LVTFan's Blog

The Earth-for-All Calendar: March 21 -- John Stuart Mill

Those who think that the land of a country exists for the sake of a few thousand land-owners, and that so long as rents are paid, society and government have fulfilled their function, may see in this consummation a happy end to Irish difficulties. But this is not a time, nor is the human mind now in a condition, in which such insolent pretensions can be maintained. The land of Ireland, the land of every country, belongs to the people of that country.

— JOHN STUART MILL, Political Economy; Book II., Chap. 10, Sec. I.

Henry Ware Allen: Special Privilege

Special Privilege

BY HENRY WARE ALLEN
from Land and Freedom, 1938

As our time honored political maxims become hackneyed they are very apt to pass into what Grover Cleveland would call innocuous desuetude. We subscribe to the sentiment that "eternal vigilance is the price of liberty" and yet little is done to counteract those aggressive forces which nullify that freedom which we profess to prize so highly. Even the prayer, "Thy Kingdom Come," is repeated as a mere wish that something good would happen rather than with a determination to bring about those righteous conditions which make for a heaven on earth. Possibly the most neglected of all of our national ideals is our professed adherence to that most democratic of all maxims, "Equal rights for all and special privileges for none." For at the present time our country is honeycombed with special privilege that has become so entirely entrenched as to be regarded on all sides as vested right. Special privilege is condoned by force of its familiarity. Like vice it is endured, then pitied, then embraced.

There lived in a Colorado city years ago a housewife who made convenient use of coal cars on the side track across the street from her dwelling with which to replenish her stock of fuel. This she did without any qualm of conscience but as a special privilege which, by the sanctifying touch of time had grown into a vested right. This woman doubtless was punctilious in the ordinary obligations of life and would have hotly resented any statement to the effect that she was stealing coal. She was guided by that all too common kind of honesty which is based upon expediency rather than principle. Not on any account would she have withheld what was due from her to a neighbor who would have suffered by her delinquency, but the advantage to her of getting this coal was so great and the loss to some impersonal owner of same, mine, railroad, or smelter, was relatively so negligible that the argument was all in favor of her acting in her own interest without question. No personal equation was involved and if at first there had been any hesitation on her part of this practice, that was long ago a thing of the past. But the railroad company put a watchman on guard and her supply of fuel was thereby stopped. She then turned to the local charity organization with request for a continuation of the supply which had thus been rudely taken from her and the very righteous indignation with which she told her story was ample proof of entire absence of comprehension on her part that she had been stealing.

This incident, which is a true story, illustrates very nicely the evolution and the nature of that special privilege which eventually becomes a vested right. And if the searchlight of analysis is turned upon our social system we may be surprised to find the presence of special privilege in unexpected places and of a volume that is, in the aggregate, enormous.

As a basis for this inquiry it may be well to state the fundamental truth that property may be secured in three ways only; first, by labor; second, by gift; and third, by theft. If this test is repeatedly kept in mind, the task will become easier. One of the commonest forms of special privilege is that which is provided under ninety-nine year leases on valuable business property sites. These leases convey to the owner of the land a stipulated income after the tenant has paid all taxes and expenses. In the parlance of political economy this revenue consists of what John Stuart Mill defined as unearned increment, a value which is produced by no individual but which is purely the result of population reflected upon desirable locations. For this revenue to be turned over to individuals as is now the unquestioned custom in all of our large cities and to an amount of billions of dollars annually is a procedure which is precisely in the same class as the stealing of coal from the railroad car by the Colorado housewife.

A much larger source of public revenue which is diverted to individuals is that of the rent of valuable property in excess of a fair interest return upon the intrinsic value of improvements on the property. This applies to practically all property located at the center of our large cities and involves enormous revenues. There is a mixture here of legitimate return on capital invested with the unearned increment which belongs absolutely to society but the case is not less clear on that account.

Another prolific source of public revenue which is diverted to individuals is that which comes from the lucky possession of oil wells. This possession frequently gives incomes of thousands of dollars daily to those who have no more claim on such revenue than is involved in the possession of the land upon which the wells were developed. The wealth that has by this means been given to certain sections of the country and certain groups of people has run into the billions of dollars. The Osage tribe of Indians in Oklahoma are said to have been made the richest people in the world due to this special privilege. Such beneficiaries are no more justly entitled to the revenue which they receive than was the Colorado woman justified in stealing coal from the railroad car. It will be said that the oil industry involves a great deal of capital and that many dry wells are paid for before a single producing well is developed. This is true and therefore makes the proposition somewhat more complicated but does not alter the conclusion.

Another source of revenue which diverts public funds into private hands is speculation in land. Purchase of inside property sure to increase in value is the one investment that has been invariably recommended by shrewd financiers. This speculation is far greater than has been generally realized. More than one-half the area of New York City consists in vacant lots which are held out of use for speculative purposes, and the same is true of all our larger cities. Incidentally, this speculation has the effect of enhancing the selling price of desirable land to artificially high figures. When land which is purchased with a hope of subsequent rise in value, the investor practically lays a trap by which he may secure values that rightfully belong to the community. And this process makes an artificial scarcity of land with consequent artificially high cost to those who must use it. This process of securing a profit, of getting something for nothing, is persistently the same in character as that by which the Colorado housewife secured her supply of coal. Here again objection may be interposed to the effect that land frequently has to be sold for less than it cost. This is an objection that was raised by no less an economist than Francis A. Walker, the foremost critic of Henry George during his lifetime. General Walker exclaimed, "Mr. George has much to say about unearned increment: He says nothing, however, about unrequited decrement." Mr. George's rejoinder to this was an expression on his part of his inability to discuss the problem with one who spoke of unrequited decrement in something which originally had no value. In other words, so far as society is concerned its interest is only in the rental value which is produced from year to year and which rises or fall accordingly as population grows or wanes. The important fact is that this increment, whether large or small, belongs to the community which produced it.

The most spectacular form of special privilege which we have to deal with today is that provided by the protective tariff. This protection enables the America manufacturer to secure an artificially high price for his product. The common argument in support of the protective system is that the American standard of living must be maintained by this artificial means, but this argument falls to the ground, if at the same time, we permit any improvement in labor-saving machinery which naturally has far greater effect upon the labor market than is produced by the competition of merchandise imported from abroad. The enormity of special privilege due to the tariff is perhaps more conspicuous in the State of Pennsylvania than elsewhere, a single family in Pittsburgh, the direct beneficiaries of the tariff on aluminum, being reputed to be worth in excess of $2 billion. There will be found that, with a few rare exceptions, the great fortunes of America are based upon special privilege of one kind or another.

Although there are many minor sources of special privilege which are embedded in our political and social institutions, those above enumerated are the principal ones.

The special privileges provided by legislative action at Washington are in a different class from those which have become a regular part of our system of taxation but are none the less to be condemned. The most flagrant of these in recent times was the appropriation by Congress and approved by President Hoover, of $500,000,000 of tax payers' money for the specific purpose of stabilizing or artificially enhancing the price of wheat, cotton, and other farm products. It was presumed by the makers of this law that it would have the effect of giving artificial advantage to the farming class, which would offset in a measure the special privileges which had been given so generously to Eastern interests by means of the protective tariff. The plea for this farm legislation was repeatedly based upon that consideration. It so happened that even the immense waste of money involved by the farm marketing act was negligible as an influence in the world wide markets and that it did not affect in any considerable degree the law of supply and demand upon the prices of the agricultural products which were supposed to be favored. But the very fact that this legislation was put through with little opposition furnished a very good illustration of the fact that special privilege legislation is regarded as perfectly legitimate. And this has been further illustrated in monstrous degree by the New Deal legislation under President Roosevelt.

There is everywhere consciousness of a mysterious force which is responsible for easily acquired fortunes on one hand together with an increase of unemployment and consequent lower incomes on the other hand. Each succeeding census report makes more appalling this undemocratic and unjust condition in our social fabric.

If prosperity is to be secure, there must be an end to special privilege of every kind, and a system of taxation inaugurated in place thereof which shall be based upon justice to all. Henry George has demonstrated how this should be done.

The Earth-for-All Calendar: March 10 - Thoreau

At present in this vicinity the best part of the land is not private property; the landscape is not owned. But possibly the day will come when fences shall be multiplied and man-traps and other engines invented to confine men to the public road, and walking over the surface of God's earth shall be construed to mean trespassing on some gentleman's rounds.

— HENRY DAVID THOREAU, Essay on Walking, in Excursions, p. 264.

The Earth-for-All Calendar: March 9 -- Spence

While I was in the wood alone by myself a gathering of nuts, the forester popped through the bushes upon me, and asking me what I did there, I answered, "Gathering nuts." 

"Gathering nuts!" said he; "and dare you say so?"  

"Yes," said I.  "Why not? Would you question a monkey or a squirrel about such a business?"

 .   .  "I tell you," said he, "this wood is not common; it belongs to the Duke of Portland."  

"Oh! My service to the Duke of Portland," said I; "Nature knows no more of him than of me. Therefore, as in Nature's storehouse the rule is, First come, first served, so the Duke of Portland must look sharp if he wants any nuts."

— THOMAS SPENCE, Pig's Meat (1793)

in Land for the Landless (Wm. Reeves, 1896), pp. 7-8.

The Earth-for-All Calendar: March 8 - Emerson

"I find this vast net-work, which you call property, extending over the whole planet. I cannot occupy the bleakest crag of the White Hills or the Allegheny Range, but some man or corporation steps up to me to show me that it is his."

— EMERSON, The Conservative.

Extended excerpts from The Conservative (an 1841 speech) follow ...

The Land Questions: #35 -- the land in the path of progress (1)

a bit out of sequence ...

35. He worked hard.  He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high lease prices for generations.  Is it right to exact an estate tax of 50% or so on the true market value of that estate?

A. No! Widows and orphans must be protected!  We wouldn't want them to have to depend on the social safety net.

B. No! The dollars he spent to buy that land decades ago were already subject to an income tax -- maybe two (federal and state) -- and the heirs are entitled to keep all the increase from the purchase price, even if that is a 20% increase, or a 200% increase, or a 2000% increase, over the purchase price.

C. No! The man had foresight, and we ought to honor, reward and encourage that!

D. No!  The interstate highway could have been re-routed, and the man and his widow and children could have been left high and dry.  They took a risk, and we ought to reward them for their brilliance!

E. An estate tax is a good way to capture this socially-created windfall once per generation.  After all, he can't take it with him.  Half for the heirs, half for the community that created the value. Seems fair, and keeps them out of the social safety net.

F. An estate tax is better than nothing, but it is a poor alternative to collecting some significant portion of the rental value of the land, month in and month out, whether that rental value be low (before the interstate highway's route is determined) or high (after it is announced and built, and the community grows up around that highway).

G. Your suggestions?

The Land Questions: #32: Crop subsidies

32.  Who should get crop subsidies in America?

A. Landlords of land that is rented to tenant farmers

B. Landlords of land that is not farmed

C. Tenant farmers

D. Big farmers who own their land

E. Absentee farm landlords, but only if they are Americans

F. Absentee farm landlords, but only if they are retired farmers or their widows

G. Absentee farm landlords, but only if their total land holdings are under $500,000 (about 1000 acres in most places).

H. Your suggestions?

The Land Questions: #29 -- Selling the Toll Roads

29. The states need money.  Should they sell their toll roads to private companies? 

A. Sure!  That would provide a nice pot of money that would help with this year's budget and next year's, and after that, we can leave the problem to a future group of legislators and a new governor!

B. Sure! The private sector will take better care of them and turn a profit to boot!

C. No.  The taxpayers paid for those roads to be built, and have a right to more control over them than would exist after privatization.

D. No. The taxpayers own that land, a unique right of way, and selling it off forever is irresponsible and wrong!

E. No. Our society -- any society -- is highly dependent on our infrastructure, and control over it must remain in the public sector.

F. No. Those highways are built on land that was bought or taken from individual property owners for the public good.  To turn them over to the private sector, for profit, would be wrong.

G.  No.  Those highways will increase in value over the coming decades and centuries, and should not become anyone's private property, at any price.  Both their economic value and the control over them belongs in the common sector.

H. No.  Even if it looks as if it might make sense for our generation, what of future generations?  Should we permit the privatization of a common asset they will likely be dependent on?

I. No. Future taxpayers will build more highways intersecting with these current tollroads, and increase their value; were these to be privatized, it would be the private corporation who would reap the benefit of that future public investment.

J. Your suggestions?

Earnings and findings -- earned and unearned income

Does the Single Tax discriminate between earned and unearned income?

It is the scientific way of doing what we have been feebly attempting to do in an unscientific way, that is, to distinguish between what Dr. Scott Nearing called "property income" and "services income," or between that form of wealth which is the result of individual effort in production and that which is purely the result of the collective effort of society; or between the two forms of wealth which Dr. Ellwood, of the University of Missouri, in a seemingly unwilling recognition of an unwelcome truth, calls "earnings" and "findings."

In the case of the great majority of us (whether as individuals or as partners in corporations) our incomes are so inextricably compounded of earnings and findings, of privilege income and service income, that it is hard for some of us to know whether we belong to the privileged or unprivileged classes, to the slave owners or the slaves, to the confiscators or the victims; and perhaps only those absolutely property less men at the bottom of the social scale can be said to have no share in the "findings" that spring from privilege. On the other hand it is equally true that all industry up to its highest strata, has to pay toll to privilege and provide those "findings" which distribute themselves with more or less inequality over almost the whole of society. How to distinguish between and separate these entirely different kinds of wealth is what all sincere sociologists and honest taxation commissioners have wanted to do and have hitherto failed in the doing.

If we take a handful of sand and a handful of iron filings and mix them thoroughly, and then set a man with the sharpest eyesight and the nimblest fingers to separate the particles, it will take him long to accomplish his task and he will never do it with more than an approximation to completeness. But apply a strong magnet to the mixture and the separation will be accomplished in ten minutes. Then see how the analogy applies to the economic problem in society. Let us imagine the return that should naturally flow to land in the form of rent to take the shape of blue coins made of steel. Let us fancy that the natural reward that goes to capital as interest takes the form of red coins made of wood. Finally let us figure the natural return to human service of all grades as being represented by white coins also made of wood. On examination it will be discovered that in the case of almost every member of society above the rank of the day laborer, his income is tri-colored or composed of all three coins. There are countless "captains of industry" among us who complacently assume their large incomes to be the rewards freely given by a free world in return for their invaluable services, who will be surprised to find how large a proportion of blue their income coins contain. There are multitudes of livers upon what they have called "interest" who will expect to find their coins red, who will be equally surprised to discover that they are almost entirely blue. To complete the parable, the taxation of land values will be like the application of the magnet which will draw away the blue steel coins in whatever stratum of society they may be found, and lay them aside for social purposes, being socially created wealth; leaving the red and white coins to be competed for in a world of free opportunity, without deduction or diminution by taxation or in any other way.

From The Single Tax Year Book (1917)

The Earth-for-All Calendar: February 26 -- Sismondi and Ruskin

In general, as soon as there is no more vacant land, the masters of the soil have a kind of monopoly against the rest of the world.

— SISMONDI, New Principles of Political Economy (1820), Book III., Chap. 5, f. 202. (Second French Edition.)

It begins to be asked on many sides how the possessors of the land became possessed of it, and why they should still possess it, more than you or I.

— RUSKIN, Fors Clavigera, Vol. I., Letter 2.

The Earth-for-All Calendar: February 24 -- Cadwalader Golden

Every year the young people go from this province and purchase land in the neighboring colonies, while much better and every way more convenient lands lie useless to the king and country. The reason of this is that the grantees themselves are not, nor never were, in a capacity to improve such large tracts, and other people will not become their vassals or tenants, for one great reason, as people's (the better sort especially) leaving their native country, was to avoid the dependence on landlords.

— Report of Cadwalader Golden, Surveyor-General, and afterward Lieutenant-Governor of the Province of New York (1732), Documentary History of New York, Vol. I., p. 384.

The Land Questions: #22 -- Infrastructure and Land Values

22.  The creation of a new subway line raises the land values near each of the stations.  Who should reap the benefit?

A. People who own homes there

B. People who own businesses there

C. People who own land there, whether or not there is a highest-and-best-use building on it

D. Corporations who own land there

E. Universities and other private landholders who own land there

F. Foreign corporations and private equity funds who own land there

G. Pension funds and sovereign wealth funds who own land there

H. The community as a whole, since the community paid for it

 

Download Fred Harrison's book, "Wheels of Fortune"

The Land Questions: #21 -- Paying for Transportation Infrastructure

21.  The creation of a new subway line raises the land values near each of the stations.  Who should pay for the building of the subway line?

A. Riders of the new subway line

B. Riders of all subways in the system.

C. Riders of all mass transit in the metro area.

D. Drivers of cars and trucks, all over the metro area, via taxes on their fuel purchases (that is, in proportion to miles driven and the fuel efficiency of their vehicles)

E. Drivers of cars and trucks, all over the metro area, via an annual surcharge on their registration

F. Drivers of cars and trucks, all over the metro area, in proportion to the value of their cars, owned or leased

G. Drivers of cars and trucks, via tolls when they use bridges and tunnels, or HOV lanes, or certain highways

G. The taxpayers, via increased sales taxes on their purchases

H. The tourists and business travelers, via hotel occupancy taxes and taxes on rental cars.

I. Passengers in taxis, via a surcharge on their fares.

J. The homeowners, via taxes on their homes

K. Drivers, commercial and individual, via taxes on fuel purchased within the city

L. Employees all over the metro area, via a payroll tax

M. The tenants of commercial buildings in the heart of the central business district

N. All landholders, paying equally (a parcel tax)

O. All landholders, in proportion to the size of their lots

P.  Landholders, in proportion to the value of the land they hold, without regard to the buildings or their contents.  Those whose land values are raised by their proximity to the new line will see a proportional increase in their share of the tax burden; those far from the new line will not.

Q. Your suggestions?

The Earth-for-All Calendar: February 20 - Herbert Spencer

Supposing the entire habitable globe to be so enclosed, it follows that if the landowners have a valid right to its surface, all who are not land owners have no right at all to its surface.  Hence such can exist on the earth by sufferance only. They are all trespassers. Save by the permission of the lords of the soil, they can have no room for the soles of their feet. Nay, should the others think fit to deny them a resting place, these landless men might equitably be expelled from the earth altogether

—HERBERT SPENCER, Social Statics (1850), Chap. IX.

[Note. — It should be remarked that after circulating this chapter for forty years, the author withdrew it. The truth however, cannot be withdrawn, and we quote this chapter on its own merits here and elsewhere. Its logic is unanswerable.]

A 1938 NYT Letter to the Editor: Collecting Ground Rent

I came across this rather good letter to the editor, from 1938.  (Trinity Church Corporation, a major landlord in downtown Manhattan, was the subject of a NYT article this past week, as well as the subject of a major series in the NYT in December, 1894):

1938-09-03 Letters to The Times

Collecting Ground Rent
Single-Tax System Regarded as No Detriment to Building

TO THE EDITOR OF THE NEW YORK TIMES:

Fabian Franklin, in his letter to THE TIMES discussing the demolition of John D. Rockefeller's Harlem tenements in order to save taxes, writes:

"That objection is simply that virtual abolition of land ownership, which the single-tax plan is designed to effect, would make the building of houses in a city an extra-hazardous business, because, under the single-tax regime, in the great majority of cases the investment would result in a disastrous loss to the owner of the building.  I was neither blaming nor praising Mr. Rockefeller for the demolition of Harlem tenements."

What is the so-called single-tax system?  It is the collection by the government, through the taxing officials, of the entire economic or ground rent of land and the repeal of all taxes on buildings and other products of labor and capital.  That ground rent is estimated to be 9% of the capital value of the land.  New York City is now collecting one-third of this ground rent.  The market value of the lots is the remaining two-thirds, capitalized.  Dr. Franklin's thesis is that if the entire ground rent is collected no one would erect buildings, because "in the great majority of cases the investment would result in a disastrous loss to the owner of the building."

Some of the finest buildings in New York City are erected on leased land and the lessee pays the ground rent 100% besides a tax on the building.  There are hundreds of buildings erected by lessees of lots owned by Trinity Church, Astor estate, Rhinelander estate, Sailors Snug Harbor and others.  The lessees must pay all the taxes, both on land and building, amounting to 3% of the assessed value of both, and to the landlord 6% of the market value of the land.

Thus the entire ground rent is paid by the lessee, but only one-third to the government representing the people who made that value by their presence and activities, the remaining two-thirds to the landlord.  Notwithstanding that they are thus obliged to pay 100% of the economic rent, bankers and business men erect buildings costing millions.  Under the Henry George plan they would have to pay less, for the taxes on these costly structures will have been repealed.

Perhaps if Mr. Rockefeller had not been obliged to pay taxes on the buildings he might not have pulled them down; or, if he had, would have erected better buildings in their place in order to get a return on his investment in buildings.  The ones who will benefit most from the adoption of the Georgian philosophy are the owners of humble homes.  The average small homeowner's house is assessed for at least twice the assessed value of the lot.  If the house is relieved from taxation and the lot taxed the entire ground rent, his tax will be less than it is now.  The difference will be made up from vacant lots and lots that are worth more than the improvements.

After all, the building of houses is like any other business.  The builder takes the risk of lessened demand because of changes in fashion, obsolescence, competition.  It is estimated that 95% of new businesses ultimately fail. With the adoption, however, of the philosophy of Henry George, commonly called the single tax, failures in the housing and other businesses will be much fewer.  This is because neither houses nor goods nor anything else will be taxed.  The collection of the entire ground rent will not lessen the area of the surface of the earth one inch.  On the contrary, it will open to occupation and use land that is now held for speculation purposes. 

The taxation of any product of labor and capital will add the amount of the tax to the price, lessen demand and thus curtail production.  The result is unemployment and misery.

Frederic Cyrus Leubuscher
Essex Fells, N. J., Aug. 31, 1938

NYT Invitation to a Dialogue - A National Service Program

Invitation to a Dialogue - A National Service Program - NYTimes.com Published: February 14, 2012

To the Editor:

David Brooks suggested in a recent column that the country needs a national service program to unite the diverging classes in society. He’s right.

