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These 2013 excerpts on public revenue progress are from the UK press:
(1) The Guardian, Spt 13, on alternatives by Phillip Inman, economics correspondent;
(2) Express and Star or the Shropshire Star, Spt 14, and
(3) The Telegraph, Spt 15, on GB Business Secretary, by Tim Ross and Patrick Hennessy;
(4) Property Week, Spt 16, on LibDems by Rhiannon Bury;
(5) Financial Times, perhaps the world’s foremost business publication, Spt 27, on the perfect tax by Merryn Somerset Webb, editor-in-chief of MoneyWeek;
(6) Tax Research, Spt 30, on a joint letter by Richard Murphy;
(7) Financial Times, again, Nov 22, on the old can saving the young by Chris Cook; and
(8) ResPublica, undated but probably late Nov, on solving housing woes by David Fagleman.
Alternative to Council Tax Freeze is Out There
We are repeatedly suckered by the easy riches to be gained from joining the property pyramid scheme at an early stage. We need a brake on the investment bloodlust that overtakes buyers and sellers when house price inflation gets going. A property boom is about persuading the next generation of buyers to pay inflated prices in the expectation they will become super-creditworthy borrowers.
A tax on land, subsuming council tax, would force us all to pay a little of the inflationary gain each year from rising land prices in the form of a tax. In most land tax schemes, the money is used to reduce income tax and transaction taxes like stamp duty. This means the only losers would be those people who rely on rental income and rising prices for their standard of living.
A land tax promotes many good things. To limit property inflation we would all be in favour of new building. It would also encourage investment in more productive assets, like start-up companies, manufacturing businesses and export-led services firms.
Vince Cable, the UK Business Secretary, said the Government should look at plans for a land value tax.
Vince Cable said there were many potential problems with the idea, which taxes land itself rather than the property or people on it — but told a fringe event at the Liberal Democrat Party Conference the idea should be examined.
He said it was one of the options “floating around at quite a high level”.
How a Levy Based on Location Values could be the Perfect Tax
What gives a piece of land its value? Why is a 500 sq ft spot in London worth more than 500 acres of land in Angus? The value of a bit of land is not in the land itself but in the location of that land. And what gives the location value? That comes down to what is going on around it. Think good transport links, good schools (a house in the UK by a good school is worth anything from 5 to 20 per cent more than one near a bad school), hospitals, and the infrastructure to provide jobs.
If it is the state that gives land some of its value — clearly there is also value in non-state provided things, such as beauty and mineral rights — why is it that all of that value generally accrues to individual landowners, rather than to the state?
A land or location value tax (LVT) is levied not on the value of a property but on the value of the land that property sits on. It is not the bricks and mortar that make a flat in, for example, London’s One Hyde Park worth £6m-plus, it is the land on which it sits. So the LVT is just an attempt to collect the value of a property that has nothing to do with the actions of the owner and everything to do with the actions of the community.
In theory, it is not just an excellent tax but the best of all possible taxes. It discourages speculation and stops in its tracks the endless cycle of investment in land and property purely to rent it out. It promises no more property boom and bust. But, as it is not collected on any improvements made to land or to buildings on land, it does not discourage productive activity. Instead, it encourages people to bring idle land into use, to improve land they own and to be as productive as possible (when you have a pure LVT, earned income isn’t taxed at all).
Time for Land Value Taxation – in the Independent this morning
I am co-signatory of a letter in the Independent this morning that says:
The compulsory purchase of land banks proposed by Ed Miliband puts Labour’s housing policy in line with the supporters of land value tax (LVT). We believe that the present taxation system is flawed and unfair. When the value of UK land increases due to increased demand, the owners, including UK and international speculators, have done nothing to increase their personal wealth.
Renters gain nothing while their rents increase. The issue is how to make some of the increase in land value available to all. LVT taxes some of that increase in land value.
It should result in the abolition of the regressive council tax and business rates. It should cover all land, used and unused, so bringing land banks and empty homes into use, making investors look for income from renting, building and creating jobs to cover the tax. HMRC would spend less chasing tax-free money parked in overseas accounts; banks have yet to find a way of moving land into their vaults.
John Lipetz Coalition for Economic Justice
Richard Murphy Tax Research UK
Dr Stephen Battersby Pro-Housing Alliance
Rev Paul Nicolson Taxpayers Against Poverty, London N17
There is no doubt LVT has to be a part of any reasonable taxation policy in the future. That future should start now.
The Young are Doomed – and Only the Old can Save Them
If the only people who can afford to buy housing are the children of people who bought housing, it creates an unbridgeable divide between the haves and the have-nots. How about a land value tax levied on house prices? It would hit the older harder, the younger less, and cut dwelling costs by encouraging the cash-poor and asset-rich elderly to move into more modest accommodation.
Land Value Tax: The radical solution to the housing crisis
Land Value Tax, taking the form of an annual levy on the rental value of unimproved land, is the radical solution to the housing crisis. By taxing the value of land as opposed to the value of the property, land will be taxed whether it is built upon or not, which will encourage a more efficient use of land by making it economically efficient to develop where appropriate.
