You are in for a wide range of items, including a rebuttal to our condemnation of the Supreme Court's Kelo decision, a resignation, pro-Georgist endorsements, and something called Meritax. Read all about it! And please remember to send your own reports of your recent Georgist activities to share with other readers.
Deadline for our September 2005 issue: August 26.
You can always reach the Georgist News at email@example.com
CONTENTS: (to return here just click the headline)
GN Comments: In last month's Georgist News we condemned the recent Kelo decision by the U.S. Supreme Court. That's the decision that says it is okay for governments to use eminent domain to seize property, not only for public purposes, but also for private enrichment.
In case you missed it, have a look at items 5 and 6 in the Georgist News archive of our July 2005 issue: http://www.georgist.com/all/GN8/GN8-1.htm
By the way, the reason that we have a Georgist News archive is thanks to the labor of Stewart Goldwater. Avail yourself of this resource!
This month, we want to bring to you a different perspective on the Kelo decision, one that is not opposed to it.
The Supreme Court's Kelo decision is right on the money! Eminent Domain is the public's (we the people) ownership of all land within a sovereign nation. The court affirmed the constitution's requirement that eminent domain can be exercised for the public good with fair market compensation to the land title holder whose title is being taken. How nice it would be if we could get fair market compensation when our income or our spending are taken for the public good.
The court merely set a very broad standard of the public good - basically whatever a city or county or state says it is. What all the critics of Kelo miss is that only elected government can make the decision to exercise eminent domain, and due process is still required giving the title holder access to the courts if they don't agree with the usually wildly generous payments offered. If LVT was practiced, the titleholders would have been taxed out of their land years before. Exercising eminent domain with fair market value compensation is abundantly generous compared to taking full economic rent.
How nice it would be if more local governments used eminent domain and zoning to acquire sites for new plants and job creating, and community building investments within their borders. Instead, the vast majority of new large site developments are located way out in the sprawling countryside where a developer can buy a whole farm.
Missouri has a legal provision that allows anyone to form a redevelopment corporation with the power to exercise eminent domain to seize land deemed blighted by the city or county. Anything is blighted if the city or county says it is, but elected officials are very reluctant to designate anything blighted unless it is really bad. This has worked wonders clearing away decrepit slums and warehouse districts and allowing redevelopment to the highest and best use. This process always includes reassessment at the maximum value allowed by law, based on fair market value. It is only useful when property owners are holdouts refusing to clear and rebuild blighted properties (slumlords, railroads, trusts, REITS, etc. holding property for long term speculation, or just holding without plans). Many owners of blighted properties are unaware of the value of the land because it was put on the books at cost and forgotten generations ago. Often land is held by trusts without the trustee having the authority to sell it and no motivation to redevelop it. Of course some universities acquired and leveled huge adjacent slums and then took generations to redevelop, but full market value assessments of LVT would have speeded up redevelopment.
Of course, LVT replacing other taxes would pressure valuable land title holders to sell or develop, but it would have no effect on near worthless land. Rezoning (a public due process) can multiply land value. Also LVT would provide the maximum revenue with no regard for the improvements on the property so a vacant lot or a holdout home would pay just as much LVT as the commercial or multi-family property next door.
Kelo was in no way bad, it merely affirmed a very good common practice that had been accepted over many generations. What was new was that some holdout had the audacity to challenge the process instead of taking the money and enjoying it.
GN Comments: Mark Sullivan, CGO President, has resigned. But don't worry, there has been no hostile takeover or angry struggle. Here is Sullivan's letter from July 6, 2005.
Dear Members, Affiliates, Officers, and Friends,
Greetings. Several months ago I took a trial leave of absence as CGO President, with the consent of the CGO Executive Committee (Vice President Alanna Hartzok, Secretary Dan Sullivan, Treasurer Jake Himmelstein, Advisor Ted Gwartney, and Administrators Sue and Scott Walton). With my responsibilities at the Robert Schalkenbach Foundation continually increasing, available time for my personal commitments, including CGO, was diminishing.
In the several months that have elapsed, the Executive Committee and Team CGO conference workers have functioned quite well with Alanna serving as Acting President. Assured by this, I feel I can now step down and resign from the post of CGO President.
The Council and I go back twenty-five years, and I have tried to serve its Members and Affiliates well. Thank you for having given me the honor and privilege to serve. It not without some sadness that I take my leave. Even so, I do think it is a good course of action. My new role at RSF and Alanna's new role at CGO will allow us to serve the Georgist movement more effectively. I hope you will give President Hartzok and the Executive Committee all your support and cooperation.
Mark A. Sullivan
GN Comments: We wish all the best to Mark Sullivan, and congratulations to new President Alanna Hartzok.
GN Comments: Have you heard of Meritax? It's a new system, created by Georgists, for handling property taxes assessment and administration.
Here are two documents about Meritax. The first is a news release distributed in South Africa. The second is a Georgist discussion of Meritax by Peter Meakin.
"Use it or Lose it" applies to a rule of rugby, to minerals in the Minerals Act and now to capital gains on land ownership. The lowering of land prices is one of the overt aims of the new Property Rates Act 6 of 2004 which compels Municipalities to promote local, social and economic development.
This is the opinion of Peter Meakin, an international valuer in Cape Town and the inventor of Meritax® a new Computer Assisted Valuation and Rating System. He says that his system will generate ninety thousand permanent jobs countrywide.
He claims that no Municipalities in the world are under such a rigorous job-creation directive as in South Africa. He argues that the traditional method of valuing each property separately so that the most valuable house in a suburb pays up to three times more rates than the vacant site next door discourages development and is therefore in contravention of the Act and even ultra vires.
Meakin predicts that in order to comply with the Act, Municipal rates on vacant or meagrely improved land are expected to become so high as to virtually force owners to develop for themselves or to sell. His system bands properties geographically so that all erven (plots) in a suburb are valued equally for rates purposes however much they might be improved.
He predicts that if Meritax® is adopted by the City then new housing starts and refurbishments will occur on three percent of the eight hundred thousand erven in Cape Town over five years. He estimates that this will result in three thousand new artisan and six thousand new labouring jobs becoming available for five years. In the whole of South Africa this translates into some ninety thousand new jobs for that period.
He explains that Meritax® is a benefits tax where erven with equal benefits pay equal rates. Benefits are mainly locational. Residential erven in Newlands of similar size enjoy the same proximity to the CBD, motorways, schools, shops and amenities and the same views, weather, fertility. They also enjoy the same services which they pay for separately.
Councils may also consider that it is not sufficient that vacant sites of a similar size in like neighbourhoods should pay the same rates as their neighbours because vacant erven do not buy water, electricity, sewerage and other services from the City leading to a loss of profit. Meritax® is suitable for single residential suburbs, farms and industrial erven. Meakin says it will save the country $40M in Municipal expenses annually.
The Americas - Ted Gwartney (firstname.lastname@example.org)
Europe, Africa and The East - Peter Meakin (email@example.com)
This weakness has now hopefully been remedied with my 2005 version of the Meritax® CAMA Valuation and Rating system. I use geographical bands such as suburbs or townships and then calculate the mean selling price of all improved and vacant plots in each band using data from the Deeds Offices and employing statistical software to eliminate size and value outriders.
The result is that each suburb, or like neighbourhood, therefore comprises plots with the same municipal value. A mansion will therefore pay the same rates as a vacant plot next door. This is surely what George intended because all similarly sized lots in a suburb enjoy the same Georgist benefits or land rents and should therefore pay the same rates and taxes. The benefits are of course largely locational such as weather, fertility, views and proximity to schools, shopping, jobs, motorways, public transport. Everybody pays for water, telecoms and other services so the consumption of services is not a benefit to the ratepayer but a cost.
Does Meritax® truly yield land rents? To answer this first imagine a suburb where all the plots are the same size and the houses are identical in design, size and age and each is valued at $48,000 and rents for (say) $1,000pm. Of this total typically $250pm would be the land rent and $750pm the improvement rent including a provision for depreciation. A 0.63% rate on the $48,000, or any lower percent, will be pure land rent. Anything higher will be land rent PLUS improvement rent. Now imagine a real suburb where the houses are all different and some sites are vacant but the mean values are the same as the above. Therefore Meritax® is a true land rent system.
There is one alleged weakness in Meritax®. This is that land parcels within a suburb are never exactly the same size and so rates and taxes should be different. My answer is that this is the choice of a Municipality but that if land sizes in the imaginary suburb above are all within fifteen percent of the mean then the house rents will not differ. In fact larger plots may well attract less rent because they require more upkeep.
Meritax is designed to calculate the full land rent where countries adopt a Single Tax fiscus. The rate in the dollar simply increases to compensate for the loss of PAYE, Company and VAT etc.
Apart from the integrity of this idea; its fairness, the cost and work-time of a Meritax® valuation is some ten percent of other mass appraisal systems such as SIGMA.
The new Meritax® CAMA Municipal Valuation and Rating System has been launched in South Africa and USA. It will make it easier to persuade States and Municipalities to adopt Georgist principles by its existence, ease of use and cost-effectiveness.
Meritax® calculates average property sales values in geographical bands such as suburbs or registered townships. The inclusion of improved and vacant prices in the same assessment transforms the rate in the rand to a pure land rent; that is the Georgian rent.
Philadelphia Forward, the citizens group advocating tax modernization and sensible economic policies for the city of Phildelphia, Pennsylvania (US), recently sent out a notice about the CGO conference that will take place there August 3-7. Here is what PF said:
The Council of Georgist Organizations will hold its 25th North American Conference in Philadelphia from August 3rd to the 7th. The theme of the Conference is "Champions of Tax Reform." Georgists (who promote the thinking of Philadelphia favorite son Henry George) support changing Real Estate Taxation from the typical system where land and the improvements and structures on the land are taxed at the same rate, to a system where land is taxed at a higher rate while the tax on structures is reduced, or even eliminated. Philadelphia's Tax Reform Commission recommended that Philadelphia decrease taxes on structures and increase taxes on land to encourage development and discourage speculation.
