I've yet to see a single valid objection as to why LVT (Land Value Tax) should not be the primary tax, yet it's nowhere to be found in the political dialogue. Such a shame that the majority of the tax burden instead falls on the working class while the landowners get a free ride.
I mean... the objection is that it's incredibly arbitrary, greatly affecting one part of the economy and leaving others untouched.
Why not a radio spectrum tax as the primary tax instead? Or an oxygen tax proportional to your lung size? Or a clean water tax, or a tax on the weight of your grocery consumption, or a tax on the weight of the garbage you produce, or the carbon you consume?
All of those are valuable resources.
That's why it's not found in the political dialog, because it's super-arbitrary and would therefore have grossly distorting effects. Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Taxation needs to be applied with some combination of minimizing distortion and achieving some level of progressivism. A land value tax is absolutely terrible at both of those.
LVT is least distortionary tax, because you can't create or destroy land.
> Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Because the supermarket is using more land compared to the hotel. Every bit of land the supermarket owns is land you and I can't use. It's only fair that the supermarket compensate the community for this, since the land could have been used for something else instead (like an apartment building, or an office building).
It's also not a given that the ultra-luxury hotel will pay less tax. It's likely that a luxury hotel will be in a more desirable area of town, where land values are higher, and so tax there will be higher.
Why tax those other things? Is there a moral reason to do so?
I'd say there's a moral reason not to!
Is there a practical reason to tax those things? Not if the goal is to maximize government revenue!
If you tax land as high as possible -- at 100% of rent -- then it's not usually possible to increase revenues by taxing the stuff you mentioned. Doing so would almost invariably decrease the revenue the LVT raises by more than the revenue your proposed taxes would raise.
There are exceptions.
1) Certain non-traditional land like radio spectrum, minerals, pollution rights, parking, space on a congested highway, etc can and should be taxed.
2) Some luxury goods could be taxed. Whether or not they should probably depends on the situation and opinion. (By luxury goods, I mean goods that are valuable in part because other people don't have them. A cell phone is thus not a luxury good, for example, because the more people have cell phones the more useful your phone is. Luxury goods in the sense I mean are not merely "expensive" or "for rich people," though most luxury goods are.)
Any tax is "arbitrary" in the sense that there's no natural law dictating what should or should not be taxed, it is up to our best judgement. Carbon taxes and garbage taxes make sense, thus why I stated in my comment that LVT is logical as a primary tax, not the only tax.
Currently most federal tax revenue comes from wage/payroll taxes (65%). There is nothing less arbitrary about taxing wages than land value. In fact, taxing wages is more harmful as I will explain.
In general the more you tax something, the less of it you get. So by increasing income taxes, we discourage working - something that is presumably beneficial to society, while also encouraging more people to evade the law to avoid the taxes (working under the table). Land value however doesn't have any of these distortions because land supply is fixed and nobody creates it. Unlike income or sales taxes, land value tax is impossible to evade.
The reason to tax land value is because nobody is more entitled to the land and commons than anyone else, land value gains are pure unearned income, and taxing land has no negative distortions. By not taxing land value, we give a free ride to the landowning rentier class, and encourage the zero sum economic waste of playing land speculation, leading to housing booms/busts like the 2008 Great Recession and 1986-91 Japan housing bubble.
> Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Land value is largely determined by location. That supermarket may have a lower tax bill than that boutique hotel in the city center if the supermarket is located in an area with lower land values. LVT promotes denser and more efficient development, and thus a supermarket could be located in the basement of a residential apartment complex or mall and pay less in land value taxes by sharing the tax burden with the rest of the land property.
The radio spectrum -- those airwaves we say belong to the American people -- should be treated as our common treasure, not purchaseable by corporations. Lease them out for, say, 5 years or 10 years, and then put them up for bids again.
We all need clean air. We all need clean water. Those who use lots of water are usually charged by their local utility for what they take. Some farms and water bottlers deplete the local resource, and they ought to be charged for what they take from the commons, if the carrying capacity can't handle it.
Supermarkets in Manhattan are amazingly inventive in providing a lot of groceries in a space whose smallness would be unimaginable in suburbia -- and is difficult to "social distance" in today.
In the city, that supermarket woudl not be a single-story building; it would have a 20- or 40- or more story building overhead, and all those users would share the land value tax.
And the building would not be taxed, so no downside to fully developing, and regularly redeveloping, the lot to serve human needs.
I don't believe so. It's considered to remove distortions in land use, as compared to property taxes that include the value of structures. In other words, you get less vacant lots and more productive use of land. Which there are good arguments for.
But proposing to replace income and sales taxes with land value taxes, making it the primary tax -- which would necessarily skyrocket the land value tax to produce the same tax revenue at the end of the day -- would be extremely distortionary.
Thanks for assuming that it's an "off-the-cuff opinion", as opposed to what might have been gathered from a great deal of expert reading. I was trying to be polite -- unlike yourself, sadly.
