Lots of good news. More good press in the UK. A break-through in the UN. Candidates campaigning on LVT. In the mainstream press, attention to oil rents and tax reform and spending reform. Plus the update on the land-price cycle. You'll also find links to more good material and useful ways to spend hard-earned money. So, dig in!
A tax on increases in land value could stimulate the building of thousands of new homes by raising money for new infrastructure. Known as a planning gain supplement, the idea was put forward a year ago in a report by Kate Barker, a member of the Bank of England's monetary policy committee, but concerns remain over how to implement the tax in practice.
There is only one factor of production that is genuinely immobile and can be taxed without discouraging enterprise. This is land, by which I do not mean business or residential structures, which are normally treated together as one lump of capital and land. I have in mind pure space, which is commanding higher and higher returns because there is so little of it in favoured locations. A land levy has long been a favourite of otherwise not very leftwing market economists, but has never really been understood by businessmen, politicians or lawyers. What is needed now is a shift of the discussion from funding local authorities to the gradual use of land levies to enable workers to protect their living standards and, if possible, transfer to them some of the gains from a single world economy.
People in metro London are subsidised by the regions. The housing market is the vehicle for delivering this result. In London's West End, homeowners can recover all their lifetime's contributions to the public purse by selling out after just two good years of house-price rises. People who rent their homes, on the other hand, don't get a penny back in windfall gains. Taxes spent in London and the South-East are largely invested in infrastructure like transport; these investments raise house prices. Public expenditure in the North is heavily devoted to supporting people who are jobless or on low wages; expenditure to help them does not much push up house prices. Taxes on wages should be abolished. Instead, public services should be funded out of the land value which schools and hospitals create.
Fred's latest book, Ricardo's Law: House Prices and The Great Tax Clawback Scam, received praise: "This very important book is detailed and comprehensive, but eminently readable. It covers in some detail one aspect of The Free Lunch – Fairness with Freedom." For the rest, visit: The Free Lunch.
From Finance Minister Flaherty's November 6 speech to the Canadian Urban Transit Association:
The LVT/C capacity building program seeks to enable implementation of the UN-HABITAT 1996 Action Agenda recommendations for land value capture and land based tax policy. The training material will be available via Internet to public officials, NGO, grassroots leaders, and others. A GLTN Advisory Group – thirty expert Georgists – have is committed to working on the LVT/C project. Other Georgists are welcome to contribute to the success of this project. For further information, or if you would like to be involved with this project, please contact Alanna Hartzok at earthrts at pa.net or by phone in the U.S.: 717-264-0957.
Cliff Cobb of the Robert Schalkenbach Foundation writes,
"A large organization that is not identified as Georgist is putting its own money into a project in support of Georgist principles. This is extremely rare. UN Habitat is not only giving lip service, which is easy to do, it is devoting scarce resources. Nor should credit for this be spread too thinly. Even though Pat Aller, George Collins, and others have done yeoman's work creating a positive climate within Habitat and a few other UN agencies for collecting economic rent for public purposes, the lion's share of praise in this particular case should go to Alanna for her persistence in persuading Habitat to give the Earth Rights Institute this contract and to Tatiana Roshkoshnaya for working inside Habitat to encourage it. I assume that Alanna will be notifying us again soon with the specific sorts of information she needs to make her work on this project a success."
Note: While subsidizing alternatives might miss the mark, at least ending subsidies to oil would be a step toward actually recovering oil rent.
The Government Accountability Office, the watchdog agency for Congress, is beginning a broad investigation into how the government collects royalties from companies that extract oil and gas from federal territory. The Minerals Management Service of the Interior Department, which oversees royalty collections, has come under growing criticism from lawmakers in both parties for losing track of billions of dollars in royalties. Four auditors responsible for scrutinizing royalties recently contended that their superiors blocked them from challenging millions of dollars in deliberate underpayments, encouraged a culture of cronyism, ethical lapses, and poor management, and that the agency's numbers do not add up. The new investigation will come on top of others already under way; the Government Accountability Office is already digging into the agency's accounting systems.
Norwegian academic Ole Gunnar Austvik: "In Norway, the idea has been, and is, that the government should take most of the economic 'rent' (that is, the profit over and above 'normal' profit, risk adjusted) created in the sector. For the companies, a 50% special tax on profits is added to the normal Norwegian corporate tax of 28%, making them pay 78% of total profit. Seventy-eight per cent of profit sounds perhaps like too much," he conceded, "but within this regime, companies have been queuing up in each licensing round for years."
