Wealth and Want
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Henry George: The Crime of Poverty  (1885 speech)

... Why, in the rudest state of society in the most primitive state of the arts the labour of the natural bread-winner will suffice to provide a living for himself and for those who are dependent upon him. Amid all our inventions there are large bodies of men who cannot do this. What is the most astonishing thing in our civilisation? Why, the most astonishing thing to those Sioux chiefs who were recently brought from the Far West and taken through our manufacturing cities in the East, was not the marvellous inventions that enabled machinery to act almost as if it had intellect; it was not the growth of our cities; it was not the speed with which the railway car whirled along; it was not the telegraph or the telephone that most astonished them; but the fact that amid this marvellous development of productive power they found little children at work. And astonishing that ought to be to us; a most astounding thing!

Talk about improvement in the condition of the working classes, when the facts are that a larger and larger proportion of women and children are forced to toil. Why, I am told that, even here in your own city, there are children of thirteen and fourteen working in factories. In Detroit, according to the report of the Michigan Bureau of Labour Statistics, one half of the children of school age do not go to school. In New Jersey, the report made to the legislature discloses an amount of misery and ignorance that is appalling. Children are growing up there, compelled to monotonous toil when they ought to be at play, children who do not know how to play; children who have been so long accustomed to work that they have become used to it; children growing up in such ignorance that they do not know what country New Jersey is in, that they never heard of George Washington, that some of them think Europe is in New York. Such facts are appalling; they mean that the very foundations of the Republic are being sapped. The dangerous man is not the man who tries to excite discontent; the dangerous man is the man who says that all is as it ought to be. Such a state of things cannot continue; such tendencies as we see at work here cannot go on without bringing at last an overwhelming crash. ... read the whole speech

Nic Tideman: The Structure of an Inquiry into the Attractiveness of A Social Order Inspired by the Ideas of Henry George
 I. Ethical Principles

A. People own themselves and therefore own what they produce.
B. People have obligations to share equally the opportunities that are provided by nature.
C. People are free to interact with other competent adults on whatever terms are mutually agreed.
D. People have obligations to pay the costs that their intrusive behaviors impose on others.
II. Ethical Questions
A. What is the relationship between justice (as embodied in the ethical principles) and community (or peace or harmony)?
B. How are the weak to be provided for?
C. How should natural opportunities be shared?
D. Who should be included in the group among whom rent should be shared equally?
E. Is there an obligation to compensate those whose presently recognized titles to land and other exclusive natural opportunities will lose value when rent is shared equally?
F. Can a person who is occupying a per capita share of land reasonably ask to be left undisturbed indefinitely on that land?
G. What is the moral status of "intellectual property?"
H. What standards of environmental respect can people reasonably require of others?
I. What forms of land use control are consistent with the philosophy of Henry George?
III. Efficiency Questions
A. Would public collection of the rent of land provide enough revenue for an appropriate public sector?
B. How much revenue could public collection of rent raise?
C. Is it possible to assess land with sufficient accuracy?
D. How much growth can a community expect if it shifts taxes from improvements to land?
E. To what extent does the benefit that one community receives from shifting taxes from buildings to land come at the expense of other communities?
F. What is the impact of land taxes on land speculation?
G. How, if at all, does the impact of shifting the source of public revenue to land change if it is a whole nation rather than just a community that makes the shift?
H. Is there a danger that the application of Henry George's ideas would lead to a world of over-development?
I. How would natural resources be managed appropriately if they were regarded as the common heritage of humanity?    Read the whole article

Nic Tideman: The Morality of Taxation: The Local Case

The fairness of such a tax system might also be questioned from another perspective. If people are required to pay the costs of the public services that they use, then who will pay for schools?

There are two possible answers.

  • One possibility is that people will agree on the value of living in a community where children are well educated, whether they have children or not, and they will find the presence of another child in the community to be a benefit for which the cost of educating the child is not too high a price to pay. In this case, educational expenditures add to the value of land throughout the community, and education can be financed efficiently by land taxes, without requiring students or their parents to pay. Those who pay will be receiving benefits that are equal to what they pay.
  • The second possibility is that there will be a consensus that, whether anyone wants to pay or not, education is a birthright of all children. In this case, the birthright can be financed efficiently by a tax on land, since land does not leave town or work less hard when it is taxed.

But is such a tax fair? Consider first a case in which everyone has the same number of children. Then the taxation of land value to finance education is equivalent to the assertion of an equal claim of everybody to land. And there is a good basis for such a claim. No one made the land. The titles to land that we recognize today generally originated in conquest. Our affection for the words of the Declaration of Independence, that "All men are created equal," in conjunction with the recognition that titles to land are privileges that are created by government, should lead us to the implication that we have an obligation to share the benefits of land equally. As Henry George pointed out (1960 [1879], 403-407), the sensible way to assert equal rights to land is not to divide the land equally, but rather to collect the rent of land and use it for public purposes. A tax on land takes for public purposes only what nature, public services, and the growth of communities produce, unlike taxes on labor and capital, which take what people produce and which people may properly resent having taken from them. Thus, at least when everyone has the same number of children, it is fair to finance education by taxing land.

Now consider how the situation changes when people have different numbers of children. Consider two possibilities.

  • First, it is possible that additional children provide a benefit to everyone in society, because the number of persons with whom everyone can interact will be greater. If this benefit is as large as the cost of education, then there is no unfairness in paying for the education of all children from public funds.
  • On the other hand if the birth of an additional child does not provide general benefits as large as the cost of educating the child, or if it generates crowding costs, then people who have more children than average can rightfully be required to pay those costs.

"But wait!" you may say. "Many people will not be able to afford to pay the cost of educating their children. How can you expect them to do so?"

I would like to turn the question around. If people cannot be expected to pay for educating the children that they ought to be able to have, doesn't that mean that there is some fundamental unfairness in the starting conditions? Is it not the combination of past injustice and current unequal access to natural opportunities that makes us reluctant to require people to pay the full costs of having children? In my conception of justice, we have not adequately compensated for past injustice until we have put people in a position where we are content to oblige them to pay the full costs of their choices. ... read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 7: Universal Birthrights (pages 101-116)

A Children’s Opportunity Trust

Not long ago, while researching historic documents for this book, I stumbled across this sentence in the Northwest Ordinance of 1787: “[T]he estates, both of resident and nonresident proprietors in the said territory, dying intestate, shall descent to, and be distributed among their children, and the descendants of a deceased child, in equal parts.” What, I wondered, was this about?

The answer, I soon learned, was primogeniture — or more precisely, ending primogeniture in America. Jefferson, Madison, and other early settlers believed the feudal practice of passing all or most property from father to eldest son had no place in the New World. This wasn’t about equal rights for women; that notion didn’t arise until later. Rather, it was about leveling the economic playing and avoiding a permanent aristocracy.

A nation in which everyone owned some property — in those days, this meant land — was what Jefferson and his contemporaries had in mind. In such a society, hard work and merit would be rewarded, while inherited privilege would be curbed. This vision of America wasn’t wild romanticism; it seemed quite achievable at the time, given the vast western frontier. What thwarted it, later, were giveaways of land to speculators and railroads, the rise of monopolies, and the colossal untaxed fortunes of the robber barons.

Fast-forward to the twenty-first century. Land is no longer the basis for most wealth; stock ownership is. But Jefferson’s vision of an ownership society is still achievable. The means for achieving it lies not, as George W. Bush has misleadingly argued, in the privatization of Social Security and health insurance, but in guaranteeing an inheritance to every child. In a country as super-affluent as ours, there’s absolutely no reason why we can’t do that. (In fact, Great Britain has already done it. Every British child born after 2002 gets a trust fund seeded by $440 from the government — $880 for children in the poorest 40 percent of families. All interest earned by the trust funds is tax-free.)

Let me get personal for a minute. My parents weren’t wealthy; both were children of penniless immigrants. They worked hard, saved, and invested — and paid my full tuition at Harvard. Later, they helped me buy a home and start a business. Without their financial assistance, I wouldn’t have achieved the success that I have. I, in turn, have set up trust funds for my two sons. As I did, they’ll have money for college educations, buying their own homes, and if they choose, starting their own businesses — in other words, what they need to get ahead in a capitalist system.

As I hope my sons will be, I’m extremely grateful for my economic good fortune. At the same time, I’m painfully aware that my family’s good fortune is far from universal. Many second-, third-, and even seventh-generation Americans have little or no savings to pass on to their heirs. Their children may receive their parents’ love and tutelage, but they don’t get the cash needed nowadays for a first-rate education, a down payment on a house, or a business venture. A few may rise because of extraordinary talent and luck, but the majority will spend their lives on a treadmill, paying bills and perhaps tucking a little away for old age. Their sons and daughters, in turn, will face a similar future.

