prop13 land values fair tax transactions tax

Why should Prop 13 be sacrosanct?
sarkozy santa clara theme park henry george theorem

France Pushes a Robin Hood Tax

A major columnist wants to debate Proposition 13. Could that lead to a reform the best minds proposed long ago? We trim, blend, and append one 2011 and four 2012 articles from: (1) Los Angeles Times, Jan 9, on Prop 13, by columnist J. Newton (whose latest book is Eisenhower: The White House Years); (2) a press release, Jan 7, on sales tax by R.L. Wrights (a libertarian for president); (3) Inter Press Service, Jan 15, on trades tax by A. D. McKenzie; (4) Santa Clara Weekly, Issue 3, on land rent by C. Schuk; and (5) GroundSwell, this time last year on famous economists by Bill Batt (ex-advisor to the New York legislature).

by Jim Newton, by R. Lee Wrights, by A. D. McKenzie, by Carolyn Schuk, and by Bill Batt

Proposition 13, the tax initiative approved by California voters in 1978, imposes a two-thirds requirement for the Legislature to approve any tax increase. A new lawsuit charges that the amendment does not amend the state Constitution but revises it. If the court agrees, it could invalidate that portion of the landmark law.

Most Californians bemoan the threat to a tax system that they believe has preserved their ability to afford their homes. Homeowners are terrified that opening up debate on the initiative would return California to the days when rapidly rising home values threatened to tax some residents -- particularly older ones -- out of their homes.

But why should a 33-year-old initiative stand as sacrosanct? Over the same period, the state and nation have debated environmental protection, gay marriage, abortion rights, and the death penalty. But the virtue of Proposition 13 remains off-limits.

To see the whole article, click here .

JJS: Rather than tax homes, should we tax sales?

"Our forefathers made one mistake. What they should have fought for was representation without taxation." - Fletcher Knebel, historian

Advocates of the “Fair” Tax [a national sales tax] say it's "revenue neutral," that it will allow the federal government to collect just as much money as the income tax. Fair Tax supporters say this as if it were a good thing. Yet out-of-control, unbridled government spending has amassed a $15 trillion federal debt, which grows every day.

“Fair” Tax advocates say it repeals the income tax. It does not. Their bill merely repeals various sections of the federal tax code relating to the income tax. The bill leaves the 16th Amendment intact.

People have the right to keep all the fruits of their labor. So taxes are not fair. They use force to take money from some people and give it to others.

Government could fund its services with voluntary user fees.

To see the whole article, click here .

JJS: Critics could also note that sales taxes are regressive, are cumbersome to both business and customers (once you live in a place without them, such as the state or Oregon, you’ll see), and when they get onerous enough they foment black markets. So, if not a tax on small trades, then should we levy one on big ones?

French President Nicolas Sarkozy said the French government may implement a financial transactions tax (FTT) without waiting for its European or G20 partners to come on board.

German Chancellor Angela Merkel said that the tax would be the "right signal to show that we have understood that financial markets have to contribute their share to the recovery of economies."

Sarkozy’s push for the “Robin Hood tax” has the approval of many non-governmental organizations, even as support lags elsewhere.

To see the whole article, click here .

JJS: Taxists like this Tobin tax since it’s supposed to fall on those who invest -- people who’re rich -- and the rate is low. But look at tax history. The US income tax was also proposed to fall on the wealthy at a low rate. Now it falls mainly on workers at a high rate. How long would it take for this transaction tax to fall on you every time you made a deposit or withdrawal or used a debit or credit card? Not long, while big traders would be exempted. So, if not a tax on trades, then tax what?

The Santa Clara City Council approved an agreement with Great America theme park owner Cedar Fair.

The city originally purchased Great America in 1985 -- a move that was passed by nearly three-quarters of city voters -- to prevent the land from being sold to a developer. The base rent was fixed at $5.3 million in 1989 when the city sold park assets to Kings Entertainment.

The new agreement calls for increases to Great America's base rent by 7.5% in 2039, and 5% in 2054 and 2064. Further, the revenue threshold at which the City receives additional rent for the land -- called participation rent -- increases by 15% in 2020, 2030, and every five years after that. But, the city hasn't collected any participation rent from the amusement park since 2006.

These increases in ground rent most likely will not capture the full increase in property values during this time. “Holding the rent stable for 62 years is essentially a rent decrease," said Council Member Will Kennedy. "Sixty-two years ago was 1950. My rough calculation is that one dollar was worth eight or nine times what it is now." A similar rate of change in the future would effectively reduce the city's rent from $5 million to $500,000.

Another question was whether the City was rushing into a deal and would get a better agreement by waiting.

To see the whole article, click here .

JJS: Why is it so hard for government to recover the socially-generated value of land, but so easy for it to take private income and purchasing power? Maybe because while even ordinary people own land (under their homes), only rich people engage in day-trades of stocks, bonds, and derivatives. So trying to recover site rent feels like an attack on the middle class while aiming for a slice of the profit from trading seems like a justifiable lien on the rich.

However, it really should be the other way around. Wages and earned profits are privately produced. Meanwhile, rents are community produced, being a function of location.

Not only should our representatives lease public land at full value, they should also levy private land at full annual rental value. The upshot of either method of recovery would not be to increase how much one pays so much as redirect to whom one pays. We’d no longer pay a private seller or leaser or lender but one’s neighbors and society in general, via government levies and government services or dividends. It’s an idea with a venerable intellectual lineage.

In Wealth of Nations, Adam Smith wrote, "Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry.... Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them."

A century later Henry George wrote that "the value of the land taken as a whole is sufficient to bear the entire expenses of government," a thesis today known as the Henry George Theorem, and borne out in studies by leading economists including “Nobel” laureates William Vickrey and Joseph Stiglitz.

To see the whole article, click here .

JJS: Not only is there plenty of rent to recover, it'd mainly come from the rich, those now corralling it. Who owns the most valuable downtowns and oil fields and best views and communications spectrum? Who owns the mortgages for land? Who creates the credit to wheel and deal? The ones taxists want to tax. If you’re like most people, if you were to pay to society only the value of where you live and not a tax on income, sales, buildings, imports, etc, you’d come out way ahead.

Still, the constant effort to tax the rich is a misplaced emphasis. It does reveal a sense of outrage but also a non-inquisitive mind. Important realities overlooked are: how are fortunes amassed? It’s by corralling common wealth, not by generating extra private wealth. And, what sort of spending is it that the well-positioned manage to corral? It’s society’s spending for nature, for land and resources and EM spectrum and ecosystem services.

Just recover the value of nature upstream and you’d no longer need to concern yourself with gross private fortunes downstream.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

If the state won’t collect the commonwealth …

While some governments recover rents …

Nobelist Stiglitz Calls for George's Tax

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