Progress and Poverty was once the most popular economics book ever written. The Georgist Theory in it, and the land value tax proposed by it is still endorsed by economists today.
This review clearly illustrates the ideas from George that land captures gains that in a more fair society we'd want to go to labour.
>"... the land value tax proposed by it is still endorsed by economists today."
Your comment is somewhat misleading, as it seems to suggest that all or most economists endorse Georgism, which is not true. Some vocal minority of economists are pro-Georgism, but I haven't seen any data suggesting it is the most popular taxation scheme.
It's hard to measure precisely how popular it was historically but he campaigned for Mayor of NYC as a Georgist and finished 2nd ahead of Teddy Roosevelt who finished 3rd. So Henry George at least was well liked.
The book itself was the best selling economics book of the 19th century. It inspired art demonstrations and some governments throughout the world even adopted LVT for a while. So yes, it was pretty popular.
Thanks for sharing this it's interesting. The first thing I've noticed is that his estimate of the tax revenue is far lower than other far more detailed estimates I've seen by economists.
But by far my biggest objection to his arguments is that he ignores the way density impacts land value over time. If we build huge skyscrapers in the countryside it's reasonable that businesses will spring up around them. Various economists have modelled this and land value increases in proportion to the income of its occupants. It's one of the reasons cities need to pay developers to get affordable housing. The allocation of people into housing that was once affordable in the market sense will naturally result in rising land values and rising rents. In no time and no place in history has density made land cheap.
If we choose to dot the countryside in huge towers the land on which those huge towers are built and the land of the shops immediately beside those huge towers will have a high value that tapers off quickly as you head further into the now empty countryside. You end up with a strange peaky distribution. In practice, the increasing land rents of the building and the decreased land rents of the countryside would encourage occupants to leave for greener pastures. And the developers would know this would happen before even building a huge building in the countryside because it is economically well understood.
He also makes far too big a deal out of the need for a negative land market. You can keep abandonment if you just have a 95% LVT instead of a 100% LVT and you now have a market where land values are overwhelmingly positive.
I'm actually doubtful this would end up being cheaper. Sure, such a building would only pay taxes equivalent to a suburban house, but the construction/maintenance cost of a 2000m building (the tallest building in the world is only 828m) would be insane and would obliterate any tax savings.
Economists generally consider LVT the best theoretical tax, but with significant practical challenges. There are several links in the first section of https://en.wikipedia.org/wiki/Land_value_tax as well as further down under Modern economists.
I may have to pick this up -- as someone with no economics training at all, a land value tax seems extremely appealing and intuitive to me. I'd already like to become a complete partisan in favor of this policy, but I guess it would make sense to read what the actual justification is, for it, haha.
The biggest problem with LVT is surprisingly simple: accurately assessing the value of land is very hard, and ensuring that the assessment process is fair is therefore extremely hard.
LVT experiments in history tend to run into problems when people feel that their land has been valued incorrectly, leading to a vocal minority that despises the law. That results in something like this:
See my sibling comment to yours. The most notable examples are in New Zealand, Australia, and several towns in Pennsylvania. Some of those ran into problems with execution, others were abandoned for purely ideological/selfish reasons, but overall it's not a bad record.
Huh. Property tax is already a thing of course, but I guess if the LVT was going to replace all taxation the stakes would be much higher.
In an urban setting, it seems to me that the land value should be... reasonably uniform, unlike property, which should make assessing much easier, right? But that's just getting the number. Whether people are happy with the number is a whole 'nother problem.
I would have assumed exactly the opposite in terms of urban land being uniform in value.
10 acres that are 30 minutes from Des Moines, IA are going to be very similar in value (price people are willing to pay) compared to 10 acres that are 10 miles down the road. Rural land is generally quite uniform and more likely to be functionally the same. In an urban area, say Los Angeles, 10 acres in Malibu (an area with very high demand for property) is going to have a totally different value (again, price people are willing to pay) as compared to 10 acres 10 miles away in skid row.
The problem, that other people have highlighted, is how do you (the government/IRS/agency in charge) determine the value of each of those land areas? Letting some city planners in LA decide that those two areas should have the same LVT, or allowing them to determine what tax each should have, is gifting a lot of power to people who may or may not be qualified, and may or may not experience any sort of consequence for poor decision making/ biased value assessment/ etc.
The exact way that sort of value/tax-setting would play out would be very interesting, but the unintended consequences could end up being pretty bad.
I've always thought it was interesting that property tax assessments don't just use the previous purchase price, and instead rely on a relatively arbitrary valuation. That could be one way to more accurately determine an LVT - make it a set percent of the previous purchase price of the land, that would allow the taxes to be priced in to land transactions.
Now you've brought the horror that is prop 13 to a tax that is supposed to replace all other taxes. Things change in value, we have to account for that.
With a land value tax we could at least come up with pretty straightforward equations, right? Some starting value from being in town, then add something for oceanfront property, then add something some extra bump based on distance from some set of amenities provided by the community (parks, subways, etc). It is at least possible to come up with something, unlike, what, the assessor's gut feeling about how nice your house is? This seems like it is putting much more arbitrary power in the hands of some random person.
> Some starting value from being in town, then add something for oceanfront property, then add something some extra bump based on distance from some set of amenities provided by the community (parks, subways, etc).
How do you know you weren't also supposed to take the floor plan or exterior paint color into consideration? How do you account for the value lost from having obnoxious neighbors? What happens when, in the future, a nice bookstore/coffee shop is opened up down the street, or alternatively a liquor store? Ultimately, how do you know if whatever equation you've constructed is exhaustive or "correct"?
It might sound like "well then you just adjust the equation" but this wouldn't be without consequence. One outcome of getting that equation incorrect is that a home is valued at a point where the imposed tax prices out anyone from purchasing the home - it would sit empty/foreclosed for as long as it takes a local government bureaucracy to come in and attempt to re-assess its value. So you could effectively be removing houses from a competitive home buying market, which is going to increase the price of other homes until they too have priced people out of the area. Multiply that by entire zip codes, and while you're working on adjusting that equation, you could end up having a real shit show on your hands with a bunch of people being displaced or in worse financial positions.
> It is at least possible to come up with something, unlike, what, the assessor's gut feeling about how nice your house is? This seems like it is putting much more arbitrary power in the hands of some random person.
I agree with the point that a home assessment is strange and arbitrary, but you're really just saying we should replace the assessor who goes and visits a property with a group of assessor's that just come up with an equally arbitrary equation that gets blanket applied to entire cities? Why is that preferable to something like just using the previous home sale price or, honestly, just staying with the current system that we know is generally very functional?
You don't know the equation you came up with is correct, but it is at least describable, so if someone doesn't like it they can live elsewhere I guess, or argue about it at the next town hall session. If a bad equation is designed, then that's a problem, but it is a general bad governance problem that effects everyone, rather than an arbitrary lightning-strike problem like a bad assessment.
Floor plan or paint color -- the point of a land value tax is that it is based on the value of the land. Floor plan and paint color would be improvements on the property, so they would be excluded.
The current system is not very functional. Housing is not very affordable in most cities due to speculative real estate investment and under-development. I mean, we clearly get by, but just because the alternative is being homeless.
Landowners decide for themselves what value their land has, and pay tax accordingly. But whatever they say the value is, someone else is allowed to buy it for.
It's certainly a fun game, but does that mean if I decide my property is worth $100,000, accurate or not, I am forced to sell it just because someone comes along and decides they want to buy it? Also, is this a game that happens every year to allow for appreciation?
For a realistic implementation, why not just use the fact that the landowner already decided what the value their land has when they purchased it and/or paid people to develop it. Why not just use those values?
This game is terrible because even yearly is too slow. The property market went up 30% in my city this past year. If I set a fair price at the beginning of the year I’m forced to sell my house at a loss. Only if guess that I should overpay by at least 30% at the beginning of the year does my house remain unsold.
Doesn't work that way. A subway gets built near your property. The benefit of greater access accrues to you more than it does someone 10km away. So your LVT has to go up.
Now you can't afford the taxes, and you're forced to sell and move to somewhere with lower LVT. It's bought by someone who will put it to better use. Maybe an apartment block instead of your single family home.
Over time, every piece of land is put to its most productive use. But before it gets there, there will be some pain for the individuals who choose (or are forced) to move because they can't afford to the improvements made to the infrastructure in their locality.
> Now you can't afford the taxes, and you're forced to sell and move to somewhere with lower LVT. It's bought by someone who will put it to better use. Maybe an apartment block instead of your single family home.
> Over time, every piece of land is put to its most productive use. But before it gets there, there will be some pain for the individuals who choose (or are forced) to move because they can't afford to the improvements made to the infrastructure in their locality.
