patrick.net

DinOR,

You mean that 30-day-freeze-option Project Lifeline thing? Yeah, that sounds like a real winner.

Scary thought: I just looked at the marketwatch.com front page, and Hank Paulson's photo makes him look like Rudy Giulani's twin brother. You decide which is the evil one, it may take some coin tosses :-).

OT, I have to claim some credit in this:

http://www.latimes.com/business/la-fi-tj12feb12,1,1079460.story

There have been more than a dozen times that I personally sent letter to TJ's management pointing out the issues of their China-sourced food, particularly the China-farmed fish that is loaded with carcinogenic chemicals that long have been banned in the US. I even took the trouble of translating some Chinese articles into English highlighting the health risk.

Not that I am a great fan of food from Vietnam or Thailand either, that whole area is massively polluted. India has only a few major sewage systems so shrimps farmed in India is a disaster as well.

I think the last thing we should outsource is food. We should grow locally and eat locally.

I think the last thing we should outsource is food. We should grow locally and eat locally.

I disagree. We need food varieties so we need to import food from all over the world.

The problem is that US consumers demand cheap food. We should encourage the consumption of premium food.

For varieties, I can accept some risks.

As usual I'll have to disagree with Peter P on anything that has to do with taxes.

Flat taxes of any kid are a terrible idea because they are regressive. Taxes must be progressive and balanced. To be balanced, taxes must apply to property, wealth, income (any kind) and consumption and sins. There should be no exceptions or deductions of ANYTHING. All kinds of income must be taxed the same way, no special deals for paper shufflers (aka. capital gains and dividend taxes).

If someone wants to propose the "no-exceptions tax", I could get behind that.

The "Flat Tax" sounds tempting to many people, but it is hugely regressive, VAT is even worse on the regression scale. By regressive, I mean "rich people contribute a smaller share of their wealth,while poor people pay a larger share", in case that was not clear.

"his lack of interest in this filth"

Totally agree. They're saying this is for Muni's? I'm sorry, I just find that hard to believe. How do you 'ef up a Muni?

This had *nothing to do w/ MBS whatsoever?

If you live in Minnesota, perhaps you should advocate importing food from all over the world. If you are living in California, I see no reason why you want imported food so much.

I actually wrote a letter to TJ pointing out how ridiculous they are to import garlic from China while the Norcal operations are so close to our garlic capital of the US, Gilroy. Fresh garlic tastes so much better than stale garlic from a product origin that I don't trust.

I eat fish for almost every meal. Fish cannot be frozen, you can easily taste the difference of frozen seafood vs. fresh seafood. If you want variety, buy a ticket and fly there to taste the real local food, fresh. I care much more about the freshness of food than just variety.

Flat taxes of any kid are a terrible idea because they are regressive. Taxes must be progressive and balanced.

Perhaps we should just agree to disagree. Regressive tax rate is arguably even more productive than flat tax rate.

I am against all form of progressive taxation. Why would you want to discourage production?

If you are living in California, I see no reason why you want imported food so much.

I remember having huge sea prawns (8 inches long) in Singapore. I still cannot find them here.

Fish cannot be frozen, you can easily taste the difference of frozen seafood vs. fresh seafood.

Of course there are ways to ship fresh fish without freezing them.

Dorade tastes just fine here. So are imported Australian "lobsters."

>Why would you want to discourage production?

Regressive taxes do not encourage production. Regressive tax encourages one class of people to sit on their fat asses while another class of people do the production for them.
That's the difference.

DinOR,

I also noticed the Muni angle. It looks like WB is buying the good stuff, and the other insurers are taking him up on it to get cash to shore up the bad stuff. Vintage WB, I would say,

Regressive tax encourages one class of people to sit on their fat asses while another class of people do the production for them.

Yes. Progressive tax is just the reverse.

Land value taxation is perhaps the most logical, just and desirable tax yet devised. That's probably why it hasn't caught on: it doesn't privilege any special interest, it doesn't burden anyone who works, it doesn't burden the economy. It is, perhaps, the antithesis of California's Proposition 13: it treats everyone equally, shares the burden across the entire community equitably, and avoids sales taxes and wage taxes. It doesn't burden production or commerce. It helps make existing housing affordable, and promotes the construction of more housing where housing is most needed, and commercial buildings where commercial buildings are needed, and, best of all, discourages urban sprawl, because it nourishes the density that allows many more of us to live closer to our work if we choose. And because it creates jobs, it tends to drive wages up: jobs chasing people, rather than people chasing jobs.

Other than those benefits, it has little to recommend it.

For those who think that tenants don't pay any tax under land value taxation, and therefore have no incentive to seek less government spending, I must disagree on 2 counts. Tenants DO pay land tax, through their monthly rent. As things work now, the landlord passes only a tiny fraction of it through to the commons -- the community -- in the form of his property tax, and pockets the rest. This forces the community to tax both the landlord's and the tenants' purchases and wages in order to provide the services that allow the landlord to charge the tenant more rent next year for exactly the same house or apartment! Neat trick for the landlord, isn't it? Not so good for the tenant.

Oh -- you say -- any tenant worth his "salt" will save up his extra pennies to buy his own place from some other landholder, and get out of that trap. Yup -- and this forces him to pay large amounts of money to the previous landholder, who didn't create that land value. The community created it, through its presence and our common spending. So the buyer is paying the wrong party -- the seller, in the form of a lump sum, financed by a 30 year mortgage, most of which actually is paying not for the building, which depreciates 1.5% per year, but for the land, which is what gains in value. Not only is the buyer paying the wrong party, then he has to turn around and pay again for those services, through sales, wage and property taxes.

Henry George had it right. I commend Progress and Poverty to your attention, unless you really really like income, sales and building taxes, and would prefer to hang on to all the perverse effects they produce.

justme Says:

> Flat taxes of any kid are a terrible idea because
> they are regressive.

When you say “regressive” it make them sound bad, how about saying they are “equal” (in that all taxpayers pay the same tax rate on every dollar they earn).

> Taxes must be progressive and balanced. To be
> balanced, taxes must apply to property, wealth,
> income (any kind) and consumption and sins.

It is only fair to tax income since you can easily take a portion of it. Taxing wealth is wrong since many people have wealth tied up in assets that do not generate any income to pay taxes. As far as taxing sins who gets to decide what is a “sin”?? For a Mormon it is drinking alcohol, for a Hindu it is eating beef, for a Muslim it is not praying to Mecca and for me it would be thinking that “Progressive” ideas like Housing Projects, Affirmative Action and Unfair taxes are a good idea…

> The “Flat Tax” sounds tempting to many people, but
> it is hugely regressive, VAT is even worse on the
> regression scale. By regressive, I mean “rich people
> contribute a smaller share of their wealth, while poor
> people pay a larger share”, in case that was not clear.

The flat tax on income is fair since everyone pays the same exact rate on any and all of their income…

To your original question -- would land value taxation create sprawl? -- the answer is no. Just the opposite.

While there are a few of us who would, all other things being equal, prefer to commute long distances from the house with the lawn and picket fence on the fringe to the decent interesting job in the central business district, I suspect that there are many people who, given the option of comfortable, affordable housing in a decent school district much closer to their work would choose the latter, at least for major portions of their lives.

Land value taxation will tend to produce density, but only in the places where people already prefer to be. Where land is valuable, LVT will nudge its owners to put it to more intense use. If it is a commercial neighborhood, a single-story building might be replaced by a three- or four-story building, with retail on the first floor and housing or office space on the upper levels -- accommodating many more users than the former one-story building did. If it is a residential neighborhood, single family homes might give way to townhouses, or to condos -- low rise at first, and decades later, perhaps, by midrises or high rises. This wouldn't occur on the fringe; not enough people want to be there to make such construction viable. (The Empire State Building would never have been built in central NJ!)

So a smaller amount of land will accommodate more people, both for residences and for commercial applications. This density produces the conditions where public transportation is viable, which will get at least some of us and perhaps many of us out of our cars for some or all of our day to day transportation needs, reduce fuel usage and the resulting pollution.

I think it is quite possible that in some places the fringe will draw back, which could create some unpleasant results. (The image that comes to mind is of a ghost town, but that's probably not going to happen). But certainly the fringe will not keep advancing quickly into agricultural land or wilderness. "Drive until you qualify" will be a much shorter distance. And it might be "ride until you qualify" in many more places.

lvtfan Says:

> Land value taxation is perhaps the most logical,
> just and desirable tax yet devised. That’s probably
> why it hasn’t caught on: it doesn’t privilege any
> special interest, it doesn’t burden anyone who works,
> it doesn’t burden the economy.

What it will do (if we adopt it today) is destroy the banking system in the US since when you increase the tax on anything the value goes down (just like giving a tax deduction on an item will make the value of the item go up). If the value of all the land in the United States were to drop the FDIC would fail…

> It helps make existing housing affordable, and promotes
> the construction of more housing where housing is most
> needed, and commercial buildings where commercial
> buildings are needed, and, best of all, discourages urban
> sprawl, because it nourishes the density that allows many
> more of us to live closer to our work if we choose. And because
> it creates jobs, it tends to drive wages up: jobs chasing
> people, rather than people chasing jobs.

The current tax (or lack of tax) on land does not discourage the construction of housing and sprawl it is the NIMBY crowd and the crazy land use laws. I would love to buy some land and build a nice water view apartment building in Marin, but I can’t and I don’t see how any changes to the tax laws would change that…

justme,

Right, they know Warren is no fool so the negotiations centered on what is more plausible. Muni's are probably a good value right about now anyway. My point is that it's STILL charity any way you slice it.

I think one of the most equitable tax schemes possible is a VAT tax on purchases. Clean and simple. Sure, it's regressive, but it's a lot LESS regressive than what's in place now. A one-time tax on land like advocated here would be a 2nd choice.

I've made a gross income of less than $8k a year, and I've grossed I think a bit over $80k. A good wide range. And I can tell you, my tax percentage was far HIGHER on the low end of the income range. I paid less tax in absolute dollars when I grossed up in the high end. That's the reality of taxation in the US.

So yeah, a VAT, a flat tax, a land tax, something that doesn't kick the little guy in the nuts for a change would be rather nice.

I don't want to begrudge anyone their fun, but these people scare me... and they're the responsible ones.
McCullough and her husband, Donald Barks, had planned to tap home equity to convert their tumble-down garage into a home recording studio. They got as far as tearing down the garage and then realized that building a new structure would max out their home equity.

"The last few years we used that home-equity line of credit for fun things, like vacations," she said. "That's not going to happen anymore. We have not exceeded the value of our home, but I don't want to go there. That scares me."
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2008/02/12/MN19V0GLO.DTL&tsp=1

Progressive taxation IS welfare. Don't forget that.

"garage into a home recording studio"

(That's code for a place to get high)

Or better yet, GROW dope! :)

America is great because this country respects private properties. It is arguable that property rights are as important as civil liberties and human rights.

Wealth-based taxation will erode the core value of property rights.

Peter P Says:
I thought i liked the “Fair Tax” - flat tax on consumption.
I thought I did too… but there was before I found out the rate would be 23%!!

I would be fine with a 23% consumption tax. It is better than the ridiculous hack system we have in place now.

I would be fine with a 23% consumption tax. It is better than the ridiculous hack system we have in place now.

Don't forget we still have to pay state income tax and state sales tax.

Again, I prefer a drastic cut in government spending. Much of the government can be privatized.

Gold is down. What is happening? (Yeah, I am aware that those IMF clowns are trying to sell gold.)

I will be ok with even 100% consumption tax as long as it is not levied on food.

I have always been very discriminating in what I buy, if I buy something, I have to research it and make sure it is superb quality. Most of the times, I buy nothing at all.

Sick fatass Americans who love to buy cheap crap ought to be subsidizing my lifestyle.

I currently reside in an area with more than a few billionaires about. Mostly old money fortunes, with a few new ones as well. Obviously this money buys the best advisors and they have complex financial structures in place to maximize wealth preservation. The names of these families all on this list would recognize.

Fact is, there are numerous landowners out here with estates into the thousands of acres who pay less tax to the local governments than average middle income wage slaves in the tract developments. I know this for a fact. They do this through special farm use zoning, creative use of easements for "scenic" areas or "unique natural preserves" ect.

Meanwhile, they own the local political establishment through these special interest "groups", which they call innocuous sounding things such as "citizens for the environment" and the "anti sprawl council", and these groups spend vast sums on slates of candidates. These candidates then preserve the local status quo of endeavoring to keep spending low and favored tax structures in place.

None of this is surprising to anyone here, but it is interesting to see it in action up close. I'll reserve opinion and judgment on this state of affairs and let all draw their own conclusions, but clearly the current system has it's problems.

justme Says:
Wall ST is up today, supposedly in part because Warren Buffett is doing some bottom-fishing.

Buffett basically offered a pawn-broker deal to acquire the relatively healthy portion of the insurer's portfolio, while they would be left with the crap. It makes perfect sense - the "good" bonds get assurance from Buffett, the insurers get some capital to help them deal with the toxic waste that they're left with.

Unfortunately, I am guessing they won't accept his offer - and when their ratings are finally downgraded, even the good bonds they insured will suffer. Vive la contagion.

Fact is, there are numerous landowners out here with estates into the thousands of acres who pay less tax to the local governments than average middle income wage slaves in the tract developments.

See, flat tax is the solution.

Any system, if left alone long enough, will start to brew a bunch of established stakeholders, who will do everything possible within their power to keep their stake growing. That is just human nature.

I don't blame those people who did these fancy zoning and interest group lobbying to preserve family wealth, I know I would do exactly the same, if not more, if I were lucky enough to be in their shoes. That is just the competition of genes at its best.

That's why every once in a while we need some systematic reshuffle. Recession, or depression, is the best way to shake up the old rules and create some new one to re-balance everything.

Here's an interesting note from the IRS in the instructions for line 6 of Schedule A for this year:

Include taxes....you paid on real estate you own that was not used for business, but only if the taxes are based on the assessed value of the property. Also, the assessment must be made uniformly on property throughout the community....

Does this imply that California property taxes, completely NOT uniform throughout the community due to Prop 13, are NOT tax deductable?

Not tax advice....tax headache.

Any system, if left alone long enough, will start to brew a bunch of established stakeholders, who will do everything possible within their power to keep their stake growing. That is just human nature.

I don’t blame those people who did these fancy zoning and interest group lobbying to preserve family wealth, I know I would do exactly the same, if not more, if I were lucky enough to be in their shoes. That is just the competition of ge-nes at its best.

That’s why every once in a while we need some sys-tematic reshuffle. Recession, or depression, is the best way to shake up the old establishments to make way for the new.

I think Warren might be playing a very dangerous game this go around. I think it is a clear attempt to corner to the muni insurance markets, which has been a very profitable underwriting business historically. But will it continue to be so?

Its all a risk game, and he will be making a wager on the default rate of muni bonds. Will he have flexibility to rapidly adjust to changes in performance of this debt? I don't know that past performance is any guarantee of future in this area. How optimistic are you about what is coming? I know my small locality is talking about issuing $100M in debt soon, to spend on water projects, some parks, some physical improvements. By my estimation, most not that necessary. Our local "leaders" are saying things such as 'we must move forward' and 'we believe in the future', ignoring the coming storm. And they already are carrying a huge debt load (if I was Warren, I would not want to insure that or it would be very, very expensive). Meanwhile, I see the tax base rapidly disintegrating. And I do mean disintegrating. I would imagine we will start seeing this everywhere. Budget numbers are predicated on continued growth, and they do not map to reality at all.

Probably Warren gets this, he is much smarter than I. But maybe there is some kool aid drinking going on there. Am I too pessimistic, will we see local government debt defaults over relatively near term?

OO - California doesn't have a sales tax on food - Arizona does. Arizona is tax-happy in fact, it's over 10% sales tax where I am. Businesses are leaving because of the high taxes.

ESR,

I don't think businesses are leaving because of tax, businesses are leaving because FBs can't afford to buy anything.

The reason why US has degraded so much in terms of quality of stuff offered on the market is because the sales tax is too low. I still remember that the socks that I bought in early 90s (made in Mexico) could last a few years and the socks I buy now (made in China) could only last a year. Sure, the price of the latter is about half, but if you amortize the cost over days worn, perhaps the former was a better deal. This perhaps applies to all imports.

I think there should be a fixed sales tax on different categories of merchandise. The fixed tax acts like an entry barrier to low-cost crap. If you have to pay 50 cents sales tax on all types of socks, you probably will choose the highest quality ones. If you need to pay $50 sales tax on all LCD monitors, you probably will pick the most durable one.

That's why I am more for a high, fixed sales tax than just land tax.

> As soon as some voters don’t have to pay any tax they don’t have any
> problem voting for higher taxes.

WHO would not have to pay any tax? Everyone living on this land would end up paying the land tax. Tenants would pay it indirectly, through the rent to their landlord, but they would most certainly pay it, no exceptions.

So you can be quite sure that people would be careful about voting unnecessary tax increases.

As for the rate, the most clever idea I've heard is this: pay whatever land tax you want. But every tax payment is also a legally binding offer to sell the land. So if you pay very little, you have valued your land at a low price, and someone else can just buy it from you!

Not sure I really like that, but it does seem fair.

"we must move forward"

Yeah it's the same BS every time major contractor firms smell a recession on the horizon. A nice little public works project to tide them over. All of a sudden Portland is very concerned about the state of our roads and they're talking about issuing over 125 mil. in bonds for the comm. coll. "expansion". What a joke.

I think all roads should be toll roads.

http://www.bloomberg.com/apps/news?pid=20601087&sid=az.e27ptjVuI&refer=home

"Paulson said that he's open to additional measures, while rejecting a Democratic proposal for the government to buy distressed mortgages."

A glimpse of things to come? The dominant political party seeks to socialize property ownership, and it's not even getting any real press.

Toll roads are fine so long as thoroughly and properly regulated. There is an egregious example here where Mobil Exxon developed this huge ex burb community, and through a much lauded private public partnership another group built a major highway from this community into the employment center. Alternatives double commute time. Toll rates have been steadily rising, and the owners lobby owns the system. Despite muted backlash outcries, another rate increase proposal is set to pass. No real public utilities commission looking out for the public interest.

Captive sheeple in their sh*tboxes, currently paying over $150 avg tolls monthly just to commute on this road. Not surprisingly, with the price of gas, the property values in this massive community are set to crash and already have fallen off the cliff. And these are the sh*tboxes supporting local government tax base.