Geonomist, #39 — 2003 Summer (Vol. 12, No. 1)
|June 25, 2003||Posted by Jeffery J. Smith under The Geonomist|
Bush Admin can’t ignore clamor for Iraq CD
UK’S Deputy PM Eco-tax works ………. page 2
Oz-land to lucky Paid to borrow …. pages 2&3
Banks get real Canada’s gulf wider page 4
Farewell, finny friends …………………………….. page 4
City can get rent Values scare us …….. page 4
Home sweet debt Income abnormal .…. page 5
Clash of two titans Big wheel turns ….… page 6
Free land for Republican ………………….….….. page 7
Inmates recycle pcs ……..……….….……………… page 7
FROM OP-ED PAGES
Bill Moyers The Guardian …………. page 8
4 major groups Orion magazine ……… page 8
John de Graaf NYU Sci Center ……… page 9
FROM THE ARCHIVES
Emperor & Evolutionist …………………………….. page 9
Perverse Subsidies, round II ……………………. page 10
SARS & squatters Bush’s tax cut .….…… Page 10
Media on deflation No sub, all natural …… Page 11
Gardens, favors, & surpluses ……………………. page 11
Bushites pro dividend?
Iraq could pay an oil dividend to its citizens as Kuwait used to and Alaska does. After asking Dave Rose, former executive director of the Alaska Permanent Fund, to develop the idea, US Senator Ted Stevens, R-Alaska, pitched it to Bush and Powell. In April the New America Foundation in Washington, DC, struck twice. On the Charlie Rose program on PBS, their Fareed Zakara, international editor for Newsweek, promoted the dividend. In The New York Times their Steven Clemons penned an op-ed urging the same. A staffer at the National Security Council called him to ask if he had run the numbers and had more information. Clemons also briefed State Department officials about the concept. (Anchorage Daily News, June 16) Two US oil-state senators, Mary Landrieu (D-La.) and Lisa Murkowski (R-Alaska) urged the Bush administration to consider dividend (The Los Angeles Times, May 1, which also ran an editorial May 2, a Barbara Ehrenreich op-ed, and letter May 6 in favor). Senator George Allen (Republican-Virginia) held a hearing where he and Powell smiled on the idea.
Press coverage has been extensive: The Wall Street Journal’s Deputy Editor, International George Melloan (email@example.com, who TG readers may recall endorsing a site-value tax for Russia years ago), April 15 and 22; New York’s Newsday; Scott Pardee in The Washington Post; Mohammed Akacem and Dennis Miller in The Washington Times (Feb 21); Guy Standing in The Financial Times (London); UPI (May 14), The San Diego Union-Tribune, The Daily Oklahoman, The Tulsa World, The Edmonton Journal, The Record of Kitchener-Waterloo, Ontario, and Pensions and Investments (magazine).
In Brazil, the new socialist president Lula presented his new budget to the national congress proposing a small minimum income and in Britain, PM Tony Blair presented his new budget proposing a baby bond – a trust fund that pays off each Brit when they reach 18. As yet, neither income supplement would be funded from oil rent or any social surplus. (USBIG Newsletter, Vol 4 No. 21, May-June)
Geonomics is …
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.
FROM THIS PEN’S PERCH
While the world wakes up
Copernicus thought he’d gone mad. If you go against the grain – even when right – it doesn’t feel good. We humans are a gregarious species; by instinct we follow the crowd. Yet Georgist George Bernard Shaw was right. The reasonable man goes along, the unreasonable goes his own way, so all social progress we owe to unreasonable people. Like Erin Brokovich and Dave Brower and the hundreds of unsung heroes who like most acorns don’t become a tree but make the soil richer. They’re the ones behind the progress headlined below. There’s lots to suggest things for geonomists are looking up, making this the fattest issue ever.
UK’s Deputy PM yearns
Great Britain’s Deputy Prime Minister, John Prescott: “I’ve always found it unacceptable that we can have massive value increases in areas by the local authority investing in something and we don’t see the real benefit from it. We’re looking at getting more from the benefit of increased land value that comes from it.” A new London Tube line sparked property booms estimated 314bn pounds in 2000 from which the Government and local authorities gained nothing. (The Observer, Guardian, June 8)
Earlier in London, Mayor Ken Livingstone pushed thru a congestion charge for the inner city. There 250,000 vehicles crowded in each workday, costing the city over $300 million a year in lost productivity. Since Feb 17, drivers crossing the line during business hours owed $8. If a driver failed to pay, a video camera would capture his license plate number, leading to a huge fine. The number of cars dropped by about 60,000, similar to a school holiday. (New York Times, April 20)
Eco-tax vs. eco-ploitation
Because the chemicals used in dry cleaning and metal cleaning cause cancer, Norway decided to discourage their use by making them more expensive. In 2000, Norway levied a tax on sales of the chlorinated solvents trichloroethylene and perchloroethylene. It worked. Users cut leakage, boosted recycling, and substituted other cleansers. Compared with average consumption in the three years 1997-99, trichloroethylene sales fell 83% in 2000 to 81 tonnes. Perchloroethylene sales fell 89% to 26 tonnes. The falls have been so large that national consumption of all chemicals classified as carcinogenic, mutagenic or reprotoxic (CMR) fell by 60% between 1999 and 2001. (Environment Daily, March 26 via Green Budget Germany)
Aussie land for the lucky
Dio Wong, nicknamed the “Wicked Sorcerer of the East” for his skill in managing investment funds, sunk his own money into location – one in the city on the beach. The Real Estate Institute of Australia noted the supply of oceanfront is limited and people flock to it, putting coastal suburbs among the fastest-growing areas. Rising prices entice people to shift from the lesser-performing stock market and superannuation funds to the seashore, further inflating its price. Median house prices in cities with beachfront rose from about 25% to 50% over the last two years. (The Australian, April 21, via Wyn Achenbaum)
From business periodical BRW’s annual top 200 rich list: The richest, Kerry Packer at $5.5 billion, is in media, which is like land, considering the EM spectrum is part of nature and its value comes from society. Four of the top 10 collect oldfashioned ground rent. Collecting site rent is how most entered the top 10. Among newcomers, the richest at $285 million are Con and Ross Makris, a pair of developers. Rent created the six fastest growing fortunes last year; developers John Gandel put on $400 million to $1.7 billion and Harry Triguboff $200 million to $1.6 billion. (Herald and Weekly Times, May 22, via Wyn Achenbaum)
At the World Trade Organization talks, Australia tries to persuade other developed nations to eliminate farm tariffs and subsidies. They say the world price for agricultural products would rise. The Australian Bureau of Agricultural and Resource Economics said it’d boost income for farmers and the demand for and price of farmland; farm owners would be $26,500 a year better off. How tenant farmers would fare was not mentioned. (The Sydney Morning Herald, June 23.) Australian land is already so spendy that government could, by renting it, afford to cut taxes on labor and capital, enabling both factors to easily compete in the global arena (Australian Tax Forum 18, 2003).