Which is why I think it makes sense that the LVT shouldn't be re-evaluated on a rolling basis. It would only be re-evaluated (or at least put into effect) when it changes owners (sale, gift, inheritance, etc). Otherwise you get bad incentives for people to vote against improvements that price them out of living where they currently are.
Corporate land ownership would likely need different rules, as the owner could theoretically be the same forever.
Over time, land is still put to it's most productive use, there is just a delay introduced that considers the human condition.
This is basically Prop 13 in California which the world outside of California conclusively thinks is stupid. It’s incredibly unfair to give people massive tax breaks for buying a long time ago. The alleged benefits don’t reflect the immense cost.
In this case you’re trying to replace the majority of all taxation with a value that doesn’t change with time. People get massive economic incentives to never move. People get massive economic incentives to resist change.
I’d rather deal with a range of options from people selling and moving to introducing liens upon the property due at sale than have to deal with the mess that is 50 year stale land values and the associated negligible taxes that result.
Yes, but note that property taxes are extremely unpopular:
> America's most hated tax: Local property tax (42%)
By far, America's most hated tax is your local property tax! It's almost ironic that your home, perhaps the single greatest source of taxable deductions on your federal income taxes, is also the greatest source of dislike when it comes to taxes in general among the American public with 42% responding that they felt it was the least fair tax of all.
Lobbyists, PR professionals and the people who pay them own lots of property and pay property taxes. They're far harder for the wealthy to dodge than income or capital gains taxes. Of course the public has been trained to hate them, like they've been trained to hate estate taxes, and in some years public polls would show near-majorities against progressive taxation in general.
edit: it seems obvious because of the thread topic, but property taxes are the most easily and intuitively justifiable tax. People with more property use more public services.
I'm thinking of my buddy back in Missouri -- not wealthy; not a lobbyist, PR professional, or any kind of professional -- who told me (more or less):
"It's unfair. It's the one tax you can't avoid. No matter what you do, you can't opt out. It's like you don't even own your own property. The government owns it. You never really own anything, as long as they can tax you just for existing on your own land."
It is a sort of silly objection -- you can avoid property tax by having no property, in the same way that you can avoid income tax by having no income. I guess it is probably easier to evade income tax, than property tax, though.
People who disagree with their assessed value should be given the option to declare whatever value they like. If they take this option, the state should have the option of buying their property at the declared value, plus some extra to cover transaction costs.
At the surface it seems there should be a market solution for this.
One approach might be to do something clever with mortages and property rights. Basically keep trying to keep the current mechanics of borrowing and just shifting around the parties involved so that the all the interest gets collected as LVT.
Might even let the central bank handle both collection and dividends of it all.
Another option might be to create economic incentives for some party to get the assessment right. Like insurance companies and banks loose either customers or revenue when getting it wrong.
Perhaps can play with some margin for speculation such that lender and borrower get to share some profit.
Or just make lenders outbid each other on who can extract most rent for the property.
I guess one concern here is to make sure the commons have a representation, so that not all land get appropriated to private use
This is a 'clever' solution to property taxes. But a land value tax specifically just taxes based on the value of the land. This is supposed to incentivize people to use their land as productively as possible -- with a property tax, any improvements you make increases your tax bill, with a land value tax, it doesn't.
A moral argument for it is, if you own an empty lot which is gaining in value as the community grows around it, you are essentially leeching extra value from the community through no work of your own. This sort of behavior is punished heavily with an LVT, as your taxes go up but you don't get any extra revenue from your empty lot.
Focusing on that one issue presents an incomplete picture, to say the least. LVT has been tried many places, and has been no less successful than other tax systems. Here's a pretty thorough analysis and discussion of empirical results.
Of course there are secondary and/or orthogonal problems that need to be solved. Of course there are some people who complain, either because they are truly being overtaxed or (more often) because they think they personally would do better under some other system. Just like literally every other tax system including the ones most of us live under right now. LVT is no panacea, but there are legitimate reasons to believe it's a fundamentally better starting point than the mishmash of income, sales, and property taxes we have now.
The biggest problem with it as presented in Progress and Poverty (i.e. as a Single Tax to fund the government budget, not some small supplementary levy to fund something like local services) is that the size of the tax bears relatively little relation to the ability of someone to pay it (at least, to pay it without selling their house). Turfing pensioners out of their house because the land it sits on gained in value faster than their pension whilst others earn millions virtually tax free obviously isn't a natural vote winner.
> Turfing pensioners out of their house because the land it sits on gained in value faster than their pension
This is a well-known canard. If someone can't pay their tax on a primary residence, you put a lien on the property that becomes enforceable when the ownership changes hands, whether by sale or inheritance. No one gets "thrown out" of their homes.
Proposing children are kicked out of family homes isn't necessarily more politically palatable, and deferrals introduce revenue issues (especially if LVT causes land value to fall over time, which is often mooted as an advantage by Georgists...)
But that's a minor issue compared with the second part of my post, which is that if a proposed tax reform reduces the tax burden on almost every corporation and high net worth individual (bar a few land speculators and domestic oil well owners), ordinary people have to pay more to the government or get less from the government. LVT might be perfectly viable as a tax, but as a Single Tax replacing the existing set of taxes (which arent exactly optimal from the point of progressitivity to start off with) it's a wealth transfer on an unprecedented scale from people whose wealth is mainly the property they bought (including the land it sits on) to people whose wealth is mainly the shares they own. The latter category is much richer than the former.
"Corporations" don't bear the incidence of any tax, they merely pass it along to something else. And taxing high net worth individuals on their savings reduces investment significantly, making everyone worse off. That's why it makes sense to single out "land"-like assets for taxation in the first place. Much of the value locked in "shares" is itself land, and would of course be taxed. Unlike with ordinary corporate taxes, the impact of this would unambiguously fall on the owners.
Sure, much of the value locked in shares is land or land-like assets but a much higher proportion of the value of the average middle class person's property is land. So as taxes go it's incredibly favourable to most one percenters, and ordinary homeowners are amongst those whose taxes must make up the difference. (And Single Taxers have to raise 1/3 of GDP from someone so its not like the possibility of the middle classes actually paying less tax providing they kiss goodbye to their homes and move into a high rise or rural Nevada is a solution and not a different category of problem)
Efficiency arguments that the average middle class homeowner would still be better off materially even with a much higher personal tax bill because the Zuckerbergs and Dorseys of this world would retain more untaxed profits and dividends to use their superior resource allocation skills to invest in land-free Bigger Adtech might appeal to the armchair neoclassical economist but for obvious reasons the public are more sceptical.
Even if you focus on real estate alone, land is a "much higher" portion of that value only in urban cores where owning one's residence would be relatively uncommon (and that for very sensible, rational reasons). The areas that are most commonly associated with middle-class real estate ownership have significantly lower land values. While it's hard to say whether a genuine "single tax" is actually feasible given modern trends in government spending, the overall incidence of LVT is really quite favorable to the middle class and especially to the lower class.
Land values vary from place to place, but I can't think significant pockets of middle class housing in developed countries where the value of the underlying land is as insignificant to the homeowners' net worth as natural resources are to Facebook's market cap.
If we plug in something approaching real data, the UK government statistics agency assesses that the UK has £6tr in land value (more than the value of the assets that sit on it!) of which two thirds is owned by householders. And there's an annual government budget of 1tr so those land value taxes are going to be a really high proportion of the total value of the land (and property that sits on it). Good luck convincing the average homeowner who takes 30 years to pay for their home from their salary and typically retires not long afterwards that the tax incidence of a Single Tax will be favourable to them
> Good luck convincing the average homeowner who takes 30 years to pay for their home from their salary and typically retires not long afterwards
But that's exactly the point - these people are glorified renters, they don't really structurally benefit when land values go up. The fact that a Georgist tax has to be introduced gradually in order not to be punitive towards those who happen to be holding land at any given time is well known. But we already have property taxes for a start, many countries have large one-time fees on real estate transactions etc. These are taxes that could quite easily be replaced by a shift to LVT.
Maybe Im heartless, but I don't see why people should be allowed to stay in a home they can't afford just because they've been there a while. Especially when the reason they can't afford it is because the community thinks it should support high density housing but they have a low density home.
My city already does a two-factor assessment that includes land value and structure value for assessing my property tax. I don't think just doing the land value component is substantially harder although I do agree it's slightly harder.
It seems extremely unappealing to me. It seems like something a wealthy apartment-dweller in a tall building in a dense city would come up with to move taxation from himself to the guy in the country with two acres and a mobile home.
The more I think about it, the more I'm sure that's the actual motivation.
