LVTFan's Blog

The Single Tax: An Essay on the Single Tax in 50 Words

All men have equal right to life.

Life depends absolutely upon land.

Therefore all have equal right to land.

Some must occupy more valuable land than others.

Equal right demands that landholders pay the yearly value of land Into a common fund for common purposes.

This is the single tax.
SAMUEL BRAZIER.

in The Public, 1900

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

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

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

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

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

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

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

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

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.

One's "Fair Share"

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

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

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

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

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

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

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

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

A Carbon Tax, Sensible for All - NYTimes.com

A Carbon Tax, Sensible for All - NYTimes.com.

ON Sunday, the best climate policy in the world got even better: British Columbia’s carbon tax — a tax on the carbon content of all fossil fuels burned in the province — increased from $25 to $30 per metric ton of carbon dioxide, making it more expensive to pollute.

This was good news not only for the environment but for nearly everyone who pays taxes in British Columbia, because the carbon tax is used to reduce taxes for individuals and businesses. Thanks to this tax swap, British Columbia has lowered its corporate income tax rate to 10 percent from 12 percent, a rate that is among the lowest in the Group of 8 wealthy nations. Personal income taxes for people earning less than $119,000 per year are now the lowest in Canada, and there are targeted rebates for low-income and rural households.

The only bad news is that this is the last increase scheduled in British Columbia. In our view, the reason is simple: the province is waiting for the rest of North America to catch up so that its tax system will not become unbalanced or put energy-intensive industries at a competitive disadvantage.

Over dinner tonight, Milton Friedman's name came up, and I commented that in about 1978 and again in 2006, a few weeks before his death, Milton Friedman called land value taxation the "least bad" tax, but never lifted a finger in the intervening years to help promote it.

The carbon tax is another good, and wise, and just, tax. 

How many economists will put their shoulder to getting it enacted? 

How many will simply hang out in their ivory towers?

Let’s start with the economics. Substituting a carbon tax for some of our current taxes — on payroll, on investment, on businesses and on workers — is a no-brainer. Why tax good things when you can tax bad things, like emissions? The idea has support from economists across the political spectrum, from Arthur B. Laffer and N. Gregory Mankiw on the right to Peter Orszag and Joseph E. Stiglitz on the left. That’s because economists know that a carbon tax swap can reduce the economic drag created by our current tax system and increase long-run growth by nudging the economy away from consumption and borrowing and toward saving and investment.

...

What would a British Columbia-style carbon tax look like in the United States? According to our calculations, a British Columbia-style $30 carbon tax would generate about $145 billion a year in the United States. That could be used to reduce individual and corporate income taxes by 10 percent, and afterward there would still be $35 billion left over.

Why on earth should the privilege to pollute OUR air be be given away for free, or for less than the social costs it imposes on us?  Who benefits from such a system?

A carbon tax makes sense whether you are a Republican or a Democrat, a climate change skeptic or a believer, a conservative or a conservationist (or both). We can move past the partisan fireworks over global warming by turning British Columbia’s carbon tax into a made-in-America solution.

Resource Rentals for Revenue -- The 3 R's of fixing our economy

I came across an excellent site at http://www.resourcerentalsrevenue.org, and thought their FAQ page particularly worth sharing.   The links will take you to answers.

We don't HAVE to burden ourselves and our economy with taxes which throw a wet blanket on jobs, on production, on homes.  There is a better way to finance our common spending!

Resource Rentals for Revenue.

The following list comprises the most commonly asked questions about the concept of making land and resource rentals the source of revenue for government. As you continue this study, you will see the value from giving resources the respect they deserve and the benefits resulting from the freeing of labour, production and exchange from taxation. If you have any questions which are not covered here, or observations you would like to put to our panel, please feel free to do so by sending your question as an e-mail query and we will attempt to respond.

The inclusion of land and resources in the economic equation is central to any solution for revenue raising. A taxation solution which does not consider the nature of taxation itself and allows the continuing private monopolisation of community land and resources fails to recognise the essential role land plays in the economic equation and will not work. Land is the only element in the economic equation which is both fixed and finite. It can be monopolised. It is a unique class of asset which must be treated accordingly. If we were to wrest not the land itself, but its unimproved value from private monopolies and return the value to the community — whose very presence creates it — then we would have reduced many problems in one stroke with great benefit to production, to the environment and to the cause of individual freedom and justice.

On the subject of land and resource rents, Henry George said this:

The tax upon land values is the most just and equal of all taxes. It falls upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by nature be attained.

1.Understandings

• What’s with all the terminology?
• Won’t the site rent be passed on to the tenant?
• It sounds too simple
• What is the difference between Land Value and Land Price?
• What is meant by ‘unimproved’ value?
• Why is income from land ‘unearned’ income?
• There is no such thing as a free lunch.
• There is no unimproved land value!
• This tax, like a debits tax, ignores two of the basic principles of raising tax
• It’s incorrect to suggest that income derived from holding land or resources out of use is not a productive activity. It is, since it produces income for the owner.

2.Interest Groups

• Will I be better off with Resource Rentals?
• Are resource rentals fair?
• Wouldn’t the wealthy simply find some way of evading it?
• Wouldn’t the wealthy sell up and flee with their wealth?
• Won’t the poor get caught, while the rich escape as usual?
• Would farmers be able to afford the tax?
• How will it affect multinationals (MNC’s)?
• How will it affect lenders and borrowers?
• Entrepreneurs and Manufacturers?
• Exporters and Importers?
• Environmentalists?
• Won’t it fall harder on the prince in his mansion than on the pauper in his hovel?
• How would old age pensioners on valuable sites be able to pay the site rent as suggested?
• What happens to the self-funded or partly self-funded retiree?
• Unemployed adults - currently untaxed but perhaps owning their own home? Will they have to pay as well?
• The investor in a site has taken a risk, and tied up their capital – who else could possibly be entitled to their capital gain?

3.Implementation

• How would such a system be implemented?
• What would happen to Land Prices?
• If resource rentals are such a good idea, why don’t we have them?
• Why would anyone want to own land under this system?
• How do I buy a property?
• If site values fall, won’t revenue fall too?
• How will it curb unemployment?
• Wouldn’t we run out of space?
• Who wins; who loses?
• Will pensioners and retirees - currently untaxed but living in their own property, be liable for site rents? Will they be reimbursed for past taxes paid?
• New enterprises - yet to realise any profit but paying tax on the property from which they operate? If you tax them, won’t they fail?
• Why don’t we impose reciprocal import duties?
• What about anti-pollution tax rebates?
• What about a Debits Tax?
• Site Rent for Revenue is a crackpot idea.
• Why put the entire burden of taxation on one area of economic activity?

Good questions -- and good answers!

The Earth-for-All Calendar: April 13 -- Jefferson

Wherever there is in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on.

— THOMAS JEFFERSON (1785), Ford's Writings of Jefferson, Vol. VII., 36.

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

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

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

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

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

The Land Questions: #27 -- Financing a New Subway Line

27. A new subway line costs $2 billion.  Suppose that its construction increases the surrounding land values by $2 billion. (Assume 5 miles long, 10 stations, 0.5 mile radius, average lot size of 0.10 acre.   How should the new subway line be financed?

A. Taxes on sales of groceries, clothing, etc. within those 1/2 mile radius areas

B. Taxes on sales of groceries, clothing, etc., all over the city the subway line connects to

C. Taxes on sales of services within those 1/2 mile radius areas

D. Taxes on sales of services of all kinds, all over the city the subway line connects to

E. Taxes on wages of those working in those 1/2 mile radius areas

F. Taxes on wages all over the city the subway line connects to

G. Taxes on wages of those living within the 1/2 mile radius areas

H. Taxes on capital gains and dividends of those living within the 1/2 mile radius areas

I. Taxes on capital gains and dividends of those with residence anywhere in the city

J. Taxes on all real estate within those 1/2 mile radius areas

K. Taxes on all real estate, all over the city the subway line connects to

L. Taxes on just the buildings within those 1/2 mile radius areas

M. Taxes on all the buildings, all over the city the subway line connects to

N. Taxes on the land value within those 1/2 mile radius areas

O. Taxes on the land value, all over the city the subway line connects to

P. Transfer taxes on either or both of buyers and sellers whenever a property within the 1/2 mile radius is sold

Q. Transfer taxes on either or both of buyers and sellers whenever a property anywhere within the city is sold

R. An inheritance tax when a house or commercial property is transferred from a decedent to a survivor.

S. Your suggestions?

 

Another motto: Save the Rent for Society

Save the rent for Society.

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

The Land Questions #19 -- Beaches

19. Storms continue to erode the resort beaches up and down our coasts.  Who should pay for beach restoration every few years?

A. The federal government, from income tax revenues.  (why?)

B. Taxes on pollution should be used to pay for this, on the basis that pollution produces the climatic conditions that make storms slower moving and more destructive.

C. State governments along the coasts.

D. Local governments, town by town, paid for by sales taxes.

E. County governments along the coasts.

F. Local governments, town by town, paid for by taxing wages.

G. Local governments, town by town, paid for by summer parking revenue, hotel bill taxes and taxes on rental properties' revenue;

H. Local governments, town by town, paid for by property taxes, taxing both buildings and land, in proportion to current market value

I. Local governments, town by town, paid for by land value taxation.  Land values close to the beaches rise and fall with the sand, and properties further from the beaches are far less effected by the presence/absence of beach sand than those near the beaches. 

J. Local governments, town by town, paid for by transfer taxes on sold properties, so as not to burden long-time owners who aren't selling.

K. Estate taxes

L. Your suggestions?

 

Mason Gaffney: An Alternative Reform

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

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

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

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

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

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

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

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

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

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

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

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

Here is, perhaps, my favorite:

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

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

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

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

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

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

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

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

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

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

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

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

"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."

What's an intact tire and your car's alignment worth to you, per year?

How much is it worth to you to have the potholes and cracks in the roads in your town promptly filled in?  Probably roughly what it costs you to have each of your cars fixed a couple of times a year. 

So is it better for the local economy to (1) keep the tire retailers and alignment shops in business; or (2) to pay city employees or contractors to maintain the roads in a condition that minimizes damage to cars and tires?

Fans of small government might opt for the first choice.  Fans of individuals having more money to spend on discretionary purchases or to invest toward their own futures might opt for the second one.

Some things ought to be done by the community, and financed by the community.  

So how should we pay for this sort of public works?

• Should we impose sales taxes on goods sold within the town providing services?
• Should we impose a wage tax on workers within the town providing services?
• Should we tax the buildings within the town?
• Should we throw an extra tax on tobacco, alcohol, cell phone use, cable TV subscriptions, electricity use in the town?
• Should we tax all the cars and trucks garaged within the city limits?
• Should we tax the gasoline and diesel sold within the city limits?
• Or should we finance this by taxing the land value within the town limits?

If you're new to this concept, all these may make equal sense to you. (Indeed, some people argue for "balance" in taxation, or for spreading taxes across many tax bases in order to "keep rates low."  But I think there is one option that is far better than the others. 

Who benefits when we make it less expensive to live within a particular community than it would otherwise be, as we do by improving road maintenance?  Isn't it ultimately those who own land within the city limits -- the landlords (residential and commercial), the homeowners, the business community -- who benefit, both as individuals and as property owners, when people are more prone to drive in their community than in one which does not maintain its roads to the same standards?  Even those who don't own cars benefit.

Some would say that this fails to collect from the tenants -- residential tenants, commercial tenants -- who also benefit, but I'd have to disagree with that argument.  Their landlords can charge them more in the presence of such services than they could charge in the absence of that road maintenance.  Should that benefit accrue to the landlords, or should it be passed through to the community whose spending created it?

I'll return to something a Tennessee business man wrote to his governor in 1873:

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

The same is true of individual towns, too.   Don't tax jobs, or workers, or buildings, or equipment, or products.

This is not a reason not to raise public revenue; rather, it is a reason to think carefully about what should be taxed -- and what should not be.  Charge for that which the community's presence and activity creates, and the privilege of using that which nature or community provides in limited supply, e.g., water, electromagnetic spectrum, geosynchronous orbits, minerals, oil, natural gas; privileges like franchises for monopolies; landing rights at congested airports; on-street parking; etc.

Who benefits when America sells off our airwaves?

I couldn't figure out how to comment at HuffPost, but I question the wisdom of selling off our airwaves, rather than leasing them for, say, 5 or 10 or 20 years.  They're OUR asset, and shouldn't become a privatized corporate asset under any circumstance.  We aren't the final generation.  Yes, we have revenue needs, and the value of the airwaves can certainly make a solid contribution to those needs.  But we ought not to do it at the expense of the next generation, and the one after that.   LEASE those airwaves, and then repeat it in 5 or 10 or so years.

