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Ed. Notes: Just a reminder that what you’re paying for is not land as dirt (the island) but land as location (where sits a London flat). And until we geonomize, who you’re paying is the wrong person. Owners don’t create land or its value; nobody by themselves does that. It’s the presence of society who creates the value of sites. Hence it is they — your neighbors — whom you should pay, just as they’d pay you. That’s how we could share the socially-generated value of locations: pay Land Dues into the public treasury and get rent dividends back from your local government. And that’s how we could get over imposing all those taxes on workers and bestowing all those subsidies for insiders … soon!
This 2013 excerpt of The Star, Dec 14, is by Frank de Jong, president, Earthsharing Canada, Toronto.
Relying primarily on gas taxes to fund mass transit, as suggested by the Anne Golden transit panel, is a socially divisive idea, pitting suburban and rural residents who rarely use transit against urban dwellers who generally drive shorter distances if at all. The war on the car will only get worse.
Transit and other infrastructure should be financed by those who benefit financially from it, not by those who live far away. Land value capture, which collects the rise in local land values that the new transit generates, could finance the infrastructure.
People bid up the price of land around new transit, hospitals, and schools because of the advantages of living and working near them. A rise in land values that was created by the government-funded infrastructure should therefore go back to government to pay for the project and not be a windfall profit to those who happen to own nearby land.
Ed. Notes: The best transit system in the world — Hong Kong’s — uses leases to recover the value of the land that arose around its stops and stations. All truly desired projects could be self-financing, concluded big-name economists William Vickrey and Joseph Stiglitz. What are we waiting for?
Informal social customs often work better than laws in Influencing good behavior.
This 2013 excerpt of On the Commons, Spt 25, by Jay Walljasper.
The vast majority of us voluntarily add 10-20 percent of the cost of a restaurant bill as a tip. There’s no law requiring this. But people tip anyway because it’s a custom. You feel guilty, like some kind of Ebenezer Scrooge, when you don’t.
Informal sanctions such as these are a neglected social resource. They often are more effective than formal ones and central to the functioning of many commons. They are one reason that the supposed “tragedy of the commons” is largely a canard, at the local level at least.
Why not make more use of this non-government and non-market force?
Ed. Notes: Somebody’s thinking creatively about how to improve our group behavior; that’s great. However, it seems like customs, sanctions, and opprobrium depend on people having already reached widespread agreement on certain actions being right or wrong. So we still need to find a creative way to win widespread agreement on the morality of sharing Earth’s worth.
These two 2013 excerpts on the new Wall Street landlords are from (1) Huffington Post, Oct 25 by Ben Hallman & Jillian Berman and (2) Tom Dispatch, Nov 26, by Laura Gottesdiener.
Here’s What Happens When Wall Street Builds A Rental Empire
Most rental houses in the U.S. are owned by individuals, or small, local businesses. A new breed: a Wall Street-backed investment company with billions of dollars at its disposal. Over the past two years, Colony American and its two biggest competitors, Invitation Homes and American Homes 4 Rent, have spent more than $12 billion on at least 75,000 homes.
This new incursion by hedge funds and private equity groups into the American single-family home rental market is unprecedented, and is proving disastrous for many of the tens of thousands of families who are moving into these newly converted rental homes.
Tenants of these Wall Street-backed rental companies have posted hundreds of scathing reviews on Internet message boards, such as Yelp, Topix and Zillow. (These sites also include a sprinkling of positive comments, though they comprise a distinct minority.)
Attempts to get issues fixed usually end in frustration, the renters said. Local management companies hired to service the homes ignore calls and emails, sometimes for weeks. When tenants try to get in touch with the owners — the firms buying up the properties — the result is often the same, they said.
Some tenants have grown frustrated enough to sue.
“Complaints were coming at us like out of a fire hose,” said a former Invitation Homes employee. Call centers were overwhelmed. “Getting someone on the phone was next to impossible,” the employee said. “I have no doubt the customer experience was compromised.”
The investment companies are focusing most of their attention on cities like Atlanta, Las Vegas and Tampa, hard hit by the foreclosure crisis but with good prospects for long-term growth. They are buying up so many houses in these places — 200,000 in the past two years, according to Bloomberg News — that they are pushing up prices and edging out ordinary buyers.
Over the last year and a half, Wall Street hedge funds and private equity firms have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
Millions of evicted Americans need a place to live, as millions of bank-owned houses are vacant. Wall Street is renting these foreclosed houses back to us.
Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.
In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012.
Blackstone is the largest owner of single-family rental homes in the nation — and of a whole lot of other things, too. It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael’s, Orangina, and dozens of other companies.
Blackstone manages more than $210 billion in assets. It’s a public company whose institutional owners include Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America, Goldman Sachs, and of course JP Morgan Chase. (Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank foreclosed on the most families in 2013.) If Blackstone makes money by capitalizing on the housing crisis, all these other Wall Street banks make money too.
In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.
Ed. Notes: Will what these writers get to complain about ever inspire them enough to focus on solutions? They really should take a page from their opponents and go for the rents. Don’t let lenders and landlords gobble it all up. Keep it all circulating at home. Just get the local government to shift the property tax off buildings, onto locations. As the tax on land rises, the price will fall, drying up the flow to Wall Street. Government could cut other taxes, and/or fund truly desired programs, and/or disburse the revenue as a dividend to residents. Whichever chosen, the fat flow of funds would no longer enrich speculators but benefit the community.
