5 ms·

The main Georgist policy recommendation is a tax assessed on land value, arguing that revenues from a land value tax (LVT) can be used to reduce or eliminate ex

The main Georgist policy recommendation is a tax assessed on land value, arguing that revenues from a land value tax (LVT) can be used to reduce or eliminate existing taxes (such as on income, trade, or purchases) that are unfair and inefficient. If I am understanding this correctly, wouldn’t it result in a world where landowners put the minimum amount of investment into the land, and then move to cheaper land as soon as possible/when their current land becomes more valuable? The assumption here seems to me that land in NYC/wherever is inherently valuable, which doesn’t seem true to me. Especially in a remote working world increasingly detached from physical spaces.

chipsa 3y ago
The value of the land in NYC is related to all the other stuff next to the land you’re valuing. Other people’s improvements make your land more valuable, because you’ve got the subway line nearby. And the pizza shop on the corner. And the bar across the street.
- keiferski 3y ago
  But why would any of this continue to exist if landowners have no interest in improving the value of the land? Lower Manhattan today is worth billions, but 50 years ago parts of it were empty enough to be used as lofts by squatting artists. Let’s say land value taxes are implemented in New York today. Suddenly companies have a real incentive to leave and move somewhere with cheaper land values - way more incentive than today, as in theory they will be taxed mostly on land value, not revenue. What’s to stop Manhattan from slowly becoming empty again as people leave, jobs leave, corner stores close, subway maintenance worsens due to less revenue, etc.?
  - thfuran 3y ago
    People don’t currently choose to live in New York City because it’s cheap.
  - BirdieNZ 3y ago
    Land value taxes have existed and do exist around the world (along with variations on the theme, such as leasehold land that is leased from the government for a long time). They don't result in the behaviour you describe. Most land value tax proposals are also revenue neutral (e.g. lower income tax in exchange for higher land value tax), so the balance sheet should end up looking the same for companies and individuals, but with higher land holding costs and lower land purchasing costs.
    - keiferski 3y ago
      But isn’t the proposal that land value taxes will replace income taxes? How is it not advantageous for a company to then reduce its tax burden by moving to a place with lower land taxes? I don’t think this happens today because income taxes are federal and not dramatically different between physical locations. The implementation of a land value tax as the primarily tax would seem to change this, no? To use a direct example: let’s say BigCo is paying 20% of revenue in taxes today. Tomorrow, this changes, and they are paying the same amount, except the source is not revenue, but the value of the land they occupy. They can now move to a location with lower land values and pay less than the the 20% equivalent + keep the current revenue without being taxed on it. Why would the company not choose to do this? That is my question: doesn’t this set up incentives for companies to continually move to lower land tax locations and minimize the land value that they currently own?
      - diordiderot 3y ago
        > How is it not advantageous for a company to then reduce its tax burden by moving to a place with lower land taxes? Forget all the numbers and try to answer the question: Why doesn't JP Morgan move their headquarters to Rawlins Wyoming?
        keiferski 3y ago
        I think I already answered this: because their taxes would basically be the same. They won’t be avoiding 20-30% in taxes by moving there. And yes, of course there’s the factor of New York’s value as a cultural hotspot, base of workers, etc. but as I said, the growth of remote work will probably have a pretty serious effect on this. We’re already seeing panic signals from city governments trying to get people to stop working remotely. I don’t think it’s inconceivable that the JP Morgan of 2040 would have a predominately remote workforce and have no issues moving their headquarters to Rawlins if it means they avoid a massive land value tax. It doesn’t really need to be that extreme of an example, though: there are plenty of smaller cities in the NYC metro area that are more attractive and fulfill the same role as a low-tax zone (if taxes are based on land values.)