Get paid to borrow
For the first time in Japanese history, their Central Bank will pay you to borrow money; they dropped their overnight lending rate to below zero, to minus 0.001%. Having lost trust in the Japanese financial system, some foreign banks are reducing their supply of yen by lending them at a loss on paper. Japanese banks have been paying one another to take surplus yen off their hands (lending below zero) since January. Japanese law prohibits banks from storing too much cash. The banks do not lose money when the rate of deflation is even lower than the lending rate, as now it is. People living off bonds with a variable yield do lose income, in some cases more than the drop in prices. (The Business Times, Tokyo, June 25) People who borrowed before this decline must still pay under the old terms; some can’t. Since 1990, corporate bankruptcies have nearly doubled to 19,000. Personal bankruptcies jumped 30% over 2001, nearly double the level in 1999, to a record 214,600. Over the last two years, more than 60,000 people have taken their own lives, 50% more than in the mid-1990s. Before losing anyone else to suicide, Japan could open up a new era of economic opportunity for all by using geonomics – de-taxing effort while sharing social rents.
Thanks to the government letting more imports compete in the Japanese market, the prices for products have fallen greatly, eventho’ Tokyo is still a very expensive city (Business Week, May 26). Besides human-made products, nature-made land keeps seeking a more realistic price, too. Two years after the bubble in the Japanese stock market burst, property prices peaked in September 1991; since 1992, commercial land prices have shriveled by two-thirds. Last year, for a 12th straight year, they plunged 8.3%, back down to the late 1970s levels, and residential real estate prices shrank 5.8%. Land in general fell 6.4%, the fastest drop in a decade, lowering values to the early 1980s level. The exception was Tokyo where some districts rose. Japanese stock prices have likewise tumbled, hitting 20-year lows this year.
Banks have yet to foreclose on their bad loans to contractors, tied together as they are by cross-shareholding, which dates back to the end of World War II. (AP and UPI, March 24) While a new generation of entrepreneurs might like to use the affordable land, it’s possible that their earnings would be taxed to bail out the old, actually bankrupt lenders and borrowers. To prosper again, and this time more widely, Japan could de-tax earnings and recover ground rents, forcing banks and real estate hoarders to let go of their frozen assets, giving others a chance. Given the Imperial Palace plot is worth about half of Los Angeles (Business Week, May 26), use these immense rents to fund a Citizens Dividend for all Japanese.
Global banks get real
The International Monetary Fund admits that the policies it has been imposing for the last 60 years do not often work. Kenneth Rogoff, the IMF chief economist, co-authored the report. It found that countries that follow IMF suggestions often suffer a collapse in growth rates and significant financial crises. (The Electronic Telegraph [UK], March 20)
The World Bank admits that in Zimbabwe, Ivory Coast, Cambodia and Columbia what people battle for is land. Trying to prevent exploitation of the landless by the landed, a state may outlaw leasing. Yet that merely drives land-leasing underground and fosters petty corruption and red tape. Or a state may confiscate and redistribute land. Then the better off refuse to invest, choking off development. In Zimbabwe, many farm workers are worse off now than before. On the other hand, bank economist Klaus Deininger reports that after winning their right to land, poor people improve their lot. Whether they lease or own, with a document that proves tenure they can settle legal disputes. Then they feel secure enough to plant trees, irrigate, and build roofs, which improves a family’s health. The resultant prosperity would improve governance and empower women. However, when crops fail or a serious illness strikes, owners might have to sell their land. (UTC, Jun 18) Hence farm owners need a safety net, as do farm workers, which a rent dividend provides. Collecting site rent also spurs big owners to sell off their excess, putting land into the hands of former tenants. From Denmark to Taiwan, taxing land won a wide distribution of land without one drop of blood shed.
Canada’s gulf widens
In Canada in the 1990s, the rich grew richer while everyone else did not. After adjusting for inflation, the median income of Canadian families held steady at $55,016 in 2000 compared to $54,560 a decade earlier. The 10% of families at the bottom averaged $10,341 in 2000, barely above their $10,260 in 1990. They amassed less than 2% of all family income, roughly the same in 1990. The 10% of families at the top averaged $185,070, almost 15% more than their $161,460 a decade ago. They amassed more than a quarter of total family income, up from 26% to 28%. In Ontario and British Columbia, the top 10% got just under $20 for every $1 that the lowest 10% got, the most unequal distribution of family income in Canada. Oil-rich Alberta saw the largest gain in median family income, rising 7.1% from $56,140 to $60,142. (Globe and Mail Update, May 13)
Farewell, finny friends
Human strip mining of the seas has reduced the stock of large fish by 90%. Whereas longlines used to catch 10 fish per 100 hooks, now it’s one. The average size of top predators is 1/5 to ½ of what it used to be, leaving them little chance to reproduce. Industrial fisheries take only 10 to 15 years to grind down any new fish community they encounter. From the tropics to the poles, only 10% of tuna, swordfish, marlin, shark, cod, halibut, skates, and flounder are left. Their depletion not only threatens the future of these fish and the fishers that depend on them, but also ocean ecosystems with unknown global consequences. To halt these losses, fishermen may need to reduce their catch by at least 50%. That means cutting quotas, licenses, and subsidies. If we restored stocks to higher abundance, we could get as much fish by putting in only 1/3 to 1/10 of the effort. (cover story, Nature, May 15) We’d should issue fewer licenses and by auction. Then use the raised revenue and rents from other sources to fund a dividend, easing the ex-fishers’ transition to other gainful employment.
