
The Threat Coming by Land - bpolania
http://www.bloombergview.com/articles/2015-09-09/the-threat-coming-by-land
======
gaius
_Essentially, a Land Value Tax is a property levy with exemptions for
development._

So let's say you buy a house, not because you are a speculator, but because
you want a home. You live there for 50 years, raise your family there, and are
enjoying your retirement. Someone over that time period, your property happens
to become more valuable, as say a city expands.

Then along come some carpetbagger in a shiny suit and says, your home is not a
"productive" use of this land, and he's going to tax you more than your
pension is worth if you want to stay there, you should make room for his new
development of "executive apartments" or whatever. No normal person would
think that is just or right.

~~~
jacobolus
This scenario of yours is used to justify policies such as California’s Prop
13.

But realistically, the primary beneficiaries aren’t retired middle-class
homeowners on fixed incomes, but large corporations who own commercial
property that now have their property taxes permanently frozen at 1970s
levels, costing local governments huge amounts of money and encouraging poor
land uses.

~~~
shaftoe
I love when people pretend that money not taken in in taxes is lost money, as
if the government has default claim to it and is missing out by not
confiscating it.

~~~
jacobolus
In this case, the losers are local roads, public transit, public utilities,
schools, police and fire departments, social services, emergency management,
parks, libraries, museums, street sweeping, garbage collection, food
inspectors, building inspectors, city planning, other city hall offices,
election infrastructure, etc.

Or, at the county level, judges and court officials, district attorneys,
public defenders, the county sheriff’s office, county fire department, animal
control, emergency rooms, county parks, public health officials, etc.

~~~
HiYaBarbie
_All_ of which could be _much_ more efficiently provided by private
enterprises competing in a free market.

Strangely enough, bureaucrats just aren't particularly prudent when _they_ are
using _our_ money.

~~~
dctoedt
> All _of which could be much more efficiently provided by private enterprises
> competing in a free market._ (Emphasis in original.)

That's one, ideological view. Another view is that the so-called free market
is very focused on the short term, which isn't conducive to providing public
goods [1].

Moreover, the "free" market seldom actually is, because more than a few of the
players work at least as hard on amassing market power and excluding
competition as they do on competing.

[1]
[https://en.wikipedia.org/wiki/Public_good](https://en.wikipedia.org/wiki/Public_good)

~~~
HiYaBarbie
It's not "an ideology", by the way. It's simple truth, and I pointed to one
element of why it's obvious:

>> _bureaucrats just aren 't particularly prudent when they are using our
money_

> _Another view is that the so-called free market is very focused on the short
> term, which isn 't conducive to providing public goods_

I can't decipher what potential problem you're pointing to. Apparently even
"knowledge" is a "public good".

But whatever your complaint there is, it's based on the flawed premise that
there is some One True Way <X> should be, and that central planning
intervention is necessary to make it so.

~~~
dctoedt
> _It 's not "an ideology", by the way. It's simple truth, and I pointed to
> one element of why it's obvious:_

That fallacy is called _ipse dixit_ , roughly translated as _I say so,
therefore it is._

> _bureaucrats just aren 't particularly prudent when they are using our
> money_

And _that 's_ the fallacy of the excluded middle. Just because (some)
bureaucrats aren't particularly prudent when using our money, it doesn't
follow that (as you alleged before) the free market is always better.

> _But whatever your complaint there is, it 's based on the flawed premise
> that there is some One True Way <X> should be, and that central planning
> intervention is necessary to make it so._

I actually happen to think the opposite of the two assertions that you claim
constitute my premise.

~~~
HiYaBarbie
> _That fallacy is called ipse dixit, roughly translated as I say so,
> therefore it is._

That's not what happened though. I pointed out that bureaucrats aren't prudent
when spending other people's money, and that's self-evidently true.

For example, you know would not be prudent with other people's money either,
or with $1000 you found on the street.

