Land Value Taxation will solve many of the 21st century's most serious social, economic and environmental problems, and promote justice, fairness and sustainability. We CAN have a world in which all can prosper.
Progress and Poverty, by Henry George Here are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!
Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It! This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm
Where Else Might You Look?
Wealth and Want The URL comes from the subtitle to Progress & Poverty -- and the goal is widely shared prosperity in the 21st century. How do we get there from here? A roadmap and a reference source.
Reforming the Property Tax for the Common Good I'm a tax reform activist who seeks to promote fairness and reduce poverty. Let's start with the enabling legislation and state requirements for the property tax. There are opportunities for great good!
There are no reliable statistics on the number of pieds-à-terre in New York City, but real estate experts say that global economic jitters have drawn more and more astonishingly wealthy people into the market in recent years. They come from all over, whether Monaco, Moscow or Texas, looking for a safe place to put their money, as well as a trophy, and perhaps a second — or third or fourth or fifth — home while they’re at it.
“It is a safe haven,” said Jonathan Miller, president of the appraisal firm Miller Samuel. “It’s not coming from just one country; it’s a global phenomenon.”
Scott Avram, an assistant vice president at Toll Brothers City Living, a company that builds luxury condos, said 40 percent of the buyers at the Touraine, a project at 65th Street and Lexington Avenue, were from foreign countries.
And the ultraluxury condo building One57 on West 57th Street, where two apartments are in contract for at least $90 million, has had billionaire buyers from Britain, Canada, China and Nigeria, as well as from America.
Then there is the $88 million crash pad at 15 Central Park West, bought last year by a trust linked to Ekaterina Rybolovleva, then 22 years old. Ms. Rybolovleva is the daughter of a Russian billionaire in the fertilizer industry, Dmitry Rybolovlev, who is in the middle of a rather expensive divorce. In a lawsuit filed last year, Mr. Rybolovlev’s wife, Elena Rybolovleva, alleged that the apartment was bought not as a place for their daughter to live, but as a way to put that money out of the older Ms. Rybolovleva’s reach. According to court documents, the younger Ms. Rybolovleva is a resident of Monaco.
The building at 15 Central Park West has its share of pieds-à-terre, real estate professionals say. But the concentration there is not as high as in other brutally expensive buildings, especially those in Midtown that share space and services with hotels, like the Plaza or the Time Warner Center, which shares a building with the Mandarin Oriental.
“I was living on the 16th floor, and I was pretty much the only one there,” said Charlie Attias, a senior vice president at the Corcoran Group who rented an apartment at the Plaza for three years and has handled many transactions in the building. “We had the occasional visitor — I mean, the occasional owner — once in a while.”
THAT man cannot exhaust or lessen the powers of nature
follows from the indestructibility of matter and the
persistence of force. Production and consumption are only
relative terms. Speaking absolutely, man neither produces
nor consumes. The whole human race, were they to labor to
infinity, could not make this rolling sphere one atom
heavier or one atom lighter, could not add to or diminish by
one iota the sum of the forces whose everlasting circling
produces all motion and sustains all life. As the water that
we take from the ocean must again return to the ocean, so
the food we take from the reservoirs of nature is, from the
moment we take it, on its way back to those reservoirs. What
we draw from a limited extent of land may temporarily reduce
the productiveness of that land, because the return may be
to other land, or may be divided between that land and other
land, or perhaps, all land; but this possibility lessens
with increasing area, and ceases when the whole globe is
considered. —Progress & Poverty — Book II,
Chapter 3: Population and Subsistence: Inferences from
read the corresponding section in Bob Drake's abridgement ...
WE are so accustomed to poverty that even in
the most advanced countries we regard it as the natural lot
of the great masses of the people; that we take it as a
matter of course that even in our highest civilization large
classes should want the necessaries of healthful life, and
the vast majority should only get a poor and pinched living
by the hardest toil. There are professors of political
economy who teach that this condition of things is the
result of social laws of which it is idle to complain!
There are ministers of religion who preach that this is the
condition which an all-wise, all-powerful Creator intended
for His children! If an architect were to build a theater so
that not more than one-tenth of the audience could see and
hear, we should call him a bungler and a botcher. If a man
were to give a feast and provide so little food that
nine-tenths of his guests must go away hungry, we should
call him a fool, or worse. Yet so accustomed are we to
poverty, that even the preachers of what passes for
Christianity tell us that the great Architect of the
Universe, to whose infinite skill all nature testifies, has
made such a botch job of this world that the vast majority
of the human creatures whom He has called into it are
condemned by the conditions he has imposed to want,
suffering, and brutalizing toil that gives no opportunity
for the development of mental powers — must pass their lives
in a hard struggle to merely live! — Social Problems — Chapter 8:
That We All Might Be Rich
OR let him go to Edinburgh, the "modern Athens," of which
Scotsmen speak with pride, and in buildings from whose
roofs a bowman might strike the spires of twenty churches he
will find human beings living as he would not keep his
meanest dog. Let him toil up the stairs of one of those
monstrous buildings, let him enter one of those "dark
houses," let him close the door, and in the blackness think
what life must be in such a place. Then let him try the
reduction to iniquity. And if he go to that good charity
(but, alas! how futile is Charity without Justice!) where
little children are kept while their mothers are at work,
and children are fed who would otherwise go hungry, he may
see infants whose limbs are shrunken from want of
nourishment. Perhaps they may tell him, as they told me, of
that little girl, barefooted, ragged, and hungry, who, when
they gave her bread, raised her eyes and clasped her hands,
and thanked our Father in Heaven for His bounty to her. They
who told me that never dreamed, I think, of its terrible
meaning. But I ask the Duke of Argyll, did that little
child, thankful for that poor dole, get what our Father
provided for her? Is He so niggard? If not, what is it, who
is it, that stands, between such children and our Father's
bounty? If it be an institution, is it not our duty to God
and to our neighbor to rest not till we destroy it? If it be
a man, were it not better for him that a millstone were
hanged about his neck and he were cast into the depths of
the sea? — The
Reduction to Iniquity (a reply to the Duke of Argyll) -- at page 25 -- originally in The
Nineteenth Century, July, 1884.
