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I have written before about the “economic development” tool which allows employers to keep the taxes paid by their employees.  Now I find that Good Jobs First has compiled a report showing that over 2700 companies in 16 states have got this kind of deal. The report includes a spreadsheet detailing the 3750 cases. Turns out that Illinois is far from the worst offender, gifting just $35 million of employees’ tax money, compared to $89 million in Indiana.

Thanks to David Cay Johnston via Reuters. Johnston says that these direct subsidies are considered necessary because states are already exempting such corporations from most real estate, income, and other taxes.  Altho he doesn’t mention it, states are also typically paying for worker training and infrastructure improvements.

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Back in the old days, pre-Internet, the Statistical Abstract of the United States was usually the first place I’d look for any US data that the feds were likely to collect or review.  I could cite it with confidence that most readers would also have access to it, and it included source citations if more detail was needed. In the Internet age, it continued as a convenient resource, posted annually on the Census Bureau’s web site.

I had missed the news (was it even reported in the dominant media?) that the 2012 Abstract will be the last.   If the federal budget must be cut, then I suppose this is one way to do it, but it seems that our rulers could have found a better way.

Apparently a guide to sources will remain, at least for the time being.

image credit: Kake Pugh via flickr (cc)

The basic function of money is as a medium of exchange.  Inevitably, a secondary function arises as a measure of value. Money can be paper, precious metals, shells, whatever people in a particular time and place use as a medium of exchange.  There’s no reason that it would need to have “intrinsic” value. If  people use U S currency to buy and sell, then it is “real money.”

So is gold “real money?” I don’t think so. Just about nobody uses it as a medium of exchange. Historically, gold coins have sometimes been used but for ordinary people silver, copper, or base metal fiat-type money would be much more common.

Certainly fiat money can depreciate, usually does, and for us in the U S that has been and will almost certainly continue to be the trend.  And gold might be a good investment, in the sense that it will be exhangeable in the future for more real wealth than it is now, or at least more in comparison to other kinds of investments available to ordinary people. Of course, gold can depreciate too, if large new deposits are discovered or folks decide they really don’t want gold after all.  Which isn’t to say that either of these things will happen any time soon.

Anyone who wishes to resurrect the “gold standard” might want to read the late Peter Bernstein’s “Power of Gold,” or some other history books. Somehow we end up electing people who don’t put a high priority on keeping the dollar strong (or at least, not too much weaker).  If that’s a problem, then maybe we should be electing other people, or finding ways to reduce the power of those who purchase elections. Making the U S dollar convertible into a fixed amount of gold is not going to bring prosperity, or even prevent further disruption. There are plenty of examples of economic collapse under a gold standard.

It might, however, benefit those who own gold, or gold mining stocks.

Somebody please disagree with me, or I will assume all of the above to be true.

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David Bernstein and Noah Isackson have a pretty good article in Chicago Magazine, Gangs and Politicians in Chicago: An Unholy Alliance. Focusing mainly on Alderman but also including State and Federal legislators, they assert that “gangs” provide the money, votes, and workers that enable officials to attain and retain their office.  In exchange, the governments these legislators control provide funds and favors.

Isackson and Bernstein stop short of suggesting how to repair this problem, but reading thru the article it’s clear that the main way these “gangs” prosper is thru unauthorized distribution of drugs.  And one of the main favors aldermen provide is assistance in avoiding “law enforcement” efforts to arrest them. End the drug prohibition, most of the “gangs’” income will end, and candidates will no longer get “gang” money.  They’ll have to rely on crooked lawyers, lobbyists, etc.

Some of the drug money, of course, has gone into real estate, with “gang” members able to get favors such as rezoning and inspection waivers. A land value tax, by constraining real estate speculation, would be of assistance here.

image from Financial Times

Nick Boles

MP for Grantham and Stamford. New-intake MP and a key moderniser. Former Policy Exchange director and one of the Notting Hill set. Deemed close to the leadership. Tipped for bigger things

I assume this means he’s successful, British political terminology being rather unfamiliar to me. What’s really important is that

Nick Boles, The MP for Grantham and Stamford says a Land Value Tax should be introduced and use the proceeds to cut National Insurance – permanently.

He doesn’t want to do it exactly how I would want to do it, because he seems to want to exclude owner-occupied residential land and farmland, without limitation.  But the important thing is, he’s a successful politician, he gets elected, and he appears to want to move toward a sound economy. I’m just some guy with a blog.

I also don’t know how all this relates to the British custom of building homes on rented land far more commonly than Americans do. But it seems to be his top priority.

Source: FT via GN

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I used to be in the forecasting business; still am in a way.  So here’s a forecast:  Look for financial difficulties in the next few years at Sandisk, Yankees Entertainment and Sports (YES) Network, Louisville Arena Authority, and Harmony Oaks housing development in New Orleans. What kind of difficulties and when?

I don’t exactly know.  Sandisk has apparently survived sixteen years of Goldman Sachs help, and the smart parasite does not kill its host too quickly. Maybe not all four; in fact maybe these four have been selected for survival.

Image of 3710 N. Kenmore from Cook County Assessor

Gary Lucido writes of a small parcel at 3710 N. Kenmore, offered at $9.9 million ($4950/sq ft) after failing to sell when offered at lower prices. While the price seems outrageous, the property is very close to Wrigley Field and could be used for a billboard or rooftop viewing platform. We know that the former use has commanded $350,000/year on a nearby building, which seems to justify a multi-million-dollar asking price.

So we have a parcel worth, let us say, five million dollars.  What are the taxes? Using data from the Illinois Department of Revenue, our friends at the Civic Federation publish estimates of the effective tax rate for various kinds and locations of property.  For residential parcels in Chicago, they estimate that the real estate taxes at 1.45% of actual market value. So on that basis, a parcel worth $5 million would pay $72,500/year.

But the Assessor doesn’t think this parcel is worth $5 million.  His estimate is $569,580.  (That is, the assessed value, which is supposed to be 10% of market value. is $56,958.)

Looks to me like this parcel is underassessed by something like 90%.  Even if we pretend it’s worth just $569,580, tax at 1.45% should be $8259/year.  Which is  $64,241/year less than the  “fair share” I estimate above.

So how much does the property actually pay? The Realtor’s listing says $147.  Surely this is a typo, no residential property in Chicago can pay so little?  Actually, the County Treasurer confirms it (I can’t seem to link to the actual record, but go here and search for parcel 14-20-218-047-0000).  This parcel receives three different kinds of exemptions: Homeowners, Senior Citizen, and Senior Freeze.  Apparently the net result is a tax bill of $147/year, on a multi-million dollar property which would “normally” pay about $72,500/year toward the costs of running the schools, parks, and various city services. Need we wonder why our local governments are in financial difficulty?

There are several additional points to be raised here.  First, assessment geeks may note that I have conflated data from several different years.  Of course that’s true, because taxes are always based on the value as of the start of the prior calendar year, and calculation assessment/sales ratios cause further delays. I also have not mentioned the multiplier, a factor which might help explain the details of this case but does not alter the basic fact that the property is severely underassessed.  Nor have I mentioned the owner of the property, beneficiary of this governmental failure.  The name of the apparent owner is on the Treasurer’s record, and he seems to have a Facebook page.

Finally, let’s give credit where credit is due.  Not only to Gary Lucido who might not realize the significance of the story he broke, but importantly to the open information policies of the Cook County Assessor and Treasurer.  Pretty much all assessment and real estate tax data is public record.  The income tax involves far worse outrages, but we rarely can see them since individual cases are confidential, and specifics have to be inferred from other sources (as for instance in this case.)

Postscript, a few hours later:

I was thinking about how the Assessor could come up with such a low value for this property.  Basically, what’s a very small residence on a tiny lot worth in the Wrigleyville neighborhood?  Very possibly the answer is $569,580. This particular parcel is worth many times that because of its precise location, but the Assessor does not consider that.  And if I owned the property, I would appeal any higher assessment.  Evidently the assessment rules need to be changed, so that the potential use of the property is considered. One does wonder how many dollars stay in speculators’ pockets because of this failure.

photo credit: jtriefn via flickr (cc)

As the national debt finds its support in the public revenue, which must cover the yearly payments for interest, etc., the modern system of taxation was the necessary complement of the system of national loans. The loans enable the government to meet extraordinary expenses, without the tax-payers feeling it immediately, but they necessitate, as a consequence, increased taxes. On the other hand, the raising of taxation caused by the accumulation of debts contracted one after another, compels the government always to have recourse to new loans for new extraordinary expenses. Modern fiscality, whose pivot is formed by taxes on the most necessary means of subsistence (thereby increasing their price), thus contains within itself the germ of automatic progression. Over-taxation is not an incident, but rather a principle. In Holland, therefore, where this system was first inaugurated, the great patriot, De Witt, has in his “Maxims” extolled it as the best system for making the wage-labourer submissive, frugal, industrious, and overburdened with labour. The destructive influence that it exercises on the condition of the wage-labourer concerns us less however, here, than the forcible expropriation, resulting from it, of peasants, artisans, and in a word, all elements of the lower middle-class.

– K Marx, Capital, Part VIII Chapter XXXI (source)

So Karl objects to public debts, sees them requiring high taxes as a way to keep the workers docile and the lower middle-class poor. What part of this do the Tea-Partiers disagree with?