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Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...

Another outstanding example of simply following appraisal laws is Southfield, Michigan. State law required all taxable property to be appraised at market value. Buildings there in 1960 were assessed at 70 to 80 percent of value and land at five to 10 percent. After Mayor S. James Clarkson took office on a promise to correct this violation, and after a fight with the assessor, special interest groups, and the courts, the city stopped overvaluing new construction and remodels and began appraising land by its highest and best use. Soon the contrast with the slums of nearby Detroit were patent. Mayor Clarkson stated that Detroit taxed land values "next to nil" under Depression era assumptions. Voters reelected him four times on his promise of fair assessments. Average homeowners paid 22 percent less in taxes immediately. Those who held large empty lots in desirable locations saw huge tax increases but reaped windfall profits from selling or developing. As Detroiters migrated outward, accurate assessments enabled Southfield to capture rising land values, bulking up its tax base by 20 percent a year. ...

A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article

Jim Clarkson: The Great Adventure

George's fame led him to be drafted by the United Labor Party to run for Mayor of New York in 1886. George lost to Abram Hewitt (and Theodore Roosevelt came in third). George wrote several books, including Social Problems, Protection or Free Trade (which was read in its entirety into the US Congressional Record) and others. George's remedy was born out of the classical economists Adam Smith and John Stuart Mill's beliefs that the unearned increment from the rent of land belonged to the people. Others who believed the same way were Thomas Jefferson, John Locke, Thomas Paine, Mark Twain, Abraham Lincoln and Winston Churchill (to name a few) and without a doubt Mr. Alan Brett, my mentor whose name "Alan" I gave to my fourth son.

My own experience of land ownership came about from a speech I gave before the Southfield Economics Club when I was given the name of "Sour Grapes". Why the name "Sour Grapes," I asked the name caller. "Simply put, he said, "you do not own any land." It was then I knew that to prove speculating in land would reward me with unearned wealth, I had to invest in land to prove the point.

The first of many speculative ventures, for instance, was when a house came up for sale on Southfield Road just North of Ten Mile Road. I convinced my law partners to join with me in its purchase. I knew that Southfield Road would be widened to four lanes and increase its value. We purchased the property with $3,000 down on a land contract for $18,000. Just over six months later we sold it for $32,000. All the profit was from the increase in the value of the land and was unearned.

It took some courage to practice what I preached, but once after the first experiment in this adventure, I was forever hooked and consequently, found myself rationalizing my action by espousing the merit of land value taxation and thereby justifying my investment in land as a means to prove my point. The practical aspect of this is easily understood when in the talks that I give, and have given, across the nation and in Canada, I could more easily ford the question that implied that my advocating of land value taxation was but "Sour Grapes" for my failure to have benefited from the system.

Not all nations or political subdivisions have failed to "see the cat", but many have adopted various forms of Land Value Taxation -- for example, by differential rates of taxation by placing a higher percentage on the land than on the improvements. The State of Alaska, for example, has secured the value of its oil royalties for their citizens by what is called the Alaskan Permanent fund.

Governor Jay Hammond introduced a proposed Constitutional Amendment to create the Permanent Fund in 1976, and it was approved by the people that fall. From then on, 25% of all mineral lease rentals, royalties, royal sales proceeds, federal mineral revenue sharing payments, and bonuses received by the state were placed into the Permanent fund. Every man, woman and child in Alaska with a qualfying 12-month residency is entitled to a portion of each year's earnings. In 1998 each resident received $1,769.84, and for 1999 it was $1,963.86. Just think, a family of four would receive $7,855.44.

This could be done in every state in America. Land values belong to the people. Let us give it to them! It is up to you to advocate the change or become a Land Lord. ... read the whole article


Mason Gaffney:  What happens when a state radically slashes its property tax?

Michiganders are saying they must wait and see, but there is no need for that: California can show you 17 years of experience. To read your future, just study our past. Here is what has happened since California passed Proposition 13 in 1978.

The obvious direct results have been to cut public services, raise other taxes, and lose credit rating. ...

The private sector is doing badly, too. Raising income taxes, business taxes, and sales taxes is no way to stimulate an economy; they are all a drag on work and enterprise. ...

It should give one pause. It is, however, if you think about it, the expectable result of what the voters did.
  • They turned property from a functional concept into a sacred one; from a commission to be enterprising, hire people, produce goods, and pay taxes into a welfare entitlement.
  • They rejected the concept of a tax on inert wealth in favor of the rival concept of taxing liquidity and cash flow.
The predictable result is to inhibit economic activity, and encourage holding wealth inert and stagnant.

David Shulman tersely summarized the distributive effects of Prop. 13 as he left us for Salomon Brothers in Manhattan: "it breached the social compact." ...

1/8 of all new businesses started in the U.S. were in L.A., 1945-50. These were small, creative, flexible, and too varied to classify. No Linnaeus could sort them in conventional categories: the new Angelenos simply stayed here and started producing everything for themselves, some things previously imported, and others never seen before.  ...

Why is that not happening today, 1995? An invisible, pervasive change is Proposition 13, which makes it possible to hold land at negligible tax cost. In 1945 land was taxed at 3% every year, building a fire under holdouts to turn their land to use. Today that same tax cost is well below 1%. Using Gwartney's Rule of Thumb (see below under B,1), it is about 1/8 of 1%: a rate of 1% applied to 1/8 of the true value.

Landowners are only taxed now if they use their land to hire people and produce something useful. Then they meet the drag of our high business and employment and sales taxes, necessitated by the fall of property taxes. A handful of oligopolistic landowners control most of the market; small businesses are squeezed out. This helps us segue from being at the cutting edge of industrial progress to a third-world economy - from the NH model to the AL model - with little relief in sight. ...

California displayed amazing growth up to 1978, and the resilience to shrug off the loss of war industries after 1945 and still grow "explosively" (as Jane Jacobs put it). After 1978 we have a string of reverses. The timing, along with a priori causative analysis, plus various direct observations too numerous for this time-slot, support an hypothesis that the reverses were aggravated by Prop. 13. Michigan, be warned of our lot, and learn about taxes from us: "This Could Happen to You." Read the whole article


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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper