4 ms·

Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine

Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity. Your use of the phrase “rent seeking” is also a bit weird. It sounds like any extraction of value from capital would meet your definition. It’s fine if you object to a persons right to extract value from their capital, but rent seeking typically describes attempting to extract value from capital _without_ reciprocating any productive value to the person who’s paying you. Which is certainly not the case with land use.

maxerickson 3y ago
You are renting it from society, not from government. Government is administering the rent.
eru 3y ago
> If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. You know that this is not true in most places? If you put a hundred dollar bill under your pillow, it will be worth less and less as time goes by thanks to inflation. And if you use that hundred dollar bill to buy an asset that hopefully keeps its real value, you pay capital gains taxes on the nominal increase in value (even if there was no real increase in value).
- logicchains 3y ago
  >If you put a hundred dollar bill under your pillow, it will be worth less and less as time goes by thanks to inflation. And if you use that hundred dollar bill to buy an asset that hopefully keeps its real value, you pay capital gains taxes on the nominal increase in value (even if there was no real increase in value). That's because capital gains taxes that don't account for inflation (which is most of them) are essentially a stealth wealth tax.
  - eru 3y ago
    Yes, that's my point. It's already the case that most government indirectly tax wealth. So the proposal isn't some new outrage.
- AmericanChopper 3y ago
  The shortcomings of modern monetary policy and the impact of inflation is a seperate topic. When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use). As a tax they’re generally not a problem unless you go full Weimar mode. But you’re right that they can also represent a tax, especially in jurisdictions that have a capital gains tax (which the jurisdiction where I am a tax resident doesn’t incidentally).
  - eru 3y ago
    My adopted home also doesn't have a capital gains tax. I agree that if you want to have a capital gains tax, it should be inflation adjusted. (You can put in place an explicit wealth tax, if that's what you want.) > When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use). I find that those incentives are a bit silly. First, the central bank can print enough money to get any level of aggregate nominal spending they fell like. No need for inflation. George Selgin's book 'Less than Zero' even makes a convincing argument in favour of deflation. (He essentially argues for a fixed nominal GDP, and an economy that's growing in real terms would thus see the price of goods decline.) Inflation is also not an incentive to put capital to good use. That's because money isn't real capital. If I have a factory or a piece of land that sits idle, that's a real cost to the economy. But if I have a hundred dollar bill that's siting idle under my pillow, nothing of value has been lost: hundred dollar bills are essentially free to print. The central bank can put them in and out of circulation by buying and selling assets. So when I remove my bill from under my pillow to spend it, the central bank can react by selling assets. (They don't need to monitor my pillow. They can just go by statistical measures of spending or inflation.) In fact, in order for me to have a hundred dollar bill under my pillow, it means I refrained from consuming some real goods earlier. So those real goods are available for investment by the wider economy while my pillow serving as a piggy bank.
nickik 3y ago
Much of the lands values comes from public infrastructure and services provided. A piece of land somewhere in the desert is gone be worth very little. A house in a city has lots of resources deployed there and land value tax pays for those things. This tax makes better for people who invest locally and hurts people who don't.
- AmericanChopper 3y ago
  I’m not saying it’s necessarily a bad way to run a city specifically, I’m just pointing out the different compromises that are made in regards to property rights with these different forms of taxation. I would really only object to property taxes (as a concept) in situations where intensified high density infrastructure doesn’t exist (or isn’t required to exist).
harimau777 3y ago
When I say rent seeking, I mean something like "gaining profit by owning capital rather than by performing labor". Under that definition, all value extracted from capital would be rent seeking[1]. Strictly speaking, I'm not necessarily opposed to extracting value by owning capital; in many cases someone bought that capital with the profits from their labor, and more broadly the world isn't black and white. However, I do see taxing profit from owning capital as more just than taxing profit from labor. In that respect, I generally see property taxes as more just than income taxes. However, I am sure that there are exceptions and any tax code would need to be nuanced. [1] Although owning capital may allow you to do some labor that you couldn't otherwise in which case the profit gained from that labor would not be rent.
- AmericanChopper 3y ago
  That’s a perfectly fine view for a person to have, but is definitely not what the economic concept of rent seeking is. What you’re talking about is essentially what Marx called “seizing the means of production”, and is the fundamental basis of Marxist economics. So if you wanted to be more clear with what you’re trying to say, I’d suggest you adjust your vocabulary a bit.
