Joshua Vincent: Land Value Taxation In Practice

Significant changes to any system of taxation require significant upheaval, and perseverance from citizens in and out of government. EarthSharing.org spoke with land value taxation proponent Joshua Vincent earlier this month, in a conversation covering attitudes towards land value tax, its applications, and the activism required to advance it. Watch the interview below, broken into three parts.

Vincent has been executive director of the Center for the Study of Economics since 1997. He has consulted for more than 75 municipalities, counties, NGOs and national governments. He works with tax departments and elected officials to promote land value taxation, and has testified as an expert witness on its impact. Vincent is the editor and publisher of Incentive Taxation.

Best Valuation Methods

Vincent lays out best practices for calculating land values, most of which “rely on values that have already been established by the assessor.” By looking at sales prices in an area, particularly of vacant lots but also of derelict buildings set for demolition, a fairly accurate picture of land value can be obtained.

Building values are more complex, but still absolutely necessary for revealing land values: by subtracting building value from a property’s total value, the ideal taxable land value can be calculated. Vincent says that “if we want to help capital and labour escape taxation we have to figure out what the building is worth, because that’s where the labour and the capital goes.”

The most effective valuation systems are in states that “update their assessments on a fairly regular basis, and they also change the percentage of land value to building value to reflect essentially what the market is,” Vincent says.

Using the example of an Atlantic City casino, Vincent says that while 20 years ago the property value would have skyrocketed due to market dominance and profit levels, today that profit has been reduced substantially. “Right now the land value is half of the total parcel value, because the building has lost its revenue-generating capacity,” he says.

Approaching City Officials

A land value tax is not just an end unto itself to reduce inequities in wealth. Vincent says the focus of any campaigners for land value taxation should be its application to almost any pre-existing problems in a city.

“You have to identify a problem that the community suffers from,” Vincent says, whether it be blight, population loss, or perceived high taxes. City officials will usually tend toward enlightened self-interest, and the revenue-neutral tax abatements that a land value tax allow are attractive to public representatives whose priorities are job creation and citizen well-being.

“We would then propose: well how about a universal permanent abatement on all buildings, and not just new buildings, not just condos, but all buildings past, present and future?”

Joel Bedford SoHo 1 via photopin (license)
Joel Bedford SoHo 1 via photopin (license)

One discussion is not enough to effect real policy change, and Vincent says any correspondence should be followed up with a second meeting, further information, and a push for the council to crunch the numbers of what is a very practical, “nuts-and-bolts” policy.

“The mistake a lot of reformers of all types make is they march into a city council chambers or a mayor’s office and say ‘here’s a reform, do it’, and then they turn around and leave. I think what we are putting forward is something that is practical, it is doable, and you can demonstrate immediately how it is doable.“

Who Is Likely To Oppose Land Value Taxation?

Entrenched interests exist that have made fortunes extracting rent from populations without investing back into them, and these interests comprise the most likely and vigorous opponents of land value taxation. Vincent points the finger at speculative, “absentee owners who have a business model that depends on blight and the decay of the neighborhood.”

“A lot of people that oppose land value tax are people that have adopted business models and used tactics to thrive in a declining city,” he says. “You extract rent, literally, from the tenants but you don’t put anything into the property; you let it run down. That’s the successful business model. And they will oppose a land value tax, because their buildings have fallen apart to such a degree that they wouldn’t benefit from such a land value tax.”

Automobile-intensive businesses are another example, and in the past, owners of flat-surface parking lots have voiced opposition to changes of the tax structure. Vincent says these businesses feed off the value of urban land, itself the product of the people and the government, but “they’re doing nothing to create that value, and they’re doing nothing for the community”.

Vincent points out that some among these interests have actively funded anti-land value taxation campaigns, like in Allentown in 1997.

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Julia Bossmann: Challenges Of A Post-Work Society

BIL: Oakland 2016 Recession Generation was an Earthsharing.org conference in Oakland, California on July 9th. Foresight Institute president Julia Bossmann presented an argument for moving toward a post-work society, and the changes both economic and social that would be required to achieve this.

Bossmann recounts the incredible advances in artificial intelligence we are witnessing, whereby computers are writing original imitations of Shakespeare, dispensing effective legal advice and piloting cars through traffic. Bossmann believes that innovative scientific research will be next on the list of A.I. accomplishments.

Photo: FritzchensFritz AMD@14nm@GCN_4th_gen@Polaris_10@Radeon_RX_470@1622_M60J5.0A_215-0876204___Stack-DSC07208-DSC07236_-_ZS-PMax via photopin (license)
Photo: FritzchensFritz AMD@14nm Radeon_RX_470 via photopin (license)

“They have theoretically unlimited memory, they have a way faster speed of reading, they can find insights and facts from all across and then draw connections and find patterns. So now that we may have reached the limit in medical research – that one human mind may not be enough to figure it all out – having a machine mind may open the floodgates to finding out much more.”

