February 27, 2012 § Leave a comment
IF WEALTH, AS opposed to income, is the true measure of economic well-being, it’s equally true that a prime location is both the quintessential signifier and repository of wealth — as well as a mechanism for getting yet more of it.
Ask the overpaid rapping bureaucrats, war contractors, lobbyists, lawyers and other privilege profiteers in the fashionable Washington suburbs of Maryland and Virginia — the enclaves of the Wall$hington “one percent”. Fabulous wealth has accrued to the real estate in the empire’s capital.
Although at its all-time peak, the perennial Wall$hington real-estate bubble is not new– it was visible even in 1886: “The Federal government has acted the part of a munificent patron to Washington City. The consequence is that the value of lots has advanced,” Henry George wrote in Protection or Free Trade.
Not that we’re just going to Let’s explore the commection between the state, the privileged private sector The connection between the privilege of ownership of key locations, and the Wall$hington One Percent’s riches goes further. Ask any urban hipster who’s watched formerly vibrant, artsy urban neighborhoods go to crap. I.e., watched the coffeehouses, music spots, dive bars or late-night diners on the busiest corners be replaced by Starbucks stores and bank branches.
A superior location is a business advantage to banks, of course. But it’s more: locations are the literal stock in trade of finance. Mortgage lending is a core business in commercial banking. (Then there are all those mortgage-backed derivatives…) And the value of the mortgages that banks trade on consists, to a lesser or greater degree — sometimes, to a very great degree — of location value.
Ancient arguments, as well as modern economic findings, put location and other features of land in a unique ethical category: no individual created the earth, or the socioeconomic advantage conferred by superior location within a community; why should any individual have a monopoly on any location? Why should such individuals have the privilege of preventing others enjoying a location, or collecting rent on them?
This question suggests a much-needed shift from the stale and eye-glazing debate over tweaks to federal income taxation, to a conversation about capturing and recirculating location and resource values instead, as Henry George eloquently argued.
Most U.S. land is under a local and State jurisdiction. Converting the local real-property tax (woefully misapplied in nearly every locality) into a Georgist land-only “single tax” is fairly simple. It would apply to the value of any urban and rural land of value (i.e., any land that could get a price on the market), including land containing natural resources. Even though it’s commonly called a tax, such a charge is more accurately called a fee, since unlike taxes, it is determined by the market and it pays for known benefits. (If a location confers few or no benefits, such as public infrastructure, then it would have little or no market value, and thus, would pay little or nothing.)
If we’re also phasing out the inefficient-to-collect, counterproductive, and liberty-destroying taxes on income, goods, and trade, as well as lifting counterproductive regulations, we’re also lifting an immense dead weight off the economy. That’s George’s “Single Tax and Free Enterprise” principle.
A land-value basis for revenue would be much more efficient, less arbitrary and less intrusive than the 17,000-page federal tax code (with its additional 54,000 pages of regulations) and the additional maze of State, county and city taxes. The ground-rent or “Single Tax” would be the least bad tax, since as economists acknowledge, it does not hinder productive enterprise in the least.
Plus, it would flow from the bottom up and would argubly shift the power from Washington to the local governments. Typically, the existing real property tax is governed by State constitutions and laws, but implemented by local governments. The Single Tax on land, similarly, would be imposed locally. It could be shared “upward” to State and federal levels, as was done previously in this nation’s history.
Federally managed resources would contribute their own rents and royalties. Finally, governments would charge other user fees for specific services. Taken together, these methods could replace the current array of destructive taxes that hinder useful activities and destroy jobs.
Also, unlike income, land cannot be hidden or taken offshore, nor does it shrink when taxed — unlike jobs, building construction, saving, exchange of goods and services, or motivation to work. The “worst” outcome of unburdening those good activities, and shifting the public revenue burden onto land value, is that economic activity would be hugely stimulated while landholders would be spurred to use their valuable asset more efficiently and productively — a win-win scenario for everybody. States and localities have significant power to begin to resurrect the economy, and to ensure just wealth distribution away from the sinkhole of Wall$hington.
February 27, 2012 § 3 Comments
Baaa! Good day! How do you do? Welcome to the farm! My name is Shelly. Can you tell what I am?
Tee hee. That’s right! I’m a sheep! Tough question, isn’t it?
Baaa! Do you like this lovely green pasture where I make my home? Do you like my fluffy white wool? Do you like my stubby little tail?
See all the other sheep. We’re a herd. We are prettier than the cows, aren’t we? Cows are disgusting! And don’t even get me started on those goats.
Well, just so you know, I can’t talk for very long. I’ve got to get back to the herd. It’s just instinct, I guess. Baahahaha!
Before I go, I must share the good news! We sheep are allowed to vote now! That’s right. We can even vote for president! Can you believe it? Not only are we allowed to live in Farmer Brown’s beautiful pasture, and give him our wool, and then give him our little lambs too! (I do miss them so.) Now this! What an honor!
For whom shall I vote, you ask? Or rather, for whom shall we vote? Remember, we’re a herd! And little Shelly Sheep here is certainly not the leader of this herd. Do I look like an alpha ewe to you?
We little sheep follow our leaders! It’s easy. Just keep your head down, munch grass, and you know when it’s time to go somewhere — just follow the ass in front of you. That is, the sheep in front of you. You know what I mean!
If you must know, I suppose the leaders of our herd will tell us to vote for the most electable candidate — probably a mainstream centrist, one who won’t rock the boat, one who has the blessings of the party leadership and the Beltway media pundits! Certainly not anybody with extremist notions. And certainly not anybody who our leaders say cannot win. Our leaders wouldn’t lie to us!
Maybe we’ll vote for Farmer Brown? He’s a very nice man to let us live here in his pasture.
Little Shelly doesn’t know much about politics! Well, it’s a good thing I don’t have to think about it. Thinking is hard!
Well, I must go now. It’s dinner time for me and my lambs. Got to get them nice and fat — that’s the way Farmer Brown likes them! Hm, It’s hard deciding what to have for dinner every night, you know! There’s my neighbor, Susie Ewe. Hello, Susie! What are ewe having for dinner?
Grass? Well, that sounds delightful. I think we’ll have some grass too!
Baaaaa! Good day!