There’s been some concern about government insiders demonstrating great skill at choosing investments, at the presumed expense of other investors (not just individuals, but pension funds and other entities on which we depend). At least they’re required to, ex post, report their trades, including those of their spouses. But there must be a better solution.
A lot could be accomplished by reducing the role of government, and government-backed monopolies such as the “Federal” Reserve, in our economy. This would reduce the leverage of gov’t insiders. But every government operation has a lobby behind it, so this will be a challenge to accomplish. And even a legitimate limited government is going to have an impact on the economy.
So I propose that government insiders be required to post all their trades in advance, let’s say at least an hour before executing them. Put them on an easily-accessible public website (insiders.gov might be a good URL) so folks can front-run them. It would create a whole new subindustry of forecasting market moves based on what the insiders are doing.
Of course all kinds of new hustles might develop to get around this.
Posting a trade and then not executing it
Having offshore trusts which they can claim not to control
Telling their friends a day ahead of time what they plan to do
But it would at least be progress. And it might discourage some of the wealthy from getting so directly involved in government.
According to this report from Indianapolis, an insurance company CEO has observed deaths of working-age people (covered by his company’s policies) running 40% above pre-‘demic levels, and says most of the claims aren’t covid deaths.
So we have about a 20% increase, most of which is listed as “covid.” The remainder might reasonably be due to knock-on effects of the lockdowns and lockouts. The difference between 20% and 40% is curious, but his insured aren’t a random sample of the total population. He also notes an increase in disability claims.
Since the vaxxed population would have been higher in 2021 than 2020, this data would be consistent with some deaths being caused by the vax, as well as few deaths prevented by it.
In a new article (archived copy, also included in this pdf) for the Chicago Council on Global Affairs, Cook County Assessor Fritz Kaegi asks “In a digital economy, how can cities create a more equitable property tax system?” Of course he does not try to define “equitable,” but one infers from the article that it means “funded more by those benefiting from the digitalization of the economy, and less by those who actually perform useful work.” A desirable result, to be sure, but how does he propose to accomplish it? He also seems to assume that government-funded schools are a good thing, or at least that parents shouldn’t be held individually responsible for arranging their own children’s education.
He proposes to get more revenue from the big infotech companies, specifying Apple, Microsoft, Alphabet/Google, Amazon, and Facebook, but by implication the numerous other organizations who have prospered by taking advantage of the internet (as well as their lobbying capabilities to stifle competitors). He doesn’t think that local or state government is equipped to collect much of this revenue. Further, he assumes that a real estate tax to fund “education” can only be implemented at the school district level, and couldn’t be countywide, regionwide, statewide, or in any respect subnational. He concludes that the U S government needs to send large quantities of money to America’s cities, particularly including Chicago and the rest of Cook County.
“The federal government … is best situated to tax incomes generated by activity like digital commerce, virtual meetings, and footloose service providers [and]…will need to build fiscal mechanisms for a digital world that separates economic activity from physical space. ” (Presumably these wealthy and influential companies won’t use their influence to deflect the tax burden to others. )
OK, so Cook County local governments don’t get revenue from this digital economy? What about the 11 (soon to be 12) data centers in Elk Grove Village (archived copy), paying real estate taxes and utility taxes, as well as taxes imposed on persons working to construct and operate them. This report (archived copy) counts 52 data centers regionwide as of February 2021. Both reports note that several kinds of tax favors are provided, without indicating that they’re necessary since the digital economy requires facilities in appropriate locations.
And Amazon and other on-line retailers don’t generate taxes? Those of us who’ve bought something on line in the past couple years have noticed that the e-commerce giants collect and remit state and local sales taxes, typically in excess of 10% here. Last year the BGA counted (archived copy) 36 warehouses in the Chicago area built for Amazon since 2015 (and noted “at least $741 million in taxpayer-funded incentives”). This of course doesn’t count warehouses used by non-Amazon sellers such as Walmart and Target. Again, it’s likely that most or all of these facilities would have been built without subsidies, since warehouses have to be located appropriately with respect to markets, labor supply, transportation, etc.