Not long ago, we had one that did so very well. It was the draft. Every young man — regrettably, only men — shared a potential obligation to his country.

Any serious discussion of comprehensive national service means talking about a draft. It’s hard to imagine the Supreme Court upholding nondefense conscription, but if civilian service were an alternative to military duty, the prospects would improve.

The all-volunteer military is exemplary for its professionalism, sacrifice, meritocracy and diversity. (I have a son with two college degrees who enlisted.) But the benefits and burdens need to be shared more widely. There have been too many multiple deployments of regulars and reserves, and if draftees were in the mix once again, perhaps there would be no more wars of choice.

Many domestic needs could be served by a comprehensive national service program. Like the Depression’s best idea, the Civilian Conservation Corps, it could involve people from all classes in repairing our parks, roads, bridges and other infrastructure. It could also bring fresh ideas and talent to teaching, law enforcement, social work and other underpaid public services. The benefits to our national character, as Mr. Brooks suggests, would be immense.

There are past and present models of a national service program in more than a dozen other nations. It is time we gave it a try.

MARTIN A. DYCKMAN
Waynesville, N.C., Feb. 14, 2012
The writer is a retired associate editor and columnist for The St. Petersburg Times.

Editors’ Note: We invite readers to respond to this letter for our Sunday Dialogue. We plan to publish responses and Mr. Dyckman’s rejoinder in the Sunday Review. E-mail: [email protected]

LVTfan's observation: Every investment in improved infrastructure creates land value.   Most projects that have value -- education, law enforcement, social work, improved public health -- will also increase land value.

A project is, by definition, worthwhile if it creates more in land value than it costs to do,* and, it could be argued that, when comparing two infrastructure projects that cost the same amount, say, $100 million, if one creates $200 million in land value and the other creates merely $150 million in incremental land value, the $200 million project should probably take priority, all other things being equal.

*which isn't to say that many public spending projects which don't create increased land value aren't worthwhile, too, for other reasons.

These projects, some will say, fall into the category of "pork" spending.

Pork barrel is the appropriation of government spending for localized projects secured solely or primarily to bring money to a representative's district. The usage originated in American English.^[1] In election campaigns, the term is used in derogatory fashion to attack opponents. Scholars, however, use it as a technical term regarding legislative control of local appropriations.^[2]

History

The term pork barrel politics usually refers to spending that is intended to benefit constituents of a politician in return for their political support, either in the form of campaign contributions or votes. In the popular 1863 story "The Children of the Public", Edward Everett Hale used the term pork barrel as a homely metaphor for any form of public spending to the citizenry.^[3] After the American Civil War, however, the term came to be used in a derogatory sense. The Oxford English Dictionary dates the modern sense of the term from 1873.^[4] By the 1870s, references to "pork" were common in Congress, and the term was further popularized by a 1919 article by Chester Collins Maxey in the National Municipal Review, which reported on certain legislative acts known to members of Congress as "pork barrel bills". He claimed that the phrase originated in a pre-Civil War practice of giving slaves a barrel of salt pork as a reward and requiring them to compete among themselves to get their share of the handout.^[5] More generally, a barrel of salt pork was a common larder item in 19th century households, and could be used as a measure of the family's financial well-being. For example, in his 1845 novel The Chainbearer, James Fenimore Cooper wrote, "I hold a family to be in a desperate way, when the mother can see the bottom of the pork barrel."^[6]

Definition

Typically, "pork" involves funding for government programs whose economic or service benefits are concentrated in a particular area but whose costs are spread among all taxpayers. Public works projects, certain national defense spending projects, and agricultural subsidies are the most commonly cited examples.

Citizens Against Government Waste^[7] outlines seven criteria by which spending can be classified as "pork":

1.  
   1. Requested by only one chamber of Congress;
   2. Not specifically authorized;
   3. Not competitively awarded;
   4. Not requested by the President;
   5. Greatly exceeds the President’s budget request or the previous year’s funding;
   6. Not the subject of congressional hearings; or
   7. Serves only a local or special interest.

The last of these seems as if it might be the most important one.

So here's the question: How should we finance these projects, if they are to be done?  How would we pay for a modern CCC? (Ah -- this sounds like The Land Questions ...)

A.  By a local tax on land value.  This would necessitate regular reassessment of the land value in every community in America, say, every 3 years, which could be done for well under $40 per parcel.  It would probably also require some state and/or federal oversight, checking values against transactions to verify that all municipalities or assessing units are doing high-quality market-based assessments. [In Maryland, they're already doing assessments every 3 years.  In Connecticut, assessments every 4 years are required.  In southern Delaware, the assessments are 30+ years old.  In California, the assessments are meaningless, due to Proposition 13.  It would take a few years for some of these entities to update their assessments.]

B. By a state tax on land value. [same issues apply]

C. By a national tax on land value.

D. Let's just use the federal income tax.  It's there.  It's easy.

E. Let's use a national sales tax.

F. Let's use a tax on imports.

G. Let's tax buildings.

H. Let's tax services.

It seems to me that a national service corps of some sort has a lot of merit.  It could promote a lot of highly desirable goals.  It could provide a lot of home-front protection in the event of natural disasters.  It could get some important projects done, including the maintenance of existing infrastructure currently under-maintained,and the provision of services we believe are important (particularly when we are the beneficiaries).

But the financial benefits ought not to fall into private or corporate pockets; they ought to accrue to all of us, and ease the burdens of financing other kinds of federal spending.  Land value taxation strikes me as the answer to so many of our supposedly intractible problems.

 

 

The Land Questions: #13 -- Electric Utilities

13. Electric utilities have long been regarded as "widows' and orphans'" stocks.  Safe, if not high income.  A few years ago, they were deregulated.  A recent study has shown that retail electricity prices have increased faster in states that adopted competitive pricing than in those where rates continue to be set by government agencies.  We all need reliable electricity.  Should we permit the licenses to generate and distribute electricity to be an opportunity to make a windfall profit?  (Or should we encourage municipal ownership of vital utilities?)

A.  Sure!  People and businesses are quite free to move from states without regulation to states with regulation if they choose.  They may not mind paying 20% more for their electricity, if other conditions are good. And didn't the utilities earn it?

B. Sure.  If local regulatory agencies decide that local best interests conflict with the interests of the corporate shareholders, they can re-regulate.  After all, the corporations don't vote.

C. No. Electricity is important and we ought to do what we can to keep the price down so that poor people can afford electricity and still have funds for other costs of living.

D. No.  Electricity is vital to the economy, and we ought to do what we can to keep it affordable to ordinary people, and not a source of corporate windfalls.

E. No.  Natural monopolies ought to be publicly owned, the prices kept low, and any excess revenue accrue to the public treasury, not to the benefit of private investors.

F. your suggestions?

 

The Land Questions: #11 -- Ports

11. Foreign corporations and governments are seeking to buy some of our ports from the American corporations that own them.  Large shares of the goods we consume come through these ports, and the ports set the price that the shippers pay for access to the ports.  The possibility of weapons, invasive species, etc., entering the US through these ports is frightening.  Ports are unique locations, on sheltered waterfronts, served by elaborate rail and highway systems.  Is foreign ownership acceptable?

A. Sure!  No problem!  The costs to shippers are the same whether the owners are American or foreign!

B. Sure!  No problem!  These corporations have long term contracts with the local Port Authorities, and the PAs are smart bargainers who make sure that they collect the economic value of these unique sites from whoever has the contracts or owns the ports, for the entire term of the contract.

C. It is acceptable for foreign corporations to "own" the ports, but they must pay into the US treasury the economic value of the site.  They must not be permitted to privatize what is rightly common property.

D. It is not acceptable for foreign corporations to own the ports, but okay for US companies to privatize that value.

E. We ought to be collecting the annual rental value of the site itself, month in and month out, as our common treasure.  It shouldn't be privatized by anyone.

F. your suggestions?

WSJ LTE: incentives for growth in cities

How might smarter taxation be able to help Baltimore?  Here's a great answer from Bill Peirce:

Steve H. Hanke and Stephen J.K. Walters explain in "How Sunday's NFL Cities Became Champs" (op-ed, Jan. 21) the recent economic success of New York, San Francisco and Boston (relative to Baltimore) by property tax limitation. Their point could have been strengthened by carrying the tax capitalization analysis one step further.

The authors point out that a decrease in the tax levied on a building results in a larger stream of net income from that building, which justifies a higher value for the building. When the existing building is worth more than the cost of building a new one, buildings will be renewed and replaced and the city thrives. That is a good argument for eliminating the tax on buildings, but cities still need revenue and they can tax the value of the land without hindering development because the quantity of land is fixed. The problem with limiting property taxes as a whole is that cities or states have resorted to more damaging taxes, including income and sales taxes. Shifting from a conventional property tax to a land-value tax would allow cities to support themselves without damaging the incentives for growth.

Mason Gaffney: An Alternative Reform

In the files I've been digging through, from the late 50s to the early 80s, I found an early draft of a fine paper by Mason Gaffney about California's Proposition 13, for presentation at an August, 1978 conference.  I dug around and found a published copy of that paper, and think it worth sharing here. Original title, "Tax Limitation: Proposition 13 and Its Alternatives"

I see that there continue to be people who see the stupidity of Proposition 13 -- see http://www.dailyrepublic.com/opinion/letters-editor/time-for-a-petition-against-proposition-13/ Perhaps they will find this of use.  Georgists recognize Prop 13 as the antithesis of logical and just taxation.

First, a few of my favorite paragraphs, which I hope will whet your appetite for the whole paper.  I won't attempt to provide the context (you can pick that up when you continue to the paper, below).

• "There is a deferment option for the elderly, bearing only 7% interest (which is about the annual rate of inflation). In California, as also in Oregon and British Columbia, hardly anyone takes advantage of this deferment option. This fact, it seems to me, rather calls the bluff of those who so freely allege that the woods are full of widows with insoluble cash-flow problems, widows who are losing their houses to the sheriff and whose heirs presumptive, will not help keep the property, which they will eventually inherit."

You can read more about the Poor Widow by clicking on the "widow's skirts" link at left, in the tag cloud, and by reading Bill Batt's Property Tax Relief Measures: Answers to the "Poor Widow " Argument (or the pdf version)

• We hear a lot these days about cutting the fat out of the public sector; but there is fat in the private sector too. I interpret "fat" to mean paying someone for doing nothing, or for doing nothing useful. Most economists agree that payments to people. for holding title to land is nonfunctional income, since the land was created by nature, secured by the nation's armed forces, improved by public spending, and enhanced by the progress of society. "Economic rent" is the economist's term, but in Jarvis-talk we may call it the fat of the land or "land-fat." It has also been called unearned increment, unjust enrichment, and other unflattering names. Howard Jarvis has said that the policeman or fireman who risks his life protecting the property of others has his "nose in the public trough." But it has seemed to generations of economists that the owner whose land rises in value because public spending builds an 8-lane freeway from, let us say, Anaheim to Riverside, and carries water from the Feather River to San Diego, is the first to have his nose in the trough. Nineteenth-century English economists who worked this out were more decorous. They said things like "landlords grow rich in their sleep" (John Stuart Mill), or the value of land is a "public value" (Alfred Marshall) because the public, not the owner, gives it value.
  
  Some 43% of the value of taxable real estate in California is land value. When we lower the property tax we are untaxing not only buildings, but also land-fat.

• The ownership of property is highly concentrated, much more so than the receipt of income. Economists in recent years are increasingly saying that the property tax is, after all, progressive because the base is so concentrated, and because so little of it can be shifted. But this message has not yet reached many traditional political action groups who continue to repeat the old refrains. Two remedies are in order.

• One is to collect and publish data on the concentration of ownership of real estate. The facts are simply overwhelming and need only to be disseminated.
• The second remedy is to note how strikingly little of the Proposition 13 dividend is being passed on to renters. This corroborates the belief of economists that the property tax rests mainly on the property owner where it originally falls, and not on the renter.

• A high percentage of real property is owned from out of state and even out of the country. The percentage is much higher than we may think. It is not just Japanese banks and the Arabs in Beverly Hills. It is corporate-held property which comprises almost half the real estate tax base. If we assume that California's share of the stockholders equals California's share of the national population, then 90% of this property is absentee-owned; the percentage may be higher because many of these, after all, are multinational corporations with multinational ownership.

• No one seems to have seized on the fact that half the taxable property in California is owned by people not voting in the state. Senator Russell Long has suggested the following principle of taxation: "Don't tax you, don't tax me, tax that man behind the tree."  Property tax advocates have done well in the past and should do well again in the future when they make their slogan: "Don't tax you, don't tax me, tax that unregistered absentee. Don't tax your voters, they'll retaliate; tax those stiffs from out of state." Chauvinism and localism can be ugly and counterproductive, as we know; but here is one instance where they may be harnessed to help create a more healthy society.  The purpose of democracy is to represent the electorate, not the absentee who stands between the resident and the resources of his homeland.
  
  California's legislative analyst, William Hamm, estimates that over 50% of the value of taxable property in California is absentee-owned. This is such a bold, bare, and enormous fact it is hard to believe that Californians will long resist the urge to levy taxes on all this foreign wealth. They may be put off by the argument that they need to attract outside capital, but that carries no weight when considering the large percentage of this property which is land value.

• Property income is generally more beneficial to the receiver than is the same income from wages or salaries, because the property owner does not have to work for it.

• Property, particularly land, has been bought and sold for years on the understanding that it was encumbered with peculiar social obligations. These are, in effect, part of our social contract. They compensate those who have been left out. Black activists have laid great stress in recent years on the importance of getting a few people into medical and other professional schools. Does it not make more sense that the landless black people should have, through the property tax, the benefit of some equity in the nation's land from which their ancestors were excluded while others were cornering the supply?
  
  A popular theme these last few years is that property owners should pay only for services to property, narrowly construed. Who, then, is to pay for welfare — the cripples? Who is to pay for schooling — the children? Who should sacrifice for the blacks — Allan Bakke? Who should finance our national defense — unpaid conscripts? The concept that one privileged group of takers can exempt itself from the giving obligations of life denies that we are a society at all.

Here is, perhaps, my favorite:

• We can ask that a single standard be applied to owners troubled by higher taxes and to tenants troubled by higher rents. When widow A is in tax trouble, it is time to turn to hearts and flowers, forebode darkly, curse oppressive government, and demand tax relief. When widow B has trouble with escalating rents, that touches a different button. You have to be realistic about welfare bums who play on your sympathy so they can tie up valuable property. You have to pay the bank, after all. A man will grit his teeth and do what he must: garnishee her welfare check. If that is too little, give notice. Finally, you can call the sheriff and go to the beach until it's over. That's what we pay taxes for. Welfare is their problem.
  
  Anyway, widow B is not being forced out of her own house, like widow A and so many like her. Jarvis said that taxes are forcing three million Californians from their homes this year. But in truth, while evictions of tenants are frequent, sheriff's sales of homes are rare. Those who do sell ("because of taxes," they say, as well as all their other circumstances) usually cash out handsomely, which is, after all, why their taxes had gone up.

• Then there is the fruit tree anomaly. Under Proposition 13, a tree can only be assessed at its value when planted, with a 2% annual increment. The value of a seed thrown in the ground or even a sapling planted from nursery stock is so small compared with the mature tree that this is virtual exemption. This anomaly rather graphically illustrates how Proposition 13 automatically favors any appreciating property over depreciating property. The greatest gain here goes, of course, to appreciating land.

• Finally, build no surpluses. Surpluses attract raiders and raiders are often organized landowners. "Property never sleeps," said the jurist Sir William Blackstone. "One eye is always open." Even though the surplus was built up by taxing income, Howard Jarvis made it seem the most righteous thing in the world that it should be distributed to property owners. He was geared up for this because his landlord patrons kept him constantly in the field.

• Economists of many generations even before Adam Smith and continuing to the present — have preached on the advantages of land as a tax base. Let me enumerate a few of those.

•  
  • A tax on land value is the only tax known to man which is both progressive and favorable to incentives. One can wax lyrical only about a tax that combines these two properties, because the conflict between progressivity and incentives has baffled tax practitioners for centuries, and still baffles them today.

•  
  • A land tax is progressive because the ownership of the base is highly concentrated, much more so than income and even more so than the ownership of machines and improvements.

•  
  • Also, the tax on land values cannot be shifted to the consumer. The tax stimulates effort and investment because it is a fixed charge based merely on the passage of time.

•  
  • It does not rise when people work harder or invest money in improvements. Think about this. It is remarkable. With the land tax, there is no conflict but only harmony between progressivity in taxation and incentives to work and invest. In one stroke it solves one of the central divisive conflicts of all time.

The land tax does that because it cuts only the fat, not the muscle. It takes from the taxpayer only "economic rent," only the income he gets for doing nothing. If people could grasp this one overriding idea, then the whole sterile, counterproductive, endless impasse between conservatives who favor incentives and liberals who favor welfare would be resolved in a trice, and we could get on to higher things.

The final paragraphs speak directly to us in 2012.  34 years have passed since this was written.

• Summing up, Walter Rybeck, an administrative assistant for Congressman Henry Reuss of Wisconsin, and head of the League for Urban Land Conservation, has sagely suggested that we distinguish two functions of business: wealth-creating and resource-holding.   A good tax system will not make people pay for creating wealth but simply for holding resources.  Most taxes wait on a "taxable event" — they shoot anything that moves, while sparing those who just sit still on their resources.
  
  If we really want to revive the work ethic and put the United States back on its feet, we had better take steps to change the effect of taxes on incentives. Legislatures have got in the habit of acting as though persons with energy and talent, and with character for self-denial, should be punished, as if guilty of some crime against humanity. We cannot study the tax laws without inferring that Congress regards giving and receiving employment to be some kind of social evil, like liquor and tobacco, to be taxed and discouraged by all means not inconsistent with the rights of property. Little wonder the natives are getting restless. If we tax people for holding resources rather than creating wealth and serving each others' needs, we will be taking a giant step toward a good and healthy society.

 If your appetite is whetted by these excerpts, you can read the entire article below:

Jefferson's Principles

JEFFERSON'S PRINCIPLES.

Reprinted in The San Jose Letter, May 2, 1896

Thomas Jefferson, founder of the Democratic party in America, was born in Virginia, April 2d, 1743. In 1769 he entered politics, and at once took rank in the progressive party destined soon to dominate American aflairs. At the first convention in Virginia, held independently of the British authorities, he was marked as a bold, radical, and a fearless tribune of the people.

Jefferson was one of the foremost leaders of the agitation against British taxation without representation, writing in 1774 an aggressive article entitled, "A Summary View of the Rights of America." This was so widely read, and so fired with the revolutionary spirit against England, that, as Jefferson said, "he had the honor of having his name inserted in a long list of prescriptions, enrolled in a bill of attainder, commenced in one of the two Houses of the English Parliament, but suppressed in embryo by the hasty course of events." This pamphlet was the forerunner of Jefferson's greatest achievement, the Declaration of Independence, which he wrote while a member of the American Congress.

Jeffersonians of today have read with amused interest of an incident illustrating the stupid conservatism which existed a century ago as well as now. A lady of Tory proclivities who lived in Philadelphia on Fifth street, opposite the State House, wrote in her diary under date of July 8, 1776: "A Declaration of Independence was read today in the State House yard, very few respectable people were present."

In 1779 Jefferson became Governor of his State, and shortly afterwards was appointed embassador to France. In 1790 he became Secretary of State for the United States. In 1796 he was a candidate for the Presidency, but was defeated, acting then as Vice President. In 1801 he was elected to the Presidency by a large majority. He died July 4, 1826.

One of his biographers speaks of him as "frank, earnest, cordial and sympathetic in his manner, full of confidence in men, and sanguine in his views of life, eschewing all pomp and ceremony."

The keynote of his principles was liberty. He asked that the inscription on his tombstone should be: "Here lies buried Thomas Jefferson, author of the Declaration of American Independence; of the Statute of Virginia for Religious Freedom; and Father of the University of Virginia."

In other words, he devoted his life to civil liberty, religious liberty, and education. Several times he attempted to pass laws emancipating the slaves. But such was the state of feeling against that measure at that time that it is but one of the many illustrations of Jefferson's grand courage in defense of what he thought right. As he said, "he never feared to follow truth and reason to whatever results they led, bearding every authority which stood in their way."

Jefferson's popularity with and influence over the people lay in the fact that he believed in them, trusted and respected them. Speaking of Gen. Washington he says: "The point on which he and I differed was that I had more confidence than he had in the natural integrity and discretion of the people."

Jefferson had no confidence in laws that were not based on the greatest freedom of the individual, in harmony with the true self-government of all. He was so fearful of tyranny of government, so zealous in maintaining the liberties of the people, that he was continually combating any increase of governmental functions, though there were moments due to the peculiar conditions of the times, when he had to ignore this idea.

"The basis of our government," said Jefferson, "being the opinion of the people, the very first object should be to keep that right."

Writing to James Madison on the moral limitations of a nation's right to contract debt, and realizing that all the wealth to pay that, all national debts, must come from the earth, Jefferson said:

"I set out on this ground, which I suppose to be self-evident, that the earth belongs in usufruct to the living; that the dead have neither powers nor rights over it. The portion occupied by any individual ceases to be his when he himself ceases to be, and reverts to the society. If the society had formed no rules for the appropriation of its lands in severality, it will be taken by the first occupants. These will generally be the wife and children of the decedent. . . . Then no man can by natural right oblige the lands he occupied, or the persons who succeed him in that occupation, to the payment of debts contracted by him. For, if he could, he might during his own life eat up the usufruct of the lands for several generations to come, and then the lands would belong to the dead, and not to the living, which would be the reverse of our principle.

"On similar ground it may be proved that no society can be made a perpetual constitution, or even a perpetual law. The earth belongs always to the living generation. They may manage it then, and what proceeds from it, as they please, during their usufruct. They are masters, too, of their own persons, and consequently may govern them as they please. Persons and property make the sum of the objects of government. . . .

