LVTFan's Blog

The landowner and the taxpayer

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

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

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

The Foldvarium: How to Extirpate Poverty

The Foldvarium: How to Extirpate Poverty.

I'm going to take the liberty of posting Fred Foldvary's entire post.  It is relevant to a lot of things I've been thinking about a lot recently.  I've added links to some pages at wealthandwant.com which expand on some of Fred's concepts.   I'm intrigued with his definition of extirpate -- it is the one I associate with "eradicate" -- to remove by the root.  Google definitions suggests that extirpate has the sense of having been made locally extinct but still in existence elsewhere.  Here's the Latin root: [Latin exstirpare to root out] -- likely related to "stirpes" -- as in "per stirpes" -- [Latin, By roots or stocks; by representation.]

How to Extirpate Poverty

To “extirpate” means to complete eliminate, from the Latin word meaning to pull out by stem and root. To extirpate poverty means to eliminate its cause, so that it does not come back. Fundamentally, poverty comes from a low wage level, so we need to examine what makes a wage level low.

The wage level of an economy can be thought of as the wages paid to unskilled people. Those with greater skill and talent get higher wages, so some think that the solution to poverty is better education. But a stagnant economy also depresses the return to human capital, the extra wage for those who are more productive. In a thriving productive economy, even those with few skills are better off than skilled labor in a depressed economy. Indeed, in an unproductive economy, those with skills often find little market for their human capital.

The wage level of an economy is set by marginal labor, those who work at the least productive land in use. The classical “law of wages” says that when workers are mobile, the wage at the margin of production will set the wage level for the rest of the economy.

hear, read, mark, learn, and inwardly digest

This phrase comes from an Anglican prayer book, but it came to my mind when I was writing to a foundation which claims to be in favor of a just society.  Examining their website, I could see no sign of any familiarity with Henry George's ideas, and this phrase, whose origins I could not bring to mind, popped into my head. 

Hear ..., read, mark, learn, and inwardly digest ...  The reference is to scripture, but I think it might apply nearly as well to Henry George's ideas, if you regard any of these as important:

• ending poverty
• improving wages
• sharing nature's bounty more evenly among us
• protecting the environment from despoilment
• reducing, even reversing, sprawl
• making housing affordable
• making cities more vibrant
• creating jobs
• making effective public transportation systems realistic 

(I'd be happy to see any one of those ... and thrilled to see all of them.  Dayenu!)

 Well, Henry George has been called "The Prophet of San Francisco" -- that's where he wrote Progress & Poverty -- and many people consider him to have answers to problems that most people think are completely intractable.

Hear, read, mark, learn and inwardly digest ... and then get to work creating a more just society, for yourself, your neighbors, and all our children and future generations.

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

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

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

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

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

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

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

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

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

Most interesting is the final sentence quoted above:

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

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

Spreading the Wealth

When we listen to one party complaining that the other's candidates want to "spread the wealth," it behooves us to pay attention to how concentrated wealth is.  In 2004, it looked like this:

• Top  1% of wealthholders:     33.38% of the net worth
• Next 9% of wealthholders:     36.12% of the net worth
• Other 90% of wealthholders: 30.50% of the net worth [source]

I'll venture the guess that most of those who turn out at the campaign rallies and boo when the words "spread the wealth" are said fall into the bottom 90%. We can split out the bottom 50% and the next 40%:

• Bottom 50% of wealthholders: 2.54% of the net worth
• Next  40% of wealthholders:  27.95% of the net worth [source]

We can look at income for the same groups (note that this is different from looking at a ranking of households by income level)

• Top 1% of wealthholders:      13.62% of the income
• Next 9% of wealthholders:     22.56% of the income
• Other 90% of wealthholders: 63.83% of the income

We can split out the bottom 50% and the next 40%:

• Bottom 50% of wealthholders: 23.80% of the income
• Next 40% of wealthholders:     40.03% of the income

The preceding data come from the Federal Reserve Board's triennial Survey of Consumer Finances. That study suggests that the concentration of wealth may actually be understated in their data.

You might look at the line in the tables (line 19) which reports "business equity," which represents privately held companies and what we fondly refer to as "small businesses." (it represents about 20% of aggregate net worth.)

