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"Thou shalt not steal." Well,
according to some of them, it means: "Thou shalt not get into the
penitentiary." Not much more than that with some. You may steal,
provided you steal enough, and you do not get caught. Do not steal a
few dollars — that may be dangerous, but if you steal millions and get
away with it, you become one of our first citizens.
Nic Tideman: Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth
IV. Applications to Resource Use
It is only a small step from charging people for street use and parks to charging them for renewable and exhaustible resources. If people who could fish as much as they wanted would deplete fish stocks excessively, then some form of control over fishing is beneficial. It is possible in theory to have efficient control through quotas, though it is difficult to set the quotas properly, and highly contentious to change them when conditions require a change. The recognition that the fish are everyone's common heritage would require that, if there are to be quotas, the quotas be auctioned, and that if not, then everyone who fishes be required to pay for fishing according to the loss in the value of fish stocks that results from fishing. If a fishing resource lies entirely within a single nation (as in a lake or river), then the recipient of the fees for fishing should be the polity that includes the resources (Though the value of the fishing resource would be included in the calculation of whether the nation was using more than its share of global natural opportunities.) When the fishing resource is in international waters, the fees should be shared equally among all nations in proportion to their populations.
Suppose that fish are caught in a river than flows from one nation into another. How should resource use be managed and accounted for in that case? The two nations should set a common price for fishing (unless fishing on one entails a greater resource cost than fishing in the other). However they divide the revenue from such charges, their ability to collect the revenue should be included in the calculation of how their appropriations of natural opportunities compare with those of other nations.
What applies to fish applies as
well to water that flows from one
country into another, when water is scarce. It is inefficient as well
as unjust for people to use water as if it were free when it is not.
When a river flows from one nation into another, there should be a
common price for extractions of water from the river (unless the
resource cost is greater in one country than in the other), and the
revenue so collected should be included in the calculation of both
nations' appropriations of natural opportunities. ... Read the entire article
Applying the Theory of Justice to Other Connections among Nations
The pre-development rental value of land is only the beginning of the natural opportunities to which all persons have equal rights. Consider fishing in the oceans. If there were so many fish in the oceans that the removal of some by the fishermen of one nation had no detectable impact on the opportunities available to the fishermen of other nations, then there would be no economic scarcity of fish in the oceans as a natural opportunity, and the value of fish would represent returns on the labor and capital of the fishermen, along with some luck. But when fishing by one nation leaves noticeably fewer fish for the others, the reduction in the value of fish stocks caused by fishing represents an appropriation by that nation of the common heritage of all, which needs to be accounted for in establishing what compensation is needed to achieve an equal division of natural opportunities. The pie to be divided now consists of the sum of the pre-development rental value of all land plus the depletion cost of the fishing that all nations do. A nation is fully entitled to the proportion of this total represented by the proportion of its population in total population.
The same logic that applies to fishing applies also to the rent component of the value of all things--the iron and other metals in products of all kinds, the gold and other resources in jewelry, the component of land rent in lumber, etc. Each nation's use of such resources must be included in the pie to be divided.
Sometimes rivers flow from one
nation into another. If the
withdrawal of water by the upstream nation reduces the value of the
natural opportunities that are left to the downstream nation, then
this reduction in the value of the downstream opportunities is part
of what the upstream nation appropriates from the common heritage of
all nations. The total value of the available natural opportunities
is maximized while also achieving justice, if all withdrawals of
water by both nations are charged at a price that equates supply and
demand, the money so collected is counted as part of the pie to be
divided, and land is valued according to the rental value it would
have if unimproved,considering the price of water. ...
the whole article
How would the world look if its political institutions were shaped by the conception of social justice advanced by Henry George?
Bill Batt: Water and Privatization
But only recently, with the advent of data availability and increased computer power, is it possible to demonstrate that Henry George was right: i.e. that taxing what he called "land" - really meaning all natural capital and resources rather than labor or human capital - constitutes the best possible tax design we could have.
