LVTFan's Blog

10 of the largest endowments in N.E.

10 of the largest endowments in N.E. - Boston.com.

This slideshow lists 10 of the top 11 university endowments in New England (MIT did not reply).  They range from Harvard's $25.62 billion down to Smith College's mere $1.09 billion.

It strikes me as odd that the homeowners and businesses in each of their home towns and cities are asked to subsidize them by exempting their landholdings from the local tax base.

This is particularly stark since relatively few of the students at these universities are graduates of the local high schools.

Cui bono?

And who pays?

What a subsidy, often from poor people to rich ones.

And it makes one think of the wisdom of Leona Helmsley.

Urban land is our most valuable resource, and those who occupy it ought to be compensating their neighbors.  Universities are large, and often growing, landholders, forcing out tax-paying neighbors, and increasing the share of the burden of supporting municipal services paid by the remaining non-exempts.

Solution?  Exempt the buildings, but require such entities to pay their full share of the tax burden based on the value of their land.  (Exempt everyone else's buildings, too, of course!)

Prosper California Tax Reform Initiative

Prosper California Tax Reform Initiative

This is an exciting website which shows promise of digging California out of the hole into which it has dug itself.

The only downside I see for the rest of us is that it will make all the taxes which California residents pay deductible on their federal tax returns, and therefore, perhaps, reduce the tax revenue the federal government receives from this huge state, at least in the short run.

But the upside is exciting: California could be the first state to eliminate the dumb taxes which weigh on any economy: sales taxes and the portion of the wage tax which falls on the first $150,000 of personal income.

This is smart taxation.  Read about it at http://www.prospercalifornia.com/

Remembering Howard Zinn

Howard Zinn died a few days ago, at 87.  I think my first awareness of him might have been via Marian Wright Edelman's writings; he was among her college professors and mentors.

I found Bob Herbert's tribute, titled "A Radical Treasure," very moving and relevant.  It got into the significance of, if not the relevance, of "radical."

I always wondered why Howard Zinn was considered a radical. (He called himself a radical.) He was an unbelievably decent man who felt obliged to challenge injustice and unfairness wherever he found it. What was so radical about believing that workers should get a fair shake on the job, that corporations have too much power over our lives and much too much influence with the government, that wars are so murderously destructive that alternatives to warfare should be found, that blacks and other racial and ethnic minorities should have the same rights as whites, that the interests of powerful political leaders and corporate elites are not the same as those of ordinary people who are struggling from week to week to make ends meet?

Mr. Zinn was often taken to task for peeling back the rosy veneer of much of American history to reveal sordid realities that had remained hidden for too long. When writing about Andrew Jackson in his most famous book, “A People’s History of the United States,” published in 1980, Mr. Zinn said:

“If you look through high school textbooks and elementary school textbooks in American history, you will find Jackson the frontiersman, soldier, democrat, man of the people — not Jackson the slaveholder, land speculator, executioner of dissident soldiers, exterminator of Indians.”

Radical? Hardly. ...

Herbert concludes:

He was a treasure and an inspiration. That he was considered radical says way more about this society than it does about him.

Radical.  Do you know the root of the word?  Pun intended, of course.  Radix -- root -- as in radish.  It brings to mind the words of Henry David Thoreau:

There are a thousand hacking at the branches of evil to one who is striking at the root, and it may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve. It is the pious slave-breeder devoting the proceeds of every tenth slave to buy a Sunday's liberty for the rest. Some show their kindness to the poor by employing them in their kitchens. Would they not be kinder if they employed themselves there? You boast of spending a tenth part of your income in charity; maybe you should spend the nine tenths so, and done with it. Society recovers only a tenth part of the property then. Is this owing to the generosity of him in whose possession it is found, or to the remissness of the officers of justice?

Find the root, and strike at it.  Be radical.

Reading Lowell Harriss

As I've noted in an earlier post, Lowell Harriss died a few weeks ago.  I've been reading some things he wrote during his long and productive career.

The first is a piece he wrote in 1978, a few months after Proposition 13, California's taxpayer initiative which lowered property taxes and "protected" property owners from paying for services through property taxes, was passed.  It is entitled "Property Taxation After the California Vote." 

He starts with this: What approach to property taxation would be most in our interest and that of our children?

He provides some history of the property tax, in general and then specifically in California.

Keep in mind that, in California more than in most of the country, assessments on homes rather promptly reflect market conditions -- in an environment in which house and land prices have been rising rapidly. Often, however, local officials did not use the increases in tax base to finance offsetting reductions in tax rates. Homeowners faced rising tax bills; cash income, especially for retired persons, did not always go up correspondingly.

California's colleges and universities were, however, among the best in the US, and surely some significant portion of the public spending was to provide the very services which caused California's property values to rise.

Lowell went on to say,

The full results of Proposition 13 will not appear at once. Only time will reveal whether new jobs develop now as property owners use the addition to their disposable income; whether extensive declines will occur in state-local employment; and how much more erosion of local authority will result from expansion of state payments to replace revenues lost by the sweeping changes in real estate taxes.

He continued,

Present owners of property have voted themselves capital gain "windfalls." The reduction in property taxes will tend to raise real estate prices. Today's owners, in voting essentially permanent reductions in annual property taxes, have enlarged the stream of net benefits (income) to be capitalized in valuing real estate. This one-time capital gain in effect absorbs much of the future benefit from the tax cut. In this respect, the specific results of Proposition 13 are difficult to judge because assessments (but not the tax rate) will rise after a sale. Future buyers will pay a higher price -- higher by enough, in general, to offset the tax benefit.  "No election will ever be lost by votes in the future," runs the conventional wisdom. And certainly California voters did not have future property owners (or voters) in mind when they rallied to the support of Proposition 13.

Lowering the tax reduces the cash required to hold on to underdeveloped land. "Speculative underutilization" becomes less expensive. Waiting for population growth and inflation to boost prices will cost less. The current offerings of land will decline -- and thereby prices will be raised -- because owners face lower cash pressure to sell or develop.  Income tax considerations, of course, complicate individual decisions and require some caution in generalization, but the net effect on land use will be some -- or much -- distortion away from the direction of free-market forces.

Will the California economy get a boost from Proposition 13? Of course it will. Other things being the same, tax something, and there will be less of it (land being an exception). The 50- to 60-percent cut in taxes on man-made capital will alter favorably the "arithmetic" of construction projects in California. How much so is difficult to say. This cost reduction will interact with many other factors, including the forces tending to raise land prices. The change in prospective net returns at the margin may be more modest than impressive. But one conclusion is clear: More capital will flow where tax reduction improves the prospects for investment.

He continues,

The once widely accepted criticism that property taxes are regressive does not survive modern economic analysis. In fact, a persuasive argument in favor of property taxation for local services can be made on grounds of equity. Especially important, it seems to me, is the fact that in effect this tax enables localities to capture some of the fruits of forces raising prices of land, including public outlays on streets, schools, sewers, and other facilities.

He concludes,

Finally, and probably of greatest potential, there is a real opportunity in the wake of Proposition 13 for restructuring fundamentally the way we tax property. We can reduce burdens on man-made capital and make up the revenue from higher taxes on site values, a procedure which seems to me eminently desirable on several grounds. This possibility should be part of the broader public discussion of the role of property taxation stimulated by the vote in California.

One change may be politically tempting -- to reduce burdens on residential property while maintaining or even raising burdens on business and public utility property. Such moves would not only add to concealment of costs of government in the form of hidden burdens on consumers and investors. In addition, the productive portions of the economy would suffer. Building better communities will not come from boosting taxes on business.

Americans should be "up in arms" -- or at least doing something -- about restricting and effectively controlling the growth of government. "Revolt" seems to me too strong a term; it also seems misleading, implying as it does that a single, dramatic action will do the job. Patient, informed, continuing efforts are required. Among them will be the reform of property taxation to develop its potential as a high-quality revenue producer.

Another, earlier paper entitled "Equity of Heavier Reliance on Land Taxation (Location Value) and Less on Improvements" (1970), starts with this:

    Greater fairness in sharing the costs of local government constitutes a prime -- but not the only -- reason for shifting much of the tax from improvements to land. This country will be around for a long time. So also, I hope, will meaningful local government. Effective freedom requires financial independence, including ability and responsibility for raising revenue.

    One of the biggest legacies we leave our children will be the tax system. We want to make it as good as possible. Equity is one (again, not the only) element of "goodness" of a tax system.

He proposes a shift to a structure where the millage rate on land is about 4 times that on buildings.  He talks about transition issues, and issues of equity during and after the transition:

    Two markedly different sets of equity issues command attention. The one of dominant concern ought to be the situation in which we (and our children) would carry on our affairs after generally full adjustment as contrasted with conditions then if present practices were to continue. The long run in which "we" are not all dead! The other concern involves the transition. The shift itself would produce results distinguishable from those to prevail after the economy had settled down to the new system.

Writing of long-term equity issues -- remember that this was 1970 when you consider the dollar figures --

    Community Use of Values Created by Social Development and Local Government Spending

    Over the longer run, landowners would get less of the increment in the values of location. The general public would get more in the form of a larger flow of the rising yields of the worth of location (land) to finance local services. On this score, the equity results commend themselves very strongly indeed. Socially created values would go for governmental, rather than for private uses -- and locally. The absorption of the increments for local, rather for state or national, governmental use would channel these funds on a benefit basis geographically.

    The localities doing most to make themselves attractive would have most of this revenue source. In major cities $10,000 to $15,000 (now often considerably more) of governmental outlay is frequently needed for each new dwelling unit -- schools, streets, fire and police, sanitation and health, park and prison, facilities. Under present arrangements much benefit from such outlays in developing areas accrues to the owner of locations being "ripened" for more lucrative use; his payment in taxes (and special assessments) toward the cost will generally be only a modest portion of the total.