Who benefits?  Smartphone Users???   Hah!

Spectrum auctions are a win-win-win?   Only if you omit future generations -- even our own future selves, if we expect to be alive in, say, 15 years -- from the calculation.

"Congressional budget officials estimate those auctions would raise a total of $24.5 billion over 10 years. Reid's plan envisions $13.1 billion going to the Treasury Department to help narrow the federal deficit. The remainder would largely go to compensate television broadcasters that give up airwaves, cover the expenses of broadcasters and government agencies that move to different parts of the spectrum and fund the construction of the public safety wireless network."

Compensate television broadcasters for giving up their privilege of owning a portion of OUR airwaves?   Should we have compensated Captain Kidd when piracy was stopped?

I don't know whether Chicago has yet figured out that selling its parking meters wasn't a particulary smart thing to do.  But we need to study this, and recognize that we ought not to be selling off our public assets.  LEASE THEM, and REPEAT in a decade or two.   NATURAL PUBLIC REVENUE, not just once, but forever!

http://www.huffingtonpost.com/2011/07/29/debt-ceiling-smartphone-harry-weird_n_913121.html

Debt Ceiling Battle: Harry Reid's Plan May Benefit Smartphone Users

By JOELLE TESSLER   07/28/11 06:01 PM ET   

WASHINGTON -- The debt ceiling battle could produce an unlikely winner: smartphone users.

Senate Majority Leader Harry Reid's current plan would direct the Federal Communications Commission to auction off highly valuable radio spectrum to wireless carriers desperate for more airwaves. Companies such as AT&T and T-Mobile USA say they need more capacity to keep up as their customers increasingly use iPhones, tablets and other portable devices to handle mobile applications, online video and other bandwidth-hungry services.

The plan could generate critical revenue for a government spending beyond its means. Congressional budget officials estimate the auctions would raise $13.1 billion for deficit reduction.

Reid's proposal would also deliver a big victory to public safety officials: It would set aside airwaves and money for the construction of a nationwide wireless broadband network that would let police officers, firefighters and emergency medical workers communicate with each other across agencies and jurisdictions.

"Spectrum auctions are a win-win-win," said Tim Doyle, a spokesman for the Consumers Electronics Association.

But the proposal still faces significant hurdles. For one thing, a competing debt ceiling plan from House Speaker John Boehner, which will be voted on Thursday, contains nothing on wireless spectrum auctions. Boehner's focus is on spending cuts, not finding new sources of revenue. What's more, Reid's proposal has run into major opposition from television broadcasters, which are under pressure to give up spectrum that would be sold to wireless carriers.

The haggling over wireless spectrum auctions comes as Congress rushes to try to agree on a plan to stave off an unprecedented U.S. default on its debt, which could have catastrophic consequences for the global economy. The Treasury Department has warned that the government will run out of money to pay its bills after Aug. 2 if Congress does not raise the debt ceiling. Reid and Boehner are pushing competing proposals to lift the debt limit and slash spending.

No matter how the current fight plays out, many in Washington see spectrum auctions as an attractive way to chip away at the federal deficit.

Stifel Nicolaus analyst David Kaut, for one, says spectrum auction legislation has a good shot of passage in Congress – whether it is part of the current debt ceiling package, a deficit reduction measure down the road or even a stand-alone bill.

"You have wireless pressures, budget pressures and public safety pressures," Kaut said. "The forces are aligned."

Reid's proposal would give the FCC authority to auction off airwaves voluntarily relinquished by government agencies such as the Pentagon and television broadcasters with extra spectrum. It would allow broadcasters to share in the auction proceeds.

Congressional budget officials estimate those auctions would raise a total of $24.5 billion over 10 years. Reid's plan envisions $13.1 billion going to the Treasury Department to help narrow the federal deficit. The remainder would largely go to compensate television broadcasters that give up airwaves, cover the expenses of broadcasters and government agencies that move to different parts of the spectrum and fund the construction of the public safety wireless network.

Reid's plan, based largely on a Senate Commerce Committee bill, would also dedicate a highly contested piece of airwaves to that network. Such an "interoperable" network was a key recommendation of the 9/11 Commission, and is becoming an urgent priority for lawmakers as the 10-year anniversary of the 2001 terrorist attacks approaches. The shortcomings of existing networks became apparent after the 9/11 attacks and Hurricane Katrina, when emergency workers could not talk to one another because they were using incompatible – and sometimes antiquated – systems.

At this point, perhaps the biggest hurdle facing any spectrum auction proposal is opposition from television broadcasters reluctant to give up their existing airwaves. Dennis Wharton, an official with the National Association of Broadcasters, noted that many broadcasters fear being moved to different channels that would reach fewer viewers.

He added that many broadcasters want to use their existing airwaves to deliver television signals to mobile devices and to "multicast" more than one television signal at a time. Broadcasters worry that they could be moved to a part of the electromagnetic spectrum that is less conducive to such broadcasts.

Wharton said that while the proposals in Congress are intended to be voluntary for broadcasters, those that want to hang onto their airwaves are concerned that they could face user fees and other government sanctions intended to force them to give up their spectrum anyway.

Ultimately, Wharton said, it will be viewers who suffer in the face of "incredibly shrinking free and local television."

Our System of Taxation

Stephen Colbert and Jon Stewart would have fun with the names in this one ...

from The Public, of March 16, 1901:

OUR SYSTEM OF TAXATION.

Old Sam Head made his millions running department stores. His method was simple. He would buy a building or take a long lease in the best part of a town. Then he would divide it up, allotting the front to fancy goods, the center to dry goods and the rear to groceries. He would entice merchants to hire of him sections of the store. He furnished light, heat, elevator service, detectives, caretakers for the building and cleaners for the aisles. For the best situations he charged the highest price, but being a good natured fellow, he gave a peanut man the privilege, for nothing, to sell his wares on the sidewalk.

One day he suddenly disappeared, and the boys took up the business. Wood Head, who was an observing fellow, took a point from the ways our cities are run and reversed the old man's methods. He charged a fee for bringing goods into the store and appointed officers who received the dues as they passed the door. Some of these fees were on the value of the goods, and some of them a fixed price for each article. He argued that, although this required a considerable number of officials, the customers who purchased goods never noticed that there was such a change, and the income derived from it relieved the seller of the goods from a part of his fees for the ground rent.

In addition to this, it induced some of the storekeepers to start making manufactures of their own, which seemed to make a demand for floor space; yet somehow, the receipts fell off and the store did not seem to be prospering.

Another brother, Bill Head, said the best thing to do would be to charge every customer who came to do business a fee based upon his estimated income. Customers seemed to object to this, and would never give their incomes correctly. They were dishonest. But Bill insisted that the principle was a just and fair one. He said "they pay according to their abilities."

Dick Head said he believed in internal revenue, and instituted a tax on all corsets worn in the store. He said corsets were injurious, anyhow. This tax was constantly evaded, however, by unscrupulous women, who said they wore only waists. The young men especially objected to being examined as to whether they wore corsets. Sharp Head, who was a far-sighted sort of chap, seeing that his brother's plans were not working as well as they might, and that a change in the management was bound to come, induced them to give him a lease (which he duly recorded) of the elevators, and charged everybody for going up or down. He put in an improved elevator, and pointed out to the firm what a public service he had done.

Big Head, taking a point from him, got a similar franchise for supplying light, and as he had not the capital to put in the electric lights that were needed, he got an agreement out of the concern that they would give him bonds for an amount sufficient to cover the actual cost of putting in an electric light plant, and he should charge a moderate fee for the service.

The custom of the store, however, seemed to be dwindling, and it was necessary to devise some new methods of raising revenue. A conference of the brothers decided that a proper source would be a small charge for the water in the drinking fonts and the lavatories. By a happy inspiration, the firm also sold outright the exclusive privilege of supplying heat to the building, for which every storekeeper had to pay in accordance with the amount of floor space he occupied. This brought in a large sum which kept the firm going for some time. Nevertheless, the business declined.

Wood Head now admitted that his tariff on goods coming in was not working well, as it did not bring enough revenue. He claimed that it had done its work by establishing industries, and that it would now be well to establish licenses to do business. He urged that those departments which sold soda water and other things that people did not need, ought to pay for the privilege; that if customers did not wish to be taxed, they should not buy these things.

Bill Head stuck to his income tax; but as it was very difficult to collect, he consented to modify it so that only the merchant should pay it. On these, however, he made them swear to the amount of their profits, or rather for the most part, swear that there were none.

Wood Head said that, in his opinion, Sharp and Big were making all the money that was in the business, and that the wise thing would be to charge them a fee for the privilege they had.

These plans, however, were of no avail, and the brothers despairingly concluded that there could be no natural and scientific plan of taxation. and made an assignment. —Bolton Hall, in Johnstown (Pa.) Democrat.

Earned Income: Public and Private

I came across a pamphlet published in 1949 by a foundation on whose board I sit, and while there are some things that I might emphasize differently 70 years later, I thought it worth sharing.   It speaks to a category I've just added to the "cloud" at left: Natural Public Revenue.

Today we see some additional privileges which corporations (and individuals) are taking advantage of -- the privilege of polluting the world's finite supply of air and water beyond its carrying capacity and ability to heal itself; the privilege of claiming as their own the supply of various other natural resources: e.g., oil, natural gas, lithium, copper.   The privatization by corporations of what ought to be revenue sources for common spending should not go unremarked.   And trivializing monopoly, as I think the author does, seems odd in light of what we've seen in the intervening years.

Earned Income: Public and Private
by Joseph S. Thompson
President, Pacific Electric Manufacturing Corp.

THE FATES of America and Europe are inextricably one. A depression here could ruin us and would ruin Europe. We dread a depression; yet we have done nothing salient or radical to prevent it. The Soviet Politburo eagerly predicts and awaits it.

The basic reason why there are depressions and why prosperity is not normal, general, and constant is that we do not distinguish between TRIBUTE TO PRIVILEGE and RECOMPENSE TO SERVICE, and are indifferent to their diametrically opposite effects.

The fault is not in our political system, the freest and best yet devised. It is not in our industrial system which, based on service, saved the world from German domination and will continue to serve us well unless stifled by "Planned Economy," as planned economy has stifled industry elsewhere.

But when we study our taxation system we find a cancerous growth, developed in the last few years, that threatens to destroy all that makes America great, fostering privilege and hampering industry and service. We take for granted the principles underlying our present taxation system; yet adherence to those principles means national disaster.

The full breadth and importance of Chief Justice Marshall's statement that "The power to tax is the power to destroy" seems never to have been wholly grasped or emphatically enough expressed. Taxation destroys good things as well as bad. The power to tax is the power to control a destructive force and, when used, becomes equivalent to a fine. A fine represses, and a tax represses. Simple reasoning develops the fact that a tax is automatically and undeniably a fine. It is an arbitrary seizure of private earnings or acquirements, based on arbitrary opinion, and the fact that the money is used for public purposes does not justify its imposition.

But since money is required for public purposes, how else is it to be provided? The answer is simple: through earned public income.

We are all familiar with earned private income, earned through labor, service, or investment, but few have inquired as to whether there might be a true, just earned public income -- an income that we all, as the public, create and earn jointly as a common wealth just as the individual creates and earns his income as private wealth -- an income that can be measured by fact and not by opinion, forming the basis for, and fixing the limit of, responsible public budgeting -- A PUBLIC INCOME PUBLICLY EARNED AND TO PUBLICLY COLLECTED.

Those who have inquired have been answered by the Physiocrats, by Thomas Carlyle, by Patrick Dove, by Herbert Spencer, by John Stuart Mill, and, in full and complete analysis, by Henry George in his great book, Progress and Poverty. These men have shown that the public income is closely measured by, and reflected in, and therefore should logically, justly, and intelligently be, the rental value of the land.

The rental value of the land, which is the amount that individuals will pay for its exclusive use, if collected or "taxed" by the public, would provide and define the rightful earned income of the public, to which the budget should conform.

Land costs nothing in human effort or creativeness and gets its value only from the presence of people; so, land rental value might better be called location value; and since location value means land in a desirable place among people, land value and location value are really people value. The landlord's title to the land is a legally created privilege. It represents no contribution on his part but gives him an unearned tribute (and it is unearned even though it was bought with money that was earned). Solely by their presence the people create this value, and it is theirs. The people should collect it and nothing else. Arbitrary assessment might have to be resorted to in time of emergency, but, as it is now understood and imposed, taxation should be reserved as a regulative or repressive curb on acts counter to the public interest.

It sounds like quibbling to speak of abolishing taxes while advocating the public collection of land rent; and, since the assessor would define and impose it, and the tax collector would collect it, it does look like a tax on land. But it is not a tax on land. It is payment for the privilege of an advantageous location among people.

It is easy to "capitalize" such an amount. Figure the capital that would earn interest equal to the rent offered. The value of the land is thus set by the rent. Assess it at that value, tax it at the current interest rate, and the public would then collect the value it creates. Taxes would no longer raise the cost of living.

The public collection of land rental simply means a charge by the public for a choice location in the midst of the public. The parking meter is a perfect example of this principle. If you want to use a desirable part of a public street, you pay the current value into a public fund. The parking meter principle should apply to all land. The simple mechanism to correct our revenue system would use present methods, equipment, and personnel, arriving by the test of the market at the desirability of all parcels and periodically adjusting appraisal and taxation to absorb the rent offered by the occupants. There is nothing of arbitrary opinion in this, nor would the rent be created by enactment. It would be a straight business matter, and little change would be needed in our laws.

Our failure to discern the difference between PRIVILEGE and SERVICE is stupid enough in its direct impact on our revenue policy, but it also creates a by-product, land speculation, which terribly hinders our progress and security. There is nothing spectacular about the land speculator. Quietly and conservatively he comes into possession of the title deed to a location, an area, for the purpose of (1) using it, (2) charging someone else for its use, or (3) selling his title at an increased price. If he uses it, he retains a public revenue. If he charges others for its use, he collects a public revenue. IN NEITHER CASE IS HIS MONEY USEFULLY INVESTED, and in both he hopes that the third purpose will be served. He hopes that more people will need the land, increasing its rental value.

When he buys it for the third purpose, straight speculation, to sell it later at a higher price, he becomes an obstructionist. He serves no good purpose. He does nothing useful. He is a legalized holdup man. He makes building, living, and working more expensive.

He could say to himself and to the community, "Someone will need this location in the near future; the growing population will make it more and more desirable; so, since the people will not collect what they create here, I will. I will get in this someone's way and prevent him from using this place until he pays me to get out of his way. I will not have to perform any service for him; the people will do that. He will not even get 'value received' from me because as soon as he begins to use the place, the people will fine him with 'taxes' for improving it. They fine anyone who builds a home or brings a business or service to their community. But they will not fine me; they are already letting me usurp a part of their wealth. I levy a tribute on progress. I capitalize other men's energies. The more they fine those who produce or render service, the more unearned value I gain." This is the unconscious soliloquy of the land speculator.

You may question this sweeping and positive singling out of land rents. What about Corporations? Monopolies? Bonds and Stocks? Capital?

Corporations are formed to perform service or to exploit through privilege, or frequently, to combine the two. To the extent that they perform service, they should retain their earnings, however great. To the extent that they exploit through privilege, they should not be supported by the law.

Monopolies, other than land, are simply opportunities for someone to get a little more than he deserves for what he gives, until competition or buyer resistance checks him.

Bonds and stocks are simply evidence of ownership in corporations that may be good and useful or evil and leechlike. Remove privilege, and they will adjust with the change.

Capital is a tool, and the man who creates it should retain what he earns from its use. The difference which sharply and cleanly separates land rental from payment for the use of buildings, tools, stocks in trade -- in short, from capital -- is that land costs nothing in human effort. Everything else is humanly produced. Money invested in the privilege of exacting tribute in the form of land rent is not capital. It is not usefully invested. "Capital is wealth used to create more wealth."

Resentment against big corporations is purely habit or label thinking. Most corporations spend fabulous sums in research seeking new products, processes, and economies, and you buy from them, not because you have to, but because you want their product. You can buy something else or do without. But you DO HAVE to have a little space on earth. That is a monopoly you cannot escape.

It would seem to be beyond dispute that the threat of depression would be remotely distant if the imbalance of our stupid taxation and the stifling barrier to our progress, land speculation, were both removed by recognition of this simple fact: THE RENTAL WHICH USERS WILL PAY FOR LAND IS THE TRUE EARNED PUBLIC INCOME. IT IS A VALUE CREATED BY THE PUBLIC. TAXATION OF INDUSTRY AND THE HOME IS UNJUST, ARBITRARY, AND DESTRUCTIVE. IT SEIZES PRIVATE PROPERTY.

When we learn this and adopt it for ourselves, we will be fitted to lead the world to prosperous peace.

Monopoly History

Monopoly History

This is one of a number of sites which describes the history of the board game Monopoly.  It doesn't get it quite right, but is directionally correct.  I'll share my corrections here:

1. "Goal" is actually "Gaol" -- what we know as Jail.
2. The "Prosperity" rules were not similar to the rules of the Monopoly game as we know it.  Rather, they were similar to the original rules, which produced a VERY dull game.  No big winners, no losers.  Just a sustainable situation in which all could prosper.  Not much fun on a Sunday afternoon, but a good model for real life.  The OTHER rules are similar to the Monopoly game we know today.

The point of "The Landlord's Game" -- Lizzie Magie's original 1903 game -- was to teach the ideas of Henry George (1839-1897), and show by a simulation why they produced a just, logical, sustainable economy and community, in which all could live as equals.  George saw that the economic rent -- the annual rental value of the land within a community's borders -- ought to be collected by the community and used to fund goods and services which would benefit the community, while that which individuals and corporations create should be the private property of those individuals and corporations.  The game demonstrated how things would work under this scenario.  (Think about SimCity as a teaching tool.) 

This website is missing the richest part of the story!

You might appreciate these two pages:

The Landlord's Game and Prosperity, at https://docs.google.com/fileview?id=0B5SHdsI4Ysi_ODQ4Y2FjZWMtNGFkMS00ZjZkLWFhNzYtMjNkNjFjMDJiZGE3&hl=en_GB

and the 1923 patent application, at http://www.google.com/patents?pg=PA1&zoom=4&id=lD1cAAAAEBAJ#v=onepage&q=&f=false

I'll post more on the subject over time.

Looking Forward

Looking for the phrase "I am for men" (see an earlier post, below) I came across a 1906 book by August Cirkel (circa 1870-1946), of Chicago, entitled "Looking Forward."  His prefatory note is as follows:

An apology is, peradventure, due the memory of Edward Bellamy for the semi-plagiarism in the title of this book.  It is true that "Looking Backward" suggested the name I have given it. The ideally happy condition of all the people, that Mr. Bellamy pictured as resulting from socialism, I look forward to as a result of a higher development of individualism.

The variety of topics considered may make the work seem presumptuous.  But though the subjects are various, the same strain runs through all.   Like the Irishman with his shillalah at the county fair, wherever I have seen a monopoly head, I have taken a whack at it.  If there are any sore pates or broken craniums on account of my impartial and promiscuous blows, I shall know that I have not labored in vain.

A.C.

A passage in the middle of "Looking Forward" caught my eye, and I added the preceding ones for setting the scene.  In this age of "too big to fail" and 10% of our households having over 70% of the aggregate net worth, a lot still rings true after 100 years:

We have one concern controlling far more than half the oil, another more than half the iron, another half the coal, another forming to control much more than half the copper, a few combinations working towards ownership of all the railroads and steamship lines; another, meat; in our large cities, the public service corporations are one by one being gobbled up by the same group of capitalists who control these other companies. It is probably safe to say that the so-called trust crowd now controls at least forty percent of the business and wealth of the country; moreover, the portion so controlled is organized on such a basis that the profits exacted each year reach the public with almost the directness of a tax. Without exception each one of these gigantic monopolies makes millions in the way of earnings disbursed to pay interest on bonds and dividends on stocks.

The profits of the Standard Oil Company have averaged forty percent per annum for many years; others of these companies are nearly as successful. In ordinary business only the very few after a period of twenty or thirty years can show a larger capital than they had at starting, and many fall by the wayside; but each, and every one, of these giant corporations makes tremendous gains. The public seems to have acquiesced in their right to fix the tribute that they will levy each year, and has grown so accustomed to their demands as not to analyze this right.

A few years ago Henry George tried to stir the people to a realization of the wrongs contained in the private ownership of land; but excepting the few Single-tax Leaguers who still try to keep alive the fires he kindled, few have given serious consideration to this matter, and many think him to be a vain dreamer of impossible conditions.

His theory as to the manner of applying a remedy has doubtless estranged many who accede to the correctness of his views as to existing wrongs. His argument as to the natural right of all mankind to the earth, the air, and the waters on the earth or underneath it, cannot well be refuted.

Let us suppose ten families occupy an island, and that this island constitutes all the land on the earth. Now, assume that they organize a regular government, the rights of each and all being fully considered and agreed to by every one, and, further, that every individual is perfectly satisfied that justice has been done him. Suppose that they agree to divide the island into ten equal parts, giving each family an equal portion, for which a patent is issued by the government, each soul on the island being satisfied that the division is fair and also satisfied with his allotment. There being no one on earth except the ten families, and as they are all content and happy, at first blush it might appear that they had a right to make this apportionment, and that there is no element of wrong concealed anywhere in the transaction. In doing this they certainly would be doing no more than has been done by nearly every people in history, and on a much more equitable basis. They overlooked, however, the changes to be wrought by time. After the apportionment, let us say that the islanders, being ordinary human men and women, went about their vocations in the usual manner, and led their lives as humankind generally does; let us say that there existed among them the same differences in capacity and temperament and habit of life that commonly prevail among people — some being thrifty and industrious, others improvident and idle, as men have been, are now, and perhaps always will be. What would probably happen? In a short space of time possibly fifty percent of the population would sell their share in the island to the provident class, and in the course of time twenty-five percent might come to hold absolute title to all the land. In consequence, the children born of the families that sold their holdings would have no land. The children born to the twenty-five percent would own it all.

If the laws of the island were based on the same principles as now obtain in the laws of the United States, it would be perfectly lawful for the twenty-five percent to say to the seventy-five percent that they might work the land on shares, giving the landlords half of the product of their labor. As there would be no possibility of procuring a livelihood otherwise, this offer would have to be accepted, if the laws were obeyed.

Normally, it is hard enough for a laborer to gain his living by the sweat of his brow, though he gets the full product of his labor. How much more difficult the situation when half of all he produces must be handed to another! In Ireland the situation was parallel to this; the poor Irish tenants tilled the soil of their native land, but instead of getting the full product of their labor, a large portion was pitilessly exacted by alien landlords. In lesser degree in nearly every country on earth the situation is comparable to this, the burden being disguised in various ways.

We, then, have seventy-five percent of the islanders giving up to the twenty-five percent one half of the product of their labor. Assuming that the original ten families that organized the government and apportioned the island have all died, by what God-given principle should the seventy-five percent of the population be required to give half of the fruits of their efforts to the twenty-five percent? Yet under our own laws would this not be possible, yea, natural? Without doing anything whatever, the twenty-five percent would be getting a revenue one and a half times as great as they could produce if working on an equal basis with the others. Because their fathers had got possession of the island, these few without toil get half again as much as they could produce if toiling, while the rest, though constantly laboring, get only half of the results of their labor. There are doubtless those who will say that the thrift of the original provident islanders should entitle them to transmit their gain to their children. Very good, but how about the thrift of the seventy-five percent now? The twenty-five percent may be compared with the original spendthrifts, as they squander without toiling, and by a just continuance of the rule, the children of the thrifty toilers should get back the island. On the face of the proposition this would manifestly be impossible. Let us go a step farther. Suppose the twenty-five percent, grown haughty with power, exercise it so arbitrarily that the others object, would it not be possible under laws like the laws of the United States, for the minority to refuse the majority employment except on the terms of the minority? What must be the consequence? Either submission to slavery by the seventy-five percent or starvation, if the laws are obeyed, or revolution and rebellion, if they are not. It cannot be an answer to the argument to hold that the ordinary principles of morality would restrain the minority in their exactions. History has not demonstrated that those who grow great with power never grow greedy. Then, if there is no justice in requiring the seventy-five percent to give up half their labor, is there justice in a situation or in laws which compel this result?

In the United States we have not even been as fair as the islanders, no equal division ever having been made, nor has every person been satisfied that his share is just; yet most of the land has been passed to the possession of private owners by patent from the government, and the average man has always thought, and the average man now thinks, that as a general proposition this was just, although knowing and admitting the possibility of minor wrongs. People have had the notion of private ownership of land so thoroughly grounded by long custom, that it seems the natural, rather than the artificial, manner of holding. Community of interest is repugnant to most minds. Socialism is believed to be a theory that might answer the requirements of angels, but finds small space for application among the wingless crowd on earth. Yet if the principle of private ownership is wrong as applied to the island, is it not equally wrong with us?

