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Book Review: Progress and Poverty

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Re: Book Review: Progress and Poverty

#31

Post by zozbot234 »

notahacker wrote: post #20
scythe wrote: post #6

Earlier quoted context omitted.

The biggest problem with LVT is surprisingly simple: accurately assessing the value of land is very hard, and ensuring that the assessment process is fair is therefore extremely hard. LVT experiments in history tend to run into problems when people feel that their land has been valued incorrectly, leading to a vocal minority that despises the law. That results in something like this: https://nassimtaleb.org/2016/08/i…

The biggest problem with it as presented in Progress and Poverty (i.e. as a Single Tax to fund the government budget, not some small supplementary levy to fund something like local services) is that the size of the tax bears relatively little relation to the ability of someone to pay it (at least, to pay it without selling their house). Turfing pensioners out of their house because the land it sits on gained in value…

> Turfing pensioners out of their house because the land it sits on gained in value faster than their pension

This is a well-known canard. If someone can't pay their tax on a primary residence, you put a lien on the property that becomes enforceable when the ownership changes hands, whether by sale or inheritance. No one gets "thrown out" of their homes.

Re: Book Review: Progress and Poverty

#32

Post by TimPC »

MiddleEndian wrote: post #22

On a personal level, I like the LVT as a single tax because then I wouldn't have to do any paperwork. They give me a bill, I pay a bill, there's no exceptions, I can improve (or fuck up) my property, and overall the numbers won't change (unless a ton of people improve or fuck up their properties around me as well). Nice and easy. But it also seems effective overall. After I quit my last job and before I got my curren…

The transition is hard. I'm convinced it has to be both gradual and compensated.

Re: Book Review: Progress and Poverty

#33

Post by bee_rider »

mrob wrote: post #9
scythe wrote: post #6

Earlier quoted context omitted.

The biggest problem with LVT is surprisingly simple: accurately assessing the value of land is very hard, and ensuring that the assessment process is fair is therefore extremely hard. LVT experiments in history tend to run into problems when people feel that their land has been valued incorrectly, leading to a vocal minority that despises the law. That results in something like this: https://nassimtaleb.org/2016/08/i…

People who disagree with their assessed value should be given the option to declare whatever value they like. If they take this option, the state should have the option of buying their property at the declared value, plus some extra to cover transaction costs.

This is a 'clever' solution to property taxes. But a land value tax specifically just taxes based on the value of the land. This is supposed to incentivize people to use their land as productively as possible -- with a property tax, any improvements you make increases your tax bill, with a land value tax, it doesn't.

A moral argument for it is, if you own an empty lot which is gaining in value as the community grows around it, you are essentially leeching extra value from the community through no work of your own. This sort of behavior is punished heavily with an LVT, as your taxes go up but you don't get any extra revenue from your empty lot.

Re: Book Review: Progress and Poverty

#34

Post by TimPC »

jmole wrote: post #19

It seems like the biggest challenge to Georgism is that municipality/county/state/federal regulations on land use would have a significant effect on land value. A landlord might lobby for restrictive land use policy while sitting on a parcel, and then lobby for opening those restrictions when it comes time to sell. Essentially avoiding the tax by using government policy to suppress the true land value. There are solu…

The problem is current speculation on land is relatively easy. Having to lobby for a change in zoning one-way when you buy the land and having to take on the risk of not being able to get the change of zoning back the other way when you sell it is a significant risk. I'd also argue because LVT rates are much higher as percentages than property tax rates, holding the land would still be more expensive than the solution.

I agree there are also significant issues with zoning, but zoning alone won't solve the problem. A bunch of people capture a bunch of economic rents unearned, and it would be much better for government to capture these economic rents as part of the system and charge us less tax on things that actually are earned.

Re: Book Review: Progress and Poverty

#35

Post by zozbot234 »

TimPC wrote: post #32
MiddleEndian wrote: post #22

On a personal level, I like the LVT as a single tax because then I wouldn't have to do any paperwork. They give me a bill, I pay a bill, there's no exceptions, I can improve (or fuck up) my property, and overall the numbers won't change (unless a ton of people improve or fuck up their properties around me as well). Nice and easy. But it also seems effective overall. After I quit my last job and before I got my curren…

The transition is hard. I'm convinced it has to be both gradual and compensated.

Since all taxes are ultimately borne by land (specifically, by resources in fixed supply), it's not at all clear that compensation is required for a neutral tax shift.

Re: Book Review: Progress and Poverty

#36

Post by TimPC »

its_ethan wrote: post #29
mynameishere wrote: post #21

Earlier quoted context omitted.

It seems extremely unappealing to me. It seems like something a wealthy apartment-dweller in a tall building in a dense city would come up with to move taxation from himself to the guy in the country with two acres and a mobile home. The more I think about it, the more I'm sure that's the actual motivation.

That sort of assumes that the owner of the apartment-dweller's property doesn't just increase their rent (pass along that tax). As other people pointed out, there should/would have to be some mechanism to value the land for the LVT. The land the apartment building is built on in the city would have a higher value than some 2 acres out in the country. The owner of that land would have to pay the LVT, and the rent for…

Interestingly because the supply of land is inelastic its supply curve is a straight vertical line. If you charge the tax directly to tenants they lose say $20,000 in LVT tax. This lowers their demand for land by $20,000. Because the supply curve is a straight vertical line the intersection of the supply and demand curve is now $20,000 lower. They literally pay $20,000 less for land rent. This doesn't work with anything that has elastic supply like buildings where the tax would lower the supply and the new intersection of the supply and demand curves would result in the tenant and owner sharing the tax. But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants.

Re: Book Review: Progress and Poverty

#37

Post by bee_rider »

its_ethan wrote: post #12
bee_rider wrote: post #8

Earlier quoted context omitted.

Huh. Property tax is already a thing of course, but I guess if the LVT was going to replace all taxation the stakes would be much higher. In an urban setting, it seems to me that the land value should be... reasonably uniform, unlike property, which should make assessing much easier, right? But that's just getting the number. Whether people are happy with the number is a whole 'nother problem.

I would have assumed exactly the opposite in terms of urban land being uniform in value. 10 acres that are 30 minutes from Des Moines, IA are going to be very similar in value (price people are willing to pay) compared to 10 acres that are 10 miles down the road. Rural land is generally quite uniform and more likely to be functionally the same. In an urban area, say Los Angeles, 10 acres in Malibu (an area with very…

With a land value tax we could at least come up with pretty straightforward equations, right? Some starting value from being in town, then add something for oceanfront property, then add something some extra bump based on distance from some set of amenities provided by the community (parks, subways, etc). It is at least possible to come up with something, unlike, what, the assessor's gut feeling about how nice your house is? This seems like it is putting much more arbitrary power in the hands of some random person.

Re: Book Review: Progress and Poverty

#38

Post by TimPC »

zozbot234 wrote: post #35
TimPC wrote: post #32

Earlier quoted context omitted.

The transition is hard. I'm convinced it has to be both gradual and compensated.

Since all taxes are ultimately borne by land (specifically, by resources in fixed supply), it's not at all clear that compensation is required for a neutral tax shift.

Some people argue no compensation is required but I think in reality an LVT at 100% reduces the price of all land to $0. Given that land is substantial portion of retirement savings in our current economy, completely obliterating land prices without any compensation seems morally dubious. Perhaps if you do it slowly enough that you give everyone time to adjust and make the market adjustments gradual enough that people who need to sell land for retirement can still get something like 90% of the value initially it could work.

Re: Book Review: Progress and Poverty

#39

Post by mcguire »

bee_rider wrote: post #4
TimPC wrote: post #2

Progress and Poverty was once the most popular economics book ever written. The Georgist Theory in it, and the land value tax proposed by it is still endorsed by economists today. This review clearly illustrates the ideas from George that land captures gains that in a more fair society we'd want to go to labour.

I may have to pick this up -- as someone with no economics training at all, a land value tax seems extremely appealing and intuitive to me. I'd already like to become a complete partisan in favor of this policy, but I guess it would make sense to read what the actual justification is, for it, haha.

Absolutely! The biggest advantage for most, particularly readers of HN, is described in part II (http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...): "...landlords cannot pass Land Value Tax (LVT) on to their tenants..." Renting an apartment in SF would therefore both be cheap, because the LVT encourages high-density, and tax-advantaged, especially if the LVT is (as it is supposed to be) the only tax.

The bottom line is that this idea has literally no downside.

Re: Book Review: Progress and Poverty

#40

Post by dkarl »

mynameishere wrote: post #21
bee_rider wrote: post #4

Earlier quoted context omitted.

I may have to pick this up -- as someone with no economics training at all, a land value tax seems extremely appealing and intuitive to me. I'd already like to become a complete partisan in favor of this policy, but I guess it would make sense to read what the actual justification is, for it, haha.

It seems extremely unappealing to me. It seems like something a wealthy apartment-dweller in a tall building in a dense city would come up with to move taxation from himself to the guy in the country with two acres and a mobile home. The more I think about it, the more I'm sure that's the actual motivation.

The land value tax incentivizes the owner of scarce, valuable urban land to put it to good social use, such as building apartments for hundreds of people to live in. You would have to be astronomically wealthy to own two acres in a dense city and keep it solely for your own enjoyment. If you want two acres all to yourself, you can move to the countryside, where land is cheap, and one person can conceivably pay the property taxes on an engineer's salary.
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