  - mdasen 3y ago
    I think another question would be: why are they in NYC today? Let's say that rents go up in NYC. Suddenly companies have a real incentive to leave and move somewhere with cheaper rents. What's to stop Manhattan from slowly becoming empty again... From my other comment: if you don't believe that location has value in a remote-work world, then companies are just doing something ridiculous renting expensive office space in cities. > But why would any of this continue to exist if landowners have no interest in improving the value of the land? Lower Manhattan today is worth billions, but 50 years ago parts of it were empty enough to be used as lofts by squatting artists. The disincentive that you see is in our current system, not Georgism. You note that Lower Manhattan has seen its value increase a lot due to improvements created on that land - improvements that you're afraid wouldn't happen with Georgism, yes? Under our current system, I pay $10,000/year in taxes on my $1M empty lot (it's all land value since it's an empty lot). If I build a 40-unit apartment building, the land is worth $1M and the building is worth $10M. Now I pay $110,000/year in taxes. I have a huge disincentive to improve the land. With Georgism, my taxes don't go up if I build something on my empty lot so I'm incentivized to build something on the empty lot. Now, you'll likely say that if I build something on my lot, the value of the land will rise because it's now in a nicer area. That's true, but the value of the land will rise a tiny bit compared to the value of the additions I've made to the land. Under our current system, I'll get taxed on the $10M building value plus the land value. If the land value goes up 10%, we're talking about taxes on $11.1M in our current system vs. $1.1M under Georgism. Again, even if you argue there's some disincentive under Georgism, it's way less disincentive than our current property tax system. What Georgism does is account for where land is becoming more valuable/popular - and maybe for you "popularity" is a better way of thinking about it since you might be skeptical of "value" if you have a very strong bias toward remote work. At some point, Lower Manhattan started becoming more popular. Why? That doesn't matter. While Lower Manhattan was cheaper than it is today, there were so many other parts of the planet way cheaper than Lower Manhattan so people had incentives to go somewhere else, but still chose Lower Manhattan despite the cost. As Lower Manhattan became popular, Georgism would have provided more incentive to improve properties. If you own a vacant lot in an area that's becoming popular, you see your taxes rise fast. If you own a $1M vacant lot that becomes worth $5M and the $1M vacant lot next to you became worth $5M and put up a $250M office building, you both pay the same taxes. The person who built the office building gets lots of money for that building so the taxes are pretty low. You'd want to put up an office building or housing or whatever so you can take advantage of that too! Land value taxes provide a much greater incentive to improve the land than property taxes since property taxes will be based on the land value plus the improvements. By not improving the land, you save money with property taxes. With Georgism, you pay the same taxes whether the land is improved or not. Maybe your improvements do increase the land value somewhat, but when everyone around you is improving the land, that's a much larger impact than just the improvements on your land. But wouldn't that disincentivize everyone from improving their land? Again, property taxes are a much larger disincentive. Georgism means that if you improve your own land, maybe your raise the value of your land (and everyone around you) by a marginal amount. Property taxes mean that the amount you pay in taxes will go up many times higher when you improve your property rather than by a tiny amount. Property taxes mean that you could see your taxes go up 10-100x rather than maybe go up 1-10% due to your impact on the land value. Again, why aren't companies leaving NYC today? Most companies are paying rent on their office space, not owning it. As such, the underlying tax structure doesn't impact them. Companies already face rising rents giving them a real incentive to move somewhere with cheaper rents. Why don't they move to 100% remote? Why is Google paying tons of money for offices in NYC when they could just have remote workers or open offices in the middle of nowhere? It's because Google sees value in having those offices. You might disagree, but the reality of our world today is that people are valuing those spaces highly. All of the incentives that you worry about would be less under Georgism than under our current system. Under Georgism, people have a bigger incentive to improve land than our current system. Under our current system, companies already face high rents incentivizing them to leave cities - but they see more value in staying. Now, there are some businesses that might own their building/land in NYC. Think a garment company that's been around for a hundred years or a kosher food processing business that's been around for a hundred years. They might have a one-story building in what is now a very expensive part of NYC. However, they already face huge incentives to leave NYC for the suburbs as developers are willing to pay more for their land than their entire business is worth. With Georgism, the incentive could be higher since they're currently facing low property taxes since their land is barely improved (by NYC standards). However, Georgism can actually make it easier for companies like this to stay in expensive areas - in a slightly modified form. They can't have a one-story building by themselves, but it would be cheaper for them to have one story inside a larger building. Georgism is about incentivizing better land use in popular areas.