VA city can now get rent
Bankruptcy looms for California. The other states running short face a $25.7 billion deficit this fiscal year. Next fiscal year, 39 states expect a combined $68.7 billion deficit. (USA Today, April 15) “While frightening taxpayers that the state will have to cut essential services (police, fire, schools), down deep you really know it’s an appeal to save the bureaucratic bloat, don’t you?” (correspondent Mark Ferran, Apr 23) Whether their need for money rose or not, most of those states recently saw their land values shoot thru the roof. Why not tap that? Two towns in Pennsylvania that had a partial land tax headed the other way, reverting to the conventional property tax, trying to spare homeowners. Who forgoing rent spares are speculators. Better for cities, states, and nations to tap all rent, eliminate taxes, and pay residents a dividend. Your manic depressive economy would soon grow tranquil, and state revenues steady. Already, some places are taking the first step. The City of Roanoke asked the State of Virginia for permission to tax land and got it. Virginia Governor Mark Warner signed the enabling legislation SB1095 into law as Chapter 164. Earlier Virginia’s politicians gave this same power to the City of Fairfax, effective July 1.
Real values horrify owners
In Alabama, the state taxes food and incomes as lows as $4,600. Governor Bob Riley, a Republican, wants to raise the threshold at which families of four start paying taxes to more than $17,000. Later he’ll try to axe the sales tax on groceries. Meanwhile, he’d raise the tax on farms and timberland (a property tax close to a land-value tax). Forests cover over 70% of Alabama yet produce less than 2% of the $205.5 million corralled by the property tax. Homeowners pay much more than the 25 cents an acre some timberland owners now pay. If Riley’s bill passes, some owners would pay about $2 more per acre each year. The Alabama Forestry Association fiercely oppose Riley’s plan, complaining it’s based on real market values. (via Wyn Achenbaum, May 29)
The state of Maine requires a town’s valuation of property to be within 70% of fair market value. Kennebunkport’s assessments of inland residential properties are at 67% of market value, the waterfront properties, the most valuable, are at 40%. Residents rejected revaluating their homes. While owners of houses worth $250,000 saved 3%, they let owners of homes fronting the ocean worth $2 million to $3 million save 30%; to catch a crumb, they yield the cake. Better to recover all site rents then share them. (AP, June 17)
Accurate assessments swell the property tax, the most hated of them all. Thirty-eight percent of adults identify the property tax as the worst tax vs 21% who cite the federal income tax. In 1994, income and property taxes were neck-and-neck for the public designation as least fair. Property tax is particularly loathsome to Easterners – 49% identified it as the worst tax vs 26% of those in the West. All income brackets view the property tax as the worst. The average property tax burden was $885 per person in 2000, double the 1985 figure, as property values doubled. (USA Today, April 15) While the average income tax is higher, inability to pay the property tax threatens people with the loss of their home, the store of most of their equity. Channel all that site rent into a dividend for residents and soon they might want to pay land dues; for most, land dues would be less than incomes taxes, and they’d tap the high values most residents don’t own – city centers and oil fields.
Home sweet debt
Harvard University’s Joint Center for Housing Studies released its latest “State of the Nation’s Housing” by Eric Belsky et al (the first was in 1988). Echoing Henry George’s title, Progress and Poverty, the report notes housing affluence marred by unaffordable housing. In 1988 the Census Bureau figured 60% of families could afford a low-end home in their community; in 1995, only 56% could (St. Petersburg Times, April 6). Today, not in any metro area can one full-time minimum wage earner afford to house a family. In 1997, 5.8 million owners spent 50% on mortgages. Last year, 14.3 million (1 in 7 households) spent more than half their incomes on housing. Half of those are owners, not renters; 3.2 million of those spending half on homes earned between $17,500 and $50,000. While housing costs continue to outpace inflation, the incomes of families in the bottom two quintiles have stayed flat since 1975.
Equity, the portion of the home’s value that belongs to the owner, not the bank, fell from 70% in 1986 to 56% last year (Chicago Tribune, May 25). Some 450,000 owners, a record, were in the process of losing their houses at the end of last year. In the 2001-02 period, household stock portfolios dropped $1.4 trillion while home equity (actually, site equity) climbed by about $405 billion. (Realty Times, June 17, via Wyn Achenbaum). Over a longer stretch (since the third quarter of 2000), their stock holdings fell $2.29 trillion while site equity rose $2.7 trillion to $7.56 trillion (Washington Post, March 19). Total selling price of residential real estate in this country is $23 trillion dollars (Inman Report, caar.com, January 20) And that’s just homes, not shops, offices, factories, farms, fields, forests, oil, minerals, airwaves, etc.