> _And that 's the fallacy of the excluded middle. Just because (some)
> bureaucrats aren't particularly prudent when using our money, it doesn't
> follow that (as you alleged before) the free market is always better._

I was hinting at the fact that since everyone uses someone else's money less
prudently than his own, using someone else's money results in 'waste' compared
to using one's own, and therefore, all public spending results in 'waste'.

So it's clear that the free market actually is 'always better' in that sense.
It's better in all other senses too.

For example, you'd be hard pressed to argue that a state-maintained monopoly
or cartel is better for us than no such thing.

> _I actually happen to think the opposite of the two assertions that you
> claim constitute my premise._

Quote the _two_ assertions I claimed constitute your premise.

~~~
dctoedt
> _That 's not what happened though. I pointed out that bureaucrats aren't
> prudent when spending other people's money, and that's self-evidently true._

It's also a sweeping generalization, both:

\-- as to what counts as a "bureaucrat" (of whom I know more than a few); and

\-- as to what counts as "prudent" \--- a public servant must take into
account more than your, or my, personal preferences.

> _you know would not be prudent with other people 's money either, or with
> $1000 you found on the street._

Evidence, please. (I happen to think I'd be prudent in each case.)

> _since everyone uses someone else 's money less prudently than his own,
> using someone else's money results in 'waste' compared to using one's own,
> and therefore, all public spending results in 'waste'._

Another sweeping generalization. It also depends on your definition of waste.
Is it waste for "bureaucrats" to spend money on, say, enforcing traffic laws
that prevent you from going as fast as you want through a school zone? (Feel
free to pick another example; I really don't like the "but think of the
children!" argument, or rather, so-called argument.)

> _So it 's clear that the free market actually is 'always better' in that
> sense. It's better in all other senses too._

I used to think that way. I assume you know about "negative externalities"
[1]. If you remember the days before the Clean Air Act and Clean Water Act,
then recall what the air and water were like in the U.S. when "the free
market" allowed businesses to dump their wastes in the air that the rest of us
breathe and the water that the rest of us drink.

Some key limiting factors of "the free market":

1\. People tend to have tunnel vision --- they want what they want, and they
want it _now_. (This, I suspect, is a trait developed by natural selection
[2].)

2\. In a so-called free market, we assume that buyers of goods and services
will individually make rational choices that, in the long term, will promote
the common good. But that assumes two facts not in evidence:

First, it assumes that people will take the time to investigate the choices
available to them. That doesn't always happen. For example, I don't know a lot
of people who study the terms of click-wrap agreements and decide whether they
want to proceed. Most people simply click on "I agree" and hope that they
aren't giving away their first-born; they also unconsciously count on the
legal system not to enforce terms that are _too_ onerous.

Second, it assumes that people are rational in their choices. That assumption
is increasingly being challenged in behavioral economics [3].

> _Quote the_ two _assertions I claimed constitute your premise._

Okay --- what you said was this: _" But whatever your complaint there is, it's
based on the flawed premise [A] that there is some One True Way <X> should be,
and [B] that central planning intervention is necessary to make it so."_ I
don't believe either of these things _a priori_ , but neither do I rule out
the possibility that _in a particular case_ one or both of them might be true.

[1]
[https://en.wikipedia.org/wiki/Externality](https://en.wikipedia.org/wiki/Externality)

[2]
[http://www.questioningchristian.com/2006/03/good_news_bad_n....](http://www.questioningchristian.com/2006/03/good_news_bad_n.html)
(a self-cite)

[3]
[https://en.wikipedia.org/wiki/Homo_economicus](https://en.wikipedia.org/wiki/Homo_economicus)

