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Not every country taxes land in that way. I own no land but pay tax for occupying a property, my landlord pays no tax on this property - he may pay some tax on

Not every country taxes land in that way. I own no land but pay tax for occupying a property, my landlord pays no tax on this property - he may pay some tax on his rental income and will be taxed if the property is sold.

jerf 12y ago
That's just accounting. In the end, the renter either effectively pays the tax or the property becomes unavailable for renting, because the rental income either covers the taxes and other expenses or it doesn't. This is important to understand because "well let's just raise taxes on rental properties" can sound really emotionally appealing to stick it to those nasty landlords, but the landlords aren't the ones who end up with the real bill in the real world. Oh, you might also as a side-effect reduce the landlord's wealth by essentially raising transaction costs, but, well, that's a plan firmly from the stupid quadrant: http://harmful.cat-v.org/people/basic-laws-of-human-stupidity/ http://harmful.cat-v.org/people/basic-laws-of-human-stupidit... Unfortunately, rather a lot of plans for addressing inequality strike me as coming from the "stupid" quadrant in practice... which is basically another way of saying this is a really hard problem, not that it isn't a problem. If too many of the golden goose's eggs are going to too few people it is still imperative that the goose not be killed, or, ideally, even all that slowed down by any plan to fix that. And I fear many people grossly overestimate the power of the modern economy to sustain social engineering schemes... the difference between even 1% growth and 1% contraction in a given quarter is very small, pretty much below a Just-Noticable-Difference everywhere, yet over the long term compounds quite frightfully... we have less buffer for playing around than it may initially seem when you first look at trillions here and trillions there.
- nwah1 12y ago
  According to David Ricardo's Law of Rent, a tax on land cannot be passed on to renters, because landlords are locational monopolists who are already charging as much as the market will bear. "A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground." - Adam Smith, Wealth of Nations "A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality." - David Ricardo, On the Principles of Political Economy and Taxation
  - icebraining 12y ago
    David Ricardo didn't live to see cars and two hour commutes.
    - nwah1 12y ago
      Are these not factored into what the market will bear? Do areas with shorter commutes have different land values than areas with longer commutes?
      - dragonwriter 12y ago
        They are factored into what the market will bear the same way that they are in any market, whether it is monopolized or competitive. But if there were a monopolized market, changes in price differentials between different areas wouldn't result in changes in patterns of where people choose to rent, but empirically we do see price changes driving decisions as to where people live, including renters. There are constraints, and the market for housing isn't perfectly fluid, but its simply not the case that real property rental -- whether for residential or commercial/industrial uses -- shows the behavior of a market where land owners have monopoly/market/pricing power. This may well have been different in late 18th to early 19th Century Britain when Ricardo and Smith were writing; availability of better means of transport for people and goods (particularly perishables) means that while location is important to the value of land, there's a wider area over which land can be substituted for other land for the same use, so any particular owner is less able to exercise market power, because price changes can be (and are) met with substitution.
        nwah1 12y ago
        But the places that you are substituting for, assuming the landlords there are self-interested, would also wish to charge the full rental value for their land. The rental value they can charge is determined by the general level of income that can be had at that location compared to the best available rent-free location. Since we don't really have much rent-free locations, land rents can go very very high. Even in the regions people are commuting from. Why do you think rents in Oakland are so high, despite the commuting required to get to San Francisco?

jerf 12y ago

That's just accounting. In the end, the renter either effectively pays the tax or the property becomes unavailable for renting, because the rental income either covers the taxes and other expenses or it doesn't. This is important to understand because "well let's just raise taxes on rental properties" can sound really emotionally appealing to stick it to those nasty landlords, but the landlords aren't the ones who end up with the real bill in the real world. Oh, you might also as a side-effect reduce the landlord's wealth by essentially raising transaction costs, but, well, that's a plan firmly from the stupid quadrant: http://harmful.cat-v.org/people/basic-laws-of-human-stupidity/ http://harmful.cat-v.org/people/basic-laws-of-human-stupidit... Unfortunately, rather a lot of plans for addressing inequality strike me as coming from the "stupid" quadrant in practice... which is basically another way of saying this is a really hard problem, not that it isn't a problem. If too many of the golden goose's eggs are going to too few people it is still imperative that the goose not be killed, or, ideally, even all that slowed down by any plan to fix that. And I fear many people grossly overestimate the power of the modern economy to sustain social engineering schemes... the difference between even 1% growth and 1% contraction in a given quarter is very small, pretty much below a Just-Noticable-Difference everywhere, yet over the long term compounds quite frightfully... we have less buffer for playing around than it may initially seem when you first look at trillions here and trillions there.

nwah1 12y ago
According to David Ricardo's Law of Rent, a tax on land cannot be passed on to renters, because landlords are locational monopolists who are already charging as much as the market will bear. "A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground." - Adam Smith, Wealth of Nations "A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality." - David Ricardo, On the Principles of Political Economy and Taxation
- icebraining 12y ago
  David Ricardo didn't live to see cars and two hour commutes.
  - nwah1 12y ago
    Are these not factored into what the market will bear? Do areas with shorter commutes have different land values than areas with longer commutes?
    - dragonwriter 12y ago
      They are factored into what the market will bear the same way that they are in any market, whether it is monopolized or competitive. But if there were a monopolized market, changes in price differentials between different areas wouldn't result in changes in patterns of where people choose to rent, but empirically we do see price changes driving decisions as to where people live, including renters. There are constraints, and the market for housing isn't perfectly fluid, but its simply not the case that real property rental -- whether for residential or commercial/industrial uses -- shows the behavior of a market where land owners have monopoly/market/pricing power. This may well have been different in late 18th to early 19th Century Britain when Ricardo and Smith were writing; availability of better means of transport for people and goods (particularly perishables) means that while location is important to the value of land, there's a wider area over which land can be substituted for other land for the same use, so any particular owner is less able to exercise market power, because price changes can be (and are) met with substitution.
      - nwah1 12y ago
        But the places that you are substituting for, assuming the landlords there are self-interested, would also wish to charge the full rental value for their land. The rental value they can charge is determined by the general level of income that can be had at that location compared to the best available rent-free location. Since we don't really have much rent-free locations, land rents can go very very high. Even in the regions people are commuting from. Why do you think rents in Oakland are so high, despite the commuting required to get to San Francisco?