Your list of six reasons for not doing Georgian taxes reminds me strongly of the range of reasons people give for not going after AGI.
I think these are likely to be people who made up their minds for a reason they don’t want to acknowledge or defend, and therefore they come up with a plausible reason to block the action. It seems a little like a Gish Gallop - they can always come up with more flimsy arguments than one has time to debunk.
Take Alon’s proposals as more aspirational and directional accurate than actually accurate. Most of them hand-wave away the existing conditions that actually drive the cost up; presumably because he is unaware of them. A good example here is the one sentence about the 4% grade with commuter trains.
Long term, things ‘like’ his plans should be the goal.
On the one hand yes, I'd expect things to be more complicated than his plans in reality. Otoh he bases cost estimates on comparisons with real projects that also had these kind of issues, not first principles calculations.
Are there ways of destroying the value of unimproved land that aren't illegal and/or hurt you worse than they help you? I'm having trouble thinking of any.
Also, I'm not sure I understand the argument that 100% LVT is completely confiscatory. It seems like, in the long run equilibrium state, a higher LVT just drives unimproved land prices lower.
Ignoring all the other issues with development (which, as you correctly point out, would prevent an LVT from fully fixing anything), under an LVT system, land prices should settle to whichever price results in the maximum tax that either A) businesses are willing to pay while making the business worth it or B) residents are willing to bear while living in their homes.
As a toy example, if a $100/year tax is the maximum I'm willing to pay while still thinking my business is worth it, then the maximum price I will pay to buy a lot to run that business is $100 under a 100% LVT. If it's a 50% LVT, then the maximum price I'm willing to pay is $200.
I'm not sure how I see that one of these two as more confiscatory than the other.
It seems like forming some sort of HOA type covenant that forbids new development would lower the value of unimproved land, because any unimproved land under that covenant would be unimprovable.
Perhaps you could split a parcel into three, and create a covenant that any usage must be approved by 2/3 of the parcels. Then the value of one parcel is zero, because you can't develop anything on it! Of course someone owning all three could develop plenty of things.
In general I believe the concept of "unimproved land value" is not adversarially robust, and would need to be replaced by a more specific system, like one based on square feet. But then we're kind of just saying, land based property taxes should be higher.
My understanding is that most proposed methods of calculating land value depend on comporables from nearby areas. Looking at sales from an entire metro area for example. I'm not sure that realistic scales of the kind of scheme you propose would work very well, unless they were so widespread that they'd just have the power to get rid of the LVT if that's what they wanted.
As for the robustness of calculating land value, it is definitely one of the more difficult aspects of an LVT, but it seems solvable to me. You don't have to get it perfect, it just has to be approximately correct.
In some sense, a 100% LVT confiscates the unimproved land you own.
Finance argument: since all possible rent from it is paid as taxes, the value you can sell the land for is reduced dramatically...maybe even by almost 100%.
Fairness argument: before LVT, you owned the future rent from your unimproved land. After LVT, your government owns that rent.
I don't think I agree that "confiscating the rent" is the same as "confiscating the land".
For the second part, I agree, which is why I'd be in favor of a pretty long term phase in, so that by the time it's fully implemented, almost everyone has bought/come into their property with the knowledge of what it's going to entail and very few (if any) people are left with property that they purchased under a different understanding of it's value/returns/etc.
I think wanting more than that gets a little too far towards anarchism/radical libertarianism for me, even as someone who mostly has pretty strong libertarian sympathies.
I think he's right, in a simple sense. The government doesn't take the buildings and other improvements, but they do take the full economic value of the underlying land. If you can't or won't pay, they take the buildings too.
Owning land becomes more of a right to build on the land and/or operate the improvements already there, not really ownership in the common sense.
In that one sense, yes. In another sense, very different, because most property taxes don't also take the value of the underlying land no matter what you do, only if you don't pay.
To get at this "confiscating the rent" vs "confiscating the land" idea, let's consider an analogy where it's not mixed up with land to make the issue clearer.
Suppose you own a car, and you've been renting it to me for $50 a month. Now Fred steps in and demands that the $50 a month rent goes to him instead of you, and since he's scary I agree, the car is still nominally yours, but I'm using it and the rent is going to Fred. Do you really still own the car, or has it been stolen?
I think a georgist would make a slightly more complicated analogy:
You are paying $50 a month to rent a car. Some proportion of that covers the maintenance, etc. which you don't have to do because it's not your car. Some proportion of it is just because this guy is the only car renter in town and he knows how much you can make with the car, and he's squeezing you for every penny until it's just barely worth it.
The government comes along and taxes him for all the squeeze value, but he still gets the fee or the maintenance etc.
The car "owner" gets to keep the value of the work he was actually providing. He doesn't get to keep the value that was just for him happening to have the only car.