• Bottom 50% of wealthholders: 0.3% of the business equity
• Next 40% of wealthholders:     9.2% of the business equity
• Next 5% of wealthholders:       5.7% of the business equity
• Next 4% of wealthholders:     22.4% of the business equity
• Top 1% of wealthholders:      62.3% of the business equity

The forces which have concentrated that wealth so narrowly are not the benign workings of free market capitalism, and those who turn out to loudly boo on cue the concept of spreading the wealth are not net beneficiaries of our current system. Wages are low, and most of us struggle.

It need not be this way, and I don't think that the party talking about spreading the wealth knows how to do it justly or well, and that the party deriding the idea has serious concern for the interests of the bottom 95% of us.  What wonders me is that so few of us and so few of our talking heads seem to know or care.

A bit of reading and study of Henry George's ideas about what is rightly private property and what is rightly the common property of the community as a whole would do wonders: start with Progress and Poverty or Social Problems.  Or explore wealthandwant.com.  We can have the society we say we are.

See also: Spreading the Wealth: Some kinds of wealth OUGHT to be spread!

Bob Herbert: A Fool’s Paradise

A Fool’s Paradise - NYTimes.com.

The article describes the fact that wages have stagnated for most of us, and that a series of events, including the entrance of wives and mothers into the workplace, and the increasing tolerance for debt, have been what has kept the bottom three quarters of the income spectrum afloat.  It ends,

The economy won’t be saved by bailing out Wall Street and waiting for that day that never comes when the benefits trickle down to ordinary Americans. It won’t be saved until we get serious about putting vast numbers of Americans back to work in jobs that are reasonably secure and pay a sustaining wage.

And that won’t begin to happen until we roll up our sleeves and begin the immensely hard and expensive work of rebuilding a nation that unconscionably was allowed to slip into a precipitous state of decline. We’ll end up spending trillions for the wars in Iraq and Afghanistan and another trillion, at least, to clean up after the madmen on Wall Street.

Now we need to find the money and the will to put Americans to work rebuilding the nation’s deteriorating infrastructure, revitalizing its public school system, creating a new dawn of energy self-sufficiency and rethinking our approach to an economy that remains tilted wildly in favor of the rich.

So how do we do that?   Herbert's answer is "That's what the presidential campaign should be about."

But I'll submit that neither of the major party candidates, and, likely, none of the third party candidates, have the answer.   That isn't to say there isn't an answer.  We just haven't heard anything about it yet from any of these candidates.

I think the answer lies in the observations of Henry George, and that the Remedy he laid out in his landmark book, Progress and Poverty (1879).  The subtitle to that book, An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy," seems pretty timely.

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.

A Budget is a Moral Document

A few days ago I received a mailing from a friend, incorporating (with permission) something I wrote a while ago, and had mostly forgotten about.  I think it is worth sharing here; I'll expand on bits and pieces of it, as the spirit moves me.

It has been said that a budget is a moral document.  Usually that is construed to refer to the spending side of the budget.  But it is equally and importantly true of the revenue side.  When we tax the wrong things, we get undesirable effects.  When we fail to tax that which we should tax, we get undesirable effects as well.  [I might add that an individual's revenue which comes from stealing from others is also a very poor idea -- even when the theft is legal!  Chattel slavery certainly fit in this category, as did the industrial slavery Douglas Blackmon described in his recent book.]
    
With other Georgists, I seek a shift in how we tax ourselves which will produce a better world for all of us. Land value taxation will have important effects in many areas which concern most Americans:

• slowing, stopping and reversing urban sprawl
• urban blight
• improve wages, without raising the cost of living
• spur job creation -- here
• poverty eradication
• wealth concentration
• education funding
• reduce long commutes
• excessive energy usage
• reducing greenhouse gases
• economic development
• infrastructure finance
• boom-bust cycle

The term LAND includes not just the value of urban land, which is huge (and currently underreported and thus ignored, despite being the underlying source of huge fortunes), but also the rest of the natural creation ...

• broadcast spectrum -- those airwaves which we all say (complete the sentence)  ... belong to the American people, but which have been sold to corporations
• water rights (ditto)
• natural resources, particularly the non-renewables
• congestion in the skies and at location³ airports
• geosynchronous orbits
• and many others -- see Mason Gaffney's paper, The Hidden Taxable Capacity of Land: Enough and to Spare, here

Land Value Taxation (LVT) can solve a lot of problems and set the stage for solving many others.  Most of us believe that without this taxation reform, none of these problems are solvable; all we can do is place small bandages on them and spend a lot of money on programs which help relatively few victims.

We seek a society with NO VICTIMS.

An Election Season Thought

Wealthandwant.com: John Stuart Mill.

"Lord, enlighten thou our enemies. Sharpen their wits, give acuteness to their perceptions, and consecutiveness and clearness to their reasoning powers: we are in danger from their folly, not from their wisdom; their weakness is what fills us with apprehension, not their strength." — John Stuart Mill, "Essay on Coleridge"

This struck me as particularly relevant in this election season.  Perhaps I'd revise it from "enemies" to "adversaries" or even "leaders" ... or politicians and their advisors.

A 21st Century Georgist in the Revised Common Lectionary

(With a nod to Mark Twain!) The OT lesson in my church today was from Exodus, about God raining bread from heaven for Moses and his people. 

In the evening quails came up and covered the camp; and in the morning there was a layer of dew around the camp. When the layer of dew lifted, there on the surface of the wilderness was a fine flaky substance, as fine as frost on the ground. When the Israelites saw it, they said to one another, "What is it?"  For they did not know what it was.  Moses said to them, "It is the bread that the LORD has given you to eat."

Can you imagine if some of us claimed the land onto which that bread had fallen as our own, and told those who wished to collect their share of that bread that they must first pay us rent for the privilege?  Can you imagine if some of us gathered it, and sold it to our fellow human beings at high prices?  Can you imagine if we permitted the landholders to charge their fellow human beings for access, and then turned around and imposed an income tax on the general community, pretty much ignoring land value in the process?

Being born into the Landed Gentry is like holding the winning lottery ticket

The Ianded gentry ...  sounds so noble ... so gentle ...  so aristocratic .... so entitled!

What is it about? 

What does an infant cost a young family?

The Self-Sufficiency Standard Studies, which have been conducted in more than 35 states so far (most recently Colorado, Pennsylvania and Ohio), show the bare-bones cost of living, county by county, for several configurations of family.

What does it cost for a single adult to get by?  How much does her cost of living rise when she has an infant? A preschooler? Both?

Making Work Pay Enough: A Decent Standard of Living for Working Families

Link: 411710_work_pay.pdf (application/pdf Object).
The study is entitled "Making Work Pay Enough: A Decent Standard of Living for Working Families" and it comes from the Tax Policy Institute.  Like the Self Sufficiency Standard Studies, it points out that many of America's jobs simply don't pay enough to support oneself, much less to support a small family.

I found myself very disappointed by the recommendations of the study.  They lack radicalism.  They don't seek the root of the problem, so they don't find the root of the problem.   They propose programs rather than solutions.

Halving US Poverty in 10 Years

A Washington think tank, the Center for American Progress, has published a strategy for halving US poverty in 10 years.  While I applaud their goal, I find it too timid and think their strategies wrong-headed.  Their analysis fails to consider why we have poverty in the first place, and proceeds to design bandaids.  If we are going to eradicate poverty, we must go to the root of the problem, and in my judgment, CfAP has not  pursued the problem to its root and thus cannot do more than attempt to trim its branches.  Pruning poverty's branches is not going to rid us of poverty.  It may move some people we acknowledge as "in poverty" to "out of poverty" as we officially define it, and perhaps they can achieve half their goal, declare victory, and call the rest of the problem intractible.

But living just above the poverty line is little better than or different from living somewhat below it, and we're kidding ourselves if we accept the poverty line as a meaningful statistic.    See this page and this page and the related pages linked there.

A Budget is a Moral Document

I hear this statement from time to time, and almost always, it turns out to be a reference to the spending side of the budget. 

But it is equally and -- perhaps more importantly -- true of the revenue side of the budget.  To the extent that we -- as individuals, corporations, philanthropies, endowments, pension funds, family trusts, small businesses, whatever -- are obtaining our revenue from illegitimate sources, and keeping it (legally), we are  stealing -- legally -- from what rightly belongs to everyone equally -- the commons.   And that theft has huge effects on others -- individuals and systems.

Why did Big Russ have to work two full-time jobs?

The tributes to Tim Russert are moving, and I'm sure many of us who follow news and politics will feel his loss, too young, for quite some time.  But as I listen, I am led to wonder whether he ever questioned why it should be that a man needed to work two full-time jobs  to support his family.

McCain, Obama stake out divergent paths on taxes - Yahoo! News

Link: McCain, Obama stake out divergent paths on taxes

And neither of them gets it right.  They are proposing different arrangements of the deck chairs, and while one may provide a slightly better view of the orchestra, and the other better accoustics for enjoying the music, neither of them understand either what needs to be done or why.

