You are already paying taxes, Land Value Taxes just seek to be a more efficient (since they try to target rent seeking rather than profitable labor) and more just (since they target land that the owner didn't create) form of taxation.
So arguing that it's effectively the government stealing your property is only a valid argument if you are arguing that all taxation is theft. If that's what you believe then that's fine, but it would be better to be upfront about what argument you are making.
Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity.
Your use of the phrase “rent seeking” is also a bit weird. It sounds like any extraction of value from capital would meet your definition. It’s fine if you object to a persons right to extract value from their capital, but rent seeking typically describes attempting to extract value from capital _without_ reciprocating any productive value to the person who’s paying you. Which is certainly not the case with land use.
I used to agree with you, then I read Falkvinge's proposal of a taxless state and it changed my mind. I'm now convinced that property tax (or more accurately, land tax) is the only justified tax, or more generally, that all taxes paid must be tied explicitly and characteristic to a service rendered, and that the only services a state should be allowed to render must be administration of a commons.
You cannot defend your land property from even a marginally better equipped aggressor who seeks to take it from you. You need a court system, or for a larger aggressor, an army, to do it for you. This means that de facto, the state with the armed men owns the land. Land tax is tantamount to a fee you pay to lease it. Also it can be framed as just payment for a service rendered, that is, the service of defending your property for you. Furthermore, any entity that "owns" land property and gets protection of his claim by a court or army that does not pay a land tax is free riding.
Income taxes are unjust. By the logic of the premise, land tax that pays for anything but defense of claim to the land is unjust. Wealth taxes are unjust, as are capital gains. Tarrifs that fund a navy to protect shipments on the high seas would be just, as would registration fees to bay for highway infrastructure. The core rules are, the state must only solve a tragedy of the commons, the tax that funds such an endeavor must derive directly from benefitting from that endeavor and it must only ever be used for that endeavor. With these axioms it is easy to deduce which taxes are just and which are not, they're all payment for services rendered for a service for which a state is the optimal organization to provide.
So much of commerce is predicated on contracts, and courts/the government help enforce them. So it'd seem to me that income/wealth taxes, much like land taxes, are a just tax for the service the government offers in providing enforcement mechanisms.
Well, how would you design a tax scheme to pay for it? Remember, a tax that doesn't directly derive from healthcare would be unjust according to these axioms. So it can't be an income tax, just as it would be unjust to pay for roads using an income tax. You tax everyone using the healthcare system and to the degree that they use it and pay for it that way.
Further, healthcare isn't a commons, so it is arguable that a state has no business interfering. Emergency facilities specifically are a commons, if the hippocratic oath is followed and all in need are helped. So some scheme where people pay for the maintenance of these facilities and services rendered in them based on how much they stand to benefit from them would be just. I don't know how you'd do that beyond sending them a bill. Maybe yearly renew on an access card, like vehicle registration, that isn't based on income but maybe could be based on medical history, or just flat rate for everyone. Taxing income, or wealth, to pay for blanket coverage including person to person contracts with specialists would be unjust, socializing something that isn't a commons would be unjust, but managing emergency facilities as a commons and funding them with some type of tax directly derived from their existence would be, because they are a commons and do suffer from tragedy of the commons.
Land ownership must be enforced by court of law, and that's true of all property. Yet land ownership is the easiest to maintain. While my neighbor might take my lawnmower and claim it as his own and the courts would have difficulty proving otherwise. Land is difficult to walk off with. Maintaining ownership is simply a matter of maintaining accurate and secure records.
No it's not. The records only mean something if a system exists to enforce those records. This is what we pay for, in the form of courts and armies. The record means nothing if it is not practically enforceable, and being able to enforce them comes with an ongoing cost, which the beneficiary, the land owner, has to pay for one way or another.
> Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity.
