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Does Georgism work? Is land a big deal?

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Re: Does Georgism work? Is land a big deal?

#361

Post by jl2718 »

tofukid wrote: post #188
jl2718 wrote: post #181

Income tax persists because it avoids the problem of valuation. These ideas are largely moot with a robust mechanism for value discovery. One such possibility is the open auction. In a value tax system, somebody puts money into an escrow bond as a bid on the property, and the owner has a choice of either paying the tax for the duration of the escrow, or exchanging the property for the escrow. The escrow bonds themsel…

Doesn’t that enable hostile takeover of land? If I own a school or restaurant, and Apple wants to replace it with a store, they can place a bid such that I can no longer afford the taxes and am forced to sell to them. Wouldn’t such a system just exacerbate business and the wealthy being able to snatch up land?

Consider some numbers:

Let’s say that the bond rate is 2%, 1% goes to the bondholder, 1% goes to the treasury. Apple bonds the property of Joe’s plumbing for $1M with a 1 year duration. So Joe The Plumber either pays $10k a year to both Apple and the treasury, or takes $1M and moves.

If Joe can’t pay, then the banks will gladly lend against the property, because the payout is guaranteed. They will also very gladly lend for purchase of a new property for the same reason.

The system is actually no different to Joe. He still loses his property either way if he can’t pay the property tax. But now he has a liquid asset with zero transaction cost, so it works out a lot better for him either way.

And that 1% to the treasury could replace the entire income tax revenue of the country.

But it’s just an idea; there are things I’m not sure about.

Re: Does Georgism work? Is land a big deal?

#362

Post by d3ckard »

whakim wrote: post #358
d3ckard wrote: post #353

Earlier quoted context omitted.

And? Due to power-law distribution that 0.1 % holds disproportional amount of riches. I really don’t get that people talk about rising income inequality all the time, but actually noticing it (i.e. very strong minority holding many assets) suddenly doesn’t make sense.

No one is denying that income and wealth are distributed very unequally. But my point is that well more than 99.9% of individuals primarily earn money via labor and are therefore subject to an income tax, and so it isn't correct to assert that income taxes don't hurt the rich. They don't hurt the absolute richest individuals - but most people aren't defining "the rich" as only the top 0.05%.

Then I’d like to hear alternative definition of rich and see whether it is sound.

Re: Does Georgism work? Is land a big deal?

#363

Post by jacobr1 »

davjhan wrote: post #324
larsiusprime wrote: post #177

Earlier quoted context omitted.

Yup, I'm the author. - As far as I know, yes, LVT would definitely incentivize multi-family housing over single-family housing. - I'm not sure exactly where the threshold would be. Under current market conditions where landlords can collect land rents, it'd be any place where the property is so bad that the rent is less than you'd be able to collect if it were, say, a parking lot. This might still be a good investmen…

Thanks for the responses. To clarify the last question, my house value would be affected if it was known that my neighbor will undergo a construction project. So I was just wondering that if the rise in propensity to teardown increased under LVT, that it would have weird ripple effects of devaluing the land of the good house by virtue of it being next to a future construction zone.

I think that would depend on the frequency the tax assessment occurs, and under what kind of legal structure. If your whole neighborhood is in the midst of a multiyear construction boom, then maybe that gets factored in. But if we are talking about a few nearby plots, then the valuation is probably being based on a some area averages anyway without factoring specifics.

Re: Does Georgism work? Is land a big deal?

#364

Post by whakim »

d3ckard wrote: post #362
whakim wrote: post #358

Earlier quoted context omitted.

No one is denying that income and wealth are distributed very unequally. But my point is that well more than 99.9% of individuals primarily earn money via labor and are therefore subject to an income tax, and so it isn't correct to assert that income taxes don't hurt the rich. They don't hurt the absolute richest individuals - but most people aren't defining "the rich" as only the top 0.05%.

Then I’d like to hear alternative definition of rich and see whether it is sound.

"Rich" is an ambiguous term; there clearly isn't a single definition. That being said, I think most people would agree that an individual who earns a salary of $500k a year (~99th percentile in the United States) is clearly "rich."

The question I'd put back to you is why it's useful to have a single, universally agreed-upon definition of "rich"?

Re: Does Georgism work? Is land a big deal?

#365

Post by dane-pgp »

Zacru wrote: post #354
dane-pgp wrote: post #92

Earlier quoted context omitted.

> Maybe one for young people too If we're concerned about fairness in the housing market, a special tax which only applies to young people isn't the policy I'd recommend. As an alternative, you could give each person an allowance of land area/value (perhaps based on the median value, or an equal share of the nation's land territory) and say that anyone who uses more than that (with a mansion, or multiple homes) would…

Taxing different entities at different rates just opens the door for a middle-man with a lower tax rate to profit from simply renting the land to the entities with higher tax rates.

If multiple middle-men all entered into contracts with one entity who wanted to set higher rental prices across the market, that would hopefully be caught by existing anti-trust / cartel laws, as well as tax evasion rules.

You're right that there's a potential loophole here, but I don't think it is any more exploitable than other tax rules (i.e. it probably depends on how motivated the tax authorities are to actually enforce the rules).

Re: Does Georgism work? Is land a big deal?

#366

Post by Anderkent »

midasuni wrote: post #341
Anderkent wrote: post #311

Earlier quoted context omitted.

>If you charge 1k a month now, the reason you don’t charge 1200 is because they won’t pay it. >If you have a LVT, and try to increase the rent, your tennent wouldn’t be gaining any more value from the land that they currently are, so you still won’t be able to charge 1200. This only holds if there's no competition between landlords - so the landlord extracts the maximum possible rent from each tenant. If I'm a tenant…

Where rents are high supply is less than demand - as demand is reduced by people living away and by people cohabiting when they would rather not. On the opposite situation where properties are empty, they are empty at any price, LVT won’t change the price. They currently can’t be rented out for $50 a month, so why would they be rentable with LVT The only properties which will be flakey are those where the cost of ren…

I think this assumes a more efficient rental market than what actually exists. Even in highly demand-skewed some properties sit empty for weeks/months between tenants.

> this will simply increase incentive to sell (if you can’t get enough to rent out), reducing the purchase price, and allowing people to live there.

But that means less supply for rental, and presumably lower impact on the demand for rental given how different the renting versus buying populations are. Even in a maximally efficient model this should result in raising rents?

Re: Does Georgism work? Is land a big deal?

#367

Post by neilwilson »

pydry wrote: post #263
neilwilson wrote: post #259

Earlier quoted context omitted.

Inflation is handled by superior spend side auto-stabilisers, like a Job Guarantee, and socially undesirable activities are done with levies and duties, not tax. The latter being a political position, not an economic one. If you have sufficient saving in society , then you hardly need to tax at all - as Japan demonstrates.

It feels like you read about MMT but didnt really... get it? You're mixing up all the concepts. A job guarantee doesnt help keep a lid on inflation at all - quite the opposite (it keeps a lid on deflationary pressures). Levies and duties are...uh, taxes.

In which case why am I writing chapters in MMT books alongside Warren Mosler and Bill Mitchell and you aren't?

The Job Guarantee is designed as an automatic stabiliser that dampens inflation both expectational and financially as well as providing stimulation. It works like this: https://new-wayland.com/blog/how-the-jg-controls-inflation/

Levies and Duties are political deductions. They are not required. Taxes are required for the public purpose. No matter whether you are hard core libertarian or Stalin's best mate you will likely need to taxes that stay in place even if everybody does precisely what is required, because there are public positions that need to be filled.

However if everybody stops smoking then cigarette duty naturally drops to zero.

Taxes are best thought of as the secondary countercyclical stabilisers or the static payments required to Drive the Denomination. Warren, for examples, favours scrapping all taxes and relying upon a single property tax.

Most importantly taxes are never altered by policy settings in response to the business cycle. They are set so the cyclical autostabilisers do their job - primarily on the spend side.

Levies and Duties are set for the political purposes of whichever view is in power at the time. They come and go with the political cycle.

Re: Does Georgism work? Is land a big deal?

#368

Post by neilwilson »

istinetz wrote: post #306
neilwilson wrote: post #259

Earlier quoted context omitted.

Inflation is handled by superior spend side auto-stabilisers, like a Job Guarantee, and socially undesirable activities are done with levies and duties, not tax. The latter being a political position, not an economic one. If you have sufficient saving in society , then you hardly need to tax at all - as Japan demonstrates.

>If you have sufficient saving in society , then you hardly need to tax at all - as Japan demonstrates. ... do you think Japan has particularly low taxes or something? Because they don't, according to this: https://www.jetro.go.jp/en/invest/setting_up/section3/page7....

Which is why they have been in a slump for this long.

As Warren Mosler would say, they are overtaxed for the size of government they have.

Re: Does Georgism work? Is land a big deal?

#369

Post by neilwilson »

Qub3d wrote: post #338
neilwilson wrote: post #203

It gets the purposes of taxes wrong, and assumes the usual economic myths of a fixed amount of money and a loanable funds structure, with money being a veil over barter. Once you realise the latter are a myth, then the entire concept of taxing land makes no sense. Government, in a country with its own free floating currency, has no need of tax money to spend. In fact spending causes taxation from the induced transact…

You should really give the original book review that preceded this a read.[0] > assumes the usual economic myths of a fixed amount of money Not at all. Henry George's original ideas included defining money as essentially an IOU pointing to an underlying wealth ; and wealth can indeed be increased. > The problem with land is not rent, it is the power of exclusion, which leads to hoarding This sentence makes me suspect…

That is the fixed amount of money idea. Money isn't an IOU pointing to an underlying physical wealth. It is wealth in its own terms that is created by government out of nothing based solely upon its future ability to tax. Even some bank money is secured on future income streams, although that is mostly discounting physical collateral.

There isn't a one-to-one mapping between money and stuff. Never has been.

"You're misunderstanding the term "rent""

I'm not. You're hoping I am.

The economic rent comes from the capacity to hoard. Once you remove that the economic rent is eliminated. In other words ownership isn't the root cause of the problem - it's the capacity to prevent use that is the problem. So you eliminate that by forcing things to be rented out and used, or they will be confiscated.

Which incidentally is a function of tax. Either you pay it, or you lose assets. So either you rent it or lose assets does the same thing.

Re: Does Georgism work? Is land a big deal?

#370

Post by Qub3d »

neilwilson wrote: post #369
Qub3d wrote: post #338

Earlier quoted context omitted.

You should really give the original book review that preceded this a read.[0] > assumes the usual economic myths of a fixed amount of money Not at all. Henry George's original ideas included defining money as essentially an IOU pointing to an underlying wealth ; and wealth can indeed be increased. > The problem with land is not rent, it is the power of exclusion, which leads to hoarding This sentence makes me suspect…

That is the fixed amount of money idea. Money isn't an IOU pointing to an underlying physical wealth. It is wealth in its own terms that is created by government out of nothing based solely upon its future ability to tax. Even some bank money is secured on future income streams, although that is mostly discounting physical collateral. There isn't a one-to-one mapping between money and stuff. Never has been. "You're m…

> It is wealth in its own terms that is created by government out of nothing based solely upon its future ability to tax.

The units may vary, but the value remains the same. You get more dollars, but they are worth less, as the purchasing power parity is diluted. See: 6.8% inflation this year.

> So you eliminate that by forcing things to be rented out and used, or they will be confiscated.

I'm confused. I genuinely think you're reinventing LVT from first-principles here. The "confiscation" in Georgism/Geoism just comes at the hand of the free market.

Yes, if you resolutely clung to land refusing to vacate it and also not pay the tax, someone will eventually show up and evict you, but the pressure to just take the money and go will drive an economically rational person to leave before then.

> I'm not [misunderstanding rent]. You're hoping I am.

I'm trying to engage you in good faith[0]. Your first comment's line of thought confused me so I thought I'd lay out my response as I understood it, and I'm glad you came back to clarify. That said, if you won't return the favor then I'm not going to bother continuing the conversation.

[0]:https://news.ycombinator.com/newsguidelines.html#comments

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