"This principle, that the earth belongs to the living and not to the dead, is of very extensive application and consequences in every country. It enters into the resolutions of the questions whether the nation may change the descent of lands holden entail. Whether they may change the appropriation of lands given anciently to the church, to hospitals, colleges, orders of chivalry, and otherwise in perpetuity. Whether they may abolish the charges and privileges attached on lands, including the whole catalogue ecclesiastical and feudal. It goes to hereditary offices, authorities and jurisdictions; to hereditary orders, distinctions and appellations; to perpetual monopolies in commerce, the arts or science; with a long train of etceteras; and it renders the question of reimbursement a question of generosity and not of right. . . . . The present holders, even where they or their ancestors have purchased, are in the case of bona fide purchasers of what the seller had no right to convey."

Jefferson not only recognized the importance of the land question as effecting the welfare of the people, but his prophetic mind sounded this note of warning. "The people will remain virtuous so long as agriculture is our principal object, which will be the case while there remain vacant lands in America. When we get piled on one another in large cities, as in Europe, we shall go to eating one another as they do there."

—Justice, (Wilmington, Del.)

Who are the Criminals? --Henry George, Jr., 1901

I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.

Henry George, Jr., was a U. S. Congressman.  His most famous writing is "The Menace of Privilege." 

WHO ARE THE CRIMINALS?

BY HENRY GEORGE , JR.
Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York

I.    Who are the Criminals? 5
II.   French Aristocracy of Privilege 6
III.  New York Aristocracy of Privilege 10
IV.  Robbery of Masses by Classes 12
V.   Nature and Extent of Robberies 13
VI.  How to Stop the Robberies 18
VII. The Criminals 23

I.    WHO ARE THE CRIMINALS?

In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?

II. FRENCH ARISTOCRACY OF PRIVILEGE.

When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.

Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.

But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery.  Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.

The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country.  Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.

Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.

But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.

The aristocracy, therefore, were the primary, the real criminals.


III. NEW YORK ARISTOCRACY OF PRIVILEGE.

I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"

That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?

The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?


IV. ROBBERY OF MASSES BY CLASSES.

Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?

I believe that there can be but one answer — yes.

Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.


V. NATURE AND EXTENT OF ROBBERIES.

LET us consider how the classes may be robbing the masses into poverty.

It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.

This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?

Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.

Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them?  What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.

Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.


VI.   HOW TO STOP THE ROBBERIES.

Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —

In ground rents	$225,000,000
In franchise values	30,000,000
While they are compelled to pay in various taxes for the support of local government	98,000,000
Which makes in all	$353,000,000

What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values?  Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?

For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?

And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?

What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.

Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?

Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.

Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used.  This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.

What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.

The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.


VII.   THE CRIMINALS.

That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?

Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?

Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?

Another whistle-blower, ignored by authorities ...

 .... this time because perhaps his targets are the well-situated, those in a position to contribute the funds which political campaigns need.   Keep in mind that NYS's former governor, though previously an attorney general, is also the scion of a real estate fortune.

Urban real estate investors live off the fruit of the land, the fruits of the community's sowing, and we praise them as philanthropists when they toss us a few tulips in the median strips or parks.

And notice that the refusal continued even Harry Markopolis testified before a congressional committee about his repeated and data-filled attempts to bring Bernard Madoff's obvious Ponzi scheme to the attention of the SEC (January, 2009).  Talk about tone-deafness on the part of those we pay to monitor things for us.  As someone else recently wrote, small government or weak government?   And government of, for and by WHICH people??

I hope some upstate legislators will push at this issue.  Their constituents ought to expect it of them.

http://www.reuters.com/article/2011/09/27/column-dcjohnston-taxcheats-idUSS1E78Q01320110927

Ignoring tax cheats: David Cay Johnston

Tue Sep 27, 2011 7:12am EDT

The writer is a Reuters columnist. The opinions expressed are his own.

By David Cay Johnston

(Reuters) - Each year New York State lets real estate investors evade at least $200 million of taxes. In peak years the figure likely rises to $700 million, if known tax cheating in another state is any indication. Some of the investors who cheat New York State also cheat New York City out of at least $40 million annually.

Back in the 1990s Jerry Curnutt figured out how to finger such cheats when he was the top partnership specialist at the Internal Revenue Service. Curnutt's computer sifted through tax returns until he learned how to separate thieves from honest taxpayers. The tax-evasion estimates of $200 million and $40 million are his.

Six New York state tax auditors took classes Curnutt taught in June 2000 and gave stellar evaluations. California's top tax auditor praised Curnutt's course as "effective, relevant and most importantly, appreciated and understood by our auditors."

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For a graphic, click link.reuters.com/cer93s

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Why has nothing been done for more than 11 years to make the cheats in New York pay what the law requires?

New York state and city are strapped for cash, slashing services for the poor, disabled and elderly. With penalties of up to 50 percent plus interest at penalty rates, the state is easily due more than $5 billion from years still open to collection, I calculate.

Every state has similar issues, but New York matters most as the epicenter of highly leveraged real estate investment pools.

Curnutt found that real estate investment partnerships with depreciated properties often misreport gains when they sell. That such cheating is widespread screams about tax law enforcement looking the other way when those at the top steal. In contrast, New York State has a well-deserved reputation for going after people whose mistakes cost the state as little as three dollars.

GO AWAY, THEY SAY

Yet in letter after letter since 2001, New York state tax officials told Curnutt to go away, smugly insisting there were no untaxed millions.

As head of audits for New York State, Thomas Heinz wrote Curnutt in 2003 that the state was "not interested in pursuing you or any other consultant on the matter" of systematic cheating by real estate partnership investors. Months later Heinz wrote a second letter that made it clear he had not understood what Curnutt was proposing, while reiterating that there were no untaxed millions to be found.

A year ago Curnutt again was told to go away because there was no money going untaxed.

And yet in Pennsylvania, Curnutt's research "resulted in the taxation of over $700 million in unreported income," the Pennsylvania Revenue Department wrote in a letter to tax administrators across the country in reference to a single instance.

"Without his assistance, our staff would have spent numerous hours getting to the crux of the issues, in that especially complex case," Pennsylvania tax authorities said.

Pennsylvania has relied on Curnutt since 2002, calculating that every dollar spent on his research and subsequent audits was worth $10 of tax.

So why are sightless sheriffs ignoring massive cheating by the most affluent among us?

The likely reason became clear nearly a decade ago when one Kentucky tax official told Curnutt that the governor's office did not want his services because it would uncover tax cheating by influential citizens, meaning campaign donors.

It is time for New York's three top state officials, all Democrats with higher ambitions, to do their duty, especially since the thieves are virtually certain to include some of their campaign contributors.

LAWMEN AND THEIR DUTY

Governor Andrew Cuomo, who harbors ambitions to be president, made his name as a state attorney general who appeared to get tough with Wall Street. Lieutenant Governor Bob Duffy rose from Rochester street cop to chief and would love to be governor. So would Attorney General Eric T. Schneiderman, elected in 2010 on a promise to be tough on white-collar crime.

Mayor Michael Bloomberg, an independent, has a similar duty to go after tax cheats even if these should turn out to include some of his friends.

New York law gives authorities leverage aplenty. The mere threat of public exposure through civil lawsuits would prompt many to write checks. For repeat offenders, the threat of indictment for tax evasion would produce checks even faster. Faced with the prospect of civil or criminal charges, many in positions of public trust would be ruined if their names got out.

The general partners -- those in charge in the partnerships Curnutt investigated -- took calculated steps to cheat and the most serious offenders should face indictment and, upon conviction, years of prison time. But many limited partners may have assumed their K-1 tax statements were reliable. Innocent victims owe taxes and interest, but not penalties. Those with multiple untaxed gains are not innocents.

As lawmen Cuomo, Duffy and Schneiderman all understand leverage. They have enough to lift billions into the state treasury where it belongs just by indicating in letters that failure to pay will result in disclosure of names. Will they?

Until Cuomo, Duffy, Schneiderman and Bloomberg enforce the law, their official inaction lends credence to billionaire Leona Helmsley's remark, quoted by her housekeeper, that "we don't pay taxes; only the little people pay taxes."

This column will keep you posted on whether these officials act or not. (Editing by Howard Goller)

I'm glad to see DCJ quoting Leona Helmsley -- but I don't think he yet fully "sees the cat" or realizes that Leona Helmsley's reference could just as accurately have been to tax STRUCTURES, not to tax evasion.

Buildings do not appreciate.  Even with the best of care and occasional renovations, they depreciate, as technologies advance, efficiencies improve.   What rises in value is land -- the location -- and it rises for reasons which have nothing to do with the individual or corporate landholder (resident or absentee), and everything to do with the community and with public investment in infrastructure and services.  These owners are evading taxes which support that spending.  In multiple ways, they are reaping what they do not -- cannot! -- sow.   These companies are in it for the so-called "capital" gains, which aren't "capital" at all, but land gains.

Another example of the FIRE sector gobbling up the profits of the productive portions of our economy.  Their "free lunch" is at the expense of the rest of us.    And the phrase "rich people's useful idiots" comes to mind.

The goal is a fair field and no favor.  But I don't think that's what this crowd is looking for.

The Owners of the United States

I recently came across an 1889 article by Thomas G. Shearman, co-founder of the NYC law firm Shearman & Sterling, entitled "The Owners of the United States."  It seems rather timely, and might be of particular interest to the Occupy Wall Street movement.  It appeared in The Forum, in November, 1889.  It refers to an earlier article in the September 1889 issue of the same journal, which appeared under the title, "Henry George's Mistakes." (Based on its content, it seems to me that it would have more accurately been titled "Henry George's 'Mistakes'.")

The Owners of the United States

by Thomas Gaskell Shearman

It has been and still is the boast of the American people, that wealth is more equally distributed here than in any other part of the world.  While every one admits that the old days of New England, in which none was very rich and none was very poor, have passed away, yet it is still believed that the land, buildings, and personal property of this country are owned mainly by the majority of its people, and that there is no danger of any such concentration of wealth in a few hands among us as exists in older and more aristocratic nations.  Statistics as to the wide distribution of wealth, shown by the deposits in American savings banks, by the large number of American farms, and by the supposed high standard of American wages, have been consistently set forth as conclusive evidence that American wealth is substantially owned by the mass of the American people.  The object of the present inquiry is not to determine whether such a condition would be desirable or not, but simply to ascertain whether it actually exists.

Interesting as such an inquiry must be, especially to that laboring class on whose behalf it was supposed that labor commissions were established, little effort has been made by any of them to solve this problem.  The very able gentleman at the head of the National Labor Bureau, after taking statistics of industrial depressions, convict labor, and strikes, seems to have felt that he had exhausted all subjects of special interest to the laboring classes; and he therefore directed the energies of all his assistants to an investigation of the subject of divorce -- the one subject, among all grave social questions, with which the masses of laboring men have the least practical concern.  One who desires to investigate the great problem of the distribution of wealth in this country must, therefore, feel this way, without much assistance from the official representatives of the very class which has the deepest interest in the question.

In the "effete monarchy" of Great Britain, where the laborer, deprived of all the blessings of a protective tariff, has no representative in the national government, no bureau, no commissioner, and only five members of Parliament among 1200, there is nevertheless no serious difficulty in the way of forming a pretty close estimate of the distribution of wealth.  The income-tax returns, combined with those of the probate and succession duties, furnish the means of estimating, at frequent intervals, the proportions in which wealth is distributed among different classes of the nation; while a return of rent rolls, made in 1872, enables us to determine with considerable accuracy the proportions in which the land of the whole country is owned.  Mulhall's estimate is as follows:

	DISTRIBUTION OF BRITISH WEALTH, 1877
	Class	Families	Wealth in Millions	Wealth per Family
	Rich	222,500	$27,781	$125,145
	Middle	1,824,400	$9,142	$4,874
	Working	4,629,100	$1,930	$418
		6,676,000	$38,853	$5,823

From this table it will be seen that one thirtieth part of the English people own two thirds of the national wealth.  With what scorn we have long pointed to these figures; and with what pride have we bade foreign nations to look upon our own beloved land, where such things no only did not exist, but were made impossible by our republican form of government!

Can any light be thrown upon the distribution of American wealth by a study of English statistics?  Let us see.  By adding to the published returns of the personal estates of British decedents a capitalization of the rental value of their estates, at 4% interest, we may form a tolerably accurate estimate of the aggregate wealth, real and personal, of the richest noblemen and bankers of England who have died within the last quarter of a century.  We may then compare these figures with the known wealth of a few American citizens, and thus obtain a starting point for further comparisons.

In this way, we find that the richest of the Rothschilds, and the world-renowned banker Baron Overstone, each left about $17,000,000.  Earl Dudley, the owners of the richest iron mines, left $20,000,000.  The Duke of Buccleuch (and the Duke of Buccleuch carries half of Scotland in his pocket) left about $30,000,000.  The Marquis of Bute was worth, in 1872, about $28,000,000 in land; and he may now be worth $40,000,000 in all.  The Duke of Norfolk may be worth $40,000,000, and the Duke of Westminster perhaps $50,000,000.

There is no official classification of British wealth or rents.  But incomes derived from the profits of  business, exclusive of railways, mines, etc., are classified as follows:

	British Incomes from Business Profits, 1884
	Persons	Incomes	Average Income
	104	50,000 and over	$91,733
	1,192	10,000 to 50,000	17,644
	1,871	5,000 to 10,000	6,553
	1,117	4,000 to 5,000	4,270
	1,947	3,000 to 4,000	3,266
	4,202	2,000 to 3,000	2,282
	13,268	1,000 to 2,000	1,277
	52,765	400 to 1,000	541
	159,198	200 to 400	282
	235,664

The great law of averages may be relied upon as confidently in America as in Europe.  We need only find a starting point; then we may safely proceed to calculations based upon general experience as to the average increase in the number of persons owning wealth, in proportion to the decrease of the amount owned by each individual.  To find this starting point, it will be necessary to give a list of Americans whose wealth is approximately known.  The writer abstains from mentioning in this list a single name concerning which he has any information which might possibly be confidential; and, to make quite sure of this, he omits the names of all gentlemen with whom he has any confidential relations.  The names of person who have died (six of them within one year) will be included, more accurate information being obtainable concerning their affairs than in any other cases. Their estates are nearly all either undivided or in the hands of so small a number of persons as to make no practical difference, while the number of names which have been omitted will far outweigh all possible errors in the list.  No name is given which is not believed, for good reasons, to represent an individual wealth of at least $20,000,000.  The figures indicate the wealth believed to be possessed on the average by each of the persons whose names follow:

	$150,000,000	J. J. Astor, Trinity Church
	$100,000,000	C. Vanderbilt, W. K. Vanderbilt, Jay Gould, Leland Stanford, J. D. Rockefeller
	$70,000,000	Estate of A. Packer
	$60,000,000	John I. Blair, Estate of Charles Crocker
	$50,000,000	Wm. Astor, W. W. Astor, Russell Sage, E. A. Stevens, Estates of Moses Taylor, Brown & Ives
	$40,000,000	P. D. Armour, F. L. Ames, Wm. Rockefeller, H. M. Flagler, Powers & Weightman, Estate of P. Goelet
	$35,000,000	C. P. Huntington, D. O. Mills, Estates of T. A. Scott, J. W. Garrett
	$30,000,000	G. B. Roberts, Charles Pratt, Ross Winans, E. B. Coxe, Claus Spreckels, A. Belmont, R. J. Livingston, Fred. Weyerhauser, Mrs. Mark Hopkins, Mrs. Hetty Green, Estates of S. V. Harkness, R. W. Coleman, I. M. Singer
	$25,000,000	A. J. Drexel, J. S. Morgan, J. P. Morgan, Marshall Field, David Dows, J. G. Fair, E. T. Gerry, Estates of Gov. Fairbanks, A. T. Stewart, A. Schermerhorn
	$22,500,000	O. H. Payne, Estates of F. A. Drexel, I. V. Williamon, W. F. Weld
	$20,000,000	F. W. Vanderbilt, Theo. Havermeyer, H. O. Havermeyer, W. G. Warden, W. P. Thompson, Mrs. Schenley, J. B. Haggin, H. A. Hutchins, Estates of W. Sloane, E. S. Higgins, C. Tower, Wm. Thaw, Dr. Hostetter, Wm. Sharon, Peter Donohue

Trinity Church is included in this list because it is practically an individual owner.  For the purpose of estimating the distribution of wealth, it is obvious that this corporation, which has no stockholders, must be treated as a unit.

It will be said that these estates could not be readily sold for their estimated value.  In a few cases this is true; but it is immaterial, because it is equally true of the property of farmers and other small owners, and so does not change the relative proportion of wealth, which is the only important question.  Our estimate of the whole national wealth is based upon the census of 1880, in which the capital and debts of railway, telegraphy, and steamboat companies were included at par.  But in the foregoing estimates of individual wealth the current market value is adopted, which is much less than par.  For purposes of comparison between different classes the census valuations ought to be adopted all around.  But if they were, the wealth of Mr. Gould would be fixed at over $125,000,000, and that of Messrs. Crocker and Huntington at nearly as much; and the proportionate share of the very rich would be greatly increased.

Making the largest allowance for exaggerated reports, there can be no doubt that these 70 names represent an aggregate wealth of $2,700,000,000, or an average of over $37,500,000 each.  The writer has not especially sought for information concerning any one worth less than $20,000,000, but has incidentally learned of 50 other persons worth over $10,000,000, of whom 30 are valued in all at $450,000,00, making together 100 persons worth over $3,000,000,000; yet this list includes very few names from New England and none from the South.  Evidently it would be easy for any specially well-informed person to make up a list of 100 persons averaging $25,000,000 each, in addition to ten averaging $100,000,000 each.  No such list of concentrated wealth could be given in any other country in the world.  The richest dukes of England fall below the average wealth of a dozen American citizens; while the greatest bankers, merchants, and railway magnates of England cannot compare in wealth with many Americans.

Lists were lately published of 67 millionaires residing in Pittsburgh, of 63 residents of Cleveland possessing in the aggregate $300,000,000, and of 60 persons residing in three villages near New York whose wealth was said to aggregate $500,000,000.  One of the gentlemen included in the last estimate said that if it included one of his neighbors, with whose affairs he is intimately acquainted, it was entirely too low: $750,000,000 would be none too much.  The Goelet estate, in New York City, pays taxes on $25,000,000 real estate.  The mayor of Chicago says that four gentlemen of that city are worth over $20,000,000 each; but only two are included in the above list.  The Boston "Advertiser" lately asserted that there were not 50 millionaires in Boston; but the official tax-list shows that more than 50 families pay taxes on over $1,000,000 each, and 200 persons pay taxes on amounts which clearly show that they are really millionaires.

The facts already stated conclusively demonstrate that the wealthiest class in the United States is vastly richer than the wealthiest class in Great Britain.  The average annual income of the richest 100 Englishmen is about $450,000; but the average annual income of the richest 100 Americans cannot be less than $1,200,000, and probably exceeds $1,500,000.  It follows, inevitably, that wealth must be far more concentrated in the United States than in Great Britain; because, where enormous amounts of wealth are placed in a few hands, this necessarily implies that the great mass of the people have very small possessions.  On the other hand, we know with tolerable certainty what are the average earnings and possible savings of the masses.  The earnings of fully fourth-fifths of American families do not average as much as $500 per annum.  As the average age of busy men is less than 40 years, their savings cannot spread over more than an average period of 20 years.  Farmers being always more economical than mechanics or other laborers of the same income, the savings of farmers, represented by their farms, will afford a maximum standard for the classes to which they correspond.  According to the census of 1880, the average value of 25% of farms was $635, of another 25%, $1,750, and of about 35%, $3,500; the remaining 15% being held by wealthy owners.  To allow, in marketable property, $750 each to the mass of the community, $2,000 each to the next class and $3,500 each to the small tradesmen, highly-skilled mechanics, and others whose condition corresponds with that of the best class of ordinary farmers, will be quite as much as facts will justify; especially when we take out of this highest class, as we must, a considerable number (say one sixth) who, by saving one third to one half of their income, have accumulated four or five times as much as their fellows.

In 1877 the number of British capitalists possessed of over $25,000 each was about 222,000, while the number of persons deriving profits of over $1,000 per annum each from business was nearly 200,000.  The two classes of persons were not at all the same; on the contrary, probably not one third of either class, possibly not even one fifth, was included in the other.  Yet, in the absence of any detailed information as to the distribution of wealth, the classification of incomes must be taken, with much reserve, as the only attainable guide.  But incomes, in their very nature, are much more equally distributed than wealth.  Millions have inomces who have practically no wealth.  Therefore, a computation on this basis will greatly underestimate the concentration of wealth in the higher figures, while it will lead to such an overestimate of wealth in the lower figures as to make it gradually quite misleading.  Such a computation is indeed of no use whatever outside of the first 250,000 families, and must be greatly modified long before reaching that number.

Bearing these considerations in mind, we proceed to estimate the distribution of American wealth.  Judging from the rate of increase in wealth indicated by the last census, it is probably that (estimated by the same method) it now amounts to nearly $1,000 per head, or $65,000,000,000 in all.  In 1880, $2,000,000,000 was invested in public buildings, churches, colleges, charitable institutions, etc.; and this item must be about $2,500,000,000 now.

Taking the number of British incomes exceeding 200 pounds as a basis for comparative classification, starting on the basis of known facts about American wealth, and modifying the figures gradually, for the reasons already stated, we arrive at the following conclusions:

	DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BRITISH INCOME RETURNS.
	Families	Average Wealth in Thousands	Total in Millions
	10	$100,000	$1,000
	100	25,000	2,500
	1,200	6,000	7,200
	2,000	2,200	4,400
	1,000	1,400	1,400
	2,000	1,000	2,000
	4,000	700	2,800
	13,000	400	5,200
	52,000	150	7,800
	160,000	60	9,600
	200,000	20	4,000
	1,000,000	3.5	3,500
	2,000,000	2	4,000
	9,565,000	.75	7,175
	13,000,310		62,575
	Public property, churches, etc.		2,500
			65,075

Condensing this table, so as to arrange it in three great classes, we arrive at this result:

	DISTRIBUTION OF AMERICAN WEALTH
	Class	Families	Wealth in Millions	Average per Family
	Rich	235,310	$43,900	$186,567
	Middle	1,200,000	7,500	6,250
	Working	11,565,000	11,175	968
		13,000,310	$62,575	$4,813

On this basis, 50,000 families would appear to own one half of the national wealth.