  - harimau777 3y ago
    Thanks for the insight, that's a good point.
lmm 3y ago
> Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity. No man is an island; land should be seen as something rented from the people, especially in cities, where most of its value comes from the efforts of others. I'm sympathetic to the idea that one is entitled to the sweat of their brow and the work of their hands, but land is neither; property in general may not be theft, but private land ownership is, because land rightly belongs to everyone and no-one. > Your use of the phrase “rent seeking” is also a bit weird. It sounds like any extraction of value from capital would meet your definition. It’s fine if you object to a persons right to extract value from their capital, but rent seeking typically describes attempting to extract value from capital _without_ reciprocating any productive value to the person who’s paying you. Which is certainly not the case with land use. There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource.
- AmericanChopper 3y ago
  > There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource. Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody. > Rent seeking is an economic concept that occurs when an entity seeks to gain wealth without any reciprocal contribution of productivity. An example of rent seeking is when a company lobbies the government for grants, subsidies, or tariff protection. https://www.investopedia.com/terms/r/rentseeking.asp https://www.investopedia.com/terms/r/rentseeking.asp Renting an asset to somebody has a very obvious reciprocal consideration of value.
  - lmm 3y ago
    > Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody. It's called rent seeking because the thing you're seeking is rent ( https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent - your link claims a false definition of the term). > Renting an asset to somebody has a very obvious reciprocal consideration of value. You could make the same argument for any of the classic examples of economic rents. A doctor's license or a taxi medallion is obviously economically valuable; that doesn't make it not a rent. The thing that makes it a rent is when you're able to rent it out for more than it cost you to produce, or when you don't produce it at all.
friend_and_foe 3y ago
I used to agree with you, then I read Falkvinge's proposal of a taxless state and it changed my mind. I'm now convinced that property tax (or more accurately, land tax) is the only justified tax, or more generally, that all taxes paid must be tied explicitly and characteristic to a service rendered, and that the only services a state should be allowed to render must be administration of a commons. You cannot defend your land property from even a marginally better equipped aggressor who seeks to take it from you. You need a court system, or for a larger aggressor, an army, to do it for you. This means that de facto, the state with the armed men owns the land. Land tax is tantamount to a fee you pay to lease it. Also it can be framed as just payment for a service rendered, that is, the service of defending your property for you. Furthermore, any entity that "owns" land property and gets protection of his claim by a court or army that does not pay a land tax is free riding. Income taxes are unjust. By the logic of the premise, land tax that pays for anything but defense of claim to the land is unjust. Wealth taxes are unjust, as are capital gains. Tarrifs that fund a navy to protect shipments on the high seas would be just, as would registration fees to bay for highway infrastructure. The core rules are, the state must only solve a tragedy of the commons, the tax that funds such an endeavor must derive directly from benefitting from that endeavor and it must only ever be used for that endeavor. With these axioms it is easy to deduce which taxes are just and which are not, they're all payment for services rendered for a service for which a state is the optimal organization to provide. https://falkvinge.net/2017/03/01/a-simplified-taxless-state-a-proposal-part-1/ https://falkvinge.net/2017/03/01/a-simplified-taxless-state-...
- mortify 3y ago
  Land ownership must be enforced by court of law, and that's true of all property. Yet land ownership is the easiest to maintain. While my neighbor might take my lawnmower and claim it as his own and the courts would have difficulty proving otherwise. Land is difficult to walk off with. Maintaining ownership is simply a matter of maintaining accurate and secure records.
  - friend_and_foe 3y ago
    No it's not. The records only mean something if a system exists to enforce those records. This is what we pay for, in the form of courts and armies. The record means nothing if it is not practically enforceable, and being able to enforce them comes with an ongoing cost, which the beneficiary, the land owner, has to pay for one way or another.
arrosenberg 3y ago
> I’m only buying the right to rent it from the government in perpetuity. You are paying maintenance in exchange for the right to exploit that land. Streets, power, water, sewage, fire, police, schools and libraries both cost money and increase the value of your land, so it makes sense to link the tax base to the value of the land since they should be strongly correlated.
lukas099 3y ago
If you use your land for something useful it will be providing rental income (or equivalent utility) to you year over year, which wouldn’t be taxed under Georgism.

