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Comment by pg | Hacker News Reader

I think one reason governments use a variety of taxes is that otherwise there is a single point of attack for people who want to game the system, and all that energy focused on one point could produce weird distortions.

In this case there would be a great incentive for people to live less densely, which seems a bad thing. Someone who went off and lived in the sticks where land was practically worthless could reduce their tax bill to next to nothing. Especially if they lived in a mobile home (deluxe versions of which would rapidly appear).

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I think you have it exactly backwards. The more points of attack, the larger the vulnerability. There are laws passed for specific corporations to reduce tax liability.

What's wrong with low density? There is a real economic value to variety and a minimum density to support certain kinds of commerce. You can't take this to a limit assuming there is no cost (if only opportunity cost) to moving to a less dense area.

Also, at least in the easy coast, the least dense areas are typically already state or national parks. Wyoming is the exact opposite. 5 digit license plates are common there.

A variety of different taxes "catches" everyone at some point. You can dodge some, but you can't dodge them all. Even the super rich hiding their money offshore pay sales tax on their Bentley, car registration, property taxes on their house, etc.

You're worried about someone dodging a land value tax?

You're assuming it would be possible to establish an un-dodgeable tax?

Not at all. I'm saying if your reason for favoring multiple taxes is to ensure no one dodges all of them, you're barking up the wrong tree. First, this is a dubious goal -- why should the primary objective be to "catch" everybody? Second, if we go by a measure like "percentage of expected tax revenues dodged," a single land value tax would be far preferable to today's messy tax system. (Consider the number of loopholes exploited today and the danger of avoiding a strict land value tax.)

I came up with a scheme that is un-dodgeable (kinda). Print money to pay expenditures, and limit expenditures to keep inflation in check. The tax is implicit, so you can't avoid it. Those holding the currency can't help but give a percentage of the value to the government. It's perfectly flat too.

The only way to get around it is to operate in another currency. But if there are any expenditures at all, they are going to pay someone in the currency, and need to be spent somewhere. This would work best with minimal government expenditures to minimize the motivation to avoid using the currency.

It would be pretty easy to make the implicit tax small enough to not only discourage avoiding the currency, but actually make the currency more stable than others tied to governments that don't know how to control spending.

Interesting idea, but why does fiat currency have any value in the first place? Largely because the government collects it in taxes.

Those that receive that currency as pay will find it valuable, as will those who want to provide services to them.

Inflation is a tax on holding dollars (and fixed income securities). This tax would be pitifully easy to dodge: simply don't hold dollars. This would drive savings rates to zero.

However, it might be temporarily sustainable if a large entity (e.g. China) behaved irrationally and decided to hold dollars in spite of the tax.

If the government is small enough, the rate of inflation would be smaller than other currencies.

If new cash was created only by government expenditures, and not by a lending model like the Fed, I can easily imagine a smaller inflation rate than any other currency. Just limit spending to be a small percentage of the previous year's growth in GDP.

Then people would avoid taxation in other countries and inflation in other currencies by holding this currency.

In a libertarian sea-steading micro-nation, the government would spend money on the police, courts, and prison (though banishment would be a common punishment). The police could be a few prefects who control robots.

There are two problems with this. First, it's not perfectly flat at all. The people who get the new currency first will get to spend it first, before the market lowers the value of the currency. This is a transfer of wealth to them from other currency holders.

Second, as tome suggested, the government would have to take measures to force people to use the currency. This has all kinds of bad effects.

Where did I say that having few taxes made it easier to avoid them? My comment was about the amount of distortion caused by people's efforts to avoid taxes, not the amount of tax people would succeed in avoiding.

If the concern in the distortion is that people don't pay taxes, my comment is valid. If the concern is for the people themselves, I'm not sure what the problem is with low population density. It doesn't even need some government program to correct if we decide it is bad for society. People already have social and economic incentives to live near eachother.

Also, I'm surprised you would suggest that law makers give a shit about the distortion taxes cause, and hope to minimize it. A politician's actions can pretty much always be directly tied to motovations to increasing influence and getting elected. Altruistic politicians that actually care about society don't exist.

Ohh, another idea: if there is a single dial to adjust, correcting for distortion is easier. If the effects of the distortion are more costly on society than diminishing government expenditures, then the government should shrink and collect less tax.

> I think one reasons governments use a variety of taxes is that otherwise there is a single point of attack for people who want to game the system, and all that energy focused on one point could produce weird distortions.

Nope. They use a variety of taxes because that increases the ways that people are interested in the tax system, which increases their power. Every different tax is an opportunity to reward/punish and "you want to give me money to make sure your interests are represented."

And, the variety of taxes actually makes the system more vulnerable to gaming. Complexity is how/why tax lawyers make big bucks.

Also, at the moment we only tax "land" -- meaning actual physical land, not space inhabited. Therefore, the truly rich could afford to construct difficult vertically engineered buildings, thus reducing their tax burden while simultaneously keeping a superhigh lifestyle. Meanwhile, many middle class who are wealthy enough to afford a home but not wealthy enough to afford a towering monstrosity would be taxed at a higher rate.

I am loath to use the term "wealth redistribution" because it tends to bring around the less thoughtful, but louder, segment of the population which rails against anything that remotely sounds like socialism. However, consider that this is one of the reasons for the progressive income tax. Essentially, money means less to you the more you have of it, especially considering that sustainable goods for comfortable life actually cost very little (thus meaning that taking ten percent of someone earning $35,000 dollars a year is far more likely to cut into their cost of living than taking ten percent of someone earning $500,000 dollars a year). One tax certainly introduces problems of point vulnerability, but it also brings up a problem with different taxes on different income brackets.

"Therefore, the truly rich could afford to construct difficult vertically engineered buildings, thus reducing their tax burden while simultaneously keeping a superhigh lifestyle."

If the tax rate is so high that this is a worthwhile use of a rich person's money, we've already lost.

Well, how high should we make it then? Remember, this is supposed to replace all other US federal tax, including income tax (I presume, maybe I misinterpreted the article).

In order to really answer your question, we'd need to attach some numbers to the problem, since it's all a matter of which is cheaper.

However, every time I try, I find the concept of "unimproved value of the land" coming apart in my hands. There's really no way to separate the value of the item on the land from what is on the land. Oh, we do talk about lot values, but that's ultimately an abstraction that once it actually started to matter would be subject to gaming and interpretation.

It isn't really meaningful to talk about the economic value of something that doesn't exist. You can only determine the value of something by seeing what people will actually give up to obtain the item. When you ask about something that doesn't exist, you are asking people to estimate what they might be willing to give up if the thing actually existed, and people are notoriously bad at that.

(Note that the failure is ultimately human, not economic; a being that was more rational about being able to hypothesize what they would give up might not have this problem, but we have to go to government with the beings we have, not the beings we wish we had. This metric would start game-able and get worse.)

So I guess my answer is I can't seem to wrap my head around what's actually being proposed enough to elaborate on what my point was meaningfully. Consider this a strike against this summary of the proposal. (Whether it applies to the original I don't know, and I don't care enough to go check.)

(... actually, if you want to get really meta, the problem is that even if you waved a magic wand and had this implemented, Congress would still have it mangled inside two years flat. Congress is the real problem here, or government, or special interests, etc. The tax system is more effect than cause.)

"Congress is the real problem here, or government, or special interests, etc. The tax system is more effect than cause."

We just need the Constitution, U.S. Code, and state laws on a DVCS. It wouldn't need to even be official; representatives would just essentially make the formal commit of publicly popular diffs, or lose reelection.

>> There's really no way to separate the value of the item on the land from what is on the land.

Sure there is. We know this because commercial real estate appraisers (whom I wrote software for for many years) do it all the time. The best method is to look for comparable unimproved properties, or to get a value on an improved property and then subtract the cost of the improvements. Not an exact science, but quite doable if you triangulate from several properties.

This isn't right. Property tax is almost always in proportion to the area of living space on the property.

Even anti-redistributionists acknowledge that taking 10% of the income of someone making $5e5 will reduce that person's lifestyle less than taking 10% of someone making $35k. I think the issue is more that this isn't the case -- the 500,001st dollar is taxed at a much higher rate than the 35,001st dollar.

I think it depends on the state -- certain states separate the taxes into Land Value Tax (LVT) and then actual "property" taxes, which is IIRC the improvement value of the building on the property. Both of these combined would be a real estate tax. I had assumed that they were taxing LVT, but the article is a little poor on details.

I think the issue is more that this isn't the case -- the 500,001st dollar is taxed at a much higher rate than the 35,001st dollar. I can't quite tell if you are agreeing or disagreeing here. I was saying that the property tax is unfair in this case. There are many ways in which someone who has a high income could be taxed lower than someone with a lower income (which is what the progressive income tax is supposed to correct).

It is certainly possible for someone with a higher income to be taxed at an overall rate that's less than the overall rate of someone with a lower income. It is true that this subverts the plain-meaning intention of the tax system (though I am skeptical that at least some of those "loopholes" aren't unintended at all) but it's not obviously unfair.

Do you think tax laws are effectively enforced today? The main argument for simplifying the tax code (in any way) is that it will limit the effectiveness of games and loopholes.

Are you arguing that the complexity of the tax code makes it more impervious to cheating?

I'm arguing what I wrote, which is that if there were a single big tax rather than a lot of small ones, people's efforts to avoid it would tend to produce more dramatic distortions in how we live. I wasn't saying anything one way or the other about the effectiveness of such a tax as a way of collecting revenue, or how effective current taxes are at that.

Sigh. I wonder if forums train one to write verbosely. When I say exactly what I mean, and no more, I always seem to end up having to produce the macroexpansion of it in the grandchild. I wonder if one eventually starts to anticipate this.

You wrote that weird distortions were a possibility, and I agree, but do you also think they'd be more dramatic than the ones which exist today? We have some big taxes on productive activity and a lot of small taxes to go along with them. All of these already produce distortions in how we live.

Indeed. It would be nice if you could mark a post as "don't extrapolate on what I've written." Just a little social cue to potentail respondents that they should check their rebuttal to ensure that the point they're refuting is actually contained in the text of the original. Like this:

  But if they did actually clone genetically engineered dinosaurs from mosquito DNA, 
  I'd prefer they did it on an island well off the mainland to ensure that
  they couldn't escape and endanger the population at large.

  /noextrapolate

Who's the "they" now, the cloners or the cloned?

I think you shouldn't be surprised that when you say "people will game the system" the assumed critique is that people won't pay taxes. Again, who cares if some people moves to the sticks? The revenue side is all that really matters in your scenario.

I think a pithy comment is still a good idea :)

I see now that you were making a point about the distribution of economic incentives that result from tax policy.

Ideally, we'd all devote consistently high-quality attention to both reading and writing on hacker news. I don't always do that, in part because of 'forum training,' and in part because I hardly ever respond to comments unless I'm procrastinating, and thus 'in a hurry.'

Can we address the problem by extending the language? Another poster mentioned a /noextrapolate tag.

What about qualitative metadata, to indicate how carefully one should read the comment?

We could end our comments with a comment character in a representative language.

  ;  means "brief"
  #  means "pretty normal"
  // means "I am (tired || pained 
  //              || procrastinating worse than usual)"

Now, let's see if it works.

As others have already mentioned, it's easier to game the system when there are many different taxes. The distortions are already weird.

> Someone who went off and lived in the sticks where land was practically worthless could reduce their tax bill to next to nothing.

Depending on the method used to assess the value of land, the market would adjust for this. There are still other great incentives for people to live in cities, of course.

Am I the only one to think that such a tax would, on the opposite, increase population density around attractive centers ?

As acquiring expensive, more attractive, inner city land would be a recurring burden for land owners, they would try to make enough profit out of it to offset the tax. The best way to do that would be to build tall buildings that have high population density.

Am I wrong ?

>> Someone who went off and lived in the sticks where land was practically worthless could reduce their tax bill to next to nothing.

It would be much smaller, of course, but the cost and accident risks of commuting and loss of high-density conveniences would be a strong countervailing force for most.

The real trick of a tax system is to punish productivity as little as possible while charging fees for resource usage. Toll roads, gasoline taxes, park entrance fees are "good" taxes. Part of the problem with Henry George's scheme is that it doesn't take those into account.

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