LVTFan's Blog

Henry George's teaching in a nutshell

Henry George's teaching in a nutshell: To deprive men of the power to take what belongs to others.

-- From The Beacon, an Australian Single Tax journal, quoted in "The New Earth," (1899)

Parking Revenue funds "Room for All"

In the ocean-front Delaware town of Rehoboth Beach, seasonal parking fees provide a major revenue source:

In Rehoboth Beach, parking meters -- at $1.50 per hour -- are big business. They bring in $2.58 million for the city's $14.75 million operating budget.

Fines on expired meters add another $667,000, bringing the total to more than $3.2 million. More comes from parking permit fees, fines for parking without a permit and collections from a lot the city operates at the north end of the community. All told, parking is the largest single segment of the city budget.

Meters, some say, are one way the city can capture a revenue stream from the thousands of summer visitors who don't rent a cottage or stay in a hotel room, or who rent accommodations outside the city limits.

City Manager Gregory J. Ferrese said he believes meter and parking permits eliminate the need for beach fees, which are routinely charged in New Jersey resorts.

This is not to say that one can't use the beaches without paying for parking; Resort Transit brings people in by bus from the Coastal Highway, and the Jolly Trolley has been transporting tourists and others from nearby Dewey Beach for many decades.

But parking revenue is a great example of a user fee.  One pays for what one takes, and if one doesn't need, one doesn't pay.

A few years ago, the price of parking varied according to location; more recently, they seem to have returned to a one-price-at-all-meters system, which puzzles me a bit.  But after late September, the parking meters disappear until late spring, because there usually is plenty of parking to meet the demand.

I seem to recall reading that on-street parking is properly priced if about 15% of spots are available at any particular time.  I suspect that that rule of thumb may not hold in RB in season, though I suspect that RB could charge more for ocean-block parking.  (I suspect that nearly 100% of RB's parking spots will be occupied during most hours of peak season, at any reasonable price.)

Rehoboth is from the Hebrew for "space for all."  One source says "City of Room" "Big City" "Broad Places, Streets" "Streets, Wide Spaces."  Interestingly, when Rehoboth Beach was first laid out, by the Methodist diocese of Wilmington, as a camp meeting ground, the streets were designed to be wide and become wider as they approached the ocean, so all could have some view and access.

As a society, how do we create "space for all?" By structures and policies which encourage all of us to take only what we'll use.  No land speculation, for example. (Rehoboth Beach fails on this count; its low property tax and use of 30+ year old assessments encourage people to hold onto empty land and unaltered cottages as a low-cost nest-egg; a new home far from the beach may pay far more in taxes than an older one close to it which sells for twice the price).  And a 3% tax on transfers -- half to the city, half to the county -- discourages transactions.)

Some of RB's revenue comes from a 3% tax on rental income.  I'm intrigued to know that parking brings in more than the tax on rentals.

Delaware, wisely, does not use a sales tax.  Rehoboth Beach has 3 large outlet malls just beyond its borders, which attract shoppers from nearby Ocean City, Maryland, and even from southern New Jersey; the latter arrive by ferry for a day of tax-free shopping.

And of course the Federal government is generous with paying for beach replenishment, which helps keep the renters and beachgoers coming, at little or no cost to the property owners in RB.

In any case, parking fees are Natural Public Revenue

 

The Last Remnant of Sorcery

THE LAST REMNANT OF SORCERY

For ages sorcerers and magicians kept their secrets, their charms and enchantments to deceive the simple and unwary. At length most of such marvels are relegated to jugglers and sleight-of-hand performers, and we are amused to be deceived. We expect to see things come out of nothing; to see the unbroken eggs come out of the beaten scarf; the guinea pigs come out of the empty silk hat, the ducks come quacking out of the empty box; silver dollars come out of the boy’s ear or empty pocket. But there is yet one piece of magic in which many still believe. That is the magic of land values materializing from a vacant rubbish-covered lot or tract of land on which not a lick of work has been done.

Our modern sorcerers do the trick and roll up the hundreds of thousands of dollars out of nothing, and we look with gaping mouths, wondering where the big roll of bills came from. No question is asked. Something came out of nothing; that is all. Ah! if we could all learn the trick! No more work for anybody!  Why should we work when we can produce money from nothing? Nobody investigates; we have the money on us, but sleep with untroubled mind, for no man can say “That is mine.” True, no man can say “That rake-off is mine”; but all the community could rise and say, “That rake-off is ours. We, all together, created the demand for the lands of the community by our presence and industry. Before we came, the values were not. If we should all go, they would disappear. Your money does not come from nothing, as some suppose. The whole community contributes to your roll. It should be ours to pay our taxes with. For lack of it we are fined for our houses, furniture, machinery, crops, merchandise, etc.”

Oh, come off with your magic of getting something for nothing! Take your chances with the rest of us, who earn our money by work. We have been shown, and are on to your magic. We are going to vote for Amendment Number 20.” Thus will sorcery fade before reason. —Lona I. Robinson, in The Great Adventure, October 23, 1920

The Earth-for-All Calendar: April 3 -- Tolstoy

"The land is common to all. All have the same right to it; but there is good land and bad land, and everyone would like to take the good land. How is one to get it justly divided? In this way: he who will use the good land must pay those who have got no land of the value of the land he uses," Nekhludoff went on, answering his own question. . . . "Well, he had a head, this George," said the oven builder, moving his brows. "He who has good land must pay more."

— COUNT TOLSTOY, Resurrection, Book II., Chap. 9.

Tolstoy has rightly discerned the evils which follow the uprooting of the people from fostering Mother Earth, and the incubation of a day-wage-earning, urban, industrial proletariat.

— MAX NORDAU, Degeneration, p. 163.

The Earth-for-All Calendar: March 30 -- Emperor Joseph II

Land, which nature has destined to man's sustenance, is the only source from which everything comes, and to which everything flows back, and the existence of which constantly remains in spite of all changes. From this unmistakable truth it results that land alone can furnish the wants of the state, and that in natural fairness no distinctions can be made in this.

— EMPEROR JOSEPH II., in Oestreichische Geschichte fur das Volk, Vol. XIV. (Vienna, 1867).

The Earth-for-All Calendar: March 29 -- Dove

The evil is expressed in a few words, and sooner or later the nation will appreciate it and rectify it.  It is the alienation of the soil from the state, and the consequent taxation of the industry of the country.

— PATRICK EDWARD DOVE, Theory of Human Progression (1850),

Chap. III., Sec. 3, p. 259 (Edition of 1895).

The Earth-for-All Calendar: March 27 -- Paine and Penn

Every proprietor, therefore, of cultivated land owes to the community a ground rent (for I know of no better term to express the idea) for the land which he holds.

— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 329 (1795-6).

If all men were so far tenants to the public that the superfluities of gain and expense were applied to the exigencies thereof, it would put an end to taxes, leave never a beggar and make the greatest bank for national trade in Europe.

— WILLIAM PENN, Reflections and Maxims, Sec. 222, Works V., pp. 190-1.

The Earth-for-All Calendar: March 26 - Spinoza

Let the fields and all the soil, and, if possible, even the houses, belong to the state, that is, to him which is the depositary of the right of the state, so that he may let them out for an annual rent to the inhabitants of the cities and the cultivators. This will exempt all citizens from extraordinary taxes in time of peace.

— SPINOZA, Tractatus Politicus, Chap. VI., On Monarchy, Sec. 12.

The Unearned Increment -- Unearned By Whom?? Earned by Whom?

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.

Developer Inks 99-Year Lease

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!)

Karl Fischer | Developer Inks 99-Year Lease | East Village.

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.

Bob Andelson: The Earth is the Lord's!

