The president of the Illinois State Senate seeks $40 billion to help the pension system, fund unemployment insurance and aid hospitals and cities according to the New York Times.
The letter, sent this week by State Senator Don Harmon, also seeks a $15 billion grant to “stabilize the state’s budget,” $9.6 billion in direct aid to Illinois’s cities, $6 billion for the state’s unemployment insurance fund, and hardship money for hospitals and nursing homes, among other things.
Messages left for State Senator Bill Brady, the minority leader, were not immediately returned on Friday evening. Democrats hold 40 of the State Senate’s 59 seats.
Illinois is Insolvent
I was certain this would happen, but the way this happened is a bit unexpected. Some of the state pension plans will run out of money in as little as 2-7 years.
Wirepoints reports Illinois pension plans were running out of cash long before the Coronavirus hit.
Many pension funds across Illinois were running out of cash even before the Coronavirus reared its ugly head. Some funds were even on the brink of becoming pay-as-you-go plans, where pensioners are forced to rely directly on employer operating budgets, and not pension fund assets, to get their retirement checks.
The proof is in the collapsing asset-to-payout ratios of most Illinois pensions. That ratio – which is one of the statistics Moody’s Investors Service uses to measure pension health – compares a fund’s total assets to how much it pays out in benefits each year. In other words, it measures how many years a pension plan can make benefit payouts before it runs out of money, assuming no new contributions or investment income.
Illinois’ worst-off funds only had two to five year’s worth of payouts left in 2018. They were among the most insolvent in the country. The COVID-19 market meltdown will have only shrunk their assets further.
Illinois and Chicago Pension Plan Funding
Take, for example, the Chicago firefighter fund. In 2018, its total assets were $1.1 billion and its pension payout for that year was $330 million. That means it had about 3 years’ worth of payouts on hand – an asset-to-payout ratio of 3.4. There are just a handful of funds in the nation with lower ratios than that.
By comparison, the plan’s assets amounted to nearly 10 years’ worth of payouts in 2000.
Chicago’s firefighter plan is now dangerously close to becoming a pay-as-you-go pension plan. That would make firefighters dependent on the city – which is already junk rated and effectively bankrupt – for their retirement checks.
It’s not just the firefighters’ fund that’s in trouble. It’s the same thing for Chicago police. Their funds’ ratio was just 4.1 in 2018. Chicago municipal had a ratio of 4.7 years. With the markets and bond yields down significantly, Chicago’s funds are now in a precarious position.
The state’s funds are only slightly better off. Illinois’ biggest fund, the state Teachers’ Retirement Fund, had a ratio of just 8.2 in 2018. At the turn of the century, it had 17 years’ worth of payouts.
The State Employees Retirement System had a ratio of only 7 years.
Worst of all is the Illinois lawmakers’ fund, which had just 2.5 years worth of payouts.
There is much more bad news in the article. Including a look at various cities.
Wirepoint Concludes
If the market meltdown persists for much longer, expect the city of Chicago’s rating to fall further and for the state’s to end up in junk. The consequences of both would be huge. But so far, Gov. J.B. Pritzker and Mayor Lori Lightfoot continue to reject an amendment to Illinois’ pension protection clause.
But soon, they may be forced to choose between either chaos or reforms. Barring state bankruptcy, pension reform is the only way to cut Illinois’ strangling debts and to keep pension fund asset-to-payout ratios from plunging straight to zero.
No Bailout
Illinois does not deserve a bailout. Its pension woes are of it own making, and have nothing to do with the coronavirus.
The state and cities need serious reform starting with the state allowing cities to declare bankruptcy.
Trump could easily have passed national bankruptcy reform in his first Congressional term but he failed to do so. Now Democrats would likely block it.
Two Things
- Bankruptcy Reform
- Pension Reform
Illinois needs both, and both are up to the state, not the federal government.
Mike “Mish” Shedlock
Here’s my solution:
Thoughts anyone?
Everybody knew that Illinois and Chicago are ticking time bombs, so this should surprise nobody.
“You never want a serious crisis to go to waste.” Thanks Rahm.
A requirement for any Federal support to state pensions should be a reduction in inflated benefits and a ban on public employee unions. CPD wants help? Fine, ban the police union. Chicago Teacher’s pension wants help? Fine, ban teacher’s unions.
