LVTFan's Blog

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

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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.

 

 

Shiller: Too Many Graduating Seniors Go Into Finance

One might be led to ask, how many is enough, and how we might go about encouraging our best and brightest into careers that serve others instead of rent-seeking.  Two generations ago, many became doctors, engineers and teachers.  

• What changes in public policy will reduce the returns now funneled so generously to the rent-seekers, leaving more for the folks who labor in the productive sectors of the economy?  
• Why do we pay so little attention to rent-seeking?  
• Why is rent-seeking taught to our MBAs, but the impacts of rent-seeking not taught to our liberal arts, social sciences, political science, public policy students?   
• D'ya think that the rent-seekers might really really like it this way??

Shiller: Too Many Graduating Seniors Go Into Finance

http://www.moneynews.com/Economy/Shiller-financial-field-speculative/2013/09/25/id/527558

Too many of the our brightest people may be choosing careers in finance, undertaking economically and socially useless — and even harmful — activities, Robert Shiller, a Yale University economics professor, writes in an article for Project Syndicate.

A survey of elite U.S. universities showed that 25 percent of Harvard graduating seniors, 24 percent of Yale graduating seniors and 46 percent of Princeton graduating seniors were going into financial services in 2006, notes Shiller, co-creator of the Case-Shiller home price index. 

While those proportions have fallen more recently, he explains that might only be a temporary effect of the financial crisis.

And more are going into speculative fields like investment banking rather than traditional finance such as lending, he says, citing a study by Thomas Philippon of the Stern School of Business, New York University and Ariell Reshef of the University of Virginia. 

We need some traders and speculators, Shiller concedes, as they provide some useful service — sorting through information about businesses and trying to judge their real worth.

"But these people's activities also impose costs on the rest of us," he explains. Much of their speculation and deal making is "pure rent-seeking." 

"In other words, it is wasteful activity that achieves nothing more than enabling the collection of rents on items that might otherwise be free."

Those working in speculative finance fields are like a feudal lord installing a chain across a river to charge fees on passing boats, he argues. Making no improvements to the river, the lord does nothing productive and helps no one but himself. Few people will use the river if enough lords put chains across it to collect fees. 

Those working in speculative fields, he says, "skim the best business deals, creating a 'negative externality' on those who are not party to them."

For example, they can reject bad assets, such as subprime mortgage securities, offloading them to less knowledgeable investors. 

The repeal of the Glass-Steagall Act, which blocked commercial banks from investment banking, allowed bankers to act more and more like those feudal lords collecting fees.

"In fact, the main advantages of the original Glass-Steagall Act," he says, "may have been more sociological than technical, changing the business culture and environment in subtle ways. By keeping the deal-making business separate, banks may have focused more on their traditional core business."

A paper by economists at Columbia University and Princeton published on the Social Science Research Network website showed that over-the-counter (OTC) traders allowed informed dealers to extract excessive rents and to undermine organized exchanges by "cream-skimming" the best deals. 

"The informational rents in OTC markets in turn attract too much talent to the financial industry, which would be more efficiently deployed as real-sector entrepreneurs," the paper asserts.

Plus, OTC dealers' rents tend to increase "as there are more informed dealers, because the greater cream-skimming by dealers worsens the terms entrepreneurs can get for their assets on the organized exchange, and therefore their bargaining power on OTC markets."

The Charitable-Industrial Complex

Here are the final paragraphs in an interesting and perceptive NYT Op-Ed by Peter Buffett.  He comes up with an interesting phrase: "Philanthropic Colonialism"

The Charitable-Industrial Complex - NYTimes.com.

What we have is a crisis of imagination. Albert Einstein said that you cannot solve a problem with the same mind-set that created it. Foundation dollars should be the best “risk capital” out there. 

There are people working hard at showing examples of other ways to live in a functioning society that truly creates greater prosperity for all (and I don’t mean more people getting to have more stuff).  

Money should be spent trying out concepts that shatter current structures and systems that have turned much of the world into one vast market. Is progress really Wi-Fi on every street corner? No. It’s when no 13-year-old girl on the planet gets sold for sex. But as long as most folks are patting themselves on the back for charitable acts, we’ve got a perpetual poverty machine. 

It’s an old story; we really need a new one.

But perhaps Buffett's most important observation is this one:

"Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left." 

To which I can only insert ... "and are benefiting from."

He also points out,

As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.

But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.

I hope Mr. Buffett will take the time to read Henry George's "Progress and Poverty."   He might be better able to identify the particular structures that create and maintain poverty and the concentrations of wealth, income and power.  And, based on that last sentence, I think Buffett would appreciate the final section of P&P.  (Bob Drake's 2006 abridgment is a fine starting place, but the unabridged is a pleasure of its own.)

a response to Joe Stiglitz's "A Tax System Stacked Against the 99 Percent"

Last week, Joe Stiglitz posted a blog piece at http://opinionator.blogs.nytimes.com/2013/04/14/a-tax-system-stacked-against-the-99-percent/, in which, among other things, he wrote:

One of the reasons for our poor economic performance is the large distortion in our economy caused by the tax system. The one thing economists agree on is that incentives matter — if you lower taxes on speculation, say, you will get more speculation. We’ve drawn our most talented young people into financial shenanigans, rather than into creating real businesses, making real discoveries, providing real services to others. More efforts go into “rent-seeking” — getting a larger slice of the country’s economic pie — than into enlarging the size of the pie.

It doesn’t have to be this way. We could have a much simpler tax system without all the distortions — a society where those who clip coupons for a living pay the same taxes as someone with the same income who works in a factory; where someone who earns his income from saving companies pays the same tax as a doctor who makes the income by saving lives; where someone who earns his income from financial innovations pays the same taxes as a someone who does research to create real innovations that transform our economy and society. We could have a tax system that encourages good things like hard work and thrift and discourages bad things, like rent-seeking, gambling, financial speculation and pollution. Such a tax system could raise far more money than the current one — we wouldn’t have to go through all the wrangling we’ve been going through with sequestration, fiscal cliffs and threats to end Medicare and Social Security as we know it. We would be in sound fiscal position, for at least the next quarter-century.

to which I posted a response.  The last time I looked, it was the only one, out of about 430, which discussed the issue of rent seeking.  Here's what I wrote:

How do we unstack it? Collect the rent. Treat it as our COMMON treasure, not something subject to privatization by individuals, corporations, foundations, universities, etc. 

Will it fund everything? We don't know. We can't know. We don't even collect the data that would permit us to calculate its magnitude. (Funny thing about that. Wonder who benefits from that. Could it be the rent-seekers?) Start collecting it, and using it to fund public goods.

At the same time, start reducing, even eliminating the dumb taxes which burden the economy: taxes on sales, buildings, wages, starting with the lowest wages earned. Watch the 99% recover. Watch the economy recover. The 1% will do all right under such a set up, but the rest of us will begin to thrive. Most likely, we'd be able to reduce the amount we need to spend on the social safety net, so that collected rent might cover a large share of our internal revenue needs.

What else might we collect revenue from? How about the privileges we've given out -- the privilege of using the airwaves (think how much a strong radio signal sells for in a large city) and the entire electromagnetic spectrum; franchises of various kinds, landing rights at LaGuardia, particularly at rush hour; 

Then there are our nonrenewable and scarce natural resources: water, oil, natural gas, various metals. Royalties on many of these things are trivial, or they are going into private pockets, instead of being treated as our common treasure.

Hoi oligoi

Hoi oligoi.  A new phrase for me, and one which made immediate sense.  My Georgist grandparents sometimes referred to themselves as part of the hoi polloi, but at other times also used it to distinguish themselves, in a joking way, from the mass of people who didn't know George's ideas.  

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 9 -- Rousseau

As soon as I see landed property established, then I see unequal fortunes, and from these unequal fortunes must there not necessarily result different and opposed interests, all the vices of riches, all the vices of poverty, the brutalisation, the corruption of civil manners?

—Jean Jacques Rousseau, "Douies sur L'Otdre Naturel."

Thomas Shearman: The Coming Billionaire (1891)

When there is even one billionaire, there will be several half-billionaires and many hundred-millionaires.  The fact will be an indication of a tremendous concentration of wealth, and of the dwindling proportion of wealth held by the farmers and wage-earners of this country.  The billionaire will bring an army of paupers in his train.  Possibly the actual average wealth of farmers and mechanics then may be a little greater than it is now.  Optimists of that day may assure them that they are richer, by ten dollars each, than their ancestors were; and therefore that all is for the best in this best of all possible worlds.  But the discontent of the masses, under a system which gives to one man a larger amount of wealth than can ever be attained by a million of his fellow citizens who are fully his equals in skill and merit and far his superiors in industry, is certain to be great and ever increasing.  Indeed, universal experience demonstrates that discontent among the masses is far greater than when the weight of oppression is somewhat diminished than it was before.

...

The vast majority of any community must always have incomes so small that they cannot help spending three fourths of what they receive.  But the small minority of large property-owners do not need to spend one eighth of their incomes, and as a rule they do not spend one half.  Looking at the subject with reference to accumulated wealth, the man who is worth $1,000 usually spends at least $500 a year on the support of his family, while the man who is worth $1,000,000 rarely spends $50,000.  Indirect taxation, therefore, obviously bears at least ten times as heavily upon the former as upon the latter.  Under absolutely direct taxation, no poor man would ever pay a larger share than a rich man, and, indeed, most of the working classes would pay no taxes at all; because the collection of direct taxes from them would be too laborious and expensive to be maintained. 

...

Direct taxation, on a large scale, is near at hand.  The men who bought and paid for the present Congress can now choose what its form shall be.  They can have a general income tax, or they can have something less open to fraud, less inquisitorial in its nature, less oppressive upon honest men, and offering no premium to perjury.  But they know nothing about the science of taxation, and they do not care to learn; so that the whole matter will be left over to the new Congress, and a general income tax, objectionable as it is, seems most likely to be adopted. 

The Coming Billionaire

The Forum, January, 1891, page 546-557

In the FORUM for November, 1889, the question was asked, "Who owns the United States?" and reasons were given for the belief that one half of all the national wealth is owned by 40,000 families and that three fourths of it is in the possession of fewer than 250,000 families.  These estimates were based in part upon official tax returns, but in part, also upon private information as to the wealth of 70 estates, specifically named, each estimated to be worth more than $20,000,000 and averaging $37,500,000.  The correctness of these statistics, as well as that of the inferences drawn from them, has been somewhat bitterly denied.  Hostile critics have assumed that the estimates of individual wealth were based entirely upon newspaper reports; and many newspaper editors, acting presumably upon their own experience, have unhesitatingly declared that such statistics are necessarily worthless.

But not one tenth of these names were given upon the authority of newspaper estimates, while a large majority were given upon very trustworthy private information.  It has been said that no one can tell what a man's wealth amounts to without access to his books, which, it has been assumed, is impossible.  In several instances, however, the information came from persons who had access to the necessary books or had been permitted to inspect the securities; in some cases it was obtained from tax returns; and in other cases it was taken from the oral or written statements of the owners themselves.  For example, one gentleman, whose wealth was set down at $100,000,000 had actually exhibited $75,000,000 in securities, and had testified in a court of law to the possession of $10,000,000 more of one kind, all encumbered.  During the year which has now elapsed, not one tenth of these names have been specified by any one as erroneously entered upon the list or as seriously overrated, and in only three instances has any probable error been established.  These names might be omitted, and their places might be supplied by others of the twenty million grade.  Errors of understatement have been discovered which largely counterbalance all overstatements.  The least that can be said is that there are 70 American estates that average $35,000,000 each, not including Trinity Church, which perhaps should not be classed with strictly individual owners.  During the year, by the consolidation of two estates, one individual has become worth at least $200,000,000.  Two brothers, whose property is held as a unit, together own even a larger amount than this.  Some great estates have been divided up by inheritance, but others have been divided up by inheritance, but others have been still more concentrated by that means.

The Menace of Plutocracy -- an 1889 Thomas Shearman speech

Thomas G. Shearman was a founding partner of Shearman & Sterling and one of America's finest legal minds in the 19th century.  This complements several other articles -- a 3-part series entitled "The Distribution of Wealth" which appeared in The Standard late in 1887, "Henry George's Mistakes" (September, 1889), and "The Owners of the United States" which appeared in The Forum in November, 1889.

from "The Public," October 6, 1900 

THE MENACE OF PLUTOCRACY.

An extract from an address delivered by the late Thomas G. Shearman at Portland, Ore., June 17, 1889. This address, just as it was taken down by the stenographer at the time, was reproduced In the September (1900) number of "Why?", an excellent little periodical published by Frank Vierth at Cedar Rapids, Ia. As the editor of "Why?" says: "The lapse of nearly 12 years gives the speech added interest and significance."

Some cause has been at work during the last 25 or 30 years, which has resulted in a tremendous widening of the social chasm between the rich and poor. Some cause has, within the recollection probably of the majority of those who are present, entirely transformed the face of American society. Our old equality is gone. So far from being the most equal people on the face of the earth, as we once boasted that we were, ours is the most unequal of civilized nations. You talk about wealth of the British aristocracy, and about the poverty of the British poor. There is not in the whole of Great Britain and Ireland so striking a contrast, so wide a chasm between the rich and the poor, as there is in these United. States of America. There is no man in the whole of Great Britain and Ireland who is as wealthy as one of some half a dozen gentlemen who could be named in this country; and there are few there who are poorer than some who could be found in this country. It is true, I think, even yet, that there is a larger number of the extremely poor in Great Britain and Ireland than there is in this country. Haw long that will remain true it is difficult to say; but it is unquestionably not true that there is any greater mass of riches concentrated in a few hands in any country than in this.

Whereas, 40 years ago a man worth $100,000 was, even in our great city of New York, an object of remark and envy, such a man is now utterly obscure and unnoticed, and is considered to have laid merely the beginnings of a very moderate part of the capital which would be necessary for him to make a living.

Whereas, 40 years ago, there was but one man in the United States who was supposed to be worth more than $5,000,000, there are several Astors now, each of whom is generally reputed to be worth at least $50,000,000. There are probably ten times as many men today who are worth $20,000,000 as there were 40 years ago who were worth $1,000,000; and there are now several men, who are worth over $100,000,000 each.

This state of things is developing more and more rapidly. In every corner are men and women buried in obscurity, until we learn by some accident that they are worth their $10,000,000 or $20,000,000. A single member of a banking firm in, the city of Philadelphia lately died, leaving more than $21,000,000. There are at least four surviving partners in that firm having equal shares with the deceased. Two Philadelphians, of no public fame, recently died, having $22,000,000 each. One lady in my own city of Brooklyn is worth certainly not less than $30,000,000. We see evidences of this enormous accumulation on every side. And, it can be demonstrated with great ease by statistics which are undisputed, that at the present day less than 100,000 persons, constituting as a matter of fact only about one two-hundredth part of our working force, are possessed of incomes which enable them to save about three-fifths of all the wealth that is annually saved in this country. And as wealth is substantially all reproduced within less than 30 years, this means that within 30 years 100,000 persons are destined to own three fifths of the entire wealth of the United States; land, houses, improvements, goods, chattels, personal property of every kind.

Everybody knows that this state of things is undesirable. This enormous amount of wealth concentrated in a few hands brings to them no particular pleasure, no additional comforts, certainly does not bring to them anything like proportionate happiness.

Shearman: The Distribution of Wealth, Part I (1887)

The Distribution of Wealth

by Thomas G. Shearman
The Land and Labor Library

Published weekly, by Henry George,
at the office of The Standard, 25 Ann Street, New York  October 22, 1887
printed in The Standard, October 8, 15 and 22, 1887

Mr. Edward Atkinson is a gentleman of whom I have no disposition to speak in any other terms than those of respect and esteem.  He has done a vast amount of useful work; he is sincerely desirous of promoting the welfare of mankind; he has done much for the dissemination of sound ideas on economic questions, and he is always sincere and earnest.  His weakness is mostly in a too strong conviction of his own infallibility, in the full persuasion that he knows just what needs to be done, how it is to be done and when it must be done, and a consequent peremptory method of disposing of everybody as something very like a fool who does not agree with him upon all these details.  Thus, he has been for many years in favor of free trade, and in former years he strenuously insisted upon the vital importance of reform in that direction.  He has not recanted his opinions; but he has become more interested in other questions, and now he has very little patience with, and indeed, something very like contempt for, men who hold his opinions as to free trade and think that issue more important than the new questions which have recently attracted Mr. Atkinson's mind.

In May last Mr. Atkinson addressed the Boston labor lyceum, ostensibly on the subject of the proposed eight hour law, but really on the question, "How are the profits divided?"  His address, as revised, has but just come into my hands, and it raises some issues which need further consideration and a broader view.  In reviewing its conclusions, it may be as well to accept its statement of facts and statistics without dispute, for it is so evident that Mr. Atkinson has overlooked important elements of the problem, upon his own showing, that it is not worth while to enter into controversy as to the facts or figures.