He describes this as a "burdensomeless" tax:

    As for the future, the tax on values of location above their present levels would be almost burdensomeless, except as owners of land and their heirs get less of the "unearned increment" of rising values over the decades. Much of the element of true economic surplus would be used for public purposes. For those parcels of land whose values drop, the annual tax would also decline. Then, because tax rates on land would be higher than today, local government would share more fully in the loss of worth. For landowners the proposal would not be a one-way affair which assumes that land always rises in price.

    No other revenue source seems to me to compare so favorably on this score of fairness. Future users of land would be no worse off for the much heavier tax they would pay on the value of location. The purchase price of land would be correspondingly less. Of the total flow of yield of location value, interest (explicit or implicit) would be smaller, taxes higher. Who would be less well off? The landowners and their heirs who would have gotten the (unearned) increments!

    More of the rise in land value which results from (1) governmental investment in community facilities and (2) the general rise in demand due to the growth of population and income would go to pay for the costs of local government. Such a tax on a pure economic surplus seems to me about as fair as any imaginable source of funds for financing community services. The National (Douglas) Commission on Urban Problems estimated that in the 10 years to 1966, and despite rising interest and tax rates, land prices rose by over $5,000 per American family -- $250,000 million.  Even a modest fraction of this amount if used for local government would have permitted quite a reduction of burden on buildings. The estimated rise in land prices was over four times the total growth of state-local debt and was greater than all of the property tax paid in the 10-year period.

And

    Land as area is fixed in quantity. Tax it heavily, and it will not move to some other place, or decide to take a vacation, or leave the inventory of productive resources by going out of existence. Tax land lightly, and the favorable tax situation will not create more space in the community.

    Our ethos apparently ties economic justice -- equity -- to rewards based on "accomplishment." This principle does not lead to justification of large rewards because of the ownership of land. Differences, big ones, in payments for human services or for the use of capital can rest on what the recipients have done. But for the owners of urban locations such justification can rarely be found; when there have been private inputs for community development, to the extent feasible administratively, they belong on the tax rolls as improvements rather than as land.

And just before he concludes, he writes,

    What an owner can get in the form of land price increases in and around cities has made rich men out of owners of farmland, vegetable plots, and waste areas. More than one owner of a few acres of potato land on Long Island or farms on the outskirts of many a city in the United States, of a small plot of rice land near Tokyo or Bangkok or Taipei, has reaped handsome gains because of the pressure of population. In America, North and South, in Europe and Australia and Africa, private enrichment has come to the passive owner of land who has done little or nothing to enlarge its worth as part of the city whose growth has brought his good fortune. In fact he may have paid no more than an infinitesimal fraction of the taxes which have financed the streets and other governmental facilities that have helped to elevate the value of his land.

Next, I moved on to a longer piece, from the same time, and containing some of the same material.  I ended up feeling that it is perhaps the best piece I've read in a long time on Land Value Taxation.  It is titled "Property Tax Reform: More Progress, Less Poverty" and it is a lecture he delivered at DePauw University in 1970.   I commend it to your attention.

Finally, I note a book from the TRED -- Committee on Taxation, Resources and Economic Development -- series (#6) entitled Government Spending & Land Values: Public Money & Private Gain edited by C. Lowell Harriss (1973).  Each book in this series came out of a 2- or 3-day conference, held at the University of Wisconsin-Milwaukee.  Lowell organized this conference, and wrote the book's introduction.  Here's the dust jacket material:

Billions of tax dollars are spent annually on government subsidy programs which are designed to help certain groups, areas, and industries, and contribute to the general welfare. Despite the good intentions of legislators, however, analysts point to evidence that the programs are not only burdensome for the taxpayer but often fail to do their intended jobs. Critics find that major benefits go not to those whom the programs are designed to help, but to others who can "capitalize" on them.

One major feature of the subsidy benefit pattern -- unintended but predictable -- is the capitalization of land values. The value of land will increase when the benefits, chiefly money income, are enhanced by government subsidization. When the land is sold, the benefit of a subsidy which seems likely to continue will be captured by the seller. Thereafter, tax funds that continue to subsidize a program will not fully benefit those for whom they were presumably intended, but the seller will have made a capital gain.

A classic example can be drawn from the experience of federal farm programs. Taxpayers and consumers have been spending billions annual to aid some farmers. In practice, of course, these programs have often -- and intentionally -- reduced farm output and raised consumer prices. The consumer-taxpayer is thus dealt a double blow, in effect subsidizing an increase in his own food prices. Yet the operating farmer, burdened with a higher land price, fails to get the full benefits of the programs established for his welfare.

In farm programs, as in some other subsidy programs, the expected annual benefits are capitalized into higher land prices. Then, after land prices have gone up to reflect these benefits, the annual payments to farm operators in effect support the higher land prices. In effect, the seller of land realizes the benefits of government subsidy into perpetuity. A somewhat similar pattern is to be expected in other public spending programs, including those concerned with urban renewal, where benefits are localized. The pattern shows that farm programs do not raise wages of low-paid farm labor, that urban projects do not rid cities of slums, and that the taxpayer-consumer bears the burden of both.

This volume explores, and at least attempts to define, the extent to which land values tend to capture the benefits of subsidies and other government spending through capitalization. It includes papers by proponents as well as critics. The contributors, who include some of the nation's leading economists, discuss the nature and effects of farm and housing programs, commodity price supports, transportation outlays, land preservation projects, water resource development, and urban renewal programs. Their work will be of more than routine interest to economists, political scientists, lawyers, political officeholders and government officials, planners, and all others who seek to unravel the complex fabric of multi-billion-dollar government spending programs.

Lowell made contributions in many parts of economics; I am probably familiar with only a small portion of his work, but I am grateful for it.

Thinking Great Thoughts

The birth of the first of the next generation in my family this week -- our great niece -- got me thinking.  I think of a friend who said of herself "I don't think I'd be a good mother, but I'm a wonderful aunt."  I think of my own great-aunts and great-uncles.  My paternal grandmother's sister, who was a lovely, gentle, elegant woman, and a sweet reminder of my own grandmother after her early death.  My paternal grandfather's sister, who I didn't meet until his 75th birthday (families are complicated!), but whose correspondence with him as they rediscovered each other was a treasure.  My maternal grandfather's brother and his wife, and her siblings, who lived very differently from anyone else I knew, but always gave me a sense of 'rootedness" when I visited their small town. (I remember my shock -- and youthful disillusionment -- when I realized this "plain" lady made her cakes using cake mixes!)

The world they lived in, and the world my new great niece is coming into, are so different from each other.  I think about my high hopes that we can make her world a better place, in part through sharing a set of ideas which were well-known at roughly the time my great-aunts and uncles were born (1885-1905), and are today relatively unknown, but no less important and full of potential for good -- the common good.  

5 generations. 

And we are reminded, as we plan, to think about the seventh generation.  What are the effects of our actions on those who will follow us?  What do we owe them?  And of course, what do we owe each other?

"The End of Poverty? Think Again"

The new film, "The End of Poverty? Think Again" had its NYC premier back in November, and is now back for a second round.

I commend it to your attention.  It is beautifully filmed, and, while it doesn't provide clear answers, it raises a lot of important questions -- different questions from the ones commonly being discussed -- and considers them in light not only of economic justice, but also the sustainability of our planet.

You can watch a number of clips on YouTube ... start at http://www.youtube.com/user/CinemaLibre2 and you'll see links to many excerpts and some outtakes, interviews with the director, and a review.

The title is a direct challenge to Jeffrey Sachs' 2005 book "The End of Poverty." The film looks for the roots of global poverty, and who benefits from the current structure.  It provides a lot to think about.

Here are three websites I encourage you to explore

• the film company's website, http://theendofpoverty.com  This will tell you where you can find the film and provides some additional clips.

• A Georgist Perspective on the film "The End of Poverty?", http://povertythinkagain.com/
• A companion book for the film, "Why Global Poverty?" http://whyglobalpoverty.com/  available at the online bookstore at http://www.schalkenbach.org/

The solutions to poverty that most people are talking about -- microcredit, vaccines, drinking water improvements, etc. -- are not going to put a major dent in the problem.  None of them, and no combination of them, goes to the ROOT of the problem, the underlying cause.

I'm actually not altogether sure that the filmmaker himself fully understands the root of the problem -- but it seems to me that he is at least on the right track.   And I think his film has the potential to get the conversation going, which is a lot better than where we've been.

When I think about the other proposals that are being made to end poverty, I think of a passage from Henry George, the beginning of a chapter called "The Robber That Takes All That is Left:"

Labor may be likened to a man who as he carries home his earnings is waylaid by a series of robbers. One demands this much, and another that much, but last of all stands one who demands all that is left, save just enough to enable the victim to maintain life and come forth next day to work. So long as this last robber remains, what will it benefit such a man to drive off any or all of the other robbers?

I'm not saying that disabling or disposing of some of these other robbers isn't noble work.  But we ought not to fool ourselves that it is sufficient.  And we're operating in the dark if most people don't even realize the existence of that other robber, who also robs them, day in and day out.   

Remember that in America, which has, most of us think, solved most of the problems these people set out to solve, has tremendous concentration of wealth:

10% of us hold 71.5% of the aggregate net worth.  The next 10% have 13.5%.

That doesn't leave a whole lot for the bottom 80% of us.  And recent developments, including the Supreme Court decision in Citizens United, lead some of us to expect that wealth will concentrate further in America.

The other Davos website

I came across an interesting website the other day ... http://www.we-forum.org/en/events/AnnualMeeting2010/index.shtml.

Unfortunately, the link to the Stiglitz interview doesn't work ... but here is a short one from the same interview.  It is an excerpt from the Philippe Diaz film, The End of Poverty?  Think Again.   Once you see that one, you'll also see links to other excerpts from the film and to trailers and other information.

The Davos website is not what it appears to be, but I encourage you to explore it anyway.   Some of the videos are priceless.

The link under "initiatives" for "Sane Tax Initiative" strikes me as directionally correct:

Sane Tax Initiative

The cancellation of taxes on labor and basic consumption, the creation of a 2% worldwide tax on property ownership (except basic habitation for the poor), and the implementation of a global 0.5% flat tax on all financial transactions with a total prohibition of speculation on food products.

Until the beginning of the 19th century, taxes were largely used as a means of reducing inequalities, and fell mainly on property ownership.

Neoliberal policies of the 20th century slowly shifted the tax burden away from the rich to the poor by taxing labor and consumption—making the poor responsible for financing our economic system while giving the rich most of the benefit. And we all know what became of trickle-down theory.

Taxes must be shifted away from basic necessities and consumption, and back to profit-making operations, and the ownership of natural resources and other industrial properties. A tax must also be levied on financial transactions.

I would differentiate between property in land, which I strongly believe ought to be taxed, with the revenue applied to public purposes, and property in buildings and other owner-created structures and improvements to land, which I do not believe ought to be taxed.

Further, I do not think that "operations" ought to be taxed because they are profitable or buildings because they are "industrial."  But I do agree that the ownership of natural resources ought not to enrich private individuals, or corporations, or any entity other than the public at large.  (Alaska has taken important steps in this direction, with good results, over the past 30 or so years.)

I'm not sure what I think of taxing financial transactions, but I'm certainly in favor of measures which would end the speculation which we've been seeing and which has contributed to awesomely large fortunes created by hedge funds and other traders.  Those fortunes don't come out of thin air, and the traders aren't growing the wealth pie or adding to the stability of our economy; when some reap what they didn't sow, others who sowed are not getting to reap.  And that's wrong. 

I'll post separately about the film, "The End of Poverty?  Think Again," which is currently showing in NYC.

The Great 18-year Real Estate Cycle

http://forums.wallstreetexaminer.com/index.php?act=Attach&type=post&id=1308

This short article by Steve Hanke, of Johns Hopkins and Cato, begins,

On January 3rd, US Federal Reserve Chairman Ben S. Bernanke delivered a major speech at the annual meeting of the American Economic Association. In his formal paper, “Monetary Policy and the Housing Bubble,” Chairman Bernanke argues that the Fed’s monetary policy was not responsible for the U.S. housing bubble. He claims that faulty regulation was the primary culprit.

Chairman Bernanke’s claim is a great canard. The Fed is a serial bubble blower. Let’s first consider the Fed-generated demand bubbles. The easiest way to do this is to measure the trend rate of growth in nominal final sales to U.S. purchasers and then examine the deviations from that trend. As the accompanying chart shows, nominal final sales grew at a 5.4% annual rate from the first quarter of 1987 through the third quarter of 2009. This reflects a combination of real sales growth of 3% and inflation of 2.4%.

It ends,  

These data talk, and the most interesting thing they say is that every 18 years we can expect the culmination of a credit-fueled real estate and ensuing business cycle. This, of course, doesn’t imply that all recessions are preceded by a real estate cycle. It only says that all real estate cycles have spawned economic downturns.

This knowledge has allowed for some prescient forecasts. The prize in that department goes to Prof. Fred Foldvary who wrote in 1997: “the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war.”

For a full treatment of the 18-year real estate cycle, I recommend the following items:

• Fred E. Foldvary. “The Business Cycle: A Georgist-Austrian Synthesis.” American Journal of Economics and Sociology Vol. 56, No. 4, 1997: 521-41.
• Mason Gaffney. After the Crash: Designing a Depression-Free Economy. Ed. Clifford W. Cobb. Chichester, U.K.: Wiley-Blackwell, 2009.
• Phillip J. Anderson. The Secret Life of Real Estate and Banking. London: Shepheard-Walwyn, 2009.

You can read a book-related interview with Mason Gaffney at http://www.masongaffney.org/essays/GAffney_interview_in_Canada_Sun_Life_Financial.pdf.  The book is available here.  Fred's paper is here.  Mason's review of Phil's book is here.

2024.

Why I Bother

The reader might wonder why there are several hundred posts on this blog, and rather few comments.  Why do I keep on writing?

This blog comes out of an experience which Georgists -- people who are persuaded that Henry George (b. 1839, Philadelphia; d. 1897, NYC) largely got it right -- call "seeing the cat."  The phrase refers to an AHA!!! moment once described as follows:

I was one day walking along Kearney Street in San Francisco when I noticed a crowd in front of the show window of a store. They were looking at something inside. I took a glance myself, but saw only a poor picture of an uninteresting landscape. As I was turning away my eye caught these words underneath the picture: "Do you see the cat?" I looked again and more closely, but I saw no cat. Then I spoke to the crowd. "Gentlemen," I said, "I do not see a cat in that picture; is there a cat there?" Some one in the crowd replied: "Naw, there ain't no cat there. Here's a crank who says he sees a cat in it, but none of the rest of us can." Then the crank spoke up. "I tell you," he said, "there is a cat there. The picture is all cat. What you fellows take for a landscape is nothing more than a cat's outlines. And you needn't call a man a crank either because he can see more with his eyes than you can with yours."

Well, I looked again very closely at the picture, and then I said to the man they were calling a crank, "Really, sir, I cannot make out a cat in that picture. I can see nothing but a poor drawing of a commonplace landscape." "Why, Judge," the crank exclaimed, "just you look at that bird in the air. That's the cat's ear." I looked but was obliged to say: "I am sorry to be so stupid but I really cannot make a cat's ear of that bird. It's a poor bird, but not a cat's ear." "Well, then," the crank persisted, "look at that twig twirled around in a circle; that's the cat's eye." But I couldn't make out an eye. "Oh, well," returned the crank a bit impatiently, "look at those sprouts at the foot of the tree, and the grass; they make the cat's claws." After a rather deliberate examination, I reported that they did look a little like claws, but I couldn't connect them with a cat. Once more the crank came back at me as cranks will. "Don't you see that limb off there? and that other limb just under it? and that white space between?" he asked. "Well, that white space is the cat's tail." I looked again and was just on the point of replying that there was no cat's tail there that I could see, when suddenly the whole cat stood out before me.

There it was, sure enough, just as the crank had said; and the only reason the rest of us couldn't see it was that we hadn't got the right angle of view. but now that I saw the cat, I could see nothing else in the picture. The poor landscape had disappeared and a fine looking cat had taken its place. And do you know, I was never afterwards able, upon looking at that picture, to see anything in it *but* the cat.

To which Nic Tideman added, "In my view, 'the cat' is the possibility of a world without privilege."

The goal of this website is to help others see what Georgists see.  We look around and see dozens -- hundreds -- thousands -- of social problems which ultimately, if you go to the root, are offshoots of our -- America's, the world's -- failure to recognize that the value of land, non-renewable natural resources and other like things (that which the classical economists would recognize as "land" even if they never saw an airplane [prime landing rights at LaGuardia] or heard a radio or TV [electromagnetic spectrum] or imagined a satellite in geosynchronous orbit, or lived in a place where water wasn't in seemingly infinite supply, or a time when clean air wasn't a given) ought to be socialized -- treated as our common treasure through taxation -- while things which individuals and corporations create ought to be privatized (not taxed).

There!  I've written a sentence of a length that only a few can parse.  But perhaps it will give you a sense of the Georgist vision and reform.

I write this blog in the hope that a curious journalist, or legislative aide, or reformer, or foundation board member, or simply another person who thinks that there has to be another, better way than what we are currently doing, will find this body of posts, and explore it long enough to start to see the cat, too, and then share it with others who are willing to work for a better country and better world. 

I'll close with a quote from Henry George's book, Social Problems, in an essay called "What We Must Do."

"I do not say that in the recognition of the equal and unalienable right of each human being to the natural elements from which life must be supported and wants satisfied, lies the solution of all social problems. I fully recognize that even after we do this, much will remain to do. We might recognize the equal right to land, and yet tyranny and spoilation be continued.

But whatever else we do, as along as we fail to recognize the equal right to the elements of nature, nothing will avail to remedy that unnatural inequality in the distribution of wealth which is fraught with so much evil and danger. Reform as we may, until we make this fundamental reform, our material progress can but tend to differentiate our people into the monstrously rich and frightfully poor. Whatever be the increase of wealth, the masses will still be ground toward the point of bare subsistence — we must still have our great criminal classes, our paupers and our tramps, men and women driven to degradation and desperation from inability to make an honest living."

Tishman Speyer Surrenders Stuyvesant Town and Peter Cooper

Tishman Speyer Surrenders Stuyvesant Town and Peter Cooper

It is interesting to see who wanted to participate in the increase in land value in New York City through investing in the housing deal which attempted to convert middle-class housing into something more upscale:

Many of the other companies, banks, countries and pension funds — including the government of Singapore, the Church of England, the Manhattan real estate concern SL Green, and Fortress Investment Groups — that invested billions of dollars in the 2006 deal stand to lose their entire stake.

“At the time, it looked like a sound investment,” said Clark McKinley, a spokesman for Calpers, the giant California public employees’ pension fund, which bought a $500 million stake in the property. “When the market tanked, we got caught.”

Calpers, he added, has written off its investment. So has Calsters, a California pension fund that invested $100 million, as has a Florida pension fund that put $250 million into the deal. ...

The Government of Singapore Investment Corporation, which made a $575 million secondary loan, and invested as much as $200 million in equity, stands to lose all of that.

It isn't as if the buyers in this deal were going to build new buildings, or add new housing capacity to NYC on this huge (80 acre) piece of land.  They hoped to make minor improvements in very well-located older mid-rise buildings, and collect much higher rent from new up-market tenants than they could collect from the existing middle-class tenants they planned to force out.

NYC's failure to collect any significant share of the rental value of the land in the form of a tax on land value contributed to the perceived opportunities for Singapore, the Church of England, California and Florida public employees and others to reap the benefit from the economic activity of the NY area and the investments made by NY's taxpayers (whose sales are taxed and whose wages are taxed, even if they only work in NYC) and subsidies given by the federal government (e.g., transportation systems).  (Do you see any irony in it being the California and Florida pension funds which sought to collect a windfall on NYC rent, when those two states have provisions which suppress property taxes and thereby create windfalls for their landholders?  I refer to Proposition 13 and "Save Our Homes.")

If NYC wised up, and placed more of its tax burden on its land value, there wouldn't have been the hope for ongoing windfalls for private investors.

There would, likely, also be a lot more housing available to meet the needs of middle class and other folks, because taxing land value nudges the owners of underused land to reconsider, and put their land to better use.  No parking lots where a high-rise could be.  No urban gardens where a mid-rise could be.   No rubble-strewn lots where townhouses could be.  No "taxpayers" where a building that meets current needs could be.

Remember Leona Helmsley's famous statement?  "WE don't pay taxes.  The little people pay taxes."  She wasn't describing tax evasion; she was describing how we structure ourselves.

If NYC placed more of its taxation on land value, the big real estate operators WOULD be paying their share of the costs of providing the services which make NYC NYC, and there wouldn't be windfalls for CALPERS, Singapore or the Church of England, or the next generation of Leona Helmsleys.  There wouldn't be land speculation.  There would be a more stable and vital economy, in which all of us could prosper.

But obviously, the powers-that-be prefer the status quo -- the system which has funneled 71.8% of America's net worth into the portfolios of 10% of us, leaving 13.5% for the middle class -- the second 10% of us -- and best wishes! to the other 80%.

And, given last week's Supreme Court decision on corporations being entitled to free speech, that 71.8% is going to drown out those who see things differently.

The Feoffees, the Ipswich School Committee and the TENANTS of Little Neck

I've been following this story for nearly as long as I've had this blog:

• The Feoffees, their tenants, and the Ipswich public schools  (February, 2008)
• Update on the Feoffees' tenants in Ipswich, Massachusetts  (July, 2008)
• The Feoffees may sell Little Neck to the tenants ... for ever and ever   (December, 2008)
• The Feoffees of Ipswich are still thinking about selling that fine piece of land at Little Neck  (February, 2009)
• Update on the Little Neck (Ipswich, MA) sale by the Feoffees of Ipswich's Public Schools   (May, 2009)

I've not posted here in a while, though I've commented on individual articles on the Ipswich area newspapers' websites. It seems that, despite the terms of the trust which forbid the sale of the land, an agreement has been reached to sell the land to the tenants for the quite pitiful sum of $29,150,000.

A bit of background: about 350 years ago, a forward-thinking landholder in Ipswich (a town on the shore north of Boston, famous for its clams) donated for the benefit of the Ipswich public schools a magnificent almost-island called Little Neck.  The trust required the Feoffees (trustees) to collect market rent on the land, and donate the proceeds to the town's public schools.  Little Neck totals perhaps 27 acres, of which about 24 acres show up on the Ipswich assessor's database; the rest, I assume is the roads which wind around it. 

For centuries, the land was used for farming, but early in the 20th century, the Feoffees recognized that farming was no longer the highest and best use of this scenic and well-located acreage, and they subdivided it into lots and permitted people to rent them and erect cottages on them.  There are 167 cottages. 

Today, less than half of the land is rented out to individual tenants: my spreadsheet, which is probably pretty close, suggests 10.32 acres rented to tenants and 13.88 acres held unrented by the Feoffees, but available to the tenants as Commons, for a total of 24.19 acres.  There are beaches and a community center, a pier, a playground, playing fields.  Presumably the Feoffees maintain these commons.  A few years ago, a sewage plant was installed.

Houses on Little Neck are mostly small cottages, many under 1000 square feet and built between 1910 and 1935.  Few have more than one bathroom.  Most are seasonal; that is, they can under the terms of the land lease be occupied only from about April to January.  24 are year-round.  I've not been able to figure out which ones, and I don't recall ever seeing one for sale in the times I've looked.

These cottages are old, weather-beaten and modest.  Some have very appealing interiors, but tiny rooms and modest outfitting.  Most are seasonal, and have no heat.They sit on lots which range from 0.041 acres (1,786 square feet) to 0.112 acres (4,879 sq ft), with most at 0.069 acres (3,005 sq ft).

Were they not on Little Neck, with its fabulous views and huge common spaces, its beaches and community amenities, these cottages would be worth no more than $50,000 to $100,000.  (An 800 square foot cottage at $60 per square foot is $48,000.  A 1200 square foot cottage at $80 psf is $96,000.  $60 psf and $80 psf are excessive valuations for cottages built between 1865 and 1950.  Houses depreciate, even with the best of care.)

Yet asking prices for these cottages when I looked 10 days ago were $175,000 (924 sq ft, built 1930) to $620,000 (1,779 sq ft, built 1910, waterfront).   

What does this mean?  It means that the current land rent being collected is nowhere near the market value land rent. 

Currently, the Feoffees are collecting about $10,000 per year each for the 143 seasonal cottages, and a bit more for the 24 year-round ones.   But the difference between the $50,000 to $100,000 value of the cottage itself and the asking prices of $175,000 to $620,000 represent capitalization of uncollected land rent -- Land Rent which the Feoffees are REQUIRED by the terms of the trust to collect!

Perhaps a year ago, or maybe it was two, I spent some time looking at the Ipswich assessor's database, and assembled a spreadsheet.  I think I probably have 95% of the lots accounted for.  I found some interesting things.  In no particular order,

• Occupied lots total 10.32 acres.  The land represented by those lots was valued by the assessor at  $30,990,200, or $3,004,382 per acre.  
• The per-acre assessed value of the occupied lots ranged from $2.6 million to $5.2 million
• Untenanted lots are of two sorts:

1. one large one, listed at 39 Bay Road, of 11 acres, valued at $842,500, or $76,591 per acre
   

2. perhaps 42 small ones, totaling 2.88 acres, valued at $918,800 total, or $320,000 per acre  

• The untenanted lots, totaling 13.88 acres, were valued by the assessor at $1,761,300, or $126,941 per acre.   Had they been valued at $3,004,382 per acre, their value would be $41,700,822. 
• Add together the $30,990,200 at which the assessor valued the occupied lots and the $41,700,822 for the untenanted lots -- the commons -- and the value of Little Neck's land would be $72,691,022.
• The assessor valued the cottages on Little Neck at $14,857,592, an average of $88,968 per cottage, ranging from $38,700 to $223,600.  
• The assessor valued the tenant-occupied lots on Little Neck at from $161,600 to $343,500, with most falling at $185,500, or $228,700, or $290,000 to $300,000.  (Perhaps differentiating a bit for views or for year-round occupancy rights)?

As a letter to the editor pointed out, the Feoffees don't own the land, and therefore can't sell it.  They are merely trustees for the land.   So the discussion about selling ought not to be happening at all.

But if somehow the powers-that-be determine that black is actually white, and up is actually down, then the Feoffees ought to be getting the full current value for the land.  And they ought not to act as mortgage lenders.  That is not within the terms of the Trust, and is nothing but trouble.

$72,691,022 divided by 167 cottagers works out to $435,275 per cottage -- quite a bit more than the $174,000 they're offering, to break the Trust which has been in place for 350 years.

Twenty years' purchase, or 5% of the $72.7 million, works out to land rent of $3.6 million per year.  Divide that by 167, and the average annual land rent would be $21,800.  Some would be worth more -- the larger lots, the ones on the waterfront, the ones with prime views, the ones with year-round occupancy rights -- and some would be worth less -- the smaller lots, the ones with less desirable views, the seasonal ones.  

Would charging the market rent make Little Neck unaffordable to some of the current tenants?  Yes, quite possibly.  Did the Grantor of the trust make an exception for that?  Or did he simply charge the trustees with collecting the market rent and being good stewards of the property, forever?   The trust was not created in an attempt to be kind or generous to tenants; the beneficiary was explicitly named as the schools of Ipswich.  If the interests of the tenants now somehow outweigh the interests of the schools of Ipswich, please tell me where to buy a new compass, because North is no longer North.

How will we know when the Feoffees are collecting the full market rent on the Little Neck property?  When the selling price of a $50,000 cottage is $50,000.  Until we see that, we'll know they're not collecting the full rent, but leaving a significant portion in the pockets of the cottage tenants.   The difference between the $50,000 value of a cottage and the $250,000 PRICE of a cottage when the land rent is not being collected is enough to put a cottager's child or grandchild through college. 

But the Trust was set up to benefit not the TENANTS' children but the children of the schools of Ipswich.  Got it?

The Trustmaker gave Ipswich's public schools and Ipswich's community a very fine gift: a goose that he knew would lay golden eggs.   The recent and current Feoffees may have failed to collect those eggs.  That's past history.  We can't change it.  And it doesn't change the nature or terms of Mr. Paine's foresighted gift.  Just collect the eggs.  Keep feeding the goose.  If the current group of Feoffees isn't so inclined, replace them with Ipswich residents who are.  If necessary, hire professional staff; at $3.6 million in annual rent flow, volunteers can't do it all.

And, by the way, when you announce the schedule under which rents will be raised from current levels to market levels, a lot of cottages are going to go on the market.   It will take a while for them to sell, and you'll see the prices drop.  The cottagers will claim theft on the part of the Feoffees.   They're wrong.   Many of the cottages will be teardowns.   The new owners will ponder for a while, and then begin to build interesting and attractive new homes there, within the constraints of those postage stamp lots.  Preservationists will bemoan the loss of "historic cottages."  Unhappy tenants will say sad goodbyes to summer homes whose full carrying cost they can't absorb.   The grocery shopping and restaurant visits these 167 families -- and their tenants -- represent may fall off for a summer or two, while new owners build new cottages.

The construction trades in Ipswich will prosper (the Feoffees might be wise to prohibit construction work during the high season) and so will the town itself, for all sorts of reasons, including the rent flowing to its public schools.

Unless, of course, the stakeholders -- or the courts -- think that the interests of the tenants ought to be primary.   In which case, please order me the new compass.

This blog has more observations and history on this story.  See them collected at  http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/.

Ben Stein's Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009

Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009.

