Don't Tax You... Don't Tax Me...
April 21, 2005 1:49 AM Subscribe
Who was Henry George? Now that those of us in the US are between tax day and Tax Freedom Day® I thought it would be useful to highlight an interesting alternative that for some reason never gets debated, the land value tax. As a quasi lefty libertarian I think the LVT is a near-perfect refinement that substantially mitigates the moral inconsistencies/failure modes of traditional neolibertarianism. Remember, to prove legal title to your land you must trace it back to the person who stole it!
A little dyspeptic background - Marx on George and the land tax.
posted by TimothyMason at 2:26 AM on April 21, 2005
posted by TimothyMason at 2:26 AM on April 21, 2005
heh, I like that cite. Georgism is pretty unique in taking fire from all sides.
The whole thing is therefore simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one.
was apparently restated by Marx:
"Henry George is the capitalist's last ditch."[1]
posted by Heywood Mogroot at 3:00 AM on April 21, 2005
The whole thing is therefore simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one.
was apparently restated by Marx:
"Henry George is the capitalist's last ditch."[1]
posted by Heywood Mogroot at 3:00 AM on April 21, 2005
Forward this one on to Tom Delay -- LVT would be, in American terms, the ultimate Red State tax. I'd guess that the average value per acre of land, excluding improvements, in Democratic voting precincts is in the range of 10-50 times higher than the average value per acre of land in Republican voting precincts.
It would also be a guarantee of sprawl -- if you have to pay tax based on the value of land, there's virtue to building housing and work places on the cheapest possible land.
posted by MattD at 5:48 AM on April 21, 2005
It would also be a guarantee of sprawl -- if you have to pay tax based on the value of land, there's virtue to building housing and work places on the cheapest possible land.
posted by MattD at 5:48 AM on April 21, 2005
It would also be a guarantee of sprawl -- if you have to pay tax based on the value of land, there's virtue to building housing and work places on the cheapest possible land.
If you own an acre in Manhattan and you have to pay taxes based on the land's unimproved value, you build the tallest possible building. This would increase the housing stock most drastically in urban areas. Further, it would increase the owner's incentive to improve existing properties, making slums less slummy.
Throw the progressives a bone and exempt undeveloped land in the name of conservation, and you can get some dems behind it, as well. In fact, those on the left who rail against corporations while ignoring the fundamentally unfair and distorting effects of leaving Ricardian Land Rents untaxed are either ignorant or dishonest.
posted by Kwantsar at 6:17 AM on April 21, 2005
If you own an acre in Manhattan and you have to pay taxes based on the land's unimproved value, you build the tallest possible building. This would increase the housing stock most drastically in urban areas. Further, it would increase the owner's incentive to improve existing properties, making slums less slummy.
Throw the progressives a bone and exempt undeveloped land in the name of conservation, and you can get some dems behind it, as well. In fact, those on the left who rail against corporations while ignoring the fundamentally unfair and distorting effects of leaving Ricardian Land Rents untaxed are either ignorant or dishonest.
posted by Kwantsar at 6:17 AM on April 21, 2005
Democratic voting precincts is in the range of 10-50 times
Income and sales taxes already hit the (democratic) urban areas "disproportionately". The Rural Red map areas are already known to be federal and state welfare queens.
It would also be a guarantee of sprawl -- if you have to pay tax based on the value of land
Note that Georgism is the community collection of ground rent, while our current system leaves the ground rent to be pocketed nearly entirely by the landlord. So the tenant (rent payer) would see no difference in rent values under a Georgist system.
And, more importantly, taxing land value separate from capital improvements greatly encourages redevelopment of inefficient lower density/aging housing stock in high demand areas to more effectively return the location rent of the property in question.
What LVT also does is penalize land speculators, wipes them out really. Land speculation is also a cause of sprawl, as landowners hold their properties off the market in relatively unproductive uses to cover the ridiculously low property tax, waiting for the community to expand into their holdings and thus raise values.
posted by Heywood Mogroot at 6:28 AM on April 21, 2005
Income and sales taxes already hit the (democratic) urban areas "disproportionately". The Rural Red map areas are already known to be federal and state welfare queens.
It would also be a guarantee of sprawl -- if you have to pay tax based on the value of land
Note that Georgism is the community collection of ground rent, while our current system leaves the ground rent to be pocketed nearly entirely by the landlord. So the tenant (rent payer) would see no difference in rent values under a Georgist system.
And, more importantly, taxing land value separate from capital improvements greatly encourages redevelopment of inefficient lower density/aging housing stock in high demand areas to more effectively return the location rent of the property in question.
What LVT also does is penalize land speculators, wipes them out really. Land speculation is also a cause of sprawl, as landowners hold their properties off the market in relatively unproductive uses to cover the ridiculously low property tax, waiting for the community to expand into their holdings and thus raise values.
posted by Heywood Mogroot at 6:28 AM on April 21, 2005
LVT - Great way to encourage sprawl.
What supports sprawl? And, what happens when that support 'goes away' or becomes expensive? (Hints: Water, energy, resource consumption of XXXX)
Given an addiction to the resulting tax income to sprawl, what happens if the land is 'needed back' for, say farming? How happy will the local government be to give up that revenue?
What if someone owns 40 acres near a city and wants to continue his organic farm operation? How can they resist the 'valuation' of the city that the land should now grow housing, not plants?
posted by rough ashlar at 7:19 AM on April 21, 2005
What supports sprawl? And, what happens when that support 'goes away' or becomes expensive? (Hints: Water, energy, resource consumption of XXXX)
Given an addiction to the resulting tax income to sprawl, what happens if the land is 'needed back' for, say farming? How happy will the local government be to give up that revenue?
What if someone owns 40 acres near a city and wants to continue his organic farm operation? How can they resist the 'valuation' of the city that the land should now grow housing, not plants?
posted by rough ashlar at 7:19 AM on April 21, 2005
LVT - Great way to encourage sprawl
In what way?
How happy will the local government be to give up that revenue?
LVT is independent of local government to some extent. LVT is simply what someone is willing to pay to use a given plot of land exclusively over a given period of time.
What if someone owns 40 acres near a city and wants to continue his organic farm operation?
"...we have the market-gardener - the market-gardener liable to be disturbed on the outskirts of great cities, if the population of those cities expands, if the area which they require for their health and daily life should become larger than it is at present.
"What is the position disclosed by the argument? On the one hand, we have one hundred and twenty thousand persons in Glasgow occupying one-room tenements; on the other, the land of Scotland. Between the two stands the market-gardener, and we are solemnly invited, for the sake of the market-gardener, to keep that great population congested within limits that are unnatural and restricted to an annual supply of land which can bear no relation whatever to their physical, social, and economic needs - and all for the sake of the market-gardener, who can perfectly well move farther out as the city spreads and who would not really be in the least injured."
-- Winston Churchill, 1909
posted by Heywood Mogroot at 7:30 AM on April 21, 2005
In what way?
How happy will the local government be to give up that revenue?
LVT is independent of local government to some extent. LVT is simply what someone is willing to pay to use a given plot of land exclusively over a given period of time.
What if someone owns 40 acres near a city and wants to continue his organic farm operation?
"...we have the market-gardener - the market-gardener liable to be disturbed on the outskirts of great cities, if the population of those cities expands, if the area which they require for their health and daily life should become larger than it is at present.
"What is the position disclosed by the argument? On the one hand, we have one hundred and twenty thousand persons in Glasgow occupying one-room tenements; on the other, the land of Scotland. Between the two stands the market-gardener, and we are solemnly invited, for the sake of the market-gardener, to keep that great population congested within limits that are unnatural and restricted to an annual supply of land which can bear no relation whatever to their physical, social, and economic needs - and all for the sake of the market-gardener, who can perfectly well move farther out as the city spreads and who would not really be in the least injured."
-- Winston Churchill, 1909
posted by Heywood Mogroot at 7:30 AM on April 21, 2005
What supports sprawl?
Necessity of 'skipping over' unsafe neighborhoods like South Central LA.
Low density housing.
Bedroom communities with 'affordable' mortgages.
LVT by its nature focuses on the productive use of land. Higher productivity will outbid lower productivity.
Our current taxation scheme penalizes developers for improving stock (for improvements are taxed along with location value), and property rate caps like California's Prop 13 reduce the turnover of single family homes and also encourage rental property speculation, driving up the price of housing for everyone.
LVT also redirects ground rents from landowners to local communities. I think it's safe to say if California had a LVT regime it would not need its 8% sales tax or income taxes. This shifts taxation away from producers and consumers and onto land speculators and the relatively unproductive landlords who profit from their useless role as rent collectors.
posted by Heywood Mogroot at 7:39 AM on April 21, 2005
Necessity of 'skipping over' unsafe neighborhoods like South Central LA.
Low density housing.
Bedroom communities with 'affordable' mortgages.
LVT by its nature focuses on the productive use of land. Higher productivity will outbid lower productivity.
Our current taxation scheme penalizes developers for improving stock (for improvements are taxed along with location value), and property rate caps like California's Prop 13 reduce the turnover of single family homes and also encourage rental property speculation, driving up the price of housing for everyone.
LVT also redirects ground rents from landowners to local communities. I think it's safe to say if California had a LVT regime it would not need its 8% sales tax or income taxes. This shifts taxation away from producers and consumers and onto land speculators and the relatively unproductive landlords who profit from their useless role as rent collectors.
posted by Heywood Mogroot at 7:39 AM on April 21, 2005
Instead of just claiming that the LVT will encourage sprawl, rough ashlar, why don't you provide a logical reason why that's the case.'
posted by Kwantsar at 7:42 AM on April 21, 2005
posted by Kwantsar at 7:42 AM on April 21, 2005
That LVT deters urban sprawl is now becoming widely accepted even in mainstream economics, with endorsements being expressed by such luminaries as Ralph Nader[5] and Nobel prize-winning economist William Vickery[6] .
posted by Kwantsar at 7:44 AM on April 21, 2005
posted by Kwantsar at 7:44 AM on April 21, 2005
Heywood, I think the conflict is this: LVT raises cost of land ownership. This will drive some people out of the market (less sprawl) but for those who want land, it will increase the appeal of moving to less valuable land. Less valuable land is that which doesn't have people/commerce/etc. This drives more people who want to own land/homes *away* from cities: sprawl.
Two other issues: this is a dynamic issue. The speculative nature of real estate means that I may buy a new development now and hold on to it as it accrues value (homes as american investments), so I only add to sprawl once. If I have to move everytime the LTV goes up past my Cheesecake Factory salary, I'll keep heading to the fringes of development.
Also: non-profits (churches, etc)do not pay real estate taxes in many areas. Changing that dynamic might pose problems.
Still, it's an interesting proposition. I think the equilibria are vastly different when land is very scarce (everywhere but north america) and where new development only comes at the marginal cost of building, infrastructure and quality-of-life.
posted by allan at 7:52 AM on April 21, 2005
Two other issues: this is a dynamic issue. The speculative nature of real estate means that I may buy a new development now and hold on to it as it accrues value (homes as american investments), so I only add to sprawl once. If I have to move everytime the LTV goes up past my Cheesecake Factory salary, I'll keep heading to the fringes of development.
Also: non-profits (churches, etc)do not pay real estate taxes in many areas. Changing that dynamic might pose problems.
Still, it's an interesting proposition. I think the equilibria are vastly different when land is very scarce (everywhere but north america) and where new development only comes at the marginal cost of building, infrastructure and quality-of-life.
posted by allan at 7:52 AM on April 21, 2005
Addendum to last line--I have no idea what the land market looks like in Australia or New Zealand. //american-centric shame.
posted by allan at 7:59 AM on April 21, 2005
posted by allan at 7:59 AM on April 21, 2005
LVT raises cost of land ownership
How so? Current tax policy amounts to an immense subsidy to landowners, as they collect and pocketrack rents on urban location value they had no direct hand in creating.
The main thing that changes under LVT is the landlord collects the rent and forwards it to the tax authorities.
In addition, we pay these rack rents whenever we buy something from a store, as store proprietors must pass along the ground rents of their shops to their customers.
LVT redirects these rack rents from the landowner's pocket to the community's operational fund. What adds to sprawl is the ability under the current regime of using land that the market values for less efficient uses like single family homes, commercial parks, and vast parking lots. The LVT regime encourages more capital-intensive use of well-located urban land. I'm not doctrinaire so I see nothing wrong with continuing tax-exemption of houses of worship, tho of course there's nothing in the constitution that requires this.
I don't pretend to have the answers wrt LVT, and certain issues wrt single family home owners being forced out off the property by rising property valuations are indeed problematic IMV, but having lived through the 1999-2003 boom in SF (where the existing property holders made out like the bandits they are) and then discovering Georgist political economy really opened my eyes as to the inherent brokenness of our current ownership regime.
Instead of taxing incomes, we should first go after land rents (in the economic sense, which includes natural resource severance taxes, usage fees for EM frequencies, etc).
posted by Heywood Mogroot at 9:07 AM on April 21, 2005
How so? Current tax policy amounts to an immense subsidy to landowners, as they collect and pocketrack rents on urban location value they had no direct hand in creating.
The main thing that changes under LVT is the landlord collects the rent and forwards it to the tax authorities.
In addition, we pay these rack rents whenever we buy something from a store, as store proprietors must pass along the ground rents of their shops to their customers.
LVT redirects these rack rents from the landowner's pocket to the community's operational fund. What adds to sprawl is the ability under the current regime of using land that the market values for less efficient uses like single family homes, commercial parks, and vast parking lots. The LVT regime encourages more capital-intensive use of well-located urban land. I'm not doctrinaire so I see nothing wrong with continuing tax-exemption of houses of worship, tho of course there's nothing in the constitution that requires this.
I don't pretend to have the answers wrt LVT, and certain issues wrt single family home owners being forced out off the property by rising property valuations are indeed problematic IMV, but having lived through the 1999-2003 boom in SF (where the existing property holders made out like the bandits they are) and then discovering Georgist political economy really opened my eyes as to the inherent brokenness of our current ownership regime.
Instead of taxing incomes, we should first go after land rents (in the economic sense, which includes natural resource severance taxes, usage fees for EM frequencies, etc).
posted by Heywood Mogroot at 9:07 AM on April 21, 2005
(I've seen it estimated that total ground rents in the US amount to 20% of GDP, or $2T/yr ... this is a pretty big taxbase!)
posted by Heywood Mogroot at 9:10 AM on April 21, 2005
posted by Heywood Mogroot at 9:10 AM on April 21, 2005
Heywood, as your temporary ideological ally, I'd advise you to cool it with the self-moderation.
posted by Kwantsar at 10:08 AM on April 21, 2005
posted by Kwantsar at 10:08 AM on April 21, 2005
Addendum to last line--I have no idea what the land market looks like in Australia or New Zealand. //american-centric shame.
Well, depends when. It was determined that the original land-owners were not making productive use of the land, and so, in fully Georgian manner, they were taxed lock stock and barrell out of it. Unfortunately, the new owners seem to have messed it up a bit.
posted by TimothyMason at 11:44 AM on April 21, 2005
Well, depends when. It was determined that the original land-owners were not making productive use of the land, and so, in fully Georgian manner, they were taxed lock stock and barrell out of it. Unfortunately, the new owners seem to have messed it up a bit.
posted by TimothyMason at 11:44 AM on April 21, 2005
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posted by Heywood Mogroot at 2:01 AM on April 21, 2005