I think we should be replacing property taxes with land value taxes pretty much everywhere. Aside from the benefits mentioned in the Strong Towns article linked above, putting the right incentives in place to build more densely in high-demand (aka high land value) areas would be a boon to making cities and towns more walkable and more amenable to public transit, and therefore reducing sprawl and pollution. It wouldn't get us all of the way, but it would help.
Central Park worked because the existing density was already high and there was no way for Manhattan to grow outward (dredging excepted).
Central Park was built before the first subway and before the bridges connecting Brooklyn, Queens and Jersey. The dirt dug from the tunnels was added to lower Manhattan. Prior to elevators buildings rarely went higher than 5 stories. There was in fact ways for Manhattan to grow outwards (effectively).
Astor and others benefited as population expanded north.
The idea behind the theorem is that all of these public benefits - open space, parks, museums and cultural attractions, mass transit, transportation, safety, etc. - increase the relative attraction of living in a location. Hence, they raise the rents that landlords can charge. Places like NYC or the Bay Area are attractive in a large part because of public investments in social goods there. The increase in rent due to public goods is specifically the increase in land value - private improvements to an individual property are not reflected in the LVT, but that portion of the property's value that is common among all properties in the area is.
Therefore, every landowner has an incentive to pass a tax increase iff it will raise the rent they can collect (or the implicit rent, for an owner-occupied property) by greater than the amount of the tax. And they have an incentive to ensure that the tax is spent on benefits that actually improve the appeal of living in a place, because otherwise they're losing money on the deal. Hence the theory implies that a LVT is not only the optimal way of collecting revenue for a government, but also leads to an optimal size of government, making it popular among many left-libertarian types.
Whether this theorem is robust against systematic cognitive biases is another matter. I don't know the answer to that, but it seems like voters are more likely to eg. vote for a tax that falls on someone else but gets passed along to them as higher prices, which would be an argument against an LVT ever being enacted.
Also, elsewhere in these comments are good arguments why an LVT is very difficult to "bolt onto" and enact a government once it's already been formed, which may be why we don't have one. That's simple path-dependence: Georgism didn't exist when most modern industrial nations were first formed, therefore it can't exist now.
This, incidentally, is the function of propaganda. You introduce an influence that biases the system to encourage certain classes or error and discourage others, thus skewing the consensus-forming process.
What doesn't remotely make sense to me is the suggestion that LVT should be the primary or even only tax, which you see others arguing for here in the comments.
Not least because of their constant attempts to disguise what they do as productive.
It's not like people are in a coffee shop and seeing "% of this product that goes to rent" built into the prices. They tend to assume that the price of the cup is basically the ingredients (which is why people balk at paying for tap water in restaurants).
If a high (but arguably appropriate and fair) land value tax was implemented and captured like 8-10 % points of that, it would fund like 70% of the government.
(Edit: Fixed typo.)
The landlord, as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord, should earn no profit based on that difference, because that difference would exist regardless of who – if anyone – is the landlord.
If the landlord makes some particular investment in addition to the "natural" or community-driven component of the land's value, she will keep all of the upside from that investment.
To repeat: All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord.
That is sufficient incentive for landlords to productively develop on valuable land. More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use). This is of course a behavior you see all over high value areas.
They provide access to their land, which is the same thing. This debate is not about who (or what) created the physical dirt. It is about the economic value of the property, which only exists as a result of human action.
> as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord
You misread. The land is known to be good or bad in retrospect. At the time it was developed that classification was only speculative. This particular landlord thought the land would be good and thus worth developing. Others disagreed and didn't bid as highly for it. The landlord is rewarded not for others' efforts but for the fact that they were right when they predicted that this would be a good location for their development.
> All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord.
To the best approximation either of us will be able to come up with that is 100% of the market value of the land. However, you are speaking in terms of ideals. In practice only the cost of building physical structures on the land will be counted as "improvement". There is no need to guess; this is the legal standard which is already applied in the rare situations where improvements must be valued separately from the land. However, it severely understates the property owners' contributions to the overall value.
> More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use).
The fact that you fail to see the economic value of speculation is a depressingly common failing among LVT supporters. Putting land to a lower-value use now prevents it from being put to a higher-value use later, which destroys wealth. Speculation holds the land ready for the higher-value use, which is why it is rewarded.
Here's a hypothetical example: Say there's a plot of land which could be used for either warehousing or family homes. If you simply put it up for auction right now for a term of perhaps 50 years you'll get $100M from the warehouse representatives or $80M from family home developers. Whichever way you go you'll be locked in to that use for at least 50 years. However, trends show that the warehouse industry is in a decline, whereas demand for family homes in that area will likely increase to $150M within ten years—meaning that if you just take the highest offer now then you will be losing out on $50M of value and those families won't have enough homes. In the best case there will be a significant cost incurred to demolish the warehouses and rebuild. The correct answer here is to speculate based on the trends that a higher-value use will come along and allow only short-term, non-destructive uses of the property in the interim rather than auctioning it off immediately. Or even leave it vacant for a few years if there are no such uses.
They neither made the land nor made it valuable, so they're not "providing" it in any meaningful sense. They're relinquishing their state provided entitlement to expel users of the land with state-backed violence. In exchange for resources.
what turns iron ore into a car is labor, which you should pay the laborer for.
that is, unless you think you should have a greater share of mineral rights than somebody else for some reason.
What would you call money which accumulates in your bank account which you didn't have to work for?
(I could the portion of rent which would be left over after a rentier paying management fees here. Managing a property is work. Owning is not.)
To rent out property you must first own property. To own property you must buy property. Buying property requires resources. Accumulating enough resources to buy property requires a great deal of work, to say nothing of the effort which goes in to deciding which properties to buy or sell or the opportunity cost of deferring consumption. All of that work occurs before the first rent check is paid or any property management fees are accrued (assuming you hired someone else to manage the property).
The concept may seem alien to someone accustomed to a weekly or biweekly paycheck from their employer, but in many fields, including investment (in real estate or anything else), the majority of the work occurs long before any income is received. The income is no less earned merely because it does not occur in close proximity to the work.
Or inherit. Mayfair is rented out by the Duke of Westminster not because him or any or his ancestors did anything as crass as buying it but because he traces his lineage back to a mate of William the conqueror (note : not William the buyer. Conqueror. The distinction is important you see) in 1066.
Broadly speaking, all land wealth is derived this way, no matter how many hands it passes through on the way to its current owner.
You no doubt believe that the act of buying and selling land and working with it somehow "morally sterilizes" it. It does not. If Mayfair was sold it would still be conquered wealth.
I am very well aware that investments do not necessarily pay off immediately and you know very well that that is not what I am talking about at all.
Nonsense. If that particular plot of land was stolen then the people it was stolen from are welcome to assert their claim. If they can prove that they have one, that is. A thief ("conqueror") does not through their theft obtain the rights to the property which is stolen, and cannot rightfully sell what they do not own. The buyer acquires nothing, and (if innocent) is welcome to sue the thief for fraud to recover what they paid.
However, leaving the ownership uncontested for this long would certainly dilute any claim based on ancestral rights. If there comes a point where no one else is claiming rightful ownership of the land then any prior claim can be considered abandoned, and whoever happens to be using it at that point holds the rights to it by default. Even if it was originally stolen. So the question becomes, has someone maintained their claim to the land and passed it down to their descendents from 1066 until now? Or was that claim permitted to lapse?
The duke of westminster doesn't use the land, though, he rents it out. If use of land begets ownership, why does the claim originally stem from william the conqueror murdering a bunch of peasants rather than me renting a flat since 2005?
This idea of yours makes no sense.
Then it should become obvious that some part of the profit is due to "work" i.e. investing money in an area by building upgrading, and some part is due to other people doing the same. So in a hot new area, a bunch of people moving in, opening hip restaurants, renovating old buildings, improving parks contributes to the landlords profit, because an empty lots value will rise as well.
Let's look at a hypothetical case for a moment. Say I buy some otherwise nice property for cheap because it's in the middle of nowhere and there is no easy way to get to it. Trees, lakes, etc. but no nearby roads. The LVT would be low, right? If you auctioned it off in that state as unimproved property you wouldn't get many takers. But say I build a private road to that area at my own expense, and then rent out the now-accessible land in family-size lots. The land hasn't changed, but its value is much higher now because of something I did. How would the "unimproved" value of those lots be assessed, and who receives the LVT? If the answer to that last question isn't "me" (and it won't be) then someone is receiving an unearned benefit from my work.
Even if you think it's somehow "unfair" for property owners to benefit financially from general improvements in their communities, LVT doesn't change the fact that someone is still getting an unearned external benefit. It takes from the property owner without doing much at all to ensure that the LVT goes to the parties actually responsible for the improvement.
