|Wealth and Want
|... because democracy alone is not enough to produce widely shared prosperity.
Joseph Stiglitz: October, 2002, interview
Chuck Metalitz: Licenses to Steal Are Expensive
The electromagnetic spectrum is, economically, land, in that it is a natural resource which cannot be manufactured. Accordingly, the economic value of a license to use a portion of the spectrum is determined not by its cost of production, but by its usefulness in comparison to licenses available for free. And, due to anticipation of future increases, the market value of a perpetual (or any long-term) license can grow to levels higher than can be supported by current use of the license.
Using financial reports filed by owners of radio broadcast licenses, this Research Note shows that license values are approaching, or may even have reached, such levels. It also shows that the main asset on these companies’ books is their licenses. This means that, while Henry George would recommend that substantially all the rent of these licenses be collected thru taxation, such a policy would be a major inconvenience for such companies.
This Research Note also provides some information about auctions of radio broadcast licenses, and their role in the Federal budget.
This paper was written because I resented being sold for $17
The value of privilege is visible— but it isn’t going to the shareholders.
The Radio Broadcast Spectrum is Being Auctioned.
Large operators have the advantage in getting financing, but FCC pretends otherwise.
Not only the radio broadcast spectrum is being auctioned.
The outlook for radio broadcast license values
Henry George’s solution might cause some dislocation.
Table 1: Licenses, Assets, Revenues for Some Major Broadcasters
Table 2: Operating Income and Related Factors
Table 3: Operating Profit and Income Available to Common
Table 4: Assets and Long Term Debt
This paper stems1 from an event last year, shortly before the Des Moines conference. Chicago’s only remaining privately-owned classical music station, WNIB2, was sold for $165 million. Bonneville International Corporation bought the station not because they wanted to continue or improve its operation; what they really bought was a license to broadcast to a market of nearly 10 million people. In fact, they bought the market, at a cost of about $17 per person.
Well, I used to listen to WNIB, and I resented being sold for $17. I wanted to look into the business of broadcast radio, and try to analyse it in Georgist terms. George pointed out that those who could monopolize natural opportunities could exact a toll on users, and that speculation could lead to excessive costs of access which eventually make productive use impossible.
What I found is, first, that the major asset of broadcasters is privilege. Actually, I could have figured that out just by reading the Chicago Tribune3, who quoted the publisher of a radio trade magazine: “These radio stations are a license to steal. They’re gushing oil wells.”
And, second, I found that speculation in broadcast licenses does indeed appear to have reached a point where productive activity is quite difficult, though not yet impossible. One can make money in radio, but it’s mainly done by holding licenses rather than producing programming. ... read the whole article
Bill Batt: Painless Taxation
Both on grounds of justice and on grounds of efficiency, a market-based system of allocating rights to use the radio frequency spectrum, with public collection of the value of rights granted, is best. The right to use the frequency spectrum is a scarce resource, whose value is derived primarily from the mere existence of the spectrum and not from the efforts of those who might be granted use. Thus the whole population has equal respectable claims to use. But efficient use of the resource requires exclusive assignment of frequencies within particular geographical areas. Therefore justice is served by requiring those who receive the privilege of use to compensate the rest of the population for that privilege. Read the whole article
Nic Tideman: The Case for Site Value Rating
The Social Justice of Site Value Rating
The Efficiency of Site Value Rating
How Valuations would be Made
Both for reasons of social justice and for reasons of economic efficiency, site value rating deserves a continued place in the programme of the Liberal Party.
The case for site value rating in terms of social justice is founded on two understandings: first, that the value of land in the absence of economic development is the common heritage of humanity, and second, that increases in the rental value of land arising from economic development and government expenditures should be collected by governments to finance those activities. What is meant by "land" is the unimproved value of sites and the value of extractable natural resources such as North Sea oil.
While there may someday be institutions capable of implementing a recognition of land as the heritage of all humanity on a worldwide basis, in the absence of such institutions each nation should implement a recognition that land within its boundaries is the common heritage of its citizens. This is accomplished not by making the nation a gigantic Common or by instituting government management of all land, but rather by requiring all persons and corporations that are granted the use of land to pay a fee or tax equal to what the rental value of the land they control would be if it were in an unimproved condition.
