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I. Taxing Land as Ethics and Efficiency
II. What is Land?
III. The simple efficiency argument for taxing land
IV. Taxing Land is Better Than Neutral
V. Measuring the Economic Gains from Shifting Taxes to Land
VI. The Ethical Case for Taxing Land
VII. Answer to Arguments against Taxing Land
There is a case for taxing land based on ethical principles and a case for taxing land based on efficiency principles. As a matter of logic, these two cases are separate. Ethical conclusions follow from ethical premises and efficiency conclusions from efficiency principles. However, it is natural for human minds to conflate the two cases. It is easier to believe that something is good if one knows that it is efficient, and it is easier to see that something is efficient if one believes that it is good. Therefore it is important for a discussion of land taxation to address both question of efficiency and questions of ethics.
This monograph will first address the efficiency case for taxing land, because that is the less controversial case. The efficiency case for taxing land has two main parts. The first and more traditional part is that taxing land permits the reduction of other taxes. This improves efficiency because it reduces the economic distortions that cause people to work less and save less. Because land is fixed in supply, there is no reduction in economic efficiency from taxing it.
The second and less customary part of the efficiency argument for taxing land is that, apart from the opportunity it offers to reduce harmful taxes, taxing land actually improves economic efficiency, in at least three ways.
To estimate the magnitudes of the impacts that additional taxes on land would have on an economy, one must have a model of the economy. I report on estimates of the magnitudes of impacts on the U.S. economy of shifting taxes to land, based on a mathematical model that is outlined in the Appendix.
The ethical case for taxing land is based on two ethical premises: ...
The ethical case for taxing land ends with a discussion of the reasons why recognition of the equal rights of all to land may be essential for world peace.
After developing the efficiency argument and the ethical argument for taxing land, I consider a variety of counter-arguments that have been offered against taxing land. For a given level of other taxes, a rise in the rate at which land is taxed causes a fall in the selling price of land. It is sometimes argued that only modest taxes on land are therefore feasible, because as the rate of taxation on land increases and the selling price of land falls, market transactions become increasingly less reliable as indicators of the value of land. ...
Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse. ...
Apart from questions of feasibility, it is sometimes argued that erosion of land values from taxing land would harm economic efficiency, because it would reduce opportunities for entrepreneurs to use land as collateral for loans to finance their ideas. ...
Another ethical argument that is made against taxing land is that the return to unusual ability is “rent” just as the return to land is rent. ...
But before developing any of these arguments, I must discuss what land is. ...
Taxing Land is Better Than Neutral
The analysis above explained how a tax on land can be ‘neutral’, that is, how such a tax can have no excess burden. In fact, taxing land is better than neutral; it improves economic efficiency compared to the no-tax situation. This section explains how.
First, a land tax can be used to take account of positive and negative externalities associated with land use. The typical example of a negative externality is pollution. If labor and capital were perfectly mobile, then the effect of pollution on near-by locations would be reflected entirely in land values. Thus one might say that a polluter ‘uses’ surrounding land and should pay for that use in the form of a ‘land tax’ equal to the reduction in the rental value of land that results from his activities. Such a land tax would not only raise government revenue, but would also improve efficiency by ensuring that people would engage in activities that produced pollution only when the benefits of those activities exceeded the costs.
Because labor and capital are not perfectly mobile, pollution affects not only land values, but also the value of structures and the net well-being that people experience from the opportunity to continue to live in accustomed places. Efficient management of pollution would charge polluters for these costs as well.
When there is traffic congestion on city streets or on highways, bridges, or tunnels, one might say that there is a problem caused by people not being charged adequately for the use of particularly valuable space. If there is a congestion charge (land tax) that reflects the extent to which any one user of streets and highways imposes costs on others users in the form of increased travel times, then that congestion charge improves efficiency while also raising government revenue.
What applies to negative externalities applies also to positive externalities, although now some extra steps in the analysis are needed. If there are private activities that raise the rental value of surrounding land, such as the provision of a car park in a city centre, then to motivate private users of land to undertake these activities at efficient levels, one must compensate them for the value of the positive externalities they generate. Again, if labour and capital were perfectly mobile, these externalities would be reflected entirely in changes (this time, positive changes) in land values.
