Good Luck With That, Jeffrey Sachs

My general impression of Jeffrey Sachs is that the things he says usually make some sense; he’s well-credentialed, widely published, quoted, cited, featured, y’know, and what-all. So I was a bit surprised, yesterday, to see a steaming pile of fresh bull-phunqué under his byline, titled “Time to End the Tax Havens.” Sachs is promoting yet another charity campaign, “Enough Food for Everyone IF.” The upshot is that if only we could get rich people and corporations to pay their taxes — which is only fair, taxes being The Price of Civilization (which is, incidentally, the title of Sachs’s latest book), after all. People like Mitt Romney, rich fatcats in austerity-ridden Greece and Spain and socialist-leaning politicians in France are parking huge sums in sleazy tax havens like the Cayman Islands and Delaware. If they weren’t — if reporting requirements were enforced and international pressure were brought to bear on these nefarious resorts, why, every nation would have plenty of good, honest revenue with which to provide food stamps for its hungry citizens.

Sachs purports to be dealing with essential questions of poverty, responsibility, public revenue and economic justice. But I don’t really think he is. I think he is scrawling graffitti on the backside of the Elephant in the Room.

It’s all well and good to rail against these irresponsible, uncivil rich people who don’t want to spend even a little of their money to feed the hungry. I don’t like them, either; I, too, wish they’d grow some humanity. Then again, I don’t think that Red Bull, crystal meth or multiple-warhead ballistic missiles are very good products. I’d be happy if people stopped buying them. Yet, aside from rending our garments, or blogging, what effective remedies can we point to?

The question of offshore tax havens is linked with the issue of sovereignty. There is general agreement that sovereign nations have the power to order their affairs as they see fit. In US law, for example, the granting and regulating of corporate charters is a power of the states — so unless the United States is willing to amend its constitution, Delaware has every right to enact permissive laws that tempt thousands of companies to incorporate there. There’s a huge market for the financial services provided by The Caymans, Cyprus, Mauritius, etc. If one nation has no right to dictate the laws of another, then outside of Sachsian moral suasion, what ammunition have we to fight this terrible, terrible thing?

“Sovereignty” is a word that’s used, I think, more often than its meaning is really considered. It has to do with power, the “supreme and independent power or authority in government as possessed or claimed by a state or community.” Now, what is it that a sovereign government has power over? You might say, well, the laws… the taxation system… matters of international trade and borders… All true — but we can be blinded by convention, and miss the main point: we have to realize that a sovereign nation has the power to decide questions of property. Indeed, the question of property was a huge point of controversy in the framing of the US Constitution, and has been ever since. It might seem that the ownership of real estate, say, is a settled convention. Yet there is an intricate structure of law and precedent that supports it. Essentially every single piece of real estate in the US is surveyed and recorded at many levels. The “bundle of rights” to its use is precisely determined. We take such functions for granted — but if you want to get a sense of how important they are, just observe the economic chaos in nations where tenure and title records aren’t so scrupulously maintained.

The economic value of land is created by the community that surrounds it. Its value depends on the population, the volume of local commercial traffic, the natural resources and the public infrastructure that renders sites useful in a modern economy. And it’s been argued — quite persuasively, I think — that the economic rent of land and other natural resources is the best, fairest, most efficient and fully suitable source of public revenue.

And yet, unfortunately, most nations fail to take advantage of this wise policy. Instead they resort to taxes on incomes, or sales, or products, or imports. It’s an unfortunate fact that those revenue sources tend to naturally retreat from regimes that tax them, like amebas from a drop of battery acid. Income taxes are especially prone to this, and the greater one’s income is, the more one is capable of taking advantage of tax havens.

What to do? Enough Food for Everyone IF — people can just be persuaded to pay their income taxes, and not indulge in offshore tax havens? I see little hope in that.

Let’s pan the camera back from Jeffrey Sachs’s graffitti, and take a look at the elephant. Land is a very, very, VERY valuable factor of production. Its value is an ideal source of public revenue. And there’s one other thing about land: you can’t move it. So, friends, the collection of land rent for public revenue is the easy, obvious solution to the problem of offshore tax havens, and if sovereign nations are too stupid, or cynical, to employ it, then, they deserve what they get.

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