Inequalities we are born with, — we cannot help. Differences in
physique, disposition, temperament, ability, talent, ambition,
perseverance, character and many other personal qualities, will always
exist. But these inequalities are made more unequal by inequalities that
ought not to exist. It is the economic inequalities that especially
command our attention. Inequalities before the law make outlaws of those
who are outlawed. Inequalities in the enjoyment of special privileges,
natural opportunities and resources, make millionaires at one end of the
social line and tramps at the other. Inequalities in wealth and
taxation, however they arise, are trouble breeders in every community.
While ability and enterprise and push are always recognized as factors
in success, still they wholly fail to explain the great disparity of
rewards existing between the frugal and industrious on the one side and
the profligate idle, drunk with opulence and power, on the other. Too
many now have tasted the bitter cup of despair and have looked beneath
the economic surface of things to be longer quieted by admonitions of
sobriety, Industry and perseverance.
In success, they now see more the hand of fraud and cunning than the
qualities of exertion and merit. Their disillusionment is known and
appreciated in high places and is well-voiced in the following words of
John A. Hobson, Lecturer in Economics, Oxford University:
"Though there are still many comfortably-situated men and
women who believe that, on the whole, industrial conditions are such as
to apportion the 'good things in life' in accordance with the deserts of
the recipients, this belief is rarely held either by those whose
circumstances give them a close and wide acquaintance with the 'hard
facts of life,' or by those who have brought intellectual analysis to
bear upon the processes by which distribution of wealth is affected. The
political economy, not only of 'the masses,' as voiced by Karl Marx,
Henry George and their followers, but also of the classes, through the
mouths of academic teachers, is full of frank avowals of the deep
injustices which underlie the existing apportionment of wealth. The
following words of J. G. Hill may be taken as a representative
expression of this feeling: 'The very idea of distributive justice or
any proportionality between success and merit, or between success and
exertion, is, in the present state of society, so manifestly chimerical
as to be relegated to the region of romance.'"
When you pick up a special privilege and examine it, — whether it be a
franchise, a rebate, a tax or a tariff, — you have in your hands
someone's special preserve. He is hurt if you criticise, and you are
hurt if you don't. The social organism is filled with these special
preserves. They are a prolific source of economic inequality. They leave
no place for a buffer in the successive distributions of labor brought
about by the successive discoveries in the arts and of mechanics and
tools. When the natural resources are someone's preserve and are closed
to retreat, those crowded out of employment by machines and tools cannot
fall back, — they must stagnate and starve, or else go forward. And
"forward" here means to turn backward upon the preserves.
-- in The Painter and Decorator, a union journal, 1907
THE aggregate produce of the labor of a savage tribe is
small, but each member is capable of an independent life. He
can build his own habitation, hew out or stitch together his
own canoe, make his own clothing, manufacture his own
weapons, snares, tools and ornaments. He has all the
knowledge of nature possessed by his tribe — knows what
vegetable productions are fit for food, and where they maybe
found; knows the habits and resorts of beasts, birds, fishes
and insects; can pilot himself by the sun or the stars, by
the turning of blossoms or the mosses on the trees; is, in
short, capable of supplying all his wants. He may be cut off
from his fellows and still live; and thus possesses an
independent power which makes him a free contracting party
in his relations to the community of which he is a member.
I wonder if Morgan the Pirate,
When plunder had glutted his heart,
Gave part of the junk from his ships he had sunk
To help some Museum of Art;
If he gave up the role of "collector of toll" And became a Collector of Art?
I wonder if Genghis the Butcher, When he'd trampled down nations like grass.
Retired with his share when he'd lost all his hair, And started a Sunday school class;
If he turned his past under and used half his plunder In running a Sunday school class?
I wonder if Roger the Rover,
When millions in looting he made,
Built libraries grand on the jolly mainland
To honor Success and "free trade;"
If he founded a college of natural knowledge Where Pirates could study their trade?
I wonder, I wonder, I wonder,
If Pirates were ever the same,
Ever trying to lend a respectable trend
To the jaunty old buccaneer game;
Or is it because of our Piracy Laws That philanthropists enter the game?
—Wallace Irwin, in Life. -- reprinted in The Painter and Decorator, a union journal, 1907
FIVE centuries ago the wealth-producing power of England, man for man, was small indeed compared with what it is now. Not merely were all the great inventions and discoveries which since the Introduction of steam have revolutionized mechanical industry then undreamed of, but even agriculture was far ruder and less productive. Artificial grasses had not been discovered. The potato, the carrot, the turnip, the beet, and many other plants and vegetables which the farmer now finds most prolific, had not been introduced. The advantages which ensue from rotation of crops were unknown. Agricultural implements consisted of the spade, the sickle, the flail, the rude plow and the harrow. Cattle had not been bred to more than one-half the size they average now, and sheep did not yield half the fleece. Roads, where there were roads, were extremely bad, wheel vehicles scarce and rude, and places a hundred miles from each other were, in difficulties of transportation, practically as far apart as London and Hong Kong, or San Francisco and New York, are now.
IF it were possible to express in figures the direct pecuniary loss which society suffers from the social mal-adjustments which condemn large classes to poverty and vice, the estimate would be appalling. England maintains over a million paupers on official charity; the city of New York alone spends over seven million dollars a year in a similar way. But what is spent from public funds, what is spent by charitable societies, and what is spent in individual charity, would, if aggregated, be but the first and smallest item in the account. The potential earnings of the labor thus going to waste, the cost of the reckless, improvident and idle habits thus generated, the pecuniary loss (to consider nothing more) suggested by the appalling statistics of mortality, and especially infant mortality, among the poorer classes; the waste indicated by the gin palaces or low groggeries which increase as poverty deepens; the damage done by the vermin of society that are bred of poverty and destitution — the thieves, prostitutes, beggars, and tramps; the cost of guarding society against them, are all items in the sum which the present unjust and unequal distribution of wealth takes from the aggregate which, with present means of production, society might enjoy. — Progress & Poverty — Book IX, Chapter 2: Effects of the Remedy, upon distribution and thence on production
see the corresponding passage in Drake's abridgment of P&P
THREE thousand years of advance, and still the moan goes up, "They have made our lives bitter with hard bondage, in mortar and in brick, and in all manner of service!" Three thousand years of advance! and the piteous voices of little children are in the moan. We progress and we progress; we girdle continents with iron roads and knit cities together with the mesh of telegraph wires; each day brings some new invention; each year marks a fresh advance — the power of production increased, and the avenues of exchange cleared and broadened. Yet the complaint of "hard times" is louder and louder; everywhere are men harassed by care, and haunted by the fear of want. With swift, steady strides and prodigious leaps, the power of human hands to satisfy human wants advances and advances, is multiplied and multiplied. Yet the struggle for mere existence is more and more intense, and human labor is becoming the cheapest of commodities. Beside glutted warehouses human beings grow faint with hunger and shiver with cold; under the shadow of churches festers the vice that is born of wants.
fact — the great fact that poverty and all its concomitants show
themselves in communities just as they develop into the conditions
toward which material progress tends — proves that the social
difficulties existing wherever a certain stage of progress has been
reached, do not arise from local circumstances, but are, in some way or
another, engendered by progress itself.
COULD a man of a century ago* — a Franklin or a Priestley — have seen, in a vision of the future, the steamship taking the place of the sailing vessel, the railroad train of the wagon, the reaping machine of the scythe, the threshing machine of the flail; could he have heard the throb of the engines that in obedience to human will, and for the satisfaction of human desire, exert a power greater than that of all the men and all the beasts of burden of the earth combined; could he have seen the forest tree transformed into finished lumber into doors, sashes, blinds, boxes or barrels, with hardly the touch of a human hand; the great workshops where boots and shoes are turned out by the case with less labor than the old-fashioned cobbler could have put on a sole; the factories where, under the eye of a girl, cotton becomes cloth faster than hundreds of stalwart weavers could have turned it out with their hand-looms; could he have seen steam hammers shaping mammoth shafts and mighty anchors, and delicate machinery making tiny watches; the diamond drill cutting through the heart of the rocks, and coal oil sparing the whale; could he have realized the enormous saving of labor resulting from improved facilities of exchange and communication — sheep killed in Australia eaten fresh in England, and the order given by the London banker in the afternoon executed in San Francisco in the morning of the same day; could he have conceived of the hundred thousand improvements which these only suggest, what would he have inferred as to the social condition of mankind?
It would not have seemed like an inference; further than the vision went, it would have seemed as though he saw, and his heart would have leaped and his nerves would have thrilled, as one who from a height beholds just ahead of the thirst-stricken caravan the living gleam of rustling woods and the glint of laughing waters. Plainly, in the sight of the imagination, he would have beheld these new forces elevating society from its very foundations, lifting the very poorest above the possibility of want, exempting the very lowest from anxiety for the material needs of life; he would have seen these slaves of the lamp of knowledge taking on themselves the traditional curse, these muscles of iron and sinews of steel making the poorest laborer's life a holiday, in which every high quality and noble impulse could have scope to grow. And out of these bounteous material conditions he would have seen arising, as necessary sequences, moral conditions realizing the golden age of which mankind have always dreamed. Youth no longer stunted and starved; age no longer harried by avarice; the child at play with the tiger; the man with the muck-rake drinking in the glory of the stars! Foul things fled, fierce things tame; discord turned to harmony! For how could there be greed where all had enough? How could the vice, the crime, the ignorance, the brutality, that spring from poverty and the fear of poverty, exist where poverty had vanished? Who should crouch where all were freemen, who oppress where all were peers?
