How then shall we overcome the non-thinkers and the land-windfall deniers? Dr. King gave an unintentional hint when he encouraged the Black community in Memphis to impose what amounted to human-rights-related trade sanctions. These involved not only boycotts of businesses that mistreated Blacks, but also what he called a "bank-in" (keeping your money in Black financial institutions) and an "insurance-in" (dealing with Black insurance companies). That was then. Perhaps what we need now is a sort of "infrastructure-in". Although Black Americans are a minority in the country as a whole, there are many cities and counties with Black majorities, including Detroit, New Orleans, Baltimore, Atlanta, Washington DC, and of course Memphis. So, if we can't have land-value taxation in all American cities and counties because it's good for all Americans, then maybe we can have it in Black American cities and counties because it's good for Black Americans. Of course I shouldn't have to say that. But if the only way to get some action on infrastructure is to turn it into a Black Pride issue, let's turn it into a Black Pride issue, because action is needed. Then the other cities and counties can try to catch up.
If America is sliding into recession, as seems to be the case, then the necessity of moving to land-value taxation is amplified by, yes, "the fierce urgency of Now." As Dr. King said at the Lincoln Memorial, "This is no time ... to take the tranquilizing drug of gradualism." Now is the time to cut payroll taxes that discourage hiring. Now is the time to cut sales taxes that reduce demand. Now is the time to exempt the values of buildings from property taxes, so that construction is no longer discouraged. Now is the time to create wealth and jobs by investing in infrastructure. Now is the time to move the tax burden onto land values so that great infrastructure projects can be financed without increasing already alarming budget deficits. And those who hope that the present crisis can be overcome by yet another stimulus package or taxpayer-funded bailout "will have a rude awakening if the nation returns to business as usual," because the tax system that gave us this recession and the one before and the one before that, if left essentially intact, will give us the next recession and the one after and the one after that.
The present recession, like the recessions of the early '90s, early '80s, and mid '70s, was preceded by a crash in the land market. The recession of 2001 may seem different because it was preceded by crash in the share market. But shares are land-like in so far as the underlying assets are land-like. Shares are even more land-like in the short term because they can be bought and sold much faster than they can be issued. Now the crucial point is this: Markets for land-like assets are susceptible to crashes under the present tax system, but would not be if the tax burden were moved onto values of land-like assets.
As economic growth adds to the demand for land-like assets while private agents can't add to the supply, prices of land-like assets rise in the long term. When people see prices rising, they try to buy into the market, thereby reinforcing the price rise, inducing more people to buy in, and so on, so that prices become decoupled from rents and are supported solely by the circular argument that prices will continue to rise. This is a speculative bubble. But eventually the illusion becomes unsustainable and prices stop rising, taking away the alleged justification for current prices, and so on: the bubble "bursts". Those who have invested heavily in the collapsed market must reduce their expenditure. If they've invested with borrowed money, they may be bankrupt. As one agent's expenditure is another's income, and as one agent's debt is another's asset, a chain reaction begins. If the initial burst is big enough, the chain reaction leads to recession, which is made worse if the reduction in funds available for investment causes bursts in other asset markets.
Irresponsible lending inflates the bubble further, causing a bigger burst, hence a deeper recession. The recent practice of selling and reselling mortgage loans, packaging them into securities and selling them again, and so forth, makes it hard to know who is credit-worthy and who isn't, causing a broader chain reaction, hence a deeper recession. But these are secondary issues peculiar to the current recession. The basic problem, common to all recessions, is that the present tax system encourages speculative bubbles by making capital gains more attractive than earned income. However, a sufficiently heavy tax on values of land-like assets can prevent recessions by preventing bubbles. If it's a capital gains tax, it directly reduces the speculative motive that inflates bubbles. If it's a holding tax, it provides corrective feedback: when prices rise, the tax also rises, making the assets less attractive and opposing the price rise, whereas when prices fall, the tax also falls, making the assets more attractive and opposing the price fall. Thus a holding tax stabilizes prices around the long-term trend. That's how to prevent the next recession.
In the Promised Land of the Old Testament, there was no land speculation and no possibility of speculative bubbles, because you couldn't sell land in perpetuity. According to the 25th chapter of Leviticus, every 50th year was to be a Jubilee, and you could only sell a lease on the land up to the next Jubilee. As the time remaining on the lease was always getting shorter, the lease was always falling in value, so you couldn't make a capital gain on it. Nowadays, if we somehow don't consider ourselves bound by the commandment that “The land shall not be sold for ever” (Leviticus 25:23), we need another method of preventing speculation. Land-value taxation not only discourages speculation, but also reduces inflationary pressure, allowing a reduction in the natural rate of unemployment, so that members of the dominant ethnic group face little risk of unemployment and have little to gain by trying to offload that risk onto some minority.
Alternatively, America can retain the present inflationary taxes, and the Fed can fight the inflationary pressure by creating unemployment, the burden of which will continue to fall disproportionately on Blacks. Meanwhile the opportunity to make capital gains on land, together with the lack of pressure to earn income from it, will maintain a permanent artificial demand for land, exacerbated by periodic speculative bubbles. The artificial demand will inflate rents and prices of residential land, which is a necessity of life, and for which workers will have to pay out of wages that have been depressed by the competition for scarce jobs, eroded by income tax, and devalued by indirect taxes. This is the Ownership Society, the caricature of the Promised Land offered by those who call themselves conservatives.
But let's conclude on a more conciliatory note. In the present recession, which has been triggered by a collapse in land prices, land-value taxation would reverse the collapse — not by re-inflating a temporary speculative bubble, but by inducing investment in infrastructure that permanently enhances the utility of the land. So maybe it takes a recession to induce a conservative appreciation of land-value taxation as a substitute for existing taxes. Maybe that's one way in which "only when it is dark enough can you see the stars."
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