maxerickson 3y ago

You are renting it from society, not from government. Government is administering the rent.

eru 3y ago

> If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. You know that this is not true in most places? If you put a hundred dollar bill under your pillow, it will be worth less and less as time goes by thanks to inflation. And if you use that hundred dollar bill to buy an asset that hopefully keeps its real value, you pay capital gains taxes on the nominal increase in value (even if there was no real increase in value).

logicchains 3y ago
>If you put a hundred dollar bill under your pillow, it will be worth less and less as time goes by thanks to inflation. And if you use that hundred dollar bill to buy an asset that hopefully keeps its real value, you pay capital gains taxes on the nominal increase in value (even if there was no real increase in value). That's because capital gains taxes that don't account for inflation (which is most of them) are essentially a stealth wealth tax.
- eru 3y ago
  Yes, that's my point. It's already the case that most government indirectly tax wealth. So the proposal isn't some new outrage.
AmericanChopper 3y ago
The shortcomings of modern monetary policy and the impact of inflation is a seperate topic. When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use). As a tax they’re generally not a problem unless you go full Weimar mode. But you’re right that they can also represent a tax, especially in jurisdictions that have a capital gains tax (which the jurisdiction where I am a tax resident doesn’t incidentally).
- eru 3y ago
  My adopted home also doesn't have a capital gains tax. I agree that if you want to have a capital gains tax, it should be inflation adjusted. (You can put in place an explicit wealth tax, if that's what you want.) > When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use). I find that those incentives are a bit silly. First, the central bank can print enough money to get any level of aggregate nominal spending they fell like. No need for inflation. George Selgin's book 'Less than Zero' even makes a convincing argument in favour of deflation. (He essentially argues for a fixed nominal GDP, and an economy that's growing in real terms would thus see the price of goods decline.) Inflation is also not an incentive to put capital to good use. That's because money isn't real capital. If I have a factory or a piece of land that sits idle, that's a real cost to the economy. But if I have a hundred dollar bill that's siting idle under my pillow, nothing of value has been lost: hundred dollar bills are essentially free to print. The central bank can put them in and out of circulation by buying and selling assets. So when I remove my bill from under my pillow to spend it, the central bank can react by selling assets. (They don't need to monitor my pillow. They can just go by statistical measures of spending or inflation.) In fact, in order for me to have a hundred dollar bill under my pillow, it means I refrained from consuming some real goods earlier. So those real goods are available for investment by the wider economy while my pillow serving as a piggy bank.

nickik 3y ago

Much of the lands values comes from public infrastructure and services provided. A piece of land somewhere in the desert is gone be worth very little. A house in a city has lots of resources deployed there and land value tax pays for those things. This tax makes better for people who invest locally and hurts people who don't.

AmericanChopper 3y ago
I’m not saying it’s necessarily a bad way to run a city specifically, I’m just pointing out the different compromises that are made in regards to property rights with these different forms of taxation. I would really only object to property taxes (as a concept) in situations where intensified high density infrastructure doesn’t exist (or isn’t required to exist).

harimau777 3y ago

When I say rent seeking, I mean something like "gaining profit by owning capital rather than by performing labor". Under that definition, all value extracted from capital would be rent seeking[1]. Strictly speaking, I'm not necessarily opposed to extracting value by owning capital; in many cases someone bought that capital with the profits from their labor, and more broadly the world isn't black and white. However, I do see taxing profit from owning capital as more just than taxing profit from labor. In that respect, I generally see property taxes as more just than income taxes. However, I am sure that there are exceptions and any tax code would need to be nuanced. [1] Although owning capital may allow you to do some labor that you couldn't otherwise in which case the profit gained from that labor would not be rent.

