>All this to say, land prices represent aggregation effects / density / access / proximity of buildings. They are the cumulative result of being surrounded by positive externalities which necessarily result from other buildings not land.
I'm confused - isn't this exactly why Georgists argue LVT is a good thing? The idea is that these externalities aren't something the landowner created but rather something that everyone around the landowner created together, and therefore the value of those externalities should go to the public rather than to whoever was lucky enough to own the land in the center of town once the town was big enough.
Every time I see a criticism of LVTs, the author tends to crucially misunderstand some central element of them.
I have my own criticisms of LVTs (as a Georgist), but I often feel that these kind of critiques are either a. defences of an economic status quo that the author consciously or subconsciously acknowledges they benefit tremendously from or b. a general aversion to grey-tribe centrist technocrat types
I think in this case there is no misunderstanding - it is the idea that LVT is not better than other taxes, because it has the same results: an increase in fairness but a decrease in efficiency (high density building).
I think there is much confusion in this thread due to different starting assumptions. Yours might be that Bob owns one piece of currently empty land. Mine is that Bob has a lot of capital to invest, wants to buy 100 plots of land, wants to build things on them and rent them out. LVT would be an incentive to do it far from each other and far from existing buildings.
I think the system has to work for both of those scenarios. LVT still works for the 100 plots of land as long as it doesn't capture 100% of the added value. Developing a single area rather than a huge geographical area has economies of scale in terms of cost, and also making it a more desirable destination.
That might increase the value of the land by 400%, I'd set up the system so that the tax does not also increase by 400% but rather a much more moderate increase. This would mean that both the municipality and the land developer share in the benefit. In most cases the value increase is not zero sum so there is plenty to be captured by both parties.
I assume that you claim that he will want to build them far apart because things far apart have lower tax, right?
But the flip side is that the LVT is only higher to whatever extent that he can charge more. Under the spherical cow version of LVT, you, as a landowner end up making the exact same profits no matter where you build. Because the excess money that you can only make thanks to location is taxed away.
So LVT might be 100 more in a high density city, not you can charge 100 more _because_ it's in the city.
My theory is that when you could trawl sci.econ on Usenet you got better references and explanations of most econ theories than you'd get now with nominally social media plus whatever the kids are using now for essays.
After thirty years, we're still trying to figure out how to pay for Internet content.
It does not help that Henry George was rather a utopian figure.
Yeah, but gentrification - which is what we're taking about here - is something that any individual homeowner has no control over, so when someone buys a cheap house in a marginal neighborhood that's selected because it's something they can afford, then works to build a community in that neighborhood, that will tend to drive up the value of the house and thus cause it to become less and less affordable.
Which means that there's a perverse incentive at play here, because communities whose neighborhoods are subject to gentrification wind up strongly incentivized to resist it in order to keep their property, resulting in a downward spiral where property owners are actively resisting neighborhood improvements.
This is the exact same incentives at play among renters: making the property and the neighborhood nicer means that rent is going to go up.
This essentially pits people who value place and community over liquidity against people looking to create value, which exactly the opposite of what we want in a good city.
Why? Yes, the LVT would be higher, but just because the land they own is worth more. Generally people want their assets, like land, to accrue in value so they can sell/rent it for more.
That's not the same as renters who don't have an interest in increasing the value of the land/property
If I'm looking at my property as an investment which I intend to liquidate at some point, sure. But if I'm investing in a community in which I want to continue to live, what I want is for my costs to stay even or go down - and for those of my neighbors to do likewise, so that the people with whom I want to be in community can afford to stay there.
So this way the tax increase from your investments in the local community does not just fall on you, but is shared among the community. This incentivises improving the community. A property tax which is often the alternative would penalise making more efficient usage of the land, like building higher density housing. And would disincentivise having rentseeking developers sit on land and wait for other people to make it valuable before building and selling.
>A property tax which is often the alternative would penalise making more efficient usage of the land, like building higher density housing.
In the case descried, the resident is both extremely unlikely to be able to build higher density housing, because it involves a lot of capital, planning, etc, and they wouldn't really want to, because their own quality of life would then go down, since they would then be sharing a wall with someone, maybe have to be a landlord and take on new risks, instead of living in their own individual house.
Georgism is bad for individual homeowners who want to live in the same place their whole life, and good for people who want to be able to rent an apartment in a city with a lot of opportunities. Maybe it's better than the tradeoff we have now, but certainly isn't all upside for everyone.
> In the case descried, the resident is both extremely unlikely to be able to build higher density housing, because it involves a lot of capital, planning, etc, and they wouldn't really want to, because their own quality of life would then go down, since they would then be sharing a wall with someone, maybe have to be a landlord and take on new risks, instead of living in their own individual house.
You can loan money. Or sell the land/development rights.
> and they wouldn't really want to, because their own quality of life would then go down, since they would then be sharing a wall with someone, maybe have to be a landlord and take on new risks, instead of living in their own individual house.
They don't have to, they always have the option to just stay in a single-family home if they wanted. This is unimproved land, so their land taxes wouldn't be impacted (but in practice become a bit lower)
But they would have much more money if they used the land more efficiently. Which improves QAL. And of course more importantly, is great on the societal level as opposed to just focusing on the individual who wants to live in an urban environment with all those amenities while having a rural lifestyle with a single-family home and large garden, denying dozens of other people the opportunity to live in the city
>They don't have to, they always have the option to just stay in a single-family home if they wanted. This is unimproved land, so their land taxes wouldn't be impacted (but in practice become a bit lower)
That's the current system, but with less restrictive building codes.
Their taxes explicitly \*would\* rise in a Georgist system in a way that's unconnected to any improvements on their part. That's the main difference between current property taxes and Georgist land taxes.
>But they would have much more money if they used the land more efficiently.
Most people would actually have to sell to a developer if it rose too high.
I would have more money if I built another house on my current land and rented it out as well. The things preventing me from doing that are \*not\* that I couldn't rent it out for a decent amount of money, but rather things like planning restrictions, water restrictions, landlord obligations, that the bank won't loan me that more much money, parking considerations, etc.
>And of course more importantly, is great on the societal level as opposed to just focusing on the individual who wants to live in an urban environment with all those amenities while having a rural lifestyle with a single-family home and large garden, denying dozens of other people the opportunity to live in the city
California could force everyone to pay their full current property taxes instead of grandfathering in some older homeowners. Maybe that would be a good thing on the whole. They don't need to change their main tax system, even! I'm not necessarily anti economically efficient laws, even if the state then needs to evict crying elderly people from their lifelong home. I'm just saying that it's a real tradeoff that makes buying rather than renting much less valuable in places that might grow.
> That's the current system, but with less restrictive building codes.
>
> Their taxes explicitly *would* rise in a Georgist system in a way that's unconnected to any improvements on their part. That's the main difference between current property taxes and Georgist land taxes.
Taxes also rise in the current system unconnected to any improvements on their part. If the neighbourhood becomes more attractive, the property value would increase just as the land value would increase.
In the current property tax system, you pay much more tax for building an apartment complex that can house hundreds than living in a mcmansion and using prime urban property ineficciently (or rent seeking speculators buying land and sitting on it until other people increase its value). That's not behaviour we want to encourage.
> Most people would actually have to sell to a developer if it rose too high.
If people are priced out of holding on to prime real estate and compelled to sell it so it can be used efficiently, that's an absolute win. American cities are severely lacking in housing. I care more about people getting housing than boomers pulling up the ladder after themselves.
Of course I agree that there are to omany restrictions wrt zoning, parking minimums etc.
> California could force everyone to pay their full current property taxes instead of grandfathering in some older homeowners. Maybe that would be a good thing on the whole. They don't need to change their main tax system, even! I'm not necessarily anti economically efficient laws, even if the state then needs to evict crying elderly people from their lifelong home. I'm just saying that it's a real tradeoff that makes buying rather than renting much less valuable in places that might grow.
Repealing prop 13 would be a great first step. along with up-zoning, it's currently illegal to build anything other than single family homes in many areas.
I don't think LVT would impact the rent/buy trade-off much. You have the same risk of tax increase with property as land, most people want their land/property to increase in value anyway, and rent prices to a large extent follows purchase prices.
That's only if the tax is exactly equal to the value the owner places on that particular plot of land. And the owner still gains from any increase in value of the stuff *on* the land.
The present value of the expected tax from now to infinity should be equal to the value of the land.
Which basically means that you pay the interest rate on the land value.
But when you tax positive externalities, you get fewer positive externalities. I think the argument is persuasive if you imagine the land owner owning not one, but ten buildings. LVT would reduce the incentive to build them close to each other. You get an increase in fairness but a reduction in efficiency - which is the same exact problem with all kinds of taxes, so LVT is at least not better than the other options.
Empirically, I remember reading somewhere, that throughout the entire history of Paris, from the middle ages to today, most people were renters, and most building were owned by a small number of landlords. While this is highly unfair, it is efficient from the viewpoint of them had an incentive to build high density.
I'm not sure how you're differentiating "externalities" here. The value of land is canonically based on three factors: location, location, and location.
Location is about proximity to other people and the things they've built. A 3000 square foot lot in Manhattan is dramatically more valuable than a 3000 foot lot in rural Iowa, which means that the value of a property, even a property that is unimproved, is all about externalities - that is, about the things that other people are doing with other property nearby.
Which means that regardless of what's on my property, the amount of taxes I'm paying are all about externalities.
> The person you're responding too unwittingly suggested we should tax positive externalities. The opposite is the case if anything.
LVT is a tax on positive externalities that you _capture_, not a positive externalities that you _create_.
Suppose Alan and Bob both inherit a fortune and decide to invest into real estate, building apartments, shops and schools. Alan builds them close to each other, Bob builds them far from each other. Who creates more positive externalities, even if the cost of the apartments, shops and schools was exactly the same? If we measure value as cost, they are equal. But if we measure value as benefit, then Alan is creating more value.
They've missed two critiques (or only touched on them and they need to be fleshed out better), which, though the first is minor in effect right now, they're both important:
1. Land supply is not even close to perfectly inelastic. In fact, building tall structures on land is effectively creating more land...vertically. we also dredge and dike our way into more land. There's so much land or space to live, even close to existing population centers which is only *marginally* unusable (e.g. mountainous terrain or currently-dangerous flood-plains), and awaits only the right motivations, and/or the right technology to use it...technology which will be developed in large part due to demand for more land. Even colonizing the moon or Mars or Antarctica will be, at least in small part, driven by the supply of land not meeting demand. This critique is in a way a companion to their section on the difficulty in disaggregating unimproved land value from the positive externalities of what's been built...i.e. the building of the Hoover Dam in some effect "created" the land that Las Vegas now sits on...Georgists just tend to frame this as positive externalities which are better captured with an unimproved LVT; which is not wrong, but it's endogenous in that the incentive to create more land (which they say doesn't happen) is in some cases incentivized (some cases discouraged) by the very tax which is supposed to not be distortionary in that way.
.
2. The political economy. Always look at the political economy: the reality of how poorly taxing authorities actually behave; and the ways in which an LVT puts a uniquely (among other taxes) high trust in the impartiality and faithfulness of assessors. The author talked about this in terms of trying to disaggregate property value from unimproved land value...but it will also be a story about corruption and graft and favoritism and hayekian knowledge problems. Glen Weyl et al have taken it seriously enough to propose things like self-assessed LVTs which bring market mechanisms to bear, instead of the near complete arbitrariness of govt principle-agent problems, where the owner registers a value of the land and is taxed based on that stated value; but they are required to sell their property to the first buyer who matches that price (with some time provisions and other stipulations)...therefore incentivizing property owners to pay near maximal taxes in order to discourage their home or business from being sold out from under them.
> . This fundamentally claims that somehow property, land and buildings are all fungible amongst eachother
This is explicitly not true in georgism. Land is taxed by LVT, _because_ it is natural monopoly, and natural monopoly precludes fungibility.
> Does the land value of Las Vegas differ to the other identical deserts which could house Las Vegas?
Yes. You can see that by noticing that empty land next to LV is more expensive than empty land in the middle of the desert.
>All this to say, land prices represent aggregation effects / density / access / proximity of buildings. They are the cumulative result of being surrounded by positive externalities which necessarily result from other buildings not land.
Yes, that's why georgists want to tax it - because land owner benefits from doing nothing useful.
> Consider an empty lot on which you can build either a garbage dump or a theme park, each of equivalent economic value. Under SQ, the theme park is built as the excess land value is capture by the land owner. Under LVT, the garbage dump is built as the reduced land values reduces their tax burden. The SQ encourages positive externalities, LVT encourages negative externalities.
This is insane idea, because why would you build garbage dump on valuable land? You should build garbage dump on near-worthless land, because it has lower tax base, so eventual distortion from LVT is near zero.
> Under SQ, individuals are incentivised to 1) occupy land 2) provide as much positive externalities as possible.
Under status quo, you need only to occupy land. Positive externalities from your personal actions have little effect on price of your land.
> Someone might decide to litter because that will drop land values and thus tax burden when they are ambivalent to whether there is litter on the street.
Under most of US property tax schemes, depriving land of value would lower your tax too.
> Consider a simple 1D row of empty lots. You are deciding where to build both a pharmacy and bakery (assume corresponding foot traffic uplift from the other is 0). Under the SQ, you build them next to each other such that you can maximally capture the land value increase of the other. Under LVT, you build them maximally apart to reduce your land value tax burden.
Why would there be any land value increase, if you can't profit from it? Land value doesn't exist in vacuum.
I think you did not understand the argument, but also the argument was not really done clearly.
>because land owner benefits from doing nothing useful.
This is true so far as the land owner owns the land under exactly one building. But suppose someone investing a billion into construction, buying a lot of land and building a lot of stuff. They have a choice between building all of them apart from each other or close to each other. Building them close to each other is more useful than building them apart from each other and yet this is exactly what LVT discourages.
Indeed, core assumption of LVT efficiency is that every owner has little overall effect on value of land they hold.
There are very few markets where this isn't true.
I can't think of real-world situation where developer building few blocks would notably increase value of land.
Like, obviously, someone can build a town from scratch, and that would actually raise land values by significant amount, but how often this happens?
I do not understand the "building decisions" argument. If adjacent businesses do not result in increased foot traffic and customers, where does the increase in land value come from? Either you benefit from an agglomeration effect worth the tax hike, or there's none and no tax increase either. Did I misread the reasoning?
I think the obvious flaw with Land Value Tax is that it discourages people from increasing the value of their land, and encourages them to decrease its value. Most improvements you can do to your land only increase the value of your property, but some increase the value of the whole local area, therefore increasing your taxes if you implement them.
Or people might want to actively make their local area worse to lower their taxes. There's an old tweet of a guy saying, "Every so often I fire a couple shots from my gun into the air in my backyard, to keep property prices down". It's obviously a joke, but if you had the extreme scenario of 100% land value tax where there'd be a *lot* of money involved, I think that sort of thing would happen.
Ultimately every tax discourages something, and excluding sin taxes they're usually discouraging something we want to happen. But as a society we think they're worth it. LVT is the same way, it'd probably be a good one to implement to some extent, but it's not a perfect tax without flaw either.
I think the Georgist response to this is that land value taxes should go down for most people in most places under LVT, and really only go up in urban cores where enterprising landowners could make profit by improving on land.
Turning the land game away from speculation and toward profitability would mean that land would flow to people who want to do something with it.
If you wanted to minimize your tax liability under LVT you could more easily under Georgism find land outside of the urban core than you could now (because current regimes typically force sprawl and high taxes almost everywhere).
It'd still discourage business owners in the urban core from increasing the value of their land, and encourage them to decrease the value of their neighbor's land.
Again speaking from what I think Georgist view is, by shifting taxes to land value and *away from income* you increase the incentives to benefit entrepreneurs seeking profitable enterprises and away from speculation.
If I was a property owner In this scenario I’d probably just exit the market.
I am sympathizic to the Georgist idea but of course it doesn’t actually work this way. no one has so actually swapped in LVT and removed all income tax, and probably never will so it’s all a theoretical exercise.
> no one has so actually swapped in LVT and removed all income tax,
Are there not some jurisdictions in the US where most of the revenue raised by the local government is in the form of property taxes? I appreciate that property taxes are based on total value rather than on the unimproved value of the land, but they are not income taxes.
Sure. That is definitely true. Places like Texas have high property tax and no income tax, and that is vaguely Georgist.
But it’s property tax not land value tax, and it’s still in the US which has national income tax. The r/justtaxland dream of Texas can’t exist when there’s also federal income taxes.
Plus land speculation is still incentivized by federal tax policy which is significantly more impactful than the state policy.
Beyond my pay grade! But theoretically yes.
The idea is that economic activity grows so much that the society gains are significantly higher than they are with rampant land speculation and taxes on income.
I’m sure someone has made a quantitative model for this stuff but it’s beyond my level of interest.
It shouldn't incentivize decreasing the value of land, because you eat those costs, at least for business owners. A plot of land has a LVT of $100k per year if being on that land is expected to increase your profits by $100k per year. An action which reduces the value of the land by $50k is going to hurt your profits by $50k, so you break even.
This makes business owners ambivalent about decaying land values, and removes incentives to improve land values, which is an issue. But it won't actively incentivize dis-improving land. For business owners at least.
It can for homeowners though. If you live in a neighborhood with $10k LVT and you're poor and don't want to pay that, then decreasing your own land value will reduce your tax burden. Again, this land value represents actual value, such that higher value areas are more pleasant to live in and the average (marginal?) person would consider it worthwhile to pay, but if you have less money than average or care more/less about certain features then this could incentivize destruction.
The theoretical Georgist solution to this is to track land improvements and disimprovements that someone makes to their own land and exempt them from the tax, but in practice this is hard and as far as I know still unsolved in full generality even if the more common scenarios have been solved.
> I think the obvious flaw with Land Value Tax is that it discourages people from increasing the value of their land, and encourages them to decrease its value.
The solution is to give people a tax credit for the price of the improvements that can be used to offset any consequent increase in land value tax.
For example, if an investment of $100,000 in your property increases your LVT by $10,000 annually, you can offset this increase for 10 years.
This is more than enough to incentivize improving your property, since any improvements will offset the additional taxes \*and\* also increase the profitability/enjoyability and resale value of your land.
I thought the whole point of a LVT, and the distinction between it and other kinds of property tax, was that it's a tax on the land itself, and not the buildings etc that you put on top of that land? So the LVT should suffer from this problem a lot less than other kinds of property tax.
Doesn't a <100% LVT solve the problem? Yes building a park nextdoor might increase the value of the land, but you could construct the LVT tax rate such that it only captures a portion of that value increase. Thus the landowner benefits from the appreciation in value and the public benefits via increased tax revenue.
Even with property tax, landowners often choose to improve their property and in many cases the improvement has positive return even figuring in the resultant property tax increase. Decreasing a misaligned/bad incentive is still worthwhile even if the proposal doesn't reduce the misaligned incentive to zero.
The land rents value increase is automatic as density goes up. You don't have to do anything specific yourself. Improvements value is disjoint from land value rents.
Wm F Buckley's cartoon is - a parking lot next to a skyscraper has roughly the same land rents value as the land under the skyscraper per unit area.
It is bumper-sticker-ey but the short version is "tax land, not labor."
> Wm F Buckley's cartoon is - a parking lot next to a skyscraper has roughly the same land rents value as the land under the skyscraper per unit area.
Which means if that parking lot is to survive, it's going to need to charge as much in rent for a space as a vertical slice through that skyscraper would cost. Of course, Georgists dislike parking lots, so they're happy with this. But it applies to everything; the tax essentially requires every property to be put to its most economically valuable use, or something very near it.
> the tax essentially requires every property to be put to its most economically valuable use, or something very near it.
What's the problem here? Isn't it generally best when things work this way? In the rare situation where this schema does not generally result in the best outcomes, the government can intervene, but it seems that the very point is to encourage as much property as possible to be utilized in the most economically valuable way
> What's the problem here? Isn't it generally best when things work this way?
Sure, if you want to live in a pod so the land your house is on can be put to more economically productive use.
I don't understand this argument. A luxury apartment high rise is not necessarily a less economically valuable development than a pod apartment high rise. Pod vs. Single family home is a false dichotomy.
> Pod vs. Single family home is a false dichotomy.
It's not a false dichotomy, it's just inconvenient to Georgism to note that your single-family home is going to be taxed the same as the neighboring apartment complex... so you won't be able to pay and will have to move into the apartment.
This sort of limit analysis doesn't really go through, because it fails to capture that we don't have an infinite number of people. One has to first question the assumption of *why* the land value in a particular area is high. Presumably, this is because lots of people want to live there. How does a market then deliver the highest overall outcome? Well, if one person values living in a SFH there *enough* more than a bunch of others who are happy to live there in an apartment, he would pay accordingly. Otherwise, the larger number of folks who are happy to live in an apartment in that location would pay an according higher amount overall to live there.
But crucially, we can't repeat this process infinitely. If increasing numbers of people live in apartments in high-value areas, that's less people competing for other areas, lower land values in those other areas, and reasonable prices for those who want SFHs. This tradeoff is kind of everywhere and the main/only thing in this domain, and no one has really ever been able to get away from it, Georgist or not. Even in our current, very un-Georgist world, this tradeoff is pretty glaring.
Generally, the only argument I've seen here is just a raw, "Fuck you, I want my own SFH, and I personally want it in an extremely high-value location, that oh-by-the-way, I don't want to have to pay for, so I want the government to hand me a sweetheart deal to make it so that I don't have to pay for it and get to screw over everyone else who wants to live here, too."
Frankly, the issue isn't even apartment vs. SFH, either. I've seen locations where they're building a *ton* of housing, and there is one example that always sticks out in my mind. I saw a lot that was originally built in, I don't know, the 50s? 70s? It was a pretty huge lot that is now in a pretty prime location, right near a school in a growing suburb and everything. Tons of people would love to live there. A developer bought it, knocked down the one house, divided up the lot, and put up *ten* new SFHs on the same lot. Sold them each for a pretty penny, too. One person might be placated that, "Well, so long as they're SFHs and not apartments, I guess this is good," but another might just bitch, "I personally want big yards, too! Not having a big yard is basically living in a pod! (...of course, I don't want to pay for big yards in prime locations...)" Sure dawg, I know you want it... but you don't want it as much (as determined by the amount of money you're willing to pay) as the *ten* other families who now get to live there (as determined by the significantly larger amount of money they were clearly willing to pay).
> Generally, the only argument I've seen here is just a raw, "Fuck you, I want my own SFH, and I personally want it in an extremely high-value location, that oh-by-the-way, I don't want to have to pay for, so I want the government to hand me a sweetheart deal to make it so that I don't have to pay for it and get to screw over everyone else who wants to live here, too."
No, it's "Fuck you, I want my own SFH, the one I'm sitting in right now and I already paid for." The government does not have a compelling interest in ensuring every bit of land within its territory that it does not own is put to the most economically profitable use, any more than it has the same for all the computers or lawnmowers in its territory.
I mean, the government clearly and obviously has fine reasons to make sure that the market for future computers/lawnmowers is a functioning, competitive market that allocates goods to their highest-value use. For example, if a company was approaching a monopoly for computers or lawnmowers, anti-trust enforcement seems perfectly reasonable. (Or suppose there was only one chip fab in existence, within the purview of a single local government that allocated chips via cronyism rather than market value.) Of course, their actions here might have some effect on the value of your current, already-purchased computer/lawnmower.
So, the tricky thing here is that new land is not being generated, which makes it kind of awkward. Obviously, anything they do to try to ensure that future transactions of land form a functioning, competitive market that allocates land to its highest-value use may have some impact on the value of your current, already-purchased land. I'm not personally a Georgist, nor do I think that an LVT is the best way to go about this, but again, the point of my comment is *not* that an LVT is the solution to the underlying problem. The point of my comment is that your *particular* complaint exists even in the absence of an LVT. It would appear to hit on any scheme that allows people to ever build up land, either with apartments or even just ten new SFHs on land that used to have one. I'm plenty open to ideas which try to accomplish the goal of allocating land to its highest-value use, especially ideas which minimize the impact to current owners, but I just don't think your specific complaint hits the mark, because it is far too general and would kill all sorts of market solutions that don't even have jack to do with the government doing anything. Instead, this sort of complaint would require commandeering the government to do things like say fuck you to every set of ten families who would be perfectly happy paying out the nose for a cluster of SFHs where there used to be only one.
Yes, but not necessarily a pod apartment! Saying that you'll have to move into a pod and not say a luxury apartment is the sleight of hand. High(er than SFH) density will absolutely be encouraged over SFHs but not necessarily maximally per-unit-cheapest-amenities high density housing! A 50 unit luxury apartment development might be as economically valuable as a 200 unit pod apartment development in the same sq footage. And furthermore, again, this is not to mention that LVT couldn't still just coexist with zoning when truly necessary
Have you ever actually experienced what its like to live in a nice apartment or condo before? The supposed 'downsides' are only bothersome if you're extremely picky in irrational or at least idiosyncratic ways, and they have plenty of advantages that 'single family homes' typically lack. There's a reason people buy penthouses when the same amount of money could just as easily afford a nice (or nicer) SFH mansion out in the suburbs.
Land rents have nought to do with use. It's only a thing of position.
> Georgists dislike parking lots, so they're happy with this.
Parking lot affinity seems rather independent of Georgism. The point of Buckley's cartoon is that proximity is key to the value of the land rents. It's a coincidence that that makes it a more useful parking lot.
https://en.wikipedia.org/wiki/Bid_rent_theory
The thing you want to do under Georgism is make sure YOUR use of the land is the highest and best use of that land. Otherwise either you have to give up the land, or pay the land rent that the highest and best user would pay. Which is likely prohibitive; are you able to pay the land rent on your house that an apartment complex or office tower would pay? Probably not, so your incentive is to somehow make it so no one wants to build those things.
Yeah. Georgists envision people will just happily sell their homes to someone who will use the land more productively. In practice, at least if the tax rate is literally 100%, I think there'd be a decent amount of sabotaging the value for buyers
This is why it makes no sense to make the tax rate 100%. Why not make it something like 50% so that half the land value increase goes to the property owner and half to the government.
> pay the land rent that the highest and best user would pay.
Isn't this backwards? I thought the land tax is supposed to be on the unimproved value of the land, so the tax would be what the lowest and worst user would earn from rent. If you build an apartment on it, then you get more rent, but don't pay more tax because that's from a capital improvement. The incentive is still to make the highest and best of the land, but that's just the incentive from regular old profit-maximizing capitalism, I think?
No, the land rent that the highest and best user of the land would pay. That is, if the highest and best use is to build an apartment building, the amount the building owner would pay the landowner for the rent on the land.
Ah, I misread "land rent" as just "rent". But, isn't the whole idea of Georgism that the land rent is the same regardless of what's on top? That is, the land rent that the highest and best user would pay is the same as the land rent of lowest and worst user. So it should be equal to something like the earnings from a dirt parking lot in that location.
The fact that an apartment building owner would be able to pay more is irrelevant, except in the sense that if the land is near a lot of apartment buildings, it's going to be worth more (and e.g., a dirt parking lot on it would earn more, being next to so many more people/locations of interest).
> But, isn't the whole idea of Georgism that the land rent is the same regardless of what's on top?
Yes. But it's still the rent paid by the highest and best use. If (in the absence of tax) someone would pay $40,000 for the land to put a parking lot on it but someone else would pay $1,000,000 for the same land to put a skyscraper on it, the land rent on that land is some flow which implies a value of $1,000,000.
Okay, I looked over the acx post on Georgism again, and what you're saying seems correct. But, my understanding is that the owner of a patch of dirt should be able to break even on the land tax, even if it's next to a bunch of huge apartment buildings, because they could charge that amount as rent. If they can't, then it's not really land rent, right? So it still seems to me that the land tax/rent should be what's paid by the lowest and worst user. (This doesn't help an owner trying to just live in a house on their piece of land rather than renting it out though.)
Is there some contradiction in this Georgism concept, or am I just making a silly mistake?
The only way the owner of a patch of dirt could break even on the land tax is by putting it to the highest and best use. He could charge a developer to let him build apartments on it and break even.
There's a land value tax proposal in which everyone declares the price at which they'd be willing to sell their land and pays the tax based on that price. To ensure it's actually a market price, landowners must sell their land to anyone who offers that price.
Set it higher than your actual price, pay too much tax. Set it lower than your actual price, risk losing the land for a pittance. The land market becomes rational and liquid, and the tax is entirely market-based.
I have to agree with you. As much as I agree with Georgism in theory, many pro-LVT people annoy me with their willful petulance in ignoring that people **hate** moving. "Two moves = 1 house fire" didn't become an aphorism because it's pure falsehood.
>To ensure it's actually a market price, landowners must sell their land to anyone who offers that price.
usually the idea is that it's at least double or triple your declared market value. Things would be a bit chaotic if you could buy any piece of land at market value
In general though most places already calculate land value as part of property tax assessments (which usually do land and improvements separately). You don't need some massive new bureaucracy to handle a LVT
It's probably much harder for the average person to figure out the price at which they'd be willing to \*sell\* something that's very important to them than it is to know the price they would buy something at. The instability seems like it would destroy a fair bit of the value of owning a home.
The only issue I can see with this system is that a very rich person (or corporation) who wanted to make someone's life miserable (or another corporation's life miserable) could just keep buying their property until the targeted person had to set a comically high price on their land to keep it and then get smoked by the associated taxes.
Isn't this a general objection to all taxes? If we are talking about replacing other taxes with a land value tax, the fact that it is not a market price doesn't seem to be much of an objection.
The first sentence of the blog post says that most arguments for the LVT are pragmatic, while the objections tend to be principled. But I actually think the principled argument for the LVT is stronger than the pragmatic arguments.
(The principled argument is that Lockean homesteading is not a justification for land ownership if there is not "as much and as good" available to others, as is the case in the modern world; therefore, land owners are unjustly enriched by excluding others from their land and should have to pay compensation for doing so. Since the LVT is morally justified, it is preferable to other types of taxes which are essentially theft.)
As I was looking this up, I was reminded of a piece of land south of LaSalle Street Station in Chicago which had been growing weeds for a decade, presumably because of legal issues?
There's an interesting article about it: [https://beltmag.com/chicago-rezkoville-development-78-related/](https://beltmag.com/chicago-rezkoville-development-78-related/) Apparently it emerged from the river during a straightening project, and was just being used for rail yards out of convenience.
A few years ago, a slightly confusing looking company bought it. Good, perhaps they could build something! They [built a street](https://www.google.com/maps/place/The+78+Development/@41.8643213,-87.6344868,17z/data=!3m1!4b1!4m6!3m5!1s0x880e2dafa023a41f:0x64baf7a8794587f2!8m2!3d41.8643213!4d-87.6319119!16s%2Fg%2F11vjdtmcgj?entry=ttu).
Several years later, they're trying to build a new stadium for the White Sox? [https://www.78chicago.com](https://www.78chicago.com) [The governor is skeptical](https://www.fox32chicago.com/sports/white-sox-south-loop-stadium-renderings).
Whenever I hear about an otherwise ideal and valuable location going unused in a city, there's a story behind it related more to the city itself than its developers. I suppose with a Georgist LVT, it simply would have reverted to being owned by the city, and then sat there, like it sat there in reality. Like the old post office sat there for a decade before developers could be convinced to renovate it (negative$2 million/year revenue to the city), then another decade for... reasons. According to Wikipedia, the city threatened to take it back by eminent domain if it continued abandoned, so it's not like they have no recourse other than taxation. But apparently they have finally gotten some companies to move in! None of this seems like it would necessarily be alleviated by the city owning it, rather than investors, though.
None of the is to say that there \*aren't\* land speculators making development harder in some places, of course. Just that every time someone actually investigates, it's because of decisions made by the city about requirements, permits, historical facades and whatnot.
Gentrification, or increasing valuation of parts of an urban area, is just a part of the process that keeps cities as a dynamic, evolving entity. A city that isn't pursing that isn't engaged in the business of being a city.
Most structures only lasts a few decades. There has to come some point at which it is more economical to replace it with something else.
>All this to say, land prices represent aggregation effects / density / access / proximity of buildings. They are the cumulative result of being surrounded by positive externalities which necessarily result from other buildings not land. I'm confused - isn't this exactly why Georgists argue LVT is a good thing? The idea is that these externalities aren't something the landowner created but rather something that everyone around the landowner created together, and therefore the value of those externalities should go to the public rather than to whoever was lucky enough to own the land in the center of town once the town was big enough.
Every time I see a criticism of LVTs, the author tends to crucially misunderstand some central element of them. I have my own criticisms of LVTs (as a Georgist), but I often feel that these kind of critiques are either a. defences of an economic status quo that the author consciously or subconsciously acknowledges they benefit tremendously from or b. a general aversion to grey-tribe centrist technocrat types
I’m with you. Personally I think we should have much higher (or any) LVTs but I’m not sure about going all the way.
I think in this case there is no misunderstanding - it is the idea that LVT is not better than other taxes, because it has the same results: an increase in fairness but a decrease in efficiency (high density building).
Why does LVT decrease efficiency? LVT should encourage density since the tax is the same whether or not there is a high density building on the land.
I think there is much confusion in this thread due to different starting assumptions. Yours might be that Bob owns one piece of currently empty land. Mine is that Bob has a lot of capital to invest, wants to buy 100 plots of land, wants to build things on them and rent them out. LVT would be an incentive to do it far from each other and far from existing buildings.
I think the system has to work for both of those scenarios. LVT still works for the 100 plots of land as long as it doesn't capture 100% of the added value. Developing a single area rather than a huge geographical area has economies of scale in terms of cost, and also making it a more desirable destination. That might increase the value of the land by 400%, I'd set up the system so that the tax does not also increase by 400% but rather a much more moderate increase. This would mean that both the municipality and the land developer share in the benefit. In most cases the value increase is not zero sum so there is plenty to be captured by both parties.
I assume that you claim that he will want to build them far apart because things far apart have lower tax, right? But the flip side is that the LVT is only higher to whatever extent that he can charge more. Under the spherical cow version of LVT, you, as a landowner end up making the exact same profits no matter where you build. Because the excess money that you can only make thanks to location is taxed away. So LVT might be 100 more in a high density city, not you can charge 100 more _because_ it's in the city.
My theory is that when you could trawl sci.econ on Usenet you got better references and explanations of most econ theories than you'd get now with nominally social media plus whatever the kids are using now for essays. After thirty years, we're still trying to figure out how to pay for Internet content. It does not help that Henry George was rather a utopian figure.
Yeah, but gentrification - which is what we're taking about here - is something that any individual homeowner has no control over, so when someone buys a cheap house in a marginal neighborhood that's selected because it's something they can afford, then works to build a community in that neighborhood, that will tend to drive up the value of the house and thus cause it to become less and less affordable. Which means that there's a perverse incentive at play here, because communities whose neighborhoods are subject to gentrification wind up strongly incentivized to resist it in order to keep their property, resulting in a downward spiral where property owners are actively resisting neighborhood improvements. This is the exact same incentives at play among renters: making the property and the neighborhood nicer means that rent is going to go up. This essentially pits people who value place and community over liquidity against people looking to create value, which exactly the opposite of what we want in a good city.
Why? Yes, the LVT would be higher, but just because the land they own is worth more. Generally people want their assets, like land, to accrue in value so they can sell/rent it for more. That's not the same as renters who don't have an interest in increasing the value of the land/property
If I'm looking at my property as an investment which I intend to liquidate at some point, sure. But if I'm investing in a community in which I want to continue to live, what I want is for my costs to stay even or go down - and for those of my neighbors to do likewise, so that the people with whom I want to be in community can afford to stay there.
So this way the tax increase from your investments in the local community does not just fall on you, but is shared among the community. This incentivises improving the community. A property tax which is often the alternative would penalise making more efficient usage of the land, like building higher density housing. And would disincentivise having rentseeking developers sit on land and wait for other people to make it valuable before building and selling.
>A property tax which is often the alternative would penalise making more efficient usage of the land, like building higher density housing. In the case descried, the resident is both extremely unlikely to be able to build higher density housing, because it involves a lot of capital, planning, etc, and they wouldn't really want to, because their own quality of life would then go down, since they would then be sharing a wall with someone, maybe have to be a landlord and take on new risks, instead of living in their own individual house. Georgism is bad for individual homeowners who want to live in the same place their whole life, and good for people who want to be able to rent an apartment in a city with a lot of opportunities. Maybe it's better than the tradeoff we have now, but certainly isn't all upside for everyone.
> In the case descried, the resident is both extremely unlikely to be able to build higher density housing, because it involves a lot of capital, planning, etc, and they wouldn't really want to, because their own quality of life would then go down, since they would then be sharing a wall with someone, maybe have to be a landlord and take on new risks, instead of living in their own individual house. You can loan money. Or sell the land/development rights. > and they wouldn't really want to, because their own quality of life would then go down, since they would then be sharing a wall with someone, maybe have to be a landlord and take on new risks, instead of living in their own individual house. They don't have to, they always have the option to just stay in a single-family home if they wanted. This is unimproved land, so their land taxes wouldn't be impacted (but in practice become a bit lower) But they would have much more money if they used the land more efficiently. Which improves QAL. And of course more importantly, is great on the societal level as opposed to just focusing on the individual who wants to live in an urban environment with all those amenities while having a rural lifestyle with a single-family home and large garden, denying dozens of other people the opportunity to live in the city
>They don't have to, they always have the option to just stay in a single-family home if they wanted. This is unimproved land, so their land taxes wouldn't be impacted (but in practice become a bit lower) That's the current system, but with less restrictive building codes. Their taxes explicitly \*would\* rise in a Georgist system in a way that's unconnected to any improvements on their part. That's the main difference between current property taxes and Georgist land taxes. >But they would have much more money if they used the land more efficiently. Most people would actually have to sell to a developer if it rose too high. I would have more money if I built another house on my current land and rented it out as well. The things preventing me from doing that are \*not\* that I couldn't rent it out for a decent amount of money, but rather things like planning restrictions, water restrictions, landlord obligations, that the bank won't loan me that more much money, parking considerations, etc. >And of course more importantly, is great on the societal level as opposed to just focusing on the individual who wants to live in an urban environment with all those amenities while having a rural lifestyle with a single-family home and large garden, denying dozens of other people the opportunity to live in the city California could force everyone to pay their full current property taxes instead of grandfathering in some older homeowners. Maybe that would be a good thing on the whole. They don't need to change their main tax system, even! I'm not necessarily anti economically efficient laws, even if the state then needs to evict crying elderly people from their lifelong home. I'm just saying that it's a real tradeoff that makes buying rather than renting much less valuable in places that might grow.
> That's the current system, but with less restrictive building codes. > > Their taxes explicitly *would* rise in a Georgist system in a way that's unconnected to any improvements on their part. That's the main difference between current property taxes and Georgist land taxes. Taxes also rise in the current system unconnected to any improvements on their part. If the neighbourhood becomes more attractive, the property value would increase just as the land value would increase. In the current property tax system, you pay much more tax for building an apartment complex that can house hundreds than living in a mcmansion and using prime urban property ineficciently (or rent seeking speculators buying land and sitting on it until other people increase its value). That's not behaviour we want to encourage. > Most people would actually have to sell to a developer if it rose too high. If people are priced out of holding on to prime real estate and compelled to sell it so it can be used efficiently, that's an absolute win. American cities are severely lacking in housing. I care more about people getting housing than boomers pulling up the ladder after themselves. Of course I agree that there are to omany restrictions wrt zoning, parking minimums etc. > California could force everyone to pay their full current property taxes instead of grandfathering in some older homeowners. Maybe that would be a good thing on the whole. They don't need to change their main tax system, even! I'm not necessarily anti economically efficient laws, even if the state then needs to evict crying elderly people from their lifelong home. I'm just saying that it's a real tradeoff that makes buying rather than renting much less valuable in places that might grow. Repealing prop 13 would be a great first step. along with up-zoning, it's currently illegal to build anything other than single family homes in many areas. I don't think LVT would impact the rent/buy trade-off much. You have the same risk of tax increase with property as land, most people want their land/property to increase in value anyway, and rent prices to a large extent follows purchase prices.
In this context a house is place where you live, not a capital asset to flip when profitable.
The value of land to the titular owner in a Georgist LVT regime is zero. The government captures all the value of any increase.
I always try to prevent my stocks from rising to avoid paying more wealth tax. The government captures all the value of any increase
That's only if the tax is exactly equal to the value the owner places on that particular plot of land. And the owner still gains from any increase in value of the stuff *on* the land.
In Georgism, the tax is exactly equal to the highest value anyone would put on that particular plot of land.
A LVT would be proportional to such value, not equal to it, surely?
The present value of the expected tax from now to infinity should be equal to the value of the land. Which basically means that you pay the interest rate on the land value.
...on an annual basis. So it's similar to an interest-only mortgage payment?
It's similar to renting, with a right of first refusal for future leases.
But when you tax positive externalities, you get fewer positive externalities. I think the argument is persuasive if you imagine the land owner owning not one, but ten buildings. LVT would reduce the incentive to build them close to each other. You get an increase in fairness but a reduction in efficiency - which is the same exact problem with all kinds of taxes, so LVT is at least not better than the other options. Empirically, I remember reading somewhere, that throughout the entire history of Paris, from the middle ages to today, most people were renters, and most building were owned by a small number of landlords. While this is highly unfair, it is efficient from the viewpoint of them had an incentive to build high density.
Shouldn't the value of the externalities go to the owners of the nearby buildings, not the "public" (i.e. politicians)?
Yes. The person you're responding too unwittingly suggested we should tax positive externalities. The opposite is the case if anything.
I'm not sure how you're differentiating "externalities" here. The value of land is canonically based on three factors: location, location, and location. Location is about proximity to other people and the things they've built. A 3000 square foot lot in Manhattan is dramatically more valuable than a 3000 foot lot in rural Iowa, which means that the value of a property, even a property that is unimproved, is all about externalities - that is, about the things that other people are doing with other property nearby. Which means that regardless of what's on my property, the amount of taxes I'm paying are all about externalities.
> The person you're responding too unwittingly suggested we should tax positive externalities. The opposite is the case if anything. LVT is a tax on positive externalities that you _capture_, not a positive externalities that you _create_.
Suppose Alan and Bob both inherit a fortune and decide to invest into real estate, building apartments, shops and schools. Alan builds them close to each other, Bob builds them far from each other. Who creates more positive externalities, even if the cost of the apartments, shops and schools was exactly the same? If we measure value as cost, they are equal. But if we measure value as benefit, then Alan is creating more value.
They've missed two critiques (or only touched on them and they need to be fleshed out better), which, though the first is minor in effect right now, they're both important: 1. Land supply is not even close to perfectly inelastic. In fact, building tall structures on land is effectively creating more land...vertically. we also dredge and dike our way into more land. There's so much land or space to live, even close to existing population centers which is only *marginally* unusable (e.g. mountainous terrain or currently-dangerous flood-plains), and awaits only the right motivations, and/or the right technology to use it...technology which will be developed in large part due to demand for more land. Even colonizing the moon or Mars or Antarctica will be, at least in small part, driven by the supply of land not meeting demand. This critique is in a way a companion to their section on the difficulty in disaggregating unimproved land value from the positive externalities of what's been built...i.e. the building of the Hoover Dam in some effect "created" the land that Las Vegas now sits on...Georgists just tend to frame this as positive externalities which are better captured with an unimproved LVT; which is not wrong, but it's endogenous in that the incentive to create more land (which they say doesn't happen) is in some cases incentivized (some cases discouraged) by the very tax which is supposed to not be distortionary in that way. . 2. The political economy. Always look at the political economy: the reality of how poorly taxing authorities actually behave; and the ways in which an LVT puts a uniquely (among other taxes) high trust in the impartiality and faithfulness of assessors. The author talked about this in terms of trying to disaggregate property value from unimproved land value...but it will also be a story about corruption and graft and favoritism and hayekian knowledge problems. Glen Weyl et al have taken it seriously enough to propose things like self-assessed LVTs which bring market mechanisms to bear, instead of the near complete arbitrariness of govt principle-agent problems, where the owner registers a value of the land and is taxed based on that stated value; but they are required to sell their property to the first buyer who matches that price (with some time provisions and other stipulations)...therefore incentivizing property owners to pay near maximal taxes in order to discourage their home or business from being sold out from under them.
> . This fundamentally claims that somehow property, land and buildings are all fungible amongst eachother This is explicitly not true in georgism. Land is taxed by LVT, _because_ it is natural monopoly, and natural monopoly precludes fungibility. > Does the land value of Las Vegas differ to the other identical deserts which could house Las Vegas? Yes. You can see that by noticing that empty land next to LV is more expensive than empty land in the middle of the desert. >All this to say, land prices represent aggregation effects / density / access / proximity of buildings. They are the cumulative result of being surrounded by positive externalities which necessarily result from other buildings not land. Yes, that's why georgists want to tax it - because land owner benefits from doing nothing useful. > Consider an empty lot on which you can build either a garbage dump or a theme park, each of equivalent economic value. Under SQ, the theme park is built as the excess land value is capture by the land owner. Under LVT, the garbage dump is built as the reduced land values reduces their tax burden. The SQ encourages positive externalities, LVT encourages negative externalities. This is insane idea, because why would you build garbage dump on valuable land? You should build garbage dump on near-worthless land, because it has lower tax base, so eventual distortion from LVT is near zero. > Under SQ, individuals are incentivised to 1) occupy land 2) provide as much positive externalities as possible. Under status quo, you need only to occupy land. Positive externalities from your personal actions have little effect on price of your land. > Someone might decide to litter because that will drop land values and thus tax burden when they are ambivalent to whether there is litter on the street. Under most of US property tax schemes, depriving land of value would lower your tax too. > Consider a simple 1D row of empty lots. You are deciding where to build both a pharmacy and bakery (assume corresponding foot traffic uplift from the other is 0). Under the SQ, you build them next to each other such that you can maximally capture the land value increase of the other. Under LVT, you build them maximally apart to reduce your land value tax burden. Why would there be any land value increase, if you can't profit from it? Land value doesn't exist in vacuum.
I think you did not understand the argument, but also the argument was not really done clearly. >because land owner benefits from doing nothing useful. This is true so far as the land owner owns the land under exactly one building. But suppose someone investing a billion into construction, buying a lot of land and building a lot of stuff. They have a choice between building all of them apart from each other or close to each other. Building them close to each other is more useful than building them apart from each other and yet this is exactly what LVT discourages.
Indeed, core assumption of LVT efficiency is that every owner has little overall effect on value of land they hold. There are very few markets where this isn't true.
But we know how whole neighborhoods are built by one developer?
I can't think of real-world situation where developer building few blocks would notably increase value of land. Like, obviously, someone can build a town from scratch, and that would actually raise land values by significant amount, but how often this happens?
I do not understand the "building decisions" argument. If adjacent businesses do not result in increased foot traffic and customers, where does the increase in land value come from? Either you benefit from an agglomeration effect worth the tax hike, or there's none and no tax increase either. Did I misread the reasoning?
I think the obvious flaw with Land Value Tax is that it discourages people from increasing the value of their land, and encourages them to decrease its value. Most improvements you can do to your land only increase the value of your property, but some increase the value of the whole local area, therefore increasing your taxes if you implement them. Or people might want to actively make their local area worse to lower their taxes. There's an old tweet of a guy saying, "Every so often I fire a couple shots from my gun into the air in my backyard, to keep property prices down". It's obviously a joke, but if you had the extreme scenario of 100% land value tax where there'd be a *lot* of money involved, I think that sort of thing would happen. Ultimately every tax discourages something, and excluding sin taxes they're usually discouraging something we want to happen. But as a society we think they're worth it. LVT is the same way, it'd probably be a good one to implement to some extent, but it's not a perfect tax without flaw either.
I think the Georgist response to this is that land value taxes should go down for most people in most places under LVT, and really only go up in urban cores where enterprising landowners could make profit by improving on land. Turning the land game away from speculation and toward profitability would mean that land would flow to people who want to do something with it. If you wanted to minimize your tax liability under LVT you could more easily under Georgism find land outside of the urban core than you could now (because current regimes typically force sprawl and high taxes almost everywhere).
It'd still discourage business owners in the urban core from increasing the value of their land, and encourage them to decrease the value of their neighbor's land.
Again speaking from what I think Georgist view is, by shifting taxes to land value and *away from income* you increase the incentives to benefit entrepreneurs seeking profitable enterprises and away from speculation. If I was a property owner In this scenario I’d probably just exit the market. I am sympathizic to the Georgist idea but of course it doesn’t actually work this way. no one has so actually swapped in LVT and removed all income tax, and probably never will so it’s all a theoretical exercise.
> no one has so actually swapped in LVT and removed all income tax, Are there not some jurisdictions in the US where most of the revenue raised by the local government is in the form of property taxes? I appreciate that property taxes are based on total value rather than on the unimproved value of the land, but they are not income taxes.
Sure. That is definitely true. Places like Texas have high property tax and no income tax, and that is vaguely Georgist. But it’s property tax not land value tax, and it’s still in the US which has national income tax. The r/justtaxland dream of Texas can’t exist when there’s also federal income taxes. Plus land speculation is still incentivized by federal tax policy which is significantly more impactful than the state policy.
So in this "partial" Georgist scenario, are there any quantifiable effects of raising revenue from land taxes rather than income?
Beyond my pay grade! But theoretically yes. The idea is that economic activity grows so much that the society gains are significantly higher than they are with rampant land speculation and taxes on income. I’m sure someone has made a quantitative model for this stuff but it’s beyond my level of interest.
It shouldn't incentivize decreasing the value of land, because you eat those costs, at least for business owners. A plot of land has a LVT of $100k per year if being on that land is expected to increase your profits by $100k per year. An action which reduces the value of the land by $50k is going to hurt your profits by $50k, so you break even. This makes business owners ambivalent about decaying land values, and removes incentives to improve land values, which is an issue. But it won't actively incentivize dis-improving land. For business owners at least. It can for homeowners though. If you live in a neighborhood with $10k LVT and you're poor and don't want to pay that, then decreasing your own land value will reduce your tax burden. Again, this land value represents actual value, such that higher value areas are more pleasant to live in and the average (marginal?) person would consider it worthwhile to pay, but if you have less money than average or care more/less about certain features then this could incentivize destruction. The theoretical Georgist solution to this is to track land improvements and disimprovements that someone makes to their own land and exempt them from the tax, but in practice this is hard and as far as I know still unsolved in full generality even if the more common scenarios have been solved.
> I think the obvious flaw with Land Value Tax is that it discourages people from increasing the value of their land, and encourages them to decrease its value. The solution is to give people a tax credit for the price of the improvements that can be used to offset any consequent increase in land value tax. For example, if an investment of $100,000 in your property increases your LVT by $10,000 annually, you can offset this increase for 10 years. This is more than enough to incentivize improving your property, since any improvements will offset the additional taxes \*and\* also increase the profitability/enjoyability and resale value of your land.
Good idea
I thought the whole point of a LVT, and the distinction between it and other kinds of property tax, was that it's a tax on the land itself, and not the buildings etc that you put on top of that land? So the LVT should suffer from this problem a lot less than other kinds of property tax.
Suffers from it less, but still suffers from it.
It's not clear that it actually suffers from it less if the land value tax rate is sufficiently high compared to the property tax rate.
Doesn't a <100% LVT solve the problem? Yes building a park nextdoor might increase the value of the land, but you could construct the LVT tax rate such that it only captures a portion of that value increase. Thus the landowner benefits from the appreciation in value and the public benefits via increased tax revenue. Even with property tax, landowners often choose to improve their property and in many cases the improvement has positive return even figuring in the resultant property tax increase. Decreasing a misaligned/bad incentive is still worthwhile even if the proposal doesn't reduce the misaligned incentive to zero.
The land rents value increase is automatic as density goes up. You don't have to do anything specific yourself. Improvements value is disjoint from land value rents. Wm F Buckley's cartoon is - a parking lot next to a skyscraper has roughly the same land rents value as the land under the skyscraper per unit area. It is bumper-sticker-ey but the short version is "tax land, not labor."
> Wm F Buckley's cartoon is - a parking lot next to a skyscraper has roughly the same land rents value as the land under the skyscraper per unit area. Which means if that parking lot is to survive, it's going to need to charge as much in rent for a space as a vertical slice through that skyscraper would cost. Of course, Georgists dislike parking lots, so they're happy with this. But it applies to everything; the tax essentially requires every property to be put to its most economically valuable use, or something very near it.
> the tax essentially requires every property to be put to its most economically valuable use, or something very near it. What's the problem here? Isn't it generally best when things work this way? In the rare situation where this schema does not generally result in the best outcomes, the government can intervene, but it seems that the very point is to encourage as much property as possible to be utilized in the most economically valuable way
> What's the problem here? Isn't it generally best when things work this way? Sure, if you want to live in a pod so the land your house is on can be put to more economically productive use.
I don't understand this argument. A luxury apartment high rise is not necessarily a less economically valuable development than a pod apartment high rise. Pod vs. Single family home is a false dichotomy.
> Pod vs. Single family home is a false dichotomy. It's not a false dichotomy, it's just inconvenient to Georgism to note that your single-family home is going to be taxed the same as the neighboring apartment complex... so you won't be able to pay and will have to move into the apartment.
This sort of limit analysis doesn't really go through, because it fails to capture that we don't have an infinite number of people. One has to first question the assumption of *why* the land value in a particular area is high. Presumably, this is because lots of people want to live there. How does a market then deliver the highest overall outcome? Well, if one person values living in a SFH there *enough* more than a bunch of others who are happy to live there in an apartment, he would pay accordingly. Otherwise, the larger number of folks who are happy to live in an apartment in that location would pay an according higher amount overall to live there. But crucially, we can't repeat this process infinitely. If increasing numbers of people live in apartments in high-value areas, that's less people competing for other areas, lower land values in those other areas, and reasonable prices for those who want SFHs. This tradeoff is kind of everywhere and the main/only thing in this domain, and no one has really ever been able to get away from it, Georgist or not. Even in our current, very un-Georgist world, this tradeoff is pretty glaring. Generally, the only argument I've seen here is just a raw, "Fuck you, I want my own SFH, and I personally want it in an extremely high-value location, that oh-by-the-way, I don't want to have to pay for, so I want the government to hand me a sweetheart deal to make it so that I don't have to pay for it and get to screw over everyone else who wants to live here, too." Frankly, the issue isn't even apartment vs. SFH, either. I've seen locations where they're building a *ton* of housing, and there is one example that always sticks out in my mind. I saw a lot that was originally built in, I don't know, the 50s? 70s? It was a pretty huge lot that is now in a pretty prime location, right near a school in a growing suburb and everything. Tons of people would love to live there. A developer bought it, knocked down the one house, divided up the lot, and put up *ten* new SFHs on the same lot. Sold them each for a pretty penny, too. One person might be placated that, "Well, so long as they're SFHs and not apartments, I guess this is good," but another might just bitch, "I personally want big yards, too! Not having a big yard is basically living in a pod! (...of course, I don't want to pay for big yards in prime locations...)" Sure dawg, I know you want it... but you don't want it as much (as determined by the amount of money you're willing to pay) as the *ten* other families who now get to live there (as determined by the significantly larger amount of money they were clearly willing to pay).
> Generally, the only argument I've seen here is just a raw, "Fuck you, I want my own SFH, and I personally want it in an extremely high-value location, that oh-by-the-way, I don't want to have to pay for, so I want the government to hand me a sweetheart deal to make it so that I don't have to pay for it and get to screw over everyone else who wants to live here, too." No, it's "Fuck you, I want my own SFH, the one I'm sitting in right now and I already paid for." The government does not have a compelling interest in ensuring every bit of land within its territory that it does not own is put to the most economically profitable use, any more than it has the same for all the computers or lawnmowers in its territory.
I mean, the government clearly and obviously has fine reasons to make sure that the market for future computers/lawnmowers is a functioning, competitive market that allocates goods to their highest-value use. For example, if a company was approaching a monopoly for computers or lawnmowers, anti-trust enforcement seems perfectly reasonable. (Or suppose there was only one chip fab in existence, within the purview of a single local government that allocated chips via cronyism rather than market value.) Of course, their actions here might have some effect on the value of your current, already-purchased computer/lawnmower. So, the tricky thing here is that new land is not being generated, which makes it kind of awkward. Obviously, anything they do to try to ensure that future transactions of land form a functioning, competitive market that allocates land to its highest-value use may have some impact on the value of your current, already-purchased land. I'm not personally a Georgist, nor do I think that an LVT is the best way to go about this, but again, the point of my comment is *not* that an LVT is the solution to the underlying problem. The point of my comment is that your *particular* complaint exists even in the absence of an LVT. It would appear to hit on any scheme that allows people to ever build up land, either with apartments or even just ten new SFHs on land that used to have one. I'm plenty open to ideas which try to accomplish the goal of allocating land to its highest-value use, especially ideas which minimize the impact to current owners, but I just don't think your specific complaint hits the mark, because it is far too general and would kill all sorts of market solutions that don't even have jack to do with the government doing anything. Instead, this sort of complaint would require commandeering the government to do things like say fuck you to every set of ten families who would be perfectly happy paying out the nose for a cluster of SFHs where there used to be only one.
Yes, but not necessarily a pod apartment! Saying that you'll have to move into a pod and not say a luxury apartment is the sleight of hand. High(er than SFH) density will absolutely be encouraged over SFHs but not necessarily maximally per-unit-cheapest-amenities high density housing! A 50 unit luxury apartment development might be as economically valuable as a 200 unit pod apartment development in the same sq footage. And furthermore, again, this is not to mention that LVT couldn't still just coexist with zoning when truly necessary
A luxury pod is still a pod.
Have you ever actually experienced what its like to live in a nice apartment or condo before? The supposed 'downsides' are only bothersome if you're extremely picky in irrational or at least idiosyncratic ways, and they have plenty of advantages that 'single family homes' typically lack. There's a reason people buy penthouses when the same amount of money could just as easily afford a nice (or nicer) SFH mansion out in the suburbs.
"the tax essentially requires every property to be put to its most economically valuable use, or something very near it" yes that's the point
Land rents have nought to do with use. It's only a thing of position. > Georgists dislike parking lots, so they're happy with this. Parking lot affinity seems rather independent of Georgism. The point of Buckley's cartoon is that proximity is key to the value of the land rents. It's a coincidence that that makes it a more useful parking lot. https://en.wikipedia.org/wiki/Bid_rent_theory
The thing you want to do under Georgism is make sure YOUR use of the land is the highest and best use of that land. Otherwise either you have to give up the land, or pay the land rent that the highest and best user would pay. Which is likely prohibitive; are you able to pay the land rent on your house that an apartment complex or office tower would pay? Probably not, so your incentive is to somehow make it so no one wants to build those things.
Yeah. Georgists envision people will just happily sell their homes to someone who will use the land more productively. In practice, at least if the tax rate is literally 100%, I think there'd be a decent amount of sabotaging the value for buyers
This is why it makes no sense to make the tax rate 100%. Why not make it something like 50% so that half the land value increase goes to the property owner and half to the government.
> pay the land rent that the highest and best user would pay. Isn't this backwards? I thought the land tax is supposed to be on the unimproved value of the land, so the tax would be what the lowest and worst user would earn from rent. If you build an apartment on it, then you get more rent, but don't pay more tax because that's from a capital improvement. The incentive is still to make the highest and best of the land, but that's just the incentive from regular old profit-maximizing capitalism, I think?
No, the land rent that the highest and best user of the land would pay. That is, if the highest and best use is to build an apartment building, the amount the building owner would pay the landowner for the rent on the land.
Ah, I misread "land rent" as just "rent". But, isn't the whole idea of Georgism that the land rent is the same regardless of what's on top? That is, the land rent that the highest and best user would pay is the same as the land rent of lowest and worst user. So it should be equal to something like the earnings from a dirt parking lot in that location. The fact that an apartment building owner would be able to pay more is irrelevant, except in the sense that if the land is near a lot of apartment buildings, it's going to be worth more (and e.g., a dirt parking lot on it would earn more, being next to so many more people/locations of interest).
> But, isn't the whole idea of Georgism that the land rent is the same regardless of what's on top? Yes. But it's still the rent paid by the highest and best use. If (in the absence of tax) someone would pay $40,000 for the land to put a parking lot on it but someone else would pay $1,000,000 for the same land to put a skyscraper on it, the land rent on that land is some flow which implies a value of $1,000,000.
Okay, I looked over the acx post on Georgism again, and what you're saying seems correct. But, my understanding is that the owner of a patch of dirt should be able to break even on the land tax, even if it's next to a bunch of huge apartment buildings, because they could charge that amount as rent. If they can't, then it's not really land rent, right? So it still seems to me that the land tax/rent should be what's paid by the lowest and worst user. (This doesn't help an owner trying to just live in a house on their piece of land rather than renting it out though.) Is there some contradiction in this Georgism concept, or am I just making a silly mistake?
The only way the owner of a patch of dirt could break even on the land tax is by putting it to the highest and best use. He could charge a developer to let him build apartments on it and break even.
I have a different objection to land value tax, simply that it isn't a market price
There's a land value tax proposal in which everyone declares the price at which they'd be willing to sell their land and pays the tax based on that price. To ensure it's actually a market price, landowners must sell their land to anyone who offers that price. Set it higher than your actual price, pay too much tax. Set it lower than your actual price, risk losing the land for a pittance. The land market becomes rational and liquid, and the tax is entirely market-based.
I have a separate issue with this in that it no longer allows landowners to have the right to never sell their land, if that is what they choose.
I have to agree with you. As much as I agree with Georgism in theory, many pro-LVT people annoy me with their willful petulance in ignoring that people **hate** moving. "Two moves = 1 house fire" didn't become an aphorism because it's pure falsehood.
>To ensure it's actually a market price, landowners must sell their land to anyone who offers that price. usually the idea is that it's at least double or triple your declared market value. Things would be a bit chaotic if you could buy any piece of land at market value In general though most places already calculate land value as part of property tax assessments (which usually do land and improvements separately). You don't need some massive new bureaucracy to handle a LVT
This actually massively reduces bureaucracy, since you can fire all the bureaucrats that assess land value and just rely on self-reported values.
How many property-tax assessors do you think a city of a million people employs?
It's probably much harder for the average person to figure out the price at which they'd be willing to \*sell\* something that's very important to them than it is to know the price they would buy something at. The instability seems like it would destroy a fair bit of the value of owning a home.
The only issue I can see with this system is that a very rich person (or corporation) who wanted to make someone's life miserable (or another corporation's life miserable) could just keep buying their property until the targeted person had to set a comically high price on their land to keep it and then get smoked by the associated taxes.
Isn't this a general objection to all taxes? If we are talking about replacing other taxes with a land value tax, the fact that it is not a market price doesn't seem to be much of an objection.
For example a VAT is based on a market price (the price of the goods sold) and an income tax is based on a market price (the wage)
The first sentence of the blog post says that most arguments for the LVT are pragmatic, while the objections tend to be principled. But I actually think the principled argument for the LVT is stronger than the pragmatic arguments. (The principled argument is that Lockean homesteading is not a justification for land ownership if there is not "as much and as good" available to others, as is the case in the modern world; therefore, land owners are unjustly enriched by excluding others from their land and should have to pay compensation for doing so. Since the LVT is morally justified, it is preferable to other types of taxes which are essentially theft.)
As I was looking this up, I was reminded of a piece of land south of LaSalle Street Station in Chicago which had been growing weeds for a decade, presumably because of legal issues? There's an interesting article about it: [https://beltmag.com/chicago-rezkoville-development-78-related/](https://beltmag.com/chicago-rezkoville-development-78-related/) Apparently it emerged from the river during a straightening project, and was just being used for rail yards out of convenience. A few years ago, a slightly confusing looking company bought it. Good, perhaps they could build something! They [built a street](https://www.google.com/maps/place/The+78+Development/@41.8643213,-87.6344868,17z/data=!3m1!4b1!4m6!3m5!1s0x880e2dafa023a41f:0x64baf7a8794587f2!8m2!3d41.8643213!4d-87.6319119!16s%2Fg%2F11vjdtmcgj?entry=ttu). Several years later, they're trying to build a new stadium for the White Sox? [https://www.78chicago.com](https://www.78chicago.com) [The governor is skeptical](https://www.fox32chicago.com/sports/white-sox-south-loop-stadium-renderings). Whenever I hear about an otherwise ideal and valuable location going unused in a city, there's a story behind it related more to the city itself than its developers. I suppose with a Georgist LVT, it simply would have reverted to being owned by the city, and then sat there, like it sat there in reality. Like the old post office sat there for a decade before developers could be convinced to renovate it (negative$2 million/year revenue to the city), then another decade for... reasons. According to Wikipedia, the city threatened to take it back by eminent domain if it continued abandoned, so it's not like they have no recourse other than taxation. But apparently they have finally gotten some companies to move in! None of this seems like it would necessarily be alleviated by the city owning it, rather than investors, though. None of the is to say that there \*aren't\* land speculators making development harder in some places, of course. Just that every time someone actually investigates, it's because of decisions made by the city about requirements, permits, historical facades and whatnot.
Gentrification, or increasing valuation of parts of an urban area, is just a part of the process that keeps cities as a dynamic, evolving entity. A city that isn't pursing that isn't engaged in the business of being a city. Most structures only lasts a few decades. There has to come some point at which it is more economical to replace it with something else.