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Saturday, October 24, 2015

Taxing the right people for the right reasons

Can Unscrupulous Speculation be Solved with a Tax?

The Washington Post printed an article: "Poorer tenants fear being pushed out by planned Congress Heights complex"

"To build the project, the developer would have to raze four rent-controlled apartment buildings where residents already feel they are no longer welcome. The tenants are largely poor, elderly and live on fixed incomes. They said they believe they are being pushed out by two politically connected developers, who have failed to make improvements to the four apartment buildings even as many residents live in squalor."

Walter Rybeck, Silver Spring wrote:

"The Oct. 15 front-page article “Tenants in path of D.C. renewal” might instead have had the headline “Affordable housing remedy missing in action.” It told a sadly familiar tale: tenants in wretched dwellings unable to afford decent housing elsewhere, and slumlords given a green light to oust their tenants and proceed with lucrative real estate projects. This classic gentrification scenario cannot be fixed with housing subsidies or rules requiring developers to offer dwellings at below market rates, as many housing advocates urge. These approaches at best help a tiny portion of those in need."

In our modern "market" heresy the Bull of "markets" reigns supreme over common sense, common-wealth, common properties and our politicians. Admittedly one:

"...problem is high land costs — the sites that housing sits on."

High land costs aren't the only problem here. But it is a start. And as Rybeck notes:

"Officials and their advisers ignore the one tax that, unlike others, lowers the selling price of what is taxed: The more you tax the value of land, the lower its price. The less you tax it, the more its value rises, making housing unaffordable. Thus, shifting the property tax off the value of homes and apartments and onto the site value spurs slum upgrading and new housing at lower prices, as over a dozen Pennsylvania cities have demonstrated."

What he's talking about is a tax that ignores capital properties and home values and focused on the unearned value of property and taxes that. He's also right that:

"By modernizing its property tax, the District could lead the nation in easing the housing crunch."

But it won't do it by itself and simply changing the tax system may alleviate the problem, but won't eliminate it. Especially if it is sold as a tool for Development.

Getting it Right

By capital George meant:

"Capital is ... [that] part of wealth—that [is] devoted to aid production." and Capital is "wealth in the course of exchange." [Georges Definitions]

So the LVT tax was a means to get to unearned incomes and unearned rents. It wasn't meant as a tool for slum clearances, gentrification, or even "new housing at lower prices" -- it was meant to break the power of monopoly over land ownership. So, yes a LVT tax is a great idea -- but not by itself. Without tax reforms that exclude wage compensation and hit at unearned wealth -- it is a shadow of what George Had in mind. Indeed George called folks who advocated the LVT for the wrong reasons as "unsound followers." As long as taxes "fall on users of land as users, and ....add to the cost of production or increase prices" the tax solution is a Kludge and not what George Had in mind. Indeed the history of the Tax was that it was struck down by the Supreme Court as a Direct Tax and so George's followers started pushing it as a reform of the Real Estate tax, and when the 16th amendment was passed in 1913, they were already set in their ways.

A Right to A Decent Home

The other side of this is that home ownership should be a right - though not necessarily the right to a house or mansion, wages should be a right and wage compensation not taxed. This is something that American's have affirmed since the beginning of the country. And FDR put it in writing:

The benefits of a right to a home. Of "property in land," which includes tenants and renters. If tenants have a property right in their apartments, they'll take care of them themselves. Deny folks power over their own neighborhoods and this is what you get.

If home ownership were the right -- then the takings clause would apply to renters and tenants too. The District, or unscrupulous developers, or other authorities should not be able to take people's homes without compensating them -- with a new home. If one's home is a right they can't offer just money so that the person can move to another substandard neighborhood, they'd have to protect their right to home, livelihood, etc... And it would thus be more expensive to stiff people than to do right by them. Yes, if a person lost all their money or is a drug addict, and is poor as a result; a "home" doesn't have to be the mansion or a giant house they once lived in. But it also be a "Decent Home." It has to be a home that their wages can afford.

None of that will eliminate speculation. But certainly taxing unearned income, unearned rent, is a start at taking the smoke and gas out of the gasbags of repeated bubble swindles.

Sources and Further Reading

References to Rybeck
"Poorer tenants fear being pushed out by planned Congress Heights complex"
Walter Rybeck's Editorial: []
Georgist Definitions of Capital
Related Posts:

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