We are Hanno Beck, Lindy Davies, Fred Foldvary, Mike O'Mara, Jeff Smith, and assorted volunteers, all dedicated to bringing you the news and views that make a difference in our species struggle to win justice, prosperity, and eco-librium.
This 2013 excerpt of the BBC, Oct 21, is by Linda Yueh.
Singapore is one of only a handful of countries to have managed it in the past half century. A colonial outpost now has the third highest average income in the world. How did it do it? And why are social tensions now showing?
Singapore has more millionaires per capita than anywhere else in the world. One in six households are in the millionaire club. They come to this city-state by design. The government offers low taxes, raising their revenues through a property tax on the expensive, multi-million dollar houses of the ultra-rich. In return the rich spend – boosting the local economy’s shops, restaurants and even a Universal Studios.
It is a city-state with about five million people so the scale isn’t comparable to the challenges of a country.
That makes its ability to be a large manufacturer all the more surprising. Manufacturing accounts for more than one-fifth of the economy, which is a larger share than in Britain and the US.
Skilled workers also come from all over the world. Two out of five people in Singapore are foreigners. Bankers and others in the financial industry have moved to what has become the Switzerland of Asia.
For Singaporeans who are working in blue collar jobs, the arrival of lower paid foreigners creates social tension. There are concerns over congestion in public transport and housing.
Singapore made itself an internationally oriented economy and that has largely paid off for its people. Cracks are showing in the orderly facade — but for most people, their working lives have benefitted.
This 2013 excerpt of the New Zealand Herald, July 27 is by Anne Gibson.
The Cornwall Park Trust Board is a registered charity which owns the park, along with 23.4ha of surrounding land gifted to it by Auckland’s founding father, Sir John Logan Campbell.
The residential land was subdivided from 1910 to 1923 into 110 sections to provide leasehold income to pay for the upkeep of the park.
As the latest round of 21-year leases expire and are reset based on current market values, rentals have gone through the roof and feelings among the lessees are running high.
The board argued successfully that the value of the land should be based on the highest and best use of a property, unconstrained by any development.
Since then disillusioned leaseholders have been voting with their feet. Properties worth at least $6 million are up for sale and at least one has simply walked away.
An auction in September 2011 failed to draw a single buyer.
Freehold: Includes the house and the land. Leasehold: Includes the house but not the land, so the house owner pays “ground rent” to the land owner.
Purchasing a leasehold property can be a way of acquiring a property in a prime real estate area at low cost, compared to the cost of purchasing the freehold in such a property. However, purchasers of leasehold properties need to understand the obligations they are taking on and the economics of the purchase.
This 2013 excerpt of New Indian Express, Oct 27, is by Express News Service.
The Economic Offences Wing (EOW) of the Crime Branch on Saturday arrested three brothers for allegedly making a false claim on a whopping 113-acre Government land in Mundali, about 30 km from Bhubaneswar.
Presenting 70-year-old land rent (khazana) papers, the family had staked claim over the land which is still in occupation of the State Government in Mundali mouza under Barang tehsil.
The trio was identified as Dhananjaya Mohapatra, Surendra Mohapatra and Jagannath Mohapatra.
A Joint Commissioner level officer of Consolidation and Settlement wing is also under scanner of the EOW for prima facie not turning down the claim filed by the family seven years ago.
Interestingly, even as EOW was probing the case, it wrote to the Revenue and Disaster Management Department seeking to know who was posted as the Joint Commissioner at that time only to receive a reply that no officer in that rank was at the helm in 2006.
Tax plan born but never used in Philly gets traction in Connecticut, copying a Pennsy tax that grows its base.
This 2013 excerpt of the City Paper, July 25, is by Ryan Briggs.
Connecticut Gov. Daniel Malloy signed into law House Bill 6706, setting in motion a process by which certain municipalities would be able to implement something called a Land Value Tax (LVT). LVT is a form of property tax that only taxes the value of land, and not improvements on the land.
