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I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sal

by belorn 5y ago

I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sales. The main argument that I see against land value taxes is that land doesn't generate any income by itself, which forces people to pay money in situation where they might not have any income to do so. One could bypass this problem by putting in limitations, like an requirement to be high-income before the tax is applicable. One could also limit land tax to specific zones outside of low density residential areas so it doesn't go into effect when the land owner and the person living there is the same person.

CryptoPunk 5y ago
>>I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sales. The article goes into the advantages of a land value tax over other types of tax, including a property tax: The big question land value taxes help answer is: How can a government raise funds without distorting choices and possibly leaving people worse off? If you tax income, it provides a disincentive to work. If you tax property, it provides a disincentive to improve the physical buildings on top of the land. Sometimes the tax is intentionally disincentivizing an activity — think carbon taxes to reduce greenhouse gas emissions or so-called “sin taxes” on tobacco. But there are also taxes governments want to levy to pay for valuable services without changing behaviors too much (or at all). >>The main argument that I see against land value taxes is that land doesn't generate any income by itself, which forces people to pay money in situation where they might not have any income to do so. Those people should be selling their land. We should not have a scarce natural resource sitting idle or under-utilized. From the article as well: In small towns, vacant lots contribute to decline — and if there’s no valuable structure on a property, its delinquent landlords likely only pay a nominal property tax. This both lowers tax revenue and hurts neighborhood quality for everyone else. ** In Allentown, Pennsylvania, the system worked! According to a 2019 Strong Towns article, after the city adopted an LVT (through a split-rate system that still kept some property taxes in place) in 1996, “construction returned to the city: the number of taxable building permits surged past neighboring Bethlehem, market investment returned and capital improvement reappeared in city budgets. ... The losers in this trade were absentee owners of vacant lots, who had to shoulder much more of the burden.” Sen. Pat Toomey (R-PA) is quoted touting the benefits of the tax: “The number of building permits in Allentown has increased by 32 percent from before we had a land tax.”*
- belorn 5y ago
  > Those people should be selling their land. We should not have a scarce natural resource sitting idle or under-utilized. From the article as well: If we have that attitude to people owning things, then the first thing should be wealth tax on jewelry, cars, boats, and other luxury items which if you can't afford to pay the tax then you should be forced to sell it. I remember how popular that concept where here in EU when refugees had their jewelry taken by the government in order to pay for expenses and basic living. People have this weird attachment to objects that defy rational thought. I get the sentiment, but in term of winning popular support it has some distinct emotional drawbacks. If we want to specifically address vacant lots within city boundaries, a tax on that seems fair. Not many low income home owners live in their property owned vacant lots located inside city boundaries.
  - CryptoPunk 5y ago
    I don't think this necessitates having that attitude toward owning things in general. Owning scarce natural resources is very different than owning man-made resources that have an elastic supply that can be expanded through production. A coherent moral framework can support the former being taxed, while maintaining that the latter should not be. Private ownership of the latter is both just, because the original owners comes to own it by producing it, and economically advantageous, because ownership incentivizes production, which leads to its supply increasing. With land, there is no moral justification for private ownership, as no private party created the land, and private ownership does not have the economic effect of leading to the supply of it expanding, since land cannot be produced.
    - belorn 5y ago
      I have a hard time distinguish between people owning gold and people owning land, and in this discussion, we are not just talking about owning land but people owning a house on that land. Similar in how gold is turned into a jewelry that people form emotional attachment to, a home is built on land which people form emotional attachments to. In both cases we have a man-made resource, ie a jewelry and homes, and in both cases they got created from a scarce natural resources, gold and land. They are also both mental concepts that is a man-made product formed by using a natural resource. Land cannot be produced but homes can be designed, constructed and built. If we want to tax land but not homes, and we want to tax gold but not jewelry, I would find that perfectly consistent. People rarely form attachment to unused land, similar to how people don't form attachment to solid gold bars or ingots. Incentivizes production of unused land and vacant properties is something I would support, while I am rather suspicious of taxing ownership of man-made resources.
neilwilson 5y ago
Land value taxes fail on the basics. Tax has nothing to do with raising money. It’s about releasing real resources for the public good - largely people to provide public services. Ideally the tax needs to be incident on the private sector entities that would otherwise hire the people the public sector needs to hire instead - military, judiciary, police, healthcare, education, etc. Government has no need of land, therefore it makes no sense to tax it. Expecting the incidence to end up in the correct place requires a faith in fungibility that just isn’t borne out in practice.
- CryptoPunk 5y ago
  >>Tax has nothing to do with raising money. Taxation is entirely about raising money. >>It’s about releasing real resources for the public good - largely people to provide public services. What does "releasing real resources" mean, and how does taxation achieve that? And how does a land value tax fail to achieve that? >>It’s about releasing real resources for the public good - largely people to provide public services. I'm puzzled as to how you conceive of government not needing land, when many government services do in fact need it, or how you perceive other objects of taxation being needed by government in a way that land is not.
  - neilwilson 5y ago
    "Taxation is entirely about raising money." It isn't. Government has no need of it. Taxes are essentially shredded and deleted. All very simple when you realise there isn't a fixed amount of money and it grows and shrinks as required by the economy. What is spent and what is taxed are inductively connected, not directly connected. That's how we have 'deficits'. It's a function of the accounting. "What does "releasing real resources" mean, and how does taxation achieve that?" If you tax employment directly, private firms offer fewer jobs because there would be insufficient money in circulation to employ everybody (wages are insufficient to purchase output due to the tax take). The public sector then hires those who can no longer get jobs in the private sector. The LVT fails to target the areas required, and it lacks a countercyclical behaviour. An employment tax, for example, collects more when the economy is hot and less when it is cooler. That's part of the automatic stabilisation mechanism. "I'm puzzled as to how you conceive of government not needing land, when many government services do in fact need it" Government is largely service based rather than goods based. What it needs is people. Georgism is based upon a view of money that isn't actually the case. So it doesn't work.
imtringued 5y ago
If you tax rent, you are taxing the building which is not the point of a land value tax.
- clairity 5y ago
  again, rents here are economic rents, not rent payments, which is an unfortunate name collision. economic rents are, by definition, unproductive capture of surplus. rent payments can fall into productive (for the provision of services, upkeep, and expansion) or unproductive (excess cash flow resulting from restrictive policy) uses, but that's really beside the point in respect to a land value tax. the land value tax is aimed squarely at taking economic rents of real property down to zero via taxation. in the ideal scenario, the land value tax would be exactly equal to the economic surplus (generated by poor policy or anything else) for each property, to negate the ability to extract economic rents, leaving only productive uses to generate income (perhaps in the form of a rent payment).

by belorn 5y ago

CryptoPunk 5y ago

>>I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sales. The article goes into the advantages of a land value tax over other types of tax, including a property tax: The big question land value taxes help answer is: How can a government raise funds without distorting choices and possibly leaving people worse off? If you tax income, it provides a disincentive to work. If you tax property, it provides a disincentive to improve the physical buildings on top of the land. Sometimes the tax is intentionally disincentivizing an activity — think carbon taxes to reduce greenhouse gas emissions or so-called “sin taxes” on tobacco. But there are also taxes governments want to levy to pay for valuable services without changing behaviors too much (or at all). >>The main argument that I see against land value taxes is that land doesn't generate any income by itself, which forces people to pay money in situation where they might not have any income to do so. Those people should be selling their land. We should not have a scarce natural resource sitting idle or under-utilized. From the article as well: In small towns, vacant lots contribute to decline — and if there’s no valuable structure on a property, its delinquent landlords likely only pay a nominal property tax. This both lowers tax revenue and hurts neighborhood quality for everyone else. ** In Allentown, Pennsylvania, the system worked! According to a 2019 Strong Towns article, after the city adopted an LVT (through a split-rate system that still kept some property taxes in place) in 1996, “construction returned to the city: the number of taxable building permits surged past neighboring Bethlehem, market investment returned and capital improvement reappeared in city budgets. ... The losers in this trade were absentee owners of vacant lots, who had to shoulder much more of the burden.” Sen. Pat Toomey (R-PA) is quoted touting the benefits of the tax: “The number of building permits in Allentown has increased by 32 percent from before we had a land tax.”*

