26 ms·

Does Georgism work? Is land a big deal?

• sokoloff 5y ago
  I look forward to reading the second part, especially if it’s going to argue that tenants will somehow be able to use the land without paying the land rent. In any case, I believe a land value (or other property) tax would face significant (possibly insurmountable) Constitutional challenge to levy this federally in the US absent an amendment. https://constitutioncenter.org/interactive-constitution/interpretation/article-i/clauses/757 https://constitutioncenter.org/interactive-constitution/inte...
  • klipt 5y ago
    You'd really need to combine land tax with zoning reform to make it work properly. The idea is that since the land under a house and under a skyscraper is taxed the same, more valuable land (eg in city centers) would be built up, which means the tax per tenant could still be very low. Also you don't need to do it federally, states could do it fine too.
    • kiba 5y ago
      If we're talking about no political restriction, I would go even further. Get rid of the mass market cars and implement trams as the basic suburban and urban feature. It could even carry some light freight for last mile logistics. As for the rest, it's bicycles, even velomobiles.
      • tormeh 5y ago
        Trams suck, IMO. The only good thing about them is they often get right of ways, which can also be given to busses. Subways are where it's at. Long trains that don't have to deal with traffic lights.
        • kiba 5y ago
          Subways are expensive to construct, and only make sense once density become high enough. So, in my conceptualization, towns start out with trams, which then connect to larger urban center.
        • lmm 5y ago
          Buses can be rerouted at the stroke of a pen, so it's difficult for people to build their lives around them. Trams are often overrated (and don't get me started on tram-trains), but they're a good fit for small towns or corridors that don't have the traffic to justify a subway.
  • hammock 5y ago
    Why does everyone assume new policy has to be enacted at the federal level? Whatever happened to states rights? This is a perfect use case, have a couple states try it and a couple not and see what happens.
    • sokoloff 5y ago
      In part because the article makes the very common argument “[LVT would raise] a bunch of revenue that can lower or even eliminate other less efficient taxes, such as sales and income taxes.” It’s often argued (more strictly than above) that LVT could replace or substantially reduce income taxes and that pretty much means it’s federal or it won’t offset much.
      • reducesuffering 5y ago
        There are plenty of states with 0 income taxes. Plus, the article mentions benefits that are orthogonal to tax revenue, like more efficient resource allocation. A trial run at the state level could be a 0 income tax state keeping their tax revenues equal by substituting property tax with LVT. Building structures will be taxed less and the land underneath taxed more.
      • AnimalMuppet 5y ago
        There is no federal sales tax. There are states that have income taxes, too.
    • pasquinelli 5y ago
      Just have them do it!
    • moriwara 5y ago
      Not pure LVT but Pennsylvania does have a two-tiered system where land is taxed at a higher rate than improvements https://www.strongtowns.org/journal/2019/3/6/non-glamorous-gains-the-pennsylvania-land-tax-experiment https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
  • runnerup 5y ago
    > In any case, I believe a land value (or other property) tax would face significant (possibly insurmountable) Constitutional challenge to levy this federally in the US absent an amendment. I'm really quite sure this would be a state-level thing.
    • epistasis 5y ago
      Further, I think such a tax would provide absolutely huge economic benefits to the states that passed them. Much like California's restrictions on non-competes allowed a much more dynamic tech industry to develop than what developed in Massachusetts.
      • ghaff 5y ago
        People moved between computer companies all the time in Massachusetts--albeit at a time when engineers job-hopped much less than today. I never had a non-compete until EMC bought the company I worked for and that non-compete was pretty reasonable and didn't keep me from getting a job elsewhere. I don't like non-competes and MA has fairly recently made some worthwhile (although insufficient) changes. But the differences between CA and MA (which still has some of the highest VC investments in the country, albeit less than CA) are hard to square with being primarily about non-competes.
  • runnerup 5y ago
    > tenants will somehow be able to use the land without paying the land rent. I believe proponents of Georgist Land Taxes generally believe that rents are already as high as they can be. This seems reasonable for areas with housing shortage, as housing is a very inelastic commodity as far as commodities go. However, it might not be a good assumption for areas with a surplus of housing. I do know (multiple!) people who each have multiple properties in Austin (e.g. a suburb house and a downtown condo) who are not renting them out after moving to California. Currently the property tax is offset by rising property prices and its not worth the hassle/risk to put tenants into the properties. A higher property tax would absolutely cause them to either rent out the units or sell them, increasing housing supply. Saudi Arabia finally created their first tax ever while I was there. It was a tax on un-developed land inside city limits. Saudi oligarchs would buy empty land and just leave it barren, because the property value would go up and there was no cost to hold it. This led to a big housing shortage. By taxing unimproved land, Saudi was able to encourage a big boom in condominium development. I believe proponents of higher land taxes are trying to do something similar, but instead of taxing "undeveloped" land, they are aiming to tax "under-developed" land to try to spur additional unit construction.
    • PragmaticPulp 5y ago
      > Currently the property tax is offset by rising property prices and its not worth the hassle/risk to put tenants into the properties. Depending on the local laws, leaving properties empty can actually be riskier than having them occupied. I had a friend struggle to evict squatters who moved into his rental property while it was vacant for a few weeks between tenants for upgrades. He lost months trying to get them evicted and they did a lot of damage to the house because they didn’t have anything to lose. Houses are also tough assets to just sit on because they slowly decay over time and require periodic maintenance and updates, even if nobody is living there. An empty house can actually accumulate damage faster than an occupied house because nobody is there to notice leaks or other problems. Leaving a property empty is definitely not a normal situation outside of maybe a few select markets with outlier (bubble) levels of appreciation and speculation. Building an entire tax system around this possibility doesn’t seem like a good idea.
    • sokoloff 5y ago
  • pasquinelli 5y ago
    Just make it a constitutional ammendment. I mean, obviously nothing of significance is going to change in terms of public policy, at all. This should be obvious after Obama->Trump->Biden, and covid, and on and on really. So, given that fact, it's a little funny to poo-poo a public policy thought experiment (which is all it is) on the grounds that the courts would strike it down-- as if any change of any significance will survive to that point. But if we're talking thought experiment, just make it a constitutional ammendment.