In this table small farmers, skilled mechanics, foremen, conductors, engineers, etc., are included in the "working class," and $968 has been allowed as the average savings of each family in this class -- more than double the highest claim made on behalf of the same class in England, and nearly treble the average deposit in American savings banks.  This amount is certainly too large.  The number of  the very largest millionaires has been kept down to very nearly the limit of the writer's personal information; while in his judgment there must have been at least as many more, of whom he has never heard.  If this surmise is correct, it would add at once $2,500,000,000 to the share of wealth belonging to the millionaire class, and would confirm the writer's rough estimate in the FORUM for September, that 25,000 persons own just about one half of all the wealth of the United States.

Objection will doubtless be made to any estimates based upon British statistics.  Fortunately, Massachusetts furnishes a purely American basis for estimates of the distribution of American wealth.  A list of the largest individual taxpayers in Boston, published this year, including all (exclusive of corporations and executors) who paid more than $1,000 in taxes, and who were therefore assessed at more than $75,000 (the tax being 1.33%) showed the following results:

	BOSTON TAX LIST FOR 1888
	Individual Taxpayers	Amount of Tax	Average Assessed Wealth
	2	$50,000 to 75,000	$4,600,000
	4	40,000 to 50,000	3,205,450
	3	30,000 to 40,000	2,732,570
	8	20,000 to 30,000	1,840,000
	39	10,000 to 20,000	930,000
	133	5,000 to 10,000	500,000
	1,065	1,000 to 5,000	160,000
	1,254

It may be safely assumed that every one who is assessed at $400,000 is really worth $1,000,000; because large estates are never assessed at their full value, and because these assessments include no shares in corporate stock, nor government, municipal, or mortgage bonds, in which a vast proportion of the wealth of the very rich is invested.  For the same reasons, an assessment of $75,000 represents in actual wealth not less than $150,000.  The wealth of the very rich is always more under-estimated by assessors than that of men in moderate circumstances.  Assessments of $400,000 and over are therefore multiplied, in the next table, by two and one half, while those below that line are only doubled.  In both cases the increase is too small.  Boston has less than a forty-fifth part of the nation's wealth, and less than a hundred and thirtieth part of its population.   Multiplying the Boston figures by only 45, it would follow that there are in the United States more than 56,000 persons worth over $150,000 each, of whom at least 8,500 are worth over $1,000,00.  Classifying men of wealth in conformity to the proportion in which assessment returns show that their wealth is divided in Boston, but adding the 70 persons who have been specifically named as averaging $37,500,000, we arrive at the following estimate, which errs only on the side of moderation:

	DISTRIBUTION OF AMERICAN WEALTH, ON THE BASIS OF BOSTON TAX RETURNS
	Families	Wealth in Thousands		Average Wealth in Thousands	Total Wealth in Millions
		over	under
	70	$20,000	$150,000	$37,500	$2,625
	90	10,000	20,000	11,500	1,025
	180	7,500	10,000	8,000	1,440
	185	5,625	7,500	6,800	968
	360	3,850	5,625	4,600	1,656
	1,755	1,875	3,750	2,300	4,036
	6,000	937	1,875	1,250	7,500
	7,000	500	937	650	4,550
	11,000	300	500	375	4,125
	14,000	200	300	230	3,220
	16,500	150	200	165	2,722
	50,000	75	150	100	5,000
	75,000	50	75	60	4,500
	200,000	15	50	20	4,000
	1,000,000	3	15	3.5	3,500
	2,000,000	1.5	3	2	4,000
	9,620,000			.75	7,215
	13,002,090				62,082

 

	Distribution in Classes
	Class	Families	Wealth in Millions	Average per Family
	Rich	182,090	$43,367	$233,135
	Middle	1,200,000	7,500	6,250
	Working	11,620,000	11,215	968
		13,002,090	$62,082	$4,775

On this basis, 40,000 persons own over one half of the wealth of the United States, while one seventieth part of the people own over two thirds of the wealth.

It will be seen that in these tables, which are prepared upon the basis of purely American statistics, the concentration of wealth appears to be much greater than in tables prepared upon the basis of British statistics.  By either table, 70% of the national wealth appears to be concentrated in the hands of a very small minority of the people; but dividing this wealth in proportion to the English ratio, it is distributed among 235,000 families, while dividing it according to the Boston ratio, it is possessed by only 182,000 families.  The truth probably lies between the two; and it may safely be assumed that 200,000 persons control 70% of the national wealth, while 250,000 persons control from 75 to 80% of the whole.

These conclusions are of course very unpalatable to comfortable optimists.  But what other results could possibly be expected, in view of well-known facts?  No one can entertain a reasonable doubt that there has been an accumulation of wealth in a few individual hands in the United States, during the last 25 years, vastly in excess of any which has taken place in other parts of the world.  In no other country have railroad-managers, manufacturers, oil-refiners, mine-owners, bankers, and land speculators accumulated fortunes so rapidly as they have in this.  In no other country, and least of all in England, during the last 30 years, has the burden of taxation been cast so exclusively upon the working class, or the machinery of public taxation been used so unscrupulously for private profit.

In Great Britain, although indirect taxation still constitutes the greatest part of the public revenue, a large share of direct taxation has been maintained, and, as far as possible, all tribute levied by the rich upon the poor, under the pretense of taxation, has been abolished.  The natural consequence is that the disproportion between the rich and the poor in Great Britain is less today than it was 40 years ago, that wealth is more widely distributed, that the middle class is much more numerous, and that the masses are rapidly gaining in power and influence.

In America the drift has been in precisely the opposite direction.  Federal taxation has increased 6-fold since 1860, and the whole of this increase has been taken out of the relatively poorer classes.  At the same time, the profit which is secured to the wealthier classes by the adjustment of indirect taxation in their interest has been increased not less than 10-fold.  The wealthy classes, collectively, have made a clear profit out of the indirect effects of taxation to an amount far exceeding all that they have paid in taxes, although this profit has been absorbed by a minority of even the rich.  But, apart from this, the whole system of taxation is and has been such as to take from the rich only from 3% to 10% of their annual savings, while taking from the poor 75 to 90%.  It is true that the same system existed, in form, before the war; but, taxation being light, the amount taken from each individual was far less, and the disproportion between the rich and the poor not so great, while the profit levied from the poor by the rich was much smaller.  The amount of the burden has increased, and it has been more and more shifted over upon the poor.

It is childish to imagine that, under such circumstances, the concentration of wealth can go on less rapidly here than in Europe.  On the contrary, it has gone on far more rapidly here; and it will continue to do so, at a tremendous pace.

It is intended to confine this paper to a simple investigation of facts, without suggesting remedies; but, to avoid misapprehension, the writer wishes it to be distinctly understood that he is opposed, on principle, to all schemes for arbitrary limitations of individual wealth, whether by a graduated income tax, a heavy succession tax, or otherwise; that he is utterly opposed to communism, socialism, and anarchism; and that he is of opinion that the enormous wealth of the few in this country has been forced upon them by the votes of the very masses who have been impoverished for their benefit.  Populous vult decipi.  The farmers insist upon throwing away their inheritance; and since they are determined to heap their earnings upon somebody, it is well that the list of their chief beneficiaries should be, upon the whole, so respectable.  And, indeed, has it not been clearly explained to us that it makes no sort of difference who owns the wealth of the nation, so long as it is kept at home?

But the facts should be known, without regard to the inferences which may be drawn from them; and we are now prepared to answer the question: "Who own the United States?"

The United States of America are practically owned by less than 250,000 persons, constituting less than 1 in 60 of its adult male population.

Within 30 years, the present methods of taxation being continued, the United States of America will be substantially owned by less than 50,000 persons, constituting less than one in 500 of the adult male population.

THOMAS G. SHEARMAN

 

 

Taking the Professor for a Ride

In my inbox this morning, a blast-from-the-past from Mason Gaffney, one of the most respected Georgists and a wonderful writer.  Unlike many of us, he came to these ideas as a young person, having read Henry George while still in high school.

Mase's cover note:
It was November 1942.  I had just turned 19, and received Greetings from Uncle Sam. Funny how fast one catches on, with the evidence lying outdoors all around you; and funny how southern California today replicates Chicagoland  in 1942.  Funny, too, how economics profs had their ways of signaling you that looking into land speculation was, well, just not done in elite circles.  How little progress we have made since then in understanding and coping with this phenomenon and its derivative ills.

Taking the Professor for a Ride
The Freeman, November, 1942

The writer of this article,  MASON GAFFNEY, is a young Chicago Georgist who recently matriculated at Harvard.  Perusal of the piece suggests that Freshman Gaffney's chances of becoming teacher's pet in the economics class are decidedly slim.

UNRUFFLED, composed, like a patient father straightening out a wayward son, he said, "You see, my boy, this Henry George lived at a time when the country was growing rapidly, when land values were skyrocketing and great fortunes were being made from speculation.  Not being a 'trained economist,' George attached disproportionate importance to this . . . er  . . . er . . . land question.  Land is, of course, of minor importance in 'economics,' and speculation, well, . . . of trifling significance."

I should like to take this man, my "economics" teacher at Harvard, for a ride from the North Shore area near Chicago straight west on Illinois 58.  A well-built-up residential district, one-half to a mile deep, runs far north along the lake shore, to end abruptly in a wilderness of sidewalks, street signs, fire plugs and weeds -- but not buildings.  Along the roads which gridiron this wasteland speed trucks and pleasure cars, burning gas, tired and time to bridge the miles which, to no purpose, stand between the metropolis and outlying communities.

"Yes," my boss told me as we were riding to work one day, "there was a time when we thought there would be a lot of building out here.  Guess I've still got some Land Company bonds in the Wilmette Bank.  The company gave the farmer one-third down and agreed to pay the rest when the land was sold.  Lots of poor farmers have got the land back now, with stiff taxes to pay on the improvements.  Improvements, hell!  Those fire plugs don't even have water pipes attached to them."

Ten miles of this and we reach Des Plaines, an oasis called by the natives a "successful development."  "Thirty-one minutes to the Loop," boasts the Northwestern R. R.  "These Homesites Best Speculation in Chicago Land," exults the land promoter.

Five miles farther west, about fifteen miles from Lake Michigan, the land is at last completely given over to farms.  The speculator fires a parting shot at us as we reach the junction with Arlington Heights Road.  "The Idle Rich of Today Bought Acres Yesterday," reads his sign.

Yes, I would like to ride with this "economist" out here.  He would have trouble then convincing me that speculation is of trifling significance.  Probably he would say: "But the men who hold this land are men of great foresight, very valuable men.  You can't refuse to reward foresight; it's a virtue.  Of course a little planning might alleviate these dreadful conditions, but, tut, tut, my boy, do you want to destroy free enterprise?"

Reward foresight indeed!  Foresight in itself deserves no economic reward.  Hitler and Baby-face Nelson at times showed great foresight, yet their loot is by no means sanctified on that account.  Only one kind of exertion deserves an economic reward, and that is exertion directed toward the gratification of human desires.  Foresight, an attribute of labor, exerted in producing wealth, deserves a reward, and in the free market will bring a reward.  But foresight no more justifies speculation in land than superior firepower justifies conquest.

Perhaps it is asking too much to expect a Harvard man to understand this, however.  His salary, after all, is paid in part from the proceeds of the foresight of certain friends of the institution who bought up much of the land on which the slums and business districts of Cambridge now stand.

I commend Mase's ideas and writing to your attention.  You might explore his recent book, After the Crash: Designing a Depression-Free Economy, and the 60+ year collection of his writings at http://masongaffney.org/.  We would be wise to act on his ideas.

And my notes say that this was not Mase's earliest publication in The Freeman. 

LTE: Rising Rate of Poverty - NYTimes.com

Rising Rate of Poverty - NYTimes.com.

To the Editor:

Re “Poverty Rate Soars to Highest Level Since 1993” (front page, Sept. 14): I know this is heresy, but why don’t we increase taxes on the wealthy and spend this money on infrastructure projects to put unemployed people to work?

Just asking.

ROBIN LEVIN
San Francisco,
Sept. 14, 2011

And consider what would happen: the infrastructure projects would increase the value of the land served by them, and make things work better in those communities, as reliable streets and bridges and other worthwhile projects do.  

Who owns that land?  Is it local folks, who one might hope would spend their infrastructure-created windfall locally (but who might simply use it to buy additional land, benefiting the seller, be he absentee, local, corporate, whatever)?   Is it REITs?  Sovereign wealth funds?

Now suppose that instead of leaving all that infrastructure-created wealth in the pockets of the landowners, local communities wised up and collected some significant fraction of it (without raising taxes on buildings in the process: the really wise communities would take this opportunity to reduce or eliminate the taxes on the buildings!) for public purposes.   What do you think would happen?

I suspect that the vacant lots in town would soon start to disappear.  They wouldn't leave town.  They'd get built on, when their carrying costs as vacant lots rose and the disincentive to build was decreased or eliminated. That would create jobs.  

Depending on what the market wanted, it would also create housing, and creating housing also leads to creating jobs to service those homes -- plumbers, electricians, painters, home improvement of various kinds.  

But it might not be the high-end housing we're used to seeing; not McMansions, but more modest homes.  Not luxury condos but housing for people of all ages and stages, and not just for the highest-income people but for people of more modest means.

Sounds like a virtuous circle to me.   Natural Public Revenue.

But if you like the current approach, by all means tell us why we should stick with it.  (California's Prop 13 is an extreme case of suppressing this wise form of taxation.  Look where it has gotten them!)

Robert Reich: Jobs Will Follow a Strengthening of the Middle Class

Jobs Will Follow a Strengthening of the Middle Class - NYTimes.com.

The Limping Middle Class

THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal. When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?

That's the first paragraph of a recent op-ed by economist Robert Reich of UC-Berkeley.

I think this article is important, but that it misses a larger, longer-acting dynamic: the extent to which our most wealthy, with an awesome amount of "patient money" need to find places to "park" that money, and end up buying land and natural resources.

Mason Gaffney has written about this.  I commend his site to your attention: http://www.masongaffney.org/

When we need land, particularly well-located land, we end up paying them for access. When we need natural resources, we pay them for that, too.  

It isn't that such access shouldn't be paid for -- it should -- rather, why on earth should private individuals or entities be the recipients of that income, rather than it flowing to the commons to finance the goods and services that make our society a good place to live, without taxing work or purchases.

Taxing work does not create ...

Inspired by the energy, rhythm and tune of Kristin Andreassen’s Crayola Doesn’t Make the Color of your Eyes or another version from Prairie Home Companion, my friend Joe Johnston wrote this song.  Watch one of the videos first!  The tune is infectious, and Joe's words communicate the message clearly.

Taxing work does not create....

I went to see the wise one
our town was such a mess
the longest lines to get in
were at the DSS

He said, I cannot cure your town
But here’s something you can do
write a list and flesh it out
Of why your town is in a stew

Well, we build roads; we run the bus,
We try to control crooks.
We build the parks and sidewalks
We give our streets good looks

To do these things, we need some wealth
And so we tax the things we see
We tax the buildings and what you earn
We tax merchants and sellers with a fee.

(refrain)
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

We tax the land, that helps ensure
that land is not a wager
It lowers the cost to those who use it
to create more jobs per acre

Collecting land rents means
That the things we as community do
are benefiting everyone and
go to all, not to the few.

And if a person wants to work
she reaps the results of her labor
The benefits of what she does,
Not the out-of-town land speculator

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

So maybe we’ll shift the taxes off
The labor you and I do, you see
And put it on the land so none
can squeeze the blood from you and me.

That way they’ll be  more jobs for those
who put their backs and brains to work
We wouldn’t have to work so long,
To put a roof and walls on God’s good dirt.

We wouldn’t need two jobs to feed
The mouths that we beget,
To house and clothe them and ourselves
And where we need to go, we’d get.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

A compact town means we could walk around
to get, to shops, to meet, to work for gain
And even walk to parks nearby
where quiet, joy, and beauty reign.

We wouldn’t need a big back yard,
or front ones with their lawns to mow.
We’d have a share in common land,
Where our souls, spirits, and bodies grow.

I think we’ve solved the problem of unemployment lines
of barely earning what we need.
We may not have the harvest yet,
But we have sown the seed.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

Flies and horses, vines and pines ...

This was a comment to a recent Paul Krugman blog post, and I thought it worth sharing.  (Multiple Google searches did not bring me to any version of it.  I'd welcome any further information!)

Here is ancient wisdom about the rich from China...

"When flies attach themselves to the tail of a galloping horse, they move at high speed. But it is difficult for them to efface the shame of being an appendage. When vines entwine themselves around a tall pine, they reach an awesome height. But they cannot erase the disgrace of being a dependent."

The problem seems to be that the rich see themselves as the horse, when in fact they are the flies.
The problem seems to be that the rich see themselves as the pine, when in fact they are the vine.

The People of a country are the horse and pine.

Tax the rich... they think their wealth was earned by them... when in fact it was earned by the work of people.

LVTfan here:  This doesn't suggest any understanding of the mechanisms by which the rich become rich illegitimately (though legally) through privilege.   I invite the curious to explore this blog, and its sibling website wealthandwant.

None of this is to say that bright people who come up with ways to meet human needs and wants should not be able to become wealthy.  But to the extent that our rich owe their position to privileges, specialness, we naively grant to some, we need to be examining and eliminating those privileges, or collect from those granted them the value of those privileges, month in and month out.  Doing this would level our playing field AND provide a healthy and growing revenue to fund our common spending without depressing our economy.

 

 

Thinking about taxes and jobs

AN IMPORTANT DIFFERENCE

Man cannot profit from owning capital without using it, which means to employ labor. Man can profit from owning land without using it, which means unemployed labor. A low tax on land will not add one foot to the State; a high tax will not drive one acre away. A low tax or no tax on capital will bring to the State the means of developing its resources and employing its labor; a high tax will drive capital away and leave unemployment.

Which is your town/city/county/state/nation going to do? Will she listen to the land speculators, and lower the taxes on vacant land? Or will she give heed to the business men and farmers, and lighten the taxes on industry? Much depends upon her decision.

 

adapted from Tax Facts, January, 1928.

Think about the unused and underused land within the borders of your town or city.  It is not neutral.  It is a drag on your economy and contributes nothing, whil the owner sits and waits for someone to meet his price.  It is held out of use to create an unearned windfall for its owner. 

We ought to examine our tax policies for the incentives which make it possible for some owners to put the land in their portfolio to little or no use.   I'm not concerned with land of genuinely little value, but with land served by infrastructure that we-the-people have taxed ourselves to provide and maintain.  We accord landholders a privilege in taxing them but lightly, month in and month out, on the value of their holdings.  (At the same time, we make a big mistake by taxing the improvements and "personal" property, including vehicles and business equipment, of those who have improved their land to make it useful and productive.  I am reminded of Enoch Ensley's important statement:

NEVER TAX ANY THING
THAT WOULD BE OF VALUE TO YOUR STATE,
THAT COULD AND WOULD RUN AWAY, OR
THAT COULD AND WOULD COME TO YOU.

Our elected representatives ought to be reminded of that, and then asked to ponder how to implement it.  I commend to their attention Fred Foldvary's article "The Ultimate Tax Reform."

Public Ownership of essential utilities

Where I live, an Australian bank owns the city water system, a stockowner electric company has the power franchise, Cablevision has the cable franchise -- and a lot of money that could profitably be recycled locally gets sent out of town.  (We do still own the sanitary sewer system.)

There was a time when these franchises were given to local entities, or held by the community.  Then we permitted them to be privatized, and revenue that was once recycled locally now leaves.  (Google "The City for the People" for more about this.  It showed, among other things, that residents of cities where the utilities were publicly owned paid less for their utilities and workers in those utilities were better paid.)

The short article quoted below makes an interesting point.  I'll preface it by quoting California Georgist Harry Pollard, who says that it would be better to collect land rent and throw it into the sea than not to collect it at all.    This shows why.  It comes from Tax Facts, 1926:

LAND SPECULATOR'S PARADISE

Arthur Brisbane has discovered that Ponca City, Oklahoma, a town of 15,000 population, is free from taxes. Through ownership of the power, light and water departments the city derives sufficient revenue to dispense with all taxes.

But is that an unmixed blessing? Police and fire protection, schools, etc., are so desirable that people will move to places where they may be had. Since no one can enjoy these government services without occupying land, the people will bid against each other till they force the price up to a point where it equals the value of the service. If the people know they will not have to pay taxes they can and will pay that much more for the land.

What a bonanza for the land speculator! He can add to his price what buyers save in taxes.

Economic rent, or land value, attaches to land whether or not the land is taxed. The amount of this land value depends upon the number and kind of people in the community, and must be paid in any event. Should the government take sufficient taxes out of this land value to pay expenses, two results will follow:

1. The user of land will pay more than he would if the owner kept it all, as in Ponca City.
2. The taking of this tax from the land owner will add to the cost of holding the land idle, and since it falls on all valuable idle land, it will make speculators more willing to make terms with land users.

When the city must pay a stockholder utility for the lights on the streets, who benefits?   The taxpayers spend more than they would otherwise need to, and instead of getting electricity at the lowest price, pay a price that benefits the shareholders, few of whom live locally -- and if you've read the "stock ownership" pages linked at left, you know how concentrated stock ownership is, based on the Federal Reserve Board's Survey of Consumer Finances data.   (A fine example of trickle-up economics.)

Local communities which own their own utilities would be more likely to care about using clean energy.  They'd be creating secure local jobs, and good management would benefit the local community.   Accountability.

 

Sharing the burden of the cost of providing public services

Here's another from a 1926 issue of Tax Facts, a California-focused, business-focused, Single Tax monthly.  While I find the intended focus of the article spot on, what caused me to share it here was the horse-grist-stone analogy in the final paragraph.   

A SURE THING

Buy real estate in Southern California, says the real estate editor of the Los Angeles Times. Use common sense in making the purchase. Hold on to the property. It will make you independent and your children wealthy.

Fifty-nine years ago Alonza E. Horton bought 960 acres for $265, think of it, at the rate of 27 cents an acre. That . property today is the heart of the San Diego business section. It is worth something like $50,000,000.

