progress and Poverty. It aroused controversy in its time, but has produced practical results in some parts of the world, and its teachings are now having a revival in our own country.
Those who agree with Henry George maintain that the man who should be encouraged and rewarded is not the one who lets his slum property run down, but the one who does a favor for everyone by improving his old buildings or tearing them down and putting up better ones.
How would this be done? By taxing the land under the buildings at its true economic value, which is usually much higher than the assessed value, and taking taxes entirely off the buildings or other improvements.
At first that may seem to be a startling thought, perhaps even an unjust one. But remember this, there is a fundamental difference morally and economically between land and buildings. No owner created his land, and its money value was created by the whole community. Is it unjust then for the creators of that value -- the people of the community -- to get the annual return on it in the form of taxes?
In contrast, buildings and all other improvements are man-made. They would not exist unless individuals had invested money and labor in them. When the community taxes them, it is taking something the community did not create.
The purpose of the tax system which Henry George advocated goes far beyond clearing slums by reversing the impact of local and state taxes. Its purpose is no less than to end persistent economic feudalism and its attendant evils. It proposes to do that by making it unprofitable to hold land out of use, or to use it inadequately while waiting for increasing population and public need to boost its selling price.
If landowners and speculators had to pay more taxes on their land, they would sell much more cheaply to people who need land for use. Thus taxes on land values tend to reduce land prices and the cost of living. In that respect, land values are unique. All other kinds of taxes in whole or in part operate to raise prices and living costs.
There is an old and true saying that "the power to tax is the power to destroy." Every dollar of tax destroys something for better or for worse. The question is what do you want to destroy -- the productive activities of labor and capital, or the feudalistic obstruction of men who command the labor of others through landownership and speculative profits?
Federal taxes as well as local taxes are full of favors for landowners and land speculators. Here is just one example:
Earned income pays federal tax rates ranging from 20 to 91%. Unearned profits from land pay only the capital gains tax, which ranges up to 25% at the most. What is more, Uncle Sam gives back to the landowner much of the local real estate taxes he has paid, because such taxes are deductible from taxable income. Thus a wealthy land speculator in the 50% tax bracket, in effect, deducts half his real estate tax from his federal income tax.
More and more people are awakening to the problem of economic feudalism and are seeking its remedy. I only wish I could say that the liberals and the laborites of our country were leading the search.
House & Home, a monthly magazine covering all phases of the home-building industry, is a Luce publication, and as such would generally be considered conservative. But on the land and tax question, House & Home is "radical" in the old American sense of that word, meaning that it goes to the root of things, seeks out and tries to remedy causes.
The Reader's Digest, scarcely a liberal magazine, recently published an excellent boil-down of the House & Home material under the title "Land Speculation and How to Stop It."
Feudal lords, big and little, are exacting more and more billions of tribute from the rest of the people. This will get worse as the population explosion puts heavier and heavier pressure on the land and other natural resources.
Warnings of this came long ago from the classical economists. One of them, David Ricardo, put it this way:
Advancing wealth and productivity bring more people, but they do not bring more land. As a result, those who own the land can command an ever greater return for an increasingly scarce resource. Meanwhile, capital and labor conflict with each other for the rest of the product, and get smaller and smaller shares while the landowners get more and more.
Therefore, Ricardo said, "the natural price of labor is that price which is necessary to enable the laborers … to subsist and perpetuate their race." This came to be known as his "iron law of wages."
Ricardo and other classical economists correctly foresaw that in times and places of rapid economic growth and relative scarcity of workers, wages could rise temporarily. But now the population explosion is on full blast and the industrial revolution, instead of creating more jobs, as it formerly did. is resulting in millions of workers who cannot find jobs even at Ricardo's "subsistence wage."
This economic insecurity will continue and grow worse until the land and tax question is answered, and answered right, for it is the inevitable result of the economic feudalism which has cursed mankind throughout the ages and lingers on in our own country.
Things move fast nowadays, and the time is growing short. Dare we delay too long in solving the biggest and most fundamental of our economic and moral problems -- the problem of Man and his Mother Earth?
Going through some old files, I came across a letter to the editor written by my late grandfather which was published in the WS J. It seems to be from late 1978. Think about California's Proposition 13 in light of its observations:
Weld Carter LTE, responds to a December 1 article entitled "Arthur Laffer's Tax Yield Curve."
Alfred Malabre's perceptive portrayal on the back page of your issue of Dec. 1 of Arthur Laffer's Tax Yield Curve and the theory he derives therefrom unfortunately has the same defect as the theory and its admirers and most of its critics. All these generalize, as though taxes were all alike. But that is just not so.
Laffer's curve tells us that at rates of 0% and 100% the yield of taxes will be zero, the maximum yield falling somewhere between these two extremes.
This may hold in the case of the income tax, although the zero point on the top side would probably be well below 100%. It is certainly not the case with excises, where, for instance, in India in the 1870s, the tax on salt almost reached 1,200%.
Nor, at the other extreme, does it hold for the property tax, where a low annual cap on the building will, over time, capture a sum whose discounted present value will be a high percentage of that present value, and where the same low rate, applied to rental property, may amount to an alarming percentage of its before-tax income.
But the most striking failure of all these theorists is their failure to analyze and describe the workings of the other part of the property tax, the part that falls on land values.
All taxes on labor and its products are harmful because they lessen incentive and, by adding to the costs of production, they lessen supply and raise prices. Likewise they are unjust as they infringe on the rightful earnings of labor and capital.
Conversely, taxes on land values are just, for land values are but the capitalization of the annual benefits from the community, net of the tax, enhanced by the expectation of future gains from the artificial scarcity created by speculation on the possibility of that rise in price of a factor, the supply of which cannot be increased by production. Moreover, the tax on land values is the only tax that encourages, that stimulates, that compels production and does that in direct proportion to the magnitude of its rate. As one of the top two economists selected for special honor by the American Economic Association at its annual meeting, held in Chicago this past August, has said: "We will never have an economically efficient economy until we have recovered in taxation at least 85% of the rent of land." (In a 5% money market, this would be achieved by a tax rate of 28.33%; in a 10% market, by a 56.7% rate on the actual market value of the land.)
It is understandable that political animals like Gov. Brown and Sen. Long should seek counsel of Laffer. The mystery is why competent economists waste their time in such distractions, instead of turning their attention to the exciting and construction potentials inherent in the study of the economics of land value taxation, especially in these times of fiscal and monetary crises.
Somehow I am reminded of the old shell game, practiced at country fairs, where the pea was under one of three shells and the facile operator moved the shells about with such dexterity that the wagering onlooker rarely could tell which shell finally held the pea. Alas! In the ongoing controversy of fiscal vs. monetary policy, there is no third shell for land value taxation. It is not even in the game!
The last two or three years have brought forth a flood of literature on the question of immigration. Very little attempt has been made to discover fundamental principles; restrictive nostrums have been freely recommended, each writer appearing to believe that the millennium only awaited the adoption of his panacea. It has seemed to me that these discussions have overlooked or ignored the very first and most vital principle. That principle is involved in the question, "Have men a right to migrate?" Is the right to move about from place to place on the surface of the earth a natural right that belongs to all men equally, or is it a privilege with which nature has endowed a few favored ones, leaving it to them to grant or withhold?
The mere statement of this question brings out its own answer. Whatever degree of freedom may justly be claimed for one must necessarily be conceded to all. There can be no freedom greater than equal freedom. Whatever right I claim for myself, that must I concede to my brother. Have you, my reader, a right to change your habitation from St. Paul to California? Most certainly. Then that same right you must accord to every other one of your fellow-men. Have you a right to expatriate yourself and become a citizen of England, China or Afghanistan? With equal emphasis you reply, "Of course I have." Then you must accord that right to every other person on earth. All rights must be equal. In short, each person must be free to choose for himself his place of abode; and so long as he encroacheth not on the equal freedom of his fellows, no one may deny him.
The favorite reply of the restrictionist is somewhat as follows: "Of course no one man may justly deny his fellows their equal right with himself to migrate from place to place; but all the people, through the regular channel of legislation, may make regulations and restrictions." If this is true, then the principle of equal freedom is a fallacy, and that part of our Declaration of Independence which asserts that all governments derive every just power from the consent of the governed is nothing but an iridescent dream.
No, the immortal Declaration is right. Governments can have no powers except such as rest originally and equally in each individual citizen. Consider, what is a just government? Simply an agent of the people, chosen by the people, to do certain things for the people. What are these things that the people may delegate to their ag«nt, the government? Only such things as each citizen would have a right to do for himself in the absence of government; and of these only such things as the citizens choose to delegate. You can't delegate to your agent a power you don't possess. Your right to interfere with other people's migrations is just nothing. No other citizen has any more right than you. Sixty-five million times nothing equals nothing. A creature can never have rights its creator does not possess; so governments can never possess powers which do not inhere in each individual citizen before they come together to create their government.
I am aware that there are certain classes of socialists who claim that the powers of governments are limited only by the will of the majority; but such claims rest upon investigations so shallow, and are so plainly at variance with the principles of equal freedom upon which our democratic republic is founded, that they should be regarded as cuiiosities instead of being seriously considered.
It is also claimed that, because the members of a family may justly resent encroachments on the sacred precincts of the home, therefore the people of any country may with equal justice drive away peaceable immigrants. The cases are not parallel. The peaceable immigrant enters no man's home unbidden. He simply comes here to make a home of his own, in his own way, and this he has the same right to do as had the Pilgrim fathers who planted their habitations on Plymouth Rock. The only limitation that may justly be applied to the peaceable immigrant, is the same that applies to every other citizen — simply this: he must not encroach upon the equal freedom of his fellows.
True, our Congress attempts to enact laws to prevent people from coming to this country; but all such laws are simply tyrannical usurpations of power, without the slightest shadow of right behind them. Public sentiment may sustain them, just as it sustained the superstition of the divine right of kings to rule and rob the people; just as it sustained for centuries the laws for the burning of heretics; just as it sustains today all sorts of laws that interfere with the divine right of every man to free thought, free speech, free labor, free land and free trade; but in the very nature of things all such laws are void for want of authority — void because there is no power on earth that has any right, or ever can have any right, to enact them.
II. BENEFITS OF IMMIGRATION.
Having shown that no people can possibly have the right to prevent peaceable immigration, I now desire to show that the coming of others not only does no harm to those already here, but really benefits them.
Imagine yourself alone on an island; or, if you please, alone on a world. How poor, how weak, how insignificant you are! You must supply for yourself all your own wants. You must plow and sow and reap and thresh and grind and bake, before you can eat bread. Your clothing, in every part and in every detail, must be of your own make. Whatever shelter you have, you alone must construct. You have no one to aid you, no one with whom to divide the cares and the joys of life! How gladly would you welcome the distant sail; with what heart-throbs of hope would you watch its nearing; with what ecstasy of delight would you note the fact that an immigrant was coming! Even one would make you glad, but many would bring greater gladness. And how doubly joyous would you consider it, if, among the many strangers coming, you could but note the happy smile of some sweet maid of your former acquaintance!
Attempt to restrict immigration! No, 'twould be the last thought to rise within you. Think of the blessings those immigrants would bring. Now the subdivision of labor is possible. Now each can devote his energy to the production of such things as he knows most about, and then exchange with all the others. Now the joys of home and fireside cast about you their holy influences, and soon the patter of little feet reminds you that immigrants from out the great unknown are doubly blest in coming.
Stop immigration? Never! Each one of the ten or one hundred now occupying the island can enjoy many times more of the comforts and blessings of life than before they came together to cooperate among themselves. How anxious you all would be to open up communication with the outside world, that you might exchange the surplus products of your labor with men beyond the sea, and thus get such comforts and luxuries of life as on your own little island you could not produce. With what scorn and contempt would you look upon the person who should seriously suggest that you ought to build a row of custom houses around your island and fill them with politicians whose duty it should be to protect you from the evil effects of swapping goods when you wanted to!
Isn't it always true that ten men working together can produce far more than ten times as much as any one of them working alone? So, also, a thousand, under conditions of freedom, can produce far more than a thousand times as much as one. This principle is universal. The greater the number of the people, the more completely the labor is divided, each doing the work he knows best — provided only they are left free to exchange their surplus products — the greater the wealth of each and the more each can have to enjoy.
Some one may here suggest that if all were permitted to come freely, the island might get too full of people. Nonsense — before the island got too full the people would stop coming.
III. WHY RESTRICTION SEEMS NECESSARY.
Why, then, does restriction of immigration seem necessary? Why does the incoming of our cousins from over the water seem to do harm? Why does it in reality intensify the competition among the workmen, and make immigration seem a curse when in reality it ought to be a blessing?
These questions can all be answered in one word — monopoly. All the good things for which men labor and strive and think and plan, must of necessity be brought forth from the earth by the exertion of man. In the language of political economy, "Labor produces all wealth." But labor can produce not one single particle of wealth unless it can have land to work upon. The food we eat, the clothes we wear, the houses that shelter us, even our very bodies — all are derived from the earth; all are the result of labor applied to land. Without the earth to use, human life is impossible.
