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If you don’t have money you end up spending more to survive.
This 2014 excerpt of Alternet, Jan 29, by Dave Johnson.
It takes money to make money, they say, but if you don’t have money you lose money. Half of us Americans are poor or almost poor now. It’s actually more expensive not having enough money to get by.
Here are nine examples of why it is expensive to be poor.
1. Getting around. When you don’t have the money to get a reliable car you are stuck with time-consuming and not-inexpensive public transportation or an old beater. Old cars break down and this costs money. It costs time. It can cost you a job. Lower-priced older cars will often be the ones that use a lot of gas, sometimes getting less than 20mpg. At today’s gas prices and today’s wages you’re eating up an hour or more’s pay every day just to get back and forth.
2. A place to live. You might be in a week-to-week situation in a budget motel, requiring you to pay with a money order. Money orders cost money so you’re even paying a fee to pay for your place to sleep.
3. Eating. If you don’t have fridge or a stove you might depend on cheap fast food. You depend on what is nearby and local stores in bad neighborhoods are expensive.
4. Banking. 28.3% of Americans conduct at least some of their financial transactions “outside of the mainstream banking system,” meaning they have to rely on expensive alternatives like money orders, check-cashing services, prepaid debit cards, and payday loans. Payday loans cost an average of more than 138 percent in interest and fees.
If you have a bank account that means high fees. You don’t have enough to meet the minimum balance requirements so you pay a monthly fee that eats away at any money you have. You will pay a fee averaging $6 to cash your paycheck. You will be hit by terrible fees if the money runs out before the month does. Overdraft fees are incredible. A Pew graphic illustrates how the median overdraft for a $36 transaction racks up a median $35 in fees. “If an overdraft was treated like a short-term loan with a repayment period of seven days, then the annual percentage rate for a typical incidence would be over 5,000 percent.”
5. Getting scammed. The poor are vulnerable to, and frequent targets of financial scams: high-interest credit cards, mortgage-fraud, insurance scams, supposed-savings scams, etc.
More Illegality: Not getting paid. Wage theft is restaurants stealing tips, employers demanding free time or not even paying the minimum wage, refusing to pay overtime pay when it is due, calling an employee a contractor or a temp, making various deductions from wages, and other ways that workers end up not getting paid for their work. Poor people are vulnerable, and have to take what they can get.
More than 60 percent of low-wage workers have some pay illegally withheld by their employer each week. Low-paid workers lose $2,634 per year, on average, in unpaid wages, or 15 percent of their income.
Meanwhile, the average McDonald’s employee takes seven months to earn what McDonald’s CEO makes in an hour. Ninety percent of Americans are continuing to go further into debt.
Being poor is a trap. It becomes one thing after another that keeps you poor. Plus you pay a high price of guilt and blame.
Ed. Notes: Money is prestige. People with money feel good about themselves, no matter how the money came about. People without money feel bad about themselves, no matter if they struggle against their poverty or not. True, money from work can make one feel proud. But the work part is not essential. Most rich don’t work for the money they get (“thank you very much.”) CEO salaries tell only a small part of the story. There’s still passive income from merely owning stocks, bonds, and real estate.
The money that corporations get is not from selling their goods and services so much as it is from lobbying government: sweetheart deals, lenient enforcement, and tax loopholes. The money that landlords and flippers and lenders get is not for their building — something they might have created — so much as it is for the location, and the value of a location is due to the advantages around it. Good views, nearness to downtown, low crime rates, etc give a site its price (or rent), and such features are created by nature and society, not by owners.
The author wants to raise the minimum wage, but what if you can’t work? Worse, that call reinforces the false view that all income must come from jobs (never mind starting one’s own business) and that the poor are incapable, must stay stuck in lousy work their entire lives, so at least pay them more. A far greater justice than paying one enough to stay stuck in dumb jobs is to pay everyone an income apart from their labor (or capital), an income from the value of land and resources and privileges such as corporate charters in one’s region. Call it a Citizen’s Dividend. It’s a more honest way to enable people to feel good about themselves.
Why The Land of Opportunity is in Danger and What We Can Do About It
This 2014 excerpt of the Libertarian Party of Orange County (California), Jan 29, is by Ryan Hinds.
The only tax that does not have negative economic consequences is the land value tax, as land cannot disappear when taxed. This free lunch of sorts will also lower real estate prices, reducing the money required to start a business. In order to truly have equal opportunity, we must all have equal access to land and natural resources; land value taxes push us towards that goal.
The Small Business Administration (SBA) has estimated that small businesses face a regulatory burden 36% higher than larger firms. State and local governments make it even worse. For example, it took a businessman in Ventura County, CA seven permits just to remove a wooden deck at his campsite, as requested by a county official! Needless to say, he closed up shop. In Florida, Louisiana, Nevada, and Washington DC, interior designers must be licensed.
Economic inequality is one of the most pressing issues of our time. Though my libertarian views are pretty apparent in this article, I have spoken to self-described socialists who support many of the same reforms that I do. Opening the lines of communication is only the first step, but will go a long way towards bringing economic opportunity back to America.
Ed. Notes: A libertarian could go even further and note that taxes are not needed to recover the socially-generated value of land and resources and ecosystem. Instead, government could use fees, dues, leases, and even fines for violators of standards. The big difference between taxes and dues is that taxes come from above and not paying them is a crime while dues come from community consensus and not paying them means no longer being a member of the community with all the benefits that entails, such as voting, proving title, getting a share of surplus site value (as in Singapore), etc. Most people would choose to pay their fair dues, altho’ it may take a while for society to evolve to that point; meanwhile, taxes would have to be relied upon.
This 2014 excerpt of the AP, Jan 30, is by Mark Stevenson.
The stunning and little-understood annual migration of millions of Monarch butterflies over thousands of miles to spend the winter in Mexico is in danger of disappearing, after numbers dropped to their lowest level since record-keeping began in 1993.
The annual trek to Mexico is the world’s biggest migration of Monarch butterflies and the second-largest insect migration, after a species of dragonfly in Africa.
Experts blamed the displacement of the milkweed that the species feeds on by genetically modified crops and urban sprawl in America, extreme weather trends, and the dramatic reduction of the butterflies’ habitat in Mexico due to illegal logging of the trees they depend on for shelter.
Twenty years ago in the North American Free Trade Agreement, the United States, Mexico, and Canada signed environmental accords to protect migratory species such as the Monarch.
There has been a movement in the United States among gardeners and home owners to plant milkweed to replace some of the lost habitat. But activists say large stands of milkweed are needed along the migratory route, comparable to what once grew there. They also want local authorities in the U.S. and Canada to alter mowing schedules in parks and public spaces, to avoid cutting down milkweed during breeding seasons.
Ed. Notes: It’s sad that our species has such a hard time living on Earth with other species, like a rowdy child in kindergarten. Hopefully the sadness will prod enough of us to take the necessary steps to harmonize our use of Earth with that of other peaceful species. The responsibility is all of ours, eventho’ one guy wreaked more havoc on butterflies than have most of us; he ate them to survive being stranded in the Outback!
These two 2014 excerpts on US GDP are from Jan 30 by the BEA and by Shadow Stats.
Gross Domestic Product, 4th quarter and annual 2013 (advance estimate)
The U.S. Bureau of Economic Analysis (BEA) says real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.2 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter). In the third quarter, real GDP increased 4.1 percent.
The SGS-Alternate GDP reflects the inflation-adjusted, or real, year-to-year GDP change, adjusted for distortions in government inflation usage and methodological changes that have resulted in a built-in upside bias to official reporting.
The official GDP headline number refers to the most-recent quarter’s annualized quarter-to-quarter rate of change (what that quarter’s percent quarter-to-quarter change would translate into if compounded for four consecutive quarters).
This can mean that the latest quarter can be reported with a positive annualized growth rate, while the actual annual rate of change is negative.
Ed. Notes: Their accompanying chart is an eye-opener. It seems official stats do not reflect reality so much as they do reflect the interests of officials. Which makes it hard to do the accounting that is a central part of economics. It’s another reason why economics is not a science. But no other discipline deals with controversies such as property and confronts the ruling elite directly, so it’s easy to see why economists wilt under the pressure. Oscar Wilde said number crunchers know the price of everything and the value of nothing. Maybe so, but they also know which side of the bread is buttered. It’s why they turn a blind eye to researchers such as Shadow Stats.