If these natural resources are a "commons" worthy of being preserved as the birthright of all humanity, their use can be rented at rates sufficient to cover the costs of not only the provision of those services but for all public needs. All taxes are ultimately shifted through the economy to rest on what classical economists call land rent in any case, and levying the taxes directly on rent improves efficiency by eliminating "deadweight loss." Moreover, taxing or collecting what classical economists call economic rent bears all the hallmarks of a perfect tax -- fairness, simplicity, stability, administrability, neutrality, and efficiency. ... read the whole article
Lindy Davies: The Top Ten Reasons Why Land is More Important than Ever
The Georgist economic proposal insists on the primary importance of land as a factor in the economy. Many people dismiss that as a quaint, agrarian notion. "Perhaps," they scoff, "land was that significant back when most people had to work the soil for a living, but modern agriculture has moved far past that! Nowadays we deal with modern issues of technology, global markets, information -- land is no longer a big deal."
10. There's no place to dump your trash for free. ...
9. Scratch a financial crisis, find a real estate bubble. ...
8. Information (like railroads) needs routes. ...
7. Cities can no longer afford to be inefficient. ...
6. Global climate change is too likely to ignore. ...
5. The loss of biological diversity cannot be reversed. ...
4. Two out of every five people lack a safe and dependable source of drinking water. ...
3. The myth of overpopulation causes cultural sickness. ...
2. We have forgotten what nations are. ...
1. "The land shall not be sold forever, for ye are strangers and sojourners with Me." ...
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
But more ominous, aquifers themselves are impaired, and maybe destroyed forever.
I wish I could report this has made us more conscious of the problem than easterners, but if so that has not reached the MWDSC (Metropolitan Water District of Southern California), the apex of our water establishment, which neglects the problem nonchalantly. MWD is driven instead by the passion of its designs on all waters north to the Arctic Circle.
You think that's hyperbole? I wish! "Only Yesterday," in the '70s, there were several Senators and a big head of steam behind "NAWAPA," to tap the Yukon. Sensible, economical conservation of local aquifers is too prosaic, and besides it violates the American credo of preferring the most resource-using solution. Real men don't conserve resources; real men have vision and acquisitive genes, they sally forth like their warrior progenitors and grab more. Conservation is for sissies and besides, it would only demonstrate the folly of MWD's hydro-imperialism. ... Americans have yet to hear this alarm bell, and take a frighteningly insouciant attitude toward groundwater. Even Earl Heady, an informed person, has written that pesticides only hurt us by being concentrated via the food chain (Nicol and Heady, 335). But in my little corner of the world, southern California, many aquifers are being impaired, perhaps lost forever by "downward runoff" or percolation of water laced with toxics. Read the whole article
Mason Gaffney: Red-Light Taxes and Green-Light Taxes
I. Shared postulates
II. What is waste, and what should we do about it?
A. What is waste?
B. Two kinds of green taxes
C. Two kinds of containment policy
III. Raising wage ratesMason Gaffney: California's Governor-Elect
IV. The need for user charges
On public lands, when a bridge is new, and oversized for its traffic, no toll should be charged: circumstances call instead for a Green Light Tax on the benefited lands, to hasten their settlement. When traffic queues up, however, it is time to charge a toll (and/or to widen the bridge).
