LVTFan's Blog

Suburban Sprawl and the Decline of Social Capital

t r u t h o u t | Suburban Sprawl and the Decline of Social Capital.

This is an excellent article which I encourage you to read.  I want to share the response which a friend posted to a global listserv we're both on. 

Before I do that, though, I think it is worth considering that the much reported downturn in the market for new housing, as opposed to resale, might relate to a flight to quality.  New subdivisions are on the fringes.  Often they are beyond the fringe, surrounded by farmland -- sometimes described as checkerboard development.   (I've even seen townhouses surrounded by farmland!)

If you have a choice between a new home in a distant subdivision and a resale home in an established location, served by established transportation systems, schools, jobs, shopping, cultural amenities, etc., which will you choose?  Maybe the explanation of why new houses are not selling is that buyers now have a wider choice of homes they can afford, and are choosing the better locations over the newly constructed houses on or beyond the distant edge of the community.

If I'm correct, it bodes well for smaller builders who are doing infill and redevelopment of existing neighborhoods.  Wise policy can promote infill, while unwise policies lead to sprawl.  I suspect the sprawl-folks have a lot more lobbying money than the infill-oriented ones, so can only appeal to good sense.

Here's Ed's response to the sprawl article, which I found to be well reasoned and well stated:

"A colleague of mine forwarded the link of this article to me for comment, as my professional work in the United States has been in community revitalization and the development of quality affordable housing.

What I came to understand midway in my career was that land markets are made dysfunctional by law that favors the landed over those who develop and utilize locations. There are many issues causing sprawling development patterns, but one of the most consistent is the struggle to gain control over land that allows for profitable development. And, of course, developers are not concerned with the infrastructure costs of bringing roadways; water, sewer and other utilities, hospitals, libraries, schools, and other public goods and services to newly-created subdivisions. These costs are passed on to property owners, working people and businesses.

There is only one measure that will redirect development inward, leaving more distant land available for agriculture, recreation and habitat for other species. This is for government to fully collect the annual rental value of every location within its geographical boundaries, while exempting improvement made thereon from the tax/revenue base. What this change in policy will do is easy to see.

• First, profit from speculating in the hoarding of land will disappear. Thus, investors will acquire control over land only when profitable development is possible.

• Second, existing owners of land parcels will not be able to continue to ignore land they hold because the cost of doing so will (particularly if the and parcels are centrally-located) make this costly. They will either develop land based on highest, best use or sell the land to someone who will.

• Third, the cost of property assessment will fall dramatically once property improvements are removed from the tax base.

• Fourth, removing speculation and hoarding of land will bring down the price (but not the annual rental value) of land parcels. This will make it far less costly for public agencies to acquire land for needed public buildings and (if still required given household incomes) to construct decent, affordable housing units for the housing-deprived.

In summary, what will curtail sprawl is public policy that encourages the renovation of existing structures and in-fill construction of new buildings where infrastructure already exists, while at the same time requiring land owners to compensate the community for the value that comes to locations because of public goods and services."

In Weather Chaos, a Case for Global Warming - NYT

In Weather Chaos, a Case for Global Warming - NYTimes.com.

The floods battered New England, then Nashville, then Arkansas, then Oklahoma — and were followed by a deluge in Pakistan that has upended the lives of 20 million people.

The summer’s heat waves baked the eastern United States, parts of Africa and eastern Asia, and above all Russia, which lost millions of acres of wheat and thousands of lives in a drought worse than any other in the historical record.

Seemingly disconnected, these far-flung disasters are reviving the question of whether global warming is causing more weather extremes.

The collective answer of the scientific community can be boiled down to a single word: probably.

“The climate is changing,” said Jay Lawrimore, chief of climate analysis at the National Climatic Data Center in Asheville, N.C. “Extreme events are occurring with greater frequency, and in many cases with greater intensity.”

He described excessive heat, in particular, as “consistent with our understanding of how the climate responds to increasing greenhouse gases.”

Theory suggests that a world warming up because of those gases will feature heavier rainstorms in summer, bigger snowstorms in winter, more intense droughts in at least some places and more record-breaking heat waves. Scientists and government reports say the statistical evidence shows that much of this is starting to happen.  . . .

If the earth were not warming, random variations in the weather should cause about the same number of record-breaking high temperatures and record-breaking low temperatures over a given period. But climatologists have long theorized that in a warming world, the added heat would cause more record highs and fewer record lows.

The statistics suggest that is exactly what is happening. In the United States these days, about two record highs are being set for every record low, telltale evidence that amid all the random variation of weather, the trend is toward a warmer climate.

Recall that the US uses a disproportionate percentage of the world's oil and coal, and produces a disproportionate percentage of the world's greenhouse gases.

As poor people around the world -- and not-so-poor people, too -- contemplate America's place in the world, particularly when they are suffering from the effects of extremes of weather, are they likely to be willing to accept the notion that America is somehow special, and that it is the rest of the world that must adjust to us, or will they come to hold us accountable to the rest of the world's people?

When we wrap our minds around the implications of that question, we will come to the question of how we can reduce the demand for the kinds of energy which pollute the world's air.

Part of the answer will come from reducing, even reversing, urban sprawl, and setting our incentives so that our cities get re-developed more quickly and more effectively.  This will also be good for the economy, creating jobs in the ongoing redevelopment process and then again in the new buildings created by this redevelopment. 

What incentives?  Start with the incentives which promote intense use of land well-served by taxpayer-provided infrastructure (highway systems, rail and subway systems, bridges, tunnels, air travel, etc.; water, sanitary sewer, stormwater management, etc.); and services (schools, police, ambulance, firefighting, street-cleaning, trash removal, recycling, public health, courts and prisons; public parking, etc.)  Every one of those services serves to increase the value of land within the area served.  Most of them contribute more to the land value than they cost.   Yet we continue to fund them, in many places, with taxes not on land value but on wages or sales -- stupid taxes, to be blunt about it!  

We can settle down and study the problem, or we can continue to do what hasn't worked yet.  But not for long, and not for free.  Our neighbors in the other 94% of the world are going to start holding us accountable at some point.  Do we want to wait until it hits us, or do we want to get out in front of it?

And if we could, via a simple reform in the US, set an example that would contribute to prosperity in other countries, wouldn't we be wise to pursue it?

Learning To Get Out Of The Way « Aldous Huxley | This I Believe

Learning To Get Out Of The Way « Aldous Huxley | This I Believe.

In every one of the higher religions, there is a strain of infinite optimism on the one hand and on the other, a profound pessimism. In the depths of our being, they all teach there is an inner light, but an inner light which our egotism keeps, for most of the time, in a state of more or less complete eclipse. If, however, it so desires, the ego can get out of the way, so to speak, can dis-eclipse the light and become identified with its divine source, hence the unlimited optimism of the traditional religions. Their pessimism springs from the observed fact that though all are called, few are chosen for the sufficient reason that few choose to be chosen.

To me, this older conception of man’s nature and destiny seems more realistic, more nearly in accord with the given facts than any form of modern utopianism. In the Lord’s Prayer, we are taught to ask for the blessing, which consists in not being led into temptation. The reason is only too obvious. When temptations are very great or unduly prolonged, most persons succumb to them. To devise a perfect social order is probably beyond our powers, but I believe that it is perfectly possible for us to reduce the number of dangerous temptations to a level far below that which is tolerated at the present time. A society so arranged that there shall be a minimum of dangerous temptations — this is the end towards which, as a citizen, I have to strive.

In my efforts to achieve that end, I can make use of a great variety of means. Do good ends justify the use of intrinsically bad means? On the level of theity, the point can be argued indefinitely. In practice, meanwhile, I find that the means employed invariably determine the nature of the end achieved. Indeed, as Mahatma Gandhi was never tired of insisting, the means are the end in its preliminary stages.

Men have put forth enormous efforts to make their world a better place to live in. But except in regard to gadgets, plumbing, and hygiene, their success has been pathetically small. Hell, as the proverb has it, is paved with good intentions. And so long as we go on trying to realize our ideals by bad or merely inappropriate means, our good intentions will come to the same bad ends. In this consists the tragedy and the irony of history. Can I, as an individual, do anything to make future history a little less tragic and less ironic than history past, and present? I believe I can. As a citizen, I can use all my intelligence and all my goodwill to develop political means that shall be of the same kind and quality as the ideal ends which I am trying to achieve. And as a person, as a psychophysical organism, I can learn how to get out of the way so that the divine source of my life and consciousness can come out of eclipse and shine through me.

English novelist Aldous Huxley was born into a family of scientists and writers. He is best known for his books “Brave New World" (1932) and “Point Counter Point" (1928), but also wrote poetry, essays, screenplays and children’s books. Huxley died in 1963.

According to the closing words Bob Edwards added after listening to this essay, Aldous Huxley, C.S. Lewis and John F. Kennedy all died on the same day.   This radio series came from the 1950s, but I've not been able to tie down the date any closer than that.

My ears perked up when I heard Huxley's name mentioned.  In his forward to the 2nd edition of Brave New World, circa 1947, he says that were he to re-write the book, he would include the possibility of a third way.  Here's my abridgment:

In the meantime, however, it seems worth while at least to mention the most serious defect in the story, which is this. The Savage is offered only two alternatives, an insane life in Utopia, or the life of a primitive in an Indian village, a life more human in some respects, but in others hardly less queer and abnormal. ... Today I feel no wish to demonstrate that sanity is impossible. ...  If I were now to rewrite the book, I would offer the Savage a third alternative. Between the utopian and the primitive horns of his dilemma would lie the possibility of sanity -- a possibility already actualized, to some extent, in a community of exiles and refugees from the Brave New World, living within the borders of the Reservation. In this community economics would be decentralist and Henry-Georgian, politics Kropotkinesque cooperative. Science and technology would be used as though, like the Sabbath, they had been made for man, not (as at present and still more so in the Brave New World) as though man were to be adapted and enslaved to them. Religion would be the conscious and intelligent pursuit of man's Final End, the unitive knowledge of the immanent Tao or Logos, the transcendent Godhead or Brahman. And the prevailing philosophy of life would be a kind of Higher Utilitarianism, in which the Greatest Happiness principle would be secondary to the Final End principle -- the first question to be asked and answered in every contingency of life being: "How will this thought or action contribute to, or interfere with, the achievement, by me and the greatest possible number of other individuals, of man's Final End?"

Huxley was not the only person to find in Henry George's ideas a "third way."  Bob Andelson wrote an excellent essay called "Henry George and the Reconstruction of Capitalism."

To return to the excerpt from Huxley's "This I Believe" essay -- "To devise a perfect social order is probably beyond our powers, but I believe that it is perfectly possible for us to reduce the number of dangerous temptations to a level far below that which is tolerated at the present time" --  This brings to mind something that has run through my head from time to time, that there is huge individual temptation to support -- actively or passively -- the maintenance of an inequitable system, even one by which one is currently victimized, if one thinks one might be able to join the portion of society which benefits from that structure.   "I might win the lottery; therefore I should support measures that preserve the privileges of those with huge wealth!" -- or so the thought pattern goes -- and goodness knows the wealthy like that thought pattern just fine!   Particularly those whose fortunes have been made based on privileges like the ownership of land well-served by taxpayer-provided infrastructure, or scarce natural resources, or anything the classical economists would recognize as "land."

Henry George starts with the premise that "man seeks to satisfy his desires with the least effort" and it flows from this that there is certainly a tendency to exploit one's fellow human beings if structures permit one to, even if one doesn't understand the mechanism of that exploitation.

From there, my musing takes me to the thought that in that same prayer, perhaps the one most used by Christians of any prayer, we ask forgiveness for our trespasses and agree to forgive those who trespass against us.  I wonder how that phrase must have seemed to people enslaved in the American south (or north).

And then my musing leads me into one of my favorites of Henry George's speeches, "Thy Kingdom Come."  A lift:

“Our Father!” “Our Father!” Whose? Not my Father — that is not the prayer. “Our Father” — not the father of any sect, or any class, but the Father of all humanity. The All-Father, the equal Father, the loving Father. He it is we ask to bring the kingdom. Aye, we ask it with our lips! We call Him “Our Father,” the All, the Universal Father, when we kneel down to pray to Him.

But that He is the All-Father — that He is all people’s Father — we deny by our institutions. The All-Father who made the world, the All-Father who created us in His image, and put us upon the earth to draw subsistence from its bosom; to find in the earth all the materials that satisfy our wants, waiting only to be worked up by our labor! If He is the All-Father, then are not all human beings, all children of the Creator, equally entitled to the use of His bounty? And, yet, our laws say that this God’s earth is not here for the use of all His children, but only for the use of a privileged few!

There's that word again: privilege.

Back to George:

Why, consider: “Give us this day our daily bread.” I stopped in a hotel last week — a hydropathic establishment.  A hundred or more guests sat down to table together. Before they ate anything, a man stood up, and, thanking God, asked Him to make us all grateful for His bounty. And it is so at every mealtime — such an acknowledgement is made over well-filled boards. What do we mean by it?

If Adam, when he got out of Eden, had sat down and commenced to pray, he might have prayed till this time without getting anything to eat unless he went to work for it. Yet food is God’s bounty. He does not bring meat and vegetables all prepared. What He gives are the opportunities of producing these things — of bringing them forth by labor. His mandate is — it is written in the Holy Word, it is graven on every fact in nature — that by labor we shall bring forth these things. Nature gives to labor and to nothing else.

What God gives are the natural elements that are indispensable to labor. He gives them, not to one, not to some, not to one generation, but to all. They are His gifts, His bounty to the whole human race. And yet in all our civilised countries what do we see? That a few people have appropriated these bounties, claiming them as theirs alone, while the great majority have no legal right to apply their labor to the reservoirs of Nature and draw from the Creator’s bounty.

Thus it happens that all over the civilized world that class that is called peculiarly ‘the laboring class’ is the poor class, and that people who do no labor, who pride themselves on never having done honest labor, and on being descended from fathers and grandfathers who never did a stroke of honest labor in their lives, revel in a superabundance of the things that labor brings forth.

and, skipping ahead,

Nothing is clearer than that if we are all children of the universal Father, we are all entitled to the use of His bounty. No one dare deny that proposition. But the people who set their faces against its carrying out say, virtually: “Oh, yes! that is true; but it is impracticable to carry it into effect!” Just think of what this means. This is God’s world, and yet such people say that it is a world in which God’s justice, God’s will, cannot be carried into effect. What a monstrous absurdity, what a monstrous blasphemy!

If the loving God does reign, if His laws are the laws not merely of the physical, but of the moral universe, there must be a way of carrying His will into effect, there must be a way of doing equal justice to all of His creatures.

There is. The people who deny that there is any practical way of carrying into effect the perception that all human beings are equally children of the Creator shut their eyes to the plain and obvious way. It is, of course, impossible in a civilization like this of ours to divide land up into equal pieces. Such a system might have done in a primitive state of society. We have progressed in civilization beyond such rude devices, but we have not, nor can we, progress beyond God’s providence.

There is a way of securing the equal rights of all, not by dividing land up into equal pieces, but by taking for the use of all that value which attaches to land, not as the result of individual labor upon it, but as the result of the increase in population, and the improvement of society. In that way everyone would be equally interested in the land of one’s native country. Here is the simple way. It is a way that impresses the person who really sees its beauty with a more vivid idea of the beneficence of the providence of the All-Father than, it seems to me, does anything else.

I've wandered a bit, but perhaps in a sense come full circle, back to Huxley's "This I Believe."

Paying for Transportation Infrastructure is simple

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

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

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

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

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

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

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

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

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

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

Dear Sirs:

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

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

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

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

Henry C. Wright, Bureau Director.

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

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

When 2+3=6, who is entitled to the "extra" 1?

When there is a benefit to be gained by people congregating in one area rather than spreading themselves out evenly over the entire area of a country such as America, who is entitled to that benefit?

Two people working together produce more than the sum of what they produce separately.  How should that surplus be divided? 

Should it be divided equally among the workers?  Should it be divided in proportion to the contributions of the labor of each worker?  Should it all go to the more able of the two workers?  Should it go to the fellow who owns the land on which they work?  Should it go to those who lent someone money to buy the land?  Should it be spent on things which make life more pleasant or work easier where they work?

Bits and Pieces from a 1914 Bi-Monthly

The bi-monthly to which I refer is The Single Tax Review, whose 1914 volume Google Books has digitized.   Here are some of the goodies I appreciate on this reading:

In fact, if a nation spends great sums in improving roads and canals and bettering the public services, these heavy expenditures increase the value of the nation's land, and this increase is taken by the landlords. If artisans, tradesmen, producers of all kinds concentrate in a locality, the money they spend on building, on the costs of living, their activity and even their presence is sure to increase the well-being of the inhabitants of this locality, a result translated into an increase of land values which the landowners pocket. If a manufacturer builds a factory in an uninhabited spot and constructs dwellings for his workmen it may result in ruin for him if he has not carefully calculated his chances, but in the meantime he will have increased the value of the surrounding land and enriched the landlords.

And this: 

Now here are a few propositions, and a question:

(1) The area of the world's surface is fixed beyond the possibility of adding thereto.

(2) The population of the world is increasing.

(3) The two preceding facts make it inevitable that particular tracts and sites of land will be increasingly more desirable than others.

(4) All of the land is for all of the people; therefore those who wish to occupy the more valuable tracts and sites, should pay the value thereof into a common fund for the use of all the people.

(5) Every man has a natural right to the products of his labor.

(6) Confiscation by the State of any man's labor is a clear violation of a natural right; therefore our present system of taxation is fundamentally wrong. (And the fact that taxes under the present system cannot possibly be, nor have ever been, equitably assessed, is only a logical sequence of violation of verified truth.)

(7) Taxes on any commodity made by individual labor is a tax on individual labor.

(8) Taxes on that which no man has made, which no man can make and -which, therefore, no man has earned, is not a tax on labor.

(9) When the wealth which is created by population is used for public purposes and not for up-building of private fortunes, and when public revenues no longer represent confiscation of the rewards of labor, we shall have taken the road which leads towards pure democracy, and not before.

The foregoing are Single Tax propositions. The Question is: In whose pages, other than those of Henry George, can our friends, the professional economists, find a body of principles of greater "scientific value" than the above propositions? If not in the pages of Henry George, where will they find ideas of greater "scientific value" than those which are directly deducible from self-evident truths?

Paring the Deficit, by Selling Part of the Radio Spectrum

Economic View - Paring the Deficit, by Selling Part of the Radio Spectrum - NYTimes.com.

I'd missed the article when it was published a week ago, but an LTE brought it to my attention.  The author is Richard Thaler, a professor of economics and behavioral science at the newly re-named business school at the University of Chicago (forever to be recalled as GSB by some, despite stern orders in the alumni rag).

He proposes auctioning off "The Buried Treasure in Your TV Dial."  But he isn't suggesting leasing it for some finite period of time, with a new auction at the end of, say, 5 or 10 or 15 years, but selling it forever.   As one of the LTE's says,

Re “The Buried Treasure in Your TV Dial” (Economic View, Feb. 28), in which Richard H. Thaler cites an estimate that the government could reap $100 billion by auctioning the portion of the radio spectrum used for over-the-air television:

How long would such a sum last, however, in an era of military adventures and over 700 foreign military bases? What would be permanent is the loss of both choice and the free reception of radio and television programming. Ownership of electronic media, and access to the privatized airwaves, would be as concentrated as cable and satellite systems are today.

The column says that such an auction would have many national benefits. But virtually all them, like faster broadband connections for schools, could be obtained by federal policy, not a fire sale.

Those airwaves belong to the American people, and the American people ought to be collecting full rent on them -- year in, year out -- not giving away licenses and then permitting corporations to make a business in re-selling or leasing out what they choose not to use.

Here's Thaler's article.  I look forward to his next suggestions; he has the germ of a good idea, but gets a very important aspect of it wrong.  Don't sell our common asset to anyone.  AUCTION OFF LEASES.  Wait 5 years.  Repeat.

HERE’S a list of national domestic priorities, in no particular order: Stimulate the economy, improve health care, offer fast Internet connections to all of our schools, foster development of advanced technology. Oh, and let’s not forget, we’d better do something about the budget deficit.

Now, suppose that there were a way to deal effectively with all of those things at once, without hurting anyone. And suppose that it would make everyone’s smartphone work better, too. (I’ll explain that benefit shortly.)

I know that this sounds like the second coming of voodoo economics, but bear with me. This proposal involves no magical thinking, just good common sense: By simply reallocating the way we use the radio spectrum now devoted to over-the-air television broadcasting, we can create a bonanza for the government, stimulate the economy and advance all of the other goals listed above. Really.

The reason for this golden opportunity may be in your purse or pocket: that smartphone to which you could well be addicted. The iPhone, the BlackBerry and competing devices are already amazing technologies. But precisely because of the nifty features they offer, like the ability to text photos, stream video and provide GPS directions, the radio spectrum is looking as crowded as Times Square on New Year’s Eve. Demand for spectrum is growing rapidly — a trend that will surely continue.

The problem is that the usable radio spectrum is limited and used inefficiently. Think of it as a 100-lane highway with various lanes set aside for particular uses, including AM and FM radio, TV and wireless computer technology. The government — specifically, the Federal Communications Commission — is in charge of deciding which devices use which lanes.

Because we can’t create additional spectrum, we must make better use of the existing space. And the target that looks most promising in this regard is the spectrum used for over-the-air television broadcasts.

These frequencies are very attractive on technological grounds. People in the industry refer to them as “beachfront property” because these low-frequency radio waves have desirable properties: they travel long distances and permeate walls. We have already allocated parts of this spectrum for mobile wireless, and the F.C.C. recently auctioned other parts for $19 billion. That has left 49 channels for over-the-air television.

Why is the current use of this spectrum so inefficient? First, because of the need to prevent interference among stations, only 17 percent of it is actually allocated by the F.C.C. for full-power television stations. (The so-called white space among stations is used for some limited short-range applications like wireless microphones.)

Second, over-the-air broadcasts are becoming a nearly obsolete technology. Already, 91 percent of American households get their television via cable or satellite. So we are using all of this beachfront property to serve a small and shrinking segment of the population.

Suppose we put this spectrum up for sale. (The local stations do not “own” this spectrum. They have licenses granted by the Federal Communications Commission.) Although the details of how to conduct this auction are important, they don’t make compelling reading on a Sunday morning. Interested readers should examine a detailed proposal made to the F.C.C. by Thomas W. Hazlett, a professor at the George Mason University School of Law who was formerly the F.C.C.’s chief economist.

Professor Hazlett estimates that selling off this spectrum could raise at least $100 billion for the government and, more important, create roughly $1 trillion worth of value to users of the resulting services. Those services would include ultrahigh-speed wireless Internet access (including access for schools, of course) much improved cellphone coverage and fewer ugly cell towers. And they would include other new things we can’t imagine any more than we could have imagined an iPhone just 10 years ago.

But some compelling technology that could use these frequencies already exists, like wireless health monitoring — to check diabetics’ blood sugar regularly, for example — and remote robotic surgery that can give a patient in Idaho a treatment like that available in New York or Chicago.

Who would oppose this plan? Local broadcasters are likely to contend that they are providing a vital community service in return for free use of the spectrum that was put in their hands decades ago. Whether the local news or other programs are vital services is up for debate, but their value isn’t the issue, because they can be made available via cable, satellite and other technologies, including improved broadband.

Say there are 10 million households that still get their television over the air, including those that can’t afford cable or satellite and some that generally just don’t care for what’s on TV. (Yes, there are people who don’t like “American Idol.”) But about 99 percent of these households have cable running near their homes, and virtually all the others, in rural areas, could be reached by satellite services. The F.C.C. could require cable and satellite providers to offer a low-cost service that carries only local channels, and to give vouchers for connecting to that service to any households that haven’t subscribed to cable or satellite for, say, two years.

Professor Hazlett estimates that $300 per household should do it: that amounts to $3 billion at most. Compared with the gains from selling off the spectrum, it’s a drop in the bucket. Or, as an interim step, we could reduce the number of channels available in a community from 49 to, say, 5.

I KNOW that this proposal sounds too good to be true, but I think the opportunity is real. And unlike some gimmicks from state and local governments, like selling off proceeds from the state lottery to a private company, this doesn’t solve current problems simply by borrowing from future generations. Instead, by allowing scarce resources to be devoted to more productive uses, we can create real value for the economy.

Economists are fond of saying that there is no such thing as a free lunch. Here we have an idea that is even better than a free lunch: being paid to eat lunch. More paid-lunch ideas will be coming in future columns.

The classical economists might never have heard a radio or seen a television, but they'd immediately recognize broadcast spectrum as "land" -- a gift of nature, finite and scarce -- and would have regarded it as our common treasure.  Unfortunately, Professor Thaler is not a classical economist.  He is a neoclassical economist, and his training in economics probably glossed over the truths the classical economists saw.  And quite likely, that's how he teaches the subject, too.

We can concentrate more wealth in the hands of a few corporations, or we can collect the economic rent on this scarce and valuable resource.  (See also Alaska Permanent Fund, in the topic cloud at left.)

I hope we'll do the latter.

Airport Landing Rights as our COMMON treasure

According to CNN, JFK's airport's busiest runway will close today for four months for reconstruction. "Officials are reducing the number of arrivals and departures at the airport from about 1,300 a day to 1,050."  Given the softness in the economy, this is a fine time to do the necessary work. (I wonder whether this is being paid for in part by stimulus dollars.)

1300 takeoffs and landings a day.  48 million passengers per year. One of two international gateways to -- and from -- NYC metro area.

Finite.  There is no suggestion in the article that this project is going to increase capacity.  The goal is to widen the runway by 1/3, and add taxiways, to ease air traffic congestion.  The results should, I hope, include reducing fuel use by delayed flights, both on the ground and waiting to land; reduce time-wasting backups produced at other airports around the US caused by JFK delays.  This will be good for the airlines, for air quality, for efficiency, productivity and stress levels of passengers.  Its effects should reverberate through many other airports, here and abroad.

The project will cost $376 million.  Quick and dirty, if there are 48 million passengers per year, a $1 surcharge on every ticket for the next 8 years would pay for the work.

So how should this be financed?

We ought to be treating landing rights at JFK (etc.) as our common treasure, not the property of the airlines. Auction them off, 5 years at a time. Lease them to the highest bidder at the price bid by the second highest bidder. Use the revenue to finance airport improvements. This is one the Bush administration's FAA director got right, but she was shot down by what I assume were corporate interests or their very good friends.

Time to review that one, and get it right.

What the airlines are paying now is far below the amount they'd be willing to pay if we required them to bid for their slots.  As I understand it, airlines own their slots, treat them as assets, and can sell them to the highest bidder, with no revenue going to we-the-people or to those who maintain the airports!  

Airport landing rights might not have been known at the time of the classical economists, but they would immediately recognize them as "land" and thus rightly part of the commons, to be treated as our common asset rather than anyone's private property.  Permitting the privatization of that economic value is a mistake.

Nation Building -- abroad and at home

Nation Building creates RENT -- economic rent.  To whom should it belong?

• Should the rent in, say, Iraq, belong to America since we're investing American dollars and American lives in building infrastructure and creating order in Iraq?
• Should the rent in Iraq belong to those who currently own the land made valuable by the infrastructure and order we're helping to create there?  (Some would say that that is the "American way;" at least it is what we do.)
• Should the rent in Iraq be collected and used to fund government services and more infrastructure for the people of Iraq?

And in America, as we consider investing in maintaining existing infrastructure -- roads, bridges, railroads, water mains, sewage systems, airports, etc. -- and building new (e.g., high speed rail), who should reap the benefit in terms of the land value such maintenance and building maintains and creates?  Should it be privatized, or recycled for public purposes?

There is a passage in Henry George's book Progress & Poverty which has been excerpted under the title "The Savannah" which I think is relevant here.  I'll share it in a moment. 

Reading Lowell Harriss

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

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

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

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

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

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

Lowell went on to say,

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

He continued,

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

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

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

He continues,

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

He concludes,

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

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

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

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

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

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

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

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

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

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

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

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

He describes this as a "burdensomeless" tax:

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

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

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

And

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

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

And just before he concludes, he writes,

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

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

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

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

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

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

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

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

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

Tishman Speyer Surrenders Stuyvesant Town and Peter Cooper

Tishman Speyer Surrenders Stuyvesant Town and Peter Cooper

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

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

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

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

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

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

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

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

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

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

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

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

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

NRDC: Ranking States’ Oil Vulnerability and Solutions for Change

Ranking States’ Oil Vulnerability and Solutions for Change
http://www.nrdc.org/energy/states/files/states.pdf

A few lifts from an interesting paper.  It speaks only to oil usage related to cars, putting aside heating oil and other uses of oil.

What it misses is the fact that our incentives are aligned to create sprawl, and that until we realign them, we aren't going to get smart growth.  Readers of this blog know that the first realignment -- necessary, if not sufficient -- is a reform of the conventional property tax, shifting taxation off buildings and onto land value, followed by a shifting of more of the tax burden off sales and wages and onto land value.  When we tax land value heavily, only good things happen --

• from the point of view of the environment,
• from the point of view of efficiency,
• from the point of view of the economy,
• from the point of view of encouraging smart growth,
• from the point of view of job creation and affordable housing,
• from the point of view of dense cities and walkable cities and effective public transit which people want to use and are willing and able to rely on, day in and day out.

The NRDC is not going to achieve its goals without the tool of land value taxation.   "Targets" and "funding" are all well and good, but they don't counteract the current disincentives that our system of taxation creates.  I'd be happy to provide the NRDC folks with material which will help them understand the needed change.

Good public transit systems can be fully funded by the increased land value they create.

From their paper:

America’s dependence on oil is problematic in several ways, including the following:

• The United States has less than 2 percent of the world’s oil supplies but is responsible for about one-quarter of the world’s oil consumption.2 We import almost two-thirds of our crude oil supply from foreign countries, and more and more of the world’s future supply will come from regions that are either politically unstable or unfriendly to U.S. interests.3
• Our unstable supply of oil threatens our national economy, particularly since about 96 percent of our transportation system relies on oil.4
• Oil consumption is a leading contributor to the greenhouse gas (GHG) emissions that cause global warming. In the United States, the oil-based transportation system is responsible for roughly one-third of our global warming pollution

...

Smart growth and public transit. States can reduce oil dependence by integrating land use and transportation policies and designing them to reduce vehicle-miles traveled and promote alternatives to driving. Nineteen states, including Hawaii, Georgia, Tennessee, and Maine, have adopted smart growth measures intended to curb sprawl and reduce the associated traffic and vehicle-miles traveled. Fourteen states have created an agency or other mechanism to develop and coordinate land use policies. Six states have set targets for reducing vehicle-miles traveled. In addition, some states — led this year by New York, New Jersey, and Washington — have prioritized the funding of public transit through the allocation of state funds and/or by transferring portions of their federal highway dollars.

...

• Nineteen states have growth management acts. Among the most comprehensive ways of promoting smart growth is growth management legislation, such as Washington’s Growth Management Act (GMA). This GMA affects 29 counties (95 percent of Washington’s population) and requires, among other things, policies covering sprawl reduction, affordable housing, open space and recreation, environmental protection, natural resource industries, permit processing, concentrated urban growth, regional transportation, historic lands and buildings, and public facilities and services.13 Despite Florida Governor Crist’s weakening of his state’s growth management laws this year, growth management legislation was still one of the areas of greatest improvement from last year, when only 12 states had such laws.
• Only six states have set targets for reducing vehicle-miles traveled. For instance, the state of Washington amended its GMA to make it even more effective at lowering oil consumption, calling for reductions in per capita vehicle-miles traveled (VMT) of 18 percent by 2020, 30 percent by 2025, and 50 percent by 2050.14
• Fourteen states have an agency or other mechanism to coordinate development. Many states have recognized that several different state entities influence development, sometimes in potentially contradictory ways, and have created mechanisms to coordinate public investment that supports development. In 2003, Massachusetts established a powerful Executive Office of Commonwealth Development.15 Such coordination is a vital first step toward smart development, enabling a state to take into account the wide range of relevant influences. We encourage states to use coordinating mechanisms to promote smart growth.
• Some states have prioritized the funding of public transit. Public transit systems, such as bus, commuter rail, subway, and light rail programs, are important components in state efforts to promote smart growth and reduce oil dependence. By creating or expanding reliable and accessible public transit programs, states can reduce the number of single-passenger cars on the road, consequently lowering average VMT. And strong public transit provides a critical transportation alternative as gas prices rise. A case in point: Americans drove 1.4 billion fewer highway miles in April 2008 than in April 2007 because of soaring fuel prices; many took trains or buses instead, leading to a surge in transit ridership.16 In 2008, public transportation saw its highest level of ridership in 52 years.17

States have the ability to “flex” certain federal funds that ordinarily would be spent on highway projects and use them to pay for public transit programs. States that choose not to transfer federal funds to transit programs are not necessarily neglecting transit funding, however, as they may be spending more state dollars on transit. The best way to understand state transit prioritization is to compare the amount of total state spending (including flexed federal funds) on mass transit with the total spent on highway programs, as shown in the far right column of Table 3. By this measure, the top five states prioritizing public transit spending are New York, New Jersey, Washington, Massachusetts, and Utah.

Opportunities, Privilege, Rent -- and a better way to fund our common spending

THE PUZZLED FISHERMEN.
For The Public.

We had packed the 500 trout in a large box with ice and cool wet moss, and as we were eating our last supper under the big pine before breaking up camp, the painter started the trouble.

"I'll bet ten dollars that this lake will be owned in five years," said he.

"I'll take that bet," said the plumber. "Why, the public wouldn't stand it. Here's a lake of five square miles, chuck full of trout, only 20 miles out of Kamloops, and the government put in a road costing $1,500 just to accommodate the public; and d'ye think it would be fair to let any one man own it? No sir!"

"What did Lusk charge you for the horse's pasture?" asked the printer of Jimmey, the stable boy.

"Four dollars, sir; dollar each for two days' pasture."

"That's a blamed outrage," said the tailor. "When I was out here last year we just picketed our horses out at the foot of the lake, and they did flne."

"Yes, but you didn't have to look after them," said the carpenter. "I had to change the pickets twice a day, and I'd much rather pay my share of the four dollars for the pasture, and be free to fish. Besides, Lusk has built a lot of fencing to make that pasture."

Is California Over-Taxed?

An LTE in the San Bernardino Sun challenged the notion, promoted by the (real estate operator) governor, that California is overtaxed, with the following research:

We're not overtaxed

Posted: 06/06/2009 05:10:29 PM PDT

I recently spent some time on the Internet investigating the governor's claims that Californians are the most highly taxed state, or nearly so. I found as follows:

• California's property taxes under Proposition 13 are ranked in an Arizona study as 34th for residential property taxes and 41st for industrial property taxes under California's split-roll system.
• California's state and local sales taxes per capita are ranked 15th per $1,000 of personal income in a Wisconsin study.
• Our taxing of utilities ranks 12th per $1,000 of personal income in a Wisconsin study.
• California's personal income tax ranks seventh greatest among the states at $3.22 per $100.00 of personal income per capita.
• The state corporate income tax has a flat rate of 8.8 percent and is ranked sixth, but many corporations pay no taxes due to legal loopholes.
• Cigarette taxes of 87 cents per pack are ranked 30th among the states, less than the U.S. median of $1 per pack.
• Excise taxes on liquor ($3.30 per gallon) are ranked 19th among the states, less than the U.S. median of $3.75 per gallon.
• Excise taxes on beer (20 cents per gallon) are ranked 43rd among the states, considerably less than the U.S. median of 69 cents per gallon.
• The real estate transfer tax of $1.10 per $1,000 valuation is ranked 29th among the states.
• Gasoline tax of 35.3 cents per gallon is ranked third among the states, most of which has been diverted to the state's general fund for years, last raised in 1994.
• The recent increase of the state's vehicle license fee ("car tax") from .65 percent of the car's value to 1.15 percent raises the tax from 20th rank to about seventh, it appears, based on a Wisconsin study.

I concluded that Californians aren't overtaxed and that the governor's story is misleading.

This is evidence of the same old misleading and partisan tricks that cause us to be divided instead of illustrating a productive way for California to solve its problems.

GREGG FIGGINS
President, Hemet Unified School District Governing Board
Director, Region 18, California School Board Association

I posted this comment:

Not over taxed, just relying on the wrong ones.  Dense cities need infrastructure built and maintained, and are logical places for many other kinds of community investment -- in services such as education, emergency services, public health, etc.  This costs money, but it also results in higher land values.

But Prop 13 prohibited the logical taxation of land value.  To the extent that Prop 13 reduced taxation of houses and commercial buildings and other individually-funded improvements to land, it was a good thing.   But that good is vastly overshadowed by its prevention of the use of the most logical and just tax yet devised: the tax on land value.

Land value rises for reasons which have nothing to do with the activity or inactivity of the individual landholder, and everything to do with the health and vitality and investment of the community.  Every infrastructure project serves to increase land value.  Good schools increase land value.  Good jobs increase land value.  Prop 13 permits the landholder to privatize all but a tiny fraction of that public investment, and forces the community into taxing, often heavily, things which ought not to be taxed at all.

Tax land value heavily.  Not one acre will leave town.  Not one building lot will wither and die under the burden.  Not one square foot less will be "produced" -- the land is already there.  What WILL happen is that the well-located acres which are languishing underused will be put to better use.  This creates JOBS and businesses vying for your patronage and businesses vying for your labor, which drives wages upward -- the reverse of what we see now, where workers are competing for jobs, driving wages downward.

And lifting taxes off wages and off sales and even off corporate profits will have a whole other set of effects -- none of which are undesirable -- for the economy.

It isn't the amount of the total tax burden which is the problem.  Rather, the load is badly placed.  Rather than being put on the back of the horse, evenly loaded, it is put around his mouth and hung from his tail.  No wonder he is struggling under the load.

San Bernardino sticks in my mind because of a 2006 Federal Reserve Board Study which showed, for 46 major metro areas in the US, the percentage of the value of the single-family housing stock which was accounted for by land value.  For the aggregate of the 46 metros, the figure was 51% in 2004.  San Francisco was 88%, and, of all the other cities in California listed, San Bernardino was the lowest at 62%.  I'm guessing that they may not have experienced the horrendous run-up in housing prices that most of the rest of the state experienced, due in large part to Prop 13.  But they're still stuck with the miserable tax structure that Prop 13 forces them into.

And think of the impact on all the towns that have courted car dealerships for the sales tax revenue, now that the auto manufacturers are shutting down dealerships.

Land Value Taxation -- Connecticut's legislature just passed enabling legislation for New London to try it!

I just received word from a friend in New London that the Connecticut legislature, on its next to last day of sessions for this year, passed the enabling legislation for New London to utilize Land Value Taxation.

This permits New London to separate the millage rate on land value from the millage rate on buildings, and to raise the millage rate on land value while lowering the millage rate on buildings.

New London has a lot going for it in terms of location.  It sits on Long Island Sound, near the Groton submarine base and the Thames River.  It is served by Amtrak (including Acela) and by weekday commuter trains to New Haven.  It is the jumping off place for ferries to Block Island, Fishers Island, Montauk Point.  It has the Coast Guard Academy, Connecticut College and Mitchell College, and a large Pfizer research facility.  Years ago, it had trolleys from its suburbs.

It also has a lot of parking lots downtown.  Far more than are healthy.  It has a lot of out of town landowners, who appear to be sitting and waiting for someone else to make their land valuable.

I look forward to watching ReNew London succeed in transforming New London into the small city for the 21st century which its organizers know it can be.  LVT is a good step in that direction.  And I hope the rest of Connecticut will be paying attention.

Post Script: according to Thursday's New London Day, the bill passed the CT House of Representatives unanimously, 148-0:

"The bill, which has strong support from the city's delegation and municipal officials, would create a pilot program limited just to New London, and would permit the city to draft a plan wherein it would tax buildings and unimproved land at differing rates. Supporters believe the system can encourage redevelopment and the improvement of blighted urban areas while promoting smarter land-use policies for cities."

What You Get for... $465,000 - NYTimes.com

Property Values - What You Get for... $465,000 - NYTimes.com.

The three homes listed today are very different from each other:

• a 4 bedroom house in Shelburne Falls, MA, on 2 acres (built 1860);
• a 1 bedroom apartment in San Francisco (1921/1950); and
• a 4 bedroom house on 7 acres in Richmond, KY (unstated). 

Interestingly, the taxes on each are fairly similar: $4,853, $5,208 and $4,650.