Correct. Land "in the country" is worth zilch compared to a similar plot in a dense urban core. GP has it backwards, they're perhaps thinking of some flat tax on land based on square footage whereas LVT is based on assessed value.
I'm just going by the headline definition: "A land value tax is a levy on the value of land without regard to buildings, personal property and other improvements." That's the basic idea.
I think people need to keep in mind the actual purpose of taxation: One group is taking resources from another. Nobody is pushing this tax (or any) because it's "efficient" or whatever. They are pushing it because they will come out ahead.
A person who lives in a 600 square foot apartment in a 60 story tower will effectively be paying taxes on 10 square feet of actual land. That land might be very valuable, but I suspect no matter how you twist the numbers, it's going to be less than two acres anywhere in the country. Especially if you go by the spirit of the LVT, which is to ignore improvements.
I could be wrong. I'm just guessing at "who fucks over whom" here.
The more I read about LVT the more clear it is to me that it legitimately solves many, many problems society is currently facing. The housing price crisis is effectively solved by LVT. The "greedy landlord" meme is effectively solved by LVT. Income tax being distortionary is solved by LVT. NIMBYism caused by people wanting their home to be worth more is solved by LVT. Yes, some are better off, some are worse. It's not as clear as you think though. Rural land is worth very little compared to urban. The real losers are people who have single family homes in desirable areas.
Your assessment is correct. The fact that implementing such a simple scheme as LVT would lift up many societal issues suggests that the entire problem that it aims at is the society's bottleneck.
From system design we know that no matter how much we optimize other parts of the system, no gain in performance will be achieved because the flow still has to go through that bottleneck. So we should focus on removing that narrow part before even engaging in discussions about other economical topics such as minimum wages, healthcare or education funding etc.
Land buildings are on tends to become extremely valuable due to all the surrounding businesses that emerge due to a high density of people. If you look at land value maps of cities you get very noticeable spikes in cities.
I’ve seen land as cheap as $489 an acre and land as expensive as $6,000,000 for a half-lot. Even assuming $12,000 an acre in the countryside in California which can be found now on the internet, it’s quite believable that 10 square feet of land beneath a skyscraper is going to be worth more than $24,000. That 10 square feet is an underestimate as well because the unit will be responsible for more than 1/60th of its floor plan.
That sort of assumes that the owner of the apartment-dweller's property doesn't just increase their rent (pass along that tax).
As other people pointed out, there should/would have to be some mechanism to value the land for the LVT. The land the apartment building is built on in the city would have a higher value than some 2 acres out in the country. The owner of that land would have to pay the LVT, and the rent for an apartment on that land would reflect that - ultimately making everyone who lives in the apartment pay that tax, if indirectly.
Interestingly because the supply of land is inelastic its supply curve is a straight vertical line. If you charge the tax directly to tenants they lose say $20,000 in LVT tax. This lowers their demand for land by $20,000. Because the supply curve is a straight vertical line the intersection of the supply and demand curve is now $20,000 lower. They literally pay $20,000 less for land rent. This doesn't work with anything that has elastic supply like buildings where the tax would lower the supply and the new intersection of the supply and demand curves would result in the tenant and owner sharing the tax. But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants.
> Interestingly because the supply of land is inelastic its supply curve is a straight vertical line. If you charge the tax directly to tenants they lose say $20,000 in LVT tax. This lowers their demand for land by $20,000.
This might sound good in theory, but it is a very hard sell to say that's how it pans out in practice. You even say: "This doesn't work with anything that has elastic supply like buildings" - so as soon as you put a building (apartments) on the property, this theory goes out the window.
> But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants.
I don't dispute that there would be some competition among landlords as to how much of their LVT they can pass off to tenants - it wouldn't be 100%. But to claim that there would be no impact to tenants strikes me as hilariously naive.
No the building on the property isn’t taxed. You pay $0 more in taxes for building it.
If you have a fundamental objection to how the established theory of supply and demand curves works I can’t really help you. Large parts of economics have shown it to be successful and I certainly trust it over anecdotal arguments about how landlords will pass on the tax.
Based on the demand curve any attempt to pass on the tax will result in empty land and less overall revenue due to the mispricing. This at a minimum means some landlords will be very unhappy.
The land value tax incentivizes the owner of scarce, valuable urban land to put it to good social use, such as building apartments for hundreds of people to live in. You would have to be astronomically wealthy to own two acres in a dense city and keep it solely for your own enjoyment. If you want two acres all to yourself, you can move to the countryside, where land is cheap, and one person can conceivably pay the property taxes on an engineer's salary.
Absolutely! The biggest advantage for most, particularly readers of HN, is described in part II (http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...): "...landlords cannot pass Land Value Tax (LVT) on to their tenants..." Renting an apartment in SF would therefore both be cheap, because the LVT encourages high-density, and tax-advantaged, especially if the LVT is (as it is supposed to be) the only tax.
The bottom line is that this idea has literally no downside.
Renting the apartment in SF will not be cheap because the land has extremely high value. It's just the government will capture the high value of that land instead of landlords and that high value land capture will be used to remove other taxes like income tax and property tax. Land prices in SF would fall slightly as the LVT removes most speculation. So likely rents go from $6000/month to something like $5400/month. But the government might capture $4500 of that to reduce other taxes.
If we still had 1870's small government the idea would be to put most of the LVT into a Citizen's Dividend which functions like a UBI and helps people pay for their cost of living (including some of the land taxes).
They probably would decrease somewhat, because there's no longer an incentive for landowners to prevent people from building housing to keep the supply low.
This is something I’ve been wondering about with LVT. Wouldn’t they still have an incentive to stop people from building more dense housing near them? Even more of an incentive than now, in fact? Because the more people that can live and work in the immediate area near them, the more valuable the land is, and the more they’ll pay in tax.
> Commentators disagreed on whether it was the largest funeral in New York history or the largest since the death of Abraham Lincoln. The New York Times reported, "Not even Lincoln had a more glorious death."
FWIW, John Michael Greer recently outlined[1] some alternative philosophies in political economy (including cooperatism, distributism and social credit), aiming to spur increased imagination. He cites numerous alternative resources, enough to suggest a study list or initial-study guide.
I think Georgism's main appeal is that if you interfere as best as possible in the mechanism by which land captures the value of labour and use that to reduce other capture of the value of labour you remove the worst excesses of capitalism. You literally don't have to change the rest of the system.
Tenants pay the same rents they do now (perhaps slightly lower due to removal of speculation) but no longer have to pay any income tax. Property owners pay more in LVT but no longer pay income tax as well. No one gets to hold land value unearned and benefit from the work of others except the government who uses it to reduce other taxes and provide services we've come to depend on in modern society.
This is quite different from various radical re-imaginings of the entire economic system. Those systems are looking to solve almost entirely different problems and introduce far more new ones.
It seems like the biggest challenge to Georgism is that municipality/county/state/federal regulations on land use would have a significant effect on land value.
A landlord might lobby for restrictive land use policy while sitting on a parcel, and then lobby for opening those restrictions when it comes time to sell. Essentially avoiding the tax by using government policy to suppress the true land value.
There are solutions to this of course, but they come down to zoning and land use regulation, which is sort of the core of all our other problems with real estate in America.
> municipality/county/state/federal regulations on land use would have a significant effect on land value.
That's not "a challenge" it's a positive side effect. Those government institutions would be enabled to internalize the value that they create, which is presently being captured by random private parties that did not create it.
I agree that there is a positive side effect here in that municipalities now have a strong incentive to rezone in ways that increase land value since they capture a portion of that value from their share of the LVT.
Look at the case of Atherton, CA - multi-million dollar home values due to city ordinances around minimum lot size and land usage. The land value here is created by scarcity, and driven largely by the success of the greater metro area.
But if you are trying to value this land from a Georgist perspective, and one that takes into account property zoning and use requirements, the land is worth much less than it should be due to the restrictions, and would be taxed lower than parcels of similar size in nearby cities.
This seems, in theory, to reward obstinate enclaves of low-density development within larger metros. The homeowners have no reason to elect a council that would vote against their interests in this respect, and their taxes would stay low.
No one is arguing Georgist tax policy will solve all of zoning. We will still have some issues with land use and no system is absolutely perfect. Still I think on the balance this is a vast improvement over the status quo.
The problem is current speculation on land is relatively easy. Having to lobby for a change in zoning one-way when you buy the land and having to take on the risk of not being able to get the change of zoning back the other way when you sell it is a significant risk. I'd also argue because LVT rates are much higher as percentages than property tax rates, holding the land would still be more expensive than the solution.
I agree there are also significant issues with zoning, but zoning alone won't solve the problem. A bunch of people capture a bunch of economic rents unearned, and it would be much better for government to capture these economic rents as part of the system and charge us less tax on things that actually are earned.
On a personal level, I like the LVT as a single tax because then I wouldn't have to do any paperwork. They give me a bill, I pay a bill, there's no exceptions, I can improve (or fuck up) my property, and overall the numbers won't change (unless a ton of people improve or fuck up their properties around me as well). Nice and easy.
But it also seems effective overall. After I quit my last job and before I got my current job, I did not work for several years (some due to choice, some due to circumstance). During this time, I obviously paid no income tax. But I still paid my mortgage (some of which obviously went to property tax, but mostly to the bank). Presumably with a land value tax, my payment to my mortgage company would be notably less less and the tax would notably be more, so during that time instead of paying a bank I would be paying taxes that go to infrastructure and welfare and whatnot.
I think this sort of thing is more accurate than an income-based source of taxes, because I obviously wasn't really in the same economic situation as an underemployed person who truly couldn't find a job for several years. It also allows you to assess your own level of taxation. For instance, I could have sold my place or rented it out, and moved elsewhere to a cheaper place (or I guess a more expensive place, were I so inclined to do so while not having a job).
Of course, the big disadvantage, as mentioned elsewhere in this thread, is that it is difficult to assess land value sometimes. It also seems like it may force people to move a bit more often, and moving is exhausting. And also presumably you'd have to convince people to pair this form of taxation with more lax zoning laws (with some stricter exception for farmland or something to keep the value per square foot low enough for it to still make sense).
Even weighing these factors, it seems like an improvement over the current system. But I guess the real issue is that in the current world of mortgages and such, even if 90% of the population decided it truly did make sense as a form of tax, the transition seems nearly impossible.
Since all taxes are ultimately borne by land (specifically, by resources in fixed supply), it's not at all clear that compensation is required for a neutral tax shift.
Some people argue no compensation is required but I think in reality an LVT at 100% reduces the price of all land to $0. Given that land is substantial portion of retirement savings in our current economy, completely obliterating land prices without any compensation seems morally dubious. Perhaps if you do it slowly enough that you give everyone time to adjust and make the market adjustments gradual enough that people who need to sell land for retirement can still get something like 90% of the value initially it could work.
Nobody is arguing for a literal 100% LVT. You'd want to still leave a fraction of land rent (say 10% or so) untaxed, since this introduces a desirable market mechanism in property assessment - and George even acknowledges this. What's nutty is to let land speculators capture all of that value for no real reason.
I think the group that is capturing the most value is actually landlords, followed by speculators. I also agree that 90% LVT may be better in practice, although I do know people who still argue for 100% and various auction mechanisms to determine the LVT.
As much as I think LVT makes sense, having to go to some sort of annual auction for my own land does seem worse than just paying taxes. Along with that being a tedious process, that could put you at the mercy of malicious actors who may just dislike you and have enough cash to outbid you.
Any implementation would have to not include this for people to be able to have stable lives.
A yearly auction is overkill. Do it every 5-10 years with a fee the longer you delay the next auction. (Like banks charge more interest the longer a fixed rate loan is)
You could use "auctions" to capture that residual value if those were long-term land leases. But you'd still want to assess and tax land rent afterwards, because in practice high-stakes leases have proven vulnerable to government corruption.
Silvio Gesell proposed an auction mechanism but I honestly don't care about the details. You can lease land. Tax it or auction it off. There are so many good enough solutions that one does not have to be picky.
That's the gist of it. If land is so worthless even rich people don't want anything to do with it, why would it make someone poor better off to have it?
> Since all taxes are ultimately borne by land ...
Objection, your honor. Assumes facts not in evidence.
How is income tax ultimately borne by land? Sales tax? Inheritance tax? Gasoline tax? Corporate income tax on corporations like SpaceX, Goldman Sachs, and Intel?
"Ultimately borne by land" may have made sense a century or three ago, when (almost) all income ultimately came from the land. That's not the world we live in any longer.
The username checks out; where do you think wealth comes from if not land? Paper money in the end is just a representation of claims for assets generated from land. Food, minerals, energy, actual things all come from land.
> The username checks out; where do you think wealth comes from if not land?
I gave several examples of wealth that doesn't come from land. I asked for an explanation of how, in those examples, wealth came from land. You reply with an insult to my chosen username. That's... not a very good argument.
> Paper money in the end is just a representation of claims for assets generated from land.
Here you're using the assumption that all wealth comes from land (the exact assumption I was questioning) in your argument. That's circular, and therefore flawed. You can't assume X and use that in your proof of X.
> Food, minerals, energy, actual things all come from land.
The silicon that goes into Intel chips comes from land. The chips themselves? Not so much.
The single biggest factor in Google's prosperity is the google.com domain name. How big a real estate footprint does that have?
I hear that Taylor Swift has a pretty big income. How much of her income is based off of land? It's derived from a musical imagination.
> You cannot eat a metaverse.
This I will grant you. All food (currently) is derived from land. There's a lot more to wealth than food, though.
Georgists divide into two categories. They define land differently, or emphasize different aspects of it.
1. Left wing georgists. Land = resource needed for human life. Humans cannot fly, therefore land is a life necessity. Food grows on land and nowhere else, therefore land is necessary for life.
2. Right wing georgists. Land as a monopoly. Electromagnetic spectrum (5g, wifi, radio waves) cannot have too many owners of a band otherwise you get interference. Google.com domain can be owned only by one entity otherwise you get mess. For actual land (geographical parcel) you hold exclusive use rights, that others have to respect, otherwise you get fights for territory. All of these - geo area, name system, electromagnetic spectrum - constitute a form of land. There are grades of it which differently priced and only one owner can operate it at a time.
Land is still the most important section of economy. Real estate is mainly land speculation. You can observe billionaires investing in real estate and land when there is nowhere else to invest, so it definitely is not piece of worthless nothing that only had value in 19th century when majority of population was still employed in agriculture. Except homeless, 100% of population is invested in real estate. Only tiny portion of money is spent on stocks comparatively.
Georgist philosophy lives completely ouside of the current left right spectrum, both on the political and cultural level. However, if it become the next societal paradigm, you'll see this divide again. It is becoming a real possiblity it'd become the next paradigm because after zero interest rate policy, quantitative easing, helicopter money and debt amnesties, the only choice is between a war and georgism.
So, if you define "land" as including domain names, patents, copyrights, trade secrets, and electromagnetic spectrum, then sure, almost all money comes from "land". I would say that at that point, calling it "land" is pretty misleading, though. A right-wing Georgist who wanted to communicate ought to call it something else, like "monopoly control" or something.
> after zero interest rate policy, quantitative easing, helicopter money and debt amnesties, the only choice is between a war and georgism.
Objection, your honor. Assumes facts not in evidence.
Many Georgism advocates seem to have this idea that Georgism is this magic formula that is going to fix everything, and the only alternative is catastrophe. Even by those standards, though, this statement seems rather extreme. Can you defend it, rather than simply assert it?
It's called "land" because it is one of the three original factors of production in classical economics - labor, capital and land.
Labor is energy, Capital is accumulation of energy. Land is any natural opportunity.
Domains, patents or spectrums are portions of namespace, string space, idea space, frequency band - some kind of space, in other words land.
> Objection, your honor. Assumes facts not in evidence.
Many Georgism advocates seem to have this idea that Georgism is this magic formula that is going to fix everything, and the only alternative is catastrophe. Even by those standards, though, this statement seems rather extreme. Can you defend it, rather than simply assert it?
I don't want to defend anything. It's up to people to decide if they want to burn everything to the ground after exhausting all the economic policities with nothing much to show for it. Real estate keeps getting bigger problem than ever, birth rates plummeting. Continuing the trend will result in a collapse by one of 1. depopulation 2. war 3. revolution or similar event. Since real estate is such a big part of it, georgism - the antidote for misbehaving real estate - seems like the next tool to reach for.
Anyways - everybody who spends a bit of time trying to understand it realizes that it is logically the obvious solution, but is politically infeasible.
> It's called "land" because it is one of the three original factors of production in classical economics - labor, capital and land.
That makes as much sense as trying to fit all of chemistry into earth, air, fire, and water. There's a lot more going on in economics these days than "the three original factors of production", and trying to shoehorn everything into those terms doesn't make sense.
Your last two paragraphs assume that everything is going to burn to the ground if we don't have a magic fix. I asked for a defense of that; you gave me a restatement.
And in your last paragraph, "everyone who understands knows it's right". Nice. I'm sure that's some flavor of logical fallacy, but I'm too lazy to dig up the right label to put on it.
I think the division between land as natural resources and land as any non-Schumpeterian economic rent source (so broadcast spectrum rights but not brands because the company created those) is more between traditional and modern Georgists.
But it still runs into the same practical problems. The taxable value of "unimproved" Google.com is negligible (the same value as any other domain name, or vaguely pronounceable nonsense word domain name if you're trying to be really specific with your tax assessments), probably less than they're currently paying their domain registrar for.
If you're taxing billion dollar companies and their founders significantly less, you're taxing everyone else significantly more or providing fewer public services (in George's vision where LVT is the only tax). There's an efficiency argument that letting Googles be even richer is good for all of us because we get so much more stuff from it and people who use land to live on rather than to build social networks on deserve penalising for their relatively unproductive use of the land, but it's not one that necessarily corresponds well to the reality of the sort of CRUD-apps with lockin monopolies Silicon Valley VCs tend to build and the sort of employment and development opportunities the average homeowner has
I apologize for the uncalled snark. My point is that at the end of the day everything valuable at some point came from the land. The Intel factory is just wealth that was extracted and accumulated earlier, it is an actual, valuable asset.
If you take the view that "land" is where all the matter on earth comes from, it kinda makes sense. It's the strictest interpretation of materialism I've ever heard, though; there would be nothing of value without input of the sun's energy.
The exact proximity of earth to the sun is what gives the land on earth value. In fact, this implies that humans did none of the work, they just took what was already there and labeled it their own.
How do you plan on existing without a universe, without any laws of physics? Ownership of land extends into the ground and into the sky. You are owning a slice of the universe. The earth is conveniently located near a nuclear fusion reactor the energy it radiates is embodied in the value of land on earth. The value of land on Pluto is very low. Nobody wants to live there. The fossil or nuclear fuels you dig out to power your car or fridge are ultimately born from land. Energy is derived from what is below our feet and extraction rights are literally the ownership of land.
>How is income tax ultimately borne by land? Sales tax? Inheritance tax? Gasoline tax? Corporate income tax on corporations like SpaceX, Goldman Sachs, and Intel?
Gasoline must be refined from crude oil which is extracted from land.
SpaceX needs aluminium, steel and rocket fuel which all must be extracted from land.
Goldman Sachs just manages incomes derived from land.
Intel obviously depends on an uncountable number of chemical compounds derived from the land
Unlikely that georgist system would get adopted gradually. It never worked in history.
Denmark georgist party (Justice party of Denmark) never got a strong popular support. When they got some attention and implemented georgist policies, vested interests would take the new gains and roll the policies back, capturing the profits only for themselves.
The only model that was sustainable on a country level was Singapore and the eastern colonies like Hong Kong or Jiaozhou Bay.
Unless there is dire disperation or a threat of a bigger enemy attempting to swallow you, the population gets complacent and always goes back to the humanity default of trying to outcompete their immediate neighbors, instead of working together to survive the threat of the poverty or the surrounding enemy.
I admire your optimism. My hopes are that humanity gives georgism a chance this time. Instead of repeating the cycle by falling into yet another great war and then bringing prosperity back only as a post-war restoration.
The trouble with value assessment is good enough to dismiss LVT altogether.
I don't want to be forced to liquidate my house to cover LVT bill only because the land value shot up thanks to being a part of future promise from a developer project that doesn't have to fall through.
Assessing value for the purpose of sale is much easier than for the purpose of tax.
Land owners need to assess value when they want to sell. Taxmen need regular value assessment so they can tax it.
Does renting out a room in your house to students influence the taxes you and your neighbors pay? How does it change your relationships if they never plan to sell?
For those who think a Georgist tax makes sense, why not apply the same type of logic to income?
If someone is employed as say, a teacher making $75,000 a year, but would be most productive as a software developer making $200,000 a year, should we tax them on $200,000 a year?
>> land doesn’t have freedom of choice the way people do
I mean that's your best argument, but it's not as clear cut as that to me. What I do with my property and what I do with my labor are both matters of freedom of choice. But yeah, I get you. I don't want to be told what to do with my labor. But I don't want to be told what to do with my land either.
>> We also currently tax land based on its market value which corresponds to the most productive use of the land
No, don't agree. If tore down the house I live in and built a 12 story apartment building on the same piece of land, it would be worth more and be taxed more. We currently tax property on its market value, not land on its market value. At least where I live.
The portion of property taxes that tax the land tax it at its market price though. And we know from economics that the market price is set based on the best economic use. So the entirety of your disagreement seems to be “we also tax buildings” not that the portion of the tax on land doesn’t work the way I said.
What you do with your labour is a strong right that is deeply connected to bodily autonomy. Bodily autonomy rights come from nature and shouldn’t be violated by society.
What you do with your land is a weak right that is socially constructed and depends on the society that defined the rules under which land acquisition made sense.
There is a stronger moral basis for taxing land than there is for taxing labour. There is also a stronger moral basis for restricting land use than for restricting labour. Despite your efforts to paint them as the same, these two things are in fact very different.
>> What you do with your labour is a strong right that is deeply connected to bodily autonomy
Taxing people at different rates based on the decisions they make is not taking away bodily autonomy. Taxing someone at a higher rate if they choose not to have children does not force them to have children. The teacher isn't forced to become a software developer. There are just tax implications for the decisions one makes, as there are already now.
And I don't agree that property rights are weak rights. Property rights are at the very core of a free society.
By weak right I mean that they are socially constructed and thus depend on society. By strong right I mean they come from nature and don’t depend on society.
Many of the classical philosophers have made strong arguments for the right of bodily autonomy extending to ownership of your labour both in the sense of owning your choice of what to do and owning the fruits of your labours. Income tax is government interfering with your ownership of your own labour which violates this sense of bodily autonomy. You might argue for a weaker notion of bodily autonomy but doing so requires some substantial moral argumentation rather than mere assertion.
As to the idea that property rights are at the core to a free society, can you provide me with an example? Since we are discussing the idea that taxation would be a violation of a property right what I’d like to see is a society where having untaxed land is core to the freeness of society.
1. Theoretically a tax against potential earnings is actually good, but it's much more difficult to estimate than land prices.
2. LVT is mostly about redistributing rents, with the land use efficiency bonus as a big second order benefit.
3. Professions aren't exclusionary. A person doesn't squat on their teacher gig for 20 years in order to see how their claim on being 1 of finite-X allowed software developers might rise in price. Other people would just become software developers.
The logic of LVT isn't to force all of the factors of production to their highest and best use. It is to share the value of the Earth, which no human created, and thus georgists believe it should be shared equally.
That this particular solution to that moral view also happens to put land to its highest use is a nice bonus.
Henry George was a classical liberal, and thus did not believe anyone had a right to the labor of others, or that they should have any say in what kind of labor others should perform.
Did some human create my ability to work in a factory stacking boxes or to work as a software developer, both things that I have done? Which human created that?
And suppose no human did that, to talk about sharing that value equally? That sounds really creepy to me.
I was not clear enough, apologies. Naturalness is not the reason that things should be owned in common. Rather, the reason that land ought to belong equally to all is because unchecked exclusive ownership reduces the freedom of non-landowners. It is thus incompatible with a classical liberal view that celebrates individual freedom.
If I build a fence and claim everything inside of it, you might find that reasonable. If I build a fence and then successfully claim everything outside of it, then I have in effect made everyone else prisoners inside of the fence. And if a subset of humanity claims the entire Earth, then the rest become like trespassers to be dealt with however the landowners saw fit. The rents they demand could be unlimited, since everyone requires access to land.
Every parcel claimed reduces the amount of freedom of everyone else, and eventually all land becomes claimed and rents begin rising in tandem with the progress of civilization, putting people into a position of serfdom. And that is why no amount of technological progress will ever eliminate poverty.
So you'd propose taxing meth, heroin and goodness knows what else too? While tax is merely an inconvenience for the wealthy, for the poor it can be a eat-or-starve decision.
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[ 4.1 ms ] story [ 198 ms ] threadThis review clearly illustrates the ideas from George that land captures gains that in a more fair society we'd want to go to labour.
Your comment is somewhat misleading, as it seems to suggest that all or most economists endorse Georgism, which is not true. Some vocal minority of economists are pro-Georgism, but I haven't seen any data suggesting it is the most popular taxation scheme.
Do you have any papers/writing which specifically criticise Georgism?
The book itself was the best selling economics book of the 19th century. It inspired art demonstrations and some governments throughout the world even adopted LVT for a while. So yes, it was pretty popular.
https://news.ycombinator.com/item?id=17605751
But by far my biggest objection to his arguments is that he ignores the way density impacts land value over time. If we build huge skyscrapers in the countryside it's reasonable that businesses will spring up around them. Various economists have modelled this and land value increases in proportion to the income of its occupants. It's one of the reasons cities need to pay developers to get affordable housing. The allocation of people into housing that was once affordable in the market sense will naturally result in rising land values and rising rents. In no time and no place in history has density made land cheap.
If we choose to dot the countryside in huge towers the land on which those huge towers are built and the land of the shops immediately beside those huge towers will have a high value that tapers off quickly as you head further into the now empty countryside. You end up with a strange peaky distribution. In practice, the increasing land rents of the building and the decreased land rents of the countryside would encourage occupants to leave for greener pastures. And the developers would know this would happen before even building a huge building in the countryside because it is economically well understood.
He also makes far too big a deal out of the need for a negative land market. You can keep abandonment if you just have a 95% LVT instead of a 100% LVT and you now have a market where land values are overwhelmingly positive.
LVT experiments in history tend to run into problems when people feel that their land has been valued incorrectly, leading to a vocal minority that despises the law. That results in something like this:
https://nassimtaleb.org/2016/08/intolerant-wins-dictatorship...
In an urban setting, it seems to me that the land value should be... reasonably uniform, unlike property, which should make assessing much easier, right? But that's just getting the number. Whether people are happy with the number is a whole 'nother problem.
10 acres that are 30 minutes from Des Moines, IA are going to be very similar in value (price people are willing to pay) compared to 10 acres that are 10 miles down the road. Rural land is generally quite uniform and more likely to be functionally the same. In an urban area, say Los Angeles, 10 acres in Malibu (an area with very high demand for property) is going to have a totally different value (again, price people are willing to pay) as compared to 10 acres 10 miles away in skid row.
The problem, that other people have highlighted, is how do you (the government/IRS/agency in charge) determine the value of each of those land areas? Letting some city planners in LA decide that those two areas should have the same LVT, or allowing them to determine what tax each should have, is gifting a lot of power to people who may or may not be qualified, and may or may not experience any sort of consequence for poor decision making/ biased value assessment/ etc.
The exact way that sort of value/tax-setting would play out would be very interesting, but the unintended consequences could end up being pretty bad.
I've always thought it was interesting that property tax assessments don't just use the previous purchase price, and instead rely on a relatively arbitrary valuation. That could be one way to more accurately determine an LVT - make it a set percent of the previous purchase price of the land, that would allow the taxes to be priced in to land transactions.
I still just don't love the idea at its core.
How do you know you weren't also supposed to take the floor plan or exterior paint color into consideration? How do you account for the value lost from having obnoxious neighbors? What happens when, in the future, a nice bookstore/coffee shop is opened up down the street, or alternatively a liquor store? Ultimately, how do you know if whatever equation you've constructed is exhaustive or "correct"?
It might sound like "well then you just adjust the equation" but this wouldn't be without consequence. One outcome of getting that equation incorrect is that a home is valued at a point where the imposed tax prices out anyone from purchasing the home - it would sit empty/foreclosed for as long as it takes a local government bureaucracy to come in and attempt to re-assess its value. So you could effectively be removing houses from a competitive home buying market, which is going to increase the price of other homes until they too have priced people out of the area. Multiply that by entire zip codes, and while you're working on adjusting that equation, you could end up having a real shit show on your hands with a bunch of people being displaced or in worse financial positions.
> It is at least possible to come up with something, unlike, what, the assessor's gut feeling about how nice your house is? This seems like it is putting much more arbitrary power in the hands of some random person.
I agree with the point that a home assessment is strange and arbitrary, but you're really just saying we should replace the assessor who goes and visits a property with a group of assessor's that just come up with an equally arbitrary equation that gets blanket applied to entire cities? Why is that preferable to something like just using the previous home sale price or, honestly, just staying with the current system that we know is generally very functional?
Floor plan or paint color -- the point of a land value tax is that it is based on the value of the land. Floor plan and paint color would be improvements on the property, so they would be excluded.
The current system is not very functional. Housing is not very affordable in most cities due to speculative real estate investment and under-development. I mean, we clearly get by, but just because the alternative is being homeless.
Landowners decide for themselves what value their land has, and pay tax accordingly. But whatever they say the value is, someone else is allowed to buy it for.
For a realistic implementation, why not just use the fact that the landowner already decided what the value their land has when they purchased it and/or paid people to develop it. Why not just use those values?
So you get to decide your tax each year but if you save yourself too much someone else will grab the excess value.
Now you can't afford the taxes, and you're forced to sell and move to somewhere with lower LVT. It's bought by someone who will put it to better use. Maybe an apartment block instead of your single family home.
Over time, every piece of land is put to its most productive use. But before it gets there, there will be some pain for the individuals who choose (or are forced) to move because they can't afford to the improvements made to the infrastructure in their locality.
> Over time, every piece of land is put to its most productive use. But before it gets there, there will be some pain for the individuals who choose (or are forced) to move because they can't afford to the improvements made to the infrastructure in their locality.
Which is why I think it makes sense that the LVT shouldn't be re-evaluated on a rolling basis. It would only be re-evaluated (or at least put into effect) when it changes owners (sale, gift, inheritance, etc). Otherwise you get bad incentives for people to vote against improvements that price them out of living where they currently are.
Corporate land ownership would likely need different rules, as the owner could theoretically be the same forever.
Over time, land is still put to it's most productive use, there is just a delay introduced that considers the human condition.
In this case you’re trying to replace the majority of all taxation with a value that doesn’t change with time. People get massive economic incentives to never move. People get massive economic incentives to resist change.
I’d rather deal with a range of options from people selling and moving to introducing liens upon the property due at sale than have to deal with the mess that is 50 year stale land values and the associated negligible taxes that result.
Yes, but note that property taxes are extremely unpopular:
> America's most hated tax: Local property tax (42%) By far, America's most hated tax is your local property tax! It's almost ironic that your home, perhaps the single greatest source of taxable deductions on your federal income taxes, is also the greatest source of dislike when it comes to taxes in general among the American public with 42% responding that they felt it was the least fair tax of all.
Source: https://www.fool.com/investing/general/2013/11/02/americas-5...
It looks like that 42% number comes from this Gallop poll: https://news.gallup.com/poll/1714/taxes.aspx
They have a sort of purity and logic that appeals to economists, but they're intuitively hated by everyone else.
edit: it seems obvious because of the thread topic, but property taxes are the most easily and intuitively justifiable tax. People with more property use more public services.
"It's unfair. It's the one tax you can't avoid. No matter what you do, you can't opt out. It's like you don't even own your own property. The government owns it. You never really own anything, as long as they can tax you just for existing on your own land."
That's the intuitive, everyman objection.
One approach might be to do something clever with mortages and property rights. Basically keep trying to keep the current mechanics of borrowing and just shifting around the parties involved so that the all the interest gets collected as LVT.
Might even let the central bank handle both collection and dividends of it all.
Another option might be to create economic incentives for some party to get the assessment right. Like insurance companies and banks loose either customers or revenue when getting it wrong.
Perhaps can play with some margin for speculation such that lender and borrower get to share some profit.
Or just make lenders outbid each other on who can extract most rent for the property.
I guess one concern here is to make sure the commons have a representation, so that not all land get appropriated to private use
A moral argument for it is, if you own an empty lot which is gaining in value as the community grows around it, you are essentially leeching extra value from the community through no work of your own. This sort of behavior is punished heavily with an LVT, as your taxes go up but you don't get any extra revenue from your empty lot.
https://www.lincolninst.edu/sites/default/files/pubfiles/ass...
Of course there are secondary and/or orthogonal problems that need to be solved. Of course there are some people who complain, either because they are truly being overtaxed or (more often) because they think they personally would do better under some other system. Just like literally every other tax system including the ones most of us live under right now. LVT is no panacea, but there are legitimate reasons to believe it's a fundamentally better starting point than the mishmash of income, sales, and property taxes we have now.
This is a well-known canard. If someone can't pay their tax on a primary residence, you put a lien on the property that becomes enforceable when the ownership changes hands, whether by sale or inheritance. No one gets "thrown out" of their homes.
But that's a minor issue compared with the second part of my post, which is that if a proposed tax reform reduces the tax burden on almost every corporation and high net worth individual (bar a few land speculators and domestic oil well owners), ordinary people have to pay more to the government or get less from the government. LVT might be perfectly viable as a tax, but as a Single Tax replacing the existing set of taxes (which arent exactly optimal from the point of progressitivity to start off with) it's a wealth transfer on an unprecedented scale from people whose wealth is mainly the property they bought (including the land it sits on) to people whose wealth is mainly the shares they own. The latter category is much richer than the former.
Efficiency arguments that the average middle class homeowner would still be better off materially even with a much higher personal tax bill because the Zuckerbergs and Dorseys of this world would retain more untaxed profits and dividends to use their superior resource allocation skills to invest in land-free Bigger Adtech might appeal to the armchair neoclassical economist but for obvious reasons the public are more sceptical.
If we plug in something approaching real data, the UK government statistics agency assesses that the UK has £6tr in land value (more than the value of the assets that sit on it!) of which two thirds is owned by householders. And there's an annual government budget of 1tr so those land value taxes are going to be a really high proportion of the total value of the land (and property that sits on it). Good luck convincing the average homeowner who takes 30 years to pay for their home from their salary and typically retires not long afterwards that the tax incidence of a Single Tax will be favourable to them
But that's exactly the point - these people are glorified renters, they don't really structurally benefit when land values go up. The fact that a Georgist tax has to be introduced gradually in order not to be punitive towards those who happen to be holding land at any given time is well known. But we already have property taxes for a start, many countries have large one-time fees on real estate transactions etc. These are taxes that could quite easily be replaced by a shift to LVT.
The more I think about it, the more I'm sure that's the actual motivation.
I think people need to keep in mind the actual purpose of taxation: One group is taking resources from another. Nobody is pushing this tax (or any) because it's "efficient" or whatever. They are pushing it because they will come out ahead.
A person who lives in a 600 square foot apartment in a 60 story tower will effectively be paying taxes on 10 square feet of actual land. That land might be very valuable, but I suspect no matter how you twist the numbers, it's going to be less than two acres anywhere in the country. Especially if you go by the spirit of the LVT, which is to ignore improvements.
I could be wrong. I'm just guessing at "who fucks over whom" here.
From system design we know that no matter how much we optimize other parts of the system, no gain in performance will be achieved because the flow still has to go through that bottleneck. So we should focus on removing that narrow part before even engaging in discussions about other economical topics such as minimum wages, healthcare or education funding etc.
Society has it backwards.
I’ve seen land as cheap as $489 an acre and land as expensive as $6,000,000 for a half-lot. Even assuming $12,000 an acre in the countryside in California which can be found now on the internet, it’s quite believable that 10 square feet of land beneath a skyscraper is going to be worth more than $24,000. That 10 square feet is an underestimate as well because the unit will be responsible for more than 1/60th of its floor plan.
As other people pointed out, there should/would have to be some mechanism to value the land for the LVT. The land the apartment building is built on in the city would have a higher value than some 2 acres out in the country. The owner of that land would have to pay the LVT, and the rent for an apartment on that land would reflect that - ultimately making everyone who lives in the apartment pay that tax, if indirectly.
This might sound good in theory, but it is a very hard sell to say that's how it pans out in practice. You even say: "This doesn't work with anything that has elastic supply like buildings" - so as soon as you put a building (apartments) on the property, this theory goes out the window.
> But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants.
I don't dispute that there would be some competition among landlords as to how much of their LVT they can pass off to tenants - it wouldn't be 100%. But to claim that there would be no impact to tenants strikes me as hilariously naive.
If you have a fundamental objection to how the established theory of supply and demand curves works I can’t really help you. Large parts of economics have shown it to be successful and I certainly trust it over anecdotal arguments about how landlords will pass on the tax.
Based on the demand curve any attempt to pass on the tax will result in empty land and less overall revenue due to the mispricing. This at a minimum means some landlords will be very unhappy.
The bottom line is that this idea has literally no downside.
If we still had 1870's small government the idea would be to put most of the LVT into a Citizen's Dividend which functions like a UBI and helps people pay for their cost of living (including some of the land taxes).
If it becomes more valuable, but in such a way that they can't leverage it, they can sell it.
> Commentators disagreed on whether it was the largest funeral in New York history or the largest since the death of Abraham Lincoln. The New York Times reported, "Not even Lincoln had a more glorious death."
https://en.m.wikipedia.org/wiki/Henry_George
https://cdn.mises.org/Progress%20and%20Poverty_3.pdf
https://www.gutenberg.org/ebooks/55308
https://librivox.org/progress-and-poverty-by-henry-george/
[1] https://www.ecosophia.net/reimagining-political-economy/
Tenants pay the same rents they do now (perhaps slightly lower due to removal of speculation) but no longer have to pay any income tax. Property owners pay more in LVT but no longer pay income tax as well. No one gets to hold land value unearned and benefit from the work of others except the government who uses it to reduce other taxes and provide services we've come to depend on in modern society.
This is quite different from various radical re-imaginings of the entire economic system. Those systems are looking to solve almost entirely different problems and introduce far more new ones.
A landlord might lobby for restrictive land use policy while sitting on a parcel, and then lobby for opening those restrictions when it comes time to sell. Essentially avoiding the tax by using government policy to suppress the true land value.
There are solutions to this of course, but they come down to zoning and land use regulation, which is sort of the core of all our other problems with real estate in America.
That's not "a challenge" it's a positive side effect. Those government institutions would be enabled to internalize the value that they create, which is presently being captured by random private parties that did not create it.
But if you are trying to value this land from a Georgist perspective, and one that takes into account property zoning and use requirements, the land is worth much less than it should be due to the restrictions, and would be taxed lower than parcels of similar size in nearby cities.
This seems, in theory, to reward obstinate enclaves of low-density development within larger metros. The homeowners have no reason to elect a council that would vote against their interests in this respect, and their taxes would stay low.
I agree there are also significant issues with zoning, but zoning alone won't solve the problem. A bunch of people capture a bunch of economic rents unearned, and it would be much better for government to capture these economic rents as part of the system and charge us less tax on things that actually are earned.
But it also seems effective overall. After I quit my last job and before I got my current job, I did not work for several years (some due to choice, some due to circumstance). During this time, I obviously paid no income tax. But I still paid my mortgage (some of which obviously went to property tax, but mostly to the bank). Presumably with a land value tax, my payment to my mortgage company would be notably less less and the tax would notably be more, so during that time instead of paying a bank I would be paying taxes that go to infrastructure and welfare and whatnot.
I think this sort of thing is more accurate than an income-based source of taxes, because I obviously wasn't really in the same economic situation as an underemployed person who truly couldn't find a job for several years. It also allows you to assess your own level of taxation. For instance, I could have sold my place or rented it out, and moved elsewhere to a cheaper place (or I guess a more expensive place, were I so inclined to do so while not having a job).
Of course, the big disadvantage, as mentioned elsewhere in this thread, is that it is difficult to assess land value sometimes. It also seems like it may force people to move a bit more often, and moving is exhausting. And also presumably you'd have to convince people to pair this form of taxation with more lax zoning laws (with some stricter exception for farmland or something to keep the value per square foot low enough for it to still make sense).
Even weighing these factors, it seems like an improvement over the current system. But I guess the real issue is that in the current world of mortgages and such, even if 90% of the population decided it truly did make sense as a form of tax, the transition seems nearly impossible.
Any implementation would have to not include this for people to be able to have stable lives.
There is a difference between something being intrinsically worthless and the taxes driving the market price to $0.
Objection, your honor. Assumes facts not in evidence.
How is income tax ultimately borne by land? Sales tax? Inheritance tax? Gasoline tax? Corporate income tax on corporations like SpaceX, Goldman Sachs, and Intel?
"Ultimately borne by land" may have made sense a century or three ago, when (almost) all income ultimately came from the land. That's not the world we live in any longer.
You cannot eat a metaverse.
I gave several examples of wealth that doesn't come from land. I asked for an explanation of how, in those examples, wealth came from land. You reply with an insult to my chosen username. That's... not a very good argument.
> Paper money in the end is just a representation of claims for assets generated from land.
Here you're using the assumption that all wealth comes from land (the exact assumption I was questioning) in your argument. That's circular, and therefore flawed. You can't assume X and use that in your proof of X.
> Food, minerals, energy, actual things all come from land.
The silicon that goes into Intel chips comes from land. The chips themselves? Not so much.
The single biggest factor in Google's prosperity is the google.com domain name. How big a real estate footprint does that have?
I hear that Taylor Swift has a pretty big income. How much of her income is based off of land? It's derived from a musical imagination.
> You cannot eat a metaverse.
This I will grant you. All food (currently) is derived from land. There's a lot more to wealth than food, though.
1. Left wing georgists. Land = resource needed for human life. Humans cannot fly, therefore land is a life necessity. Food grows on land and nowhere else, therefore land is necessary for life.
2. Right wing georgists. Land as a monopoly. Electromagnetic spectrum (5g, wifi, radio waves) cannot have too many owners of a band otherwise you get interference. Google.com domain can be owned only by one entity otherwise you get mess. For actual land (geographical parcel) you hold exclusive use rights, that others have to respect, otherwise you get fights for territory. All of these - geo area, name system, electromagnetic spectrum - constitute a form of land. There are grades of it which differently priced and only one owner can operate it at a time.
Land is still the most important section of economy. Real estate is mainly land speculation. You can observe billionaires investing in real estate and land when there is nowhere else to invest, so it definitely is not piece of worthless nothing that only had value in 19th century when majority of population was still employed in agriculture. Except homeless, 100% of population is invested in real estate. Only tiny portion of money is spent on stocks comparatively.
Georgist philosophy lives completely ouside of the current left right spectrum, both on the political and cultural level. However, if it become the next societal paradigm, you'll see this divide again. It is becoming a real possiblity it'd become the next paradigm because after zero interest rate policy, quantitative easing, helicopter money and debt amnesties, the only choice is between a war and georgism.
> after zero interest rate policy, quantitative easing, helicopter money and debt amnesties, the only choice is between a war and georgism.
Objection, your honor. Assumes facts not in evidence.
Many Georgism advocates seem to have this idea that Georgism is this magic formula that is going to fix everything, and the only alternative is catastrophe. Even by those standards, though, this statement seems rather extreme. Can you defend it, rather than simply assert it?
Labor is energy, Capital is accumulation of energy. Land is any natural opportunity.
Domains, patents or spectrums are portions of namespace, string space, idea space, frequency band - some kind of space, in other words land.
> Objection, your honor. Assumes facts not in evidence.
Many Georgism advocates seem to have this idea that Georgism is this magic formula that is going to fix everything, and the only alternative is catastrophe. Even by those standards, though, this statement seems rather extreme. Can you defend it, rather than simply assert it?
I don't want to defend anything. It's up to people to decide if they want to burn everything to the ground after exhausting all the economic policities with nothing much to show for it. Real estate keeps getting bigger problem than ever, birth rates plummeting. Continuing the trend will result in a collapse by one of 1. depopulation 2. war 3. revolution or similar event. Since real estate is such a big part of it, georgism - the antidote for misbehaving real estate - seems like the next tool to reach for.
Anyways - everybody who spends a bit of time trying to understand it realizes that it is logically the obvious solution, but is politically infeasible.
That makes as much sense as trying to fit all of chemistry into earth, air, fire, and water. There's a lot more going on in economics these days than "the three original factors of production", and trying to shoehorn everything into those terms doesn't make sense.
Your last two paragraphs assume that everything is going to burn to the ground if we don't have a magic fix. I asked for a defense of that; you gave me a restatement.
And in your last paragraph, "everyone who understands knows it's right". Nice. I'm sure that's some flavor of logical fallacy, but I'm too lazy to dig up the right label to put on it.
But it still runs into the same practical problems. The taxable value of "unimproved" Google.com is negligible (the same value as any other domain name, or vaguely pronounceable nonsense word domain name if you're trying to be really specific with your tax assessments), probably less than they're currently paying their domain registrar for.
If you're taxing billion dollar companies and their founders significantly less, you're taxing everyone else significantly more or providing fewer public services (in George's vision where LVT is the only tax). There's an efficiency argument that letting Googles be even richer is good for all of us because we get so much more stuff from it and people who use land to live on rather than to build social networks on deserve penalising for their relatively unproductive use of the land, but it's not one that necessarily corresponds well to the reality of the sort of CRUD-apps with lockin monopolies Silicon Valley VCs tend to build and the sort of employment and development opportunities the average homeowner has
>How is income tax ultimately borne by land? Sales tax? Inheritance tax? Gasoline tax? Corporate income tax on corporations like SpaceX, Goldman Sachs, and Intel?
Gasoline must be refined from crude oil which is extracted from land.
SpaceX needs aluminium, steel and rocket fuel which all must be extracted from land.
Goldman Sachs just manages incomes derived from land.
Intel obviously depends on an uncountable number of chemical compounds derived from the land
Denmark georgist party (Justice party of Denmark) never got a strong popular support. When they got some attention and implemented georgist policies, vested interests would take the new gains and roll the policies back, capturing the profits only for themselves.
There are pockets in the US which are adopting georgist policies out of desperation. https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
The only model that was sustainable on a country level was Singapore and the eastern colonies like Hong Kong or Jiaozhou Bay.
Unless there is dire disperation or a threat of a bigger enemy attempting to swallow you, the population gets complacent and always goes back to the humanity default of trying to outcompete their immediate neighbors, instead of working together to survive the threat of the poverty or the surrounding enemy.
I admire your optimism. My hopes are that humanity gives georgism a chance this time. Instead of repeating the cycle by falling into yet another great war and then bringing prosperity back only as a post-war restoration.
I don't want to be forced to liquidate my house to cover LVT bill only because the land value shot up thanks to being a part of future promise from a developer project that doesn't have to fall through.
Land owners need to assess value when they want to sell. Taxmen need regular value assessment so they can tax it.
Does renting out a room in your house to students influence the taxes you and your neighbors pay? How does it change your relationships if they never plan to sell?
GameOfRent is a new site by the author to collect these and similar writings by him and others.
https://astralcodexten.substack.com/p/your-book-review-progr...
If someone is employed as say, a teacher making $75,000 a year, but would be most productive as a software developer making $200,000 a year, should we tax them on $200,000 a year?
Regardless, I think there are fundamental differences between the two cases. Most notably land doesn’t have freedom of choice the way people do.
We also currently tax land based on its market value which corresponds to the most productive use of the land so LVT doesn’t change this.
I mean that's your best argument, but it's not as clear cut as that to me. What I do with my property and what I do with my labor are both matters of freedom of choice. But yeah, I get you. I don't want to be told what to do with my labor. But I don't want to be told what to do with my land either.
>> We also currently tax land based on its market value which corresponds to the most productive use of the land
No, don't agree. If tore down the house I live in and built a 12 story apartment building on the same piece of land, it would be worth more and be taxed more. We currently tax property on its market value, not land on its market value. At least where I live.
What you do with your labour is a strong right that is deeply connected to bodily autonomy. Bodily autonomy rights come from nature and shouldn’t be violated by society.
What you do with your land is a weak right that is socially constructed and depends on the society that defined the rules under which land acquisition made sense.
There is a stronger moral basis for taxing land than there is for taxing labour. There is also a stronger moral basis for restricting land use than for restricting labour. Despite your efforts to paint them as the same, these two things are in fact very different.
Taxing people at different rates based on the decisions they make is not taking away bodily autonomy. Taxing someone at a higher rate if they choose not to have children does not force them to have children. The teacher isn't forced to become a software developer. There are just tax implications for the decisions one makes, as there are already now.
And I don't agree that property rights are weak rights. Property rights are at the very core of a free society.
Many of the classical philosophers have made strong arguments for the right of bodily autonomy extending to ownership of your labour both in the sense of owning your choice of what to do and owning the fruits of your labours. Income tax is government interfering with your ownership of your own labour which violates this sense of bodily autonomy. You might argue for a weaker notion of bodily autonomy but doing so requires some substantial moral argumentation rather than mere assertion.
As to the idea that property rights are at the core to a free society, can you provide me with an example? Since we are discussing the idea that taxation would be a violation of a property right what I’d like to see is a society where having untaxed land is core to the freeness of society.
2. LVT is mostly about redistributing rents, with the land use efficiency bonus as a big second order benefit.
3. Professions aren't exclusionary. A person doesn't squat on their teacher gig for 20 years in order to see how their claim on being 1 of finite-X allowed software developers might rise in price. Other people would just become software developers.
That this particular solution to that moral view also happens to put land to its highest use is a nice bonus.
Henry George was a classical liberal, and thus did not believe anyone had a right to the labor of others, or that they should have any say in what kind of labor others should perform.
And suppose no human did that, to talk about sharing that value equally? That sounds really creepy to me.
If I build a fence and claim everything inside of it, you might find that reasonable. If I build a fence and then successfully claim everything outside of it, then I have in effect made everyone else prisoners inside of the fence. And if a subset of humanity claims the entire Earth, then the rest become like trespassers to be dealt with however the landowners saw fit. The rents they demand could be unlimited, since everyone requires access to land.
Every parcel claimed reduces the amount of freedom of everyone else, and eventually all land becomes claimed and rents begin rising in tandem with the progress of civilization, putting people into a position of serfdom. And that is why no amount of technological progress will ever eliminate poverty.
Wouldn't this be a pragmatic way to raise tax revenue? What do we want less of?
Pollution.
What do we want more of?
Jobs, prosperity, the good things in life.
So tax pollution instead of things like jobs, prosperity, etc.