Thursday, Sep 16, 2010
The Mail is silent about this method of running up public debt
Counterpunch: Obama's Thatcherite gift to the banks
Transport projects can pay for themselves by a windfall-gains tax enabling governments to recapture the higher rent-of-location and site value along the right-of-way. Instead transportation projects make land speculators, the construction industry and their bankers very rich at public expense. The Jubilee Line extension to the financial district cost £3.5 billion but increased property values by around £13 billion along the route. It could have been financed by bonds secured by a windfall tax on site-value gains, thus boosting the economy by making it cheaper for people to get to work and back and giving them more to spend, but it didn't. US transport schemes similarly gouge rent from the real economy, transfer it to Wall St./property speculators and run up public debt to the banks.
5 Comments
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1. Crunchy said...
What do one expect from a criminal government.
Welcome to a third constitutional party that knows their place. The people are voting with their feet now.
Bye, bye to the likes of Karl Rove.
"We are mad as hell and were not going to take it anymore" - no matter how many Mexicans gangs you try to bribe.
2. ontheotherhand said...
I like this idea a lot. For homeowners you could give a choice. Either pay 20% of the unearned excess capital gain instantly after the announcement of the new infrastructure, or pay 40% at the time that you sell in the next 30 years (again, on the amount above and beyond the general rise in the market). So if your house goes up from 250k to 300k instantly, you can pay 10K that year, or you can wait until you sell it. Let's say you sell it in 10 years for 500K and the general market rise can only explain 425K, you pay 40% of 75K = 30K.
I do think using Canary Wharf as an example exposes difficulties. Hesseltine was panned at the time for an over budget Jubilee line that led to nowhere (this is why politicians don't take on 'we pay now, future politician benefits' type projects\). The developer of Canary Wharf went bankrupt. I doubt whether in an environment like this a private company could issue bonds based on the windfall tax gains when everyone thought the project was a mistake.
3. icarus said...
I think the idea is for the governmental authority to issue the bonds secured by future windfall taxation.
4. mark wadsworth said...
OTOH, don't forget that Reichman originally offered Hezza that they would pay for (a slimmed down) Jubilee Line/DLR system, out of their own pockets. They reckoned it would pay for itself (which ultimately it would have done).
Land Value Tax will sort all this out, of course.
5. drewster said...
Yep, another case for LVT. Digging the tube tunnels is only part of the job though - there's all the cost of running and maintaining them too. You might think otherwise considering how high our public transport fares are (especially compared with the rest of Europe), but the Tube can't even cover its running costs from the farebox.
Windfall taxes are an appealing concept to many because they don't disrupt the existing land ownership system; but Land Value Tax is a better long-term solution.