A few years back, owing to financial stress in the business world, vast numbers of men were idle from inability to find employment. Coxey gathered together a tatterdemalion army of the riffraff, tramps, and bums of the country, and marched them to Washington to emphasize to Congress the hardship of the situation, and to beg relief. He was derided and jeered at every hand. The public looked upon the idea as one of a crank, laughed at it, and dismissed it from their minds. Yet out of this army of thousands, how many possibly were sincerely desirous of a chance to earn an honest livelihood? The country at that time was infested with tramps, but since times improved the majority of them have gone to work again, and Coxey is forgotten. But way down deep, unperceived by the casual thinker and busy every-day man, some elemental principle had been violated, and in consequence the deplorable condition resulted. These men had a right to live. They had a right to labor. They had as good a right as any one of us to use God's soil, and to breathe God's air, and pity for them on our part by no means fulfilled our duty towards them. Somehow, little they knew how; somewhere, little they knew where; some time, little they knew when,— they had been cheated of the rights that are due to every human being that comes upon this earth.

The Declaration of Independence holds it to be a self-evident truth, that all men are entitled to life, liberty, and the pursuit of happiness. What a grim sardonic joke this would be, if read some Fourth of July to a ragged army of a hundred thousand starving men, women, and children, willing to labor, but with naught to lay their hands to! Hollow, indeed, would it sound, and the mockery would be so apparent to the multitude that I doubt not they would feel that somehow a terrible injustice had been done them.

When the ten families divided the island they allotted what belonged to God, and not to themselves, except as a blessing flowing from Him. They had no right to alienate the title from the whole community. The island belongs to every child who is born upon it, and each has as good a right to its benefits as every other. The ten families deeded away what they had no right to. Posterity was not considered, but the child then unborn owed no duty to the agreements made adverse to his interests by incompetent, reckless, luckless, or improvident ancestors, who bartered away his birthright. It was not theirs to give.

We must all, high and low, rich and poor, young and old, somehow or other, directly or indirectly, get our living from the earth. Necessity compels every one to eat to live. How fulfill this necessity except by application to Nature? What right has any government so to shape its laws that one single human being is debarred from his God-given right to labor in order to sustain his life? Organize society as you will, if provision is not fully made to protect the unborn souls to come, an injury is done, a seed is planted that will grow and bear suffering.

Henry George's theory is correct. The land belongs to all, the air and the water belong to all. If we are on earth for a purpose, and the God of chance is not ruling our destiny, as no man who thinks deeply can believe, it behooves us to conform to Nature's laws. The rules of conduct prescribed by people hundreds of years ago should have no binding force upon us today against our reason. Because people have always divided the land, it is not proof positive that their methods have been correct. Humanity has not reached the acme of advancement by any means. Some things are done vastly better today than ever before in history. It seems as if progress is being made. The world seems to be growing better. Yet how would this be possible but by the correction of previous wrong conceptions? Progress can never be made contrary to Nature's law; the decay of the nations of history proves the inexorableness of her workings. Conformity to her decrees, through principles of justice, of liberty, of equality, has ever led to advancement at a tremendous pace; but selfish interests have always injected into the laws of the nations the virus of destruction; decay ensues, the people become enfeebled, corruption reigns, and dissolution follows through the onslaughts of vigorous, lusty races that have grown strong through meting out the justice which the older nations had forgotten.

No government is good that does not give the greatest consideration to its lowliest citizens.

Let's talk about "our lowliest citizens."  Recall that 10% of us have title to 71.5% of the aggregate net worth. The bottom 75% of us have an amazing 12.7% of the aggregate net worth.  A slightly different 10% of us receive 47.2% of the before-tax income, and 20% of us get 61.0% of the pre-tax income.  The bottom 60% of us share --  are you ready? -- 20.9% of the pretax income -- and most economists agree that we're paying 15% of that in social insurance taxes on our wages, plus federal and state income taxes, sales taxes, taxes on our buildings and on our land (if we own any).  (Remember Leona Helmsley's observation about who pays taxes.)

Looking forward ... to more of the same?  To a society which doesn't automatically enrich a small segment of us at the expense of the rest, who, most of us would agree, work equally hard, even if we're not in privileged categories of the real estate, finance, insurance or natural resources sectors, or otherwise endowed with a monopoly which feeds them so abundantly at the expense of others.

In many fast examinations of the Gilded Age, Edward Bellamy's book on socialism, "Looking Backward" is mentioned in the same sentence with Henry George's book best-selling "Progress & Poverty."  The former book seems to be more widely assigned reading, in courses which bring in original sources.  This is a shame.

"I Am For Men"

That's the slogan on the two-story high advertising mural found recently on a building in Galesburg, Illinois.  (Photo here.)  It is an ad for Henry George 5 cent cigars.  (See also this page of cigar ads.)

The "I am for men" slogan was on a pin I found on ebay a few years ago.  The seller made some comment about it being anti-feminist.  Well, she or he didn't know much about George.

When I googled the phrase, I found some interesting things.  Here's one:

Henry George, a nineteenth-century American author and political economist, was nominated for the office of mayor of New York in 1886. He was called to a meeting at the Cooper Institute to speak to working men. The chairman of the meeting gave him a flowery introduction with the customary political rhetoric. The chairman concluded by saying, "Henry George is the friend of the working men." As soon as Mr. George rose to his feet, slowly and emphatically he said, "I would like to announce that I am not the friend of the working man." Stunned silence ensued -- a strange kind of bewilderment. He went on, "Nor am I the friend of capital. I am for men simply as men, regardless of any accidental or superfluous distinctions of race, creed, color, class, function, or employment."  [source.]

I found a front-page article in the Scranton (PA) Tribune and Kansas City Journal (among others) of October 30, 1897, the day after Henry George's death, which reported some of the campaign speeches George had given on his last day, a few days before the 1897 mayoral election.  Here is one of them:

At College Point there were 1,200 common laborers, a rough crowd, closely packed in the hall.  Mr. George was introduced as the friend of the working man.

He began: "I have never claimed to be a friend of the workingmen.  I do not now make any such claim (there was a pause of dead silence).  I have not and do not intend to advocate anything in the special interest of the laboring man (another dead pause; Mr. George walked the full length of the platform and let out his full voice in a shout:).  I am for men! (The crowd set up such a cheering and stamping that the room was filled with a choking dust).  I am for men! -- the equal rights of all men.  Let us be done with asking privileges for the laboring men."

I also found a 1906 book called "Looking Forward," by August Cirkel, which has a chapter by that title which starts with these paragraphs:

"I am for men." This famous expression, uttered by Henry George, sounds the keynote of the true spirit in which every public policy should be tested. Does it make men? Does it make them stronger, or wiser, or better? These are the all-important questions to be asked, when the effect of any system is to be noted. If the answer cannot be made affirmatively, sophistical must be the arguments that support it.

The kind of laws and institutions any people lives under is the kind of laws and institutions that that people deserves to live under. Every thing of life builds the body that it inhabits, and what kind of abode it constructs for itself, that is the kind of abode it must dwell in. Every people makes its own government. Where a race is ruled by tyrants, craven fear smites the hearts of the masses, and rather than endure the dangers of asserting their divine prerogative of freedom, they shuffle through life in cowardly submission to a few men no stronger than themselves.

I found a 1910 speech by Theodore Roosevelt, entitled "New Nationalism" which contains these paragraphs:

I believe in shaping the ends of government to protect property as well as human welfare. Normally, and in the long run, the ends are the same; but whenever the alternative must be faced, I am for men and not for property, as you were in the Civil War. I am far from underestimating the importance of dividends; but I rank dividends below human character. Again, I do not have any sympathy with the reformer who says he does not care for dividends. Of course, economic welfare is necessary, for a man must pull his own weight and be able to support his family. I know well that the reformers must not bring upon the people economic ruin, or the reforms themselves will go down in the ruin. But we must be ready to face temporary disaster, whether or not brought on by those who will war against us to the knife. Those who oppose reform will do well to remember that ruin in its worst form is inevitable if our national life brings us nothing better than swollen fortunes for the few and the triumph in both politics and business of a sordid and selfish materialism.

Near the end of the same speech, TR says this:

One of the fundamental necessities in a representative government such as ours is to make certain that the men to whom the people delegate their power shall serve the people by whom they are elected, and not the special interests. I believe that every national officer, elected or appointed, should be forbidden to perform any service or receive any compensation, directly or indirectly, from interstate corporations; and a similar provision could not fail to be useful within the States.

The object of government is the welfare of the people. The material progress and prosperity of a nation are desirable chiefly so long as they lead to the moral and material welfare of all good citizens. Just in proportion as the average man and woman are honest, capable of sound judgment and high ideals, active in public affairs; but, first of all, sound in their home, and the father and mother of healthy children whom they bring up well; just so far, and no farther, we may count our civilization a success.

(TR by that time had become quite comfortable with Henry George's ideas. See his party's 1912 platform "A Confession of Faith.")

In 1917, Luke North (James Hartness Griffes) published a book of poetry entitled "Songs of the Great Adventure" which included this:

"I AM FOR MEN"

He stood for Men —
Not for parties, sections, classes;
Not for dogmas, doctrines, isms —
Nor all the minutiae of over-elaborated plans for the future,
Nor for craven caution, dissimulation, equivocation —
Patience that now outrages virtue —
Program'd ways and means which if not followed
The world may stay in hell.

He stood for Men —
For in his soul he knew the line of cleavage
Was not between the robber and the robbed —
Was not marked by external difference,
By rank or class or occupation or wealth or poverty.
He knew that poor men could be very cruel and rich men kind.
He knew the line of cleavage was in the heart — those who care and those who don't —
This Henry George who wrote "Progress and Poverty."

He stood for Men —
And was he wrong to yield no tithe to classes?
What has now become of all the appeals
To class interest, class consciousness, class solidarity?
The human heart will not respond to them — in every class are tyrants.
The human mass forgets its every interest,
Flings to the wind all self and class advantage
And goes out to die for a word.

He stood for Men —
And showed the world how to unshackle the chains that bind men.
He showed how poverty begins,
Where modern slavery has its roots,
And how to tear them up.
The earth is for all men, he said —
And his word has gone around the world —
And now it's time to act!

He stood for Men —
Not creeds and doctrines, nor all the lesser details of future contingencies.
He bared the earth to man.
It is for us to take it.
He tried to gain it, and was beaten back to his death.
Now we will gain it —
At whatever cost!

Check out this fine book of poetry -- and if you know of a songwriter looking for inspiration, send them to this starting page.

It is ironic that Henry George's name became associated with cigars.  He smoked, and that likely contributed to his premature death at age 58.   He wrote about cigar-making and taxation as follows, in Chapter 8 of "Protection or Free Trade?"

It is no wonder that princes and ministers anxious to make their revenues as large as possible should prefer a method that enables them to "pluck the goose without making it cry," nor is it wonderful that this preference should be shared by those who get control of popular governments; but the reason which renders indirect taxes so agreeable to those who levy taxes is a sufficient reason why a people jealous of their liberties should insist that taxes levied for revenue only should be direct, not indirect.

It is not merely the ease with which indirect taxes can be collected that urges to their adoption. Indirect taxes always enlist active private interests in their favor. The first rude device for making the collection of taxes easier to the governing power is to let them out to farm. Under this system, which existed in France up to the Revolution, and still exists in such countries as Turkey, persons called farmers of the revenue buy the privilege of collecting certain taxes and make their profits, frequently very large, out of the greater amount which their vigilance and extortion enable them to collect. The system of indirect taxation is essentially of the same nature.

The tendency of the restrictions and regulations necessary for the collection of indirect taxes is to concentrate business and give large capital an advantage. For instance, with a board, a knife, a kettle of paste and a few dollars' worth of tobacco, a competent cigar maker could set up in business for himself, were it not for the revenue regulations. As it is, in the United States, the stock of tobacco which he must procure is not only increased in value some two or three times by a tax upon it; but before the cigar maker can go to work he must buy a manufacturer's license and find bonds in the sum of five hundred dollars. Before he can sell the cigars he has made, he must furthermore pay a tax on them, and even then if he would sell cigars in less quantities than by the box he must buy a second license. The effect of all this is to give capital a great advantage, and to concentrate in the hands of large manufacturers a business in which, if free, workmen could easily set up for themselves.