Mr. Atkinson claims that in $1,100,000 worth of cotton sheeting there is not more than $145,000 profit to capitalists, while $15,000 go in taxes and $940,000 to labor.  He makes no allowance whatever for rent, except perhaps for the rent of the ground upon which the mill stands.  He assumes that 1,400 bales of cotton can be grown upon land which pays no rent and costs nothing to the cotton grower.  Of course he makes no allowance for rent in the cost of supplies, machinery, repairs, freight, etc.  In one place he says that rent does enter into the cost; in another he says that if the landlord is taxed upon his rent he will add the tax to the rent, and so it will enter into the cost; and finally he says that rent amounts to a trifle less than 1% of sales, anyway.  Now the truth is that before this $1,100,000 worth of cotton sheeting can get into the hands of the people there must be paid out of the proceeds rent, or the interest on the cost of the land, which is the same thing, on the land where the cotton is grown, on which the supplies are manufactured, on which the railroad is laid, on which the repairs are done, on which the sheeting mill is situated, on which the great stores where the sheetings are sold stand, and, finally, on which the residences of the 3,400 persons said to be engaged in producing these goods also stand.  All this is plainly stated in Mr. Atkinson's "Distribution of Products."  We will leave Mr. Atkinson to reckon the amount of these items, simply remarking that upon his own estimates the single item of the rent of the stores in which the goods are sold would add $100,000 to their cost, and that, making the most moderate allowance for the rent of the other land used in this work of production, it is obvious that rent alone would far exceed the whole sum Mr. Atkinson has allowed to go to compensation for capital.

In the next place, Mr. Atkinson has fallen, for the moment, into the old idea, long ago exploded by Adam Smith, but still current among unthinking people, that what is spent by the rich in their personal luxuries is as truly employed for the general good as that which is spent in productive enterprise.  He seeks to reduce the $145,000 appropriated by capital by showing that much of this is spent in employing labor.  He might just as well include the whole of it, because even the money which he charges to waste, as spent on champagne, etc., is all paid out for labor of some kind. The true rule is that nothing should be charged to labor except that which is expended usefully and so as to promote reproduction.  A lord who employs a hundred servants to wait upon his idle and useless person, not only wastes the money which he pays to them, but also wastes their time and skill in occupations which neither help him nor them to serve mankind any better than they would have done before.  Every dollar thus spent is devoted to waste, not to useful labor.

Shearman: The Distribution of Wealth, Part II (1887)

THE DISTRIBUTION OF WEALTH
BY THOMAS G. SHEARMAN.

II.

An Irish landlord, writing to the London Times, called particular attention to the fact that, in case all the landlords should be expelled, the whole of Ireland, outside of the large towns, would be left without a single person whose annual income would exceed $1,500. To the wealthy landlord who owns the Times, this appalling fact seems to afford such conclusive proof of the desolation and misery which would follow home rule that he deems it superfluous to add a word of comment. He considers it quite enough to say that no such state of things exists in any civilised country. That it should be eventually brought about in Ireland, he evidently believes, must be considered by every sane man as one of the most frightful disasters which could befall the human race.

I am writing in Germany, the country from which have proceeded the most important additions to the intellectual wealth of the world during the last fifty years. The man who knows nothing of the contributions made to history, to theology, to science, whether abstract or applied, by German students, knows practically nothing at all. What have been the income of the men who have thus enriched the world! Rarely so much as $1,500; generally not half that amount. Some of the world-famous German scholars accomplished their great achievements on an income of less than $600 a year.

New England developed a marvelous degree of intellectual activity in the colonial period of our history, though confined within a narrow circle. But that was a period of small incomes and very little accumulated wealth; nor did the few wealthy men contribute anything of importance to the intellectual or moral development of the people. What have the wealthy Irish landlords done for the development of the Irish people in religion, morality or intellect? What contribution has any wealthy Irish landlord ever made to literature, science, art or high thought of any kind? What benefit have these men of wealth conferred upon any part of the world in any direction? They have just held a solemn meeting to answer these questions, and their own testimony affords the best evidence against them. They claim to have advised their tenants to improve their stock, to introduce better methods of cultivation and to qualify themselves generally to pay higher rents, while they themselves have set excellent examples to their inferiors by taking good care of themselves.

Many years ago a practical joker inserted an advertisement in a daily paper to the following effect: "Wanted, by a young gentleman of good birth and breeding, board in a respectable family, where his Christian example would be considered sufficient compensation for his board." The Irish landlords do not advertise, but they get precisely that for which the young man advertised in vain. Their Christian example, however, has been chiefly directed toward hunting, horse racing and hard drinking. Certainly, down to a period less than fifty years ago, all accounts of Ireland agreed in this; and except that the drinking is conducted with more moderation, there seems no reason to believe that there has been any change.

Shearman: The Distribution of Wealth, Part III (1887)

This, the third and final instalment, appeared in The Standard, October 22, 1887:

THE DISTRIBUTION OF WEALTH.

BY THOMAS G. SHEARMAN.

III

 

Having reached the conclusion that indirect, or as the writer first called it five years ago, "crooked" taxation is certain to produce enormous inequality of wealth, that it is palpably and indisputably unjust, and that it inevitably leads to that worst form of inequality which involves the perpetual ownership of more than half of the wealth of a country by less than the one-hundredth part of its inhabitants, we are prepared to take up the next and final question in our series. 

What can be done to effect a more equal distribution of wealth, without diminishing its production?

Again let us waive the discussion of rent. Having purposely avoided all consideration of that tender subject, we will not take it up just now. Assuming that rent can rightfully be private property, and that the community is not to claim it, simply as rent — conceding all that the champions of private property in land claim — let us inquire what, nevertheless, remains to be done and ought to be done, in order to prevent the unjust use of government to the injury of the poor, and to check the artificial tendency toward the monopoly of wealth by a hundredth part of the population.

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.)

Want Less Inequality? Tax It

Want Less Inequality? Tax It.

Pigou, a key bridge figure in the history of his field, was one of the earliest classical economists to notice that markets do not always produce the best possible social outcomes. The pollution generated by a factory imposes costs on those who live downstream or in the path of its airborne emissions. The risks assumed by banks leading up to the recent financial crisis imposed costs on just about everybody. Market transactions often generate what economists call “externalities” — side effects, sometimes positive but often negative, that affect people who do not participate in the transaction. 

Pigou, having recognized the problem, was the first to propose a solution. Society should tax the negative externalities and subsidize the positive ones. This simple notion — if you want less of something, tax it — is why his ideas periodically bubble up in the service of combating a recognizable cost to society, like pollution. We think that his approach offers an answer to another great problem of our time: inequality.    

Does the extreme degree of inequality in America today really create, as Pigou would put it, negative externalities? Does the fact that hedge-fund manager Mr. Jones rakes in 100 or 1,000 times what office manager Mrs. Smith earns impose costs on everybody else? Plenty of Americans think not. Defenders of our skewed income distribution point out that a free-enterprise system requires some inequality. Unequal rewards give people an incentive to work hard and acquire new skills. They encourage inventors to invent, entrepreneurs to start companies, investors to take risks. It’s fine in this view that some people get astronomically rich. As Mitt Romney likes to say, “I’m not going to apologize for being successful.”  

On the other side, many of us have a gut feeling that inequality has gone too far. Our times are reminiscent of the Gilded Age’s worst excesses. Hence the popularity of the Occupy Wall Street movement’s slogan, “We are the 99 percent.”

LVTfan here: Wouldn't it be better to prevent the inequality by such measures as treating the natural creation as our common treasure, instead of permitting its privatization and then taxing back what is taken?   Treating the natural creation, and that which the community creates by its presence and its investment in public goods -- schools, roads, libraries, etc. -- as our COMMON treasure would create equal opportunity for all, a much better idea than permitting some to capture it and then taxing some of their booty back after the fact.   When we let some reap what others sow, and then take back a share after the fact, we're still permitting them to reap which deprives the sowers of that right.  Whether it be nature doing the sowing, or the community as a whole, no good can come of permitting the privatization of that.  Henry George, in "Progress and Poverty" and "Social Problems" showed the logical, efficient, just way to do better.

Individual Account Retirement Plans: An Analysis of the 2010 Survey of Consumer Finances | EBRI

Note: this has some statistics you might want to know, but it is primarily a post on public policy.

Individual Account Retirement Plans: An Analysis of the 2010 Survey of Consumer Finances | EBRI.

... many Americans are facing the likelihood of not having sufficient income in retirement unless they increase their savings, work longer, or significantly decrease their expenditures in retirement if they hope to make ends meet.

The Employee Benefits Research Institute recently published an analysis of 2010 Survey of Consumer Finances data.  It demonstrates how few people have the traditional defined-benefit retirement plans, and the account balances people of various demographics have in their individually-directed retirement accounts.

Here are some statistics worth considering as we think about the effects of a system which permits a few of us to capture a large share of the nation's net worth and a large share of its income, and to unduly influence our elections with advertising which works to conceal and reinforce the structures of that system:

• 38% of all families -- of all ages -- had a family member with a retirement plan. [Figure 2]
  • of those 38%, 18% had only a defined benefit plan; 61% had only a defined contribution plan; 21% had both.  82% had a 401(k) type plan, and of that 82%, 22% also had a defined benefit plan
  • Among those families whose head was 55-64, 43% had a member with a retirement plan; among those 45-54, 53% did.
  • Interestingly, the top 75% of the net worth spectrum all had rates in the 41% to 46% range; in the bottom 25%, only 21%.
• Among families whose head was under 65 and working, 52% had a member participating in a retirement plan [Figure 3].  
  • Among households with income abov e $100,000, 76% had retirement plans; in the $50,000 to $100,000 income range, 64%; in the lower income groups, the rate ranged from 44% down to 9% 
  • In the 55-64 age group, 59% had a retirement plan; in the 45-54 group, 61%. 
  • Within this working-age universe, similar trends held: the top 50% had roughly 61-67% availability of employment-related retirement plans; for the next 25%, only 53%; for the bottom 25% of working families, only 29%.   
• IRAs and Keogh plans: 28% had one or both; median value, $40,000 (up from $34,574 in 2007). Among those 55-64, 41% had one or both; median value $60,000 (down from $68,101); among those 45-54, 29% had one or both; median value $40,000, up from $37,717. [Figure 5]
  • Even among those in the top 10% of the net worth spectrum, only 77% had IRA or Keogh accounts, median value $200,,000, up from $142,487 in 2007; in the next 15% of the net worth spectrum, median value was $60,000.  
• Of all families, 64% had some sort of retirement account from a current or previous employer (down from 66% in 2007) 
• Retirement assets in Defined Contribution plans and IRAs typically [that is, at the median] represent 61% to 66% of total financial assets, which is to say that most have less in mutual funds, stocks, checking and other accounts than they do in their retirement accounts. [Figure 8]
• Only in the top 10% do retirement assets represent less than half of financial assets.
• As is typical of median/average ratios, average holdings are considerably higher -- that is, the holdings of the top few are huge, and most of us are below average.  The average balance is $173,232; in the top 10% of the net worth spectrum, average balances are $519,034.  For the next 15% of us, the average balance is 147,061 -- well below the average of all of us! [Figure 9]  Recall from Figure 6 that 64% of us have such a plan; the other 36% have no balance at all (and likely a significant percentage have very small account balances).
• For those in the 65-74 age group, the average balance is $324,199; for those in the 55-64 group, the average balance is $297,903.
• For those in the top 10%, average account balance is $519,034.  One might reasonably guess that the top 5% have the lion's share of this.
• It might be worth noting that a 70 year old must withdraw at least 1/27 of his IRA per year.  Based on that 65-74 age group average balance, that's $12,000 per year.  (Another rule of thumb says that if one only withdraws 3% per year, one's account should last forever. That would be $9,725 per year, for that "average" -- not median -- family in the 65-74 age group. 

 Enough said.  Time to circle back to the study's conclusion:

... many Americans are facing the likelihood of not having sufficient income in retirement unless they increase their savings, work longer, or significantly decrease their expenditures in retirement if they hope to make ends meet.

What public policy reforms might one suggest based on these data points?

• Find a way to raise wages for ordinary workers
• Find a way to lower the cost of living for ordinary workers and retirees
• Find a way to reduce the sum of the taxes we pay and the costs of housing without reducing the public goods which those taxes provide (unless it is by reducing the demand for social safety net 

If you have other suggestions, I'd like to hear them.

But the reason for this blog is that I believe I have found the public policy reform which would accomplish these goals, in collecting the lion's share of the annual rental value of our land, and in collecting for the commons certain other kinds of natural public revenue which our current system permits to accrue to individuals and corporations.  I didn't invent it.  Henry George is the clearest exponent of it, but not the first or last.  Is it perfect?  No, but it is vastly superior to what we've got now, and I believe it is consistent with the ideals to which Americans pay the most honor.

Our Daughters and Sons, and Opportunity

As I listen to the rhetoric of the presidential and vice-presidential candidates about equal opportunity for women -- seeking equal opportunities for their daughters and granddaughters as for their sons and grandsons -- it occurs to me that they haven't asked that their sons and daughters have opportunities equal to the sons and grandchildren of Mitt Romney, who apparently share a trust fund currently worth over $100 million.*  Even divided among 5 sons and 18 grandchildren, that's about $4 million per descendant, enough to throw off $90,000 per person per year without diminishing (and without them working -- or even having finished grade school).  And that's before we start to talk about the $100 million IRA they are likely to inherit, which continues to appreciate free of taxes.

The Earth-for-All Calendar contains a number of items which speak to equality of opportunity for all in our current generation, and for all in future generations.  When some of us start life with all the advantages, and others, because of the design of our society's systems, have few or no advantages, how do we continue to maintain the fiction that we believe we are all created equal, that our nation is founded on this proposition and its laws and customs said to conform to and support this proposition? 

The advantages of our wealthiest didn't come out of thin air.  They aren't "no-cost" to the rest of us, and they don't benefit the rest of us by any form of "trickle down."  The trickle flows the other direction. To the extent that our society pretends that this comes out of thin air, we are permitting ourselves to be fooled -- treated as fools, taught by rich people's useful idiots.

And when some of us have the money to devote to promoting points of view that benefit ourselves, at the expense of the common good, to influence elections, where does democracy get us?

 

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.

Chrystia Freeland: Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else

Chrystia Freeland: Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.

Henry George is the most famous American popular economist you've never heard of, a 19th century cross between Michael Lewis, Howard Dean and Ron Paul. Progress and Poverty, George's most important book, sold three million copies and was translated into German, French, Dutch, Swedish, Danish, Spanish, Russian, Hungarian, Hebrew and Mandarin. During his lifetime, George was probably the third best-known American, eclipsed only by Thomas Edison and Mark Twain. He was admired by the foreign luminaries of the age, too -- Leo Tolstoy, Sun-Yat Sen and Albert Einstein, who wrote that "men like Henry George are unfortunately rare. One cannot image a more beautiful combination of intellectual keenness, artistic form and fervent love of justice." George Bernard Shaw described his own thinking about the political economy as a continuation of the ideas of George, whom he had once heard deliver a speech.

Later, she writes,

What George found most mysterious about the economic consequences of the industrial revolution was that its failure to deliver economic prosperity was not uniform -- instead it had created a winner-take-all society: "Some get an infinitely better and easier living, but others find it hard to get a living at all. The 'tramp' comes with the locomotives, and almshouses and prisons are as surely the marks of 'material progress' as are costly dwellings, rich warehouses and magnificent churches. Upon streets lighted with gas and patrolled by uniformed policeman, beggars wait for the passer-by, and in the shadow of college, and library, and museum, are gathering the more hideous Huns and fiercer Vandals of whom Macaulay prophesied."

George's diagnosis was beguilingly simple -- the fruits of innovation weren't widely shared because they were going to the landlords. This was a very American indictment of industrial capitalism: at a time when Marx was responding to Europe's version of progress and poverty with a wholesale denunciation of private property, George was an enthusiastic supporter of industry, free trade and a limited role for government. His culprits were the rentier rich, the landowners who profited hugely from industrialization and urbanization, but did not contribute to it.

George had such tremendous popular appeal because he addressed the obvious inequity of 19th century American capitalism without disavowing capitalism itself. George wasn't trying to build a communist utopia. His campaign promise was to rescue America from the clutches of the robber barons and to return it to "the democracy of Thomas Jefferson." That ideal -- as much Tea Party as Occupy Wall Street -- won support not only among working class voters and their leaders, like Samuel Gompers, but also resonated with many small businessmen. Robert Ingersoll, a Republican orator, attorney and intellectual, was a George supporter. He urged his fellow Republicans to back his man and thereby "show that their sympathies are not given to bankers, corporations and millionaires."

 

 

I commend the entire post, adapted from Freeland's new book, Plutocrats.  It ends with these paragraphs:

"America today urgently needs a 21st century Henry George -- a thinker who embraces the wealth-creating power of capitalism, but squarely faces the inequity of its current manifestation. That kind of thinking is missing on the right, which is still relying on Reagan-era trickle-down economics and hopes complaints about income inequality can be silenced with accusations of class war. But the left isn't doing much better either, preferring nostalgia for the high-wage, medium-skill manufacturing jobs of the post-war era and China-bashing to a serious and original effort to figure out how to make 21st century capitalism work for the middle class.

Globalization and the technology revolution aren't going away -- and thank goodness for that. Industrialization didn't go away either. But between 1886, when George lost the mayoral race, and the presidency of FDR, American progressives invented, fought for and implemented a broad range of new social and political institutions to make capitalism serve the whole of society -- ranging from trust-busting, to the income tax, to the welfare state.

We are living in an era of comparably tumultuous economic change. The great challenge of our time is to devise the new social and political institutions we need to make the new economy work for everyone. So far, that is a historic task neither party is taking on with enough energy, honesty or originality."

Those looking for a starting point might look for Walt Rybeck's book, Re-Solving the Economic Puzzle.

Along the same lines, you might find interesting an earlier post here, an article by Thomas Shearman entitled "Henry George's Mistakes."  (He was a co-founder of Shearman & Sterling, and went on to write some excellent articles on plutocracy in The Standard, October, 1887.)