Likewise, when demand for water exceeds supply, it is time to price it and charge people for withdrawing it from Nature. The history of irrigation in California is instructive. During the Populist and Progressive eras Californians developed the legal framework for what we call Irrigation Districts, to divert, store and distribute water. They raised funds by taxing land; most of them delivered water free of variable cost. Likewise, no one charged them for taking our water from our rivers. There was ample water, so it seemed, running to waste, or into swamps. The result, from 1900-30, was to convert California from pasture and wasteland to the #1 farm state in America. It was a Georgist object lesson, and a brilliant success story. Quoth Albert Henley, a prominent attorney,
"The discovery of the legal formula of these organizations was of infinitely greater value to California than the discovery of gold a generation before. They are an extraordinarily potent engine for the creation of wealth."A worm in the apple was waste of water. The same policy that promoted close economy and rapid conversion of land also tolerated waste of water, and even subsidized it by basing the quantity of rival water claims on histories of use - what economists now call "rent-seeking." It was once a minor problem, but times change, and "circumstances alter cases." Today we are stuck with much of our water, a limiting natural resource, frozen in lower uses and withheld from higher ones - exactly what Georgist policy is supposed to prevent. The solution, clearly, is for the State to charge each Irrigation District (and other diverters) per unit of water they take, and reallocate the great surpluses they would immediately stop taking. Read the whole article
Many valuable land resources are held by license, rather than title, and escape the property tax almost entirely. ... Read the whole article
Mason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth
Failure to put indigenous waters of southern California to full economical use creates the appearance of scarcity where there is actually enough water. It drives demand northwards to the Owens Valley and the Feather River, and eastward to the Colorado River, at enormous social cost, much of it for energy. Those who issue doomsday dessication scenarios, and deplore the loss of water to farming, also seem to have no idea of how a handful of giant landowners waste most of our water on low-valued uses like pasture, hay, small grains and rice, using primitive wasteful methods like flooding, or furrow irrigation. Only 2-3% of our irrigated lands use basic conservation techniques like drip emitters. Those who waste water in this way are basically substituting water, a limited natural resource, for the labor and capital others use to conserve water while growing higher-valued crops (Gaffney, 1997; Kahrl). Read the whole article
Mason Gaffney: Megabucks for Negabucks: Solving the Water Crisis
... When Henry George wrote “We must make land common property” it was in a place and at a time when most land in sight had been privatized only recently, using crude methods. “Force and fraud” were not dim memories in 1879, but a living presence. So George’s phrase did not strike people then as being any more shocking than it is today to remind them that the public domain, with its pasturelands, waters, rights of way, the air, radio spectrum, fish, mineral riches and timber, belongs to us all in common. ...
The California Constitution and Water Code, like those of most states, are explicit that “The waters of California belong to the people of California.” Water is not private property, evidenced by its not being taxed as such (except indirectly, as it adds to the value of fee simple land). Water is not, therefore, subject to the limits that Prop. 13 (and cognate laws in other states) impose on property tax rates. The State, as owner, can presumably charge whatever the legislature decides, without its being considered a tax at all. Water claimants would of course resist strenuously, with all the lawyers and pawns and media that money can buy, and social pressure sway, but the public has a strong case.
It’s not just water per se, but also the lands under what were originally shallow waters. Most coastal cities have increased their areas greatly by filling in shallow waters. ...
There are four major ways that individuals and corporations acquire the use of waters. One is by riparian rights. To own the bank of a lake or stream is to have a right to the water, theoretically “undiminished and unpolluted,” that nature put there - subject to the equal rights of other riparians, but not of anyone else. ...
A second way to claim water is by owning land overlying ground water, and the aquifers that store it. ...
A third way to claim water is by “prior appropriation.” The key rules are “first in time, first in right”; “due diligence”; “beneficial use”; and “history of use.” The precondition for putting water to “beneficial use” is owning land on which to spread it. ...
Part of appropriating water is securing sites for dams and reservoirs and rights of way, either from public domain or from private owners by use of eminent domain. A major case is San Francisco’s seizure of the site of the Hetch Hetchy reservoir inside Yosemite National Park. This scenic site on the Tuolumne River once rivaled Yosemite Valley itself, on the neighboring Merced River. Rent has been $30,000 a year, fixed since the 1920s. The Administration is now proposing $8 million a year. However this case goes, the charge is for the site alone, not for the water or the power drop. San Francisco seized so much more than its own needs that it sells 2/3 of what it takes to other cities, for a fat profit that helps keep land values in San Francisco nearly the highest in the U.S.A., and its housing the least affordable.