What does one get for one's money?  It varies.  In the two small towns, a significant portion of the purchase price is likely to be for the structure, even with the large sites involved.  In San Francisco, the bulk of one's purchase money is not for the structure, which is both small and modest, but for the location -- the proximity to jobs, to transportation, to all the amenities -- both publicly and privately provided -- of city life.

• a 4 bedroom house in Shelburne Falls, MA, on 2 acres -- 2,741 square feet 
• a 1 bedroom apartment in San Francisco  -- 641 square feet
• a 4 bedroom house on 7 acres in Richmond, KY -- 3,233 square feet. 

Quick and dirty, these homes are each probably worth $100 per square foot.  The remainder of the value is locational value.

• a 4 bedroom house in Shelburne Falls, MA, on 2 acres -- 2,741 square feet -> $274,000 house and $181,000 land  (60/40)
  
• a 1 bedroom apartment in San Francisco  -- 641 square feet -> $64,000 house and $385,000 land (14/86)
• a 4 bedroom house on 7 acres in Richmond, KY -- 3,233 square feet. -> $323,000 house and $142,000 land  (69/31)

In the small towns, one is paying the seller mostly for value he (or a previous owner) created.  In cities, one is paying the seller mostly for value he didn't create.

In each situation, property taxes are, more or less, 1% of the asking price.  Assuming that the buyers put down 20% of the $465,000 ($93,000) and finance the remaining 80% ($372,000) with a mortgage at 6% for 30 years, they'll be paying $27,000 per year on the mortgage and $5,000 to their community in the first year.   85% of their carrying cost goes to the lender, 15% to the community.

Viewed another way, if we looked at this as if all the purchase money was borrowed, about 87% of the carrying cost goes to the lender and 13% to the community.   And of that 87%, only 17% is principle; 83% is interest.  That interest all leaves town.  It isn't available for meeting the needs of the community, or of the borrower's family. It doesn't get recycled locally.

And, on top of that, the buyer continues to pay taxes on both the land and the building, and on their purchases and on their wages and most of their other income.

Can you picture how it would be if, instead of paying taxes based on one's wages and purchases and the house one occupies, one's taxes were primarily a function of the value of the land one occupied?

• The buyer of the Shelburne Falls property would be paying on the basis of his $181,000 worth of land
• the buyer of the SF property would be paying based on his $385,000 of land; and
• the buyer of the Richmond property would be paying based on his $142,000 worth of land.

Why is that tiny plot in San Francisco worth so much more? 

1. taxpayer-provided Infrastructure and services: transportation, water, sewage, streetcleaning, emergency, public health, etc.
2. high paying jobs in a vibrant economy, including very specialized jobs
3. proximity to community, culture, etc.

Were we to based our taxes on land value, the seller of the tiny San Francisco apartment would receive, say, $64,000 for his structure.  And the buyer would not be taxed on that value by his community.  Rather, he would be taxed on the value of the land he bought, paying, say, 5% of that value in the form of a tax on his land value: 5% of $385,000 is $19,250 per year.  His mortgage payment on the $64,000 purchase would be $4,650 per year.  And he wouldn't owe any other taxes.

Wouldn't that be a more just system?  He pays San Francisco and California for the right to occupy that choice site.  They recycle those funds locally to provide the services and infrastructure which make that site worth ~$20,000 per year, and send some on to the federal government.

This leaves the mortgage lender out of the loop.  The homebuyer doesn't need to borrow $450,000; he only needs to borrow $64,000.  The other funds are available for more productive purposes: financing businesses.  Creating jobs.  Maybe financing cars or other purchases.

Land and Freedom

That was the name of a bi-monthly magazine published from 1926 to 1940, successor to The Single Tax Review.  I want to share its premise with you.  It turns out that it was expressed a bit differently from one issue to the next.  These come from the 1940 volumes.

WHAT LAND AND FREEDOM STANDS FOR

Taking the full rent of land for public purposes insures the fullest and best use of all land. In cities this would mean more homes and more places to do business and therefore lower rents. In rural communities it would mean the freedom of the farmer from land mortgages and would guarantee him full possession of his entire product at a small land rental to the government without the payment of any taxes. It would prevent the holding of mines idle for the purpose of monopoly and would immensely increase the production and therefore greatly lower the price of mine products.

Land can be used only by the employment of labor. Putting land to its fullest and best use would create an unlimited demand for labor. With an unlimited demand for labor, the job would seek the man, not the man seek the job, and labor would receive its full share of the product.

The freeing from taxation of all buildings, machinery, implements and improvements on land, all industry, thrift and enterprise, all wages, salaries, incomes and every product of labor and intellect, will encourage men to build and to produce, will reward them for their efforts to improve the land, to produce wealth and to render the services that the people need, instead of penalizing them for these efforts as taxation does now.

It will put an end to legalized robbery by the government which now pries into men's private affairs and exacts fines and penalties in the shape of tolls and taxes on every evidence of man's industry and thrift.

All labor and industry depend basically on land, and only in the measure that land is attainable can labor and industry be prosperous. The taking of the full Rent of Land for public purposes would put and keep all land forever in use to the fullest extent of the people's needs, and so would insure real and permanent prosperity for all.

Pretty short and sweet, isn't it?  It might look out of date in this computer age -- though I would argue that it is not, even and especially in our most dense and developed cities -- but if you don't see its importance in the developed world, can you see that for the other 80%, including many places where American lives are at stake and our dollars being spent, it has huge relevance?

And as a means of ending poverty for the billions who do not get to reap the harvest of their own labor, it is of prime importance.

From the March/April issue:

WHAT LAND AND FREEDOM STANDS FOR

We declare:

• That the earth is the birthright of all Mankind and that all have an equal and unalienable right to its use.
• That man's need for the land is expressed by the Rent of Land; that this Rent results from the presence and activities of the people; that it arises as the result of Natural Law, and that it therefore should be taken to defray public expenses.
• That as a result of permitting land owners to take for private purposes the Rent of Land it becomes necessary to impose the burdens of taxation on the products of labor and industry, which are the rightful property of individuals, and to which the government has no moral right.
• That the diversion of the Rent of Land into private pockets and away from public use is a violation of Natural Law, and that the evils arising out of our unjust economic system are the penalties that follow such violation, as effect follows cause.

We therefore demand:

That the full Rent of Land be collected by the government in place of all direct and indirect taxes, and that buildings, machinery, implements and improvements on land, all industry, thrift and enterprise, all wages, salaries and incomes, and every product of labor and intellect be entirely exempt from taxation.

ARGUMENT

Taking the full Rent of Land for public purposes would insure the fullest and best use of all land. Putting land to its fullest and best use would create an unlimited demand for labor. Thus the job would seek the man, not the man the job, and labor would receive its full share of the product.

The freeing from taxation of every product of labor would encourage men to build and to produce. It would put an end to legalized robbery by the government.

The public collection of the Rent of Land, by putting and keeping all land forever in use to the full extent of the people's needs, would insure real and permanent prosperity for all.

What is the point of sending stimulus money to a state which chooses not to tax its land value??

California is looking for stimulus money from the Federal taxpayer, or, perhaps more precisely, from the federal taxpayers' children.

Yet for the past 30 years, California law, created under 1978's Proposition 13"  has PROHIBITED the taxation of land value at a rate higher than 1% of assessed value, and, in addition, limits the annual increase in assessed value to 2%, even when and where market values rise by 10% or 20% or more, until the property is resold, which results in both a very low and a very uneven taxation of land value.

This forces California into using taxes which both burden the poor and damage their economy: sales taxes, wage taxes.

It also strangles any effort to collect back for the commons that which our common spending creates.  4 shares for the landholder, 1 share for the community ... or , if you've owned your California property for 10 or 20 years, 9 shares for the landholder and 1 share for the community.

Meanwhile, California has one of the lowest homeownership rates in the entire US.  For 1Q 2009, the US homeownership rate was 67.3% (down from a peak of 69.1% four years earlier); California's was 56.8%, down from 59.9% 1Q2005.  So nearly half of Californians are paying rent, and paying it to landlords who pass only a tiny fraction of it on to the community in the form of taxes -- leaving the tenants to pay sales and wage taxes.  Perverse, cruel, dumb, privilege-maintaining.

The classical economists observed hundreds of years ago that all benefits go to the landlord.  Landlords grow rich in their sleep.  Land rises in value for reasons which have nothing to do with the activity or inactivity of the individual landholder, and everything to do with the presence of the community, the public spending of the community on infrastructure and services.  California's voters -- knowingly or unknowingly, but most likely the latter -- said that that was just fine with them, and the young people and the renters be damned!

Please don't come asking the rest of us to tax our wages to fund your "stimulus" when you won't tax your own landholders more than 1% -- and many of them a tiny fraction of 1% -- to meet your own state's needs. 

If your current governor, who benefits mightily from Proposition 13, won't lead you in the right direction, elect someone who will.

How Should Connecticut Pay for Maintaining I-95, I-91, I-84 and the Parkways?

When I moved to Connecticut in 1975, the Connecticut Turnpike and the Merritt Parkway both had tollbooths.  Some years ago, after a terrible accident in which a dozing truckdriver rear-ended cars waiting to pay their toll at Stratford, killing passengers in at least one car, the toll booths were removed.

Now the state, like most others, is strapped for cash, and there are calls to again use tolls to help pay for the roads.  But there is a noisy constituency which resists tolls.

Connecticut has among the highest taxes on gasoline in the US, and also the highest pump prices.  According to  http://www.connecticutgasprices.com/tax_info.aspx, we pay 62.5¢/g [cents per gallon] on gasoline, and 61.4¢/g on diesel.  California's are the highest at 63.9 and 72.0¢/g (necessitated in part, I'm sure, by California's 30 year old Proposition 13 which keeps the property taxes of old-timers to a minute fraction of 1% of the property's market value).  Alaska's are the lowest, at 26.4 and 32.4¢/g.  (These include Federal excise taxes of 18.4¢/g for gasoline and 24.4¢/g for diesel.)

Here are the surrounding states:

	Gasoline tax per gallon (cents)	Diesel tax per gallon (cents)
Connecticut	62.5¢	61.4¢
Massachusetts	41.9	47.9
Rhode Island	49.4	55.4
New York	59.6	64.7
New Jersey	32.9	41.9
Pennsylvania	50.7	63.6
Vermont	38.4	50.4
New Hampshire	38.0	44.0

Why did I list so many states? Because 18-wheelers have large fuel tanks -- as much as 300 gallon capacity.  That gives them the option to fill them when prices are good, and avoid buying in states with high prices.   At 5 mpg, 300 gallons gives a 1,500 mile range.

Here are two tables from http://www.icpa.org/consumer_motor.htm showing Connecticut's prices compared to nearby states.  First gasoline:

The Rich List

I'm playing catch-up, after having been occupied with other work for the past month or so, and came across some articles from UK publications listing the sources of wealth for the 2000 or so most wealthy people in the UK. 

I shouldn't be surprised how many of these fortunes come from land, from "property," from oil, minerals and other natural resources.  But this is striking validation of what Henry George told us in 1879, and Winston Churchill told us 100 years ago.   See http://business.timesonline.co.uk/tol/business/specials/rich_list/rich_list_search/

See a few entries down, where Michael Kinsley laid it out this way in the Washington Post:

Perusing the Forbes 400 list of America's richest people, it's striking how few of them made the list by building the proverbial better mousetrap. The most common route to gargantuan wealth, like the route to smaller piles, remains inheritance. The ability to pass money along to your kids may motivate many a successful executive or investor to work harder, but it can't possibly motivate those kids to inherit harder in order to pass it along once again.

Dozens of Forbes 400 fortunes derive from the rising value of land or other natural resources. These businesses are fundamentally different from mousetrap building. Land does not need to become "better" to increase in value, and that value increase doesn't produce more land. Yet other fortunes depend directly on the government. The large fortunes based on health care and pharmaceuticals would not exist if not for Medicare and Medicaid. The government hands out large fortunes even more directly in forms as varied as

• cable-TV franchises;
• cellphone licenses;
• drilling, mining and mineral rights;
• minority small-business loans; and
• other special treatment.

We must conserve the earth -- yes.  But we must also share its bounty with all, not permit the privatization of that bounty.  Henry George put it this way:

We sail through space as if on a well-provisioned ship.  If food above deck seems to grow scarce, we simply open a hatch -- and there is a new supply. And a very great command over others comes to those who, as the hatches are opened, are permitted to say: "This is mine!"

Actually, that's from a recent (2006) modernized abridgment by Bob Drake, available at http://www.progressandpoverty.org/ or http://hgchicago.org/audio.   Here's HG's 1879 original:

It is a well-provisioned ship, this on which we sail through space. If the bread and beef above decks seem to grow scarce, we but open a hatch and there is a new supply, of which before we never dreamed. And very great command over the services of others comes to those who as the hatches are opened are permitted to say, "This is mine!"

In case it isn't obvious, I'm not opposed to fortunes which come from creating better mousetraps!  I'm quite in favor of them.  But we need to distinguish between what monopoly privilege creates, and what hard work creates, and LVT does that.

Council of Georgist Organizations Conference: Cleveland 2009

Council of Georgist Organizations Conference: Cleveland 2009.

The schedule for the annual gathering of Georgists (that is, people who are persuaded that the economist and social philosopher Henry George (b. 1839, Philadelphia; d.1897, NYC), author of "Progress & Poverty" and a book of essays entitled "Social Problems," among others, pretty much had it right) is now online.  It is in downtown Cleveland in early August.

Looking over the schedule, I see a lot of familiar names -- people I've come to know since I attended my first CGO meeting in 2001 -- and some people I've not yet met face to face but know online.  I'm happy that we have few sessions running side by side, because virtually all of the programs are of interest to me.

