4 ms·

The most obvious solution to this is to do away with land ownership entirely. If the land is state owned and the value of a lease on it is auctioned to the high

The most obvious solution to this is to do away with land ownership entirely. If the land is state owned and the value of a lease on it is auctioned to the highest paying renter, the market price of the land is precisely the same as the tax paid on it.

ta1243 2y ago
Why would I pay to improve the land if next year someone can simply outbid me and take the land off me?
- dredmorbius 2y ago
  Long-term leases exist for this function. Often 99-year leases (e.g., Hong Kong to the UK). In practice, the tenant can typically break the lease with minimal consequence as the landlord (the government) can generally find new tenants, and diversifies risk over many landholdings.
  - some_random 2y ago
    That removes any benefit of confiscating all land and leasing it out while still retaining all the society destroying consequences of this idea. Basically at this point it's just a proposal to confiscate all land and resell it, for fun I guess.
    - dredmorbius 2y ago
      It prevents land speculation, as bidding leads to higher rents, rather than asset inflation.
- James_K 2y ago
  This is an important part of the system. People won't construct buildings unless they feasibly believe that they can also provide the highest return on investment for said buildings and therefore pay the highest rent on the land. If you are unable to produce the greatest value with a piece of land, why should you be allowed to hoard it away from someone who can do something better with it? That said, this theory obviously falls short in practice, but equally obviously, there exist many practical remedies to that problem. Lease values can be adjusted based on the value of surrounding leases, then negotiated down by an auction if the owner believes they've grown to high, rather than periodically re-auctioned. Down payments can force bidders to internalise the cost of displacing existing business. Existing lease holders would clearly be given an advantage in the bidding process if they choose to initiate it. Edit: I should add that the simplest way to handle this is to attach the debt used for building to the land instead of the land-owner. That way there is no loss for auctioning off the land after building.
  - some_random 2y ago
    That still doesn't answer the question "Why would I pay to improve the land if next year someone can simply outbid me and take the land off me?". Why wouldn't this world's Blackrock swoop in the instant a profitable lease comes up for auction?
    - James_K 2y ago
      > Why would I pay to improve the land if next year someone can simply outbid me and take the land off me? You wouldn't pay. The building would be financed by debt and the debt would be attached to the land. You'd only pay the interest on that debt for as long as you maintain the lease on the land. > Why wouldn't this world's Blackrock swoop in the instant a profitable lease comes up for auction? Two reasons: Firstly, Blackrock could hypothetically do this in real life but they don't because they don't have the money. And secondly, from an ideological perspective they would have no motivation to. You are still thinking in terms of "owning land" and the idea that it's better to own more land. Under the new system, you can't own land, only rent it. Hence you want to minimise the amount of land you are leasing. If Blackrock gets the lease, they will lose money on the down payment, then lose money on the rent unless they can find something productive to do with the land. Any business they set up won't be competitive as they'll be paying more in rent than the surrounding businesses. Overpaying on rent is a strictly money-losing affair.
      - some_random 2y ago
        Even if I don't pay in money, I have to pay in time and effort. Does the bank lend me that too? Furthermore, no Blackrock cannot do this in real life because in real life you are not0 _required_ to sell a thing to anyone. Let me outline this simple hypothetical I lease a plot of land with a parking lot on it. I spend a year of my time building a quadplex on it, financed by a loan, and get tenants in. After all my expenses, I am making 10k a month in profit! Next year rolls around, tell me what stops Blackrock from taking the lease by offering the value of the lease+9.5k per month and making their money in quantity? Down payment doesn't matter because they have so much more in assets than me that they can make use of a plot of land that generates less profit than I need to live on.
andrewla 2y ago
This is obvious? This seems like a terrible solution. Lease durations are important here; if you're like England and have 99 year leases instead of freeholds or something, then that's great, it's basically ownership, but you get no unit pricing signal until the next 99 year renewal rolls around. Practically speaking, from a Georgist perspective, ths isn't even useful because it doesn't convey anything about the unimproved value. What if you make improvements to the land, like build a house or something? Do you have to knock it down when you leave? Is the government the only entity that can build houses? What do you do when Elon Musk decides he doesn't like you and outbids you on every parcel you try to get a lease on?
- s1artibartfast 2y ago
  Poison the land to reduce your tax basis.
  - James_K 2y ago
    That would be illegal.
- dredmorbius 2y ago
  Individually unit price signals are indicated as infrequently as once a century. In practice the individual units turn over more frequently, and aggregate price signals are available as other units turn over far more frequently. On turnover, it's interesting to note that real-estate mobility has fallen markedly in the United States in recent decades. Whereas ~20% of individuals moved in any given year from 1948 through the early 1970s, that figure has fallen to about 7% in the 2020s: <https://paulkedrosky.com/americans-are-less-mobile-than-ever/ https://paulkedrosky.com/americans-are-less-mobile-than-ever...> That translates to a move every 5 years to roughly every 15 years, or three times the residency. Ironically, among the factors contributing to this is being "stuck" by a mortgage, e.g., a house that's under water (more owed than the unit can be sold for), particularly in states without non-recourse ("walkaway") lending laws. This isn't the only factor, but it does contribute. Removing private land ownership might well improve this situation.
- James_K 2y ago
notatoad 2y ago
that seems like a super clean solution as long as nothing ever gets built, but the problem is the same: it's not a question of how much the land is worth, it's a question of how much the unimproved land is worth. everything gets messy as soon as you start improving the land, because the improvements are not easily removed from the land. if the state owns the land but i own the skyscraper i built on it, what happens to my skyscraper when the state auctions my lease off to somebody else? the whole point of a land value tax is that the value of land changes after things have been built on it (and around it), and you need to capture that change in value.
- James_K 2y ago
  Buildings are constructed with borrowed money. Attach said debt to the land, rather than the person building, and payments on it are a part of the lease. If you build a sky-scraper, you only pay for it while you occupy the land. Then if someone outbids you for it, they have to pay the debt.
  - some_random 2y ago
    How does this differ from an investment then? Debts attached to people can be recovered through their assets, but if the only "asset" is a temporary government lease on some land there's nothing to recover if it falls through. Furthermore, this leads to so many conflicts of interest it's not even funny, whats to stop someone from taking out a huge loan and paying their own construction company to do the work at a premium?
    - James_K 2y ago
      It can't fall through, because the debt is on the land and not a person. The land doesn't run out of money. There will always be a buyer for the building who will then have to pay down the loan. If there isn't a buyer for the building, then the building is worth less than the loan and even in the traditional case of the banking issuing the loan to an individual, there would not be sufficient recovered capital to repay the loan. TL;DR the lender loses money iff the value of the building is less than the money they loaned to build it (true in any system). > whats to stop someone from taking out a huge loan and paying their own construction company to do the work at a premium? That's called embezzling. Are you familiar with corporate law? The "limited liability" in "limited liability company" refers to the fact that the owners of a company are not liable for the debts owed by said company. One can, in principal, take out a large loan on behalf of a company you own, pay it to yourself as salary, then declare the company insolvent and pocket the cash. Laws exists to prevent this and could be extended to fraud under the new system.