Incomes not normal at all
The Internal Revenue Service reported that some Americans rake in more than $1 billion a year, but none as high as $10 billion. The IRS compared the 400 wealthiest taxpayers in 2000 to 1992: The minimum income to qualify for the list was $86.8 million, more than triple the minimum income of $24.4 million of eight years earlier. Their average income was almost $174 million, nearly quadruple ‘92’s $46.8 million. Huge payouts elevated CEOs, and the 1997 cut in capital gains tax rates from 28% to 20% encouraged owners of private businesses to sell. (This year Congress cut it to 15%.) Eventho’ the stock market collapsed, salaries, dividends, and rents for the 400 continued to rise. Long-term capital gains accounted for 64% of the income of the top 400, nearly double the level in 1992. Wages contributed 16.7%, down from 26.2% in 1992, and dividends made up 2.8%. Their incomes increased at 15 times the rate of the bottom 90% of Americans, whose average income rose 17% from 1992 to 2000, to $27,000.In 2000, the 400 accounted for 1.1% of all the income in the United States, more than double their share in 1992, 0.5%. Their taxes grew at a slower rate, from 1% of all taxes in 1992 to 1.6% in 2000, when their tax bills averaged $38.6 million each. Their 1.6% of all taxes exceeds their 1.1% of all income. On average they paid 22.3% of their income in federal income tax, down from 26.4% in 1992 and a peak of 29.9% in 1995, due to reduced tax rates on capital gains and bigger gifts to charity. The rate actually paid by the top 400 in 2000 was about the same as that paid by a single person making $123,000. The top 1.3 million households yield 37.4% of individual income tax revenue. The half of Americans who earned less than $27,682 in 2000 paid less than 4%. (The New York Times, June 26) Since 1973 for all individuals, income taxes rose 21% faster than adjusted gross incomes. Social Security taxes, which apply to the first $87,000 of pay, together with Medicare taxes, grew 82% faster than incomes. (The New York Times, April 14)
Figures do not include interest from municipal bonds, which is exempt from tax, nor the incomes of the many wealthy Americans who use shelters to reduce their reported incomes below the level of the top 400. The number of Americans with incomes of more than $200,000 who paid no income tax anywhere in the world rose from 37 in 1977, when the report was first issued, to 2,022 in 2000, a record. (The New York Times, June 26)
To return from the stratosphere, for the first time since the 1980′s, the average pay at all income levels fell. The salary of employees at the 90th percentile of all workers fell 1.4% over the last year to $1,439 each and every week; even their take-home pay has fallen behind inflation. The inflation-adjusted weekly pay of the median worker – half made more, half made less – fell 1.5% from early last year to early this year. It was the biggest drop since the mid-1990′s. The pay stagnation ended the strongest period of salary growth in 30 years. During the first three months of 2003, consumer spending increased at an annual rate of 1.4%, which matched the slowest pace in 10 years. (The New York Times, April 26)
For a decade, the number of IRS auditors, tax collectors, and special agents shrank by more than a fourth even as the tax system grew larger and more complex. Enforcement of the tax laws grew so lax that the tax-shelter industry flourished and openly advertised opening secret offshore bank accounts. The rich who used these dodges avoided paying many billions of dollars in taxes. Which tax dodger is Bush’s IRS most likely to go after? Syracuse University’s Transactional Records Access Clearinghouse charges that it’s poor guys. (The New York Times, April 14, via Joe Johnston) Perhaps to counter such charges, and while Bush and Congress cut tax rates and engorged the US debt, the IRS and Treasury and Justice Departments staunched the hemorrhaging; they moved against Ernst & Young and other big accounting firms, a prominent Dallas law firm, and wealthy individuals and corporations with an array of high-profile summonses and civil suits. Ernst & Young agreed to pay $15 million, half their fees for the deal, for violating tax shelter registration rules. (New York Times, July 6)
Clash of two titans
Freddie Mac, the federally chartered corporation that backs mortgages and which with its sister, Fannie Mae, gets $10.6 billion in subsidies each year (National Taxpayers Union), cut loose three top execs and admitted juggling three billion dollars to smooth out the volatile swings in its cash flow over a longer stretch of time. What happened to the book doctors? They left with golden parachutes worth millions. (OregonLive.com, The Associated Press, June 25) So, what doesn’t pay?
In 2002, banks doubled their profit increase, from 14% to 28% (The New York Times, March 26); for 2003, mortgages should hit $3 trillion (Chicago Tribune, May 25) – which only whetted their appetite. Bankers are trying to move onto realtors’ turf; the two powerful lobbies are spending fortunes fighting over a bill that would make it legal for banks to do the job of realtors: broker homes and offices. At least they, if not the general public, realize that the multi-trillion annual flow of site rent is worth squabbling over. Of course, once the public wakes up, then both bankers and realtors would, like the rest of us, have to work for a living.
Big wheel turns slowly
In June, 2 million people were out of work for 27 weeks or more. That’s the nation’s highest level of unemployment in more than nine years (which is the length of one Kuznets cycle). The Labor Department sharply revised its May job losses, which had initially been reported at 17,000, up to 70,000. The unemployment rate, which stood at 6.1% in May, jumped to 6.4% in June. The jobless rate has not been this high since April 1994. (The New York Times, July 3)
Donald H. Straszheim of Santa Monica, CA, claims that drops in housing starts preceded most of the post-World War II recessions, and upsurges preceded most recoveries. It’s housing – which is boxed in by land prices – that gives economies their cyclic nature. (The Washington Post, June 8) In February, starts dropped 11%, the biggest one-month drop in almost a decade (The Oregonian, March 24). If Straszheim’s pattern holds, then when this present real estate bubble bursts, the current slowdown must worsen. Nationwide over the past five years, housing in California and the Northeast went up by 70% and last year by double digits. But elsewhere, the vast majority of houses gained much less value. The full-year averaged 6.48%. The most recent national annualized quarterly rate was 3.77%, down from 5.40 percent the previous quarter. (The Washington Post, June 7) From the first quarter of 2002 through the first quarter of this year, average prices fell in 13 of 220 metropolitan areas. (The Washington Post, June 8) The percentage of loans entering foreclosure hit 1.18%, a record high since MBAA first started tracking the foreclosure rate in 1979, up from 1.15% during the third quarter (ABCNEWS.com, April 11). I expect this cycle will plateau a few more quarters before heading south.
Trying to be the tail wagging the dog, the Federal Reserve cut its short-term lending rate by one quarter of a point from 1.25% to 1%, the lowest level since 1958. The Fed has now cut rates 13 times since the beginning of 2001. (New York Times, June 25)
Free land for Republican
It’s not as great a gift of OPM (Other People’s Money; pronounced “opium”) as Bush’s no-bid contract to Cheney’s company, Halliburton, for tidying up Iraq, worth up to $7 billion. And the more than $76 billion in 2001 and 2002 awarded to nine of the 30 members of the Defense Policy Board (appointed by the secretary of defense to advise the Pentagon and whose meetings are secret) dwarfs it (The New York Times, April 10). But it typifies the oldest role of the state: enrich the rich.
The Army Corps of Engineers owns 456 lakes in 43 states. Senator James M. Inhofe, OK Republican, chairs the Committee on Environment and Public Works, which oversees the corps. He urged the corps to grant swift approval of a lease for 50-years rent-free on 280 acres along Skiatook Lake not far from Tulsa to Ronald W. Howell. Howell, chair of Inhofe’s fund-raising committee, plans to build a $10 million marina, golf and cabin complex. To promote recreational development and stimulate the economy, the corps has granted 1,300 rent-free leases and makes little effort to monitor them. (The New York Times, March 13) If you let land for free, why not let to the poor, people who can’t afford it when it’s not free? People who can afford to pay its value, should. Land value is not theirs but everyone’s.
Inmates recycle pcs
Waving a magic wand, a geonomist would disappear limited liability and charge users some and abusers more. That is, if your business put workers, consumers, or nature at risk, you’d pay more than just land dues for your location; you’d also pay a deposit, insurance, fees for permits, and fines when exceeding limits. These extra charges would inspire you to find the eco-friendly alternatives. Do they exist? Fewer used TV sets and computers go to landfills; now companies in China, India, Pakistan, and the nation’s two largest personal computer makers, Dell and Hewlett-Packard, recycle used computers. Dell and HP even pick up your old computers. Dell uses prison labor. Inmates get 20 cents to $1.26 an hour; at that rate, how will they ever pay back their victims? Safety standards do not cover inmates; they smash leaded monitors manually, exposing themselves to toxics and injuries. But they volunteer to work and have a recidivism rate 24% lower than other prisoners. (New York Times, June 26)
FROM THE OP-ED PAGES
Bill Moyers at the Take Back America conference in Washington, DC, the day before his 69th birthday: “This is what’s hard to believe – hardly a century had passed since l776 before the still-young revolution was being strangled in the hard grip of a merciless ruling class. The large corporations that were called into being by modern industrialism after l865 – the end of the Civil War – had combined into trusts capable of making minions of both politics and government. What Henry George called ‘an immense wedge’ was being forced through American society by the maldistribution of wealth, status, and opportunity.” (www.faireconomy.org)
“Unlike taxes on incomes, a tax on rising land values is a levy on unearned income. What could be fairer? Variants of the land value tax are starting to come back into fashion as a result of the government’s search for increased revenues at a time when it perceives, rightly or wrongly, that the electorate will not tolerate higher income taxes. This week, the Social Market Foundation, an independent think tank, called (among other things) for an annual property tax of a proportion of the value of a house. This is not quite what Henry George had in mind, but it is moving in that direction.” (Guardian editor Victor Keegan, June 26, firstname.lastname@example.org)
4 major organizations
Mark Obrinsky, Chief Economist, National Multi-Housing Coalition (Apr 2): “Jeffrey; I asked our property tax expert, and he says: ‘we would definitely favor shifting property taxes off of buildings and onto locations.’”
Joseph L. Bast, Heartland Inst: “The alternative I mentioned last month is land value taxation, the ‘single tax’ proposed by Thomas Jefferson, Tom Paine, and most famously, Henry George (1839-1897). George observed that we own our own bodies, and this gives us the right to own the fruit of our labor. Taxing the fruit of our labor is therefore no different from involuntary servitude, and should be prohibited in a free society. The natural world, however, is a gift by God to mankind, and can be taxed without offending any human rights. So George proposed replacing all other taxes with a tax on the value of land. Most economists would agree that taxing land value (or rent) causes less economic distortion than taxing income or sales, and privacy advocates ought to be among its strongest advocates.” (Heartlander, May)
Northwest Environment Watch British Columbia: Land speculation removes land from productive use and thereby encourages development (sprawl) farther from the city centre. Shifting the tax burden from property value to land value would encourage property owners to develop their land to its highest and most productive use. It could revitalize city centers, encourage compact development, and discourage sprawl and dependence on automobiles; high intensity use in core areas allows for more effective public transit and more efficient utility servicing and infrastructure development. A vital downtown has lower crime rates; mixed-use neighborhoods are more vibrant. (integraleconomics.org/TAXSHIFT/pol_factsheets.html; thanks to Josh Vincent, Mar 31)
Planning Practice & Research’s Theme Article for vol 16, No 3&4, was Tom Gihring’s “Applying Value Capture in the Seattle Region” which concludes, “planners might be encouraged by the recent inclusion of LVT in the Metro Transpo Plan.” Dada Maheshvarananda, head of Prout (Progressive Utilization Theory), author of After Capitalism, endorsed by Noam Chomsky, Howard Zinn, et al, included LVT in his recent book (via Alanna Hartzok)
Orion Magazine on trust
“Public Trust Doctrine says that common resources such as water are to be held in trust by the state for the use and enjoyment of the general public, rather than private interests. All users of water are subject to a beneficial use doctrine, which prohibits unreasonable use or waste. This concept could conceivably be expanded to other elements of the commons, such as soil and public forests – things so particularly the gifts of nature’s bounty that they ought to be preserved for the whole of the populace. Public trust values include not only tidelands, lakes, rivers, and riverbeds, but also wildlife habitat, recreational value, and the sheer beauty of place.” (July August) OK, but even more effective in defending nature would be to redirect rent, the profit now driving the exploitation. Put Earth in trust for all Earthlings. That doctrine is ancient, too.
