LVTFan's Blog

A Neuroscientist, Nature and Nurture, and America's Children in Financial Distress

A Neuroscientist Uncovers A Dark Secret : NPR.

This is a fascinating story, and I commend it to your attention. The link takes you to the transcript and the option to listen to the story.  It describes a university neuroscientist who looks into his own family history and, with the cooperation of family members, brainscans and DNA of a number of others descended from the same line:

About four years ago, Fallon made a startling discovery. It happened during a conversation with his then 88-year-old mother, Jenny, at a family barbecue.

"I said, 'Jim, why don't you find out about your father's relatives?' " Jenny Fallon recalls. "I think there were some cuckoos back there."

Fallon investigated.

"There's a whole lineage of very violent people — killers," he says.

One of his direct great-grandfathers, Thomas Cornell, was hanged in 1667 for murdering his mother. That line of Cornells produced seven other alleged murderers, including Lizzy Borden. "Cousin Lizzy," as Fallon wryly calls her, was accused (and controversially acquitted) of killing her father and stepmother with an ax in Fall River, Mass., in 1882.

A little spooked by his ancestry, Fallon set out to see whether anyone in his family possesses the brain of a serial killer. Because he has studied the brains of dozens of psychopaths, he knew precisely what to look for. To demonstrate, he opened his laptop and called up an image of a brain on his computer screen.

The story is fascinating.  I'm sharing it here because of the final lines.  First, a bit more of the story:

After learning his violent family history, he examined the images and compared them with the brains of psychopaths. His wife's scan was normal. His mother: normal. His siblings: normal. His children: normal.

"And I took a look at my own PET scan and saw something disturbing that I did not talk about," he says.

What he didn't want to reveal was that his orbital cortex looks inactive.

"If you look at the PET scan, I look just like one of those killers."

Skipping ahead:

Still, he says the evidence is accumulating that some people's brains predispose them toward violence and that psychopathic tendencies may be passed down from one generation to another.

The Three Ingredients

And that brings us to the next part of Jim Fallon's family experiment. Along with brain scans, Fallon also tested each family member's DNA for genes that are associated with violence. He looked at 12 genes related to aggression and violence and zeroed in on the MAO-A gene (monoamine oxidase A). This gene, which has been the target of considerable research, is also known as the "warrior gene" because it regulates serotonin in the brain. Serotonin affects your mood — think Prozac — and many scientists believe that if you have a certain version of the warrior gene, your brain won't respond to the calming effects of serotonin.

Fallon calls up another slide on his computer. It has a list of family members' names, and next to them, the results of the genotyping. Everyone in his family has the low-aggression variant of the MAO-A gene, except for one person.

"You see that? I'm 100 percent. I have the pattern, the risky pattern," he says, then pauses. "In a sense, I'm a born killer."

Fallon was prompted to study his brain after his mother, Jenny, told him his ancestry was full of alleged murderers.

Fallon's being tongue-in-cheek — sort of. He doesn't believe his fate or anyone else's is entirely determined by genes. They merely tip you in one direction or another.

And yet: "When I put the two together, it was frankly a little disturbing," Fallon says with a laugh. "You start to look at yourself and you say, 'I may be a sociopath.' I don't think I am, but this looks exactly like [the brains of] the psychopaths, the sociopaths, that I've seen before."

I asked his wife, Diane, what she thought of the result.

"I wasn't too concerned," she says, laughing. "I mean, I've known him since I was 12."

Diane probably does not need to worry, according to scientists who study this area. They believe that brain patterns and genetic makeup are not enough to make anyone a psychopath. You need a third ingredient: abuse or violence in one's childhood.

That's why I'm sharing this one here.  35% to 40% of America's children live in families where the household income is insufficient to meet the most modestly defined needs of a family of that size and configuration in that location.  (See "Self-Sufficiency Standard" for more information.)   How many more live in families which have below-average income, little financial security, little in savings, shaky housing situations, unemployment or underemployment?

Our nation's concentration of income and concentration of wealth mean that about 80% of us are below average.  Every time you see a report about average wealth, or average income, please recognize that we live in Lake Wobegon in Reverse.  Most of our children live in families that are below average, particularly those who were born to young parents, to less educated parents, to single parents, or who made unfortunate choices of who their parents would be, or what pressures their parents' marriages would come under, particularly financial pressures.

We have a poverty machine.  The rich keep getting richer, and the rest -- including the families of a very large proportion of our children -- are struggling to keep their heads above water.

How do we fix this poverty machine?  How do we transform it into a rising prosperity-for-all machine?  For that, you'll have to do some reading.  Start with the works of Henry George --

• a speech or two at www.wealthandwant.com -- say, The Crime of Poverty, or Thou Shalt Not Steal;
• a reading of Progress and Poverty at progressandpoverty.org;
• your choice of chapters from Social Problems at wealthandwant.

Then, you might read Bob Andelson's Henry George and the Reconstruction of Capitalism at wealthandwant.

How do we reduce the chances that conditions in a child's life will cause them to become people who victimize others as adults?   By assuring that all get what they need as children, and are protected from victimization by adults and by other children.

Just a thought.

Tackling America's Drug Addiction

Tackling America's Drug Addiction : NPR.

I heard parts of this when it was initially broadcast, and hunted around for the text version.   It contains some statistics that surprised me.   Here's the first part of the interview:

MICHELE NORRIS, host:  Earlier this week, Mexican President Felipe Calderon defended Mexico's war against the drug cartels, and cast some blame on his neighbor to the north: the U.S. The origin of our violence problem begins with the fact that Mexico is located next to the country that has the highest level of drug consumption in the world, Calderon wrote in a newspaper editorial. It is as if our neighbor were the biggest drug addict in the world.

Harsh words, to be sure. It got us wondering about the appetite for drugs in the U.S., and whats being done to curb it.

For answers, we turn to Joseph Califano, the former secretary of Health, Education and Welfare, and now director of the National Center on Addiction and Substance Abuse at Columbia University.

Mr. Califano, welcome to the program.

Mr. JOSEPH CALIFANO (Director, National Center on Addiction and Substance Abuse, Columbia University): Nice to be here.

NORRIS: Now first, any truth in President Calderon's statement? Is it fair to characterize the U.S. as the biggest drug addict in the world?

Mr. CALIFANO: The U.S. is 5 percent of the world's population. We consume two-thirds of the world's illegal drugs. So there is a lot of truth...

NORRIS: Hmm.

Mr. CALIFANO: ...in what President Calderon said.

NORRIS: Let me ask you about the war on drugs right now. The current administration is trying to focus on a balance between interdiction and treatment: drug courts, for instance, followed by mandatory treatment, things like that.

Will that shrink the domestic market for drugs - since when you're talking about treatment, there are so many issues surrounding access to treatment?

Mr. CALIFANO: You're absolutely right. The rhetoric of the administration is good, but the dollars haven't changed. We're still putting roughly two-thirds into interdiction and enforcement, and one-third into treatment and prevention. Interestingly, when President Nixon started the war on drugs, his first budget was two-thirds for prevention and treatment, and one-third for interdiction.