    • runnerup 5y ago
      Indeed! Thank you. Too many people don't see the constitution as the living document it was intended to be. It's so weird to me to keep hearing "that would be unconstitutional" as if it's some ultimate argument-ender for these thought experiments. Also, in real life, I'd be happy to see a constitutional convention to resolve quite a few things - 2A, 4th amendment, abortions, 100-mile constitution-free-zone, etc. Seems like having a well-defined constitution that we can actually follow would be much better than our current situation where we largely seem to ignore the constitution text in favor of byzantine court precedence/interpretations. I mean, on the face of it, people should see it's strange that alcohol prohibition required a constitutional amendment in 1920 but marijuana/drug prohibition in 1970 did not (Controlled Substances Act).
      • tormeh 5y ago
        That's just how common law works. If you want to get rid of the power of precedent, it's not gonna really happen, but civil law would relax it a little bit, at least. Civil law is, in practice, also using precedent, but it's given way less weight
      • harimau777 5y ago
        How would we go about actually changing the constitution? It seems like there's too much polarization and entrenched interests for that to happen.
        • runnerup 5y ago
  • pydry 5y ago
    >I look forward to reading the second part, especially if it’s going to argue that tenants will somehow be able to use the land without paying the land rent. Tenants already pay a 100% land value tax. They just pay it direct to landlords. All an LVT would do is redirect this flow of wealth into community/city/state coffers rather than to land / mortgage backed security owners.
• lr4444lr 5y ago
  It's used as the primary source of funding for county and town level government in most parts of the USA already. Does it "work"? Like any other tax system, it has its pros and cons. But one of the big drawbacks I see to federalizing it is the extremely relative value of property from region to region. It even dwarfs the relative difference in income taxes for similar jobs in dissimilar places. Yeah, you could have weightings and such in the formulas, but then there's even more complexities like how you assess condos vs. Single family houses vs. Gated communties... property is a much more diverse asset, and I don't think our Congress would come to any kind of majority needed to legislate such a tax.
  • wffurr 5y ago
    Property taxes in most of the United States are not land value taxes in the Georgist sense.
  • epistasis 5y ago
    No, it is not. What is generally used is a property tax, not a land value tax. The difference is whether the tax is based in the value of the location, or whether improvements to the land are included. Economically, these behave very differently, and the percentage of the property tax is typically too low to tax away the land rents.
  • runnerup 5y ago
    Ignoring the confusion over "property tax" vs "land-value tax" I think your complaint about: > extremely relative value of property from region to region would apply equally to income tax and sales tax. Is there some other tax that you feel doesn't have high variance between regions? You did note: > It even dwarfs the relative difference in income taxes for similar jobs in dissimilar places It may be worth noting that Mississippi has a per-capita GDP of $40,000 (income per person), whereas New York State is $90,000 per person. The median home sale price in Mississippi is $163,600 whereas in New York (state) it is $336,000. It would appear that the ratio between incomes-actually-worked matches the ratio between homes-actually-lived-in. Each are a bit over twice as high in New York as in Mississippi. As an aside, one of the benefits of property tax (especially over sales tax) is the relative stability of it. Property values don't change nearly as much year-to-year as consumer spending does. Therefore, school districts can more easily plan 5-to-10 year budgets when they derive their income from property taxes rather than sales taxes.
• MrPowers 5y ago
  I'm not a huge fan of how deadweight loss is defined in the article: > virtually all economists agree that land value tax has zero "deadweight loss"–a fancy word for a drag on the economy that makes certain activities no longer profitable Property taxes tax the land + the building. Building taxes are complicated to assess. They require tax assessments, appraisers, tax code, accountants to compute depreciation schedules, etc. The deadweight loss of property taxes is the economic loss of having resources devoted to filling out property tax filings. Appraisers and accountants would do other productive economic activities if they didn't spend all their time filling out tax forms. Property taxes also distort incentives. If you improve your property, then you pay more tax. Property taxes can discourage you from using your land to its highest and best use. Land taxes offer the opposite incentives. They encourage you to make your property better. Land taxes would arguably help a lot of the housing crises. Landowners have to pay a lot more taxes if they want to convert a lot with a single family home to a 4-plex. A land tax wouldn't impose an additional tax to the landowner for improving the value of their land.
  • bradleyjg 5y ago
    Land taxes are far far more difficult to calculate than property taxes. Impossible to do well in some cases. To know what land and the buildings on it are worth you can look to what people are willing to pay to buy them. There’s no similarly straightforward way to value the separate parts. So you’ll end up with a lot more wasted expert time for a less accurate result.
    • MrPowers 5y ago
      Nah, it's really easy to calculate the value of the land. Once you calculate the value of the land, then it's pretty much applicable to the whole neighborhood too. It's a one-and-done analysis. This isn't my opinion. There's lots of economic research to back this up. EDIT: some support: https://www.progress.org/articles/the-implementation-of-land-value-taxation https://www.progress.org/articles/the-implementation-of-land...
      • AnimalMuppet 5y ago
• jaredpetersen 5y ago
  As a sort of Baader–Meinhof phenomenon, I just listened to a recent podcast episode about this topic that goes more into the history. It's worth a listen. https://www.omnibusproject.com/417 https://www.omnibusproject.com/417
• runnerup 5y ago
  The pro-Georgist essayist lists the three biggest challenges to Land-Value Tax as: > 1) Land might have been a big deal in 1879, but it just doesn't matter much today > 2) Landlords will just pass Land Value Tax (LVT) on to tenants, so it won't work > 3) In real life you can't accurately assess land value separately from improvements, so even if LVT would work in theory, it doesn't work in practice I personally understand and (mostly) agree with rebuttals to (1) and (2). At least in areas of constrained housing. But I fail to see how (3) would work out. To me, I think setting the LVT higher than the value of the land would be disastrous because people wouldn't want to own that land, let alone improve it. Setting it lower than the value of the land wouldn't be as disastrous, but seems like it could still encourage similar behavior that we have today (under-develop the land, NIMBYism, hold land passively and wait for scarcity price gains). Perhaps any amount of "getting close" to the true LVT is at least helpful, as long as you don't go over. Or maybe I'm mis-thinking this and accidentally settings taxes higher than the "true" LVT isn't disastrous?
  • TulliusCicero 5y ago
    > In real life you can't accurately assess land value separately from improvements Hmm, is this true? It seems to me like the value of owning that 'space' wouldn't be that hard to evaluate separately from the stuff on it. When you say improvements here, do you mean improvements to land itself, like removing poison from the soil or reshaping it to be more flat, or 'improvements' meaning properties built on the land?
    • runnerup 5y ago
      Generally improvements would mean "housing/commercial/industrial structures built on the land". The tricky part is that the land value can change quite a bit year-to-year, and the structures built on it can also both decrease or increase in value.
  • Schiendelman 5y ago
    Most places already assess the value of land separately from improvements; when you get your property tax bill they’re often broken out. The process of separate assessment is well established!
• PragmaticPulp 5y ago
  I was excited to read this article, but by the end it felt like a jumble of unrelated conjectures examined in isolation from each other that all seem to be presented in a way that deliberately ignores any downsides: For example: > Also, keep in mind that LVT would see the elimination of the portion of property tax that falls on buildings. I just checked my own property tax records (I live in the suburbs of a medium-sized town far from any major urban cores). If the assessed land share more than doubled to 40%, under a 100% LVT regime I'd actually save $545.05 on my property taxes every year–and that's without a Citizen's Dividend. Picking the author’s house, applying arbitrary land value tax numbers to it, and declaring a net tax savings for the author as a victory for LVT is not really a useful data point. It seems that actually analyzing the winners and losers of a LVT would require a more thorough simulation, but that’s outside the scope of the article. The article also had an unsettlingly high number of “If we assume that X is true, then Y is a reasonable conclusion” while completely sidestepping an examination of whether or not “X” was true or even reasonable. The second part looks to be more interesting: I’d like to see some arguments for why a LVT wouldn’t just be passed along to the renters like every other expense is currently.
  • Hermitian909 5y ago
    > all seem to be presented in a way that deliberately ignores any downsides If I understand correctly, the point of this article (one of several) is just to establish that a land tax would constitute a large amount of money. I get the impression the article was supposed to merely establish whether a land tax would generate a substantial amount of money whether good or bad, though admittedly the author tips his hand as to what his conclusion is. I'm also hopeful for the next article, I've been wanting a good reference on Georgism that wasn't book length to point people at for years.
    • PragmaticPulp 5y ago
      > If I understand correctly, the point of this article (one of several) is just to establish that a land tax would constitute a large amount of money. We could make a land value tax constitute any amount we’d like. Just take the value you want it to produce, divide by the assessed value of all of the land, and you have your tax rate. That’s not an interesting question, though. The interesting part is whether or not that’s reasonable or fair, and to explore who wins and loses.
• TomAbel 5y ago
  Here is a YT video of Lars Doucet(the guest author of this newsletter post) discussing Georgism, Lars is a video game designer and developer by profession. Henry George, Land, and Video Games with Lars Doucet https://youtu.be/jPaL7QfDAqo https://youtu.be/jPaL7QfDAqo
• MisterMower 5y ago
  “But won't landlords just raise the rent to make up for the LVT, passing the burden of the tax on to the tenants? Georgists say no, because land is special in that it is scarce and nobody can make any more of it. Indeed, LVT is a rare form of taxation that actually boosts the economy, because it discourages rent-seeking and speculation. Some Georgists even go so far as to say that LVT can raise enough revenue to replace all other less efficient taxes, becoming the so-called "Single Tax," but this is not a universally held position among modern Georgists. To be clear, proponents of the "Single Tax" believe that LVT is sufficient for all public purposes and that no other taxes (such as income tax, capital taxes, and tariffs) are necessary for revenue generation, although they still might support carbon taxes or "sin taxes" on things they want to discourage.” Translation: Land is special, see? That means landlords will suddenly act irrationally and not pass costs onto their tenants, choosing instead to operate at a loss. And this method of taxation will somehow solve the housing crisis, because it will cause competition for scarce resources to suddenly stop. Some followers of these ideas imagine it being the only tax society could ever need! Except, you know, the ones that we want to keep so we can manipulate the dumber citizens into behaving the way we smarter citizens decide. What a garbage philosophy. It takes a lot of education to step into bullshit this pungent.
  • jolux 5y ago
    Well, charging an increase in rent without making an improvement would suggest that the value of the land has gone up, that increase would be taxed away, and so they wouldn’t be able to increase profit by raising rent. Of course, you do have to redistribute as well. It doesn’t help nearly as much just to tax.
  • hahaxdxd123 5y ago
    Landlords in California might benefit from Prop 13, in which case their property taxes might be 10% of the landlord across the street. Yet all things equal, they charge the same. Landlords already charge what the market will bear. Taxing them more or less does not change that or else there would be $600/mo 4BRs in SF for rent. Since your comment is deliberately inflammatory, I will do the same - do you have any basic economic training?
• trophycase 5y ago
  Is Georgism the new fad philosophy? Seems like every few years you see things like this crop up and the technies go all nuts over it. Stoicism was the last big one. I know they aren't strictly related but seeing these fad philosophies is interesting.
  • nwah1 5y ago
    Stoicism is hard to call a fad. It has persisted as an important philosophy for over two millennia. Georgism is a distilled moral argument that is core to classical liberalism. Classical liberalism is centuries old, as is georgism.
    • trophycase 5y ago
      Stoicism is most definitely a fad and experienced a strong revival along with the male "self-improvement" and "grind" culture. It basically popped up out of nowhere around 2015-2016 in these circles. Georgism is also a fad. A friend of mine brought it up at a barbecue during the summer and I had never heard of it in my life, and consider myself decently aware of philosophy at a basic level. Ever since then I've seen about 10 articles/topics on HN front page about it.
  • imtringued 5y ago
    Georgism is a technical requirement to implement negative interest rates. Falling interest rates are a millenium old fad.
• slibhb 5y ago
  I think the biggest problems with Georgism are 1. in some sense it calls for the expropriation of land by the government 2. it's unfair to change the rules in the middle of the game and 3. it's logistically difficult to carry out. As far as unfairness goes, imagine a couple, 65, retired, paid off their mortgage, paid income taxes all their lives until retirement, now living off their savings. It's unfair to start taxing them based on the value of the land their home is built on, which they already paid for.