ta1243 2y ago

Why would I pay to improve the land if next year someone can simply outbid me and take the land off me?

dredmorbius 2y ago
Long-term leases exist for this function. Often 99-year leases (e.g., Hong Kong to the UK). In practice, the tenant can typically break the lease with minimal consequence as the landlord (the government) can generally find new tenants, and diversifies risk over many landholdings.
- some_random 2y ago
  That removes any benefit of confiscating all land and leasing it out while still retaining all the society destroying consequences of this idea. Basically at this point it's just a proposal to confiscate all land and resell it, for fun I guess.
  - dredmorbius 2y ago
    It prevents land speculation, as bidding leads to higher rents, rather than asset inflation.
James_K 2y ago
This is an important part of the system. People won't construct buildings unless they feasibly believe that they can also provide the highest return on investment for said buildings and therefore pay the highest rent on the land. If you are unable to produce the greatest value with a piece of land, why should you be allowed to hoard it away from someone who can do something better with it? That said, this theory obviously falls short in practice, but equally obviously, there exist many practical remedies to that problem. Lease values can be adjusted based on the value of surrounding leases, then negotiated down by an auction if the owner believes they've grown to high, rather than periodically re-auctioned. Down payments can force bidders to internalise the cost of displacing existing business. Existing lease holders would clearly be given an advantage in the bidding process if they choose to initiate it. Edit: I should add that the simplest way to handle this is to attach the debt used for building to the land instead of the land-owner. That way there is no loss for auctioning off the land after building.
- some_random 2y ago
  That still doesn't answer the question "Why would I pay to improve the land if next year someone can simply outbid me and take the land off me?". Why wouldn't this world's Blackrock swoop in the instant a profitable lease comes up for auction?
  - James_K 2y ago
    > Why would I pay to improve the land if next year someone can simply outbid me and take the land off me? You wouldn't pay. The building would be financed by debt and the debt would be attached to the land. You'd only pay the interest on that debt for as long as you maintain the lease on the land. > Why wouldn't this world's Blackrock swoop in the instant a profitable lease comes up for auction? Two reasons: Firstly, Blackrock could hypothetically do this in real life but they don't because they don't have the money. And secondly, from an ideological perspective they would have no motivation to. You are still thinking in terms of "owning land" and the idea that it's better to own more land. Under the new system, you can't own land, only rent it. Hence you want to minimise the amount of land you are leasing. If Blackrock gets the lease, they will lose money on the down payment, then lose money on the rent unless they can find something productive to do with the land. Any business they set up won't be competitive as they'll be paying more in rent than the surrounding businesses. Overpaying on rent is a strictly money-losing affair.
    - some_random 2y ago
      Even if I don't pay in money, I have to pay in time and effort. Does the bank lend me that too? Furthermore, no Blackrock cannot do this in real life because in real life you are not0 _required_ to sell a thing to anyone. Let me outline this simple hypothetical I lease a plot of land with a parking lot on it. I spend a year of my time building a quadplex on it, financed by a loan, and get tenants in. After all my expenses, I am making 10k a month in profit! Next year rolls around, tell me what stops Blackrock from taking the lease by offering the value of the lease+9.5k per month and making their money in quantity? Down payment doesn't matter because they have so much more in assets than me that they can make use of a plot of land that generates less profit than I need to live on.