With compensation for the externalities now generating an outflow from the public treasury rather than an inflow, it is not immediately clear that the government can afford to provide efficient incentives. However, if the tax regime is one in which the government collects all of the rental value of land in taxes, then efficient incentives for activities with positive externalities that are reflected in land values will be self-financing. What is spent in rewarding activities with positive externalities will be recaptured from taxes on the land that rises in value. In fact, there is bound to be a net surplus, because the improved coordination of land uses that would be induced by the rebates for positive externalities would make land worth more in the aggregate with the rebates than without them.
If the government collects only a fraction of the rental value of land, then rewards for positive externalities would not be self-financing, and one would need to ask whether this particular use of scarce government funds was more important than other potential uses. Still, it would be possible to have ‘betterment districts’ that would levy special-purpose taxes on the land that benefited from activities like private parking garages. With such special-purpose taxes there is no competition for scarce public funds. And while the system of rewards for positive externalities would not generate a net surplus for the Treasury as it would under a system of full taxation of the rental value of land, it would generate a net improvement in the efficiency of the economy.
As with negative externalities, the fact that labor and capital are not perfectly mobile means that not all of the effects of activities with positive externalities are reflected in land values. ... Read the whole article
Nic Tideman: The Case for Site Value Rating
The Social Justice of Site Value Rating
The Efficiency of Site Value Rating
How Valuations would be Made
Both for reasons of social justice and for reasons of economic efficiency, site value rating deserves a continued place in the programme of the Liberal Party.
The case for site value rating in terms of social justice is founded on two understandings: first, that the value of land in the absence of economic development is the common heritage of humanity, and second, that increases in the rental value of land arising from economic development and government expenditures should be collected by governments to finance those activities. What is meant by "land" is the unimproved value of sites and the value of extractable natural resources such as North Sea oil.
While there may someday be institutions capable of implementing a recognition of land as the heritage of all humanity on a worldwide basis, in the absence of such institutions each nation should implement a recognition that land within its boundaries is the common heritage of its citizens. This is accomplished not by making the nation a gigantic Common or by instituting government management of all land, but rather by requiring all persons and corporations that are granted the use of land to pay a fee or tax equal to what the rental value of the land they control would be if it were in an unimproved condition.
The case for site value rating in terms of economic efficiency is founded on the fact that a tax on resources that are not produced by human effort is one of the few sources of government revenue that does not reduce incentives for people to be productive. Two other revenue sources that have this virtue are taxes on other government-granted privileges such as exclusive use of radio frequencies and taxes on activities with harmful consequences, such as polluting the air. An economy will be more efficient if revenue sources that do not diminish productivity are employed to the greatest possible extent before any use is made of taxes that impede productivity.
What makes a tax efficient is that the amount of tax that is due cannot be reduced by reducing productive activities. When incomes are taxed, people can reduce the amount of taxes owed by working less. They do so, and the productivity of the economy falls. When houses are taxed, people can reduce the amount of taxes owed by building fewer house and smaller houses. They do so, and the housing shortage worsens. But when the unimproved value of land is taxed, there is no resulting diminution in the quantity of land. Thus taxes can be levied on land without diminishing the productivity of an economy. And shifting taxes from other, destructive bases to land will improve the productivity of an economy.
Subsequent sections explain in
more detail these social justice
and efficiency arguments for site value rating, describe procedures
for implementing such a tax system, and explain why a variety of
potential objections are without merit. ... Read
the whole article
Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy
Creating a More Productive Economy
The ideas we espouse are attractive not only for their embodiment of principles of justice, but also because they can be expected to lead to a more productive economy.
Economists agree that the imposition of taxes generally retards an economy. The reason for this is that with almost all taxes, it is possible for a tax payer to reduce total tax collections by doing less of whatever is taxed--work less, spend less, save less, etc. This means that taxes generate an incentive to be less productive.
With fees for the use of government-assigned opportunities, on the other hand, the only thing that a person can do to reduce the amount of money that he or she pays is to use fewer of these opportunities. But then the opportunities can be used by someone else, who will pay the fees, and total public revenue will be unchanged. There is no possibility reducing total government revenue by being less productive. Thus these fees can be collected without dragging down the economy in the way that existing taxes do.
Our ideas provide for the natural financing of any worthwhile public expenditure that makes a particular area more attractive or productive--parks, freeways, subways, sewer systems, etc. These public expenditures raise the rental value of land in their vicinity, and thereby raise the fees that can be collected for using the land. If the activity is worthwhile, the increase in rental values will be sufficient to pay for the activity.