NORRIS: Oh, so it's flipped.

Mr. CALIFANO: It's flipped totally. Now, we have to look at a lot of systems to really do something about this. The drug courts are great. We've analyzed them at our center. They work. And the prison population is important because 65 percent of the people in prison meet the medical criteria for drug or alcohol abuse and addiction. That's a wonderful - in a sense, captive audience. But we don't provide much treatment for them.

NORRIS: So it's just a wasted opportunity. They're not getting treatment.

Mr. CALIFANO: About one in 10 that need treatment gets some kind of treatment. But most of it is not good.

There's a Medicaid population: 30 percent of the beneficiaries of Medicare have drug and alcohol problems. We have to go after those populations. That's the short-run - in a sense - solution to this problem.

There's a longer-run solution. We know from our research that if you get a child through age 21 without getting into this stuff, that child is virtually certain to be home free for the rest of his or her life. And when you say a drug-free society - and there will always be drugs being used - what you're really talking about is that population of children - and that's parents, that's schools, that's people that are dealing with that. And they've got to get focused on it.

NORRIS: Is the U.S. serious enough about the war on drugs?

Mr. CALIFANO: No, we're not. I'll tell you - and we're not serious. The government is not serious enough. You can barely hear any of the leaders in the government talk about it. The medical profession is not serious enough. The public-health profession is not serious enough.

Think about it.  The richest nation in the world.  And our wealth is quite concentrated in a relatively small portion of our population: 1% of us have over one third of the net worth.  10% of us have over 71% of the net worth.

And 10% of us get nearly half of the pre-tax income, and 20% of us get 61%, and 40% of us get 80%, leaving not much for the rest.

The rest of us keep talking about our nation's ideals, as if we'd already achieved them and we should all be content.  But clearly our concentration of wealth and concentration of income are producing effects which burden a large number of us and then get transmitted to other parts of the world.  (Am I a master of understatement?)

Income Mobility and the Persistence Of Millionaires, 1999 to 2007

The Tax Foundation recently published a study which apparently seeks to comfort those of us who are concerned about the concentration of income in the US -- what they call "the rising gap between the rich and poor."  It suggests that "snapshots of income inequality" should be considered in light of "the mobility of people up and down the income ladder."

The first graph is from Piketty and Saez, and shows the percentage of income going to the top 1% of income recipients.  It shows the 1980 share as 10% and the 2007 share approaching 23.5%.   The text mentions that the share of income received by the top 10% has risen from 34.6% in 1980 to 49.7% in 2007, also sourced to P&S.

The paper then goes on to show, from IRS data, the extent to which people moved from one income quintile to another between 1999 and 2007:

Table 1  More than 50 Percent of Taxpayers Moved Out of the Bottom Quintile Between 1999 and 2007
	2007 Income Quintile/Percentile
1999 Income Quintile/Percentile	Lowest	Second	Third	Fourth	Fifth	Total	Top 10%	Top 5%	Top 1%
Lowest	42.5%	25.1%	16.3%	10.4%	5.7%	100.0%	2.2%	0.8%	0.1%
Second	32.2%	34.7%	17.3%	10.8%	5.0%	100.0%	1.7%	0.7%	0.1%
Third	14.4%	26.0%	32.8%	17.8%	8.9%	100.0%	3.4%	1.2%	0.1%
Fourth	7.7%	10.7%	25.7%	37.7%	18.3%	100.0%	6.2%	2.2%	0.3%
Fifth	3.1%	3.8%	7.5%	23.3%	62.3%	100.0%	36.5%	20.0%	4.3%
Top 10%	2.7%	2.4%	4.4%	13.3%	77.1%	100.0%	56.7%	34.8%	8.0%
Top 5%	2.4%	1.9%	3.0%	8.2%	84.5%	100.0%	72.7%	54.2%	14.7%
Top 1%	2.3%	1.4%	1.4%	4.5%	90.5%	100.0%	85.5%	78.3%	44.6%
Note: Computations by author from the 1999-2007 SOI Individual Tax Panel.

They cite the good news that only 43% of those in the bottom income quintile in 1999 remained in that quintile in 2007.  A similar percentage of those who were in the top 1% in 1999 were again in the top 1% in 2007.    Less than 10% of the 1999 Top 1%'ers had fallen out of the top quintile 8 years later.  It was far more likely that a top-quintile taxpayer would remain in the top quintile -- 62% -- than anyone else remain where they were. 

(Might I be forgiven for wishing that the study showed what percentage of income over the 9 years went to the people in each quantile in 1999, and then again for each quantile in 2007?  One might come away with a different understanding.)

The remaining tables/figures show, for three different measures of income, how many taxpayers were "millionaires" for 1, 2, 3, 4, 5, 6, 7, 8 or all 9 years.  (The appendix shows that the top 1% began at $339,600 in 1999, and $549,200 in 2007.)  

Working with Gross Income, 675,000 tax payers had income over $1,000,000 during at least one year between 1999 and 2007.  Of those, half were in that category for just one year, and only 6% -- 38,000 taxpayers -- were in the $1,000,000+ category for all 9 years.   This is apparently intended to demonstrate that many more of us have one fabulous year than have consistent reported income at that level, and that this must mean that there is opportunity for all.

Narrowing the definition of income to exclude capital gains, a similar table shows that 431,000 taxpayers fell into the $1,000,000+ category at least once, of whom 175,000 were only once.  So 36% of those who were "income millionaires" by the Gross Income definition were not "IM's" when capital gains were excluded.

Excluding (instead) "Business Income," the ever-an-income-millionaire universe drops to 555,000 taxpayers, and 55% of them were one-year-only income millionaires.

It would be interesting to see the aggregate income during the 9 years for each group.  The author clearly has the data.

Appendix B Persistence/Transience of Millionaires: Data Underlying Figures 2, 3 and 4
	Number of Years a Millionaire
	One	Two	Three	Four	Five	Six	Seven	Eight	Nine	Total
Gross Income
Returns (1,000s)	338	102	54	50	29	23	24	17	38	675
Percent	50%	15%	8%	7%	4%	3%	3%	3%	6%	100%
Gross Income Excluding Capital Gains
Returns (1,000s)	175	77	41	38	22	17	17	13	29	431
Percent	41%	18%	10%	9%	5%	4%	4%	3%	7%	100%
Gross Income Excluding Business Income
Returns (1,000s)	307	81	44	35	23	18	13	11	23	555
Percent	55%	15%	8%	6%	4%	3%	2%	2%	4%	100%
Source: Computations by author from the 1999-2007 SOI Individual Tax Panel.

I suppose their conclusion is that since so many more people have one year of $1,000,000+ income than have 9 years of it, we ought not to worry about the actual distribution of income, which, as I've previously reported, is as follows:

	Top income decile:	47.19% of the before-tax income
	Second income decile:	13.77% of the before-tax income
Top income quintile:		60.96% of the before-tax income
Second highest income quintile:		18.18% of the before-tax income
Middle income quintile:		11.23% of the before-tax income
Fourth highest income quintile:		6.72% of the before-tax income
Bottom income quintile:		2.92% of the before-tax income
[Source: SCF Chartbook, page 7 and my calculations]

Moving from the bottom quintile to the fourth highest quintile may be considered mobility by the Tax Foundation.  But when the top quintile receives 61% of the income, and 62% of those who were in the top quintile in 1999 are again in it in 2007, even a lot of mobility doesn't get one very far, in terms of economic security or return on one's labor.

Look at it this way:

• 67.6% of those in the lowest quintile in 1999 are still in the bottom 40% in 2007
• Of those in the second quintile in 1999, 66.9% are still in the bottom 40% in 2007.  More have moved down a quintile than have moved up a quintile (and almost as many have moved down as have moved up in total: 32.2% down, 33.1% up).
• Of those in the middle quintile in 1999, more have fallen into the bottom 40% than have moved into the top 40% in 2009
• Of those in the fourth quintile in 1999, only 56% are in the top 40% in 2007.  More have moved down a quintile than have moved up a quintile (25.7% vs 18.3%).
• Of those in the top quintile in 1999, 85.8% are in the top 40% in 2007
• Of those in the top 10% in 1999, only 23% are in the bottom 80% in 2007
• Of those in the top 5% in 1999, only 15% are in the bottom 80% in 2007
• Of those in the top 1% in 1999, only 10% are in the bottom 80% in 2007.

This is structural.  We have permitted the creation and maintenance of income- and wealth-funneling machines. 

You can read more about the nature of the machine, and how to harness it to make things better, in Henry George's books, including Progress and Poverty, and Social Problems (the latter is a book of essays, and the link will take you to some material which will help you choose one of interest).  Certain things in society rightly belong to all of us, and our failure to treat them accordingly is at the root of our income- and wealth concentration problems (and many others, including sprawl, joblessness, boom-bust cycles, pollution -- and I think most of us would be happy to see that there is a solution to any one of these, much less something that will lead to a solution of all of them).

Income mobility in a society where so few of us control so much is a salable proposition only to the gullible.  If every one of us could spend 3 months of our lives in the top 0.25% of income recipients, then maybe our top-20%-gets-61%, top-1%-gets-23% might be consistent with our ideals of equal liberty.  Maybe, kinda sorta.

Tax Foundation, look into the wisdom of Henry George.  Unless, of course, your funders' interests are not the interests of ordinary Americans. 

The Prayer of the Landless

A friend sent me two prayers, both by John Archer, of Huddersfield, in the UK.  I'm guessing they might be 100 years old.

The Prayer of the Landless.

O THOU, who didst decree all things, and who didst breathe upon us, giving us life, for what purpose didst Thou create us?

For we are aliens upon the soil which gave us birth, and we are trespassers in the land of our fathers.

Thou didst fashion us in nakedness, and didst bid us break the bread we eat in the sweat of our brows.  But though we would fain comply with Thy command, we may not do so without the consent of others.

And the price of such consent is so exacting that our lives are made bitter by hard bondage.

We plough the fields and scatter the good seed o'er the land, but a mere pittance of the golden grain is our portion of the harvesting.

We spin and weave, but it is the bodies of others which are kept warm by the cloth our hands doth make.

We build ships and carry over the face of the deep the fruits of the labours of our brethren, and we return laden with the fruits of Thy beneficence and other men's labours in the lands we have visited, but others than ourselves and our brethren appropriate the fruits of our activities.

Down, down we go into the deeps of the mind, and through danger attended with discomfort we dig and hew the coal which shall give warmth and glow to the hearthstones of our homes; but divers rents, royalties and wayleaves impoverish the hire of our labour in order to enrich the exchequer of those who neither toil nor spin.

The rights of the birds of the air and of the beasts of the field to their place on this planet of Thy creation is acknowledged, but ours is challenged.  We have not where to lay our heads, we have not where to place the soles of our feet -- without permission.  And we may only secure such permission by the payment of annual tribute known as ground-rents.

Jesus, our elder Brother, who taught us to believe that Thou art equally the Father of us all; didst also command us to render to Thee the things which belong to Thee.

The earth, created Thou it! Hast Thou given the title deeds thereof to those who refuse to us the right of a standing and a resting place thereon, unless we pay rent to them annually?

If Thou hast bestowed on them the title deeds, wherein have we sinned against Thee, and wherein have they so pleased Thee, that they should be thus lifted above compliance with Thy decrees and ordinances, and we be so penalised that our children languish for lack, their mothers droop and die, thus causing many of us to curse the day we were born.

If these things be not of Thy ordering, so incline the hearts of all Thy people to the issues of justice, that they may be made to realise they but mock Thee with vain petitions when they pray, "Thy will be done on earth as it is in heaven," until they right this wrong which dishonours Thee and which enslaves and destroys Thy disinherited children.  Amen.

It may not be immediately obvious to those who haven't thought about this before that the alternative is for every individual who possesses land to pay to the commons each year the annual value of the land itself -- that size lot in that location.  Each pays for what he uses, and thus keeps for himself no more than what he is actually using.  This creates an economy in which valuable sites get used for valuable purposes, not held out of use as someone's nestegg for their children or grandchildren.  No one grows wealthy off others' labor, and this flow of land rent gets used for common purposes rather than pouring into the portfolios of a select few.

Click on this link to see all the Landlord and Landless prayers I've got on a single page.

The Landlord's Prayer -- Archer's version

THE LANDLORD'S PRAYER OFFERING IN THE TEMPLE

O God, I thank Thee that I am not as other men. Thou art very wonderful and very kind — for Thou hast made me Thine own selected one!

All Thy works praise Thee — and yield their tribute to me! The earth, created Thou it — and gavest it to me!

The sea also is Thine, but Thou hast given me its bed for a long distance out from the shore — so that none may ride upon its waters without paying toll to me.

The firmament of the Heavens is Thine, and Thou hast set the sun therein to give light and warmth by day, likewise the moon and the stars whereby to radiate through the gloom and the darkness of the night, and these also enrich my exchequer.

Thou ridest Thy chariots in the clouds and causeth the winds to blow, and dost thereby still further increase my plenteousness.

Thou hast decreed that the non-elect of mankind shall live by labour, and hast conferred on me the power to make them hand over annual tribute to me and mine for the opportunity of so doing.

Thou hast ordained that the earth which Thou gavest me shall rise in value through the operation of natural laws and social factors, and hast appointed me to collect these enhanced values and to use them for myself and my house.

In further manifestation of Thy concern for me and mine, Thou hast commanded that the non-elect shall forge weapons for defending that which Thou hast given to me; that they — the non-elect — shall provide forces to use these weapons on my behalf, that they shall pay the capital costs thereof, and that they shall further provide out of their own common labors such funds as may be needed for feeding and clothing themselves and their dependents, and of providing compensation for the dependents of those who fall or are maimed and bruised whilst engaged in safeguarding Thy gifts to myself, in order that no toll shall be made upon Thy goodness to my house. Yea, Lord, I thank Thee that I am Thine own elect, and that Thy wonderful goodness is made plain in the tribute which Thy created handiwork brings to me and to my house. Amen, Amen, and yet again Amen.

