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Comment by keiferski | Hacker News Reader

The main Georgist policy recommendation is a tax assessed on land value, arguing that revenues from a land value tax (LVT) can be used to reduce or eliminate existing taxes (such as on income, trade, or purchases) that are unfair and inefficient.

If I am understanding this correctly, wouldn’t it result in a world where landowners put the minimum amount of investment into the land, and then move to cheaper land as soon as possible/when their current land becomes more valuable?

The assumption here seems to me that land in NYC/wherever is inherently valuable, which doesn’t seem true to me. Especially in a remote working world increasingly detached from physical spaces.

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This is why you are only supposed to tax the unimproved value of land. This is different from the property tax that's commonly used by local governments in the U.S., which includes the value of buildings and such, and so acts as an incentive against development.

A precondition of Georgism being sane is that 1 acre in downtown Manhattan must be taxed HIGH and 1 acre in Nowheresville must be taxed LOW. One is more desirable than the other. No one argues this point but sometimes they lose sight of the fact that places can go from desirable to not, or vice versa.

Given this, if you improve your land, or everyone in the neighborhood improves their land, and desirability goes way up as a result, you've just raised the value of the land, improved or not. Anything you do to make the area a better place to live increases your taxes. This is a dangerous thing to put at odds. It's something a lot of pro-Georgism people ignore because they only think in steady state (Manhattan will stay Manhattan and Nowheresville will stay Nowheresville), but that's not a tenable assumption for a lot of places.

Your benefit from building a thing on your land is far larger than the effect of that on your LVT, as much of the value spills onto neighboring land (your mall makes places nearby more valuable). Similarly if your neighbor builds something valuable you have to pay more taxes, encouraging you to put your land to its most valuable use or sell to someone who will.

Every individual landowner still has a very strong incentive to put their land to good use, and their doing so will push neighbors to do the same. It helps development and funding of public goods (the LVT pays for a decent fraction of government revenues), it doesn’t hurt it. All those vacant lots will be pushed into service, inefficient land uses like parking lots or inefficient businesses or undersized apartment buildings will be pushed into renovations and rebuilds or more valuable uses. Your neighbors may not be pleased about your improvements as it ups their taxes, but we just need to defang them and put an end to all methods NIMBYs use to coerce people and prevent them from doing as they like with their own land.

I've never liked the term "unimproved", since it makes people think of rich soil, mineral resources, water access as the only things that increase land value.

It's easier to think about it as the tax on the improved value of all other lots except your own.

How is this “original unimproved” value determined? Presumably the improvements of the previous tenant have to factor in somewhere? When is the cut off point?

The government keeps tabs on real estate deals and makes an estimate on the value of the unimproved land. Or for an extreme case, the government can buy some old property, demolish whatever building is left standing there, and the sell the lot to the highest bidder, giving a benchmark for land values in the area.

https://gameofrent.com/content/can-land-be-accurately-assess... is a decent explanation of how this can be made to work.

A method come from the sale of vacant lots (the land value is the sale price) or of buildings that are immediately demolished (the land value is the sale price minus demolition cost).

Apparently even in dense cities a majority of land sales are like this.

Even a vacant lot can be 'improved', e.g. a preexisting underground utility conduit has some non-zero impact on its value.

Even a literal patch of dirt, with nothing going through it, is still 'improved' in value by distant structures, e.g. if a major highway passes by a half dozen miles away.

And the 'improvement' is more than a comparable patch of dirt 20 miles away.

So this part of Georgism never made sense to me.

The entire point of the LVT is that the land value includes things that your neighbors (or society in general) does to make your lot more valuable.

Did you get confused with a different comment chain?

In response to the parent comments, my comment indicates that it's impossible to determine the 'unimproved value', because there are no records of land values during the times of pre-human habitation of the north american continent.

Hence why I said 'So this part of Georgism never made sense to me.' It's supposed to be based on literally impossible to obtain information.

> Did you get confused with a different comment chain?

Nope.

> my comment indicates that it's impossible to determine the 'unimproved value', because there are no records of land values during the times of pre-human habitation of the north american continent.

My point was that this definition of 'unimproved value' is a strawman. Nobody except you is claiming that this is the definition of 'unimproved value' that is used in discussions about a land value tax. In the context of LVT, 'unimproved value' pretty much means the value of a lot minus any buildings on it (in jurisdictions that have a LVT, I'm sure they have a much more specific definition of it, so the government doesn't have to spend endless time in court with nitpickers). So it definitely includes things like a bustling city around the lot, with roads, sewers and other infrastructure, shops, apartments, and whatnot. Nobody is trying to figure out the value of a plot of land in pre-human times for tax purposes.

Assuming that's true, then who gets to choose the cutoff date or set the cutoff criteria?

City council, voters, etc.?

If so, what's stopping them from changing the definition every election cycle to score political points?

> In the context of LVT, 'unimproved value' pretty much means the value of a lot minus any buildings on it

no cutoff necessary, the distinction is between thins on the lot of land and things not on the lot of land today.

But the 'value of a lot minus any buildings on it' is a subjective definition that can be changed?

It clearly's possible one election year for that definition to be expanded to included remediation of any underground improvements for example, or a penalty if it uses certain undesirable materials, etc...

Under this lens "unimproved value" might be a red herring, the concept is "the market value of the lot after a complete demolition of everithing on it" or equivalently "the market price of the exclusive priviledge of being able to build things on a piece of land".

Maybe you should take it up with the proponents of Georgism who use that term?

And offer these reasons to switch.

But just at a quick glance:

"the market value of the lot after a complete demolition of everithing on it" doesn't make sense, because even a single disused subway tunnel could easily double the value of the land.

There are things "on" the lot and things "around" the lot.

An empty lot the right size to build a condo in front of a subway station is significantly more valuable than an otherwise identical lot 5km away from the closest subway station.

A consequence is that what is built around you becomes the main factor in how many taxes you pay.

Which is ok since what is build around you is also the main factor of how much value you can extract from the land you own.

> Maybe you should take it up with the proponents of Georgism who use that term?

the term is perfectly adeguate, for a given piece of land (like a lot you can build a condo on) you consider its value before any improvement ON it.

The main conflict seems to be about either considering gigantic pieces of land or considering improvement that are not ON the piece of land but around it.

For context[1]:

> A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it.

[1] https://en.wikipedia.org/wiki/Land_value_tax

I don't really see what's preventing people in the future from simply ignoring this interpretation?

The value of the land in NYC is related to all the other stuff next to the land you’re valuing. Other people’s improvements make your land more valuable, because you’ve got the subway line nearby. And the pizza shop on the corner. And the bar across the street.

And when you buy the subway line, the pizza shop, and the bar, the value of your land will go back down?

If you tear all that down, it likely would.

No. The concept is that you get taxed on the unimproved value of your land.

So chipsa says that if you own a small plot of land in New York, you'll still pay a lot of property tax (on "unimproved value") because you're right next to the subway and that's part of the unimproved value of your land.

But if you own a large plot of land, the subway is just another improvement that doesn't get counted towards the value of your land. So once you've bought the subway, the unimproved value of your land is lower than it used to be.

I think it's weird to be so enthusiastic about a tax system with such fine dependence on the exact ownership structure of property. It's especially weird when the ownership structure the system is driving people toward is "a very small number of people each own truly massive quantities of land".

The unimproved value of land next to a subway stop is greater than the unimproved value of land far from the nearest subway stop regardless of who owns the subway.

You don't get it. Imagine owning the entire subway. Then the subway system is an improvement on your land, not something adjacent to it, and should not be counted. (Yes, this would require buying most of all the five boroughs.)

This is a highly unrealistic scenario though.

You would not be taxed on the tunnels, the trains, and the stations. You would presumably be taxed on the value of the land occupied by those things, but not the things themself.

Land value tax does not need to pretend that none of the improvements exist, just that the improvements are not directly taxed.

> Land value tax does need not pretend that none of the improvements exist

That's precisely what land value tax must do. That is the definition of the tax. That is its only characteristic.

Imagine that things happen in the other order. You buy a bunch of undeveloped land somewhere. It has some assessed land value.

Now you build a city and a subway system on your land. Fifteen million people live on your land, work on your land, and commute by the subway that you dug on your land. Your land now has tremendous value. But, by definition, the land value is still the same as it was before there was anything there. The subway system didn't add to the land value. It added to the developed value.

If you believe the land under a city of 15M people has the same value as that same amount of undeveloped land, I'm not sure how to begin with an explanation.

You even slipped into your own reply: "Your land now has tremendous value."

You are talking about different things.

The land of a 15M people city has huge value but low unimproved value.

Georgist believe that if you buy a piece of land and build value on it you should not be punished. Georgist taxation is meant to encourage individuals to develop their own land.

In practice likely the taxation would apply on a lot by lot basis, so you would have to count your huge land ownership as 150 thousand small lots each with significant unimproved value.

Another way to look at this is that you should tax a piece of land exactly the market value of renting that piece of land. So that the only value in owning land is the corresponding control and not the value extraction of ownership.

In this formulation you would pay a lot of taxes on the thousand of hectars the city is build on but no more and no less than you can get your tenants to pay you.

My main criticism of georgism is that it aggregate owneship to the rich, as you might not have the capital to make your land productive enough to cover its rent value.

E.g a small bed and breakfast in a scenic location could easily be developed into a 10 story hotel has an unclear undevaloped value.

A lot of Boston is built on old swampland. Would Georgists say that the 2023 tax value of all of Back Bay is $0?

> no more and no less than you can get your tenants to pay you

Tenants will pay you for both the use of the land and the use of the improvements, though, so if you're going to pin the tax to the rent value, the tax must be the lease value only of the use of the land. You are allowed to profit, untaxed, from the rent of buildings on the land.

> A lot of Boston is built on old swampland. Would Georgists say that the 2023 tax value of all of Back Bay is $0?

This is exactly what I was addressing in:

> In practice likely the taxation would apply on a lot by lot basis, so you would have to count your huge land ownership as 150 thousand small lots each with significant unimproved value.

Let's play an experiment: in the middle of nowhere Alice and Bob each own two closeby land lots. Each lot by itself is worth essentially 0 dollars so neither Alice nor Bob pay any taxes on it.

One year Alice builds an hotel on her lot, her unimproved landvalue remains unchanged but Bob's increases to X dollars.

Another year Bob builds a restaurant on his lot, his unimproved landvalue remains unchanged at X but Alice's increases to Y dollars.

Honestly I am not sure how this would handle infrastructure development like a road or a railroad

---

For georgist taxation to work you need to set a sensible limit to how big or small a lot can be: an entire city is too big and a square foot is to small.

The possible failure mode of this taxation is that all but the most efficient use of land can become impossible, but right now I believe that the problem of excessive rent-seeking and "parked land" are more critical

Here's where I think you're going wrong: the unimproved land value of Alice's land does kinda change? If you try to do it specifically at the lot level, you go crazy. Do it at the neighborhood or block level on a per square foot basis, and you'll be able to levelize the value of two lots next to each other. And this handles someone building a private road or a subway or something: them building it increases the land value of the entire neighborhood, including the property the improvement is on, but the value of the improvement isn't included.

It's having access to a subway, or having a hotel nearby, or a restaurant nearby that improves values, and they stack. There might be some adjustments on a lot level, but that's due to things like: water access might increase the value of the lots that have it, but not on the other side of the street that doesn't have access.

And here's the thing: cities already calculate the value of the land separately from the stuff on top. I do look at my property taxes, and they break it into the two values.

By "lot by lot" I mean that for each lot of land you determine how much that land is worth considering everything around it. I believe that we are sort of saying the same thing.

The question here is "what's the unimproved land condition?" not "how many lots is Back Bay?"

When left as swampland, Back Bay is essentially valueless, both in aggregate and lot-by-lot. Someone in the past came along and improved that condition to the current relatively firm earth.

Quoting wikipedia https://en.wikipedia.org/wiki/Land_value_tax

> A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it.

So if you were to own the lan under the Shamrock Pub in 501 E 8th St, Boston, MA 02127, United States you would pay taxes on that piece of land as if the Shamrock Pub was not there but obviously still considering the city around it.

Georgism asks you to not consider the improvements UPON your land, not to ignore those AROUND it.

The question of what that value is is quite easy to answer, it is the price of a similar empty lot in the same area, with the same developments around it.

>But, by definition, the land value is still the same as it was before there was anything there.

No, it's massively higher. Just go look at the value of an empty lot in the middle of nowhere in Nebraska vs the value of a lot in Manhattan. Land in Manhattan is more valuable because more people want land in Manhattan. This is only incidentally related to the cost to build all the physical infrastructure, which is the only part that land value tax ignores.

No, the land value tax ignores the value created by the physical infrastructure. The cost of building the physical infrastructure is ignored by... every tax system. (Well, except for VAT.) It's not relevant to anything.

> land value tax ignores the value created by the physical infrastructure

LVT ignores the value created by the improvements on that piece of property. It does not ignore the value created by other land/improvements. If my neighbor makes an improvement to their land that makes my land have more value, that increase in value is subject to tax on my land. (Otherwise, the taxable value of land in a city would never increase.)

If I own the only subway station in a city, that's not particularly valuable. If someone else builds a second subway station and connects theirs to mine, the value of my land and the value of the land of my immediate abutters increases. If 40 other stations are built, that effect is further magnified. These physical improvements on other properties result in increases in the value of the land near subway stations, which in turn increases the value of the land of the subway station.

And when you own the only 100 subway stations in the city?

So far you've refused to answer this question many, many times in a row. It's not complicated. See this comment above you: https://news.ycombinator.com/item?id=37568145

It ignores the value of the physical infrastructure on that property. It's not ignoring the value of the physical infrastructure around it. And this discussion ignores the most likely method of determining the value, which isn't by individual determination of the lot, but by determining the price per sq ft for a block or neighborhood, then multiplying by the size of the lot. Which is a roundabout saying that it may in fact incorporate the existence of the physical infrastructure, but only in so far as it makes the land of the neighborhood more valuable.

I believe that from a georgism perspective you are not allowed to arbitrarily merge lots you own.

So the 10 thousand square kilometers you own will probably be counted as a thousands of different independent lots.

This would mean that subdividing an existing lot while making no other changes would immediately crater the value of the lot by spiking its tax liabilities. Is that a sensible policy?

And when I complain "why are we so excited about a system with such fine dependence on the exact ownership structure of land?", is "the dependence on the exact ownership structure is so sensitive that we don't even plan to look at it; we'll legislate a fictitious ownership structure instead" a convincing response?

Why is one division of lots less arbitrary than some other division of lots?

Finally, under the system you describe, let's say you own property that has been, in the government's wisdom, registered as two "tax lots", A and B.

You put a building on tax lot A and pay property taxes on it that get assessed against tax lot B.

Then you put a building on tax lot B and pay property taxes on it that get assessed against tax lot A.

How is this tax regime different from a bog-standard property tax regime in which, when you put a building on tax lot A, its property taxes are assessed against tax lot A, and when you put a building on tax lot B, its property taxes are assessed against tax lot B? You develop the land, and then you pay taxes on the developed value.

What happened to the concept of "if you buy a piece of land and build value on it you should not be punished"?

It produces a very different dynamic overall as in almost every cases nearby lots have different owners.

This means that it is very expensive to own a piece of land in manhattan and do nothing with it while you just wait for the price to raise, while it is significantly cheaper to start new developments in "less desirable" parts of town.

I agree with you that a 4 paragraph explanation is not a good practical tax policy, but overall georgism creates better incentives than property taxes.

> What happened to the concept of "if you buy a piece of land and build value on it you should not be punished"?

Yep, it is not perfect, or at the very least the way I understand it has some holes, I still think it is more fair than what we have now and less exploitable.

That's how externalities work. It isn't particularly a 'fine dependence' or driving people toward owning massive quantities of land. If you buy those things then you paid for them and for them to keep their value you must maintain them. If you believe you can do this at a lower price than the state, more power to you. Rent gets paid whether it is publicly collected or privately captured. The point is that when you -don't- own them but benefit from the work of others, you should pay for them.

As noted in https://www.henrygeorge.org/caldes.htm

Edward Treadwell, the biographer of Henry Miller, the "Cattle King", noted: "for the smaller farmer irrigation districts are essential, but for the large landowners and cattlemen, they were deemed a menace. They compelled development... they transferred control from the large landholder to the populace. They invaded the liberty of action on which the land barons prospered."

The Chamber of Commerce in Modesto in the same year stated, "as a result of the exemption of improvements many of the large ranches have been cut up and sold in small tracts. The new owners are cultivating these farms intensively. The population of both country and city has increased... the new system of taxation has brought great prosperity to our district. Farmers are now encouraged to improve their property. Industry and thrift are not punished by an increase in taxes."

Fred Foldvary has an interesting paper called "Walt Disney World as a Rent-Funded Community" https://cooperative-individualism.org/foldvary-fred_walt-dis... in which he notes, "WDW obviously has had an impact on the development of Central Florida. The population in the greater Orlando area grew from 30,000 in 1965 to 450,000 in 1970 and 1.1 million in 1990. The labor force grew from 186,000 to 620,000 (Facts and Figures, 1990). With this growth, WDW has induced an increased land value in the area, but the surrounding developments in turn increase the value of its land, hence it is an open question how large the value received from external developments is, relative to the value exported to the region."

There's no secret power associated with 'buying up surrounding land and public works'. The cost and benefit are proportional, paying a tax or paying for the capital costs/upkeep/maintenance are commensurate.

It doesn’t need to be torn down, just abandoned. The tear down process can happen decades later.

See: Detroit.

But why would any of this continue to exist if landowners have no interest in improving the value of the land? Lower Manhattan today is worth billions, but 50 years ago parts of it were empty enough to be used as lofts by squatting artists.

Let’s say land value taxes are implemented in New York today. Suddenly companies have a real incentive to leave and move somewhere with cheaper land values - way more incentive than today, as in theory they will be taxed mostly on land value, not revenue. What’s to stop Manhattan from slowly becoming empty again as people leave, jobs leave, corner stores close, subway maintenance worsens due to less revenue, etc.?

People don’t currently choose to live in New York City because it’s cheap.

Land value taxes have existed and do exist around the world (along with variations on the theme, such as leasehold land that is leased from the government for a long time). They don't result in the behaviour you describe. Most land value tax proposals are also revenue neutral (e.g. lower income tax in exchange for higher land value tax), so the balance sheet should end up looking the same for companies and individuals, but with higher land holding costs and lower land purchasing costs.

But isn’t the proposal that land value taxes will replace income taxes? How is it not advantageous for a company to then reduce its tax burden by moving to a place with lower land taxes?

I don’t think this happens today because income taxes are federal and not dramatically different between physical locations. The implementation of a land value tax as the primarily tax would seem to change this, no?

To use a direct example: let’s say BigCo is paying 20% of revenue in taxes today. Tomorrow, this changes, and they are paying the same amount, except the source is not revenue, but the value of the land they occupy. They can now move to a location with lower land values and pay less than the the 20% equivalent + keep the current revenue without being taxed on it.

Why would the company not choose to do this? That is my question: doesn’t this set up incentives for companies to continually move to lower land tax locations and minimize the land value that they currently own?

>I don’t think this happens today because income taxes are federal and not dramatically different between physical locations.

It’s true that there’s federal income tax in the US, but there’s still significant variation in state and local taxes.

> How is it not advantageous for a company to then reduce its tax burden by moving to a place with lower land taxes?

Forget all the numbers and try to answer the question: Why doesn't JP Morgan move their headquarters to Rawlins Wyoming?

I think I already answered this: because their taxes would basically be the same. They won’t be avoiding 20-30% in taxes by moving there.

And yes, of course there’s the factor of New York’s value as a cultural hotspot, base of workers, etc. but as I said, the growth of remote work will probably have a pretty serious effect on this. We’re already seeing panic signals from city governments trying to get people to stop working remotely.

I don’t think it’s inconceivable that the JP Morgan of 2040 would have a predominately remote workforce and have no issues moving their headquarters to Rawlins if it means they avoid a massive land value tax. It doesn’t really need to be that extreme of an example, though: there are plenty of smaller cities in the NYC metro area that are more attractive and fulfill the same role as a low-tax zone (if taxes are based on land values.)

Why would that be a problem? The tax revenue of Manhattan goes down because JP Morgan is no longer headquartered there, but Manhattan also doesn’t have to provide as many services. All of those employees who used to live in Manhattan needed roads to drive on and police patrols and tree trimming and whatever else the city of Manhattan does. That’s a lot of money that Manhattan saves by not having as many people living there.

Now all of those people are working remotely, living wherever they want to live, and are no longer forced to live in Manhattan. They no longer have to commute, so they're not adding traffic at all. They still need services, but they’re paying property taxes in whatever place they live in, so those are still paid for. In fact, the “headquarters” is really just the CEO’s house, because now _everyone_ is working remotely.

JP Morgan still needs bank branches all over the place, and some of those are in Manhattan. JP Morgan must pay the land–value tax for the land that those branches occupy, and that money pays for the city services required by the branches. They’ll still have the same number of branches before and after the move, so that won’t change.

JP Morgan still needs datacenters. The largest ones will be located where the land value is the lowest, of course. However, it will still be necessary to interconnect with multiple backbones, and the best place to do that is in the city where many companies are very close to each other. That won't change either.

I don't see how this would be a negative for anybody. People who want to live in a dense city still can. Businesses who want to operate in a dense city with lots of nearby customers will still do so, even if the land value taxes are higher; the revenue will be higher as well so it will be worth it.

Maybe I’m thinking about this wrong, but wouldn’t it incentivize people to try as hard as possible not to live in the same district as people who need redistributive government services?

What do districts have to do with it?

> I don't see how this would be a negative for anybody.

I think it would be a large negative for NYC bond-holders and NYC pension holders.

I don’t see how. Remember, if JP Morgan moved their HQ out of Manhattan, that leaves room for others to move in. Maybe some other business would profit more than JP Morgan did from having an HQ in Manhattan, and would pay the higher land–value tax that comes with it. Or maybe more people would move in instead, looking for life in a busy urban area.

Of course any random change could result in NYC dwindling away and not being able to pay it’s bond obligations any more. We don’t have to posit a radical change in how taxes are collected to imagine that, we just have to look at Detroit. The whole point of a bond is that when you purchase one you are betting that the city will still exist and still be able to pay the interest on the bond. That’s never guaranteed though.

And surely the pension holders would be fine, since those obligations will be funded from investments NYC has made whose performance is independent of its own revenue.

Are you equally eager to invest your life savings in a 2053 NYC bond under both of the following scenarios:

1. NYC funding sources will remain as they are today, or

2. NYC will transition entirely by 2038 to a land value tax?

To the extent and for the entirely rational reasons that you prefer #1, that's the negative to NYC bondholders.

> surely the pension holders would be fine, since those obligations will be funded from investments NYC has made

Assuming the pension was funded to 100% of projected obligations, this would be true. That is not the case; it's around 4/5ths funded.

I am equally indifferent to NYC bonds under either taxation scheme. From a national perspective, the bond prices of one particular city are irrelevant. It’s not even clear to me that a change in bond prices is necessarily a good way to measure whether a particular type of taxation is good or not. Even if a new tax scheme caused NYC tax revenue to drop enough to affect bond prices, surely that would be offset by increasing revenues elsewhere and thus increasing bond prices for other cities. After all, the businesses are simply moving their headquarters around. McDonald’s isn’t going to stop selling burgers in Manhattan, right?

Likewise pensions. My personal opinion is that anyone accepting a pension instead of better pay is not really doing themselves a favor; they’re taking on extra risk that the politicians won’t raid the pension fund or otherwise mismanage the city. I would rather just own the underlying securities myself, and eliminate the extra steps.

The upthread point of controversy was whether this scheme would be a negative for anybody. I think I've shown that there are people for whom it would be a negative (at a minimum, increasing the risk/uncertainty of a current holding with no offsetting increase in return in the success case).

If you disagree, that's OK, but there's probably no way to make further progress in resolving that disagreement beyond a back-and-forth of "nuh-uh, yuh-huh".

Oh, ok. So you’re saying that changing tax systems would change the equilibrium, and some people might call that a harm. But that’s true of any major change, even if the new equilibrium is better for most people. It’s more of a fact about the _change_ than about what you changed to.

Yes. There are actual bondholders and pension holders right now who would be harmed by the change to a land-value taxation scheme.

Because a place with lower land taxes will have fewer workers and worse infrastructure. Companies with a small land footprint will end up paying less taxes, companies with a large land footprint will end up paying more. If a company needs a lot of land to do business, then it is good for them to move to a place where land is cheaper because others could make more efficient use of that land.

A tax on the value of your building didn’t incentivize the construction of the building, and there is already a huge cost incentive to leave Manhattan. Costs there are already pretty high, and people only stay due to inertia and the higher incomes available there.

But you are asking the right type of question, which is how the equilibrium will change if we change the tax system.

> Let’s say land value taxes are implemented in New York today. Suddenly companies have a real incentive to leave…

Not necessarily. Note that implementing a land–value tax means removing other kinds of taxes while collecting the same amount of money overall.

Suppose two companies both want the same plot of land in the city you run, and both want the existing building. Suppose that one company makes twice the profit as the other on the same expenses. That company is the one that you would want to invite into your city (assuming you couldn’t get both, of course), because it will make the most effective use of the land. If there are no taxes on income, then that second company has more money to spend bidding up the price of the land, and thus to spend on the land–value tax. Thus the current owner will prefer to sell to the more profitable company, which is the exact result that the city as a whole wants.

With a flat income tax, the ratio of profits after taxes between these two businesses will be the same 2×. Each company has less money available to spend on land, but one will still be able to outbid the other.

But most income taxes are progressive, meaning that the tax rate goes up the higher your company’s income tax is. That reduces the ratio of profitability between these two companies, making it less likely that the more profitable one will be able to expand into your city. If you make the taxes progressive enough, then highly–profitable companies would never be able to enter your city at all, because they would have less money available than less–profitable ones.

I think another question would be: why are they in NYC today? Let's say that rents go up in NYC. Suddenly companies have a real incentive to leave and move somewhere with cheaper rents. What's to stop Manhattan from slowly becoming empty again...

From my other comment: if you don't believe that location has value in a remote-work world, then companies are just doing something ridiculous renting expensive office space in cities.

> But why would any of this continue to exist if landowners have no interest in improving the value of the land? Lower Manhattan today is worth billions, but 50 years ago parts of it were empty enough to be used as lofts by squatting artists.

The disincentive that you see is in our current system, not Georgism. You note that Lower Manhattan has seen its value increase a lot due to improvements created on that land - improvements that you're afraid wouldn't happen with Georgism, yes?

Under our current system, I pay $10,000/year in taxes on my $1M empty lot (it's all land value since it's an empty lot). If I build a 40-unit apartment building, the land is worth $1M and the building is worth $10M. Now I pay $110,000/year in taxes. I have a huge disincentive to improve the land. With Georgism, my taxes don't go up if I build something on my empty lot so I'm incentivized to build something on the empty lot.

Now, you'll likely say that if I build something on my lot, the value of the land will rise because it's now in a nicer area. That's true, but the value of the land will rise a tiny bit compared to the value of the additions I've made to the land. Under our current system, I'll get taxed on the $10M building value plus the land value. If the land value goes up 10%, we're talking about taxes on $11.1M in our current system vs. $1.1M under Georgism. Again, even if you argue there's some disincentive under Georgism, it's way less disincentive than our current property tax system.

What Georgism does is account for where land is becoming more valuable/popular - and maybe for you "popularity" is a better way of thinking about it since you might be skeptical of "value" if you have a very strong bias toward remote work. At some point, Lower Manhattan started becoming more popular. Why? That doesn't matter. While Lower Manhattan was cheaper than it is today, there were so many other parts of the planet way cheaper than Lower Manhattan so people had incentives to go somewhere else, but still chose Lower Manhattan despite the cost.

As Lower Manhattan became popular, Georgism would have provided more incentive to improve properties. If you own a vacant lot in an area that's becoming popular, you see your taxes rise fast. If you own a $1M vacant lot that becomes worth $5M and the $1M vacant lot next to you became worth $5M and put up a $250M office building, you both pay the same taxes. The person who built the office building gets lots of money for that building so the taxes are pretty low. You'd want to put up an office building or housing or whatever so you can take advantage of that too!

Land value taxes provide a much greater incentive to improve the land than property taxes since property taxes will be based on the land value plus the improvements. By not improving the land, you save money with property taxes. With Georgism, you pay the same taxes whether the land is improved or not. Maybe your improvements do increase the land value somewhat, but when everyone around you is improving the land, that's a much larger impact than just the improvements on your land.

But wouldn't that disincentivize everyone from improving their land? Again, property taxes are a much larger disincentive. Georgism means that if you improve your own land, maybe your raise the value of your land (and everyone around you) by a marginal amount. Property taxes mean that the amount you pay in taxes will go up many times higher when you improve your property rather than by a tiny amount. Property taxes mean that you could see your taxes go up 10-100x rather than maybe go up 1-10% due to your impact on the land value.

Again, why aren't companies leaving NYC today? Most companies are paying rent on their office space, not owning it. As such, the underlying tax structure doesn't impact them. Companies already face rising rents giving them a real incentive to move somewhere with cheaper rents. Why don't they move to 100% remote? Why is Google paying tons of money for offices in NYC when they could just have remote workers or open offices in the middle of nowhere? It's because Google sees value in having those offices. You might disagree, but the reality of our world today is that people are valuing those spaces highly.

All of the incentives that you worry about would be less under Georgism than under our current system. Under Georgism, people have a bigger incentive to improve land than our current system. Under our current system, companies already face high rents incentivizing them to leave cities - but they see more value in staying.

Now, there are some businesses that might own their building/land in NYC. Think a garment company that's been around for a hundred years or a kosher food processing business that's been around for a hundred years. They might have a one-story building in what is now a very expensive part of NYC. However, they already face huge incentives to leave NYC for the suburbs as developers are willing to pay more for their land than their entire business is worth. With Georgism, the incentive could be higher since they're currently facing low property taxes since their land is barely improved (by NYC standards). However, Georgism can actually make it easier for companies like this to stay in expensive areas - in a slightly modified form. They can't have a one-story building by themselves, but it would be cheaper for them to have one story inside a larger building.

Georgism is about incentivizing better land use in popular areas.

>Land value taxes provide a much greater incentive to improve the land than property taxes since property taxes will be based on the land value plus the improvements. By not improving the land, you save money with property taxes. With Georgism, you pay the same taxes whether the land is improved or not.

Environment wise, isn't that an incentive to build every last square meter?

In places where the land is expensive, yes. But that's also largely where the people are, so it's helpful to build there too. You don't end up with a giant surface parking lot, because you get taxed the same whether you have a parking lot, or a 5-story parking structure.

> Environment wise, isn't that an incentive to build every last square meter?

In places where land values are very high, yes. Presumably leading to denser cities and less suburban sprawl, which would be a nice benefit for the environment.

The current system discourages people from investing in the land because the more you invest in the land, the more it gets taxed.

The Georgist assumption isn't that land in NYC (or wherever) is inherently valuable. However, I think we'd all agree that a plot of land in NYC is valuable - maybe you think it shouldn't be, but I think we'd both agree that it is. The value might not be inherent to the land. Much of the value of land in NYC is because of what others have built in NYC.

Georgism encourages land owners to invest in the land in valuable places (like NYC) because they will be taxed the same whether they improve the land or not. If they have a vacant lot, they pay $X in taxes. If they have that same lot with an office building on it, they pay $X in taxes.

The current system allows land owners to profit off the improvements others create around their land without making any improvements. Many people sit on unimproved property in major cities like NYC because they pay almost nothing in taxes on unimproved property.

Let's say that you own a vacant lot in a part of a city that's seeing revitalization. People are putting up office buildings, biotech lab space, etc. In the current system, you think "if I just wait another 20 years, I'll have the only unimproved land in the area and it'll be worth 10-100x more!" You pay near-zero property taxes and look to profit off what everyone else is creating around your property. People creating housing, office space, lab space, etc. are all creating value around you and you're looking to leech off that value. Every resident, worker, artist, community organizer, etc. that ends up in your area is creating value near your property and you get to leech off that value they're working hard to create.

In a Georgist system, the taxes on your vacant lot would increase and that would encourage you to put the lot to use or sell it to someone who would. In effect, a Georgist system taxes you on the value that everyone is creating around you rather than letting you leech off that value.

> The assumption here seems to me that land in NYC/wherever is inherently valuable, which doesn’t seem true to me. Especially in a remote working world increasingly detached from physical spaces.

Going back to this point, from a market-based perspective, we can both agree that land in NYC is valuable - that people are willing to pay more for land in NYC. You might think they're foolish to pay for it, but they are paying for it. The vast majority of the most successful companies are all locating themselves in the most expensive cities in the world. Most people disagree with your assessment of the value of land in NYC.

Cities provide access to lots of opportunities. Yes, remote work detached from physical spaces might offer that. One can debate the value of remote work for the next decade. However, right now, land in NYC is definitely valuable. Most people and companies still perceive a lot of value there - even if you don't. Therefore, a vacant lot in NYC is squatting on a lot of value

> then move to cheaper land as soon as possible/when their current land becomes more valuable?

Ah, but this is where markets work. If the land becomes more valuable because it is more valuable to you, then you wouldn't want to move. If the land gets assessed at a higher value, but it isn't delivering that value to you or anyone else, demand will go down and then the valuation goes down.

I think what's hard for you wrapping your head around this is that to you the land in NYC isn't valuable. Would you pay to rent an apartment in NYC? I think the answer is "no" based on how you've talked about it. You probably think people renting apartments in NYC are wasting their money. However, most people don't think that way. If they did, everyone would leave NYC and rents would go down. Maybe you find no value in location. That's not true for most people.

You might be correct about the future: maybe all work will become remote and to take it a step further let's say that all friendships, dating, education, and community move to remote/metaverse. NYC no longer has any value beyond things like access to a good harbor.

But in the world we live in today, NYC is highly valued. You might not value it highly, but it is highly valued. There are many highly valued things that I see no reason to be valued highly - but I acknowledge that they are highly valued even if I don't personally value them. In the world we live in today, people can squat on vacant lots and leech off what others are building around them.

Maybe location will have zero value in the future. I don't want to put words in your mouth, but that seems to be where your thought process is going: NYC doesn't seem to have any value for you and in a remote-working world, physical space wouldn't have any value (beyond things like shelter and such). If that's the case, then all land would have equal value and pay equal Georgist taxes.

That's not the world we live in today. Even if you think people are foolish for valuing NYC highly, I think you can agree that they are valuing NYC highly. Even if you think companies are wasting money on offices in NYC, I think you can agree that they are paying lots of money for those NYC offices. That's the reality on the ground. Likewise, the reality on the ground is that there are people squatting on land that would provide real value to people if it were improved, but they're hoping to pay near-zero taxes and just squat on the land realizing a profit for zero work on their part - leeching off the work of those around them.

To flip this around on you: why do you live where you live? Why do you not move to the middle of nowhere 100 miles from anyone else? Even for those who don't like cities and might want to move to rural areas, they often still put value on place/location to an extent. You want to be proximal enough to a supermarket. Most people don't want a 4-hour round-trip to get food. Many people want to be within community rather than just being lonely - that could just mean being proximal to people that can come over and watch sports with you at your home (which they won't drive 2-hours to get to) or close enough that you can join a gym or do recreational sports with others. And you might answer that you can buy workout equipment for your house and chat with people online while watching sports together or that you'll just order food to be delivered (though if more people decided to move to inconvenient locations, free delivery to rural areas would probably need to cease as it's basically subsidized today).

But I'm guessing that you still value place/location as most people do. You might be more flexible and cost might sway you more, but I doubt that you're truly agnostic to place/location. If you live in the suburbs, there's almost assuredly a cheaper town you could have moved to and didn't move to. As such, you found more value based on place/location. Even in rural areas, there are cheaper places you can move to that people decide not to move to.

>You might be correct about the future: maybe all work will become remote and to take it a step further let's say that all friendships, dating, education, and community move to remote/metaverse. NYC no longer has any value beyond things like access to a good harbor.

Even if it's all remote work, many people like the urban lifestyle, of many things to do, shops, bars, pilates, nail saloons, pizza places, comedy clubs, dance clubs, delis, cafes, culture centers, galleries, gelato shops, museums, libraries, and so on. So, it's not like all incentives to a big city are office work opportunities.

I like your explanation. Some may think it repetitive but you arrive at the same point from slightly different angles and your writing is clear. It gets the message across to those who may not have fully appreciated the mantra that in real estate it’s all about location, location, location.

Thanks for the long reply, but I think you kind of missed the point entirely. The question was about what would happen if Georgism were adopted. Not what NYC is like now. I'll respond to each section:

Well, certainly it has some value, but I don't know if this value is "inherent." The fact that large parts of lower Manhattan was a kind of wasteland in the 70s would seem to indicate that it there isn't a huge amount of value in the land itself. Detroit is another good example, although definitely not as much as NYC.

Most people disagree with your assessment of the value of land in NYC.

Again, I think you are reading too much into my comment. These companies are centralized in NYC because of the social factors, not because of the inherent value of the dirt there. In the not too distant past, large parts of Manhattan had dramatically less value than today. Plenty of other cities in the world were once far more important than they are now.

Ah, but this is where markets work. If the land becomes more valuable because it is more valuable to you, then you wouldn't want to move.

But wouldn't you then be taxed more because of this value? Again, that doesn't really solve the issue. You'd just want to sell the land and move somewhere that has a lower tax burden.

Well, I didn't say those things and you are claiming far more than I did. So yeah, you are putting words in my mouth.

All of the comments about my personal living location are again, not really relevant to the point at all. At no point did I say NYC is not a desirable place to live, that I think the land doesn't have value, or that I have some issue with living in cities and prefer rural areas.

My question is not about how NYC is now, it's about what would happen if Georgism were adopted, and if this would set off a cycle of companies not investing into urban areas because their tax burden was determined by land value and not revenue. All of the things about NYC today are frankly irrelevant to the discussion, because the question is about effects of the policy if implemented.

Some of the philosophy all sounds reasonable and rational if the intention is to spur development from empty lots, but I still don't see how Georgeism prevents capital exit. Your assumption here is that when choosing between "keep empty lot and get taxed X" or "build thing and get taxed X", those are the only options. The other option is just to leave, which again is what my question is about. You might say, "then someone better able to capitalize on it will buy the lot," but what if there are no buyers? That's a pretty big assumption to make.

Finally, you're making a lot of giant leaps that a) I didn't make and b) aren't necessary for my point to be relevant. BigCo doesn't need to go from NYC to a barren tundra; it can just go from NYC to a smaller, cheaper city that has lower land values. If those land values rise a decade later, they can just move to another one, ad infinitum.

I still don't see how replacing income/revenue taxes with land value taxes will prevent this sort of behavior.

I think a key point is that taxation discourages certain behaviors. If you're so worried about LVT discouraging one behavior, why aren't you worried about income tax discouraging others? Many people, including myself, believe that the negative effects of taxing primarily income - wage income specifically - are far worse than those of taxing land value. There is no perfect tax system, but that's not really a strong argument against change.

I mean I don’t really have a dog in this fight. I am just trying to understand Georgism. Certainly the current tax system isn’t great either but that is a different conversation.

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