“If only they knew now what they’ll know then …”
Try as hard as academics and bureaucrats might, it’s nigh impossible to do economics without getting politics all over you. If you find that competition accomplishes some goal equitably, the gallery calls you a rightist. If you find that cooperation accomplishes some goal efficiently, your detractors call you a leftist. Comes with the territory.
While economists try to steer clear of politics, political people, OTOH, grab their favorite economic policy and charge up the hill with it. Which could work out for us gadflies. Some of those political people have influence and may help us sway officialdom to calculate the worth of Earth in America. They’d do that because such a statistic would help them advance their own agenda.
Able to inform their listeners about how much society as a whole spends on land and resources, then …
* Environmentalists could extrapolate how much more valuable healed nature would be;
* Urbanists could dangle a fat plum before reformers of local revenue policy;
* Libertarians could show the feasibility of freedom from conformist work;
* Businesses could present an alternative to taxes on business; and
* Governments could demonstrate how successful they’ve been.
Advocates in all these movements might join the call to officials to calculate the total of all rents.
Loving land, environmentalists cringe when seeing others treat land as an object of speculation. Our seeking a figure for the rental value of nature seems suspiciously speculative. Yet emotion aside, a figure for how much we all spend now for land somewhat degraded must make some wonder how much land in better health would then be worth.
In defense of the priceless, ecological economist Robert Costanza employs his estimate of the replacement value of the global ecosystem. Imagine that we completely destroy the entire ecosystem—and survive. We’d have to do what it did, like deliver rain. Stuff like that gets costly. If environmentalists can receive Constanza’s financial figure, why not ours, too? BTW, what’s his calculation for what we’d have to pay the planet to perform the services it now performs for free (like create oxygen)? In 2011, Robert figured $125 trillion USD/yr.
Of course, nobody pays nature a penny of that. Instead, we reward owners, some of whom waste resources or leave behind waste. Rather than continue to enrich those who pollute and deplete, society could make them pay. Government could levy a tax, charge a fee, auction off permits, fine violators, institute land dues, whatever, upon those who chew up the environment and spew out pollutants. To avoid such expense, producers and investors would switch from foul, inefficient ways of providing a good or service to clean, efficient ways.
As damaging to land as misuse has been nonuse. Specifically, when owners underuse urban land, they displace others who then overuse rural land. That farmland lost to asphalt and concrete might be better left as a source of food to feed urban dwellers.
A policy that benefits the environment that some jurisdictions now use in order to raise revenue efficiently is to shift the property tax from buildings to land. To pay the land levy, owners of prime vacant lots put them to good use. Then downtown absorbs new building, leaving little or no construction to sprawl over the countryside.
To infill cities, making them more compact, many environmental groups have endorsed the notion of public recovery of land values. In general, however, just like economists claim neutrality, “greens” have been as silent about society’s entitlement to rent as their opponents have been vocal about claiming it.
Environmentalists do speak up about sparing hillsides, creek banks, and marshes and argue for zoning and other regulations. However, the only current way to profit from land is to develop it. An alternative way could both reward the owner and spare the land. That is, government could gather up the annual rental value in its jurisdiction and pay residents a share. Receiving their portion, owners prevented from developing their land would be compensated financially—and get to live in a vigorous environment.
A region with parks, open space, and wildlife corridors has higher value than one with wall-to-wall development. So does a region that humans have cleaned up. The cleaner the environment, the more valuable the locations, then the bigger the share. Residents have less motive to exploit their land in any way that’d lower its value and their share of rents. Talk about a positive reinforcing feedback loop.
Pie in the sky? Actually, it’s already happened. Once the public sees the size of natural values, many see that immense figure as a windfall and feel comfortable with their community recovering this socially-generated value. Citizens of Aspen CO—where site rents are sky-high—voted to tax locations a bit and share the revenue as housing assistance.
With “greens”, another movement that might join the call for an official figure for the value of land are urban advocates. Two key issues for them are the cost of housing and walkability. The public recovery of location value addresses both issues, hence those urbanists might like to know the size of that trigger.
When owners develop vacant lots and rehab abandoned buildings to earn more money in order to pay their land dues, they infill cities. In compact cities, residents do not rely on cars so much and walk more, or ride bikes and take buses. Furthermore, this revenue policy creates affordable housing:
* Those owners engaged in development add to the housing stock; as supply goes up, the price of housing goes down.
* Plus, paying the rental value of locations as land dues removes that value from the price of housing; locations of reduced price means housing of reduced price, too.
* And finally, sharing the recovered rent among residents—a la Aspen—helps residents afford to keep living on locations they love, even as the sites rise in value.
To enjoy these benefits, the urban advocates aware of them support public recovery of site value and might join the chorus calling for its measurement. And to free themselves of confining social norms, people who long to express their uniqueness move to cities. Amid the population density, they find both anonymity and others of their kind; they find the freedom to be themselves.