Long before I became interested in Henry George's ideas, I had been nudged in their direction by 3 very enthusiastic grandparents. I didn't find the time to read Progress and Poverty, despite receiving lovingly inscribed copies at several milestones in my young years. But somewhere along the way, I acquired a modern reissue of a 1912 book entitled "Gems from George." One of its beauties was that it could be read in short sections; another was that the headings on each page telegraphed the subject area. I can't replicate the latter here, but want to share the gems. I'll post one a day. Today, I'd share Bob Drake's abridgment of P&P; its chapters are shorter, and one can digest them. The Gems, however, come from all George's books, and some of his speeches and articles.
What is this you
call property? It cannot be the earth, for the land is our mother,
nourishing all her children, beasts, birds, fish and all men. The
woods, the streams, everything on it belongs to everybody and is
for the use of all. How can one man say it belongs only to him?
Timon: Why should you want? Behold, the earth hath roots;
Within this mile break forth a hundred springs;
The oaks bear mast, the briers scarlet hips;
The bounteous housewife, Nature, on each bush
Lays her fullness before you. Want! Why want ?
—Shakspere: "Timon of Athens," Act IV., Scene 3.
Timon: Common mother, thou, (digging)
Whose womb unmeasureable, and infinite breast
Teems and feeds all.
They sing of the golden Sigurd, and the face without a foe,
And the lowly man exalted, and the mighty brought alow;
And they say, when the sun of summer shall come aback to the land,
It shall shine on the fields of the tiller that fears no heavy hand;
That the sheaf shall be for the plougher and the loaf for him that
Through every furrowed acre where the son of Sigurd rode.
—William Morris, "Story of Sigurd, the Volsung," Book III, p. 203.
Quite belatedly, I found an interesting article on Taxi Medallions and Rent-Seeking. I particularly like the juxtaposition of the sidebar and the article's primary content; read the sidebar first.
Why did I include in the "categories" for this post "all benefits go to the landholder"? Because a taxi medallion is a privilege, which, in classical economics, is another form of "land." Read the sidebar!
There is an easy solution: auction off those privileges for limited periods of time. Lather, rinse, repeat!
The sidebar quotes Adam Smith "... the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce," which leads me to think about Henry George's axiom that
"The fundamental principle of human action — the law that is to political economy what the law of gravitation is to physics — is that men seek to gratify their desires with the least exertion." [Progress & Poverty Book III, Chapter 6 — The Laws of Distribution: Wages and the Law of Wages]
One quote from the body of the article:
Studies of economic losses due to rent-seeking and the resulting
monopolies have produced figures ranging from 3 to 12 percentage points
of national output for the US.
All of these are possible reasons why the city of Milwaukee might want
to limit the number of cab permits, but they do not imply that the
existing owners must have a permanent right to them.
The city could simply auction 321 licences every year or two and capture
all of the economic rents for itself. Another argument is that a permit
acts as a pension for drivers that would otherwise not have a business
they could sell on retirement. But that is true only for the first,
lucky generation of owners.
I should have thought the question about raising rents had been,
to your own knowledge, enough answered by me. I have in several, if
not in many places, declared the entire system of rent-paying to be
an abomination and wickedness of the foulest kind, and have only
ceased insisting on that fact of late years, because I would not be
counted among the promoters of mob violence. The future, not only of
England, but of Christendom, must issue in abolition of rents, but
whether with confusion or slaughter, or by action of noble and
resolute men in the rising generation of England and her colonies,
remains to be decided. I fear the worst, and that soon.
I'm skimming Louis Post's book "Social Service" (1909) and came across a couple of elegant paragraphs about Laissez faire.
Doesn't unrestricted competition mean to let everybody alone? That
depends upon what you mean by letting alone. It does not mean to let
everybody or anybody alone to interfere with production, with
service, with industry. Such interferences, whether by government or
highwaymen, are precisely what ought to be stopped in the interest
unrestricted competition. Unrestricted competition does mean that
everybody should be let alone in production, in trade, in service,
usefulness to his fellows, in making the world better and richer,
in securing a fair distribution of service among those who render
Truly enough, "laissez faire" is the word — "let alone," that is the
watchword of competition. But it isn't all of it. As the old
economists of France put it — those preceptors of Adam Smith — it
"laissez faire, laissez aller." Now, how would you translate that,
Doctor? Don't you think that George's free translation of "a fair
and no favor" will do? Or we might make it "a square deal and no
or best of all, maybe, "equal rights and no privileges."
There is no competition in the policy of "let alone," unless you
abolish privileges. But with equal rights and no privileges, can you
imagine anything fairer or squarer or juster in industry, in trade,
social service, than the policy of "let alone"? This doesn't mean a
"struggle for existence and survival of the fittest" in the sense of
survival of the strong at the expense of the weak, nor even of
of the more productive at the expense of the less productive. It
fair distribution in proportion to production. It means that he who
renders the most and the best service in his specialty shall get the
most and the best service from other specializers, while those who
render the least and the poorest shall nevertheless get the
of what they do render. And it leaves the decision to those who in
equal freedom make the deal for the service.