Is LVT the answer to all our problems?

My local newspaper has set up a facility to permit comments on articles and opinion pieces, and I frequently respond to what I read.  Yesterday, I posted a comment to an article entitled Office owners strive to retain tenants whose thumbnail description says "In tough times, office building owners often look for other sources of tenants besides relocations to their properties."  Today I went back and someone had posted the comment, " Your sole issue is land value tax. Am I right?"

 

Poverty, America's Children, and Our Future

A recent article on the NYT "most-emailed" list, entitled Can You Become a Creature of New Habits? had a paragraph which caught my attention.  It said,

Researchers in the late 1960s discovered that humans are born with the capacity to approach challenges in four primary ways: analytically, procedurally, relationally (or collaboratively) and innovatively. At puberty, however, the brain shuts down half of that capacity, preserving only those modes of thought that have seemed most valuable during the first decade or so of life.

Why Smart People should shun the "FairTax" concept

I came across a piece entitled "Why Democrats should love the FairTax," written by Laurence J. Kotlikoff, a professor of economics at Boston University, an economic adviser to Mike Gravel and a consultant to FairTax.org.

I continue to be amazed how even economists, who should know better -- far better -- than to even think about a sales tax as a solution to anything, can be in favor of such an alternative.

a tax reformer does the family 1040's

I've heard it said that voting and paying taxes are two of the major sacraments of citizenship. Having spent a significant part of the past week working on the machinations of the latter for several different family members, I am weary of the sacramental qualities of income taxes.  It isn't that I think taxes are a bad thing.  But our current system of taxation is both fundamentally wrong and, having said that, unbelievably convoluted.

Most of the commentators I read and hear are only interested in simplifying the income tax. A few propose getting rid of the income tax and replacing it with a sales tax, which I regard as simpler, but nearly as evil as an income tax from a number of points of view.   And that puts aside the question of whether the necessary rate for the so-called "FairTax" is 23% (or 30% in the way we're used to thinking of sales taxes) or closer to 60%, as I understand is more realistically the case.

The Purpose of Government

I received in an email recently a quote from Albert Einstein:

A clever person solves a problem; a wise person avoids it.

Taxes as oppression, taxes as incentives: Alabama

Friday night's PBS NOW and Bill Moyers Journal were a powerful combination.   My local station shows NOW first, followed immediately by BMJ.  NOW showed three families in Alabama, including a hard working couple whose income places them at roughly the poverty level.  They pay sales taxes of 10% on their purchases, even on food.  They only recently got indoor plumbing.

The footage also showed one of my heroes, Susan Pace Hamill, law professor at the University of Alabama, who has written several important papers, all available online [and highly recommended], about the inconsistency of Alabama's tax code [2002] and of the federal tax code [2006] with the ideals we say we hold dear.  I applaud her efforts and her scholarship and her good heart ---  and I don't think she sees the half of it, or the solution.

Getting Poverty Wrong, by Steven Malanga, City Journal 3/21/08

Link: Getting Poverty Wrong by Steven Malanga, City Journal 21 March 2008.

Malanga argues that the solution to poverty is getting people to marry before they have children.  He cites Census poverty statistics which show that a far larger proportion of children who live in single-parent families are in poverty, and that relatively few in two-parent families are in poverty.

Is LVT the answer? It depends what the question is.

The title for this post was prompted by an article in the NYT about people not raised on farms deciding to become farmers, particularly in places near large cities.  It seems that local food was said to be the answer to a number of questions.  I'm generally in favor of it, but I'm not sure it is the answer to as many questions as its supporters claim.  That doesn't make "local food" a bad thing; just not the answer to as many questions as it might seem.

But the title for this post sprang to mind.  It seems to me that Land Value Taxation is the answer to a lot of very important questions.

Connecticut: Should Cities Use a Sales Tax?

Newspapers in New London ("Urban Mayors Push For Local Sales-tax Option") and Stamford ("Malloy: Cities should have sales tax option") had articles today describing 4 Connecticut cities' mayors' aversion to increasing the property tax.

Four urban mayors, including Kevin Cavanagh of New London, urged the legislature Monday to give municipalities the ability to levy a local sales tax of up to 1 percentage point to raise revenue without resorting to property-tax increases.

The articles quote Dannell Malloy of Stamford, Kevin Cavanagh of New London, Bill Finch of Bridgeport, and Dan DeStefano of New Haven as endorsing the idea.