This 2014 excerpt of the AP, Jan 29, is by Mark Lewis.
Two Norwegian politicians have jointly nominated former National Security Agency contractor Edward Snowden for the 2014 Nobel Peace Prize, saying his disclosures of secret U.S. documents have contributed to making the world more peaceful.
Anyone can be nominated for the prestigious award, so the submission Wednesday by Socialist lawmakers Baard Vegard Solhjell, a former environment minister, and Snorre Valen just means Snowden will be one of scores of names that the Nobel committee will consider.
“We do not necessarily condone or support all of his disclosures,” the two lawmakers said in their nomination letter. “We are, however, convinced that the public debate and changes in policy that have followed in the wake of Snowden’s whistleblowing has contributed to a more stable and peaceful world order.”
“But to have the debate, you have to be aware of what is going on,” he told The Associated Press.
The Organization for the Prohibition of Chemical Weapons won last year’s Nobel Peace Prize.
Ed. Notes: Ironically, the prize was also given to US President Obama (2009) who, if he could, would have Snowden’s head. Obama is commander-in-chief of the world’s biggest war machine now waging at least two wars. Another hyphenated American war-monger who received the prize is Henry Kissinger (1973). While the image of the prize is tarnished, it was once given to Nicholas Murray Butler (1931). He, at least, was an advocate of Georgism, an economic system that has brought about land reform without one drop of bloodshed. If more widely used, who knows? perhaps the modern version of geonomics could deliver world peace.
This 2014 excerpt of EUROPP (European Politics and Policy of the London School of Economics), Jan 29, is by Jonathan Hopkin, Victor Lapuente, and Lovisa Moller.
The less unequal a country is, the more likely it is to be innovative. While the US combines high levels of inequality and innovation, other countries with much lower inequality levels are also high performers in innovation.
The United States – the most unequal of the advanced economies – has outperformed the Scandinavian countries in patent filings in the last two decades. However, if we expand the period of study with a few more decades, Sweden has had more patent filings per resident than the US for most of the last half-century. Further, the other Anglo-Saxon countries are nowhere near the United States’ patent filings levels.
‘Patent trolling’ – whereby patents are used as a means of generating returns by threatening legal actions, rather than a source of productive innovation – suggests patents filed may be measuring rent-seeking strategies as well as genuine inventions.
High regulatory quality and R&D expenditure are common denominators for countries that are ranked as highly innovative – inequality is not one of these uniting factors. Innovation is not just about a narrow view of incentives based on spectacular rewards for a small number of high achievers; it also rests on high levels of investment in research, not just by the private sector but also, and often decisively, by the state.
The US combines high inequality with excellent universities financed by both public and private funds, and a regulatory environment that encourages innovation. ‘Cuddly capitalist’ countries that invest in research, have good universities and quality regulation can also innovate, without having to offer successful entrepreneurs outsized rewards. There seems little evidence for the thesis that egalitarian societies need to freeload off the innovations of the American super-rich in order to prosper.
Ed. Notes: Sure, inventors and innovators need support but that support need not come from concentrations of wealth. Indeed, the phenomenon of concentrating wealth into government or university or venture capitalist could be skipped altogether. How?
Just pay citizens a dividend from society’s spending for things not created by labor or capital, things like land, natural resources, corporate charters, and patents and copyrights. Those government-granted privileges and natural assets capture a torrential flow within the GDP. You could redirect that flow, using fees, dues, taxes, etc, into public treasuries then back out again as dividends, a la Alaska’s oil share.
Further, you could shift taxes off labor and capital, onto pollution and depletion. That way, you’d redirect investment from industries like oil and into cutting-edge technology. Thus you could enjoy progress, economic parity, and do so without any paternalism from the state.
This 2014 excerpt of Cityscope, Jan 27, is by Sulev Vedler.
Last January, Tallinn, the capital city of Estonia of 430,000 people, made all public transit in the city free for residents.
One year later, Mayor Savisaar says traffic on the biggest crossroads had decreased by 14 percent compared to a week shortly before the policy started.
But researchers at the Royal Institute of Technology in Sweden found that traffic speeds in Tallinn had not changed and if any modal shift is happening, it’s that some people are walking less and riding transit more.
Free transit is less effective than increasing the price of parking, gasoline, or using the roads.
Tallinn isn’t the first city to experiment with free transit. Across Europe, a number of smaller towns have done it, dating back to the late 1990s. Templin, Germany was one. In France, there was the city of Châteauroux and Aubagne and some surrounding municipalities. Ridership in all of those places increased substantially when fares went away.
What sets Tallinn’s experiment apart is its size and Tallinn’s status as a European capital. As the birthplace of Skype and online voting, Tallinn also has a reputation for innovation. So there’s a feeling, at least among advocates of the idea, that if free transit can work here, maybe it can work in other large cities.
In Tallinn the system was highly subsidized to begin with. That’s not the case in London, for example, where fares account for 85 percent of public transport revenues. Free fares there would leave a gaping budget hole. It is easier to waiver the ticket revenue if there’s already a large subsidy. The subsidy part used to be 70 percent in Tallinn. Now it’s 96 percent.
Ed. Notes: Free rides and free anything sound good but is there no free lunch? Possibly. One of the best and biggest transit systems in the world has no trouble funding itself without any subsidy: Hong Kong’s. That system funds itself from the steep land values around its transit stops. It’s a method any city could use, argued big-name economists William Vickrey and Joe Stiglitz, who dubbed his proof the “Henry George Theorem”. Any public works project could pay for itself from the resultant rise in nearby site values as long as it’s not a white elephant and truly desired by the public.
This 2014 excerpt of the Los Angeles Times, Jan 27, is by Claudia Luther.
Pete Seeger, folksinger, who was awarded the National Medal of Arts in 1994, died at 94 yesterday. He was born in 1919 on May 3 in New York state (at Patterson) into a musical family that was rich in dissenters.
Almost exactly six years ago, with Bruce Springsteen, Seeger performed Woody Guthrie’s “This Land Is Your Land” at the Lincoln Memorial concert marking President Obama’s 2008 inauguration.
In 1965, The Byrds had a hit with “Turn! Turn! Turn!” that Seeger co-wrote. He used a passage from the Bible for the lyrics (To Everything, There is a season, And a time to every purpose, under Heaven, A time to be born, a time to die …)
During World War II, Seeger served in the Army Special Services, entertaining troops in the U.S. and the South Pacific. After the war, Seeger formed the Weavers with Lee Hays and others.
Seeger joined Guthrie and Millard Lampell in New York City, playing the “subway circuit” — left-wing fund-raising parties. They soon formed the Almanac Singers, which also included Hays.
As a member of the Almanac Singers and the Weavers, Seeger wrote or co-wrote “We Shall Overcome,” the anthem of the civil rights movement based on an early 20th century gospel song: and Where Have All the Flowers Gone,” which became an anti-Vietnam War protest song; and “The Hammer Song” (If I had a hammer, I’d hammer in the morning, I’d hammer in the evening, All over this land …) In the 1960s his songs were popularized by Joan Baez, The Kingston Trio, and Peter, Paul, and Mary. Famed actress Marlene Dietrich covered his “Kisses Sweeter Than Wine“.
A musical historian, Seeger tried to share the credit and profits on songs he recorded. He was the first to acknowledge his source material.
Seeger was not a geoist but a leftist. While a college student at Harvard, Seeger joined the Communist Party, but spurned it in disgust by 1949. Yet he never apologized for his earlier belief.
“I’d like to see a world without millionaires,” Seeger said in 1993.
Called before the House Un-American Activities Committee in 1955, Seeger invoked the 1st Amendment and was held in contempt of Congress. Sentenced to a year in jail, he served a few hours before being released. The case was dismissed years later.
The controversy shattered Seeger’s career. He was barred from network TV for 17 years. Then in 1968 his antiwar song, “Waist Deep in the Big Muddy,” was broadcast. It was credited with helping to cement public opinion against the war.
Ed. Notes: How ironic that those concerned with justice can not follow their concern to geonomics, to an economy that works right for everyone, without invoking the heavy hand of the state. If only famous reformers could see the wisdom of sharing Earth’s worth while keeping the fruits of one’s labor inviolable (non-taxed) … Then their well-heard voices would not tend to divide society but could help transform the economy, so that no longer would the people have to serve it but at last the economy would serve us.
What If We Just Got Rid of All the Money in Political Campaigns?
This 2014 excerpt of Pacific Standard, Jan 21, is by Seth Masket of the University of Denver.
Most places, money in politics plays a major role. Even if the winner of an election isn’t the biggest spender, how much you can raise determines if you can even run. Party donors play gatekeeper to the electoral ballot.
Concerned about a corrosive effect of money on lawmaking, several states —- Connecticut, Maine, and Arizona —- have created publicly financed systems for state legislative elections. The U.S. Supreme Court says you can’t just ban private spending in elections, but you can offer incentives. These states give candidates the equivalent of a typical election’s worth of money in exchange for them forgoing any private fundraising or spending.
Public funding changes business as usual, letting less able fundraisers run, major donors be damned. Who are these new candidates? The more ideologically extreme.
Ed. Notes: Making it impossible to legally buy an electoral victory may be necessary but it’s not sufficient to create rigorous political fairness. What’s also needed is a new way of voting. That is, instead of voting for just one candidate, you should be able to vote for your top three, ranking them from most favorite to least. That way, you can vote for whom you really want to win first, vote for your compromise candidate second, and for the one whom you’d accept to defeat all those you don’t like third. This method — ranking — ensures that the winner is always the most representative of the will of the people.
Plus, it saves money. The system no longer needs a primary; voting your first choice handles that. Nor does it need a runoff; voting your third choice takes care of that. And actually, this method is already in use. It’s the method that US sports writers use to choose the number one team in various college sports. If ranking can work for sports fans, it can work for the entire populace.
And if you want people to vote in their best interest instead of in the interest of their “betters”, you better amplify the call for equal rights, especially the right to a fair share of Earth’s worth, to make people feel better about themselves and worthy of a world working right for everyone.
This 2014 excerpt of India’s The Hindu is by Navin Singh.
While the traditional feudal class has largely faded out, post-Independence, especially in the last decade, real estate prices have soared to vertiginous heights, bringing realty back to the centre stage of the Indian economy.
The fall in property prices in 11 out of 15 major Indian cities in 2013 as compared to 2012, has created a feeling that the overheated real estate sector is showing signs of correction.
However, the Indian realty sector differs from that of developed world. Up to 50 per cent of the value of a property is paid by the buyer in “black”. Money is parked in this sector usually to evade taxes, and this flow of unaccounted funds is not likely to slow down anytime soon.
Black money, whether earned legitimately or siphoned off from government-spending, funds shady land deals. It jacks up land prices for end-users. Moreover, the builder-politician nexus delays projects without political patronage, leading to a mushrooming of irregular colonies lacking water lines and sewerage.
The logical solution would be to tax land at its annual rental value. The value tax was an idea considered by Adam Smith in The Wealth of Nations, but most famously and fervently advocated by Henry George. It has been used in the U.S., Australia, and Hong Kong. It has been dubbed ‘the least bad tax’ by Milton Friedman as it does not lead to allocative inefficiency. From Paul Samuelson to Joseph Stiglitz, it has many supporters in the economists’ fraternity. Michael Hudson is a vocal proponent and he has suggested it for China as a way to avoid the fate of debt-ridden Western economies.
Land value tax will end speculative land hoarding and bring down prices for the end-user. The money saved thus will be spent on other commodities, increasing consumption and give the economy a boost.
Mining companies, which find it more profitable to squat on natural reserves sensing a rise in mineral prices, will not do that once they have to pay annual tax on the value of the mines. They will have to mine it to earn revenue to pay tax, or choose to return it to the government. Unused prime urban land, of closed mills for example, will be promptly returned to the government for the same reason.
Ed. Notes: Indian governments are already recovering some ground rent, not by taxing private land but by letting public land. The value of public land for mining, in particular, is lucrative enough to spark a dispute between the federal and regional governments over who’ll get those immense rents. One solution might be: neither. Use the socially-generated revenue to pay the members of society a dividend from the recovered rents, a la Alaska’s oil share. That should end some of the competition and corruption. To end more, outlaw taxation, institute dues, forcing government to offer useful services that citizens would willingly pay for.
This 2014 excerpt of CBS MarketWatch, Jan 24, is by David Weidner.
If you had a year like Jamie Dimon, the chairman and chief executive of J.P. Morgan Chase & Co., do you think you’d be getting a raise? Or course not.
Yet, Dimon will actually take home more than he did for 2012. Dimon is slated to receive more than the $11.5 million compensation package he received in 2012, a year his pay was cut following the bank’s losses resulting from the “London whale” trading fiasco.
Last year was even worse for J.P. Morgan and shareholders. The bank had to set aside more than $25 billion in legal reserves and ended up spending it on settlements tied to the sale of damaged mortgage securities, market manipulation, and other alleged wrongdoing. J.P. Morgan reported a third-quarter loss and a drop in profit in the fourth quarter.
That Dimon would be able to reap a reward for that sort of performance underscores just how empty Wall Street’s promises about how pay would be tied to performance after the financial crisis.
Wall Street has argued that curbs on pay would drive talented bankers from institutions subject to the restrictions which means any day now capable European bankers will be hitting the U.S. shores in search of high-paying work.
Good. We apparently need them. Meanwhile here in the US, the typical worker makes no more than Dad did in 1979.
Ed. Notes: When the board of directors give millions of a bank’s money to a CEO, they are stealing from investors and depositors and the CEO is holding up the bank. The investors lose dividends and the depositors lose interest. Like they say, the best way to rob a bank is to own one.
We need to stop treating these white collar crimes as merely business excesses. We need to talk about jail for these people, just as we do for muggers and foodstamp cheats. It’s human nature to abuse those we put below us and excuse those we put above us. But that has to stop.
One way to stop it is to demand equal shares of our common natural heritage, to demand Citizen’s Dividends from the worth of Earth, from our society’s spending for all the land and resources it uses. Nobody made the world, we all need a portion of it, and it’s all of us together, our mere presence, that makes locations valuable.
We need to insist that our governments recover these socially-generated values of sites and resources, and not tax our earnings, purchases, and buildings, and then disburse the raised revenue to the citizenry in general, a la Alaska’s oil share.
Once we all get a fair share, then there won’t be any surplus leftover for the greedy elite to grab. Instead, it’ll flow as extra income into the accounts of us all.
These two excerpts of the BBC on rich Chinese are of 2014 Jan 23 by Celia Hatton and 2013 Spt 11.
Report Reveals Offshore Dealings of China’s Elite
More than $1tn in illicit funds flowed out of China from 2002-2011 via the secret offshore banking dealings of thousands of well-connected people in China, Hong Kong, and Taiwan, including China’s richest woman, Yang Huiyan, and the brother-in-law of China’s President, Xi Jinping.
The yuan worth over a trillion dollars often comes from criminal activity, tax evasion, or state corruption.
This ICIJ report has not been mentioned in state media reports and has been censored on Weibo, China’s version of Twitter.
Strictly speaking, it is not illegal for a Chinese citizen to set up a company in an offshore tax haven, like the Cayman Islands or the British Virgin Islands. Chinese entities often set up offshore parent companies in such locations.
According to Chinese law, individuals can exchange just $50,000 (£30,000) worth of Chinese yuan a year into another currency.
However, wealthy Chinese have developed a variety of techniques to skirt those laws. They trade their yuan for the harder currency of a foreign investor. Or visit Macau, an autonomous region south of China, where they gamble in casinos, buying chips in official yuan while cashing in chips for Hong Kong dollars, and in jewelry stores buying expensive jewelry with a credit card then returning the jewelry for cash.
Ed. Notes: Before communism, the rich were the large landowners. Now after communism, the rich are once again becoming the owners of land, not so much agricultural land but residential land in that oh-so crowded.
In a formerly communist country, indeed in every country, the value of land is a commonwealth. Given their history, the Chinese may be more sensitive to that moral position and could any time demand that their government recover the socially-generated value of land and resources. Before that day befalls, the current recipients of all those natural “rents” evacuate their undue fortunes to foreign accounts for safekeeping and later spending on a lifestyle of opulent luxury.
If the Chinese do geonomize, and make their standard of living comfortable for all Chinese, they could lead the world to universal economic justice.
These three 2014 excerpts on land tax sanity are from: (1) The Canberra Times, Jan 23, by the Editors; (2) Quartz, Jan 23, by Noah Smith of Stony Brook University; and (3) Slate, Jan 24, by Matthew Yglesias, author of The Rent Is Too Damn High.
Scrapping Stamp Duty and Taxing the Land is the Only Fair Solution
A good tax – from a government’s perspective, at least – is one that is cheap to administer and almost impossible to avoid. It also helps if the tax applies very widely, because that lightens the burden on individual taxpayers. The perfect tax, in this respect, is land value tax.
Land cannot be hidden: governments record the use and ownership of all land in Australia. This no doubt helps explain why taxing land has always been so difficult politically: no matter how clever one’s accountants are, land tax cannot be dodged.
Former federal Treasury secretary Ken Henry, whose thorough review of Australian taxes was published in 2010, recommended abolishing many of the narrow, inefficient, unfair taxes currently levied on Australians – including stamp duty, payroll tax, and others – and replacing them with a simpler tax on land value.
Unfortunately, his sensible, considered advice has been largely ignored. The sole exception has been the ACT, where the Gallagher government began, in 2012, a generational switch to land tax that it says will be completed in 10 to 20 years’ time. The benefits will be immense.
As such, it is disappointing that the ACT’s Liberal opposition campaigned strongly against the policy at the last election. Equally disappointing has been the refusal of other jurisdictions to embrace similar reforms.
This 100-year-old Idea could End San Francisco’s Class War
The solution was thought of more than 100 years ago, by a San Francisco economist. His name —- sadly forgotten in this day and age —- was Henry George.
As any broker will tell you, there are three important things in real estate: Location, location, location. A plot of land in downtown Manhattan will be worth much more than an identical plot in rural Kansas, even if they have identical houses built on top of them. So when a city grows or enjoys a boom, a lot of the new economic value will go to the people who own the land, regardless of what they build on it.
A century later economists realized that the land value tax (or Henry George Tax) was not just fair but efficient as well. Joseph Stiglitz, along with co-author Richard Arnott, showed that it makes sense for the city to tax the value of land to pay for things like infrastructure. As Paul Krugman showed when a bunch of people move to the city —- for example, as the result of a tech boom —- productivity goes up. Some of the fruits of that productivity will be captured by whoever owns the locations.
A George Tax actually encourages landlords to build useful, valuable stuff on top of the land they own. What San Francisco needs now is a Henry George Tax. The policy would bring rents down. At the same time, it would raise the money the city needs to build better trains, run more bus lines, and build more public housing that will benefit the poor and middle class of San Francisco.
It’s time for San Francisco to embrace the brainchild of its first legendary economist. It’s time for Henry George to become a household name again.
I love the idea of a land value tax. Instead of taxing human labor (and disincentivizing work) or taxing accumulated capital (and disincentivizing savings) you tax land. You get revenue (good!) in a progressive way (because landowners are rich!) without any bad incentives (amazing!) and everyone’s happy. Noah Smith thinks it could greatly ameliorate the class tensions currently gripping San Francisco. I’m afraid that I’m skeptical.
There are lots of places in the United States of America —- most places, even —- where a tax on land value would be a great thing for housing affordability. For example, if Harris County in Texas replaced its property tax with a land value tax it would alter the incentives facing property owners in the Houston area. You’d get more building, less idle land, more housing supply, and lower rents.
But in a place like San Francisco (or Cambridge, Mass.; or Manhattan; or Santa Monica, Calif.; or D.C.), the constraint on the supply of new buildings isn’t really taxes it’s zoning.
The median value of an owner-occupied house in San Francisco is $750,900 —- almost double the California average and more than quadruple the national average. Under the circumstances, the financial incentives to build new housing units are already extremely strong. The problem is that it’s hard to get regulatory permission to build.
If a city wanted to have robust population growth, affordable housing, and lots of construction sector job opportunities then it could easily change its zoning code to allow for more housing. Having upzoned for density, prosperity, and environmental sustainability, it would find itself in a situation where a land value tax is much smarter than a traditional property tax. But for the already-built-up, already-expensive, restrictively-zoned cities of America you need to fix your zoning first.
Ed. Notes: Some have suggested that if society were to recover all of its socially-generated location value (the presence of society generates it), it might be able to dispense with zoning all together. Instead, have government really go after anyone creating a nuisance with their noise or pollution, and anyone putting neighbors at risk by disturbing steep cliffs and riparian areas, and anyone taking too much of any natural resource without compensating neighbors. Do all that and land users and owners would leave space open along creeks and cliffs. To open up space in the city center for a plaza, well, that’s where site value is at its absolute spendiest, and the city, as the richest local entity, could outbid anybody. Looks like another issue that public recovery of publicly-created rents could resolve.
These two excerpts are from a “movement” press release by Masimo, a wealthy med-tech company, 2014 Jan 16, and Forbes, 2013 Spt 23 by Leah Binder, Contributor.
More than 100 Hospitals and Med Tech Companies Join the Call to Reduce Preventable Patient Deaths
At the second annual Patient Safety, Science & Technology Summit more than 100 hospitals and med tech companies made public commitments and pledges to help reduce preventable patient deaths to zero by 2020 in U.S. hospitals.
In addition, 20 medical technology companies pledged to make their devices interoperable so the patient data collected and displayed on their products are accessible for patients and clinicians. To date, 29 medical technology companies have made this public pledge.
More than 200,000 people die every year in U.S. hospitals in ways that could have been prevented.
In 1999, Americans learned that 98,000 people were dying every year from preventable errors in hospitals. That came from a analysis by the Institute of Medicine (IOM) called “To Err Is Human”. As it turns out, those were the good old days.
According to a new study from the Journal of Patient Safety, four times as many people die from preventable medical errors, as many as 440,000 a year.
With these latest revelations, medical errors now claim the spot as the third leading cause of death in the United States, dwarfing auto accidents, diabetes, and everything else besides cancer and heart disease.
What do these errors look like? The sponge left inside the surgical patient, prompting weeks of mysterious, agonizing abdominal pain before the infection overcomes bodily functions. The medication injected into a baby’s IV at a dose calculated for a 200 pound man. The excruciating infection from contaminated equipment used at the bedside.
Over a thousand people a day are dying from these kinds of mistakes. And you are paying for it. Hospitals shift the extra cost of errors onto the patient, the taxpayer and/or the business that buys health benefits for the infected patient.
A study a few months ago in the Journal of the American Medical Association found that employers paid $39,000 extra every time an employee suffered a surgical site infection. That’s enough money to create a good job. Instead, it’s rewarding a hospital for creating an infection.
Hospitals that put a priority on safety and use proven techniques show results, and their patients are safer. Those that minimize the importance of patient safety kill more of their patients.
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.
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.
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?
close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)
not exactly Georgism, the Single Tax on land value proposed by Henry George. He did, tho’, inspire most of the real-world implementations of the land tax that some jurisdictions enjoy today, and modern thinkers to craft geonomics. While his name and our remedy both begin with “geo” since both words refer to “Earth”, the two have their differences. (a) George pegs land monopoly as the fundamental flaw while geonomics faults Rent retention. (b) To fix the flaw, George was content to use a tax, while geonomics jettisons them in favor of price-like fees. (c) George focused on the taking while geonomics headlines the sharing. George envisioned an enlightened state judiciously spending the collected Rent while geonomics would turn the lion’s share over to the citizens via a dividend. (d) And George, as was everyone in his era, was pro-growth while geonomics sees economies as alive, growing, maturing, and stabilizing. Despite these differences, George should be recognized as great an economist as Euclid was a geometrician.
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.
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.
a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.
a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!