4 ms·

Georgists have studied the mechanism by which land captures the value of labour quite extensively and many of them even predicted this trend. The solution to l

by TimPC 4y ago

Georgists have studied the mechanism by which land captures the value of labour quite extensively and many of them even predicted this trend. The solution to land capturing excess amounts of labour is to reduce total labour capture by taxing land instead of labour.

newaccount74 4y ago
Would that not just lead to increased rent? Is there a way to do it so that rents become lower?
- throw123123123 4y ago
  Taxes on land dont have economic incidence on rents. The reasoning is that land's profit stems from its location and the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value. Its not the same with property taxes because builders/buyers can choose not to build, so there is some distortion.
  - pandaman 4y ago
    A land owner has a whole continuum of choices because he is setting the rent price. It's no different from any other seller on the market. The higher price will push the potential tenant elsewhere but if other places are taxed the same way they may also need to raise prices so it will be a wash in lost customers and higher rent across the board.
    - TimPC 4y ago
      You can draw the supply and demand curves to see what happens when you add the tax. The supply curve is a straight vertical line since land is in fixed supply. When you tax someone $2000 for land, their demand for the same land falls by $2000. So if you charge the tenant the tax, prices will fall by $2000 making the landlords absorb the cost. If you charge the landlord the tax both the supply and demand curves are unchanged and the tenants pay the same. Taxes on most things change prices by adjusting both supply and demand, it’s the adjustment to supply that can pass on part or most of the tax to the customer. If supply doesn’t adjust you can’t do that.
      - pandaman 4y ago
        I really can't. What are supply and demand curves for non-fungible goods? Each plot of land is unique. The asking price doesn't not affect its size. It does affect the time on market: the higher the ask, the longer it will take to rent out.
        TimPC 4y ago
        And some pieces will take infinite time to rent out if the price is set too high. The point is the land was just as unique before and after the tax. If you believe in supply and demand curves at all, this example is straight forward. Land has essentially fixed supply, so the curve is vertical and outside of a few weird exceptions can't change. The demand curve for your individual unique piece of land will be unchanged if the landlord pays the tax (taxes don't cause tenants to be willing to pay more) or be lowered by the tax if the tenant pays the tax (total spend by tenant unchanged). The new intersection of the lines determining the market price is either unchanged or lowered by the tax depending on who pays. This is unlike other supply and demand examples where in response to the tax you reduce supply causing the supply and demand curves to intersect at a higher price point.
        pandaman 4y ago
        >And some pieces will take infinite time to rent out if the price is set too high. Yes. Same as the demand curve goes to 0 if price is high enough. >If you believe in supply and demand curves at all, this example is straight forward I believe in supply and demand curves for fungible items. It's easy to observe that you can acquire less of a particular item at a lower price than at a higher price and also true that you can sell more at at a lower price than at a higher price. I don't see how, say, a particular painting becomes bigger or adds detail with price increase or how one can sell two Mona Lisas by cutting down the price.
        TimPC 4y ago
        If you have a unique item your supply curve is flat at 1 supply and steps down to 0 at a price at which you refuse to sell. It’s still a supply curve and there is still a corresponding demand curve that determines the price you can sell at. In this case, it’s the demand of the highest bidder that causes the intersection. But the theory of supply and demand doesn’t go out the window because items are non-fungible.
    - throw123123123 4y ago
      They can't set rent prices - prices occur when supply meets demand, it's not unilateral. The origin of rent in land - beware it is not the same for buildings - is the difference in value from one land to the least valuable land. (roughly, David Ricardo). A land tax is about taxing this rent, not about nominal land taxes on everything. If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away. Adam smith, David Ricardo, Henry George, Milton Friedman and even Stiglitz have all lauded that land taxes are less distortive than any other tax and would be great as a local tax policy. (In the us, for cities and states).
      - pandaman 4y ago
        >They can't set rent prices They totally can. Go to any marketplace and see for yourself: sellers set prices. Buyers can negotiate, accept or refuse, but the seller setting the price (ask) is completely unilateral and happens billions of time every day. >If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away. If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices. >land taxes are less distortive than any other tax Might be true or false, is orthogonal to the fact that land taxes, like any other taxes will be paid by the end consumer through increased prices.
        throw123123123 4y ago
        > They totally can. Go to any marketplace and see for yourself: sellers set prices. Buyers can negotiate, accept or refuse, but the seller setting the price (ask) is completely unilateral and happens billions of time every day. There is some subtlety about talking about prices conceptually. Both sellers and buyers can make an offer or a bid at any price, but market prices are the result of sellers and buyers meeting - about making the actual exchange. In this context, saying "sets prices" would mean that the buyer takes the price, not that the seller has made a listing at an arbitrary number. Offering 1$ for a car and not buying a car is not setting a price - neither is Asking 1000000$ and not getting an offer. Rent prices are paid at all because there is a benefit to the land. If the Ask for the land is higher than the value, it will meet demand and validate the price. > If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices. Thats not true - economic incidence requires evaluation in a case by case basis. It depends on the relative market strength or demand/supply elasticity. For example, a tax on life saving medication is borne by the consumer, but a tax on skittles is born on the skittles manufacturer (as consumers replace skittles with other candy). The point is that the economic incidence on unimproved land is very much against the landlord - he can't do anything with the unimproved land but rent it. For longer, wider and more interesting historical analysis of LVT I recommend reading from source - Henry George and Provery and Progress, a book denouncing homelessness and land speculation in...San Francisco, 100 years ago.
soramimo 4y ago
Interesting. Can you recommend a book or an article on this?
- TimPC 4y ago
  Progress and Poverty is the most interesting original source but the first few chapters are an outdated theory of capital. I’d recommend one of the modern abridged editions that skips this.
  - soramimo 4y ago
    Thank you! Quick follow up question, which abridged edition would you recommend? Also, are there any recent books on the subject that you would recommend?

