Comment by SmellTheGlove | Hacker News Reader

Comment by SmellTheGlove | Hacker News Reader

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I'm not entirely surprised. In Florence, and probably in lots of other places too, wealth was amassed in land holdings and gold (florins being the currency). Land holdings over a 700 year horizon seems like a far better stability bet than equities, since the land itself has intrinsic value even if the occasional war or natural disaster gets rid of whatever is happening on it. Back in the 1400's, the merchant class absolutely made a great living - upper class even. But the old blue bloods (many families of which even went broke, in terms of liquidity) and nobility had land. They used that land to build business and bring in rents, and build business relationships with other upper class families, but even as the businesses faded the land remained. I mentioned some of the old Florentine nobility going broke - many of them preferred hardship to selling their land holdings. Some of them would eventually marry off a daughter to a family that desired the blue blood relationship and some land would go as dowry, thus restoring the fortune in that family (through the wealth of the inlaws). One good example is Lisa Gherardini's marriage into the del Giocondo family - she was of an old nobility fallen on harder times, while the Giocondo family were new money merchants. Some land and a few florins went with her, the Gherardini family were restored a bit and the Giocondo family remained wealthy for a long time.

I'm not a historian, but I've taken a bit of an interest in Florentine history as an adult, so take this for what it's worth. A real historian would probably know better.

Read Piketty's Capital; there's a great discussion about how wealth has been held across several capitalist countries for the past 200-300 years.

What's striking is that the value of agricultural land in the US around 1700-1800 was, if memory served, something like 50% of aggregate US wealth, whereas today it's <1%, with the dominant portion being residential real estate and business equity (which includes commercial RE, I think). According to the book, US wealth is about 50/50 between those two categories.

Which is all to say, land hasn't been that great of a bet growth-wise for the past 100 or so years in the US. I don't know how one would've fared over 700 years of Italian history, though.

More broadly, I think the biggest determinant of wealth is one's attitude toward generation of income. In a capitalist economy, long-term wealth is generated by the acquisition, improvement, and operation of assets; it's the same deal whether you're a business owner/founder, investment banker doing leveraged buyouts, landlord, miner, whatever. Get assets (build/buy), work on them, then use them for income or sell them to buy other/more assets. Very different attitude toward income than "Get a job". I wonder how correlated attitude is with wealth?

I'm curious how much of the agricultural land then is the residential land today.

Seems land taxation + basic income would be a great combo to spread wealth around.

I happen to think that if you want to maximize human potential across the board, you need to take away the threats to existence at the individual level - meaning a place to live, food, healthcare, education. If your basic needs are met, theoretically, you're free to explore and innovate (or sit on your ass, but I think the propensity for that is overblown). That's not just to help poor people either, that could boost your middle class output as well - use me for an example, I'm educated, relatively advanced in my career for my age, but I'd probably be doing something different if I didn't have to worry about student loans to repay and a roof over my family's head. Maybe that something different would be more impactful, maybe it wouldn't, but it'd be different. I digress. I really hope to see UBI attempted somewhere to see if it works.

We do already tax land in most (all?) of the developed world. I honestly have no idea of the tax structure on land in 15th century Florence, but I'm inclined to check that out after work today.

Of course, goals vary across humans. Advancing the whole at the relative expense of another makes the people who are already ahead a bit nervous. That's not wrong, either, it's just human nature. Advance the baseline far enough and it begins to matter less.

AFAIK, we have tax on property. We tax the land plus the value added to the land by building on it. IMH, we shouldn't tax the construction since that is disincentive for economic activity. But the land? Some land just becomes valuable because it is near other valuable properties.

Georgism gets a lot of support on HN, but how exactly would the unimproved value of land be determined? Similar to the appraisal system we have in place for houses, or something different?

I think you would have to take the current market value of the land, then subtract an estimate of what it would cost to re-do the improvements at today's prices. The insured value of structures may be an easy way to get at that estimate.

For instance, a lot with a house on it that costs $250k, when the structure would cost $180k to reconstruct from scratch, implies that an adjacent empty lot of the same size would be $70k. But that's not entirely unimproved. There still may be water, power, telecoms, and sewer utility hookups, which certainly qualify as improvements. So you estimate the cost to re-wire/re-pipe the entire neighborhood from the utility, and divide that across all the lots, weighted by area. And being close to a road is an improvement...

Professional appraisers would most likely just make a plausible-sounding number up, and collude with one another to ensure consistency over an entire county. It's the easy way.

The idea of land value tax is to create value by building on that land. Decreasing the tax when there is nothing on the land goes against that.

Just as an FYI: https://en.wikipedia.org/wiki/Bid_rent_theory

It is definitely an interesting problem. Perhaps a function based on the travel distance from where the rest of the people are living or working ? Sort of like page rank.

So land in Detroit and San Francisco, which have similar populations, should be valued about the same. (Yes, there are probably more people in the Bay area overall, but to a first approximation.) And coastal property on the southern Maine coast should have a low value.

Ultimately, it's market value. You can subtract the value of the building but it's actually hard to separate the two.

Instead of distance to people, how about distance to people times dollars?

Well San Francisco is on the coast. By sea, it has shorter travel times to all the cities in the West Coast, Vancouver and a continent called Asia.

> If your basic needs are met, theoretically, you're free to explore and innovate (or sit on your ass, but I think the propensity for that is overblown).

It's a necessary, but not a sufficient condition. You also need world class free education, and a networking system that tries to bring the most inventive people together.

I'm not sure if the propensity for empty hedonism is overblown or not. It's hard to imagine what would happen in a system with open economic freedom and self-determination, because it's never been attempted before.

I've seen estimates that maybe only 10% of the population is even remotely innovative. A lot of people seem to want to have someone telling them what to do with their time.

But is that because of the emotional scarring left by an economically abusive upbringing, or is it innate?

No one knows.

It makes more sense to try to grow the GDP and tax income instead. Taxing land in order to specifically target people with inherited land holdings has all sorts of unintended (or maybe intended) consequences because these people often do not have sufficient liquid holdings to pay the taxes. They end up having to sell off land in parcels which is an arduous and incredibly inefficient way for a government to raise revenues to 'spread wealth' and land in these cases often isn't easily parceled. Should a family sell their estate, the farmland that produces revenue that sustains the estate, or the useless swamp to cover the taxes? This isn't the sort of situation governments should be encouraging. If you have no mercy for that family, consider people whose parents buy a small plot of land that unexpectedly becomes very valuable and then the children are forced to sell the house on the death of their parents. Or the same family who finds their tax rate going up but their income staying the same because their land is suddenly in a trendy area. Taxing income to me seems like the most fair way to raise revenue because it targets liquid means.

> people often do not have sufficient liquid holdings to pay the taxes.

This is the "death tax" argument and has been debunked over and over. When they tried to find one of those, as the story goes, "farmers who lost their family farm", they couldn't actually find one.

If this is a genuine concern, then personal holdings of property should have capped tax increases until they transact. At point of transaction (inheritance generally), the assessment jumps to match the market.

As for corporate holding of property, it should get no such consideration. If you can't pay the tax, you transact the property. California is having a massive problem with the fact that a bunch of really expensive real estate in places like Silicon Valley have subleases that are 20+ layers deep to avoid triggering a reassessment.

That isn't true. Great article about the death tax here[1]. Also, have a look at these famous auctions[2]. Some were brought on by things other than taxes but death duties that Labour increased in the 1940s were definitely a precipitant. But these taxes are far reaching. From [1] it even says the death duties earn less than booze or tobacco, or vehicle duties.

I can't speak to corporate holdings of property, I am specifically talking about property held for generations in families. My general points are that it is a)inefficient and strange to target certain people that inherited and b) when you do target them, there are unintended consequences.

[1]http://www.telegraph.co.uk/news/politics/georgeosborne/11907... [2]https://en.wikipedia.org/wiki/British_country_house_contents...

As your article mentions, the problem is that the rich have a loophole because the property isn't taxed properly when transacted.

The point isn't to make "inheritance" the taxation point, it's to make "transaction" the taxation point.

In addition, I think that "inheritance tax" executes differently in the US than the UK.

I wasn't quite sure what you meant originally but I see it now and completely agree with taxes on transactions and perhaps removing those loopholes.

I fail to see why, if they aren't using the land productively, they shouldn't sell to someone who will. I don't understand why I should feel bad for the family whose small plot of land becomes very valuable so they make lots of money. How terrible!

So exempt primary residences from large tax hikes. The original promise of Prop 13 was to protect grandma from having to sell her home due to rising property values. But there have been some pretty bad side effects and a lot of the benefits are going to the commercial property owners and wealthy individuals and landlords.

This could have been solved by square footage or price floors. If grandma lives in a mansion, maybe she should be paying her share :)

But the original promise actually to protect people with larger property holdings like apartment complexes and condominium complexes.

The only thing worse than a wealthy person sitting on a vast horde of cash is a land-rich person sitting on vast tracts of highly desirable land. If somebody owned several acres in the heart of Manhattan and chose to leave them in the form of undeveloped, fallow fields, why should we not charge them high taxes in order to force them to either develop the land or sell it off to somebody who will?

Land is one of the rare cases where the needs of the many trump the rights of the few.

So what if we apply that rule to poor and middle income people? Are you suddenly interested in taxing those people to get them out so that someone with more cash can do something better with their land? What about people with just enough land to have an unsustainable tax rate but not enough land for it to be immediately useful for development? People with older homes in cities fall into this category frequently. How much revenue is this worth for the government after land is sold and properties destroyed to make way for new versus if they had just raised tax on income? This assumes there is even a willing buyer.

Raising tax on income is regressive by its very nature. The wealthiest people in our society pay almost no income tax at all and raising it would not affect them.

If an old couple is barely scraping by on a pension but sitting on a property worth millions that could be converted to an apartment housing hundreds of people, why shouldn't they be encouraged to sell or at the very least rent? In their present state they are a net drain on society, paying no income taxes and squeezing everybody else into less available land.

Land value taxes[0] are the answer to this mess.

[0] http://www.economist.com/blogs/freeexchange/2015/04/land-val...

>People with older homes in cities fall into this category frequently.

Would this not be a good example of just the sort of thing that would be fixed by this tax?

There are many people in places like San Francisco and Manhattan that are holding on to single family homes. This reduces the amount of housing that is available and increases rents. It seems fairly reasonable that these people should pay for the enormous resource usage.

I don't see how a tax resolves that situation, if the situation indeed needs resolving. The tax could just as well cause a large apartment with many renters to be unsustainable and become replaced with a smaller apartment with very high rents to cover the cost. If land can be used to build an apartment, that is one issue, but another issue is using a tax policy to try to change its ownership or purpose. I am more strongly opposed to the latter.

If every person has the right to defend even by force — his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right — its reason for existing, its lawfulness — is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute. Thus, since an individual cannot lawfully use force against the person, liberty, or property of another individual, then the common force — for the same reason — cannot lawfully be used to destroy the person, liberty, or property of individuals or groups.

Such a perversion of force would be, in both cases, contrary to our premise. Force has been given to us to defend our own individual rights. Who will dare to say that force has been given to us to destroy the equal rights of our brothers? Since no individual acting separately can lawfully use force to destroy the rights of others, does it not logically follow that the same principle also applies to the common force that is nothing more than the organized combination of the individual forces?[1]

[1]: http://bastiat.org/en/the_law.html#SECTION_G008

The right to defend one's person is not strictly a defensive right - without food, water, and shelter a person's body will get sick and die. Therefore, defense of the body carries the possibility of necessity for aggression, particularly against the property of others.

In view of this, the idea of placing one's property rights on the same level as the rights of the person of another is flawed. If one person is starving and another owns far more food than he could eat in a lifetime yet refuses to part with it I see no problem with the starving man using force to obtain his daily bread.

I am sort of reaching that conclusion myself too.

We are better and better on manufacturing. I don't know how much efficiency is left to extract. And human labor is becoming less and less valuable as we are better on automating.

Real Estate(housing and commercial), education and health are still very expensive.

A tax on land would reduce real estate costs and help pay for basic income. But politically will be really, really hard to do.

"Land taxation" is called property tax and it already exists everywhere. For most people it is the largest tax bill they pay, it pays for schools and roads and local government.

Property tax is common, land value taxes muss less so. Although arguably they're much better in many ways (assuming regulation isn't otherwise broken in regards to zoning for example).

Bali is a similar case. A bunch of rice farmers with vast ancestral lands, some families owning multiple square miles.

And when a new town or school is built nearby, they suddenly own 1,000 rental apartments. Dad goes from rice farming to collecting rents full-time.

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