Taxpayers give a gift to U. S. Sugar, or some of its shareholders.

Associated Press reports that the state of Florida will give U. S. Sugar $1.75 billion to take 187,000 acres out of sugar production and give it to the State for Everglades restoration. An “environmentalist” is ecstatic:

“In the old days, you didn’t just beat your opponent, you also ate them,” he said. “Today, we’re eating U.S. Sugar.”

This works out to about $9,000 per acre, considerably more than the price of good rural midwest farmland. According to the article, it’s become increasingly difficult to make a profit in the sugar industry– leading one to imagine that a similar result might have been achieved had the State spent nothing.

The article states that the 1,700 employees will lose their jobs– but the companies web site says that it is an employee-owned company– with 1700 owners.  Looking at it that way, it’s about a million dollars per displaced worker.  Tho I doubt that each gets an equal share  of what amounts to a gift from the taxpayers. The San Diego Union Tribune says employees own only 30% of the company.  That source also says that the company’s 30,000 acres of orange groves are included in the deal.

And according to the New York Times, insiders have been squeezing the employee-owners out.  So there may be even more sleaze here than at first appears.

Assessor Houlihan raises marginal income tax rates

I’ve commented before on the conclusion, by several analysts, that due to means-tested assistance many people of low an moderate income can face marginal tax rates approaching or even exceeding 100%. That is, if you accept a raise, you might lose some of your food stamps, or medical assistance, or subsidized housing, or federal and/or state earned income tax credits, or other benefits “targeted” for low-income people.

Last week Cook County Assessor James M. Houlihan was kind enough to tell me about another means-tested benefit, that apparently has put some people into a marginal tax bracket of 2,000% or more. And they didn’t even know it, because tho just announced, it’s based on 2006 income.

He calls it the “Long-time Occupant Homeowner Exemption,” and it only applies to “homeowners residing in their homes 10 years or more.”

• If total household income for 2006 doesn’t exceed $75,000, the increase [in assessed valuation for the homeowner's residence, apparently] will be limited to 7%.
• If total household income for 2006 doesn’t exceed $100,000, the increase will be limited to 10%

In both cases there is no maximum exemption amount.

Somewhere there is a longtime homeowner, whose 2006 income was, say, $100,005. That extra $5 might now cost her hundreds (or thousands?) of dollars in real estate taxes.

The impossibility of intelligent tax planning is far from the only reason this is a dumb idea, of course. The savings these longtime homeowners receive will be made up by the rest of us– including the first-time recent buyer struggling to cover an adjusting mortgage.

But I don’t mean to blame Assessor Houlihan exclusively for this nonsense. He says, and I’m sure it’s true, that it is established by the Illinois Legislature. And furthermore, he seens toi be embarrassed enough by it that it’s not on his web site at http://www.cookcountyassessor.com (or at least I couldn’t find it there). There is some mention of it at the City of Berwyn site.

Brach’s site update

Back in January I noted a proposal to spend $141,000 of our tax (TIF) money per job “created,” to subsidize redevelopment of the old Brach’s candy factory site. Even more scandalous, the planned distribution center would have contained only 75 jobs on 30 acres within the densely-developed west side of Chicago.

Now comes a report that the City Council Finance Committee has delayed approval of the subsidy. Not because of the wasteful spending or small number of jobs created, but because some local people prefer that a school be built on the site.  I’m not familiar enough with the area’s land use or politics to know whether this is a good site for a school, but at least somebody seems to be paying attention to the fact that land is a limited resource, and perhaps giving land and money away for a small number of jobs is a bad idea.

btw, the more recent report places the parcel size at 12 acres, not 30, which seems small to me but perhaps the area involved is less than the entire site of the former Brach’s facility.

More “sports” subsidy

Of course it’s well known that professional “sports” businesses receive big subsidies for stadiums, but I’d not thought about sales tax.  In at least one case, the Super Bowl is exempt.

GAO on Funding Infrastructure

No great surprises in the new Gov’t Accountability Office report on: PHYSICAL INFRASTRUCTURE  Challenges and Investment Options for the Nation’s Infrastructure.  (Summary, full report).  Roads, bridges, dams, railroads, airports etc are decaying and not keeping up with “demand,” and existing funding methods are proving inadequate.   Is there a cheaper way to meet the needs? The report does not say.  Is it worth spending what it costs to update the facilities? Not discussed. And perhaps most importantly, is there a way that the owners of land benefiting from infrastructure improvements could be made to pay for them?  Well, one sentence recognizes some approximation of the possibility:

A variety of taxes have been and could be used to fund the nation’s infrastructure, including excise, sales, property, and income taxes. (p. 15)

That’s all.

Why would sugar-exporter Fiji import sugar?

Because the European Union has agreed to buy 229,000 tonnes of Fiji-grown sugar, at prices above the world market.  That might leave Fiji without enough sugar for domestic consumption, so they’re importing 45,000 tonnes from India. I bet those Indian producers would like that premium price.  (Unfortunately, the article in source fijilive.com doesn’t specify exactly what the prices are.

Update on Consumer Taxes

The Civic Federation has updated their compilation of Chicago consumer taxes, noted last year.  This includes the additional 1/4% RTA sales tax effective April 1, but not the Cook County sales tax increase going into effect later.

Unruly Americans

Just finished Woody Holton’s Unruly Americans and the Origin of the Constitution.  He’s not the first to point out that the Constitution was established largely to protect the interests of creditors, especially those holding government bonds used to fund the American Rebellion.  Bond speculators benefited, as did all creditors, with the states prohibited from issuing paper money, and a federal court system established. Holton gives relatively little attention to land issues, tho he notes that under the Confederation the cost of using the military to secure western land exceeded the revenue from land sales.

The Constitution provided for significant federal military, which not only protected settlers (and their landlords) from Indians but also could aid in putting down slave rebellions.  Holton notes that, by making debts more enforceable, the Constitution also made credit more available to Americans.  He doesn’t seem to doubt that more debt would be a good thing.  He also seems to think that tariffs were an appropriate source for federal revenue, tho acknowledging that excise taxes, such as on whiskey, could lead to difficulties.  He approvingly notes that higher tariffs allowed the easing of taxes on land.

Henry George, of course, opposed tariffs as a hindrance to trade, and thought government at all levels would best be funded by a tax on the value of land and other natural resources.  And George suggested that a government which does not assist in collection of private debts might discourage excessive lending.

Despite his apparent failure to appreciate such economic fundamentals, Holton’s book is well worth the read for a description of the conditions and methods which brought about the original U S Constitution.  (There is a little discussion of the Bill of Rights, which Holton sees as having been promised as one of the compromises necessary to get an elite-favoring constitution ratified, and even less of the subsequent amendments.)

“No country in the world affords such a field for speculations both in paper and land” as the United States, Noah Webster declared in 1791.  One of the most successful of the speculators was Abigail Adams.   [-- page 267]

At least they spelled the name right

I’ve gotten reports from a couple of HGS friends about Jonah Goldberg’s Liberal Fascism, which mentions Henry George a couple of times, not in a favorable light. I rarely find it worthwhile to read Goldberg’s columns in the Tribune, so I would hardly waste time reading his book, but I have been lent a copy of it and found two references to Henry George in the index.

Posted in Georgist, Miscellaneous outrages | 2 Comments »

Capital Market Dysfunctionality

Posted by taxpayer on February 17, 2008

It’s not the way a Georgist would describe our main economic problems, but it doesn’t fit badly. Paul Woolley, a former (reformed?) investment manager and IMF official, has established his Centre for the Study of Capital Market Dysfunctionality.   One way he states the problem:

By most measures finance has become the dominant industry sector accounting, for example, for between 30% and 40% of the aggregate profits of the quoted corporate sector in the US, UK and globally, compared with only around 10% forty years ago

Not only does this mean a lot of money is being paid for a service which isn’t really central to our economy’s purpose, but also that much of the best talent in many fields is diverted to playing financial games rather than useful work.

Of course, in his talk he did not mention land.  Since his background is in finance, I guess he looks at the problem as a capital market problem rather than a land speculation problem.  As a Georgist, I tend to think that the problem can only be solved by making speculation in natural resources unprofitable.  Woolley however will probably show many ways in which the problem can be reduced, or at least postponed.   His site shows many papers related to the subject, many worth a look I think. (Of course quite a few of the papers are not available free.)

One reason I am inclined to think this is a serious effort to address the issue is that Woolley is apparently funding the work personally.

Posted in Georgist, Miscellaneous outrages, worth a look | No Comments »

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