Presentation to the New York
Trilevel Task Force on Jobs:
Land Value Taxes and State Banking

Scott Baker

[Reprinted from GroundSwell, September-October, 2010]

On October 8, 2010, I responded to an invitation to speak to members of the New York Trilevel (city/state/federal) Job Creation Task Force, in Borough President Scott Stringer's office, along with other community organization leaders. Politicians attending included: Borough President Scott Stringer (host); Assembly Member Keith L.T. Wright; NYC Councilmembers Dan Garodnick (who represents my district and with whom I've spoken to before and who might have been responsible for putting me on the mailing list), Robert Jackson, and Margaret Chin; State Senators Malcolm A. Smith (President of the State Senate), Robert Jackson, and Bill Perkins; a representative from U.S. Senator Kirsten Gillibrand's office.

I was fortunate to be allowed to speak first. Typically, during two hour recorded semi-public meetings like this, the main panel members will slip away as the meeting runs into overtime, and this was no exception. I'm glad I had the opportunity to speak first and to the entire panel. The meeting was recorded and should appear here at some point: http://www.nysenate.gov/event/2010/apr/23/new-york-state-tri-level-joint-legislative-task-force-hearing-jobs-21st-century.

While most of the speakers focused on how their particular organization could help provide jobs, or at least income, in novel ways, at Common Ground-NYC, which I was representing as president, we chose to focus on how to restructure the economy so that the natural opportunities that already exist could become available to people. As Georgists and Geoists everywhere know, there are things that need to be done, and people that want to do them. The only thing standing in the way is money. So, I took this invitation as an opportunity to show where the money is and how it could be freed for both private and public sector opportunities. This may sound like an obvious thing to local politicians, but judging by the reception, and the Q&A that followed, it was not.

Land Value Tax was new to most of them, but they were interested and I was asked how this would work. It is not really new to Scott Stringer's office, as he and Josh Vincent worked on a paper a few years back on LVT, available form the Borough President's site here: http://mbpo.org/free_details.asp?id=52.

Without getting into New York City's (let alone the state's) arcane and often conflicting 6-tax class system, I simply made the point that Common Ground-NYC, using NYC Department of Finance figures, had calculated that there is a bit less than half a trillion dollars of Ground Rent in the city alone, to tax, and that a roughly 8%/year tax would enable the city to get rid of nearly all other taxes (there are social reasons for perhaps keeping some "sin" taxes, though this is not Georgist. I never actually used the word Georgist, using Geoist instead).

I left the task force with supporting documents including: Mason Gaffney's "The Hidden Taxable value of Land: Enough and To Spare"; Lindy Davies' "New York City Property Taxes: From the Ridiculous to the Sublime" ; NYC Common Ground's "Tax and the City"; The Map of Land Values from the NY Federal Reserve; Professor Steven Cord's Top 23 LVT studies, and his larger 238-Study Document.

Since I am also an active member of the 177-member online Public Banking Group - open by invitation only - this was in addition, an opportunity to talk about creating a State Bank for New York, as North Dakota has had since 1919, and to leave them with statements from the Bank of North Dakota (BND) and an article showing their current billion dollar surplus and 5% unemployment, numbers that New York can only dream of.

I pointed out to them that there is ample money in the state's Comprehensive Annual Financial Report to set up a reserve - that would never be loaned out - to fund a State Bank (over $110 Billion). Senator Bill Perkins in particular seemed interested in that, and I intend to follow up with him by mail and phone on both the LVT and State Bank ideas. My last point to him was that if the 2008 $155 Billion State Pension fund had been invested in a State Bank, making in-state, non-securitized, on-the-books loans to small businesses and individuals, the fund would not have lost $40 Billion from 2008-2009 - over 4 times what the so-called budget deficit for New York State was that fiscal year. This seemed to both impress and to scare him and the other panel members. I further reminded them that while agency money cannot be spent, it can be invested differently, and in this case, more prudently.