My last visit to Cleveland was with 600 delightful women, and included a great and noisy party at the Rock 'n' Roll Hall of Fame. (I just had the pleasure of being on the host committee for the same group's 2009 Annual Meeting!)  At that time, I didn't know the significance of the larger-than-life statue nearby of Cleveland mayor Tom L. Johnson.  The book he holds in his hand is P&P.

• If you would like to see an end to poverty, come join us.
• If sprawl and its concomitants concern you, come join us; we know how to slow it and reverse it and channel it into reusing the land already well served by taxpayer-provided infrastructure. 
• If long commutes -- and the fuel, pollution, spending and time loss involved -- worry you, come join us.  
• If you would like to see a more stable economy, without the booms and busts which cause such widespread pain and ruin, we have answers. 
• If you would like to see healthier cities and a more vibrant economy, come listen to what some of these people have to offer. 
• If unaffordable housing troubles you, come talk to us. 
• If the extreme concentrations of income and wealth -- particularly of natural resource wealth -- trouble you, we know how to correct it gently and justly.
• If you hate the income tax and recognize that sales and consumption taxes damage the economy, but still believe that there are some things government can do better than the private sector, we know how to finance that spending justly.

We come from all over the political spectrum, and share little except a major commitment to creating a better and more sustainable world and society and economy for all. (That's a lot actually!)  It is a joy to spend a few days with people so passionate about social and economic justice and with a clear vision of how to get there.

If you're curious about Henry George, you might start where I started, with four of his speeches.  I found these as pamphlets in the files of my late grandparents when I took possession of their library and file cabinets and some sentimental treasures.  My first pass was for genealogical information.  Shortly after that, I started reading a speech entitled "Thou Shalt Not Steal," and it clicked. My paternal grandparents (three of them, actually: my own grandparents, and my step-grandmother, whose first husband was a dear family friend, too, in the 1940s and 50s) were all Georgists.  For every landmark occasion in my young life, their gifts included a lovingly inscribed copy of Progress & Poverty (just in case I'd misplaced the previous ones!)  But I'd not done more than thumb through it.   When I first did get around to reading it, I was in my late 40s; my grandparents were quicker studies, and devoted the second half of their lives to promoting these ideas.  My first read of P&P was a slow slog; a friend shocked me when she said she found it a page-turner, a mystery whose solution she was anxious to get to.  Now I admit I read it for, and with, pleasure.

Another piece you might read is my grandfather's "An Introduction to Henry George" or my grandmother's more humorous article, "My Introduction to Henry George;" she went on to write delightful short stories for Ladies Home Journal, Colliers, the Saturday Evening Post and many other magazines in the 40s.  Things have come full circle -- I'm on the board of two Georgist foundations, including the one my grandfather worked for and with for over 30 years, the Robert Schalkenbach Foundation.  And following in the example of my late stepgrandmother, who tried to write an activist letter every day, I try to post comments on either my blog or other blogs or articles online every day.  I mostly succeed, though in the past month or two, I've fallen short.   And I've created a website to make Henry George's ideas accessible to people coming from a wide range of interests and points of view: http://www.wealthandwant.com/

People's Budget Day: the Centennial

A friend in the UK gave me permission to share his post here.  You might explore Winston Churchill's writings on the subject, entitled "The People's Land" at wealthandwant.com/docs/Churchill_TPL.html.  I'm on the fly today, and didn't copy in Jock's links.  You might want to go to his original to pursue them!

http://jockcoats.me/peoples_budget_day

People's Budget Day
tagged with:  * Land Value Tax    * 1909    * common birthright   * economic liberalism    * geo-libertarian   * Henry George
* house of lords   * liberalism   * lloyd-george  * Revolutionary Liberalism  * tax   * welfare state

Just a brief post to recall that today, 29th April, is the hundredth anniversary of David Lloyd-George's 1909 "People's Budget". Thanks to the wonders of the interwebs you can now read the whole budget online.

He ended (the main section - in the "Balance Sheet" section) with these words which have stood for a century accusing his successors of all parties for not having solved the problems he set out on the road to do:

"This, Mr. Emmott [in the chair of the Ways and Means Committee to which the budget was addressed], is a War Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away we shall have advanced a great step towards that good time when poverty and wretchedness and human degradation which always follow in its camp will be as remote to the people of this country as the wolves which once infested its forests."

From the financing of the newly created Old Age Pension and Disability insurance to the funding of the preparations for real war in the form of spending on Dreadnought battleships there was much for Lloyd-George to find in his budget. He didn't miss a trick, and more or less anything that could conceivably be taxed was, in many cases for the first time, taxed.

But for many of us it is for what ended up not being taxed that this budget is most remembered. The debate surrounding this budget, with speeches up and down the country by Lloyd-George himself and more notably perhaps Winston Churchill, must be one of the best documented in history, for it was a first attempt to implement some permanent form of Land Value Taxation. A tax shift that Churchill described as:

"the new attitude of the State towards wealth. Formerly the only question of the tax-gatherer was, "How much have you got?" We ask that question still, and there is a general feeling, recognised as just by all parties, that the rate of taxation should be greater for large incomes than for small. As to how much greater, parties are no doubt in dispute. But now a new question has arisen. We do not only ask today, "How much have you got?" we also ask, "How did you get it?

• Did you earn it by yourself, or has it just been left you by others?
• Was it gained by processes which are in themselves beneficial to the community in general, or was it gained by processes which have done no good to any one, but only harm?
• Was it gained by the enterprise and capacity necessary to found a business, or merely by squeezing and bleeding the owner and founder of the business?
• Was it gained by supplying the capital which industry needs, or by denying, except at an extortionate price, the land which industry requires?
• Was it derived from active reproductive processes, or merely by squatting on some piece of necessary land till enterprise and labour, and national interests and municipal interests, had to buy you out at fifty times the agricultural value?
• Was it gained from opening new minerals to the service of man, or by drawing a mining royalty from the toil and adventure of others? 
• Was it gained by the curious process of using political influence to convert an annual licence into a practical freehold and thereby pocketing a monopoly value which properly belongs to the State — how did you get it?"
  

That is the new question which has been postulated and which is vibrating in penetrating repetition through the land."

How Do We Fix an Ailing Economy?

Georgists -- people who have read one or more of Henry George's books*, and are persuaded of the logic and truth of his findings and diagnosis -- have, for over 100 years, had an answer to share with the rest of us about how to make our economy more just, more honest, more vibrant and more stable; make equal opportunity real; protect the environment from despoilment; reduce the excessive concentrations of wealth and income without destroying incentives which encourage productivity.

* e.g., Progress and Poverty; Social Problems; Protection or Free Trade?; The Science of Political Economy; The Land Question, etc.  Henry George (b. 1839, Philadelphia; d. 1897, NYC) was among the most prominent and widely read Americans of the late 19th century, and no one has successfully refuted his observations or his prescriptions; yet few of us, even economics majors, are exposed to his ideas in the course of even a highly regarded college or university education.   More of us who know his ideas have found them through our own research, or through a course at a Henry George School (e.g., NYC, Philadelphia, Chicago, etc.) or online (henrygeorge.org)

Georgists know some things that other people don't seem to know.  It is common sense.  It is logical, not all that complex.

Paul Harvey's "thing" was to tell us about "the other part of the story."  Well, Georgists know a lot about the rest of the story.  We know that federal spending on infrastructure is only half the story of stimulating the economy (and even know that it is not necessary!)

If all we "do" is the federal end of stimulus, we aren't going to get anywhere.  We may even make some things worse -- unintentionally, of course, but worse nonetheless -- for a significant percentage of us. 

Armed with Henry George's observations, we would know how to fix this economy and create a better one.  We can reduce the need for consumer credit, freeing up more funds for productive investment by industry.   We can undo the machine which creates poverty and simultaneously enriches a particular class of us.

About Land Value Taxation

If you spend some time reading this blog, you might come away thinking that I believe that land value taxation is a cure-all, a panacea. (See the "topic cloud" in the left sidebar.)  But that isn't the case. 

However, I have come around to the point of view that many of our most serious social, environmental, economic and justice problems are not going to be solved -- cannot be solved! -- without the enactment of land value taxation.

That sounds extreme, particularly to those who have never heard of LVT or who have read little about it.  

So many of our most serious problems ultimately find their root in the privatization of the natural creation -- that which the classical economists called land, including things that the classical economists would have known nothing about, but would immediately recognize: electromagnetic spectrum, geosynchronous orbits, landing rights at LaGuardia (particularly at rush hour), etc..

Let me be more specific.  It isn't the privatization of land, or oil resources, or minerals, or geosynchronous orbits, or water rights themselves that is the problem.  Secure title is necessary and important.  Rather, the problem is that the economic value of these common resources is currently treated as private treasure rather than as our common asset.   But we need revenue for public purposes, so we then tax sales and wages and interest.  But those who need land pay others for it (unless they inherited the rights to it) either in the form of rent or in the form of a lump sum, and then are burdened with the sorts of taxes which depress the economy and steal from them that which they produced (in addition to the significant costs of servicing the debt related to that lump sum payment).

Land, in all its forms, is not of human creation.  We can't create more of it in response to an increase in demand.  In particular, we can't create more land downtown, where it is served by awesomely important infrastructure that took decades and millions or billions to build.  We can't create more water, or more frequencies on FM or AM radio. Yet we permit the privatization of the economic value of these and other like vital and fabulously valuable common assets.

Were we to shift our taxes off productive effort, off sales, off buildings, and onto all these things called "land value," we would be on our way to solving many of our environmental problems, our social problems, our economic problems, urban sprawl and its concommitants, and many of our justice problems. We'd have a more efficient economy, a more vibrant one, without the excess burden (deadweight loss) our current system creates.  We'd have opportunity, jobs, a growing pie, and lose the boom-bust cycle which plagues us.

Just What is Home Equity?

What is home equity, and how does it relate to the American Dream?

Sometimes we hear about "building home equity" as if it were some sort of muscular activity.  There are two ways to "build home equity."  The first, the old-fashioned way, is by paying down the mortgage.  This happens fairly slowly.  On a 30 year mortgage, and making no extra payments, here is the payoff schedule for several mortgage rates:

Cumulative Mortgage Payoff Schedule for 30-year Mortgage
	Mortgage Interest Rate
Year	4%	5%	6%	7%	8%
1	1.7%	1.4%	1.2%	1.0%	0.8%
2	3.5%	3.0%	2.5%	2.0%	1.7%
5	9.4%	8.0%	6.7%	5.7%	4.7%
10	20.8%	18.1%	15.7%	13.6%	11.7%
15	34.6%	31.1%	27.8%	24.7%	21.8%
20	51.5%	48.7%	43.9%	40.3%	36.8%
25	73.0%	68.8%	65.5%	62.2%	58.9%
28	86.4%	84.2%	81.9%	79.4%	76.8%
30	100.0%	100.0%	100.0%	100.0%	100.0%

The other -- and much faster -- part of home equity, of course, is the appreciation we have come to expect.  What few people realize is that houses do not appreciate; they are never worth more than what it costs to build them, less depreciation, to account for deterioration, obsolescence of systems, etc.  A Federal Reserve Board Study (May, 2006) pegged annual depreciation of single family home stock at 1.5%.

So when housing was rising in value by 5% or 10% per year, what was rising was the price of the land under the houses, not the houses themselves.  

What causes land to rise in value?  Not individual activity.  Not the landholder himself.   There is no muscular activity on the part of the landholder here!  (Yes, the owner who does a gut renovation adds to his property's total value, though not always as much as the project costs.  Most studies suggest that adding a second bathroom to a home which has only one actually adds more to the value of the property than the project itself costs; some say that adding a deck also pays back more than the project costs.   Few other projects pay back fully, so while home equity may rise, it is through individual investment, and the owner's net assets do not increase as a result.)

Land rises in value for reasons which have little or nothing to do with the landholder himself:

1. Local taxpayers invest in goods and services which people value: good schools; well-paved streets; well-equipped fire trucks and ambulances; police trained in CPR and equipped with defibulators; parks; courts, jails; sewers and city water replacing septic and wells; libraries; community colleges; letc.
2. State and federal taxpayers invest in goods and services which people value: electricity; good transportation systems; infrastructure; "pork";  broadband; public colleges and universities; etc.
3. Private sector investments: good hospitals; cultural amenities; an active and vibrant local economy; a healthy downtown; private universities; charities; etc.
4. Technological advancements: elevators (urban land); air conditioning (southern states); earth moving equipment -- advances from WWII equipment (making difficult sites easier to develop); fiberglass boats (waterfront properties); maglev trains; etc.
5. Population increases: natural fertility increases; assisted fertility; fewer wars or auto or industrial accidents; better outcomes after such events; reduced infant mortality; better health resulting in longer lifespans; people having larger families because of religious beliefs or greater prosperity; local amenities which attract population to the school district or metro area; immigration from other countries; lower cost of living drawing more people;

So if all those things were happening, why did we just experience a crash in land values?   

Well, what we experienced was a crash in land prices.  Land prices got well ahead of land values in many places.  This is known as land speculation.  People were "investing" in land, buying homes for outlandish prices, thinking that prices would continue to rise forever.   Mortgage lending standard went from 20% down to 10% down to 5% down to 1% down to 105% financing.  Private Mortgage Insurance became the norm for first-time buyers.  Debt to income ratios rose from 28% to the high 30's, or weren't even discussed.  Mortage rates dropped, particularly for Adjustable Rate Mortgages.  Interest-only mortgages became available, and negative amortization mortgages were a possibility. 

How could we be so stupid? 

Did someone yell "FIRE?"  (as in the FIRE sector of the economy: Finance, Insurance, Real Estate)    The FIRE sector was making money from this.  Home builders.  Land sellers -- including farmers, land speculators, mom-and-pop subdividers, and many others.  Builders.  Real estate brokers.  Mortgage brokers. Mortgage insurance sellers.  Title insurance sellers.   Homeowners' insurance sellers. 