Another way in which our ideas promote a more efficient economy is by eliminating the opportunity grow rich by having government promote one's own interest at the expense of others. Such distortions of the political process can occur either by persuading a government agency to spend money in a way that raises the value of land that one owns while others foot the bill, or by persuading a government agency to prohibit others from doing what one is permitted to do. In both kinds of cases, the person who promotes his or her own interest has no reason to take account of the costs that are thereby imposed on others, and typically these costs to others are greater than the self-seeking benefits. This makes the economy less productive.
Furthermore, the very possibility
of growing rich by manipulating
government action draws talented people into the effort to manipulate
government decisions, when they could be employed doing something
useful. ... Read the whole article
Under the conservative or homesteading libertarian versions of classical liberalism, the possessor of land might say, "This is my land. I didn't ask for these public goods. You have no right to tax me to pay for them." Under geoliberalism, on the other hand, the community can reply, "You have as much right to the use of land and other natural opportunities as anyone else. If you want to exercise your rights in this community, these are the taxes you must pay. If you don't like it, claim your share of natural opportunities somewhere else."
If people are perfectly mobile and have an unlimited range of communities to choose among, then they cannot be exploited and need not tolerate inefficiency. They will move. Competing communities will find that the utility-maximizing public sector equilibrium involves providing all local public goods with benefits greater than costs, financing them by a combination of fees equal to marginal costs and taxes on the land that benefits from differential access to the local public goods. There will be no taxes on labor or capital except to internalize externalities.
If tastes vary so much that a community cannot be filled with people with the same taste for local public goods, then it will not be possible to finance all worthwhile local public goods by the increase in rent that they generate.
The community will either have to
leave some worthwhile local
public goods unprovided, or finance them from some other source. But
in either case the residents are treated fairly if they are free to
move elsewhere and choose not to do so.... Read
the whole article
Fred Foldvary: Geo-Rent: A Plea to Public Economists
A similar sort of blinkered compartmentalization goes for textbook discussions of externalities. The mainstream literature rarely highlights the point that, whether by geo-rent taxation or by private contract, the tapping of geo-rent promotes internalization of externalities. If the government depends on geo-rent, it has a strong incentive to increase geo-rents, or to ameliorate externalities. Public revenue from site values thus is an important way to internalize territorial costs and benefits. The failure to tap geo-rent exacerbates externalities. Private communities do base their finances on site rentals, and we are less inclined to identify the positives and negatives within a private community as “externalities.” Territorial amenities have been internalized within property relations and pecuniary effects. Read the entire article
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
... Nonpoint pollution goes right to a chink in the armor of conventionally trained economists (like myself) who are overtrained towards becoming protagonists of the price system. To the skeptical we are "free market freaks": eco‑freaks who are ‑nomic rather than ‑logical. Whatever our faults we are zealous, and carry the conviction of true belief. With the problem at hand, however, we can't do what we do best, that is call for price signals, punt, and slip away.
The very name "nonpoint" pollution suggests that economists see this as just an odd bit of clutter, something "non‑regular" in their tidy world. Indeed, all pollution was an exception, an "externality," until recently (at least at my age it seems so). Then they learned you can meter effluents and tax them, or trade effluent rights around like private property. Thenceforth they could fit pollution right into existing models and ideologies with minimum intellectual strain. They were happy as Procrustes with a new guest.
But we can't meter runoff — how frustrating.
Standard-brand economists are ill-equipped and undisposed to face such problems.Karl Williams: Land Value Taxation: The Overlooked But Vital Eco-Tax
Conventional price theory has been accused of mocking physics because it uses some elementary calculus, but if so it is a poor imitation: it deals with an imaginary world abstracted not just from friction but from space and time themselves. Space is relegated to one subdiscipline (location theory) and time to another (finance), so regular price theorists can spin their webs in purest abstraction, undistracted by these details.
Most price theory is spaceless. Even location theory, at least the most common kind, conventionally treats cities as Euclidean points: the math is simpler that way. Newton could get away with it explaining planetary motion; students of urban sprawl can not.
Economists are also ill-equipped to deal with ecology. Economists' "externalities" pour into a biosphere of interdependencies at least as complex as what economists purport to understand. Economists are too disposed to underrate the sensitivity, passion and numbers of Nature's votaries, and the real economic value of the philosophical values they celebrate. Fisheries economists are a notable exception, although they probably impose more economics on biology than vice versa. But most economists treat "eco-freaks" as noisy nuisances. In the absence of a real ecologist I will presume to take their part. ...
THE SEARCH FOR SURROGATES
The frustrated economist, unable to tax runoff, still has a bag of tricks. He looks for surrogates to tax, something in a sack or bottle that moves through a market: Aha! pesticides, fertilizers, salt, they'll do nicely to tax. Thus we will "internalize the externalities" and have "proper pricing of inputs" to create incentives for correct "trade-offs" in the "production functions," and we're nearly home. Well, halfway home.
Well, we've made a start. A few problems remain. One is that a plurality of economists don't like the effluent charge approach anyway, even for point sources. They follow Coase and prefer to grant pollution entitlements to be traded in a free market. Incredibly (to me) this view has prevailed.
In principle they profess not to care what worthy few get the original entitlements, but in practise a select company of ancient and honorable polluters get them. We now call these "offset rights," a new form of property. In the L.A. Basin (South Coast Air Quality Management District), a few have grown rich by establishing their respective histories of pollution which they can now sell to others who wish to continue this wholesome tradition. The demonstration effect on those contemplating new and as yet unregulated forms of pollution may be imagined.
Those needing air to breathe? Well, according to the modern philosophers they can enter the market, buy up offset rights and retire them. Thus is fulfilled Robert Ingersoll's forecast a century ago that if some corporation could bottle the air they would charge us to breathe. It seems to confirm this dour warning from a former Secretary of Labor:
"We soon discovered ... the danger of allowing economic policy to be dominated by business or financial interests or, which usually comes to the same thing, orthodox economic analysis." (Marshall, p.ix) (emphasis added)
The public has learned what is being done to it, finally, and is rebelling at the Coase logic, which only a Chicago economist could love. Offset rights are on the ropes. To simplify, therefore, I am not going to speculate how Coase might be applied to nonpoint, but just ignore it. I will treat effluent charges, and taxes on surrogates, as the conventional economic solution to pollution.
But before leaving this there is a lesson in it. The holders of offset rights, whether "ancient and honorable" or "innocent purchasers," are demanding compensation. Never mind about asking them to pay the victims; they demand payment to stop! (Polakovic, 1987)
They will probably get it, for if the system be changed, there will be a taking of something, which they claim is property. Such is the force of the Great Secular Superstition, that unearned gains are sacred, even those originating with something as unworthy as dumping crud on other human beings. This superstition is why effective control seems so expensive. My remarks will not be instructed by it.
The surrogate approach may work through regulation and prohibition as well as taxation. Banning DDT and other organochlorines after 1972 has solved or prevented a lot of nonpoint problems, as you know. We may also tax or ban other pesticides of long residual life, stimulating a predictably successful quest for pesticides that self-destruct after doing their job. ...
You've heard the traditional spiel, it is arguable. We can inhibit nonpoint pollution, in some ways optimally, by controlling surrogates. But let's look at the problems that would remain.
a. Taxes overlook the locational element, whereas damages vary according to the site of the runoff. A tax imposed only in critical areas is avoidable by importing the input from tax-free zones. We could tax uniformly everywhere; but a uniform tax on, say, nitrogen fertilizer would, in order to protect certain waters, reduce yields from all lands. Presently that would pull more acres into use, worsening other problems.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. Read the entire article
b. Taxes raise revenue, and recipients develop vested interests in the revenue, interests which may come to override the regulatory purpose of the tax. The main issue of 19th century tariff debates was regulation vs. revenue.
c. Excise taxes are not leakproof. ... The underground economy sometimes rises to the surface, in episodes of rebellion, when deregulation is the vogue in government. I favor some kinds of deregulation myself, but the repressed cowboy psychology seizes these opportunities, too, to evade legitimate taxes and prohibitions.
There is a grand tradition of bailing out sellers with stocks on hand when a product is taxed or banned. Chlordane is a recent example. Dairy producers have been compensated when they could not sell their pesticide-contaminated milk. (Carlson, 1977, p.319)
To sell existing stocks tax free, when new ones are banned or taxed, creates a nice windfall. The 1972 Federal Pesticide Act also "provides for compensation to holders of patents on pesticides when registration removal occurs." (ibid.) The problem is, this whets the appetite for future windfalls.
It is something like the terrorism treadmill where ransoming one hostage stimulates future kidnapping. Some clever people will develop new harmful products whose future prohibition or taxation will endow them with more windfalls, etc. ad inf. There are more than 50,000 agricultural pesticides registered in the U.S. (Gianessi, 1987, p.1), giving a notion of the possibilities. This is a second kind of "pesticide treadmill."
Earl Heady has optimistically noted that herbicides are becoming more specific, tailored to certain crop problems (Nicol and Heady, 1977, p.339). Whatever else you can say about Roundup it is anything but that, and I wonder if we have yet to find an optimal set of incentives to bend the twig of research in desirable directions.
d. A tax on nitrogen could be avoided by growing legumes. Not a bad idea, perhaps, all things considered, but it just scratches the surface of the kinds of substitution, some of it unpredictable, that can occur when you tax a surrogate rather than the damaging effluent itself.
e. Taxing a surrogate fails to distinguish among individual applicators. ...
f. The objectivity and moral authority of the professionals on whom we must rely to evaluate pesticides is not unquestioned. ...
What would happen if their objectivity were questioned on the grounds that they accept large, directed grants from pesticide producers, let faculty members consult for the same, and push faculty members into grantsmanship? Would Rachel Carson have found happiness in a UC Department of Entomology? Will Frances Moore Lappé? Was Earth Day conceived under a grant from Monsanto?
U.C. Entomology Professor Robert van den Bosch was not amused by the dominance of what he called "the pesticide mafia." His Pesticide Conspiracy (1978), although tendentious, cites enough specifics to impugn several U.C. administrators, other universities, the USDA (that "wholly owned subsidiary" of the chemical industry), many congressmen, bankers and food processors, farm employers, most producers, salesmen and lobbyists, and at least one Nobel laureate. It is not a reassuring picture, nor is it reassuring that van den Bosch has been answered, if at all, by ridicule, personal abuse, and whispering. I draw the curtain of diplomacy over wherever these thoughts may lead.
Moral authority or not, there are questions of efficiency and expedition. The mills of EPA may or may not grind exceeding fine, but they do grind exceedingly slowly. Since 1972 EPA has arrived at suspending only 79 active ingredients. Most of its "reregistration" reviews are still in some interim stage. Apparently industry advances new toxins much faster than EPA reviews them, so the inventory of pending reviews can only grow.
g. The case for "proper pricing of inputs" is most persuasive when we can show that everything else in the system is working right first, as the optimal background we are to avoid distorting. But that is conspicuously untrue. ...
I. Historical overviewNic Tideman: The Structure of an Inquiry into the Attractiveness of A Social Order Inspired by the Ideas of Henry George
II. The problem of sprawl
III. Affordable and efficient public transport
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to Land Value Taxation
The process of monitoring and assessing LVT itself leads to a more subtle, more environmentally-appreciative understanding of how best to prioritise conflicting demands on land. Should a tract of land best be used for green space for local residents, a light rail corridor or employment providing development? LVT assessment inherently weighs the pros and cons of a whole range of intangible costs and benefits for the wider community now and into the future, and eliminates corrupting "NIMBY" motives and rent-seeking behaviour that influence existing planning and development decisions. In response to the accusation that LVT assessment is little more than a best guess at quantifying values that are inherently unquantifiable, LVT advocates respond "Guilty as charged!" However, they then add, "Our good guesses are based on solid, objective methodology and are better than wild guesses, and even most wild guesses are better than the decisions made today." Currently, many natural resources are almost assigned a worthless value because, not entering the mainstream marketplace, they usually have no $ tags hanging off them - hence the existence of externalities whereby the environment is plundered as near worthless. So even wild guesses at the value of land and other natural resources are better than the present situation, in which the "no guess" decision effectively assigns natural and community resources a zero value.
One way or another, it is necessary to quantify and prioritise the real value (in a broad sense) of natural resources to better account for economic externalities. In the end, only if a prospective resource user is prepared to pay the full cost of utilising land and other natural resources will resource extraction or development go ahead. The intrinsic nature of the LVT assessment process considerably assists in such cost estimation.
LVT's foundation of detailed land use assessments will also help expose the true costs of subsidies for natural resources, which effectively amount to negative eco-taxes. Subsidies come in all shapes and sizes, often barely visible, and urgently need to be exposed and evaluated. Even some harmful subsidies which are labeled land taxes have nothing to do with genuine LVT. Banks gives the example of a Brazilian tax which was levied on unimproved land but was reduced by up to 90% on land used for crops or pasture. Forests were classified as unimproved land and were therefore taxed at the full rate, which induced settlers to chop down the trees to reduce their tax liability." ... read the entire article
I. Ethical Principles
A. People own themselves and therefore own what they produce.II. Ethical Questions
B. People have obligations to share equally the opportunities that are provided by nature.
C. People are free to interact with other competent adults on whatever terms are mutually agreed.
D. People have obligations to pay the costs that their intrusive behaviors impose on others.
A. What is the relationship between justice (as embodied in the ethical principles) and community (or peace or harmony)?III. Efficiency Questions
B. How are the weak to be provided for?
C. How should natural opportunities be shared?
D. Who should be included in the group among whom rent should be shared equally?
E. Is there an obligation to compensate those whose presently recognized titles to land and other exclusive natural opportunities will lose value when rent is shared equally?
