LVTFan's Blog

A "Fighting Leaflet" from another time and place, relevant today

From an 1899 newspaper:

FIGHTING LEAFLET OF THE SCOTTISH ASSOCIATION.

The Scottish Liberal Association has just issued the following as a fighting leaflet, written by Mr. Edwin Adam. M. A., vice-president of the Scottish Land Restoration Union:

The Taxation of Land Values and Social Problems. Lower Rent. Higher Wages:

Why are house rents so high, and the accommodation so bad? Mr. Joseph Chamberlain told us that a good three-roomed house could be built for £150, but that, unfortunately, did not include the cost of the site. It remains a "castle in the air.” The Edinburgh Town Council can borrow money at 2½ percent, and yet it makes a loss in giving one-roomed houses at £6 10s a year.

Because the cost of the land is so enormous. This is the opinion of the Royal Commission on the Housing of the Working Classes. Building and land in and around Edinburgh is feued from £40 to £200 an acre, and sells at from £1,200 to £6,000 an acre. Eight thousand pounds has just been refused for seventy yards of ground which the city of Glasgow wished to acquire for widening the corner of Buchanan street.

The remedy is to put a tax on the land value, whether the owner allows that land to be used or not.

Taxation of land values means putting a tax on the value of the land apart from the value of any improvement placed upon the land by the occupier’s industry. It would put the tax on the site, and not on the house built upon it.

The present system of local rating puts the tax upon the improvement— the better a man uses the land the more tax he has to pay. The less he uses the land, the lower the use he makes, or allows other to make of the land, the less he contributes to the public expenditure. This enables him to hold it idle, and wait for the rise in its value, which will result from the continued growth and expenditure of the community, to which he has contributed nothing.

We wish better houses and more houses. The present system permits the man who refuses to allow building on his ground to go free: puts the rates on the man who builds. This is unjust.

When Jenner's shop in Princes street, Edinburgh, was burnt down, the site was worth £100,000. Had the owner resolved not to rebuild, he would have paid no rates, but the value of the site would have continued to rise, because of the continued increase of population and public expenditure. He, however, not only rebuilt, but spent some £95,000 in making the building an ornament to the town. He is therefore rated on £7,000, which represents the annual value both of the site and of the £95,000 spent on the building. The new system would rate him on the value of the site, say on £4,000 a year, whether he rebuilt or not, and would leave him to enjoy all the value of the building.

Let owners of land pay their rates on what they say their land is worth. This would compel them either to use it, or let others use it, at its present market value.

Would a slum proprietor be able to demand a fancy price for his houses which have been closed by the sanitary authority, if he had to pay rates on that fancy price?

Would the Duke of Buccleuch have been able to hold out for £120,000 for 100 acres of almost barren foreshore and a flooded-out quarry, which Edinburgh required for gas works, if he had to pay rates for that, and all the similar land he holds on a value like that?

Would sites for the Usher Hall in Edinburgh be quoted at fancy figures if the owners had to pay rates on what they say is the selling value of their property? Why should they be allowed to name one value for rating, and an enormously greater for selling? The North British Railway Company refused £65,000 for the Canal Basin. That stands in the valuation roll at a rental, which represents a capital value of only £30,000.

Taxation of land values is a just system of taxation. It puts the burden of public expenditure on those who ultimately benefit by that expenditure.

It merely takes for the municipality a portion of that value which is created by the work of the municipality.

It would discourage idleness among land owners, and force them to use the land or let others use it, at its present market value.

It would not, like the present system, only rate a man according as he used and improved the land, but would leave to every man the full value of his own improvement.

It would encourage building. More houses and better houses would be built. It would therefore lower rents.

We should have land owners asking builders to come and build; they would be advertising for laborers, and not the laborers be begging for employment. It would therefore raise wages, and the conditions of labor would be improved. Monopoly would be taxed and industry would be free.


reprinted in the Oakland Tribune, 1899-03-25, in Pomeroy's single tax column

"Proputty" --- A Lecturette in Rhyme, by J. W. Bengough

John Wilson Bengough was a skilled artist and cartoonist, but he was also skilled with words.  This appeared in Single Tax Review, Winter 1906.

“PROPUTTY.”
(For the Review.)
A LECTURETTE IN RHYME.

I took up my Tennyson lately and read his dialect verse
Of the sturdy old “Northern Farmer,” whose soul was in his purse;
How he berated Sam, his son, who wanted to marry for “loove,”
And the folly of such a notion sought earnestly to prove.

“ ’Ear my ’erse’s legs,” says he, “as they canters and canters awaay,
Proputty, proputty, proputty—that’s wot I ’ears ’em saay!”
“Proputty, proputty, proputty”—that was the only thing
That to him was of real importance concerning a wedding ring.

Gentleness, truth and sweetness; a pretty figure and face,
These, and a passionate love, are all very well in their place;
But to be of any account in blushing, prospective brides,
“Proputty, proputty, proputty”—that must be there, besides!

Now, to many who read the poem this Northern Farmer seems
A sordid old grasping wretch, who only of riches dreams;
“Proputty, proputty, proputty.”—so runs his one refrain,
“Proputty, proputty, proputty”—hoarding, profit and gain.

Natural Public Revenue -- sourced to 1825

I had thought that this phrase came from J. W. Bengough, in 1914.   (For quite some time, I thought I'd originated it, in the shower one morning around 2010, and was later delighted to find that Bengough, creator of The Up-to-Date Primer: A First Book of Lessons for Little Political Economists In Words of One Syllable, With Pictures (1895) and weekly cartoonist in The Public, had used it in his Chalk Talks.)  But today, searching for references, I discovered one from 1825 and a 2nd edition from 1827.  

"Principles of Political Economy and of Population; including an Examination of Mr. Malthus's Essay on Those Subjects" by John M. McIniscon, a Fisherman (1825) online at https://books.google.com/books?id=wF1U5_IXlWsC.  Google says that "Maciniscon" is a pseudonym for J. C. Ross.

Two years later, another edition appeared: "An Examinations of Opinions Maintained in the 'Essay on the Principles of Population' by Malthus; and in the 'Elements of Political Economy' by Ricardo; with some Remarks in reply to Sir James Graham's 'Address to the Land-Owners'." (1827)   Its title page at https://books.google.com/books?id=h1hJSjgJxIAC lists the author as J. C. Ross and google says "[A reissue, with additional material, of “Principles of Political Economy and of Population,” published under the pseudonym John MacIniscon.]"  The additional material is the 65 page "Remarks."   

at pages 83-84 of the McIniscon (1825) edition:

It follows, from what we have observed, that the legislature should equally abstain from any attempts at the forcible creation of fictitious capital, as of offering artificial incitements to the increase of population.* The rent of the soil of the country, which is the only natural public revenue of the State, should be put in a course of resumption, and faithfully applied to the public service and benefit, in defraying the just expense of its government; in the endowment of seminaries of useful and necessary education, under regulations which should render them effective for that purpose, and hold out to ingenious persons the means of attaining the respective objects they may have in view, for the benefit of the community, whether these be travel—learning—the cultivation of knowledge or the inventing and perfecting of improvements in the arts and sciences—or the fitting men for all the higher and more difficult duties of society, and for becoming superintendants in all the more important works by which the domination of the human species is extended over the powers of nature—and to employ the surplus revenue in the cultivation and improvement of the country. These, together with the providing for the external and internal protection of the community, are the only legitimate objects of just legislation and good government.

*The employment of capital unproductively, and especially in war, is an artificial incitement of the most mischievous description; it causes their existence, and, at the same time, destroys the funds by which that existence should be maintained.

I commend these to your attention.  You might consider going to the 1827 edition and skipping over the "Remarks" until you've read the rest.

Searching just on McIniscon, I find, among other things, https://www.routledgehistoricalresources.com/economic-thought/sets/malthus-and-the-population-controversy-1803-1830/volumes/an-examination-of-opinions-maintained-in-the-essay-on-the-principles-of-population-two-lectures-on-population 

And I've collected a number of other references to Natural Public Revenue.    I don't think Thomas G. Shearman uses the phrase, but he certainly has the idea -- see his Natural Taxation.

 

Saving for Retirement

It is worth considering that one of the reasons that people are having more difficulty saving for retirement now than they did, say, 10 or 20 or 30 years ago, is that housing costs are absorbing a larger portion of their wages than used to be the case.

And I'm rather sure that if one looked at the sum of their housing and commuting costs as a percentage of income, that, too would have risen significantly.

The old rule of thumb was to spend no more than 1/4 of one's income on housing.  I assume that was construed to include not just the rent or mortgage payment, but also property taxes, condo or association fees, homeowner's or renter's insurance, heating fuel, and utilities such as electricity, water, sewer and telephone.  That was probably before TV was a monthly bill, and before an internet connection became, if not essential, nearly so.  And it may have been before borrowing more than 80% of the purchase price became common, adding in costs for private mortgage insurance, costing 0.32% to 1.2% of the loan principle.  It doesn't take into account the likely costs of maintenance, sometimes estimated at a few percent of the house's value.

Thirty or forty years ago, one couldn't get a standard mortgage whose payments, plus property taxes and homeowners' insurance, exceeded 28% of gross income, or take on a mortgage when the sum of those costs and other debt service (credit card, student loans, car loans) exceeded 35% of income.

Today, according to the Consumer Financial Protection Board, "Qualified Mortgages" generally don't exceed a debt-to-income ratio of 43%.   But that doesn't appear to include expenses for utilities.

Another Wise LTE, from 1932

A fellow named Hugo W. Noren, of Pittsburgh, wrote to the Philadelphia Inquirer, in January 1932:

To the Editor of The Inquirer:

A gentleman of your city who appears to give largely of his time to promote its welfare sends me an editorial quoting Mr. Franklin Spencer Edmonds to the effect that taxation must be stabilized and your own that taxes on real estate must be reduced.

Perhaps we shall never make any progress so long as we think of it as a tax problem.  The term "real estate," too, is confusing.  It includes land from which wealth is drawn and wealth drawn from the land.  There is no possibility of arriving at a solution if we treat land as wealth.  Land is not wealth.  It is the surface of the planet earth.  It is not produced.  No man can add an inch to it or reduce it an inch.  Wealth is produced and has no limit.  It is in our power to destroy it all or double it.

It seems necessary to grand land titles for security of possession.  But in granting such exclusive possession equity requires that an equivalent be rendered in return for the grant.  Unless such equivalent payment, called rent, is required, the possessor has an advantage over his fellows: he has a privilege.

Wherever land has a market price we know that public funds have gone astray.  Wherever public funds go astray public business must suffer.  It is no remedy to go out and punish business men, raising funds by levying penalties on production and exchange of wealth in lieu of failure to collect the public fund.

To stabilize taxes would be a guarantee to private parties a perpetual untaxed income from public funds.  Anyhow, one would hardly look for such proposal from Philadelphia, the birth place of Henry George.

To which I can only add that California's Proposition 13, which "stabilizes" the property tax, is exactly what Mr. Noren is referring to.   No wonder seniors remain in homes too large to clean, to maintain, to cool or heat, close to jobs from which they're retired and schools their children attended decades ago.  Every dollar by which their cost of living is subsidized comes out of others' pockets, in the form of higher taxes on their new neighbors, and the long commutes which younger people must endure to get from a rental they can afford or a mortgage for which they can qualify to the jobs which support themselves and their families!

The Henry George Idea in One Hundred Words

This appeared in a 1943 Henry George School newsletter (which I'm pretty sure was edited by my grandmother, Marjorie Carter (1902-1963) -- something I'd not been aware of!)  It is signed by Louis W. Weston.

 

The Henry George Idea in One Hundred Words

The rental value of land is due to our common human needs.  No single individual -- the people as a whole produce that value.  It grows larger as the population and its activities increase.

This natural law of rent gives the community the moral right to take all of this value which it creates. 

The mistake is made of permitting a few to take this value, thus creating speculation in land, upsetting economic stability, necessitating unemployment and the recurring breakdowns in our civilization.

This fundamental wrong must be righted before wars and all injustice can be abolished.

 

Frank Chodorov on rent, and who receives it

Rent is not a tax. It is payment for the use of a location, determined by the higgling and haggling of the market, and it makes no difference to the land user whether he pays rent to the city fathers or to a private owner.

—Frank Chodorov (1887–1966)

John Dewey's Foreword to Geiger's "The Philosophy of Henry George" (1933)

Many are familiar with John Dewey's 1928 "An Appreciation of Henry George," which prefaced the book "Significant Paragraphs from Progress and Poverty," but this 1933 essay is worth knowing, too, and it is harder to find online. [See also Dewey's 1933 radio address, "Steps to Economic Recovery".]

I like his summation, in the first paragraph: "Practical Idealism."

 

John Dewey's Foreword to The Philosophy of Henry George
by George Raymond Geiger

THE life history of Henry George is typically American even though it has few parallels in this country. There are many instances of rise from poverty and obscurity to wealth or fame or both in the realms of business and politics, and there have been many self-made thinkers in various fields. But Henry George stands almost alone in our history as an example of a man who, without a scholastic background, succeeded by sheer force of observation and thinking that were dictated by human sympathy, and who left an indelible impress on not only his own generation and country but on the world and the future. He is an outstanding example of something of which we hear a good deal, but mainly in the way of unjustified boasting, since the quality in question is more marked in talk than evident in conduct: Practical Idealism. He is an example of what may be accomplished by unswerving devotion and self-sacrifice to a dominating idea. He was, we might say, a man of a single idea, but the statement would be misleading unless we also said that he broadened this one idea until it included a vast range of social phenomena and became a comprehensive social philosophy.

Henry George is typically American not only in his career but in the practical bent of his mind, in his desire to do something about the phenomena he studied and not to be content with a theoretic study. Of course he was not unique in this respect. The same desire has been shared by many British economists. John Stuart Mill's theoretical writings were ultimately inspired by interest in social reform. But there is something distinctive in the ardent crusade which George carried on. His ideas were always of the nature of a challenge to action and a call to action. The "science" of political economy was to him a body of principles to provide the basis of policies to be executed, measures to be carried out, not just ideas to be intellectually entertained, plus a faint hope that they might sometime affect action. His ideas were intrinsically "plans of action."

Unfortunately, in some respects, the American public was practical-minded in a much narrower sense and shorter range than was Henry George himself. It is perfectly true that the culmination and indeed the meaning of his social philosophy is to be found in his proposals regarding taxation. It is also true that many persons accept and are justified in accepting his taxation scheme without having knowledge of or interest in the background of principles and aims with which this scheme was organically associated in the mind of Henry George himself. But nevertheless the connection between the theoretical part and the practical part was vital in the thought of George himself. Something vital in acquaintance with his thought is lost when the connection is broken. One may understand the plan of tax reform by itself but one comes far short in that case of understanding the idea which inspired Henry George.

In spite, therefore, of the immense circulation of George's writings, especially of Progress and Poverty (which I suppose has had a wider distribution than almost all other books on political economy put together), the full sweep of George's ideas is not at all adequately grasped by the American public, not even by that part which has experienced what we call a higher education. Henry George is one of a small number of definitely original social philosophers that the world has produced. Hence this lack of knowledge of the wider and deeper aspects of his thinking marks a great intellectual loss. In saying this, I am not speaking of acceptance of his ideas but of acquaintance with them, the kind of acquaintance that is expected as a matter of course of cultivated persons with other great social thinkers, irrespective of adoption or nonadoption of their policies.

I should hesitate to write in this way, lest I might be thought to depreciate the practical importance of his plan of social action were it not for two things. One of these things is the fact which I have already stated. His theoretical conceptions and his program of social action are so closely united that knowledge of the first will inevitably lead on to a better understanding of the second. The other reason is more immediately applicable. Actual social conditions (like those for example of the present) are bound to raise the problem of reform and revision of methods of taxation land public finance. The practical side of George's program is bound in any case to come forward for increased attention. It is impossible to conceive any scheme of permanent tax reform which does not include at least some part of George's appropriation by society for social purposes of rental value of land. For instance, we are just beginning to understand how large a part unregulated speculation has played in bringing about the present crisis. And I cannot imagine any informed student of social economy denying that land speculation is basic in the general wild orgy, or that this speculation would have been averted by social appropriation, through taxation, of rent. To a large extent, then, some knowledge of the directly practical side of George's thought is bound, in the long run, to result from the movement of social forces. A corresponding knowledge of George's theory of the importance of land -- in the broad sense in which he uses the word -- in social development, of the causes of moral progress and deterioration, cannot be secured, however, without an understanding of his underlying philosophy.

The importance of a knowledge of this underlying philosophy is urged in spite of the fact that the present writer does not believe in the conceptions of nature and natural rights which at first sight seem to be fundamental in the social philosophy of Henry George. For, as I see the matter, these conceptions are symbols, expressed in the temporary vocabulary of a certain stage of human history of a truth which can be stated in other language without any serious injury to the general philosophy implied. It has repeatedly been pointed out that the real issue in the "natural rights" conception is the relation of moral aims and criteria to legal and political phenomena. Personally, I have little difficulty in translating a considerable part of what George says on nature over into an assertion that economic phenomena, as well as legal and political, cannot be understood nor regulated apart from consideration of consequences upon human values, upon human good: that is, apart from moral considerations. The question whether a "science" of industry and finance, of wealth, or of law and the State, can exist in abstraction from ethical aims and principles is a much more fundamental one than is the adequacy of certain historical concepts of "nature" which George adopted as a means of expressing the supremacy of ethical concepts, and on this fundamental question I think George was in the right.

This statement brings me to the connection which exists between the foregoing remarks and the work of Dr. Geiger to which the remarks are introductory. In connection with every topic he discusses, Dr. Geiger makes it clear that a vital connection between ends, human values, and economic means is at the basis of George's distinctive treatment. This fact alone gives a distinctive and timely color to this book. Moreover, the significance of Dr. Geiger's treatment does not stop at this point. There is no phase of the work and the influence of Henry George which is not considered. The account of his life and development forms a personal thread which binds all the parts together. Dr. Geiger has given us a book which meets the contemporary demand for an adequate interpretation of the thought and activity of Henry George regarded as a vital whole and not as an aggregate of isolated parts. It will enable the reader to obtain a clear and comprehensive view of one of the world's great social philosophers, certainly the greatest which this country has produced.

JOHN DEWEY

 

The book is online at  http://catalog.hathitrust.org/Record/006827034

Who Gets the Land Rent, and Why: Two NYC Stories

and, more to the point, is there a better way to do things, if an efficient economy, more jobs, less income concentration are things we value?

Interesting that, according to these articles, the lords of NYC land will collect 6% or 8% of the land's value when the rent resets.  6 or 8%!   (Typical property taxes in NYC for condos run less than 1% of the total value; see http://www.nytimes.com/2012/10/16/nyregion/many-high-end-new-york-apartments-have-modest-tax-rates.html, which includes this paragraph:

"In a study of 2010 nationwide property tax rates, the average homeowner paid a median of 1.14 percent of home value that year, according to the Tax Foundation, a research group. In Manhattan, that figure was 0.78 percent. For the $88 million apartment at 15 Central Park West, 0.78 percent would be $686,000. But this year, the property taxes due on that penthouse were $59,000."

Just think how much productive activity we could untax were we-the-people to collect some portion of that annual land rent for public purposes.   And consider how unproductive the Lords of Land are.  What have they done to earn that land rent?  Is our "tradition" -- to let them keep it -- a wise or just one, or is it part of our wealth concentration structure?

Here are the two articles, with a couple of calculations added:  (Notice that acreage is not even mentioned!)

http://www.bloomberg.com/news/2014-11-06/nyc-trump-co-op-dwellers-face-million-dollar-bills.html

NYC Trump Co-Op Dwellers Face Million-Dollar Bills
By Oshrat Carmiel  Nov 6, 2014 4:16 PM ET   

The ground beneath Trump Plaza, at 167 E. 61st St., is up for sale as land prices break records.
Manhattan’s surging land costs are leaving the shareholders of an East Side luxury co-operative with a tough choice: pay a hefty price to buy the land under the building, or face increasing bills to keep renting it.

The ground beneath Trump Plaza, at 167 E. 61st St., is up for sale as land prices break records. The co-op board has offered to buy the property for $185 million, a cost that would saddle residents with assessments that, for some, would top $1 million, said Adam Leitman Bailey, a New York real estate attorney who has been contacted by owners concerned about the deal before it goes into contract.

“People are calling me to stop this from happening,” said Bailey, who has reviewed board documents but hasn’t been officially retained. “People want to stop the assessment.”

The 31-year-old co-op, which makes annual rent payments to the family that owns the ground, is weighing its financial future at a time when rising prices for land make it attractive for investors to buy such property for a reliable stream of rental income. The board opted to put in a bid as it otherwise faces the prospect of a steep rent increase when the lease resets in 2024, Bailey said.

“The fact that the family put it up for sale should terrify the co-op,” said Joshua Stein, a Manhattan real estate attorney who isn’t involved in the transaction.

“Whatever opportunistic investor buys the land will probably be way more aggressive about the rent reset than either an estate or a group of heirs,” he said. “Someone who is buying it, is buying it specifically to squeeze out every last dollar of rent.”

Monthly Payments

Marc Cooper, president of the co-op board and vice chairman of investment-banking firm Peter J. Solomon Co., didn’t return a phone call left at his office yesterday seeking comment on the plan to purchase the ground.

Co-op residents buy shares in a corporation that owns the building, rather than getting a deed to the apartment itself, as they would in a condominium. Shareholders make monthly maintenance payments that collectively cover building costs such as mortgage payments, ground rent and operating expenses.

A Trump Plaza shareholder with a 1,000-square-foot (93-square-meter) one-bedroom apartment whose monthly maintenance fee is now about $2,100 would pay about $9,800 after the rent is recalculated in 10 years, Bailey said, citing a projection by the building’s co-op board. The rent increase would be about 8 percent of what the land value is in 2024, he said.

Record Prices

Buildable lots in Manhattan sold for an average of $657 a square foot in the third quarter, up 29 percent from a year earlier and an all-time high for the period, according to Massey Knakal Realty Services. Three purchases completed in the quarter were for more than $1,000 a square foot, the firm’s data show.

LVTfan here:  That $657 per square foot is NOT per square foot of land (at 43,560 sq ft per acre, that would be just $28.6 million per acre, laughably low in Manhattan). Rather, it is per buildable square foot.  Quick and dirty, if a, say, 20 story building can be built on a 10,000 sf footprint, constituting 200,000 sf, the calculation would be 200,000 times $657, or $131.4 million, for that 1/4 acre, which works out to over $500 million per acre. $500 million per acre -- compared to an acre of good agricultural land, at $5,000 per acre, that's 100,000:1.  (And for those 3 purchases over $1,000 psf, add 50% to that ratio.)

Possibly difficult for those of us who see land which sells for $5,000 or $50,000 or even $500,000 per acre to fathom $500 million per acre.  But that's reality!

Trump Plaza’s situation is different from most other co-operatives in Manhattan, which do own the land on which the building sits and make no rent payments. Co-op units with ground leases tend to sell at a discount because they have higher maintenance costs and buyers sometimes face challenges getting mortgage financing. Other ground-lease co-ops in New York include 995 Fifth Ave., the Excelsior at 303 E. 57th St. and Carnegie House at 100 W. 57th St.

Carnegie House

The ground beneath the 324-unit Carnegie House was purchased for $285 million to a group that includes Rubin Schron’s Cammeby’s International and real estate investor David Werner, Christa Segalini, a spokeswoman for Cammeby’s, said today. The 21-story building, with an entrance on Sixth Avenue, occupies an entire block front from 56th Street to 57th Street, according to real estate website Streeteasy.com.

For shareholders at Trump Plaza, buying the land beneath them means coming up with large sums of cash up front. Each owner was assessed a fee of about $2,329.40 a share, according to Bailey.