  • Schiendelman 5y ago
    Many places already have protections for people on fixed or low incomes, that reset when a property is sold. Property tax can vary widely today; LVT can lower it for an owner as much as raise it.
  • tormeh 5y ago
    It only takes one such case to make the tax look bad. But a LVT for corporate owners makes sense. Maybe one for young people too, only excepting retirees.
    • fatbird 5y ago
      The way you handle retirees is tax deferral: they don't pay the taxes every year, they pay the whole amount when the property is transferred by sale or inheritance. In this case it would just be the land transfer.
    • dane-pgp 5y ago
      > Maybe one for young people too If we're concerned about fairness in the housing market, a special tax which only applies to young people isn't the policy I'd recommend. As an alternative, you could give each person an allowance of land area/value (perhaps based on the median value, or an equal share of the nation's land territory) and say that anyone who uses more than that (with a mansion, or multiple homes) would pay the tax, and perhaps people who own less land than that should get a rebate. Obviously corporations wouldn't get such an allowance, as they are not people for the purposes of this calculation. Also, you could make the tax exponentially progressive, to put a downward pressure on the size of land holdings and encourage competition between landlords.
• thesausageking 5y ago
  > It's more expensive to live in the heart of New York City than in the middle of Nebraska. That's not because construction costs are orders of magnitude more expensive in New York, but because the land is orders of magnitude more expensive. This is missing a key element: The value of a parcel in NYC is partly from the land itself but most of it comes from the development rights. If you have parcel which a 5 story building could be built on, that parcel is worth 2-5x more if the city grants you the right to build a 100 story building there. The limiting factor in cities tends to be zoning and development rights more than land itself.
  • TulliusCicero 5y ago
    Okay. Does that interrupt their point though? It seems like what would happen with a land tax in this case is that if an area got rezoned to allow buildings 20x the height, the land value would skyrocket and thus so too would the land tax. That would then incentivize actually building a really tall building on that land, which is probably what you want (both in the sense of what land tax proponents want, and what you'd want if you just did that rezone).
    • midasuni 5y ago
      The problem comes with the city then deciding to rezone as a punitive measure. Rezone 10-19th street to make it unaffordable for the existing 3 story houses and you get rid of that community. Meanwhile 20-29th street isn’t, and they get to stay.
      • TulliusCicero 5y ago
        Doing that only works if the land becomes super valuable. Whoever owns that space gets rich. You’re right, but you can use almost any city policy to punish some group if you wanted. It’s not reason to avoid otherwise sound policies.
    • thesausageking 5y ago
      Development rights are made up by cities and don't have a fixed supply like land, so can't be taxed in the same way. For example, cities often grant development rights over highways, creating them literally out of thin air. This gets even messier in cities like SF or Boston where the zoning rules are basically never followed and instead development rights are granted a on per-project basis, often based on how hard various groups lobby for or against a project. That makes a land tax not make any sense in large cities.
• bedobi 5y ago
  I don't like how "Georgism" and any number of other literally hundreds of years old economic ideas are presented as some underdog, unknown thing. Just no. Economists know about these things, and they're pretty much universally in favor of taxing land, just like they're pretty much universally in favor of taxing carbon and any number of other things.
  • neilparikh 5y ago
    It doesn't really matter what economists think about it if the general public and politicians are against/unaware of it.
• nabla9 5y ago
  Adam Smith’s definition of 'free market' wasn’t freedom from governments, it was freedom from rentiers. Land is big deal. Value of land comes mostly from it's surrounding infrastructure. Taxing it is one of the least harmful taxes.
  • CryptoPunk 5y ago
    Taxing land: * violates no human rights (unlike taxes on income and sales) * costs very little to assess and enforce (unlike taxes on income and sales) * is impossible to evade (unlike taxes on income and sales) * causes no economic harm in disincentivizing productive activity * enables the funding of public goods (in this respect, it is similar to all other forms of taxation), and * increases economic efficiency by discouraging wasteful use of land.
  • dredmorbius 5y ago
    Out of curiosity, where specifically do you find this definition within Smith's writings?
    • larsiusprime 5y ago
      Here's some https://www.goodreads.com/quotes/6536394-as-soon-as-the-land-of-any-country-has-all https://www.goodreads.com/quotes/6536394-as-soon-as-the-land... https://www.adamsmithworks.org/documents/chapter-xi-of-the-rent-of-land https://www.adamsmithworks.org/documents/chapter-xi-of-the-r...
      • dredmorbius 5y ago
        I was hoping OP would respond. I'm familiar with both passages. Neither contain a definition of "free market". (That's a term Smith uses exceedingly rarely. Only once AFAIR.)
  • Dracophoenix 5y ago
    In Adam Smith's time, the biggest rentier of them all was the Imperial era British government along with its patrons, titled members of the nobility and the landed gentry. Even in Smith's time, free markets did mean freedom from government interference.
• endisneigh 5y ago
  Land is already taxed, Georgism is already in play. If one is arguing for higher property (addition + land) tax then that’s another discussion. The housing issue is a zoning issue, and consequently solely a political one, not a tax one.
  • TulliusCicero 5y ago
    Yes, but a pure land tax behaves differently from a property tax. A land tax punishes 'unproductive use' of in-demand space much harder, and doesn't provide a disincentive for investing in building improvements.
  • amablue 5y ago
    Land is taxed at very low rates, and it's almost always bundled with property taxes. Instead of taxing land at a few percent, Georgism says we should be taxing it at 100%. That's a huge difference from what we have in play today.
    • endisneigh 5y ago
      I don’t disagree - which nations have a 100% land value tax? Either way, increasing the tax or reforming zoning, the crux of the issue is political.
    • zajio1am 5y ago
      > Instead of taxing land at a few percent, Georgism says we should be taxing it at 100%. Property tax percentages are from property value, while georgism is taxing 100% of imputed rent, not value. Relation between rent and price, as mentioned in the article, is described by capitalization rate, which is estimated to be 5-8%. So georgian LVT would be 5-8% of original land value.
• temp8964 5y ago
  I always hate those kind of policy discussions. They assume the world is a dead water. They make some policies and small changes follow, like throw a small rock into a pond. The reality is that if their proposed policy changes really get implemented, the change in the real world will be chain reactions. Not the changes you want to see will happen, lots of things will happen. People will change their behaviors. Developers, land owners, renters, factory builders, city planners will all change their behaviors, because of the inventive structure is changed. In the end, this kind of armchair discussion is just a mind game for "rational thinking." What really matters is people who discover and develop new frontiers.
