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>it’s more progressive
Taxation based on realised employment income is more progressive. Any taxation based on unrealised gains/value is regressive, because it
>it’s more progressive
Taxation based on realised employment income is more progressive. Any taxation based on unrealised gains/value is regressive, because it will be levied against people who may not have the income to support the taxation.
And yes, forcing people to move also costs money and can be seen as an extra levee against poor people who need to move to accommodate your new taxation model.
Proponents of LVT really hate poor and retired people, and tend to make up reams of excuses when this is put to them.
That might actually be the goal, to remove the last remaining poor people from gentrifying neighborhoods. All you have to do is build more expensive services, and subject the land to a new valuation and there you go, self removing poor people from your rich neighborhood.
Most poor people rent. They are already forced to move when the land they live on gets more valuable and they can't afford the new lease. Taxing land redirects part of the rent they already pay to serve their interests (assuming good government).
Land value taxes are politically impossible in America, so there's no need to make the people who like LVT look bad. We already look bad!
> Any taxation based on unrealised gains/value is regressive, because it will be levied against people who may not have the income to support the taxation.
You can borrow against unrealised gains. That's a key part of the 'buy, borrow, die' tax strategy.
People who sit on hugely appreciated land ain't 'poor'.
> Proponents of LVT really hate poor and retired people, and tend to make up reams of excuses when this is put to them.
Haha, right.
>You can borrow against unrealised gains. That's a key part of the 'buy, borrow, die' tax strategy.
Borrowing and taxation are completely different concepts. Unless I am the only idiot who hasn't asked for their tax back with interest. Possible.
>People who sit on hugely appreciated land ain't 'poor'.
They aren't poor in that they have at least one valuable asset. The kind of asset that helps people stay afloat when they have issues with income or domestic violence. Regressive taxes are regressive because they simply do not look at income. Someone can be retired, living on nearly no income, and have a single valuable asset. It is not the role of government to significantly disrupt peoples lives because they have 1 good thing going. IIRC home ownership is the single best indicator of mental health.
My memory (going on 10 years I have been having this conversation with Georgists) is that George was largely enraged with Private US railways. From memory they would be automatically granted the land immediately adjacent the track they laid. Sometimes they would develop this land, sometimes they would sell it, but largely they banked it. Because that land was adjacent to, the railway, it was quite valuable, but often underused.
The problem with Georgists, is that the context their ideas were formed under is no longer relevant. The people who will be punished by these ideas are not the railways, but people who are just holding on to their property, people who bought cheaply (ie made an intelligent forward thinking decision for their future) and find themselves surrounded by new services that raise their properties value. Thats what gets me, is that property value is not something you can consent to or plan for. Its arbitrary subjective market valuation, and asking people to lose their homes (homes are houses that humans have a relationship with) because of a subjective market valuation is bad. Its bad when variable mortgages do it, and its bad when georgists roll up and propose the same.
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> on realised employment income is more progressive
Most of income from employment is "unrealised". Employment comes with expenses such as car for commuting, rent in expensive part of town (where jobs are), clothes... Big part of "income" does not even land on a bank account (mandatory insurances, taxes, child support, alimony....)
If we will apply logic from property tax, to employment income tax, everyone would pay 100 USD tax every year. Because that was tax of 20 years old in their first job, and raising taxes is horrible!
>they’re set as high as the market allows.
Huge red flag, this isnt the case. It isnt a perfectly liquid market.
>If we implemented a LVT tomorrow, the renters don’t get additional capacity to pay rent as mana from heaven.
No of course not, the process would probably take 12 months, as home owners identify their losses, and instruct rental agencies to end leases and increase prices. Accepting that while the house might be on the market for longer than usual, attracting a higher income tenant and getting them to sign for term is going to long term resolve the new hole in their budget.
>that landlords are undercharging renters en masse. I have never seen evidence in support of such a claim.
I am living this discussion right now. So this is amusing me.
