Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Letter from a Young Distributist: Georgism and Distributism

progressandpoverty.substack.com

Post reply on HN
Print view View original

141–150 of 165 posts

Re: Letter from a Young Distributist: Georgism and Distributism

#141

Post by TimPC »

bombcar wrote: post #90
TimPC wrote: post #75

Earlier quoted context omitted.

There are a number of big developers in my province most of which have generated substantial returns to their investors. In the current environment where property values are high and increasing holding onto land is quite profitable. All developers do this. They also create proposals to develop land and that activity has some returns to it as well. I agree that building housing is productive, I just see large numbers…

I think the argument is to switch it so things remain the same at first - 10% tax on 100k land is the same as 1% tax on 1m land+improvements. Coincide with an appropriate drop in income taxes and you could get something. The key would be people agreeing in principle and then boiling the frog over a hundred years.

The percentages will work out to what they need to be to generate sufficient revenue for government. I disagree fundamentally with the idea you can tweak them independently solely to be fair to certain groups.

The tax on land+improvements is fundamentally different from the tax on land when different users are considered. Large condo buildings are high value improvements so taxing only land value represents a huge savings for them. Single family houses are generally structures worth only a small fraction of the land they are on, often less than 20% so the savings are marginal. If you adjust the land value tax to generate current property tax revenues the buildings will pay less than they do currently and the homeowners will pay more.

I agree you need the whole system, perhaps implemented gradually. If you change just the property tax portion you offer homeowners increased expenses without any benefit.

Re: Letter from a Young Distributist: Georgism and Distributism

#142

Post by TimPC »

goodpoint wrote: post #54
TimPC wrote: post #4

Georgism and Distributism is interesting but short of a plan to actually transition the tax infrastructure in that direction this article reduces to an unactionable history lesson. Still worth reading, but not powerful enough for those who want economic change. I'd argue that transitioning is an extremely hard problem. The Georgist system taxes property at extreme rates. In particular, the taxes on property ownership…

> I'd argue that transitioning is an extremely hard problem. The Georgist system taxes property at extreme rates. Forgive the naive suggestion, but tax rates on property can be be introduced progressively - few percentage points per year - for many decades.

Doing something progressive is probably the right way to go. I'm not sure how large a drop in property values merely announcing the policy would have. I'm also not sure how long a time window would be necessary. I think if the change is sufficiently gradual it might be possible to do so without compensation for either mortgage owners or property owners. Of course for that to be true it has to still make sense for current mortgage owners to pay their mortgages. I think that suggests a window size of larger than 25 years, but I'm not sure how much larger than that it would need to be.

Re: Letter from a Young Distributist: Georgism and Distributism

#143

Post by brightly-salty »

throwaway4aday wrote: post #135
imtringued wrote: post #120

Earlier quoted context omitted.

You mean Georgists think that taxes on all of those should be $0? Yes, that is the entire point of Georgism, only the land is taxed because land can be used for anything and if the land value is higher than the shopping center can afford, then it means people want something more valuable than a shopping center there.

> the land value I think this is the key issue that gets glossed over. Who decides the land value? How is that decision arrived at? Is it a purely bureaucratic process where the community has no say? Is it set at a federal level where it will likely be completely disconnected from the reality of a particular municipality? A lot would hinge on the answers to these questions and I'd take a bet that if this were ever im…

Common solutions include appraisal (like property taxes are today) or a Vickrey auction, where we auction off the land, and the first place bidder gets it at the price of the second bid.

Re: Letter from a Young Distributist: Georgism and Distributism

#144

Post by skybrian »

TimPC wrote: post #140
skybrian wrote: post #78

Earlier quoted context omitted.

This is confused. If expenses are higher than revenue then there is no profit in the deal. And then, not making the loan is the bank's best choice.

I think the problem is not with new loans though. As property value is reduced to structure value in the new system, many individuals will be able to own property without mortgages at all given the far lower cost of doing so. Some may still need mortgages and banks will have to provide a viable vehicle for doing so for the fraction of the population that needs them. The bigger issue is what happens to current mortgag…

Yes, the transition would be pretty horrific both for property owners and banks, and therefore for the entire economy (see 2008).

I think that would be true for any reform that's actually effective in driving property values down.

Re: Letter from a Young Distributist: Georgism and Distributism

#145

Post by skybrian »

Thorentis wrote: post #108
skybrian wrote: post #7

It seems like the US already has widespread ownership of property? Home ownership isn't exactly rare. NIMBYism is a consequence of widespread ownership; it's small land owners exercising political power. In the cities, converting apartment buildings to condos is another form of this. Of course, many people believe this is inadequate and we need to go further, with low-income housing and the like. But it's been a long…

Distributism is primarily about widespread ownership of the means of production, and does not necessarily include home ownership, though this should be a logical down stream effect. One early way in which this could be easily done - and which tech companies are leading the way in - is to normalise the idea of workers in a company being given company equity. While it is still a long way off from actually owning the me…

This is not true, or at least not at larger conpanies. Company stock is just an investment; it gives you almost no say in decision-making unless you have a huge amount.

Employees get more influence (not control) over what happens by working at the company and contributing to internal discussions. That's mostly gone when you leave.

Re: Letter from a Young Distributist: Georgism and Distributism

#146

Post by TimPC »

brightly-salty wrote: post #127
anamax wrote: post #99

Earlier quoted context omitted.

"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…

Existing contracts don't magically change just because the government changes how the system of taxation works. I'm not saying it's impossible to have a fair system of mortgages with LVT. I'm saying there are a lot of existing mortgages with specific terms already outlined and no legal basis for changing them. Those mortgages will suddenly be far larger than the new value of the property underlying them. Chances are the homeowners will mostly vacate the property instead of paying those mortgages off and the mortgage holder will then sell the property for a small fraction of the mortgage.

In this system, the homeowner loses any value they had accumulated in their house and the mortgage holder loses a large portion of the mortgage. This is what I'm saying the problem is.

Re: Letter from a Young Distributist: Georgism and Distributism

#147

Post by TimPC »

skybrian wrote: post #144
TimPC wrote: post #140

Earlier quoted context omitted.

I think the problem is not with new loans though. As property value is reduced to structure value in the new system, many individuals will be able to own property without mortgages at all given the far lower cost of doing so. Some may still need mortgages and banks will have to provide a viable vehicle for doing so for the fraction of the population that needs them. The bigger issue is what happens to current mortgag…

Yes, the transition would be pretty horrific both for property owners and banks, and therefore for the entire economy (see 2008). I think that would be true for any reform that's actually effective in driving property values down.

I think the effect size is far far larger than 2008 which would look like a minor correction compared to this change. If the effect size was only as bad as the 2008 correction we'd have an easy time doing this.

You're comparing a roughly 80% reduction in house prices with a promise that taxation will absorb further rises in the asset price of land to a 30% reduction in house prices with a promise that the market will eventually recover and grow to new heights. The first effect is nearly triple the second one, the change in future conditions makes it even more extreme.

Re: Letter from a Young Distributist: Georgism and Distributism

#148

Post by pwinnski »

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're saying that land taxes should supply 100% of federal tax revenue, but 0% of state/local revenue?

Currently most property taxes are local, not federal. You're also missing the bit about a citizen's dividend which seeks to offset some of this.

Re: Letter from a Young Distributist: Georgism and Distributism

#149

Post by TimPC »

yellowapple wrote: post #42
TimPC wrote: post #4

Georgism and Distributism is interesting but short of a plan to actually transition the tax infrastructure in that direction this article reduces to an unactionable history lesson. Still worth reading, but not powerful enough for those who want economic change. I'd argue that transitioning is an extremely hard problem. The Georgist system taxes property at extreme rates. In particular, the taxes on property ownership…

> This means that people owning property with a mortgage would suddenly be forced to sell their property at the near zero prices that Georgism is designed to foster. Not necessarily. Relatively few homeowners occupy all that much land value; it's probable that most homeowners' dividends would entirely offset their tax burdens, in which case they stand to benefit if anything.

I think this is fundamentally untrue. It seems plausible for condo owners in large buildings where each unit represents a tiny portion of land. For single family residences consisting of detached or semi-detached homes on slices of valuable land in a city or suburb of a city that's almost certain not to be true.

Most of the people you're taxing in a land value tax are residential uses. Taxing the money doesn't magically multiply it and it's impossible to return nearly all of the tax money to constituents since governments have substantial other expenses.

My estimate is that a current home worth $1.5 million in a suburb of Toronto has land value of roughly $1.25 million and is likely to be taxed at 10% of land value. This suggests an LVT of $125,000. If the general trend of all residential real estate follows this government raises only 2.688 trillion dollars from residential property. To fund federal government we'd have to raise another 1.362 trillion and then we'd have additional amounts to raise for each other level of government. I'm not certain whether we can do this from the additional amounts on commercial and industrial property but it seems to be a close approximation.

The point is the funds leave very little left for the citizen's dividend unless we want to vastly reduce existing government programs.

Re: Letter from a Young Distributist: Georgism and Distributism

#150

Post by bombcar »

TimPC wrote: post #141
bombcar wrote: post #90

Earlier quoted context omitted.

I think the argument is to switch it so things remain the same at first - 10% tax on 100k land is the same as 1% tax on 1m land+improvements. Coincide with an appropriate drop in income taxes and you could get something. The key would be people agreeing in principle and then boiling the frog over a hundred years.

The percentages will work out to what they need to be to generate sufficient revenue for government. I disagree fundamentally with the idea you can tweak them independently solely to be fair to certain groups. The tax on land+improvements is fundamentally different from the tax on land when different users are considered. Large condo buildings are high value improvements so taxing only land value represents a huge sa…

That varies widely in different areas - California houses are often not worth the land they’re sitting on but in the Midwest the lot may be worth only about as much as the cost to get sewage and power to it.
Post reply on HN