Competition is the natural regulator of the law of the line of least
resistance. Without such regulation that law might stimulate the
strongest — not the strongest in rendering service, but the
extorting service — to get service without giving an equivalent
of his own. There is your savage "tooth and claw" condition, Doctor.
But under free competition this would be impossible, for free
competition restrains the individual desires of each by the
of the individual desires of others. In other words, competition
to produce an equilibrium of the self-serving impulse at the most
useful level of social service.
It is a word of confusing connotations, this word "competition," as
all living words; and it may not be the best word for conveying my
idea. But I can't manufacture words, Doctor. All I can do is to make
unto myself a definition, and always to use my word in that sense;
all I can ask you to do is to adopt my definitions when you try to
understand my discourse.
Though competition may not be quite synonymous with natural
co-operation, it is closely related to it, and in such a manner as
justify me, I think, in characterizing it as the life principle of
Monopoly, on the other hand, whether its purpose be malevolent or
benevolent, is the death principle of natural co-operation.
So it seems to me that you will grasp the significance of
best by contrasting it with monopoly.
To sum it all up, there are only two ways of regulating co-operative
service, that social service which springs from individual desires
selfservice. One way is by monopoly; the other is by free
Monopoly is pathological, and socially destructive; competition is
natural, and socially creative.
Louis F. Post was editor of Henry George's weekly newspaper, The Standard, for a year or so, and went on to edit The Public for a number of years, and then became an Assistant Secretary of Labor in Woodrow Wilson's administration.
They had so long held the Swamp and felt it to be their very own
in every part and suburb, . . . that they would have resented the
appearance of another rabbit even about the adjoining barnyard.
Their claim, that of long, successful occupancy, was exactly the
same as that by which most nations hold their land, and it would be
hard to find a better right.
—Ernest Thompson Seton, "Wild Animals I Have Known."
"Raggylug," Chapter VIII.
George Monbiot has an excellent article on tax in the Guardian this morning. At its core is an argument for land value taxation, which he explains has long had powerful support. As he puts it:
In 1909 a dangerous subversive explained the issue thus. “Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -– and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived … the unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done.”
Who was this firebrand? Winston Churchill. As Churchill, Adam Smith and many others have pointed out, those who own the land skim wealth from everyone else, without exertion or enterprise. They “levy a toll upon all other forms of wealth and every form of industry”. A land value tax would recoup this toll.
[W]hat’s wrong with the argument the Terry Leahys and the Bob Diamonds make for their extreme wealth? Look, the line runs, we work bloody hard for it; we’re worth it. And it’s true: unlike previous generations of the ultra-wealthy, many of the modern super-rich work for a living, in running major businesses or in finance (although the Davos guestlist still includes plenty of sheikhs and royals). But that doesn’t mean they truly earn the millions they claim.
Take a look at who’s in the Davos set. Last spring, two American academics, Jon Bakija and Brad Helm, and a US Treasury official, Adam Cole, published the most comprehensive analysis yet of the richest 0.1% earners, based on tax returns. Of these top dogs, nearly two in three were top corporate executives and bankers. And the story in both those professions has not been of brilliant returns to shareholders or vast improvements for society, but of wealth extraction and lobbying politicians, Davos-style. In particular, the tale of modern high-finance is of generating transactions, whether in corporate mergers or sub-prime mortgages and then skimming off some of the cash.
That’s extracting rent in exactly the same way that the property owner does. Economically the logic is the same. This is all unearned income, and we should not be granting it favours which increase the divisions and stresses in society; we should be taxing it.
That means we need land value taxation for sure, but we need progressive income taxation, capital gains tax at the same rate as income tax and enforceable corporation tax too if these rents are to be collected. And then there’s the need for reform of inheritance tax.
I really must get round to writing the Joy of Tax. It is next on my list.
"This is where the debate about workers and shirkers, strivers and skivers should have led. The skivers and shirkers sucking the money out of your pockets are not the recipients of social security demonised by the Daily Mail and the Conservative party, the overwhelming majority of whom are honest claimants. We are being parasitised from above, not below, and the tax system should reflect this."
Although this is a UK-focused story, it has international relevance. As we've noted several times before, Land Value Tax is an essential element of any good tax mix. It's progressive, it doesn't damage productivity, and it curbs the abusive practice of economic rent extraction. The article has a particular opinion:
"It's not really a tax. It's a return to the public of the benefits we have donated to the landlords. When land rises in value, the government and the people deliver a great unearned gift to those who happen to own it."
"The Lord's Prayer says, Give us this day our daily bread. Our
daily bread comes from the land. No man made the land. It is God's
gift to mankind. It belongs to all men. Therefore individual
ownership of land is wrong. Individual control of the fruits of the
land is wrong."
God has made the rich and the poor of the same clay and one
earth bears them both. It is through emperors and kings of the world
that God gives the human law of the human race. Take away the law of
the emperors and who shall dare to say, "This villa is mine?"
The current issue of the Georgist News ends with these two quotes:
“Capital is a result of labor, and is used by labor to assist it in further production. Labor is the active and initial force, and labor is therefore the employer of capital.”
“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.”
On a sudden the commonalty rose one and all, and encouraging
each other, they left the city, and withdrew to the hill not called
Sacred, near the river Anio, but without committing any
violence, or other act of sedition. Only as they went along, they
loudly complained, that it was now a great while since the rich had
driven them from their habitations; that Italy would anywhere supply
them with air and water and a place of burial; and that Rome, if
they stayed in it, would afford them no other privilege, unless it
were to bleed and die for their wealthy oppressors.
The fate of empires, and the fortunes of their peoples, depend
upon the condition of the proprietorship of land to an extent which
is not at all understood in this country. We are a servile,
aristocracy-loving, lord-ridden people, who regard the land with as
much reverence as we still do the peerage and the baronetage. Not
only have not nineteen-twentieths of us any share in the soil, but
we have not presumed to think that we are worthy to possess a few
acres of mother earth.
1. There are a lot of living costs that we don't pay for.
2. A higher gas tax could make the economy more efficient.
3. And so could taxes for all kinds of things.
4. But where do you draw the line?
Adam Davidson is asking some good questions here. Henry George provided some good answers to those questions. I recommend starting with "Social Problems" and then progressing to "Progress and Poverty."
Here are the opening paragraphs of a recent article about the complexities of Ground Lease contracts. I commend the entire article to your attention. It helps flesh out why and how the entire FIRE sector -- Finance, Insurance and Real Estate (as well as their attorneys) -- is receiving such a large share of the profits produced by the productive sectors of the economy. The owner of land, and the entities which lend on land, and insure the buildings and the revenue flow, all reap significant shares of what the tenants labor to create. Modern sharecropping. And the recipients of the ground rent get to parade as self-made men, people of awesome foresight and wisdom -- and even philanthropists (think Brooke Astor, the Fishers, and others in your own community) when they donate a small share back to a charity! As you read this, think both of Manhattan land and of land in your community's central business district, and along its major roads. (Location, location, location!)
If one wonders why (true) small business struggles, one might consider the complexity and expense of their ground leases, and contrast that with the Georgist alternative: that one's taxes would be simply the current rental value of the land, while the value of the building remains one's private property, not subject to taxation or going pouf! at the end of a ground lease.
The land lord is "supplying" something he didn't create. We ought to ease him out. Land value taxation is the obvious tool for reducing, and -- slowly or not -- eliminating, his "take" on those who do create. Think what it would mean if working people had that spending power, instead of the lords of the land.
All that land rent could be used to fund our community's needs, instead of lining the pockets of a few very "lucky" -- privileged -- duckies. (The analogies to chattel slavery are not a long stretch, once one starts to think about it. We should all own ourselves, and reap the fruits of our own labors.)
A lease is a lease is a lease – or so you may think. Yes, real property leases grant an estate in land to a tenant for a period of time. And yes, the tenant pays for that right of possession. But the action in a lease isn’t in the conveyance provisions; it’s in the contract provisions. Multiply out the rent and other annual monetary obligations by the length of the lease term (in years), and you’ll see that it might be (and often is) a big dollar contract. Even more important, unlike the vast majority of contracts whose obligations are satisfied in days or weeks, a lease contract goes unfulfilled for 50, 75, “99,” and even 500 years. That takes it beyond the life of the parties involved in its creation, and the future brings surprises. Neither Nostradamus nor Jules Verne got everything right.
Why a Ground Lease?
If a tenant has to build its own building (as is often the case), and has all of the burdens of ownership, why would it lease a property knowing that at the end of the lease term it has nothing left to show for its money and efforts? There are a number of common reasons, principal among them is that the owner won’t sell the land and the tenant has no alternative.
Real property often carries a long term unrealized gain, waiting to be taxed upon its sale.
Not every landowner is interested in making further active real property investments. This makes a like kind exchange unappealing.
Ground leasing the same land keeps ownership in the family. At the owner’s death, because of the current estate tax “stepped up basis” arrangement, the built in gain may never be taxed.
The hospitals (of England) are full of the ancient. . . . The
almshouses are filled with old laborers. Many there are who get
their living with bearing burdens, but more are fain to burden the
land with their whole bodies. Neither come these straits upon men
always through intemperance, ill-husbandry, indiscretion, etc.; but
even the most wise, sober and discreet men go often to the wall when
they have done their best. . . The rent-taker lives on the sweet
morsels, but the rent-payer eats a dry crust often with watery eyes.
—Robert Cushman, Plymouth, 1621, in Young's "Chronicles of the
As soon as I see landed property established, then I see unequal
fortunes, and from these unequal fortunes must there not necessarily
result different and opposed interests, all the vices of riches, all
the vices of poverty, the brutalisation, the corruption of civil
—Jean Jacques Rousseau, "Douies sur L'Otdre Naturel."
I want to live in a just society - a society where we, the people, are recognised as the rightful owners of natural resources; where we all feel a shared ownership of the earth.
Such a simple proposition has profound implications. As co-owners, we would be entitled to a dividend from those natural resources.
That would provide a basic income for every person, allowing us the freedom to choose a fulfilling career, rather than be forced to accept wage-slave jobs to meet our debt-ridden commitments. True freedom implies the right to choose our work, our interests and where we live.
If we, as owners, had a say in the management of our natural resources, most likely we would not consent to the world as it is.
In a democratic society, where the people own the natural resources, in common, we would recognise commons property rights in our accounting. We would not allow loss of biodiversity, pollution of our streams and rivers, high rates of mineral depletion (including fossil fuels), loss of our starscape every night of the year to light pollution – or, at least, we would not allow these things beyond what is acceptable to the people.
When there is even one billionaire, there will be several
half-billionaires and many hundred-millionaires. The fact will
be an indication of a tremendous concentration of wealth, and of the
dwindling proportion of wealth held by the farmers and wage-earners
of this country. The billionaire will bring an army of paupers
in his train. Possibly the actual average wealth of farmers
and mechanics then may be a little greater than it is now.
Optimists of that day may assure them that they are richer, by ten
dollars each, than their ancestors were; and therefore that all is
for the best in this best of all possible worlds. But the
discontent of the masses, under a system which gives to one man a
larger amount of wealth than can ever be attained by a million of
his fellow citizens who are fully his equals in skill and merit and
far his superiors in industry, is certain to be great and ever
increasing. Indeed, universal experience demonstrates that
discontent among the masses is far greater than when the weight of
oppression is somewhat diminished than it was before.
The vast majority of any community must
always have incomes so small that they cannot help spending three
fourths of what they receive. But the small minority of large
property-owners do not need to spend one eighth of their incomes,
and as a rule they do not spend one half. Looking at the
subject with reference to accumulated wealth, the man who is worth
$1,000 usually spends at least $500 a year on the support of his
family, while the man who is worth $1,000,000 rarely spends
$50,000. Indirect taxation, therefore, obviously bears at
least ten times as heavily upon the former as upon the latter.
Under absolutely direct taxation, no poor man would ever pay a
larger share than a rich man, and, indeed, most of the working
classes would pay no taxes at all; because the collection of direct
taxes from them would be too laborious and expensive to be
Direct taxation, on a large scale, is near at hand. The men
who bought and paid for the present Congress can now choose what its
form shall be. They can have a general income tax, or they can
have something less open to fraud, less inquisitorial in its nature,
less oppressive upon honest men, and offering no premium to
perjury. But they know nothing about the science of taxation,
and they do not care to learn; so that the whole matter will be left
over to the new Congress, and a general income tax, objectionable as
it is, seems most likely to be adopted.
The Coming Billionaire
The Forum, January, 1891, page 546-557
In the FORUM for November, 1889, the question was asked, "Who owns
the United States?" and reasons were given for the belief that one
half of all the national wealth is owned by 40,000 families and that
three fourths of it is in the possession of fewer than 250,000
families. These estimates were based in part upon official tax
returns, but in part, also upon private information as to the wealth
of 70 estates, specifically named, each estimated to be worth
more than $20,000,000 and averaging $37,500,000. The
correctness of these statistics, as well as that of the inferences
drawn from them, has been somewhat bitterly denied. Hostile
critics have assumed that the estimates of individual wealth were
based entirely upon newspaper reports; and many newspaper editors,
acting presumably upon their own experience, have unhesitatingly
declared that such statistics are necessarily worthless.
But not one tenth of these names were given upon the authority of
newspaper estimates, while a large majority were given upon very
trustworthy private information. It has been said that no one
can tell what a man's wealth amounts to without access to his books,
which, it has been assumed, is impossible. In several
instances, however, the information came from persons who had access
to the necessary books or had been permitted to inspect the
securities; in some cases it was obtained from tax returns; and in
other cases it was taken from the oral or written statements of the
owners themselves. For example, one gentleman, whose wealth
was set down at $100,000,000 had actually exhibited $75,000,000 in
securities, and had testified in a court of law to the possession of
$10,000,000 more of one kind, all encumbered. During the year
which has now elapsed, not one tenth of these names have been
specified by any one as erroneously entered upon the list or as
seriously overrated, and in only three instances has any probable
error been established. These names might be omitted, and
their places might be supplied by others of the twenty million
grade. Errors of understatement have been discovered which
largely counterbalance all overstatements. The least that can
be said is that there are 70 American estates that average
$35,000,000 each, not including Trinity Church, which perhaps should
not be classed with strictly individual owners. During the
year, by the consolidation of two estates, one individual has become
worth at least $200,000,000. Two brothers, whose property is
held as a unit, together own even a larger amount than this.
Some great estates have been divided up by inheritance, but others
have been divided up by inheritance, but others have been still more
concentrated by that means.
Government's role in income inequality in the U. S.
The federal government has emerged as one of the most potent factors behind the rise in income inequality in the United States - especially in the nation’s capital. Income is increasingly being redistributed up, not just down, through tax cuts and to a growing upper class of contractors, lobbyists and lawyers.
Massachusetts, home to America’s best schools and best-educated workforce, has seen income inequality soar. Why? The poor are losing an academic arms race with the rich. READ MORE
The Undeserving Poor
The American welfare state is bigger than ever, but so are the ranks of the poor. As the U.S. focuses on those deemed most worthy, millions of adults get squeezed. That is clear in Indiana, which has seen a surge in poverty. READ MORE
DEMOCRACY is like a bicycle: if you don’t keep pedaling, you fall. Unfortunately, the bicycle of Greek democracy has long been broken. After the military junta collapsed in 1974, Greece created only a hybrid, diluted form of democracy. You can vote, belong to a party and protest. In essence, however, a small clique exercises all meaningful political power.
For all that has been said about the Greek crisis, much has been left unsaid. The crisis has become a battleground of interests and ideologies. At stake is the role of the public sector and the welfare state. Yes, in Greece we have a dysfunctional public sector; for the past 40 years the ruling parties handed out government jobs to their supporters, regardless of their qualifications.
But the real problem with the public sector is the tiny elite of business people who live off the Greek state while passing themselves off as “entrepreneurs.” They bribe politicians to get fat government contracts, usually at inflated prices. They also own many of the country’s media outlets, and thus manage to ensure that their actions are clothed in silence. Sometimes they’ll even buy a soccer team in order to drum up popular support and shield their crimes behind popular protection, as the drug lord Pablo Escobar did in Colombia, and as the paramilitary leader Arkan did in Serbia.
In 2011, Evangelos Venizelos, who was then the finance minister and is now the leader of the socialist party, Pasok, instituted a new property-tax law. But for properties larger than 2,000 square meters — about 21,000 square feet — the tax was reduced by 60 percent. Mr. Venizelos thus carved out a big exemption for the only people who could afford to pay the tax: the rich. (Mr. Venizelos is also the man responsible for a law granting broad immunity to government ministers.)
It seems to me that I also heard that the property tax law only applied to land with buildings on it -- it was collected via electric utility bills! Thus, vacant land, even in choice locations, seemed to be excluded.
How to kill an economy!
Such shenanigans have gone on for decades. The public is deprived of real information, as television stations, newspapers and online news sites are controlled by the economic and political elite.
The article goes on to detail other corrupt things, and then concludes:
This is all unfolding at a time when Greece is walking a tightrope above the abyss of bankruptcy, while the coalition government is instituting new taxes on the lower classes. Half of young Greeks are unemployed. The economy is shrinking at an annual rate of 6.9 percent. People are scrounging for food. And a neo-Nazi party, Golden Dawn, is on the rise, exploiting the resentment and rage toward the ruling class.
The Greek people must remount their bicycle of democracy by demanding an end to deception and corruption. Journalists need to resist manipulation and rediscover their journalistic duties. And the government should revive Greece’s ancient democratic heritage — instead of killing the messenger.
It began more than 90 years ago as a small tax break intended to help family farmers who wanted to swap horses and land. Farmers who sold property, livestock or equipment were allowed to avoid paying capital gains taxes, as long as they used the proceeds to replace or upgrade their assets.
Over the years, however, as the rules were loosened, the practice of exchanging one asset for another without incurring taxes spread to everyone from commercial real estate developers and art collectors to major corporations. It provides subsidies for rental truck fleets and investment property, vacation homes, oil wells and thoroughbred racehorses, and diverts billions of dollars in potential tax revenue from the Treasury each year.
The tax break also exposes one of the greatest vulnerabilities of the United States tax system: it depends on voluntary compliance. The I.R.S. staff is so outnumbered by tax lawyers and accounting departments at major corporations that there is often little to prevent taxpayers from taking a freewheeling approach to interpreting and administering the rules.
What’s more, the tax break is one of so many that it tends to escape attention. The independent Simpson-Bowles deficit commission appointed by Mr. Obama in 2010 raised the possibility of eliminating it and other tax expenditures, however, and some budget experts argue that the program should be severely limited or repealed.
Some financial planners and economists say that the tax break even favors real estate investors unfairly by allowing them to defer capital gains taxes that those who invest in securities and other ventures have to pay. And although it was originally intended to help farmers, some economists and lawmakers in agricultural areas say it has perversely contributed to suburban sprawl and the spiraling cost of farmland. Because it allows farmers to avoid capital gains taxes on land swaps, the tax break provides an incentive to sell farmland coveted by developers and buy property in less desirable and more remote areas.
Even as the debate over the tax break continues, there is a deep conviction in the real estate business that it is justified. Advocates for the real estate industry say that a large majority of transactions are conducted in strict compliance with I.R.S. regulations. Because the asset exchanges spur investment and help create jobs, industry officials say they would strenuously oppose any effort to end them.
“Historically, these exchanges are a very important consideration for a very important segment of the economy,” said Jeffrey D. DeBoer, chief executive of the Real Estate Roundtable. “I have no reason to believe that Congress won’t ultimately recognize that.”
A very important segment of the economy, or a very important segment of the financing of political campaigns? Land speculation doesn't create jobs for ordinary working people. Tax accountants, perhaps. Banks, perhaps. But land speculation is inert -- if what we want are jobs and widespread prosperity.
Recall that capital doesn't appreciate. Buildings and equipment, even with the best of maintenance, decline in value. What appreciates is land and natural resources -- and they rise in value for reasons which have nothing to do with the fellow, or corporation, who owns them. He is passive, inert -- and rent-seeking. We ought not to reward or even permit it. We can correct it through a better designed tax system.