We considered this private enterprise and pronounced it good. 

Go back to the five items listed above, and tell me why a smallish -- or even a largish -- portion of the private sector ought to reap all the benefits for all those things, in proportion to the size and quality of their landholders.

But only the Georgists were aware of what was really happening.  What was happening was that we attempted to increase the homeownership rate from the low 60's to the high 60s, under the guise or illusion that by doing so we'd be extending the "American Dream" to an additional 10% of our fellow residents of this country.    But of course the homes they could afford were not in the places where land was appreciating, and their attempts to "catch the brass ring" which would, they hoped, make them part of the "rising tide."  (Okay, too many metaphors ... but haven't we heard all of them in this context?)

What did the Georgists know?  That land value which our system permits landholders to privatize ought to be socialized.  Small landholders ... most of the residential owners, that is ... get to privatize some small land value ... a bone to shut them up, while the big landholders -- individuals, family trusts, corporations, REITS, philanthropies, universities, churches and other tax exempts, individual foreign investors, pension funds, private equity funds, foreign sovereign funds, etc. -- get to privatize the BIG land value in our cities.    Even in our small cities and medium-sized towns, the businesses which are their own landlords are, on average, far more profitable than those which are tenants, and landlords take a significant share of their tenants' production -- a non-agricultural version of sharecropping, which we honor as if the landlord was actually a producer of some sort.

John Stuart Mill, one of the classical economists, told it this way: Landlords grow rich in their sleep.

So back to the initial question: what is home equity, and how does it relate to the American Dream?  Home equity is a sop, thrown to keep the puppies quiet and calm, while the big dogs enjoy the contents of the manger.

We'd be far better off if the vast majority of us -- and our elected officials -- understood and talked openly about what Henry George was telling us, in his landmark book on political economy entitled Progress and Poverty -- subtitled: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy: that we permit the privatization of the economic value of our natural and other rightly-common resources, including urban land value, at our extreme peril. 

We turn the American Dream into our common nightmare.  Increasing home equity holdings is not the answer to our problems; it is, at bottom, a symptom or sidelight of the problem itself!   

We can fix this through a simple and just tax reform.

Oh -- you might be interested in how Henry George dedicated his book, Progress & Poverty:

to those who, seeing the vice and misery that spring from the unequal distribution of wealth and privilege, feel the possibility of a higher social state and would strive for its attainment.

Lawson Purdy: The Influence of Taxation on the Prosperity of Cities

Reprinted in The Public, October 6, 1906

THE INFLUENCE OF TAXATION ON THE PROSPERITY OF CITIES

A Paper Read by Lawson Purdy of New York
Before the League of American Municipalities,
in Session at Chicago, September 26, 1906.

In 1873, Enoch Ensley, a wealthy planter of Tennessee, wrote to Governor Brown asking him to call a special session of the legislature to amend the constitution so that changes could be made in the tax laws of Tennessee. The tax rate of Nashville was three and one-half per cent and of Memphis four per cent, and Mr. Ensley said that the burden on business was insupportable. Great land owner as he was, however, Ensley did not urge a search for new sources of revenue, but rather the application of the "rule or motto" which, he said, "It would be well for the State to adopt and have cut into the stone at the capitol (in large letters and have them gilded), in the Senate chamber, the hall of the House of Representatives and in the governor's office, . . . to-wit:

"Never tax anything
That would be of value to your State,
That could and would run away, or
That could and would come to you."

This rule laid down by Ensley has become an axiom, but before it can be applied the constitutions of about thirty-five States must be amended by repealing those despotic limitations on legislative power which are not found in the earlier constitutions, and which should find no place in the constitution of any free people. Because of constitutional and statutory restraints upon the power of cities we need discuss only what can be accomplished in most cities by executive officials under existing laws.

Conditions of Prosperity.

City officials often regard the city as apart and distinct from the individual citizens, and sometimes therefore uphold policies which appear to be in the interest of the city corporation, although opposed to the interests of the citizens. This is, of course, a short-sighted view. In reality nothing can be good for the city which is bad for the citizen, nor bad for the city which is good for the citizens. Again, many consider the interest of classes and speak of what will be advantageous to manufacturers or shopkeepers or land owners. This, too, is a mistaken attitude. Citizens should be regarded alike as men, and not as the owners or users of some kind of property. All depend upon the workers who render service for service, and it is fair therefore to consider the interest of all citizens as bound up in the interest of those who earn their living; and that city may be regarded as the most prosperous in which it is easiest and most agreeable to earn a living.

The interests of the city and of its citizens are identical. Nevertheless, they may be viewed from both standpoints.

Grocery Store Parking Lot: Sprawl in Microcosm

When I seek a parking spot near my local grocery store, I am brought face to face with a form of sprawl.  While I am not one to drive around for long looking for a parking spot (it seems a waste of time and energy), I find myself dealing with a simple form of sprawl: parking spots occupied or blocked by shopping carts.  The parking spots can't serve their intended purpose because someone has left behind an underuse.   

Statistics of Income: Mortgage Interest and Real Estate Taxes

I've been exploring the IRS Statistics of Income data for 2006 which permits one to download spreadsheets of data and do one's own calculations on the data.  I've stumbled across some data that tickles my Georgist curiosity.   The tables break returns out by AGI (not the greatest option in the world -- a lot of income disappears before that point) but the observations are still of interest.

Table 2.1 looks at only returns that itemize deductions, 49.2 million returns out of the total 138.4 million filed (35.5%), which are reported on Table 1.2.  I'll use the column numbers provided in the spreadsheet, since I've added dozens more. Column 75 shows the total Home Mortgage Interest deducted as $443 billion, and Column 66 shows the Real Estate Tax deducted as $156 billion -- 35% the amount paid in interest.  39.8 million returns deducted interest; 42.6 million returns deducted Real Estate Taxes.

I'm intrigued that people don't seem to mind paying large amounts of interest to a mortgage lender, for the privilege of paying off the previous owner of their home, but balk at paying roughly 1/3 as much to the community which provides the services which make that home and community a good place to live! 

Further, the federal taxpayers who itemize deducted $265 billion in sales tax and state/local income taxes.  So they deducted a total of $421 billion in taxes, and interest of $443 billion.

A 2006 Federal Reserve Board study found that for the top 46 metro markets, land value represented 51% of the value of single family homes in 2004.   Applying that percentage to the mortgage interest amount deducted, we could say that $222 billion of mortgage interest was deducted that went to paying the interest on land the taxpayer purchased from someone else, and the other $222 billion went for paying for the house on that land.

If we accept that state and local government costs $421 billion, wouldn't we rather be paying $222 billion in interest to finance the purchase of the houses we live in, plus $421 billion in taxes on land value, and not pay either principle to the seller or interest to the lender for the land value?

How much land does a family need? What are the implications for our country?

A friend's comment that for most people, a lot of 15,000 to 20,000 square feet is about all we could put to use (for a home), got me thinking. That's 0.33 to 0.46 acre.  Certainly some of us need more, particularly if we are market farming or are growing all our own food.  Many of us live on far less land, particularly in or near cities.  In Manhattan, a lot 25' wide and 100' deep, or 0.057 acres, is standard, and might bring $7 million or more; it might house a single family, quite generously, in 3 or more stories.

At 2.5 persons per household, 0.33 acre average lot size works out to 2.5*3*640 = 4800 people per square mile.  To accommodate all 300 million of us would require a circle with a radius of 141 miles.  (Calculation: 300,000,000, divided by 4,800, divided by pi; take the square root.) That's a circle whose opposite edges are in

• Los Angeles and Las Vegas	272 miles
  Pittsburgh and Cincinnati	285 miles
  Albany and Buffalo	288 miles
  Chicago and Cincinnati	291 miles
  Philadelphia and Pittsburgh	297 miles
  St. Louis and Nashville	304 miles
  New Orleans and Montgomery	310 miles
  Boston and Philadelphia	317 miles
  Atlanta and Charleston, SC	320 miles

  
  

A 0.50 acre lot size works out to 2.5*2*640 = 3200 people per square mile.  To accommodate all 300 million of us at that density would require a circle with a radius of 173 miles.  That's a circle whose opposite edges are in

New Orleans and Birmingham	339 miles
Kansas City and Oklahoma City	343 miles
New Orleans and Houston	346 miles
Chicago and Columbus	351 miles
Baltimore and Cleveland	361 miles
New York and Pittsburgh	362 miles
Albany and Washington, D.C.	366 miles
Los Angeles and Phoenix	372 miles
Atlanta and Memphis	387 miles
Minneapolis and Chicago	403 miles

If we were all content with a single-family home on that Manhattan 25x100 lot, the calculation would be 2.5x17x640 = 27,200 people per square more.  To accommodate all 300 million of us would of require a circle with a radius of 105 miles ... diameter of 210 miles.  No we haven't even talked about any multi-family housing!  This is all single-family. 

Not everyone wants as much as 0.33 acres. If we return to the 0.33 acre assumption per family, but assume that half of the single-person households would prefer 0.05 acres, and that 25% of the remainder of households would prefer 0.10 acres.

1-person households represent about 52 million people.  If half of those households would choose to live on 0.05 acres, and the other half would still want to be on .33 acre, the "central core" of 26 million people would live on 26 million*.05 acres/640 = 2,031 square miles; that's a radius of 25.4 miles.  If the rest of us, 248 million, chose to live at .33 acre per household, with an average household size of 3.0 (pulled from thin air!) that would be 248 million, divided by 3 per household equals 83 million hh at .33 acre is 42,800 square miles; add that to the 2,031 sq miles occupied by the .05 acre group.  That's 44,831 square miles.  Divide by 3.14, and take the square root: the circle would need to have a radius of 119 miles.  A 240-mile circle would be the area between

• Dallas and Houston  -- 239 miles
• Chicago and Detroit -- 275 miles
• St. Louis and Indianapolis -- 244 miles
• St. Louis and Kansas City -- 244 miles.

Of course none of these calculations allows any room for places to work, so let's say that we need to devote, say, 30% of our land to places that would employ us (and simultaneously provide for our shopping needs).  Let's further say that beyond that we need to allow 20% more for streets, railroads, parks, rivers, airports, schools.  That 44,831 square miles grows to just about 70,000 square miles. 

So how big an area is that?  Divide it by pi (3.14) ... 22,300 and take the square root: 149 miles.  That's a 300 mile circle, to contain all 300 million of us!  

And if, instead of a single urban area 300 miles across, we instead looked at 50 cities, they would need to be 1,400 square miles each, with a radius of 21 miles (and a population of 6 million people each). 

Some of us don't care about being within a commuting distance of what a city has to offer, and prefer to live in the wide open spaces.  That's fine, as long as they cover the costs themselves.  And they shouldn't be asked to pay for the infrastructure of the cities, except to the extent that they make use of them.  

Sharecropping on Madison Avenue, NYC

Even Luxury Stores Can’t Afford Madison Ave - NYTimes.com

a few paragraphs from the middle of the article:

Madison Avenue has traditionally catered to the wealthy, but until Polo Ralph Lauren opened at the former Rhinelander Mansion on 72nd Street in 1986, most of the shops were private boutiques like E. Braun. In 1998, the stretch on Madison Avenue known as the Gold Coast surpassed Causeway Bay in Hong Kong as the most expensive shopping strip in the world, Cushman & Wakefield reported, with annual rents averaging $550 a square foot. By then, Giorgio Armani had two 16,000-square-foot stores on Madison and Hermès was about to move there from 57th Street.

For many international retailers, a Madison Avenue address was viewed as essential for promoting their brand, even if sales were not robust enough to justify the rent. Often, part of the rent came out of the marketing budget —a practice that brokers say is fast disappearing.

Rents began escalating rapidly a few years ago, after the stores on the Madison Avenue side of the General Motors Building, at Fifth Avenue on 58th and 59th Streets, were expanded and began commanding annual rent of more than $1,000 a square foot, said Benjamin Fox, the president of Winick Realty Group, a New York retail brokerage.

In 2007, fancy jewelers clustered on the avenue, especially between 61st and 64th Streets. They were able to afford higher rents because their costly merchandise could fit into smaller spaces and more revenue could be squeezed out of every inch. Rents skyrocketed to $1,250 a foot or even more. (Even so, Fifth Avenue between 49th and 59th Streets is now ranked as the world’s costliest shopping strip, with asking rents as high as $2,000 a foot. Its luxury tenants share the avenue, however, with shopping-mall clothing chains like Diesel and Abercrombie & Fitch.)

Retailers typically expect their rent to equal about one-tenth of their sales volume. “In a prime location like Madison Avenue, most retailers will change that to 25 percent,” said Joel Isaacs, the president of Isaacs & Company, a retail brokerage. Even under that formula, a tenant paying $1.25 million for 1,000 square feet would need to have nearly $5 million in annual sales.

One tenth of sales volume!  One quarter of sales volume in prime locations!!  And that isn't for a fancy, well-outfitted building; it is for the prime location.  It used to be that retailers marked up the goods they bought at wholesale by 100%.  If that is still the case, then landlords are getting 1/5 of gross sales in ordinary location and 1/2 in prime locations.

Landlords, as the classical economists recognized, grow wealthy in their sleep.  Having acquired excellent sites, they need do nothing further.  They are permitted to reap what others sow, and we're so used to it we don't even notice.  Their trusts can collect the rental income in perpetuity, long after they're dead.  Remember the name Astor?

If we relieved the landlords of the portion of that "take" which is a function of the value of the location, we would no longer need to tax wages, and sales, and buildings.  Wages would rise.  Entrepreneurial opportunities would rise as prime sites got put to better use.  

