Boeing and Airbus products photo by contri via flickr (cc)
Entrenched U S carrier Delta Airlines complains that their foreign competitors can buy Boeing jets cheaper than Delta can. Why? Because the federal Export-Import Bank offers loan guarantees, intended to make Boeing’s products more cost-competitive in the international marketplace, particularly against Airbus.
Of course this is a case where we might be better off allowing the “free market,” whatever that is, to set the cost of financing. Abolish the ex-im bank, let manufacturers offer subsidized financing from their own resources if they wish, and don’t worry about the “balance” of trade. But Boeing has sufficient political power that is unlikely. Perhaps some favors will be offered to Delta, who doubtless also has political friends, in order to get them to drop the suit or minimize its practical impact.
As some indicator of the likely outcome, Influence Explorer says that Delta spent $4,154,382 on lobbying during the most recent reporting period, whereas Boeing spent $24,120,000.
A nice series of threeshortarticles (h/t Gloria Picchetti) in Salon by Michael Lind, explaining the difference between an entrepreneur — who may become wealthy by providing goods and services people want — and a rentier — who seeks to become rich by exacting a toll or tax on productive work.
Lind mentions, in a positive way, the land value tax, and also notes that this isn’t a left/right issue, as labor unions and professional associations can be just as monopolistic as bankers. The negative effects of “intellectual” “property” are noted, altho Lind seems to think that those who profit from patents are “inventors.” Of course there’s no mention of Henry George, but maybe changing our name to “Institute for the Study and Extirpation of the Useless Rich” would be a helpful step.
Salon describes Michael Lind as author of Land of Promise, for which Amazon carries 15 reader reviews. Not all the reviews are positive, but the criticisms seem to focus on his style and attitude, nobody complaining that his analysis is flawed. Lind is also a “co-founder of the New America Foundation,” whose sources of funding are unclear to me but seem to include rentier George Soros.
The remedies Lind suggests are quite centralized, such as changing federal tax laws, and maintaining financial repression with the object of moving people from private savings to social programs. Not what I would propose, but what does a geoist in flyover country have to contribute to this discussion?
From C. Eugene Steuerle’s June 27, 2012 statement at http://www.urban.org/UploadedPDF/901508-Marginal-Tax-Rates-Work-and-the-Nations-Real-Tax-System.pdf
I’ve written before about the wild effects of graduated taxes and means-tested benefits which can dump low-income workers into effective tax brackets in excess of 100%. That is, once the effects on eligibility for earned income tax credit, child tax credit, medicaid, SNAP (food stamps), subsidized housing, and so forth are taken into account, an extra $1000 of income can easily cost more than that amount in increased taxes plus reduced benefits. (Worse, most low-income people don’t have professional accountants who keep track of this, and so they don’t know in advance what the effects of getting a raise, or taking some overtime, might be.)
This is hardly original with me, and most recently the Congressional Budget Office has issued a report on the subject, summarized here by Evan Soltas of Bloomberg. What can be done to fix this? Not much, conclude most writers including Soltas. We need tax revenue, we need to target aid to those with the greatest need, we can’t expect the rich to pay everything (since they have the lobbyists, lawyers and accountants to limit the taxes they pay.)
None of the writers who get attention seem to consider the citizens dividend. The basic idea is that government collects all the land rent — that is, the effective rental value of private control of natural resources — and share it with all citizens, everyone getting an equal share. It’s done on a small scale in several jurisdictions, including Alaska where each state resident gets a thousand dollars or so, each year, as a share of investments funded by mineral resources. Of course, natural resources include not only oil, gas, and ore, but also the electromagnetic spectrum, agricultural land, forests, and much of the value of land sites (except of course those which have no market value.) Suppose this rental value, or just a substantial part of it, were collected by the federal government and distributed, equally, to every U S citizen (maybe legal permanent residents should get a share also). How much would that be? Would it be enough to pretty much replace most means-tested programs? Wouldn’t that solve our problem?
Of course, arguments for collecting economic rent go far beyond fixing the screwed-up incentives of means-tested programs and graduated income taxes, (visit a Henry George School or the Henry George Institute to learn more), but let’s not forget this benefit.
And by the way, it isn’t only the poor who can face these >100% marginal rates. I wrote before about how certain Cook County homeowners with incomes in the $75,000 – $100,000 could face such rates; I don’t know whether these limits remain in effect. More broadly, it seems that affluent Americans subject to Medicare face a similar situation: As explained here, should your “modified adjusted gross income” amount to $107,001, then your Medicare cost will be $754.80 more than if your income had been only $107,000. The effective tax rate on that particular dollar is 75,480%. (Of course if you have a really alert accountant keeping track of all your financial affairs, she will alert you and find a way to avoid that extra dollar. And that accountant knows that the rates quoted above are for 2011 income, at least I think they are, and different limits will be in effect for the current year.)
Of course they are, but it’s convenient to see it illustrated as Crains Chicago Real Estate Daily explains.
The proposal seems to be for Pam Gleichman and Karl Norberg to sell their 4.9 acre parcel (the Tribune story says 3.67 acres) near McCormick Place, in pieces, for a total of $195 million, which works out to something over $900/square foot, a level which I don’t recall seeing so distant from the loop. We also learn from Crains that $90 million in TIF (real estate tax) money will be sought to help pay for these developments. And of course the entire McCormick Place complex benefits from the 1% tax which all restaurant patrons in the central portion of Chicago (as far north as Diversey and as far west as Ashland) pay, not to mention the basic urban services, such as fire protection, transit, and streets, which are funded from other taxes. We’re all paying so Gleichman and Norberg can get their $195 million. It’s only slightly comforting to realize that their venture is in bankruptcy, and the only reason we get to see these details is because they’re part of a court filing. But it seems that, if everything works out as they claim, they’ll get to keep a large portion of this money.
Just for fun, we can consider what would have happened under a land value tax. If the land was taxed at something approaching its full economic rent, it would likely already be developed pretty fully because nobody could profit by holding it underused. There would likely be no bankruptcy because nobody would have loaned money on land with a modest selling price.
What’s this? No posts for a month? Actually had several things “almost ready” to post, but meanwhile I spent an interesting three days at the National Council of State Legislators’ “Legislative Summit,” what most of us would call their annual convention.
Since about 1996, the Public Revenue Education Council (Missouri chapter of Common Ground — USA) has staffed a booth at the NCSL conference exhibit hall, alerting legislators, their staffs, and other attendees to the existence of a tax option which generates revenue while increasing, rather than discouraging, productive economic activity. Honing the message over the years (and gaining seniority which allows choice of better locations within the exhibit hall), PREC President Al Katzenberger and his colleagues may have gained some ground.
Al explains the economy to a visitor (All photos: Chuck Metalitz for the Henry George School)
Among Al’s innovations is a custom-made (and unpatented, as far as I know) three-tray scale, used to illustrate the factors of production. Land, labor, and capital (the trays) are all necessary for most production, and usually use money (the chains) to facilitate the process. Banks and other financial institutions (the arms holding the chains) may try to manipulate the system unfairly, and it’s the job of government (the central post) to keep things more or less in balance.
For the 2012 event, which concluded Aug 9, Al was assisted by Don Killoren of St. Louis, Irene Marmi of Chicago, and this blogger. Since two people are generally enough to staff the booth, each of us had time to wander the hall visiting with other exhibitors– and there were many (a list is here). Why so many? As has been said: “No one’s liberty or property is safe while the legislature is in session,” so everyone wants legislators to do, or refrain from doing, something. Some exhibitors were interesting, and might be the subject of future posts.
Of course each of us has a slightly different view of what geoists want to accomplish, but we tried to present a unified message: “If you tax jobs, retail sales, and buildings, you’re likely to get less of those. If you tax the value of land as vacant, you’ll get economic benefits and, hey, let me tell you about much nicer your community will look.”
Legislators can be a tough audience, but Al seems to hold this one’s attention
Few people might stop by a booth about public revenue, so Al and Don just call out to passers-by “Where are you from?” They reply, and Al or Don says “Oh, you could use this there.” But they’ve also learned (better than I) to just shut up and listen to each prospect, find out what their concerns are, and provide a helpful response.
Irene on duty, while Don scans for passing prospects
Thinking about next year’s NCSL conference (in Atlanta), we might want to seek a cleaner look by having fewer documents on the table. Plastic racks would be suitable for some of them. Others would be “under the counter,” or perhaps even available only on request via email. People will put their business cards in a fish bowl if a prize is offered. What prize? Maybe a $50 RSF gift certificate, along with some suggestions about what to spend it on. Use the business cards to generate an email list. Three days after the conference, everybody gets a “Thank you and call us if we can help” message. If they don’t respond, they won’t hear from us again until a week before the 2014 (Minnesota) conference, when we invite them to stop by our booth.
We need an attention-getting colorful postcard-size piece, highlighting our special web address which we’ll set up for the occasion, and perhaps a phone number. To the extent possible, the look of the documents we distribute should be modernized and made consistent. The Revenue Source is Under Our Feet seriously needs updating, and must include contacts for (not necessarily in) every state.
Across from the PREC booth was ESRI, the dominant geographic information systems software provider, who almost certainly were behind the Greenwich land value map we used to illustrate how straightforward land value assessment is. They suggested some contacts and ideas which may aid geoists in the future.
It’s all about the rent. Once you understand what it is and how it works, you’ll look for it and see it everywhere. You’ll know the fundamental cause of unemployment, low wages, economic stagnation, and poverty. The cause that makes possible most of the other corruption and theft that plague our nation.
The slogan came from a local campaign to reduce pedestrian deaths, certainly a worthy cause and one that got some funding and creative minds. But we should have thought of it first.
image credit: taken in 1990 by John Foss via Wikimedia (cc)
This article from the Guardian illustrates nicely the difference between what we want– goods (“wealth” in terms of political economy) and services– vs. money. Money is a medium of exchange, which we can use to obtain wealth and services, but in itself it really isn’t capable of satisfying our desires. The particular example here is from the town of Volos, whose railway station is pictured.
I could imagine Greece not formally dropping the Euro, but just kind of abandoning it, using local currencies, perhaps eventually united into a new Drachma. It’s not clear from the article whether their government is attempting to tax the alternative-currency transactions. The wiser course would be to tax economic rents instead of transactions, and that could be done in whichever currency is most practical.
Longtime HGS supporter Joseph Bast, head of the Heartland Institute, has a new policy brief (pdf), with a podcast overview, recommending that fans of professional “sports” own the teams thru nonprofit corporations. The only actual example of this is the Green Bay Packers, which originated as a for-profit organization but was bought out of bankruptcy by a fan-organized nonprofit. They would never leave Green Bay since the owners cannot profit by moving them. Thus the main lever used by for-profit teams to extort new stadiums and other favors would be broken.
Pointing out that teams currently extract monopoly rents from the community, Bast mentions Henry George but rejects George’s idea that natural monopolies should be municipally-owned. Of course, George never applied this concept to professional “sports,” which existed in his day but was nothing like what we see now. The closest I can think of is that George considered the idea of a publicly-subsidized theater to be so absurd, that he compared it to subsidy of various other industries to illustrate the absurdity of the latter.
So why don’t fans establish nonprofit teams? My personal theory is that most fans of professional “sports” are masochists and like to be abused. But perhaps I’m wrong. Bast suggests routes around other barriers including opposition of major leagues, high cost of setting up a team, and existing taxpayer-subsidized facilities which are controlled by existing monopolies.
Chicago Park District’s new harbor at 31st street reportedly cost $103 million and can accommodate 1000 boats. “Rates for the new harbor range from about $3,780 for a 35-foot slip to more than $10,000 for the longest slips of 70 feet and more, excluding taxes and a 25 percent nonresident surcharge.”
One could imagine that these figures might actually cover debt service, maintenance, and the economic rent of the lakefront location. But there’s no such indication in the Park District’s 2011-15 Capital Improvement Plan, which lists funding and projects, but makes little effort to tie the two together so there’s no indication of how much any project costs nor how it’s paid for. Nothing in the latest posted (2010) Comprehensive Annual Financial Report, either.
But in the process of browsing the District’s web site, I did discover that I would be violating their regulations if, without a permit, I post on this web site a photo that I took on Park District property.
The Public Building Commission has some information on their web site, including some contracts and many construction photos. Can’t wade thru all of the former, but they appear not to include any information on how the project is funded.
Back in the old days, pre-Internet, the Statistical Abstract of the United States was usually the first place I’d look for any US data that the feds were likely to collect or review. I could cite it with confidence that most readers would also have access to it, and it included source citations if more detail was needed. In the Internet age, it continued as a convenient resource, posted annually on the Census Bureau’s web site.
I had missed the news (was it even reported in the dominant media?) that the 2012 Abstract will be the last. If the federal budget must be cut, then I suppose this is one way to do it, but it seems that our rulers could have found a better way.
Apparently a guide to sources will remain, at least for the time being.
Chicago Park District’s new harbor at 31st street 