By THE ASSOCIATED PRESS AUG. 20, 2014
By THE ASSOCIATED PRESS AUG. 20, 2014
Posted on August 23, 2014 at 02:27 PM in common good, commons, cui bono?, Earth for All, economic rent, financing services, government's role, land includes, land monopoly capitalism, Natural Public Revenue, natural resource revenues, natural resources, privatization, windfalls | Permalink | Comments (0)
| | | |
An article in the NYT a few weeks ago described some proposed changes in the zoning for midtown Manhattan.
The accompanying map says, "Around Grand Central Terminal, towers could be up to twice the size now permitted. Development could also take place along the Park Avenue corridor, where towers could be more than 40% larger. Elsewhere in the district, towers could be 20% larger."
But New York’s premier district, the 70-block area around Grand Central Terminal, has lagged, Bloomberg officials say, hampered by zoning rules, decades old, that have limited the height of buildings.
Mayor Michael R. Bloomberg wants to overhaul these rules so that buildings in Midtown Manhattan can soar as high as those elsewhere. New towers could eventually cast shadows over landmarks across the area, including St. Patrick’s Cathedral and the Waldorf-Astoria Hotel. They could rise above the 59-story MetLife Building and even the 77-story Chrysler Building.
Mr. Bloomberg’s proposal reflects his effort to put his stamp on the city well after his tenure ends in December 2013. Moving swiftly, he wants the City Council to adopt the new zoning, for what is being called Midtown East, by October 2013, with the first permits for new buildings granted four years later.
His administration says that without the changes, the neighborhood around Grand Central will not retain its reputation as “the best business address in the world” because 300 of its roughly 400 buildings are more than 50 years old. These structures also lack the large column-free spaces, tall ceilings and environmental features now sought by corporate tenants.
The rezoning — from 39th Street to 57th Street on the East Side — would make it easier to demolish aging buildings in order to make way for state of-the-art towers.
Without it, “the top Class A tenants who have been attracted to the area in the past would begin to look elsewhere for space,” the administration says in its proposal.
The plan has stirred criticism from some urban planners, community boards and City Council members, who have contended that the mayor has acted hastily. They said they were concerned about the impact of taller towers in an already dense district where buildings, public spaces, streets, sidewalks and subways have long remained unchanged.
Mr. Bloomberg has encouraged high-rise development in industrial neighborhoods, including the Far West Side of Manhattan, the waterfront in Williamsburg, Brooklyn, and in Long Island City, Queens. But with the proposal for Midtown, which is working its way through environmental and public reviews, he is tackling the city’s commercial heart.
“Unlocking the development potential in this area will generate historic opportunities for investment in New York City,” Deputy Mayor Robert K. Steel said.
The initiative would, in some cases, allow developers to build towers twice the size now permitted in the Grand Central area. The owner of the 19-story Roosevelt Hotel at Madison and 45th Street could replace it with a 58-story tower under the proposed rules. Current regulations permit no more than 30 floors.
See also http://lvtfan.typepad.com/lvtfans_blog/2008/03/hotel-roosevelt.html , which discusses this in terms of value of land per buildable square foot.
When zoning changes increase the value of land, who should reap the benefit? The current landholder, or the community? What did the landholder do to earn that windfall? Do you think it comes out of thin air? Do you think it is paid him by other rich people?
Or do you recognize that it is part of the structure which enriches a few and impoverishes the many?
It is easy to fix this one. One just has to recognize the structure, and value the land correctly, and start collecting the lion's share of the land rent for the community. If it is more than NYC can put to use -- and it will be -- then apply the excess to reducing our federal taxes on productive effort. Use it to fund Social Security, or Medicare, or universal health insurance, or something else that will benefit the vast majority of us instead of an undeserving tiny privileged minority. Don't throw it in the ocean, and don't leave it in private pockets, be they American or not.
Collect the land rent. Repeat next year, and the next, and the next. Natural Public Revenue.
Posted on October 21, 2012 at 05:36 PM in a Manhattan acre, all benefits go to landholder , better cities, classical economists, commons, corporations, cui bono?, economic rent, financing education, financing health care, financing infrastructure, financing services, financing Social Security, fixing the economy, free lunch, government's role, income concentration, justice of the single tax, land appreciates buildings depreciate, land rent, land value created by community, land value taxation, location, location, location, make land common property, monopoly -- not the game, Natural Public Revenue, Occupy Wall Street's values, one solution for many problems, pay for what you take, payroll tax, popular ignorance of land economics, privilege, special interests, time making wrongs into rights, toll-takers, unburdening the economy, underused land, unearned increment, untaxing production, urban land value, wealth distribution or concentration, windfalls | Permalink | Comments (0) | TrackBack (0)
| | | |
Unrestricted private property in land gives to individuals a large proportion of the wealth created by the community at large.
— PROF. ALFRED RUSSEL WALLACE, Land Nationalization, Chap. VIII., pp. 235-2.
Posted on July 30, 2012 at 12:01 AM in absentee ownership, all benefits go to landholder , capital gains are land gains, corporations, cui bono?, Earth for All, economic rent, fixing the economy, free lunch, justice of the single tax, land monopoly capitalism, land value created by community, landed gentry, Landlord's Prayer, landlordism, make land common property, political economy, private property in land, privatization, privilege, reaping what others sow, rent-seeking, special interests, toll-takers, unearned income, urban land value, windfalls | Permalink | Comments (0)
| | | |
Here is the fundamental error, the crude and monstrous assumption, that the land which God has given to our nation, is or can be the private property of anyone. It is a usurpation exactly similar to that of slavery.
— PROF. F. W. NEWMAN, Lectures on Political Economy (1851), Lecture VI., p. 533.
Posted on April 29, 2012 at 01:05 AM in a wedge driven through society, commons, commonwealth, Earth for All, ending poverty, land monopoly capitalism, landlordism, make land common property, political economy, popular ignorance of land economics, private property in land, privatization, privilege, rich people's useful idiots, sharecropping, slavery, special interests, teach your children well, time making wrongs into rights, toll-takers, windfalls | Permalink | Comments (0)
| | | |
While I was in the wood alone by myself a gathering of nuts, the forester popped through the bushes upon me, and asking me what I did there, I answered, "Gathering nuts."
"Gathering nuts!" said he; "and dare you say so?"
"Yes," said I. "Why not? Would you question a monkey or a squirrel about such a business?"
. . "I tell you," said he, "this wood is not common; it belongs to the Duke of Portland."
"Oh! My service to the Duke of Portland," said I; "Nature knows no more of him than of me. Therefore, as in Nature's storehouse the rule is, First come, first served, so the Duke of Portland must look sharp if he wants any nuts."
— THOMAS SPENCE, Pig's Meat (1793)
in Land for the Landless (Wm. Reeves, 1896), pp. 7-8.
Posted on March 09, 2012 at 02:02 AM in absentee ownership, all benefits go to landholder , commons, commonwealth, Earth for All, economic rent, ecosystem services, equal opportunity, equality, free land, fruits of one's labors, land rent, land, labor and capital, landed gentry, Landlord's Prayer, landlordism, make land common property, pay for what you take, private property in land, property rights, reaping what others sow, sharecropping, special interests, time making wrongs into rights, toll-takers, unearned income, untaxing production, windfalls | Permalink | Comments (0)
| | | |
a bit out of sequence ...
35. He worked hard. He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high lease prices for generations. Is it right to exact an estate tax of 50% or so on the true market value of that estate?
A. No! Widows and orphans must be protected! We wouldn't want them to have to depend on the social safety net.
B. No! The dollars he spent to buy that land decades ago were already subject to an income tax -- maybe two (federal and state) -- and the heirs are entitled to keep all the increase from the purchase price, even if that is a 20% increase, or a 200% increase, or a 2000% increase, over the purchase price.
C. No! The man had foresight, and we ought to honor, reward and encourage that!
D. No! The interstate highway could have been re-routed, and the man and his widow and children could have been left high and dry. They took a risk, and we ought to reward them for their brilliance!
E. An estate tax is a good way to capture this socially-created windfall once per generation. After all, he can't take it with him. Half for the heirs, half for the community that created the value. Seems fair, and keeps them out of the social safety net.
F. An estate tax is better than nothing, but it is a poor alternative to collecting some significant portion of the rental value of the land, month in and month out, whether that rental value be low (before the interstate highway's route is determined) or high (after it is announced and built, and the community grows up around that highway).
G. Your suggestions?
Posted on March 07, 2012 at 10:16 PM in absentee ownership, all benefits go to landholder , capital gains are land gains, cui bono?, economic rent, estate taxes, FIRE sector, fruits of one's labors, income tax, infrastructure, justice of the single tax, land appreciates buildings depreciate, land rent, land speculation, land value created by community, land value taxation, location, location, location, Natural Public Revenue, pork spending, private property in land, public spending, reaping what others sow, the land questions, unearned increment, widow's skirts, windfalls | Permalink | Comments (1)
| | | |
28. Private-sector insurance companies are raising their rates for waterfront or near-waterfront property, or refusing to renew policies in hurricane-prone areas. States are stepping in to provide insurance of last resort. How should this be financed?
A. It should be self-financing, with rates designed to cover 100% of the risks. This might drive down the selling prices of the properties, but that is appropriate given the increased risks involved.
B. Taxpayers all over the state should subsidize the insurance rates, from taxes on wages
C. Taxpayers all over the state should subsidize the insurance rates, from taxes on sales
D. Taxpayers all over the state should subsidize the insurance rates, from taxes on their land values
E. Inland taxpayers should be taxed to pay for the subsidies to coastal propertyowners
F. Hotel and rental-car taxes should be used to pay for the subsidies to coastal homeowners and commercial property owners
G. Collect taxes in proportion to pollution which is producing slower-moving storms, which will have the effect of incentivizing reductions in that pollution
H. Your suggestions?
Posted on February 28, 2012 at 09:26 AM in capital gains are land gains, environment, FIRE sector, greenhouse gases, income tax, location, location, location, pollution, privilege, sales taxes are wrong, socializing risk and privatizing profit, special interests, subsidies, wage taxes, wages, water, windfalls | Permalink | Comments (0)
| | | |
Does the Single Tax discriminate between earned and unearned income?
It is the scientific way of doing what we have been feebly attempting to do in an unscientific way, that is, to distinguish between what Dr. Scott Nearing called "property income" and "services income," or between that form of wealth which is the result of individual effort in production and that which is purely the result of the collective effort of society; or between the two forms of wealth which Dr. Ellwood, of the University of Missouri, in a seemingly unwilling recognition of an unwelcome truth, calls "earnings" and "findings."
In the case of the great majority of us (whether as individuals or as partners in corporations) our incomes are so inextricably compounded of earnings and findings, of privilege income and service income, that it is hard for some of us to know whether we belong to the privileged or unprivileged classes, to the slave owners or the slaves, to the confiscators or the victims; and perhaps only those absolutely property less men at the bottom of the social scale can be said to have no share in the "findings" that spring from privilege. On the other hand it is equally true that all industry up to its highest strata, has to pay toll to privilege and provide those "findings" which distribute themselves with more or less inequality over almost the whole of society. How to distinguish between and separate these entirely different kinds of wealth is what all sincere sociologists and honest taxation commissioners have wanted to do and have hitherto failed in the doing.
If we take a handful of sand and a handful of iron filings and mix them thoroughly, and then set a man with the sharpest eyesight and the nimblest fingers to separate the particles, it will take him long to accomplish his task and he will never do it with more than an approximation to completeness. But apply a strong magnet to the mixture and the separation will be accomplished in ten minutes. Then see how the analogy applies to the economic problem in society. Let us imagine the return that should naturally flow to land in the form of rent to take the shape of blue coins made of steel. Let us fancy that the natural reward that goes to capital as interest takes the form of red coins made of wood. Finally let us figure the natural return to human service of all grades as being represented by white coins also made of wood. On examination it will be discovered that in the case of almost every member of society above the rank of the day laborer, his income is tri-colored or composed of all three coins. There are countless "captains of industry" among us who complacently assume their large incomes to be the rewards freely given by a free world in return for their invaluable services, who will be surprised to find how large a proportion of blue their income coins contain. There are multitudes of livers upon what they have called "interest" who will expect to find their coins red, who will be equally surprised to discover that they are almost entirely blue. To complete the parable, the taxation of land values will be like the application of the magnet which will draw away the blue steel coins in whatever stratum of society they may be found, and lay them aside for social purposes, being socially created wealth; leaving the red and white coins to be competed for in a world of free opportunity, without deduction or diminution by taxation or in any other way.
From The Single Tax Year Book (1917)
Posted on February 27, 2012 at 03:20 PM in a Manhattan acre, a wedge driven through society, absentee ownership, all benefits go to landholder , capital gains are land gains, connect the dots, cui bono?, Earth for All, economic justice, economic rent, equality, FIRE sector, fruits of one's labors, income concentration, justice of the single tax, land appreciates buildings depreciate, land different from capital, land rent, land value created by community, land value taxation, land, labor and capital, Natural Public Revenue, pay for what you take, privilege, reaping what others sow, sharecropping, single tax, slavery, socializing risk and privatizing profit, special interests, toll-takers, unearned income, unearned increment, untaxing production, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
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?
Posted on February 27, 2012 at 09:26 AM in all benefits go to landholder , assessment, better cities, buildings depreciate, capital gains are land gains, cui bono?, direct taxation, economic rent, facilitating commerce, financing infrastructure, fixing the economy, free lunch, fruits of one's labors, government's role, income tax, infrastructure, land appreciates buildings depreciate, land speculation, land value created by community, land value taxation, little people pay taxes, location, location, location, Natural Public Revenue, payroll tax, popular ignorance of land economics, population growth, privatization, property tax, property tax is two taxes, Proposition 13, public ownership of utilities, reaping what others sow, sales taxes are wrong, socializing risk and privatizing profit, special interests, sufficiency of land rent, the land questions, unburdening the economy, unearned increment, untaxing buildings, untaxing production, urban land value, user fees, wage taxes, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Save the rent for Society.
That's short and sweet. I came across it in The Single Tax Year Book for 1917, in a chapter about the Single Tax in Germany.
Posted on February 26, 2012 at 02:53 PM in all benefits go to landholder , ecosystem services, equality, financing education, financing infrastructure, financing services, land rent, land value created by community, landed gentry, landlordism, make land common property, natural resource revenues, pay for what you take, popular ignorance of land economics, private property in land, privatization, privilege, reaping what others sow, rich people's useful idiots, sharecropping, single tax, socialize, special interests, toll-takers, unearned income, user fees, windfalls | Permalink | Comments (0)
| | | |
THE EARTH OUR MOTHER
Man is a land animal as much as a fish is a water animal. Not only does man live on land but all of his wants are supplied by or from land. The earth is, literally, his mother. He will perish quickly if he has not access to the breast of his earth mother and will suffer and squall and become panicky if he has not free access to earth's breast and cannot obtain sufficient nutriment. His relation to land is fundamental and can be broken or disturbed only at great peril and loss to him and to society.
Production and consumption will always be in equilibrium and commerce and exchange will always flow smoothly, if all men at all times have equal and free access to nature's storehouse of wealth and if there are no dams -- tariff, -- etc. to interfere with the exchange of products. Free land and free trade are therefore, essential to economic justice; to give all an equal opportunity to produce goods and to exchange them without paying toll to anyone. When goods are produced and exchanged freely, it is reasonably certain that production and consumption will run so closely together that there can be no serious panics or long periods of depression. Serious maladjustment can and will occur only when production and exchange are interfered with and to the extent that they are interfered with.
The private ownership of land, that is, the taking of economic or land rent by private land owners, or landlords, most seriously interferes with some men's access to mother earth. Landlords are not only dogs in the manger; they are a class and about the only class, except the tariff beneficiaries, that consume without producing; that do not give a quid pro quo for what they get.
The capitalist supplies capital and is entitled to the interest that he gets. The laborer --wage, salary or fee earner -- produces goods or gives services and is entitled to what he gets in exchange. The landlord produces neither the land nor the land rent and is not, therefore, entitled to the rent that he takes. He is the only one who takes out of the economic pot without putting something into it. He is the only one who can and does live off the labor of others. He is the greatest of all economic leeches.
Professor Thorold Rogers said, in 1870:
If, as in ordinary times, the landlord takes only a moderate rent, that is, charges only the actual rental value of land to the capitalist and laborer who use land, production and consumption proceed normally, for society has fairly well adjusted itself to this unjust system. In times of great prosperity -- so-called -- when there is great speculation in land values and they rise rapidly, the landlords can and do take even more than the normal rental value of land; that is, more rent than is produced by society. Access to land then becomes so difficult and the prices that producers have to charge for food, clothing and shelter become so high that consumers are unable, after paying excessive rent, to purchase all of the goods produced. Hence, the glut in the market; the decline in the prices of commodities; the collapse of the over-extended credits; business failures; closed mills; idle labor and low wages. The business depression does not end until land values have declined to or below normal for the population. Soon thereafter business begins to revive, mills to open, unemployment to decrease, wages to advance and prosperity to return. Industry will continue on the up-grade until rents again become excessive. Most, if not all, periods of prosperity end with real estate booms. Even our present war prosperity will probably continue until there is a boom in city, farm, forest and mine land values.
The Single Tax Year Book (1917)
Posted on February 23, 2012 at 01:37 PM in a wedge driven through society, all benefits go to landholder , boom-bust cycles, cost of living, Earth for All, economic justice, equality, free land, free lunch, free trade, land different from capital, land speculation, landlordism, make land common property, overproduction, private property in land, property rights, protection or free trade, real estate bubble, reaping what others sow, special interests, tariffs, toll-takers, unburdening the economy, windfalls | Permalink | Comments (0)
| | | |
The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.
The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.
"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.
excerpt from The Single Tax Year Book (1917)
Posted on February 22, 2012 at 10:22 PM in all benefits go to landholder , better cities, capital gains are land gains, capitalization, civilization, commonwealth, corruption in government, corruption of economics, cui bono?, economic rent, financing education, financing health care, financing infrastructure, financing services, government's role, immigration, income tax, justice of the single tax, land appreciates buildings depreciate, land rent, land value created by community, land value taxation, landlordism, little people pay taxes, location, location, location, make land common property, Natural Public Revenue, popular ignorance of land economics, population, population growth, private property in land, privatization, privilege, property rights, property tax, property tax "relief", property tax is two taxes, property tax reform, reaping what others sow, rent, defined, socializing risk and privatizing profit, special interests, sufficiency of land rent, tax reform, toll-takers, trickle-down economics, unearned increment, urban land value, windfalls | Permalink | Comments (0)
| | | |
22. The creation of a new subway line raises the land values near each of the stations. Who should reap the benefit?
A. People who own homes there
B. People who own businesses there
C. People who own land there, whether or not there is a highest-and-best-use building on it
D. Corporations who own land there
E. Universities and other private landholders who own land there
F. Foreign corporations and private equity funds who own land there
G. Pension funds and sovereign wealth funds who own land there
H. The community as a whole, since the community paid for it
Download Fred Harrison's book, "Wheels of Fortune"
Posted on February 22, 2012 at 04:51 AM in absentee ownership, all benefits go to landholder , better cities, buildings depreciate, capital gains are land gains, corporations, cui bono?, direct taxation, economic rent, facilitating commerce, financing infrastructure, free lunch, infrastructure, land appreciates buildings depreciate, land different from capital, land speculation, land value created by community, land value taxation, landed gentry, landlordism, location, location, location, popular ignorance of land economics, pork spending, property rights, Proposition 13, public spending, reaping what others sow, special interests, subsidies, tax reform, taxation, the land questions, time making wrongs into rights, transportation, unearned income, unearned increment, urban land value, windfalls | Permalink | Comments (0)
| | | |
21. The creation of a new subway line raises the land values near each of the stations. Who should pay for the building of the subway line?
A. Riders of the new subway line
B. Riders of all subways in the system.
C. Riders of all mass transit in the metro area.
D. Drivers of cars and trucks, all over the metro area, via taxes on their fuel purchases (that is, in proportion to miles driven and the fuel efficiency of their vehicles)
E. Drivers of cars and trucks, all over the metro area, via an annual surcharge on their registration
F. Drivers of cars and trucks, all over the metro area, in proportion to the value of their cars, owned or leased
G. Drivers of cars and trucks, via tolls when they use bridges and tunnels, or HOV lanes, or certain highways
G. The taxpayers, via increased sales taxes on their purchases
H. The tourists and business travelers, via hotel occupancy taxes and taxes on rental cars.
I. Passengers in taxis, via a surcharge on their fares.
J. The homeowners, via taxes on their homes
K. Drivers, commercial and individual, via taxes on fuel purchased within the city
L. Employees all over the metro area, via a payroll tax
M. The tenants of commercial buildings in the heart of the central business district
N. All landholders, paying equally (a parcel tax)
O. All landholders, in proportion to the size of their lots
P. Landholders, in proportion to the value of the land they hold, without regard to the buildings or their contents. Those whose land values are raised by their proximity to the new line will see a proportional increase in their share of the tax burden; those far from the new line will not.
Q. Your suggestions?
Posted on February 21, 2012 at 04:35 AM in a Manhattan acre, absentee ownership, all benefits go to landholder , better cities, capital gains are land gains, congestion, corporations, cui bono?, direct taxation, economic rent, facilitating commerce, financing infrastructure, fruits of one's labors, income tax, indirect taxation, infrastructure, land appreciates buildings depreciate, land rent, land value created by community, land value taxation, landed gentry, landlordism, little people pay taxes, location, location, location, middle class, one solution for many problems, paying twice, popular ignorance of land economics, population growth, property tax, Proposition 13, public spending, reaping what others sow, sales taxes are wrong, socializing risk and privatizing profit, special interests, subsidies, tax reform, taxation, the land questions, transportation, triple net leases, unburdening the economy, unearned increment, untaxing buildings, untaxing production, urban land value, windfalls | Permalink | Comments (0)
| | | |
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?
Posted on February 19, 2012 at 04:12 AM in all benefits go to landholder , capital gains are land gains, cui bono?, employment, environment, facilitating commerce, financing services, free lunch, land value created by community, land value taxation, landed gentry, little people pay taxes, location, location, location, Natural Public Revenue, parking, pork spending, privilege, property tax, public spending, reaping what others sow, socializing risk and privatizing profit, special interests, subsidies, taxation, the land questions, user fees, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
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
Posted on February 16, 2012 at 05:51 PM in a Manhattan acre, absentee ownership, all benefits go to landholder , assessment, better cities, buildings depreciate, capital gains are land gains, capitalization, connect the dots, cui bono?, direct taxation, economic rent, financing education, financing infrastructure, financing services, FIRE sector, government's role, Henry George, housing affordability, indirect taxation, justice of the single tax, land appreciates buildings depreciate, land different from capital, land share of real estate value, land speculation, land value created by community, land value taxation, landed gentry, landlordism, leased land, location, location, location, make land common property, monopoly -- not the game, Monopoly and The Landlord's Game , Natural Public Revenue, one solution for many problems, popular ignorance of land economics, population growth, private property in land, privatization, privilege, property tax, property tax is two taxes, property tax reform, reaping what others sow, the land questions, underused land, untaxing production, urban land value, windfalls | Permalink | Comments (0)
| | | |
13. Electric utilities have long been regarded as "widows' and orphans'" stocks. Safe, if not high income. A few years ago, they were deregulated. A recent study has shown that retail electricity prices have increased faster in states that adopted competitive pricing than in those where rates continue to be set by government agencies. We all need reliable electricity. Should we permit the licenses to generate and distribute electricity to be an opportunity to make a windfall profit? (Or should we encourage municipal ownership of vital utilities?)
D. No. Electricity is vital to the economy, and we ought to do what we can to keep it affordable to ordinary people, and not a source of corporate windfalls.
E. No. Natural monopolies ought to be publicly owned, the prices kept low, and any excess revenue accrue to the public treasury, not to the benefit of private investors.
F. your suggestions?
Posted on February 13, 2012 at 10:49 AM in absentee ownership, common good, corporations, cost of living, cui bono?, democracy, facilitating commerce, franchises, government's role, immigration, infrastructure, land includes, location, location, location, monopoly -- not the game, municipal ownership of utilities, natural monopolies, privatization, privilege, public ownership of utilities, special interests, stock ownership, the land questions, time making wrongs into rights, unburdening the economy, windfalls | Permalink | Comments (0)
| | | |
from Gavin Putland:
All the way with Hazlitt - as far as he goes - On Line Opinion - 25/1/2012.
That may explain my mostly sympathetic reaction to a book much admired by advocates of free markets and small government: Economics in One Lesson (1946; revised 1978) by Henry Hazlitt (1894-1993). ...
In three places in the text (ss. 11.4, 15.2 and 16.2), he lists the factors of production as land, labour and capital, but doesn't distinguish between them for purposes of argument. In s.16.2 he also mentions the "poorest land", "least competent farmers" (labour) and "poorest equipment" (capital), but again doesn't distinguish further.
Similarly in the chapter on credit, he doesn't care whether borrowed funds are spent on farms (land) or tractors (capital).
In s.15.2 he adds that for an economy in "equilibrium", these factors are limited "at any moment", thus glossing over the fact that the supply of capital can build up or decay. Although Hazlitt is usually said to be of the Austrian school, this snapshot view of "equilibrium" is neoclassical, not Austrian; it was pioneered by J.B. Clark for the purpose of making capital look like land, so that land could be called a form of capital. Hazlitt includes Clark in his recommended reading list.
Earlier (s.6.2), Hazlitt cites the "limited" supply of capital as an argument against government-guaranteed home mortgages, claiming that they cause "oversupply of houses as compared with other things" -- not that they pump up land prices.
