Nice article. Your links will be my weekend reading.
I've read about a land tax supplanting other taxes. Currently property taxes have a "land" component and a "building" or structure improvements component. For residential the land is typically a small value and the improvements are large. For commercial properties, appraisers use not comparables, but income to estimate value. This is done so that they commercial properties aren't taxed more than the income they generate can support. This dual valuation system supports what you suggest, allowing land ownership to generate profits as capital gains, while minimizing taxes for income.
"Property rights", from common property appropriated and deemed personal property is the root of the problem, but our legal system is structured around such property rights. It would be a massive uphill slog to push a portion back to the commons, to change property rights, and to quash rentier behavior. One would be labeled socialist or communist from the 'get go'.
Taxes are inherently about picking winners and losers. (eg Prop 13) Any ideas on how to change the framing so we get more 'winners" and the "losers" aren't ruined?
*It can be pitched as property tax reform, because people feel that property taxes are too high. Hey, everyone, let's exempt all your buildings. You could build a coalition that's excited about that, especially if you do the math and show, for example, what the change in your taxable rate is going to be. A revenue-neutral property tax shift to land can be quite popular.*
*The most plausible way to get a land value tax would start by just capturing the same revenue. What I actually proposed for our first step is not 100% land value tax federally.*
*I think what you actually do is you start in places like here in Texas with, legalized split-rate property tax:*
- *Tax buildings and land at separate rates*
- *Set the rate on buildings to zero*
- *Collect the same dollar amount of taxes.*
**Gordon Tullock's Transitional Gains Trap**
Think about taxing medallions in New York City
It's this artificially scarce asset that allows you to operate a taxi. The first generation that got their taxing medallions basically got in cheap. And then afterward made out like gangbusters. But the second generation had to buy those taxi medallions at the fully priced in value. And now when you come in and you're like, oh, okay, we're going to abolish taxi medallions, you would screw over that entire second generation who bought in in good faith after the value of the asset had been fully priced in.
Even if you admit that the system is now unfair, removing that unfairness screws over the people who played by the “unfair rules”. I think it's something that Georgists need to grapple with because we can't just imagine a future utopia without accounting for being fairer to people who played by the rules, including people like myself. Like I'm a homeowner, right? Am I intending to screw over myself and everyone like me? And so I think this is where it's really important to do the math of knowing exactly who's going to be a winner, who's going to be a loser, who's going to pay more, who's going to pay less.
I think it's really salient that a lot of the value of land is commercial downtown real estate. I think that a revenue-neutral property tax shift land where we exempt the taxation of all buildings, but collect the same amount in property taxes as we're doing now, but just from the land and then a modest citizen's dividend is a really good first step. And then over the years, you can raise the land value rate as you also decrease things like income tax and sales tax. I think that's a transition that gets us there without really screwing anyone over. And for any edge case, like a poor sympathetic widow who has no income but has a high-value home, you just make it so she doesn't have to pay the land value tax until she dies or sells the estate.
**Experiments In Transitioning to Land Value Tax**
*There are a lot of cities around the US right now where this is being floated. Organizations like Strong Towns and the Center for Property Tax Reform are working on this, the Lincoln Land Institute is talking to places about it. I think there's one in Virginia. Detroit is talking about it right now, and they could desperately use it. I think it could pass. I'd like to see those experiments run and observe what happens there.*
*I think we should do it in Texas. **And that would be something that I think would be very friendly to the libertarian mindset because very clearly there’s no new revenue. And we're exempting an entire category of taxation. Most people are gonna see savings on their tax bill and the people who own those parking lots downtown in Houston are gonna be paying most of the bill.***
*In terms of Henry George's relevance, it seems to be coming back, especially in Norway. The Ruling Center Party coalition just passed a very successful resource management policy with oil, and they also have one from the early 1900s in hydropower, which was set up by Norwegian Georgists. The Ruling Center Party coalition just put one in for salmon farming aquaculture locations, a new severance tax on that, and they name-checked Henry George when they implemented it in the speech. So I think if they are willing to stand up to the landowners in Oslo and pass a land value tax, that would be the next step. I'm not sure if they're brave enough to do that, but we're starting to see this kind of bubble up.*
*A revenue-neutral property tax shift to land is the politically popular way to do it because it can be done on the local level without having to change a whole bunch of laws.*
It took me a week to run all the trails you left. Thanks again for the pointers. I liked your comparison to landed gentry for California property holders. In Europe, with Constitutions written since WWII, the social contract, including taxes, was designed to be more equitable, and the contract was designed to be updated as often as necessary. Here in the USA, where the Constitution has characteristics of a religious artifact, note that it was written without much mention of a social contract; just the bare bones structure of a government edifice. The Social Contract terms were added as amendments, back when the document could be amended. Social contract is thus either ephemeral, or defined by national or state laws. Enforcement is by police and purse, and the long game for those in power it to manage the purse, both expenditures and revenues (taxes), in such a way as to minimize the costs to those in power and maximize the costs to those not in power.
