A reader (anonymity requested, and respected) who works close to the ground in the world of high finance, has offered to me the following thoughts. They are so cogently and persuasively rendered, that I requested to circulate his thoughts more widely. In the note, the reader is responding to specific points in last Friday’s column by David Brooks about Phillip Blond. I think he helps us – here at FPR and elsewhere – to articulate a path that takes seriously Blond’s diagnosis but remains wary about his enthusiasm for government’s capacity to effect a cure. I am perhaps more sympathetic than many here at FPR toward the argument that government at various levels must play a role in restoring a sensible subsidiarity in the nation, but I share the wariness of my colleagues that this can be done easily and without great danger of simply accruing more power at the center at the expense of the periphery.

For those who have the chance to listen and eventually see the audio/video of the Blond event at Georgetown, I think this reader anticipates a constructive response to the serious and respectful criticisms of Blond’s position that were articulated during the morning panel by Ross Douthat and Dan McCarthy, of the New York Times and American Conservative, respectively. In the main, their forceful and articulate concerns highlighted the ways that the contemporary American political arrangement tends to co-opt and incorporate what would be dissident efforts to use the engines of government to devolve power. Blond, I think, was especially impressed by McCarthy’s careful review of the various iterations of “Red Toryism” in the American context – citing such authors as Nisbet and Vierek – and showing that mainstream American conservatism is where these arguments have gone to die.

I invite our readers to read and assess the arguments of the discerning reader that I quote, below. And I invite our readers to respond with their own thoughts.

Patrick,

Since we’ve met, I have been struggling with the distinction between Libertarian ideas and Communitarian (or Distributist) ideas. Brooks reflects a view that I have heard from others that seems to put the two worldviews at odds. I certainly agree that their philosophical roots are distinct. However, I think Blond’s analysis has helped put my finger on what’s been troubling me. In a nutshell, we should use libertarian tools to achieve communitarian goals. I think this contrasts with Blond, who seems to want to use statist tools to achieve communitarian goals. I may be wrong, but I think it is much easeir to protect against out-of-control libertarianism than it is to protect against out-of-control central government power.

A large part of the reason I believe this stems from my understanding of how important the federal government has been to the growth of giant corporations. Every time I hear some lament about the “market” fueling corporate power, I see the hand of the government pushing down small business and promoting big business. By what I have read, it has been going on since the early 1900’s and from what I have seen personally, it is central to the “too-big-to-fail” financial system we struggle with today. Perhaps the result would have been worse without the heavy hand of the federal government, but I am doubtful.

I think there is room for a thorough analysis of the forces that impair small business and farming in the US. Blond is right to link the economic and the social. I believe the governmental actions that have destroyed the small, distributed business structure in the country are often considered seperately from the government actions that have eroded the social structure. But I have been frustrated by my inability to find any high quality economic and business analysis that systematically links the ample anecdotal, historical evidence.

[Editor’s Note: Can anyone help point to such analyses?]

Brooks says Blond wants the following (I have enumerated his points):

To create a civil state, Blond would

1. Reduce the power of senior government officials and widen the discretion of front-line civil servants, the people actually working in neighborhoods.
2. He would decentralize power, giving more budget authority to the smallest units of government.
3. He would funnel more services through charities.
4. He would increase investments in infrastructure, so that more places could be vibrant economic hubs.
5. He would rebuild the “village college” so that universities would be more intertwined with the towns around them.

Who is the “He” that would do all of this? I am afraid it is simply the omnipotent, omniscient central government with a new “social engineering” ethic. I think this is a dead end. The government will simply use this as a pretext to expand its role even further. Drawing on Robert Nisbet, the destruction to community is the result of the expansion of the central government at the expense of intermediating institutions. The individual gets a small portion of the “liberated” power, but the central government keeps the rest.

In order to restore these intermediating institutions, three things must be in place. First, they must have a function. Second, they must be free from direct central government control. Third, they must be allowed to create an independent source of funding. Government must give up performing the functions of the intermediating institutions (charity, social service, business, collective bargaining, etc.). Government must curtail its endless desire to regulate the performance/behavior of these institutions (absent of compelling need and then subject to subsidiarity). Government must allow money to be raised/earned and kept, free from excessive taxation directed at the institutions and/or the donors/consumers.

Let me at least try to lay out some of my ideas how I think it would be better to proceed.

Accepting Blond’s goals, but challenging his method, I would offer the following approach for each point above instead:

1. Substantially reduce Federal involvement in social services, leaving this activity to state, local and community efforts. The practice of federal involvement in directing social services through state “block grants” should be ended. Ideally, privatize Social Security and Medicare over time.
2. Substantially cut federal taxes, allowing state and local governments to tax citizens for the social services they want to pay for and thereby give them budgetary control over both revenues and expenses.
3. Do not “funnel” government money to charities, but do allow charitable donations to be fully deducted from taxable income. Allow charities to provide the social services they see fit, in the manner they desired.
4. If infrastructure is narrowly defined, this makes sense. Broadly defined, this is a recipe for government creating a huge bureaucracy that crowds out private initiative.
5. Stop funneling enormous federal money to universities. Let them fund and be funded by their communities – state, local and charitable.

On the economic front, there is a more promising tone, to Blond/Brooks ideas. Brooks summarizes as follows:

Economically, Blond lays out three big areas of reform: remoralize the market, relocalize the economy and recapitalize the poor. This would mean

1. passing zoning legislation to give small shopkeepers a shot against the retail giants,
2. reducing barriers to entry for new businesses,
3. revitalizing local banks,
4. encouraging employee share ownership,
5. setting up local capital funds so community associations could invest in local enterprises,
6. rewarding savings,
7. cutting regulations that socialize risk and privatize profit,
8. and reducing the subsidies that flow from big government and big business.

Again, accepting Blond’s goals but challenging his approach, I would offer the following:

1. As for Zoning, this is currently a local regulation. It would be a mistake to federalize this activity. Why not start by taking away power from the federal government rather than expanding its role in the zoning power? For example, it was the Supreme Court which set in motion the giant discount “box” stores in the 1911 ruling that banned manufacturers setting minimum prices. Without this ruling, it was possible for a manufacturer to design a product distribution strategy that rewarded small distributors (by maintaining minimum prices). There are undoubtedly other areas where federal interference has had a similar impact.
2. What are the barriers to entry for new business in America? Is it the overwhelming burden presented by federal regulations? Is it the tax code, that makes it easier for big corporations to deduct research and investment compared to the hassles faced by small enterprise?
3. Local banks have been squeezed out by the end of interstate banking rules. Why not restore these rules in some fashion? Also, why not make capital charges lower for small banks (not “too big to fail”) and higher for bigger banks. The same for FDIC insurance.
4. Employee share ownership is best encouraged by keeping capital gains taxes low. Even more importantly, ending the death tax on small business owners and farmers will encourage them to pass their business on to their children rather than sell them to conglomerates.
5. Who runs the funds? Who provides the capital? At the state level, these have been mostly failures.
6. Rewarding savings through lower taxes on interest and capital gains for some threshold. At the moment, the threshold is much too small.
7. Socialize risk and privatize profit? The last two years have told the story, and the villain is “too big to fail”. This is not only banks but any of the big businesses tht have been bailed out (auto companies, etc). Big firms need to go bankrupt. Big unions need to see their employees lose their jobs when big firms fail. That restores the balance to encourage both labor and capital to work for small enterprise.
Reduce government subsidy to ALL business. But start with the biggest first. How about corporate farming as well?

I hope this can be a continuation of a conversation about “what is to be done”? I think many of us at FPR are emboldened with a confidence that our analysis of our situation is on the mark. Where we go remains a challenge. Let’s create a brain trust of Other Ways.

38 COMMENTS

  1. Patrick, thanks for sharing this thorough, challenging, constructive response. I feel obliged to poke a few holes in it, however.

    Substantially reduce Federal involvement in social services, leaving this activity to state, local and community efforts.

    The key question here is what consists of a “social service.” Is the author talking solely about welfare payments, such as Food Stamps and TANF? Or would it include job training, unemployment support, anti-discrimination appeals, child protection services, and the like? Much of all of this, which we broadly call “social services,” is already funded significantly (sometimes almost entirely) the state level; to push it even further in a solely state-funded and state-run direction will result in even greater disparities between rich and poor states, and thus will crash directly against the 14th Amendment, and the basic constitutional mandate that all citizens be treated equally. Which really means that the ultimate focus of such reforms perhaps has to be how we define the American nation, and our obligations to each other as American citizens.

    Ideally, privatize Social Security and Medicare over time.

    Wait, how did we go from making SS and Medicare state responsibilities to “privatizing” them? Perhaps the reader and I just use words differently, but I assume “privatize” to mean turning something over to the market and away from government oversight. Until and unless market behavior changes markedly, I would suspect that there would be little likelihood of fully privatized social services being administered in a manner which reflects the kind of social justice concerns which in part animated those programs in the first place.

    Stop funneling enormous federal money to universities. Let them fund and be funded by their communities–state, local and charitable.

    Again, this could crash into the same mandate for the (roughly) equal treatment of American citizens mentioned above. Of more direct concerns to those who value Front Porch principles, however, it seems to me that the even-greater inequalities which a complete scaling back of federal loans and such would result in (with certain wealthy private universities and state colleges in wealthy states being able to offer far more programs and far more scholarship money in comparison to poorer institutions than even is already the case) would probably result in even more mobility and competition, and even more flight by young people to big cities and wealthy states. Looking at the local situation here in Wichita, for example, Wichita State is no big player in the higher education scene, but if there weren’t federal loans and other forms of support which their students and scholars can make use of, it probably wouldn’t exist, at least not as a comprehensive 4-year university, and that would mean–assuming that our meritocratic, winner-take-all, capitalist economy does not change anytime soon–far more young Wichitans leaving behind family and community to get the credentials they need at KU in Lawrence. A Jayhawk like Caleb would appreciate that, perhaps, but the families of Wichita wouldn’t.

    Local banks have been squeezed out by the end of interstate banking rules. Why not restore these rules in some fashion? Also, why not make capital charges lower for small banks (not “too big to fail”) and higher for bigger banks.

    An excellent idea. Though–to use the reader’s own words against him or her–I must ask, “Who is the ‘He’ that would do all of this?” The reader here, whether he or she is comfortable with it or not, is calling for stronger government oversight and regulation–in fact, stronger national government oversight and regulation, as the reader is specifically looking at “interstate” banking rules. Now, the reader does also add that curtailing government regulations should be “subject to subsidiarity.” So perhaps the author can make a principled argument as to why, in the case of financial institutions, national government action is necessary, but why, in the case of social services or university education, national government action is inappropriate. It’s an important argument to have, and the solution is by no means obvious to me? But it seems to me a case for the distinction must be made, if one is to argue successfully that the default approach to securing “communitarian goals” must be “libertarian tools.”

    Reduce government subsidy to ALL business. But start with the biggest first. How about corporate farming as well?

    No disagreement from me on this point, though!