Who Are the Job Creators?

There has been a lot of political rhetoric lately centered around the "Job Creators," and what we can do to encourage them to create jobs (in America).  Most of it seems to be centered around (1) creating some sort of "certainty" for them regarding what sorts of taxes they might be expected to pay if the jobs they deign to create are successful in increasing their profits; and (2) lifting the supposedly onerous regulations we put on them regarding product safety, environmental protection, and perhaps royalties on what they withdraw from the earth's supply of non-renewable natural resources and other services they receive from our common ecosystem.

I contend that those who frame it this way are leading us astray. 

First, the jobs that the so-called Job Creators actually create occur when (a) they want more personal services -- haircuts, manicures, acupuncture, botox, dry cleaning, catering; (b) they want more goods -- dinners out, boats, cars, swimming pools, airplanes, motorcycles, jewelry, wardrobe, fancy foods, alcohol, tobacco, etc.; (c) when they decide to build or rebuild a home, and furnish it.   

The real job creators are those whose demand for products and services create jobs.  A few percent of us have sufficient current income -- or sufficient wealth to draw on -- that it is fair to say that virtually all of their needs and many of their wants are being met.  But the vast majority of us have unmet needs and certainly more wants.  And I think it is fair to say that while it is human nature to want something for nothing, and that all of us want to meet our needs and wants with the least possible effort, it is also true that virtually all of us are willing to work, to serve others with products and services, in return for wages, be they from a single employer or a collection of customers.

So what's the problem?  Why can't this supply of labor get together with this demand for labor, to the general benefit of our entire society?

I can point to several problems.

First, much of the nation's capital is in the portfolios of a very small proportion of our society, and that process of concentration shows no signs of slowing down, much less reversing.  (Not surprising, since we've done nothing to correct the structural causes which produce it!)  Joe Stiglitz has said that the FIRE sector is harvesting something like 40% of the profits of the productive sectors of the economy.  This cannot be permitted to continue if we seek to create prosperity for all.

Second, ownership of America's choicest sites -- mostly in the central business districts of our biggest  cities, but also in some of the scenic coastal areas and the suburbs surrounding those cities -- is in the portfolios of a very small proportion of our society (as well as in portfolios of foreign landlords).  This may not appear to some to be a problem, but I assert that it is -- and a big one.  (The good news is that it is readily fixable.)    An acre of Manhattan land can be worth $250 million or more, while an acre of good farm land might be worth $5,000 -- a difference of 50,000 times!  That is, 50,000 acres of farmland might be worth the same amount as a single acre of Manhattan land!!)   A single 25x100 residential building lot in Manhattan -- 0.058 acre -- can be worth $10 million ... that works out to $172 million per acre.

Third, we tax labor income -- wages -- to fund federal and state spending.  We tax the first $105,000 or so of wages at 15% or so to fund Social Security and Medicare (that includes both the employee's and the employer's contribution, as economists agree is appropriate).  After exempting some amount of income in proportion to family size ($15,200 for a family of 4) and some additional for a standard deduction ($11,900 for married filing jointly) or some combination of itemized deductions (which go mostly to high-end urban/suburban homeowners in northeastern states, with big mortgages and significant property taxes, and California owners, with big mortgages and more modest property taxes), the Federal Income Tax taxes the next dollar of wages at 10%, and the rate rises to 15%, 25% 28%, and, for a tiny but noisy minority of us (adjusted income over $217,450 after exemptions and deductions, for married filing jointly -- which Romney calls the middle class), to 33% and 35% on the marginal dollars (not on all of one's income). But 86% of us pay more in payroll taxes than we do in federal income taxes, when the employer's portion is taken into account. [source:  http://www.cbo.gov/publication/43373, table 8.]  It is worth noting that 15% [social insurance] plus 10%, the federal tax rate on the first dollar after deductions and exemptions, is 25%, but that for those whose household income is well above the $105,000 cut-cutoff, the 35% bracket is not all that much higher than what comes out of the pockets of the low-income worker.

So 25% to 35% of the portion of our wages beyond that allowance for some basic expenses, are being taken to fund federal spending, and in most states, more for state spending.

The federal spending, and much of the state spending, goes to projects whose effect is to increase local land values in specific places -- infrastructure, public goods of various kinds.  Oddly, we fund it via taxes on wages!  Wouldn't we be wiser to fund it via taxes which fall on those land values, which are so concentrated into a relative few pockets -- pockets which are currently not asked to contribute much, but receive so much from those who need to occupy those choice urban sites.   I do not begrudge the owner of a luxury building the right to keep the portions of the rent he receives which can be attributed to (a) the qualities of the building itself and (b) the services he as landlord provides, but much of that rent is attributable to neither of those factors; rather, it is a function of .... (all together, now) Location, Location, Location, and value which is created by the community, not by that landlord!

Fourth, most of us of working age, and particularly our young people, are paying at least 30% of our income for housing, and many, many people are paying a far larger portion of their income. On top of that, many have student loans, car loans, and perhaps credit card debt, and live paycheck to paycheck.  Many young people who bought a home during the 2002 to 2010 period are upside down on their mortgages, owing the lender more than they could sell the property for, and are thus effectively trapped in those homes until prices rise or someone does something to renegotiate their mortgage, or they win big in the Lottery.  Thus they cannot move to meet their families' changing needs, or leave the area to accept a job in another part of the country.   

So what does this have to do with Job Creation?  Well, if those of us who don't live on the really choice bits of urban or coastal land were relieved of some portion of their tax burden, including the 15% that goes for social insurance, we'd have more to spend on satisfying our other needs and wants, and virtually all of that would create jobs.  Here, in the U. S.  

A Right-to-Life Platform -- 125 years old

As I listen to the 2012 party platforms, I am reminded of what they ought to be focused on, embodied pretty well in this platform from 1886-87. 

PLATFORM OF THE UNITED PARTY.
Adopted at Syracuse August 19, 1887.

We, the delegates of the united labor party of New York, in state convention assembled, hereby reassert, as the fundamental platform of the party, and the basis on which we ask the co-operation of citizens of other states, the following declaration or principles adopted on September 23, 1886, by the convention of trade and labor associations of the city of New York, that resulted in the formation of the united labor party.   

"Holding that the corruptions of government and the impoverishment of labor result from neglect of the self-evident truths proclaimed by the founders of this republic that all men are created equal and are endowed by their Creator with unalienable rights, we aim at the abolition of a system which compels men to pay their fellow creatures for the use of God’s gifts to all, and permits monopolizers to deprive labor of natural opportunities for employment, thus filling the land with tramps and paupers and bringing about an unnatural competition which tends to reduce wages to starvation rates and to make the wealth producer the industrial slave of those who grow rich by his toil.

'“Holding, moreover, that the advantages arising from social growth and improvement belong to society at large, we aim at the abolition of the system which makes such beneficent inventions as the railroad and telegraph a means for the oppression of the people and the aggrandizement of an aristocracy of wealth and power. We declare the true purpose of government to be the maintenance of that sacred right of property which gives to every one opportunity to employ his labor, and security that he shall enjoy its fruits; to prevent the strong from oppressing the weak, and the unscrupulous from robbing the honest; and to do for the equal benefit of all such things as can be better done by organized society than by individuals; and we aim at the abolition of all laws which give to any class of citizens advantages, either judicial, financial, industrial or political, that are not equally shared by all others."

We call upon all who seek the emancipation of labor, and who would make the American union and its component states democratic commonwealths of really free and independent citizens, to ignore all minor differences and join with us in organizing a great national party on this broad platform of natural rights and equal justice. We do not aim at securing any forced equality in the distribution of wealth. We do not propose that the state shall attempt to control production, conduct distribution, or in any wise interfere with the freedom of the individual to use his labor or capital in any way that may seem proper to him and that will not interfere with the equal rights of others. Nor do we propose that the state shall take possession of land and either work it or rent it out. What we propose is not the disturbing of any man in his holding or title, but by abolishing all taxes on industry or its products, to leave to the producer the full fruits of his exertion and by the taxation of land values, exclusive or improvements, to devote to the common use and benefit those values, which, arising not from the exertion of the individual, but from the growth of society, belong justly to the community as a whole. This increased taxation of land, not according to its area, but according to its value, must, while relieving the working farmer and small homestead owner of the undue burdens now imposed upon them, make it unprofitable to hold land for speculation, and thus throw open abundant opportunities for the employment of labor and the building up of homes.

While thus simplifying government by doing away with the horde of officials required by the present system of taxation and with its incentives to fraud and corruption, we would further promote the common weal and further secure the equal rights of all, by placing under public control such agencies as are in their nature monopolies: We would have our municipalities supply their inhabitants with water, light and heat; we would have the general government issue all money, without the intervention of banks; we would add a postal telegraph system and postal savings banks to the postal service, and would assume public control and ownership of those iron roads which have become the highways of modern commerce.

While declaring the foregoing to be the fundamental principles and aims of the united labor party, and while conscious that no reform can give effectual and permanent relief to labor that does not involve the legal recognition of equal rights, to natural opportunities, we nevertheless, as measures of relief from some of the evil effects of ignoring those rights, favor such legislation as may tend to reduce the hours of labor, to prevent the employment of children of tender years, to avoid the competition of convict labor with honest industry, to secure the sanitary inspection of tenements, factories and mines, and to put an end to the abuse of conspiracy laws.

We desire also to so simplify the procedure of our courts and diminish the expense of legal proceedings, that the poor may be placed on an equality with the rich and the long delays winch now result in scandalous miscarriages of justice may be prevented.

And since the ballot is the only means by which in our Republic the redress of political and social grievances is to besought, we especially and emphatically declare for the adoption of what is known as the “Australian system of voting,” an order that the effectual secrecy of the ballot and the relief of candidates for public office from the heavy expenses now imposed upon them, may prevent bribery and intimidation, do away with practical discriminations in favor of the rich and unscrupulous, and lessen the pernicious influence of money in politics.

In support or these aims we solicit the co-operation of all patriotic citizens who, sick of the degradation of politics, desire by constitutional methods to establish justice, to preserve liberty, to extend the spirit of fraternity, and to elevate humanity.

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

 

A thought for an election year, from 1887

As it was, so it will be! Labor must hold its own, must organize, must expect discouragement, disappointment, treachery. It will only be felt in politics when it educates the influences without which ''practical politics" would pass away. The remedy is in the hands of the voter. He can close the ruin shop and the gambling hell when he pleases. He can clean the streets, give the city pure water, compel railway and other corporations to serve the people instead of striving to own them, and make Gouldism impossible; have judges on the bench whose election means something more than a large assessment. But it cannot be done by listening to the blandishments of professional politicians. Make it a disgrace to be a professional politician; an honor to be a politician of the Jefferson era, when office sought the man, not the man the office; when the hustings was a tribune, not the shambles. Then we can see what can be done in council with our brethren of all parties to advance the people's welfare.

This paragraph is in the second issue of the weekly newspaper The Standard, on the editorial page.  It came in January, 1887, in the aftermath of the November, 1886, New York mayoral election.  Substitute for "Labor" "ordinary people," if you like.

The Earth-for-All Calendar: July 9 -- anonymous -- Chants of Labor

From the sweat of their brows the desert blooms,
    And the forest before them falls;
Their labor has builded humble homes,
    And cities with lofty halls.
And the one owns cities and houses and lands,
And the ninety and nine have empty hands.

There are ninety and nine that work and die
    In want and hunger and cold,
That one may live in luxury
    And be lapped in the silken fold!
And ninety and nine in their hovels bare
And one in a palace of riches rare.

— Anonymous, There are Ninety and Nine, Chants of Labor, p.11 (From the Boston Globe.)

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.)

Florence A. Burleigh: Who Are the Anarchists? (1902)

Another article from the author of the "Property Rights" article below.  It is in the same (1902) volume of The Railroad Trainman.

Who Are the Anarchists?
Florence A. Burleigh
1902
The Railroad Trainman

According to the popular idea and the ordinary daily paper, an anarchist is a person who goes about the world with a bomb hidden in each pocket and a pistol in his hand, seeking whom he may devour.  By the same warrant anarchism is a synonym for murder or assassination.  Especially during these last few months has the subject of anarchism been discussed more or less hysterically by all kinds of people and in all kinds of periodicals.  It is well, therefore, to look at the subject calmly, and without prejudice, in order that we may fully understand what real anarchism is, what its upholders hope, or wish to do, and also ask, incidentally, if the real anarchists are in the anarchist camp.

Let me state at the outset that I do not believe that any school of anarchism will ever be possible, even if it were just. No anarchist has ever, to my knowledge, talked for any length of time without admitting the necessity among citizens of some kind of a settlement of questions relating to public policy, even though they don't call it government. No anarchist has ever, to my knowledge, proposed any solution of the land question that did not involve injustice. I, therefore, am not writing from the standpoint of a supporter of the much-maligned anarchism, but from the standpoint of one who likes fair play and a clear understanding of a proposed system of social life which must be reckoned with. Let me say, also, that I number among my acquaintances and friends several avowed anarchists who are conscientious, kind, peace-loving and' thoroughly good citizens — men and women who would, and do, sacrifice much of their own comfort and convenience to help their fellowmen, who deprecate as much as any one possibly can such a deed as the killing of any human being.

That there are anarchists who have used this cowardly, as well as useless way of attempting to abolish government, is true, but that all the advice to murder or all the deeds of murder are done by anarchists is not true.

Many people who are not anarchists advocate the killing of certain classes of people, and to class all anarchists as assassins or instigators of assassination, is as unjust as it is untrue. The unpopular anarchists are usually poor and of a "lower class" of society, and are therefore under the ban whatever they do. The popular anarchists sit in high places and are respected citizens, using the word anarchist in its popular meaning as one who acts contrary to existing laws and not in its strictly correct sense, meaning one who believes in no government. For an anarchist is really one who holds that when all barriers are removed and every one is free to do what seems to him right he will not wish to do harm to any human being; that absolute freedom brings with it the possibility for every one to be kind and just to his fellowmen and that as government to a greater or less degree limits the freedom of the individual it must be unjust in the nature of the case and that it is also unnecessary, as human nature is ever good when let alone.

There are doubtless anarchists who say — as they believe — that a social revolution is coming in this country; a revolution which may or may not be bloody; that it will be brought on by the continued injustice of those in power, and that force will be used by the plutocrats — a belief that is not dissipated by the building and enlarging of armories and militia and such affairs as that at Latimer — and, therefore, the oppressed must be ready to use force in return. But even those who say this advise force only for self-defence. But the belief in a coming revolution is not confined to anarchists, but is shared by men and women of other economic schools, and does not necessarily imply in either case that the revolution will come in any other way than as a natural result of causes. Society is indeed on a wrong basis, and it seems as though nothing but a miracle could save it from a revolution which we pray may be a peaceful one. Men and women of a despised or down-trodden race, or class, are sometimes arrested and punished for acts which are entirely harmless, while those in high places may act entirely in opposition to both statute and moral law and still be looked up to.

A few months ago a poor, deluded, ignorant fellow took the most sacred thing in the world — a human life. What might have been his motive, or whose life it was, is for the moment not essential. Suffice it to say he killed a brother man and gave as an excuse that the deed was done because of a speech he had recently heard from a noted anarchist, which speech had been also heard by a vigilant police and not considered "inflammatory." But immediately after the deed was done there were cries from all classes of people, including followers of the Great Teacher, not only demanding that he be lynched on the spot, and in other ways trying to "stamp out anarchy by anarchy," but calling for dire punishment to be meted out to the woman who had delivered the lecture in question and who was hunted out and imprisoned for a time. The man had committed a crime and was punished according to law, but the woman had committed no crime, yet was threatened with violence from those who professed the highest respect for law. Both of these people belonged to an unpopular class. I am not excusing murder, or even apologizing for it; murder in all its forms, whether done by an ignorant, crazy man, or any one else, whether the murdered be one man or a thousand men, whether done in passion or in battle, Is a terrible crime. I only wish to call attention to the fact that all the defying of law and morals is not confined to the class called anarchists.

At the same time that this tragedy was enacting, Judges were issuing illegal injunctions; negroes were being burned at the stake for crimes which there was no proof they had committed — but their lynchers were "respectable" men — trust companies were evading the laws, and city, state and national officials were breaking laws with impunity.

These examples are given merely to show that in public opinion what is legal and what is not, or what is "anarchy," or what is not, depends upon the person and not the deed. No wonder justice is represented with blinded eyes — to shut out the crimes committed in her name. I do not wish to excuse wrong-doing of any kind, but only to point out the growth of class feeling in this country; the lapse from the fundamental principles of equality upon which our fore-fathers prided themselves.

Rev. John R. Crosser said recently: "I am not afraid that the anarchy on Carroll avenue will ever destroy our institutions. It is too black and ugly. The anarchy to be found on the boulevards is the most dangerous, the anarchy which buys a legislature. Anarchy cannot be put down with laws. We can learn nothing from European countries in this regard, except what not to do. We must be careful not to go too far In annihilating the class of anarchists found on Carroll avenue, lest we injure many others who really have the best Interests of our country at heart."

It is not anarchy, then, which some people are trying to stamp out, but the claim of the oppressed, even though rudely expressed, and roughly comprehended, for equal rights. The only governments which many people know about are those which oppress certain classes and give special privileges to others. The way to "stamp out anarchy" is not to pass stringent laws against allowing anarchists to come to this country or to suppress meetings at which anarchism may be discussed. It is only by discussion that we learn the truth. The way to "stamp out anarchy" is to repeal all laws granting special privileges and to accord equal justice to all men.