Just exactly what do you expect me to say here? That Madame Jane can channel John Maynard Keynes? That the ghost of Adam Smith hovers over my house waiting to come down the chimney like Santa Claus? That Henry George and his "Law of Rent" is gonna rise up from the grave and give me advice that will save our sorry bottoms from the inevitable?
Rent doesn't go down and up: it is correlated with land values, which go up and up. An increase in child poverty (is) connected with housing costs which are spiraling out of reach. If there were a single cause which we could adjust, then we could not hide behind the thicket of multiple-causation theories. We would be accountable for our inaction. The cause is rent. Rents, while big money on a national scale, do not grow the nation's wealth. This is because the money is only moved around, taken from the have-nots and given to the haves (what moderns would call a zero-sum exchange). The only strong disagreement came later from Henry George, an American (who) got into things. Henry George's solution was to tax land values to the point that land ownership – especially land monopolies – would become unattractive. His descriptions of rich and poor juxtaposed fit modern America so well, we wonder why his theory is out of fashion. Perhaps George was forgotten because he was not a revolutionary and the publication of his book Progress and Poverty did not start riots. Rent should be made an open topic – and a point of accountability.
Australia's National Forum posted at their website November 3, 2006 a lengthy article by Gavin Putland of the Georgist Prosper Australia in which he wrote, "The modified levy will then tax the increase in land values caused by provision of the headworks and by permission to develop, but will not penalise the actual development."
BRITAIN'S money supply is growing at its fastest rate for 16 years, the Bank of England revealed, as mortgage approvals return to boom levels and consumers start to borrow more on credit cards again. Some members (of the Bank of England) seem to have become anxious that the relationship between money growth and inflation will reassert itself."
San Francisco Federal Reserve Bank President Janet Yellen: U.S. income inequality has risen to such a level that "there are signs that (it) is intensifying resistance to globalization, impairing social cohesion, and could, ultimately, undermine American democracy." She noted that during the past three decades, much of the gain from U.S. economic performance had gone to the people at the top of the income ladder. Yellen said inequality is higher in the U.S.A. than in other industrial nations and the safety net less generous. "Inequality has risen to the point that it seems to me worthwhile for the U.S. to seriously consider taking the risk of making our economy more rewarding for more of the people."
Note: How risky is it for the economy to serve the people instead of vice versa?
In the same article, former Fed chairman Alan Greenspan said that while the housing market has not hit bottom, "The worst is behind us."
Hank Paulson, the market-wise Treasury Secretary who built a $700m fortune at Goldman Sachs, is re-activating the 'plunge protection team' (PPT). Otherwise known as the working group on financial markets, combining the heads of Treasury, Federal Reserve, Securities and Exchange Commission (SEC), and key exchanges, it was created by Ronald Reagan to prevent a repeat of the Wall Street meltdown in October 1987. It has enormous powers to artificially support stock index, currency, and credit futures in a crash. In 1998, there was the Long Term Capital crisis, a global currency crisis; at the guidance of the Fed, all of the banks got together and propped up the currency markets. They have an informal agreement among major banks to come in and start to buy stock if there appears to be a problem.
Note: Problem? Like what the chart described in the next item portends?
A chart plots the National Association of Home Builders' Housing Market index – a monthly measure of builder confidence – against the Standard & Poor's 500 stock market index, with a one-year lag over the past ten years. Not only did the NAHB index presage the start of the post-1994 bull market in stocks, but its decline starting in 1999 foreshadowed the equity market collapse that came the following year. Builder confidence rebounded in November 2001 – a year ahead of the stock market upswing that began in October 2002. Over the past year, the NAHB housing index plummeted 54%. Were stocks to follow suit, the S&P – 1400 in late October – would be trading below 700 this time next year. We've had 11 sharp declines in the housing market since World War II, including this one. Eight of the last ten were followed by a recession.
Note: Could be coincidence; ten years are not much time in the history of cycles. There was another eye-popping chart: the exponential J-curve growth in using homes as cash machines – temporarily; more like debt machines.
Home prices fell in 45 metro areas last summer. More than 100 metro areas posted price gains over the summer, including 21 that saw double-digit gains. Nevertheless, the number of metro areas that suffered price declines jumped from 26 in the April-June period. The drag on median home prices has gone beyond the industrial cities, where job losses have taken a toll on housing. Now, markets in Florida, California and Arizona, where prices had shot up higher than many working families could afford, are falling back to Earth. The 45 metro areas that saw year-to-year price declines in the third quarter were the most since the NAR's record-keeping began in 1979. We had the biggest boom ever, so you'd expect we would have the broadest price drop. Nationally, the median price of an existing single-family house fell to $224,900 in the third quarter, 1.2% lower than in the same period last year. The Detroit area was the worst hit; prices there fell nearly 11% in the July-September period from a year earlier. Sarasota, FL, was second, with a 9% drop in the median single-family home price. Four Florida metro areas were among the 10 regions with the steepest price drops in the third quarter. And in California, prices fell in San Diego and Sacramento.
Allegheny County has been approving big property tax breaks at a record clip for country clubs, developers, and some of Allegheny County's priciest properties. Among those benefiting are the owners of million dollar mansions. These property owners get the break in a program called Clean and Green, because they own at least 10 acres, and they agreed to allow the public to use their land. Others get the break because they claim their land is used for agriculture or is forest land. One property, valued at $11,000 instead of $638,000, is surrounded by no trespassing signs and so are several other properties getting Clean and Green tax breaks.
Note: A similar barely legal exemption in Vietnam cost the public millions, as that nation turns to conventional capitalism. Exemptions not only undermine the moral argument for recovering all rents, they're also easily misapplied as political favors. A better way may be to simply return a portion of the recovered rent as a dividend to regional residents.
A report in Science journal predicts 90% of the fish and shellfish species that are hauled from the ocean to feed people worldwide may be gone by 2048. Even now, 29% of those species have collapsed, meaning a 90% decline in the amount being fished from the sea. With each species that is lost, the opportunity for the system to repair itself is diminished. The destruction of coastal areas, estuaries, and reefs by dredging, building, and pollution destroys nursery habitats for young fish. This trend can be reversed. We need to implement sustainable fishing methods, create marine sanctuaries where species can replenish themselves, and limit pollution.
Note: Fish, like land, are a natural resource. Fishing licenses are like land titles. So, let licenses at full rental value (by an international agency) to discourage marginal fishing. And might developers be building in wetlands in part because some prime dry land sites are kept vacant? Recovering the rent of coastal sites should spur more efficient land use and help spare estuaries.
The United States last year provided nearly half of the weapons sold to militaries in the developing world, as major arms sales to the most unstable regions – many already engaged in conflict – grew to the highest level in eight years. The U.S. supplied $8.1 billion worth of weapons to developing countries in 2005 – 45.8% of the total and far more than second-ranked Russia with 15% and Britain with a little more than 13%. While the U.S. has long relied on arms sales to prop up allies or enhance collective defense arrangements, a certain amount of it is simply keeping factories running in certain congressional districts. The U.S. transferred weaponry to 18 of the 25 countries involved in an ongoing war. More than half of the countries buying U.S. arms – 13 of the 25 – were defined as undemocratic by the State Department's annual Human Rights Report. Introducing weapons risks fueling conflicts rather than aiding long-term U.S. interests. When a United Nations panel voted to study regulating the sale of conventional arms, the United States was the only country out of 166 to vote no.
Note: The U.S also pushes freedom which, if won, could dissipate the arms trade, as the following data suggest:
Protectionists believe that consumers who buy goods and services from foreigners cause domestic employment – and wages – to fall. Economists since before Adam Smith have shown that this belief is mistaken; foreigners who sell things to us also buy things from us or invest in our economy. These activities employ workers here at home and raise their wages. The greater the amounts that foreigners invest in the United States, or the more that Americans invest abroad, the lower is the likelihood of war between America and those countries with which it has investment relationships. Reducing barriers to both trade and capital flows can promote a more peaceful world. Peace is fostered by economic freedom, the allocation of resources by markets rather than by government officials. Examining military conflicts from 1816 through 2000, countries that rank lowest on an economic-freedom index are 14 times more likely to be involved in military conflicts than are countries whose people enjoy significant economic freedom. Economic freedom is about 50 times more effective than democracy in diminishing violent conflict.
Few U.S. growers would be in the cotton business if not for the roughly $3.5 billion the government shovels their way every year. Much of this money goes to large corporate operations or wealthy families that feel it is their birthright to unfairly rig the global trading game. The payments encourage overproduction and make it almost impossible for African farmers to compete with this nation's subsidized exports. An explosion of U.S. cotton exports over the last decade, fueled by one of the most obscene corporate welfare programs this country has ever seen, has increasingly helped tip the scales toward deprivation over there. This doesn't just hurt people overseas. The U.S. government last year spent about $23 billion on farm subsidies. What did taxpayers get for their money? A fat agribusiness industry and inflated land values. When other nations try subsidizing industrial exports that compete with our goods, we cry foul, and this incessant hypocrisy contributes to anti-American sentiment in much of the world. The crowning irony is that while the United States spends billions of dollars a year on foreign aid programs for developing nations, it spends even more billions on agricultural subsidies that make it harder for these countries to wean themselves off outside support. Enough already.