It doesn’t have to be this way. One can imagine all sorts of government programs that can help people advance in life — free college and graduate school, GI bills, housing subsidies, and so on. Such programs, as we know, come and go, and I prefer more rather than less of them. But the simplest way to help people advance is to give them what my parents gave me, and what I’m giving my sons: a cash inheritance. And the surest way to do that is to build such inheritances into our economic operating system, much the way Social Security is.

When Jefferson substituted pursuit of happiness for Locke’s property, he wasn’t denigrating the importance of property. Without presuming to read his mind, I assume he altered Locke’s wording to make the point that property isn’t an end in itself, but merely a means to the higher end of happiness. In fact, the importance he and other Founders placed on property can be seen throughout the Constitution and its early amendments. Happiness, they evidently thought, may be the ultimate goal, but property is darn useful in the pursuit of it.

If this was true in the eighteenth century, it’s even truer in the twenty-first. The unalienable right to pursue happiness is fairly meaningless under capitalism without a chunk of capital to get started.

And while Social Security provides a cushion for the back end of life, it does nothing for the front end. That’s where we need something new.

A kitty for the front end of life has to be financed differently than Social Security because children can’t contribute in advance to their own inheritances. But the same principle of intergenerational solidarity can apply. Consider an intergenerational transfer fund through which departing souls leave money not just for their own children, but for all children. This could replace the current inheritance tax, which is under assault in any case. (As this is written, Congress has temporarily phased out the inheritance tax as of 2010; a move is afoot to make the phaseout permanent.) Mind you, I think ending the inheritance tax is a terrible idea; it’s the least distorting (in the sense of discouraging economic activity) and most progressive tax possible. It also seems sadly ironic that a nation that began by abolishing primogeniture is now on the verge of creating a permanent aristocracy of wealth. That said, if the inheritance tax is eliminated, an intergenerational transfer fund would be a fitting substitute.

The basic idea is similar to the revenue recycling system of professional sports. Winners — that is, millionaires and billionaires — would put money into a kitty (call it the Children’s Opportunity Trust), to be divided among all children equally, so the next round of economic play can be more competitive. In this case, the winners will have had a lifetime to enjoy their wealth, rather than just a single season. When they depart, half their estates, say, could be passed to their own children, while the other half would be distributed among all children. Their own offspring would still start on third base, but others would at least be in the game.

Under this plan, no money would go to the government. Instead, every penny would go back into the market, through the bank or brokerage accounts (managed by parents) of newborn children. I’d call these new accounts Individual Inheritance Accounts; they’d be front-of-life counterparts of Individual Retirement Accounts. After children turn eighteen, they could withdraw from their accounts for further education, a first home purchase, or to start a business.

Yes, contributions to the Children’s Opportunity Trust would be mandatory, at least for estates over a certain size (say $1 or $2 million). But such end-of-life gifts to society are entirely appropriate, given that so much of a millionaire’s wealth is, in reality, a gift from society. No one has expressed this better than Bill Gates Sr., father of the world’s richest person. “We live in a place which is orderly. It’s a place where markets work because there’s legal structure to support them. It’s a place where people can own property and protect it. People who have the good fortune, the skill, the luck to become wealthy in our country, simply have a debt to the source of their opportunity.”

I like the link between end-of-life recycling and start-of-life inheritances because it so nicely connects the passing of one generation with the coming of another. It also connects those who have received much from society with those who have received little; there’s justice as well as symmetry in that.

To top things off, I like to think that the contributors — millionaires and billionaires all — will feel less resentful about repaying their debts to society if their repayments go directly to children, rather than to the Internal Revenue Service. They might think of the Children’s Opportunity Trust as a kind of venture capital fund that makes startup investments in American children. A venture capital fund assumes nine out of ten investments won’t pay back, but the tenth will pay back in spades, more than compensating for the losers. So with the Children’s Opportunity Trust. If one out of ten children eventually departs this world with an estate large enough to “pay back” in spades the initial investment, then the trust will have earned its keep. And who knows? Some of those paying back might even feel good about it. ... read the whole chapter



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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper