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Sales-tax bias against turnover and jobs

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Appendix I: How Gigantism in Banking Reinforces the Bias Against Turnover
The following is an excerpt from Stacy Mitchell, "How State Banks Bring the Money Home", Nation of Change.org, Sept 15 2011

One of the most significant, but least noticed, consequences of the rapid and dramatic consolidation of the banking industry over the last decade is how much it has hindered the U.S. economy's ability to create jobs.
To begin to understand this, take a look at each end of the banking spectrum. On one end are the nation's 6,900 small, locally owned, community banks. These institutions control $1.4 trillion in assets. That's 11 percent of all bank assets. They currently have $257 billion in loans to small businesses and farms on their books.
On the other end, four giant banks--JP Morgan Chase, Bank of America, Citibank, and Wells Fargo--now command $5.4 trillion in assets, or 40 percent of the total. Given that they are nearly four times as large as all local banks combined, one might expect that they would have made four times the small-business loans, or about $1 trillion. In fact, these banks have a mere $85 billion in small-business and farm loans on their balance sheets.
Why do giant banks make so few small-business loans? Automation is the short answer. The only way these sprawling institutions can function efficiently is by taking a mass production approach to lending: Plug credit score, income, and appraisal into the computer--out comes the loan. That's why the mortgage business was supposed to be so safe. The economic meltdown of 2007 shows that it's actually very risky.
Small-business loans are not so easily mechanized. Each is a custom job, requiring human judgment to evaluate the risk associated with a particular entrepreneur, a particular business plan, and a particular market. Community banks excel at this. Their lending decisions are made locally, informed by face-to-face relationships with borrowers and an intimate understanding of their hometown economies. Big banks, whose decision-making is long-distance and dictated more by computer models than judgment, are pretty bad at it. So they don't make many small-business loans.
It's no wonder, then, that unemployment has been so persistent. Our financial system is top-heavy with big banks that are scaled to meet the needs of large multinational corporations. The Commerce Department estimates that U.S.-based multinationals have eliminated 3 million American jobs over the last decade. Meanwhile, small businesses, historically responsible for about two-thirds of new jobs, have found it harder and harder to obtain credit.
In short, we have a financial system that is mismatched to the economic needs of American communities. This mismatch will become more acute as we attempt to transition to a carbon-efficient economy, which, by its very nature, will be the domain of small-scale enterprises: local food producers, community-owned wind and solar electricity, neighborhood stores that provide goods within walking distance of homes, and so on. To take root, these businesses will need a robust array of community-based financial institutions capable of meeting their capital and credit needs.

1 While they are at it, Buchanan and Flowers want to tax people for "consuming leisure", a euphemism that includes being involuntarily unemployed. The idea goes back to Chicago's Henry Simons (1938). Buchanan and Flowers do not call this a poll tax, for they disapprove of "emotive terms". Yet they do not suggest taxing idle or underused land or capital for taking leisure, suggesting a bias against labor.

BIBLIOGRAPHY to Mason Gaffney, Sales-tax Bias against Turnover and Jobs
Note: Relevant works by Mason Gaffney are listed separately, below this bibliography.
Anderson, John E., 2003. Public Finance. Boston: Houghton Mifflin Co.
Brown, Harry G., 1939, "The Incidence of a General Output or a General Sales Tax". JPE 47(2):254-62
Buchanan, James, and Marilyn R. Flowers, 1975, The Public Finances, 4th Ed., Homewood, IL, Richard D. Irwin Inc.
Dorfman, Robert, 1959, "Waiting and the Period of Production". QJE 73:3):351-72
Due, John F. 1963. Government Finance. 3rd Ed. Homewood, IL: Richard D. Irwin Inc.
Gaffney, Mason, 2009, "The Hidden Taxable Capacity of Land", The International Journal of Social Economcs 36(4):328-411
Groves, Harold, (revised ed.) 1946. Financing Government. New York: Henry Holt and Company
Gruber, Jonathan, 2007, Public Finance and Public Policy, New York: Worth Publishers, 2nd Ed.
Hendershott, Patric H., James R. Follain, and David C. Ling, Real Estate and the Tax Reform Act of 1986 (December 1986). NBER Working Paper Series, Vol. 2098. Available at SSRN: http://ssrn.com/abstract=227265).
Herber, Bernard, 1983. Modern Public Finance, 5th Ed. Homewood, IL: Richard D. Irwin, Inc.
Hudson, Michael, and Kris Feder, 1997-a, Real Estate and the Capital Gains Debate, Annandale-on-Hudson, Jerome Levy Institute, Working Paper #187
Hudson, Michael, and Kris Feder, 1997-b, What's Missing from the Capital Gains Debate. Annandale-on-Hudson, Jerome Levy Institute, Public Policy Brief #32, p.20
Hudson, Michael, and Kris Feder, 1997-c. "The Capital Gains Controversy". A module from the above.
Hyman, David N., 1990. Public Finance, 3rd Ed. Chicago: The Dryden Press
Hyman, David N., 2005. Public Finance, 8th Ed. Mason, Ohio: Thomson
Kay, John, 1987, "Indirect Taxes", The New Palgrave London: Macmillan and Co. Ltd., II: 787-88
McCulloch, John Ramsay, 1821. The Opinions of Messrs. Say, Sismondi and Malthus, on Effects of Machinery and Accumulation", 1821, Edinburgh Review
McLure, Charles E., Jr., 2005. Testimony, Advisory Committee on Federal Tax Reform, Washington, D.C., May 11
Mill, John Stuart, 1848. Principles of Political Economy. Book V, Chapter IV, "Of taxes on commodities". People's Edition. Boston: Lee and Shepard
Mitchell, Stacy, 2011, "How State Banks Bring the Money Home", Nationofchange.org Sept 15 2011
Musgrave, Richard, 1953. "On Incidence". JPE 61 (August)
Musgrave, Richard, 1959, The Theory of Public Finance. NY: McGraw-Hill
National Industrial Conference Board, 1929, General Sales or Turnover Taxation, New York
Peirce, William, 2011. Letter to the writer, Sept. 19, on Ohio's turnover tax
Pigou, Arthur C., orig. 1928, A Study in Public Finance. 3rd (revised) Ed., 1947, rpt. 1949. London: Macmillan & Co. Ltd.
Rolph, Earl, 1952, "A Proposed Revision of Excise Tax Theory" JPE 60 (April):102-17
Rolph, Earl, 1956. The Theory of Fiscal Economics. Berkeley: U.C. Press, Chap. 6
Rolph, Earl, and George Break, 1949, "The Welfare Aspects of Excise Taxes", JPE 47(1). Rpt. In Musgrave, Richard, and Carl Shoup, acting as a Committee of The AEA, 1959 (Homewood, IL: Richard D. Irwin Inc.), Readings in the Economics of Taxation, pp. 110-22
Ryan, Christopher K., 2002. Harry Gunnison Brown. Malden, MA: Blackwell Publishing
Shoup, Carl, 1948, "Incidence of the Corporation Income Tax: Capital Structure and Turnover Rates", NTJ. Rpt. In Musgrave, Richard, and Carl Shoup, acting as a Committee of The AEA, 1959 (Homewood, IL: Richard D. Irwin Inc.), Readings in the Economics of Taxation, pp.322-29
Shoup, Carl, and Louis Haimoff, 1934, "The Sales Tax", Columbia Law Review 34(5):809-30
Somers, Harold, 1964. The Sales Tax. Sacramento: ASSEMBLY, California Legislature
Sullivan, Dan, 2011. "Sales Tax Destroys Commerce". http://savingcommunities.org
Ulbrich, Holley, 2003. Public Finance. Mason, Ohio: Thomson
Young, Allyn, 1929. Review of "A.C. Pigou: A Study in Public Finance". E.J. 39 (March). Rpt. In Musgrave, Richard, and Carl Shoup, acting as a Committee of The AEA, 1959 (Homewood, IL: Richard D. Irwin Inc.), Readings in the Economics of Taxation, pp. 13-18
Stiglitz, Joseph, 1986. Economics of the Public Sector. New York & London: W.W. Norton.
Stiglitz, Joseph, 2010. Principles and Guidelines for Deficit Reduction. Hyde Park: The Roosevelt Institution, Working Paper #6
Vickrey, William, 1971. Mathematical Appendix to Mason Gaffney, "Tax-induced Slow Turnover of Capital." AJES 30(1): 105-11, at p. 111
Wolfman, Bernard, cited in obit, The New York Times, August 31 2011
BIBLIOGRAPHY of works by Mason Gaffney that are cited in or relevant to "Sales-tax Bias against Turnover and Jobs"
NOTE: Most of the following works are available online at http://www.masongaffney.org.
