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These two 2014 excerpts on LVT, Jun 26, are of NICVA by Elizabeth Hendron and of The Guardian by Simon Goodley and Leila Haddou.
Tax Land, Not Houses
NICVA’s Centre for Economic Empowerment has launched a new report into the feasibility of introducing a land value tax in Northern Ireland.
Under the current system of taxation, charges are levied on land and the improvements – typically buildings – together, with no distinction made between the two.
Under a system of Land Value Tax, the charges would be levied on the land only, with improvements subject to zero or minimal taxation. If introduced it could mean that land bought by developers but not developed, and agricultural land could be taxed for the first time.
This would shift the burden of real estate taxation towards less productive activities, particularly speculation on land, which is a major source of property bubbles. LVT would be a progressive tax, with the most deprived paying least.
Seamus McAleavey, chief executive of NICVA said, “House prices in Northern Ireland are on the rise again. As before, this has been widely welcomed as an indication of economic progress. It is important to ensure that any price rises are a sustainable result of real economic growth, rather than speculation. In this context, this report is crucial reading.”
Inflated property values merely increase indebtedness and reduce economic output.
People who have low incomes and modest homes should continue to receive rates relief, as currently applied. People with low incomes but with expensive properties could defer payment until the property is sold.
Tesco, the UK’s largest supermarket chain, is hoarding land and buildings covering an area big enough to build 15,000 homes, a Guardian analysis has revealed.
While the aggregate size of Tesco’s land bank could theoretically be used to build many homes, it is distributed across Britain, with some plots likely to be unsuitable for housing.
Some of the portfolio is residential property or rented to other retailers, but the majority is undeveloped. Tesco last year said its UK property empire was worth £20bn.
The hoarding of development land for long periods has also drawn criticism in the house building sector – which owns far larger plots of land than the supermarkets.
Fred Harrison, an economist who has called for land to be taxed as if the sites were in use, added: “Given there is a market demand for it and we know the value, you can charge the owners for the public services that make the land valuable. Then they lose money if they just sit on it with no revenue”.
This 2014 excerpt of Lebanon’s Alakhbar, Jun 17, by Alain Tabourian, industrialist, Minister of Energy and Water from 2008 to 2009, and graduate of the Harvard Business School.
I do not see any future for industry in Lebanon, and definitely not a world-class industry.
Private investors who enter into partnership with the public sector in an unstable region of the world assume a Weighted Average Cost Of Capital (WACC) of 15 to 20 percent.
Still, a major international company reached out to us for collaboration on establishing a world-class production unit in the food industry, which would have employed 1,000 people. It was found not to be feasible due to the high price of agricultural land, which was about 10 to 20 times the global average.
High land prices here have no corresponding economic justifications. Who could believe that our locations produce 10 to 20 times more than elsewhere?
High hotel room rates keeps Lebanon off the global tourism market.
Everything has high prices because of excess liquidity that has no room to be invested productively except in inflating bank deposits or buying up real estate. Acquisition of real estate does not result in any cost. A person may keep a piece of land for 30 or 40 years without paying any fees, then sell it at a huge profit without paying any tax.
Investors in the real economy bear many risks even as they employ people. If these investors profit, they pay taxes, first on profits, and second on distribution. Is that fair? Does this encourage productive investments?
The solution is not to increase tariffs. Doing so would reduce the consumers’ purchasing power, reducing their demand for the rest of goods and services, and subsequently, cause the entire economy to contract.
The rentier economy is also directly responsible for the migration of our young people. The Lebanese economy does not create enough value-added jobs that can accommodate the capacities of educated young people.
These young people send remittances to support their families. Meanwhile, we import low-wage workers for simple jobs, and these workers in turn send a large part of their incomes to their home countries.
We had a war that caused widespread destruction, and we had to rebuild. We benefited from external cash inflows, which drove consumption up. At the same time, oil prices rose, and the incomes of Lebanese expatriates improved, increasing the size of their remittances to Lebanon. Of course, the energy bill skyrocketed, but money was available to pay it thanks to remittances. We also benefited from the global debt crisis of 2008, which reduced interests to zero in the major economies, reducing the cost of our debt and increasing the flow of capital. However, all these factors are precarious.
