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Comment by TimPC | Hacker News Reader

Okay some things don't add up. You can't have a Georgist tax as a single revenue source for the government and calculate it off something other than what the government needs for revenue. Either you calculate the Georgist tax rate on the unimproved land value, you add other taxes to government or you slash and burn through government spending to deal with the capped revenue. It's living in fantasy land to say Georgist land value taxes, calculated in precise accordance with this metric and not adjusted upward or downward by revenue needs will be a single source of revenue for all levels of government.

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Well, while Georgism is most famous for advocating for land value taxation the LVT itself is not the only Georgist tax. All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents and are candidates for taxation. Furthermore, cutting taxes on labor and capital increases the value of land significantly, so much of the revenue "lost" by cutting income taxes, sales taxes, corporate taxes etc would flow directly back into land values and return via the LVT.

In any case, there is lots of room for experimentation at the margins and any Georgist reform won't be complete or overnight. Any shift from taxing labor and capital will result in a better and more efficient economy, so don't get too caught up in the abstract end state.

> All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents and are candidates for taxation.

That fixes my biggest complaint about Georgism.

Take Google, for instance. What is the basis of their income? It's not the land they own or occupy. It's that they own google.com.

Where does IBM's money come from? Not from the land they own in upstate New York. It comes from their patent portfolio.

> All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents

Natural resources are consumed inputs and don't generate rents (extraction rights, which are a subset of property rights in land, do); intellectual property isn't land in the usual economic sense (it is not naturally occuring, so not land; it is durable and created, and therefore capital in the classic division.) It does generate rents, but that's typical of capital goods generally.

(In modern use it's more typical to expand the use of “capital” to include land and thereby encompass durable, rent-generating subjects of property rights than to expand “land”.)

Well yes, natural resources are dealt with under severance taxes on extraction. By intellectual property rents I mean monopoly rents from government enforced IP law.

And yes, neoclassical economics classes land under capital and that is a fundamental disagreement of Georgist economists with neoclassical economists.

> And yes, neoclassical economics classes land under capital and that is a fundamental disagreement of Georgist economists with neoclassical economists.

Perhaps, but your proposed construction (I’m not familiar enough with Georgism to know if it is the standard there) seems to be equivalent to that in equating classical categories of land and capital, but simply reversing the terminology, making durable (and thereby serving as rent-producing property) non-human factors of production, whether natural (and thus classically “land”) or created (and thus classically “capital”) all “economic land”.

I think it's extremely important to undertake a cost benefit analysis of the end state to decide if we want to transform society in that direction. So I disagree strongly with any comment of the form "don't get too caught up in the end state".

I agree there are some other things you can tax. I presume those are also taxed at precisely the economic rents they create? My point is that government needs some sort of tax with a knob that they have the ability to tweak upwards or downwards based on shifting revenue needs. It seems to me the only things in a Georgist system are taxed at precise values and fail to give government that knob. Do all Georgist societies have some sort of services cap because their tax revenues are capped?

I say "don't get caught up in the end state" not because I don't think the end state is important but because the intermediate effects are hard to predict without more data. But, more to the point, if LVT is the most efficient kind of tax, why would we not want to over time, shift as much of the tax base to it as possible?

In any case, Georgism produces a very different financialization of governance than the current tax system, because public goods pay for themselves via increases in land value- see the Henry George Theorem by Nobel laureate Joseph Stiglitz: https://en.wikipedia.org/wiki/Henry_George_theorem. This means that rather than adjusting taxation to meet desired investment, desired investment is adjusted to produce optimum public returns- which has the beneficial side effect of incentivizing good and proper governance.

I think it's fair to say efficiency and fairness are sometimes competing concerns. For instance, I disagree on shifting only property taxes to LVTs because I think they benefit condo developers at the expense of homeowners. Any tax shift has winners and losers and while there might be a slight overall benefit to the shift itself the individual outcomes can vary dramatically. I'd argue that we do have to have some degree of consideration for individual outcomes as well.

Arguably the whole point of the tax is to convince those homeowners who’s land would be better valued as condos to convert to condos.

You already see this in areas that don’t prop 13 tax rates - as land values rise the land gets redeveloped.

I live in Ontario which doesn't have prop 13 and I think development is still far from straightforward or simple. We do see some condo development but I'm not sure how much not having a prop 13 like policy has to do with it. It's almost impossible to measure this given the difference between regions extends far beyond a single tax law.

I worry that the Henry George Theorem suggests a government can spend money in order to tax more of it. It potentially solves the issue of governments not having enough revenue, since arguably they can tune unimproved land values upwards to the levels they need. Of course it also introduces the problem of governments tuning unimproved land values to the level they need. Tax revenues have grown from $3.32 trillion in 2017 to $4.05 trillion in 2021. That's nearly 22% growth in a four year window.

I'd be very concerned about governments undertaking the necessary actions to drive land value taxes up by 22% over a four-year window. I think such policies would lead to many people being forced to vacate their land.

