Welcome login | signup
Language en es fr
OccupyForum

Forum Post: (Jan. 4, 2013) Corporate Government - Michael Hudson on Taxes (Fees) on the 1%

Posted 2 years ago on Sept. 21, 2012, 9:49 p.m. EST by lkindr (58)
This content is user submitted and not an official statement

(Update 1/17/13) (I'm glad to see some folks here read Michael Hudson. His recent article below explains that economies do best when governments charge the 1% {i.e. the upper class} fees, commonly called taxes [wrongly in my opinion] for privileges of using land, natural resources, and powers that properly belong to everyone. Economies do worse when governments extract taxes [properly called theft in my opinion] from labor, productive capitalism and consumers. Libertarians agree that such taxes are theft.)

Michael Hudson: America’s Deceptive 2012 Fiscal Cliff, Part IV -- Why Financial and Tax Reform Should Go Together http://www.nakedcapitalism.com/2013/01/michael-hudson-americas-deceptive-2012-fiscal-cliff-part-iv-why-financial-and-tax-reform-should-go-together.html - By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. - Friday, January 4, 2013 - His latest book is “The Bubble and Beyond.”

  • Taxes pay for the cost of government by withdrawing income from the parties being taxed.
  • From Adam Smith through John Stuart Mill to the Progressive Era, general agreement emerged that the most appropriate taxes should not fall on labor, capital or on sales of basic consumer needs.
  • Such taxes raise the break-even cost of employing labor.
  • In today’s world, FICA wage withholding for Social Security raises the price that employers must pay their work force to maintain living standards and buy the products they produce.
  • However, these economists singled out one kind of tax that does not increase prices: taxes on the land’s rental value, natural resource rents and monopoly rents.
  • [- Actually, that‘s not a tax, imo; it‘s a government fee, just like postal fees, toll road fees, incorporation fees, court fees etc.]
  • [- No taxes are justified, because tax is theft; fees are voluntary equal exchanges.]
  • [- All land, natural resources and governing power belong to all of the people.]
  • [- The people have the right to decide via their true representatives who may use natural resources and power and what fees they should pay for them.]
  • [- When any individual or group uses such resources or power, the people deserve to be compensated] ...
  • Land is the economy’s largest asset.
  • A site’s rental value is set by market conditions – what people pay for being able to live in a good location.
  • People pay more to live in prestigious and convenient neighborhoods.
  • They pay more if there is local investment in roads and public transportation, and if there are parks, museums and cultural centers nearby, or nice shopping districts.
  • People also pay more as the economy grows more prosperous, because one of the first things they desire is status, and in today’s world this is defined largely by where one lives.
  • Landlords do not create this site value.
  • But speculators may seek to ride the wave by buying property on credit, where the rate of land-price gain exceeds the interest rate.
  • This “capital” gain is the proverbial free lunch.
  • It is created by public investment, by the general level of prosperity, and by the terms on which banks extend credit.
  • In a nutshell, a property is worth whatever a bank will lend, because that is the price that new buyers will be able to pay for it.
  • This logic was more familiar to the public a century ago than it is today.
  • A property tax [fee] to collect this “free lunch” rent is paid out of the rent [to the government].
  • This leaves less to be capitalized [i.e. used by resource exploiters to put] into new interest-bearing loans – while freeing the government from having to tax labor and industrial capital.
  • So this tax [fee] not only is “less bad” than others; it is actively desirable to reduce the [government‘s] debt overhead [overhead means ongoing costs of operation].
  • Rent levels [paid by consumers?] are not affected, but the government collects the rent instead of the property owner or, at one remove, the mortgage banker who [otherwise?] turns this rent into a flow of interest by advancing the purchase price of rent-yielding properties to new buyers.
  • Real estate was the major source of rising net worth and wealth for America’s middle class for over sixty years, from the return to peace in 1945 until the 2008 financial collapse.
  • Rising property prices were fueled largely by banks providing mortgage credit on easier terms.
  • But by 2008 these terms had reached their limit.
  • Interest rates were seemingly as low as they could go.
  • So were down payments (zero down payment) and amortization rates (zero, with interest-only loans) and property values were becoming fictitious as a result of a tidal wave of fraud by the banking system’s property appraisers, while the income statements of borrowers also [were] becoming fictitious (“liars’ loans,” with the main liars being the mortgage writers).
  • If the rise in real estate prices (mainly site values) had been taxed [i.e. charged reasonable fees], there would have been no financial overgrowth, because this price-gain would have been collected as the tax base [government revenues or assets].
  • The government would not have needed to tax labor either via income tax, FICA wage withholding or consumer sales.
  • And taken in conjunction with the government’s money-creating power, there would have been little need for public debt to grow.
  • Taxing [charging fees for] rent extraction [selling raw material resources] privileges thus would minimize [end] debt levels and taxes on the 99%.
  • The next leading form of economic rent is taken by oil, gas and mining companies from the mineral deposits created by nature, as well as by owners or leasers of forests and other natural resources [which in] Classical economics [was called] “economic rent.”
  • It is not profit on capital investment, because nature has provided the resource, not human labor or expenditure [of] capital – except for tangible capital investment in the buildings erected on the land, saws to cut down trees, earth-moving equipment to do the mining, and so forth.
  • The basic contrast is between a productive industrial economy and a rent-extracting one in which special privileges, monopoly pricing and economic rents divert spending away from tangible capital investment and real output [production].
  • Classical economists defined economic rent generically as “empty” pricing in excess of technologically necessary costs of production.
  • This would include payments to pharmaceutical companies, health management organizations (HMOs) and monopolies [but excluding their] cost of doing business.
  • Much like paying debt service, such economic rent siphons market revenue away from tangible production and consumption.
  • It was to demonstrate this that Francois Quesnay developed the first national income statistics, the Tableau Économique.
  • His aim was to show that the landed aristocracy’s rental rake-offs should form the basis for taxation rather than the excise taxes that were burdening industry and making it uncompetitive.
  • But for the past hundred years, commercial banks have opposed property taxes, because taxing the land’s rent would mean less left over to pay interest [to the banks].
  • Some 80 percent of bank loans are for real estate, mainly to capitalize [profit from] the rental value left untaxed.
  • A property and wealth tax [make that "fee", not "tax"] would reduce this market – along with the government’s need to borrow, and hence to pay interest to bondholders.
  • And without a fiscal squeeze there would have been less of an opportunity for the financial sector to push to privatize [give special interests ownership of] what remains of the public domain.
  • Today’s central financial problem is that the banking system lends mainly for rent extraction opportunities rather than for tangible capital investment and economic growth to raise living standards.
  • To maximize rent, it has lobbied to untax [i.e. give away to them] land and natural resources.
  • At issue in today’s tax and financial crisis is thus whether the world is going to have an economy based on progressive industrial democracy or a financialized and polarizing rent-extracting society.

3 Comments

3 Comments


Read the Rules
[-] 1 points by lkindr (58) 1 year ago

The above is a new update. The former post is now at http://bettergov.lefora.com/2012/10/10/1-4/

[-] 1 points by UntilUKnow (35) 2 years ago

Saw the vid. I agree. If you take a look at my post "These are the Faces of the One Percent", you'll see just who the people are behind these corps.

[-] 1 points by Nevada1 (4727) 2 years ago

Good post Ikindr. Can't load video (on old rural phone line), but likely know what it says.