Somebody please tell me whether the Tribune has any human editors any more.
Public Revenue Education Council helps state officials learn about smart tax policies
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.
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.”
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.
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.
How China and Wal-Mart Help the Poor to Pay more Rent
Good interview last week on EconTalk, with Enrico Moretti who has a new book, The New Geography of Jobs. So
me places are growing and innovating, some stagnating and declining. Which one would you rather live in? Enrico seems to prefer the innovative one, where workers are more educated (at least in the credential sense), jobs are available, and even if you’re working in a local service job — barber, dentist, whatever — your wage will be higher. Host Russ Roberts keeps Moretti pretty much honest, sure wages will be higher but so will — they don’t dare use the phrase — economic rent. And so if you’re a homeowner, you benefit (assuming of course that you bought before the innovative, growing local economy was widely recognized), while if you’re a renter, perhaps not.
From the interview, it appears that the book includes some analysis of how working people benefit from low-cost imports and big-box stores. I don’t doubt it, if the working person can afford to support an auto-centric way of life then these developments do benefit her/his standard of living.
Moretti suggests that places will be better off if their workforce has more formal education. Roberts is at his best here, pointing out that, sure, college professors would say that. Moretti does seem to recognize that, as more people get credentialed (“skilled”), this will tend to reduce the earnings gap between the unskilled and the specialised. He does not say that it does so by reducing earnings of the skilled, but we can figure that out.
The most irritating part, for anyone who understands political economy, is the assertion that wages for service workers are higher in innovative, growing regions because service workers are more productive there. I don’t know if they’re more productive, maybe a dentist fixing the teeth of $100,000 engineers is more productive than one who does the same for $25,000 laborers, I have no idea. But regardless, wages aren’t determined by productivity. They’re determined by the alternatives: If the employer can get competent labor for less, she almost certainly will do so, over time if not right away. And if the worker can find a job that, all things considered, is more satisfactory, why wouldn’t he take it?
Why isn’t this the geoists’ slogan?
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.
Is this why CTA can’t coordinate?
The failure of the Chicago Transit Authority to coordinate its services is evident to regular riders. I have long attributed this to misplaced priorities, which seek to serve the interests of contractors, politicians, and certain employees, rather than passengers or the public in general.
But this picture implies that I’m wrong. CTA do a pretty poor job of facilitating convenient transfer from Yellow and Purple Line trains to Red Line trains at Howard Street, but this may have nothing to do with priorities or competence. Rather, the problem seems to be that Track 1 is in a different time zone from Track 2, so if passengers actually were able to transfer between trains on these two tracks they’d enter some sort of time warp, perhaps endangering their very existence and ability to pay taxes. Safety has always been CTA’s number one priority. (In the photo, both tracks are occupied by Red Line trains, so no transferring takes place. The practice of putting Red Line trains on both southbound tracks enables CTA to hold Yellow and Purple Line trains outside the station, preventing the dangerous practice of passengers transferring directly.)
Hydraulic economic model– the Phillips Machine
Yes, you can build an economic model without computers. In fact, around 1950 New Zealander Bill Phillips did, modelling economic flows not with electrons, but with water. He built a total of 14 of these “MONIACs”, one of which has been restored by Allan McRobie and can be seen in operation in this video. McRobie is a hydraulic engineer, not an economist; Phillips at first was neither, nor was he a plumber, but rather a journeyman electrician and polymath (eventually an economist at the London School of Economics). McRobie describes the machine’s operation in some detail. Like many economic models it fails to consider the role of land, but it does have a bucket representing optimism (perhaps Keynes’ “animal spirits”).
Phillips’ original design had an additional feature, a high-voltage connection that could be used to execute meddling politicians or bankers (see the video from about 17 to 19 minutes), but that has been removed in the restoration.
Like Henry George, Phillips smoked and died young, in 1975 .
Economic divide is geographic, too
When I see the same theme coming from two different sources, I think there’s a trend (tho maybe it just means I wasn’t paying attention). And so we heard Meredith Whitney a few days back describing the developing divide of local and state governments, between those that are solvent (and can attract mobile, affluent residents and investors) and those spiralling down the debt hole. Now Al Lewis looks at it from the retail side– nobody wants to invest where the mundanes live, but as areas like Silicon Valley and Washington continue to prosper retail facilities are renewed and enlarged.
In a democracy of educated, thinking citizens, any state finding itself on the wrong side of this divide could reverse its decline simply by removing all taxes on wages, capital, purchases, and transactions in general, substituting a very heavy tax on land value (which ideally would include the value of mortgages on land, to be paid by the mortgage lender rather than the borrower). Unfortunately, the “investors” who control much of the land in declining areas have the resources to fool the electorate, or can work directly with elected officials to prevent effective reform.
Another reason passengers get delayed
It’s not just CTA’s suboptimal management that causes passengers to be delayed. Fire yesterday just west of the Red Line near Altgeld, trains blocked for something like three hours. The train on Track 4 pulled back to Fullerton shortly after this photo.
After about twenty minutes it was clear service wouldn’t resume soon. A bus shuttle was promised, but downstairs there was just one empty bus labeled “not in service.” Even if buses were available, closure of Sheffield meant traffic was even more of a mess than usual.
So, a nice walk to Belmont, I do wonder how the CA there would have responded to a demand for free admission but as it happened I had a valid transfer and no CA was in sight anyway, just a lot of folks waiting for that mythical bus.
Can’t really blame CTA for this one, doubtless there’s plenty of blame for other agencies but I’m not privy to the details.
Why do cab medallions go up?
Last time we looked, Chicago taxi medallions were going for slightly over $250,000, far higher than a few years earlier. In the subsequent 17 months, they’ve continued their rise, and here are the most recent transactions reported on the City’s web site:
4/27/12 6601 $325,000
4/27/12 5594 $345,000
4/30/12 6182 $348,000
5/3/12 1839 $360,000
5/4/12 2297 $370,000
Now, I do not follow taxi matters in great detail, as I am not of the economic class which can regularly use cabs. But it’s hard to believe that, in less than two years, the economic value of the privilege of operating a taxi has increased by anything like 50%.
The best explanation, I think, came from a driver who styles himself Samuel Langhorne Insull. He explained that medallions aren’t used by taxi passengers, but by taxi drivers. And who are the taxi drivers? For the most part, they’re people unable to get work in their chosen or more lucrative professions, who drive a cab for survival. And are there more of those people nowadays, or fewer?
That makes sense as the main cause. Of course, additional pressures are the general levitation of financial asset prices due to the FRB’s zero-interest-rate policy, and perhaps anticipation of future increases in value.
Planned office tower may take double subsidy
Two or three developers (depending on which source you read) plan a new 45-story, 900K sq ft, $300 million office tower at 444 W Lake Street. In the world most of us were born into, this would mean they’d purchase the site, continue to pay taxes on it, and on the building when constructed. Thus the prior landowner would benefit from the transit and other infrastructure that we all provide, some part of this cost being offset by taxes resulting from the project.
This particular building, tho, may be a special case, to be built on air rights over the north approach to Union Station, tracks owned by either Metra or Amtrak. So public transportation would benefit, right? It doesn’t appear so, because, I think pre-Amtrak, the old Chicago Union Station Co. sold off the air rights. The Sun-Times says Larry Levy owns the “site,” presumably including the air rights.
Still, the building will yield taxes which help the comunity pay, right? Not in today’s Chicago. Blair Kamin says we’ll pay $29 million in real estate tax money to the developer, to build a park. A commenter elsewhere suggests it might be $40 million. Whichever, of course, that’s on top of all the subsidies we pay to provide transit service and maintain infrastructure without which this building would be infeasible.
The Tribune helpfully notes that the project “is expected to generate … 3,400 permanent office jobs.” Apparently those office jobs will be created to fill the building and would not otherwise exist in Chicago. The details of this mechanism are beyond me.