What??? Hell no. Just hell no! There is NO way the Federal government should lift a finger to help Illinois. Their people voted for the people who created this mess, let their people live with their own mess. They created it, they need to deal with it.
Bailout IL state pensions?
Why would any solvent state remain in the union if IL is bailed-out?
Bailout of insolvent states = the beginning of the end of the USA.
…and some will say, “…oh, that’s extreme stuff… secession will never happen…“.
…to which I reply ” …look out your window…”.
this isn’t 1950 america anymore… everything is ‘extreme’ now… the new normal.
Guess the Fed could give the state a trillion in the Central Bank. Or CLD make state employees do what everyone else does. I. E. use occasionally worthless 401k
Wow, which pension in the graph is funded for 50 years out? Makes you think perhaps there’s something as a pension being funded too well (or the payouts are too small).
Actually, it seems to be a well-managed plan. Best not to touch it.
Why should those who do not get/have a pension have to pay for those who do? If all US citizens have to pay towards some state’s pension, then that state should also pay towards other states’ pensions and every working citizen should get a pension.
Property taxes are an abominable thing. You don’t end up actually owning the home you spent most of your laboring years to “buy”. State should be funded in some other way.
If the Feds cave to Illinois’s request for a bailout, then pension plans across the country will want “equal” treatment because it’s only “fair”.
The question for me is will Congress have the guts to turn down Illinois?
I wouldn’t want to bet my life on it judged on the recent behavior of the Congress and Federal Reserve Bank.
There is an easy solution for all pension funds:
What do you guys think?
It’s idiotic
That’s what I think
The way things are going, idiotic is likely to win.
It is already happening. The Fed is buying bonds of all kinds. Bondholders are selling bonds to the Fed and buying stocks. It is effectively the same thing. This is why the major indices haven’t gone much lower since the crisis started. The Fed did the same thing in 2011 and didn’t stop buying bonds until December of 2017. It is Illinois fault if they weren’t dollar cost averaging all pension funds into stocks over the last 10 years and rotating money from the winners to the losers a few times year. Yesterday’s winners always become today’s losers and vice versa.
If the Federal government borrows even more money to bail out insolvent states and/or industries, buyers of “safe” US Treasury debt will say, “If you’re going to assume these risks, I want better compensation!” which means the Federal government will have to pay higher rates of interest that they would have otherwise.
Since it’s a matter of self-preservation for the Federal government, there may be as high as a 50% chance the fools running the country will figure this out before opening the bail-out spigot.
Buyers of US Treasury do not have a choice. What else are they going to buy? Corporate bonds? Riskier, even with the Fed bailout. German bonds? Maybe, but then what about the Euro?
Name me a safer asset class with sufficient depth and liquidity, then we’ll talk.
You completely missed the point. What I said was if the Feds bail out insolvent states and/or industries and accept higher risk, the cost to issue and service Federal debt will be higher.
Not if the Fed monetizes the debt.
Leaving aside that the issue was only “higher financing costs”, you seem to imply a buyer’s strike/bear market in treasury bonds is impossible based on “TINA”. I assure you that is not true.
I already said: “name me a safer asset class with sufficient depth and liquidity, then we’ll talk.” Assurance is not an asset class.
You are stuck in a time warp.
There is no such thing as a “US Treasury Market” anymore. Central Banks are the only buyers, and have been for years.
I’m in a time warp? Your statement about ownership is completely false. The link I tried to post didn’t work, but a casual search quickly disproves your assertion.
Regardless, my point wasn’t about who buys the debt, it’s that bail-outs would lessen the quality (such as it is) of Federal debt making the cost higher due to higher interest rates.
Perhaps someone could comment on what I actually wrote instead of making some irrelevant point.
Good grief, Mish. I admire what you do on this blog more than ever. I got two comments on my post and neither of them understood the point.
What Bam Man was saying.
The fed can take treasuries onto its books, the reserves created feed through to investors. It is as close to direct purchase of them as you are likely to get. The effect is to lower yield (interest) on new government debt, allowing for higher issuance.
Tokidoki, treasuries are pseudo dollars, interest paying. You might as well be talking cash. You can invest in cash dollars, also, but it does not mean that there is any guarantee to their value – it depends on volume created, US economy etc.
Safe asset classes might include gold, land, food even because it is what many need to convert other assets into eventually, etc.
Safer though ? Who knows which is going to retain its usefulness or worth most, it’s very specific to individual circumstance.
Im gonna sign up for this deal hellya
Eligible Americans would receive $2,000 per month for at least six months. And it would continue until national employment levels return to pre-COVID-19 levels.
All single Americans older than 16 earning less than $130,000 a year get a monthly $2,000 check.
Married Americans who make less than $260,000 a year would receive a monthly $4,000 check, plus $500 per child, capped off at three children.
The money would not be considered income and would not be taxed.
U.S. Reps. Tim Ryan (Ohio-13) and Ro Khanna (Calif.-17)
I am done with this country. This is highway robbery, also as I said, grocery workers will all stay home.
Can’t compare 2000 to today,20 years ago US still had manufacturing, to afford those lavish benefits.Offshoring destroyed that,factories that paid millions (billions)in taxes were replaced by pawn shops,Dollar stores,Title loans ,Convenience stores,lots of prisons,liquor stores etc,those together don’t generate anywhere near the tax revenue of a single manufacturer!
The federal reserve can do anything, and they will probably bail out the states and cities.
What, you mean the Fed pumping out stonks does not help them enough?
Illinois has been digging a hole for decades….just have the feds throw dirt on them!
They should have a state flag that has the word “CORRUPTION” on it!
“The president of the Illinois State Senate seeks $40 billion to help the pension system”
…
If Illinois were a swing state, I’d wager DJT would come to its rescue.
Seriously, most have Americans have no pension and look with envy at those who do. And they are the ones who are supposed to bail out the fortunate?
Not to mention there is NEVER just one cockroach.
It may be the most famous bit of economic policy advice ever given to a US president. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Treasury Secretary Andrew Mellon told his boss President Hoover. “It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”
“It will purge the rottenness out of the system.”
…
Indeed.
The problem wasn’t the 30’s, it was the excesses of the 20’s allowed to build. Pains me to listen to Bernanke REPEATEDLY speak of the Great Depression and problem caused by not enough liquidity (ie: bail out each and all … no matter the mal investment / fraud) provided by Federal Reserve. Never acknowledges the Roaring Twenties nonsense.
Unfortunately Hoover refused to listen and embarked on the most intense economic interventionism the US had ever seen up to that point. His biggest mistakes were killing international trade by signing the Smoot-Hawley bill and keeping wages artificially high, which led to a massive surge in unemployment. FDR then intensified the interventionism after complaining throughout the campaign that Hoover was a “spendthrift”.
Mish, you still in Illinois? Moved yet? Hopefully you can sell the house!
Rented a house in Utah already – but not yet moved.
This Covid hurt our home sale – but not in trouble. We own the house free and clear
Illinois’s? Lol!
A possessive ‘s’ after an ‘s’ is considered acceptable per ELA. Sort of like a plural pronoun for a singlular noun, used to be the norm, it fell out of fashion, it has now returned.
New York, while not as bad as Illinois, is angling for a bailout as well. Gov. Cuomo has referenced federal bailouts for coronavirus stating a 10-15 billion shortfall. It’s disingenuous because he had that 10-15b deficit heading into 2020 and is not corona related. I suspect many blue states will try passing the buck to the feds under the guise of dealing with the pandemic..
I’m probably missing something here but aren’t all annual pension fund payments funded by an equal annual contributions and the level of the fund irrelevant? I mean, there is no purpose to having a fund apart from as a buffer maybe.
If for example, annual contributions are less than annual payments out then the fund exhausts itself inevitably, and why would the other case, that of contributions exceeding payments, ever continuously exist?
So isn’t the actual issue that payments out exceed contributions in?
In the case that this is because of demographics, workforce shifting out of state, then a federal bailout levied on the states with the extra transplanted workers seems reasonable enough because the contribution loss suffered by Illinois is their gain. Bankruptcy would allow any overly generous pensions to be reduced to reasonable levels.
First, you’d have to go back 6 or more decades, and claw back overly generous pensions already paid out. In addition to all fees and bonuses sucked out by the Fed’s favored welfare queens. Otherwise, all your doing is robbing other people’s children to make up for handing pointless leeches unearned fortunes in return for nothing other than being pointless leeches.
Just bankrupcy. No bailouts. No this nor that, nor any other nonsensical excuses for crass theft from people who weren’t even born when leeches granted themselves access to their wallets in perpetuity. Bankruptcy has worked for millennia. And things are never different, no matter what the dumbest of the indoctrinati may have been told to chant uncritically.
The actuarial contribution is computed almost every year. The states choose not to make it because it won’t be paid out till many years in the future. Some states are 100 percent funded like South Dakota, because they have made their actuarial contribution on time. Last time I checked they are in the United States, and have the same economic environment as Illinois, but not the incompetence or corrupt behavior of Illinois.
With interest rates on any relatively safe investments near 0% how can any mutual or individual fund their retirement. Extreme low interest rates have killed saving in favour of debt and gambling in the markets. Umm, also why did these miniscule funds ever exist. The biggest of the examples has maybe 100 members, that is silly small.
“Illinois does not deserve a bailout.”
No one does. It is anathema to capitalism. But then, given that USA is a bailout nation and it has the printing press and it bails out scoundrels and corporate scavengers any which way why not Illinois?
Because “scoundrels and corporate scavengers” shouldn’t be bailed out, either.
That’s what needs fixing. Not trying to use a million wrongs as an excuse for adding a billion more.
Bankruptcy has worked for millennia at clearing debt. It ain’t that hard.
Gotta agree with killben here. We all know this isn’t capitalism, but you’ll have to pry easy Fed money out of our elites’ cold, dead hands. They’ll make sure to crash the entire system before they turn off the money spigot.
I’m still in favor of this, but whenever I mention collapse here a small cadre of posters clutch their pearls and wax on about families losing their livelihoods. You see, it’s not just the bankers, corporate execs, and corrupt politicians that are the problem. Wide swaths of the American public refuse to accept reality too, so here we are.
“That’s what needs fixing.” – But then is it getting fixed is the question. Bailouts happened in 2008 and is happening in 2020. Will happen tomorrow too. President, Congress, Treasury and the Fed were the players then and they are the players now. What has changed tell me. Risk takers are getting bailed out and tax-payers end up holding the bag and capitalism gets a bad name. Anyone went to jail then? Was the Fed held accountable then? Is it going to be held accountable now? Given that the system is a piece of s*** (the Fed can do whatever it wants, bipartisan means-you scratch my back I scratch yours – where is the bloody check on lawlessness and bailouts anyway) why should only a favoured few have a blast? Why not let everyone join in? At least the collapse will be earlier. Anyone who believes the existing system is not due for a reset lives in cuckoo land.
“Bankruptcy has worked for millennia at clearing debt. It ain’t that hard.”- But then it is also not happening.
“why should only a favoured few have a blast? Why not let everyone join in? At least the collapse will be earlier.”
As long as you are talking literally everyone, then fine: Whatever the highest paid Illinois’ pension which is being bailed out happens to be; hand the exact same sum to everyone else in the country as well. From Trump to guys on Death Row for genocide. No strings attached.
Problem is, that’s not what’s being considered. Instead, it’s just aging Illinois tax feeders screaming for the Government to let them, and only them, become junior members of the Fed Welfare Queen club. While everyone else will, instead of being treated to the same largess, have to pay even more in order to keep an additional bunch of deadweight leeches in invariably unearned splendor.
As for the collapse, a real one, that is a positive by definition. But you’ll do more to speed it up by NOT bailing out Illinois, and instead let everyone invested in that pile of lies, in any capacity, from pensioner to bondholder, get wiped out. Then rinse and repeat across all the domino pieces making up this failed experiment in progressivism.
“As long as you are talking literally everyone,” Yes. You want money you take it, he wants money he takes it, after all I have the printing press and I can print all I want.
Why single out beneficiary as if that makes it a fair system. After all, it is all subterfuge to hand over money to the Fed’s cronies (the gall to say that they are doing it for ordinary people and but for their actions, they would have been worse. My foot!) .
My rant was simply because anyway the system being a piece of s*** adding some more is not going to make the stench any worse. In fact it may of help if it makes people revolt.
That said, my rant is not going to change anything especially the Fed with its hands on the printing press and handing over money to their cronies. This is going to happen again as soon as the markets fall another 10 or 20%.
Without a reset and the exit of the Fed it will be an exercise in can kicking till the system collapses. How long that will be is up in the air.
My earlier post was a bit incomplete: In addition to giving everyone the same bailout, you’d also need to take care of inter temporal distortions arising from such an inflation. Since the inflation itself would bail out those who were given access to debt at an earlier stage, vs those who had to wait until later.
So, in addition to offering everyone an Illinois pension, you’d also have to confiscate everything anyone owns above a nominal sum, then let each and everyone bid for the confiscated stuff with their newfound Illinois pension.
This is why bankruptcy works, and debt jubilees don’t. As the latter does nothing but further entrench those closest to the central bank hence privileged wrt credit access during inflation, by removing even the last vestige of liability encumbering the assets their privileged credit access redistributed their way.
So yes. Blow it all up. Just make sure you keep firm emphasis on all .
Dow 100K will fix EVERYTHING.
Wait for it guys.
You may be correct the Venezuelan stock market has been one of the best performers in nominal terms. That is the time tested way of removing excessive debt. BK and deflation seem to be to painful of a way out. Hyperinflation screws over the financially prudent and rewards the financially reckless. Kind of what is happening now in slow motion.
The number on the DOW Industrial index is meaningless since there is tremendous selling pressure due to demographics. Baby boomers are retiring, and millennials have too much debt to invest in stock markets.
Baby boomers are limited in terms of their money. The Fed has unlimited money at its disposal. It just needs a partner (Blackrock) to conduct transactions with and its off to the races.
Why not bail out everyone and everything? We are seeing how easy it is to print trillions to bailout CV19!
Exactly at this point why are we even paying any taxes. Payroll tax is only about 1.6 trillion a year that’s peanuts in this last bailout. Eliminate all payroll taxes now!
If Illinois gets bailed out many others will get in line. We can’t borrow all of the money for these bailouts, we can’t tax it – we will create the money and risk the purchasing power of the currency.
First one at the trough gets the most feed.
In Spain they have fined over 1% of the population so far for not keeping to confinement measures
Illinois needs to pull in the reins on their pensions and so does every other state that may hit the wall with their pensions.
Illinois should :
A.) They need to cut pension payments in half or more immediately to help balance their budget. Public employee pensions are unsustainable….cut…cut…cut now.
B.) These public employees have been living like Kings and Queens with the amount they receive in retirement compared to the private sector.
Illinois and other states are about to get a reality check like the rest of us all! Do not bail them out.
Watch detroit closely. They have already gone through bankruptcy a few years ago and had to start making payments on 190 million dollars of debt the court deemed to be their responsibility in January 2018, cutting essential services such as police and fire department budgets to raise the necessary funds to make those payments. Now they are in trouble again… and so are the suburbs in the tri-county area. Detroit owns the water system to those areas.
Yeah and speaking of pensions the state has bailed out Detroit’s pension twice in the past.
How many times was the same Mexican oil been backed up with some kind of fiat instrument… I remember it to be 6 times.
Detroit is not in trouble financially and it’s suburbs certainly aren’t either. Detroit has a balanced budget with a usual surplus, Chicago has the opposite of that and Michigan is not in financial crisis while Illinois obviously is.
The states should get some help for the difference from projected income to revised. They need to make cuts to the new reality though. Not a continuous rolling bailout. Since the shutdown was a national issue
They should not be bailed out of 50 years of stupid though.
My grandfather had an old saying from the Great Depression. Never mistake debt for wealth. They look the same in good times but not in bad.
“The states should get some help for the difference from projected income to revised.”
From who? From those states whose “revised income” magically went up as a result of covid?
Just let them go bankrupt. Simple and easy, and has worked for millennia. Wipe the debt out, and make sure it’s done fast, cheap and final. Anything else is just crass theft.
I’m in California, and it does not deserve a bailout either. My guess is that states in better shape will block bailouts so those “two things” will be the order of the day.
While we’re at it let’s redesign the entire system and get rid of personal real estate taxes entirely. This crap has to stop now!
Property taxes are he only legitimate taxes out there, in societies even remotely free.
Income and sales taxes, along with the spying and massive, expensive bureaucracies and favoritism which inevitably goes with them, are the ones to get rid of.
If people want government help protecting their claim to some property, they should pay for it. Or, they can spend the money on sandbags and crossed fingers.
Fine them, limit them.
remove funding for education from property taxes and we can talk. it should not be my responsibility to pay for someone else’s child’s education. especially when it is over $10K per child per year. that is insane.
The only reason we’re not back in the Dark Ages is because society views educating children as a worthwhile investment. I have childless friends who bitch about taxes for schools. It’s never occurred to them 1) who is going to pay their social security and 2) my kids, who are going to pay their social security, are being raised by myself at enormous expense. My friends are getting an extraordinarily good deal, as opposed to being put on an ice floe with a fishhook once they’re too old to do anything about it.
Not to question the benefits of education, nor the expense of raising a family, nor even the good intent behind your view. The question of social security is an unusual one, because afaik it started with current workers paying for the benefits of say those retired. However there is another way to understand it, and that is of current workers collecting payment they have made when they retire. In theory they might even prefer to pay no tax and just invest it in a form that supports them (and their family if it were the case) eventually.
It is just a bit of a jump to assume others will value your family as you do, not that they do or don’t deserve that appreciation.
A lot of this depends on whatever ideals anyone holds, it isn’t that one is necessarily right and the other wrong.
Exactly what government should spend the taxes it collects on, is orthogonal to how they collect them. Publicly funding Institutions of Universal Indoctrination certainly was never included as an enumerated power of the Federal Government. As for states? Communities???
Regardless, there are two fundamental concerns as regards a tax: 1)Do those who benefit from services, pay for them themselves, instead leeching off of others? And 2) is the tax easy, cheap, minimally distorting and non invasive to collect.
A land, or real estate, tax; scores 10 out of 10 on both metrics. Very little else does. Completely non discriminatory, anything from anywhere treated the same, tariffs; possibly fits the bill as well, as long as the tariff is low enough to not require a massive police state to prevent smuggling, and keeping tabs on what enters the country is considered a duty of Government regardless. Taxes on ownership of shares of Not-A-Person entities, possibly as well.
But real estate is by far the most straight forward, simple to administer, free of required necessary backdoors to totalitarianism etc.; as well as the conceptually cleanest: You want the government to protect your claim to exclusive use of a part of America: Pay for it. It sure ain’t anybody else’s responsibility to work for free until May every year, in order to pay to protect your stuff.
Pretty much any other tax, immediately becomes an excuse for spying: How many glasses of lemonade did you really buy from your neighbors daughter, huh? And how much did you really pay her? And are you sure you really bought the standard version, and not the one with extra sugar, which is taxed higher? We have to take you in for questioning, to make sure the two of you aren’t conspiring to defraud Dear Leader of funds here….. etc., etc….
All possible activity taxes fall prey to that dynamic. Simply because they all require government to spy on all of everyone’s activities. Which is why totalitarian government loves them. As does members of the massive, lucrative, rackets which inevitably grow up and get fat off navigating it all; from lobbyists to tax advisers to lawyers. All dead weight who produce nothing of real value.
With a real estate tax, none of that is required. You just pay your 10, or 20, percent of property value every year. And if you don’t: Good luck! May the Sandbags protect you…. No spying, lobbying nor any other totalitarian transgression required. Ditto no army of deadweight zero-value-adders required to pay in order to comply with it all.
“Or, they can spend the money on sandbags and crossed fingers.”
No, they can’t, because they will be evicted by the force you fund by paying that tax, and without doubt.
If they don’t have an income, they will also be evicted.
That is to say, the safety of their home and related livelihood is under constant open threat by the people you purport are there to protect it.
Who owns your property, you or the state ?
Answer : Not you, because you are paying continuously for the right to use it.
(Hint – people in very low tax countries don’t have any more trouble securing their property than in high tax countries, and not because they are rich, as some countries simply barely have a functioning tax system)
Ownership is purely a function of the state. It’s a fictional, abstract idea that requires the state to create and enforce. That being said, it is of enormous benefit to mankind.
But that doesn’t mean the taxes necessary to maintain it have to be outrageous. I live in suburban Florida, and the taxes on my 2000 sq ft house in a very nice area are only $1200/year. That’s because we have laws limiting how much taxes can increase year over year, regardless of how much property values go up.
I think ownership is created by exclusivity, and that exclusivity can be created as much by simple agreement or even subtle understanding as by force. It is abstract because it is not directly tangible except where others grant or challenge recognition. If you lived on a planet by yourself you would never consider “owning it” . I don’t think it is fictional because it has real effect, even if that is via the actions of a person that are influenced by the concept. It doesn’t require the state to enforce, though if there is challenge the use of force by the individual or his community might be exercised to defend ownership.
Communal ownership, say tribal lands, is the same concept except that it does not reduce to the individual level.
“No, they can’t, because they will be evicted by the force you fund by paying that tax, and without doubt.”
That depends on whether government retains monopoly on use of non-defensive force. As long as they do then, yes, they will inevitably be the only ones with the power to evict.
“If they don’t have an income, they will also be evicted.”
Not if they have savings. If they have no income and no savings, then yes, they’ll also be awfully hungry and entirely defenseless against rabid dogs and Zombies.
The solution to the latter issue, for those who aren’t entirely indifferent to people possibly starving to death in otherwise wealthy countries, is a Citizen Salary / UBI…. Which, again, just like real estate taxation, is an extremely simple, cheap and, by being entirely universal, definitionally fair to administer institution.
Have that, and you simply no longer have people without income, no longer have people without pensions, no longer have people who can’t afford food, no longer have people who can’t afford roof over their heads, no longer have people who can’t afford a gun for personal protection etc., etc. Leaving the entire class of such “but…., people will be starving in the streets” objections, definitionally moot.
I tell you what….if you eliminate central banking monopoly , legal tender law, and so fiat money, I might consider your idea 😀 . Now you have to get back to me with how, and in what, taxable property value is ascertained 😉 .
Unto Caeser what is of Caeser.
Meaning you can take what is yours, but you cannot forcefully put me in debt for that of which I do not have of it.
Eliminating a central banking monopoly is the only way to have an even semi free society regardless. That’s a given. As long as some guys can arbitrarily rob everyone else to their hearts’ content by simply debasing their currency, all else is moot.
Without activity taxes, enforcing a central bank monopoly, becomes much more difficult, though. Americans are, de facto, forced to transact in and amass dollars, largely because that is what they will be taxed in. And taxes are such an major share of people’s overall expenditure.
As for how to value property, ask the owner what it is worth to him. In Gold. Then take X percent of that. It’s as simple, non distorting, fair, universal and cheap to administer as a tax can possibly be.
Well I think he will value his land less than it is worth in gold ( much less 🙂 ) , but I suppose you could look at market prices. That might self regulate also because the higher the tax the lower the price might be – you are creating disincentive to ownership.
Leave me to think about it , because it is a concept that I have only looked over in a circumspect manner, and it brings in a whole load of other questions, some of them very philosophical, others more practical. My starting point though is that a person should be able to claim or buy or earn an unencumbered (by those outside) reality that is at least minimally adecuate to own needs, which is free from unreasonable intervention. I’ll see where I get to and if I am not just reinventing the wheel, and post a reply to you in some future article.
“Well I think he will value his land less than it is worth in gold ( much less 🙂 ) ”
When someone values his 20K acre ranch at $10, that $10 is not just some arbitrary number devoid of context. Instead, it specifically means: I would rather have $10.01 than this land. Hence, would sell at that price.
It’s self policing and self reinforcing. Without any lobbyist influenced tax feeder needed to arbitrarily “deem”, “find” nor “judge” what something is “really worth.”
As for disincentive to own, sure. Maintaining exclusive ownership of something, isn’t free. Someone has to pay for the policing and bookkeeping. But similar to how people don’t starve to death even if they think rice may get cheaper tomorrow, neither will they spend winter in Fairbanks out in the open, just because doing so reduces their tax bill. Guaranteeing exclusive access to a piece of land, is a valuable service government provides. Since it is valuable, those who receive that value, are willing to pay something for it. How much, who knows? But an equilibrium will be found. As is the case in all free interactions on the market.