The legislation was authored with help from the obliquely named Center for the Study of Economics (CSE), a spin-off of the Henry George Foundation of America. The foundation was created to carry on the mission of the Victorian-era economist Henry George, who was born in Philadelphia and advocated for LVT. The eponymous foundation has been working since the 1930s to carry on his vision.
After languishing for a good century or so, the taxation formula has piqued the interest of city administrators in a number of older American cities that have struggled with abandonment and vacant land.
The purses for winning the Scottish Open and Open Championship came to $2.1 million.
This 2013 excerpt USA TODAY, July 23, is by Nate Scott.
Not so fast with that cash, Lefty.
Phil Mickelson will sacrifice 61% of his earnings for winning both the 2013 Open Championship and the Scottish Open, all of which will go in taxes to the British and U.S. governments and to the State of California.
Great Britain still collects taxes in Scotland, where the Open Championship was held this year. (Scotland will start collecting its own taxes in 2016.)
Forty five percent of Mickelson’s winnings will go to Great Britain, with 13% going to California and the remaining going to the United States government.
Doubling the pain? Mickelson also won the Scottish Open the week before the Open Championship, which will be taxed at the same rate. For winning both tournaments, Mickelson earned £1,445,000, or about $2,167,500. After taxes, he’ll take home $842,700, and that’s before Mickelson pays his caddie, pays for his hotel and expenses, pays his agent, etc, with a bit over $1.3 million going to taxes.
Mickelson was ranked as Forbes’ #7 highest-paid athlete. This is the guy who said he might move away from California because of the state taxes there. No tears shall be shed for him. But man. Sixty-one percent is a lot of percent.
This 2013 excerpt of The Huffington Post, Oct 31, is by Mark Gongloff.
Bill Gross, the billionaire founder and chief investment officer of Pacific Investment Management Co., the world’s biggest bond fund, wrote to his wealthy investors: “Having gotten rich at the expense of labor, the guilt sets in and I begin to feel sorry for the less well-off.”
We in the magnificent ’1%’ grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living.
Economies work best when inequality of incomes are at a minimum. Right now, the U.S. ranks 16th on a Gini coefficient for developed countries, barely ahead of Spain and Greece.
The 1 percent now take up 20 percent of U.S. income, up from 10 percent in the 1970s.
The wealthy have gotten all of the benefit of the explosive rise of the financial sector over the past several decades.
Acknowledge your good fortune at having been born in the ‘40s, ‘50s or ‘60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune.
Gross jabs at financial muckraker Carl Icahn, who lately has been agitating for Apple to pay its shareholders a bigger dividend.
If X can’t grow revenues any more, if X company’s stock has only gone up because of expense cutting and stock buybacks, what does that say about the U.S. or many other global economies? Has our prosperity been based on money printing, credit expansion, and cost cutting, instead of honest-to-goodness investment in the real economy?
Property Tax Laws Allow Agricultural Rates for Commercial Land
This 2013 excerpt of WIBW, Jul 18, is by Melissa Brunner.
Rounded bales of hay are a common site around the Kansas countryside. But they recently turned up, dotting the landscape of a the decidedly urban lots around the WIBW-TV studios.
The land was being baled. The move turned the lots into land being used for agricultural purposes. The less-intense use has a lower property tax rate.
In the case of the 11 acres between WIBW and the Kansas Bankers Assocation, it brought the bill down to just $23.11, a difference of $34,578.49 to Shawnee County. For all five lots around WIBW-TV, the agricultural use tax totals $58.70, instead of the market value rate of $83,443.40.
Taxes can fall either on actual events and values, or on potential values. Actual events include transactions such as the sale of goods and the payment of wages, rent, and interest. Actual values include the profit from enterprise. Most taxes today are imposed on such actuals.
Potential prices are based on the usual or maximum capacity of a person or asset to obtain market value. Suppose that a specialized medical doctor could normally earn $200,000 per year. That is his potential income, although he could be earning less than that if he choose to work fewer hours or to be employed in a setting that pays less. As another example, suppose one has $100,000 in stocks and bonds, and the average real return (adjusting for inflation) has been five percent. The potential income is $5000 per year.