Anarchy, whether it be among the avowed anarchists or those who sit in legislatures, or wear broadcloth bought with the lives and sufferings of their fellowmen, can be abolished only by equal freedom and equal justice. No suppression of free speech or laws against the coming to this country of anarchists will ever avail except to increase the number and zeal of those of whom the government would be rid.

But, it may be said: "'Inflammatory speeches' cannot be allowed because as a result someone with a weak mind may be influenced thereby to commit some crime." Is not the reason deeper than that? The spirit of war — of killing — is rampant all over the country. Even Christian ministers advocate killing — not of one man, but of many, when they counsel war and rejoice when the newspapers announce, the murder by their sons and friends of their fellowmen who live in far away Islands.

Louis F. Post says in The Public: "The gospel of strenuous life has been preached from high places. Its ideal was war. This was welcomed for its own sake, as inspiring robust ambitions and giving strength to character. War was described as making heroes, and peace milksops. Throughout this strenuous life there ran rivulets of human blood, and over it there hung the heavy shadow of wholesale murder. It was to be the middle age tournament come again, but with slaughter enough to have turned the stomach of your middle age knight. And in this sanguinary spirit an imperial destiny was working out. The first republic of Asia had been strangled in infancy by the first republic of America. * * * The American republic, turning its back upon its ideals of liberty and peace, was exchanging the substance of world influence for the reputation of world power. * * * In the common mind a spirit of anarchy was being generated in the name and by the methods of the strenuous life."

The official reports state that 100,000 people go insane annually in Italy from hunger, and many are on the verge of starvation all their lives. Italy is creating anarchists by her unjust laws and nothing but a change of laws giving her people a chance to earn a living and to be free will "stamp out anarchy" there. In our own country over 90% of the people possess about 25% of the wealth, leaving the other 75% of wealth for only 10% of the people. Is it any wonder that anarchy is growing among this 90%? It is unnecessary to say that this 10% will do everything in their power to retain possession of their "property," which means, rather, their privilege to tax the other 90%. They will stop at nothing, for they know the power of the masses should they ever realize how great it is and what is the cause of their condition.

We have, then, three classes of anarchists;

• first, the poor, despised ones who are preyed upon and hunted down and imprisoned on the least provocation:
• second, the rich, respected ones who would indignantly repel the name anarchist, but who prey upon the first kind and make them what they are; who continually oppress them legally and illegally and who hold over them the whip of starvation;
• the third class is composed of intelligent, conscientious, peaceful men and women who believe that in the absence of statute law people will not only not wish to injure their fellowmen but will do all they can to assist them; who are opposed to all kinds of violence and are willing and expect to wait for their "good time coming" a long time. No one deprecates more than these people the killing of any human being, whether he be king, president or one of the plain people. They hold human life to be the most sacred thing in the world, unless it be human freedom.

Which of these classes is the dangerous one?

Michael Kinsley: Inequality is even worse than everyone thought | iPolitics

Inequality is even worse than everyone thought | iPolitics.

Posted on Sat, Jun 16, 2012, 9:31 am by Michael Kinsley

The current debate about rich and poor — the 1 percent versus the 99 percent — is a bit misleading because the evidence usually is data about income, not wealth. Looking at wealth would make the comparison even starker.

There are some nice deals to be had in the income tax code these days, but most wealth accumulates and passes from generation to generation with no tax at all. Warren Buffett (who has selflessly taken on the role of all-purpose tape measure in these matters) is worth $45 billion or so. Do you think that all of that $45 billion, or even most of it, has appeared on any Form 1040 on its way to the cookie jar? Even at the special, low 15 percent rate the U.S. insanely confers on capital gains?

Unlikely. Much of that $45 billion is unrealized capital gains — increases in the value of Buffett’s stock that have never been cashed in, and therefore have never been taxed. I’m not saying that unrealized capital gains should be taxed (although it’s a thought). I’m just noting that you only pay income tax when an investment is liquidated, and very wealthy people don’t have to liquidate until they actually need to spend the money.

For most of the very rich, this time is never. When you die, any unrealized capital gains disappear for tax purposes. Your heirs, if and when they sell, pay taxes only on any increase in value since they got the money. And there is no estate tax at the moment on estates of $5.12 million or less.

Really Skewed

The Federal Reserve released new numbers on Monday. Unsurprisingly, wealth distribution is even more skewed than income distribution. In 2010, the median family had assets (including their house but subtracting their mortgage) of $77,300. The top 10 percent had almost $1.2 million, or more than 15 times as much.

But the headlines — and rightly so — went to the dismal fact that household wealth has been sinking for all categories of Americans. As I said, the net worth of the median family in 2010 was $77,300. In 2007, the net worth of the median family was $126,400. That’s a drop of almost 40 percent in just three years. (All these numbers are corrected for inflation.)

Characteristically taking the longer view, the New York Times led with the fact that household savings were back to where they had been in the early 1990s, “erasing almost two decades of accumulated prosperity.”

Most of the lost household net worth of recent years is due to the drop in housing prices. This is comforting, in a way, because the price of land and things built on land — and what, ultimately, is not? — are different from the price of other goods and services.

Let me tell you about my favorite economist, an indulgence I allow myself every couple of decades. (The last time was 1989, pre-hyperlink, unfortunately.) He was an American named Henry George, who died in 1897 at the age of 58. If you took economics in college, there might have been one sentence about him in your textbook. He once ran for mayor of New York. (Fancy that. He lost.)

George would look at our present situation and ask: In what sense were we richer three or four years ago, when the exact same housing stock sold for up to twice as much? In what sense are we poorer now? Land is special because, as Realtors like to remind us, they aren’t making any more of it. This means that you can get rich owning land without doing anything productive with it.

(Henry George: “You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground. …”) The natural increase in population will do the trick.

Tuna Fish

This is also true, to varying degrees, of other investments. It is true to some extent of any product that can’t be easily and quickly reproduced. It is somewhat true of houses, once they are built. (As Tolstoy didn’t write, “Cans of tuna fish are all alike, but every house is a house in its own way.”) But it is especially true of land.

My Bloomberg View colleague Clive Crook claimed recently to be a “supply-side liberal.” So was Henry George. He was as concerned about income equality as the most bleeding-heart liberal and as concerned about economic growth as the noisiest supply-side conservative.

George’s solution to everything was to eliminate all taxes on working, saving and investing, and to put the entire tax burden on unproductive land, which can’t escape the tax by moving. There are problems with this idea. But it’s provocative.

I don’t have room to do George justice, but take a look at his masterwork, “Progress and Poverty.” For an economics tract, it’s actually a fun read. And, yes, you’re responsible for it on the final exam.

(Michael Kinsley is a Bloomberg View columnist. The opinions expressed are his own.)

The Earth-for-All Calendar: June 13 -- Paine and Marmontel

Landed monopoly has dispossessed more than half the inhabitants of every nation of their natural inheritance.

— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 331.

In the country the more rich people there are, the less wealth there is.

— MARMONTEL, Address in Favor of the Peasants of the North (1757), Oeuvres, Vol. X., p. 70.

Goldsmith, a supplement to the "Earth for All" collection

"One only master grasps the whole domain,
And half a tillage stints thy smiling plain.

*   *   *   *   *   *

Ill fares the land to hastening ills a prey:
Where wealth accumulates and men decay:
Princes or lords may flourish or may fade;
A breath can make them as a breath has made;
But a bold peasantry, their country's pride,
When once destroy'd can never be supply'd.

*   *   *   *   *   *

A time there was ere England's griefs began;
When every rood of ground maintained its man;
But times are alter'd, trade's unfeeling train
Usurp the land, and dispossess the swain."

Goldsmith: The Deserted Village

Other excerpts from this poem appear in Crosby's Calendar, but this one does not.  I hereby add it!

Free Trade, Free Land and Free Men (1888 Brooklyn Eagle Article)

The Brooklyn Eagle, October 24, 1888, page 1

FOR SINGLE TAX
Henry George Men Hold a Mass Meeting at the Rink.
Cleveland's Name Enthusiastically Cheered.
Addresses by the Author of "Progress and Poverty," by Hon. Thomas G. Shearman, Rev. Hugh O. Pentecost, Louis F. Post and Others.

Another great audience gathered at the Clermont Avenue Rink last night to hear the discussion of political issues. It filled every seat in the big hall, crowded the platform and the galleries, choked the entrances and formed a dark dado around the sides of the room wherever standing place was available. It was the single tax men's night to own the speakers' platform, and the key to all that was said was conveyed in plain words above the speakers' desk: "Free Trade, Free Land, Free Men." The audience was not only large, but it was wide awake. It enjoyed the brass band and it listened attentively to every word of the single tax orators and cheered vociferously in the right places to show that a large proportion of the crowd was in sympathy with the sentiment expressed above the speaker's head.  It had a habit of hissing, too, and whenever Mr. Blame, Mr. Andrew Carnegie or the Tory Government of England was mentioned it practiced this habit. The meeting was of citizens who favor the election of Cleveland and Thurman, and though less was said on this subject than on "Free Trade, Free Land and Free Men," the occasional mention of Mr. Cleveland's name left no doubt as to the sentiment of the vast assemblage regarding his candidacy. They cheered for him uproariously, spontaneously and untiringly. The slightest allusion to him called forth a, wild outbreak.

C. T. Christensen had agreed to preside at the meeting, but was called out of town at the last moment, and Thomas G. Shearman, who was booked as one of the speakers of the evening, acted as chairman. Beside him on the platform sat Henry George, the Rev. Hugh O. Pentecost, Louis F. Post, James Hickling and others of the shining lights of the Single Tax legions. Mr. Shearman called the meeting to order and said:

While we hope and trust that in this audience there are many Protectionists, that both sides of this great question are represented here, we wish it understood that on this platform we stand for no half way politics, no semi Protection, no false pretenses, no evasions. We are absolutely for Free Trade [applause] as we are for free land and for free men. In the old time of slavery the master would give everything to his slave rather than Free Trade. He would give him free whisky as the Republicans would give tree whisky to the white slaves of today. Slavery was a system of "Protection" to the inferior workman. The slave was protected in the liberty to work for his employer. The Irish people have had Protection. Within the last hundred years 80 statutes have been passed by a British Tory Parliament, composed mostly of Protectionists, furnishing "Protection" to Ireland, the very statute under which Dill on was imprisoned in an Irish jail without the privilege of a trial by jury or by any decent Judge was a "Protection" law.  The Tory Parliament gave it the name Protection.  But Irishmen called it Coercion. Mezeroffs paper, that preaches the assassination of innocent women and children, is being circulated by the First Ward Republicans, because of its advocacy of Protection. He should advocate this American system of Tariff, for it is simply coercion. Protection coerces the American workingman into assisting the development of monopolists and Trusts. It puts coercion upon him and upon American industry. It fosters no industry. It murders industry. What does a Tariff do? Can any one look me in the face and say it assures him better pay for his toil? It is simply coercion to prohibit you from carrying on an industry that brings you into relations with other nations. What does the Government do when it puts a "Protective" Tariff on coal?  It says, You shall get no more coal for your labor than Mr. Elkins, Mr. Maine and the other coal monopolists shall allow you to have. The land owners of this country, those who have been sharp enough to get possession of the richly productive mining tracts, grind the manufacturers that grind you. You must first get $100,000 to put into a mine or manufactory to be protected under this American system. We are for Free Trade because it means the highest wages: because the history of this country shows that with every advance of the Tariff there has been a depression of wages. What stuff is talked to you about the importation of foreign goods throwing out of employment American workmen. The Protectionists shout that increased importations will drive out the gold of the country. There never was enough gold in this country to pay for a single year's importations. All the gold in the world would not buy the goods that have come across the ocean to this country in the last ten years. So what can't be done, in spite of the tearful arguments of Protectionists, won 't be done. In the last 27 years, since our Protective Tariff began, more gold has gone out of this country than during the years of '46 and '47, when we had Free Trade. When the Tariff reached its highest point the greatest amount of gold went out. The export of gold is merely a mercantile transaction. The other charge is that Free Trade will throw the American workman out of employment. If you could import $7,000,000,000 instead of $700,000,000 worth of goods the call for American labor would advance ten times what it is now. Why are Brooklyn and New York great manufacturing cities? Why are we more successful than Chicago or St. Louis? They have markets on both sides of the ocean, while by our system of Protection we are cut off from one side, it is because we, from our location, can get more readily material from across the ocean. If the mad scheme of the Protectionists could be carried out to shut out entirely this foreign material, and compel us to rely on our home production, what a blight would fall upon this city. Sweep away this Protection system and we would have all this foreign material brought in to work up, and would have two markets instead of one. Yet you will go on in one way or another "protecting." You might have liberty, freedom of trade and of commerce, and double the manufacturing business of those cities. You hear of the revenue reformer being converted into a Free Trader; of the moderate Protectionist into a revenue reformer, but in this campaign you read of no Free Trader being converted to Protection. Every gain the Republican party has made from the Democratic ranks has been of those men who opposed the freeing of the slave.

After the cheering had died away Mr. Post stepped forward upon the platform and amid renewed applause walked back and forth triumphantly. "Last night," he said , "Mr. McKinley stood upon this platform." [Laughter, applause and hisses.] Then an enthusiastic Republican got up and shouted "Three cheers for McKinley." In the confusion the crowd thought that he was yelling for Post and followed his lead with a will.  Mr. Post continued:

I am glad to hear that demonstration for, in the first place, it shows that we have people here to convert, and in the second, because it is due him from Protectionists as the best representative of Chinese polities in the country. [Long continued cheers.] He says that the Tariff is not a tax, that it is paid by the man who sends his goods to this country to sell. The Tariff on firecrackers is 100%. I want Mr. McKinley to explain how much the Chinaman makes on his fireworks after he has paid that tax. Our Chinaman says we are absolute Free Traders. It is true there is no 7% about us. We are with the Democratic party because we get that little reduction from them, which is better than nothing and a step in the right direction. If we are to have trade, why should we not have it free. We have Free Trade all over the United States. In fact, here is the only example of absolute Free Trade in the whole world. I have a horse that I want to exchange for two mules. I can take him to New York, to Pennsylvania or New Jersey and make whatever terms I am able. It is only when a policeman comes alone and says I can't trade that I get Protection. If I desire to trade with a Canadian not only must I give him one horse for his mules, but I must give the Government another. What do they want of that other horse? They want to put him in the Treasury vaults or else compel me to go over into Pennsylvania and sell to someone, Carnegie for instance, who demands a horse and three-quarters for a couple of mules. [Laughter and applause.] But this man doesn't want the extra three-quarters to divide among his men who raise mules, unless they are organized and strong enough to make him. The employer always gets the bonus, and divides with his employes — when he thinks best. Workingmen are getting sick of being fooled about this notion that the Tariff gives them higher wages. Some, however, are afraid that shops will be closed and that foreign goods will run us out of the market. How can we buy foreign goods unless we have our own goods to exchange for them. This shop closing story is another great fraud. The truth is the monopolists have a soft thing, and they are going to hold on to it. That is what makes me think of a story. A darky was working at $5 a week for a Protectionist boss. One day he was in great trouble, for he had a dream. He told his employer, that he was dead and had gone to hell. "Well, that's a bad place," was the answer. "Did you see anyone there you knew?'' "Oh yes, lots of them." "Did you see any Protectionists?" "Yes, I did, and every one held a $5 darky between himself and the fire to keep off the heat." Nor do Protectionists like to let go their victims in this world. Every day we buy the necessities of life from whomsoever we please. We give for them the product of our labor, or its equivalent. We don 't want Protection in this trade. We had absolute Protection from outsiders when the Republican blizzard of last March came along and I for one didn't like it. About 3000 years ago the children of Israel were going through the wilderness. God sent quails to them from Heaven. It was all import and no export and almost everybody liked it. Finally Aaron went to Moses and said: "This invasion of quails ought to be stopped. I have an infant industry that must be protected. In short, I have started a little poultry yard." It was no use to put on an ad valorem duty of 100%, as suggested, because the quails had no money value, so it was determined to put on a specific duty of $5 a dozen. I don't wonder that you doubt this story and believe the incidents never happened. Well, the story is not true. Do you know why? Because Moses and Aaron led "the children of Israel through the wilderness, and not Blaine, Harrison or Carnegie. Whenever you tax a product of labor you make that commodity harder to get, but the more you tax land the cheaper it becomes. It is only by abolishing the tax on labor and coming down to a single land tax basis that we accomplish our great purpose. We shall then have cheap goods, cheap land, high wages and free men, for they all go together.

When Henry George rose to speak he was greeted with a thunder roll of applause. When it stopped for want of breath someone who had saved his lungs shouted lustily, "Three cheers for Henry George." They were given. "Three cheers for the 68,000" were called for, but failed, because the great single tax advocate had begun to speak. Mr. George said:

The gentleman says "Three cheers for the 68,000." He means the men who voted for me two years ago when I ran for Mayor of New York City.  I ran as a candidate then for the purpose of introducing into our politics a principle. I ran because I believe it is only by political action and through political action that the emancipation of labor can be secured. For the very same reason that I was a candidate two years ago, from my belief in and my love for these same principles, I stand here to advocate the election of Grover Cleveland.

