Why a land-value tax is inevitable
medium.com
medium.com
2. LVT
3. Environmental externality taxes
That's all we need to fix the 21st century. Simple as hell so basically immune to regulatory capture, and will usher in a rate of progress we haven't seen in 100 years, if ever.
I'm skeptical of UBI. The idea doesn't include any kind of automatic stabilization system to set the UBI at a sustainable level. Because UBI is not market-based, there's little information that flows into the process that sets of level of UBI and other redistribution systems. In a market system, a distributed consensus algorithm governs both wages and prices and adjusts both continuously to account for changes in scarcity and utility.
Who decides how much UBI is enough? What procedure will that person or body use? What is the algorithm that prevents UBI increasing without bound? After all, the public voting itself unsustainable transfers from the state is one of the classic failure modes of democracy.
No matter the initial level of UBI, there will be someone who's able to gain political advantage by claiming that the UBI is insufficient for a dignified existence and that human rights demand an increase. Proposing a decrease in UBI will be political suicide. What prevents UBI increasing to the point that it captures all excess value production from all of society and redistributes it evenly? Wouldn't that system be tantamount to the planned economies of the 20th century?
Except it does: land value.
This right here is the basis of geolibertarianism, which calls for a minimal government that exists solely to collect LVT and redistribute it directly as UBI. The UBI distributed should be equal to the opportunity cost externalized by private/exclusive land use. The cap would be a 100% LVT, where all land is leased from society as a whole (or more precisely, this minimal government representing said society).
So:
> Who decides how much UBI is enough?
The land market.
> What procedure will that person or body use?
The appraisal of the market value of land (sans the improvements upon it, like buildings).
> What is the algorithm that prevents UBI increasing without bound?
Supply and demand of land.
In America, in 2017, there was a group who decided that they could “vote themselves largesse from the public treasury” and it was not “voters”. The end result is referred to as the Tax Cuts and Jobs Act.
e.g. SpaceX shouldn't be taxed on CO2 release from their Raptor engines if they are getting all their methane via the Sabatier process.
I'm not saying any of this is easy to do, but that's because politics and reform is hard. Not enough people can agree what to do != no one can know what to do.
With fields like "mechanism design" we've blurred the distinction between central planned and distributed economics too; never have we had a better menu of options.
If you want a steady-state economy, you're going to need far more reforms than this, and if you want capitalism without interest you're shit out of luck.
It's worth pointing out that the SEC banned short selling during the 2008 economic crisis, I wonder why. Not to mention that without interest bearing loans and selling debt for debt, there wouldn't have been a 2008 crisis to begin with.
The solution is less taxation, while removing the parasitic practices that underly the economy today.
Wouldn't a less punitive system of welfare properly distribute the wealth with none of the requirement to be universal?
It wouldn't by being calibrated (preferably by being indexed to a revenue source and not to inflation) to be at a level where that wouldn't occur, which is a factor of productivity and other factors.
> Wouldn't a less punitive system of welfare properly distribute the wealth with none of the requirement to be universal?
UBI is a less punitive welfare system; any retreat from universality is restoring the essence of the punitive factor which also is the driver of wasteful administrative overhead by duplicating functions already performed in the progressive income tax system.
(the others, sure, much simpler)
The downtown parking lot, for example, probably doesn't have recurring carbon costs. The gasoline people use to drive there will be more expensive from the carbon tax on oil and gasoline production, and the cement or asphalt that takes electricity to produce will be covered by the source-charge on power plants.
Doing so also likely violates any free trade agreements you've signed.
It's a hard problem, but the gains are massive, so it's worth it.
It'll be a lot easier if a set of countries do this together.
Carbon tax can be made revenue neutral and will net benefit innovative companies and/or customers buying their products.
LVT is literally taxing non-productive, limited, legally hereditary but actually “common heritage” capital. No damage there.
I’m quite opposed to UBI myself but I think there’s plenty of other ways to improve the social safety net with less opportunity of abuse, the net benefit being that people are less concerned with staying alive (low Maslow need) and free to be creative (high Maslow need).
Trying to keep society progressing without improving land use and suburbia is like trying to improve CPUs while not improving upon 1980s processes/chip density.
See https://www.currentaffairs.org/2019/01/why-taxation-is-neith...
So annoying that the vast majority of Americans seem to fundamentally do not understand this. The curse of too much land.
LVT is good for state governments that don't have their own currency.
The jobs guarantee that goes with it I really don't like. It's stupid in 2020 to not be trying to reduce the total labor per person.
Sure, some infrastructure projects are really important, not profitable, and might even require the training of new labor to get it done. They should definitely still happen. But I see no good reason to hitch that to jobs guarantee.
It started out as a job guarantee, where women were given jobs as caregivers and got shifted to UBI where the women were told they didn't have to do the jobs but they'd still get the money.
They still did the jobs when they didn't have to. They said it provided them with a social network and social interactions and most importantly, with purpose.
One of the things that bugs me the most about UBI is the idea that people would rather just laze at home and do their own thing given the chance and the money to make that possible. I don't believe that's true. I think humans have a deep seated need to be part of a community, to have purpose and to leave a mark.
The new deal was a spectacular illustration of that. The people who took part in public works projects were justifiably proud of what they'd done - building bridges, art works, schools, sewers, streets and more.
The rest of your text seems to be an argument for UBI and against job guarantee. Is that first sentence what you meant?
1. a group of people were assured jobs
2. the job assurance was changed to a basic income, no need to work anymore
3. people still showed up to work
errr... seems OK to me? It proves that even if there is an UBI most people will still work. The UBI is just a safety net that assures you do not die of exposure if you get to spend some time without working (for whatever reason). Your example proves that the UBI does not really distort the job market (except for the most shitty jobs, which is alright if they disappear). Also, your example proves that the existence of an UBI does not turn people lazy.
All in all, your example is a great argument for the UBI!
This story very much demonstrates that giving people jobs helping the community rather than just money is a better option. They were both productive and happier. So much so that they didn't want to stop.
I'm sure the nature of the job probably had something to do with it. If these jobs were in call centers for debt collectors they probably would have quit en masse and been happy about it.
Fact: Productivity growth stars exceeding whole economy growth sometime in the 1970s.
Rather than a shrinking workday or mass unemployment, we get mass underemployment. What this means is no one can survive without a job so inefficient or pointless work grows rapidly, fed by the margins of the labor market. This ultimately discourages further investment, technological progress, and will lead to falling median productivity and then mean productivity.
This is extremely dangerous for society. We'll end up paupers in the ruins of our past greatness. Maybe we already have, if one looks at our infrastructure.
Basically, you can think of the lack of a UBI as https://en.wikipedia.org/wiki/Dumping_(pricing_policy) on the labor market.
And it is worse in the poorer states, because they don't have high home values to cushion the blow to the individual taxpayer.
When your sector makes up like three of the five most valuable companies on the planet, we probably should be taxing it more.
And Jeff Bezos does not need more money.
It's also not like the money is never taxed. If Jeff Bezos wants to turn his AMZN shares into dollars, he'll federal capital gains on the appreciation. He pays nothing in Washington state because it has no income or capital gains tax, and that's Washington's choice. Corporate taxes are also a form of double taxation for this reason; the profits are taxed when the company makes the money, and taxed when investors realize gains.
Amazon also indirectly pays taxes in ways you're not thinking about. There's sales tax on sales, taxes on all the supplies it buys, property tax on all the land it owns, payroll tax for employees, and its employees also pay income tax (except in Washington), property tax, etc.
Taxes are actually getting collected pretty much everywhere along that chain. The usual criticism is with tax inversions, and even those mostly defer taxes, and because dividends and capital gains are taxed, I'm not convinced it makes sense to tax corporation.
Certainly, but many of the tricks involve licensing IP between subsidiaries in different tax regimes.
So create an IP tax. Declare the value of your IP and pay an annual tax on it. If you ever go to court to claim infringement, this is the maximum value you can claim.
The problem is that increasing the corporate income tax rate just doesn't provide enough revenue. Corporate income taxes are only 7% of the US government's annual tax revenue, for example. Even if we doubled the corporate income tax rate, that's still only another 7% of the total tax revenue, which is way too small to make up for the annual US budget deficit.
> Jeff Bezos does not need more money.
While I don't disagree with this, taxing the wealth of the rich also just doesn't provide enough revenue. Suppose we set a hard cap on personal wealth of $1 billion--everything over that, the government takes in tax at a rate of 100%. The net worth of the 400 richest people in the world is around $3 trillion, so we'd be taking $2.6 trillion of it. And that would fund...the US government for about 6 months. Or all 50 US states for...a little more than a year. And then the wealth is gone, and what do you do next?
In other words, all the complaining about low corporate tax rates and wealth inequality is complaining about something that, even if it were "fixed" (and fixed without depressing wealth creation, which is highly implausible), would not do much of anything about the real problem: that we expect governments to do far too much and give them far too much power. And that translates into chronic overspending and deficits, which end up being paid by the middle class, because that's the only source of revenue large enough to pay it.
Agreed. We should be ruthlessly taxing capital gains, and in general should look upon money earned without laboring for it with scorn.
Tell that to startup founders whose only income from all the work they put in on their startup is capital gains.
> Tell that to startup founders whose only income from all the work they put in on their startup is capital gains.
I think there really ought to be more of a distinction made between taxing the upside of sweat equity vs. literal capital gains (as in, the return on invested capital).
Also, startup founders should only be deferring their salary (or a portion of it), not forgoing it entirely.
For that matter, it's insane that VC fund managers only pay capital gains tax rates on carried interest and management fees. The fees are really just ordinary income plain and simple (which they get regardless of how the fund does), and while carried interest is technically a return on invested capital, it's entirely OPM and seems like a dodge that lets the manager participate in the upside of the fund with no actual skin in the game, so what's the point of taxing it at a preferential rate?
A better way to restore progressively to capital gains is to index them for inflation, and then you can tax them at ordinary income rates.
It makes sense that it's an attempt to index for inflation, although strange that there is only one cutoff (securities held for 1 year taxed the same as the ones held for 10 years); you would imagine some sort of step-down function would make more sense / track inflation more accurately (or indexing directly which is much harder).
So maybe different tax rates for 1/5/10/20 years held?
Lets have a single fair set of rates with progressivity. A rich man in the 35% tax bracket should pay 35% on their capital gains, just as a poor retiree in the 15% tax bracket should only pay 15% on capital gains.
Capital gains get a favorable treatment because we want to encourage investment that creates economic growth, but comes with risk of loss.
Clinton was able to run a federal government spending less than 20% of GDP, since George Walker Bush federal spending has exploded to the 25 to 30% range. The reality is that 20% is plenty, and can solve all the problems government has the ability to solve.
Need to start by NOT
1) serving as the worlds policeman
2) building double the aircraft carrier tonnage of the rest of the world combined.
3) spending a trillion dollars on newest latest fighters not ready for service when we aren't at war
4) staging US troops and ships in the Middle East or Europe when both are immensely wealthy and able to defend themselves.
5) pouring $40B into a launch system design based on obsolete technologies and an overweight deep space capsule that needs a year to replace a single bad power unit.
6) subsidizing professional sports leagues paying millions a year per employee. etc, etc.
A good start would be requiring senators and congresspeople to recuse themselves from any legislation that specifically allocates funds for any projects in their states/districts. Get away from the thousand page earmarked pork funding bills and focus their responsibilities on legitimate national interests.
Have you looked at the federal budget? The expenditures you mention are insignificant. Social security and medical assistance programs make up 48% [1] of the federal budget. Defense only makes up 16%, and of that, only 27% goes to the navy. Another 8% is various assistance programs. 8% is interest on debt. 0.5% is all of NASA.
You can't really reduce the government's expenditure levels by cutting a few high-profile programs that some consider wasteful. The majority of the budget goes to supporting the most vulnerable in society. Cutting these programs is politically impossible.
> thousand page earmarked pork funding bills and focus their responsibilities on legitimate national interests.
Earmarks are dead already. But they shouldn't be: earmarks let lawmakers swap favors in a way that promotes the smooth operation of government and compromise in lawmaking. Yes, there's some corruption, but that corruption was a small price to pay for decreasing the overall level of hostility in the legislature and promoting compromise.
[1] https://www.cbpp.org/research/federal-budget/policy-basics-w...
And most social security payments go to people with living standards at or above the US median.
US taxpayers have invested close to $20B in a launch system that was outdated the day it was designed and will literally cost 100 times more per pound than commercially available launch systems.
The first reason it's so costly is that the US congress required it to use solid rocket boosters, which increase launch risks, and substantially increase launch costs.
The second reason the SLS is so costly is that congress required it to use RS-25 engines, which were some of the most expensive rocket engines ever designed, originally costing $45M a pop. They were so expensive because they were used on the Shuttle and had to be refurbished between launches instead of expended (destroyed) every launch.
But not only will the RS-25s used on the SLS be expended every launch, Aeroject is getting $100M(!) each to build new ones. And it forced the SLS to use one of the worst possible first stage fuels, Hydrogen, which requires carrying a massively heavy cryogenic tank, construction of has held up launches for years,
By contrast, each SpaceX Merlin which has roughly half the thrust of an RS-25 costs around $500,000 to build, 200 TIMES LESS! And uses a far more compact and effective first stage fuel.
First, a soldier wounded in Afghanistan and being treated in a VA hospital would have to have that cost excluded from the budget.
The department of energy dealing with nuclear weapon waste is excluded from that budget.
The office of a foreign US embassy serving as cover for a CIA case officer is excluded from that budget.
Interest on military deficit spending from last year is excluded from that budget.
In fact, add all these things up which don't fall within this theoretical 12% and it comes to hundreds of billions of dollars.
Defense Department base budget: $636 billion.
DoD Overseas Contingency Operations: $69 billion.
Departments that support defense: $228 billion. They include the Department of Veterans Affairs ($93 billion), State Department ($48 billion), Homeland Security ($48 billion), FBI and Cybersecurity ($10 billion), and the National Nuclear Security Administration ($17 billion).
NATO is an organization of countries near the Russian border. The US could easily get by with 2% or less to defend it's own borders. If Russia invades Germany we can ship and airlift troops and meet them in France (given that Germany won't spend enough to defend itself).
This info is woefully out of date, and at least some attribute the sharp increase in partisanship and gridlock to the ban on earmarks preventing horse trading.
If it is, please explain the SLS. It's entire design was dictated by Congress to use specific components from specific contractors.
“ In 2011, Rep. Tom McClintock and other groups called on the Government Accountability Office (GAO) to investigate possible violations of the Competition in Contracting Act (CICA), arguing that Congressional mandates forcing NASA to use Space Shuttle components for SLS are de facto non-competitive, single source requirements assuring contracts to existing Shuttle suppliers.”
“ In the summer of 2019, a former ULA employee claimed that Boeing, NASA's prime contractor for SLS, viewed orbital refueling technology as a threat to SLS and blocked further investment in it.”
“ In 2019, the Government Accountability Office found that NASA had awarded Boeing over US$200 million for service with ratings of good to excellent despite cost overruns and delays”
“ On 1 May 2020, NASA awarded a US$1.79 billion contract extension for the manufacture of 18 additional RS-25 engines. Ars Technica, in an article published on the same day, highlighted that over the entire RS-25 contract the price of each engine works out to US$146 million, and that the total price for the four expendable engines used in each SLS launch will be more than US$580 million. They critically commented that for the cost of just one engine, six more powerful RD-180 engines could be purchased, or nearly an entire Falcon Heavy launch with two thirds of the SLS lift capacity.”
https://en.m.wikipedia.org/wiki/Space_Launch_System
http://www.competitivespace.org/issues/the-senate-launch-sys...
What I personally would do, if I could, is to target the unscrupulous rich by banning companies located in tax havens from operating in the country, unless they can prove that they have proportionally high enough of employees working full-time in the said tax haven compared to their assets. That, I would say, is very achievable goal that would affect mostly just tax-dodgers and give a strong signal that those practices should come to an end.
I think it is just unfair that normal people have pay taxes up to 50% on their earnings (depending on the country of course) while millionaires and billionaires can just bypass the whole system by incorporating a holding company in Cayman Islands. Or mega corporations that can even negotiate special tax privileges.
That's not what the article is proposing; it specifies a tax only on the land, not on whatever is built on the land. The point is to incentivize transferring ownership of the land to whoever can get the highest value use out of it; that only works if the tax itself is only on the land, so it makes sense to build higher value infrastructure on it since that raises the income from the land without raising the tax.
Rich folk hoarding higher value but physically smaller land/buildings in the city centres surrounded by amenities and transport infrastructure will be buried in taxes. Either they make that land work for its taxes or they yield it to somebody who will.
It'll cause better development of land too since land speculation will be removed from the land development formula. Either you make buildings people like and want to rent and you make a profit or you don't. As a landlord you'll be both insulated from declines in an area's popularity and unable to profit from an area being suddenly fashionable.
In both scenarios few people will build villas in downtown Manhattan because it is too profitable to build skyscrapers instead. The difference is that with LVT building a villa will be a massive tax burden whereas under our current system there is no tax burden.
Insurers have no problems assessing land value and have been doing it for centuries.
Well
$PROPERTY_VALUE = $LAND_VALUE + $IMPROVEMENTS_VALUE
$LAND_VALUE = $PROPERTY_VALUE - $IMPROVEMENTS_VALUE
One of the funner ones I've heard of is that the owner and payer of the property tax performs the valuation of the land: it makes implementation pretty much free and uncontroversial! The only caveat is that whatever value the owner lists as the value is an amount they must accept for the land in a sale (plus some meaningful fee to drive off trolls).
So, sure, you can list the value of the land of your Pac Heights mansion as $1 and pay a commensurate tax on that. If you do, though, someone can purchase it for $1 and start charging you a hefty use fee.
Unless you have an allodial title (hint: you almost certainly do not), you are always subject to the whims of at least one landlord, specifically the state.
A captain could declare the value of the cargo whatever he sees fit, and pay the tax on that amount.
The customs reserved the right to buy the entire cargo at the declared price, at their discretion.
It's a bit harder to implement with large parcels of land, but should work well with home-sized lots.
It's only in trying to resist the above that the difficulties arise.
However, I'd love to be pleasantly surprised, and occasionally am, e.g., apparently Baden-Wurttemburg (the German state that includes Stuttgart) has recently passed a LVT scheduled to be implemented in 2025 https://libdemsalter.org.uk/en/article/2020/1382897/germany-...
If one can, by some miracle, pass simple policies like LVT and UBI, the resulting fronts and battlegrounds are a hell of a lot clearer.
Also https://en.wikipedia.org/wiki/Henry_George_theorem shows "that under certain conditions [presumably including limited squandering, though I didn't check], beneficial investments in public goods will increase aggregate land rents by at least as much as the investments cost"
The government can also hand out cash raised from the LVT as a UBI.
Problem solved.
It's a flow of income (land rent) that can accrue either to everybody and be shared or to individuals. One way or another some party has to be the beneficiary. The question is who deserves this unearned income?
On the other hand, certain parts of the political spectrum are very emphatic about wanting to reduce both budget and expenditures, and sometimes manage to do so.
It would make little sense to have two kinds of property tax.
Today:
c(land value) + c(building value) = tax
eventually:
big(land value) + small(building value) = tax
Just interpolate between those the obvious way.
Almost automatically, the assessment of just land has to be harder than the assessment of land plus the property that's there. And assessing land for taxes tends to be politically hard. For example, the overall process of real estate taxation in California was politicized into a disastrous mess years ago with proposition 13. Just undo prop 13 would be a simpler matter and even that likely isn't going to happen.
Further consider, the objective land value of a parcel in Mountain View is probably less than the assessed value a lot of homeowners pay their taxes based on. I'd be in favor of measures that force more intensives use of that land but taking on home-owners with vast political influence is going to be a challenge.
The goal is essentially to separate the value of land based on local infrastructure like subway systems from the amount of effort put into improving the property. An empty lot that’s worth 10,000$ per acre may physically look the same as an empty lot worth 10,000,000$ per acre, but it’s clear society not the property owner generated that value is.
That said, there are a lot of edge cases like beach front property vs having another house in front.
You need a ball park figure for land value to work and even that is going to depend on the philosophy used for valuation. If Walmart buys the cheapest land it can find and builds a distribution center on that land, how much is that land worth? What they paid for it? What someone else would pay for it now? How bought all the parcels around it that now would be useful for housing?
Either paradigm is real estate valuation (at which point it become real estate tax) or the paradigm is something else with that something else up for grabs.
Good. That's the whole point. That abandonment of ownership gives other people the opportunity to make use of it for their own benefit.
That is: the very act of land ownership externalizes opportunity costs on the rest of society, and this is what underpins wealth inequality. LVT forces landowners to internalize those costs.
They’re also spending more than they ever have before in history.
> The LVT is not the same as a property tax, as it does not punish those who put the land to use; it taxes only the land, not the structure built on top of it.
I’m not convinced this is that different than what’s happening now. For a $1m house in the Bay Area, only a quarter or a third of that value is the structure.
> However, most of all, it is one of the rare taxes that does not diminish economic activity, and in fact stimulates it.
How do they arrive at this conclusion? A bakery that’s been around for 100 years finds itself in a hip part of town (which maybe it helped foster), and then has to move out because the only type of business that can support the LVT in the area is luxury apartments. The higher the LVT, the more risk of a monoculture in land usage, not the other way around.
We see so much about wanting "walkable" neighborhoods where we have shops and markets all steps away from our door. Well, if the land is so valuable that it will only support dense apartment towers, small businesses like that will not be able to afford to be close by.
If the market is begging for a 100-floor tower on a piece of land, but the zoning says you can only build a single house, the LVT would be based on a house sitting there.
So, if you had a historic or otherwise significant structure, you’re going to have to downzone the land to prevent the loss of the structure. Naturally, that’s going to be abused. Connected people are going to get their property zoned for smaller structures, while unconnected people will get their property zoned for huge structures.
Tell me that's not charming as hell.
So the first problem is zoning, but imagine if zoning is fixed. Now the taller the building is, the smaller the portion of the taxable value derives from the land itself.
The fact of the matter is single family suburbia is a scourge, and we need redevelopment not more development. We can subsidize affordable housing, or we can structure the taxes such that the only economical thing to do is massively denser buildings immediately. The latter is better because it is simpler and less subject to regulatory capture.
Which is sort of the problem, right? You have an area which is, say, two story buildings, in an area where you really need an average of three story buildings to satisfy local demand.
Implement LVT and everyone gets the bright idea to build twelve story buildings, because why wouldn't they? Three story buildings would have four times the tax per unit.
But then you get the opposite problem. Real estate prices crash, because there are suddenly twelve story buildings going up everywhere and the prices need to fall to the level that building more of them isn't viable even against the tax advantage. Which is well before you're saturated with tall buildings.
But now you have a thousand plots of land and 10% of them have new tall buildings while 90% have existing single family homes. Now the owners of the single family homes are paying a disproportionate amount of the taxes. They abandon their properties, which have already declined in value, because the tax is more than the newly lowered cost of buying space in one of the tall buildings.
The government is now receiving no tax from 90% of the lots because they've been abandoned, so the land tax amount has to increase by ten fold per plot. But that makes it profitable to build 25 story buildings instead of twelve story ones, to amortize the tax over more units, and the cycle repeats.
It seems obvious that this only works if the amount of the land tax isn't large enough to cause these behavioral changes.
It's about the speed of the transition to LVT, not the stateless amount of LVT.
> But then you get the opposite problem. Real estate prices crash, because there are suddenly twelve story buildings going up everywhere and the prices need to fall to the level that building more of them isn't viable even against the tax advantage. Which is well before you're saturated with tall buildings.
Only if the LVT goes up to quick. Because the value of the land depends on the improvement to adjacent land, we can think of human building as a puddle of liquid that LVT makes more cohesive.
If we crank of the cohesion too quick, we get tiny beads of liquid everywhere, you scattered 12 storey buildings, and no walkability. It's just a modernist landscape.
If we grank of the cohension slowly, we get bigger beads, i.e. new manhattens as the surrounding suburbia is drained. This is exactly what we want.
The increased density itself creates more derived value, and so a big crash is unlikely.
I'm just describing the incentives. Identify the flaw in the logic.
Pennsylvania[1].
> The number of vacant structures in Harrisburg declined from over 4200 in 1982 to under 500 by 2001. The downtown—previously a ghost town—is alive, even at night. The number of businesses on the tax roll has grown from 1,908 to 8,864.
> After LVT was adopted by voters in 1996, 70% of residential parcels saw a tax decrease; importantly, in the most at-risk neighborhoods (older pre-war housing and factory blocks) upwards of 90% of homes had their tax liability reduced. Local business taxes were frozen by law at 1996 levels. Construction returned to the city: the number of taxable building permits surged past neighboring Bethlehem, market investment returned, and capital improvement reappeared in city budgets. Tax burdens on productive work and business declined. The losers in this trade were absentee owners of vacant lots, who had to shoulder much more of the burden.
[1] https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
> It seems obvious that this only works if the amount of the land tax isn't large enough to cause these behavioral changes.
If we hit the saturation point for tall apartment buildings, the land is less valuable (since you can't extract as much value from it), decreasing the land value taxes (and thus, incentive to leave homes). Lower land value taxes incentivize constructing more modest apartment buildings, as those will now be profitable. This process continues until housing supply meets demand.
Also many people prefer living in single-family houses. The bay area is full of people who won't sell their single-family house even though the value has gone up 20x. They wouldn't abandon their properties unless they had to. And if they have to it means they can sell them for a lot to a developer who will profitably build an apartment.
The problem here is that you're assuming we can just reduce government revenues that way. That would imply a corresponding reduction in government spending, or else the government would have to increase the rate to account for the reduced land value.
Which is why people would be forced out of single family homes. The amount of government services required by the occupants of a twelve story building would have to be financed by a tax that collects the same money from the owner of a single family home. The latter would be forced out by that amount of tax.
Imagine instead that zoning restrictions were relaxed gradually.
The problem in the Bay Area is simply that taxable value assessed only at sale.
No, tax-basis value is assessed annually. However, increases in assessed value are limited to a maximum of 2% per year outside of certain events qualifying for full-value assessment of the property or particular improvements. (And this is statewide, not Bay Area specific).
No. The problem is they're not building enough housing. Not that taxes aren't high enough.
That incentive already exists, landholders typically use their land in a high-value way. If you cast your eye on Europe there are a large contingent of undeserving people who have generations of wealth that they secure through owning land, which does not degrade over time. The big win of a land tax is about breaking ultra-low-risk inter-generational wealth transfer. If wealth is transferred between generations there at least has to be some level of competent management demonstrated by each new layer of the family tree.
The same principle seem to apply to LVT: A landowner would, it seems, be forced, by the taxes extracted from them, to generate a matching (or larger) income by the land, regardless if they might feel that the community would be better served by using the land for something which would, incidentally, make less money for them personally.
If the object of LVT is to prevent inter-generational wealth transfer, I would assume that there would be vastly more effective ways to accomplish this more directly. Or there could at least be some carve-out which limits the effect of a LVT to those instances.
> ... regardless if they might feel that the community would be better served by using the land for something which would, incidentally, make less money for them personally ...
The community obviously disagrees with our landholder in this scenario, or the community can stump up the cash to pay the land taxes or hold the land publically.
It is just 1 more expense. It isn't like running a soup kitchen was ever free, someone is paying for the soup. Giving a donation of space is the same as giving a donation of time and materials.
There are incentives, but there isn't anything especially new here. It isn't going to be radically different from a mortgage in the short term, and in the long term the change is competent people will own land instead of old families.
The rest of your text can be summarized as “whoever has money deserves to have it, and should be trusted to make decisions which override any community which, in aggregate, have less money”. I believe this to be a somewhat controversial stance.
But that's theoretically. Whether you could actually impose this regime is a different matter. What the "real" value of land isn't a clear thing thing imo. A town might that since it's zoning prevents building much, it's land isn't worth much.
I think the one thing is clear and I agree with is taxes increases capital outflow. But my biggest issue is with the central premise that is taken at face value. That the government needs more money. I don't think it does. The US government especially has far to much money and waste most of it.
So I'd say instead of trying to find sneaky ways of taking more of the citizen money maybe incentive it to be use to create more opportunities. Instead of taking from some to give to other incentive opportunities so those who have will willingly give opportunities to those who don't
Thats way different than postulating facts and trying to conclude a narrative based on those facts. Cause I may be wrong about the government having to much money and I fully admit to it.
What does this even mean? This is not a sentence :)
How would this same situation play out with a land-value tax?
The other difference is that proponents of LVT often argue it should replace other taxes like income tax. But regardless of theoretical efficiency criteria, it's a lot easier to persuade people that a large fixed portion of their earnings are the government's share than give them an enormous bill for the valuable land their house sits on and tell them if they're not earning enough to afford it they can always move (as long as they can find a buyer...). Which is why LVT has been 'inevitable' since before the Industrial Revolution without it being very widely experimented with
I feel like homeowners may become more resistant to city services and improvements in their area if it will impact their bottom line disproportionately. I guess it would come down to the value formulation.
Tax should be based on land value, not your improvements. So a really nice house isn't taxed more than a run down house. Fixing up the house, or knocking down a post war box and putting up a nice modern house, should not change your taxes.
Tax needs to vary with the maximum use of the land. A daily farm that is now surrounded by luxury apartments should pay taxes at the same rate per acre as those luxury apartments. This is where people start to flip out and get offended that they might be on the side of things that's disadvantaged by it.
Most property tax systems in the US have features that allow some land to be taxed at much lower rates than other land based just on historical ownership. Most notorious is California's Prop 13. The beneficial incentive system of the LVT is that it encouraging redeveloping now-valuable land. That means grandma can't afford to live there anymore. But, that only happens if grandma owns land that has appreciated, so she's probably okay overall.
I'm not really clear on whether LVT always goes with opposition to zoning or discretionary review, but I have seen some of that as well.
AIUI, they see a few benefits:
- it will ensure someone holding onto empty land for future use will have to pay at the same "rate" as you do. They don't get a discount simply because they choose not to use the land. If you aim to collect the same total amount of revenue, this would lower your tax.
- Use of land would be better optimized if there was no disincentive to build an expensive (eg bigger/denser) building. IMO this is flawed in that local land use rules are the bigger issue compared to tax policy.
To me, it almost sounds like this type of tax puts more power in the hands of big developers, which is a challenge many municipalities deal with right now - striking the right balance with that. If they want to force someone to sell the remaining property in a block they’re trying to develop, wouldn’t they just need to make enough improvements that the city drives that person out with taxes?
I can’t help but think it could incentivize municipal governments seeking revenue to approve big projects without input from people living there, and incentivize people living somewhere to being actively anti-development.
So I guess it can't be that way, as it would piss a lot of people off.
Most likely, it would be heavily based on zoning, neighborhood, and proximity to jobs and transit. Take Los Angeles, for example. I would imagine you could actually see taxes in predominantly SFH enclaves like Calabasas or Malibu 1hr+ from job centers go _down_ while taxes on similar single family homes in West Hollywood or Beverly Hills, being much more incorporated into the urban framework of LA, would go up.
Wealthy people can still have their expansive estates elsewhere, but the incentive is to move them off of land that would have a better use serving more people: just as it doesn’t make too much sense for the Empire State Building to be built in Aspen, CO, it doesn’t make much sense for a single-family, detached vacation home with a white picket fence and yard to be built in the financial district of Manhattan.
If you completely renovate the house, a property tax would go up but the lvt stays the same.
After the transition period, far fewer people can afford freestanding single-family buildings.
I'd also like to see more general resource use taxes (i.e taxes on raw materials like water, oil, aluminum etc.). They could be adjusted based on economic conditions (instead of playing shell games with interest rates) and adjusted for external effects. Make it formulaic. Open source, everyone can see how it works and who adjusted and how and it's not a closed door XX party with input from lobbyists.
Among other good effects I see this encouraging efficient use and recycling.
Take Google, for instance. Google owns some buildings on some land. But, in proportion to how valuable Google is, they don't own much land. What they own is a mountain of code, and multiple mountains of data. The single most valuable thing they own is the google.com domain. And out of all of that, we're going to tax... the land? Huh?
If all money came from land, then LTV would make sense. When it was devised, that was more or less true. But it's not the 1800s any more, and that is a long way from true today.
This sounds regressive. So someone with a bungalow on their property pays the same tax as someone with a 40 story apartment building?
If the bungalow is out in the suburbs and the apartment building is downtown next to the transit station, the apartment will pay MUCH more tax as that land is much more valuable.
The land is our collective inheritence, so someone with 1 story bungalow on highly desireable land is actually extremely selfish and decedent in their misuse of the commons.
To get less moral and more mathematical, developers can lessen their tax only to the extent that the flood the market with floors pace, devaluing the good they are selling (floor space, not land space). This forces and equilibrium where the vast majority of people do better than today.
The needs of a child are mediated by productivity, which has been wildly different throughout history. E.g. maybe we'll have practical fusion in 100 years and can support 100 billion people no problem.
But the surface area of the earth is fixed. If you want 100 acres to do nothing good with, do it with a giant seastead.
And even then, the surface area of the Earth is still fixed. So is the volume (unless you're willing to destroy Earth as we know it in the process).
So a seastead just kicks the can down the road. If you want 100 acres to do nothing good with, do it in space.
2. But I don’t agree that property rights ought to be snatched from owners.
3. I also don’t think we could keep on increasing the world population when we have clearly crossed carrying capacity.
They are all different issues and points. Not necessarily related.
You don’t need separate a person’s property from him just because a few million people are homeless.
You don’t need to keep on breeding homo sapiens to out breed all other species and destroying habits and environment to support the extra billions of human beings. Because the apex predator can wipe out every eco system to support itself. And at a faster rate if it outbreeds the rest of the species.
Half the planet needs to be uninhabitated and rewilded for species and habitat preservation, conservation and restoration.
As apex predators, if we don’t protect habitat and other species below us, it is like sawing off the main trunk of a tree below us while perching on the top most branch. We will become extinct as a species.
One day, I am going to be able to buy thousands and thousands of acres and let nature take it back. There is a better chance that we will survive as a species if we reduce our population rather than keep on increasing it exponentially. Because we are guaranteed to outbreed every other species upon whom we rely on for our survival.
The planet survives because of a delicate balance between the ocean’s temperature and carbon levels in our atmosphere. We really don’t understand it fully yet. It’s premature to assume that we can keep on breeding to perpetuate our species. It’s the most unscientific, irrational and illogical way to solve a problem. It certainly is a sure way to erase ourselves from the universe as we know it.
Nobody's calling for any snatching of property rights. What's being called for is for landowners to internalize the opportunity costs they've externalized on the rest of society (and, indeed, the planet).
> I also don’t think we could keep on increasing the world population when we have clearly crossed carrying capacity.
As much as I agree, unfortunately humans happen to enjoy making more humans (and indeed, arguably have a biological drive to do so), so barring either the ability to move humans off Earth or some Malthusian catastrophe, global population will continue to increase whether we like it or not.
> Half the planet needs to be uninhabitated and rewilded for species and habitat preservation, conservation and restoration.
Which is a lot easier when people are penalized for contributing to suburban and rural sprawl.
Your argument states that empty land would be better served if it’s used for other human beings. The same argument if applied to a time scale rather than upon land resources, it is rational to conclude that our planet is better off if people had 1/2 surviving child per person until we hit carrying capacity.
If land owners should be taxed for owning land they don’t use, we should also have a child tax for future exponential growth of a certain set of genes who will monopolize the world’s population by over breeding.
Humans can continue to enjoy baby making(it’s not unlike some human beings enjoy owning vast tracts of land they dont put to use) but left to their own devices and without encouragement, if they are allowed to bear the full cost of raising the fruits of their loins, I think the numbers will go down dramatically.
If goods cost as much as it takes to make them..especially food which is grown at tremendous costs(not just monetary), we will realize that the abundance is a myth and scarcity is our reality.
Re: Your final point..people who own property don’t contribute to suburbs and rural sprawl. It is those who can’t make proper decisions personally and financially who make choices FOR themselves. Things like where to live, what job to do and what to study are easy choices. Inheriting illness, disabilities are choices we didn’t make, but was made by nature for us. We take care of vulnerable people who had no control over their deficiencies because we share as a species DNA with them.
That obligation and duty towards our collective humanity is entirely different than feeling responsible for personal decision making.
Sometimes people make terrible decisions for themselves because they are unable to make best decisions for themselves. In those cases, we have to make decisions for them if we feel responsible for them. These kind of things never end well as history as shown and is best avoided if possible. An example would be the mentally ill. Many refuse to take medications and their circumstances cause them to suffer. Those are tough decisions. But even then there is no need to penalize private property owners.
None of these issues are connected to each other. I doubt if anyone cares about urban sprawl. An easy target is private property owners and that comes from what I can only term as jealousy in simplistic terms.
In today’s world, we have managed to conquer crippling poverty even though there is much work to do. GINI co-eff fueled inequality makes villains out of the property owners. That is a dangerous path to take..once again, as history has shown us.
A serial breeder..say..someone who has a couple of children with different women more selfish than someone who has 1-2 children.
The commons will be saturated by the needs of genes of prolific breeders who use women’s bodies as vessels. Is that selfish? Since we are talking about selfishness and commons as a collective inheritance, define commons.
I believe you mean the needs of actual human beings born of such people, to whom the God-given rights of life, liberty, the pursuit of happiness, and yes, the collective inheritance of the commons, are owed.
These serial breeders do not show up in the aggregate in any country I've every been too. If you are worried about population rates in dirt poor countries, the per-capita consumption is so much lower you shouldn't bother.
> The commons will be saturated by the needs of genes of prolific breeders who use women’s bodies as vessels.
Do you have evidence to think this numerically insignificant behavior is so genetically hereditary we should worry about it?
It just doesn’t mesh well with the declining birth rates in developed nations. Some countries are paying people to have kids, and it’s not working very well.
My hope is that if we can manage population numbers before we run out of resources, we can stave off the severe resource crunch that will come when we don’t have a sufficiently large gene pool when the decline begins.
The problem also is that our efficient supply chain has ensured that one or two rich deposits of xyz resource takes care of the whole world. Many rare metals and precious metals mined for electronics and phones come to mine. Phosphorous comes to mind. We use it as fertilizer but it’s not renewable. The river sand we use for construction. Top soil that is depleted and water sources that are poisoned due to Ag runoffs and Ag soils that are tilled away.
And I am not even talking about global raising temperatures or carbon. Take insects for example. The bees we need for pollination. The frogs..especially insects and reptiles and amphibians need habitat to survive. Their disappearance shows that there is a tear in the web. It indicates that we have destroyed their environment or poisoned it or made it impossible for them to reproduce it sufficient numbers to keep their future generations up. They are on the other side of mammals like us or elephants etc..because we live so long, it would take a while and a lag before we see a decline. They have such short life spans and can have a couple of hundred generations within a matter of days, they are like early warning systems.
Given this, we know that habitat is disappearing and ecosystems are in peril. Poverty is disappearing and we are expending huge amounts of energy to keep our soon to be 10 billion people by 2050.
Even if population becomes stable before plummeting as the old people become more more numerous and are non reproductive and die off..even if we have sufficient young people to keep our species alive and even if we find it ways to live smaller and differently...the non renewable resources once gone are gone. Top soil once gone is gone. Soil phosphorus once depleted isnt coming back. Mining has to end some day. Oil will become scarce someday. Homes build on Ag land and forests cannot be razed down to become habitat and forests and environment and habitat again.
This might not happen in your lifetime or mine, but our species extend beyond one or two generations. We owe it to generations down the line to preserve the planet. We can’t synthesize our own food. We rely on our environment and natural resources as an apex predator sitting on top of the food chain.
The most urgent thing to do is multi part: 1. Find a way to preserve genetic material effectively and create a gene data base. We do that with seeds in Ag. There is a seed vault in Svalbard(don’t know if it still exists) 2. Invest in anti ageing therapies. And by this I don’t mean youthfulness of looks but ageing is the slow decline of cognitive faculties and organ failure and cell aging. 3. Have a half-earth philosophy as promulgated by E.O.Wilson to keep intact our environment and habitat that relies on that environment.
I am not attempting to suggest that we have to become Luddites or start controlling population numbers. If we just back off and stop incentivizing high birth rate, within 120-150 years, we might get this under control. No need for coercion or mandatory depopulation methods. Stop encouraging people who can’t afford children to keep having children. That will do.
China supplies most of the developed world with what we need at cheap prices. These are mass produced products. In return, through belt and road initiative, China has the entire Southern Hemisphere trading food and Ag products to support its 1.4 billion. It’s easy to make 10 billion iPhone chips. It’s not as easy to feed 1.4 billion people pork with available resources.
So with declining populations, the world still needs to deploy and deplete its resources to trade due to our higher consumption habits. But exponential population increases are a funny thing. Exponentially 1.4 increases faster than 350 million. Some resources don’t increase at all and in fact non renewable. What do we do now?
It's not regressive at all. You pay tax based on the value of the land. If you're not utilizing the full value of the land (by leaving it vacant or otherwise under built compared to the demand) then you're going to pay more in taxes than you get out of it. The whole purpose of LVT is to nudge you toward either improving the land so you can utilize its value or sell it to someone who will.
We can't make that determination without knowing how much profit a rented bungalow can receive versus the apartment building. A bungalow in midtown Manhattan might very well house one of the world's richest families.
Fundamentally, LVT is a wealth tax. If you hold a large amount of wealth (land) but have no income then the tax would seem regressive from an income-based perspective. But from a wealth-based perspective, its a perfectly reasonable thing to expect those that own to pay taxes not just those who labor.
A vacant property (really, any ownership of property, period) results in an opportunity cost externalized onto all other members of society. That opportunity cost is equal to the land's value. In the middle of nowhere, therefore, that opportunity cost might be low to the point of nonexistence, but in the middle of a city downtown, that opportunity cost can be and often is on the scale of tens/hundreds of thousands of dollars (or more!) per year. That is wealth that is long overdue to be repaid back to the rest of society.
Why should a property owner who does not impose any of those costs (or imposes a tiny fraction of them) pay equally for them?
The apartment almost certainly already pays for all of these things.
> It has a massive carbon footprint.
Which can be offset or even reduced/eliminated outright.
This is exactly the point he is making: One should put the land to good use. Move the bungalows where land is cheap and tax is low.
Clearly I will just rent vacation bungalos when I actually have a need to be near nature.
Once you start assessing peoples property in such a wholesale fashion, you almost end up in a classic "managed economy" situation. "From each according to his ability, to each according to his needs" failed due to the combined difficulty of assessment + corruption of the assessors. LVT is the same principle applied to land.
I think that LVT will end up as one of those ideas that is great in theory but doesn't work in practice.
That's the gist of why I was comparing it to communist economics - it works great in small communities, but when either the scale is large, and/or the stakes are high, it will be subject to inefficiency and corruption.
LVT experiments on the small scale have people highly invested in making it work. On the large scale, this will just be a matter of everyday bureaucracy and any competence will revert to the mean.
On the large scale, it will be subject to the exact same corruption seen elsewhere. Certain industries will carve out exceptions to the tax, certain people with influence will get their historical properties excluded, etc.
By and large I've heard of LVT being a replacement for Sales/VAT style taxes. Whilst those are often regressive, at least they are relatively simple, 20% VAT is 20% VAT.
https://en.m.wikipedia.org/wiki/1978_California_Proposition_...
There is no property tax, but we have capital gains taxes based on transfers of assets.
Income and/or sales tax.
What makes you think that poor people don't inherit property? There are lots of people with very low incomes but who own a house. And no they don't just sell it. Why sell the only house you have? Or maybe it is not their house but it is a piece of property that they have always owned and which they use as a garden or a yard or storage.
They don't sell it because they'd rather have a piece of land to enjoy then some money in the bank. It might be their only luxury in an otherwise frugal life.
In an LVT world, the value of land (overall-inflation-adjusted) should basically track the population, and virtually no one will own land they could no longer afford to buy.
If a freeway exit gets built a block away from my house, my taxes will reflect the value of a Walmart or whatever instead of my house.
LVT is just bad policy that sounds ok in concept. In my city, inner city residential property is near worthless once it falls below section 8 standards. The taxes are low too as result. With a LVT scheme, someone would cook up some “true” value subjectively, which has obvious potential for abuse.
What is a better use than property? I though property was the best investment one could make. The government taking property because of a lack of income to pay taxes is heinous.
Who are these people inheriting land who are too poor to use it, too dumb to sell it and losing it to the county?
I live in a high tax state and have served on nonprofit boards that have exposure to housing issues. This didn’t happen.
The common problems of this ilk were usually frauds where caregivers, relatives, powers of attorney or others squander or steal proceeds of reverse mortgages or borrow money against property without telling the family. The other issue that would come up is Medicaid recapture when money is given away.
Usually if there is a tax sale there is some bigger story why the property is worthless. You can borrow against the equity of anything.
You're not a "temporarily embarrassed billionaire", and if owning land one can no longer afford seems commonplace, it is entirely because the current real estate speculation scheme we prop up (CA especially).
Any realistic LVT would be phases in slowly, and give the prop 13 petit gentry plenty of time to sell and live a fine remainder of their life in a very fashionable condo.
You make a valid point about services that can be measured, but the point of a Georgist land value tax is that land is the thing that is least distortionary to tax.
I'm not fully bought in and think a transition would be very difficult, but this is one of the reasons I don't like California's Prop 13 (even if I think all the proposed reforms would leave us in a worse state).
Isn't that what property tax already codifies?
Also aren't market forces already essentially doing this? If I sit on an acre of land in a dense area I will have developers knocking at my door and everyone has a price.
The theory behind LVT is that the increase in a land's value from it becoming the centre of a bustling city should accrue to funds the government spends on the city's population (which helps make land more valuable) and not the person that's sitting on the land
Yes you should, that's literally the entire point of an LVT. If you can generate enough productive economic activity on the land to equal/surpass that of ten households, then the tax is no problem, otherwise you should sell it so the houses can use it better.
Why not? You may not be making use of the services because of your inefficient use of land, but you do benefit from those services being available in the form of higher land value.
There is a temporary transition period when shit is weird because we don't have the density/land value gradient to make farming not suffer. The best thing to do is re-plan where the density ought to be to come up with
> pre_plan(x, y) * current_value(x, y)
But I'm not sure how to do this in a way that isn't a political clusterfuck.
If you have real use for the land, paying the lvt won’t be an issue. If you can’t use it efficiently, an lvt will incentivise you to sell what you don’t use.
If those 100 farms take up the same land area as 1000 households, then yes they absolutely should. Hell, they'll even have an easier time doing so, since they're (ostensibly) using that land productively (and if not, they absolutely should be) and thus be more able to internalize that opportunity cost they've imposed on others.
And if they can't produce enough to internalize that opportunity cost, then all the more reason for someone else to be given the opportunity to do so.
Also, when I lived in a rural township there weren't any household services, the township did things like look after a couple of roads and zoning and had a little park. We had a well and septic and contracted with a private trash hauler.
Okay, then all the more reason for those farms to sell off some unused acres to alleviate what little pent-up demand there is. And if there are no unused acres, then it's best to work on getting more productivity per acre to make some unused acres.
The agricultural sector is in dire need of a kick in the rear to encourage better land efficiency; LVT is one heck of a kick.
> Farm land just sits there.
Then it ain't a farm, in which case all the more reason to sell off that land and make it available to someone else.
> It doesn't "cost" the local town/county anything.
It imposes an opportunity cost on everyone who would more effectively use that land, including other farmers with better methods (and also, more broadly, anyone else wanting places to live and/or work and/or play).
Also I think "occupancy taxes" as referred to by policy people means a tax on unoccupied land/homes (e.g. pied a terre laws). But I could be mistaken.