A tax is neutral if it has no forced effect on the economy or on individual behavior relative to the absence of the tax. Market prices are neutral, because the purchase is voluntary. But taxation is mandatory, and alters behavior. There is no such thing as a neutral tax.
A tax on flows of income or spending reduce the flow. The tax increases the cost of the good, reducing the quantity of demanded. The tax misallocates resources away from their most productive and desired uses. Taxes on production and goods impose a distortion of prices and profits, and a deadweight loss or excess burden on individuals and the economy.
However if the tax is on a resource that has a fixed supply or demand, since the quantity does not change, there is no deadweight loss. Spatial land is the prime resource with a fixed supply, and so a tax on land does not affect the quantity of land, and it does not affect the market rent. Land will not shrink, hide, or flee when taxed. A tax on a good with a fixed demand, where the quantity does not change even when the price rises, also has no deadweight loss.
A lump-sum or poll tax is a fixed amount of money regardless of income, spending, or wealth. While a lump-sum tax does not impose a penalty on marginal or extra income or spending, it is not neutral regarding leisure. If a person would have preferred more leisure to more goods, and has no savings, a high lump-sum tax forces that person to work in order to pay the tax. This forced labor makes a lump-sum tax non-neutral. Likewise, a tax on a good with a fixed demand acts like a lump-sum tax, and is not neutral.
The analysis of neutral taxation also has to account for the spending of the revenue. If the funds are spent for goods and services, the spending affects the economy, and the tax is not neutral. For example, if the government provides roads with the revenue, some will benefit more than others. That benefit is, in effect, an income. In that way, the spending redistributes income unequally. Therefore a tax is completely neutral only if the tax revenues are distributed to the whole population in equal amounts of money.
The anarchist economist Murray Rothbard wrote about “The Myth of Neutral Taxation” in 1981. Rothbard compares taxation to theft by a robber. In both cases, the victim is unable to spend his money as he pleases, and this makes any tax non-neutral. However, Rothbard does not consider the situation in which coercion takes place if there is no compulsory payment.
Pollution without compensation is in effect a tax on the health and welfare on those affected, and a subsidy to the producers and consumers who do not pay the full social cost of the good. A tax on pollution compensates society and removes the subsidy. A pollution tax also reduces pollution, and so it is not neutral relative to the absence of the tax. Pollution taxes are non-neutral in a good way.
When government provides goods and services, this spending makes locations more attractive and productive, raising the rent and land value. If there is no tax on land value, land owners receive a subsidy. Moreover, this subsidy induces greater land holding and speculation, which feeds on itself as land prices rise, until it becomes a real estate bubble that bursts into a collapse, recession, and depression.
Even though a tax on land value does not change the quantity of land, it changes behavior relative to the absence of the tax, by preventing the land-value speculative boom, and by shifting spending from the purchase of high-price land to the purchase of produced goods, including more investment in the tools of production. A tax on land value also promotes an optimally efficient use of land, since the tax is based on land as put to its highest and best use. Therefore a tax on land value or rent is non-neutral in a good way.
In physics, there are particles called “neutrons” that are neutral in having neither a positive nor negative charge. Protons have an electric charge designated by convention as positive, and electrons have the opposite negative charge.
Since taxes are economically positively or negatively charged, we should choose proton taxes with positive benefits rather than negative electron taxes. Yet, people democratically elect representatives who impose negative taxation.
Moreover, the thousands of scholarly economists who have PhD degrees and win prizes have not vehemently advocated a prosperity tax shift. The classical economics of Adam Smith had a positive effect in promoting free trade, but during the neoclassical tide of the past century, by condoning or even advocating market-hampering taxation, the field of economics has perhaps done more economic harm than good.
This 2013 excerpt of Naked Capital, Spt 20, is by Yves Smith.
US Congress has ordered the US Postal Service to prepay retiree benefits 75 years in advance. USPS has to fund benefits now for workers who haven’t even been hired. It is the only agency subject to this requirement. If that were eliminated, and the Post Office stopped pricing business mail (meaning all that junk you get) at a loss, the USPS would be profitable.
The forces against the Post Office include DHL, Federal Express, UPS, and USPS supplier Ursa Major.
The husband of powerful Senator Diane Feinstein (DiFi chairs the Senate Intelligence Committee), Richard Blum, is the chairman of C.B. Richard Ellis (CBRE) which has the exclusive contract to handle sales for the Post Office’s $85 billion of property.
• CBRE has sold valuable postal properties to developers at prices that appear to have been steeply discounted from fair market values, resulting in the loss of tens of millions of dollars in public revenue.
• In a series of apparently non-arm’s-length transactions, CBRE negotiated the sale of postal properties all around the country to its own clients and business partners, including to one of its corporate owners, Goldman Sachs Group.
• CBRE has been paid commissions as high as 6 percent by the Postal Service for representing both the seller and the buyer in many of the negotiations.
• Senator Feinstein has lobbied the Postmaster General on behalf of a redevelopment project in which her husband’s company was involved.
In June 2013, Postal Service Inspector General David C. Williams published a scathing audit of CBRE’s exclusive contract to manage all the sales and leasing of postal real estate.
Ed. Notes: This corruption could not happen without the land. Grasping for the profit from locations long ago became an obsession. The only rule is to get as much as you can, any way you can — until the geoist vision spreads.
These stories keep the pot boiling and offer vital information.