I've taken some liberties with the formatting, because sometimes bullet points help ... you can find the original in the online library at http://schalkenbach.org/  I was fortunate enoguh to meet Bob

The Earth is the Lord's

by Robert V. Andelson
Professor Emeritus of Philosophy,
Auburn University, Auburn, Alabama

George Bernard Shaw, in a letter written in 1905 to Hamlin Garland, describes how, more than twenty years earlier, he had attended Henry George's first platform appearance in London. He knew at once, he said, that the speaker must be an American, for four reasons:

• "Because he pronounced 'necessarily' . . . with the accent on the third syllable instead of the first;
• because he was deliberately and intentionally oratorical, which is not customary among shy people like the English;
• because he spoke of Liberty, Justice, Truth, Natural Law, and other strange 18th-century superstitions; and
• because he explained with great simplicity and sincerity the views of the Creator, who had gone completely out of fashion in London in the previous decade and had not been heard of there since."

George's magnum opus, Progress and Poverty (the centenary of which occurred in 1979), is characterized by the same moral and religious emphasis remarked by Shaw in its author's London lecture, an emphasis that rises in the final chapter to the noble declaration of a faith revived. It is, I think, therefore entirely appropriate that I focus today on the moral and religious aspects of his basic proposal for economic reform — his proposal to lift the burden of taxation from the fruits of individual labor, while appropriating for public use the socially-engendered value of the land.

For land value taxation is

• not just a fiscal measure (although it is a fiscal measure, and a sound one);
• not just a method of urban redevelopment (although it is a method of urban redevelopment, and an effective one);
• not just a means of stimulating business (although it is a means of stimulating business, and a wholesome one);
• not just an answer to unemployment (although it is an answer to unemployment, and a powerful one),
• not just a way to better housing (although it is a way to better housing, and a proven one);
• not just an approach to rational land use (although it is an approach to rational land use, and a non-bureaucratic one).

It is all of these things, but it is also something infinitely more: it is the affirmation, prosaic though it be, of a fundamental spiritual principle — that "the earth is the Lord's, and the fulness thereof."

It is the affirmation of the same principle to which Moses gave embodiment in the institution of the Jubilee, and in the prohibition against removing ancient landmarks, and in the decree that the land shall not be sold forever. It is the affirmation of the same principle to which the prophets of old gave utterance when they inveighed against those who lay field to field, and who use their neighbor's service without wages. It is the affirmation of the same principle to which Koheleth gave voice when he asserted in the fifth chapter of Ecclesiastes that "the profit of the earth is for all."

The earth is the Lord's! Consider what this means. It means that

• our God is not a pale abstraction.
• Our God is not a remote being who sits enthroned on some ethereal height, absorbed in the contemplation of his own perfection, oblivious to this grubby realm in which we live.
• Our God is concerned with the tangible, with the mundane, with what goes on in the field, in the factory, in the courthouse, in the exchange.
• Our God is the maker of a material world — a world of eating and sleeping and working and begetting, a world he loved so much that he himself became flesh and blood for its salvation. In this sense, then,
• our God is eminently materialistic, and nowhere is this more clearly recognized than in the Bible, which, for that very reason, has always been a stumbling-block and an offense to those Gnostics, past and present, whose delicacy is embarrassed by the fact that they inhabit bodies, and for whom religion is essentially the effort to escape from or deny that fact.
• Our God is not a dainty aesthete who considers politics and economics subjects too crass or sordid for his notice.
• Neither is he a capricious tyrant who has enjoined an order of distribution that condemns retirees after a lifetime of toil to subsist on cat food while parasitic sybarites titillate palates jaded by the most refined achievements of the haute cuisine. It is men who have enjoined this order in denial of his sovereignty, in defiance of his righteous will.

The earth is the Lord's! To the biblical writers, this was no mere platitude. They spelled out what it meant in concrete terms. For them, it meant that the material universe which had been provided as a storehouse of natural opportunity for the children of men was not to be monopolized or despoiled or treated as speculative merchandise, but was rather to be used reverently, and conserved dutifully, and, above all, maintained as a source from which every man, by the application of his labor, might sustain himself in decent comfort. It was seen as an inalienable trust, which no individual or class could legitimately appropriate so as to exclude others, and which no generation could legitimately barter away.

The earth is the Lord's! With the recognition of this principle comes the recognition of the right of every man to the produce which the earth has yielded to his efforts. As the Apostle Paul says in his first letter to the Church at Corinth, if the ox has a right to a share in the grain which it treads out, surely a human being must have a right to the fruits of his labor. For the exercise of this right, he is, of course, accountable to God — but against the world, it holds.

To one who takes seriously, as I do, that insight about human nature which is expressed in the doctrine of original sin, there can be nothing self-evident about the rights of man. In the words of my friend, Edmund A. Opitz, "the idea of natural rights is not the kind of concept which has legs of its own to stand on; as a deduction from religious premises it makes sense, otherwise not." The French Revolution and its culmination in the Reign of Terror demonstrated that humanistic assumptions afford no secure foundation for the concept of human rights. That concept, for the believer, can be neither understood nor justified except in terms of what Lord Acton so eloquently speaks of as "the equal claim of every man to be unhindered in the fulfilment by man of duty to God."

This is what it comes down to: How can a person be "unhindered in the fulfilment of duty to God" if he be denied, on the one hand, fair access to nature, the raw material without which there can be no wealth; and on the other, the full and free ownership of his own labor and its earnings?

You who have studied the history of the Peasants' Revolt in sixteenth century Germany know that in calling for the abolition of serfdom and the restoration of the common lands, the peasants were simply voicing demands which were logically implied by Luther's doctrine of the priesthood of all believers — that the service of God to which all the faithful are elected requires, as I have said, access to the land and its resources, and the free disposal of one's person and of the guerdon [editor's note: reward] of one's toil. Despite the excesses that accompanied this uprising, Luther's part in the suppression of a movement which stemmed logically from his own teaching must always be a source of pain to those of us who revere him for his spiritual genius and integrity.

The earth is the Lord's! The same God who established the just authority of governments has also in his providence ordained for the major source of revenue. Allow me to quote from Henry George:

In the great social fact that as population increases, and improvements are made, and men progress in civilization, the one thing that rises everywhere in value is land, we may see a proof of the beneficence of the Creator . . . In a rude state of society where there is no need for common expenditure, there is no value attaching to land. The only value which attaches there is to things produced by labor. But as civilization goes on, as a division of labor takes place, as men come into centers, so do the common wants increase and so does the necessity for public revenue arise. And so in that value which attaches to land, not by reason of anything the individual does, but by reason of the growth of the community, is a provision, intended — we may safely say intended — to meet that social want. Just as society grows, so do the common needs grow, and so grows the value attaching to land — the provided fund from which they can be supplied (George 1889).

On another occasion he wrote:

The tax on land values is the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses (George, P&P, 421).

And yet, my friends, in the topsy-turvy world in which we live, this provided fund goes mainly into the pockets of speculators and monopolists, while the body politic meets its needs by extorting from individual producers the fruits of honest toil. If ever there were any doubt about the perversity of human nature, our present system of taxation is the proof! Everywhere about us, we see the ironic spectacle of the community penalizing the individual for his industry and initiative, and taking away from him a share of that which he produces, yet at the same time lavishing upon the non-producer undeserved windfalls which it — the community — produces. And, as Winston Churchill put it, the unearned increment, the socially-produced value of the land, is reaped by the speculator in exact proportion, not to the service, but to the disservice, done. "The greater the injury to society, the greater the reward."

We hear constantly a vast clamor against the abuse of welfare. I do not for a moment condone such abuse. Yet I ask you, who is the biggest swiller at the public trough?

• Is it the sluggard who refuses to seek work when there is work available?
• Is it the slattern who generates offspring solely for the sake of the allotment they command?
• Or is it the man — perhaps a civic leader and a pillar of his church — who sits back, and, with perfect propriety and respectability, collects thousands and maybe even millions of dollars in unearned increments created by the public, as his reward for withholding land from those who wish to put it to productive use.

Talk about free enterprise! This isn't free enterprise; this is a free ride.

But if that same person were to improve his site — if he were to use it to beautify his neighborhood, or to provide goods for consumers and jobs for workers, or housing for his fellow townsmen — instead of being treated as the public benefactor he had become, he would be fined as if he were a criminal, in the form of heavier taxes. What kind of justice is this, I ask you? How does it comport with the Divine Plan, or with the notion of human rights?

Let me make this clear: Acquisitiveness, or the "profit motive," if you will, is a well-nigh universal fact of human nature, and I have no wish to suggest that the land monopolist or speculator has any corner on it. Even when I speak of him as a parasite, this is not to single him out for personal moral condemnation. He is not necessarily any more greedy than the average run of people. As my late friend, Sidney G. Evans, used to say: "if you have to live under a corrupt system, it's better to be a beneficiary than a victim of it." But the profit motive can be channeled in ways which are socially desirable as well as in ways which are socially destructive. Is it not our duty to do everything we can to build an order without victims one in which the profit motive is put to use in such a way that everybody benefits?

I do not harbor the illusion that the millennium is going to be ushered in by any program of social betterment. My theological orientation does not happen to be one which minimizes the stubbornness of man's depravity. Yet to make the depth of human wickedness an alibi for indifference to the demands of social justice is to ignore the will of him who said:

Take away from me the noise of your songs;
to the melody of your harps I will not listen.
But let justice roll down like waters,
And righteousness like an ever-flowing stream.
(Amos 5:23-24)

To some of you, the promotion of specific programs for social justice is seen as part of the responsibility of the institutional church; to others it is not. But all of us, I am sure, can agree that the individual Christian (or Jew or Moslem, Hindu or Buddhist, as the case may be) has a solemn moral obligation to study the issues carefully, and then involve himself strenuously in whatever social and political efforts his informed conscience tells him best advance the cause of right.

O shame to us who rest content
While lust and greed for gain
In street and shop and tenement
Wring gold from human pain,
And bitter lips in blind despair
Cry, "Christ hath died in vain!"
Give us, O God, the strength to build
The city that hath stood
Too long a dream, whose laws are love,
Whose ways are brotherhood,
And where the sun that shineth is
God's grace for human good.*

The earth is the Lord's!

* From "O Holy City, Seen of John" by Walter Russell Bowie. Copyright, 1910, by A. S. Barnes and Company. Quoted by permission.

Bob Andelson: An Open Letter to Pope John Paul II

Open Letter to Pope John Paul II

by the late Robert Andelson

Your Holiness,

THE QUESTION OF MISERY

At the outdoor mass you held in Wroclaw in Poland during your recent visit to that country, you said the following very true and sincere words:

"The Earth is capable of feeding everyone. Why therefore -- here at the end of the 20th century -- should thousands of people die from starvation" -- "Pray solidarity will prevail over the unrestrained thirst for profit and ways to handle laws of trade, which do not take into consideration inalienable human rights".

It was the same concern about the greed of the wealthy and the plight of the poor, that your predecessor, Pope Leo XIII, expressed in his Encyclical Letter of 1891, 'Rerum Novarum'. Yet, in the more than hundred years that have past, if there has been a change, it has been for the worse!

The wealth is there. The growth of industry and the discoveries of science about which Pope Leo spoke, are even more fantastic and surprising than he would have imagined in his most inspired dreams. The enormous fortunes of individuals, of which he also spoke, have become more enormous. Yet the poverty is still there.  Even in countries that are considered wealthy, people are homeless and live in cardboard boxes; people die, not just by the thousands as your Holiness said in Wroclaw, but by the millions, from poverty related diseases, malnutrition and starvation. You are indeed right to ask the question:

WHY?

THE EXCLUSION FROM THE GIFTS OF GOD

As your Holiness will know, the Encyclical Letter of 1891 was not only an attack on socialism, but also a strong defence of the right to hold land as private property, a right that Pope Leo XIII claimed to be natural.

But the right to hold land includes the right for the owner to exclude other people from it, and, as all usable land in industrially developed countries is owned in that way, people without such a right will be unable to enjoy the gifts of God unless they accept the conditions exacted of them by a landowner. Neither can they work, reside nor relax without land, and again they have to accept conditions exacted by a landowner.

Normally the landowner will ask people to pay the market-determined site rental, which is high because of the many excluded people who want land, or he will offer to let them work at a market-determined wage, which is low because of many excluded people wanting a working place.

Some people, in fact -- as a consequence of the many excluded -- a growing number of people, can neither qualify for a job nor afford to pay the site rental, and they have to live on the streets, on the roads, at the dumping grounds or wherever they can find a poor shelter, some clothes and a little to eat. Some of them find that crime and prison give them a better life than there is available through the legal opportunities open to them.

In some countries Social Security is implemented to mitigate the cruel consequences of the exclusion of people from the gifts of God. The Social Security bill is not paid by landowners, but by entrepreneurs, wage earners, pensioners, savers and consumers.

In other countries only private charity is available to relieve the hardships.

But neither Social Security nor charity will change the basic injustice that causes the horrible conditions of the people excluded, that increases the site rentals to be paid for the use of land, and reduces net-wages, widening the gap between poor and rich. The basic cause of these evils has to be destroyed.

Political leaders from all over the world, including representatives of the Holy See, agreed at the United Nations conference on Human Settlements (Habitat II) at Istanbul last year, that:

"The failure to adapt, at all levels, appropriate rural and urban land policies and land management practices remains a primary cause of inequity and poverty".

LETTER TO POPE LEO XIII

Allow us, your Holiness, to point to the Open Letter of September 11th, 1891, written in New York by Henry George and sent to your predecessor his Holiness Pope Leo XIII, as a response to 'Rerum Novarum'.
 
Published as a book this Open Letter has been read by many thousands, and still today the book is sold and read.

Henry George did consider 'inalienable human rights' and 'unrestrained thirst for profit and ways to handle laws of trade'. On exactly this background he spoke for all people's equal rights to the gifts of God.

To maintain this right for everybody and at the same time to allow exclusive right for some to own land as private property, he advocated that people who are given the exclusive right to own land -- and thereby the right to exclude other people from the gifts of Nature -- should pay a compensation to the people they exclude (in fact to all citizens).

The compensation, as a duty to be paid by the landowners, should be the market-determined rentals of the sites from which they can exclude others. This being a fair charge of justice as the rentals are not due to efforts or investments made by the landowners, but due to the development of society and to the growth of the population of human beings, all wanting a place to work, and a place to reside.

The rentals should be collected from all landowners by society, and the revenue should be used to the benefit of all citizens. In that way, Henry George emphasized, all citizens would be able to get their equal share of the gifts of God.

HOLY INCENTIVES OR HOLLOW FALSEHOOD

We do agree with your Holiness and with Henry George that people have private right to property created by man, the right to the fruits of their labour; and also that people can achieve private right to exclusive possession of land, from which they can exclude other people.

But we find it logically inconsistent to believe that people have equal right to life and to be on the Earth, when at the same time some of them have exclusive right to own land as private property without paying compensation to those people whom they exclude from their land.

Your Holiness' sincere words, as quoted initially in this letter, accord with Rerum Novarum of 1891 and with the Habitat II statement quoted above, but they will only become true if your Holiness will succeed in urging on the rulers/governments of this world to collect the annual market-determined Site Rentals of all land in their countries, and distribute the revenue thus acquired to the benefit of all their citizens.

If your Holiness could succeed in persuading the governments to do so, all people on Earth would gain equal access to the gifts of Nature, and true solidarity would become a reality. If not, all statements about equal right to life, to work, to education and to residence, will continue being hollow and false; and our successors will not see a change for the better; on the contrary, they will see the gap between very rich people and alienated poor people grow bigger, and the problems of poverty grow more serious than they are today.

OUR PRAYER

We pray your Holiness may succeed in convincing the governments of this world of the importance of public collection of the annual market rental of all land, and the revenue to be used for equal benefit of all the citizens, thus to provide far all human beings, equal rights to the gifts of Nature.

Let this become the manifestation of the new Millennium, the 2000 year anniversary of the birth of Jesus Christ. Let it become a Jubilee in the original meaning of the word, striking unjust shackles from society; thereby preparing a new age of humanity, a social life in friendship and peace.