A surge of available land would lower the price, enabling smaller developers and housing associations (who in the face of declining government grants, are becoming increasingly dependent on income from construction), to join established house builders in providing a plentiful supply of affordable housing. Creating greater competition will see a reduction in rent and house prices, stabilising the housing market and creating a more equal relationship between landlords and tenants.
Either working simultaneously with reduced property taxes, or outright replacing the outdated and regressive Council Tax, Stamp Duty Levy, and Business Rates, a locally collected Land Value Tax would have to be phased in gradually and under the right blueprint.
This 2013 excerpt of CNBC, Nov 25, is by Diana Olick.
A lot of Asians are buying as an investment, but their kids are going to school here, so kids live in the home. They are looking at it more as an investment in education also.
While American secondary schools and universities are a big draw for the majority of Chinese buyers in California, Chinese are also concerned about China’s political instability, inflation, even pollution. They are paying all-cash for real estate in California, using it as a safe-haven for their wealth.
More than 20,000 attended an opening in Irvine CA, according to developers. The vast majority of lookers were Asian. Hoping to cash in on this new wave of investors, the builders are incorporating multigenerational floor plans and even Feng Shui designs.
The homes range from the mid-$700,000s to well over $1 million.
While no one would say specifically why certain families were shying away from the media, some alluded to the fact that many of the buyers don’t want any questions about where the cash is coming from. Some are buying multiple homes as investments, while others are moving their families to the U.S., intending to stay at least until their children graduate from college.
Ed. Notes: So Americans spend their money on cheap Chinese imports then the insider Chinese spend that money on pricey American homes-plus-home-sites. Americans think they’re saving money buying cheaper goods but actually they’re pushing up land values. Land has a way of always absorbing economic advantages.
Of course pricier land would not matter to buyers and citizens if they also had to pay Land Dues or a land tax or land-use fee or deed fee. Having to pay such a charge would make a bad investment for speculators, so they’d shy away and the price of land and homes would not inflate.
Further, such a charge would suck high land values into the public treasury. Ideally the government would spend the funds in ways that benefit society better than now how banks and other lenders spend the funds. Government could cut its counterproductive taxes, or subsidize a program that a majority might want such as socialized medicine, or pay citizens a dividend, or actually do all three, the value of sites and resources being so sky high.
Food shortage? Who says? One-third of food worldwide gets wasted.
A 2013 excerpt of the AP, Spt 11.
The U.N. food agency says one-third of all food produced in the world gets wasted, amounting to a loss of $750 billion a year.
The Rome-based Food and Agricultural Organization said that food in developing countries is wasted mostly due to poor harvesting techniques, while in high-income areas the primary cause of waste is careless consumer behavior.
The report said food waste hurts the environment by causing unnecessary carbon emissions, extra water consumption, and the reduction of biodiversity as farming takes over more land. The most serious areas of waste are of cereals in Asia and meat in wealthy regions and Latin America.
Ed. Notes: Hungry people, obviously, could use that food. They’d be happy to take it off the producers’ hands. If the hungry had more money, like getting a Citizen’s Dividend, then they could create some demand for that surplus food.
On the producer side, what’s needed is owner occupancy. An absentee owner getting government subsidies might not care about wasting some harvest — if he’s not there to see what’s happening, it’s hard for him to care. But an owner occupant not getting subsidized who had to work the land himself would have every incentive to put to good use every bushel of the harvest.
So how can we increase owner occupancy? We can charge land owners rent (or tax the land or institute land dues). When owners must pay rent, they lose the reason to keep land that they rent out to tenants; there’s no longer any reason to be a middle man. So the owners sell out, often to former tenants, and at prices that the former farm worker can afford. This geonomic recipe has worked before and can work again.
This 2013 excerpt of Op-Ed New, Nov 24, is by Fred Harrison, a graduate of University College, Oxford, where he read Politics, Philosophy & Economics.
How much does society spend for the nature it uses? For the land and resources? In the jargon, how much “ground rent” is produced in the economy? There is no answer in the economic literature.
But if America was a tax-free zone, the tax base would become this natural rent. People would use the money to bid up the price of locations when they buy homes and sellers would jack up their asking price to the greatest amount anyone would be willing to pay. In the US in 2013, tax revenue was $5.3tn (GDP: $16.2tn).
How much of a nation’s revenue currently is visible as land rent? This is rent that is not collected by government. The prudent estimate is that rents in private pockets amount to about 20% of national income.
If we take a random selection of 10 rich nations, ranging from Australia through the US to Sweden, Germany, and Japan, the average tax-take as a percent of GDP is 37%. If we add to this the rent that is not collected by government, of around 20%, we find that rent exceeds 50% of national income.
This first approximation of rent needs to be adjusted.
1. Taxes distort total income. They encourage the
- Under-use of urban land (which artificially raises rents). and they
- motivate behavior that damages the environment, as when polluters do not have to pay for dumping waste into the atmosphere (which artificially reduces rents).
2. A small part of tax revenue may actually fall on wage earners, rather than being shifted (ultimately) onto rent. People with no bargaining power are particularly vulnerable.
Such considerations add to, and subtract from, rent. Further assessment is required, but the outcome would not significantly modify the conservative estimate that rent is about 50% of total income. This is more than sufficient to cover existing government financial commitments.
