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Interestingly because the supply of land is inelastic its supply curve is a straight vertical line. If you charge the tax directly to tenants they lose say $20

by TimPC 4y ago

Interestingly because the supply of land is inelastic its supply curve is a straight vertical line. If you charge the tax directly to tenants they lose say $20,000 in LVT tax. This lowers their demand for land by $20,000. Because the supply curve is a straight vertical line the intersection of the supply and demand curve is now $20,000 lower. They literally pay $20,000 less for land rent. This doesn't work with anything that has elastic supply like buildings where the tax would lower the supply and the new intersection of the supply and demand curves would result in the tenant and owner sharing the tax. But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants.

its_ethan 4y ago
> Interestingly because the supply of land is inelastic its supply curve is a straight vertical line. If you charge the tax directly to tenants they lose say $20,000 in LVT tax. This lowers their demand for land by $20,000. This might sound good in theory, but it is a very hard sell to say that's how it pans out in practice. You even say: "This doesn't work with anything that has elastic supply like buildings" - so as soon as you put a building (apartments) on the property, this theory goes out the window. > But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants. I don't dispute that there would be some competition among landlords as to how much of their LVT they can pass off to tenants - it wouldn't be 100%. But to claim that there would be no impact to tenants strikes me as hilariously naive.
- TimPC 4y ago
  No the building on the property isn’t taxed. You pay $0 more in taxes for building it. If you have a fundamental objection to how the established theory of supply and demand curves works I can’t really help you. Large parts of economics have shown it to be successful and I certainly trust it over anecdotal arguments about how landlords will pass on the tax. Based on the demand curve any attempt to pass on the tax will result in empty land and less overall revenue due to the mispricing. This at a minimum means some landlords will be very unhappy.

by TimPC 4y ago

its_ethan 4y ago

> Interestingly because the supply of land is inelastic its supply curve is a straight vertical line. If you charge the tax directly to tenants they lose say $20,000 in LVT tax. This lowers their demand for land by $20,000. This might sound good in theory, but it is a very hard sell to say that's how it pans out in practice. You even say: "This doesn't work with anything that has elastic supply like buildings" - so as soon as you put a building (apartments) on the property, this theory goes out the window. > But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants. I don't dispute that there would be some competition among landlords as to how much of their LVT they can pass off to tenants - it wouldn't be 100%. But to claim that there would be no impact to tenants strikes me as hilariously naive.

TimPC 4y ago
No the building on the property isn’t taxed. You pay $0 more in taxes for building it. If you have a fundamental objection to how the established theory of supply and demand curves works I can’t really help you. Large parts of economics have shown it to be successful and I certainly trust it over anecdotal arguments about how landlords will pass on the tax. Based on the demand curve any attempt to pass on the tax will result in empty land and less overall revenue due to the mispricing. This at a minimum means some landlords will be very unhappy.