Letter from a Young Distributist: Georgism and Distributism • Hacker News Board

Re: Letter from a Young Distributist: Georgism and Distributism

#71

Post by TimPC » Thu, Apr 28, 2022, 7:52 PM UTC

pyradius wrote: post #60

geocon wrote: post #56

Earlier quoted context omitted.

I think you have a mistaken view of who is actually making money in this equation. Developers do not make all that much money from building housing, which is actually a productive contribution to society. Homeowners, on the other hand, make hand over fist by simply sitting on land absorbing rents: https://pbs.twimg.com/media/EyJN_g3UUAIW0f0?format=jpg&name=... https://www.wsj.com/articles/homes-earned-more-for-owners…

Yep the suburbs are a money-loser for governments as noted in https://www.youtube.com/watch?v=7Nw6qyyrTeI

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.

Re: Letter from a Young Distributist: Georgism and Distributism

#72

Post by AnimalMuppet » Thu, Apr 28, 2022, 8:15 PM UTC

geocon wrote: post #28

TimPC wrote: post #24

Earlier quoted context omitted.

Okay some things don't add up. You can't have a Georgist tax as a single revenue source for the government and calculate it off something other than what the government needs for revenue. Either you calculate the Georgist tax rate on the unimproved land value, you add other taxes to government or you slash and burn through government spending to deal with the capped revenue. It's living in fantasy land to say Georgis…

Well, while Georgism is most famous for advocating for land value taxation the LVT itself is not the only Georgist tax. All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents and are candidates for taxation. Furthermore, cutting taxes on labor and capital increases the value of land significantly, so much of the revenue "lost" by cutting income t…

> All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents and are candidates for taxation.

That fixes my biggest complaint about Georgism.

Take Google, for instance. What is the basis of their income? It's not the land they own or occupy. It's that they own google.com.

Where does IBM's money come from? Not from the land they own in upstate New York. It comes from their patent portfolio.

Re: Letter from a Young Distributist: Georgism and Distributism

#73

Post by TimPC » Thu, Apr 28, 2022, 8:22 PM UTC

adgjlsfhk1 wrote: post #70

TimPC wrote: post #58

Earlier quoted context omitted.

I think it's misleading to measure things in revenue per square foot. Most government services aren't provided based on the number of square feet but rather based on the number of people. The per capita revenue for denser developments is lower than the per capita revenue for single family housing. When you get to rural densities you have issues of providing services because of the lack of scale of communities but sub…

the counter examples are things like roads, pipes, wires, and Public transit which make to up a high percent of city and state budgets and scale with density.

These examples are fair. At the provincial level Transport, Pipes and Wires all are small enough expenditures to not warrant their own category breakdown in the budget and are lumped into a 14.6% of budget other category.

At the city level it's tricky because the breakdown my city provides in the budget separates into capital and operating rather than other categories. From what I can tell from the 50 page report, water pipes cost approximately 25% of budget and transport costs approximately 5%. Wires aren't listed in enough details to get an estimate.

My best sense from the numbers in the breakdown is the expenses for my suburb breakdown into roughly 60% per capita items, and 40% per area items. So 60% of our budget gets more expensive as you add people with low per capita taxation and 40% gets cheaper as you add more density.

Re: Letter from a Young Distributist: Georgism and Distributism

#74

Post by dragonwriter » Thu, Apr 28, 2022, 8:32 PM UTC

geocon wrote: post #28

TimPC wrote: post #24

Earlier quoted context omitted.