The case for site value rating in terms of economic efficiency is founded on the fact that a tax on resources that are not produced by human effort is one of the few sources of government revenue that does not reduce incentives for people to be productive. Two other revenue sources that have this virtue are taxes on other government-granted privileges such as exclusive use of radio frequencies and taxes on activities with harmful consequences, such as polluting the air. An economy will be more efficient if revenue sources that do not diminish productivity are employed to the greatest possible extent before any use is made of taxes that impede productivity.
What makes a tax efficient is that the amount of tax that is due cannot be reduced by reducing productive activities. When incomes are taxed, people can reduce the amount of taxes owed by working less. They do so, and the productivity of the economy falls. When houses are taxed, people can reduce the amount of taxes owed by building fewer house and smaller houses. They do so, and the housing shortage worsens. But when the unimproved value of land is taxed, there is no resulting diminution in the quantity of land. Thus taxes can be levied on land without diminishing the productivity of an economy. And shifting taxes from other, destructive bases to land will improve the productivity of an economy.
Subsequent sections explain in more detail these social justice and efficiency arguments for site value rating, describe procedures for implementing such a tax system, and explain why a variety of potential objections are without merit. ... Read the whole article
Mason Gaffney: The Taxable Surplus of Land: Measuring, Guarding and Gathering It (for the Duma Hearings in Moscow, 1999)
Another natural resource (hence part of "land"), whose nature and value the mass of people are only slowly realizing, is the radio spectrum. In this age of communication its value is vaulting skywards even faster than the rockets launching the satellites that direct and relay signals through the spectrum. Each satellite requires a spectrum assignment, or it is nothing but space junk. One minor American entrepreneur, Craig McCaw, collected a bundle of spectrum rights for cell phones, and a few years ago sold them to AT&T for $12 billions. Then Mr. McCaw went partners with Bill Gates, perhaps the richest American, in a firm called Teledesic, to launch hundreds of satellites and amass radio spectrum rights around the entire world, including your part of the world, in the hope of dominating worldwide communications. Radio spectrum is a natural resource, and it belongs to the government, even in the capitalistic U.S.A. When Teledesic comes calling, under the auspices of our Vice President Al Gore, don't sell anything cheap! In fact, don't sell anything at all, but lease it for a limited time, so you may gain from future rises in value. And don't stint on the professional help you should hire to protect your interests: these lease contracts are complex, and are worth billions if you play your cards right. ... Read the whole article
Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy
When the principle that the value of government-assigned opportunities should be received by the public treasury is violated, the result is "privilege," which from its Latin roots means "private law," that is, law that permits one person to do what others are not permitted to do. Thus what we stand for is an end to privilege.
Numerous examples of privilege are incorporated in our institutions.
This list of examples of privilege, which is by no means exhaustive, contains some privileges, such as acreage allotments and import quotas, that would be best reformed by eliminating restrictions and permitting all to do what now only some may do. For other privileges, such as broadcast licenses and land titles, great productivity results from the social understanding that a specified individual will have the use of a given resource. For these privileges, the best reform is the introduction of the requirement that any person who is assigned such an opportunity must pay to the public treasury an annual fee equal to what the opportunity would be worth to someone else. ... Read the whole articleNic Tideman: Global Economic Justice, followed by Creating Global Economic Justice
If nations are close enough together that effective use of parts of the frequency spectrum by one requires that others refrain from using those parts, and if bandwidth on the spectrum is scarce, then any recognition that one nation will have exclusive use of a portion of the frequency spectrum should be accompanied by a payment into the fund to be divided, equal to what others give up by not using it.
If geo-synchronous parking spaces for satellites are scarce, then each nation that has the use of such parking spaces should include a payment for their market value in the pie to be divided.... Read the whole articleNic Tideman: Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth
The frequency spectrum is another natural opportunity whose use is analytically equivalent to that of land. When the consequences of use of a part of the frequency spectrum are confined to a single nation, then a principle of equal rights to natural opportunities implies that a right of exclusive spectrum use should be offset by a payment to the government of that nation, corresponding to the scarcity value of use. When the use that a nation wishes to make of a part of the frequency spectrum requires other nations to refrain from using it, then a recognized right of exclusive use counts as a part of that nation's appropriation of natural opportunities, and is incorporated into the calculation of what the nation owes to other nations.
... Read the entire article
Mason Gaffney: Sounding the Revenue Potential of Land: Fifteen Lost Elements
Variant forms of tenures to resources, omitted from standard tax rolls, show great revenue potential. Leases on public lands give tenure, de facto, but are often exempt because the public land is exempt.
... The Alaska Permanent Fund is an innovative and important model of resource rents for citizen dividends, but with worldwide oil production nearing peak, it is the opinion of this writer that oil resource rents had best be directed to the development of renewable energy technologies. The electromagnetic spectrum, geo-orbital zones, and surface land values would be a more appropriate source of rent distribution as citizen dividend payments. ...Karl Williams: Social Justice In Australia: INTERMEDIATE KIT
We live in yet another age of rapid privatization of the remaining commons. The airwaves, also known as the electromagnetic or radio-frequency spectrum, the most valuable resource of the information economy, is being given away to huge media corporations. Economists estimate that in the United States alone the commercial value of access to it could be more than $750 billion. There is a rush to patent plant material around the world. The attempt to patent sections of the DNA code itself is but a modern expression of previous centuries of enclosures. ... Read the whole article
Green taxes have long been supported by Geonomists. Full resource rentals imposed on such things as timber extraction or commercial fishing prevent undervaluation, wastage and overexploitation. "Polluter pays" pricing policies preserve the planet from plunderers (sorry). In fact, the whole range of carbon taxes are forms of LVT in the sense of being charges for use and abuse of air, water and other natural resources.Mason Gaffney: Land as a Distinctive Factor of Production
The electromagnetic spectrum also falls within the wide definition of land. To sell it off for good to the highest cash bidder is to set up an exploitative and economically inefficient monopoly. The spectrum belongs to the people who increase its value as much as they increase that of land. Government should act as its custodian, auctioning off for rent the various segments of the bandwidth. To prevent changing economic circumstances or technological developments from dropping big chunks of economic rent into the laps of bandwidth lessees, rents should be regularly and appropriately reviewed and raised. That Kerry Packer's broadcasting licences have appreciated by well over a billion dollars shows the foolishness of failing to distinguish, for tax purposes, between land and capital. And perhaps shows the political influence of a powerful rent-seeker. ... Read the entire article
The initial distribution of land - the origin of property in land - is military, legal, and political, not economic. The prime business of nations throughout history has been to gain and defend land. What was won by force has no higher sanction than lex fortioris, and must be kept and defended by force.
After land is appropriated by a nation the original distribution is political. The nature of societies, cultures and economies for centuries afterwards are moulded by that initial distribution, exemplified by the differences between Costa Rica (equal partition) and El Salvador with its fabled "Fourteen Families" (Las Catorce), or between Canada and Argentina.
Political redistribution also occurs within nations, as with the English enclosures and Scottish "clearances", when one part of the population in effect conquered the rest by political machinations, and took over their land, their source of livelihood. Reappropriation and new appropriation of tenures is not just an ancient or a sometime thing but an on-going process. This very day, proprietary claims to water sources, pollution rights, access to rights of way, radio spectrum, signal relay sites, landing rights, beach access, oil and gas, space on telephone and power poles(e.g. for cable TV), taxi licences, etc. are being created under our noses. In developing countries of unstable government the current strong man often grants concessions to imperialistic adventurers who can bolster his hold on power by supplying both cash up front, and help from various US and UN agencies from the IMF to the United States Marine Corps.
Ordinary economic thinking today would have it that a nation that distributes land among private parties by "selling to the highest bidder" is using an economic method of distribution. Such thinking guides World Bank and IMF economists as they advise nations emerging from communism on how to privatise land. The neutrality is specious, at best. Even selling to the highest bidder is a political decision, as 19th century American history makes clear.
The right to sell was won by force, is not universally honoured, and must be kept by continuous use of force. In practice, selling for cash up front reserves most land for a few with front-money advantage, inside information, good contacts, corrupt aids, etc. The history of disposal of US public domain leaves no doubt about this and it is still going on with air rights, water, radio, landing rights, fishing licenses, etc. Choices being made currently are just as tainted as those of 19th century history.
Selling land in large blocks under frontier conditions is to sell at a time before it begins yielding much if any rent. It is bid in by those few who have large discretionary funds of patient money. Politicians, meantime, treat the proceeds as current revenues used to hold down other taxes today, leaving the nation with inadequate revenues in the future.
The ability to bid high does not necessarily come from legitimate savings. The early wealth of Liverpool came from the slave trade. High bidders for many properties today are middle eastern potentates who neither produced nor saved the wealth they control. Other high bidders are criminals, who find the "sanctity of property" a splendid route for laundering their gains, and a permanent shelter against further prosecution. Read the whole article
Jeff Smith: What the Left Must Do: Share the Surplus
Making land public does not guarantee that the public end up with the rent. The public’s steward, the state, often lets public resources at “fire-sale” prices, unduly enriching Chevron, Arco, Kerr-McGee, Weyerhauser, etc. The state gifts enormously valuable licenses for TV, radio, and cell phones to GE, Disney, Time Warner, and Clear Channel. The metaphor, “field of knowledge”, lets us see patents and copyrights as flags; by excluding innovative outsiders, they not only skew techno-progress (thus addicting civilization to oil) but also enrich those few who can afford to corral them: GM, DuPont, and Microsoft. Similarly, a utility franchise lets AT&T pay investors, and Enron insiders, handsomely. Read the whole article
Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
And yet, for pricing to work at all, there must be both supply and demand; the lack of either results in there being no market price at all. Is it possible, perhaps, that policies might be developed where demand for certain resources are reduced to zero — and hence no price? To some extent this is how the Georgist economics approach works. It leaves certain realms of the commons unthreatened by exploitation for the reason that the attention of the market is focused elsewhere. By the collection of economic rent the prices of resources are effectively shifted, so much so that the market arena is profoundly altered. Resource prices are shifted in such a way that their use is curtailed and their consumption concentrated. It was noted earlier, for example, that collection of land rent tends to reverse the centrifugal forces of sprawl, actualizing demand at the core of urban areas and leaving remote regions uninhabited and intact. Economic rent accrues to sites that have high demand and frequent use; collecting that economic rent tends to concentrate their use in ways that discourages speculative practices, allocate their use to those who can best maximize their utility, and leave other sites and commodities in remote areas less affected by human activity. So also with charges for other public resources such as radio frequencies and airport landing slots. Pricing incentives are established in such a way that economic activity is intensified, concentrated, and integrated without the need of artificial CAC instruments such as zoning, urban growth boundaries, community land trusts, and other devices which are expensive to implement and have notable records of failure.Mason Gaffney: Property Tax: Biases and Reforms
On the other hand, collection of economic rent, whether it be from the use of land sites, fossil fuels, fishing grounds, solar and wind energy settings, electromagnetic spectrum frequencies, airport landing timeslots, and or even air sinks facilitates their highest and best use while leaving less attractive settings unaffected. Where there exists the possibility that environmentally sensitive sites or resources might otherwise be exploited, then is the appropriate time to institute focused CAC approaches, and with more attentive and efficient administration for all involved. The practice of concentrating economic activity in the more limited footprint that pricing creates is consistent with approaches taken in ecological economics. This is because the economy is recognized as only one component of human experience and the world system, not coterminous with it. Daly, for instance, draws concentric circles to illustrate the proper setting of the economic system — inside the social and cultural system which itself exists in a greater ecosystem. Collection of economic rent has a centrifugal and concentrating effect on human activity and hence upon the ecosystem itself. It has a benign effect on ecosystems insofar as it effectuates a steep and identifiable market gradient between areas of heavy socio-economic activity and those that bring no price at all. And yet by facilitating closer contact between members of the human community, it also fosters exchanges of a nature that are outside the market economy — family relationships and neighborhood activity.... read the whole article
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
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:
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. ...
Another soft target is the Manhattan taxi license, or "medallion." For some reason this has long been a favorite object lesson among economists, even as they shut their eyes to grosser sources of rent. It may be because cabbies are rude and visible and lower class, but whatever the reasons these writers have shown their consciousness of the rent aspect of medallions, and raised the consciousness of others.
The reason for pursuing soft targets is not for the money they may yield, but for principle. Once the principle is understood and established, wider applications should follow. In economic principle, fishing quotas and taxi medallions are just like conventional land titles: privileged control over limited natural resources. If it makes sense to socialize the rent from quotas and medallions, why not land titles too? ... Read the whole article
Nic Tideman: A Bill of Economic Rights and Obligations
Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper