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Job Creation

It seems to me that we should be exploring strategies that promote job creation. That doesn't mean subsidies or privileges for corporations; it means getting the incentives right for creating a healthy marketplace. It means reducing or eliminating the barriers to entry and perverse incentives that make it difficult for an entrepreneur to execute a business plan (without reducing the requirement that she not harm the environment or others in the process). The excerpts on this page speak to how we go about creating jobs. Check the themes to the right for some issues related to these excerpts.

Harry Gunnison Brown: Significant Paragraphs from Henry George's Progress & Poverty: 10. Effect of Remedy Upon Wealth Production (in the unabridged P&P: Part IX — Effects of the Remedy: Chapter 1 — Of the effect upon the production of wealth)

The elder Mirabeau, we are told, ranked the proposition of Quesnay, to substitute one single tax on rent (the impôt unique) for all other taxes, as a discovery equal in utility to the invention of writing or the substitution of the use of money for barter.

To whosoever will think over the matter, this saying will appear an evidence of penetration rather than of extravagance. The advantages which would be gained by substituting for the numerous taxes by which the public revenues are now raised, a single tax levied upon the value of land, will appear more and more important the more they are considered. ...

Consider the effect upon the production of wealth.

To abolish the taxation which, acting and reacting, now hampers every wheel of exchange and presses upon every form of industry, would be like removing an immense weight from a powerful spring. Imbued with fresh energy, production would start into new life, and trade would receive a stimulus which would be felt to the remotest arteries. The present method of taxation operates upon exchange like artificial deserts and mountains;

  • it costs more to get goods through a custom house than it does to carry them around the world.
  • It operates upon energy, and industry, and skill, and thrift, like a fine upon those qualities.
  • If I have worked harder and built myself a good house while you have been contented to live in a hovel, the taxgatherer now comes annually to make me pay a penalty for my energy and industry, by taxing me more than you.
  • If I have saved while you wasted, I am mulct, while you are exempt.
  • If a man build a ship we make him pay for his temerity, as though he had done an injury to the state;
  • if a railroad be opened, down comes the tax collector upon it, as though it were a public nuisance;
  • if a manufactory be erected we levy upon it an annual sum which would go far toward making a handsome profit.
  • We say we want capital, but if any one accumulate it, or bring it among us, we charge him for it as though we were giving him a privilege.
  • We punish with a tax the man who covers barren fields with ripening grain,
  • we fine him who puts up machinery, and him who drains a swamp.

How heavily these taxes burden production only those realize who have attempted to follow our system of taxation through its ramifications, for, as I have before said, the heaviest part of taxation is that which falls in increased prices.

To abolish these taxes would be to lift the whole enormous weight of taxation from productive industry. The needle of the seamstress and the great manufactory; the cart horse and the locomotive; the fishing boat and the steamship; the farmer's plow and the merchant's stock, would be alike untaxed. All would be free to make or to save, to buy or to sell, unfined by taxes, unannoyed by the taxgatherer. Instead of saying to the producer, as it does now, "The more you add to the general wealth the more shall you be taxed!" the state would say to the producer, "Be as industrious, as thrifty, as enterprising as you choose, you shall have your full reward! You shall not be fined for making two blades of grass grow where one grew before; you shall not be taxed for adding to the aggregate wealth."

And will not the community gain by thus refusing to kill the goose that lays the golden eggs; by thus refraining from muzzling the ox that treadeth out the corn; by thus leaving to industry, and thrift, and skill, their natural reward, full and unimpaired? For there is to the community also a natural reward. The law of society is, each for all, as well as all for each. No one can keep to himself the good he may do, any more than he can keep the bad. Every productive enterprise, besides its return to those who undertake it, yields collateral advantages to others. If a man plant a fruit tree, his gain is that he gathers the fruit in its time and season. But in addition to his gain, there is a gain to the whole community. Others than the owner are benefited by the increased supply of fruit; the birds which it shelters fly far and wide; the rain which it helps to attract falls not alone on his field; and, even to the eye which rests upon it from a distance, it brings a sense of beauty. And so with everything else. The building of a house, a factory, a ship, or a railroad, benefits others besides those who get the direct profits.

Well may the community leave to the individual producer all that prompts him to exertion; well may it let the laborer have the full reward of his labor, and the capitalist the full return of his capital. For the more that labor and capital produce, the greater grows the common wealth in which all may share. And in the value or rent of land is this general gain expressed in a definite and concrete form. Here is a fund which the state may take while leaving to labor and capital their full reward. With increased activity of production this would commensurately increase.

And to shift the burden of taxation from production and exchange to the value or rent of land would not merely be to give new stimulus to the production of wealth; it would be to open new opportunities. For under this system no one would care to hold land unless to use it, and land now withheld from use would everywhere be thrown open to improvement. ...

Consider the effect of such a change upon the labor market. Competition would no longer be one-sided, as now. Instead of laborers competing with each other for employment, and in their competition cutting down wages to the point of bare subsistence, employers would everywhere be competing for laborers, and wages would rise to the fair earnings of labor. For into the labor market would have entered the greatest of all competitors for the employment of labor, a competitor whose demand cannot be satisfied until want is satisfied — the demand of labor itself. The employers of labor would not have merely to bid against other employers, all feeling the stimulus of greater trade and increased profits, but against the ability of laborers to become their own employers upon the natural opportunities freely opened to them by the tax which prevented monopolization.

With natural opportunities thus free to labor;

  • with capital and improvements exempt from tax, and exchange released from restrictions, the spectacle of willing men unable to turn their labor into the things they are suffering for would become impossible;
  • the recurring paroxysms which paralyze industry would cease;
  • every wheel of production would be set in motion;
  • demand would keep pace with supply, and supply with demand;
  • trade would increase in every direction, and wealth augment on every hand. ... read the whole chapter

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q58. What expected result of the single tax needs studious emphasis?
A. That it would unlock the land to labor at its present value for use, instead of locking out labor from the land by a prohibitive price based upon the future value for use.... read the whole article

Winston Churchill: The People's Land  

Tax on capital value of undeveloped land  But there is another proposal concerning land values which is not less important. I mean the tax on the capital value of undeveloped urban or suburban land. The income derived from land and its rateable value under the present law depend upon the use to which the land is put, consequently income and rateable value are not always true or complete measures of the value of the land. Take the case to which I have already referred of the man who keeps a large plot in or near a growing town idle for years while it is ripening -- that is to say, while it is rising in price through the exertions of the surrounding community and the need of that community for more room to live. Take that case. I daresay you have formed your own opinion upon it. Mr Balfour, Lord Lansdowne, and the Conservative Party generally, think that is an admirable arrangement. They speak of the profits of the land monopolist as if they were the fruits of thrift and industry and a pleasing example for the poorer classes to imitate. We do not take that view of the process. We think it is a dog-in-the-manger game. We see the evil, we see the imposture upon the public, and we see the consequences in crowded slums, in hampered commerce, in distorted or restricted development, and in congested centres of population, and we say here and now to the land monopolist who is holding up his land -- and the pity is it was not said before -- you shall judge for yourselves whether it is a fair offer or not. We say to the land monopolist: 'This property of yours might be put to immediate use with general advantage. It is at this minute saleable in the market at ten times the value at which it is rated. If you choose to keep it idle in the expectation of still further unearned increment, then at least you shall he taxed at the true selling value in the meanwhile.' And the Budget proposes a tax of a halfpenny in the pound on the capital value of all such land; that is to say, a tax which is a little less in equivalent than the income tax would be upon the property if the property were fully developed. That is the second main proposal of the Budget with regard to the land, and its effects will be,
  • first, to raise an expanding revenue for the needs of the State;
  • secondly, half the proceeds of this tax, as well as of the other land taxes, will go to the municipalities and local authorities generally to relieve rates;
  • thirdly, the effect will be, as we believe, to bring land into the market, and thus somewhat cheapen the price at which land is obtainable for every object, public and private, and by so doing we shall liberate new springs of enterprise and industry, we shall stimulate building, relieve overcrowding, and promote employment.... Read the whole piece

Mason Gaffney: Land as a Distinctive Factor of Production
Tip O'Neil, the former Speaker of the US Congress, is oft-quoted that "All politics is local politics." One might say the same of market power. Some lands are sold or leased with covenants against competition, as Gimbel's Department Store holds a covenant on a lot adjoining its parent store on 3rd Street and Wisconsin Avenue, Milwaukee.  Such anticompetitive arrangements, however blatant, are intra-state, and apparently immune from sanctions under US Federal anti-trust laws.  Scholars of industrial organization, many of them doing outstanding work otherwise, pay these grass-roots matters little heed.  Researchers and activists concentrate on commodity markets at national and world levels - the ones subject to Federal sanctions, such as they are.  They could probably find more severe and blatant market failure in local land markets.

Bargaining power increases with the number of options one has.  A large landowner with a chain of holdings in different jurisdictions is positioned to bargain, to play off one against the other.  Thus, the Disney Corporation, 1991-93, considered rebuilding and expanding Disneyland at its current site in Anaheim, or in Long Beach where it had tenure over another suitable site.  Using this leverage it won concessions from both cities, "finally" choosing to expand in Anaheim.  It has yet to do so, however, and nothing is really final.  Disney has many other sites around the world.

Likewise, land is a basis for oligopsony power in local labor markets. A city's labor pool is often faced with a local employers' association whose membership is limited by the amount of industrial land within reach of the labor pool.  Migrant farm labor is faced with statewide employers' associations who have the advantages of limited numbers, wealth, ancient roots and stability.  Labor unions that organize a local plant are faced with the threat of the "runaway shop", or merely reallocating work among plants, when the employer owns plants elsewhere.

Custom has dulled us to it, but a corporation is a pool of separate individual landowners bargaining in concert.  A century ago, corporations and limited liability were viewed with suspicion and apprehension.  Today, hundreds and thousands of separate landowners pool their corporate strength against labor, as a matter of course.  Some employees bargain through unions, but not as a matter of course, and hardly ever with international options.  In the US, less than 20% of the labor force is unionized, yet many, probably most economists treat labor as the only threatening monopoly.  They see corporations as benign; a prime cause carried by many economists today is to eliminate the corporate income tax completely.  Would we saw such support for eliminating the payroll tax, the most obvious cause of unemployment. Read the whole article


Mason Gaffney:  George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies
George's tax program stimulates both the demand side and the supply side. Here is the gist of why it works where other methods fail. A land tax spurs landowners to use land to earn cash to pay the taxes. A land tax creates pressure on owners to hire and produce more; other taxes create pressures to hire and produce less. That works because it is a fixed charge: it cannot be avoided by underusing land, and it is not increased by using it. It applies leverage to landowners, just as would a fixed debt service. Leverage means that a landowner, by raising gross output 20%, for example, may raise his net income by 100%.

On the demand side, to repeat,

    • it makes jobs by removing tax penalties from hiring workers and creating capital.
    • Second, a land tax creates pressure on owners to hire more; other taxes create pressures to hire less.
    • Third, untaxing capital and its income raises the incentive to invest, answering those who still dispute Say's Law.
    • Fourth, tax revenues are spent locally (whereas rents paid to absentee owners are spent distantly). Read the whole article


Mason Gaffney:  Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth
There is enough land, if only we use it well. Poverty and unemployment result from owners’ withholding better lands from full or any use, creating an artificial and specious scarcity of land relative to population. Definition: “land” means all natural resources (Gaffney, 1998).

Lemma:. Factor proportions are highly variable (Gaffney, 1976); labor-stinting use of land (same as land-lavishing use) is a form of withholding land from full use.

Lemma 2: Growth of jobs and output are not coupled in lockstep with resource extraction, or with preemption of more Lebensraum. Jobs and output can and should grow by using given lands better. Processes and products can and should be modified in more labor-intensive, land-conserving ways.

Lemma 3: Tyrants, and tyrannical landowning classes, circulate the “overpopulation” concept to conceal their own roles in famines and other extremes of deprivation. In this, George anticipated Amartya Sen. Read the whole article


Bill Batt: How Our Towns Got That Way   (1996 speech)
There were many arguments to be made for the classical tradition, the result of which would be to rely upon payment of rent of land according to its value to society. George recognized that land value is largely a function of how society has elected to invest in any general neighborhood; there is no argument for any one titleholder to reap the reward of what others have invested. Gaffney points out that, from the standpoint of economic theory, the framework had the following virtues:
  • It reconciled common land rights with private tenure, free markets and modern capitalism, a growing and persistent problem as the industrial society took hold.
  • It enabled the lowering of taxes on labor without raising taxes on capital.
  • It reconciled equity and efficiency. It constituted a progressive tax because land is concentrated so much among the wealthy and because the tax cannot be shifted. It was efficient because it is neutral among different land-use options.
  • It constituted no disincentive to business location or population settlement. In this way it encouraged the most efficient land use and discouraged sprawl.
  • It created jobs without inflation, and raised government revenue without any penalty upon its base.
  • It strengthened public revenues and at the same time promotes economy in government.

Those economists who today still persistently hold to the view that there is something special about land that make it unwise to treat as a form of capital are known as Georgists. They represent a small minority of the economics profession, but, little known as they are, they are among its most esteemed members.... read the whole article

 

Mason Gaffney: The Taxable Surplus of Land: Measuring, Guarding and Gathering It

Taxable surplus is also what you can tax without driving land into the wrong use. It is not enough that the land supply is fixed: a tax must not force underuse or other misuse of the fixed supply.
   
A great advantage of taxing rent is that it does not change the ranking of land uses in the eyes of the landowner. Let me explain.
   
In a free market, the function of rent is to sort and arrange land uses: landowners allocate land to those uses yielding the most net product, or rent. Economists have shown (and you can easily see) that this is socially advantageous: the net product is the excess of revenue over all costs, so land yielding the highest rent is adding its utmost to the national product.
   
When you base your tax on the net product (or rent), the ranking of rival land uses remains the same after-tax as it was before-tax. That is, if use "A" yields 20% more rent than use "B", and a tax takes 50% of the rent, then use A still yields the owner 20% more after-tax than use B, and the owner still prefers use A. We will see below, (Section D), that when you tax something other than rent (say the Gross Revenue, G), you will drive the land into less intensive uses, or out of use altogether.
 
A related advantage of taxing rent is that you can often levy the tax on the land's potential to yield rent, regardless of what use the owner actually chooses. This is, indeed, a standard way of taxing rent in most capitalist nations. It is possible because buyers and sellers trade land based on their careful estimates of its maximum rent-yielding capability. The tax valuer observes and records these value data, and uses them to place a value on all comparable lands. Many books and manuals and professional journals have been published on the techniques used: it is a well established art, with its own professional associations, of which our speaker Mr. Gwartney is a leading member.
 
Such a tax is limited to the maximum possible rent, and so will not exceed a landowner's ability to pay - provided he uses the land in the most economical manner (which is not always the most intensive manner). It will surely not interfere with his using the land in the best way, but will discourage using it any other way. ...


When you base a tax on taxable surplus, and keep the tax proportional to taxable surplus, you levy taxes without twisting and inverting the landowner's or land manager's ranking of land uses. As noted before, the owner's preferred use after tax remains the same as it would be without any tax. On the other hand, if you tax on some other basis (Gross Revenue, for example), you bias the owner against uses more heavily taxed. To keep the example simple, and generally realistic, we assume here that the seller is a "price-taker," meaning he sells on a world market and cannot raise the price, and so has no choice but to bear the tax.
 
Bear in mind that Net Revenue is the Taxable Surplus: you cannot tax more than that without aborting the land use. The ratio of Costs (C) to Gross Revenue (G) varies over a wide range, from zero up nearly to one (and even above one for subeconomic uses which, however, you do not want). Let's compare two rival uses, A and B, for the same piece of land. Use "A" yields more Net Revenue (N), but has a higher ratio of C/G. We levy a tax of 10% on Gross Revenue (G). To simplify, Expenses and Capital Costs are consolidated as "C", so N = G-C. Table 1 shows the effects of the tax on Net Revenue after Tax (NAT).

Table 1: Effect on Net Revenues of a 10% Tax on Gross Revenues

Revenues/ %

Gross
$

Costs
$

Net Product
$

Gross/ Net

Tax
$

Net After Tax $

Tax/ Net
%

Land Use

G

C

G-C

G/N

T

NAT

T/N

A

$100

$90

$10

10 x

$10

0

100%

B

$20

$15

$5

4 x

$2

$3

40%


The higher use, A, produces more goods, makes more jobs, and yields more Net Product: it is clearly the higher use. The tax on G [Gross Revenue], however, turns A into a lower use than B, in the eyes of the landowner or manager. A 10% tax on G is a 100% tax on the N from use A, wiping out the entire incentive to put land to use A. It is a 40% tax on the N from use B, leaving 60% of the Net Product for the landowner. The landowner would choose use A in the absence of taxes, or with a tax on N; but the tax on G forces him to choose use B, which is socially inferior. This, in a nutshell, expresses the damage done by imposing taxes on bases other than N, the Net Revenue of land.

  • The tax lowers output, employment, and investment opportunities for capital, all three.
  • Fourth, it lowers tax revenues well below their maximum possible level of $10k, the Net Revenue from use A. ... read the whole article

 

Martin Luther King, Jr: Where Do We Go From Here? (1967)

 

... read the book excerpt and whole speech

 

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