Fred Harrison now has a youtube video version of his Ricardo’s Law, which explains how a “progressive” income tax actually traps the poor and benefits the rich. Mairead Sullivan, Ben Kettlewell, Ross Ashcroft, Ben Holland, and Megan Campbell are also credited on the project.
If you only have 8 minutes to spend learning about this stuff, or as an introduction, the video is recommended.
update Feb 26: The youtube link is changed above. Also there is an alternative link.
That’s the estimate I came up with in the revised and quite enhanced version of HGS Research Note 5a. I’m using parameters estimated several years ago in a study of the Washington, DC, metropolitan area. Maybe the actual number here would be a lot more; I wish someone would do the analysis. This loss is expected to occur by 2014; further losses would follow.
If RTA really needs the funding, I estimate we could do it with a land tax that would cost the typical homeowner maybe $40/year, with renters essentially paying nothing. For $290/year, the homeowner could do away with all transit taxes, and fares too. No jobs would be lost; some would be gained.
By comparison, Chicago Metropolis 2020, in their surprisingly thoughtful study Time is Money, estimate that fully funding all the transit spending that RTA wants, plus some “smart growth” changes in land use arrangements, would add 22,307 jobs by 2020. They do not discuss how the funds would be obtained, although the study does note that a doubling of gasoline prices– which might be achieved thru taxation– would have great benefits for transit use.
Or, to look at it differently, we’ll give you $353,000 per acre of land you use. That’s what the City of Chicago is giving ” ML Realty Partners LLC” to build a “distribution center” at 401 N. Cicero. Now, all I know about this is what I read in the papers, but according to the Jan 20 Tribune article, $10.6 million in TIF money is going to “create” 75 jobs on 30 acres. This site is practically adjacent to the Green Line Cicero station. Why did nobody want to develop it before? (My guess is that it’s because the landowner was holding out for TIF money.) And how can we justify less than 3 jobs/acre on a transit-served site? This sort of thing might be suitable for Will County, not the west side of Chicago. Is there nothing more productive that can be done with this land?
Thanks again to Dan Sullivan of Saving Communities for locating Henry George’s advice on preventing excessive debt (government, corporate, individual) without constraining economic growth. George’s straightforward solution: take government out of the business of collecting debts. People could still lend and borrow money, but you can be sure lenders would be careful, relying heavily on the reliability of the borrower. As for public debts, if the government needs money for a defensive war or public improvements, let it levy taxes to collect what’s needed. The logic of this becomes clear when one reflects that in wartime everyone should sacrifice, the rich no less in proportion to their assets than the rest, and that public improvements have the effect of increasing land values and therefore generate their own financing.
The article Sullivan quotes is from The Standard, Feb 11, 1888, and apparently isn’t posted in its entirety anywhere, so I reproduce Sullivan’s extensive extract below. Continue reading Ending "a sea of indebtedness"
Many years ago, I wrote a memo called “Vacant Land is Undertaxed.” The title says it all, but it’s still true today.
A new Civic Federation report shows vacant land in Chicago assessed at just 4.81% of market value– it’s supposed to be assessed at 22%. On this basis, vacant land in Chicago is worth $5.3 billion, and to assess (and tax) it properly would bring in over $50 million/year. If the County Board were to revise its classification ordinance to assess vacant land at 40% of value (to go any higher would have other repercussions), another $40 million or more would be recovered.
In the suburbs, the underassessment is less severe, but vacant land there is estimated to be worth over $4.6 billion, so some additional revenue could be realized.
And or course, no matter how high the taxes on vacant land are raised, nobody’s going to move it away or decide not to use it because of the tax on it.
A letter to this effect was sent to the Tribune this afternoon. I am sure they will instantly recognize it as a perceptive and cogent statement, and will publish it under a prominent headline. Uh, right?
UPDATE Nov 6: The Tribune did publish the letter, though not formatted quite as I wished. Two days later they also included on their web page (but not in print) my suggestion (about halfway down here) for transit funding from land value.
Our friends at the Civic Federation have published a memo on Selected Consumer Taxes in the City of Chicago. Showing a total of 29 different taxes, it shows that the sales tax on general merchandise purchases in Chicago is now 9%:
In restaurants we pay an additional 1.25%, of which 1% goes to McCormick Place and the remainder to the City.
Something I didn’t know about is that taxi medallions are reportedly taxed $78/month by the City. Anyone know when this started? If raised to something like $350 or $400/month, it wouldn’t affect the earnings of cabbies, except those who own medallions, and might bring in $25 million for the City.
The Lincoln Institute says they’ve started a program to have George Washington University build a national database of real estate tax information. There’s a bit of information on GWU’s site, indicating that
a data collection team is compiling and classifying a wide range of material that characterizes property tax structures and processes in all fifty states to produce a “Compendium of State Property Tax Regimes.” The compendium will be available as a data set, and researchers will be able to perform simple queries through an interactive web site.
Lincoln’s 2007-8 program document is behind here but you’ll need to register, or use bugmenot.
The previous post notes that the value of taxable land in the Chicago metro area exceeds $1 trillion. Therefore, if we want to get an extra $200 million for transit, we can do it with a land tax rate of 0.02%, meaning $40/year for the owner of a $200,000 lot. Another option is to raise $2 billion/year, use some for transit and some for roads and parking, so that people who don’t ride transit will still see direct benefit. This would cost our typical homeowner $400/year, likely deductible from federal taxable income and partly credited on state income tax. Renters, at least in theory, will pay none of this tax; it will fall on owners of the land on which their rented quarters are located.
A proper analysis of this would compile current transit funding sources and uses, and show how funds will be freed up, and taxpayers unburdened. In addition, it would use information compiled by Richard W. England, from a study by others of Washington, DC, which estimates a drop in job growth of 2.08% for every 1 percentage point increase in the sales tax rate. Applied to the Chicago area, this means that the existing and proposed transit sales tax will reduce, by 9,422, the number of jobs which would otherwise be in the metropolitan area ten years from now. [These figures are calculated in a simple spreadsheet which I would post here, if I could figure out how to post it, and will send to anyone interested.]
Today’s Tribune tells of two more TIF subsidies, one to keep an employer in Chicago and another to build hotel and office space.
Navteq will get $5 million that would otherwise go to schools and other public services, to retain 550 jobs (a total of 900 including expected growth) in downtown Chicago. Navteq CEO Judson Green implied that California would be a more efficient location for the company, but that $5 million persuaded him to remain in Chicago. btw, he is obligated to donate $50,000 of that to “non-profit organizations.” So I wonder about two things:
(1) Wouldn’t the 230,000 square feet that Navteq is taking at 100 N. Riverside have been rented to some other employer, if not Navteq? And if it would’ve remained vacant, wouldn’t that have eased, at least a little, the peak-hour load on the CTA and Metra?
(2) If in fact California is a better location, will Navteq execs and customers end up flying back and forth, adding to O’Hare congestion and greenhouse gas?
Maybe RM Daley answered the question at his press conference to announce the deal. If he hadn’t used our tax money to persuade Navteq to stay in the City, “there’d be a big headline, ‘Why does Mayor Daley let those companies move?’ “ And I guess he’s right, at least in some cases. Apparently there’s no headline, “Why does Mayor Daley waste all this money?”
The other TIF subsidy is $58.8 million, covering about 1/8th the cost of renovating/expanding the space atop Union Station.
The new Union Station will have an additional 14 stories on top of the existing eight stories. It will house a 300-room hotel, likely to be operated by Hilton Hotels Corp.; 85,000 square feet of retail space; 200 condominiums; and 600,000 square feet of office space.
The office anchor tenant, the American Medical Association, has agreed to lease 275,000 square feet, said a Jones Lang LaSalle spokeswoman.
This project was first proposed over a decade ago. Maybe it’s not viable on its own, without the subsidy, in which case one wonders why it is needed if no one who will use it is willing to pay for it. Or perhaps market conditions have improved and it’s viable now, in which case one wonders why the developer should be given what amounts to about a dozen years worth of taxes on a thousand Chicago bungalows.
Several weeks ago, Ben Joravsky(?) mentioned that Mike Quigley had done a report on TIF’s, their impacts and misuse. Having finally read it, I find it’s a good, clear description of how TIF’s work in Chicago and Cook County, and I recommend it for those who want a good understanding of this. There are also recommendations for improving the reporting, so the public (if it cares, and/or is aided by journalists) could understand what TIF’s are actually doing.
Unfortunately, Quigley believes that TIF’s are a legitimate development tool, just that they’ve been used inappropriately. Why local governments cannot simply collect the taxes and build the infrastructure, without designating special zones, is not explained.