I rented my current property in 2020 for 320 p/w. It was probably worth 400 p/w I had a handshake agreement with the rental agency that they would leave the price where it is, and I would complete as much maintenance myself before raising a fuss.
In 2022, the owners had to sell the property to pay for medical treatment. The old owners had no mortgage, and loved having a fixed stable income. Their biggest risk was having the property untenanted for any length of time. So they left the price alone while the world moved on.
The new owner has raised the rent every 12 months since. The previous owners sold at a massive gain, and the new owner was struggling to pay the mortgage. My calculation based on sale price is that their mortgage payments were in excess of 380 p/w and, considering the sale grandfathered my no maintenance agreement, are looking at considerable maintenance costs.
Current cost to me is ~500 per week.
Issues: Market is currently roughly (we have big discussions about this) permitting 520 - 540 pw for similar properties.
My barrier is that its a substantial cost to move. So I negotiate all the price rises with the real estate in terms of property improvements.
If they saw a taxation increase imposed by an LVT, they would not hesitate to pass it on to me over 12 months. I would have to reevaluate the costs to move. If the same increase occurred roughly evenly across where I want to live, I would probably just have to make it work. I cant go anywhere to avoid the LVT increase, and it costs money to relocate. I would have to further erode my spending in other areas to account for it. And I could.
This really comes back to what the LVT is designed to do. Its designed to enforce the most efficient use of the land. The outcome is intrinsic to the goal. The land is not being used most efficiently (I rue the day that my landlord figures out that we have the exact amount of land required to battleaxe the block, turning my backyard into another property) which for humans, as opposed to spherical cows, is actually fantastic in a lot of cases. Under an LVT my landlord would be required to run the property in the most taxation efficient manner, which is counter to my interests as a renter.
But yeah, the rental market is not liquid. There's costs to move. Costs for having the property on the market untenanted for significant time. Costs to bring a property up to spec between renters etc etc. And lots of people live in that gap. To the point where our local real estate industry body actually issued guidance to real estates that they should raise the rent as frequently as possible because it wasn't getting done very often, suppressing prices.
> No of course not, the process would probably take 12 months, as home owners identify their losses, and instruct rental agencies to end leases and increase prices.
Why don't home owners just instruct rental agencies right now to end leases and increase prices? Why do they need to wait for some hypothetical tax to kick in?
> How do you think rent prices are set now? I’ll tell you, they’re generally set to maintain a given occupancy rate, which is to say, they’re set as high as the market allows.
"What the market allows" is affected by taxes.
Suppose the risk-adjusted return to investing in real estate in some area is equivalent to the overall market, and rents are currently $1000/mo. Then if new people move into the area, rents start to go up from higher demand, but that brings rents above the overall market rate of return, which makes it profitable for developers to invest money in building new buildings, which increases supply to match the increase in demand and acts to mitigate the increase in rents.
Now suppose you raise taxes on property ownership, so that to match the overall market rate of return, rents would have to be $1500/mo in order to cover all the existing costs plus the new taxes. Then nobody is building anything new until rents hit $1500/mo, because new construction isn't profitable until then. So when new people move in, there is an increase in demand but no corresponding increase in supply, and that persists until rents get above $1500/mo. By which point the renters are paying the new taxes.
Notice that this is effectively the same thing that happens when you impose restrictive zoning rules like single family zoning. They effectively act as a tax because now you have to buy a lot more land for each housing unit you want to add, so the cost of construction goes up and rents with it.
> So when new people move in, there is an increase in demand
but the presumption that there will be a stream of people moving in is false. The people would just not move to a place with high rent (all else being quite equal).
So high rents will lower the incoming demand. Aka, the current rent is almost always the max the market will bear, regardless of people moving in (or out) - so you can assume it's at some sort of equilibrium.
A new tax on the land will cause the owner to obsorb it, and under that equilibrium assumption above, they will not be able to raise the rent to compensate. Unless, the new tax has an equal and opposite tax credit to renters! Who now have more money, and would be able to accept a higher rent as they've become slightly richer.