At the mention of the President's name there was a great roar of applause, beginning not gradually, but at its full volume, the instant the speaker had spoken the name. The cheering continued for more than a minute. Mr. George then continued:

I told you then that we needed the formation of no new party, but the revival of that party of the people which Thomas Jefferson called Republican and Andrew Jackson called Democrat, that party of equal rights that represents the true idea of a government for the people by the people. I never dreamed two years ago that I would now be standing here advocating the election of a Democratic candidate. I had not the confidence in the party that would allow me to believe that they could have given me the opportunity I now possess. Thanks to Grover Cleveland the Democratic party in this national contest again has raised the standard of Jeffersonian Democracy, timidly, it is true, falteringly. Only a 7% move. But we hail it as a beginning. We are for that 7%. Not for that alone, but because we know this movement, once started, can never be stopped. I trust my friend, the previous speaker, will live long enough to see the full consummation of his wishes. If he lives to three score years and ten I have faith by that time we will have swept all Tariff away. I have faith in that because I have faith in the American people. A fair discussion will bring death to Protection. The American people are nobody's fool. Protection is repugnant to the genius of American institutions. It existed in Europe before it was borrowed by us. It is an old scheme of monarchy and aristocracy. Free Trade is as much a right of the people as free speech. Protection should indeed be called coercion. We don't want Protection. The American idea is that each should support the church that pleases him best. No state church. Apply this to trade. Why should not those who believe in Protection take up a voluntary subscription for the infant industries? That would leave us all free men. Mr. McKinley said in this hall, so I am told, that Protection does not raise prices. If that is true, what does anyone want Protection for? The whole end and aim of Protection is to raise prices. When. I was a boy it was, indeed, Protection to infant industries.  They ceased to talk about that later on. It used to be, a good while ago, Protection to American capitalists. But that, also, is of the past. Now it is Protection to labor. How they do love the laborer, these good monopolists, such as Andrew Carnegie! How does labor get this vaunted Protection? It doesn't get it. It goes to the employing producer. It is only when by some combination, trust or monopoly by which domestic as well as foreign competition is choked off that Protection yields its full value of protection — to the monopolist. It is not the profit his employer is making that fixes a man's wages. Not at all. It is the price at which the employer can get a man to take the workman's place. It is in the protected industries of our country that laborers have had to fight most and make the greatest efforts to escape being crushed to the wall. But I believe that now a spirit of self respect is awakened among American workingmen. Think of it. Is labor such a poor, helpless thing that it must have protection? Are the American people so inferior to the rest of the world that the industry of 60,000,000 people is to be jeopardized by the law of the British lion unless he is kept at bay by men in buttons? Trusts need protection but labor can protect itself if you only sweep away restrictions and give it a chance. This campaign is the opening of a discussion of all economic questions. The appeal of intelligence will not stop here. We have started on the road to freedom and I have sufficient faith in my countrymen to think that we will not stop till we reach the goal: till we have swept away every tax that deprives the worker of the fair result ot his work. We will make our one direct tax the means of breaking down monopoly. Every tax on the products of labor diminishes their amount. It is the same way with a tax on imports, which tends to lessen the aggregate amount of wealth there is for all and brings to some too much and to others too little. A tax on products requires more capital for carrying on the business. Indirect taxes were never objected to by the first person who paid them. Why were match manufacturers anxious to have the tax kept on? Because as in every other case the price was increased and the man with large capital had an advantage over the man with small. Under that scheme the man who begins as a laborer shall remain one. But there is a tax that takes from no one anything that is due him from his industry — that is the tax on land values. [Long continued applause.] The value of land differs essentially from that of anything produced by labor. This house has a value representing the labor required to put it up and the materials used. With the land on which the house stands the case is very different. That was not produced by labor. Yet the value of the land is ever increasing and that of the building decreasing. The increased value of the land has been produced not by industry, but by the number of people around here. It has been produced by the whole community, belongs to the whole community, and is therefore the proper basis for tax. Instead of promoting monopoly by our plan we are diminishing and destroying it, and we are making it harder for dogs in the manger to hold land that they cannot use. This is the absolute Free Trade at which we single tax men aim. We do not support Grover Cleveland because we imagine that he aims at any kind of Free Trade, nor because we imagine that the Democratic party favors it. But we support Grover Cleveland [cheers and applause] because this is the direction in which he is leading. We stand with the Democratic party because at last its face is turned in the right road, and it has only to keep on to become as Democratic as Thomas Jefferson himself. A gentleman said to me tonight as I came into this hall, "There are people in Brooklyn so stupid as to think the Cobden Club is running this campaign. "I am a member of the Cobden Club [great applause] and if they have any money they might send me a little. I am very willing to take it and use it. The only complaint I have is that the Cobden Club doesn't believe in Free Trade. They see what American Free Trade would do to them. In regard to this question I once said to an Englishman: Once our people are started they will never stop as in England. They will go on till Free Trade ultimates in free land and free men. When I was elected an honorary member of the Cobden Club I was very glad to accept as a mark of respect to Richard Cobden [applause], a man who sought to get justice for Ireland, a man who, when aristocratic England was on the side of the States that would break up the Union, saw in our side this light for freedon; the man that wanted to break down barriers that divide nations, to disband armies and unite the world by a fraternal bond of peace. When Gladstone is restored to power and Ireland has the restoration of home rule the movement for the natural and equal rights in land will spring up with power to grow. And this little movement here beginning with a 7% reduction will go on and on. I am proud to have lived to see this time. This is not a struggle for the protection of labor, but for the emancipation of labor; not to give a few monopolists a few more percent profit at the expense or their fellow citizens, but to give to all their full and equal rights of making this a republic worthy of a name, in which there shall be no master and no tramps, no monstrous fortunes or monstrous poverty, a republic in which there shall be room for all and abundance for all.

The Rev. Hugh O. Pentecost was introduced eulogistically by Mr. Shearman. Among other things Mr. Pentecost said:

Your chairman has told you a truth. I do not believe in all the doctrines of Christianity, as perhaps you do not, but I have a perfect belief in the Founder of Christianity. If Jesus of Nazareth were on earth today He would be engaged in this work. This meeting was called under tho auspices of a single text — Cleveland and Thurman Campaign Committee. That is a combination that some in this audience may not understand. If the men who are thus ignorant have recovered from the shock of the recent remarks about Mr. Cobden they can be enlightened by my explanation. What do the single tax men desire? First, the abolition of every form of indirect taxation — the Tariff tax and the Internal Revenue tax. Indirect taxation is sneaking taxation. It sneaks into your house and taxes everything you use without your knowing you are being taxed. It is peculiarly in favor with despots. When a monarch wishes to raise money without disturbance he uses indirect taxation. It is cowardly. A man goes into a store and buys a suit ot clothes. Nothing is said about the tax on them as it is included in their price. Should a "man in buttons" meet you at the door of the clothing store and demand $10 tax of you for the clothes you had bought your indignation would know no bounds. It is easy to overtax the people by indirect taxation. The single tax men are opposed to the tax on products of labor. What we want is not less wealth, but more wealth. Our system keeps men from producing the very thing we stand in need of. It is idiotic. It punishes a man that does just the thing we want him to. Is he going to do the monstrous thing of building a house? We tax every step he takes, every nail and stick he buys. I know a man who wants to build a back kitchen on his house, but daren't do it for fear of the increased assessment. There is probably not a man in this house who is not at least once a year regularly a liar. Men who in church or family are too honorable, to stain their lips with a lie, yet swear to the tax assessor that they do not own certain property which they know they do. Even ministers who go to Europe and make many purchases there sometimes deceive the customs officers. But it is not his fault. A man goes to Europe and buys certain articles, then if he doesn't pay a fine to the Government they are taken away from him. This is on a par with the policy which taxes the most industrious of our people and makes the burden upon the owners of lots, vacant and rapidly rising in price, as light as possible. Any man who cannot see the absurdity of this policy is as blind as a bat. When Grover Cleveland said that "unnecessary taxation is unjust taxation," he told the truth. [Cheers and long continued applause.] We can prove from facts that it is unnecessary to tax the products of labor. We propose to put a tax upon the value or land. We believe in that single tax because it is right, and we never saw any one who could demonstrate that it wasn't right. A man produced this house, therefore it belongs to him. God produced the land; whom, then, does it belong to? [A voice: "God."] You are right: He has never given it away; He has never sold or willed it away. If the transfers cannot be shown we shall hold that it belongs to God. Between the land and the house is the value of land. Did God produce that? No, but the people did, and why does not the land belong to them? The house belongs to the man because he produced it. God produced the land and it belongs to all His children. What we want is for the people to stop the stealing from the man who owns the house and take what belongs to them. When the New York Sun in its wonderful wisdom says [hisses] that all the wealth of the country if divided equally would give but $800 to each inhabitant, don't you see that we want to produce wealth so that it will go around. The only way we can do that is by lessening not increasing the cost of Protection. You may shout again now if you choose for I am going to mention McKinley's name. [Hisses.] He tried to tell an audience in this hall last night that articles were made cheaper by laying on a tax. That is not so, as any one can see, but this is a fact. The more we tax land the cheaper it gets. We want to have land so cheap that when a workingman wants to build a house he will not have to spend his life in saving money to buy the lot. We want also to make it impossible for men to keep land vacant, to let it lie idle doing no one any good and increasing in price simply because more people are living near it each day. This is an increase in value to which no man has exclusive right. After we have got this reform established other reforms will come much easier. It has often been asked how it happens that we work with the Democratic party. I will tell you. Because we want all taxes removed. We want to get rid of the Protective Tariff first, then the revenue tax, till we get down to our single tax. The Democratic party has made a beginning, and that is a great thing to do after all the years of high Protective Tariff talk that has been poured into the ears of the workingmen. They have heard the Protection side of the story till they have begun to think that it must be true. Perhaps the truth has been impressed upon them more forcibly and terribly. A story is told of an Englishman who had been stopping at a hotel in the far West, and who finally asked for his bill. "Three dollars without potatoes, $4 with," was the reply. The Englishman said he thought the charges were exorbitant and growled considerably. Pulling a big pistol from his pocket the landlord told his guest to look out of the window. "Do you see that graveyard?" he inquired. Well, that place is filled with men who thought my charges were too high. What do you think now?" The Englishman expressed himself as very satisfied. So the American workingman is "satisfied" with the High Tariff robbery of the manufacturers, only, in this latter case the pistol is starvation which affects not himself alone, but wife and little ones. No wonder that under such circumstances the bosses' view has been the laborer's. You know what a fetish is? A savage worships in his cave. Every time he comes back from a hunt, fish, or fight  successful he gives that miserable fetish all the credit. All his bad luck he attributes to other causes. As the savage grows more intelligent he drops his fetish. The Tariff is the fetish of the Protectionist. Just at this time Mr. Blaine is its great high priest and Benjamin and Levi are altar boys. All our fine weather, plentiful crops and beautiful women are due to the Tariff. I sometimes think that the old hymn should read as follows:

"Tis Protection that can give

Sweetest pleasures while we live;
Tis Protection that can give
Solid comfort when we die.

The rhyme is not just right, but I think you see the meaning. Like the Indian, the Protectionist doest not blame his fetish for the growling growing discontent in the ranks of labor, this dark shadow on the land. There are people who believe every good comes from Protection and every bad from some other causes. Just when this superstition was at its height Grover Cleveland walked into the temple. He did not quite dare to strike down the miserable fetish, but he slapped its face and said to the congregation; This thing you worship is a humbug." We honor him because of this, and because he brought on this great discussion that will not end until we have Free Trade in goods, free travel for men and free land for labor.

After Mr. Pentecost's speech half of the audience remained to hear Mr. George and the other speakers answer questions.

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.

The Earth-for-All Calendar: February 11 -- Cardinal Manning

The state of the houses — families living in single rooms, sometimes many families in one room — a corner apiece. These things cannot go on. The accumulation of wealth in the land, the piling up of wealth like mountains, in the possession of classes or of individuals, cannot go on, if these moral conditions of the people are not healed. No commonwealth can rest on such foundations.

— CARDINAL MANNING, Dignity and Rights of Labor, Miscellanies, Vol. I., pp. 96-97.

FDR on revenue and spending

"One sure way to determine the social conscience of a government is to examine the way taxes are collected and how they are spent.  And one sure way to determine the social conscience of an individual is to get his tax-reaction.  Taxes, after all, are the dues we pay for the privileges of membership in an organized society."

-- Citation: Franklin D. Roosevelt: "Address at Worcester, Mass.," October 21, 1936.

Online by Gerhard Peters and John T. Woolley, The American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=15201

Here are some more extended quotes; the full speech will follow.

In 1776 the fight was for democracy in taxation. In 1936 that is still the fight. Mr. Justice Oliver Wendell Holmes once said: "Taxes are the price we pay for civilized society." One sure way to determine the social conscience of a Government is to examine the way taxes are collected and how they are spent. And one sure way to determine the social conscience of an individual is to get his tax-reaction.

Taxes, after all, are the dues that we pay for the privileges of membership in an organized society.

As society becomes more civilized, Government—national, State and local government—is called on to assume more obligations to its citizens. The privileges of membership in a civilized society have vastly increased in modern times. But I am afraid we have many who still do not recognize their advantages and want to avoid paying their dues.

It is only in the past two generations that most local communities have paved and lighted their streets, put in town sewers, provided town water supplies, organized fire departments, established high schools and public libraries, created parks and playgrounds—undertaken, in short, all kinds of necessary new activities which, perforce, had to be paid for out of local taxes.  ...

He continues,

New obligations to their citizens have also been assumed by the several States and by the Federal Government, obligations unknown a century and a half ago, but made necessary by new inventions and by a constantly growing social conscience.

The easiest way to summarize the reason for this extension of Government functions, local, State and national, is to use the words of Abraham Lincoln: "The legitimate object of Government is to do for the people what needs to be done but which they cannot by individual effort do at all, or do so well, for themselves."

Taxes are the price we all pay collectively to get those things done.

To divide fairly among the people the obligation to pay for these benefits has been a major part of our struggle to maintain democracy in America. ...

(Readers new to this website might be surprised that Georgists will take issue with "ability to pay," as the phrase is commonly used, as a good criterion on which to judge taxation, and those same readers may have a visceral negative reaction.  If you're among that group, you might take a look at this page.)

FDR continued,

Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.

Before this great war against the depression we fought the World War; and it cost us twenty-five billion dollars in three years to win it. We borrowed to fight that war. Then, as now, a Democratic Administration provided sufficient taxes to pay off the entire war debt within ten or fifteen years.

Those taxes had been levied according to ability to pay. But the succeeding Republican Administration did not believe in that principle. There was a reason. They had political debts to those who sat at their elbows. To pay those political debts, they reduced the taxes of their friends in the higher brackets and left the national debt to be paid by later generations. Because they evaded their obligation, because they regarded the political debt as more important than the national debt, the depression in 1929 started with a sixteen-billion-dollar handicap on us and our children. ...

and

For the average American we have reduced the individual income tax. Any family head who earns an income of less than $26,000 a year pays a smaller income tax in 1936 than he paid for 1932. That means that less than one percent of the heads of American families pay more than they did; and more than 99 percent pay less than they did, for more than 99 percent earn less than $26,000 per year. If you want the answer to this talk about high taxes under this Administration—there it is. Taxes are higher for those who can afford to pay high taxes. They are lower for those who can afford to pay less. That is getting back again to the American principle—taxation according to ability to pay.

You would think, to hear some people talk, that those good people who live at the top of our economic pyramid are being taxed into rags and tatters. What is the fact? The fact is that they are much farther away from the poorhouse than they were in 1932. You and I know that as a matter of personal observation.

A number of my friends who belong in these very high upper brackets have suggested to me, more in sorrow than in anger, that if I am reelected they will have to move to some other Nation because of high taxes here. I shall miss them very much but if they go they will soon come back. For a year or two of paying taxes in almost any other country in the world will make them yearn once more for the good old taxes of the U.S.A.

One more word on recent history. I inherited from the previous Administration a tax structure which not only imposed an unfair income tax burden on the low-income groups of this country, but also imposed an unfair burden upon the average American by a long list of taxes on purchases and consumption- hidden taxes.

In 1933 when we came into office, fifty-eight cents out of every dollar of Federal revenue came from hidden taxes. Leaving out of account the liquor tax—for liquor was illegal in 1933—we have reduced these indirect taxes to thirty-eight cents out of every dollar.

 

It is worth including the whole speech here. 

Don’t Tax the Rich. Tax Inequality Itself. - NYTimes.com

Don’t Tax the Rich. Tax Inequality Itself. - NYTimes.com.

THE progressive reformer and eminent jurist Louis D. Brandeis once said, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.”

What we call the Brandeis Ratio — the ratio of the average income of the nation’s richest 1 percent to the median household income — has skyrocketed since Ronald Reagan took office. In 1980 the average 1-percenter made 12.5 times the median income, but in 2006 (the latest year for which data is available) the average income of our richest 1 percent was a whopping 36 times greater than that of the median household.

Brandeis understood that at some point the concentration of economic power could undermine the democratic requisite of dispersed political power. This concern looms large in today’s America, where billionaires are allowed to spend unlimited amounts of money on their own campaigns or expressly advocating the election of others.

We believe that we have reached the Brandeis tipping point. It would be bad for our democracy if 1-percenters started making 40 or 50 times as much as the median American.

Enough is enough. Congress should reform our tax law to put the brakes on further inequality. Specifically, we propose an automatic extra tax on the income of the top 1 percent of earners — a tax that would limit the after-tax incomes of this club to 36 times the median household income.

Importantly, our Brandeis tax does not target excessive income per se; it only caps inequality. Billionaires could double their current income without the tax kicking in — as long as the median income also doubles. The sky is the limit for the rich as long as the “rising tide lifts all boats.” Indeed, the tax gives job creators an extra reason to make sure that corporate wealth does in fact trickle down.