A fourth way to claim water is by getting “sweetheart” contracts from large supply systems: Federal water from the Bureau of Reclamation; State water from the State Department of Water Resources; and mixed-source waters from the giant MWDSC. No sooner are these contracts inked than learned counselors go to work to convert them into perpetual obligations of the taxpayers and other ratepayers. The original 40-year contracts that the U.S. Bureau of Reclamation executed on the 1950s at giveaway prices came up for renegotiation in the 1990s, and only a few old timers even remembered their origins. Meantime the once-surplus water had multiplied many times in value, and the contractors were busy securing rights to resell water that they buy for some $10 per acre-foot to coastal cities for $200-$500 per acre foot. A rather shocking decision by Senior Judge John Wiese, December 31, 2003, requires the Feds to compensate the Tulare Lake Basin Water Storage District for withholding some of “their” water to comply with the Endangered Species Act to save fish downstream. Said District is a front for the J.G. Boswell Company, owner of 200,000 (sic) acres in the Basin.
What’s the moral? We can turn “Negabucks into Megabucks” for state and Federal treasuries by charging water takers a market price for what they get, instead of subsidizing them to get it, as now. The stakes are huge; the barriers are surmountable. Besides raising revenues we would institute a regime of “demand management,” promoting water conservation in the most economical way. We would solve our factitious “water crisis” and “revenue crisis” in one stroke. Read the whole article
Mason Gaffney: Property Tax: Biases and Reforms
Priority #1. Safeguarding the property tax
Priority #2: Enforce Good Laws
Reassess Land FrequentlyPriority #3. De-Balkanize Tax Enclaves
Use the Building-Residual Method of Allocating Value
Federal Income Taxes
A. Rich and Poor
B. Timber and Timberland
The Role of Timber and Timberland
Two More Areas Deserving Attention
Priority #4. What Tax to Fight First?
Priority #5: Make Landowners Pay Their Taxes
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
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:
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.
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
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. Read the whole article.
One example has to do with irrigation. About 60 to 80 years ago, 1890-1930, irrigation was the refuge of the small farmer -- it was the new frontier, and specifically in California. A lot of publicity has been given to something called the Irrigation District movement, whereby farms and cattle ranches were incorporated into taxing districts or irrigation districts, which taxed land and exempted improvements and used tax powers to issue bonds and build expensive irrigation units. And under this system, people in the district paid for water whether they used it or not, and caused a revolution in California agriculture from 1900 to about 1930. It was a fantastic case study in economic development (which has been mostly ignored by academic and government economists). As a result, the average size of a farm in California went way down. And the concentration of land went way down, and irrigation was at the forefront of this.
When irrigation was young in Anglo-America (1890-1914), it was the recourse of small farmers and ranchers. Then, vast spreads were subdivided to create small irrigated farms. There was drastic subdivision and intensification (1900-1930). After the 1930s drop in property tax rates, this land has been reconsolidated. If you don't tax land, conglomeration occurs inexorably. The sections buy out the quarters. This has happened in irrigated agriculture faster than almost anywhere else. Ownership and control based on water have become highly concentrated. Irrigated land is worth a lot more than dry land. Read the whole article
Mason Gaffney: Sounding the Revenue Potential of Land: Fifteen Lost Elements
Substituting taxes for subsidies to promote conservation, turning "Negabucks into Megabucks" for the treasury. Water makes a good example. Now, as for years past, we subsidize landowners to withdraw water. The benefits of the subsidy are roughly in proportion to the area of irrigable land owned. As a result, water is maldistributed, underpriced and wasted. There is also great revenue potential in water. In an arid land, water is life. The Constitution says that water belongs to "the people of California." The State can serve market efficiency, conserve water, and raise revenue in one stroke by putting a charge on water withdrawals. Such a charge would also expedite the current movement to market water. Many in the Green Movement also see the double efficacy of “Pigovian” taxes (effluent charges that “tax bads, not goods”) to curtail overuse and pollution of common airs and waters, while also raising revenue. ...