As you can plainly see, land value tax is hardly the centerpiece of strategies to minimize distortion. In fact, it's left for the end of the last section of the article. Because while it's a proposal for sure, it's certainly anything but a consensus, in reality.
I'm sorry, but offhandedly dismissing opinions like you did there triggers snippy reactions from me.
That said your opinion is clearly not gathered by expert reading, because I've done that reading and it comes to a different conclusion.
If you're interested in optimal taxation, I'd skip reading Wikipedia page and just go read the 2008 Mankiw literature review on "optimal taxation in theory and practice" instead. It doesn't touch land value taxation (which is a niche topic) but is very accessible and a good read.
Second, when metropolitan LVT is studied, the theoretical social benefits are large bordering on the absurd. Here's a study by the NY fed:
I personally think the land value tax has a lot going for it, in contrast to a property tax. Social benefits are great.
But that has nothing to do with land value tax being the distortion-minimizing solution for optimal taxation -- which it isn't -- and is what I was originally responding to.
It is often considered a "narrow" tax base - just not enough for a "single" tax, all things considered. (That's largely because the burden of existing taxes is already being borne by land, at least to a significant extent. They just have additional disincentive effects, quite separate from that sort of final tax incidence.) But even then, it's clearly enough to fund local government expenses, so there's really no excuse for why we aren't using it.
And I have yet to see a single valid reason as to why LTV should be the primary tax. I've seen a lot of words, but they all seem to start by assuming that LTV would be fair and the current system is not. That forms a very poor basis for convincing people who don't already agree.
Here's my argument against LTV: Warren Buffet owns one modest house in Omaha. Should he be taxed based on the land value of that modest house, and nothing more? That hardly seems fair.
Most of his stock holdings occupy land in very valuable places, and aren't paying much in property tax.
The principle is to pay for what you take, not for what you make. His modest home, likely on a modest lot, in a not-huge city, is worth little.
For a while, he had a couple of places in Malibu, and he told the WSJ what he thought of Proposition 13, keeping the taxes ridiculously low. Arnold Schwarznegger told him to go do pushups. Buffett saw the injustice.
Sure, his home is worth little, but he's worth billions. Should he be taxed based on his billions, or only based on his home? I see the injustice in your proposal.
And, most of his stock holdings occupy land in very valuable places? True to some small degree, but not all that true overall. Take Coca-Cola, for instance. They own some very valuable land in Atlanta. But the value of Coca-Cola is much more than the value of the land, and is mostly unrelated to the value of the land. Should Coca-Cola be taxed based on the value of Coca-Cola, or on the value of Coca-Cola's land?
To the degree that Coca-Cola is harming people, they owe something. Coke likely occupies a very valuable site in Atlanta, and perhaps has O&O bottlers on locally valuable sites, near centers of population, served well by transportation infrastructure that brings ingredients in and finished products to the customers. When communities start collecting the full value of those sites (and stop burdening the buildings and equipment with taxes) who will be harmed?
Should Coca-Cola be taxed on its good will? or for adding to people's satisfaction?
The biggest promoters of Henry George's single tax were business people who saw a way to a more just society in which all could prosper. But there were others -- railroad, steel, other monopolies -- whose continued position depended on keeping their monopolies, and they were less than enthusiastic about the concept.
Who owns the land in the central business district of most cities? Often it is the corporations that use it, but frequently it is trusts of people long dead, whose heirs just keep enjoying the ever-rising land rent. They didn't create the value. The corporations should pay for the value of the land they use; so should the trusts who collect the land rent of our most valuable sites.
And the value of Warren Buffett's holdings might be affected, but the freer market it will create will provide opportunities for all sorts of entrepreneurs to work their business plans.
And recall the data on how concentrated stock ownership is.
> The corporations should pay for the value of the land they use; so should the trusts who collect the land rent of our most valuable sites.
OK, but why just the land? Trusts hold stock, too, that some long-dead person bought. Their heirs receive the dividends from that stock, for not having done anything whatsoever. By your logic, why should that not be taxed?
What is so magical about land, that only that should be taxed? What makes it different from all other assets?
> And recall the data on how concentrated stock ownership is.
Yes, I recall the data on how concentrated stock ownership is. The exact same logic you are using on land tax applies to stock ownership. So... what was your point?
Land is finite. Capital can be created infinitely, by thriftiness of Labor.
Land wasn't created by any individual or any corporation. (Minor, and not eternal, exception: Made Land, such as by filling in a swamp or dumping fill alongside a river. After a century or so, it stops being special, and is simply land, whose value comes from its location and the services that are provided to it.
When the companies that issue stock are paying LVT on the land they occupy, and on the finite natural resources they claim for themselves and process to sell to consumers, the value of their stock will be reduced somewhat by that "pre-distribution."
If that's where the dividing line is, then bitcoin should be subject to the tax (since it's finite - only a finite amount can ever be created). Ditto collectibles - the finiteness of the supply is the point of collectibles. And ditto stuff like art created by now-dead artists.
So either you need to say that LVT applies to those kinds of assets, or you need a different explanation for why land and not other assets.
Say bitcoin was the single tax. Then people would just not use bitcoin. That's why it wouldn't make for an effective tax.
Land is always in demand (the economic term being that demand is inelastic) since everyone needs it, and it is the source of all material wealth (agriculture, energy, commodities). Thus it is an effective tax.
I have yet to hear an argument for an alternative to land that is more sensible to tax.
> OK, but why just the land? Trusts hold stock, too
The stock is taxed indirectly. Georgism holds that all wealth fundamentally comes from the land. This isn't completely true in the digital age but it is still true enough.
> Their heirs receive the dividends from that stock
If you tax income it never goes away. You just take a portion of whatever is there. If you tax wealth then the wealth is eventually drawn completely into the society. That's the fundamental difference. LVT is a tax on wealth.
They are efficient at not consuming too many resources while producing a lot of value? Probably shouldn't pay much then.
But this applies not only to big tech companies but to individuals too - they shouldn't pay much if they don't consume or extract from others.
Taxes are only a last-resort mechanism to raise money in absence of proper funding model.
If you can price government provided services appropriately then you don't need taxes.
Eg. to build infrastructure (roads, networks) you can predict that it'll benefit owners of nearby properties. They will benefit by landfall increase to the value of their property because the land on which it stands becomes more valuable.
So you collect the money for the infrastructure project by land "tax" before you begin with construction.
("tax" because it's not a tax but payment for exclusive land ownership rights)
If you follow MMT, taxes are the way governments withdraw money from circulation.
> So you collect the money for the infrastructure project by land "tax" before you begin with construction.
No, you use land taxes after completion to pay back the debt incurred to create the infrastructure. Adjustments of valuations based on the advantages of the infrastructure result in a greater burden of that repayment on those that receive the greatest benefit, but everyone contributes.
I'd like to see your "proper funding model" for the military.
Or you'd have to say that the military is part of your "last resort". But then you need to raise enough money to pay for all your last resorts. If LTV is your method, the numbers may not work (as others have said here).
Or, instead of raising all that money, you could say that we don't need that big of a military. That's not an insane position. But using desire for an LVT as the basis for deciding on the size of your military seems to me to be putting the cart before the horse.
First: "They can flee to another country in case of war" is terrible reasoning. You expect the other country to let them in? All of them? Yeah, that's not the way things actually happen in this flawed world. Most of them will not have the opportunity to flee. So... they should just die?
No, the military is there to protect the people, not just the wealth. So your post seems like it's trying to rationalize a not-up-for-debate position, rather than actually reasoning based on reality. Georgism claims to be motivated by compassion for those who are at the mercy of rentiers, but your position shows an immense lack of compassion. "Let them flee to a different country" is the most cold-hearted thing I've heard in a long time.
Second: that wasn't my point. My point was, let's see the plan where you actually produce $800 billion (or whatever the military budget is) just from a land tax. Let's see what the actual rates would have to be, and what the effects of those rates would be.
Look. You only seem to want to make it complicated.
If your military is too expensive and not covered by LVT, just go ahead and add a specific tax to fund your military. If you can justify that it'll protect everybody then people will be fine with it.
Idea of LVT as a single or zero tax is a political move to get you thinking about better government funding schemes. You should think of "paying for specific services" instead of "pooling money and allocating them according to wishes of select few" as is the case of current tax systems.
> Idea of LVT as a single or zero tax is a political move to get you thinking about better government funding schemes.
You know, if you had said that up front, we could have had a more productive discussion. But everybody's been saying "This is The Right Way(TM) to do taxes!" When non-true-believers point out all the problems, then we get "it's just a talking point".
In fact, I suspect that a number of LVT supporters on this thread don't agree with you. I suspect that several of them believe that it's the answer.
The point of invasion has been to kill people until the other government will do what you want. "Kill people" is supposed to be just the military, but there are inevitably civilian casualties. A big part of the point of a military (namely defense) is to keep anybody else's military from getting inside our borders, where it's our people being killed.
Both snidane and I assumed that there would be danger to civilians in case of an invasion. The invader doesn't have to intend genocide for that to be true.
> If you can price government provided services appropriately then you don't need taxes.
This is absolute nonsense. It's somewhat true for roads, provided you can efficiently price every single piece of road (which you can't). But it's horribly wrong for things like the police or fire fighting.
They generally locate where they can draw on a pool of talented people, and those people are drawn by social amenities, good schools, good infrastructure. All those things contribute to land value.
And those who are late to the game and buy a piece of land comparable to their entrenched competitor who bought years ago are paying multiples of the property tax.
