In Brief: Milwaukee Magazine Says Parks are “Dull” (Wrong!), Idiot of the Day, Closing Tax Loopholes
2009 June 23
On this day in 1867, the first commercially viable typewriter was invented right here in Milwaukee by
Christopher Sholes. June 24th ushered in the modern era of cursing inanimate objects.
- Milwaukee Magazine has a profile on the Milwaukee County Parks system in it’s current issue and tries to make that argument that we should be trying to more like Millennium Park in Chicago, or the green space near the Calatrava at the Milwaukee Art Museum. Parks are different things to different people of course, but when was the last time you saw someone having a picnic in front of the Calatrava? It’s a beautiful green space to be sure, but it’s not a “park”. On the flip side of the MM argument: just a few weeks ago a friend was up from Chicago and commented several times how cool it was that we had some parks that were less of “attractions” and more places to relax. Again, parks are different things to different people, and Milwaukee Counties parks are anything but “dull”.
- Local idiot of the day: A 42-year-old Milwaukee man with a blood-alcohol content more than four times the legal limit drove his daughter to school Thursday after partying all night long. “The driver said he went to a party at 10 p.m. and drank until he returned home at 11 a.m. He had a nearly empty bottle of whisky in his vehicle. His BAC was 0.34.”
- This sounds like a tax loophole that deserves to be closed. Of course developers are going to complain about it, but so what? We continue to have dropping tax receipts which puts pressure on other income streams or forces cuts to services, and the source is companies like Gander Mountain only paying $75 for property taxes instead of $50,000 because they planted a few rows of corn. An outrageous abuse of the system, good riddance.
The Brewers start a home stand tonight against the Twins and a few friends from Minnesota are rolling in to catch the series. I hope to be a good host and send them home disappointed.
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Beware the Law Of Unintended Consequences. Simply closing this loophole without giving it thought will give a small handful of people the ability to close down any farm they want to, simply by rezoning. The end result would give a well-connected developer a way to force a farmer to sell to him, simply by getting the land rezoned. (Property taxes are lower for agricultural use for a reason; people would scream bloody murder if they had to pay a fair price for their food.)
There’s a legitimate reason most loopholes exist; address that when addressing the abuse.
“people would scream bloody murder if they had to pay a fair price for their food”
Arlen, I don’t know how you can say that when the government goes out of their way to prop UP food prices, like paying land owners not to grow crops and by buying up “excess” food in order to reduce supply.
I agree with Dan; close the loophole.
The farmer doesn’t make much from the food. For example, take the milk price supports that were briefly talked about a few years back. They guaranteed a farmer a fraction of the price he was paid for milk in 1909, with an extra tip added based on the distance the farm lies from Eau Claire, WI. (This of course, put WI farmers at a disadvantage already in competing with other states.)
Farmers are the only producers that don’t get to set their prices based on cost of production. Instead, most farm prices are set by one of a very small number of megacorporations.
But vague philosophy aside, let’s crunch some numbers:
USDA figures report nearly 11 million acres in farm cropland in Wisconsin.
Same source (dated 2007) lists crop value at $2.7 billion. Dividing that out, it gets to roughly $250/acre. That’s just crop, if we factor in animal and other value, it goes up to a little over $1000/acre.
Actual working farms are not making enough to pay the same real estate tax as developed land would call for.
In principle, I agree. What the developers are doing seems an abuse of the system (I say seems because I only have the facts in the article, which seems to imply that a little farm use is enough to move an entire parcel into agricultural tax space) and should be addresses. But just eliminating the use-value entirely isn’t going to work, either.
The best question, left unanswered by the article, is: Is the entire parcel of land being farmed, and thus taxed lower, or is just a piece of it being farmed, but the entire lot’s taxes lowered.
I don’t have a problem with different tax rates for different uses of the land (especially when the most vital use of the land, producing food for urbanites who can’t feed themselves, pays so badly — let’s put it in perspective, every single dairy farm in the state, put together, didn’t gross in 2007 what Google netted last year). If a developer wants to “bank” his land in farming for a few years, it should be taxed as farmland so long as that’s what it’s used for. Eliminate/reduce the gaming of the system, by all means, but we shouldn’t toss out the baby with the bathwater.
Arlen, the real question is why farmed food does not follow the economic laws of supply and demand. If you can answer that, then I’ll shut up and support the huge, huge, huge tax subsidization of the industry (we all do pay for the price of food; it just comes in the form of subsidies and buying excess food to throw away).
Supply and demand doesn’t operate well in the conditions of a farm:
1) Very few buyers. Farmers are breaking past that with the various Farmer’s markets and selling directly to the consumers in some cases, but still an unhealthily huge amount of buying of farm products goes through a very few large corporations. And the conditions are such that no real competition will arise to change that anytime soon.
2) Farmers have to sell. They don’t have the luxury of holding out for a better price. In other marketable goods, the producer can warehouse the goods when the market won’t cover their costs. But food expires quickly, milk even faster, so the farmer has to take what the corporate buyer offers, regardless of the reasonableness of the offer.
The nature of farming is also antithetical to S&D: crops mature at the same rate, so harvest time is always a glut on the market, because everyone sells at once (or within a very small window). Hence there is never a time on the S&D curve where the farmer gets the benefit.
When you combine that with the first two factors, you get a playing field heavily weighted in favor of the corporate buyer. At its worst, it resembles Grapes of Wrath.
Farming is pretty much the only industry where the producer doesn’t get to sit down, calculate his costs of production, factor in an ROI, and decide on a selling price. Farmers get a “take it or leave it” offer from the food and dairy industries (no, farmers don’t control either industry) and settle for what they’re willing to pay.
You want to get rich, get in between the farmer and the consumer. *There’s* where the money is. Let’s take milk: the farmer gets about 43 cents per gallon of milk (based on Feb Chicago prices of 9.50/hundredweight, which is about 22 gallons). The difference between what you pay at the store and that is not making it to the farmer. I always get a chuckle about how an increase of 20% in farming costs is going to add 30+ cents to a gallon of milk. A farmer is told what he’s going to get for his milk, he doesn’t set a price, and even if he did, how a 20% increase in his price results in a final price increase of double what he gets for his milk is beyond me. (The cost of processing milk doesn’t change simply because the cost of acquiring it does.)
“Farmers get a ‘take it or leave it’ offer from the food and dairy industries (no, farmers don’t control either industry) and settle for what they’re willing to pay.”
Exactly. The supply of food is so high that buyers can make an offer and they are no worse off if the farmer won’t take it. There are plenty of other farmers who will sell.
If supply met demand (demand from consumers, not the distributors), this would not be possible. Getting a ‘leave it’ from a ‘take it or leave it’ offer would result in lost profits (which would be taken by a competitor or purchased directly in farm markets in order to deal with the food shortage that results).
I really do think the problems you see are a result of the government pandering to the farm special interests and trying to prop up prices and not “lose” farming jobs (even though as far as I can tell, that needs to happen).
“Exactly. The supply of food is so high that buyers can make an offer and they are no worse off if the farmer won’t take it. There are plenty of other farmers who will sell.”
Not supply. The problem is too few buyers, not too little demand. If, as a buyer, I know that the four other people in the bidding aren’t going to compete with me, and that no one else will enter the bidding, and further that the sellers *have* to sell or will lose their entire investment, I can feel free to low-ball the seller. It has nothing to do with supply and demand, and everything to do with artificially dampening prices.
The only farmer that is able to ‘leave it’ is one that has managed to route around the intermediaries. That number of farmers is growing, slowly, through the farmer’s markets and through CSA shares, and the like, but it’ll take a few more decades of current growth before these alternate routes will be available to most farmers.
‘Lost profits’ is a nice theoretical concept, but it’s not accurately quantifiable. The action you posit isn’t likely to happen, simply because it will destabilize the market, and the corporations desire a stable market more than a few percentage points more profit. If, given we are those buyers, I follow your lead (or more precisely remain consistent in behavior while you do the same) we both profit greatly, and more importantly, we keep the market a buyer’s market. Maintaining control of the market is more important than upsetting the market to the point where I stand to lose more than I would ever gain.
The market control won’t be permanent, but it’s in my best interest to maintain it as long as possible, because it ensures a consistent income for myself and my shareholders. Once the sellers become our equal in the market, we buyers will *have* to deal, but until then maintaining control means more profits than a fair market would allow, so it’s my best course.
“Factory farms” millions of acres owned by just a few large corps, is one way to meet the problem of too few buyers, and it’s clear that’s the way you support. My biggest problem with them is they don’t have a long-term interest in the land; farming is just one way to make money. When the land dries up, they’ll cash out and let the next person take the hit for resting and replenishing the land. (I’m assuming you realize the lesson we learned back in the cotton south and the dust bowl, that land cannot always be in production; it has to lay fallow a while to rest and replenish itself regardless of how much fertilizer you use. Crop rotation and the Land Bank were two ideas that came out of that.)
I’d rather encourage more buyers to enter the field, and equalize the market in that way, but that’s where the barriers to entry have been erected. And you can bet that wasn’t done by the “farm interests.” It’s their interest to see the barriers are low.
A free market’s natural tendency is to reduce the number of competitors to a very low number, then implode, crash, and start the cycle again (alternatively, what happens is when the competitors become few, they exercise restraint to avoid the crash, but when they do that, the market’s no longer free so the discussion is moot).
I’d far rather maintain the number of competitors at a high level, when ensuring competition is easier, and avoid the cost of human suffering caused by the crash. This means many farmers and also many food buyers. It’s always debatable whether making everyone suffer a little is better than making a subset of the group suffer extremely, and where we draw that line is foggy; all we can do is try. The cost of failure is that the suffering we tried to postpone arrives anyway, so there is little to lose by trying, and perhaps much to gain if we succeed.
BTW, have a look at Elizabeth Warren’s interview on the Jon Stewart show. It’s some really good financial reporting (it’s sad but true that the best financial reporting on TV these days comes from a comedian).
Arlen, it sounds like you would be in favor of removing the numerous government programs that exist in order to keep the supply of farm produce from getting larger than it already is, like paying potential farmers not to farm and like buying up excess produce. Since there is no excess, like you say, then there is no need for these programs (and one wonders what they keep spending our farm subsidy tax dollars on!).
Your assertion that supply is not inflated just doesn’t match reality. The fundamental problem with your argument is you are ignoring the consumer and putting the buyers/distributors/whatever in place of them. If what you say were the whole story, then the price of every item coming out of a farm would be one penny over cost, because every farmer would rather take one penny than nothing, and the way you paint it, those are their only two choices.
But that isn’t the case. The true source of demand is consumers. Middlemen cannot set prices (without government help, anyway). If we’re ever around a cocktail napkin together, I can prove it.
We KNOW that supply outstrips demand in the farm industry. We have government programs to prove it. That excess alone can explain the low prices. To introduce a complex oligarchical conspiracy is unnecessary. Further, it does not address whether this structure could survive in an environment where supply were equal to demand. You seem to have completely ignored this point in my comment. If supply=demand, the purchaser’s power you describe simply does not exist. If the purchaser offers $x for the crops as a “take it or leave it” offer, the farmer knows they can leave it, which will result in a food shortage (because supply=demand), and will lead to opportunities to sell the crops through other channels (that exist today or not). Realistically what would happen is farmers would band together and bargain collectively, because that is now in their interest (but it isn’t in their interest when supply is greater than demand).
The source of this power is supply and demand. The people who claim that everything in the world is an exception to market principles seem to misunderstand the meaning of the word “exception”.
We have six or seven planting beds on our lot. Does that mean we can get a giant break on property taxes, too?