4 ms·

If the land tax increased, wouldn't the landlords just increase the rent? Thus making life more expensive for non-homeowners? Disregarding what the governme

• chvid 11y ago
  According to economic theory they would not as the supply of land is fixed.
  • colomon 11y ago
    How does a fixed supply of land preclude raising the rent?
    • marcosdumay 11y ago
      If the supply is fixed, the price will fluctuate only with demand. (But no, the supply isn't really fixed.)
    • notahacker 11y ago
      The land value taxers' argument generally works the other way round, arguing that the supply of rental properties actually is artificially constrained by landowners, and that tax on the undeveloped value of the land would push landowners into developing and letting property on their land or selling up to developers, implying more price competition in the rentals market and thus less ability to pass on the tax costs to the end occupant. The fixed supply of land is important only inasmuch as it provides a reason why landowners can be pretty confident their land will appreciate in value in the first place (and in some cases, to a sufficient degree to make the additional revenues achievable from development/rentals in the short term appear relatively trivial). Moreover, if land ownership is highly concentrated then releasing very little of that land for rentals and gradually selling off the highest-value parcels probably is the most effective way of maximising the value of one's dynasty's land portfolio. The argument isn't so much that rents would never go up at all as that the effects of more efficient land use and competition in the rentals market mean that individual occupants of the land wouldn't pay the full value of the tax (and would tend to benefit from commensurate rate reductions on other taxes) How well that argument explains or even fits the facts of land ownership varies hugely by geography.
• mattgibson 11y ago
  No. They will try, but it doesn't work because of an often overlooked quirk of the market which only affects land. Land is unique because it can't be manufactured or moved, so when it comes to supply and demand, the normal mechanism of the consumer playing off suppliers against each other to get the cheapest price can't happen. Each piece of land is unique because of it's location, so other bits of land won't do. For example, starting a business on the high street. You can't just get a cheap piece of land elsewhere and move it to the location you want it to be in, whereas you can do this with all of the other supplies you need. This makes land a de facto monopoly. The consumer has no choice and allowing people to own more than they need is damaging to capitalism. What really happens instead is that the consumer is left competing with other consumers to get the bit of land they need. Each location is effectively an auction for a unique item. In starting a business, rival entrepreneurs will continue to outbid one another until they are left with only just enough profit for it to be worth it. Bidding less means a rival will outbid them and they won't get the land they need. Bidding more means the business is not viable. In this way, the landlord does not and cannot set the price themselves. The market decides. They can try to raise the rent, but the business owner will then not be making enough profit for it to be worth it, so they will either refuse or shut down. The is counter intuitive, but well researched. Google for Ricardo's law of rent https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent or read Churchill's rather good speech on the matter here: http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html http://www.landvaluetax.org/current-affairs-comment/winston-...