1957. Concepts of Financial Maturity of Timber and Other Assets. Agricultural Information Series #62, N.C. State College, Raleigh, 1957. 105 pages. 2nd Impression 1960. (N.C. State is out of stock; copies available online and from writer. Not copyrighted, widely copied.)
1967. "Tax-induced Slow Turnover of Capital." Western Economic Journal, Sept. 1967, pp. 308-23. Abridged.
1970-71. Unabridged. "Tax-induced Slow Turnover of Capital." AJES 29(1):25-32 (Jan. 1970); 29(2):179-97 (April 1970); 29(3):277-87 (July 1970); 29(4):409-24 (Oct. 1970); 30(1):105-11 (January 1971).
1973. "A Critique of Federal Water Policy." In Robert Haveman and Robert Hamrin (eds.) The Political Economy of Federal Policy. New York etc., Harper and Row, 1973, pp.191-99.
1975. Chairman, Conference on "Full Employment on a Small Planet." 1975 Annual Meeting of the Committee on Taxation, Resources, and Economic Development (TRED), Madison.
1976-a. "Full Employment and the Environment." In George Rohrlich (ed.), Environmental Management - Economic and Social Dimensions. Cambridge: Ballinger Press, 1976, pp. 81-102. Republished by Resources for the Future Inc., Full Employment and the Environment, Reprint No. 128, 1976.
1976-b. "Replacement anticipates liquidation". Excerpt from Gaffney, Mason, 1976, "Toward Full Employment with Limited Land and Capital", pp. 141-43, from "Toward Full Employment with Limited Land and Capital." In Arthur Lynn, Jr. (ed.), Property Taxation, Land Use and Public Policy. Madison: Univ. of Wisconsin Press, 1976, pp. 99-166.
1976-c. "Toward Full Employment with Limited Land and Capital." In Arthur Lynn, Jr. (ed.), Property Taxation, Land Use and Public Policy. Madison: Univ. of Wisconsin Press, 1976, pp. 99-166.
1976-d, "Capital Requirements for Economic Growth." Joint Economic Committee, Congress of the United States, U.S. Economic Growth from 1976 to 1986: Prospects, Problems and Patterns. Vol. 8, pp. 56-75.
1978. "Taxes, Capital and Jobs." Invited Paper delivered to NTA, special meeting, Chicago, August 1978.
1980. "Alternative Ways of Taxing Forests." In Will Knedlick (ed.), State Taxation of Forest and Land Resources. Cambridge: Lincoln Institute of Land Policy, 1980, pp. 5-16.
1982-a. "Harry Gunnison Brown as an Old Master." 2nd Annual University Lecture in honor of Harry Gunnison Brown, University of Missouri, Columbia, April 1982.
1982-b. "Supply-side Economics." Paper delivered at seminar held for the purpose by and at The Center for the Study of Democratic Institutions, Sta. Barbara, January 1982.
1987. "Brown, Harry Gunnison." In Eatwell, John; Peter Newman, and Murray Milgate (eds.) The New Palgrave Dictionary of Political Economy (London: The Macmillan Press, Ltd., 1987).
1988. Working paper. "Production Economics: Variable Proportions of Inputs." 1988, pp.1-60, in three installments.
1991, Working Paper. "Capital, Turnover and Payback Time," 1991, pp. 1-8.
1992. Working Paper, "Calculating Mean Periods of Investment by means of Normalized Models." Rev. 1992, pp. 1-26.
1993-a. "Tax Policy and Capital Formation," pp. 1-46. Pilot paper, Conference on Tax Incentives, Capital Formation, Capital Conservation, and Capital Allocation, August, 1993. The American Institute for Economic Research, Great Barrington MA.
1993-b. "Full Employment through Total Tax Reform." Papers on Employment for All, (ISBN: 0 646 186140), pp. 1-27. Melbourne: Georgist Council of Australia (31 Hardware Street, Australia 3000). [Was Keynote Paper, Biennial Meeting, International Union, sponsored by Tax Reform Australia, Melbourne, at Ormond College, University of Melbourne, 27 September, 1993.]
1993-c. "The Taxable Capacity of Land," 1993. In Patricia Salkin (ed.), Land Value Taxation, Papers from a Conference sponsored by The Government Law Center of Albany Law School, The Senate Environmental Conservation Committee, and the New York State Division of Equalization and Assessment. Albany: The Government Law Center, pp. 59-82. There is also a Proceedings, with court-reported discussion, that the Government Law Center of Albany Law School published separately: Land Value Taxation, pp. 60-74.
