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Absentee Ownership
Henry George: The Irish Land Question (1881) The best measure of rent is, of
course, its proportion to the
produce. The only estimate of Irish rent as a proportion of which I
know is that of Buckle, who puts it at one-fourth of the produce. In
this country I am inclined to think one-fourth would generally be
considered a moderate rent. Even in California there is considerable
land rented for one-third the crop, and some that rents for one-half
the crop; while, according to a writer in the Atlantic Monthly, the
common rent in that great wheat-growing section of the New Northwest
now being opened up is one-half the crop! ...
... In New York, in San Francisco, in Washington, Boston, Chicago, and St. Louis, live men who own large tracts of land which they seldom or never see. A resident of Rochester is said to own no less than four hundred farms in different States, one of which (I believe in Kentucky) comprises thirty-five thousand acres. Under the plantation system of farming and that of stock-raising on a grand scale, which are developing so rapidly in our new States, very much of the profits go to professional men and capitalists who live in distant cities. Corporations whose stock is held in the East or in Europe own much greater bodies of land, at much greater distances, than do the London corporations possessing landed estates in Ireland. To say nothing of the great land-grant railroad companies, the Standard Oil Company probably owns more acres of Western land than all the London companies put together own of Irish land. And, although landlordism in its grosser forms is only beginning in the United States, there is probably no American, wherever he may live, who cannot in his immediate vicinity see some instance of absentee landlordism. The tendency to concentration born of the new era ushered in by the application of steam shows itself in this way as in many others. To those who can live where they please, the great cities are becoming more and more attractive. And it is further to be remarked that too much stress is laid upon absenteeism, and that it might be prevented without much of the evil often attributed to it being cured. That is to say, that to his tenantry and neighborhood the owner of land in Galway or Kilkenny would be as much an absentee if he lived in Dublin as if he lived in London, and that, if Irish landlords were compelled to live in Ireland, all that the Irish people would gain would be, metaphorically speaking, the crumbs that fell from the landlords' tables. For if the butter and eggs, the pigs and the poultry, of the Irish peasant must be taken from him and exported to pay for his landlord's wine and cigars, what difference does it make to him where the wine is drunk or the cigars are smoked? ... read the whole article Henry George: The Crime of Poverty (1885 speech)
Is it not a self-evident truth, as Thomas Jefferson said, that "the
land belongs in usufruct to the living," and that they who have died
have left it, and have no power to say how it shall be disposed of?
Title to land! Where can a man get any title which makes the earth his
property? There is a sacred right to property — sacred because ordained
by the laws of nature, that is to say, by the laws of God, and
necessary to social order and civilisation. That is the right of
property in things produced by labour; it rests on the right of a man
to himself. That which a man produces, that is his against all the
world, to give or to keep, to lend, to sell or to bequeath; but how can
he get such a right to land when it was here before he came? Individual
claims to land rest only on appropriation. I read in a recent number of
the "Nineteenth Century," possibly some of you may have read it, an
article by an ex-prime minister of Australia in which there was a
little story that attracted my attention. It was of a man named
Galahard, who in the early days got up to the top of a high hill in one
of the finest parts of western Australia. He got up there, looked all
around, and made this proclamation: "All the land that is in my sight
from the top of this hill I claim for myself; and all the land that is
out of sight I claim for my son John."
Henry George: Thou Shalt Not Steal
(1887 speech)That story is of universal application. Land titles everywhere come from just such appropriations. Now, under certain circumstances, appropriation can give a right. You invite a company of gentlemen to dinner and you say to them: "Be seated, gentlemen," and I get into this chair. Well, that seat for the time being is mine by the right of appropriation. It would be very ungentlemanly, it would be very wrong for any one of the other guests to come up and say: "Get out of that chair; I want to sit there!" But that right of possession, which is good so far as the chair is concerned, for the time, does not give me a right to appropriate all there is on the table before me. Grant that a man has a right to appropriate such natural elements as he can use, has he any right to appropriate more than he can use? Has a guest in such a case as I have supposed a right to appropriate more than he needs and make other people stand up? That is what is done. Why, look all over this country — look at this town or any other town. If men only took what they wanted to use we should all have enough; but they take what they do not want to use at all. Here are a lot of Englishmen coming over here and getting titles to our land in vast tracts; what do they want with our land? They do not want it at all; it is not the land they want; they have no use for American land. What they want is the income that they know they can in a little while get from it. Where does that income come from? It comes from labour, from the labour of American citizens. What we are selling to these people is our children, not land. ... read the whole speech We are selling land now in large
quantities to certain English lords, who are coming over here and
buying greater estates than the greatest in Great Britain or Ireland.
We are selling them land; they are buying land. Did it ever occur to
you that they do not want that land? They have no use whatever for
American land; they do not propose to come over here and live on it.
They cannot carry it over there to where they do live.
It is not the land that they want. What they want is the income from it. They are buying it not because they themselves want to use it, but because by and by, as population increases, numbers of American citizens will want to use it, and then they can say to these American citizens: "You can use this land provided you pay us one-half of all you make upon it." What we are selling those foreign lords is not really land; we are selling them the labor of American citizens; we are selling them the privilege of taking, without any return for it, the proceeds of the toil of our children. So, here in New York, you will read in the papers every day that the price of land is going up. John Jones or Robert Brown has made a hundred thousand dollars within a year in the increase in the value of land in New York. What does that mean? It means he has the power of getting many more coats, many more cigars, dry goods, horses and carriages, houses or much more food and wine. He has gained the power of taking for his own a great number of these products of human labor. But what has he done? He has not done anything. He may have been off in Europe or out west, or he may have been sitting at home taking it easy. If he has done nothing to get this increased income, where does it come from? The things I speak of are all products of human labor — someone has to work for them. When a man who does no work can get them, necessarily the people who do work to produce them must have less of the products of human labor than they ought to have. ... read the whole article Henry George: In Liverpool: The Financial Reform Meeting at the Liverpool Rotunda (1889)
Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)
Upton Sinclair: The Consequences of Land Speculation are Tenantry and Debt on the Farms, and Slums and Luxury in the Cities
Charles T. Root — Not a Single Tax! (1925)
Mason Gaffney: The Taxable Capacity of Land Another attractive feature of land taxation is its interesting positive effect on the economic base of a city. It strengthens it by its tendency to hit absentee owners harder than resident owners. The land fraction in real estate is generally highest in the CBD of any city, so that is a favorite place for absentees to buy and hold. They like the steady income, and the "trophy" quality. The surplus in real estate is what attracts outside buyers, and land is what yields the surplus. About 2/3 of downtown Los Angeles is owned by non-resident aliens, for example. In a more workaday city, Milwaukee, the absentee owners consist of former residents, or their heirs, who grew too rich to abide the harsh winters. Consider the effect on your balance of payments. When you get more tax money from absentees, money that used to flow to Tehran, Zurich, or Palm Beach now flows into your local treasury to pay your local teachers and city workers, and relieve your builders and building managers. In this way taxing land actually acts to undergird the value of its own base. ... Read the whole article
a synopsis of Robert V. Andelson and James M. Dawsey: From Wasteland to Promised land: Liberation Theology for a Post-Marxist World
(W)hen
investors from one country buy property in other countries they are
seeking site rent, which
they hope to obtain directly from tenants, or indirectly by selling
land in the future when the price or capital value has increased....
The site rent that is so attractive to overseas investors can be
kept in the country quite easily - - by shifting taxation from labor
onto land."
Because George asserted, "We must make land common property," he is sometimes erroneously regarded as an advocate of land nationalization. But, as we have seen, he was nothing of the sort. The expropriation of land makes it practically impossible to fairly compensate people for the improvements to land, which are their legitimate property. George's system renders to the community what is due to the community, without doing any violence to the wealth that has been fairly earned by productive workers. Read the whole synopsis
Mason Gaffney: Nonpoint
Pollution: Tractable Solutions to Intractable Problems
The Special Challenge to
Economic Thinking
The Search for Surrogates Sources of Nonpoint Pollution What Problems are Created? What Problems are Unsolved by Excise Taxes on Surrogates? The Case of Forestry The Case of Urban Settlement The Case of Agriculture The Common Theme from Forest, City and Farm Solutions ... In fact, land use decisions
are superimposed on a
settlement pattern based on massive market failure in land. The
phenomena rather imprecisely called "land speculation" and "absentee
ownership" betray market failure; and no one disputes there is massive
regulatory failure in pricing and subsidizing transportation, which in
turn determine land rents and values. Result: the land market is
not efficient; land is not properly priced and allocated to begin
with. This is the thread I will follow, although it may run afoul
of The Great Secular Superstition. ...
This perversion does not occur by accident. Spread and sprawl in forestry, cities and agriculture are common results of the dominant force driving American politics, the quest for unearned increments to land value. Thorstein Veblen in his final testament, Absentee Ownership, noted that American farmers
...have always, ... wanted something more than their ... share of
the soil; not because they were driven by a felt need of doing more
than their fair share of work ..., but with a view to ... getting
a little something for nothing in allowing their holdings to be turned
to account (Veblen, pp. 138-40).
To enhance those values they will now invoke any complaisant higher power, and since God already did His bit by donating the Earth, they turn to Government. But the profile of land values is like a volcanic island. To raise the top and the slopes and the shores we must also raise the shallows above sea level, where they shed the waters and come into use. Rising population is one factor pushing up the profile of values, but not the strongest one. Increased demand per capita is the main factor. These demands include all the spurious demands described above, like the demand of government for land to "bank" and hold idle, and the demand of speculators "with a view to getting a little something for nothing." Veblen went on to say that farm technology adapts to the Procrustean bed of absentee ownership: rather than leading, technology lags changes wrought by the ownership pattern. Thus it is not "society" or "efficiency" alone that mandate inorganic monocultural chemical farming, but also the peculiar needs of absentee owners holding more land than they can work themselves or with their families. Logic of, by and for this minority is set up as logic for all. If this be true, or (more likely) partly true, it must be admitted that most academics go along and get along with this dominant minority. Organic farming, biological controls, appropriate technology, IPM, and other countervailing logics had to come from screwballs outside the system, plus a few martyrs and kamikazes inside it, dominated as it is by accommodating "regular fellows," "good old boys," noncontroversial administrators who "understand local needs" and "work with community leaders," and complaisant faculty who enjoy "credibility." Are we part of the problem? Let everyone debate that with his own conscience, and be fair enough to lose a few points. Read the entire article Mason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth Where land is valued less for amenities, and more for cash crops, absentee ownership runs high in much of Iowa and central Illinois, with rents going to Chicago lawyers and European investors. Likewise the oven-like Imperial and San Joaquin Valleys of California, whose absentee owners are more likely to live in coastal California, but also have addresses all over the world – some real, and some in tax havens (Gaffney, 1982). In such regions, land values per capita run high. Vilas County, for example, an abandoned old “cutover” county centered on Eagle River, now has the highest land value per capita in Wisconsin, thanks to its many little lakes, and the high social status of summering there. ... Owner-occupancy and operation.
There is considerable evidence
that the result of heavy land-value taxation is to discourage
absentee owners, and induce sales to residents, and operators. Rural
Denmark is one case in point. Urban New Westminster, B.C., is another
– it long boasted the highest rate of resident-ownership in
Canada, at a time when it was the only city in B.C. exempting
buildings 100% (and before a boom in apartments, which I suspect
changed the data). On the east side of the San Joaquin Valley, small
farms and small businesses are related to resident-ownership and
owner-operation, both urban and rural. Another Goldschmidt-type study
or two are needed to establish the relationship definitely, for
skeptical scholars. Read the whole article
Mason Gaffney: Land as a Distinctive Factor of Production Few people can invest
heavily in an asset
of high price and deferred
yields. Those who can do so have a field with fewer competitors
than most, and tend to expand widely. As Loyd Fisher, a rustic
Nebraska land
economist twanged to me and others 30 years ago, "When a rancher
buys these days it ain't the quarters
roundin' out, it's the sections gobblin' the quarters."29
29. For those
unfamiliar
with the American township survey system, as "section" is 640 acres or
one square mile; a quarter is 160 acres.
Those with existing cores of rent-yielding land -- “existing nuclei” -- enjoy a continual flow of discretionary funds they can use to buy more land. The advantage of a head start snowballs over time. Buying with equity funds is only the beginning. Land is the basis for extending credit. The "sections" go to the banks for accommodation to buy the "quarters." As Rainer Schikele wrote, "The basis of credit is not marginal productivity, but collateral security." A major factor giving one a good credit rating is the prior ownership of land. Thus, owning land is not just dominated by, but also dominates access to long-term credit. Here is a positive feedback loop: it takes good credit to buy land, and prior ownership of land gives one good credit. Those already owning land have access to more land at a lower carrying cost than those trying to enter the market from poverty. The result is a tendency for land to agglomerate in the hands of the financially strong (cf. B-8). Just why some should want to expand so much as to be "alone in the midst of the earth" has puzzled man gentler souls than Isaiah. Thorstein Veblen never turned his acidic irony to better account than in his last book, Absentee Ownership, describing acquisition for acquisition's sake:
30. The Latin sacra means either accursed or
holy, the emphasis depending presumably on whether described by a
critical observer or one possessed. "Fanatical" seems to capture
the double-edged meaning being relished by Veblen. It should give
pause to many modern economists with their weakness for treating
self-interest as The Holy Spirit.
