Owning: You Get to Keep Rent Or You Must Pay Rent?
|January 27, 2014||Posted by Jeffery J. Smith under The Geonomist Blog|
Owners Owe Rent, Nobody Owes a Tax
The present custom of paying an owner for land is an improvement over the old way of killing occupants of coveted land, of getting your fellow tribesmen together and driving out a different tribe. But paying owners is still unfair. As the judge said, all land titles descend from force or fraud. And this system of having to pay owners does leave a lot of people landless and homeless.
It’d be better to keep the paying part but not pay owners, rather, pay one’s neighbors. How’d that work? Each occupant would pay in Land Dues and each would get back Rent Dividends, an equal share of all the collected rents.
Land Dues would not change how much one pays – the market sets that. Land Dues would only change to whom one pays – not owners but neighbors. Justice dictates that owners are not entitled to keep rent; they’re obligated to pay rent.
Why Owners Owe
In such a geonomic system, you’d pay for the value of your land alone, excluding the value of whatever is on top of it. Some places already do this. Companies in US port districts, contractors in Hong Kong, and homeowners in Australia’s capital Canberra, all lease the land beneath their buildings because in all those place the land is owned by the public.
How much you’re willing to spend for a parcel of land (not for anything on it) is due to two things. One is nature, the other is society. You pay more for fertile soil, good views, deep harbors, rich mineral deposits, etc. And you pay more for proximity, for nearness to downtown, to metro stops, to good schools, to parks, and to be in a low-crime, high-income neighborhood. Often, it’s not objective land that we want but a relative location.
Locational benefits are not created by anyone owning but by society surrounding. Just the mere presence of a populace pushes up land value. What’s the value of land in a ghost town? Zero. What’s the value of land in an occupied town with the same buildings? Anything above zero.
The best indicator of land value is population density. The more that people choose a place, the more they have to pay to be there. No lone owner can claim to have created population density all by himself. It’s community who create value of land – something none of made and all of us need. That’s why site value makes the perfect common wealth.
Ideology: Not Left Nor Right But Organic
Is sharing the worth of Earth socialist? It could be, just as Christianity could be, since it calls for charity toward the poor and claims camels have an easier time passing thru the eye of a needle than the rich have of passing thru the Pearly Gates. Heck, critiquing the Federal Reserve could be called socialist since the Central Bank is the quintessence of capitalism.
Two places that capitalists rave about are Hong Kong and Singapore. Each year, conservative outfits like the Heritage Foundation rate these two city-states as the very best place for business and the freest, or very near the top. Ironically, however, both places are not such good examples of capitalism, but of geoism. Hong Kong owns its land, Singapore taxes its. Hong Kong funds affordable housing; Singapore does, too, and pays citizens a dividend.
Markets have no better friend than geoism, better than even capitalism, with its built-in cronyism. Land Dues and similar fees make it possible to repeal counterproductive taxes. Rent Dividends make it possible to abolish wasteful subsidies. Markets like that because both taxes and subsidies distort prices. Taxes make goods more costly, subsidies make bads more affordable. Distorted prices distort the choices of both producer and consumer and on this tilted playing field you get less competition and more exploitation of nature, worker, and consumer.
Another taking that markets don’t like is “private taxation” or “rentention”. When owners, lenders, and speculators retain the rents for land, they bid up the price for land; they inflate demand. While speculating, awaiting higher prices for their parcels, they under-use them; they curb supply. Scarce supply with excess demand not only makes land less affordable but also blows a bubble that ends in recession. None of this is good for markets, especially if you want markets to be free of statist interference.
When people do get a Land Dividend, that benefits the market, too. The extra security helps people choose exactly what they want to do to make more money or to contribute to society or to develop themselves. It helps the basement inventor come up with a better mousetrap (altho’ you couldn’t tell, judging by what the rich do with their no-strings-attached largesse). It creates more consumers and investors willing to try novel goods and services. All that creates many unexpected ways to make money.
