Archive for October, 2007

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What’s wrong with “hard money”

October 23, 2007

It’s a bad idea to use gold (or gold-backed certificates) as money.  Dan Sullivan’s recent LandCafe  post cogently explains why:

Money is a place holder for wealth, not for labor. You get the fruits of someone’s labor for money, not the labor itself. If the productivity of labor goes up, the value of monetary debts should not go up with it. Rather, labor should be able to pay the debts more easily.

Legitimate wealth degrades in value, or has to yield value to those who maintain and protect that wealth. If money is to be a place holder for wealth, the money should degrade just as wealth degrades. People do not hoard actual labor-produced wealth for just this reason, but they do hoard money that increases in value in relation to wealth, and they particularly hoard gold.

I am not at all convinced that a steady, mild inflation is a bad thing. Certainly it is better than deflation, which causes great economic distress.

The only part I may not be persuaded of concerns deflation. It’s said to be bad, and I can understand intellectually why it would damage an economy if money is a more lucrative investment than wealth.  But never having seen deflation up close, perhaps I don’t fully understand it.

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Vacant Land is still undertaxed

October 19, 2007

Many years ago, I wrote a memo called “Vacant Land is Undertaxed.” The title says it all, but it’s still true today.

A new Civic Federation report shows vacant land in Chicago assessed at just 4.81% of market value– it’s supposed to be assessed at 22%. On this basis, vacant land in Chicago is worth $5.3 billion, and to assess (and tax) it properly would bring in over $50 million/year. If the County Board were to revise its classification ordinance to assess vacant land at 40% of value (to go any higher would have other repercussions), another $40 million or more would be recovered.

In the suburbs, the underassessment is less severe, but vacant land there is estimated to be worth over $4.6 billion, so some additional revenue could be realized.

And or course, no matter how high the taxes on vacant land are raised, nobody’s going to move it away or decide not to use it because of the tax on it.

A letter to this effect was sent to the Tribune this afternoon. I am sure they will instantly recognize it as a perceptive and cogent statement, and will publish it under a prominent headline. Uh, right?

UPDATE Nov 6: The Tribune did publish the letter,  though not formatted quite as I wished.  Two days later they also included on their web page (but not in print) my suggestion (about halfway down here)  for transit funding from land value.

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Compilation of Consumer Taxes

October 19, 2007

Our friends at the Civic Federation have published a memo on Selected Consumer Taxes in the City of Chicago. Showing a total of 29 different taxes, it shows that the sales tax on general merchandise purchases in Chicago is now 9%:

  • 5% State (of which 0.25% is passed on to RTA)
  • 0.75% RTA
  • 1.00% Cook County
  • 2.25% Chicago

In restaurants we pay an additional 1.25%, of which 1% goes to McCormick Place and the remainder to the City.

Something I didn’t know about is that taxi medallions are reportedly taxed $78/month by the City.   Anyone know when this started?  If raised to  something like $350 or $400/month, it wouldn’t affect the earnings of cabbies, except those who own medallions, and might bring in $25 million for the City.

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Too cool not to post– for Georgists only

October 17, 2007

Original 1880 Census enumeration record (lines 6-12 of this 2.6 mb jpg)  of Henry George, his wife, children, and brother, in San Francisco.   Thanks to Marie Bousfield.

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RTA prefers parking to transit

October 14, 2007

Whoops! Update from Sick Transit– RTA can tax only fee offstreet parking, and would have to eliminate its sales tax to do so.  Still might not be a bad move…

Earlier post was:

Yes, the RTA has authority to impose and collect a parking tax, per 70 ILCS 3615/4.03 . As one commenter stated at Sick Transit Chicago, RTA chose “a service meltdown over exercising the authority it does have” to tax parking.

I don’t consider a parking tax the best way to fund transit, as its economic objectives could be more efficiently obtained thru a land tax. But it’s better than a sales tax, and it’s already authorized. If RTA’s main purpose were to support and improve public transportation, this would have been done.

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New national database on real estate taxation?

October 12, 2007

The Lincoln Institute says they’ve started a program to have George Washington University build a national database of real estate tax information.  There’s a bit of information on GWU’s site, indicating  that

a data collection team is compiling and classifying a wide range of material that characterizes property tax structures and processes in all fifty states to produce a “Compendium of State Property Tax Regimes.” The compendium will be available as a data set, and researchers will be able to perform simple queries through an interactive web site.

Lincoln’s 2007-8 program document is behind here but you’ll need to register, or use bugmenot.

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How transit can fund itself

October 9, 2007

It’s simply a matter of retrieving some of the benefits that transit creates.  I have (finally!) put together estimates of land value and transit funding desires, to show how a land value tax for transit might work.   It looks as if a typical homeowner, for $290/year, could get all her transit paid for– not just the subsidy, but the fares, too.  Other options are cheaper.  Details here.