But he mentions the need for capital accumulation elsewhere, especially in the chapter on saving, where his examples of "capital" include schools, colleges, churches, libraries, hospitals, private homes, and "the most wonderfully equipped factory", all of which include land components. This conflation of capital and land is neoclassical.
In contrast, Austrian economists emphasize that capital, unlike land, must be constantly renewed, that its life cycle may be long or short, and that loose monetary policy causes overinvestment in long-life capital, whose value then collapses, contributing to recessions.
Meanwhile Georgists notice that recessions follow bursting "property bubbles", which are really land bubbles because land prices, unlike prices of buildings (prime examples of "long-life capital"), are not constrained by construction costs.
Hazlitt's failure to make these distinctions may explain why his explanation for depressions (s.23.5) is so vague: "the real causes, most of the time, are maladjustments within the wage-cost-price structure... At some point these maladjustments have removed the incentive to produce, or have made it actually impossible for production to continue... Not until these maladjustments are corrected can full production and employment be resumed." All clear now?
Those who call themselves free-traders too often fail to apply their own standards to trade within their own countries. Witness those misnamed "free trade agreements" in which each country promises to impose the other's monopolies on its own citizens.
Hazlitt falls into this error in chapter 4, where he considers an extra bridge between Easton and Weston and declares that "For every dollar that is spent on the bridge a dollar will be taken away from taxpayers." Not necessarily, because any such bridge will lower barriers to trade between Easton and Weston, especially the indispensable trade between employers and employees.
The benefit of the additional trade, net of any bridge tolls, will be shown in prices of access to locations served by the bridge -- in other words, land values. If the benefit exceeds the cost, it will be possible to cover the cost by clawing back a sufficient fraction of the uplift in land values, in which case the cost, although clawed back through the tax system, will not be "taken away from the taxpayers" but will be part of the new value created by the bridge.
The rest of that new value will be a net windfall to the property owners.
Hazlitt then turns to the Norris Dam (a New Deal project) and rubbishes the claim that "private capital could not have built it", because it was indeed built by private capital "expropriated in taxes... taken from people all over the country", causing the loss of "the private power plants, the private homes, the typewriters and television sets" that the expropriated funds might otherwise have bought. Thus the people of one district got richer at the expense of the rest of the country.
But it didn't have to be done that way. The earlier Don Pedro dam (completed 1923) was built by two Californian irrigation districts and financed entirely by local land-value taxes. The affected land owners were fiercely in favour of it because they knew the increase in their land values would outweigh the taxes. Even if the land-value taxes had been imposed by a higher level of government, the financing of the dam would still have been local, because only the local land values would have been affected by it. Private capital did not build it, because the uplift in land values that paid for it would not have occurred without it. Private agencies could not have organized it, because they would have had no way of tapping the uplifts in land values.
With an eye to current debates, I should conclude by praising Hazlitt for an insight that his latter-day admirers have ignored.
In explaining why "Taxes Discourage Production" (chapter 5), he says:
"When a corporation loses a hundred cents of every dollar it loses, and is permitted to keep only 52 cents of every dollar it gains, and when it cannot adequately offset its years of losses against its years of gains, its policies are affected." If individual investors "lose the whole dollar when they lose, but can keep only a fraction of it when they win," they are less likely to take risks.
The entire article is worth your time.
Posted on January 24, 2012 at 09:23 PM in facilitating commerce, financing infrastructure, free trade, infrastructure, land different from capital, land value created by community, land value taxation, land, labor and capital, tax reform, untaxing production, windfalls | Permalink | Comments (0)
| | | |
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.
A lot of good material -- and I've barely mentioned the graphics!
Posted on November 16, 2011 at 09:17 PM in boom-bust cycles, bubble, financing infrastructure, Henry George, infrastructure, inter-generational equity, land speculation, land value created by community, land value taxation, land, labor and capital, location, location, location, Natural Public Revenue, natural resource revenues, natural resources, private property in land, Ricardo, special interests, trickle-down economics, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
In my inbox this morning, a blast-from-the-past from Mason Gaffney, one of the most respected Georgists and a wonderful writer. Unlike many of us, he came to these ideas as a young person, having read Henry George while still in high school.
Mase's cover note:
It was November 1942. I had just turned 19, and received Greetings from Uncle Sam. Funny how fast one catches on, with the evidence lying outdoors all around you; and funny how southern California today replicates Chicagoland in 1942. Funny, too, how economics profs had their ways of signaling you that looking into land speculation was, well, just not done in elite circles. How little progress we have made since then in understanding and coping with this phenomenon and its derivative ills.
UNRUFFLED, composed, like a patient father straightening out a wayward son, he said, "You see, my boy, this Henry George lived at a time when the country was growing rapidly, when land values were skyrocketing and great fortunes were being made from speculation. Not being a 'trained economist,' George attached disproportionate importance to this . . . er . . . er . . . land question. Land is, of course, of minor importance in 'economics,' and speculation, well, . . . of trifling significance."
I should like to take this man, my "economics" teacher at Harvard, for a ride from the North Shore area near Chicago straight west on Illinois 58. A well-built-up residential district, one-half to a mile deep, runs far north along the lake shore, to end abruptly in a wilderness of sidewalks, street signs, fire plugs and weeds -- but not buildings. Along the roads which gridiron this wasteland speed trucks and pleasure cars, burning gas, tired and time to bridge the miles which, to no purpose, stand between the metropolis and outlying communities.
"Yes," my boss told me as we were riding to work one day, "there was a time when we thought there would be a lot of building out here. Guess I've still got some Land Company bonds in the Wilmette Bank. The company gave the farmer one-third down and agreed to pay the rest when the land was sold. Lots of poor farmers have got the land back now, with stiff taxes to pay on the improvements. Improvements, hell! Those fire plugs don't even have water pipes attached to them."
Ten miles of this and we reach Des Plaines, an oasis called by the natives a "successful development." "Thirty-one minutes to the Loop," boasts the Northwestern R. R. "These Homesites Best Speculation in Chicago Land," exults the land promoter.
Five miles farther west, about fifteen miles from Lake Michigan, the land is at last completely given over to farms. The speculator fires a parting shot at us as we reach the junction with Arlington Heights Road. "The Idle Rich of Today Bought Acres Yesterday," reads his sign.
Yes, I would like to ride with this "economist" out here. He would have trouble then convincing me that speculation is of trifling significance. Probably he would say: "But the men who hold this land are men of great foresight, very valuable men. You can't refuse to reward foresight; it's a virtue. Of course a little planning might alleviate these dreadful conditions, but, tut, tut, my boy, do you want to destroy free enterprise?"
Reward foresight indeed! Foresight in itself deserves no economic reward. Hitler and Baby-face Nelson at times showed great foresight, yet their loot is by no means sanctified on that account. Only one kind of exertion deserves an economic reward, and that is exertion directed toward the gratification of human desires. Foresight, an attribute of labor, exerted in producing wealth, deserves a reward, and in the free market will bring a reward. But foresight no more justifies speculation in land than superior firepower justifies conquest.
Perhaps it is asking too much to expect a Harvard man to understand this, however. His salary, after all, is paid in part from the proceeds of the foresight of certain friends of the institution who bought up much of the land on which the slums and business districts of Cambridge now stand.
I commend Mase's ideas and writing to your attention. You might explore his recent book, After the Crash: Designing a Depression-Free Economy, and the 60+ year collection of his writings at http://masongaffney.org/. We would be wise to act on his ideas.
And my notes say that this was not Mase's earliest publication in The Freeman.
Posted on September 29, 2011 at 05:23 PM in a wedge driven through society, absentee ownership, capital gains are land gains, corruption of economics, cui bono?, FIRE sector, free lunch, incentives, infrastructure, land speculation, land value created by community, landlordism, neoclassical economists, popular ignorance of land economics, reaping what others sow, rich people's useful idiots, tax reform, transportation, underused land, windfalls | Permalink | Comments (0)
| | | |
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."
Posted on February 16, 2011 at 02:00 PM in a Manhattan acre, absentee ownership, all benefits go to landholder , better cities, capital gains are land gains, common good, cui bono?, employment, fixing the economy, government's role, incentive taxation, incentives, income concentration, land different from capital, land speculation, land value created by community, landed gentry, location, location, location, Natural Public Revenue, one solution for many problems, population growth, pork spending, privilege, property tax "relief", property tax is two taxes, property tax reform, real estate bubble, reaping what others sow, sprawl, tax reform, taxation, unburdening the economy, underused land, unemployment and underemployment, urban land value, windfalls | Permalink | Comments (0)
| | | |
Yet another from Tax Facts, this from March, 1927.
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.
Posted on February 10, 2011 at 06:45 PM in a wedge driven through society, all benefits go to landholder , better cities, buildings depreciate, capital gains are land gains, cui bono?, employment, fixing the economy, government's role, land appreciates buildings depreciate, land speculation, land value created by community, land value taxation, location, location, location, make land common property, Natural Public Revenue, population, population growth, reaping what others sow, tax reform, taxation, underused land, urban land value, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Here's another from "Tax Facts." It speaks to the difference between fortunes which come about because of privileges granted (or grabbed), and those created through rendering service and -- not so incidentally -- employing people!
Should we continue to look the other way when we see privilege? Should we educate the next generation to continue to permit privileges, and to accept the miserable effects they create on society as a whole?
President Coolidge gives his approval of the great fortunes in this country on the ground that they have been the means — through the various endowments — of promoting learning and culture.
The righteousness of a great fortune depends not upon the end to which it is put, but upon the source from which it came. If a man earns his fortune he can do so only by employing labor and producing wealth, or by rendering his fellow men some great service. A fortune made in that way benefits all.
But when a fortune is made through legal privilege, by a grant from a king, by a franchise from a republic — which grant or franchise he sells or leases to another for a great sum — the possessor of that fortune has employed no labor, produced no wealth and rendered no service to his fellow men. The owner of that fortune is a social parasite, and a burden upon his fellows. He has done society a wrong that never can be righted by devoting a part of the fortune, no matter how large a part, to public service.
Nor does the virtue of a fortune depend upon its size. One dollar gotten without adequate return is wrong. A million gotten by service may be justified.
For several years now I've been following the story of a lovely, scenic 30-acre neck (almost-island) of land on a sheltered piece of the Atlantic Ocean about an hour's train ride north of Boston. It currently contains 167 rented-out lots, of which 24 can be occupied year-round and the other 143 only seasonally. Half of the land is unoccupied, available to all tenants; the rest is subdivided into mostly small lots; all have panoramic water views, of varying quality. The tenants own their cottages, most of which are in the 800 to 1000 square foot range, and typically 70 to 100 years old; a few are 2-story, newer or larger. Asking prices run as high as $600,000, and I've seen few transactions below $300,000. I estimate the cottages themselves to be worth about $75,000 anywhere else. Currently annual land rent is in the range of $10,000, up considerably from many years of token rents, and many of the tenants are objecting to paying them, putting them into escrow -- and, remarkably, planning to use the escrowed rent as a down payment to BUY the land! (That brings a new meaning to chutzpah, which, you might recall, was exemplified by the man who killed his parents and then threw himself on the mercy of the court because he was an orphan!)
In 1650, the will of a resident, William Paine (Payne?), apparently gave the land to be managed for the benefit of the school(s) of Ipswich, via the provision that "unto the free scoole of Ipswitch the little neck of land at Ipswitch knowne as Jeferry's neck, the which is to be and remaine to the benefitt of the said scoole ... for ever as I have formerly intended and therefore for the sayd land not to be sould nor wasted". It seems to me that his intent was pretty clear: keep the land forever ("not soulde"), take care of it, and collect market-level rents ("nor wasted") for the benefit of the beneficiary (the local school).
And yet the trustees -- known as Feoffees -- have apparently entertained an offer from the current group of 167 tenants (calling themselves "The Little Neck Legal Action Committee!) to sell the land for a tiny fraction of its value, which I estimate could be as high as $71 million. (My calculations are 3 paragraphs below this one.) The offer was in the range of $30 million, of which $6 million would go for paying off bonds on a wastewater system installed a few years ago.
There has been no effort to market the land to other possible buyers.
Apparently this has become so troublesome that some in Ipswich want to sell the land to the tenants, figuring that a little income from the proceeds is better than no income from recalcitrant tenants! Absolutely amazing. Short sighted. And it represents the privatization of an asset which was designed to provide a public benefit, forever.
Calculations: When a cottage worth $75,000 sells for $300,000 or more, what is being sold is land value -- locational value. But the tenants don't own the land, and I can't imagine a rational lender being willing to lend on an asset which the borrower doesn't own! The current land rent of about $10,000 per year represents roughly $200,000 in land value per lot (5% capitalization or "20 years' purchase"). Add to that the $225,000 in land value in the $300,000 price for a $75,000 cottage, and you're looking at $425,000 in land value per cottage. Multiply that by 167 and that's $70,975,000. (The cottages would be another $13.4 million or so.) Obviously, some locations are better than others, some lots are larger than others, and year-round rights are more valuable than only seasonal occupancy rights. (You'll note that the $225,000 in land value in the $300,000 example is less than what 5 of the 6 current listings suggest.)
A. Current Little Neck listings at realtor.com and zillow.com [the latter added here on 11/15/10]: recall that all the sellers own is the building, not the land. And that the cottage buyers should expect to pay $10,000 or more in land rent -- the current rate)
|Table 1: Cottages for Sale on Little Neck, mid November, 2010
| --- Assessments ---
1779 sq ft
1318 sq ft
852 sq ft
1408 sq ft
1160 sq ft
800 sq ft
|5% of LV **
*Asking price as percent of assessed building value
** Land rent at 5%, a/k/a "20 years' purchase"
B. Comparable cottages for sale in other parts of Ipswich (where the seller owns the land and is selling both land and house, so there is no land rent payment involved) suggest that most other sellers are asking much closer to the assessor's valuation (some higher, some lower, but typically within 20%, as compared to 385%!):
C. Some additional newer/larger homes on sites with good views:
D. Some recent sales, also from Realtor.com; notice that the transaction prices are generally pretty close to the assessor's valuations, which validates the assessments:
(I suspect the last six of these might be situations where a co-heir to an estate bought out another heir, with the transaction price representing half of the value, but I can't be sure of that.) Have any of the assessments been adjusted downwards in 2010 on the basis of the transaction price? That might have been the case in a few situations(?)
If the landlords were collecting the full market rent on the Little Neck land, then the asking prices for the cottages on Little Neck would be in the range of 90% to 120% of the assessor's valuation of the buildings.
The tenants did not create -- could not possibly have created! -- any of the land value, despite what the "Little Neck Legal Action" committee asserts below. The letter makes interesting, even humorous, reading, particularly in light of the fact that were there to be a sale, it would be the seller who would be paying off the debt on the wastewater system, not the buyers. That wastewater system created some value, particularly if it ends up making it possible for more than 24 cottages to be used year-round.
Here are the various prices, divided by 167 current tenants and by 32 acres:
(Compare those amounts per lot to the assessed values of the land, and then to the asking prices, above. Did the assessor get it that wrong? I suspect his LN land valuations are low.)
Here's the letter from the "Legal Action" committee to the local paper:
To the editor:
The School Committee’s recently released appraisal performed by Lincoln Property Company (“Lincoln”) establishes four things:
While the Little Neck Legal Action Committee (“LNLAC”) appreciates the good faith effort of the Lincoln appraisal, we believe that it does not appropriately take into account the potential adverse consequences to the School Committee of not affirmatively supporting the settlement agreement. The cost of not doing so includes:
We believe that the settlement agreement is fair to all parties and that a rational review will bring all reasonable and clear minded parties to that conclusion. Should that not be the case, LNLAC is willing to allow the Probate Court to make the judgment as to whether the settlement agreement is, in light of all relevant circumstances, fair and reasonable. The School Committee is aware that the Feoffees have engaged LandVest and LNLAC has engaged Petersen/LaChance Realty Advisors to update their prior appraisals. At the end of the day, we anticipate that the Probate Court will conclude that the agreed upon figure of $29,150,000 is more than justified and supported by a careful review of the four appraisals at issue. We appreciate the deliberate approach taken by the School Committee and believe that responsible and professional analysis will be demonstrated by its members. We await the conclusion and closing of the settlement that will allow the School Committee and the school children for which it is responsible, to benefit from what we are advised will be the largest investment trust for any public school system in the commonwealth.
Mark DiSalvo and William Gottlieb
Little Neck Legal Action Committee
So what do you think? Should the 2010 Ipswich citizens be in favor of selling this piece of land to the LNLAC at $29 million? $40 million? $70 million? Or is this a priceless asset that ought to be kept, to serve its intended purpose for future generations of Ipswich students? Should the Feoffees sell it, or simply collect, month in and month out, the market-value rent of the land?
Is there a statute of limitations on how long a public-spirited gift with growth potential should remain an asset for the benefit of the schools, or is the LNLAC arguing that the value of this gorgeous piece of land has peaked, to stagnate forever, and they're willing to accept the downside and the upside for a mere $30 million?
I just can't imagine how the discussion has ever gotten this far. This asset was never to be sold. And were the trustees to stop wasting it -- permitting tenants to remain without paying roughly market rent -- the schools would, as the donor intended, have a fine -- and growing -- income, forever. "The largest investment trust for any school in the commonwealth" will provide a fine income to a lot of investment brokers and firms, but an inferior and declining income for the schools. (Think about what the schools would have in 2010 if the trustees of, say, 1933, had sold Little Neck and invested the proceeds. What do you think that fund would be worth now? Remember the question: where are the customers' yachts?) Keep the asset. Collect the rent. Repeat annually.
The alternative? Sell it to the tenants now, and then watch some private equity or hedge fund swoop in and double the tenants' purchase price -- on a down payment made with escrowed rent! -- and then watch the investor hold the asset until the market improves and they can develop it. A win for the tenants, but what about the rest of Ipswich, and the intended beneficiaries?
Filed under "popular ignorance of land economics," "privatization," among other categories. This blog has more observations and history on this story. See them collected at http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/.
Posted on November 12, 2010 at 06:17 PM in buildings depreciate, common good, cui bono?, financing education, land appreciates buildings depreciate, land rent, leased land, Little Neck Feoffees of Ipswich, location, location, location, popular ignorance of land economics, privatization, rich people's useful idiots, windfalls | Permalink | Comments (0)
| | | |
Op-Ed Columnist - Fear and Favor - NYTimes.com. Paul Krugman's column today
A note to Tea Party activists: This is not the movie you think it is. You probably imagine that you’re starring in “The Birth of a Nation,” but you’re actually just extras in a remake of “Citizen Kane.”
I mean that literally. As Politico recently pointed out, every major contender for the 2012 Republican presidential nomination who isn’t currently holding office and isn’t named Mitt Romney is now a paid contributor to Fox News. Now, media moguls have often promoted the careers and campaigns of politicians they believe will serve their interests. But directly cutting checks to political favorites takes it to a whole new level of blatancy.
Arguably, this shouldn’t be surprising. Modern American conservatism is, in large part, a movement shaped by billionaires and their bank accounts, and assured paychecks for the ideologically loyal are an important part of the system.
And these organizations have long provided havens for conservative political figures not currently in office. Thus when Senator Rick Santorum was defeated in 2006, he got a new job as head of the America’s Enemies program at the Ethics and Public Policy Center, a think tank that has received funding from the usual sources: the Koch brothers, the Coors family, and so on.
Now Mr. Santorum is one of those paid Fox contributors contemplating a presidential run. What’s the difference?
David Cay Johnston spoke to some of this in his writings about the effort to re-brand the estate tax, which affects a tiny fraction of households, as the "death tax," funded by those who would be beneficiaries. (Remember all that talk about saving the family farm? Think about that family-owned factory farm in Iowa which produces all those eggs. That's the sort of entity we'd be protecting.)
Might I encourage you to go read "The Corruption of Economics" by Mason Gaffney and Fred Harrison. Here's the product description:
The cover material reads,
What comes to mind is that the vast majority of those who learned our/their economics from economists and instructors who only know neo-classical economists become highly useful idiots.
Schalkenbach.org may be your best source, at $16. And any purchase over $10 gets you a free copy of Henry George and the Reconstruction of Capitalism.
I hope you -- and Dr. Krugman -- will take a look at both.
What is it the plutocrats are protecting? The concentration of wealth in this country. If you don't have the statistics top of mind, here's a quick version, from the Federal Reserve Board's 2007 Survey of Consumer Finances, which under-reports the concentration of wealth because it expressly omits the Fortune 400 families, who represent about 1% of aggregate net worth.
1. EQUITY (stock in publicly held companies and equity mutual funds, whether held individually, in trusts, in retirement accounts):
2. BUS (the value of privately held businesses)
3. EQUITY and BUS combined
|Distribution of Wealth: Stocks, Privately Held Business, and all other, by percentile of NETWORTH
|Percentile of Wealth Distribution (NETWORTH)
|0 to 50th||50 to 90th
||90 to 95th
||95 to 99th
||99 to 100th
|HOUSES, net of
|Source: Ponds and Streams, reported at http://lvtfan.typepad.com/lvtfans_blog/
Posted on October 04, 2010 at 05:42 PM in a wedge driven through society, cui bono?, estate taxes, fixing the economy, free lunch, Henry George, home equity, land, labor and capital, middle class, neoclassical economists, popular ignorance of land economics, poverty machine, privatization, privilege, reaping what others sow, rich people's useful idiots, SCF data, stock ownership, Survey of Consumer Finances data, trickle-down economics, unburdening the economy, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Resale Fees That Only Developers Could Love - NYTimes.com.
What a story! The developers of some subdivisions have slipped into their covenants a 1% resale "commission" which anyone who sells a property they developed must pay them ... not just once, but at every transaction for 99 years! How's that for a tax imposed by the private sector? Here are some excerpts from the article.
"But four months later, when a local television reporter was doing a story on housing taxes in their subdivision, the Dupaixs discovered that their sales contract included a “resale fee” that allows the developer to collect 1 percent of the sales price from the seller every time the property changes hands — for the next 99 years. ....
A growing number of developers and builders have been quietly slipping “resale fee” covenants into sales agreements of newly built homes in some subdivisions. In the Dupaix contract, the clause was in a separate 13-page document — called the declaration of covenants, conditions and restrictions — that wasn’t even included in the closing papers and did not require a signature.
The fee, sometimes called a capital recovery fee or private transfer fee, has been gaining popularity among companies that have been frantically searching for new ways to gain access to cash in the depressed housing market. ...
Freehold Capital Partners, a real estate financing firm founded by the Texas developer Joseph B. Alderman III, has been leading the charge. According to William White, Freehold’s chief operating officer, the firm has signed up more than 5,000 developers who are adding the covenant to developments worth hundreds of billions of dollars that will be built out over the next decade in 43 states.
Many developers see the resale fee as a creative way to get new financing. They are hoping to one day use the trickle of cash from these fees as collateral for a loan, or to get cash up front if pools of the fees are packaged into securities to be bought and sold on Wall Street. Freehold has begun shopping the idea of securitizing the resale fees, much as subprime loans were packaged and sold to investors.
Someone selling a home for $500,000, for example, would have to pay the original developer $5,000. If the home sold again two years later for $750,000, the second seller would have to pony up $7,500 to the developer, and so on. Even if a home declines in value, the seller still must pay the 1 percent fee. Freehold gets a cut of the resale fee; if the fees are securitized, it retains a percentage of the cash generated from the securitization.
Freehold’s principals and lawyers have been aggressive in sales pitches to developers, but have declined to give details on their clients, securitization efforts or the company itself. Freehold moved its corporate office from Round Rock, Tex., to New York this year as it stepped up efforts to securitize the resale fees.
Mr. White characterizes the resale fee as a win-win deal for the developer and the home buyer. The fees let developers spread out the cost of building the roads, utilities and other infrastructure across all homeowners in a subdivision, rather than just the initial buyers. As a result, he said, the developer can lower the initial price of a home to the first buyer.
For example, he says, a typical $250,000 home may be able to sell for about $5,000 less. “The fee is a fair and equitable way to spread development costs, and results in lower costs to the average consumer,” Mr. White says. ...
Jeff Moseley, founder of Badger Creek Development in Brunswick, Ga., says he signed up with Freehold after watching his business tank with the economy. “I can’t sleep at night,” he says, adding that he had laid off all 32 of his employees.
He is hoping Freehold’s resale fee program will breathe new life into his business. “I thought it was an intriguing and compelling story,” says Mr. Moseley, who owns two development projects, encompassing about 220 lots.
Under his deal with Freehold, he will get about two-thirds of the revenue from the securitized fees while Freehold and other parties will get one-third. ...
A COALITION of real estate trade groups, including the National Association of Realtors, the American Land Title Association and the Center for Responsible Lending, opposes resale fees and is lobbying federal and state authorities to ban them.
“The idea that someone who has no ownership stake or interest can continue to collect revenue off of a property that they may have built up to 99 years ago exploits an already complex transaction and doesn’t pass the smell test,” says Justin Ailes, director of government affairs at the land title association. The fee could hurt real estate values in the future if buyers are reluctant to purchase properties that have a 1 percent fee attached. ...
The Federal Housing Finance Agency is considering a proposal to prohibit the transfer fees on all mortgages financed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. And 17 states have either banned or placed conditions on the practice.
Some bankers say Freehold will have a tough time selling the idea to Wall Street. The uncertain economy and housing market have made it next to impossible to predict when and how often a home will sell, or where home prices are headed — information that is needed to estimate cash flows to value the securities.
And some worry that an all-out ban of resale fees by states or the federal government could make the securitized paper worthless.
Dave Ledford, a senior vice president at the National Association of Home Builders, says he’s not sure Freehold can deliver on its big promises. “It’s almost in the category of ‘too good to be true,’ ” Mr. Ledford says.
Mr. White dismisses the criticism as sour grapes. He contends that Realtors oppose the fee because homebuyers might pressure them to lower their commissions to offset it. “Apparently 6 percent to a Realtor is justified, yet 1 percent to pay for roads and utilities isn’t,” Mr. White says. He says he believes title companies are worried that they might face legal claims if they miss the fee during a search.
LVTfan here: 1% to pay in 2050 or 2090 for roads built in 2010? Right .... Tell us another one.
See also http://www.wealthandwant.com/docs/Gross_Rent.html Rent-seeking is alive and well -- and these folks are reaping what they didn't sow -- and won't sow. It doesn't come out of thin air. It will come out of the pockets of future owners and users of the property.
Shouldn't we-the-people -- the public sector -- get that benefit?
This seems a bit like the Baltimore land rent story: private parties getting to collect value today, in return for someone paying a bit less 50 or 100 years ago to buy a house.
And both situations ignore what those who have read Henry George know: that land rent ought to be used by the commons to finance our common spending, not privatized by any individual or corporate entity.
Little people pay the taxes ... and we're paying to the wrong parties. When private entities get to collect what we-the-people create, there's something badly wrong with the structure. It forces us to rely on sales taxes, wage taxes, building taxes, and other taxes which burden the economy and steal from those who produce in order to enrich those who speculate in land value.
Wise states will implement the legislation necessary to wipe out such structures.
Posted on September 13, 2010 at 11:46 AM in buildings depreciate, capitalization, cui bono?, economic rent, financing infrastructure, FIRE sector, free lunch, government's role, Henry George, housing affordability, income concentration, land appreciates buildings depreciate, land rent, land speculation, land value taxation, landed gentry, Natural Public Revenue, paying twice, popular ignorance of land economics, privatization, privilege, reaping what others sow, sales taxes are wrong, sprawl, unearned income, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Isn't it amazing what some special interests will manage to get defined as "public works"?
The article continues,
Some politicians in New Jersey applaud the Jets and the Giants for building their own stadium. But the old Giants Stadium generated about $20 million a year for the authority. Now, the agency will receive only $6.3 million in lease payments from the teams, and needs additional state subsidies.
The authority has promoted Xanadu, a privately built retail complex that has yet to open next to the Izod Center. But desperate to plug holes, the authority has spent the entire $160 million in rent payments it received from the developers. Some of the money was meant to pay off debt associated with the arena and the stadium, and was supposed to last 15 years.
The whole thing reminds me of a friend's sigfile:
back to the NYT article:
"How municipalities acquire so much debt on buildings that have been torn down or are underused illustrates the excesses of publicly financed stadiums and the almost mystical sway professional sports teams have over politicians, voters and fans.
Rather than confront teams, they have often buckled when owners — usually threatening to move — have demanded that the public pay for new suites, parking or arenas and stadiums."
Do professional sports team owners really have a mystical sway over voters? Or is it mostly over politicians?
Posted on September 08, 2010 at 09:09 AM in better cities, capital gains are land gains, cui bono?, free lunch, income concentration, reaping what others sow, socializing risk and privatizing profit, teardowns, unearned income, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.
It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.
The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.
What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.
Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.
This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.
THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.
I think Robert Reich sees part of the problem, but he doesn't see the solution. How do we achieve more widely shared prosperity? By a variation on Alaska's theme. In Alaska, a significant share of the value of the state's natural resources is used to fund state government, and another significant share is placed each year into the Alaska Permanent Fund, which is invested in a broadly diversified portfolio and pays an annual dividend of $1000 to $2000 to every permanent resident of Alaska, of all ages. [See http://www.nytimes.com/2010/09/04/us/politics/04alaska.html for an article mentioning this, and the Alaska Permanent Fund link, at the left of this page.] Alaska has it half right: they collect a decent share of the value of the natural resources, but they don't tax their land value much.
How do we share the prosperity beyond the top 10%? By shifting our incentives so that those who currently grow wealthy in their sleep by collecting economic rent find themselves sharing that rent with the rest of us. Untax wages, starting with incomes under the median. Untax sales. Untax buildings. Tax land value. Tax the value of those things which the classical economists would have recognized as land -- water rights, "rights" to pollute, airport landing rights at congested airports, geosynchronous orbits (which prevent satellites from bumping into each other), electromagnetic spectrum (those airwaves which most people would say "belong to the American people" but which we have permitted corporations -- public and private -- to privatize), natural resources such as oil, natural gas, copper, coal, lithium, etc.. All these things are going into corporate portfolios (here and abroad -- and some of those corporations are families in power, despite attempts at nation-building), week in and week out, and their value accrues to the shareholders of the corporations. Stock ownership is quite concentrated, and these benefits flow into the pockets of a relative few, who, as Reich rightly points out, may or may not spend or invest in America's products. When they do invest, they often acquire our best land and resources, buying thereby the labor of thousands of Americans. When an acre in Manhattan can be worth $400 million, the seller of that land didn't make it valuable. WE did! So why should an individual, or a corporation, or a trust, or a university, or a pension fund -- or any private entity -- get to pocket that value as if they did? (The kindest thing I can say is that we have a bad habit! Something like chattel slavery -- and look at how long it took us to end that.)
Pocketing that value has two sorts of effects: when they sell, they pocket that so-called "capital" gain. It isn't capital! It is land value! Capital depreciates; what rises in value is land, and it rises for reasons which have nothing at all to do with the "fellow" who owns it.
But even when they buy and hold, there are important effects of permitting that privatization. The rich don't need to put the land to its highest and best use, because they can get by with something less while they wait for the community to cause it to grow. (See The Taxpayer at 72nd and Madison. Notice all the surface parking lots in Manhattan, Philadelphia, Hartford and many other cities. See the 4.3 acre "hole in the ground" in Stamford, CT, right near the city's 100% location, vacant since the early 1980s.) They're patient! They can afford to be. The top 10% of us hold 71.5% of the chips, according to the 2007 Survey of Consumer Finances.) Not using the land well reduces the supply of housing close to the center of things (adding to sprawl) and/or of jobs (which we say we want) and contributes to a wide range of our most serious social, economic, environmental and justice problems.
If we collected more of the annual rental value of our urban land, the holders of that land would turn into active users or sell it to someone who would put it to good use. Good use creates jobs, and homes and other things that the market wants. But when the market can't afford them, it does without. People are priced out of housing in the places they'd prefer to live. They lack jobs or are underemployed, and the rich keep getting richer.
Reich advocates extending the EITC, exempting the first $20,000 of wages from payroll taxes, improving and extending early childhood education, making public universities free in return for 10% of the first 10 years of full-time earnings, creating "earnings insurance." He concludes,
Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.
Well, 130 years ago, Henry George spoke to some of the kinds of measures that have been proposed over the years for reducing poverty and promoting widely shared prosperity. See "Part VI -- The Remedy" and particularly "Ineffective Remedies" and "The True Remedy"
"Ineffective Remedies" begins,
OUR CONCLUSIONS point to a solution. It is so radical that it will not be considered if we believe less drastic measures might work. Yet it is so simple that its effectiveness will be discounted until more elaborate measures are evaluated. Let us review current proposals to relieve social distress. For convenience, we may group them into six categories:
1. More efficient government
2. Better education and work habits
3. Unions or associations
5. Government regulation
6. Redistribution of land
That 10% of us who hold 71.5% of the net worth also received 41.3% of the current income. [Note that these percentages are understated, since the SCF purposely omits the Fortune 400 families. They hold about 1% of the nation's net worth.]
Picketty & Saez provide annual updates on income concentration. For 2008, they report that the top 10% of us (sorted by income, not net worth) received 45.60% of the income when capital gains are excluded and 48.23% of income including capital gains. (For 1988, the corresponding figures are 38.63% and 40.63%; in 1958, 32.11% and 33.56%. Do we notice a trend here? Do we like it or think it a healthy trend?)
We have permitted and supported a structure which funnels wealth and income into relatively few pockets. We have to reform this structure, and we have to recognize that the current beneficiaries are not likely to be keen on reform -- conservatives have a lot to conserve for themselves -- and those who are dependent for their salaries on being popular with those beneficiaries are not likely to be particularly interested in looking at the underpinnings of the structure with an eye to removing some of the ladders (escalators!!) or gentling the chutes.
Those who get to privatize the value of what ought to be common assets grow wealthy in their sleep. Until enough of us understand the mechanism to constitute a majority, we aren't likely to correct it.
It is a bit disheartening to think how many well-regarded economists live in California, the land of Proposition 13, and haven't lifted a finger or opened their mouths to suggest that it is not in the best interests of California's people. Milton Friedman acknowledged many times that the tax on land values was the "least bad" tax -- and didn't have anything to say about Proposition 13, which was the antithesis of what a wise person or society would do with that information. So I guess I shouldn't be surprised that today's California economists, with very few exceptions, aren't all that concerned with the economic wellbeing of ordinary people any more than economists elsewhere are. Or maybe, as my late mother would have expressed it, their educations have simply been neglected. (At which point she would proceed to fill in my newly-identified knowledge gap.) Economists can start with the links in this post, and then explore from there.
Posted on September 05, 2010 at 12:19 PM in a Manhattan acre, a wedge driven through society, absentee ownership, Alaska Permanent Fund, broadcast spectrum, capital gains are land gains, classical economists, common good, commons, cui bono?, economic rent, ending poverty, fixing the economy, government's role, income concentration, land appreciates buildings depreciate, land includes, land speculation, landed gentry, location, location, location, natural resource revenues, natural resources, oil, one solution for many problems, popular ignorance of land economics, poverty machine, privatization, reaping what others sow, socialize, unburdening the economy, unemployment and underemployment, wealth distribution or concentration, windfalls | Permalink | Comments (0)
Tags: Depression, Recession, Robert Reich
| | | |
There is an interesting story coming out of Rosses Point, County Sligo, Ireland, that a Church of England vicar and his wife are seeking to be paid ground rent on some land that her great, great grandfather, William Middleton, acquired sometime before 1875. He owned the entire community, except for the church. Apparently the people who have resided on that land over the intervening years are supposed to have been paying annual ground rent to his heirs, or "buying out" the ground rent. Either would benefit his heirs with value to which neither he nor they have contributed anything other than what nature provided. (I think we can reasonably assume that any improvements he made to the land -- fences, drainage, stumping, septic systems, etc -- are long gone after 135 years.)
Most of the Middleton family left Ireland, some as long as 90 years ago. Apparently no ground rent has been paid in the past 35 years.
According to one of the articles,
In the 1970s, locals traced Middleton family members across the globe, and reached a deal where many bought their ground rent for sums of around IR£100.
But some did not clinch agreement, leaving uncertainty over the ground on which their homes was built, which is in one of the most valuable locations in the north-west.
This raises all sorts of interesting questions about the logic and justice of our laws. Who has made that land worth anything? Is it the heirs of William Middleton? Is it the taxpayers of the community in which the land is located, who presumably have supplied services to these properties? Is it the people who live in or work in or visit that community?
And then comes the important question. Putting aside what the law says, who is entitled to that land rent? Is it the descendants of the 1875 owner? Is it the current tenants? Is it the community in which those lots are located?
Which of these is a logical and just way to run a society so that all of us can thrive and prosper? How should we fund the public goods and services which make a community a good place to live? Taxing sales within the borders? Taxing the wages of residents or workers within the border? Taxing the buildings within the border? Or collecting some, even all, of the annual rental value of the land for public purposes?
There are properties in midtown Manhattan owned by trusts "granted" by people who have been dead for many decades. Those who want to use that land pay land rent, year in and year out, to the beneficiaries of those trusts, decade after decade. Mostly likely that rent escalates over time, as the residents, taxpayers and tourists who use Manhattan contribute their tax dollars and their presence to providing the services which make Manhattan what it is. So why on earth do we tax wages, sales, hotel rooms, buildings of all kinds, rather than collecting the rent for public purposes?
The Rosses Point heir's husband is quoted as follows:
Mr Chave-Cox said: “You know I am a vicar. Vicars are honest and clear about things. All we want is what’s right and fair and sort things out. Presumably that means people buying up the ground rent.”
I wonder how much they feel they are entitled to receive in 2010.
I seem to remember it being said that "The Earth is the Lord's." Which Lord? And what are the implications for ordinary people?
You can read more at
I heard something this morning on the radio which tickled my funny bone, and then got me thinking. The program was "Wait, Wait -- Don't Tell Me" and they were spinning yarns for a contestant to pick out the real one from the two made-up news stories. The theme was about how the wealthy are different, and there was a tale of rich people, perhaps in some form of noblesse oblige, choosing to play the board games Life and Monopoly with $1,000 less in starting money than the rules call for.
Well, my imagination was off and running. (I was stuck in traffic.)