But even in the absence of such regulations indirect taxation tends to concentration. Indirect taxes add to the price of goods not only the tax itself but also the profit upon the tax. If on goods costing a dollar a manufacturer or merchant has paid fifty cents in taxation, he will now expect profit on a dollar and fifty cents instead of upon a dollar. As, in the course of trade, these taxed goods pass from hand to hand, the amount which each successive purchaser pays on account of the tax is constantly augmenting. It is not merely inevitable that consumers have to pay considerably more than a dollar for every dollar the government receives, but larger capital is required by dealers. The need of larger capital for dealing in goods that have been enhanced in cost by taxation, the restrictions imposed on trade to secure the collection of the tax, and the better opportunities which those who do business on a large scale have of managing the payment or evading the tax, tend to concentrate business, and, by checking competition, to permit large profits, which must ultimately be paid by consumers. Thus the first payers of indirect taxes are generally not merely indifferent to the tax, but regard it with favor.

The other passage about cigars which I recalled turned out to be not from Henry George, but from his friend Louis F. Post, who went on to be President Wilson's Secretary of Labor:

Though land value has no effect upon the price of good, it is easier to sell goods in some locations than in others. Therefore, though the price and the profit of each sale be the same, or even less, in good locations than in poorer ones, aggregate receipts and aggregate profits are much greater at the good location. And it is out of his aggregate, and not out of each profit, that rent is paid, For example: A cigar store on a thoroughfare supplies a certain quality of cigar for fifteen cents. On a side street the same quality of cigar can be bought no cheaper. Indeed, the cigars there are likely to be poorer, and therefore really dearer. Yet ground rent on the thoroughfare is very high compared with ground rent on the sidestreet. How, then, can the first dealer, he who pays the high ground rent, afford to sell as good or better cigars for fifteen cents than his competitor of the low priced location? Simply because he is able to make so many more sales with a given outlay of labor and capital in a given time that his aggregate profit is greater. This is due to the advantage of his location, and for that advantage he pays a premium in higher ground rent. But that premium is not charged to smokers; the competing dealer of the side street protects them. It represents the greater ease, the lower cost, of doing a given volume of business upon the site for which it is paid; and if the state should take any of it, even the whole of it, in taxation, the loss would be finally borne by the owner of the advantage which attaches to that site — by the landlord. Any attempt to shift it to tenant or buyer would be promptly checked by the competition of neighboring but cheaper land.

Location, location, location!  Or, as a friend in the advertising business put it when I told him about George's ideas, Location, Location, Taxation!

Reading Lowell Harriss

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

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

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

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

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

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

Lowell went on to say,

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

He continued,

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

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

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

He continues,

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

He concludes,

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

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

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

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

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

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

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

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

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

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

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

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

He describes this as a "burdensomeless" tax:

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

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

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

And

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

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

And just before he concludes, he writes,

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

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

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

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

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

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

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

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

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

Ben Stein's Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009

Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009.

I finally got the time to sit down and read through some of the obituaries and tributes to Lowell Harriss, who died in late December (just after Paul Samuelson).  His name was one I grew up with; he was a younger and much respected colleague of my late Georgist grandfather, and participated in the Committee on Taxation, Resources and Economic Development in the 1970s, and, likely, beyond.

The tribute I'm reading right now is interesting in light of data I've reported here recently, and in light of yesterday's Supreme Court decision on corporate free speech.  The data I report has only been gathered in its current form since the 1980s, and I have no idea what the earlier data sources on the subject might have been.

The tribute comes from Ben Stein, who young people know from "Win Ben Stein's Money,"  and a film or two, and those who watch the nightly news sponsored by the pharmaceutical companies may recognize from Visine commercials.  He is the son of two economists, and writes for Fortune Magazine.  He was a student of Lowell's at Columbia University in the mid 1960s.  He wrote, in tribute to Lowell,

But when Professor Harriss started talking about how corporations manage their affairs, he said, "Now assume that the stockholders of the corporation, the owners and beneficiaries of the corporation, are all widows and orphans."

This was an eye-opener indeed. And it made total sense. Of course, except in the rarest of cases in those days, then, and even now, the biggest companies are owned by legions of pension funds, mutual funds, (now, also ETFs and index funds). They are not owned by the Rockefellers or the Astors, as Professor Harriss used to say. They are owned by our parents and by us. The corporations are the people every bit as much as the workers are the people.

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

Let's look closely at that second paragraph in light of the Survey of Consumer Finances data (2007, the newest available).

The SCF doesn't report pension fund assets.*  Others do -- see Ed Wolff's work.  But it is widely understood that a small and diminishing portion of the workforce today has a defined benefit pension -- that which we think of as a pension.  Some of today's workers still have some pension assets, either from a current employer who is no longer contributing to the pension fund, or from a previous employer.

The SCF reports several relevant categories, all mutually exclusive, and then an aggregate called "EQUITY."  The individual categories which might include stock or mutual funds are STOCKS; the category NMMF -- non-money-market mutual funds -- which represents holdings of mutual funds (which includes bonds as well as equities) outside of retirement assets; and RETQLIQ represents total holdings of such retirement assets as IRAs, 401(k) accounts, and other similar individually controlled retirement funds, which likely includes stocks, bonds and mutual funds.   The SCF also reports an aggregate called EQUITY.  Here are the ownership rates, and the distribution of holdings for 2007:

Table 1: Ownership Rates (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	7.2%		2.3%		33.6%		29.7%
Next 40%	22.7%		15.0%		68.3%		68.2%
Next 5%	43.7%		36.5%		83.3%		86.9%
Next 4%	59.5%		47.6%		85.3%		92.0%
Top 1%	65.4%		52.7%		87.8%		92.8%
Table 2: Share of Holdings (2007)
Total:	100.0%		100.0%		100.0%		100.0%
Bottom 50%	0.6%		0.4%		3.8%		1.5%
Next 40%	9.0%		11.6%		36.7%		19.6%
Next 5%	8.0%		10.3%		16.9%		12.4%
Next 4%	30.5%		30.9%		28.0%		30.5%
Top 1%	51.9%		46.7%		14.5%		36.0%

So while it might have been true that the young people sitting in Lowell's classes were likely to be beneficiaries of the corporations as shareholders, I think it is safe to say that the larger society was not, unless the distribution of stock holdings has concentrated even more precipitously than I suspect it has between 1964 and today.  The widows and orphans were far more likely to be in the bottom half of the wealth distribution, which, as of 2007 shared 1.5% of the EQUITY value.   

Today, it is clear that many corporations are not being managed even for the long-term benefit of their shareholders.  It is the top tier of employees whose interests are being served.

But perhaps one other piece of data ought to be considered: the distribution of the owners of holdings. This is the sort of figure which corporate advertising refers to when they talk about stock ownership being broad.  The "Total" line matches the first distribution; the others add to that total.

Table 3: Distribution of Holders of Assets (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	3.6%		1.2%		16.8%		14.9%
Next 40%	9.1%		6.0%		27.3%		27.3%
Next 5%	2.2%		1.8%		4.2%		4.3%
Next 4%	2.4%		1.9%		3.4%		3.7%
Top 1%	0.7%		0.5%		0.9%		0.9%

   

Do you feel better now?  The top 1% folks represent less than 2% of those who own EQUITY!  What's the big deal?  Look how many more of EQUITY owners are from the bottom 50%!  Isn't America wonderful?  Does Ben Stein's memory of Lowell's classroom statement sound right now?

One more table.  This one looks at the relative holdings across the holders in each wealth quantile.  It divides the dollar holdings for each group by the percentage in Table 3.  Data is comparable both across columns and up and down each column.

Table 4: Average Dollar Holdings per 1% of Households Who Hold
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Average:	221		309		146		231
Bottom 50%	7		11		17		12
Next 40%	39		68		103		85
Next 5%	145		200		312		337
Next 4%	508		573		629		977
Top 1%	3,142		3,127		1,271		4,577

Notice what percentage of us are "below average."  Compare each figure to the average in its column.

Let me throw in one other set of figures:   The Table 4 data for BUS -- equity in privately held companies.  Average: 1,069.  Bottom 50%: 24   Next 40%: 137; Next 5%: 443; Next 4%: 1,507; Top 1%: 10,960.  (That's what the Astors and Rockefellers of today own.  And much of it is land value and the value of other natural resources, value which we permit them to privatize.)  We call much of it "small business" and permit the owners to style themselves as self-made successes.

To return to Ben Stein's questions:

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

The nonrenewable natural resources belong to the people, not exclusively to those who extract them from the soil, or their shareholders, even if 100% of us were shareholders in name.  Until our system collects the royalties on those natural resources from those who we currently permit to privatize our COMMON asset, Stein is just plain wrong.  Fortune Magazine's subscribers may appreciate his assertions, but the rest of us ought to be very very skeptical.   

*  Postscript, 1/30/2010:

I came across some data about stock ownership which showed where pension funds fit in the picture, at least in the 1990s.  See Pension Fund Capitalism, by G. William Domhoff, at http://sociology.ucsc.edu/whorulesamerica/power/pension_fund_capitalism.html, Table 1, which shows that Corporate Pension Funds held 18% of Corporate Stock, and Public Pension Funds held 8% in 1994, compared to Households, which held 48% and Mutual Funds which held 12%.  He sources the data to Margaret M. Blair, Ownership and Control, 1995)

Income Concentration

I stumbled across a webpage, created by William Domhoff of UCSC, which contains some fascinating data on income distribution and wealth distribution, or, if you prefer, income concentration and wealth concentration.

I've posted the wealth concentration data separately; here, I'll focus on the concentration of income.  Table 6 draws on work of Edward Wolff, of NYU, not yet published. 

Income Distribution, 1982 and 2006
	1982	2006	Change
Top 1%:	12.8%	21.3%	+8.5 points
Next 19%:	39.1%	40.1%	+1.0 points
Bottom 80%:	48.1%	38.6%	-9.5 points

Turning to Capital Income -- by which I assume they mean income derived not from wages but from other sources, which includes that which the classical economists called land, and which the neoclassical economists subsume under "capital" as if they were identical:

		1979		2003
Top  1%		37.8%		57.5%		+19.7 percentage points
Next 4%		20.1%		15.7%		-4.4 percentage points
Next 5%		8.8%		6.2%		-2.6 percentage points
Next 10%		10.2%		8.0%		-2.2 percentage points
Bottom 80%		23.1%		12.6%		-10.5 percentage points

Is this something we're proud of, or think we ought to be exporting to other countries?  Is it consistent with our ideals, about life, liberty and the pursuit of happiness being the right of every American, of every person on earth?

We're permitting the privatization of things which rightly belong to the commons -- to all of us.  What things?  The value of natural resources flows into whose pockets?  The annual value of urban land flows into whose pockets?  The value of water rights flows into whose pockets?  The value of the airwaves flows into whose pockets? (Hint: look at the distribution of capital income!)  The value of 8am landing rights at LaGuardia flows into whose pockets?  The value of geosynchronous orbits so necessary to certain businesses and systems flows into whose pockets?   The bottom 80% of us?  The next 19% of us?  The top 1%?  The owners of so-called "small" businesses?

These are privileges.  Structures which divert to individuals and corporations things which all of us create.  They reap what we together sow, and then we are led to respect them as "self-made men" and success stories.

They are not eternal.  They are not immutable.  Each can be reformed, and each can provide a significant revenue source to meet our communities' need for revenue for common purposes.  Collecting this revenue this way will not damage our economy as our current tax structure does.  It will, however, lighten the portfolios of some who are used to considering themselves blessed by our current way of doing things -- those born on 3rd base who think they hit a home run.  And create some opportunities for those who want to works, and for those who want to be compensated for their work with wages which begin to line up better to the cost of living.

There IS enough to go around. Not enough for all of us to live like the top 1%, perhaps, but certainly enough for many more of us to live at the sort of level we call middle class, and even at the, say, 70th percentile -- without despoiling the earth.

The Landed Gentry ... this time, in Pakistan

but Pakistan is just an example.  A standing google alert brought an article at http://www.defence.pk/forums/national-political-issues/31924-who-rules-pakistan.html which includes this paragraph:

The democracy in Pakistan is fledgling at best. There are powerful vested interests such as the landed aristocracy. A vast majority of the members of the Assemblies are landed gentry; they do not pass any legislation that hurts big landlords, nor do they allow any taxes on themselves. Then there is the military; the government survives at the mercy of the army chief.

What is so special about the landed gentry?  Here's what Henry George said:

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

and

What largely keeps men from realizing the robbery involved in private property in land is that in the most striking cases the robbery is not of individuals, but of the community. For, as I have before explained, it is impossible for rent in the economic sense — that value which attaches to land by reason of social growth and improvement — to go to the user. It can go only to the owner or to the community. Thus those who pay enormous rents for the use of land in such centers as London or New York are not individually injured. Individually they get a return for what they pay, and must feel that they have no better right to the use of such peculiarly advantageous localities without paying for it than have thousands of others. And so, not thinking or not caring for the interests of the community, they make no objection to the system.