belorn 5y ago
> Those people should be selling their land. We should not have a scarce natural resource sitting idle or under-utilized. From the article as well: If we have that attitude to people owning things, then the first thing should be wealth tax on jewelry, cars, boats, and other luxury items which if you can't afford to pay the tax then you should be forced to sell it. I remember how popular that concept where here in EU when refugees had their jewelry taken by the government in order to pay for expenses and basic living. People have this weird attachment to objects that defy rational thought. I get the sentiment, but in term of winning popular support it has some distinct emotional drawbacks. If we want to specifically address vacant lots within city boundaries, a tax on that seems fair. Not many low income home owners live in their property owned vacant lots located inside city boundaries.
- CryptoPunk 5y ago
  I don't think this necessitates having that attitude toward owning things in general. Owning scarce natural resources is very different than owning man-made resources that have an elastic supply that can be expanded through production. A coherent moral framework can support the former being taxed, while maintaining that the latter should not be. Private ownership of the latter is both just, because the original owners comes to own it by producing it, and economically advantageous, because ownership incentivizes production, which leads to its supply increasing. With land, there is no moral justification for private ownership, as no private party created the land, and private ownership does not have the economic effect of leading to the supply of it expanding, since land cannot be produced.
  - belorn 5y ago
    I have a hard time distinguish between people owning gold and people owning land, and in this discussion, we are not just talking about owning land but people owning a house on that land. Similar in how gold is turned into a jewelry that people form emotional attachment to, a home is built on land which people form emotional attachments to. In both cases we have a man-made resource, ie a jewelry and homes, and in both cases they got created from a scarce natural resources, gold and land. They are also both mental concepts that is a man-made product formed by using a natural resource. Land cannot be produced but homes can be designed, constructed and built. If we want to tax land but not homes, and we want to tax gold but not jewelry, I would find that perfectly consistent. People rarely form attachment to unused land, similar to how people don't form attachment to solid gold bars or ingots. Incentivizes production of unused land and vacant properties is something I would support, while I am rather suspicious of taxing ownership of man-made resources.

neilwilson 5y ago

Land value taxes fail on the basics. Tax has nothing to do with raising money. It’s about releasing real resources for the public good - largely people to provide public services. Ideally the tax needs to be incident on the private sector entities that would otherwise hire the people the public sector needs to hire instead - military, judiciary, police, healthcare, education, etc. Government has no need of land, therefore it makes no sense to tax it. Expecting the incidence to end up in the correct place requires a faith in fungibility that just isn’t borne out in practice.

CryptoPunk 5y ago
>>Tax has nothing to do with raising money. Taxation is entirely about raising money. >>It’s about releasing real resources for the public good - largely people to provide public services. What does "releasing real resources" mean, and how does taxation achieve that? And how does a land value tax fail to achieve that? >>It’s about releasing real resources for the public good - largely people to provide public services. I'm puzzled as to how you conceive of government not needing land, when many government services do in fact need it, or how you perceive other objects of taxation being needed by government in a way that land is not.
- neilwilson 5y ago
  "Taxation is entirely about raising money." It isn't. Government has no need of it. Taxes are essentially shredded and deleted. All very simple when you realise there isn't a fixed amount of money and it grows and shrinks as required by the economy. What is spent and what is taxed are inductively connected, not directly connected. That's how we have 'deficits'. It's a function of the accounting. "What does "releasing real resources" mean, and how does taxation achieve that?" If you tax employment directly, private firms offer fewer jobs because there would be insufficient money in circulation to employ everybody (wages are insufficient to purchase output due to the tax take). The public sector then hires those who can no longer get jobs in the private sector. The LVT fails to target the areas required, and it lacks a countercyclical behaviour. An employment tax, for example, collects more when the economy is hot and less when it is cooler. That's part of the automatic stabilisation mechanism. "I'm puzzled as to how you conceive of government not needing land, when many government services do in fact need it" Government is largely service based rather than goods based. What it needs is people. Georgism is based upon a view of money that isn't actually the case. So it doesn't work.

imtringued 5y ago

If you tax rent, you are taxing the building which is not the point of a land value tax.

clairity 5y ago
again, rents here are economic rents, not rent payments, which is an unfortunate name collision. economic rents are, by definition, unproductive capture of surplus. rent payments can fall into productive (for the provision of services, upkeep, and expansion) or unproductive (excess cash flow resulting from restrictive policy) uses, but that's really beside the point in respect to a land value tax. the land value tax is aimed squarely at taking economic rents of real property down to zero via taxation. in the ideal scenario, the land value tax would be exactly equal to the economic surplus (generated by poor policy or anything else) for each property, to negate the ability to extract economic rents, leaving only productive uses to generate income (perhaps in the form of a rent payment).