I find I really struggle to believe that a land value tax is progressive. It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do, making the tax regressive rather than progressive (the case if you would use more than ten times the land value.) While big farms may pay a lot of the tax, that gets pushed to food prices which will have a proportionally larger affect on the poor, even if wealthier people eat more land-intensive foods.
A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. It seems the only way for the rich to pay a lot more land tax is for them to go back to having large country estates (that mostly aren’t farmed) which doesn’t seem to be the way the rich are going—most people get and stay rich through businesses which, in western countries, tend to provide services and operate out of a small amount of land rather than farms or mines which exploit their monopoly on land.
> It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do
Why? Someone living in Manhattan or Queens is certainly using 10x the land value of someone living in rural Idaho. If I were to magically teleport a $3m brownstone from NYC to Idaho Falls, it would be worth perhaps $200k at most (it is old and crumbling).
> While big farms may pay a lot of the tax
As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes.
> A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment.
Why is this bad? They are now being very efficient with the use of their land. They have taken less of a rivalrous resource from the rest of society but have managed to shape it to their satisfaction.
>> It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do
> Why?
The world's richest man own $500m of real estate. Sounds like a lot until you realise it's 0.25% of his net worth (and the unimproved land value's possibly sub 0.1%)
What percentage of the average American's net worth is tied up in the footprint of their home? Guess it's two orders of magnitude more than Jeff's, and potentially >90% of the value of the average farm. Hence not remotely progressive, even if it's less worse than a pure property tax in most circumstances and other even more regressive taxes.
> As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes.
It takes a lot of land to make a farm. (Sure, per acre it's less than the city, but city dwellers don't own many acres and unlike the farmer have a realistic proposition of selling their limited acreage to a condo developer when the tax makes it unaffordable).
c.f. It takes zero land to make a much higher margin SaaS startup.
> What percentage of the average American's net worth is tied up in the footprint of their home?
I think a better question is what percent of the average person's net worth is tied up in the unimproved value of their land? I posit that unless they are pretty wealthy, it is nearly nothing.
The tax incidence from a land value tax on someone living in a 300k home in rural California is nearly nothing, while it will be massive on a wealthy person living on a $5m home in Palo Alto. Their actual physical homes are fairly similar - the 4.7m difference is land value. I don't see why it isn't progressive. You give an unrepresentative example of literally the wealthiest person in the world - what about for 99.9% of people? Sure, it isn't literally the most progressive tax possible, but you can apply your argument to the progressive income tax we have today. Jeff pays literally 0 income tax, but that doesn't mean in general the income tax is not progressive.
If you are that concerned about it being progressive - and not the efficiency benefits of the tax - you can literally just make it progressive. 0% on the first $X/ft value of the land, 10% on the next $Y/ft, etc. This would solve your problem with farms as well (if you are not convinced by the graphic that 1000sqft in SF is worth more than 100 acres in Idaho anyway).
> Why is this bad? They are now being very efficient with the use of their land. They have taken less of a rivalrous resource from the rest of society but have managed to shape it to their satisfaction.
Their point of contention was in it not also being a progressive tax. So I guess they want the rich to pay more tax even if they use less of the taxed resource.
I don’t really want to argue about whether or not a progressive tax is good (the dual meaning of the word can make that difficult.) There is a claim that a land value tax is progressive, that is, the effective tax rate increases as one’s means increase, and I don’t really believe that claim. So “this is good [even though it is a case of the tax being regressive]” is irrelevant to the question.
> This study examines how replacing a uniform property tax with a land value tax
(LVT) would shift the tax burden for single-family residential properties in Tarrant
County, Texas, over the period 1997–2006. Results suggest that a LVT would shift
the tax burden away from single-family properties and on to other property classes.
For the more recent years in the sample, the average tax liability for single-family
properties would decrease about 30 percent, regardless of household income, and
SuitsIndices suggest that, within residential properties, a LVT would be slightly more
progressive than a property tax. Horizontal equity problems would be greatest for
the lowest-valued properties relative to other properties. This study also examines
how a LVT would change property values due to the effects of tax capitalization.
> A land tax is considered a progressive tax in that wealthy landowners normally should be paying relatively more than poorer landowners and tenants. Conversely, a tax on buildings can be said to be regressive, falling heavily on tenants who generally are poorer than the landlords
So in general the idea is you tax the market value of the land, but not the value of what was done out of it. So an apartment building with 10 units would be taxed approximately the same as a single family home if their land is in the same area and of the same size. But since there are 10 units, each tenant of the apartment building would pay only 1/10 of the tax. Same thing if it's a Condo building. It also means that if someone wants to live near some "hot market" they'd pay higher tax for being there than if they were to move further away, since the tax is based on land market value.
I understand what a land value tax is. I just think that for it to be progressive requires the rich to behave like turn-of-the-century aristocrats with large estates, whereas I think today rich people are more likely to not use a proportionally large amount of land, and to own shares in companies (which themselves don’t need much land) instead.
Thank you for the link to the study around Fort Worth (my first guess was that this was some rural country which wouldn’t be very representative but that’s wrong. Most people in that county live in Fort Worth)
It's hard to visualize just how much more valuable land is in high-value areas. It far far outweighs the amount of land. And remember that it's a tax on the value of the land, not the amount of land. $1M of land in the Bay Area is not often enough to place even a house, but $1M of farm land far from economic opportunity will buy hundreds of acres.
What this does is make the Ricardo/Georgist of land more relevant in the current times than it was for agricultural land hundreds of years ago. The difference between good and bad land is amplified, not reduced.
Check out this map of the US, that switches from pixels proportional to acres to pixels proportional to real estate value. Georgism applies most extremely to these areas that metastasize:
It's also worth pointing out that the primary "critique" of Piketty's analysis of wealth inequality, with wealth increasing towards capital owners, by Matthew Ronglie, was two fold 1) depreciation wasn't properly analyzed, and 2) most of the wealth transfer went to capital in the form of real estate rather than other forms of capital. And the part of real estate that doesn't depreciate is the land, not the structure. So I view Ronglie not as a refutation of Piketty, but an addition that points the way to the real problem with capital: land.
For George, land was not capital, it had to be separated out because it behave differently than a set of tools. And for George, land doesn't refer just to the dirt on which we build structures, it also applies to things like patents and other monopolies that the HN crowd understands to sap wealth from society.
Georgism is a very unintuitive understanding of political economy, but I think that the HN crowd is far more likely to find it a natue thing to understand, since our "capital" in the form of computers are cheap and plentiful, most of us live in places where real estate demonstrates George's insights dramatically (the Bay Area), and we also encounter other forms of economics land like patents/IPv4 addresses/domain names.
Where I am from the majority of rich people are heavily invested in high value land. There have been many studies asssessing the question you describe. I will try to find them when I get some time, I think you will be surprised.
Transfer payments don't need to be in the tax code. You can e.g. tax land at a higher rate and write all people a check for the same number.
Sweden and Denmark and the Netherlands have less progressive income taxes than the US. Rather than encoding transfers in the tax code, they perform them via programs, leaving them with a more redistributive system.
> A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment.
Sounds like pro-social behavior.
Today the rich buy shops in Manhattan and turn them into garages, lowering the value of the property and thus the tax revenue that New York gets. Rather than being rewarded for squandering, folks should be incentivized to make good use of the space they're taking up. If someone wants to turn a productive business into storage for their toys, that's fine, but we shouldn't be giving them a discount for doing it.
I don’t want to get sidetracked on whether or not the incentives are good, or even whether a regressive tax is bad. (Though I admit I sidetracked with my comment above.) The question is why a land value tax is progressive in a modern industrialised country with a services-based economy?
Whether a tax is progressive or regressive tends to be quite a fundamental question economists ask. Lots of proponents of a land value tax claim the tax is progressive. So either they think that is a good argument in favour of it (in which case shouldn’t their argument be weakened if the tax is not progressive? Surely one should care about that?) or they think it is immaterial, but then why mention it at all?
Regressive taxes coupled with payments are a very powerful way to squeeze the lower ranks of the middle class, while preserving the rich and the higher middle class.
You can structure the rates however you like to place the squeeze at any place you want. If you structure it to completely get rid of the squeeze point you have just created a proportional or progressive tax.
Whether those transfer payments are via taxes, payments, or services is not essential for the goal.
If you encode it in tax rates, you are subsidizing behavior that you are trying to deincentivize via taxes, which is unfortunate.
The idea of LVT or other taxes on externalities is to tax behavior you want to prevent. That's why we should tax the capture of land, the pollution of the environment, adding traffic to a transportation system, etc. That's why it's unfortunate to tax things like "making your house nicer" or "converting a parking lot to a veterinarian office" or "hiring another employee". You wouldn't sent checks to someone because they let their house decay or they fired someone, so why would you give them a tax break?
The point of the transfer system is to help people who need help, right? Not to discourage things we want to happen.
I believe the original intention was to tax the market value of the land a structure sits on, not the structure itself. So in the case of apartments, presumably local density would have to be fairly high to make it a good place to build an apartment building there in the first place, and so the market value of the land would also be high; but the units would not be taxed directly at all, though their occupants would have to pay some fraction of the overall LVT. (Presumably that fraction would be higher for the penthouse.)
You can see why the LVT is relatively density-friendly: the taller the building, the less tax paid by each resident.
It corresponds to the value of the unimproved land. So the tax paid by a skyscraper would be roughly the same as that paid by an empty lot of the same size next to it. (You can imagine a system where a tall building would have to pay more tax for blocking out the shared light).
If the burden of the tax were shared equally than the penthouse would contribute the same amount as each of the floors below it—some small fraction of the total for a tall building.
It's taxing fair market value of the land. So, if you erased a skyscraper in downtown, how much would that barren plot of land be worth? Tax all of the value there. It's one of the only known taxes that doesn't negatively distort the economy
in many taxing jurisdictions, property tax is actually a combo tax on (unimproved) land (square footage/acreage) and on the value of the structure. sometimes these are the same rate and sometimes not. in other jurisdictions, market value dominates, though they often consider land value and structural value separately as well. once upon a time i managed a product to help assessors determine building values so they could do the necessary discrimination for property taxes.
It’s not. It’s a spin on property taxes favored by people on the internet and some libertarians.
Instead of taxing your property based in market value, you tax it based on what your neighbors value is. It’s basically a scheme to transfer wealth in a arbitrary and confusing way.
IMO it gets traction here because California has an outsized influence on HN for obvious reasons and California’s tax regime is bizarre and unjust. On the flip side, the economic influence of that tax policy makes it very obvious to some people that unjust tax policy can make you rich.
I'd be very surprised if many true libertarians supported Georgist principles. Georgists are all about socializing land, and other efforts include Community Land Trusts, social housing, and other ways to make sure that markets result in fair outcomes. The difference is in prioritizing the well-being of people rather than the primacy of markets or "freedom from government" style libertarianism.
A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. It seems the only way for the rich to pay a lot more land tax is for them to go back to having large country estates (that mostly aren’t farmed) which doesn’t seem to be the way the rich are going—most people get and stay rich through businesses which, in western countries, tend to provide services and operate out of a small amount of land rather than farms or mines which exploit their monopoly on land.