Author: Administrator

Collecting the Rent in Hong Kong

Georgists often like to point to Hong Kong as a successful example of funding a community’s needs from economic rent.  The result is a prosperous and (relatively) free city, a magnet for immigrants.  But our information is old, and numerous changes have happened since the transfer of power, from UK to PRC in 1997.

So I was pleased to spend a bit of time this afternoon with a Hong Kong native, who now lives and works in Chicago.  Not familiar at all with Henry George, not even interested in political philosophy as far as I could tell, but able to speak with me about current economic conditions.  If I have any errors below, I trust that someone will correct me. Continue reading Collecting the Rent in Hong Kong

Short term loan at 0%, and how you can get one

Not from the Federal Reserve; surely none of my readers are “too big to succeed” and therefore qualified for direct quantitative easing. But an arm of the U S Government actually will sell you cash, in $250 increments, accepting credit cards without surcharge (you get any usual rebates or bonuses that your card provides) and with free shipping. The only catch: Your cash is in the form of dollar coins.

Stated purpose of the program is “to make $1 coins readily available to the public, at no additional cost, so they can be easily introduced into circulation—particularly by using them for retail transactions, vending, and mass transit.”  (Your government does not want you to just deposit them in the bank, but CTA farecard machines accept them.)  Altho coins cost more to produce than dollar bills, they save your government money because they last a lot longer.

For those of us who do not love the Federal Reserve, there is also the consideration that the coins are issued directly by your government, the closest thing we have to greenbacks (more about the advantages of greenbacks).

This program apparently has been going on for a couple of years; I learned about it recently from this old post.  It really works; I placed an order January 17, it arrived (by ordinary U S mail!) about a week later, and I will pay for it next week.  Presumably you could roll it over by placing another order.

Of course, what with credit cards, checks, direct bank transfers, etc., I don’t spend $250 cash in any month.  But maybe we’d all be better off if there was more use of the anonymous cash economy, which this seems to encourage.

Housing costs and land use regulation

Steve Keen did the great service of reading the FCIC report and confirming my impression (obtained without reading it) that it was not worth reading.  And a few posts prior, he reported that Wendell Cox and friends are out with another edition of their annual Demographia report, showing, once again, that the ratio of house cost to income tends to be higher in metropolitan areas where housing development is relatively restricted, and lower where developers find it relatively easy to get clearance to build. (Their report is international in scope but I will limit my comments to their analysis of US conditions.) Continue reading Housing costs and land use regulation

Medical tax to burden homebuyers

Yes, the report of the Financial Crisis Inquiry Commission is out.  It’s over 600 pages long.  Sources I respect say it’s the expected whitewash.  I probably won’t ever read it. I still haven’t read the Obamacare Act (yeah, thats not a good name for it, we really oughta call it something like DemoPublicare.)  Anyhow, I just found out how it’s going to increase the screwing up of the housing market.

As Lew Sichelman explains, it includes

a highly targeted 3.8% tax enacted as part of the controversial health-care reform legislation that has been signed into law and which Republicans are now trying to overturn.

The tax will apply to individuals with adjusted gross incomes above $200,000 and couples filing jointly with more than a $250,000 AGI. If you and your spouse choose to file jointly, the AGI threshold is $125,000 for each of you.

The Medicare tax, so named because the proceeds are to be dedicated to the Medicare Trust Fund, will be on interest dividends, rents less expenses, and capital gains less capital losses. But the key thing to remember is that the tax is based on whichever is less, the gain you made on the sale of the house or the amount your income exceeds the AGI threshold.

It’s complicated, so it’s hard to predict how it will effect every seller. As always with tax matters, it’s best to consult with a professional.

Of course, the income limits may change (legislatively or thru unmeasured inflation), so any of us who own our housing better save all receipts which might possibly have anything to do with adjusting the basis.  But at least it doesn’t immediately affect the rest of us, does it?

Not so.  I’d say this is another in a series of moves discouraging old people from selling houses that are larger than they need or really want, and which would otherwise be bought by families with children who could use the space.  Earlier policies with similar effect include real estate tax breaks targeted at old people, and whatever programs facilitate reverse mortgages.

So what will homeseeking families do? Most likely, they’ll find houses they can afford, and the probability is that these will be further out. (The tax presumably also applies to sales of high-priced vacant lots, another force discouraging construction of homes on well-located sites.)

So maybe instead of the Obamacare Act, we should call it the Sprawl Enhancement and Old People Stabilitzation Act.

Grant funding and transit efficiency

A couple of years back I attended a conference where somebody– I think it was a couple of Chicago payrollers– reported on the bus rapid transit system of Curitiba, Brazil.  It’s considered by many (and I have no information to the contrary) to be a cost-effective implementation of pretty good transit service (better than we have, anyhow) at modest cost. They actually got to compare notes with the former Mayor who is considered most responsible for the design of the system.  He was quoted as saying, “I’m glad we don’t have as much money as you have in Chicago, because surely we would waste it.”

What reminded me of this most recently is this release from Sen. Durbin’s office, anouncing or reannouncing the awarding of various grants. In particular:

Illinois Department of Transportation (Chicago Metro): $341,694 in TIGGER II funding to install automatic shut-down and start-up systems in an estimated 27 locomotives in the Metra fleet, which operates in the Chicago metro area. Metra estimates that by shutting down instead of idling the locomotives, the automatic systems could save an estimated 800,000 gallons of diesel fuel and reduce CO2 emissions by an estimated 80,000 tons per year.

If the information is to be believed, an investment of $341,694 “could save” 800,000 gallons of diesel per year.  Now, I don’t know how reliable that estimate is, but let’s assume it’s way too high, really only 200,000 gallons will be saved.  And what does Metra pay for diesel, surely not less than $2.50/gallon.  On these very conservative assumptions, it would take less than 9 months’ fuel savings to pay for the devices.  (And that’s not even considering the savings from not having to go thru the grant process.)  And if they lacked the cash, they certainly could have borrowed it, paid extortionate interest, and still come out ahead in a year.

So why didn’t Metra do that?  Are they stupid? Or corrupt? Of course I have no way to know, but I think there’s another reason.  I can imagine how the decision was made:

Technical staffer:  We can buy shutoff devices, pay for them with fuel savings in less than a year.  May I place the order?

Manager: Would this qualify for TIGGER funds?

TS: Huh?

M: It’s a grant program.  I don’t remember where the acronym comes from, but it’s federal money we can spend on things that save energy and reduce emissions. This sounds like it would qualify.  The Board prefers that we use federal money instead of Metra’s “own” money.

TS: I suppose it would qualify.  What do I do now?

M: Go talk to the Metra Department of Getting Grants.  They’ll take care of it, you’ll just have to get them some pictures, brochures, maybe some other paper.  Shouldn’t take you more than a week or two.

TS: Well, OK.  Will I get a bonus for this?

I have no idea who will get a bonus, but I know who is spending more and waiting longer than necessary for a cost-effective investment.

Privacy Policies

Every organization seems to have a privacy policy.  Of course the one (pdf) at the Henry George School recognizes that we rely on and are subject to forces beyond our control, and can really only promise to do our best.  But most privacy policies (for example here) seem to have provisions like:

We may share your Information with any third party outside our family of companies as permitted or required by law or as expressly authorized by you.

Which imho could be equivalently stated as:

We will do anything we damn well please with your information as long as we don’t think it’s illegal.

That’s why I was struck some years ago by the  privacy policy of the iconoclastic but quite successful Mairs and Power Funds

We do not disclose any nonpublic personal information  about our shareholders, past or present, to nonaffiliated third parties, such as consultants or accountants, except as authorized by shareholders or required by law.

Which I restate as:

We’ll give out your information only if you, or guys with badges and guns, want it given out.

Unfortunately, somebody seems to have told Mairs and Power that investors really don’t care about privacy, and policy now says:

We do not … disclose … information … unless … permitted by law.

It’s really too bad, but what else are we rentiers supposed to do?

Lambert’s Law of Rent

“All rents tend toward fraud”

Lambert has proposed this as “Lambert’s Law,” but since there appears to already be a “Lambert’s Law” in the field of physics, we could name this one “Lambert’s Law of Rent.”  Based on, tho not directly derived from, the Law of Rent.

Lambert goes on to assert that “a parasitic class of rent-seekers has paralyzed and hollowed out the economy,” which sounds correct to me.  Lambert’s post (which actually is not about economic rent) is here.

The logical conclusion, of course, is that public policy should seek to collect for the benefit of the community those rents that cannot be eliminated.

LVT better than bank secrecy or Wikileaks

Former banker Rudolf Elmer, opposed to use of Swiss bank secrecy to aid evasion of taxes by non-Swiss, has provided Wikileaks with two CD’s of (apparently incriminating) data.   Who is right here? Customers were assured the data would remain secret, now it will be revealed.  But aren’t governments entitled to collect taxes which they impose on their citizens?  If not, why should anyone pay? If so, how can anyone’s financial affairs be private?

The answer is, none of this would be an issue under Land Value Taxation.  When revenue comes from the land, government does not even need to know who the owner is.  Government need only know sales prices and a few readily-observable characteristics.  The tax has been paid or it has not been paid, and in the latter case a process starts which eventually will result either in the tax (plus late fees) being paid, or the land being taken by the government. (And remember, the government is necessarily the ultimate custodian of land records, a natural monopoly.)

Only land value taxation permits financial privacy.

Just because they’re “Nobel” prize winners doesn’t mean they’re wrong

Washington’s blog says:

Virtually all independent financial experts say the size of the big banks is hurting the economy

and fortunately George Washington been keeping (documented) count.  It’s a total of 30 (mostly individuals but including a few coherent small groups), of which at least three have received the “Nobel” prize.

So why does “the market” cause such large banks to exist? Perhaps because correlates of bank size include political influence and chief executive salary.

Land prices, not house prices, have dropped

in the past few years, as well illustrated by this article from MSNBC.  Homeowner insurance costs generally haven’t declined, because construction costs haven’t declined. (Homeowner insurance covers the cost of repairing or replacing the structure.) If it’s not construction cost, what went down? Must be the land. (ht Rob’t Blau)

I’m struck that an article about homeowner’s insurance doesn’t touch on title insurance, which is having difficulties of its own.