  - db48x 3y ago
    A tax on the value of your building didn’t incentivize the construction of the building, and there is already a huge cost incentive to leave Manhattan. Costs there are already pretty high, and people only stay due to inertia and the higher incomes available there. But you are asking the right type of question, which is how the equilibrium will change if we change the tax system. > Let’s say land value taxes are implemented in New York today. Suddenly companies have a real incentive to leave… Not necessarily. Note that implementing a land–value tax means removing other kinds of taxes while collecting the same amount of money overall. Suppose two companies both want the same plot of land in the city you run, and both want the existing building. Suppose that one company makes twice the profit as the other on the same expenses. That company is the one that you would want to invite into your city (assuming you couldn’t get both, of course), because it will make the most effective use of the land. If there are no taxes on income, then that second company has more money to spend bidding up the price of the land, and thus to spend on the land–value tax. Thus the current owner will prefer to sell to the more profitable company, which is the exact result that the city as a whole wants. With a flat income tax, the ratio of profits after taxes between these two businesses will be the same 2×. Each company has less money available to spend on land, but one will still be able to outbid the other. But most income taxes are progressive, meaning that the tax rate goes up the higher your company’s income tax is. That reduces the ratio of profitability between these two companies, making it less likely that the more profitable one will be able to expand into your city. If you make the taxes progressive enough, then highly–profitable companies would never be able to enter your city at all, because they would have less money available than less–profitable ones.
- thaumasiotes 3y ago
  And when you buy the subway line, the pizza shop, and the bar, the value of your land will go back down?
  - thfuran 3y ago
    If you tear all that down, it likely would.
    - keiferski 3y ago
      It doesn’t need to be torn down, just abandoned. The tear down process can happen decades later. See: Detroit.
    - thaumasiotes 3y ago
      No. The concept is that you get taxed on the unimproved value of your land. So chipsa says that if you own a small plot of land in New York, you'll still pay a lot of property tax (on "unimproved value") because you're right next to the subway and that's part of the unimproved value of your land. But if you own a large plot of land, the subway is just another improvement that doesn't get counted towards the value of your land. So once you've bought the subway, the unimproved value of your land is lower than it used to be. I think it's weird to be so enthusiastic about a tax system with such fine dependence on the exact ownership structure of property. It's especially weird when the ownership structure the system is driving people toward is "a very small number of people each own truly massive quantities of land".
      - thfuran 3y ago
        The unimproved value of land next to a subway stop is greater than the unimproved value of land far from the nearest subway stop regardless of who owns the subway.
        nine_k 3y ago
        You don't get it. Imagine owning the entire subway. Then the subway system is an improvement on your land, not something adjacent to it, and should not be counted. (Yes, this would require buying most of all the five boroughs.) This is a highly unrealistic scenario though.
ameliaquining 3y ago
This is why you are only supposed to tax the unimproved value of land. This is different from the property tax that's commonly used by local governments in the U.S., which includes the value of buildings and such, and so acts as an incentive against development.
- keiferski 3y ago
  How is this “original unimproved” value determined? Presumably the improvements of the previous tenant have to factor in somewhere? When is the cut off point?
  - jabl 3y ago
    The government keeps tabs on real estate deals and makes an estimate on the value of the unimproved land. Or for an extreme case, the government can buy some old property, demolish whatever building is left standing there, and the sell the lot to the highest bidder, giving a benchmark for land values in the area.
  - ameliaquining 3y ago
    https://gameofrent.com/content/can-land-be-accurately-assessed https://gameofrent.com/content/can-land-be-accurately-assess... is a decent explanation of how this can be made to work.
  - afiori 3y ago
    A method come from the sale of vacant lots (the land value is the sale price) or of buildings that are immediately demolished (the land value is the sale price minus demolition cost). Apparently even in dense cities a majority of land sales are like this.
    - MichaelZuo 3y ago
      Even a vacant lot can be 'improved', e.g. a preexisting underground utility conduit has some non-zero impact on its value. Even a literal patch of dirt, with nothing going through it, is still 'improved' in value by distant structures, e.g. if a major highway passes by a half dozen miles away. And the 'improvement' is more than a comparable patch of dirt 20 miles away. So this part of Georgism never made sense to me.
mdasen 3y ago
The current system discourages people from investing in the land because the more you invest in the land, the more it gets taxed. The Georgist assumption isn't that land in NYC (or wherever) is inherently valuable. However, I think we'd all agree that a plot of land in NYC is valuable - maybe you think it shouldn't be, but I think we'd both agree that it is. The value might not be inherent to the land. Much of the value of land in NYC is because of what others have built in NYC. Georgism encourages land owners to invest in the land in valuable places (like NYC) because they will be taxed the same whether they improve the land or not. If they have a vacant lot, they pay $X in taxes. If they have that same lot with an office building on it, they pay $X in taxes. The current system allows land owners to profit off the improvements others create around their land without making any improvements. Many people sit on unimproved property in major cities like NYC because they pay almost nothing in taxes on unimproved property. Let's say that you own a vacant lot in a part of a city that's seeing revitalization. People are putting up office buildings, biotech lab space, etc. In the current system, you think "if I just wait another 20 years, I'll have the only unimproved land in the area and it'll be worth 10-100x more!" You pay near-zero property taxes and look to profit off what everyone else is creating around your property. People creating housing, office space, lab space, etc. are all creating value around you and you're looking to leech off that value. Every resident, worker, artist, community organizer, etc. that ends up in your area is creating value near your property and you get to leech off that value they're working hard to create. In a Georgist system, the taxes on your vacant lot would increase and that would encourage you to put the lot to use or sell it to someone who would. In effect, a Georgist system taxes you on the value that everyone is creating around you rather than letting you leech off that value. > The assumption here seems to me that land in NYC/wherever is inherently valuable, which doesn’t seem true to me. Especially in a remote working world increasingly detached from physical spaces. Going back to this point, from a market-based perspective, we can both agree that land in NYC is valuable - that people are willing to pay more for land in NYC. You might think they're foolish to pay for it, but they are paying for it. The vast majority of the most successful companies are all locating themselves in the most expensive cities in the world. Most people disagree with your assessment of the value of land in NYC. Cities provide access to lots of opportunities. Yes, remote work detached from physical spaces might offer that. One can debate the value of remote work for the next decade. However, right now, land in NYC is definitely valuable. Most people and companies still perceive a lot of value there - even if you don't. Therefore, a vacant lot in NYC is squatting on a lot of value > then move to cheaper land as soon as possible/when their current land becomes more valuable? Ah, but this is where markets work. If the land becomes more valuable because it is more valuable to you, then you wouldn't want to move. If the land gets assessed at a higher value, but it isn't delivering that value to you or anyone else, demand will go down and then the valuation goes down. I think what's hard for you wrapping your head around this is that to you the land in NYC isn't valuable. Would you pay to rent an apartment in NYC? I think the answer is "no" based on how you've talked about it. You probably think people renting apartments in NYC are wasting their money. However, most people don't think that way. If they did, everyone would leave NYC and rents would go down. Maybe you find no value in location. That's not true for most people. You might be correct about the future: maybe all work will become remote and to take it a step further let's say that all friendships, dating, education, and community move to remote/metaverse. NYC no longer has any value beyond things like access to a good harbor. But in the world we live in today, NYC is highly valued. You might not value it highly, but it is highly valued. There are many highly valued things that I see no reason to be valued highly - but I acknowledge that they are highly valued even if I don't personally value them. In the world we live in today, people can squat on vacant lots and leech off what others are building around them. Maybe location will have zero value in the future. I don't want to put words in your mouth, but that seems to be where your thought process is going: NYC doesn't seem to have any value for you and in a remote-working world, physical space wouldn't have any value (beyond things like shelter and such). If that's the case, then all land would have equal value and pay equal Georgist taxes. That's not the world we live in today. Even if you think people are foolish for valuing NYC highly, I think you can agree that they are valuing NYC highly. Even if you think companies are wasting money on offices in NYC, I think you can agree that they are paying lots of money for those NYC offices. That's the reality on the ground. Likewise, the reality on the ground is that there are people squatting on land that would provide real value to people if it were improved, but they're hoping to pay near-zero taxes and just squat on the land realizing a profit for zero work on their part - leeching off the work of those around them. To flip this around on you: why do you live where you live? Why do you not move to the middle of nowhere 100 miles from anyone else? Even for those who don't like cities and might want to move to rural areas, they often still put value on place/location to an extent. You want to be proximal enough to a supermarket. Most people don't want a 4-hour round-trip to get food. Many people want to be within community rather than just being lonely - that could just mean being proximal to people that can come over and watch sports with you at your home (which they won't drive 2-hours to get to) or close enough that you can join a gym or do recreational sports with others. And you might answer that you can buy workout equipment for your house and chat with people online while watching sports together or that you'll just order food to be delivered (though if more people decided to move to inconvenient locations, free delivery to rural areas would probably need to cease as it's basically subsidized today). But I'm guessing that you still value place/location as most people do. You might be more flexible and cost might sway you more, but I doubt that you're truly agnostic to place/location. If you live in the suburbs, there's almost assuredly a cheaper town you could have moved to and didn't move to. As such, you found more value based on place/location. Even in rural areas, there are cheaper places you can move to that people decide not to move to.

