If global warming is in fact a problem, and if it can be controlled by reducing carbon emissions, then Georgists point out that “cap & trade” is a lousy way to accomplish this. Yoram Bauman says that a cap becomes effectively a floor, and that British Columbia actually has a revenue-neutral carbon tax.
Even if there’s no need to reduce carbon emissions, I don’t see how a carbon tax could be worse than taxes on retail sales and earned income.
As a result of high taxes on cigarettes, UIC economist David Merriman estimates that “75 percent of cigarettes smoked in Chicago come from packs that don’t bear city tax stamps.” Many, of course, also lack county and state stamps. And according to the Tribune.
In 2006, city revenues from cigarette taxes came in at a little less than $32 million. By 2008, they had declined to about $25 million. This year, they’re projected to drop again.
Several times each year I give a little talk at HGS about “What the Rich Know.” And I always point out that the richest man in Chicago, Sam Zell, got that way not so much from smart investments in real estate and other monopolies, but more because he is extremely clever in taking advantage of income tax laws and regulations. (And that’s why increasing tax rates on high incomes doesn’t really bother the rich much, nor does it raise much revenue, except for tax lawyers.)
We see another example today, with a Sun-Times report that tax expert Robert Willens suggests that IRS will eventually examine the (pending) “sale” of the Cubs, which has been structured to avoid $300 million in capital gains tax that would otherwise be due.
Update Sept 27 2009: Kevin Horrigan suggests that, if Zell doesn’t want to pay the tax, America’s taxpayers should be entitled to a share in the team.
For those who say government can’t run anything right, I say, compared to what? Not winning a World Series for 101 years?
Thanks to Al Katzenberger of Public Revenue Education Council/ Common Ground USA for the tip.
LAND VALUE TAXATION: THEORY, EVIDENCE, AND PRACTICE
edited by Richard F. Dye and Richard W. England
Lincoln Institute of Land Policy, 2009
“[E]conomists agree on a great many things, but tend only to discuss the things about which they disagree,” writes Lincoln Institute (of Land Policy) chief Gregory K. Ingram in the Foreword to this new book. And if one is disinclined to conspiracy theory, that might be the reason that the Single Tax and its various derivations don’t get much attention in the academic world.
A book about experience with the Single Tax would, of course, be a short one, since we don’t have any experience of a modern economy in which the only tax is one that collects virtually all the land rent. Rather, this work examines some cases in which land has been taxed at a higher percentage of value than buildings and other improvements.
From Reihan Salam in The Atlantic.
There’s a certain compelling logic to the Single Tax that stands the test of time. When you tax income, aren’t you punishing people for working hard? But when you tax an asset like land, you’re simply encouraging the most valuable use of that land. In the years since George faded from the scene, a number of economists, from Milton Friedman to Paul Romer, have found virtue in the Single Tax, not least because it creates the right incentives for government.
Thanks to Vince Tolve for the tip.
Danish Georgist Ole Lefmann recently circulated a paper looking at this question from, of course, a Georgist viewpoint. There’s a lot about Georgist theory (I guess Georgists can skip that part) and a lot about Danish history (likewise for Danes, I suppose). Lefmann notes the Danish traditions of political and legal equality, absence of an empire and no “resource curse.” Historically Denmark had a considerable land tax, but in more recent times this has declined to, he says, less than 2% of value. (Not trivial, I say, even 1% is a significant cost to the speculator.)
But Danes pay high taxes, and these are largely taxes on labor, so how can the Danes be happy? The answer, he says, is all taxes reduce rent, so part of any tax on labor is really a tax on rent. And the proceeds are used to provide social services, so Danes are happy.
It would of course be less complicated and much cheaper for the Government and the taxpayers to collect the rent of land directly from the landowners than by collecting the same amount indirectly via many other sources. The major problem in that matter is that so many of the Danish voters have got the idea that they don’t like land-value taxation and prefer many other taxes
I claim no knowledge of the Danish tax system, but I would guess that higher-income folks do pay a somewhat greater percentage of their incomes than lower-income ones, and the former are more likely collecting rent than the latter. If so, then on that basis I would conclude that Denmark is collecting some of the rent. Then we might also assume that, in Denmark, public expenditures are primarily for the benefit of the public. Under those circumstances, I could see high taxes primarily on labor income as an awkward but not entirely ineffective way to aid happiness. It would only look stupid if compared to a more intelligent tax regime elsewhere. Where might that be?
Who knew? Not me, but I don’t pay as much attention as I should. Effective with the “2009 tax year” Cook County is moving toward just two assessment classes: 10% and 25%. That means that residential and vacant are now supposed to be assessed the same, which is probably good since Assessor Houlihan just couldn’t seem to accept that, under the old system, vacant was supposed to be assessed at a higher percentage of value than owner occupied 1-6 unit residential. This change will reduce some tax bills and raise others, but total revenue is likely unaffected due to the multiplier which the Illinois Department of Revenue will calculate.
I can’t find any mention of this in the daily newspapers, although separately there seems to be a project to reassess all parcels in the county, instead of just the 1/3 done in a normal year. (Is this legal? Probably it doesn’t matter.) See Break for suburban homes? – ‘This is not a gimmick,’ Houlihan says, but taxes could still increase Chicago Sun Times May 12 ’09.
Just in case anybody thinks they understand how assessments work.
A new report from the University of Minnesota looks at ways of financing transportation projects by capturing part of the benefit they provide. Land value tax is only one of the eight options (Land Value Tax, Tax Increment Financing, Special Assessments, Transportation Utility Fees, Development Impact Fees, Negotiated Exactions, Joint Development, Air Rights) considered.
A quick skim indicates that on the whole it’s pretty good, though it seems to overestimate the difficulty of assessing land value, and repeats the error of some previous studies which conflates owners of land occupied by low income people with the low income people themselves. (More likely, low income people are renters living on land owned by someone else, and when taxes on such land increase the owners can’t pass the cost on to their tenants.)
There is also mention of a study, new to me, that seems to document an anti-sprawl benefit from a land tax. The study unfortunately is secured by ssrn; I shall have to try to find it elsewhere.
This study was requested and funded by the Minnesota legislature.
Hat tip to lvtfan.
With governments at all levels in fiscal distress, I just want to describe a solution which would be effective, would save money for most taxpayers, and would encourage productive enterprise. Georgists will already be familiar with everything below. Continue reading Solution for governments’ budget woes
Last week, the Tribune published Cook County Assessor James Houlihan’s fiscal reform proposal. He wants to restructure the state sales tax and the state income tax, claiming that this would not only balance the state budget but also provide more funds to localities, theoretically allowing them to reduce real estate taxes.
But Mr. Assessor, how about the assessment and extension of real estate taxes. You know, the stuff you do? Can’t you improve that? Maybe you could start by assessing vacant land properly? And making sure that land value is fully included in all assessments? That’s not going to discourage any economic activity.
Then maybe we could ask the solons of the Cook County Board to change the property classification system, assessing improvements at only 40% of the ratio applied to land value? They could do this under existing law. Maybe they could even exempt improvements entirely? And, while we’re asking the Illinois General Assembly to reform things, why not eliminate the sales and income taxes, by resurrecting the state sales tax?
Regular readers of this blog, and Henry George School students, know why this is a good idea. Evidently Assessor Houlihan doesn’t want us to even think about it.