AmericanChopper 3y ago
That’s a perfectly fine view for a person to have, but is definitely not what the economic concept of rent seeking is. What you’re talking about is essentially what Marx called “seizing the means of production”, and is the fundamental basis of Marxist economics. So if you wanted to be more clear with what you’re trying to say, I’d suggest you adjust your vocabulary a bit.
- harimau777 3y ago
  Thanks for the insight, that's a good point.

lmm 3y ago

> Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity. No man is an island; land should be seen as something rented from the people, especially in cities, where most of its value comes from the efforts of others. I'm sympathetic to the idea that one is entitled to the sweat of their brow and the work of their hands, but land is neither; property in general may not be theft, but private land ownership is, because land rightly belongs to everyone and no-one. > Your use of the phrase “rent seeking” is also a bit weird. It sounds like any extraction of value from capital would meet your definition. It’s fine if you object to a persons right to extract value from their capital, but rent seeking typically describes attempting to extract value from capital _without_ reciprocating any productive value to the person who’s paying you. Which is certainly not the case with land use. There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource.

AmericanChopper 3y ago
> There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource. Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody. > Rent seeking is an economic concept that occurs when an entity seeks to gain wealth without any reciprocal contribution of productivity. An example of rent seeking is when a company lobbies the government for grants, subsidies, or tariff protection. https://www.investopedia.com/terms/r/rentseeking.asp https://www.investopedia.com/terms/r/rentseeking.asp Renting an asset to somebody has a very obvious reciprocal consideration of value.
- lmm 3y ago
  > Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody. It's called rent seeking because the thing you're seeking is rent ( https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent - your link claims a false definition of the term). > Renting an asset to somebody has a very obvious reciprocal consideration of value. You could make the same argument for any of the classic examples of economic rents. A doctor's license or a taxi medallion is obviously economically valuable; that doesn't make it not a rent. The thing that makes it a rent is when you're able to rent it out for more than it cost you to produce, or when you don't produce it at all.

friend_and_foe 3y ago

I used to agree with you, then I read Falkvinge's proposal of a taxless state and it changed my mind. I'm now convinced that property tax (or more accurately, land tax) is the only justified tax, or more generally, that all taxes paid must be tied explicitly and characteristic to a service rendered, and that the only services a state should be allowed to render must be administration of a commons. You cannot defend your land property from even a marginally better equipped aggressor who seeks to take it from you. You need a court system, or for a larger aggressor, an army, to do it for you. This means that de facto, the state with the armed men owns the land. Land tax is tantamount to a fee you pay to lease it. Also it can be framed as just payment for a service rendered, that is, the service of defending your property for you. Furthermore, any entity that "owns" land property and gets protection of his claim by a court or army that does not pay a land tax is free riding. Income taxes are unjust. By the logic of the premise, land tax that pays for anything but defense of claim to the land is unjust. Wealth taxes are unjust, as are capital gains. Tarrifs that fund a navy to protect shipments on the high seas would be just, as would registration fees to bay for highway infrastructure. The core rules are, the state must only solve a tragedy of the commons, the tax that funds such an endeavor must derive directly from benefitting from that endeavor and it must only ever be used for that endeavor. With these axioms it is easy to deduce which taxes are just and which are not, they're all payment for services rendered for a service for which a state is the optimal organization to provide. https://falkvinge.net/2017/03/01/a-simplified-taxless-state-a-proposal-part-1/ https://falkvinge.net/2017/03/01/a-simplified-taxless-state-...

mortify 3y ago
Land ownership must be enforced by court of law, and that's true of all property. Yet land ownership is the easiest to maintain. While my neighbor might take my lawnmower and claim it as his own and the courts would have difficulty proving otherwise. Land is difficult to walk off with. Maintaining ownership is simply a matter of maintaining accurate and secure records.
- friend_and_foe 3y ago
  No it's not. The records only mean something if a system exists to enforce those records. This is what we pay for, in the form of courts and armies. The record means nothing if it is not practically enforceable, and being able to enforce them comes with an ongoing cost, which the beneficiary, the land owner, has to pay for one way or another.

arrosenberg 3y ago

> I’m only buying the right to rent it from the government in perpetuity. You are paying maintenance in exchange for the right to exploit that land. Streets, power, water, sewage, fire, police, schools and libraries both cost money and increase the value of your land, so it makes sense to link the tax base to the value of the land since they should be strongly correlated.

lukas099 3y ago

If you use your land for something useful it will be providing rental income (or equivalent utility) to you year over year, which wouldn’t be taxed under Georgism.