Return to the Free Liberal Homepage

December 30, 2008

Paying Land Value Taxes

Dr. Fred and I have had a running debate on the advisability of Land VAlue Taxes. In this entry, I am going to ignore the problem of lowering land values through taxation while many home owners are already underwater and go straight to the issue at hand - how are land value taxes.

The simple answer, of course, is that the land owner writes a check or has it included in the mortgage. It is more complicated than that, however. Land is not automatically productive. Its value comes from how it is used - either for resource extraction (mining and farming), as the location for commercial activity (manufacture or commerce) or for residences (either rented or owned). If residential land is owned, then rent can be imputed through residential use - the opportunity cost of renting similar property in a similar location.

In the resource and commercial arenas, the source of the money used to pay the tax is obvious - the owner may be obligated to pay, but the money comes from sales and will be accounted for as a cost of doing business. If I have 1000 acres of land, the decision to engage in operations or sell the property is partially determined by whether the gross profit from the business will cover the LVT payment. If it does not, the land will be sold or if unsaleable abandonned to either the government or the mortgage holder. This may serve to lower land prices, but I am not sure that using default as a method of price control will be seen as a good thing in the commercial sector any more than it is currently seen as a good thing in the housing sector. It is good if you are a land purchaser, but awful if you hold land and wish to sell it (or are a government wishing to tax it if the tax is based on value rather than on acerage).

For residences that are leased, whether it determines the market rent or not, the cost of the LVT will be included in the decision to operate the business, sell or default (or lobby for a lower tax rate - which is also a very likely course). If operating the business is chosen, then the funds to pay the tax come from the renters (or from the owners pocket if taking a loss is an acceptable outcome - NOT).

For owned residences, LVT is a tax on income or savings, albeit indirect, in that the residence does not produce income (unless a room is leased out - see prior paragraph). In this case, the homeowner must have a job, royalties, interest or dividend income, other rental income or savings to deplete in order to pay the tax or lose the property to the taxing authority. Note that all of these revenue streams can eventually be traced back to a commercial transaction, since people get income from sales of their own services to either an end user or by combining it with the labor of others in a company or supply chain which eventually results in a commercial sale (with the exception of public servants, who pay the LVT from salaries paid from tax revenue).

In all of these cases, the link between the LVT and the commercial transaction used to obtain the money to pay the tax is very indirect, although if the LVT is a single tax then it must initially be high enough to replace the revenue currently collected by all other taxes (income, sales, property, sin taxes, fees) and may be even higher to compensate some individuals for the inevitable economic disruptions (as land loses its value and whole industries fail). If it is phased in, the impact may not be as great. Even if the LVT is a fixed cost, the link between it and the need to make all non-public land productive still means that customers must pay, as ultimately the average person in the average home with the average number of children working for the average size business will likely have to pay the same in taxes as they currently pay - and they may have to pay more. Buried income taxes will be replaced by buried LVT taxes. If distributional equity is a goal in the LVT movement, then it seems easier to gain this equity by progressive income taxes, since the taxes collected by the very wealthy are buried in the same way regardless.

Posted by MichaelBindner at 11:14 PM | Comments (14)

December 20, 2008

Fair Tax Compromise

In the past two elections, the Democrats have picked up 75 seats. It will take some really bad government to reverse this and movement by the Republican Party to the left on both economic and social issues. While oppossing gay marriage may appeal to the older demographic, it won't do well with younger voters, who are growing older and becoming more and more of a majority.

What does this all mean? It means compromise is necessary on the Fair Tax should the nation like Mike and elect him President. One of the reasons I voted for Huck is that a compromise between the Fair Tax and what the Democrats would propose looks remarkably like the tax plan I favor, which is similar to the Competitive Tax Plan of Michael Graetz of Yale. Michael of was George H.W. Bush's Director of Tax Policy, so he is hardly a flaming liberal.