The editor goes on to say that since Mr. Horton bought his 960 acres of land at 27 cents an acre millions of people have come to Southern California to live, and the same inducements that brought them will bring millions more. "So don't delay," the editor says, "but buy Southern California real estate while you have the opportunity." And he adds; "It is the fellow with the foresight and the decision to back his jugdment that gathers in the shekels."

This is the counsel of the go-getter. Southern California is an attractive place. Many people have come here. There are indications that many more people will come in the next few years. All these people must have land upon which to live, to do business, and to raise crops. They may bring with them all manner of goods and supplies, but they must use the land that is already here.

Hence, buy that land now, says the realtor, and sell it or lease it to those who come after. To the man who comes to Southern California next year, fix the price a little above the price of this year. Next year add again to the price; the year after, increase it again, and so on, always adding all you dare, short of an amount that will drive the builder away. This is the way the "fellow with the foresight and the decision to back his judgment" reaps the wealth of soil and climate that nature supplied in such perfection. When Mr. Horton came to San Diego in 1867 he bought land at 27 cents an acre. But the man who wants to use that same land today must pay fifty thousand dollars an acre.

This is the law and custom. We must have permanent possession, in order to secure the best use of land. But is there any reason why we should tax alike lands that increase in value so fabulously, and buildings and goods that deteriorate with age?

Some governments do not tax all property alike. Pittsburgh, Pa., taxes machinery and goods not at all, and taxes buildings at one half the rate of land. Mr. Moody, the far-seeing assessor of San Diego, taxed buildings at less than half the rate of land, until he was enjoined by the court. His policy was very popular with the people — business men and residents — excepting a grouchy land owner who evoked the aid of the courts.

When the assessor was compelled to follow the letter of the law there was great distress among the builders of San Diego. Men had built larger and finer buildings because the taxes were lighter on improvements than on land. So great was the burden when the court ruled that they be taxed alike that efforts were made to have the legislature legalize the practice of the far-seeing assessor.

It will come. What has been done in Pittsburgh can be done in San Diego, Los Angeles and San Francisco. It may take time. For years the countryman balanced his grist on the horse's back by putting the meal in one end of the sack and a stone in the other. One day it occurred to him that he could secure the same result by dividing the meal — and save the horse the weight of the stone.

Realtors are merely human when they advise people to buy land on speculation. It is their business. And the man who buys land, and lets it lie idle, while labor and capital build up the community around it, he, too, is human, and is acting within the law.

But what shall be said of the voters who control the laying of taxes? Are they as careful in looking into the tax laws as they are in watching their business affairs?

In the old days when government was simple and taxes were light it did not so much matter, but now it is different. There is hope. The voters will learn to divide the meal, and save the weight of the stone.

Lizzie Magie's 1902 commentary on The Landlords' Game, on which Monopoly is based

Digging through primary sources can provide some great thrills.  I stumbled onto this article about The Landlords' Game in the Autumn, 1902, number of The Single Tax Review (then a 64-page quarterly, later more frequent) .   It was the Landlord's' Game which was later revised to create the board game Monopoly.   As I've written earlier here, the Landlords' Game (probably in later editions than what is referred to here) came with 2 sets of rules, one which would create widespread prosperity, and the other which would create a winner-take-all situation.

Magie's comments are quite relevant to understanding the game of Monopoly, too:

from The Single Tax Review, Autumn, 1902

THE LANDLORDS' GAME.

AN INTERESTING INVENTION OF A YOUNG LADY IN WASHINGTON BY WHICH CHILDREN AT THEIR PLAY MAY BE TAUGHT THE TRUE LAWS OF ECONOMICS.
Miss Lizzie J. Magie, a single taxer of Washington, D. C has invented an ingenious game, played with checkers and dice as is parcheesi, and thus describes it for the Review:

"It is a practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences," says Miss Magie. " It might well have been called the 'Game of Life,' as it contains all the elements of success and failure in the real world, and the object is the same as the human race in general seem to have, i. e., the accumulation of wealth.  Representative money, deeds, mortgages, notes and charters are used in the game; lots are bought and sold; rents are collected; money is borrowed (either from the bank or from individuals), and interest and taxes are paid. The railroad is also represented, and those who make use of it are obliged to pay their fare, unless they are fortunate enough to possess a pass, which, in the game, means throwing a double. There are two franchises: the water and the lighting; and the first player whose throw brings him upon one of these receives a charter giving him the privilege of taxing all others who must use his light and water.

"There are two tracts of land on the board that are held out of use—are neither for rent nor for sale—and on each of these appear the forbidding sign: 'No Trespassing. Go to Jail.' One of these tracts of land (the largest on the board) is owned by Lord Blueblood, of London, England, and represents foreign ownership of American soil. A jail is provided for any one  who trespasses upon this land, and there the unfortunate individual must linger until he serves out his time or pays the required fine. 'Serving out his time' means waiting until he throws a double.

"Before the game begins, each player is provided with a certain amount of cash, sufficient to pay all necessary expenses until he is well enough along in life to earn his living. Should any one be so unlucky, or so reckless and extravagant, as to become 'broke,' there is a nice little poor house off in one corner where he may tarry until he makes a lucky throw or until some  friend takes pity on him and lends him enough to set him on his feet again. And here is where he generally gets 'soaked,' for the other players, taking advantage of the unfortunate one's necessities, demand an enormous rate of interest which the impecunious individual must pay before he can complete his round and get his wages.
 
"The rallying and chaffing of the others when one player finds himself an inmate of the jail, and the expressions of mock sympathy and condolence when one is obliged to betake himself to the poor house, make a large part of the fun and merriment of the game.

"Each time around the board represents so much labor performed, for which so much wages are paid. When a player has been the rounds ten times he retires from his labors, although he still remains in the game, which is not finished until the last player has made his tenth round. It takes forty moves to make a round and there is in each round one little black-bordered spot marked 'Legacy,' and whenever a player stops on this he receives a cash legacy. In each round there are three spots marked 'Luxury,' and these the player may indulge in or not, according to his inclinations or finances, but each luxury purchased counts the player so much more at the end of the game.

"General directions for playing the game accompany this description, but it is difficult to make a set of rules that will cover all contingencies since no two games are alike. The combination of circumstances are so many that almost every time the game is played new situations are brought out. Thus it is a game that is always interesting—never monotonous. It was the original intention of the author simply to work out a demonstration of how the landlord gets his money and keeps it, but while doing this there gradually developed a game which has proven one of amusement as well as of instruction and one which has attractions for both old and young.

"Children of nine or ten years and who possess average intelligence can easily understand the game and they get a good deal of hearty enjoyment out of it. They like to handle the make-believe money, deeds, etc., and the little landlords take a general delight in demanding the payment of their rent. They learn that the quickest way to accumulate wealth and gain power is to get all the land they can in the best localities and hold on to it. There are those who argue that it may be a dangerous thing to teach children how they may thus get the advantage of their fellows, but let me tell you there are no fairer-minded beings in the world than our own little American children. Watch them in their play and see how quick they are, should any one of their number attempt to cheat or take undue advantage of another, to cry, 'No fair!' And who has not heard almost every little girl say, 'I won't play if you don't play fair.'  Let the children once see clearly the gross injustice of our present land system and when they grow up, if they are allowed to develop naturally, the evil will soon be remedied."

 To read more about The Landlord's Game, explore the two "Monopoly and the Landlord's Game" tags in the cloud (I can't seem to meld them into a single one!)  It is quite an interesting story.

The New Nobility

"So long as individuals and private corporations have the power to monopolize natural resources or public utilities they will be the masters of all who do not share in the monopoly. The coal barons, the railway kings, the steel magnates and the whole piratical fraternity of multi-millionaires all subsist, like the regal plunderers of Europe, upon the fruits of privilege. They are an untitled nobility. The sunshine scintillates upon their gilded palaces in every great city of our land; but in the same cities there are dens of squalid misery and want, where sunbeams never penetrate, and where no kindly ray dispels the darkness of despair that lurks within."

In the 21st century, it is the owners of our privately held businesses and of corporate stock who fill this role.  See "stock ownership" in the topics at left for more detail.    And those who have studied the classical economists will recognize that natural resources fall into the category known as "Land."

The cited paragraph is an excerpt from a longer letter in "The Public" of June 9, 1900.  It seems particularly timely given the reading aloud the U.S. Constitution in the House of Representatives, upon opening the new session of Congress today.

THE NEW NOBILITY.

The constitution of the United States provides, in article 1, section 9, that—

no title of nobility shall be granted by the United States.

Why not?

The "Federalist" does not tell us, and there is little said of it in the constitutional debates. Some of the members, indeed, spoke of creating a peerage, but said that such a thing could not be thought of, because of the deep-seated prejudice prevailing against a hereditary nobility. According to Yates's Minutes, Charles Pinckney said:

There is more equality of rank and fortune in America than in any other country under the sun; and this is likely to continue as long as the unappropriated western lands remain unsettled.

This statesman must have believed as Thomas Carlyle did, when in "Past, and Present," book III., chapter 8, that great Englishman wrote:

It is well said, "Land is the right basis of an Aristocracy;" whoever possesses the Land, he, more emphatically than any other, is Governor, Vice-King of the people.

Conversely stated, Mr. Pinckney's proposition is that with the valuable free lands of the west all taken, there would be danger of a constantly increasing tenant class, keeping pace with the growth of land monopoly and resulting finally in a landed aristocracy on the one hand and complete serfdom on the other; for population must increase, while the area of land cannot. But in view of the vast area of unoccupied land in the west at that time, its complete settlement seemed so remote a contingency that it was scarcely dreamed of by the members of the convention, and had no weight in their deliberations.

They thought it advisable, nevertheless, to put in a clause against the granting of titles of nobility. That clause was a part of the Virginia resolutions. By inserting it, the framers of our constitution showed their aversion to privilege, and their determination that whether privilege existed or or not the government should confer upon its possessors no honorary distinction. But by the use of that phrase they no more rendered their country exempt from the evils of a hereditary aristocracy than they would have made inocuous the serpent's venom by enacting that all snakes shall be called humming-birds. A title is but a name— the rank is but the guinea's stamp.

Privilege does not depend for its existence upon honorary distinctions. Mere titles do not create privilege, although privilege does ultimately create titles. Titles of nobility are but the emblems of the power behind them. Thy are dangerous only because of the "nobility" which they imply. It is not the duke who is dangerous, but the dukedom—the social condition of which the duke is but a symptom. The real value of such a title is in the power which it represents.

Such power is always based upon privilege—upon rights accruing solely to the holder of the title, to the exclusion of others not so favored; in short, it is based upon monopoly. From time immemorial the granting of noble titles has, with few exceptions, been either in recognition of power already in possession, or else has been accompanied by a grant of power—usually a grant of lands— commensurate with the supposed dignity of the title.

So long as individuals and private corporations have the power to monopolize natural resources or public utilities they will be the masters of all who do not share in the monopoly. The coal barons, the railway kings, the steel magnates and the whole piratical fraternity of multi-millionaires all subsist, like the regal plunderers of Europe, upon the fruits of privilege. They are an untitled nobility. The sunshine scintillates upon their gilded palaces in every great city of our land; but in the same cities there are dens of squalid misery and want, where sunbeams never penetrate, and where no kindly ray dispels the darkness of despair that lurks within.

According to Charles B. Spahr, Ph. D., author of a treatise on Distribution of Wealth, one percent of our families own more wealth than do the whole of the remaining 99 percent! Now, who are the favored one percent? Men like John D. Rockefeller and Andrew Carnegie; men who own more than any individual could produce in a dozen centuries.

And are they not princes, lords, kings? They have no titles, to be sure. But what could a paltry title add to the man who controls, for instance, the oil-producing lands of the United States? They have no coronets, but they possess that without which the coronet is but a barbaric bauble. The man who bows to the throne really makes his obeisance to the power behind the throne. The king's word, the king's name, is but "as sounding brass or a tinkling cymbal;" the king's power is everything. Crowns, scepters, robes of ermine and cloth of gold—all these are nothing; nothing but hated symbols. If the kingly power remain, what boots it though we lack the kingly name? A king by any other name is just as bad. The powerful Earl Warwick, known to history as "the king-maker," was no more a king-maker than one Marcus A. Hanna, of Ohio; and if Hanna really wore the crown which he sometimes wears in the newspaper caricatures he would be no more dangerous than he is today. And what makes him dangerous? The privileges which he and his kind possess.

The real groundwork of an aristocracy is not in the unequal distribution of wealth. It lies farther back than that. We must seek it in the causes which lead to unequal distribution. It is in the inequality of opportunity to produce wealth. Equality of opportunity begets equality of condition. Whether you restrict the opportunities of one class, or grant special privileges to another, it matters not; the result is the same., and that result is seen in the class distinctions which inevitably follow in the wake of privilege.

As there may be serfs without shackles, so may there be nobles without titles. We have both in America today. The thing which our fathers greatly feared has come upon us. We are face to face with as great a crisis as ever threatened any republic since Rome first trembled at the glance of Caesar. The final struggle may not come this year, nor next, but it will come; and when it does, the American people will exclaim, in the words of the immortal Frenchman, "Tyrant, step from thy throne and give place to thy master!"

The ballot is the bloodless guillotine of the new revolution. It is a weapon mightier than the bayonet if used in time. Let us use it while it is still at our disposal. Put a true man in the white house, and the work of reform will be more easily accomplished. Inasmuch as the barons of the United States today, unlike those at Runnymede 800 years ago, are seeking special privileges for themselves instead of magna chartas for the people, it should be our first duty to remove from the presidency of this nation one whose instability of character and inordinate love of powerequaled only by his incapacity to exert it—mark him with peculiar distinctness in these respects as the American ectype of King John.

What Tolstoy Taught: Human Rights

In a recent column in the NYT entitled "Description is Prescription", David Brooks made references to Tolstoy, and it sent me looking to see whether a book I remembered was available via Google Books.  The book was written in 1905 by Bolton Hall, and it is entitled "What Tolstoy Taught."  Its final chapter, "Human Rights," follows:

(Tolstoy proclaimed the law of love as enunciated by Christ; the political rights as enunciated by Thomas Jefferson; the economic rights as announced by Henry George: the two latter as amplifications of the first; all being essential to man's earthly welfare. Tolstoy's philosophy was progressive. At first he saw that the law of love was necessary; then he recognized the necessity of equal political rights; next he recognized that without economic justice these remedies were futile, and he accordingly embraced the philosophy of Henry George, as evidenced by the following article addressed to the Russian people.— Ed.)

A number of suggestions have been made as to how to divide, in the most just manner, all land among the workers, but of all these only the one made by the late Henry George appears to me to be practicable.

The property right, Henry George wrote in his book about the single tax, is founded not on human laws, but on the laws of God. It is undeniable and absolute, and everyone who violates It, be it an individual or a nation, commits a theft.

A man who catches a fish, who plants a tree, builds a house, constructs a machine, sews a dress or paints a picture, thereby becomes the owner of the results of his own efforts — he has the right to give them away, to sell them or to leave them to his heirs. As the land has not been created by us, and only serves as the temporary residence of changing generations of human beings, it is clear that nobody can own the exclusive right to possess land, and that the rights of all men to it are equal and inalienable.

The right to own land is limited by the equal rights of all others, and this imposes upon the temporary possessor of land the duty to remunerate society for the valuable privilege given him to use the land in his possession.

When we impose a tax upon houses, crops, or money in any form, we take from members of society something which by right belongs to them, we violate the property right and commit a theft in the name of the law; while when we impose a tax upon land we take from members of society something which does not belong to them, but to society, and which cannot be given to them except at a detriment to others. We thus violate the laws of justice when we place a tax on labor or the results of labor, and we also violate them if we do not levy a tax on land.

Let us, therefore, decide to stop levying all taxes except the tax on the value of land, regardless of the buildings erected or the improvements made on it, but only on the value which natural or social conditions give to it.

If we place this single tax on land the results will be these:

1. The tax will relieve us of the whole army of officials necessary to collect the present taxes, which will diminish the cost of government, at the same time making it more honest. It will rid us of all the taxes which lead to lying, to perjury, to frauds of all kinds. All land is visible, and cannot be hidden, and its value is fixed easier than that of any other property, and the single tax can be determined at less expense and less danger to public morals.

2. It will to a great extent increase the production of wealth, doing away with the discouraging tax upon labor and thrift, and it will make the land more accessible to those who want to work or improve, as the proprietors, who do not work themselves, but speculate in its increasing value, will find it difficult to keep up such expensive property. The tax on labor, on the other hand, leads to the accumulation of immense fortunes in a few hands, and the increasing poverty of the masses. This unjust division of wealth on one side leads to the creation of one class of people who are idle and corrupt, because they are too rich, and the creation of another class of people who are too poor, and thus doubly delays the production of wealth. This unjust division of wealth creates on one side terrible millionaires, and on the other side vagrants, beggars, thieves, gamblers and social parasites of various kinds, and necessitates an enormous expense for officials to watch these — policemen, judges, prisons and other means which society uses in self-defense.

The single tax is a remedy for all these evils.

I do not mean to say that this tax will transform human nature, for that is not within the power of man, but it will create conditions under which human nature will grow better instead of worse, as under the present conditions. It will make possible an increase of wealth, of which it is hardly possible to form an idea. It will make undeserved poverty impossible. It will do away with the demoralizing struggle for a living. It will make it possible for men to be honest, just, reasonable and noble, if they desire to be so. It will prepare the soil for the coming of the epoch of justice, abundance, peace and happiness, which Christ told His disciples of.

Let us suppose that in a certain place all land belongs to two owners — one very rich, who lives far away, and another, not rich, living and working at home — and to a hundred of small peasants owning a few acres each. Besides these, there live on that place some scores of people who own no land — mechanics, merchants, and officials.

Now let us suppose that the people of that community, having arrived at the conclusion that the land is common property, decide to dispose of the land according to their new conviction.

What would they do? Take all the land away from those who own it, and give everybody the right to take the land he desires? That could not be done, because there would be several people who would want the same ground, and this would lead to endless quarrels. To form one society and work all things in common would be difficult, because some have carts, wagons, horses and cattle, while others have none, and, besides, some people do not know how to till the soil, or are not strong enough.

To divide all the land in equal parts, according to its value, and allow one part to each is very difficult, and this would, besides, be impracticable, because the lazy and poor would lease their property to the rich for money, and these would soon again be in possession of it all.

The inhabitants of the community, therefore, decide to leave the land in the possession of those who own it, and to order each owner to pay into the common treasury money representing the revenue which had been decided on after appraising the value of the land, not according to the work or the improvements made on it, but to its quality and situation, and this money was to be divided equally among all.

But as it was difficult first to take this money from all those who held the land, and then divide it equally among all the members of the community, and as these members, besides, paid money toward the public needs — schools, fire departments, roads, etc.— and as this money was always needed, they decided to use all the money derived from those who had the use of the land, for public needs.

Having made this arrangement, the members of the community levied the tax for the use of land on the two large owners, and also on the small peasants, but no tax at all was imposed on those who held no land.

This caused the one landowner who lived far away, and who derived little income from his property, to realize that it did not pay to hold on to land thus taxed, and he gave it up. The other large owner gave up part of his land, and kept only that part which produced more than the amount of his tax. Those of the peasants who held small properties, and who had plenty of men, and not enough land, as well as some of those who held no land at all, but who desired to make a living by working the land, took up the land surrendered by its former owners.

After that all the members of the community could live on the land and make a living from it, and all land passed into the hands of or remained with those who loved to work it, and who made it produce the most. The public institutions flourished and the wealth of the community increased, for there was more money than before for public needs; and the most important fact was that this change in the ownership of land took place without any discussions, quarrels, or discord, by the voluntary surrender of the land by those who did not derive any profit from it.

This is the project of Henry George, which, if tried here, would make Russia wealthy and happy, and which is practicable all over the world.

 

The Case Plainly Stated

I stumbled across this document in a little book which runs to 24 pages, from 1887.  Those with an interest in Alabama history, particularly as it relates to taxation, might find that it helps explain how the 1903 constitution came about -- whose interests it sought to protect.   Consider it, too, in light of our current economic situation -- too few jobs, lots of income and wealth concentration; not enough credit available to afford housing or commercial sites.     These problems can be solved, but not in the ways we've already tried.

 

The Case Plainly Stated
By H. F. RING

PREFATORY NOTE -- This address originally was delivered to the United Labor Organization of Houston, Texas, in 1887. It appeared in full the next morning in the Houston Daily Post, and afterwards in The Standard, published at that time in New York by Henry George. Mr. George then issued it in tract form, giving it the name of "The Case Plainly Stated." Many editions of it have since been published from time to time in this country and in Europe and Australia, and it is generally regarded as one of the clearest brief statements extant of the philosophy of land value taxation as taught by Henry George in his famous "Progress and Poverty."

MR. CHAIRMAN:— The land question is simply a question as to how the use of the bounties of nature shall be best regulated and controlled. By bounties of nature I mean the coal beds, the mineral deposits, the land — all those natural elements which were not created by human industry, but which Nature has freely and abundantly provided for the use and enjoyment of all the children of men; and I propose to show how the right of capital and. labor to use these natural elements should be regulated by the government*, so as most to conduce to the happiness and well-being of mankind.

* The word "government" as used in this presentation of the Single Tax refers to the tax levying power as vested, not alone in the federal, but also and even primarily in the state, county, and municipal governments.
It is probable that a complete application of the Single Tax will be reached through its gradual adoption at first in cities, counties and states, before it is substituted for tariff and internal revenue taxation.

I am a Single Taxer, and a discussion of the land question by me can be nothing more than a mere attempt to expound the teachings of that great master of the subject, Henry George.

George, at the outset, calls attention to the marvelous improvements in the arts and sciences, the discoveries, inventions, and labor-saving machines which, within the past 100 years, have so immensely increased the productive powers of the human race. Is it not a moderate estimate to assume that on an average the labor of one man today, with all these labor-saving inventions, will produce as much of the comforts and luxuries of life as the labors of four men would a hundred years ago? And does it not follow that the average workman of today creates, by each day's labor, four times as much wealth as the average workman did a hundred years ago? George teaches that if the workman of today, on an average, creates four times as much wealth as the workman of a hundred years ago, then the services of this workman of today are four times as valuable to society; then why should not his wages of right be four times as great? Why should he not be four times as independent? Why should it not be four times as easy for him to make a living and support his family in comfort and decency?