> but the presumption that there will be a stream of people moving in is false. The people would just not move to a place with high rent (all else being quite equal).
People move into places where there are jobs. All else is not equal, because other places don't have those jobs. Notice that higher rents correlate with population growth. Under your theory, if rents went up, shouldn't the local population decline rather than increase?
Also notice that the overall population increases over time as a result of births and immigration, and that existing structures are occasionally damaged in various ways and have to be renovated or rebuilt. The result is that the steady-state is rents going up unless you have active investment in new housing.
> So high rents will lower the incoming demand. Aka, the current rent is almost always the max the market will bear, regardless of people moving in (or out) - so you can assume it's at some sort of equilibrium.
"What the market will bear" is supply and demand. If you add costs to supplying more housing, supply won't increase until the price matches the new costs. It changes the intersection point with the same demand curve.
> Unless, the new tax has an equal and opposite tax credit to renters! Who now have more money, and would be able to accept a higher rent as they've become slightly richer.
Your assumption is that renters can't pay higher rents. It's that they won't pay higher rents if lower rents are available, which is caused by competition between landlords and increases in supply from new construction. Take that away and people have to outbid each other for the now more constrained number of units, and then people have to pay higher rents and have it come out of their other spending, or take on more debt. Because you pay for housing or you're homeless.
This actually gets at one of the main criticisms land value tax (LVT) proponents have of traditional property taxes, which tax both land and buildings.
Let’s unpack your example with some rough numbers to see where the logic leads.
You assume rents are currently $1,000/month and that a new tax causes them to rise to $1,500/month to maintain the same return. That implies an added tax burden of $500/month per lot. If the lot is 10,000 sq-ft (common for single-family homes where I live), that’s about $0.05/sq-ft/month, or $0.60/sq-ft/year in land tax.
Now let’s look at whether this disincentivizes development.
Say a developer replaces that single-family home with a fourplex:
* Each unit is ~1,000 sq-ft
- Construction cost is ~$270/sq-ft, so total is ~$1.08M
* Required rent for a 5% return = $1,125/month per unit
- The land tax ($500/month) is now split over 4 units = $125/month per unit
* Total required rent = $1,250/month per unit, or $1.25/sq-ft/month
Compare that to the single-family home:
Rent = $1,500/month, also $1.25/sq-ft/month
So the developer earns the same return per square foot, and houses more people on the same land. Renters gain a cheaper overall option at the same cost per square foot. New development isn't disincentivized — it's neutral or even encouraged under a pure LVT.
Where your argument usually does apply is with regular property taxes, because those are assessed on both the land and the structure:
Single-family home is taxed on $240K (structure) + land
Fourplex is taxed on $1.08M (structure) + land
Per unit, that’s $270K in taxable improvements vs. $240K
Unless the land is very expensive, higher-density development pays more tax per unit, even though it uses the land more efficiently. And that penalty grows with scale (e.g. high-rises).
That's the core issue LVT proponents focus on: property taxes tend to penalize building, while land value tax does not. In fact, LVT often makes better use of land more attractive by decoupling the tax burden from how much you invest in construction.
> You assume rents are currently $1,000/month and that a new tax causes them to rise to $1,500/month to maintain the same return. That implies an added tax burden of $500/month per lot.
That implies an added tax burden of $500/month per unit. It's only $500/month per lot if the lot is only expected to have one unit.
> New development isn't disincentivized — it's neutral or even encouraged under a pure LVT.
You're getting this result by comparing it to existing property tax, which even more heavily disincentivizes new development.
Consider what happens if you only compare LVT to itself, i.e. to see what happens if you raise the amount of LVT by $500/lot.
If you build the fourplex, the amount of LVT increases by $500/lot or $125/unit. Now incentive to build the fourplex is lost unless the tenants are going to eat another $125/mo in rent.