I finally got the time to sit down and read through some of the obituaries and tributes to Lowell Harriss, who died in late December (just after Paul Samuelson).  His name was one I grew up with; he was a younger and much respected colleague of my late Georgist grandfather, and participated in the Committee on Taxation, Resources and Economic Development in the 1970s, and, likely, beyond.

The tribute I'm reading right now is interesting in light of data I've reported here recently, and in light of yesterday's Supreme Court decision on corporate free speech.  The data I report has only been gathered in its current form since the 1980s, and I have no idea what the earlier data sources on the subject might have been.

The tribute comes from Ben Stein, who young people know from "Win Ben Stein's Money,"  and a film or two, and those who watch the nightly news sponsored by the pharmaceutical companies may recognize from Visine commercials.  He is the son of two economists, and writes for Fortune Magazine.  He was a student of Lowell's at Columbia University in the mid 1960s.  He wrote, in tribute to Lowell,

But when Professor Harriss started talking about how corporations manage their affairs, he said, "Now assume that the stockholders of the corporation, the owners and beneficiaries of the corporation, are all widows and orphans."

This was an eye-opener indeed. And it made total sense. Of course, except in the rarest of cases in those days, then, and even now, the biggest companies are owned by legions of pension funds, mutual funds, (now, also ETFs and index funds). They are not owned by the Rockefellers or the Astors, as Professor Harriss used to say. They are owned by our parents and by us. The corporations are the people every bit as much as the workers are the people.

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

Let's look closely at that second paragraph in light of the Survey of Consumer Finances data (2007, the newest available).

The SCF doesn't report pension fund assets.*  Others do -- see Ed Wolff's work.  But it is widely understood that a small and diminishing portion of the workforce today has a defined benefit pension -- that which we think of as a pension.  Some of today's workers still have some pension assets, either from a current employer who is no longer contributing to the pension fund, or from a previous employer.

The SCF reports several relevant categories, all mutually exclusive, and then an aggregate called "EQUITY."  The individual categories which might include stock or mutual funds are STOCKS; the category NMMF -- non-money-market mutual funds -- which represents holdings of mutual funds (which includes bonds as well as equities) outside of retirement assets; and RETQLIQ represents total holdings of such retirement assets as IRAs, 401(k) accounts, and other similar individually controlled retirement funds, which likely includes stocks, bonds and mutual funds.   The SCF also reports an aggregate called EQUITY.  Here are the ownership rates, and the distribution of holdings for 2007:

Table 1: Ownership Rates (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	7.2%		2.3%		33.6%		29.7%
Next 40%	22.7%		15.0%		68.3%		68.2%
Next 5%	43.7%		36.5%		83.3%		86.9%
Next 4%	59.5%		47.6%		85.3%		92.0%
Top 1%	65.4%		52.7%		87.8%		92.8%
Table 2: Share of Holdings (2007)
Total:	100.0%		100.0%		100.0%		100.0%
Bottom 50%	0.6%		0.4%		3.8%		1.5%
Next 40%	9.0%		11.6%		36.7%		19.6%
Next 5%	8.0%		10.3%		16.9%		12.4%
Next 4%	30.5%		30.9%		28.0%		30.5%
Top 1%	51.9%		46.7%		14.5%		36.0%

So while it might have been true that the young people sitting in Lowell's classes were likely to be beneficiaries of the corporations as shareholders, I think it is safe to say that the larger society was not, unless the distribution of stock holdings has concentrated even more precipitously than I suspect it has between 1964 and today.  The widows and orphans were far more likely to be in the bottom half of the wealth distribution, which, as of 2007 shared 1.5% of the EQUITY value.   

Today, it is clear that many corporations are not being managed even for the long-term benefit of their shareholders.  It is the top tier of employees whose interests are being served.

But perhaps one other piece of data ought to be considered: the distribution of the owners of holdings. This is the sort of figure which corporate advertising refers to when they talk about stock ownership being broad.  The "Total" line matches the first distribution; the others add to that total.

Table 3: Distribution of Holders of Assets (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	3.6%		1.2%		16.8%		14.9%
Next 40%	9.1%		6.0%		27.3%		27.3%
Next 5%	2.2%		1.8%		4.2%		4.3%
Next 4%	2.4%		1.9%		3.4%		3.7%
Top 1%	0.7%		0.5%		0.9%		0.9%

   

Do you feel better now?  The top 1% folks represent less than 2% of those who own EQUITY!  What's the big deal?  Look how many more of EQUITY owners are from the bottom 50%!  Isn't America wonderful?  Does Ben Stein's memory of Lowell's classroom statement sound right now?

One more table.  This one looks at the relative holdings across the holders in each wealth quantile.  It divides the dollar holdings for each group by the percentage in Table 3.  Data is comparable both across columns and up and down each column.

Table 4: Average Dollar Holdings per 1% of Households Who Hold
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Average:	221		309		146		231
Bottom 50%	7		11		17		12
Next 40%	39		68		103		85
Next 5%	145		200		312		337
Next 4%	508		573		629		977
Top 1%	3,142		3,127		1,271		4,577

Notice what percentage of us are "below average."  Compare each figure to the average in its column.

Let me throw in one other set of figures:   The Table 4 data for BUS -- equity in privately held companies.  Average: 1,069.  Bottom 50%: 24   Next 40%: 137; Next 5%: 443; Next 4%: 1,507; Top 1%: 10,960.  (That's what the Astors and Rockefellers of today own.  And much of it is land value and the value of other natural resources, value which we permit them to privatize.)  We call much of it "small business" and permit the owners to style themselves as self-made successes.

To return to Ben Stein's questions:

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

The nonrenewable natural resources belong to the people, not exclusively to those who extract them from the soil, or their shareholders, even if 100% of us were shareholders in name.  Until our system collects the royalties on those natural resources from those who we currently permit to privatize our COMMON asset, Stein is just plain wrong.  Fortune Magazine's subscribers may appreciate his assertions, but the rest of us ought to be very very skeptical.   

*  Postscript, 1/30/2010:

I came across some data about stock ownership which showed where pension funds fit in the picture, at least in the 1990s.  See Pension Fund Capitalism, by G. William Domhoff, at http://sociology.ucsc.edu/whorulesamerica/power/pension_fund_capitalism.html, Table 1, which shows that Corporate Pension Funds held 18% of Corporate Stock, and Public Pension Funds held 8% in 1994, compared to Households, which held 48% and Mutual Funds which held 12%.  He sources the data to Margaret M. Blair, Ownership and Control, 1995)

Justices Overturn Key Campaign Limits - NYTimes.com

Justices Overturn Key Campaign Limits - NYTimes.com. WASHINGTON — Sweeping aside a century-old understanding and overruling two important precedents, a bitterly divided Supreme Court on Thursday ruled that the government may not ban political spending by corporations in candidate elections.

Well, so much for recognizing that people are all created equal.  Corporations are created more equal.

"I believe in the division of labor. You send us to Congress; we pass laws under which you make money ...and out of your profits, you further contribute to our campaign funds to send us back again to pass more laws to enable you to make more money."

-- Senator Boies Penrose (R-Pa.), 1896, citing the relationship between his politics and big business.

Is corporate free speech more important than the good of ordinary people? Evidently our Supreme Court considers that it is.

Recall how the benefits of corporate stock are distributed:

Top 1%	own 38.3% of the stocks
Next 19%	own 52.8% of the stocks
Bottom 80%	own  8.9% of the stocks

and

51.9% of us	owned no stocks in 2007
17.5% of us	owned stocks worth less than $10,000 in total
31.6% of us	owned stocks worth more than $10,000 in total

[source: Edward Wolff, 2009]

And then consider the distribution of business equity: privately held businesses ["BUS"]:

Top 1% hold	62.7% of the value
Next 4% hold	25.5% of the value	(top 5% = 88.1%)
Next 5% hold	5.5% of the value	(top 10% = 93.7%)
Next 40% hold	15.5% of the value	(top 50% = 99.6%)
[source: SCF, 2007]

and then the aggregate of the SCF categories STOCKS, Non-Money Market Mutual Funds [NMMF], Retirement Assets [RETQLIQ] and BUS, which together represent 50.3% of aggregate household wealth:

top 1% hold	45.9% of the value
next 4% hold	27.6% of the value	(top 5% = 73.5%)
next 5% hold	9.6% of the value	(top 10% = 83.1%)
next 40% hold	15.5% of the value	(top 50% = 98.7%)
[Source: 2007 SCF, reported here]

83.1% of 50.3% is 41.8% of America's aggregate net worth ... in the hands of 10% of us in the form of businesses and stock. (It omits their holdings of a number of other categories -- which are not insignificant. The top 10% of us hold 71.5% of aggregate net worth; the other 30% they hold is in their real estate and other assets.  For instance, guess whose beaches get renourished by the federal government?  Guess whose bridges and airports get lots of federal dollars, even if the locality refuses to tax its own land value -- California being the prime example, but NYC isn't far behind.)  And they have now been declared free to spend that money on influencing elections right up to the last minute, with no time for ordinary folks to collect funds to rebut their assertions.  Some free speech, huh?

Thank you, Supreme Court.  Thank you, Justice Kennedy.  Thank you Justice Roberts.  Thank you Justice Scalia.  Thank you, Justice Thomas.  Thank you, Justice Alito.   I suppose they all believe that the founders of our country would have approved of this.  Could the founders have imagined this distribution of wealth, given the ideals on which this country was founded? 

Guess whose freedom of speech the Supreme Court has guaranteed?  Those who have the dollars.  Guess who gets to write our rules, and in whose favor they will be written.

Post Script: There are more comments to this article than I've seen in a long time on a NYT article.  A few I particularly liked:

• Money gives you freedom of speech. Oh and by the way, we the people don't have any.
• Do corporations also have the right to bear arms?
• Thank you SCOTUS for finally giving a voice to the beleaguered and powerless corporations of these United States. I look forward to an enlightened age of political discourse that this decision will certainly usher in.

MLK: An edifice which produces beggars needs restructuring

Beyond Vietnam--A Time to Break Silence

Reverend King gave this speech at the Riverside Church in New York on 4 April 1967, a year before his death.   I was intrigued to note how frequently he mentions land reform as important.

Perhaps the most stirring paragraph is this one:

A true revolution of values will soon cause us to question the fairness and justice of many of our past and present policies. On the one hand, we are called to play the Good Samaritan on life's roadside, but that will be only an initial act. One day we must come to see that the whole Jericho Road must be transformed so that men and women will not be constantly beaten and robbed as they make their journey on life's highway. True compassion is more than flinging a coin to a beggar. It comes to see that an edifice which produces beggars needs restructuring.

I think of the wealth distribution within America (2007) or throughout the world.  I think of some paragraphs from Henry George's book "Protection or Free Trade" (Chapter 25) which speak of "the robber that takes all that is left."  I'll share them at the bottom of this post. I think of some writings on the subject of piracy.

Middle Class Wealth

One of my google alerts, for the words "wealth distribution," took me to a blog post about the tragedy which has occurred in Haiti, which referred to America being different because it had a large middle class.  Since I'd recently posted on this blog some new data about the distribution of wealth, I took a look at that data with the "middle class" in mind.

Here's the data on the distribution of Net Worth, copied from the post below:

	Top 1%:		34.6%
	Next 4%:		26.4%		Top 5%:		61.0%
	Next 5%:		10.8%		Top 10%:		71.8%
	Next 10%:		13.3%		Top 20%:		85.1%
	Next 30%:		12.4%		Top 50%:		97.5%
	Bottom 50%:		2.5%

Do we define as "middle class" the people who hold the middle third of our wealth?  That's the 9% of us who hold 37.2% of our wealth.   Those below that cutoff must be "lower middle class" or "poor."

Do we define as "middle class" the people between the 50th and 80th percentiles of the wealth distribution?  That 30% has a mere 12.4% of our wealth.  The 50% below them only have 2.5% of the net worth.

Do we define as "middle class" the people between the 50th and 90th percentiles? They hold 25.7% of the wealth.

If America's strength is its broad middle class, they certainly aren't reaping much of a reward.  The Chartbook for the Survey of Consumer Finances, page 42, shows this:

Median Value of Net Worth for Families with Holdings, 1989, 1998 and 2007, by Income Quantile in thousands of 2007 dollars: Income Quantile: 1989 1998 2007 1989 to 2007 Bottom Quintile (20%) 2.9 7.4 8.1 +5.2 Second Quintile (20%) 38.8 42.2 38.1 -0.7 Middle Quintile (20%) 67.1 68.0 88.1 +21.0 Fourth Quintile (20%) 107.0 143.0 205.8 +98.8    Second Decile (10%) 211.2 240.0 356.2 +155.0    Top Decile (10%) 625.4 575.9 1,119.0 +493.6

From the following chart in the Chartbook, Mean Value of Net Worth for Families With Holdings, I calculate the following shares of Net Worth:

Share of Holdings, 1989, 1998 and 2007 -- by Income Quantile
Income Quantile:			1989		1998		2007		1989 to 2007
Bottom Quintile	(20%)		2.65%		3.38%		3.77%		+ 1.12 percentage points
Second Quintile	(20%)		7.07%		6.80%		4.84%		- 2.23 percentage points
Middle Quintile	(20%)		10.90%		8.94%		7.54%		- 3.36 percentage points
Fourth Quintile	(20%)		14.64%		14.59%		13.48%		- 1.16 percentage points
Second Decile	(10%)		11.96%		11.53%		10.92%		- 1.04 percentage points
Top Decile	(10%)		52.78%		54.76%		59.45%		+ 6.67 percentage points

   

By this standard, who is our middle class? 

• The 20% of us between the 40th and 60th percentiles, who have  7.54% of the net worth? 
• The 60% of us between the 20th and 80th percentiles, who have 25.86% of the net worth?   
• The 70% of us between the 20th and 90th percentiles, who have 36.78% of the net worth?
• The 50% of us between the 40th and 90th percentiles, who have 31.94% of the net worth?

The top 10% of us, sorted by income, have 59.45% of the net worth -- $6 out of every $10 of net worth in America!!

What does this suggest to you about how we might tax ourselves?

What does this suggest to you about who we might ask to support the aid to Haiti after its tragedy?  

What does this suggest to you about the notion that the strength of America is its large healthy middle class?

What does this suggest to you about the notion that our taxes ought to be based on income?

Does it put Leona Helmsley's comment -- "WE don't pay taxes.  The little people pay taxes." -- in a different light?

A caution about the data: This post shows two different distributions of net worth: according to net worth in the first part, and according to income in the second part.  Don't confuse them -- it is easy to do.  But all the data is based ultimately on the Federal Reserve Board's Survey of Consumer Finances, and I've never heard anyone claim that the SCF overstates the concentration of wealth.    If you need help differentiating, post a question, and I'll try to help.

Tolstoy: The Last Station

I heard Dame Helen Mirren interviewed on NPR this morning.  Her new film is apparently in theaters now, and received a nomination for the Golden Globe awards.  The film is called "The Last Station;" I first heard of it November, 2008, and posted a comment here.  I won't repeat myself (much), but the novel and film are based on the last year of the life of Count Leo Tolstoy, one of the many people who saw and proclaimed the wisdom of Henry George's ideas over the decades.  Christopher Plummer plays Tolstoy, and Dame Helen his wife.

The book, by Jay Parini, who teaches at Middlebury College, opens with "The year has turned again, bringing us to the end of the first decade of the new century.  I write the strange numbers in my diary.  1910.  Is it possible?"

I don't pretend to understand the movie business, but it seems odd to me that a film which is just now in the theaters is also up for a major award.  I hope it does well.

You might enjoy an interview with Jay Parini by Ramona Koval on Australian radio from 2 years ago.

Progress & Poverty is on Kindle

I'm not a Kindle user, but I was pleased to see that Henry George's book, Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth, The Remedy  is available for Kindle, for under $4.  See http://www.amazon.com/Progress-and-Poverty-ebook/dp/B002BU24PQ/ref=sr_1_5?ie=UTF8&s=digital-text&qid=1263678914&sr=8-5

I wish, however, that Bob Drake's 2006 abridgment, Progress and Poverty: Why there are recessions and poverty amid plenty -- and what to do about it!, a thought-by-thought updating of Henry George's much longer original -- was also available as for Kindle.

You can also read either of them online.  The original unabridged is at http://schalkenbach.org/ and Drake's abridgment at http://www.progressandpoverty.org/ and also at http://henrygeorge.org/ (the latter has an excellent online course and related materials).  And you can download MP3's of Drake's abridgment at  http://hgchicago.org/audio/.

I encourage you to explore that last website, for the Henry George School of Chicago, including the page which starts this way:

Why Not Enroll? 

Which of the reasons below prevents you from enrolling? 

and proceeds to list 7 "reasons" one might propose.  Here's the first one:

1. George's ideas may have been important in the 19th century, but today we're in an information economy, land doesn't really matter, and besides, poverty really isn't much of a problem anymore. George described fundamental principles that always apply as long as people need a place to live and don't want to work for nothing. Sure, the economy has changed, but land remains extremely important. Ask anyone struggling to remain in a gentrifying neighborhood. Poverty no longer a problem? Worldwide, by any measure, billions of people remain in poverty. In the U. S., few of us starve but many of us suffer from high cost of living, low wages, and poor working conditions. Why should supporting a family require both parents to have full-time employment? Why should people have to commute an hour or more from areas with affordable housing to areas with decent jobs? These thoroughly modern problems are clearly analyzed in our courses.

The Henry George Conspiracy « Liberty Revival

The Henry George Conspiracy, Henry George: The Economic Nightmare of Tyrants, and Arthur Laffer’s Laughing Effect

I stumbled across some recent posts from Keith Gardner, at libertyrevival.wordpress.com, which I thought worth sharing.  I think he raises some interesting questions!

The Henry George Conspiracy

January 13, 2010 by Keith Gardner

Everyone knows about the most popular board game Monopoly. What many people don’t know is that this board game was originally called The Landlord’s Game and created by Lizzie Magie in 1904, specifically as an educational tool to teach the principles of Henry George.

If Henry George was such an influential economist to inspire the most popular board game, you begin to wonder why his name isn’t even mentioned in high school books covering American history, economics, or ethics. He isn’t even taught in college courses.

Henry George pointed out the flaws of both capitalism and socialism. His concepts bridged the gap between capitalism and socialism in a definitive and justified manner. However, the global banking cartel, european monarchs, and other aristocrats couldn’t take over our nation if the people had a solid understanding of economics. They couldn’t push forward the flawed systems of socialism, keynesian economics, and austrian economics if there was a theory which debunked all of them.

They couldn’t engineer problems and present solutions with Henry George in the pool of public knowledge. They hid the concepts as a children’s game, preventing people from relating common sense to real economic theory. The American people could only relate to whatever the false left, false right, and false libertarian foundations pushed forward.

They instituted the Austrian School of Economics and the Ludwig von Mises Institute in conservative and libertarian foundations, taught at places like Auburn University. They instituted Keynesian Economics and the Chicago School of Economics for more mainstream or moderate economics. They instituted socialism and communism in your left and liberal institutions.

All political paradigms were under their misdirection of flawed economic policies so they could run their problem-reaction-solution scams with the people, who were unable to articulate a real solution.

They made sure Henry George, the most important American economist, was deleted from the American memory. He is the unknown ghost behind the most popular board game and behind our state and local government tax systems. His remains consist of a one room office barely manned with a part-time volunteer in Pennsylvania.

It is the conspiracy never talked about even though so blatant. It is difficult for the people to give up their flawed team and support the team with no fans. It is only a matter of time until the global banking empire can achieve their dream of once again owning all the land and having a complete monopoly over the people, unless the people learn about Henry George.

The Native Americans still scratch their head, “How can man own the land and the rivers?” Thomas Paine progressives still search for common sense and agrarian justice. Albert Jay Nock, a ghost among Libertarians, still tries to revive the ghost of Henry George.