 

Henry Ware Allen: Special Privilege

Special Privilege

BY HENRY WARE ALLEN
from Land and Freedom, 1938

As our time honored political maxims become hackneyed they are very apt to pass into what Grover Cleveland would call innocuous desuetude. We subscribe to the sentiment that "eternal vigilance is the price of liberty" and yet little is done to counteract those aggressive forces which nullify that freedom which we profess to prize so highly. Even the prayer, "Thy Kingdom Come," is repeated as a mere wish that something good would happen rather than with a determination to bring about those righteous conditions which make for a heaven on earth. Possibly the most neglected of all of our national ideals is our professed adherence to that most democratic of all maxims, "Equal rights for all and special privileges for none." For at the present time our country is honeycombed with special privilege that has become so entirely entrenched as to be regarded on all sides as vested right. Special privilege is condoned by force of its familiarity. Like vice it is endured, then pitied, then embraced.

There lived in a Colorado city years ago a housewife who made convenient use of coal cars on the side track across the street from her dwelling with which to replenish her stock of fuel. This she did without any qualm of conscience but as a special privilege which, by the sanctifying touch of time had grown into a vested right. This woman doubtless was punctilious in the ordinary obligations of life and would have hotly resented any statement to the effect that she was stealing coal. She was guided by that all too common kind of honesty which is based upon expediency rather than principle. Not on any account would she have withheld what was due from her to a neighbor who would have suffered by her delinquency, but the advantage to her of getting this coal was so great and the loss to some impersonal owner of same, mine, railroad, or smelter, was relatively so negligible that the argument was all in favor of her acting in her own interest without question. No personal equation was involved and if at first there had been any hesitation on her part of this practice, that was long ago a thing of the past. But the railroad company put a watchman on guard and her supply of fuel was thereby stopped. She then turned to the local charity organization with request for a continuation of the supply which had thus been rudely taken from her and the very righteous indignation with which she told her story was ample proof of entire absence of comprehension on her part that she had been stealing.

This incident, which is a true story, illustrates very nicely the evolution and the nature of that special privilege which eventually becomes a vested right. And if the searchlight of analysis is turned upon our social system we may be surprised to find the presence of special privilege in unexpected places and of a volume that is, in the aggregate, enormous.

As a basis for this inquiry it may be well to state the fundamental truth that property may be secured in three ways only; first, by labor; second, by gift; and third, by theft. If this test is repeatedly kept in mind, the task will become easier. One of the commonest forms of special privilege is that which is provided under ninety-nine year leases on valuable business property sites. These leases convey to the owner of the land a stipulated income after the tenant has paid all taxes and expenses. In the parlance of political economy this revenue consists of what John Stuart Mill defined as unearned increment, a value which is produced by no individual but which is purely the result of population reflected upon desirable locations. For this revenue to be turned over to individuals as is now the unquestioned custom in all of our large cities and to an amount of billions of dollars annually is a procedure which is precisely in the same class as the stealing of coal from the railroad car by the Colorado housewife.

A much larger source of public revenue which is diverted to individuals is that of the rent of valuable property in excess of a fair interest return upon the intrinsic value of improvements on the property. This applies to practically all property located at the center of our large cities and involves enormous revenues. There is a mixture here of legitimate return on capital invested with the unearned increment which belongs absolutely to society but the case is not less clear on that account.

Another prolific source of public revenue which is diverted to individuals is that which comes from the lucky possession of oil wells. This possession frequently gives incomes of thousands of dollars daily to those who have no more claim on such revenue than is involved in the possession of the land upon which the wells were developed. The wealth that has by this means been given to certain sections of the country and certain groups of people has run into the billions of dollars. The Osage tribe of Indians in Oklahoma are said to have been made the richest people in the world due to this special privilege. Such beneficiaries are no more justly entitled to the revenue which they receive than was the Colorado woman justified in stealing coal from the railroad car. It will be said that the oil industry involves a great deal of capital and that many dry wells are paid for before a single producing well is developed. This is true and therefore makes the proposition somewhat more complicated but does not alter the conclusion.

Another source of revenue which diverts public funds into private hands is speculation in land. Purchase of inside property sure to increase in value is the one investment that has been invariably recommended by shrewd financiers. This speculation is far greater than has been generally realized. More than one-half the area of New York City consists in vacant lots which are held out of use for speculative purposes, and the same is true of all our larger cities. Incidentally, this speculation has the effect of enhancing the selling price of desirable land to artificially high figures. When land which is purchased with a hope of subsequent rise in value, the investor practically lays a trap by which he may secure values that rightfully belong to the community. And this process makes an artificial scarcity of land with consequent artificially high cost to those who must use it. This process of securing a profit, of getting something for nothing, is persistently the same in character as that by which the Colorado housewife secured her supply of coal. Here again objection may be interposed to the effect that land frequently has to be sold for less than it cost. This is an objection that was raised by no less an economist than Francis A. Walker, the foremost critic of Henry George during his lifetime. General Walker exclaimed, "Mr. George has much to say about unearned increment: He says nothing, however, about unrequited decrement." Mr. George's rejoinder to this was an expression on his part of his inability to discuss the problem with one who spoke of unrequited decrement in something which originally had no value. In other words, so far as society is concerned its interest is only in the rental value which is produced from year to year and which rises or fall accordingly as population grows or wanes. The important fact is that this increment, whether large or small, belongs to the community which produced it.

The most spectacular form of special privilege which we have to deal with today is that provided by the protective tariff. This protection enables the America manufacturer to secure an artificially high price for his product. The common argument in support of the protective system is that the American standard of living must be maintained by this artificial means, but this argument falls to the ground, if at the same time, we permit any improvement in labor-saving machinery which naturally has far greater effect upon the labor market than is produced by the competition of merchandise imported from abroad. The enormity of special privilege due to the tariff is perhaps more conspicuous in the State of Pennsylvania than elsewhere, a single family in Pittsburgh, the direct beneficiaries of the tariff on aluminum, being reputed to be worth in excess of $2 billion. There will be found that, with a few rare exceptions, the great fortunes of America are based upon special privilege of one kind or another.

Although there are many minor sources of special privilege which are embedded in our political and social institutions, those above enumerated are the principal ones.

The special privileges provided by legislative action at Washington are in a different class from those which have become a regular part of our system of taxation but are none the less to be condemned. The most flagrant of these in recent times was the appropriation by Congress and approved by President Hoover, of $500,000,000 of tax payers' money for the specific purpose of stabilizing or artificially enhancing the price of wheat, cotton, and other farm products. It was presumed by the makers of this law that it would have the effect of giving artificial advantage to the farming class, which would offset in a measure the special privileges which had been given so generously to Eastern interests by means of the protective tariff. The plea for this farm legislation was repeatedly based upon that consideration. It so happened that even the immense waste of money involved by the farm marketing act was negligible as an influence in the world wide markets and that it did not affect in any considerable degree the law of supply and demand upon the prices of the agricultural products which were supposed to be favored. But the very fact that this legislation was put through with little opposition furnished a very good illustration of the fact that special privilege legislation is regarded as perfectly legitimate. And this has been further illustrated in monstrous degree by the New Deal legislation under President Roosevelt.

There is everywhere consciousness of a mysterious force which is responsible for easily acquired fortunes on one hand together with an increase of unemployment and consequent lower incomes on the other hand. Each succeeding census report makes more appalling this undemocratic and unjust condition in our social fabric.

If prosperity is to be secure, there must be an end to special privilege of every kind, and a system of taxation inaugurated in place thereof which shall be based upon justice to all. Henry George has demonstrated how this should be done.

The Land Questions: #38: Mining

38. Mining companies which mine on public lands pay far less to the Federal government than they pay on privately held lands. 

A.  That's fair, because the private landholders are better negotiators

B. That's fair, because the 1872 Mining Act set the price, and it wouldn't be fair to change the business environment after setting the rules.

