LVTFan's Blog

The Ethics of Sharecropping, Taxation ... and Theft

Another "find" in "The Public" from November 14, 1903:

A PROBLEM IN ETHICS.

Jones—Neighbor Smith. I am out of a job; how am I to make a living?

Smith—I have a proposition to make to you. Provide yourself with tackles and go to fishing, and I will give you half you catch.

Jones—I'll do that; thank you; you are very kind, indeed.

And the people laugh at Jones' foolishness and ask: "If he provides his own tackles, what claim has Smith on the fish he takes? Ought not all the fish belong to the man who catches them?"

We think so. But while about it, suppose you tell us the difference between this proposition and the one that Brown made to Wilson when he said: "Get your teams and plows and go to work raising potatoes, and I will give you half the potatoes you raise."

Now, don't answer this question until you have thought over it just a little.  — Living Issues.

Should we tax wages?  Should indivdual (or corporate) landholders be permitted to pocket the land rent?

It seems to me that we as a society have a right to tax wages only after we've collected virtually all the land rent, and then only if we agree that the resulting revenue is insufficient to fund the legitimate purposes of government.  (Reasonable people can differ about what ought to be done by the public sector; that's a separate conversation.)

Land rent here includes not only the rent on unimproved land values (that is, the value of each site before accounting for the improvements its owner has put on it himself or bought from someone else who did) but also on things like electromagnetic spectrum (the "airwaves"), primetime landing rights at congested airports, geosynchronous orbits, on-street parking in congested downtowns, the use of water where it is scarce, rights to pollute air and water, the withdrawal of scarce natural resources, etc.

Gary Schilling's idea ...

Somewhere, this week, I heard or read that Gary Schilling has proposed an idea to solve two of this country's problems.  Here is the snippet note I made:

Gary Schilling proposed a novel solution to two problems our country is facing: the foreclosure problem and the illegal immigration problem: he suggests that they be able to buy the foreclosed homes and after some period of time, become legal residents

I don't happen to think his solution is a good one.  Property ownership should not be a condition for anything resembling citizenship status, even legal residency.

But I've got one to propose in its stead.

Suppose that local governments which thought about buying foreclosed homes and fixing them did so, but instead of turning around and selling them at some significant discount to people who meet certain income criteria (income no less than $X, no more than $Y), suppose that they fixed them up, and then sold ONLY THE HOUSES to whomever was interested, and KEPT THE LAND as city property.  The buyer of the house would have a land lease and would pay annually 5% of the assessed market value of the site.  This would provide participating towns and cities with a reliable income source several times the property tax they currently collect, which might range from as little as 0.1% of market value in California to perhaps 2% or even 3% in a few places.  It certainly beats borrowing the money to buy the land, if one has limited funds, and paying interest for 30 years on that debt.  

It has parallels to the Community Land Trust movement as a way to provide affordable housing, but it doesn't require contiguous lots, and the entity that collects the land rent is the local community as a whole.  Land rent is an excellent way to fund public spending.

Land appreciates, if the local economy is healthy.  And over time, it may be that the neighborhood around one of these homes will shift from single-family residential to commercial or to multi-family housing.  At that point, the value of the house drops to very little IN THAT LOCATION.  It might be possible to move it to another lot, or a developerwill come along and offer the homeowner something for access to the site, taking over the land rent payments and spreading them over multiple residents or multiple businesses. 

Mortgage payments leave town.  They ultimately go to the shareholders of out of town banks.   Land rent paid to the community gets recycled locally, to meet local needs.

The landowner and the taxpayer

I stumbled across a quote, in someone's sigfile on a forum I hadn't previously been to.  It expresses the effect of permitting the privatization of the economic value of land, and the socialization of our wages through income and wage taxes and taxes on what we produce.  It is, perhaps, a bit stronger than how I'd express it, but I have to agree that Roy has it right:

The landowner effectively owns part shares in millions of part-time slaves called, "taxpayers." -Roy L

We can make our system far more just by shifting our taxes onto land value, and off workers.  The owners of fabulously valuable land are collecting from the rest of us value which they didn't create and we did.  It does not come out of thin air; it comes out of someone's labor.  Yours and mine, even if we've never set foot on that land or even passed within 10 miles of it.  (Would it be any better somehow if it came out of someone else's labor, but NOT ours?)

We all contribute to rent. Some of us get to live off it. How does this fit with the notion that we are created equal?

Rent is something most of us give little thought to, and most of those who think about it are not thinking about the sort of rent to which I refer.  The rent I'm talking about is not the payment which goes from tenant to landlord each month.

Rather, the rent to which I refer is the return to land, just as wages are the return to labor and interest is the return to capital.  And, just to expand it a bit further, "land" in this usage refers not just to the sites under our feet, but equally to the remainder of the natural creation and to that which our common investment in infrastructure and services has added to the natural creation: the access created by bridges, highways, railroads, subways, airports, river locks, etc, the value created by schools, parks, public health, courts, systems set up to respond to individual and widescale emergencies, etc.  Land includes natural resources, such as oil, water and air, the electromagnetic spectrum (those airwaves that belong to the American people); airport landing slots (where demand exceeds supply), etc.  

Rent happens.  It happens whenever more than one party wants to use a specific piece of land.  Who should benefit from it?  A small group of us? the first to arrive? Or all of us? 

Update on the Feoffees' tenants in Ipswich, Massachusetts

One of the early posts on this blog described (at length!) a peninsula community off Ipswich, Massachusetts, about an hour from Boston by train, where under the terms of a trust dating back to 1660, the neighborhood, known as Little Neck, belonged to the Feoffees (trustees) of the public schools of the town, and the grantor's trust told them to obtain the full market value for the benefit of the public schools.  For a long time, this was not done, and recently the Feoffees have moved toward meeting that requirement.  The tenants aren't happy.

A recent article in the Boston Globe entitled "Threatened Idylls" describes a home for sale for $290,000 which they say would have sold for a great deal more when land rents were lower.

Although waterfront properties often retain their value, even in a soft market, the seaside cottages on Little Neck have seen a significant decline in value since 2005. Properties that would have commanded a sales price in the low $600,000 range just a couple of years ago are now being listed in the mid-$400,000s, Gilbert said. Homeowners blame the dispute with the feoffees for turning buyers sour.

The Feoffees, their tenants, and the Ipswich public schools

I've been researching a story which I first learned of via the Boston Globe's "most emailed" page a while back.  It seems that there is a lovely almost-island, connected by a narrow neck of land to the mainland, near Ipswich, MA, about an hour north of Boston.  photo  The neighborhood is known as Little Neck, and the land has been owned since about 1650 by the Feoffees of Ipswich. (A feoffee is a trustee.)  The trust was set up to benefit the schools of Ipswich. 

For most of those years, Little Neck was rented out as farmland. Early in the 20th century, the Feoffees began to lease out the land to individuals, who built cottages on the small lots.  Today, there are 167 cottages on the 27 acres.  assessor's map  (That would suggest an average lot size of perhaps 1/7 of an acre, but there are actually a number of vacant lots that are treated as common property; most of the cottages on are lots of 0.069 acres, about 3,000 square feet, each with its own septic field.  From the assessments, it appears that 14 acres are kept as common space, for the use of all LN residents.  3 acres is in small building-sized lots; 11 acres in a single lot with the community center.)