  • epistasis 5y ago
    Those ripples and downstream effects are the actual goal here. The LVT isn't the goal, the end to rentierism and better use of a finite resource, towards the elimination of poverty, are the actual goal.
  • amablue 5y ago
    I once heard someone say that land value taxes would be worth it even if we burned the tax revenue. I almost agree with that. The point of land value taxes is not just that it raises money, it's so the downstream effects. We want it to change people's behaviors. The incentive structure that it creates for developers, land owners, renters factory builders, and City planners is why the tax is so good.
• zapataband1 5y ago
  Really thorough argument. While it seems like a great idea, the last bit is what gets me: the wealthy owns the vast majority of the land. Our gov is effectively captured by financial interests. At what point will the rich give this up? We can come up with a million reasons for taxation but the rich will evade them like it's their job. The problem is still wealth inequality caused by greed. I had never heard of Georgism, Here's another person that thought land ownership was immensely important https://en.wikipedia.org/wiki/Emiliano_Zapata https://en.wikipedia.org/wiki/Emiliano_Zapata
  • neilparikh 5y ago
    (Copy pasting my comment from elsewhere) > Our gov is effectively captured by financial interests. The "financial interests" that would provide you the biggest opposition in imposing a LVT are the financial interest of the average voter! The majority of voters are homeowners, and thus their material interests lie in land values rising. As a concrete example of this, Prop 13 was passed by a referendum, not politicians. As a general point, I think housing is the major weak policy point for the left. The overarching theory that drives their politics is that the wealthy and powerful are the major barriers to positive change. Housing is the one area where that isn't true; the barrier to improvement is the "average" person.
    • zapataband1 5y ago
      If financial interests largely decide who gets enough funding to run in an election then how is it up to the average voter? To choose which corporate funded lackey they get? I don't know what left we are talking about but most people I talk to left or liberal or right seem to agree that large financial interests or 'the elite' are sucking us dry, they pretty much just disagree on taxes. It is a theory with some pretty strong evidence, showing that normal poor people do not get their interests heard in government. https://www.cambridge.org/core/journals/perspectives-on-politics/article/testing-theories-of-american-politics-elites-interest-groups-and-average-citizens/62327F513959D0A304D4893B382B992B https://www.cambridge.org/core/journals/perspectives-on-poli...
      • 5y ago
• CryptoPunk 5y ago
  Any transition to a LVT should accompany one-time compensation to existing land owners. The same should apply to any other repeal of rent-seeking institutions, whether it's anti-labor-competitive laws privileging labor unions, licensure barriers privileging taxi medallion holders, etc. The British used this method to end slavery throughout their empire, which meant: 1. much more rapid end to slavery, due to less political opposition to its abolition, 2. no costly civil war and enduring sociopolitical grievances that emanated from it. Economic analyses indicate that compensating rent-seekers at an amount equal to the expected loss of economic utility over their lifetime from the elimination of their rent-seeking opportunity, as part of a reformation to end the institutions that enable their rent-seeking, leads to net economic gains, because the economic efficiency gains from expedited abolition of the rent-seeking far outweighs the cost of the compensation.
  • neilparikh 5y ago
    Just out of curiosity (ie. not trying to ask you a "gotcha" question), would you apply this idea to measures to reduce climate change? Oil companies and companies/individuals dependent on cheap oil would presumably lose a lot. I'm not sure if their current behavior is exactly rent-seeking, but asking them to internalize their externalities is fairly close to abolishing rent seeking I think. And if your answer is yes, how would we value the economic loss they face?
    • ItsMonkk 5y ago
      I don't know the answer to this either, but I'll at least try to give an idea on how one might get to that value. For the Land Value Tax this question is fairly straight-forward. We have the current market value(say $2.4M from the article). We need to work out the value for the land($2M from the article). That 2M is the losses if a 100% LVT is applied. You can choose to phase in the tax, or you can give a tax subsidy equal to the land value($2M), or you can flat out print money equal to the land value, and you can do some combination of all three. Of those 3, it is better to implement the full tax right away to correct the incentives as soon as possible, but long-term it doesn't matter so long as the incentives get there. One of the interesting consequences here is if you currently own a home, and understand that we are currently in a bubble, and know the consequences of 2008, you are incentivized to vote for a Land Value Tax with a one time transition subsidy, as it will lower your risk profile from another catastrophic collapse of the housing market. Similar approaches surely apply to carbon sellers, and the carbon tax and dividend is extremely close in idea as the Land Value tax with UBI. So long as people are disincentivized against using carbon, giving tax credits or cash to these companies seems appropriate.
• panick21_ 5y ago
  A simple flat tax is clearly a far superior system in every single way. If you are really hardcore about richer people paying even larger part then simply make the curve slightly progressive. If you want poorer people to pay even less make the minimum number required for max tax higher. This would make the overall tax system 1000x simpler releasing a gigantic amount of labor and would allow IRS to actually check effectively if people are lying. It would make all fraud much harder.
  • spurgu 5y ago
    I tend to agree, and definitely on the surface of it. But what about for example incentives to cut down on carbon emissions, how would you achieve those? Or stopping investors for buying up all the great real estate in an area and boost up the rent prices? I believe that there needs to be some "punishment" taxes, to regulate things that might otherwise go out of hand (which is important in order for capitalism to function well). But I do recognize the issue that it's probably what has lead most governments down that exact path towards an overly complex taxation system. Also I don't think you have to be "really hardcore" to support progressive taxation. It just makes sense. As long as it's not "overly progressive". Edit: A too simple of a system makes it too easy to game the system. I wish there was a clear way out of it.
    • panick21_ 5y ago
      > I believe that there needs to be some "punishment" taxes, to regulate things that might otherwise go out of hand (which is important in order for capitalism to function well). First of all I don't think that actually is true. Second, even assuming this is true. Using the tax system is about the worst possible way of achieving these things. Making the tax system complex to micromanage all possible situations on a federal level is just not a smart way of achieving almost anything. For really big picture issues, I would make revenue neutral taxes. So if you really want a carbon tax, it would be revenue neutral. Meaning all the money made from the carbon tax would be used to reduce the taxes for everybody (or alternative use it to raise the minimum income line so poorer people have to pay less. If you just want to give a general reward or punishment for doing the right or wrong thing, those should be individual acts of congress or from bureaucracies based on their executive power, and not somewhere in 6000 page of tax code. > Also I don't think you have to be "really hardcore" to support progressive taxation. It just makes sense. As long as it's not "overly progressive". Well its % based so its already progressive as in you pay far more if you are richer. So if you want to also pay higher % if you are richer. > Edit: A too simple of a system makes it too easy to game the system. I wish there was a clear way out of it. Its the opposite. A simple system makes it incredibly hard to game the system.
• aunty_helen 5y ago
  I would like to table a point about how this will prevent urban sprawl. The maps showing land value peaking in cities should be a good indicator of this but the opposite conclusion is being formed. If land is expensive, it will be taxed at a considerable amount per year driving people out of these areas or into condos where they can share the costs with those on the floors above and below them. Perhaps there will be two types of development with this Georgism paradigm, high rise and extra urban but at the cost of suburban homes.
  • aesh2Xa1 5y ago
    I’d like to see the same. Your comment got me to think about it for a couple minutes. If another claim about LVT is true – that speculation is defeated and thus prices are driven downwards – then the most valuable land becomes more generally affordable. Because of that, you’ll see _more_ people able to move into cities. Perhaps then the city also grows naturally/securely (rather than sprawls). You’ll still have people that prefer privacy and property, of course. But would a government need to or want to service them with roads and utilities? I think these are some of the “dynamic effects” hinted towards in the article. Anyway, though, the point is that more people can afford to live in the city.
  • BirdieNZ 5y ago
    > at the cost of suburban homes. Suburban homes have a much larger footprint than urban homes, so it would reduce urban sprawl if you have fewer suburban homes and more urban homes.
• nverno 5y ago
  > It's the market value that derives from the benefits the land itself provides (crops it can grow, proximity to a desirable job, etc) Do they really lump profitability from agriculture in with location, rent profit, etc.? It seems unfair to tax farming, a labor intensive job, equivalently to passive income propositions.
  • larsiusprime 5y ago
    The land value on farm land is really low compared to urban land. The status quo right now is that we tax farming -- a labor intensive job as you say -- with income (labor) taxes and sales taxes. Shifting even partially to a land value tax would be a major savings for farmers.
• dredmorbius 5y ago
  Suggested reading: Mason Gaffney & Fred Harrison, The Corruption of Economics https://www.worldcat.org/title/corruption-of-economics/oclc/1081125221 https://www.worldcat.org/title/corruption-of-economics/oclc/... This was based on an earlier paper by Gaffney, "Neo-classical Economics as a Stratagem Against Henry George" https://masongaffney.org/blog/index.php/2007/04/neo-classical-economics-as-a-stratagem-against-henry-george/ https://masongaffney.org/blog/index.php/2007/04/neo-classica...
• davjhan 5y ago
  I really liked this article. I had a question about it. Could there be a case where existing unpleasant rental properties in highly dense urban cities suddenly have negative rental value? For example, imagine there was a run-down house that is livable, but is one of the most undesirable in SF. Adjacent to it, let's say there's a shiny desirable house with the same land characteristics. If I understand correctly, these 2 apartments would have the same land value tax right? What kind of effect will this have on the rental price of the bad house? What will dictate the floor of it? - Would it be the cost of the LVT? - Would it be the lowest rent transaction that occured in the market? - Would it be zero? If it is one of the last two, I can't imagine the land-owner renting it out except for speculation on the desirability of living in SF right?
  • larsiusprime 5y ago
    So you're basically describing the slumlord situation. Let me grab a figure from the book review: https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F8b57ab87-8422-437f-b6c4-f3ccdd223624_1022x597.png https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q... So imagine that the return from land was taken away. The only thing a landlord can charge rent on now is providing a nice building (capital) and good service & maintenance (labor). The first property, "a nice house" would be able to charge rent -- because it now has value above the value of an empty field. The second property, an empty lot, would be able to charge approximately nothing (the government collects the land rents, and this is capitalized into the price such that you can't charge any additional rent above that). And yes, the third property (teardown property) you'd have to actively pay people to occupy, because you can't charge for access to the land, and the place sucks and is hazardous to your health. What's the incentive in this situation for a landowner who wants to make money? Build something good (capital) and provide good service (labor), both are things we want to encourage. Of course, the above assumes that land value taxes are fully capitalized into land prices and thus can't be passed on to tenants. This isn't discussed in this article (Part I) but will be discussed tomorrow in Part II.
    • davjhan 5y ago
• intrasight 5y ago
  We have LVT in my county. And it changes - nothing. So what am I missing? Why is this even discussed? A much more interesting discussion is to ask the question: Should there be no private land ownership. That's the case in many places. In such locals, the ownership right is in the long-term lease of that land. And it changes - nothing. Tax on private property is the price we pay to have the property protected by a power with corporal punishment rights. A good old fashioned protection racket. Capitalism: The worst economic system, except for all the others. We'd not have all of this neat stuff without it. I like nice stuff so I'm in favor.
  • larsiusprime 5y ago
    What is the county, and what is the rate, and what is the assessment policy?
  • radu_floricica 5y ago
    Which country? and how is it applied?
  • imtringued 5y ago
    The corporal protection racket not only protects your life but also built the schools and roads that made you want to live there in the first place. Why should your money go to a land owner which forces the government to levy taxes on income instead? You'll pay twice.
    • intrasight 5y ago
      Twice? We pay way more than twice. It would take another pair of hands to count all the different taxes we pay. I am not saying that taxes are "only a protection racket". There are hard-core libertarians who think any federal taxes that aren't paying for protection are unjust. I am not one of those people. I am one, like many, who say "taxes are the price we pay for civilization"
  • pydry 5y ago
    If it's Hong Kong then it's 3% which is low enough that yeah, it changes nothing. Since you didn't actually say where you live, though, it's impossible to say what you are "missing". The question clearly wasn't asked in good faith.
• djokkataja 5y ago
  Just for fun, purely as a thought experiment... Could digital "real estate" or "territory" be taxed in the same way -- not literal digital territory, like in games, but considering "ad spaces" as virtual territory? I suppose more generally, any "technology company" which primarily makes its profits by virtue of establishing a network effect, wherein they earn ever more money as more people show up. One possible objection: there are fixed costs for sustaining the virtual territory. It doesn't just exist; at a bare minimum, sustaining the software requires servers which in turn require maintenance, and the software itself would require some developers to fix bugs. But these particular costs can be indicated and accounted for without too much difficulty. Another possible objection: there are no competitors providing the virtual territory; there is only the one company. If they hadn't created it, it wouldn't exist. So... if this kind of tax was to be executed on virtual territory, the company would have to be broken up and divided into competitors that could attempt improving on things in different ways, and the infrastructure providing the virtual territory would have to be nationalized. As an example, maybe the competitors can buy keywords from nationalized Google, and then they can change the ad space that people who search for those keywords see; they become the rentiers of that ad space. But to be able to afford the taxes on keywords that are in high demand, they have to improve upon those ad spaces. Maybe they provide a shiny gold effect and sparkles around the ad -- only if the people paying them to show ads for those keywords want it, of course.
  • larsiusprime 5y ago
    You mean like domain names?
    • djokkataja 5y ago
      In terms of ownership structure, yeah, that's pretty similar.
      • Dracophoenix 5y ago
        That just creates artificial scarcity. What's stopping anyone from building out another DNS system?
• jl2718 5y ago
  Income tax persists because it avoids the problem of valuation. These ideas are largely moot with a robust mechanism for value discovery. One such possibility is the open auction. In a value tax system, somebody puts money into an escrow bond as a bid on the property, and the owner has a choice of either paying the tax for the duration of the escrow, or exchanging the property for the escrow. The escrow bonds themselves would have to take some portion of the tax revenue as interest. This has some interesting equilibrium properties because it aligns interests of all parties: owners, bidders, and government. Likewise, negative valuation in Pigouvian taxation is also very difficult. There could be, for instance, a way of matching the tax required to continue an activity, with a multiple of the amount raised to stop it.
  • tofukid 5y ago
    Doesn’t that enable hostile takeover of land? If I own a school or restaurant, and Apple wants to replace it with a store, they can place a bid such that I can no longer afford the taxes and am forced to sell to them. Wouldn’t such a system just exacerbate business and the wealthy being able to snatch up land?
    • brendoelfrendo 5y ago
      Hm, hostile in that you'd be forced to sell, yes. In theory, though, Apple has to put their money where their mouth is: they're not going to make an absurd offer out of spite, they're going to offer what they're willing to pay. In that sense, this system would just a market alternative to property appraisal: allowing the market to decide the price of something that's not (currently) for sale.
    • sagarm 5y ago
      > they can place a bid such that I can no longer afford the taxes and am forced to sell to them. Sell for multiples of the assessed value? What hardship! Businesses can already purchase land for multiples of market value if they wish: very few people would refuse the offer. For the few that would, money clearly isn't a huge problem.
• neilwilson 5y ago
  It gets the purposes of taxes wrong, and assumes the usual economic myths of a fixed amount of money and a loanable funds structure, with money being a veil over barter. Once you realise the latter are a myth, then the entire concept of taxing land makes no sense. Government, in a country with its own free floating currency, has no need of tax money to spend. In fact spending causes taxation from the induced transaction chain that will, without impediment from people saving some of their income rather than spending it, always precisely match whatever government spends. It's like a stone skipping across a pond. Taxing reduces the length of spending chains. You tax to release resources for the public use, and the tax imposer is then morally required to hire all those released to avoid unemployment. There is no other operational purpose for taxation. The natural conclusion of that view is that the best place to tax is to charge business for hiring labour. Then they won't hire as much, and government can then hire them to be teachers, doctors, judges, etc. The presence of financial saving means that money has an inductive relationship with physical production, not a direct one. Just like we need reactive power in an electrical circuit so that iPhone chargers work properly, we need reactive monetary circulation to make sure that physical production occurs at the maximum amount. The problem with land is not rent, it is the power of exclusion, which leads to hoarding. Just like any other market. So you tackle the hoard in the same way as any other attempt to corner markets - via anti-trust measures.
  • pydry 5y ago
    >Once you realise the latter are a myth, then the entire concept of taxing land makes no sense. Government, in a country with its own free floating currency, has no need of tax money to spend. Tax keeps a lid on inflation and can be used to discourage socially undesirable activity. It absolutely makes sense to keep inflation down and prevent productive land from being hoarded or used inefficiently with a tax at the same time.
    • neilwilson 5y ago
      Inflation is handled by superior spend side auto-stabilisers, like a Job Guarantee, and socially undesirable activities are done with levies and duties, not tax. The latter being a political position, not an economic one. If you have sufficient saving in society , then you hardly need to tax at all - as Japan demonstrates.
• jorge-fundido 5y ago
  I'm not commenting on the merits of Georgism or the article. I found it curious that Krugman was quoted 5 times in the article. Is that someone to be taken seriously? Wondering if he was used as a straw man. He (Krugman) seems like a paid shill to me. While I loves me some Asimov Foundation, how is it that the mainstream takes him seriously after things like: https://www.forbes.com/sites/modeledbehavior/2016/11/19/paul-krugman-calls-off-the-fake-alien-invasion/ https://www.forbes.com/sites/modeledbehavior/2016/11/19/paul... I remember hearing about him discussing this shortly after the Great Recession. My first reaction was "Hooray, the psycho-historians DO exist!" Paul Volcker is our version of Hari Seldon? I don't know much, but it's hard to take any economist seriously. They remind me of String Theorists.
  • pydry 5y ago
    Krugman is kind of a Democratic party cheerleader. Sometimes that means what he says aligns with what's actually progressive. Other times quite the opposite. He own comment section once schooled him on the regressive contents of the TPP (when the dems were pushing it), which ought to have been humiliating given his credentials. He is supposed to understand how international trade functions.
• Kaotique 5y ago
  Some questions that come to mind. Is the price for land supposed to be the same in the entire country or should the government calculate a cost per region. A square meter inside a city would be more expensive to own than a square meter in the countryside? What are you thoughts on implementing this tax system gradually? Could it work to assign certain parts of land that can be bought and taxed and then except the person from paying other taxes. IE: Buy this land, build a house and don't pay income tax while you live there.
• alignItems 5y ago
  The concept behind Georgism is ancient. In Biblical Israel all land was redistributed every 50 years. The exact implementation probably wouldn’t make sense in our times (they divided the land initially by lottery, and all land sales reverted every jubilee year. Everyone “went back home”, all at once - effectively resetting the Monopoly board to restart the game). However, the idea can probably be adapted using a more gradual, non-synchronous, and non-tribal method. (Perhaps pay the land tax with shares in the land?).
• alexitorg 5y ago
  This makes my head hurt! If the value of an asset is a reflection of it's total future income at net present value, then would 100% tax on the unimproved rent value of land mean unimproved land would be worth $0. The rent on a $0 item would be 0, wouldn't it? Would land become worth the value of the improvements on it? I guess there would be some smaller value obtained for having the right to use the land and the security of ownership, but I can't see how this would be valued. Would there be much difference? Wealthy people would be able to afford the capital to improve and exploit larger amounts of land than poorer people, and so exploit more land? In the situation in say a city, where land is scarce, rent values for properties would greatly exceed the returns expected on the value of the building alone. I would guess the would government calculate the market rent rate for the unimproved land (e.g. rent paid - (interest rate+acceptable profit %) * capital cost of building = unimproved rent)? If not the market value of unimproved land would still be close to zero, so how could you value the rent? Would it just be a tax on excess rental profits for landlords and a tax on owner occupiers? Would you depreciate the cost of the building each year? If a building was depreciated entirely over a 20 year period, would the government extract 100% of rents after that, effectively passing into the government's ownership? It sounds a bit like nationalizing all the land? Does China already do this by giving out 99 year leases? What effect would nationalizing the land have? Nationalizing other asset can lead to adverse effects "reducing competition in the marketplace, which in turn reduces incentives to innovation and maintains high prices. In the short run, nationalization can provide a larger revenue stream for government" - https://en.wikipedia.org/wiki/Nationalization https://en.wikipedia.org/wiki/Nationalization I'm guessing the closest analogy would be with natural resources. Nationalization of oil can end with good results like Norway (responsible management, investment of dividends) or bad results like Venezuela (diversion of resources to political ends, under investment and collapse). Would you see such divergent results with nationalizing land? Would it be in the interest of a government to restrict land usage to increase rents, like how Hong Kong sits on large land reserves and only releases small amounts of land for inflated prices to improve their budget (actually Canberra here in Australia does something similar). Sorry for rambling thoughts...
  • doubleunplussed 5y ago
    The rent isn't based on the sale price of the land, it's based on the value of the land. If land comes with a tax obligation, they're not the same thing anymore. sale_price_of_land = underlying_value_of_land - how_much_you_would_pay_as_a_one_off_to_avoid_paying_the_tax_forever So no, you wouldn't update the tax rate to be a fixed percentage of the new sale price of the land after bringing the tax in. That's not the value of the land, it's just the sale price. Instead, you would update the tax rate in order to ensure the sale price of unimproved land was zero. If the sale price is zero, that means the tax rate is correctly set so as to cancel out the land value as per the above equation. It's weird having the value of the land plus tax obligation be exactly zero, which is one of the reasons many Georgists propose merely a 85% tax instead of a 100% one.
• zajio1am 5y ago
  IMHO discussion about Georgism (as extreme position) is detrimental to reasonable discussion about property tax vs land value tax with more realistic parameters (say 3 % of value).
• pontifier 5y ago
  Value is subjective, and most people are idiots. An asset in one person's hands will be destroyed by incompetence in another person's hands. Nobody will ever admit they can't do something, but my experience tells me something different. If you disagree, try this... Next time you need something painted, ask random people if they know how to paint. Offer the job to the first person that says "Yes, I can paint." My guess is that you will be very disappointed with the result... Same thing goes for plumbing. If anyone is interested, I've got some video of a plumbing job I had it go back and fix. I had to pull the whole thing out... Honestly I just pulled on it a little and it just fell apart. Do you think that guy would ever say he didn't know what he was doing? No, but people are idiots and stupid... <End Rant> I used to have a different outlook about the noble nature of humanity, but then I moved to Pine Bluff Arkansas. It's filled with hopeless people stuck in a cycle of crime, drugs, and ignorance. The people there don't know anything different, so they think they are doing a good job. I'm filled with so many conflicting ideas. How can we help the best of us soar without the dregs of society grabbing their ankles and pulling them down to drown in the cesspool that we keep digging deeper? Where is the escape hatch? I just realized I'm asking "Who is John Galt?"
• caeril 5y ago
  Land Value Taxes are an immediate nonstarter for anyone who cares about the environment or conservation. Imagine wanting to start an urban community garden and make your city a nicer place to live, but the taxes are prohibitive because you could have built a concrete monstrosity there instead. Taxes predicated on the money you could have hypothetically made by paving over everything is a great way to ensure that you'll pave over everything.
  • francisofascii 5y ago
    Simple fix. Community gardens are tax-free. A big reason why much of America is covered with mostly empty asphalt parking lots is because is costs very little in land taxes.
  • BirdieNZ 5y ago
    Isn't increased density good for the environment? Georgism/LVT would encourage increased density, which means fewer roads, more compact cities, and probably less driving.
  • aeternum 5y ago
    Cities can use the tax revenue to create community gardens or parks. Property taxes in many places currently tax improvements, so if that concrete monstrosity wanted to build a nice community garden on the premises it would often result in a tax bump. That typically isn't the case with LTV. In contrast, if the land owners surrounding the concrete monstrosity build higher density housing with gardens and public areas then they may drive up the LTV such that the concrete monstrosity is no longer economically viable and must be torn down and updated.
    • caeril 5y ago
      Right. And the political process being what it is, it sounds great that you need to have pull with the city council or county government to do what you'd like with your property. I'm sure we all look forward to a world in which buying hookers for the Mayor's son and keeping it all on the DL, or contributing to a few Town Selectmen's "nonprofits" is what you have to do to in order to inject a half-acre of greenery into an otherwise desolate dystopian concrete hellscape.