Twenty years have passed since President Reagan signed the landmark Tax Reform Act of 1986, a bipartisan effort to simplify the egregiously complex federal tax code. Since then, Washington has taken about 15,000 steps backward, enacting an average of 750 new or modified exemptions, deductions and other wrinkles to tax law every year. Two Democrats – Sen. Ron Wyden of Oregon and Rep. Rahm Emanuel of Illinois – have introduced bills that would simplify and flatten federal taxes. Lawmakers should eliminate all but the most vital and effective tax breaks and tailor those as precisely as possible to the goal they want to achieve.
Note: Might simplification be a necessary first step toward abolition, replacing income taxes with public recovery of rents?
A global externality can best be dealt with by a globally agreed tax rate. This does not mean an increase in overall taxation, but simply a substitution in each country of a pollution (carbon) tax for some current taxes. It makes much more sense to tax things that are bad, like pollution, than things that are good, like savings and work.
Friedman was a mixed blessing. He was not a Georgist, and said so. But he did state, "the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago" ("An Interview with Milton Friedman," Human Events 38 (46), November 18, 1978, p. 14.) The value of invoking the great Friedman as a friend of using land value for public revenue cannot be underestimated. It at least makes free-market advocates pause before they reject the concept. He proposed free-market reforms to abolish the military draft, to provide school choice with vouchers, and to replace expensive welfare programs with a simple negative income tax, whereby folks with very low incomes would receive instead of pay money.
Incentive Taxation, the Henry George Foundation and the Center for the Study of Economics note with great sadness a too early departure from The Land. An articulate long-time advocate of land value taxation – Chris Toto of Lawrence, New Jersey – died at 51. We communicate our sorrow to his wife Margaret and his parents and family. We will miss Chris' enthusiasm and his born-in-Brooklyn pugnacity that served him and us so well in the uphill struggle for Land Value Taxation in the Sate of New Jersey. When a skeptical Assemblyman questioned Chris' advocacy for LVT in hearings in 1999 (for ACR-145), Toto held his ground, boiling it all down to the essence of supporting LVT: do what is right and stand for what is just. "What it all has referred to is that my wages, what I earn, go to subsidize people who benefit from low taxes on land. I don't want them to pay more taxes on real estate than I do. I just want them to pay the same as what I do. I don't want to have to subsidize their million dollar facilities, their corporate buildings, their expense accounts. They can do whatever they want, but they are talking about me forcing them to pay higher taxes. They are the ones who are forcing me to subsidize them. They've got it wrong. They got it the wrong way around." Thank you, Chris. We will keep up your fight, as it is our fight too.
Don't change a thing. I read the G-News and skip the parts that are of little interest but who knows what ones that will be be unless it's all there.
Last issue, we wondered if taxing oil in situ resources – rather than distribute resource rent more fairly – would just accelerate their extraction.
Nic: Yes, it will accelerate extraction, but it also raises revenue and is probably better than nothing. The efficient policy is a combination of a tax on extractions and a tax on the value of resources in situ, with rates coordinated in such a way that the present discounted value of all future taxes is independent of the path of extraction.
For a bigger share of the results of increased efficiency in production, labor must claim their equal share of what the classical economists called Rent of Land. Today a considerable part of this quantity is captured by monopolists and privilege holders and by tax collectors. Danish taxes collect 50%+ of the Gross Domestic Product. The total of market prices of Danish land is less than 3% of the Gross Domestic Product. Georgists will have to include the extra profits (huge amounts) captured by monopolists and privilege holders in the quantity they call Rent if they want people to take seriously the replacement of taxes with rents.
Interest in Thomas Paine and his contribution to modern thinking continues to expand. Yet another new biography of Paine is now available, this one by Craig Nelson. My review of this book is provided at the SCI website. A link to the review is provided on the home page.
