Post: #1

I want to do a long post on the economist Henry George sometime.

In particular the writings of Fred Harrison (a sometime guest on Max Keiser - by the way) who has done the most in modern times to update and spread the teachings of Henry George.

I came across Henry George here on the forum a couple of months ago. And have been studying this area ever since. It is fascinating stuff. A totally new paradigm for thinking about economics.

Capitalism teaches us that capital is at the foundation of economics.

Communism teaches us that labour is at the foundation of economics.

Georgism teaches us that land is a forgoten factor in the analysis of economics. And deserves equal weighting along with capital and labour when analysing the subject.

I am still in 'learning mode' here. So I can't go into too much detail. But the key insight of Henry George is that the government and the people who live in a society spend money (through taxes) and create value (by living together in a society) which increases the value of land.

And that increase in value is siphoned off by those who own the land. And it is not even taxed. It is unearned income - and untaxed to boot!

This is a complex area - but it is the most important financial issue in our lives. Next time you are signing a cheque to pay your rent, paying your mortgage or buying a house - it is worth thinking about the reasons why these things are so expensive. And this is what Henry George was most interested in.

Winston Churchill (along with the Prime Minister - Lloyd George) wanted to reform this back in 1909 as part of a series of populist liberal reforms which were entitled 'The People's Budget'. But the House of Lords prevented his reforms. A land value tax was to be passed - but the House of Lords blocked it. Unsurprising since - by definiton - those who sit in the House of Lords tend to be large landowners.

For students of British history this was a shocking event.

The House of Lords is an unelected 'second chamber'. And the unspoken rule in the British constitution was that any Finance Bills would be passed unopposed by the House of Lords. Since the raising of taxation was fundamental to the running of Parliament - there was an unspoken agreement that the House of Lords would never interfere with such acitivities.

In 1909 - they broke that agreement. Leading to a constitutional crisis - and two election being held in the same year. In exchange for the land value tax not being passed - the House of Lords agreed to legislation promising to never again override any future Finance Bills passed by parliament.

Anyway - although Henry George is largely unknown today. A hundred years ago - he was one of the most famous writers in America. And sold over a million copies of his book 'Progress and Poverty'. Something unheard of for an economics book.

Check out this link for some quote about his work from the likes of Leo Tolstoy, Milton Friedman and Albert Einstein praising his work.

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Anyway - all of that is just a quick overview. The reason I am mentioing all this is because I want to pass along a fascinating talk that Fred Harrison gave.

Fred Harrison is a brilliant writer and his books in this area have my highest recommendation. Below is a talk he gave on the issue of land reform and land taxation.

It seems that this is an issue which has been around for a long time.

Indeed - according to Fred Harrison - it was the issue of land reform which was the real reason why Jesus Christ was crucified. The stuff we are taught in the churches covers up the real issue behind the crucification of Jesus Christ.

He explains his thinking in the video below. The ideas at work make it the most interesting video I have ever seen. Seriously.

For those interested in Henry George, land reform and land value taxes it is fascinating. Seeing these issues come up as the real reason behind the crucification of Jesus Christ is pretty mindblowing.

Post: #2

I haven't thought about this much in the past, but my first reaction is that land's high value is due to its scarcity.

Land is, in fact, taxed in many countries, usually annually (property taxes) and when it changes hands (capital gains and title transfer taxes). Sometimes there are exemptions for a person's home, which are not made available to companies, nor individuals who own more than one piece of land.

Also, in the modern economy there are many large companies which don't own a lot of land relative to their size:
- Tech companies (Apple, Google, Microsoft)
- Banks
- Insurance (AXA, Allianz, Generali)
- Auto manufacturers - their plants are usually located in low-value industrial areas
- Telecommunications, although they have some artificial property (spectrum allocation) which is economically similar to land.

Post: #3

One of the key points that Georgists make is that economic progress creates value and increased wealth.

But since people always need a place to live - much of that wealth is transferred into the cost of land and higher rents. Indeed - Adam Smith also wrote about how unfiar it was that landlords could take this unearned income from other people's labour.

Which is why houses and land are one of the best long term investments.

I am only a few months into my study of this area. So - I am just passing along information from these thinkers. It will take me longer to deepen my understanding and to decide whether I agree with these viewpoints.

I just wanted to pass along the video above. Since for those interested in this area (eg the person on the forum who first mentioned Henry George) it is pretty fascinating.

Still - to add to the above - here is Winston Churchill addressing these issues back in the first decade of the twentieth century:

Quote:The roads are made, the streets are made, the railway services are improved, electric light turns night into day, electric trains glide to and fro…and all the while the landlord sits still.

Every one of these improvements is effected by the labour and at the cost of other people – yet his [the landlord’s] land value is enhanced. When the land is eventually sold, it is sold by the yard or inch at ten times, twenty times or even fifty times its agricultural value…

Post: #4

don't know too much about "georgism", but land is a resource. Ie. a form of capital.

I don't think you'd enhance the quality of an analysis very much by adding land as a seperate factor. It's well accounted for in "capital" already. There are different types of capital with different kinds of return. But in a general analysis? Nah.

Taxing land seems easy, and convenient, but it is simply a wealth tax. Nothing more. With the same kinds of disincentives that creates. Which can be catastrophic if unchecked.

Post: #5

Don't have the time to make a full comment, but yes Georgism is a very interesting idea in itself.

It is one of the few movements where I can see a moral justification for tax (otherwise tax is violence), because you can't expect a man to fit into a capitalist specialized society, but at the same time take away from him the opportunity to hunt, fish and grow crops. That is slavery by proxy.

Taxing land and natural resources is therefore morally sound, since it is very easy to argue that land and resources on a geographical area belong to those people. It is nationalist in that way though and likely why it hasn't been more embraced by both marxists and libertarians.

My personal opinion is that this is the way to go, particularly because Georgism stresses the right to keep the fruits of one's labor (no income tax), while at the same time, saying that you shouldn't be allowed to properly own water or soil anymore than the fresh air.

It reaches a nice compromise between free market capitalism and a social consciousness that is grounded in sound ethics.

Now, you could combine Georgism with Friedman ideas about the negative income tax and then you suddenly have an idea for a radically different future high tech society.

Post: #6

Yeah - alot of people coming to these ideas assume they are left-wing ideas.

But in fact they are not. They are pretty libertarian ideas (as expressed above) - and reach a nice compromise between the traditional capitalist/socialist dichotomy.

Alot of Georgists talk about abolishing ALL taxes - and replacing them with a single land value tax.

As for myself - I am not so bothered about changing the taxation system. I just find it really interesting trying to analyse society (and economics) from a fresh perspective. Equally - I spent 18 months studying Marx and found that rewarding as well.

Post: #7

(03-08-2014 06:35 PM)ElJefe Wrote:  don't know too much about "georgism", but land is a resource. Ie. a form of capital.

I don't think you'd enhance the quality of an analysis very much by adding land as a seperate factor. It's well accounted for in "capital" already. There are different types of capital with different kinds of return. But in a general analysis? Nah.

This.

Also, I can't see any justification for saying that income earned from land is "unearned income".

Capital produces a return / an income - just like labor does.

Post: #8

Actually, property taxes do make some sense now that I think of it, but not because of Georgism.

In the past, land owners had to defend their property with walls and private security, both of which came with significant costs. Today the government ensures property rights through the courts, Police and in extreme cases, the military. So those people who own property and benefit from the security that the government provides them, should reasonably expect to pay for it.

Post: #9

I own land with a rental house.

i pay $2600 US taxes per year. This will probably increase this year or next, to $3,500

I don't pay much income tax though, because I can legally write off almost all of my expenses, including the mortgage. Overall, its a pretty good business to be in, real estate. Though its not as easy as people think it is.

Bottom line is that if you can put in the hours and the comittment to become the owner of a business, its often a good investment. Whether that business is land based or otherwise.

Being highly skilled/educated is also a good investment, and may allow more mobility as far as moving to a new city. For example, I could be better off working a corporate job and having stocks, than to be tied to my rental house (well, I have people manage it for me, but sometimes this is a pain in the ass. don't assume you will be able to remote manage real estate)

If you want to escape property tax, you can move to the countryside. Land is cheap in the US and most countries. Cities have high property tax because of the services they provide (sewer,police, fire, bearacracy, etc.)

Property tax is a way of forcing land mongers to use it or lose it (anti hording measure).

Paper money works the same way. Because inflation decreases the value of your money, it makes no sense to hoard it. In the gold ole days they would hoard treasure chests of gold, and everyone was poor and in debt to the banks. This is why I am in favor of paper money if it is responsibly managed.

Post: #10

Quote:Ground rents are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which can best bear to have a peculiar tax imposed upon them. - Adam Smith

Quote:Landlords grow richer in their sleep, without working, risking, or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title. - John Stuart Mill

Just wanted to pass along those two quotes. And mention something else.

The framers of the US constitution based their ideas on the work of John Locke. He was a British philosopher and political thinker who wrote the book 'Two Treatises of Government' about a century before the framing of the US constitution.

He argued that government existed for the sake of protecting "property", which he defined as a person's "life, liberty, and estate". In John Locke's time - estate meant land.

The founding father who wrote the US constitution were all landowners - and wanted to tamper with what John Locke wrote so as to protect their interests. As such - they changed it to "Life, Liberty and the pursuit of Happiness".

Replacing land with 'the pursuit of happiness' is quite revealing. First of all - it is quite difficult to be happy if you have no land to live on.

And secondly - "the pursuit of happiness" is such an vague term that it is almost meaningless.

Post: #11

First of all, many landowners do invest a lot into the community. In the modern world, you usually have to build housing, utilities, roads, fencing, etc before you can rent a property. Someone is not going to just move onto your property without it being improved and maintained. Second, in the US we pay property tax. So the landowner is giving money to the local government to build roads, schools, police, etc. Yes, the renter does pay sales tax and pays for things, but we can't say that the landlord does not contribute. Sometimes landlords lose money. Sometimes renters burn down a house and the insurance doesn't cover it. Lots of other things happen, like lawsuits, etc.

The system is more or less a good system. If you plan on being in one town for more than 5 years, you might want to buy a house. Try to buy something with enough extra bedrooms that you can rent out. Pick a location that will be easy to rent rooms. Its a good business to have. The people renting are happy because they can't buy a house or don't want to (they don't plan on being in the area that long).

Inflation will pay off your house. My parents paid $25,000 for their house in 1980. After 15 years, the initial price seems a lot less once inflation kicks in. (for example, you can rent out a room in 1980 for $125, now you can get over $500). People told my parents that 25K was a lot to pay for that house in 1980.