Ed. Notes: It is painfully ironic that economic troubles are easy to solve logically and hard to solve politically. Imagine if Lebanon taxed land or instituted land dues; there goes speculation and the inflated price for locations. Imagine if Lebanon repealed taxes on wages and on profits from actual output; there goes the scarcity of capital as domestic savings and investments from outside pile up. Imagine if Lebanon did not subsidize any industry or product, not even fuel for heating homes; there goes waste to be replaced by upgrading the means of production. Make these geonomic reforms and maybe Lebanon could lead the Middle East to peace and prosperity.
This 2014 excerpt of the New York Times, Jun 17, is by Michael Forsythe.
President Xi Jinping of China has been pushing his own family to sell hundreds of millions of dollars in investments. If he doesn’t do this, it is very hard for him to convince other elite families to be more self-disciplined.
Xi’s sister Qi Qiaoqiao and brother-in-law Deng Jiagui sold investments in at least 10 companies worth hundreds of millions of dollars, including their 50 percent stake in a Beijing investment company they had set up in partnership with a state-owned bank.
Even while Mr. Xi’s relatives were selling off assets, those calling publicly for more disclosure have been jailed. The websites of The Times and Bloomberg, which have both reported on elite shareholdings, have been blocked in China for many months.
Relatives of the Politburo elite are deeply enmeshed in the state-driven business culture of the country. They have accumulated billions of dollars in assets, including company shares and real estate, in the past decade as China’s economy has boomed. Many of the investments are in areas such as mining, infrastructure, and property that involve the privatization of formerly state-owned assets.
At least four families among the nine-man Politburo Standing Committee that ruled the country from 2007 to 2012 each owned or controlled documented assets in excess of $150 million, including relatives of Xi, former Prime Minister Wen Jiabao, Zhou, and Jia Qinglin (the former fourth-ranked party member).
Deng through a Shanghai holding company owned more than one-sixth of a rare-earth mining company that reported assets of about $2.1 billion. Rare earths go into critical components in electric cars and wind turbines.
Qinchuan was set up in the weeks after Xi ascended to the Politburo Standing Committee in 2007 with $2.7 million in investments, ballooning to $156 million four years later. Deng and Qi did not sell three of its most valuable assets held by Qinchuan, including two infrastructure companies in the city of Xiangyang in Hubei Province. The three assets are together worth at least $234 million.
On Oct. 8, ownership of Qinchuan itself was transferred out of the family and into the hands of a longtime business associate, Xu Zaisheng. Qi, her husband Deng, and her daughter Zhang Yannan still hold tens of millions of dollars in company shares and real estate, including a villa overlooking Hong Kong’s exclusive Repulse Bay.
Surging income inequality in China is among the highest in the world and far greater than in Japan, South Korea, and Taiwan: neighbors that, unlike China, do not have Communist roots.
Ed. Notes: These details from China show how government creates fortunes, a universal process, that happens in all times and places, even in so-called market economies. In the US, investors and politicians both got rich off railroads. Oil companies, thru their lobbyists and the banks they spun off, enriched helpful politicians along with the businessmen. Governments paid for paving roads which made it possible to sell millions of cars. Governments bought millions of desktop computers and developed the internet, paving the way for fortunes to be made in Silicon Valley. If government is to have a role in industry, then the resultant profit should go to the public. Or better yet, politicians should not give or receive favor from any players in the business world.
This 2014 excerpt of Wired, Jun 12, is by Jordan Golson.
Tesla CEO Elon Musk announced that his company will not “initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” In plain English, that means that if other car companies want to produce electric cars, they can use Tesla’s technology to do it.
Of course, Tesla wants to make and sell electric cars (it exists to make a profit, theoretically), but in order to do that on a large scale, the company needs to move past the niche markets that the Model S currently plays in. They need the public to stop thinking of them as electric cars and to start thinking of them simply as cars.
“They need to see Americans … at least be open to switching to an electric vehicle lifestyle,” Kelly Blue Book analyst Karl Brauer said. By themselves, “they’re never going to convert the average American into an electric car fan, even with great press and great publicity.” A $90,000 electric car for celebrities and the Silicon Valley elite isn’t going to save the world.
At the moment, the Model S is the only electric car that acts as a true replacement for a more traditional gasoline-powered automobile, with its 200+ mile range and network of rapid charging stations that stretches from coast-to-coast across 96 stations in the US, with dozens more coming in North America, Europe and Asia. Not enough people are interested in electric cars with 70-100 miles of range, as Nissan and others are discovering.
If other automakers begin using Tesla’s technology, it increases the value of the company and its inventions. Tesla has hundreds of patents, but if the company goes bust because not enough people buying electric cars, they’re all meaningless. Tesla needs widespread adoption of electric cars and the easiest way to do that is to get other automakers to sell them too.
Ed. Notes: This is not the only time that it’s not a good idea for an inventor to hoard his discovered knowledge. Actually, it’s rarely a good idea. Patents and copyrights don’t protect inventors so much as they benefit corporations who use the legalisms to post “no trespassing” signs on the field of knowledge, hampering the spread of good ideas.
Competition and cooperation work best together, not apart. More beneficial to inventors is getting a head-start in business, establishing a brand identity, and capturing huge market share (see Apple).
Of course, inventors deserve to be rewarded for their useful creations. But is owning and hoarding knowledge the best way to do that? Preventing everyone else from using a good idea when they’re not the first to realize it?
Should ownership go on forever? Should the descendants of Newton be paid every time somebody uses calculus? Should no one ever repeat a joke without paying the person who first told it?
Does the first person who stepped on the moon own the moon? Nope. Not unless they compensate everyone else who also wants to and can visit the moon. That’s what makes owning land — or ideas — proper … or “property”, and that is compensating those excluded. Pay the rental value of land, or of knowledge, to society and it is yours … for as long as you keep paying your neighbors (as they’ll be paying you in your harmonious geonomy).
This 2014 excerpt of Fortune, Jun 10, is by Chris Matthews.
When we think of government corruption, our biased minds often gravitate to thoughts of military juntas and third world governments. But corruption is everywhere, in one form or another. And it’s costing U.S. citizens big time.
Corruption on the state level is costing Americans in the 10 most corrupt states an average of $1,308 per year, or 5.2% of those states’ average expenditures per year.
Between 1976 and 2008, there have been more than 25,000 convictions of public officials for violation of federal corruption laws. Further, state spending reveals patterns of corruption.
Based on these data, the the most corrupt states are:
8. South Dakota
Mississippi and Louisiana are some of the least economically developed states in the country. Illinois and Pennsylvania are part of the Rust Belt. Alaska is resource rich.
For 9 out of the 10 of the most corrupt states, overall state spending was higher than in less corrupt states (South Dakota was the only exception). Attacking corruption could bring down state spending without hurting programs that benefit people.
Spending in these states was different than their less corrupt counterparts; it favors construction, salaries, borrowing, correction, and police protection at the expense of schools and hospitals.
Construction spending, especially on big infrastructure projects, is particularly susceptible to corruption because the industry is dominated by a few monopolistic, well-connected firms. Corrupt states also have more and better paid public employees, including police and correctional officers, who may have more to do where residents are kept poor.
The least corrupt states are: Oregon, Washington, Minnesota, Nebraska, Iowa, Vermont, Utah, New Hampshire, Colorado, and Kansas. All are in the North, are either mountainous or prairie, and several are play states.
Ed. Notes: Government officials can’t be corrupt if they can’t spend public money. There is no good reason to continue to allow them to enjoy this ppwer. The budget could be put on the ballot and bonds could be offered for sale for infrastructure projects; if they don’t sell, the project dies. If we could clean up public spending, then next we could correct taxation. And once we straighten out the state and local governments, then we could shape up the federal government … and finally live in a citizen-friendly nation — a geocracy!
This 2014 excerpt of Weekly Wastebasket, Jun 06, is by Taxpayers for Common Sense.
With the near-trillion dollar farm bill now law, the U.S. Department of Agriculture (USDA) shovels out cash for at least 55 new programs, reports, and studies for everything from catfish inspection and cotton trust funds to studying the marketability of U.S. Atlantic Spiny Dogfish and conservation of the Lesser Prairie Chicken.
Instead of eliminating wasteful, outdated, and ineffective programs, the farm bill created a whole new alphabet soup of agribusiness income entitlement programs – Agriculture Risk Coverage (ARC), Supplemental Coverage Option (SCO), Price Loss Coverage (PLC), and Stacked Income Protection (STAX) to name a few.
These programs only add more waste to highly subsidized crop insurance for more than 120 crops; this number will soon balloon as Congressional mandates for “priorities” such as sugarcane, swine, and sorghum (used as a bioenergy crop).
USDA just dispensed $6 million to universities, extension offices, and even a crop insurance consultant to create “decision tools and educational materials” designed to tell producers [who mainly now are not families but corporations] to squeeze the most money out of the programs.
USDA is delaying enrollment until spring 2015 so producers will be picking their “safety net” for their 2014 crops after they’ve already harvested and sold them. It’s like being able to make your poker bet after you’ve seen everyone else’s cards.
Ed. Notes: You really must rein in your politicians if ever you’re to save money and save land. Real farmers don’t need subsidies. All they need is zero taxes and fines upon fake farmers who ruin land and raise crops of low nutritional value.
Farmers, by living in the country, enjoy one huge advantage over others — the land rent they pay is much less per acre than that paid by people leasing city land. If everyone paid land rent into the public treasury and got a rent share back, country folk would come out way ahead, compared to urban dwellers.
Then maybe farmland could catch a long needed rest.
This 2014 excerpt of the New Economics Party, Jun 6, is by Deirdre Kent.
Like the formation of a river from the small streams to the river to the sea, create a new national currency at Local Board level and pass it up the line. Then the monetary authority, in conjunction with the monetary authorities of the supercities and the government, would make sure the local board did not issue more money than it was allowed, as inflation must be kept strictly under control.
We aim to move to a tax system that taxes the monopoly use of the commons rather than labour and sales. Some revenue will be distributed as a Citizens Dividend to all citizens who have lived there for a year or more, the rest will be shared by all levels of government.
Government pays you for your land, and the title of your property then bears a covenant, an obligation to pay a ground rent from then on, whoever owns the land. The tenure is for a lifetime, with rights that your descendants can get the next lease.
Land rents are stable over time. When there is a major event like an earthquake they decline or when a railway is put in or a labour intensive business arrives they rise more than just a tiny bit.
Councils and Government should never sell land. They should keep it and auction the leases to the highest bidder, then share that revenue with the public (via a Citizens Dividend) and the central government. This should be entrenched in law.
This 2014 excerpt of Dirt Diggers Digest, May 29, is by Phil Mattera.
More than half of corporate miscreants (146 of 269, or 54 percent) have received state and local subsidies. These include cases in which the awards went to the firm’s parent or a “sibling” firm. The total value of the awards comes to more than $25 billion.
A large portion of that total ($13 billion) comes from a single company — Boeing, which is not only the largest recipient of subsidies among corporate miscreants but is also the largest recipient among all firms. Boeing made the Justice Department list by virtue of a 2006 non-prosecution agreement under which it paid $615 million to settle criminal and civil charges that it improperly used competitors’ information to procure contracts for launch services worth billions of dollars from the U.S. Air Force and NASA.
Not all the subsidies came after that case was announced. In the period since 2006, Boeing has received “only” about $9.8 billion.
The other biggest subsidy recipients on the list are as follows:
Fiat (parent of Chrysler): $2.1 billion
Royal Dutch Shell (parent of Shell Nigeria): $2.0 billion
Toyota: $1.1 billion
Google: $751 million
JPMorgan Chase: $653 million
Altogether, there are 26 parents on the DOJ list that have received $100 million or more in subsidies. As with Boeing’s $13 billion figure, the amounts for many of the companies include subsidies received before as well as after their settlement.