No man is an island; land should be seen as something rented from the people, especially in cities, where most of its value comes from the efforts of others. I'm sympathetic to the idea that one is entitled to the sweat of their brow and the work of their hands, but land is neither; property in general may not be theft, but private land ownership is, because land rightly belongs to everyone and no-one.
> Your use of the phrase “rent seeking” is also a bit weird. It sounds like any extraction of value from capital would meet your definition. It’s fine if you object to a persons right to extract value from their capital, but rent seeking typically describes attempting to extract value from capital _without_ reciprocating any productive value to the person who’s paying you. Which is certainly not the case with land use.
There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource.
> There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource.
Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody.
> Rent seeking is an economic concept that occurs when an entity seeks to gain wealth without any reciprocal contribution of productivity. An example of rent seeking is when a company lobbies the government for grants, subsidies, or tariff protection.
> Renting an asset to somebody has a very obvious reciprocal consideration of value.
You could make the same argument for any of the classic examples of economic rents. A doctor's license or a taxi medallion is obviously economically valuable; that doesn't make it not a rent. The thing that makes it a rent is when you're able to rent it out for more than it cost you to produce, or when you don't produce it at all.
You’ve linked to a Wikipedia page that describes dozens of different definitions for what rent is. The category of rent that this thread is broadly discussing is rent in the form of value extracted from capital and land. The much broader term “economic rent” includes things like wage increases negotiated by labor unions, which I presume you’re not objecting to, and certainly isn’t the topic of this thread.
Rent seeking describes a specific case of “economic rent” where the reciprocal value either doesn’t exist or is highly contrived. As I’ve said, it’s fine to be against a persons right to seek “economic rent” from their capital or land. But this isn’t an “anti-rent-seeking” position. That’s an economically Marxist anti-capitalist position, as that is the most fundamental component of Marx’s economic model.
There's a huge difference between saying that people shouldn't be able to rent out capital they've legitimately earned (by creating value through their own efforts), and saying people shouldn't be able to seek rent from things they didn't create but just squatted on - radio spectrum, land, IP addresses, fraudulent patents...
>The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource
As soon as anybody owns any piece of land or capital, they are not doing anything to produce any value that is derived from it, they are simply collecting money for controlling a scarce resource. Those two factors of production can create ongoing value without any intervention from their owners, and you either support a persons right to own those resources, and collect some portion of the value they create, or you don't.
Your use of the phrase "legitimately earned" also means nothing in this context, and I presume this is just a weasel word you're using to avoid actually having to clarify any sort of concrete stance. For starters, legitimate according to who? I would further presume that you have some sort of view on who's accumulated their wealth legitimately, and who hasn't. What criteria have you invented for this? Is the use of capital and land something you would consider contributes to "illegitimate earnings"? Because all of that just circles back to "seizing the means of production" (as in land and capital).
Also, what's wrong with unearned capital? If I give somebody a hammer, do you have some sort of moral objection to them deriving income from the increased productivity that would create for them? Because I would suggest that the only thing that matters there is whether I had a legitimate ownership claim to the hammer in the first place.
> That's a big revision from your previous comment
It's not, but semantic arguments are pointless. If you want to use "rent seeking" to mean something different from what it normally means, fine, I don't mind using different words.
> As soon as anybody owns any piece of land or capital, they are not doing anything to produce any value that is derived from it, they are simply collecting money for controlling a scarce resource. Those two factors of production can create ongoing value without any intervention from their owners, and you either support a persons right to own those resources, and collect some portion of the value they create, or you don't.
> Also, what's wrong with unearned capital? If I give somebody a hammer, do you have some sort of moral objection to them deriving income from the increased productivity that would create for them? Because I would suggest that the only thing that matters there is whether I had a legitimate ownership claim to the hammer in the first place.
Right; the point is that land and capital are very different. People can legitimately own hammers, which are the work of human hands (yes, access to the means of production could be a factor, but if we assume that production of hammers is now widespread then it's irrelevant). Claims of ownership of land (or radio spectrum, or so on), if you mean chattel ownership, can't ever be legitimate, because people can't make land, only seize it.
> People can legitimately own hammers, which are the work of human hands
> Claims of ownership of land (or radio spectrum, or so on), if you mean chattel ownership, can't ever be legitimate, because people can't make land, only seize it.
These two claims aren't logically consistent. As a factor of production, land includes all natural resources. 100% of the input materials used for the production of a hammer are land, and so are 100% of the input materials used for the entire hammer supply chain. If you claim that ownership of land is never legitimate, then how can ownership of a hammer ever be legitimate if it's made of 100% land? Nobody made the iron or the wood in the hammer with their own hands.
I can see that you prefer to invent your own vocabulary, rather than use the long established vocabulary of economics. But that doesn't make the inconsistencies in your arguments dissapear. The only thing you've consistently expressed that a person can have a legitimate ownership claim over is labor (which yet again, takes us back to seizing the means of production).
> As a factor of production, land includes all natural resources. 100% of the input materials used for the production of a hammer are land, and so are 100% of the input materials used for the entire hammer supply chain. If you claim that ownership of land is never legitimate, then how can ownership of a hammer ever be legitimate if it's made of 100% land? Nobody made the iron or the wood in the hammer with their own hands.
No, but the overwhelming majority of the value of the hammer is from human efforts, not from the raw materials. Like yes technically you could say that whoever takes the hammer should have to pay tax on the value of 100g of unrefined iron or whatever, and if we ever reach a point where good iron for the tools that you need for good jobs is so expensive that only the children of rich families are able to hope to own those tools and the rest of us have to rent them at extortionate rates then maybe that would be a policy worth adopting. In theory nothing is 100% land and nothing is 100% product. But in practice you can draw the distinction pretty easily and say which things are scarce enough that taking them out of circulation has an impact on your fellow citizens and which aren't.
>No man is an island; land should be seen as something rented from the people
right but if this is my only piece of land where I live on, I am "the people". I need to live somewhere, I have no choice. It's like asking a prisoner to pay weekly tax for the cell he lives on: He has no choice, he has to live in some cell.
Instead tax it intelligently so that I'm exempt for my first and only house on a moderately sized piece of land.
> right but if this is my only piece of land where I live on, I am "the people". I need to live somewhere, I have no choice. It's like asking a prisoner to pay weekly tax for the cell he lives on: He has no choice, he has to live in some cell. Instead tax it intelligently so that I'm exempt for my first and only house on a moderately sized piece of land.
We all need to live somewhere bruh, you're not special. If you pick a piece of land that no-one else wants, you'll be paying zero or very close to it. But if you want your "first and only house" in the middle of Manhattan, either you pay a fair tax to compensate the rest of us for the valuable land you're taking out of public circulation, or you let someone else have their go.
Can you calm down? I didn't say that I was special and I'm not your "bruh". The few super rich people who buy 100 million dollar properties in the middle of a city for personal use as their only home are not the problem. By all means, add a clause so the tax exemption only applies for land values below a threshold. In fact I already thought of this by writing "moderately sized". The solution is never to tax working people even more just because they want to have a home.
> By all means, add a clause so the tax exemption only applies for land values below a threshold. In fact I already thought of this by writing "moderately sized".
That implies a size-based exemption, not a value-based one. And that kind of thing is how you get loopholes that the super-rich exploit. Keeping the tax system simple is the only way to do it. Tax all land in proportion to its value, no exceptions.
> The solution is never to tax working people even more just because they want to have a home.
Part of the point of the idea is to (eventually) move away from taxes on working. It's not like having a home is being treated as a special case, and nor should it be. Again: if you're taking the land out of public use, you pay your fair share of tax, in proportion to the value of the land you're monopolising. Keeping the rules simple ultimately benefits the working poor far more than trying to create special case carve outs.
When I say rent seeking, I mean something like "gaining profit by owning capital rather than by performing labor". Under that definition, all value extracted from capital would be rent seeking[1]. Strictly speaking, I'm not necessarily opposed to extracting value by owning capital; in many cases someone bought that capital with the profits from their labor, and more broadly the world isn't black and white. However, I do see taxing profit from owning capital as more just than taxing profit from labor.
In that respect, I generally see property taxes as more just than income taxes. However, I am sure that there are exceptions and any tax code would need to be nuanced.
[1] Although owning capital may allow you to do some labor that you couldn't otherwise in which case the profit gained from that labor would not be rent.
That’s a perfectly fine view for a person to have, but is definitely not what the economic concept of rent seeking is. What you’re talking about is essentially what Marx called “seizing the means of production”, and is the fundamental basis of Marxist economics. So if you wanted to be more clear with what you’re trying to say, I’d suggest you adjust your vocabulary a bit.
> If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again.
You know that this is not true in most places?
If you put a hundred dollar bill under your pillow, it will be worth less and less as time goes by thanks to inflation. And if you use that hundred dollar bill to buy an asset that hopefully keeps its real value, you pay capital gains taxes on the nominal increase in value (even if there was no real increase in value).
>If you put a hundred dollar bill under your pillow, it will be worth less and less as time goes by thanks to inflation. And if you use that hundred dollar bill to buy an asset that hopefully keeps its real value, you pay capital gains taxes on the nominal increase in value (even if there was no real increase in value).
That's because capital gains taxes that don't account for inflation (which is most of them) are essentially a stealth wealth tax.
The shortcomings of modern monetary policy and the impact of inflation is a seperate topic. When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use). As a tax they’re generally not a problem unless you go full Weimar mode. But you’re right that they can also represent a tax, especially in jurisdictions that have a capital gains tax (which the jurisdiction where I am a tax resident doesn’t incidentally).
My adopted home also doesn't have a capital gains tax. I agree that if you want to have a capital gains tax, it should be inflation adjusted. (You can put in place an explicit wealth tax, if that's what you want.)
> When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use).
I find that those incentives are a bit silly. First, the central bank can print enough money to get any level of aggregate nominal spending they fell like. No need for inflation. George Selgin's book 'Less than Zero' even makes a convincing argument in favour of deflation. (He essentially argues for a fixed nominal GDP, and an economy that's growing in real terms would thus see the price of goods decline.)
Inflation is also not an incentive to put capital to good use. That's because money isn't real capital. If I have a factory or a piece of land that sits idle, that's a real cost to the economy. But if I have a hundred dollar bill that's siting idle under my pillow, nothing of value has been lost: hundred dollar bills are essentially free to print.
The central bank can put them in and out of circulation by buying and selling assets. So when I remove my bill from under my pillow to spend it, the central bank can react by selling assets. (They don't need to monitor my pillow. They can just go by statistical measures of spending or inflation.)
In fact, in order for me to have a hundred dollar bill under my pillow, it means I refrained from consuming some real goods earlier. So those real goods are available for investment by the wider economy while my pillow serving as a piggy bank.
> I’m only buying the right to rent it from the government in perpetuity.
You are paying maintenance in exchange for the right to exploit that land. Streets, power, water, sewage, fire, police, schools and libraries both cost money and increase the value of your land, so it makes sense to link the tax base to the value of the land since they should be strongly correlated.
I’m not saying it’s necessarily a bad way to run a city specifically, I’m just pointing out the different compromises that are made in regards to property rights with these different forms of taxation.
I would really only object to property taxes (as a concept) in situations where intensified high density infrastructure doesn’t exist (or isn’t required to exist).
If you use your land for something useful it will be providing rental income (or equivalent utility) to you year over year, which wouldn’t be taxed under Georgism.
>> Land Value Taxes just seek to be a more efficient (since they try to target rent seeking rather than profitable labor) and more just
So someone like Musk should pay basically no tax personally because he doesn't own any land?
I think the idea LVT comes from a period of time when land was a good proxy for wealth. These days, I think that's only true for the middle class, who gets crushed by LVT while the true wealthy laugh from their mansions on modest plots of land while spending their summers on billion dollar yachts.
Most of Musk’s money comes from astronomical stock valuations. Most of that stock is bought by hedge funds and the financial sector. That money mostly comes from mortgages and loans, which allow the financial sector to capture the land value that could otherwise belong to the people.
So basically land value (which nobody creates through their own labor- its created by a community and should be owned by the community) is vacuumed up by the financial sector, which they throw at tech.
For more on this process, look into Michael Hudson, who accurately forecasted the 08 financial crisis.
The government owns all the land and gives you a more-or-less yearly subscription to keep your land at a reasonable cost. If you are a landlord then you're just a middle-man who can profit.
Hmm. So in your view landlords are zamindars, there to extract value from the land and to give a little bit of it to their overlord?
I presume in your view, it would be best if governments cut the middle man and seized all land, but alas, they are too incompetent to extract any value from it. So like the EIC of old, they must rely on landlords.
That is an interesting view of private property. It certainly explains a lot about about modern rental problems.
Most leftists see landlords as people who unjustly make money without doing any work by taking money from their renters who do work. It's fairly common for leftists to describe them as parasites.
What they think should be done about that depends on exactly what type of leftist they are. However, most do not think that the land should be seized by the government. Many are fine with private ownership but feel that systems (such as the land value tax in this discussion) should be put into place to help ensure that the land's value is shared by society. On the other hand, anarchists might feel that land should be owned collectively by those living on it and managed by them democratically.
I think that most leftists would agree with you; realizing that landlords didn't actually do any labor to earn the money that they receive opens ones eyes to a lot of the problems in our current system of housing.
If you want to have a government at all, you must finance it somehow. Usage fees can go a long way, but you most likely also need some general taxation. Taxing land value is the least bad thing to tax, because the supply of land is fixed.
Yes, you can see this alternatively as the government renting out the land. And that's a fine view. Landlords pass on the land, but also put buildings on top. What you pay monthly for your apartment is partially for the land (which would go to the government, indirectly) and partially for the building and amenities and maintenance.
In practice does anyone buy that? I'm not a "government bad" person, I think it's necessary, if messy. I also think the problem with our government isn't that it has access to a lack of money.
Imagine this system was in place in 2000, you watch as trillions are flushed into a pair of 20 year wars. You watch as lax oversight leads to the crash in 2008. And you ask yourself if the piddling sums extracted from your property were well spent, and conclude that it probably wasn't.
If these taxes went into a single payer healthcare system, I'd be a lot more interested, but as just another step in gifting insurance companies another trillion... eh.
For what it's worth, I see it somewhat differently:
People now live by, for and at the discretion of the corporations. The government is just a tool that the rich use to exert their will upon the people.
If the role of the individual is to serve the needs of the government, it is easy to corporations to control the whims and goals of the government. The individual doesnt have to understand whys and wants of the government, just serve it.
However, if the roles are reversed and the purpose of the government is to serve the individual, than each person can judge if their personal interests are being served.
That is to say, I think the idea of people as a servant of the government is instrumental in corporate capture of the institution. The idea of serving a greater good, without voluntary consent, is just an exploit opportunity for capture by corporations or others.
When people view the government as their servant, they just say no, I dont want that policy.
I do not see Brazil under the Wikipedia section for implementations of land value tax. I tried to look myself, but did not see a definitive answer. It sounds like there is a property tax, but a property tax is different from a land value tax.
Also, 2% is in a similar range to many existing implementations, and has been shown to be too low to prevent speculation.
Your comment about "it's gone" shows that you do not understand the intent here. I would recommend you watch the following: https://m.youtube.com/watch?v=h59se33UCK4
In short, the land is not gone. The profits you made if you rented it out are not gone. However, any hope of increased value through speculation will be diminished based on how long you held the high value asset prior to sale... which is the exact intent of this policy change.
In the US, people have the right to property (unlike say, places like Canada https://www.albertalandinstitute.ca/resources/property-right...). This is a freedom enshrined in the US Constitution and through the fifth amendment. If the Detroit government pushes too hard and rapidly deprives certain parties of their land, they can expect a constitutional challenge.
I think that you may be missing the point of the argument that you are replying to. As I understand it, what they are getting at is that no one created the land, it was already here. Therefore, it's not valid to say that the person who originally claimed the land had a right to it in the same sense that, for example, a farmer has a right to what they grow because of the labor they put into growing it.
In effect, the argument is that since land was not created by anyone then no one has any more right to it than anyone else. So the land's value should be shared among all of society; which is precisely what a Land Value Tax seeks to do.
Well, in the US at least, the one who first claimed the land is the one who built a cabin there, often broke the land to the plow, and then held it against anyone who tried to take it from them. It wasn't just "claiming" the land. They had to work to improve it.
So LVT separates the value created by your labor (building the cabin, plowing, etc) from the value you did not create. I think its more just than taxing, i.e. cabins or crops.
This isn't quite as trivial as "but people have a right to property", because the government has rights too. The US has long had property taxes, and they are entirely legal.
I advise reading the 14th amendment as well: "nor shall any State deprive any person of life, liberty, or property, without due process of law"
For an extra twist: There's the fact that land-as-property is not enshrined in the constitution - that's the land ordinance of 1785. Which would make a constitutional challenge interesting.
And of course, none of all that obviates the original point: Nobody worked to create land, so from a moral standpoint, "land ownership" is a very interesting concept.
That device you used to post that comment, what, did you create it? Those clothes you are wearing, did you create them? The car you drive, did you create it?
I’m not saying anything pro/con the LVT. But measuring ownership by whether you created it or not is a pretty terrible measure. You wouldn’t own _anything_ worth any value in the modern world.
The difference is that someone created the products that I own and I payed them for it. However, no one (at least no one human depending on your religious beliefs) created the land.
Someone created the improvements on it, though. Which is most of what you're paying for when you buy or rent a place to live.
This isn't going to change much about landlords. If anything, it will increase the amount of housing rented through landlords, because the land value tax will make it uneconomical for more people to own their own homes. In a high value area, the only people who would be able to do so are the very rich.
A land value tax seeks to only tax the value of the land itself, not the improvements. Of course that's not always easy to assess, but neither are property values for normal property taxes.
Even setting that aside, if the land value taxes on the land that someone owns dramatically increase then that means the value of their property has dramatically increased, and they can sell the land for a dramatic profit. Certainly it sucks that someone might have to sell; however, don't think that someone who becomes rich due to their home value appreciating is really much of a victim in the grand scheme of things.
Exactly. And that's why taxing the land itself—and therefore access to all those improvements and amenities—is a good way to allocate it.
If somebody is sitting on a prime seat in the hot tub, and they don't really care very much about it, and there's a line of 20 people waiting to get in, we have a wasted resource. Revealing true preferences by having people put some skin in the game means that more people are happy, more people are productive, and society works better.
That is a great argument for never building a hot tub, or participating in a project to build one.
Why bother making a tub, a neighborhood, or a community if it can simply be taken from you.
Id rather burn mine to the ground than have it taken away just because someone else wants it more. They might not even want it more, but they just have more money.
I don't think you understand, it can't be taken from you, at least no more than now. Nearly every single person will pay less tax on their home under LVT than a property tax, too.
>Nearly every single person will pay less tax on their home under LVT than a property tax, too.
How could that possibly be true. The lvt would have to be high enough to replace revenue from all current income taxes, sales taxes, corporate taxes, and current property taxes.
It would also be based on land used, so Warren be buffet and someone working at Walmart would have the same tax bill if they both own houses in the same neighborhood.
It is incredibly regressive.
Elon Musk can live out of his small undesirable home in boca chia, so his total taxes would be close to zero
> It would also be based on land used, so Warren be buffet and someone working at Walmart would have the same tax bill if they both own houses in the same neighborhood.
If they both live in the same size house in the same neighbourhood, sure. If a billionaire really wants to live in a closet to spite the taxman, that's fine, although I don't know why they'd bother having the billion. They aren't imposing on the community, they apparently made their billion without using any space (because it's not just homes, the whole point is that it applies to every kind of land use, good for them.
> It is incredibly regressive.
It's the opposite. Land ownership is the biggest thing separating the upper and lower classes.
> Elon Musk can live out of his small undesirable home in boca chia, so his total taxes would be close to zero
He'd still have to pay LVT on his giant factory and fashionable city-centre showrooms, so skimping on his home is not going to make a lot of difference.
The point is that money can buy you a lot more than land. A Picasso takes no land. Elons giga factory would pay no land tax because the land vale is zero. It is in the middle of the desert surrounded by employ land that nobody wants.
Buying stuff that people make enriches those people and spreads the wealth around. It's good to encourage doing that rather than hoarding land. (While you can hoard individual old paintings, if you drive up the price of paintings then new and innovative painters - like Picasso - emerge, and produce new paintings to meet that demand).
> Elons giga factory would pay no land tax because the land vale is zero. It is in the middle of the desert surrounded by employ land that nobody wants.
Which is exactly where we want giant factories being built.
Lvt is of course a good way for making sure land gets used for its most financially lucrative purpose. I never denied that.
My point is that it's a terrible way to fund a government. The vast majority of economic value created does not require land and would go un taxed. The vast majority of value comes not from land or the raw materials derived from land, but from Human labor used to convert the raw material into Goods, or pure services.
It's also much more regressive than the current system. People like Elon Musk make a million times more than your average person, but they don't use a million times more land or eat a million times more hamburgers. Most of what the rich purchase is labor and human compute.
> The vast majority of economic value created does not require land and would go un taxed. The vast majority of value comes not from land or the raw materials derived from land, but from Human labor used to convert the raw material into Goods, or pure services.
The value gets created by human labour but it ends up captured by landowners. I believe there's an economic theorem to that effect, but it's also pretty clear in Silicon Valley: some new innovation increases productivity, workers and investors get paid more, rents go up and all the gains end up in the pockets of San Francisco landlords.
> It's also much more regressive than the current system. People like Elon Musk make a million times more than your average person, but they don't use a million times more land or eat a million times more hamburgers. Most of what the rich purchase is labor and human compute.
In theory I take the point. Do those people actually pay a million times more tax under the current system though?
> This isn't going to change much about landlords. If anything, it will increase the amount of housing rented through landlords, because the land value tax will make it uneconomical for more people to own their own homes. In a high value area, the only people who would be able to do so are the very rich.
No. A land value tax doesn't make any difference at all to the ongoing cost of owning a given piece of land.
That's because land value taxes decrease the price of a piece of land (via market mechanisms), so that the sum of tax plus ongoing capital cost is the as before.
A simplified example: without LVT you might be able to buy a piece of land with a mortgage that costs $1000 per month. Afterwards, you can buy the same piece of land with a smaller mortgage of $200 dollar a month, but you are paying $800 in LVT.
If you own the land outright, you still have opportunity costs of capital. But it's easier to explain with a mortgage. Also, if you already own land then the introduction of an LVT will definitely put a one-off hit on your finances. (Unless the government compensates you.) But there's no long running impact.
The problem is exactly that the improvements are not most of what you're paying for, at least in many locales where this sort of policy would make a difference.
In high value land areas, the only people who own their own homes are those who are either very rich, or who were very lucky in the past and who are now very rich due to having bought a home in the past.
I appreciate the sentiment, but that's not really true.
If you can afford the rent for your home, you can afford to own it via a mortgage. (Assuming functioning capital markets and assuming low enough transaction costs.)
Something like this has to be true, because that's how landlords pay for their cost of capital and maintenance etc. If rent couldn't cover that, but for some reason home prices still stayed high, and sane land lord would sell the property and put the proceeds in some investment that does cover its cost of capital.
> If you can afford the rent for your home, you can afford to own it via a mortgage.
This does not follow. It assumes the landlord has the same cost basis and cashflow requirements as the person with the mortgage, which is almost never the case. Your mortgage interest payments alone can be higher than a rent that allows a landlord to make a profit. This is not uncommon. Rents in Seattle, for example, are far lower than the equivalent mortgage if you bought the place.
Because most people don’t live their life by min-maxing their finances. They have other non-financial objectives that take priority over being efficient with money. You might as well ask why people buy nice cars, eat out at restaurants, etc. If people optimized for financial efficiency then the world would look very different, and the median household in the US has a lot of cash leftover to burn even after accounting for ordinary lifestyle expenses (~$12,000 per year, per the US BLS). Seattle, of course, is much wealthier and higher income than the US median so there is more money to burn.
That said, most people struggle with financial and investment math generally, even when they sincerely attempt to make prudent financial decisions. I can’t really blame people for not knowing how to build and reason about financial models, it isn’t a skill you ordinarily pick up in day-to-day life.
And in fact your mortgage would almost certainly be less than the rent for the same property, since the landlord will be using commercial financing which costs more, and will be paying taxes as a non-resident owner, which are higher. The landlord will also need to buy commercial property and liability insurance, which costs more.
Your residential mortgage will be at a lower rate and you will have property tax exemptions if the property is your primary residence and your insurance will be cheaper.
Why do you assume the landlord has a significant mortgage or any mortgage at all? Most landlords have owned the properties for decades. I know quite a few that bought the properties with cash and never had a mortgage.
If you buy a place for $1,000,000 at 7%, you can’t compete with someone that owes $100,000 at 2.5% on the same place, which is often the reality.
Whether your landlord owns outright or has a mortgage doesn't make much of a difference for this analysis. That's because even if you own outright, you have opportunity costs of capital.
> If you buy a place for $1,000,000 at 7%, you can’t compete with someone that owes $100,000 at 2.5% on the same place, which is often the reality.
Where does that 2.5% come from?
If mortgages cost more than the rental yield, then your landlord should sell the place and use the proceeds to get into the mortgage business. (If not, your landlord is doing the landlording as a charity, because they are leaving money on the table.)
>If anything, it will increase the amount of housing rented through landlords, because the land value tax will make it uneconomical for more people to own their own homes.
You do realize condominiums exist, right? You don't need to own an entire parcel of land to own your own home.
>> You wouldn’t own _anything_ worth any value in the modern world.
That seems to be the goal. If everyone rents everything that would increase dollars flowing in the economy right? We are all here to work for the man, and rent the air when we inhale.
The difference is that they are making more phones, more cars, more clothes, etc. They are not finite.
As the saying goes, they aren't making more land. With a constrained resource that nobody created, the least efficient way to allocate it is to just let whoever got there first have it. A far better way would be to have competitive bidding so whoever thinks they can do a better job gets a shot at it.
As someone who is kept off of that land by somebody else's ownership of it, I am personally the reasonable recipient of a share of that 2%. As is everyone else, including the owner of the land.
That share could come as government services, or it could come as a paycheck. But in either case that 2% belongs to all of us equally.
People are perfectly capable of protecting their own land when it's not illegal for them to do so, as demonstrated in the early history of the US. You're much less safe in somewhere like Chicago with "well funded" public safety than you were anywhere in the US in the 1800s.
It is only the owner who gets to decide the best use, whatever they want! But the land value is determined by what others are willing to pay to no longer be excluded from the area, or to be given a spot in the area.
Roughly, 2% each year and in 50 years and it's gone.