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Karl Williams: Social Justice In Australia: INTERMEDIATE KIT
Want another classic example of the madness of our current neoclassical economic system? Melbourne's Dockland Project is such, in the sense that it took so long to happen. Look at what we had - a vast expanse of idle land and derelict buildings sitting right next to the central business district for decades. The Docklands area was a waste of enormously-valuable real estate because of our failure to collect the LVT, which would have otherwise financially obliged the owners to put the land to its full potential or to have passed on the land titles to those who would do so.
HOW TO ENCOURAGE SLUMS
But examples abound of needless urban decay - poorly maintained housing, fields in urban areas with nothing on them except thistles, outdated infrastructure, old and unused warehouses with rusted roofs and broken windows etc. Once again, we lack LVT to get things (and unemployed people) moving. And at present, even if you do put land to use, you're going to be hit with taxes if you make an income or profit, even though you're employing people and are of benefit to society by offering your goods and services.
What we should be doing is
Some may object that we do have some sort of state land tax as well as the property taxes of local governments!" However, "property" is a woolly word which, in our current understanding, can mean land and/or capital - two very different things. Where property taxes are actually LVT (often termed site value rating at local government level) they are equitable and beneficial, but the problem is they are minuscule and misapplied in a number of ways. But where property taxes are (more commonly) a tax on land and improvements (such as buildings), the effect is entirely different. When the owner does, for example, build a house or renovate a derelict building, up will go his/her property taxes!
What society needs is a tax system which encourages land to be put to its optimum use, and for productive labour to be free of punitive taxation. Instead we have a system in which it is profitable for landowners to sit and wait for their land value to appreciate, while honest enterprise is treated as a cash cow by our tax system.
Our conditioning has somehow led us to accept this economic and social madness. We might travel to work and glance at an empty block of land worth millions of dollars, yet not think twice about it. Once we arrive at work, however, our mind-set is - curiously - very different. Hey! - the new printing press or forklift truck has arrived, worth a hundred thousand dollars! How long do you think management will let this valuable piece of machinery lie idle on the factory floor?
The same profit motive that compels someone to tear off the shrink-wrap at once and get their new equipment working can also be applied to the occupancy of land. To drive the point home so that your all-taxes-are-the-same programming is forever deleted, take an everyday example of a valuable block of land a person might occupy. The land's value has been built up by the community as a result of the surrounding amenities, so the occupier is rightly subject to a certain amount of LVT. Knowing the assessed LVT, the land will put people to work rather than weeds. Or, if the land is really valuable, it might have a modern, efficient multi-story building on it rather than an old single-story building or a car park. Read the entire article
Mason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth
Renewal as intensification. George observed land speculation in California when it was young and raw. Today, an equally or more baneful aspect of underusing land is found in older blighted slums, where underuse takes the form of non-renewal. Thus, land of high capacity is providing only minimal service and employment. Why do we not get timely renewal? The most obvious reason is that the sites under old buildings bear low tax valuations, because assessors mistake the building for the site and overlook its reuse value, or opportunity cost. Let the owner renew the site, and taxes shoot up: not only on the new building, but often on the site as well. Result: nonrenewal. So capital that should go to renew these sites of high potential migrates outward instead, to where tax rates are lower and subsidies are higher, wasting capital in duplicating the infrastructure, and of course also wasting land.
Many Georgists fail to see that a major part of the problem is underassessment of the land. Land is underassessed when tax-valuers lapse into using the “building-first, land-residual” method of separating land from building values. This results in land valuations so absurdly low that one observes, in many cities and neighborhoods, most of the joint value of land/building being allocated to the building in the very year that the owner chooses to demolish the building, i.e. when the building really no longer has any value at all. Then the assessor raises the land valuation under the new, or replacement building – making the land tax in effect an additional tax on the new building. The correct method is the “land-first, building-residual” method: value the land as though vacant, and give the old building the excess, if any, of the joint value over the land value. Then the land value remains fixed when a new building arises, and the land tax serves, as it should, as a stimulus to rebuilding (Gaffney, 2001). Read the whole articleJeff 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. ...
What determines one's new bottom line is how intensely one uses land.
Sprawl inflates the values of suburban and rural land. Leap-frog development raises a few spikes in a land value map that soon pull up values everywhere, increasing the property tax burden of owners of previously developed sites, unless the tax is capped. The resultant sprawl also raises enormously the cost of extending infrastructure and makes auto-dependency a given.
The PTS reverses all these negative consequences.
Walter Rybeck and Ronald Pasquariello: Combating Modern-day Feudalism: Land as God’s Gift
The immorality of landlordism. An increasingly small elite is taking possession of the nation’s land, enabling them to squeeze more and more from the landless. This is runaway landlordism, and current public policy fuels its progress.
On the federal level, while the wages of ordinary workers find no shelter from the Internal Revenue Service, exemptions and special preferences for landowners whittle down their taxes or turn real estate losses into profits. The 1986 Tax Reform Act aims to reduce these privileges, but landowners’ past ingenuity in avoiding taxation warrants continued vigilance over tax structures. At the local level, the property tax rises for owners who build or improve their homes, rental apartments or commercial buildings, while it is reduced for those who let their land go fallow. Compare the following situation of the Joneses, the Smiths and the Greens.
Overtaxing good land use while under-taxing blight
and empty lots invites slumlords and encourages land speculators. This
type of landlordism -- or modern feudalism -- is an injustice. It
allows individual landowners to siphon off the lion’s share of land
the whole article
Jeff Smith Share Rent, Transform Society
If society decided to share among its members all the annual value of society's sites and resources and air space, what would happen? ...
The amount of rent has to total some amount. If you ask how much taxes are, you get a figure, or how much wages or interest are, you could get a figure. No one does a good job of keeping track of how much we spend or how much nature we use. In some of the best estimates, Ronald Banks in England estimates that the flow of rent is as great if not more than any of those other flows. Assuming that is true, if not allowed to collect in the wrong pockets, but redirected to everybody's pockets, we can expect a solution. How would you do it? ...
If you were to choose the Libertarian version, and rely on fees and dividends, you get a geobonus, an added benefit. You would quit distorting prices, you could pull government back in a sense. Now taxes and subsidies at the margin can make housing unaffordable to maintain, so the apartment owner lets his apartment building become dilapidated and causes nearby owners to do the same. He can breed a slum. ...
What other social relations might change? Increase land ownership participation in community and it benefits community, with town hall meetings and block parties. Those kinds of communities have less crime. Read the whole article
Jeff Smith: How Profit Shapes Urban Space
Without spending a penny of subsidy, cities can make urban renewal more profitable than suburban development. How is about as commonsensical as Einsteinian physics, but like "e=mc2", it works. The trick is to forget subsidies and lower one tax while raising another. That is, levy a tax or charge a fee to collect land value while eliminating any tax on buildings or improvements.
The present property tax works backwards, like an intruder from the anti-universe. It increases as owners improve their property; it decreases when owners let buildings dilapidate. "Save money, create slums," cities tell owners.
Some owners do keep prime sites covered with parking lots or abandoned buildings while waiting for land values to rise. "Good numbers are hard to come by," notes Bill Batt, former fiscal policy researcher for the New York legislature, "but easily a quarter of a US city is under-utilized." Thus urban cores decay, an entropy that seems natural and inevitable yet is policy-induced. ... Read the whole article
Jeff Smith: Planning by Markets
Taxes -- an aspect of politics, not markets -- motivate misuse of land.
While taxes are creatures of
legislatures, ground rent is a
phenomenon of markets. What's political is what we do with it.