Remember Leona Helmsley's oft-quoted statement?  It WASN'T about tax evasion; it was about how we have things set up:

"We don't pay taxes, only the little people pay taxes."

See also Winston Churchill, at quoted at http://lvtfan.typepad.com/lvtfans_blog/2008/07/leona-helmsleys.html.   .... 100 years ago, in 1909 ...

See also http://www.wealthandwant.com/themes/Sharecropping.html.  see in particular Joe Stliglitz's comment:

My concern that I expressed about land is that in many developing countries, you have most land owned by a few rich people, and the land is relatively little taxed. But the land is worked in a system of sharecropping in which workers have to pay the landlord 50% of their output. In a way, you can look at that 50% as a tax. The sharecroppers are paying a 50% tax to the landlord. But it's worse than a tax. Because it's not a land tax, it's a tax on their labor. And it's a tax that goes to the landlord rather than to society.

Who should that tax go to?  We the people, or the lucky-duck landholders of NYC??   

Is this a structure that serves us well?

NYT: Property Values - What You Get for ... $850,000

Property Values - What You Get for ... $850,000 - NYTimes.com

As I read this regular column, I generally have several thoughts:

1. The size of the lot is relevant, whether the home is on a city postage stamp, or a country estate.
2. For multi-story multi-family buildings, I'd like to know the number of stories and the footprint of the unit.
3. The age of the building is useful to know; many are quite old and, likely, quite inefficient, even obsolete
4. Right below the Property Tax information, I'd like to see the percentage of the school district's high school graduates who go to 4 year colleges, and the drop out rate from 9th grade to 12th.  (This matters even if the target audience is 2nd home New Yorkers whose children won't attend those schools.)  Generally, there seems to be a strong correlation between high property taxes and quality of local education.

What the typical reader probably doesn't think about is that for most of these properties, it is the location which is valuable, not the house itself.  The writeups sometimes describe the locational amenities: transportation infrastructure and services, views, parks, jobs.  All these things are definitely worth paying for; the question, of course, is who we should be paying, and how.  Should we pay the previous owner, who didn't create any of those things -- or should we pay the community, which did?   Should we pay the community in the form of taxes on our labor, or in the form of taxes on the value of the land we occupy?

See paying twice, paying the wrong party, privilege, windfall, unearned increment, rent, rent is for the community.  There is a better way to finance our common spending than what we're doing now.

Dumbest Thing Voters Did

A friend of mine named Wendell Fitzgerald posted a wonderful comment under that title to an OpEdNews article at http://www.opednews.com/articles/California-s-Legislators-a-by-Sandy-Sand-081228-553.html entitled "California's Legislators and Voters are Among the Dumbest in the Land."  With his permission, I am posting it in its entirety.  (The bolding is mine.)

The most truly stupid thing California voters did a long time ago which is slowly killing the State and underlies everything Sandy is saying is voting for Proposition 13 back in 1978.  The only proper source of revenue to pay for local and state services (physical infrastructure in particular) is to assess against the economic value that those expenditures engender.  All public expenditure and most obviously in the case of expenditure for physical infrastructure results in increasing land values. They do not increase the value of improvements but land value only.  All economists agree.

The appropriate source of revenue to pay for public services, therefore, is to assess against the privately held values public expenditures produce and increase.  That value is land value.  The property tax is the only tax that directly taxes land value.  In that regard, the property tax merely takes back for community use to pay for community provided services the value the community gives to land.  This is the epitome of economic justice.  Unfortunately the property tax is deeply flawed in that it also taxes the value of improvements the value of which is not increased by public services but compared to every other tax that by definition has to fall on labor and capital, the property tax even as flawed as it was/is contains the only just and economically neutral form of taxation there is. The tax on community created land value.

Some Factoids from the CBO on Infrastructure Investment

I'm reading Peter Orzag's statement, from 7/10/08, when he testified before the Senate's Committee on Finance, and thought I'd collect some of the interesting bits and pieces, and offer some observations.

Landlording in NYC: "We don't pay taxes, only the little people pay taxes."

There was an interesting blog post on the NYT website yesterday, entitled "Gotham Book Mart Holdings are Given to Penn."  I found it interesting because it deals with a specialized business which existed in NYC for decades: a bookstore specializing in antiquarian books.

It was most recently housed in a building at 16 East 46th Street, between Fifth Avenue and the top of Grand Central Terminal.  The article says that two "benefactors" had bought the building in ~2004 for $5.2 million and leased it to the owner of the bookstore for $51,000 per month.  The implication is that the $51,000 monthly rent was a bargain.

Eisenhower's roads to prosperity

Eisenhower's roads to prosperity - Los Angeles Times.

Tom Lewis describes some of the history of Eisenhower's huge infrastructure initiative, the Interstate Highway system, in the context of Barack Obama's plans to use infrastructure as a job-creation tool.

What most people don't seem to realize is that investments in infrastructure do more than create jobs in the process of the development of the infrastructure and in its maintenance: they also create something else of much larger importance, which we as a society have chosen to pretend is of little or no significance, to our detriment.  (How's that for understatement?)

What is it?  Every worthwhile infrastructure project creates more land value than the project costs.

I'll repeat that.  Every worthwhile infrastructure project creates more land value than the project costs!    Therein lies one of the most important keys to solving many of our most serious problems.

Madoff Greatest Ponzi Scheme? Real Estate Magnitudes Greater -- The Inspired Economist

Madoff Greatest Ponzi Scheme? Real Estate Magnitudes Greater -- The Inspired Economist.

I'm going to take the liberty of sharing with you a post which I wish I'd written.  It is by Fred Etchevery:

Madoff Greatest Ponzi Scheme? Real Estate Magnitudes Greater.

Written by Fred Etcheverry | Published on December 22nd, 2008

Bernard Madoff was arrested December 12, 2008 for an alleged $50 billion investor fraud and released on $10 million bail. While the press heralds this as the biggest ponzi scheme in history, it’s a pittance compared to the real estate schemes that have created the present financial crisis.

Like Madoff’s scheme, the house market became dependent on a steady price increase. Buyers were willing to pay high prices with the expectation that they could later sell for a profit.

Eventually, without substantial inflation, houses had to become unaffordable. House prices had reached levels that often required most of a household’s income. Subprimes were just a frantic attempt to continue this pyramid. Like every ponzi scheme, some means must be found to get more money from new “investors” to payoff old.

The landowner and the taxpayer

I stumbled across a quote, in someone's sigfile on a forum I hadn't previously been to.  It expresses the effect of permitting the privatization of the economic value of land, and the socialization of our wages through income and wage taxes and taxes on what we produce.  It is, perhaps, a bit stronger than how I'd express it, but I have to agree that Roy has it right:

The landowner effectively owns part shares in millions of part-time slaves called, "taxpayers." -Roy L

We can make our system far more just by shifting our taxes onto land value, and off workers.  The owners of fabulously valuable land are collecting from the rest of us value which they didn't create and we did.  It does not come out of thin air; it comes out of someone's labor.  Yours and mine, even if we've never set foot on that land or even passed within 10 miles of it.  (Would it be any better somehow if it came out of someone else's labor, but NOT ours?)

The Feoffees may sell Little Neck to the tenants ... for ever and ever

For background on this story, you might look at two previous posts (below):

• The Feoffees, their tenants, and the Ipswich public schools  February 20, 2008

• Update on the Feoffees' tenants in Ipswich, Massachusetts  July 8, 2008
  

I was surprised to learn that the Feoffees of Ipswich had decided to sell the property for which they have been trustees for over 300 years.  They have an agreement to sell the 36 acre property to the 167 tenants, who individually own cottages which sit on lots totaling a bit more than half the of the 36 acres; the rest of the land is apparently common property, shared by all the cottage owners (and their tenants) -- and assessed by the town at 10% of what a comparable sized lot with a home on it is assessed for.

Since Chicago has sold off on-street parking to a private entity (a financial services company), and Indiana has sold some toll roads to a foreign corporation, I suppose I should not be surprised that the Feoffees of Ipswich have followed suit.  But I am disappointed.  (I know nothing more of the story than what I read online and I've read everything I can find.)  It seems to me that the fellow who owned the land in the 1600s and chose to donate it to his community, for the ongoing benefit of the town's public schools, did a good thing.  He knew the land was choice (oh -- what a sweet place it appears to be, from all the photos!)   He might not have anticipated that a railroad would make it possible for daily commuters to work in Boston and live in Ipswich, but clearly the sheltered almost-island not far from the Atlantic ocean was a fine site. 

So the articles raise some interesting questions. I'll be curious to see how they get resolved.

1. The agreed-upon purchase price is $26.5 million.  What is the entity that will purchase it?  The tenants' association? 

2. How will the individual lots be valued, when it comes to the shares of ownership in the property?

3. Need one be a tenant to buy either a lot or a share in the Little Neck association?

4. If an individual cottage owner can't afford to purchase his lot, or his share of the $26.5 million, what provisions will be made?

5. Will the 24-year-round and 143-seasonal rule continue?  Will owners of "Seasonal" houses be permitted to buy rights to use their property year-round?  At what price?

6. Will there be tears shed over the folks who can no longer afford their cottages?

I'd like to suggest a model that the Little Neck tenants might want to consider.  Instead of owning the individual lots outright and sharing ownership of the other ~50% of the land through some association, they ought to consider continuing to rent the land out. Arden, Delaware, does this -- has since about 1903 -- and it is a fine place to live.  Like Little Neck, Arden has smallish lots and lots of common spaces, which make a very fine place to live.  Arden collects land rent from every homeowner, sufficient to cover local taxes on the land and buildings, and to provide other services within the community.  Taxes are not placed on buildings.  Land is valued according to its size and its proximity to positive and negative amenities.  In Little Neck, this would mean that lots with better views would pay more than comparably sized lots with more modest views, and, likely, that lots with the rights for year-round occupancy would pay significantly more than those with only seasonal access.  

And the Ipswich assessor ought to watch property values carefully.  When 80-year-old 900-square-foot cottages sell for $300,000 or $400,000 -- just for the cottage, not for the cottage and its land -- the full economic rent is not being collected.  (See http://lvtfan.typepad.com/lvtfans_blog/2008/07/update-on-the-f.html.)

$26,500,000 divided by 167 cottages works out to a mere $159,000 each. What a deal!

I'm amazed that the Feoffees would accept such an offer.

Looking at current real estate listings,

• there is a property asking $625,000. The assessor values the land at $294,300 and the 1910 building at $90,300, for a total of $384,600. That's one of the larger lots. Across the road is a vacant lot half the size, valued by the assessor at $27,600.
• Another property, listed at $339,900 consists of a 1935 cottage, valued at $81,800 and a lot valued at $185,500, for a total assessed value of $267,300.
• A third is listed at $465,000; the 1930 cottage is valued at $109,500, and the lot at $185,500, for a total assessed value of $295,000.
• A fourth is listed at $495,000; the assessor values the cottage at $102,900, and the land at $228,700, for a total of $331,600. (A nearby lot, the same size, is valued at $18,500.)

How on earth can the Feoffees justify accepting only $26.5 million for this fabulous land? $159,000 each, on average. Incredible. What a deal for the tenants. What a lousy deal for the beneficiary, Ipswich's schools, forever.

Land rent is a powerful thing.  Good things happen when it is collected and used for the benefit of the community.  Using it for common purposes -- schools, infrastructure, public health, emergency services, transportation systems, to name a few -- leads to healthy communities which are both fine places to live and fine places to visit, and fine places to run a business.  Letting it sit in private pockets generally leads to expensive housing, land speculation both in the residential and commercial neighborhoods, sprawl, old buildings, -- and, worst of all, reliance on sales taxes and taxes on wages, neither of which should be taxed at all.

I'll probably be revising this post a bit, but thought I'd publish it sooner rather than later.

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

Daily Kos: One Person's Lot is Person's Loot

Daily Kos: One Person's Lot is Person's Loot.

Eron Lloyd has an excellent post over at Daily Kos.  He's writing about Philadelphia, but could just as well be writing about most American cities and towns.  He writes,

At the Mayor's third town hall meeting last week on the budget cuts, I was handing out our Philadelphia LVT brochure to people before the meeting as usual when I had a brief but interesting exchange. A man walking into the building took a quick look at my brochure and handed it back, shaking his head. He said that he works for the city, and that "there's no money in land" to solve the city's problems. ...

After the meeting, I decided to test this person's belief while walking along Girard Ave. back to my car. Across the street were some vacant lots that looked like they'd been empty for years. It appeared to be about 3-5 lots in size, with huge weeds and junk all over the place. Rather than describing it in detail, have a look for yourself.

Eron goes on to describe the property, the public records on it, and the location, and then tells us that the property is for sale.  I'll leave it to you to read the rest of his post, and to consider how we currently finance public spending, and how the incentives affect our economy -- local and national.

Change.gov

The new administration is seeking comments.   I'd like to believe they'll be read.  Here's what I posted at http://change.gov/ under "economy":

We need to shift taxes OFF productive effort and ONTO land value and natural resources.    Doing so will have a wide range of benefits.

Taxes and Tolls Sought in Plan to Save M.T.A. - NYTimes.com

Taxes and Tolls Sought in Plan to Save M.T.A. - NYTimes.com.

The tax on payrolls, expected to be less than one half of 1 percent, would apply to businesses in the 12-county area served by the authority. It would be paid by businesses, not employees. The tax would be designed to raise $1 billion a year or more.

It would be coupled with the new bridge tolls, which would generate about $600 million a year, after the cost of maintaining the bridges and collecting the tolls is accounted for. Drivers would pay a higher rate on the East River bridges than on the Harlem River bridges under the plan.

