Wednesday, July 09, 2014

Neofeudalism's Tax Donkeys (Yes, You) and the Battle for Control of Resources

Those who own the resources and influence the political control of those resources are the New Nobility in a pernicious Neofeudalism enforced by the very government that claims to serve the debt-serfs and tax donkeys.

Let's tease apart several strands of Neofeudalism, my preferred term (along with Neocolonialism) for the Status Quo.

The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

It is increasingly clear that a new form of feudalism has subverted democracy, and that the New Feudalism is powered by concentrations of private wealth and centralized state control: what I call the New Nobility.

Recall my Neofeudalism Corollary #1:

If the citizenry cannot replace a dysfunctional government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.
The essence of Neofeudalism is: those with access to the low-interest unlimited credit spigot of the Federal Reserve become more equal than others--the perfect Orwellian description of a Neofeudal arrangement in which financial leverage buys not just rentier assets but political power and control.

Neofeudalism depends on the cultural supremacy of Neoliberalism, the belief that the social order is defined and created by markets: if markets are free, participants, society and the political order are also free.

This conceptual framework is the perfect enabler for the dominance of credit-based, leveraged capital, i.e. Neofeudalism. In a "free market," those with access to nearly-free money can outbid everyone who must rely on savings from earned income to finance borrowing. In a "free market" where those with access to leverage and unlimited credit are more equal than everyone else, the ability of wage earners to acquire rentier assets such as rental housing, farmland and timberland is intrinsically limited by the financial system that makes credit and leverage scarce for the many and abundant for the few.

Those with access to the low-interest unlimited credit spigot of the Federal Reserve are free to snap up tens of thousands of houses and tens of thousands of acres of productive land--the classic rentier assets that reliably produce unearned income because people need shelter and food--along with other rentier assets such as parking lots and meters, fossil fuels in the ground, and of course the engines of credit creation, the banks.

In The Neofeudal-Neoliberal Arrangement: Since We Own What You Need, We Own You(June 13, 2014) correspondent Bart D. discusses the many barriers to middle-income households buying and holding productive assets. (Recall that owning a home is a form of consumption; a rental housing unit, an orchard, shares in an oil well, etc., are productive assets in that they generate an income stream.)

Correspondent Kevin K. (among others) has described the many barriers being raised by local government (at the behest of those who have bought influence over local government policy and regulations) to home businesses and small businesses that might offer competition to cartels and monopolies. Should a legitimate (as opposed to black market/cash business) small business manage to open its doors, it faces a blizzard of junk fees, permits and taxes that make its survival a dubious prospect. No wonder self-employment and small business are in structural decline:

The primary role of small business owners and homeowners in the Status Quo is to labor for the government's Upper Caste as uncomplaining tax donkeys. (I coined the term tax donkeys on July 7, 2010 and have found no earlier useage.)

Cash-strapped cities, counties and states are increasingly turning to property taxes and parcel fees to raise millions of dollars to pay their employees' salaries, benefits and pensions, and if there are no "Prop 13" type limits on how high property taxes/fees can be jacked up without voter approval, homeowners are a captive tax base which is ripe for exploitation: homeowners are reduced to tax donkeys, loaded up with ever higher taxes and fees and expected to suffer the whip without complaint.

Opting out of the Status Quo becomes next to impossible as property taxes skyrocket. We have friends in California whose property tax is $16,000 a year--and this is not at all unusual for those who bought homes in high-demand areas of the state in the past eight years. Add in utilities, sales taxes and the unavoidable host of other junk fees, and even the most frugal homeowner has to generate $2,000 a month in net income just to keep the lights on and keep the county from auctioning his house off to pay the confiscatory property taxes.

Add in the bubble-level prices for productive assets generated by competition from buyers with unlimited free money courtesy of the Federal Reserve, and it makes little financial sense for the merely middle class to overpay for an asset and then have to pay local government $160,000 a decade for the privilege of being a tax donkey in their jurisdiction.

That's $320,000 for 20 years of "ownership" and $480,000 for 30 years. Fail to pay your property taxes and your claim of "ownership" vanishes.

High taxes, bubble valuations and multiple regulatory barriers and fees all serve to reduce the opportunities for the bottom 99% to own any essential resources as those resources become increasingly scarce. Those few who scrape up the cash and are willing to mortgage their future to compete against private equity financiers and global corporations (and thieves from overseas seeking to park ill-gotten booty skimmed from peasants) face impoverishment as the cost of "ownership" is crushing for those with stagnating earned income and no access to the Fed's near-zero interest free money.

Those who own the resources and influence the political control of those resources are the New Nobility in a pernicious Neofeudalism enforced by the very government that claims to serve the debt-serfs and tax donkeys.

Control the regulatory and taxation machinery of governance and the essential resources, and you control everything of any value, leaving the debt-serfs and tax donkeys with nothing. If that's not Neofeudal, then what is it?

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go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.

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You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

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Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

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Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers (25 minutes, YouTube) 

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Thank you, Donald C. ($50), for your magnificently generous contribution to this site -- I am greatly honored by your support and readership.Thank you, Alan B. ($50), for your monumentally generous contribution to this site -- I am greatly honored by your support and readership.

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