
Nothing Like This Has Ever Happened Before – Gilded age in SF compared to today - lladnar
http://techcrunch.com/2016/01/29/nothing-like-this-has-ever-happened-before/
======
Lazare
The article is about (among other things) Henry George, and his ideas about a
single land value tax being the best way to fund government. Interestingly,
modern economics is quite favourable to his ideas. In particular, research on
the economics of taxation has shown that land taxes are the most efficient
taxes with the lowest deadweight losses.

And when it comes to actual economists, Krugman "agrees that land value
taxation is the best means of raising public revenue", but has questioned if
it would raise enough; many other economists have suggested that it would.
Rothbard (a leading an-cap/Austrian economist) attacked it, but I don't think
many people ever agreed with him. Milton Friedman (a very widely respected
economist of the Chicago school) said it was the "least bad" tax for raising
government revenues. Hayek (another Austrian and also a Nobel prize winner),
was an early proponent but later feared it would be unfair in practice. Robert
Solow and Joseph Stiglitz are also on record as being in favour. Some of
George's contemporaries suggested that distinguishing land from capital made
no sense, but (as above) modern research has shown otherwise.

And Marx hated the idea, viewing it as "Capitalism's last ditch". In other
words, he was afraid it would work, and thus delay to inevitable onset of
world socialism. (I think on balance that should be counted as a vote in
favour of Georgism?)

In short, it's an idea supported by research and with the backing of a
glittering array economists from the far left to the far right (including
several winners of the Nobel prize), a few prominent politicans (Churchill in
Britain and two US presidents), numerous jouranlists and pundits, etc. And yet
it's never been tried. (I don't count the few experiments at the local
government level, since national taxes still applied.)

Kind of odd. Of course, it would be an enormous change to enact, which I
suppose explains it.

~~~
AnthonyMouse
I don't get land value tax. The idea is theoretically supposed to be that you
only pay tax on the value of the land, but the value of the land is because of
what's on/around it. There is plenty of perfectly good land in rural Texas or
Iowa but it isn't as valuable as land in San Francisco because there isn't a
city right there.

So you have somebody who is going to build a factory and they pick a nice
piece of low value rural land. But once there is a factory, people build
housing for the workers and stores and so on, and now you have a whole town
centered on the factory and the value of the land goes up. But the reason the
value of the land goes up is _because of the factory_.

So the next thing you know the factory owners realize they're sitting on a
"high value" piece of land, so they put all the machinery on trucks and carry
it fifty miles down the road where the land is still cheap and they don't have
to pay high taxes. And then the process repeats.

It seems like the result would be a _preposterous_ amount of urban sprawl and
inefficiency. Anything that doesn't actually care about its location but
attracts other investment would keep getting moved, which would destroy the
value of the third party investment.

Third parties would then respond by making their investments mobile (e.g.
living in mobile homes or selling food from food trucks instead of building
houses or restaurants). Every time the taxing authority said the piece of land
where everybody is has significantly more value than the piece where nobody
is, everything moves down the road again.

And that's the extreme case but you get the same thing in the suburbs. You
don't want a house which is near anything because the land value will be
higher which is now a liability, so build it a little further out and you'll
have a longer commute but your taxes will go down by $10,000/year.

Because it isn't the land that has value, it's the people and the stuff. If
you tax land highly non-uniformly then the people and stuff will spread out.

~~~
larsiusprime
Actually what happens is without land value tax, you get land speculation. In
practice with Land tax, you'd have cheaper land than without it because there
is no incentive to speculate and hold productive land out of use hoping its
value will go up (which is where most of the price of real estate comes from
-- it's a "safe bet" that land values increase as long as the area's
population increases, so there is no incentive NOT to speculate and drive
prices way up).

An interesting phenomenon like this played out in EVE online where an
economist independently re-discovered the land tax:
[http://www.gamasutra.com/blogs/RaminShokrizade/20130405/1899...](http://www.gamasutra.com/blogs/RaminShokrizade/20130405/189984/How_I_Used_EVE_Online_to_Predict_the_Great_Recession.php)

~~~
AnthonyMouse
> there is no incentive to speculate and hold productive land out of use
> hoping its value will go up

It is possible to speculate without holding productive land out of use: You
buy it and then rent it out. Which land value tax would presumably have little
effect on (except insofar as it increases sprawl and therefore reduces city
center land values) because the tax would be passed on to the renter(s).

The reason people buy land in cities and then don't use it for anything is
often because they own enough other property in the same city that withdrawing
rental units from the market will increase the rents for the other units by
enough that the strategy is net profitable. Which seems like it ought to be
illegal, but anything nefarious that has the consequence of increasing
property values tends to get overlooked "for some reason."

~~~
larsiusprime
> because the tax would be passed on to the renter(s).

false:

