Redfin Economist says land value tax will fix the economy

45:03

> right past the simple solutions and right to the hard-to-understand, change-the-paradigm solution

Rich Hickey's 'Simple made Easy' talk[0](don't need to watch this, but I figure most on HN have already seen this) goes into this, and I would argue that the 'simple' solutions that you mention are complected, whereas the LVT really truly is 'simple'. Simple does not mean easy. It can be hard to understand and yet still simple. It can inevitably change the fabric of society and still be simple.

> The refinement on my original suggestion (increasing capital gains on rent-seeking activity) is simpler.

In addition to stopping building, in much the same way that Prop 13 does, this would result in no one selling property for just about any reason unless they couldn't come up with money in any other way. Transactions are good, as a transaction implies that both sides are better off. They would sit on it until the building rotted, build a house on it, live in for 2 years, and then sell it for full price. LVT is simpler.

This has been studied, and it does not help.

>> Can a Transaction Tax or Capital Gains Tax smooth House Prices? Nicole Aregger, Martin Brown* and Enzo Rossi**[1]

>> Our results suggest that higher taxes on capital gains exacerbate house price dynamics while transaction taxes have no impact on house price growth. These findings support the existence of a lock-in effect of capital gains taxes on housing supply. They further suggest that taxes on real estate capital gains and transaction values are not suitable measures to prevent excessive house price growth. ... Taxes on capital gains, and in particular penalty taxes on short-term gains, seem to fuel price growth by making house owners more reluctant to sell their property. The lock-in effect is strongest in tourist destinations where we expect to find more real estate transactions motivated by pure investment considerations.

> government to collect more taxes from the circus, but the circus is the problem.

I'll open this by saying that I think we both agree with a lot of fundamentals here. By far the most important aspect of the LVT to me is that it eliminates speculation and rent-seeking activity. In many ways it would be fine to implement the LVT and then simply burn the money. Maybe you could do that at the federal level. The key aspect is that the incentives are set-up properly. One of the things I think we could do with the LVT money is IP reform, but that's another story.

We're probably going to have to agree to disagree here, but this point might help us see how we're getting to such a large difference. I see government spending as it is today as fairly bad, and you might agree. But the reason that it is horrible is that when government spends, it is local homeowners that reap the benefits(good short video explaining this here[2]). And it is that wrongful capture of value that makes public spending look so terrible. It seems obvious that there is a ton of waste going on, and with such waste comes the ability for corruption to hide. But many projects do provide great value, and it's projects that largely could not be done through individuals or corporations alone.

If like in that video explains, that one enhancement to the city provides five times the value in land, they can take the profits from that and build more projects, or if they have run out of projects that provide positive returns, they can simply give it back as a UBI. If the returns are as large as they claim, it should be obvious when we miss.

> making land more expensive without reducing property tax much

Under a perfect Land Value Tax, we would remove the property tax and raise the land tax such that the price of land will fall to zero. You would transact the value of simply the building above it. A $250k house to build, both in middle of nowhere and in Manhattan, would trade for $250k.

[0]: https://www.youtube.com/watch?v=SxdOUGdseq4

[1]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1780826

[2]: https://youtu.be/KVMGzkSgGXI

That may not last long if the Texas GOP continues to emulate California housing policies by seeking to repeal property taxes; if they do that they will soon start to also imitate the California-style housing crisis.

With that said, there are net-neutral transition strategies.

One of them is for the government to simply give all land owners money equal to the value of their land, but that might create inflation. Another might be instead to give all land owners a tax credit equal to the value of the land that can be spent on their land tax.

We can do this fast, we can do this slow. We can give aid, we can give tax credits, we can phase things in. If the LVT advocates, which includes many of the world's top economists, are right, then small transitions will quickly yield results that we can snowball into bigger transitions. The important aspect to me, is that eventually we reach a point where incentives align.

The FACT of the matter is that people who can't afford housing don't care about any of that.