Most of us forget it's there, letting it reward speculation and
sprawl.... Read the whole article
Herbert J. G. Bab: Property Tax -- Cause of Unemployment (circa 1964)
When analysing property taxes we shall distinguish between that part of the tax which is assessed on improvements and that part which is assessed on land.
"A survey made by the editors of Fortune found that during the 1950's the population in metropolitan areas increased by about 400,000 persons annually. About 250,000 housing units were built yearly in these areas, but almost the same number were lost by demolition, condemnation or conversion into industrial use. Thus the housing shortage increased by about 400,000 persons each year. The editors of Fortune concluded that the battle against slums will be decided by the simple arithmetic of new buildings versus immigration to the cities." ...
That part of the tax that is assessed on buildings penalizes everybody who improves his land, his buildings or intends to construct residential, commercial or industrial property. The most serious incidence of property taxes is on new housing. When rental property or houses are newly constructed these taxes add 15 to 20% to the annual cost depending on assessment practices and tax rates. ...
The ever widening gap between the level of rentals and the urban family income constitutes a rental squeeze, which has brought untold misery and hardship to families in the lower income group, especially to those belonging to minority groups. The rental squeeze has also aggravated overcrowding and slum conditions.
In the press, on the radio and on television we are often warned about the threat of inflation. Hardly ever are we told, that the increase in the cost of living is to a large extent due to the increase in housing costs brought about by the housing shortage. The inflationary effects of property taxation are reinforced by the fact that property taxes themselves are included in the cost of living index and that property tax rates have the tendency to rise.
To the extent that property taxes discourage residential construction and the improvement and modernization of homes they create unemployment. The housing construction industry employed about 2,200,000 people in 1962, that is about 1.4 persons per housing unit. Any change in the direction of home building employment is multiplied 2.57 times. Thus an increase in housing starts by 50% would give employment to 2.8 million persons. An increase by about 66.6% or by 2/3 would create about 3.6 million jobs. These figures do not take into consideration the investment in public utilities, streets, schools etc., that would be required to service these additional housing units.
Under our property tax system wealthy communities with expensive homes or with heavy concentration of industry will have a large tax basis and low tax rates. Schools will be good and public services will be adequate. Yet in a poor community the tax base will be much smaller, tax rates will be much higher and still it will be found impossible to provide for good schools and adequate public services.
In a pamphlet entitled Paying for better schools the Committee for Economic Development came to the conclusion that "where a child happens to live is likely to be important in determining the quality of his education. In some areas children are taught by meagerly qualified teachers in substandard schools with inadequate equipment. The school session is shorter and the school leaving age is lower than the national average."
A defect of our property tax system that is seldom mentioned is that it puts a premium on obsolescence and penalizes new housing. This is so because property taxes are ad valorem taxes. Every piece of real estate except land is subject to depreciation. Thus the owners of old and obsolete real estate will pay little in taxes, while newly constructed buildings will bear the brunt of the tax.
This characteristic of the property tax is obscured by the rising trends of land values, which in many cases offset the loss in value of the improvement. Increases in tax rates and differences in assessment procedures and practices further hide the fact that ad valorem taxes favor obsolete real property. ...
We have discussed the sharp increase in the level of rents that has taken place during these last years. These increases reflect the steep rise in land values that have taken place in almost all sections of our cities. The tax assessed on the improvements has discouraged the construction of more and better housing. At the same time, the tax assessed on land has been too low to induce owners to sell, improve, or replace their rental properties. Read the whole article
The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath
(Ireland): Back to the Land (1881)
An Open Violation of the
Principles of Justice
How can any government allow the land of a
remain in the
hands of a class of men who will not improve it themselves, or allow
others to improve it either? How can any just government suffer any
longer a system of Land Tenure which inflicts irreparable ruin on the
general industry and prosperity of a nation, and which is maintained
solely for the purpose of giving the landlords an opportunity of
plundering the class of industrious, improving tenants which it is
specially bound to protect and defend? Read
the whole letter
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper