Many
varieties of natural resources generate rents.
City land is the greatest single source. For example, one city,
Vancouver, contains half the value of taxable property in B.C. - a
province of 934,000 sq. kilometers, or 70% larger than France.
However, many other resources
yield rents. Some of them are
also huge in value, even though some are inconspicuous. Here are a
few varieties of them:
- access points to transportation (by water,
rail, highway, air, etc.);
- clean air (or the license to pollute it);
- aircraft time-slots and gates in airports;
- amenities (good views,
warm weather, soft breezes, freedom from pests, riparian access,
etc.);
- aquifers;
- dam and reservoir sites;
- water in arid zones;
- rights
of way;
- preferential use of "common" lands (e.g. street
parking in
New York);
- covenants over lands of others (e.g., covenants
against
competition);
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- easements (e.g. the right to pass over land);
- fisheries;
- forests;
- franchises (exclusive right to sell in certain
areas);
- the gene pool;
- geothermal energy;
- grazing;
- licenses;
- minerals
and gas (rent includes the rise of value of minerals in situ);
- orbits;
- some patents (giving effective control over
minerals);
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- ability to wield political influence (meetings at
private estates;
special voting rights);
- rights of way;
- foreign holdings and ocean
shipping routes protected by national forces;
- soils;
- spectrum (radio,
TV, communications);
- legal standing;
- strata rights;
- space on the
streets;
- advertising sites;
- water;
- wildlife (for hunting, viewing,
etc.);
- wind (for power);
- zoning permissions; etc.
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Some of those varied resources
are highly valued. For
example,
- newly minted fishing
permits offshore of Washington State
sell for $1 million each. Their owners retire and rent the permits to
working fishermen, creating an instant class structure where before
there was equal opportunity. Imagine the value of an exclusive right
to take Caspian sturgeon.
- Radio spectrum amassed by
the McCaw Company
recently passed to AT&T for $13 billions.
- Dmitri Lvov estimates
that your oil and gas revenues alone could support the entire
national government (Practicable Course of Economic Reforms in
Russia. Moscow: Russian Academy of Sciences, Central Economics and
Mathematics Institute, 1994). They might even
surpass urban rents in
value, if they were valued at world market prices.
- In arid lands,
access to water is life itself.Read the
whole article
Mason Gaffney: Property
Tax:
Biases and
Reforms
Tax All Natural
Resources Uniformly and Comprehensively
Advances in the arts and sciences
keep disclosing new values in
old resources. Owing to institutional lag, these values can grow huge
without finding their way onto the tax rolls. A thoughtless reaction
is, "Bureaucrats want to tax everything!" The point is to tax all
natural resources uniformly and comprehensively, to end the lowering
taxes on incomes. productive business, and sales! Land taxation
will
not win wide support, nor will it deserve to, if it is perceived as a
tax focusing on median homeowners, farmers, and merchants, while
exempting oilmen, media tycoons, and timber barons.
In addition to newly awakened resources,
many resources long known (like water)
are held in odd tenures that
have not been recognized as taxable property, although they should
be. Any comprehensive move toward using resource rents for public
revenue must include these varied resources and tenures. I have a
list of 30 or so, too many to treat here. To give a sampling, they
include
- pollution easements over air and water;
- aircraft landing
time-slots and gates;
- aquifers;
- benefits from covenants;
- access
easements;
- power drops;
- concessions;
- fisheries;
- franchises;
- the gene
pool;
- grazing licenses;
- minerals;
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- orbits;
- soils;
- radio spectrum;
- rights-of-way;
- shipping lanes;
- standing to sue;
- strata titles;
- use of
the streets;
- wildlife;
- wind; and
- zoning.
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In tapping
these many varieties of
resources and tenures for
public revenues, citizens and their representatives may have to set
priorities. Two practical criteria rise to the top:
- go first for the
big values, and
- go for the soft targets.
The
biggest values are probably in
energy, communications, water,
rights-of-way, zoning and street use. Let's just look at what we
are
learning about communications. Knowledge and entertainment
appear
both at top and bottom on man's hierarchy of needs. People
without
even adequate shelter may be seen huddled around tv sets; people in
war, or under totalitarian governments, risk their lives to hear
smuggled broadcasts. People with higher incomes and security equip
themselves with mobile telephones, and call around the world; they
rush to get on the information highway. AT&T was the biggest
non-financial corporation in the world before splitting up.
Newspapers depend on their "wire" services: one of the first Great
American Monopolies was Western Union and its news appendage, AP.
Recent
FCC auctions have fetched
billions of dollars for spectrum
licenses, but this is like selling the badlands after giving away the
beachfronts. The values of extant licenses given away ion the
past,
especially spectrum in top locations, are much higher. AT&T
recently paid $112.5 billion for the McCaw Company's spectrum
licenses, which are a smattering of all that is out there. These
licenses should be on the property tax rolls in the jurisdictions
that they cover. The revenue possibilities are staggering.
How
about soft targets? A
soft target is any tenure recently
created, in a field that is easy to understand. Fisheries come to
mind. In the last few years governments in Canada and the U.S. have
limited allowable fish hauls by excluding new fishing boats and
imposing quotas on the owners of old ones. This "imposition" amounts
to a gift. Some quotas swiftly rose in value to over $1 million each,
suddenly creating a class society where before there was equal
opportunity. There is now a class of nouveau, instant millionaires
and parlor fisherman who rent out their quotas to working
fishermen.