    Sorry to go on at length, but the readers comments seemed to warrant it. Perhaps the reader will respond with a further reply of their own.

  2. This is a very good critique, which requires a very good response, meaning a response from somebody other than me. And certainly a response larger than a combox. But despite that, I will work on a response, and give part of it in this combox.

    The key institution in this is taxation, because power follows funding. As long as the federal gov’t is the major funding source, power will gravitate to the federal level, as indeed it has. After the passage of the 16th amendment, the rest of the Constitution became irrelevant. Until the revenues are primarily local, power cannot devolve. Income taxes are best collected at the federal level. This is because an entity can always record its income in the place with the most favorable tax structure. Even with a federal tax, multinational corporations record much of their income overseas (which is easy to do since the sent the prices on internal trades.) Further, since income taxes are a tax on productivity (rather than wealth) they are the most intrusive and destructive form of taxation.

    By way of self-promotion, my forthcoming book deals precisely with this question, and with the solution. So obviously I think there is a solution.

  3. John:

    The key institution in this is taxation, because power follows funding. As long as the federal gov’t is the major funding source, power will gravitate to the federal level, as indeed it has. After the passage of the 16th amendment, the rest of the Constitution became irrelevant. Until the revenues are primarily local, power cannot devolve. Income taxes are best collected at the federal level. This is because an entity can always record its income in the place with the most favorable tax structure. Even with a federal tax, multinational corporations record much of their income overseas (which is easy to do since the sent the prices on internal trades.) Further, since income taxes are a tax on productivity (rather than wealth) they are the most intrusive and destructive form of taxation.

    It seems to me that Henry George and Hilaire Belloc are key here. I spoke very briefly with both Blond and Andrew Abela, and a locally based differential tax seems to me to be a necessary step. It’s a tax on capital, yes, but one that is essentially optional. The single tax is something, I think, that we can enforce locally, rather than nationally, that taxes the one thing that we don’t create, to wit, land.

    Thoughts?

  4. The single tax is something, I think, that we can enforce locally, rather than nationally, that taxes the one thing that we don’t create, to wit, land.

    I agree that Georgist ideas (to the extent that they complement various different distributist or market socialist notions) are an important component in thinking about any kind of radical Red Tory/Front Porch reform. However, I do not see how a shift to a single land tax, even if achievable, would be necessarily friendlier to attempts to localize most tax revenue than any other currently existing tax scheme. Just become a land tax could be more easily assessed and enforced locally than an income tax doesn’t, it seems to me, amount to an argument for those tax revenues being collected and kept local. So long as the people of the United States, for good or ill, continue to constitute and express themselves nationally, there will be a desire for the land value of the whole United States to be used nationally. Am I missing some step in the argument?

  5. No, Russell, I think that you’ve made a good point, one of which I made no mention, and that had hitherto escaped my frequent cogitations on the matter.

    Getting to localist land-value taxing is important; I haven’t a clue how to overcome the obstruction that you mention. *returns to the drawing board*

  6. The income tax is best collected nationally (internationally, actually) while the land tax is best collected locally. The enforcer of a tax will be the key in the distribution of the tax.

    I still think there is a place for income taxes, highly progressive with no deductions, but the entire revenue should be devoted to income programs: social security, income support, etc.

  7. I share the concern about looking to the state to solve the problems the state has created. Blond calls for state incentives and subsidies to promote small business – this would result in the absurdity of a government providing incentives and subsidies to big business while also providing incentives and subsidies to small business – so in such a situation it is likely the state subsidized big business would still crush the state subsidized small businesses – except now we’d spend more money on the whole cycle. On Rod Dreher’s blog this was discussed and I noted that where distributist principles have been successfully implemented they came from local initiatives – the people who had the problem initiated ways to solve the problem. I do not think you can empower the local with an initiative sponsored by the national. Of course inevitably laws have to be changed but this happens when the locals have achieved more relative power to influence the feds because the did use local initiative to achieve change.

    Russell has addressed other things that seem problematic to me – the considerable disparity of distribution of income among the states. Obviously – sanity requires that we reconsider turning over SS and Medicare to the market as it is now – the re moralization would have to proceed very far before one could entrust SS and Medicare to a market.

    I think too that we should keep in mind that distributist or communitarian efforts are well underway in the US and have long and successful histories in Europe. We need not only rely on the theoretical discussion of Mr. Blond’s ideas but we can look at what is already happening. I note a few – the US Steelworker’s alliance with Mondragon – taking over a closed steel mill to produce wind turbines, the Cleveland Co-op Laundry, the new technical school in Chicago and the bakery co-ops in Michigan. These are all inspired by Mondragon. There are also quite a few approaches towards ownership and management of public housing by residents based on distributist principles that have had impressive results.

    There were a lot of remarks on Dreher’s site about how unlikely it is any such an approach could happen in the US. So the existence of these efforts in the US is important to note – they have in common that they are being started by people who are losing their livelihoods and communities that are being destroyed. Clearly – the desperate circumstances of these people have led them to consider other ways. So implementation of these principles here is not as difficult or impossible as one might conclude.

    I think too we must always keep in mind one of the most important tenets of this approach – the really to my mind radical piece – that accumulation of capital is not an ends – it is a tool to be used to promote human flourishing. Profit is not the primary goal – it is subordinate to human and community well being.

    Finally I would just like to say how encouraging it is to find a place that welcomes this sort of discussion as well as attracting participants who have so many intelligent and practical observations.
    Brain trust indeed.

