Archive for the ‘taxes’ Category

Retiring regional leader on how to fund infrastructure

from Wikimedia

from Wikimedia

From Marni Pyke’s interview in the Herald:

One way to pay involves value capture — establishing special taxing areas that assume that development like a new road benefits landowners by growth in sales, rents or property values, he said.

“I’m a developer,” Ranney said. “I think developers need to pay more for the value that is generated (by the project). Value capture makes sense. That is something that the real estate community isn’t too keen on — but let’s get real. If you use public dollars to generate private wealth, you can darn well pay for it.”

And an observation regarding transit progress in the region:

Noting he takes the same train from Libertyville that his father took, Ranney added that “nowhere else in the world do they have complacency about exactly the same level of service.”

Land sales price vs. what is paid for land

image credit: Onishenko

image credit: Onishenko

In order to fund community needs from a tax on land value, assessors need to estimate what that land value is.  Conceptually the task need not be difficult (Ted Gwartney outlines some options here, but a more complete and still-valid examination is in this book.) Basically, you look at sales prices for actual land transactions, and make adjustments for parcels which haven’t sold recently or where land comprises only a small part of the value.  But what happens if the buyer pays something additional, “off the books,”  for the land?

According to Peter Katz, that seems to be what often happens. This presentation at APA last March starts off slow (and self-promotional), but moves along thru some interesting territory. Regarding the price of vacant land, he asserts that, in many desirable areas, developers have to first buy (or option) the land, then negotiate with local authorities to get permission to build. Getting that permission might require agreeing to donate money (or land) for public use, or perhaps less savory expenditures, and to the developer this is part of the cost of land. If an area of any size is subject to such constraints, all the land sales are below market prices by the amount of such costs, and all sites, whether sold or not, receive assessed land values that are lower than what developers actually pay to get a buildable site.  This results in less public revenue, implying a need for other taxes, as well as a tendency to develop at lower densities than might be appropriate, when developers choose to settle for existing zoning rather than what they might be able to negotiate. Katz suggests that a formal study of this effect should be done, and nominates Lincoln Institute to make it happen.

Katz’s remedy seems to be a combination of form-based zoning codes, plus a sophisticated (and presumably accurate) fiscal impact analysis that might show denser development to actually be more “profitable” to governments.  But, responding to a question about 65 minutes into (and near the end of) his talk, he acknowledges that funding government from a land value tax would be a good way to obtain the desired development pattern, and that Henry George was a great guy.  His observation that Georgists tend to be wacky has been made before, and I can’t say it’s wrong.

Quid Pro Brew

image credit: Bernt Rostad (cc) via flickr

image credit: Bernt Rostad (cc) via flickr

I was wondering a few weeks ago why Revolution Brewing supported the lobbyist-friendly “Transit Future” funding effort.  How foolish I was, is not brewing a regulated industry desirous of government favors? WBEZ reminds us of the “Small Brew Act,” which would cut the federal taxes on the first 60,000 barrels produced. Senator Kirk, who has never done anything constructive that I can recall, toured the Lobbyist Revolution Brewery and spoke kindly of the act.

Of course, there is no just reason to impose any tax on production of beer or anything else people want, provided that land rent is collected by and for the benefit of the community. In the same situation, I might do the same thing Revolution has done, especially if I knew more about political strategy and good beer than about smart fiscal policy and public finance.  But it’s a shame they’re doing it.

 

America Fast Forward to Transit Future Obligations

Sunday on CTA Route 49

Sunday on CTA Route 49

Over here in Illinois a coalition of powerful and dangerous people and organizations seems to be supporting a “transit future” initiative to harvest a “robust revenue stream,” inferentially a further increase in the sales tax. I say “seems to be” because I haven’t verified that everyone listed (including southern California’s moveLA) is in fact a supporter rather than a typo. And “inferentially” because the examples cited on the site involve sales tax increases.

GETTING TO HYDE PARK…

There is some fancy mapping at vision.transitfuture.org (more…)

What the Tribune missed

iTax Dodge protest

image from Michael Casey via flickr (cc)

Last year the remnant of the Chicago Tribune requested ideas for elements of a new “Plan of Chicago.” They even posted a few of the responses on their site. I suppose some were included in the hardcopy newspaper too.  But those don’t seem to have included my submission, so I probably ought to post it here.

My proposal, of course, relates to how public revenue is raised.  The protesters pictured on the right probably wouldn’t realize that it relates to their concerns, and would almost certainly cause Apple to make a greater contribution to local coffers than they do now. But it wouldn’t increase any corporate tax rate nor prevent Apple from playing accounting games.  It doesn’t need to.

Here’s the proposal as submitted on October 24 2013: (more…)

Using gifts to promote thought about taxes

As Tolstoy pointed out in slightly different words, anyone who understands the fundamentals of public finance cannot fail to agree that the smartest way to fund our governments is to collect economic rent. So the challenge for Georgists is simply to get the 99% of the population who really don’t think about these things to do so.

Which brings to mind some cards printed many many years ago by Advocates for Self Government.

front

front

back

back. The phone numbers and addresses may no longer have any connection to the organization, because the card is probably over 30 years old.

 

 

 

 

 

The idea is, of course, that if you like (or respect or admire) the person who served you, you don’t tip, but give a gift. A gift to an individual is taxable to the giver, not the recipient, but as long as you don’t give any one person more than $14,000 you won’t pay gift tax. (I get my information from Wikipedia, which is no more likely to be incorrect than other sources I know of.) I find tipping disconcerting,  but I do admire and respect the ability of many  baristas, waiters, cabdrivers, barbers, etc who have skills I could never hope to develop.  I like some of them too, and have had a few of them as students learning the fundamentals of political economy.

So this is an approach Georgists might try, to encourage more folks to think about important issues, while making their lives just a teeny bit easier.  No, I have no idea what happens if you put a card and a small amount of money in a tip jar. Maybe new regulations will be issued requiring separate gift jars, and auditors dispatched to assure compliance..

NY Times reports another benefit of the citizens dividend

photo credit: coal dubya via flickr (cc)

photo credit: coal dubya via flickr (cc)

If the earth belongs to the people, then whatever is paid for the use thereof belongs to them in some equitable fashion also.  Therefore, beyond what’s needed for legitimate government purposes, there would seem to be enough for a considerable “citizen’s dividend” for everyone.  Plenty of discussion on this subject can be found here.

My guess is that it would likely be enough to replace most of the aid programs which provide funds — rarely enough but maybe better than nothing — to low income people.  One advantage is that it could be administered at relatively modest expense.  A related advantage is that it can probably be made to work, with everyone getting what they’re entitled to. This latter aspect is what came to mind when I read this NY Times article, in which a Georgetown law professor summarizes “a litany of automation and contracting meltdowns” whereby the poor were unable to obtain benefits to which they were entitled under various aid programs and which may have been essential to their support.

His point seems to be that, while healthcare.gov suffered major problems initially, it was soon repaired because its failure affected many non-poor people. (I have no idea how well-repaired it might be, but will assume he is correct about this.)  He does not mention the citizens dividend, perhaps is unaware of it, or maybe ignores it because it would likely reduce the demand for lawyers. But he makes the case. A regular check for everyone, as a just entitlement, would be a far simpler system than most of the means-tested (and otherwise-restricted) aid programs which cost taxpayers so much money.

And while we’re on the subject of means-tested programs, consider this:

[I]f a single mother has two children in childcare and she’s making $36,000, she’ll pay about $310 a month for childcare. Then, if she gets a raise to $37,000, she’ll need to pay $1,200 a month for childcare because of the loss of a subsidy.

Of course, it needn’t be a raise, it might just be a decision to work a bit of overtime. I have written about this before and I will probably have to write about it again. Means-tested aid is a disgrace.

 

Aussie prof says land value increase can fund light rail

https://upload.wikimedia.org/wikipedia/commons/thumb/d/d0/Light_Rail_Sign.svg/119px-Light_Rail_Sign.svg.png

Land value increase due to light rail is sufficient to pay the entire cost of construction, asserts Curtin U. Prof Peter Newman.  At a minimum, he suggests, the increased real estate tax revenue resulting from the system should be used as part of the funding.  This from an interview on (Australia) Radio National‘s Saturday Extra, May 18.  I think RN leave their audio posted for only a few weeks after broadcast.  One assumes Newman has written some posts somewhere documenting his assertions, but a quick search doesn’t reveal any.

 

The taxing question of land value

1_69ffd9a3b25bee3673beaa1ee0190583UK Geoists are crowdsourcing a film about the nature and benefits resulting from a tax on the value of land.  You needn’t be a UK resident nor have a UK charge card in order to support this. Seeking a total of £9000, they’ve already got £2188 with 18 days to go.  Join the 46 funders so far, or find out more, here.

I’m from the government and I’m here to deceive you

image credit: A Mina via flickr (cc)

image credit: A Mina via flickr (cc)

They call it “Factors Influencing Voluntary Compliance by Small Businesses[pdf],” and the report comes from IRS (actually “an independent organization within IRS,” whatever that means), and  so you know that it’s referring to compliance with Federal income tax laws and regulations.

The focus on small business makes sense, since folks on payrolls or pensions generally can’t hide much of their income, and large corporations can obtain legislative action or legal advice providing their own loopholes.  Two surveys were done, one of small businesspeople nationwide for whom, statistically, an audit would be expected to result in additional tax payments, and the other of small businesspeople in communities from which a high proportion of such returns was filed. (NOTE: When wooing their votes we call them “entrepreneurs” or “job creators,” but that would not be dainty when we are considering them “tax cheats.”) These “low compliance” folks were supplemented by a survey of those expected to be “high compliance.”

I see two surprising results in this report.  First, on most attitude measures there’s little difference between the “low compliance” and “high compliance” respondents.  For example, only 15% of the “low” group thought that federal tax laws were fair, and the same proportion of the “high” group agreed.   Differences that did appear were fairly small. “Wealthy taxpayers minimize their taxes in ways the average taxpayer cannot” was agreed with by 74% of the “low compliance”‘ group, and 69% of the “high compliance” people.

An even bigger surprise, to the IRS analysts as well as this blogger, is that “low compliance” seems to be associated with greater participation in their local communities, including churches, schools, volunteer organizations, and even were more likely to vote than “high compliance” people. I hesitate to speculate on what this means, but it is probably a positive for those of us who believe (along with most respondents) that federal government is not an appropriate way to deal with many of the areas it has become involved in.

The report acknowledges that the survey suffers from an indirect method: “Low compliance” merely indicates a statistical likelihood of same, not an actual lack of compliance by the respondent.   Because a random selection of taxpayers are audited simply to calibrate the compliance-prediction model, it would have been possible to target these particular taxpayers for the survey.  Of course they couldn’t be surveyed after their audits because they might be especially unhappy with IRS at that point.  But they could have been surveyed just before being notified on the audit.  IRS decided not to do that because they “deemed it overly deceptive.”  However, the actual survey (done over the phone by a contracted private company), did not reveal that this was an IRS project until the conclusion, after the data had been gathered.  That apparently was deemed just deceptive enough.

Not part of the published report is a list of “clusters of potential tax cheats” posted by AP but presumably originating with IRS. Apparently tabulated by zip code, here’s the Illinois portion of the list:

Bellwood, Calumet City, Dolton,  Grand Crossing, Hazel Crest, Matteson, Maywood, Ogden Park, Phoenix, Riverdale, Roseland, South Chicago Heights, South Holland, University Park.  I assume that folks in Oakbrook and Barrington Hills had already purchased their own loopholes.