Frank Crane was a syndicated writer of inspirational essays in the early 20th Century. I recently acquired his ten volume set of "Four Minute Essays," and his brilliant book, "Why I Am a Christian," which is remarkably undogmatic and sensible. Two of his "Four Minute Essays" are clearly sympathetic to the Georgist viewpoint, and I am putting them online. This is the first: http://savingcommunities.org/docs/crane.frank/doginmanger.html
For most of the second half of the 20th century, Oscar Johannsen served the Georgist movement in several important capacities. He has been a teacher, administrator, board member and, perhaps most important, a prolific essayist and commentator. Over the last few years, I have tracked down Oscar's writing that has appeared in Georgist periodicals, particularly the Henry George News. Recently I discovered a cache of newsletters of the Henry George School of New Jersey from the late 1950s through the mid-1970s. Oscar regularly contributed material for the newsletter, The Gargoyle. Letters to the editor indicate readers did not always agree with Oscar's positions but always described his writing as thought-provoking. A large selection of Oscar's writings from The Gargoyle have now been added to the library of the School of Cooperative Individualism.
A couple weeks ago I gave a talk to the Fairhope Unitarian Fellowship. The presentation can be read on the Unitarian Fellowship web site, under Speakers' Text Archive.
Hanno Beck recently sent the Henry George School a box of Georgist materials he has collected over the years. One of the many interesting items is a large cartoon printed on paper the size of a typical newspaper. The cartoon is neither signed nor dated. I have scanned this unique piece of art work (in four sections) and created a page on the School of Cooperative Individualism website. Reduced in size, the cartoon's impact is somewhat diminished but is still quite entertaining. If anyone knows anything about the history and use of this cartoon, I would very much like to know more about it. View the cartoon
Does anyone know the whereabouts of an available copy of Tale of 5 Cities, the 1984 25 minute film by Walt Rybeck on the graded-tax/split-rate property tax experience in PA?
My essay on land ownership, urban sprawl, and the vast pyramid scam in land that underlies our economy is now archived at the NPR site. I never had the opportunity to read it on the air, but it is enjoyable to see it available under two categories on the site: "social justice" and "nature." Perhaps other Georgists would like to take a crack at "This I Believe" and get on the air with NPR, or at least add our point of view to their archives. They are still encouraging submissions at www.NPR.org. By the way, I am very much enjoying the Georgist News on line, and the length is fine. Bring it on!
As a Georgist with certificates from the HG Institute of New York, I have been acquainted with the Canadian Research Committee on Taxation (CRCT) of Montreal and its chief messenger, Frank Peddle of Ottawa, for some years. My company, Articulate Consultants, has been contracted by the CRCT to upgrade its website. The new website will provide a renewed Georgist message and LVT education in a Canadian context. We'd like to enlist you as any ally in making the CRCT site standout visually. (Think of Malcolm Gladwell's Blink.) Are there color illustrations of George that we might use? Could any of you grant us use of good photos of George? What about other images of him in color? Please reply with JPG files, if possible. Perhaps we can reciprocate appropriately, as well. I thank you in advance for any assistance.
Want a free subscription to the e-newsletter, Simple Solutions by John Watkins? The newsletter deals with uncomplicated social reform including Georgism. Watkins' organization, Simple Society, also sponsors e-forums in which some participants are well known in their fields. If interested, contact Jeff Smith, jjs at geonomics.org.
To find out, in numbers, how concentrated ownership is in Great Britain and around the world, check out this new book. For sales and further information, contact the author, Kevin Cahill, at 44 (0)7758002940 or firstname.lastname@example.org
You know about Enron, but probably did not hear that Citibank and Merrill Lynch paid over a billion dollars to settle a lawsuit by the Enron Pension Fund for their complicity in the Enron fraud. The one thing these crooks fear is an aroused citizenry. Also, the audio CD's from the AMI 2006 Monetary Reform Conference are ready. The sound quality is excellent; listen to them on your computer while working or doing email. The whole conference – about 22 hours on the cutting-edge of monetary reform – are on 4 CD's. The entire set is only $35 plus $5 for domestic shipping, $15 for foreign airmail. We will send them to you as a gift if you become a Supporting Member of the American Monetary Institute.
Attention: All Council of Georgist Organizational members and affiliates please remember that all dues for the coming year are due as of December 31, 2006. By now (November 30, 2006) you should have received your renewal and donation letter in the mail. Also please be sure to check your listing in our on-line Georgist Directory. The CGO cannot correct address errors if we were not notified of them. The deadline for changes is December 31, 2006. Contact Scott & Sue Walton, 1111 Church St., #405, Evanston, IL 60201 U.S.A.; Phone 847-475-0391, efax 775/248-8630, sns at swwalton.com.
The IHG just had our first "Maestria" meeting for "Comprender La Economía" superior-level course graduates in our new salon. The standing-room-only group discussed, "How can we help the new leftist government-elect 'discover' the Georgist remedy?" For the rest of the report, please visit the website.
Phone remains 503/232-1337.
Please udate your address books. Thanks.
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