Another thread you pulled on was taxes on labor, capital and land. With commons (eg: airwaves, air, ocean, etc) as an extension to land. Taxing use of the commons also makes great sense.
Last point was the notion of "stocks" as a derivative of a real asset. Made me think of Options and CDOs as second and third order derivatives....
I've heard of "land tax" before, but never really gave it much thought.
This is something that is intriguing as I've always thought that there is a bit of a flaw in the capitalist system in that those that are naturally good (or "lucky") at the "game" get an advantage that compounds over time...at least until their heirs screw it up. That said, I've thought of it more as power/influence/assets rather than land. As land is "fixed", I can see it being a reasonable proxy. Water rights and natural use rights are other big issues with land.
I have always appreciated the LVT, primarily from the economic aspect of removing the deadweight loss of taxation. The sheer simplicity of a single tax is tempting, though I have doubts that it would remain that way for long...
While I'm very much against the market distortion of CA Prop 13, I do wonder if a LVT would force too many seniors out of homes. Making efficient use of valuable land, compassionate no.
Is there any empirical evidence supporting LVT tax schemes? Implementation has been limited, so maybe it's hard to gauge well.
Amazing how easy it is to justify an increase in complexity and taxes, to fix the broken patches with yet another patch. Any society that is elitist enough to redistribute 50% is well down the monopoly dictatorship road. Imagine the scale of sociopathology required to climb into the elite ranks and be the distributor, and take a cut of the flow.
A quick tour of complexity theory and emergent evolution implies less is more. Less rules, better results. Or we could double down on failure.
I lean optimist. Labor has lost to capital all my life. No more. Business models built with lower cost excess labor are dead. Kids can be debt slaves for government paper credentials, or work smart and get rich. Even ivy league creds are more an impediment than an aid to success. Price matters. Subsidized government school is having its "real estate only goes up" GFC 2008 moment. That's a good thing. This is even more true for the less than perfect student from a currently demonized demographic... say a mediocre white guy without a firm educational major, just a bit adrift.
Boomers used school to reduce the labor pool and defer competitors, kneecapping them with debt. No more.
First I've heard of this. Always interested in a good tax discussion.
It sounded like something I would be sympathetic to but not so sure.
I feel like there are many assumptions being made. The value of CRE being one. The amount of tax $$ govt should get in the first place.
Not clear the effects that zoning has had on these situations also. It is my understanding many places don't want the parking lots anymore but zoning rules restrict development.
Also author seems very scarcity mindset thinking. The discussion of squatting domain names, lol. You give me a domain name and I will give you 2 names that are better and not taken.
Nice article. Your links will be my weekend reading.
I've read about a land tax supplanting other taxes. Currently property taxes have a "land" component and a "building" or structure improvements component. For residential the land is typically a small value and the improvements are large. For commercial properties, appraisers use not comparables, but income to estimate value. This is done so that they commercial properties aren't taxed more than the income they generate can support. This dual valuation system supports what you suggest, allowing land ownership to generate profits as capital gains, while minimizing taxes for income.