F. Can a person who is occupying a per capita share of land reasonably ask to be left undisturbed indefinitely on that land?
G. What is the moral status of "intellectual property?"
H. What standards of environmental respect can people reasonably require of others?
I. What forms of land use control are consistent with the philosophy of Henry George?
A. Would public collection of the rent of land provide enough revenue for an appropriate public sector?Jeff Smith: What the Left Must Do: Share the Surplus
B. How much revenue could public collection of rent raise?
C. Is it possible to assess land with sufficient accuracy?
D. How much growth can a community expect if it shifts taxes from improvements to land?
E. To what extent does the benefit that one community receives from shifting taxes from buildings to land come at the expense of other communities?
F. What is the impact of land taxes on land speculation?
G. How, if at all, does the impact of shifting the source of public revenue to land change if it is a whole nation rather than just a community that makes the shift?
H. Is there a danger that the application of Henry George's ideas would lead to a world of over-development?
I. How would natural resources be managed appropriately if they were regarded as the common heritage of humanity? Read the whole article
The much and justifiably criticized corporation is in essence its corporate charter, given value by limiting the liability of managers, directors, and investors. It’s worth at least the cost of the insurance payments not made by the corporation, which would equal the costs imposed upon worker, customer, and nature. As the “need” arises, legislatures extend limited liability even further: Congress legally lowered the greater risk of nuclear power to benefit Westinghouse, of the Valdez oil transport spill for Exxon, and the Y2K software design bug for Microsoft. Politicians define legally “safe” amounts of polluted air and water for GM and Monsanto, keeping safe the wealth of those responsible.
Not to be outdone by any legislature, the Supreme Court has ruled in favour of compensating landowners for environmental “takings”, but has remained silent about landowners compensating the public for any “givings”, as when site values skyrocket near a new light rail stop. Molly Ivins wrote,
"Henry George must be in his grave spinning' like a cyclotron. We, the people at large, make the land more desirable; and then the landowners want us to pay them because we won't allow them to poison the air or to pollute the rivers." (1995 March)
That’s how great fortunes are made: by sloughing off private costs (which become “negative externalities”) while soaking up public benefits (some “positive externalities”). Land titles, corporate charters, and other privileges – mere pieces of paper – are worth trillions each year. The corporations – from the Federal Reserve to Exxon (both founded by the “oiligarchy”) – that receive these privileges make their owners rich or richer. Their wealth is not compensation for the exertions of either labor or capital, not profit in the market from output, but rent from present lobbying of legislatures or past conquest of others’ lands. Thus laws (“privilege” means “private law”) funnel multi-trillions of dollars each year from the many to the few.Jeff Smith: Sharing Natural Rents to Sustain Human Society
Rentiers become the elite or rise higher up among the upper echelon, the puppeteers of our puppet state. Their ranks grow with every techno-advance that spurs a new monopoly and pushes up locational values. ...
Meanwhile, ignoring our common assets guarantees that we continue to pay rent rather than begin to receive rent. Conversely, insisting upon a fair share could win us the world we want. While it breaks an old habit to leave jobs behind in favour of fair distribution, just recognizing surplus empowers people. It reaffirms the very existence of our commonwealth and challenges the narrow view of property as exclusively private. While the Left gets excoriated for wanting to be big spenders, demanding a dividend in lieu of waste and a shift of taxes from individual effort to social surplus helps refurbish the Left’s image.
The call to share the commonwealth enjoys an unshakable moral base and gets high marks for real world success, unlike taxes upon true earnings. Once implemented, sharing rent will grant us leisure – time enough to evolve and reconnect with friends, family, and neighbours – and drain away fortunes rather than let the fortunate continue to soak society. Hence support for shifting taxes and paying dividends to the citizenry grows already, without the Left’s leadership. It’s time to run with the banner of an extra income for everyone, in the halls and capitols of governments everywhere. To liberate humans from exploitive labor, let us advance the sharing of society’s surplus. Read the whole article
To get rich, or more likely to stay rich, some of us can develop land, especially sprawling shopping centers, and extract resources, especially oil. While sprawl and oil depletion are not necessary, they are more profitable than a car-free functionally integrated city. Under the current rules of doing business, waste returns more than efficiency. We let a few privatize rent -- ground rent and resource rent -- although rent is a social surplus. As if rent were not profit enough, winners of rent have also won further state favors -- tax breaks, liability limits, subsidies, and a host of others designed to impel growth (20 major ones follow herein).
If we are to sustain our selves, our civilization, and our eco-system, we must make some hard choices about property. What we decide to do with rent, whether we let it reward our exploiting or our attaining eco-librium, matters. Imagine society waking up to the public nature of rent. Then it would collect and share its surplus that manifests as the market value of sites, resources, the spectrum, and government-granted privileges. Then we could forego taxing labor and capital. On such a level playing field, this freed market would favor efficiency - the compact city - not waste - the mall and automobile. ...
Drawing their cue from the public, governments tolerate "rentention", the private retention of publicly-generated land values. Lacking this Rent, states turn to taxes. But to grow the economy, all governments -- left, right, or undecided -- hustle to stimulate development; they cut taxes and slop subsidies. Going beyond the call of duty, the state excuses producers' their routine pollution and limit liability, thereby cutting the cost of insurance. Companies that don't impose on nature, worker, or customer are not benefited at all but lose a competitive advantage. On this tilted playing field, one with the lumps of subsidies and the tilts of taxes, technologies lean and clean have a hard time competing as suppliers of materials, homes, food, rides, and energy. ...
Now wipe out the taxes, subsidies, liability limits, and rent retention. Instead, replace all that with running government like a business. Charge full-market value for state acknowledgements (the seven secret subsidies):
Collecting rent for government-granted privileges would not only raise trillions but also whittle corporations down to a competitive size, less hazardous to democracy.
Besides charging what privileges are worth, government should also replace license with responsibility ("internalize the externalities"). To temper the temptation to use lands both fragile and valuable, society could impose surcharges - an Ecology Security Deposit, Restoration Insurance, Emission Permits, and fines when users exceed standards. To minimize all these charges, producers would seek sustainable alternatives. Getting and sharing rent from land titles is the centerpiece of this geonomic revenue reform. Each phase of such a revenue shift motivates sustainable choices in its own way. ...
Geonomics draws its power to predict and fix what ails economies by being grounded in reality. It holds to the notion that economies are not apart from but part of the embracing eco-system. As part of whole, economies self-regulate by the same natural feedback loops. The prey/predator cycle is mimicked by the pricing cycle, also known as the Law of Supply and Demand. This familiar pattern is found, too, in the Share Rent Cycle.
(1) Getting more rent, people work less, so output drops.
Thus, production is put into
balance with consumption and work
with play. Geonomics yields a policy that's not at war with but
aligned with nature as model. Perhaps the most central feature of
economics is price. Price is to production what DNA is to
reproduction, the guides to growth. Rather than distort price with
taxes and subsidies, with license (so-called "externalities") and
rent-retention, geonomics respects the integrity of price, allowing
it to accurately reflect our costs and values, by sharing rent. Then
economies ("geonomies") can operate without the deadweight losses of
taxation and rent seeking.... Read the whole article
The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881)
Land Monopoly Usurps God's Gifts to All.
Thus, on the highest and most unquestionable authority, are we forced to conclude that, owing to the monopoly which the landlords have usurped in the land of the nation, they sell out the "use of the original and indestructible powers of the soil"; of "the natural and inherent powers of the soil"; of "the natural powers of the soil"; that is to say, they sell the use of God's gifts like so many articles of private property, and as if they were purely the result of their own toil and labour. Read the whole letter
Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use
... The failure to collect site rent leads to a distortion in land use configurations. If patterns unfolded along the lines of both social preference and economic efficiency, high value landsites would tend to have high value buildings, and low value landsites would tend to be vacant or have very modest buildings. Consistent with this, urban centers sites would tend to have office and commercial use, surrounded by lower-value residential land uses, and still further out would be farms and forests. The ratio of building to land value, land to total value (or for that matter any other ratio between buildings, land, and total values) would be relatively constant throughout a region. Instead, the ratio of land value to total value consistently tends to reveal a patchwork of random development. This inefficient settlement of land sites is what we know as sprawl.
Land Rent is Capitalized Transportation Cost
There is another dimension to the distortion of land use in contemporary life. That is the heavy subsidy granted to motor vehicle transportation services. Estimates are that the typical driver pays only about a tenth of the true cost of his travel; society picks up the rest. This profuse subsidy paid to private automobile and truck transportation further encourages people to locate on sites at far greater distances from where they would choose than if they had to pay the full burden of that travel. ...
This relationship has been demonstrated more empirically in a recent study by the Urban Land Institute. The author concluded that, for Portland Oregon,
each additional mile [traveled] translated into slightly more than $5,000 in housing costs; closer-in locations command a premium, those farther out save money. A ten-mile difference, all other things being equal, would amount to about $56,000 in new home value.
For a household in which one worker drives downtown (or at least to a more central location) to work, that ten-mile difference may amount to 4,600 miles annually, assuming 230 days of commuting and a round-trip of 20 miles each day. Moreover, if non-work trips to the central area and elsewhere doubled that amount, the tradeoff would be about 9,000 miles annually, which could mean a higher/lower driving cost of $3,000 annually, not counting the time saved/spent.(7)
That's the savings for living closer to the urban center by ten miles. If the urban resident has to rely upon a car nonetheless, subtracting some $3,000 annual travel expenses will still leave him paying again that much, and likely more, to own a car. Seven years ago James Kunstler put the true costs along with other experts at about $6,100 annually.(8) The American Automobile Association calculated that a car driven 15,000 miles in 2001 cost 51¢ per mile or $7,650.(9) Even that figure reflects only direct costs to the driver, not those passed on to society. One study calculated that the total costs of motor vehicle transportation to our society equal approximately one-fourth of our Gross Domestic Product (GDP).(10) In 1991 road user fees totaled only about $33 billion whereas the true costs to society were ten times that;(11) put another way, drivers paid only 10% of the true costs of their motor vehicle use.(12)
The latter figures include externalities like pollution and the costs of highway crashes. Hortatory public pleas for people to tune up their engines so they pollute less, inflate their tires properly, and drive more safely are not likely to change the reality that people are forgetful and fallible. ...
Correcting Distortions by Pricing: Increasing the Recovery of Transportation Service Costs
With respect to charges upon transportation services and externalities, there are several components to a proper pricing design.(25) The first step to proper pricing is to identify the proportion of transportation services that ought rightly to be seen as private goods as opposed to public goods.(26) Although this is a daunting task, the frequent figure used is 80 percent - 20 percent proportion.
It is easy to distinguish five elements of transportation service cost: capital investment, maintenance costs, regulation costs, environmental externalities and congestion costs. Each of these calls for a different treatment with respect to revenue design. ... read the whole article
Bill Batt: Stemming Sprawl: The Fiscal Approach
"But the funny thing is, you don't really believe it yourself," says Vernon. "You aren't being consistent. You say goods and services that we produce belong to the producers and no one else. But you support the income tax and the sales tax. Those taxes take away from the producer, without his or her consent, part of what he or she produced. So it doesn't seem that you really believe your own claims. Why should people support the Polluter Pays Principle that says they are stuck with negative products they produce, when at the same time you wouldn't allow them to keep the positive products they produce? Sounds like an uneven deal."
Sara is shocked. But she has to admit Vernon has a point. "Hmm, I guess this might be part of why the Polluter Pays Principle doesn't excite as much support as it should. If we lived in a world where people get to keep the full value of whatever their labor and their investment yields, then pollution would stand out in sharp contrast, as a crime against innocent people and their property. The Polluter Pays Principle would be totally obvious then."
"And instead," says Vernon, "we're surrounded by cases of theft by income tax, by sales tax, and so on. Well then, no wonder people aren't shocked when the Polluter Pays Principle isn't applied. And no wonder some people don't even see the wisdom of it. "
The bottom line question is this -- can a person support the Polluter Pays Principle and support involuntary taxation both, or is that inconsistent? Your opinion, please! ... read the whole article
Mason Gaffney: Economics in Support of Environmentalism
Looking for Mr. Goodbar
Here is how we get urban sprawl with leapfrogging. Remember the last time you moved and went househunting? You saw some mouthwatering homes, but they were not for sale. You had to find motivated sellers, and pick from what they offered. It's the same with builders. They scour the exurbs seeking motivated sellers. Ideally the most motivated sellers would line up by distance from the existing city, but the market is not ideal. Each seller is moved by his personal circumstances, not the geographical location.
Potential builders are little concerned with the social costs they might impose, so long as others are to bear them. Thus, they sometimes settle for and build
Peter Barnes: Capitalism 3.0 — Chapter 1: Time to Upgrade (pages 3-14)
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper