Monday, November 25, 2013

Explaining Henry George, video

Explaining Henry George

A short history and profile of 19th century American economist Henry George, based on the writings of Agnes de Mille, George's granddaughter.

Funding: Robert Schalkenbach Foundation

Produced by: Earthsharing Canada

George advocated financing government by collecting "economic rent" rather than with taxes on jobs, business and sales. 

Economic rent refers to revenue without a corresponding cost of production, the societal surplus that flows to monopoly held assets like land, resources (oil, trees, water), the privilege to pollute, billboards, the stock market, the electromagnetic (EM) spectrum, agricultural quotas, taxi medallions, etc. 

Though this wealth rightfully belongs to the community, it mostly flows untaxed to private asset owners, forcing governments to damage the economy by taxing incomes and sales. 

This economic theory is supported by classical economists Adam Smith, David Ricardo, John Stuart Mill, Henry George, prominent people like Winston Churchill, Dr. Sun Yet-Sen, Mark Twain, and modern economists Joseph Stieglitz, Milton Friedman, Michael Hudson, Herman Daly, and George Monbiot.

Earthsharing Canada is dedicated to promoting the economics popularized by the 19th century American economist Henry George, as articulated by the international Georgist movement calling on governments to collect economic rent (income without a corresponding cost of production) in lieu of taxes on income or consumption.

In his seminal book Progress and Poverty (1879), George builds on the work of Adam Smith, David Ricardo and John Stuart Mill, enumerating the multiple benefits to the economy and society when governments are financed by collecting economic rent. 

Economic rent refers to the societal surplus that flows to assets like land, resources like oil, trees, water, the right to pollute, billboards, the stock market, the electromagnetic (EM) spectrum, agricultural quotas, taxi medallions, etc. 

Although this wealth rightfully belongs to the community, it presently flows to private asset owners, forcing governments to damage the economy by taxing incomes and consumption. 

Earthsharing Canada argues that taxing incomes makes people more expensive to hire, that taxing capital increases the cost of borrowing, that taxing profits pushes viable enterprises closer to bankruptcy, and that taxing consumption raises prices. Economists refer to these taxes as "dead weight" that stifle economic vitality and cause unemployment and poverty. 

Alternately, funding government programs by capturing the community-generated, "unearned income" that accrues to desirable finite assets increases economic efficiency, reduces and eventually eliminats poverty, and reduces unemployment, halts sprawl, conserves resources and reduces pollution.

Economic rent capture has many profound and beneficial implications. Collecting unearned income rather then earned income eliminates antipathy toward paying taxes, since people keep all of the hard-earned cash earned from jobs and businesses. 

Collecting economic rent from the relatively few sources is far less bureaucratic then administering the taxation of hundreds of millions of jobs, businesses and billions of purchases. 

Infrastructure becomes self-financing, since collecting the rise in land value from construction projects is used to finance the project. 

Economic rent capture eliminates real estate speculation, which is the root cause of recessions and depressions, including the present crash. 

Taxing pollution and stimulating the productive economy biases toward labour-intensive local production raises wages and spawns new businesses. Right-pricing land stops sprawl and fosters walkable communities linked by transit.

Economic rent capture has been practiced extensively in the past and is clearly beneficial in jurisdictions where it is used today. Alberta and Winnipeg used it in the early 20th century, Japan, Hong Kong and Taiwan are more recent examples, and it is how Sydney paid for their Olympics. Alaska, Alberta and many other countries use it when collecting oil royalties.

With communism, socialism and Marxism now abandoned in favour of free markets, with interventionist Keynesianism discredited as doing more harm than good, and with trickle-down economics mocked as a cynical justification for unconscionable wealth disparity, governments should now return to what Fred Foldvary calls "Foundational Economics", quash the damaging speculative economy and allow a purely entrepreneurial economy to flourish.

Monday, January 28, 2013

Land Value Taxation and Public Infrastructure

Municipal governments should finance infrastructure by collecting the unearned income (economic rent) that accrues to land. No new taxes needed.

Warranted new projects (parks, schools, transit, roads, hospitals) always raise local land values more than the cost of the project. Presently this wealth disappears into the pockets of local land owners. Instead, Land Value Taxation should be used to finance the infrastructure.

LVT is equally effective in small towns and big cities. Those who live closest and benefit most should finance the projects out of their unearned income. Inter-city projects -- like high-speed rail -- should also be financed by economic rent capture.

The rental value of land is revenue that belongs equally to all by birthright, and should be captured by LVT to provide services like health care and education. The revenue generated by LVT should also be used to reduce and eliminate income and sales taxes.

All taxes should be on the use and the abuse of nature (land, resources, pollution), not on jobs, business or sales.

Saturday, May 19, 2012

Land Value Taxation and the Built Environment

The main benefits of LVT (revenue-neutral municipal tax sifting off buildings onto the land below the buildings) are:

1. LVT doesn't punish businesses, landlords or home owners for fixing up, expanding, renovating, or re-purposing their buildings;

2. LVT encourages land owners to put vacant and underused land to more productive use or sell it to someone who will. This reduces downtown blight by freeing up existing urban-zoned land to productive use, (which also reduces greenfield sprawl pressure);

3. LVT makes municipally-built infrastructure self-financing by capturing more of the land value rise resulting from new infrastructure.

4. LVT increases accuracy and reduces cost of property assessment, since assessing buildings is complex, expensive and inexact.

5. LVT is farmer-friendly as it encourages value-added and pre- and post-harvest facilities on farms.

6. LVT encourages construction of affordable housing, since multi-unit construction, which is generally land-efficient, will receive tax relief.

7. LVT raises the carrying cost of holding land which lowers the upfont cost of land, reducing the size of mortgages and corresponding interest payments. Instead of payments to banks, payments go to government in lieu of other taxes making land more affordable.

8. LVT is nature-friendly as it raises the cost of holding land. This will encourage land owners to return land back to nature if they hold more than they have a use for.

LVT should be phased in over a number of years. If a senior or fixed income person is adversely affected by LVT, the municipality may defer their municipal fees till time of sale.

Sunday, September 18, 2011

Meet Frank de Jong

- By Matthew Lopoes

Representing the Green Party of Ontario, Frank de Jong has built a political platform aimed at tackling many prominent issues in Davenport, including everything from Catholic funding Education to strip clubs in the Bloordale village, traffic flow, and environmental accountability to name a few.

Having lived in Davenport for nearly 15 years, and having run for Ward 18 councillor in last year’s municipal election de Jong said he has watched the community grow into what it is today and currently works as a public school teacher in the neighbouring ward.

“I think one of the biggest issues is Catholic funding education,” said de Jong, “the provincial government continues to fund two education systems when there should be just one.”
De Jong said that with no other religious education funded by the province, Catholic schools should not be funded either, he also added that by stopping catholic funding, students and taxpayers would see the benefits.

“It would be a great advantage to the citizens of Davenport because kids could travel much shorter distances to get to school, plus it would be fewer taxes to pay for the taxpayers,” said de Jong.
De Jong said he is an avid supporter of local businesses by shopping at Dufferin Grove Organic Market fixing his bike at the bike shops around town, and eating at local restaurants, but two businesses he wants to see out of Davenport are Bloor street strip clubs, The house of Lancaster and Club Paradise.

“We don’t want our daughters and our children seeing this kind of thing, why is it in Davenport, and why are none of these strip clubs in the Bloor West Village or in the Annex?” said de Jong, “it’s a huge embarrassment, it objectifies women and it has no place in our community.”

De Jong said the strip clubs are a sleeper issue because people do not realize that their community is being sacrificed.

The owner of The House of Lancaster Gentleman’s club, Spiro Koumoudouros is also Chairman of the Bloordale BIA. De Jong said Koumoudouros would be considered a hero in the community if he turned his business into something community oriented.

“I suspect Lancaster would be a much more profitable space for Spiro if it was welcoming to people from the neighbourhood and if it was a different kind of business that is up and above the board instead of shady. I think the whole community would consider him a hero if he turned it into a community oriented type of building,” said de Jong.

Shutting down strip clubs and relocating funding for education can be a long process if elected but de Jong said one of the first things that needs to be done is add bike lanes on Bloor and slow down the traffic in the riding’s major streets.

“Streets like Bloor, College and Dundas are like freeways with people from outside of our community screaming through twice a day, and that’s wrong, this is our community,” said de Jong, “we should have ‘walkability’ so our kids and seniors can be safe crossing the streets.”

De Jong also takes a strong stand on banning handguns, creating a self-sustaining infrastructure, and having land value taxation in the city of Toronto.

Wednesday, February 23, 2011

Tax-Increment Financing for Transit

Toronto's mayor is on the right track with his suggestion to use "tax-increment financing" to pay for new transit. The best way to finance transit is indeed by collecting the upkick in land values (economic rent) so that the unearned increment generated by the new infrastructure goes to pay for that infrastructure, rather than financing it out of general revenue by taxing distant taxpayers who won't benefit from it.

Three problems, however, with Ford's approach:

Municipal taxes amount to roughly 1% of property value, so the amount collected will be insufficient to cover the cost of the subways over their lifetime. The unearned increment to land (economic rent) is 4-5% annually, which if collected would be sufficient to amortize the new asset. (Economic rent is revenue without a corresponding cost of production, it is unearned, so collecting it does not jeopardize business or residential viability.)

Secondly, only warranted infrastructure generates land value upkick equal to its costs, and subways are probably not warranted in these low density areas, which are served cost effectively by LRT.

Thirdly, taxing buildings discourages construction just when and where it is desirable, so the municipal tax should be moved onto land alone which will not punish construcution but will incent efficient land use.

But Toronto should pursue this idea, because if structured properly, new transit can be self-financing without increasing taxes throughout the city.

Tuesday, February 8, 2011

Split and Shift

The property tax is actually a combination of two taxes: one on the land and one on the buildings, but there are multiple benefits to urban design when municipal property taxes are split in two and shifted off buildings and onto land value alone. When municipalities collect a percentage of the community-created land value (economic rent), instead of taxing improvements (buildings), walkability and infill occur naturally, reducing municipal taxes and improving the quality of life for all. By employing economic rent capture as a market mechanism, municipalities can generate sufficient revenue plus achieve policy goals without coercive regulations and punitive actions.

A revenue-neutral tax shift off buildings and onto land value:

* Encourages efficient and intensive land use since taxes remain the same whether land is vacant or if it is used productively.
* Reduces the amount of vacant land and parking lots since it becomes more expensive to sit on undeveloped or poorly developed land.
* Reduces land speculation since waiting till the price of land rises will be more expensive.
* Improves housing stock and rental units since improvements, renovations, and additions do not incur increased taxation.
* Increases the amount of affordable housing without subsidies since builders can avoid higher land costs by building efficiently on small lots (row houses, low-rise, semi-detached).
* Reduces suburban sprawl since land-inefficient greenfield developments incur higher land taxes relative to more land-efficient infill.
* Eliminates the costs, inaccuracy and complexity of assessing improvements. Assessing land alone is a simple and inexpensive process.
* Reduces speculative land bubbles since more of the unearned increment that accrues to land is captured to finance city programs instead of flowing to land owners.

Furthermore, collecting community-generated upkick in land value is the best way to finance infrastructure. Any infrastructure that increases land values should be funded through the collection of the increased economic land rent generated by that infrastructure, whether it is a hospital, school, sewer upgrade, park or transit system.

Normally the increased economic rent goes (untaxed) to the person or company that owns affected land, instead of to the taxpayers who paid for it. Taxpayers everywhere are unjustly expected to pay for improvements that only benefit the local land-owning minority.

If infrastructure is warranted and beneficial it will raise the value of local land by more than the cost of that infrastructure. When publicly funded redevelopment makes locations more desirable, more economic rent is attracted, over time, than the cost of the initial redevelopment.

Thursday, January 27, 2011

Green Backlash Predictable

No doubt the Ontario Liberals had the best intentions putting in the Green Energy Act, the eco fees and the Greenbelt, but the poorly thought through financial implications of each initiative has made the present backlash predictable.

The Green Energy Act is flawed in that it subsidizes clean power instead of charging closer to the true cost of dirty electricity through a carbon tax. Rather than costing taxpayers money, a carbon tax would generate revenue which would replace income or sales taxes by an equal amount, costing taxpayers nothing.

Likewise with the eco-fees. Most people would accept fees to ensure the safe recycling and disposal of electronics and other dangerous products if they knew the charges would replace other taxes by the same amount.

The Greenbelt is a fine enough idea, but due the large amount of unprotected land between to developed areas and the Greenbelt, and because of development leapfrogging the protected zone, sprawl will continue apace, as if there was no Greenbelt at all, just in different parts of the province. This could have been avoided had the Greenbelt Act been accompanied by a province-wide, revenue-neutral land value tax (LVT), as recommeded by the Scottish Green Party, which would encourage infill and walkable communities plus generate provincial government revenue which would reduce other provincial level taxes.

People want to go green, but not if it means additional taxes. Revenue associated with any new government initiative, green or otherwise, should not be new taxation, but always used to reduce other taxes by equal amounts.