The Keynesians still search for ways to moderate the boom and bust cycles. The socialists still search for a way to justify social justice. The Libertarians still search for a way to apologize for the short-comings of capitalism.

If they only knew the European monarchs were hard at work using large tribal organizations called governments and voodoo economics like ancient witch doctors to scam their people into enslavement. If they only knew the answer was staring them in face when they played Monopoly.

Well, I know quite a few fans of Henry George's ideas, and hope that a year or two from now there will be many more, as people search for answers to the sad state our economy has fallen into.  I think George's thought provides the most rational answer I've found.  Explore http://www.wealthandwant.com/ for more information.

Here's the other post, at http://libertyrevival.wordpress.com/2009/12/29/henry-george-the-economic-nightmare-of-tyrants/.  I particularly like its final paragraph:

Henry George: The Economic Nightmare of Tyrants

December 29, 2009 by Keith Gardner

If the price of land (and natural resources) goes up holding money supply constant, the price of labor has to go down. The more money is spent on land, the less money there is to spend on labor and eventually the only money spent on labor is coming from land wealth rather than labor wealth. The wealthy like to own and buy land because they realize this truth. With the more land they own, the less they have to pay someone to mow their lawn, clean their house, or polish their shoes. The working class pays increasing rent or pays increasing interest on their mortgage. The worker pays more on rent than they do on taxes. The worker pays more on interest on their mortgage than they do to any other creditor. This is the big secret the tyrants don’t want you to know.

Even if you hold population constant, the wealthy who already own a lot of land, collecting rent on it, continue to generate wealth and keep buying more land. They keep driving up the price. The rest of the people have to increasingly work harder in order to afford to buy their own land or pay rent for land. As this happens, there are more people working harder for the land owner than there are people working for each other.

Eventually the commodity bubble of land bursts because eventually there isn’t enough money for the workers to keep renting or buying available land. When this happens, the wealthy, specifically the banks, grab all the land back from the workers and start the cycle over by renting and selling land to the workers again at lower, more affordable rates. Labor rates stay down since people are still desperate to start building their wealth again which is now more concentrated in the hands of the wealthy.

The worker never wins unless they are able to work hard enough and sacrifice enough to keep their own land under the rules of the tyrants. They sacrificed more than they should have to get there. Many will get a false sense of financial security and spend what they earn. Many will give up in frustration trying to work in a system rigged against them. They’ll start to game the system which gamed them.

This is why the elite push forward such economists like Ludwig von Mises, Karl Marx, Milton Friedman, and Maynard Keynes. They want you to be left confused by witch doctor economics. The Native Americans were intuitively better economists than any of the big names from the last two centuries.

Most anarcho-capitalists, and I hate to call them “anarcho” since most of them support land theft through statist institutions, try to claim that the one with the most gold wins and to the victor goes the spoils. I’m sorry, but that piece of paper saying you own a piece of land or a lot of gold is secured by force of the state and was once taken by force of the state. They throw out the Cicero’s natural law philosophy, probably the Roman Empire’s greatest achievement. They come forward with this egoist, objectivist philosophy, which is no better than the social darwinism put forth by the socialist tyrants they oppose.

I’m not trying to promote anarcho-socialism or the moderate schools of anarchism. I believe they all have valid concerns, but none of them are valid is isolation. People should have the freedom to live in communes as pack animals and leave the commune if the alpha dog is a fraud. People should have the freedom to be rugged individualistic capitalists as lone wolves and be protected from other lone wolves and pack animals who will likely be stronger than they are. Neither can accomplish their goals without awareness or acknowledgement of the concerns raised by Henry George.

I’m just trying to promote the idea that land and labor are different. People have the right to their own labor. Land is not a person’s labor. People borrow land from nature. However, land is needed by everyone to exist, and everyone needs to have their right secured to have land and the natural resources the land provides to compete fairly in free markets. They shouldn’t have the right to someone’s labor. They should have the right to have the land and natural resources needed for survival. They shouldn’t have to work for someone else just to exist on land.

It is also equally important to recognize Henry George just proposed the idea of collected land rent through land value taxes in order to pay everyone a citizen dividend to everyone. There are flaws in this application as there are flaws in any application of any philosophy. I hope we can work to build upon this philosophy to recognize natural resources are also land, some land should be held in private while other land should be public. That we do need some minimum government to secure rights and help move people in the direction of a realizing their ability to provide for themselves.

Therefore, I don’t want to promote a purist application of Henry George. I favor the use of property taxes, to simplify land valuation, and the use of sales taxes on the sale of natural resources, to fund both basic government and to supply a significant citizen dividend since today’s cave or hut tends to mean skilled labor in the creation of a home. We should minimize social services and maximize the citizen dividend so people have a claim to land and can more easily work in a capitalistic society to provide and choose their own social needs. You don’t want the state to become owners of the land and chose how to spend the money either since the state is ruled by the same tyrants. The state as land owner can be worse than slave owners since the state will eventually want to kill the slaves they can’t control to do their bidding.

Therefore, everyone pays taxes on land and natural resources. They are paying rent for the land and natural resources they are taking exclusively from everyone else. They are paying rent to everyone. Those who take more will pay more rent and they receive as a dividend. Those who take less will receive more than they pay rent. The result is that tyrants will no longer be able to horde land to drive up the price of living on land while they drive down labor rates without paying the people they’re stealing the land from under their feet, forcing people on the streets and into sweat shops. There won’t be people slaving in horrible conditions for a corporation just for some food and a place to sleep. People will have the freedom to say no and work for themselves and other people like themselves more freely. People are more driven to store their wealth in investments that put people to work rather than investments in land and natural resources. Fractional reserve banking could be eliminated because there would be significant savings available to loan to others. Usury would dramatically drop. A natural economic balance will be achieved where the inflation and deflation of land and labor move in the same direction rather than in opposite directions.

Income taxes should be banned by constitutional amendment. We should never promote the idea that one has the right to another person’s labor, but we should promote the idea that everyone has the right to have their own share of land and natural resources.

With that right secured, capitalists can go out and pursue their goals without pulling the rug out from under their own feet or the land from under the feet of another less abled person, and socialists can go build their communes without someone taking it from them or forcing it upon them.

If there is a citizen dividend, capitalists would realize they would have a great insurance policy if they should lose everything. If there is a citizen dividend, the socialists would have the freedom to fund their social goals without having to work for a capitalist.

Henry George economics is a victory for everyone, except perhaps the tyrants who are the only victors in other economic systems. It is time to bring Henry George out of the closet. Everyone has the inalienable right to land. If you don’t have your own land, you’re a slave because you have to work for someone else in order to just put your feet on the ground. It is time to get angry, put your head out the window, and yell, “I’m mad as hell, and I’m going to learn about Henry George.”

and Arthur Laffer’s Laughing Effect:

Arthur Laffer is the known Reagan economist for promoting the idea that lower taxes will result in increased economic activity and higher revenue for the state.

However, he has come back with a new idea of eliminating property taxes. Every globalist is laughing to the bank because the tea party patriots have embraced this idea from the We the People Foundation to Debra Medina, running for governor of Texas on a tea party patriot platform.

Land is limited in supply like gold, perhaps more limited than gold. Furthermore, we all need land to survive. if all property taxes were eliminated, globalists will rush out to sell their gold, causing tea party patriots everywhere to lose their savings in gold, and buy land.

There would be a land rush. The tea party patriots will be celebrating as their home values increase in value and a new housing bubble is created. They’ll also celebrate not having to pay property taxes. There will be good times with an economy propped up once again on the paper value of equity.

Meanwhile, David Rockefeller is yelling, don’t throw me in the harbor, tea party patriots! Don’t eliminate property taxes!

There is a beast laughing in the boom. Home prices are being driven up once again where working class people can no longer afford real estate. Since America’s manufacturing and services has been exported and out-sourced, there are no decent-paying jobs for them to afford the real estate.

Globalists around the world are suddenly slum lords, holding property to store their wealth while they grab whatever rent they can get for holding it with no care for maintenance. Who needs to maintain property when the supply is drying up, and you don’t need to pay property taxes?

The divide between wages and rent starts to widen to the point that mass poverty is created. Socialists call for minimum wage increases and income tax increases to pay for the social justice created by the increasing divide between the land tycoons and the working class. Keynesians call for larger government programs to provide stability in land and labor prices.

The people are finding their labor devalued even more while the land necessary to survive is being driven further up in price as the land tycoons continue to buy more and more land, to gain more and more wealth, and to collect more and more rent. Welcome to the game of Monopoly, a game where if you get unlucky or screw up, you become a slave, begging for a job.

Eventually, Nike owns a whole community. Unable to afford a place to live, people are forced to work in a factory making shoes for China and Saudi Arabi for pennies a day and for a place to sleep in Nike city. Welcome to the third world. A world where over 99% of you are slaves begging for food and a place to sleep.

While I agree that we need to eliminate property taxes for the person who owns a single home, I believe eliminating all property taxes would be a bad idea.

As seekers of truth, we might want to investigate Henry George and his treastie, Progress and Poverty. He is perhaps the most important American economist whose economic knowledge and works have been the most suppressed even though his economic works inspired the most popular American board game of Monopoly and his influence remains evident in the tax systems of state and local communities everywhere.

Our nation was founded on property taxes collected by states and local communities. The economic benefits of such tax systems were intuitive for early Americans considering many Americans were either fleeing the land slavery of Europe where the artistocrats owned all the land or were native Americans who didn’t even understand the statist-capitalist concept of land ownership.

Property taxes do have an interesting benefit of pushing down the price of land. It also does the same for commodities when sales taxes are used. The cost of the tax is hidden in the supply and demand of the land or commodity, reducing the cost of government and the cost of living for everyone.

If made progressive, as Henry George proposed, it can eliminate poverty on a moral basis of agrarian justice, as suggested earlier by Thomas Paine, since everyone has the right to put their feet on the land, provide for themselves, own themselves, and own their labor.