These eight 2013 excerpts are from: (1) and (2) Pennsylvania’s Reading Eagle, Spt 25 on city data and Oct 9 on consultants, both by Don Spatz; (3) New York’s capitol city, Albany’s Times-Union, Oct 14 on the Green Party by Bryan Fitzgerald; (4) On the Commons, Oct 17 on shaping cities by Mason Gaffney & Rich Nymoen; (5) Bank of International Settlements Working Paper No 433, November on non-interest rate policies by Kenneth N Kuttner & Ilhyock Shim; (6) Truthout, Dec 10 on unearned income by Karl Fitzgerald; (7) Sacramento Bee, Dec 13 on property taxes by Peter Schrag; and (8) New Hampshire’s Concord Monitor, Dec 15, on MONOPOLY by Grant Bosse.
Detailed data for how the proposed land-value tax will affect every Reading property now is available on the city website, and property owners are checking whether they’ll pay more or less compared with existing property taxes.
The administration says the land-value tax promotes economic development and the new jobs that come with it; it discourages owners from sitting on a vacant lot. Pittsburgh has been using the land-value tax since 1913.
Allentown has it. So do more than a dozen cities such as Coatesville, Harrisburg, Lock Haven, Aliquippa, McKeesport, and Scranton.
Consultants Give Qualified Endorsement to Land-Value Tax
The outside consultants who coordinate the city’s Act 47 recovery moves have given what Mayor Vaughn D. Spencer calls a qualified endorsement for his plan to shift the property tax to a land-value tax over five years.
In an eight-page report, the consultant team led by Philadelphia-based Public Financial Management said: “PFM supports the administration’s proposal to the extent that it can be demonstrated not to have disproportionately negative impacts on Reading’s low-income residents.”
The outside consultants are one of three groups that must support the tax shift in writing before Council President Francis G. Acosta said he’d allow it to come up for a vote.
The other two are the Reading-Berks Association of Realtors and the Greater Reading Chamber of Commerce & Industry.
Green Party Albany mayoral candidate Theresa Portelli announced her economic agenda for the city of Albany. It includes switching to a land value tax to help spur development of Albany’s abandoned building, investment in local worker-owned co-ops, a local income tax, and to curtail Albany’s landfill revenue loss by becoming a zero-waste city.
An historical undercurrent in the campaign for economic justice in the U.S. has been the ideas of economist Henry George and the Single-Tax movement, which wielded considerable influence during the Progressive Era of the early 20th Century.
Put into practice through local property taxes, this idea helped shape the growth of leading cities like New York, Chicago, Milwaukee, Cleveland, San Francisco, Pittsburgh, and Detroit.
The formula for growing and revitalizing cities seems to be the same, whether under a “socialist” mayors like Milwaukee’s Hoan or a colorful populist like Cleveland’s Johnson: supply infrastructure, keep user-rates low, raise land taxes, attend to the details of assessment, and go easy on taxing buildings.
Population growth is not always a goal of civic policy. But it is vital to the interests of labor to have cities vie to attract people by fostering good use of their land. That is, indeed, the main point of Henry Geroge’s thesis in Progress and Poverty.
A healthy economy generates surpluses that belie the Chicago School slogan that “There is no free lunch.” Land rents are the free lunch. Perhaps Connecticut’s move this year indicates that this time-proven wisdom is beginning to spread once again.
Can Non-interest Rate Policies Stabilise Housing Markets?
Among the policies considered, a change in housing-related taxes is the only policy tool with a discernible impact on house price appreciation. The evidence suggests that an increase in housing-related taxes can slow the growth of house prices.
Unearned income is the cornerstone to the wealth gap and is highlighted by the capital gains one sees in property, where the value of a location can jump $30,000 – $50,000 in one year – more than many people earn. The great tragedy of modern economics is that the concept of unearned income is rarely taught at university. Nor is the advantage of location. But “location, location” remains the number one rule in real estate investment.
Blackstone Capital has bought up swathes of property for $35,000. Council appraisers valued them at $60,000, but the rents charged are akin to a $173,000 property. At $60,000 they should be charging $250 per month, not $720. This extra $470 in rental payments is an unearned income.
Neo-classical economics has kept this story under wraps by removing the analytical tools from the syllabus. This happened not in the 1980s, but in the 1880s. Robber barons were concerned about the rising understanding of how they derived their magic money. Henry George’s Progress and Poverty had spelt out the natural advantages that the owners of the earth had over anyone needing some earth: those trying to run a business or earn a wage.
The barons moved to fund the first American Economics Association (1886).
They paid academia to remove land, from the three factors of production (with labor and capital). Thus came the transition from Classical to Neo-Classical Economics. It was as if we no longer needed a place on the earth to work, play or run a business. The influence of high land prices on consumer spending and small business resilience are expected to be ignored.
Adding to this obfuscation is the poor quality of data in many jurisdictions. The USA’s National Incomes and Products Accounts conflates house and land valuations. This is part of the plan to focus on “housing” bubbles, ignoring the locational value of land. It also amplifies depreciation write-offs.
Australia is one of the few remaining nations with a decent data system. This allowed the quantification of unearned income in the Total Resource Rents of Australia report. This found the economic rents of all monopolies at 23.6% of GDP. This is twenty three times greater than neo-classical economists such as Paul Krugman dismiss it at.
This misinformation demonstrates the mastery of economic deception. It provides the barrier to analysis into companies like Blackstone making so much money “in their sleep” (as John Stuart Mill famously once said).
The quantification of unearned incomes is important because society could decide to do what economists have pointed to for hundreds of years – make monopolists pay for the running of government.
