US Farmers Get Subsidies, Argentinians Get Taxed
|May 17, 2012||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
US Farmers Get Subsidies, Argentinians Get Taxed
Farmers Protest In Buenos Aires as Mexicans Go Hungry
Landowners get hurt and helped by political policies that ignore economic logic or, in a word, geonomics. We trim, blend, and append three 2012 articles from: (1) GDAE, May 16, on ethanol; (2) Buenos Aires Herald, May 11, on farm protest; and (3) Liberal Democrat Voice, May 10, on LVT by J. Bourke (accountant and Treasurer of Hounslow Liberal Democrats).
by Global Development and Environment Institute, by Buenos Aires Herald, and by Joe Bourke
US Subsidies for Ethanol Make Mexicans Pay More for Imports
How much have U.S. ethanol policies pushed up corn prices? And how much has these higher prices cost developing countries dependent on imports for their staple foods? It cost Mexico between $1.5 and $3.2 billion from 2006 and 2011, when U.S. corn ethanol production expanded dramatically and food prices rose in tandem.
The Working Paper, The Cost to Mexico of U.S. Corn Ethanol Expansion, is being released in conjunction with a policy report from the international aid organization, ActionAid. It finds that:
* Ethanol now consumes 40% of U.S. corn production, spurred by U.S. subsidies and rising oil prices.
* U.S. ethanol expansion has raised corn prices. Conservative estimates suggest that prices would have been 21% lower in 2010 without the rising demand from U.S. ethanol. Other estimates suggest that the price impact is as high as 27% for the entire 2006-11 period.
* Mexico imports one-third of its corn, and the added cost due to U.S. ethanol was between $1.5 and $3.2 billion from 2006-11. That is between $250 and $500 million per year, ten-to-twenty times the amount the Mexican government spends on MasAgro, a productivity program for Mexicos small-scale corn farmers.
* This has contributed to rising hunger and food insecurity in Mexico. Corn tortillas are the staple of the Mexican diet, accounting for 40% of calories consumed in the country. Tortilla prices rose 60% over these six years while the cost of the basic food basket jumped 53%. Meat and dairy prices, pushed up by high feed costs, increased 35%. In 2011, 56% of Mexicans suffered some period of food insecurity, and five million children went hungry.
* Countries that grow little of their own staple foods see no benefit from higher prices, as they have few farmers gaining from the price increases. For these countries, biofuel-related price increases are a growing drain on limited resources and threaten their food security.
The study recommends that the Mexican government take a strong stand in upcoming G-20 meetings, by demanding that biofuels, commodity speculation, import dependence, and other underlying causes of the food crisis be on the agenda. A recent report, “Resolving the Food Crisis,” found that the G-20 was undermining global efforts to address the crisis, ignoring even its own commissioned studies on food security.
JJS: Just as some farmers are helped and some are hurt by subsidies, so too do taxes play favorites.
Farmers Protest Property Tax Bill
According to the president of the Argentine Rural Association, Hugo Biolcati, a proposed law that would increase tax by over 1000 per cent would make it impossible to pay the personal property tax. This reform could have left out of the system a lot of small and medium producers.
They are using a Rural Property tax to increase the land tax, but we dont sell land, we sell wheat, maize, beef and milk, Biolcati said, and considered that the bill is a consequence of the National government pressure on the province, hence the pressure on the producers.
A delegation of rural leaders from CARBAP, SRA, CONINAGRO and FAA entered the provincial Legislature building in La Plata to hold meetings with representatives of the different members of the Lower House and Senate. Kirchnerite lawmakers did not meet with them.
Kirchnerite Senator Nora de Lucía sustained that an increase on the rural property tax constitutes a progressive wealth tax and no one can think that this is not income distribution.
The rural property tax is totally distorted and the Executive has the political decision of adapting land values to those of 2012, she said. She also added that the farm sector also asks for more roads, hospitals, and rural schools and thats why its time for a change, and there is a political decision that in a fair and equitable society we all must support this bill.