by TimPC 4y ago

newaccount74 4y ago

Would that not just lead to increased rent? Is there a way to do it so that rents become lower?

throw123123123 4y ago
Taxes on land dont have economic incidence on rents. The reasoning is that land's profit stems from its location and the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value. Its not the same with property taxes because builders/buyers can choose not to build, so there is some distortion.
- pandaman 4y ago
  A land owner has a whole continuum of choices because he is setting the rent price. It's no different from any other seller on the market. The higher price will push the potential tenant elsewhere but if other places are taxed the same way they may also need to raise prices so it will be a wash in lost customers and higher rent across the board.
  - TimPC 4y ago
    You can draw the supply and demand curves to see what happens when you add the tax. The supply curve is a straight vertical line since land is in fixed supply. When you tax someone $2000 for land, their demand for the same land falls by $2000. So if you charge the tenant the tax, prices will fall by $2000 making the landlords absorb the cost. If you charge the landlord the tax both the supply and demand curves are unchanged and the tenants pay the same. Taxes on most things change prices by adjusting both supply and demand, it’s the adjustment to supply that can pass on part or most of the tax to the customer. If supply doesn’t adjust you can’t do that.
    - pandaman 4y ago
      I really can't. What are supply and demand curves for non-fungible goods? Each plot of land is unique. The asking price doesn't not affect its size. It does affect the time on market: the higher the ask, the longer it will take to rent out.
      - TimPC 4y ago
        And some pieces will take infinite time to rent out if the price is set too high. The point is the land was just as unique before and after the tax. If you believe in supply and demand curves at all, this example is straight forward. Land has essentially fixed supply, so the curve is vertical and outside of a few weird exceptions can't change. The demand curve for your individual unique piece of land will be unchanged if the landlord pays the tax (taxes don't cause tenants to be willing to pay more) or be lowered by the tax if the tenant pays the tax (total spend by tenant unchanged). The new intersection of the lines determining the market price is either unchanged or lowered by the tax depending on who pays. This is unlike other supply and demand examples where in response to the tax you reduce supply causing the supply and demand curves to intersect at a higher price point.
        pandaman 4y ago
        >And some pieces will take infinite time to rent out if the price is set too high. Yes. Same as the demand curve goes to 0 if price is high enough. >If you believe in supply and demand curves at all, this example is straight forward I believe in supply and demand curves for fungible items. It's easy to observe that you can acquire less of a particular item at a lower price than at a higher price and also true that you can sell more at at a lower price than at a higher price. I don't see how, say, a particular painting becomes bigger or adds detail with price increase or how one can sell two Mona Lisas by cutting down the price.
        TimPC 4y ago
        If you have a unique item your supply curve is flat at 1 supply and steps down to 0 at a price at which you refuse to sell. It’s still a supply curve and there is still a corresponding demand curve that determines the price you can sell at. In this case, it’s the demand of the highest bidder that causes the intersection. But the theory of supply and demand doesn’t go out the window because items are non-fungible.
  - throw123123123 4y ago
    They can't set rent prices - prices occur when supply meets demand, it's not unilateral. The origin of rent in land - beware it is not the same for buildings - is the difference in value from one land to the least valuable land. (roughly, David Ricardo). A land tax is about taxing this rent, not about nominal land taxes on everything. If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away. Adam smith, David Ricardo, Henry George, Milton Friedman and even Stiglitz have all lauded that land taxes are less distortive than any other tax and would be great as a local tax policy. (In the us, for cities and states).
    - pandaman 4y ago
      >They can't set rent prices They totally can. Go to any marketplace and see for yourself: sellers set prices. Buyers can negotiate, accept or refuse, but the seller setting the price (ask) is completely unilateral and happens billions of time every day. >If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away. If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices. >land taxes are less distortive than any other tax Might be true or false, is orthogonal to the fact that land taxes, like any other taxes will be paid by the end consumer through increased prices.
      - throw123123123 4y ago
        > They totally can. Go to any marketplace and see for yourself: sellers set prices. Buyers can negotiate, accept or refuse, but the seller setting the price (ask) is completely unilateral and happens billions of time every day. There is some subtlety about talking about prices conceptually. Both sellers and buyers can make an offer or a bid at any price, but market prices are the result of sellers and buyers meeting - about making the actual exchange. In this context, saying "sets prices" would mean that the buyer takes the price, not that the seller has made a listing at an arbitrary number. Offering 1$ for a car and not buying a car is not setting a price - neither is Asking 1000000$ and not getting an offer. Rent prices are paid at all because there is a benefit to the land. If the Ask for the land is higher than the value, it will meet demand and validate the price. > If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices. Thats not true - economic incidence requires evaluation in a case by case basis. It depends on the relative market strength or demand/supply elasticity. For example, a tax on life saving medication is borne by the consumer, but a tax on skittles is born on the skittles manufacturer (as consumers replace skittles with other candy). The point is that the economic incidence on unimproved land is very much against the landlord - he can't do anything with the unimproved land but rent it. For longer, wider and more interesting historical analysis of LVT I recommend reading from source - Henry George and Provery and Progress, a book denouncing homelessness and land speculation in...San Francisco, 100 years ago.

soramimo 4y ago

Interesting. Can you recommend a book or an article on this?

TimPC 4y ago
Progress and Poverty is the most interesting original source but the first few chapters are an outdated theory of capital. I’d recommend one of the modern abridged editions that skips this.
- soramimo 4y ago
  Thank you! Quick follow up question, which abridged edition would you recommend? Also, are there any recent books on the subject that you would recommend?