To step back for a second, the argument that georgists make is that the economic rents from owning land is not something that _anyone_ should own. Because, definitionally, they are money that you are not earning and did nothing to deserve. Now, historically, we have allowed people to capture this. That's an admittedly big change, and lots of people have made plans with the assumption that they will have those rents. That's why I said elsewhere that I am for a very gradual phase in. No one likes a rug pull.
But I'm pretty sympathetic to the argument that no one actually _deserves_ the economic rents from landownership (and, in case it's necessary to remind anyone reading this, "economic rents" has a very specific, technical definition that is not at all the same thing as the rent you pay to rent something), and that taxing economic rents, all the way up to 100%, is potentially fine, fair, and reasonable.
Then why would people lease out properties? Getting rid of the economic rent turns it into an economic-loss generating asset and it gets sold. Lower property prices, perhaps, but some people really just need to rent.
Because a landlord is still providing value to a leasor, value that they _are_ working for. LVT is not, and would not, tax 100% of the revenue that a landlord gets. Landlords do work, and provide value, and deserve to be compensated for that work (and _would_ be compensated for that work even under a 100% LVT), they just would no longer get the portion of rents that is _not_ derived from the effort they are putting in or risk they are taking.
To be honest, I don’t think the “owner does no work and doesn’t deserve the rents” thing is really that much of a deal. If I buy 10 year government bonds, those pay me money I do “nothing” for (except bind my capital) and this isn’t really something so many people are worried about (and since the risk free rate is usually very close to inflation, nobody is getting rich off that alone either).
I still:
a) think that Georgism (with a 100% LVT) is in some sense putting all land under government ownership.
b) that this is a good idea, since land is very valuable and the cost of mismanagement is high (and asking people to first buy a really expensive asset to be able to build a home also sucks...so I think going to a model where you just lease the land from the government sounds quite nice).
But yeah, a transition where you devalue an asset class which for many people and companies is the majority of their net worth ... it’s not gonna be easy.
Almost every single Landowner is providing value to the renter. I don't think even the most hardcore Georgist would argue that. But _also_ in almost every place in the US, some amount of money that you are paying to the landlord is _not_ just for the value they are providing (which includes not only doing maintenance etc., but also carrying the risk of being died to a non-liquid asset), but also the "economic rents" they get just for being a landowner. It is the latter portion that an LVT attempts to tax. The fact that the latter exist in no way implies that landlords are not doing _any_ work or do not deserve to make money from the service they are providing.
The problem isn't with the long run equilibrium state, it's how to get there from here. Yes, in a situation with existing land tax you buy land at a lower price. The problem is people who currently own land valued at a higher price, and often have mortgages that a bank will still expect to be repaid, even once the value of your land is gone and no one will buy it at a price that pays off your mortgage. The way these loans are structured, when a house loses a large portion of its value because a 100% LVT was just passed, it's not the bank that's on the hook for the loss, it's the homeowner who will be foreclosed on because they can't afford to keep paying their mortgage and simultaneously pay a similar amount to the government.
In your example, you're doing the math assuming the LVT existed when you bought the land. If instead you bought the land at $400 when there was no LVT, and then the LVT is passed dropping the value anyone else will now buy the land for to $100, this has confiscated 3/4 of the value. It's not a continual confiscation that happens in the steady state, it's a one-time confiscation that happens when you move from the no-LVT state to the 100% LVT state.
Easy: very long run times and gradual phase ins. This is admittedly _politically_ difficult because it requies consistency across multiple administrations, but it's not _actually_ a hard problem to solve. Here is an example:
In 50 years, LVT is going to start being phased in. At the beginning of the phase in, it's going to increase by 20% every decade, so that in 100 years, we have a 100% LVT. Start providing the assessed land value now, so that people know what taxes _will_ be in the future.
Pick your numbers however you want, but with enough lead time, no one is surprised, everyone is able to adjust. I'm skeptical that very many plans can't accommodate a 100 year adjustment period. And to be clear, I don't even think that a fair, reasonable time period would require that long, but I'm actually pretty ambivalent and don't mind giving an extremely long lead time.
I'd be fine with it on that time frame, but tactically would not advocate for it because the risks of the proposal getting captured by the radicals calling for immediate LVT outweigh the hypothetical eventual benefits (most benefits more than 20 years out are made irrelevant one way or the other by AGI, either we're dead or the AGI has solved this problem in a better way).
I do wonder why people in these circles who commonly believe AGI is basically around the corner are so concerned with other issues with such a long time horizon - this is obviously not about DangerouslyUnstable specifically as they may have one of any number of views (or none) on AGI.
I like Georgian taxes in theory, but "the value of unimproved land" is not a thing that currently exists. I can't just look up the value of my unimproved land. We would have to go construct it, we would have to build a system for evaluating it. And then the actual system we get would very likely have all sorts of garbage. It's easy to say that the value of unimproved land will be a value that has all these nice theoretical properties, when we don't actually have these calculations.