Professor Graetz proposes a Value Added Tax combined with a Simplified Income Tax with a $50K individual/$100K family standard deduction. He would also provide the prebate for paying VAT taxes to poor families, the Child Credit and the EITC as an offset to payroll or through a Smart Card.

I suggest going beyond the Graetz prebate to a full up $500 per month per dependent child and spouse tax credit on an expanded Business Income Tax (Graetz would cut the tax rate to 15%) payable by all employers, not just corporations, with labor costs no longer deductible. I would also have this tax cover Unemployment, Survivors Insurance payable to non-retired widows, Disability Insurance and Medicare Taxes. I would also roll any Obama health insurance reform taxes into the Business Income Tax rate and allow any deductions or credits to be made against Business Income Taxes, whether insurance is paid by employers or employees. There would also be education credits for vo-tech, college and remedial adult education arranged by the employer and students or welfare recipients would have to get an employer or religious organization to sponsor them as employees and would be paid to go to school, with some part-time work requirement as well and the full range of tax benefits available to them. This would be in concert with state and local government. There would be no other public assistance.

Old Age and Senior Survivor's Insurance would be privatized, with some of the employer paid portion going to voting stock in the employer, if applicable, as well as a trust fund of similar employee-owned firms. Part of the employee contribution would also be invested in the same way, however the employer contribution would be credited equally, regardless of base wage. Additionally, the base minimum wage would be set to at least $12 per hour so that no one pays their employees solely with tax credits. Because some workers salaries will go down due to the tax credit, the income cap on Social Security contributions will be raised to capture 95% of wage income, thus raising the average. Workers under 35 would be under the new plan, while workers over 35 would stay under the old unless they and their firms opt to convert to the new plan by fully capitalizing all past and current older workers with stock as if they had been in the plan from day one. Firms and employees that take this option would no longer pay FICA retirement taxes.

This plan would reduce the need for government employees while still meeting all of the public purposes set out in current programs. The education and dependent benefit provisions would also take away most incentives to abortion. The benefits should be good enough so that young people in a family way can get married and husbands won't care whether the child who would have been aborted to cover an affair was really their's.

Posted by MichaelBindner at 08:22 AM | Comments (4)

Abortion from a Christian Leftist Huckabee supporter's perspective

I like what Mike Huckabee says about abortion. For too long the National Right to Life Committee has advocated a "Federalist" approach, although the original radical republicans and even Hamilton would call such a position anti-federalist or states rights. Any solution must be national, if only because people travel to have abortions or to procure them for their daughters, which is pretty much what they do now. Many admit that not much would change on the abortion front should Roe v. Wade be overturned in such a way as to restore state authority.

What exactly did states do when they had the authority? They imposed fines on abortionists.

Come again?

That's right, fines. This is why Justice Blackmun said that there was no right to life before Roe. If your only protection is a fine, you aren't protected. Animal cruelty has higher penalties. It seems the only effect of the law was to create a black market for abortion, travel for abortion and back alley and self-induced abortion.

I'm not working for that. Roe makes clear that the only way to trump the right of privacy, which is legitimate if abortion is only about medical regulation, is to recognize the legal personhood of the unborn.

Sounds good? It depends on how you draw the line.

Personhood implies equal protection under the law. This means that anyone who tells you that fetal rights means only punishing doctors is either misinformed or fibbing (to put it politely). Full human rights means just that. It means that if you die, your relatives can sue the doctor for malpractice. It means that if you get killed, the state is obligated to prosecute the person who killed you and anyone who paid to have it done as an accessory to murder or manslaughter. It also means similar penalties to killing a child or even an adult. Whether you accept it or not, every fetal death becomes a public matter if there is no right to privacy.

How many pro-life women consent to talking to the police, prosecutors or a grand jury if the authorities suspect that your OB/GYN has been doing too many D&C's if you've recently had one yourself? What if they suspect that yours was not justified and treat you as such?

This is not about the police going after "them" but going after you. Equal protection is equal protection.

