Black Ghettos: The Role of Segregation, Deindustrialization and Interstate Freeway Construction

Black Lives: Truth, Racial Segregation Legacy Keeps America Divided

RT (2019)

Film Review

The fourth episode of Black Lives visits segregated Black slums in Baltimore and Pittsburgh that were thriving African American communities before the US government allowed Wall Street to destroy the country’s manufacturing base (in the 70s and 80s) and move thousands of factories overseas. The Black area of Homewood (Pittsburgh), which initially survived de-industrialization, was a thriving African American business district until the city fathers decided to tear it down to build a freeway.

Many US cities adopted this strategy. In the early eighties, Seattle City Council gave their blessing to a plan by Washington Department of Transportation to crush Seattle’s African American community by running an I-5 extension through it. This destroyed any remaining good paying jobs in the central city.

The filmmakers record it all: the dilapidated unheated housing, the drug dealers that moved in as businesses were boarded up, the ubiquitous police presence and the intrusion of homicide into Black family life.

East Baltimore has been compared to a war zone – at present it’s the murder and heroin capitol of the US.

 

 

Facebook’s Billionaire Tax Refugee

depardieu

French actor Gerard Depardieu

In January, Forbes reported that Facebook’s billionaire co-founder Eduardo Severin had renounced his U.S. citizenship to move to Singapore, where the top tax rate is 20%. The article about millionaires and billionaires fleeing high western tax rates was triggered by French actor Gerard Depardieu’s renunciation of his French citizenship to move to Russia. He chose Russia based on its top tax rate of 13% on individuals and 20% on corporations (except for the oil and gas industry – see below). France had just enacted a 75% tax on millionaires to pay off the 1.7 trillion euros it owes to international banksters. Socialist president Francois Hollande sees taxing the rich as a better alternative than laying off public servants and cutting health care, education, and pensions like Greece, Spain, Portugal, and Italy.

Forbes clearly disagrees. Predictably the article represents the traditional neo-classical economic viewpoint – slashing public services is always a better alternative than increasing taxes on the rich. They also leave out the most important part of the story – namely why income taxes in Singapore and Russia are so low.

The real reason income is taxed at a low rate in Singapore and Russia is because both countries have adopted a modified Land Value Tax (LVT). An LVT is a tax on unimproved land, resources and the cultural commons (e.g. public airwaves). It was journalist Henry George who first proposed replacing taxes on income and capital with a single LVT in his 1879 international bestseller Progress and Poverty. See Progress and Poverty: the Suppressed Economics Classic.

Singapore’s Economic Miracle

Singapore, a flourishing city-state of 5.3 million people, faced massive unemployment and a major housing crisis when it first gained its independence from Malaysia in 1965. Its leaders immediately launched a modernization program funded by an LVT. Although Singapore no longer relies on a single tax, income taxes still remains extremely low with corporate rates between 8.5 and 17%.

Thanks to the LVT, Singapore recovered much more rapidly than western countries from the 2008 economic collapse. In 2011 a 12% increase in GDP enabled them to pay a dividend to all adult citizens of approximately $269 each (total $1.22 billion).

How Putin Saved Russia’s Moribund Economy

Russia’s LVT, introduced by President Vladimir Putin as part of a 2001 tax reform package, falls more heavily on mineral (e.g. oil and gas) extraction than unimproved land. Taxes on oil and gas revenues amount to approximately 45% of net sales (compared to 12 percent in the construction industry and 16.5 percent in the telecommunications industry). Property owners pay a tax ranging from 0.1 – 0.3% on land value (and a comparable rate on state-owned land that they lease).

Experience with LVT in other countries

Hong Kong (1985) – thanks to LVT, enjoys low taxes, low inflation, high investment and high salaries. Often voted the world’s best city for business and the freest for residents. According to Bloomberg’s they, too, paid a $700 dividend to all adult residents in 2011. Unfortunately since rejoining China, Hong Kong has been gradually replacing land and resource taxes with income tax. This has resulted in a return of land speculation and increasing income inequality. The Hong Kong real estate holdings of China’s multimillionaire president Xi Jinping are valued at more than $24.1 million.

Taiwan (1949) – following the Communist takeover of mainline China, Chinese nationalists under General Chiang Kai-shek fled to Formosa (Taiwan), a brutally poor feudal island controlled by a handful of rich farmers. Chiang Kai-Sheck, a follower of Sun Yat-Sen, the first Chinese president and  a great admirer of Henry George, introduced a LVT. When plantation owners found themselves paying as much in taxes as they were collection in rent, they sold off their excess land to peasant farmers. Taiwan went on to set world records with growth rates of 10% per annum.

Denmark (1957) – the small Georgist Justice Party won seats in parliament and a role in the ruling coalition. A year later, inflation had gone from 5% to under 1%; bank interest dropped from 6.25% to 5%. By 1960, 100,000 unemployed (out of a population of 5 million) had found jobs and received the highest average pay increase in Danish history. In the 1960s, a media backlash funded by wealthy bankers and corporations caused the Justice Party to lose its seats. Land taxes were decreased and income tax and sales tax (currently at 25%) drastically increased. Inflation quickly rose to 5% and by 1964 reached 8%. Land prices began to sky-rocket, increasing 19-fold from 1960 to 1981 increasing 19-fold.

Estonia (1990s).- enacted a 2% LVT following the break-up of the Soviet Union. It was much easier to collect than the income taxes enacted by other former Soviet republics, more successful than trying to collect from others, succeeding over 95% of the time. It’s largely the LVT that has enabled Estonia to become the electric car capitol of the world. In addition to installing 165 electric vehicle fast-charging stations country-wide, it provides a 50% subsidy for residents who purchase electric vehicles.

Other jurisdictions that opted for LVT:

  • Ethiopia 1990s
  • Saudi Arabia, Kuwait, UAR – resource-based LVT on oil and gas exports
  • Baja California (Mexico) 1990s
  • British Columbia (1912) – resource-based LVT on forestry
  • Vermont 1978
  • Kansas City 1930s
  • Pennsylvania – Pittsburgh and Scranton in 1975 and 18 other cities following suit in the 1990s. Housing costs and crime in both Pittsburgh and Scranton have trended the lowest in the US, despite the collapse of the steel industry. Both avoided the 2000-2007 real estate bubble and 2008 collapse. Foreclosure rates in Pittsburgh remain the lowest in the country.

Single tax colonies founded by Henry George’s American followers:

  • Free Acres (New Jersey) 1910
  • Arden (Delaware) 1900
  • Fairhope (Alabama) 1894

 

photo credit: igorjan via photopin cc

A Novel Bipartisan Solution to the Economic Crisis

re-solving economic puzzle

Re-Solving the Economic Puzzle

Walter Rybeck 2011

Book Review

What if there were a single, simple solution to the current credit/debt crisis? What if mere tax reform could end the recession, repay public debt, and reverse growing income inequality? What if this tax could also end real estate bubbles and speculation and reverse urban decay and sprawl? What if it could also make cities and states more financially self-reliant, thus reducing their reliance on federal subsidies and the size of federal government?

It all sounds highly improbable, doesn’t it? But Walter Rybeck, a former urban affairs official in the Johnson, Nixon and Carter administration, claims that widespread adoption of a  Land Value Tax (LVT) would accomplish all these objectives. What’s more, political thinkers across the political spectrum (e.g. Patrick Buchanan, Milton Friedman, Michael Hudson, Martin Luther King, Paul Krugman and Joseph Stigliz) have all spoken in favor of this type of tax reform.The LVT, which taxes unimproved land, dates from pre-revolutionary times. Prior to the enactment of the Federal Income tax in 1913, most public services were financed locally via an LVT. Progressives like it because it shifts the tax burden from small business and low and moderate income families to real estate developers and speculators. Conservatives like it because it shrinks the size and role of federal government, as well as leading to a reduction in company and income tax.

Here is what conservative free market economist Milton Friedman had to say about Land Value Tax (The Times Herald, Norristown, Pennsylvania; Friday, 1 December, 1978): “We need taxes. So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.”

Ending the Monopoly on Land Ownership

Like Henry George, author of the 1879 Progress and Poverty, Rybeck proposes to end the ruling elite’s monopoly on land and natural resources through tax reform – by gradually replacing income, company, sales, and property taxes with a tax on unimproved land and resources. As he explains in Re-Solving the Economic Puzzle, land is the ultimate source of all wealth. In the US 3% of the population own 95% of private land. Ted Turner alone owns two million acres, equivalent to nearly two Rhode Islands. In many cities, a few wealthy families own all the prime downtown sites.

Rybeck’s definition of land includes all the natural resources accompanying it – soil, forests, game, grazing rights, water, oil, gas, minerals and the electromagnetic waves (broadcast, cellphone, and wi-fi spectrum) above it. Like Henry George and modern Georgists, he argues that land and resources should be public property. Because no one produced any of this stuff, no one has a right to claim an exclusive monopoly over it.

According to Rybeck, our current system of taxing labor and productivity is grossly unfair to all but the top 1% of Americans. Besides being more equitable, the LVT also ends curbs the real estate speculation that leaves vast areas of American cities vacant. Setting land taxes too low inadvertently rewards landowners for keeping land vacant or turning it into parking lots.

High land vacancy rates were already a major problem during the Nixon administration. In 1970, cities with a population of 100,000 had a 22% vacancy rate, and those over 250,000 a 13% vacancy rate. Thanks to the 2008 economic crisis, an epidemic of vacant foreclosed homes has massively increased this urban blight. Worse still, low land taxes reward middle class families for moving to the suburbs. In doing so, they abandon expensive infrastructure (water, sewage, lighting, schools, etc) that was created to accommodate them. As they spread out into sprawling suburbs, taxpayers must fund new infrastructure.   

Cities and Countries Successfully Adopting an LVT

The final third of Re-Solving the Economic Puzzle relates the success stories of the 25 cities and five countries that have spared themselves economic disaster by adopting an LVT. The communities Rybeck singles out include

  • California Irrigation Districts (1887)
  • Fairhope Alabama (1894)
  • Arden Delaware (1890)
  • Cleveland (1901)
  • Pittsburgh (1913, 1979)
  • New York City (1918)
  • Miami (Ohio) Conservancy (1929)
  • Rosslyn Virginia (1950)
  • Southfield Michigan (1960)\Harrisburg and 15 other Pennsylvania cities (1980-1990)

Sadly many of these communities subsequently caved in to special interests and began taxing capital improvements, rather than land values. Those who did so are confronting a major debt crisis, as well as decaying schools and infrastructure.

Pittsburgh, one of the backsliders, saw the error of their ways in 1979 and instituted a gradual return to what Rybeck refers to as a two-tier land tax. At present, Pittsburgh taxes unimproved land six times as heavily as improvements. The resulting revival of their central city is referred to as Renaissance II. Thanks to their Land Value Tax, Pittsburgh didn’t experience the same real estate bubble as other US cities. Thus their housing market didn’t collapse in 2008. In addition, their current foreclosure rate is the lowest in the country.

Countries which have adopted an LVT include Hong Kong (1843), New Zealand (1878), Denmark (1912), South Africa (1916) and Taiwan (1949).

To learn more about Land Value Tax, check out the LVT Facebook page.

Reprinted from Veterans Today