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 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.
This 2013 excerpt of Rolling Stone, Oct 25, is by Matt Taibbi.
This $13 billion settlement, which is actually a $9 billion settlement, came very close to never happening. In fact, this deal is actually quite a gift to Chase. It sounds like a lot of money, but there are myriad deceptions behind the sensational headline.
First of all, the settlement, may wipe out between $100 billion and $200 billion in potential liability – meaning that the bank might just have settled “for ten cents or so on the dollar.” The Federal Housing Finance Agency alone was suing Chase and its affiliates for $33 billion. The trustee in the ongoing Bernie Madoff Ponzi scandal was suing Chase for upwards of $19 billion.
Obviously, those plaintiffs may never have gotten that kind of money out of Chase. But just settling the mere potential of so much liability has huge value for the bank. It’s part of the reason the company’s share price hasn’t exactly cratered since the settlement was announced.
Moreover, the settlement is only $9 billion in cash, with $4 billion earmarked for “mortgage relief.” We’ve seen settlements with orders of mortgage relief before, and banks seem to have many canny ways of getting out of the spirit of these requirements.
There’s also the matter of the remaining $9 billion in fines being tax deductible (meaning we’re subsidizing the settlement), and the fact that Chase is reportedly trying to get the FDIC to assume some of Washington Mutual’s liability.
But overall, the key to this whole thing is that the punishment is just money, and not a crippling amount, and not from any individual’s pocket, either. People who committed essentially the same crimes as Bernie Madoff will walk away without paying any individual penalty.
Madoff’s operational fiction was his own personality. He used his charm and his lifestyle and his social status to con rich individuals into ponying up money into an essentially nonexistent investment scheme.
In the cases of both WaMu and especially Bear (both acquired by Chase), the operating fictions were broad, carefully-crafted infrastructures of bogus guarantees, flatlined due diligence mechanisms, corrupted ratings agencies, and other types of legal chicanery. These fake guarantees and assurances misled investors about what they were buying. Most thought they were investing in home mortgages. What they were actually investing in was a flow of cash from new investors that banks like Bear and WaMu were pushing into a rapidly-overheating speculative bubble.
Bernie Madoff ultimately caused about $18 billion in losses. When he got caught, the state threw the book at him, giving him a 150-year jail sentence. Meanwhile, just the subset of Bear Stearns defendants, according to a complaint against Chase filed last year by Eric Schneiderman, caused $22.5 billion in losses in just two years, 2006 and 2007.
And while it is true that the federal government in this latest $13 billion settlement is ostensibly reserving the right to continue to pursue criminal charges, don’t hold your breath. The arc of this story suggests that the whole purpose of this agreement has been to find the highest price Chase is willing to pay to a) stay in business b) keep employees out of jail.
So again, $13 billion sounds like a lot of money. But Bernie Madoff is doing 150 years, and nobody in this cast of characters will personally pay a dollar in fines. Nobody will do one day in jail. That’s a huge, huge discrepancy.
Of course, Bernie Madoff today is reviled on Wall Street, even by papers like the Wall Street Journal. This is mainly because he ripped off other finance-sector hotshots, but also because he gave Wall Street a bad name.
Post-2009 coverage of Madoff from the financial press has focused intently on the failure of the government (and in particular the SEC) to aggressively investigate the scandal in a timely fashion. This has followed a rhetorical line that frequently emanates from the finance sector, in which white-collar crime is somehow less the fault of criminals than of the police who failed to stop it.
These “Where were the regulators?” cries generally never show up in financial-press coverage of Wall Street scandals until those same pundits have first exhausted all attempts to argue that no crime was ever committed by the bank/broker/hedge fund in question.
Only then do they blast the financial cops of the world for failing to protect Madoff’s investors and the good name of honest Wall Street business.
Ten years from now, they will be denouncing everyone from Eric Holder to Lanny Breuer to the SEC and DOJ officials in the Bush administration for failing to protect investors from predatory companies like Bear Stearns, Washington Mutual, and their parent, JP Morgan Chase.
A few more notes on the deal. This latest settlement reportedly came about when CEO Jamie Dimon picked up the phone and called a high-ranking lieutenant of Attorney General Holder, who was about to hold a press conference announcing civil charges against the bank. The Justice Department meekly took the call, canceled the presser, and worked out this hideous deal, instead of doing the right thing and blowing off the self-important Wall Street hotshot long used to resolving meddlesome issues with the gift of his personal attention.
Only on Wall Street does the target of a massive federal investigation pick up the telephone and call up the prosecutor expecting to make the thing go away – and only in recent American history would such a tactic actually work.
Considering the scale of the offenses, the state could have taken the hardest of hard lines. Instead, they once again took a big fat check to walk away.
Papers like the Journal have particularly complained that Chase should not be held responsible for the offenses committed by companies long before Chase acquired them. What they forget is that Chase has made a fortune off its acquisitions of Bear and Washington Mutual, two purchases which were massively subsidized by the state. Nobody complained about potential liability back when all those two deals were doing for Chase was helping its executives buy overpriced art and summer homes.
And remember, this sort of liability was basically the only risk Chase took in these deals. The government took on most of the rest, in order to make the acquisitions happen.
Chase got to buy Bear Stearns with $29 billion in Fed guarantees, with the state setting up a special bailout facility, Maiden Lane, to unwind all of the phony-baloney loans created through Bear’s Ponzi-mortgage-mechanism described above. So Chase got to acquire one of the world’s biggest investment banks for pennies on the dollar, and then got the Fed to buy up all the toxic parts of the bank’s portfolio, essentially making the public the involuntary customer of Bear’s criminal inventory.
Later on, Chase took $25 billion in TARP money, bought Washington Mutual and its $33 billion in assets for the fire-sale price of $1.9 billion, and then repeated the Bear scenario, getting another Maiden Lane facility to take on the deadliest parts of Washington Mutual’s portfolio (including, for instance, a pool of mortgages in which 94 percent of the loans had limited documentation).
Incidentally, the notion that Chase was somehow dragged kicking and screaming by the government and forced to buy these two massive companies essentially for free is almost as laughable and ridiculous as the oft-cited explanation for the financial crisis, that the government forced banks to lend to the poor.
Chase, as has been reported by multiple outlets, had already tried on its own to buy both companies before the state arranged its infamous shotgun weddings. Only after both firms collapsed, the economy was in crisis, and Chase was able to get the Fed to eat the toxic portfolios of both companies did these already-longed-for acquisitions take place.
Chase was too big to fail before the crash, but it’s even Too-Bigger-To-Failier now, thanks to the expanded market share afforded by these two Fed-sterilized acquisitions. Bloomberg reported that Bear’s book value has soared by $36 billion since it swallowed up those two firms with the public’s help. Its retail banking earnings have soared nearly 1000 percent. It has more than doubled the size of its banking deposits. Chase didn’t have a single branch in Florida or California before this deal: It’s now a top-5 banking presence in both states.
So nobody should be crying for poor Chase now, just because it’s no longer able to simply sit back and collect gobs and gobs of essentially free cash from the ill-gotten market share “won” by its two crooked acquisitions.
Now they’ll have to write a big check, which sucks for them, but what about the victims? Shouldn’t Chase merely be required to pay back every dollar to those investors wiped out by these schemes? That would be a hell of a lot more than $13 billion.
No-jail, no-individual-penalty settlements, just companies using shareholder money to pay fines at huge discounts relative to the actual damage they caused.
This 2013 excerpt of Seattle PI, July 17, is by Neil Vigdoor.
Copper Beech Farm, a 50-acre compound on the waterfront of Greenwich CN, has been listed for $190 million, believed the be the highest listing in the United States. The property boasts a carriage house with a clock tower, co-joined heptagonal pools, a greenhouse, wine cellar and grass tennis court.
When John Rudey, the owner of the expensive residential property, procured a designation for most of his Greenwich CN compound as forestland, he — a timber tycoon and known as Copper Beech Farm — was able to reduce his real estate tax liability by more 80 percent, or $720,000 annually.
“I knew that it was a way of dodging taxes, realizing that some day he would sell it for a subdivision and make a fortune on it,” said Ted Gwartney, Greenwich’s assessor from 2003 to 2012.
In a May interview with the newspaper, Ogilvy said that the ability to subdivide the estate for future development factored into the property’s jaw-dropping listing price.
With the discount, the town’s valuation of Copper Beech Farm has plummeted from $84.6 million to $21.3 million.
The forestland designation on 40.6 acres of the property’s 50 acres goes back to 1984, when Rudey bought the compound from Carnegie Steel scion Harriet Lauder Greenway.
Gwartney is no fan of the law, but said he couldn’t unilaterally strip the property of the tax exemption. “I would have loved to have assessed it for its future value as a subdivision.”
not a panacea, but like John Muir said, “pull on any one thing, and find it connected to everything else.” Recall last month’s earthquake in El Salvador. We felt it and its formidable after-shocks in Nicaragua. Immediately afterwards, my host nation, one of the poorest in the Western Hemisphere, sent aid to its Central American neighbor. The Nica newspapers carried photos of the devastation. They showed that the cliff sides that crumbled had had homes built on them while the cliffs left pristine withstood the shock. Could monopoly of good, safe, flat land be pushing people to build on risky, unstable cliffs? If so, that’s just one more good reason to break up land monopoly. What works to break up land monopoly, history shows, is for society to collect the annual rental value of the underlying sites and resources. That’d spur owners to use level land efficiently, so no one would be excluded, forced to resort to cliffs. To prevent another man-induced landslide is yet another reason to spread geonomics.
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 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.
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.
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 POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.
what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, in-cluding the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.
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.
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?
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.
Commerce with all nations, alliance with none, should be our motto.
The real voyage of discovery consists not in seeking new landscapes but in having new eyes.
I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend.
Freedom is nothing but a chance to be better.
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.
Be who you are and be that well.
Saint Francis de Sales
There is no shame when you try and fail; there is only shame when you fail to try.
I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.
You’ll never have a quiet world till you knock the patriotism out of the human race.