At the conference, speakers including City Controller Jonathan Saidel, Brett Mandel of Philadelphia Forward, Joshua Vincent of the Philadelphia-based Center for the Study of Economics, and other experts from jurisdictions that are currently considering the change or currently enjoying the benefits of Land-Value Taxation will discuss the push for Land-Value Taxation and the upcoming Philadelphia reassessment in 2006.
Jeff Smith, President of the Forum on Geonomics, has released his organization's annual summary of activities. It is much too long for us to reprint here, but you can request that Smith send you a copy via email. Smith can be contacted at firstname.lastname@example.org
Read the report and you will be inspired by how much can be accomplished. You will also get ideas for worthwhile Georgist projects of your own.
GN Comments: In recent years, Friends of the Earth chapters in several different nations have communicated favorably about Georgist economic policies, such as the two-rate property tax. Alanna Hartzok found this July 13 article, originally appearing in the Guernsey Press and Star, about another Friends of the Earth group joining the geo-bandwagon. Here is the text.
It calls on the future taxation strategy to consider diversification from the finance sector, abolition of income tax, an increase in fuel duty, an overhaul of the energy tariff, a land tax and a so-called basic income for all.
The environmental pressure group believes that finance has become Guernsey's golden goose, but that as a source of tax revenue, it is particularly vulnerable to the continuing hike in oil prices to the dreaded $100 a barrel peak.
"It follows the same old pattern of backing just one industry, such as with the grapes and tomatoes, both of which collapsed," said Mike Johnson, the report's author.
He admitted that the effect on welfare and charitable activity of a move away from finance had not been taken into account in the proposals.
Mr Johnson said this was because the amounts involved and the motives for charitable activity by the finance sector remained unclear to him.
"We also have a regressive income tax system, which penalises the low-paid workers. By shifting the burden of taxation into different areas like fuel, pesticide, waste disposal and energy, local workers could be re-employed in horticulture and tourism."
The submission says migratory labour is a strain on the island's economy and infrastructure.
Mr Johnson said he believed it was possible that the two sectors - prime candidates for heavy environmental taxation - would survive if local employees paid little or no income tax.
The group also proposes quadrupling fuel duty to 27.2p a litre and abolishing vehicle excise duty. This would be fairer on those on low incomes and reflect the damage done by congestion and pollution.
"We have a rather strong motoring lobby in Guernsey. There are far too many assumptions about the right to drive, and the rights of those who get around in other ways are ignored," he said, adding that motorists' behaviour would change with higher prices.
The report cites traffic as the number one turn-off for visitors.
Friends of the Earth wants to alter consumer behaviour through changing the energy tariff structure - penalising heavy use rather than rewarding it as in the present pricing system. Mr Johnson said that the cost imposed on energy suppliers would be offset by efficiency.
"People would not be paying very much because they wouldn't be using very much. Energy utilities should be allowed to pass on the cost of investment if it saves energy, so it would be profitable for them."
The group also wants to impose a land site value tax to help offset income tax.
"I hope the States look closely at this because it has been successfully done elsewhere, especially Australia, where it has been welcomed by businesses and residents."
The most radical proposal is introducing a basic income, to which all would be entitled, whether in paid employment or not. Paying everyone £275 a week would gradually phase out the island's benefit system.
Mr Johnson, who spent a few weeks writing the report, denied this would act as a disincentive for people to work and said it would help those who did unpaid work at home or in the voluntary sector.
GN Comments: Here is a note from geolibertarian Fred Foldvary.
If anyone knows of an excellent speaker on geoism, please contact Fred Foldvary, email@example.com
I am now in charge of the public lectures for the Civil Society Institute at Santa Clara University.
The speaker should be able to explain geoism or related topics with excellent logic, evidence, clarity, and excitement.
Do you like to imagine 'the big picture'? Do you want a single worldwide Georgist movement that acts based on one overall plan, or would you prefer to see multiple independent Georgist activities? What actions are most important for Georgist success in the years to come?
Questions of this sort are often discussed, but at the CGO conference in Philadelphia August 3-7 they will receive more attention and focus than usual. So bring your thinking cap along, or if you are not able to come to the conference in person, please tell you ideas to someone who will be attending.
Make sure that your ideas and suggestions are heard.
The Georgist News is seeking a copy editor. After several years of service, Scott Kroyer is moving on to other projects.
Would you like to be copy editor for the Georgist News? We are seeking someone who has a few hours available near the end of each month, and who has good editing/proofreading skills. This is a paid position.
If you are interested, please contact publisher Hanno Beck at firstname.lastname@example.org
Each morning when I open my eyes I say to myself: I, not events, have the
power to make me happy or unhappy today. I can choose which it shall be.
Yesterday is dead, tomorrow hasn't arrived yet. I have just one day,
today, and I'm going to be happy in it.
- Groucho Marx
Your life is the sum result of all the choices you make, both consciously
and unconsciously. If you can control the process of choosing, you can
take control of all aspects of your life. You can find the freedom that
comes from being in charge of yourself.
- Robert F. Bennett
The only one thing I can change is myself, but sometimes that makes all of
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