Speculators pay > $250,000 for Chicago taxi medallions

Chicago Dispatcher reports that the City of Chicago has auctioned another 50 taxi medallions.  Ten of these were reserved for working cabbies and went for $150,599 to $180,101. Of the remaining 40, half were bought by Paul Widmarck for $259,999 each, and the other half by Leonid Sorkin for prices ranging from $252,800 to $254,700.   I assume that the total proceeds, something under $12 million, will be used to help plug the City’s current budget deficit.  I suppose that’s better than giving medallions away, but a policy of collecting annually the rental value of a medallion would provide a continuing income stream to the City and prevent speculation.

The ten owner-operator medallions “are designated, and must remain, Owner/Operator Medallions.”  It will be interesting to see how this is enforced over the years.

The speculative prices over $250,000 compare to past sales which, to my knowledge, have never exceeded $200,000.  Shortly before the sale, Chicago Dispatcher provided a graph of medallion price trends.  Certainly looks like a speculative bubble to me.  But you probably should ignore me.  Had I had been prescient enough to know what would happen to medallion prices, I would have bought a couple dozen (on credit) five years ago.

Income tax rates don’t matter

Lots of discussion lately about income tax rates, pointing out that individuals reporting high incomes once were subject to marginal federal rates in excess of 90%, whereas today that rate never exceeds 35%.  And corporate incomes face federal tax rates of 39.3%, higher than most other countries. Various ignorant or deceptive interests use these figures to make all kinds of arguments, such as that America’s rich are undertaxed, or American corporations are overtaxed.

But the secret, that all lobbyists know, is that income tax rates don’t much matter.  When wealthy Americans were subject to 90% taxes, they didn’t really have to pay them.  Instead, accountants and lawyers and various other shysters put together all kinds of partnerships, trusts, and other mostly imaginary constructs, which were used to legally hide or redefine income into something else.  It was a bother and an expense, but way cheaper than paying taxes.

As for corporations, they have all kinds of manipulations available to reduce their taxes, as I discussed two months ago.  (If individuals figured their taxable income the way that corporations do, we could deduct all our expenses for food, clothing, medical treatment, and practically everything else).  If a few corporations appear to pay taxes in excess of the federal rate, it is due to state income taxes, local real estate taxes, other nonincome taxes, or special circumstances.

What brings all this to mind is this post, which provides two nice examples to illustrate my point.  Read them if you have the patience, but the basic point is that corporations are able to entice many very intelligent, experienced people to devise ways to avoid taxes that legislators intend (or at least pretend to intend) to impose.  They are opposed by many very intelligent, somewhat less experienced (and less well-compensated) people employed by IRS and other agencies, many of whom hope in the future to be employed by the corporations.  The net result of taxing incomes, especially corporate incomes, is that many of the most intelligent and creative people, who might be providing goods or services that people need or want, are instead playing word-games with each other.

I would appreciate if someone would explain to me how a land value tax could possibly waste 1/10th of the brainpower absorbed by this useless, destructive system.

Real estate can help pay for transit

Haven’t posted much lately; busy with other things, including trying to clear off my desk.  In the process of which I found some notes of interest

How do you fund transit in the “most liveable city in the world?” Vancouver uses the real estate tax to cover about 35% of its operating shortfall (net of fares).  Fuel tax covers an almost equal amount (See this pdf). One can imagine how well Chicago’s transit system could run if funded this way, assuming also that it was competently planned and managed.

Unfortunately, Vancouver fails to fund capital costs in this way, relying instead on what Canadians call “senior governments,” meaning provincial and federal funds.  Probably that has something to do with the continuing real estate bubble in the area.

I also found notes I took at a conference in July concerning Japanese high speed rail services.  Japan is said to be the only country with privately-owned high speed passenger rail.  How is it funded? Hint: JR-East, one of the big operators of high speed trains, gets 32% of its gross revenue (see this pdf) from real estate it owns, and intends to grow this to 40 by collecting more of the value that good transport gives to real estate.

Is waste paper our major export?

There is a meme floating around the Internet (for example, here):

Do you know what our biggest export is today?  Waste paper.

and

The United States has lost a total of about 5.5 million manufacturing jobs since October 2000.

The former assertion seems based on 2007 data reported here, which indicates (without giving a specific figure) that waste paper fills more shipping containers leaving the U S than any other product.  A big volume, surely, but is it our largest export, either by dollar value or physical volume?

Take a look at the U S Statistical Abstract, 2010 edition, table 1272 (download the pdf for the international trade section here).  Latest data shown is for 2008.  Total value of “pulp and waste paper” exported: $7.744 billion.  This is less than 1% of total exports ($1287.442 trillion).  A few larger figures are Coal ($8.196 billion), Vehicles ($98.871 billion), “Television, VCR, etc” ($24.379 billion).  There are eight different categories of chemicals, five of which each exceed $7.744 billion.  And $115.248 billion of “agricultural commodities,” including Corn ($13.931 billion) and “Vegetables and fruits” ($14.040 billion).

I don’t have data on physical volume, but many of the products I mentioned above typically do not travel in shipping containers.  In fact, one reason for export of waste paper might be that many containers would otherwise have to return empty to Asian ports.

As for the loss of manufacturing jobs, certainly there has been a decline, largely because manufacturing workers have become more productive.  The Statistical Abstract only shows manufacturing data back to 2000, but during the period 2000-2008 the constant-dollar manufacturing GDP increased by over 10%, just slightly more than population growth.

I won’t deny that there are serious problems with the U S economy, and I won’t deny that the net outflow of dollars (largely due to petroleum consumption and “defense” expenditures) is unsustainable.  It would be a good thing to remove obstacles which hinder American labor from producing in America, such as taxes on production and encouragement of nonproductive speculation.  A more balanced flow of trade would likely be a byproduct. The more important result would be higher incomes and a better standard of living for working people.

Free land still available

It’s been over three years since I blogged about free land available to anyone who wants to use it, and now CNBC has an article (more conveniently accessible via Yahoo, but with fewer pictures) about 7 Towns Where Land is Free.  Each place has some requirements, basically that you must build something and you must conform to local codes.  In most places you need not pay for the land but of course you’ll be liable for future taxes.  Even if we go back to the Homestead Act, you had to eventually pay ($1.25/acre) for and use the land you claimed.

Of course, there are probably thousands of towns in America where $1,000 will get you a decent lot, and if you can’t afford $1,000 you may not be able to build anything anyway.

Thinking in terms of Progress & Poverty, such free or cheap lands are, for practical purposes, approximately at the margin of production.  As the towns grow, one could expect the land value to increase; however it is  unlikely that any of these towns will grow substantially any time soon.

Does poverty cause conservatism?

A University of Tennessee study, reported at phys.org among other places, finds that, when incomes are more concentrated, people are more likely to say they oppose governmental redistribution of income.  This decidedly includes low-income people.  Why would low-income people oppose redistribution of income?

It might be because they’re too busy with survival to pay much attention to the question.  Or, having been screwed by the powers-that-be, they assume any redistribution will be away from them, toward those already in control.  Might even be that they are “free-market” types who expect to make a better living in the absence of government interference. I really have no idea.

I’ve only seen the news report, the actual paper seems to be behind a paywall, so there’s a lot of detail left unspecified. Such as whether “redistribution” is defined to include the current pattern of redistribution from those who work to  those who manipulate, what specific surveys were analyzed, and how the matter of sequence (Does public support for redistribution cause redistributive programs to be expanded?) was handled.

Patriotism of people who didn’t hang up

The headline on the Rasmussen report is 41% Now Say “Buying American” Is Top Factor When Purchasing a Car. If this means that a very large proportion of auto buyers prefer to buy US-built even if it might not be the best deal,  it would indicate that many people are patriotic and willing to sacrifice for their country. That would be significant for any reformer, showing that many people are seriously committed to national welfare, and we need only find a way to connect with them.

But when we look at the details of how the survey was done, we find that:

  • It uses robocall technology, and covers only those who do not automatically hang up when receiving a robocall.  (Pollsters say they make adjustments for age, race, gender, political party, which might help overcome this limitation.)
  • It’s not limited to people likely to buy new cars in the near future, nor to people with any interest in or ability to buy any car
  • Many of the calls were made on Veterans’ Day, when some people might be in a particularly patriotic mood
  • Only 29% of the total respondents think that “buy American” means “buy a car manufactured in the United States.”

Imho the most patriotic thing Americans can do regarding new car purchases is to forego them, buy a bicycle and/or transit pass, and avoid going into debt. (Only 27% of new car buyers pay cash.)  The benefits in terms of reduced petroleum dependence outweigh anything from purchasing domestic brands.

Unfortunately, many employers choose locations which are accessible only by automobile, so not everyone has this option. If fewer of us chose to have cars, this problem might be less common.

Why Why the German Republic Fell is Hard to Find

Bruno Heilig’s 1938 essay Why the German Republic Fell is posted and freely available on the Internet. Unfortunately, the Scholars at the School of Cooperative Individualism are not the world’s greatest proofreaders, so google has some trouble finding it, but it is here.  There is also a nice abridgement here.  Hardcopy, of course, is for sale cheap at Schalkenbach.

I read this booklet about 25 years ago, didn’t remember a thing about it, but hoped it would give me some insight into how the Weimar inflation was dealt with. No such luck, it really begins after inflation had been tamed and prosperity commenced, but it’s all the more worthwhile for that.   Heilig asserts that the rise of Hitler was caused by land speculation. I am no expert in German history, but he does seem to make a good case.

Not by land speculation exclusively, of course, but land speculation as an ingredient along with:

  • public aid to large landlords, encouraging them to withhold land from use
  • privatization, on especially favorable terms to connected individuals and groups
  • failure to fully utilize farmland, resulting in unemployment as well as high food prices
  • tariffs, raising prices of consumer and industrial goods
  • public subsidies to favored enterprises
  • control of the major news media by the landed class

Land prices soared, wages fell, eventually the economy slowed, and:

Although it was obvious that the, “invariable costs” — i.e. the tribute land monopoly exacts from the working people — were eating into all production, the responsible men and the leading exponents of what was taught as economics kept their eyes, as if under some hypnotic influence, fixed upon the worker’s pay-packet.

Reformers advocated unworkable or ineffective solutions: If progress brings poverty, they urged that we retard progress.

The newspapers, of course, served the interests of their owners:

I need not explain what that propaganda organization meant in operation. Its effect was to sway public opinion into believing that the interests of the landowners were the interests of the nation. Subsidizing the landlords was the accepted policy for preserving and even saving the sources of subsistence of the people: the higher tariff walls were for the benefit of the wage-earning population: increase in land values meant increase in the national wealth: and so on…

[A]s unemployment grew, and with it poverty and the fear of poverty, so grew the influence of the Nazi Party, which was making its lavish promises to the frustrated and its violent appeal to the revenges of a populace aware of its wrongs but condemned to hear only a malignant and distorted explanation of them.

Much in this essay is similar to today, tho Heilig never uses words like “TIF” or “terrorism.”  Some things are decidely different, for example I don’t think Germany at the time had anything like a well-paid public employee class, nor a large class of small-scale investors, such as workers with 401k’s.  But it’s easy to see how today’s conditions could lead to similar results.

Georgists at the Barber Shop

Thanks to Abu Bakr Nurruddin for contriving to get us invited to The Barber Shop Show on the strange enterprise that is vocalo.org.  The audio can be streamed from here; I don’t see any way to download it tho.  Very nice folks run this show.  It’s difficult to get much economic wisdom into 20 minutes, but we expect to be invited back.