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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

#41

Post by larsiusprime »

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…

Two things:

1) "In particular, the taxes on property ownership are supposed to capture the entire value of renting the property."

Not true. Only the unimproved value of land is meant to be taxed. This amounts to a complete exemption on taxes on buildings.

The current proposal that is often on the table is not to go for classical 100% Georgist LVT, but to simply collect the exact same amount of property taxes we do now, but to shift the burden off of buildings and onto land. This can be done right now with existing property tax regimes. The burden would fall mostly on underutilized land, parking lots, and vacant lots in city centers, where the lion's share of land value is concentrated. Proposals for this sort of reform are in the works right now in various US cities.

If you'd like to see a practical policy paper on the subject see here by Tideman, Kumhof, Hudson, and Goodhart (the Goodhart of Goodhart's Law, by the way): https://voxeu.org/article/post-corona-balanced-budget-fiscal...

2) Georgism is not just about real estate. It's about properly dealing with scarce economic assets that can't be created and which invite speculation

Norway's sovereign wealth fund is an extremely successful example of applying Georgist principles to natural resources, for just one example:

https://progressandpoverty.substack.com/p/norways-sovereign-...

Re: Letter from a Young Distributist: Georgism and Distributism

#42

Post by yellowapple »

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.

Re: Letter from a Young Distributist: Georgism and Distributism

#43

Post by geocon »

TimPC wrote: post #38
TimPC wrote: post #31

Earlier quoted context omitted.

I think it's extremely important to undertake a cost benefit analysis of the end state to decide if we want to transform society in that direction. So I disagree strongly with any comment of the form "don't get too caught up in the end state". I agree there are some other things you can tax. I presume those are also taxed at precisely the economic rents they create? My point is that government needs some sort of tax…

Can you explain in what sense LVT is the most efficient form of tax? I do understand that normally when you tax something malleable you get less of it so it's often best to tax things that aren't malleable. But what precisely is LVT more efficient at? Does it generate the fewest negative externalities per unit of tax revenue? If so, how do we evaluate between different types of externality? Have we accounted for the…

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 the economy better than it was before an LVT.

As for the tax being too high, if people started to vacate land that would mean the tax rate is over 100% of the land value (if it's at 100% people won't vacate, they won't be able to extract rents from it but it won't be an economic loss). Governments have every incentive not to tax land over 100% value because they actually lose money from doing so, so that's a pretty good security that it won't happen.

Re: Letter from a Young Distributist: Georgism and Distributism

#44

Post by TimPC »

larsiusprime wrote: post #41
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…

Two things: 1) "In particular, the taxes on property ownership are supposed to capture the entire value of renting the property." Not true. Only the unimproved value of land is meant to be taxed. This amounts to a complete exemption on taxes on buildings. The current proposal that is often on the table is not to go for classical 100% Georgist LVT, but to simply collect the exact same amount of property taxes we do no…

My default reaction to 1) is that I dislike it. I feel like the incentive to labour to accept the tax of unimproved land value instead of property tax is the removal of income and sales taxes that accompany it. Taxing unimproved land value instead of improved land value in a system as close as possible to the current one feels like a massive wealth transfer from homeowners to condo developers. As it is, condos represent a problem for many communities in that they are often taxed at lower percentage rates and have a lower market value than houses. This means communities consisting of more condos have lower tax revenue per capita compared to communities consisting of more houses. Suburbs resist densification because the decreased revenue per capita generally means declining services. I think this a fundamental cause of NIMBY that largely gets ignored.

Re: Letter from a Young Distributist: Georgism and Distributism

#45

Post by clairity »

geocon wrote: post #36
clairity wrote: post #33

Earlier quoted context omitted.

LVT has nothing to do with improved vs. unimproved land. both improved and unimproved land have productive and unproductive aspects. LVT is solely targeted at economic rents . this is the key to understanding LVT. otherwise, the idea that it's the most economically efficient tax will not make sense, and the tax itself will not seem to make sense. on the other hand, what the government will do tax-wise is political, n…

One of the nice things about LVT is that it aligns those incentives though, since what increases tax revenue the most is investment in public infrastructure and services. It's the Henry George Theorem at work: https://en.wikipedia.org/wiki/Henry_George_theorem

that's assuming politicians are compelled at least a little bit by the public good. unfortunately, our politico-economic systems have become more and more captured by moneyed interests, insulating politicians from those wider incentives.

but to be fair, that's not unique to georgism. we need to solve for that problem generally.

Re: Letter from a Young Distributist: Georgism and Distributism

#46

Post by yellowapple »

skybrian wrote: post #14
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.

Uh, you might want to learn about tax incidence. If the bank pays the tax, why wouldn't they pass it on to the mortgage holder in the form of higher interest rates or other fees? There are exceptions when businesses are investing for growth and expenses are paid by investors, but normally no business is going to agree to a contract where they lose money. The money to pay expenses comes from customers.

> If the bank pays the tax, why wouldn't they pass it on to the mortgage holder in the form of higher interest rates or other fees?

Because land has an inelastic supply, and therefore its value is driven entirely by demand. Banks already charge as high an interest rate as they can get away with (i.e. one commensurate with the buyer's credit rating and the value of the land); trying to raise it to account for LVT would immediately backfire due to the resulting profit loss (in this case, from people being less willing to take out such mortgages).

Re: Letter from a Young Distributist: Georgism and Distributism

#47

Post by TimPC »

geocon wrote: post #43
TimPC wrote: post #38

Earlier quoted context omitted.

Can you explain in what sense LVT is the most efficient form of tax? I do understand that normally when you tax something malleable you get less of it so it's often best to tax things that aren't malleable. But what precisely is LVT more efficient at? Does it generate the fewest negative externalities per unit of tax revenue? If so, how do we evaluate between different types of externality? Have we accounted for the…

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 definitely a strong positive effect.

I worry that the overtaxation causing vacation mechanism isn't very efficient because if the tax takes a small part of the land value improvement it seems that the government gets additional unearned revenue while only land with little to no improvement would be vacated. I think people only vacate if the taxes cut into their additional revenues too steeply. I'm not sure exactly where the too steep point is, but I think governments would have an incentive to overestimate the value of land.

Re: Letter from a Young Distributist: Georgism and Distributism

#48

Post by TimPC »

geocon wrote: post #39
TimPC wrote: post #35

Earlier quoted context omitted.

I worry that the Henry George Theorem suggests a government can spend money in order to tax more of it. It potentially solves the issue of governments not having enough revenue, since arguably they can tune unimproved land values upwards to the levels they need. Of course it also introduces the problem of governments tuning unimproved land values to the level they need. Tax revenues have grown from $3.32 trillion in…

Most increases in land value are for the construction of infrastructure and other investments which make people more productive and increase wages, so while land values increase that investment increases wages also, meaning that it shouldn't have much of an effect on people's ability-to-pay.

Can you give examples of how this is true? I feel like the main government spending that made me more productive was some transit spending before I was born and their education spending. I feel like most government services aren't this.

Even things like health care, which arguably keeps me healthy enough to work isn't distributed in any sort of uniform way so the productivity increase from it isn't likely to match the land value tax increase.

I think there are a lot of things that can increase land value 22%. I think some of them might even raise average wages 22%. I think almost none of them will raise each individual wage by 22%.

Re: Letter from a Young Distributist: Georgism and Distributism

#50

Post by TimPC »

lukifer wrote: post #10
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. While you're completely correct, I don't think this is a reason to abandon the enterprise (other extremely hard problems: sending a human safely to the moon; democratic rule of law; the elimination of slavery). While I ideologically support the so-called "Single Tax" model, it is indeed extremely difficult to imagine how this would be implemented at the fed…

I'm hesitant to implement locally without changes at larger levels. I feel like the system depends in a fundamental way on the removal of sales and income taxes on individuals to account for the increase in taxation for less improved land. Without the changes in the other forms of taxation I feel the change in property tax amounts to a wealth transfer from homeowners to condo developers.
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