What sort of a welcome does the immigrant receive who comes to this boasted "land of the free," seeking a place where he can use his energy and skill for the betterment of himself and all those who were here before him? Is he permitted to use the earth to satisfy his needs? Yes, if he can pay the price monopoly has placed upon land. May he not travel from place to place in search of cheaper land, or that he may find an employer to hire him? Yes, if he can pay the price that law-favored highway monopolists charge for a ride. Can't he go afoot and thus escape excessive transportation charges? No, he will be arrested as a tramp and put in jail, his only consolation being that some of those who helped make the laws that caused him to become a tramp will have to pay taxes to support him while he is there. Suppose he can pay the price demanded for transportation and for land, is he allowed to keep and enjoy the products of his labor, that he may thus become a good and self-reliant citizen? No, the tax gatherer is bound by law to fine him for every good thing he does, in order that some land speculator may the more readily blackmail his fellow-men.
Suppose, by hard work, he overcomes all these unnatural obstacles that stupid laws have put in his way, and has a surplus of wheat or other product, is he permitted to exchange that surplus in order to get the things he needs for the maintenance and comfort of himself and family? Yes, but oh condition; if he exchange with his brothers who live outside the imaginary line that separates this "great free country" from the rest of the world, then he must give up from one fourth to three fourths of all he gets to a legalized robber called a customs collector before he may go home with the remainder. Or if he choose to exchange with some one on this side the line, he must pay the monopoly price that our tariff was designed to enable the home producer to extort. Suppose he submits to all these robberies and finally gets home with the fragment that remains, is he let alone to enjoy it in peace? Oh, no; the tax assessor comes around and fines him every year for having it.
What a "grand and glorious free country" this of ours is, to be sure! Is it any wonder that immigrants coming here compete with "our own laborers" for a chance to work? How could they do otherwise, when we shut away the earth from them and compel them to beg employment of the favored few upon whom our system confers the privilege of owning the planet on which we live!
This is just as true of those immigrants who come through the natural channel of birth, as of those who come from distant lands in ships; and to restrict or keep out one class is no more logical or just than to pass laws to prevent the coming of the other.
Why, then, do the citizens of foreign lands come here, and why do so many of them come in spite of all these evils that await them? Simply because they are compelled to suffer more evils where they are. But the tyranny of old world despotisms is no excuse for ours. Because in one country a man is robbed of 90% of all he produces is no reason why in another he should thank God for the robbers who take only 75.
Thus it appears that the problem of immigration does not stand alone. Freedom of migration is as clearly the right, of every human being as is freedom to breathe the air. Monopoly alone is the cause of the evil.
IV. THE REMEDY.
What, then, is the remedy? Again the answer comes clear and plain: Abolish monopoly and restore freedom. These evils have been brought about by laws that restrict and interfere with the rights of man. The remedy must come through the repeal of those laws and the restoration to man of his natural right to be free. Not more laws added, but many existing laws repealed, is the kind of legislation we now need. Our watchword must be "More liberty."
We must erase from our statute books all laws that tax men in proportion to their industry. No man should be taxed more because he has made a piece of land useful, than another is taxed for holding an equally valuable piece of land idle.
The great iron highways of the country must cease to be the private property of such as the Goulds and the Vanderbilts, the Hills and the Huntingtons. They must be made real free public highways, and all must have equal rights to use them, just as they now use the lakes and rivers, the bays and oceans, the country roads and the city streets.
All existing laws that tend to currency monopoly must be repealed. The money of the country must not be made to favor either state or national banks, nor to give the owners of mines a greater price for their products than they will command in the free markets of the world.
But most important of all and first of all, land monopoly must be destroyed. We must recognize again nature's only title to land — the title that rests upon possession and use; and the value of land — that value which is produced by the presence of population and the evolution of society — the value of land must be taken for public use; not allowed to swell the private fortunes of mere title holders.
Look over this fair America of ours today, and see how few and how scattering are its people. More than all the inhabitants of the United States could live in peace and comfort east of the Alleghany Mountains were it not fo: the curse of land monopoly. Less than half the land even in New York City is really occupied and used. More than half is only partially used or is held idle by speculators who expect to reap large profits from the increase of value which always comes with increase of population.
Why do men hold land idle? For no other reason than to pocket the difference between the yearly value which the public gives and the yearly taxes which the public takes.
How can land monopoly be abolished? By making the yearly taxes which the public takes equal to the yearly value which the public gives. When the public takes what it produces, it won't have to rob individuals of the product of their labor under the pretence of taxation. Adopt the single tax, and the vacant-lot industry is a thing of the past.
All laws that pretend to grant to corporations or individuals any special favors must be abolished.
All men must be restored to their rightful condition of freedom, and then let alone to work out each one his own career, unaided by government bounties or favors, unhindered by repressive or restrictive legislation.
Democratic government is possible only under conditions of equal freedom; and that equal freedom must not be the variety proposed by restrictionists and paternalists, where all are equally oppressed by a governing class, but that broad and genuine freedom, where each person has perfect liberty to do whatsoever best doth please himself, so long as he does not interfere with the equal freedom of his fellows.
All men must have equal rights to be on the earth, to move about on its surface, and to use its materials to satisfy their needs. Each one must be the owner of his own powers and capacities. All that his labor of hand or brain can produce is his own; and he must never be compelled to yield to individual or state any part of the product.
The value of land, which is not in any sense a product of individual labor, properly belongs to the community that has produced it. When this value is put into the public treasury where it may meet all public requirements, taxes on labor will be unnecessary, and can be abolished.
This simple, practical change in our system of taxation on the one hand destroys land monopoly and restores to labor its natural right freely to use the earth; while on the other hand it takes the burden from labor's back and leaves it free from the crushing weight of indirect taxation.
Thus again we reach the same conclusion — that only in freedom for the individual man we shall find the cure for all our social evils; freedom to think, freedom to speak, freedom to act; freedom to use the earth to produce the things that are necessary to life, comfort and happiness; freedom, absolute freedom, to exchange the products of his labor with his fellow-men the wide world over, with never a custom house nor a collector to interfere with his trading; freedom to cooperate with his fellows in all things, and never to know that government exists, except when he pays for the value of the land he uses, or when he attempts to encroach upon the equal freedom of his fellows.
With freedom established and monopoly, especially land monopoly, destroyed, the problem of immigration is solved; its terrors have vanished. The innocent comer from over the sea is no longer an enemy to take our work away and reduce us to a meaner standard of living; but a friend who comes to help us, while we all rise to better conditions and heights of nobler manhood.
THE progressive reformer and eminent jurist Louis D. Brandeis once said, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.”
What we call the Brandeis Ratio — the ratio of the average income of the nation’s richest 1 percent to the median household income — has skyrocketed since Ronald Reagan took office. In 1980 the average 1-percenter made 12.5 times the median income, but in 2006 (the latest year for which data is available) the average income of our richest 1 percent was a whopping 36 times greater than that of the median household.
Brandeis understood that at some point the concentration of economic power could undermine the democratic requisite of dispersed political power. This concern looms large in today’s America, where billionaires are allowed to spend unlimited amounts of money on their own campaigns or expressly advocating the election of others.
We believe that we have reached the Brandeis tipping point. It would be bad for our democracy if 1-percenters started making 40 or 50 times as much as the median American.
Enough is enough. Congress should reform our tax law to put the brakes on further inequality. Specifically, we propose an automatic extra tax on the income of the top 1 percent of earners — a tax that would limit the after-tax incomes of this club to 36 times the median household income.
Importantly, our Brandeis tax does not target excessive income per se; it only caps inequality. Billionaires could double their current income without the tax kicking in — as long as the median income also doubles. The sky is the limit for the rich as long as the “rising tide lifts all boats.” Indeed, the tax gives job creators an extra reason to make sure that corporate wealth does in fact trickle down.
The authors go on to mention that they're both 1%-ers (presumably 1%-ers by income, not by wealth, though they use terms interchangeably in a way that seems very odd for people with any training in economics. Further, I am surprised they are as innumerate as their "solution" would suggest.
Their proposal is that each year the IRS would do some calculations based on "the average 1%er:"
Here’s how the tax would work. Once a year, the Internal Revenue Service would calculate the Brandeis ratio of the previous year. If the average 1-percenter made more than 36 times the income of the median American household, then the I.R.S. would create a new tax bracket for the highest 1 percent of income and calculate a marginal income tax rate for that bracket sufficient to reduce the after-tax Brandeis ratio to 36.
This new tax, if triggered, would apply only to income in excess of the poorest 1-percenter — currently about $330,000 per year. Our Brandeis tax is conservative in that it doesn’t attempt to reverse the gains of the wealthy in the last 30 years. It is not a “claw back” tax. It merely assures that things don’t get worse.
What this doesn't account for is the wide range of incomes within the top 1%. Should the folks in the bottom half of the top 1% be penalized indiscriminately for what the folks in the top half are "earning?" Why? Whose activity are we attempting to penalize? When a Bill Gates, or big deal football player,* or a so-called "small businessman" selling his company to a roll-up receives a huge windfall, should the $250,000 per year doctor be taxed? Why should the latter be in the same bracket with the windfall folks? And the fellow selling his company gets taxed at the 15% "capital" gains rate, well below what working people get hit with.
*Why is the football player on this list? Well, in part because I see that I am paying $100 per year to the NFL via my cable TV bill. I am thus taxed to provide him his windfall. My tax doesn't go through any government entity, but is in my cable bill.
I don't think Justice Brandeis would think Ayres and Edlin have proposed a good solution to the problem. They're nibbling at the leaves, not hacking at the root.
The article sent me off to read some of Brandeis's work, including "Other People's Money, and How the Bankers Use It," (published as a series of 10 articles in Harpers Weekly in 1913 and as a book in 1914). Here is the table of contents for the book:
I Our Financial Oligarchy 1 II How the Combiners Combine 28 III Interlocking Directorates 51 IV Serve One Master Only! 69 V What Publicity Can Do 92 VI Where the Banker is Superfluous 109 VII Big Men and Little Business 135 VIII A Curse of Bigness 162 IX The Failure of Banker-management 189 X The Inefficiency of the Oligarchs 201
Ian Ayres and Aaron S. Edlin write, “It would be bad for our democracy if 1 percenters started making 40 or 50 times as much as the median American.”
Are Bill and Melinda Gates a great threat to democracy? Jeff Bezos? Oprah Winfrey? Mayor Michael R. Bloomberg? I fail to see how those who have amassed great fortunes in America threaten American democracy.
They do not plot coups or finance fascist militias. They do, however, give lots of money to wonderful charitable and educational organizations.
He's chosen some people who have built up monopolies, and have helped to drive other businesses into the ground, and in at least one case, used a great fortune to influence elections; and it might be worth mentioning what people like the Koch Brothers have done, and others will do, now that "corporations are people" and have free speech rights. Bloomberg managed to derail the term limits laws in his city.
Wouldn't we be better off examining privilege, and eliminating it, than indiscriminately taxing productive activity? Forcing the internalization of externalities. Playing around with income tax brackets doesn't fix the problem, and it deflects us from going to the source of the problem.
Shouldn't our incentives be set up to encourage our best and brightest to devote themselves to serving others instead of enriching themselves at the expense of others?
When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?
Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:
I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.
The 99% need to start identifying the laws and structures that must be adjusted. This is not easy work.
What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures. We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist. It won't be easy. We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.
Labor should get its share, and capital should get its share, and we-the-people should get land's share. That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create. That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.
I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund.
In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong. Letting it be "there for the taking" is insanity and injustice. And don't we pledge "liberty and justice for all?"
Our ancestors may have granted some privileges to some lucky folks for one reason or another. That doesn't mean that we can't, politely and firmly, revoke those privileges. A couple of centuries is plenty. Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them. Will the privileged give up those privileges graciously? Quite possibly not. But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."
Pointing to the recent declines at the top, Mr. Kaplan argues the Occupy protesters have accused the wrong villain by focusing on inequality, which he called an inevitable byproduct of growth. “If you want to reduce inequality, all you need to do is put the economy in a recession,” he said. “If you want the economy to do well, as all of us do, then you’ll get more inequality.”
Well, maybe at the University of Chicago, that is what is taught, but is it true?
It may be inevitable under our current structures, but if one gets outside that box, and looks deeper, one finds other answers.
I would suggest that Mr. Kaplan, who teaches economics at the Graduate School of Business at the U of C, look beyond the interests of the university's and b-school's founders and big donors and alumni and current students, and consider that we're all in this together, and that when we permit a few to monopolize and privatize things which rightly are our common treasure, inequality is the inevitable byproduct.
Mr. Kaplan might start by exploring the ideas of Henry George. They were in his freshman economics texts, but most likely his instructor didn't lecture on them, or include them in exams (most likely because his own instructors hadn't!)