Will any one presume to assert that this is in fact the case? On the contrary, is it not just about as hard for the poor man to make a living today as it ever was? Does he not dread the loss of a position today just as much as he ever did? George asserts that labor-saving machinery really ought to lessen the burdens of labor, to make it easier for the laborer to live, and in fact, to lighten his toil. But alas, from some apparently mysterious cause, — a cause which many comfortably well-to-do people insist is one of the unfathomable mysteries of Divine Providence, — what George claims should rightly result from inventions does not result from them. And still we are all the time making new discoveries, and year by year increasing, by means of new inventions, the productive powers of working men; yet, with the increase of population, the lot of those who produce all this wealth seems to be becoming more precarious, less independent and more and more wretched.

Who denies that under the present social system, wages tend to fall irresistibly to the point at which the wage-workers can barely subsist? This is called the iron law of wages, and all the strikes conceivable can only temporarily, and but fitfully, arrest this steady tendency. For so long as unemployed men compete for employment against the employed, wages cannot permanently advance. The worker may create quadruple the wealth, but he is not permitted to retain any more of it as his share.

WHO GETS THE WEALTH?

Now, where does this wealth go — this wealth which we now produce so much more easily and in such vastly greater quantities than ever before? What becomes of it? Who gets it? Why is it that in this age of wealth-producing and labor-saving machinery, poverty as abject and hideous as ever before seen in the history of the world abounds and increases in our midst? What is the cause of the so-called iron law of wages? Henry George has discovered it. He has pointed it out, and he has shown us the remedy. He has demonstrated beyond a doubt or question that it does not result as a fatal necessity from the nature of things, but that it is a result of violation of natural law, of a refusal on the part of society to recognize the inalienable right of every citizen of access to the bounties of nature within the territory of his country on equal terms with every other citizen of that country.

Let me now give you a short lesson in the elements of this new political economy.

Three factors enter into the creation of every conceivable kind of wealth. By wealth we mean any material thing produced by human industry which gratifies human desires. These factors are land, labor and capital. Wealth in a civilized community is produced only by means of a union or partnership between land, labor and capital. Labor does the work, capital loans the tools, and land furnishes the natural elements on which, and out of which all material things resulting from human industry are created. In speaking of land in the new political economy we never include improvements or anything which is the result of human toil. We simply mean the opportunities which land and the elements within it afford for the employment of capital and labor — we mean the raw elements as they lie on or in the bosom of the eartli, untouched by the hand of man.

Now, as before remarked, the product of land, labor and capital is wealth, and after it is produced, it is divided among these factors entering into its composition. A certain portion of it, called rent, goes to land, either directly in the form of rent or in the form of interest on the selling price of the land or of the coal bed, or whatever it is; another portion of it, called profit or interest, goes to capital for the use of tools which capital has furnished, and the balance left, after land has been paid rent and capital has been paid interest or profits, goes to labor as wages for the work which labor has done, including the labor of superintendence.

MEANING OF RENT.

Now what does rent signify as used here? Rent is the price paid for the privilege of access to the raw material — for the mere privilege of getting hold of something not created by man, on which and out of which labor and capital can produce wealth. This rent may be paid periodically, or may be paid in a lump in the form of purchase money. In either case the result will be the same. Is it not clear that in the division of wealth after it has been produced by this partnership between land, labor and capital, the more land gets for rent the less there will be left for capital and labor? Is it not quite as plain as A B C that the more it costs capital and labor to get hold of these natural elements, the coal beds, the mines, the water fronts, the land — the gifts of nature which a kind providence has provided for the equal use and enjoyment of all — the less there will be for labor and capital to divide between them?

In the new political economy we must never confuse land with capital. One is never the synonym of the other. Land, as before stated, is simply the natural opportunity, exclusive of improvements or anything done to it by man. Capital is something that has been made by man, like a machine for instance, which is useful in the production of wealth. It is wealth used to produce more wealth.

LABOR AND CAPITAL PARTNERS.

But someone asks: Suppose the capitalist who is using the coal bed or using this natural opportunity, whatever it may be, is also owner of it. Where then does your partnership between land, labor and capital come in? We answer just the same as before. A sum equal to the interest on the market value of the coal bed (independent of the machinery, excavation work, etc.) is in such cases a factor of rent. The owner, in addition to profit or interest on his capital, as before defined, must also take from the wealth produced a sum equal, approximately, to interest on the market value of the coal land, otherwise he would sell out and quit. It is evident that the more money the owner is obliged to invest in purchasing the coal bed, for instance, the greater must be the sum which he takes out of the wealth produced to cover interest on that investment, and hence such interest money is simply rent paid for the use of a natural element, for the privilege of access to one of the bounties of nature. Therefore, is it not equally plain in this case that the more paid for this privilege of use, the less will remain out of which labor can get wages?

A few years ago we read in the newspapers of a great boom in the vicinity of Birmingham, Alabama. We were exultingly told that the lands containing coal beds and mineral deposits in northern Alabama had gone up in value from $75,000 to $50,000,000 in the space of six years. What does this signify? It means that when capital and labor shall attempt to utilize these coal beds and mineral deposits, when capital and labor shall unite together, the one to furnish the tools, the other the labor, with which to produce wealth out of this raw material, then will a set of landlords step forward and block the enterprise with a demand for $50,000,000 for the mere right of access to these free gifts of nature, or in lieu of it the payment of $3,000,000 a year as tribute money, that being the interest of $50,000,000 at six per cent.

There lie the coal beds and mineral deposits untouched by man, fresh from the hands of the Creator, intended by Him, if He is the just, benevolent Being whom we have been taught to worship, for the equal use and enjoyment of all His children, and yet our laws say that capital and labor must pay a few forestallers $3,000,000 a year for the privilege of applying the hand of industry to these elements.

And after this blackmail has been paid, how much will there be left for the wages of labor? The answer is, just as little as labor can ordinarily subsist upon. Why? Because this monopolization of the gifts of nature going on, not only in northern Alabama, but everywhere else, enables capital to drive a hard bargain with labor. For this reason, and this alone, they can't deal with each other on equal vantage grounds. Suppose labor objects and says to capital: "I'll not accept the pittance you offer." Capital replies: "All right, go elsewhere." And so labor starts out to get work for himself, and what does he find? Here he is, living in a country capable of raising food for ten times its present population, and he finds four-fifths of the land untilled or but partially cultivated. He finds four-fifths of the coal beds and mineral deposits unused. He finds vacant land and unused lots on every side. He goes to New York City even and he finds there within its corporate limits almost one-third the area of that city vacant, unoccupied, and unused, although there are miles and miles of tenement houses, in which men and women and innocent children are packed and crowded like maggots, as though there wasn't ample room in the city for the comfortable housing of every human being in it. He finds unused natural elements all around him wherever he goes, sufficient to give employment and support in abundance to tens of millions of happy families.

But now suppose labor attempts to make use of any of these unused natural opportunities? Suppose he concludes to go to work for himself upon a piece of vacant land in the suburbs of a city, for instance, where labor could be applied to the greatest advantage. What happens? An individual comes along and waves a title deed, and orders him off the premises. He finds that all these unused natural opportunities are owned by individuals and claimed as private property. He finds himself frustrated at every point. He finds that he can't go to work anywhere without paying blackmail to the owner of some natural element for the mere privilege of working and so he strikes back to northern Alabama and takes off his hat to Capital and bows very low and says: 'Please, sir, give me a bare living and I will be your slave."

And that is about all that he does get, and that is all he ever will get under the present system of land ownership, though you may strike and boycott and potter about graduated land taxes, graduated income taxes, and graduated nonsense until doomsday.

THE GREAT PARASITE.

With advancing population the greater becomes the demand for natural opportunities and the higher the prices which can be extorted for the privilege of using them. As population increases, the town lots, the coal beds, the mineral deposits, the water fronts, the land, go up in value, and so goes up also the amount of tribute money which labor must pay for access to them, for the privilege of employment. The more of the products of industry which go for the payment of this constantly increasing tribute, the less and less will grow the share allowed the laborer and the more dependent and the more wretched will his lot become.

Here in Houston today, suppose Enterprise has $50,000 to invest in the paper mill business, a sum barely sufficient to put up the building, buy the machinery and carry stock. He finds a beautiful site for his mill on the banks of the bayou. It is a vacant lot. The hand of man has never been applied to it, and it stands there now just as it stood when the Indian roamed over the site of this city. The owner of that block, however, thinks he can make Enterprise pay him $20,000 for the privilege of giving employment to labor on this natural opportunity — this piece of ground. That is the price, and if he can't get it today he will get it when the city grows a little larger. But Enterprise says to him: "I have only $50,000 capital, all of which I shall need in my business." The land owner answers it is not his lookout, and so Enterprise turns away checkened and baffled, and the mill is not built.

CAUSE OF DULL TIMES.

And so it is everywhere. Wherever we find a portion of the vacant surface of the earth which could be utilized by capital and labor, and which affords an opportunity for human toil and enterprise, there we find a human vampire with a paper title in his hand warning off labor; and that vampire must always be placated by the payment of blackmail before the wheels of industry can begin to turn.

Need we wonder that these wheels turn slowly, and that they are always getting out of gear; that we are always talking about dull times; that men are always out of employment and always hunting for work, regarding it as a favor even to be allowed to work; that we are all the time growing too much cotton, when millions of human beings have only one shirt to their names; that we are producing too much food, when half the population of the world is insufficiently fed; that carpenters are out of work, when half the people are not comfortably housed; shoemakers wanting work and millions needing shoes? How could it be otherwise, when labor is compelled to beg for work in the midst of limitless unused opportunities for work, on which opportunities, however, sit these human vampires, these dogs in the manger, waving labor back with their paper title deeds?

AN ILLUSTRATION.

Now let us go back for a moment to that partnership between land, labor and capital. For illustration, suppose the wealth produced by the partnership to be created by the application of capital and labor to those coal beds and mineral deposits in northern Alabama, valued, as we have seen, at $50,000,000. In the division of wealth produced we have shown how, say six percent of this $50,000,000, or $3,000,000, must go to land as rent. Or, in other words, $3,000,000 a year must be paid to land owners directly as rent or interest on purchase money for the bare privilege of utilizing these gifts of nature. Now, in the division of wealth produced, why is labor entitled to any portion of it? Clearly because labor's industry has contributed to its creation. Why is capital entitled to any part of it? Because capital has furnished labor with tools with which to develop the mineral deposits. The capitalist who owns the tools can trace his title back to the creator of them, to some individual or set of individuals whose industry produced them and from whom he purchased or inherited them. The title, then, of both labor and capital to a portion of the wealth produced from these mineral deposits originates in human industry, and it is a sacred title. Now then, why should the land owner get any portion of this wealth, to produce which capital has supplied the tools and labor has done the work? This owner claims the right of making capital and labor pay him interest on $50,000,000, or $3,000,000 a year, for the mere privilege of access to this raw coal and raw ore. Ought we not to scrutinize most carefully his right to extort this immense tribute? And if he can show no natural and moral right to claim it, does not society countenance the robbery of labor in permitting him to do so? Where does his title originate?

We find that six or seven years ago he paid someone who claimed to own the land in which these mineral deposits are found $750,000 for the raw natural element for which he now demands $50,000,000. Was this additional value of $49,250,000 in six years produced by his industry? Was it produced by the industry of any previous owner of these natural elements? Did it cost $49,250,000 to discover these mineral deposits? We trace back his title a little further, and we find that perhaps a hundred years ago it originated in a grant to John Jones from the government — that is to say, the people who inhabited this country a hundred years ago and who constituted the government said: "We will divide the land and we will give John Jones this particular tract for his private property."

But did these people create that land and the coal and iron in it? Can it be shown that they had any better right to it from the Almighty Creator than the people of this generation have? Was the earth intended by the Heavenly Father for one generation to dispose of forever, or as an abiding place for all generations? Was Thomas Jefferson right or wrong when he wrote: "The earth belongs in usufruct to the living; the dead have no right or power over it?" By what authority could the people living here a hundred years ago, long since dead and gone, confer upon John Jones, also dead and gone, a right which would enable John Smith today, by tracing a paper chain of titles from him, to extort from capital and labor a tribute of $3,000,000 a year for the bare privilege of getting to that coal and iron and making it useful to mankind?

Who dares to blaspheme the name of the Almighty Ruler of the universe by saying that the coal and iron were not intended by Him for the equal use and the enjoyment of all His children — the humblest babe born today in a garret equally with a child of the proudest duke who ever lived?

MAN IS A LAND ANIMAL.

Is not man a land animal? Can he live without land? Can he any more rightfully be deprived of access to land than he can rightfully be deprived of life itself? Can he any more rightfully be compelled to yield up to a forestaller, a mere owner of land, a portion of the fruit of his industry for the privilege of getting hold of the raw material elements than he can rightfully be compelled as a slave to yield up to a master a portion of the fruits of his industry? To compel him to do so is as much a robbery of labor in one case as in the other. Why then is not the humblest babe that God sends into this world naturally and by inalienable right entitled to access to land on equal terms with all his fellow human beings?

ORIGIN OF PROPERTY RIGHT.

Mind, when we say access to land we do not include access to improvements on land, or access to anything produced by human industry, a title to which can be shown originating in human toil; we simply mean access upon equal terms to the free bounties of nature as they lie upon the kind bosom of mother earth, untouched and undisturbed by the hand of man. What I produce by my industry is mine. What I obtain by exchanging the products of my industry for the products of another's industry is mine. What my father or my grandfather produced by his industry was his, and if he has given it to me it is mine.

In all these cases human industry is the origin of property right, and property rights originating in human industry must be held sacred, else there would be no incentive to human effort. Do not the values produced by the individual belong to the individual producing them? Do not the values produced by the community belong to the community producing them? Is there anything wrong, immoral or communistic in this ideal? And yet this is the sum and substance of the Henry George philosophy.

Take the case of the vacant block on the bank of the bayou which Enterprise wanted for a paper mill and could not get. Fifty years ago it was worthless. Now labor must pay a tribute of over $20,000 to the so-called owner for the privilege of using it. Whose industry has put $20,000 of value on that piece of vacant ground? Not the industry of the present owner, nor the industry of any former owner, because no man has ever done a stroke of work upon it. That value of $20,000 has been placed upon the land by the common energy and enterprise of the entire community. Since the community has produced that land value why does it not belong to the community? Why has not the community the same rights to the value it creates as the individual has to the values which he individually creates?

THE REMEDY.

How shall this derangement of the wheels of industry, this blackmail upon enterprise, this robbery of labor, this eager and fatal competition among laborers for employment, this slavish fear of the loss of a situation in the midst of abundant unused opportunities for employment — how shall this curse which our present land system has fastened upon the productive industry of the country, be removed? Simply by doing justice; by being honest; by recognizing in our laws one of the inalienable rights of man; by recognizing in every human being, in every generation, the present as well as the past, an inalienable right of access to the bounties of nature on equal terms with every other human being.

How shall this right of access on equal terms be secured? Simply by making every individual who claims a right to the exclusive possession of a tract of land pay in the form of a tax approximately what the use of that tract of land is worth, exclusive of all improvements on it or anything done to it by the hand of man, and by abolishing every other form of taxation. Take the rent of land for public use instead of taxes.

WILL SIMPLIFY GOVERNMENT.

Some one asks: "Will not this proposed change vastly increase the functions of government and immensely add to the number of government employees?" I reply no. On the contrary, at least two-thirds of the present army of revenue collectors and tax gatherers will be dispensed with, and the remaining one-third will collect this single tax on land values at one-third the expense now incurred in the collection of national, state, county, and municipal taxes.

Another inquirer asks: "Will not the new system offer abundant opportunities for corruption and partiality in fixing the amount of this tax annually to be paid for the exclusive use of a piece of land? And how do you propose the amount of the tax shall be determined?" It will be determined by the same law of demand and supply which now determines the amount of tax under the present system. The single tax will be fixed by the same machinery of an assessor and a board of equalization which fixes it now. For instance, under this system a piece of property on Main street rents for $5,000 a year. Interest at the prevailing rate on the building alone, added to the annual cost of insurance, repairs and caretaking, and a sum sufficient to provide a sinking fund for renewals amounted to, say $3,000 a year. The landlord is then collecting the difference between $3,000 and $5,000, or $3,000 for the use of this naked earth. That is to say, he is collecting $2,000 a year for the use of something never created by man, to which all are by natural right equally entitled, and which owes its rental value of $2,000 a year exclusively to the common enterprise and energy of the entire community.

This is the sum which, under Henry George's system, would be turned over to the government in the form of a tax for the common benefit of the community who collectively have made the use of this land worth $2,000 a year.

Here an interested friend anxiously inquires: "But if the landlord has to pay this tax of $2,000 a year for the use of the land, will he not take it out of the tenant by raising his rent to $7,000?" No, for the landlord's charges now all he can compel the tenant to pay. Suppose he tries to. Suppose he says to his tenant: "You must now pay me $7,000 a year." What happens? Just what happens every day now. If the tenant can do no better he pays the increase. But now, mark you, when the landlord goes to pay his tax what happens then? Why the board of equalization says to him, you have received $7,000 a year rent for the use of improvements worth only $3,000 a year. You are therefore collecting $4,000 a year instead of $2,000 for the use of the naked lot, and you will therefore pay the city or state $4,000 a year for the privilege of the exclusive use of the ground instead of $2,000 a year as heretofore. Now what has the landlord made by jumping up the rent? Nothing. What would be made by thus jumping up the rents under the present system? Everything. Under which system would landlords be more apt to force up rents?

DETERMINING THE TAX.

Another way by which the board of equalization under the George system would determine the amount of tax to be paid for the privilege of the exclusive possession of a tract of land, and which would also compel landlords to collect from their tenants and turn over to the government in the form of a tax the full value of the use of the land, would be from observation of the prices which real estate brought in the market. But note, at this point some smart fellow jumps up — and he is likely enough to be a newspaper editor — and vehemently protests, saying: "Why, sir, the taxation of ground values plan does not propose to allow any exclusive ownership of land. It demands that the government own it all and rent it out or divide it up into 60,000,000 or 70,000,000 little bits, or do something of that kind with it, and here you are talking about lands being bought and sold under the Henry George system. Why, man alive, you don't know what that system is!"

Now, Mr. Editor, or Mr. Who-ever-you-are, let me say to you that in your ignorance, or in your indifference to the sufferings of your fellowmen, or in your desire to pander to the greed of monopoly, or to the timidity of capital, you may say what you please; you may misrepresent as much as you please for the purpose of bringing odium and contempt upon the cause; you may call it what you please — state ownership, state landlordism, ownership in common, communism, nihilism, anarchism or anything else; but the fact, nevertheless, remains that, under the just and righteous land system which we are trying to explain, the land will continue to be bought and sold under the same form of paper deeds, precisely as it is bought and sold today. It will continue in precisely the same way to pass to devisees by will and to heirs by law of descent and distribution. The right of control, of exclusive possession and dominion over a piece of land and of the free and exclusive enjoyment of all improvements on it, will in no way be abridged or disturbed. When you buy a lot on Main street today worth $10,000 with a building on it worth $10,000 more, your deed recites a consideration of $20,000. Now when you buy this same property under the George system, the only difference in the whole transaction will be that your deed for it — assuming that the price accords with the market value prevailing at the time of your purchase — will recite a consideration of only $10,000, and $10,000 is all that you will then pay for the property. You will pay nothing for the land. After you have bought the property you will pay yearly in the form of a tax to the government, approximately the full market value of the (yearly) use of it — which will amount to the annual rental value of the land, and as the man from whom you purchased had to pay the government the same annual rental value, you will consequently pay nothing, or approximately nothing*, to him for the land itself when you purchase the property. You thus save an investment of $10,000 in dirt; instead of such investment you will pay for the common benefit of the community, including yourself, what the privilege of the exclusive use of that spot of earth is worth — nothing more, nothing less — and that is simply what you ought to pay. The $10,000, which, under the present system, you are compelled to bury in a bit of earth, you will have left you with which to increase your business; and if you do increase your business with it, and add another story to your building, no tax gatherer will come around and impose an additional fine upon you for doing something with your money which gives employment to labor.

* There will, no doubt, be instances where the desire of an individual to get and retain possession of a certain piece of property, will cause him tooffer a bonus over and above the market value of the improvements.

 

NO PROPERTY IN LAND.

Thus, under the single tax system, land would be sold and would change hands as it does now, but it would only bring in the market approximately the value of the improvements on it. If land in any locality should get to selling for considerably more than the value of the improvements on it, this would be a certain indication that the parties using the natural elements in that neighborhood were not paying for the benefit of all the people what the use of the same was worth, and so a board of equalization would put the tax up. As population increases the value of the use of land increases, and with it, under the George system, the revenue from this tax on land values will increase, and thus the entire people who collectively produce this increasing value will get the benefit of the values collectively produced by them. As it is now, the increase in the value of land, which amounts to several billions annually in the United States, four-fifths of which is increase in the value of city and town lots and mineral deposits, goes to a comparatively small number of individuals who do no more to produce these values than any other members of the community.

TAXATION ABOLISHED.

Another doubter puts this objection: Under the George system you would make the owner of a lot on Main street, with an improvement on it worth $10,000, pay as much tax as the owner of a similar lot adjoining, having a building on it worth $50,000. What justice is there in that?

Let us see. Take away the improvements and these two lots are of the same value — that is to say, the value of the use of both lots for ordinary business purposes is the same. Suppose it is $300 a year. Now, the man with the $50,000 improvement collects from his tenant ten percent on his $50,000, or $5,000. He also collects $300, the value of the use of the lot, making in all $5,300. The man with the $10,000 improvement also collects ten percent upon the valuation of his improvement from his tenant, of $1,000. He, too, collects $300 in addition for the use of the lot, making in all $1,300. Now after both have paid the government $300 apiece for the privilege of the exclusive use of these lots, each will have left ten percent upon the capital invested, and why should one be entitled to any greater percent upon the capital invested than the other?

