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I don't understand how that needs a special tax though. Wouldn't the more obvious choice be to just tax all wealth/assets? E.g. where I live it's just assumed

I don't understand how that needs a special tax though. Wouldn't the more obvious choice be to just tax all wealth/assets? E.g. where I live it's just assumed that all your assets produce a yield of 4% yearly, and that is taxed as regular income. Makes the tax declaration also a lot easier, since people don't have to list all exact dividends and profits they might have gotten from investments.

blagie 3y ago
The idea is to change incentive structures around specific types of assets, not to raise money. The idea of rent-collecting landed gentry is economically devastating. Adam Smith wrote extensively about the outcomes, and that is a natural path for economies to take. Wealth consolidates, buys landed, and becomes an informal nobility who collects land and does no work. At some point, it spirals, as rents lets real estate investors buy more land. Put another way: If I have $1B, and I buy $1B of land, that creates no value, and raises prices for everyone. If I have $1B and I start or fund a company which produces a new medical device, computer, or car, I've created massive economic value, both in the inputs (hiring people) and outputs (new technology). Land is also a scarce resource we all need to share fairly (for whatever 'fairly' means). If you have more, everyone else has less. On the other hand, if you're investing in making movies, I can make my own movies too. There is no fundamental limit to that sort of economic growth.
tedk-42 3y ago
Land specifically has uses (people live there, grow stuff, build a business on top of, have community things like a park etc). Most people won't care about some Rolex that someone around the world is willing to pay $100K for. Land has purposeful value rather than just 'worth'
ajsnigrutin 3y ago
The problem is, what if it doesn't produce that much? What if it doesn't produce anything? Imagine someone buying a house somewhere cheap. Then some gentrification, a new microsoft campus built nearby, etc., and the price of the house jumps 10x+. You're on a fixed income, and your taxes are now higher then you can afford. If you have multiple houses, sure, tax the second, third, etc. one (evn though the taxes are then charged as higher rents if you lease those properties), but the first, primary residence should not be taxed as a "profit maker". Maybe it's a cultural difference, but here in the balkans, people rarely move, and telling a 75yo grandma that she'll have to move, since her socialist built apartment is now worth 500k eur+, because "investors" want it for airbnb, and she cannot afford taxes on it, is just evil.
- nisegami 3y ago
  One way you could look at it is that this person's inability to afford the land value tax signals that they are not making effective use of the land and that it would be in society's best interest if the land were to change hands to someone who could use it in a way that lets them afford the taxes on it.
  - ajsnigrutin 3y ago
    You're looking at a persons home as an economic investment and not as a social thing. It's a home. Someone will live in that house. You just want to replace a poor grandma with someone who can pay more taxes, while the use of the land/house/apartment will stay the same, even with airbnb, someone will just use that apartment to sleep in. It's the society's best interest that people can afford places to live and not live under threat that some new fad will make something they already own (and need to survive) unaffordable.
    - screye 3y ago
      Land value tax often goes hand in hand with lax zoning. In your example, if the grandma's house went from 200k to a 1million, then she isn't poor anymore. She is very rich. She doesn't have to leave the neighborhood. She can give her house away for redevelopment into a condo. Get the nice penthouse flat and a pretty penny on the same land. Now, she has enough liquidity to pay the land value tax, which is also lower per person because it's distributed over the whole condo. This is happening in India right now. Apartments are redeveloped into towers. Old residents get 2x the floor space and decent relocation $$ for the construction period. No one is being kicked out of their house. Most people move to another spot within a 10 minutes walk from their home for 3 years and then come back when the building is done.
      - ajsnigrutin 3y ago
        In my country, a previously ~100k condo apartment now costs 500k+... sometimes even less than that before (city center, no easy parking, lots of noise) and more now (airbnb).
pydry 3y ago
It might at some level, but taxing all assets would disincentivize the creation of new assets. For most assets we probably don't want that - we probably want more home construction for instance. Taxing land only disincentivizes land from being hoarded and being used inefficiently. It's not going to prevent the creation of new land. Theres also the issue of fairness. Land owners didn't create the land or make it valuable. They just use it to extract rents. Asset creators did make their assets valuable and if they do rent them the value of the rents will be in proportion to the value of the work they put into them.
dfxm12 3y ago
In addition to the idea that this tax is designed to make better use of land, the best tax is one that will pass. I think most people who support a land value tax would also support a wealth tax. A land value tax is more politically viable. Also, importantly, you can't "hide" land (from taxation) by moving it out of the country.
- TimPC 3y ago
  I'm not sure about this. I think soaking the rich is likely more viable (at least in popular vote terms) than a regressive tax like land value. Middle class people will at certain points in their life have over 100% of their net worth in land (perhaps even 1000% if they can barely afford a 5% down mortgage for a property that is half structure half land). Meanwhile profiles for the ultra-wealthy are typically 13% real estate. Taxing one person on 1000% of their wealth and one person on 13% of their wealth is nothing like a wealth tax.
overrun11 3y ago
Land is unique because it's a productive asset with fixed supply. The problem with most taxes on assets is that they decrease the amount of productive assets in service by making the economics less favorable. A tax levied against land however, will (obviously) not change the total amount available and therefore have no negative effect on total wealth created.
red_admiral 3y ago
As far as I understand, the idea is to incentivise the kind of wealth-creation that is good for society by taxing it less than other kinds. The idea is definitely not to introduce a land tax on top of all the existing taxes. Historical Georgists were also called "single taxers" because of the idea to abolish all other taxes, but make up for this by a tax on land ownership that leaves the state with the same income stream as before. Apart from being (in their view) socially good, this would also have the advantage that landowners couldn't just move their land to the Cayman Islands to evade the tax. I don't think modern Georgists are quite that single-minded, but I do get the argument that, for example, VAT is a tax on the poor in the sense that even people whose income is low enough that they're not paying income tax in the usual sense have to pay it every time they buy something (unless it's exempt), but taxing land would truly be a tax on the more affluent only, at least in a country where most poor people rent their accommodation.
michael1999 3y ago
To tax is to discourage. We don't want to discourage work. We don't want to discourage housing. But land (by definition) can not be produced. Taxing land does not discourage anything except hoarding.

