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Book Review: Progress and Poverty

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Re: Book Review: Progress and Poverty

#61

Post by ryukafalz »

TheCoelacanth wrote: post #59
colinmhayes wrote: post #49

Earlier quoted context omitted.

Rental prices would not change, it's just that more of the money would go to government instead of the landlord, especially for low density housing.

They probably would decrease somewhat, because there's no longer an incentive for landowners to prevent people from building housing to keep the supply low.

This is something I’ve been wondering about with LVT. Wouldn’t they still have an incentive to stop people from building more dense housing near them? Even more of an incentive than now, in fact? Because the more people that can live and work in the immediate area near them, the more valuable the land is, and the more they’ll pay in tax.

Re: Book Review: Progress and Poverty

#62

Post by TimPC »

rufus_foreman wrote: post #56

For those who think a Georgist tax makes sense, why not apply the same type of logic to income? If someone is employed as say, a teacher making $75,000 a year, but would be most productive as a software developer making $200,000 a year, should we tax them on $200,000 a year?

Georgists get around this issue by abolishing income taxes entirely.

Regardless, I think there are fundamental differences between the two cases. Most notably land doesn’t have freedom of choice the way people do.

We also currently tax land based on its market value which corresponds to the most productive use of the land so LVT doesn’t change this.

Re: Book Review: Progress and Poverty

#63

Post by its_ethan »

bee_rider wrote: post #37
its_ethan wrote: post #12

Earlier quoted context omitted.

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 h…

> 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).

How do you know you weren't also supposed to take the floor plan or exterior paint color into consideration? How do you account for the value lost from having obnoxious neighbors? What happens when, in the future, a nice bookstore/coffee shop is opened up down the street, or alternatively a liquor store? Ultimately, how do you know if whatever equation you've constructed is exhaustive or "correct"?

It might sound like "well then you just adjust the equation" but this wouldn't be without consequence. One outcome of getting that equation incorrect is that a home is valued at a point where the imposed tax prices out anyone from purchasing the home - it would sit empty/foreclosed for as long as it takes a local government bureaucracy to come in and attempt to re-assess its value. So you could effectively be removing houses from a competitive home buying market, which is going to increase the price of other homes until they too have priced people out of the area. Multiply that by entire zip codes, and while you're working on adjusting that equation, you could end up having a real shit show on your hands with a bunch of people being displaced or in worse financial positions.

> 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.

I agree with the point that a home assessment is strange and arbitrary, but you're really just saying we should replace the assessor who goes and visits a property with a group of assessor's that just come up with an equally arbitrary equation that gets blanket applied to entire cities? Why is that preferable to something like just using the previous home sale price or, honestly, just staying with the current system that we know is generally very functional?

Re: Book Review: Progress and Poverty

#64

Post by its_ethan »

TimPC wrote: post #36
its_ethan wrote: post #29

Earlier quoted context omitted.

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 anyth…

> 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.

This might sound good in theory, but it is a very hard sell to say that's how it pans out in practice. You even say: "This doesn't work with anything that has elastic supply like buildings" - so as soon as you put a building (apartments) on the property, this theory goes out the window.

> But it's well understood and accepted in the economic literature that landlords end up paying the tax not tenants.

I don't dispute that there would be some competition among landlords as to how much of their LVT they can pass off to tenants - it wouldn't be 100%. But to claim that there would be no impact to tenants strikes me as hilariously naive.

Re: Book Review: Progress and Poverty

#65

Post by its_ethan »

lordnacho wrote: post #60
its_ethan wrote: post #12

Earlier quoted context omitted.

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…

Someone came up with this delicious game: Landowners decide for themselves what value their land has, and pay tax accordingly. But whatever they say the value is, someone else is allowed to buy it for.

It's certainly a fun game, but does that mean if I decide my property is worth $100,000, accurate or not, I am forced to sell it just because someone comes along and decides they want to buy it? Also, is this a game that happens every year to allow for appreciation?

For a realistic implementation, why not just use the fact that the landowner already decided what the value their land has when they purchased it and/or paid people to develop it. Why not just use those values?

Re: Book Review: Progress and Poverty

#66

Post by AnimalMuppet »

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.

> Since all taxes are ultimately borne by land ...

Objection, your honor. Assumes facts not in evidence.

How is income tax ultimately borne by land? Sales tax? Inheritance tax? Gasoline tax? Corporate income tax on corporations like SpaceX, Goldman Sachs, and Intel?

"Ultimately borne by land" may have made sense a century or three ago, when (almost) all income ultimately came from the land. That's not the world we live in any longer.

Re: Book Review: Progress and Poverty

#68

Post by TimPC »

xboxnolifes wrote: post #42
markdown wrote: post #18

Earlier quoted context omitted.

Doesn't work that way. A subway gets built near your property. The benefit of greater access accrues to you more than it does someone 10km away. So your LVT has to go up. Now you can't afford the taxes, and you're forced to sell and move to somewhere with lower LVT. It's bought by someone who will put it to better use. Maybe an apartment block instead of your single family home. Over time, every piece of land is put…

> Now you can't afford the taxes, and you're forced to sell and move to somewhere with lower LVT. It's bought by someone who will put it to better use. Maybe an apartment block instead of your single family home. > Over time, every piece of land is put to its most productive use. But before it gets there, there will be some pain for the individuals who choose (or are forced) to move because they can't afford to the i…

This is basically Prop 13 in California which the world outside of California conclusively thinks is stupid. It’s incredibly unfair to give people massive tax breaks for buying a long time ago. The alleged benefits don’t reflect the immense cost.

In this case you’re trying to replace the majority of all taxation with a value that doesn’t change with time. People get massive economic incentives to never move. People get massive economic incentives to resist change.

I’d rather deal with a range of options from people selling and moving to introducing liens upon the property due at sale than have to deal with the mess that is 50 year stale land values and the associated negligible taxes that result.

Re: Book Review: Progress and Poverty

#69

Post by kevinpet »

nickff wrote: post #3
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.

> "... the land value tax proposed by it is still endorsed by economists today." Your comment is somewhat misleading, as it seems to suggest that all or most economists endorse Georgism, which is not true. Some vocal minority of economists are pro-Georgism, but I haven't seen any data suggesting it is the most popular taxation scheme.

Economists generally consider LVT the best theoretical tax, but with significant practical challenges. There are several links in the first section of https://en.wikipedia.org/wiki/Land_value_tax as well as further down under Modern economists.

Re: Book Review: Progress and Poverty

#70

Post by rufus_foreman »

TimPC wrote: post #62
rufus_foreman wrote: post #56

For those who think a Georgist tax makes sense, why not apply the same type of logic to income? If someone is employed as say, a teacher making $75,000 a year, but would be most productive as a software developer making $200,000 a year, should we tax them on $200,000 a year?

Georgists get around this issue by abolishing income taxes entirely. Regardless, I think there are fundamental differences between the two cases. Most notably land doesn’t have freedom of choice the way people do. We also currently tax land based on its market value which corresponds to the most productive use of the land so LVT doesn’t change this.

>> land doesn’t have freedom of choice the way people do

I mean that's your best argument, but it's not as clear cut as that to me. What I do with my property and what I do with my labor are both matters of freedom of choice. But yeah, I get you. I don't want to be told what to do with my labor. But I don't want to be told what to do with my land either.

>> We also currently tax land based on its market value which corresponds to the most productive use of the land

No, don't agree. If tore down the house I live in and built a 12 story apartment building on the same piece of land, it would be worth more and be taxed more. We currently tax property on its market value, not land on its market value. At least where I live.

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