Okay some things don't add up. You can't have a Georgist tax as a single revenue source for the government and calculate it off something other than what the government needs for revenue. Either you calculate the Georgist tax rate on the unimproved land value, you add other taxes to government or you slash and burn through government spending to deal with the capped revenue. It's living in fantasy land to say Georgis…

Well, while Georgism is most famous for advocating for land value taxation the LVT itself is not the only Georgist tax. All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents and are candidates for taxation. Furthermore, cutting taxes on labor and capital increases the value of land significantly, so much of the revenue "lost" by cutting income t…

> All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents

Natural resources are consumed inputs and don't generate rents (extraction rights, which are a subset of property rights in land, do); intellectual property isn't land in the usual economic sense (it is not naturally occuring, so not land; it is durable and created, and therefore capital in the classic division.) It does generate rents, but that's typical of capital goods generally.

(In modern use it's more typical to expand the use of “capital” to include land and thereby encompass durable, rent-generating subjects of property rights than to expand “land”.)

Re: Letter from a Young Distributist: Georgism and Distributism

#75

Post by TimPC » Thu, Apr 28, 2022, 8:32 PM UTC

geocon wrote: post #55

TimPC wrote: post #53

Earlier quoted context omitted.

Can you make a strong case for transitioning just property taxes to land value taxes without transitioning other forms of taxation? I'd argue that this would result in a fairly sizeable wealth transfer from homeowners to condo developers. To me it feels like the decrease in sales and income taxes underpins the whole structure to make it feasible for the average American.

I think you have a mistaken view of who is actually making money in this equation. Developers do not make all that much money from building housing, which is actually a productive contribution to society. Homeowners, on the other hand, make hand over fist by simply sitting on land absorbing rents: https://pbs.twimg.com/media/EyJN_g3UUAIW0f0?format=jpg&name=... https://www.wsj.com/articles/homes-earned-more-for-owners…

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 of proposals and projects in my region to the point that many stakeholders in the community want to see less development not more. Economic theory says developers are making enough money to continue to propose developments so I don't see why we need to change taxation laws to make those developers generate even higher returns at the expense of homeowners. Property tax in my region is a sizeable expense for many homeowners and seeing it undergo a sizeable increase would be a hardship for many in the community.

Re: Letter from a Young Distributist: Georgism and Distributism

#76

Post by brightly-salty » Thu, Apr 28, 2022, 9:16 PM UTC

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…

I agree that land has to some extent been widely redistributed in the United States because of the frontier, which continued to exist and distribute land ownership up until the 1880s. However, since the frontier died, land ownership distribution has stayed more or less the same. Compare the coasts to England, where land mobility is even more limited because the frontier died even longer ago. What Georgism and a Land Value Tax would do is to re-create the frontier at the margin of production, where land is free and there is no tax to be paid, but the land itself is still workable without profit. Recreating the frontier would re-introduce land mobility and make land more liquid, while also countering NIMBY desires to keep their land and neighborhoods the way they were fifty or a hundred years ago.

Companies are arguably not very widely distributed. The stock market is ownership of companies by those who do not work for it, so the distance between the worker and the owner is still greater than in small businesses, family businesses, worker cooperatives, or even traditional corporations with Employee Stock Ownership Plans. Trust-busting is one way to decrease that distance, although true anti-monopoly policies like a land-value tax or a tax on intellectual property enforcement would truly remove the privileges these big companies have and allow smaller ones to truly compete.

Re: Letter from a Young Distributist: Georgism and Distributism

#77

Post by TimPC » Thu, Apr 28, 2022, 9:26 PM UTC

pyradius wrote: post #67

TimPC wrote: post #6

Earlier quoted context omitted.

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…

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 substantial assets. Any financial institutional whose continued existence was threatened by the transition would be bailed out in exchange for a significant fraction of its equity. The costs of the compensation would be paid by a capital levy.

I don't think this proposal is feasible. Many people owe more than their entire net worth on their primary residence. The plan is to tax land to the point that the value of land for that residence goes to zero leaving only the value of the structure on that land. The structure value is often a small fraction of the total current value of the home. This puts people sizeably underwater and would result in a fair number of people forcibly vacated from their homes as banks sold the structures to pay the mortgages.

