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Does Georgism work? Is land a big deal?

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Re: Does Georgism work? Is land a big deal?

#171

Post by djokkataja »

Just for fun, purely as a thought experiment...

Could digital "real estate" or "territory" be taxed in the same way -- not literal digital territory, like in games, but considering "ad spaces" as virtual territory? I suppose more generally, any "technology company" which primarily makes its profits by virtue of establishing a network effect, wherein they earn ever more money as more people show up.

One possible objection: there are fixed costs for sustaining the virtual territory. It doesn't just exist; at a bare minimum, sustaining the software requires servers which in turn require maintenance, and the software itself would require some developers to fix bugs. But these particular costs can be indicated and accounted for without too much difficulty.

Another possible objection: there are no competitors providing the virtual territory; there is only the one company. If they hadn't created it, it wouldn't exist. So... if this kind of tax was to be executed on virtual territory, the company would have to be broken up and divided into competitors that could attempt improving on things in different ways, and the infrastructure providing the virtual territory would have to be nationalized.

As an example, maybe the competitors can buy keywords from nationalized Google, and then they can change the ad space that people who search for those keywords see; they become the rentiers of that ad space. But to be able to afford the taxes on keywords that are in high demand, they have to improve upon those ad spaces. Maybe they provide a shiny gold effect and sparkles around the ad -- only if the people paying them to show ads for those keywords want it, of course.

Re: Does Georgism work? Is land a big deal?

#172

Post by mech422 »

mindslight wrote: post #94
TulliusCicero wrote: post #71

Earlier quoted context omitted.

> But it doesn't make the converse true. It does work that way, though. Except it's not exactly 'better', but rather 'more economically productive', which may or may not be better depending on your value system and the specific cases that arise. > For a rural example, a single house on several acres is much nicer than a ticky-tack suburban panopticon (or even worse a HOA). Arguably nicer, yes, but the suburban hellsc…

> the suburban hellscape is definitely a lot more economically productive Neither dense suburbs nor rural suburbs are defined by economic productivity, because they're residences. If this shifts with work from home, their focus will still be on quality of life rather than packing people in as close as possible for more "specific revenue". > the rural living you describe is probably no better If you have to drive ever…

>>Furthermore I'm currently in a quasi-rural area with gigabit muni fiber, so I don't buy that argument either. Whether there is the political will to build out modern Internet access or suffer the extractive oligopoly depends entirely on the politics of an area.

Our experiences color our views. I grew up in rural towns (I ran as fast as I could when I was 18.

oh - and btw, pulling utilities can be quite expensive - 'going a little further' isn't always easy (or even possible).

So while a 'quasi-rural' (suburb with larger yards? :-) ) might be your idea of heaven, it doesn't necessarily translate well across the board.

In short, what people want/like or what is 'better' is pretty hard to get a consensus on.

Re: Does Georgism work? Is land a big deal?

#173

Post by neilparikh »

CryptoPunk wrote: post #88

Any transition to a LVT should accompany one-time compensation to existing land owners. The same should apply to any other repeal of rent-seeking institutions, whether it's anti-labor-competitive laws privileging labor unions, licensure barriers privileging taxi medallion holders, etc. The British used this method to end slavery throughout their empire, which meant: 1. much more rapid end to slavery, due to less poli…

Just out of curiosity (ie. not trying to ask you a "gotcha" question), would you apply this idea to measures to reduce climate change? Oil companies and companies/individuals dependent on cheap oil would presumably lose a lot. I'm not sure if their current behavior is exactly rent-seeking, but asking them to internalize their externalities is fairly close to abolishing rent seeking I think.

And if your answer is yes, how would we value the economic loss they face?

Re: Does Georgism work? Is land a big deal?

#174

Post by ItsMonkk »

PragmaticPulp wrote: post #72
Hermitian909 wrote: post #47

Earlier quoted context omitted.

> all seem to be presented in a way that deliberately ignores any downsides If I understand correctly, the point of this article (one of several) is just to establish that a land tax would constitute a large amount of money. I get the impression the article was supposed to merely establish whether a land tax would generate a substantial amount of money whether good or bad, though admittedly the author tips his hand a…

> If I understand correctly, the point of this article (one of several) is just to establish that a land tax would constitute a large amount of money. We could make a land value tax constitute any amount we’d like. Just take the value you want it to produce, divide by the assessed value of all of the land, and you have your tax rate. That’s not an interesting question, though. The interesting part is whether or not t…

If you tax the land at a rate greater than a 100% LVT, the market price of the building will be less than the improvement value, and therefore there will not be a good reason for builders to build. This will create distortions that are harmful and you will ultimately see less tax money.

Re: Does Georgism work? Is land a big deal?

#175

Post by larsiusprime »

djokkataja wrote: post #171

Just for fun, purely as a thought experiment... Could digital "real estate" or "territory" be taxed in the same way -- not literal digital territory, like in games, but considering "ad spaces" as virtual territory? I suppose more generally, any "technology company" which primarily makes its profits by virtue of establishing a network effect, wherein they earn ever more money as more people show up. One possible objec…

You mean like domain names?

Re: Does Georgism work? Is land a big deal?

#176

Post by runnerup »

davjhan wrote: post #158
runnerup wrote: post #153

Earlier quoted context omitted.

In areas of housing shortages, the rent with LVT would be whatever it currently is without LVT. Theoretically, landlords are already extracting the maximum rent price possible in housing-constrained markets like NYC/SF/etc. What would change is that the land-owner would make less profit. Potentially, a unit which is currently renting for $1100/mo in Manhattan might be assigned an LVT of $1500/mo. In that case, the la…

I see. Could it be possible in areas like Detroit where the cost of renovating the house for profitability is just too prohibitively expensive that the house itself just isn't sellable? Could home-owners now somehow be stuck in situations where they are forced into debt by holding a property that just sucks money out? Especially if implemented too suddenly?

Ideally in low-value areas like Detroit, the land tax would be low as well. A "negative rent yield" situation should generally "only" occur where, for an extreme example, you could put a skyscraper to house 4,000 people on the land, but instead put a brownstone to house 4. There you might be taxed at the same land rate as the skyscraper next door, if skyscrapers were ubiquitous in that neighborhood.

If you were fabulously wealthy, you could choose to maintain your single-family brownstone there and simply pay the millions in annual taxes. The local school district wouldn't notice a difference. But most landowners would decide to partner with a developer and build a skyscraper so that they can earn more than the LVT, which should lower rents for the laborers in that city.

> Could home-owners now somehow be stuck in situations where they are forced into debt by holding a property that just sucks money out? Especially if implemented too suddenly?

Yes. As could large commercial real-estate holders. The reason is simple: if you raise taxes, the resale value of the land will be lower. A graduated implementation could help a bit, but the final "price" will still get instantly priced in with a bit of a time discount.

Proponents of Georgian LVT are generally comfortable with lowering the resale prices of real-estate. They may underestimate the degree of the change, or misjudge the wider effects of most properties suddenly being worth less. However, proponents generally don't like the idea of people earning their retirement just by holding land. So the first-order effects on resale prices of land are more of a feature than a bug.

I'm not entirely convinced that second- and third- order effects wouldn't be potentially devastating. I believe if the nation had been founded with a Georgian LVT things would have worked out much for the better! But I'm afraid of how much of our economy we have precariously perched on infinitely rising land prices.

Re: Does Georgism work? Is land a big deal?

#177

Post by larsiusprime »

davjhan wrote: post #156
larsiusprime wrote: post #152

Earlier quoted context omitted.

So you're basically describing the slumlord situation. Let me grab a figure from the book review: https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q... So imagine that the return from land was taken away. The only thing a landlord can charge rent on now is providing a nice building (capital) and good service & maintenance (labor). The first property, "a nice house" would be able to charge rent -- because it…

Thanks for the concise explanation! You must be the original author. I've shared the article with many friends. A few follow up questions: - I'm interested to see how this affects multi-family housing. Do the same mechanics come to play? In an apartment complex, I assume that the positive or negative value of the property would be way greater than the land value, no? - Do the resulting effects of the 3rd property onl…

Yup, I'm the author.

- As far as I know, yes, LVT would definitely incentivize multi-family housing over single-family housing.

- I'm not sure exactly where the threshold would be. Under current market conditions where landlords can collect land rents, it'd be any place where the property is so bad that the rent is less than you'd be able to collect if it were, say, a parking lot. This might still be a good investment for the slumlord because the presence of the teardown property has negative value and makes it cheaper to buy than if it were just an empty lot, and then they just refuse to fix anything and collect the land rents.

- Not 100% sure what you're asking but maybe I can answer it this way -- So locational value comes from the activity of your neighbors. That's why "location, location, location" is a thing. If you're in a good neighborhood, your land value goes up because it's a nice place to be and people will pay more for that privilege. If there's, say, a crackhouse next door that will depress your land value for obvious reasons.

Re: Does Georgism work? Is land a big deal?

#178

Post by neilparikh »

slibhb wrote: post #28

I think the biggest problems with Georgism are 1. in some sense it calls for the expropriation of land by the government 2. it's unfair to change the rules in the middle of the game and 3. it's logistically difficult to carry out. As far as unfairness goes, imagine a couple, 65, retired, paid off their mortgage, paid income taxes all their lives until retirement, now living off their savings. It's unfair to start tax…

> it's unfair to change the rules in the middle of the game

This has already happened many times, and is happening now. Two examples:

- abolition of slavery

- taxing of carbon, and anti climate change measures in general

Should we stop trying to reduce climate change because it changes the rules on oil companies and those dependent on cheap oil?

Re: Does Georgism work? Is land a big deal?

#179

Post by smnrchrds »

ItsMonkk wrote: post #174
PragmaticPulp wrote: post #72

Earlier quoted context omitted.

> If I understand correctly, the point of this article (one of several) is just to establish that a land tax would constitute a large amount of money. We could make a land value tax constitute any amount we’d like. Just take the value you want it to produce, divide by the assessed value of all of the land, and you have your tax rate. That’s not an interesting question, though. The interesting part is whether or not t…

If you tax the land at a rate greater than a 100% LVT, the market price of the building will be less than the improvement value, and therefore there will not be a good reason for builders to build. This will create distortions that are harmful and you will ultimately see less tax money.

More than 100% over how long?

Re: Does Georgism work? Is land a big deal?

#180

Post by neilparikh »

bedobi wrote: post #58

I don't like how "Georgism" and any number of other literally hundreds of years old economic ideas are presented as some underdog, unknown thing. Just no. Economists know about these things, and they're pretty much universally in favor of taxing land, just like they're pretty much universally in favor of taxing carbon and any number of other things.

It doesn't really matter what economists think about it if the general public and politicians are against/unaware of it.
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