Those late to the game who decide to rent are paying rents based on current land values, but their landlords, who may have owned the property for 10, 20, 30, 40 years, are paying to the community based on their purchase price. It becomes a form of sharecropping. Landlording can be very profitable, especially in California, if you own or inherit property from someone who bought it decades ago. Cui bono?
George was for removing taxes altogether which is possible if you fund government services properly in a pay for what you use scheme.
It is not good politics to start your political campaign by proclaiming that you will remove all taxes altogether because it is so far out of anyone's reality that he would have been considered crazy.
You're not being concrete. How do you properly tax a tech company whose land allocation is negligible compared to the overall value of the company? Tech companies have less than 1% of their value tied up in land. If they're all-remote and cloud-based, then they have $0 in land. How would you even tax them if the only tax is based on land?
Also, I live in an apartment. Should my tax be $0? Or if I owned and lived on land way out in a rural area where a small plot is only worth a few thousand bucks, do I only pay tax on that despite my income being mid six figures? The point is, as a knowledge worker, my economic productivity is entirely divorced from land. This is true of most white collar workers. Land value taxes may have made sense as the primary tax hundreds of years ago but they don't make sense for that purpose now.
How much of the rent on your apartment is due to its location? might be 10% in a small town, but it is likely more like 50% in most cities (unless the landlord is providing a lot of services -- doorman, flowers in the lobby). In his land value tax, he'd be paying for the value of the site. In a highrise, that value gets used by dozens of housing units in each column.
You wouldn't see a tax bill because you're not a landowner. But you'd be paying your share via your monthly rent. And your rent would not rise: your landlord is already charging what the market will bear.
And if there is a vacant lot next door, its owner would be motivated to build on it or sell to someone who would. That would likely reduce the rise in your monthly rent.
The whole point of this tax type is encouraging efficiency. Tech companies are usually efficient, and taxing them less increases their efficiency even more. At the same time their harmful effects should be regulated (GDPR is an example of such regulation).
Countries and states that let tech companies thrive are winning the race for capital.
The point of taxes is absolutely not to encourage efficiencies. The point of taxes is to fund the state in order to provide for defense and palliate the ills of capitalism.
I didn't write about the point of taxes, but about the point of a type of taxation. A government can collect the same amount of tax with different rules and procedures.
I agree with you, providing defense and protecting real capitalism, stopping oligarchies/long term monopolies from forming is important, to be able to have a return on investment on the taxed capital in the country.
As I wrote before, countries are competing for investor money, that's why it's important how they collect and distribute taxes. The counterforce is usually corruption inside the political system though.
The whole point of taxes is to fund government spending. That is a large amount of money you need to bring in every year. Taxing based on income seems to make the most sense for that, not "taxing based on efficiency". If tech companies have billions of dollars but aren't paying taxes just because their business doesn't happen to use land, how does that make sense? Why is land efficiency the only thing that matters? The government needs to fund its spending, and they're not going to ignore large profitable tech companies for taxation merely because said industries happen to not be land-intensive.
Who do you think should pay more taxes: someone sitting on 10M worth of land and doing nothing or a factory worker with no assets making 20$/hour? Income tax is unfair. It taxes productive people instead of those who benefits the most from the stable system (land owners).
By occupying that space in Brooklyn, that landowner excludes others from the opportunities that they enjoy. The land, which the homeowner didn't create, has tons of benefits that accrue only to the owner that come not from the owner's labor, but from the labor of others that are nearby, merely by being close to all those other people.
So how much does that Brooklyn homeowner owe to the rest of society for excluding others from what they enjoy? How much does the SaaS millionaire exclude others from opportunities?
Many proposed economic systems distinguish between property that comes from your own labor, and profits that come from idly owning an asset and restricting its use by others in certain ways. The slogan "property is theft" doesn't refer to the bookshelf that a person crafted, it refers to real estate and the economic systems of the time that excludes so many people from the opportunity to escape the economic rents of those who were born with more wealth and privilege.
There are many reasons to tax things: to make life more fair, to raise funds for government, to improve economic efficiency, to reduce pollution. It's so hard to say who should be taxed more without baseline values!
> there's way more economic activity happening that isn't associated with land than there is that is.
First, that is an actively contested claim. Pointing to tech companies as "way more economic activity" is laughable because (even though they occupy a huge proportion of public discourse) tech companies are a very small percentage of economic activity globally.
Second, intellectual property holdings would be considered "land" in the Georgian sense.
> tech companies are a very small percentage of economic activity globally.
This flat-out isn't true. Tech companies alone are a significant part of economic activity globally (e.g. they make up the majority of the top 10 largest companies in the world by market cap). Once you include all white collar work, which generally tends to be similarly divorced from land value, you're talking about the majority of the world economic activity at this point.
> Second, intellectual property holdings would be considered "land" in the Georgian sense.
Oh really? How the hell do you value that if not based on the actual income derived from said intellectual property? I.e. this is just the taxation regime that already exists.