Malloy, along with mayors Bill Finch of Bridgeport, John DeStefano of New Haven and Kevin Cavanagh of New London, said cities need other options for raising revenue besides burdening constituents with more property taxes.

Fixing Wages, and Fixing Housing Affordability -- for All of Us

By this, I mean fixing the problem of low wages -- wages insufficient to support an individual or a family in conditions we consider acceptable on a reasonable number of hours of labor per week.  I don't mean minimum wage legislation, or living wage legislation, both of which I regard as well-intentioned but ultimately destructive for the community they intend to help.  I don't mean measures like the Earned Income Tax Credit, either.  It appears that people must jump through high hoops to get those dollars (which often seems to require professional advice, at a price), and then a significant portion of the money goes not to the wage earner but to his tax preparer/advisor, in the form of fees and interest.

The 80/20 Rule -- and its misapplications

I came across some obituaries for Joseph Juran, who died recently at 103.  Here are the first two paragraphs of the Guardian's obit:

Joseph Juran, who has died aged 103, will be remembered as the first management guru whose name is best associated with "quality". His distinctive contribution lay in expanding the statistical conception of quality so that it became an essential resource for management. He adapted the 19th-century statistical tool known as the Lorenz Curve to make it a manufacturing aid to identify clusters of defects in the production process. By integrating it with the 19th-century statistics-based Pareto's "80/20" Law, he eliminated random searching for the majority of defects, not only saving time but reducing waste.

The translation of Pareto's Law that he coined was that 80% of problems occur in only 20% of activities. This Juran/Pareto law of identifying the "vital few" (the 20%) has been applied to many functions of management since Juran gave it application: the most widely accepted formula it has generated is that 80% of results are the consequence of 20% of total activities (for example, a popular interpretation is that 80% of profits come from 20% of customers).

Working harder, making others richer

Bob Herbert wrote, in his 3/11/08 column entitled "Sharing the Pain", in part,

The American dream is on life support because men and women by the millions who want very much to work — who still have in their heads the ideal of a thriving family in a nice home with maybe a picket fence — are unable to find a decent job.

For years, families have been fighting weakness on the employment front with every other option imaginable.

• Wives and mothers have gone to work.   
  
• People have been putting in more hours and working additional jobs.
• And Americans have plunged like Olympic diving champions into every form of debt they could find.

Who has gotten the benefits of women spending many more years and many more hours per year in the workplace?  Who has benefited from Americans carrying more and more debt?  How does this relate to the run-up in the price of housing?  I said I'd write about these issues in another post.   This is it.

The Basis of U.S. Poverty Statistics

I had occasion to look up the 2008 Federal Poverty Guideline data the other day, and thought it worth sharing a few observations that might give one pause when considering poverty statistics.  The Guideline is one of two measuring sticks (the Census Bureau's Threshold being the other) which are used to gauge poverty.  The Guideline is usually used for eligibility for programs, the Threshold for as a yardstick for judging a household's income in relation to poverty; the Census Bureau is careful to state that it is merely a statistical measure and has no relationship to income adequacy.  The Thresholds are a bit more complex in structure than the HHS Guideline, but are substantially the same figures.

For 2008, a family of four is judged to be in poverty if their income is below $21,200, anywhere in the continental US.  A single individual is judged to be in poverty if their income is below $10,400, and from there, $3,600 is added for each additional family member.

Where in America is an income of $21,200 an even minimally adequate income for a household of four people of any age?

Bob Herbert's 3/11 column, Sharing the Pain: The "Near-Poor"

Link: http://www.nytimes.com/2008/03/11/opinion/11herbert.html

It begins with the statement,

Now that the economic crunch is reaching those near the top of the pyramid, there is finally a sense that the U.S. is facing a real crisis.

The article goes on to talk about the large group of  "near-poor" in America -- the 60 million people who are "just one notch above the official poverty line," with incomes that range from $20,000 to $40,000 for a family of four.

We have always gotten a distorted picture of how well Americans were doing from politicians and the media. The U.S. has a population of 300 million. Thirty-seven million, many of them children, live in poverty. Close to 60 million are just one notch above the official poverty line. These near-poor Americans live in households with annual incomes that range from $20,000 to $40,000 for a family of four.

It is disgraceful that in a nation as wealthy as the United States, nearly a third of the people are poor or near-poor.

You can read the statistics, expressed in terms of income multiples of the Federal Poverty Guideline here.  I think you'll find them moving.