Very
likely it is wise to limit
fish catches and avoid the
"tragedy of the commons." It is also necessary to police the waters
and keep out alien interlopers, a dicey business calling for the full
power of a strong national government. It is not necessary, however,
to give away the quotas so dearly policed. It is obvious
to any
objective observer that the quotas should be sold or (better) leased
to the highest bidder. If the Feds insist on giving them away, states
and localities should class them as taxable property subject to a
high rate. The best time to levy appropriate charges is when quotas
are new, and the injustice of the present dispensation is apparent to
all.
Another soft target is the
Manhattan taxi license, or "medallion."
For some reason this has long been a favorite object lesson among
economists, even as they shut their eyes to grosser sources of rent.
It may be because cabbies are rude and visible and lower class, but
whatever the reasons these writers have shown their consciousness of
the rent aspect of medallions, and raised the consciousness of
others.
The reason for pursuing soft
targets is not for the money they may
yield, but for principle. Once the principle is understood and
established, wider applications should follow. In economic principle,
fishing quotas and taxi medallions are just like conventional land
titles: privileged control over limited natural resources. If it
makes sense to socialize the rent from quotas and medallions, why not
land titles too?... Read the whole article
Previous estimates of rent and
land values have been narrowly
limited to a fraction of the whole, thus giving a false impression that
the tax capacity is similarly narrow. We are adding Fifteen Elements to
the traditional narrow “single tax” base:
- correcting omissions and understatements in standard data
sources
- updating ancient sources that use obsolete low values
- raising the Land Fraction of Real Estate Values (LFREV)
- adding rents that are best taxed by use of variable excises
- adding rents taxable by income taxes
- substituting taxes for subsidies to foster conservation
- adding current unearned increments as part of ongoing rent
- adding previously invisible and undervalued resources to
the tax base
- adding lands held under variant forms of tenure
- adding rents that are now dissipated, but need not be
- noting the feasibility of much higher tax rates on a base
that is both non-erosive, and concentrated in ownership
- noting the great mass of holdout prices exceed visible
market prices by a large factor
- adding the revenue from most existing taxes to the
potential land tax base, on the ATCOR principle
- adding (tentatively) the value of mortgage debt
- adding the favorable multiplier effect on balance of
payments ...
Read
the whole article
Mason Gaffney: Rent, Taxation,
Dissipation and Federalism
I premise we understand "rent" to mean the income imputable to natural
resources, and natural resources means gifts of nature, fixed and
limited in quantity. We understand there are marginal resources yielding little
or no rent, grading up to superior ones yielding much. We understand
there is a dynamic secular tendency for rents to rise with rising
population
and moreso with rising disposable income per capita. There is a tendency
for marginal exhaustible resources to rise in value with the depletion
of superior ones that are normally
used up first.
Because land is not produced, rents may be zero or less, and rise without
limit. There is no competition from new production.
I premise resource rents are the joint product of three distinguishable factors:
- nature;
- complementary private activity; and
- public works and services, publicly financed.
I premise rent is the most basic and general source of taxable surplus, especially
in an open economy in which other input costs and product prices are set at
world levels in world markets.
Triffin's epigram says "Surpluses are either
competed away or imputed away." Rent is what we call it when they are imputed
away. He might have added, they may also be frittered away: that is what
we seek to avoid.
Imputed rent is the foregone gain of withholding land from the market, i.e.
from others. It is equal to the marginal product of land. I premise (some
others differ) that rent is the prior distributive claim, not a "residual." Thus,
unused valuable land costs the owner as much rent as though he were paying
cash to a landlord. Failure to realize this rent is imputable to management,
not land as such.
Rent is a levelized concept to give a unitary, commensurable expression to
costs and yields that have variable time patterns. Selecting time patterns
optimally is part of maximizing rent. That is a fortiori true of exhaustible resources.
... Read the whole article
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q3. What is meant by economic rent?
A. Gross ground rent -- the annual site value of land -- what land, including
any quality or content of the land itself, is worth annually for use --
what the land does or would command for use per annum if offered in open
market -- the annual value of the exclusive use in control of a given area
of land, involving the enjoyment of those "rights and privileges thereto
pertaining" which are stipulated in every title deed, and which, enumerated
specifically, are as follows: right and ease of access to
* water, and
* health inspection,
* sewerage,
* fire protection,
* police,
* schools,
* libraries,
* museums,
* parks,
* playgrounds,
* steam and electric railway service,
* gas and electric lighting,
* telegraph and telephone service,
* subways,
* ferries,
* churches,
* public schools,
* private schools,
* colleges,
* universities,
* public buildings --
utilities which depend for their efficiency and economy on the character
of the government; which collectively constitute the economic and social
advantages of the land which are due to the presence and activity of population,
and are inseparable therefrom, including the benefit of proximity to, and
command of, facilities for commerce and communication with the world -- an
artificial value created primarily through public expenditure of taxes. For
the sake of brevity, the substance of this definition may be conveniently
expressed as the value of "proximity." It is ordinarily measured
by interest on investment plus taxes. ... read the whole article
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