Sort by profit, not be revenue, and you see the tech companies appearing again. Profit (or even just total corporate spending) is a better measure of economic activity than revenue.
> Profit (or even just total corporate spending) is a better measure of economic activity than revenue.
Profit is a terrible measure of economic activity because it is unrelated to the amount of goods changing hands. Indeed, in industries where lots and lots of goods change hands, profit is likely to be lower.
e: Also, real estate is extremely profitable, it's just not as consolidated as the major tech companies are.
Your focus on profit is misguided. It's neither measuring economic activity nor is a good base for taxation.
If someone makes a painting in 5 minutes and another guy pays 10M USD for it very little happened. 10M changed hands and the other guy has a painting on his wall. Yet somehow income tax proponents thinks it's fair to now take 50% from that transaction just because money changed hands. It's just not a good way to organize your tax system.
Patents are essentially the "land" of the tech industry. With weaker patents there probably wouldn't be any such thing as "big tech" as it would be constantly disrupted from below.
The exception is google's search index, which is, given its capital intensity and power requirements, practically a form of of heavy industry on a par with aerospace or automotive.
You let the free market decide the price of patents. Each year they are all put up for sale. Highest bid wins and gets the patent, and they can license it to others or keep it for themselves.
1% of patent value is paid each year as compensation for the government protecting the IP.
If they don't pay anything it's not really a problem. Their owners will and their employees will. Corporate income tax is the worst possible tax as it creates incentives for all the things at both don't want and which are very hard to police in a fair way (is this 1M they paid for licensing really a fair price or is it tax evasion?).
Thanks for the articles providing feedback to georgist ideas - I've read some of these but some are new to me.
The authors seem not to understand the topic unfortunately and have to use long prose as they are trying to wrap their head around it.
The core problem and idea for solution is actually quite simple. Let me condense the topic into a tweet or two.
---
Problem:
You have a naturally occuring resource which is scarce and which nobody created. How do you allocate it to humans?
Solution:
Georgist simply say you can use an auction granting you possession for some amount of time instead of giving you time unlimited rights just because you were first to ask to use it.
---
This is not a theory as it is applied in many systems such as DNS allocation or electromagnetic spectrum allocation. Georgists point out that similar allocation problem is for "land" (think location) and the same auction mechanism can be applied.
Land was considered abundant in the past, especially as new continents were being discovered. Therefore nobody though about allocation, same as nobody considers allocation of air. If air got severely polluted (say by radioactivity) and only small fraction remained usable for humanity, you can be assured that the same allocation problem would exist for air.
After discovering all continents on Earth land ceased to be abundant and now requires a proper allocation mechanism. Otherwise landlord monopolies will continue piling up profits because of their luck in winning the infinitely durable possession rights allocated years, decades and centuries ago in badly structured auction.
Either we start inhabiting new planets or we solve problem of allocation of important scarce resources.
What's funny - you solve this allocation problem and many societal problems disappear as if by magic. Somehow this suggests that land allocation is a major root cause of society.
That's why Georgists dwell on it so much. You should start solving problems from the most serious ones with high impact.
> You have a naturally occuring resource which is scarce and which nobody created. … Georgist simply say you can use an auction granting you possession for some amount of time …
First problem: This is a recurring process but the land is only "unimproved" at the time of the first auction. At which point no one was interested in the land, there being nothing and noone there, so the auction price is effectively zero. After that first auction you can't say how much of the market price in any later auction is due to the land itself and how much is due to improvements.
Second problem: In order to auction something off you have to own it first, but this is unowned land. No one has the right to sell it—or to prevent anyone else from using it. Land only becomes property after it has been improved. This is also the point where it first acquires economic value.
Third problem: You can't just go auctioning off already-improved land separate from the improvements. The improvements and the land are a single, unified good and in the vast majority of cases cannot be separated without incurring expense akin to rebuilding the improvements from scratch.
Fourth problem: LVT is valued mainly for being a tax on "unearned" external benefits property owners receive from the community, but the "unimproved" value of the property is a poor proxy for net external benefit received by property owners. On the one hand, the value of the improvements also depends on the community; if you build a family home or a restaurant or a warehouse the value of that building is going to depend on the demand for specific kinds of goods in that area and not just the cost to build a similar building. On the other hand, the so-called "unimproved" value of the land is readily influenced by the actions of the property owner, for good or ill. LVT punishes property owners who contribute to the surrounding community by taxing them on any increase in the value of their property which follows from their own contribution to the public good, and rewards property owners who contribute to lowering property values in their own neighborhood.
To your first problem: In the simple agricultural example, clearing the land has a reasonably predictable cost, whether it is taking down centuries-old trees and removing stumps and roots, or removing the boulders, or removing the spring harvest of rocks that surface due to winter freezes and placing them onto walls. Often the soil must be drained, and fenced, and possibly irrigated. But not all the land will be improved at once; uncleared land will be close to cleared, fenced, drained land, and obviously a tenant or buyer will pay more for partially improved farmland than for unimproved.