Read what those textbooks have to say, and then think about whether it is in Mr. Kaplan's personal career interests to speak of an idea that could rock the yachts of alumni and donors and others who like our current structures just fine, thank you! The privileged like their privileges, and would prefer that we not notice that they are privileges, or, if we do notice, think that THEIR privileges are somehow in OUR best interests.
If you've just arrived at this page, this is the first (last) of perhaps 10 items I've picked up from reading a year's worth of an 1895-6 weekly called The San Jose Letter. I'm amazed how topical they are 115 years later!
From The San Jose Letter, of November 28, 1896:
THE SUPERFICIAL REFORMER.
A great fault of the human family today, when starting out on reform measures, is to battle with effects and neglect the primary causes of the evil. What man, be he the most uneducated tiller of the soil, would start out to eradicate weeds by cutting them off at the surface of the ground? Would he not dig down and remove the roots? And yet all the great reform parties, temperance people and labor organizations, are fighting effects, all claiming to be right, while the "ignis fatuus" is luring them on to their own destruction.
What, then, is the primary cause of the evil that is today filling our jails and insane asylums, making prostitutes of women and placing a premium upon drunkenness and suicide, while the products of industry are taxed to their utmost to keep up this damnable retrograde movement of our civilization? Are these the results of man's development in freedom, or are they the results of present conditions over which he has, or thinks he has, no control? Cannot this entire brood of evils be laid at the door of poverty and want, the result of bad laws? Anything, therefore, that will better man's condition will certainly lesson crime. Such a state of affairs is what the single tax will bring about. It has already been shown that taxing a thing has a tendency to discourage it, hence we are going to stop taxing industry and production, because these are the mainstays of existence, and to discourage them is to say that we have no right to that which nature decreed should be ours, but our entire revenue for community purposes, we propose to take from land values created by reason of the presence of the community.
—George W. Loehr in National Single Taxer.
If we don't go to the root of the problem, we and our descendants are going to be spending centuries trimming the weeds.
"Radical" has an honorable root: Radix, radicis --the root! Radish, radius, eradicate, radical ...
The current conversation about "tax reform" seems to mostly consist of arguing about federal income tax brackets. It doesn't go to the root of the problem. Most of those carrying on the conversation wouldn't know the root if they stumbled across it.
How does this strike you? If this is the first thing you've read here, it may seem very odd to you. I invite you to explore the ideas involved, through the tags (below this post) and in the cloud, at left. Comments welcome, of course!
Single Tax Platform
The single taxers of Delaware are conducting a red hot campaign. The single tax will be the issue in that state this fall, and Justice, the state single tax organ, published the following as their Single Tax Platform:
We assert as our fundamental principle, that all men are equally entitled to the use of the earth;
Therefore, No one should be permitted to hold land without paying to the community the value of the privilege thus accorded; and from the fund so raised all expenses of government should be paid. We would therefore abolish all taxation, except a tax upon the value of land exclusive of improvements. This tax should be collected by the local government and a certain proportion be paid to the state government.
This system of taxation would dispense with a horde of tax-gatherers, simplify government and greatly reduce its cost.
It would do away with the corruption and gross inequality inseparable from our present methods.
It would relieve the farmer, the workman and the manufacturer of those taxes by which they are unjustly burdened, and take for public uses those values due to the presence of population.
It would make it impossible for speculators to hold land idle, and would open unlimited opportunities for the employment of labor and capital, which is essential to the solution of the labor problem.
"ARE WE SOCIALISTS?" Thomas B. Preston, in the Arena, December, 1899
It is socialistic to make the revenues of the government a burden on industry. Revenues there must be, but they should not bear upon industry. In fact, the taxation of any product of labor is simply taking from the laborer part of his earnings. To such an extent we are socialists. Any other form of taxation than that on the value of land is essentially socialistic because any other tax is passed on from the seller to the consumer, and takes part of the latter's earnings without compensation, for use by the community. Any tax on earnings is socialistic, although it may not go so far as to take all a man earns. The substitution for our present system of a single tax amounting to the full rental value of land would sound the death-knell of socialism.
While we sin so deeply in our present bungling, socialistic way by forcing individuals to give up part of the proceeds of their labor, by fining a man who builds a house more than if he were maintaining a public nuisance, by tariffs which hinder trade with foreign countries, and add millions to private fortunes at the expense of the people, and by a thousand indirect taxes which make life harder for men without their being able easily to see the reason, on the other hand we foolishly leave to individuals those great agencies which are the outcome of social growth — the product of the inventive genius of a few men, if you like, but which after a time grow so powerful as to become the very arbiters of life and death. Prominent among such agencies are the railroad and the telegraph. They can crush communities out of existence and enrich the owners at the expense of their fellow men. They have already become the chief source of corruption in government. The ownership of these agencies by the community becomes a necessity for the continuance of social progress. Otherwise these monopolies can go on increasing and concentrating until a few persons are enabled, through them, to appropriate the wealth of a community. In so far as socialism demands the state ownership of agencies of this nature, it is proceeding in the right direction. There are many other agencies besides the railroad and the telegraph, such as the supply of water, gas, light, heat, telephones and means of transit and communication, in which the American idea of free competition is a fallacy. Here we are too individualistic. The right to make war and peace was long ago taken from individuals and vested in the community. So at a later stage was the carriage of letters. National quarantines, boards of health, public schools, are all examples of applied socialism in its legitimate sense. But why should we stop here? The existence of such great monopolies as the railroad and the telegraph is a standing menace to the life of the Republic. Let us munificently reward the inventors or appliances which shall add to the comfort and convenience of the community, but allow these agencies to be owned perpetually by individuals never!
We are socialistic where we should respect the rights of the individual, and we are individualistic when individualism is a crime against the Commonwealth. And so we go blundering on. When our stupid and oppressive system leads men to cry out against it, and riot and murder follow, we hang a few anarchists. When monopolists, grown bold through long years of immunity, attempt to rob a little more openly, by pools and combinations or by direct bribery, we create interstate commissions to watch them, or we send a few to prison, allowing others to escape to Canada; repressing a little here those who complain too loudly, where we should rather rectify their grievances, and lopping off a little there the enormous unearned profits, which we should abolish altogether. Meanwhile our two classes of tramps are increasing — those who travel around the world in flowing palaces, living upon the toil of others, without using their capital in any legitimate enterprise and those who go afoot, pilfering from cornfields and hen roosts — both classes an unjust burden on a hard working, long suffering community. We have arrived at a critical period of our history, where we must meet the demands of social progress, or our civilization will perish as surely as did the fallen empires of former ages. Already the mutterings of revolt are growing louder and louder, while upstart monopoly was never so insolent and imperious as it is today. Let us be warned in time, and, discarding all half measures, face the issue like men, and not go on trusting to luck, foolishly dreaming that somehow, at some time, existing wrongs will right themselves.
Perhaps you saw "60 Minutes" last Sunday (11/13). Just in case you didn't, here are some excerpts from the transcript. I commend the whole thing to your attention. It begins:
The next national election is now less than a year away and congressmen and senators are expending much of their time and their energy raising the millions of dollars in campaign funds they'll need just to hold onto a job that pays $174,000 a year.
Few of them are doing it for the salary and all of them will say they are doing it to serve the public. But there are other benefits: Power, prestige, and the opportunity to become a Washington insider with access to information and connections that no one else has, in an environment of privilege where rules that govern the rest of the country, don't always apply to them. ...
Most former congressmen and senators manage to leave Washington - if they ever leave Washington - with more money in their pockets than they had when they arrived, and as you are about to see, the biggest challenge is often avoiding temptation.
Peter Schweizer: This is a venture opportunity. This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family.
Schweizer says he wanted to know why some congressmen and senators managed to accumulate significant wealth beyond their salaries, and proved particularly adept at buying and selling stocks.
Schweizer: There are all sorts of forms of honest grafts that congressmen engage in that allow them to become very, very wealthy. So it's not illegal, but I think it's highly unethical, I think it's highly offensive, and wrong.
Steve Kroft: What do you mean honest graft?
Schweizer: For example insider trading on the stock market. If you are a member of Congress, those laws are deemed not to apply.
Kroft: So congressman get a pass on insider trading?
Schweizer: They do. The fact is, if you sit on a healthcare committee and you know that Medicare, for example, is-- is considering not reimbursing for a certain drug that's market moving information. And if you can trade stock on-- off of that information and do so legally, that's a great profit making opportunity. And that sort of behavior goes on.
Kroft: Why does Congress get a pass on this?
Schweizer: It's really the way the rules have been defined. And the people who make the rules are the political class in Washington. And they've conveniently written them in such a way that they don't apply to themselves.
The buying and selling of stock by corporate insiders who have access to non-public information that could affect the stock price can be a criminal offense, just ask hedge fund manager Raj Rajaratnam who recently got 11 years in prison for doing it. But, congressional lawmakers have no corporate responsibilities and have long been considered exempt from insider trading laws, even though they have daily access to non-public information and plenty of opportunities to trade on it.
Schweizer: We know that during the health care debate people were trading health care stocks. We know that during the financial crisis of 2008 they were getting out of the market before the rest of America really knew what was going on.
While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts.
Peter Schweizer thinks the timing is suspicious, and believes congressional leaders should have their stock funds in blind trusts.
Schweizer: Whether it's uh-- $15,000 or $150,000, the principle in my mind is that it's simply wrong and it shouldn't take place.
But there is a long history of self-dealing in Washington. And it doesn't always involve stock trades.
Congressmen and senators also seem to have a special knack for land and real estate deals. When Illinois Congressman Dennis Hastert became speaker of the House in 1999, he was worth a few hundred thousand dollars. He left the job eight years later a multi-millionaire.
Jan Strasma: The road that Hastert wants to build will go through these farm fields right here.
In 2005, Speaker Hastert got a $207 million federal earmark to build the Prairie Parkway through these cornfields near his home. What Jan Strasma and his neighbors didn't know was that Hastert had also bought some land adjacent to where the highway is supposed to go.
Strasma: And five months after this earmark went through he sold that land and made a bundle of money.
Kroft: How much?
Strasma: Two million dollars.
Kroft: What do you think of it?
Strasma: It stinks.
We stopped by the former speaker's farm, to ask him about the land deal, but he was off in Washington where he now works as a lobbyist. His office told us that property values in the area began to appreciate even before the earmark and that the Hastert land was several miles from the nearest exit.
But the same good fortune befell former New Hampshire Senator Judd Gregg, who helped steer nearly $70 million dollars in government funds towards redeveloping this defunct Air Force base, which he and his brother both had a commercial interest in. Gregg has said that he violated no congressional rules.
It's but one more example of good things happening to powerful members of Congress. Another is the access to initial public stock offerings, the opportunity to buy a new stock at insider prices just as it goes on the market. They can be incredibly lucrative and hard to get.
Schweizer: If you were a senator, Steve, and I gave you $10,000 cash, one or both of us is probably gonna go to jail. But if I'm a corporate executive and you're a senator, and I give you IPO shares in stock and over the course of one day that stock nets you $100,000, that's completely legal.
And former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House.
Brian Baird is a former congressman from Washington state who served six terms in the house before retiring last year. He spent half of those 12 years trying to get his colleagues to prohibit insider trading in Congress and establish some rules governing conflicts of interest.
Baird: One line in a bill in Congress can be worth millions and millions of dollars. There was one night, we had a late, late night caucus and you could kind of tell how a vote was going to go the next day. I literally walked home and I thought, 'Man, if you-- if you went online and made-- some significant trades, you could make a lot of money on this.' You-- you could just see it. You could see the potential here.
So in 2004, Baird and Congresswoman Louise Slaughter introduced the Stock Act which would make it illegal for members of Congress to trade stocks on non-public information and require them to report their stock trades every 90 days instead of once a year.
Kroft: How far did you get with this?
Baird: We didn't get anywhere. Just flat died. Went nowhere.
Kroft: How many cosponsors did you get?
Baird: I think we got six.
Baird: When you have a bill like this that makes so much sense and you can't get the co-sponsorships, you can't get the leadership to move it, it gets tremendously frustrating. Set aside that it's the right thing to do, it's good politics. People want their Congress to function well. It still baffles me.
But what baffles Baird even more is that the situation has gotten worse. In the past few years a whole new totally unregulated, $100 million dollar industry has grown up in Washington called political intelligence. It employs former congressmen and former staffers to scour the halls of the Capitol gathering valuable non-public information then selling it to hedge funds and traders on Wall Street who can trade on it.
Baird: Now if you're a political intel guy. And you get that information. Long before it's public. Long before somebody wakes up the next morning and reads or watches the television or whatever, you've got it. And you can make real-- real-time trades before anybody else.
Baird says its taken what would be a criminal enterprise anyplace else in the country and turned it into a profitable business model.
Baird: The town is all about people saying-- what do you know that I don't know. This is the currency of Washington, D.C. And it's that kind of informational currency that translates into real currency. Maybe it's over drinks maybe somebody picks up a phone. And says you know just to let you know it's in the bill. Trades happen. Can't trace 'em. If you can trace 'em, it's not illegal. It's a pretty great system. You feel like an idiot to not take advantage of it.
The newest issue of Progress, an Australian Georgist publication, is online here. The motto is "Sharing the Earth So All May Prosper."
There is a lot of good material, and I'll share some of the things that caught my eye.
An article about a film entitled "Real Estate 4 Ransom" which I commend to your attention, wherever you live. (I'll keep you posted on the film itself.)
“Economist James Galbraith has noted that only 12 out of 15,000 economists in the US noticed the US$8 trillion dollar housing bubble” (page 6)
We propose a change in the tax mix so that future infrastructure pays for itself by expanding the tax base without increasing the tax burden. (page 9)
Infrastructure adds enormous value to land in prime locations according to proximity and serviceability. Land Value Capture (LVC) is a simple technique to recycle the publicly funded windfall gains that accrue to land owners. Importantly, these windfalls are captured over the life-cycle of the infrastructure, such that one generation is not hit with the total infrastructure costs (ie as per the current preference for Developer charges). (page 10)
Windfall gains from infrastructure add up to several times the cost of the infrastructure to surrounding properties. We propose that a sufficient contribution from this windfall be recycled back to the government so that other infrastructure projects can be funded without substantially burdening one generation over another. At present land speculators baulk at paying barely 10% of the land bounty (windfall gain) back to the community via government’s Land Tax, Council Rates, Stamp Duties and Capital Gains. (Page 11)
“Henry George did more than draw ‘the deadly parallel of riches and misery.’ He recast the science of political economy by working out the natural laws of the distribution of wealth. He destroyed the current academic theory of wages and capital. He amplified and extended Ricardo's law of rent. He dug to the root of the wealth distribution.” (John Dewey, quoted on page 22)
If you could choose the sort of society that you were to be born into, would you choose one in which the distribution of wealth is guaranteed to be equal? (page 28 -- and don't miss the illustration cartoon on "trickle-down economics"!!)
The world faces a series of worsening crises, climate instability, rising energy costs, economic apartheid, and erosion of democratic institutions. What is required is not a set of technical instruments that try to resolve these, one at a time. We need a new social philosophy that addresses all these crises simultaneously. (page 38)
All 17th century authors took it for granted that God had given the earth to all people in common, not just to those who had claimed title to a part of it. Starting with that premise, the difficulty lay in justifying private ownership of nature. They saw that private property in land or ocean or other gifts of nature was an obvious usurpation of the rights of the rest of humanity. Private ownership was deemed a necessary evil to achieve more productive use of nature, but it was clearly an evil, never an institution that was good in itself. (page 39)
The idea of charging a fee for the use of nature and sharing the revenue equally might seem like a proposal that would not be threatening to powerful interests, but it is. The wealthy at present take a disproportionate share of the common stock of resources, both renewable and non-renewable, and they aim to keep it that way. (page 40)
“Ironically, what comes closest to being sacred in modern societies are individual rights, private property, and personal freedom.” (page 41)
“It seems that most people are concerned only with the future of their own children, not with the next generation as a whole.” (page 43)
A lot of good material -- and I've barely mentioned the graphics!
I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.
Henry George, Jr., was a U. S. Congressman. His most famous writing is "The Menace of Privilege."
WHO ARE THE CRIMINALS?
BY HENRY GEORGE , JR. Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York
I. Who are the Criminals? 5 II. French Aristocracy of Privilege 6 III. New York Aristocracy of Privilege 10 IV. Robbery of Masses by Classes 12 V. Nature and Extent of Robberies 13 VI. How to Stop the Robberies 18 VII. The Criminals 23
I. WHO ARE THE CRIMINALS?
In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?
II. FRENCH ARISTOCRACY OF PRIVILEGE.
When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.
Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.
But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery. Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.
The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country. Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.
Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.
But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.
The aristocracy, therefore, were the primary, the real criminals.
III. NEW YORK ARISTOCRACY OF PRIVILEGE.
I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"
That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?
The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?
IV. ROBBERY OF MASSES BY CLASSES.
Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?
I believe that there can be but one answer — yes.
Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.
V. NATURE AND EXTENT OF ROBBERIES.
LET us consider how the classes may be robbing the masses into poverty.
It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.
This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?
Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.
Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them? What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.
Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.
VI. HOW TO STOP THE ROBBERIES.
Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —
In ground rents
In franchise values
While they are compelled to pay in various taxes for the support of local government
Which makes in all
What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values? Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?
For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?
And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?
What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.
Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?
Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.
Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used. This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.
What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.
The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.
VII. THE CRIMINALS.
That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?
Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?
Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?
The tax plan being promoted by one of the presidential candidates, Herman Cain, seeks to impose a federal personal and corporate tax rate of 9% and a national sales tax of 9%. The word for "no" in German is "nein." Since the 9-9-9 plan would be neither equitable nor efficient, we can respond in German, "nein, nein, nein!"
The first "nein" is on the 9% business flat-rate income tax. This would impose a tax on gross income minus purchases from US firms, investment in capital goods, and exports. That would be much better for enterprise than the current top income tax rate of 35%. However, recognizing that any taxes on production has an excess burden, the best tax rate of all would be a flat zero.
The second "nein" is on a personal income tax rate of 9% on gross income minus charitable donations. The plan complicates this with special tax rates in "empowerment zones." Such enterprise zones often just shift business away from other areas, and then the land rent in the zone goes up to soak up the locational advantage, so the ultimate gainers are the landowners, especially those who are politically well connected and are able to buy up land in the zones prior to being established.
The poorest workers pay little or no income tax today, or even get cash under the "earned income tax credit". The flat-rate 9% tax would make the poor pay higher taxes. Again, a 9% tax is better for most taxpayers than the current tax rates that go up to 35%, and a flat tax that eliminates real estate deductions and exemptions is also better, but best of all would be a flat wage and profits tax of 0%.
The worst part of the 9-9-9 plan is the 9% national sales tax. While to some extent the effect of the sales tax would be offset by the reduction of income taxes, still, sales taxes get added to the cost of production to increase the price of goods. For companies that were making little profit, they would have paid little income tax, so the tax could end up raising their prices by more than the current tax system. If they employ low-wage labor, those workers would have been paying little or no income tax, and would now have to pay the higher nine-percent income tax, which would further increase costs to those enterprises. The 9-9-9 plan would dramatically increase income inequality at a time when inequality has already been rising rapidly.
The 9-9-9 plan is supposed to be revenue-neutral, but analysts have found that it would generate less revenue than the current system, so the 9-9-9 numbers would probably be raised to 10-10-10 or higher. Once a national sales tax or value added tax is in place, the tax rates could be raised, as they have been in Europe.
It has been pointed out that the tax plan being promoted by Herman Cain is the same as the tax structure in the 2003 video game "SimCity 4". This video game simulates a city, and the default tax rate is 9-9-9. According to some analysts, in this simulation game, the 9% tax rates were not enough to finance the desired public goods.
The favoring of one tax plan implies the rejection of the other systems. The advocacy of a national sales tax implies the rejection of alternatives such as a national land-value tax. So we can ask why a candidate is rejecting a tax on land value in favor of a tax on produced goods.
Herman Cain is correct in saying that the natural state of the economy is prosperity, and that freedom promotes prosperity. He is right in saying that government must get out of the way of production. He is right in saying that production drives the economy. But he does not go to the logical conclusion of the free-market argument: marginal tax rates of zero. To best promote employment, investment, and growth, place no tax on additional production, trade, or consumption.
A land-value tax would best let the economy rise to its natural rate of prosperity. LVT would be levied on the economic rent of all land. Taxing land value is equivalent to taxing its economic rent, also referred to as ground rent or geo-rent. LVT would be based on the most productive use of a plot of land, regardless of current use, and regardless of current rental payments. Thus if a plot of land were not being used as productively as possible, the tax would push landowners to make the best possible use of their lands, or else pay the same as those who do.
LVT would promote equity and greater equality of income and wealth, because it would equalize the benefits from land, and equalize the gains from economic progress as captured by higher rent.
The prices of goods, including wages and interest rates, provide information about their scarcity relative to the desire for those items. Taxes both on production and on goods twist, distort, and skew these numbers, so that the economy is operating on false signals. LVT does not change the market rent, and rather than acting as a tax, it acts to remove a subsidy. Land value gets subsidized as the public goods provided by government, but not paid for by landowners, pumps up rent and land value. If this rent is not collected for public revenue, then it is a gigantic subsidy to land ownership. Thus taxes on goods and on income from production and not on land value end up subsidizing land value and shifting wealth from the poor to the rich.
Thus if the 9-9-9 plan increases wealth, the gains would go to the rich at further expense to the poor. The worst part of the plan is its continuation of the massive subsidy to land value, and even if the plan generates more growth, the benefit will ultimately go to higher rent and land value, generating an even greater real estate boom to be followed by another big crash.
So let's say in German: Nein! Nein! Nein! Let's also say Zero, Zero, Zero! Zero tax on wages, zero tax on goods, zero subsidy to land value. The tax emperor appears to be dressed to the nines, but like in the story of the naked emperor, the cloth is imaginary. -- Fred Foldvary
Copyright 2010 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
I have a family member who, when Herman Cain says "9-9-9," plays a sound bite of another voice shouting "nein! nein! nein!"
Georgists have a better proposal for how we ought to fund our common spending.
0% tax on wages
0% tax on sales
0% tax on corporate profits
0% tax on buildings and equipment
100% recovery of our commonwealth
This probably raises several questions in your mind:
what is "recovery of our commonwealth"?
how will it affect me?
Our commonwealth includes the value of land -- not the improvements made by the present or previous owner, but the value of the site itself, which is created by the gifts of nature; by the investment of the local, state and national communities in public goods and services (including most "pork"); by the presence of the community and its economic activity. While good farmland may be worth $5,000 or $10,000 per acre, depending on climate and proximity to markets, suburban residential lots might be $35,000 to $1,000,000 -- or far more! -- per acre, and an acre in midtown Manhattan can be worth $250,000,000 or more. The landholder doesn't create that locational value.
Our commonwealth includes the value of ecosystem services. It includes the value of electromagnetic spectrum (the airwaves which most people would agree rightly belong to the American people, not to corporations). It includes the value of water, particularly fresh water for drinking and water for irrigating crops and for corporate use. It includes the value of government-granted privileges. It includes the value of geosynchronous orbits -- those parking spots in space for satellites whose owners and customers would not want to see crashing into each other. It includes the value of landing rights at busy congested constrained airports, such as LaGuardia or JFK, particularly at their rush hours. It includes the value of scarce on-street parking in congested cities. It includes the value of nonrenewable natural resources extracted from below the earth and the oceans, for 200 miles beyond our land borders. It includes a whole range of other similar things.
As you look at that paragraph, compare it to the 0-0-0-0 list above, and notice that it collects upfront certain values, and leaves the rest to those who produce. It is direct taxation rather than indirect, and one could reasonably argue that it isn't even really taxation; rather it is more in the nature of a user-fee.
It is Natural Public Revenue.
Once one has sat with this idea for a while, it seems quite unnatural to permit the value to continue to accrue to private individuals, or to corporations publicly or privately owned, or to entities other than the community as a whole!
Recall how concentrated wealth is in the US: The 2007 SCF [the Federal Reserve Board's Survey of Consumer Finances] reported that aggregate net worth is "distributed" as follows:
Top 1% of us have 33.8%
Next 4% of us 26.6% [cumulative: 60.4%]
Next 5% of us 11.1% [cumulative: 71.5%]
Next 40% of us 26.0% [cumulative 97.5%]
Bottom 50% of us 2.5%
Recall also that the Forbes 400 families are specifically and intentionally omitted from the SCF, and that Forbes estimates that they represent 2.5% of aggregate net worth. So add that 2.5% to the numerator and denominator. And note, as Michael Moore did, that it is very similar to the value of the Net Worth of the bottom 50% of us.
And it seems quite unnatural to tax wages, and sales, and corporate profits, and buildings at all before we've fully collected Natural Public Revenue.
Will Natural Public Revenue be sufficient to meet all the needs of all levels of government?
Quite possibly not, at least today when we are so reliant on a social safety net because current conditions have kept a significant share of our people from providing well for themselves. But I regard it as altogether possible that within a generation or two, it could be quite sufficient, in part because it would have the effect of redistributing some of the wealth which today is pouring into the pockets of a relative few of us.
How much of corporate profits are coming from (quite legal) privatization of the value of natural resources, the value of being able to get away with polluting air, water and soil, and the value of other privileges which corporations -- public and private -- are used to enjoying? One of the interesting findings in the SCF is that the value of privately held businesses [BUS] actually exceeds the value of publicly held ones [EQUITY] in household wealth -- and the value of both is highly concentrated:
Consider, too, how much more of this value the Forbes 400 have! These two categories represent 21.2% and 23.1% of aggregate net worth held by the rest of us -- a total of 44.3%. Most of the 2.5% is likely in these two categories. I'll leave the math to you.
.... this time because perhaps his targets are the well-situated, those in a position to contribute the funds which political campaigns need. Keep in mind that NYS's former governor, though previously an attorney general, is also the scion of a real estate fortune.
Urban real estate investors live off the fruit of the land, the fruits of the community's sowing, and we praise them as philanthropists when they toss us a few tulips in the median strips or parks.
And notice that the refusal continued even Harry Markopolis testified before a congressional committee about his repeated and data-filled attempts to bring Bernard Madoff's obvious Ponzi scheme to the attention of the SEC (January, 2009). Talk about tone-deafness on the part of those we pay to monitor things for us. As someone else recently wrote, small government or weak government? And government of, for and by WHICH people??
I hope some upstate legislators will push at this issue. Their constituents ought to expect it of them.
The writer is a Reuters columnist. The opinions expressed are his own.
By David Cay Johnston
(Reuters) - Each year New York State lets real estate investors evade at least $200 million of taxes. In peak years the figure likely rises to $700 million, if known tax cheating in another state is any indication. Some of the investors who cheat New York State also cheat New York City out of at least $40 million annually.
Back in the 1990s Jerry Curnutt figured out how to finger such cheats when he was the top partnership specialist at the Internal Revenue Service. Curnutt's computer sifted through tax returns until he learned how to separate thieves from honest taxpayers. The tax-evasion estimates of $200 million and $40 million are his.
Six New York state tax auditors took classes Curnutt taught in June 2000 and gave stellar evaluations. California's top tax auditor praised Curnutt's course as "effective, relevant and most importantly, appreciated and understood by our auditors."
Why has nothing been done for more than 11 years to make the cheats in New York pay what the law requires?
New York state and city are strapped for cash, slashing services for the poor, disabled and elderly. With penalties of up to 50 percent plus interest at penalty rates, the state is easily due more than $5 billion from years still open to collection, I calculate.
Every state has similar issues, but New York matters most as the epicenter of highly leveraged real estate investment pools.
Curnutt found that real estate investment partnerships with depreciated properties often misreport gains when they sell. That such cheating is widespread screams about tax law enforcement looking the other way when those at the top steal. In contrast, New York State has a well-deserved reputation for going after people whose mistakes cost the state as little as three dollars.
GO AWAY, THEY SAY
Yet in letter after letter since 2001, New York state tax officials told Curnutt to go away, smugly insisting there were no untaxed millions.
As head of audits for New York State, Thomas Heinz wrote Curnutt in 2003 that the state was "not interested in pursuing you or any other consultant on the matter" of systematic cheating by real estate partnership investors. Months later Heinz wrote a second letter that made it clear he had not understood what Curnutt was proposing, while reiterating that there were no untaxed millions to be found.
A year ago Curnutt again was told to go away because there was no money going untaxed.
And yet in Pennsylvania, Curnutt's research "resulted in the taxation of over $700 million in unreported income," the Pennsylvania Revenue Department wrote in a letter to tax administrators across the country in reference to a single instance.
"Without his assistance, our staff would have spent numerous hours getting to the crux of the issues, in that especially complex case," Pennsylvania tax authorities said.
Pennsylvania has relied on Curnutt since 2002, calculating that every dollar spent on his research and subsequent audits was worth $10 of tax.
So why are sightless sheriffs ignoring massive cheating by the most affluent among us?
The likely reason became clear nearly a decade ago when one Kentucky tax official told Curnutt that the governor's office did not want his services because it would uncover tax cheating by influential citizens, meaning campaign donors.
It is time for New York's three top state officials, all Democrats with higher ambitions, to do their duty, especially since the thieves are virtually certain to include some of their campaign contributors.
LAWMEN AND THEIR DUTY
Governor Andrew Cuomo, who harbors ambitions to be president, made his name as a state attorney general who appeared to get tough with Wall Street. Lieutenant Governor Bob Duffy rose from Rochester street cop to chief and would love to be governor. So would Attorney General Eric T. Schneiderman, elected in 2010 on a promise to be tough on white-collar crime.
Mayor Michael Bloomberg, an independent, has a similar duty to go after tax cheats even if these should turn out to include some of his friends.
New York law gives authorities leverage aplenty. The mere threat of public exposure through civil lawsuits would prompt many to write checks. For repeat offenders, the threat of indictment for tax evasion would produce checks even faster. Faced with the prospect of civil or criminal charges, many in positions of public trust would be ruined if their names got out.
The general partners -- those in charge in the partnerships Curnutt investigated -- took calculated steps to cheat and the most serious offenders should face indictment and, upon conviction, years of prison time. But many limited partners may have assumed their K-1 tax statements were reliable. Innocent victims owe taxes and interest, but not penalties. Those with multiple untaxed gains are not innocents.
As lawmen Cuomo, Duffy and Schneiderman all understand leverage. They have enough to lift billions into the state treasury where it belongs just by indicating in letters that failure to pay will result in disclosure of names. Will they?
Until Cuomo, Duffy, Schneiderman and Bloomberg enforce the law, their official inaction lends credence to billionaire Leona Helmsley's remark, quoted by her housekeeper, that "we don't pay taxes; only the little people pay taxes."
This column will keep you posted on whether these officials act or not. (Editing by Howard Goller)
I'm glad to see DCJ quoting Leona Helmsley -- but I don't think he yet fully "sees the cat" or realizes that Leona Helmsley's reference could just as accurately have been to tax STRUCTURES, not to tax evasion.
Buildings do not appreciate. Even with the best of care and occasional renovations, they depreciate, as technologies advance, efficiencies improve. What rises in value is land -- the location -- and it rises for reasons which have nothing to do with the individual or corporate landholder (resident or absentee), and everything to do with the community and with public investment in infrastructure and services. These owners are evading taxes which support that spending. In multiple ways, they are reaping what they do not -- cannot! -- sow. These companies are in it for the so-called "capital" gains, which aren't "capital" at all, but land gains.
Another example of the FIRE sector gobbling up the profits of the productive portions of our economy. Their "free lunch" is at the expense of the rest of us. And the phrase "rich people's useful idiots" comes to mind.
The goal is a fair field and no favor. But I don't think that's what this crowd is looking for.
This blog-like page contains an interesting economic indicator: despite a tepid economic environment for most home construction, the pace of teardowns in Westport, Fairfield County, Connecticut, seems to be steady to rising.
Westport sits on Long Island Sound, and has a reputation for excellent public schools and good express trains to midtown Manhattan. ($308 for a monthly pass -- 44 miles, about 67 minutes; $5 per day for day parking -- 300 spots -- but a 4 to 5 year wait for one of 1800 parking stickers -- $325/year.)
Many of the entries show recent transaction prices, which readers of this site will know are clearly simply for land value.
It would be interesting to know what the bank appraisals on these properties would show, in terms of the value of the houses and the value of the land itself -- assuming that the buyers needed to take out mortgages.
And it would also be interesting to know how Westport's assessor values these properties, and what adjustments take place in neighborhood land values as the evidence of most of the value being in the land accumulates.
And it turns out that Westport's assessments are online. So let's look at the newest teardown, posted 10/1/2011:
This was the aftermath of the demolition this week of 3 Great Marsh Road in the Saugatuck Shores across from the entrance to the Saugatuck Harbor Yacht Club, Built in 1934, the 1 1/2-story conventional-style house had 1,701 square feet, was situated on a 1.11-acre property and changed ownership in August 2011 for $1,136,174
The assessor's database shows an "appraised" value of $249,800 for the buildings, and $696,400 for the land, or a total of $946,200. (This is the supposed "market value" of the land at the date the valuation was done, October 1, 2010. By Connecticut law, assessed value is 70% of that market value. Peculiar law; one wonders whose interests it was designed to serve.)
The Assessor’s primary responsibility is to find the “full and fair cash value” of your property so that the taxpayer may pay only his/her fair share of taxes.
The record also shows that the property sold in August 2010 for $1,000,000. The previous transaction was in 1973, which suggests that it might have been an estate situation. But 14% appreciation in 12 months is pretty sweet these days.
So that 1.11 acres sold for $1,136,174 in August, 2011, and then the buyer paid an additional amount for the removal of the 1700 square foot building -- say, $10 psf? That's $17,000, for a total of about $1,150,000. And the assessor says the land is worth $$696,400.
And that $250,000 square foot house? Over valued by quite a bit.
The 2010 tax rate for Westport was $14.85 per $1000 of value. (I couldn't find the 2011 figure, but it was expected to be 15% higher.) That's based on the 70% value, which for this property was $662,400. So the 2010 property tax was $10,300.
$10,300 as a percentage of the transaction price, $1,136,174, is 0.91%.
Clearly the town is well run, and people want to live there. They're willing to pay $1.1 million for a lot. And even in these times, financially difficult for many people, there are people who can afford to pay $1.1 million and more for a bit of land on which to live.
How much of the value of these lots comes from excellent schools and good municipal services, and how much from the existence of Metro North, of I-95 and the Merritt Parkway, the presence of Long Island Sound, and the presence of NYC? And how much comes from the presence of hedge funds and other high-paying employers which are skimming the cream from the productive economy and pocketing that value, because we let them do so?
In my inbox this morning, a blast-from-the-past from Mason Gaffney, one of the most respected Georgists and a wonderful writer. Unlike many of us, he came to these ideas as a young person, having read Henry George while still in high school.
Mase's cover note: It was November 1942. I had just turned 19, and received Greetings from Uncle Sam. Funny how fast one catches on, with the evidence lying outdoors all around you; and funny how southern California today replicates Chicagoland in 1942. Funny, too, how economics profs had their ways of signaling you that looking into land speculation was, well, just not done in elite circles. How little progress we have made since then in understanding and coping with this phenomenon and its derivative ills.
Taking the Professor for a Ride The Freeman, November, 1942
The writer of this article, MASON GAFFNEY, is a young Chicago Georgist who recently matriculated at Harvard. Perusal of the piece suggests that Freshman Gaffney's chances of becoming teacher's pet in the economics class are decidedly slim.
UNRUFFLED, composed, like a patient father straightening out a wayward son, he said, "You see, my boy, this Henry George lived at a time when the country was growing rapidly, when land values were skyrocketing and great fortunes were being made from speculation. Not being a 'trained economist,' George attached disproportionate importance to this . . . er . . . er . . . land question. Land is, of course, of minor importance in 'economics,' and speculation, well, . . . of trifling significance."
I should like to take this man, my "economics" teacher at Harvard, for a ride from the North Shore area near Chicago straight west on Illinois 58. A well-built-up residential district, one-half to a mile deep, runs far north along the lake shore, to end abruptly in a wilderness of sidewalks, street signs, fire plugs and weeds -- but not buildings. Along the roads which gridiron this wasteland speed trucks and pleasure cars, burning gas, tired and time to bridge the miles which, to no purpose, stand between the metropolis and outlying communities.
"Yes," my boss told me as we were riding to work one day, "there was a time when we thought there would be a lot of building out here. Guess I've still got some Land Company bonds in the Wilmette Bank. The company gave the farmer one-third down and agreed to pay the rest when the land was sold. Lots of poor farmers have got the land back now, with stiff taxes to pay on the improvements. Improvements, hell! Those fire plugs don't even have water pipes attached to them."
Ten miles of this and we reach Des Plaines, an oasis called by the natives a "successful development." "Thirty-one minutes to the Loop," boasts the Northwestern R. R. "These Homesites Best Speculation in Chicago Land," exults the land promoter.
Five miles farther west, about fifteen miles from Lake Michigan, the land is at last completely given over to farms. The speculator fires a parting shot at us as we reach the junction with Arlington Heights Road. "The Idle Rich of Today Bought Acres Yesterday," reads his sign.
Yes, I would like to ride with this "economist" out here. He would have trouble then convincing me that speculation is of trifling significance. Probably he would say: "But the men who hold this land are men of great foresight, very valuable men. You can't refuse to reward foresight; it's a virtue. Of course a little planning might alleviate these dreadful conditions, but, tut, tut, my boy, do you want to destroy free enterprise?"
Reward foresight indeed! Foresight in itself deserves no economic reward. Hitler and Baby-face Nelson at times showed great foresight, yet their loot is by no means sanctified on that account. Only one kind of exertion deserves an economic reward, and that is exertion directed toward the gratification of human desires. Foresight, an attribute of labor, exerted in producing wealth, deserves a reward, and in the free market will bring a reward. But foresight no more justifies speculation in land than superior firepower justifies conquest.
Perhaps it is asking too much to expect a Harvard man to understand this, however. His salary, after all, is paid in part from the proceeds of the foresight of certain friends of the institution who bought up much of the land on which the slums and business districts of Cambridge now stand.
How much is it worth to you to have the potholes and cracks in the roads in your town promptly filled in? Probably roughly what it costs you to have each of your cars fixed a couple of times a year.
So is it better for the local economy to (1) keep the tire retailers and alignment shops in business; or (2) to pay city employees or contractors to maintain the roads in a condition that minimizes damage to cars and tires?
Fans of small government might opt for the first choice. Fans of individuals having more money to spend on discretionary purchases or to invest toward their own futures might opt for the second one.
Some things ought to be done by the community, and financed by the community.
So how should we pay for this sort of public works?
Should we impose sales taxes on goods sold within the town providing services?
Should we impose a wage tax on workers within the town providing services?
Should we tax the buildings within the town?
Should we throw an extra tax on tobacco, alcohol, cell phone use, cable TV subscriptions, electricity use in the town?
Should we tax all the cars and trucks garaged within the city limits?
Should we tax the gasoline and diesel sold within the city limits?
Or should we finance this by taxing the land value within the town limits?
If you're new to this concept, all these may make equal sense to you. (Indeed, some people argue for "balance" in taxation, or for spreading taxes across many tax bases in order to "keep rates low." But I think there is one option that is far better than the others.
Who benefits when we make it less expensive to live within a particular community than it would otherwise be, as we do by improving road maintenance? Isn't it ultimately those who own land within the city limits -- the landlords (residential and commercial), the homeowners, the business community -- who benefit, both as individuals and as property owners, when people are more prone to drive in their community than in one which does not maintain its roads to the same standards? Even those who don't own cars benefit.
Some would say that this fails to collect from the tenants -- residential tenants, commercial tenants -- who also benefit, but I'd have to disagree with that argument. Their landlords can charge them more in the presence of such services than they could charge in the absence of that road maintenance. Should that benefit accrue to the landlords, or should it be passed through to the community whose spending created it?
I'll return to something a Tennessee business man wrote to his governor in 1873:
"Never tax anything That would be of value to your State, That could and would run away, or That could and would come to you."
The same is true of individual towns, too. Don't tax jobs, or workers, or buildings, or equipment, or products.
This is not a reason not to raise public revenue; rather, it is a reason to think carefully about what should be taxed -- and what should not be. Charge for that which the community's presence and activity creates, and the privilege of using that which nature or community provides in limited supply, e.g., water, electromagnetic spectrum, geosynchronous orbits, minerals, oil, natural gas; privileges like franchises for monopolies; landing rights at congested airports; on-street parking; etc.
Are public sector jobs by definition a drain on the economy?
Some would say that they are. But I think there might be a false assumption in there -- one which comes from an unexamined assumption.
When a public sector job is funded via a tax on wages, or a tax on sales, or a tax on buildings -- things which are produced by human effort -- there is a burden to the economy.
Employers must pay far more than their employees receive in wages and benefits;
purchasers must pay more for goods than the producers (including those in the distribution chain -- distribution is part of production) receive;
owners of buildings and other improvements must pay an annual penalty in proportion to the value of those improvements.
All these taxes reduce the demand for what is taxed: work, goods (and, in some places, services), buildings. Fewer jobs are created, fewer goods produced, fewer buildings built and maintained well, less expensive technologies are favored over more expensive ones.
And these are the taxes most of us think about when we think about how to finance public goods.
But suppose we got ourselves outside the smallish box of taxes we're used to thinking about -- those advocated by the neo-classical economists -- and looked more closely at the wisdom of the classical economists -- Adam Smith, David Ricardo, John Stuart Mill, Henry George.
Suppose we thought about the effect of our public spending: effective public spending on goods and services that people value increases land value.
Good schools. Paved streets. Well-maintained streets. Lit streets. Plowed and cleaned streets. City water. Sanitary sewers. Stormwater runoff. Police, with well-equipped cars. Fire departments, with trained professionals and the best of equipment. Ambulances (ditto). Hospitals with life-saving equipment and professionals. Other public-health services. Courts and jails. Libraries. Public health services. Social services. Parks. Playgrounds. Highways (ideally with maintenance taking place at night or at least not during rush hour). Bridges, well-maintained. Buses, subways, railroads (passenger and freight). Airports. Beaches. Utilities (more commonly owned by shareholders, but quite realistically municipally provided). Preschools. Community colleges. Colleges and universities. Perhaps after-school activities for children. A social safety net. This list is incomplete, but each item on it is a fair example of what makes communities good places to live and worth paying to live in and conduct business in.
The presence of each of these things increases land values within the area served. It increases what landlords can charge tenants; it increases what houses and commercial buildings will sell for, without the building owner improving the building or providing additional services.
So does it make any sense to finance these things via taxes on wages? On sales? On buildings? On imports? On personal possessions? On cars? On trucks and business equipment? On business inventory? None of these things are increased in value by the provision of public services and goods.
What increases in value is land -- as everyone can chant, the three most important things in real estate are location, location and location! Much of that is the availability of publicly-funded services. (The rest can be attributed to the presence of the community -- drawn in large part by those services, but also by the beauties of nature, the harbors and rivers, the climate, other favorable conditions; to opportunities seen by entrepreneurs and nonprofits to provide commercial ventures and cultural amenities; to advances in technology and science such as air conditioning, mosquito control, fiberglass pleasure boats, etc.)
How can raising taxes put more money in your pocket? By increasing efficiency.
This year we paid $210 in higher property taxes to finance trash collection and sidewalk snowplowing. Purchased retail, those services would cost about $600. So we spent $210 to save $390. That translates into a savings of $1.86 for every dollar of increased tax. As an added bonus we have just one garbage truck a week down our street, not a different company’s truck everyday, and garbage cans on the street only on Thursday mornings.
What matters in public finance is not how much government spends, so much as what it buys with our tax dollars. But don’t count on the new “Super Congress 12″ committee to undertake serious cost-benefit analysis because cutting spending has become dogma and reality-based policies would be economic heresy.
I don't think DCJ has yet seen the cat, but he's certainly recognizing whiskers.
Would you be willing to pay $210 more in property taxes each year to have these services delivered to you by your community? I'd guess that you might be very willing to pay $210 more in property taxes AND be willing to pay the seller -- and for 30 or 15 years, a mortgage lender -- more for the privilege of living in a place where these things are provided by the community, rather than just outside of town. (If we paid for this via a tax on land value, the selling price wouldn't rise; and the cost of living would be held down. If we pay for it by taxing wages, or sales, or buildings, we do burden the economy, just as the "small government" people tell us. But they don't seem to consider the possibility of taxes which don't burden the economy.)
There are some who would complain that private trash collectors and the people who specialize in shoveling the sidewalks ought not to have competition from the public sector. They should all live in communities which feel this way. And they might concede that others might choose to live in communities which provide these amenities efficiently, with people paid from the public treasury.
I thought this presentation -- made nearly 100 years ago, in December, 1911, to County Assessors in California -- worth sharing. (Merriam-Webster defines plunderbund as "a league of commercial, political, or financial interests that exploits the public.") That such a paper would be delivered to such a body gives one a hint of how widely understood and appreciated Georgist ideas were 100 years ago. The notes say:
"Mr. Edmund Norton presented a paper entitled "What is Single Tax?" Upon conclusion of the reading, which was interspersed with many extemporaneous remarks by the speaker, a very free discussion of the subject was held, and many interrogatories propounded to the author of the paper."
I'll give you the final paragraphs first, and then the whole talk.
Never, while the world lasts, will mankind become "Masters, lords and rulers" of themselves till these public values are publicly absorbed in taxation. The Single Tax is the most feasible, practical, expedient, simple, natural and just way of making the necessary, rational change without the violence of revolution. It stands "four square to all the winds that blow" — in economics, and politics; in ethics, morals and religion; in principle, science and philosophy; it is the practical application of Christianity to social affairs. "Equal Rights to All and Special Privileges to None," is the translation of the Golden Rule of the Nazarene to an economic and political formula. Therefore, fulfilled democracy is applied Christianity to governmental affairs.
"Do unto others as ye would that they should do to you," "Equal Rights to all and special privileges to none"; the Single Tax: these are synonymous.
Here we have the great Eleventh Commandment of the Master of Nazareth — the sum total of all "the Law and all the prophets" — we have its Jeffersonian formulation into a politico-social maxim of "Equal rights to all," and its scientific practical application in the Single Tax of Henry George. This is applied Christianity; this is democracy; this is Georgean philosophy; this is the Single Tax; different expressions of the one Unity.
and here's the whole thing:
WHAT IS THE SINGLE TAX?
The Georgean Philosophy and the Jeffersonian Formula. By Edmund Norton.
Never in the history of the world have there been so many inquiring minds asking: "What is the Single Tax and the Georgean Philosophy?" In England, Germany, Australia and Canada, as elsewhere, the constructive work of the leading statesmen is all being developed along the lines laid down by Henry George. To my mind, "The Prophet of San Francisco," as he was derisively dubbed by the Duke of Argyle, is, measured by his influence on the world of statesmanship, present and future, and as a sociological thinker, the greatest personality in the Western world between the North Pole and Patagonia since Columbus found the land. Henry George has found more continents than did Columbus by uncovering monopoly-submerged lands in the presence of which we hungered and died.
This paper is meant to merely outline the principles and philosophy of the great school of thought that has grown up in the last thirty years around its teachings that now has a literature of its own that will fill a library.
The Single Tax is the popular name of the great fiscal reform and social philosophy most powerfully promulgated by our great American, Henry George, sometimes called "the Prophet of San Francisco."
WHAT IT PROPOSES TO DO.
Its purpose is to increase wages to the full returns or earnings of labor; to shorten the hours necessary to earn a living; to leave to capital, which is secondary labor, its full returns, which are secondary wages; to abolish monopoly, which is the thief that is robbing both labor and capital, and thereby prove the unity and remove the apparent antagonisms which have no place in a natural order where monopoly does not exist. It will free production, including all trade, barter and exchange, which are but processes of production, and will equalize the distribution of wealth into the possession only of those who can earn it. It will destroy privilege by substituting equal natural rights, remove the dead hand from the control of living men; throw open the limitless natural resources of the planet to willing labor, and, by taking all social creations of value into the social treasury, will conserve all natural resources forever to the people and make private appropriation of public values impossible. This condition will start a boom that will never stop till every human want is satisfied.
It will make internecine and international wars impossible by destroying all trade and monopoly privileges which are the chief causes tempting the crafty, cunning and unscrupulous to create or encourage these sum totals of all vices, crimes and horrors against humanity for personal power and profit.
THE METHOD OF ATTAINMENT.
The Single Tax does not intend to add to or multiply the already almost infinite statutory enactments now confusing and befuddling the social state, but rather means to abolish, one after the other, every law on the statute books granting a special privilege to any one man or body of men that is at the expense of the unprivileged mass of society. This will destroy the petty and grand larceny now preying upon the social body.
Aside from the million of petty privileges granted by municipalities, states and the nation to individuals, the great and glorious pillage shows itself in privileges and monopoly in labor-saving inventions, trade restrictions and the private ownership of natural resources, the major part of which is a matter of taxation; therefore, the Single Tax would abolish all taxes on barter, trade, exchange, personal property and improvements, commensurately raising all taxes from the value of land alone, till there was in existence but one single tax upon the value of bare land exclusive of improvements. This would be a single tax on land value — not on land, for some land would pay no tax while other land would pay much tax.
For instance, one acre of land worth a million dollars would pay as much tax as a million acres worth only one dollar per acre.
SQUARES WITH THE MORAL LAW.
The Single Tax is ethically sound in application for the simple reason that all labor-created wealth is the result of individual effort and leaving that wealth untaxed would be leaving to the individual only that which belonged to him by his right to himself and to that which he himself creates; while taking into the public treasury only those values which society creates in its collective capacity would be leaving to society only that which belongs to it, for no individual on earth, by himself, can create land values.
At present we compound injustice by permitting private individuals to appropriate what society creates and then society turns about and deprives the individual of his private creation to support the governments whose existence makes possible the public values privately appropriated.
This basic injustice results in a fundamental disturbance of the equilibrium of society, showing itself in numberless evils — economic, social, political, physical, mental and moral.
Mistaken symptoms for disease, effects for causes, we have numerous social quacks pressing forward with innumerable nostrums — palliative, alleviative, suppressive or curative of the particular symptoms they have noted — each claiming he has found a remedy and each ready to cure the world with a salve, bandage, pill or liniment.
The diseased social body can be cured only by removing the cause and restoring it to a normal condition. Monopoly and Special Privilege is all that the social body suffers from today, and destruction of Monopoly and Special Privilege will cure it. Equal rights to All and Special Privilege to None is the only magic remedy. Apply this, make man free and equal before the law and the Divine Mind operating through nature will do the rest.
Thomas Jefferson's was probably the greatest democratic mind of his age and the equal of any age. If we examine the Jeffersonian formula we will find it the square, level and compass, without which no nation can ever be permanently founded., The natural rights of man, "life, liberty and the pursuit of happiness," we must take for granted, and the right of revolution — also put forth in the immortal document — "the Right of the People to alter or to abolish and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness" we must also take for granted.
The constitution — itself a reactionary document, taking away from the people perhaps 75% of the liberties gained in the war of 1776 — still leaves us the power to apply the golden rule of democratic thought to our government without violence — for which we may be thankful.
EQUAL RIGHTS; NO SPECIAL PRIVILEGE.
If we view the recent, present and past history of Los Angeles, San Francisco, Colorado, Springfield, New York, Albany, Pittsburg, and the nation at large, we will have to confess that now and for fifty years past, at least, municipality, state and nation have been passing through a Saturnalia of public pillage by Special Privileges working through varying forms of oligarchic, partisan and political control. The government has been wrested from the hand of Democracy by Plutocratic privileges.
Applying the rule of Equal Rights to All, we clearly see that while these rights exist, the power to exercise them has been nullified; therefore, all of these reforms such as the Initiative, Referendum, Recall, Commission Government for cities, Direct Primaries and Popular Senatorial elections, are democratic efforts for the restoration of the Mechanics of Government into the hands of Equal Citizens.
I say the Mechanics of Government, for in no sense will the people be at all benefited permanently, even by the perfection of these reforms, which are but tools of government to develop efficiency of popular expression, unless they grasp these economic truths and change or readjust economic conditions. Indeed they might be worse off, for having captured these means completely, they might mistake them for ends, and believing their victory full, might slumber while being worse pillaged, which has been the case in the past.
I wish to inject here one pertinent suggestion — cities, within themselves, should have absolute right to exert self-government in all things within their borders that do not infringe upon the equal freedom of other cities, the state or nation, especially in matters of taxation.
SOME FISCAL FACTS OF LOS ANGELES (1910).
Having eliminated, then, the mechanics of government, suppose we apply our rule to the fiscal and economic conditions existing in our city of Los Angeles, and nearly every other city.
During the last fiscal year we raised about $5,000,000 in taxes imposed on land values, improvements, personal property and license — fines, which amounted to some $650,000. Now, there is no civic, fiscal or economic excuse for license, business and occupation fines other than police regulation or revenue raising.
Police regulations have no reason for existence except to protect the citizens from infringement on his equal rights, and to grant a special privilege under any name whatever for some persons to possess to the exclusion of other persons, is a wrong that breaks our golden rule of Democracy and should be abolished on that ground alone.
For Government to grant these powers of wrong doing on receipt of a stipulated share of the profits of the wrong, is to participate in, sanction and legalize the wrong and thereby corrupt society at its fountain head by official and statutory enactments.
Again, varying the cost of these granted privileges from $1.00 to $200.00 or more per month is absurdly unjust, unequal and discriminative, for or against certain businesses, making another breach of the rule calling for their abolition.
The effect of these fines is to act as trade restrictions, as interference with production, and to centralize business in the hands of a dominant privileged class. They are national protective tariff superstitions localized for the benefit of civic plunder.
Here I wish to call your attention to a vital, absolute, commercial and economic law: ''All taxes on things produced by human exertion enter into the cost of production and are paid for by the ultimate consumer."
If we grasp this fact in its fullness we will see that these fines and taxes effect not so much the middlemen who are compelled by this inexorable law to add them to the price, as it does the ultimate consumer, who is the whole body of society. Thus we do not hit the one we imagine, but simply strike ourselves.
To abolish them would be to free trade, diffuse business, accelerate its activity and lower prices to the ultimate consumer, permitting him to retain a greater amount of his earned wealth.
If we could so emphasize this one law as to make all see it, the ideals of democracy would be here.
I have laid particular stress on this all-important law because it applies not only to license fines but to all personal property and improvement taxes — on everything made by man. Therefore, in all forms of wealth in course of production there are no real taxpayers but the ultimate consumers — the intermediary is only a tax shifter. This is vital.
The Single Tax would abolish all these taxes; so would the Jeffersonian formula. In the two we have a principle and a method for its practical application.
To extend this practical application of the Democratic Principle to all things — including the international tariff — would immediately destroy the nightmare of high prices and flood the world with limitless possibilities of trade. This trade is now stifled and vast amounts of wealth are wrongly diverted to the possession of those who do not create or earn it.
The question arises: Where would you get the money to run the government if the Single Tax theory were put into operation? Of course! Why, there would be no place to get it except from land values. Here is something fastened to the world — possibly by the "Big Nail" of the North Pole — anyway it is where it can be seen; it can't run away, hide in a hole nor be loaned to a convenient friend in an adjoining county when the assessor comes around.
The millions of varieties and values of other forms of property being eliminated, scientific simplicity would be possible in taxation. Taking into the public treasury publicly created values in the form of a tax and leaving in the possession of private individuals their private creations, by tax exemptions, would square with the moral law. Incidentally, "Conservation of natural resources" would become an accomplished fact in city, state and nation; for the taxing power involved in the private possession of the "Unearned Increment," "Land Values," "Economic Kent," or "Ground Rent," is a governmental power now privately possessed, obtained by grant, theft or tax evasion. It is a special privilege held only by land owners — the abolition of which is necessary to the restoration of equal rights to all.
The private possession of a governmental privilege is, moreover, the prime motive — the chief incentive — to all the speculative holdings of idle city lots, agricultural, mining, timber, coal and oil lands, and all other natural resources. It is responsible for 90% of the speculative gambling that is prostituting city councils, state legislatures, the national government and even threatening the judiciary itself.
In fact, this basic injustice is at the bottom of 90% of all the vice, crime and graft — public and private — from which society is now suffering. The removal of the cause by the socialization of land values through the application of the Single Tax, would destroy the incentive, divert the evil tendencies to the best instead of the worst in society, displace an abnormal condition by a normal one, and cut out, eventually, the 90% of evil which we now deplore. The victories opening to us under these possible conditions are only picturable by the poet or the seer.
The Single Tax will remove unjust conditions by a rational, expedient process of readjustment. It will restore to the individual his freedom and to the state its own values.
The right to "Life, Liberty and the Pursuit of Happiness," "Equality of Opportunity," "Equality of Rights," and destruction of Special Privilege, all demand its enactment as the only natural and perfectly sane method of squaring these demands.
The equal right to life can never be guaranteed until equal right to the natural opportunities upon which that life depends is also guaranteed. A denial of one is the denial of the other.
The opening up of the limitless storehouse of nature on this continent alone, by the destruction of its monopoly, would be equivalent to discovering several new continents.
Labor and capital, unrestricted, would flow to these opportunities as the sparks fly upward. Relieved of the pressure at the bottom and congestion of trade restriction removed from the top, who can tell the wonderful possibilities of America?
Here, toward the last, we come in contact with another vital related problem: that of the functions and ownership of highways — national, state, county and municipal.
These highways are, in organ and function, to the social body, what veins, arteries and nerves are to the human body. They are the channels of communication and transportation for persons, property and intelligence. Interference, restriction, congestion — all tend to varying disorders in the social body. Perfect freedom to normal action is the solvent. Private control of a public function is privileged ownership of a governmental power which should never be tolerated in a state of equal freedom. In fact, equal freedom is impossible where special privileges of government are farmed out to private individuals.
It will be noted that practically all private possessions of land on the continent, except those facing free waterways, are criss-crossed, intersected and separated by these highways. Theoretically we can easily see that, should we grant absolute ownership of highways to one individual — even were every other adjustment on earth perfected — that one individual would be master of the continent, for no possible intercommunication of persons, property, or intelligence could take place on, by, through or across these arteries and nerves without his consent, which condition, if submitted to, would make him sole arbiter of the world.
What is true of the whole is fractionally true of any part. We can never establish Equality of Right till absolute freedom of highway is guaranteed. Private possession of highways is no more necessary to private possession of property than is private possession of the ocean necessary to private ownership of ships.
In fact, the rights of private property are abrogated when governmental power to exact tribute from private property is granted to a privileged few; therefore, "Equal Rights to All and Special Privilege to None,'' demand the application of the Georgean philosophy to highway functions as a democratic and not a socialistic measure.
When we remember that these privileges now controlled (facts of 1900 since accentuated) by the national steam railways alone are capitalized at $8,000,000,000 in excess of the $5,000,000,000 of actual cost, we can see the enormity of one form of special privilege and the corresponding abrogation of natural property rights.
In passing, I will say that there are three practical methods by which these rights may be restored.
(1) Government control, ownership and operation of entire systems;
(2) Government control, ownership and operation of roadbeds only through official control of despatching service — leaving free operation of untaxed capital in all else, or:
(3) Public taxation of all incomes and values in excess of current rate of interest on actual capital — said capital otherwise untaxed.
The practical applications of these principles are mere matters of detail, expediency and policy. The brains that organize and manipulate these gigantic social plunders in all their minutia, can just as well work out the details of public restitution when deprived of activity in private depredations — and would be glad of the job.
Applied, this would mean the destruction of special privilege in national railways, telegraph, telephone, street railways, water, light, heat, power and all other monopolies of highway function.
This, with absolute free trade and the taxation of land-values through all other things being exempt, would mean the complete abolition of "Special Privilege" in all things; the institution of "Equal Rights" the "Conservation of Natural Resources,'' and the restoration of "Equal Opportunity to All." When all this is done — and never until it is done — there will be left nothing but the individual problem for man to solve.
Again let me interject a vital suggestion: Had we absolute free trade — international, state and local — including absolute freedom of highways, which is but an extension of freedom of trade — in truth, had we reached perfection in production — for this all means freedom in production — had we all these things while still leaving the "Unearned Increment, or Economic Rent,'' in the hands of the land-owner — there would be no permanent benefit to society except that incident to the transitional period of readjustment. Eventually all these wonderful benefits would clearly raise nothing but land-values and make the plunderbund richer and mightier than ever. The rise and fall of land values measure all the advances of civilization and their private appropriators are the "Masters, lords and rulers in all lands'' of whom the poet spoke.
Never, while the world lasts, will mankind become "Masters, lords and rulers" of themselves till these public values are publicly absorbed in taxation. The Single Tax is the most feasible, practical, expedient, simple, natural and just way of making the necessary, rational change without the violence of revolution. It stands "four square to all the winds that blow" — in economics, and politics; in ethics, morals and religion; in principle, science and philosophy; it is the practical application of Christianity to social affairs. "Equal Rights to All and Special Privileges to None," is the translation of the Golden Rule of the Nazarene to an economic and political formula. Therefore, fulfilled democracy is applied Christianity to governmental affairs.
"Do unto others as ye would that they should do to you," "Equal Rights to all and special privileges to none"; the Single Tax: these are synonymous.
Here we have the great Eleventh Commandment of the Master of Nazareth — the sum total of all "the Law and all the prophets" — we have its Jeffersonian formulation into a politico-social maxim of "Equal rights to all," and its scientific practical application in the Single Tax of Henry George. This is applied Christianity; this is democracy; this is Georgean philosophy; this is the Single Tax; different expressions of the one Unity.
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.
(refrain) 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
(refrain) 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.
(refrain) 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.
(refrain) 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.
One of my standing google alerts took me to an editorial in a northern California newspaper endorsing the call for a 1/8 cent sales tax on all goods sold within the county to support the town's library, which, because of Proposition 13, receives no funding from the county. They have exhausted their ability to do fundraisers, have no acquisition budget, and if the library goes from its current 3 or 4 days a week to none, the existing collection will be divided up and people will have to drive to one of the other 2 libraries in the county.
I tried to post a comment, but they seem only to accept comments through Facebook, and I'm not a FB subscriber. So I'll share my comment here:
Amenities like libraries and good schools and well-maintained streets, among many others, are what make a community a good place to live. They support and increase land values; they don't change the value of the structures that sit on that land.
The sensible way to finance them is through taxes proportionate to land value. Those who own a large, well-located lot pay the most; those who own a small share of a large, well-located lot pay their share of that lot's value; those who own a small, well-located lot, close to the amenities people find desirable, pay in proportion to the value of their location, not to what they paid for their property, be it last year, 5, 10, 20, 30 years ago. Those who own an off-on-the-edge postage stamp pay little or nothing (whether they've put a cottage or castle on that little lot.).
I understand that you're trying to solve a local problem, but the underlying mess created by Prop 13 needs to be corrected.
Taxing sales drives sales out of town. That burdens hardworking people who own and work in the shops that sell taxed goods in your community. (It probably won't hurt the landlords much.) Wage taxes are no better. Building taxes ditto. We shouldn't use them!
In the 1870s, a Tennessee businessman wrote to his governor,
Never tax anything That would be of value to your State, That could and would run away, or That could and would come to you.
Your town needs to make it clear to your state that Proposition 13 forces you to do stupid things. Jon Coupal and his fellow Prop 13 supporters are not working to make California better for ordinary people. They have something else in mind.
There are a thousand hacking at the leaves. Go to the root of the problem and eradicate it. Prop 13 is the root of this one (and many others). It has forced California's towns into dishonest assessments and put a low cap on what is arguably the wisest, most just tax ever proposed (land value taxation).
It was a California newspaperman, Henry George, who saw most clearly and wrote most eloquently on this topic. Look for his 1879 book, "Progress and Poverty," written in San Francisco. You can find a modern abridgment online at http://www.progressandpoverty.org/ and more about him and his ideas at http://henrygeorge.org/ or the URL's below. (For example, the board game Monopoly is based on The Landlord's Game, which someone developed circa 1902 to teach the wisdom of George's ideas. It came with 2 sets of rules, one similar to the game we play today, and another called the "prosperity rules." Dull game, but sustainable society!) Prop 13 is the antithesis of what George's analysis showed was the way to a good life for ordinary people.