Ed. Notes: Soon’s you get tired of such corruption, let’s put a stop to it. Quit letting politicians subsidize anybody. And quit fining the corporation but instead punish the CEOs and managers making the decisions.
If not subsidizing, government could save so much public revenue it could climb out of the red. The biggest “subsidy” is letting corporations keep “rents” (society’s payments for land, resources, etc). Once government recovers those socially-generated values, it could not just end counterproductive taxes but even pay citizens a dividend!
If corporations can’t profit when not getting taxed on creating value and when people are endowed handsomely in order to become customers, then the corporation deserves to go broke.
This 2014 excerpt of CalTech, Jun 5, is by Cynthia Eller.
If you’re trying to outwit the competition, it might be better to have been born a chimpanzee. The study involved a simple game called the Inspection Game. To win repeatedly, players have to accurately predict what their opponent will do next.
The game is common in everyday lives. An employee may want to work only when her employer is watching and prefers to play video games when unobserved.
However cleverly you play the Inspection Game, if your opponent is also playing strategically, there is a limit to how often you can win. Unlike humans, chimps learned the game rapidly and nearly attained the predictions for optimal play. They continued to do so even as researchers introduced changes into the game.
Chimpanzees excel at short-term memory; humans find it much more challenging. Further, wherever humans sit on the cooperative/competitive scale, common chimpanzees are more competitive. They continuously update status and dominance hierarchy.
The “cognitive tradeoff” is probably a key. Acquiring capacities such as language and categorization caused human brains to lose other capacities, such as intuiting another’s strategy. In the experiments, humans were not allowed to speak with one another.
Ed. Notes: When humans got TV, they quit reading. When they got literacy, they quit story-telling. So when they got language, what did they quit? ESP? That’s my theory, which did not make me very highly regarded in grad schools decades ago. But guess what? Now the cutting-edge linguists at last agree! So if linguists can open up to “intersubjectivity”, can economists finally open up to the role of rent about which so many of us are in denial?
This 2014 excerpt of the Korea Herald, Jun 5, is by the editors.
Following the Sewol ferry tragedy, uprooting the so-called “bureaucratic mafia” has emerged as an urgent national task. Last month, President Park Geun-hye unveiled plans to prevent retired public officials from pursuing rent-seeking in cahoots with officials on active duty.
While all government agencies are supposed to join this drive, the ethics committee of the executive branch approved the employment of a former director-general of the Ministry of Trade, Industry and Energy at the steelmaking company POSCO. He had been retired for less than two months.
Under the Public Service Ethics Act, high-ranking public officials cannot land a job for two years after retirement with private companies closely connected with the business of the departments to which they belonged for five years before retirement.
The corrupt symbiosis between incumbent and retired public officials is pervasive and deeply entrenched. The government should toughen the penalties for those who breach it.
Currently, retired officials who find jobs at companies in violation of the law are subject to imprisonment for up to a year or a maximum penalty of 10 million won. But the severest punishment meted out so far was a penalty of 4 million won. This is nothing more than a slap on the wrist for officials who make several hundreds of millions of won per year.
Ed. Notes: A more thorough and effective reform — that is, radical — is to quit letting politicians decide how to spend public money. Limit their spending to police and military. But for infrastructure, social programs, and corporate welfare, forget it. Abolish spending on the rich. Pay citizens a dividend, enabling them to hire teachers and doctors. And sell geo-bonds to fund any newly needed road or bridge, etc. If politicians and bureaucrats can no longer stick their sticky fingers into the public till, then no lobbyist or business will try to bribe them. Problem solved.
Central banks such as the Federal Reserve have obtained their income from interest on the bonds they hold. But with interest rates so low now, the central banks, like other bond holders, are receiving little revenue. So now, central banks are buying shares of stock to get higher income from dividends and capital gains.
It’s a bad idea!
First of all, the reason interest is so low now is because central banks around the world have been pushing rates down. The low income from savings accounts and bonds has hurt retired folks and have distorted stock markets. The U.S. stock market averages have been making new highs to a great extent because bonds yields are so low, and also because US companies are borrowing funds at low rates to buy back their stocks.
Secondly, when central banks buy up shares of stock, they, as agents of government, socialize the ownership of otherwise private companies. Government already taxes and regulates the economy, and they own industries such as education and much of medical care, and now they want to own more of the whole economy. Even if a central bank buys shares in an index fund, they artificially raise share prices, and they do it with money they create. Moreover, what happens when the price of stocks has a large drop? Will the central banks contribute to the selling, or buy more?
According to a report to be published this week by the Official Monetary and Financial Institutions Forum, governments and their agencies have already made twenty-nine trillion dollars of market investments. The largest governmental investor is China. The Swiss and Danish central banks have also been buying substantial equities. Central banks have also been buying real estate. Ever more financial and real assets are being acquired by central banks, and thus also by the governments that own and control them.
The ownership of the economy is not what the founders of central banks had in mind. When the Federal Reserve was established in 1913 in response to the banking panic of 1907, its role was to stabilize the banking system as a lender of last resort. For a long time, the Fed purchased US treasury bonds to expand the money supply, as it created the funds it used to buy bonds. But after the recession of 2008, the Fed also bought mortgage-backed securities as well as shares in companies it wanted to bail out.
But now central banks are not buying shares to bail out failing companies, but to increase their income. Ultimately this buying is self-defeating for central banks and all investors, because such massive purchases raise the ratio of share prices to yields, reducing the rates of return.
The pension funds of government employees have, of course, been investing in the stock markets, as well as in bonds and real estate, but these funds can be regarded as belonging to the employees rather than to governments. Governments with surpluses such as from exports or oil sales have set up “sovereign wealth funds” that invest in financial markets, with the potential to manipulate and distort markets. There should be a global treaty to confine sovereign funds to government bonds and global index funds.
It is even worse for central banks to invest in private financial markets because they are creating the money they use for these purchases. This inflation of the money supply is not for stabilizing the currency or helping the banking system, but just to get stock market yield. That monetary inflation will eventually cause price inflation and fuel an even bigger real estate bubble than that which ended in the Crash of 2008.
The ultimate remedy for such asset distortion is the elimination of all central banks. Since that’s not about to happen, we will have to witness a coming financial tragic horror. Just as in the years prior to 2008, we are sitting in boats on a river whose current will take us ever faster the financial waterfall. The most likely year of the next crash will be in 2026, as the 18-year real estate cycle has been the leading cause of the business or interventionist cycle for the past two centuries.
Last time around, government-sponsored enterprises such as Fannie Mae helped stoke the boom by packaging and selling real estate mortgages. The financial reforms after 2007 did nothing to stop the basic causes of the real estate cycle. Now, the massive purchases of stocks, in addition to bonds and real-estate related assets, will help make the Crash of 2026 the biggest ever.
This 2014 excerpt of the New York Times, Jun 5, is by Carl Zimmer.
Billion-dollar levees aren’t the only things that protect coasts from storm damage. Nature offers protection, too. Coastal marshes absorb the wind energy and waves of storms, weakening their impact farther inland, and rebuild themselves.
Protection from storms is one of many services that ecosystems provide us — services that we’d otherwise have to pay for. In 1997, a team of scientists estimated they are worth, worldwide, $33 trillion — equivalent to $48.7 trillion in today’s dollars. Put another way, the services ecosystems provide us were twice as valuable as the gross national product of every country on Earth in 1997.
Robert Costanza, a professor at Australian National University who led the study, has concluded that ecosystems do more for us than researchers could appreciate in 1997.
Coral reefs, for instance, have proved to be much more important for storm protection than previously recognized. They also protect against soil erosion by weakening waves before they reach land. Each acre of reef provides $995,000 in services each year for a total of $11 trillion worldwide.
The global figure for all services is $142.7 trillion a year (in 2014 dollars).
Deforestation and other damage we’ve inflicted on the natural world has wiped out $23 trillion a year in ecosystem services. The gross domestic product of the United States is “only” $16.2 trillion.
Yet ecosystems don’t simply provide us with good things. Ecosystems can also harbor diseases and harm us in other ways.
Ed. Notes: We can’t pay Nature so whom would we pay? And who would do the paying? And who would determine exactly how much? For the last question, if we reformed limited liability, then businesses would buy insurance, and insurance companies, not just armchair academics, would also calculate ecosystem values.
We could look at our species’ damage of ecosystems totally differently. Instead of play brain dead and accept it as the price of progress, we could make polluters and depleters pay. We could auction off emission permits and extraction leases. We could require those who own land to set aside an Ecology Security Deposit, like tenants do when moving into an apartment. We could require those who use the environment to buy Restoration Insurance, like drivers must have insurance. And we’d fine those who exceed emission standards.
Something else to do is to charge owners land dues. Having to pay, they won’t want their precious land to get ruined and will provide better care. And with all these collected revenues we could pay dividends to the citizenry. Where land is healthier, its value is higher, so the dividend would be fatter, and everyone would have a financial reason, too, to go with love, to conserve resources and be better stewards.
This 2014 excerpt of Forbes, Jun 5, is by Contributor Michael F. Cannon of the Cato Institute.
Lobbyists pursue rents on behalf of their clients. In economics, “rents” are income above and beyond the value you provide to your customers; they are income in excess of production.
When lobbyists for labor unions demand mandatory unemployment minimum-wage laws, it is in part because adding to the labor costs of non-union shops makes union shops more competitive. When lobbyists for physicians demand laws preventing nurse practitioners from signing death certificates or performing other tasks within the NPs’ training, it is in part because physicians earn more income if they are the only ones permitted to perform those services. Union members and doctors receive more income, but not because they are more productive than they were before. The added income they receive are rents.
When lobbyists use government to extract rents for their clients, that additional income comes at the expense of vibrant and thriving parts of the economy: from the clients’ competitors and customers.
Ed. Notes: Want to know how to put lobbyists out of business? Quit letting politicians spend our public dollars. No more subsidies and tax breaks.
Instead of politicians deciding how much to fund programs like schools and medical care and welfare, pay the citizenry a hefty dividend. Instead of politicians deciding how much to fund infrastructure, force them to sell bonds to be paid off from any rise in land value near the project — no rise, no sale. Instead of exempting certain people from unfair taxes, exempt everyone from those but no one from fair charges, such as pollution fees and land dues and resource royalties.
Let politicians spend our money on one thing only: war. So if we don’t want to pay the war tax (on our incomes), we’ll have to learn how to wage peace.
This 2014 excerpt of Robert Reich’s Blog, Jun 5, is of course by Robert Reich.
Corporations don’t break laws. People do. In the cases of GM and Credit Suisse, the evidence points to executives at or near the top.
Credit Suisse pleaded guilty to criminal conduct. GM may also face a criminal indictment. Yet the government imposes corporate fines.
Such fines are often treated by corporations as costs of doing business. GM was fined $35 million. That’s peanuts to a hundred-billion-dollar corporation.
Credit Suisse was fined considerably more — $2.8 billion. But even this amount was shrugged off by financial markets. In fact, the bank’s shares rose the day the plea was announced – the only big financial institution to show gains that day. Its CEO even sounded upbeat: “Our discussions with clients have been very reassuring and we haven’t seen very many issues at all.” (Credit Suisse wasn’t even required to turn over its list of tax-avoiding clients.)
Fines have no deterrent value unless the amount of the penalty multiplied by the risk of being caught is greater than the profits earned by the illegal behavior.
The people hurt aren’t the shareholders who profited years before when the crimes were committed. Most current shareholders weren’t even around then.
To be sure, corporations can effectively be executed. In 2002, the giant accounting firm Arthur Andersen was found guilty of obstructing justice when certain partners destroyed records of the auditing work they did for Enron. As a result, Andersen’s clients abandoned it and the firm collapsed. (Andersen’s conviction was later overturned on appeal).
But here again, the wrong people are harmed. The vast majority of Andersen’s 28,000 employees had nothing to do with the wrongdoing yet they lost their jobs, while most of its senior partners slid easily into other accounting or consulting work.
Conservatives talk about personal responsibility. But when it comes to white-collar crime, I haven’t heard them demand that individuals be prosecuted. Yet the only way to deter giant corporations from harming the public is to go after people who cause the harm.
Ed. Notes: When a big name talks tough about powerful people, that’s great. An even deeper reform, one that might discourage criminal behavior by executives in the first place, would be to get government to end its practice of limiting the liability of all business people automatically (for a mere filing fee). Without that blanket license to do harm to others, business people would buy insurance and sign contracts with investors. Insurance companies and stockholders would pressure managers to clean up their act.
This 2014 excerpt of the Philippines’ Inquirer, Jun 2, is by Tonette Orejas.
The agrarian reform process for Luisita lands had been “hijacked by financiers who reconsolidated the [distributed agrarian] lands through the arriendo (land rent) system. Big sugar planters have leased agrarian lands in Hacienda Luisita owned by farm workers. The contracts bind the agrarian reform beneficiaries to continue farming sugar exclusively and prevent them from planting other crops, not even food for their tables.
The arriendo contracts would last until 2016, which is the end of the six-year term of President Aquino, whose relatives lost a 6,000-plus hectare estate in Tarlac province to agrarian reform.
A legislator, a retired police general, a former Land Transportation Office chief, and a relative of President Aquino are among the arriendo contractors.
Ed. Notes: Some land reforms work, some don’t. One that has always worked wherever tried, whenever tried, is for government to tax land or charge owners a land use fee or institute land dues. Having to pay such a periodic charge constantly makes it too expensive to own too much land; there is no profit for absentee owners who’re nothing more than useless middlemen. So the hoarders and speculators get out of the way of those who actually work the land.
Since working the land does not actually pay very much, country people could be greatly aided by getting back shares of all the ground rents collected in their region by their regional government. With land dues in and rent dividends back out, land would be distributed automatically and family farming would be a comfortable way of life.
Another benefit is the toppling of class and hierarchy and the creation of an egalitarin society.
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.
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.
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.
the policy that the earth’s natural patterns suggests. Use the eco-system’s self-regulating feedback loops as a model. What then needs changing? Basically, the flow of money spent to own or use Earth (both sites and resources) must visit each of us. Our agent, government, exists to collect this natural rent via fees and to disburse the collected revenue via dividends. Doing this, we could forgo taxes on homes and earnings and subsidies of either the needy or the greedy. For more, see our web site, our pamphlet of the title above, or any of our other lit pieces; ask for our literature list.
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.
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.
a way to redirect all the money we spend on the nature we use – trillions of dollars annually. We can’t pay the Creator of sites and resources and are mistaken to pay their owners this biggest stream in our economy. Instead, as owners we should pay our neighbors for respecting our claims to land. Owners could pay in land dues to the public treasury, a la Sydney Australia’s land tax, and residents could get back a “rent” dividend, a la Alaska’s oil dividend. We’d pay for owning sites, resources, EM spectrum, or emitting pollutants into the ecosphere, then get a fair share of the recovered revenue. The economy would finally have a thermostat, the dividend. When it’s small, people would work more; when it’s big, they’d work less. Sharing Earth’s worth, we could jettison counterproductive taxes and addictive subsidies. Prices would become precise; things like sprawl, sprayed food, gasoline engines, coal-burning plants would no longer seem cheap; things like compact towns, organic foods, fuel cells, and solar powers would become affordable. Getting shares, people could spend their expanded leisure socializing, making art, enjoying nature, or just chilling. Economies let us produce wealth efficiently; geonomics lets us share it fairly.
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!
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.
The equal right of all men and women to the use of land is as clear as their equal right to breathe the air. It is a right proclaimed by the fact of their existence. For we cannot suppose that some men and women have a right to be in this world and others do not.
Face the facts of being what you are, for that is what changes what you are.
Life is an adventure in forgiveness.
Courage is saying, “Maybe what I’m doing isn’t working; maybe I should try something else.”
The mass of men lead lives of quiet desperation.
Henry David Thoreau
What we plant in the soil of contemplation, we shall reap in the harvest of action.
The secret of getting ahead is getting started.
Because things are the way they are, things will not stay the way they are.
Always do right. This will gratify some people and astonish the rest.