andrewla 2y ago

This is obvious? This seems like a terrible solution. Lease durations are important here; if you're like England and have 99 year leases instead of freeholds or something, then that's great, it's basically ownership, but you get no unit pricing signal until the next 99 year renewal rolls around. Practically speaking, from a Georgist perspective, ths isn't even useful because it doesn't convey anything about the unimproved value. What if you make improvements to the land, like build a house or something? Do you have to knock it down when you leave? Is the government the only entity that can build houses? What do you do when Elon Musk decides he doesn't like you and outbids you on every parcel you try to get a lease on?

s1artibartfast 2y ago
Poison the land to reduce your tax basis.
- James_K 2y ago
  That would be illegal.
dredmorbius 2y ago
Individually unit price signals are indicated as infrequently as once a century. In practice the individual units turn over more frequently, and aggregate price signals are available as other units turn over far more frequently. On turnover, it's interesting to note that real-estate mobility has fallen markedly in the United States in recent decades. Whereas ~20% of individuals moved in any given year from 1948 through the early 1970s, that figure has fallen to about 7% in the 2020s: <https://paulkedrosky.com/americans-are-less-mobile-than-ever/ https://paulkedrosky.com/americans-are-less-mobile-than-ever...> That translates to a move every 5 years to roughly every 15 years, or three times the residency. Ironically, among the factors contributing to this is being "stuck" by a mortgage, e.g., a house that's under water (more owed than the unit can be sold for), particularly in states without non-recourse ("walkaway") lending laws. This isn't the only factor, but it does contribute. Removing private land ownership might well improve this situation.
James_K 2y ago

notatoad 2y ago

that seems like a super clean solution as long as nothing ever gets built, but the problem is the same: it's not a question of how much the land is worth, it's a question of how much the unimproved land is worth. everything gets messy as soon as you start improving the land, because the improvements are not easily removed from the land. if the state owns the land but i own the skyscraper i built on it, what happens to my skyscraper when the state auctions my lease off to somebody else? the whole point of a land value tax is that the value of land changes after things have been built on it (and around it), and you need to capture that change in value.

James_K 2y ago
Buildings are constructed with borrowed money. Attach said debt to the land, rather than the person building, and payments on it are a part of the lease. If you build a sky-scraper, you only pay for it while you occupy the land. Then if someone outbids you for it, they have to pay the debt.
- some_random 2y ago
  How does this differ from an investment then? Debts attached to people can be recovered through their assets, but if the only "asset" is a temporary government lease on some land there's nothing to recover if it falls through. Furthermore, this leads to so many conflicts of interest it's not even funny, whats to stop someone from taking out a huge loan and paying their own construction company to do the work at a premium?
  - James_K 2y ago
    It can't fall through, because the debt is on the land and not a person. The land doesn't run out of money. There will always be a buyer for the building who will then have to pay down the loan. If there isn't a buyer for the building, then the building is worth less than the loan and even in the traditional case of the banking issuing the loan to an individual, there would not be sufficient recovered capital to repay the loan. TL;DR the lender loses money iff the value of the building is less than the money they loaned to build it (true in any system). > whats to stop someone from taking out a huge loan and paying their own construction company to do the work at a premium? That's called embezzling. Are you familiar with corporate law? The "limited liability" in "limited liability company" refers to the fact that the owners of a company are not liable for the debts owed by said company. One can, in principal, take out a large loan on behalf of a company you own, pay it to yourself as salary, then declare the company insolvent and pocket the cash. Laws exists to prevent this and could be extended to fraud under the new system.