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Letter from a Young Distributist: Georgism and Distributism

progressandpoverty.substack.com

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Re: Letter from a Young Distributist: Georgism and Distributism

#121

Post by imtringued »

anamax wrote: post #101
colinmhayes wrote: post #98

Earlier quoted context omitted.

Taxing people for doing good things disincentivizes people from doing good things. Taxes shouldn't be a punishment for being successful. Georgists think real estate should be taxes based off the unimproved value of the land, what the owners do with the land is up to them, but if they don't use it well their taxes will put them underwater and someone else will make better use of it.

My point is that parking lots can easily be the best use.

Okay, let's assume land is expensive and you do need the parking lots. Georgism just tells you, please use the land more efficiently. Underground parking or a multi story garage become profitable as they reduce the amount of land being used and therefore reduces land value taxes you have to pay. Ethical tax avoidance!

Re: Letter from a Young Distributist: Georgism and Distributism

#122

Post by imtringued »

TimPC wrote: post #77
pyradius wrote: post #67

Earlier quoted context omitted.

These are not show-stoppers, nor are they something that Georgists have failed to consider. "Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse. It is true that many properties have mortgages that would exceed the value of the property if land taxes were increased significantly. This makes it ne…

Tideman's proposal is for the costs to the system to be absorbed by the current holders of property. As a first approximation, people would continue to hold title to the land to which they now hold title, and would continue to owe whatever money they now owe. But compensation could be sought on a case-by-case basis, by individuals who stood to bear the costs of the moral accident disproportionately and did not have s…

You are absolutely correct, this may be a multi generational project and as far as we know politicians don't think beyond their term. Future generations, even those born today, count for nothing.

Perhaps we should just convert all inherited land into 20 year leases with a land value tax being introduced after the lease expires?

Re: Letter from a Young Distributist: Georgism and Distributism

#123

Post by imtringued »

TimPC wrote: post #11
brightly-salty wrote: post #5

Earlier quoted context omitted.

I think you might misunderstand Georgism, or maybe I did a poor job explaining it. Georgism does not propose taxing improvements (buildings etc), only the actual land. So many peoples tax burden would be decreased, and if the bank owns the land as in a mortgage, they are the ones paying the tax, not the people taking out the mortgages.

Total Federal US Tax Revenues in 2021: $4.05 trillion Total US Mortgages in 2021: $17.1 trillion Once you add the taxes for other jurisdictions of government I can see taxes reaching 30% of total mortgage value. It's fairly clear to me that owning land is extremely expensive in a Georgist society that needs to generate the levels of taxation that fund current government. If land value tax replaces income tax it needs…

You are ignoring that income taxes and other taxes reduce land rents. You can't tax the same dollar twice after all. The entire reasoning behind a single tax system is that every dollar is taxed through land value taxes in this case.

Yes this does mean that renting/owning low density housing will be more expensive but your income will be much higher to begin with as it isn't taxed.

For example 20% VAT and 30% income tax mean 56% of your money can be spent on housing. Without those taxes you will have almost twice as much money to spend which means you can afford higher land value taxes and if you decrease the amount of land you use, your effective tax burden will go down but so do the costs to maintain infrastructure and other public services.

Re: Letter from a Young Distributist: Georgism and Distributism

#124

Post by imtringued »

TimPC wrote: post #47
geocon wrote: post #43

Earlier quoted context omitted.

Because land has fixed supply, as you've said, the tax is perfectly efficient: it causes zero deadweight loss. But LVT actually has positive externalities as well- namely, it makes it nearly impossible to speculate, which with land consists of buying land and holding it off the market unused or underused in order to sell it later. Speculation is very inefficient and also quite common, so removing it actually makes th…

I think I need to think about this some more. It seems like the goal of government is to figure out the tax rate that counters the land value perfectly without taxing any more. The fact that it is unimproved land value means we aren't stuck in an efficiency trap since a diverse enough set of uses can improve the land sufficiently to generate a reasonable economic profit in non-rent form. Countering speculation is def…

Overtaxing is definitively a problem but I personally am not a fan of extremes. Even just 50% of the ideal tax rate would be sufficient to significantly improve an economy while not ruining anything by being overzealous. There will have to be an escape hatch so that people can defer taxes for 5 years.

Re: Letter from a Young Distributist: Georgism and Distributism

#125

Post by pydry »

imtringued wrote: post #110
brightly-salty wrote: post #80

Earlier quoted context omitted.

Perhaps I'm explaining it poorly, that's entirely possible. The frontier is where land value is zero, at the margin of production. It is possible to get value out of the land, but only with hard work. Currently this land may be held without using it for production, but it largely doesn't exist. This is because the lack of a land value tax incentivizes landholders to own all land for the purpose of speculation rather…

I am always confused when the idea is that the price of land should be 0. Yes I agree it should be low but let's be pragmatic. It would be enough if the land price is a fraction of a yearly salary. Say $20000.

It doesnt really make sense from a moral or economic perspective to have it be owned it's purely about tradition and the implicit threat of violence.

A tradition that arbitrarily prints free money for some and arbitrarily imbues economic burden on others.

The electromagnetic spectrum is sort of like land from an economic perspective except it "appeared" only recently. Nobody owns that or puts a price on it. Everybody purchases a limited lease from the government via auction. This was, in a sense, a frontier.

The Duke of Westminster didnt inherit electromagnetic spectrum from his ancestors coz they won a war in 1066.

Re: Letter from a Young Distributist: Georgism and Distributism

#126

Post by pydry »

TimPC wrote: post #6
brightly-salty wrote: post #5

Earlier quoted context omitted.

I think you might misunderstand Georgism, or maybe I did a poor job explaining it. Georgism does not propose taxing improvements (buildings etc), only the actual land. So many peoples tax burden would be decreased, and if the bank owns the land as in a mortgage, they are the ones paying the tax, not the people taking out the mortgages.

I get that Georgism doesn't tax the improvements. I think we have a fundamental disagreements about how mortgages work. A mortgage doesn't make the bank the owner of the land. Even if we strangely ruled that it did, that would lead to strange situations where as long as people were paying a mortgage they could live tax free on their land. But the minute that mortgage disappeared they'd be on the hook for the tax valu…

The government already backstops most residential mortgages through freddie/fannie. Absorbing the losses and taking in LVT instead of mortgage payments will be nothing more than an accounting difference for many mortgages (e.g. say, some pension funds).

Some land owners should have to eat losses. Thats the whole point. If you live on a portfolio of land inherited through your 15th century duke great grand uncle you should be getting a job at McDonalds rather than living off the labor of others.

The problem is less technical and more political. Try to deprive large scale land holders of their property and they will bankroll a fascist uprising and launch a coup while foreign leaders in hock to property owners elsewhere will back the coup and enact punishing sanctions to prevent it from being seen to work.

It'll happen one day probably but the transition will be bloody and violent as it always has been when land is redistributed.

Re: Letter from a Young Distributist: Georgism and Distributism

#127

Post by brightly-salty »

anamax wrote: post #99
brightly-salty wrote: post #95

Earlier quoted context omitted.

I do understand that mortgages are on both the land and the buildings. We were talking about land only though. It is irrelevant to the question of who pays the land value tax that the mortgage also includes the buildings.

"Who pays" was relevant when the claim was that banks holding mortgages would pay. Let's review: "if the bank owns the land as in a mortgage, they are the ones paying the tax, not the people taking out the mortgages." You don't understand mortgages in a way that is essential to your argument. Banks holding mortgages don't own the property. At most, they own the right to grab the property if they're not paid, which is…

I will admit that I misunderstand TimPC’s point about people having to pay the land value tax in addition to the mortgage; I misunderstood mortgages in terms of who really owns the land.

But the point still stands. If the land value tax is paid by the homeowner, the sales price of the land is zero (under a 100% LVT), so the mortgage rates are lowered by an equivalent amount. So there is no additional burden upon the homeowner. If we flip the model and say the bank owns the land, they will pay the land value tax until it is paid off. In this case also, the sales price also drops to zero so the mortgage just incorporates the land value tax and the building payment. In all possible arrangements, there is no additional burden on the homeowner until the mortgage is paid off.

Re: Letter from a Young Distributist: Georgism and Distributism

#128

Post by brightly-salty »

skybrian wrote: post #116
snidane wrote: post #106

Earlier quoted context omitted.

Urban sprawl is an expansion of a single city as the land in its center rises. It applies to both small and large cities and it doesn't mean people moving from a larger city to a smaller one, unless the smaller city's area overlaps with commuting radius of the bigger city. Under a georgist system there is no such thing as real estate speculation. Real estate there doesn't cost multiples of peoples' net worth and incr…

Seems like if the increase in the tax rate is hardly noticeable then it isn't going to lower land prices very much? You'd need a hefty tax to make desirable locations not worth spending money on.

Land prices decrease proportionally with the level of LVT implemented: 0% of today gives a 100% sales price; 25% LVT gives a 75% sales price; etc; 100% LVT as I propose gives a 0% sales price. Of course the prices increase in a particular transaction more than the exact amount if the buyer wants to live on the land for a long time, though.

Re: Letter from a Young Distributist: Georgism and Distributism

#129

Post by TimPC »

imtringued wrote: post #119
TimPC wrote: post #71

Earlier quoted context omitted.

Suburbs are a money-loser for governments if you allocate income tax revenue at the location of the job. That isn't really a fair allocation though, as suburbs are part of the reason professionals take jobs in big cities. If you either average the income tax revenue between where someone lives and where someone works or put it entirely where someone lives suburbs easily pay for themselves.

That's a recipe for corruption. If a politician receives no strings attached income taxes even if those are intended to be spent to improve location and pay for infrastructure, he is sure to spend them as if they have none of those strings attached.

I never said to give the income tax to the suburbs. I said the model of whether or not suburbs are tax sources or tax sinks depends on how this is computed. People create models where cities that swell to double the size in the day generate all the tax revenue and every other community is a financial burden. This isn’t saying cities get all the money. I’m just saying how you measure tax generation has big impacts on which communities generate more taxes than they consume.

Re: Letter from a Young Distributist: Georgism and Distributism

#130

Post by TimPC »

pyradius wrote: post #109
TimPC wrote: post #71

Earlier quoted context omitted.

Suburbs are a money-loser for governments if you allocate income tax revenue at the location of the job. That isn't really a fair allocation though, as suburbs are part of the reason professionals take jobs in big cities. If you either average the income tax revenue between where someone lives and where someone works or put it entirely where someone lives suburbs easily pay for themselves.

Alas there is no relationship between an income tax and personal consumption of spatial services. There is absolutely no coherent reason to do as you suggest, and every reason for the land to pay the cost of delivering those services, along with the rest of the rental value of land.

I’m not suggesting altering the flow of tax money. I’m suggesting changing how it’s measured when you determine which communities are sources and sinks. It’s very superficial to say a city with a job generates 100% of the income tax from that job when the city doesn’t house the person and provides barely and services to that person or their family. If you measure things that way of course cities are the only tax sources. But it’s a bad way to measure things.

It’s more reasonable to measure where taxes are coming from by some combination of where people live and where they work. If you do this then suburbs are not tax sinks. This isn’t saying you change how you distribute tax revenue it’s only saying you change how you measure where it comes from.

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