How Colonies Can Liberate Themselves by Taxing Real Estate

By Polly Cleveland

Greece, Haiti, and Puerto Rico have something important in common: they are colonies. Puerto Rico started out as a Spanish colony and was then acquired by the United States as a “gift with purchase” of the Philippines in 1898. Greece and Haiti (itself a former colony of France) have become debt colonies of the multinational banks and their supporting governments. In all three, wealth is highly unequal. Most of the land, and all the best land, is owned or controlled by absentee natives or by outside organizations—foreign corporations, banks or governments. Local government is corrupt, incompetent, and obligated to outsiders if not actually controlled by them. There’s a two-fold net effect. On the one hand, there’s a continuing drain of working capital and labor to the outside, as rents, interest, profits flow out and young adults emigrate. On the other hand, the extraction process cripples the economy, by cutting off working capital and killing labor incentives. The local government, cannot or will not provide adequate services, due to corruption and lack of tax money. Metaphorically, these colonies are being bled dry.

Suppose a reform government were to come to power in these places and suppose it could stave off foreign threats. How could it stop the bleeding?

New settlers in the 19th-century United States faced a similar problem. Large chunks of good land were held vacant by absentees, often railroad companies. The resulting scatter made it hard to build public works like dams and canals for irrigation. Meanwhile, the railroads charged exorbitant monopoly rates to ship the settlers’ grain to market. The solution: tax the value of property in the district. Because the absentees were not using their land, the tax helped force them to sell to incoming settlers. Until the middle of the 20th century, property taxes were the dominant means of state and local finance, so using them to bring in revenues for local development while nudging out absentees made perfect sense.

The same strategy can work for modern colonies. A reform government can heavily tax the value of real estate, possibly with exemptions for small resident property owners. Better yet, and much easier to implement, tax only the land component of real estate. Such a tax would force absentee owners to send euros or dollars back to the colonies. The government could then begin to provide services and repair infrastructure. But why tax real estate? Why not tax income or imports? Because absentees and foreign based corporations can easily avoid income taxes by funny accounting. Taxes on most imports are regressive and a drain on the economy. The real money is in real estate.

All but the most primitive governments keep some sort of registry of property, crude and out of date in Greece, Haiti, and Puerto Rico. A reform government can easily create new cadastral maps—that’s what George Washington did as he surveyed Native American land. In the age of GPS it’s even easier. The government can then place the existing claims on the map. The recorded “owner” may be a shell corporation based in the Bahamas, but no matter. Just tax it. Where claims overlap, they can be taxed twice—forcing owners to resolve the boundaries. The government can claim any blank spots—forcing hidden informal owners to declare themselves or lose the property.

How should a reform government estimate the value of property in order to tax it? This may appear a daunting problem when the property market is not very active—large absentees mostly do nothing—and many transactions are informal. But an experienced appraiser can in fact put a reasonable assessed valuation on property by walking around and observing activity. A great advantage to taxing land only is that value depends entirely on location and tends to vary smoothly from one spot to another. Property owners then can, and will, challenge their valuations—but they will have to show that the valuation is out of line with that of neighboring properties.

Another strategy for getting initial property values is to ask owners to declare the values themselves, with the government having the right to purchase the properties at the declared value. The government right to purchase, if enforced, takes away owners’ incentive to understate the value.

Once the government imposes taxes, some owners—absentees especially—will decide to sell in order to pay the tax. These sales will provide government assessors with more information, enabling them to make more accurate assessments. Meanwhile the purchasers of the property will put it to use, generating production and jobs.

When Fidel Castro’s revolutionary government took power in the American colony of Cuba, they nationalized most foreign-owned property. In accordance with international law, they offered compensation, which all but the Americans accepted. I have to wonder, if they had tried taxation instead of nationalization, could they have pulled off a smoother transition, while giving the U.S. less excuse for military intervention?

Is The US Hypocritical To Criticize Russian Election Meddling?

Cross-posted at Social Europe.

Thomas Carothers has recently written an article in Foreign Affairs, the prestigious elite journal published by the US-based Council on Foreign Relations. The article asks: is the US hypocritical for criticizing Russian election meddling?

Given the place of publication, the unsurprising conclusion is that it is not. The problem is the US is a champion meddler. Consequently, the argument crumbles every time Carothers reaches for substance.

At the end of the day, the defense reduces to the claim that we (the US) are good and they are evil, so that our meddling is a net good and theirs bad: “the trends of US and Russian behavior are divergent, not convergent – with Russia on the negative side of the divide.”

That is a moral superiority defense which is doubly flawed. First, the US can still be a hypocrite. Second, framing great power international relations in terms of moral superiority quickly promotes crusader thinking, which is a grave menace to all.

Meddling Since The Cold War

The first line of defense is that the US meddles less now than in the Cold war. But exactly the same can be said of the Russians. Moreover, since the US is far wealthier than Russia, its democracy manipulations now dwarf those of Russia measured in financial terms.

On top of that, the recent history of US meddling is of an order of magnitude worse than that of Russia. In the Ukraine, which is a highly sensitive space on Russia’s border and historically part of the Motherland, the US helped promote a coup in 2014 three months before scheduled elections.

Moreover, this intervention in the Ukraine came on top of 20 years of the US pushing NATO into former Soviet bloc countries. That has put US forces closer and closer to Russia’s borders, and violated the end of Cold War understanding that former Soviet bloc countries would remain outside NATO.

Elsewhere, in 2016, following an illegal and unconstitutional coup in Honduras, the US supported the junta’s consolidation of power.

Going back to the previous decade, there was the internationally illegal invasion of Iraq and the promotion of a coup in Venezuela. And before that, in 1996 there was the mother of all interventions when the US intervened to influence Russia’s election in favor its preferred candidate, Boris Yeltsin. Carothers fesses up to that, but fessing up does not mean acquittal.

In short, not only has there been a lot of US meddling since the end of the Cold War, it exceeds Russian meddling.

The Democracy Promotion Charade

The second line of defense is that the US is different because of its democracy promotion efforts, which are not matched by Russia.

It is absolutely true Russia does not have such programs. But we must be careful to distinguish between rhetoric and reality. Forty years ago, the Soviet Union was dedicated to liberating the workers of the world, but no one except a Soviet apparatchik would have counseled taking this at face value. Similar skepticism is warranted regarding US democracy promotion.

The US is for democracy promotion when it suits its interests, and against it when it does not. Strategically important undemocratic allies are given a free ride, while unfriendly undemocratic countries are subjected to subversive meddling in the name of democracy. Seen in that light, US democracy promotion is the twin of democracy meddling. Both are tactics serving US interests.

The hollowness of the US commitment to democracy promotion is evidenced by how quickly it is dropped when real interests come in to play. That is forever etched in the record by the way the Tiananmen Square protests were conveniently forgotten when trade with China was at stake. Similarly, democracy concerns are always excluded from the room in dealings with Saudi Arabia.

That is exactly how a great power with important interests is expected to behave. But it speaks to being done with the democracy promotion charade, which the US elite pumps up to gain rhetorical advantage in international relations and disingenuously enlist the support of common citizens.

The US Is A Double Hypocrite

Any honest assessment of US democracy would compel the admission that the real threats to it lie within the US. These threats include fake corporate-produced news, the political power of money and corporations, gerrymandering of congressional districts, voter suppression, built-in representational biases from the electoral college and Senate, and obstruction of change from the first-past-the post electoral system which blocks emergence of new political parties.

Compared to those problems, Russia’s Facebook interventions are a small time side-show. Moreover, Russia’s actions are par for the course of international relations, as long practiced by both the US and itself.

It is relatively easy to further secure the US voting system, and there is much that can readily be done to make US democracy more competitive and informed. But a high quality democracy is not the real goal. Instead, the US elite’s obsession with Russia’s election meddling is a circus aimed at distracting the public from domestic problems, and at increasing national security paranoia to justify more military spending and more domestic surveillance.

Warning: Don’t Be Conned By The Democracy Meddling Narrative

How we got here, how to address authoritarian Russia’s encirclement fears, and how to restrain the US imperial impulse are huge questions. A good starting place is to strip away US hypocrisy regarding democracy meddling and democracy promotion.

Doing so does not imply moral equivalence, but it has two huge benefits. First, it can help avoid getting locked into conflict on grounds of false principle. Second, it can help surface the real concerns and conflicts of interest that must be managed.

All of this is especially important for Europe, where the damaging backwash of US actions are now so often felt.