Redfin Economist says land value tax will fix the economy
narrativespodcast.com
narrativespodcast.com
'Forcing everyone in the suburbs to sell their home to an apartment building developer due to ruinously high taxes' is the single most politically unrealistic idea ever proposed. LVT is certainly a clever way to make sure land is used efficiently, and probably a good idea in the abstract, and perhaps we could enact it when we colonize Mars. But implementing it on a country where many of the voters are living in 'inefficient' SFHs now is not ever going to happen
Implementing the change more narrowly would allow you to test that assumption.
You’re reframing tax-policy to shape landowner behavior towards your desired outcome on the presumption that this will be an improvement of the land by increasing the cost of owning it by fiat. Sin taxes exist for a similar reason and have similar problems.
Taxes should not be conceded as an instrument of power to reorient society into a form viewed by a subset of society as correct, but recognized as what they are sold as: a levy to provide revenue for an unprofitable but necessary organization (“the government”) to raise revenue in order to service its obligations to society. To the extent that this shapes behavior, it is as an unavoidable side effect. When you treat the side effect as the goal, you lose sight of the fact that regardless of reason, taxation is a taking of assets from its owners, and this is a moral compromise we tolerate in service of having a government at all.
I will read your link this evening.
Why? If taxes are going to have side effects anyway, I think we should try to make those effects positive instead of negative.
> Regardless of reason, taxation is a taking of assets from its owners, and this is a moral compromise we tolerate in service of having a government at all.
I don't think I agree with that.
For example, I also think we should have a (revenue neutral) carbon tax. Part of the tax's purpose would indeed be to fund the government, but the other purpose would be to make people pay for the actual social cost of emitting carbon into the atmosphere, as opposed to passing them on to the broader public. This would allow the free market actually work properly.
Simply put: it’s a moral hazard. When the goal of the tax is in service to something other than the cost of government, then the tax rate can be arbitrary, and manipulated to the benefit of those in political favor. That sort of arbitrariness is intolerable in a free and just society as we should aspire to be.
>> Regardless of reason, taxation is a taking of assets from its owners, and this is a moral compromise we tolerate in service of having a government at all.
> I don't think I agree with that.
> For example, I also think we should have a (revenue neutral) carbon tax. Part of the tax's purpose would indeed be to fund the government, but the other purpose would be to make people pay for the actual social cost of emitting carbon into the atmosphere, as opposed to passing them on to the broader public. This allows the free market to work properly.
You are free to disagree, but what is the purpose of the disagreement here? It is possible to both recognize taxes as both a taking of assets (often cash, but historically could be anything) and a necessity. You can view this on your own paycheck: every single dollar that goes to your government is a dollar that you personally earned and was taken from you (“withheld”) by your employer and paid to your government.
You have some influence over how those dollars are then expensed by your government, by only to the extent allowed by the law through a power-sharing agreement (“the Constitution”, both Federal and your State’s). The larger the government, the less influence you have, and the more likely a higher percentage of the earnings which were taken from you will go to benefit folks you would rather it didn’t (“wasted”).
But you raise a good point about the side effects: we are going to have taxes anyway, and the side effects are going to matter in the discussion. Where they matter though is not in the purpose of the tax—that is and should remain to cover the cost of government—it matters in which taxes are implemented to cover the cost of government. As long as that remains the basis, there is much room for improvement in the way we levy taxes.
Because in the case of a carbon tax, the government isn't taking assets that are rightfully yours; they're taking assets that rightfully belong to the public.
Let's say that I bulldoze your house in order to expand the size of my factory. The factory might generate lots of additional revenue, but that revenue would not be rightfully mine.
Now let's say that instead, I dump refuse from my factory into a river that runs through both of our properties. The refuse flows downstream and ruins your drinking water. I would argue that again, the revenue from my factory is not rightfully mine.
That's still pretty obvious. But now let's say that instead of polluting the river, I pollute the air with greenhouse gases. Long-term, this is also going to be detrimental to your property, such as by increasing the likelihood of extreme weather.
And so some portion of the revenue I generate by releasing greenhouse gasses does not actually belong to me. The government should take that revenue, both to allow the free market to correct for those social costs, and to compensate those affected.
In that same exact way, a land value tax is correcting the capture of the positive externality that is coming from your neighbors for your particular location because of your monopoly over it.
Taxes are a cost from a business accounting perspective. Costs are not borne by the business but paid for by their customers in a manner which is usually obscured to them. A “carbon” tax would effectively be a tax on all goods and services that use energy (all of them).
Now my understanding (when I’ve raised this cost of governance issue with advocates prior anyway) of a lot of carbon tax proposals is that the taxes paid would be remitted back to taxpayers or citizens in some way in a kind of Robin Hood-like manner rather than actually used to cover the cost of government, but this doesn’t actually accomplish anything and I disagree with that kind of scheme on prudential grounds (inappropriate use of tax authority). In any case it would be cash seized from someone who earned it first. A power plant doesn’t emit hydro-carbons needlessly, it emits them as a function of a customer downstream paying for it: to power your refrigerator or to pay for the manufacture of the phone you purchased.
Whether you are levying the tax against the business operating the plant, the customer at the point of sale or any and all of the intermediaries, what you are effectively doing is raising business costs no matter how you phrase it or rhetorically justify it. This informs the final product and service price, so if costs go up including taxes, you should also expect prices to go up.
Unless one company could find a way to produce goods with less energy than their competitors, or obtain its energy from cleaner sources, perhaps by investing in solar power. This would of course incentivize competitors to do the same.
Yes, it would cause prices to go up, but those prices would reflect the actual cost of the good. As you noted, you could offset the price increases by redistributing the tax revenue to the public. This redistribution doesn't make the tax pointless: you're giving a discount to individuals who make greener choices. People who pollute more (whether directly or indirectly via the products they buy) will pay more of the tax but not receive more back.
(This reasoning can apply to a LVT as well, but I prefer the carbon example because I think it's more clear-cut. Clearly, no one person owns the air. People do own land, so I'm more conflicted.)
Sure. Let’s take that solar power investment: under your proposed regime, the cost of the supplies and materials and electronics of the R&D employees would be bear a carbon tax. The electricity to power the lightning and electronics would beat a carbon tax. Any transport they use will bear a carbon tax. The food they eat will bear a carbon tax. The mines the materials for the panels will bear a carbon tax. The transport of the materials will bear a carbon tax. The equipment for extraction will bear a carbon tax. The factories which produce the panels will bear a carbon tax. The intermediaries that ship and handle the panels will bear a carbon tax. The infrastructure to connect it to the grid will bear a carbon tax. And I’m sure I’m leaving out several thousand items, but that’s probably why the serious proposals say to just do it at the plants and refineries, I.e. increase the cost of energy directly.
Taxes are not a cost in the way supplies and materials are and a carbon tax doesn’t make the “cost of the good” more real, just higher. They are a fiat cost, hence the need to tie to something real: the cost of governance. Consumers do not accept lightly increases in their cost of living, as you can see in the present moment with the current price of fuel in the US and the likely parties to suffer in upcoming elections.
Let me ask: do you think it's possible in a literal sense for society to emit greenhouse gases?
If it's not possible, your argument makes sense to me. But if it is possible, we should financially reward people who make greener choices.
Every single thing you just listed would take energy to produce and would bear a carbon tax because a carbon tax is really just an energy tax. The electric vehicles need batteries, the batteries need lithium, and the lithium has to come out of the ground. This results in a product with much more mass than your typical ICE, thus has more energy put into its production, but to offset this the electricity can theoretically come from some solar farm in the Mojave desert. In practice it probably comes from a gas fired plant, but that is still a lot better than if it were to come from a coal powered plant (and sometimes it does).
Everything we do by living has an impact on the planet. Actually to be more exact anything any living creature does has an impact on the planet, but we’re the only species that thinks on a planetary scale (except maybe birds, I’m sure there’s a fun philosophical discussion there but we’ll have to table it) and therefore care about this ecosystem we have conceptualized as a planet.
So when I eat some beans or drink milk and or a cow eats some grass or “feed”, we both emit a GHG with a global warming potential of 27-30 over 100 years. You should be happy to note that as a responsible citizen of this planet, I have omitted both beans and milk from my diet. Unfortunately my hypothetical methane account is probably overdrawn on account of my love of steak as my primary source of protein.
No. We cannot live without waste as a necessary product of living, and since there’s a lot of us, we waste a lot of energy. What we can do is get a lot more efficient with our energy usage and reduce the total amount of waste, but we will continue to be GHG emitters for as long as we have civilization. Either we find some way to get the planet to absorb more of our emissions or we naturally die off until we reach an equilibrium with the planet. That could be billions of us or it could be zero of us. I’m unconvinced tax policy will be our silver bullet, nor will cronyism.
> we should financially reward people who make greener choices.
Which brings me to my final point. If you mean this in a private market sense, that’s fine. If you mean this as an extension of tax policy and the course of government business, this is called cronyism—the government picking winners and losers and is a fine example of why our tax code is already so complex. We have plenty of that already, and I would like to see less to the point that it approaches or eventually achieves zero but I’m not holding my breath.
Only if the supply of the thing being taxed is elastic. The supply of land is inelastic, so (returning to the original topic) there is no way to price LVT into downstream rents; attempting to do so would mean pricing the thing above the value set by its demand, which would mean even less profit.
Property taxes do go into the cost of business by the way; and that would be true for an LVT as well. The land itself may be inelastic but that isn’t necessarily true of the products and services that are produced on it.
Yes but that requires a majority to want to abolish said LVT, whereas the majority would stand to benefit from an LVT as close to 100% (of economic rent) as possible.
> Property taxes do go into the cost of business by the way; and that would be true for an LVT as well.
Most businesses (last I checked) lease from commercial landlords, which means property taxes and LVT would both be part of rent - which, again, can't be raised to account for LVT without violating supply v. demand constraints and hurting profits as a result.
Even for those businesses which do own land outright, land prices are also currently a factor in the cost of business; they're no worse off by replacing a giant lump sum with LVT.
I mean as close to 100% is probably like maybe 4-5% at most, if the LVT on the land and the property tax on the structure were added up to that going by this Strongtown article someone linked me somewhere in this comment chain about how some PA towns have done it.
I think you’re reading me and getting the wrong idea about what it is I’m arguing against. LVT’s as a tax are okay in lieu of other taxes, provided they’re in lieu of other taxes and also the rate is not set arbitrarily high to accomplish nebulous other social goals. That last part is requirement for every sort of tax, and excessive government revenue should dollar for dollar be returned to the people it was levied from.
I don't think I am. Rather, I think our disconnect is that I disagree with your implication that fully internalizing the negative externalities produced by the ownership of land as property is a "nebulous other social goal".
The endgoal - i.e. the full internalization of those opportunity costs externalized onto every other member of society - is 100% LVT with all surpluses disbursed evenly as a citizens' dividend (a.k.a. "UBI" in more modern parlance). Anything short of that is theft by landowners from everyone else (including other landowners, but especially those without land at all); the question is how much theft the general public will continue to tolerate, and for how much longer.
We are fundamentally at odds then with irreconcilable differences of opinion on private property. The protection of private property is a core justification for the State, because as I replied to you elsewhere, private property doesn’t cease without the State but the situation around it becomes more volatile. I do not seek to re-base the State on the socialization of land value and you probably couldn’t with an extreme amount of State violence.
You're ignoring the reductions/eliminations of other taxes. For example, replacing property taxes with LVT is the usual "first step", and would reduce costs for most homeowners (whose land is typically less valuable than the house sitting on it). Same with sales tax, or income tax, or any other non-LVT tax; non-LVT taxes are less efficient than LVT, so replacing them with LVT would maximize tax revenue while reducing individual tax burdens for all but the largest landowners (namely: landlords, be they residential or commercial/industrial).
> taxation is a taking of assets from its owners
The private ownership of land is itself theft from the commons, and is itself the product of state power and authority. A tax on the value of that land is therefore compensation for that theft, and is more than fair.
Modern society has gone on long enough letting land owners have their cake and eat it too. If land owners expect society to respect their exclusive claims over land, then it's on them to compensate society accordingly.
I’m not against replacing other taxes with LVT. I’m against the misapplication of tax authority for purposes which are not subordinate to covering the cost of governance.
> The private ownership of land is itself theft from the commons, and is itself the product of state power and authority.
No.
Yes. Or do you believe land titles to be magical artifacts that the rest of society obeys for the hell of it? Land ownership would not exist (and therefore wouldn't need taxed) if not for the state using its monopoly on violence to enforce your piece of paper; given that state-issued privilege, it should be entirely unsurprising that you might be called upon to pay accordingly.
Yes it is. Any attempt to enforce private property ownership itself entails the attempted creation of a monopoly of violence in respect to that land - also known as "a state".
> try something more akin to a cross between Europe in the Middle Ages and drug cartels
Both feudal lordships and drug cartels (well, the ones that are actually worth fearing, at least) entail the creation and enforcement of a monopoly of violence over a given geographic area (a.k.a. "land"). That would make them states. They collect(ed) taxes, they raise(d) armies, and they generally control(led) the local populace under threat of violence. The latter case is only exceptional due to it competing with another state over control of a given geographic area; that hardly precludes a cartel from being a state, for the same reason that two states at war continue to be states even when they're being invaded by each other.
> private property rights are recognized by the State by custom (or “common law” if you prefer), not derived from the State, even though they can be deprived from you by the State by due process per the compromises we made in our Constitutional order.
If the State can deprive you of your "private" property, then how does that not in and of itself demonstrate rather plainly that the State is the thing from which said property derives? By what authority do you get to claim a piece of land as your own except with the State giving you a piece of paper saying it's yours?
So in that case would a drug cartel that excludes the government from enforcing its sovereignty over a piece of land be recognizable as a state? I won’t argue, but I’m going to go out on a limb and suggest to you that maybe while a fiefdom could in modern parlance be considered a “state” if it were large enough or managed to make it into the present day with internationally recognized borders (like Liechtenstein), not all fiefdoms were states. I’ve made that mistake too so I won’t knock you for it, but a State as you and I know it is a very very recent invention that entails a bit more than Capitol Hill in lieu of a lord. France prior to their revolution and France post-Napoleon provide the starkest contrast between a feudal Kingdom and a State (in both Kingdom and Republic flavors because they’re restless like that).
> If the State can deprive you of your "private" property, then how does that not in and of itself demonstrate rather plainly that the State is the thing from which said property derives? By what authority do you get to claim a piece of land as your own except with the State giving you a piece of paper saying it's yours?
Well you dropped the due process provision I put in there. Did you know for example that Bills of Attainder are illegal under the Constitution? This would be a legislative instrument where a parliamentary body can simply vote to declare someone guilty of a crime, and simply take their property and even life by majority vote. Those have existed at various points in time, but they are off-limits to Congress (and the States too).
But also a title is not just a piece of paper from the State. Think of a title as a record or evidence of the transaction. It is the agreement between buyer and seller that transfers property rights over a piece of land between two parties, but there isn’t a step where the State steps in and says “I approve this transfer”. The contract is between two parties, not two parties plus the State (unless the State is actually one of the parties to the transaction). Where did the buyer get the rights from? There’s a record of that too, and the State’s role is to keep a record. Maybe it was originally a State grant, but the State forfeited it’s rights with the transfer.
That said, yes, there are ways for the state to take property, so long as due process is followed. This might follow a criminal conviction, or maybe someone died without next of kin and it was determined there was no one to inherit the land, or it was debt collateral, or it was compensated for after an eminent domain action. It isn’t arbitrary.
It ain't a matter of recognizability. It's a matter of function and action - and in both of those senses, a drug cartel is a state.
> not all fiefdoms were states
All landed fiefdoms entailed a monopoly on violence over their geographic territories a.k.a. land, be it directly (by raising their own armies) or indirectly (by relying on a superior lord to whom they swore fealty). All such fiefdoms were either states outright or parts of larger states. You're literally the first person I've encountered who claims otherwise - and I've met a lot of people with very diverse perspectives on European medieval history.
> Well you dropped the due process provision I put in there.
Because it's irrelevant. That the State has constrained its own powers to revoke land deeds does not change the rather basic fact that private ownership of land is fundamentally derived from and dependent upon the state and its monopoly on violence.
You still haven't answered my question: in the absence of the state, who enforces your piece of paper claiming some portion of land to be yours? By what obligation do I have to respect it?
> there isn’t a step where the State steps in and says “I approve this transfer”.
There are actually many such steps. At the bare minimum, the local courthouse usually needs to sign and notarize the new deed. There's also typically a rather hefty stack of documents for (among other things) various state and local requirements.
> Maybe it was originally a State grant, but the State forfeited it’s rights with the transfer.
No, the State pinky-promised that it wouldn't revoke the privilege of land "ownership" except under certain conditions. Laws can and do change.
A family of four would then have an inherent tax advantage against Blackrock etc. accumulating family housing.
Property tax isn't THAT different, and one component of it is a tax on land.
Are we seeing the LVT effects in locales with high property taxes?
That may not last long if the Texas GOP continues to emulate California housing policies by seeking to repeal property taxes; if they do that they will soon start to also imitate the California-style housing crisis.
This seems trivially fixable by making the tax revenue neutral (ie. every additional dollar collected by the LVT is counterbalanced by one less dollar in taxes collected elsewhere).
2. Make it revenue neutral? Who's going to do that? Some legislature somewhere? Are they actually going to do it? Or are they going to say "Yay, more money!" and find new things to spend it on?
I have zero confidence that a Georgist tax would be revenue neutral, no matter what theory says should happen, and no matter what promises are made.
It's pretty trivially easy to make any tax revenue neutral. Just return 100% of the tax revenue to the people split evenly between every person or adult in the country.
(Also, giving tax money "back" to the population is surprisingly nontrivial given political complications over which people qualify to get the rebate, political and practical complications over actually getting the money, and an expected ultimate impact - positive and negative - on the net recipients)
Fewer people could afford 2% of land value + mortgage costs + insurance + … at current prices which means there are fewer buyers at those prices. That price drop scales with the LVT so at 10% you would pay more than at 2%, just nowhere close to 5x as much.
Well it would depend on why the land is expensive. What it would do (at least in theory which I do agree with) is force the expensive land to be developed for a useful economic purpose instead of just sitting there.
For single-family homes and such a LVT is likely to be neutral or slightly positive b/c a lot of those homes weren't built on particularly valuable or useful land (which is why it was cheap in the first place).
I really like the idea of focusing taxes on more of a "what am I actually paying for in my community" which LVT and variations of that tend to support, but it'll never happen in the US.
This tends to minimize the distance people travel to work, but it’s hardly go to force a billionaire to sell land they want to keep.
I’m sure we can come up with contrived examples of things, but be open-minded to how things could work.
Anyway, it’s not that property taxes are 1:1 with population, however it does broadly correlate with density. A farmer next to a subdivision is a more extreme version of the same thing that only represents which farmer happened to sell their land. Meanwhile a farm is less value per acre than a housing development. Just as high rises represent more value per acre than garden style apartments and garden style apartments beat single family homes.
Land value taxes on the other hand ignore all such differences by design. The farmer pays the same amount per acre as the subdivision next door. LVT can capture increases in value as regions develops, but those increase don’t line up with political borders.
Beachfront vs non beachfront isn’t equivalent, but two random fields in Northern Virginia next to each other with similar features should be. Anyway, LVT definitely doesn’t care about what you built on the property so this distinction just doesn’t matter.
Yes… but you can’t just look at vacant lots in abstract. If you have two lots and they are taxed the same or similarly, either the owners pay the tax, or they sell the lot because they aren’t providing enough economic value to afford the tax, or someone who has a better economic idea buys the lot to improve it.
In your example of the similar lots you demonstrated this, but drew the wrong conclusion. You realize economic value from the 10,000 people on Lot A because the owner had to either improve it or sell it so that it produced economic value.
> Beachfront vs non beachfront isn’t equivalent
Right, which is why they’d be taxed differently… depending on other factors. L
> Anyway, LVT definitely doesn’t care about what you built on the property so this distinction just doesn’t matter.
That’s exactly the wrong conclusion! LVT cares more than any other tax system because the tax revenue is reflective of the economic value of the property.
This is false, LVT only cares about the hypothetical economic value not the actual economic value.
Let’s say you buy some farms in the middle of nowhere for 10k/acre and put a theme park on it. Your LVT taxes are in theory unchanged, though depending on how it’s calculated the value of land around that property increases because it’s near a theme park. Then your LVT increases when people start to build hotels etc around your property.
What’s interesting about this model is your incentivized to develop land as a single unit. A sports stadium with associated shops and hotels is valued as if none of it was there, but split it up and each pays more due to proximity to other businesses.
And of course what improvements are included or excluded is rather arbitrary. Do you value a natural or artificial pond differently?
No, it’s not false. It’s the fundamental characteristic of LVT. There is no separation of the hypothetical and actual.
> Let’s say you buy some farms in the middle of nowhere for 10k/acre and put a theme park on it. Your LVT taxes are in theory unchanged, though depending on how it’s calculated the value of land around that property increases because it’s near a theme park. Then your LVT increases when people start to build hotels etc around your property.
Right. That’s the point. You buy land and the taxes are such that you must improve the land or otherwise produce economic value to be able to hold it. As land around the theme park becomes more valuable taxes eventually go up and then the economic value of the park must continue to increase in order to support the taxes (at the same profit level).
> What’s interesting about this model is your incentivized to develop land as a single unit. A sports stadium with associated shops and hotels is valued as if none of it was there, but split it up and each pays more due to proximity to other businesses.
I’m not following this very well. I think it makes you think more holistically, but I am not tracking well that building a sports stadium and shops and hotels would cause the value to be as though nothing is there. Can you elaborate? I would think that someone developing the parcel to include all of these things would be doing so to decrease risk, increase economic engagement so they can afford taxes at a specific, desired profit level.
To simplify.
If it’s the actual economic value then the city would include your neighbor who’s brown lawn slightly decreases your property values and a million other factors nobody can actually account for. It’s always going to be calculated based on some simplified model or the best guess of some accessor.
Even stepping into the abstract some choices are just arbitrary. Do you decrease the LVT of a superfund site? What if someone drained swampland so the land it’s self is more valuable?
