Author Archives: taxpayer

Madagascar update

Last fall I mentioned a deal between Korean conglomerate Daewoo and the gov’t of Madascar, for the former to get half a Belgium’s worth of farmland at basically no charge. Turns out it was more controversial than I thought, caused a revolution, and the new government has revoked the deal. But, as the linked article explains, similar deals are proceeding in several other countries.

This information comes from farmlandgrab.org (“Governments and corporations are buying up farmland in other countries to grow their own food – or simply to make money”), via Alanna Hartzok.

patents + taxes = insanity squared

Yes, over sixty patents have been issued for “tax planning methods.”  You discover (or contrive?) a loophole, then patent its use. Subsequent taxpayers (or tax avoiders) who might happen on the same idea are obligated to contact you and arrange to license your innovation.  This is not what the Framers had in mind when they empowered Congress

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries

Cong. Rick Boucher introduced a bill a couple of years ago to limit the benefits patent holders could obtain for such patents (summarized here(doc) with full text here(pdf)).   A message today from Vaughn Henry implies that this has been reintroduced.

Farmers still don't own their land

The Census Bureau has issued the 2007 Census of Agriculture reports for Illinois, and, no surprise, most farmland is not owned by the farmer who works it.  62% of farmland in the state is tenant-farmed, up from 58% in 2002.  (table 9, pdf) . Owner-operators are the majority of farmers, but have much smaller farms, 107 acres and $47,726 gross revenue, compared to part-tenants (784 acres and $407,013) and farmers who rent all their land (439 acres and $254,814) (table 65, pdf)

Nationally, however, more than half of farmland is operator-owned.  And these owners paid more than $7 billion in interest on loans secured by real estate.

The Secret Life of Real Estate

is subtitled “How it Moves and Why,” but this isn’t about the Kinetic Condos. It’s a response to a questions Georgists often hear: “If you’re so smart, why aren’t you rich?”  Different Georgists give different answers, including “I am rich.”

We know that the major cause of the business cycle is the capitalization and trading of government-protected privilege.  This privilege can be any kind of income obtained without producing, and may flow from spectrum licenses, drilling rights, patents, copyrights, or a hundred other sources.  But the main one is land ownership, since land is not a product of human labour.

When demand increases for a product or service, production can increase, but that isn’t true of privilege. The only limit on the price of privilege is what the market will bear without breaking.   So can’t we measure that price, use the information to forecast economic meltdowns, and thus become wealthy?

Our massive government statistics operations, which know how much more Asian-American households spend on rice than the rest of us do (4 times as much, as of 2003), and that people spend an average of 2.43 hours each weekday watching television, know just about nothing about the price of land.  Only a few countries maintain any such information (Korea, Japan, Denmark, and Australia come to mind).  Many local authorities compile land assessments, but the relationship to actual market prices is, at best, elastic, and the information is not systematically reported.  So indirect and ephemeral indicators must be relied upon.

Moreover, they land price cycle tends to run about 18 years, and may be disrupted by war (not by much else, it appears). This means that taking advantage of it requires a great deal of patience and, one can only say, a certain amount of faith.  And starting at a young enough age, by the way. Of course the cycle might be entirely abolished, but that would require the elites, and some of the non-elites, to surrender significant privilege.

The book is well-written, well-edited, and well-documented. (A subject index would be nice.) Economist Mason Gaffney’s  review is far more informed than anything I could have produced.  He points out a number of imperfections, but on the whole this is a very useful book for anybody who wants to know why many of us aren’t rich, or who would like to be.

Assessor ignores assessment policy

Last week, the Tribune published Cook County Assessor James Houlihan’s fiscal reform proposal.  He wants to restructure the state sales tax and the state income tax, claiming that this would not only balance the state budget but also provide more funds to localities, theoretically allowing them to reduce real estate taxes.

But Mr. Assessor, how about the assessment and extension of real estate taxes.  You know, the stuff you do?  Can’t you improve that?  Maybe you could start by assessing vacant land properly?  And making sure that land value is fully included in all assessments?  That’s not going to discourage any economic activity.

Then maybe we could ask the solons of the Cook County Board to change the property classification system, assessing improvements at only 40% of the ratio applied to land value? They could do this under existing law. Maybe they could even exempt improvements entirely?  And, while we’re asking the Illinois General Assembly to reform things, why not eliminate the sales and income taxes, by resurrecting the state sales tax?

Regular readers of this blog, and Henry George School students, know why this is a good idea.  Evidently Assessor Houlihan doesn’t want us to even think about it.

Earmarks

Wikipedia (right now) defines “earmark” as

a congressional provision that directs approved funds to be spent on specific projects or that directs specific exemptions from taxes or mandated fees.

On the face of it, I don’t see that as such a bad thing.  If my Congressbeing has determined that the national interest requires a particular expenditure, it seems reasonable that she might want to make sure that a budget or appropriation item really will be used for that purpose.

The problem, of course, has been that earmarks are obscure, and invariably are for local projects in which the Federal government has no legitimate role.  Now, the earmarks are being disclosed, at least by House members, and our friends at Taxpayers for Common Sense have compiled a list. Not of earmarks, but of URL’s where earmarks can be found.

I figured they might be bad, and they are.  “My” Congressbeing, for instance, has a list of mainly municipal and nonprofit projects, at least some of which are economically justified and therefore should be funded out of the savings or other benefits which they produce. There  are also a few government contractors being taken care of, and a couple of CTA projects.  Because the latter is something I know a little bit about, I can say that the descriptions are quite deceptive, greatly exaggerating the result (e.g. “extension of the Yellow Line”) which will be obtained by a relatively modest ($1 million) expenditure.

And that list is hardly the worst.

Does CPI show land price declines?

Of course the consumer price index, out this morning, doesn’t show land prices or land rents.  That is, cost of getting access to land is buried in all the other figures.

Much is being made of the year-to-year decline, which is largely due to the drop in petroleum (and gasoline) prices.  Of course this is reflected in housing costs, which include an energy component.  But the main piece of housing costs is “shelter cost.”  Under this, “rent” and “owner equivalent rent” increased 3.2% and 2.1%, respectively.  Because most Americans are “homeowners,”  the latter figure has a large impact on the total CPI.  The actual cost of purchasing a house and lot may have declined, but the CPI’s housing cost is based on what you might have to pay to rent a unit like the one you are buying.

The price of used cars also dropped, probably because fewer people are interested in buying one.  But the cost of what BLS calls “education” increased 5.6%.

For some reason BLS seems not to have yet posted the sub-national data.