chipsa 3y ago

The value of the land in NYC is related to all the other stuff next to the land you’re valuing. Other people’s improvements make your land more valuable, because you’ve got the subway line nearby. And the pizza shop on the corner. And the bar across the street.

keiferski 3y ago
But why would any of this continue to exist if landowners have no interest in improving the value of the land? Lower Manhattan today is worth billions, but 50 years ago parts of it were empty enough to be used as lofts by squatting artists. Let’s say land value taxes are implemented in New York today. Suddenly companies have a real incentive to leave and move somewhere with cheaper land values - way more incentive than today, as in theory they will be taxed mostly on land value, not revenue. What’s to stop Manhattan from slowly becoming empty again as people leave, jobs leave, corner stores close, subway maintenance worsens due to less revenue, etc.?
- thfuran 3y ago
  People don’t currently choose to live in New York City because it’s cheap.
- BirdieNZ 3y ago
  Land value taxes have existed and do exist around the world (along with variations on the theme, such as leasehold land that is leased from the government for a long time). They don't result in the behaviour you describe. Most land value tax proposals are also revenue neutral (e.g. lower income tax in exchange for higher land value tax), so the balance sheet should end up looking the same for companies and individuals, but with higher land holding costs and lower land purchasing costs.
  - keiferski 3y ago
    But isn’t the proposal that land value taxes will replace income taxes? How is it not advantageous for a company to then reduce its tax burden by moving to a place with lower land taxes? I don’t think this happens today because income taxes are federal and not dramatically different between physical locations. The implementation of a land value tax as the primarily tax would seem to change this, no? To use a direct example: let’s say BigCo is paying 20% of revenue in taxes today. Tomorrow, this changes, and they are paying the same amount, except the source is not revenue, but the value of the land they occupy. They can now move to a location with lower land values and pay less than the the 20% equivalent + keep the current revenue without being taxed on it. Why would the company not choose to do this? That is my question: doesn’t this set up incentives for companies to continually move to lower land tax locations and minimize the land value that they currently own?
    - diordiderot 3y ago
      > How is it not advantageous for a company to then reduce its tax burden by moving to a place with lower land taxes? Forget all the numbers and try to answer the question: Why doesn't JP Morgan move their headquarters to Rawlins Wyoming?
      - keiferski 3y ago
        I think I already answered this: because their taxes would basically be the same. They won’t be avoiding 20-30% in taxes by moving there. And yes, of course there’s the factor of New York’s value as a cultural hotspot, base of workers, etc. but as I said, the growth of remote work will probably have a pretty serious effect on this. We’re already seeing panic signals from city governments trying to get people to stop working remotely. I don’t think it’s inconceivable that the JP Morgan of 2040 would have a predominately remote workforce and have no issues moving their headquarters to Rawlins if it means they avoid a massive land value tax. It doesn’t really need to be that extreme of an example, though: there are plenty of smaller cities in the NYC metro area that are more attractive and fulfill the same role as a low-tax zone (if taxes are based on land values.)