There would be no toll plazas: Most tolls would be collected through a system of E-ZPass readers. Drivers without E-ZPass would be identified and could be billed using digital cameras that snap a picture of each vehicle’s license plate.

Control of those bridges, which are owned by the city, would be transferred to the authority under the plan, although it was not clear how that would be achieved.

The third main element of the proposal is a more modest increase for next year in fares and existing tolls on the bridges and tunnels already controlled by the authority.

That increase would allow Mr. Ravitch and his supporters to argue that the cost of running the system was being shared by all those who benefit from it.

So we've got a proposal that the way to pay for the shortfalls in providing the public transportation on which the NYC economy is vitally dependent is from taxing employers, imposing tolls on previously free bridges into Manhattan, and raising existing bridge tolls (which fall on those who don't use public transportation [except perhaps bus commuters?]

Most interesting is the final sentence quoted above:

That increase would allow Mr. Ravitch and his supporters to argue that the cost of running the system was being shared by all those who benefit from it.

Ah, but he has omitted from his analysis something vitally important: paying in proportion to the benefit received. One of the biggest -- huge!! -- beneficiaries would pay next to nothing!  To whom am I referring? The landlords of New York. 

Trickle-Up Economics

http://www.youtube.com/watch?v=6ZkfmY1PMng

That's the link to a film which explains rather neatly, in about 7 minutes, how one very significant aspect of trickle-up economics works.

The film is called Ricardo's Law ~ The Great Tax Clawback Scam  and I commend it to your attention.

Dying of Consumption - NYT

Dying of Consumption - NYTimes.com.

The chairman of Morgan Stanley Asia has an op-ed piece in the NYT which calls for measures which will increase savings by the American people, and promote less consumption:

The United States needs a very different set of policies to cope with its post-bubble economy. It would be a serious mistake to enact tax cuts aimed at increasing already excessive consumption. Americans need to save. They don’t need another flat-screen TV made in China.

The Obama administration needs to encourage the sort of saving that will put consumers on sounder financial footing and free up resources that could be directed at long overdue investments in transportation infrastructure, alternative energy, education, worker training and the like. This strategy would not only create jobs but would also cut America’s dependence on foreign saving and imports. That would help reduce the current account deficit and the heavy foreign borrowing such an imbalance entails.

It is difficult, though, to ask people whose income is being eaten up by fixed costs to save.  (See Warren & Tyagi's The Two Income Trap.)  Many of these fixed costs relate to housing, and, for young families, childcare -- and, I might add, this is a vicious circle: many need the childcare because of the high housing costs

Couple this with the fact that taxes weigh heavily on lower-income and middle-income people, and one might be led to seek a better way. 

As we do things now, if one buys a home, one makes a down payment of some size, and finances the rest.  For most of us in urban areas, with the possible exception of those who are buying newly built homes, over half of what we are paying is not for the house (or condo) itself, but for the location, the site.  The seller didn't create the land value, even if he and his ancestors have owned that property for generations.  The community created that land value.  But as we currently do things, the hapless buyer must pay the seller for it.  And then, to add insult to injury, he must pay property taxes on the house itself and on the land value, and taxes on many of his purchases (in Chicago, the sales tax is now over 10%, surpassed only by a few counties in Alabama), and taxes on his wages.

Americans and Mass Transit

An article in Salon last week, entitled Who says Americans won't ride mass transit? contained some interesting factoids:

• Like mass transit systems across the country, BART has experienced record ridership this year. In 2007, Americans took 10.3 billion trips on public transportation, the highest number since the Model T and its progeny took over the nation.
• Back in 1926, Americans each year took 147 transit rides per capita.
• By 1950, Americans took just 113 transit rides per capita, and by 1956 that number had plummeted to just 66. By 2006, Americans took just 33 transit trips a year per capita. In the decades since World War II, it has been only in the dense financial centers, like New York, Chicago and San Francisco, where transit has been able to stubbornly resist the rise of the car, remaining a major way for many residents to get around.
• In 1960, some 12 percent of all U.S. workers used transit to get to work. By 2000, that number was down to 4.7 percent, and in the past couple of years it has just barely ticked up to 4.9 percent.
• Since the early '80s, 15 major American cities, including San Diego, Portland, Ore., Denver, Houston, St. Louis, Salt Lake City and Los Angeles, have built new light-rail systems from the ground up. Dozens of other cities are considering proposals for similar systems, or have them in development, such as Phoenix and Seattle.

So how do we go about making our cities and towns mass-transit-friendly?  Seems to me that measures that lead to increased density will help support mass transit ... and that mass transit will support increased population density.

The best measure I know is shifting taxes onto land value.  Sites well-served by infrastructure (e.g., roads, bridges, highways, airports, public transportation systems, ports, city water and sewer, stormwater runoff and, where needed, levees or hurricane protection, etc.) -- and services (e.g., schools, emergency response for small- and large-scale emergencies, public health, courts, etc.) -- and in places made desirable by nature (e.g., good views, waterfront, access to recreation, an appealing climate, a reliable supply of clean water, etc.) and good laws (e.g., limiting pollution, unpleasant smells, noise, etc.), efficient and uncorrupted government, and a healthy economy (with smart incentives and few disincentives to productivity, good infrastructure, logical and efficient services provided by the government, particularly in natural monopolies) have tremendous value.  For a good example of this, see this post.

When we tax land value lightly, those who own choice sites can choose whether to sit and wait -- without lifting a finger -- for the rise in land value they can reasonably expect to occur, or put the land to good use now.  Putting the land to good use now creates jobs, housing, offices, retail spaces, density.  Sitting and waiting produces nothing on that site, and leads to sprawl at the fringes.  Should our landholders have that choice, or is putting such sites to something approaching their highest and best use sufficiently important to the community as a whole that we ought to have incentives to good land use?  I'd say that reducing and reversing sprawl is sufficiently important that we ought to be taxing land value heavily. 

And there are many other good reasons to do so beyond this one.

That acre in midtown Manhattan: $800 million -- as a teardown!

I don't know how reliable the estimates involved are, but this article from a Pakistan website came across a google alert today.  The property is a 1-acre teardown within a short walk of Manhattan's Grand Central Terminal: 

Roosevelt Hotel to be sold out Naveed Miraj ISLAMABAD: The government has finally decided to sell the famous PIA-owned Roosevelt Hotel in a bid to add some foreign exchange to the national exchequer and has asked the Privatization Commission to arrange open bidding to this end. The commission hopes to get a minimum offer of eight hundred million US dollars as compared to two hindered million dollars the Shaukat Aziz-led government had expected for the hotel located in the busiest commercial area of Manhattan in New York. The previous government was in haste to sell off the hotel apparently to oblige some of its blue-eyed officials but shelved its plan following the Supreme Court's ruling in the Pakistan Steel privatisation case. In the wake of the current economic crunch, the government has decided to sell the hotel in the hope of getting handsome foreign exchange.

If you are one who thinks that land rent -- the value which the land itself would rent for each year -- is not a large enough tax base to provide much in the way of revenue, consider that this single acre, taxed annually at 5% of its proposed selling price, could provide $40 million each year in income to support the spending needs of NYC, NYS and the federal government.   I don't know what NYC is collecting in property taxes on land and buildings, but it isn't much -- which is part of why the asking price can be so high.

Think what it would mean to shift $40 million worth of taxation off wages, off sales, off buildings! 

PIA is the airline of Pakistan.

See previous posts about this site at That block in Manhattan ... and Hotel Roosevelt For Sale at $1 Billion

NYS leasing out its assets to private sector?

A recent AP article says that New York state's Governor Paterson is considering leasing some state assets to private contractors to "trim costs and provide long-term, steady revenue."

Under consideration for leasing could be everything from state highways and bridges to the lottery, golf courses, parks and beaches.

Let's  think about the economics of the situation for those who bid on such projects, assuming there are multiple serious bidders.  They are willing to give some up front concessions, because they believe that things will turn their way within a few years.  By that time, today's governor and legislator will have moved onto other pursuits, and the people of NYS will be receiving a small fraction of what they should be getting for scarce rights of way (highways, bridges, beaches, golf courses, parks) or monopolistic privileges (lottery).  Yes, the current governor and current legislature will have solved their current problems, but they will have effectively turned parts of the commons and special privileges over to special interests, likely on long-term leases that effectively turn over to private entities an increasing amount of economic rent.

Likely the folks negotiating such deals on our behalf don't even know what economic rent is.

It would be bad enough if these things were being turned over to America's corporations and entrepreneurs for privatization into their already significant stores of wealth.  But the article goes on to mention, quite casually, that it is an Australian-Spanish partnership which paid $3.8 billion to lease the Indiana Toll Road, and $1.83 billion to lease the 8-mile Chicago Skyway, and an Australian company that bought the 99 year lease on a parkway in Virginia, and a Spanish-American partnership which is building and running for 50 years a toll road from Austin to Seguin.

Guess what America's investment banks were up to?  (I wonder whether this is still on their list.)

Nationally, Wall Street investment houses have courted more than a dozen states to lease state lotteries to private investors. The Illinois House last month approved a plan to raise $10 billion for building roads and schools by privatizing its state-run lottery for half a century, with the Senate scheduled to vote on the measure this fall.

And while this article doesn't address it, some of America's ports are also privately owned or leased long term, by foreign entities.  See also: wealth transfer overseas!

We've made a secular religion of homeownership

I heard this phrase from a guest on Diane Rehm's NPR program today.  And I think it is essentially a correct statement, and reflects our lack of understanding of the underlying dynamics.

We see that homeowners fare better than renters, and think that the answer to wealth distribution might be to make more renters into homeowners as a way to help them fare better.

But as a society, we could do a lot better if we all -- owners and tenants alike -- shared in the appreciation of land value, which currently accrues only to owners.  If you've never thought about it before, this will sound very odd to you.  But consider that
(1) houses, like cars and machinery, do not appreciate.  They depreciate.
(2) land appreciates, for reasons which have nothing to do with the individual landholder.  It appreciates because of public spending on infrastructure and services (schools, libraries, roads, highways, bridges, public health, emergency response at both the individual and community level, police, courts, jails, prisons, social workers, food stamps,  It appreciates because of natural amenities like great views.  It appreciates because of the presence of a healthy local and/or national economy.  It appreciates because of increases in population, whether from increased fertility, decreased mortality because of better health care or fewer accidents or disabilities, immigration or migration. It appreciates because of advances in technology -- faster trains, air conditioning, elevators, earthmoving equipment advances, subways, bridge design.

Why on earth should landholders -- residential or, far more significantly, commercial -- be the beneficiaries of this appreciation?  Why shouldn't we treat this value as our common treasure, since we're all equally responsible for it?  Shouldn't we use this as our natural revenue base, to benefit all of us -- those who consider ourselves owners, those who are residential tenants, and those whose work is on land owned by others? 

The way we do it now, tenants get nothing (and get to pay for some of that public spending, which raises next year's rent to their landlord), residential owners do pretty well, and commercial property owners, who own our best-served-by-valuable-infrastructure downtown sites (like that block in Manhattan) make out magnificently.  That "magnificent" doesn't come out of thin air. It comes from the labor of all of us, often at wages well below what they should be.

Another benefit of civilization and government

A recent Boston Globe article about a small town in Alaska (also described elsewhere as the state's 4th or 6th largest city, depending on whether one accepted a population figure of something like 6,000 or another estimate of 8,000) mentioned that as recently as the past decade, it had no building codes, and that its mayor seemed to be quite proud of that during her tenure. 

It seems to me that building codes and their enforcement by inspectors during the construction process are one of the very worthwhile protections that increasing population density and civilization brings us.  If I am thinking about buying an improved property, I want assurance that it was properly built, that it was built to reasonable standards at the time.  I want it to be built to withstand earthquakes, if those are a known issue in the area, and hurricanes, if those are a real possibility locally.  I don't want to have to research the reputation and finances of the builder at the time he built the building, or take it on faith that all was done properly. 

DIvision of labor is a fine thing, and it seems worthwhile to me to have such services be part of what one pays for through user fees and local taxes on land value.

When I am elected President ...

That was the title of a talk I heard some months ago, by my friend Mike Curtis, and with his permission, I'm sharing it here.  [The links are my additions.]

When I am elected president I will initiate legislation that will end poverty.  It will create full employment, raise wages, and make housing affordable for all Americans.  It will increase the return on savings,  stop inflation, and end recessions.  It will rejuvenate our cities, outlaw pollution, and generate a socially-created fund to pay for national health care and social security. 

This legislation, once enacted, will deliver an abundance of opportunity, strengthen the incentives, and protect the rights of property.   Revenues will come from the value of benefits received —— exclusive privileges assigned by the government.

We all contribute to rent. Some of us get to live off it. How does this fit with the notion that we are created equal?

Rent is something most of us give little thought to, and most of those who think about it are not thinking about the sort of rent to which I refer.  The rent I'm talking about is not the payment which goes from tenant to landlord each month.

Rather, the rent to which I refer is the return to land, just as wages are the return to labor and interest is the return to capital.  And, just to expand it a bit further, "land" in this usage refers not just to the sites under our feet, but equally to the remainder of the natural creation and to that which our common investment in infrastructure and services has added to the natural creation: the access created by bridges, highways, railroads, subways, airports, river locks, etc, the value created by schools, parks, public health, courts, systems set up to respond to individual and widescale emergencies, etc.  Land includes natural resources, such as oil, water and air, the electromagnetic spectrum (those airwaves that belong to the American people); airport landing slots (where demand exceeds supply), etc.  

Rent happens.  It happens whenever more than one party wants to use a specific piece of land.  Who should benefit from it?  A small group of us? the first to arrive? Or all of us?