Look at what happens in the board game Monopoly. Everyone starts with the same amount of money, and each one earns the same salary ($200 for each pass around the board). And yet some become wealthy and most end up penniless. The rules and structures are designed to create that situation. Some of it is random, or at least appears to be: what happens to you depends in part on a throw of the dice. Assuming all the players are using the same dice, one assumes that much is due to "chance." There is even a deck of cards by that name, each of which produces a different turn outcome.
Imagine Monopoly if the rules were a little different: that some started the game with a bit more money, or an undeveloped property they already owned, or a block or neighborhood with single family houses on them. After all, we weren't all born the same year.
Or imagine that instead of all players receiving $200 each "year," some of us received $400 or $600, and others received only $80 or $150.
Or combine those two assumptions.
Or imagine that the amount each player receives begins at $80, and for some rises and for others does not.
Or assume that some of us receive nothing, since there is a finite amount of money in the game, and if the powerful players have it all tucked under their side of the board, it simply isn't available when you pass "GO."
Or assume that when you do go to buy a house, having assembled your 2- or 3-lot neighborhood, there aren't any available: the supply is fixed, and the existing players have bought them all up. You'll have to wait, and keep paying rent until they replace them with hotels. (Sounds like California under Prop 13, doesn't it? One of the lowest homeownership rates in the US, except among seniors, whose homeownership rate exceeds that of their counterparts in the rest of the country!)
Those who have explored this blog may know that the board game Monopoly was not created during the 1930s depression, but is a direct descendant of a turn-of-the-century board game called The Landlord's Game, which was created to teach the ideas of Henry George. Elizabeth Magie (later Phillips) patented it in 1904, and later versions in the 1920s. (See a modern rendering here.) I've also seen pictures of another board for the Landlord's Game, showing a community surrounding a lake; one advances around the board.
The game came with two sets of rules, one called the Landlord Rules, rather similar to the game we know today. The other set was called the Prosperity Rules. You might enjoy the recent article in Land & Liberty (pages 14 & 15). Don't miss the last couple of paragraphs.
Posted on August 21, 2010 at 03:51 PM in a wedge driven through society, absentee ownership, capital gains are land gains, cui bono?, economic rent, fixing the economy, free lunch, Henry George, income concentration, land appreciates buildings depreciate, landed gentry, Monopoly and The Landlord's Game , playing by the rules, poverty machine, unburdening the economy, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Posted on August 17, 2010 at 08:47 PM in a wedge driven through society, absentee ownership, Alaska Permanent Fund, bubble, capital gains are land gains, classical economists, commons, ecosystem services, environment, externalities, FIRE sector, government's role, greenhouse gases, land speculation, land value taxation, land, labor and capital, landed gentry, natural resource revenues, natural resources, neoclassical economists, oil, one solution for many problems, pollution, privatization, privilege, reaping what others sow, tax reform, unburdening the economy, unearned income, urban land value, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
I looked online, and found a copy of the article in PDF format here, which permits me to throw away my hardcopy.
Posted on August 09, 2010 at 12:22 PM in a wedge driven through society, absentee ownership, boom-bust cycles, bubble, buildings depreciate, capital gains are land gains, connect the dots, cost of living, cui bono?, debt, economic rent, FIRE sector, fixing the economy, free lunch, government's role, home equity, housing affordability, income concentration, land appreciates buildings depreciate, land includes, land share of real estate value, land speculation, landed gentry, Landlord's Prayer, landlordism, little people pay taxes, middle class, paycheck to paycheck, popular ignorance of land economics, poverty's cause, privatization, privilege, reaping what others sow, slavery, Stiglitz, tax reform, unburdening the economy, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
This struck me as a short and clear delineation between what is rightly our common treasure and what is rightly the private property of individuals and corporations.
It seems clear what we ought to be taxing -- collecting -- to fund education, to fund infrastructure, to fund all the services which are best funded by all of us. Tax public wealth to the extent that policies give individuals and corporations title to it. Stop taxing private wealth, until we have collected all the public wealth sitting in private pockets. End that free lunch, that windfall.
Posted on August 06, 2010 at 03:28 PM in a wedge driven through society, civilization, commons, cui bono?, economic justice, equality, financing education, financing infrastructure, financing services, fixing the economy, free lunch, government's role, income concentration, land appreciates buildings depreciate, land includes, land speculation, land value taxation, land, labor and capital, landed gentry, natural resource revenues, oil, one solution for many problems, public spending, reaping what others sow, socialize, tax reform, teach your children well, unburdening the economy, wages, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
| | | |
All the discussion about what income tax structure will stimulate the country while not reducing the incentives of America's wealthiest -- recall that 1% of us hold 1/3 of the net worth and 10% have over 70% of the net worth.
We're taxing the wrong things. We expend a lot of energy talking about
income tax brackets, ignoring the extent to which US income is
concentrated among a relative few of us.
We'd be wiser if we started paying attention to how income has become so concentrated: through granting of privileges such as the privilege of pocketing most of the value of natural resources; the privilege of collecting what is mostly land rent not building rent, both month by month or in the form of "capital" gains upon sale of urban land; the privilege of using the electromagnetic spectrum without paying one's community for the privatization of this scarce resource; geosynchronous orbits; landing rights at Laguardia and other congested and constrained airports; water rights; rights to pollute.
If you're not familiar with the statistics on how concentrated the benefits of such privileges are, read the Survey of Consumer Finances data on Equity (publicly held stocks) and "BUS" (the value of privately held companies) at LVTFAN. A few percent of us own awesome percentages of these privileged assets and reap what the rest of society sows through its labor and presence.
And our economics education neglected to mention this detail. (Should we be surprised?)
Life on a tilted playing field -- and we're so used to it that we don't even realize the tilt.
The wealthy can be stimulated to do the things which create jobs and drive wages upward for ordinary workers -- but it isn't through fiddling with income taxes. We may need to fiddle with them in order to reduce the effects of our terrific income concentration and our need for revenue for legitimate common purposes, but it isn't the answer to stimulating the economy.
Posted on August 06, 2010 at 03:23 PM in a wedge driven through society, common good, cui bono?, financing infrastructure, financing services, fixing the economy, government's role, incentive taxation, incentives, income concentration, little people pay taxes, middle class, poverty's cause, privilege, public spending, reaping what others sow, tax reform, unburdening the economy, unemployment and underemployment, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis, by Josh Kosman « Econamici.
Polly Cleveland posted a fine piece by Josh Kosman, which I commend to your attention. It provides a concrete example of something Joe Stiglitz described in his talk at the University of Queensland last week:
Kosman's article won't take long to read. But it gives a good sense of one of the reasons why wealth is concentrating in America, and the extent to which the legitimate interests of ordinary working people are being subordinated to the privileges of our wealthiest.
Posted on August 06, 2010 at 03:06 PM in a wedge driven through society, connect the dots, cui bono?, FIRE sector, free lunch, income concentration, poverty machine, privilege, reaping what others sow, Stiglitz, unburdening the economy, unemployment and underemployment, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
One of my standing Google Alerts brought me to someone's blog post about income concentration in the US, which took me back to my spreadsheets on the subject. My spreadsheets start with Piketty & Saez's annual spreadsheet, and then add in some calculations. Many people who report on their data seem to me to miss the most important columns. What many people report is this breakout:
The data is powerful. Looking at income including capital gains and fractiles defined using that income definition (their Table A3), we find the following income shares for 2007:
But where it gets interesting is to break out the fractiles individually, and then to look at trends. Here are a few selected years from the P&S tables, which start in 1913:
|Income Concentration, selected years 1913-2007
|Source: Piketty and Saez 2007 spreadsheet, Table A3 (includes
capital gains in both income and fractile definitions) and LVTfan calculations
One way to read this is that of the 17.11% of income which the bottom 90% lost between 1970 and 2007, nearly 30% went to the 1-in-10,000 fellow, 26% went to the 9-in-10,000, 21% went to the 40-in-10,000, and the remaining 24% went to the 950-in-10,000. I'm willing to guess (or concede, if you will) that half or more of those 50-in-10,000 in 2007 were not in the top 50-in-10,000 37 years earlier (and that many in the 1970 top 50-in-10,000 were no longer alive in 2007).
Henry George wrote about a wedge driven through society. That was 130 years ago.
So what's your guess for 2008?
Posted on July 18, 2010 at 07:06 PM in a wedge driven through society, cui bono?, democracy, free lunch, income concentration, land includes, landed gentry, little people pay taxes, natural resource revenues, poverty machine, privatization, reaping what others sow, windfalls | Permalink | Comments (0)
| | | |
The Tax Foundation recently published a study which apparently seeks to comfort those of us who are concerned about the concentration of income in the US -- what they call "the rising gap between the rich and poor." It suggests that "snapshots of income inequality" should be considered in light of "the mobility of people up and down the income ladder."
The first graph is from Piketty and Saez, and shows the percentage of income going to the top 1% of income recipients. It shows the 1980 share as 10% and the 2007 share approaching 23.5%. The text mentions that the share of income received by the top 10% has risen from 34.6% in 1980 to 49.7% in 2007, also sourced to P&S.
The paper then goes on to show, from IRS data, the extent to which people moved from one income quintile to another between 1999 and 2007:
|Table 1 More than 50 Percent of Taxpayers Moved Out of the Bottom Quintile Between 1999 and 2007|
|2007 Income Quintile/Percentile|
|1999 Income |
|Lowest||Second||Third||Fourth||Fifth||Total||Top 10%||Top 5%||Top 1%|
|Note: Computations by author from the 1999-2007 SOI Individual Tax Panel.|
They cite the good news that only 43% of those in the bottom income quintile in 1999 remained in that quintile in 2007. A similar percentage of those who were in the top 1% in 1999 were again in the top 1% in 2007. Less than 10% of the 1999 Top 1%'ers had fallen out of the top quintile 8 years later. It was far more likely that a top-quintile taxpayer would remain in the top quintile -- 62% -- than anyone else remain where they were.
(Might I be forgiven for wishing that the study showed what percentage of income over the 9 years went to the people in each quantile in 1999, and then again for each quantile in 2007? One might come away with a different understanding.)
The remaining tables/figures show, for three different measures of income, how many taxpayers were "millionaires" for 1, 2, 3, 4, 5, 6, 7, 8 or all 9 years. (The appendix shows that the top 1% began at $339,600 in 1999, and $549,200 in 2007.)
Working with Gross Income, 675,000 tax payers had income over $1,000,000 during at least one year between 1999 and 2007. Of those, half were in that category for just one year, and only 6% -- 38,000 taxpayers -- were in the $1,000,000+ category for all 9 years. This is apparently intended to demonstrate that many more of us have one fabulous year than have consistent reported income at that level, and that this must mean that there is opportunity for all.
Narrowing the definition of income to exclude capital gains, a similar table shows that 431,000 taxpayers fell into the $1,000,000+ category at least once, of whom 175,000 were only once. So 36% of those who were "income millionaires" by the Gross Income definition were not "IM's" when capital gains were excluded.
Excluding (instead) "Business Income," the ever-an-income-millionaire universe drops to 555,000 taxpayers, and 55% of them were one-year-only income millionaires.
It would be interesting to see the aggregate income during the 9 years for each group. The author clearly has the data.
|Appendix B Persistence/Transience of Millionaires:
Data Underlying Figures 2, 3 and 4
|Number of Years a Millionaire|
|Gross Income Excluding Capital Gains|
|Gross Income Excluding Business Income|
|Source: Computations by author from the 1999-2007 SOI Individual Tax Panel.|
I suppose their conclusion is that since so many more people have one year of $1,000,000+ income than have 9 years of it, we ought not to worry about the actual distribution of income, which, as I've previously reported, is as follows:
|Top income decile:||47.19% of the before-tax income|
|Second income decile:||13.77% of the before-tax income|
||60.96% of the before-tax income|
|Second highest income quintile:||18.18% of the before-tax income|
|Middle income quintile:||11.23% of the before-tax income|
highest income quintile:
||6.72% of the before-tax income|
||2.92% of the before-tax income|
[Source: SCF Chartbook, page 7 and my calculations]
Moving from the bottom quintile to the fourth highest quintile may be considered mobility by the Tax Foundation. But when the top quintile receives 61% of the income, and 62% of those who were in the top quintile in 1999 are again in it in 2007, even a lot of mobility doesn't get one very far, in terms of economic security or return on one's labor.
Look at it this way:
This is structural. We have permitted the creation and maintenance of income- and wealth-funneling machines.
You can read more about the nature of the machine, and how to harness it to make things better, in Henry George's books, including Progress and Poverty, and Social Problems (the latter is a book of essays, and the link will take you to some material which will help you choose one of interest). Certain things in society rightly belong to all of us, and our failure to treat them accordingly is at the root of our income- and wealth concentration problems (and many others, including sprawl, joblessness, boom-bust cycles, pollution -- and I think most of us would be happy to see that there is a solution to any one of these, much less something that will lead to a solution of all of them).
Income mobility in a society where so few of us control so much is a salable proposition only to the gullible. If every one of us could spend 3 months of our lives in the top 0.25% of income recipients, then maybe our top-20%-gets-61%, top-1%-gets-23% might be consistent with our ideals of equal liberty. Maybe, kinda sorta.
Tax Foundation, look into the wisdom of Henry George. Unless, of course, your funders' interests are not the interests of ordinary Americans.
Posted on June 23, 2010 at 08:41 PM in a wedge driven through society, America in the world, boom-bust cycles, common good, connect the dots, cui bono?, economic justice, economic rent, externalities, Henry George, income concentration, land includes, landed gentry, little people pay taxes, middle class, one solution for many problems, poverty machine, privilege, SCF data, Survey of Consumer Finances data, teach your children well, unemployment and underemployment, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
| | | |
A friend sent me two prayers, both by John Archer, of Huddersfield, in the UK. I'm guessing they might be 100 years old.
The Prayer of the Landless.
O THOU, who didst decree all things, and who didst breathe upon us, giving us life, for what purpose didst Thou create us?
For we are aliens upon the soil which gave us birth, and we are trespassers in the land of our fathers.
Thou didst fashion us in nakedness, and didst bid us break the bread we eat in the sweat of our brows. But though we would fain comply with Thy command, we may not do so without the consent of others.
And the price of such consent is so exacting that our lives are made bitter by hard bondage.
We plough the fields and scatter the good seed o'er the land, but a mere pittance of the golden grain is our portion of the harvesting.
We spin and weave, but it is the bodies of others which are kept warm by the cloth our hands doth make.
We build ships and carry over the face of the deep the fruits of the labours of our brethren, and we return laden with the fruits of Thy beneficence and other men's labours in the lands we have visited, but others than ourselves and our brethren appropriate the fruits of our activities.
Down, down we go into the deeps of the mind, and through danger attended with discomfort we dig and hew the coal which shall give warmth and glow to the hearthstones of our homes; but divers rents, royalties and wayleaves impoverish the hire of our labour in order to enrich the exchequer of those who neither toil nor spin.
The rights of the birds of the air and of the beasts of the field to their place on this planet of Thy creation is acknowledged, but ours is challenged. We have not where to lay our heads, we have not where to place the soles of our feet -- without permission. And we may only secure such permission by the payment of annual tribute known as ground-rents.
Jesus, our elder Brother, who taught us to believe that Thou art equally the Father of us all; didst also command us to render to Thee the things which belong to Thee.
The earth, created Thou it! Hast Thou given the title deeds thereof to those who refuse to us the right of a standing and a resting place thereon, unless we pay rent to them annually?
If Thou hast bestowed on them the title deeds, wherein have we sinned against Thee, and wherein have they so pleased Thee, that they should be thus lifted above compliance with Thy decrees and ordinances, and we be so penalised that our children languish for lack, their mothers droop and die, thus causing many of us to curse the day we were born.
If these things be not of Thy ordering, so incline the hearts of all Thy people to the issues of justice, that they may be made to realise they but mock Thee with vain petitions when they pray, "Thy will be done on earth as it is in heaven," until they right this wrong which dishonours Thee and which enslaves and destroys Thy disinherited children. Amen.
It may not be immediately obvious to those who haven't thought about this before that the alternative is for every individual who possesses land to pay to the commons each year the annual value of the land itself -- that size lot in that location. Each pays for what he uses, and thus keeps for himself no more than what he is actually using. This creates an economy in which valuable sites get used for valuable purposes, not held out of use as someone's nestegg for their children or grandchildren. No one grows wealthy off others' labor, and this flow of land rent gets used for common purposes rather than pouring into the portfolios of a select few.
Click on this link to see all the Landlord and Landless prayers I've got on a single page.
Posted on June 18, 2010 at 10:53 PM in a wedge driven through society, absentee ownership, charity and justice, cui bono?, economic justice, ending poverty, free lunch, landed gentry, Landlord's Prayer, landlordism, paying twice, poverty machine, poverty's cause, privatization, reaping what others sow, The End of Poverty?, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
THE LANDLORD'S PRAYER OFFERING IN THE TEMPLE
O God, I thank Thee that I am not as other men. Thou art very wonderful and very kind — for Thou hast made me Thine own selected one!
All Thy works praise Thee — and yield their tribute to me! The earth, created Thou it — and gavest it to me!
The sea also is Thine, but Thou hast given me its bed for a long distance out from the shore — so that none may ride upon its waters without paying toll to me.
The firmament of the Heavens is Thine, and Thou hast set the sun therein to give light and warmth by day, likewise the moon and the stars whereby to radiate through the gloom and the darkness of the night, and these also enrich my exchequer.
Thou ridest Thy chariots in the clouds and causeth the winds to blow, and dost thereby still further increase my plenteousness.
Thou hast decreed that the non-elect of mankind shall live by labour, and hast conferred on me the power to make them hand over annual tribute to me and mine for the opportunity of so doing.
Thou hast ordained that the earth which Thou gavest me shall rise in value through the operation of natural laws and social factors, and hast appointed me to collect these enhanced values and to use them for myself and my house.
In further manifestation of Thy concern for me and mine, Thou hast commanded that the non-elect shall forge weapons for defending that which Thou hast given to me; that they — the non-elect — shall provide forces to use these weapons on my behalf, that they shall pay the capital costs thereof, and that they shall further provide out of their own common labors such funds as may be needed for feeding and clothing themselves and their dependents, and of providing compensation for the dependents of those who fall or are maimed and bruised whilst engaged in safeguarding Thy gifts to myself, in order that no toll shall be made upon Thy goodness to my house. Yea, Lord, I thank Thee that I am Thine own elect, and that Thy wonderful goodness is made plain in the tribute which Thy created handiwork brings to me and to my house. Amen, Amen, and yet again Amen.
This version was printed in Land and Freedom in 1917.
In another version, the final paragraphs read slightly differently:
Posted on June 18, 2010 at 10:52 PM in a wedge driven through society, cui bono?, economic justice, equality, free lunch, income concentration, land appreciates buildings depreciate, landed gentry, Landlord's Prayer, landlordism, one solution for many problems, playing by the rules, poverty machine, poverty's cause, privatization, privilege, prosperity, reaping what others sow, sharecropping, slavery, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
| | | |
I've found a longer version of a Landlord's Prayer which Henry George published in The Standard (late 1880s, or early 1890s). This one was reprinted in December, 1920 in an IBEW publication, and is sourced there to the Dundee People's Journal.
(By William Allan.)
Lord, keep us rich and free from toil
Are honored holders of thy soil,
Which democrats would fain despoil
O Lord, our fathers got the land
For serving men whom Thy right hand
Had chosen to be great and grand,
Tho' taken by stealth, we're not to blame;
Thou knowest, O Lord! it is a shame
To say to us of titled name
Lord, let us live in wealth's content
Lord, we are by Thy mercy meant
To rule mankind and make our rent
The birds that hunt the moors and hills,
The fish that swim in streams and rills,
The beasts that roam as nature wills,
E'en Lord, the minerals that lie
Beneath the earth's periphery
Belong to us -- Thou knowest why
Lord, on the rugged rabble frown,
Are foes to us, Thy church and crown;
Lord, bare Thine arm and grind them
O Lord, our God! we make their laws,
Which they reject with wild applause;
Be Thou a buckler to our cause
They scorn our love, Thy name and word,
They reverence neither squire nor lord;
Lord, them consume with fire and sword
Lord, they are poor and ignorant,
Compared with us, how different
In manner, garb, and lineament,
Lord, never let them get or see
The power which lies in unity.
Keep us apart from them -- for we
Protect us from their greedy hands,
Protect us from their vile demands,
Protect us in our wealth and lands,
--Dundee People's Journal.
Posted on June 18, 2010 at 09:18 PM in a wedge driven through society, charity and justice, commons, cui bono?, democracy, economic justice, ending poverty, equality, FIRE sector, free lunch, Henry George, income concentration, land includes, landed gentry, Landlord's Prayer, landlordism, natural resources, poverty machine, poverty's cause, privatization, privilege, reaping what others sow, sharecropping, slavery, The End of Poverty?, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
| | | |
Posted on June 16, 2010 at 01:16 PM in a Manhattan acre, a wedge driven through society, absentee ownership, better cities, buildings depreciate, cui bono?, economic rent, FIRE sector, land appreciates buildings depreciate, land share of real estate value, land speculation, little people pay taxes, location, location, location, privatization, privilege, reaping what others sow, urban land value, windfalls | Permalink | Comments (0)
| | | |
The New York Times reported recently that Dan Duncan died in March, leaving an estate estimated by Forbes Magazine to be $9 billion. He started with $10,000 and two propane trucks, and "and built a network of natural gas processing plants and pipelines that made him the richest person in Houston."
I do not begrudge his heirs the value of the plants themselves, other than the value created by any sort of monopoly they might benefit from -- which may be considerable -- and the value of the well-located land on which they sit. But the pipelines run over rights of way whose value has probably gone very lightly taxed, just as the value of railroad rights of way has traditionally been under-valued and therefore taxed lightly.
The estate includes over 100 million shares of the stock of Enterprise GP Holdings, worth $43 per share at the time of his death, shares which likely have appreciated hugely over the years without being taxed. Because Duncan's estate escaped paying estate tax, the value of the shares was not stepped up, so when the shares are sold someday, a 15% "capital" gains tax will be due, and his heirs will keep the other 85%.
Had Mr. Duncan died in 2009, while the estate tax was still in place, the $4.3 billion of shares would have resulted in a $2 billion estate tax. (That ignores his other holdings, including a 5,500 acre hunting ranch.)
The estate tax is an imperfect tool, but it is better than no tool at all to collect back for the community value which individuals during their lifetimes have managed to privatize.
The best solution, though, would be for each of us who privatize something from the commons to be required to compensate the commons, month in and month out, for that which we claim title to. Buildings, machines and pipelines are rightly private property, but the land on which they sit and the nonrenewable natural resources which they draw down are OURS, not the rightful property of any individual or corporation, and when we permit some to privatize that value without compensating society, we create wide channels for TRICKLE-UP. We're so used to it that we don't even notice.
Recall that a huge something over 70% of America's net worth is owned by just 10% of us, and over 34% is owned by 1% of us. Mr. Duncan's children are in that 1%. They have inherited the reins to a corporation which we've permitted to privatize the value of what ought to be common property.
Those who have high hopes and sincere expectations of someday winning a large jackpot in the Powerball Lottery may think it appropriate to defend the privileges associated with having large amounts of wealth (Powerball winnings, however, are income -- that's a detail) and they may think it to be in the best interests of their future lucky self to protect privileges associated with privatizing the commons. (They might want to take a look at the odds in their favor compared to the odds associated with the privilege of access to America's or the world's natural resources.)
Posted on June 14, 2010 at 09:16 PM in a wedge driven through society, Alaska Permanent Fund, commons, cui bono?, estate taxes, land includes, land, labor and capital, natural resource revenues, natural resources, poverty machine, privatization, privilege, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Posted on June 14, 2010 at 04:24 PM in a wedge driven through society, assessment, boom-bust cycles, buildings depreciate, cost of living, cui bono?, estate taxes, financing education, financing infrastructure, financing services, FIRE sector, free lunch, home equity, housing affordability, land appreciates buildings depreciate, land share of real estate value, land speculation, landed gentry, location, location, location, middle class, population, poverty machine, poverty's cause, property tax, Proposition 13, public spending, real estate bubble, reaping what others sow, urban land value, wealth distribution or concentration, windfalls | Permalink | Comments (0)
Tags: economic justice, estate tax, property tax, tax reform
| | | |
A friend passed along this excellent piece, from the City Club of New York just over 100 years ago. It is long, but highly instructive, and quite relevant in the 21st century.
Do you want to know the mechanisms by which we concentrate wealth into the portfolios of a narrow slice of our population? Read this. Read Fred Harrison's Wheels of Fortune. Watch Fred's brief video, Ricardo's Law: The Great Tax Clawback Scam:
And consider a town or city you know. Is your experience any different?
Why on earth would we finance infrastructure any other way? Well, California's Proposition 13 is designed to make sure California can't. No wonder the state is in such trouble.
Remember what Leona Helmsley told us: "WE don't pay taxes. The little people pay taxes." She wasn't talking about tax evasion; she was describing tax structure. THIS is how wealth concentrates.
The reference to Spuyten Duyvil is to the point where today the Henry Hudson Bridge, on the parkway of the same name, crosses from upper Manhattan into Riverdale, in The Bronx. (It refers to devilish currents in the rivers, which menace unsuspecting rowers.)
A Memorandum Addressed to the Board of Estimate and Apportionment
And The Public Service Commission of New York City.
The Board of Estimate and Apportionment and the Public Service Commission:
The City Club respectfully submits for your consideration the results of inquiries made through its Transit Bureau with relation to the feasibility of meeting the cost of future subway extensions by means of assessments on the property benefited.
The city urgently needs more rapid transit roads. Private capital seems disinclined, at present at least, to finance the work of building. The city's borrowing power is utterly inadequate to cover the need, and will be until relief may be secured through the slow process of constitutional amendment. If the necessary lines are to be built, it seems self-evident that other methods must be considered.