~~~
HiYaBarbie
I've debated lots and lots of _other_ psychopaths, going through variations of
those bullshit distractions, so I'll just not bother now.

~~~
dctoedt
Check the mirror first, noob. And while you're at it, note the number of
downvotes you've attracted in your first few days here.

------
narrator
The reason land is so valuable is that when new money is created in our
financial system it is created as loans. Naturally, banks want to lend against
valuable collateral, which is primarily represented by property and large
businesses, thus the new money goes to holder of land and large business first
and then slowly spreads out to the rest of the economy. This time lag in the
distribution of money and that there is a smaller class of land and business
owners is the main source of inequality.

This is one of the main criticisms that Hayek and Von Mises have of
Keynesianism: that "raising aggregate demand" via monetary policy does not
raise prices evenly but instead tends to create asset bubbles because the new
money enters the system through loans against assets.

------
massysett
Unconvincing. So the explosion in modern communication technology and advanced
worldwide transportation has led to this?

Many jobs are now shipped round the world. Xrays are read overseas. iPhone
parts are procured from multiple nations. People work from home--some teams of
software developers are scattered over thousands of miles.

Meanwhile, there is a growing prospect of transportation becoming even cheaper
and more efficient. We've already seen this for goods--containerized shipping
was a revolution. Now the Uber-like services and driverless cars hold
potential to remake cities.

A piece like this needs a rebuttal--or at least a mere mention!--of these
developments. Instead the reader is left to figure out how innovations like a
video phone in everyone's pocket and worldwide next day shipping have had the
exact _opposite_ effect that one would expect?

~~~
muraiki
Of the few hundred people I know, who work across many industries including
health care, automotive and aerospace engineering, and software development, I
can think of 3 who are able to work from home full time. What you experience
in your particular area might not be the norm in another part of the world (or
even just the US).

~~~
massysett
Just because they are not able to work from home does not mean that technology
has not affected their work. More importantly for the purposes of this
article, technology may still affect the importance of proximity in land uses.
A call center worker may not be able to work at home. But thanks to cheap
communications the job can be moved overseas, thus reducing the value of land
in rich countries. A health care worker may not be able to work at home. But
if someone overseas can read the x-rays, there's less need for land in the
rich country. Moreover you say you know only three who can work from home
_full time_. Others may be able to work from home part time, which gives them
freedom to live farther from work and commute.

These are obvious arguments in an age of blanket 4G coverage but this piece
doesn't even address them.

------
oldpond
LMAO! I love how Bloomberg (voice of the financial sector) stirs up shit and
then suggests that taxation is the solution. This is great propaganda at work
here, so study it well. They want desperately to steer the world away from
financial sector reform (debt amnesty, bank regulation, prohibition of
currency speculation, etc.) and blame it all on the government. Why? Because
the US government is leading criminal proceedings against the leaders of the
financial sector for their crimes during the collapse of the financial sector
in 2008.
[http://www.bloomberg.com/news/articles/2014-11-03/jpmorgan-f...](http://www.bloomberg.com/news/articles/2014-11-03/jpmorgan-
faces-u-s-criminal-probe-into-foreign-exchange-trading)

~~~
1971genocide
Yeah, Bloomberg View has no idea how real people in real world live and work.
I remember reading an article a few weeks ago with the premises that income -
equality is okay because we have these superman productive individuals.

They also love china/japan/asia bashing which is okay but after a while it
gets old.

I still read it the same way I find fox news to be interesting.

------
tinco
The article is a bit strange. In my opinion it accurately describes a problem,
but then totally fumbles on the reason and the solutions.

The real reasons are described by narrator and kephra in this comment thread.
They've got to do with how land is scarce and getting scarcer, and how banks
leverage the demand almost without risk and in perpetuity. If you don't really
get the economics of it, it comes down to this: property owners negotiate with
you one (important) aspect of your life (where/how you live) for a percentage
of _all_ income you _ever_ make. Imagine the scale of that nationally, it's
really not surprising to learn that property is the largest share of income
for capital.

I've been thinking about this reason a lot since I've started reading Piketty
and perhaps more so now I'm looking to buy a house in one of those super
scarce places. An interesting point Piketty makes at some point that this form
of capitalism is fundamentally un-American, or at least, against the idea of
the U.S. in its forming years, but you'll have to read the book for that. I
promise you he's not a socialist ;)

The solution that came to me, even though it would screw me if it were
implemented, is capping mortgages even stronger. In the Netherlands we are
moving to a 100% home value cap in the coming few years, and gave them a max
duration of 30 years, that fixes one side of it. But it should also enforce
lower limits on mortgage relative to salary.