If you think malpractice is high for OB/GYNs, just wait until every miscarriage is a potential court case. Granting full protection, which is required to overturn privacy, means just that. It is not a nightmare scenario. It is giving power to lawyers to pursue wrongful death cases, which most insurance companies will simply settle - although good luck finding obstetric care until after two months of gestation have passed and a miscarriage is no longer likely. This is what Blackmun was talking about when he stated that legal abortion was necessary to protect all obstetricians, not just abortionists.

It takes maturity to come to grips with this. It also takes honesty.

I am frankly sick and tired of those individuals who run for office saying that they are pro life while appealing to emotionalism about the unborn, soft pedaling the real legal concerns. This is called opportunism, and what else can you call it with more than 35 years of fundraising and no real viable solutions to the root problem. That's three and a half decades of death rather than compromise.

Shame.

The fact is, before 23 weeks, a fetus cannot survive if born, while after it can with medical intervention. That seems like a reasonable line. Another might be the fetal heartbeat at 4 weeks of gestation (6 weeks or so from the last period). While I believe that life begins at gastrulation (rather than conception) and the best embryologiss agree, the heartbeat is a natural start of legal life when its cessation is considered the moment of death.

Huckabee likely does not agree with this, however I supported him in the primary because he would likely put in enough income supports for families that the abortion rate would go down anyway - judging by his performance as Arkansas Governor.

He also stated that he favored a life amendment. This is code for saying he wasn't about to do anything to quickly. A life amendent would need 2/3 of the House to pass, as well as 2/3 of the Senate and 3/4 of the states. It is regarded among constitutional scholars as the impossible dream of the pro-life movement and why overturning Roe was thought to be more attainable.

Of course, it is only unattainable if it is attempted as an all or nothing position. If it is important to stop abortion, primarily in the later terms, then maybe its time to compromise on the 23rd week. Also, it may be that an Amendment is not necessary. The Congress is sovereign in matters of citizenship (not the states). Under the 14th Amendment, it has the power to enforce equal protection. Part of enforcement is deciding issues, like whether at some stage the rights of the child are equal to those of the mother. In the partial birth case, even though it was not spelled out, Congress was able to regulate abortion precisely because the fetus was in contact with air. Being a little bit born is like being a little bit pregnant. If any of you is out, you are legally a person. Congress could likely go further, although doing so takes work.

It takes the willingness to compromise - not easy when you are dealing with conservatives on a moral issue. It also takes specificity in deciding what legal protection really means. Let's say I am wrong about lawsuits and criminal charges. The way to make me wrong is to publish some language to make sure these things aren't issues - or admit that they are - and engage opponents in discussion.

Its time to end the emotionalism of this debate and get down to brass tacks. Anything else is too much like what that other Governor from Arkansas would do. You know who I mean. The slick one.

Posted by MichaelBindner at 08:18 AM | Comments (2)

School Choice in Virginia and Taxes

As the father of a kindergartener, I am in favor of school choice. I am planning on sending my daughter to parochial school next year and should not have to pay for two educations, one by tuition and the other by taxes (although I pay for less than a full educaiton through taxes, since each child's tuition is spread among several taxpayers).

Since we are Catholic, there is a problem, since in Virginia we have a Blaine Amendment which prohibits state funds to Catholic education. Many have said this is an equal protection violation under the terms of the 14th Amendment. I tend to agree and hope for a change in the near future, either through a Constitutional Amendment in Virginia or a federal case. This could come about if the legislature or a school district tried to fund Catholic schools and were sued in Virginia courts. (It could also come from a federal case in another state). Regardless of how it goes down, I predict the Blaine Amendment will eventually be a thing of the past. What is of concern is what will happen next.

There is currently quite a constituency in Virginia, particularly Northern Virginia for public of funding of parochial schools. To put it bluntly, this part of the state is crawling with Catholics, especially when compared with other parts of the state (although Tidwater also has its share). If private school funding were constitutional, there would be an outcry for it, and the GOP should take advantage of that outcry by advocating for school choice. School choice will go nowhere, however, if it is seen as merely an attempt to gut public school budgets or break the teachers union. This means that school choice needs to do two things. The first is to allow parochial school teachers to unionize if they so chose, with a local for each diocese. The second is to increase revenue.

How much should revenue be increased? Simply put, revenue should go up enough to cover the cost of tuition and contributions no longer needed by the parochial school system because of public funding. That is half of the equation - the other is to determine the income distribution of current private school parents and donors and increase taxes for the same economic strata, prefereably through income tax changes.

When the advocates of school choice are willing to concede these two points, school choice will pass

Posted by MichaelBindner at 08:16 AM | Comments (1)

December 13, 2008

Free Liberalism as a Creative Philosophy

Reading Micah Tillman's article mocking politicians' lack of creativity made me realize that one of the main things that we do at Free Liberal is offer a different perspective for seeing the world. The aspiration of Free Liberalism is to continually see the world in new, better ways. When we stop being creative we are more vulnerable to the forces that seek to structure our lives and our thoughts -- creating prisons for body and mind.

Posted by KevinRollins at 12:50 PM | Comments (0)

December 09, 2008

Wall Street's 2 Primary Perspectives on the Crash of '08

http://www.cnbc.com/id/15840232?video=956329241

Check out this video from CNBC. It's a great summary of the two principal responses to the current financial and economic challenges. Santelli represents the Chicago School, which says let the markets (the people) sort this out. Liesman is of the New York School, which says the government needs to intervene, albeit judiciously and temporarily.

Note that I went to college with Liesman...he was the Music Editor of the college mag I edited. He didn't make too much sense then, and he still doesn't, though I'm proud of him, nevertheless!

-RC

Posted by RobertCapozzi at 06:00 PM | Comments (0)

December 08, 2008

Outside the Bailout Box

Watching President-Elect Obama yesterday on Meet the Press, I was impressed. While I mostly disagreed with him, he's impressed me as a thoughtful, wise individual. For instance, I was convinced that he understands the concept of "moral hazard," which I can't say about most pols and the populace generally.

In a sense, I agreed with him that some sort of bailout of the domestic auto industry will happen. It's like when it rains and I have plans for an outdoor event...I wish it were not so, yet precipitation happens.

Of course, bailing out GM, Ford and Chrysler are really bad ideas on a lot of levels. But, if it's to be inevitable, I wonder if there's a way to do it that is least injurious.

Governments have large auto fleets. Why doesn't President Obama pre-pay the Detroit 3 for a fleet replenishment? At $25 billion and an average of say $30,000 per vehicle, that's about 834,000 cars and trucks. The Feds don't need that many, so they can disperse them to the states and counties in lieu of federal payments. They might even offer them to government employees in lieu of pay, with terms of, say, 0% for four years. Or even ship them as in-kind foreign aid, as an offset, of course.

The optics would be even better if this pre-payment plan was for hybrids only.

Such pre-payment serves as a form of a bridge loan, but it could also be positioned as part of Obama's green shift. Ultimately, though, it would not be a bailout, but rather an acceleration of the normal course of doing government business, i.e., fleet maintenance. It could be close to net neutral for taxpayers, which is far better (or less bad) than what's on the table now. It could even be a net positive for taxpayers, considering the cost to taxpayers of increased unemployment that a failure of the auto industry would entail in the short-to-intermediate term.

-RC

UPDATE: I was listening to Rush Limbaugh this afternoon, and he suggested something very similar to my suggestion. A bit chilling, yes, but then I'm a transpartisan.

Posted by RobertCapozzi at 07:31 AM | Comments (18)

Free-for-all (frfr-ôl) -- n. A disorderly fight, argument, or competition in which everyone present participates.

from Dictionary.com



SIMPLE AD ERROR VIEW COUNT NOT UPDATED

Advertisement