—john Archer

This version was printed in Land and Freedom in 1917.

In another version, the final paragraphs read slightly differently:

William Allan's Landlord's Prayer

I've found a longer version of a Landlord's Prayer which Henry George published in The Standard (late 1880s, or early 1890s).  This one was reprinted in December, 1920 in an IBEW publication, and is sourced there to the Dundee People's Journal.

LANDLORD'S PRAYER.
(By William Allan.)
Lord, keep us rich and free from toil
For we
Are honored holders of thy soil,
Which democrats would fain despoil
With glee.
O Lord, our fathers got the land
For serving men whom Thy right hand
Had chosen to be great and grand,
As kings.
Tho' taken by stealth, we're not to blame;
Thou knowest, O Lord! it is a shame
To say to us of titled name
Such things.

Lord, let us live in wealth's content
And peace;
Lord, we are by Thy mercy meant
To rule mankind and make our rent
Increase.
The birds that hunt the moors and hills,
The fish that swim in streams and rills,
The beasts that roam as nature wills,
We own.
E'en Lord, the minerals that lie
Beneath the earth's periphery
Belong to us -- Thou knowest why
Alone.

Lord, on the rugged rabble frown,
For they
Are foes to us, Thy church and crown;
Lord, bare Thine arm and grind them
down
To clay.
O Lord, our God! we make their laws,
Which they reject with wild applause;
Be Thou a buckler to our cause
And caste.
They scorn our love, Thy name and word,
They reverence neither squire nor lord;
Lord, them consume with fire and sword
At last.

Lord, they are poor and ignorant,
And worse.
Compared with us, how different
In manner, garb, and lineament,
And purse!
Lord, never let them get or see
The power which lies in unity.
Keep us apart from them -- for we
Are men.
Protect us from their greedy hands,
Protect us from their vile demands,
Protect us in our wealth and lands,
Amen, amen!

--Dundee People's Journal.

The Larger Struggle - David Brooks

Op-Ed Columnist - The Larger Struggle - NYTimes.com.

On the one side are those who believe in democratic capitalism — ranging from the United States to Denmark to Japan. People in this camp generally believe that businesses are there to create wealth and raise living standards while governments are there to regulate when necessary and enforce a level playing field. Both government officials like President Obama and the private sector workers like the BP executives fall neatly into this camp.

On the other side are those that reject democratic capitalism, believing it leads to chaos, bubbles, exploitations and crashes. Instead, they embrace state capitalism. People in this camp run Russia, China, Saudi Arabia, Iran, Venezuela and many other countries.

Many scholars have begun to analyze state capitalism. One of the clearest and most comprehensive treatments is “The End of the Free Market” by Ian Bremmer.

Bremmer points out that under state capitalism, authoritarian governments use markets “to create wealth that can be directed as political officials see fit.” The ultimate motive, he continues, “is not economic (maximizing growth) but political (maximizing the state’s power and the leadership’s chances of survival).” Under state capitalism, market enterprises exist to earn money to finance the ruling class.

The contrast is clearest in the energy sector. In the democratic capitalist world we have oil companies, like Exxon Mobil, BP and Royal Dutch Shell, that make money for shareholders.

In the state capitalist world there are government-run enterprises like Gazprom, Petrobras, Saudi Aramco, Petronas, Petróleos de Venezuela, China National Petroleum Corporation and the National Iranian Oil Company. These companies create wealth for the political cliques, and they, in turn, have the power of the state behind them.

It might be worth looking at these assertions in light of how wealth is distributed ... concentrated might be a better description ... in America.  The 2007 Survey of Consumer Finances, from the Federal Reserve Board, reports the following distribution of "Equity," which includes individual stocks and equity mutual funds, whether held in retirement or non-retirement accounts:

Bottom 50%      1.5%
Next 40%        19.6%
Next 5%          12.4%
Next 4%          30.5%
Top 1%           36.0%

The SCF also reports the distribution of holdings of "BUS" -- the value of privately-held businesses:

Bottom 50%      0.4%
Next 40%          6.0%
Next 5%            5.5%
Next 4%          25.5%
Top 1%           62.7%

The two categories are of roughly equal size: Equity $13.7 trillion and BUS $14.9 trillion.   So one might reasonably estimate that the top 1% have roughly 50% of the aggregate value of these two categories, and the next 4% have about 28% -- leaving 22% for the bottom 95% of us.

If state capitalism puts, say, 80% of business in the hands of the top 5%, is it that much worse than what we've got?  In some ways, yes -- but the question is worth pondering.

Brooks closes with this:

We in the democratic world have no right to be sanguine. State capitalism taps into deep nationalist passions and offers psychic security for people who detest the hurly-burly of modern capitalism. So I hope that as they squabble, Obama and BP keep at least one eye on the larger picture.

We need healthy private energy companies. We also need to gradually move away from oil and gas — the products that have financed the rise of aggressive state capitalism.

More than "needing healthy private energy companies" we need to start collecting for the commons more of the value of the natural resources they draw from our common supply -- not to mention forcing them to privatize the environmental risks associated with drilling.  Remember what Henry George said about a well provisioned ship?  He who controls the hatches controls his fellow human beings.

And of course, we need to be undertaking the shift of incentives which will redirect sprawl into the underused sites in our cities.  Land value taxation -- untaxing buildings, and uptaxing land value -- will produce the urban density which will lead to walkable cities and populations which will support effective public transportation systems.  It will provide technologically modern housing affordable to people at all levels of the income spectrum, close to their work -- for those who want that.  The reduced pressure on the suburban markets will lower prices there, too, for those who want that.   That urban redevelopment will also create more commercial venues in the centrally located places where specialized businesses thrive.  And of course all that building activity creates jobs, and those new technologies will produce buildings which use less energy and produce less pollution.  And because untaxing buildings removes the penalties associated with things like solar power, all the incentives will be pointing in the same direction.

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New plan to make millions in profits without any investment - PakTribune

New plan to make millions in profits without any investment

A standing google alert on the "Roosevelt Hotel" in NYC brought me this article on another way for the foreign owner of this excellent acre in Manhattan to make money without selling the site.  It suggests that this method might be quite profitable for a number of individuals in that country's government. 

The back story, as I've gleaned it, is contained in some earlier posts to this blog.

The article slightly mis-states the situation.  It is not the Roosevelt Hotel which is worth $300 to $400 million; rather, it is the ground under the hotel, which is a well-located full-block, roughly an acre, in midtown Manhattan.  Estimates of its value a few years ago, as a tear-down, ranged from $400 million to $1.2 billion.  When the real estate market went soft, it was clear that waiting a few years for it to revive would be quite profitable.

This article, though, suggests that a lot of individual politicians stand to make individual profits through a different strategy.

Remember what Leona Helmsley told us:  "WE don't pay taxes.  The little people pay taxes."    The little people's taxes provide the services which make this acre worth $400 million.