Rents that are now dissipated, but need not be.
1. Dissipation by open access
It is a truism of economic theory that open access to lands dissipates and destroys potential rents, by overcrowding. Open range and fisheries are classic examples from olden times. Fisheries are being privatized only in our times, and the rents, where observable, are often over half the catch. Streets and highways are like open ranges, with cars and trucks instead of cattle and sheep. The revenue potential of charging motorists for squeezing into crowded streets is staggering. Wm. Vickrey, among others, has come up with vertiginous numbers. The beauty of it is that discouraging marginal trips by pricing actually can increase the aggregate traffic flow, a double gain.
Access to underground “pools” of water and petroleum is limited to overlying landowners, but even that degree of openness is enough to destroy much potential rent that may be conserved by unitized control or better, severance taxes.
2. Dissipation by rent-seeking in the process of tenuring
Private tenure is not the panacea for all resource problems, because the process of creating tenure entails orgies of “soonerism.” Notorious examples are exploring for minerals in the preleasing period, and establishing water licenses based on prior appropriation, and radio spectrum licenses based on histories of broadcasting. Read the whole article
Mason Gaffney: The Taxable Surplus of Land: Measuring, Guarding and Gathering It
1. Common Property in Land is Compatible with the Market Economy.
2. The Net Product of Land is the Taxable Surplus
A. To socialize the taxable surplus, land rent, effectively, you must define and identify it carefully, and structure your taxes to home in on it.
B. Taxable surplus is also what you can tax without driving land into the wrong use.
C. To tax rent we must be sure there is rent to tax, and we must adopt public policies to husband and maximize it, and avoid policies that lower and dissipate it.
i. Avoid "perverse subsidies."
ii. Avoid letting lessees of public land conceal their revenues.
iii. Avoid letting lessees or taxpayers pad their costs to understate their net revenues.
iv. Avoid dissipating rent by allowing open access to resources like fisheries,
v. Avoid trying to distribute rents to consumers by capping prices below the market.
D. Raising output by removing tax bias
E. Maximizing public revenue.
F. Sustaining the tax base
3. Taxing the Net Product of Land Permits Untaxing Labor
4. Taxing the Net Product of Land Permits Untaxing Capital
5. Taxing the Net Product of Land Provides Ample Public Revenues: a Master Solution to Many Problems
A. Public revenues will support the ruble.
B. Your public credit will, of course, recover to AAA rating when lenders see that there is a strong flow of revenue to pay public debts.
C. Never again need you bend to any "advice" or commands from alien lenders, nor endure patronizing, humiliating homilies from alien bankers, nor beg any foreign power for aid.
D. If you again feel the need (as I hope you will not) to rebuild your military, you will of course require strong revenues.
E. Strong national revenues are required to unite Russia, and keep it one nation.
1. Common Property in Land is Compatible with the Market Economy.
You can enjoy the benefits of a market economy without sacrificing your common rights to the land of Russia. There is no need to make a hard choice between the two. One of the great fallacies that western economists and bankers are foisting on you is that you have to give up one to enjoy the other. These counselors work through lending and granting agencies that seduce you with loans and grants to learn and accept their ideology, which they variously call Neo-Classical Economics, or "monetarism," or "liberalization." It is glitter to distract you and pave the way for aliens to acquire and control your resources.
To keep land common while shifting to a market economy, you simply use the tax system. Taxation is the form that common property takes in a monetary, market-oriented economy. To tax is to socialize. It's then just a simple question of what you will socialize through taxation, and how; but in the answers lie success or failure.
Not only can you have both common land and free markets, you can't have one without the other. They go together, like love and marriage. You need market prices to help identify land's taxable surplus, which is the net product of land after deducting the human costs of using it. At the same time, you must support government from land revenues to have a truly free market, because otherwise you will raise taxes from production, trade, and capital formation, interfering with free markets. If you learn this second point, and act on it, you will have a much freer market than any of the OECD nations that now presume to instruct you, and that are campaigning vigorously to make all nations in the world "harmonize" their taxes to conform with their own abysmal systems.
Mason Gaffney: Who Owns Southern California?
1. HOLDINGS BY ALIENS ... Non-resident aliens own about 75% of the "major" buildings in the L.A. CBD west of Broadway ...
2. AMERICANS FROM OTHER STATES ... A second kind of holder is the out-of-state American, individual or corporate.
3. CALIFORNIANS Many of our largest landholders also live in California. This is partly because the lands are here, but moreso because certain places in California are good places to live. One of the advantages of receiving property as opposed to labor income is it lets one choose his residence. California ranks after New York in the number of rich Americans (using Forbes' list) who reside here.
Also included here are California-based corporations. A corporation's "base" refers simply to the site of its headquarters: its shareholders are scattered around the world, and the major shareholders, who exercise control, are effectively screened behind layers of trusts and financial institutions, so they are impossible to identify with certainty.
Institutions acquire land for their operations and then it tends to stick to them for various reasons. It is tax free, for one, so long as they retain it (and do not use it commercially). They are not subject to corporate raids. Thus there is no mechanism whereby the current opportunity cost of land is felt by management. It never appears in their budgets; they never need compete for or justify it. College Boards are not accountable to any public body, a precedent set by Marshall's U.S. Supreme Court in Dartmouth College v. Woodward, 1819.
These same interests wield special influence on private and public higher education, working behind the scenes. They stand in well with the press: in fact, the Chandler family of the Times-Mirror Company is one of them, owning the vast Tejon Ranch. Scott Newhall was once editor of the San Francisco Chronicle. (It is alleged by Stanley Sapiro that "the Newhall ranch was assembled by the owners of the San Francisco Chronicle." ) They dominate Chambers of Commerce. They generally dominate the Metropolitan Water District of Southern California (MWDSC), the regional water supply agency, which has long overtaxed the City of Los Angeles to subsidize expansion to outlying areas.
The Metropolitan Water District of Southern California is run by a Board of 50 Directors, representing 27 cities and districts that it serves. Those from cities are elected on the basis of "one-person-one-vote." Those from several outlying districts are elected by "one-acre-one-vote." Representatives from landowner-run districts remain the same from election to election, thus gaining seniority to dominate the 50-person Board.
Thus a handful of speculative landowners have as many votes as millions of city residents. Accordingly, MWDSC preaches water conservation in the cities while it keeps annexing new speculations at its fringes. It is probably no accident that its current President represents the Western Municipal Water District of Riverside County, an area dominated by land speculators. Many economists have criticized its persistent refusal to consider any kind of economically rational, cost-justified rate structure. ... 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. ...
About a 100 years ago, California adopted the land tax for a while. The legislature allowed irrigation districts to fund dam and canal construction by taxing the resultant rise in land value. This legislation was the fruit of the effort of one legislator, C. Wright, who left teaching school to run for office, pass his bill, then returned to teaching. As voters, farmers were beginning to have more representation than rich ranchers. Then the idea of a Single Tax on land values, made popular by writer Henry George, was current. Unfortunately, once the irrigation improvements were paid for, the land tax was allowed to languish, as speculators regained political control. ...
A century ago, many farmers and miners went without water because cattlemen like Henry Miller owned 1,000,000 acres in California. Miller could drive his herds from Mexico to Oregon and spend every night on his own land. In 1886 Mill won full rights to the water of the Kern River. To correct this aggrandizement, the state allowed communities to create by popular vote irrigation districts to build dams and canals and pay for them by taxing the increase in land value. Once irrigated, land was too valuable to use for grazing, and the tax made it too costly for hoarding. So cattlemen sold off fields to farmers and at prices the farmers could afford. In ten years, the land rent tax turned the Central Valley into over 7,000 independent farms. Over the next decades, those treeless, semi-arid plains became the garden of America. ...
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
Mason Gaffney: 18 Fallacies
1. "Water rights are real property"
Wrong! To begin, the word 'right' is wrong. A right is something like free speech, possessed by everyone. The only water rights, properly speaking, are common, which present water permits certainly are not.
Private water interests are claims, licenses, permits, holdings, reservations, privileges, or possessions. I do not say 'property,' except in reference to the state, water is the property of the states.
Most private water claims are licenses, at least in the 17 western states. Most state constitutions read that the water of a state belongs to the state (in trust for the people of the state).
If economists have two hands, (on the other hand!) a lawyer has more than a squid has arms, and as much ink to darken the waters. Murky ideas make for clouded titles and blinded citizens. Now and again, however, one finds a pure ray of light like this from Oregon Chief Justice McBride: -- "It does not seem to me that a license to appropriate water in this State ever rose above the dignity of a mere privilege over which The legislature has complete control."
A water license has about the same standing as
It is like the old Oregon and California Railroad land grant which was revested when the grantee failed to perform. It is subject to conditions and to forfeiture for failure to meet same.
The evidence is, you do not find water licenses recorded like title deeds to real property. More important, you do not find them on the real estate tax rolls. Never have I heard a licensee demand to be taxed because he holds real property.
Lawyers habitually intone 'property' when describing water permits, especially their clients'. This is ceremonial and tendentious, to bolster the particular case.
It is also a group shibboleth, to bolster all clients' cases against all the outside, unlicensed public. Call it a class bias. After all, most lawyers get in this field to represent licensees, individually and collectively.
The upshot is that The Legislature has more latent power than most of us imagine. As electors and citizens our hands are not fled, but rather our minds. That's part of a lawyer's job, and they are good at it. ...
5. "The cost of water is passed through to consumers in higher prices"
Wrong! At last I'm in my own field. Prices are determined by supply and demand, not cost. If you sell in a national or world market, or even a competitive local market, you are a price-taker, not a price-maker. You can't pass cost hikes on to consumers; you have to eat them.
In addition, water (like energy) is an unusual kind of input whose high price may actually increase production.
It would be easy to assume, using the good old idea of diminishing returns, that dearer water would reduce intensity of land use.
It certainly cuts water use, but when you pay more for water you often switch to higher-valued crops. That is what Southern California farming is all about. You substitute capital and labor for water on the same land, and often raise yields per acre.
You cannot afford to dump high-priced water on barley, or alfalfa, or rice, or irrigated pasture, or any other of these domesticated phreatophytes that guzzle up most of our underpriced water today.
A number of fairways and cemeteries would also give way to higher-valued uses.
With dearer water you use less by controlling it better, switching from primitive furrow irrigation to sprinklers, spitters and drip.
This in turn lets you do new things like growing avocados on steep hillsides formerly barren, yielding more dollars of product for less water (and in this case on waste land).
The above facts point to a fascinating, portentous corollary: you can tax water withdrawals without wrecking the water economy.
On the contrary, such taxes (carefully crafted to be constructive) can encourage conservation, getting more bins and bales for the bucket, so to speak.
Americans are raised on anti-tax slogans masquerading as economic analysis, always presuming taxes destroy good incentives and wreck the economy.
Here is a kind of tax that raises revenue while strengthening the economy.
This corollary is too good to drop, and is highlighted later.
6. "You can't stop a landowner from pumping on his own land"
Wrong! You can even control his hunting and fishing there, and apply police power. As to pumping, it depends on whether he owns what is under his land.
If it is oil, we all know mineral rights are routinely severed from surface rights by sale, reservation or lease. Water can be subject to constraints, too.
Limits on pumping water are not as common or severe as Huey Johnson and I think they should be, but they do exist. In coastal areas, pumping is limited and/or taxed to stop salt water intrusion.
Further inland, pumping can be stopped to control movement of toxic plumes that destroy valuable aquifers: this is done in the Bunker Hill aquifer under the Santa Ana River, threatened with fouling by toxins from Norton Air Force Base, San Bernardino.