1994-a. "Macroeconomic Chokes," pp. 1-25. Pilot Paper, Conference on Land Speculation and the Banking Collapse, October 20-22, 1994. American Institute for Economic Research, Great Barrington, MA.
1994-b. "Consuming Land". Excerpt from Gaffney, Mason, 1994, "Land as a Distinctive Factor of Production", a chapter in Tideman, Nicolaus (Ed.), Land and Taxation. London: Shepheard-Walwyn (Publishers) Ltd., pp. 39-102]
2000-a. "Why Sales Taxes?" State Tax Notes 18(7):529-31, Feb 14 2000.
2000-b. "More on Clarifying Sales Tax History. a response to John Mikesell." State Tax Notes, April 3, 2000
2001-date, "Sales-tax Suicides through History" Leaders retired by voters (or other public) after they championed consumer taxes. List accumulating on hard disk of Mason Gaffney: additions welcomed.
2003. "Taxes, Capital and Jobs: the Variability of Valences". Geophilos 3(1), Spring, pp. 62-74
2006-a. "A simple general test for tax bias". In Moss, Laurence S. (ed.), Natural Resources, Taxation and Regulation. Oxford: Blackwell Publishing, pp. 261-78. Also published 2006 in AJES 65(3):733-49, July
2006-b. "Keeping Land in Capital Theory: Ricardo, Faustmann, Wicksell, and George". A paper for annual meeting of History of Economics Society (H.E.S.), Grinnell College, June 25, 2006. Published in 2008, Moss, Laurence S. (ed.), q.v., and in AJES, 2008, q.v.
2007. "Stimulus: the False and the True". Progress (Melbourne, Australia) March-April, pp. 13-16
2008-a, "The Great Crash of 2008". Progress (Melbourne, Australia), July-August.
2008-b. (Lindy Davies, ed.) The Great Crash of 2008, and How to Thaw Credit: Now and Permanently (bound together. New York: The Henry George Institute
2009-a, "The Four Vampires of Capital". Land and Liberty, Summer 2009, pp. 12-17.
2009-b, "A New Framework for Macroeconomics". AJES 68(4):889-981 (October). Also published as Chapter 2 of 2009, After the Crash: Designing a Depression-free Economy. Malden, MA, and Oxford: Wiley-Blackwell.
==========================================================================
The articles below were published in Groundswell, edited by Nadine Stoner, Beloit, WI
2004, August, "John Stuart Mill on Luddism"
2004, October, "Sounding the Revenue Potential of Land: 15 Submerged Elements"
2005, April, "The Sales Tax: History of a Noxious Idea"
2005, October, "Defining "Consumption'"
2008, February, "Stimulus: the False and the True"
2008 June, "Full Employment and the Environment"
2008, Auust, "The Great Crash of 2008"
2008, "How to Thaw Credit, Now and Permanently"
2009, February, "Empty Spaces"
2011-08, "Why Sales Taxes?"
===============================================
The articles below were published in The Georgist Journal. Winter-Spring 2001 to Autumn 2009, after vetting by Editor Lindy Davies. The numbers refer to editions of the Journal.
#94, 2001, Fall. "Georgist Analysis: Some Room for Improvement". Pp. 18-21, 25-28. Digested from "Full Employment on a Small Planet", a paper prepared for and delivered at the Conference on Growth, Poverty and the Environment, sponsored by the Center for Process Studies of the Claremont School of Theology and the Claremont Graduate University, John Cobb, Chairman. October 18-21, 2001.
#96, 2002, Fall, "Rent-seeking and Global Conflict". Pp. 6-11
#100, 2004, Spring, "The Danger of Favoring Capital over Labor". Pp. 30-34
#105, 2006, Autumn. "Money, Credit, and Crisis". Pp. 18-21+35
#106, 2007, Winter, "Land Booms and Peace Dividends", pp. 18-23 + 35
#107, 2007, Spring. "Denying Inflation: Who, Why, and How". Pp. 26-33
#110, 2008, Summer. "The Great Crash of 2008", Part 1 of 2, PP. 10-15, 28-30.
#111, 2008, Autumn. "The Great Crash of 2008", Part 2 of 2
#112, 2008-09, Winter. "How to Thaw Capital, Now and Permanently".
#114, 2009, Summer. "Four Vampires of Capital"
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Mason Gaffney first read Henry George when a high school junior , and became notorious among his classmates for preaching LVT to them . H e served in the S.W. Pacific during W.W. II, where he observed the results of land monopoly in The (more...)
 
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