If you eliminate all property and sales taxes and replace them with income taxes, eventually, you’ll have to pay half your income to the government and the other half of your income to the land lord.

I hate to disagree with Chip Case, but I must

1732_952_LLA100103.pdf (application/pdf Object).  "Housing, Land and the Economic Crisis" and it appears in "Land Lines." 

The Lincoln Institute of Land Policy, an organization founded back in the 1940s by an industrialist enthusiastic about the ideas of Henry George, who intended that his wealth be used to promote those ideas, publishes a newsletter, the link to which arrived in my inbox last week.  One of the articles was by Chip Case, recently retired from Wellesley, and half of Case-Shiller.  The article is titled, "Housing, Land and the Economic Crisis" and it appears in "Land Lines." 

What I take issue with is this statement:

The expansionary monetary policy pursued during this short period reduced the cost of buying a home by almost a third.

It might be correct to say that monetary policy reduced the cost of borrowing a particular amount of money by almost a third, and I suspect that is what Chip meant to say.    But the reality is that instead of a potential buyer being able to purchase a particular house for 1/3 less monthly outlay for mortgage costs, he was able to borrow 50% more for the same monthly outlay -- and indeed, if he wanted to buy that particular house, he was competing for it with other people who WOULD be willing to borrow 50% more, so he would have to.   And he needed to accept an adjustable rate mortgage, with all the downside that leads to.

This drove up the transaction prices, and produced the appearance of home equity against which a larger percentage of non-sellers were able to borrow.  The spending -- on credit -- has led to profits for retailers and manufacturers, and most certainly for bankers (and thus to greater concentration of our wealth and income) and, as it had to, to a bust of large magnitude and widespread pain.

Have we learned, or are we going to do this again?

The article is titled, "Housing, Land and the Economic Crisis" and it appears in "Land Lines."    But the word "land" appears only twice in the article:

1. second paragraph:  "Between 2000 and 2005, the value of residential land and buildings increased from about $14 trillion to $24 trillion. About half of this increase reflected new construction, and half was due to rising land values, primarily on the coasts (Case 2007). But in late 2006 prices began to decline, and by mid-2009 they had fallen roughly 30 percent.
2. antepenultimate paragraph (I knew I'd have a use for that word someday!):  "California represents about 25 percent of all the land value in the United States, and events there have major implications for the rest of the country. The good news is that for the last three months, the indexes for San Francisco, San Diego, and Los Angeles have led the nation in price appreciation. The California Association of Realtors reports substantial increases in home sales volumes except in the Central Valley.

I'm disappointed that neither Case nor Lincoln saw fit to connect the dots.

(And I'll note parenthetically that California and Florida's steeply rising land prices were in part due to their limitations on the property tax under Proposition 13 and "Save Our Homes" respectively.   Many of California's problems would get better if they would simply fund their public spending from a tax on their land value, rather than suppressing that tax and relying on taxes on sales and wages, both of which depress any economy.)

To connect the dots, I'll ask that you read Mason Gaffney: The Great Crash of 2008, at http://www.masongaffney.org/ and his new book, After the Crash: Designing a Depression-free Economy, available at http://www.schalkenbach.org/store.php?crn=78&rn=610&action=show_detail

Lenders ought not to be lending on speculative land values. Localities ought to be collecting more of the economic rent on the land within their borders, lowering the selling price of land without reducing its value in use -- and arguably increasing it!  Localities and states ought to be lowering their taxes on buildings, on wages, on sales, and substitute the revenue from collecting economic rent.  See also Mason Gaffney: How to Thaw Credit, Now and Forever, online at his website (above).

 

Wealth Concentration data

I stumbled across a bit of data on wealth concentration which I thought worth sharing.  Previously I've reported data from the 2007 Survey of Consumer Finances, which was published just about a year ago.  The data on Net Worth as reported shows top 1%, next 4%, next 5%, next 40% and bottom 50%:

Top 1%:		33.8%
Next 4%:		26.6%		Top 5%:		60.4%
Next 5%:		11.1%		Top 10%:		71.5%
Next 40%:		26.0%		Top 50%:		97.5%
Bottom 50%:		2.5%

Ed Wolff, of NYU, is quoted here as reporting this distribution of Net Worth for 2007:

• Top 1%:        34.6%
• Next 19%:     50.5%
• Bottom 80%:  15.0%

Since the source is a working paper not yet published online, I don't know the underlying data source, but I'm guessing that Wolff might be working with the SCF 2007 data and following up on the statement in Arthur Kennickell's Ponds & Streams, the Federal Reserve Board paper which published the 2007 SCF, that the wealth holdings of the Forbes 400 are omitted from the SCF data, and that Wolff is adding that data both to the top 1% and the aggregate to come up with these data. (If I'm wrong, I'd welcome correction!) If I'm correct, his 50.5% for the "next 19%" indicates that the distribution of Net Worth is roughly as follows:

• Top 1%:     34.6%
• Next 4%:    26.4%   Top 5%:    61.0%
• Next 5%:    10.8%    Top 10%:  71.8%
• Next 10%:   13.3%   Top 20%:  85.1%
• Next 30%:   12.4%   Top 50%:  97.5%
• Bottom 50%: 2.5%

Those figures include housing wealth.

The same table which reported that Net Worth data also reports Wolff's findings for Financial Wealth, which he defines as Net Worth minus the [gross] value of one's home:

• Top 1%:  42.7%
• Next 19%: 50.3%
• Bottom 80%: 7.0%

The same article reports some useful measurements of stock ownership -- that is, ownership of shares in publicly held companies, whether directly, through retirement accounts or mutual funds.

• Top       1% own 38.3% of the stocks
• Next    19% own 52.8% of the stocks
• Bottom 80% own  8.9% of the stocks

and

• 48.1% of us owned no stocks in 2007
• 51.9% of us owned some amount of stocks in 2007
• 17.5% of us owned stocks worth less than $10,000 in total
• 31.6% of us owned stocks worth more than $10,000

What do you conclude from this data? 

Do you conclude that the bottom 80% of us are simply shiftless folks who must not be working very hard, or stupid folks who don't work very well, or invest what little we save very well, or do you think there might be something else going on?  What is it that the bottom 80% of us lack?

Does it seem to you that if only we shift some more of our wealth to the top 1%, benefits will somehow begin to trickle down to the rest of us, perhaps in the form of job creation by wealthy benefactors?

Does it seem to you that increasing homeownership is (or was ever) the solution to these problems, or do you think we might need to dig deeper to find the root of the problem?

We have permitted a wealth-concentrating machine to be created, sustained and, within the adulthood of the boomer generation, strengthened.

Few understand this machine, but I submit that the first step to understanding it is to read a 130 year old bestseller.

Progress & Poverty begins with the questions "why, despite awesome technological progress which has the potential to wipe out poverty, do we still have poverty?" and "why is wealth so concentrated?"   It examines the standard answers to those questions (you'll recognize them all) and finds them wanting.  It then sets out to find a more satisfactory answer, and to examine its implications.  It proposes a remedy -- the remedy -- and explores what that remedy means for the individual and a society with America's ideals.

If you've never read Progress & Poverty or your acquaintance with it goes back a decade or two, take a look at it in light of these issues.  You can read a modern abridgment at http://progressandpoverty.org/, listen to it at http://hgchicago.org/audio/, or get more information at http://www.wealthandwant.com/George_P&P.html

Income Concentration

I stumbled across a webpage, created by William Domhoff of UCSC, which contains some fascinating data on income distribution and wealth distribution, or, if you prefer, income concentration and wealth concentration.

I've posted the wealth concentration data separately; here, I'll focus on the concentration of income.  Table 6 draws on work of Edward Wolff, of NYU, not yet published. 

Income Distribution, 1982 and 2006
	1982	2006	Change
Top 1%:	12.8%	21.3%	+8.5 points
Next 19%:	39.1%	40.1%	+1.0 points
Bottom 80%:	48.1%	38.6%	-9.5 points

Turning to Capital Income -- by which I assume they mean income derived not from wages but from other sources, which includes that which the classical economists called land, and which the neoclassical economists subsume under "capital" as if they were identical:

		1979		2003
Top  1%		37.8%		57.5%		+19.7 percentage points
Next 4%		20.1%		15.7%		-4.4 percentage points
Next 5%		8.8%		6.2%		-2.6 percentage points
Next 10%		10.2%		8.0%		-2.2 percentage points
Bottom 80%		23.1%		12.6%		-10.5 percentage points

Is this something we're proud of, or think we ought to be exporting to other countries?  Is it consistent with our ideals, about life, liberty and the pursuit of happiness being the right of every American, of every person on earth?

We're permitting the privatization of things which rightly belong to the commons -- to all of us.  What things?  The value of natural resources flows into whose pockets?  The annual value of urban land flows into whose pockets?  The value of water rights flows into whose pockets?  The value of the airwaves flows into whose pockets? (Hint: look at the distribution of capital income!)  The value of 8am landing rights at LaGuardia flows into whose pockets?  The value of geosynchronous orbits so necessary to certain businesses and systems flows into whose pockets?   The bottom 80% of us?  The next 19% of us?  The top 1%?  The owners of so-called "small" businesses?

These are privileges.  Structures which divert to individuals and corporations things which all of us create.  They reap what we together sow, and then we are led to respect them as "self-made men" and success stories.

They are not eternal.  They are not immutable.  Each can be reformed, and each can provide a significant revenue source to meet our communities' need for revenue for common purposes.  Collecting this revenue this way will not damage our economy as our current tax structure does.  It will, however, lighten the portfolios of some who are used to considering themselves blessed by our current way of doing things -- those born on 3rd base who think they hit a home run.  And create some opportunities for those who want to works, and for those who want to be compensated for their work with wages which begin to line up better to the cost of living.

There IS enough to go around. Not enough for all of us to live like the top 1%, perhaps, but certainly enough for many more of us to live at the sort of level we call middle class, and even at the, say, 70th percentile -- without despoiling the earth.