It isn't that I don't agree there is a problem -- readers of this blog likely know that  -- but must point out that defining the problem this way, as the authors of "The Missing Class" do, misses the point that $20,000 or $40,000 for a family of 4 in rural Alabama is very different from $20,000 to $40,000 in New York City or San Francisco, or any of our other major metropolitan areas, where the vast majority of us live. [See data about the cost of living in America's low-cost counties, and in America's major cities.]

True Irish -- and all of us

Link: True Irish - Timothy Egan - Op-Extra Columnist - Opinion - New York Times Blog.

A few lifts:

And more than once you will hear this Irish saying: “If you want to know what God thinks of money, just look at who he gives it to.”

and

“The thing about the Irish,” he said, “is that we have always been there for the little guy. We go through life as underdogs. We die as underdogs. There is no other way for the Irish.”

It isn't right to blame God for unjust manmade systems.   And if we think it important to create a society with no victims -- and conversely, symmetrically, with no windfalls, no free lunches -- we need to understand the structural reasons for the poverty we see around us.  God didn't create poverty.  We do.  Day in and day out.   God didn't create slavery either; men did, and men ended it in this country, in its most obvious form, anyway.

Landholders, windfalls, productive effort and community revenue

I attempted to post this response to a blog, and ran into a technical error.  But even without the post to which it was responding -- which praised the so-called FairTax -- I though it worth sharing here. 

I'm still in Henry George's camp. Why tax the results of individual human effort -- stealing from the individual, or for that matter the corporation that which he/it created -- BEFORE collecting the economic value of that which the community created?

Affordable Family Formation and Values Voters: Social Values, or Land Values?

There is an interesting article in the 2/11/08 issue of The American Conservative,  entitled "Value Voters: The best indicator of whether a state will swing Red or Blue? The cost of buying a home and raising a family."  Steve Sailer posits that

Neither Jane Austen nor Benjamin Franklin, however, would have found the question of what drives the Red-Blue divide so baffling. Unlike today’s intellectuals, they both thought intensely about the web linking wealth, property, marriage, and children. They would not have been surprised that a state’s voting proclivities are now dominated by the relative presence or absence of affordable family formation. ...

Remarkably, a half-century before Malthus’s gloomy and Austen’s witty reflections on life and love in crowded England, Ben Franklin had pointed out that in his lightly populated America, the human condition was more relaxed and happy. In his insightful 1751 essay, “Observations concerning The Increase of Mankind,” Franklin spelled out, with an 18th-century surfeit of capitalization, the first, nonpartisan half of the theory of affordable family formation: “For People increase in Proportion to the Number of Marriages, and that is greater in Proportion to the Ease and Convenience of supporting a Family. When Families can be easily supported, more Persons marry, and earlier in Life.”

He outlined the virtuous cycle connecting the colonies’ limited population, low land prices, high wages, early marriage, and abundant children: “Europe is generally full settled with Husbandmen, Manufacturers, &c. and therefore cannot now much increase in People. … Land being thus plenty in America, and so cheap as that a labouring Man, that understands Husbandry, can in a short Time save Money enough to purchase a Piece of new Land sufficient for a Plantation, whereon he may subsist a Family; such are not afraid to marry…” Franklin concluded, “Hence Marriages in America are more general, and more generally early, than in Europe.”

Sailer lays out four gaps

Four interlocking reasons explain why the affordability of family formation paints the electoral map red or blue.

First is the Dirt Gap ...
The second major factor in the Red-Blue divide is the Mortgage Gap. ...
The Mortgage Gap leads, in turn, to a third factor: the Marriage Gap. ...
That leads to the fourth and final factor: the Baby Gap.   ...

He concludes,

This theory suggests that, in order to encourage marriage and children among voters, Republicans should pursue policies that raise wages, lower demand for houses, and keep the public schools from eroding further. The most obvious way to move the country toward a more Republican future is to restrict immigration. This revamped GOP could then position itself as the party of more weddings and more babies, while describing the Democrats, with some accuracy, as the party of dying alone.

Who Benefits From This Mortgage Mess -- and From the Proposed Solutions? Is there an alternative?

No one seems to be talking about "cui bono?" in this situation.    But there were some big beneficiaries, and I think we need to acknowledge that; and the awareness of the dynamics might just lead us in some productive directions.

How do we eliminate poverty?

Inspired by the same 2/18 Krugman article that my post, below, refers to, a blog asked this question:

When you look at the challenges faced by the low-wage worker you interviewed, what policies would help them and their families move out of poverty?