  8. My compliments to this contributor.

    One bit of general advice–keep room for the operation of democratic insanity. Read and re-read Publius (and Plato!) on this. Humans (besides according to another book always rebelling against the most rightful authority) given liberty will passionately divide against one another for the paltriest of reasons, and they will with periodic but unpredicatble regularity turn against those in authority that speak, whether truly or only seemingly, “brain-ily.” So don’t insist upon an end that requires all or even most of the pieces to come together correctly.

  9. Did Phillip Blond not clarify in his speech that subsidiarity had to be appropriate? Is the potential for factionalism in localism not being ignored by Patrick’s “High Finance Contributor” and others? Local states and councils do compete with others by way of tax breaks and other concessions to attract investment. At nation state level the factionalism continues, for example, with game rigging by countries like China who peg their currency to the American dollar, like the United States that pegs its currency to oil payment, Eire (Southern Ireland) that makes sure that its corporation tax is always substantially below other developed countries and the Cayman Islands which charges no direct taxation on registered companies. All of this is human nature to wish to free-ride on the backs of others and this is why we have government at the “appropriate” level to determine the right and wrong, or morality, of any social conflict that arises. In other words we elect governments to conflict manage. Phillip Blond, however, whilst calling for appropriate subsidarity in government is also simultaneously calling for a massive redistribution of power away from government and the increasingly elite monopolistic market. He sees that conflict issues can be managed in a more spontaneous and harmonious manner through smaller scale non-governmental associations both economic and non-economic. Karl Polanyi, Robert Nisbet and Paul Hirst all recognized this. For example, in Chapter 14, page 163, of his book Polanyi states:-

    “To separate labor from other activities of life and to subject it to the laws of the market was to annihilate all organic forms of existence and to replace them by a different type of organization, an atomistic and individualistic one. Such a scheme of destruction was best served by the application of the principle of freedom of contract. In practice this meant that the non-contractual organizations of kinship, neighborhood, profession, and creed were to be liquidated since they claimed the allegiance of the individual and thus restrained his freedom. To represent this principle as one of non-interference, as economic liberals were wont to do, was merely the expression of an ingrained prejudice in favor of a definite kind of interference, namely, such as would destroy non-contractual relations between individuals and prevent their spontaneous reformation.”

    This is why Phillip Blond was so scornful of Libertarianism in his speech which he perceives as wanting to do away with as much government and non-governmental associational conflict management as possible and make everybody subject to contractual arrangements where of course conflict resolution will be dominated and dictated by the wealthy who have grown to be wealthy precisely because of inadequate conflict of interests restraint by the community.

  10. Biometric Sales Tax.

    Off the top of my head doesn’t the potential exist for greater fairness in taxation and local distribution if you combine a smartcard and a computer? Since means testing exists for government benefits why not make it automatic as a tax break. Abolish all taxes for a single Sales Tax, or Value Added Tax as the Europeans call it. Make it mandatory that you use a Biometric Smartcard for all purchases which links up with your annually monitored bank accounts. Sales Tax is set at a maximum “X” per cent for a target annual consumption and above of a Federally determined amount. Annual consumption which falls into bands below this amount generates a Sales Tax of “X-a” or “X-b” etc. percent. Local redistribution is by Federal government dividing up Sales Tax receipts according to formula for passing on to respective States who then redistribute again by formula to local councils for public goods and services. The Biometric finger recognition on the Smartcard is used to deter fraud. There is little point allowing your low Sales Tax band to be used by wealthier individuals since it bumps your band up. Also automatic monitoring of abnormal large expenditure jumps could trigger an automatic inquiry unless previously registered and legitimized. Here is the Smartcard biometric info:-

    http://www.smartmetric.com/

  11. I don’t think many distributists would object too much to the talk of libertarian means as long as this means relatively low state input, particularly from the central gov’, and not “free market fundamentalism” or anything like that that would scream at even the most measured and decentralised state support for distributism.

  12. Brue the fairest and best tax is the Georgist land value tax by far. It is on the value that society and nature creates, the site and ground rent, and not on anyone’s labour or capital, it raises wages and the returns on capital and it ends land monopolisation and speculation having a distributist effect by lowering the price of land and its rent. Its burden is on the landlord, the one would gain from something he didn’t create while burdening the community otherwise, and cannot be shifted whereas the burden of a sales tax can be shifted by larger companies.

  13. Bruce
    as bit a of a Berry idealist and occasional FPR visitor , (very small retailer in a very small agricultural town) thank you for your succinct definition of hell. I would not only get to act as the governments revenue agent (already the case and not well remunerated) I could also participate in electronic state surveillance of members of the community.
    The upside would be immediate growth in the under the table economy which would certainly be a boost to local economic activity. I’m not sure where you live, but this part of the economy is already vast in rural areas and can only benefit from the proposal.
    I think I hear the snorting of horses from the more libertarian end of the porch as they form a rebuttal posse.
    I can hardly wait.

  14. Duncan. As Leona Helmsley once famously said “Only the Little People pay tax.” Very few people want to admit they are a Little Person. But I don’t much see the point of taxing capital as long as it stays invested which is why I have trouble with a Georgist land tax and inheritance tax. Regular income tax and real estate taxes get evaded by the rich who can afford to pay clever tax consultants to think up evasion schemes.

    So what would you do to bring in revenue for public goods and services? Would you go the Ellen Hodgson Brown route and just have the government take over credit creation from the bankers and just have the public and private sector credit electronically created by strokes on the computer keyboard?

    I do understand the point about the surveillance but maybe it’s less of a stigma than to be seen handing over food stamps. The alternative, of course, is for the customer’s bank to do the reconciliation and reimburse the percentage of sales tax directly into the customer’s account without the retailer/business owner knowing.

    Before computerized tills the usual scam for the retailer was to take money out of the till at the end of the week and not declare it for tax. And no I’m not suggesting you personally do this but I’d be interested to know your views on what scams are operated with sales tax at the moment by business owners and customers outside of the internet purchases.

  15. The Georgist land value tax is the only tax that cannot be evaded, if the landlord puts the price or rent up then he just has more tax collected from him. The LVT is distinct from other real estate taxes being only on the unimproved value of the land.

    There are only two main objections really, one philosophical and the other practical. The philosophical one is it impplies a social element in property and a certain amount of non-absoluteness in ownership. Some Lockeans and similar will use this to make wild claims like it amounting to socialism or state control of land or whatever but that is nonsense, however it does imply that you are not completely sovereign over what you claim as property. Personally, as a traditionalist, I have no problem with this, it is perfectly possible to combine an LVT with a healthy respect for private property and the social element implied is perfectly acceptable to me and indeed necessary to the modest level it features in the LVT.

    The other objection carries more weight imho, but is certainly not fatal. It is simply that the LVT very much incentivises using land to the best use(in money terms.) it is capable of. Now to a degree this is a positive thing but it can also have negative environmental, social and cultural effects; relatively unused land or wilderness could become a drag on its owners’ finances. This is at least partially solvable though using certain restrictions on land use and zoning and national parks and such.

  16. Bruce,
    interestingly enough the distribution you describe is almost precisely how it works in Australia. A broad-based Federally collected consumption tax is by law wholly given over to the States through a combination of formula and unseemly fighting among Premiers, and this then part funds the states and subsequently local government.(This is grossly simplified)
    I’m not opposed to taxes on consumption (and your rebate moderates their regressiveness) but the system you propose (off the top of your head admittedly) runs counter to any notions of the local. It’s dependance on technology, the great web of communications, cost imposition, the surveillance from indifferent and remote places and presumable prosecution of small players by said indifferent/remote places. I would not wish to be party to it.
    One of the ironies of small communities, of the ‘localism’ FPR makes much of is that obligations and loyalties turn inward and governments become distant. If you believe in ‘place’ and ‘limits’ you have to accept limits on the ability of distant governments to create a sense of obligation in regards to taxation/revenue. I would hope that obligation could be forged without recourse to sticking your digit into a state sponsored biometric doodad for every purchase. That would be humiliating.
    We have no computer till and fulfill our obligations through a combination of faithful paper records and honest reporting. As someone once said computers would be an expensive solution to a problem we don’t have.
    The simple answer to dodging sales tax ,and income tax for that matter, is cash. Undeclared cash. Again I would say that this is far easier to do in the very communities that FPR would promote. You know people, you know their colours and there is trust. However wherever this informal economy brushes against the formal economy the government gets their piece.
    Wessexman
    the primary source of revenue for Australian local government is a tax (or rate) on the unimproved value of land determined by a Valuer-General. Local governments are severely restricted in their ability to raise rates however and zoning is crucial. I don’t know how property tax works elsewhere but as a source of increased local independence it’s interesting.

  17. Wessexman. I can remember quite some years ago being interested in Land Tax as a solution but came across an urban geographer’s phrase “the maximum aggregate area of accessibility” which was a fancy name for downtown, or town center, but its point was to clarify why downtowns happened, namely a place where it was possible for the greatest number of people to interact with each other for whatever their purpose which was usually business of private or public nature. This lead me off into the whole notion of how the environment was determined in a sort of organic way where the provision of public and private goods and services had to mesh together and how it did this was also influenced by technology. So, for example, the invention of the automobile eventually allowed a de-densification of environment where appropriate at the price of environmental pollution with the burning of gasoline. What came over loud and clear, however, was how carefully you had to think to avoid distortion and damage to markets, public goods provision and the environment and the land tax greatly worried me as a well meaning but distorting policy particularly with Public Theory, or Agency Theory, involved. These are the reason I prefer consumption taxes as means to minimize distortion. Here is Murray Rothbard on this distorting aspect:-

    http://mises.org/rothbard/georgism.pdf

    Rothbard in essence is trying to warn us of the dangers of allowing economic production into the hands of individuals who have limited incentive to take the business seriously. A less than 100% land tax, therefore, still has the potential to choke off investment because the rate is set too high for the economic climate by a government bureaucrat. It is like a partial nationalization and all the attendant dysfunctional central planning that stems from this. Far better it seems to me to tax after the profit, or rent, has been obtained and for government to “pick everybody’s pockets” at the moment of consumption. Far better too than bureaucratic guess-distortion as to what amount of capital profits or rent will, or should, be reinvested rather than consumed. Of course, from a moral perspective Rothbard’s arguments don’t negate the potential for some form of limited collective ownership of land that avoids indecisiveness in decision making. Indeed it would seem rational to do so as the first sentence of the American Constitution declares the constitution is set up amongst other things to “promote the general welfare.”

  18. Duncan. I appreciate your comments but you have not given much indication of the kind of taxation system you would prefer to promote localism.

  19. I second Carl’s comment regarding being careful not to insist upon ends requiring that one’s plans come together perfectly. I have yet to hear anything from the Red tory front (though i honestly aint looked for it too hard) regarding a push-back against excessive wants and their malignant embrace of fear. Hannah Arendt in the section on “Action” in her thought provoking book “The Human Condition” cited briefly the essential difference between Adam Smith’s definition of proper government and Augustines. Smith, of course, characterized government as the means with which the wealthy protect themselves against the rabble poor. Augustine simply averred that it was the means with which the Good can minimize the impositions of the Bad. The warmly embracing man from Hippo had it exactly right, no Earthly Utopian here. Plan as we might, the bigger the plan, the greater opportunity for the Bad to screw the pooch.

    Though they might have the best intentions of verifying the dog license and leave a citation behind.

  20. I’m surprised that question 2. “What are the barriers to entry for new business in America?” The choices are “Is it the overwhelming burden presented by federal regulations? Is it the tax code, that makes it easier for big corporations to deduct research and investment compared to the hassles faced by small enterprise?”
    Where is the choice for the fact that economies of scale make big business automatically able to offer lower prices than small? There’s no way I could start up an electronics store while Best Buy exists. I suggest repealing state sales taxes and replacing them with a parking tax (since box stores can only exist by being hooked up to massive parking lots), and an internet sales tax.

  21. @Bruce, Rothbard’s objections are not difficult to answer. For the most part he is demonstrably wrong. For example, site rents would not go to zero; site rents going the landlord would go to zero. The critique of Georgism is just the opposite, that it does not eliminate economic rent, but instead seizes it for the gov’t in place of taxes.

    The practical effect is that no one could own any more land then they could put to use (unless they just liked collecting land, in the way that some collect art.) This would make land available to actual users. Land would be profitable only in use; there could be no unearned increment.

    A consumption tax is no different from an income tax for those who must convert all of their income to purchase. And it is regressive, since those who can save can avoid the tax, and those with the greatest ability to save are those with the highest incomes.

  22. Well John has pretty much refuted Rothbard(some might say that’s not too hard:;) ) but I’ll offer my opinion as well. Rothbard’s argument is based on free market fundamentalism that takes men as self-sufficient atoms and the market as something anterior to society. Hence it takes any disortion of the fictional and rather meaningless “free market” as fatal.

    We are not really talking about business incentives, the local community only collects the LVT which should really be all the site and ground rent(perhaps minus deductions or exemptions for average residential properties and a few other types of buildings or something like that.). On top of this the LVT is already collected, it just goes to private landlords. I see no reason to think that is economically superior to it being collected, given the effects mentioned in my previous posts that flow from an LVT, or how it is more “natural” in a real sense other than Rothbard and free market fundamentalists deciding the “free market” can be removed from its social setting and claimed to be “natural”. Rothbard’s simply decided private landlords have the right to this ground and site rent and therefore it is distorting to collect it.

    In fact the main, real flaw in the LVT is it would make land use too efficient economically; and we all know that sometimes land should not be used to its economically most efficient potential(though of course Rothbard wouldn’t of which shows the simplistic nature of his economics.), particularly as Porchers.

    One of the most interesting writers on technology is Lewis Mumford, I very much suggest checking out his work, particularly his Technics and civilisation.

  23. I agree that charitable contributions should be 100% deductible from taxation. This would be a huge step toward remoralizing the market, relocalizing the economy, and recapitalizing the poor. Charity is best accomplished locally and relationally. Centralized wealth redistribution is tearing apart the community fabric.

    Medaille, I agree that a consumption tax is regressive, which is regrettable. But the flip side is that it also rewards savings and encourages individuals to earn more. So the question is do the benefits outweigh the negatives?

    Also, I echo Cecelia’s appreciation for the great discussion and this forum. Thanks discerning reader for taking the time to share your thoughts. I had been mulling Brooks’s article for the last few days.

  24. Bruce
    being an amateur tax collector rather than a student of the subject I would be not be so bold as to suggest any encompassing scheme. If the ends are localism/communitarianism though, I suspect the means cannot involve centralised electronic state surveillance.
    Forget the perfectability of any proposals too as per Carl Scott and DW Sabin above. It’s going to be messy, I just hope for a more locally obligated mess. In ground up localism there is always going to be cracks government can’t stick its hands into. Let it slide and work on building local communities of obligation that include government.

  25. Vance, I’m not sure how it “rewards savings” by dipping into the savings of working people, nor do I see why taxing the working man encourages him to earn more. And anyway, why should the gov’t “reward savings.” Aren’t savings, like virtue, their own reward? That and the interest, of course. I don’t see the benefits to the economy, although there will be lots of benefits to the rich.

    I am reminded of James Galbraith’s comment that neo-classical economics can be summed up in the statement, “The poor don’t work hard enough because they are paid too much, and the rich don’t work hard enough because they are paid too little.”

  26. John and Wessexman. I’ll have to disagree with you on the merits of the Land Tax since government in my experience never seems to do too well relating taxation to fluctuations in income. For example, a person’s income may drop considerably as well as the the value of their house but real estate taxes never seem to reflect this adjustment. I know why they use the real estate tax its because you can’t hide unlike income tax. Land tax I fear would be used in the same way as real estate tax distorting the state of the market.

    My object in trying to suggest that consumption tax could be made better use of relates in part to the obvious fact that a healthy economy requires demand (primarily wage demand) and velocity. Being able to monitor consumption through a consumption tax and automatically adjust that tax according to demand levels either through negative rates for individuals in low income bands or credit contribution directly into bank accounts seemed to offer a more cybernetic approach to maintaining a healthy economy. Of course, the top rates would rise to pay for the subsidies. I think, however, the point that Duncan makes is an anticipated one and revolves around data privacy and protection and realistically rules my idea out leaving only extension of ownership of income producing assets as a feasible way to maintain demand by a more direct linkage to profits.

    One issue that hasn’t been mentioned is government taking over the power of credit creation from the privately run Federal Reserve which helped cause the Financial Crash by allowing massive credit creation for reckless gambling purposes. It is after all a waste of time tinkering with your tax system if you are going to all your economy to crash on a regular basis because you fail to control reckless gambling. Clearly one thing a government could do if it took over credit creation is to automatically provide income supplements to people on low incomes based on the annual productivity levels within the society as a whole to deter such supplements being inflationary. Indeed whole incomes to individuals who act as primary care-givers to others could provide automatically adjusting income on this basis. All of which helps to automatically adjust and maintain demand. What say you to the whole notion of credit creation being taken over by government?

  27. Bruce rhe LVT has little to with income, except for ground rent or that from selling the land, or houses. It is simply a collection of the ground and site rent, which is relatively easy and has been done. I’m sorry but there is just no comparison between an LVT and any consumption tax, the LVT even has less interference with the workings of the economy except for making land use more economic and increasing the income of wage earners and capitalists.

  28. Thanks John, That answers my question about where you stand on the consumption tax. Yes, saving is a virtue with its own reward. And yes, we should promote tax and regulatory policies that encourage saving. Are we not discussing the unintended, negative consequences of tax and regulatory policy on civic and moral virtues, like saving and charity? Surely you agree that government should not recklessly promote institutional and individual debt. Despite it being a vice with it’s own consequences.

  29. VAnce, I agree they shouldn’t punish savings. I don’t think debt is a vice, unless it’s for vicious purposes, like pure speculation. Or frivolous ones, like pure consumption. But debt is necessary to production, since there is always a time between the planting and the harvest, between opening up a product line and selling the product, and this time interval must be financed.

  30. Wessexman. Whilst I can appreciate the arguments for the LVT I still find myself instinctively against government, or local state, involvement in this form of taxation because I believe that involvement is an impediment to market process. However, I think there is a danger your concept of the implementation of the LVT might be conceptually different than mine. So to clarify I understand the taxation process is that the local state has the final responsibility for determining the valuation of the land and then has the final responsibility for applying an annual interest rate formula to the value of the land which together determines the final LVT amount. Please correct me if I’m wrong.

    If it is assumed that a healthy economy primarily depends upon adequate demand from wages plus the velocity of circulation of that wage money then any taxation process for public goods and services has to be judged from the perspective of its impact on that demand. The notion of monitoring consumption tax for the purposes of income subsidy through a variable rate positive and possibly negative is rejected on the grounds of privacy invasion and data protection. This outside of the LVT tax leaves government handouts either as direct handouts, or negative income tax, as a means to maintain demand. Given that the tax base of income tax tends to fall many only the wage earners because the rich are more successful at evading income tax it can be argued that income tax is a regressive tax. The only plausible antidote to this is for ownership of income producing assets to become more widespread and anti-tax evasion techniques tightened. The other way which neither you, or John Médaille, have responded to me on is whether you regard government direct credit creation as a viable means to provide handouts, or social credit. This, of course, still requires a mechanism of income tax, consumption tax or credit creation reduction to damp down inflation.

  31. The local state determines the estimated unimproved value of a piece of land is the basis of the LVT. It can be applied in many ways including levies annually based on this value or simply collecting the ground and site rent whenever rent comes in or a sale occurs.

    I’m unsure what you mean by “market process”, it sounds dangerously close to dubious Austrian or neoclassical attempts to separate the economy and society. Markets do not exist outside of society and the LVT being a locally collected, relatively hands off measure which seems to have many bonuses and few minuses makes it hard to take such a criticism seriously; it seems rather like Rothbard’s rather random idea of rigid, simple natural property rights which must always be absolutely adhered to. Of course I do believe that there needs to be a rough equilibrium and great distortions are to avoided but it is this absoluteness and simpleness, which Rothbard best examples but which most of the neoclassicals and Austrians accept as well, that I disagree with. I’m small gov’t, I’m not free market(whatever that really means.), I think there is a sphere, of relatively little distortion but not none, within which an economy will be mostly balanced not a rigid completely “free” forumla.

    I’m unsure what your last paragraph is suggesting. The only change in effective demand that comes from the LVT is that wages and returns on capital will go up while there will be few gaining from the unimproved value of land. No doubt this will change production and consumption patterns greatly but I do see it will cause a problem with effective demand (which in fact the problem at the heart of corporate-capitalism and which makes it very much reliant on ever more state intervention to prevent collapse.)or in fact change it(ignoring other changes to current imbalances in corporate-capitalism.).

  32. Bruce, The notion of the LVT is based on the belief that ground rent can neither be avoided nor changed, and that it constitutes an unearned increment. Since the rent will always be collected, and since it is always at the maximum, site rent taxes cannot be passed on to the consumer. Hence, site rent, unlike other taxes, have no impact on prices. Further, since site rent is a result of community action, and not the result of anything that the landlord does, it is an unearned increment that rightly belongs to the community; it is the community’s “natural” revenue. Hence, it is also the limit on the community’s claim to revenue. Labor and capital are not taxed at all, only ground rent. My views on this are at http://distributism.blogspot.com/2008/07/chapter-xi-fictitious-commodities-land.html

    I certainly agree that the community–not the banks–should create money. I have a chapter on that as well.

  33. Wessexman and John. Thanks for your comments. They are appreciated. I need to respond, however, since my position remains the same but I believe I need to restate my position differently. I don’t have a difference with both of you on two things. Firstly, there has to be a means for society to find the money to pay for public goods and services and currently in the United States this is achieved through taxation (I’m ignoring origination Federal Reserve credit creation arguments). Commercial property developers should be no exception with regard to liability for taxing than other types of business. Secondly, I have no difficulty in accepting the argument that the owner of land, or landlord, gets to free-ride, or receives windfalls, in terms of increases in the value of the land they own through the activities of society much like Walmart with the public highway system. I think of them as Free-riding Externalities. However, the difference I have with you both is not taxing the productivity of society but the wisdom of collecting tax off the commercial property developer by the method of the LVT tax.

    It seems to me better to try to take some of the emotiveness out of the argument by imagining that now the Spanish Mondragon Corporation has decided to help set up co-operatives in the United States it has decided to set up a Commercial Real Estate Property Development business specializing in mixed use developments of housing, retail, offices and cottage industry units. A very European approach, but they think this will give them an edge particularly because its more ecologically sensible. They especially want to focus on reviving “doughnut-ed” traditional downtown areas, or city centers. This they realize will require patient time consuming assembly of sites over several years in a piecemeal fashion as well as permitting existing businesses they buy to continue paying them rents during this assembly period which are sub-optimal in terms of their location potential. They are also willing as a business to do either, or both, of two things for the good of the general community and the future community they wish to develop. Provide an equity stake to the local council in the proposed mixed use development and/or donate land for public amenity.

    For the Real Estate Co-operative to be commercially successful they face several potential obstacles. Firstly, the co-operative receives its financing from the Mondragon Co-operative bank based in Spain and one of the rules of its operation is that the bank will not allow a co-operative venture it loans money to a period in excess of seven years without making a profit. Co-operative ventures which fail in this are to be liquidated by the bank. Secondly, despite the Mondragon Bank rolling-over interest and capital repayments for the American Real Estate Co-operative to assemble its sites the local council is strapped for cash because of declining downtown real estate taxes and decides it wants to start taxing privately owned land that doesn’t generate a revenue stream from the business activity on it. Previously, it had a policy of not taxing non-revenue producing sites in order to encourage revenue producing development. This was a reason for the Real Estate Co-operative to choose this particular downtown area for investment. In addition when the Co-operative enquires how the expanded real estate tax is to be calculated they are told that the local council’s valuation officers will decide this. Against this background the national economy also appears to be slowing a little because of the failure of the politicians and the Federal Reserve to take corrective action early enough. The Real Estate Co-operative discusses their business model with the Mondragon Bank and it’s decided it’s in the best interests of the Mondragon Corporation as a whole to pull the plug because the financial viability of the real estate development is more risky than other investments that require less front-loaded financing to third parties. The news is relayed to the local council who then change their mind about taxing non-revenue producing sites.

    Looked at under a microscope it can be seen that both the local council and the Real Estate Co-operative are inextricably linked together in establishing the viability of the proposed downtown revitalization property development and the timing of the taxation of the revenue producing stream is crucial. My objection to the LVT is, therefore, why bother with it when you can rely on established income stream taxation such as corporation and personal income tax that doesn’t have such property development viability threatening implications and the corporation and personal income tax have a much more direct relationship to the viability of the economy as a whole. But, of course, it’s not just a matter of timing when you choose to tax an income producing stream, or have it relate as directly as possible to the state of the local and national economy, it’s also a case of carefully choosing taxation systems that don’t encourage investment discrimination against particular systems, especially on risk lines. Having a single, or few systems, that minimize bias (investment neutral) is crucial to the even-handed development of an economy unless the citizens democratically decide to deliberately target particular forms of investment and then they would be wise to do their best to determine any possible side effects in advance. To summarize I’m arguing that as far as possible the design of taxation systems should be concerned with timing, bias and maintenance of a cybernetic relationship to the market state and hence its ability to pay.

  34. Sorry Bruce again that is a very inaccurate way too look at it. Sure it will stop speculation and monopolisation but it will raise wages and capital and reduce rent and land prices. So what is lost in land speculators will be gained in small businesses and families investing in land. The idea that we should not collect an LVT because some who gain by land speuclation and unearned ground rent will not want to invest is no argument against the LVT, it is the basis for starting it up; it is a positive thing! It means the price of land goes down, it means increased productivity is not tending to be asorbed by landlords and therefore wages and returns on capital go up so we get a more distributive state replacing the old rentiers.

    The bonus of the LVT is it is a relatively indirect and hands-off approach even though a large initial change will result. We don’t use the interventionist income tax which causes great distortions and great state power but a simple, even and locally based approach.

    You also seem to object to much of a change in our current economy whereas we distributists are not put off by that; we want a lot of change, we want large corporations and rentiers to be unviable as they are without the state and without private collection of ground rent.

    Really your arguments are pluses for the LVT from a distributist or economically decentralist position. It does seem though that in the end you don’t want much economic change, you are happy with corporate-capitalism. Is that a correct view?

  35. Bruce, the reason it takes time to assemble the unused parcels is that the parcels are not taxed at their full value. If they were, assembling such a tract would be much easier. The LVT makes it unprofitable to hold land for speculation; only actual use can earn a profit. The Mondragon development would be far easier with an LVT than without it.

  36. I do support distributism. However, permit me to ask if one of the purposes of the LVT is to drive down the price of land to bring more of it into productive use would the implementation of the tax allow for compensation of the losses of all those who have already invested in land or issued loans for the purchase of land, pension and mutual funds, banks and foreign investors, etc.? If so where would the compensation money come from and would the tax payer support this bail out?

  37. That would depend on what the implementors want, I don’t really think I would want that. Most distributists would remove most corporate welfare and role back the state which is, as Kevin Carson ably shows, the only reason big business can make a profit, so this would be the least of their problems. I’d even remove corporate personhood and privileges.

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