On what terms would that revenue be raised? Through the land market, the people themselves negotiate the rents they are able to pay for the use of services available at each location. By this process of free negotiation, who paid, and how much they paid, would be settled by citizens, not politicians or the servants of the State.
Want a real overhaul of the tax code? Here’s an elegant way to reduce inequality and mitigate poverty — in one tax.
This 2013 excerpt of Salon, Nov 22, is by Jesse Myerson. It was republished in Alternet.
At present, neither party advocates the tax code so elegant it can reduce inequality, mitigate poverty, stimulate productivity, prevent asset price bubbles, stem community-shredding gentrification and drain the distended Wall Street cabal of its ill-gotten gains – in just one tax.
Land value. If we want a real overhaul/simplification of the tax code, the way to do it is to tax land value. It might be the only tax we need. No sales tax. No income tax. No payroll tax to fill a Social Security trust fund. No corporate income tax that, as we can plainly see, offshores profits. No need to tax labor and industry at all. Just tax the stuff that humans had nothing to do with creating, and therefore have no basis to claim ownership over at all. You’ll find that almost all of it is “owned” by the fabled 1 percent.
And boy are they sucking a lot of money out of it. By far the most valuable asset form in the U.S. is real estate, and the majority of that is the value of the land, as distinct from the value of the human-made buildings. Economist Michael Hudson has assessed that the land value of New York City alone exceeds that of all of the plant and equipment in the entire country, combined. No owner put any enterprise or cost into producing the land’s value – they simply bought it when it was cheap, sold it when it was dear, and waited for the check. “They” are the Finance, Insurance and Real Estate (FIRE) sector, and they capture 40 percent of the United States’ profits, despite the complete passivity of their profit-accumulation method.
Not only would a land value tax (LVT) drastically shrink that Wall Street bloat, it would have prevented the housing bubble in the first place. Land, after all, was the speculative commodity at play, not the houses themselves, which, as “Arrested Development” incisively suggested, were a bunch of crap. With an LVT, the cookie-cutter McMansions in suburban housing developments would only be worth the cost of their cheap paneling, artificial marble and the rest of it. Without one, they were wrongly assessed as being worth the value of the land they stood upon, which speculators bid up and up and up.
An LVT would stimulate urban property development without incurring the socially catastrophic ethnic displacement pattern we call “gentrification.” As that noted far-left rag the Economist notes, “Property developers … would be less inclined to hoard undeveloped land if they had to pay an annual levy on it.” Despite this, the new developments wouldn’t push rents up throughout the rest of the neighborhood, because the increased land value would be taxed. The rest of the apartment buildings in the area didn’t get any nicer. So why should they cost more? Urban land, scarce by definition, is very valuable. There is no reason to let a small group of rich landlords extract its value, when what created the value are parks, subways, local restaurants, and other things the landlords didn’t provide.
Nothing could simplify and demystify the taxation experience for Americans like making sure that the vast majority of us who don’t own the resources, who don’t collect rent and capital gains, who have to work to get our paychecks, wouldn’t ever have to mark April 15 on the calendar again.
The amount of revenue that can be raised by taxing the land is huge. Enough, for example, to support truly liberatory social spending, like a universal basic income, without risking inflation.
Ed. Notes: The reform to raising public revenue can get even simpler still. If you don’t like taxes at all, don’t use any. You can still recover the socially-generated value of land. You can charge land-use fees or require Land Dues, plus lease public land at full market value. You can record deeds and titles at full market value of the location, too. No need to tax.
Plus, land is not the only thing of value that was not created by anyone providing their labor or capital. There’s also government-granted privilege, such as corporate charters, patents and copyrights, utility franchises, and the power to print new money. These little official pieces of paper don’t require work (excluding lobbying) nor investment (unless you mean campaign contributions). Charge full market value — that’s the principle: quid pro quo — for those little pieces of paper, too, as you did to leases and deeds. Your public treasury will be stuffed to bursting.
And to make it yet simpler for everyone, collect the rents from owners monthly and pay the citizenry a dividend monthly from surplus public revenue. Most people would come out a little ahead. The poor would really do well. And those who’ve been calling the shots for so long would finally pay for the privilege of having lorded it over everyone else for so long.
These three 2013 excerpts about the wealth gaps are from Reuters: (1) Spt 10, on the elite by Paul Wiseman and (2) Spt 17, on the poor by Lucia Mutikani, Caroline Humer, and Susan Heavey.
Top 1% Took Record share of 2012 US Income
The income gap between the richest 1 percent and the rest of America widened to a record last year.
The top 1 percent of U.S. earners collected 19.3 percent of household income in 2012, their largest share in Internal Revenue Service figures going back a century.
U.S. income inequality has been growing for almost three decades. But until last year, the top 1 percent’s share of pre-tax income had not yet surpassed the 18.7 percent it reached in 1927.
Incomes of the richest Americans might have surged last year in part because they cashed in stock holdings to avoid higher capital gains taxes that took effect in January.
Last year, the incomes of the top 1 percent rose 19.6 percent compared with a 1 percent increase for the remaining 99 percent.