Most increases in land value are for the construction of infrastructure and other investments which make people more productive and increase wages, so while land values increase that investment increases wages also, meaning that it shouldn't have much of an effect on people's ability-to-pay.

Can you give examples of how this is true? I feel like the main government spending that made me more productive was some transit spending before I was born and their education spending. I feel like most government services aren't this.

Even things like health care, which arguably keeps me healthy enough to work isn't distributed in any sort of uniform way so the productivity increase from it isn't likely to match the land value tax increase.

I think there are a lot of things that can increase land value 22%. I think some of them might even raise average wages 22%. I think almost none of them will raise each individual wage by 22%.

The obvious one is increasing the number of workers.

You have a thousand acres of farm farmed by your family and another say - ten workers in total.

The government builds a rail line and highway along one side of your farm and suddenly a portion of the thousand acres is better used as a small town - which now houses tens of families and perhaps a hundred workers.

Even if your personal income didn’t raise, the income of the area did.

Can you explain in what sense LVT is the most efficient form of tax? I do understand that normally when you tax something malleable you get less of it so it's often best to tax things that aren't malleable. But what precisely is LVT more efficient at? Does it generate the fewest negative externalities per unit of tax revenue? If so, how do we evaluate between different types of externality?

Have we accounted for the fact that with LVT it's possible to get less tax revenue from land becoming vacant because the taxes become too high for users?

Because land has fixed supply, as you've said, the tax is perfectly efficient: it causes zero deadweight loss. But LVT actually has positive externalities as well- namely, it makes it nearly impossible to speculate, which with land consists of buying land and holding it off the market unused or underused in order to sell it later. Speculation is very inefficient and also quite common, so removing it actually makes the economy better than it was before an LVT.

As for the tax being too high, if people started to vacate land that would mean the tax rate is over 100% of the land value (if it's at 100% people won't vacate, they won't be able to extract rents from it but it won't be an economic loss). Governments have every incentive not to tax land over 100% value because they actually lose money from doing so, so that's a pretty good security that it won't happen.

I think I need to think about this some more. It seems like the goal of government is to figure out the tax rate that counters the land value perfectly without taxing any more. The fact that it is unimproved land value means we aren't stuck in an efficiency trap since a diverse enough set of uses can improve the land sufficiently to generate a reasonable economic profit in non-rent form. Countering speculation is definitely a strong positive effect.

I worry that the overtaxation causing vacation mechanism isn't very efficient because if the tax takes a small part of the land value improvement it seems that the government gets additional unearned revenue while only land with little to no improvement would be vacated. I think people only vacate if the taxes cut into their additional revenues too steeply. I'm not sure exactly where the too steep point is, but I think governments would have an incentive to overestimate the value of land.

That is not the sole purpose for the public collection of land rent. Land rent is based on demand for land. Land rent is what you would pay for a particular plot vs. some other plot that is available.

The question is to whom should this payment go, and "fee simple" is an entirely inappropriate mechanism for payment.

Everyone has an equal right to the use of land, limited only by the equal rights of others to use land. What the state does not need for the provision of public goods & services should still be collected and returned to the people on a per capita basis, as a simple matter of social & economic justice.

Overtaxing is definitively a problem but I personally am not a fan of extremes. Even just 50% of the ideal tax rate would be sufficient to significantly improve an economy while not ruining anything by being overzealous. There will have to be an escape hatch so that people can defer taxes for 5 years.

Well other taxes are not precluded by Georgism. See for instance Piguovian taxes and IP taxes. But additionally, I don’t think it can be assumed that the government will continue to need its current amount of revenue. Under subsidiary, the size of the federal government would drastically be reduced as power moves downward to local governments.

Well, many Georgists believe that All Taxes Come out of Rents, so under that belief there is no reason to keep inferior taxes in existence as opposed to collecting the higher rental value that would occur with the removal of those current taxes.

As for levies on externalities, these should be more accurately seen as correcting a market failure, the social cost that society must pay that the consumer/producer do not pay.

Notably, Frank Ramsey and A.C. Pigou can be considered crypto-Georgists -http://blog.lvrg.org.au/2013/09/ramsey-and-pigou-crypto-geor...

"As we shall see, Ramsey not only formulated a rule that leads directly to a “single tax” on land, but also anticipated the so-called Laffer curve in cases where the “single tax” is not employed. Moreover, Ramsey's rule was to be applied after any externalities had been internalized by means of appropriate taxes and bounties."

Ethically, under Georgism there is a strong moral basis for taxing economic rents and particularly so for taxing land and natural resources. The argument is that we all have equal entitlements to the land and the resources on it. That equal entitlement is forced by taxing adequately for the land value or natural resource value so that it doesn't unfairly benefit the person who holds it at the expense of everyone else.

Georgists are a bit like libertarians when it comes to income taxes. It's very difficult for government to demonstrate a moral basis for interfering in work markets to generate taxation. Libertarians argue that if you are forced to pay 57% income tax you're 57% a slave. I'm not sure Georgists would go that far, but it seems unlikely you'd see implementation of taxes that are both economically less efficient and ethically more dubious than taxation of economic rents.

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