C. That's fair.  Corporations need subsidies to create jobs.

D. That's unfair, and the federal government should be getting just as much from the miners as the private landholders are getting

E. That's unfair, and not only should the federal government be getting more from the mining companies, but the federal government should be collecting a significant portion of the royalties now privatized by private and corporate landholders, since we're all equally entitled to nature's bounty.  This would permit us to reduce other taxes on wages and production, and perhaps lead to a citizen's dividend, similar to the Alaska Permanent Fund

F. That's unfair, because the 1872 Mining Act was based on old prices and old mining technology.

G. Your reactions?

 

The Land Questions: #35 -- the land in the path of progress (1)

a bit out of sequence ...

35. He worked hard.  He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high lease prices for generations.  Is it right to exact an estate tax of 50% or so on the true market value of that estate?

A. No! Widows and orphans must be protected!  We wouldn't want them to have to depend on the social safety net.

B. No! The dollars he spent to buy that land decades ago were already subject to an income tax -- maybe two (federal and state) -- and the heirs are entitled to keep all the increase from the purchase price, even if that is a 20% increase, or a 200% increase, or a 2000% increase, over the purchase price.

C. No! The man had foresight, and we ought to honor, reward and encourage that!

D. No!  The interstate highway could have been re-routed, and the man and his widow and children could have been left high and dry.  They took a risk, and we ought to reward them for their brilliance!

E. An estate tax is a good way to capture this socially-created windfall once per generation.  After all, he can't take it with him.  Half for the heirs, half for the community that created the value. Seems fair, and keeps them out of the social safety net.

F. An estate tax is better than nothing, but it is a poor alternative to collecting some significant portion of the rental value of the land, month in and month out, whether that rental value be low (before the interstate highway's route is determined) or high (after it is announced and built, and the community grows up around that highway).

G. Your suggestions?

The Land Questions: #37

37.  Our ancestors bought or stole the land which the ancestors of some of those now identified as "Native Americans" relied on.  How should we and our children pay back them and their children?

A. By giving them the privilege of selling cigarettes without taxes, forgoing revenue that could help meet the health costs associated with smoking, both for smokers and for those who live with them.

B. By giving them the privilege of running casinos, even if a percentage of that revenue must be contributed to the state, and even if gambling is creates tremendous problems for some individuals in society, beyond those who actually gamble.

C. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever.  (Similar to the Alaska Permanent Fund)

D.  By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever, and providing a double share to those who are starting from a disadvantaged position for some fixed number of years

E. By collecting from everyone who owns land and natural resources the annual economic value, paying the costs of government and common spending from that source, producing equal opportunity for all.

F. Your suggestions?

 

The Land Questions: #30 -- Public Lands

30. What should we do with our public lands?

A. Sell them off at the current price, about $5 per acre, per the 1872 Mining Act, even if they contain minerals worth billions of dollars.

B. Sell them off to the highest bidder, as soon as possible

C. Sell them off to any bidder, as soon as possible

D. Lease them for fixed terms, to the highest bidder, with future lease prices to be calculated with an eye to making it profitable for the tenant

E.  Lease them for fixed terms, to the highest bidder, and then repeat the auction in 10 years. Maintain extensive online databases so that the lease descriptions are visible to all, and the lease expirations are well advertised to all who might be interested in bidding.  Make it the landlord's business to get high quality unbiased appraisals of tenant improvements, so that tenants can make sensible improvements and be secure in them.  Use the revenue to reduce other taxes which burden the economy.

F. Lease them out, at market rates, with the proceeds used to generated a citizen's dividend.  If there is a monopoly or oligopoly, break it up so that there is a genuine market.

G. Keep renting them out at whatever price they're now receiving; we don't want to upset anyone's plans or privileges.

H. Your suggestions?

The Land Questions: #29 -- Selling the Toll Roads

29. The states need money.  Should they sell their toll roads to private companies? 

A. Sure!  That would provide a nice pot of money that would help with this year's budget and next year's, and after that, we can leave the problem to a future group of legislators and a new governor!

B. Sure! The private sector will take better care of them and turn a profit to boot!

C. No.  The taxpayers paid for those roads to be built, and have a right to more control over them than would exist after privatization.

D. No. The taxpayers own that land, a unique right of way, and selling it off forever is irresponsible and wrong!

E. No. Our society -- any society -- is highly dependent on our infrastructure, and control over it must remain in the public sector.

F. No. Those highways are built on land that was bought or taken from individual property owners for the public good.  To turn them over to the private sector, for profit, would be wrong.

G.  No.  Those highways will increase in value over the coming decades and centuries, and should not become anyone's private property, at any price.  Both their economic value and the control over them belongs in the common sector.

H. No.  Even if it looks as if it might make sense for our generation, what of future generations?  Should we permit the privatization of a common asset they will likely be dependent on?

I. No. Future taxpayers will build more highways intersecting with these current tollroads, and increase their value; were these to be privatized, it would be the private corporation who would reap the benefit of that future public investment.

J. Your suggestions?

Earnings and findings -- earned and unearned income

Does the Single Tax discriminate between earned and unearned income?

It is the scientific way of doing what we have been feebly attempting to do in an unscientific way, that is, to distinguish between what Dr. Scott Nearing called "property income" and "services income," or between that form of wealth which is the result of individual effort in production and that which is purely the result of the collective effort of society; or between the two forms of wealth which Dr. Ellwood, of the University of Missouri, in a seemingly unwilling recognition of an unwelcome truth, calls "earnings" and "findings."

In the case of the great majority of us (whether as individuals or as partners in corporations) our incomes are so inextricably compounded of earnings and findings, of privilege income and service income, that it is hard for some of us to know whether we belong to the privileged or unprivileged classes, to the slave owners or the slaves, to the confiscators or the victims; and perhaps only those absolutely property less men at the bottom of the social scale can be said to have no share in the "findings" that spring from privilege. On the other hand it is equally true that all industry up to its highest strata, has to pay toll to privilege and provide those "findings" which distribute themselves with more or less inequality over almost the whole of society. How to distinguish between and separate these entirely different kinds of wealth is what all sincere sociologists and honest taxation commissioners have wanted to do and have hitherto failed in the doing.

If we take a handful of sand and a handful of iron filings and mix them thoroughly, and then set a man with the sharpest eyesight and the nimblest fingers to separate the particles, it will take him long to accomplish his task and he will never do it with more than an approximation to completeness. But apply a strong magnet to the mixture and the separation will be accomplished in ten minutes. Then see how the analogy applies to the economic problem in society. Let us imagine the return that should naturally flow to land in the form of rent to take the shape of blue coins made of steel. Let us fancy that the natural reward that goes to capital as interest takes the form of red coins made of wood. Finally let us figure the natural return to human service of all grades as being represented by white coins also made of wood. On examination it will be discovered that in the case of almost every member of society above the rank of the day laborer, his income is tri-colored or composed of all three coins. There are countless "captains of industry" among us who complacently assume their large incomes to be the rewards freely given by a free world in return for their invaluable services, who will be surprised to find how large a proportion of blue their income coins contain. There are multitudes of livers upon what they have called "interest" who will expect to find their coins red, who will be equally surprised to discover that they are almost entirely blue. To complete the parable, the taxation of land values will be like the application of the magnet which will draw away the blue steel coins in whatever stratum of society they may be found, and lay them aside for social purposes, being socially created wealth; leaving the red and white coins to be competed for in a world of free opportunity, without deduction or diminution by taxation or in any other way.

From The Single Tax Year Book (1917)

The Land Questions: #27 -- Financing a New Subway Line

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.

S. Your suggestions?

 

Brief Statement of Single Tax Philosophy

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 Land Questions: #26 -- Revenue Sources for Financing Transportation

26. Fares on inter-city public transportation may not be high enough to finance all the costs of providing the transportation.  What revenue source should be used to pay for the remainder of the costs?

The Land Questions: #24 -- Financing Transportation: What Revenue Sources?

24.  Fares on local public transportation may not be high enough to finance all the costs of providing the transportation.  What revenue source should be used to pay for the remainder of the costs?

The value of land is the day-to-day product of the community

The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.

The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.

"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.

excerpt from The Single Tax Year Book (1917)

The Land Questions #19 -- Beaches

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.

