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Comment by TimPC | Hacker News Reader

You can draw the supply and demand curves to see what happens when you add the tax. The supply curve is a straight vertical line since land is in fixed supply. When you tax someone $2000 for land, their demand for the same land falls by $2000. So if you charge the tenant the tax, prices will fall by $2000 making the landlords absorb the cost. If you charge the landlord the tax both the supply and demand curves are unchanged and the tenants pay the same.

Taxes on most things change prices by adjusting both supply and demand, it’s the adjustment to supply that can pass on part or most of the tax to the customer. If supply doesn’t adjust you can’t do that.

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> So if you charge the tenant the tax, prices will fall by $2000 making the landlords absorb the cost. If you charge the landlord the tax both the supply and demand curves are unchanged and the tenants pay the same.

Beautifully correct. Can you imagine peddling in politics a tax on renters claiming it is in their benefit?

I really can't. What are supply and demand curves for non-fungible goods? Each plot of land is unique. The asking price doesn't not affect its size. It does affect the time on market: the higher the ask, the longer it will take to rent out.

And some pieces will take infinite time to rent out if the price is set too high. The point is the land was just as unique before and after the tax. If you believe in supply and demand curves at all, this example is straight forward. Land has essentially fixed supply, so the curve is vertical and outside of a few weird exceptions can't change. The demand curve for your individual unique piece of land will be unchanged if the landlord pays the tax (taxes don't cause tenants to be willing to pay more) or be lowered by the tax if the tenant pays the tax (total spend by tenant unchanged). The new intersection of the lines determining the market price is either unchanged or lowered by the tax depending on who pays. This is unlike other supply and demand examples where in response to the tax you reduce supply causing the supply and demand curves to intersect at a higher price point.

>And some pieces will take infinite time to rent out if the price is set too high.

Yes. Same as the demand curve goes to 0 if price is high enough.

>If you believe in supply and demand curves at all, this example is straight forward

I believe in supply and demand curves for fungible items. It's easy to observe that you can acquire less of a particular item at a lower price than at a higher price and also true that you can sell more at at a lower price than at a higher price. I don't see how, say, a particular painting becomes bigger or adds detail with price increase or how one can sell two Mona Lisas by cutting down the price.

If you have a unique item your supply curve is flat at 1 supply and steps down to 0 at a price at which you refuse to sell. It’s still a supply curve and there is still a corresponding demand curve that determines the price you can sell at. In this case, it’s the demand of the highest bidder that causes the intersection. But the theory of supply and demand doesn’t go out the window because items are non-fungible.

So now you have "demand curve of $CUSTOMER"?

There are also no individual demand curves. The whole idea of supply/demand curves is statistical and does not apply to a single individual (as same as unique items). I have no more questions about the "land tax won't be passed to the end consumer" though so here is some result from this exchange :)

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