Friday night's PBS NOW and Bill Moyers Journal were a powerful combination. My local station shows NOW first, followed immediately by BMJ. NOW showed three families in Alabama, including a hard working couple whose income places them at roughly the poverty level. They pay sales taxes of 10% on their purchases, even on food. They only recently got indoor plumbing.
The footage also showed one of my heroes, Susan Pace Hamill, law professor at the University of Alabama, who has written several important papers, all available online [and highly recommended], about the inconsistency of Alabama's tax code [2002] and of the federal tax code [2006] with the ideals we say we hold dear. I applaud her efforts and her scholarship and her good heart --- and I don't think she sees the half of it, or the solution.
Here's what I posted on NOW's comment board. I hope they might look into these ideas.
I applaud your reporting and your attention to this important topic. You came close to what I think is a very important truth, without seeing the full importance of it.
You seem to be caught mostly in an income tax box. That is, it seems as if most of your solutions fall into the category of a more progressive income tax. I'm all for progressivity in taxation. But the income tax is not the best answer or even a decent answer, at least not until we've utilized fully a far superior tax.
The superior tax to which I refer is a portion of the property tax. The conventional property tax is actually two very different taxes yoked together: a tax on the value of buildings, and a tax on the value of land. The one is very counterproductive and leads to results that no wise person or community would find desirable. The other is perhaps the best tax available to us -- one which could radically reform a number of our most serious problems: housing affordability, poverty, low wages, urban sprawl, urban blight. I'm not overpromising: these are all related to a single malady, a single error we commit through our ways of taxing ourselves.
When we tax buildings, we get fewer buildings (less housing, fewer commercial buildings) and older buildings, and less redevelopment and poorer maintenance. We get fewer jobs, less competition among entrepreneurs for our patronage, higher prices, lower wages.
But when we tax land, what do we get? For one thing, we get better land usage, most particularly of our most valuable land. Urban land can be worth millions of dollars per acre - there's an acre in midtown Manhattan that may sell for $1 billion shortly - a lot more than the $10,000 per acre that the best agricultural land goes for (other than perhaps wine country land) and a lot more than the $50,000 or $100,000 per acre land that most of us live on if we live in single family homes.
That better usage of urban land creates housing. Creates density. Creates commercial venues. Obviates the need for long commutes to get to cheap land to live on.
When we tax land value, we motivate the private sector to act in desirable ways.
When we tax land value, we do not reduce the supply of anything, because no one can produce an additional building lot. Taxing land value does not reduce the land value by a penny, but it does bring down the selling price, just the way an increase in interest rates reduces the amount that buyers who rely on borrowed funds can pay to sellers.
When we tax land value, we calibrate things so that those who get the benefit of the effects of public spending -- the landholders -- get to pay for that spending in direct proportion to the benefits they receive! Pretty good! And better yet, their tenants now pay once -- by paying rent to the landlord, who in turn passes it to the public treasury through the land value tax, instead of the tenant paying both the landlord AND a sales tax (as in Alabama or Chicago) and a wage tax (as in Alabama).
The traditional property tax yokes together these two taxes. The incentive effects are something like the effect on a train of having engines at both ends pulling in different directions. Every time the community needs more revenue, it raises both the good tax -- the tax on land value -- and the bad one -- the tax on buildings. And doing so penalizes those who have already developed their prime sites to their highest and best use -- which usually means that many people are employed in them, and much commerce is occurring -- and rewards with low taxes those whose adjoining land has only a chainlink -- or wrought-iron -- fence and queen anne's lace and chichory flowers, or a well-mowed lawn -- employing only a guard and maybe a landscape mower.
What do we want? Empty lots downtown and lots of sprawl and few jobs, so workers chase jobs, or well-used downtown lots, compact development, lots of jobs, and jobs chasing workers, driving wages upwards.
The only possible loser under land value taxation is the fellow whose idea of a business plan is being a land speculator. He contributes nothing to the community, and is due nothing from it. We can adjust our tax code to achieve that, and to create the kind of society we want.
Land value taxation.
For more on these ideas, look at http://www.answersanswers.com, http://www.wealthandwant.com/ and http://lvtfan.typepad.com
LVTFan is a reference to the only tax I know of that deserves a fan club: LAND VALUE TAXATION. It can solve many of our most serious social, economic and environmental problems.
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