- mdasen 3y ago
  I think another question would be: why are they in NYC today? Let's say that rents go up in NYC. Suddenly companies have a real incentive to leave and move somewhere with cheaper rents. What's to stop Manhattan from slowly becoming empty again... From my other comment: if you don't believe that location has value in a remote-work world, then companies are just doing something ridiculous renting expensive office space in cities. > But why would any of this continue to exist if landowners have no interest in improving the value of the land? Lower Manhattan today is worth billions, but 50 years ago parts of it were empty enough to be used as lofts by squatting artists. The disincentive that you see is in our current system, not Georgism. You note that Lower Manhattan has seen its value increase a lot due to improvements created on that land - improvements that you're afraid wouldn't happen with Georgism, yes? Under our current system, I pay $10,000/year in taxes on my $1M empty lot (it's all land value since it's an empty lot). If I build a 40-unit apartment building, the land is worth $1M and the building is worth $10M. Now I pay $110,000/year in taxes. I have a huge disincentive to improve the land. With Georgism, my taxes don't go up if I build something on my empty lot so I'm incentivized to build something on the empty lot. Now, you'll likely say that if I build something on my lot, the value of the land will rise because it's now in a nicer area. That's true, but the value of the land will rise a tiny bit compared to the value of the additions I've made to the land. Under our current system, I'll get taxed on the $10M building value plus the land value. If the land value goes up 10%, we're talking about taxes on $11.1M in our current system vs. $1.1M under Georgism. Again, even if you argue there's some disincentive under Georgism, it's way less disincentive than our current property tax system. What Georgism does is account for where land is becoming more valuable/popular - and maybe for you "popularity" is a better way of thinking about it since you might be skeptical of "value" if you have a very strong bias toward remote work. At some point, Lower Manhattan started becoming more popular. Why? That doesn't matter. While Lower Manhattan was cheaper than it is today, there were so many other parts of the planet way cheaper than Lower Manhattan so people had incentives to go somewhere else, but still chose Lower Manhattan despite the cost. As Lower Manhattan became popular, Georgism would have provided more incentive to improve properties. If you own a vacant lot in an area that's becoming popular, you see your taxes rise fast. If you own a $1M vacant lot that becomes worth $5M and the $1M vacant lot next to you became worth $5M and put up a $250M office building, you both pay the same taxes. The person who built the office building gets lots of money for that building so the taxes are pretty low. You'd want to put up an office building or housing or whatever so you can take advantage of that too! Land value taxes provide a much greater incentive to improve the land than property taxes since property taxes will be based on the land value plus the improvements. By not improving the land, you save money with property taxes. With Georgism, you pay the same taxes whether the land is improved or not. Maybe your improvements do increase the land value somewhat, but when everyone around you is improving the land, that's a much larger impact than just the improvements on your land. But wouldn't that disincentivize everyone from improving their land? Again, property taxes are a much larger disincentive. Georgism means that if you improve your own land, maybe your raise the value of your land (and everyone around you) by a marginal amount. Property taxes mean that the amount you pay in taxes will go up many times higher when you improve your property rather than by a tiny amount. Property taxes mean that you could see your taxes go up 10-100x rather than maybe go up 1-10% due to your impact on the land value. Again, why aren't companies leaving NYC today? Most companies are paying rent on their office space, not owning it. As such, the underlying tax structure doesn't impact them. Companies already face rising rents giving them a real incentive to move somewhere with cheaper rents. Why don't they move to 100% remote? Why is Google paying tons of money for offices in NYC when they could just have remote workers or open offices in the middle of nowhere? It's because Google sees value in having those offices. You might disagree, but the reality of our world today is that people are valuing those spaces highly. All of the incentives that you worry about would be less under Georgism than under our current system. Under Georgism, people have a bigger incentive to improve land than our current system. Under our current system, companies already face high rents incentivizing them to leave cities - but they see more value in staying. Now, there are some businesses that might own their building/land in NYC. Think a garment company that's been around for a hundred years or a kosher food processing business that's been around for a hundred years. They might have a one-story building in what is now a very expensive part of NYC. However, they already face huge incentives to leave NYC for the suburbs as developers are willing to pay more for their land than their entire business is worth. With Georgism, the incentive could be higher since they're currently facing low property taxes since their land is barely improved (by NYC standards). However, Georgism can actually make it easier for companies like this to stay in expensive areas - in a slightly modified form. They can't have a one-story building by themselves, but it would be cheaper for them to have one story inside a larger building. Georgism is about incentivizing better land use in popular areas.
- db48x 3y ago
  A tax on the value of your building didn’t incentivize the construction of the building, and there is already a huge cost incentive to leave Manhattan. Costs there are already pretty high, and people only stay due to inertia and the higher incomes available there. But you are asking the right type of question, which is how the equilibrium will change if we change the tax system. > Let’s say land value taxes are implemented in New York today. Suddenly companies have a real incentive to leave… Not necessarily. Note that implementing a land–value tax means removing other kinds of taxes while collecting the same amount of money overall. Suppose two companies both want the same plot of land in the city you run, and both want the existing building. Suppose that one company makes twice the profit as the other on the same expenses. That company is the one that you would want to invite into your city (assuming you couldn’t get both, of course), because it will make the most effective use of the land. If there are no taxes on income, then that second company has more money to spend bidding up the price of the land, and thus to spend on the land–value tax. Thus the current owner will prefer to sell to the more profitable company, which is the exact result that the city as a whole wants. With a flat income tax, the ratio of profits after taxes between these two businesses will be the same 2×. Each company has less money available to spend on land, but one will still be able to outbid the other. But most income taxes are progressive, meaning that the tax rate goes up the higher your company’s income tax is. That reduces the ratio of profitability between these two companies, making it less likely that the more profitable one will be able to expand into your city. If you make the taxes progressive enough, then highly–profitable companies would never be able to enter your city at all, because they would have less money available than less–profitable ones.
thaumasiotes 3y ago
And when you buy the subway line, the pizza shop, and the bar, the value of your land will go back down?
- thfuran 3y ago
  If you tear all that down, it likely would.
  - keiferski 3y ago
    It doesn’t need to be torn down, just abandoned. The tear down process can happen decades later. See: Detroit.
  - thaumasiotes 3y ago
    No. The concept is that you get taxed on the unimproved value of your land. So chipsa says that if you own a small plot of land in New York, you'll still pay a lot of property tax (on "unimproved value") because you're right next to the subway and that's part of the unimproved value of your land. But if you own a large plot of land, the subway is just another improvement that doesn't get counted towards the value of your land. So once you've bought the subway, the unimproved value of your land is lower than it used to be. I think it's weird to be so enthusiastic about a tax system with such fine dependence on the exact ownership structure of property. It's especially weird when the ownership structure the system is driving people toward is "a very small number of people each own truly massive quantities of land".
    - thfuran 3y ago
      The unimproved value of land next to a subway stop is greater than the unimproved value of land far from the nearest subway stop regardless of who owns the subway.
      - nine_k 3y ago
        You don't get it. Imagine owning the entire subway. Then the subway system is an improvement on your land, not something adjacent to it, and should not be counted. (Yes, this would require buying most of all the five boroughs.) This is a highly unrealistic scenario though.

ameliaquining 3y ago

This is why you are only supposed to tax the unimproved value of land. This is different from the property tax that's commonly used by local governments in the U.S., which includes the value of buildings and such, and so acts as an incentive against development.

keiferski 3y ago
How is this “original unimproved” value determined? Presumably the improvements of the previous tenant have to factor in somewhere? When is the cut off point?
- jabl 3y ago
  The government keeps tabs on real estate deals and makes an estimate on the value of the unimproved land. Or for an extreme case, the government can buy some old property, demolish whatever building is left standing there, and the sell the lot to the highest bidder, giving a benchmark for land values in the area.
- ameliaquining 3y ago
  https://gameofrent.com/content/can-land-be-accurately-assessed https://gameofrent.com/content/can-land-be-accurately-assess... is a decent explanation of how this can be made to work.
- afiori 3y ago
  A method come from the sale of vacant lots (the land value is the sale price) or of buildings that are immediately demolished (the land value is the sale price minus demolition cost). Apparently even in dense cities a majority of land sales are like this.
  - MichaelZuo 3y ago
    Even a vacant lot can be 'improved', e.g. a preexisting underground utility conduit has some non-zero impact on its value. Even a literal patch of dirt, with nothing going through it, is still 'improved' in value by distant structures, e.g. if a major highway passes by a half dozen miles away. And the 'improvement' is more than a comparable patch of dirt 20 miles away. So this part of Georgism never made sense to me.

mdasen 3y ago

The current system discourages people from investing in the land because the more you invest in the land, the more it gets taxed. The Georgist assumption isn't that land in NYC (or wherever) is inherently valuable. However, I think we'd all agree that a plot of land in NYC is valuable - maybe you think it shouldn't be, but I think we'd both agree that it is. The value might not be inherent to the land. Much of the value of land in NYC is because of what others have built in NYC. Georgism encourages land owners to invest in the land in valuable places (like NYC) because they will be taxed the same whether they improve the land or not. If they have a vacant lot, they pay $X in taxes. If they have that same lot with an office building on it, they pay $X in taxes. The current system allows land owners to profit off the improvements others create around their land without making any improvements. Many people sit on unimproved property in major cities like NYC because they pay almost nothing in taxes on unimproved property. Let's say that you own a vacant lot in a part of a city that's seeing revitalization. People are putting up office buildings, biotech lab space, etc. In the current system, you think "if I just wait another 20 years, I'll have the only unimproved land in the area and it'll be worth 10-100x more!" You pay near-zero property taxes and look to profit off what everyone else is creating around your property. People creating housing, office space, lab space, etc. are all creating value around you and you're looking to leech off that value. Every resident, worker, artist, community organizer, etc. that ends up in your area is creating value near your property and you get to leech off that value they're working hard to create. In a Georgist system, the taxes on your vacant lot would increase and that would encourage you to put the lot to use or sell it to someone who would. In effect, a Georgist system taxes you on the value that everyone is creating around you rather than letting you leech off that value. > The assumption here seems to me that land in NYC/wherever is inherently valuable, which doesn’t seem true to me. Especially in a remote working world increasingly detached from physical spaces. Going back to this point, from a market-based perspective, we can both agree that land in NYC is valuable - that people are willing to pay more for land in NYC. You might think they're foolish to pay for it, but they are paying for it. The vast majority of the most successful companies are all locating themselves in the most expensive cities in the world. Most people disagree with your assessment of the value of land in NYC. Cities provide access to lots of opportunities. Yes, remote work detached from physical spaces might offer that. One can debate the value of remote work for the next decade. However, right now, land in NYC is definitely valuable. Most people and companies still perceive a lot of value there - even if you don't. Therefore, a vacant lot in NYC is squatting on a lot of value > then move to cheaper land as soon as possible/when their current land becomes more valuable? Ah, but this is where markets work. If the land becomes more valuable because it is more valuable to you, then you wouldn't want to move. If the land gets assessed at a higher value, but it isn't delivering that value to you or anyone else, demand will go down and then the valuation goes down. I think what's hard for you wrapping your head around this is that to you the land in NYC isn't valuable. Would you pay to rent an apartment in NYC? I think the answer is "no" based on how you've talked about it. You probably think people renting apartments in NYC are wasting their money. However, most people don't think that way. If they did, everyone would leave NYC and rents would go down. Maybe you find no value in location. That's not true for most people. You might be correct about the future: maybe all work will become remote and to take it a step further let's say that all friendships, dating, education, and community move to remote/metaverse. NYC no longer has any value beyond things like access to a good harbor. But in the world we live in today, NYC is highly valued. You might not value it highly, but it is highly valued. There are many highly valued things that I see no reason to be valued highly - but I acknowledge that they are highly valued even if I don't personally value them. In the world we live in today, people can squat on vacant lots and leech off what others are building around them. Maybe location will have zero value in the future. I don't want to put words in your mouth, but that seems to be where your thought process is going: NYC doesn't seem to have any value for you and in a remote-working world, physical space wouldn't have any value (beyond things like shelter and such). If that's the case, then all land would have equal value and pay equal Georgist taxes. That's not the world we live in today. Even if you think people are foolish for valuing NYC highly, I think you can agree that they are valuing NYC highly. Even if you think companies are wasting money on offices in NYC, I think you can agree that they are paying lots of money for those NYC offices. That's the reality on the ground. Likewise, the reality on the ground is that there are people squatting on land that would provide real value to people if it were improved, but they're hoping to pay near-zero taxes and just squat on the land realizing a profit for zero work on their part - leeching off the work of those around them. To flip this around on you: why do you live where you live? Why do you not move to the middle of nowhere 100 miles from anyone else? Even for those who don't like cities and might want to move to rural areas, they often still put value on place/location to an extent. You want to be proximal enough to a supermarket. Most people don't want a 4-hour round-trip to get food. Many people want to be within community rather than just being lonely - that could just mean being proximal to people that can come over and watch sports with you at your home (which they won't drive 2-hours to get to) or close enough that you can join a gym or do recreational sports with others. And you might answer that you can buy workout equipment for your house and chat with people online while watching sports together or that you'll just order food to be delivered (though if more people decided to move to inconvenient locations, free delivery to rural areas would probably need to cease as it's basically subsidized today). But I'm guessing that you still value place/location as most people do. You might be more flexible and cost might sway you more, but I doubt that you're truly agnostic to place/location. If you live in the suburbs, there's almost assuredly a cheaper town you could have moved to and didn't move to. As such, you found more value based on place/location. Even in rural areas, there are cheaper places you can move to that people decide not to move to.