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Capital is used as a synonym of wealth. It's a book about wealth inequality. The book was originally written in French, and land is considered as "capital fonc
by ebalit 10y ago
Capital is used as a synonym of wealth. It's a book about wealth inequality.
The book was originally written in French, and land is considered as "capital foncier". Maybe this meaning got lost in translation, but I think "capital" also has the "wealth" meaning in English.
Nevertheless, the point I was making still holds. The Medium post isn't a refutation of Piketty's theory.
- eru 10y agoYes, that confusion is a decent enough explanation. The important thing I want to highlight, is that as factors of production go, increasing returns to land have different policy implications than increasing return to capital: A general wealth tax might be required if capital was actually the problem; with all the economic inefficiency that implies. I don't know for sure. But increasing returns to land have a simple solution: a land value tax, with no negative impacts on economic activity, since supply of land is perfectly inelastic, since land is basically fixed in abundance. (To forestall a common argument: that the Dutch are converting some of their land from below the sea level to above sea level doesn't change matters.) We are fortunate to live in a world where Georgism applies, ie taxation to finance a welfare state doesn't have to impact the economy at all.
- ebalit 10y agoI'm sold to Henry George's land value tax idea, if we were to create a nation. But we aren't. In our current situation, I would worry that taxing only the wealth "stored" in land ownership would create a massive economical crisis as capital tries to escape this new tax. A broader wealth tax base, with a slightly higher rate for land, is a more prudent approach.
- eru 10y agoThe Australian capital territories are currently phasing in a broader land taxt and phasing out stamp duty in exchange. Not flight of capital has happened so far, and no crisis either. And how is land supposed to flee? You can't take soil with you. Wouldn't a broader wealth tax that applies to movable capital as well lead to that very moveable capital fleeing? (As an example, I am currently in the process of optimizing my own capital gains taxes, by eg choosing the country I hold my assets in carefully.)
- ebalit 10y agoI was more talking about a fall of real estate valuations as you introduce a significant land value tax. And it must be significant to cancel the impact of land value on the rise of inequality.
- eru 10y agoPhase it in gradually. Land prizes don't actually fall in practice with introduction of land value tax, if it goes hand in hand with elimination of other taxes. In effect, shifting the tax base from labour and capital to land.