Being priced out of your home

These are interesting times. As home prices go up and long with them, the property taxes associated with those home prices, some consumers are being priced out of the housing market or, in some cases, need to sell their homes.

It's partly a supply-and-demand issue. Years of soaring house prices (and recent increases in mortgage rates) have simply priced many people out of the home-buying market. Indeed, the portion of U.S. households owning their own home slipped to 68.5 percent in the first quarter from 69.1 percent a year earlier, according to the Census Bureau.

Wherever I travel in Vermont, I hear stories of the pain being inflicted by rapidly rising property taxes. Property taxes now threaten many of the qualities we cherish in our state.

Legislation lowering the cap on local property-tax increases met resistance right up to the end. Supporters of the property-tax cap told lawmakers that Rhode Islanders are being priced out of their homes by taxes that average $4,000 a year.

In each of these cases one can find the same problems, which are not discussed. Speculators / flippers / developers speculating on land prices, urban sprawl, and rising costs associated with government.

These are the mains reasons why home prices have risen so sharply, which for most people wouldn’t be a problem except their property taxes are also going up. But why? If the costs of government remained the exact same or at least kept pace with inflation, the property tax rate should decrease as values increase. However, in many communities, in addition to the escalating rise in values the tax rate is going up as well. This from my own town of Red Hook, NY.

But why do costs with government go up? Sure, wages for teachers should go up, garbage collection fees should go up, and everything else should also go more or less with inflation. But, it doesn’t. Why?

Because of urban sprawl, the cost for the government to support one more additional child is greater then it would be in a more condensed city. Those subdivisions with those huge yards each need long roads to connect them. They need power lines. They need cable lines. Buses need to travel further for each additional child. Cars need to travel further and spend more time in traffic.

Drive by your local strip of suburbia big-box stores and what do you see? Parking lots. Lots and lots of parking lots. Think about how many stores in the urban center of any city could be on just one of those massive parking lots, which are rarely used to maximum capacity. Here is the kicker. Those huge stores pay almost nothing in taxes on those parking lots.

For example:

The subsidies Wal-Mart lobbies for run the whole gamut: free or reduced-price land, infrastructure assistance, tax increment financing (TIF), property tax abatements or discounts, state corporate income tax credits, sales tax rebates, enterprise zone tax breaks, job training funds and low-interest tax-exempt loans. The most deals and dollars were found in Texas (30 deals worth $108 million) and Illinois (29 deals worth $102 million).

On top of that, the property tax is a hybrid tax which taxes both capital and land and usually at the same rate. Hence, the majority of the tax falls on the building and improvements. This gives incentive for these firms to take valuable out of production for massive parking lots, which you the consumer need to drive around. Often times this land is some of the most valuable and productive land around. Transforming it into a parking lot is a major cost to all of society. Speculators, who are waiting for “the rise” and will sell when the conditions are right ten or twenty years down the road.

The solution to all of these problems is to tax land. Shift our taxes away from capital improvements and labor, and towards land.

Our cities, towns, and villages need to grow. But they need to grow smartly. Property tax caps, rate caps, subsidies, and portioning were implemented in many cases with the idea of reducing the tax burden or slowing down sprawl. In all cases the opposite has happened.

Land Value Tax would eliminate the sprawl. It would eliminate the speculation associated with the boom / bust cycle in the markets. It would help eliminate much of the poverty associated with the speculation in land markets.

I encourage you to support Land Value Taxation reform. Write your lawmaker and ask if they support LVT reform. Or, you can help me in any of my ongoing projects.

Frank J. Gonzalez FL-21 endorses LVT reform

Frank says;

“I prefer Henry George's Land Value Tax (LVT) just like you, instead of the outrageous taxes on labor or capital. LVT is the most economically sensible and ethical form of taxation that simultaneously benefits the environment with what I have personally been describing as a sort of "Tetris" effect toward "ground zero" that minimizes sprawl.”

Donate Here : Volunteer Here

Streaming Music (cont)

Grateful Dead - Europe 72 - Jack Straw

Actblue

Added an Actblue page for candidates who support LVT and Georgist causes.

Because ignorance is strength?

Seriously that is the only explanation of this article from California.

The local planning commission favors sprawl over non-sprawl because:

• The sprawling plan accommodates deals being negotiated between the city and two developer teams.

• These deals would see 500 of 600 new homes in Tracy built in two outer-Tracy subdivisions by The Surland Cos. and Souza Realty and AKT Development from the year 2013.

• The developers would buy these home-building rights from the city for $40 million and 35 acres of land.

However

• Other developers have argued that the deal sells the city short by more than $100 million.

Shocker I say. Shocker.

Oh, but that is not my favorite. Yes, we get another newspeak term for this, but first, the quote:

“In this case, commissioners agreed with city staff that the sprawling plan was preferable because it would leave the most amount of land empty for unplanned commercial developments.”

Doublethink.

You can contact the city council of Tracy, CA here:

City Hall

325 East 10th Street
Tracy, CA 95376
Phone: (209) 831-4103
Email: council@ci.tracy.ca.us

I then went digging around and found this from the same paper dating from April 17th.

Hobbs said Thursday that he learned the U.S. Department of Interior has approved transfer of the site to the city. Pombo, R-Tracy, previously had sponsored legislation that would transfer the 200-acre site if the city pays for 50 acres. Most of it would be used for baseball, softball and soccer fields, but the city also has to commit 50 acres for businesses or some type of economic development.

That leaves only completion of environmental reviews before the city can take ownership of the site.

Are these the same environmental impact studies?

Digging a little bit more and what do we find? Well, well, well This from May 06th. So, who is mentioned?

None of the cities or the county contracted with AKF Development in the last three years. The company deals primarily with the private sector. AKF recently built Spreckels Park in Manteca and a 293-unit apartment complex south of Highway 120.

Oh, sure, but so long as the city is giving them free land they don’t have to, now do they?

Simply amazing. I am sure there is more digging to do yet

Florida says Split rate and LVT on the table

Hopefully a reader can help me out with some addresses and emails so we can better coordinate with the effort in Florida to switch to an LVT based tax structure. This includes not only politicians, but coordinators for the LVT in that state. In the mean time, I'll see what I can dig up.

Property-tax reform committee created

There is an email if you wish to be considered for this panel.

wankers

Not to take away Atrios' patented term, but seriously, there is no other title more fitting.

Over at a crooksandliars they have a video up of a Mr. John Stossell spewing forth the disinformation, which frankly, is the only defense that the global warming opponents have.

Now, I wouldn't normally bother to link something like that here, but when Scarsdale gave him "the last word" he took that opportunity to effectively say that anyone who is a global warming opponent must hate capitalism and are proponents of socialism. However, if Mr. Stossell had done is homework, he would know allowing firms and people to pollute without paying for the privilege to pollute, is in fact, subsidizing this behavior and further, it is not compensating the cost the I have for the benefit you are getting.

I am not certain what economic system Mr Stossell is operating under, but it is certainly not the free-market. Maybe some twisted hybrid of mercantilism or protectionism, but certainly not the free-market.

Lastly, if he was familiar with the proposal then he would know that Gore is a proponent of shifting taxes away from income taxes (a socialist misunderstanding) and towards pollution rents. I can only assume that Mr. Stossell is intellectually lazy or has some other “agenda” which I have yet to learn about.

Mr. Stossell could go and read my Skytrust initiative.

Streaming Music (cont)

Ladysmith Black Mambazo

Interesting

SInce I blogged about this yesterday.

Go here and read this article. Then go down and re-read what I blogged about in yesterdays inventories segment.

Water

Lots of it

So far this has been a wicked hot summer and spring and very wet. I have never seen so much rain. I feel bad for the farmers. I have no idea how they are going to get their corn in. First cut for many sat there and sat there.

Bloggity blog

Feedburner or blogger is doing something wierd. I used to have an option at the bottom of every post called "burn this feed". The &script& tags are all where they should be so this tells me something is wrong with the &bloggeritempage& tags. The feed burned just that post and not the entire blog. I have no idea how many people were using that instead of the normal one.

I've now added another "burn it" on the bottom, which will burn the entire feed. If the old decides to come back, I'll take away the second "burn it".

The Power of Discussion (cont)

This comment below is in response to the diary I put up at DKos yesterday: Saving the Family Farm.

I don't mean that we don't ever talk about eminent domain or sprawl or transportation or development or organic vs. factory farms or protecting the environment, just that there isn't a cohesive, easily-communicable vision linking it all together. These issues ARE all tied up together - once you start trying to address any one aspect of land use, you bump up against the others.

This is why the opposition has such an advantage. They have a clear, concise message surrounded by a theory that is comprehensive. This is also why I will keep relentlessly pushing the Georgist message to the net-roots. I think it is clear that many people are aware of the problems, are also aware that the opposition’s theory is not the remedy, they are aware that the current plans are “push down push up” wack-a-mole solutions, and are seeking some sort of comprehensive plan. The “party” is not going to come around until the people come around.

Streaming Music (cont) - indie

The Yeah Yeah Yeahs.

I have yet to pick up their newest album and I think it is getting good reviews. Maps, the song below, is on par with Rolling Stones, The Ramones, and other garage rock. The rest of the music that is on that album is less then steller, which is always infuriating.

The guitar picker is Nik Zinner who went to my college, Bard.

Climbing Inventories

Stuck! Homes sit longer on the market

I wouldn't consider this “the sign” but it is certainly one of the many signs of the coming real estate collapse. How does this happen, one might wonder. Developers, seeking that escalating rent, get all excited and go into a building spree. When people start to try and sell their homes, or businesses try and move across town, or those ARMs go up and people can’t afford them anymore, they find they can’t sell their houses at those escalated prices.

Here is when things get fun, when the rent starts to decrease, which will happen once inventory starts going up, all that wealth will drain itself out of the housing market and into other things. Remember, most peoples wealth is tied up in their houses, if they lose part or all of that, then things start not-so-merry.

We’re playing for all the marbles this time around.

Running

I went for my first run this year. I used to be a frequent runner, but I became lazy. I was running half marathons at one point.

I just came back and I needed to stop at the one mile point. Good lord, do I need to get back in to the swing of things.

Saving the Family Farm

I grew up on a dairy farm in rural upstate New York, north of the mountains on the Canadian border. I would go to school in the middle of the week and on the weekends I would help my father run the farm and his 50 or so milking cows. This was a good experience for me, although hard word and one which has rewarded me with more then just a good work ethic.

It was back then that I noticed something was going in farmland, but I could never put my fingers on it. I noticed how some small farmers very near the city seemed to stay put for a long time while small and medium farms out in “Farm country” would become absorbed into one of three or four farms in the area. It always seemed counter intuitive to me and it wasn’t until I read Henry George’s Progress and Poverty that I realized what was going on. The farmers very near the city were renting out or selling land near the city every so often, the farmers out in the country never had this opportunity and simply went out of business only to become absorbed by the larger agri-corps in my region.

Even today, if you go to Plattsburgh, New York and drive on Salley Avenue, not 500 yards north of the city line there is a small farmer raising beef, with a Wal-Mart in his backyard. I kid you not. I could probably count the number of beef farmers in Clinton County on one hand, let alone one right beside the city. Occasionally he will sell off a part of his land close to the city or Wal-Mart, raising a small fortune in the process.

Now, lets go for a drive around in the country in anywhere, USA. As I drive around my local here in Dutchess, or in Hampton Roads Virginia, or Northern, IL, I always would see the same thing. Lots of stagnant land, which used to be farm land (according to people in the dinners – I’m a big dinner person) in between “the city” and where all the strip malls are at. After asking around about it, I would usually get one of two responses, either the local farmer sold off a lot of his development to the big-box stores, holding onto the more valuable land in between, because he knows that once that site gets developed and there is traffic going past it, it will sell for much more then just a tidy sum. Or, the farmer sold all of it to a developer who is doing the exact same thing.

Part of this is all fine and good. Cities grow, people build, people move. That’s just life. But, is it to this degree?

When I was living in Hampton Roads, I would always wonder why there were so many strip malls and big box stores in the outskirts when there was plenty of store space in the inner city, except it was empty or in run down buildings. Parts of the city used to be known for their shopping and now they are known for potholes. Most people I knew in Norfolk who actually lived in the city would drive out 20 miles just to go shopping. Something is wrong here, I would think. I used to think how much space was wasted in all those vast parking lots, just sitting there and hardly ever more then 50% full, all of the paved roads to interconnect all of those bigbox stores, all of those cul-de-sacs sweeping around in those cookie cutter subdivisions.

I was amazed how, near Rosendale and Witchduck, the area which was a primo suburban community was now a high poverty area and the new primo suburban community was now 10 miles past that.

In the mean time, if we drive out into the country, we see plenty of farming going on, huge gigantic agri-corps. Anyone who has drive then I-90 in Ohio and smelled the factory pig farms, or the chicken houses in Maryland on the 13 and route 1 up into Delaware, or the dairy barns so big you can barely see the end of them, or the ADMs and Monsanto’s of this world, whose chemists are bringing you some of the finest genetically altered food that government subsidies can buy.

So what is going on and how is all this inter-related? We do not tax land, instead we tax the labor and capital improvements on the land. Small farmers have a higher capital / land ratio, thus to seek a lower tax burden, they expand out or become absorbed into other farms, or they sell all their capital and own only the land, at an extremely low tax rate. If land was taxed and not capital, farmers would have an incentive to build up their capital infrastructure, invest in more labor and invest in less land, hence this would encourage more people to engage in small farming or at least, encourage them not to leave it.

Also, this would be a major boon for the organic farming industry, which uses an extremely high labor investment as well as capital in relation to the amount of land they use.

If the land was taxed and not the capital, developers would not be able to hold on to prime land in the middle of developing areas, something called checkerboard development. This sort of development, as you can imagine, is incredibly wasteful. A tax on land would ensure that only the marginal land (that land closest to the cit) would be the next land to get developed. It is no wonder our property taxes skyrocket because the costs of supporting these subdivisions is enormous compared to the city housing on the margin, roads, law enforcement, power lines, gasoline, car pollutants.

Streaming Music (cont)

Beethoven's String Quartet No. 16 in F major (Opus 135) -

Must it Be?

It must be!

What is Land (cont) – Taxi

Want a free beer?

The taxi medallion is another form of “Land”. It is a good example of what Land is and it is easy to demonstrate some of the market failures.

I am not sure as to why they started issuing such medallions, little monopolies, but I believe there are two reasons. The first is it had something to do with altruism. Generally speaking, regulations come from a good heart but a soft brain. The second is, people in power actually understand how the power of rent works, realizing it would be an easy sell to the people, and moved forward it in an effort to enrich their friends. I don’t know which the truth is. All I know is it gives me a great example to work with.

In New York City, the number of cabs is limited to 11,787. Each cab needs to have a medallion attached to its hood. Occasionally the TLC auctions off new ones, but this has not happened in around 50 years. These medallions are, however, freely tradable.

Further, the TLC sets the price of the cab and what it can charge for each situation. I’m not going to go into if this price fixing is a good thing or a bad thing, because anyone who has traveled in Egypt or Saudi Arabia knows, having a predetermined and set price for a cab can be a very good thing.

Let’s model this simply first.

Consider any other “unskilled” job and how much I could earn. In this simple world lets say it is 100 dollars per year.

Now, I have been given this medallion by Warren Buffet and Bill Gates because they are into that kind of thing. It so turns out that I can drive a cab and after all my expenses are made (car, gas, repair, etc) I earn 200 dollars per year. Sounds good, right?

Joe down the street hates his job. He earns 100 dollars a year. They are both “unskilled” labor and he says to you he might be willing to buy this medallion from you, or maybe you could rent it to him?

So, how much should you rent it for is the first question. That is easy. Rent is your opportunity cost and in this case, that is 100 dollars. I can sit on my but and do nothing and earn 100 dollars a year for doing nothing, or I can drive myself and earn 200, or I can rent for 100 dollars and get some other job for 100 dollars. Which one you choose depends on which scenario is worth more then 100 to you.

Ok, but Joe is really interested in buying so how much should you sell this medallion for?

All you need to do is teach yourself a little bit of present value, which is nothing but fractions added up. For you math geeks, here ya go:

(sorry, i couldn't copy over the equation editor formula, just trust me in the next few lines where it goes in "the limit".)

It so turns out the limiting equation for that is simply R/I or in other words, Rent divided by interest, which is all you need to know.

Ok, so lets say I can loan out that money to anyone I want to at the prevailing interest rate of .10 or ten percent and like we said earlier the rent is 100 per period. So, the present value of this medallion is 1000 dollars. Let’s say the interest rate is 5% or .05, it would then be worth 2000 dollars. Why? Because, I have a guaranteed 100 dollar rental income from this land / medallion and I will not be willing to give it up for anything less then a 100 dollar stream of payments. In this case, that is 2000 dollars. The interest paid on this 2000 dollars is 100 dollars, so you are happy.

Ok, so that is all good. You decide to sell your medallion for 2000 dollars and invest your money wisely in other medallions (lets say you take out a loan to get ten more).

Ok, so a new product comes along, let’s say a new hybrid that will suddenly make driving the cab less costly. Now, if you own a medallion and drive yourself rather then rent you take home 250 a year after all expanses are made, all other jobs are still 100 dollars a year.

So, I have a bunch of medallions and I have a bunch of cabs needing drivers. What do I do? The old rental rate was 100 dollars for driving a cab. Lots of people want to drive a cab and they are willing to do it at 100 dollars. I decide to raise the rents for the medallion and I will now charge them 110. They make a little more and I make a little more. But, I am getting job offers from Sam for a rent of 120, and Todd for 130, and Pete for 140 and Joe wants his old driving position back at 150. Do I pass those cost savings on? Well, I did, briefly, and then the free-market labor market sort of competed them away, woops, nothing I can do about that I’m just the rent taking land lord.

Let’s say the city in all of its benevolence wants to give the “cabbies a break” and raises the rates which they can charge… would you like to guess what happens to the rental rate of that medallion? You guessed it; it goes up until it meets the prevailing wage, enriching the land lord. Just kind of makes you feel al warm and fuzzy every time you get in a cab it is going to end up right back at Carnegie Hill.

Would you like to take a guess what happens if a group of people are willing to work less then the prevailing wage? You get one beer in NYC the next time we both are there at the same if you can answer correctly.

Streaming Music (cont)

Calexico

This video showcases the large arrangement and the talent. We are starting to see more of this sort of thing in other bands like Arcade Fire also. If you aren't familiar with this band, well, give it 3 minutes of your life and you will not regret it, no matter what your musical preference.

What is up with California?

I am putting together a rough study of the farm land in US compared with the productivity of said farmland. I’d like to have at least 20 of the states complete before I finish my writings that will give me a good sample set. But, one thing I can say right now is all states, with one exception, are losing productivity in our farm land. How so?

I took all produce sold by farmers and divided that by the acres declared to be farm land that year by the Dept of Ag in corresponding years going back to 1974. I then deflated that price by the inflation for each period with respect to 1974 (in other words, making 1974 my base year). In all states and in all periods (so far) the productivity is trending downwards. I’ll talk about what this stat means in my next addition.

But, the exception is California and I was a little shocked to see the initial data. Granted, it only went up 15% since 1974, but the amazing thing is all of that is reflected in the latest three time periods. 1987-1992 saw a 4.5% increase and 1992-1997 saw a 20.1% increase. The next period is the most current data period, the 1997 – 2002 period and it saw a 2.6% increase.

Here is where things start looking interesting: I looked at the raw data and it seems the number of acres is decreases each period by around 4.5% with one exception. The 1992-1997 period is decreasing also, but only by .6% (that is 6/10ths of one percent) decrease in total farm land. Tricksy, very tricksy!

Now, the actual productivity, not accounting for efficiency, oscillates between -10% and 10%; except the 1992-1997 period. Which saw an inflation adjusted 27% increase in productivity.

Ok, so something happened in 1992 -1997 and probably more likely in the 1992-1987 period. But, it is important to know what California’s cash crop is: wine. That’s right, the ol’ vino. 90% of all wine made in this country comes from California and 63% of all wine trickled down our throats can be traced back to California. This amounts to a 45.4B dollar economic impact.

In 1990 a piece of legislation came down the pike which said that all wine made in the US needs to list its appellation. For example, if the wine comes from Napa Valley, it needs to say that. There are lots of wineries out there and they can be anywhere. This gave the non-wine buff an easy to go by tool in which to buy what they perceive as high quality wine.

Wine appellation rents. How so very intriguing, no?

Ok, so lets take a look at the wine industry to the best of my ability. Between 2002 and 1974 the physical amount of wine production has gone up 85%. If my theory is right, for that period of 1997 and 2002, I should see more land going towards vineyards and in fact this is exactly what happened, a 7.5% increase in fact. But, this is not good enough because this is actually only 75K of acres and we still need to account for 1M other acres. I think what happened is the USDA changed their methodology in 1997 and they provide both sets of data for that year. If you compare the old 1997 data to the 1992 year you will get a loss of 4.5% also, so it appears everything is normal here.

So, what I need to drive this theory of Wine Appelation Rents home, I need to find total sales of wine in each going back to 1974. I can find wine drank, wine produced, wine exported… in gallons which tells me we are a boozing country for sure, but it tells me nothing about how much people are spending. This much I can say right now, between 1992 and 1997 5B more wine was sold, which is around a 50% increase. However, this is ALL wine not just Californian. True, 60 some odd percent is from CA but, this is science people and we need to be thorough, so I am not prepared to make any declarations yet.

If I make any headway in this problem, I’ll keep you updated.

Liveblogging Events

Next month will be the Council of Georgist Organizations meeting in Chicago in July, which I will be attending.

Many of you here are familiar with liveblogging, how it is done, what to be prepared for and what to expect. Now, to me, this seems fairly straight forward. Just bring a laptop and have at it. But, I also spent 6 years in the military and if there is one thing my experience in the Navy taught me was - the straight forward is always kinked.

So, I’d like to tap this resource of knowledgeable livebloggers out there in the blogging community well ahead of time so I can have time to acquire what I need, schedule and plan ahead so I can get out as much information as possible to this community.

Just post your comments here or email me if it is very lengthy and I’ll post it up on the main board. I’d like everyone to be able to read this information.

The Power of Discussion

Very recently there was an energetic and very lengthy discussion over at Dkos about Land Value Taxation. I think there are a lot of things to learn from that discussion, the details of which I won’t go into.

However, I want to share with you one of the comments when the discussions were being drawn to a close:

"I'm mulling it all over...and over...trying, as you no doubt are...to fit what's possible to change and what's not with both the status quo in my state together with the political realities re all taxes, that reality 'created' by propaganda created by the wealthy to protect themselves and gain advantage. The complexities drive the average citizen (me) to distraction...literally..."What the HELL! Let's go shopping! (or to the beach or the ballgame or 'what's on tv?' Jeez, I might even read a novel for a change!) Like Vivian Leigh, confronted by the complex and seemingly insurmountable problems at Tara...I'll think about that tomorrow."

Now, I don’t know if that person is suddenly going to become a Georgist or not and frankly, it doesn’t really matter. What is important that most people, in my opinion, are genuinely trying to seek new and alternative solutions to some very old problems. Henry George is a different paradigm and like all paradigm shifts can be a hard pill to swallow at first and as such, trying to think critically about what George said can be a challenge.

The interesting thing about the internet, in most cases, is that most are willing to confront these problems and ask the tough questions. While, it may not seem that people are receptive to new ideas, because the most stalwart defenders of the current paradigm are also the most vocal.

I think the poster pretty much nailed it though, which is why the internet is so powerful because it is a self-selecting pool of people who are willing to actively engage in such topics of debate.

As Henry George said:

If the conclusions that we reach run counter to our prejudices, let us not flinch; if they challenge institutions that have long been deemed wise and natural, let us not turn back

Streaming Music (cont) – duets

I am a big fan of the duet and vocalized harmony in general. So, I’m a big bluegrass fan. I think the duet is a lost American art form. Country music used to be the place for the duet and even that has largely gone away. Merle Haggard and Dolly Pardon, Kenny Rogers and Dolly Pardon, Johnny Cash and June Carter Cash, Conway Twitty and Loretta Lynne, but we don’t hear it anymore. Country music has become all about the “Rock star” persona, flag waiving, beer and pigskin and has lost a lot of the magic along the way.

But, where country is leaving off, bluegrass or what some people are calling the “newgrass” movement is really taking off and it really shows in their on stage performance. Some of these new bands coming out like Yonder Mountain, and some of the older bands like Ralph Stanley are starting to get a lot of traction in the contemporary music crowd and radio play where you would not have expected it.

Today’s Streaming Music is Gillian Welch & David Rawlings performing "I Wanna to Sing that Rock & Roll."

Allergies

Yesterday I went to Blithewood Gardens on my Campus at Bard and they were beautiful. Except, I now have allergies, which I never used to have. It’s not at all times of the year, so it must not be all types of pollen, but my eyes water later on in the day and I get real tired. Today is better but my eyes are still burning, though I’m not as tired as was.

Haloscan

No idea what happened but it looks like haloscan died on me. I'll work on that now.

Update: they are back. Not sure why they went away and I'm not sure why they are back.

Streaming Music (cont)

Gomez, I love this band.

Slow day today

And I’m a little tired. Hopefully I can get some stuff up when if I feel a little better later on today.

Tomorrow is Sunday, if you want to guest blog send me something to post

Friday Wine Blogging (cont)

I have three wines to blog about this week.

First and the only one with a real cork, Toasted Head – Chardoney – 2004. I paid about 15 bucks I would pay around 14 for it again. It is very oaky, aroma heavy of pears and maybe granny smithy apples. The oak overwhelms everything, though it does give it a downhome flavor. At the same time it could stand up to (probably) nearly anything you could throw at it, for food paring that is.

For a Chard, it is a nice break from the run of the mill chard. This is unlike nearly everything out there and is a quality wine. I think for 15 bucks it is ok for something a little different. It is also OK for a first go, I would think

The second is the Villa Maria - Sauvignon Blanc – New Zealand – 2005. This is on the grapefruit spectrum of Sauvignons. My wine store owner described it as “refreshing”. I am not so sure I would use that adjective. On the finnish it has an excited lime that seems to linger. Lime is not something I associate with refreshed, personally. I paid 12 bucks for this and would pay 12 bucks again.

The third is what I am sampling atm and it is not remarkable in any way. I can not recommend buying it at any price and, frankly, I am surprised the wine dude allowed my through checkout.

Brampton – Sauvignon Blanc – 2004 – South Africa. On the grass spectrum. Not much else to say.

Soaring Property Taxes

Not a day goes by when I don’t read some news article about our soaring property taxes and very quickly a politician declaring that “something must be done” and let’s be clear before I say anything else, indeed something must be done.

Generally speaking, some of the current proposals revolve around shifting the property to either income taxes or sales taxes. Sometimes they do this through rebate programs like Star here in New York and sometimes it is a direct shift like that in Michigan and California. But, in both cases the money must come from one of those two sources. This includes cooperate income tax. Corporations pass any tax on to the consumers in the form of higher prices and/or lower wages.

However, what is really needed is to improve and expand the tax base. If I told you that you would be pay less in tax yearly and had more job opportunities from a simple shift in the property tax, would you be interested in learning more?

I am speaking of the Land Value Tax. This is a shift away from the buildings and improvements on the land and towards the land itself. Consider if you own a house. You decide you wish to paint your house, build a garage, or any other improvement, what is the immediate effect? Your property taxes go up because you have increased the value of the improvements on the land. This is backwards. Under the LVT you are free to improve your house, fields, whatever it is as much as you want and your taxes will not go up. This is the way things should be.

Walk around in your neighborhood, in the city, or even our in the country. Have you ever said to yourself, “wow, that would be a beautiful home if they only took care of it”. Under the current property tax regime, the people owning that home have an incentive to let I run down because their taxes go down as a result.

When the land is not taxed, this creates problems in society and our neighborhoods. Think about that same neighborhood from before, have you ever seen a parking lot or fenced off empty lot and think to yourself it doesn’t quite belong? Or a single family home in a dense urban area that probably shouldn’t be there anymore? Or an empty factory with weeds and trees springing up?

All of those are examples of when the tax on the land is either non-existent or very small. Speculators are free to sit on the land, benefiting from your hard work in making the neighborhood better, while contributing nothing themselves. In the mean time, your rents are higher and there are fewer jobs because this valuable piece of property is being withheld from production.

The answer to all of these problems, is a shift to the LVT and away from the capital on the land and eventually away from income and sales taxes also.

Is this fair? Yes! Ask yourself which you would rather own, a piece of land of equal size in downtown Manhattan or in the middle of Nebraska if it was given to you at no cost? Wealth is always concentrated in land more at greater rates then even income is distributed. Thus, a tax on land is even ore progressive then the graduated income tax.

Is it efficient? Yes! A tax on land can not check production and more importantly, it can not be passed on to the consumer, the wage earner, or to the business owner.

If you are interested in the LVT and would like to learn more click on any of the links on the right sidebar. You can also help me in any of my projects that I currently have going to raise awareness about the LVT.

Florida Land Boom

I’m in the middle of writing my morning Dkos edition and I found an article that fits so well into the Georgist paradigm, I wanted to bring it to your attention by itself.

Some of the Highlights include

• Miramar makes the top 10 of fastest-growing cities in the nation, but city leaders say its population boom is easing up.

• Over the past decade, people from all over the world have flocked to Miramar and other cities in West Broward in search of newer homes, better schools and safer neighborhoods.

• But in recent years, large tracts of open land gobbled up by subdivisions, office parks and retailers has slowed the city's building boom considerably.

• The years of double-digit growth in the early 2000s slowed in 2004-05 to around 5 percent, the same as the year before. Despite its slower growth, the city added 5,256 residents, making it the eighth fastest-growing city in the nation among cities of 100,000 or more population, according to figures released by the U.S. Census Bureau this week.

• Miramar is not the only Florida city to land on the Census Bureau's top-10 list: Port St. Lucie, in St. Lucie County, was third, and Cape Coral, Lee County, is fifth.

Now, go back and read my Boom Bust cycles and the Neoclassical myth, specifically look at the timeline, and see how the above timeline fits in. Once you’ve done that go HERE and read up on the Florida land boom and bust of 1926. Funny how these things happen isn’t it?

In which I talk about corrupt politicians

When I get all grows up I went to be an urban developer because I like such things. Now, this fellow Bill Batt also takes an interest in such things and he occasionally writes intelligent things about it. One such intelligent thing would be his piece on Value Capture as a Policy Tool in Transportation Economics.

Except, now I know Bill probably has it all wrong because such entrepreneurs as House Speaker Dennis Hastert, figured out that funding the highway really doesn’t matter so long as you are in the land speculating business. It’s easy really. All you need to do is buy some land out in the middle of nowhere, but close enough to a large city so divisions can go in should some highway be built. Then you run for congress. After that, at some point, you just happen to “slip in” a 207M earmark to build a highway. Once the highway is announced, the markets will take this into account. Allow the markets and news to settle for a year, sell your property at an obscene price and celebrate your victory. Yet another win for the good guys!

You see, if Bill had his way, it would stand in my way as a speculating land owner from profiting on the massive windfall gains, now wouldn’t it!

West Virginia

West Virginia

Things don’t look good for the LVT crowd in WV.


ARTICLE X


10-1. Taxation and finance.

Subject to the exceptions in this section contained, taxation shall be equal and uniform throughout the state, and all property, both real and personal, shall be taxed in proportion to its value to be ascertained as directed by law. No one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value; except that the aggregate of taxes assessed in any one year upon personal property employed exclusively in agriculture, including horticulture and grazing, products of agriculture as above defined, including livestock, while owned by the producer, and money, notes, bonds, bills and accounts receivable, stocks and other similar intangible personal property shall not exceed fifty cents on each one hundred dollars of value thereon and upon all property owned, used and occupied by the owner thereof exclusively for residential purposes and upon farms occupied and cultivated by their owners or bona fide tenants, one dollar; and upon all other property situated outside of municipalities, one dollar and fifty cents; and upon all other property situated within municipalities, two dollars; and the Legislature shall further provide by general law for increasing the maximum rates, authorized to be fixed, by the different levying bodies upon all classes of property, by submitting the question to the voters of the taxing units affected, but no increase shall be effective unless at least sixty percent of the qualified voters shall favor such increase, and such increase shall not continue for a longer period than three years at any one time, and shall never exceed by more than fifty percent the maximum rate herein provided and prescribed by law; and the revenue derived from this source shall be apportioned by the Legislature among the levying units of the state in proportion to the levy laid in said units upon real and other personal property; but property used for educational, literary, scientific, religious or charitable purposes, all cemeteries, public property, the personal property, including livestock, employed exclusively in agriculture as above defined and the products of agriculture as so defined while owned by the producers may by law be exempted from taxation; household goods to the value of two hundred dollars shall be exempted from taxation.

That word “May” has me wondering, but still, I wonder how many (F)armers there are in WV vs how farmers.

And later in the same paragraph:

The Legislature shall have authority to tax privileges, franchises, and incomes of persons and corporations and to classify and graduate the tax on all incomes according to the amount thereof and to exempt from taxation incomes below a minimum to be fixed from time to time, and such revenues as may be derived from such tax may be appropriated as the Legislature may provide.

I think this last sentence and the first sentence are not compatible. I’m not a lawyer, but as a lay person, it looks like there is room for interpretation there.

And lastly

After the year nineteen hundred thirty-three, the rate of the state tax upon property shall not exceed one cent upon the hundred dollars valuation, except to pay the principal and interest of bonded indebtedness of the state now existing.

10-1b. Property tax limitation and homestead exemption amendment of 1982.

Subsection A -- Value; Rate of Assessment; Exceptions

Notwithstanding any other provisions of this Constitution and except as otherwise provided in this section, all property subject to ad valorem taxation shall be assessed at sixty percent of its value, as directed to be ascertained in this section, except that the Legislature may from time to time, by general law agreed to by two thirds of the members elected to each house, establish a higher percentage for the purposes of this paragraph, which percentage shall be uniform as to all classes of property defined in section one of this article, but not more than one hundred percent of such value.

Why not just leave it at 100% of value and adjust the tax rate instead of adding constitutional complexities? I’ll never know.

Notwithstanding the foregoing, for the first day of July, one thousand nine hundred eighty-two, and the first day of July of each year thereafter until the values may be fixed as a result of the first statewide reappraisal hereinafter required, assessments shall be made under the provisions of current statutory law, which is hereby validated for such purpose until and unless amended by the Legislature. Assessment and taxation in accord with this section shall be deemed to be equal and uniform for all purposes.

Subsection B -- Determination of Value

In such law, the Legislature shall provide for consideration of (1) trends in market values over a fixed period of years prior to the base year, (2) the location of the property, and (3) such other factors and methods as it may determine: Provided, That with respect to reappraisal of all property upon the base year of one thousand nine hundred eighty, such reappraisals are deemed to be valid and in compliance with this section: Provided, however, That with respect to farm property, as defined from time to time by the Legislature by general law, the determination of value shall be according to its fair and reasonable value for farming purposes, as may be defined by general law.

I wonder how that provision is working out for them?

Subsection D -- Additional Limitations on Value

With respect to the first statewide reappraisal, pursuant to this section, the resulting increase in value in each and every parcel of land or interest therein and various items of personal property subject to ad valorem property taxation over and above the previously assessed value shall be allocated over a period of ten years in equal amounts annually.

lol, just love me some speculators.

10-7. Duties of county authorities in assessing taxes.

County authorities shall never assess taxes, in any one year, the aggregate of which shall exceed ninety-five cents per one hundred dollars' valuation, except for the support of free schools; payment of indebtedness existing at the time of the adoption of this constitution; and for the payment of any indebtedness with the interest thereon, created under the succeeding section, unless such assessment, with all questions involving the increase of such aggregate, shall have been submitted to the vote of the people of the county, and have received three fifths of all the votes cast for and against it.

Lots of work to do in WV. An entire repeal of section X is probably in order, frankly.

Tax Reform Awareness

Lots of communities are in the news lately discussing tax reform options. For Land Value Tax advocates, this is the perfect time to break out those letter writing templates.

What is LVT? The Land Value Tax is a tax on strictly land values and not a tax on capital or labor and in this respect is different then the property tax, which taxes mostly the capital on the land and not the land itself. If you want to know more, click on that wikipedia article above, visit my own FAQ, answersanswers.com, or wealth and want.

In this article is a series of polls in WV about the different taxes in WV. Many of the polls are useless. For example

According to the poll, 80 percent of registered voters said property taxes were a major burden or somewhat of a burden. About 12 percent said taxes on homes, land, vehicles and other property was not much of a burden. Another 6 percent said it was no burden at all.

Well stop the presses. Taxes are a burden to people. Man, I think I need a morning cocktail after that stunning revelation. Snark aside, there was some useful information, for example:

According to a newly released poll, 77 percent of registered voters in the state said they would likely support a restructuring of the state's tax code. Only 15 percent said they were unlikely to support such a change.

And more importantly:

West Virginia Chamber of Commerce President Steve Roberts said business leaders don't get excited about the upcoming discussions on the tax system. Some of that, he said, has to do with a fear the reforms will just shift burdens from one tax to another. What people want, he said, is a tax reduction.

"If you are just reshuffling the deck but it's the same game and same cards, people don't want to get involved," he said. "But if the state approaches this as a way to re-examine how the state spends money and to re-evaluate the entire system to make West Virginia a place people want to come to, start businesses in, invest in and spend money in, then there is an opportunity for discussion."

Now that has me thinking about writing a letter to Mr. Roberts. It is no wonder that Mr. Roberts (I am strategically avoiding any Henry Fonda references) is a little apathetic. Shifting money around from one bad tax base to another is a recipe for disaster.

Take those two pieces of information together and now we have something.

They polled on each of the different types of taxes and asked if they were a burden and the numbers were high in each, of course. Here is what I want to see: I want to see a poll if people would be willing to support ANY tax which combines many of these different taxes into ONE tax. Based on Mr. Roberts statements and the earlier poll, I would expect to find that most people would at least be willing to learn more about such a proposal.

West Virginia could shift to a tax strictly on land, mineral, and carbon rents. They could also slowly phase in a tax on just land rents, shifting away from the capital on the land. I would bet though, that the local population is not even aware of the LVT as a policy option.

West Virginia
Chamber of Commerce
1624 Kanawha Boulevard East
Charleston, WV 25311
(304) 342-1115

The next story comes from Michigan. I consider the state of Michigan to be in my own personal top 5 of states I would like to see take serious LVT reform. Why? The are an old industrial state and these sorts of communities have a proven track record of implementing the LVT, take a look at some of the old mill towns in Massachusetts or Pennsylvania for example. The LVT saved those communities from ghost town or slum status, which has befallen some of their neighbors in New Jersey, Ohio, and Indiana. Further, the tax reform which has been done in Michigan has been counterproductive. They revised their property tax reforms in 1994, however, like Dr. Phil says: How’s that workin’ out for ya?

Michigan significantly reduced the state's property tax burden. Reforms instituted in 1994 have reduced the state's reliance on property taxes to fund schools.
• Under the new property tax system, businesses pay 24 mills ($24 per $1,000 of assessed valuation) in school property taxes.
• Michigan's property tax is assessed at the state and local levels, and abatements are allowed at both levels.
• Taxable value of property is 50% of current market value, including both real and personal property.
• Annual property assessment increases are limited by the State Constitution to the lesser of 5% or the rate of inflation.

Poverty rate in Michigan in 2004 was 13.3% and going up, not such a good outcome, ten years later, considering the national rate is 12.7%, although a whopping net gain of 1% since 1994.

The prop13 for Michigan is the real killer here. In fact, this is the measure which has probably caused most of the problems in Michigan and as times goes on will only cause more. Speculators will be able to hold land out of production without being taxed on the land, awaiting their windfall. To the speculator, they can store their wealth in the land for as long as is needed because the tax on the land is so incredibly low. This costs the state jobs by taking this valuable land out of production and it costs them more jobs because no one is investing capital (which takes labor) on the land. This is a good reason why so many have fled Detroit for the suburbs.

Michigan desperately needs to implement LVT on at least some level and they need to work hard to repeal the prop13 for Michigan.

The third state, another one of my personal top 5, is Ohio. Sales taxes are possibly worse then the income tax due to its extreme regresivity, and cutting the sales tax was one of the things the report recommended. Ohio, like Michigan, is an old industrial state with lots of old industrial towns which used to revolve around the “the factory” and this is no longer the case in many of those towns. When these factories packed up their bags for China, they left a lot of land which was then gobbled up by hungry speculators who were able to buy a lot of land on the cheap in prime locations, due to the low incidence of tax on this land and very often subsidies from the State, the speculators are able to sit on this land for as long as they need to, withholding this land from production and, like Michigan, costing the state jobs. Or, often, it is simply held long enough for the state to pay for a large subdivision where the factory once stood, chock full of McMansions and golf courses, which the state will pay for “to clean up the worthless site”. If they are so worthless, then why do the states invest money in them and why do speculators hold on to them?

The state subsidizing the suburban development would not even be necessary if land values were taxed and not the capital on the land. The market would respond on its own, landowners would sell or develop, and buildings would go up without the government needing to lift a finger. However, the Ohio state constitution prevents any sort of LVT reform. Any real tax reform revolves around implementing the LVT which for Ohio means an amendment to their State Constitution.

Write your state legislator and ask them to repeal this regressive and bad law or help me put togethor a list of contacts who can help in LVT reform.

Dkos

I’ve been making daily Georgist diary entries cross-posted from this site for a little while now. I’ve been experimenting with different themes / times of day / titles. Yesterdays actually had the most comments of any topic I have posted to date (34 including my own) and I suspect it had lot to do with the title, Ethanol: Rent Seeking in Action. People didn’t care about after the colon; they just saw ethanol and went for it. The reason why I think that is I had no comments coming from a rent-seeking perspective, but there was a good discussion going on from a chemist, and other varied opinions.

I seem to get more recommends when I have lots of links and blocked quotes from other sources. I have no idea why that is, but if you look at the “recommended diary” list you will see a similar pattern.

Now, take my Net Neutrality post from a few days ago. I had two recommends and 0 comments. I suspect the reason is that the post is a little on the econ-speak side. I could be because my mechanics are not the best, but I reread it again this morning and it was definitely readable, and a few small errors here and there. Less then what I see in many recommended diaries. It could be I had a lot of readers, Dkos doesn’t give me this sort of data, but I doubt it because I track where my readers come from and generally speaking the more comments I get, the more hits I get from Dkos. Yesterday for example I had 6 hits coming directly from the ethanol thread alone.

The object here is to boost awareness which means trying to increase the likelihood any random person clicks on that diary and starts participating. I think there is a “tipping point” where some people only bother to read a non-recommended diary only if people have been commenting (I actually do that from time to time).

I’ve posted at most times of the day and it seems posting at or around 9AM – 10AM seems to work, but the data points from all other times are few. I think this has to do with most people read blogs at work. I’ve read about this before and noticed the same on my own blog. My readership goes down on the weekend.

I’ve never taken a class in journalism or marketing, so this is a fun learning experience for me and I thought I would share my experience with you. If you have any ideas for a title, just drop it in the comments and I’ll try and write a post around it. Same goes for times of day and Georgist themes.

Menace of Privilege

I’m not one to pimp other blogs, but I discovered another Georgist leaning blog (or should I say they discovered me, leading me to them) and the current top story is a winner.

I am always amazed how these “New Urbanist” movement people seem to forget the basics when it comes to city design and planning. They’ll talk all day long about fundamentals but utter the word “rent” and then all of a sudden its: “Well, the macro-indicators are blah blah, and the interest rates are blah blah, and …”. The next closest thing to astrology, I swear.

These are the same people who will say we should build these mass-transit white-elephants and then try and explain why they aren’t used. Just like Bill Batt says here:

http://thetyee.ca/Views/2006/06/21/WUF1/

(Wyn A)

“This prompted William Batt, a sustainable transportation expert from Albany, New York, to recall the ride he took on a fancy new elevated commuter railway in Chennai, India. "They put the rail where the politicians wanted it to go, not where people needed it. So at rush hour, it was empty." Batt also spent a lonely Sunday afternoon on Vancouver's Millennium SkyTrain Line. What shocked him most were the vast parking lots along the way, like that at Brentwood Mall. "Parking lots! That land is begging to be used."

Alaska

Alaska is possibly the most Georgist or second most Georgist in the country because of the Alaska Permanent Fund.

Some relevant passages are below. I’ll be adding Alaska to the “LVT friendly” for now.

Article VIII
Natural Resources

SECTION 2. GENERAL AUTHORITY. The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.

SECTION 3. COMMON USE. Wherever occurring in their natural state, fish, wildlife, and waters are reserved to the people for common use.

SECTION 4. SUSTAINED YIELD. Fish, forests, wildlife, grasslands, and all other replenishable resources belonging to the State shall be utilized, developed, and maintained on the sustained yield principle, subject to preferences among beneficial uses.

Article IX
Finance and Taxation

SECTION 3. ASSESSMENT STANDARDS. Standards for appraisal of all property assessed by the State or its political subdivisions shall be prescribed by law.

SECTION 15. ALASKA PERMANENT FUND. At least twenty-five per cent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.

Article X
Local Government

SECTION 11. HOME RULE POWERS. A home rule borough or city may exercise all legislative powers not prohibited by law or by charter.

Ethanol: Rent Seeking in Action

Yesterday I was going to write a thread on ethanol if I could not put together a net neutrality thread. In a nice stroke of serendipity I received this in my in box last night

Experts: Ethanol's water demands a concern

Hat tip: Wyn A


That article misses three critical points:

1.) The water mentioned is only the water used in the plant itself, not in actually growing the corn. Consumptive water use according to THIS Penn state report is around 9000 gallons of water per acre of corn per day (they said hot July day, your mileage may very). Let’s just say 4.5K gallons of water per day for the hell of it. In the Yahoo article, they said 50 acres of corn per plant. So, that is 50*4.5K*100 (the growing season of corn, which is actually longer then 100 days in IL). That is 22.5M gallons of water out of the system PER plant just to grow the crop. If we use their 300K per acre per season number, we get 30M gallons of water. Mind you, this area is already producing corn.

Now, they tossed out that 40M annual recharge rate. Doesn’t look so high all of a sudden does it? But, you say, we have over a hundred years to figure it out! And this leads me to my second point.

2.) I actually believe the Ethanol people when they say the probability of any ground water pollution caused directly by them is low. I also believe them when they say they will pump out water cleaner then when they got it. That’s great. I am not a hydrologist, but one of the more interesting is the physical properties of water. The hydrological pressure underground actually helps to keep the baddies out while keeping the goodies in. This is mostly a concern for places near the shore like in Israel, but salt water intrusion or what we are talking about here simply increased salinity could eventually be a problem. Further more, all those pesticides used in growing the corn will have a higher concentration in the ground then they did previously.

3.) Lastly, I am curious who is paying for that plant. Generally, with ethanol, government subsidies are not very far behind.

My point? The community is right to raise an eyebrow, but the situation may be worse they what they are accounting for.

So that’s that.

In other ethanol news, over at Crooks and Liars, you can see Jack Cafferty going off on big oil, John Hofmeister who runs Royal Dutch / Shell to be specific. In short, The Hofmeister says “energy independence has gone too far”. Well, if the CEO of an oil firm says it then it must be so, I mean, they are the experts after all, right?

In my quest to find out a little more about The Hofmeister, go to THIS article and watch the feeding frenzy of politicians jockeying for position in the subsidy race.

"It would be absurd in 10 years if we're doing 60 billion gallons of ethanol, and the only crop in America that's not participating is sugar," said Sen. Norm Coleman, a Minnesota Republican and one of Congress' leading champions of sugar-based ethanol. Coleman is backing legislation that would encourage the use of renewable fuels.

Jack Roney, an economist with the American Sugar Alliance, agreed that the government would need to step in to stimulate a sugar-to-ethanol industry.

"It would take a combination of consumption mandates to ensure that the demand would be there, and conceivably some production incentives to use sugar ethanol," he said.

Now, moving right along, I was wondering what the good senator from MN had to say about this legislation and I found some interesting things along the way.

Mercantilism

Subsidies

Rent-seeking

“In the past week, the ethanol lobby has stepped up pressure for even faster phase-in, angering some House members.”

I could go on and on. The point here is, none of this will mean a better price the consumer, lower taxes, more consumer choice, and in the end will probably end up not being very good for the environment.

One of things I haven’t mentioned along the way is rents. Forgetting the subsidy rents for a moment, all that water extracted is a rent. All that waste water injected is a rent. Less we forget the carbon emissions from ethanol. Ethanol only reduces emissions by 20%, it is another filtered cigarette. Read my proposal on the SKY TRUST for my position on emissions reductions.

I am not saying ethanol is bad. I am saying they should have to pay the market rent like anyone else and not doing so will cause more harm then good. If all rents were taxed, people would naturally gravitate towards fuel alternatives like ethanol anyway and with better results.

Network Neutrality

I’ve been working on this post for a few days and I’m still not sure which side of the argument I fall on, but for now and until further notice I am a “net neutrality supporter”. I’ll get to that reason why in a moment.

Firstly, Network Neutrality is the name given to the movement to regulate the internet such that private bandwidth providers will not be able to discriminate between data packets. I recommend reading that wikipedia article. It seems to be the most comprehensive non-biased explanation of the debate.

This might not seem important, but some signals need a very low ping time. For example, VOIP and most online gaming needs a low ping time, other applications are in the works also, such as video conferencing and other inventions which “have yet to come to pass”.

For me, this comes down to three things, the degree of rivalness, the degree of excludability, and the marginal cost of consuming one more “unit” of bandwidth. If we add one more unit of consumption and if that adds some cost, or lets say it slows down the network, by adding one more person then the service is rival. If the companies can refuse service to people, then the good is excludable.

For the internet, the telcos are arguing that the network is rival. The more people and services we add, the more the service will slow down adding some kind of social cost. They are arguing that their level of excludability is not enough and they are asking for more.

Now, let’s further say that for each consumer of bandwidth imposes some cost on the firm. If they can not pass this cost on, no one will provide faster speed networks in the future. However, the other side of the argument, let’s say it costs nothing for the firm to add “one more marginal unit”, for example they need to constantly upgrade their network anyway because of deteriorating equipment.

Here’s an example which everyone already knows. Cable providers are non-rival and excludable. It costs them nothing to add one more unit of consumption, but they exclude people from buying the service and further they can exclude within the service itself, the HBO package for example. It wouldn’t be very efficient to have 10 different cable providers all with different cables going every which way, and so there is this existing capital which the cable company can bid on to provide service to the local community. This bidding is good, if it is competitive and no one is colluding, because it extracts those monopolistic rents and shares them out to the community.

I suspect the telco’s and cable cos want to operate like the cable tv model. They already can throttle your bandwidth and charge you for more bandwidth. The access they want is called the “last mile”: the pipe that runs from your service provider to your house. Kind of like the railroads being able to kickoff any other competition, the situation is analogous.

Here’s the other argument and here is also what I really think. Wi-fi. Forget about all this land line stuff. That will only be relevant for those out in rural areas. Where the big money is, is where the big money has always been. Urban dwelling. With wi-fi I can set up a network (I actually have a transponder myself) and transmit a wi-fi signal that anyone can use so long as they are in range. Some communities have taken the initiative and may soon be offering wi-fi community based projects. The telcos look at this and have a minor heart attack and in typical rent-protectionism, try and manipulate the marketplace VIA the government to make the marketplace for favorable to them. Wi-fi is the way of the future and some day soon we will see wi-fi transponders that will connect entire cities and maybe beyond. The question comes down to who is going to pay for it, and with Google ponying up, I’m not sure this is such a big problem.

There is a ton of Georgist analysis that could go into this. But, I will say to close this thing, the community should tax the land and not the infrastructure, incomes or sales in order to pay for this thing otherwise we will end up with more problems then we will know what to do with.

Digg It

Ohio

Ohio has a history of Georgists, which isn't suprising considering their old industrial base. With the Ohio Constitution though, it effectivly neuters any LVT reform before it can get off the ground.

“Land and improvements thereon shall be taxed by uniform rule according to value, except [minor irrelevant exceptions]” (Ohio Constitution, §12.02)

“The powers defined herein as the ‘initiative’ and ‘referendum’ shall not be used to pass a law authorizing any classification of property for the purpose of levying different rates of taxation thereon or of authorizing the levy of any single tax on land or land values or land sites at a higher rate or by a different rule than is or may be applied to improvements thereon or to personal property.” (Ohio Constitution §2.01e)

The LVT FAQ

I have seen a pattern of the same objections or concerns about the LVT and I hope this FAQ will answer or calm some of those.

Q: Wait. I know of this tax and I hate it. I pay it every year.

A.) Actually, you pay a hybrid bastard tax that mostly taxes the buildings and not the land. This tax is both regressive and counterproductive. If you want to build a new building on the land, your taxes will go up. If you want to paint your house, your taxes will go up.

Q.) So Donald Trump pays the same taxes as I do, if we have the same lot size. Now just hold on one cotton pickin’…

A.) Yes. However, how many skyscrapers have you seen in the middle of a cornfield and how many single family homes have you seen in downtown Manhattan? Wealth is disproportionately concentrated in land. Just look at The Donald and how much of the best real estate he owns. He is not a billionaire on accident.

Q.) What about commercial use lands?

A.) Commercial properties would get taxed at the same rate as any other property. Golden Sachs in Downtown Manhattan would pay a lot in tax, while Buck’s off route 22 in the Town of Plattsburgh would pay very little. Their rate of taxation would be the same.

Q.) What about those empty lots I see in the middle of cities? Won’t this prevent them from every building on the land?

A.) Taxing the land according to its value will make it so people will have to invest money in the land and improve it.

Q: Why are you a proponent of this method of taxation?

A.) I am a believer in fair and just taxation and I do not believe in the government subsidizing the ultra-rich. In short.

Q.) I live out in rural country. It sounds to me like my taxes will go up because I own land.

A.) Probably not. If you are a middle class family with a couple acres of land, a house, a dog, a couple children pounding around, maybe a few chickens, most likely your taxes will go down. If you own more then just a house, like a garage, swimming pool, deck, barnes, then your taxes will go down a good deal.

Q.) What about my job? Will they need to move to china?

A.) No. A tax on land will discourage firms from moving away and will cause them to invest more money in labor and capital which in turn requires more labor. Why? because a tax on land comes out of rent and does not effect the companies bottom line.

Q.) Wait. What about my grandmother? She’s old and retired and widowed. What about her?

A.) There are many proposals on how to take care of those who in their golden years. One popular example: tax deferred until death against the equity in the home or other asset and the other tax or until sale of the home.

Q.) But, the President gave me free money and told me that he will give me more if I’m a good boy.

A.) Did you know that real wages have declined each year since 1970’s? Oh, don’t take my word for it.

This document is “working” and new questions are always welcome.

California

“Unless otherwise provided by this Constitution or the laws of the United States:

(a) All property is taxable and shall be assessed at the same percentage of fair market value. When a value standard other than fair market value is prescribed by this Constitution or by statute authorized by this Constitution, the same percentage shall be applied to determine the assessed value. The value to which the percentage is applied, whether it be the fair market value or not, shall be known for property tax purposes as the full value.

(b) All property so assessed shall be taxed in proportion to its full value.” (California Constitution, Art. 13, §1)



“Not more than 25 percent of the total appropriations from all funds of the State shall be raised by means of taxes on real and personal property according to the value thereof.” (California Constitution, Art. 13, §22)

Also see the wikipedia article on prop 13. It seems prop 13 has become the sacred cow of california.

Alabama

Alabama's constitution of 1901, apparently its current one has the following provisions:

SECTION 211
Property taxes to be assessed in exact proportion to value of property.

All taxes levied on property in this state shall be assessed in exact proportion to the value of such property, but no tax shall be assessed upon any debt for rent or hire of real or personal property, while owned by the landlord or hirer during the current year of such rental or hire, if such real or personal property be assessed at its full value.

SECTION 214
Limitation on state property tax rate.

The legislature shall not have the power to levy in any one year a greater rate of taxation than sixty-five one-hundredths of one per centum on the value of the taxable property within this state.

Hat tip: Bill Frambach

Virtual land for sale

Heh indeedy.

Since most people who read this like thinking about property rights and land, I thought this might make smile. Interestingly, this isn't actually "virtual land". Anyone can start up a new service and do the same thing and this can happen infinitly so there is nothing scarce about it. At 10 cents per square meter I can do all sorts of fun things though. Happy and sad faces abound! Of course, it would cost me a full buck to sad face and as much comedy as I would get out of it, I think that one dollar would be better spent on my grocery bill.

LVT FAQ – Heads up

I’m going to make a FAQ for later today at Kos, which will also serve as a living document here at my blog. This is more going to serve as a “myths busted” then a FAQ; generally though, they aren’t very different anyway.

Comment here if you have a question, or submit a common Q &A, or submit a common myth and reality.    

Eco Friendly wine

This in from Vivi's Wine Journal.

Basically, the OP is right. It's all about the dollar. As oil and other fossil fuels are becoming more expensive, I would expect to see more firms switching to solar when they can. Places like wineries are a great example becaue of the long roofs they need. In the near future (and maybe even now) I would expect to see dairy farmers, chicken farmers, and other farming activities which have extremelly long barns. All of that surface area could be used to harness the power of the sun. This isn't practical in all areas, but genereally speaking this is a good thing.

I am posting this because it goes perfectly with my post from earlier today. If firms can stand to benefit from adding solar tech to their building AND trade carbon credits at the same time? Now we are talking some serious cash flow and some serious innovation. Too bad we don't play nice with the other kids in the sandbox.

Streaming Music (cont)

Todays station is from Santa Monica California, KCRW. The DJ there, Nic Harcourt, is probably the most influential DJ in the country. He used to DJ at wdst, the station I recently linked. Nic has a reputation for finding the new talent and puttin them on the air. His tastes are extremelly broad and as such, your likely to hear anything from South African hip hop to new-grass on his show.

If you get a kick out of listening to music and being the first to hear a year ahead of time, there is no better place to listen the KCRW.

Environmental Activism

The environmental movement is flawed in one major respect: It needs to start thinking about a paradigm shift and not the current marketing of “living a green lifestyle”.

However, this is not as hard as it sounds, in fact it fairly simple. We need to tax the rents from land, otherwise known as the Land Value Tax (LVT).

For the ecological economics movement the LVT is a perfect dovetail. It does everything that the environmentalists want and for economists it is extremely efficient and fair.

How will taxing land effect the environmentalist movement?

• Many of the problems associated with the environment are a failure to capture the rent generated by such activities. For example, polluting in a river, while beneficial to the factory causes harm to anyone who wants to use the river. If we, as a society, charged that firm a “rent” for fair use of the river and used that rent for either A.) clean up or B.) distributed those rents to the population, the firm would voluntarily lower its own pollution levels.

• Suburbanization: As our communities sprawl further away from the city center and become less dense, the human generated pollution goes up, such as car emissions, and polluted water run off which then finds its way into our aquifers.

However, suburbanization has other costs as well (and benefits). For example, the deer which populate the Westchester / Putnam / Dutchess county areas of New York and causes thousands of traffic accidents each year is a direct result of suburbanization. The huge sprawling lawns of the suburbanites provide for easy soft grass to chew on in the dark of night. The added traffic accidents each year of the daily commute back and forth to the city center is another overlooked cost of suburbanization. The roads which need to get paved, power lines which need to get run, and sewer lines which need to get dug become more costly per person and inflict both environmental and fiscal costs on each person in the community. A road, after all, is not a very productive piece of land.

• Our fisheries and common grazing areas: both of these suffer from the same problem, people and firms will overuse the resource until the resource can no longer replenish itself. If we charged an accurate annual rent for fishing rights (or grazing), and allowed those rights to be fully tradable, fishermen and cattlemen would no longer overuse the resource.

• Instead of paying out subsidies to farmers not to farm, instead, taxing the land itself and NOT the capital on the land farmers will be able to accurately determine which fields to plant and which are best left to Mother Nature. This will save the government time, money and resources and lowering our overall tax burden. The set-a-side program was made with good intentions; however it has had the opposite effect in many areas.

• Crop subsidies: Instead of paying crop subsidies to farmers, a land tax will allow farmers to accurately determine how much of which crop to most efficiently grow where. Our lust for corn subsidies and from it the high fructose corn syrup is a direct cause of our obesity epidemic.

• Small farmers will benefit: Small farms will be rewarded for being good stewards of the land and for having high capital to land ratios while those who are using the land for speculation will need to pay for that privilege.

• Mining operations: Mining will become more eco friendly as they will attempt to leave the land as nature intended, or even improve it from when it was found.

• The list does not end here. These few things are only a very small fraction of the positive effects of implementing the LVT.

You say, this sounds great, what do I do? Write your congressmen and ask them if they support LVT reform and help me compile a list of potential allies

The Bank of New York

In Environmental and Ibanking news, The Bank of New York has added a voluntary carbon trading unit.

My only concern is enforcement. With the US not playing with the other kids in the playground, someone needs to conduct audits of these firms to make sure they are actually reducing their emissions. Ironically, I think the free-markets are taking care of that on their own because Ibanks like The Bank of New York through their clearing house unit Pershing, stand to lose a lot of money if firms are not playing by the rules. My guess is they will require some sort of auditing to make it happen

The Bank of New York has a history of innovation, so it does not surprise me that they are the ones leading the pack. They were founded by none other then Alexander Hamilton, after all.

I think this is great for US firms, though. I’ve been worried for a while after Kyoto came out (read: rejected) that the US would fall behind in carbon emissions trading and carbon reduction technology. I still think we have a long way to go, however. Flooding the market with more credits the market can handle will drive the price down and render Kyoto pointless. They key is scarcity, which means the US needs to implement its own caps.

I also see this spontaneous trading as a partial validation of my own proposal which I’ve blogged about here.

Guest Blogger

I am considering having a guest Blogger series if there is interest for it (in other words, if I can get submissions). For now, I am thinking once a week on Sundays. No professional criteria, just a unique perspective on the world and of course a Georgist viewpoint.

The title of the thread will look like this

This is Google and other web tracking services can pick up your name easier.

If you are interested, email me your manuscript. Please keep them short. Not including links and reference materials, one should be able to read a blog in under 5 minutes and preferably 2 minutes.

How You Can Prevent the Coming Real Estate Collapse

Write your local congressman and ask them for Land Value Tax reform.

As I’ve blogged about previously, all major economic downturns follow a specific pattern and this pattern is driven by the speculation of land.

In the news this past week talking about land speculation:

Shiller: Real estate is risky business

“In justifying his pessimism, he pointed out that price increases have far out paced rises in construction costs, rents and income. In addition, inventory levels are up, as are interest rates and real estate holdings as a percentage of the gross national product”

and

“This latest one, says Shiller, is a speculative boom. "It's an uncertain situation," he says. "It looks like a down cycle that might continue down or it may bounce around. I will not make a forecast but this pattern suggests risk."

Real estate boom grows

“Just two weeks into the month, the average cost of a home in Calgary has skyrocketed more than $16,000, earning the typical local homeowner over $1,150 a day in June.”

The analysts seem to be in happy go lucky denial

“During the record-setting months of April and May, residential realty increased an average of $500 a day, but the latest figures indicate prices are climbing at rates never seen before.

"The real estate market is completely reflective of the economy," said CREB president Kevin Clark.

"I'd be surprised if this wasn't happening."

As well as Harvard analysts

Housing boom 2.0

The study rides on a major and wrong assumption: that value in home appreciation is permanent.

Booming household growth. The nation will add 1.37 million new households this year. Part of this is natural population increase but this has also been bolstered by foreign migrants.

And then

The Harvard researchers downplay the risk in mortgages with adjustable rates and easy downpayment requirements. Those loans introduce uncertainty, some worry: if interest rates rise, owners could find themselves with much higher monthly payments and that could result in a big jump in foreclosures and forced sales, adding to home inventory and hurting prices.

The Harvard researchers don't expect that to happen, though. Most owners with risky loans have already seen their home values grow substantially. "Having significant home equity is the best protection against foreclosure because homeowners can sell at a profit if they cannot cover their mortgage payments."

As the rate of construction increases, this will drive down the marginal rate of rent. With increasing interest rates and decreasing rental value the opportunity cost of owning real estate will become greater. Investors will leave the housing market depressing the value of homes. When the marginal AIM mortgage owners begin to default, this will spiral out of control and where it stops no one knows.

The Harvard study goes on to say:

“Even if home prices fall in the next few years, the drops are unlikely to erase all the equity of the great majority of homeowners, the Harvard researchers predict. And the interest rate declines that usually accompany such price drops would enable many borrowers to refinance their homes at favorable terms. All this should help prevent large price drops.”

Those who were on the margin will default and those who were near the margin will suddenly be on the margin. With a major amount of defaults the available amount of credit will dry up and banks will be much more hesitant to lend out new funds and those new marginal players will suddenly find themselves in a tight position. With the inevitable dry up of new construction, and with it the jobs, will come an economic downturn.

Speculation in companies who specialize in construction have lost half of their value

Housing's engine -- low rates -- losing steam

“Stocks in the sector have fallen dramatically. Hovnanian, for instance, is trading near $30 a share, down from its 52-week high of $73.40. Rival Toll Brothers trades around $27 a share, down from a 52-week high of $58.67.”

and projects are now being cancelled

“Developers have started canceling projects. Plans were scrapped last week for a 4,400-unit Las Vegas condo resort complex that had been backed by actor George Clooney and nightclub owner Rande Gerber. The development company for the project said rising construction costs and slow sales forced it to rethink the plan.”

As I blogged about previously, one of the big indicators that we are near a sudden land market crash is when land speculators start buying large tracts of undeveloped land.

What's really happening on 13th Street?

“The other jaw of the vise is represented by private developers who have been attracted to the street by relatively inexpensive property that has a million-dollar view overlooking Newport's basin with a Cincinnati skyline that could have been painted as a backdrop for a Hollywood set.”

And finally, to close this:

U.S. housing boom is biggest since 1890

“Increase in home prices may have been psychological, economist says”

And what happened just after that real estate mania?

Panic of 1893

Write your congressmen and help me compile a list of politicians who are LVT friendly and will work towards an LVT future.