Presidential candidate endorses Georgist reform– sort of

The present adjustment of Henry George’s celebrated land tax could also be considered.

From Ralph Nader’s position on taxation.  Unfortunately it’s so far down in the document that even folks who read the position won’t likely notice it.  And I don’t quite know what “present adjustment” means.  Earlier in the text he does seek to replace taxes on “work and consumer essentials” with taxes on “the clearly addictive industries (alcohol and tobacco), pollution, speculation, gambling, extreme luxuries…[and] [t]iny taxes (a fraction of the conventional retail sales percentage) on stock, bond, and derivative transactions…”  Can’t say I agree with all of this, but at least there is some recognition that taxing work is a bad thing, and that Henry George might have something to contribute to today’s tax debates.  Which, as far as I know, puts him ahead of the other candidates.

700-bank solution isn't better than nothing

Bob Matter’s thoughtful comments need a response, and I can’t figure out how to properly format one without doing a new post, so here it is.

1. Not enough to time to implement a plan of such scope.

There’s enough time to price and purchase opaque derivative securities but not to open 700 straightforward banks?  There are so many out-of-work bank staff– and more to come.  I agree that this is a considerable task, but there are lots of people who know how to do it, and would have started their own banks already if they could raise the capital.

2. Too much added expense. 700 more buildings to rent, heat, light, and maintain, 700 sets of phone lines to pay for, computers, personnel, etc. etc.

We have a banking infrastructure in place now. There is plenty of vacant commercial space pretty much throughout the country. Of course there will be a cost, but each bank is a billion-dollar institution before they even take a deposit; they could spend 1/10th of 1% for physical facilities and startup staff.

3. Even this plan would ultimately lead to failure. The core problem of allowing private ownership of real property needs to be addressed. Until that time we will just keep repeating the boom-bust cycle. Interested parties can read the solution to today’s financial “crisis” in _Progress and Poverty_ by Henry George.

Henry George explains the root cause of economic meltdowns, and they will not be avoided until something like his proposal is put into effect. If he were here today, what would he propose as a way out of this depression?
I claim only that my proposal is far better than what the authorities propose.  I don’t claim that it is better than doing nothing, which would result in considerable inconvenience but probably a quicker recovery than what we’ll get.

What’s really encouraging now is how much opposition is appearing to the whole idea of any bailout.  I wish that meant it was unlikely to happen.

Unbroken record on overtaxing those who use land…

…and undertaxing those who just sit on land, waiting for its value to rise.

The 2006 data are now published, and once again the Cook County Assessor has overassessed houses (and the lots they occupy) in Chicago relative to vacant land.  As in the previous year, data from actual sales show that, as a percentage of  sales price, assessments on houses (including land) average 50% higher than assessments on vacant land. This is the reverse of the legal requirement, under which real estate which includes houses is supposed to be assessed at a 1/3 lower percentage of value than vacant land.

This amounts to is a further penalty on homeowners (and owners of condo’s, and 2-4 flats, too), as owners of vacant land aren’t carrying their legal (let alone fair) share of the tax burden.

Is Cook County uniquely corrupt or incompetent in this regard? Other Illinois counties do not even pretend to assess residential parcels at a lower percentage of value than vacant parcels.  Rather, they are obligated to assess everything at the same percentage of value.   In most cases where data are reported, however,  the assessment as a percentage of sales price is considerably lower for vacant parcels than for improved real estate.

Source: Data compiled by the Illinois Department of Revenue, which can be seen here (look at the “ratio” links under “property tax.”

Nobody understands the income tax

That’s what Albert Einstein is reputed to have said, tho I’ve never found it documented.  He might have meant that nobody understands the logic of a tax system that penalizes productivity and “put[s] a premium upon unscrupulousness and a tax upon conscience.” More likely he meant that no one understands how to calculate it.  A recent prominent example could be Charles Rangel, who maybe really didn’t understand that he had to pay taxes on the income from renting his Dominican villa.

But today’s a twofer, because we also have a report that “[s]ome of the country’s biggest investment banks and brokerage firms…marketed allegedly abusive transactions that helped foreign hedge-fund investors avoid billions of dollars in U. S. taxes…”  The big news isn’t that they cheated, but that they got caught. I bet they’ll be a lot more careful in the future.

The income tax is inherently difficult to administer.  Many very smart people spend their working hours figuring out ways to avoid taxes.  Other smart people spend their working hours figuring out how to eliminate the ways discovered by the first group of smart people. (Later those in the second group join the first group, whose work is more lucrative.)

Meanwhile, we ordinary taxpayers have to deal with more and more complexities, most inserted by the second group in a futile attempt to stop the first group.

Fairness in school funding

The Reader’s Ben Joravsky is one of many in the media making a big hoopla about how Chicago Public Schools spend a lot less per pupil than New Trier High School does ($10,049 vs. $20,811, according to Joravsky).  Leaving aside the question of whether more money results in better education, some basic facts seem to be getting lost here.

(1) Comparing Chicago’s k-12 district to New Trier’s high school district isn’t meaningful. High schools always spend more than elementary schools, per pupil. I’m not going to try to explain why, tho it seems high school teachers are paid better than elementary school teachers. and maybe more specialized equipment and smaller classes are needed.

(2) Compared to most other districts, Chicago is wealthy. Since advocates say the main reason for the disparities is that some districts have a bigger tax base (more assessed value of real estate per student) than others, we’d think that Chicago’s tax base must be pretty poor. Sure, New Trier’s tax base is more than seven times as much, per student, as Chicago’s. That leaves plenty for them to share with the elementary feeder districts.

But how does Chicago compare to the 394 other K-12 districts in Illinois? Chicago’s $165,380 per student is higher than 92% of the other K-12 districts. And that’s even after allowing for the scandalous TIF extractions that have Joravsky rightfully concerned. (Check my work with the figures from here. Look on the left side under “file type” and download the xls spreadsheet.) Most of the K-12 districts have a tax base of less than $100,000/student.

(3) Disparities of local tax base can be remedied without raising income or sales taxes. If for some reason it’s necessary to increase state funding for local schools, that can be done without raising the income tax or sales tax. Wealthier districts could be required to “donate” part of their revenues to poor districts. Or the statewide real estate tax can be resurrected. Ideally, it would exclude improvements from the tax base.

GAO on Funding Infrastructure

No great surprises in the new Gov’t Accountability Office report on: PHYSICAL INFRASTRUCTURE  Challenges and Investment Options for the Nation’s Infrastructure.  (Summary, full report).  Roads, bridges, dams, railroads, airports etc are decaying and not keeping up with “demand,” and existing funding methods are proving inadequate.   Is there a cheaper way to meet the needs? The report does not say.  Is it worth spending what it costs to update the facilities? Not discussed. And perhaps most importantly, is there a way that the owners of land benefiting from infrastructure improvements could be made to pay for them?  Well, one sentence recognizes some approximation of the possibility:

A variety of taxes have been and could be used to fund the nation’s infrastructure, including excise, sales, property, and income taxes. (p. 15)

That’s all.

Racism and land value taxation

Prosper Australia exec Gavin Putland has written an insightful analysis (“Still on the Mountaintop”) of how a policy of taxing productive activity almost guarantees, under American conditions, that blacks will suffer economic discrimination and be overrepresented among the poor and unemployed. The link is thru NAIRU, which requires a substantial level of unemployment in order to prevent ruinous inflation.

“full employment” means enough unemployment to cause enough wage restraint to give stable inflation. So we’re living in a system of enforced failure. A percentage of people have to be unemployed, and therefore, at the boundaries of unemployment, another percentage of people have to be underemployed or intermittently employed or precariously employed. In other words, the economy is being run in such a way that a certain percentage of people have to be losers.

He explains what seem logical reasons why Africian Americans, rather than other minorities or the entire labour force, bear this burden. The solution is to tax “land-like assets” instead of “house-like assets” and the work that goes to produce them, resulting in increased employment opportunities with less inflation, among other benefits. The piece includes detailed explanation of why even landowners will be better off under this reform.

Even experienced Georgists will benefit from reading Putland’s accessible explanation.

NAHB report endorses Land Value Tax

A new report prepared by a consultant for the National Association of Homebuilders reviews dozens of strategies which have been proposed or used to promote affordable housing.  It points out that an increased tax rate on land values, balanced with decreased taxation of improvements, reduces real estate taxes for most homeowners, while encouraging owners of vacant or underused land to get their land developed, often increasing the supply of housing.

The report also notes that it costs virtually nothing to tax land at a higher rate than improvements.  Examples cited include Harrisburg and Allentown, PA.  Information is from Josh Vincent of the Center for the Study of Economics.

In  Illinois, the Cook County Board could pursue a similar strategy using existing authority to tax land and improvements as two different classes of real estate.  As previously discussed here, the Assessor could take a big step in this direction by just valuing vacant land as prescribed by existing laws and ordinances.