The Club's investigations show that in the outlying districts reached by the present subway, and to some degree the nearer sections, the value of the property served has increased to an extraordinary degree. This added value would have paid for the cost of the work several times over. While the city as a whole has benefited greatly, the scale of local benefit is naturally much greater. In our judgment, it would not only be helpful as a solution of the problem, but far more equitable to charge a proportion of the cost of constructing a rapid transit line to the property most benefited by such construction.
The argument is elaborated, and the exact results of the Club's investigation given, in the accompanying memorandum. We trust that this may have your examination, and that if the plan commends itself to your judgment, the future policy of the city may be shaped accordingly.
Henry C. Wright, Bureau Director.
For many years the city has deemed it just to assess upon abutting property the cost of opening streets and building sewers. The theory of such a tax upon property is that it receives almost the exclusive benefit from the construction of a street or sewer adjacent to it. The question naturally arises, does not a transit line, by the benefit that it confers, fall in the same class as new streets and sewers? If a street railroad or rapid transit line be extended into an undeveloped territory, is it not built primarily for the purpose of furnishing transit facilities to future residents in that section? People will buy this property primarily because it has good transit facilities and the value placed upon it is largely based upon its accessibility. This being true and universally admitted, why should not the property thus enhanced in value by the extension to it of a transit line pay for the construction of such line, to the extent that the increased value warrants it, instead of receiving such increased value as a present from the city. This principle, in a modified and unofficial form, is operated in Berlin. The assessment is not collected by the city, but the street car company when extending a line to outlying territory requires the owners of the property benefited to guarantee to the company a certain return upon the cost of such extension.
Posted on June 05, 2010 at 10:32 PM in a wedge driven through society, absentee ownership, buildings depreciate, cui bono?, economic rent, financing infrastructure, government's role, income concentration, infrastructure, land appreciates buildings depreciate, land value taxation, landed gentry, landlordism, little people pay taxes, location, location, location, population, property tax, property tax reform, reaping what others sow, tax reform, transportation, urban land value, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
Without a doubt, the much lower tax rates at the top encouraged people to realize more income in the tax system. And if the only measure is that some people made more, then this would be a good.
But let’s ask the question that the classical economists would have asked back when they were known as moral philosophers and their leaders spoke of policies that benefited the majority. Let’s go back to a time before Vilfredo Pareto’s observations began what is the overwhelmingly dominant orthodoxy today, neoclassical economics with its focus on gain.
What is the social utility of creating a society whose rules generate a doubling of output per person but provide those at the top with 37 times the gain of the vast majority? ...
Is a ratio of gain of 37 to 1 from the top to the vast majority beneficial? Is it optimal? Does it provide the development, support, and initiative to maximize the nation’s gain? Are we to think that the gains of the top 398 or 400 taxpayers are proportionate to their economic contributions? Does anyone really think that heavily leveraged, offshore hedge fund investments are creating wealth, rather than just exploiting rules to concentrate wealth, while shifting risks to everyone else?
Under the overwhelmingly dominant economic theory of today, this is all good. Pareto argued that if no one was harmed, then all gain was good.
Carried to an extreme, neoclassical economics would say that if the bottom 99.9999997 percent had the same income in 1961 and 2006, and all of the gain went to the one other person in America, that would be a good. ...
Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?
Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families with children whose head is age 50 or younger, is smaller today than it was in 1983.But the original has some other important things to say. It begins,
The alternative? Tax the annual value of those resources -- which are rightly COMMON property, provided by the Creator and by the presence of all of us and the spending/investment of the entire Community, not by individuals or corporations -- heavily (say, 90% or 95% of the annual value) and reduce or even eliminate -- starting at the bottom -- the wage and interest and sales taxes and taxes on manmade improvements to land. Think about the ramifications of that reform. They're profound, and point in the direction of a healthier, more stable and more just economy. Will the revenue generated be sufficient to fund all of today's public spending? Probably not. But
The bottom 70% or so of us CAN'T save. Large shares of our incomes are devoted to housing and transportation, and to all sorts of FIXED costs. We can't increase our spending on other goods, and we can't save. We have to fix that. We have to do things which distribute the value of that which SHOULD be common, and end the privatization of value which ought to be common.
1. that's no reason not to shift our taxes off bad taxes onto good ones; and
2. we may find that with good taxes, things change enough that we no longer need to spend large amounts on the social safety net, because a vibrant economy with opportunities for all and a somewhat more equal distribution of income and of wealth and power permits the vast majority of us to be self-sufficient and prosperous.
Posted on June 05, 2010 at 08:32 PM in a wedge driven through society, absentee ownership, boom-bust cycles, charity and justice, classical economists, common good, commons, ending poverty, equality, financing education, financing infrastructure, financing services, FIRE sector, government's role, housing affordability, income concentration, individualism, land value taxation, landed gentry, landlordism, natural resource revenues, natural resources, neoclassical economists, one solution for many problems, poverty, poverty machine, poverty's cause, privatization, privilege, reaping what others sow, tax reform, taxation, unburdening the economy, unemployment and underemployment, urban land value, wage taxes, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
“If every Californian understood the situation, and they decided they didn’t want to do anything about it, that would be fine with me,” Ms. Bestor said. “But nobody seems to know about this.”
I wonder if she'd include in that sentiment the 50% of California residents who DON'T own the homes they live in, and those among the homeowners who recognize the injustice Prop 13 creates. Or are they below the radar level?
“Any time you bring this up people start saying you’re talking about overturning Proposition 13,” Ms. Bestor said. “That’s not what this is about.”
BUT IT SHOULD BE!
Lobby to free a few of the slaves, but be sure you don't harm the interests of any slaveholders in the process!
THE LABOR PROBLEM.
By An American.
The signs of dissatisfaction on the part of the laboring classes are clearly apparent everywhere. Labor organizations, strikes, boycotts, labor journals -- all these mean something, and what that something is we cannot find out too soon.
Is the dissatisfaction of labor simply the result of human perverseness, the envy and jealousy of idleness and carelessness at the better success of industry and thrift, or are there unjust forces operating on society producing vicious inequalities?
Has every man the same chance? Can all men attain to the same fortune if all are equally industrious and thrifty? Is there a fair field and no favor?
Certainly there is, cries a host of respondents. Is not each man the architect of his own fortune? And they quote case after case of men who began at the foot of the ladder, but who with indomitable pluck gained step after step until they conquered fortune, while others who began at the same point, neglected their opportunities and are still toiling in poverty, where they are destined to stay to the end of the chapter.
Is society so constructed that to all there is the same chance? Can all by exercising the same industry and thrift become equally wealthy? This question goes directly to the core of the labor problem. If there is the same chance to all, then what reason has the laborer to complain? A little consideration answers this question.
In how many years could society with its utmost exertions and greatest economy accumulate enough so that toil would be no longer necessary, and forever after all succeeding generations could live in idleness. No more plowing in spring, no reaping in harvest, no toiling in the mine, no sailing on the ocean — a huge, everlasting pic-nic!
Never! Toil, to restore the faded or to replace the worn out, must be as lasting as the race. Toil, toil, toil, is the inevitable.
"Men may come and men may go,
But toil goes on for ever."
Note that as fact number one and put fact number two alongside it.
And fact number two is this: Certain families now have the power of living for ever without toil. They organize no industry, invent no machine, do nothing to furnish supplies for themselves or their fellows — drones in the human hive, and yet their cruse of oil never fails.
Now, put these two facts together:
1st. Toil must be lasting as the race;
2nd. Some are now eternally exempt from toil;
Therefore, as certain as any therefore can be, some are endowed with privileges from which the rest of the race must be by an inexorable physical law for ever excluded.
Posted on May 30, 2010 at 09:33 PM in a wedge driven through society, absentee ownership, better cities, civilization, connect the dots, cost of living, cui bono?, economic justice, economic rent, ending poverty, equality, free lunch, government's role, immigration, income concentration, individualism, land includes, land speculation, landed gentry, landlordism, location, location, location, natural resource revenues, natural resources, one solution for many problems, opportunity, population, poverty machine, poverty's cause, privatization, privilege, sharecropping, unemployment and underemployment, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
| | | |
When there is a benefit to be gained by people congregating in one area rather than spreading themselves out evenly over the entire area of a country such as America, who is entitled to that benefit?
Two people working together produce more than the sum of what they produce separately. How should that surplus be divided?
Should it be divided equally among the workers? Should it be divided in proportion to the contributions of the labor of each worker? Should it all go to the more able of the two workers? Should it go to the fellow who owns the land on which they work? Should it go to those who lent someone money to buy the land? Should it be spent on things which make life more pleasant or work easier where they work?
Posted on April 27, 2010 at 10:24 AM in a wedge driven through society, absentee ownership, better cities, classical economists, common good, cost of living, cui bono?, economic justice, economic rent, financing education, financing infrastructure, financing services, FIRE sector, free lunch, incentives, income concentration, infrastructure, land appreciates buildings depreciate, land speculation, land value taxation, landed gentry, landlordism, location, location, location, neoclassical economists, one solution for many problems, poverty's cause, privilege, public spending, reaping what others sow, wealth distribution or concentration, windfalls | Permalink | Comments (0)
| | | |
That figure has been in the news and opinion columns a great deal in the past couple of weeks. It is the percentage of Americans who pay nothing in federal income taxes (as distinct from federal withholding for social insurance).
Some of the articles and related comments have focused on the concept that everyone should be paying something, so that they "have some skin in the game" so that there is an incentive not to vote for spending that others will have to pay for. Some have approached the 47% as "freeloaders."
It is funny that in our largest state, where, for 30+ years, Proposition 13 has put a ceiling on property taxes, so that landholders, who are the primary beneficiary of the effects of state and local spending (and federal funding of state and local projects) can expect their tenants to contribute mightily to the projects they vote for -- and no one has made an impression by pointing this out.
And none of the articles I've seen about the 47% figure -- which went viral after an article by Bob Williams in the WaPo -- have spent much time exploring the policy decisions behind this.
I am reminded that according to our official Federal Poverty Guideline, about 13% of us live "in poverty." And that even the Census Bureau, which collects and reports the data on who lives below the Federal Poverty Threshold (a retrospective figure which relates closely to the FPG) willingly recognizes that the Federal Poverty threshold and guideline are merely a statistical yardstick, with no particular logical relationship to the cost of living anywhere in America.
I am reminded that for the states for which a Self-Sufficiency Standard Study has been published (about 35 in all), the bare-bones cost of living for a young working family typically runs from 180% of the Federal Poverty Guideline -- in the least expensive counties (where very few people live) to perhaps 210% in the major cities of our smaller states to 300% or 400% in the major cities in our larger states.
Should the incomes -- mostly wages -- of our working people whose incomes are insufficient or barely sufficient to meet their own and their families' most modestly defined needs, be taxed?
I am reminded of the Overlooked and Undercounted studies, which typically follow a Self-Sufficiency Standard Study, and seek to quantify the number and percentage of working-age families whose incomes are insufficient to cover their bare-bones cost of living. Significant percentages of these families are at these income levels. 30% to 35% sticks in my mind -- and a larger percentage of America's children.
I am reminded that a large percentage of today's seniors are hugely reliant on their income from Social Security, and that the level of Social Security income is established upon retirement and thereafter only rises to keep up with the CPI-U; our oldest retirees are receiving Social Security incomes which are a function of their wages 30 years ago -- roughly as logical as California property taxes for long-time owners being based on the selling price of California housing 30 years ago!
I am reminded that many people get to deduct their mortgage interest and real estate taxes from their taxable income (they're typically in the coastal states; in the heartland states, the standard deduction often turns out to be higher, since taxes and interest payments tend to be lower ... which may correlate to the percentage of children who attend 4 year colleges).
And I am reminded that state and local taxes fall more heavily on low-income people than they do on high income people. (See "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States", particularly the "Averages for All States" table on page 124 of 130), which shows that, on average, the bottom quintile of us pay 10.9% of our income in state and taxes, while the fourth quintile pays 8.5% and the top 1% pays just 5.2%, on average.
I am reminded of our concentration of income:
So the bottom 40% of us receive less than 10% of the before-tax income. And those who think they don't pay enough in taxes would like them to pay more into the system than they already do? The problem is one of low wages, unemployment and underemployment. The best solution to these problems I've come across lies in the ideas of Henry George. The law of wages is something like the law of gravity: we operate in ignorance at our own risk.
Posted on April 26, 2010 at 07:17 PM in a wedge driven through society, classical economists, common good, connect the dots, cost of living, cui bono?, ending poverty, government's role, Henry George, income concentration, little people pay taxes, natural resource revenues, natural resources, neoclassical economists, playing by the rules, poverty, poverty machine, poverty's cause, prosperity, reaping what others sow, sales taxes are wrong, tax reform, taxation, teach your children well, unburdening the economy, unemployment and underemployment, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
| | | |