"Property rights", from common property appropriated and deemed personal property is the root of the problem, but our legal system is structured around such property rights. It would be a massive uphill slog to push a portion back to the commons, to change property rights, and to quash rentier behavior. One would be labeled socialist or communist from the 'get go'.
Taxes are inherently about picking winners and losers. (eg Prop 13) Any ideas on how to change the framing so we get more 'winners" and the "losers" aren't ruined?
Lars addresses all of that including the Tulloch transitional gains problem that you've pointed at
I'm obviously not an expert...I just thought it was so interesting that I wanted to point people towards it so they can explore as well
From the interview:
**Selling the idea**
*It can be pitched as property tax reform, because people feel that property taxes are too high. Hey, everyone, let's exempt all your buildings. You could build a coalition that's excited about that, especially if you do the math and show, for example, what the change in your taxable rate is going to be. A revenue-neutral property tax shift to land can be quite popular.*
*The most plausible way to get a land value tax would start by just capturing the same revenue. What I actually proposed for our first step is not 100% land value tax federally.*
*I think what you actually do is you start in places like here in Texas with, legalized split-rate property tax:*
- *Tax buildings and land at separate rates*
- *Set the rate on buildings to zero*
- *Collect the same dollar amount of taxes.*
**Gordon Tullock's Transitional Gains Trap**
Think about taxing medallions in New York City
It's this artificially scarce asset that allows you to operate a taxi. The first generation that got their taxing medallions basically got in cheap. And then afterward made out like gangbusters. But the second generation had to buy those taxi medallions at the fully priced in value. And now when you come in and you're like, oh, okay, we're going to abolish taxi medallions, you would screw over that entire second generation who bought in in good faith after the value of the asset had been fully priced in.
Even if you admit that the system is now unfair, removing that unfairness screws over the people who played by the “unfair rules”. I think it's something that Georgists need to grapple with because we can't just imagine a future utopia without accounting for being fairer to people who played by the rules, including people like myself. Like I'm a homeowner, right? Am I intending to screw over myself and everyone like me? And so I think this is where it's really important to do the math of knowing exactly who's going to be a winner, who's going to be a loser, who's going to pay more, who's going to pay less.
I think it's really salient that a lot of the value of land is commercial downtown real estate. I think that a revenue-neutral property tax shift land where we exempt the taxation of all buildings, but collect the same amount in property taxes as we're doing now, but just from the land and then a modest citizen's dividend is a really good first step. And then over the years, you can raise the land value rate as you also decrease things like income tax and sales tax. I think that's a transition that gets us there without really screwing anyone over. And for any edge case, like a poor sympathetic widow who has no income but has a high-value home, you just make it so she doesn't have to pay the land value tax until she dies or sells the estate.
**Experiments In Transitioning to Land Value Tax**
*There are a lot of cities around the US right now where this is being floated. Organizations like Strong Towns and the Center for Property Tax Reform are working on this, the Lincoln Land Institute is talking to places about it. I think there's one in Virginia. Detroit is talking about it right now, and they could desperately use it. I think it could pass. I'd like to see those experiments run and observe what happens there.*
*I think we should do it in Texas. **And that would be something that I think would be very friendly to the libertarian mindset because very clearly there’s no new revenue. And we're exempting an entire category of taxation. Most people are gonna see savings on their tax bill and the people who own those parking lots downtown in Houston are gonna be paying most of the bill.***
*In terms of Henry George's relevance, it seems to be coming back, especially in Norway. The Ruling Center Party coalition just passed a very successful resource management policy with oil, and they also have one from the early 1900s in hydropower, which was set up by Norwegian Georgists. The Ruling Center Party coalition just put one in for salmon farming aquaculture locations, a new severance tax on that, and they name-checked Henry George when they implemented it in the speech. So I think if they are willing to stand up to the landowners in Oslo and pass a land value tax, that would be the next step. I'm not sure if they're brave enough to do that, but we're starting to see this kind of bubble up.*
*A revenue-neutral property tax shift to land is the politically popular way to do it because it can be done on the local level without having to change a whole bunch of laws.*
It took me a week to run all the trails you left. Thanks again for the pointers. I liked your comparison to landed gentry for California property holders. In Europe, with Constitutions written since WWII, the social contract, including taxes, was designed to be more equitable, and the contract was designed to be updated as often as necessary. Here in the USA, where the Constitution has characteristics of a religious artifact, note that it was written without much mention of a social contract; just the bare bones structure of a government edifice. The Social Contract terms were added as amendments, back when the document could be amended. Social contract is thus either ephemeral, or defined by national or state laws. Enforcement is by police and purse, and the long game for those in power it to manage the purse, both expenditures and revenues (taxes), in such a way as to minimize the costs to those in power and maximize the costs to those not in power.
Another thread you pulled on was taxes on labor, capital and land. With commons (eg: airwaves, air, ocean, etc) as an extension to land. Taxing use of the commons also makes great sense.
Last point was the notion of "stocks" as a derivative of a real asset. Made me think of Options and CDOs as second and third order derivatives....
Again, I much enjoyed your suggestions. Ciao
Reminds me of this piece by Alastair Parvin. You´ll prbably like it, too.
"A New Land Contract" https://medium.com/open-systems-lab/a-new-land-contract-684c3ba1f1b3
It was one of my greatest surprises in recent years. Lead me to radically reorder some of my fundamental beliefs. Fascinating!
In the queue ty!
I've heard of "land tax" before, but never really gave it much thought.
This is something that is intriguing as I've always thought that there is a bit of a flaw in the capitalist system in that those that are naturally good (or "lucky") at the "game" get an advantage that compounds over time...at least until their heirs screw it up. That said, I've thought of it more as power/influence/assets rather than land. As land is "fixed", I can see it being a reasonable proxy. Water rights and natural use rights are other big issues with land.
Other resources are all discussed too...the rabbit hole runs deep. It's one of the most fun mini-explorations I've poked around in.
I love that Monopoly was originally a lesson that was misinterpreted -- so on the nose for America.
The concepts as they are laid out beg to be explored in game format, the link is so obvious to structuring game economies
I have always appreciated the LVT, primarily from the economic aspect of removing the deadweight loss of taxation. The sheer simplicity of a single tax is tempting, though I have doubts that it would remain that way for long...
While I'm very much against the market distortion of CA Prop 13, I do wonder if a LVT would force too many seniors out of homes. Making efficient use of valuable land, compassionate no.
Is there any empirical evidence supporting LVT tax schemes? Implementation has been limited, so maybe it's hard to gauge well.
Amazing how easy it is to justify an increase in complexity and taxes, to fix the broken patches with yet another patch. Any society that is elitist enough to redistribute 50% is well down the monopoly dictatorship road. Imagine the scale of sociopathology required to climb into the elite ranks and be the distributor, and take a cut of the flow.
A quick tour of complexity theory and emergent evolution implies less is more. Less rules, better results. Or we could double down on failure.
I lean optimist. Labor has lost to capital all my life. No more. Business models built with lower cost excess labor are dead. Kids can be debt slaves for government paper credentials, or work smart and get rich. Even ivy league creds are more an impediment than an aid to success. Price matters. Subsidized government school is having its "real estate only goes up" GFC 2008 moment. That's a good thing. This is even more true for the less than perfect student from a currently demonized demographic... say a mediocre white guy without a firm educational major, just a bit adrift.
Boomers used school to reduce the labor pool and defer competitors, kneecapping them with debt. No more.
First I've heard of this. Always interested in a good tax discussion.
It sounded like something I would be sympathetic to but not so sure.
I feel like there are many assumptions being made. The value of CRE being one. The amount of tax $$ govt should get in the first place.
Not clear the effects that zoning has had on these situations also. It is my understanding many places don't want the parking lots anymore but zoning rules restrict development.
Also author seems very scarcity mindset thinking. The discussion of squatting domain names, lol. You give me a domain name and I will give you 2 names that are better and not taken.
There is cheap land in rural areas/smaller towns.
Thanks for a new topic to explore!