Of course in reality it's not a private road or private sewer system or private fire service or private police force, it's all provided by government via taxes.
Taxes that people pay based on how much they earn, a far more obvious source of people being penalised for doing the right thing.
If you have an empty lot and you improve the district you can get your reward by selling the plot or opening your own business on it. Under LVT what you can't do is just sit on it for years at no cost to yourself, but great costs to others just in case it turns out to be a lottery ticket.
One assumes that the people I'm renting the lots to are permitted to use the road as part of their contract. But let's make this simple and say that I offer a perpetual agreement to let anyone use this road at cost, whether they rent from me or not. The road is a loss-leader; I intend to make my money by renting out the land, not by operating a toll road.
There are plenty of examples of communities with their own private roads and other services. Not everything of value to a community is provided by the government.
> you can get your reward by selling the plot
That won't work. Whoever buys it would be taking over the LVT payments, so that expense will come out of the resale value of the property.
> Under LVT what you can't do is just sit on it for years at no cost to yourself, but great costs to others just in case it turns out to be a lottery ticket.
And here we once again have someone failing to see the economic value of speculation.
The only reason to "sit on" the land and not use it would be that any use you could put the land to now would interfere with taking advantage of an even more valuable opportunity which you anticipate in the future. Not holding the land in readiness for that more valuable future use under such circumstances would be destructive.
When you were new to arithmetic, did it remotely make sense to you that the number of integers and the number of even integers was the same?
If you find a surprising conclusion, consider reading the argument. Perhaps you will discover that you agree with the premises and the reasoning, and the conclusion will seem less surprising.
Here in the finite world, most of the money moving around is in services, while most of the land is disconnected from that economy. How are you getting 1-2 trillion in tax revenue from land without making, say, farming economically unviable? Will it just be riddled through with exceptions and carveouts?
An acre in midtown Manhattan might be worth $250 million to as much as $1.25 billion, before we look at the building that is on it. (An acre is a big lot in Manhattan -- a whole city block.) A tiny lot in Manhattan sells hundreds of thousands of dollars, due to its location, which the seller didn't create. The old building on it may be worth nothing.
And the 100x100 lot with a new hotel on it and the 100x100 lot next door with just a parking lot, or maybe just a chain link fence, would be assessed identically. The unimproved value of the land.
Farmers would pay little under LVT. In fact they'd be advantaged, because their buildings and equipment would not be taxed. The owners of sites in our major cities would pay in proportion to the value of their site. And frequently the land is already leased to someone who puts a building on it, which gives a sense of the value of the land at the time the lease was negotiated -- a value which is not always made public.
And why would we want to tax wages, or sales, if we could obtain from the value of land much of the revenue we need, while providing a boost to the economy via removing the deadweight loss of dumb taxes?
On that note, is the inherent land value of a lot in Bushwick way higher then 20 years ago now that they've gentrified? Is neighborhood desirability an 'unimproved' attribute?
I very much get where you guys are coming from in a philosophical sense, but I feel like there are a million wrenches in the works that everyone's ignoring because the theory is so nice.
Yes. Desirability and infrastructure near land increases it's unimproved value.
If you want to pay less taxes, you move to an area that doesn't do this sort of investment. If you want nice stuff, you can move in and pay for it, and be content that people who are against improvement are kicked out by higher taxes.
So we need additional correctives to the additional injustices that capitalism has invented since Henry George's time, like our NIMBY-promoting land use decision system. We could, for example, adopt something like Japan's more federal system.
What LVT proponents really want is some kind of oracle that will tell them just how much of the (estimated) market value of a property is due to the direct efforts of the past and present owners of the property and how much is external benefit from the actions of others. Two problems with this approach are (a) there is no such oracle and (b) the "unimproved" value includes external benefits property owners provide to their communities which are not included in the assessed value of any obvious material improvements to their own properties. There is something fundamentally self-defeating in any proposal which would result in taxing people extra for their contributions to the public good.
The idea that land has any "unimproved value" to be taxed is flawed from the start. In fact land has no economic value until someone claims it and puts it to use. If you walled off a piece of land such that no one could reach it, even an otherwise choice parcel in the middle of Manhattan, it might as well not exist. All economic value is the result of human improvements, though they don't always take the form of physical changes to the property. LVT takes physical improvement as a proxy for improvements attributable to the property owner(s), but this is at best a lower bound and significantly understates the owners' own contributions to the property value.
The situation is almost tautological. I mean, suppose Amazon builds a giant shipping depot in the middle of nowhere. The land was worth nothing before. Without the depot, it would be worth nothing now. Then town arises around giant depot. Town tries to raise taxes on Amazon says "still worth nothing if we leave". Who's right?
Edit: Some of this is more or less what’s happening when buying a property based on a mortgage. The bank decides what the property might be worth, and what the new owner will be able to pay in rent. It must be possible to do slight adjustments in this scheme so that the rent ends up as tax instead.
As Bushwick becomes popular, because of better transit, or community amenities or whatever, yes, the unimproved value of the sites served by them go up. A school develops an excellent reputation? Up go the land values. (Some say that in most suburban towns, the superintendent of schools is the highest paid employee, in part because s/he can influence "property values" -- more precisely, land values -- more than any other single person.)
My first acquaintance with Elizabeth Warren came from a book she wrote about 2003, whose title was something like "The Two Income Trap: How Middle Class Parents are Going Broke" and in part it was from seeking the best public schools for their children, and paying a huge share of their income for it, seldom to be matched by single parents.
We know what the total budget is right now, at a national, state, and local level. And we know where that income is coming from -- mostly a mix of income, property, sales, payroll, corporate, and other taxes. And crucially we know exactly what the breakdown of that taxation burden is on various people in various financial situations.
I want to see the numbers on this Georgian proposal that show the total revenue at federal, state, and local levels. Is the total amount of tax the same? Or are we talking about radically reduced tax revenue in total? And how does the distribution of who pays this tax change under the new system? Then, and only then, with these figures, we can look at the proposal and see if it remotely makes sense using the typical criteria of (a) is there enough funding for current levels of government services at all levels, (b) are the changes in who's paying how much in taxes fair and equitable, etc.
I really want to see a full proposal on exactly what a typical individual and corporate tax bill for a variety of common situations, and I want to see that those numbers all add up to enough revenue.
But what we really care about is what the system looks like a decade in, after property values have massive changes. And what it looks like 50 years in, after cities have been remade to reflect the shift in tax costs. I don't think any modern day Georgist argue for "single tax." Remember that income tax wasn't in place in the US when Henry George started writing!
So any modern plan will Lokey include shifting tax bases, over time, to rely more heavily on LVT and less on sales tax and other regressive taxes. This will require adaptation and policy change over the years and decades, rather than saying ahead of time that they can predict the future with absolute certainty.
There were also significant tariffs on imported goods. Sugar and tea, which the poor liked as well as the rich. One of HG's books was "Protection or Free Trade" which Milton Friedman called his favorite book on the topic. (Then again, Friedman repeatedly called land value taxation the "least bad" tax, but never found the motivation to promote its application.) I had occasion to dip into POFT last week, and found it pleasurable and interesting reading. Its at Schalkenbach's website, among other places.
Yes, a shift could be quite gradual, though I suspect that once it was begun, and people began to see the beauty of untaxing buildings, wages, sales, it would likely be sped up.
And tax revenues reach the government without middlemen collecting their share, so the cost will be lower to those who pay.
It does not seem at all clear to me that most economic activity is in services and not in resources/monopoly ownership.
> farming economically unviable
Farming is already unviable, that's why we subsidize it so heavily.
I'm fine with taxing the hell out of Exxon, btw, or at least not giving them cash-in-a-briefcase subsidies, but you're not going to replace the income tax on that.
We collected 3.46 trillion in income taxes last year. How do you get there on a land-value tax? Do we weight it so Manhattan land owners are paying more in tax than the entire midwest?
That said, you roll out the new policy gradually by reducing labor related taxes while increasing land and monopoly related ones.
After several iterations you should expect convergence to a new stable position.
It's better to prefer iterative deployment over big bang changes. Not only in software.
And when the Single Tax was conceived, it was already abundantly clear that urban land values were far above rural land values, and rising much faster.
Few tech companies will want to locate where there isn't already broadband, good schools, cultural amenities, a range of interesting restaurants, and ready pool of the talents they need, not to mention infrastructure such was water, sewer, medical care, etc. And to the extent that they create jobs in such places, they will probably be quite welcome.
Though, wouldn't an LVT that encourage companies to push all their employees to work from home, where possible? There are certainly benefits to that, but it might mean that certain industries get taxed much more heavily than others. Is it ok if distributed work-from-home software companies pay no tax at all, because they have no offices? The workers would pay tax on their own houses and apartments, but the company wouldn't.
I guess it depends on whether you want to consider taxes to be a tool for limiting rent on scarce resources, or for balancing out wealth disparities. (aside from the main goal of raising revenue, of course) The two things are related, but not identical. The first seems like more of a proxy for what we actually want to do, which is to prevent concentration of wealth. Or is it more about the fact that collecting rent isn't an economically productive activity, so if we incentivize everyone to gain wealth by producing value, it'll make us all wealthier?
To be fair, the hurdle that LVT has to pass is not to be perfect, but just to be better than what we have, which isn't a high bar. But it is worth thinking about the possible loopholes and edge cases.
Should we also assume that switching to a single tax wouldn't exclude things like cigarette taxes and carbon taxes? These taxes are designed intentionally with particular incentives, just like the LVT, and unlike property taxes and income taxes.
It would be a shame to take away the single best tool we have for fighting climate change, for example.
Anyway, no obligation to reply, a lot of these questions are just me thinking out loud.
Solar energy is an infinite resource, so there is no reason to charge for it, but for scarce or finite resources, pay for what you take.
A LVT will generally greatly decrease the concentration of wealth. The massive concentration of wealth in the Bay Area economy comes mostly from land owners extracting an inordinate amount of wages, something far greater than the 30% that is typically considered livable. Tech takes from others far less than the landowners take from laborers.
Tech is flashy and gets all the attention these days, but it's not the big story when it comes to exploitive capitalism in the Bay Area. What's really driving poverty and homelessness and evictions are the housing austerity imposed by wealthy landlords and landowners and homeowners to maximize their financial gains.
It is a form of sharecropping.
And then we must pay the dumb taxes on top of it. Sales taxes, wage taxes.
Taxing land value fully would bring the purchase price of a home down to the depreciated value of the structure plus something for the lovely mature landscaping. Instead of a downpayment on the land and building, one would, in effect, be purchasing the building from its current owner, and taking over the stream of location-based payment to the community. No down payment on that. Mortgages would be smaller, and shorter, and the sum of the mortgage payment and one's land value tax would be a lot less than the current sum of one's housing-related costs plus the dumb taxes. If one wanted to move from one city to another, selling one's home would be easier because more people could afford it, and in one's new city, one could afford a similar home, because wages in the new city would support the higher tax on the higher land value there.
Today, moving from Peoria to NYC or Silicon Valley is a whole other ballgame.
Phase this in, removing the dumb taxes, one after another, and collecting an increasing share of the annual value of the land, and our children will have better opportunities to thrive.
Those who do leave will likely be replaced by others seeking those things.
There's nothing wrong with the idea. The big issues were mainly around introducing a new tax system and the massive upheavals and uncertainties businesses and people would face as part of the change. Winners and losers, etc. Given the uproar surrounding the later introduction of Universal Credit I'm glad Sir Michael chose not to recommend LVT in his report.
Anyway - anecdote time. One of the big questions we asked at the start of the Inquiry was: "Why tax property?" After long consultations with the most senior Experts and Gurus across Government and Academia the answer came back: "Because it's there."
(I'm mainly commenting because it's an opportunity to show off the Inquiry's website. I built that! I had to do it in my "spare time" because we didn't have a budget for the work. This version is from 2007, but the original code was written in 2004 in PHP and after that most of the work was adapting the site to add events, display responses received, etc. Simpler times!)
I'm certainly not going to say something like "because me and my mates and people like me would lose a stream of unearned income".
> ... extremely wealthy landlords ... killing LVT
LVT would not be an appropriate method for targeting tax extraction from extremely wealthy landlords. They would (probably) make up their losses through rent increases and additional service charges - effectively passing on the tax to renters and leaseholders. If you want to target the rich you need to use tools that target their personal and/or business income streams - in the UK, for example: Income, Capital Gains, and Corporation taxes.
"The producer is unable to pass the tax onto the consumer and the tax incidence falls on the producer. In this example, the tax is collected from the producer and the producer bears the tax burden. This is known as back shifting."
From section "Inelastic supply, elastic demand"
If the landlords decided to increase rents expecting tenants would foot the bill, they would find out tenants to leave the location because it would be unlivable for them at that cost.
More likely scenario is by introducing LVT the landlord would be forced to do the opposite - ie decrease rent - as other landlords would dump their uninhabited properties back to the market.
Being a landlord is not some easy path to free money. It is a great deal of trouble and expense for (usually) marginal profit, and yet somehow people manage to be uniquely ungrateful for the services being performed on their behalf even as they freely choose to rent rather than own.
Now, if you abolish zoning or rezone places in addition to a land value tax, it could work as the investor could build more housing for the same land thus splitting the cost over multiple renters which I'm sure is the intended affect but a land value tax won't work without changing zoning laws.
Yes, tenants will be better able to afford to purchase a home -- and will be able to sell it more easily should they choose to, either to upgrade to a fancier house or a better location within the community, or to move to another part of the country.
Yes, they will be responsible for replacing the refrigerator and other appliance, and doing the maintenance (said to be estimated at 1% of the cost of the property, but of course that would vary a lot according to whether land value is 20% of the total, or 80% of the total value of the house-plus-land or condo-plus-share-of-the-land.
And for first-time homeowners, there are always some rude shocks.
Those landlords will have to find productive uses for their money, perhaps investing in young entrepreneurs, or developing land to meet the needs of their community for housing.
Seriously?? If your inquiry concluded this then it certainly was being run on behalf of landlords.
They would no more be able to make up their losses through rent increases than I could make up the loss of being charged extra for a loaf of bread at the supermarket by unilaterally raising my wages. One does not drive the other.
When the supply of housing remains constant and the demand of housing remains constant then prices remain constant. LVT changes none of these variables directly.
Doesn't LVT increase the cost of providing the already existing housing and wouldn't that decrease the supply of housing? This would apply one time when the LVT comes into effect.
No, it just shifts where the land rents go.
Depending on how it was implemented it could lead to a wave of property developers going spectacularly bankrupt and a lot of mortgages secured on the value of land would be defaulted on. Stock market would likely take a hit/tank.
If anything, it encourages building more, so that the income from the rent can be used to the pay the LVT.
I'm not talking about long-term, but the initial effect of LVT coming into effect. If the landlord has to pay more then that's an increase in cost. Landlord income was likely at equilibrium before LVT. Those that could afford to lower prices to outcompete others probably already did so. As a result I don't see how we can expect landlords to eat the cost instead of passing it on.
>If anything, it encourages building more, so that the income from the rent can be used to the pay the LVT.
Sure, but this also requires housing to be as profitable (or more) as other uses of the land. It might make sense to turn that housing into something else.
Just to be clear, I'm not arguing about what it would be like in the long-term. I'm talking about the transition between going from not having LVT to having LVT. It's not at all clear to me that this wouldn't disrupt housing.
Right, but how does that lead to less housing? It's not like the landlord would stop renting the apartment and just hold it empty right after an LVT is implemented, since they would to pay the LVT either way. Most likely, the landlord would sell the building and land to someone else, who would then develop it to something that would provide enough income to cover the LVT obligations (say, a taller apartment).
Your claim also assumes that the LVT will be greater than the current property tax obligations. I don't think that's a given. The LVT for buildings that are using land efficiently probably would be lower, since the would no longer have to pay tax on the building (which is higher for a multi-unit building compared to a SFH).
As a side note, I am in favour of the government providing a subsidy to current landowners when a LVT is implemented, to compensate them from the lost land value (essentially "buying them out"), but I don't think that would be economically necessary.
> It might make sense to turn that housing into something else.
Yes, this is a possibility. But if that happens, then it's a sign that the demand for new housing is a low, so it makes sense to not build new housing (or convert existing housing). In regions where there's a housing shortage, a developer would be able to make a large profit building new housing, and thus would do so.
Why on earth would you assume that a landlord charging market rent would lower their prices when there's nothing forcing them to?
>As a result I don't see how we can expect landlords to eat the cost instead of passing it on.
Heavily leveraged landlords would be able to pass the costs on in the form of defaulting on mortgages. Non-leveraged landlords being forced to eat the costs would likely be very unhappy about being forced to "eat the costs" (lose their stream of unearned income), but they would have few other options. Violence would be a significant possibility.
Do you have research, or an evidence base, for this?
> [...] it certainly was being run on behalf of landlords.
It certainly was not.
Economics by Paul Samuelson: https://archive.org/details/economics00paul/page/603
Do you have research that indicates the opposite is likely to be true? I'd be really interested in seeing what that is based upon.
>It certainly was not.
It's not unusual among for economists to do this subconsciously due to the incentive structure of the profession.
[Links to PDF] https://www.webarchive.org.uk/wayback/en/archive/20070411120...
Since no land can be created or destroyed, the supply-demand curve is fixed. This means that the land tax cannot be passed onto the renter, because the market conditions haven't changed. The rent is not calculated based on the landlord's costs plus some extra, but instead is whatever the market equilibrium price is.
Another way to think about it: if landlords have the market power to raise rents, why wouldn't they just do it now, rather than wait until an LVT is passed?
Exactly. Because they hold monopoly pricing power over tenants they could in theory increase the rents 10 times even today. They don't do that, because better strategy for a parasite is to maximize profit and not to kill the host.
Now, if you abolish zoning or rezone places in addition to a land value tax, it could work as the investor could build more housing for the same land thus splitting the cost over multiple renters which I'm sure is the intended affect but a land value tax won't work without changing zoning laws and at the end of the day, it's all passed onto renters.
That logic only works in a non-competitive market. The reason they don't raise rates is obvious: There are other landlords around and any one landlord raising rates would lose business to the others. If you raise costs for all landlords, however—for example, by imposing a LVT—then there is no risk of defection. Landlords either raise their rates or lose money with every rent payment. Any that don't raise their rates will go out of business to be replaced with others who do. And if you use price controls to prevent them from raising rates despite losing money then they would go out of business without being replaced, leaving individuals and businesses to buy their own property outright rather than renting, in which case they will be paying the LVT along with all the other costs formerly handled by the landlord.
TL;DR: Don't assume that the market equilibrium price is fixed and independent of cost!
City rent is an aggregate monopoly - there is not enough supply of housing to have effect on downward pressure for rents. Demand is overwhelming supply.
Landlords' rent prices are not driven by competition but determined by what the market can bear.
The problem it targets is not the wealth of landlords. The problem it targets is land owners who are not landlords making money, often as a by-product of consuming a luxury good (a home in a city center), without actually providing the social functions which in principle justify their compensation (anticipating demand, managing housing at scale, high-quality construction on a budget, etc).
It's funny how we introduce massive upheavals all the time - ending this social program here, injecting trillions of dollars there, but this one addition is considered infeasible.
I suspect that the primary problem with George's theory is that he underestimated the political power of rent-seekers.
The Inquiry was set up in 2004 because there was a legal requirement to undertake a property revaluation before 2005 which, as things stood, would have led to massive changes in people's tax burdens (winners and losers). The Government wanted a way out of the problem - but the Inquiry didn't give them one: Lyons decided that revaluation was essential and should go ahead.
The Government sorted the issue in time-honoured fashion by changing the legislation to remove the need for a revaluation, and changing the Inquiry's terms of reference. And so it goes ...
> It's funny how we introduce massive upheavals all the time - ending this social program here, injecting trillions of dollars there, but this one addition is considered infeasible.
My understanding is that things are done in at least 51 different ways in the US. Maybe one of the smaller, more progressive States in the Union will be willing to try out some form of LVT in the near future?
Because its appreciation in value is largely unearned wealth, especially in a country like England with a long history of aristocracy and landed gentry.
You might search for the term "unearned increment." It was a common expression to point out what people who reaped but did not sow receive due to our failure to collect the economic rent.
One person's unearned increment is another's — and likely many others' — lost birthright. Who is entitled to it? All of us! How do we implement this? Land value taxation.
The whole thing about tax is to extract the maximum number of feathers from the goose with the minimum amount of hissing. Taxing property is easy "because it's there" - you can't hide a house, or a barn, or a factory.
Though deciding _how_ to tax property is a bit more difficult. At one time they tried taxing by the number of chimneys a house had. Another was the Window Tax.
Have you ever heard of the phrase "They got away with it scot free"? I was born in the village which (by legend) introduced the Scot Tax - not a per-head levy in our Friends born north of Hadrian's Wall but rather a tax on properties across the Romney Marshes, specifically raised to pay for maintenance of the sea wall. Houses below sea level had to pay the tax, houses above sea level were 'scot free'.
... And people think tax policy is boring!
 Technically they taxed hearths, but it's a lot easier to count chimneys from the outside of a house than it is to gain entry to the house to count the number of fireplaces - https://www.nationalarchives.gov.uk/help-with-your-research/...
 You can still see many houses in the UK with bricked up windows. It wasn't done for aesthetic purposes; it was done to limit the level of tax that could be levied on the property - https://en.wikipedia.org/wiki/Window_tax
Its a shame the inquiry didn't recommend formula funding from central government receipts (couple of pennies on income tax?) - so much grief could have been saved.
The Inquiry's main objective was to investigate possible revenue streams that could be raised locally, to help local councils free themselves from the tyranny of central government funding. At the time local government revenue came from Council Tax, Business Rates (though the level was set by central government, not local authorities themselves), licence and other fees (eg to open a tattoo parlour, or register a death), small fines (dog mess and other litter) and car parking charges. Altogether the revenue raised covered less than 10% (I think) of all local government spending. The rest of the money was supplied by central Government - making the UK one of the most centralised states in the world.
A "couple of pennies on income tax" would've made the situation worse - though one of the things the Inquiry looked at was the possibility of localising (some) income tax.
The reason to do so is because it reduces inequality and leads to a fairer society.
Instead, we permit individuals and corporations and trusts to privatize the value and we tax it only very lightly --- they get to keep the lion's share, just as if they made it themselves.
And you don't de-incentivize productive labor (as our current tax scheme does to an extent).
If all tax were things like use of land, use of aluminum in a can, burning of a unit of fossil fuel instead of "you worked an extra hour or invented something, now you owe a greater percent!" I believe society would become much more innovate and efficient.
Not sure if it leads to a fairer society. (of course one could argue it is fair for a not so rich person not to live in a rich area :-) )
I sincerely believe all types of capital should be taxed instead of income, the tax burden doesn't have to change but it should be redistributed a bit.
This would also deal with companies like Amazon and Apple who pay very little tax on profits - they'd pay a tex on assets instead like land or cash and pay a larger share.
Values for assets are market values, which are arbitrary and every-changing yes, just like income and profit is arbitrary and every-changing but at least values for assets are generally set by third parties, as opposed to the value of profits - the situation could not be much worse than the one at present where large companies choose how much tax to pay by manipulating their books to adjust profit.
I don't think companies should be taxed on customers personally, but if they choose to value their brand name at $10m owned by a subsidiary as a tax dodge (as at present), sure they should be taxed on that.
Why not a radio spectrum tax as the primary tax instead? Or an oxygen tax proportional to your lung size? Or a clean water tax, or a tax on the weight of your grocery consumption, or a tax on the weight of the garbage you produce, or the carbon you consume?
All of those are valuable resources.
That's why it's not found in the political dialog, because it's super-arbitrary and would therefore have grossly distorting effects. Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Taxation needs to be applied with some combination of minimizing distortion and achieving some level of progressivism. A land value tax is absolutely terrible at both of those.
> Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Because the supermarket is using more land compared to the hotel. Every bit of land the supermarket owns is land you and I can't use. It's only fair that the supermarket compensate the community for this, since the land could have been used for something else instead (like an apartment building, or an office building).
It's also not a given that the ultra-luxury hotel will pay less tax. It's likely that a luxury hotel will be in a more desirable area of town, where land values are higher, and so tax there will be higher.
It's not an argument for why we should rely solely on a land tax in lieu of e.g. taxes on corporate profits, income taxes, or sales tax.
I'd say there's a moral reason not to!
Is there a practical reason to tax those things? Not if the goal is to maximize government revenue!
If you tax land as high as possible -- at 100% of rent -- then it's not usually possible to increase revenues by taxing the stuff you mentioned. Doing so would almost invariably decrease the revenue the LVT raises by more than the revenue your proposed taxes would raise.
There are exceptions.
1) Certain non-traditional land like radio spectrum, minerals, pollution rights, parking, space on a congested highway, etc can and should be taxed.
2) Some luxury goods could be taxed. Whether or not they should probably depends on the situation and opinion. (By luxury goods, I mean goods that are valuable in part because other people don't have them. A cell phone is thus not a luxury good, for example, because the more people have cell phones the more useful your phone is. Luxury goods in the sense I mean are not merely "expensive" or "for rich people," though most luxury goods are.)
See ATCOR: http://www.wealthandwant.com/themes/ATCOR.html
Currently most federal tax revenue comes from wage/payroll taxes (65%). There is nothing less arbitrary about taxing wages than land value. In fact, taxing wages is more harmful as I will explain.
In general the more you tax something, the less of it you get. So by increasing income taxes, we discourage working - something that is presumably beneficial to society, while also encouraging more people to evade the law to avoid the taxes (working under the table). Land value however doesn't have any of these distortions because land supply is fixed and nobody creates it. Unlike income or sales taxes, land value tax is impossible to evade.
The reason to tax land value is because nobody is more entitled to the land and commons than anyone else, land value gains are pure unearned income, and taxing land has no negative distortions. By not taxing land value, we give a free ride to the landowning rentier class, and encourage the zero sum economic waste of playing land speculation, leading to housing booms/busts like the 2008 Great Recession and 1986-91 Japan housing bubble.
Land value is largely determined by location. That supermarket may have a lower tax bill than that boutique hotel in the city center if the supermarket is located in an area with lower land values. LVT promotes denser and more efficient development, and thus a supermarket could be located in the basement of a residential apartment complex or mall and pay less in land value taxes by sharing the tax burden with the rest of the land property.
We all need clean air. We all need clean water. Those who use lots of water are usually charged by their local utility for what they take. Some farms and water bottlers deplete the local resource, and they ought to be charged for what they take from the commons, if the carrying capacity can't handle it.
Supermarkets in Manhattan are amazingly inventive in providing a lot of groceries in a space whose smallness would be unimaginable in suburbia -- and is difficult to "social distance" in today.
In the city, that supermarket woudl not be a single-story building; it would have a 20- or 40- or more story building overhead, and all those users would share the land value tax.
And the building would not be taxed, so no downside to fully developing, and regularly redeveloping, the lot to serve human needs.
But proposing to replace income and sales taxes with land value taxes, making it the primary tax -- which would necessarily skyrocket the land value tax to produce the same tax revenue at the end of the day -- would be extremely distortionary.
Thanks for giving your off the cuff opinion against a consensus of people studying the question
> which would necessarily skyrocket the land value tax to produce the same tax revenue at the end of the day -- would be extremely distortionary.
It's distortionary against the existing distortions, by reducing them.
Anything reducing tax distortions is "distortionary" by your argument's logic
Why don't you educate yourself? Starting here:
As you can plainly see, land value tax is hardly the centerpiece of strategies to minimize distortion. In fact, it's left for the end of the last section of the article. Because while it's a proposal for sure, it's certainly anything but a consensus, in reality.
That said your opinion is clearly not gathered by expert reading, because I've done that reading and it comes to a different conclusion.
If you're interested in optimal taxation, I'd skip reading Wikipedia page and just go read the 2008 Mankiw literature review on "optimal taxation in theory and practice" instead. It doesn't touch land value taxation (which is a niche topic) but is very accessible and a good read.
Second, when metropolitan LVT is studied, the theoretical social benefits are large bordering on the absurd. Here's a study by the NY fed:
It massively reduces income and wealth inequality (lots of inequality is tied up in urban real estate ownership).
But that has nothing to do with land value tax being the distortion-minimizing solution for optimal taxation -- which it isn't -- and is what I was originally responding to.
So I'm not sure you're even disagreeing with me.
Here's my argument against LTV: Warren Buffet owns one modest house in Omaha. Should he be taxed based on the land value of that modest house, and nothing more? That hardly seems fair.
The principle is to pay for what you take, not for what you make. His modest home, likely on a modest lot, in a not-huge city, is worth little.
For a while, he had a couple of places in Malibu, and he told the WSJ what he thought of Proposition 13, keeping the taxes ridiculously low. Arnold Schwarznegger told him to go do pushups. Buffett saw the injustice.
And, most of his stock holdings occupy land in very valuable places? True to some small degree, but not all that true overall. Take Coca-Cola, for instance. They own some very valuable land in Atlanta. But the value of Coca-Cola is much more than the value of the land, and is mostly unrelated to the value of the land. Should Coca-Cola be taxed based on the value of Coca-Cola, or on the value of Coca-Cola's land?
Should Coca-Cola be taxed on its good will? or for adding to people's satisfaction?
The biggest promoters of Henry George's single tax were business people who saw a way to a more just society in which all could prosper. But there were others -- railroad, steel, other monopolies -- whose continued position depended on keeping their monopolies, and they were less than enthusiastic about the concept.
Who owns the land in the central business district of most cities? Often it is the corporations that use it, but frequently it is trusts of people long dead, whose heirs just keep enjoying the ever-rising land rent. They didn't create the value. The corporations should pay for the value of the land they use; so should the trusts who collect the land rent of our most valuable sites.
And the value of Warren Buffett's holdings might be affected, but the freer market it will create will provide opportunities for all sorts of entrepreneurs to work their business plans.
And recall the data on how concentrated stock ownership is.
OK, but why just the land? Trusts hold stock, too, that some long-dead person bought. Their heirs receive the dividends from that stock, for not having done anything whatsoever. By your logic, why should that not be taxed?
What is so magical about land, that only that should be taxed? What makes it different from all other assets?
> And recall the data on how concentrated stock ownership is.
Yes, I recall the data on how concentrated stock ownership is. The exact same logic you are using on land tax applies to stock ownership. So... what was your point?
Land wasn't created by any individual or any corporation. (Minor, and not eternal, exception: Made Land, such as by filling in a swamp or dumping fill alongside a river. After a century or so, it stops being special, and is simply land, whose value comes from its location and the services that are provided to it.
When the companies that issue stock are paying LVT on the land they occupy, and on the finite natural resources they claim for themselves and process to sell to consumers, the value of their stock will be reduced somewhat by that "pre-distribution."
So either you need to say that LVT applies to those kinds of assets, or you need a different explanation for why land and not other assets.
Land is always in demand (the economic term being that demand is inelastic) since everyone needs it, and it is the source of all material wealth (agriculture, energy, commodities). Thus it is an effective tax.
I have yet to hear an argument for an alternative to land that is more sensible to tax.
The stock is taxed indirectly. Georgism holds that all wealth fundamentally comes from the land. This isn't completely true in the digital age but it is still true enough.
> Their heirs receive the dividends from that stock
If you tax income it never goes away. You just take a portion of whatever is there. If you tax wealth then the wealth is eventually drawn completely into the society. That's the fundamental difference. LVT is a tax on wealth.
Yeah, I think that's most of the debate right there. A bunch of us seriously question whether it is "still true enough".
This taxation system does make sense for land, but there's way more economic activity happening that isn't associated with land than there is that is.
They are efficient at not consuming too many resources while producing a lot of value? Probably shouldn't pay much then.
But this applies not only to big tech companies but to individuals too - they shouldn't pay much if they don't consume or extract from others.
Taxes are only a last-resort mechanism to raise money in absence of proper funding model.
If you can price government provided services appropriately then you don't need taxes.
Eg. to build infrastructure (roads, networks) you can predict that it'll benefit owners of nearby properties. They will benefit by landfall increase to the value of their property because the land on which it stands becomes more valuable.
So you collect the money for the infrastructure project by land "tax" before you begin with construction.
("tax" because it's not a tax but payment for exclusive land ownership rights)
> So you collect the money for the infrastructure project by land "tax" before you begin with construction.
No, you use land taxes after completion to pay back the debt incurred to create the infrastructure. Adjustments of valuations based on the advantages of the infrastructure result in a greater burden of that repayment on those that receive the greatest benefit, but everyone contributes.
Or you'd have to say that the military is part of your "last resort". But then you need to raise enough money to pay for all your last resorts. If LTV is your method, the numbers may not work (as others have said here).
Or, instead of raising all that money, you could say that we don't need that big of a military. That's not an insane position. But using desire for an LVT as the basis for deciding on the size of your military seems to me to be putting the cart before the horse.
If you mean defence part of it. Invading other countries is likely profitable for select groups so who else should pay for it if it gets approved.
But let's focus on defence. It's not that much individual people, who need protection, because they can flee to another country in case of war.
What actually needs protection is property which you cannot take with you. And voila that happens to be real estate (locational value).
So who should be footing the bill for defence more than owners of land who are desperate for its protection when shit hits the fan?
Similar argument can be used to justify LVT for funding of other protective services such as police and firefighters.
No, the military is there to protect the people, not just the wealth. So your post seems like it's trying to rationalize a not-up-for-debate position, rather than actually reasoning based on reality. Georgism claims to be motivated by compassion for those who are at the mercy of rentiers, but your position shows an immense lack of compassion. "Let them flee to a different country" is the most cold-hearted thing I've heard in a long time.
Second: that wasn't my point. My point was, let's see the plan where you actually produce $800 billion (or whatever the military budget is) just from a land tax. Let's see what the actual rates would have to be, and what the effects of those rates would be.
If your military is too expensive and not covered by LVT, just go ahead and add a specific tax to fund your military. If you can justify that it'll protect everybody then people will be fine with it.
Idea of LVT as a single or zero tax is a political move to get you thinking about better government funding schemes. You should think of "paying for specific services" instead of "pooling money and allocating them according to wishes of select few" as is the case of current tax systems.
You know, if you had said that up front, we could have had a more productive discussion. But everybody's been saying "This is The Right Way(TM) to do taxes!" When non-true-believers point out all the problems, then we get "it's just a talking point".
In fact, I suspect that a number of LVT supporters on this thread don't agree with you. I suspect that several of them believe that it's the answer.
Both snidane and I assumed that there would be danger to civilians in case of an invasion. The invader doesn't have to intend genocide for that to be true.
This is absolute nonsense. It's somewhat true for roads, provided you can efficiently price every single piece of road (which you can't). But it's horribly wrong for things like the police or fire fighting.
Those late to the game who decide to rent are paying rents based on current land values, but their landlords, who may have owned the property for 10, 20, 30, 40 years, are paying to the community based on their purchase price. It becomes a form of sharecropping. Landlording can be very profitable, especially in California, if you own or inherit property from someone who bought it decades ago. Cui bono?
"George preferred taxing unimproved land value"
It is not good politics to start your political campaign by proclaiming that you will remove all taxes altogether because it is so far out of anyone's reality that he would have been considered crazy.
Also, I live in an apartment. Should my tax be $0? Or if I owned and lived on land way out in a rural area where a small plot is only worth a few thousand bucks, do I only pay tax on that despite my income being mid six figures? The point is, as a knowledge worker, my economic productivity is entirely divorced from land. This is true of most white collar workers. Land value taxes may have made sense as the primary tax hundreds of years ago but they don't make sense for that purpose now.
You wouldn't see a tax bill because you're not a landowner. But you'd be paying your share via your monthly rent. And your rent would not rise: your landlord is already charging what the market will bear.
And if there is a vacant lot next door, its owner would be motivated to build on it or sell to someone who would. That would likely reduce the rise in your monthly rent.
Countries and states that let tech companies thrive are winning the race for capital.
Markets need massive amounts of legal structure and regulation to make them efficient. Including taxation as part of that is an excellent idea.
And if we get to Piketty-inspired corrections for r>g, part of that will include eliminating economic rents the way a LVT does.
I agree with you, providing defense and protecting real capitalism, stopping oligarchies/long term monopolies from forming is important, to be able to have a return on investment on the taxed capital in the country.
As I wrote before, countries are competing for investor money, that's why it's important how they collect and distribute taxes. The counterforce is usually corruption inside the political system though.
So how much does that Brooklyn homeowner owe to the rest of society for excluding others from what they enjoy? How much does the SaaS millionaire exclude others from opportunities?
Many proposed economic systems distinguish between property that comes from your own labor, and profits that come from idly owning an asset and restricting its use by others in certain ways. The slogan "property is theft" doesn't refer to the bookshelf that a person crafted, it refers to real estate and the economic systems of the time that excludes so many people from the opportunity to escape the economic rents of those who were born with more wealth and privilege.
There are many reasons to tax things: to make life more fair, to raise funds for government, to improve economic efficiency, to reduce pollution. It's so hard to say who should be taxed more without baseline values!
First, that is an actively contested claim. Pointing to tech companies as "way more economic activity" is laughable because (even though they occupy a huge proportion of public discourse) tech companies are a very small percentage of economic activity globally.
Second, intellectual property holdings would be considered "land" in the Georgian sense.
This flat-out isn't true. Tech companies alone are a significant part of economic activity globally (e.g. they make up the majority of the top 10 largest companies in the world by market cap). Once you include all white collar work, which generally tends to be similarly divorced from land value, you're talking about the majority of the world economic activity at this point.
> Second, intellectual property holdings would be considered "land" in the Georgian sense.
Oh really? How the hell do you value that if not based on the actual income derived from said intellectual property? I.e. this is just the taxation regime that already exists.
Market cap doesn't measure economic activity. https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...
Look at this. Among the tech companies that are high, most of those are consumer electronics or something else not purely related to tech.
Profit is a terrible measure of economic activity because it is unrelated to the amount of goods changing hands. Indeed, in industries where lots and lots of goods change hands, profit is likely to be lower.
e: Also, real estate is extremely profitable, it's just not as consolidated as the major tech companies are.
If someone makes a painting in 5 minutes and another guy pays 10M USD for it very little happened. 10M changed hands and the other guy has a painting on his wall. Yet somehow income tax proponents thinks it's fair to now take 50% from that transaction just because money changed hands. It's just not a good way to organize your tax system.
Patents are essentially the "land" of the tech industry. With weaker patents there probably wouldn't be any such thing as "big tech" as it would be constantly disrupted from below.
The exception is google's search index, which is, given its capital intensity and power requirements, practically a form of of heavy industry on a par with aerospace or automotive.
1% of patent value is paid each year as compensation for the government protecting the IP.
Similar system could work for copyright property.
Lots of tech companies are located in Silicon Valley, some of the most expensive land around...
The best criticism I've found, however, is here: https://www.orionsarm.com/fm_store/Critique%20of%20Georgism..... It's from a more mainstream economist POV (I think?) than the other links and is far more fair and detailed.
The authors seem not to understand the topic unfortunately and have to use long prose as they are trying to wrap their head around it.
The core problem and idea for solution is actually quite simple. Let me condense the topic into a tweet or two.
You have a naturally occuring resource which is scarce and which nobody created. How do you allocate it to humans?
Georgist simply say you can use an auction granting you possession for some amount of time instead of giving you time unlimited rights just because you were first to ask to use it.
This is not a theory as it is applied in many systems such as DNS allocation or electromagnetic spectrum allocation. Georgists point out that similar allocation problem is for "land" (think location) and the same auction mechanism can be applied.
Land was considered abundant in the past, especially as new continents were being discovered. Therefore nobody though about allocation, same as nobody considers allocation of air. If air got severely polluted (say by radioactivity) and only small fraction remained usable for humanity, you can be assured that the same allocation problem would exist for air.
After discovering all continents on Earth land ceased to be abundant and now requires a proper allocation mechanism. Otherwise landlord monopolies will continue piling up profits because of their luck in winning the infinitely durable possession rights allocated years, decades and centuries ago in badly structured auction.
Either we start inhabiting new planets or we solve problem of allocation of important scarce resources.
What's funny - you solve this allocation problem and many societal problems disappear as if by magic. Somehow this suggests that land allocation is a major root cause of society.
That's why Georgists dwell on it so much. You should start solving problems from the most serious ones with high impact.
First problem: This is a recurring process but the land is only "unimproved" at the time of the first auction. At which point no one was interested in the land, there being nothing and noone there, so the auction price is effectively zero. After that first auction you can't say how much of the market price in any later auction is due to the land itself and how much is due to improvements.
Second problem: In order to auction something off you have to own it first, but this is unowned land. No one has the right to sell it—or to prevent anyone else from using it. Land only becomes property after it has been improved. This is also the point where it first acquires economic value.
Third problem: You can't just go auctioning off already-improved land separate from the improvements. The improvements and the land are a single, unified good and in the vast majority of cases cannot be separated without incurring expense akin to rebuilding the improvements from scratch.
Fourth problem: LVT is valued mainly for being a tax on "unearned" external benefits property owners receive from the community, but the "unimproved" value of the property is a poor proxy for net external benefit received by property owners. On the one hand, the value of the improvements also depends on the community; if you build a family home or a restaurant or a warehouse the value of that building is going to depend on the demand for specific kinds of goods in that area and not just the cost to build a similar building. On the other hand, the so-called "unimproved" value of the land is readily influenced by the actions of the property owner, for good or ill. LVT punishes property owners who contribute to the surrounding community by taxing them on any increase in the value of their property which follows from their own contribution to the public good, and rewards property owners who contribute to lowering property values in their own neighborhood.
To your second problem: Where in the US is there unowned land? The settlers went west across thousands of miles of unoccupied land. Why didn't they stop and settle? It was owned. Early and ultimate sprawl. Others had pre-empted it for the benefit of their heirs. Think how the development of the US would have been had development proceeded west in some orderly way.
To your third problem: the land is forever. If well taken care of, it will remain fertile. But its fertility may not be important for all that long, depending on its location; its highest and best use will stop being agriculture. Buildings built for one purpose gradually deteriorate, and as the community changes, are no longer suitable to the current highest and best use of that land. At one time in NYC - say, 1880 - 21 year leases were common, and huge department stores and other edifices were built on them. It was understood that another building would likely follow. And it did. And the landlord got his "share." How did he earn that share? And look at the teardowns in your part of the country. Homes that seem perfectly serviceable to some of us are bought to be torn down to build something else on that well-located land. It doesn't happen on the edge of town; it happens in the center of things. The price one is willing to pay to get that land is pretty clear: the transaction plus the cost of removing the old improvement.
To your fourth problem: the land owner who doesn't improve his land can still sell it for a higher price due to the activity of the community around him. The value of the improvements never exceeds their replacement value, but could be quite a bit less. A huge spa resort built 15 or 20 miles from Disney World is likely an over-development of the land it is built on, while closer to DW, it might be quite appropriate and profitable. One who is building with consideration to others' preferences -- as customers or as tenants -- will build differently from one who simply wants what they want, without regard to resale value. We don't increase the unimproved value of our own sites, but we can contribute to the value of the surrounding sites -- or we might decrease the value. Increasing it doesn't exempt us from any portion of the value of our own site. Our neighbors' actions can increase or decrease the value of our own site. Regular reassessments take that into account.
What does the government want with all that land?
Are you sure you have enough fungibility in your economy so that it will free up doctors, judges, refuse collectors or whatever and all the real goods that their salaries actually represent so that you can achieve the public purpose that is the reason you are taxing in the first place?
In any Modern Money informed Targeted Taxation regime what you really want to tax is whoever is using the things government wants to use instead.
And that, paradoxically, means the ideal tax is likely a Wage tax paid by businesses for the use of labour. That reduces the demand for labour in a controlled way, and those people are then hired (directly or indirectly) by government to do whatever the polity asked them to do when they were elected.
Do that and you can probably scrap any income tax completely - meaning whatever an individual earns they get to keep.
Bear in mind that if the labour resource is already free (aka unemployed) then there is no need to tax to free them up in the first place...
You are correct that the government does not want land. What the government wants is a share of the economic value that control of the land makes possible.
Consider "vacant storefronts." The government does not want to operate stores. The government wants those storefronts put to good economic use, where what is good use is determined by bona fide auctions.
And how is a wage tax different from an income tax? It might not show up on an employee's payroll, but the end result is the same, no?
And if you're not taxing capital/capital gains in any way, won't this cause inequality to shoot up even more than it already is?
(1) If you spend more, you're taxed more. Obviously this is better for poorer people, who spend less, but also for rich yet reserved people, who keep most of their money in the bank (which lends it) and are earning an income (=productive). Both will not penalized.
(2) It's much hard to raise, because people will just stop buying stuff, which is much easier than quitting a job to not pay income tax
(3) Being uniform, it doesn't choose favorites. Everything is taxed the same
A sales-only tax incentivized rent seeking, basically, because the rentiers pay the same taxes as the renters while accumulating capital.
You want billionaires to keep their money, because unless they put it under their mattress, they are growing the economy, which means lowering prices and raising quality.
This goes against just about every standard defense of the ability to be rich: that rich people are job creators, that they power the economy by buying things, etc. Why should we discourage them from employing people and buying things? I don't want a loan (that needs to be repaid) from a bank from a rich person, I want the rich person to either employ me or buy goods and services from me.
Actually, that's another point - does employment incur your "sales" tax? If not, it's more advantageous to hire a private chef or driver than to pay for a restaurant meal or a taxi trip, which makes the tax regressive - there's a discontinuity when you're able to hire someone instead of getting a service from a business.
(Or in other words - my actual position that the nobility should be abolished. I'm just surprised to see someone say not only that it should stay, but that the world would be better if they didn't provide any of the benefits people usually claim in defense of feudal society, so I'm trying to understand what their position is.)
If we assume that the rich are, as other advertisers, rational and self-interested, the we should expect their messaging (i.e., the “standard defenses”) to be that which is most effective.
Something akin to if it works, it ships.
Consider that from the perspective of the accountants, every job created is a huge and ongoing liability and cost, and that from the perspective of the shareholders, every job created is stolen profit, money that is not returned in the form of equity appreciation + dividends.
Then you will begin to see the reality of the situation.
(There are a couple of standard answers, including government consumption / public works projects, that can address this.)
Food comes from capital investment in farms, factories, etc. That is real wealth.
>There are a couple of standard answers, including government consumption / public works projects, that can address this.
These answers don't work, and are great at destroying wealth.
But the broad principle that capital investment should bear a lower tax burden is quite correct. And one you've accepted that general principle, it makes a lot of sense to tax rent-generating assets like land and spectrum rights (since those are not really "capital" in the first place), which is pretty much the Georgist idea.
What do you care about ability-to-pay?
> ...also, because people might try to disguise income/expenses as investment-related in order to shield them from taxation, and having a more uniform tax base helps prevent this.
You can't shield from that tax. All entities pay, for every sale, no refunds.
Because it helps align incentives. You can have a 7% tax on sales, or a 5% tax on sales plus a 2% tax based on a noisy correlate. The latter will raise more revenue at a lower excess cost.
> You can't shield from that tax. All entities pay, for every sale, no refunds.
That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)
I see. Well we seems to have different goals. As I see it, government is mostly good at destroying wealth, and so I aim to minimize their revenue.
> That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)
I am essentially suggesting a non-refundable, uniform VAT
The "excess cost" I was referring to is precisely a matter of destroying wealth. It's all well and good to limit government involvement in the economy but clearly, whatever revenue it does collect should be collected efficiently.
Map these values, and you have a pretty good tool for good land assessments. And for lots a wider or narrower, or deeper or shallower, there have been very usable tables for over 100 years. NYC was doing this in the first decade of the 20th century.
A tax on land values asks us to pay to exclude others from our site. In the middle of nowhere, that price can be $0. On valuable sites, it can be quite high.
Today, a lot of city land is leased, and the tenant pays the landlord for the use of the land. The higgling of the market sets the price. There is a lot of revenue potential there, and collecting it for public purposes doesn't take from anyone something he created.
And that can't be said for sales taxes, or wage taxes, or taxes on buildings.
Land tax (important to distinguish) doesn't inhibit labor and effort. On the contrary cities implementing land taxes see increase in output because land gets better allocated to who need it. Simply because people sitting on vacant and absent land in the middle od cities drop it and sell it somebody else.
Land is not subjective but perfectly objective. It is a necessary input to all production - whether it is agricultural (obvious) or manufacturing (your factory has to be placed somewhere) or services (you need access to concentrated area for qualified workers in big cities).
You can't even survive without standing on land.
100% of people need land to survive so how can it be subjective? It might be subjective to birds.
So it's no different to rent in this respect. It IS effectively rent, it just spreads the unpredictability of renting across the whole society instead of concentrating the negative downside among one portion of society.
Unimproved land is pretty fungible. If you have two empty lots across the road or even in the same area they will usually end up costing about the same.
Whether it would be /accepted/ is another matter. But it's not impossible in the squaring-the-circle sense.
This is not the case any more - only a tiny fraction of our economy is tied to the land, primary production (agriculture/forestry/fishing and mining including oil) is just a few percent of the total economy; real estate/rents/leasing is perhaps 15% but most of that is related to the value of buildings, not the value of land. For extremely wealthy people, almost nothing of their wealth or income is in the form of land, because land is not worth that much. The current billionaires aren't major landowners, we're not Victorian age with most of the upper class being rentiers living off the rents of their land estates; the upper class is living off the dividends of their capital which is not tied to land and would be tax-free in a land-tax-only regime.
Extremely large taxes on land (or are we talking about an orders of magnitude reduction in the toal tax burden, and not just about the type of taxation? If we want to drastically cut the total volume of taxes, then that becomes the main topic, not the means of collecting taxes) while not the taxing the other 90% of the economy at all is not really a reasonable solution for modern times. It may have been reasonable in 1870s, but right now all it would just remove pretty much all taxes from all the very wealthy people and corporations, while putting all the tax burden on owners of farms and homes, and the 1.5% of USA economy that handles mining.
> real estate/rents/leasing is perhaps 15% but most of that is related to the value of buildings, not the value of land.
Not at all clear that most of that is related to the value of the building and also you conveniently neglect to mention that that is the largest share of GDP out of any industry in the world.
Further, land includes a lot more stuff that is not counted in the economic measures you are using. 
I agree that determining the value of IP is difficult. Georgists would probably advocate that there is no reason for IP to be in private hands in the first place, nor any need for a system of IP.
Alternatively, you could give temporary ownership of the IP to the creator (like we already do, except without the absurd lengths of time), then when that expires, put it up for auction to determine the pricing, then tax based on that.
This might also usher out IP trolls and IP squatters.
Maybe it will help to think of "land" as "location" since it is not the actual soil but the location which Georgists keep talking about.
If you are a modern services company you need to have access to large pool of qualified people - which happens to be in big cities. So you need a great location for your office to attract people from this talent pool. Location (aka land) therefore is an important input to your business and you will pay a lot for it.
Second, wealthy people park their money (regardless of origin, good or bad) in real estate. That drives living costs for non wealthy people.
It turns out it is non-wealthy workers who pay taxes which fund infrastructure development which benefits wealthy owners of real estate by increasing value of their property.
Georgists promote reversal of the present day funding scheme from nonwealthy workers to wealthy land owners with money parked in real estate. With the alternative being simple "taxing" of locational value to fund government services with two main outcomes
1. reducing tax burden on workers and small business
2. reducing cost of living (rents) by properly allocating land (mostly city land, not agricultural)
But nobody would argue Taiwan is a Georgism heaven right now. Why? Rich and political powerful people own the land. Georgism as a practical matter is very difficult to push through.
Georgism conflates made up “value” with market “value”. Ultimately some person has to assess the value of the unimproved land, meaning someone anointed to write down whatever number they want.
Value is subjective. There is no such thing as “unimproved land value”, unless you’re talking about the last sale price of a particular unimproved lot. Property taxes in general have this problem, but it’s very acute with unimproved land. Unimproved land is one of the most non-fungible goods there is.
It's called Common Ownership Self-Assessed Tax (COST).
Land owner would self-assess the value of assets they possess, pay a tax on that value. The owner would be required to sell the asset to anyone willing to purchase them at this self-assessed price.
If you value the land high for any reason and want to keep it, you must self-assess the value higher than anyone is willing to pay for it and pay tax for it. If value it too low, someone might buy it.
It’s an interesting idea, and I like it in principal, but I also like living in my house on my land knowing that I need to give permission before someone can buy it.
So basically you lock down the price in an auction once every 7 years giving you enough predictability and time to justify your investment.
This is how these groups operate in present day already
1. businesses renting space in cities - they lock down rent for say 10 years
2. individual apartment renters - price is usually locked down for 1 year
3. domain name system - you lock down piece of land in "string space" for a year
4. electromagnetic spectrum auctions (LTE, 5g spectrum bands for telephone companies) every several years usually when new technology is deployed
5. technology patents locked down for 20 years
6. Government LAND to LANDOWNERS - locked down once, with expiration time at infinity and passable down through generations
It helps to see what Georgists actually want to achieve with LVT - proper auction mechanism for something everybody needs and there is scarcity of it - land.
For political reasons they attack it from the position of tax, not from the position of an auction. Which makes it a bit convoluted and confusing unfortunately.
In the US there is $16T currency, $38T stocks plus a roughly equal amount in corporate internal valuation, ~$30T small business, $33T houses, $17T commercial real estate, plus commodities, any other mark to market securities, vehicles, collectibles, intangibles like copyrights, patents, operating licenses, and really anything else that a court can adjudicate possession of.
I would expect somewhere around $250-500T with defensive valuation, so tax rates <1%. If your house is worth $1M, it’ll cost you $800/mo. By comparison, a US top 5%-er pays the same in property tax, plus income tax of about $7000/mo.
And it seems amazingly efficient. List and pay. If you like it, pay more. If you want to sell, just pay less and somebody will inquire. Market liquidity and order book depth transparency would be amazing. Capitalizations would be accurate for liquidation rather than estimated by float pricing.
The big monkey wrench I see is privacy. I believe this can be solved with zero-knowledge proofs. Maybe this is my next project.
So if I don't value it highly enough myself, someone else can come in and take the land. But the house is on the land. So I'm going to have to adjust the price to the actual price of the house + land, or someone else will outbid me and take it, thereby getting both the land and the house.
Or else, when they outbid me, they only get the land but I keep the house. But how's that actually going to work in practice?
The net effect is that this scheme stops being Georgism. It becomes a tax on the total value of the land plus improvements.
Mansions and expensive property would be always on the market.
This notion of copyright has basically destroyed the idea of folklore in the last few hundred years, relegating it from one of the main areas of human expression to a corner of the internet.
I think even 20 + 20 copyright is problematic. People should be free to use characters and stories while they are still relevant, and create their own variations that may even become more popular than the 'original creation' (in quotes because so much of creativity rests on the shoulder of others).
1. Copyright that's not assigned value defaults to the public domain; this provides an avenue for copyright to devolve to public domain immediately which does not currently exist;
2. Copyright that's no longer maintained by its owner devolves to the public domain (similar to 1), taking it out of "copyright limbo";
3. Any group with sufficient resources can take a copyright into the public domain as a public good, e.g., "we" could buy Wolverine into the public domain;
4. Copyright can be maintained for very long durations for entities that choose to do so;
5. The ever-increasing cost means that eventually the copyright "buys itself out", that is, when the COST is assessed at 100%, the Fed has sufficient funds to simply buy the copyright outright (this is a choice, btw, the Fed could happily accept 130% of COST!); and,
6. Absurd copyright lengths no longer universally apply.
I think (but I've not completely thought this through) that such a system could help with patent litigation. Specifically, consortia of entities can buy out a patent if the patent is weaponized. Mind you, the patent holder can no longer "squat" on a patent for free: they must pay the COST of a patent portfolio! This naturally handles the asymmetry of costs between NPEs and regular old entities.
If you like 100 years of ownership, set the rate at 1% per year, calculated on the copyright/patent holder's self-assessed price. Every century, the polity collects 100% of the value. What the polity does with the money collected is up to the polity.
Any sizable company could easily bully any number of people out of their homes to acquire the land. It's hard to overstate how much people would hate this.
This idea is the problem. Taken to its logical conclusion, we get feudalism, where those who don't own land will forever pay rent the landed gentry, only because they were fortunate enough inherit land.
Property tax fixes this somewhat, but California decided to weaken that with Prop 13, and now is approaching feudalism. For example, in the apartment I lived in California, the rent paid would cover the landlord's property tax obligations in a month, and the remaining rent is the landlord's (minus whatever costs they have for maintenance).
Idea that you can buy a monopoly is generally a bad idea.
Consider what the government would do if a huge oil deposit was found under your house.
There were years, under Prop 13, when many people's houses -- that is, their land -- rose in value by more than their gross salary. Not their savings, but their gross wages!
And Prop 13 keeps taxes artificially low, driving the prices up. Normal turnover doesn't happen, so retirees stay in family-sized homes close to jobs they no longer fill, and young families are forced to "drive until they qualify" for a mortgage, and every workday thereafter.
Occasionally one sees a diner in a skyscraper neighborhood. Under LVT, their incentive would be to find another place to conduct business, perhaps on the 1st floor of a taller building, and let the site be redeveloped to meet current needs.
This idea could still be workable for unimproved land
Obviously you'd have to keep tracking the improvements over time.
Even places (like California) that do not assess tax based on value still have massive fleets of property value assessors that are used during the course of normal market transactions, since those who lend mortgages use them to prevent fraud.
A 50 year old building, with old systems, may be fully depreciated, but if one had to rebuild, one would need far more than the current building is worth.
When one buys a home with a mortgage, the bank requires an appraisal. In some places, the forms don't even break out land value from building value, or they do it badly. An appraisal merely compares the subject house with others that have sold recently in the same area. Better location? $15,000 more (or, in California, $100,000 more) Inferior location? subtract $15k or $100k. 1 more bathroom? Add $5,000 (CA: might be $5k or $50k) new kitchen vs 20 y/o kitchen? Add $10k, $50k or $100k, or more, depending on what is typically spent in that neighborhood. For each "comparable" add up all the pluses and minuses, and add that to the transaction price for that property. Average those, and the subject house value is estimated. Land value is in there, but not explicit.
California has assessors, too, who, after a property has sold, update the assessment on it to equal the transaction price. Some goes to land, some to the building. (check out listings at realtor.com, and fully expand the property history info. Notice when the previous transaction was, and look at the increases. They are in reality mostly land value. Buildings don't appreciate. Land rises and falls in value --- mostly rises.)
But appraisers and assessors are very different.
Valuations in currency are an abstraction for how we deal with this really tricky and intractable problem. But like all abstractions, it's leaky. A $100 bill has no "inherent" value yet it's value is very precisely known.
So you see, there is no inherent value or price to oranges or water or land, or anything. This is a fundamental misunderstanding that Georgists have about the nature of prices and the world.
The fact that someone can be appointed to declare an imagined inherent price to water or land or whatever doesn’t change it. Yes, the government does appoint people to do this and it is ridiculous. My house isn’t worth what the government says it is, it’s worth what I’m willing to trade for it.
What you are arguing against, the idea of taxing something based on its "value" where everybody already values things differently, this is not a new thing. It's not hard to implement. We already do it. It's here in the real world. We have property taxes. Each property is unique, non-fungible, everybody has different valuations for every property, and yet somehow we still work out a "market" value.
Establishing land values is only a slight modification of establishing property values. It's easily solvable, and the places that have implemented it have not had difficulty establishing the valuations for tax purposes, by basing these valuations off of market transactions.
But, you might argue, what if your personal valuations are different than what the "market" values them at? Well good for you, because then you are likely able to find a great deal more value out of a property than what the market values something at.
And maybe if the market values something far less than what you value something, then you can hold on to it for cheap! And if the market values something far more than you value something, you can avoid the expense of buying it, or if you have it, you can profit from selling it.
If markets are useful for something, it's finding out what a population thinks something is worth. When it comes to land, and who is excluded from using this precious and finite resource, and who is allowed to use it, market valuations are extremely useful. We can watch transactions to figure out who is using up the most of what other people want (i.e. holding land with high market value). If somebody is hoarding a precious resource, but unwilling to pay the taxes to hold onto it, perhaps they don't actually value that resource so much after all.