The oil and gas billionaire, and estate taxes

The New York Times reported recently that Dan Duncan died in March, leaving an estate estimated by Forbes Magazine to be $9 billion.   He started with $10,000 and two propane trucks, and "and built a network of natural gas processing plants and pipelines that made him the richest person in Houston."

I do not begrudge his heirs the value of the plants themselves, other than the value created by any sort of monopoly they might benefit from -- which may be considerable -- and the value of the well-located land on which they sit.  But the pipelines run over rights of way whose value has probably gone very lightly taxed, just as the value of railroad rights of way has traditionally been under-valued and therefore taxed lightly.

The estate includes over 100 million shares of the stock of Enterprise GP Holdings, worth $43 per share at the time of his death, shares which likely have appreciated hugely over the years without being taxed.  Because Duncan's estate escaped paying estate tax, the value of the shares was not stepped up, so when the shares are sold someday, a 15% "capital" gains tax will be due, and his heirs will keep the other 85%.

Had Mr. Duncan died in 2009, while the estate tax was still in place, the $4.3 billion of shares would have resulted in a $2 billion estate tax. (That ignores his other holdings, including a 5,500 acre hunting ranch.)

The estate tax is an imperfect tool, but it is better than no tool at all to collect back for the community value which individuals during their lifetimes have managed to privatize. 

The best solution, though, would be for each of us who privatize something from the commons to be required to compensate the commons, month in and month out, for that which we claim title to.  Buildings, machines and pipelines are rightly private property, but the land on which they sit and the nonrenewable natural resources which they draw down are OURS, not the rightful property of any individual or corporation, and when we permit some to privatize that value without compensating society, we create wide channels for TRICKLE-UP.  We're so used to it that we don't even notice.

Recall that a huge something over 70% of America's net worth is owned by just 10% of us, and over 34% is owned by 1% of us.  Mr. Duncan's children are in that 1%.  They have inherited the reins to a corporation which we've permitted to privatize the value of what ought to be common property.

Those who have high hopes and sincere expectations of someday winning a large jackpot in the Powerball Lottery may think it appropriate to defend the privileges associated with having large amounts of wealth (Powerball winnings, however, are income -- that's a detail) and they may think it to be in the best interests of their future lucky self to protect privileges associated with privatizing the commons.  (They might want to take a look at the odds in their favor compared to the odds associated with the privilege of access to America's or the world's natural resources.)

What an Estate Looks Like to the Taxman

What an Estate Looks Like to the Taxman - NYTimes.com.

But where does that dynastic plutocracy begin? There is an astronomical gap between Mr. Buffett’s fortune, which Forbes estimated at $47 billion, and two retirees in Marin County, California, whose life’s work might have allowed them to leave their heirs $3.5 million in assets, mostly in the value of a house.

Oh, I was so pleased to read someone expressing it so clearly.  Tell me about that house in Marin County.  Let's see.  Let's say our retirees bought it in, say, 1980, for, say $200,000.  They probably put down 10% or 20% in those days (borrowing standards were a little different then).   Let's say that they had a mortgage for, say $160,000, at 8%.  They finished paying it off last year.  The monthly mortgage payment was $1,174. Over the course of 30 years, they paid off $160,000 of principle, and paid the lender about $266,000 in interest.  To rise from the $200,000 purchase price to today's value of $2 million, the average annual appreciation was about 8.3%.  Obviously, some years it was more, some less.  But 8.3% is an average.

What the paragraph quoted doesn't explain is how our hard-working retirees caused their property to appreciate by 8.3% per year over 30 years. 

The reality is that houses depreciate.  What rises in value is the land, and it rises for reasons which have nothing to do with the individual landholders, or even all the landholders in aggregate.  Land appreciates as a result of the presence and growth of population and a healthy economy; as a result of the public provision of goods and services which people value and which make a community or state a better place to live.  Advances in technology can also contribute to increases in land value -- consider elevators in cities, air conditioning in the American south, fiberglass boats in waterfront communities.

Our retirees experienced an 8.0% average annual growth in the value of their residence.  Paying off their mortgage raised their equity by the $160,000 they originally borrowed. Appreciation, provided by their community and their nation, provided $1,800,000 -- over 10 times as much!   Their hard work paid the mortgage, but their community contributed FAR more.

But, you might argue, they did pay property taxes all those years.  Yes.  Under Proposition 13, their property tax is based on 1% of the assessed value of the property, and the assessed value of the property can only rise by 2% per year, no matter how much the market value has risen.  Voters can approve additional payments in the form of parcel taxes, which might bring taxes up to perhaps 1.25% of the assessed value of the property. 

At 1.25%, over those 30 years, our hardworking Marin retirees have paid in $109,514 in property taxes.   The rest of their "hard-earned"  appreciation comes from

• the scarcity of housing close to California's cities, compared to the number of people who would like to live close in;
• spending supported by taxes on sales and wages -- which come not only from their own pockets but from the pockets of the 50% of California residents who are renters because they can't afford to buy;
• federal dollars spent on California infrastructure
• effects created by changes in mortgage interest rates and mortgage lending policies, including loan-to-value ratios, underwriting standards related to income ratios, etc.

Does it seem churlish to collect back a portion of the value we-the-people have created once per generation?  We'd be much wiser to collect it year-in and year-out, in the form of a tax on the value of the land itself, and let our workers keep their wages and not pay taxes on their purchases or homes.

Does it seem churlish that the Marin retirees' children should not be entitled to keep all that value we-the-people created just as if the retirees had created it themselves?  After all, other people's children, including those of tenants, don't get to keep that value, but they've contributed to creating it.

A 15% capital gains tax on the $1,800,000 somehow seems an insufficient share for the commons.  Even a 50% estate tax seems a bit insufficient, too.

This is trickle-up economics at work, and saying that some of it trickles to people we might consider middle class doesn't change the fact that some grow wealthy in their sleep, while others simply grow poor despite working hard for decades.   The two situations are not unrelated.   (And a $3.5 million estate doesn't fall into most definitions of middle class in America.)

Paying for Transportation Infrastructure is simple

A friend passed along this excellent piece, from the City Club of New York just over 100 years ago.  It is long, but highly instructive, and quite relevant in the 21st century.  

Do you want to know the mechanisms by which we concentrate wealth into the portfolios of a narrow slice of our population?  Read this.  Read Fred Harrison's Wheels of Fortune. Watch Fred's brief video, Ricardo's Law: The Great Tax Clawback Scam:

And consider a town or city you know.  Is your experience any different?

Why on earth would we finance infrastructure any other way?  Well, California's Proposition 13 is designed to make sure California can't.  No wonder the state is in such trouble.

Remember what Leona Helmsley told us: "WE don't pay taxes.  The little people pay taxes."  She wasn't talking about tax evasion; she was describing tax structure. THIS is how wealth concentrates.

The reference to Spuyten Duyvil is to the point where today the Henry Hudson Bridge, on the parkway of the same name, crosses from upper Manhattan into Riverdale, in The Bronx. (It refers to devilish currents in the rivers, which menace unsuspecting rowers.)

Building of Rapid Transit Lines In New York City By Assessment Upon Property Benefited

A Memorandum Addressed to the Board of Estimate and Apportionment
And The Public Service Commission of New York City.

The City Club of New York
55 West 44th Street
October 2, 1908

The Board of Estimate and Apportionment and the Public Service Commission:

Dear Sirs:

The City Club respectfully submits for your consideration the results of inquiries made through its Transit Bureau with relation to the feasibility of meeting the cost of future subway extensions by means of assessments on the property benefited.
 
The city urgently needs more rapid transit roads. Private capital seems disinclined, at present at least, to finance the work of building. The city's borrowing power is utterly inadequate to cover the need, and will be until relief may be secured through the slow process of constitutional amendment. If the necessary lines are to be built, it seems self-evident that other methods must be considered.

The Club's investigations show that in the outlying districts reached by the present subway, and to some degree the nearer sections, the value of the property served has increased to an extraordinary degree. This added value would have paid for the cost of the work several times over. While the city as a whole has benefited greatly, the scale of local benefit is naturally much greater. In our judgment, it would not only be helpful as a solution of the problem, but far more equitable to charge a proportion of the cost of constructing a rapid transit line to the property most benefited by such construction.

The argument is elaborated, and the exact results of the Club's investigation given, in the accompanying memorandum. We trust that this may have your examination, and that if the plan commends itself to your judgment, the future policy of the city may be shaped accordingly.

Very respectfully yours,
Homer Folks, Chairman, Transit Committee.

Henry C. Wright, Bureau Director.

BUILDING OF RAPID TRANSIT LINES IN NEW YORK CITY
BY ASSESSMENT UPON PROPERTY BENEFITED

For many years the city has deemed it just to assess upon abutting property the cost of opening streets and building sewers. The theory of such a tax upon property is that it receives almost the exclusive benefit from the construction of a street or sewer adjacent to it. The question naturally arises, does not a transit line, by the benefit that it confers, fall in the same class as new streets and sewers? If a street railroad or rapid transit line be extended into an undeveloped territory, is it not built primarily for the purpose of furnishing  transit facilities to future residents in that section? People will buy this property primarily because it has good transit facilities and the value placed upon it is largely based upon its accessibility. This being true and universally admitted, why should not the property thus enhanced in value by the extension to it of a transit line pay for the construction of such line, to the extent that the increased value warrants it, instead of receiving such increased value as a present from the city. This principle, in a modified and unofficial form, is operated in Berlin. The assessment is not collected by the city, but the street car company when extending a line to outlying territory requires the owners of the property benefited to guarantee to the company a certain return upon the cost of such extension.

Is Our Tax System Helping Us Create Wealth?

tax.com: Featured Articles: Is Our Tax System Helping Us Create Wealth?.

This article, by David Cay Johnston, is at least a few months old, and I didn't see it when it first came out.  I did see a blog post which referred to it, and quoted some passages of it.  Here are the ones which caught my eye then: 

Without a doubt, the much lower tax rates at the top encouraged people to realize more income in the tax system. And if the only measure is that some people made more, then this would be a good.

But let’s ask the question that the classical economists would have asked back when they were known as moral philosophers and their leaders spoke of policies that benefited the majority. Let’s go back to a time before Vilfredo Pareto’s observations began what is the overwhelmingly dominant orthodoxy today, neoclassical economics with its focus on gain.

What is the social utility of creating a society whose rules generate a doubling of output per person but provide those at the top with 37 times the gain of the vast majority? ...

Is a ratio of gain of 37 to 1 from the top to the vast majority beneficial? Is it optimal? Does it provide the development, support, and initiative to maximize the nation’s gain? Are we to think that the gains of the top 398 or 400 taxpayers are proportionate to their economic contributions? Does anyone really think that heavily leveraged, offshore hedge fund investments are creating wealth, rather than just exploiting rules to concentrate wealth, while shifting risks to everyone else?

Under the overwhelmingly dominant economic theory of today, this is all good. Pareto argued that if no one was harmed, then all gain was good.

Carried to an extreme, neoclassical economics would say that if the bottom 99.9999997 percent had the same income in 1961 and 2006, and all of the gain went to the one other person in America, that would be a good. ...

Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?

Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families with children whose head is age 50 or younger, is smaller today than it was in 1983.

But the original has some other important things to say.  It begins,

Imagine that all you had to live on was the amount of tax you saved in your best year because of the many tax rate cuts Congress has put in place since 1964, when President Johnson signed into law the Kennedy tax cuts.

For most Americans, living off income tax savings would mean starvation. Their income tax savings have been minor, and when looked at over a long period, say since 1961, increases in payroll taxes have more than offset their slight income tax reductions.

But for the very few who have gained the most from living in the United States, the story is quite different. Their tax savings alone from a single year, invested to earn just 5 percent annually, would be enough to provide a lifetime income at nearly twice the income threshold for being in the top tenth of 1 percent.

That's a remarkable decrease for some very privileged folks!  Johnston goes on to compare what has happened with incomes at the very top of the scale between 1961 and 2006 with what has transpired for the bottom 90% of us.  The bottom 90% saw real income rise from $22,366 to $31,642 (both in 2006 dollars).  At the 90th percentile, wages rose from $60,404 to $104,440.  DCJ goes on to make some points which Elizabeth Warren and Amelia Tyagi made in "The Two Income Trap:"

That tiny increase in pay does not represent a real increase in wages, only total income. That is because in the middle of that 45-year era, a profound transformation took place in America.

In 1961 most families lived on one income, maybe supplemented by some part-time work by the wife for what was quaintly known back then as "pin money." Now two-income households are the norm.

The overall wealth of America grew and grew during this era. GDP, adjusted for inflation and increased population, was up 227 percent. But wages and fringe benefits did not grow with the economy. For most workers, they fell. Wages peaked way back in 1972-1973, were on a mostly flat trajectory for more than two decades, rose briefly in the late 1990s, and then fell sharply in the new century. Airline pilots have seen their 1990s income cut by more than half; some union factory workers have seen their pay slashed by two-thirds. Millions are out of work, and the jobs they once held are gone and are not coming back. And even if the Great Recession is coming to an end, we face years of jobs growing more slowly than the working-age population, which could radically transform America's culture, work ethic, and sense of progress.

In 2006 families worked on average about 900 more hours than families did in the 1960s and early 1970s. That is a roughly 45 percent increase in hours worked accompanied by a 41 percent increase in total income.

For many, the reality is that two jobs produce the same or a smaller after-tax income than just one job did three and four decades ago.

Compare that to the top 400 taxpayers:

The average income for the top 400 taxpayers rose over the 45 years from $13.7 million to $263.3 million. That is 19.3 times more.

The income tax bill went up too, but only 7.8 times as much because tax rates plunged. Income tax rates at the top fell 60 percent, three times the percentage rate drop for the vast majority. And at the top, the savings were not offset by higher payroll taxes, which are insignificant to top taxpayers.