I am now following up with them with written letters and some additional info to further answer their concerns. Hopefully, this is an opportunity to finally move the needle in our direction. Here is the text of my 4-minute speech, which I also left with them.

PRESENTATION TO THE TRILEVEL JOINT LEGISLATIVE TASK FORCE

Greetings, members of the distinguished Trilevel Task Force. As president of the local chapter of the north American Geoist organization, Common Ground-NYC, I would like to speak to you today about the job-stimulating effects of the Land Value Tax (LVT).

The LVT would shift taxes from wages, sales, and capital, onto natural resources (referred to as Land in classical economics). While taxes on wages, sales, and capital (real capital, like factories, buildings and cars etc.) discourage the production of all of these, taxes on Land actually encourage the use of new Land because they force landowners to either develop the land or to sell it to someone who can, in order to pay the LVT. According to Common Ground's research, there are over 22 square miles of vacant land citywide. This land isn't being used for affordable housing or for new businesses that can boost the city's revenues. By simplifying the tax system to the LVT, you also reduce company overhead and remove the incentive for lobbyists to inundate politicians looking for tax breaks and subsidies. More production and less corruption: a winning combination anywhere.

238 peer-reviewed studies show the efficacy of the LVT. They are proof that the LVT always works if proper assessments are made and the LVT is applied uniformly to all land, regardless of what is built upon it. The opportunities for job creation this simple but profound change in the tax code would make are time-tested and dramatic. Many of our existing buildings, like the Empire State Building, were built at a time when we had something much closer to a Land Value Tax than we have today. We can return to that productive time.

I would also like to talk about the possibility of creating a State Bank, like North Dakota has had since 1919. From the Bank of North Dakota's (BND) website: "All state funds and funds of state institutions are deposited with Bank of North Dakota, as required by law." These monies are loaned through a network of community banks in a harmonious relationship that benefits both the banks and the citizens of North Dakota. The BND sailed through the crisis of the last couple of years with a profit, unlike so many other larger banks, which had to be bailed out.

New York State could also establish a bank that would extend loans to small businesses and individuals to create new opportunities and recreate a competitive credit environment. New York has ample "seed" money to fund a State Bank from abundant reserves in State and municipal agencies, variously estimated to total nearly half a trillion dollars. The introduction to the state's Comprehensive Annual Financial Report (CAFR) for 2009 cites a budget deficit of $8 billion. However, in the same report, there are net Fiduciary assets, worth $111 billion (pg. 42). Alarmingly, the loss from equity and bond investments, and management fees, totals $40 Billion, (pg 84), a figure over 4 times greater than our budget gap! For the privilege of mismanaging the people's investments, the state paid a whopping $773 million administration cost - none of which went to our citizens (pg. 43).

This is only the tip of the iceberg. The state has thousands of various government CAFRs with investments like this. What the citizens of New York need is a comprehensive and independent accounting -- and analysis -- of how to maximize these funds for the public benefit.

Some of these monies could be used to invest in state needs, such as infrastructure, while taking only prudent risk. Today, I ask the task force: which types of investments are more risky - the kinds of investments made by investment banks which lost $40 Billion last year, or the kinds of investments made in state and local needs, which are not securitized, nor divvied up and resold to foreign investors, and which instead provide good jobs in the state for those who need them now more than ever? Local is not only better for the state, but better for the bottom line too.

In short, the State is not broke. Even according to current under-assessments from the New York City Department of Finance, and crunched by Common Ground's proprietary Real Estate Database, there are at least half a trillion dollars in city land values alone, ready to be properly taxed, to go with the half trillion in all the State's CAFRs.

With this money and resources, and by untaxing wages, capital, and sales, jobs can be created by the people, for the people, of the State. It's just a matter of determining the best use of all available resources.

I believe in the can-do spirit and ability of the American worker and entrepreneur, but I also believe government has an essential role to play in making conditions favorable for that spirit and ability to assert itself. A Land Value Tax and a State Bank would both go a long way towards creating the environment that would make New York a leader in job creation for the country. It would be consistent with the best of our traditions, including the American tradition of creative problem-solving.