To your second problem: Where in the US is there unowned land? The settlers went west across thousands of miles of unoccupied land. Why didn't they stop and settle? It was owned. Early and ultimate sprawl. Others had pre-empted it for the benefit of their heirs. Think how the development of the US would have been had development proceeded west in some orderly way.
To your third problem: the land is forever. If well taken care of, it will remain fertile. But its fertility may not be important for all that long, depending on its location; its highest and best use will stop being agriculture. Buildings built for one purpose gradually deteriorate, and as the community changes, are no longer suitable to the current highest and best use of that land. At one time in NYC - say, 1880 - 21 year leases were common, and huge department stores and other edifices were built on them. It was understood that another building would likely follow. And it did. And the landlord got his "share." How did he earn that share? And look at the teardowns in your part of the country. Homes that seem perfectly serviceable to some of us are bought to be torn down to build something else on that well-located land. It doesn't happen on the edge of town; it happens in the center of things. The price one is willing to pay to get that land is pretty clear: the transaction plus the cost of removing the old improvement.
To your fourth problem: the land owner who doesn't improve his land can still sell it for a higher price due to the activity of the community around him. The value of the improvements never exceeds their replacement value, but could be quite a bit less. A huge spa resort built 15 or 20 miles from Disney World is likely an over-development of the land it is built on, while closer to DW, it might be quite appropriate and profitable. One who is building with consideration to others' preferences -- as customers or as tenants -- will build differently from one who simply wants what they want, without regard to resale value. We don't increase the unimproved value of our own sites, but we can contribute to the value of the surrounding sites -- or we might decrease the value. Increasing it doesn't exempt us from any portion of the value of our own site. Our neighbors' actions can increase or decrease the value of our own site. Regular reassessments take that into account.
The primary purpose of taxation in a sovereign economy is to free goods and services up for deployment by the public sphere.
What does the government want with all that land?
Are you sure you have enough fungibility in your economy so that it will free up doctors, judges, refuse collectors or whatever and all the real goods that their salaries actually represent so that you can achieve the public purpose that is the reason you are taxing in the first place?
In any Modern Money informed Targeted Taxation regime what you really want to tax is whoever is using the things government wants to use instead.
And that, paradoxically, means the ideal tax is likely a Wage tax paid by businesses for the use of labour. That reduces the demand for labour in a controlled way, and those people are then hired (directly or indirectly) by government to do whatever the polity asked them to do when they were elected.
Do that and you can probably scrap any income tax completely - meaning whatever an individual earns they get to keep.
Bear in mind that if the labour resource is already free (aka unemployed) then there is no need to tax to free them up in the first place...
> What does the government want with all that land?
You are correct that the government does not want land. What the government wants is a share of the economic value that control of the land makes possible.
Consider "vacant storefronts." The government does not want to operate stores. The government wants those storefronts put to good economic use, where what is good use is determined by bona fide auctions.
It actually makes much more sense to use a uniform sales tax:
(1) If you spend more, you're taxed more. Obviously this is better for poorer people, who spend less, but also for rich yet reserved people, who keep most of their money in the bank (which lends it) and are earning an income (=productive). Both will not penalized.
(2) It's much hard to raise, because people will just stop buying stuff, which is much easier than quitting a job to not pay income tax
(3) Being uniform, it doesn't choose favorites. Everything is taxed the same
Sales tax fails to capture the accumulation of capital, so (1) is kind of bogus. If you make 100 billion dollars and invest it you and several generations of your family coild live comfortably without ever working and your tax burden would only depend on your spending.
A sales-only tax incentivized rent seeking, basically, because the rentiers pay the same taxes as the renters while accumulating capital.
But what is investing other the attempt (aware or unaware) of creating wealth? When people make money, it means someone bought something from them. This means they had to create something other want. That can be a service, a good, or a house for rent. Remember that those who rent houses are people who can't afford to buy them, so they need someone with capital to manage the house. I am renting myself and I much prefer it at the moment to owning a house.
You want billionaires to keep their money, because unless they put it under their mattress, they are growing the economy, which means lowering prices and raising quality.
and so often it gets invested in land, which includes not just the sites under our feet, but vital natural resources, the kind that are finite in supply.
> rich yet reserved people, who keep most of their money in the bank (which lends it) and are earning an income (=productive) ... will not penalized.
This goes against just about every standard defense of the ability to be rich: that rich people are job creators, that they power the economy by buying things, etc. Why should we discourage them from employing people and buying things? I don't want a loan (that needs to be repaid) from a bank from a rich person, I want the rich person to either employ me or buy goods and services from me.
Actually, that's another point - does employment incur your "sales" tax? If not, it's more advantageous to hire a private chef or driver than to pay for a restaurant meal or a taxi trip, which makes the tax regressive - there's a discontinuity when you're able to hire someone instead of getting a service from a business.
Replace "the rich" with "Lords" and your post is an adequate defense of feudal society. In other words, you're thinking "inside" the system, i.e. justifying the system with itself.
Well, the position I'm arguing against is that the lords should be left alone, that it's better for them to have their fiefdoms be isolated places than to actually employ anyone or purchase anything, and that we should use tax law to incentivize the lords to never interact with the peasants.
(Or in other words - my actual position that the nobility should be abolished. I'm just surprised to see someone say not only that it should stay, but that the world would be better if they didn't provide any of the benefits people usually claim in defense of feudal society, so I'm trying to understand what their position is.)
The standard defenses of the ability to be rich are persuasive arguments promulgated by those who are rich.
If we assume that the rich are, as other advertisers, rational and self-interested, the we should expect their messaging (i.e., the “standard defenses”) to be that which is most effective.
Something akin to if it works, it ships.
Consider that from the perspective of the accountants, every job created is a huge and ongoing liability and cost, and that from the perspective of the shareholders, every job created is stolen profit, money that is not returned in the form of equity appreciation + dividends.
Then you will begin to see the reality of the situation.
Sure. But the standard way of driving production is private consumption. Given that you have disincentivized the poor from consuming, what is the counterbalance that incentivizes the rich to produce?
(There are a couple of standard answers, including government consumption / public works projects, that can address this.)
Private consumption is only possible due to productivity gains due to capital investment.
Venezuelans can't just vote to redistribute nonexistent wealth or declare food to be a human right and magically have sufficient food appear.
Food comes from capital investment in farms, factories, etc. That is real wealth.
>There are a couple of standard answers, including government consumption / public works projects, that can address this.
These answers don't work, and are great at destroying wealth.
The issue I've always had with the uniform sales tax idea is that poorer you are, the larger percentage of your money you pay in taxes. As a total cost, it's ultimately regressive.
Really, the thing is that the whole "single tax idea" is a bit misguided. A consumption tax (sales tax) is great, but there are some sensible reasons to tax capital income/investment to some extent, too. Mostly, because it correlates somewhat with basic ability-to-pay; also, because people might try to disguise income/expenses as investment-related in order to shield them from taxation, and having a more uniform tax base helps prevent this.
But the broad principle that capital investment should bear a lower tax burden is quite correct. And one you've accepted that general principle, it makes a lot of sense to tax rent-generating assets like land and spectrum rights (since those are not really "capital" in the first place), which is pretty much the Georgist idea.
> Mostly, because it correlates somewhat with basic ability-to-pay;
What do you care about ability-to-pay?
> ...also, because people might try to disguise income/expenses as investment-related in order to shield them from taxation, and having a more uniform tax base helps prevent this.
You can't shield from that tax. All entities pay, for every sale, no refunds.
Because it helps align incentives. You can have a 7% tax on sales, or a 5% tax on sales plus a 2% tax based on a noisy correlate. The latter will raise more revenue at a lower excess cost.
> You can't shield from that tax. All entities pay, for every sale, no refunds.
That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)
> Because it helps align incentives. You can have a 7% tax on sales, or a 5% tax on sales plus a 2% tax based on a noisy correlate. The latter will raise more revenue at a lower excess cost.
I see. Well we seems to have different goals. As I see it, government is mostly good at destroying wealth, and so I aim to minimize their revenue.
> That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)
I am essentially suggesting a non-refundable, uniform VAT
> As I see it, government is mostly good at destroying wealth, and so I aim to minimize their revenue.
The "excess cost" I was referring to is precisely a matter of destroying wealth. It's all well and good to limit government involvement in the economy but clearly, whatever revenue it does collect should be collected efficiently.
Land value (like all value) is subjective. There is no inherent value to land. What one person is willing to pay is not the same for everyone. Appointing someone to imagine a price for the purposes of taxation doesn't change this fact.
Every teardown provides a clear picture of the land value for that neighborhood: the transaction price plus the cost of clearing off the old building. The similar sized lot next door is worth just as much. And the value of whatever improvement is on it is the difference between what the building-plus-land is currently worth, and the value of the land -- pretty much the depreciated value of the existing improvements.
Map these values, and you have a pretty good tool for good land assessments. And for lots a wider or narrower, or deeper or shallower, there have been very usable tables for over 100 years. NYC was doing this in the first decade of the 20th century.
A tax on land values asks us to pay to exclude others from our site. In the middle of nowhere, that price can be $0. On valuable sites, it can be quite high.
Today, a lot of city land is leased, and the tenant pays the landlord for the use of the land. The higgling of the market sets the price. There is a lot of revenue potential there, and collecting it for public purposes doesn't take from anyone something he created.
And that can't be said for sales taxes, or wage taxes, or taxes on buildings.
Property taxes are bad because they punish labor and effort.
Land tax (important to distinguish) doesn't inhibit labor and effort. On the contrary cities implementing land taxes see increase in output because land gets better allocated to who need it. Simply because people sitting on vacant and absent land in the middle od cities drop it and sell it somebody else.
Land is not subjective but perfectly objective. It is a necessary input to all production - whether it is agricultural (obvious) or manufacturing (your factory has to be placed somewhere) or services (you need access to concentrated area for qualified workers in big cities).
You can't even survive without standing on land.
100% of people need land to survive so how can it be subjective? It might be subjective to birds.
>In my opinion property taxes are terrible because they aren’t in the owners control at all. There’s no way to know what your tax bill will be next year and no way to control for it.
So it's no different to rent in this respect. It IS effectively rent, it just spreads the unpredictability of renting across the whole society instead of concentrating the negative downside among one portion of society.
Unimproved land is pretty fungible. If you have two empty lots across the road or even in the same area they will usually end up costing about the same.
There are ways to address value being subjective: use an incentive compatible revelation mechanism. E.g. http://radicalmarkets.com/chapters/property-is-monopoly/ where the property-owner appraises his own property, pays a fraction of his given value as a tax, and anyone can buy his property at the appraised price.
Whether it would be /accepted/ is another matter. But it's not impossible in the squaring-the-circle sense.
Yup, tax sounds problematic. Another way would be to declare all land common property and rent any piece of it out to the highest bidder. The market solves the problem of pegging it to a value.
Some time ago wealth and production of wealth was heavily tied to land, agriculture and various natural resources were key to the wealth of a nation.
This is not the case any more - only a tiny fraction of our economy is tied to the land, primary production (agriculture/forestry/fishing and mining including oil) is just a few percent of the total economy; real estate/rents/leasing is perhaps 15% but most of that is related to the value of buildings, not the value of land. For extremely wealthy people, almost nothing of their wealth or income is in the form of land, because land is not worth that much. The current billionaires aren't major landowners, we're not Victorian age with most of the upper class being rentiers living off the rents of their land estates; the upper class is living off the dividends of their capital which is not tied to land and would be tax-free in a land-tax-only regime.
Extremely large taxes on land (or are we talking about an orders of magnitude reduction in the toal tax burden, and not just about the type of taxation? If we want to drastically cut the total volume of taxes, then that becomes the main topic, not the means of collecting taxes) while not the taxing the other 90% of the economy at all is not really a reasonable solution for modern times. It may have been reasonable in 1870s, but right now all it would just remove pretty much all taxes from all the very wealthy people and corporations, while putting all the tax burden on owners of farms and homes, and the 1.5% of USA economy that handles mining.
"Land" for George is just things you can rent-seek on and are fixed in supply, that includes stuff like intellectual property, etc.
> real estate/rents/leasing is perhaps 15% but most of that is related to the value of buildings, not the value of land.
Not at all clear that most of that is related to the value of the building and also you conveniently neglect to mention that that is the largest share of GDP out of any industry in the world.
Further, land includes a lot more stuff that is not counted in the economic measures you are using. [0]
How do you determine the value of intellectual property if not by looking at how much income is actually being derived from said IP? And at that point, don't you just have the same income-based corporate taxation that we already have, with extra steps?
> How do you determine the value of intellectual property if not by looking at how much income is actually being derived from said IP?
I agree that determining the value of IP is difficult. Georgists would probably advocate that there is no reason for IP to be in private hands in the first place, nor any need for a system of IP.
Alternatively, you could give temporary ownership of the IP to the creator (like we already do, except without the absurd lengths of time), then when that expires, put it up for auction to determine the pricing, then tax based on that.
You hold an annual auction for the exclusive rights to the property that the tax will be derived from. The current owner can choose to keep the rights and pay the tax or they can choose to sell the exclusive rights to the highest bidder who must pay and then becomes the holder of the exclusive use rights and the new owner would then also pay the tax based on the known value.
This might also usher out IP trolls and IP squatters.
Maybe it will help to think of "land" as "location" since it is not the actual soil but the location which Georgists keep talking about.
If you are a modern services company you need to have access to large pool of qualified people - which happens to be in big cities. So you need a great location for your office to attract people from this talent pool. Location (aka land) therefore is an important input to your business and you will pay a lot for it.
Second, wealthy people park their money (regardless of origin, good or bad) in real estate. That drives living costs for non wealthy people.
It turns out it is non-wealthy workers who pay taxes which fund infrastructure development which benefits wealthy owners of real estate by increasing value of their property.
Georgists promote reversal of the present day funding scheme from nonwealthy workers to wealthy land owners with money parked in real estate. With the alternative being simple "taxing" of locational value to fund government services with two main outcomes
1. reducing tax burden on workers and small business
2. reducing cost of living (rents) by properly allocating land (mostly city land, not agricultural)