As Veblen taught, what is true of Nebraska sections and quarters is equally true of giant and small world corporations. The worldwide merger mania of the insatiable '80s followed the same pattern. Beneath the corporate veil, most corporations are large collections of real estate: industrial, commercial, agricultural, mineral, transportation, communications, and utility real estate. Read the whole article Mason Gaffney: Two-Rate in Reverse In 1955, Spiro Agnew was a
Maryland State Assemblyman on the
rise. He carried a new law that let
tax assessors value farmland on its
"use-value" as farmland, instead of market value. It let owners who
were farming for unearned increments around Baltimore and D.C. hold
out with low carrying costs. "Farmland" meant land used for
farming,
and any play at farming would qualify. Under this law, a relative of
mine with 102 acres in Maryland near Western Avenue, the D.C. line,
kept just two steers thereon to validate his farmland assessment
status. Holding for the rise "never crossed his mind." Right --
except, whenever such land is condemned for public use, courts
everywhere have held that compensation must be based on speculative
market value. ...
It is not just peri-urban land speculators who gain. A large chunk of land value in rural regions is not based on cash flow from food and fiber, but on amenities. Wisconsin is a major playground for rich urbanites from nearby Chicago, Milwaukee, Minneapolis and St. Paul. "Use-value" assessment exempts this chunk of value completely, for use-value is based on capitalizing the net cash farm income from growing crops, and, in the Wisconsin law, specifically corn. The highest land values per capita in the State are in Vilas County up in the north woods, once dismissed as worthless "cutovers." Vilas' barren podzol soils are worthless for corn, but sparkling lakes bedizen the County. Values per capita in Vilas are 6 times those in Milwaukee. Rich recreationists and "investors" (read speculators) are gobbling up the "wild forties." Shoreline parcels are like diamonds among coal. ... 100 years ago, American Georgists made a big point that city land outvalues rural land many times over. One implication is that taxing city land is taxing the rich, and we can ignore farmland. Some land-taxers counsel that farmers are easily misled to oppose us, so leave them alone and convert the cities. But rich city folks also own choice rural lands.
those
are a few of the struggling family
farmers whom use-value assessment of farmland saves from destitution.
The privilege of use-value assessment stretches even beyond farmlands, vast as they are. Timberland in most states gets the same preferred treatment, only better. About 1/3 of the privately owned land in the U.S. is in timber. In California, owners (mostly huge corporations) may put the land into the "TPZ" class. The standing timber is then exempt, and taxed only at harvest, at 2.9%, much too low a rate to make up for a 60-year lifetime of exemption. County assessors have to value the land separately on its putative value for growing timber, following a State-legislated formula that is tailored drastically to understate even that low value (California Revenue and Tax Code, Section 434.5). Much of that land, though, has alternative uses, e.g. for retirement and vacation homes and resorts, the outliers and pioneers of urban sprawl. There are also mineral values, hunting, fishing, rifle ranges, grazing, campsites, tourism, rights of way, lumber camps, loading sites, water sources, lakes, log storage, landings - there are many things to do with 1/3 of a nation's land. Those uses are all declared "compatible" with timber, hence land values derived therefrom are tax-exempt. Read the whole article Mason Gaffney: George's Economics of Abundance:
Replacing dismal choices
with practical resolutions and synergies
a. Taxing land
sharpens market incentives via the leverage effect noted earlier.
Thus it makes the land market work better, and follow its
natural infilling, centralizing tendency. Curbing urban sprawl does
not overrule the land market; it is a byproduct of making the market
work better. Richard Hurd, as cited above, noted that land values
are marked by continuity in space. That means the market is telling
owners to develop land contiguously; to anchor new building to
established strength. Sprawl, then, is not market driven, but
market-defying. It is the product of market failure. Georgist
taxation makes the market work better.
b. Fosters resident ownership, civic participation Riverside, CA built itself a lovely downtown pedestrian mall, back when that was in vogue, and has been sorry ever since. Nothing worked out, retailers deserted, and half the stores are empty. Recently I asked the developer of Tyler Galleria, a success, why he thought downtown failed, and got the answer in two words: "absentee ownership". I should have known, I've preached it for years. An agricultural adviser in Fresno
once told an impressionable boy
"The best dressing for soil is the owner's shadow, applied daily". In
town they say "Who's keeping the store?" Absentees aren't the
only negligent owners, nor are they all bad. Torpid owners are the
problem and they come in many forms. Basically, to make a city go
you want to be rid of owners who see real estate mainly as a cash cow
for their retirement, and replace them with owners who see it as a
vehicle for their enterprise, who "apply their shadows" daily. Those
shadows will also follow them into local civic clubs, and
enterprising downtown and neighborhood associations for making joint
improvements. Read the whole article Mason Gaffney: How to Revive a Dying City Riverside built a downtown
pedestrian mall when they were in vogue, and has been sorry ever since.
It did not work; retailers deserted, and half the stores are empty. I
asked the developer of a successful mall why he thought downtown
failed, and got a two word answer: "absentee ownership." I should have
known, having preached it for years.
Farm advisers say, "The best dressing for soil is the owner's shadow, applied daily." In town they ask, "Who's keeping the store?" Absentees aren't the only negligent owners, nor are they all bad. Torpid owners are the problem, and they come in many forms. A city wants to be rid of owners who see real estate as a cash cow for their retirement, and to replace them with owners who see it as a vehicle for enterprise and who apply their shadows daily. The shadows follow them to local civic clubs and to enterprising downtown or neighborhood associations for making joint improvements. The surplus to land attracts outside buyers. Absentees, redundant parties in production, are often top bidders for pure ownership, which is the legal right to receive land rent plus unearned increments that accrue over time. Georgist taxation cuts directly into rents and unearned increments, which attract absentee owners; it spares the rewards of enterprise. It thereby effects a market transfer of ownership from absentees to occupants, with the community benefits that follow. In a period of rising concern over alien takeovers of U.S. real estate, these points merit focused attention. Read the whole article Mason Gaffney -- Canada's System of Revenue Sharing It seems to me therefore that we
need to face up to the question
that is known in my trade as Fiscal
Federalism, that is, how is money
going to be distributed by the federal government out of its
so-called surplus, either to people or the States, or localities? ...
The reason it's so hard to sell growth policies at the local level today in the United States is very much due to the fact that the United States federal government taxes people and it gives subventions to landlords. So the landlords can get the subventions without having the people. So who needs people? That's it in a nutshell. We need to reverse that, I think, if we're going to be able to make Georgism work at the local level. ... At any rate, let's begin by looking at the similarities between the federal systems in the United States and Canada. In both countries we find something called 'vertical balancing' which means that the senior governments send money to the junior governments. We find also something called 'horizontal balancing' which means that the payments are made more to the poorer governments, those that are poorer on a per capita basis, than to richer ones. ... ... Cannan's Law. ... But the general idea is, you may think you have tenure control of land but if the municipal government can tax that land and use that money to finance public welfare services, public education and other things that are open to all comers, then you will end up with an uneconomical distribution of population. ... At the same time, in both countries you find something I will call Hammer's Law. This is not a carpenter's tool but again the name of a man, an economist in Missouri, who observed in 1935 that if you compared population to land values in the different counties of his State (in the very poor counties of the Ozarks the land was hard scrabble land of very little value, with the very rich lands in the north-western part of the State, which resembles Iowa) you found that the population density was much greater on the very poor land of the Ozarks than it was on the very rich land of the northwest. ... Now another similarity to the two countries us that the subventions that do go from the federal government to the provinces in Canada (and you find a similar thing in the United States) do not come from the richer provinces. They come instead from the general fund, the general taxpayer. There is in other words more vertical balancing than there is horizontal balancing (horizontal balancing you remember means equalization among the different jurisdictions). It's a little like what somebody said about foreign aid. 'Foreign aid is a device by which poor people in rich countries are taxed to subsidize rich people in poor countries.' We'll see that equalisation in most countries works something like that; that is, in addition to this inter-provincial equalisation, there's a tax shift involved where local sources of taxation like the property tax are being displaced by the federal income tax. I suppose Ferdinand Marcos would be a splendid example of the kind of person I was talking about in the poor country and in West Virginia you have all these coal companies whose owners live in Palm Beach, whose shareholders live in Palm Beach and such places, who benefit from an inter-state equalisation that benefits West Virginia. Well these are similarities. ... The federal aid in Canada goes to provinces, whereas in the United States it goes to specific cities, The U.S. Congressman likes to have his fingerprint, as they say, on every dollar that goes from Washington. ... So in the States the idea has been: Tax the States according to their population and then give the money back according to political power. In the United States Senate it means that the smallest State has just as much clout as the biggest State or would have if their senators weren't so merchantable. (I mean, in California when we need something we just look to Nevada or one of those places for a Senator who is having difficulty raising funds for his next election. But that's another story.) ... But the most delightful distinction about Canadians is the strong and explicit recognition among almost everyone, even if he's an economist, who discusses this subject, that different resource endowments are the basis of inter-provincial differences. Equalisation in Canadian politics means sharing the economic rent. Everybody talks that way. Canadian economists even when they come to the States talk that way. Just as though rent were a permissible word in polite discourse. It's very refreshing. However there's a very selective attitude towards rent -- towards what rents are shareable, I should say.
But now how about the rents that are generated by the valuable lands of Montreal, or Toronto, or some of those other big and powerful cities in the east? They are not fair game. As a matter of fact, if you pore through the fine print of the equalization law, which I did on the airplane, you find the most interesting exception to what's included in the formula. I'll explain the formula to you in a moment if you are still awake. The formula says that the greater the capacity to raise taxes that a province enjoys, the less will be its equalization payment. And various potential tax bases are included in this formula. And one of those is the property tax. But then you look at the fine print and only the improvements are included. The land is specifically excluded. Very pecular. In the formula as it's commonly printed you don't see that exclusion; it's only in the footnote. But in the footnote it says 'Instead of the value of land we will substitute the gross provincial product.' Of course, all right thinking people know that land value is in direct proportion to the growth of the provincial product. Or do they? I always thought that was the product of other inputs. What it means is that if a province has a great deal of valuable land which is not being used to a highest and best use, that valuable land will not be included in its potential tax base, and it can continue to get subventions from the federal government. Whereas on the other hand if its potential tax base includes oil and gas, then the revenues that it receives from that, or the ability it has to receive revenues from that, is counted against it in the sharing formula. So this is a very peculiar sort of rent sharing. Some rents are shared and others are not. You might even call it a conspiracy against Alberta. I'm sure that's the way they look at it. Now another difference is the high degree of foreign ownership. Actually there's no higher degree of absentee ownership in Canada than there is in the United States but it is much more visible because it's international absentee ownership, whereas our absentee owners live in some other corner of the United States, at least some of them do, or in Canada -- we have quite a few of them. Of course Hong Kong, Belgium, you name it. This high degree of absentee ownership, as Bob Williams more than hinted this morning, is one of the reasons for the success of the populist parties. They recognise property ownership is an alien phenomenon in some considerable measure and therefore a legitimate target for attack. Some economists say that the ideal taxpayer is a non-resident alien. In the case of these foreign owned resources you're getting pretty close. ... Now let's look at the sharing
formula. The sharing formula in
Canada is essentially based on population and potential tax base.
And it can be made to look very complicated but I think I've boiled
it down to its essence. You take a province's percentage of the
population of Canada, and then you take the percentage of the tax
base that it has, subtract that and that gives you another
percentage. And then you multiply that times the total tax revenue
that's collected throughout Canada from that tax source, and then you
pay them that amount out of the provincial treasury. ...
The conclusion of all this is that the Canadian system is really better in terms of its Georgist implications because the payments to the provinces, with all the faults that I've described, are essentially based on population. Population is in the formula. And if you compare this with the way things are done in the States, population plays a very minor role in the formula for equalisation payments in the United States. Now, how should it be done?
Well, there's a well known Georgist
economist who figured this out a long time ago and wrote an article
about it. His name is Colin Clark. ... He came up with a plan for
collecting economic rent at the federal level, and he said what we
really should do, and this I think is the ultimate equalisation
payment, is we should classify local jurisdictions according to
land value per capita, and those that have the least land value per
capita, we'll leave all of that land value for them to use for local
purposes. But then we will graduate the federal land tax according to
the amount of land value per capita in the jurisdiction, and thus we
will have a federal tax that automatically achieves inter-regional
equity, without all this razzmatazz that I've been describing about
inter-regional equalisation payments. Read the whole article
Mason Gaffney: Sounding the Revenue Potential of Land: Fifteen Lost Elements Multiplier
effect of taxing
absentee owners to spend funds locally Transferring rents
from absentees to be
spent locally improves the State economic base and balance of payments
(except to the extent the State outsources its work). Focusing taxes on
land means absentees cannot remove the tax base from our state. The
worst they can do is sell it to residents, thus raising the quality of
life. California's
legislative analyst, William Hamm, estimated in 1978 that over fifty
per cent of the value of taxable property in California was owned by
residents of other states or nations. The potential impact of
this factor is enormous.
There is a curious silence on the matter. When it comes to discriminating against immigrant workers, xenophobia fills the air. There is a hue and cry against outsourcing. Taxing alien property, however, pushes a different button. Yet, here is one instance where localism may be harnessed to help create a more healthy society. The purpose of democracy is to represent the electorate, not the absentee who stands between the resident and the resources of his homeland Read the whole article Mason Gaffney: The Taxable Capacity of Land The question I am assigned is whether the taxable capacity of land without buildings is up to the job of financing cities, counties, and schools. Will the revenue be enough? The answer is "yes." The universal state and local revenue problem today is whether we must cap tax rates to avoid driving business away. It is exemplified by Governor Pete Wilson of the suffering State of California. He keeps repeating we must make a hard choice: cut taxes and public services, or drive out business and jobs. (When a public figure gives you two choices you know they're both bad, and he wants one of them.) The unique, remarkable quality of a property tax based on land ex buildings is that you may raise the rate with no fear of driving away business, construction, people, jobs, or capital! You certainly will not drive away the land. However high the tax rate, not one square foot of it will put on a track shoe and hop out of town. The only bad thing to say about this tax's incentive effects is that it stimulates revitalization, and makes jobs. If some people think that is bad, maybe this attitude is the problem. There is the answer to Governor Wilson' dilemma. I hope here in The Empire State you will supply a practical demonstration of the answer, one we may then use to inspire The Golden State. California now, following Proposition 13, has become a morality play, a gruesome object lesson in what happens when the property tax is pushed down toward zero. It forces higher taxes on production and exchange. Non-property taxes, you know, mostly have the character that they "shoot anything that moves," penalizing and discouraging economic activity. New buildings gain by having a lower property tax burden, it is true; but they bear the brunt of these new taxes and impost fees up front, at the time they are built. These offset the benefits of their lower property tax rate. Most California land, on the other hand, is now taxed at well below the allowable max of 1%. Speculators may sit on it at little tax cost, however many highways and water and sewer lines run to and past it, however many policemen are guarding it from trespass. Little wonder that California enterprise, once so dynamic, flexible, and vital, is giving way to stasis and decay. We used to lead the nation in making jobs; now in losing them. We used to lead in school quality; now in jail population.
Another attractive
feature of land taxation is its
interesting positive effect on the economic base of a city. It
strengthens it by its tendency to hit absentee owners harder than
resident owners. The land fraction in real estate is generally
highest in the CBD of any city, so that is a favorite place for
absentees to buy and hold. They like the steady income, and the
"trophy" quality. The surplus in real estate is what attracts outside
buyers, and land is what yields the surplus. About 2/3 of downtown
Los Angeles is owned by non-resident aliens, for example. In a more
workaday city, Milwaukee, the absentee owners consist of former
residents, or their heirs, who grew too rich to abide the harsh
winters.
Consider the effect on your
balance of payments. When you
get more tax money from absentees, money that used to flow to Tehran,
Zurich, or Palm Beach now flows into your local treasury to pay your
local teachers and city workers, and relieve your builders and
building managers. In this way taxing land actually acts to undergird
the value of its own base. Read the whole article A high fraction of California real estate is absentee owned. The Sultan of Brunei, for example, owns several houses and sites in Beverly Hills and Bel Air. California's official Legislative Analyst, the highly respected William Hamm, estimated in 1978 that over fifty per cent of the value of taxable property in California was absentee-owned. This is such a bold, bare, and enormous fact it is hard to understand how Californians have been misled into resisting the urge to levy land taxes on all this foreign wealth. They may be put off by the argument that they need to attract outside capital, but that carries no weight when considering the large percentage of this property which is land value, and which may be taxed separately from buildings. Some half of any reduction in California property taxes leaks to out-of-state owners. Nor is this the only leakage.
This substantial leakage of
economic base results in multiple
declines in state income. Cities love to commission "economic
base" studies, and a small industry of moonlighting economists love
to perform them, usually to rationalize subsidizing some
transnational conglomerate to put in a branch plant. They use canned
"input-output" models to show how every dollar invested generates
$2-3 of induced investment locally. Yet no one has seized on this
obvious case to show that local property taxes, substituted
for
absentee rent payments, creates multiple increases in local income.
The whole intellectual apparatus is dominated by absentee investors
and used for their benefit.... read
the whole essay
Karl Williams: Landlording It Over Us
Geoism seeks to expose the many forms of unearned wealth, or privilege,
that exist in our monstrous economic system. Monopoly rights are the more obvious
examples of economic privilege, but less noticeable is the massive
wealth to be gained by using the Global Commons (especially land)
without reimbursing the rest of us. ...
Here we’re going to look at one of the most obvious examples of unearned wealth – the massive riches accumulated by the great landowners of Britain. Remember, it’s not the acreage of land that is important, but the value of the land. ... Britains' wealthiest man gets rich the easy way -- he has his underlings collect and bank his rent. And if the rents from his vast land holdings weren’t enough, soaring property prices have escalated his net worth sky high – to be exact, UK£11.5 billion. To give him his full title, he is His Grace, Gerald Grosvenor, OBE, Sixth Duke of Westminster. Forget the vast tracts of rural land, including a 100,000-acre estate in Scotland which contains no less than three mountains. The 300 acres the duke owns in central London, comprising Mayfair and Belgravia, are today one of the most valuable patches of ground on the planet. ... The duke has nowadays diversified his land portfolio. His commercial property company, Grosvenor, has become a serious player, with a vast array of investments and developments around the world. These include office blocks in San Francisco, business parks in Vancouver, luxury apartments in Hong Kong and shopping centres in Spain and Portugal. In the UK, Grosvenor has developed Festival Place shopping centre in Basingstoke and is set to undertake a £700m. mixed-use redevelopment in the centre of Liverpool. Back in his tract of Mayfair, land values are in the stratosphere: in 2001, BP’s pension fund sold ten acres of Mayfair for a cool £335m. Is it any wonder that, given how there is little or no land value taxation, the duke has all his many eggs in the land investment basket? But it’s not just for economic considerations that he could never contemplate selling his vast acreage, for he has a philosophical reason for not selling. (Have a bucket ready before reading the following!) “This is part of my heritage, my birthright. It is not to do with anything materialistic, but is deeply ingrained.” Read the whole article Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS) John Muir is right. "Tug on any
one
thing and find it connected to everything else in the universe." Tug on
the property tax and find it connected to urban slums, farmland loss,
political favoritism, and unearned equity with disrupted neighborhood
tenure. Echoing Thoreau, the more familiar reforms have failed to
address this many-headed hydra at its root. To think that the root
could be chopped by a mere shift in the property tax base -- from
buildings to land -- must seem like the epitome of unfounded faith. Yet
the evidence shows that state and local tax activists do have a
powerful, if subtle, tool at their disposal. The "stick" spurring
efficient use of land is a higher tax rate upon land, up to even the
site's full annual value. The "carrot" rewarding efficient use of land
is a lower or zero tax rate upon improvements. ...
issues: Is ownership of land value concentrated? More so than other wealth? It's hard to unveil the largest landowners who own land under different names or corporations, or together with partners and family members. Best guesses tend to underestimate the concentration. One study of a Pennsylvania town of 15,000 found that 1.5 percent of landowners owned 53 percent of the land value. Under a land tax, they would pay 53 percent of the revenue. How much of the central business district (CBD) is owned by absentees? One argument for a hotel tax is that it taxes out-of-state visitors who don't vote (locally). Yet in North Carolina, for example, nine of the ten largest private landowners are headquartered out-of-state. In Los Angeles, more than half of the CBD is owned abroad. In all of LA, an even greater amount of land is held by absentee Americans due to chain stores owning land there but being based elsewhere. ... Eventho' almost everyone would worry about paying more tax, the PTS is inherently progressive. Studies of the towns in Pennsylvania that have shifted some tax from buildings to land show that about 75% come out ahead (nearly the entire bottom four quintiles of income earners), 20% break even and 5% pay more (together a bit larger than the top quintile of income recipients), who are usually absentee owners. ... A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article Jeff Smith: Subsidies at Their Worst: Privileges Money is the mother's milk of
politics. Yet the milk invested by
lobbyists and those they represent is a drop in the bucket compared
to the flow they get back from the public tit, thanks to the milkmaid
state. Politicians grant well-connected big businesses:
a. direct cash outlays, such as cash to corporations for advertising overseas, Land titles are the granddaddy of all privileges. Historically, titles preceded all others and created a class of elite owners with the power to win the six other indirect subsidies, along with the more direct ones – grants, contracts, and tax favors. To undo and reverse this history, it's necessary to collect and share the natural rents from all seven inconspicuous privileges. For these pieces of paper, government should charge full market value. ... Getting a Citizens Dividend would not only eliminate poverty, it'd also erase any rationale for subsidies - direct or indirect - to the poor or to the privileged. Repealing the free ride of privileges would be like repealing capitalism. Without those subtle detours imposed upon public revenue, owners would have to work to amass a fortune, and work is one of the worst ways known to strike it rich. What you can do: Dry up the milkmaid state. Dispense with the notion that the state must meddle in enterprise. Dispense the notion from others, too. Focus government on its lone raison d'etre - defend rights. Demand your right to a fair share of natural revenue. ... Read the whole article Bill Batt: Comment on Parts of the NYS Legislative Tax Study Commission's 1985 study “Who Pays New York Taxes?”
James Kiefer: James Huntington and the ideas of Henry George
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