Perhaps those values are already closer to what's right in The Netherlands
than they are elsewhere. In Amsterdam you pay 220k for a small 2-bedroom
apartment or small house on the edges, which costs you about 35% of your
income (if you maxed out).

Those regulations give way to another problem though, and that's rent. They
definitely should be regulated the same way. At the moment that same apartment
in Amsterdam rents for about 1300, almost twice to what a mortgage would cost.
And I know for a fact that people who aren't allowed the mortgage do rent
those places instead, that's just draining capital.

Maybe some (amateur) economist can poke a hole in my plan (reduce mortgages
and rents through regulations). I have a feeling there is a right level of
regulation that will make mortgages comfortably profitable for banks without
it squandering the publics spending power.

------
golemotron
The article doesn't make a convincing case that there's a problem.

------
aaron695
Given such a ridiculous premise they need to back their theory up with data.

We are living denser than we ever have, and getting denser but somehow that's
going to just stop because land owners will do what and why?

Stop building up? Stop subdividing? Because why? they hate money?

~~~
ZeroGravitas
Building up isn't affected by a land value tax, since the tax value is on the
unimproved land. If anything it encourages building up.

One negative outcome, in the absence of a land value tax, is empty lots.
Leaving a lot derelict may be the wisest option for those that don't hate
money, as it can be held as an investment and quickly sold after it
appreciates in value. No building to demolish, or tenants to evict. Of course
in the meantime it's just a placeholder in the middle of a bustling city
that's looking for new houses and/or commercial property.

With the land value tax they'd need to pay more to keep it empty as the area
became more desirable, encouraging them to use it for some purpose or sell it
to someone who intends to use it.

------
kephra
it starts promising with:

> Landlords are eating the world.

but it then falls short, by only pointing to the tip of the iceberg, the
rising prices in city centers. But the problem is much bigger in the rural, in
2nd and 3rd world, where former small farms are replaced by big agriculture
corporations.

> To understand why, we have to look at the reasons land has value in the
> first place.

And he totally fails here. He fails to explain, that land ownership depends on
the state monopoly on use of force, and legalization of murder, rape and
genocide during the time the state acquired the land. He fails to explain that
money equals debt, debt is often preferring land as security, and therefore
land prices are doomed to rise globally.

I do not expect a Marxist analysis in Economist, but I would at least expect
some in deep comparison of how different countries cope with this problem.
Point to massive buyout of agricultural land in eastern Europe, point to the
housing bubble in Spain, point to how Hartz IV stabilized the German housing
market, ... but this article is only pointing to the iceberg in front of the
unsinkable.

------
TheSpiceIsLife
From the article:

"When it becomes more important, it also becomes more scarce, and when it
becomes more scarce, it puts a brake on growth, just as if oil became more
expensive."

Oil got more expensive. Did that put a brake on growth? Does it follow that
land becoming more expensive will put a brake on growth? Land got more
expensive, did that put a brake on growth.

I don't mean to sound repetitive, but land has been getting more expensive for
the past 300(?) years, and yet here we are.

That other thing the article says about land becoming an increasing percent of
GDP, does that really mean anything? Are the right metrics being considered
and the right data being used to come to the right conclusions?

I'm not sure I got the point of the article? Economists know what to do but
interest groups get in the way? Does that make any sense? Sounds like the
economists models don't match reality then. Economists shouldn't try to
predict the future, they do a bad enough job of predicting the past.

I'm not really sure what I'm getting at either. I think I'm just disappointed
the article ended right when I was getting in to it.

~~~
ubernostrum
_Oil got more expensive. Did that put a brake on growth?_

Have you paid much attention to what happened to Western economies following
the 1973 OPEC embargo?

------
andybak
Surely this is something that should unite both ends of the political
spectrum?

For the right - it's about improving market efficiency and rewarding
economically useful behaviour over 'rent seeking'.

For the left - it's about social justice and avoiding yet another way for
wealth to accumulate wealth.

------
jgalt212
The simplest way to counter this problem is for the Fed to raise rates this
week.

------
pcr0
If the land tax increased, wouldn't the landlords just increase the rent? Thus
making life more expensive for non-homeowners? Disregarding what the
government does with the extra tax revenue.

Feel free to correct me.

~~~
chvid
According to economic theory they would not as the supply of land is fixed.

~~~
colomon
How does a fixed supply of land preclude raising the rent?

~~~
notahacker
The land value taxers' argument generally works the other way round, arguing
that the supply of rental properties actually is artificially constrained by
landowners, and that tax on the undeveloped value of the land would push
landowners into developing and letting property on their land or selling up to
developers, implying more price competition in the rentals market and thus
less ability to pass on the tax costs to the end occupant.

The fixed supply of land is important only inasmuch as it provides a reason
why landowners can be pretty confident their land will appreciate in value in
the first place (and in some cases, to a sufficient degree to make the
additional revenues achievable from development/rentals in the short term
appear relatively trivial). Moreover, if land ownership is highly concentrated
then releasing very little of that land for rentals and gradually selling off
the highest-value parcels probably is the most effective way of maximising the
value of one's dynasty's land portfolio.

The argument isn't so much that rents would never go up at all as that the
effects of more efficient land use and competition in the rentals market mean
that individual occupants of the land wouldn't pay the _full_ value of the tax
(and would tend to benefit from commensurate rate reductions on other taxes)

How well that argument explains or even fits the facts of land ownership
varies hugely by geography.

------
bjackman
Here in the U.K. our right-wing government are planning re-introduce a scheme
whereby those in government-owned social housing have the right to buy the
property cheaply after a set period. This has always been a very controversial
idea: it does increase home-ownership rates fantastically, especially in poor
areas, but it also destroys the social housing programme (an attractive
outcome to the nasty British right).

Rent limits, related to local earnings, are one way to increase home-ownership
by making landlording less profitable. Our new opposition leader, Jeremy
Corbyn, goes further and suggests we should actually extend this "right-to-
buy" idea into the private sector. I only just discovered the idea this
morning and I think it's pretty interesting.

~~~
TheSpiceIsLife
You say "nasty right" then go on to appear to support the idea of forcing
property owners to sell. Nasty left!

I'm only half joking. P.J. O'rourke's has a chapter called 'Why I'm Right' in
his book 'Don't Vote! It just encourages the Bastards', I found it helped with
a similar attitude I used to have.

~~~
bjackman
I do indeed. We have a problem in this country; there is a shortage of homes,
so being a landlord is extremely profitable, so house prices are astronomical
and its very difficult to get on the ladder.. leading to all the homes being
concentrated in the hands of a few rich people. I want to see that trend
reversed and homes distributed more evenly.

Still though, it's a pretty extreme manoeuvre, I'd like to read an expert's
analysis of the idea.

------
x5n1
Most "land" or real estate is actually held by banks or other financial
conglomerates through a proxy called a home "owner".

~~~
duhast
Banks enjoy a cut from the interest rate but it is also the people who
deposited money in those banks who earn money that way. And noone is forced by
financial institutions to take 40 years long home loan.

~~~
Gravityloss
Deciding between buying and renting depends on many things, like the different
costs, interest rates, inflation, tenant rights etc.

------
huuu
Land should be from the country not owned by a private entity. This fixes a
lot of issues.

~~~
mikerichards
Despite overwhelming evidence of such failed policies in the past and the
"let's try failure again" crowd, you probably don't even like the reality of
your suggested policy.

You end up with a small group of people owning everything. It's like what the
left complains about now with wealth inequality, but orders of magnitude
worse.

I wish you would think these things threw.