The authors go on to mention that they're both 1%-ers (presumably 1%-ers by income, not by wealth, though they use terms interchangeably in a way that seems very odd for people with any training in economics. Further, I am surprised they are as innumerate as their "solution" would suggest.

Their proposal is that each year the IRS would do some calculations based on "the average 1%er:"

Here’s how the tax would work. Once a year, the Internal Revenue Service would calculate the Brandeis ratio of the previous year. If the average 1-percenter made more than 36 times the income of the median American household, then the I.R.S. would create a new tax bracket for the highest 1 percent of income and calculate a marginal income tax rate for that bracket sufficient to reduce the after-tax Brandeis ratio to 36.

This new tax, if triggered, would apply only to income in excess of the poorest 1-percenter — currently about $330,000 per year. Our Brandeis tax is conservative in that it doesn’t attempt to reverse the gains of the wealthy in the last 30 years. It is not a “claw back” tax. It merely assures that things don’t get worse.

What this doesn't account for is the wide range of incomes within the top 1%.  Should the folks in the bottom half of the top 1% be penalized indiscriminately for what the folks in the top half are "earning?"  Why?  Whose activity are we attempting to penalize?   When a Bill Gates, or big deal football player,* or a so-called "small businessman" selling his company to a roll-up receives a huge windfall, should the $250,000 per year doctor be taxed?   Why should the latter be in the same bracket with the windfall folks?    And the fellow selling his company gets taxed at the 15% "capital" gains rate, well below what working people get hit with.

*Why is the football player on this list?  Well, in part because I see that I am paying $100 per year to the NFL via my cable TV bill.  I am thus taxed to provide him his windfall.  My tax doesn't go through any government entity, but is in my cable bill.

I don't think Justice Brandeis would think Ayres and Edlin have proposed a good solution to the problem.  They're nibbling at the leaves, not hacking at the root.

The article sent me off to read some of Brandeis's work, including "Other People's Money, and How the Bankers Use It," (published as a series of 10 articles in Harpers Weekly in 1913 and as a book in 1914). Here is the table of contents for the book:

I Our Financial Oligarchy 1
II How the Combiners Combine 28
III Interlocking Directorates 51
IV Serve One Master Only! 69
V What Publicity Can Do 92
VI Where the Banker is Superfluous 109
VII Big Men and Little Business 135
VIII A Curse of Bigness 162
IX The Failure of Banker-management  189
X The Inefficiency of the Oligarchs  201

The letters to the editor published today don't speak to the issue either.  For instance,

Ian Ayres and Aaron S. Edlin write, “It would be bad for our democracy if 1 percenters started making 40 or 50 times as much as the median American.”

Are Bill and Melinda Gates a great threat to democracy? Jeff Bezos? Oprah Winfrey? Mayor Michael R. Bloomberg? I fail to see how those who have amassed great fortunes in America threaten American democracy.

They do not plot coups or finance fascist militias. They do, however, give lots of money to wonderful charitable and educational organizations.

He's chosen some people who have built up monopolies, and have helped to drive other businesses into the ground, and in at least one case, used a great fortune to influence elections; and it might be worth mentioning what people like the Koch Brothers have done, and others will do, now that "corporations are people" and have free speech rights.  Bloomberg managed to derail the term limits laws in his city.

Wouldn't we be better off examining privilege, and eliminating it, than indiscriminately taxing productive activity?   Forcing the internalization of externalities.  Playing around with income tax brackets doesn't fix the problem, and it deflects us from going to the source of the problem.

Shouldn't our incentives be set up to encourage our best and brightest to devote themselves to serving others instead of enriching themselves at the expense of others?

"It was there for the taking"

When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?

Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:

I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.

The 99% need to start identifying the laws and structures that must be adjusted.  This is not easy work.

What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures.  We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist.  It won't be easy.  We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.

Labor should get its share, and capital should get its share, and we-the-people should get land's share.  That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create.  That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.

I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund. 

In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong.  Letting it be "there for the taking" is insanity and injustice.  And don't we pledge "liberty and justice for all?"

Our ancestors may have granted some privileges to some lucky folks for one reason or another.  That doesn't mean that we can't, politely and firmly, revoke those privileges.  A couple of centuries is plenty.  Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them.  Will the privileged give up those privileges graciously?  Quite possibly not.  But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."

Social Problems

Social Problems.

A civilization which tends to concentrate wealth and power in the hands of a fortunate few, and to make of others mere human machines, must inevitably evolve anarchy and bring destruction. But a civilization is possible in which the poorest could have all the comforts and conveniences now enjoyed by the rich; in which prisons and almshouses would be needless, and charitable societies unthought of. Such a civilization waits only for the social intelligence that will adapt means to ends. Powers that might give plenty to all are already in our hands. Though there is poverty and want, there is, yet, seeming embarrassment from the very excess of wealth-producing forces. "Give us but a market," say manufacturers, "and we will supply goods without end!" "Give us but work!" cry idle men.

The evils that begin to appear spring from the fact that the application of intelligence to social affairs has not kept pace with the application of intelligence to individual needs and material ends. Natural science strides forward, but political science lags. With all our progress in the arts which produce wealth, we have made no progress in securing its equitable distribution. Knowledge has vastly increased; industry and commerce have been revolutionized; but whether free trade or protection is best for a nation we are not yet agreed. We have brought machinery to a pitch of perfection that, 50 years ago, could not have been imagined; but, in the presence of political corruption, we seem as helpless as idiots. The East River bridge is a crowning triumph of mechanical skill; but to get it built a leading citizen of Brooklyn had to carry to New York $60,000 in a carpet bag to bribe New York aldermen. The human soul that thought out the great bridge is prisoned in a crazed and broken body that lies bedfast, and could watch it grow only by peering through a telescope. Nevertheless, the weight of the immense mass is estimated and adjusted for every inch. But the skill of the engineer could not prevent condemned wire being smuggled into the cable.

The progress of civilization requires that more and more intelligence be devoted to social affairs, and this not the intelligence of the few, but that of the many. We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act.

Wow!  How many quotes can you take from those 3 paragraphs?  The source is the first essay in Henry George's book, "Social Problems," published in 1883, entitled "The Increasing Importance of Social Questions."

• "A civilization which tends to concentrate wealth and power in the hands of a fortunate few, and to make of others mere human machines, must inevitably evolve anarchy and bring destruction."

• "a civilization is possible in which the poorest could have all the comforts and conveniences now enjoyed by the rich; in which prisons and almshouses would be needless, and charitable societies unthought of. Such a civilization waits only for the social intelligence that will adapt means to ends. Powers that might give plenty to all are already in our hands."

Think about that one not just with regard to America, but with regard to the entire world.

• "Though there is poverty and want, there is, yet, seeming embarrassment from the very excess of wealth-producing forces. 'Give us but a market,' say manufacturers, 'and we will supply goods without end!' 'Give us but work!' cry idle men."

• "The evils that begin to appear spring from the fact that the application of intelligence to social affairs has not kept pace with the application of intelligence to individual needs and material ends. Natural science strides forward, but political science lags."

• "With all our progress in the arts which produce wealth, we have made no progress in securing its equitable distribution."

• "The progress of civilization requires that more and more intelligence be devoted to social affairs, and this not the intelligence of the few, but that of the many."

• "We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act."

"Social intelligence."  Nearly 130 years have passed since Henry George wrote these words.  Nearly every college has a Social Sciences division.  Most have a political science department and an economics department.  Almost all have history departments.  Many have American Studies programs.  I'd venture to say that not one in 1000 has a professor who knows these ideas well.  Many know the name of Henry George, as they know some other names from his era, but few have had the quality of education that would include exposure in depth to George's ideas.

Some would say that these social questions have no solutions, and move on to discuss some other topic they think more important, or solvable.  Some might murmur that any attempt to solve these questions would by definition be somehow socialistic, and therefore is not worth a further thought. (Much depends on what you mean by "socialistic;"  the word seems to be a conversation closer in many circles, which is a shame -- though I do not regard George's ideas as remotely socialistic as the term is commonly used.) 

Those who have sat with Henry George's ideas know differently. These problems can be solved.  Might you join that group?  What would it feel like to know these problems do have solutions?

And as we enter a presidential election season, this one bears repeating:

"We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act."

Wealth Concentration and Trinity Church (Wall Street)

When I heard that Trinity Church was not particularly keen on hosting the Occupy Wall Street protestors, I was not overly surprised.  Years of watching Louis Rukeyser's "Wall Street Week" with the opening scenes of Trinity Church, and a reading of Thomas Shearman's 1889 article "The Owners of the United States" (below, posted on October 6),passed through my mind.  Shearman was the co-founder of Shearman and Sterling law firm, and was a highly respected legal scholar of the late 19th century.  He also wrote some fine books

Here are some relevant paragraphs:

The figures indicate the wealth believed to be possessed on the average by each of the persons whose names follow:

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

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

So which side is the church on?  Which side is the Church on?  The side of the poor, or the side of the wealthy? 

How do we judge it?  By its words, or by its actions?  The Episcopal Church, in some places, is known as the Frozen Chosen.  In many places, it is a very welcoming community, but with some exceptions, it does not seek to find the structures that create poverty, or to challenge them when faced with them.  It is good at charity, but not as good at justice.  It asks prayers for seekers after justice, but doesn't otherwise encourage them.

"Faith, hope and charity ... but the greatest of these is ... justice!"

The General Convention of the Episcopal Church (then known as the Ninth Church Congress), in 1884, heard an address by Henry George, entitled Is Our Civilization Just to Working Men?

The founder of the (Episcopal) Order of the Holy Cross, the Rev. James Otis Sargent Huntington (1854-1935), was very active in the Anti-Poverty Society in NYC.  See James Kiefer's article on the Rev. James Otis Sargent Huntington, which gives a fine account of what Henry George's ideas are about.

I guess I don't expect too much of Trinity Church, a/k/a The Republican Party at Prayer.  They know where their bread is buttered, and aren't going to have a lot of interest in the folks who rely on margarine.  But I hope their theology works for them; it doesn't work for American society.  But that's what freedom of religion is about: give them tax exemptions to spread whatever they call their theology!

PostScript: I'm led to wonder about how there can be vacant land in lower Manhattan, and second, what sort of harm it would do to its owners to permit someone to put it to use for a while.  I'm sure the church isn't paying property taxes on that vacant land.  Why should that be?  And for whose benefit is it being kept vacant?

Charity or Justice: How We Treat the Poor

THE SOLID TRUTH OF IT.

And what is this lowest man who holds the fate of the world in his hands; whom we must lift or perish? He is landless, workless, poverty stricken, degraded, drunken, dishonest. In a word overflowing with plenty, he lacks everything. In a world of brightness, he and his cower in a cellar, or burrow in a sun-abandoned court. With abundance of pure air, they breathe only the foul.

Let us go to this man, whom we have thus painted in somberest hues; loveless, imbruted, dirty, lazy. What shall we do with him?

Let me rehearse some of the favorite processes of the philanthropic tread-mill so amiably worked by the well-meaning, though willfully blind, in their efforts to "raise the fallen":

• Preaching Jesus to his soul.
• Giving soap and water to his filth.
• Compelling him, willy-nilly, to work.
• Exhorting him to abstinence.
• Giving his children a taste of heaven on earth, with a treat of fresh air (sending them back again to hell of foul air).
• Building airy tenements for his occupation.
• Providing for his immediate wants in food, fuel, clothing and physic.

Although these do not exhaust the enumeration, they are typical and must suffice. But they are all wrong wrong, wrong.

What! Wrong to preach Jesus to the fallen? Yes, wrong to preach Jesus to them, until we practice Jesus ourselves.

What a mockery to preach Jesus to the fallen man, with the proceeds of his stolen rights in our pockets, in the suit of clothes we wear, and in the meal we enjoyed before we went forth to meet him. The first lesson in religion we can give him is an object lesson in the restoration of his lost inheritance in the earth. The first sermon he hears us preach should be one exhorting ourselves to repentance, confession, and restitution. Having obeyed and thus done the first duty in the premises, it remains for us to aid our fallen and defrauded brother in recovering the ground from which we have thrust him.

And this fallen man is not hurt harmlessly. He is the fly in the ointment of our wealth. He is the barrier to the realization of our social dreams. To secure ourselves we must secure him. The oneness of industry in its best conception is impossible until we have made this our brother one with ourselves. In some sad respects we trace evidences of our relationship. Is he sinful? So are we. Has he fallen? So have we. He was robbed and fell. We robbed and fell. Clearly our first duty is to "restore the pledge, given again that we have robbed." We can restore; he cannot recover; he is helpless; only we can help.

Until the lowest man and his rights are practically dealt with, and his opportunities to rise assured, we shall suffer; depressions, crashes, anxiety, overcompetition, aggravated covetousness, will mar all our industry.

We produce as individuals; we suffer as an organism. No man liveth to himself. The need of one is the calamity of all.

We have taken our brother's inheritance — the right to the use of the earth — and we make merchandise out of it. Let us agree to pay into the public treasury the whole annual value of the land we use in city or county, only retaining the proceeds of our own industry. Having agreed to and carried out this act of simple justice, no one will hold, can hold, land for profit. He must use or abandon it. The abandoned estates will then be available for our brother now landless, hopeless, degraded. Then, and only then, can we preach Jesus to him.

We are many members in one body. Which of us can be hurt and not bring hurt on the rest? In this sense, in the sense of sharing in suffering, the oneness of industry is perfect.

—James T. Barnard, in Hamilton Templar.

reprinted in The San Jose Letter, June 27, 1896

Pointers on the Single Tax

POINTERS ON THE SINGLE TAX.

The San Jose Letter, February 15, 1896

A landless man is an unfreeman. — Saxon Proverb.

He who has no clear, inherent right to live somewhere has no right to live at all. — Horace Greeley.

The land of every country is the common property of the people of that country. — Bishop McNulty.

The greatest discovery of my life is that the men who do the work never get rich. — Andrew Carnegie.

Let the great landlords beware; if once they believe that they have no need of the people, the people may in their turn think they have no need of them. — Sismondi.

All the sufferings, against which civilized nations have to struggle, may be referred to the exclusive right of property in the soil, as their source. — Professor Zachraie.

Bodies of men, land, water, and air, are the principle of those things which are not, and which it is criminal to consider as, personal or exchangeable property. — John Ruskin.

The foreign goods that compete with the goods of our manufacturers and trusts are heavily taxed at the Custom House, but foreign laborers are admited free of duty. — Hon. Tom L. Johnson.

The widow is gathering nettles for her children's dinner;'a perfumed Seigneur, delicately lounging in the Oeil de Boeuf hath an alchemy whereby he will extract from her every third nettle—and call it rent. — Carlyle.

The English landlord system, so far from having any moral basis, is founded upon a supercilious contempt of the only moral principal that can afford any justification for private property in land. — Professor A. W. Hunter, M. A., L. L. B.

Under the feudal system the proprietor was the Crown, as representing the nation; while the subordinate tenures were held with duties attached to them and were liable, upon nonfulfilment, to forfeiture. — J. A. Froude.

Those who make private property of the gift of God (land) pretend in vain to be innocent. For in thus retaining the substance of the poor they are the murderers of those who die every day for the want of it. — St. Gregory the Great.

I should myself deny that the mineral treasures under the soil of a country belong to a handful of surface proprietors in the sense that this gentleman appeared to think they did (i. e., to do with as he pleased). — Lord Coleridge.

While the tax on the land values promotes industry and therefore increases private wealth, taxes upon industry act like a fine or a punishment inflicted upon industry; they impede and restrain and finally strangle it. — Dr. McGlynn.

Every permanent improvement of the soil, 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. — Thorold Rogers.

This bull, the very type of massive strength, who, because he has not wit enough to see how he might be free, suffers want in sight of plenty, and is helplessly preyed upon by weaker creatures, seems to me no fit emblem of the working classes. — Henry George.

Equity, therefore, does not permit property in land. For if one portion of the earth's surface may justly become the possession of an individual, and may be held for him for his sole use and benefit, as a thing for which he has an exclusive right, then other portions of the earth's surface may be so held; and eventually the whole of the earth's surface may be so held; and our planet may thus lapse altogether into private hands. — Herbert Spencer.

We permit absolute possession of the soil of our country with no legal rights of existence on the soil to the vast majority who do not possess it. A great landholder may legally convert his whole property into a forest or hunting ground, and expel every human being who has hitherto lived upon it.  In a thickly populated country like England, where almost every acre has its owner and occupier, this is a power of legally destroying his fellow creatures; and that such a power should exist, and be exercised by individuals, in however small a degree, indicates that as regards true social science, we are still in a state of barbarism. — Alfred Russell Wallace.

Things to Tax

Paul Krugman's column in the NYT Sunday was entitled "Things to Tax," and I thought it was a bit broad-brush. 

Krugman wrote,

"Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions."  

I don't disagree with either of those as a starting point, but neither goes to the root of the problem, which I believe to be the sorts of privileges we have given out, or somebody's ancestors put in place and we've not even thought about questioning.  They are so familiar to us that we don't question them any more than we think about breathing.  So (switching metaphors) we find ourselves barking loudly up the wrong tree -- while the critters in the other trees are smiling broadly!

The best answers I know to which tree we ought to be barking up come from the writings of Henry George.  Several speeches were what I was first inspired by:

• Thou Shalt Not Steal!
• The Crime of Poverty
• Thy Kingdom Come!
• Moses

Whether or not your own orientation is theological, I think you might appreciate these. 