So sure, it’s of course possible for properties next to each other to have significantly different values per acre, but nothing says the higher density one must have a higher or lower value so let’s just assume their identical for simplicity. Any way you slice it it’s clear LVT doesn’t care about the actual population on the land.
Local population (incl. the density thereof) is arguably the driver of value, moreso than any other factor besides sheer size and maybe location (in exceptional cases, e.g. adjacent to a coastline). If you could build a store or a restaurant anywhere, then all else being equal, would you build it where there are 10,000 potential customers within walking distance or where there are merely 1,000? Likewise, are you going to move where there are lots of places to eat and shop or where there are few? Generally people want to be where other people are, and this produces a positive feedback loop between local population and demand for land; there are exceptions, of course (some people like to live away from population centers instead of in the middle of them), but they ain't numerous enough to meaningfully suppress that feedback loop.
Assuming all things where equal the lower population density one might be assessed at a higher LTV because it’s next to a higher population density and the higher population density one would be assessed lower because it’s next to a low population density one.
But the actual effect depends on many factors, being next to poor people generally lowers property values etc.
Forget politics, who thinks its a good idea to force people into economic transactions? I could see a whole new line of blackmail, akin to patent trolls, looking for people who under-priced their property or really don't want to move. It sounds terrible.
Any billionaire could kick you out of your home in a moments notice. Sure you get paid, but you probably don't want to move. How could you even say the property is yours? People get upset with government forces them to sell their property using eminent domain. This strikes me as a hundred times worse.
You are thinking more of something like Glen Weyl's Radical Markets proposals.
My taxes are assessed as land and property, with the majority of the valuation coming from the land. Is LVT a big departure from what we currently have in most US states?
That's one approach. Another is for property appraisers to determine the land value - something which is already pretty commonly done.
> How could you even say the property is yours?
It never was. All land "ownership" consists of borrowing a portion of a nation-state's sovereign territory. LVT makes that explicit, requiring land "owners" to pay what's actually due to society (rather than a tiny fraction thereof as is the status quo).
I haven’t fully thought through all the incentives it brings though. However, it seems like a better solution than telling people to reverse mortgage their houses. Especially given how predatory that industry seems to be.
https://dor.wa.gov/sites/default/files/2022-02/PTDeferral_Se...
If income tax drops by X% and a LVT of Y% is implemented to, theoretically, keep the same revenues - some people will win and some will lose.
The idea that all of the middle class, upper class, and wealthy will lose seems absurd.
Some people seem poised for a loss - all the people living in SFH in the middle of a city where lots are worth $2M. All the parking lot operators, etc. And that's kind of the point...
Perversely, it's easy to imagine a poorly implemented LVT that incentives the opposite of what proponents want - it reduces overall tax burdens on suburbs because the "land" is less valuable than the cut land - driving people to leave the city and live in the suburbs.
It all comes down to implementation. Blanket statements seem out of touch
I'm not sure that's actually what the upper middle class is.
The US is >50% urban. Wealth MASSIVELY skews urban. Home values massively skew urban.
I would not be surprised if >50% of the "upper middle class" does not own an expensive SFH in the suburbs.
And, again, this is beside the point.
If income tax is reduced by 50% for the average upper middle class family, and then a LVT makes up the difference - there is no change. You're just incentivizing different behaviors.
It comes down to implementation.
Source? My understanding is that most Americans live in suburban areas. I live in Chicago, where the suburbs have 3x as many people as the city. The city population is largely split between the poorest in the region and richest, most white collar workers live in the suburbs. Seems to be true to a lesser extent in NYC, and it's hard to say there's any urban area in LA, the whole place is suburban.
> Source? My understanding is that most Americans live in suburban areas.
One variable is that it really depends on the definition of "suburb" each person is using.
Take the greater Silicon Valley area. There's only three small urban cores, San Francisco, Oakland and San Jose. Even within those, a lot of the area is suburbs and even semi-rural and agricultural. So by that viewpoint, most of Silicon Valley is suburbs.
If you count places like Evanston, Yonkers, and Pasadena as Urban - then you get ~56% urban. If you pretty much only count places where the vast majority of buildings are multifamily - then you only get ~30%.
Renters are close to out-numbering non-renters by double digits.
Those are incredibly new phenomena. It's hard to over-state how different things are now compared to even 5 years ago.
I will be surprised if there isn't an open electoral revolt against land owners in my community over the next 10 years. And not just pro-housing policy, but policy explicitly designed to punish.
I don't have an opinion on LVT, but the idea that home owners are the primary organized electoral power base is, I think, shifting quickly in many communities. Landowners, I think, I have two options: find ways to fracture/disempower the rent base in the communities where they invest or else find a way to keep the number of non-renters well over 50%.
I would say they already are disempowered. It is unfortunately pretty hard to organize anything when you have to worry about high rent, not losing your job or having to move every few years. What we have seen in the last decades is that it is now hard to do much at all through organizing unless you can somehow affect the economy. Which you can't if you risk getting fired or evicted doing so. Look at Japan, South Korea, Singapore, Hong Kong etc. for the results.
It's more prudent to look at the ratio of owners and renters, which is 1.85:1, there are almost twice as many owner households than renters.
This didn't sound right to me - according to the census bureau there are nearly twice as many owners as renters in America (1). So I'm not sure what discrepency you're pointing out there.
And anecdotally there was an explosion in demand last year while interest rates were crazy low and the rate of first time home purchasing was similarly crazy in my area. It was very easy for people to get the money to buy homes, but there was a shortage of housing stock.
(1) https://www.census.gov/housing/hvs/files/currenthvspress.pdf
"A greedy land speculator (middle class home owner) refuses to develop a vacant parking lot (refuses to sell to a McMansion developer) because he can let land appreciation pay for his refusal to develop (let him stay in his home).
Since the villainous speculator and the heroic homeowner are economically the same, any consistent LVT has to essentially force the home sale. That is the entire point of the LVT"
I think LVTs are a great idea for a brand new society, and they certainly would work- by making land too valuable for SFHs, so that it has to be used for its highest & best usage. But if you're not forcing homeowners to do that, you're not capturing any of the efficiency gains, so LVT just becomes another tax. It's either forcing landowners to develop apartment buildings on valuable land or it isn't- you have to pick one
https://www.theguardian.com/commentisfree/2015/aug/19/donald...
Given the fact that renters (who generally have less income than homeowners) can manage to pay the annual land rent every year, homeowners will manage just fine.
"Furthermore, as we discuss in more detail in our paper, the number of net winners from this reform would far exceed the number of net losers, who, if necessary, could be exempted or compensated at little budgetary cost." https://voxeu.org/article/post-corona-balanced-budget-fiscal...
The premise behind a land value tax is to take an increasing amount of the land rent in taxation, which at the extreme end would reduce the selling price of land to $0.
The objective is both to make the land markets work better and one of distributive justice. It isn't to punish homeowners. It is to redirect the privatization of land rent and return it to the rightful recipients (those who are excluded from using a location with the public acting on their behalf).
In other words, if the Georgist solution had been in place, the price of land would have been close to $0. I can assure you this is nowhere near the case. In fact, here in Salt Lake City, the land share of real estate value is around 70%.
Of course, transitions can be challenging. The prior owners of the land got away with legalized theft and you can trace this back in time from each former landowner capturing the land rent from the next buyer. This is what Georgists aim to stop.
I think the core of it is that taxes are for the people to pay the government for services, and the value of land does not correlate to the amount of services used.
for example, a single person, dwelling on an acre of land may consume very little water, school usage, police assistance, etc. A 40 story apartment on an acre will consume a great deal more of those services. The value of the land is not taxed right now because it is understood that the improvements to the land dictate the cost of the services that the government needs remuneration for.
The government derives its mandate to tax from private property owners' demands that they provide services. Not vise versa.
Meanwhile, taxing people's labor is a way of collectivizing people's labor, which violates the right to self-ownership.
As for the 'payment of services', this is simply a narrow view of the services land provides.
"The consumption tax that best fits Smith’s criteria is on that of spatial services. A tax on spatial services also best applies the Ramsey rule of taxing inelastic items. Space does not get used up, but space generates a flow of site services over time that do get used up, and is measured as the implicit market rent. For example, suppose the rental of a house includes a back yard. The yard offers a continuous flow of service as a place to enjoy the outdoors. The user consumes that flow over time. Though the space remains, every hour of yard service is an hour of spatial service that is gone as soon as that time passes. As a flow, the spatial service is simultaneously generated and consumed. It has been well known by economists since the classical economics of Ricardo that the taxation of land rent does not affect the economic rent. Since the supply of land, within some jurisdiction, is fixed, a tax on land rent does not alter the amount of land. Since a tenant does not care who gets the rent, the tax on land rent does not change the demand, i.e. the quantity of land demanded at various amounts of rent." https://sor.senate.ca.gov/sites/sor.senate.ca.gov/files/Fina...
Whether you personally use a service or not is irrelevant. If the land provides a service and you choose not to use that service, you are still depriving others from enjoying that service.
Amusingly, levying a land value tax alongside the Wright Irrigation Districts in California is what broke up the large landholders who were monopolizing access to water. This was widely viewed as an enormous success in policy, even as the large landholders screeched that it wasn't fair that they should have to pay for the water whether they were using it or not. https://www.henrygeorge.org/caldes.htm
A private lump sum payment is simply a private tax. How we treat land ownership is ultimately an ethical question, without the state your title to land means nothing.
"THE TREATMENT of rent as public revenue is part and parcel of an organic theory of the State.
In the contractual theory, government is a kind of business which extends services to landowners. They only need pay for benefits received, which are construed in the narrowest possible terms.
In the organic theory, landowners hold title to land as a privilege. In return, they owe the State - acting on behalf of the community - certain obligations. The entire value of land is regarded as a benefit received from government. This is in keeping with the definition of land as "Public Value" offered by Alfred Marshall, the distinguished Victorian economist.
Land and its value is the joint product of at least three things:
• nature, which created it;
• government, which acquired it from other sovereigns and protects it from other powers and extends public works for the public's benefit; and
• synergism, which is the increment to value that spills over from social and economic activity in the neighborhood of each parcel of land. Value stemming from all these elements is regarded as unearned by the individual landowner. It is the product of outside forces and therefore a fit object of taxation."
https://masongaffney.org/publications/G44Philosophy_of_Publi...
You're welcome to believe otherwise of course, but trying to dispute the ethical position of land value taxation is like trying to argue against the laws of physics.
I'm not sure I'm sold on the idea that ethics are somehow extra-cultural constants, but, we can table that discussion.
>>So it’s kind of just basically a shorthand for I think, being kind of selfish. valuing your property value, your view, your neighborhood character that you want more than building a neighborhood that is welcome for all people or for more people. To be able to afford and live in. So, unfortunately, nimbyism, it’s like a consequence of, I think incentives.
It is not a consequence of incentives, it is a consequence of the fact that when someone moves to a place with a particular quality of life, pays more, and then pays high taxes and high maintenance costs for decades, they themselves have paid for decades to build that quality of life. To say that oh, your neighbor can randomly decide to make a major construction project literally in your backyard and convert a wetlands housing endangered species into a several hundred unit high-density living complex, with years of construction and two orders of magnitude greater traffic on your street forever - yeah, you can expect people to object. (this literally happened to me, and in a matter of weeks we got 10x the largest crowd to show up at a planning board meeting and we gave a presentation to shut it down; not yet permanently, but...)
And rightly so - the developer is literally stealing all the value that you and your neighbors and town created over the past few decades, and then profit from the buyers also.
Now, if you are talking about areas that are already cities and have such high density that there is effectively no wildlife, then it might be different, but again the value of walkable neighborhoods vs random massive development is not to be overlooked.
So, no this proposal is preposterous, aside from being a nonstarter. Young people who might want it are great at making noisy protests and notoriously bad at bothering to vote - the one thing that matters, while older people, and especially those who own property, tend to reliably vote.
> So, no this proposal is preposterous, aside from being a nonstarter. Young people who might want it are great at making noisy protests and notoriously bad at bothering to vote - the one thing that matters, while older people, and especially those who own property, tend to reliably vote.
In other words, "let them eat cake". The "anyone under 45 doesn't deserve to afford shelter" attitude strikes me as a "fuck around and find out" situation.
* No. I didn't build it, I bought it already built, and no wetlands were damaged, it's 100' away, and thev'e got strict measures in this town. And if you think that a single family home outside the buffer zone has the same impact as 300 units in five buildings built ON the wetlands has the same impact, that's ummm, some next-level ignorance.
The strict conservation zoning measures apply to any work - just replacing a porch footing 20 inches inside a zone requires several permits. Planning, work & expense. Everyone here incurs those costs to maintain a standard of living.
>>In other words, "let them eat cake"
Not even close
The point is that destroying value that exists, and value that people have worked significant parts of their lives to create, is a very bad idea.
It is a nonstarter because the ppl that worked to create & maintain those standards vote in far greater numbers than the people complaining. Just a relevant fact. (And threating "f around and find out" is great performance but zero votes - in how many elections have you voted?)
Accusing the people who own nice properties of being motivated by selfishness and greed is not only offensive to the people whose votes you need, it is also exactly 100% wrong.
If they were actually selfish & greedy, they would not be putting in large extra work & expense to maintain standards, they'd be tearing down zoning to build as much as they could on every square foot of their lot to extract maximum value.
They are not. I watched a town where I lived vote out zoning for just such considerations. It was driven by developers, but a lot of it was "why should I have to get permission to build a barn or an in-law apt?".
The same town voted a few years later to restore even stronger zoning.
The FACT of the matter is: while unrestrained development may initially create more units, it actually sucks, badly, for everyone but the fly-by-night developers.
Which means that the article's argument is wrong. People are spending sweat and money to actively NOT get the maximum dollar value out of their homes, because building quality of life is more important.
If you want to go after the real problems, it is not zoning, any more than it's young people having Netflix subscriptions.
A good place to start is with the problem of rental units for "passive income", for running AirBnBs, and housing being purchased by hedge funds and the like. Heavily tax anything that isn't a primary residence, and you'll get a lot of units back on the market fast, and at good prices.
With that said, there are net-neutral transition strategies.
One of them is for the government to simply give all land owners money equal to the value of their land, but that might create inflation. Another might be instead to give all land owners a tax credit equal to the value of the land that can be spent on their land tax.
We can do this fast, we can do this slow. We can give aid, we can give tax credits, we can phase things in. If the LVT advocates, which includes many of the world's top economists, are right, then small transitions will quickly yield results that we can snowball into bigger transitions. The important aspect to me, is that eventually we reach a point where incentives align.
>>government to simply give all land owners money equal to the value of their land That is already in place - it's called eminent domain, and a SCOTUS case decided that it CAN be used for private development and not only for public works like roads. So, yes, govt could literally do a forced purchase of entire neighborhoods, and they would be required to pay current values, and then rebuild it at whatever density they want.
The other thing that could actually reduce complaints is to actually compensate the owners for loss of value. E.g., if single-family tracts have a value of $100 due to quality of living (wildlife, low traffic, open spaces, etc), and someone wants to put up massive apartment units in the middle, eliminating wildlife habitat, increasing traffic and consuming the open space, that will make the single-family unit's value decline to maybe $50 right next door, and $70 500 yards away, $90 1000 yds away, and $95 between the location and the major highway. Pay them the $50/$30/$10/$5 loss of their value, maybe in tranches when the project is approved, built, occupied. It can come out of some combination of the developer's or the town's budget.
That sort of appropriate compensation would go a long way towards reducing opposition.
What the tantrum-people ignore is that they want to live in the nice places, but giving them what they want is literally doing to destroy the very thing they want.
The FACT of the matter is that people who can't afford housing don't care about any of that.
Right. You DGAF about anything past the end of your own nose, and don't really want to do the work of solving problems, you just want to have your tantrums.
Saying "I want it, other people have it, so take it from them and give it to me" will not lead to a solution.
What leads to solutions is figuring out the ACTUAL problems, and then finding solutions that work in that space.
You say "can't afford housing until they are 45" - I bought my first house at 47, 40+ miles from the nearest metropolis, and I'm not whinging about it. Before that, I rented a similar distance away, and/in the city. Yes, commuting sucks, and so does city life. But I'm not all about taking stuff from other people to give it to me.
Where are you living now? What is so bad about it?
Have you ever actually read on the issue, attended a town meeting, voted in a local election, worked on a board? If you haven't, you're just another statistic of a young person who wants everything and does nothing. At least the guy in the article is actually thinking about the problem and trying to find a solution that isn't something a 5-year-old would spout.
I can also guarantee that if you got what you wanted, within a decade you would be yelling even louder to recreate what already exists - I've watched it happen.
Says the guy who LITERALLY proposes that he be compensated if dense housing is built on land that he doesn't fucking own because it messes up his morning walk.
I'm not asking for anything free. I'm asking that rightful owners of property be allowed to build on that property that they own without writing a random old man a massive check for ruining his morning walk.
Strategic advice for lurkers:
0. OP is common, and people like this are NEVER going to compromise. You have to crush them with pure electoral force. This is possible.
1. Attend a few meetings and do 1:1s with every seatholder, but don't get too bogged down. Either you have the votes or you don't, and this is an issue where many council people have huge personal financial vested interest. Figure out what they do for a living, any rental income streams they have, and how they got their seat.
2. If you have seats on your side, work with the most senior friendly councilperson to draft a plan of action. They'll know how the local law works and what there are likely votes for. Contrary to parent's cloud yelling, there is no one golden solution. The levers available and the impact those levers will have is highly contextual to your community.
3. If you don't have the seats, focus on flipping seats and crushing NIMBYs. Again, work with a friendly councilperson on a strategy and figure out if there's already organizing happening.
You likely have the votes; the key is turnout. One good strategy is to target renters, who tend to be pro-housing. Be smart and use your skills.
"Does the person who owns this property live there" is the question to ask, and there are many different ways of answering that question. You'll likely need a quiltwork approach, using public property records as your starting point. In many states you can obtain county-level voter rolls for free or for a small fee. Names and addresses.
Then canvas. Don't pitch, listen. Don't try to convince or debate; that's literally doing turnout work for t he other side. Just listen, ask a couple open ended questions, walk away, and at the sidewalk tick "yes" or "no" or "doesn't care". Find your base. Make sure they know how to vote for and make sure they vote.
Only start doing the hard work of convincing people to change their minds if you don't have the votes in your base. The good news is that you likely have the votes in your base. Look at numbers from prior elections. Turnout is low.
4. Likely don't run yourself; find a candidate who is passionate about YIMY and anti-rentier. But also embedded in the community. Churches, school groups, grew up in the area, etc. Well liked. It's possible you're a good candidate, but much more likely that you can find a better candidate who agrees with you on these key issues.
5. Regarding meeting attendance: stuff like "big groups at city council meetings" only works when you have the votes anyways, or when a councilperson doesn't really GAF, which makes it kind of silly. Especially for this issue where there are likely well-formed opinions and financial conflicts of interest. Don't waste your time if the votes aren't there. Until you have a majority of friendly councilpeople, ignore the city council boomer circus. (And it really is a total circus of retired nutjobs many weeks...) Ignore it. Quietly do the work of flipping seats. Turnout in local elections is low; getting even 20% of renters in your community to vote 100% pro-housing is likely enough to flip every at-large and a good number of precincts.
6. This will likely take multiple election cycles, but if you can find one cycle where all the seats you need line up, go all in. Spend money, spend time, don't squander a rare opportunity. Slating can be incredible effective, especially with a really good at-large candidate who can carry multiple precincts on his/her coattails.
This year is an especially good year because of massive rent increases. People are angry. Capitalize.
7. If you think this helpful, thank OP. Without the strange condescension I wouldn't have bothered typing this up.
I completely agree about increasing scrutiny on and taxation of owners for whom it is not their primary residence, e.g., "passive income" rentiers, full-time AirBNB hosts, etc.. These dramatically reduce available housing stock and increase costs (renters pay not only the full costs of the property but also the owner's profits).
That said, you are now squarely in the camp of restricting what people do with property that you do not own - exactly what you didn't like about my position.
This also brings us to the reality of why zoning was created.
It was specifically because people did NOT like the results of no zoning: anyone who owns the land can do whatever the fck they want with it.
This always creates externalities that impose costs on the neighbors, whether pollution, noise, light, safety issues, traffic, blight, or whatever. I watched a town where I lived which had eliminated zoning — with the methods you described — then found that all kinds of problems happen, and then they PUT BACK STRONGER ZONING.
Also look at another contradiction in your position. You say anyone should be able to build whatever the fck they want on their land. What that likely means is many more rental units. This will not substantially improve the lot of the renters, as it will be like the highway building paradox wherein adding more lanes brings more congestion; after a possible brief reduction for new competition, the rents won't decrease.
What you probably want is more actual purchasable housing stock at more reasonable prices, so be careful what you ask for. Just killing zoning will get more of what you don't want.
I also note that you are looking at a different kind of community than mine. I'm in a quasi-rural exurb (literally horses, cows, chickens on our street) with a town meeting and select-person govt, not a town/city council. The residents actually come to town meeting — often a multi-evening or all-day affair — and vote on almost everything, instead of electing town reps that make all the decisions. It is also a very substantial commute to the nearest city and zero public transport - for example, implementing low-income housing would force any owner to own a car, which puts them kind of out of the low-income category. So we may be talking about quite different ends of the issues.
The same things were said with market value assessment was in introduced in Ontario, Canada:
* https://en.wikipedia.org/wiki/Municipal_Property_Assessment_...
Municipalities were forced to used the market value, but could determine rates themselves. Not much happened IIRC.
Not if it's paired with a citizen's dividend or other form of UBI, which is what most Georgists (myself included) advocate. The idea is that if you're occupying your equal share of land value, then at a 100% LVT rate the tax you pay should be equal to what you're getting back in dividends + public services.
LVT+UBI therefore represents a tax savings for everyone except the wealthiest of land owners.
what's an equal share? land is not fungible.
a ranch somewhere vs a shoebox in the middle of manhattan quite likely will not be considered "equal" by prospective owners, even if the dollar valuation is exactly the same.
Estonia has an LVT of 0.1—2.5%.
https://www.emta.ee/en/private-client/taxes-and-payment/othe...
> Housing in the US is a constant source of frustration. On the way up, prospective homebuyers worry that they're missing out on their chance to jump on the housing ladder. On the way down, homeowners worry about losing their equity and their nest egg. So is there a better way? Is there a way to make housing more equitable, and to separate the investment component from the shelter component? On this episode we speak with Daryl Fairweather, the chief economist at Redfin, about a land value tax and how it could help us reposition housing so that it's less of a financial asset that spirals people higher, and blocks so many people out.
* https://play.acast.com/s/oddlots/2f88bd35-04b5-4956-b770-aeb...
* https://podcasts.apple.com/us/podcast/daryl-fairweather-on-t...
Additionally, property tax rates vary massively from state to state and there's pretty strong correlation between property tax rates and housing supply and housing affordability. The legacy of California's Proposition 13 and its effects on housing supply are very well studied.
Property tax still has inefficiencies (it can punish someone who builds relative to someone who holds an empty lot), and Land Value tax would be more efficient in aligning incentives properly.
https://dailyanarchist.com/2012/06/12/what-is-georgism-follo...
That said I don't find this to be particularly convincing, given that they have mixed up labor and land, as well as failing to remember that Georgists are concerned with the benefit of land ownership (that is, rents) not the thing itself. The remainder is standard anarchist criticism of the state, which is fine I suppose if you are an anarchist but I don't think will convince anyone else (and I am not an anarchist)
"The anarchists' vagueness in attempting to define occupancy and use was best exemplified in the correspondence between Tucker and Stephen Byington (who subsequently became a "disciple" of Tucker's).
Byington wanted to know what would happen to occupiers of land or buildings when they would be away from their premises for a period of time.
Tucker, reducing his answer to an absurdity, replied that the very last user and occupier would not only lose his land but his personal property as well."
These are not serious worldviews.
Relativity. You have spent years hearing views that are contrary to Tucker.
Of course they seem insincere and worth scoffing at. Making the entire premise unfalsifiable and hewing to hand me down gossip from the past, as if it has a monopoly on “greater good”.
Meat based tape recorders rambling inanity of the dead.
You should look into squatters rights. Tuckers view is alive and well in some forms in our society. It’s hardly resulted in physics inverting.
Vain people defending hand me down story regarding private property on the other hand tends to result in a whole lot of atrocity.
>A common explanation of Georgism’s failure is that the philosophy itself is flawed and, ultimately, would strengthen collectivism and the state, not individualism. In this vein Tucker asked a fundamental question: How can a collective like society own land if such ownership is improper for individuals? Either land could be owned by an individual — and, thus, sold or transferred to another individual — or it was not subject to ownership at all. He considered collective ownership to be a contradiction in terms. Or, as Tucker might ask, “Can I sell my share? No? Then I don’t own it either individually or as part of a collective.”
>It is to such critiques of Georgism that Part II of this article will turn.
Granted, that might be a good criticism of Georgism from the perspective of a committed anarchist, but I was expecting, you know, economics.
Usually the obstacle is they're not permitted to, not least because the neighbours don't want it. LVT doesn't solve the neighbours not wanting it - at best they get a small tax reduction but they still live next door to a glue factory and will lose money selling their house. For some things it makes it worse: now people protest against mass transit they don't think they'll hear or will bring the "wrong sort of people" into the neighbourhood because land near a transit hub will be in a higher tax bracket. And if LVT is assessed on development potential of the land, homeowners that dont want to sell to developers should absolutely love some more restrictive covenants on the neighbourhood that mean the nice plot they live on is no longer classed as suitable to build anything bigger than the house they already live in.
Yes, that's the point, the current levels of incentive are not working so we need to crank it up
> LVT doesn't solve the neighbours not wanting it
The point is to crank up the pain, a lot. NIMBY-ism can be very local since not every parcel of land is being developed at the same time, but the beauty of LVT is that land value doesn't vary much in a local immediate area, so it hits everyone the same. The idea is that if everyone is hurting, they will seek relief as a group by overall relaxing restrictions that would better allow them to meet their tax burden.
> For some things it makes it worse: now people protest against mass transit they don't think they'll hear or will bring the "wrong sort of people" into the neighbourhood because land near a transit hub will be in a higher tax bracket.
This already happens. Those who want to NIMBY against new development will do so in any shape or form it takes, and it's not clear that the current paradigm is really effectively addressing this either.
> And if LVT is assessed on development potential of the land
LVT is assessed on land value, and development potential is but one piece. Other pieces include convenience, good amenities like parks and schools, etc.
Part of why I find LVT so appealing is that it has the potential to address (not necessarily completely solve, but address) the US's very unequal system of things like access to good schools, parks, convenience that are more or less funded by local property taxes; if you want good services, you will also be forced to open those up to others as well to address your tax burden.
Nope. If I'm hurting from my tax burden, I don't want to remove restrictions on development which will make my land more valuable (unless I've decided to move). On the contrary, there's nothing I'd love more than a zoning restriction which not only stops my neighbour building an apartment block overlooking my property but also reduces my taxes as my dwelling no longer sits on land which can be considered prime real estate for building apartments on.
(As an aside, talking about 'cranking up the pain a lot' on people who are guilty of the crime of enjoying a house they bought in an area which is nice as a benefit to the system is a large part of the reason that Georgism has never really got anywhere)
> This already happens. Those who want to NIMBY against new development will do so in any shape or form it takes, and it's not clear that the current paradigm is really effectively addressing this either.
But as I said in the part you reply to, LVT explicitly creates new incentives to NIMBY: people that do not find the noise of a mass transit system bothersome will find the tax increases bothersome (unless they're personally big users of the system). That's more people opposing the development than before. Indeed it creates incentives to NIMBY against stuff almost universally considered good because the further away the excellent public school is, the less tax you pay. This doesn't mean facilities will be built in deprived areas, it means people will seek to block them being built in good areas. A "solution" to NIMBYism which creates more NIMBYism is no kind of solution at all
The crime is not climbing the ladder, it's climbing the ladder and then pulling it up so only the few who overcome a much higher stumbling block can join. Or, as satire site Reductress put it, "‘All Are Welcome Here,’ Says Sign in Neighborhood Where Average Home Costs $2 Million"
> https://reductress.com/post/all-are-welcome-here-says-sign-i...
The pain is all felt by people that lived in an area when it really wasn't appealing, the people who would have been sufficiently proud of how that area's changes to turn down the carrot of life changing financial offers until LVT beats them with the stick of No, Really, You're Too Poor To Live Here
The wealthier, whiter sort of person that actively looks for $2m houses gets upsides as well as downsides, especially if they actually want to live in an area where only people who can overcome the stumbling block of high incomes can afford.
Or as a satirist might put it: "Rich Neighbourhoods Lack Diversity, Advocate of Accelerating Gentrification via the Tax System Suggests"
LVT would force these people (on the margin) to move to less desirable areas since their tax bill will go up. When they people will buy their house and want higher density housing put it since it's cheaper than single family homes under LVT. Over time all the single family home wanters will be forced to live further from the city center/desirable areas as land value continues to rise due to development in the area.
Not even going to get into the weird incentives/pressure this would create for zoning boards.
LVT is a good idea. If it convinces neighborhoods to accept re-zoning then fine. If not then just use the tax dollars to promote housing. One good use would be improving transit to help neighborhoods handle more residents and to reduce the need for cars. Fewer cars could mean fewer garages, which in turn could become more auxiliary dwelling units.
Want something to tax? Tax pollution.
Economic rent isn't the same as just paying landlords rent, though it's related. Economic rent is basically you profiting from owning stuff and doing nothing. It's a pure wealth transfer
https://en.wikipedia.org/wiki/Rent-seeking
Rent seeking behavior is when you try to acquire more wealth without creating more wealth. This would include behaviors like regulatory capture, or raising housing rents or other necessary goods to whatever the populace is capable of paying because they have either little alternatives or switching costs are prohibitive. Monopolies, IP law (and abuse thereof), and cases like Apple prohibiting other app stores are all examples of rent seeking behavior as well.
A nice quote from the first article on Land Value Taxes and why this is directly relevant.
> "Henry George, best known for his proposal for a single tax on land, defines rent as "the part of the produce that accrues to the owners of land (or other natural capabilities) by virtue of ownership" and as "the share of wealth given to landowners because they have an exclusive right to the use of those natural capabilities."
It is a generally agreed upon problem, going all the way back to adam smith. It's not possible to have a self consistent economic ideology that does otherwise. You get some radical free market capitalists who think otherwise, but if it were up to them we'd all be living in the United States of Standard Oil by now. They're safe to ignore.
The solution to this problem is not clear at all and varies dramatically by ideologies.
The evidence does not support SO growing to take over the world.
In this case the “added value” is the distinction between “not broadly punishing productivity” and narrowly punishing one kind of unproductivity (as it pertains to land use).
A land value tax is punishing people for squandering valuable land. If you're not making a sufficiently productive use of your valuable land for it to be worth paying the tax, you should sell it to someone who will, and you should move somewhere cheaper.
No, quite the opposite. The tax is the same irrespective of the productivity of the land. If you make the land valuable, by making it productive, you've decreased the relative cost of the tax. That is the whole point of a LVT.
This is a huge problem where I live. Folks sit on these parcels of land that are taxed at super favorable rates compared to improved properties. This drives up the cost of existing land and makes building additional housing extremely expensive. Their land should be taxed the same rate as my land and they would likely sell as it no longer makes financial sense to hold onto such unproductive land.
Exactly. Taxing pollution not only raises needed tax revenue, it reduces pollution as a side effect. It's a winner of a way to run things.
The solution to pollution ($30/gallon gas and $1k/hour flights, or whatever numbers make consumption go down) was obvious a long time ago. The problem is it is not going to be political popular for people to vote to kill their own dreams of future consumption.
Also, I am assuming the few billion people in developing countries will be happy to pick up the slack in fossil fuel demand in the event developed countries do find an alternative. The Middle East can pump it out for a few dollars per barrel, I imagine it will be tough to compete with that.
Better yet, do both.
Extra supply in already dense/popular areas is fighting symptoms, an uphill battle that will always lag behind actual relief. Doesn't mean you shouldn't try that, I'm just saying to include a wider framework of ideas.
For example, can we rethink how and where we work and how we commute to it? I know this is easier said than done, but I find it bizarre that the number one reason for urbanization, work, is just not included into the thinking. At all.
Further, plan for the boomer exit rather than calling them names. In my country, the Netherlands, many boomers would love to scale down in housing. But those units don't exist. Up to the 90s, we'd have communal living for the elderly where they have small private housing with shared facilities and care, but now most of this is gone.
So they have nowhere to go. You can call them names, tax them (whilst most have no liquid income), none of this is a solution. I'm not saying to pity them, I'm saying a rational and intelligent plan needs to include them whether you like it or not.
* Major issue: LVT is related to valuation, but valuation depends on mortgage rates. House valuations are mostly driven by interest repayments, not scarcity. This was demonstrated in Christchurch because there were homes going for say 30% of “value”, even though housing was in short supply due to the 2010 earthquake. A property could not be insured so buyers could not get a mortgage, and without a mortgage properties were going very cheaply. I bought a uninsurable home for ~$200k that would have sold for about $600k if it was insurable. Insurance was unavailable because the floor was out of level by 60mm due to land movement - but the home was fine. I see friends buy a house based on how much they can afford to pay on the mortgage: the housing market value is not related to what houses are worth but mostly to what people can afford. Mostly a zero-sum game where buyers bid against each other for how much they can pay, and the bank wins.
* An LVT is expensive for retirees. An average home in Christchurch is $750000 which has rates (LVT) ~$5000, a single retiree gets about $21k. There is a rebate of up to $665 from the government for low earners (like retirees). Forcing people to move from their home is pretty shitty - I would like to be able to retire in fair comfort without being forced into a shitty retirement home.
* The NZ government introduced a bipartisan law to force allow infill housing without NIMBY constraints in all cities - overriding almost all city district rules. Housing density will go up, a lot. https://bonded.co.nz/news/what-do-the-new-medium-density-hou...
* Locals complain about farming land being wasted for residential subdivision. This is bollox. Land around Christchurch is low value for farming unless you can get irrigation - water is the resource limitation therefore land is not being wasted. I see similar nonsense reasoning supporting an LVT.
* After the 2010 Christchurch earthquake, about 8000 homes were permanently removed (redzoned[1]). Thousands of new sections were created on existing farmland (greenfield sections) but new housing requires infrastructure that takes many years to build[2]. There are between 100k and 200k homes in Christchurch (depending on when and how you count).
* Saying that LVT is only land value and not the house, is crappy misdirection. Land value is related to the value of the surrounding properties, which depends on the developed value of the surrounding properties. This really shows in Christchurch where a home in a good suburb pays far more rates (LVT) than a similar home in a bad suburb. Land gets revalued by the government, but the figures are kind of made-up.
[1] https://en.wikipedia.org/wiki/Residential_red_zone
[2] https://www.stuff.co.nz/the-press/news/70270288/5000-greenfi...
On a somewhat absurd tangent, I’ve been toying with the idea of something I call a “land dividend” to solve homelessness. If every US citizen had by birthright, a small parcel of land with no taxes owed, they would always have somewhere to go. Even if they lived in a tent. And land is one thing the government has in surplus and divvying it up could could both decrease expenses while also solving a problem without creating new tax burdens.
I'm sorry, but if you can't see the numerous problems with this high school level idea about solving homelessness, maybe housing policy isn't something you should opine about.
From ground level, access to property does not seem to be any part of the problem here. Plus, you'd want that property to be somewhere close to jobs and services or you're just going to be pushing problems from the downtown core to wherever you manage to build these homes.
This is largely the point of Georgism. Basically the premise is that land is the most valuable asset a society has and since all profits tend to accrue to land holders in the long run it is immoral to have any system other than the government being the only landholder with the people being able to enter perpetual leases for the full value of the land.
They even made a song about it https://en.wikipedia.org/wiki/The_Land_(song)
https://time.com/3478199/trade-iphone6-for-detroit-house/
There are places where in bulk (sections) you can get land for less than $500 an acre (you would not want to live there admittedly) often land already owned by the state or the fed as you alluded to.
Giving an acre to a homeless person and relocating them there though would be a death sentence.
Also, the purchaser is sometimes on the hook for the back taxes (in his case $6K). I'm not sure how MI law works, but if the purchaser is on the hook then he's actually selling a lot with a condemned house for $6,500. Which is not an amazing deal, since vacant land in nicer rust belt cities goes for $10K-$30K and demolition is expensive. Again, not sure, but if that's how it works in MI then it makes sense that he's having trouble selling a lot with a condemned building and $6K in back taxes at pretty much any price. You're going to burn mid five figures before you have lien-free empty land, which can be had at that price with much less hassle.
In some cities, a condition of sale for city-owned property is that the buyer rehabs or rebuilds within a given timeframe.
> Giving an acre to a homeless person and relocating them there though would be a death sentence.
That's probably a massive over-statement -- even in the most dangerous communities in the US a homeless man probably isn't going to be killed for no reason. And this is Detroit, not the Alaskan wilderness, so there are shelters and so on. But it is true that the land would be totally worthless to a homeless person.
My point is that just giving people a bit of land will not solve homelessness at least not the land that is typically managed by the BLM. Not that the streets are not dangerous.
Even rounding up all the homeless in the SF area and sticking them on Alcatraz island would not solve homelessness.
With no restrictions on use of the land, this is obviously unsustainable and impossible to make fair. Not all land is equal and if someone trashes their lot then it can't be used by the next generation.
> Even if they lived in a tent
This already exists -- it's called public lands.
You can already do this on BLM and some USFS land. 14 days in any 25 mile radius. If you have a car then it's hard to go unnoticed but moving around to stay in compliance is easy. If you only have a tent then you could go unnoticed basically forever if yo aren't stupid so the 14 day rule doesn't really matter.
Incidentally, most homeless folks have issues that make it impossible to live out of a tent on public lands. Deeding them a small plot that is technically theirs wouldn't really solve that issue.
And at some point you run out of land, after which point you'd need to shrink everyone else's parcels to make room for new birthright parcels. Further, not all land is equal; if one parcel has a bunch of features that another lacks, then it stands to reason that unless the former is smaller than the latter, the citizens assigned to either would be on an unequal footing.
In short: what you call a "land dividend", once you've addressed the above, is literally Georgism - specifically, LVT plus a citizens' dividend (more modernly known as "UBI"). This results in a self-balancing system for ensuring every American enjoys one's equal share of America's land value. Own more than your fair share? You pay more LVT than you get from UBI. Own less than your fair share? You get more UBI than you pay LVT.
I would be happy to swap out my property, school, state, and income taxes for one where I paid what it would cost to lease the land I currently own. It would reduce my tax burden by 99%
I know because my neighbor leases a large parcel (several times my lot size) from the federal government. I would be delighted to swap my current property, school, state and income taxes for what he pays for what he leases.
I fear that if people like me don't pay these taxes, things like public schools and municipal services will simply fail where I live.
It seems great to cash in on high demand until you look at the flip side and consider what happens when there is no demand. From my perspective LVT just looks like an expensive urban cash grab that utterly breaks down when demand softens.
With a LVT there is no "here is your % of the district tax burden apportioned by what you own" only a "here is what we estimate it would cost to lease this property for a year".
When you think it through no system based on the sanctity of private property rights really makes any sense.
If you are saying that lvt is the amount one would pay if someone else owned the land and you were leasing it then ya.
I would be happy to swap all my taxes for the cost to lease "my property". I cost way more to build my property than it is worth. When we took a year to travel we had to pay someone to live there.
This is not uncommon in rural America and I would be happy to swap this for my taxes.
Just know that doing this would kill most rural schools and defund most rural governments and related safety services including the volenteer ones.
The most straight forward way to make people avoid speculating is to heavily tax all non-primary residence homes. Cap the amount people can charge in rent to some %s of purchase value (incentive to have high purchase value) to and set a baseline on the taxes required and make the math for building property empire bleak (absolute destruction of the housing-as-a-financial-asset model).
If you want people to buy homes to live in them, and not as a store of value or speculative instruments, we can disincentivize that behavior directly.
It encourages productivity instead of rent-seeking and restores housing stock to people who are trying to live in a place, rather than extract value and it puts more taxes in government coffers from the likes of companies like BlackRock and REITs.
It's simple. Tax people who buy homes they don't plan to live in heavily.
Landlords will figure out how to setup wash sales, or as close to a wash sale as they can legally get, or trade property between entities owned by the same real people, or engage in swapping behavior with other large holders in a cartel-like fashion, etc. Closing all the loop-holes would be difficult.
Tax the net proceeds of rental properties at 90% and slap a 100% capital gains tax on any property that is not owner-occupied. Also, simply rule out renting for huge swathes of property (especially single family homes).
Ah thanks for this criticism, the amount of loop holes would be pretty staggering/annoying.
> Tax the net proceeds of rental properties at 90% and slap a 100% capital gains tax on any property that is not owner-occupied. Also, simply rule out renting for huge swathes of property (especially single family homes).
LGTM, ship it.
The many changes that you are proposing, and the tax evasion that will occur, and the modifications to stop those evasions, and the changed behaviors to those modifications are where the complexity lies. A Land Value Tax isn't a complicated thing. In fact, in a single land tax + carbon tax world, many things would be drastically simpler.
The beautiful thing about a Land Value Tax is that it is incredibly hard to evade. You own the land, you pay the tax. You don't want to pay the tax? Sell the land.
> Tax the net proceeds of rental properties at 90% and slap a 100% capital gains tax on any property that is not owner-occupied.
This disincentives building, and would harm rent prices over the long run. The land value tax does not have this downside.
Can you point out the timestamp, I don't see it in the transcript and I just listened and I don't hear any discussion of speicfically heavily taxing non-primary residences.
I listened to this same economist making the rounds (another really good indication they're talking their book) on Odd Lots[0][1].
Just as on Odd Lots, the entire conversation was tilted -- they jumped right past the simple solutions and right to the hard-to-understand, change-the-paradigm solution. Of course Redfin wants this solution -- they don't care about the land tax (and they don't have to pay it), but they do want more units to broker.
They bang on NIMBYism and zoning problems that could open up space for new housing, and that's great, but this is a different problem right under our noses -- and that's rampant speculation and rent-seeking activity in the housing market.
I don't want to be unduly critical here, but the odd lots interview was slightly better. There is so much nuance being lost (a throw away allegory to stopping littering with PR, when the real problem was companies not being taxed for the externality that is plastic/styrofoam packaging).
> The many changes that you are proposing, and the tax evasion that will occur, and the modifications to stop those evasions, and the changed behaviors to those modifications are where the complexity lies. A Land Value Tax isn't a complicated thing. In fact, in a single land tax + carbon tax world, many things would be drastically simpler.
My initial proposal was a bad one -- someone pointed this out and made a better suggestion, an even more direct tax, right on the capital gains. That's a much better proposal.
A land value tax is more complicated than simply increasing capital gains tax (or even my previous suggestion) on rental property.
We do not need to create new tax machinery (which is what a land value tax would require) for this, and in the end a land value tax is a proxy for what we really want. What we want is to disincentivize speculative and profit-via-rent-seeking purchasing of homes. The easiest, most straight forward way to do that is to tax that specific activity.
Fairweather did this as well -- I don't think it's a good idea to mix in carbon taxes, equity & equality, and other things with this issue. Just stick to the one issue. In practice those issues are related, but that doesn't mean we must solve them all at once.
> The beautiful thing about a Land Value Tax is that it is incredibly hard to evade. You own the land, you pay the tax. You don't want to pay the tax? Sell the land.
This is stated simply, but implementation will not be simple, vary from state to state, and likely contain lots of the tax evasions/loopholes as well.
The refinement on my original suggestion (increasing capital gains on rent-seeking activity) is simpler.
> This disincentives building, and would harm rent prices over the long run. The land value tax does not have this downside.
It's a market -- building will be disincentivized until supply is constrained enough to raise prices. It will balance out, and this time the speculative turbulent forces will be gone, meaning housing will be easier to predict and plan out.
The land value tax is a way for the same circus we have to keep going, and the government to collect more taxes from the circus, but the circus is the problem. It's better to attack the problem directly than indirectly.
The land value tax encourages building bigger structures to juice the ROI on a single plot of land. That is not what I want, at least right now, and it is an indirect way of reducing demand. Remove the 2nd, 3rd, 4th, 100th home buyers from the market, and demand will plunge. Maybe our goals are different, but I mean what I said -- I want to disincentivize rent-seeking behavior.
In fact, the land value tax is probably actually harmful to my stated goals -- making land more expensive without reducing property tax much would actually make land ownership less affordable for the common homebuyer, and a cost of doing business for professionals who can pass along land ownership taxes to the 1st level tenants (with renters becoming the 2nd level tenants).
[0]: https://www.bloomberg.com/news/articles/2022-06-13/transcrip...
[1]: https://podcasts.google.com/feed/aHR0cHM6Ly93d3cub21ueWNvbnR...
45:03
> right past the simple solutions and right to the hard-to-understand, change-the-paradigm solution
Rich Hickey's 'Simple made Easy' talk[0](don't need to watch this, but I figure most on HN have already seen this) goes into this, and I would argue that the 'simple' solutions that you mention are complected, whereas the LVT really truly is 'simple'. Simple does not mean easy. It can be hard to understand and yet still simple. It can inevitably change the fabric of society and still be simple.
> The refinement on my original suggestion (increasing capital gains on rent-seeking activity) is simpler.
In addition to stopping building, in much the same way that Prop 13 does, this would result in no one selling property for just about any reason unless they couldn't come up with money in any other way. Transactions are good, as a transaction implies that both sides are better off. They would sit on it until the building rotted, build a house on it, live in for 2 years, and then sell it for full price. LVT is simpler.
This has been studied, and it does not help.
>> Can a Transaction Tax or Capital Gains Tax smooth House Prices? Nicole Aregger, Martin Brown* and Enzo Rossi**[1]
>> Our results suggest that higher taxes on capital gains exacerbate house price dynamics while transaction taxes have no impact on house price growth. These findings support the existence of a lock-in effect of capital gains taxes on housing supply. They further suggest that taxes on real estate capital gains and transaction values are not suitable measures to prevent excessive house price growth. ... Taxes on capital gains, and in particular penalty taxes on short-term gains, seem to fuel price growth by making house owners more reluctant to sell their property. The lock-in effect is strongest in tourist destinations where we expect to find more real estate transactions motivated by pure investment considerations.
> government to collect more taxes from the circus, but the circus is the problem.
I'll open this by saying that I think we both agree with a lot of fundamentals here. By far the most important aspect of the LVT to me is that it eliminates speculation and rent-seeking activity. In many ways it would be fine to implement the LVT and then simply burn the money. Maybe you could do that at the federal level. The key aspect is that the incentives are set-up properly. One of the things I think we could do with the LVT money is IP reform, but that's another story.
We're probably going to have to agree to disagree here, but this point might help us see how we're getting to such a large difference. I see government spending as it is today as fairly bad, and you might agree. But the reason that it is horrible is that when government spends, it is local homeowners that reap the benefits(good short video explaining this here[2]). And it is that wrongful capture of value that makes public spending look so terrible. It seems obvious that there is a ton of waste going on, and with such waste comes the ability for corruption to hide. But many projects do provide great value, and it's projects that largely could not be done through individuals or corporations alone.
If like in that video explains, that one enhancement to the city provides five times the value in land, they can take the profits from that and build more projects, or if they have run out of projects that provide positive returns, they can simply give it back as a UBI. If the returns are as large as they claim, it should be obvious when we miss.
> making land more expensive without reducing property tax much
Under a perfect Land Value Tax, we would remove the property tax and raise the land tax such that the price of land will fall to zero. You would transact the value of simply the building above it. A $250k house to build, both in middle of nowhere and in Manhattan, would trade for $250k.
[0]: https://www.youtube.com/watch?v=SxdOUGdseq4
[1]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1780826
The host mentions "ban second ownership" and a "vacant lot tax", and "ban corporate buying of homes", neither of which are what I'm discussing (increasing existing capital tax rates). These are the worst ways to represent the question of "should taxes be higher on rent seeking behavior".
She goes on to state that she "doesn't have patience for solutions that aren't going to help". It's a terrible shallow dismissal of even that flawed suggestion.
> Rich Hickey's 'Simple made Easy' talk[0](don't need to watch this, but I figure most on HN have already seen this) goes into this, and I would argue that the 'simple' solutions that you mention are complected, whereas the LVT really truly is 'simple'. Simple does not mean easy. It can be hard to understand and yet still simple. It can inevitably change the fabric of society and still be simple.
Simple vs Easy is exactly what I meant, and I stand by what I said -- none of the solutions are easy, we can only realistically talk about what is simple. Changing a percentage in an existing statute/law is simpler than introducing a new kind of tax. If we disagree here we probably must agree to disagree.
I think we may be drawing our lines in different spots. The concept of LVT is simple, but the implementation of it, in the current landscape with our current political system is not simple in the least.
We are discussing attempting to introduce a new (to many) kind of tax, versus increasing a percentage that already exists. LVT may work simpler in theory, but we do not live there.
> In addition to stopping building, in much the same way that Prop 13 does, this would result in no one selling property for just about any reason unless they couldn't come up with money in any other way. Transactions are good, as a transaction implies that both sides are better off. They would sit on it until the building rotted, build a house on it, live in for 2 years, and then sell it for full price. LVT is simpler.
> This has been studied, and it does not help.
This would not "stop building". It is a market -- and unless you are implying that all builders would instantly stop building, that's hyperbolic phrasing.
I'm not sure I understand your connection with Prop 13 here -- that is a measure to limit property taxation. What I am proposing is an increase on capital gains taxes for people with multiple properties.
> They further suggest that taxes on real estate capital gains and transaction values are not suitable measures to prevent excessive house price growth. ... Taxes on capital gains, and in particular penalty taxes on short-term gains, seem to fuel price growth by making house owners more reluctant to sell their property. The lock-in effect is strongest in tourist destinations where we expect to find more real estate transactions motivated by pure investment considerations.
We're talking about different things here. It's different in at least these ways:
- They are talking about taxes levied upon sale, I originally proposed higher and more numerous taxes. We can tax the purchase, ongoing renting and time of sale.
- They are discussing house price growth, not reducing demand for homes. Some amount of price growth is reasonable if people choose not to sell (and this is actually a reasonable outcome -- people can/should be able to buy a house for 60-100 years!)
I guess the wording of capital gains is causing an unintended association here. I am advocating increasing existing taxes on behavior that is rent-seeking.
Whether this is increasing taxes upon home purchase for those (for a home that you do not live in), or levying taxes on single/multi family homes that are rented out, or it is taxing capital gains, these are measures to support the same goal.
Also, this is directly in conflict with your statement about builders stopping building -- if we get price growth due to lack of sellers, this will encourage builders to build.
> I'll open this by saying that I think we both agree with a lot of fundamentals here. By far the most important aspect of the LVT to me is that it eliminates speculation and rent-seeking activity. In many ways it would be fine to implement the LVT and then simply burn the money. Maybe you could do that at the federal level. The key aspect is that the incentives are set-up properly. One of the things I think we could do with the LVT money is IP reform, but that's another story.
Same, I think we agree on the fundamentals, just the approach.
My problem with LVT is that it is not direct enough. If you want to reduce demand for homes, remove the people buying 2-5 from the market by increasing taxes specifically on their use case.
That is the most expedient solution, in comparison to introducing a new taxing mechanism which will take years if not decades to roll out, be studied, and see the effects of.
> We're probably going to have to agree to disagree here, but this point might help us see how we're getting to such a large difference. I see government spending as it is today as fairly bad, and you might agree. But the reason that it is horrible is that when government spends, it is local homeowners that reap the benefits(good short video explaining this here[2]). And it is that wrongful capture of value that makes public spending look so terrible. It seems obvious that there is a ton of waste going on, and with such waste comes the ability for corruption to hide. But many projects do provide great value, and it's projects that largely could not be done through individuals or corporations alone.
I agree with you that government spending is often bad (unintelligent/mis-allocated/etc). I do also agree that government can make investments that are beyond individual or corporations!
I agree on both of those points, and the wrongful capture of value point.
I think where we're talking about is that attempting to reform the laws around land value is not the quickest way to lower demand.
> If like in that video explains, that one enhancement to the city provides five times the value in land, they can take the profits from that and build more projects, or if they have run out of projects that provide positive returns, they can simply give it back as a UBI. If the returns are as large as they claim, it should be obvious when we miss.
Again, this is a great idea, and might be better than our current system, but it's just too heavy a lift, I think.
> Under a perfect Land Value Tax, we would remove the property tax and raise the land tax such that the price of land will fall to zero. You would transact the value of simply the building above it. A $250k house to build, both in middle of nowhere and in Manhattan, would trade for $250k.
This I have to say don't understand at all. The value of living in Manhattan and the middle of nowhere must differ greatly, I don't know where the extra cost is going, but it must go somewhere. Just on a basic economics 101 level this doesn't make sense, but I will continue reading and see if I can square the circle.
That said, all of this is besides the point I was hoping to make -- LVT may be a great long term solution, but I'm not interested in reworking the taxation system (introducing a LVT and removing property taxes are LARGE changes), I'm interested in removing marginal buyers from the equation, with an eye on ease-of-implementation. The mechanics are simple -- make the practice of rent-extraction unprofitable and people will find their yield elsewhere.
I mean, most places currently have a Land Value Tax, it's just included within the Property Tax that we pay. Conceptually all we are looking to do is raise this percentage and lower the building percentage. This has been done already in Pennsylvania[0]. We're just looking to continue this process. You can do it all at once, and that would be better, but I think most LVT advocates are fine with phasing it in, and trying to find out the best way to phase it in.
Once we get that change then we can look to change other things, and the podcast rightfully points out that in places like Texas that has no income tax and has a property tax, if they went to a LVT system they would start to out-produce the rest of the country. Other states and cities would then quickly try to catch up.
> We can tax the purchase, ongoing renting and time of sale.
If we move to just ongoing renting, that's all you need. And that's a Land Value Tax. See the annuity point below.
> if we get price growth due to lack of sellers, this will encourage builders to build.
When you have an elastic good and the supply of it goes down, the price goes up. We get price increases BECAUSE there is less supply. This is not a contradiction. Builders will not build more when you discourage trading. Liquid goods are worth more.
> LVT is that it is not direct enough. If you want to reduce demand for homes, remove the people buying 2-5 from the market
The LVT directly taxes the misuse of land at a just rate. We don't want to remove the demand for homes, we want to remove speculation. We want to make it unprofitable to waste land. We want the supply of homes to meet demand. We want people to be forced to pay to the community for being a NIMBY, and we want the community to be able to take those funds and build elsewhere to be able to meet demand.
Under a LVT, we want and like landlords. Landlords who need to compete on the quality of the homes that they have, that have to compete on the quality of services that they give, that's what we want. The issue now is that they are fat bloodsuckers who don't have to do those things because as the city grows around them they accrue value for doing nothing. You see this now in how even mobile home land is being bought up and rents are increasing, as brought up in the podcast.
> see if I can square the circle.
When you win the lottery, you can choose to take the lump sum or you can choose to take the monthly check. There is a certain value in how that calculation gets done that we call the capitalization rate. In that same way, anyone at any time can choose to spend their million dollars and get something like a $50k/year annuity.
What the Land Value Tax really is to Georgists is seeing that the combined positive externalities of the city is worth say that $50k/year to the location. So what we want to do is to tax away that $50k. If we don't do this, then through the capitalization of that annuity on the land, the price of the land would be worth 1 million. Once we tax that value however, the land price drops from a million to zero. So in Manhattan(although I suspect Manhattan has higher than $1m land values, adjust accordingly) you would have a $250k house with a $50k/year tax, and in middle of nowhere you would have a $250k house with a $0/year tax.
What economists know is that taxes on elastic goods cause dead-weight losses. Similar to what I mentioned above, when you tax something you get less of it, and that less ends up raising the price. Land is a special case in that it is inelastic, and thus it is the best thing to tax.
When you tax income, that means you get less of it. By reducing the income tax, by reducing the sales tax, by reducing the capital gains tax, the economy will grow. We'll have more outputs. And that growth will then be captured by the land. So what this means is that for every $1 we reduce in other taxes, the value of the land value tax grows by more than $1. This is why we're called 'Single Taxers', and why we need to quickly mention that we are also for carbon taxes and the like. If you take this to its extremes, what you would find is that the vast majority - certainly greater than 90% of the population - would be better off under a LVT world.
[0]: https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
These movements are going to take years and decades, where I think we could reasonably measure getting something through congress in months to years.
> When you have an elastic good and the supply of it goes down, the price goes up. We get price increases BECAUSE there is less supply. This is not a contradiction. Builders will not build more when you discourage trading. Liquid goods are worth more.
You get price increases, and then new people who want to make money become home builders. Builders will build to make money if the price is right, they will build taking into account the expense of trading. You're suggesting that builders will not start building under any price and we'll see price appreciation with no end. That doesn't make sense.
Also, this whole point is a bit off because the point is to tax homes after the first one. It's more likely that what I proposed leads to a frenzied search for new home buyers, and a boom in building and lending. If the only way to avoid the increased targeted taxes is to find new home owners, industries will start optimizing for that.
> If we move to just ongoing renting, that's all you need. And that's a Land Value Tax. See the annuity point below.
See this is the problem -- it feels like you're just focused on LVT! It's not the only solution.
There is value in taxing the purchase more heavily, or sale, or renting. These are all levers to be pulled. They may be inferior to a starting situation where LVT was adopted, but they are valuable right now, in the world we live in today.
> The LVT directly taxes the misuse of land at a just rate. We don't want to remove the demand for homes, we want to remove speculation. We want to make it unprofitable to waste land. We want the supply of homes to meet demand. We want people to be forced to pay to the community for being a NIMBY, and we want the community to be able to take those funds and build elsewhere to be able to meet demand. > > Under a LVT, we want and like landlords. Landlords who need to compete on the quality of the homes that they have, that have to compete on the quality of services that they give, that's what we want. The issue now is that they are fat bloodsuckers who don't have to do those things because as the city grows around them they accrue value for doing nothing. You see this now in how even mobile home land is being bought up and rents are increasing, as brought up in the podcast.
But I do want to remove the demand from homes. Specifically, I want to remove the demand from people buying a second, third or 100th home. I want it to be easy for first home buyers to get in a primary residence, and harder for someone to buy a second/third/100th home.
I want the supply of homes to meet demand, but LVT is not the only way to get there, and IMO it's not the most expedient way.
> What the Land Value Tax really is to Georgists is seeing that the combined positive externalities of the city is worth say that $50k/year to the location. So what we want to do is to tax away that $50k. If we don't do this, then through the capitalization of that annuity on the land, the price of the land would be worth 1 million. Once we tax that value however, the land price drops from a million to zero. So in Manhattan(although I suspect Manhattan has higher than $1m land values, adjust accordingly) you would have a $250k house with a $50k/year tax, and in middle of nowhere you would have a $250k house with a $0/year tax. > > What economists know is that taxes on elastic goods cause dead-weight losses. Similar to what I mentioned above, when you tax something you get less of it, and that less ends up raising the price. Land is a special case in that it is inelastic, and thus it is the best thing to tax.
Thanks for the in-depth explanation and example of LVT.
I want to point out that yes, when you tax something you get less of it, but that's sometimes exactly what we want. For example, if the share of corporate profits (and value retained in other parts of the economy) is out of control, then tax corporate profits how much you can safely tax corporate profits is hard to figure out, but it's not rocket science. We could juice growth by removing lots of regulation, but we as a society choose to restrain growth in exchange for clean waterways for example.
> ... would be better off under a LVT world.
I don't disagree, but I think where we differ is that I'm OK going with an incremental patch, but you'd like the patchset that includes LVT and I think it's too large!
We'll have to agree to disagree here!
This is backwards. Such a tax will be a strong incentive to never ever sell since the seller would hand off all gains to the tax man. Who would want to sell?
Instead, you'd want to actually incentivize selling if you're not living on the property. Make the capital gain tax very low, that makes selling it off the most attractive option.
Good point, thanks for the criticism. There are many ways to solve this problem.
> Instead, you'd want to actually incentivize selling if you're not living on the property. Make the capital gain tax very low, that makes selling it off the most attractive option.
No.
First, that incentivizes treating property as an appreciating asset.
Second, fuck low taxes on capital gains, period. The tax rate on any capital gain should not be lower than the highest rate on labor. Ever.
The capital gain tax can't be both very high and very low and you seem to have agreed that very high is the wrong incentive.
So what remains?
A low capital gain has the benefit of making it easy to sell so more people will sell. Not perfect, perhaps, but an incentive to keep unused/unwanted properties on the market is better than pushing people to hold on to them forever which a high capital gain tax will do.
The best argument for favorable LTCG taxes is that naive taxation of long-term capital gains as current-year income in a progressive tax system overtaxes income that takes an extended period to generate and isn't repeatable, but allowances for advance recognition and/or deferral of recognition of income for tax purposes solve that and are also usable for non-capital income that is concentrated over a shorter time than the work to generate it (as is often the case for creative work.)
If you want to encourage sales of idle assets of a particular class, tax the asset, don't lower the capital gains tax.
LVT + UBI would accomplish the same thing (and then some) more fairly and efficiently; UBI would subsidize the LVT for your primary residence, while secondary residences (and residences owned by corporations and other non-residents) would see no such benefit.
Sure that could work, but it looks like 5x the complexity and political will required.
Also, I'm not fully sold on UBI, because I haven't heard a convincing argument on why it wouldn't lead to persistent inflation. As the economy moves towards a you-will-own-nothing stance (to be fair, I'm contributing to this in trying to launch and operate SaaS services)
Even if UBI was the answer, the political fight is bigger, I think. Let's just be honest and straightforward about what we (well, some of us -- it is a democratic republic after all) want, we want people to stop speculating on houses and use them for living.
Assuming we can agree on the premise, tax the behavior we want to disincentivize as directly as possible, be clear about why we're doing it. Clear hearts, full hearts, can't lose. Just kidding this is politics so absolutely can lose but you get the idea.
I can't speak to the political will, but in terms of complexity the inverse is true: a universally-applicable LVT and universally-applicable UBI is far less complex for everyone involved than trying to navigate a bunch of ad hoc taxes and exemptions.
> Also, I'm not fully sold on UBI, because I haven't heard a convincing argument on why it wouldn't lead to persistent inflation.
It leads to inflation when
1. it's funded through government moneyprinting instead of a solid tax system, and/or
2. it gets captured by landlords who jack up rents in response to the new demand
LVT rather explicitly and directly fixes both of these problems; it provides a maximally-fair and maximally-efficient tax revenue, and it feeds land value increases back into the tax revenue (and therefore UBI disbursements) instead of letting landlords capture it. It's a self-balancing system with no room for inflation to happen (at least not through either LVT or UBI).
> we want people to stop speculating on houses and use them for living.
Which is yet another thing which LVT explicitly and directly addresses. Specifically:
> Assuming we can agree on the premise, tax the behavior we want to disincentivize as directly as possible, be clear about why we're doing it.
The behaviors we want to disincentivize are land speculation and rentseeking. LVT is the most direct disincentive to both, and we Georgists ain't exactly shy about that being the key reason why we believe LVT to be necessary for a free and equitable society; the economic properties are just a nice bonus :)
> I can't speak to the political will, but in terms of complexity the inverse is true: a universally-applicable LVT and universally-applicable UBI is far less complex for everyone involved than trying to navigate a bunch of ad hoc taxes and exemptions.
OK, so I agree that from nothing they would be simpler setups. What I mean to state is that right now, given the current world we live in, changing existing tax rates is easier than introducing and feeling out two entirely new concepts.
> It leads to inflation when > >1. it's funded through government moneyprinting instead of a solid tax system, and/or > >2. it gets captured by landlords who jack up rents in response to the new demand > > LVT rather explicitly and directly fixes both of these problems; it provides a maximally-fair and maximally-efficient tax revenue, and it feeds land value increases back into the tax revenue (and therefore UBI disbursements) instead of letting landlords capture it. It's a self-balancing system with no room for inflation to happen (at least not through either LVT or UBI).
It's not that I'm against LVT or don't think it could be good. My point is that attempting to add LVT and/or UBI are just not practical. They may be theoretically great, but there are other options on the table.
> Which is yet another thing which LVT explicitly and directly addresses. Specifically: > The behaviors we want to disincentivize are land speculation and rentseeking. LVT is the most direct disincentive to both, and we Georgists ain't exactly shy about that being the key reason why we believe LVT to be necessary for a free and equitable society; the economic properties are just a nice bonus :)
I agree! I just think that LVT is a bigger lift than "just" raising taxes on the behavior we want to disincentivize specifically.
Sure, it would get rid of some vacant buildings, and we do need a way to discourage land and property banking that turns hot money into high prices for home buyers, but taxes are what you impose when you have a policy that nobody would win re-election on voting for. It's literally what nobody wants. Nudging taxes are inferior back door policymaking by regulators (in their own interest) who can't get the political traction for an actual policy. Who is nimby'ism a problem for? Arguably, people who want to impose unwanted experimental policy, and in-effect loot the wealth that cohesive local communities and their cultures invested in and built. Nimby'ism as concept is a slur that makes a villain of anyone with a home and investment in their local community, and who may be skeptical of centralized policymaking. I'd question the underlying values behind advocating an LVT, as they tend to be within a degree of some other very technocratic impositions that mainly benefit their administrators.
Oh, we're talking about zoning?
>The main thing a LVT creates is constant churn as (retired) people cease to be able to afford to live in their homes, incentivizes being a landlord, and punishes family wealth creation via home ownership (which is a barrier to class mobility)
Yes, this is in fact literally the point.
You can't have a growing population, and then depend on land ownership to generate wealth in perpetuity. There's only so much land. The class mobility point is especially hilarious. Yeah, Joe the Waiter is really going to be able to afford the $1.5 million 2000 sq ft house in Seattle to move his family up the ladder.
This hypothetical couple took a risk by moving into an area that was blighted by related naive policymaking the OP was advocating, and a LVT just penalizes them for their rapacious capitalist gentrification of a progressive policy failure.