Progress of All Stripes: the Yield of Justice
All that activity also ratchets up the pace of technological progress. To date, new technology has not improved the quality of life for everyone. The only way that it ever could would be if everyone gets a share of the rise in land value, a value that’s pushed up by techno-progress. Check out the astronomical site values in Silicon Valley, Silicon Forest, Silicon Harbor, and silicon everywhere. As technology advances, the cost of living falls (we can’t tell now because of inflation). Rather than be a burden upon government, the Rent Dividend would cut the cost of living, thereby reducing the demands placed on government.
Note that a dividend is not a guarantee but a share. If there is no surplus in any particular year, there is no dividend. However, since society spends so much money for the nature it uses – indeed, FIRE (Finance, Insurance, & Real Estate) is the biggest sector in the GDP – it’d be a very freakish year, if ever, when there’d be no surplus of natural value to share.
In a fair economy, some people would be richer than others, because we each do provide different inputs into production: different talents, different dedication. But fortunes would be human-scale and every penny would be earned. And nobody would be poor. So far, the poor have always been with us. But have we ever tried economic justice – or geonomics – to eradicate it, so everyone could prosper?
Justice, the Basis
Owners do have a right to the value of their land but no more right than do their neighbors. And since owners are neighbors, too, they also have a right to the value of the land of their neighbors. Since rights are equal, each person has a right to a share of land value that’s no more and no less than the share of everyone else – each resident has a right to an equal share of the value of all the land in one’s region.
Equality does not mean everyone would get equal income in total but that everyone would have equal rights. And not just political rights like voting but economic rights, too. The most basic economic right is to “reap as you sow”.
You should get all your wages for your labor, untaxed. You should get all your profits for your capital (savings and investments into useful enterprises), untaxed. And, most crucially, you should also get an equal share of the surplus output that your society generates.
What is social surplus? Mostly, as David Ricardo showed almost two centuries ago, it’s the extra output due to the advantages of a location. Somebody could employ the exact same quantity and quality of labor and capital on one location and do a certain amount of business but on another location do a very different amount of business. Check out a gas station near a freeway off ramp vs. one in the middle of nowhere. The extra commerce at the off ramp is due to only one thing: location, location, location.
The Psychology of Normalcy, a Bias
The problem with sharing rent does not lie in the realm of ethics or pragmatics but in psychology. People demand jobs, not justice. People lack the self-esteem to demand a fair share, but are willing to demean themselves to do nearly anything for money. Indeed, some of the “best” jobs (in the sense of salary) are some of the worst jobs; they don’t grow the pie but destroy value: a lawyer for a polluter, a sales person for junk destined for a landfill, an engineer in nuclear power, a paper-pushing bureaucrat in a big corporation or government agency erecting hurdles for everyone else; there’s good money in bad work. People need money and can see no other way to get it than to occupy a job, never mind start their own business.
Americans in particular are allergic to sharing. But most people – since they’ve never been rich – think that all income must come from their labor or capital, from their work or savings. But they’re wrong. The very rich are not very rich because they work harder or smarter but because they operate in a mass market that’s filled with favors for insiders. The rich get a free lunch, the corporate welfare such as bailouts, agri-business subsidies, bloated military contracts, token fines for violating standards, etc. The rich do not feel the least bit of embarrassment from getting something for nothing. It’s an attitude the rest of us could stand to emulate.
To win such a just geonomy, we must accept as normal and natural getting a fair share of Earth’s worth, just as we accept the notion of getting air to breathe without having to pay for it (so far), of getting room to walk on the sidewalk without having to pay for it, of getting beefsteak instead of horsemeat when the former is on the menu without having to pay for the customary honesty.
The New Normal
We have equal rights, we’re all Earthlings, we all have an equal right to a fair share of Earth’s worth. That’s not socialism, that’s not capitalism. That’s geoism and it needs to become the new normal.