The average income tax rate for those at the top in 1961 was 42.4 percent. By 2006 it was down to 17.17 percent. Add on payroll taxes, and the 2006 rate is 17.2 percent, the same as rounding the income tax figure alone.

Readers of this site will know that I have no use for income taxes.  But until we shift to smart and just taxes, a sharply progressive income tax seems to me to be a better-than-nothing way to fund our common spending.

Johnson ends with this:

Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?

Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families, with children, whose head is age 50 or younger, is smaller today than it was in 1983.

In my humble opinion, DCJ isn't looking quite deep enough.  Our tax system -- federal, state and local combined -- is permitting those who own our most valuable common assets (land value and nonrenewable natural resources) to privatize their value, year after year, generation after generation -- and grow hugely wealthy and powerful -- and then merely taxing some of the income from them. 

The alternative?  Tax the annual value of those resources -- which are rightly COMMON property, provided by the Creator and by the presence of all of us and the spending/investment of the entire Community, not by individuals or corporations -- heavily (say, 90% or 95% of the annual value)  and reduce or even eliminate -- starting at the bottom -- the wage and interest and sales taxes and taxes on manmade improvements to land.   Think about the ramifications of that reform.  They're profound, and point in the direction of a healthier, more stable and more just economy.   Will the revenue generated be sufficient to fund all of today's public spending?  Probably not.  But

1. that's no reason not to shift our taxes off bad taxes onto good ones; and

2. we may find that with good taxes, things change enough that we no longer need to spend large amounts on the social safety net, because a vibrant economy with opportunities for all and a somewhat more equal distribution of income and of wealth and power permits the vast majority of us to be self-sufficient and prosperous.

The bottom 70% or so of us CAN'T save.  Large shares of our incomes are devoted to housing and transportation, and to all sorts of FIXED costs.   We can't increase our spending on other goods, and we can't save.   We have to fix that.  We have to do things which distribute the value of that which SHOULD be common, and end the privatization of value which ought to be common. 

An Inconvenient Tax

An Inconvenient Tax

There seems to be a new film about the income tax.  I've looked at its website, and the list of contributors.  Among them, there don't seem to be any who seem likely to have breathed a mention of what I think is the only logical, just, fair, efficient revenue base: the value of nonrenewable natural resources and the land within our borders.

Apparently they are content to permit those values to be privatized by those who hold title to them.

It is difficult to fault anyone for not considering an idea to which they've not been exposed, but no examination of taxation can be considered particularly useful (to the vast majority of us -- I'm not speaking of the elite wealthholders, the 10% who have over 72% of net worth -- yes, 72% -- see http://lvtfan.typepad.com/lvtfans_blog/2010/04/americas-wealth-distribution-2007-wealth-concentration-part-1-of-3.html, below, which shows this same 10% has 41% of the income) without considering:

• the justness of each tax base;
• the efficiency of same;
• the incentives -- perverse and desirable;
• the administrability of each tax base.

I wonder which of the film's experts provide the viewer with some basic familiarity with Adam Smith's "canons of taxation."   And I'm referring to the classical economist Adam Smith, author of The Wealth of Nations, not the fellow who writes on economics under his name.

Henry George expressed it this way:

The increasing need for public revenues with social advance, being a natural, God-ordained need, there must be a right way of raising them — some way that we can truly say is the way intended by God. It is clear that this right way of raising public revenues must accord with the moral law.

Hence:

It must not take from individuals what rightfully belongs to individuals.

It must not give some an advantage over others, as by increasing the prices of what some have to sell and others must buy.

It must not lead men into temptation, by requiring trivial oaths, by making it profitable to lie, to swear falsely, to bribe or to take bribes.

It must not confuse the distinctions of right and wrong, and weaken the sanctions of religion and the state by creating crimes that are not sins, and punishing men for doing what in itself they have an undoubted right to do.

It must not repress industry. It must not check commerce. It must not punish thrift. It must offer no impediment to the largest production and the fairest division of wealth.

I'll bet that "An Inconvenient Tax" doesn't spend much time on these issues.  But I could be wrong.

Readers of this blog will know that I am not a fan of the income tax.  But the other solutions commonly proposed are little better.

What's better?  Read Fred Foldvary's The Ultimate Tax Reform for starters.

What's the real cost of living, in Pennsylvania?

Pennsylvania is a diverse state.  Its major cities and their suburbs tend to have higher costs of living, and its smaller cities and rural counties are much less expensive.  But even the least expensive counties have bare-bones cost of living far about the Federal Poverty Guideline.

Here are the Federal Poverty Guidelines for 2009, which were extended into at least mid-2010:

• 1-person family:   $10,830
• 2-person family:   $14,570
• 3-person family:   $18,310
• 4-person family:   $22,050
• larger families: add $3,740 per person

This week, the newest Self-Sufficiency Standard Study was published, for Pennsylvania.  I've collected the SSS data for some selected counties, and added some data from the Census Quick Facts site (county population, median family income 2008, and persons per square mile).  A few observations:

• The barebones cost of living in the least expensive counties is over 150% of the FPG for a single adult; and nearly twice the FPG for adults with children.
• A similar lifestyle would cost far more in Pittsburgh (about 250%, with children) and Philadelphia (about 300%, with children.  In suburban Pittsburgh, the figure is slightly higher than in the city itself.  In Lancaster County, the costs are similar to suburban Pittsburgh's.
• And in the suburban counties of Philadelphia, that still-bare-bones lifestyle costs more yet: 325% to 350% of the Federal Poverty Guideline.
• Few people live in the rural counties, where costs are low. (So are wages and opportunities!)
• Most people live in the urban and suburban counties, where costs are higher.  (And if they tried to live in the rural counties and work in the urban ones, their high transportation costs would eat up much of the difference.)
• High population density goes with high median income; low population density goes with low median income.

All these places need janitors, and nurses' aides, and fast-food workers, and retail clerks, and many other jobs which pay wages which are insufficient for an adult to live independently on, much less support a family on.  (And most places have zoning regulations which prohibit more than a few unrelated adults from living in a single housing unit, which would be a way to reduce the cost of living.)   Encouraging individuals to seek more education to move beyond these jobs is fine, but it doesn't mean that those jobs won't be needed in a hypothetical more-educated future.   Do we really expect that they will be filled by people who will be content with dormitory living, and not having children, or supporting an elderly relative, or that young people will fill these jobs briefly and then move into higher-paying jobs when they marry and have children?  Really?

Trickle-down economics doesn't speak to how all these people can afford to live.   The SSS is not a middle-class lifestyle, at least not the way most of us think of "middle class."  It is the just-getting-by-without-depending-on-help (though it does take into account EITC, CCTC and CTC; the EITC is only relevant in a few rural counties -- see the tables starting at page 42).  We need to understand why wages are so low, and why our wealth and income are so concentrated.  And we need to understand the structures that create this situation, in order to correct them.

Area	Population	Median Family Income	Persons per Square Mile	1 Adult	1 Adult, 1 Preschooler	1 Adult, 1 Preschooler, 1 Schoolage	2 Adults, 1 Preschooler, 1 Schoolage
Federal Poverty Guideline	source: Census Quick Facts site, except for Allegheny County: Pittsburgh city data			$10,830	$14,570	$18,310	$22,050
Erie County	280,291	$44,005	350	$17,344	$35,928	$46,676	$53,077
% of FPG				160%	247%	255%	241%
Allegheny County: Pittsburgh	312,819	$56,300 source: SSS	6,019	$17,431	$36,412	$47,857	52,009
% of FPG				161%	250%	261%	236%
Allegheny County: excluding Pittsburgh	total county: 1,218,494	$48,778 source: 2008 ACS	1,756	$20,013	$38,957	$50,226	$56,865
% of FPG				185%	267%	274%	258%
Philadelphia	1,547,297	$37,090	11,461	$21,392	$41,863	$54,705	$59,501
% of FPG				198%	287%	299%	270%
Bucks County	626,015	$75,701	985	$27,886	$51,253	63,821	71,846
% of FPG				257%	352%	349%	326%
Chester County	498,894	$85,547	573	$28,160	$51,853	$63,639	71,296
% of FPG				260%	356%	348%	323%
Lancaster County	507,766	$55,824	496	$19,223	$37,612	$48,400	$54,821
% of FPG				177%	258%	264%	249%
Bedford County	49,579	$39,754	49	$17,221	27,916	35,445	43,756
% of FPG				159%	192%	194%	198%
Juniata County	23,118	$42,705	58	$16,545	$27,412	$34,985	$42,355
% of FPG				153%	188%	191%	192%
Total	12,604,767	$50,702	274

The Republican Journal: The only fair tax

The Republican Journal: The only fair tax.

I was impressed with this piece in a Maine newspaper, and thought it worth sharing.  The emphasis is mine (picture me in the stands, cheering the points):

The only fair tax

By Lisa Cooley | May 25, 2010

[Editor's note: The following column is in response to point/counterpoint columns on the VillageSoup Web site and in The Republican Journal by Reps. Jayne Crosby Giles ("Facts argue for repeal of tax overhaul," May 12 TRJ) and John Piotti ("You're offered $1.07 and it costs you 53 cents — do you take it?", May 19 TRJ) regarding the tax reform bill passed by the Legislature last year and the upcoming people's veto referendum June 8.]

Dear Jayne and John,

I would like to explain something to you that might stretch your partisan brain cells to their limit, so pay attention.

You can quibble all you want about sales taxes, income taxes, tax credits, deductions, revisions, reductions, refructations and intermoflations. It's all quite beside the point. Lend me your ears: I come to bury everything you know about taxation, not to praise it.

First, let's play a little game. Can you name something that is absolutely necessary for the survival, health and productivity of the human species, and whose value is not created by any single individual, but by the community as a whole? If there is such a thing, and someone is taking that value and making a profit from it, does it make sense that it is a thing that should be taxed?

The community as a whole needs money. Every individual cannot finance the maintenance of their portion of the Interstate Highway System. We can't each pay the salary of a police officer; we need to pay as a community for law enforcement. And so on. Within the mostly gratuitous quibbling over how the government spends our money, there is a certain amount of common ground where we can all agree that public revenue is necessary. But what we tax is important.

What we tax is important. As a matter of fact, it's the only important thing. Can we really not scratch our heads and come up with the thing that, if taxed, would make our system more healthy? How many people are saying, right now, "I know very well that the system is not working. I don't know what the solution is, but I don't hear anything I think can really work."

Let's go back to our guessing game: What is that thing that we all need access to in order to live? That thing is valuable only because the community as a whole has created its value, while people who own this thing can collect a lot of profit, just for owning it! They can be sleeping. They can be off in Mallorca or swimming with dolphins, and still profit from it, because we would all rather tax the things we produce, the money we earn, the merchandise we need, rather than consider it.

It's very simple: it's land. Not the buildings on it. Not the stuff we produce while working on top of it. Not the wages we earn by producing stuff on top of it. The very ground itself, that thing that we cannot produce any more of. Only one person can own a specific square foot of land, and that person holds the ultimate monopoly. Generally monopolies are frowned upon, even by the biggest, scariest Libertarian. Except for the most obvious and overlooked monopoly of all.

Tax land, not labor. Tax land, not production. Tax land. Don't tell someone that the more they work, the better they manage, the more they will be penalized by the state. And you, you left-wingers out there shaking your head as you hear me say something that sounds like it's coming from Fox News: yes, you read me right. Don't penalize production. Don't burden those who are, by their work, creating jobs, helping the economy. Tax the value of land, because the community as a whole has already paid for it.

Let's think about how the community creates land value. This is the crux of my case: the idea that since we all have created the value of everybody's land, that is the thing from which we need to collect public revenue. Think about the Interstate Highway System. They decide where an exit will be located. You exit the highway and there is a Dysart's there. They do a good business at that Dysart's, but why? Because the tax dollars that built that exit created the value of that land. (Sorry, Dysart's. I'm not singling you out; really, I want to make things better for you, too.)

Remember that commercial for the Re-Max real estate company where the pregnant woman is running after the school bus, yelling something like, "What is your teacher-student ratio?" She wants to know what the schools are like before she buys a house in your community. Publicly funded services affect real estate value; the quality of a school system affects it more than most other services.

The federal government supports Acadia National Park, the state creates very good roads and a very nice new bridge leading there, so that people can have easy access to a wonderful park experience. (How much is a house in Acadia? Why does that house have value? Because it's gorgeous. Take that same gorgeous house and put it in interior Waldo County and it still has value — but not nearly as much.)

If you have a piece of land with a restaurant on it on Cottage Street in Bar Harbor you will do well, because you are a good business person, and because thousands and thousands of people will travel on those roads to that very nice park. Right next to that restaurant is a derelict building owned by someone who doesn't want or can't afford to build on the site right now, but is holding onto it, hoping to cash in on it later when values rise. So the potential camping equipment or souvenir store that could be employing people is not there, and that makes our town less prosperous.

Unfair? Very much so. The system that allows that landlord to hold that property out of use cripples our ability to help ourselves. So someone who does want to start a business that employs people and makes him a profit will have to go further from the center of that city, or further from that nice big road and pretty park, where land values are less. They call this sprawl. Now you know why sprawl exists, and how we can stop it: Tax the value of land.

Tax only the value of land. Keep every penny of what you produce on that land, including the buildings. Will this hurt our restaurant owner? Far from it. Land value taxation simply collects public revenue in a way that penalizes no one but the land hoarder, and benefits everyone, including land owners who use their land productively.

So, Jayne and John, and all of you out there who fancy you have the answers: did you get all that? You might say there are some details to fill in, but for every objection you think of there are clarifications and answers. If this intrigues you, read up on it. If you think you can prove me wrong, bring it on. It is simply the best, fairest way to help ourselves. Embrace it and be among those who really do have the solution.

Lisa Cooley is a resident of Jackson. For more information on land-value taxation, she encourages people to visit henrygeorge.org. To contact her directly, e-mail her at: [email protected].

Lisa, I could not have said it any better!