The fact is, that under this system there will be no such thing as taxes. Taxation, as we now understand it, will be abolished. The revenue derived by the government from requiring all who use a natural opportunity to pay into the common treasury what the use of that opportunity is worth, if it is worth anything at all, will be more than sufficient to enable the government to dispense with every species of taxation. As it is now, when you pay your taxes, you are simply robbed of a portion of the fruits of your industry, for which you do not get, directly, any equivalent. Under the proposed system, when you pay your single tax on land values you will get directly a full equivalent for every dollar paid. You will get the privilege of the exclusive use of a tract of land for what that privilege is worth.
 

ACCESS TO UNUSED LAND.

If this system were adopted what would become of the vacant lots and lands, the unused coal beds and mineral deposits, the unoccupied water fronts and water privileges over which human vampires now stand guard, retarding enterprise and driving off labor? They would become absolutely free. No one could afford to hold them and pay taxes on them. The vampires would turn them loose. Land speculators and land sharks, instead of trying to grow rich by forestalling labor and capital and thus preying like devouring beasts on their fellowmen, would turn their talents to better account. Wherever labor could find an unused lot or coal bed or mineral deposit or unused tract of land, there labor could go to work and employ itself without being required to invest a dollar in the purchase of a right of access to the natural element, without being compelled to first make terms with a dog in the manger claiming it as private property and holding it for speculative purposes.

If that vacant natural opportunity were situated near a center of population, or were of a character to bestow peculiar money-making advantages upon the persons using it, this advantage would create a demand for it, and this demand would regulate in the manner already pointed out the amount which labor and capital would pay for the use of it, in the form of a tax for the common benefit of all. If that vacant opportunity, for instance, were a tract of land four or five miles from this city, it would have few advantages to make the use of it at present peculiarly valuable. Why? Because there is so much vacant land of the same character near it, the use of which is equally valuable, that no one would give a bonus, as it were, for the use of that particular tract. Labor would, therefore, at first get the use of that land for nothing. It would have no taxable value at all until all the other vacant land similarly situated was put into use. Under this most just and equitable system the taxable values of land would be confined almost exclusively to the cities and towns and the coal and mineral deposits. Where people congregate, there land has value. In New York City alone, capital and labor today pay to a few thousand land owners, in ground rent alone, exclusive of rent paid on improvements, for the bare privilege of living and doing business, tribute money amounting to hundreds of millions annually, a sum almost equal to the expense of carrying on the government of the United States. It is in these great centers of trade and commerce that land has its greatest value; it is here that land values are mostly found and from these centers nine-tenths of the revenue of the government from this tax on land values would be derived.

FARMERS WOULD BE BENEFITED.

If the George plan were suddenly put in force today, not only would all farmers be relieved from direct and indirect taxation, not only would farmers participate in common with all others in the universal and uninterrupted prosperity which would result from removing the obstructions which needlessly hamper and clog enterprise, but probably three-fourths of the working farmers in this country would pay no land tax at all. Why? Because with so much vacant or but partially cultivated land as there is here today three-fourths of the farmers would have no taxable value at all; and all who are counting on the farmers of America being so foolish as not to see how they will be as much benefited by a just and righteous land system as any other class will certainly be disappointed.

EFFECT ON FARMS.

"Yes," says our farmer friend, "but you propose to confiscate the farmer's land." Let's see about that. You are a farmer owning say a hundred-acre farm, situated like a majority of farms, in a neighborhood where for every acre of land in cultivation there are two or more acres unimproved or but partially improved. Your farm is worth under the present system, say $2,000. A hundred acres of this unimproved land adjoining it of the same quality is held by some speculator at $500. Your tax on your hundred-acre farm is $10 a year, the speculator's tax on the hundred acres of land adjoining of equal value, exclusive of improvements, is $2.50 a year — one-fourth as much as yours. You give employment to labor on your land, and thereby add to the prosperity of the community. The speculator excludes labor from employment on his land, and thereby retards the prosperity of the community. Why should you be taxed any more for using your hundred-acre tract, and giving employment to labor on it, than the speculator is taxed for holding in idleness a tract of equal value and preventing labor from using it? Why should not the speculator pay at least as much tax for the privilege of excluding labor from his tract as you have to pay for the privilege of employing labor on yours? Have you hurt anyone by turning up the wild sod and building fences and houses and putting $1,500 worth of improvements on your land? If not, why should you be fined for it by having your taxes increased?

Where our plan is adopted you will have no taxes at all to pay until this vacant land around your farm is put into use. Until then no land value could attach to your farm, and the tax which, with increasing population, you would ultimately be required to pay, would seldom equal and rarely, if ever, exceed that which farmers now pay on the improvement valuation. Assuming that you spend say $600 a year on your family, then under the present system your taxes, direct and indirect, and the toll which the merchants take for collecting indirect taxes, amount to at least $100 a year. You may not know it, because an indirect tax always fools a fellow paying it. You will be relieved from all these taxes, but best of all, men who are now idle and who can't buy what you raise will all be at work, and not only that, but their wages will be high enough to pay good prices for what you raise. It is true that under the new system you could only sell your place for $1,500. Still, with this same $1,500 you could buy just as good a place from some one else. The purchasing power of your farm, when it comes to buying another farm, would not have been reduced. Do not your interests as producer or a laborer vastly exceed your interests as a land owner?

LANDLORDISM AND GOVERNMENT

Now, coming back to the elements of the new political economy, some one says: "What difference does it make to the workmen whether labor and capital pay this ground rent to the individual or to the government, since, according to your theory, it must be paid all the same?" In the first place, if it is paid to the individual none of it ever comes back to labor and capital unless value received is paid for it; so far as labor and capital are concerned, it might about as well be cast into the sea. But when it is paid to the government in the form of a tax on land values it does come back to labor and capital again in the form of relief from every species of taxation, direct and indirect.

Again, the amount that Enterprise would pay the government for the privilege of access to the natural elements would be less under the single tax than is now paid individuals for this privilege. Under the land value tax the prices could not be advanced by monopolization of these elements, as is being done now.

But best of all, and by far the most glorious result that will flow from the establishment of a just and righteous land system, is that it will enable the wealth creator to stand erect, presenting to capital an unterrified front.

Return for a moment to the coal beds of northern Alabama and imagine the Henry George system adopted. Labor now again objects to the terms offered by capital, and again capital tells him to go. And again labor goes forth hunting for work. But how different he finds the aspect of things. He finds the same unused natural elements, the same unused coal beds and mineral deposits, the vacant lots and lands, but he no longer finds a fellowman sitting upon every vacant opportunity for work and waving him off. They have vanished. They have gone to work themselves. He finds every unused opportunity for labor, wherever it may be, absolutely free. Not a dollar of capital need be invested in buying a natural opportunity, in paying for the privilege of work. When labor went forth hunting work before, he not only had to ask capital to pay for the tools, but also to pay, usually a greater sum, to some forestaller, in addition, as blackmail, for the privilege of access to a natural element.

This will all be changed. It won't take near as much capital to start enterprises as it did, or in other words, to give employment to labor. In fact, labor could then take even an axe and hoe and find plenty of vacant opportunities on which he could make a living without having to bury himself in a wilderness to do it. All this makes him feel independent and enables him to bargain with capital for employment on equal vantage grounds.

MONOPOLY IS PROFITABLE.

Some time since a large manufacturing firm in Massachusetts adopted the eight-hour system. After trying it a year they gave it up and went back to the ten-hour system. The general manager said they could only make five percent profit on their investments by requiring only eight hours' work, and that unless they could make a bigger percentage than that, they would not be bothered with the management of the business — they would put their money into town and city lots, because that species of property would certainly enhance in value as much as five percent annually, and that, too, without any trouble to the owner, and so it is everywhere. Now, is it not absurd to expect to reduce the rate of profits with which capital will be content below this steady percent of increase in the value of town and city lots, by any combination of labor, or by any legislation which falls short of restoring these land values to the people who collectively create them?

Suppose you have $10,000 today. The best and safest thing you can do with it is to invest it in town lots in or near some growing town. Ten years from today, unless the George theory becomes generally understood, the lots will be worth $20,000 and you will have drawn to yourself $10,000 worth of wealth for which you have given no equivalent. You will simply have robbed the labor of the country of $10,000. But now suppose ground values to be appropriated to the public use by taxation. What are you to do with your $10,000? You would not buy vacant lots now; there is no speculation in them. The tax which you would have to pay for the privilege of excluding capital and labor from the opportunities for employment which vacant lots afford, would be too heavy for you. In fact, you couldn't even loan on land alone, because land alone will have no selling value in the market. The result is, that unless you let your money lie idle and so lose interest on it, you will be compelled to invest it so as to give employment to labor. You must put it into buildings, into machinery, into manufactory stock, into farm implements, into some channel where it will be active and where it will afford employment to labor.

Not only must you do this with your capital, but every other capitalist must do the same with his capital. Capitalist thus must bid against capitalist, since capital can only increase by calling labor to its aid and giving it employment.

Under the present system the rich can grow richer without calling in the aid of labor, without giving employment to labor. They do so by buying space and monopolizing land.

Under the present system, as wealth accumulates, the wealthy seek to invest in land, to get control of natural elements, and get into a position from which to blackmail labor, thus becoming an obstacle in the way of the production of more wealth.

Under the better system, however, wealth could not thus be made to set up an obstacle to the creation of more wealth, or, in other words, to the employment of labor. It can then only obtain a profit by investing in lines of enterprise which give employment to labor.

Under which system will the demand for labor be greater? Under which will earnings be higher?

God bless the child that's got his own

Them that's got shall get
Them that's not shall lose
So the Bible said* and it still is news
Mama may have, Papa may have
But God bless the child who's got his own, who's got his own

Yes, the strong gets more
While the weak ones fade
Empty pockets don't ever make the grade
Mama may have, Papa may have
But God bless the child who's got his own, who's got his own

*Likely a reference to Matthew 25:29, which can be translated as "For everyone who has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him."

Consider the possibility that the meaning behind Billie Holiday's lyrics and Matthew 25:29 is not prescriptive but descriptive: that those who own land will always receive land rent, while those who do not have it must pay those who do have it for access to it (to have a place to live and a place to work), and thus will always be poor, particularly if, in addition to paying someone for access to land, they must pay taxes on their labor and/or on their purchases, in order to support Caesar (who was not part of the community) or to pay for the provision of public goods (schools, roads, courts) for the community.   Landlords in high-rent areas receive lots of rent; landlords in low-rent areas -- including small towns and agricultural land -- receive far less -- but it is still the landless who are paying them, for access to something whose value the landlords didn't create.

And then hear the words of Leona Helmsley:  "WE don't pay taxes.  The little people pay taxes."  She knew whereof she spoke. Property taxes in the places she did business were rather low, but her customers and workers paid significant taxes on their purchases and wages.   Deep down, she likely knew that she didn't make the sites of her buildings valuable: we all did.

A simple tweak of our taxation system can change it all: we can collect from landlords and other landholders some significant fraction of the annual rental value of their land, and use it to fund our public spending, instead of taxing sales, and buildings, and wages.   Not only would it be just and reduce the concentration of wealth and income, but, as the 2008 OECD study showed, it would promote economic growth.

I find it much easier to accept the idea that the gospel verse is descriptive than to believe that a loving god would intend it to be prescriptive.  You might explore wealthandwant.com for "The Crime of Poverty."

Concerning Women

Trickle Down Economics: The Very Useful Idiocy of Christine O’Donnell (Frank Rich, NYT)

Op-Ed Columnist - The Very Useful Idiocy of Christine O’Donnell - NYTimes.com

"Rove’s flip-flop was no doubt hastened by his own cohort’s assaults on both his ideological purity and masculinity. The blogger Michelle Malkin labeled him an “effete sore loser,” and Sarah Palin publicly instructed him to “buck up.” But surely the larger motive for his retreat was the dawning recognition of just how valuable O’Donnell is to the G.O.P.’s national aspirations in November — even should she ultimately lose her own race in blue Delaware. Whatever her other talents, she’s more than willing to play the role of useful idiot for her party. She gives populist cover to the billionaires and corporate interests that have been steadily annexing the Tea Party movement and busily plotting to cash in their chips if the G.O.P. prevails."

While O’Donnell’s résumé has proved largely fictional, one crucial biographical plotline is true: She has had trouble finding a job, holding on to a home and paying her taxes. In this, at least, she is like many Americans in the Great Recession, including the angry claque that found its voice in the Tea Party. For a G.O.P. that is even more in thrall to big money than the Democrats, she couldn’t be a more perfect decoy.

By latching on to O’Donnell’s growing presence, the Rove-Boehner-McConnell establishment can claim it represents struggling middle-class Tea Partiers rather than Wall Street potentates and corporate titans. O’Donnell’s value is the same as that other useful idiot, Michael Steele, who remains at the Republican National Committee only because he can wave the banner of “diversity” over a virtually all-white party that alternately demonizes African-Americans, Latinos, gays and Muslims.

 

LVTfan here:  I keep hoping that an interviewer or moderator will ask Ms O'Donnell whether she supports or is opposed to the Federal government continuing to fund the regular replenishment of the sand on the ocean beaches of Delaware and Maryland.  Many of the voters throughout Delaware own well-located beach homes in one state or the other, on which they pay annual property taxes well under $2,000 per year -- including many homes which collect summer rents of $20,000, $30,000 and (far) more.  These are often modest homes, made valuable by their proximity to the beaches; those which have had no building-permit work have annual taxes well under $1,000.   [The state and county each collect 1.5% of the purchase price at closing when homes change hands -- perhaps 20 years' worth of property taxes!  And renters may pay a 3% rental tax -- which may be more than the owners pay annually!]    The Atlantic Ocean beaches of Delaware and Maryland are "the nation's summer capital," the playground for residents of the Washington, D.C., Baltimore, Philadelphia and Wilmington metro areas.   Traditionally, they have been funded by federal taxes.

I suspect that the answer to that question may be a useful one for many voters all over Delaware, and will be of interest to southern Delaware's small business owners, and to people who vacation on and near those beaches.

I look forward to O'Donnell's answers.

Quarter days

Quarter days - Wikipedia, the free encyclopedia.

In British and Irish tradition, the quarter days were the four dates in each year on which servants were hired, and rents were due. They fell on four religious festivals roughly three months apart and close to the two solstices and two equinoxes.

The significance of quarter days is now limited, although leasehold payments and rents for business premises in England are often still due on the old English quarter days.

The quarter days have been observed at least since the Middle Ages:

"These have been the days when accounts had to be settled, days when magistrates paid their visits to outlying parts in order to determine outstanding cases and suits. There is a principle of justice enshrined in this institution: debts and unresolved conflicts must not be allowed to linger on. However complex the case, however difficult to settle the debt, a reckoning has to be made and publicly recorded; for it is one of the oldest legal principles of this country that justice delayed is injustice. Among the provisions that the barons wrested from the extortionate and unjust King John in Magna Carta of 1215, a safeguard for gentry like themselves and hungry peasants alike, was the promise that 'To none will we sell, or deny, or delay right or justice'. Days of assize ensure openness, assurance and timeliness of justice, justice not sold, not denied, not delayed."

In England

The English quarter days (also observed in Wales and the Channel Islands) are:
* Lady Day (25 March)
* Midsummer Day (24 June)
* Michaelmas (29 September)
* Christmas (25 December)

Lady Day was also the first day of the year in the British Empire (excluding Scotland) until 1752 (when it was harmonised with the Scottish practice of 1 January being New Year's Day). The British tax year still starts on 'Old' Lady Day (6 April under the Gregorian calendar corresponded to 25 March under the Julian calendar).

The cross-quarter days are four holidays falling in between the quarter days: Candlemas, May Day (1 May), Lammas, and All Hallows (1 November). The Scottish term days, which fulfil a similar role as days on which rents are paid, correspond more nearly to the cross-quarter days than to the English quarter days.

Well, I sometimes think that part of why people dislike the conventional property tax is that it is billed twice a year, and one must write a fairly large lump sum check.   Those who escrow their taxes as a condition of their mortgage aren't faced with this.  The vast majority of one's income taxes and payroll taxes are withheld biweekly or monthly.

Technology has come a long way, and it would probably make sense for our land value taxes to be paid once a month, just as mortgage payments are.  Many people would opt for an automatic withdrawal from their checking account, as mortgages and car payments are often handled.

Sidelight: my understanding is that Candlemas, which is on the same date that the US celebrates Groundhog Day, is the middle of winter, and one should have remaining half the candles one needs to get through the winter.

How to Increase America's Saving Rate: Rich Americans Save Tax Cuts Instead of Spending

Rich Americans Save Tax Cuts Instead of Spending, Moody's Says - Bloomberg.

Well, from time to time, we hear that Americans aren't saving enough, and sometimes columnists ask for suggestions of how we might increase America's savings rate.

Moody's has provided the answer: cut federal income taxes on the highest income people, and they will save a significant portion of it.   (The question arose because some say that in order to facilitate job creation, we ought to avoid increasing federal income taxes on the portion of taxable income over $250,000 per year.)

If the goal is to produce savings at the median, or at the 25th or 75th percentiles, or at the 10th or 90th percentiles, reducing taxes on the highest-income 2% or so is not going to serve the purpose.   But it will satisfy the "increase America's saving rate" goal.

Before we went into this recent "bust" portion of our 18-year boom-bust cycle, a shocking proportion of Americans lacked sufficient savings to provide even a poverty-line existence for their families for as short a period as 3 months.  (Edward Wolff of NYU wrote the study on this.)   Most of us live paycheck to paycheck.

The notion of saving for a "rainy day," or even of saving to buy one's next car for cash, seems quaint and of-another-era, with so many of us paying more than 40% of our income for housing.  (Yet we don't complain about owing our soul to the company store.  Now it is the FIRE sector we owe.)    And look at the measures we've used to substitute for people's inability to save a 20% down payment on a starter home!

But the best-off among us -- both those who have large amounts of wealth and many of those who receive high wages or high profits on their "labor" (even if their labor consists of reaping that which other people sowed, they do regard it as labor, and sometimes the IRS does, too -- unless they run hedge funds, in which case it gets treated just as if they'd actually invested their own capital in a way a corporation could use to enhance its operations!) -- can and do save and invest.   And clearly this is an aspect of the wedge driven through society which Henry George described 130 years ago, driving some up and the vast majority down.

The wealthiest among us own, and take opportunities increase their holdings of, the corporations -- public and private -- which hold our best land (urban, oil-laden, etc.) and our non-renewable and/or otherwise finite natural resources.  (See "stock ownership" in the tag cloud at left for the data.)  We praise them as if they are somehow self-made, and let them parade about as such, and we gratefully accept their charity -- tulips and swimming holes on Park Avenue -- as if it made up for what they and their ancestors stole from us and ours, and what their children will reap from the labor of our children.   We don't see the structures by which they do it -- we're so used to them that they are, like the air we breathe, invisible to us.   But 120 years ago, most Americans did understand them.  (Explore the free NYT archives, 1880 to 1900, for the name of Henry George, and do some reading.  I suspect even the American history and American Studies majors will be surprised.)

 

Obama to Call for $50 Billion Public Works Plan

Obama to Call for $50 Billion Public Works Plan - NYTimes.com.

WASHINGTON – President Obama on Monday is to call for as much as $50 billion in government spending to start up a long-term public works plan emphasizing transportation projects – roads, rail and airport runways – over the next six years.

Okay.  Sounds good.  This is what some people have called Pork, when the money has been invested in other people's congressional districts. 

Good infrastructure projects are very worthwhile, and, properly conceived, well designed and well executed, will serve the public for decades, perhaps many generations.  Look at what the CCC accomplished during the Depression.  Look at the Interstate Highway system.  Look at the service that commuter rail and, in some places, intercity rail offers.

But local government has failed to follow through.  Federal investment in infrastructure is the "1" of the "1-2 punch," but if local, county or state governments fail to respond appropriately, much of the benefit is lost.

Every worthwhile infrastructure project creates (or in the case of necessary maintenance, maintains) far more land value than the cost of the project.  Consider:

• the George Washington Bridge across the Hudson created how much land value in northern New Jersey?
• the Golden Gate Bridge created how much land value in Marin County, California?
• the Tappan Zee Bridge across the Hudson created how much land value in Rockland and Westchester Counties?
• the Northway created how much land value north of Albany, New York?
• the Verrazano Narrows Bridge created how much land value on Staten Island?

Who benefited?  The landholders!  Federal dollars were poured into these projects, and individual landholders reaped the windfall we created.  Their communities and counties and states could have taken two simple steps to recycle that value -- and still can!:

1. Assess the land value every few years.  (Assessing land value is not expensive or difficult to do well, if one sets out to do it.  Unfortunately, many assessments are focused on buildings, or on the property as a whole, and only later assign a land value, which may bear little relation to market values.)
2. Collect some significant portion of the value which results from federal, state, county and local investment in infrastructure and services.   Don't tax the buildings.  Don't tax sales.  Don't tax wages.  Just the land value. 

And if the local, county and state governments don't see fit to collect that value for local, county or state purposes, the federal government ought to be able to step in and collect it.  After all, WE created it.  It doesn't belong in private pockets.  And if we collected it, we could reduce or eliminate the dumb taxes which burden our economy.

Which is the whole point of stimulating the economy, isn't it?

Unless, of course, we're doing it for the benefit of the 10% of us who receive about 48% of the income, or the slightly different 10% of us who own 71.5% of the net worth, in which case this is a very poor idea.  Remember what Leona Helmsley told us:  "WE don't pay taxes.  The little people pay taxes."

Shall we create more unearned income for them?  Or shall we create incentives for localities and states to recycle that value, with the option of collecting it for federal purposes if they choose not to?

How to End the Great Recession

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.

via www.nytimes.com

I think Robert Reich sees part of the problem, but he doesn't see the solution.   How do we achieve more widely shared prosperity?  By a variation on Alaska's theme.  In Alaska, a significant share of the value of the state's natural resources is used to fund state government, and another significant share is placed each year into the Alaska Permanent Fund, which is invested in a broadly diversified portfolio and pays an annual dividend of $1000 to $2000 to every permanent resident of Alaska, of all ages.  [See http://www.nytimes.com/2010/09/04/us/politics/04alaska.html for an article mentioning this, and the Alaska Permanent Fund link, at the left of this page.]   Alaska has it half right: they collect a decent share of the value of the natural resources, but they don't tax their land value much.

How do we share the prosperity beyond the top 10%?  By shifting our incentives so that those who currently grow wealthy in their sleep by collecting economic rent find themselves sharing that rent with the rest of us.  Untax wages, starting with incomes under the median.  Untax sales.  Untax buildings.  Tax land value.  Tax the value of those things which the classical economists would have recognized as land -- water rights, "rights" to pollute, airport landing rights at congested airports, geosynchronous orbits (which prevent satellites from bumping into each other), electromagnetic spectrum (those airwaves which most people would say "belong to the American people" but which we have permitted corporations -- public and private -- to privatize), natural resources such as oil, natural gas, copper, coal, lithium, etc..   All these things are going into corporate portfolios (here and abroad -- and some of those corporations are families in power, despite attempts at nation-building), week in and week out, and their value accrues to the shareholders of the corporations.  Stock ownership is quite concentrated, and these benefits flow into the pockets of a relative few, who, as Reich rightly points out, may or may not spend or invest in America's products.  When they do invest, they often acquire our best land and resources, buying thereby the labor of thousands of Americans.  When an acre in Manhattan can be worth $400 million, the seller of that land didn't make it valuable.  WE did!  So why should an individual, or a corporation, or a trust, or a university, or a pension fund -- or any private entity -- get to pocket that value as if they did?   (The kindest thing I can say is that we have a bad habit!  Something like chattel slavery -- and look at how long it took us to end that.)

Pocketing that value has two sorts of effects: when they sell, they pocket that so-called "capital" gain.  It isn't capital!  It is land value!  Capital depreciates; what rises in value is land, and it rises for reasons which have nothing at all to do with the "fellow" who owns it.  

But even when they buy and hold, there are important effects of permitting that privatization.  The rich don't need to put the land to its highest and best use, because they can get by with something less while they wait for the community to cause it to grow.  (See The Taxpayer at 72nd and Madison.  Notice all the surface parking lots in Manhattan, Philadelphia, Hartford and many other cities.  See the 4.3 acre "hole in the ground" in Stamford, CT, right near the city's 100% location, vacant since the early 1980s.) They're patient!  They can afford to be.  The top 10% of us hold 71.5% of the chips, according to the 2007 Survey of Consumer Finances.)   Not using the land well reduces the supply of housing close to the center of things (adding to sprawl) and/or of jobs (which we say we want) and contributes to a wide range of our most serious social, economic, environmental and justice problems.

If we collected more of the annual rental value of our urban land, the holders of that land would turn into active users or sell it to someone who would put it to good use.  Good use creates jobs, and homes and other things that the market wants.  But when the market can't afford them, it does without.  People are priced out of housing in the places they'd prefer to live.  They lack jobs or are underemployed, and the rich keep getting richer.

Reich advocates extending the EITC, exempting the first $20,000 of wages from payroll taxes, improving and extending early childhood education, making public universities free in return for 10% of the first 10 years of full-time earnings, creating "earnings insurance."  He concludes,

Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.

Well, 130 years ago, Henry George spoke to some of the kinds of measures that have been proposed over the years for reducing poverty and promoting widely shared prosperity.  See "Part VI -- The Remedy" and particularly "Ineffective Remedies" and "The True Remedy"

"Ineffective Remedies" begins,

OUR CONCLUSIONS point to a solution. It is so radical that it will not be considered if we believe less drastic measures might work. Yet it is so simple that its effectiveness will be discounted until more elaborate measures are evaluated. Let us review current proposals to relieve social distress. For convenience, we may group them into six categories:

1. More efficient government
2. Better education and work habits
3. Unions or associations
4. Cooperation
5. Government regulation
6. Redistribution of land

That 10% of us who hold 71.5% of the net worth also received 41.3% of the current income. [Note that these percentages are understated, since the SCF purposely omits the Fortune 400 families.  They hold about 1% of the nation's net worth.] 

Picketty & Saez provide annual updates on income concentration.  For 2008, they report that the top 10% of us (sorted by income, not net worth) received 45.60% of the income when capital gains are excluded and 48.23% of income including capital gains.   (For 1988, the corresponding figures are 38.63% and 40.63%; in 1958, 32.11% and 33.56%.   Do we notice a trend here?  Do we like it or think it a healthy trend?)

We have permitted and supported a structure which funnels wealth and income into relatively few pockets.   We have to reform this structure, and we have to recognize that the current beneficiaries are not likely to be keen on reform -- conservatives have a lot to conserve for themselves -- and those who are dependent for their salaries on being popular with those beneficiaries are not likely to be particularly interested in looking at the underpinnings of the structure with an eye to removing some of the ladders (escalators!!) or  gentling the chutes.

Those who get to privatize the value of what ought to be common assets grow wealthy in their sleep.  Until enough of us understand the mechanism to constitute a majority, we aren't likely to correct it.

 

It is a bit disheartening to think how many well-regarded economists live in California, the land of Proposition 13, and haven't lifted a finger or opened their mouths to suggest that it is not in the best interests of California's people.   Milton Friedman acknowledged many times that the tax on land values was the "least bad" tax -- and didn't have anything to say about Proposition 13, which was the antithesis of what a wise person or society would do with that information.    So I guess I shouldn't be surprised that today's California economists, with very few exceptions, aren't all that concerned with the economic wellbeing of ordinary people any more than economists elsewhere are.  Or maybe, as my late mother would have expressed it, their educations have simply been neglected.  (At which point she would proceed to fill in my newly-identified knowledge gap.)    Economists can start with the links in this post, and then explore from there.

Who is entitled to Ground Rent? The Vicar's Wife, or someone(s) else?

There is an interesting story coming out of Rosses Point, County Sligo, Ireland, that a Church of England vicar and his wife are seeking to be paid ground rent on some land that her great, great grandfather, William Middleton, acquired sometime before 1875.  He owned the entire community, except for the church. Apparently the people who have resided on that land over the intervening years are supposed to have been paying annual ground rent to his heirs, or "buying out" the ground rent.  Either would benefit his heirs with value to which neither he nor they have contributed anything other than what nature provided.  (I think we can reasonably assume that any improvements he made to the land -- fences, drainage, stumping, septic systems, etc -- are long gone after 135 years.)

Most of the Middleton family left Ireland, some as long as 90 years ago.  Apparently no ground rent has been paid in the past 35 years.

According to one of the articles,

In the 1970s, locals traced Middleton family members across the globe, and reached a deal where many bought their ground rent for sums of around IR£100.

But some did not clinch agreement, leaving uncertainty over the ground on which their homes was built, which is in one of the most valuable locations in the north-west.

This raises all sorts of interesting questions about the logic and justice of our laws.  Who has made that land worth anything?  Is it the heirs of William Middleton?  Is it the taxpayers of the community in which the land is located, who presumably have supplied services to these properties?  Is it the people who live in or work in or visit that community?

And then comes the important question.  Putting aside what the law says, who is entitled to that land rent?  Is it the descendants of the 1875 owner?  Is it the current tenants?  Is it the community in which those lots are located?

Which of these is a logical and just way to run a society so that all of us can thrive and prosper?  How should we fund the public goods and services which make a community a good place to live?   Taxing sales within the borders?  Taxing the wages of residents or workers within the border?  Taxing the buildings within the border?  Or collecting some, even all, of the annual rental value of the land for public purposes?

There are properties in midtown Manhattan owned by trusts "granted" by people who have been dead for many decades.  Those who want to use that land pay land rent, year in and year out, to the beneficiaries of those trusts, decade after decade.   Mostly likely that rent escalates over time, as the residents, taxpayers and tourists who use Manhattan contribute their tax dollars and their presence to providing the services which make Manhattan what it is.  So why on earth do we tax wages, sales, hotel rooms, buildings of all kinds, rather than collecting the rent for public purposes?

The Rosses Point heir's husband is quoted as follows:

Mr Chave-Cox said: “You know I am a vicar. Vicars are honest and clear about things. All we want is what’s right and fair and sort things out. Presumably that means people buying up the ground rent.”

I wonder how much they feel they are entitled to receive in 2010.

I seem to remember it being said that "The Earth is the Lord's."   Which Lord?   And what are the implications for ordinary people?

You can read more at

• http://www.independent.ie/national-news/landlords-lay-claim-to-property-at-scenic-spot-2307972.html
• http://clericalwhispers.blogspot.com/2010/08/vicars-wife-defends-her-claim-to.html
• http://revjph.blogspot.com/2010/08/church-of-england-vicar-in-irish-land.html
• http://www.irishdigest.com/?p=10099

Some random thoughts on Monopoly and Life

I heard something this morning on the radio which tickled my funny bone, and then got me thinking.  The program was "Wait, Wait -- Don't Tell Me" and they were spinning yarns for a contestant to pick out the real one from the two made-up news stories.  The theme was about how the wealthy are different, and there was a tale of rich people, perhaps in some form of noblesse oblige, choosing to play the board games Life and Monopoly with $1,000 less in starting money than the rules call for.

Well, my imagination was off and running. (I was stuck in traffic.) 

Look at what happens in the board game Monopoly.  Everyone starts with the same amount of money, and each one earns the same salary ($200 for each pass around the board).  And yet some become wealthy and most end up penniless.  The rules and structures are designed to create that situation.    Some of it is random, or at least appears to be: what happens to you depends in part on a throw of the dice.  Assuming all the players are using the same dice, one assumes that much is due to "chance."  There is even a deck of cards by that name, each of which produces a different turn outcome. 

Imagine Monopoly if the rules were a little different: that some started the game with a bit more money, or an undeveloped property they already owned, or a block or neighborhood with single family houses on them.  After all, we weren't all born the same year.

Or imagine that instead of all players receiving $200 each "year," some of us received $400 or $600, and others received only $80 or $150.  

Or combine those two assumptions.

Or imagine that the amount each player receives begins at $80, and for some rises and for others does not.

Or assume that some of us receive nothing, since there is a finite amount of money in the game, and if the powerful players have it all tucked under their side of the board, it simply isn't available when you pass "GO." 

Or assume that when you do go to buy a house, having assembled your 2- or 3-lot neighborhood, there aren't any available: the supply is fixed, and the existing players have bought them all up.  You'll have to wait, and keep paying rent until they replace them with hotels.  (Sounds like California under Prop 13, doesn't it?  One of the lowest homeownership rates in the US, except among seniors, whose homeownership rate exceeds that of their counterparts in the rest of the country!)

Those who have explored this blog may know that the board game Monopoly was not created during the 1930s depression, but is a direct descendant of a turn-of-the-century board game called The Landlord's Game, which was created to teach the ideas of Henry George.  Elizabeth Magie (later Phillips) patented it in 1904, and later versions in the 1920s. (See a modern rendering here.)  I've also seen pictures of another board for the Landlord's Game, showing a community surrounding a lake; one advances around the board.

The game came with two sets of rules, one called the Landlord Rules, rather similar to the game we know today.  The other set was called the Prosperity Rules.  You might enjoy the recent article in Land & Liberty (pages 14 & 15).   Don't miss the last couple of paragraphs.

Why were resources expunged from neo-classical economics? | Martin Wolf's Exchange

Why were resources expunged from neo-classical economics? | Martin Wolf's Exchange

Almost a month ago (7/12), Martin Wolf, the Financial Times' chief economics commentator, posted a piece to his blog under this title. The last time I looked, perhaps 10 days after his initial post, there were about 150 responses.  I circled back recently, and found that the comments count had risen to over 350.  

Here is his response, posted 7/23:

This ended up as a heated debate. Nobody will be surprised if I conclude that the result of the debate (often surprisingly ill-tempered) was pro-LVT 10, anti-LVT zero. I am surprised by some of what the anti-LVT proponents have said. I would have thought they would wish to open their minds a bit. I did and was persuaded of the case, as a result. Is not the purpose of such exchanges to learn from one another?

Some of the arguments addressed at the case for LVT are quite extraordinary.

The essential point is quite simple: the value of resources is created by the economic activity of other factors of production. The owners of these resources can become hugely wealthy and are often untaxed on that increase in wealth: the Duke of Westminster is the richest Englishman simply because he owns a large amount of land in a valuable part of London. So why should he have command over the labour of so many other people?

That wealth is, in the strictest sense, unearned. If that rise in wealth were taxed away, other taxes -- those on labour, capital and entrepreneurship -- could fall. This would be both efficient (because taxes on rent do not create distortions, as Ricardo showed) and also just, because the wealth was unearned. Now, surprisingly, the UK allows foreign landowners to enjoy the increase in value created by the British economy, entirely tax-free. This is utterly crazy.

Let me add four other points.

First, throughout history, the main source of wealth was land-ownership. The parasitic landowner became wealthy on the efforts of others -- peasants, tenants and even developers. Sometimes the parasite was also a farmer or developer, but that does not change the fact that these are two distinct economic roles. The parasite built fine castles and palaces and often sponsored music and culture. But he was still a parasite. The beauty of capitalism is that many of the wealthiest are no longer parasites. This is good. But many of the wealthy still are parasites. Moreover, now everybody wants to get rich by being a mini-landowner. That is a huge diversion of effort.

Second, the financial system's ills are the result of unchecked credit-creation. Yes. But unchecked credit-creation would be impossible without collateral. Land is always the principal form of collateral (buildings are a depreciating asset). That is why financial bubbles that do not create credit booms (like the dotcom bubble) are economically benign, while property bubbles are potentially catastrophic. When the value of collateral collapses, the financial system implodes.

Third, there is really nothing new about this understanding of the role of resource rents. They were central to the classical system, from which modern economics, in its various forms, derives. Ricardo's analysis of rent remains intellectually impeccable.

Finally, as Herman Daly has noted (http://steadystate.org/modernizing-henry-george/), today economically valuable resources are much more than just land (and what lies below it). They include all the services of the biosphere - those that are appropriated, those that are appropriable and those that are non-appropriable. If we do not think seriously and intelligently about how to price resources, we are likely to go seriously adrift, perhaps even into disaster. Here land is the least of our problems -- it is appropriable and, by and large, appropriated. So, at least, the price mechanism works, even though the distribution of the gain is grossly unjust. But, in other cases, no appropriation is possible, or at least it is not easy. Nobody can appropriate the atmosphere. It is nigh on impossible to appropriate the oceans. How do you own species diversity? These are serious challenges.

So, I conclude where I started: resources matter. It was a great mistake to exclude them from the canonical neo-classical model. It is also a great mistake not to tax their owners to the hilt.

Michael Hudson: The Road To Serfdom (2006)

Hudson: The Road To Serfdom

Doing some housecleaning, I came across the May, 2006, issue of Harper's Magazine, whose cover story was entitled "The Road to Serfdom: An Illustrated Guide to the Coming Real Estate Collapse."  On the promotional half-cover, the headline said "THE HOUSE TRAP: How the MORTGAGE BUBBLE Will Bankrupt Americans -- in 20 East Steps."

I looked online, and found a copy of the article in PDF format here, which permits me to throw away my hardcopy. 

Never before have so many Americans gone so deeply into debt so willingly. Housing prices have swollen to the point that we’ve taken to calling a mortgage — by far the largest debt most of us will ever incur — an “investment.” Sure, the thinking goes, $100,000 borrowed today will cost more than $200,000 to pay back over the next thirty years, but land, which they are not  making any more of, will appreciate even faster. In the odd logic of the real estate bubble, debt has come to equal wealth.

And not only wealth but freedom — an even stranger paradox. After all, debt throughout most of history has been little more than a slight variation on slavery. Debtors were medieval peons or Indians bonded to Spanish plantations or the sharecropping children of slaves in the postbellum South. Few Americans today would volunteer for such an arrangement, and therefore would-be lords and barons have been forced to develop more sophisticated enticements.

The solution they found is brilliant, and although it is complex, it can be reduced to a single word — rent. Not the rent that apartment dwellers pay the landlord but economic rent, which is the profit one earns simply by owning something. Economic rent can take the form of licensing fees for the radio spectrum, interest on a savings account, dividends from a stock, or the capital gain from selling a home or vacant lot. The distinguishing characteristic of economic rent is that earning it requires no effort whatsoever. Indeed, the regular rent tenants pay landlords becomes economic rent only after subtracting whatever amount the landlord actually spent to keep the place standing.

Most members of the rentier class are very rich. One might like to join that class. And so our paradox (seemingly) is resolved. With the real estate boom, the great mass of Americans can take on colossal debt today and realize colossal capital gains — and the concomitant rentier life of leisure — tomorrow.

If you have the wherewithal to fill out a mortgage application, then you need never work again. What could be more  inviting — or, for that matter, more egalitarian?

That’s the pitch, anyway. The reality is that, although home ownership may be a wise choice for many people, this particular real estate bubble has been carefully engineered to lure home buyers into circumstances detrimental to their own best interests. The bait is easy money. The trap is a modern equivalent to peonage, a lifetime spent working to pay off debt on an asset of rapidly dwindling value.

Most everyone involved in the real estate bubble thus far has made at least a few dollars. But that is about to change. The  bubble will burst, and when it does, the people who thought they would be living the easy life of a landlord will soon find that what they really signed up for was the hard servitude of debt serfdom.

From there, Hudson proceeds to list the 20 steps, each illustrated with a graphic.  I encourage you to look up the original; the graphics are generally quite helpful to making the point -- but the text is valuable here.

Joe Stiglitz: the people are being cheated and the economy is getting poorer

Joe Stiglitz made some important observations in a talk on July 26 at the University of Queensland.  Here are the first few paragraphs from an article on the University's website:

Inadequate taxes on mining means the people of Australia are being cheated and the economy is getting poorer, a Nobel Prize-winning economist told a crowd of 1400 people at The University of Queensland last night.

Professor Joseph Stiglitz shared his thoughts on the proposed mining tax in response to a question from an audience member during the seventh UQ Centenary oration.

“Natural resources lead to an appreciation of the currency and that leads to an imbalanced economy because it's hard for any other sector to do well, competing with imports or exporting,” Professor Stiglitz said.

“You're selling off your assets and in many cases you're selling them off at a very low price.

“If you are taking resources out of the country and you are not reinvesting those resources in one way or another – a stablisation fund, human capital, infrastructure – then your economy is getting poorer, not richer, and a good accounting framework can show that,” he says.

“When you're taking out natural resources from an economy you ought to have a subtraction from GDP - a firm that held a resource and was selling it off would take off depreciation and that would show up in its books as depreciation.”

A bit of searching returned another account of that same evening:

Professor Stiglitz told a packed UQ Centre that Australia's economic stimulus package was the best designed in the world.

AND he said natural resources - coal, iron ore - should be properly valued at market just like the electromagnetic spectrum.

The government auctions the spectrum to the highest bidders who want to operate mobile phone networks, cable companies, television and radio stations. 

Basically, a country - like Australia - will end up poor if doesn't get the best price for its assets - and natural assets are not renewable, once they are gone they are gone. If the proceeds from the sale of these assets are not invested in infrastructure to support and grow other sectors the economy (manufacturing and value-adding, goods creation) then a country and it's people will not prosper - HELLO! HELLO! Drowning not waving.

"It should be subtracted from Gross Domestic Product (GDP)," he said. "You are selling off assets at a very low price if you don't have adequate taxes on mining - you are being cheated," he said to audience applause.

He thinks resources should be auctioned off to the highest bidder - the free market at work. Of course, the mining industry will make all kinds of threats.

To everyone's amusement he joked about how mining companies bamboozled, threatened and bribed governments of developing, fragile nations. 

"I assume that's not the case in Australia," he mused.

To prosper, a country needs to set up a stabilization fund (from a mining tax, if not a resources auction) for nation building.

This is what he calls an investment fund for building infrastructure and to grow value-adding industries, maintain education, job creation.

Not only that but the sell-off of natural resources should appear on a country's accounts as a kind of depreciation of assets - otherwise the accounts are not accurate. ...

He made these comments at the end of the oration after he explained the difference between the financial sector and the economy - the economy is not the financial sector.

The financial sector (the banks and regulators) are the culprits behind the global financial crisis which has crippled the global economy. Apparently, moneylenders have been skimming 40 percent of the profits from companies that actually make and produce things. His big point was that this is not really the role of the financial sector. The financial sector's job is to support economic growth, not cripple it. 

"Finance is a means to an end," he said. "The lack of balance between the financial sector and the economic sector was actually the real problem in this economic crisis (NOT the real estate bubble)."

The second account concludes with:

And as for Climate Change and the price of carbon and waiting for the rest of the world before we do anything?

Economies are not restructuring because there is no carbon price. The western world worries about the growing and changing consumption patterns of China and India.

Professor Stiglitz doesn't believe the West should begrudge them at all.

It's not consumption that's evil - it's profligacy. WASTE! Now, I wonder who wastes more the West or countries raising people out of poverty?

India and China will follow the wasteful ways of the West if the world fails to set a carbon price and force everyone to consume less to save the planet - the planet will force us to change in the end (*he says).

"If we had agreed to have a price on carbon at Copenhagen that would have been the answer," he said. "It would have provided an increase in global aggregate demand (global economic spending) as firms all over the world needed to retrofit (their business to meet pollution standards)."

So why is the US not hearing this advice?   There is a lot here that speaks to issues which Americans would be wise to attend to.   Alaska pays for a large portion of its costs by taxing its natural resources, and also provides an annual income to every permanent resident, of any age, from the proceeds of investing oil revenue into a broadly diversified portfolio, through the Alaska Permanent Fund.   We have sacrificed many American lives in Iraq, but not produced a situation in which Iraq's oil revenue gets used either to finance infrastructure and government-provided services OR to provide an income to every citizen.

Re-read these excerpts with Iraq in mind, and then thinking of Afghanistan, and then of America.

Postscript:  see also Karl Fitzgerald's account of Stiglitz's 7/30 talk.

The Woodpeckers' Tree System

The Woodpeckers' Tree System

The Woodpeckers were advancing in civilization and took up something like the English land system.  It was shown that holes in a tree trunk were fixed improvements which could not be made unless ownership of the tree was secure.  Full title to the trees was, therefore, confirmed to various Woodpeckers.

Thereupon the more active and long-headed Woodpeckers began to affix to each vacant tree a little red leaf like a seal, so as "to hold it until is is wanted."

The Woodpeckers increased in number so that there were not unclaimed trees enough for everybody; later all the convenient trees were full, and there were still more applications.

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.

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.