Human beings are dependent on having a supply of water. Many corporate entities also depend on a supply of inexpensive water in order to stay in business. When individual human needs for water come up against corporate needs for water, who loses?

Are some of us more entitled than others? Should some of us have to pay others for access to water? Should domestic corporations own our water? Should foreign corporations own our water? Should local entities own our water? Should our municipalities own our water? The answers to these questions are important!

We may have to buy our water, but who should benefit from that?

Should the fact that some of one's ancestors got here earlier than other peoples' ancestors give one more rights to the water, or the air, or the land?

Can some of us pollute the water with impunity, whether it be through point pollution or non-point pollution? Do corporations have privileges individuals don't have?

Henry George: Thou Shalt Not Steal  (1887 speech)

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

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.  ...  Read the whole article

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.

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

• Offshore Oil
• 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

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.  Read the whole article.

Mason Gaffney: The Relationship Between Property Taxation and the Concentration of Farm Land Ownership

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.

The very people who gave us the term laissez-faire -- the slogan at the core of a free market economy -- made communizing land rents a central part of their program. These were the French economistes of the 18th Century, sometimes called "Physiocrats," who were the tutors of Adam Smith, and who inspired land reforms throughout Europe. The best-known of them were François Quesnay and A.R. Jacques Turgot, who championed land taxation. They accurately called it the "co-proprietorship of land by the state."
   
Since their time we have learned to measure land values, and we have broadened the meaning of "land" to comprise all natural resources. Agrarians will be relieved, and may be surprised, that farmland ranks well down the list in terms of total market value. Thus, a land tax is not primarily a tax on farms; only the very best soils in the best locations yield much taxable surplus.  ...  
 
In arid lands, water is life, and the most valuable natural resource is water. For example, in southern California we need water so much we import it from the Feather River 600 miles north of us, pump it uphill through the long San Joaquin Valley, then over the high Tehachapi Mountain range, and tunnel it through the San Bernardino Mountain Range, all at great cost. When it gets here, it supplements and competes with local water that nature provides freely in the Santa Ana, San Jacinto, and other rivers. That local water then has a value equal to the high cost of importing the remote northern water. That value in the local waters is a taxable surplus. However, we have not learned to take that surplus value into the local treasuries; we give the water away, and worse, we actually subsidize people to withdraw water by helping them pay for dams, canals, and pipelines so they can waste water without paying for it. Thus we turn a public asset into a public liability - an extreme form of folly that is called "dissipating rent." In this age of growing water scarcities it is past time we learned to husband and nurture rent, in order to socialize it by taxing the surplus. So should you, in comparable circumstances.  
 
Another value from water is to generate power. Again, California witlessly fails to socialize this value, but Canada, our northern neighbor, has shown the way. British Columbia, Newfoundland (the Labrador part), Quebec, and other provinces raise large revenues from charges on the use of falling water. Russia, with some of the world's largest hydro-electric projects, can do the same, or better.
 
Fisheries are another source of value. In the past most nations have let this rent be "dissipated" by overfishing. In recent years the U.S. and Canada have in effect "privatized" fishing in their offshore waters by limiting the number of licenses and boats. This limitation was needed and desirable, overall. It created large rents, where previously there were little or none, by preventing overfishing and the great waste of duplicate, triplicate, and even quintuplicate fishing effort. That is a good example of husbanding and guarding rent, which is necessary before you can collect it. It was not necessary or desirable, however, to give away this net benefit to private parties.
 
The government did not sell these licenses, but simply gave them away to owners of existing boats, and others with political influence. Each license now sells for something like a million dollars, creating a new class of instant millionaires and "parlor fishermen." This giveaway to the few, and takeaway from the many, created an instant class society where before there were equal access and equal opportunities.
 
These privileges are worth so much that there are now documented cases off Alaska where the parlor fisherman takes 70% of the total catch. The captain, the crew, and the owner of the boat, who do the work and bear the dangers and discomforts and financial risks of fishing, must get by with the other 30%. Parlor fishermen are simply leeches; these rents should be socialized, relieving the workers from taxes. ...

Avoid "perverse subsidies." These are subsidies that encourage harmful things like

• polluting air and water,
• wasting water,
• cutting timber whose value is less than the cost of logging, or
• populating remote regions whose costs exceed the benefits derived.

Cape Breton Island, the northern tip of Nova Scotia, contains the most polluted area in Canada thanks to years of subsidies to sustain its uneconomic, obsolescent coal and steel industries that employ just a few people by fouling one of the most scenic jewels in North America.
   
We have mentioned how we actually subsidize people to withdraw scarce water from our overdrawn rivers in the arid U.S.A. The so-called water "shortage" in the lower Colorado River is entirely an artifact of such misguided policies: every major agency drawing on the Colorado is actually subsidized to do so, when they should be paying for the privilege. If they paid, they would stop wasting water, and would enrich the Treasury, which could then abate taxes on work, trade, and saving.
 
The U.S. Forest Service has turned a great national asset, our national forestlands, into a drain on the Treasury by subsidizing forest roads in subeconomic areas. It makes money selling good timber in good areas, but then spends $10 on roads into subeconomic areas to get $1 in revenues from sale of timber to private parties, destroying scenic values and watershed protection.
 
Perverse subsidies like those are unspeakably foolish and wasteful. They "dissipate rent" so there is none left to tax.   Read the entire article

Mason Gaffney:  Who Owns Southern California?

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

• the privilege some airlines had (before deregulation) to occupy certain airport gates and time slots;
• the privilege of a cab to work the streets of New York after securing a medallion;
• a license from the FCC to use a specified frequency; or
• a grazing permit on Federal lands.

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. ...

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.

Mason Gaffney: Land as a Distinctive Factor of Production

Peter Barnes: Capitalism 3.0 — Chapter 2: A Short History of Capitalism (pages 15-32)

In the seventeenth century, John Locke sought to balance the commons and private property. Like others of his era, he saw that private property doesn’t exist in a vacuum; it exists in relationship to a commons, vis-à-vis which there are takings and leavings. The rationale for private property is that it boosts economic production, but the commons has a rationale, too: it provides sustenance for all. Both sides must be respected.

Locke believed that God gave the earth to “mankind in common,” but that private property is justified because it spurs humans to work. Whenever a person mixes his labor with nature, he “joins to it something that is his own, and thereby makes it his property.” But here Locke added an important proviso: “For this labor being the unquestionable property of the laborer,” he wrote, “no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others.” In other words, a person can acquire property, but there’s a limit to how much he or she can rightfully appropriate. That limit is set by two considerations: first, it should be no more than he can join his labor to, and second, it has to leave “enough and as good” in common for others. This was consistent with English common law at the time, which held, for example, that a riparian landowner could withdraw water for his own use, but couldn’t diminish the supply available to others.

Despite Locke’s quest for balance, the English commons didn’t last. In the eighteenth and nineteenth centuries, the movement to enclose and privatize it accelerated greatly. According to historian Karl Polanyi, this enclosure was the great transformation that launched the modern era. Local gentry, backed by Parliament, fenced off village lands and converted them to private holdings. Impoverished peasants then drifted to cities and became industrial workers. Landlords invested their agricultural profits in manufacturing, and modern times, economically speaking, began.

 

... read the whole chapter