You are Here:
Sorry Guest, you are banned from posting and sending personal messages on this forum.
Host Name Bans (EG)
This ban is not set to expire.
Land Value Taxation: Rebuttals to Common Objections

Author (Read 303283 times)

0 Members and 1 Guest are viewing this topic.

Economic Growth and Income Distribution
« Reply #25 on: Feb 27, 2014, 02:52:33 pm »


  • Mega InfoWarrior
  • *****
  • 1113

Economic Growth and Income Distribution

Fred Foldvary
The Progress Report
January 12, 2014

One of the topics that has not received enough attention in economics is the effect of economic growth on the distribution of income. So if you want to understand it, you should get a piece of paper. I’ll wait until you have it …

Now on the lower left side, draw a rectangle with a height longer than the width. The top half of the paper should still be blank. We will use an agricultural model with one product, corn. At first, the only factors are land and labor. Now draw small circles of equal size in the rectangle. These are farms of equal size. The yield is ten bushels of corn per farm per period of production. As long as there is free land available, land rent is zero, and the entire yield of ten goes to wages.

Now draw another rectangle to the right of the first one, three-fifths as high. Label this “six,” because the output in that land is six bushels of corn. All the farm workers are equally skilled and work the same number of hours, so the lower yield is due to its being less productive land. With rent at zero because there is free land, the wage is six. The wage in the ten-bushel land has now fallen to six, because workers are mobile and equally skilled. The extra four bushels in the ten-bushel farms are now land rent.

For rent and wages, it does not matter whether the owner is also the worker, or whether he hires labor at six bushels, or whether he rents out the land to a tenant at four bushels. The economic rent is the difference in the productivity of the two lands, regardless of who are the owners, tenants, and workers. If the landlord happens to charge only three bushels from a tenant, the economic rent is still four: three go to the landlord, while one bushel is the yield as rent kept by the tenant.

In classical economics, the least productive land in use is called the “margin of production.” There is a “law of wages,” which states that the wage level for the economy is the wage at the margin of production. There is a “law of rent” which states that the rent of a plot of land is its output minus the normal costs of labor and capital goods, such as, in our simple model, the difference between the output of the lands yielding ten and six.

Now add a third rectangle to the right of the six-bushel land, and label this “four,” because this is the new margin of production yielding four bushels. Wages there are four, making the wage also four at the lands yielding ten and six. Now rent in the ten-bushel land has risen from four to six, and rent at the six-bushel land has risen from zero to two. You can see that as the margin of production moves to less productive land, wages fall and rent rises.

Now let us introduce a plow, which represents both more capital goods and better technology. The plow costs two bushels and completely depreciates each period, requiring a new plow for the next period. The plow doubles production at each plot of land. So on the rightmost rectangle, draw another rectangle just above the first one, attached to it, with an equal size, representing the doubling of output.

Is it worth buying the plow? Yes! The farms at the margin, having yielded four, now yield eight. After paying for the capital good, the plow, the output is six, which all goes to wages. Wages there have risen by 50 percent. By the law of wages, wages in the other farms have risen to six.

With the plow, the farms that yielded six now yield twelve. Draw a rectangle above the middle one, with equal size. Now the distribution of the twelve-bushel output is two to capital goods, six to wages, and the remainder, four bushels, to rent. Rent there doubled from two to four bushels.

Now do the same for what was the ten-bushel land, which now yields twenty. The distribution is two to capital goods, six to wages, and the remainder, twelve bushels, to rent. Rent there also doubled, from six to twelve bushels. (A similar graph of the factors).

Now we can see the effect of the economic growth caused by more and better capital goods. Wages have risen by fifty percent, while rent doubled. We can calculate this in bushels. Suppose there were ten farms in each grade of land. Write this down: before the plow, for the three lands, output was 100 + 60 + 40 = 200. Wages were 40 times 3 = 120. Rent was 60 + 20 = 80. So wages were 60 percent and rent was 40 percent of income.

With the plow, output doubles to 200 + 120 + 80 = 400. Are you writing this down? Wages are now 60 times 3 = 180. Capital yields are 2 bushels per plow times 30 farms = 60 bushels. Land rent is 120 + 40 = 160. Wages are now 180/400 = 45 percent of income. Capital yields = 60/400 = 15 percent of income. Rent = 40 percent of income. Wages rose by 60 bushels, while rent has risen by 80 bushels.

The portion of income going to wages has fallen from 60 to 45 percent, but the portion of rent stayed the same, 40 percent. The doubling of output doubled the rent, but because the plow has a cost, wages could not double, but they did rise by 50 percent. Labor benefits from the greater productivity, but landowners benefit more. If new technology and capital goods were to similarly double production again, the distribution of income would keep the same proportions.

If the ownership of the land value is concentrated, then much of the gains from economic expansion is distributed to a few landowners. The greater rent going to a few owners explains much of the inequality of income today throughout the world. These landowners do nothing to generate the growth. Usually, better capital goods also requires better human capital, greater skills. So the economic growth and development is caused by entrepreneurship and investment in capital goods and human capital, and the yields properly go to a return on the capital goods, the capital yield, and to greater wages, including the gains to the entrepreneurs. But the greater rent is a surplus windfall to the owners of land that obtain the rent just by holding title.

If we believe in human equality, the land rent should be distributed to all the people equally. Then all the people would equally benefit from the greater productivity. The effect of greater productivity on the input-factor distribution of income has been neglected, so this model should be taught in all courses on the principles of economics.
"Abolish all taxation save that upon land values." -- Henry George



  • Mega InfoWarrior
  • *****
  • 1113
Unsurprisingly, what Zero Hedge (ZH) doesn't tell you in the following article is that, since land is fixed in both supply and location, absentee landlordship of this magnitude is the inevitable consequence of not using publicly-generated land values as the primary if not sole source of public revenue. And the reason ZH doesn't tell you this is that it knows all too well that, if the Austrian School had its way, land values would be even more privatized than they already are. The end result? More rent-seeking, not less.

These 10 People Collectively Own 33 Million Acres, Or 1.5% Of All US Land

Zero Hedge
January 15, 2014

It is a well-known fact that when it comes to ownership of rental properties in the US, Wall Street, and particularly Blackstone, has become the single largest landlord in the country. But what about undeveloped land? As summarized by Vizual-statistix, according to The Land Report published by Fay Ranches, the top 100 owners of US land collectively have 33 million acres in their private holdings. This equates to about 1.5% of all USA land – that may seem like a small percentage, but it’s actually a massive area.  The chart below lays out the top 10 largest private landowners with the areas of Puerto Rico, Delaware, Rhode Island, and Washington, D.C. included for scale. As can be seen, all of the top 10 own a piece of the USA that is bigger than Rhode Island, and five have a piece that is at least as big as Delaware. John Malone, who is the largest land owner in the country with 2.2 million acres, owns private property the size of Puerto Rico.

"Abolish all taxation save that upon land values." -- Henry George

The left and an anti-rentier agenda
« Reply #27 on: Feb 27, 2014, 02:54:15 pm »


  • Mega InfoWarrior
  • *****
  • 1113

The left and an anti-rentier agenda

The Henry George Society of Devon
February 02, 2014

In a series of articles appearing on Salon last year Michael Lind argued that left and right alike are confused by a failure to distinguish productive businesses that sell innovative goods and services from “rentier” interests — landlords, lenders, copyright holders and others — which use their natural or artificial monopoly power to extract excessive tolls, fees and other recurrent payments from the rest of society, including productive businesses. Lind made the case that the fees or rents extracted by these interests constitute a kind of “private taxation” and that this is the greatest threat facing the productive economy.

This line of thinking is essentially a Georgist one and it doesn’t sit easily on the tired old left-right spectrum that dominates mainstream political discourse today. Many on those who identify with the left, worried that growing wealth inequality is leading to complete domination of society by big moneyed interests, denounce “capitalism” and reach for socialist answers. Take for example the following policy statement from the newly formed LeftUnity Party in the UK:

    “We are socialist because our aim is to end capitalism. We will pursue a society where the meeting of human needs is paramount, not one which is driven by the quest for private profit and the enrichment of a few. The natural wealth, and the means of production, distribution and exchange will be owned in common and democratically run by and for the people as a whole, rather than being owned and controlled by a small minority to enrich themselves.”

This approach is born out of a flawed understanding of fundamental economic principles, namely the conflation of land with capital and the mistaken belief that privilege stems from ownership of the latter rather than the former.

There is nothing wrong with wealth per se – after all we all want it! A top footballer or movie star who earns astronomical amounts by virtue of their unique talent isn’t preventing anyone else from prospering, so good luck to them I say! Similarly, creative go-getting entrepreneurs who make their money satisfying others needs in the market place should be free to enjoy the wealth they have created. Stealing their income and redistributing it to others smacks of envy.

The problem with wealth arises when it is possible to use it to buy monopoly privilege including control of natural resources, thus depriving others of access to the opportunities they need to get ahead unless they meet the payment terms of the owner. So in the aforementioned examples, the movie star and the entrepreneur who go on to invest their wealth in speculative real estate or shares in an exploitative oil company have crossed the line from wealth creator to parasite. In essence the Georgist solution is to cut off this possibility in a very simple and efficient way, leaving the economy to function as a true free market that benefits all.

I believe the best way to undermine the powerful elite vested interests that exploit the wealth of society and the planet is to drive a wedge between them and genuine wealth creators i.e. the industrious hardworking people that actually provide the goods and services in the economy. This includes lowly wage workers and high flying individuals who should be allies in this struggle. It won’t be done with socialist rhetoric which unhelpfully perpetuates the sterile socialist-capitalist dichotomy and precludes the possibility of a broader anti-rentier agenda from taking shape thus playing into the hands of establishment interests that want to maintain the status quo. Clearly much needs to be done to reshape the political debate in order to form a genuine coalition for change that works for everyone. Georgist education of economic principles has an absolutely vital role to play in this process of realignment.
"Abolish all taxation save that upon land values." -- Henry George

Re: : Land Value Taxation: Rebuttals to Common Objections
« Reply #28 on: Feb 27, 2014, 02:54:58 pm »


  • Mega InfoWarrior
  • *****
  • 1113
Of the millions of "little old ladies" who -- due to the land speculation-driven high cost of housing -- are forced to "rent" instead of "own," how many have fallen prey to this worsening trend?


Housing crisis taking toll with no-fault evictions

Marisa Lagos and John Coté
November 16, 2013

Jennifer Mieuli Jameson isn't the kind of person you would expect to be losing her home.

The middle-class, 48-year-old Sunset District resident has manicured nails, well-coiffed hair and neat clothing. A paralegal who was laid off during the economic downturn, she now runs a nonprofit dog rescue organization. Her husband works in information technology for a law firm. She is not elderly or disabled. She has not lived in her rental for decades.

And when she and her husband are forced out of their Sunset District home because their rent is doubling, they will not be counted among the city's evictions.



In light of what was already being reported on (see the link below) several years before the 2008 derivatives-caused financial crisis, is it safe to assume that more than a few have?

And have you noticed that those who profess so much concern for the plight of "little old ladies" either start hemming and hawing or become mysteriously silent whenever someone brings up the issue of tenants being evicted from their homes at gunpoint as a consequence of the poverty-in-the-midst-of-plenty-creating rent-wage gap?

Why the apparent double standard?

Could it have something to do with intuitive awareness of the fact that this issue can't be candidly addressed without running the risk of drawing attention to the anti-Georgist tax policy that gave rise to said "gap" in the first place -- and of thereby validating the Single Tax remedy?

Such questions cannot be answered by continually begging them.

"Abolish all taxation save that upon land values." -- Henry George

Why is the rent so high?
« Reply #29 on: Feb 27, 2014, 02:56:13 pm »


  • Mega InfoWarrior
  • *****
  • 1113
An excellent introduction to the Law of Rent... (Why is the rent so high?)
"Abolish all taxation save that upon land values." -- Henry George

Georgism in 300 words
« Reply #30 on: Feb 27, 2014, 02:56:50 pm »


  • Mega InfoWarrior
  • *****
  • 1113

Georgism in 300 words

February 26, 2014

Imagine that in the distant past, a ship ran into rocks off a desert island and started sinking.  Everyone jumped overboard and started swimming towards the nearest beach. Imagine a guy armed with a gun got to the island first, and then upon everyone else's arrival, the guy said, “I got here first, so this island is mine. You can't live here unless you pay me rent for using my land”. The swimmers have no choice and have to give the “landowner” part of their income forever more.  This situation obviously stinks. If you were one of the people having to pay rent you would be angry as hell, you’d protest at every opportunity. Who could possibly defend such system?

Now imagine that at some later time, a rich islander purchased the island from the gunman for a large sum of money. The rich man announced to the rest of the islanders, “That nasty gunman was evil and grabbed the island unjustly. He had no right to claim rent from you all. But I purchased the land with my own money and without violence. Therefore this island is rightfully mine, and now you should all quit protesting and pay me rent!”.

If you were an islander, would you be happy with the situation now?

By the way, this is essentially the way the world works today. How do you think the first owners of the land you're living on got to own the land? (Usual answer: they took it by force) Personally, I have no idea why people are not marching in the streets demanding a better system.

Is there a more just way of distributing land? Yes. An idea known as Georgism. The fact that houses get built on land makes the potential solutions more complex, but almost any system based on Georgist ideals would be better than what we have today… unless you’re a landlord that is.

Georgism: - look into it.

"Abolish all taxation save that upon land values." -- Henry George

The antimonopolist history of the world’s most popular board game
« Reply #31 on: Apr 17, 2014, 01:24:29 pm »


  • Mega InfoWarrior
  • *****
  • 1113

Monopoly Is Theft

The antimonopolist history of the world’s most popular board game

By Christopher Ketcham
Harper's Magazine
October 19, 2012

The players at Table 25 fought first over the choice of pawns. Doug Herold, a forty-four-year-old real estate appraiser, settled on the car. The player across from him, a shark-eyed IT recruiter named Billy, opted for the ship and took a pull from a can of Coors. The shoe was taken by a goateed toxic-tort litigator named Eric, who periodically distracted himself from the game on a BlackBerry so that he “could get billable hours out of this.” The dog was taken by a doughy computer technician named Trevis, who had driven from Canton, Ohio, as a “good deed” to help the National Kidney Foundation, sponsor of the 25th Annual Corporate Monopoly Tournament, which is held each year in the lobby of the U.S. Steel Tower in downtown Pittsburgh. On hand for the event, which had attracted 112 players, divided into twenty-eight tables of four, were the Pittsburgh Steelers’ mascot, Steely McBeam, who hopped around the lobby grunting and huzzahing with a giant foam I beam under his arm; three referees dressed in stripes, with whistles around their necks; and a sleepy-looking man, attired in a long judges’ robe and carrying a two-foot-long oaken gavel, who was in fact a civil-court judge for Allegheny County donating his time “to make sure these people follow the rules.”

I had spoken the night before with Doug, who won the previous year’s tournament, about his strategy for victory. “Well, last year I managed to get Boardwalk and Park Place, and then everybody landed on them,” he explained, chalking his success up to dumb luck. “What you have to do,” he said, “is get a monopoly, any monopoly, as quickly as you can.” I asked him if he knew the secret history of the game. He confessed that he did not.

The official history of Monopoly, as told by Hasbro, which owns the brand, states that the board game was invented in 1933 by an unemployed steam-radiator repairman and part-time dog walker from Philadelphia named Charles Darrow. Darrow had dreamed up what he described as a real estate trading game whose property names were taken from Atlantic City, the resort town where he’d summered as a child. Patented in 1935 by Darrow and the corporate game maker Parker Brothers, Monopoly sold just over 2 million copies in its first two years of production, making Darrow a rich man and likely saving Parker Brothers from bankruptcy. It would go on to become the world’s best-selling proprietary board game. At least 1 billion people in 111 countries speaking forty-three languages have played it, with an estimated 6 billion little green houses manufactured to date. Monopoly boards have been created using the streets of almost every major American city; they’ve been branded around financiers (Berkshire Hathaway Monopoly), sports teams (Chicago Bears Monopoly), television shows (The Simpsons Monopoly), automobiles (Corvette Monopoly), and farm equipment (John Deere Monopoly).

The game’s true origins, however, go unmentioned in the official literature. Three decades before Darrow’s patent, in 1903, a Maryland actress named Lizzie Magie created a proto-Monopoly as a tool for teaching the philosophy of Henry George, a nineteenth-century writer who had popularized the notion that no single person could claim to “own” land. In his book Progress and Poverty (1879), George called private land ownership an “erroneous and destructive principle” and argued that land should be held in common, with members of society acting collectively as “the general landlord.”

Magie called her invention The Landlord’s Game, and when it was released in 1906 it looked remarkably similar to what we know today as Monopoly. It featured a continuous track along each side of a square board; the track was divided into blocks, each marked with the name of a property, its purchase price, and its rental value. The game was played with dice and scrip cash, and players moved pawns around the track. It had railroads and public utilities—the Soakum Lighting System, the Slambang Trolley—and a “luxury tax” of $75. It also had Chance cards with quotes attributed to Thomas Jefferson (“The earth belongs in usufruct to the living”), John Ruskin (“It begins to be asked on many sides how the possessors of the land became possessed of it”), and Andrew Carnegie (“The greatest astonishment of my life was the discovery that the man who does the work is not the man who gets rich”). The game’s most expensive properties to buy, and those most remunerative to own, were New York City’s Broadway, Fifth Avenue, and Wall Street. In place of Monopoly’s “Go!” was a box marked “Labor Upon Mother Earth Produces Wages.” The Landlord Game’s chief entertainment was the same as in Monopoly: competitors were to be saddled with debt and ultimately reduced to financial ruin, and only one person, the supermonopolist, would stand tall in the end. The players could, however, vote to do something not officially allowed in Monopoly: cooperate. Under this alternative rule set, they would pay land rent not to a property’s title holder but into a common pot—the rent effectively socialized so that, as Magie later wrote, “Prosperity is achieved.”

For close to thirty years after Magie fashioned her first board on an old piece of pressed wood, The Landlord’s Game was played in various forms and under different names—“Monopoly,” “Finance,” “Auction.” It was especially popular among Quaker communities in Atlantic City and Philadelphia, as well as among economics professors and university students who’d taken an interest in socialism. Shared freely as an invention in the public domain, as much a part of the cultural commons as chess or checkers, The Landlord’s Game was, in effect, the property of anyone who learned how to play it.

Thousands of Monopoly tournaments are held in the United States each year: county tournaments, school tournaments, church tournaments, corporate tournaments, tournaments in basements, in boardrooms, in lunchrooms, in public libraries, and online. Every four or five years there are the big officiated tournaments—the U.S. Championship and the World Championship—sponsored by Hasbro, which hands out $20,580 pots to the winners of each. I missed the big tournaments—both were last held in 2009—and instead ended up in the lobby of U.S. Steel. I thought the venue fitting, as the corporation was the brainchild of supermonopolists Andrew Carnegie and J. P. Morgan, the latter being the inspiration for Monopoly’s top-hatted, monocled, tails-wearing mascot, Rich Uncle Pennybags.

The emcee called the lobby to order, shouting into his microphone, “You have ninety minutes. Let’s play Monopoly!” Immediately, the men at Table 25 began rolling dice and frantically buying property as they rounded the board. Doug snagged Pacific Avenue (an expensive investment at $300), two yellow parcels, and several slummier properties. Trevis’s portfolio included two railroads and Marvin Gardens, the most expensive property in the yellow group. Billy held the ultrachic Boardwalk ($400). Eric got Tennessee Avenue and St. James Place ($180 each). These last are among the properties most coveted by competitors, because they are relatively cheap and frequently landed on, along with the other properties that sit directly downboard of the jail, where odds are the players will spend a lot of time.

Sixteen minutes into the game Doug offered Billy a trade. (“The propensity to truck, barter, and exchange one thing for another,” writes Adam Smith in The Wealth of Nations, “is common to all men, and to be found in no other race of animals.”) Land was already growing scarce, and as land becomes scarce in Monopoly—as in the real world—its market value rises, often beyond its nominal value. “This,” said Doug, holding up one of his yellow deeds, “for that,” pointing at one of Billy’s slum deeds, “plus three hundred bucks.”

Billy was unimpressed. “No, you give me three hundred bucks.”

“Give you three hundred bucks?”

“Cash is king!”

This in turn inspired Trevis and Eric to start haggling, with Billy and Doug interjecting to gum up the talks when their own interests were threatened. The table got loud. The parties offered, counteroffered, rejected all offers, sweetened the original offers, rejected the sweetened deals with greater aplomb. Doug heaved a great sigh. “We’re just gonna go around the board and around the board,” he said, “and collect our little money.”

“It’s gotta make sense for me,” said Trevis.

“This guy wants my left testicle,” Doug replied.

In what amounted to open conspiracy, Billy then told Eric that if they made a trade and each received a monopoly as a result, they’d share a “free ride”—no rent would be charged—when they landed on one another’s monopolies: a corrupt duopoly, in effect, targeting Doug and Trevis.

Doug shrugged as Eric pondered the deal, but Trevis was aghast. “You can’t do that—it’s against the rules.”

“Rules!” said Billy. “I’m gonna set my price.”



A referee, whistle around his neck, hurried over—the judge with the gavel had disappeared—to decide on the matter as the players barked at each other. “You can’t do that,” he said finally.

A few weeks before the tournament, I’d had a conversation with Richard Marinaccio, the 2009 U.S. national Monopoly champion. “Monopoly players around the kitchen table”—which is to say, most people—“think the game is all about accumulation,” he said. “You know, making a lot of money. But the real object is to bankrupt your opponents as quickly as possible. To have just enough so that everybody else has nothing.” In this view, Monopoly is not about unleashing creativity and innovation among many competing parties, nor is it about opening markets and expanding trade or creating wealth through hard work and enlightened self-interest, the virtues Adam Smith thought of as the invisible hands that would produce a dynamic and prosperous society. It’s about shutting down the marketplace. All the players have to do is sit on their land and wait for the suckers to roll the dice.

Smith described such monopolist rent-seekers, who in his day were typified by the landed gentry of England, as the great parasites in the capitalist order. They avoided productive labor, innovated nothing, created nothing—the land was already there—and made a great deal of money while bleeding those who had to pay rent. The initial phase of competition in Monopoly, the free-trade phase that happens to be the most exciting part of the game to watch, is really about ending free trade and nixing competition in order to replace it with rent-seeking.

"Abolish all taxation save that upon land values." -- Henry George

How a Progressive Tax System Made Detroit a Powerhouse (and Could Again)
« Reply #32 on: Apr 19, 2014, 01:59:19 pm »


  • Mega InfoWarrior
  • *****
  • 1113

How a Progressive Tax System Made Detroit a Powerhouse (and Could Again)

Detroit’s property tax base, diminished and badly-assessed, could still fund a renewal if Michigan would only read its history and find the political will.

By Mason Gaffney and Polly Cleveland
August 9, 2013

In 1995, we encountered a group of economic advisors to Governor John Engler of Michigan, intent on cutting property taxes. We reminded them of California’s 1979 Proposition 13. After Prop. 13 rolled back and froze property taxes, sales taxes reached crushing levels, budget crises became routine, local services collapsed, and public schools fell from the best in the nation to among the worst. But Engler was determined.

From 1890-1930, Detroit’s population boomed from 205,000 to 1,569,000, the fastest growth of any US city. The auto industry did it, but why Detroit? Detroit had produced horse-drawn carriages from hardwood lumber, but so had other places. It was not low wages; Detroit paid better than most—that’s why so many people rushed in. It was not business-dominated politics; Michigan was a Progressive, Bull Moose Teddy Roosevelt state. It was not low taxes on wealthy “job-creators”; Michigan relied on high state and local property taxes. As most people recognized in those days, (and as we have documented here and here), property taxes are wealth taxes, dramatically more progressive than income taxes.

Detroit Mayor Hazen Pingree, 1889-1897, was an early Georgist Progressive. He supported the idea of American economist and reformer Henry George (1839-1897) that all taxes should be shifted onto land and other natural resources. Today, Nobel-Prize-winner Joseph Stiglitz advocates this as the “Henry George principle.” Applied to cities, it means raising property tax rates on land and lowering them on buildings. In cities, poor renters own no land, heavily-mortgaged middle classes own very little. So shifting taxes to land turns property taxes into wealth taxes on steroids. Better yet, taxing land discourages rich speculators from holding valuable property out of use. Mayor Pingree was a mentor to and model for the Georgist soon-to-be Mayors Tom Johnson and Newton Baker of Cleveland, and Samuel Jones and Brand Whitlock of Toledo.

The crash of 1893 hit Detroit soon after Pingree’s election. The city was riddled with vacant lots held by land speculators; Pingree arranged for the unemployed to plant vegetables. “Pingree’s Potato Patches” inspired other cities to follow. Meanwhile, he had campaigned for “higher taxes on the vast landed estates of the city”; when big industries threatened to leave town, he responded by raising just the land assessments. This won the support of small business.

The Georgist Progressive movement supported cheap mass transit on trolley cars. With fixed costs funded by property taxes, fares stayed low. Property taxes also paid for public education, public health, public parks, water, sanitation, welfare—all the public services that make a big city livable, and its small industries viable. Property tax rates of 2.5% of market value were normal; there were no sales taxes, business taxes, or income taxes. Detroit’s private sector was a big collection of small machine shops, little businesses and services. That’s what attracted Henry Ford, the Dodge brothers and other young tinkerers to Detroit. In one of history’s ironies, trolley cars nursed the auto industry that later rose up to slay them.

In 1897 Pingree became governor. He centralized the assessment of property taxes, and had the State Board of Tax Commissioners revalue all property. They found so much untaxed land, especially railroad holdings, that they actually lowered tax rates even as they raised more taxes.

During the “Dirty Thirties,” Detroit grew while many cities shrank. Walter Reuther’s UAW pioneered the sit-down strike at the GM plant in Flint. Former Detroit Mayor and now Governor Frank Murphy negotiated a settlement that legitimized the UAW, using the new national Wagner Act. It was “The strike heard round the world.” UAW membership exploded from 30,000 to 500,000.

After Pearl Harbor, FDR naturally turned to Detroit to convert its assembly lines to war production. This was the age of Rosie the Riveter, and Rosie loved Detroit. From 1930 to 1950, Detroit’s population grew 18%, to 1,850,000.

Yet after 1950, Detroit began to shrink, the first break in its sensational upward trajectory. What happened? Some blamed the end of the war, but America was pouring billions into the Interstate Highway System. The world wanted American cars and trucks. The causes of decline must have been internal.

Governor G. Mennen “Soapy” Williams, 1949-1960, introduced the Business Activities Tax (BAT), a kind of sales tax. The BAT was replaced by a corporate income tax in 1967 and by the Single Business Tax (SBT) in 1975. The SBT allowed the deduction of inputs—including real estate purchases!—but not labor. Easy for big corporations to evade, the SBT fitted concrete boots on small unincorporated businesses.

Governor George Romney, 1962-68, introduced a personal income tax to provide “property tax relief,” a new catchword. Meantime in Michigan and nationwide, the property tax itself was degenerating; effective rates were falling, especially on land. Its Georgist heritage forgotten, Detroit was valuing land at next to nil, using assessments dating from the Great Depression. In 1967, a police raid on an unlicensed late-night drinking club in a black neighborhood triggered Detroit’s notorious 12th Street riots, which destroyed over 2000 buildings. Detroit never recovered.

While Detroit hollowed out, its suburb Southfield boomed. From 1950-70 it grew from 19,000 to 69,000 people. It had a Georgist Mayor, James Clarkson, who aggressively raised land assessments and lowered building assessments. Southfield’s tax base actually rose by 20% per year under Clarkson, funding good utilities and public services. The lesson went unnoticed.

In 1995, despite our warnings to his staff, Governor John Engler took Michigan’s public schools off local property taxes and onto a state sales tax. That sealed Detroit’s fate. Out-migration of people and industry accelerated into the 2008 crash. Detroit’s current population of some 700,000 is the lowest since 1914. In another of history’s ironies, Detroiters today grow food in vacant lots—“Pingree’s Potato Patches” again, 105 years later. Bankruptcy seems inevitable.

And yet… Detroit’s property tax base remains. Though diminished and badly-assessed, it could still fund a renewal if Michigan reads its history and finds the political will.

For the full story, see Mason Gaffney’s New Life in Old Cities (2006) and What’s the Matter with Michigan? (2008)
"Abolish all taxation save that upon land values." -- Henry George

San Francisco Landlord Tells Tenants: Make $100K, Have 725 Credit Score
« Reply #33 on: Aug 14, 2014, 10:45:41 am »


  • Mega InfoWarrior
  • *****
  • 1113
And what's the Austrian School "solution" to the following? Make publicly-generated land values even more privatized than they already are.  ::)

San Francisco Landlord Tells Tenants: Make $100K, Have 725 Credit Score

By Alan Farnham
ABC News
May 06, 2014

[Video clip omitted - see original article]

How tight is San Francisco’s housing market? So tight that the landlord of a rent-controlled apartment building at 312 Fillmore Street has sent a memo to his existing tenants, telling them they must show they have an annual income of at least $100,000 and a FICO credit score of at least 725.

Or else...what? The memo (which describes itself as “informational”) doesn't say.

When ABC News phoned landlord Robert Shelton to ask, he hung up. When an ABC News reporter knocked on his door, Shelton slammed it in her face.

Local housing and tenants’ rights experts tell ABC News they are in no doubt what such memos are meant to accomplish: They’re supposed to scare the heck out of tenants, on the chance that ones unaware of their rights will vacate.

Landlords want old tenants out so that they charge new ones higher rent, explains Delene Wolf, executive director of the San Francisco Rent Board. She tells ABC News she has specialized in local rent control issues for 30 years. But, she says, “I have never seen rents like this--not even during the dotcom boom. A teeny 1-bedroom can go for $4,000 a month.” The bidding-up of rents she calls a frenzy. The market, she says, "is amazing--but not in a good way.”

"Abolish all taxation save that upon land values." -- Henry George



  • Mega InfoWarrior
  • *****
  • 1113

America’s Housing “Recovery”: Transforming “Foreclosed Homes” Into Rental Empires. Private Equity Firms Drowning in Profits

By Laura Gottesdiener
Global Research, June 24, 2014
TomDispatch 22 June 2014

Security is a slippery idea these days — especially when it comes to homes and neighborhoods.

Perhaps the most controversial development in America’s housing “recovery” is the role played by large private equity firms. In recent years, they have bought up more than 200,000 mostly foreclosed houses nationwide and turned them into rental empires. In the finance and real estate worlds, this development has won praise for helping to raise home values and creating a new financial product known as a “rental-backed security.” Many economists and housing advocates, however, have blasted this new model as a way for Wall Street to capitalize on an economic crisis by essentially pushing families out of their homes, then turning around and renting those houses back to them.

Caught in the crosshairs are tens of thousands of families now living in these private equity-owned homes. For them, it’s not a question of economic debate, but of daily safety and stability. Among them are the Cedillos of Chandler, Arizona, a tight-knit family in which the men work in construction and the oil fields, while the strong-willed women balance their studies with work and children, and toddlers learn to dance as early as they learn to walk. Their story of a private equity firm, a missing pool fence, and the death of a two-year-old child raises troubling questions about how, as a nation, we define security in housing and why, in the midst of what’s regularly termed a “recovery,” many neighborhoods may actually be growing increasingly vulnerable.

A Buying Frenzy

In early August 2013, the Cedillo family threw a pool party at their house in Chandler. It was the sixth birthday of Brenda Cedillo’s son, Jesus, and the family gave him a Batman-themed celebration, complete with a piñata in the driveway and a rented waterslide for the small pool in the backyard. Brenda, her brother Bryan, and her sister Christine had signed a one-year lease on the two-story structure three weeks earlier, which made the party special. It was the first family celebration that could be held in a house.

“We’ve always lived in apartments, apartments, apartments,” said Christine.

The three of them were excited to find a place they could afford that was big enough for their children, Christine’s partner Javier, and their parents Olga and Jesus. Christine’s oldest daughter, two-year-old Zahara, was so close to Brenda’s son that the two called each other brother and sister.

The only worry during the party was the pool, carefully monitored by the adults. Being unfenced, it had been a source of stress since they moved in. Repeated requests to the management company overseeing the property that one be installed had resulted in nothing. The Cedillos had no idea that the house’s real owner was a private equity firm called Progress Residential LP.  It had been founded in 2012 by Donald Mullen, a former Goldman Sachs partner, and Curt Schade, a former managing director at Bear Stearns, an investment bank that collapsed in 2008. Progress was financed by a $400 million credit line from Deutsche Bank.

The same month that the family rented the house at 1471 West Camino Court, Progress Residential purchased more homes in Maricopa Country than any other institutional buyer. Nationally, Blackstone, a private equity giant, has been the leading purchaser of single-family homes, spending upwards of $8 billion between 2012 and 2014 to purchase 43,000 homes in about a dozen cities. However, in May 2013, according to Michael Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University, Progress Residential bought nearly 200 houses, surpassing Blackstone’s buying rate that month in the Phoenix area.

"Abolish all taxation save that upon land values." -- Henry George

Revealed: Tesco hoarding land that could build 15,000 homes
« Reply #35 on: Aug 14, 2014, 10:47:02 am »


  • Mega InfoWarrior
  • *****
  • 1113

Revealed: Tesco hoarding land that could build 15,000 homes

Investigation reveals embattled supermarket chain's land bank bigger than estimated – 310 separate sites without a Tesco store

Simon Goodley and Leila Haddou
The Guardian
26 June 2014

A Guardian investigation reveals that Tesco own 4.6m sq m of land without a
store, an area big enough for 15,000 homes. Photograph: Alamy

Tesco, the UK's largest supermarket chain, is hoarding land and buildings covering an area big enough to build 15,000 homes, a Guardian analysis has revealed.

The size of the embattled retailer's land bank, theoretically large enough to replicate the government's proposed new garden city at Ebbsfleet, is far greater than previously estimated and remains on its books despite much of it being bought to build out-of-town Extra superstores which are no longer financially attractive as shoppers turn their back on the big weekly grocery shop.

The scale of Tesco's land holdings are revealed as the grocer's under-pressure boss, Philip Clarke, steels himself for a barracking from disgruntled shareholders at Friday's AGM. Clarke has said it could take three years to turn the struggling UK chain around. Its most recent sales figures were the worst in a generation.

The study of Land Registry records by the Guardian and aerial photography company Getmapping reveals Tesco's British property portfolio covers 4.6m sq m, spanning around 310 separate sites that do not currently house a Tesco store in England, Scotland and Wales. The data is a snapshot of Tesco's land ownership, taken from Land Registry records in March, which was then matched against the retailer's own database to remove existing stores. Some of the portfolio is residential property or rented to other retailers, but the majority is undeveloped.

"Abolish all taxation save that upon land values." -- Henry George



  • Mega InfoWarrior
  • *****
  • 1113
...have you noticed that those who profess so much concern for the plight of "little old ladies" either start hemming and hawing or become mysteriously silent whenever someone brings up the issue of tenants being evicted from their homes at gunpoint as a consequence of the poverty-in-the-midst-of-plenty-creating rent-wage gap?

Why the apparent double standard?

Could it have something to do with intuitive awareness of the fact that this issue can't be candidly addressed without running the risk of drawing attention to the anti-Georgist tax policy that gave rise to said "gap" in the first place -- and of thereby validating the Single Tax remedy?

San Francisco landlord uses loophole to evict 98-year-old who paid rent on time for 50 years

By David Edwards
Raw Story
July 10, 2014

A 98-year-old San Francisco woman said this week that she is being evicted from her apartment after 50 years, and she’s never once been late paying her rent.

KRON reported that Urban Green Investments is using the 1986 Ellis Act to kick Mary Phillips out of her apartment so the company can cash in on the surging real estate market in San Francisco. The Ellis Act allows landlords to evict tenants if they are getting out of the rental business.

“I’ve been very happy here,” Phillips explained. “I’ve always paid my rent, I’ve never been late.”

Phillips, who is one of many the low-income families and seniors being evicted, has vowed to fight the eviction because she has nowhere else to go.

“I didn’t sit down and cry, I just refused to believe it,” she said. “They’re going to have to take me out of here feet first.”

“Just because of your age, don’t let people push you around,” she said.

"Abolish all taxation save that upon land values." -- Henry George



  • Mega InfoWarrior
  • *****
  • 1113

Five Star Interview

Andrew Mazzone Interviews PCR

This is an excellent conversation between PCR and Andrew Mazzone of the Henry George School of Social Science. Of all my interviews, this one is the best.
"Abolish all taxation save that upon land values." -- Henry George

Here's one way to reduce the number of undeveloped lots in Minneapolis
« Reply #38 on: Mar 24, 2016, 01:00:48 pm »


  • Mega InfoWarrior
  • *****
  • 1113

Here's one way to reduce the number of undeveloped lots in Minneapolis

By Peter Callaghan

This lot on Hennepin Avenue is the type of property that could see increased taxes should
cities like Minneapolis shift to a land-value tax that taxes the value of land at higher rates
than improvements.

It would be understandable if members of the Minneapolis City Council wanted to avoid talking about property taxes for a while.

A dispute over the size of the city’s 2015 tax levy led to an acrimonious end-of-year debate. Yet not quite a month later, a council committee went there anyway, though in a way that could end up providing more revenue from property taxes, not less.

Last week, the Intergovernmental Relations Committee discussed an idea known as land-value taxation. In brief, it means taxing land separately and at a higher rate than the buildings and other improvements that sit on top of that land. Currently, land and improvements are lumped together and taxed at a single rate, with the building usually making up the vast majority of the total.

“This is an idea that has been floating around,” said committee chair Elizabeth Glidden. “It definitely has had some research and support from academics.”

The local chapter of the group known as Common Ground USA has been quietly pushing the idea throughout the region. Employed in a handful of cities around the U.S. — though none in Minnesota — land-value taxation discourages leaving property undeveloped or underdeveloped (i.e. surface parking lots). Paying more in property taxes for fallow land, the thinking goes, would encourage owners to develop it.

In exchange, taxes on improvements would be lowered under the system, so that developers would not face a disincentive to build or improve buildings. Depending on how it is structured, the system could produce the same amount of revenue as the existing system, or even raise additional money, and could be applied across a city or in specific districts, such as the central business district.

"Abolish all taxation save that upon land values." -- Henry George

Monopoly’s Inventor: The Progressive Who Didn’t Pass ‘Go’
« Reply #39 on: Mar 24, 2016, 01:02:03 pm »


  • Mega InfoWarrior
  • *****
  • 1113

Monopoly’s Inventor: The Progressive Who Didn’t Pass ‘Go’

The New York Times
February 13, 2015

The Landlord's Game, which became Monopoly, was created by Elizabeth
Magie Philips.

For generations, the story of Monopoly’s Depression-era origins delighted fans almost as much as the board game itself.

The tale, repeated for decades and often tucked into the game’s box along with the Community Chest and Chance cards, was that an unemployed man named Charles Darrow dreamed up Monopoly in the 1930s. He sold it and became a millionaire, his inventiveness saving him — and Parker Brothers, the beloved New England board game maker — from the brink of destruction.

This month, fans of the game learned that Hasbro, which has owned the brand since 1991, would tuck real money into a handful of Monopoly sets as part of the game’s 80th “anniversary” celebration.

The trouble is, that origin story isn’t exactly true.

It turns out that Monopoly’s origins begin not with Darrow 80 years ago, but decades before with a bold, progressive woman named Elizabeth Magie, who until recently has largely been lost to history, and in some cases deliberately written out of it.

Magie lived a highly unusual life. Unlike most women of her era, she supported herself and didn’t marry until the advanced age of 44. In addition to working as a stenographer and a secretary, she wrote poetry and short stories and did comedic routines onstage. She also spent her leisure time creating a board game that was an expression of her strongly held political beliefs.

Magie filed a legal claim for her Landlord’s Game in 1903, more than three decades before Parker Brothers began manufacturing Monopoly. She actually designed the game as a protest against the big monopolists of her time — people like Andrew Carnegie and John D. Rockefeller.

She created two sets of rules for her game: an anti-monopolist set in which all were rewarded when wealth was created, and a monopolist set in which the goal was to create monopolies and crush opponents. Her dualistic approach was a teaching tool meant to demonstrate that the first set of rules was morally superior.

And yet it was the monopolist version of the game that caught on, with Darrow claiming a version of it as his own and selling it to Parker Brothers. While Darrow made millions and struck an agreement that ensured he would receive royalties, Magie’s income for her creation was reported to be a mere $500.

Amid the press surrounding Darrow and the nationwide Monopoly craze, Magie lashed out. In 1936 interviews with The Washington Post and The Evening Star she expressed anger at Darrow’s appropriation of her idea. Then elderly, her gray hair tied back in a bun, she hoisted her own game boards before a photographer’s lens to prove that she was the game’s true creator.

“Probably, if one counts lawyer’s, printer’s and Patent Office fees used up in developing it,” The Evening Star said, “the game has cost her more than she made from it.”

In 1948, Magie died in relative obscurity, a widow without children. Neither her headstone nor her obituary mentions her role in the creation of Monopoly.

A Born Provocateur

Elizabeth Magie was born in Macomb, Ill., in 1866, the year after the Civil War ended and Abraham Lincoln was assassinated. Her father, James Magie, was a newspaper publisher and an abolitionist who accompanied Lincoln as he traveled around Illinois in the late 1850s debating politics with Stephen Douglas.

James Magie gained a reputation as a rousing stump speaker. “I have often been called a ‘chip off the old block,’ ” Elizabeth said of her relationship with her father, “which I consider quite a compliment, for I am proud of my father for being the kind of an ‘old block’ that he is.”

Because of her father’s part ownership of The Canton Register, Elizabeth was exposed to journalism at an early age. She also watched and listened as, shortly after the Civil War, her father clerked in the Illinois legislature and ran for office on an anti-monopoly ticket — an election that he lost.

The seeds of the Monopoly game were planted when James Magie shared with his daughter a copy of Henry George’s best-selling book, “Progress and Poverty,” written in 1879.

As an anti-monopolist, James Magie drew from the theories of George, a charismatic politician and economist who believed that individuals should own 100 percent of what they made or created, but that everything found in nature, particularly land, should belong to everyone. George was a proponent of the “land value tax,” also known as the “single tax.” The general idea was to tax land, and only land, shifting the tax burden to wealthy landlords. His message resonated with many Americans in the late 1800s, when poverty and squalor were on full display in the country’s urban centers.

"Abolish all taxation save that upon land values." -- Henry George

America's 11 poorest cities
« Reply #40 on: Mar 24, 2016, 01:04:28 pm »


  • Mega InfoWarrior
  • *****
  • 1113

America's 11 poorest cities

CBS News
February 18, 2015

For all its apparent conveniences and perks, city living has never been easy or inexpensive. And income inequality is often most obvious in metropolitan areas.

U.S. Census Bureau data, cited by the Brookings Institution, found that the 50 largest American cities had significantly higher income gaps between rich and poor when compared to cities overall.

And in December, the Census Bureau released its Five-Year American Community Survey (ACS). It aims to assist in the annual distribution of over $400 billion in federal and state funds to communities across the country while supplying those districts with data they need to help plan municipal investments and services.

A California-based online research group,, used that ACS data to compile a list of the nation's 33 poorest cities.

Here are the 11 poorest cities on that list.

"Abolish all taxation save that upon land values." -- Henry George

Re: America's 11 poorest cities
« Reply #41 on: Mar 24, 2016, 01:06:14 pm »


  • Mega InfoWarrior
  • *****
  • 1113

^^  Notice how Detroit is the poorest of them all, while Pittsburgh isn't even on the list?

Why is that?

Read the following and find out:

Where Will You Stand in the Great Housing Crash?

A severe crash is inevitable, but some places will be hit much harder than others.

by Dan Sullivan
director, Saving Communities
February 2, 2008 (10 Seconds with Buster Keaton)

Real estate prices must plummet. The value of any land you hold will fall, but how much it falls depends on the tax policies of your national, state, and local governments, as well as the zoning, demographics and indebtedness of your neighborhood. Essentially, places that have moved away from real estate taxes, particularly on land, have the least affordable housing and the heaviest debts. These places will suffer the greatest drop in values. Other factors, like dependence on the automobile, will also affect real estate prices.

Lessons from Pittsburgh in the Great Depression

It should be no surprise that the US city with the greatest drop in land prices during the Great Depression was Detroit, which was dependent on its volatile automotive industry. It is far more surprising, however, that Pittsburgh, which supplied much of the steel for automotive and other hard-hit industries, was able to sustain its land values remarkably well. Pittsburgh's land prices even fell less than those in Washington, DC, where the "business" of the New Deal was booming.

   Land-Value Reduction

City               Percentage
Detroit                    58.05
Los Angeles             50.01
Cleveland                46.24
Boston                    27.71
New Orleans            26.63
Cincinnati                26.05
Milwaukee                25.42
New York                 20.59
Washington              11.96
Pittsburgh                11.05

Why didn't Pittsburgh go bust like so many other cities? In terms of its industrial base and population growth, Pittsburgh had been booming. By the onset of the Great Depression, it was the seventh largest city in the United States.

The rest of the country had changed its tax policies in ways that encouraged land speculation. Before 1910, over half the total tax burden in the United States had been coming from the land portion of the real estate tax. But with the introduction of federal income tax and increases in other state and federal taxes, the tax burden shifted off of speculators and onto productive investors.

The result of this tax change and of loose-credit monetary policies was an orgy of land and stock speculation. Much of the stock speculation was indirect land speculation, with investors gambling on corporations that were in turn buying up land, natural resources, broadcast licenses and other privileges. Land prices more than tripled in many American cities between 1913 and 1925.

In contrast, Pittsburgh had modified its real estate tax in 1913, gradually shifting its tax burden off of homes and improvements and onto the value of land. By 1925, the tax rate on land values was twice the rate on improvement values, and over 80% of Pittsburgh's total tax revenue was coming from land.

During that time, land prices in Pittsburgh went up only 20%, despite tremendous economic growth and construction in that city. Real estate interests complained that the tax had made Pittsburgh's land undesirable, but those same interests were spared the subsequent collapse.

History repeats itself

In 1978, California put itself in the vanguard of the anti-property-tax movement by passing Proposition 13, which froze assessments, limited property tax rates to 1% of assessed value, and made it extremely difficult for local communities to increase property tax rates even within those constraints. Rampant land speculation followed. Foreign interests acquired as much California land in the 18 months following passage of Proposition 13 as they had accumulated during the entire history of that state. A construction boom was overshadowed by a much larger real estate price boom, until California had the most unaffordable housing in the United States.

Although Proposition 13 was supposed to make home ownership easier, California now has the most unaffordable housing in the United States. In 2005, the median price of a house or condo was more than twelve times as high as the median annual household income in such California cities as Berkeley, Costa Mesa, Downey, Fullerton, Glendale, Los Angeles, and San Francisco. Even in parched, dusty Bakersfield, the median house price was more than 5.8 times as high as the median income.  Compare that to Pittsburgh, one of the most affordable cities in the United States, where the 2005 median house price was only 2.4 times as high as the median income. [see Affordability Ranking, 243 US Cities.]

California is now 49th in the percentage of housing units that are owner-occupied. Moreover, 79% of California's owner-occupied units are mortgaged, and, where property values have fallen, mortgaged balances often exceed those values.

California has also had the most mortgage foreclosures and bankruptcies of savings & loan institutions since Proposition 13. Some Californians had even taken 50-year mortgages with no payment on principal for the first five years. As real estate prices fell, people walked away from $500,000 mortgages on homes that had fallen in value from $700,000 to $400,000.

Sanity in Pittsburgh

At the end of 1978, Pittsburgh went in the opposite direction from California, doubling its tax rate on land values only. The following year, Pittsburgh raised the land value tax again, to over 2 1/2 times its pre-1978 rate, and in 1980, land tax went to over 2 2/3 the 1978 rate.

Pittsburgh's land prices remained stable while construction levels soared. Fortune Magazine noted that

    Construction in 1980 leaped 212% above the 1977-78 average, reflecting groundbreaking for a new crop of office skyscrapers that is giving the city its so-called second renaissance (the first came in the 1950s with the redevelopment of the Golden Triangle). The adoption in 1980 of three-year tax exemptions on all new buildings -- but not the land -- also boosted construction. In 1981 construction peaked at nearly six times the 1977-78 rate.


Once again, while the rest of the country saw real estate prices boom while the economy flagged, Pittsburgh's real estate prices remained stable while its construction boomed. And, once again, the worst price booms were in states that had moved away from real estate taxes. During the collapse of Savings & Loan associations, the only S&L that went bankrupt from the Pittsburgh area had been making loans in California.

Unaffordable housing invites collapse

As California housing prices collapse and banks try to unload houses on which they will have foreclosed, it will become even more difficult for an ordinary California home seller to get anything like the price he had expected. California's business market will also weaken as businesses will discover that they can save on labor costs as well as on commercial rents by moving to places like Pittsburgh. After all, employees who enjoy lower rents and house prices can live better on smaller salaries.

California is not the only state that overpriced itself by curtailing its property tax, and Pittsburgh is not the only city that kept itself affordable. For example, there has been a major migration from Massachusetts to New Hampshire in the wake of a 1980 Massachusetts referendum that tried to mimic California's Proposition 13. New Hampshire gets two thirds of its state and local revenues from property tax and has no general sales or income tax. It is not a good place for land speculators, but it is a great place for ordinary taxpayers. There are also 18 smaller cities in Pennsylvania that have adopted shifts to land value tax. They also enjoyed construction surges after making the shifts, and they also have very reasonable land prices. One can locate in any of these cities without being gouged by land speculators or tax collectors either.

How did we ever forget?

The lessons of the Great Depression were so severe that people vowed to never let anything like it ever happen again. For decades, banks made a point to only consider the value of improvements as collateral; parents told their children about the evils of speculation; "Never pay more than one year's income for a house," was still the prevailing conventional wisdom as late as the 1960s; and the Shakespearean line, "Neither a borrower nor a lender be," was accorded the reverence of profound truth.

So how did we forget these lessons? The short answer is that we had no choice; our monetary system was designed to collapse unless we as a people suppressed what we had learned and put ourselves hopelessly into debt. The problem is that a growing economy needs a growing money supply, and, almost all new money in the United States is loaned into circulation. If we don't keep borrowing more and more, the system collapses. Sooner or later, however, we reach a point where we not only can't borrow any more but can't pay the interest on what we have already borrowed. That's where we are today.

Hiding from the truth

The news that housing prices would inevitably collapse came a long time ago, but the American people and their leaders refused to listen. As far back as 1960, House & Home, the trade journal of the residential housing industry dedicated an entire issue to the subject of spiralling land prices, with such statements as,

    "FHA is deeply concerned over the way land prices are shooting up. The average land cost component in our valuations has climbed from $761 in 1946 to $2,362 in 1959."

                  -- Julian Zimmerman, Federal Housing Administration commissioner

    "Steepest inflation of all has been the price inflation in land, but nobody is doing anything to stop it and we have no land policy designed to bring land into the market when it is needed. The result has been a largely fictitious shortage of land for housing that has pushed prices far above today's values and is almost sure to end in a bust."

              -- statement of economists and housing industry leaders of the House & Home Round Table on Inflation

    Today's fancy land prices can be kept high only as long as the illusion of scarcity can be preserved, as long as each buyer thinks the land he pays too much for today would cost more -- and sell for more -- tomorrow. But what will happen and who will get hurt when this land-price boom collapses -- as every other land-price boom has collapsed?


After almost half a century of ignoring these warnings we can't deny the inevitable any longer, but we still blame every cause but the real cause. "Irresponsible lenders," is a convenient scapegoat, but more and more lending became necessary to delay the collapse until even "irresponsible" lending had to be winked at. The horrendous Iraq War is also an easy target, especially now that the war is so unpopular. Yet that war delayed the crash as well, even though it made us all poorer in the long run. Even our dependency on foreign oil, which will lead to real problems for communities designed around the automobile, is not the cause of the crash itself.

The true cause

The true cause of real estate crashes is the interplay between land speculation and our debt-money system. People who have no reason to hold real estate other than to cash in on rising prices squeeze out home buyers and productive entrepreneurs. The home buyers and entrepreneurs can only compete by borrowing. That's where debt-money comes in.

Banks have been allowed to create money out of nothing and lend it to us. The only limit is set by the Federal Reserve, and that limit has been continually increased to keep one step ahead of the crash. Because policy wonks at the Federal Reserve kept letting debts get bigger and bigger, real estate prices kept getting higher and higher.

Everyone speculates

In the broadest sense, speculation just means looking ahead, and almost anyone who is not living hand-to-mouth looks ahead to some degree. However, poorer people cannot afford to pay extra now for a home that they expect to grow in value. The better off a person is, the more he looks to the future. Although moderately successful professionals usually pay more to live in neighborhoods where they expect prices to rise, they rarely buy more real estate than they are going to use or rent out for others to use. Idle speculation, which creates artificial shortages of land and drives up prices, is a game for the unusually wealthy.

The who, why and where of land speculation

True speculators are basically people who aren't looking for an immediate return on their money as much as a long-term gain. They buy land when the long-term gain, after taxes, looks more promising than the long-term gain from a productive investment. If there is a rentable building on the land they buy, they will continue collecting rent and performing minimal maintenance. However, as their purpose is to sell the property someday, those with really deep pockets avoid making major improvements that a potential buyer might not want. Also, they do not want to spend money on improvements that could be spent buying more land.

Most speculators buy when land prices are going up, causing them to go up even faster, and sell when prices are going down, causing them to go down even faster. The shrewdest buy before land prices start going up and sell before they start going down, but doing so requires other, less shrewd speculators to buy what they sell.

As a local phenomenon, the economic effect is referred to as "gentrification" where prices are driven up by speculation and as "blight" where they are driven down. On a broader level, it is referred to as inflation and depression. However, even broad depressions do not impact all areas evenly. Wherever land speculation had been most rampant, depressions will be most severe.

Where speculators pounce

As noted above, idle speculators look for the greatest gains after taxes. That means that they look for land that is not only headed up in value, but is also lightly taxed. Land near a new airport, highway interchange or other major project is a great prize for speculators, but it's an even greater prize if it's in a state that curtailed its property taxes, such as California, Massachusetts, or Florida. In those states, they can not only buy land in the path of progress, but can hold that land far longer, and at far less expense, than land that is near similar projects in states that rely on real estate taxes. In cities like Pittsburgh and states like New Hampshire, the out-of-pocket cost of real estate taxes discourages speculators from holding as much land or holding it for as long.

Freezing under duress

One of the things that turns a real estate crash into a full-blown depression is the refusal of land owners to accept reality and sell at a loss. They try to wait for the economy to turn around and bring back high prices, but the economy cannot turn around until land becomes available at affordable prices. Often the full-time speculators have already unloaded their property on smaller, heavily mortgaged landowners who cannot recover what they had borrowed by selling. Still, as long as the sellers or landlords demand a higher price than what potential buyers or tenants are willing to pay, the economic outlook will continue to deteriorate.

What to do now

As an individual, you are well advised to minimize your real estate holdings. Sell if you can, because taking a small loss now is better than taking a huge loss in a few years, even if it means paying rent in the meantime.

If you can afford to relocate, central US states tend to be less overpriced than southern and coastal states. Small cities and compact towns are less overpriced than big cities and their sprawling suburbs.

Within those parameters, consider places that rely most heavily on property taxes, and consider the Pennsylvania cities that tax land values separately. Also, high-density locations will be able to provide decent public transportation when oil shortages destroy automobile-based communities, and looser zoning laws will allow the return of neighborhood businesses.

The trendiest neighborhoods within a community are the worst deals at this point, even where real estate has been heavily taxed. Stable, blue-collar neighborhoods with a high percentage of unmortgaged, owner-occupied houses are very good. Neighborhoods with a high percentage of home owners from racial minorities also tend to be better priced because prejudice and past redlining practices have deflected inflationary pressures away from those neighborhoods.

Good local policies

Keep assessments up-to-date. If a location is gaining value, it is doing well and able to pay its share. The locations that need help are the ones where prices are dropping, and good assessing helps by making the tax drop where the price has dropped.

A small, abrupt drop in real estate prices is better than a big, slow decline. Local officials should light a fire under speculators, but also make it as easy as possible for them to sell and for productive investors to buy. If your community has a land value tax option, it should shift other taxes to land value tax. The more precarious the local economy is, the faster it should do so. If you do not have a land value tax option, property tax is the next best alternative.

Start by abolishing any deed transfer taxes and building permit fees. If you have vacant land and a shortage of housing, replace the building portion of the property tax with land value tax. If you have unoccupied business properties, replace any business taxes with land tax. If you have unoccupied residences, replace gross receipts taxes and wage taxes.

If the state will allow you to make per capita grants to people over 65, you can soften the blow to retirees. However, there is no justice in granting special breaks to elderly home owners at the expense of renters, or granting larger breaks to those who live in more valuable homes.

Loosen or abolish zoning restrictions that prevent higher density construction. In a falling real estate market, people are going to locate where they can do as much as possible on as little land as possible. Allowing single-family home owners to subdivide large homes or to take in boarders will also help them stave off foreclosure. Allowing people to set up home-based or neighborhood businesses will also help. Don't create local debts to stimulate development, as there is a danger of monetary deflation, where debts will become terribly difficult to pay off.

In making spending decisions, consider what an expenditure will do for land values, and think in terms of immediate returns. For example, bus service in some neighborhoods pays for itself many times over because people in those neighborhoods will pay more to live where they can work and shop. In other neighborhoods, bus service makes very little difference.

You can best cut government spending by getting rid of economic development authorities, but keep up the general services that both employ people and maintain land values. When government gets overly involved in developing real estate, real estate owners get overly involved in government. It's better to remove obstacles than make deals or create artificial incentives.

Good state policies

Stop using sales and income taxes to fund local services that could be paid for from real estate taxes. Allow local jurisdictions to tax land values separately from improvements and to grant per capita rebates to people over 65. Allow each county or municipality to do its own assessing, but have a well-funded state oversight operation that investigates assessment accuracy, publishes the results, and allows property owners to cite those results in appealing their assessments.

Abolish "clean and green" exemptions, agricultural exemptions and other interferences that attract land speculators and corporate agribusiness. Family farms actually do better in states that tax farmland heavily, because they are more land-efficient than their corporate competitors. See Gaffney, "Rising Inequality and Falling Property Tax Rates"

Good national policies

National governments can change their monetary systems to prevent housing collapses from expanding into full-blown depressions, but they won't. Banking interests and conservative politicians have brainwashed people into opposing the very thing that needs to be done, while liberals avoid antagonizing banks.

The right way to expand the money supply is through deficit spending. Money that is spent into circulation continues to circulate with no strings attached. This is much better than lending money into circulation and making the public forever indebted to the lenders. While deficit spending is increased, deficit lending can be curtailed by increasing fractional reserve requirements.

Under normal circumstances, the proper goal would be to balance increased spending with decreased lending to produce little or no inflation. In the current situation, however, moderate inflation might be necessary to avoid a major collapse.

Deficit spending does not mean increased spending. Government could decrease its spending and run a deficit by decreasing its taxes even more. As it does so it should liquidate its government debts and help state and local jurisdictions liquidate theirs. Without government bonds to buy, affluent investors will invest in productive enterprises instead. Meanwhile, banks will be hungry for deposits so they can meet their increasing reserve requirements.

National governments should curtail aid to state and local governments, as such aid tends to replace taxes on real estate with taxes on productivity.

"Abolish all taxation save that upon land values." -- Henry George

The Georgist Constitution
« Reply #42 on: Mar 24, 2016, 01:07:46 pm »


  • Mega InfoWarrior
  • *****
  • 1113

Saturday, August 15, 2015

The Georgist Constitution

Rick DiMare Dug this up in his studies of Georgism and Henry George's writings. It was called the Georgist Constitution. He writes:

"The following Georgist platform was adopted on September 3, 1890 in Coopers Union, New York, on the final day of a 3-day convention, the first national convention in Georgist history, and only a few months before Henry George had a stroke that would cause him to withdraw from the movement (though he kept writing important works until he died in 1897)."

"The event was remarkable, as hundreds of delegates attended from nearly every state in the union. It was after this convention that Georgism entered a new phase, one that sought federal and international recognition. This month (August 2015) the movement’s 115th annual convention was held in Detroit."

Platform of the Single Tax League of the United States,
adopted September 3, 1890

Paragraph 1

"We assert as our fundamental principle the self-evident truth enunciated In the Declaration of American Independence, that all men are created equal, and are endowed by their Creator with certain Inalienable rights."

Paragraph 2

"We hold that all men are equally entitled to the use and enjoyment of what God has created and of what is gained by the general growth and improvement of the community of which they are a part. Therefore, no one should be permitted to hold natural opportunities without a fair return to all for any special privilege thus accorded to him, and that value which the growth and improvement of the community attach to land should be taken for the use of the community."

Paragraph 3

"We hold that each man is entitled to all that his labor produces. Therefore no tax should be levied on the products of labor."

Paragraph 4

"To carry out these principles we are in favor of raising all public revenues for national, state, county and municipal purposes by a single tax upon land values, irrespective of Improvements, and of the abolition of all forms of direct and Indirect taxation."

Paragraph 5

"Since in all our states we now levy some tax on the value of land, the single tax can be instituted by the simple and easy way of abolishing, one after another all other taxes now levied, and commensurately increasing the tax on land values, until we draw upon that one source for all expenses of government, the revenue being divided between local governments, state governments and the general government, as the revenue from direct taxes Is now divided between the local and state governments; or, a direct assessment being made by the general government upon the states and paid by them from revenues collected in this manner."

Paragraph 6

"The single tax we propose is not a tax on land, and therefore would not fall on the use of land and become a tax on labor."

Paragraph 7

"It is a tax, not on land, but on the value of land. Thus it would not fall on all land, but only on valuable land and on that not in proportion to the use made of it, but in proportion to its value—the premium which the user of land must pay to the owner, either in purchase money or rent, for permission to use valuable land. It would thus be a tax, not on the use or improvement of land, but on the ownership of land, taking what would otherwise go to the owner as owner, and not as user."

Paragraph 8

"In assessments under the single tax all values created by individual use or improvement would be excluded and the only value taken into consideration would be the value attaching to the bare land by reason of neighborhood, etc., to be determined by impartial periodical assessments. Thus the farmer would have no more taxes to pay than the speculator who held a similar piece of land idle, and the man who on a city lot erected a valuable building would be taxed no more than the man who held a similar lot vacant."

Paragraph 9

"The single tax, in short, would call upon men to contribute to the public revenues, not in proportion to what they produce or accumulate, but in proportion to the value of the natural opportunities they hold. It would compel them to pay just as much for holding land idle as for putting it to its fullest use."

Paragraph 10

"The single tax, therefore, would—

Section 1

Take the weight of taxation off of the agricultural districts where land has little or no value irrespective of improvements, and put It on towns and cities where bare land rises to a value of millions of dollars per acre.

Section 2

Dispense with a multiplicity of taxes and a horde of tax gatherers, simplify government and greatly reduce Its cost.

Section 3

Do away with the fraud, corruption and gross inequality inseparable from our present methods of taxation, which allow the rich to escape while they grind the poor. Land cannot be hid or carried off and its value can be ascertained with greater ease and certainty than any other.

Section 4

Give us with all the world as perfect freedom of trade as now exists between the states of our Union, thus enabling our people to share, through free exchanges, in all the advantages which nature has given to other countries, or which the peculiar skill of other peoples has enabled them to attain. It would destroy the trusts, monopolies and corruptions which are the outgrowths of the tariff. It would do away with the fines and penalties now levied on anyone who improves a farm, erects a house, builds a machine, or in any way adds to the general stock of wealth. It would leave everyone free to apply labor or expend capital in production or exchange without fine or restriction, and would leave to each the full product of his exertion.

Section 5

It would, on the other hand, by taking for public use that value which attaches to land by reason of the growth and improvement of the community, make the holding of land unprofitable to the mere owner, and profitable only to the user. It would thus make it impossible for speculators and monopolists to hold natural opportunities unused or only half used, and would throw open to labor the illimitable field of employment which the earth offers to man. It would thus solve the labor problem, do away with involuntary poverty, raise wages in all occupations to the full earnings of labor, make overproduction impossible until all human wants are satisfied, render labor-saving inventions a blessing to all and cause such an enormous production and such an equitable distribution of wealth as would give to all comfort, leisure and participation in the advantages of an advancing civilization."

"Abolish all taxation save that upon land values." -- Henry George



  • Mega InfoWarrior
  • *****
  • 1113
Once again, Henry George was right, and both his left-wing and right-wing critics were (and are) wrong...

You can’t rent a one-bedroom apartment anywhere in America on a minimum-wage job

The Raw Story
May 30, 2015

Hours needed at minimum wage to afford a one-bedroom apartment (National Low-Income Housing Coalition)

A new report by the National Low-Income Housing Coalition shows that there is no state in the U.S. where a full-time, minimum-wage worker can afford the rent of a one-bedroom apartment, Vox reports.

According to the report, the national average Housing Wage in 2015 is $19.35 for a two-bedroom unit, and $15.50 for a one-bedroom unit, while the federal minimum wage remains at $7.25 per hour in 2015, which hasn’t been raised since 2009. In 13 states and D.C., Housing Wage is more than $20 per hour. The Housing Wage is an estimate of the full-time hourly wage that a household must earn to afford a decent apartment at HUD’s estimated Fair Market Rent (FMR) for no more than 30% of their income.

The data from the report show a gap between wages and rents across the country. In no state or D.C. can a full-time minimum-wage earning worker at the federal minimum wage afford a one- or two-bedroom apartment for his or her family. With the exception of just a few counties in Washington and Oregon (where the state minimum wage is $9.47 and $9.25, respectively), in no county in the U.S. a one-bedroom unit at the FMR is affordable to someone working 40 hours a week at the minimum wage, according to the report.


------------------------------------ (Why is the rent so high?) (Ricardo's Law ~ The Great Tax Clawback Scam) (Real Estate 4 Ransom)

"Abolish all taxation save that upon land values." -- Henry George

Land is not capital
« Reply #44 on: Mar 24, 2016, 01:10:42 pm »


  • Mega InfoWarrior
  • *****
  • 1113
As a Georgist friend of mine recently (and accurately) put it: "If land is treated as capital then the concept of 'rent' goes away and rentiers can masquerade as capitalists and cloak their unearned 'rent' income as justifiable profit."

Keep that in mind while reading the following...

Land is not capital

Robert Ross
May 6, 2010

This week’s column is about the simple tautology “land is not capital.” To many economists, this may seem so basic it goes without saying, but in my conversations with people I have come to realize that many educated, intelligent people believe that land is capital. For many, the confusion comes from the fact that land is regularly treated as an investment by financiers and business people. But not all investments are capital, and not all capital can be an investment.

This isn’t an irrelevant discussion of semantics. The distinction between land, labor and capital exists because of real differences in their economic behavior, and how the government treats these different inputs has a huge impact on the quality of life of real people. Take mobility for example; labor and capital are mobile, so efforts to tax them will encourage flight.  Tax capital and investors will take their money somewhere else, depriving businesses and consumers the credit and liquidity they need to prosper. Tax high salary positions, as Quinn is proposing, and you encourage top income earners to move just outside the state, avoiding the tax and spending their incomes in Indiana instead of Chicago.

A good way to distinguish between capital and land is by their source.  Capital is stored up labor that yields a return over time. All capital, machines, buildings, cars, roadways, etc. are ultimately the product of human exertion. A tractor that costs $1 million represents thousands of hours of labor producing innumerable products and services. The wages from that labor were not consumed immediately, but instead saved and invested in the tractor, which will in turn produce million of dollars of value over its lifetime. This is the return on investment we call interest, and it comes from the provision of goods and services over time.

Ethically, the owners of capital have a legitimate claim to interest, since it is the value that stored up labor produces over time. Like wages, interest is the product of human exertion, which is the ultimate claim to ownership, and a free and competitive market is the best mechanism to price labor and capital and direct their use. 

Land, on the other hand, was not created by human exertion. In many ways, “land” is a catchall term used to describe anything of value that labor did not directly or indirectly create. It can be land proper, a forest, gold or oil deposits in the ground, a vista, proximity to amenities, even legal rights like licenses or patents depending on your view. A big difference between land and capital is that land is fixed in supply while capital is variable in supply. As we saw before, taxing capital causes capital flight, but taxing land has no such effect, since land is fixed in place and cannot move. Land is not produced, so taxes on land don’t reduce land supply as it does capital and labor supply. And, perhaps most importantly, taxing land does not penalize human productivity as do taxes on labor and capital, so they are ethically justified.

The legal ownership of land, the right to have the government back you claim to landed value, exists for the practical purpose of allocating land to the most productive uses. Society shouldn’t grow corn in downtown Chicago, and it shouldn’t build skyscrapers on downstate farmland because those are not the most productive uses of those lands. Private ownership of land creates a market that rewards smart uses of land and penalizes inefficient uses… supposedly. In reality, private, untaxed ownership of land encourages the opposite; Landowners hold land idle and vacant for “investment” purposes, deriving financial gain at society’s expense without providing value. Unlike capital and labor, which only generate returns by providing services to the community, land generates returns because of goods and services provided by the community. The value of land appreciates for reasons entirely outside the control of the landowner.

The Socialist solution to this problem is to nationalize all land and force individuals to rent from the state. But there is a simpler solution that relies on a competitive market instead of a big central government. A high tax on the value of land would discourage speculation and motivate landowners to “use it or lose it,” either using the land to maximize revenue or selling their land to someone who will.  This isn’t anti-capitalist. Quite the opposite, it encourages productivity by freeing natural resources for the purpose of productive activity. It rewards those who provide a service to others and penalizes those who expect others to provide them with service. In fact, many have argued that capitalism cannot be fully realized without land value taxation.

So the next time you hear people talk about land as an investment, or land as capital, remember that investments produce happiness. Empty lots produce dandelions.
"Abolish all taxation save that upon land values." -- Henry George

Enthusiasm for Capitalism
« Reply #45 on: Mar 24, 2016, 01:12:04 pm »


  • Mega InfoWarrior
  • *****
  • 1113

Enthusiasm for Capitalism

by Harry Gunnison Brown

[Reprinted from the Henry George News, July 1958]

According to the Marxist-Leninist-Stalinist economic philosophy labor produces all that is produced, and income from property is "surplus value." Its adherents manifest little or no interest in differentiating between the capital which, by working and saving, men produce to aid them in further production and, on the other hand, natural resources, urban sites and tracts of land usable for agriculture, forestry and grazing.

There is, however, a philosophy that does distinguish between capital and land and between the incomes yielded by the one and by the other. Adherents of this philosophy stress the thought that, since man-made capital can come into existence only as there is work and saving, and since capital adds to the productiveness of industry, the private enjoyment of income from capital is a desirable -- and a deserved -- incentive to bringing capital into existence.

But they look with less kindly eyes on the private enjoyment of income from land, purely as such, and favor having an increasing amount of such income taxed into the public treasury. For the private enjoyment of such income appears, to adherents of this philosophy, as a requirement from landowners that others pay them for permission to use the earth. More specifically, they think of land rent as payment required by landowners of the payers for permission to work, live on, and draw subsoil deposits from, the earth or those parts of the earth which geological forces and community development have made relatively productive and livable.

Is there or is there not significant reason for distinguishing between the capital that, by working and saving, men produce to aid them in further production and, on the other hand, natural resources, sites and tracts? Is there, in short, good reason for distinguishing between capital and land?

Surely the rent of land is in a very peculiar sense socially produced rather than individually earned, and it ought to be sharply distinguished in thought from interest on capital produced by men's labor and saving. If there is any kind of return which is peculiarly fitted to be a source of public revenue, it is the rent of land.

Time was when the American Declaration of Independence and the struggle of the American states for freedom from political domination by Great Britain, stirred the imaginations of liberty-loving people in many other countries. Today we seek allies and sympathizers in our ideological struggle against the socialistically regimented countries of the Communist bloc. Will it help us in this ideological struggle -- will it stir enthusiasm for capitalism -- if in the "capitalism" that we practice and urge upon others, we include vast private income derived from charging (a) for permission to use -- and history might have been such as to make it so -- navigable lakes and streams, or (b) for permission -- and this is the way history really has made it -- to work on and to live on the earth?

Professor Henry E. Hoagland has stated that vacant lots are the largest single class of property in American cities. His statement is substantiated by a survey of eighty-six cities ranging In population from 900 to over 800,000, the results of which were published in 1955. The survey showed that approximately 43 per cent of the land area -- excluding streets and water areas -- was held vacant.

When land is held out of use speculatively or otherwise, rents which must be paid for apartments or homes and their sites become higher; thus the purchase price of land -- and homes -- increases. Wherever large amounts of land are vacant all public utility services become more expensive to install and maintain. If our taxes were shifted more largely to bare land and reduced or abolished on buildings and other capital, the building of apartment houses and other dwelling units would increase. Capital, because taxed less and thus yielding more, would flow in, causing rents to fall.

Without understanding the theory of land value taxation no economist can be expected to advise wisely regarding what tax policy is favorable to low-cost housing, slum clearance, industrial development or labor productivity. How shall we account, unless by the existence of an unfavorable intellectual climate among the economics professoriate, for the persistent ignoring, by most -- not, of course, quite all -- of our economists and their textbooks, of cause and effect relations so clear and so significant?

"Capitalism" is under heavy attack in a large part of the world. And the college graduates our economics professors have taught, are but poorly armed against the bombardments of communist and socialist ideology, when they can oppose the optimistically idealized programs of the "planners" with nothing better than the contemporary caricature of what capitalism could be at its possible best. Why have they not been shown the blueprint of a free private enterprise system which would be for many a college student, were it adequately explained to him, an acceptable societal goal and an inspiration to personal effort towards its realization?
"Abolish all taxation save that upon land values." -- Henry George

The Economic Consequences of John Maynard Keynes
« Reply #46 on: Mar 24, 2016, 01:13:06 pm »


  • Mega InfoWarrior
  • *****
  • 1113

The Economic Consequences of John Maynard Keynes

John D. Allen

[Reprinted from Land & Liberty, July-August, 1983. At the time of this article, Mr. Allen was one of Britain's leading industrial journalists. He had undertaken a re-examination of the teachings of the masters of economics in the search for a solution to current economic problems.]

MANY EMINENT men have in their day accepted the Malthusian principle of population as a scientific revelation. Among them is the naturalist Charles Darwin, the distinguished economist Alfred Marshall and, of course, Lord Keynes himself.

It was left to Henry George to inveigh against the so-called principle with its plausible explanation of poverty and unemployment among people dependent upon incomes at subsistence level.

John Maynard Keynes, the centenary of whose birth falls this year, had a most favourable view of these theories and the propositions that flow from them. After reading the volume of letters that passed between Thomas Mathus, Professor of Political Economy at Haileybury, and the stockbroker David Ricardo, Keynes gave this opinion in his Essays in Biography:

"One cannot rise from a perusal of this correspondence without a feeling that the almost complete obliteration of Malthus's line of approach and the complete domination of Ricardo's for a period of a hundred years has been a disaster for the progress of economics ... If only Malthus, instead of Ricardo, had been the parent stem from which nineteenth century economics proceeded, what a much wiser and richer place the world would be today."[1]

To Keynes's great regret, the Malthusian doctrine that employment is regulated by the laws of supply and demand for labour appeared to be swamped by the weight of Ricardian reasoning. But this cannot be quite right because Ricardo not only did not dissent from the Malthusian view of wages, he also voiced his admiration for the Essay on Population. "I am persuaded" he wrote, "that its just reputation will spread with the cultivation of that science of which it is so eminent an ornament."[2]

Ricardo's differences with Malthus were over a quite different aspect of economic science -- the principles of rent. Here the Ricardian view has not triumphed. To quote Henry George:

"This accepted (sic) law of rent, which John Stuart Mill denominates the pans asinorum of political economy, is sometimes called 'Ricardo's law of rent' from the fact that, although not the first to announce it, he first brought it prominently into notice. It is: The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use'."[3]

As Henry George comments, the mere statement of this proposition should be sufficient to demonstrate its self-evident character. It may well be that economists have agreed over the principle or formulation of the law of rent. But the Malthusian interpretation of its action is totally different from that of Ricardo and there is no doubt whatever that the Malthusian view of the law of rent has prevailed.

This interpretation, as expounded by John Stuart Mill and most leading economists since then, is that because a greater effort is required to raise the same produce from inferior land, labour and capital is confronted by the law of diminishing return.

To cite John Stuart Mill, it is the law of production from the land that an increase in labour inputs does not increase the output of produce by an equal degree; or to express the same thing in other words, every increase of produce is obtained by a more than proportional increase in the application of labour.

MILL SAYS that this general law is the most important proposition in political economy.[4]

Not surprisingly, other economists have followed him down this road, culminating at the end of the 19th century with the theory of marginal productivity as propounded by Marshall and others.

This centres on the proposition that the wages of every class of labour tend to be equal to the net product of the marginal labourer. This principle is Malthus all over and Keynes draws heavily on it in his writings.

This kind of thinking, where wages are subject to the law of diminishing return, is at the basis of Keynesian economics and indeed the orthodox economics of the preceding century.

In his preface to the German edition of the General Theory of Employment, Interest and Money, Keynes says that Alfred Marshall, on whose principles of economics all contemporary English economists have been brought up, was at particular pains to emphasise the continuity of his work with Ricardo's.

According to Keynes, the important contribution made by Marshall was grafting the marginal principle on to the Ricardian tradition.

This in itself is rather strange for it was Ricardo who first drew attention to the marginal principle as the regulator of all economic phenomena. However, if Marshall followed the Ricardian tradition, it is not evident from his writings. Plainly from his own testimony, he was an ardent Malthusian. There was no need for Keynes to wring his hands over Marshall's deviationist tendencies.

Malthus, he stated, by careful study of the facts, proves that every people has been so prolific that the growth of their numbers would have been rapid and continuous if they had not been checked either by a scarcity of the necessaries of life or some other cause, that is by disease, by war, by infanticide or, lastly, by a voluntary restraint.

"His second position", said Marshall, "relates to the demand for labour. Like the first it is supported by facts, but by a different set of facts. He shows that up to the time at which he wrote, no country (as distinguished from a city, such as Rome or Venice) had been able to obtain an abundant supply of the necessaries of life after its territory had become very thickly peopled. The produce which Nature returns to the work of man is her effective demand for population: and he shows that up to this time a rapid increase in population when already thick had not led to a proportionate increase in this demand."[5]

Malthus could hardly have wished for a more able expositor, but those who have read Henry George will know that there are other facts and reasons for this apparent niggardliness of Nature.

Lest it be thought that Marshall was merely summarising Malthus, one more quotation will dispel that:

"His position with regard to the supply of the population remains substantially valid ... it remains true that unless the checks on the growth of population in force at the end of the nineteenth century are on the whole increased ... it will be impossible for the habits of comfort prevailing in Western Europe to spread themselves over the whole world and maintain themselves for many hundred years."[6]

The principle of effective demand turns up as one of the key concepts in Keynesian economics.

This was the established view at the end of the 19th century and Keynes carried it forward, though in a novel form which caught the attention of his generation.

To give him his due, it was a brilliant attempt to re-formulate the 19th century view. And the predictions of the population principle certainly seem to be borne out by rising unemployment in Europe and the state of things in the Third World.

While endorsing the Malthusian approach with such eloquence (for he was a fine writer), Marshall was slighting in most of his references to Ricardo. He accused him of inexactitude in stating the law of diminishing return, adding somewhat patronisingly: "It is however probable that the inaccuracy was due not to careless thinking but only to careless writing."[7]

These are hardly the words of someone who sought to perpetuate the tradition of Ricardo. Alfred Marshall was very much on the side of Malthus when it came to the law of rent.

Actually Ricardo never formulated any law of diminishing return: this was the work of Malthus and the economists who followed this line of thinking.

WHAT RICARDO stated with tolerable accuracy was the action of the principles of rent, albeit mainly in their agricultural application.

These principles brought out the key importance of the least productive site in use, or the margin of cultivation. Time and again, Ricardo refers to the product of the marginal site as the regulator of wages, prices, profits and rents.

The Ricardian marginal principle is that the product of the least productive land in use is the fund from which wages and return on capital are drawn; any excess above this on more productive land is rent. Since prices are determined by the revenue required by the marginal producer, rent cannot possibly enter into prices because at the margin no rent is paid.

This is quite different from the exposition given by Malthus, who asserted that the main cause of the high price of produce was "that quality of the earth, by which it can be made to yield a greater portion of the necessaries of life than is required for the maintenance of the persons employed on the land."[8]

Here is a fundamental difference between the two men: though he admired Malthus for his diligent application to the principles of economics, Ricardo felt it necessary to refute this and other errors.

This part of his book is one of the most rewarding in economics, due to its close reasoning. In one telling passage he says: "Land possessed of very little fertility can never bear any rent; land of moderate fertility may be made, as population increases, to bear a moderate rent; and land of great fertility a high rent; but it is one thing to be able to bear a high rent, and another thing actually to pay it. Rent may be lower in a country where lands are exceedingly fertile than in a country where they yield a moderate return, it being in proportion rather to relative than absolute fertility -to the value of the produce and not to its abundance."[9]

Time and again, Ricardo keeps on hammering home that rent is not a question of quantity but of proportion. Its quantity has no influence on wages, costs or prices. The amount of rent on any site is measured by the product on that site (given equal inputs of labour and capital) relative to the product on the marginal site.

This has been completely missed by the advocates of the law of diminishing return, required to give a spurious validity to the Malthusian approach. This assumes, as Keynes expounded it, that the return to labour diminishes with the increase of employment at a given location, so that the pressure of population or demand for jobs exerts a downward force on wages, until they reach the level at which they are just sufficient to call forth the required volume of labour.

Ricardo, on the other hand, said that with increasing population, the tendency was for rents to rise, implying that the community was enriched by the expansion of employment. This is the correct analytical approach and if it were adopted, it would help us to banish unemployment.

But the Malthusian approach won: Keynes described unemployment occurring when the marginal product of labour falls to a level where its utility to the employee is counterbalanced by the disutility of employment as "voluntary unemployment".

In other words, if men withhold their labour because the return isn't worth the effort, that is their affair. In the welfare state, of course, the missing subsistence for labour has to be supplied from public funds, at enormous cost to the taxpayer. The resulting tax pressure has a further adverse action on the margin.

The surprising aspect of the Keynesian theory is that when men are unwilling to work for the marginal wage (itself determined according to this theory by the pressure of numbers) their plight is regarded as "voluntary".

According to Keynes, the state of "involuntary unemployment" occurs when, even though men are willing to work for a lower money wage than the marginal product would justify, there is insufficient demand for their labour.

Such a reduction in the money-wage would be caused by rising prices, i.e. the marginal wage unadjusted for inflation.

This is close to the economic policy followed by Mrs. Thatcher's Conservative Government, whose Chancellor sees pay restraint as the key to improved prospects for employment.

As Keynes saw it, writers in the classical tradition assumed that "unemployment must be due at bottom to a refusal by the unemployed factors to accept a reward which corresponds to their marginal productivity."[10] Such unemployment, he argues, is merely apparent and this corresponds to a state of full employment.

'This is analagous to Malthus's view that rising prices are due "to the increasing number of people demanding subsistence, and ready to offer their services in any way in which they can be useful."[11]

As previously observed, Ricardo accepted the Malthusian view of wages determination but at the same time lamented the distress of the poor whom Keynes might have regarded as voluntarily unemployed.

However, Ricardo did suggest an easing of unemployment and low wages through accumulation of capital at a faster rate than the growth of population.[12] Here were the seeds of a different possibility, unfortunately killed by the 19th century insistence that industry is limited by capital, and wages are subject to iron laws.

Yet in his General Theory Keynes said:

"The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for a century. Malthus, indeed, had vehemently opposed Ricardo's doctrine that it was impossible for effective demand to be deficient; but vainly.

"For since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction, and Ricardo conquered England as completely as the Holy Inquisition conquered Spain.

"Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of effective demand with which Malthus had wrestled vanished from economic literature."[13]

If the question of effective demand vanished, it must have been because succeeding economists felt that the Malthusian principle had answered it; when effective demand failed, it was due to the pressure of population on the means of subsistence. Ricardo accepted it, John Stuart Mill elevated it to an economic law; only the voice of Henry George was raised against it. His advocacy of the taxation of land values as a cure for unemployment is obliquely dismissed by Marshall and not even mentioned by Keynes.

ONE OF the great puzzles of Keynesian economics is its total failure to grapple with questions of taxation, notwithstanding the enormous importance of taxation in the modern economy, both in Europe and the United States.

It seems strange that the principles of taxation laid down by Adam Smith, applauded by Ricardo and endorsed by Henry George, should be so completely ignored. They are hardly mentioned by Marshall and, needless to say, by no economist since his time.

Modern taxation is therefore guided by no principle whatever except that of exaction and impost. This, too, is part of the heritage of Keynes.

The completeness of the Ricardian victory is something of a curiosity and a mystery, according to Keynes. But an even greater curiosity and mystery is why the triumph of Malthusian principles should be laid at the door of Ricardo.

There is a big misunderstanding here.

Take, for example, the postulates on which Keynes founds his General Theory. He calls it a general theory to distinguish it from what he calls the special case to which classical postulates are applicable. By "classical", Keynes means the views of all who preceded him including Marshall, Edgeworth and Pigou, those whom he claims perfected the theory of the Ricardian economics.[14]

Keynes evidently meant by the theory of Ricardian economics the proposition as enunciated by Ricardo - that what matters in economics are the laws which determine the division of the product of industry. No law, said Ricardo, could be laid down respecting quantity but a tolerably correct one can be laid down respecting proportions.

This is exactly the principle on which the whole of Ricardian economics depends.

He added this telling comment:

"Every day I am more satisfied that the former is vain and delusive, and the latter the only true objects of science."[15]

If this is what Keynes meant by the Ricardian tradition, he was evidently undeterred by Ricardo's warning that any other kind of inquiry (such as that of Malthus) is vain and delusive.

Keynes's question was: what determines the actual employment of the available resources, which includes the size of the employable population?

This is the quantitative approach so much deplored by Ricardo. He spoke of laws governing distribution of the product, whereas the Keynesian view derived from Malthus is concerned with the so-called laws of supply and demand for labour.

KEYNES attempted to summarise the classical theory of employment in two fundamental postulates.

The first of this is brilliantly simple, the second almost obscure.

1. The wage is equal to the marginal product of labour.
2. The utility of the wage when a given volume of labour is employed is equal to the marginal disutility of that amount of employment.[16]

The first statement is a splendid formulation of the law of wages which classical writers such as Adam Smith sought to express. The marginal product, following the doctrine of The Wealth of Nations and echoed by Henry George in Progress and Poverty, is the product of labour at the margin of cultivation.

As Henry George put it, the wages which an employer must pay will be measured by the lowest point of natural productiveness to which production extends, and wages will rise or fall as this point rises or falls.

The corollary is that wages can never exceed the marginal product which sets the standard of earnings for the rest of the economy. So, on the face of things, the Keynesian formulation is one that could have come straight from the pages of The Wealth of Nations. For as Adam Smith said, the produce of labour constitutes the natural recompense or wages of labour.[17]

But this is not what Keynes meant by the marginal product. He had in mind wages being determined by the law of diminishing return and the theory of marginal productivity. Hence the next postulate, bringing in the concept of marginal utility.

As Keynes himself explained, the argument runs as follows: n men are employed, and nth man adds a bushel a day to the harvest, and wages have a buying power of a bushel a day. That is the marginal product.[18]

Another man, it is argued, could not raise the product by so much; it must be less, say, 0.9 of a bushel.

Thus the marginal product of labour has fallen due to an increase of employment, and this marginal product sets the standard for everyone employed.

Not only that, it will cause a shift in the balance of distribution between labour and employers.

As Keynes puts it, the employment of an additional man will necessarily involve a transfer of income from those previously in work to the entrepreneurs.

What about that for the pressure of population?

This may well have been the view of Marshall; indeed, he advances something of the kind in his own writings.

In reality it is the law of diminishing return and it is straight from the Malthusian tradition of economics. It owes nothing to Ricardo, who merely adopted the prevailing view of the day on wages that the natural level was subsistence of the labourers.

This is Keynes's version of subsistence, for he says that the real wage of an employed person is that which is just sufficient to induce the labour actually employed to be forthcoming. So we arrive at the Keynesian conclusion that the amount of employment is fixed at the point where the utility of the marginal product balances the disutility of the marginal employment.

In its way, this is a brilliant formulation of economic laws at work, except that it means in the minds of today's economists something quite different from what it would have meant to Adam Smith and David Ricardo.

Where the volume of employment is contracting, it should surely be the job of the economist to see how the utility of the marginal product can be improved.

Under today's conditions this effort is weighed down by the huge pressure of taxation on employment, both income tax and national insurance charges.

It means that the price of the marginal product has to be inflated to meet taxation: putting it another way, the cost of the marginal labour becomes too high and the margin is forced out of use.

The Henry George tradition would require easing the burden of taxation on labour and capital by shifting it on to that excess product yielded by more productive sites that the classical economists called rent.[19] This releasing of taxation at the margin has the advantage of relieving taxation on wages and profits, thus reducing the marginal cost of labour to the employer. It also provides an enormous incentive to productive effort.

KEYNESIAN theory has no answer to the problems of rising unemployment and inflation. It cannot produce these answers because it has no theory of taxation. It does not recognise taxation as a factor in the equation, probably because taxation is not a factor of production. Despite what Keynes said, what is needed now is a return to the Ricardian tradition of measuring marginal productivity, together with a better formulation of the laws that govern wages. Keynes's own formulation, that the wage is equal to the marginal product of labour, would be a good starting point if only the marginal product of labour were equal to the wage. This can only occur if it is freed of taxation.

Adam Smith gave the elements of the law of wages; Ricardo gave the elements of the law of rent. Henry George appreciated the force of both these laws and struggled to reconcile them with the return to capital.

In fact, there is nothing difficult about the return to capital. It is simply that part of the marginal product which the employer takes in providing the means of enhancing the marginal product.

But it must never be forgotten that labour generates the marginal product and must be allowed to take its full share.

Taxation can be met in proportion to the better resources of industries better placed. This needs a concept of taxable capacity, measured by reference to rental values.

This would satisfy the first of Adam Smith's rules of taxation, that the taxpayers should contribute to the support of the Government as nearly as possible in proportion to their respective abilities.[20]

Adam Smith was right when he spoke in favour of liberal wages. "The liberal reward of labour, therefore," he said, "as it is the effect of increasing wealth, so it is the cause of increasing population. To complain of it is to lament over the necessary effect and cause of the greatest public prosperity."[21]

This was the approach with which the classical school began, the liberal approach that has been overthrown by slavish adherence to the doctrines of Malthus.

Keynes is only the latest exponent of these ideas and the price being exacted is the decline of the industrial economies of the Western world.


1. Quoted in Professor Flew's introduction to An Essay on the Principle of Population by the Revd. Thomas Malthus. 1798: Penguin Library edn.. 1982. p.16.
2. David Ricardo, On the Principles of Political Economy and Taxation, Pelican Classics edn.. 1971. For Mr. Malthus's opinions on rent, see p.390.
3. Progress and Poverty, 1879; Everyman's Library edn., 1911,p.121.
4. Principles of Political Economy, Book I. Ch. 12; Longmans Green 1926 edn.. p. 177.
5. Principles of Economics, Book IV, Ch. 4; Royal Economic Society. 1961. p. 178.
6. Ibid., Book IV. Ch. iv. pp. 179-80.
7. Ibid., Book IV, Ch. iii, p. 163. See also the appendix on Ricardo's theory of value.
8. An Inquiry into the Nature and Progress of Rent, 1815; John Hopkins Press, 1903, p.15.
9. Op. cit., p.395.
10. General Theory of Employment, Money and Interest, 1936; Royal Economic Society edn., p. 16.
11. Op. cit., p.21.
12. Principles, op. cit., p. 121.
13. Op. cit., p.32.
14. Op. cit., p.3.
15. Letter to Thomas Malthus, October 1820, quoted in the General Theory, op. cit., p.4.
16. Ibid., p.5.
17. The Wealth of Nations, Book I. Ch. 8: Everyman's Library edn., 1910, p.57.
18. Op. cit.,p.17.
19. The Ricardian definition is assumed here, whereby the rent of land is the compensation paid for access to its original powers, irrespective of any improvements produced by expenditure of capital.
20. Op. cit.. Vol. II. Book V. p.307.
21. Ibid.,Vo\. I. Book I, p.72.
"Abolish all taxation save that upon land values." -- Henry George

Nuns who help homeless face eviction in costly San Francisco
« Reply #47 on: Mar 24, 2016, 01:14:06 pm »


  • Mega InfoWarrior
  • *****
  • 1113
Once again, Henry George was right, and both his left-wing and right-wing critics were (and are) wrong:


Nuns who help homeless face eviction in costly San Francisco

Associated Press
Feb 9, 2016

SAN FRANCISCO (AP) — Sister Mary Benedicte wants to focus on feeding the hungry lined up outside a soup kitchen in a gritty part of San Francisco.

But the city's booming economy means even seedy neighborhoods are demanding higher rents, threatening to force out an order of nuns who serve the homeless.

The sisters of Fraternite Notre Dame's Mary of Nazareth House said Tuesday that they can't afford a monthly rent increase of more than 50 percent, from $3,465 to $5,500, and they have asked their landlord for more time to find a cheaper place to serve the poor.

"Everywhere the rent is very high, and many places don't want a soup kitchen in their place," said Sister Mary Benedicte on Tuesday, in her French-accented English. "It's very, very hard to find a place for a soup kitchen where people can feel welcome and where we can set up a kitchen for a reasonable price."



Is there any amount of parasitic rent-gouging that brainwashed ideologues won't shamelessly wrap in the flag of "liberty"?

Apparently not.
"Abolish all taxation save that upon land values." -- Henry George

4 Lessons on Economic Populism
« Reply #48 on: Mar 24, 2016, 01:14:55 pm »


  • Mega InfoWarrior
  • *****
  • 1113

4 Lessons on Economic Populism

By Alexandra W. Lough
Earth Sharing
March 11, 2016

Numerous articles and studies published over the past eight years on the effect of the 2008 financial crisis on the future of America’s “millennial” generation have reached the same conclusion: at its best, the future is uncertain; and its worst, the future is downright bleak.  It’s not difficult to understand why.  While the most highly educated generation of young adults in the nation’s history, Americans born between 1980 and 2002 also carry the highest loads of student debt and suffer one of the highest rates of underemployment.  As a result of their strained economic situation, many millennials are delaying marriage, starting a family, and buying homes—once considered central components of the American Dream.

Despite all this, millennials report feeling “hopeful” about their own futures and that of the country. And many have channeled that hope into the 2016 presidential race, in which recent polls show that young voters aged 18 to 29 are participating in larger numbers in primaries and caucuses than in previous elections.  The two candidates who have thus far attracted the most support from millennials include Bernie Sanders and Donald Trump, the so-called “anti-establishment” candidates who have promised to radically transform America’s rigged political and economic systems.  Although they stand on the opposite sides of many issues, both Sanders and Trump employ a certain type of rhetoric called “economic populism,” that decries crony capitalism and especially resonates with millennials and others who have yet to benefit from America’s economic recovery.

Before millennials cast their vote for one or another of these candidates, however, they should consider the modern origins of economic populism and the particular lessons of one of America’s most famous “economic populists”—Henry George (1839-1897). Never heard of Henry George? Think again. If you’ve played the popular board game Monopoly, at the very least, you’re familiar with his ideas which inspired the game’s founder, Lizzie Magie.

In the wake of one of the worst economic disasters in the nation’s history—the Long Depression of the 1870s—George, a middling California journalist, set out to expose and explain why industrial and technological progress seemed perversely to deepen poverty, inequality, and economic instability. In 1879, George published his findings in the aptly titled economic treatise, Progress and Poverty. The work became an international success and likely outsold every other book published in the nineteenth century except The Bible.

More than 135 years later, Progress and Poverty still holds key insights into the polarizing character of American capitalism and helps explain why vast disparities of wealth continue to accompany economic growth. More importantly, George’s ideas—and the amazing story of their life—provide important lessons to those seeking to build a more just and sustainable economic system. George’s ideas not only provide the necessary context for understanding the origins of America’s broken economic system but also the steps for constructing a more just and viable one.


The failure to treat land and natural resources as the common property of all people—as opposed to the private property of individuals—perpetuates crony capitalism, accounts for the growing divide between the wealthy and poor, and causes the pernicious boom and bust cycle that has afflicted the American economy since the late-eighteenth century.

Living and working in California in the post-Gold Rush Era, George closely observed the new and perplexing realities of industrial capitalism. Over the past century, human civilization had experienced unprecedented levels of technological development and industrial production. New sources of power including steam and electricity as well as improved methods of transportation such as canals, turnpikes, and railroads enabled mankind to produce and distribute more goods than ever before.

Despite the fact that society could produce exponentially more food, families continued to starve. Despite the fact that the nation’s leading industrialists earned more profit than at any other time in history, workers struggled to support their families. Despite the fact that America’s economy had become larger and more diversified, the nation continued to face worsening financial panics and industrial depressions.

Unlike other social commentators of his generation who attributed these conditions to overproduction, under-consumption, or a unsound monetary policy—Congress had recently passed the Coinage Act of 1873, which drastically reduced the price of silver—George concluded that at the heart of this dilemma was land. As he explained:
    The reason why, in spite of the increase of productive power, wages constantly tend to a minimum, which will give but a bare living, is that, with the increase in productive power, rent tends to even greater increase, thus producing a constant tendency to the forcing down of wages.
By “rent” George referred not only to the monthly fee a tenant paid to their landlord, but to “economic rent”—which economists define as the profit one earns simply by owning something of value, such as land.

George continued:
    Land being necessary to labor, and being reduced to private ownership, every increase in the productive power of labor but increases rent—the price that labor must pay for the opportunity to utilize its powers; and thus all the advantages gained by the march of progress go to the owners of land, and wages do not increase.
George defined land broadly to include not just the surface of the earth, but all the materials, forces, and opportunities freely supplied by nature. To George, buildings, houses, farms and other improvements to land represented wealth or capital, whose values could be separated from land. Unlike the value of capital, land value increased not as the result of any effort on behalf of the individual owner, but to the increase in the demand for land as a result of advancing population, the building of a railroad, the construction of a school, or a multitude of other public improvements. In other words, George argued that land values are social in origin, completely dependent on the development of the surrounding community.

The relationship between public improvements and an increase in land values was especially apparent in California and other western states. Following the announcement of a new railway route, for example, land values skyrocketed and investors raced to purchase large sections near the planned route. Speculators made a killing following the completion of the railway when they could sell the land for many more times what they had initially paid. Railroad officials often colluded with speculators to increase the price of land to help finance construction.

Unbridled speculation in land values, George correctly surmised in Progress and Poverty, had preceded every major North American economic panic since the late-eighteenth century.


To break the boom and bust cycle and prevent deepening wealth inequality, the federal government should replace all taxes that penalize the working and middle classes with one “single tax” on the full value of land rent.

Prior to the passage of the Sixteenth Amendment, which enshrined the modern federal income tax into the Constitution, Congress mainly relied on public land sales and tariffs—taxes on imported goods—to finance the activities of the federal government. State and local governments raised revenue almost entirely from the general property tax. Both tariffs and property taxes, George pointed out, unfairly privileged the wealthy at the expense of the poor and middle classes.

By design, tariffs protect manufacturers by restricting and raising the price of imported goods and materials. Defenders of high tariffs claimed such taxes protected American jobs by reducing foreign competition. Opponents like George, however, pointed out that high tariffs make most goods purchased by laborers more expensive and thus, reduce the true value of wages.

Property taxes also tended to benefit the rich by failing to differentiate between the economic value of land and the value added by capital improvements. In many places, only improved land—that is, land with houses, farms, buildings, etc.—reached tax rolls, while the owner of many acres of valuable albeit undeveloped land entirely escaped taxation. Additionally, the rich were rather adept at “hiding” certain types of property—valuable jewelry, stocks, paintings, etc.—while also convincing tax assessors to underreport the value of property they could not hide—land.

To reduce corruption and more fairly distribute the tax burden, George proposed to eliminate all taxes save one tax on the full value of land minus the value of improvements. As he explained,
    Were all taxes placed upon land values, irrespective of improvements, the scheme of taxation would be so simple and clear, and public attention would be so directed to it, that the valuation of taxation could and would be made with the same certainty that a real estate agent can determine the price a seller can get for a lot…

    A tax upon land values is, therefore, the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community.
George’s proposal became known as the single tax and those who supported it were called “single taxers.”

Through the single tax, George hoped not only to reform the system of taxation, but also abolish the system of private property in land, which allowed individuals to horde resources nature bestowed to all of mankind and profit from the efforts of the entire community. According to George:
    The wide-spreading social evils which everywhere oppress men amid an advancing civilization spring from a great primary wrong—the appropriation, as the exclusive property of some men, of the land on which and from which all men must live…

    It is the continuous increase of rent—the price that labor is compelled to pay for the use of land, which strips the many of the wealth they justly earn, to pile it up in the hands of the few, who do nothing to earn it.
Beyond righting a wrong, the single tax promised a host of other social benefits. Taxing only land values would generate all the revenue needed to operate government and doing so would produce ever greater levels of opportunity, as man’s right to the bounty of nature and his desire for a productive life was strengthened. Taxing only land values would ameliorate and one day eliminate the hardship caused by continually bursting bubbles of land speculation. Taxing only land values, George believed, was not just the application of sound public policy, but the acknowledgement of a spiritual duty.


The unprecedented popularity of the single tax and all that it stood for prompted the beneficiaries of crony capitalism—the defenders of the status quo—to accept half-measures such as the federal income tax, while at the same time burying George under a mound of lies and epithets.

The simplicity and inherent fairness in the single tax drew followers from different walks of life and from all over the world. In 1886, the United Labor Party selected George as its candidate for Mayor of New York City. In a hotly contested and nationally followed race, the Democratic candidate Abram Hewitt narrowly defeated George, who earned more votes than any other third party candidate in the City’s history. He also outperformed the Republican in the race, Theodore Roosevelt, who placed third.

George was a profound influence on the religious reform movement known as the Social Gospel, both in the United Kingdom and the United States. One of his best known followers was the popular New York City priest, Edward McGlynn, whose outspoken efforts to bring a Georgist solution to the deepening poverty and inequality led him to be ex-communicated—and then re-communicated, in his lifetime and under the reign of Pope Leo XIII.

George’s growing religious influence in Europe and the United States coupled with the McGlynn controversy prompted Pope Leo XIII to issue the famous 1891 Encyclical Rerum Novarum, in which he reaffirmed the Catholic Church’s support for private property rights in land and also reminded Catholics of their spiritual duty to charity and the less fortunate.

Because he campaigned against private ownership of land, George’s detractors labeled him a socialist. In supporting private ownership of capital, however, George was clearly not a socialist. Karl Marx vehemently opposed George and the single-tax movement for misleading workers into believing that landowners rather than capitalists were to blame for their suffering. “Theoretically the man is utterly backward!” Marx wrote of George in 1880.

Despite the economic nature of his subject, George wrote for the common reader. He rejected the idea that one must possess a good deal of formal schooling to grasp the laws of political economy. His lack of academic credentials and increasing popularity threatened a growing number of professional economists who dismissed George’s theories as “half-baked” and “dangerous.”

The widespread appeal of the single tax together with the growing demand to lower tariffs, led many in Congress in 1913 to support a federal income tax. Although a good deal more progressive than today’s version, the federal income tax was a poor substitute for a tax on economic rent. The main problem with an income tax, according to George, was that it failed to differentiate between incomes justly earned and those earned from the labor of others. As he explained:
    Nature gives to labor; and to labor alone…

    Now, here are two men of equal incomes—that of the one derived from the exertion of his labor, that of the other from the rent of land. Is it just that they should equally contribute the expenses of the state? …The income of the one represents wealth he creates and adds to the general wealth of the state; the income of the other represents merely wealth that he takes from the general stock, returning nothing.

Despite attempts to discredit George, his ideas inspired a generation of social activists on multiple continents who successfully built the single tax into a number of Progressive Era reforms and programs—particularly at the state and local levels—that continue to provide such basic human services as clean water, electricity, and public transportation to large populations all over the world.

Although the single tax was never fully implemented anywhere in the world, George’s ideas animated many of the most notable social reform movements of the era of high industrialism. In particular, local government leaders of the Progressive Era pulled heavily from the single tax to justify their efforts to raise taxes on public service corporations and transfer the provision of water, power, and transportation from private to public suppliers—a movement known as municipal ownership.

Similar to George’s single tax, which aimed at reclaiming and distributing socially created land values, advocates of municipal ownership targeted the socially generated wealth of public service corporations, which amassed huge profits by providing services required by all residents and using public property, such as streets, waterways, gas lines, and franchises, to do so. As Ohio State Senator and single tax advocate Frederic C. Howe explained in 1907,
    The value which these corporations enjoy in the market is social in its origin. It is created by the community itself. No act of the owner gives them the earning power which they enjoy…Moreover, the franchises and privileges that these corporations enjoy are granted by the people themselves. They are created by law. No labor enters into their making. They are a free gift from all of the community to a few of its members.
In states with constitutional provisions against municipal ownership, urban reformers utilized the single tax in their efforts to increase taxation on the property of public service corporations, particularly that of railroads and streetcars.

The reach of the single tax into such seemingly disparate movements as labor politics, religious reform, and municipal ownership testifies to the importance of land and natural resources to the fundamental dilemma facing democratic society: how to encourage economic growth and provide an equal opportunity to all persons to engage in and benefit from the advancements of human civilization. To George the answer was simple: one tax based solely upon the wealth produced by land—the resource from the time of its creation that has always existed for the benefit of all men.

As the presidential election rolls nearer, young voters might fare well to remember George’s lesson that so long as the government continues to treat socially generated wealth as the private property of individuals, the benefits of industrial progress and economic recovery will not be shared equally; instead, those benefits will flow to those who control the greatest shares of economic rent.

Alexandra (Alex) holds a Ph.D. in American History from Brandeis University. She currently serves as the Director of the Henry George Birthplace and is preparing a book manuscript based on her 2013 dissertation, “The Last Tax: Henry George and the Social Politics of Land Reform in the Gilded Age and Progressive Era.”
"Abolish all taxation save that upon land values." -- Henry George

A Tax That Liberals and Conservatives Could Love?
« Reply #49 on: Mar 24, 2016, 01:16:14 pm »


  • Mega InfoWarrior
  • *****
  • 1113

A Tax That Liberals and Conservatives Could Love?

How to discourage rent-seeking

By Matt Zwolinski
March 08, 2016

Nobody likes taxes. But not all taxes are equally bad. From a moral perspective, some taxes are more unjust than others – imposing costs, for instance, on precisely those people who are least able to afford them. And from an economic perspective, some taxes are more inefficient than others, distorting economic activity by discouraging work and/or investment.

So, if we resign ourselves to the fact that some taxation is a necessary evil, it’s worth asking the question: what is the least evil way for governments to raise revenue?

In 1879, an American social theorist named Henry George wrote a book entitled Progress and Poverty in which he proposed an intriguing answer to this question: government financing should be derived from one “Single Tax.” And that tax should be not on income, or on consumption, but on land.

By “land,” George meant not just the ground beneath your feet but all natural resources. That includes the dirt on which you’re standing but also the minerals under the dirt and the airspace above it. Anything that exists independently of human activity but which can nevertheless be appropriated and used for human purposes is a natural resource, and the unimproved value of such resources is a legitimate object of George’s Single Tax.

Why is this tax better than any other? George had two arguments: one moral, and one economic.

The moral argument starts from the same place as John Locke’s famous discussion of property, with the claim that each individual is the sole rightful owner of his body and labor. Because George accepted Locke’s idea of self-ownership, he argued that most forms of taxation are unjust – essentially a form of theft. If you own your labor, and you choose to sell your labor to somebody else, no third party – including government – can legitimately demand that you give them a portion of the income you’ve received. To do so would be, in effect, to steal your labor.

But natural resources are not the product of anyone’s labor. They simply exist, on their own, as a free gift of nature. And because nobody created them, nobody has any better claim on the raw value of those resources than anybody else. Your ownership of your body and of your body’s labor does not give you the right to put a fence around a piece of land that your labor did not create, and to prevent everybody else from using it without your consent.

Natural resources, George thought, belong to humanity as a whole, and not to any particular person. A tax on the unimproved value of those resources is therefore one way in which humanity as a whole can reclaim what has been unjustly monopolized by a few, and do so moreover without violating individuals’ self-ownership. The Single Tax, on George’s view, is the only kind of taxation that does not amount to theft.

But not only did George think the Single Tax was more just than other forms of tax; he also believed, like Adam Smith before him and economists from Milton Friedman and Joseph Stiglitz after, that it was more economically efficient. Most taxes have a distortive effect on economic activity. A tax on income causes people to work less than they would if they simply followed the normal market forces of supply and demand. A tax on capital gains causes them to invest less. In short, any time you tax something people do, or anything that is produced by things that people do, then people are going to do less of that thing and produce what economists call “deadweight losses.” But since natural resources are not the product of human activity, a tax on their value obviously doesn’t lead to people producing less of them. All it leads to is less “rent” winding up in the hands of the landlord, and therefore less of an incentive to become a landlord in the first place, at least if all you’re going to do with the land is hold it and charge other people for its use.

Of course, many landowners do more than this. Many landowners use their land productively. They build things on it; they plant trees on it; they fertilize the soil. Insofar as landowners improve the land – or “mix their labor” with it, in Locke’s terminology – they are entitled to something in return for their labor. But what they are entitled to, George insisted, was only the value of their improvement. If you make a $10,000 improvement to a $500,000 tract of land, your labor entitles you to the $10,000 you’ve produced. It does not entitle you to the $500,000 you simply took. By allowing people to keep what they’ve produced – but only what they’ve produced – we both respect their moral claim to the products of their labor, and we maintain a strong incentive for people to use their land productively.

"Abolish all taxation save that upon land values." -- Henry George


Powered by EzPortal