Bossmann’s scenario of a post-work society presents significant economic challenges, with a disruption of millions of jobs across the professional spectrum. Truck drivers could be an early casualty, but many others earning an income by selling their time and labor stand to lose their current employment due to automation.

“How would a human even compete with someone who can drive for thousands of hours at no end and not ask for a salary?”, Bossmann says.

Photo: jurvetson Your Uber Otto has arrived via photopin (license)
Photo: jurvetson Your Uber Otto has arrived via photopin (license)

In general, a person’s income is derived either from time, or from ownership of assets like land and other property. Bossmann states that “once the time goes away, the only thing left is ownership. And we all know that ownership is not distributed in a way that all of us could just live on that alone; in fact, most of us need to sell our time to live”. A radical shift in how we think about ownership is required if society is to remain prosperous, Bossmann says.

As artificial intelligence progresses, those who own the valuable sites where A.I. research takes place, especially in Silicon Valley, will continue to become more disproportionately wealthy vis a vis the appreciating value of their land: rents they can charge, prices for which they can sell, etc. They will become wealthier not by doing the research and development themselves, but simply by owning valuable space in areas doing R&D. Regardless of Bossman’s predictions about the rate of A.I. progress and its replacement of human labor, a greater proportion of the wealth created will continue to go to owners of prime land.

Those who own prime locations already have a large advantage over wage earners, simply by their ever-appreciating real estate values. We have seen a huge explosion in labor-saving devices, wealth production, and wealth inequality in the last two centuries. These gains disproportionately go to the owners of property. So, there is already a need to share the returns from owning natural resources like land.

This need to redistribute the benefits of land ownership become even more obvious in Bossmann’s prediction of the future – where she assumes a lack of A.I. winters/ceilings, no comparable human intelligence augmentation, and where the Law of Comparative Advantage (between humans and robots) no longer holds. In such a scenario, obedient robots would simply produce enormous amounts of wealth, and this wealth would all go to those humans who own the natural resource inputs needed for A.I. The people who did not own land, or receive a dividend/basic income of some kind, would simply have no income.

Henry George, a prominent political economist and author from the late 19th century, argued that gains derived merely from the ownership of land and other natural resources should be considered the property of everyone, not just the title-holders. A system of land value taxation would be a pragmatic way of shifting the burden of raising public revenue from workers to landowners. It would be the obvious choice for funding a basic income that would protect people from unemployment now, and facilitate any kind of post-work society.

“Once we have figured out this dilemma, and we have machines that will do most of the work on the planet… we will look back and think that it was barbaric that people had to sell most of their living time on this planet, doing things they didn’t want to do,” Bossmann says. But reaching an economic consensus is not all that is required to reach a prosperous post-work society.

“Many of us define ourselves by our jobs, what we do for a living, how much money we make, all these things are important to so many of us. Are we willing to give up this kind of thinking for something better?”

Julia Bossmann is president of Foresight Institute, a think tank promoting transformative future technologies, and founder of Synthetic, a startup building A.I. of its own. Bossmann is a McKinsey Fellow, Singularity University GSP graduate and master of science in neuroscience and psychology. She lectures on Artificial Intelligence, hard technology, innovation, the future, and technology transforming society.

 

Photo: Tej3478 <a>Artificial Intelligence</a>. Licensed under Creative Commons.

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Simulation Could Explain Why People Reject Smarter Economic Policy

If variety is the spice of life, then why are so many of us drawn to old habits? You might think of this phrase in the context of your Friday night plans, but economists are asking it about our approach to public policy. Despite a growing body of research indicating that the structure of U.S. property taxes could be vastly improved, we tend to be content with the status quo, and it hasn’t always been clear why. But now, using experimental economics, a professor at the University of Delaware is undertaking a one-year study to identify why people don’t respond to smarter economic policy that could greatly enhance their lives.  

Joshua Duke, Professor of Applied Economics at the University of Delaware, sees a big problem with how cities and municipalities in the United States tax property. Governments levy taxes according to the value of buildings and productive activities on the land instead of the land value itself. While property tax is by far one of the best taxes, especially over wage and sales taxes, it is still not as good as a land value tax. A land value tax is virtually the same as a property tax except that the tax is on the land value only, not the building. Property taxes have been structured this way for centuries, but Duke believes we could implement an alternative tax structure that raises tax revenue and stimulates economic development. This would run in contrast to the existing tax structure, which tends to generate and exacerbate wealth inequality by taxing regular people for working and exchanging, but fails to tax unearned income like that from passively owning an ever appreciating vacant urban lot.

By InSapphoWeTrust from Los Angeles, California, USA (Lower East Side) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons
By InSapphoWeTrust from Los Angeles, California, USA (Lower East Side), via Wikimedia Commons.
Duke’s interest lies primarily in land value taxation, a theory popularized by 19th century economist Henry George in which taxes are determined by the inherent value of land rather than what sits on it.

“The idea is that if you’re going to tax anything in society, probably the best thing to tax is the value of land. Not the value of the improvements on land, like a house, just the value of land, and the reason is that it’s non-distortionary**. That means that it doesn’t provide the incentive to do less property improvement than is optimal,” Duke said.

Duke is not the only economist to advocate for land value taxation . Professor Joseph Stiglitz, Nobel Laureate in Economics and author of ‘The Price of Inequality’ is one such prominent proponent of a land value tax.  Stiglitz considers rent-seeking behavior, like the privatization of land values, to be the primary element that generates inequality of wealth. Other economists, like Mason Gaffney, Fred Foldvary, Nic Tideman and Fred Harrison also support implementation of land value taxation.

According to Duke,“[land value taxation] really would make society a lot better. It’s one of these major things we could do. We don’t have to create anything, we can just change the way things are taxed and [as a result] increase society’s wealth,” Duke said.

Determined to understand why land value taxation is so rarely used, Duke is harnessing the power of experimental economics. He is constructing a virtual city, in which land value taxation is financially advantageous to all citizens. The citizenry will be composed of 100 students of business, economics, and engineering. Ultimately, Duke hopes to identify why people, given the option of introducing financially advantageous land value taxation, tend to reject this tax structure.

San Francisco California Before the Sun Rises via photopin (license)
San Francisco California Before the Sun Rises via photopin (license)

“Economics is all about simplifying reality. What we’re trying to do is reduce problems to the fundamental incentives that we want to study. You have an amount of income; how much of your income do you devote to improving your land and how much do you devote to consumption? Then do you feel that, over time, you’re being treated fairly by the tax system and do you vote to reject it? So we set up a little democracy using our computer program where participants in our experimental economics platform can vote,” Duke said.

Duke is already planning his next study. After the completion of this one-year project, he will use his findings to identify ways to help citizens overcome political objections to land value taxation initiatives. Ultimately, he hopes to aid economists and policy experts who are eager to see cities and municipalities usher in smarter economic policy.

 

 



**Distortion, in the most basic sense of the word, simply means change. In economics, it is almost always considered a harmful mutation in an idealized market, where there is perfect competition and no externalities, e.g. almost all taxes vis a vis reducing productive incentives, misallocating resources, etc. Just as breaking up inefficient monopolies encourages competition and benefits the market, land value taxation encourages competition and captures distortionary externalities. This encourages behavior that is good for markets and for people, which is what Duke means when he says that land value taxation is “non-distortionary.” In fact, shifting to land value taxation actually increases productive incentives, what we might call a positive distortion.

 

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Creating Strong Towns With Localized Self-Government

BIL: Oakland 2016 Recession Generation was an Earthsharing.org event which took place on July 9th in Oakland, California. Keynote speaker Chuck Marohn presented his experiences as an engineer, city planner, and founder of the non-profit Strong Towns to explore the problems with large, specialized systems of government, and the case for localization.

In a world where city planners and engineers must work within a narrow vision on the same sorts of projects, Marohn says there is a disconnect that only leaves space for endless repairs and fix-ups, and very little room for real creative thinking or new technology. With many cities struggling financially or going broke, Marohn makes a case for innovation that not only can increase the productivity and self-sufficiency of a town, but can improve the lives of all who live there.

Marohn suggests that while big governing organisations tend towards specialists as decision-makers, localized government is most effective when generalists are in charge. People who can make connections with others, seek out the experts on any given subject, and bring together combinations of skills will be the most successful leaders.

“The large systems that we have created – really a byproduct of the things that happened in the Depression and World War II – allowed us to accomplish a lot of things in a very short period of time, but come with their own fragility, their own kind of disconnectedness.”

“You can see in things like the Brexit vote, you can see in things like the conversation we’re having in our election cycle… you can see this disconnect between the large systems we have to govern ourselves, the large systems we have to run our economies, and the way we actually live our everyday lives.”

He has also advocated for shifting from the traditional property tax to a land value tax. He explains:

“The property tax system punishes investments that improve the value of property. The land tax system… punishes property that is left idle.”

Charles “Chuck” Marohn works as a licensed engineer in the State of Minnesota.  He is a member of the American Institute of Certified Planners and founder and president of Strong Towns, a national media organization that supports the development of resilient cities, towns, and neighborhoods. Marohn holds a Master’s degree in Urban and Regional Planning from the University of Minnesota and a Bachelor’s degree in Civil Engineering from the University of Minnesota’s Institute of Technology.  He is the author of Thoughts on Building Strong Towns. Volume I and A World Class Transportation System.

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Robin Hanson On Life With Replicable Robots

BIL: Oakland 2016 Recession Generation was an Earthsharing.org event which took place on July 9th, 2016 in Oakland, California. Keynote speaker, Robin Hanson, shared a fascinating vision of the future in which cheap, replicable robots are able to do most human work, and the implications of such a possibility.

Hanson presents an idea divergent from what he says are the two most prevalent in the world of artificial intelligence, those being either slow, ongoing developments in AI research over the coming decades, or some “grand new theory” that hasn’t been discovered.

“The third scenario is where we port the software that’s already in the human brain,” Hanson says.

“If we have good enough models for how each of the cell types work, we have a good enough scan of a particular brain, we have enough cheap, fast computers, then we can make a model of that particular person’s brain on those computers; and if it’s cheap enough, you could run that simulation cheaper than you could rent the human, that changes everything.”

He thinks this means “humans retire” and become completely replaced in the labor market by these emulated brains. However, he says humans “start out owning everything” and “their investments double as fast as the economy, i.e. every month.” So he thinks this means that humans who have access to wealth, and he mentions real estate in particular, will profit tremendously. He implies that those who don’t have wealth will suffer.

This parallels a lot of the discussions we usually have at EarthSharing about the need to fairly share the fruits of nature, so that we can all benefit from technological progress. Even these far-future forecasts aren’t, ultimately, so different from ages past. In the Guilded Age, we had industrialists profiting enormously off resource wealth and land during a time of rapid technological growth.

What this discussion shows is that no amount of technology can be relied upon for solving the problems of political economy. Poverty, in particular, cannot be solved without economic justice.

 

Robin Hanson is associate professor of economics at George Mason University and a research associate at the Future of Humanity Institute of Oxford University. He is known as an expert on idea futures and markets, and he was involved in the creation of the Foresight Institute Foresight Exchange and DARPA FutureMAP project. He invented market scoring rules like LMSR (Logarithmic Market Scoring Rule) used by prediction markets such as Consensus Point (where Hanson is Chief Scientist), and has conducted research on signalling.

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Who Owns Geosynchronous Orbital Pathways?

Who owns outer space? Our most idealistic visions of the future require us to transcend our narrow personal or nationalistic interests, but increasingly, space seems likely to be divvied up among the powerful, as has so often happened with the Earth. Can space be managed to serve the common interest?

Managing a Commons

Space is generally thought of as a commons. A commons is a resource which is not under the exclusive control of anyone. This makes it an interesting and challenging economic coordination problem. The US Department of Defense classifies outer space as one of the “global commons” alongside the oceans, atmosphere, and cyberspace.

Former Under Secretary of Defense for Policy, Michele Flournoy, and Shawn Brimley of the Center for a New American Security write:

“…as rising nations and non-state actors become more powerful, the United States will need to pay more attention to emerging risks associated with the global commons, those areas of the world beyond the control of any one state—sea, space, air, and cyberspace—that constitute the fabric or connective tissue of the international system.”

Even during the heated Space Race between the United States and the USSR, there were lofty ideals about how to treat the cosmos. The Outer Space Treaty, ratified by all major world powers at the time, limits the use of orbital pathways and celestial bodies to peaceful purposes. Weapons of mass destruction are specifically banned. More interestingly, it also prohibits any signatory nation from claiming ownership of celestial resources.

The resources of space were not to be seen as just a bunch of loot waiting to be plundered. According to the Treaty, managing outer space was viewed as an international responsibility of utmost importance, for the benefit of all.

Photo: NASA on The Commons Van Allen Probes via photopin (license)
Photo: NASA on The Commons Van Allen Probes via photopin (license)

New Space Race

But a new space race is on. This time, a private space race. Billionaires are funding serious commercial spaceflight companies such as SpaceX, Blue Origin, Planetary Resources, Virgin Galactic, Stratolaunch Systems, and Bigelow Aerospace, and other lesser-known private companies and defense contractors are also competing. Additionally, competitions like the Google Lunar X Prize are under way. All of these enterprises share the goal of making space more accessible.

Elon Musk once raised the possibility of launching as many as four thousand micro-satellites into low Earth orbit for the purpose of providing worldwide high-speed internet access. Mark Zuckerberg had planned a similar service  via Internet.org. Both men have quietly put these plans on the back-burner; however, the inexorable trend of cheaper spaceflight is continuing to increase satellite congestion surrounding Earth.

The progress that SpaceX has made with reusable launch vehicles does help reduce the quantity of space junk per-launch, but it also makes spaceflight cheaper thus encouraging more congestion. Junk continues to accumulate much faster than it is burned up.

Kessler Syndrome

Space junk is any small debris left in orbit by spacecraft. The problem is that it can impact orbiting spacecraft at speeds up to twenty times faster than a bullet. Worse yet, in the event of a collision, more debris is created.

In the worst-case scenario, this process of collisions creating more debris starts a chain reaction called Kessler Syndrome. If there are enough orbiting satellites, this chain reaction can eventually consume all of them, and leave behind a speeding cloud of bullets encircling the Earth and keeping humanity grounded for a century or more.

In political economy, we would call this an example of tragedy of the commons.

To reduce this threat, a number of mechanisms have been proposed. Decommissioning large obsolete satellites can significantly reduce the likelihood. However, doing so is expensive and of little direct benefit to the individual spacefaring organization. Nonetheless, the European Space Agency has already planned missions as part of its Clean Space initiative.

Another theoretical mitigation technique includes the development of lasers to shoot down space junk, or to redirect it whenever it threatens important orbital spacecraft.

Photo: John Flannery Space Junk(license)
Photo: John Flannery Space Junk(license)

Financing cleanup efforts

Who ought to be paying for these cleanup efforts? If billionaires intend to start launching thousands of satellites, is it simply up to the public to clean up the mess?

The ‘polluter pays principle’ is standard in environmental law. In addition to aligning with our moral intuitions for responsibility, taxes on pollution have the benefit of discouraging the damaging activities that create pollution in the first place.

In keeping with this thought, it would be sensible to propose a Pigouvian tax on anyone who creates space junk, in proportion to the amount of junk that they create. Since this junk can be accurately detected, it would be straightforward to measure and determine the tax.

Amending the Outer Space Treaty and establishing a body to implement the polluter pays principle would be a common sense method by which we could work to eliminate the threat of space junk.

There’s another possible source of revenue if we consider that the orbital paths themselves are a finite resource. Satellite collisions have happened in the past and will continue going forward. Indeed, every satellite launched brings with it a small risk of collision. And the more satellites we have, the greater the likelihood of collision and, eventually, of triggering Kessler Syndrome.

Certain orbital pathways are more desirable than others. Geo-stationary orbits might be more desirable than low Earth orbit; a sun-synchronous orbit may be more desirable than an alternative orbit. If billionaires start launching thousands of satellites, it is entirely possible that we could eventually be forced to allocate these orbital paths by auction, in order to fund general collision insurance.

Such a model would certainly be more fair and predictable than our current process, which is for companies to patent orbital pathways, and sue anyone who infringes on it (regardless of collision risk). Granted, the FAA’s Office of Commercial Space Transportation also has a permitting process in the United States. But permitting practices vary by nation, and there’s little or no international coordination for revenue-sharing, insurance, or cleanup.

Motherboard interviewed Andrew Rush, a patent attorney and entrepreneur with expertise in space law, who said “As more and more companies start commercial activities using satellites, and using new and innovative ways to do so, we should see an uptick in patent activity.”

“We may also see the attendant uptick in patent litigation around some of those activities,” he added. “I personally hope that’s not the direction that we go. I hope there’s a lot more licensing and a lot more cooperative ownership and stewardship of patents, rather than just suing each other. “

An exemplary model of proper resource management can be found in the Norwegian Oil Fund. Upon discovery of its oil reserves, Norway instituted the collection of economic rent based on the revenue generated from oil extraction, plus oil exploration licensing fees. The resulting revenue was then kept in a trust fund and used to invest both within Norway and internationally. As of June 2015, the fund has accrued $873 billion. Given its size and stake in companies worldwide, the fund has become an significant player in international affairs. As such, it pursues economic and social justice through its decisions concerning its holdings, divesting from companies that violate its ethical standards.

If our civilization is able to use market pricing to collect economic rent from the Earth’s geosynchronous orbits, we would enjoy similar success as Norway while preserving a critical resource. Such concepts are already proving successful here on Earth. London uses congestion pricing to reduce traffic in its city center, and uses that revenue to fund public transportation. Congestion in space is ultimately no different.

Let’s preserve our common inheritance of space for future generations, not at the expense of our current generation, but by achieving justice. We all deserve to share the benefits and the value of outer space.

 

Feature image: NASA on The Commons Satellites for Sale (license)

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Bidding Wars Create New Headaches for Vancouver Renters

Finding a new apartment in a competitive housing market can be exhausting: constantly scouring classified ads, racing from one showing to another, hoping that your credit history and persona can charm potential landlords. But just when you thought finding an apartment couldn’t be more difficult, prospective tenants are finding themselves in rental bidding wars, as landlords exploit competitive real estate markets to maximize revenues.

Vancouver, British Columbia has a housing market rivaling the aggressive competition of New York City and San Francisco. The vacancy rate decreased from 1.8% in 2014 to 0.8% today, and the average rent is $2,230. Neither metric shows any sign of improving as the population continues to grow, partially driven by Vancouver’s strong job market.

29567276440_32154f9552_b
Photo: justenoughfocus Lights of Coal Harbour via photopin (license)

It is not uncommon for prospective renters to conduct searches spanning months, which can cause substantial disruption in their lives. But some landlords are now taking steps that will exacerbate this problem – once you find an apartment in your price range, bidding wars between applicants will probably increase the list price.

As Devin Cox and his roommate hunted for an apartment in Vancouver, they noticed that approximately a quarter of all rental applications asked prospective renters to list the maximum amount above the asking price they would be willing to pay. According to Cox, multiple landlords notified them of higher offers and gave them the chance to increase their bid.

This practice is not illegal, and is even being highlighted in classified ads. A recent Craigslist posting for a studio apartment noted that monthly rent would be determined by an on-site auction. While this practice might be gaining steam in Vancouver for the first time, it has plagued US cities with limited housing stock for several years, particularly New York City and San Francisco.

Housing advocates cite bidding wars as a reason to implement stricter rental laws. At present, Vancouver officials are taking no action to curb this practice. Bidding wars have been blamed for worsening Vancouver’s housing crisis, although no studies have investigated the full extent of their effect.

Bidding wars are another way in which landlords are taking advantage of Vancouver’s economic success. Yet, they are just a symptom of deeper issues. The city’s infrastructure, people, and businesses are enticing large swathes of educated workers to relocate there, increasing the value of land in the metropolitan area. This increasing land value is a social product that should be reinvested in the community. Unfortunately, this value is being depleted through rising rents that are far outpacing wages.

If Vancouver will not take steps to eliminate bidding wars, it should at the very least take steps to increase residential space. Government officials should consider implementing a land value tax (LVT).

American political economist Henry George argued that taxing productive activity discourages production. Taxing buildings punishes those who build vertically, and results in a reduction in urban housing and worksites. To encourage more construction, he proposed abolishing the building taxes altogether, and shifting all taxes onto land. He argued that land is our common inheritance, and we can achieve justice by sharing the revenue from land.

Photo: Caelie_Frampton 6th ANNUAL WOMEN’S HOUSING MARCH via photopin (license)
Photo: Caelie_Frampton 6th ANNUAL WOMEN’S HOUSING MARCH via photopin (license)

There are many nuanced arguments in favor of this strategy. George argued that sufficiently-high land value taxation would actually encourage landowners to develop residential and commercial space, adding value for others, in order to pay the land value tax as well as provide themselves a respectable return. This additional housing inventory would ultimately reduce housing costs. But also the increase in construction and development would create a high demand for labor, thereby reducing unemployment and improving wages.

Given the extreme nature of Vancouver’s housing market, officials should move quickly to keep Vancouver a place where all people can afford to live and live well. The Vancouver mayor and council can be contacted online, over the phone, in person, or using a mobile app, details of which are listed at vancouver.caRead more on the problems of bidding wars and speculation.

 

Featured image: James Wheeler Granville Island Bridge via photopin (license)

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How Optimal Taxation Can Create a Better World

optimal taxation panel 2016

Earthsharing.org organized BIL: Oakland 2016 Recession Generation on July 9th in Oakland, California. The Optimal Taxation Panel participants were Yoram Bauman, Joshua Vincent, Fred Foldvary, Robin Hanson, and Kris Nelson. The panel moderator was Edward Miller (bios below).

The discussion revolved around the essential role that natural phenomena play in all economic activity and how to fairly treat these resources vis a vis taxation. Resources like land, minerals, access rights, the electromagnetic spectrum, domain names, and atmospheric carbon were discussed.

Optimal Taxation Panelists:

Yoram Bauman: PhD environmental economist and “stand-up economist.” Bauman is the founder of the revenue-neutral carbon tax proposal (I-732) that will be on the ballot in Washington State in November 2016. He has been working on environmental tax reform since his 1998 co-authorship of Tax Shift, which helped inspire the revenue-neutral carbon tax in British Columbia. Bauman also co-authored the Cartoon Introduction to Climate Change and the two-volume Cartoon Introduction to Economics. He lives in Seattle with his wife Laura and their two-year-old daughter.

Joshua Vincent: Executive Director at the Center for the Study of Economics since 1997. Vincent has consulted for more than 75 municipalities, counties, NGOs and national governments. He works with tax departments and elected officials to restructure taxation to a land-based system, and has testified as an expert witness on the impact of land value taxation. Vincent is the editor and publisher of Incentive Taxation, a journal on land value taxation.

Fred Foldvary: Board member at Robert Schalkenbach Foundation (RSF), a non-profit organization established in 1925 to spread the ideas of the social and economic philosopher Henry George (1839-1897). Foldvary received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at the Latvian University of Agriculture, Virginia Tech, John F. Kennedy University, California State University East Bay, the University of California at Berkeley Extension, Santa Clara University, and currently teaches at San Jose State University. Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary’s areas of research include public finance, governance, ethical philosophy, and land economics.

Robin Hanson: Associate Professor of Economics at George Mason University and a research associate at the Future of Humanity Institute of Oxford University. Hanson is known as an expert on idea futures and markets, and he was involved in the creation of the Foresight Institute Foresight Exchange and DARPA FutureMAP project. He invented market scoring rules like LMSR (Logarithmic Market Scoring Rule) used by prediction markets such as Consensus Point (where Hanson is Chief Scientist), and has conducted research on signalling.

Kris Nelson: Principal at Phoenix Finance, which provides access to capital without collateral to small businesses and startups. Nelson also serves as Legislative Director of Common Ground OR-WA, a non-profit organization that promotes a more democratic treatment of land and natural resources. Previously, Nelson worked as a Principal at Genomics Consulting, where he helped launch a clean technology venture capital firm. He holds a Master’s degree in Business Administration from Willamette University and a Bachelor’s degree in Journalism from Evergreen State College.

Edward Miller: Co-organizer of the Recession Generation event. Miller is the Administrative Director of the Henry George School of Chicago, a non-profit educational organization which provides educational opportunities to the public on the topic of classical political economy. He serves as a board member for the Center for the Study of Economics. Previously, he has worked with the Institute for Ethics and Emerging Technologies.

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Uranium Mining Continues to Threaten Grand Canyon

The Grand Canyon is remarkable for its awe-inspiring scenery, precious geological value, and diverse flora and fauna. It is a natural wonder recognized by UNESCO, and also happens to be the site of significant underground uranium deposits.

These deposits have made it a prime target for energy companies seeking to privatize the public commons that the uranium represents. Unfortunately, natural resource extraction can have devastating consequences for public health and the natural environment. President Barack Obama is now considering designating the area a national monument, to add new protections to the lands and waters of the Grand Canyon, and prevent potential environmental disaster.

Arizona has a long history of traditional mining. In 2014, the state reported 303 active mining operations employing a total of 25,660 people. The entire industry generates a staggering $12 billion of the state’s GDP. Due to market fluctuations and government restrictions, there are no active uranium mining operations in the state at this time, but between 1918 and the early 21st century, traditional uranium mining in Arizona yielded tens of millions of pounds of uranium, valued at approximately $65 per pound.

While the mining industry benefits Arizona by contributing substantially to the state’s GDP, it is often accused of hoarding publicly-owned natural resources. Such speculative hoarding is common in unregulated or under-regulated industries. The vast majority of mining operations occur on public land, which accounts for 82% of Arizona’s total landmass. Federal law, through the General Mining Act of 1872, permits US citizens to stake a natural resource claim on public land and subsequently extract that resource. While mining operations are subject to state and federal taxes, they are not required to share revenue from their operations. Natural resources, as a public commons, comprise a large share of a nation’s wealth and, as such, ought to generate substantial economic rents. An excellent example of this in action comes from Norway and the management of its oil.

photo credit: wolfgang.mller54 View via photopin (license)
photo credit: wolfgang.mller54 View via photopin (license)

The consequence of ignoring this potentially substantial source of tax revenue is that the government must turn to taxing human productive work via income and sales taxes. Consequently, economists have long argued that governments and their constituents would be best-served if public revenue was instead derived from natural resource extraction, regulated, and utilized for the common good.

Uranium mining in Arizona has a history of disastrous environmental and public health consequences. Following World War II, the United States increased uranium production in order to produce more nuclear weapons, and mining companies hired large numbers of Navajo people to work the mines. Incidence of diseases caused by excessive radiation exposure increased sharply because companies failed to adequately protect those workers. Uranium mining has polluted 15 springs and five wells in the Grand Canyon watershed with toxic levels of uranium, requiring multi-million dollar government-funded cleanup measures.

It is clear from this history that uranium mining companies have proven themselves incapable, under current regulations, of operating without jeopardising people or damaging the critical lands and waters of the Grand Canyon watershed. Introducing royalties for uranium mining would fund implementation and enforcement of regulations that would lead to greener mining.

As uranium prices increased in the early 21st century, mining companies increasingly pursued access to the vast uranium deposits surrounding the Grand Canyon. In 2012, the federal government, recognizing the need to protect “natural, cultural and social resources in the Grand Canyon watershed,” issued a 20-year moratorium on new mining operations in lands surrounding the Grand Canyon. The order applies to all mining but is primarily aimed at uranium mining. The reaction from Arizona and the mining industry was swift, citing the order as an example of federal overreach and petitioning for it to be overturned. This case has now been challenged in federal court.

Photo: CEBImagery.com A New Day via photopin (license)
Photo: CEBImagery.com A New Day via photopin (license)

Many Arizona citizens have applauded the federal government, citing the enormous importance of the Grand Canyon for Arizona’s cultural heritage and economy. To many, permitting uranium mining on this stunning landscape would not only jeopardize the massive tourist activity driven by the Canyon, but would irreparably degrade a monument that is held close to the heart of Arizonans.

The federal government is now trying to make its moratorium permanent by declaring the lands surrounding the Grand Canyon as the Greater Grand Canyon Heritage National Monument. The monument was first proposed in 2015 and has support from 80% of Arizona voters, the Navajo Nation, and other key Native American tribes. The plan has stalled in Congress due to Republican opposition, but President Obama has the singular authority to bypass Congress and designate the area a monument by invoking the Antiquities Act.

An alternative approach would be to regulate the uranium mining more stringently, with the additional regulation and mining oversight financed by uranium royalties. While that may well require congressional approval, it would permit the mining to take place and that it be done under careful stewardship.

It is not yet clear which action President Obama will take, but support for the monument is a profound example of citizens recognizing the importance of their natural inheritance and taking steps to protect it.  Concerned citizens can write to President Barack Obama at 1600 Pennsylvania Ave NW, Washington, DC 20500  or call the White House at (202) 456-1111.

Featured Image: Photo: TheMorganBurke via photopin (license)

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The Norwegian Model: Managing Resource Wealth for the Common Good

Natural resources play a foundational role in a country’s economic development. As natural commons, they provide economic assets via space, raw materials, and energy that can be used to create other assets and opportunities in the form of industry and wealth. But because these commons are finite, their mismanagement often leads to a boom and bust pattern of economic development. Norway, however, has set a solid example for how to properly manage natural resources, including one of the most sought after – fossil fuels.

In the 1950’s, European countries began to speculate that vast oil and natural gas deposits lay under the North Sea. This theory was confirmed in 1959, when the largest natural gas field in Europe was discovered in the Netherlands. Excitement grew around potential future discoveries, particularly in the area of Norway’s continental shelf. Anticipating the discovery of reserves, the Norwegian government passed legislation in 1963 stating that the State owns all natural resources. The legislation also stated that the government is the only authority that can grant licenses for exploration and production. This legislation put Norway’s natural commons firmly into the hands of its citizens.

This turned out to be smart planning. In 1969, oil was discovered in Norway’s continental shelf. Oftentimes, nations turn to free-market economics, an approach that consistently fails to allocate the wealth derived from natural resources efficiently. Instead, Norway sought a different strategy to ensure that this natural commons provided long-term wealth to the entire country.

Initially, the Norwegian government gave private energy companies limited licenses to explore and tap Norway’s reserves. These companies can be credited with developing the country’s first oil and gas fields. However, in an effort to maximize national revenue, in 1972, the government moved quickly to create a government-owned petroleum company called Statoil. From that point forward, any foreign energy company granted a license was required to split 50% of the work with Statoil.

photo credit: L.C.Nøttaasen Yme platform via photopin (license)
photo credit: L.C.Nøttaasen Yme platform via photopin (license)

Norway’s fast action prevented the privatization of its natural commons and secured its oil wealth for its citizens. The government credits oil wealth with the creation and sustainability of their welfare state and support of macroeconomic development during downturns in the petroleum industry.

In the 1990’s, the government created the Government Pension Fund – Global (GPFG), informally known as the Norwegian Oil Fund, as a place to deposit all excess oil profits. The value of the fund stands at a staggering $850bn, and officials estimate that sum will surpass $1 trillion by the end of 2019.

So what has Norway been doing with all this money? Well, not much. And that is the point. The government capped annual withdrawals at 4% in order to prevent hyperinflation and to secure a surplus of money to survive in a looming post-fossil fuel world. This decision has proven wise recently as a drop in oil prices has moved Norway to declare its petroleum industry in crisis.

Norway’s natural commons management is a shining example of the prosperity that results when revenue from national resources is shared by all citizens. Norway has used this wealth to create social and economic programs that help each citizen. This wealth has also built a massive pension fund that can support the country during periods of economic hardship. It is a powerful equalizing tool not often seen in nations rich in oil and other natural resources.

photo credit: Jean-Paul Navarro The Grand Harbor via photopin (license)
photo credit: Jean-Paul Navarro The Grand Harbor via photopin (license)

Some economic scholars draw comparisons between Norway’s approach to natural commons (referred to as “petro populism”) and the theories of Henry George. Henry George, an American economist and political theorist from the 19th century, postulated that land is social commons, and that the profits drawn from land should be shared by all citizens via the use of land value taxation (LVT). In the case of Norway, they have taxed the revenue drawn from oil rich land at the very high rate of 78% and both redistributed and saved that revenue. In addition, they have carried over such sustainable thinking towards other natural resources, such as lumber and fisheries, and seen the same successes as with petroleum.

Resource-rich nations should take lessons from Norway on how to fully profit from and intelligently invest revenues from the utilization of our natural commons. The discovery of lucrative resources can inevitably lead to a boom and bust economy. Avoiding that requires managing those resources appropriately and wisely, as the Norwegians have, by using wealth derived from them to create an equitable and healthy society for all.

But all nations, whether “resource-rich” or not, have at least one socially-created resource of enormous value which can be tapped: the rental value of land.

Audio podcast on Norway and it’s oil management system. Courtesy of NPR online.

Featured Image: photo credit: arbyreed  via photopin

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