Kaegi is legitimately concerned about the fragmentation of Cook County’s tax base, noting that “The lower the value of real estate in a community, the higher the effective rate to provide a comparable level of school services. This results in
great disparities.” But that problem isn’t inherent in the real estate tax; it’s inherent in the fragmentary structure of finance, funded largely by local real estate tax. A statewide real estate tax, such as Illinois had until it was replaced by a sales tax in 1933, could reduce or eliminate the disparities. A number of states retain statewide real estate taxes, but the problem of disparities can also be addressed by a tax-base sharing arrangement, as has operated for half a century in Minnesota.
“[W]e must continue to push for local-school funding that is not rooted in local land values,” writes Kaegi. Actually, if an effective disparity-reduction arrangement is in place, the opposite might be true. I have previously posted a table and map illustrating that, if taxes were based on land value rather than land+improvement value, the burden on homeowners in communities of low income and color would be lessened. And of course if the burden of sales taxes could be replaced by a tax on land value, the benefit to moderate-income households would be enhanced.
So we have an Assessor, running for re-election, who doesn’t believe the taxes he helps calculate are a good way to fund local services. I had hoped for better (but didn’t really expect it), as the quality of assessment seems to have improved during his tenure. He does have one announced primary opponent.
Tech billionaire wants to solve economic inequality, among other problems, by building a new city funded by land value tax. As described here, alternate source here.
Of course there are all kinds of issues involved in building a new, freestanding city, but it’s encouraging that he wants to start on a sound economic basis. Thanks to Bob Jene and Edward Miller for the tip.
UPDATE Aug 29 2021: If anyone familiar with Chicago doubts that removing improvements from the tax base will ease the burden on low-income homeowners, this map will be instructive. The original, mapless post from Aug 25 follows.
We sometimes are told that a land value tax (LVT) would punish the poor person who has a small rundown house on a high-value lot, while benefiting the person next door who has a large fancy house on an identical lot. And that’s not wrong, it’s just atypical. In practice, we believe, poor people mostly live in neighborhoods where housing is cheap and land is cheaper, thus they would tend to benefit from a shift to LVT.
As the quality of Cook County assessments has been improving, we expect to be able to show this by analysis of that data. In the meantime, we have some estimates of land and improvement value from William Larson and colleagues at the Federal Housing Finance Agency. Using appraisals produced for mortgage underwriting, they estimate land and improvement values for homes in most zip codes (and census tracts) nationwide. Their source data includes only single family properties which were appraised for mortgage purposes. They consider only parcels where the improvement is less than 15 years old, and exclude vacant land as well as land where the appraised value is very close to the assessed value (in case appraisers might have relied on low-quality or obsolete assessments). Also excluded are zip codes with an insufficient number of single family home transactions.
The chart below shows, for Chicago zip codes, the ratio of land value to total value (vertical axis) and total value of the property (horizontal axis. What stands out is that the ratio tends to be lower where the properties are cheaper. That is, a revenue-neutral shift of property taxation to land values only, ignoring value of improvements, would tend to reduce the taxes on low-value zip codes, while increasing it in higher-value areas.
The table below shows the data for each zip code, sorted from high proportion of value in land to low. Clearly the more affluent areas have lower proportion of improvement value, and the areas with low income population have a higher proportion of improvement value.
Estimated land value proportion and related data for single family properties in Chicago zip codes
Also of interest, even tho the low-value areas have a high ratio of improvement to land value, this isn’t because of large houses on small lots. The floor area ratio is generally lower in the areas with lower land value proportion.
Overall, the above data is consistent with Georgists’ assertion that low-income residents usually benefit from a switch to LVT. I might be taking a further look at this dataset.
We have a new report from Cook County Treasurer Maria Pappas, subtitled “2020 Cook County property tax analysis: A heavier burden for businesses, Black and Latino suburban property owners.” It’s got more detail than I recall seeing published before, including two decades of total real estate tax revenue countywide and by triad, and (for the past two years only) median taxes per parcel for residential and commercial, by municipality and township (and limited data for Chicago wards) as well as a fun list of the ten highest residential and commercial tax bills for each township. The extra load Cook County’s current classification system places on commercial property is noted.
All of this data for individual parcels has been available on the Treasurer’s web site for some time, but it wasn’t assembled for convenient use.
It’s likely impossible to discuss the real estate tax system (let alone the complete scope of public revenue) in a way which can hold the attention even of people who find themselves heavily burdened by the way government is funded and operated. And Pappas’ office got this information out quickly, as the taxes have only recently been calculated and won’t be due until October 1. All the same, there are problems which one hopes will be fixed next time this is done (and one certainly hopes there will be a next time, soon.)
Noting the continuing rise in revenues, the report asserts that “[t]he bigger tax burden is not being shared equally.” What could this mean? What would be equal? Should we fund government by a poll tax, which is the only way to get everyone to pay the same amount? Perhaps the writer means “equitably,” a desirable thing tho difficult to agree on. It’s then observed that “Property owners in many south suburbs continue to pay far more in taxes than landowners in other parts of the county.” I will set aside the fact that “property” and “land” aren’t the same thing, and assume that the writer may have meant “real estate taxes are higher in many south suburbs than in other parts of the county,” which is sufficiently cautious that it must be true.
But in fact the amount of real estate tax paid by a median homeowner is much lower, less than $4,000/year in Bloom and Thornton townships (page 49 of the statistics section of the report), less than any of the north suburban townships (page 56).
That doesn’t mean that the taxes in Bloom and Thornton aren’t a burden for many, because taxes imposed on struggling people are always a burden. And the very high tax rates reduce market values, while increasing the extra burden on renters (who cannot benefit from the “homeowner exemption.”)
The report makes no attempt to separate the value of land from the value of improvements, even tho the assessments provide this breakout for each parcel. There’s no distinction between owner-occupied and renter-occupied homes. The only mention of vacant land is to say that it’s been ignored, as has mixed-use (residential+commercial) property. There’s no mention at all of exempt government-owned land.
It would be helpful to include reference maps, especially of townships. And in an ideal world, the tables would be offered in spreadsheet format.
According to a Sun-Times report, Cook County Assessor Fritz Kaegi acknowledges that his “Senior Freeze” program, under which old property owners claiming household income under $65,000 can get a big break on property taxes, is “riddled with errors.” Highlighted is a multi-million dollar condo in Water Tower Place, whose owners pay only $2502/year. While it’s certainly possible that these folks might have income under $65,000/year, that seems unlikely, as they also own a Florida condo valued at over $1 million. Their Chicago property apparently also benefits from the temporary removal of toilets during a 2017 remodeling. It seems that the Assessor never noted that the toilets were replaced (or perhaps they were not?)
While the WTP property is clearly an extreme case, the senior freeze program transferred $250 million from owners of 144,904 properties who participate in it to the remainder of the 1.77 million taxable properties (of which 1.6 million are residential) in the County. With the total property tax revenue at $15.6 billion, this amounts to about 1.6 % of total taxes collected. The Sun-Times article provides several other examples of affluent old people who benefit from the program.
Clearly this is a problem of bad policies ((discriminating against renters, the nonelderly, and people who find it difficult to complete simple bureaucratic forms), and taxing improvements), combined with governmental malfunction (Kaegi hasn’t been able to get the program under control, partly because there is no mechanism for the County to verify incomes).
It should not be necessary to mention, but I will mention anyway, that the Sun-Times report relied on property tax data being, for the most part, publicly available. While far worse scandals likely could be found regarding income tax, many of these can’t be documented unless taxpayers “voluntarily” release their information, or it is (probably unlawfully) liberated.
Accurate assessments are said to be important because assessing a property too high can “destroy wealth by diminishing the market value of the property.” Which is true, but do not taxes based on accurate assessments also destroy wealth? What the Assessor seems to mean by a “fair” assessment is an assessment that is calculated in accordance with applicable laws and ordinances. This definition of “fair” comes mainly from our friends in the Legislature and County Board, with some role for other government officials. “Fair” in Cook County means that owners of houses or vacant land should pay taxes at 40% of the rate applied to ordinary industrial or commercial property, unless special favors have been bestowed. In the rest of the State, “fairness” requires rates in the absence of special favors to be uniform. In all areas, “fairness” requires that religious and most nonprofit educational facilities are entirely exempt from tax. Continue reading Clobbering fairness more accurately
…as to the cause which so suddenly and so largely raised wages in California in 1849, and in Australia in 1852. It was the discovery of the placer mines in unappropriated land to which labor was free that raised the wages of cooks in San Francisco restaurants to $500 a month, and left ships to rot in the harbor without officers or crew until their owners would consent to pay rates that in any other part of the globe seemed fabulous.
…Henry George; Progress & Poverty Book V Chapter 2
George goes on to describe how gold mining was organized, and why it was the form of tenure rather than just the availability of gold that raised wages:
[I]t was by common consent declared that this gold-bearing land should remain common property, of which no one might take more than he could reasonably use, or hold for a longer time than he continued to use it. This perception of natural justice was acquiesced in by the General Government and the Courts, and while placer mining remained of importance, no attempt was made to overrule this reversion to primitive ideas. The title to the land remained in the government, and no individual could acquire more than a possessory claim. The miners in each district fixed the amount of ground an individual could take and the amount of work that must be done to constitute use. If this work were not done, any one could relocate the ground. Thus, no one was allowed to forestall or to lock up natural resources. Labor was acknowledged as the creator of wealth, was given a free field, and secured in its reward.
— Progress & Poverty, Book V, Chapter 2
And now I tripped over a 2002 paper (From Commons to Claims: Property Rights in the California Gold Rush by Andrea G McDowell) that provides a lot of detail and background supporting George’s assertion. A particular mining claim might be 100 to 900 square feet. A miner would work it for a few weeks, then expect to move on to another one. Thus the first miners to arrive had an incentive to avoid land monopoly, because they’d be looking for land again in a short while. “[The miners’] position can be summed up as a rejection of a fee-simple interest in mining claims on the grounds that this would result in the monopoly of the diggings by capitalists and the exclusion of individual miners from the chance to strike it rich.”
There’s a lot about how various mining districts managed their operations — certainly not all the same and often poorly documented, with a lot of the information coming from personal journals and correspondence rather than official sources.
I recall a couple years ago, the first time I saw the CTA Holiday Train enter a station. It was packed, mainly with grandparents/aunts/uncles/cousins taking small ones for a ride. Probably generated a lot of revenue. Forward to 2020, a train crowded with people who breathe isn’t desired, so what to do?
Well, they could have just cancelled it, but that’d be dropping yet another tradition, and I suppose reducing overtime for union employees. So they’re going to run it empty, and instead of crowding the train, folks can crowd the platforms– probably a bit less close breathing.
But CTA trains run every day with people on them– the problem is the crowding. Why not sell tickets? How much would people pay for a ride in a semi-private car, restricted to, say 10 people per car? $25 for a 2-hour trip? $100? I don’t know, but it’s nontrivial. Maybe $1000/trip/car, $4000/trip/train, $160,000 assuming each space is sold just twice per operating day. Now, $160,000 is probably not quite enough to operate one bus for a year. But why not collect it?
Ideally, CTA would use the money to pay the cost of operation, and apply any left over to its growing deficit. But it might be more acceptable to have some sufficiently progressive charitable organization– United Way?– devise a system for distributing the proceeds to a politically-balanced array of groups actually assisting impoverished people. CTA could even reserve a certain number of tickets for actual impoverished folks who’d like to ride.
I wonder how much money a lobbyist could attract if paid $160,000?