[http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-
ri...](http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-rich-and-
hurt-poor.html)

~~~
AnthonyMouse
What your link is getting at is if you increase the tax on property/land
value, it _instantaneously_ reduces property values to account for the net
present value of the future tax payments. So passing it is one-time very bad
for current property owners.

Because the housing market is extremely efficient. Rents are essentially
property value * current interest rate + taxes + property maintenance costs.
But rents are also set from the other side by what renters can afford to pay.
So if you increase the tax, the _property value_ goes down to compensate.
Anyone who buys the property after the tax is already in place is unaffected.

So there are two ways of looking at it. One is the renter pays the tax (i.e.
the formula for rent has "the entire amount of taxes on the property" as a
component) and the other is the tax is paid entirely by whoever owned the
property when the tax was enacted, via a large reduction in property value. It
depends which point in time you're looking at it, the moment when the tax is
enacted or rent paid by tenants in the future as a percentage of then-present
property values.

But in any case the tax _isn 't_ paid by speculators who didn't already own
the property in year zero of the tax being enacted.

------
Animats
Yes, that's Henry George.

The article ends with the comment that the automobile broke the land ownership
monopoly by creating suburbia. It took about fifty years to fill out
surburbia, but that's been done.

Henry George's single tax plan has been implemented in two cities in the US.
One is Fairhope, AL.[1] The Fairhope Single Tax Corporation owns most of the
land in the town, including the downtown area, and rents it out on 99 year
leases. The ground rent cover all property taxes, plus some public facilities
the Single Tax Corporation runs. The corporation sets the rent based, as Henry
George wanted, on the most productive use of the land. This encourages
development. This just covers the land; you can build, and own the building,
but must keep up the rent payments on the land to continue owning the
building.

What you can't do in Fairhope is buy land and wait for it to become more
valuable. You cannot get a capital gain out of owning land there. So no one
can become rich by owning land.

[1] [http://www.fairhopesingletax.com/](http://www.fairhopesingletax.com/)

~~~
ubernostrum
_The corporation sets the rent based, as Henry George wanted, on the most
productive use of the land._

So, a single unelected and unaccountable entity managing a centrally-planned
economy? This is the utopian vision?

~~~
dredmorbius
A corporation is implementing the taxation model described by George. Note
that "corporation" is any incorporated body, and need not be a for-profit
enterprise. In many parts of the US, towns are corporations ("incorporated")
already. I'm not familiar with the governance of Fairhope's corporation, but
incorporation need not require unaccountability.

As for central management of core elements of an economic system, look up the
role of the Texas Railroad Commission (hint: it didn't regulate railroads) and
prepare to have your mind blown.

------
TuringTest
"A missing piece of Perez’s work, that often goes underemphasized by the
private investment community, is the role of government in creating an
equitable framework that allows everyone to participate in benefits of
technological change. This is not an argument in favor of big government for
big government’s sake; it’s to point out that when technology changes the
complexity or structure of society, citizens have to push public institutions
to transform themselves too."

This highlight explains something that the Californian investment mindset
seems to ignore - capitalism is good at creating wealth, but it tends to
concentrate a lot of power in the hands of a few; _efficient_ government is
needed to distribute that wealth, so that an enough amount is shared and most
of society benefit from it.

------
rsync
Best and most interesting story I have ever read on TC.

~~~
ScottBurson
Kim-Mai Cutler is great. Here's one of her classics:
[http://techcrunch.com/2014/04/14/sf-
housing/](http://techcrunch.com/2014/04/14/sf-housing/)

~~~
mklim
That was a deeply informative read, thank you for linking it.

------
barney54
So what is the difference between a land tax and property tax? After all I
looked at my tax assessment recently and there is a value for the land and a
value for the house itself?

~~~
Lazare
George advocated a land value tax; that is a tax on the _unimproved value of
the land_.

This might seem like a minor difference but it actually isn't, because taxes
generally cause changes in behaviour. Sometimes those changes are desirable:
Carbon taxes, "sin" taxes, etc. More often the change is undesirable (as when
we tax investment, wages, or consumption). (And, very frequently, those
changes in behaviour results in the actual burden of the tax shifting. Payroll
taxes are levied on businesses, but nobody actually thinks they _pay_ them.)

Tax housing, and you'll get less housing. Since people like housing (that's
why they build it), that's considered a Bad Thing. Tax land, and you'll...get
the same amount of land. With a few very minor exceptions, the amount of land
is fixed. No distortions, no deadweight costs, and no real ability to shift
the economic burden of the tax.

~~~
tomjen3
What? It is trivial to shift the economic burden. As en employer I only hire
remote: my employees now have to waste space having a home office.

As a home owner I want a garden, but I don't want to pay for it so I build it
on top of my house and make a basement to put my car in - I now shifted
something like 8/10 of my tax burden because I use less land.

~~~
vidarh
You have shifted the burden by giving up on a resource that is valuable to
society around you. That may well be an equitable trade. The point is you
won't get rid of the tax without giving something back to society in return.

Now, I don't believe that this is sufficient as an alternative to all other
taxes, but it does have many desirable properties, and your suggested
behavioural changes are amongst them: Optimizing usage of land.

~~~
tomjen3
Yeah but I have done that by lowering my tax contribution too. In fact if I
move into one of the new mega-super-skyscrapers that this will surely result
in I may end up paying so little in taxes (because so many people will share
the ground) that it won't be enough to pay for the police and fireservices,
which surely will go up because it is more expensive and difficult to fight
fires in so tall buildings.

So in effect I have shifted most of my tax-burden off to others, land will
have very little value (because it will have to be taxed more and more
heavily).

Of course you can mix it with older taxes, but then you have the problems you
had with them too.

~~~
AngrySkillzz
It's relative to the value of the land though. The value of the small area
your skyscraper occupies in downtown Manhattan or wherever is probably
extremely valuable. Thus, high land taxes to be split among the occupants.
It's hard to say whether your tax burden would go up or down without hard
numbers, though.

------
dang
If someone can suggest a less baity title (preferably using representative
language from the article), we'd appreciate it.

~~~
hacknat
I think the title is fair, because it is meant as a literary or rhetorical
reference, not as a sensational headline meant to draw you in to some ho hum
news article.

~~~
dang
It's pretty clearly meant as both.