The rioting in England is indefensible, but how to understand it?
I’ve mentioned several times throughout these blogs that the rent of land represents community. However, although land and natural resource rent is community-generated, less and less of it has been captured back for public revenue over the last forty years. Thereby, a sense of a community has been lost.
That’s because it has become fashionable to privatise the rent of land and natural resources in the misbegotten belief that ‘user pays’ and increased taxation is preferable to the public capture of publicly created resource rents. It is largely privatisers of our natural resource rents who’ve been able to put about this self-serving idea successfully. And they’ve sold it well to governments.
The cumulative effect of the process over forty years has been to widen the gap between rich and poor. This now vast divide is well documented, but the role of rent has been kept invisible.
Right wing shock jocks consider the private leeching of natural resource rents by private interests is respectable employment and, unable to think through the natural consequences, they’re flabbergasted by London’s street riots.
The rising of the hun in the city is obviously a function of poverty and dispossession. Feeling disenfranchised and disconnected, these predominantly lower class youth exhibit their hate for a system that keeps them down and often unemployed whilst bank CEOs receive their multi-millions. Unlike many of us, the rioters see the game is rigged and their frustration has spilled over into aggression and excess.
I couldn't figure out how to comment at HuffPost, but I question the wisdom of selling off our airwaves, rather than leasing them for, say, 5 or 10 or 20 years. They're OUR asset, and shouldn't become a privatized corporate asset under any circumstance. We aren't the final generation. Yes, we have revenue needs, and the value of the airwaves can certainly make a solid contribution to those needs. But we ought not to do it at the expense of the next generation, and the one after that. LEASE those airwaves, and then repeat it in 5 or 10 or so years.
Who benefits? Smartphone Users??? Hah!
Spectrum auctions are a win-win-win? Only if you omit future generations -- even our own future selves, if we expect to be alive in, say, 15 years -- from the calculation.
"Congressional budget officials estimate those auctions would raise a total of $24.5 billion over 10 years. Reid's plan envisions $13.1 billion going to the Treasury Department to help narrow the federal deficit. The remainder would largely go to compensate television broadcasters that give up airwaves, cover the expenses of broadcasters and government agencies that move to different parts of the spectrum and fund the construction of the public safety wireless network."
Compensate television broadcasters for giving up their privilege of owning a portion of OUR airwaves? Should we have compensated Captain Kidd when piracy was stopped?
I don't know whether Chicago has yet figured out that selling its parking meters wasn't a particulary smart thing to do. But we need to study this, and recognize that we ought not to be selling off our public assets. LEASE THEM, and REPEAT in a decade or two. NATURAL PUBLIC REVENUE, not just once, but forever!
Debt Ceiling Battle: Harry Reid's Plan May Benefit Smartphone Users
By JOELLE TESSLER 07/28/11 06:01 PM ET
WASHINGTON -- The debt ceiling battle could produce an unlikely winner: smartphone users.
Senate Majority Leader Harry Reid's current plan would direct the Federal Communications Commission to auction off highly valuable radio spectrum to wireless carriers desperate for more airwaves. Companies such as AT&T and T-Mobile USA say they need more capacity to keep up as their customers increasingly use iPhones, tablets and other portable devices to handle mobile applications, online video and other bandwidth-hungry services.
The plan could generate critical revenue for a government spending beyond its means. Congressional budget officials estimate the auctions would raise $13.1 billion for deficit reduction.
Reid's proposal would also deliver a big victory to public safety officials: It would set aside airwaves and money for the construction of a nationwide wireless broadband network that would let police officers, firefighters and emergency medical workers communicate with each other across agencies and jurisdictions.
"Spectrum auctions are a win-win-win," said Tim Doyle, a spokesman for the Consumers Electronics Association.
But the proposal still faces significant hurdles. For one thing, a competing debt ceiling plan from House Speaker John Boehner, which will be voted on Thursday, contains nothing on wireless spectrum auctions. Boehner's focus is on spending cuts, not finding new sources of revenue. What's more, Reid's proposal has run into major opposition from television broadcasters, which are under pressure to give up spectrum that would be sold to wireless carriers.
The haggling over wireless spectrum auctions comes as Congress rushes to try to agree on a plan to stave off an unprecedented U.S. default on its debt, which could have catastrophic consequences for the global economy. The Treasury Department has warned that the government will run out of money to pay its bills after Aug. 2 if Congress does not raise the debt ceiling. Reid and Boehner are pushing competing proposals to lift the debt limit and slash spending.
No matter how the current fight plays out, many in Washington see spectrum auctions as an attractive way to chip away at the federal deficit.
Stifel Nicolaus analyst David Kaut, for one, says spectrum auction legislation has a good shot of passage in Congress – whether it is part of the current debt ceiling package, a deficit reduction measure down the road or even a stand-alone bill.
"You have wireless pressures, budget pressures and public safety pressures," Kaut said. "The forces are aligned."
Reid's proposal would give the FCC authority to auction off airwaves voluntarily relinquished by government agencies such as the Pentagon and television broadcasters with extra spectrum. It would allow broadcasters to share in the auction proceeds.
Congressional budget officials estimate those auctions would raise a total of $24.5 billion over 10 years. Reid's plan envisions $13.1 billion going to the Treasury Department to help narrow the federal deficit. The remainder would largely go to compensate television broadcasters that give up airwaves, cover the expenses of broadcasters and government agencies that move to different parts of the spectrum and fund the construction of the public safety wireless network.
Reid's plan, based largely on a Senate Commerce Committee bill, would also dedicate a highly contested piece of airwaves to that network. Such an "interoperable" network was a key recommendation of the 9/11 Commission, and is becoming an urgent priority for lawmakers as the 10-year anniversary of the 2001 terrorist attacks approaches. The shortcomings of existing networks became apparent after the 9/11 attacks and Hurricane Katrina, when emergency workers could not talk to one another because they were using incompatible – and sometimes antiquated – systems.
At this point, perhaps the biggest hurdle facing any spectrum auction proposal is opposition from television broadcasters reluctant to give up their existing airwaves. Dennis Wharton, an official with the National Association of Broadcasters, noted that many broadcasters fear being moved to different channels that would reach fewer viewers.
He added that many broadcasters want to use their existing airwaves to deliver television signals to mobile devices and to "multicast" more than one television signal at a time. Broadcasters worry that they could be moved to a part of the electromagnetic spectrum that is less conducive to such broadcasts.
Wharton said that while the proposals in Congress are intended to be voluntary for broadcasters, those that want to hang onto their airwaves are concerned that they could face user fees and other government sanctions intended to force them to give up their spectrum anyway.
Ultimately, Wharton said, it will be viewers who suffer in the face of "incredibly shrinking free and local television."
It comes from a 1914 report of a Washington State taxation symposium, in a section about taxing forests. Here's a section of it, a comment from someone representing the state Grange:
Mr. Kegley of the state grange requested me to express to this conference as the representative of the grange the purport of the resolution that we have been adopting for the past five years, and with the permission of the chairman I will do so. He cautioned me particularly not to "let them put anything over on us," and I will try not to do so. Our particular grievance lies against the speculators. We have adopted resolutions for the past five years at every session of the state grange, county granges, and by a great many subordinates, for the reform of our system of revenue so as to abolish speculation in land. When I was a small boy I purchased a pig. It spent most of its time rubbing itself against the pen, but did not seem to grow. Finally I asked my father what was the trouble. He teased me for awhile and then stated, using big words, that it was "supporting too many parasites." I asked him what a parasite was, and he said, "Your pig is lousy." The speculator is a louse on the body politic. He is absolutely useless, a mere parasite. He takes what does not belong to him. We farmers clear up our land and more than half the values we create goes to speculators. That ought to stop. We ought to collect from the speculator all that he gets that he does not earn. There ought to be taken from the speculator a special economic rent, not a tax, not a burden upon industry, not a burden on anything he is doing except his stealing.
We believe that the speculator ought to be relieved of that which he has unjustly acquired, to which he has no more right than the slave-holder or pirate to his ill-gotten wealth. These are strong terms, but it is the language of the grange. They have adopted resolutions again and again, unanimously and with great enthusiasm, and we submit that the principal thing this conference can do is to so reform our system of taxation, of public revenue, as to prevent the speculator getting a single dollar he has not earned.
Just a word considering what the speculator is doing in the community. If I went over on the other side of the mountains and dug a ditch, and a man should take water from that ditch, say half of it, he would be stealing. Yet every farmer who goes out on the stump land on the West coast, cultivates a farm and opens it up, has most of his value stolen from him by speculators — absolutely stolen. If a man were to come to my farm and drive off half my stock he would not be robbing me of a bit more, directly or morally, of what I had created, than he does when he takes the value I have created by clearing my farm. An Italian went to Bellingham and bought a lot from a speculator in the suburbs for $200. After awhile he thought he wanted to buy another lot, and tried to buy it for $200 — a lot next to the one he had already bought. But the speculator said, "No, you have added $100 to the lot adjoining your house." He did not get that $100. The speculator stole it. It is absolute stealing. Now we go further than that; we say the special curse of our whole system of taxation is the speculator. If we take from the speculator anything like what he is stealing from us we would not need any taxes. We could absolutely abolish all taxes and have a vast fund left over for a dividend to every stockholder.
Our timber is increasing tremendously. Our fisheries are increasing. The value of land on Second Avenue has increased, not because of what has been done by the owner, but because there are something like 80,000 people more in Seattle now than there were 10 years ago. The people that come in create but don't get that value. The speculator gets it all.The speculator is the sole cause of unemployment. Every man who wishes to control any natural resource should be made to pay to the public an annual rent of 4% or 5%, whatever is right, on the population value of the natural resources he is controlling, and we would have in this state more than $100,000,000 a year over and above our expenses, and that is a very conservative estimate. Timber increased in the State of Minnesota in 8 years more than $7 per thousand. You and I have built the Panama Canal by the increase in the price of sugar, $1.50 a sack, a few dollars on a suit of clothes, 50 cents to a dollar on a pair of shoes. The Panama Canal will add to the price of the billions of feet of timber in this state perhaps a dollar or two dollars per thousand, how much nobody knows yet, but something. Who is going to get that? If any man living thinks the timber barons are going to get that he is badly fooled. The state grange, the state federation of labor, and other organizations in this state propose to collect for the people every dollar of population-made value, or a fair rental on the values which our people have added to these natural resources, giving to the timber men merely what they have created, but keeping for the people all the values they have created. We propose to give the individually-made value to the individual who creates it. That is all we claim, all that we want. It is considerable to be sure, but it is all that we want. We want that every individual should have all that he creates, absolutely free of taxes. That is the position of the grange, asserted again and again in resolutions as clear as language can be made, to give to each individual all that he creates; to abolish all penalizing fines upon any industry and not fine a man for doing what he ought to do, what we want him to do. Up in Whatcom County every man who keeps a cow is fined 60 cents a year. If he keeps a good horse he is fined $8 a year. If he paints his house or takes out a stump he is taxed (fined). In the state in which I was born and raised, they paid a man for planting trees; but here we tax a man who blows out a stump. We should fine the man who keeps the stump in, and reward the man who takes it out. We want to tax the stump and exempt the cow. That, we think, is the only system. As representative of the grange I will have to make my report to the grange — they want to know what the attitude of every speaker is and what he thinks concerning the speculators. I think we of the grange do not care a continental about anything else. Are you going to help us to rid ourselves of the parasites (the speculators), or are you not? Are you going to help us to free ourselves from the men who are robbing as of the values we create, or are you going to fool away your time in a sham fight in putting upon property a lying tax which ultimately will fall upon the farmer and the wage-worker?
This was a comment to a recent Paul Krugman blog post, and I thought it worth sharing. (Multiple Google searches did not bring me to any version of it. I'd welcome any further information!)
Here is ancient wisdom about the rich from China...
"When flies attach themselves to the tail of a galloping horse, they move at high speed. But it is difficult for them to efface the shame of being an appendage. When vines entwine themselves around a tall pine, they reach an awesome height. But they cannot erase the disgrace of being a dependent."
The problem seems to be that the rich see themselves as the horse, when in fact they are the flies. The problem seems to be that the rich see themselves as the pine, when in fact they are the vine.
The People of a country are the horse and pine.
Tax the rich... they think their wealth was earned by them... when in fact it was earned by the work of people.
LVTfan here: This doesn't suggest any understanding of the mechanisms by which the rich become rich illegitimately (though legally) through privilege. I invite the curious to explore this blog, and its sibling website wealthandwant.
None of this is to say that bright people who come up with ways to meet human needs and wants should not be able to become wealthy. But to the extent that our rich owe their position to privileges, specialness, we naively grant to some, we need to be examining and eliminating those privileges, or collect from those granted them the value of those privileges, month in and month out. Doing this would level our playing field AND provide a healthy and growing revenue to fund our common spending without depressing our economy.