Buildings are constructed with borrowed money. Attach said debt to the land, rather than the person building, and payments on it are a part of the lease. If you build a sky-scraper, you only pay for it while you occupy the land. Then if someone outbids you for it, they have to pay the debt.
How does this differ from an investment then? Debts attached to people can be recovered through their assets, but if the only "asset" is a temporary government lease on some land there's nothing to recover if it falls through. Furthermore, this leads to so many conflicts of interest it's not even funny, whats to stop someone from taking out a huge loan and paying their own construction company to do the work at a premium?
It can't fall through, because the debt is on the land and not a person. The land doesn't run out of money. There will always be a buyer for the building who will then have to pay down the loan. If there isn't a buyer for the building, then the building is worth less than the loan and even in the traditional case of the banking issuing the loan to an individual, there would not be sufficient recovered capital to repay the loan.
TL;DR the lender loses money iff the value of the building is less than the money they loaned to build it (true in any system).
> whats to stop someone from taking out a huge loan and paying their own construction company to do the work at a premium?
That's called embezzling. Are you familiar with corporate law? The "limited liability" in "limited liability company" refers to the fact that the owners of a company are not liable for the debts owed by said company. One can, in principal, take out a large loan on behalf of a company you own, pay it to yourself as salary, then declare the company insolvent and pocket the cash. Laws exists to prevent this and could be extended to fraud under the new system.
>even in the traditional case of the banking issuing the loan to an individual, there would not be sufficient recovered capital to repay the loan.
This just is not necessarily true, and more importantly runs into the issue that now lenders will not lend to people and land that they believe cannot be be positively valued for the entire term of the debt. In real life if you buy a home on a 30 year mortgage, the lender does not need to care much if it could be less valuable in 20 years, only that it retains enough value to be worth the rest of the loan if it needs to be seized.
As for embezzlement, go try to get a loan as a new LLC without assets, or revenue, or personal collateral. The reality is that under your proposed system, no bank would ever take the risk of loaning money to a plot of land. Forget fraud and embezzlement, there's zero mechanism for preventing flat out bad management from ruining a plot over and over again if you don't attach debts to people.
so then it isn't just that the state owns the land, but for all practical purposes the state owns the land and the buildings on it. nobody ever owns any property anymore, and all property is only leased from the state.
i don't know that i'm even necessarily against this idea, but it's a long ways from just being a land value tax at this point.