We ought not to be taxing indiscriminately.  What we tax matters greatly.  Some provide Natural Public Revenue -- and we ought to socialize that revenue -- and other possible objects of taxation ought not to be taxed at all -- privatize them!

Here's the comment I posted to Krugman's column:

Which rich should we tax?

• Should we tax the ones who have bought or inherited or otherwise acquired our very choicest land -- that in our biggest cities, well-served by taxpayer-provided infrastructure and services?
• Should we tax the ones who, in effect, own our most valuable natural resources, or have access to resources we send our military to protect on our behalf?
• Should we tax those who benefit from monopolies of various kinds, such as owning our water companies, our electric utilities, our cable-tv companies, or monopolies of their own creation?
• Should we tax those who benefit from privileges of various kinds, such as the possession of our airwaves, landing/takeoff rights at busy constrained airports (think LGA at rush hour)?
• Should we tax those who benefit by taking some fraction of every financial transaction, even if that transaction doesn't create additional value for the economy as a whole?
• Should we tax those who benefit from the activity or inactivity of the FIRE sector, which Joe Stigitz says is creaming 40% of the profits made by the productive sectors of the economy?
• Or should we just tax all the high-income people, without going to the root of the privileges which produce undeserved wealth for some at the expense of the rest of us.

The answers to these questions matter.

Go to the root. Understand what is privilege, and what is an actual contribution to the economy. Understand what is someone's free lunch, paid for by the labor of others. Understand who reaps what they haven't sown. Correct these things.

An old idea. Look up Henry George's writings from the late 19th century, which kicked off the Progressive movement and still inspire many of us.

Short term, maybe, changing the income tax brackets is appropriate. But it doesn't get at the root of the problem.

Be radical. Go to the root.

For more information, see http://lvtfan.typepad.com/ or http://www.wealthandwant.com/, or look up Henry George's ideas.

As an afterthought, I'll add that you might want to check out Mason Gaffney's website, at http://www.masongaffney.org/; Fred Foldvary's writings, including "The Ultimate Tax Reform," and Walt Rybeck's book, "Re-Solving the Economic Puzzle."

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

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

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

WHO ARE THE CRIMINALS?

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

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

I.    WHO ARE THE CRIMINALS?

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

II. FRENCH ARISTOCRACY OF PRIVILEGE.

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

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

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

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

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

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

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


III. NEW YORK ARISTOCRACY OF PRIVILEGE.

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

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

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


IV. ROBBERY OF MASSES BY CLASSES.

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

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

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


V. NATURE AND EXTENT OF ROBBERIES.

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

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

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

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

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

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


VI.   HOW TO STOP THE ROBBERIES.

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

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

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

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

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

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

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

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

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

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

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


VII.   THE CRIMINALS.

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

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

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

How Wealth Concentrates: The Dartmouth College Case Decision

I'd read some other things by White, but found this particularly compelling and relevant, in the era after the U. S. Supreme Court's decision in the Citizens United case, and as the "Occupy Wall Street" movement grows.

THE DARTMOUTH COLLEGE CASE DECISION.

John Z. White in the St. Louis Mirror of Oct. 4, 1906
With an Introduction by Wm. Marion Reedy,
Editor of The Mirror.

Mr. Bryan's proposal of government ownership of railways; Mr. Folk's proposal of taxing corporations upon the actual value of their property, including franchises, or upon the earning capacity as an estimate of valuation; every proposal to do anything to a corporation that the corporation doesn't want done, is met with the proclamation by corporation lawyers: "You can't do it. Marshall's decision in the Dartmouth College case forbids. That decision holds a charter, or a franchise, is a contract, that no State can impair the obligation of contracts. If the corporations aren't willing to submit to those things you can't do them without impairing the obligation of contracts." This Marshall decision is the backbone, the vitality of all corporate power. It is the secret of corporate tyranny over the people. It is the buttress of every corporation iniquity which reformers try to remedy. It is the fetich of all the courts. It is the gospel of all lawyers. It is sacred because it was formulated by Webster, and embodied in the law by Marshall and Story. It has been so for 87 years. But now the law as laid down by these giants is questioned. Their logic is attacked. The conclusions of the Supreme Court that have been held sacred and binding on all courts forever are denied. They are shown to be absurd. With government ownership and corporation regulation the intensely vital issues they have become, we shall hear much of the Dartmouth College decision being as unassailable as Divine Writ.  The war of the new democracy, the true republicanism of this day and the future, must be against this decision, which supports all the corporation iniquities and infamies. This article by John Z. White sounds the first note of the battle cry to which all American radicals must rally, for the law of the Dartmouth College decision is the issue upon which both the great parties are to split in such way that all those in both parties who believe in liberty, in the rule of reason, in freedom from the tyranny of "artificial persons" will eventually be in one party, and all the beneficiaries of the tyranny and corruption of artificial persons will be in another party. Marshall's decision has made for the enslavement of men to corporations. It must be reversed and its logic denounced if this government is to fulfil the purposes of its founders or realize the hope and faith of mankind that found expression in the Declaration and in the Constitution.

EDITOR OF THE MIRROR.

* * *

The people of the United States are much disturbed by private monopolies.

Very many, possibly the majority, appear to view the situation as hopeless.

All manner of remedial measures are proposed.

Kansas attempted a public oil refinery; various municipal enterprises are under consideration; it is even suggested that the amount of business that one corporation may do shall be limited to a given fraction of the total business of the country in any particular line; while a message from the President to Congress informs us that state regulation of railroads has thus far achieved but little.

"How not to do it," is still the distinctive characteristic of American public life.

Is the President not aware of the fact that early in our history the Supreme Court adopted a policy and established a precedent that deprived the people of their natural remedy for corporate aggression?

The doctrine affirmed by the decision in the Dartmouth College case is the source of most of our present industrial abuses.

Instead of seeking the overthrow of that doctrine, our so-called statesmen seem bent on devising schemes that admit its truth, but attempt to dodge its consequences.

* * *

Daniel Webster conducted the case for the college.

John Marshall and Joseph Story delivered the principal opinions.

Those opinions were essentially repetitions of Webster's argument.

On fundamental law Blackstone was favorably quoted.

The case is interesting. Story said so, and in this respect his opinion is sound.

* * *

As told by Wheaton, the story is as follows:

In 1754 Dr. Wheelock began teaching the Christian religion to Indian children. He included some white children, and added educational to religious instruction.

The school was charitable, and contributions were sought. Finally the favorable attention of Lord Dartmouth and others in England was secured.

Originally, Dr. Wheelock intended to bequeath the school and its funds to twelve men with power to fill vacancies, that the trust so formed be perpetual.

The English contributors believed an incorporated organization more desirable, and in 1769 there was secured from the English crown a charter.

The "Trustees of Dartmouth College" is formed in harmony with the plan of Dr. Wheelock, being composed of twelve men who, with other privileges, have power to fill vacancies, and thus is self perpetuating.

The charter declares its provisions unalterable by the crown, and that the twelve trustees may make rules and regulations for the government of the college not repugnant to the laws of Great Britain or New Hampshire.
 
After the Revolution the State of New Hampshire increased the number of trustees to 21, and appointed a board of 25 overseers.

The college corporation resisted this action, and was defeated before the Supreme Court of that State.

The constitution of New Hampshire (art. 15) reads: "No person shall be deprived of his property, or immunities, or privileges, put out of the protection of the law, or deprived of his life, liberty or estate, but by judgment of his peers, or the law of the land."

The New Hampshire court said: "That the right to manage the affairs of this college is a privilege within the meaning of the bill of rights, is not to be doubted. But how a privilege can be protected from the law of the land by a clause in the constitution declaring that it shall not be taken away but by the law of the land is not very easily understood."

Upon appeal to the Supreme Court of the United States it was held that the charter from the crown is a contract, and therefore that said laws are null and void, because in violation of the Constitution of the United States, which reads (art. 1, sec. 10): "No State shall pass any law impairing the obligation of contracts."

* * *

In his contribution to this interesting case Judge Story said: "It is a principle of the common law . . .  that the division of an empire works no forfeiture of obviously vested rights of property."

And of course the division of empire does not destroy sovereign power — that power passes, it does not disappear.

The people of England, through their agent, Parliament, as an act of sovereignty, can, could and did revoke grants made by the crown. All grants issued by the crown were and are subject to this condition.

Webster admitted this power of Parliament, but urged that "in modern times it has exercised this power very rarely;" that "even in the worst times this power of Parliament to repeal and rescind charters has not been exercised;" that "Parliament could not annul charters as a matter of ordinary legislation, but only as an act of omnipotent sovereignty;" that "no legislature in the United States has such power."

The people of New Hampshire, by their sovereign agency (legislative, executive and judicial), declared these laws in full force and effect.

When these agree has not sovereignty spoken? What further appeal is possible — save to the mob?

Therefore, unless the Constitution of the United States delegated to the Federal Government power to annul charters, or prohibited it to the States, it has continued to reside in each State as an inherent sovereign right.

The tenth amendment to the Constitution reads: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

There was no pretense that power to annul charters was delegated to the United States, but it was held the clause declaring that "No State shall pass any law impairing the obligation of contracts," is such prohibition to the States.

In our early history some of the States too readily altered the basis of debt liquidation. For this reason this Constitutional prohibition was inserted, and yet this decision pretends that in it is concealed the destruction of a great sovereign prerogative.

And even a hasty perusal of the proceedings of the Constitutional convention show the subject under consideration to have been private contracts.

Even if a grant be absurd or unjust, or secured through corruption, still are the sovereign people helpless.  According to this decision there is no power in the United States that can annul charters -- because of a Constitution ordained "to promote tranquillity," and to secure other "blessings."

* * *

The vital question before the Supreme Court, therefore, was -- Is the charter from the crown a contract? 

Chief Justice Marshall disposed of the matter by saying: "It can require no argument to prove that the circumstances of this case constitute a contract."

On the contrary, very energetic argument is required; much more forceful than any advanced by either counsel or court.

* * *

As a point from which to view the matter in hand, let us first perceive the conditions of equitable social adjustment.

Blackstone says truly that: "The laws of nature are coeval with mankind and are binding everywhere and at all times," and that "all human enactments derive whatever force and vitality they may have from their conformity to those great originals," and that "any human laws made in contradiction of the laws of nature must eventually fail and become null and void."

As a condition of nature, then, men live on the earth, and must produce things from its materials in order to continue life.

Some, if able, will rob, or wantonly or carelessly injure others, and to prevent such trespass all the people (strictly, the majority) within a given territory organize the police power.

To utilize the earth efficiently it is necessary that parcels be exclusively occupied by individuals. To this end the whole people ordain a method of holding land.

In other words, each man has the right to peacefully occupy and use the earth, and the only known way to maintain this right (security of person and property) is by the exercise of the supreme force.

This supreme force is sovereignty. Sovereignty is dominion; government its organized agency.

States are not corporate agencies to be compelled. They are sovereign agencies that command. They bow not to the past; they rule not the future; but they control the present.

To yield this power in any degree is, in that degree, to yield the only power in nature whereby civilized society is possible.

To argue that sovereignty can, in part, surrender itself, is to argue that a thing can divest itself of its essential characteristics.

If we argue that sovereignty can partly surrender itself, must we not logically agree that it can do so wholly?

Sovereignty is the arbitrary will of the majority, and finds justification for its exercise in the fact that nature (i. e., the constitution of man, together with that of his environment) compels the assertion of that will.

The supreme force is often used to the disadvantage of some, but such act is in violation of natural equity and "must eventually become null and void."

This is nature's social law. "Conformity to this great original" is the State's duty.

* * *

It will be observed that sovereignty does not originate in the divine right of the King, nor in the legislature, nor in the so-called social compact, nor in the conscious contract that James Wilson tried to deduce from the assertion that governments derive "their just powers from the consent of the governed."

Like the right of each man to peacefully use the earth, sovereignty exists of itself. The State is but the agency of sovereignty, organized to conserve this right to peacefully occupy.

Plainly, while a State may contract with a citizen to build a school house, it cannot contract with him regarding matters of sovereignty.

Such act would be an attempt to "agree" that the greatest force is not the greatest force — an attempt in degree to surrender sovereign agency.

A charter gives power to the possessors as against other citizens, but not as against the State.

A State therefore may create a corporation by permitting a group of persons to exercise sovereign powers, but such act is to delegate, not to surrender power. It is a license, a permit — not a contract.

In short, a State may delegate portions of its power, but it can abdicate no part of its sovereign agency.

Any agent may make contracts as to matters in the conduct of business proper to his agency, but who will urge that he may contract away any part of the title to the enterprise itself? Are we to understand that an agent may absolve himself of his agency, in any degree?

A corporation holds power only because it is sustained by sovereignty. It is not only created by law, but also is sustained by law, and has no being save for law.
 
To admit the power to grant charters and deny the power to annul them, is like admitting the existence of one side of an object while disputing the existence of the other side; or like asserting the positive and denying the negative pole of electricity; or like disputing the similar conversion of a syllogism.

* * *

The Supreme Court was right, when, in the "Slaughter House" and other cases, it held that no part of the police power may be "contracted" away.  Each citizen must submit to this phase of sovereign authority.

But is land-holding less a result of sovereignty than police regulations?  One may refuse a particular parcel of land, but cannot refuse all land and live.  Either as owner or tenant he must conform to the methods ordained.  He may, however, refuse to erect any building.

Men and land include all things social, and if sovereignty be asserted as to these it is complete.

* * *

Webster dimly perceived that to contract, all parties must be free to withhold consent, and he said: "What proves all charters of this sort to be contracts is that they must be accepted, to give them force and effect."

Can we not with equal justice say the relation between master and slave is contractual?

The master grants permission to attend a picnic. The slave "accepts" — and we have a contract.

Or, the master commands a like act, and the slave refuses, even preferring death — and no contract results.

Is not the permission or the command without "force and effect" unless the slave "accepts"?

"Accept," says the master, "and live a slave, or fail to 'accept' and die a man."

Corporations live. Men die. Therefore, says the State, according to this decision, accept this charter and live an artificial, immortal person, or fail to accept and die as the God of nature designed in his "great originals."

* * *

If we are agreed as to the nature of sovereignty and its agency, we perceive the validity of the British rule that the Parliament can annul charters.  Also we will be able to note the virtue of the positions taken by the court.

Two principal assumptions were made:

First, that land grants are irrevocable.
Second, that corporations are persons.

Some positions were evaded, but, on the important matter of "privileges" there is agreement, as follows:

Blackstone said: "Franchise and liberty are used as synonymous terms, and their definition is, a royal privilege, or branch of the King's prerogative, subsisting in the hands of the subject."

Webster quoted Prof. Sullivan as saying that, "The term liberty signifies the privileges that some of the subjects, whether single persons, or bodies corporate, have above others, by the lawful grant of the King."

Webster then said: "The plaintiffs have such an interest in this corporation."

Privileges, then, are partialities, favoritisms, "grants of the King's prerogative," "advantages that some have above others."

Per contra: They are handicaps, burdens, oppressions, tyrannies upon those same "others."

"What is one man's privilege is another man's right," is a wise saying attributed to Andrew Carnegie.

Of corporations Justice Story said: "An aggregate corporation at common law is a collection of individuals united into one collective body, under a special name, and possessing certain immunities, privileges and capacities in its collective character which do not belong to the natural persons composing it. . . .  It is in short an artificial person, existing in contemplation of law, and endowed with certain powers, and franchises, which, though they must be exercised through the medium of its natural members, are yet considered as subsisting in the corporation itself, as distinctly as if it were a real personage."

Marshall said of this corporation: "An artificial immortal being was created by the crown, capable of receiving and distributing forever, according to the will of the donors, the donations which should be received by it."

And said Webster: "A grant of corporate powers and privileges is as much a contract as a grant of land."

"Was it ever imagined," asked Story, "that land voluntarily granted to any person by a State was liable to be resumed at its own good pleasure?"

The nature of privileges is agreed to; also that corporations hold privileges; also that "a grant of franchises is not in principle distinguishable from a grant of any other property," as asserted by Story.

But cannot the State take the physical thing, land, under power of eminent domain; and did not John Marshall say, in Providence Bank v. Billings (4 Peters, 562), referring to a land grant, that: "This grant is a contract, the object of which is, that the profits issuing from it shall inure to the benefit of the grantee? Yet the power of taxation may be carried so far as to absorb these profits. Does this impair the obligation of contracts? The idea is rejected by all," etc.

If the State can take the land under condemnation, and its value (profits) by taxation, what becomes of the contention of Webster and Story that land granted may not be resumed? And we are all agreed that land grants and franchises stand or fall together.

Thus one principal assumption is destroyed. It has no validity in reason, and from a different point of view, as shown in the case cited, even Marshall was able to perceive the truth.

* * *

The second principal assumption was necessary to the conclusion, because if the corporation was not a "person," there was no party with whom the crown might contract.

It is agreed that a contract is "an agreement between two or more persons to do or not do a particular act."

As a corporation does not exist until the charter issues, it would seem that, if the charter is a contract, the corporation must be a party to its own creation.
 
Perhaps the State creates a corporation, or artificial person, and then contracts with that artificial person to do what it has already done, viz., create a corporation.

Story dealt with this point in the following manner:

"From the nature of things, the artificial person called a corporation must be created before it can be capable of taking anything. When, therefore, a charter is granted, and it brings the corporation into existence without any act of the natural persons who compose it, and gives such corporation any privileges, franchises, or property, the law deems the corporation to be first brought into existence, and then clothes it with the granted liberties and property.   . . . There may be, in intendment of law, a priority of time, even in an instant, for this purpose."

The corporation must exist before it is "capable of taking anything."

Certainly; and it must "be" before it can contract to "be." To "be" is one of its liberties, and all of its liberties are in the "contract."

As Marshall said: "A corporation is an artificial being, invisible, intangible, and, existing only in contemplation of law, it possesses only those properties which the charter expressly confers upon it."

One of which properties is to "be." "The law deems the corporation to be first brought into existence and then clothes it," etc. Never mind about clothing it. Get the thing born first — as a contract.

Story said those who oppose his view should "consider whether or not they do not at the same time establish that the grant itself is a nullity for precisely the same reason."

As a contract, we do establish "precisely" that.

* * *

Story had yet another line of approach. He said: "An executory contract is one in which a party binds himself to do or not to do a particular thing. An executed contract is one in which the object of the contract is performed."

The non-professional mind can readily perceive how one may contract to make a pair of boots, or to sell or to deliver a pair, but how can one contract to make a pair that is already made?

Seemingly, in the court's view, a charter is an executed contract. That is, "the object of the contract is performed." But this does not relieve the situation. For, even though the making and the performance of the contract be simultaneous, there can be no contract without parties, and the corporation or artificial person does not exist until the charter issues.

Not only is the "person" artificial but the whole concept is artificial and woodeny and bears no semblance to those "great originals" to which Blackstone rightly declared all permanent law must conform.

One feels impelled to warn the profane reader that this is not a discussion of farce-comedy.

* * *

The facts in the case appear simple enough, before Webster indulged in intellectual gymnastics, or the court applied its alchemy.

It seems that a group of persons applied for, and received, "an advantage above others," a "branch of the King's prerogative," or a privilege sustained by sovereign power, that is, a charter.

The grant being secured, the group thereby becomes an organisation of persons upon whom the State has conferred certain specified favors.

If the corporation is an artificial person "in contemplation of law," it can be very bluntly be asserted that the law assumes as true what is not true, but is absurd.

When told that in the eye of the law his wife supposed to act under his direction, Mr. Bumble replied: "If the law supposes that, the law is a ass — a idiot. If that's the eye of the law, the law's a bachelor; and the worst I wish the law is, that his eye may be opened by experience — by experience."

We are getting experience, and it is to be hoped our eyes will open. Mr. Bumble's estimate of the law was, in some respects, extremely accurate.

The second assumption seems untenable, and with its dismissal the case vanishes.

A corporation is an organization — not an organism, and certainly not a person.

Its charter is but the expression of the grant of authority conferred. If the State has power to confer, it also has power to withhold or withdraw — that is, to annul. Unless, of course, there is some power in government greater than sovereign agency.

* * *

Story suggested that power to annul charters might be reserved by the legislature, either in each charter or a general law.

Such reservation surely cannot give to a legislature a power not already possessed. Otherwise an act may not only tend, as Webster feared, but easily secure, "the union of all powers in the legislature."

And if the legislature cannot so add to its own powers, but can by act secure the reservation, does it not follow that the reservation exists regardless of the act?

Does a legislature possess power through contract with individual citizens, or is its power delegated to it by the sovereign people?

After agreeing to the nature of privilege, and listening to the definition of corporations, and observing Justice Story's assurance that these grants imply on the part of the grantor "a contract not to reassert the right" (although it is agreed that Parliament can annul), and being told that "the only effect of the charter was to give permanency to the design;" in fact, being duly impressed with the solemnity of the whole proceeding (and why should not artificial, immortal beings be viewed with awe?), we are suddenly startled by Marshall's assertion that "From the fact that a charter of incorporation has been issued nothing can be inferred which changes the character of the institution or transfers to the government any new power over it."

If this assertion is true, why do men seek charters?

If the character of the institution was not changed, what contract was made?

And what did Story mean in saying that a corporation possesses "certain immunities, privileges and capacities in its collective character which do not belong to the natural persons composing it"?

We must infer a change in the character of the institution, and that change is the possession of political powers not before held.

It is these political powers that Story said "do not belong to the natural persons composing" the corporation.

These "branches of the King's prerogative" are political because the whole of the King's prerogatives are political. The State is political. It has political power only to give.

It was to this sort of power that Webster referred when, after describing privilege, he declared that his clients "have such an interest in this case."

The character of the institution was changed by the exchange of a private for a public administrator. All corporations are public for the reason that all their powers are derived from the State. Corporate powers are part of the State — (sovereign powers subsisting in the hands of the citizen, — to use our terms in place of the British form).

On the same point Mr. Hopkinson, of counsel for the college, asked: "If the property of this corporation be public property, when did it become so? It was once private property; when was it surrendered to the public?"

The property was not surrendered to the public, but its administration was given to the public by the voluntary act of its owners.

The owners preferred to entrust it to a publicly established agency (viz., the corporation), rather than to leave it by bequest to private parties, in accord with the original intention of Dr. Wheelock.

* * *

Distinguishing between public and private corporations and indicating that the physical property with which a college corporation is endowed is called its "foundation." Story said: "If the foundation be private, though under the charter of the government, the corporation is private, however extensive the uses may be to which it is devoted, either by the bounty of the founder, or the nature and objects of the institution."

And in this class of private corporations he places hospitals, banks, canals, insurance, turnpike and bridge companies.
 
This conclusion gives to a corporation the character of its physical property, while common sense asserts its character to be that of the source of its authority.

It is a corporation because the State created it. Is it not more in harmony with right reason to say, ''if the grant be from the public, the corporation is public, however slight be the uses to which its political power is devoted"?

Do the privileges of a corporation spring from its foundation, or from the State?

Its power "to be" is of the State; its permanence, or "immortality," is of the same source.

How can we say that the privileges of a corporation are sovereign powers in the hands of a citizen, and at the same time say the corporation is private?

To classify corporations as civil and eleemosynary, or as public and private, is to divide them according to their uses, and is entirely proper as an aid to convenient identification; but to make this classification on the basis of philosophical distinction is merest twaddle.

A corporation is a group of persons holding "privileges," and the nature of privileges is agreed to. Whether the corporation is used to conduct a Sunday school, a great city, a railroad, or a manufacturing plant is immaterial.

A gun, whether a toy pistol or the most improved rifle, is still a gun; and whether in the hands of an honest man defending his home, or in the hands of a highwayman attacking his victim, it is still a gun.

A corporation holds political power. Its power to "be" is political. And all the fancy balancing indulged by counsel and court operates to conceal, not to destroy, this truth.

* * *

The New Hampshire court, as before stated, said it was difficult to understand "how a privilege can be protected from the law of the land by a clause in the Constitution declaring that it shall not be taken away but by the law of the land."

In reply Webster quoted Blackstone as follows: "And first it (i. e., the law), is a rule; not a transient or sudden order from a superior, to or concerning a particular person; but something permanent or universal. Therefore a particular act of the legislature to confiscate the goods of Titus or to attaint him of high treason does not enter into the idea of a municipal law; for the operation of this act is spent on Titus, and has no relation to the community in general; it is rather a sentence than a law."

Webster added, "Everything that may pass under the form of an enactment is not therefore to be considered the law of the land. Such construction would render constitutional provisions of highest importance inoperative and void."

All of which is true, but the case in hand is an instance of the "universal and permanent" rule that sovereignty can annul charters.

Webster seems to have dodged the issue, or begged the question; which reminds us that of one of counsel's arguments Story said, "The fallacy of the argument consists in assuming the very ground in controversy."

This is precisely the method of the court throughout most of this case.

Many eminent authorities, voicing sound doctrines as to the proper relation between sovereignty and the person, were quoted — and then the doctrines were applied to corporations.

Herein lies the plaintiff's need for asserting corporations to be persons — and herein is the lameness of this absurd decision.

* * *

In conclusion, sovereignty is not a subject of contract.

Nature forces the majority to be sovereign.  Sovereignty of necessity relates to persons and to land.

These two exist of themselves. All else in the social state is subsidiary.

The whole string of sophistries indulged by the court were to the end that these simple truths be submerged. 

It is only as these simple truths are clearly apprehended that social freedom is possible. Marshall was a Tory. His whole career proves it. A Tory is not a friend of freedom.

The truth is that power to regulate corporations or annul their charters inheres in each State — save for this precedent.

Deprived of this power by this invasive rule, the people flounder on, rapidly losing faith in the great American experiment.

Does anyone doubt that our Western States would long since have regulated railroads and other corporations in the interest of common honesty if the group of attorneys called the Supreme Court did not bar the way?

The people think they live under the Constitution, in fact, they live under Marshall's decisions.

If it were not for the slavish submission of the present court to the name of Marshall, would we need to be outraged by the spectacle of sovereign States like Idaho, Montana and Colorado in the West, and Pennsylvania and New Jersey in the East, lying bound at the feet of a lot of soulless corporate pirates, as reckless of human rights as any horde that ever sailed the Spanish Main?

Let the court confine itself to its own affairs, and leave the States to attend to theirs.

The decision was in degree destructive of the rights of the States (which in itself is of no moment), and thereby of the people's rights (which is of great moment).

It was not adjudication. It was usurpation. Thus far it has been endured.

One Judge dissented. Let us revere his name — it was Duvall.

Wealth Concentration data

I got into a chance conversation with a friend a couple of weeks ago about wealth concentration, and he made an assertion that appalled me: that 400 families hold 50% of America's wealth.  I told him that I knew wealth concentration was a serious problem, but that I was sure it wasn't that concentrated!   He brought out his cell phone and googled these words: 400 families control 50% wealth, and got results.  We were at lunch with a group, so I didn't pursue it then.

I returned to the topic and did some research (without recalling exactly what his search criteria had been).    What I came up with were the following: 

1. A page from Michael Moore's website, entitled "The Forbes 400 vs. Everybody Else" (March 7, 2011), which begins, "According to the most recent information, the Forbes 400 now have a greater net worth than the bottom 50% of U.S. households combined."  He provides sources for his assertions, and they all look quite sound to me, with the possible exception of his note 3, which includes nonprofits.
2. A Politifact page which fact-checks Moore's statement and finds it true (and doesn't seem bothered by the nonprofits issue).   

This is a very different assertion from saying that 400 families hold 50% of America's wealth.  That sent me looking for the correct data for my friend.

• If you've spent much time on this site, you've probably looked at the series of 3 articles listed at left on Concentration of Wealth.  Part 1 provides these data, from the 2007 Survey of Consumer Finances (Federal Reserve Board "Ponds and Streams"):

Top 1%          33.8%
Next 4%        26.6%  [Cumulative: 60.4%]
Next 5%        11.1%  [Cume: 71.5%]
Next 40%      26.0%  [Cume: 97.5%]
Bottom 50%   2.5%

• The 2007 SCF study writeup says that the Forbes 400 are expressly and purposely omitted from the SCF, and suggests that they account for 1% of Net Worth.  So add that to the numberator and the denominator.
• More recently, I learned about a series of 3 articles Citigroup published in 2005 and 2006 in a newsletter called "Equity Strategy" which dealt with how investors might profit from "plutonomy"; "rich" here pertains not to net worth but to income:

"In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie. ...   As Figure 1 shows the top 1% of households in the U.S., (about 1 million households) accounted for about 20% of overall U.S. income in 2000, slightly smaller than the share of income of the bottom 60% of households put together. That’s about 1 million households compared with 60 million households, both with similar slices of the income pie! Clearly, the analysis of the top 1% of U.S. households is paramount. The usual analysis of the “average” U.S. consumer is flawed from the start. To continue with the U.S., the top 1% of households also account for 33% of net worth, greater than the bottom 90% of households put together. It gets better (or worse, depending on your political stripe) - the top 1% of households account for 40% of financial net worth, more than the bottom 95% of households put together. This is data for 2000, from the Survey of Consumer Finances (and adjusted by academic Edward Wolff)." - October16, 2005

One of the other articles in the series also provided a much higher estimate for the net worth of the Forbes 400 than the 1% I'd been carrying in my head: 2.4%

The Factcheck article provided, for September 2010, the Forbes 400 Net Worth of $1.37 trillion and the total US Net worth of $54.9 trillion, which makes the Forbes 400's share 2.5%.    If we apply that 2010 percentage to the 2007 SCF data, we get this:

Top 1%          (33.8 + 2.5) / 102.5 = 35.4%
Next 4%        26.6 / 102.5 =             26.0%   [Cumulative: 61.4%]
Next 5%        11.1 /102.5 =              10.8%   [Cume:          72.2%]
Next 40%      26.0 / 102.5 =             25.4%   [Cume:          97.6%]
Bottom 50%  2.5 / 102.5 =                 2.4%

Or, viewed another way:

• Top 1%             35.4%
• Next 9%           36.8%
• Bottom 90%     27.8%

It appears to me that 50% of the net worth is held by about 3.5% to 4% of us.

 Henry George wrote of a wedge being driven through society, driving a relative few upwards, and the rest downwards.

Thomas Shearman wrote, in 1889, as follows:

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

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

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

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

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

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

The entire article is a few posts below this one, under the title, "The Owners of the U.S."

0-0-0-0-100

I have a family member who, when Herman Cain says "9-9-9," plays a sound bite of another voice shouting "nein! nein! nein!"

Georgists have a better proposal for how we ought to fund our common spending.

• 0% tax on wages
• 0% tax on sales
• 0% tax on corporate profits
• 0% tax on buildings and equipment
• 100% recovery of our commonwealth

This probably raises several questions in your mind:

• what is "recovery of our commonwealth"?
• how will it affect me?

Our commonwealth includes the value of land -- not the improvements made by the present or previous owner, but the value of the site itself, which is created by the gifts of nature; by the investment of the local, state and national communities in public goods and services (including most "pork"); by the presence of the community and its economic activity.  While good farmland may be worth $5,000 or $10,000 per acre, depending on climate and proximity to markets, suburban residential lots might be $35,000 to $1,000,000 -- or far more! -- per acre, and an acre in midtown Manhattan can be worth $250,000,000 or more.  The landholder doesn't create that locational value.

Our commonwealth includes the value of ecosystem services.  It includes the value of electromagnetic spectrum (the airwaves which most people would agree rightly belong to the American people, not to corporations).  It includes the value of water, particularly fresh water for drinking and water for irrigating crops and for corporate use.  It includes the value of government-granted privileges.  It includes the value of geosynchronous orbits -- those parking spots in space for satellites whose owners and customers would not want to see crashing into each other.  It includes the value of landing rights at busy congested constrained airports, such as LaGuardia or JFK, particularly at their rush hours.   It includes the value of scarce on-street parking in congested cities.  It includes the value of nonrenewable natural resources extracted from below the earth and the oceans, for 200 miles beyond our land borders.  It includes a whole range of other similar things.  

As you look at that paragraph, compare it to the 0-0-0-0 list above, and notice that it collects upfront certain values, and leaves the rest to those who produce.   It is direct taxation rather than indirect, and one could reasonably argue that it isn't even really taxation; rather it is more in the nature of a user-fee.

It is Natural Public Revenue.

Once one has sat with this idea for a while, it seems quite unnatural to permit the value to continue to accrue to private individuals, or to corporations publicly or privately owned, or to entities other than the community as a whole!

Recall how concentrated wealth is in the US: The 2007 SCF [the Federal Reserve Board's Survey of Consumer Finances] reported that aggregate net worth is "distributed" as follows:

• Top 1% of us have 33.8%
• Next 4% of us        26.6% [cumulative: 60.4%]
• Next 5% of us        11.1% [cumulative: 71.5%]
• Next 40% of us      26.0% [cumulative 97.5%]
• Bottom 50% of us    2.5%

Recall also that the Forbes 400 families are specifically and intentionally omitted from the SCF, and that Forbes estimates that they represent 2.5% of aggregate net worth. So add that 2.5% to the numerator and denominator.  And note, as Michael Moore did, that it is very similar to the value of the Net Worth of the bottom 50% of us.

And it seems quite unnatural to tax wages, and sales, and corporate profits, and buildings at all before we've fully collected Natural Public Revenue.

Will Natural Public Revenue be sufficient to meet all the needs of all levels of government? 

Quite possibly not, at least today when we are so reliant on a social safety net because current conditions have kept a significant share of our people from providing well for themselves.   But I regard it as altogether possible that within a generation or two, it could be quite sufficient, in part because it would have the effect of redistributing some of the wealth which today is pouring into the pockets of a relative few of us.

How much of corporate profits are coming from (quite legal) privatization of the value of natural resources, the value of being able to get away with polluting air, water and soil, and the value of other privileges which corporations -- public and private -- are used to enjoying?  One of the interesting findings in the SCF is that the value of privately held businesses [BUS] actually exceeds the value of publicly held ones [EQUITY] in household wealth -- and the value of both is highly concentrated:

                                    EQUITY          BUS              

[value, billions, 2007] $13,694.3    $14,893.7

• Top 1%            36.0%            62.7%
• Next 4%          30.5%            25.5%
• Next 5%            5.5%            12.4%
• Next 40%         19.6%             6.0%
• Bottom 50%       1.5%             0.4%

Source: http://lvtfan.typepad.com/lvtfans_blog/americas-wealth-distribution-2007-wealth-concentration-part-1-of-3.html, lines 19 and 28

Consider, too, how much more of this value the Forbes 400 have!   These two categories represent 21.2% and 23.1% of aggregate net worth held by the rest of us -- a total of 44.3%.  Most of the 2.5% is likely in these two categories.  I'll leave the math to you.