John de Graaf
“The average American worked 199 hours more in 2000 than in 1973, a period during which worker productivity per hour nearly doubled. (But the workweek was not slashed by half.) Society took all of its increases in labor productivity in the form of money and stuff instead of time. We didn’t all get the money; the very poor earn even less in real terms than they did then, and the largest share of the increase went to the richest Americans. The harmful effects of working more hours are being felt: Stress is a leading cause of heart disease and weakened immune systems. Consumption of fast foods and lack of time for exercise has led to an epidemic of obesity and diabetes. Many parents complain that they do not have enough time to spend with their children, much less become involved in their community. By contrast, Western Europeans average five to six weeks of paid vacation a year; we average two. Later this year, on Oct. 24, will be the first Take Back Your Time Day. The date falls nine weeks before the end of the year, nine weeks being how much more, on average, Americans work each year than Western Europeans. Perhaps American workers will realize that, in the end, there’s no present like the time.” (The New York Times, April 12)
NYU advances society
Director of New York University’s Center for Advanced Social Science Research, Dalton Conley in The New York Times: If Exxon destroys a sizable section of Alaska’s coastline, the most their victims can retrieve is the value of the corporation’s assets. Ending limited liability moves us closer to a true “free market.” Worthy investments would find ways to attract capital, in spite of risk. An efficient market will quickly adapt to reflect the social risks that are now ignored and subsequently paid for by tax dollars. New insurance markets would arise to protect investors in cases of a tort judgment or lien. Insurers would have an incentive to assess the risk of a corporation’s practices. Shareholders would become more involved in the companies in which they invest. Corporate oversight would be far stronger because it would be in the market’s interest. (via the Progress Report)
FROM THE ARCHIVES
Emperor & Evolutionist
Roman Emperor Justinian added to Codex Justinianus (A.D. 529): “By the law of nature these things are common to all mankind, the air, running water, the sea and consequently the shores of the sea.”
Alfred Russell Wallace (1823-1913) deduced the theory of evolution independently of Charles Darwin and pushed him to finally publish: “In consequence of the wide circulation of Mr. Henry George’s well-known Progress and Poverty, examine carefully the proposals there advocated. The products of human labor become cheaper as population increases and civilization advances. When the reverse occurs it owes to exceptional conditions or some kind of monopoly. But with land the increase of value is due to the growth of society, and the fluctuations owe either to monopoly and speculation or to restrictions on its use. The products of a man’s labor should be private property; land, the first condition of man’s existence, should belong to society. The state will need only collect its quit-rent as it now collects the land-tax or house-tax. There will accrue a steadily-increasing income from quit-rents which will enable the more injurious taxes to be remitted and ultimately all taxation be abolished.” “The Why and the How of Land Nationalisation” (Macmillan’s Magazine, 1883 Sept/Oct; wku.edu/~smithch/wallace/S365.htm)
Perverse Subsidies, II
Reviewed in the winter Geonomist, Norman Myer’s book merits more attention. It cited a real world success story. While we in the US pay about $380 per person extra for food thanks to agri-subsidy, in New Zealand they’ve practically wiped out such subsidy, getting it down to $26 per tummy. Myer structures his book around four pillars in an economy: agriculture, transportation, etc. These four I also chose for my book about 13 years ago (which currently undergoes revision for today’s pickier market). And while Myers faults direct cash outlays, tax breaks, and license, he leaves out temporary waivers, utility franchises, patents, broadcast licenses, resource leases, and “rentention”, the granddaddy subsidy of them all and just as perverse an any recent one, if not more so. Myers also concludes that subsidies can be fixed, which they can’t. All we need do is replace them with a Citizens Dividend.
SARS starts amid squatters
November thru February, most of the world’s flues originate from China’s Guangdong province. SARS, the flu-like disease coming out of Hong Kong, is actually from that province, too. There domestic animals, especially pigs and chickens, are husbanded in the most overcrowded conditions you can imagine, like nowhere else on earth. This too close contact allows animal bacteria to infect humans. Farmers husband their animals, world-traveler Phil Anderson notes, on land that is untitled, illegally occupied, and squatted in. Not simply due to over-population but because nothing else is available; the better lands are hoarded by the local elite. If the world wants to solve such health issues, it will one day have to deal with sharing nature’s bounty. If the community recovered rent, no owner would hoard land; more would become available for everyone, and this sort of health risk would never arise.
Bush’s tax cut
Some of our richest citizens oppose Bush’s lowering of income tax rates, especially for the rich. While it’s a noble intent – returning to your society a portion of your success – it still begs the question, where’d all those riches come from? Subsidies, mainly. The military, at $400 billion annually, buys weapons, oil, ads, etc from elite-held corporations. The 2003 Green Scissors report (May 8) found 68 programs that threaten our environment, health, and treasury, costing $60 billion. Bush’s Energy Act authorizes $46.7 billion in new spending and $18.7 billion in tax cuts for fuel extractors, plus extends the extra limited liability for nuclear power for free. He even subsidizes cruise ships. If government were not serving up corporate welfare, just how wealthy would these elite tax defenders be? More fundamentally, if government were to collect all rents – from broadcast licenses to downtown land titles – then how many trillions would be flowing around for moguls to concentrate into their own pockets? So, sure, let’s cut income taxes, but from the bottom up. And let’s quit wasteful spending, from the top down. More importantly, let’s recover all rents, from all sources, and share this social surplus among all of us. Even Bush’s buddies would get an equal share, but no more than that.
Media spotlights deflation
In April, the Federal Reserve blared its siren. Wholesale prices dropped 1.9%, a record. Food, clothing, cars, and computers: all cheaper. Must good news be bad news? Your cost of living drops, yet this should give you insomnia? First, you‘re supposed to worry about inflation, now article after article wails about deflation. (AP, May 16; Los Angeles Times, May 18; Business Week, May 26; New York Times, June 26; etc) They trying to set us up for even greater government debt (already over six trillion) and the inflation that comes with it?
But if it’s not broke, don’t fix it. If the cost of living falls, people can live with smaller wages. People could even take time off and consume less (also giving Earth a breather). Or, if lower prices trigger more purchases, businesses can make up profit in volume of sales.
What gets tight is paying back same-sized debt from smaller wages or profits. To own homes, people borrow. To raise funds yet not their taxes, corporations borrow rather than issue more stock. When bankruptcy threatens, often big business gets bailed out while taxpayers get the bill.
Rather than levy or indebt ordinary people, what we should be doing all along is de-taxing everyone, helping workers afford smaller wages and businesses smaller profits. Instead of taxing, run government like a business and charge as much as the market will bear for government granted privileges, everything from corporate charters to land titles. Recovering rent deflates the price of land, for which people went into debt originally.
With that recouped rental revenue, pay dividends; shares, not debt, is how to get an income supplement to everybody. Coming from land, one of the few things along with other constrained goods still inflating (like medicine and diplomas), it’ll be a rather comfy safety net. Even when land value falls, most other things fall farther faster, so relatively there will plenty of rent for this social salary.
Lose subsidies, go natural
Brad VanDyke (Apr 3): “To make a game preserve in Africa more “natural”, Allan Savory, a wildlife activist and government land manager, kicked out a tribe. They were the only effective predator of grazers, including elephants. He let in tourists. The herding animals lost their fear, didn’t run anymore, and destroyed vegetation. He pushed ranchers off the land, yet it continued to desertify. The problem was not stocking rates or overgrazing but herd effect and timing. In nature herbivores bunch together, trample, and graze intensively. Without predators to bunch them, they graze randomly, eating some things to the ground, leaving less palatable, invasive stuff. With predators, Savory tripled the stocking rates yet improved the range. This got him kicked out of the bureaucracy and academia. His biggest supporters are maverick ranchers. In Utah, managers kicked grazing animals out of some national parks and can’t keep the vegetation growing. Nearby overgrazed land gets some herbivore impact and fares better, but it still desertifies. In New Mexico Savory introduced more grazers; it increased the impact yet regenerated the range. In the American West more animals were grazing prior to white settlement than after. Savory also encourages ranchers to get off of subsidies.”
Garden, favor, surplus
Ella May Wulff (Mar 19): “Shifting the property tax to land means that people who want to keep a bit of green space around their houses in areas that have become urban since they began living in them will then be forced to sell off the land for development.”
Jeff Smith: In some cases, but not all, the site-value tax will be higher than the property tax. Those sites generally lie in the center. If center sites aren’t used to accommodate growing population, then suburbs are – presto, sprawl. And to curb population, recover and share rents, especially with women, giving them more options than just breeding.
Jeff Boyd (Dec 10): “Even while recovering rent, would we still need tax breaks for farmland and an urban growth boundary (UGB)?”
JS: Maybe not. Since the best locations do cost more, those owners would pay society more rent; they’d be the ones most eager to attract builders and businesses. Since the pricey sites sit in urban centers, it’s to there that the owners paying greater rents would attract the development now dispersed into sprawl. Even if not obviating the UGB (which has not yet worked), rent recovery makes it much easier to enforce.
Brad VanDyke, Utahan reporter and protector (Mar 21): “I’ve been covering some towns in my area for the local newspaper. Some have gone the RDA route to try to redevelop. I’m leery of it. It sounds like giving businesses special privileges, and giving government a lot of arbitrary power. Can you tell me anything about this from a geonomic point of view?”
JS: Subsidizing certain businesses (RDA) is neither efficient nor fair. If instead the town employed geonomics, then collecting site-values acts like the rod, while de-taxing improvements acts like the carrot, engendering redevelopment. In the Canadian provinces about a century ago, the towns that taxed land developed much faster and much more thoroughly to the benefit of all residents. In Pennsylvania during the past couple decades, Allentown and Harrisburg went from the bottom to the top by shifting its property tax. If a town paid rent shares, then as residents spend that, they’ll benefit local business.
Chuck Adams, Alternatives to Growth Oregon (Oct 15): “If the city pays a dividend to residents, how can it afford to provide services, and who could afford the necessarily high land tax? Don’t get me wrong, I love the idea but have a hard time seeing how it would work.”
JS: First, the owners of the pricey locations where land dues would be highest, they tend to have deep pockets. Second, cities, like most governments, waste a lot on things to promote growth; let’s cut that out. And third, a city could fund things like water and sewer not from taxes or rents but from user-fees. Finally, to share costs and benefits fairly, better than the city handling dues and dividends would be the entire bioregion.
Bruce Oatman (May 29): “Where can I go to find support for your estimate of rent, natural and social? I would be elated to believe it were so high and so would many of the students who pass through (the New York Henry George School) each year for whom this figure often makes the difference between their becoming further interested in Geoism or dismissing it as a clever, but unsubstantiated, idea.”
JS: You’ve come to the right place. Check out my essay, “Immensity: Can rent shrink the workweek?”
In the media
The Alternative Energy Institute Newsletter highlights the latest trends in the rapidly changing field of energy. Issue 3/11/03, NEW ENERGY REPORT #94: “GREENLIGHT AWARD: THE GEONOMY SOCIETY & PROPERTY TAX SHIFT. Rural regions provide resources and cities provide services. Yet neither does so very efficiently today. Encouraged by a present property tax structure that takes aim at buildings while treading lightly on empty parcel sites, owners of land sites and resources both over-extract and withhold appropriate land from use, speculating on a higher future return. Vacant and underused sites waste on the average about 22% of city surface. Using land less than optimally means more land must be used. The Property Tax Shift (PTS) has many success stories in the United States and around the world.” altenergy.org.
Via word of mouth there
May 22-24, Saratoga Springs, NY, the 2nd Biennial Conference of the US Society for Ecological Economics, co-founded by ex-World Banker Herman Daly, heard my “Property Tax Shift” and “Dividends as Feedback Loops”; talked with Juliet Schor of The Overworked American. June 5-7, Australia, Sydney, 4th Annual Global Conference on Environmental Taxation heard “Property Tax Shift” and “Tax & Subsidy Favoritism”. Afterwards, I presented at two universities (Sydney and Macquarie) and two groups (Greens and Georgists), thanks to the organizing of Mark Pavic and others. In Melbourne, thanks to Karl William, I was in one panel with the Greens and was feted with a farewell dinner. Returning won’t be too soon.
Phil Thrum, Sydney Green (July 1): “Thank you for your ideas, discussion, and references in your recent talk to us Down Under. Up until now, we humans have adapted to social and environmental problems rather than eliminating their causes. I find the re-think on taxes and the concept of rent on all resources to be highly commendable. It is the link that has to be made between sustaining any sort of future for planet earth and putting resources (human, natural & technological) to meaningful and equally shared uses. Altho’ the ideas of H.G. have been around for a long time, they are pertinent today. The interest of Greens here and elsewhere in geonomics is exciting and evolutionary. I look forward to the time when some of these ideas are incorporated in Greens policies. I will help our Economic Committee however I can.”
Via word of mouth here
After supplying local players with all five US examples of states letting localities shift the property tax from buildings to land, I sat back to enjoy their testimony at the Oregon House Revenue Committee’s hearing on HJR 30, the bill to let cities and counties do the PTS. One local elected official, Rex Burkholder of Metro, testified convincingly in person. Two other local worthies – developer John Russell and urban Development Commissioner Don Mazziotti – submitted letters extolling the virtues of the property tax shift. The house committee didn’t vote our bill up or down but formed a committee.
After interviewing me on his community TV show in Pt Townsend, WA (which still has a century old ad for the Henry George 5¢ Cigar painted on side of a downtown building), Jim Rough, author of Society’s Breakthrough (ToBe.net), (Jun 26): “It was great to meet you and Tom and to learn more about geonomics. Yes, I’m sold.”
Via word of pen
Simple Solutions, edited by John Watkins on April 29 ran my “Share the Commonwealth, Raise the Consciousness” and on May 14 my “From Jobs to Joy”. Feedback from Communitarian Update #54 (Jul 2) ran my push for an oil dividend for Iraq.
Bill Parish, GeoSoc member, accountant, investment consultant, and activist, got quoted in The Detroit Free Press (April 14) on pension funds, warning people how some corporations raid them to finance mergers and acquisitions.
Brad VanDyke, Utahan reporter and protector (Apr 3): “Politics makes strange bedfellows: an artistic, liberal crew lobbying with conservative legislators for a program that creates a local aristocracy under the guidance of a federal bureaucracy. The local travel people have lobbied for a heritage designation; they write the management plan for the area and determine who gets the subsidies, $10 million over ten years for historical restoration and promotion of tourism. That isn’t much money, but many of the leading activists in this group already see themselves as entitled. They also see it as leverage for more. If this program follows what happened in New Mexico, then the boosterism of travel will force residents out in favor of an absentee, landed elite.”
John Morales, who sent fascinating articles on Panama, where he worked, one on the history, another on the recent scheme to despoil a park (July 9): “My webtv, now owned by Microsoft, tells me that your attachments ‘contain a kind of information that can’t be used.’ How the #@%& do they know I can’t use it!”JS: Getting scary.
Gabriel Farrell, NY shopkeeper (Apr 28): “I’m opening a small record shop, and I’m finding that if I want to hire any employees I’ll have to pay hundreds or thousands of dollars a year. No wonder we have unemployment. I apologize for the rant. I truly enjoy the newsletter. Very informative, nicer layout than some publications, and a nice mix of news and views. I especially like the following from ‘Iraq: War? Or real victory?’: ‘This war, like most wars, is not so much against an opponent materially but against one’s own people psychologically, that is, to scare Americans and to keep them paying taxes loyally.’ I agree, and I believe a number of people here in New York would agree as well.”
John Watkins (Mar 22): “Every issue of The Geonomist, I check off a number of items that might be included in Simple Solutions. If there is anything you (or others) have written (not in excess of 1,000 words) that might be used without heavy editing, I’d love to run it. You mentioned ‘sinks’ several time. What is a sink?”
JS: Ecologists mean using the environment as a sink for waste, a term borrowed from physics, like an energy sink, after entropy.
M. Quinn, visitor to the website, progress.org, where are our quizzes, “Test Your Geonomic IQ”, (June 14): “I appreciated your eye-opening information. Thank you for putting up this page.”
Don LeVor, NY traveler (Feb 13): “It’s about time for me to enter my subscription to your publication, so here’s my check.” For that, it’s always about time.
Jim Mann, ex-Northeast publisher (Mar 21): “Just finished reading your latest newsletter. Good job, with much interesting stuff. Keep up the good work! A few thoughts for improving your membership form.” Huge thanks for useful tips; changes made below.
Newcomers, old stayers
Rich Nymoen of ISAIAH, a group with a bill in the MN legislature to shift the state-wide commerical/industrial property onto land value over 10 years: “The map looks great and I’m hoping to use it in a presentation to the whole ISAIAH organization later this year to get full organizational support for the legislative push. I also want to put up on the screen some quotes that appeared in a news article recently about a real estate investors conference: ‘Asked where they would invest their money, Fransen said it’s a great time to acquire Class C-plus and Class B apartment properties in good locations, while Rancone would buy land and sit on it until the economy improves. Tankenoff would consider infill sites that are in the path of progress.’ They certainly don’t hide their intentions. Just wanted to see if you got the check I mailed for the map.”
Last quarter, the Robert Schalkenbach Fdn helped us participate in events in upstate New York City and in Australia. Individuals pitched in mightily, too. For re/joining, thanks to Brian Beinlich, OR technologist, Keith & Karen Harding, OR Mt Hooders, and Don LeVor, NY traveler. If you don’t see your name on this list and know it belongs there, send a donation. If that doesn’t work, send a contribution. Somehow we’ll get your name up there.
WHERE FROM HERE?
Organizers of conferences of change-makers have invited me to present geonomics. July 15-20, during the annual meeting of the Council of Georgist Organizations in Bridgeport, CT with local politicos, will present twice: “Geonomics: Financing the Ecologizing of Cities” and “Movement paralyzed: Five factors that de-railed Georgism”. For details, call Sue Walton, 888/262-9015.
New name more knowable?
Member Jeff Strang, who’s been geonomizing The Greens, Oregon’s Coalition for a Livable Future, and others, touched off a multi-log of insightful commentary by proposing a new name for our group, “LVT Advocates”. His nominee got me thinking about merely massaging our name into “Forum on Geonomics”. Now it’s your turn. What do you think? Like the existing name or either of the above? Or got a great new entry?
What else you can do
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