And wait a minute here, under the existing property tax system the government was getting $500/mo/unit in property tax. If the typical plot is going to have a fourplex on it and the tax is expected to raise the same amount of revenue as the old property tax then it needs to be $2000/lot and thereby likewise increase the required rents by $500/mo/unit.
Where the incentive changes is that now you'll want to build not just fourplexes but highrises to try to dilute the LVT over more units. But now you've got a weird incentive: If existing rents are high enough then you want to build a highrise. But as soon as they drop below the point that building a highrise is profitable -- and highrises have a higher construction cost per unit -- you certainly don't want to build anything smaller than that, because the higher LVT per unit for smaller structures outweighs the lower construction cost per unit for smaller structures. So as soon as prevailing rents can't justify any more highrises, you get no more construction at all. Even if there are still a bunch of abandoned lots.
> Borrowing and taxation are completely different concepts. Unless I am the only idiot who hasn't asked for their tax back with interest. Possible.
I get the impression that maybe you are not aware of what is implied by the 'buy, borrow, die' tax strategy that parent is referring to: in effect it completely eliminates taxes on capital gains (in the US). [0] and [1] below are first two Google hits.
[0]: https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26rsf/buy_borrow_die_explained/ https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26...
[1]: https://www.wsj.com/finance/investing/buy-borrow-die-how-rich-americans-live-off-their-paper-wealth-11625909583 https://www.wsj.com/finance/investing/buy-borrow-die-how-ric...
Why do you want to punish anyone? What's that strange obsession.
Land Value Tax is simply an efficient tax system that minimalises dead weight losses. Yes, Henry George was a big fan of them, but he was just one proponent. LVT does not live and fall with Henry George.
> Borrowing and taxation are completely different concepts. Unless I am the only idiot who hasn't asked for their tax back with interest. Possible.
I am saying that your specific objections to taxing unrealised gains do not apply.
> They aren't poor in that they have at least one valuable asset. The kind of asset that helps people stay afloat when they have issues with income or domestic violence. Regressive taxes are regressive because they simply do not look at income. Someone can be retired, living on nearly no income, and have a single valuable asset. It is not the role of government to significantly disrupt peoples lives because they have 1 good thing going. IIRC home ownership is the single best indicator of mental health.
You are proving too much. Holding down a steady job is also a great indicator of mental health. So the government shouldn't tax your job either? Ie income tax bad?
You have to tax something to run the government.
Btw, you could run a land value tax but give everyone a universal basic income equivalent to the LVT paid by the median person. That means only people who sit on more than the median amount of land (by value) would pay a net tax. Everyone else would see a net income from the system. That would immediately knock out all of your arguments about those poor widows and orphans.
(In taxation and income, medians tend to be lower than averages, so the above system would leave money left over to use for general government revenue. If you want more of that, instead of paying the median amount, you could pay UBI at eg the 20%-ile level. That would still protect those people who only 'have 1 good thing going' from net outflowing payments.)
>I am saying that your specific objections to taxing unrealised gains do not apply.
I dont see how referencing borrowing is relevant to taxation.
>Ie income tax bad?
Yes its horrible. But if you tax 10% on income, you are left with 90% of your income on an ongoing basis, and that can accrue. People can become wealthier. People without income dont pay the tax so arent negatively affected. If you tax someone with 5 bucks in their bank account and no job, 10% of their 200K property, they arent going to accrue 90% of their property on an ongoing basis. Their wealth will shrink. Which is bad on average.
>Btw, you could run a land value tax but give everyone a universal basic income equivalent to the LVT paid by the median person.
I often see these joined but IIRC I did some math on this, and UBI would make your LVT extremely punishing. I wouldnt group them together as proposals.
> If you tax someone with 5 bucks in their bank account and no job, 10% of their 200K property, they arent going to accrue 90% of their property on an ongoing basis. Their wealth will shrink. Which is bad on average.
Again, that's the whole idea behind LVT: it minimizes non-productive use of land, like housing.
No, LVT does not minimise non-productive use of land at all.
I like LVT just as much as the next guy, but we can't have it both ways: _either_ LVT has no deadweight losses, because it doesn't change any opportunity costs for land use and thus has no (direct) influence on land use. _Or_ LVT does have an influence, and you want to argue that it's the 'correct' one.
However: with or without LVT, the opportunity cost differences in different land uses are exactly the same. The same amount of LVT is due no matter what you do with the land or who owns it.
LVT might have an indirect influence on land use, because financing your government via LVT means you can potentially lower other less efficient taxes. Removing these other more distorting taxes can have an influence on land uses.
I am having a hard time understanding your last sentence.
How is housing a non-productive use of land? Why would housing be something to be minimized?
> I often see these joined but IIRC I did some math on this, and UBI would make your LVT extremely punishing. I wouldnt group them together as proposals.
What's with you and punishment?
LVT should be set to approximately tax all land rents. Given current prevailing interest rates, setting LVT to, say, a yearly 10% of land value should accomplish that. (But the exact value doesn't matter too much, because of arbitrage. I can explain that, if you want to. Basically, as LVT goes up, market prices for land go down. So even setting an LVT of 50% per year won't get you more of a tax take then saner values.)
Just to be clear, I don't propose the UBI above as something anyone could live off. I proposed to mechanically set it to eg the 20%-ile of LVT payments, so that the land-poorest 20% of the population have no net LVT payments to make. Thus forestalling only your very specific objection.
That suggestion was not meant to pay for any specific living standard on its own.
> Yes its horrible. But if you tax 10% on income, you are left with 90% of your income on an ongoing basis, and that can accrue.
Why are you so obsessed with income that's measured in money? There's also plenty of in-kind income. Eg when you have an apple tree, you get apples. If you have a house, you get housing.
It's generally good, if the tax system doesn't care, if you rent his house and she rents yours, or if both of you live in your own home. (Neither scenario has any net flows of money, but the first one has gross flows of money.)
Interestingly, in Switzerland people actually pay taxes on the imputed rental income they get from being owner-occupiers.
This was a long reply and I’d like to honor it by addressing what you bring up, but there’s a lot so forgive me for jumping around.
Let’s start by noting that we’ve now shifted the argument from “100% of this tax will be charged to renters” to, “this will get passed through to renters who were previously being undercharged.”
It’s hard to directly argue with your anecdote because I don’t know where you are or what your rental market is like, so I’ll address the argument more broadly.
Let’s examine how common that arrangement is. To the best of my search small time landlords of the variety you mention own something on the order of 35 and 40% of rental units. The rest, primarily multifamily (apartments) are owned by corporate landlords.
The corporate landlords were sued by the last admin for price fixing using realpage. I don’t know if or how that case was resolved but I think it’s safe to conclude they’re probably not undercharging.
For the small time landlords, probably some aren’t undercharging and some are. After all, how hard is checking neighborhood rents on Zillow once a year? Even if none are, we’re still admitting at least 60% of renters aren’t getting the kind of deals you mention. So this is a minority case, and probably shouldn’t be the basis of policy.
Addressing this point:
> Under an LVT my landlord would be required to run the property in the most taxation efficient manner, which is counter to my interests as a renter.
Even granting that that’s true, I’d argue it’s not persuasive. The government needs some amount of money to function. LVT is one source of that money, income taxes are another, sales taxes are another, wealth taxes are another, etc.
So your argument fundamentally resolves down to “other members of society should make up the deficit in taxes I would otherwise pay so that I (and others in my situation) can enjoy a yard or more space than I otherwise would.”
And the basic question here is, why? In what way does it benefit literally anyone else in society that you have a bigger yard? This is a blunt and perhaps impolite way to put it, but it’s true.
Going back to those alternatives, we can counterfactually raise income taxes on some waiter bussing tables or a SWE slinging code at Facebook, on an author with a copyright, or on someone who owns a business. But, if we do, we should expect less of all of those services. That serves as a reason to avoid such a tax.
In contrast, with the yard, I can’t think of a single such service provided or reason to avoid the tax. And that’s the crux of the Georgist argument more than railroads or slumlords. It’s the empty lot, or the lawn as we now call it.
>The government needs some amount of money to function.
The issue at hand isnt "Does the government need money to function" unless we are going full MMT derp we can all accept a level of taxation is necessary.
The issue at hand is whether LVT is a better distribution of the burden of taxation.
>So your argument fundamentally resolves down to “other members of society should make up the deficit in taxes I would otherwise pay so that I (and others in my situation) can enjoy a yard or more space than I otherwise would.”
My argument is largely that by shifting the burden of tax from a progressive tax regime, that is only targeting those by an amount calculated on what they can afford, to a tax regime thats largely dictated by circumstance and subjective valuation, you will hurt a lot of people who dont deserve it.
If we go too far in this direction we will have to define basic moral principles, because that seems to be where you are heading. I dont necessarily think that earning income should mark you for punishment either. But just as not taxing the homeless is fairly universal, not taxing people who organised their retirement and arent a burden is also fairly universal. Your mileage may vary.
> You must account for the cost of the random new UBI you addressed to cover your other arguments.
I already accounted for that in the original comment https://news.ycombinator.com/item?id=44188857 https://news.ycombinator.com/item?id=44188857 so I see that it was perhaps a bit too implicit:
> (In taxation and income, medians tend to be lower than averages, so the above system would leave money left over to use for general government revenue. If you want more of that, instead of paying the median amount, you could pay UBI at eg the 20%-ile level. That would still protect those people who only 'have 1 good thing going' from net outflowing payments.)
The less UBI you pay, the more you have left over for general government revenue. The more UBI you pay, the less you have left over for general government revenue.
> Land value as it stands is fucked in large part because the government holds so much of it. The solution is to release more land, not lock more of it up in state ownership.
It doesn't really matter, as long as they lease it out to the highest bidder.
> Its highly likely that people will end up with a significantly increased tax bill, especially if they had low/no income previously. Again this is stated intention, its just the flip side of encouraging more efficient use, is discouraging people from living within their means on a block of land they own that's near things property evaluators value.
LVT does not encourage (or discourage) any land use, efficient or otherwise. It makes no change to opportunity costs between different uses.
> You need to solve for the entire budget, not a number you made up.
I have no clue what you are on about?
If you want a clear suggestion of what I would prefer:
Auction off all the plots of land for eg 30 years at a time. Do the auction for the next lease 5 years before the old lease ends. Stagger the auctions to have around 0.28% of plots being auctioned off every month.
(Don't bother with UBI etc, unless you want UBI for other reasons anyway. Those were just suggestions to solve specific concerns about orphans and widows you brought up. I would suggest to just use the regular, existing means-tested social safety net for them, instead of spinning up something bespoke.)
Singapore does something reasonably similar, but I think 99 year leases are too long, especially since the country is young enough that the giving back at the end of leases has essentially never been tested.
I'm not sure why you bring up the US government spending? I don't know how much LVT could raise in the US. But some people have tried to figure that one out.
> If someone lives in a caravan sitting on a 200k valued piece of land that they own outright (hoping to develop one day), making minimum wage, and they get a tax bill for 20k, or even 10 or 5k their life just ended. If you want them to borrow with no income to offset their tax, they wont get that loan.
That's fine. They can sell the land to get rid of those hopes and dreams and tax obligations.
You can write similar sob stories about any tax at all. And most are worse than what you get with LVT.
With an established LVT, your caravan dweller would never get this weird idea in the first place.
And I admit that whenever you make an adjustment to the tax system, the people who made plans based on the previous system will have those plans torpedoed. Them's the breaks.
So we have to decide what we want to discuss: how an LVT system would work in the steady state, or how we could (or could not) transition to one.