If taxes were based on potentials, the doctor would not be taxed on his actual income, but rather on his potential income. Suppose the tax rate is ten percent. His wage tax would be $20,000 even if he earned more than $200,000 in a particular year. If he chose to work half time, the tax is still $20,000. Hence the effect of the tax on potential income is to push the doctor to work at least normal hours, and the effect is also to avoid any disincentive to work extra hours. In economic terms, the tax would be a fixed cost, with no tax on extra actual income. In contrast, a tax on actual income imposes a disincentive to work longer.
To analyze taxes on potential versus actual wages, we need to assume the best possible implementations. So, to be equitable, a tax on potential income should include a deduction for charitable work. Suppose that the doctor worked for a charity that provides medical services for the poor, at a wage of $50,000. There would be a $150,000 deduction for taxable income, so the tax would be ten percent of $50,000, since the doctor is working at his potential, and donating 3/4 of his potential to charity.
If income from financial assets were taxed based on potentials, the best implementation would postpone the tax in years when market returns were low. The tax would promote prudent behavior, such as investing in market index funds, so that the probability of returns being close to potentials would be higher.
A tax on the potential value of buildings and other improvements would be based on their being optimally maintained. If the owner allowed his building to deteriorate due to lack of repairs, the tax would be based on the value when maintained, and so the tax on potential building value promotes optimal maintenance, in contrast to today’s taxes on actual value, which reduce maintenance by making it more costly after paying extra taxes.
The best application of taxes on potential value is on land. Indeed, taxes on real estate are typically applied to the potential value of the property, based on the highest and best use of the site. The property is assessed annually based on the prevailing market prices in the neighborhood. One exception is California, whose Proposition 13 limits the tax increase to two percent per year even when the market prices are rising faster, so long as the title does not get transferred.
A tax on potential land value promotes the optimal use of land, and that also promotes optimal production and employment, especially if there is no tax on actuals.
A tax on potential land value is morally optimal as well, since title holders pay back the value received from government’s public goods, and because self-ownership does not apply to natural resources and the value derived from the community’s population and commerce.
While a tax on potential wages would push employment towards its potential, it would in some cases amount to forced labor for those who prefer more leisure. It would deprive workers of the freedom of choice, and thus not be equitable. It would not even be efficient, since leisure is a desired good.
Taxes on potential financial returns could reduce entrepreneurship in business and investments, and so would probably have negative effects.
A tax on pollution is based on its potential damage, and so is efficient and equitable.
Therefore taxes on potential land value and pollution are the best applications of taxes on potentials. Taxes on transactions reduce production and trade, while taxes on potentials promote production and trade. For maximum equity, efficiency, tax potentials, not actuals.
Land value taxation could help to finance low-carbon infrastructure projects in cities suffering from austerity budgets.
This 2013 excerpt of London School of Economics, Oct 10, is by Blanca Fernandez.
In view of the current environment of budgetary austerity in Europe, municipalities require new local funding methods independent from freezing higher levels of governance funds. Under the present conditions of rapidly rising public debt, loans-based or bonds-financed infrastructure investments do not seem like a feasible option in the years ahead.
However, property values are increasing in most European cities, influencing urban development and urban liveability.
Taxation should not be seen only as a source of revenue for the community but also as a powerful tool to encourage development of desirable locations, to exercise a controlling effect on the land market, and to redistribute to the public at large the benefits of the unearned increase in land values.
UN-HABITAT published in 2011 “Innovative Land and Property Taxation”, in which land and property taxation is described as an effective mechanism for urban transformation.
Land based taxation is increasing its followers worldwide, and especially in Europe. Ireland, Scotland, England and Lithuania are examples of European countries where extensive analysis and discussions have taken place.
If there is institutional will, sustainable transport can be financed locally, accessibility can be improved, and economic potential can be fostered by land-based taxation.
This 2013 excerpt of New Economic Perspectives, Oct 28, is by Dr. William K. Black.
Economics does not have a true Nobel Prize, so a central bank decided to create a near-beer variant. The central bankers have frequently awarded economists who got it disastrously wrong.
Economists are blind to conflicts of interest and eagerly seek out such conflicts to enrich themselves. Economists are blind to ethics, even disdainful of it.
Economists do not study fraud. They have a primitive tribal taboo against using the word. Economists do not study the criminology literature on elite white-collar crimes.
Accounting fraud produces fraudulent accounting data that economists and finance scholars treat as facts. During the expansion phase of a bubble the traditional econometric study will lead economists to support the worst possible policies. Competent bank examiners never forget that accounting data can be the product of accounting control fraud.
Economists, in the rare cases where they mentioned fraud, claimed that fraud posed no risk in “sophisticated” financial markets. Economists did not simply fail to warn about the fraud epidemics – they recommended doubling down on the criminogenic policies (deregulation, desupervision, and de facto decriminalization) that Akerlof and Romer warned were “bound to produce looting.”
From 2000 to 2007, a coalition of appraisal organizations … delivered to Washington officials a public petition; signed by 11,000 appraisers…. [I]t charged that lenders were pressuring appraisers to place artificially high prices on properties [and] “blacklisting honest appraisers” and instead assigning business only to appraisers who would hit the desired price targets.
What was the reaction of many of the Fed’s senior economists to the facts of mortgage lending? They were enraged at the messengers. Their reaction was “emotional” and “heated” and directed against the supervisory messengers rather than at the fraudulent banks.
This 2013 excerpt of Slate, July 16, is by Matthew Yglesias, author of The Rent Is Too Damn High.
Well-heeled universities receive huge implicit tax subsidies often for activities with little relationship to education. In New York City, for example, the tax benefit that Cooper Union gets from owning the land beneath the Chrysler building works out to $18,200 per enrolled student.
Of all the ways you can come up with subsidizing a worthy nonprofit organization, a property tax exemption has just about the worst incentive structure you can imagine. If you look at the list of things that churches and other religious institutions spend money on, “acquiring land and buildings” has got to be one of the least socially beneficial and worthy of encouragement. And the tendency of administrators and the fundraising-donor complex to plow more and more money into more and more buildings is something policymakers should be looking to restrain not encourage.
Property taxes encourage land owners to transform valuable parcels of land into high-value uses that generate useful economic activity throughout the city. George Washington University is using prime land at the corner of 20th and H NW as an open air parking lot.
an answer to a rarely asked question. If price is a reward for production, why do we pay for land, never produced by any of us? What is land price a reward for? Good behavior? How much money do we spend on the nature we use? Who gets it? What do they do with it? (If you answer all these correctly, you’re not a genius but a geoist.) The worth of Earth is enough that were we to collect and share it, we could abolish taxes on the goods we do produce. For example, San Francisco’s Redefining Progress has calculated that Cali-fornia could abolish all state and local taxes were it to collect the values of resources and of using na-ture as a dump. By exorcising the profit motive from depletion and pollution, rent collection could replace bossy regulation. Economies could self-regulate, as the rest of the eco-system does. See how big problems yield to big answers when we ask the right questions?
more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part and parcel of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.
about the money we spend on the nature we use. It flows torrentially yet invisibly, often submerged in the price of housing, food, fuel, and everything else. Flowing from the many to the few, natural rent distorts prices and rewards unjust and unsustainable choices. Redirected via dues and dividends to flow from each to all, “rent” payments would level the playing field and empower neighbors to shrink their workweek and expand their horizons. Modeled on nature’s feedback loops, earlier proposals to redirect rent found favor with Paine, Tolstoy, and Einstein. Wherever tried, to the degree tried, redirecting rent worked. One of today’s versions, the green tax shift, spreads out of Europe. Another, the Property Tax Shift, activists can win at the local level, building a world that works right for everyone.
in part 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.
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 answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”
Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.
shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.
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.
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.