5 ms·

Land Value Tax, of course. The UBI is unthinkable without it.

by bufordsharkley 11y ago

dredmorbius 11y ago
What's the mechanism by which the LVT (Georgian Tax) prevents rent / property value escallation?
- notahacker 11y ago
  Theoretically, if increases in the value of a site are taxed at very high marginal rates, landowners have a lot of incentive to increase the supply of housing to be able to actually gain any benefit from the increase in demand.
  - norea-armozel 11y ago
    Also, I would like to point out that any property improvements themselves don't get factored into the land value tax itself. Properly, a land value tax is a response to the value of the land itself (where you're literally just buying a plot sans any external improvements). So, demand for land itself sets the bar for the tax. If a plot is $100 today but doubles to $200 dollars the tax should (on a curve or however it's computed) increase thusly. But if you improve the property on the land like adding better windows to your home or solar panels those improvements don't factor into the tax. Thus, it incentivizes you to keep adding to the property value without the current penalties of the property tax system we have today.
  - dragonwriter 11y ago
    No, if increases in value of landholdings are taxed at a high rate, than landholders have a lot of incentive to invest their surplus revenues in non-land assets whose appreciation is not so highly taxed.
    - bufordsharkley 11y ago
      What are these assets? Surely not most capital, which depreciates rapidly. The only assets that would apply would be: * Intellectual property (patents and copyrights). This would be a problem, but only to an extent-- there isn't such an inelastic demand on the return of IP as there is on housing stock. * Picassos, etc. This, while true, isn't especially relevant. Is there something you're getting at that I'm missing here?
- samscully 11y ago
  If the tax is 100% of the annualised return on the land (so perhaps around 6-7% of the land value) an increase in property values will lead to a concomitant increase in the level of UBI. Presumably there is an equilibrium point where prices settle down though it would lead to significant inflation initially.
  - bufordsharkley 11y ago
    Yes, it would be pegged to the full Economic Rent of the whole of the land stock. Essentially making it a citizen's dividend on the value of this land.
- bufordsharkley 11y ago
  Essentially by definition. Property value escalation either means that the actual structure becomes more valuable (something that very rarely, if ever happens), or that the ground underneath becomes more valuable. The land becoming more valuable (up to $X) is equivalent to saying that the market price on the unimproved land is now worth $X-- this is the amount of money any landowner can expect to collect on this land, given the proper amount of improvements upon it. Since there is no marginal cost in the unimproved land, the entire return to this land is pure Economic Rent. The LVT would tax the full Economic Rent of the land (which is essentially equivalent to an annuity on $X, for land worth $X.) Why wouldn't the landlord pass on the LVT to tenants? Competition, essentially. Land would only be desirable to be held by people well-equipped to build (and gain the return on) the proper improvements. These landowners would have an advantage over a landowner who does not make the proper improvements, and competition would drive the market rate of rent towards the marginal cost of improvements.
  - dredmorbius 11y ago
    My understanding is that LVT is just that, a tax on the land value. In any significant urbanised setting, that's an alternative statement of "the value of the surrounding services of the property". More specifically, it excludes the improvements to the property itself. That aside, your tax on the unimproved economic rent makes some sense. What of increases in cost of rents or property values?
    - bufordsharkley 10y ago
      Didn't see this until now. In general, increases in the cost of land rents are an important signal that more should be built on this land; it's a bummer for current residents, but it's important that this demand is satisfied. I believe financial instruments should help: an insurance policy taken by landowners against a rise in land value should dampen the blow. (This is somewhat related to the housing markets championed by Case/Shiller) But in general, it would probably lead to a bigger change, that is that the property with the greatest risk (land) would likely tend to be owned by those best equipped to deal with this risk. More people would prefer to be renters (what's the advantage of landownership, anyway, other than the investment potential that the LVT would relieve?)
dragonwriter 11y ago
The UBI is quite thinkable without an LVT, and if your accept the GPs description of housing supply curve, trying to solve the problem it creates by lining UBI to an LVT would just create a huge positive feedback loop and inflationary spiral. Really, independent of the unlikely characterization of housing supply curve in this subthread, UBI makes more sense tied to a progressive income tax without preferential treatment of capital income than to an LVT.
- bufordsharkley 11y ago
  I think any funding of the UBI cannot be distorted by the UBI itself, at any level of the UBI. Imagine the UBI was raised to a level high enough that essentially no one wanted to work anymore; how could this possibly be funded, insofar as there IS no income to be taxed? The LVT avoids this particular problem, in that it's driven fully by the value of land within a city. No matter how much or little people work, this land will continue to have value.
  - ghaff 11y ago
    Land has no value absent the demand for it by people who have money.
    - bufordsharkley 11y ago
      This statement seems to be fundamentally incorrect or untrue. Land is valuable for its many uses: * To grow on * To live on * To collaborate on * To build on * To travel on etc and etc and etc. What do you possibly mean that it "has no value"?
      - ghaff 11y ago
        This is in the context of a discussion of a tax on land value which is presumably a function of the monetary value placed on that land--i.e. how much someone is willing to pay for it. But, sure, pay a land value tax of 10 percent of the sheep grazing on it or whatever.

Land Value Tax, of course. The UBI is unthinkable without it.

dredmorbius 11y ago

What's the mechanism by which the LVT (Georgian Tax) prevents rent / property value escallation?

notahacker 11y ago
Theoretically, if increases in the value of a site are taxed at very high marginal rates, landowners have a lot of incentive to increase the supply of housing to be able to actually gain any benefit from the increase in demand.
- norea-armozel 11y ago
  Also, I would like to point out that any property improvements themselves don't get factored into the land value tax itself. Properly, a land value tax is a response to the value of the land itself (where you're literally just buying a plot sans any external improvements). So, demand for land itself sets the bar for the tax. If a plot is $100 today but doubles to $200 dollars the tax should (on a curve or however it's computed) increase thusly. But if you improve the property on the land like adding better windows to your home or solar panels those improvements don't factor into the tax. Thus, it incentivizes you to keep adding to the property value without the current penalties of the property tax system we have today.
- dragonwriter 11y ago
  No, if increases in value of landholdings are taxed at a high rate, than landholders have a lot of incentive to invest their surplus revenues in non-land assets whose appreciation is not so highly taxed.
  - bufordsharkley 11y ago
    What are these assets? Surely not most capital, which depreciates rapidly. The only assets that would apply would be: * Intellectual property (patents and copyrights). This would be a problem, but only to an extent-- there isn't such an inelastic demand on the return of IP as there is on housing stock. * Picassos, etc. This, while true, isn't especially relevant. Is there something you're getting at that I'm missing here?
samscully 11y ago
If the tax is 100% of the annualised return on the land (so perhaps around 6-7% of the land value) an increase in property values will lead to a concomitant increase in the level of UBI. Presumably there is an equilibrium point where prices settle down though it would lead to significant inflation initially.
- bufordsharkley 11y ago
  Yes, it would be pegged to the full Economic Rent of the whole of the land stock. Essentially making it a citizen's dividend on the value of this land.
bufordsharkley 11y ago
Essentially by definition. Property value escalation either means that the actual structure becomes more valuable (something that very rarely, if ever happens), or that the ground underneath becomes more valuable. The land becoming more valuable (up to $X) is equivalent to saying that the market price on the unimproved land is now worth $X-- this is the amount of money any landowner can expect to collect on this land, given the proper amount of improvements upon it. Since there is no marginal cost in the unimproved land, the entire return to this land is pure Economic Rent. The LVT would tax the full Economic Rent of the land (which is essentially equivalent to an annuity on $X, for land worth $X.) Why wouldn't the landlord pass on the LVT to tenants? Competition, essentially. Land would only be desirable to be held by people well-equipped to build (and gain the return on) the proper improvements. These landowners would have an advantage over a landowner who does not make the proper improvements, and competition would drive the market rate of rent towards the marginal cost of improvements.
- dredmorbius 11y ago
  My understanding is that LVT is just that, a tax on the land value. In any significant urbanised setting, that's an alternative statement of "the value of the surrounding services of the property". More specifically, it excludes the improvements to the property itself. That aside, your tax on the unimproved economic rent makes some sense. What of increases in cost of rents or property values?
  - bufordsharkley 10y ago
    Didn't see this until now. In general, increases in the cost of land rents are an important signal that more should be built on this land; it's a bummer for current residents, but it's important that this demand is satisfied. I believe financial instruments should help: an insurance policy taken by landowners against a rise in land value should dampen the blow. (This is somewhat related to the housing markets championed by Case/Shiller) But in general, it would probably lead to a bigger change, that is that the property with the greatest risk (land) would likely tend to be owned by those best equipped to deal with this risk. More people would prefer to be renters (what's the advantage of landownership, anyway, other than the investment potential that the LVT would relieve?)

dragonwriter 11y ago

The UBI is quite thinkable without an LVT, and if your accept the GPs description of housing supply curve, trying to solve the problem it creates by lining UBI to an LVT would just create a huge positive feedback loop and inflationary spiral. Really, independent of the unlikely characterization of housing supply curve in this subthread, UBI makes more sense tied to a progressive income tax without preferential treatment of capital income than to an LVT.

bufordsharkley 11y ago
I think any funding of the UBI cannot be distorted by the UBI itself, at any level of the UBI. Imagine the UBI was raised to a level high enough that essentially no one wanted to work anymore; how could this possibly be funded, insofar as there IS no income to be taxed? The LVT avoids this particular problem, in that it's driven fully by the value of land within a city. No matter how much or little people work, this land will continue to have value.
- ghaff 11y ago
  Land has no value absent the demand for it by people who have money.
  - bufordsharkley 11y ago
    This statement seems to be fundamentally incorrect or untrue. Land is valuable for its many uses: * To grow on * To live on * To collaborate on * To build on * To travel on etc and etc and etc. What do you possibly mean that it "has no value"?
    - ghaff 11y ago
      This is in the context of a discussion of a tax on land value which is presumably a function of the monetary value placed on that land--i.e. how much someone is willing to pay for it. But, sure, pay a land value tax of 10 percent of the sheep grazing on it or whatever.