It recently came to light in New York that a man having no title whatever had been for years collecting rents on a piece of land that the growth of the city had made very valuable. Those who paid these rents had never stopped to ask whether he had any right to them. They felt that they had no right to land that so many others would like to have, without paying for it, and did not think of, or did not care for, the rights of all. .

See also http://www.wealthandwant.com/themes/underpop/landed_gentry.htm and http://www.wealthandwant.com/themes/underpop/landlordism.htm

Nothing particularly special about Pakistan in this regard.  But perhaps it might lead us to think about America's most landed gentry, and the windfall we grant them, at the expense of the commons and the ordinary working person.

"END ALL TAXES - EXCEPT ONE"

In the new issue of the Atlantic, there is this very wise pair of paragraphs.  

"END ALL TAXES - EXCEPT ONE" by Reihan Salam, Fellow at the New American Foundation
[email protected]
 
"The property tax may be the most loathsome tax in America. During the 1970s, a number of activists - angry that their tax burdens were rising as their neighborhoods became more desirable - pushed to abolish it altogether. President Nixon proposed significantly reducing state property taxes by implementing a federal consumption tax that would fund public education across the country. But when this proved a lost cause, the masses sought instead to strictly limit annual property tax increases through a series of ballot initiatives. The result hasn't been pretty. Chronic revenue shortfalls have crippled local governments ever since, leading to heavier reliance on punishing state income and sales taxes.
 
What if the problem isn't the property tax at all but rather, well, all other taxes? In 1879, Henry George, a brilliant if slightly crankish autodidact, published Progress and Poverty, a scathing polemic that blamed all economic ills on the private ownership of land. A staunch believer in laissez-faire economics, George found it perverse that we tax productive activities like work and innovative investment while letting landowners grow rich simply because they scooped up property at the right time. In that spirit, George called for a "Single Tax" on the unimproved value of land. There's a certain compelling logic to the Single Tax that stands the test of time. When you tax income, aren't you punishing people for working hard? But when you tax an asset like land, you're simply encouraging the most valuable use of that land. In the years since George faded from the scene, a number of economists, from Milton Friedman to Paul Romer have found virtue in the Single Tax, not least because it creates the right incentives for government. Simply put, the better you govern, the more valuable the property. The more valuable the property, the more revenue you raise."

Bravo!  From Reihan Salam's pen to the eyes and ears of all who are trying to figure out how to get us out of our current tax and revenue mess.

And if you're curious about what others have said about land value taxation, google "quotable notables" and "quotable nobels" 

P.S. This is part of the cover story, entitled "The Ideas Issue: How to Fix the World"

Life on a Small Island

News that 13 Uighurs, confined to the camp at Guantanamo for a number of years, are being sent to Palau and 4 others to Bermuda, on guest worker status, intrigued me, particularly in light of two short videos I watched last night.

I've visited Bermuda perhaps a dozen times over the past 35 years, and virtually every trip has been an opportunity to think about life in community, about how to run and finance government, etc.  (Riding a scooter from one end to the other provides a lot of time to observe and think!  Bermuda is perhaps 17 miles from tip to tip, and consists of many islands.  One crosses a few small bridges and one major causeway.

Last night, I visited the new IU website at http://www.theiu.org/.  The International Union is a Georgist group whose mission statement is as follows:

The International Union was founded to promote permanent peace and prosperity for everyone by re-establishing mankind’s natural relationship with land.

The two films to which I refer both feature my friend Dave Wetzel of the Labour Land Campaign, and a third one of them is a visual version of a piece I've had on the wealthandwant website for several years.

• Robinson Crusoe: Land, Labor, Capital - the bits that Robert Louis Stevenson missed [5:16 minutes]
  
• The Desert Island: A clean slate -- the architecture of raising public revenue in a moral economy [2:37 minutes]
• Victoria Coach Station: The Duke of Westminster has fingers in many pies. [2:18 minutes]  See also Who should Get the Land Rent? 

Also on the wealthandwant website are some other pages which the Uighurs story brought to mind, some related to Robinson Crusoe, some related to tenancy and sharecropping:

Thou shalt not suffer thyself or anybody else to be stolen from

"Thou shalt not steal." That means, of course, that we ourselves must not steal. But does it not also mean that we must not suffer anybody else to steal if we can help it? "Thou shalt not steal." Does it not also mean, "Thou shalt not suffer thyself or anybody else to be stolen from?"

If it does, then we, all of us, rich and poor alike, are responsible for this social crime that produces poverty. Not merely the men who monopolize land — they are not to blame above any one else, but we who permit them to monopolize land are also parties to the theft. The Christianity that ignores this social responsibility has really forgotten the teachings of Christ. Where He in the gospels speaks of the judgment, the question which is put to men is never, "Did you praise me?" "Did you pray to me?" "Did you believe this or did you believe that?" It is only this: "What did you do to relieve distress ; to abolish poverty ?" To those who are condemned, the judge is represented as saying: "I was ahungered and ye gave me not meat, I was athirst and ye gave me not drink, I was sick and in prison and ye visited me not." Then they say, "Lord, Lord, when did we fail to do these things to you?" The answer is, "Inasmuch as ye failed to do it to the least of these, so also did you fail to do it unto me; depart into the place prepared for the devil and his angels." On the other hand, what is said to the blessed is, "I was ahungered and ye gave me meat, I was thirsty and ye gave me drink,'I was naked and ye clothed me, I was sick and in prison and ye visited me." And when they say, "Lord, Lord, when did we do these things to thee ?" the answer is, "Inasmuch as ye have done it unto the least of these ye have done it unto me."

Here is the essential spirit of Christianity. The essence of its teaching is not, "Provide for your own body and save your own soul!" but, "Do what you can to make this a better world for all!" It was a protest against the doctrine of "each for himself and devil take the hindermost I" It was the proclamation of a common fatherhood of God and a common brotherhood of men. This was why the rich and the powerful, the high priests and the rulers, persecuted Christianity with fire and sword. It was not what in so many of our churches to-day is called religion that pagan Rome sought to tear out — it was what in too many of the churches of to-day is called "socialism and communism," the doctrine of the equality of human rights!

Now imagine when we men and women of today go before that awful bar that there we should behold the spirits of those who in our time under this accursed social system were driven into crime, of those who were starved in body and mind, of those little children that in this city of New York are being sent out of the world by thousands when they have scarcely entered it — because they did not get food enough, nor air enough, nor light enough, because they are crowded together in these tenement districts under conditions in which all diseases rage and destroy. Supposing we are confronted with those souls, what will it avail us to say that we individually were not responsible for their earthly conditions? What, in the spirit of the parable of Matthew, would be the reply from the judgment seat? Would it not be, "I provided for them all. The earth that I made was broad enough to give them room. The materials that are placed in it were abundant enough for all their needs. Did you or did you not lift up your voice against the wrong that robbed them of their fair share in what I provided for all?"

"Thou shalt not steal!" It is theft, it is robbery that is producing poverty and disease and vice and crime among us. It is by virtue of laws that we uphold; and he who does not raise his voice against that crime, he is an accessory. The standard has now been raised, the cross of the new crusade at last is lifted. Some of us, aye, many of us, have sworn in our hearts that we will never rest so long as we have life and strength until we expose and abolish that wrong. We have declared war upon it. Those who are not with us, let us count them against us. For us there will be no faltering, no compromise, no turning back until the end.

There is no need for poverty in this world, and in our civilization. There is a provision made by the laws of the Creator which would secure to the helpless all that they require, which would give enough and more than enough for all social purposes. These little children that are dying in our crowded districts for want of room and fresh air, they are the disinherited heirs of a great estate.

Did you ever consider the full meaning of the significant fact that as progress goes on, as population increases and civilization develops, the one thing that ever increases in value is land ? Speculators all over the country appreciate that. Wherever there is a chance for population coming; wherever railroads meet or a great city seems destined to grow; wherever some new evidence of the bounty of the Creator is discovered, in a rich coal or iron mine, or an oil well, or a gas deposit, there the speculator jumps in, land rises in value and a great boom takes place, and men find themselves enormously rich without ever having done a single thing to produce wealth.

Now, it is by virtue of a natural law that land steadily increases in value, that population adds to it, that invention adds to it; that the discovery of every fresh evidence of the Creator's goodness in the stores that He has implanted in the earth for our use adds to the value of land, not to the value of anything else. This natural fact is by virtue of a natural law — a law that is as much a law of the Creator as the law of gravitation. What is the intent of this law ? Is there not in it a provision for social needs ? That land values grow greater and greater as the community grows and common needs increase, is there not a manifest provision for social needs — a fund belonging to society as a whole, with which we may take care of the widow and the orphan and those who fall by the wayside — with which we may provide for public education, meet public expenses, and do all the things that an advancing civilization makes more and more necessary for society to do on behalf of its members?

Today the value of the land in New York City is over a hundred millions annually. Who has created that value? Is it because a few landowners are here that that land is worth a hundred millions a year? Is it not because the whole population of New York is here? Is it not because this great city is the center of exchanges for a large portion of the continent? Does not every child that is born, everyone that comes to settle in New York, does he not add to the value of this land? Ought he not, therefore, to get some portion of the benefit? And is he not wronged when, instead of being used for that purpose, certain favored individuals are allowed to appropriate it?

We might take this vast fund for common needs, we might with it make a city here such as the world has never seen before — a city spacious, clean, wholesome, beautiful —a city that should be full of parks; a city without tenement houses; a city that should own its own means of communication, railways that should carry people thirty or forty miles from the city hall in a half hour, and that could be run free, just as are the elevators in our large buildings; a city with great museums, and public libraries, and gymnasiums, and public halls, paid for out of this common fund, and not from the donations of rich citizens. We could out of this vast fund provide as a matter of right for the widow and the orphan, and assure to every citizen of this great city that if he happened to die his wife and his children should not come to want, should not be degraded with charity, but as a matter of right, as citizens of a rich community, as coheirs to a vast estate, should have enough to live on. And we could do all this, not merely without imposing any tax upon production; not merely without interfering with the just rights of property, but while at the same time securing far better than they are now the rights of property and abolishing the taxes that now weigh on production. We have but to throw off our taxes upon things of human production; to cease to fine a man that puts up a house or makes anything that adds to the wealth of the community; to cease collecting taxes from people who bring goods from abroad or make goods at home, and put all our taxes upon the value of land — to collect that enormous revenue due to the growth of the community for the benefit of the community that produced it.

LVTfan here.  That was an excerpt from one of my favorite speeches, by Henry George (entitled "Thou Shalt Not Steal.")

Now consider the newest evidence from the Federal Reserve Board's 2007 Survey of Consumer Finances, as reported in a too little noted paper issued a few months ago entitled "Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007"

• 1% of our households hold over 1/3 of America's wealth. 
• 10% of our households possess over 70% of America's wealth.
• The other 90% get to split the remaining 28.5%
• The bottom 50% of us have only 2.5% of that net worth.

Ranked by income:

• 1% of our households receive 21.4% of the income
• 10% of our households receive 47.2% of the income
• The other 90% of our households get to split 52.8% of the income
• The bottom 50% of our households have only 14.6% of that income.

Coheirs to a vast estate.  Hmmm.  In America?

We could out of this vast fund provide as a matter of right for the widow and the orphan, and assure to every citizen of this great city that if he happened to die his wife and his children should not come to want, should not be degraded with charity, but as a matter of right, as citizens of a rich community, as coheirs to a vast estate, should have enough to live on. And we could do all this, not merely without imposing any tax upon production; not merely without interfering with the just rights of property, but while at the same time securing far better than they are now the rights of property and abolishing the taxes that now weigh on production.

Thou shalt not steal, yes.  But also "Thou shalt not suffer thyself or anybody else to be stolen from."  

The first step is to understand the nature of the theft that is structural, legal, even respected and treated as reflective of personal or corporate virtue.  Shine a light on it.  A Mount-Rushmore-at-night illumination. 

Land and Freedom

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

WHAT LAND AND FREEDOM STANDS FOR

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

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

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

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

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

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

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

From the March/April issue:

WHAT LAND AND FREEDOM STANDS FOR

We declare:

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

We therefore demand:

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

ARGUMENT

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

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

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

1 in 5 Pennsylvania Families Lack Sufficient Income to Meet Their Most Modestly Defined Needs

That's the finding of a study published this week by PathWays.  (Story here.)  It uses the methodology of the Self-Sufficiency Standard Studies, which calculate, for various configurations of families, a localized cost of living, by county, one state at a time.  The 2008 Self-Sufficiency Standard Study for PA is available online at http://pathwayspa.org/Self_Sufficiency_Standard.pdf, and I commend it to your attention.

Initially, this was done for families of working age, and to date, studies have been done in about 35 states.  More recently, a similar study was done to determine the cost of living in retirement in various places in Pennsylvania; that study is Elder Economic Security Standard. It looks a several different living situations: in a rented home, in a home whose mortgage has been paid off, for a single elderly person and a married couple.

The new study, entitled Overlooked and Undercounted, calculates how many people live in families whose incomes are below the SSS level; that is, where there is not enough to meet all the most simply defined needs: safe housing; childcare for young children while all parents work; homemade food at the USDA Low-Cost Food Plan level, transportation, health care, plus an allowance of 10% of the subtotal of those first 5 categories for "all other" spending, plus a calculation of the taxes that would need to be paid to NET that level of income after the local combination of taxes due from a renter would be paid.  That is the Self Sufficiency Standard.  It is quite a bit higher than the Federal Poverty Guideline in most large cities;  and even in America's lowest-cost-of-living counties, is somewhat above the FPG (which, for 2009, is $18,310 for a family of three and $22,050 for a family of four.  ("Self-Sufficiency" means not depending on subsidies or help from relatives with childcare.)

The most striking table to me is Table 7, on page 15, and it is striking both for what it says, and for the calculation they failed to provide.  Table 8 provides useful detail.

• As noted in the headline, 21% of PA's working-age families live below the SSS for their family configuration in their county.
• Among families with no children, only 15% live below their SSS.
• Among families with children (who represent 41% of families), 29% live below their local SSS.
• Among families with 1 child, 21% live below their SSS
• Among families with 2 children, 26%
• Among families with 3 children, 43%
• Among families with 4 or more children, 71% live below their local SSS.
• Among families whose youngest child is less than 6 years old, 40% live below the SSS
• Among families whose youngest child is 6 to 17, 21% live below the SSS.

So among families without children, only 1 in 6 lack sufficient income to meet their most simply defined needs. (In America!!)  That proportion doubles to nearly 3 in 10 among families with a child.

What they failed to calculate was what percentage of PA's children live below the SSS. I made one assumption: that among families with 4 or more children, the average number of children was 4.5.   I have no way of testing its validity.  But if you accept that assumption, here's what we find:

• 918,273 children in PA live below the SSS in their county for their particular configuration of family
• That's 35.3% of Pennsylvania's 2,603,590 children.

Table 8 breaks out similar data by whether the household is headed by a married couple, a male or a female householder with no spouse present. Working the same methodology (assuming 4.5 children per household where the table says "4 or more"), I find

• a total of 925,914 children living below local SSS. 
• 50.5% of them are in two-parent households.

When you see a child in PA who comes from a family of 4 or more children, chances are that they live below the SSS.
When you see a child in PA who comes from a family headed by a female householder, no spouse present, changes are that they live below the SSS.
When you see a child in PA, the chances are over 1 in 3 that he lives in a family whose income is below the SSS.

Now here's the question: which of these statistics will you remember most? 
Followed closely by "what do we need to change?"

If your answer is "fewer single mothers" or "fewer single parents" or "fewer divorces" or even "more availability of birth control" then evidently you are willing to accept that, among married-couple households with 2 children, our wage structure is acceptable when 17% of those families lack sufficient income to meet their most simply defined needs.

GO TO THE ROOT OF THE PROBLEM.  Discover the problem and eradicate it.   I'm persuaded that the problem is structural, not a failing of the individuals involved.  We need to look at why wages are not sufficient to support a family.

Oh, and if you think this is just Pennsylvania, think again.  The figures are similar for Colorado (34.5%) and for Connecticut (38%).  And in California, more than 48& of the children live in families with insufficient income.  (I'm willing to bet that much of this is a function of awesomely high rents in the populated portions of California.  And ultimately, that can be traced in significant part to distortions produced by Proposition 13.)

Spending more on schools is not going to fix this.  WE MUST GO TO THE ROOT of it.  Read Henry George's Progress and Poverty, and you will come away knowing what most people 120 years ago knew well. (That would be progress!)  And then act on it.  Act locally, act at the state level, act at the federal level to implement HG's simple and just reform. 

Update on the Little Neck (Ipswich, MA) sale by the Feoffees of Ipswich's Public Schools

I've posted several times before about this story (see Feoffees' land which includes these three stories

• The Feoffees, their tenants, and the Ipswich public schools with photos, maps and other illustrative data
• Update on the Feoffees' tenants in Ipswich, Massachusetts
• The Feoffees of Ipswich are still thinking about selling that fine piece of land at Little Neck) 

This past week, two articles http://salemnews.com/punews/local_story_128174243.html and http://www.wickedlocal.com/ipswich/news/education/x2133276729/Sale-of-Little-Neck-will-not-go-through report that the sale will not go forward because the 168 land tenants are not able to raise the purchase money.

There are 167 tenants, who own homes but under the terms of the gift of the entire almost-island.  Their individual lots total less than half of the total land area: 14 acres are kept as common space, including the 11-acre lot which holds the community center. 

My initial research (shown in the first of those three blogposts) suggests that Ipswich's assessor valued the land for 2008 at $32,751,500, including a very low assessment of $1,761,000 for the 14 acres of common areas.  If the common areas were assessed as the rented-out portions are valued, the total land assessment would be about $48 million.

The $26,500,000 asking price amounts to less than $160,000 for each building site.    A 5% 30Y mortgage on $160,000 works out to a payment of $859 per month, or $10,307 per year, a not inconsiderable sum.   One of the current real estate listings reports that land rent for a seasonal cottage lot is $9,700.  (That 99 year old cottage of 1,710 sq ft carries an asking price of $620,000, down $5,000 from last year.)

So how much are the lots really worth?  One way to find out would be to auction off the rental rights for two of the unoccupied lots not currently rented out.  Make one a seasonal property, the other a year-round occupancy. Publicize the auction well, including a letter to every current Little Neck tenant, and accept bids for several weeks.  Award the rental rights for each lot to the highest bidder, at $1 more than the amount bid by the second highest bidder.  That will give the Assessor and the Feoffees a sense of the current market for this fabulous almost-island.

The proposed "endowment fund" for the benefit of the Ipswich Public Schools will never provide as much as the market rent, net of expenses, will provide.  I do not understand why the Feoffees (that is, trustees on behalf of the schools, under the terms of a 17th century trust), or the voters of Ipswich, would ever consider selling this land, or why a probate court would permit the sale.

When the asking prices for Ipswich cottages begin to approach the depreciated value of the homes on them, the Feoffees will know that they are charging appropriate rents.  When asking prices are 3, 4, 5 times the depreciated value of the cottages, it is clear that the Feofees are not collecting the full land rent, and the discount is being capitalized into the selling prices of the cottages.  The terms of the trust require the Feoffees to collect the fair rent, and they ought to be required to get into compliance within, say, 5 years.

The tenants who assumed the Feoffees would never do it have my sympathy, but no tears.

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

Forgive us our trespasses, as we forgive those who trespass against us ...

Does this mean that we ought to permit others to trespass against us in a systematic way, in exchange for forgiveness of our own trespasses against other individuals? 

Does it mean we ought not to act to end structural trespassing against the basic rights of others: the right to one's fair share of the world's natural resources, including access to land on which to labor?

I wonder how enslaved people viewed this prayer in 18th and 19th century America.

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

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

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

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

Here are the surrounding states:

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

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

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

Council of Georgist Organizations Conference: Cleveland 2009

Council of Georgist Organizations Conference: Cleveland 2009.

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

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

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

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

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

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

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

Pirates threatening revenge ...

The right to stay in business ...

The threat of pirates to avenge the deaths of three of their number sent me in search of something Henry George wrote many years ago, using Captain Kidd as an example:

Henry George:  The Land Question (1881)

The galleys that carried Caesar to Britain, the accoutrements of his legionaries, the baggage that they carried, the arms that they bore, the buildings that they erected; the scythed chariots of the ancient Britons, the horses that drew them, their wicker boats and wattled houses–where are they now? But the land for which Roman and Briton fought, there it is still. That British soil is yet as fresh and as new as it was in the days of the Romans. Generation after generation has lived on it since, and generation after generation will live on it yet. Now, here is a very great difference. The right to possess and to pass on the ownership of things that in their nature decay and soon cease to be is a very different thing from the right to possess and to pass on the ownership of that which does not decay, but from which each successive generation must live.

To show how this difference between land and such other species of property as are properly styled wealth bears upon the argument for the vested rights of landholders, let me illustrate again.

Captain Kidd was a pirate. He made a business of sailing the seas, capturing merchantmen, making their crews walk the plank, and appropriating their cargoes. In this way he accumulated much wealth, which he is thought to have buried. But let us suppose, for the sake of the illustration, that he did not bury his wealth, but left it to his legal heirs, and they to their heirs and so on, until at the present day this wealth or a part of it has come to a great-great-grandson of Captain Kidd. Now, let us suppose that some one – say a great-great-grandson of one of the shipmasters whom Captain Kidd plundered, makes complaint, and says: "This man's great-great-grandfather plundered my great-great-grandfather of certain things or certain sums, which have been transmitted to him, whereas but for this wrongful act they would have been transmitted to me; therefore, I demand that he be made to restore them." What would society answer?

Society, speaking by its proper tribunals, and in accordance with principles recognized among all civilized nations, would say: "We cannot entertain such a demand. It may be true that Mr. Kidd's great-great-grandfather robbed your great-great-grandfather, and that as the result of this wrong he has got things that otherwise might have come to you. But we cannot inquire into occurrences that happened so long ago. Each generation has enough to do to attend to its own affairs. If we go to righting the wrongs and reopening the controversies of our great-great-grandfathers, there will be endless disputes and pretexts for dispute. What you say may be true, but somewhere we must draw the line, and have an end to strife. Though this man's great-great-grandfather may have robbed your great-great-grandfather, he has not robbed you. He came into possession of these things peacefully, and has held them peacefully, and we must take this peaceful possession, when it has been continued for a certain time, as absolute evidence of just title; for, were we not to do that, there would be no end to dispute and no secure possession of anything."

Now, it is this common-sense principle that is expressed in the statute of limitations – in the doctrine of vested rights. This is the reason why it is held – and as to most things held justly – that peaceable possession for a certain time cures all defects of title.

But let us pursue the illustration a little further:

Michael Kinsley - The Senate's Estate Tax Debate

Michael Kinsley - The Senate's Estate Tax Debate - washingtonpost.com.

The online article is titled "Democrats for Rich Heirs?":

But why the populist fury over those AIG bonuses of a few million dollars while no one seems to care much about billions being transferred through inherited wealth? The obvious answer -- that there's a difference between what people do with our hard-earned money and what they do with their own hard-earned money -- isn't actually as persuasive as it seems.

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

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

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

LVTfan here: The privilege of calling OUR natural resources MINE is a major one, and we're so used to it that we don't even notice it.

The oil revenue  (and other like revenue -- see Mason Gaffney's article, The Hidden Taxable Capacity of Land for a listing of some of the things which the classical economists would recognize as land), that currently flows to individuals -- be they Jed Clampetts, or large property owners rural or just choice-land owners urban -- or corporations (ditto!) should be treated as OURS.  Then we wouldn't need to tax wages so much -- and maybe not at all.

And we'd all have an equal opportunity under such a scenario.

Federal Gifts to Landlords

A recent article in a Delaware newspaper described the federal spending on replenishing the ocean beaches at Dewey Beach. The project involves bringing in 300,000 cubic yards of sand for Dewey Beach, at a cost of $6,000,000.   The project is bring headed by the Army Corps of Engineers.  Dewey Beach is on a narrow strip of sand which separates the Atlantic Ocean from Rehoboth Bay, just south of Rehoboth Beach, DE.  The article says that renourishment typically takes place once every three years.

I'm looking at a real estate listing on realtor.com for a home in the beach block.  The asking price is a hair under $1.7 million, for a lot 40x125 (5,000 square feet, or 0.115 acre).

Here are the taxes and fees:

City Tax: $120
County Tax: $2100
Water Fee: $200
Sewer Fee: $200

So the carrying costs on this house are $2620 per year ... $218 per month.

But here's the interesting figure from the listing:

Rental Income: $65,000

The federal taxpayer pays a significant amount of money so that that landlord can collect big bucks from his tenants and enjoy the off-season weekends on the ocean beach. 

