I think it's extremely important to undertake a cost benefit analysis of the end state to decide if we want to transform society in that direction. So I disagree strongly with any comment of the form "don't get too caught up in the end state".
I agree there are some other things you can tax. I presume those are also taxed at precisely the economic rents they create? My point is that government needs some sort of tax with a knob that they have the ability to tweak upwards or downwards based on shifting revenue needs. It seems to me the only things in a Georgist system are taxed at precise values and fail to give government that knob. Do all Georgist societies have some sort of services cap because their tax revenues are capped?
I say "don't get caught up in the end state" not because I don't think the end state is important but because the intermediate effects are hard to predict without more data. But, more to the point, if LVT is the most efficient kind of tax, why would we not want to over time, shift as much of the tax base to it as possible?
In any case, Georgism produces a very different financialization of governance than the current tax system, because public goods pay for themselves via increases in land value- see the Henry George Theorem by Nobel laureate Joseph Stiglitz: https://en.wikipedia.org/wiki/Henry_George_theorem. This means that rather than adjusting taxation to meet desired investment, desired investment is adjusted to produce optimum public returns- which has the beneficial side effect of incentivizing good and proper governance.
I think it's fair to say efficiency and fairness are sometimes competing concerns. For instance, I disagree on shifting only property taxes to LVTs because I think they benefit condo developers at the expense of homeowners. Any tax shift has winners and losers and while there might be a slight overall benefit to the shift itself the individual outcomes can vary dramatically. I'd argue that we do have to have some degree of consideration for individual outcomes as well.
I live in Ontario which doesn't have prop 13 and I think development is still far from straightforward or simple. We do see some condo development but I'm not sure how much not having a prop 13 like policy has to do with it. It's almost impossible to measure this given the difference between regions extends far beyond a single tax law.
I worry that the Henry George Theorem suggests a government can spend money in order to tax more of it. It potentially solves the issue of governments not having enough revenue, since arguably they can tune unimproved land values upwards to the levels they need. Of course it also introduces the problem of governments tuning unimproved land values to the level they need. Tax revenues have grown from $3.32 trillion in 2017 to $4.05 trillion in 2021. That's nearly 22% growth in a four year window.
I'd be very concerned about governments undertaking the necessary actions to drive land value taxes up by 22% over a four-year window. I think such policies would lead to many people being forced to vacate their land.
Most increases in land value are for the construction of infrastructure and other investments which make people more productive and increase wages, so while land values increase that investment increases wages also, meaning that it shouldn't have much of an effect on people's ability-to-pay.
Can you give examples of how this is true? I feel like the main government spending that made me more productive was some transit spending before I was born and their education spending. I feel like most government services aren't this.
Even things like health care, which arguably keeps me healthy enough to work isn't distributed in any sort of uniform way so the productivity increase from it isn't likely to match the land value tax increase.
I think there are a lot of things that can increase land value 22%. I think some of them might even raise average wages 22%. I think almost none of them will raise each individual wage by 22%.
The obvious one is increasing the number of workers.
You have a thousand acres of farm farmed by your family and another say - ten workers in total.
The government builds a rail line and highway along one side of your farm and suddenly a portion of the thousand acres is better used as a small town - which now houses tens of families and perhaps a hundred workers.
Even if your personal income didn’t raise, the income of the area did.
Can you explain in what sense LVT is the most efficient form of tax? I do understand that normally when you tax something malleable you get less of it so it's often best to tax things that aren't malleable. But what precisely is LVT more efficient at? Does it generate the fewest negative externalities per unit of tax revenue? If so, how do we evaluate between different types of externality?
Have we accounted for the fact that with LVT it's possible to get less tax revenue from land becoming vacant because the taxes become too high for users?
Because land has fixed supply, as you've said, the tax is perfectly efficient: it causes zero deadweight loss. But LVT actually has positive externalities as well- namely, it makes it nearly impossible to speculate, which with land consists of buying land and holding it off the market unused or underused in order to sell it later. Speculation is very inefficient and also quite common, so removing it actually makes the economy better than it was before an LVT.
As for the tax being too high, if people started to vacate land that would mean the tax rate is over 100% of the land value (if it's at 100% people won't vacate, they won't be able to extract rents from it but it won't be an economic loss). Governments have every incentive not to tax land over 100% value because they actually lose money from doing so, so that's a pretty good security that it won't happen.
I think I need to think about this some more. It seems like the goal of government is to figure out the tax rate that counters the land value perfectly without taxing any more. The fact that it is unimproved land value means we aren't stuck in an efficiency trap since a diverse enough set of uses can improve the land sufficiently to generate a reasonable economic profit in non-rent form. Countering speculation is definitely a strong positive effect.
I worry that the overtaxation causing vacation mechanism isn't very efficient because if the tax takes a small part of the land value improvement it seems that the government gets additional unearned revenue while only land with little to no improvement would be vacated. I think people only vacate if the taxes cut into their additional revenues too steeply. I'm not sure exactly where the too steep point is, but I think governments would have an incentive to overestimate the value of land.
That is not the sole purpose for the public collection of land rent. Land rent is based on demand for land. Land rent is what you would pay for a particular plot vs. some other plot that is available.
The question is to whom should this payment go, and "fee simple" is an entirely inappropriate mechanism for payment.
Everyone has an equal right to the use of land, limited only by the equal rights of others to use land. What the state does not need for the provision of public goods & services should still be collected and returned to the people on a per capita basis, as a simple matter of social & economic justice.
Overtaxing is definitively a problem but I personally am not a fan of extremes. Even just 50% of the ideal tax rate would be sufficient to significantly improve an economy while not ruining anything by being overzealous. There will have to be an escape hatch so that people can defer taxes for 5 years.
I agree there are some other things you can tax. I presume those are also taxed at precisely the economic rents they create? My point is that government needs some sort of tax with a knob that they have the ability to tweak upwards or downwards based on shifting revenue needs. It seems to me the only things in a Georgist system are taxed at precise values and fail to give government that knob. Do all Georgist societies have some sort of services cap because their tax revenues are capped?