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Nic Tideman:  Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth

IV. Applications to Resource Use

It is only a small step from charging people for street use and parks to charging them for renewable and exhaustible resources. If people who could fish as much as they wanted would deplete fish stocks excessively, then some form of control over fishing is beneficial. It is possible in theory to have efficient control through quotas, though it is difficult to set the quotas properly, and highly contentious to change them when conditions require a change. The recognition that the fish are everyone's common heritage would require that, if there are to be quotas, the quotas be auctioned, and that if not, then everyone who fishes be required to pay for fishing according to the loss in the value of fish stocks that results from fishing. If a fishing resource lies entirely within a single nation (as in a lake or river), then the recipient of the fees for fishing should be the polity that includes the resources (Though the value of the fishing resource would be included in the calculation of whether the nation was using more than its share of global natural opportunities.) When the fishing resource is in international waters, the fees should be shared equally among all nations in proportion to their populations.

Suppose that fish are caught in a river than flows from one nation into another. How should resource use be managed and accounted for in that case? The two nations should set a common price for fishing (unless fishing on one entails a greater resource cost than fishing in the other). However they divide the revenue from such charges, their ability to collect the revenue should be included in the calculation of how their appropriations of natural opportunities compare with those of other nations. ... Read the entire article

Mason Gaffney: Nonpoint Pollution: Tractable Solutions to Intractable Problems
The Special Challenge to Economic Thinking
The Search for Surrogates
Sources of Nonpoint Pollution
What Problems are Created?
What Problems are Unsolved by Excise Taxes on Surrogates?
The Case of Forestry
The Case of Urban Settlement
The Case of Agriculture
The Common Theme from Forest, City and Farm

... Nonpoint pollution goes right to a chink in the armor of conventionally trained economists (like myself) who are overtrained towards becoming protagonists of the price system.  To the skeptical we are "free market freaks": eco‑freaks who are ‑nomic rather than ‑logical.  Whatever our faults we are zealous, and carry the conviction of true belief.  With the problem at hand, however, we can't do what we do best, that is call for price signals, punt, and slip away.   

The very name "nonpoint" pollution suggests that economists see this as just an odd bit of clutter, something "non‑regular" in their tidy world.  Indeed, all pollution was an exception, an "externality," until recently (at least at my age it seems so).  Then they learned you can meter effluents and tax them, or trade effluent rights around like private property.  Thenceforth they could fit pollution right into existing models and ideologies with minimum intellectual strain.  They were happy as Procrustes with a new guest.   

But we can't meter runoff — how frustrating. 
  • It comes from areas — how disorienting.
  • Its damages are spread unequally over other areas, differentially populated — how non-homogenous. 
Standard-brand economists are ill-equipped and undisposed to face such problems.   
Conventional price theory has been accused of mocking physics because it uses some elementary calculus, but if so it is a poor imitation: it deals with an imaginary world abstracted not just from friction but from space and time themselves.  Space is relegated to one subdiscipline (location theory) and time to another (finance), so regular price theorists can spin their webs in purest abstraction, undistracted by these details.   

Most price theory is spaceless.  Even location theory, at least the most common kind, conventionally treats cities as Euclidean points: the math is simpler that way.  Newton could get away with it explaining planetary motion; students of urban sprawl can not.   

Economists are also ill-equipped to deal with ecology.  Economists' "externalities" pour into a biosphere of interdependencies at least as complex as what economists purport to understand.  Economists are too disposed to underrate the sensitivity, passion and numbers of Nature's votaries, and the real economic value of the philosophical values they celebrate.  Fisheries economists are a notable exception, although they probably impose more economics on biology than vice versa.  But most economists treat "eco-freaks" as noisy nuisances.  In the absence of a real ecologist I will presume to take their part.   ...

... Damage to lakes and impairment of riparian values is notorious and needs no laboring here.  We see some progress in protecting inland lakes, but now the oceans themselves are threatened.  There is worsening damage to salt‑water estuaries, gulfs, bays, and wetlands.  Shellfish and finfish supplies are diminished and contaminated; the littoral is all littered; swimming is restricted; riparian amenities are impaired (Business Week, October 1987).   

Urban invasion of coastal wetlands is an aspect of the problem.  Wetlands have served as filters protecting the ocean: urbanize them and more raw sewage reaches the ocean.  Here again the culprit is not "construction" as such, it is filling.  Cuts in the hills increase runoff; fills in the wetlands reduce filtering.  The combined effect is very bad news.    ...  
Read the entire article

Mason Gaffney:  Oil and Gas Leasing: a Study in Pseudo-Socialism

Meantime, on the Outer Continental Shelf (OCS), a billion acres (ten times the area of California) was to be leased before 1984. Before that, major oil firms had about 1/5 of that area under lease, looking many years or several decades ahead of need. This helps explain why a recent Alaska sale, an old Naval Petroleum Reserve (NPR 4), fetched only 14% of the anticipated amount. ...

Today's industry is faced less with the property tax than the income tax. Most state property taxes are applied only at low levels to mineral-bearing lands. Worse, the most active leasing today is on the OCS, outside the tax reach of any state or county, and so exempt from property taxation.

The Federal income tax does reach out to the OCS. Its effect, however is to redouble the industry's support for the bonus system by treating bonuses most favorably. The bonus, being a cost of land acquisition, might normally not be easily deductible or depreciable. Oil and gas are exhaustible, however, so the bonus might reasonably be written off slowly on a unit-of- production basis, or by means of the depletion allowance where that is still used. In the distinctive conditions of frontier oil exploration, however, much of the bonuses paid are deducted before production even begins.

It works like this. In the normal course of exploration, some five leaseholds are taken and explored for every one where post-leasing drilling will show commercially producible hydrocarbons. The other four may be "abandoned," which means the lessee formally terminates the lease. At this time, which the lessee may choose at his tax convenience, all bonuses previously paid are taken as current expenses, fully deductible in the year of abandonment. In addition, all pre-leasing exploration costs that the lessee assigns to the abandoned leaseholds are expensed also. Thus, before production begins, the exploring firm may have expensed 80% of its land acquisition costs. Read the entire article

Mason Gaffney: Property Tax: Biases and Reforms
Priority #1. Safeguarding the property tax
Priority #2: Enforce Good Laws
  • Reassess Land Frequently
  • Use the Building-Residual Method of Allocating Value
  • Federal Income Taxes
Priority #3. De-Balkanize Tax Enclaves
  • A. Rich and Poor
  • B. Timber and Timberland
  • The Role of Timber and Timberland
  • Two More Areas Deserving Attention
    • Offshore Oil
    • Tax All Natural Resources Uniformly and Comprehensively
Priority #4. What Tax to Fight First?
Priority #5: Make Landowners Pay Their Taxes

In 1946 President Harry S. Truman, with the stroke of a pen, added 50 percent to the area of the U.S. when he unilaterally extended our traditional three-mile limit out to 200 miles.

  • The first three miles were soon given to the coastal states; California and Alaska both raise large lease and tax revenues from their lands under these coastal waters.
  • The next 197 miles, however, is unorganized territory, outside the sovereignty and tax reach of any state, or subdivision thereof.
Most of our domestic oil and gas is now produced from the seabed under this water wilderness. The property is public domain under federal BLM administration, but firms bid for leaseholds there under a system that the majors seem to manipulate to their advantage. Even so, there are some Federal revenues from both lease payments and corporate taxes. State and local revenues, however; are nil.

Counties may, and often do assess and tax "possessory interests" in leaseholds on federal uplands that lie within state boundaries. They are helpless, however, to tax such property held offshore. The property values are huge, and so are the firms that own the leaseholds. Many firms own tens of millions of acres apiece, areas larger than whole states. Offshore oil is our largest enclave protecting rent-bearing lands from property taxation, and any other form of state or local taxation.

Some form of national property tax is called for; or higher lease payments in lieu of taxes. Perhaps some income tax surcharge is the best way, or special federal tax on net proceeds. This paper cannot enter the thicket of what jurisdiction should have sovereignty to tax offshore leaseholds, nor how best to levy the tax. The point here is that no system of resource-based taxation is complete, philosophically or practically, that leaves this enclave untouched.  ....

Tax All Natural Resources Uniformly and Comprehensively

Advances in the arts and sciences keep disclosing new values in old resources. Owing to institutional lag, these values can grow huge without finding their way onto the tax rolls. A thoughtless reaction is, "Bureaucrats want to tax everything!" The point is to tax all natural resources uniformly and comprehensively, to end the lowering taxes on incomes. productive business, and sales! Land taxation will not win wide support, nor will it deserve to, if it is perceived as a tax focusing on median homeowners, farmers, and merchants, while exempting oilmen, media tycoons, and timber barons.

In addition to newly awakened resources, many resources long known (like water) are held in odd tenures that have not been recognized as taxable property, although they should be. Any comprehensive move toward using resource rents for public revenue must include these varied resources and tenures. I have a list of 30 or so, too many to treat here. To give a sampling, they include

  • pollution easements over air and water;
  • aircraft landing time-slots and gates;
  • aquifers;
  • benefits from covenants;
  • access easements;
  • power drops;
  • concessions;
  • fisheries;
  • franchises;
  • the gene pool;
  • grazing licenses;
  • minerals;
  • orbits;
  • soils;
  • radio spectrum;
  • rights-of-way;
  • shipping lanes;
  • standing to sue;
  • strata titles;
  • use of the streets;
  • wildlife;
  • wind; and
  • zoning.

In tapping these many varieties of resources and tenures for public revenues, citizens and their representatives may have to set priorities. Two practical criteria rise to the top:

  • go first for the big values, and
  • go for the soft targets.

The biggest values are probably in energy, communications, water, rights-of-way, zoning and street use. Let's just look at what we are learning about communications. Knowledge and entertainment appear both at top and bottom on man's hierarchy of needs. People without even adequate shelter may be seen huddled around tv sets; people in war, or under totalitarian governments, risk their lives to hear smuggled broadcasts. People with higher incomes and security equip themselves with mobile telephones, and call around the world; they rush to get on the information highway. AT&T was the biggest non-financial corporation in the world before splitting up. Newspapers depend on their "wire" services: one of the first Great American Monopolies was Western Union and its news appendage, AP.

Recent FCC auctions have fetched billions of dollars for spectrum licenses, but this is like selling the badlands after giving away the beachfronts. The values of extant licenses given away ion the past, especially spectrum in top locations, are much higher. AT&T recently paid $112.5 billion for the McCaw Company's spectrum licenses, which are a smattering of all that is out there. These licenses should be on the property tax rolls in the jurisdictions that they cover. The revenue possibilities are staggering.

How about soft targets? A soft target is any tenure recently created, in a field that is easy to understand. Fisheries come to mind. In the last few years governments in Canada and the U.S. have limited allowable fish hauls by excluding new fishing boats and imposing quotas on the owners of old ones. This "imposition" amounts to a gift. Some quotas swiftly rose in value to over $1 million each, suddenly creating a class society where before there was equal opportunity. There is now a class of nouveau, instant millionaires and parlor fisherman who rent out their quotas to working fishermen.

Very likely it is wise to limit fish catches and avoid the "tragedy of the commons." It is also necessary to police the waters and keep out alien interlopers, a dicey business calling for the full power of a strong national government. It is not necessary, however, to give away the quotas so dearly policed. It is obvious to any objective observer that the quotas should be sold or (better) leased to the highest bidder. If the Feds insist on giving them away, states and localities should class them as taxable property subject to a high rate. The best time to levy appropriate charges is when quotas are new, and the injustice of the present dispensation is apparent to all.  Read the whole article

Mason Gaffney:  Sounding the Revenue Potential of Land: Fifteen Lost Elements
Leaseholds on the OCS (Outer Continental Shelf) are outside state sovereignty, hence not subject to property taxes. Their tenure was established by U.S. military might as recently as 1946, when President Truman unilaterally extended our boundaries from the traditional 3-mile limit to 200 miles. That is not the end of it, however, for our military/diplomatic/financial umbrellas undergird tenures of American nationals and allies in nations around the world, and protect vessels at sea, even those flying foreign flags of “convenience” (i.e. tax-avoidance). There is every reason why private beneficiaries of these tenures should pay for their protection.

Rents that are now dissipated, but need not be.
         1. Dissipation by open access
  It is a truism of economic theory that open access to lands dissipates and destroys potential rents, by overcrowding. Open range and fisheries are classic examples from olden times. Fisheries are being privatized only in our times, and the rents, where observable, are often over half the catch. Streets and highways are like open ranges, with cars and trucks instead of cattle and sheep. The revenue potential of charging motorists for squeezing into crowded streets is staggering. Wm. Vickrey, among others, has come up with vertiginous numbers. The beauty of it is that discouraging marginal trips by pricing actually can increase the aggregate traffic flow, a double gain.

  Access to underground “pools” of water and petroleum is limited to overlying landowners, but even that degree of openness is enough to destroy much potential rent that may be conserved by unitized control or better, severance taxes.

         2. Dissipation by rent-seeking in the process of tenuring
  Private tenure is not the panacea for all resource problems, because the process of creating tenure entails orgies of “soonerism.” Notorious examples are exploring for minerals in the preleasing period, and establishing water licenses based on prior appropriation, and radio spectrum licenses based on histories of broadcasting.  Read the whole article

Mason Gaffney: The Taxable Surplus of Land: Measuring, Guarding and Gathering It
1. Common Property in Land is Compatible with the Market Economy.
2. The Net Product of Land is the Taxable Surplus
A. To socialize the taxable surplus, land rent, effectively, you must define and identify it carefully, and structure your taxes to home in on it.
B. Taxable surplus is also what you can tax without driving land into the wrong use.
C. To tax rent we must be sure there is rent to tax, and we must adopt public policies to husband and maximize it, and avoid policies that lower and dissipate it.
i. Avoid "perverse subsidies."
ii. Avoid letting lessees of public land conceal their revenues.
iii. Avoid letting lessees or taxpayers pad their costs to understate their net revenues.
iv. Avoid dissipating rent by allowing open access to resources like fisheries,
v. Avoid trying to distribute rents to consumers by capping prices below the market.
D. Raising output by removing tax bias
E. Maximizing public revenue.
F. Sustaining the tax base
3. Taxing the Net Product of Land Permits Untaxing Labor
4. Taxing the Net Product of Land Permits Untaxing Capital
5. Taxing the Net Product of Land Provides Ample Public Revenues: a Master Solution to Many Problems
A. Public revenues will support the ruble.
B. Your public credit will, of course, recover to AAA rating when lenders see that there is a strong flow of revenue to pay public debts.
C. Never again need you bend to any "advice" or commands from alien lenders, nor endure patronizing, humiliating homilies from alien bankers, nor beg any foreign power for aid.
D. If you again feel the need (as I hope you will not) to rebuild your military, you will of course require strong revenues.
E. Strong national revenues are required to unite Russia, and keep it one nation.
1. Common Property in Land is Compatible with the Market Economy.
You can enjoy the benefits of a market economy without sacrificing your common rights to the land of Russia. There is no need to make a hard choice between the two. One of the great fallacies that western economists and bankers are foisting on you is that you have to give up one to enjoy the other. These counselors work through lending and granting agencies that seduce you with loans and grants to learn and accept their ideology, which they variously call Neo-Classical Economics, or "monetarism," or "liberalization." It is glitter to distract you and pave the way for aliens to acquire and control your resources. 

To keep land common while shifting to a market economy, you simply use the tax system. Taxation is the form that common property takes in a monetary, market-oriented economy. To tax is to socialize. It's then just a simple question of what you will socialize through taxation, and how; but in the answers lie success or failure.

Not only can you have both common land and free markets, you can't have one without the other. They go together, like love and marriage. You need market prices to help identify land's taxable surplus, which is the net product of land after deducting the human costs of using it. At the same time, you must support government from land revenues to have a truly free market, because otherwise you will raise taxes from production, trade, and capital formation, interfering with free markets. If you learn this second point, and act on it, you will have a much freer market than any of the OECD nations that now presume to instruct you, and that are campaigning vigorously to make all nations in the world "harmonize" their taxes to conform with their own abysmal systems.

The very people who gave us the term laissez-faire -- the slogan at the core of a free market economy -- made communizing land rents a central part of their program. These were the French economistes of the 18th Century, sometimes called "Physiocrats," who were the tutors of Adam Smith, and who inspired land reforms throughout Europe. The best-known of them were François Quesnay and A.R. Jacques Turgot, who championed land taxation. They accurately called it the "co-proprietorship of land by the state."
Since their time we have learned to measure land values, and we have broadened the meaning of "land" to comprise all natural resources. Agrarians will be relieved, and may be surprised, that farmland ranks well down the list in terms of total market value. Thus, a land tax is not primarily a tax on farms; only the very best soils in the best locations yield much taxable surplus.  ...  
Fisheries are another source of value. In the past most nations have let this rent be "dissipated" by overfishing. In recent years the U.S. and Canada have in effect "privatized" fishing in their offshore waters by limiting the number of licenses and boats. This limitation was needed and desirable, overall. It created large rents, where previously there were little or none, by preventing overfishing and the great waste of duplicate, triplicate, and even quintuplicate fishing effort. That is a good example of husbanding and guarding rent, which is necessary before you can collect it. It was not necessary or desirable, however, to give away this net benefit to private parties.
The government did not sell these licenses, but simply gave them away to owners of existing boats, and others with political influence. Each license now sells for something like a million dollars, creating a new class of instant millionaires and "parlor fishermen." This giveaway to the few, and takeaway from the many, created an instant class society where before there were equal access and equal opportunities.
These privileges are worth so much that there are now documented cases off Alaska where the parlor fisherman takes 70% of the total catch. The captain, the crew, and the owner of the boat, who do the work and bear the dangers and discomforts and financial risks of fishing, must get by with the other 30%. Parlor fishermen are simply leeches; these rents should be socialized, relieving the workers from taxes. ...

Avoid "perverse subsidies." These are subsidies that encourage harmful things like
  • polluting air and water,
  • wasting water,
  • cutting timber whose value is less than the cost of logging, or
  • populating remote regions whose costs exceed the benefits derived.
Cape Breton Island, the northern tip of Nova Scotia, contains the most polluted area in Canada thanks to years of subsidies to sustain its uneconomic, obsolescent coal and steel industries that employ just a few people by fouling one of the most scenic jewels in North America.
We have mentioned how we actually subsidize people to withdraw scarce water from our overdrawn rivers in the arid U.S.A. The so-called water "shortage" in the lower Colorado River is entirely an artifact of such misguided policies: every major agency drawing on the Colorado is actually subsidized to do so, when they should be paying for the privilege. If they paid, they would stop wasting water, and would enrich the Treasury, which could then abate taxes on work, trade, and saving.
The U.S. Forest Service has turned a great national asset, our national forestlands, into a drain on the Treasury by subsidizing forest roads in subeconomic areas. It makes money selling good timber in good areas, but then spends $10 on roads into subeconomic areas to get $1 in revenues from sale of timber to private parties, destroying scenic values and watershed protection.
Perverse subsidies like those are unspeakably foolish and wasteful. They "dissipate rent" so there is none left to tax.  Read the entire article

Nic Tideman:  Global Economic Justice, followed by Creating Global Economic Justice
Applying the Theory of Justice to Other Connections among Nations
The pre-development rental value of land is only the beginning of the natural opportunities to which all persons have equal rights. Consider fishing in the oceans. If there were so many fish in the oceans that the removal of some by the fishermen of one nation had no detectable impact on the opportunities available to the fishermen of other nations, then there would be no economic scarcity of fish in the oceans as a natural opportunity, and the value of fish would represent returns on the labor and capital of the fishermen, along with some luck. But when fishing by one nation leaves noticeably fewer fish for the others, the reduction in the value of fish stocks caused by fishing represents an appropriation by that nation of the common heritage of all, which needs to be accounted for in establishing what compensation is needed to achieve an equal division of natural opportunities. The pie to be divided now consists of the sum of the pre-development rental value of all land plus the depletion cost of the fishing that all nations do. A nation is fully entitled to the proportion of this total represented by the proportion of its population in total population.

The same logic that applies to fishing applies also to the rent component of the value of all things--the iron and other metals in products of all kinds, the gold and other resources in jewelry, the component of land rent in lumber, etc. Each nation's use of such resources must be included in the pie to be divided.

Sometimes rivers flow from one nation into another. If the withdrawal of water by the upstream nation reduces the value of the natural opportunities that are left to the downstream nation, then this reduction in the value of the downstream opportunities is part of what the upstream nation appropriates from the common heritage of all nations. The total value of the available natural opportunities is maximized while also achieving justice, if all withdrawals of water by both nations are charged at a price that equates supply and demand, the money so collected is counted as part of the pie to be divided, and land is valued according to the rental value it would have if unimproved,considering the price of water. ...  Read the whole article

Mason Gaffney: George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies

4. Local, state, and national applications

Georgist policy can be applied at any level: local, state, or national. To some extent it is even applied at a world level, through the U.N., with its concept of "common heritage" applied to oceanic resources of the deep seabeds.

Georgist tax policy can also be applied at any tax rate, low or high. A low rate does a little good; a high rate does a lot of good.

In this Century, strenuous efforts have been made to box the property tax into the local level, where local particularism tends to cap the rate. In England, this policy is identified with the half-brothers, Austen and Neville Chamberlain. Neville was so successful that in 1938 he was forced to face Adolf Hitler without any armed support, with the disaster at Munich. In America the Federal government last taxed land in the Georgist manner during the Civil War. After 1913 it taxed the income from land, but in recent years the income tax has degenerated into a payroll tax primarily. In tandem with the other payroll tax it has become a primary cause of our depressed labor market.

In 1920, about half of all state revenues (not counting local) came from state property taxes. These tended to focus on land, rather than capital, much more than now. Both the state and Federal governments could tax land again, any time the voters send that message. ... read the whole article



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Wealth and Want
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