A resident of a two-bedroom unit who holds 440 shares in the corporation, for example, would be charged $1.02 million, Bailey said. A 1,600-square-foot three-bedroom apartment, worth 671 shares, would get a $1.56 million assessment. Residents get more shares the higher up their apartments are in the 39-story building.

The 154-unit Trump Plaza, at 61st Street and Third Avenue, was completed in 1983, according to StreetEasy. A 2,800-square-foot unit on the 32nd floor with views of Central Park is listed for sale at $3.95 million. The monthly maintenance charge for the three-bedroom, four-bathroom apartment is $7,228, according to the website.

LVTfan here: One might reasonably wonder how much (a) the sellers of the land were paying NYC in property taxes; (b) how much of the monthly "maintenance charge" for the condo is paid by the condo complex to the city in property taxes (which pay for the schools and lots of other public services) and how much is for the building and its services to the condo owners; and (c) how much the land share of that 32nd floor unit is.  If a 1600sf apartment gets a $1.56 million assessment, the 32nd floor apartment, at 2800sf should be roughly twice that, or about $3 million.  Thus, the $3.95 million asking price on the 32nd floor is about 4/7 of the total value, or 56%; the other 44% is land value.

Resale Value

The sale of the ground beneath the tower hasn’t gone into contract yet. Douglas Harmon and Adam Spies, brokers at Eastdil Secured LLC, are representing the owners, who are listed in public records as the estate of Donald S. Ruth and members of the Ruth family. Spies declined to comment on plans for the sale.

A purchase of the land by the co-op ultimately would add resale value to the building’s apartments, Stein said. Extinguishing the ground lease permanently removes the threat that rents will reset to unaffordable levels. With that uncertainty gone, future buyers would be willing to pay more for a unit in the tower, he said.

“If you’re the co-op, getting rid of that threat is a really good thing,” Stein said. “There’s a lot of value being created.”

To contact the reporter on this story: Oshrat Carmiel in New York at [email protected]

To contact the editors responsible for this story: Kara Wetzel at [email protected] Christine Maurus

 

Here's the second article

http://therealdeal.com/blog/2014/11/06/werner-led-group-pays-285m-for-land-under-100-west-57th-street-sources/

Werner-led group pays $285M for land under 100 West 57th Street: sources

324-unit Carnegie House co-op faces ground rent reset in 10 years, insiders say

November 06, 2014 11:30AM  By Adam Pincus

• Print

Carnegie House at 100 West 57th Street (Photo credit: Google)

David Werner, a Borough Park investor who has wowed New York City with a series of big buys this year, partnered with Rubin Schron and the Cohen family to pay $285 million for the land under 100 West 57th Street, sources told The Real Deal. The 324-unit Carnegie House cooperative building is the ground tenant on the property.

A person close to the deal said the investment group closed yesterday on the purchase of the property, which is located at the corner of Sixth Avenue and 57th Street.

This is the third major acquisition by David Werner this year. He purchased 5 Times Square for $1.5 billion and the leasehold for the Mobil Building at 150 East 42nd Street, for $855 million. Werner, Schron and the Cohen family’s Carlton Associates did not immediately respond to requests for comment.

Insiders expect to see more pricey sales of land under co-op buildings with resets looming.

In fact, the sale is being mirrored nearby with the marketing of the ground under the Trump Plaza at 167 East 61st Street, which has a rent reset in 2024. Eastdil Secured brokers Doug Harmon and Adam Spies have that listing.

The co-op building has a ground lease that runs for another 51 years with the property owner, currently paying about $4.4 million per year. In approximately 10 years, the rent for the ground lease payments will reset. That reset will be based on market values.

an average of $13,600 per year per family -- ignoring the commercial tenants

Ground resets typically price the new rent at about 6 percent of the current market value.

Investment sales broker Robert Knakal, chairman of Massey Knakal Realty Services, estimated the value of the land to be at least $1,200 per square foot and up to $1,500 per foot, if the value of the retail is taken into consideration. Knakal is not involved in this property.

At that value, the land with 377,000 square feet of development rights, would be worth $452 million. That could work out to an annual rent payment of $27 million per year, if reset today, according to an analysis by TRD.

An average of $83,300 per family -- ignoring the commercial tenants

To help fund the purchase, the group obtained a $180 million loan from Natixis Capital Markets in a deal arranged by Drew Anderman, a senior managing director at the mortgage brokerage firm Meridian Capital Group, insiders familiar with the deal said.

 

 

Giving Away the Commons ... Land Rent for Cottages on Forest Service Lands

It appears that someone in Congress -- probably multiple someones -- feels that we're not giving away the Commons fast enough, and that the federal government ought to rely on other kinds of income rather than collecting the fair market rent on the land on which individually owned cottages sit within Forest Service lands, those rents ought to be reduced!   They've asked the CBO to estimate the costs of this gifting.

A bit of calculating reveals that the owners of the 14,000 cottages are paying, on average, $2,142 in land rent annually, at 5% on older valuations of the land, suggesting that the average lot is currently valued at about $43,000 for land rent purposes.   Interestingly, these are apparently longtime owners; average turnover is 400 per year, or 2.9%.   

When we-the-people lower the rent below market value, what happens to the selling price of the homes?  The selling prices go up.  In other words, the leaseholders who want to sell can charge buyers more for the house.  Aren't we nice to provide those homesellers such a gift?

Not only that, our gift is to be retroactive to the beginning of 2014, it appears!

They propose to cap the fees at $5,600, no matter what the updated valuation of the land might be.  That is, no matter what the real value of the cabin's site might be, for land rent purposes, the impolite fiction would be that it is worth no more than $112,000.  No matter what the view is, what the location is, how good the infrastructure is, what services the federal employees provide to keep the lot accessible. This sounds a bit like California's Proposition 13, which detaches property taxes from current valuations.

More typically, if a tenant gives up a lease, they are expected to remove their cottage from the lot and leave it clean for the next tenant.  The landlord -- we the people -- shouldn't have to deal with abandoned cottages.

Below is a copy-and-paste of the PDF at http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4873.pdf; I've not bothered with the formatting of the tables.

"the collectively earned increment"

I came across an interesting article from 1908, with what strikes me as a well-described concept:

http://archive.org/stream/worldswork17gard/worldswork17gard_djvu.txt

November, 1908

MUTUAL TOWN-BUILDING IN ENGLAND
"GARDEN CITIES" OF INDIVIDUAL, DETACHED HOMES BUILT WITHOUT THE AID OF PHILANTHROPY — A BETTER PLAN THAN REBUILDING THE SLUMS

BY WILHELM MILLER
(who visited these cities to make a first hand study of them)

LETCHWORTH, "the perfect city," less than five years old but with 6,000 inhabitants, is thirty-four miles north of London and is reached by the best trains in fifty minutes. It has 3,818 acres and its population is limited to 35,000 inhabitants, so that there will never be any crowding. The factory quarter can never be enlarged; it is situated as far as possible from the residence quarter and the prevailing wind carries the smoke away from the homes. Nearly one-sixth of the town site, or two hundred acres, is perpetually reserved for open spaces, including parks, jjlaygrounds, and a golf course.

And even if the surrounding country should build up as solidly as London, the people of Letchworth are always sure of enjoying a beautiful rural scene because a large belt is perpetually reserved for agriculture. This belt comprises 2,500 acres, or 65 percent of the whole estate. It will undoubtedly be occupied by market gardeners and dairymen, for gardens yield about eleven times as much profit per acre as farms.

A man can buy a house at Letchworth or he can rent one, but he cannot buy the land. He cannot even lease it for 999 years, because that would enable him to sell or lease his property in such a way as to make a profit from the unearned increment. He can lease the land for ninety-nine years without revaluation and the improvements will not revert to the landowner. In any case, he has every advantage enjoyed by the man who owns the land outright — save one. He cannot get rich from what Henry George called the "unearned increment" but which in Letchworth is called the "collectively earned increment." Even if he rents his house and land from week to week he cannot be dispossessed by some one who offers more money. In the agricultural belt, the tenant is allowed to continue in occupation as long as he is willing to pay as much as anyone else, less 10 percent, in favor of the present tenant.

Letchworth has been built upon a plan whereby people in any part of the world can make a city that is practically perfect without asking any rich man to give money, and without facilities for borrowing any large amount. The essence of the scheme is to preserve to the people the "collectively earned increment." The Letchworth people take some pride in the use of this phrase, and justly. For, merely by moving to Letchworth and living there they created in four and a half years a net increase of half a million dollars. They do not get that half million now, but some day they will get 95 percent of it in the form of abolition of taxes. And that day, in my opinion will come in about twenty years, for by that time the city should be able to pay back all that its public works have cost.

THE TWO OTHER "GARDEN CITIES "

There are two other successful "garden cities," Bourneville, a suburb of Liverpool built by the Cadbury Cocoa Works, and Port Sunlight near Birmingham created by the Lever Brothers, soap manufacturers, solely for their employees.

Port Sunlight is the most beautiful because the Messrs. Lever have gone to the unnecessary extreme of making no two houses alike. Also, they have spent more upon ornamentation of
houses than is necessary and they plant and care for all the front yard gardens.

The tenants at Port Sunlight get more for their money than elsewhere for two reasons. First, the rents are too low, because they are calculated only to pay expenses. Second, the social institutions, though more elaborate than elsewhere, cost the people nothing originally and they can and do manage them so as to keep expenses down to the mininum.

THE "taint" of philanthropy

The one great drawback to the Port Sunlight idea is that it involves too great an expenditure on the part of one man or one firm, and it is hard to prove to a factory owner that the investment is worth while. In this case, the factory owners disclaim all idea of philanthropy and are positive that it pays, because their employees are healthier, happier, more prosperous and therefore more efficient.

The Lever Brothers rejected all direct profit-sharing schemes because they thought this the only plan that would benefit the wives and children of the men. There is the keenest competition for a chance to work in that factory and live in one of those houses. But all the profits to the firm are indirect. Rarely, if ever, can they be expressed in dollars and cents and indirect profits can never be expected to weigh in the mind of the average employer against the appalling fact that Lever Brothers have put about $1,700,000 into their paradise at Port Sunlight and have never directly gotten back one cent.

In other words, if this is not philanthropy, it is too much like it to be generally copied. Humanity cannot look to great employers for the solution of the housing problem. And employees do not want philanthropy.

And at Bourneville there is less of the philanthropic spirit. The employees of the Cadbury Cocoa Works get a normal social life, which the people of Port Sunlight do not have. The cocoa workers are not obliged to live in Bourneville and only 42 percent of the tenants at Bourneville are employed at the Cadbury factory. Thus Bourneville is a mixed community and the ideal community must be mixed — not merely industrial, or suburban, or composed exclusively of any one class. It is sad to see the magnificent clubs, lecture halls, baths, and other social features at Port Sunlight languish for attendance, but it is only human nature. On getting home after a day's work, a man wants to forget thoughts of his work. And if he lives in a city where every house and every person he sees on the street suggests the workroom, he is bound to escape to the next town where he can get a drink or otherwise forget his daily routine. The only serious complaint which the tenants at Port Sunlight have any right to make is that they live in the atmosphere of a single class.

Mr. Cadbury gave Bourneville to the people. How then does it escape the "taint" of philanthropy?"

A GREAT FUND FOR PROPAGANDA

It is true that Mr. Cadbury gave the property to a trust which administers it for the benefit of the people, but eventually this trust will be able to finance hundreds of other garden cities that will be purely cooperative. For instance, people wishing to live in a "garden city," where all the "collectively earned increment" benefits all alike instead of going to the building up of individual fortunes, can form a stock company with shares as low as $25. If the Bourneville trust approves of their plan, it will lend them enough money to start a town. But the company must pay it back, so that the Bourneville trust can use it again and again.

How does the Bourneville trust hope to get this fund? Its income, which is almost wholly rent, doubles every five years. At this rate, in fifty years it will have an annual income of five million dollars. Long before that, Bourneville will have reached its limit of population. And since the trust never has to pay back the cost of the houses, roads, or other public works, it will be able to roll up a vast sum for the propagation of the "garden city" idea.

The all-important point is that the Bourneville trust will never give anyone something for nothing. It will merely lend money to people who are building "garden cities."

THE HEALTH AND BEAUTY OF THESE CITIES

These are far healthier and more beautiful than cities that have grown up normally; healthier because crowding is prevented by a limit to the population and because more and better provision is made for outdoor sports — to say nothing of architecture in which health is the first thought. The average town death-rate in England is 15 per 1,000. Letchworth has cut this down to 2.75. The birthrate at Port Sunlight is twice the average for the rest of England.

The greater beauty of these garden cities lies chiefly in the architecture and gardening. The houses and stores all conform to one general style of architecture, but are never monotonous. Every building must be approved by the city's architect. The houses are all of brick and built to last. There are no long rows of houses just alike. The first idea was to have no two houses alike but that is a needless waste of money. For poor people it is impossible to get good houses cheap enough without building three or four in a row and this row can be duplicated in another part of town without harming the total effect. Moreover, Bourneville has shown how much can be saved on ornamentation. The plainest houses are transformed in three years by the use of climbers. Bourneville's head gardener sees that every house has a different set of vines. Not merely is the plainness soon hidden thereby, but also the individuality of each home is notably increased.

Gardening is compulsory at Bourneville and Letchworth. If a tenant neglects his garden at Bourneville and will not hire some one to weed it, the estate notifies him that he will forfeit his lease unless he makes his place look decent. But there have been only two cases of neglect.

The estate plants a hawthorn hedge all round each man's place, digs and manures his vegetable garden, lays down the lawn, sets out dwarf fruit trees, plants the climbers on his house, and digs his flower-beds. These expenses are considered part of the cost of building and the rent is based thereon. The tenant must keep it in good condition but he can buy plants from the estate cheaper than from a nurseryman and he gets instruction for nothing. There is no chance for a beginner to get discouraged.

A FIVE-ROOM HOUSE FOR $7.80 A MONTH

I am almost afraid to tell how much a tenant gets for his money at one of these garden cities. The cheapest houses at Bourneville rent for only $7.80 a month, which includes taxes and water rates. Such a house contains five rooms and a wonderful "folding bath" which stands up like a cabinet when not in use. Clerks and artisans, however, generally pay about $12.30 a month for seven rooms and an eighth of an acre.

The ideal amount of land at Bourneville is one-eighth of an acre, and the average value of the fruits and vegetables produced on such a plot is about $32.24 a year, or sixty-two cents a week the year round. The smallest lots at Letchworth are a twelfth of an acre, which is the same as 25 x 145 feet, and is 45 percent larger than the typical New York lot, on which many families are allowed to live. In addition to these direct benefits the tenant gets a chance to play cricket, tennis, bowls, quoits, and hockey near by at no expense or at less cost than in an ordinary club.

All rents at Bourneville are figured at 8 percent of the cost. Taxes, insurance and repairs cost 3 percent, leaving a profit to the Bourneville estate of 5 percent. With this 5 percent, it employs a permanent staff of about one hundred builders and has about fifty houses under construction all the time.

OBSTACLES OVERCOME AT LETCHWORTH

The Letchworth company had its hands full with public works, for it had to construct eight miles of road, eleven miles of sewers, and seventeen miles of water main. Also it had to build a reservoir for water, a gas making plant, and an electric power station to supply the factories, of which it now has twenty-four. Another difficulty overcome was transportation. The company has cooperated with the railroad so well that its "commuters" can make their thirty-four miles to and from London daily in less than an hour, though most trains require an hour and a quarter.

The income of the land company is partly from the sale of water, gas, and electricity, but chiefly from ground rent. It never sells any land or houses. Ground rent may seem a very small source of revenue, but every man, woman and child in England contributes for ground rent an average of $10.50 a year. The Letchworth company can, and doubtless will, raise the ground rent as its limit of population approaches, but even if it should raise it as high as the average for England, the tenant will pay less than elsewhere, for taxes will eventually be abolished.

Postscript -- a few hours after I posted this, a google alert on ground rent brought me a story about Letchworth, at http://www.thecomet.net/news/letchworth_businesses_finally_land_meeting_over_rent_rise_1_2311500

The Earth-for-All Calendar: Undecimber 20 -- Herodotus

They said also that this king divided the country amongst all the Egyptians and from thence he drew his revenues, having required them to pay a fixed tax every year.

—Herodotus, Euterpe, II, 109.

Basic Principles of Ground Lease Agreements – Yes, a Contract!

Here are the opening paragraphs of a recent article about the complexities of Ground Lease contracts.  I commend the entire article to your attention.  It helps flesh out why and how the entire FIRE sector -- Finance, Insurance and Real Estate (as well as their attorneys) --  is receiving such a large share of the profits produced by the productive sectors of the economy.  The owner of land, and the entities which lend on land, and insure the buildings and the revenue flow, all reap significant shares of what the tenants labor to create.   Modern sharecropping.  And the recipients of the ground rent get to parade as self-made men, people of awesome foresight and wisdom -- and even philanthropists (think Brooke Astor, the Fishers, and others in your own community) when they donate a small share back to a charity!  As you read this, think both of Manhattan land and of land in your community's central business district, and along its major roads.  (Location, location, location!)

If one wonders why (true) small business struggles, one might consider the complexity and expense of their ground leases, and contrast that with the Georgist alternative: that one's taxes would be simply the current rental value of the land, while the value of the building remains one's private property, not subject to taxation or going pouf! at the end of a ground lease.

The land lord is "supplying" something he didn't create.  We ought to ease him out.  Land value taxation is the obvious tool for reducing, and -- slowly or not -- eliminating, his "take" on those who do create.  Think what it would mean if working people had that spending power, instead of the lords of the land.

All that land rent could be used to fund our community's needs, instead of lining the pockets of a few very "lucky" -- privileged -- duckies.  (The analogies to chattel slavery are not a long stretch, once one starts to think about it.  We should all own ourselves, and reap the fruits of our own labors.)

Basic Principles of Ground Lease Agreements – Yes, a Contract!.

PUBLISHED: JANUARY 7, 2013  

A lease is a lease is a lease – or so you may think. Yes, real property leases grant an estate in land to a tenant for a period of time. And yes, the tenant pays for that right of possession. But the action in a lease isn’t in the conveyance provisions; it’s in the contract provisions. Multiply out the rent and other annual monetary obligations by the length of the lease term (in years), and you’ll see that it might be (and often is) a big dollar contract. Even more important, unlike the vast majority of contracts whose obligations are satisfied in days or weeks, a lease contract goes unfulfilled for 50, 75, “99,” and even 500 years. That takes it beyond the life of the parties involved in its creation, and the future brings surprises. Neither Nostradamus nor Jules Verne got everything right. 

Why a Ground Lease? 

If a tenant has to build its own building (as is often the case), and has all of the burdens of ownership, why would it lease a property knowing that at the end of the lease term it has nothing left to show for its money and efforts? There are a number of common reasons, principal among them is that the owner won’t sell the land and the tenant has no alternative. 

Real property often carries a long term unrealized gain, waiting to be taxed upon its sale. 

Not every landowner is interested in making further active real property investments. This makes a like kind exchange unappealing. 

Ground leasing the same land keeps ownership in the family. At the owner’s death, because of the current estate tax “stepped up basis” arrangement, the built in gain may never be taxed.

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The Earth-for-All Calendar: Undecimber 12 -- Cushman

The hospitals (of England) are full of the ancient. . . . The almshouses are filled with old laborers. Many there are who get their living with bearing burdens, but more are fain to burden the land with their whole bodies. Neither come these straits upon men always through intemperance, ill-husbandry, indiscretion, etc.; but even the most wise, sober and discreet men go often to the wall when they have done their best. . . The rent-taker lives on the sweet morsels, but the rent-payer eats a dry crust often with watery eyes.

—Robert Cushman, Plymouth, 1621, in Young's "Chronicles of the Pilgrims."

The Mortgage on the Farm

We worked through spring and winter, through summer and through fall.

But the mortgage worked the hardest and steadiest of them all;
It worked on nights and Sundays, it worked each holiday;
It settled down among us and it never went away.
Whatever we kept from it seemed almost as bad as theft;
It watched us every minute and it ruled us right and left.
The rust and blight were with us sometimes, and sometimes not;
The dark-browed, scowling mortgage was forever on the spot.
The weevil and the cutworm they went as well as came;
The mortgage stayed forever, eating heartily all the same.
It nailed up every window, stood guard at every door,
And happiness and sunshine, made their home with us no more;
Till with falling crops and sickness we got stalled upon the grade.
And there came a dark day on us when the interest wasn't paid.
And there came a sharp foreclosure, and I kind o' lost my hold.
And grew weary and discouraged and the farm was cheaply sold.
The children left and scattered, when they hardly yet were grown;
My wife she pined and perished, and I found myself alone.
What she died of was a mystery, and the doctors never knew;
But I knew she died of mortgage — Just as well as I wanted to.
If to trace a hidden sorrow were within the doctors art.
They'd ha' found a mortgage lying on that woman's broken heart.
Worm or beetle, drought or tempest, on a farmer's land may fall.
But for a first-class ruination, trust a mortgage 'gainst them all.

How much of a farmer's mortgage is for the value of the land itself, and how much for the present value of the improvements which previous owners have made, such as clearing, draining, fencing, irrigating, building structures, plus, perhaps, equipment purchased with the land and buildings?

For that matter, how much of a homeowner's mortgage is for the value of the land itself --including its access to community-provided services such as city water and sewer, fire hydrants, and the like -- and how much for the purchase price of the landscaping and structures on the property, built by any of the previous owners?

To what degree is the modern buyer including in his formal calculations or his underlying assumptions the notion that the land will increase in value during his tenure?  (See Case & Schiller, 2003.)

The Earth-for-All Calendar: December 30 -- Dove

If, then, successive generations of men cannot have their fractional share of the actual soil (including mines, etc.) how can the division of the advantages of the natural earth be effected? By the division of its annual value or rent; that is, by making the rent of the soil the common property of the nation. That is (as the taxation is the common property of the State), by taking the whole of the taxes out of the rents of the soil, and thereby abolishing all other kinds of taxation whatever. And thus all industry would be absolutely emancipated from every burden.

— PATRICK EDWARD DOVE, Theory of Human Progression (1850), Chap. III., Sec. 3.

Baltimore Ground Rents -- some history and some principles

Just Taxation

Among no class of reformers do we find more clear thinking or a sounder political economy than among the "single-taxers." Following the writings of the late Henry George there is a considerable and important literature upon this subject. Land monopoly and speculation should be stopped. Labor should not be taxed. The resources of nature should be made to minister equitably to the whole people. Now the weakest pay the most tax. It should be the strongest and they whom the government most benefits. 

A Baltimore Instance

The Public

A single tax man of Baltimore, Mr John Salmon, expresses no little surprise that Senator Hanna's candidate for governor of Ohio supposes that the single tax has been a disastrous failure wherever tried. Of Mr Herrick and his notion Mr Salmon writes: This stamps him as being a twisted thinker and a loose observer. The single tax is in operation all over the United States, flowing into the pockets of private individuals, which is what single taxers object to. Here in Baltimore more than in any other section of the country, it is strongly apparent. We have the ground rent system in operation, 90 percent of the real estate being held on leaseholds. The custom is an old English one grafted on the Maryland colonies by Lord Baltimore and his English compeers, and it has grown and flourished like a green bay tree. When one buys a home here it is in nine cases out of ten subject to a ground rent. These ground rents are dealt in as a form of investment the same as a mortgage or any other form of investment; but the point to observe is that they are a single tax, pure and simple, the price paid for the use of the ground per se and for ground only.

