Category: Georgist/geoist

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.

Value of land grows fast or slow…

…as illustrated by this image from the NY Public Library. It’s probably a bit over 100 years old, and shows “a wagon with signs promoting the single tax.” Among other things, the sign claims that an acre of land in downtown Chicago is worth $10 million, whereas an acre of farmland is worth $50.

If that was the relationship around 1900, it’s very different today. Good Illinois farmland today can be worth $5,000/acre, even far far beyond the reach of suburban sprawl. But downtown Chicago land has increased in value much less, perhaps to $50 million/acre.

Of course, most of the farmland in Illinois is farmed by tenants, so the impact on the farmer of the single tax would still be minimal or beneficial.

Thanks to the Georgist Journal for publishing this photo in their Spring 2007 issue (#107).

Garrison Keillor a Georgist?

In 1995 he proposed that Minnesota sell water from Lake Superior to buyers in the arid southwest. The proceeds, after expenses would be split 50-50 between the citizens of Minnesota and their state government. By Keillor’s calculation, each Minnesotan would receive $3.8 million (That’s 1995 dollars, too), which could yield a very nice perpetual income, kind of like the Alaska Permanent Fund.

Expenses would include not only construction of a canal system to transport the water, but some very skilled lawyers and lobbyists to deal with environmentalists, Wisconsin, Canada, etc.

Much later, Keillor wrote from Alaska, not of their citizens’ dividend (which amounts to about $1,000/person/year), but about the $50 head tax to be imposed on cruise ship passengers. Part of this will fund State inspectors aboard, who will monitor observance of pollution control regulations. It will probably be effective, he notes, because “government is good at providing negative incentives.”

Sounds Georgist to me. But how is Garrison going to find out that he’s a Georgist? Perhaps he will never know.

Thanks to Jim Frederiksen for the tip.

Robert Reich a Georgist?

It does appear that the former Sec’y of Labor recommends a “carbon auction,” under which polluters bid for the right to emit, and everybody shares equally in the proceeds.  If there is a need to reduce carbon emissions, this does seem to be the way Henry George would recommend it be done.

Reich rejects a carbon tax because “I can’t imagine any politician calling for higher taxes affecting the middle class, or for that matter the middle class – already squeezed by high energy prices and stagnant wages – putting up with it. ”  Kind of sounds like Jeff Smith, but  with clout.  Of course, Reich wants to share only a tiny piece of the commons, whereas Jeff wants to share all of it.

Frank Lloyd Wright on land, money, patents

Three major artificialities have been drafted and grafted by law upon all modern production; hangovers from petty customs originating in feudal circumstances. Many of these traditions have been blown up into supposed economic patterns: but all forms of rent and all illegitimate. Rent for money; rent for land; really only extrinsic forms of unearned increment; and the third artificiality is traffic in invention. A graft by way of patents is another but less obvious form of rent.

From F L Wright, The Living City. Original copyright 1958. March, 1970 New American Library edition.

More about free land

The phrase “free land” today means free residential lots available to anyone pledging to build a new home in selected communities. As an incentive to entice new residents to repopulate areas of the Great Plains, this is a new and intriguing strategy. Free land programs are available in most Great Plains states, from North Dakota to Texas.

The above is from a University of Nebraska report, which also documents the experience of three of the Kansas towns who offer free land to anyone who’d
come and build a house.

As of October 2005, when the interviews were conducted, 27 of 33 available home lots in Minneapolis[KS] had been given away, as were all 80 lots in Marquette. In Marquette, six reserved lots became available again due to construction challenges in November of 2006. More than 100 people had relocated in Marquette, including more than 30 children. Although some people came to these communities to get a free lot to build on, most found it easier to buy an existing home. In Ellsworth County 122 new residents had been brought in by the program including 55 people from out of state.

The influx of new residents also brought some added benefits, according to the interviews:

! several new businesses as well as new ideas to the community,

! an improved positive (growing) community atmosphere that inspired long-time residents, and

! an increase in the ethnic diversity of the local population.

In a sense,then, there is still free land that puts a floor under wages. However, as a practical matter, many of the very poorest would be unable to qualify for and take up residence on the free land.