K. Estate taxes

L. Your suggestions?

 

A 1938 NYT Letter to the Editor: Collecting Ground Rent

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

NYT Invitation to a Dialogue - A National Service Program

Invitation to a Dialogue - A National Service Program - NYTimes.com Published: February 14, 2012

To the Editor:

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: letters@nytimes.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.

These projects, some will say, fall into the category of "pork" spending.

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.^[1] 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.^[2]

History

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.^[3] 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.^[4] 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.^[5] 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."^[6]

Definition

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.

Citizens Against Government Waste^[7] outlines seven criteria by which spending can be classified as "pork":

1.  
   1. Requested by only one chamber of Congress;
   2. Not specifically authorized;
   3. Not competitively awarded;
   4. Not requested by the President;
   5. Greatly exceeds the President’s budget request or the previous year’s funding;
   6. Not the subject of congressional hearings; or
   7. 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.

 

 

The Land Questions: #15 and 15a -- War, Natural Resources

15. We were at war in Iraq.  What was the real issue?

A. Oil revenues: who gets them?

B. A stable supply of oil -- don't worry about who gets the revenues

C. Providing water systems, electricity, schools for the people of Iraq

D. Providing a safe period in which they can replicate 250 years of American experience and develop government structure to provide security, infrastructure, etc.

E. your suggestions?

 

15a.  We're in Afghanistan.  Is it about that country's natural resources?

The Land Questions: #11 -- Ports

11. Foreign corporations and governments are seeking to buy some of our ports from the American corporations that own them.  Large shares of the goods we consume come through these ports, and the ports set the price that the shippers pay for access to the ports.  The possibility of weapons, invasive species, etc., entering the US through these ports is frightening.  Ports are unique locations, on sheltered waterfronts, served by elaborate rail and highway systems.  Is foreign ownership acceptable?

A. Sure!  No problem!  The costs to shippers are the same whether the owners are American or foreign!

B. Sure!  No problem!  These corporations have long term contracts with the local Port Authorities, and the PAs are smart bargainers who make sure that they collect the economic value of these unique sites from whoever has the contracts or owns the ports, for the entire term of the contract.

C. It is acceptable for foreign corporations to "own" the ports, but they must pay into the US treasury the economic value of the site.  They must not be permitted to privatize what is rightly common property.

D. It is not acceptable for foreign corporations to own the ports, but okay for US companies to privatize that value.

E. We ought to be collecting the annual rental value of the site itself, month in and month out, as our common treasure.  It shouldn't be privatized by anyone.

F. your suggestions?

The Land Questions: #5 -- Water

5. Water is running short in some parts of the US.  How should we effectively share the water?

A. Let those who own it now continue to treat it as their private treasure.  After all, they've planned on it, and we can't interfere with their plans, can we?

B. Recognize that every one of us needs water, and charge everyone for the water they use, based on the local supply and demand situation.  Where water is scarce, all will pay high prices for the water they use; where the supply is generous, the price will be lower.

C. Treat water as our common treasure.  Charge for it.  Let the revenues flow into public coffers, not private or corporate pockets.

D. Your suggestions?

Wasserman: The Ethics of Land-Value Taxation

Two great quotes:

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.

and

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.

 

Mason Gaffney: An Alternative Reform

In the files I've been digging through, from the late 50s to the early 80s, I found an early draft of a fine paper by Mason Gaffney about California's Proposition 13, for presentation at an August, 1978 conference.  I dug around and found a published copy of that paper, and think it worth sharing here. Original title, "Tax Limitation: Proposition 13 and Its Alternatives"

I see that there continue to be people who see the stupidity of Proposition 13 -- see http://www.dailyrepublic.com/opinion/letters-editor/time-for-a-petition-against-proposition-13/ Perhaps they will find this of use.  Georgists recognize Prop 13 as the antithesis of logical and just taxation.

First, a few of my favorite paragraphs, which I hope will whet your appetite for the whole paper.  I won't attempt to provide the context (you can pick that up when you continue to the paper, below).

• "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."

You can read more about the Poor Widow by clicking on the "widow's skirts" link at left, in the tag cloud, and by reading Bill Batt's Property Tax Relief Measures: Answers to the "Poor Widow " Argument (or the pdf version)

• 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:

A Statement of Beliefs, and Purposes of the Movement

Another goody from my grandparents' files.  I searched for a version of this online, and, finding none, have transcribed it because I thought it good.

I BELIEVE:

• that the problems of poverty, hunger, illness and illiteracy have reached such proportions that they can no longer be neglected, and that they demand immediate, vigorous and adequate solutions;

• that the rising levels of joblessness and homelessness can only be reduced through systematic adjustments that foster reversal of the widening economic gap between rich and poor;

• that an adequate level of economic and social well-being must become more widespread if the political freedoms essential for a peaceful world are to be achieved and maintained;

• that this requires that access to the wealth of the land, the oceans and other natural resources be made available to all on a basis of fairness and equity;

• that the essential pre-requisite to solving these problems with justice for all is to relieve labor, industry and consumers of the onerous taxes they now bear;

• and that this can best be done by raising revenue for public purposes from those values that are created by the public itself, namely, the economic values of land and other natural resources, which now flow as unearned income to those corporations and individuals who happen to hold title to them.

 

PURPOSES OF THE MOVEMENT

1. To fund public services from publicly-created land-value revenues, instead of from privately-created wealth, such as homes and other man-made structures;
2. To stimulate the general economy by lessening the need for income, sales and other kinds of taxes;
3. To encourage private construction of low-cost housing, industrial plants and other needed facilities by reducing taxes usually levied against buildings of all kinds;
4. To encourage proper maintenance of all structures by reducing the tax "penalty" usually incurred whenever major repairs or improvements are made;
5. To discourage land speculation, which drives up both land prices and rents, resulting in increased levels of tenancy and homelessness;
6. To reduce urban sprawl and the mounting pressures to convert nearby agricultural land to residential, commercial and industrial uses;
7. To strengthen political freedom by enabling more people to share in the economic and social benefits of owning one's own home and/or workplace; and
8. To reduce the risk of global war by promoting a widely-recognized remedy for a primary cause of conflict within and between nations.

Vie Peterson on Henry George's one tax

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.)

Vie wrote,

"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. "

 

Immigration and The Land Question

IMMIGRATION AND THE LAND QUESTION.

BY C. J. BUELL.

I. THE RIGHT TO MIGRATE.

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.

From "The Arena" - 1894

The Superficial Reformer

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.

Building a Railroad, and Paying for It -- and Who Benefits?

Here's another item from an 1896 California weekly.  It is a little difficult for the 21st century reader to remember that "road" at that time was shorthand for "railroad" or sometimes "streetcar line."

Incidently, only a rather small portion of the material in The San Jose Letter strikes me as particularly Georgist. (You'll see most of it here!)

The First Street Road and Single Tax

The San Jose Letter, May 30, 1896

A very good illustration of the unfairness and unjustness of our land system was furnished by the failure of the First Street Electric Road Company.  Jacob Rich, practically the company, has been a pioneer in local street car building, has failed, and stepped aside for others to reap the benefits of his toil and experiments.

It would be better for the community if the roads were all owned and operated by the city, but since they are not, and could not be, under existing conditions, the individual whose enterprise secures them is entitled to the gratitude of the people.

Rich spent thousands in experimenting on the San Jose and Santa Clara road. At the moment it began to pay, he found himself so situated, financially, that he was obliged to dispose of the property, thereby sinking a large fortune. Along the line of this particular road are situated many building lots. These lots doubled and trebled in value on account of the road. But Rich was not benefited. Individual owners, who stayed quietly at home, laughed at Rich as a crank, and condemned his road, found their fortunes doubled on account of it, but Rich got nothing. He was obliged to dispose of even the road itself, when it began to pay, a poorer man by many thousands of dollars. But I have not heard of one land owner whose property was benefitted by the road offering to help him out.

After getting free from the Santa Clara road tangle, Rich mortgaged his real estate, and hypothecated his securities to raise money to build the First street line, and the numerous extensions of the system. He then bonded the property to improve it, and eventually came to the end of his magnificent fortune. He failed then, disastrously.

The building of the First street line and its extensions have made many holders of suburban property wealthy. Rich does not get the benefit of this. He built the lines that have made the property more desirable for building purposes; has put the extra value upon them in fact, but he gets nothing for it, and the very people who have been benefited are now condemning him for losing his money in such an unprofitable venture.

Under a system of single tax the benefit of the increased value of the land to the community, which was occasioned by the new lines of street cars, would have been enjoyed by the whole people and not by individuals. Had the car lines been built by the municipality, by the people, the money lost in establishing and perfecting them would have been made up by the increased amount the community, the whole people, would have received from their outlying lands.

For instance, if the rent, which the people received for the lands before the roads were built, equaled 5% of their value as agricultural lands, when their value became doubled or trebled on account of the new demand for them as residence lots, caused by the building of the car lines, the rent or single tax would become double what it had been before the improvements were made. Thus the increased revenue from the land would make up the deficit that might result on account of the road before it became established.  In a word, the losses growing out of the first few years' expenses of the road would be borne by the whole community who would in return be benefited by the increased value of the suburban lands. One man would not be ruined by the experimental line, while another had his fortune doubled or trebled, but the advantages and disadvantages would be shared by all.

The people recognize that something is decidedly wrong in our economic system.  They all turn doctors of economics to remedy the matter, and set up economic cure-alls, warranted to make everybody sick. Apparently sane men tell us that "high protection" will result in all the economic reforms on the list. Others are for low tariff, others for single standard, others for free silver, others for prohibition, and so on and so on to the end of the chapter. Everything is tried, and has been tried over and over again, but the only thing that will ever permit men to enter the struggle of existence unhampered will be a system of single tax by which natural resources would be turned to the use of the whole community, and not to the benefit and advantage of individuals.

A progressive, energetic man like Jacob Rich would not then be beggared by his endeavors to improve conditions in the community, while the non-progressive Silurian of a land-holder has his fortune doubled and trebled through the efforts of another.

 

Things to Tax

Paul Krugman's column in the NYT Sunday was entitled "Things to Tax," and I thought it was a bit broad-brush. 

Krugman wrote,

"Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions."  

I don't disagree with either of those as a starting point, but neither goes to the root of the problem, which I believe to be the sorts of privileges we have given out, or somebody's ancestors put in place and we've not even thought about questioning.  They are so familiar to us that we don't question them any more than we think about breathing.  So (switching metaphors) we find ourselves barking loudly up the wrong tree -- while the critters in the other trees are smiling broadly!

The best answers I know to which tree we ought to be barking up come from the writings of Henry George.  Several speeches were what I was first inspired by:

• Thou Shalt Not Steal!
• The Crime of Poverty
• Thy Kingdom Come!
• Moses

Whether or not your own orientation is theological, I think you might appreciate these. 

We ought not to be taxing indiscriminately.  What we tax matters greatly.  Some provide Natural Public Revenue -- and we ought to socialize that revenue -- and other possible objects of taxation ought not to be taxed at all -- privatize them!

Here's the comment I posted to Krugman's column:

Which rich should we tax?

• Should we tax the ones who have bought or inherited or otherwise acquired our very choicest land -- that in our biggest cities, well-served by taxpayer-provided infrastructure and services?
• Should we tax the ones who, in effect, own our most valuable natural resources, or have access to resources we send our military to protect on our behalf?
• Should we tax those who benefit from monopolies of various kinds, such as owning our water companies, our electric utilities, our cable-tv companies, or monopolies of their own creation?
• Should we tax those who benefit from privileges of various kinds, such as the possession of our airwaves, landing/takeoff rights at busy constrained airports (think LGA at rush hour)?
• Should we tax those who benefit by taking some fraction of every financial transaction, even if that transaction doesn't create additional value for the economy as a whole?
• Should we tax those who benefit from the activity or inactivity of the FIRE sector, which Joe Stigitz says is creaming 40% of the profits made by the productive sectors of the economy?
• Or should we just tax all the high-income people, without going to the root of the privileges which produce undeserved wealth for some at the expense of the rest of us.

The answers to these questions matter.

Go to the root. Understand what is privilege, and what is an actual contribution to the economy. Understand what is someone's free lunch, paid for by the labor of others. Understand who reaps what they haven't sown. Correct these things.

An old idea. Look up Henry George's writings from the late 19th century, which kicked off the Progressive movement and still inspire many of us.

Short term, maybe, changing the income tax brackets is appropriate. But it doesn't get at the root of the problem.

Be radical. Go to the root.

For more information, see http://lvtfan.typepad.com/ or http://www.wealthandwant.com/, or look up Henry George's ideas.

As an afterthought, I'll add that you might want to check out Mason Gaffney's website, at http://www.masongaffney.org/; Fred Foldvary's writings, including "The Ultimate Tax Reform," and Walt Rybeck's book, "Re-Solving the Economic Puzzle."

Progress: Sharing the Earth So All May Prosper - September-November issue

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!

Who are the Criminals? --Henry George, Jr., 1901

I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.

Henry George, Jr., was a U. S. Congressman.  His most famous writing is "The Menace of Privilege." 

WHO ARE THE CRIMINALS?

BY HENRY GEORGE , JR.
Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York

I.    Who are the Criminals? 5
II.   French Aristocracy of Privilege 6
III.  New York Aristocracy of Privilege 10
IV.  Robbery of Masses by Classes 12
V.   Nature and Extent of Robberies 13
VI.  How to Stop the Robberies 18
VII. The Criminals 23

I.    WHO ARE THE CRIMINALS?

In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?

II. FRENCH ARISTOCRACY OF PRIVILEGE.

When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.

Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.

But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery.  Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.

The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country.  Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.

Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.

But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.

The aristocracy, therefore, were the primary, the real criminals.


III. NEW YORK ARISTOCRACY OF PRIVILEGE.

I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"

That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?

The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?


IV. ROBBERY OF MASSES BY CLASSES.

Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?

I believe that there can be but one answer — yes.

Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.


V. NATURE AND EXTENT OF ROBBERIES.

LET us consider how the classes may be robbing the masses into poverty.

It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.

This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?

Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.

Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them?  What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.

Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.


VI.   HOW TO STOP THE ROBBERIES.

Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —

In ground rents	$225,000,000
In franchise values	30,000,000
While they are compelled to pay in various taxes for the support of local government	98,000,000
Which makes in all	$353,000,000

What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values?  Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?

For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?

And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?

What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.

Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?

Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.

Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used.  This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.

What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.

The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.


VII.   THE CRIMINALS.

That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?

Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?

Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?

LTE: Rising Rate of Poverty - NYTimes.com

Rising Rate of Poverty - NYTimes.com.

To the Editor:

Re “Poverty Rate Soars to Highest Level Since 1993” (front page, Sept. 14): I know this is heresy, but why don’t we increase taxes on the wealthy and spend this money on infrastructure projects to put unemployed people to work?

Just asking.

ROBIN LEVIN
San Francisco,
Sept. 14, 2011

And consider what would happen: the infrastructure projects would increase the value of the land served by them, and make things work better in those communities, as reliable streets and bridges and other worthwhile projects do.  

Who owns that land?  Is it local folks, who one might hope would spend their infrastructure-created windfall locally (but who might simply use it to buy additional land, benefiting the seller, be he absentee, local, corporate, whatever)?   Is it REITs?  Sovereign wealth funds?

Now suppose that instead of leaving all that infrastructure-created wealth in the pockets of the landowners, local communities wised up and collected some significant fraction of it (without raising taxes on buildings in the process: the really wise communities would take this opportunity to reduce or eliminate the taxes on the buildings!) for public purposes.   What do you think would happen?

I suspect that the vacant lots in town would soon start to disappear.  They wouldn't leave town.  They'd get built on, when their carrying costs as vacant lots rose and the disincentive to build was decreased or eliminated. That would create jobs.  

Depending on what the market wanted, it would also create housing, and creating housing also leads to creating jobs to service those homes -- plumbers, electricians, painters, home improvement of various kinds.  

But it might not be the high-end housing we're used to seeing; not McMansions, but more modest homes.  Not luxury condos but housing for people of all ages and stages, and not just for the highest-income people but for people of more modest means.

Sounds like a virtuous circle to me.   Natural Public Revenue.

But if you like the current approach, by all means tell us why we should stick with it.  (California's Prop 13 is an extreme case of suppressing this wise form of taxation.  Look where it has gotten them!)

What's an intact tire and your car's alignment worth to you, per year?

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?

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.)

 

A few weeks ago (8/30/11), David Cay Johnston's blogpost at Reuters, entitled "Budget Costs That Raise Costs," ended with this example:

How can raising taxes put more money in your pocket? By increasing efficiency.

This year we paid $210 in higher property taxes to finance trash collection and sidewalk snowplowing. Purchased retail, those services would cost about $600. So we spent $210 to save $390. That translates into a savings of $1.86 for every dollar of increased tax. As an added bonus we have just one garbage truck a week down our street, not a different company’s truck everyday, and garbage cans on the street only on Thursday mornings.

What matters in public finance is not how much government spends, so much as what it buys with our tax dollars. But don’t count on the new “Super Congress 12″ committee to undertake serious cost-benefit analysis because cutting spending has become dogma and reality-based policies would be economic heresy.

I don't think DCJ has yet seen the cat, but he's certainly recognizing whiskers.

Would you be willing to pay $210 more in property taxes each year to have these services delivered to you by your community?  I'd guess that you might be very willing to pay $210 more in property taxes AND be willing to pay the seller -- and for 30 or 15 years, a mortgage lender -- more for the privilege of living in a place where these things are provided by the community, rather than just outside of town.    (If we paid for this via a tax on land value, the selling price wouldn't rise; and the cost of living would be held down.  If we pay for it by taxing wages, or sales, or buildings, we do burden the economy, just as the "small government" people tell us.  But they don't seem to consider the possibility of taxes which don't burden the economy.)   

There are some who would complain that private trash collectors and the people who specialize in shoveling the sidewalks ought not to have competition from the public sector.   They should all live in communities which feel this way.   And they might concede that others might choose to live in communities which provide these amenities efficiently, with people paid from the public treasury.  

Robert Reich: Jobs Will Follow a Strengthening of the Middle Class

Jobs Will Follow a Strengthening of the Middle Class - NYTimes.com.

The Limping Middle Class

THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal. When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?

That's the first paragraph of a recent op-ed by economist Robert Reich of UC-Berkeley.

I think this article is important, but that it misses a larger, longer-acting dynamic: the extent to which our most wealthy, with an awesome amount of "patient money" need to find places to "park" that money, and end up buying land and natural resources.

Mason Gaffney has written about this.  I commend his site to your attention: http://www.masongaffney.org/

When we need land, particularly well-located land, we end up paying them for access. When we need natural resources, we pay them for that, too.  

It isn't that such access shouldn't be paid for -- it should -- rather, why on earth should private individuals or entities be the recipients of that income, rather than it flowing to the commons to finance the goods and services that make our society a good place to live, without taxing work or purchases.

Taxing work does not create ...

Inspired by the energy, rhythm and tune of Kristin Andreassen’s Crayola Doesn’t Make the Color of your Eyes or another version from Prairie Home Companion, my friend Joe Johnston wrote this song.  Watch one of the videos first!  The tune is infectious, and Joe's words communicate the message clearly.

Taxing work does not create....

I went to see the wise one
our town was such a mess
the longest lines to get in
were at the DSS

He said, I cannot cure your town
But here’s something you can do
write a list and flesh it out
Of why your town is in a stew

Well, we build roads; we run the bus,
We try to control crooks.
We build the parks and sidewalks
We give our streets good looks

To do these things, we need some wealth
And so we tax the things we see
We tax the buildings and what you earn
We tax merchants and sellers with a fee.

(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.

Who benefits when America sells off our airwaves?

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!

http://www.huffingtonpost.com/2011/07/29/debt-ceiling-smartphone-harry-weird_n_913121.html

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."

Flies and horses, vines and pines ...

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.

 

 

Thinking about taxes and jobs

AN IMPORTANT DIFFERENCE

Man cannot profit from owning capital without using it, which means to employ labor. Man can profit from owning land without using it, which means unemployed labor. A low tax on land will not add one foot to the State; a high tax will not drive one acre away. A low tax or no tax on capital will bring to the State the means of developing its resources and employing its labor; a high tax will drive capital away and leave unemployment.

Which is your town/city/county/state/nation going to do? Will she listen to the land speculators, and lower the taxes on vacant land? Or will she give heed to the business men and farmers, and lighten the taxes on industry? Much depends upon her decision.

 

adapted from Tax Facts, January, 1928.

Think about the unused and underused land within the borders of your town or city.  It is not neutral.  It is a drag on your economy and contributes nothing, whil the owner sits and waits for someone to meet his price.  It is held out of use to create an unearned windfall for its owner. 

We ought to examine our tax policies for the incentives which make it possible for some owners to put the land in their portfolio to little or no use.   I'm not concerned with land of genuinely little value, but with land served by infrastructure that we-the-people have taxed ourselves to provide and maintain.  We accord landholders a privilege in taxing them but lightly, month in and month out, on the value of their holdings.  (At the same time, we make a big mistake by taxing the improvements and "personal" property, including vehicles and business equipment, of those who have improved their land to make it useful and productive.  I am reminded of Enoch Ensley's important statement:

NEVER TAX ANY THING
THAT WOULD BE OF VALUE TO YOUR STATE,
THAT COULD AND WOULD RUN AWAY, OR
THAT COULD AND WOULD COME TO YOU.

Our elected representatives ought to be reminded of that, and then asked to ponder how to implement it.  I commend to their attention Fred Foldvary's article "The Ultimate Tax Reform."

What should we tax?

Yet another from Tax Facts, this from March, 1927.

TAX DISCRIMINATION

To say that a tax is inequitable, because one kind of property is taxed at a higher rate than another kind of property, is to beg the whole question at issue. Equity demands that the cost of government be laid upon citizens in proportion to advantages derived by citizens from government.

To tax one miller more than another miller having the same investment would be unjust discrimination. But if one miller got power from steam of his own plant, while the other got power from a water fall, the latter's tax should be greater than the former's tax in order to place them on an equality before the law.

To tax a business man with a hundred thousand dollar investment the same as a land speculator with a hundred thousand dollar lot is unjust discrimination because the two investments are dissimiliar in nature and they respond differently to the tax law.

Thus, a factory deteriorates, the machinery wears out and becomes obsolete. The owner must constantly give it care and expend labor on it. The land speculator, on the contrary, gives his land no care, and he employs no labor. Yet the factory grows less in value with time, while the land increases in value. Manifestly it is unjust to tax these two citizens the same. One citizen enjoys no value but what he himself creates, while the other enjoys a value that the community has made.

If the community is to render justice to all its members it must vary its tax burdens to equalize the advantages they derive from the services rendered by the community.

 

Some 1927 wisdom for New Jersey in 2011

This comes from Tax Facts, January, 1927:

JERSEY WISDOM

Governor A. Harry Moore, of New Jersey, in his first inaugural address to the 1927 Legislature, after discussing several methods of financing new highway construction, said: "Lastly, I might suggest to you the wisdom of assessing some part of the cost of the road system upon the land specially benefitted thereby, as is the practice in municipal improvements. A striking illustration of what might be regarded as an evil of having the State at large pay for major improvements and the land peculiarly benefitted by the improvements escape, except in so far as it shares its proportion of the State's expense, is in the increase of land values in Bergen county, which came as a result of the projected Hudson River Bridge."

Notice that this was said before the George Washington Bridge had become a reality: the increase in land values began well before construction began.

Governor Christie could learn from Governor Moore's wise observation in 1927, as New Jersey considers the benefits to be derived from building an additional tunnel under the Hudson River.

And those who are upset about pork spending don't seem to notice that much of that federal spending has the effect of increasing land value in the localities where it is done, and that smart states, counties and towns would collect some significant share of that increase in land value, month in and month out, from those benefited by that federal investment.