Since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.
That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession.
The top 10 percent haven’t done badly, either. Last year, they captured 48.2 percent of income, another record. Their biggest previous take was 46.3 percent in 1932.
The top 1 percent of American households had income above $394,000 last year. The top 10 percent had income exceeding $114,000.
Paul Krugman, New York Times columnist: Of the gains made by the top 10 percent, almost none went to the 90 percent to 95 percent group; in fact, the great bulk of gains went to the top 1 percent. In turn, the bulk of the gains of the top 1 percent went to the top 0.1 percent; and the bulk of those gains went to the top 0.01 percent. We really are talking about the flourishing of a tiny elite.
U.S. Poverty Rises Despite Economic Recovery
The number of U.S. residents living in poverty edged up to 46.5 million last year. Although the number of people in poverty went up from 46.2 million in 2011, the national poverty rate was unchanged at 15 percent. The poverty threshold in 2012 was an income of $23,492 for a family of four.
The recovery from the worst recession since the 1930s has been marked by a jump in stock prices to record highs, aided in part by the Federal Reserve’s ultra easy monetary policy.
While the Standard & Poor’s 500 index gained 16 percent on a total return basis last year, including reinvested dividends, the Census Bureau report showed median household income slipped to $51,017 from of $51,100 in 2011.
Although the bulk of the more than 8 million jobs lost during the downturn have been recouped, many of the jobs have been in services industries such as retail and restaurants that typically do not pay well.
About 16.1 million children and 3.9 million people aged 65 years and older were living in poverty last year. The uninsured rate for children in poverty was 12.9 percent compared with 7.7 percent for children not in poverty, the Census found.
Ed. Notes: The rich don’t get richer by working harder or smarter but by owning stocks of companies that own prime land and modern capital; those companies get subsidies from the government and their payouts get tax loopholes. Eventho’ it’s not fair, it is instructive: it shows how to end poverty.
That is, quit the corporate welfare and (perhaps surprisingly to some) quit the taxes on earnings. Instead uses taxes or fees or dues or leases to recover the worth of Earth, the annual rental value of sites and resources. Redirect that — all of society’s spending for nature — into the public treasury then back out again as dividends to members of society.
Then all remaining fortunes won’t be gifts from the state but truly earned and, more importantly, poverty will be no more. The dividend will provide a basic income and the combination of no taxes on earnings with a hefty charge for owning land, especially downtown locations, will greatly expand the opportunities for investment and employment. A wealth gap will remain, but it won’t be much; citizens at both ends of the spectrum will be able to see each other.
An alternative to the local property tax, the land value tax offers certain benefits over the economically inefficient property tax. However, its novelty and legal and political challenges continue to make it an elusive option at this time.
A 2013 excerpt of the Eye on Housing, Nov 18, by the NA of Home Builders.
According to numerous polls, the most hated tax is the local property tax. The property tax is economically inefficient because it taxes the value of improvements, which acts as a tax on economic development. One alternative to the property tax is the land value tax.
Local governments in New York, Pennsylvania and Hawaii have used it. In addition, twenty-five nations use some form of the land value tax.
The land value tax provides an incentive for development. Economists Oates and Schwab find a positive association between adoption of land value taxation and building activity in Pittsburgh. Under a split-rate system, the higher the land tax in relation to the improvements tax, the more building activity occurs.
Property taxes are the largest single source of revenue for state and local governments, accounting for over one-third of all revenue. The county of Hawaii abolished the land value tax in 2002. This June the state of Connecticut signed into law a pilot program letting three municipalities implement a land value tax.
Reprinted in RIS Media, the leader in real estate information.
Ed. Notes: Real builders should like a tax shift that stimulates construction. It’s those who’re speculating in land, withholding prime sites from beneficial use, are the ones who may be opposed. For everyone else, a tax or fee or dues on land could increase how much the landowner must pay. But to assuage that, the collecting government could return a hefty portion of the raised revenue to residents as a monthly dividend. It’s their money, any way. It’s the presence of society as a whole, not the ownership of individuals, that generates the value of land. Thus, locational value is a common wealth; we should treat it as such. Then builders would get more business and, more importantly, they’d be building in a better society, where more people prosper and enjoy life as it’s meant to be lived.
These two 2013 excerpts on public pension reform — the first about the problem, the second about the solution — are from (1) USA Today, Nov 18, by their Editorial Board and (2) the Toronto Star, Nov 4, by Frank deJong, head of EarthShare Canada.
Rein In Reckless Public Pensions
Excessive retiree benefits — which account for 20% of San Jose’s $1.1 billion budget, for instance — drain governments of the money needed for education, housing, parks and public safety.
Estimates for the total shortfall of public pensions start at about $700 billion. In 2011, the Congressional Budget Office said that $2 trillion to $3 trillion was more accurate. Even a long bull market won’t make the problem go away.
Detroit is Exhibit A for municipal irresponsibility. It negotiated generous pensions, even overpaid in some cases, as the city began its long descent into bankruptcy. Illinois tops most lists of states in trouble.
Fueling taxpayers’ anger is that they are financing benefits no longer available to most private-sector workers. Some state and local government workers can retire in their 50s, after 33 years of service, and continue drawing the same income.
An Ontario pension plan, as suggested by Premier Kathleen Wynne, is warranted. Too many seniors in this province don’t receive sufficient private or public pension benefits.
However, instead of raising taxes on incomes, sales or business (dead-weight taxes that damage the economy), the new pension plan should be financed by capturing some of the unearned income that accrues to Ontario’s monopoly-owned assets like land and resources — wealth that economists call “economic rent.”
Economic rent is revenue with no corresponding cost of production. It is wealth belongs to all citizens by birthright, which makes it an ideal way to finance a pension plan.
Our seniors, who spent their working lives building Ontario, should receive a “senior’s dividend” — their share of the public wealth generated by the commons.
This 2013 excerpt of the Los Angeles Times, Spt 9, is by The Times editorial board.
Federal efforts to protect growers of sugar beets and sugar cane epitomize everything that’s wrong with U.S. farm programs. At times they’ve artificially raised the price of sugar, costing consumers billions of dollars; at other times they’ve stuck taxpayers with the bill for the surplus sugar production they’ve promoted.
Sweeteners are ubiquitous in processed foods, and sugar is the most popular by far. There are two primary sources in the United States: sugar beets and sugar cane, which is grown only in Hawaii, Texas, Louisiana, and Florida.
Like the rest of the agriculture industry, beet and cane growers enjoy considerable protection from the federal government that’s not contingent on their incomes. But while other farmers are typically offered subsidized crop insurance (taxpayers cover roughly 60% of the cost) and guarantees against steep reductions in revenue, beet and cane farmers are also protected by import and production quotas that limit supply, deter competition, and inflate prices.
When unusually big harvests in the United States and Mexico (which faces no import quota on its subsidized products) push sugar prices below the target set by Washington, growers unload surplus sugar onto the federal government in lieu of repaying their federal loans, forcing Washington to sell the sweetener below cost to ethanol producers. Both of those things are happening this year.
U.S. farm program benefits flow overwhelmingly to the largest — and, consequently, most durable — agribusinesses; 10% of the farm operations collect 60% of the $23.5 billion in annual farm subsidies.
Sugar growers gave more than $4 million to members of Congress in the 2012 campaign. The largest buyers of sugar — bakers and confectioners — contributed about $250,000.
The unusually high farm profits in recent years have given Congress a golden opportunity to try to wean agribusiness from sugar subsidies and other market-distorting protections.
Ed. Notes: The politicians giving public money to the well-connected who don’t need it may seem wrong, but it is the role of government, and has been forever. Trying to reduce the subsidies or redirect them to the “right” recipients has never succeeded. What’s needed is a total overhaul, a transformation of government, a paradigm shift in how we see ourselves and our rulers. We need to see ourselves as worthy of spending our money, thank you very much.
That is, we’d each get a share of the common wealth, of surplus public revenue. With this extra income, farmers would not need any other public assistance. Their share would go further in the countryside where the cost of living is much lower. And they could adopt the strategy of selling directly to consumers, cutting out the middleman — those are the corporations who make the most off of a family’s food budget, not the farmer, and certainly not the lowly farmworker.
So say “no” to all subsidies, abolish them, root out the very concept of bribing politicians and winning handouts as a decent way of conducting business. Replace all that papered-over dishonesty with the share-Earth ethic in which each member of society gets a fair share of Earth’s worth — saving billions in pubic subsidies.
Jobless Growth, the 21st Century Condition in Poor Nations
This 2013 excerpt of the IPS, Nov 25, is by Samuel Oakford.
Though the percentage of people living in extreme poverty (less than 1.25 dollars per day) has declined in LDCs, their numbers have increased due to population growth.
While the economies of LDCs expanded yearly by over 7.5 percent in the decade before the 2008 financial crisis, employment growth per annum stood at just 2.9 percent between 2000-2012, barely ahead of the population growth rate of 2.3 percent.
If high growth couldn’t buoy the job market during boom years, a period of slower increases will require specifically catered policies to spur employment.
In Namibia, the government has set up a national mining company, hoping to replicate Chile’s CODELCO and not the bloated state-run enterprises of post-independence Africa.
If Chile is a model for mineral exporters, garment producers look to Taiwan, South Korea, and Singapore, all of which began by manufacturing textiles before graduating to more complicated consumer goods and electronics.
Ed. Notes: As usual, the wannabe problem-solvers want to tax the businesses that have succeeded, which reduces their success and does not necessarily create success for anyone else. It’s like the swing of the pendulum from leftwing mistakes to rightwing mistakes and back again. How can well-meaning people be so blind to the land? All three of the Asian examples cited — Taiwan, South Korea, and Singapore — first implemented land reform. Not taking land away from large landholders but by taxing the value of land, so owners sold off their excess, usually to their tenant farmers, at prices the landless could afford. The thousands of new family-owned farms is what founded the bedrock of the Asian Tiger miracle economies, and its a reform that could work anywhere. Longer ago, it also worked in Denmark, California, Australia, and New Zealand. Look where their economies are today!
This 2013 excerpt of the Washington Post, Spt 9, is by Debbie Cenziper, Michael Sallah, and Steven Rich.
Steven Berman, son of a Baltimore banker, swept into the District during the height of the housing boom, flush with money and ready to take on hundreds of bidders at the city’s high-stakes tax lien auction.
From 2005 to 2007, Berman’s companies dominated the bidding room, spending millions to buy the liens placed on properties when owners fall behind on their taxes.
He was a big player at tax lien auctions in Maryland, too, where he was caught in 2007 rigging bids at sales across the state, leading to the largest criminal conspiracy case of its kind at the time.
A Washington Post investigation found that during Berman’s spectacular spending spree in the city, his companies engaged in dozens of rounds of irregular bidding similar to what federal agents had discovered in Maryland.
All told, six companies, three owned by Berman, took turns winning hundreds of liens on real estate worth $540 million through unusual back-and-forth patterns of bidding never detected by city government.
Of hundreds of participants, only those six companies stood out for bidding that was so irregular that the odds of it happening by chance were less than 1 in 1,000, according to The Post’s analysis, which was conducted with a team of economists and antitrust experts from Boston.
Once the liens were won, the companies charted an aggressive course through the District that would shake families for years to come, pressing to foreclose on homes in every ward — often over tax debts of $500 or less.
Ed. Notes: Why does real estate and fraud go hand in hand? And what’s the government doing, selling people’s tax-debt to private collectors? How slimy is that? What government should auction off, and do so with its eyes open, are vacant lots and abandoned buildings. How much money the government gets at the auction won’t matter so much as long as later the government recovers the ongoing annual rental value of the locations, which will rise as the new owners develop their latest acquisitions.
Further, people could afford to pay a tax on property if the tax did not also fall on the value of the building — a stupid tax that merely induces owners to forgo maintenance and improvements — and if the residents were to receive a share of the recovered revenue. It’s a recipe that works elsewhere. In British Columbia, to make the tax on carbon more affordable to lower-income people, the BC government shares out some of the collected revenue as a dividend to residents.
In Maryland, Washington DC, everywhere, the government could use the same scheme: recover all the socially-generated value of all the locations but then pay out the lion’s share as a dividend to residents. Doing so is somewhat similar to what Aspen Colorado does and what Singapore does. Singapore prospers so notably because it keeps taxes on people’s efforts low and taxes on the rising value of locations high, then disburses some of its revenue surplus back to its citizens. It’s a policy that would solve the problem of tax delinquency in Maryland and Washington DC.
This 2013 excerpt of The Ecologist, Nov 23, is by Frederic Mousseau & Serah Aupong.
It has been said that PNG has the most equal distribution of land on earth. The country’s constitution protects customary land rights and there is virtually no private ownership. Land is almost entirely controlled by clans and tribes. The constitution sets self-reliance, sovereignty, and the sustainable management of natural resources as overarching principles for the country.
Yet, even with these legal protections, a massive land rush is currently taking place in the country. In recent years, 12 percent of the country, 5.5 million hectares, has been leased out to foreign corporations, ostensibly to launch agricultural projects. Yet these firms appear to be mostly occupied with harvesting timber that is then exported to overseas markets.
As a result, PNG is now the second largest exporter of tropical logs in the world, after Malaysia, and exports more than 3 million cubic meters of logs every year, primarily to China.
In many deals, landowners were blatantly misled about the size and the nature of an agribusiness project. The logging occurs without free, prior, and informed consent of the local people. State agencies such as the Lands Department, the Department of Agriculture and Livestock, and the Forest Authority fail to perform their duties: fraud, misconduct, and incompetence as well as overall lack of adherence to proper procedures.
Offering Papua New Guinea’s natural resources to foreign interests has made the country one of the fastest growing economies in the world [benefitting insiders, another instance of the "resource curse], a paradox of wealth without development. People have little or no access to safe drinking water, health facilities, nor schools.
The problem does not lie in the law. [It lies in law enforcement.]
Ed. Notes: How many more times must people note the irony of Progress and Poverty — the title of the most famous book on economic reform by Henry George back in the 19th c. — before they finally see the connection and how to uncouple it? The central problem is that people see the profit from land as up for grabs. So a partnership of investors and government officials grab it, leaving ruin for the rest of society. What the rest of society must do is to declare loudly and as many times as it takes that the surplus, rental value of land, resources, and locations is a common wealth, not an object of speculation, but a stream of wealth for all members of society to share, a la Alaska, Singapore, and a handful of other places. It can’t be said often enough, loud enough. Not until the land-squeezing stops and the rent-sharing begins.
This 2013 excerpt of Reuters, Sep 8, is by Lionel Laurent.
The Champs-Elysees lures millions of tourists every year to enjoy shopping at the Elysees 26 mall, poker at the Aviation Club, plush cars and futuristic architecture in the Citroen showroom, or feather-clad showgirls at the Lido cabaret.
But for all their Parisian charisma, none of these attractions are French-owned. They belong to the royal family of Qatar, a resource-rich emirate about 3,000 miles away.
Some Muslims may frown on investments in gambling, alcohol and high-kicking dancers, but over the past few decades the buildings have helped bolster Qatar’s global portfolio of trophy assets, including London’s Harrods and Singapore’s Raffles Hotel. The latest French addition was a chain of upscale malls under the Printemps banner, bought by a fund controlled by Qatari royals in August for 1.7 billion euros ($2.23 billion).
For oil-rich royalty from the Arab Gulf, part of the attraction of the United Kingdom has been the fact it charges no taxes on profits foreign investors make when they sell real estate. Five years ago, Qatar sealed a similar agreement with France. The treaty was agreed by former center-right president Nicolas Sarkozy in 2008, and is one of the most generous Qatar has secured, exempting Qatari investors from taxes on the profits they make when they sell properties.
The treaty allows state-owned Qatari entities to avoid capital gains tax – the lowest rate would be 34.4 percent – on any profits made selling French property, whether held directly or via subsidiary companies. Private Qatari investors are entitled to the break as long as they hold the property in an investment vehicle that also has 20 percent in non-property assets. The treaty applies to all purchases made since January 2007.
Aside from the United Kingdom, only Ireland has offered Qatar the same exemption and that only since 2012. At home, Qataris face no personal income taxes but some businesses could be taxable at up to 10 percent on gains from the sale of property.
Property experts say the luxury real-estate deals that are encouraged by the tax treaty mainly benefit a small circle of investors.
“We are always told this type of agreement is designed to promote investments in France but this is money that is not going into the economy,” said Olivier Duparc, a Paris-based notary. “Taxes are going up for everyone except the Qataris, it seems.”
Taxes matter a lot in France: The country’s total tax take was 43 percent of GDP in 2010, according to the Organization for Economic Cooperation and Development (OECD), far bigger than the United States’ 25 percent or the United Kingdom’s 35 percent. A generous healthcare system and faith in the state have helped governments sell tax rises to the public, which are needed to trim a 90-billion euro budget deficit.
Ed. Notes: These deals between rich nationals and wealthy foreigners treat landmarks — what should be our common heritage — as their own game pieces on a real-life MONOPOLY board. The rich always have and always will secure their fortunes in real estate, meaning, in prime locations and in expansive ranches and in fertile mega-farms. Land is tangible and after a bubble bursts will pay off handsomely for a couple decades.
The treaty waives any tax on the sale of land (and building). But why wait ’til then to tax land? The people could be benefitting all along if owners were charged Land Dues all along.
And why should the elite alone benefit? Land’s value should not be lining just their pockets but those of the whole society. Then it wouldn’t matter who owned the land as long as society got its rent. And if society got its rent, then speculators would have no interest in owning land, so ownership would always reside with those who actually use the land or site.
This 2013 excerpt of the New York Times, Nov 7, is by Ron Nixon.
The federal government paid $11.3 million in taxpayer-funded farm subsidies from 1995 to 2012 to 50 billionaires or businesses in which they have some form of ownership.
The billionaires who received the subsidies or owned companies that did include the Microsoft co-founder Paul G. Allen; the investment titan Charles Schwab; and S. Truett Cathy, owner of Chick-fil-A. The billionaires who got the subsidies have a collective net worth of $316 billion.
The findings likely underestimate the total farm subsidies that went to the billionaires on the Forbes 400 list because many of them also received crop insurance subsidies. Federal law prohibits the disclosure of the names of individuals who get crop insurance subsidies.
Congress is debating a House proposal that would cut nearly $40 billion over 10 years from the food stamp program, which helps provide food for nearly 47 million people. A Senate provision would cut $4.5 billion over the same period.
Food stamps kept about five million people above the poverty line last year. The food stamp program was cut by about $5 billion on Nov. 1.
Proposed bills would allow billionaires to get even more in subsidies, all without taxpayers knowing who they are, while imposing draconian requirements on low-income people.
Ed. Notes: Hungry people outnumber billionaires by millions yet exercise nearly no power in America’s so-called democracy. But that’s not unusual. Everywhere, forever, in all times and places, the role of government has not been to serve the people in its entirety but to serve the ruling elite, whether an owning class in a capitalist country or a ruling party in a “communist” country. The only thing that can change the situation is not demanding a bandaid fix but demanding an end to politicians getting to spend all our public revenue and a beginning of every citizen getting a fair share of the common wealth. That’s how to put an end to such vile injustice. And it’s called geonomics.
This 2013 excerpt of Quartz, Spt 6, is by Gwynn Guilford.
Chinese local governments hit the jackpot this week. In Beijing, Shanghai, Hangzhou and Suzhou, land parcels sold for record prices, crowning a slew of new “land kings,” as Chinese slang refers to record-setting plots.
In Beijing, a residential land parcel near the city’s embassy district commanded 73,000 yuan ($11,900) per buildable square meter, or about $1,100 per buildable square foot. For comparison, the most expensive property deal in Manhattan in 2013 fetched $800 per buildable square foot; the average for 2012 was $323.
Why is Beijing more expensive than Manhattan?
Is Beijing supply scarce? Actually, it could mean the opposite. Price rises could be due more to speculation than to a dearth of supply. Even though swanky high-rises are getting more expensive in Beijing, their sales in smaller cities are flagging, suggesting that genuine demand is weak.
Per capita housing stock hit 35 sq m in 2011, and is rising by 1.2 sq m a year, putting China in the same league as many wealthy countries. Demand in mega-cities like Beijing and Shanghai can probably absorb any excess supply. But oversupply is already hitting smaller cities, and as demand flags, prices there have started to fall.
Ed. Notes: Sure, speculators add their bids to demand and keep some of their land out of supply — that’s a big part of the story. The other part is population density. Nowhere is denser than China. Close to 1 of 5 humans are Chinese and China is smaller than America. All those people needing sites for homes and business push up location value sky-high.
While that’s a curse for those who can’t afford the land, it needn’t be. All government need do is not sell land but lease it and renegotiate the leases after short periods of time. The land it already sold it can tax or levy land-use fees or charge Land Dues. Doing that would drive out the speculators. With the revenue, government could pay a dividend, as does Singapore, and that’d enable residents to afford to live there. Then as ground rents rise due to true demand and/or limited supply, the increases in spendiness would benefit everyone.
Following such a geonomic policy, Beijing would be ahead of Manhattan in more ways than one.
suitable for framing by Green Parties. When Greens began in Germany two decades ago, they defined themselves as neither left nor right but in front. Geonomics fits that description. The Green Parties have their Four Pillars; geonomists have four ways to apply them:
Ecological Wisdom. Want people to use the eco-system wisely? Charge them Rent and, to end corporate license, add surcharges. To minimize these costs, people will use less Earth.
Nonviolence. Want people to settle disputes nonviolently? Set a good example; don’t levy taxes, which rely on the threat of incarceration, to take people’s money. Try quid pro quo fees and dues.
Social Responsibility. Want people to be responsible for their actions? Don’t make basic choices for them by subsidizing services, addicting them to a caretaker state. Let people spend shares of social surplus.
Grassroots Democracy. Better have grassroots prosperity. Remember, political power follows economic. Pay people a Citizens Dividend; to keep it, they’ll show up at the polls, public hearings, and conventions.
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.
the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.
an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.
the annoying habit of seeing the hand of land in almost all transactions. In geonomics we maintain the distinction between the items bearing exchange value that come into being via human effort — wealth — and those that don’t — land. Keeping this distinction in the forefront makes it obvious that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that much so-called “interest” is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit is from real estate (Urban Land Institute, 1999). Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology.
of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.
one of many words I coined over 20 years ago: geoism, geonomics, geonomy, geocracy, etc – neologisms that later others came up with, too. CNBC once had a Geonomics Show, and Middlebury College has a Geonomics Institute. If “economy” is literally “management of the household”, then geonomy is “management of the planet”. The kind of management I had in mind is not what CNBC was thinking – top-down. My geonomics is not hands-on, interfering, but hands-off, organic. It’d strive to align policy with natural processes, similar to what holistic healing does in medicine, what organic farming does in agriculture. Geonomics attends to two key components: One, the crucial stuff to track is fat – or profit, especially profits without production, such as rent, or all the money we spend on the nature we use. Society’s surplus is the sine qua non for growth, needed to counter death – not merely more, but sustainable development, more from less. Two, the basic process to respect is the feedback loop. These let nature maintain balance automatically and could do the same for markets, if we let them. Letting them would turn our economies, now our masters, into a geonomy, our servant, providing us with prosperity, eco-librium (to coin a term) and leisure, time off – a hostile environment for economan but a cradle for a loving and creative humanity.
a way to redirect all the money we spend on the nature we use – trillions of dollars annually. We can’t pay the Creator of sites and resources and are mistaken to pay their owners this biggest stream in our economy. Instead, as owners we should pay our neighbors for respecting our claims to land. Owners could pay in land dues to the public treasury, a la Sydney Australia’s land tax, and residents could get back a “rent” dividend, a la Alaska’s oil dividend. We’d pay for owning sites, resources, EM spectrum, or emitting pollutants into the ecosphere, then get a fair share of the recovered revenue. The economy would finally have a thermostat, the dividend. When it’s small, people would work more; when it’s big, they’d work less. Sharing Earth’s worth, we could jettison counterproductive taxes and addictive subsidies. Prices would become precise; things like sprawl, sprayed food, gasoline engines, coal-burning plants would no longer seem cheap; things like compact towns, organic foods, fuel cells, and solar powers would become affordable. Getting shares, people could spend their expanded leisure socializing, making art, enjoying nature, or just chilling. Economies let us produce wealth efficiently; geonomics lets us share it fairly.
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 study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.
The significant problems we have cannot be solved at the same level of thinking with which we created them.
When your work speaks for itself, don’t interrupt.
Henry J. Kaiser
No matter how bad you think it is, it’s worse.
Short seller David Einhorn on insider corruption.
The most effective way to do it, is to do it.
Democracy is a device that ensures we shall be governed no better than we deserve.
George Bernard Shaw
The best government is that which teaches us to govern ourselves.
Johann Wolfgang von Goethe
There is no shame when you try and fail; there is only shame when you fail to try.
Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much higher consideration.
The world hates change, yet it is the only thing that has brought progress.
What we plant in the soil of contemplation, we shall reap in the harvest of action.