Saturday, September 20, 2014

How To Make The World Better

What is wrong with the world is simple. Why that is, is the complicated part. The same holds true for fixing the problem.

What I'm writing about is one of the core problems that is the root of more complex problems. What I'm getting to is poverty. Naturally, just bringing everyone out of poverty will not end all other problems but it would go a long way making the world a better place to live in.

As I stated the problem is a very simple one. Individuals allow the wrong things to be taxed. Why does government tax jobs and houses like they were booze and cigarettes? It's clear that these good, positive things, that are absolutely necessary to lead a prosperous life, are being taxed while bad things are left unmolested by the taxman. The big enchilada in this respect is land especially the most expensive desired urban land that is unused, underused or a slum property. Here's how the scam works:

In the urban areas most of the tax is on the house and other improvements to the land. Very little of the tax is on the actual value of the land location. So the classic example of how the rich can use this cozy setup is the Washington Post Parking Lot. There on 15th Street and L is located the Washington Post. Right next door was the Washington Post two story parking lot. For decades the Post paid a pittance in property tax for the lot compared to the tax for the office buildings right next door. They deducted all costs for running the lots and after taxes pretty much broke even on the operation over the course of the years.

Then at the height of the Real Estate market, after everybody else in DC has paid huge amounts in taxes compared to the tax on the Post lot, and people invested millions in private money in the community to make everyone's property location more valuable, the paper sold that parking lot for millions for a big office building to be built there. So after essentially paying no money after costs, parking fees and taxes are accounted for, the Post reaped millions of dollars in profit. However, where did that value actually come from? The answer is from the labor of all the home and business owners paying ten times more in taxes to be able to own a home or business than the Post paid for simply owning the lot and waiting. This is what is called urban land hording which combined with slum properties are very bad things for society and the economic balance of civilizations.

Here again the problem and solution are simple. Tax only the value of everybody's land holdings regardless of what is built on that land. Income from labor as well as houses and businesses would be tax free because these are good things that we need more of to have a prosperous society. Conversely, land hording for future speculative profit is a bad thing because by underusing or not using urban land it prevents wealth from being created there when it's not mixed with human labor, or at the very least used to store the personal wealth of humans and as a living space or business. It is fenced off, guarded by taxpayer funded police, owned for virtually nothing after deductions are factored in, then sold for a fortune at the peak of the market booms. This, like slum properties, adds nothing to society or the economic pie that everybody else is baking with their labor and investments. The urban land hoarder makes nothing, uses up time and some of his money to hold the land until everybody else in the area makes it valuable with their taxes and private investments, then the speculator sells for a fortune like the Washington Post did.

Why all these things are true is the complex part to explain. If you really want to know why there is so much poverty and how it is related to land hording you should read Progress and Poverty by Henry George. It's over 800 pages because George wanted to build a convincing argument that could not be refuted. As Einstein said in not so many words, that there's was no arguing with what Henry George was asserting in his masterpiece Progress and Poverty. There were just those who were familiar with George's writings and agreed with him and those who had not yet read his literary works.

But all you really need to know is what makes simple sense anyway. Politicians should stop peeing taxes on good things like jobs then complain about the rein of unemployment.

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