The bailouts of various financial institutions would be expensive, as would the system shocks from the various losers on the mortgage debt. Lastly, many people in old age sell their homes to pay for living in a nursing home until they die. This option would become infeasible if we drastically reduce the value of their homes and given their old age they would have no viable alternative to generate alternate capital.

His proposed solution to this is a vague and nebulous "case-by-case" compensation for disproportionate costs without adequate assets. Depending on your definition of inadequate assets and disproportionate costs the total cost of this compensation can range from nearly $0 to the vast majority of all current property values. Keep in mind that a sizeable percentage of the population owns a single family residence that is a disproportionate portion of their net worth and generally factors into their retirement plans. I'd argue that every such individual is disproportionately impacted and does not have adequate assets.

Zillow estimates the total residential property market in the US at $33.6 trillion dollars. I can't find good statistics for single family owners vs landlords but it's easy to assume that close to 50% of the market will be situations I described. This makes it quite possible for the homeowner compensation to be in the area of $16.8 trillion dollars.

Similarly, mortgage debt is often held by pension funds that would struggle to pay their pensions out if that wealth suddenly evaporated or was vastly reduced due to people abandoning their homes. The current US residential mortgage market is $17.6 trillion dollars. Assuming half of this qualified for hardship we'd have $8.8 trillion dollars of subsidies.

There are other institutions and individuals adversely effected and a program to adequately compensate them all may well cost as much as the current US debt which is currently $30.5 trillion dollars.

I think Tideman vastly understates the problem. The introduction of LVT would arguably be the largest wealth transfer within a nation in human history and by his own admission mostly transfers wealth from the old to the young. It has sizeable risk of transferring wealth people can't spare, particularly transferring wealth away from those no longer work and cannot easily generate new wealth.

Re: Letter from a Young Distributist: Georgism and Distributism

#78

Post by skybrian » Thu, Apr 28, 2022, 9:45 PM UTC

yellowapple wrote: post #46

skybrian wrote: post #14

Earlier quoted context omitted.

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 woul…

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.

Re: Letter from a Young Distributist: Georgism and Distributism

#79

Post by skybrian » Thu, Apr 28, 2022, 10:00 PM UTC

brightly-salty wrote: post #76

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…

I agree that land has to some extent been widely redistributed in the United States because of the frontier, which continued to exist and distribute land ownership up until the 1880s. However, since the frontier died, land ownership distribution has stayed more or less the same. Compare the coasts to England, where land mobility is even more limited because the frontier died even longer ago. What Georgism and a Land…

I'm not sure what you mean by "recreating the frontier?" Are you talking about cities, suburbs, or rural areas?

Changing property tax rates doesn't change cities or suburbs into something else, at least not at first. All the property is still owned by the same people. People still live in the same houses.

Re: Letter from a Young Distributist: Georgism and Distributism

#80

Post by brightly-salty » Thu, Apr 28, 2022, 10:14 PM UTC

skybrian wrote: post #79

brightly-salty wrote: post #76

Earlier quoted context omitted.

I agree that land has to some extent been widely redistributed in the United States because of the frontier, which continued to exist and distribute land ownership up until the 1880s. However, since the frontier died, land ownership distribution has stayed more or less the same. Compare the coasts to England, where land mobility is even more limited because the frontier died even longer ago. What Georgism and a Land…

I'm not sure what you mean by "recreating the frontier?" Are you talking about cities, suburbs, or rural areas? Changing property tax rates doesn't change cities or suburbs into something else, at least not at first. All the property is still owned by the same people. People still live in the same houses.

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 than production, even if it's economic rent value is low. With a land value tax, people who hold land purely for speculative sales prices would sell it because the sales price would drop to zero, therefore freeing up those pieces of land for families to move to and work upon. The frontier, the margin of production, where only hard work would make the land valuable, reopens and other land also becomes more mobile because there is a disincentive to holding land for speculative purposes, reducing the price of housing in general and contributing to housing liquidity.