Rather than taxing our hard work, gather up monopoly profits in water trading, cyber squatting, geo-satellite orbits, the electromagnetic spectrum, forestry, gambling, banking licenses, and privatized utilities. Owners of such property do little productive work, but claim enormous, lightly taxed profits.
Consider cyber squatter Michael Kovatch, who had the good fortune to be first to buy the domain name www.iphone.com. He sold to Apple for a reported $1 million.
Are those economic rights valued yearly and taxed for their economic potential? The ability of VeriSign to exercise its monopoly power by increasing domain name registration fees at will is ‘overlooked’ as a cost to society. At present, such insiders have the best of both worlds – privatizing monopoly rights while driving through loopholes in a tax system incapable of tracing tax havens.
The state could lay claim to some 40% of this unearned income and use this to remove damaging payroll or sales taxes.
The “invisible hand”‘ was mentioned just once in Smith’s ‘The Wealth of Nations’, as was the ‘free market’. Monopoly was mentioned 64 times, land, 87, tax, 96, and rent, 102 times. For this reason it is time we looked back to the classical era to focus on the unearned incomes (rents) found in land and monopoly. This natural bounty acts as a source of government income while stabilizing the inequities derived from dominion over the earth.
Every economist, Lenny Goldberg, who heads the California Tax Reform Association, says, would agree that the best tax is a tax on land value only and, to the extent possible, doesn’t tax new investment.
Monopoly is the world’s best-selling board game, and I don’t know why. It’s an awful game. It takes too long, it relies almost entirely on luck; the player has almost no real decisions to make. As a real estate simulation game, Monopoly is preposterous.
That’s due to its origin as a protest against greedy landlords. In 1904, Elizabeth Magie of Brentwood, Md., received a patent for The Landlord’s Game. Magie was heavily influenced by the writing of Henry George.
George advocated that all government revenue come from a tax on the value of unimproved land, arguing it was the least intrusive tax possible. Under a Georgian tax code, you’d pay local, county, state, and federal property taxes, not on the value of your house, but on the land itself. If you built a shack or a skyscraper, your tax wouldn’t change, so the tax would not discourage investment and improvement. Of course, the value of your land would itself increase based on how much improvement was going on around you.
Ed. Notes: So revenue reform does get some press coverage, tho’ it could use quite a bit more. Even these fine articles had some holes.
The Reading articles noted the need to consider the poor; a dividend paid to residents from the recovered rents could easily handle that.
The Green candidate called for a tax on income but that only drives residents away and lowers land values, which she proposed to use as the city’s tax base.
The old cities authors recalled a popular movement of a bygone era; perhaps what’s needed is a diagnosis which would reveal how a reform could spur a popular movement today.
The bankers’ economists used the usual stilted jargon; were they too cowed to come out and say “property tax” or “land tax”?
The unearned income article (in Truthout, where I had a half dozen articles) connected a lot of dots for me. But why not for the mass of readers?
The California article addressed commercial property for political reasons, leaving out residential, but shifting the property tax is good for both.
The Monopoly article did a nice job of correcting the urban myth on the game’s origins.
We’ll probably have to see many more such articles on the tax/subsidy system before we see a well informed movement demanding fundamental reform. Good press coverage, yes, but what else will make sharing Earth’s worth popular?
The vast majority of Americans — 91 percent of Democrats, but also 76 percent of Independents and even 58 percent of Republicans — are in favor of raising the minimum wage.
Minimum wage laws are a price control. They dictate the minimum level that a company can pay a worker. If the minimum wage is $10, and a company wants to take on a new employee that they determine will be worth $8 an hour, they have a choice — either pay $10 an hour, or not hire the employee. Sometimes, the company will accept a hit to their profit margin, and pay the employee $10 an hour. Sometimes they will just not hire a new employee at all. Or, increasingly, sometimes they will go overseas and hire an employee elsewhere — like China — where wages are far lower.
Right now, America has over three jobseekers for every available job. And worker productivity in America has risen, yet the minimum wage has not.
I propose abolishing the minimum wage, and replacing it with a basic income policy.
A basic income is basic. It does not make you rich or successful — it simply ensures a minimum standard, with a minimum of bureaucracy and without setting any price controls. People would still have many personal and financial incentives to work and to become entrepreneurs. If anything, the fact that there is no longer a minimum wage would probably create more employment, not less.
Ed. Notes: With progress, the workweek is supposed to be shrinking, people are not supposed to be addicted to jobs. What else is an economy for, if not to lavish upon us great amounts of leisure?
The second writer proposes taxing the rich. But that accepts great fortunes, no matter how they’re made, and just demands a slice of them … hmm.
If you don’t want the rich to have so much money, don’t give it to them. It’s not theirs anyway. What they’re getting rich off of is common wealth, or society’s surplus, which should be common wealth, a wealth stream we should all share.
The way to turn off the spigot is to redirect all of society’s spending for nature and privilege, all the money we spend for the land and resources we use, and the money we must spend due to some corporation with a government-gratned privilege, like a patent monopoly on drugs, squeezing the consumer. Instead, use taxes, fees, dues, and leases to suck those immense flows into the public treasury. Then have government disburse the lion’s share of those funds back out to the citizenry.
Such spending is plenty of money — the biggest stream in the GDP — and it will only get bigger as technology advances and society prospers. Sharing society’s surplus is sort of like the Alaska oil dividend or Singapore’s land dividend or Aspen Colorado’s housing assistance to all working families. Just as a basic income is a more humane idea than a minimum wage, so is a Citizen’s Dividend a vastly more fair and efficient form of an extra income for everyone. Help it along at Progress.org.
This 2013 excerpt of Common Dreams, Dec 10, is by Lauren McCauley.
One day after Canada laid claim to the North Pole in a bid to out-maneuver other nations in the land grab for the resource-rich Arctic, Russian president Vladimir Putin issued orders to “concentrate on building up infrastructure and military units in the Arctic,” including the restoration of a number of Soviet-era Arctic bases.
The bid comes as Arctic-bordering nations race to establish gas and oil drilling in the region, greenlighting what environmental groups call reckless operations that risk spoiling the pristine Arctic ecosystem. Rapidly melting ice has also opened up new shipping channels through the Arctic which neighboring countries have been eager to exploit.
Canada’s official submission to the UN is due this month. Last week, Canada applied to increase its nautical borders by roughly 1.2m square kilometers beyond the current boundary, 200 nautical miles from the northern coast, which is allotted to all neighboring Arctic nations including Canada, Denmark, Norway, Russia, and the U.S.
Ed. Notes: If governments can’t wage a Cold War over ideology, they must revert to threatening war over good ol’ fashioned territory and resources? Isn’t any society over petty land grabs? Not even developed Canada? Can’t this species progress?
It doesn’t matter who owns the Arctic. It only matters who gets its “rent” or royalties. If everybody got them, a good-sized number of us — those living nearby the extraction sites — then there’d be no “rents” leftover to flow into the deep pockets of a few insiders.
To prevent these conflicts, it really is up to us to declare loudly, clearly, and often that the worth of Earth is a common wealth for all of us to share.
This 2013 excerpt of the Huffington Post, Spt 23, is by Mary Manning Cleveland of Columbia University.
A carbon tax would operate much like a diamond tax, for reasons both of demand and supply.
Demand: The wealthy actually consume a disproportionate amount of carbon. Discussions of a carbon tax usually focus on the price of gasoline — a significant cost to low-income commuters and small truckers. But the rich fly planes, including private jets; drive to low-density suburbs; occupy and heat multiple houses and hotels; and buy lots of stuff. Clearly the rich consume much more carbon per capita than the poor.
Supply: In the short run, it’s hard for people to cut energy consumption, especially if they must drive to work. But oil production takes decades and billions in capital investment; producers cannot quickly increase or decrease supply. Second, oil producers form an international cartel, an organized mega-monopoly, which holds down production to drive up prices. Since they’re already charging what the traffic will bear, they can’t much raise prices to cover a tax.
Because most of the tax falls on suppliers, it will generate plenty of revenue to help those unfortunate long-distance commuters and small truckers, to build more public transportation, to invest in renewable energy, and even to cut super-regressive taxes like the payroll tax.
Who owns the suppliers, anyway? According to Edward Wolff, in 2007, the top 1 percent in the U.S. owned 43 percent of non-home wealth, mostly securities, including of course energy company stocks and bonds. The top 10 percent of wealth holders owned 83 percent. The same folks who own DeBeers also own Exxon, Shell, and BP.
Ed. Notes: And if you want to really be sure that a tax on carbon spares the poor polluting a little and targets the rich polluting a lot, all you have to do is do what British Columbia do: they use some of the revenue raised by their carbon tax to fund a dividend to the lower income earners.
Besides using that payback to get a tax on emissions passed, you could also use it to pass a tax on extraction, even to pass a tax or fee on exclusion, on monopoly use or ownership of a location. Whether it’s the atmosphere, or buried resources, or desirable land, if you use it, you owe for it.
And while recovering these values of nature, ideally, at the same time government would quit taxing the values we do individually create, such as our income, purchases, and buildings. Reduced to a slogan of bumper sticker size: “Pay for what you take, not what you make.”
De Blasio tells lot owners to put up or pay up. His bid to close a tax loophole could force landlords to build new housing on their vacant plots or sell out to those who will.
This 2013 excerpt of Crain’s New York Business, Nov 24, is by Joe Anuta.
Prime vacant lots spurred Public Advocate Bill de Blasio in April to push for tax hikes on vacant land to force owners either to put theirs to use and build housing or to sell it to those who will. As mayor-elect, Mr. de Blasio is pledging to carry out his idea, which today would affect more than 10,500 lots in the five boroughs.
“It would drive the price of land down and increase development, to the extent the tax increases are significant,” predicted Robert Knakal, chairman of Massey Knakal Realty Services. “The more expensive [vacant land becomes to hold], the less of it you will get—that’s Economics 101.”
The plan could also provide a significant jolt of new revenue for the city that could go toward an affordable-housing program. Mr. de Blasio estimated his plan would eventually generate $162 million annually.
Upping the cost of inactivity for landowners would pay dividends by reducing the number of empty lots, which not only become magnets for crime, garbage and vermin, but also drive down neighboring property values—and city tax revenue.
“It doesn’t hurt developers like me,” one businessman said. “I’ll gladly pay the higher taxes for the few years I hold a property if it helps to stop long-term speculation.”
Mr. de Blasio’s plan is nearly identical to a campaign that was successfully waged in Manhattan in 2007 by Borough President Scott Stringer and state lawmakers, which resulted in the tax change being made to all properties north of 110th Street.
Will Mr. de Blasio have any luck in persuading Albany to pass it without the help of Gov. Andrew Cuomo, who has not weighed in on the issue?
This 2013 excerpt of The Guardian, Spt 22, is by Robert Newman, a comedian.
The rate of population growth has been slowing since the 1960s, and has fallen below replacement levels half the world over. But what about the other half? The UN Population Division’s world fertility patterns show that, worldwide, fertility per woman has fallen from 4.7 babies in 1970–75 to 2.6 in 2005-10. As Peoplequake author Fred Pearce puts it: “Today’s women have half as many babies as their mothers … That is not just in the rich world. It is the global average today.”
Today’s population panic goes on as if the Earth’s temperate grasslands are straining under the weight of supporting voracious humans rather than voracious Big Ag. According to the National Corn Growers Association, 30% of US corn ends up as fuel ethanol, while 5% is grown as corn syrup for junk food sweeteners and fizzy pop. Ain’t it grand that we’d sooner say there are too many human beings in the world than too much Coca-Cola, Honey Nut Cheerios, or Special K?
Food security and ecological sustainability are impossible without democratic control of land. Only through land nationalisation can we introduce the connected landscapes, smart cities and wildlife corridors that will let ecosystems bend, not break. As with homelessness a century ago, the problem facing a population of 7 billion is not too many people crowding too small a piece of land, but too few people owning too much world.
Ed. Notes: Actually, you don’t have to nationalize land. All you have to do is share land’s rental value. You see, members of society spend piles of money for land, natural resources, ecosystem services, and government-granted privileges like utility franchises which grant monopolies over certain regions. People’s spending for nature and privilege is by far the biggest flow within the GDP. So you’d get your government to redirect that flow with user fees, Land Dues, maybe land taxes, so to fill up the public treasury, the disburse it back out again as dividends to citizens.
When owners must pay Land Dues to compensate their neighbors for excluding them from their private property (as their neighbors would do for them), then owners lose any reason to own more land than they can use, land that others need. Why bother collecting rent from tenants if you just have to turn around and hand it over to your community? So you don’t bother. That’s how the tax on land value broke up humungous land holdings in nations all over the world and widely spread ownership of land to most of the population.
Taiwan did it and when former tenant farmers became family farmers, they rooted out hunger and — lo and behold — cut population growth by 40% in one generation. So economic justice is a win/win for both issues — ownership and population growth. Geonomics can be that powerful.
Perhaps the most basic reform possible is public recovery of the socially-generated values of land, locations, and natural resources. Collecting those values of assets not made by anyone’s labor or capital not only makes it possible to eliminate the counterproductive taxes on income, sales, and buildings (property). It also gives everyone, even the poorest among us, the opportunity to prosper and live lives of dignity. Plus, by streamlining the economy, our new efficient ways of producing and consuming would remove the pressure on the environment.
So it’s great news when other writers and publications cover this crucial topic. Previously the British press touted the idea. This time the roundup is from the Australian press.
These seven 2013 excerpts of Aussie coverage of a tax on land value are from:
(1) Australian Property, Dec 10, by Leith van Onselen;
(2) Herald Sun, Oct 8, by Jessica Irvine;
(3) Australian Financial Review, Nov 19, by Robert Carling;
(4) The Australian, Nov 22, by James Pawluk;
(5) Property Observer, Nov 25, reprinted in Macrobusiness, by Catherine Cashmore, a market analyst with extensive experience in all aspects relating to property acquisition; then our own cohorts, Prosper Australia:
(6) Media Release, Nov 19, by David Collyer; and
(7) Research Report, Dec 3, by Karl Fitzgerald who also recently had an op-ed in America’s Truthout, Dec 10 (more on that later).
Speculators Run Wild in Housing Finance
If you’re wondering what’s primarily driving up house price at the moment, look no further. Investor [speculator] finance commitments [to buy a house] were up by 8% in October, 29% over the year, and hit the highest level on record.
Various government-initiated tax reviews, including the Henry review, have recommended replacing stamp duty with broader and less distorting taxes, including land tax. However, land tax attracts much more political protest than stamp duty.”
The tax on land value (LVT) is best advocated by American political economist and author, Henry George, who wrote Progress and Poverty - an enlightened and impassioned read. George noted that land is in fixed supply, therefore we can’t all benefit from the ‘best’ sites without effective taxation of the resource.
New York’s Central Park is the highest generator of real estate wealth. The most expensive homes in the world surround the park with apartments selling in excess of $20 million, and newer developments marketed in excess of $100+ million.
Economist Michael Hudson has recently assessed land values in New York City alone to exceed that of all of the plant and equipment in the entire country, combined.
Currently more than 30 countries around the world have implemented land value taxation – including Australia – to varying degrees. In Pennsylvania 19 cities use land value tax with Altoona being the first municipality in the country to rely on land value tax alone.
Bringing about reform is never easy. The increased tax burden falls on those who have significant influence across the political spectrum. Strong leadership is essential. I do see a time when all the chatter around affordability, will finally evolve into real action – and a broad based LVT should form an important part of that debate.
State governments wring their hands over funding infrastructure, yet ignore the direct link between civic facilities and land prices. Houses close to transport, schools, libraries, and parks are simply worth more.
Dr Gavin Wood et al of the Australian Housing and Urban Research Institute: “Land prices have broken from their fundamental connections. We are in speculative frenzy, bidding up the price of land and shouldering a staggering debt burden to do so. This departure from common sense and good economics will destroy the finances of all who borrow heavily to buy property.”
The influence of monopoly is 10 times greater than mainstream economists acknowledge.
Economic rents are a significant component of the Australian economy, comprising 23.6% of GDP.
Almost half of all government revenues could be delivered by channelling the property boom to more productive purposes.
Income, company and sales taxes, along with 122 present taxes could be scrapped.
90% of taxes are distortionary, adding 23% to prices of goods and services.
The Total Resource Rents of Australia report finds monopoly rents are capable of replacing taxation at all levels of government. In 2011-12, local, state and federal governments required $390.067 billion in operating revenue. The most efficient form of government revenue-raising, the taxation of economic rents, can raise 87% ($340.719 billion) of revenue needed. By including ‘sin taxes’ and non taxation revenue, a fairer, more equitable tax base is possible.
This 2013 excerpt of Naked Capitalism, Spt 4, is by Lambert Strether of Corrente.
Christopher Alexander’s A Pattern Language (1977). From Pattern #79, Your Own Home:
People cannot be genuinely comfortable and healthy in a house which is not theirs. All forms of rental — whether from private landlords or public housing agencies — work against the natural processes which allow people to form stable, self-healing communities. …
This pattern is not intended as an argument in favor of “private property” or the process of buying and selling land. Ineed, it is very clear that all those processes which encourage speculation in land, for the sake of profit, are unhealthy and destructive, because they invite people to treat houses as commodities, to build things for “resale,” and not in such a way as to fit their own needs.
And just as speculation and the profit motive make it impossible for people to adopt their houses to their own needs, so tenancy, rental, and landlords do the same. Rental areas are always the first to turn to slums. The mechanism is clear and well-known. The landlord tries to keep his maintenance and repair costs as low as possible; the residents have no incentive to maintain and repair the homes — in fact, the opposite — since improvements add to the wealth of the landlord and even justify higher rent. And so the typical piece of rental property degenerates over the years.
This requires, then, that every house is owned — in some fashion — by the people that live in it; it requires a form of ownership which discourages speculation.
In Germany, “just 45% of homes in Germany are owner-occupied, one of the lowest rates in Europe.” Are 55% of Germans not, then, genuinely comfortable and healthy in their living quarters?
Still: Renting works against “stable, self-healing communities.”
The degree to which the housing “recovery” has been driven by speculators isn’t fully appreciated. Some sources have said that cash buyers have accounted for as much as 50% of the activity in the hottest states, and those would also have a bigger impact in the national estimates of home price appreciation.
They might have had some cash from a previous life on Wall Street, and raised a bit more money overseas, mainly from the Middle East and China. They may call themselves hedge funds as a way of glamorizing their strategy and justifying asking for hedgie-type fee structures. They often simply hold the houses for expected appreciation.
It was “not a coincidence” that more Americans than at any time since the Great Depression were being forced out of their homes just as records of home ownership and mortgages were transferred wholesale to a privatized database.
Ed. Notes: The key is to realize that the rent for the building and the rent for the land are two very different rents. The value of the building belongs to whoever built or owns the structure. The value of the location belongs to those who created it, which is the surrounding community.
As they say, the three most important things in real estate are location, location, location (the actual answer to an actual question on the California Real Estate Exam). People pay for good views, nearby shops, schools, accessible open space — things not made by any lone owner but by society as a whole.
Our mistake is having people pay lone owners instead of paying the neighbors. That is, we should pay the seller for the home (or other building) but pay the local government — which in turn would disburse the revenue to residents — for the land.
Government could require Land Dues, levy a land tax, or shift the property tax off buildings, onto locations. Places that have done this have de-motivated speculators. When speculators back out of the property game, then the price for land and improvements falls.
And more people become homeowners, as happened in Pittsburgh from 1980 to 2000 when they taxed land six times as much as buildings. They enjoyed the most affordable housing and highest owner occupancy rate of any major US city and twice was named America’s Most Livable City.
The writers above are looking for a solution. Geonomics is it.
These two 2013 excerpt about de-criminalizing a weedy mood-alterant are from (1) the BBC, Dec 11, by Ignacio de los Reyes, and (2) AlterNet, Spt 19, by Jodie Gummow.
Uruguay Marijuana Move ‘Illegal’ – UN Drugs Watchdog
Hundreds of young people gathered outside Congress in Montevideo to follow the vote on a giant screen. Many shared a joint of marijuana with their friends. They partied amid reggae music and some waved marijuana leaves.
Presenting the bill to fellow senators, Roberto Conde said it was an unavoidable response to reality, given that the “war” against drugs had failed.
After nearly 12 hours of debate, senators gave the government-sponsored bill their final approval — it was passed by 16 votes to 13 — making Uruguay the first country in the world to legalise the production and sale of marijuana.
The project had already been approved by Uruguay’s lower house in July.
A group of former presidents and influential social figures, including Brazil’s Fernando Henrique Cardoso, Mexico’s Ernesto Zedillo, and Colombian ex-leader Cesar Gaviria, have called for marijuana to be legalised and regulated.
President Mujica asked why the former leaders only spoke out about the legalisation of marijuana after they had left office.
The INCB is an independent body of experts established by the United Nations to monitor countries’ compliance with international drug treaties. It claims that de-criminalization violates international law.
Ed. Notes: The most important part of this story has little to do with drugs and more to do with the fact that people in power can make a rational decision some times. If they can go by the facts when dealing with drugs, perhaps they can use the clear-cut evidence in favor of turning land value into common wealth by taxing site rent or charging ground rent in lieu of the typical counterproductive taxes on income, sales, and buildings (property). One sensible step might lead to another and eventually all the way to geonomics.
a new policy from a new perspective. Once your worldview shifts — so that vacant city lots are no longer invisible — then epiphany. “Of course! Why didn’t I see it before?” Once you do see the emptiness and what damage it does, how can you ever go back to the old paradigm?
the policy that the earth’s natural patterns suggests. Use the eco-system’s self-regulating feedback loops as a model. What then needs changing? Basically, the flow of money spent to own or use Earth (both sites and resources) must visit each of us. Our agent, government, exists to collect this natural rent via fees and to disburse the collected revenue via dividends. Doing this, we could forgo taxes on homes and earnings and subsidies of either the needy or the greedy. For more, see our web site, our pamphlet of the title above, or any of our other lit pieces; ask for our literature list.
the Great Green Tax Shift maxed out”
Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net.
Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent. Better settlement patterns do reduce extraction upstream and pollution downstream.
Politically, green fees have less impact if applied locally; local is where grassroots movements have more impact. Yet getting rent usually entails shifting the property tax (or charging user fees), the province of local jurisdictions; both mayors and city voters have been known to adopt a site-value tax.
Ethically, putting into practice “tax bads, not goods” skirts the issue of sharing Mother Earth which collecting rent confronts head on. Since nothing is fixed until it’s fixed right, ultimately, greens must lead humanity into geotopia where we all share the worth of Mother Earth.
a discipline that, compared to economics, is as obscure as Warren Buffett’s investment strategy, compared to conventional investment theory, about which Buffett said, “You couldn’t advance in a finance department in this country unless you taught that the world was flat.” (The New York Times, Oct 29). The writer wondered, “But why? If it works, why don’t more investors use it?”
Good question. Geonomics works, too. Every place that has used it has prospered while conserving resources. Yet it remains off the radar of many wanna-be reformers. Gradually, tho’, that’s changing. More are becoming aware of what geonomics studies – all the money we spend on the nature we use. Geonomics (1) as an alternative worldview to the anthropocentric, sees human economies as part of the embracing ecosystem with natural feedback loops seeking balance in both systems. (2) As an alternative to worker vs. investor, it sees our need for sites and resources making those who own land into landlords. (3)As an alternative to economics, it tracks the trillions of “rent” as it drives the “housing” bubble and all other indicators. And (4) as an alternative to left or right, it suggests we not tax ourselves then subsidize our favorites but recover and share society’s surplus, paying in land dues and getting back “rent” dividends, a la Alaska’s oil dividend. Letting rent go to the wrong pockets wreaks havoc, while redirecting it to everyone would solve our economic ills and the ills downstream from them.
People must learn to stop whining so much and feel enough self-esteem to demand a fair share of rent, society’s surplus, the commonwealth.
a neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heritage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a dividend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jefferson suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
a manual. The world did not come without a way for people to prosper, and the planet to heal and stay well; that way is geonomics. Economies are part of the ecosystem. Both generate surpluses and follow self-regulating feedback loops. A cycle like the Law of Supply and Demand is one of the economy’s on/off loops. Our spending for land and resources – things that nobody made and everybody needs – constitutes our society’s surplus. Those profits without production (remember, nobody produced Earth) can become our commonwealth. To share it, we could pay land dues in to the public treasury (wouldn’t oil companies love that?) and get rent dividends back, a la Alaska’s oil dividend. Doing so let’s us axe taxes and jettison subsidies. Taxes and subsidies distort price (the DNA of exchange), violate quid pro quo by benefiting the well-connected more than anyone else, reinforce hierarchy of state over citizen, and are costly to administer (you don’t really need so much bureaucracy, do you?). Conversely, land dues motivate people to not waste sites, resources, and the ecosystem while rent dividends motivate people to not waste themselves. Receiving this income supplement – a Citizens Dividend – people can invest in their favorite technology or outgrow being “economan” and shrink their overbearing workweek in order to enjoy more time with family, friends, community, and nature. Then in all that free time, maybe we could figure out just what we are here for.
not exactly Georgism, the Single Tax on land value proposed by Henry George. He did, tho’, inspire most of the real-world implementations of the land tax that some jurisdictions enjoy today, and modern thinkers to craft geonomics. While his name and our remedy both begin with “geo” since both words refer to “Earth”, the two have their differences. (a) George pegs land monopoly as the fundamental flaw while geonomics faults Rent retention. (b) To fix the flaw, George was content to use a tax, while geonomics jettisons them in favor of price-like fees. (c) George focused on the taking while geonomics headlines the sharing. George envisioned an enlightened state judiciously spending the collected Rent while geonomics would turn the lion’s share over to the citizens via a dividend. (d) And George, as was everyone in his era, was pro-growth while geonomics sees economies as alive, growing, maturing, and stabilizing. Despite these differences, George should be recognized as great an economist as Euclid was a geometrician.
a study of Earth’s economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land’s value and deserve compensation for keeping off ours, as they’d pay us for keeping off theirs. It’s mutual compensation: we’d replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.
a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old log-gers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.
a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!
Make visible what, without you, might perhaps never been seen.
Even if you’re on the right track, you will get run over if you just sit there.
Courage is saying, “Maybe what I’m doing isn’t working; maybe I should try something else.”
One should be able to see that things are hopeless and yet be determined to make them otherwise. This philosophy fitted on to my early adult life, when I saw the improbable, the implausible, often the “impossible,” come true.
F. Scott Fitzgerald
Never let your good get in the way of your better.
Face the facts of being what you are, for that is what changes what you are.
Most ball games are lost, not won.
There is no shame when you try and fail; there is only shame when you fail to try.
The real voyage of discovery consists not in seeking new landscapes but in having new eyes.
I would no more teach children military training than teach them arson, robbery, or assassination.