Provincial representative Gonzalo Atanasof sustained that the tax reform to the rural sector is incredible and assured that we can not continue to give in to the National government because the ones who end up paying are the people from Buenos Aires province.
The day did not pass without incidents. Yesterday morning while the bill was being debated in the Senate farm activists threw stones and bottles against the Legislature building while others tried to break into the building through the door on Calle 8 between 51 and 53, in La Plata. They clashed inside with members of the police force and members of the Kirchnerite activist group La Cámpora. The farm activists were thrown out of the building with the doors being locked afterwards. Some minor injuries were reported by both sides of the confrontation.
JJS: Despite the objection of some big farmers, the land tax actually has some well-informed supporters. Maybe land dues could also help settle the dispute between Argentina and Britain over the Falkland Islands. The winner would have to pay the loser!
Land Value Tax an old idea with lots of modern supporters
The economists John Kenneth Galbraith and Milton Friedman recommended Land Value Tax (LVT) for its fairness and intrinsic efficiency.
In recent years, prominent commentators have continued to argue for the introduction of LVT.
Land value taxation is a no-brainer It is both fair and efficient. It should be adopted — Martin Wolf Financial Times.
The taxation of future growth in land values to eliminate the fever of land speculation that has ended up destabilizing the entire global economy is what Labour should have done and should commit to in future. — Polly Toynbee The Guardian.
The Mirrlees review of UK taxation proposes the conversion of business rates to a site value only base and reform of council tax. Sir James Mirrlees, who led the review, said that his findings showed that the current tax system imposes unnecessary costs on the economy. There is no getting away from the political difficulty associated with some of the proposed changes. But there is also no getting away from the enduring costs of failure to reform, he said.
JJS: Farmers, like most people, object to paying taxes on land. Yet when society taxes land or by other means recovers land rent, it actually benefits farmers and everyone else. Thats because, when landowners must pay land dues, then they do not claim more land than they can use, leaving lots of land available for others to claim and use. Thats how the land tax broke up latifundia in Denmark, California, Australia, New Zealand, Taiwan, etc, reduced absentee ownership, increased owner occupancy, and made family farms the norm in those places.
Further, having to pay land dues discourages speculators from stockpiling land or bidding up its price, keeping it affordable to young families and other first-time buyers. And when speculators cant drive up the price of land, then no bubble can form, and collapses and recessions are avoided. Plus, when land costs less, farmers and other buyers need not borrow so much and find mortgages less onerous.
Since land dues are beneficial, how can they be made palatable? First, make sure they fall on all owners, including owners of urban land, which is far, far pricier than rural land. Second, dont let politicians fiddle with rates and exemptions; write the law so that all the value of all nature is considered common wealth and charge government with the duty of recovering all the common wealth without granting any special interest a loophole.
Once all the land rents are collected into the public treasury, then government could disburse the revenue as a dividend to all citizens. When lower income people receive their fair share of the value of the land in their region, then they will easily be able to afford their land dues, even if they happen to own well-located and valuable land. Owners of more desirable sites would pay in big land dues, owners of less desirable parcels would pay in little land dues, and everybody would get back the same size share.
Alternatively, government could try to spend public revenue in ways that aim to benefit everyone equally. However, such good intentions aft gang aglay. Instead of pay for things like roads or clinics from the general fund, government could instead sell bonds which it would pay off only from any rise in location value around the public project. Useful projects like parks and schools tend to push up site values and useless projects like trash incinerators and nuclear power plants pull down site values. If the bond market figured a project offered by government made sense — a bridge to somewhere — theyd buy the bonds; if they thought it were a dumb idea — a bridge to nowhere — theyd pass. Thus the discipline of the market would act as a governor on government profligacy. Politicians could collect land value but they would not be able to waste it, which should mollify landowners everywhere.
While ethanol investors grab land, elsewhere
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