The $65,000 is mostly for the location, not for the (admittedly) very nice house.  $65,000 is 3.8% of the asking price.    $2620 is 4.0% o the claimed annual rental.   Let's say that the landlords spend $10,000 a year on the rental agent, cleaning crews, maintenance.  Let's also say that 2/3 of the value is land value.  2/3 of $65,000 is, roughly, $44,000 -- per year!

WHAT A DEAL!!  Aren't we nice?  And what do we ask in return?

Post script: The local community collects a 3% surcharge tax on rental income.  So the landlord pays the community $2,620 per year, and the tenants pay $1,950! 

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

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

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

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

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

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

Some Factoids from the CBO on Infrastructure Investment

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

Eisenhower's roads to prosperity

Eisenhower's roads to prosperity - Los Angeles Times.

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

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

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

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

"Miles Per Gallon" is the wrong measuring stick!

A few weeks ago there was a brief piece in the NYT Magazine entitled "Gallons Per Mile."  It got me thinking; my noodlings follow the article itself:

As gas prices rose earlier this year, consumers started paying a lot more attention to their cars’ miles per gallon. Good luck with that. The apparently simple unit of measurement is a highly misleading one, as two Duke management professors demonstrated in a June issue of Science. They favor an alternative measure of fuel economy: gallons consumed per 10,000 miles.

The problem with m.p.g., argues Richard Larrick, who wrote the article with his business-school colleague (and carpooling partner) Jack Soll, is that it leads consumers to significantly underestimate the gains in fuel efficiency that can be achieved by trading in very low m.p.g. vehicles — even for one that gets only a few more miles per gallon. Less detrimentally, m.p.g. also misleads people about the fuel savings achieved by moving from an ordinary family sedan into a Prius.

Trickle-Up Economics

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

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

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

On a well-provisioned ship, how is it that 6% of us consume ~25% of the resources?

As we, perhaps, become somewhat more appealing to the other 94% of the globe's residents as a result of the choice the voters made on Tuesday, we still need to consider the question of the rightness and the sustainability of a country which has 6% of the world's people consuming about 25% of the world's resources.

There is the theory of American exceptionalism. A Google search provides the Wikipedia definition of American exceptionalism; The second thing Google brings up is a recent book review from The American magazine:

Understanding American Exceptionalism

By Karlyn Bowman Monday, April 28, 2008

An ambitious new book explains how and why the U.S. is so different from other countries around the world.

“America is indeed exceptional by any plausible definition of the term and actually has grown increasingly exceptional [over] time.” This is the conclusion of the editors of a new volume, Understanding America: The Anatomy of an Exceptional Nation (PublicAffairs, $35). At an American Enterprise Institute conference on April 22, Peter H. Schuck and James Q. Wilson introduced the collection of essays, which is designed to probe Alexis de Tocqueville’s observation that America is “exceptional,” or qualitatively different from other countries. The book, which examines 19 different areas, marshals the best and most current social science evidence to examine America’s unique institutions, culture, and public policies.

During his introductory remarks, AEI president Christopher DeMuth said that no effort to understand the meaning of American exceptionalism had been “more ambitious and far-reaching” than this book. Not only does it describe the ways — both good and bad — in which Americans differ from people in other nations, DeMuth said, it also considers whether American exceptionalism is likely to continue, and how it matters to the world. DeMuth noted that Americans are more individualistic, self-reliant, anti-state, and pro-immigration than people in many other countries. They work harder, are more philanthropic, and participate more in civic activities. On the negative side, America also has a higher murder rate than some other countries. 

Wilson noted that one of the best ways to understand American exceptionalism is to look at polls. Three-quarters of Americans say they are proud to be Americans; only one-third of the people in France, Italy, Germany, and Japan give that response about their own countries. Two-thirds of Americans believe that success in life depends on one’s own efforts; only one-third of Europeans say that. Half of Americans, compared to one-third of Europeans, say belief in God is essential to living a moral life. 

Three-quarters of Americans say they are proud to be Americans; only one-third of the people in France, Italy, Germany, and Japan say that about their own countries.

Negative views of America in polls today have been shaped by the Iraq war and by the response to President Bush, Wilson noted, but criticism of America has a long history, particularly among elites. He quoted Sigmund Freud as saying, “America is a great mistake.” “Anti-Americanism was an elite view,” Wilson continued, “but it has spread deeper to publics here and abroad.” 

Schuck said that Understanding America casts a new light on American exceptionalism by examining it at a micro level. He identified seven overarching themes that connect the essays. 

(1). American culture is different. Its patriotism, individualism, religiosity, and spirit of enterprise make it different. The United States, Schuck said, “is more different from other democracies than they are from one another.” 

(2). American constitutionalism is unique in its emphasis on individual rights, decentralization, and suspicion of government authority. 

(3). Our uniquely competitive, flexible, and decentralized economy has produced a high standard of living for a long time, even though it now generates greater inequality. 

(4). America has been diverse throughout its history. Schuck cited research by historian Jill Lepore, who found that the percentage of non-native English speakers in the United States was actually greater in 1790 than it was in 1990. The thirst for immigration, he said, has transcended economic booms and busts. 

(5). The strengths of civil society here make America qualitatively different. No other country, he said, allocates as much responsibility for social policy to the nonprofit sector. 

(6). The characterizations of the United States as a welfare-state laggard compared to Europe miss an element of American distinctiveness: its reliance on private entities to provide certain benefits. 

(7). We are exceptional demographically with our relatively high fertility rate. 

... The editors of Understanding America, Schuck and Wilson, believe that the “stakes in understanding America could hardly be higher. For better or worse, America is the 800-pound gorilla in every room in the world.” 

Karlyn Bowman is a senior fellow at the American Enterprise Institute and a contributing editor to THE AMERICAN.

Americans are consuming roughly 25% of the world's natural resources, despite representing only 6% of the world's people.  As others  see themselves as our equals -- equally entitled to the world's resources, including the carrying capacity of the environment to handle the pollution we spew out, how are we going to reconcile the notion that all men are created equal with their very reasonable expectation that they are equally entitled -- and further, that future generations are entitled to inherit a world that works and a planet with resources available to meet their needs, too -- not to mention, within the US, the younger generation's very reasonable right to not be paying for our generation's wars and mistakes?

And then remember that within the US, the top 1% of wage-earners are getting 12% of wages; the top 10% are getting nearly 36% of wages.  When we look at all income excluding capital gains, the top 1% of income recipients are receiving nearly 20% of income and the top 10% are receiving 47% of income.  When we look at income including capital gains -- the most inclusive measure -- the top 1% are receiving nearly 23% and the top 10% nearly 50% of income.   [Source: Piketty & Saez, 2006 data]

And when we look at the accumulated net worth of Americans, in 2004 the top 1% of wealthholders had over 33% of the net worth; the top 10% of wealthholders held nearly 70% of America's household wealth. [Source: FRB Survey of Consumer Finances, 2004.]

How much of that wealth is created out of thin air, without the use of natural resources?   We've learned a bit about assets created from thin air, and we may have reason to worry greatly in coming months about the moods and portfolios of those who invested heavily in hedge funds.  But I'm willing to bet that were we to get a new snapshot of the same statistics for, say, October 31, 2008, the wealth concentration would be little a bit higher than 2004's.  (The 2007 data will likely be available in January, if previous publication patterns hold.) 

Natural resources and resources which are rightly common property -- the economic value of land, of broadcast spectrum, of water rights, of landing rights, of many other like things, which the neoclassical economists would recognize as "land," as opposed to "capital"  -- have been privatized -- quite legally -- to produce the wealth and income concentration which America lives with.  They've played by the rules -- but the rules aren't just or right.  It is time to revise the rules and the structures. 

By doing so, we can do something about our excessive use of the world's scarce resources; reduce urban sprawl; shorten commutes; increase urban density; encourage job creation, raise wages, reduce wealth concentration, improve the economy's efficiency, remove much of the deadweight loss, motivate the private sector to provide, at a profit, affordable housing for all.   And reduce our overuse of the world's natural resources significantly, making us an example to the rest of the world of what to do and how to do it, rather than the opposite.

Too much to ask of one reform?  Too much to ask for?  NO!

 

Progress, and Poverty -- how do they relate?

I suspect that many people relate these two words, without quite knowing why.  A google alert on the two words brings me 4 to 6 items a day which mention the two words fairly close together.  In many the context is "We're making progress against poverty."  In others, the context is more like "we're making progress in many areas, but little progress against poverty." 

Putting those two words into the search field at Amazon yields these books:

• The Poverty of Progress: Latin America in the Nineteenth Century by E. Bradford Burns (1983)
• Progress, Poverty and Exclusion: An Economic History of Latin America in the Twentieth Century (Inter-American Development Bank) by Rosemary Thorp (1998)
• Poverty and Progress: Social Mobility in a Nineteenth Century City (Joint Center for Urban Studies) by Stephan Thernstrom (1981)
• Poverty, Progress, and Population by E. A. Wrigley (2004)
• Poverty and Economic Issues (Africa: Progress & Problems) by Tunde Obadina (2006)
• Progress and Poverty: An Economic and Social History of Britain 1700-1850 by Martin Daunton (1995)
• The Other Bostonians: Poverty and Progress in the American Metropolis, 1880-1970 by Harvard University Press (1999)
• Poverty and social progress, by Maurice Parmelee (1926)
• Poverty and Progress (Down to Earth) by Fred Martin and Aubrey Whittle (1990)
• Poverty and Progress in the Caribbean, 1800-1960 (Studies in Economic & Social History) by J.R. Ward (1985)
• Progress, Poverty and Population: Re-reading Condorcet, Godwin and Malthus by John Avery (1997)
• The Time Has Come: To Confront the Tragedy of World Poverty Through Centers of Village Progress by James Mayfield (2006)
• Poverty and Progress in the U.S. South since 1920 (European Contributions to American Studies) by Suzanne W. Jones and Mark Newman (2006)
• Profits, Progress and Poverty by Richard N. Farmer (1985)
• Poverty and progress;: An ecological perspective on economic development by Richard G Wilkinson (1973)
• Poverty Reduction and the World Bank: Progress in Operationalizing the Wdr 2000/2001 by World Bank (2002)
• The Developing Nations Poverty and Progress (Volume 41, Number 1) by Irwin (Editor) Isenberg (1969)
• Poverty and Progress in New Zealand by W. B. Sutch (1969)

All of these books together can not have come close to the sales of Henry George's 1879 book, Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth; the remedy.  By the turn of the century, over 6 million copies had been sold, it had been translated into 30 or so languages, serialized in newspapers in a number of countries. [6 million copies would be a large number today ... think of it in 1885!] Today, there are at least two foundations, created by industrialists of another era (using identical language), whose missions are to share Henry George's ideas, as expressed in Progress & Poverty -- the Robert Schalkenbach Foundation (based in NYC) and the Lincoln Foundation (with offices in Cambridge, MA), founded, respectively, by a printer and an electric utility magnate.  Joseph Fels, of the Fels Naptha soap company (and brother of the endower of the Fels Planetarium at Philadelphia's Franklin Institute) also devoted much of his mature years to promoting these ideas. 

George's Progress & Poverty was the #2 best seller of its decade, second only to the Bible, and the "progress" in its title helped inspire the Progressive movement.  Anyone in English-speaking countries who read at all was likely to be familiar with its ideas, and George was an effective speaker who traveled widely.  In NYC, he ran twice for mayor; the first time, he lost to Abram Hewitt (the Tammany Hall candidate) in 1886, but beat out the 29-year-old Theodore Roosevelt (whose Bull Moose Party platform about 25 years later looked remarkably Georgist; it is said TR learned his George at San Juan Hill, from a hero who died there); the second time, he died a few days before election day in 1897.  His funeral was among the largest ever in NYC.  (Search the NYT's free archives for articles.)

So what sets Henry George's Progress & Poverty apart from the other books which mention those two words in their titles?  Why did he choose that title?  What is the relationship between these two aspects of our society?  Is it a necessary relationship, ordained by immutable natural forces or laws of economics, or is it something created by human structures, and therefore something we can alter?

George saw clearly something that others had seen through a glass darkly.  He laid it out clearly in Progress & Poverty.  Extend your education by reading this book.  It will probably change your mind and your vision forever, and if enough of us understand the workings of the poverty machine, we will be able to retool it, and leave our children a better world, and a country which genuinely lives up to its ideals.

Progress and Poverty.  You might also want to go read the first essay in George's second book, Social Problems.  It is very timely.

Another benefit of civilization and government

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

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

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

When I am elected President ...

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

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

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