Author: taxpayer

Chicago area land value exceeds $1 trillion

Finally received Lincoln Institute’s new book Land Policies and Their Outcomes. David Barker (apparently of the University of Chicago) estimated land values for four metro areas by looking at vacant land sales. Assuming that each such sale represents the per-acre value of land in its immediate area, he finds that for the Chicago 8-county MSA total land value is $2.188 trillion. From this he deducts streets and concludes that the rest of the land is worth $1.872 trillion. Of course, not all of this could be subject to a land value tax, for instance public facilities and favored nonprofits are exempt. Still, it seems that the taxable value would exceed $1 trillion. And this doesn’t count all the other privileges which could be taxed without reducing productivity.

The paper does include a much lower estimate reached by an alternative method, but that method assumes land to be worth only the difference between the parcel price and the depreciated cost of building whatever is on it. And excludes vacant land. And has some other limitations.

How the sinking rich brought prosperity

According to economic historian Gregory Clark, the industrial revolution occurred because people developed “the middle-class values of nonviolence, literacy, long working hours and a willingness to save…” And this happened because the poor lived in such wretched conditions that the rich out-reproduced them.  Not enough of the working class children survived to do the work, so  many children of the rich, carrying these “middle-class” values, ended up in the working class.  They carried the values with them: “Thrift, prudence, negotiation and hard work were becoming values for communities that previously had been spendthrift, impulsive, violent and leisure loving.” This made the industrial revolution possible.

That’s my summary of Nicholas Wade’s review in yesterday’s New York Times of Clark’s forthcoming “A Farewell to Alms” (to be published by Princeton University Press).  Apparently it’s based on a huge amount of detailed research.

It seems to contradict Georgist theory in a couple of ways.  First, Clark assumes that to some extent values are genetic, whereas George emphasized that people are pretty much identical everywhere, with social institutions explaining the main differences.  Second, it implies that the formula for prosperity is to let the children of the poor die, and make the rich kids work.  Well, maybe making the rich kids work wouldn’t be so bad.

Thanks to NewsTrust for bringing this to my attention.

What's missing from the Burnham Plan centennial

Folks around Chicago are getting ready to observe the centennial of Dan Burnham’s 1909 “Plan of Chicago.” We’ve all heard about it, but who has actually read it?

Not me, so I figured I would borrow a copy from the Chicago Public Library.  Not the 1909 original, of course, but there were reprints in 1970 and 1993.   But although CPL has several copies, apparently none of them circulate.  No problem, this is a 1909 document, so it should be free of copyright.  But as far as I can tell, nobody has placed it on-line.  Sounds like a good project for the Plan of Chicago Centennial Initiative

I did spend a little time reviewing a noncirculating copy.  There’s all kinds of wonderful stuff, but I focused on the final chapter.  “Legal Aspects of the Plan of Chicago,” by Walter L. Fisher, is where issues of financing are discussed.   Except for the railroad terminals, there was no indication of funding by anything other than the real estate tax, applied equally to land and improvements.  Fisher did note that, in some places, public authorities could acquire more land than needed for the improvement, and sell the surplus to help capture some of the benefit, but this wouldn’t be feasible in Chicago.

Thanks to Robert Piper for alerting me to this project.

Monetary seminar Sept 26 in Chicago

American Monetary Institute’s Steve Zarlenga offers a seminar (free!) immediately prior to their annual conference.    I think Zarlenga’s fundamental ideas are sound and this should be a good way to understand key monetary issues in three hours.   More detail about the conference (not free) is here. More about monetary history and principles in his book. 

Off at the Georgist Conference

No blogging to speak of this week; I’m attending the annual conference of the Council of Georgist Organizations at Scranton.  

I’m not going to try blogging the conference, titled “Two Views of Social Justice: A Catholic/Georgist Dialogue.”   Probably the most striking thing I’ve learned today: Theologian Brian Benestad said that Catholic doctrine neither requires nor prohibits the single tax.  If the laity thinks the single tax is a good thing, let them put it into effect.  However, he said the single tax cannot solve all the problems of poverty and human misery, because those are caused by Original Sin, and the single tax cannot overcome Original Sin.

Can’t reply to that one.

Nic Rosen is doing some updates.

32 Years of Housing Data

Your tax dollars bought a new compilation of data from the American (formerly “Annual”) Housing Survey from 1973-2005. Data on housing costs, incomes, structure and neighborhood conditions, commuting, etc. I didn’t find a whole lot of surprises at first look, but it can be a useful and well-designed reference.  It’s a 1.6 mb pdf, downloadable here.  I suppose hardcopy is also available, though it’s not immediately obvious how to order.

Assessment limits make many homeowners worse-off

In the July issue of Land Lines, two UIC economists show how limitations on the increase in real estate tax assessments not only fail to protect all homeowners, but actually cause many of them to pay more tax than they would in the absence of the limitations.  It’s simple mathematics, say Richard F. Dye and Daniel P. McMillen.  If the total tax take does not decrease, then those with relatively small increases in home value– not protected by assessment caps– end up paying a larger share to make up for the absence of assessments on the full value of homes in areas where values are rising rapidly.

This is despite the fact that business’ share of the tax burden grows.  And it has nothing to do with TIF’s.  Well, I guess TIF’s worsen the situation further, but that isn’t discussed in this article.

Land Lines comes from the Lincoln Institute of Land Policy.  They provide free subscriptions in hard-copy.  Or you can download it without charge, but they want you to register.  You can probably avoid registration by using bugmenot.

Responding to PIRG, despite WordPress

Phineas Baxandall, one of the authors of the Illinois PIRG report blogged yesterday, commented on the item. Well, I responded to his comment, but for some reason WordPress swallowed the comment. Twice. I tried to comment as a normal person instead of myself. Swallowed again. Tried again. Rejected as “duplicate.” I don’t know what’s going on at WordPress, possibly there is some difficulty regarding html in the comment. But following is my response to Phineas Baxandall.

I’m always happy to see activists claiming that Henry George would approve of their work, but in this case there’s a serious gap between George’s proposal and yours.

George wanted to remove all taxes from productive activity, and instead charge for control of land (and other natural resources). Retail sales and service are productive activities, and when they’re taxed then the cost of living increases and living standards are reduced. Real estate transfers, too, usually involve productive activity, either construction or at least the transfer of property to someone who can use it more effectively than the seller.

Development impact fees likewise make it more expensive and difficult to provide housing (or other kinds of development). If such fees were truly user fees, then they’d be paid by all users, rather than just by those who seek to build.

You’re certainly not the first person to misunderstand George’s ideas, which is why we have Henry George Schools in Chicago and elsewhere, run courses by Internet, and have Progress & Poverty posted in original and modernized versions. Some relevant (and more succinct) modern documents are here.

It’s not so important whether your proposal would please Henry George. What’s important is that, had you proposed supporting transit thru a tax on location values, you would have recommended a policy to reliably fund transit in the long run, encourage transit-supportive development patterns, and improve the standard of living of ordinary working people.

"Protect land speculators" — Illinois PIRG

A solicitor stopped by my house a week or so ago pushing Illinois PIRG’s campaign to “save our transit.” They do have a report, funded by the “Illinois PIRG Education Fund” and prepared by Brian Imus, Nick Christensen, and Phineas Baxandall, that explains how they want us to pay more money for transit service.

The report notes that “Locations served by transit… show increased property values compared
to similar locations not served by transit.” Although they do cite sources for this assertion, they don’t refer to either of the Chicago studies which are (see footnotes 3 and 4 on page three of this). So then do they propose a tax on location value?

No surprises here. They proclaim “Seven Principles for Funding Transit:”

1-Enhance market efficiency

2-Low collection costs

3-Reliability

4-Diverse funding

5-Fare increases are self defeating

6-Budget accountability

7-Community participation

They do provide some discussion of each. Then they evaluate several potential sources of funding:

-Sales taxes

-Gasoline tax

-Rental car tax

-(auto) License, registration or title fees

-Several other driving-related taxes

-Real estate development impact fees

-Stormwater fees

-Real estate transfer tax

-Parking tax

Their recommendation:

-Higher sales tax

-Extend sales tax to services

-Establish a real estate transfer tax, or maybe one of a few other taxes.

But although they acknowledge that transit service increases land value, there is no consideration of this option. Instead, they want to reduce economic efficiency by raisng taxes on economic activity.