Our last assessment separated the value of the land from the value of improvements, and it is done every day in our community. Baltimore has more houses per capita than any city in the country, due to the ground rent system; and a house costing $1,200 to build is very often sold for $800 or $900 in order to create a ground rent ranging from three dollars a front foot to $20 and $40 a front foot. To explain more fully: Bonus buildings are run up on plats of ground split up into lots of 15x90, and a ground rent say of $6 per front foot is put on the lot, making $90 a year ground rent, which the buyer agrees to pay, and in his ground rent is a clause that he will also pay all taxes. This $90 is essentially a single tax. The agreement to pay it is exactly the same kind of a contract that is in vogue in Fairhope, Ala. With this extremely important exception, that whereas we in Baltimore bind ourselves to pay all the taxes, in Fairhope the company or lessor, agrees to pay all taxes. Talk of its being a disastrous failure! Not on your life. Ground rents are as scarce as hen's teeth, and can only be bought on a three percent basis. They command as good a price as government bonds, and it is estimated that $14,000,000 at least is raised in Baltimore alone from this source —  nearly twice as much as the city and state taxes amount to. And what is this tax of $14,000,000 paid for? Why, merely for the privilege of living in the city of Baltimore. That's all the payers get for it. And the only kick we've got coming is that the private individuals get that money instead of the city and state.

-- found in "The American Cooperator" (1903); "The Public" was a weekly newspaper, out of Chicago, edited by Louis F. Post, who went on to serve in Woodrow Wilson's administration.

That acre in Manhattan

An article in the NYT a few weeks ago described some proposed changes in the zoning for midtown Manhattan.

Bloomberg Pushes a Plan to Let Midtown Soar

The accompanying map says, "Around Grand Central Terminal, towers could be up to twice the size now permitted.  Development could also take place along the Park Avenue corridor, where towers could be more than 40% larger. Elsewhere in the district, towers could be 20% larger."

But New York’s premier district, the 70-block area around Grand Central Terminal, has lagged, Bloomberg officials say, hampered by zoning rules, decades old, that have limited the height of buildings.

Mayor Michael R. Bloomberg wants to overhaul these rules so that buildings in Midtown Manhattan can soar as high as those elsewhere. New towers could eventually cast shadows over landmarks across the area, including St. Patrick’s Cathedral and the Waldorf-Astoria Hotel. They could rise above the 59-story MetLife Building and even the 77-story Chrysler Building.

Mr. Bloomberg’s proposal reflects his effort to put his stamp on the city well after his tenure ends in December 2013. Moving swiftly, he wants the City Council to adopt the new zoning, for what is being called Midtown East, by October 2013, with the first permits for new buildings granted four years later.

His administration says that without the changes, the neighborhood around Grand Central will not retain its reputation as “the best business address in the world” because 300 of its roughly 400 buildings are more than 50 years old. These structures also lack the large column-free spaces, tall ceilings and environmental features now sought by corporate tenants.

The rezoning — from 39th Street to 57th Street on the East Side — would make it easier to demolish aging buildings in order to make way for state of-the-art towers.

Without it, “the top Class A tenants who have been attracted to the area in the past would begin to look elsewhere for space,” the administration says in its proposal.

The plan has stirred criticism from some urban planners, community boards and City Council members, who have contended that the mayor has acted hastily. They said they were concerned about the impact of taller towers in an already dense district where buildings, public spaces, streets, sidewalks and subways have long remained unchanged.

Mr. Bloomberg has encouraged high-rise development in industrial neighborhoods, including the Far West Side of Manhattan, the waterfront in Williamsburg, Brooklyn, and in Long Island City, Queens. But with the proposal for Midtown, which is working its way through environmental and public reviews, he is tackling the city’s commercial heart.

“Unlocking the development potential in this area will generate historic opportunities for investment in New York City,” Deputy Mayor Robert K. Steel said.

The initiative would, in some cases, allow developers to build towers twice the size now permitted in the Grand Central area. The owner of the 19-story Roosevelt Hotel at Madison and 45th Street could replace it with a 58-story tower under the proposed rules. Current regulations permit no more than 30 floors.

See also http://lvtfan.typepad.com/lvtfans_blog/2008/03/hotel-roosevelt.html , which discusses this in terms of value of land per buildable square foot.

When zoning changes increase the value of land, who should reap the benefit?  The current landholder, or the community?    What did the landholder do to earn that windfall?  Do you think it comes out of thin air?  Do you think it is paid him by other rich people?

Or do you recognize that it is part of the structure which enriches a few and impoverishes the many?

It is easy to fix this one.  One just has to recognize the structure, and value the land correctly, and start collecting the lion's share of the land rent for the community.  If it is more than NYC can put to use -- and it will be -- then apply the excess to reducing our federal taxes on productive effort.  Use it to fund Social Security, or Medicare, or universal health insurance, or something else that will benefit the vast majority of us instead of an undeserving tiny privileged minority.  Don't throw it in the ocean, and don't leave it in private pockets, be they American or not. 

Collect   the   land   rent.    Repeat next year, and the next, and the next.  Natural Public Revenue.

One's "Fair Share"

The post below this one, "Mitt Romney's 'Fair Share' " refers to his fair share of the costs of providing public goods.

But perhaps an equally important question is the nature of one's fair share of the output of our economy and the output of the earth.  Some of the former output is the result of individual efforts, and one ought to be able to keep that portion. But at the same time we must recognize how much comes from the division of labor, from drawing down on the non-infinite supply of non-renewable natural resources on which all of us today must depend and on which future generations of human beings must rely. Those who draw down more than their legitimate share owe something to the rest of the community.  Our wealthiest tend, we suspect, to use many, many times their legitimate share, and the median American likely draws far more than their share, when one considers the planet as a whole.   

Perhaps "legitimate" is not the right word here.  It refers to what is permissible under current law.  (The word gets misused a lot -- see the discussion on "legitimate rape," which seemed to be about the circumstances under which a woman has a right to make a specific very personal, decision, and when it is considered by some to not be left to her and is the province of government, legislators or others.)

What is one's "fair share" of natural resources?  America is using a hugely disproportionate share of the world's resources.  Are we entitled to it because we're somehow "exceptional"?  Because "our" God is somehow better than other nation's Gods?   Or do we genuinely believe that all people are created equal, and intend to live our lives accordingly?

Our output of greenhouse gases exceeds our share of the world's population.  This is not without consequences for the world, and for peace on earth.

We ought to be re-examining our incentives so that they move us in the direction we ought to be going, which is, to my mind, using less.  We can build transportation infrastructure which will permit many more of us to move around with less impact on the environment.  We can fund that through collecting the increases in land value that infrastructure creates.  We can correct the incentives which cause us to use today's inferior technologies to extract natural resources from the earth in ways which damage the environment, as if ours was the final generation, or the only one worth serious consideration.

Better incentives could reduce, eliminate, even reverse urban sprawl.  I refer specifically to land value taxation as a replacement for the existing property tax, particularly in places where assessments are for one reason or another not consistent with current property values -- e.g., California and Florida, parts of Delaware and Pennsylvania which currently use assessments from the 1970s, and many other places where assessments are simply out of whack with current reality!)  We should be replacing sales taxes, wage taxes, building taxes with taxes on land value and on natural resources.  Most of that value is flowing generously into private or corporate pockets, to our detriment.  It concentrates wealth, income, and, of course, political power. 

Collecting the rent, instead of leaving the lion's share of it to be pocketed by the rent-seekers, would go a long way to making our society and our economy healthier.  Eliminating the privilege of privatizing that which in a wisely designed society would be our common treasure would make our society a better place in which to live, a place in which all could thrive and prosper without victimizing their fellow human beings. 

Stiglitz: "Mitt Romney’s Fair Share"

a few excerpts from: "Mitt Romney’s Fair Share" by Joseph E. Stiglitz | Project Syndicate.

A major theme of the underlying political debate in the United States is the role of the state and the need for collective action. The private sector, while central in a modern economy, cannot ensure its success alone. For example, the financial crisis that began in 2008 demonstrated the need for adequate regulation.

Moreover, beyond effective regulation (including ensuring a level playing field for competition), modern economies are founded on technological innovation, which in turn presupposes basic research funded by government. This is an example of a public good – things from which we all benefit, but that would be undersupplied (or not supplied at all) were we to rely on the private sector.

Conservative politicians in the US underestimate the importance of publicly provided education, technology, and infrastructure. Economies in which government provides these public goods perform far better than those in which it does not.

But public goods must be paid for, and it is imperative that everyone pays their fair share. While there may be disagreement about what that entails, those at the top of the income distribution who pay 15% of their reported income (money accruing in tax shelters in the Cayman Islands and other tax havens may not be reported to US authorities) clearly are not paying their fair share. ...

I have to disagree with the second sentence of this next paragraph.  And I think Stiglitz knows better, if he stops to think about it:

Democracies rely on a spirit of trust and cooperation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme. Both alternatives are unacceptable. 

We don't need intrusive or coercive; we just need to start collecting the lion's share of the rent!  Well, I suppose some rent-seekers would find this extremely intrusive -- it intrudes on their habit of self-enrichment by privatizing of what is rightly and logically our PUBLIC treasure, the logical way of financing PUBLIC goods.   And Professor Stiglitz is quite aware of the value of natural resources; he may not be quite as conscious of the value of urban and other well-situated land.   

Our national recordkeeping doesn't even collect the valuations of land and natural resources on any consistent basis! (One could reasonably argue that this failure-to-measure is a form of corruption!)  What we don't measure we can't do anything about.  And the powers that be are quite content with how we do things; the benefits accrue to them!  And several generations of college-educated people know nothing about the issue, which was well known and widely discussed 100 years ago.  (Look into the extensive Single Tax literature and the ideas of Henry George.)

Some more excerpts:

The billionaire investor Warren Buffett argues that he should pay only the taxes that he must, but that there is something fundamentally wrong with a system that taxes his income at a lower rate than his secretary is required to pay. He is right. Romney might be forgiven were he to take a similar position. Indeed, it might be a Nixon-in-China moment: a wealthy politician at the pinnacle of power advocating higher taxes for the rich could change the course of history.

Comments

But Romney has not chosen to do so. He evidently does not recognize that a system that taxes speculation at a lower rate than hard work distorts the economy. Indeed, much of the money that accrues to those at the top is what economists call rents, which arise not from increasing the size of the economic pie, but from grabbing a larger slice of the existing pie.

Those at the top include a disproportionate number of monopolists who increase their income by restricting production and engaging in anti-competitive practices; CEOs who exploit deficiencies in corporate-governance laws to grab a larger share of corporate revenues for themselves (leaving less for workers); and bankers who have engaged in predatory lending and abusive credit-card practices (often targeting poor and middle-class households). It is perhaps no accident that rent-seeking and inequality have increased as top tax rates have fallen, regulations have been eviscerated, and enforcement of existing rules has been weakened: the opportunity and returns from rent-seeking have increased. 

Today, a deficiency of aggregate demand afflicts almost all advanced countries, leading to high unemployment, lower wages, greater inequality, and – coming full, vicious circle – constrained consumption. There is now a growing recognition of the link between inequality and economic instability and weakness.

There is another vicious circle: Economic inequality translates into political inequality, which in turn reinforces the former, including through a tax system that allows people like Romney – who insists that he has been subject to an income-tax rate of “at least 13%” for the last ten years – not to pay their fair share. The resulting economic inequality – a result of politics as much as market forces – contributes to today’s overall economic weakness. 

The Earth-for-All Calendar: August 7 -- Thorold Rogers and Ede

I can easily imagine a great proprietor of ground rents in the metropolis calling attention to the habitations of the poor, to the evils of overcrowding, and to the scandals which the inquiry reveals, while his own income is greatly increased by the causes which make house-rent dear in London, and decent lodging hardly obtainable by thousands of laborers.

— PROF. THOROLD ROGERS, Work and Wages, Chap. XX., p. 550.

Efforts should be made to prevent the increase of value which is occasioned by the growth of the population of towns enriching private individuals.

— The REV. W. MOORE EDE, Honorary Canon of Durham, The Church and Town Problems, p. 88, note.

The Earth-for-All Calendar: August 5: Patrick Edward Dove

Let it be observed that when land is taxed, no man is taxed; for the land produces, according to the law of the Creator, more than the value of the labor expended on it, and on this account men are willing to pay a rent for land.

— PATRICK EDWARD DOVE, Theory of Human Progression (1850), Chap. I., Sec. 2, p. 44

(American Edition of 1895).

The Earth-for-All Calendar: July 31 - John Stuart Mill

The ordinary progress of a society which increases in wealth is at all times to augment the incomes of landlords — to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer as it were in their sleep, without working, risking or economizing. What claims have they, on the general principles of social justice, to this accession of riches?

— JOHN STUART MILL, Principles of Political Economy, Book V., Chap. 2, Sec. 5

 

On land producing income for local communities -- with thoughts of Ipswich's Little Neck "trust"

When I came across this article, 111 years old, I thought of the Ipswich, Massachusetts, trust established in 1650 by the gift of a fine 32-acre piece of land by a forward-thinking resident.  His stated intention was that the land be kept by the town, forever, for the benefit of the public schools.  Alas, it was poorly managed for a number of years, perhaps decades, and this appears to have been transformed, remarkably, into an excuse for the eager TENANTS to buy the land (and at less than half what I calculate it to be worth -- click on the "Little Neck Feoffees of Ipswich" link at left to see all my posts on the topic). 

The tradition of school lands has served many communities very well.  Part of Chicago was rented out to tenants and the revenues used to fund the city's schools.

But some fast-talkers appear to have convinced the powers-that-be in Ipswich, Mass., (including, remarkably, some judges and perhaps the state A.G.!) that "forever" is just temporary, and other investments are superior to the revenue from land and natural resources for funding public spending.  (Not!)   And the land will be there forever; a few decades of poor management is, in the long run, a triviality; the same would not be true of any of the substitute investments the Feoffees and their highly-compensated investment advisors will come up with. 

(The first-quoted writer was the president of the Massachusetts Institute of Technology.)

http://paperspast.natlib.govt.nz/cgi-bin/paperspast?a=d&d=TS19010921.2.76&l=mi&e=-------10--1----2--

Star, Putanga 7209, 21 July 1901, Page 7

Land Nationalisation

The Land and the People

The Lands Sub-Committee submitted the following report at the last annual meeting of the Progressive Liberal Association: --

General Francis Walker, in "First Lessons in Political Economy," says: -- "It certainly is true that any increase in the rental value or selling value of land is due, not to the exertions and sacrifices of the owners of the land, but to the exertions and sacrifices of the community.  It certainly is true that economic rent tends to increase with the growth of wealth and population, and that thus a larger and larger share of the products of industry tends to pass into the hands of the owners of land, not because they have done more for society, but because society has greater need of that which they control."

On the same subject Thorold Rogers has expressed himself thus: -- Every permanent improvement, every railway and road, every bettering of the general condition of society, every facility given for production, every stimulus applied to consumption, raises rent.  The land owner sleeps, but thrives."

The observant thinking man must admit that the above opinions are borne out by facts, but the importance to the community of the nationalisation of the land is unfortunately realised by comparatively few.  If people would endeavour to understand its importance, there is little doubt that the majority would be forced to the conclusion that the private ownership of land is beyond question decidedly against the best interests of the State.

Cardinal Manning has said: -- "The land question means hunger, thirst, nakedness, notice to quit, labour spent in vain, the toil of years seized upon, the breaking up of homes, the misery, sicknesses, deaths of parents, children, wives, the despair and wildness which spring up in the hearts of the poor, when legal force, like a sharp harrow goes over the most sensitive and vital right of mankind.  All this is contained in the land question."  The opinion of the late Cardinal, expressed in such a forcible language, should at the very least induce people to study this question thoroughly.  As a proof of its importance many object lessons are to be found -- as bearing upon it from a municipal point of view two may be mentioned.  Doncaster in Yorkshire has no borough rate.  Why?  Because it is the owner of certain remunerative land; and Durban, in South Africa, for a rate of 1½d in the £ obtains the usual municipal services such as we possess in Christchurch, and in addition enjoys several others which we much desire to have.  The difference is because in Durban its founders made reserve round the town which have not been alienated and have so increased in value that the rentals therefrom very nearly provide for all municipal requirements.  The founders of Canterbury made a similar wise provision for Christchurch, but in an evil day the Provincial Council, when it took over the affairs of the Canterbury Association, sold the city's inheritance for a mess of pottage.  It will doubtless be interesting to many to lean something of the history of the

CHRISTCHURCH TOWN RESERVES.

When constitutional government was established in Canterbury the Provincial Government took over the property of the Canterbury Association, including the town reserves of Christchurch and Hagley Park, the total area of these two being 897 acres, which, five years previoiusly, had been considered of the value of £2700. The Association had got into debt to the extent of nearly £29,000, which the Provincial Government paid with money raised on debentures, and proceeded to sell the reserves situated inside the belts.  To prevent any misunderstanding as to the then estimated value of these town reserves, it is desirable to state that for the £29,000 mentioned the Association transferred to the Provincial Government all the property it possessed in Canterbury, which included other reserves than those in Christchurch, also plant, tools, survey maps and field books, which must have been value for a considerable portion of the sum named.  By the deed poll of the Association these lands were to be held in trust for the purposes for which they were reserved, but a special Act of the Assembly was obtained to permit of their alienation.  It has been truly said that the price of liberty is eternal vigilance.  It is equally true with regard to reserves of land made for the benefit of the public; the people (every individual) should be ever on guard and watchful that no tampering with public reserves be allowed.

At the present day it is particularly interesting to consider what would now be the position of Christchurch if the reserves inside the belts had not been sold.  What income would now be derivable therefrom?

Excluding twelve acres which were set apart by the Provincial Council  as endowments for various religious bodies, the frontages of the reserves on the main streets of the city, as originally laid out in the extensions of these streets to the belts, amount to about 92,400 ft, after deducting 1¼ chains at each corner to avoid reckoning double frontages at corners.  At 4s per foot frontage it would be £23,100.  Bearing in mind that more than half the frontages have a depth of 5½ chains, it is estimated that if these lands were now let on building leases they would average a return of not less than 4s per foot, possibly more, and it is probably safe to say that the income therefrom would be £20,000 a year.

HOW WOULD CHRISTCHURCH BE AFFECTED.

The statement of accounts of the City Treasurer shows that for the year ending March 31, 1901, the rates assessed amounted to £28,526 --

	£
General rate (omitting shillings and pence)	13,680
Special drainage rate	1,983
Charitable institutions	1,370
Waimakariri	686
District drainage	10,807
	£28,526

obtained by a total assessment of 2s 7½d in the pound, whereas, had the town reserves not been alienated, all the municipal services rendered would probably have been obtained for a modest rate of less than 9d. in the pound.

This is surely an object lesson which should be laid to heart by every inhabitant of the colony, as well as by the citizens of Christchurch, and should demonstrate how very desirable it is in the interests of the people as a community, that all land should be owned by the community, seeing that increased values of land are derived from the exertions and sacrifices of society.  It will serve to show what enormous sums society thus pays to individuals to state that it is estimated that the value of land in London is increasing at the rate of 7½ millions annually; under the system of private ownership of land this large sum is accruing yearly in London alone to private individuals, and the public who must use the land, necessarily pay interest on that sum.

The Progressive Liberal Association earnestly commends these facts to the consideration of the people of New Zealand in the hope that they will insist upon a stoppage being put to the sale of Crown lands; and as regards the granting of leases in perpetuity, which, in parting with the possession for 999 years at a rental based on the present value, hands over to individuals the unearned increment for that unconscionably long period, it is hoped that a mandate will go forth from the electors of the colony insisting upon a periodical revaluation of the unimproved value.  When these have been accomplished, there will be the question of the nationalisation of all the lands in the colony to be dealt with.

"That which was created for the use of all, the use of which is absolutely necessary for the existence of every individual, should be owned and controlled for the benefit of all.  The private control of land is dead against the common welfare.  Justice demands this, and what justice demands must sooner or later be conceded.

Christchurch, July 29, 1901

Bankrupt in California

Has no one in California figured out that when the calf is deprived of mother's milk, starvation is inevitable?

It has taken 34 years, but it is coming about.

Feeding calves grain, or seaweed, or sunflower seeds isn't as smart as letting it consume its natural food.

Taxing wages, sales and buildings isn't as smart as collecting the lion's share -- calf's share, if you will -- of the land rent for public purposes.

Proposition 13 was designed to make sure that the cows' milk was kept for the Irvines, the big landowners, the commercial property owners, and the longtime homeowners, while providing a diminishing fifth of it to the calf and supplementing with grain, seaweed and sunflower seeds.

The calf's digestive system has blown up because it was deprived of its proper food, and "nourished" with stolen fake food.

 

To make America more egalitarian, tax the value of land

To make America more egalitarian, tax the value of land - FT.com.

Sir, Joseph Stiglitz is concerned that America has become less egalitarian, and no longer the land of opportunity (June 26). He mentions reducing rent-seeking as a solution, but he does not mention the paradigmatic form of rent-seeking: collecting the ground rents of land. If an increasing share of gross national product is going to the top 1 per cent, it is at least in part because they are the people who own most of the valuable land, and the rents of land are absorbing a larger share of production. No one is making more land to keep the price down by competition.

I'll leave it to you to go read the rest. (Registration is free.)

The Rent of Land, and Government Expense

"The rent of land and government expenses are both caused by population. Let one pay the other."

--Henry Chase, M. D.

NYT 99 years ago ... a "Lower Rents" bill in Albany

1913-05-11 Demand Reduction of Building Taxes

Thousands Sign Petition at a Mass Meeting Held in Union Square

Pastor Flays Legislature

Dr. John Haynes Holmes Says Bosses Have No Right to Stop the Expression of the People's Will

Petitions asking for a referendum vote upon the question of reducing gradually the tax rate upon buildings in New York to one-half the tax rate upon land, through five consecutive reductions in as many years, were signed yesterday by several thousand persons at a mass-meeting held in Union Square under the auspices of the New York Congestion Committee. The meeting was announced as a public protest for lower rents.

Benjamin Clark Marsh, Executive Secretary of the Committee on Congestion of Population in New York, was Chairman.  Dr. John Haynes Holmes of the Church of the Messiah said that the Legislature "in the wisdom of the Big Sachem at Fourteenth Street has decreed that the people are not fit to register their judgment as to this bill.  I, for one, desire to protest against the boss or set of bosses who presume to forbid the people to express their will on any question."

Frederick Leubuscher, representing the New York State League of Savings and Loan Association, said:

"It was admitted by some of the land speculators at the hearing of the Lower Rents bill at Albany that they were unable to answer our arguments.  Nevertheless, a Democratic majority stifled the bill.  As a savings and loan association man, I am interested particularly in the enactment of this proposed law.  The stimulation of the erection of buildings and the making of improvements generally will be more market in the suburbs, where modest homes, costing from $2,000 to $5,000 to erect, are most in demand."

The purpose of the law was explained in a letter from Assemblyman Michael Schaap, who introduced the Salant-Schaap bill in the lower House of the State Legislature.

"If the tax rate on buildings had been half that on land this year," he wrote, "the rents of the average tenant would have been at least one month's rent less than it was; owners of small houses would have paid $15 to $25 less taxes than they do, and there would be fewer than 9,000 evictions for non-payment of rent.

"The taxes on all adequately improved property would have been reduced and the city would have recovered almost $20,000,000 more of ground rent which now goes to a few people of New York and to absentee landlords.  This ground rent at 6% is over $273,000,000.  The people of the city have created and maintain these values, but they get less than $84,000,000 of it -- the land owners get the other $189,000,000.  Rent and taxes on homes and other buildings would have been reduced by at least $20,000,000."

The Rev. Alexander Irvine said that one family out of every 150 in New York City was evicted for non-payment of rent, because of the unjust taxation of improved property as contrasted with vacant land.  Only 3% of the residents of the city own land, the speaker asserted.

John J. Hopper, Chairman of the New York State Independence League, said:

"A tax upon anything tends to lessen the supply of that commodity.  By the same principle a tax upon buildings tends to lessen their number.  A bill tending to reduce the tax upon buildings will bring about the construction of more buildings, and as a result there will be more competition and a corresponding reduction in rents.

"The Legislature refused to let us decide this question for ourselves, asserting that we did not know enough to vote on the subject of taxation.  When we realize that for the expenses of the National Government each one of us pays $7.50 a year; for the state expenses, $5.50 and for the city expenses $38.50, making a total of $51.50 per individual, or $255 for a family of five, then we understand that we must think upon this subject of taxation.

Frederick C. Howe, Director of the People's Institute, said:

"Think of the stupidity of New York citizens.  We talk about bankruptcy and lack of city credit and yet we give away each year at least $100,000,000 in the speculative increase of land values which the growth of the community creates.  That is, the increase show by the tax valuation of the city.  New York could pay a large part of its present budget out of the land speculation profits alone, if it taxed land and exempted buildings."

C. N. Sheehan of the Twenty-eighth Assembly District Board of Trade, Brooklyn, and J. P. Coughlin of the Central Labor Union of Brooklyn also spoke.

Edmund Vance Cooke: Rent, Rent, Rent!

I've taken the liberty of retitling the poem (in the spirit of "Location, Location, Location!).  Cooke is also the author of Uncivilized, Thanksgiving, and The Monkeys Disgrace

When people remind us, next April, of the so-called "Tax Freedom Day," perhaps it is worth bringing this aspect to their attention.  However, few of them will have the economic education to understand what this poem is saying, on a first reading.  (Maybe they'll take the time to explore this blog.)

It was Winston Churchill who brought the term "Mother of all Monopolies" to prominence, in a series of speeches he gave in the fall of 1909.

Rent
Edmund Vance Cooke
Written for the Cleveland Singletax Club
in The Single Tax Review, October 2, 1914

        You may tinker with the tariff and make some simple gains,
        You may put on tolls or take 'em off, inducing party pains;
        You may monkey with the money, but the lack of it remains,
        For the Mother of monopoly is laughing as she reigns.

        Rent! rent! who is it pays the rent?
        A dozen days in every month the worker's back is bent;
        Figure it in dollar bills or work it by percent,
        But with his dozen days he pays just rent, rent, rent.

        You may "minimum" the wages, you may let the women vote,
        You may regulate the railroads with a legal antidote,
        You may jail some Rockefeller, or may get a Morgan's goat,
        But the Mother of Monopoly is laughing in her throat.

        Rent! rent! who is it pays the rent?
        A hundred days in every year a business profit's spent;
        Figure it in "overhead," or state it by percent,
        But all your hundred days are gone for rent, rent, rent.

        You may institute Foundations, you may educate the dubs,
        You may librarize the Bread Line, and establish Slumy Clubs;
        You may ostracize the Demon Rum and eugenize the cubs,
        But the Mother of Monopoly is smiling at your snubs.

        Rent! rent! who is it pays the rent?
        A score of years in life you spent to get one document;
        From your cradle to your coffin you must bow to its assent,
        And that's your little, old receipt for rent, rent, rent.

        I look across the rented world and idle land I see,
        Whose owner doesn't work it, for he's working you and me,
        And on the first of every month all tenants bow the knee,
        And pay the rent of vacant land, in great or small degree

        Rent! rent! who is it pays the rent?       
        The worker's hands are busy and the business back is bent;
        The idle lands advance in price and every single cent,
        Of that advance is paid by us in rent, rent, rent.

The Earth-for-All Calendar: May 12 -- Adam Smith

As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.

— ADAM SMITH, Wealth of Nations, Book I., Chap. 6.

The Last Remnant of Sorcery

THE LAST REMNANT OF SORCERY

For ages sorcerers and magicians kept their secrets, their charms and enchantments to deceive the simple and unwary. At length most of such marvels are relegated to jugglers and sleight-of-hand performers, and we are amused to be deceived. We expect to see things come out of nothing; to see the unbroken eggs come out of the beaten scarf; the guinea pigs come out of the empty silk hat, the ducks come quacking out of the empty box; silver dollars come out of the boy’s ear or empty pocket. But there is yet one piece of magic in which many still believe. That is the magic of land values materializing from a vacant rubbish-covered lot or tract of land on which not a lick of work has been done.

Our modern sorcerers do the trick and roll up the hundreds of thousands of dollars out of nothing, and we look with gaping mouths, wondering where the big roll of bills came from. No question is asked. Something came out of nothing; that is all. Ah! if we could all learn the trick! No more work for anybody!  Why should we work when we can produce money from nothing? Nobody investigates; we have the money on us, but sleep with untroubled mind, for no man can say “That is mine.” True, no man can say “That rake-off is mine”; but all the community could rise and say, “That rake-off is ours. We, all together, created the demand for the lands of the community by our presence and industry. Before we came, the values were not. If we should all go, they would disappear. Your money does not come from nothing, as some suppose. The whole community contributes to your roll. It should be ours to pay our taxes with. For lack of it we are fined for our houses, furniture, machinery, crops, merchandise, etc.”

Oh, come off with your magic of getting something for nothing! Take your chances with the rest of us, who earn our money by work. We have been shown, and are on to your magic. We are going to vote for Amendment Number 20.” Thus will sorcery fade before reason. —Lona I. Robinson, in The Great Adventure, October 23, 1920

The Earth-for-All Calendar: April 3 -- Tolstoy

"The land is common to all. All have the same right to it; but there is good land and bad land, and everyone would like to take the good land. How is one to get it justly divided? In this way: he who will use the good land must pay those who have got no land of the value of the land he uses," Nekhludoff went on, answering his own question. . . . "Well, he had a head, this George," said the oven builder, moving his brows. "He who has good land must pay more."

— COUNT TOLSTOY, Resurrection, Book II., Chap. 9.

Tolstoy has rightly discerned the evils which follow the uprooting of the people from fostering Mother Earth, and the incubation of a day-wage-earning, urban, industrial proletariat.

— MAX NORDAU, Degeneration, p. 163.

The Earth-for-All Calendar: March 31 -- Adam Smith

A tax upon ground-rents would not raise the rent of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist and exacts the greatest rent which can be got for the use of the ground.

— ADAM SMITH, Wealth of Nations (1776), Book V., Chap. 2, Art. I.

The Earth-for-All Calendar: March 30 -- Emperor Joseph II

Land, which nature has destined to man's sustenance, is the only source from which everything comes, and to which everything flows back, and the existence of which constantly remains in spite of all changes. From this unmistakable truth it results that land alone can furnish the wants of the state, and that in natural fairness no distinctions can be made in this.

— EMPEROR JOSEPH II., in Oestreichische Geschichte fur das Volk, Vol. XIV. (Vienna, 1867).

The Earth-for-All Calendar: March 27 -- Paine and Penn

Every proprietor, therefore, of cultivated land owes to the community a ground rent (for I know of no better term to express the idea) for the land which he holds.

— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 329 (1795-6).

If all men were so far tenants to the public that the superfluities of gain and expense were applied to the exigencies thereof, it would put an end to taxes, leave never a beggar and make the greatest bank for national trade in Europe.

— WILLIAM PENN, Reflections and Maxims, Sec. 222, Works V., pp. 190-1.

The Earth-for-All Calendar: March 26 - Spinoza

Let the fields and all the soil, and, if possible, even the houses, belong to the state, that is, to him which is the depositary of the right of the state, so that he may let them out for an annual rent to the inhabitants of the cities and the cultivators. This will exempt all citizens from extraordinary taxes in time of peace.

— SPINOZA, Tractatus Politicus, Chap. VI., On Monarchy, Sec. 12.

Developer Inks 99-Year Lease

The remarkable thing about this story, to my eye, is that the size of the lot isn't even mentioned!  It is worth $1 million land rent per year, and one might infer from the information provided that the lot is about 10,000 square feet, or less than 1/4 acre.

Capitalized at 5% (also known as "20 years' purchase") the lot would sell for about $20 million.

I assume that in addition to the land rent, the tenant pays the property tax on the land.  So the entire $1 million annual land rent flows out of NYC, to the property's owner, in Marshall, Virginia.

What, pray tell, has the land owner done to earn that land rent? 

Consider how many people's wage taxes and sales taxes could be lifted, and what that additional spending power could do for the local economy.  Consider what would happen if there were no taxes to be paid on the apartments or on people's condo structures.  

Or NYC can just keep letting the land rent leave the city, and even leave the country, continuing to flow into private pockets, just as if they'd rendered someone some service and earned it!

Land rent is natural public revenue, and we permit landlords to privatize it.  Aren't we generous with our patrimony?  (Leona told us the truth!)

Karl Fischer | Developer Inks 99-Year Lease | East Village.

The developer of a nine-story Karl Fischer rental apartment building planned for a corner site in the East Village signed a 99-year ground lease that requires payments each year of about $1 million.

The development company, YYY Third Avenue, signed the long-term lease for the vacant site at 74-84 Third Avenue, at 12th Street, April 27, 2011, however, a memorandum of the lease was not recorded in public records until last Wednesday, city property documents show.

A source citing city property records said the lease payment, which is not specifically recorded, could be inferred to be about $1 million per year. Prior to the document’s release, the annual lease cost was not known.

The prolific and controversial architect Fischer filed plans to build an 82,000-square-foot, nine-story residential building with 94 units, city Department of Buildings online records show. The permit has not been approved and is pending, DOB data indicate, and is to include nearly 9,511 square feet of retail, as well.

You might also be intrigued by the URL for the story ... I'm not sure what to make of it.

Bob Andelson: An Open Letter to Pope John Paul II

Open Letter to Pope John Paul II

by the late Robert Andelson

Your Holiness,

THE QUESTION OF MISERY

At the outdoor mass you held in Wroclaw in Poland during your recent visit to that country, you said the following very true and sincere words:

"The Earth is capable of feeding everyone. Why therefore -- here at the end of the 20th century -- should thousands of people die from starvation" -- "Pray solidarity will prevail over the unrestrained thirst for profit and ways to handle laws of trade, which do not take into consideration inalienable human rights".

It was the same concern about the greed of the wealthy and the plight of the poor, that your predecessor, Pope Leo XIII, expressed in his Encyclical Letter of 1891, 'Rerum Novarum'. Yet, in the more than hundred years that have past, if there has been a change, it has been for the worse!

The wealth is there. The growth of industry and the discoveries of science about which Pope Leo spoke, are even more fantastic and surprising than he would have imagined in his most inspired dreams. The enormous fortunes of individuals, of which he also spoke, have become more enormous. Yet the poverty is still there.  Even in countries that are considered wealthy, people are homeless and live in cardboard boxes; people die, not just by the thousands as your Holiness said in Wroclaw, but by the millions, from poverty related diseases, malnutrition and starvation. You are indeed right to ask the question:

WHY?

THE EXCLUSION FROM THE GIFTS OF GOD

As your Holiness will know, the Encyclical Letter of 1891 was not only an attack on socialism, but also a strong defence of the right to hold land as private property, a right that Pope Leo XIII claimed to be natural.

But the right to hold land includes the right for the owner to exclude other people from it, and, as all usable land in industrially developed countries is owned in that way, people without such a right will be unable to enjoy the gifts of God unless they accept the conditions exacted of them by a landowner. Neither can they work, reside nor relax without land, and again they have to accept conditions exacted by a landowner.

Normally the landowner will ask people to pay the market-determined site rental, which is high because of the many excluded people who want land, or he will offer to let them work at a market-determined wage, which is low because of many excluded people wanting a working place.

Some people, in fact -- as a consequence of the many excluded -- a growing number of people, can neither qualify for a job nor afford to pay the site rental, and they have to live on the streets, on the roads, at the dumping grounds or wherever they can find a poor shelter, some clothes and a little to eat. Some of them find that crime and prison give them a better life than there is available through the legal opportunities open to them.

In some countries Social Security is implemented to mitigate the cruel consequences of the exclusion of people from the gifts of God. The Social Security bill is not paid by landowners, but by entrepreneurs, wage earners, pensioners, savers and consumers.

In other countries only private charity is available to relieve the hardships.

But neither Social Security nor charity will change the basic injustice that causes the horrible conditions of the people excluded, that increases the site rentals to be paid for the use of land, and reduces net-wages, widening the gap between poor and rich. The basic cause of these evils has to be destroyed.

Political leaders from all over the world, including representatives of the Holy See, agreed at the United Nations conference on Human Settlements (Habitat II) at Istanbul last year, that:

"The failure to adapt, at all levels, appropriate rural and urban land policies and land management practices remains a primary cause of inequity and poverty".

LETTER TO POPE LEO XIII

Allow us, your Holiness, to point to the Open Letter of September 11th, 1891, written in New York by Henry George and sent to your predecessor his Holiness Pope Leo XIII, as a response to 'Rerum Novarum'.
 
Published as a book this Open Letter has been read by many thousands, and still today the book is sold and read.

Henry George did consider 'inalienable human rights' and 'unrestrained thirst for profit and ways to handle laws of trade'. On exactly this background he spoke for all people's equal rights to the gifts of God.

To maintain this right for everybody and at the same time to allow exclusive right for some to own land as private property, he advocated that people who are given the exclusive right to own land -- and thereby the right to exclude other people from the gifts of Nature -- should pay a compensation to the people they exclude (in fact to all citizens).

The compensation, as a duty to be paid by the landowners, should be the market-determined rentals of the sites from which they can exclude others. This being a fair charge of justice as the rentals are not due to efforts or investments made by the landowners, but due to the development of society and to the growth of the population of human beings, all wanting a place to work, and a place to reside.

The rentals should be collected from all landowners by society, and the revenue should be used to the benefit of all citizens. In that way, Henry George emphasized, all citizens would be able to get their equal share of the gifts of God.

HOLY INCENTIVES OR HOLLOW FALSEHOOD

We do agree with your Holiness and with Henry George that people have private right to property created by man, the right to the fruits of their labour; and also that people can achieve private right to exclusive possession of land, from which they can exclude other people.

But we find it logically inconsistent to believe that people have equal right to life and to be on the Earth, when at the same time some of them have exclusive right to own land as private property without paying compensation to those people whom they exclude from their land.

Your Holiness' sincere words, as quoted initially in this letter, accord with Rerum Novarum of 1891 and with the Habitat II statement quoted above, but they will only become true if your Holiness will succeed in urging on the rulers/governments of this world to collect the annual market-determined Site Rentals of all land in their countries, and distribute the revenue thus acquired to the benefit of all their citizens.

If your Holiness could succeed in persuading the governments to do so, all people on Earth would gain equal access to the gifts of Nature, and true solidarity would become a reality. If not, all statements about equal right to life, to work, to education and to residence, will continue being hollow and false; and our successors will not see a change for the better; on the contrary, they will see the gap between very rich people and alienated poor people grow bigger, and the problems of poverty grow more serious than they are today.

OUR PRAYER

We pray your Holiness may succeed in convincing the governments of this world of the importance of public collection of the annual market rental of all land, and the revenue to be used for equal benefit of all the citizens, thus to provide far all human beings, equal rights to the gifts of Nature.

Let this become the manifestation of the new Millennium, the 2000 year anniversary of the birth of Jesus Christ. Let it become a Jubilee in the original meaning of the word, striking unjust shackles from society; thereby preparing a new age of humanity, a social life in friendship and peace.

 

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

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

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

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

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

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

— THOMAS SPENCE, Pig's Meat (1793)

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

The Land Questions: #38: Mining

38. Mining companies which mine on public lands pay far less to the Federal government than they pay on privately held lands. 

A.  That's fair, because the private landholders are better negotiators

B. That's fair, because the 1872 Mining Act set the price, and it wouldn't be fair to change the business environment after setting the rules.

C. That's fair.  Corporations need subsidies to create jobs.

D. That's unfair, and the federal government should be getting just as much from the miners as the private landholders are getting

E. That's unfair, and not only should the federal government be getting more from the mining companies, but the federal government should be collecting a significant portion of the royalties now privatized by private and corporate landholders, since we're all equally entitled to nature's bounty.  This would permit us to reduce other taxes on wages and production, and perhaps lead to a citizen's dividend, similar to the Alaska Permanent Fund

F. That's unfair, because the 1872 Mining Act was based on old prices and old mining technology.

G. Your reactions?

 

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

a bit out of sequence ...

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

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

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

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

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

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

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

G. Your suggestions?

The Land Questions: #37

37.  Our ancestors bought or stole the land which the ancestors of some of those now identified as "Native Americans" relied on.  How should we and our children pay back them and their children?

A. By giving them the privilege of selling cigarettes without taxes, forgoing revenue that could help meet the health costs associated with smoking, both for smokers and for those who live with them.

B. By giving them the privilege of running casinos, even if a percentage of that revenue must be contributed to the state, and even if gambling is creates tremendous problems for some individuals in society, beyond those who actually gamble.

C. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever.  (Similar to the Alaska Permanent Fund)

D.  By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever, and providing a double share to those who are starting from a disadvantaged position for some fixed number of years

E. By collecting from everyone who owns land and natural resources the annual economic value, paying the costs of government and common spending from that source, producing equal opportunity for all.

F. Your suggestions?

 

The Land Questions: #30 -- Public Lands

30. What should we do with our public lands?

A. Sell them off at the current price, about $5 per acre, per the 1872 Mining Act, even if they contain minerals worth billions of dollars.

B. Sell them off to the highest bidder, as soon as possible

C. Sell them off to any bidder, as soon as possible

D. Lease them for fixed terms, to the highest bidder, with future lease prices to be calculated with an eye to making it profitable for the tenant

E.  Lease them for fixed terms, to the highest bidder, and then repeat the auction in 10 years. Maintain extensive online databases so that the lease descriptions are visible to all, and the lease expirations are well advertised to all who might be interested in bidding.  Make it the landlord's business to get high quality unbiased appraisals of tenant improvements, so that tenants can make sensible improvements and be secure in them.  Use the revenue to reduce other taxes which burden the economy.

F. Lease them out, at market rates, with the proceeds used to generated a citizen's dividend.  If there is a monopoly or oligopoly, break it up so that there is a genuine market.

G. Keep renting them out at whatever price they're now receiving; we don't want to upset anyone's plans or privileges.

H. Your suggestions?

Earnings and findings -- earned and unearned income

Does the Single Tax discriminate between earned and unearned income?

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

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

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

From The Single Tax Year Book (1917)

Brief Statement of Single Tax Philosophy

This is from Joseph Dana Miller, the editor of the Single Tax Year Book (1917), and it is a concise statement which might help make clear why I think this such an important reform in the 21st century.

Men have a right to land because they cannot live without it and because no man made it. It is a free gift of nature, like air, like sunshine. Men ought not to be compelled to pay other men for its use. It is, if you please, a natural right, because arising out of the nature of man, or if you do not like the term, an equal right, equal in that it should be shared alike. This is no new discovery, for it is lamely and imperfectly recognized by primitive man (in the rude forms of early land communism) and lamely and imperfectly by all civilized communities (in laws of "eminent domain", and similar powers exercised by the State over land). It is recognized by such widely differing minds as Gregory the Great and Thomas Paine (the religious and the rationalistic), Blackstone and Carlyle (the legal and the imaginative). All points of view include more or less dimly this conception of the peculiar nature of land as the inheritance of the human race, and not a proper subject for barter and sale.

This is the philosophy, the principle. The end to be sought is the establishment of the principle -- equal right to land in practice. We cannot divide the land -- that is impossible. We do not need to nationalize it that is, to take it over and rent it out, since this would entail needless difficulty. We could do this, but there is a better method.

The principle, which no man can successfully refute or deny even to himself, having been stated, we come now to the method, the Single Tax, the taking of the annual rent of land -- what it is worth each year for use -- by governmental agency, and the payment out of this fund for those functions which are supported and carried on in common -- maintenance of highways, police and fire protection, public lighting, schools, etc. Now if the value of land were like other values this would not be a good method for the end in view. That is, if a man could take a plot of land as he takes a piece of wood, and fashioning it for use as a commodity give it a value by his labor, there would be no special reason for taxing it at a higher rate than other things, or singling it out from other taxable objects. But land, without the effort of the individual, grows in value with the community's growth, and by what the community does in the way of public improvements. This value of land is a value of community advantage, and the price asked for a piece of land by the owner is the price of community advantage. This advantage may be an excess of production over other and poorer land determined by natural fertility (farm land) or nearness to market or more populous avenues for shopping, or proximity to financial mart, shipping or railroad point (business centers), or because of superior fashionable attractiveness, (residential centers). But all these advantages are social, community-made, not a product of labor, and in the price asked for its sale or use, a manifestation of community-made value. Now in a sense the value of everything may be ascribed to the presence of a community, with an important difference. Land differs in this, that neither in itself nor in its value is it the product of labor, for labor cannot produce more land in answer to demand, but can produce more houses and food and clothing, whence it arises that these things cost less where population is great or increasing, and land is the only thing that costs more.

To tax this land at its true value is to equalize all people-made advantages (which in their manifestation as value attach only to land), and thus secure to every man that equal right to land which has been contended for at the outset of this definition.

From this reform flow many incidental benefits -- greater simplicity of government, greater certainty and economy in taxation, and increased revenues.

But its greatest benefit will be in the abolition of involuntary poverty and the rise of a new civilization. It is not fair to the reader of a definition to urge this larger conclusion, the knowledge of which can come only from a fuller investigation and the dawning upon his apprehension of the light of the new vision. But this conclusion follows as certainly as do the various steps of reasoning which we have endeavored to keep before the reader in this purely elementary definition.

Another motto: Save the Rent for Society

Save the rent for Society.

That's short and sweet.  I came across it in The Single Tax Year Book for 1917, in a chapter about the Single Tax in Germany.

The value of land is the day-to-day product of the community

The taxation of all property at a uniform rate is made necessary by the constitutions of about three-fourths of the States of the Union. The taxes on chattels, tools, implements, money, credits, etc., find their condemnation from the Single Taxer's point of view in those ethical considerations which differentiate private from public property. Where there arises a fund known as "land values," growing with the growth of the community and the need of public improvements, it is not only impolitic, it is a violation of the rights of property to tax individual earnings for public expenses.

The value of land is the day-to-day product of the presence and communal activity of the people. It is not a creation of the title-holder and should not be placed in the category of property. If population deserts a town or portions of a town, the value of land will fall; the land may become unsalable. When treated as private property the owner of land receives from day-to-day in ground rent a gift from the community; and justice requires that he should pay taxes to the community proportionate to that gift.

"Land value" or "ground rent" as the older economists termed it, is a tribute which economic law levies upon every occupant of land, however fleeting his stay, as the market price of all the advantages, natural and social, appertaining to that land, including necessarily his just share of the cost of government.

excerpt from The Single Tax Year Book (1917)

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

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

A. Riders of the new subway line

B. Riders of all subways in the system.

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

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

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

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

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

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

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

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

J. The homeowners, via taxes on their homes

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

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

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

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

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

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

Q. Your suggestions?

Downton Abbey: The Landed Gentry

I had the pleasure of watching part of a marathon of the second season of Downton Abbey yesterday, knowing that I'd missed a few shows -- and want to watch them all in sequence.

The setting of the show raises some questions one might want to think about.

1. What sort of wages do all the "downstairs" employees receive?

2. What employment alternatives are available to them?

3. How does the owner of Downton Abbey afford to pay for the services of all those workers, in addition to the non-wage costs of maintaining the castle and the surrounding land, which is an overwhelming job -- and passion -- for him?

4. Is there a middle class in that town?  On what are their fortunes dependent?  How are they different from the staff at Downton Abbey?

5. What are the opportunities for the children of the house staff at Downton Abbey to have a different life from their parents?

6. Can others prosper?

7. What sorts of ideas, particularly on public policy, maintain the status quo?

8. Why is having the property pass intact to one person so important?  What would happen if it were divided among several heirs?

9. Do you think there are small holdings in the same area, where individual families can live, work and prosper, or a series of large holdings like DA?

10. Are people unemployed or underemployed? Are their opportunities limited by the system, particularly if they care about staying close to family?

This is off the top of my head.  I'm charmed by the series, and at the same time, am puzzled by how much I enjoy watching it.  (Good writing, of course.)

Mason Gaffney: An Alternative Reform

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

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

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

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

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

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

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

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

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

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

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

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

Here is, perhaps, my favorite:

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

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

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

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

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

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

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

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

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

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

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

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