Pumping is routinely stopped to prevent 'export' of water from lands overlying an aquifer: California calls that the 'correlative rights' doctrine. It is not always well observed, and not often well-advised, but very well established.
If that does not suffice to stop overdraft, pumping is controlled to prorate water among surface owners, and shorten pump lifts.
Also, pumping wells near streams can be stopped to prevent the indirect diversion of surface water. This happens on the alluvial fans that are so common in the west.
A simple solution to half our tractable water problems would be a severance tax on water withdrawals. If you can regulate it you can tax it.
A tax can be viewed as nothing more than an economic price charged by the owner of water (the state) for using its property.
If Chicago-School (and Rand Corporation) economists were more consistent in their ardor for the price system, and less consistent in their anarchistic mistrust of legislatures, they would seize upon this obvious application of the price system and boost it with all the considerable influence they wield.
Whether one chooses taxation regulation, we must control pumping in some manner if any system of surface control is to work.
While California rations and conserves surface water, landowners in the arid San Joaquin Valley just punch more and more wells into the aquifers and pump up free water the State keeps recharging at high cost.
Thus they play out their destined role in The Great Water Treadmill: subsidized water supply followed by overdraft followed by State rescue projects followed by new overdrafts, etc. ad bankruptcy.
This treadmill got well started in 1913 when Los Angeles tapped the Owens Valley waters to supply free water in the San Fernando Valley.
The lands there were timely pre-purchased by insiders, giving a clue to the forces behind the premature seizures and diversion of water.
The episode was dramatized in the film Chinatown, so the scenario is often now labelled 'the Chinatown syndrome' although the key names like Mulholland, Otis and Chandler sound distinctly occidental.
It is not just history; it is the present and near future: the Great Treadmill keeps turning. The Metropolitan Water District of Southern California (MWD) now presides over our destinies.
The MWD presses for more water sources, preaches domestic conservation, imposes rationing on its old customers -- and annexes new desert lands to water.
In similar fashion, Kern County landowners keep irrigating desert lands and overdrafting, while petitioning the Sacramento legislature for 'emergency' aid. ... Read the whole article
Capital, however durable, also obsolesces because it is subject to continual competition from streams of new products. Intellectual capital, however classic, is subject to endless competition from floods of new ideas and discoveries. Land does not obsolesce from this cause: there is no new land, let alone modem, state-of-the-art land. Both land and capital are subject to demand-obsolescence from changes in tastes and fashions, but overall the taste for land as a consumer good rises as incomes and wealth grow. The writer has documented elsewhere how the land share of residential real estate value rises sharply with its total value.' The land part of residential real estate is a "superior good"; the building part is not.
It follows that the demand for land arises over time with incomes, but faster than incomes. For example the soaring demand for golf has produced 150 golf courses in one California county (Riverside) alone, preempting a good bit of the usable land and a huge share of this natural desert's limited water resources. The western quarter of Massachusetts, the Berkshires, with adjoining parts of Connecticut, New York, and Vermont, has become one vast country estate for suburban New Yorkers and retirees, and is priced high above its farm value. Ski resorts, hunting clubs, yacht harbors, spas, beach resorts, and such uses increasingly outbid mere utilitarian uses for prime lands. There is also a high and rising technical multiplier of demand for land to complement modem consumer capital. For example, the parking demands alone of 200 million private autos in the U.S.A. preempt an area as large as Maryland and Delaware combined. Unlike most of Maryland and Delaware, the parking lots are mostly on high-valued land in cities. Soaring demands and reuse values are thus the norm in an affluent society.
What can it mean to "consume" land, when it does not get used up? It can only mean to occupy or preempt a time-slot of space. That has the most profound implications for the meaning of "consumption" in economic thinking, and "consumer taxation" in fiscal policy. Economists have neglected and papered over these matters almost completely. These are pursued in B-13 below. ... read the whole article
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper