Responding to PIRG, despite WordPress

Phineas Baxandall, one of the authors of the Illinois PIRG report blogged yesterday, commented on the item. Well, I responded to his comment, but for some reason WordPress swallowed the comment. Twice. I tried to comment as a normal person instead of myself. Swallowed again. Tried again. Rejected as “duplicate.” I don’t know what’s going on at WordPress, possibly there is some difficulty regarding html in the comment. But following is my response to Phineas Baxandall.

I’m always happy to see activists claiming that Henry George would approve of their work, but in this case there’s a serious gap between George’s proposal and yours.

George wanted to remove all taxes from productive activity, and instead charge for control of land (and other natural resources). Retail sales and service are productive activities, and when they’re taxed then the cost of living increases and living standards are reduced. Real estate transfers, too, usually involve productive activity, either construction or at least the transfer of property to someone who can use it more effectively than the seller.

Development impact fees likewise make it more expensive and difficult to provide housing (or other kinds of development). If such fees were truly user fees, then they’d be paid by all users, rather than just by those who seek to build.

You’re certainly not the first person to misunderstand George’s ideas, which is why we have Henry George Schools in Chicago and elsewhere, run courses by Internet, and have Progress & Poverty posted in original and modernized versions. Some relevant (and more succinct) modern documents are here.

It’s not so important whether your proposal would please Henry George. What’s important is that, had you proposed supporting transit thru a tax on location values, you would have recommended a policy to reliably fund transit in the long run, encourage transit-supportive development patterns, and improve the standard of living of ordinary working people.

"Protect land speculators" — Illinois PIRG

A solicitor stopped by my house a week or so ago pushing Illinois PIRG’s campaign to “save our transit.” They do have a report, funded by the “Illinois PIRG Education Fund” and prepared by Brian Imus, Nick Christensen, and Phineas Baxandall, that explains how they want us to pay more money for transit service.

The report notes that “Locations served by transit… show increased property values compared
to similar locations not served by transit.” Although they do cite sources for this assertion, they don’t refer to either of the Chicago studies which are (see footnotes 3 and 4 on page three of this). So then do they propose a tax on location value?

No surprises here. They proclaim “Seven Principles for Funding Transit:”

1-Enhance market efficiency

2-Low collection costs

3-Reliability

4-Diverse funding

5-Fare increases are self defeating

6-Budget accountability

7-Community participation

They do provide some discussion of each. Then they evaluate several potential sources of funding:

-Sales taxes

-Gasoline tax

-Rental car tax

-(auto) License, registration or title fees

-Several other driving-related taxes

-Real estate development impact fees

-Stormwater fees

-Real estate transfer tax

-Parking tax

Their recommendation:

-Higher sales tax

-Extend sales tax to services

-Establish a real estate transfer tax, or maybe one of a few other taxes.

But although they acknowledge that transit service increases land value, there is no consideration of this option. Instead, they want to reduce economic efficiency by raisng taxes on economic activity.

Economics course as video game

The University of North Carolina/Greensboro’s   Economics 201 “is now a fast-paced video game.”  You were supposed to register by March 14; I guess it’s over now.  More about the course here.

Is this effective and/or appealing to gamers?  I have no idea, but if I were one I would want to try it.  It’s micro, not macro, so probably not too much overlap with Georgist concepts.

Value of land grows fast or slow…

…as illustrated by this image from the NY Public Library. It’s probably a bit over 100 years old, and shows “a wagon with signs promoting the single tax.” Among other things, the sign claims that an acre of land in downtown Chicago is worth $10 million, whereas an acre of farmland is worth $50.

If that was the relationship around 1900, it’s very different today. Good Illinois farmland today can be worth $5,000/acre, even far far beyond the reach of suburban sprawl. But downtown Chicago land has increased in value much less, perhaps to $50 million/acre.

Of course, most of the farmland in Illinois is farmed by tenants, so the impact on the farmer of the single tax would still be minimal or beneficial.

Thanks to the Georgist Journal for publishing this photo in their Spring 2007 issue (#107).

Garrison Keillor a Georgist?

In 1995 he proposed that Minnesota sell water from Lake Superior to buyers in the arid southwest. The proceeds, after expenses would be split 50-50 between the citizens of Minnesota and their state government. By Keillor’s calculation, each Minnesotan would receive $3.8 million (That’s 1995 dollars, too), which could yield a very nice perpetual income, kind of like the Alaska Permanent Fund.

Expenses would include not only construction of a canal system to transport the water, but some very skilled lawyers and lobbyists to deal with environmentalists, Wisconsin, Canada, etc.

Much later, Keillor wrote from Alaska, not of their citizens’ dividend (which amounts to about $1,000/person/year), but about the $50 head tax to be imposed on cruise ship passengers. Part of this will fund State inspectors aboard, who will monitor observance of pollution control regulations. It will probably be effective, he notes, because “government is good at providing negative incentives.”

Sounds Georgist to me. But how is Garrison going to find out that he’s a Georgist? Perhaps he will never know.

Thanks to Jim Frederiksen for the tip.

Robert Reich a Georgist?

It does appear that the former Sec’y of Labor recommends a “carbon auction,” under which polluters bid for the right to emit, and everybody shares equally in the proceeds.  If there is a need to reduce carbon emissions, this does seem to be the way Henry George would recommend it be done.

Reich rejects a carbon tax because “I can’t imagine any politician calling for higher taxes affecting the middle class, or for that matter the middle class – already squeezed by high energy prices and stagnant wages – putting up with it. ”  Kind of sounds like Jeff Smith, but  with clout.  Of course, Reich wants to share only a tiny piece of the commons, whereas Jeff wants to share all of it.

Two more nonviable projects?

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.

Frank Lloyd Wright on land, money, patents

Three major artificialities have been drafted and grafted by law upon all modern production; hangovers from petty customs originating in feudal circumstances. Many of these traditions have been blown up into supposed economic patterns: but all forms of rent and all illegitimate. Rent for money; rent for land; really only extrinsic forms of unearned increment; and the third artificiality is traffic in invention. A graft by way of patents is another but less obvious form of rent.

From F L Wright, The Living City. Original copyright 1958. March, 1970 New American Library edition.