I responded with this:

lvtfan said...

Policies and programs are not going to do it. What we need is to revise our system of what we tax and what we don't tax. Hundreds of years ago, a wise economist noted that landlords grow rich in their sleep. Every bit of pork spending, every bit of local public investment in schools, roads, bridges, libraries, fire and ambulance, good hospitals, water, sanitary and storm water management, etc., has the same effect: it increases property values.

(Other forces also work to increase property values: population growth and technological progress. None of these are bad things -- they are all desirable.)

But the effect, as we conduct ourselves now, is to enrich those who own the choice bits of land, at the expense of those who need land. Since none of us come with our own hover packs that allow us to float endlessly a bit above the ground, we must either pay a landlord each month for the use of a bit of "his" land, or save our pennies to buy our "own" bit of land, or spend decades paying off the lender who provides some large fraction of the purchase price to pay off a seller.

But that landlord and that seller didn't create the land value. We all did. So why should we permit, by our traditions and choices of what we tax and what we don't tax much, the landlord and the seller to grow richer in their sleep, while others must toil to pay them?

Meanwhile, many of us are paying 30%, 40%, and far more of our wages to pay for housing. I'm not talking about granite counters; I'm talking about mostly paying for location, not for landlord-provided amenities.

So what's the alternative? The tenant is still going to pay the landlord, yes. But instead of the landlord paying a small tax on his land and a small tax on his building, and a small income tax after accounting for interest and depreciation (and, by the way, most landlords have figured out how to depreciate land, and the same building gets depreciated over and over by a series of landlords, each starting from a higher figure!) and a small "capital" gains tax and some sales taxes, we should be asking the landlord to pay a much larger tax on the land value -- in effect, passing through to the commons the portion of the monthly rent paid by the tenant which reflects the land value of the property. In cities, this is a large percentage; on the fringe, not all that much.

Similarly, by collecting every month from all landholders the economic value of the land, when someone wants to buy a house, all they're buying is the house itself, which is a depreciating asset. That may be a small fraction of the current purchase price, particularly in cities. And by paying monthly to the community for land value, and paying to the mortgage lender only for the loan on the structure itself, one's monthly costs go way down.

That is how we fix poverty.  A lot of other good things happen if we embrace this. 

1. The owners of choice downtown land will be motivated to put it to better use, which will create jobs both in the construction phase and when the new structures are in place. Jobs will chase people, driving wages upward. Currently, people are chasing scarce jobs, driving wages downward.

2. Sprawl will slow, even reverse, because most businesses want to be downtown, in the center of activity, and by creating venues for them where they want to be, there won't be pressure at the edges. Similarly, housing will be created closer to where people work. Shorter commutes, less time in cars, less energy used, fewer dollars used commuting. That saves money, time, fuel, pollution.

3. The more dense downtown areas will provide the critical mass for effective and efficient public transportation. Also walkable cities, which leads to healthier people.

Let the land owners fend for themselves. The landed gentry of England held the land, and collected the rents from their grateful tenants, who knew their place in the system. The landed gentry of the post-civil war south collected "their" share of their tenants' crops for permitting the former slaves (and whoever else needed a place to live -- poor whites, Native Americans, etc.) to use some land. Generous, weren't they?

None of us created the land. None of us can create another acre, or another downtown building lot. We need to share what already exists, use the incentives which will cause it to be put to its highest and best use (downtown that might be housing or commercial; on the fringe, agriculture or open spaces). We mustn't let some monopolize it, even when they cry "property rights." Land is different from that which man can create. Property rights are legitimate when they relate to what man creates.

This is the sort of policy change it will take to end poverty.

Or shall we keep talking about bandaids?  (Keep in mind that we're really good at bandaids, but they haven't worked yet!)

You can read more about these ideas at http://www.wealthandwant.com/, http://www.answersanswers.com/, http://www.henrygeorge.org/.

I returned later in the morning to add this comment.

By the way ... I am very impressed with the Self-Sufficiency Standard as a way to put some real dimensions on the problem of poverty. You'll find a lot of data drawn from the SSS's on my website, http://www.wealthandwant.com/, linked from the front page, right-hand column:


How much does it cost a young family to live at the "all one's basic needs met" level? -- at
http://www.wealthandwant.com/issues/pov/sss/index.htm

How does that level compare to the Federal Poverty Guideline? at http://www.wealthandwant.com/issues/pov/sss/sss_more.htm

How many of us are living below that level? And how many of our children are living below that level? at http://www.wealthandwant.com/issues/pov/income-to-poverty-ratios.htm

What does life cost in America's lowest-cost counties? at http://www.wealthandwant.com/issues/pov/sss/low-cost_counties.htm

What sort of compromises do those with incomes below that level have to make? at http://www.wealthandwant.com/issues/pov/sss/life_below.htm

Last year, the people who did the SSS study for Connecticut also issued a report quantifying how many people (under age 65) are living below the Self-Sufficiency Standard level. I regard that as a step in the right direction. see http://www.cga.ct.gov/PCSW/Publication%20PDFs/2007/WCS%20Full%20Report.pdf

However, as you might guess from my previous post, I'm not optimistic that the programs proposed in the SSS studies are going to solve the problem.

We've got to get to the root of it, which is not a problem with individuals but with our basic economic structure, as I've detailed above. "Fixing" individuals may change which individuals are impoverished, but won't reduce poverty, given our structure. The landed will still be the ones getting richer, and those who need land -- all of us! -- will be the poorer.

I'm sure I need to learn about trackbacks and that sort of thing ... there is probably a better way to bring that post into this blog.   

You might also look at the theme Fences and Small Bandages from the wealthandwant website.

Robert Reich's NYT column "Totally Spent"

I spent last evening working on a piece I hope to post later, and only got to yesterday's NYT "most emailed" this morning, too late to post on the NYT website my comment re: Robert Reich's article titled "Totally Spent"  which begins,

WE’RE sliding into recession, or worse, and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn’t a normal downturn.

and continues later ...

The first way was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 — to more than 70 percent. But there’s a limit to how many mothers can maintain paying jobs.

So Americans turned to a second way of spending beyond their hourly wages. They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.

But there’s also a limit to how many hours Americans can put into work, so Americans turned to a third way of spending beyond their wages. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. With the bursting of the housing bubble, the piggy banks are closing.

The binge seems to be over. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth.

 

Here's what I put together ...

I'm with Mr. Reich, and many of the nearly 200 responders before me, part way.  But I think they all are missing something vitally important.  As wages rise, so do rents.  Landlords with land to rent, be it for housing or for commercial uses, and Sellers with land to sell, be it for housing or commercial uses, can command higher rents as wages rise.  So a large share of the gain in wages won't be available to workers for satisfying more of their wants and needs; it will go into the portfolios of landlords and sellers.   (The buildings on the landlords' and sellers' properties are depreciating assets -- 1.5% annually; it is the land which increases in value in response to economic activity, technological progress and population growth.)

The implication of this truth is that until and unless we correct the structural situation which allows landlords and sellers to privatize the economic rent, raising wages is going to largely benefit the people who own our best land.  We've already seen this as women entered the workplace in large numbers for longer parts of their lives; as men and women worked more hours; as people increased their borrowing from 80% to 90% to 95% to 103% of purchase prices; lengthened the mortgage terms; paid only interest on their mortgages; as buyers increased the share of their wages they spend on housing from 25%  to closer to 40%; and buyers took on teaser-rate mortgages just to get into the market, driving up the portfolios of sellers.

How do we fix this?  Just as our great-grandparents knew: through moving our tax base from wages and sales to land.  Henry George laid it out most eloquently and clearly in Progress & Poverty, but he was not the first to recognize these truths, or the last to acknowledge their importance. 

Talk about tweaking individual and corporate income tax brackets is akin to rearranging the deck chairs to hear the music better.  If we can't open our minds to think outside the income tax box -- and that doesn't mean using any form of sales tax -- we're not going to improve things for the vast majority of our fellow members of society.   

Land, in all its forms from urban and suburban sites, the value of natural resources, electromagnetic spectrum, water rights, roads, to airport congestion, etc.,  is a reliable and logical and just tax base.  If we close our eyes to that truth and to the logical implications of allowing all that value to reside in private pockets, we continue to create poverty.   How much did Exxon pay in royalties, and to whom did they pay them?  How much in taxes?  I'd argue that we're owed royalties, at the federal level, without regard for what entity has title to the land or oil rights.   That oil value is ours, not individual property.  Jed Clampett is no more entitled to that revenue than the rest of us. 

Mr. Reich, will you take a look at these ideas?    You might start by searching for "quotable-Nobels" together with "quotable-notables" and exploring the site on which you find those two phrases.

Education is the key ... but education in land-based economics must be a large component, if our other problems are ever going to be solved.