blagie 3y ago

The idea is to change incentive structures around specific types of assets, not to raise money. The idea of rent-collecting landed gentry is economically devastating. Adam Smith wrote extensively about the outcomes, and that is a natural path for economies to take. Wealth consolidates, buys landed, and becomes an informal nobility who collects land and does no work. At some point, it spirals, as rents lets real estate investors buy more land. Put another way: If I have $1B, and I buy $1B of land, that creates no value, and raises prices for everyone. If I have $1B and I start or fund a company which produces a new medical device, computer, or car, I've created massive economic value, both in the inputs (hiring people) and outputs (new technology). Land is also a scarce resource we all need to share fairly (for whatever 'fairly' means). If you have more, everyone else has less. On the other hand, if you're investing in making movies, I can make my own movies too. There is no fundamental limit to that sort of economic growth.

tedk-42 3y ago

Land specifically has uses (people live there, grow stuff, build a business on top of, have community things like a park etc). Most people won't care about some Rolex that someone around the world is willing to pay $100K for. Land has purposeful value rather than just 'worth'

ajsnigrutin 3y ago

The problem is, what if it doesn't produce that much? What if it doesn't produce anything? Imagine someone buying a house somewhere cheap. Then some gentrification, a new microsoft campus built nearby, etc., and the price of the house jumps 10x+. You're on a fixed income, and your taxes are now higher then you can afford. If you have multiple houses, sure, tax the second, third, etc. one (evn though the taxes are then charged as higher rents if you lease those properties), but the first, primary residence should not be taxed as a "profit maker". Maybe it's a cultural difference, but here in the balkans, people rarely move, and telling a 75yo grandma that she'll have to move, since her socialist built apartment is now worth 500k eur+, because "investors" want it for airbnb, and she cannot afford taxes on it, is just evil.

nisegami 3y ago
One way you could look at it is that this person's inability to afford the land value tax signals that they are not making effective use of the land and that it would be in society's best interest if the land were to change hands to someone who could use it in a way that lets them afford the taxes on it.
- ajsnigrutin 3y ago
  You're looking at a persons home as an economic investment and not as a social thing. It's a home. Someone will live in that house. You just want to replace a poor grandma with someone who can pay more taxes, while the use of the land/house/apartment will stay the same, even with airbnb, someone will just use that apartment to sleep in. It's the society's best interest that people can afford places to live and not live under threat that some new fad will make something they already own (and need to survive) unaffordable.
  - screye 3y ago
    Land value tax often goes hand in hand with lax zoning. In your example, if the grandma's house went from 200k to a 1million, then she isn't poor anymore. She is very rich. She doesn't have to leave the neighborhood. She can give her house away for redevelopment into a condo. Get the nice penthouse flat and a pretty penny on the same land. Now, she has enough liquidity to pay the land value tax, which is also lower per person because it's distributed over the whole condo. This is happening in India right now. Apartments are redeveloped into towers. Old residents get 2x the floor space and decent relocation $$ for the construction period. No one is being kicked out of their house. Most people move to another spot within a 10 minutes walk from their home for 3 years and then come back when the building is done.
    - ajsnigrutin 3y ago
      In my country, a previously ~100k condo apartment now costs 500k+... sometimes even less than that before (city center, no easy parking, lots of noise) and more now (airbnb).

pydry 3y ago

It might at some level, but taxing all assets would disincentivize the creation of new assets. For most assets we probably don't want that - we probably want more home construction for instance. Taxing land only disincentivizes land from being hoarded and being used inefficiently. It's not going to prevent the creation of new land. Theres also the issue of fairness. Land owners didn't create the land or make it valuable. They just use it to extract rents. Asset creators did make their assets valuable and if they do rent them the value of the rents will be in proportion to the value of the work they put into them.

dfxm12 3y ago

In addition to the idea that this tax is designed to make better use of land, the best tax is one that will pass. I think most people who support a land value tax would also support a wealth tax. A land value tax is more politically viable. Also, importantly, you can't "hide" land (from taxation) by moving it out of the country.

TimPC 3y ago
I'm not sure about this. I think soaking the rich is likely more viable (at least in popular vote terms) than a regressive tax like land value. Middle class people will at certain points in their life have over 100% of their net worth in land (perhaps even 1000% if they can barely afford a 5% down mortgage for a property that is half structure half land). Meanwhile profiles for the ultra-wealthy are typically 13% real estate. Taxing one person on 1000% of their wealth and one person on 13% of their wealth is nothing like a wealth tax.

overrun11 3y ago

Land is unique because it's a productive asset with fixed supply. The problem with most taxes on assets is that they decrease the amount of productive assets in service by making the economics less favorable. A tax levied against land however, will (obviously) not change the total amount available and therefore have no negative effect on total wealth created.

red_admiral 3y ago

As far as I understand, the idea is to incentivise the kind of wealth-creation that is good for society by taxing it less than other kinds. The idea is definitely not to introduce a land tax on top of all the existing taxes. Historical Georgists were also called "single taxers" because of the idea to abolish all other taxes, but make up for this by a tax on land ownership that leaves the state with the same income stream as before. Apart from being (in their view) socially good, this would also have the advantage that landowners couldn't just move their land to the Cayman Islands to evade the tax. I don't think modern Georgists are quite that single-minded, but I do get the argument that, for example, VAT is a tax on the poor in the sense that even people whose income is low enough that they're not paying income tax in the usual sense have to pay it every time they buy something (unless it's exempt), but taxing land would truly be a tax on the more affluent only, at least in a country where most poor people rent their accommodation.

michael1999 3y ago

To tax is to discourage. We don't want to discourage work. We don't want to discourage housing. But land (by definition) can not be produced. Taxing land does not discourage anything except hoarding.