Modern libertarians claim yesteryear’s classical liberals as their intellectual lineage. And even though many libertarians see paying land value to community (instead of to a bank) as a tax and taxation as theft, and see receiving a share as a handout akin to a bribe, they are out of step with their roots. Libertarian heroes Adam Smith, Thomas Jefferson, and Tom Paine, and others all stated that spending for land—our mutual heritage—is something that all members of society would be better off sharing.
Along with lionizing past liberals, modern libertarians prefer their governments slender (as do freedom seekers of all eras). The revenue policy of sharing rents can grant their wish. Jurisdictions that recover the rents of land, such as Hong Kong and Singapore, need not tax labor or capital. The jurisdictions that pay rent dividends, such as Alaska paying residents the oil dividend, need not subsidize citizens, whether rich or poor. Presto. Governments regain their youthful figures.
Ironically, it was Alaskan Libertarians who won that oil dividend and the libertarian organization the Heritage Foundation that ranks Hong Kong and Singapore as two of the freest places on Earth, while remaining mute about their policy of capturing rents. Most modern libertarians are too anti-government to be aware of the libertarian nature of socialized rents but not all. Some rich libertarians and libertarian groups are on board, too. Others could join the call.
Not so much a movement as a discussion group scattered nationwide are wannabe reformers of economies; a passionate segment focuses on money. Among those, some would abandon the call to return to gold or any precious metal as a backing for newly issued currency. Instead, they’d use the value of land. If that makes sense, then they and their audience might want to know land’s value.
Another non-movement but an immense component of society wielding enormous influence is business, from local Chambers of Commerce to multi-national corporations. Most of them profit more from capturing rent than from returns to their inventiveness and delivering desirable goods and services. But no segment of society is monolithic.
There are some businesses who realize that putting prime land to good use attracts investment. After Pittsburgh widened the gap between its half of the property tax on land and its half on buildings, the city renewed its downtown without one penny of subsidy but rather with private investment. Savvy business people who take note of results also understand that it’s on prime sites where one can make the most money.
Such business people have on occasion endorsed shifting the property tax:
- Nationwide, the Multi-Family Homeowners Association, who are the owners of apartment buildings,
- In Portland OR, major developer John Russell, and
- Believe it or not, one year both the Greater Philadelphia Association of Realtors and the Chamber of Commerce.
Businesses tend to be less willing to leap before looking. You’d think they’d like to know the size of their new land dues. They could use their influence to win an estimate for the value of land.
A few politicians have endorsed public recovery of socially-generated land value.
Some state reps:
- In Michigan, a candidate and some office-holders;
- In California, Mike McGuire; and
- In Pennsylvania, Wayne Fontana.
Decades ago, presidential candidates of the two big parties—Democrats Edmund Muskie and Republican Jack Kemp.
In years gone, back when the idea of using land value as public revenue was the progressive policy, even US presidents voiced approval including Democrats FDR and Grover Cleveland and Republican Teddy Roosevelt. Louis Brandeis, a Supreme Court justice, was on board.
Across the pond, Winston Churchill and Lloyd George—two British prime ministers—pushed the shift of the property tax off buildings, onto land.
More than just talk, several members of the Oregon legislature have introduced bills. Elected reps did the same in Maryland, Minnesota, Missouri, New York, and Virginia. Connecticut passed legislation to allow certain cities to test out the tax shift; to date, none have.
Longer ago, several jurisdictions actually adopted the policy. Every place that has implemented it has benefited, in terms of higher wages, slower inflation, greater investment, gentler business cycle, wider spread prosperity, etc. For others to follow suit and take it mainstream, first they might like to know the size of their tax base.
In recent years, supporters of using natural value as a tax base have had to yield the spotlight to proponents of paying all citizens an extra income from whatever source. They call the stipend a “basic income” since the amount is supposed to cover one’s basic needs. Silicon Valley billionaires campaign on the proposal while some towns experiment with giving cash to their poor, no strings attached. The more practical-minded among the would-be grantors of a Basic Income consider using rent as the fund to draw from. They, too, may ask government to determine the value of land.
These movements—from environmentalists to politicos—have been at cross purposes in the past, which leaves society in a somewhat turbulent state and even the victor feeling a bit uncomfortable. To lose that social dissonance, some advocates in disparate movements welcome the opportunity to work across the aisle with opponents. Perhaps tabulating the natural surplus of our economy could become a mutual goal. It’s merely a matter of basic research; a new statistic need not be all that controversial.
Imagine this book motivating a reader to rally these various movements into a coalition that would urge officials to make an accurate accounting of society’s spending on nature and privilege. With that total known and kept up to date, we’d have an excellent indicator of the economy’s state of wellbeing and of the economy’s dynamic, of its next inhale or exhale. But first, those in charge would have to issue the order to those who do the actual number-crunching.
This article is Part 35 of a series highlighting the forthcoming book, “Bounty Hunter: a gadfly’s quest to know the worth of Earth,” by Jeffery J. Smith. To date, the experts have not risen to meet the challenge. Indeed, some have even stood in the way. Yet the payoff for knowing this datum is huge.
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