Of course Prop 13 is so terrible, my neighbors with a larger, nicer house than me pay about 1/5 of the property taxes, so pretty much any overhaul of the system would be great for me. I doubt my neighbors would support it though. Better reform the system before I live here another decade and the lingering miasma of Prop 13 corrupts me into a NIMBY.
Depends which country you're in, many do asses land value and improvements value separately already (though perhaps not accurately....). Many places in the USA, even, IIUC!
It's extremely hard to explain the ways in which "housing is too expensive" is the hidden despair factor in mid-30s American city life right now.
Nothing has driven me more insane than seeing a city where it's easier to steal public land for a literal insurrectionist's think tank's patio than to build a by-right permitted ADU on private land.
I think part of the problem is in the "city life" portion. I get that jobs in cities pay more, but if you're spending 50% of $110k you're still taking home less money for less home than in a place where you spend 25% of $80k.
I live in a nice semi-rural community with essentially no crime, and spend approximately 15% of my income on a 3,600 sq. ft. house with a moderate yard. I make a good bit less than I could at the same job in a metro area, but why would I want to make more just to spend it on (less) housing?
Well sure, but if more people in cities who were able to do so moved to areas with cheaper housing, that would lower costs in cities and benefit you too.
That far too many people want to move to SF or NY (who by definition aren't attached to living in the city, because they don't) indicates a more fundamental problem. I get that some people truly enjoy city life and would hate living rural, but there are a number of people living in cities who don't, but feel constrained thinking that they have to live in a city to make good wage. If they considered cost of living, they would almost certainly be better off in a smaller city at least, and maybe an area like where I live.
I'm definitely in the camp opposed to Georgian taxes, specifically because of #2 on your list. The fundamental problem here is that the most common version of this proposal, the 100% Georgian tax, attempts to fix the problem for future generations through the complete destruction of most current homeowners, rather than looking for a solution where everyone takes a proportionate share of the costs. There can be reasonable compromises where homeowners are compensated for the taking of their property, the tax is phased in VERY gradually, or mortgages are voided to share the losses between banks and homeowners, and I see that you propose a gradual ramp that stops at 50%, so I'm not strongly opposed to that proposal if I was confident that's how it would happen, though we would first need to determine how steep the immediate drop in values would be as people will not pay as much for property that will predictably lose much of its value. However, every time I see this discussed there are quite a few in favor of an immediate 100% tax who view the ruination of the middle class as a side benefit, as long as that's the case this reform is too dangerous to be seriously considered.
For those who saw the bit about voiding mortgages and objected that's wildly impractical because it would destroy the banking system, I'd ask you to consider that the situation is not improved by moving that same cost onto people who are less able to afford it. Personally, I would only lose about a third of my net worth to a 100% Georgian tax, so I'd survive, but for many people the size of their mortgage would be higher than the remaining value of their home, resulting in underwater mortgages and trapping those people where they are, unable to sell their house in a way that pays off the mortgage and unable to afford the new tax. The millions of resulting bankruptcies and foreclosures would be even more harmful to the economy than the failing banks from voided mortgages would be.
Another potential compromise: have banks pay part of the tax proportional to how much of the house they effectively own through a mortgage. So if the mortgage is 2/3 the value of the house, the bank pays 2/3 of the land tax. They're free to annul the mortgage and give the house to the homeowner if they don't want to pay their share.
Most people who own their homes keep a significant portion, maybe a majority, of their wealth tied up in that home. I might be able to buy a home in a year if that was an absolute top priority, but because I can sell my current home and use that money towards a down payment, I don't have to think about it.
That's how most people buy homes - they sell their home for the cash they need.
Renters might be in a tough place, especially if they want to live in or near a city where prices are much higher. I highly recommend considering a more rural location, especially a non-satellite city (meaning not dependent on a larger city for why people move there, like Manassas for DC).
It is a shame that starter homes are built far less often than they used to be. A small 2-3 bedroom home with a postage stamp yard - good for a family with no kids or maybe a few small kids - is a great way to get into a house and start building equity that can be used to upgrade to a future home. Spending the same money on rent doesn't allow someone to live in a place while also using the same money to save up for a bigger place.
This plan leaves most people a little vulnerable to price shocks, which may also answer the question of NIMBYs and people against Georgist taxes.
Not sure what is going on in the rent control section - your link titled "Where ‘get rid of rent control’ gets implemented, it keeps working." is to a tweet about implementing supply increasing YIMBY policies, nothing to do with rent control. You even quote the tweet!
The point is that rent control suppresses supply, and removing it leads to new construction and lower rents - as well as more actual homes, because low rents only matter if there are places available
But what does that have to do with the totally different non-rent control related policies aimed at increasing supply that are discussed in the link? It's like titling a story about unions winning wage increases "where a minimum wage gets implemented, it keeps working." Yes a minimum wage aims at the same goal of increasing wages, it just has nothing to do with how they were increased in that situation.
It's not official yet, but it has the support of city council now, so it will likely make it through all the necessary steps. I hope that Calgary will soon be another example of successful YIMBYism.
>Twitter Community Note: According to the Census Bureau, the vast majority of Americans (65.8% of US households) live in a home that they own. The home ownership rate continues to increase, and is currently higher than it was before the start of the pandemic.
In what sense is 65.8% a "vast majority"?
------------------------
>You have to live somewhere. In many places the rental market is at best thin. Home ownership rates have not declined much because many will respond by buying and living in a smaller house, or one in a much worse location, or most importantly by having fewer children.
Why is Singpore's fertility so low? It's commonly talked about as a YIMBY paradise, and yet nobody wants to have kids. This is important because it is claimed that people are having fewer children in the US due to housing affordability, and YMIBYs love high density housing. But it really seems like either apartment living or urban living is toxic to fertility - obvious confounders around culture, IQ and other behavioral traits that apartment dwelling people and populations are more likely to have notwithstanding.
My pet theory is that children used to produce economic value (very little of which was from paid child labor outside the home) and now there are more costs to having children, especially during the parent's early careers when they are least able to afford them.
This is far worse in cities, where costs are higher for extra bedrooms and children are far less likely to perform meaningful work for the family. Kids on farms feed the chickens and collect eggs and similar even from very early ages, and can be field hands in their teenage years. Suburban kids can at least mow lawns. I'm not sure what tasks most urban kids can even do to produce value.
Cities also tend to have an abundance of people, even without children being born, which makes them feel far less necessary for the continuation of society.
I wouldn't expect that they do. Apartment living is simply worse for raising kids, and there's less reason to want/need kids when living in a city (where most apartments are found).
I'm torn. The point that this changes incentives by making growth a plus in city budgets rather than a minus is super-important and under-appreciated. Still I can draw the housing supply curve and notice that this too creates deadweight loss. In practice it's not so different from non-monetary kinds of onerous requirements, which do give the city something it wants (other things equal) and not necessarily at a worse rate than "oh we'll spend it on parks". I notice that the monetary and non-monetary requirements are positively rather than negatively correlated and I claim that yes, in practice there is "just one dial to turn" of Cities Are Entitled To Make New Construction Jump Through Hoops.
I think I have an objection to Georgism that actually falls under the #1 umbrella - viz., I think you can't in principle tax the unimproved value of land.
Specifically, the maximum amount I'd be willing to bit on a piece of unimproved land is the NPV of its *as-improved* value -- as YIMBYs themselves point out, land on which you can build an apartment building is generally worth more than land you can only build an SFH on. This also means that as construction or zoning improvements occur, the more-intensive potential use of the same plot increases its (unimproved) value (and under a 100% LVT as a property owner/developer I actually see no gains, merely transaction costs at best if I undertake the improvements to its maximally-intensive use).
Essentially, because my maximum bid for the unimproved land would be epsilon less than the NPV of (Expected rents in as-improved state - market-clearing RoR - cost of capital), any value *not* allocated (to cost of capital + market-clearing RoR) is implicitly capitalized into the bid price for the unimproved land value.
In brief: I don't think you can tax land value but not tax improvements even in principle.
This would be less true under a highly idiosyncratic improvement market in which some combination of uniquely low building costs (seems extremely unlikely in general and especially under typical construction contractor arrangements) and/or uniquely high above-market rents following improvement (not characteristic of the urban apartment market, which is dominated by basically commoditized rectangular prisms where price, square footage, and location rather than improvement-unique amenities dominate price) was a big consideration, but in general I don't think that urban apartment construction is characterized by high alpha. Disneyworld is the exception rather than the rule when it comes to improvements.
I think the dynamic you bring up is the point - if it *could be* a high rise, you're taxed as if it *were* a high rise, so your incentives are to build a high rise. This contrasts with the current model of "property tax", where your empty field is taxed far far less than the same lot with a high rise on it.
Now, construction is far from free so one needs to be careful to make land tax under rather than over shoot, but it's basically strictly better than property tax. The comparisons to other taxes like eg. income taxes are less obvious, but there's solid argument that LVT has no deadweight loss at all, and that's not true of most extant taxes
My understanding is that you’re correct with respect to the idea that Georgism punishes land speculation by forcing development to keep up with the tax burden* but that Georgism is also very big on the idea that you’re supposed to tax the unimproved value of land separately from its improvements — but under this model there seems to be no actual term for the value of the improvements, because any increase in potential (not even realized) improvement value immediately gets taxed away.
As you say, as soon as you prove that an apartment building is a viable investment, you’re taxed as if there’s an apartment building there. But this seems conceptually indistinguishable from a (maximal, prospective) property tax and one of the big Georgist critiques of a property tax is that it disincentivizes or punishes improvements. Proving that an apartment building or a mall is viable seems like it faces the same hurdle: the only thing you’ve accomplished by doing so is increasing your own tax burden such that you realize at most a market-clearing RoR rather than 100% of the value of the improvement.
A guy I was discussing this with on Noah Smith’s substack suggested valuation “freezes” for like some period as a potential solution so that the incentive for R&D in improvements was retained instead of taxed away, although obviously this knowingly sacrifices assessment accuracy during that period. Perhaps one could think of this as “patents for improvements.”
*I actually think this can be a bug rather than a feature inasmuch as I think that slack in economic systems is imortant and there’s some value in not mandating maximum exploitation of all land, and also as I’ve seen observed in some other places, a surfeit of vacant lots isn’t actually a problem high-demand metros face.
A lot of the problems disappear if you set the LVT at less than 100%; something like 50% nominal would be very unlikely to ever accidentally exceed 100% actual, while still being a large source of revenue and a disincentive to sitting on valuable land (which is more of a problem in some areas than others).
Re: "But this seems conceptually indistinguishable from a (maximal, prospective) property tax and one of the big Georgist critiques of a property tax is that it disincentivizes or punishes improvements", the word "prospective" is key there. The big reason it's different form a property tax is that actually building the big apartment block doesn't increase your tax bill, so it doesn't disincentivize it. You do get some thorns re "does it de facto tax getting a planning permit approved?", and so forth, but something like valuation "freezes" as you mentioned or other comparatively minor tweaks seem like they'd solve this kind of issue.
Your list of six reasons for not doing Georgian taxes reminds me strongly of the range of reasons people give for not going after AGI.
I think these are likely to be people who made up their minds for a reason they don’t want to acknowledge or defend, and therefore they come up with a plausible reason to block the action. It seems a little like a Gish Gallop - they can always come up with more flimsy arguments than one has time to debunk.
Re Penn station, Alon gave an alternative design plan here
https://pedestrianobservations.com/2023/09/18/penn-station-3d-model/
Take Alon’s proposals as more aspirational and directional accurate than actually accurate. Most of them hand-wave away the existing conditions that actually drive the cost up; presumably because he is unaware of them. A good example here is the one sentence about the 4% grade with commuter trains.
Long term, things ‘like’ his plans should be the goal.
On the one hand yes, I'd expect things to be more complicated than his plans in reality. Otoh he bases cost estimates on comparisons with real projects that also had these kind of issues, not first principles calculations.
Are there ways of destroying the value of unimproved land that aren't illegal and/or hurt you worse than they help you? I'm having trouble thinking of any.
Also, I'm not sure I understand the argument that 100% LVT is completely confiscatory. It seems like, in the long run equilibrium state, a higher LVT just drives unimproved land prices lower.
Ignoring all the other issues with development (which, as you correctly point out, would prevent an LVT from fully fixing anything), under an LVT system, land prices should settle to whichever price results in the maximum tax that either A) businesses are willing to pay while making the business worth it or B) residents are willing to bear while living in their homes.
As a toy example, if a $100/year tax is the maximum I'm willing to pay while still thinking my business is worth it, then the maximum price I will pay to buy a lot to run that business is $100 under a 100% LVT. If it's a 50% LVT, then the maximum price I'm willing to pay is $200.
I'm not sure how I see that one of these two as more confiscatory than the other.
It seems like forming some sort of HOA type covenant that forbids new development would lower the value of unimproved land, because any unimproved land under that covenant would be unimprovable.
Perhaps you could split a parcel into three, and create a covenant that any usage must be approved by 2/3 of the parcels. Then the value of one parcel is zero, because you can't develop anything on it! Of course someone owning all three could develop plenty of things.
In general I believe the concept of "unimproved land value" is not adversarially robust, and would need to be replaced by a more specific system, like one based on square feet. But then we're kind of just saying, land based property taxes should be higher.
My understanding is that most proposed methods of calculating land value depend on comporables from nearby areas. Looking at sales from an entire metro area for example. I'm not sure that realistic scales of the kind of scheme you propose would work very well, unless they were so widespread that they'd just have the power to get rid of the LVT if that's what they wanted.
As for the robustness of calculating land value, it is definitely one of the more difficult aspects of an LVT, but it seems solvable to me. You don't have to get it perfect, it just has to be approximately correct.
In some sense, a 100% LVT confiscates the unimproved land you own.
Finance argument: since all possible rent from it is paid as taxes, the value you can sell the land for is reduced dramatically...maybe even by almost 100%.
Fairness argument: before LVT, you owned the future rent from your unimproved land. After LVT, your government owns that rent.
I don't think I agree that "confiscating the rent" is the same as "confiscating the land".
For the second part, I agree, which is why I'd be in favor of a pretty long term phase in, so that by the time it's fully implemented, almost everyone has bought/come into their property with the knowledge of what it's going to entail and very few (if any) people are left with property that they purchased under a different understanding of it's value/returns/etc.
I think wanting more than that gets a little too far towards anarchism/radical libertarianism for me, even as someone who mostly has pretty strong libertarian sympathies.
I think he's right, in a simple sense. The government doesn't take the buildings and other improvements, but they do take the full economic value of the underlying land. If you can't or won't pay, they take the buildings too.
Owning land becomes more of a right to build on the land and/or operate the improvements already there, not really ownership in the common sense.
>If you can't or won't pay, they take the buildings too
So....like every other tax?
In that one sense, yes. In another sense, very different, because most property taxes don't also take the value of the underlying land no matter what you do, only if you don't pay.
I don't know what you mean with this comment.
To get at this "confiscating the rent" vs "confiscating the land" idea, let's consider an analogy where it's not mixed up with land to make the issue clearer.
Suppose you own a car, and you've been renting it to me for $50 a month. Now Fred steps in and demands that the $50 a month rent goes to him instead of you, and since he's scary I agree, the car is still nominally yours, but I'm using it and the rent is going to Fred. Do you really still own the car, or has it been stolen?
I think a georgist would make a slightly more complicated analogy:
You are paying $50 a month to rent a car. Some proportion of that covers the maintenance, etc. which you don't have to do because it's not your car. Some proportion of it is just because this guy is the only car renter in town and he knows how much you can make with the car, and he's squeezing you for every penny until it's just barely worth it.
The government comes along and taxes him for all the squeeze value, but he still gets the fee or the maintenance etc.
The car "owner" gets to keep the value of the work he was actually providing. He doesn't get to keep the value that was just for him happening to have the only car.
To step back for a second, the argument that georgists make is that the economic rents from owning land is not something that _anyone_ should own. Because, definitionally, they are money that you are not earning and did nothing to deserve. Now, historically, we have allowed people to capture this. That's an admittedly big change, and lots of people have made plans with the assumption that they will have those rents. That's why I said elsewhere that I am for a very gradual phase in. No one likes a rug pull.
But I'm pretty sympathetic to the argument that no one actually _deserves_ the economic rents from landownership (and, in case it's necessary to remind anyone reading this, "economic rents" has a very specific, technical definition that is not at all the same thing as the rent you pay to rent something), and that taxing economic rents, all the way up to 100%, is potentially fine, fair, and reasonable.
Then why would people lease out properties? Getting rid of the economic rent turns it into an economic-loss generating asset and it gets sold. Lower property prices, perhaps, but some people really just need to rent.
Because a landlord is still providing value to a leasor, value that they _are_ working for. LVT is not, and would not, tax 100% of the revenue that a landlord gets. Landlords do work, and provide value, and deserve to be compensated for that work (and _would_ be compensated for that work even under a 100% LVT), they just would no longer get the portion of rents that is _not_ derived from the effort they are putting in or risk they are taking.
To be honest, I don’t think the “owner does no work and doesn’t deserve the rents” thing is really that much of a deal. If I buy 10 year government bonds, those pay me money I do “nothing” for (except bind my capital) and this isn’t really something so many people are worried about (and since the risk free rate is usually very close to inflation, nobody is getting rich off that alone either).
I still:
a) think that Georgism (with a 100% LVT) is in some sense putting all land under government ownership.
b) that this is a good idea, since land is very valuable and the cost of mismanagement is high (and asking people to first buy a really expensive asset to be able to build a home also sucks...so I think going to a model where you just lease the land from the government sounds quite nice).
But yeah, a transition where you devalue an asset class which for many people and companies is the majority of their net worth ... it’s not gonna be easy.
Almost every single Landowner is providing value to the renter. I don't think even the most hardcore Georgist would argue that. But _also_ in almost every place in the US, some amount of money that you are paying to the landlord is _not_ just for the value they are providing (which includes not only doing maintenance etc., but also carrying the risk of being died to a non-liquid asset), but also the "economic rents" they get just for being a landowner. It is the latter portion that an LVT attempts to tax. The fact that the latter exist in no way implies that landlords are not doing _any_ work or do not deserve to make money from the service they are providing.
The problem isn't with the long run equilibrium state, it's how to get there from here. Yes, in a situation with existing land tax you buy land at a lower price. The problem is people who currently own land valued at a higher price, and often have mortgages that a bank will still expect to be repaid, even once the value of your land is gone and no one will buy it at a price that pays off your mortgage. The way these loans are structured, when a house loses a large portion of its value because a 100% LVT was just passed, it's not the bank that's on the hook for the loss, it's the homeowner who will be foreclosed on because they can't afford to keep paying their mortgage and simultaneously pay a similar amount to the government.
In your example, you're doing the math assuming the LVT existed when you bought the land. If instead you bought the land at $400 when there was no LVT, and then the LVT is passed dropping the value anyone else will now buy the land for to $100, this has confiscated 3/4 of the value. It's not a continual confiscation that happens in the steady state, it's a one-time confiscation that happens when you move from the no-LVT state to the 100% LVT state.
Easy: very long run times and gradual phase ins. This is admittedly _politically_ difficult because it requies consistency across multiple administrations, but it's not _actually_ a hard problem to solve. Here is an example:
In 50 years, LVT is going to start being phased in. At the beginning of the phase in, it's going to increase by 20% every decade, so that in 100 years, we have a 100% LVT. Start providing the assessed land value now, so that people know what taxes _will_ be in the future.
Pick your numbers however you want, but with enough lead time, no one is surprised, everyone is able to adjust. I'm skeptical that very many plans can't accommodate a 100 year adjustment period. And to be clear, I don't even think that a fair, reasonable time period would require that long, but I'm actually pretty ambivalent and don't mind giving an extremely long lead time.
I'd be fine with it on that time frame, but tactically would not advocate for it because the risks of the proposal getting captured by the radicals calling for immediate LVT outweigh the hypothetical eventual benefits (most benefits more than 20 years out are made irrelevant one way or the other by AGI, either we're dead or the AGI has solved this problem in a better way).
I do wonder why people in these circles who commonly believe AGI is basically around the corner are so concerned with other issues with such a long time horizon - this is obviously not about DangerouslyUnstable specifically as they may have one of any number of views (or none) on AGI.
I like Georgian taxes in theory, but "the value of unimproved land" is not a thing that currently exists. I can't just look up the value of my unimproved land. We would have to go construct it, we would have to build a system for evaluating it. And then the actual system we get would very likely have all sorts of garbage. It's easy to say that the value of unimproved land will be a value that has all these nice theoretical properties, when we don't actually have these calculations.
Of course Prop 13 is so terrible, my neighbors with a larger, nicer house than me pay about 1/5 of the property taxes, so pretty much any overhaul of the system would be great for me. I doubt my neighbors would support it though. Better reform the system before I live here another decade and the lingering miasma of Prop 13 corrupts me into a NIMBY.
Depends which country you're in, many do asses land value and improvements value separately already (though perhaps not accurately....). Many places in the USA, even, IIUC!
It's extremely hard to explain the ways in which "housing is too expensive" is the hidden despair factor in mid-30s American city life right now.
Nothing has driven me more insane than seeing a city where it's easier to steal public land for a literal insurrectionist's think tank's patio than to build a by-right permitted ADU on private land.
I think part of the problem is in the "city life" portion. I get that jobs in cities pay more, but if you're spending 50% of $110k you're still taking home less money for less home than in a place where you spend 25% of $80k.
I live in a nice semi-rural community with essentially no crime, and spend approximately 15% of my income on a 3,600 sq. ft. house with a moderate yard. I make a good bit less than I could at the same job in a metro area, but why would I want to make more just to spend it on (less) housing?
I mean, the answer is that almost all my friends don't live in rural areas, and many of their jobs make it not possible to move.
And I'd dare say that we should have a society rich enough for both options
Well sure, but if more people in cities who were able to do so moved to areas with cheaper housing, that would lower costs in cities and benefit you too.
That far too many people want to move to SF or NY (who by definition aren't attached to living in the city, because they don't) indicates a more fundamental problem. I get that some people truly enjoy city life and would hate living rural, but there are a number of people living in cities who don't, but feel constrained thinking that they have to live in a city to make good wage. If they considered cost of living, they would almost certainly be better off in a smaller city at least, and maybe an area like where I live.
I'm definitely in the camp opposed to Georgian taxes, specifically because of #2 on your list. The fundamental problem here is that the most common version of this proposal, the 100% Georgian tax, attempts to fix the problem for future generations through the complete destruction of most current homeowners, rather than looking for a solution where everyone takes a proportionate share of the costs. There can be reasonable compromises where homeowners are compensated for the taking of their property, the tax is phased in VERY gradually, or mortgages are voided to share the losses between banks and homeowners, and I see that you propose a gradual ramp that stops at 50%, so I'm not strongly opposed to that proposal if I was confident that's how it would happen, though we would first need to determine how steep the immediate drop in values would be as people will not pay as much for property that will predictably lose much of its value. However, every time I see this discussed there are quite a few in favor of an immediate 100% tax who view the ruination of the middle class as a side benefit, as long as that's the case this reform is too dangerous to be seriously considered.
For those who saw the bit about voiding mortgages and objected that's wildly impractical because it would destroy the banking system, I'd ask you to consider that the situation is not improved by moving that same cost onto people who are less able to afford it. Personally, I would only lose about a third of my net worth to a 100% Georgian tax, so I'd survive, but for many people the size of their mortgage would be higher than the remaining value of their home, resulting in underwater mortgages and trapping those people where they are, unable to sell their house in a way that pays off the mortgage and unable to afford the new tax. The millions of resulting bankruptcies and foreclosures would be even more harmful to the economy than the failing banks from voided mortgages would be.
Another potential compromise: have banks pay part of the tax proportional to how much of the house they effectively own through a mortgage. So if the mortgage is 2/3 the value of the house, the bank pays 2/3 of the land tax. They're free to annul the mortgage and give the house to the homeowner if they don't want to pay their share.
Most people who own their homes keep a significant portion, maybe a majority, of their wealth tied up in that home. I might be able to buy a home in a year if that was an absolute top priority, but because I can sell my current home and use that money towards a down payment, I don't have to think about it.
That's how most people buy homes - they sell their home for the cash they need.
Renters might be in a tough place, especially if they want to live in or near a city where prices are much higher. I highly recommend considering a more rural location, especially a non-satellite city (meaning not dependent on a larger city for why people move there, like Manassas for DC).
It is a shame that starter homes are built far less often than they used to be. A small 2-3 bedroom home with a postage stamp yard - good for a family with no kids or maybe a few small kids - is a great way to get into a house and start building equity that can be used to upgrade to a future home. Spending the same money on rent doesn't allow someone to live in a place while also using the same money to save up for a bigger place.
This plan leaves most people a little vulnerable to price shocks, which may also answer the question of NIMBYs and people against Georgist taxes.
Not sure what is going on in the rent control section - your link titled "Where ‘get rid of rent control’ gets implemented, it keeps working." is to a tweet about implementing supply increasing YIMBY policies, nothing to do with rent control. You even quote the tweet!
The point is that rent control suppresses supply, and removing it leads to new construction and lower rents - as well as more actual homes, because low rents only matter if there are places available
But what does that have to do with the totally different non-rent control related policies aimed at increasing supply that are discussed in the link? It's like titling a story about unions winning wage increases "where a minimum wage gets implemented, it keeps working." Yes a minimum wage aims at the same goal of increasing wages, it just has nothing to do with how they were increased in that situation.
My hometown, Calgary, Alberta, Canada, is relaxing residential zoning. https://calgaryherald.com/news/local-news/calgary-housing-strategy-approved-whats-next
It's not official yet, but it has the support of city council now, so it will likely make it through all the necessary steps. I hope that Calgary will soon be another example of successful YIMBYism.
>Twitter Community Note: According to the Census Bureau, the vast majority of Americans (65.8% of US households) live in a home that they own. The home ownership rate continues to increase, and is currently higher than it was before the start of the pandemic.
In what sense is 65.8% a "vast majority"?
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>You have to live somewhere. In many places the rental market is at best thin. Home ownership rates have not declined much because many will respond by buying and living in a smaller house, or one in a much worse location, or most importantly by having fewer children.
Why is Singpore's fertility so low? It's commonly talked about as a YIMBY paradise, and yet nobody wants to have kids. This is important because it is claimed that people are having fewer children in the US due to housing affordability, and YMIBYs love high density housing. But it really seems like either apartment living or urban living is toxic to fertility - obvious confounders around culture, IQ and other behavioral traits that apartment dwelling people and populations are more likely to have notwithstanding.
My pet theory is that children used to produce economic value (very little of which was from paid child labor outside the home) and now there are more costs to having children, especially during the parent's early careers when they are least able to afford them.
This is far worse in cities, where costs are higher for extra bedrooms and children are far less likely to perform meaningful work for the family. Kids on farms feed the chickens and collect eggs and similar even from very early ages, and can be field hands in their teenage years. Suburban kids can at least mow lawns. I'm not sure what tasks most urban kids can even do to produce value.
Cities also tend to have an abundance of people, even without children being born, which makes them feel far less necessary for the continuation of society.
Sure, that makes a lot of sense. But I don't then see why we should expect cheaper apartments to fundamentally change this.
I wouldn't expect that they do. Apartment living is simply worse for raising kids, and there's less reason to want/need kids when living in a city (where most apartments are found).
You may have seen it already but a recent Works In Progress piece shares your contrarian take on city fees: https://worksinprogress.co/issue/growing-the-growth-coalition
I'm torn. The point that this changes incentives by making growth a plus in city budgets rather than a minus is super-important and under-appreciated. Still I can draw the housing supply curve and notice that this too creates deadweight loss. In practice it's not so different from non-monetary kinds of onerous requirements, which do give the city something it wants (other things equal) and not necessarily at a worse rate than "oh we'll spend it on parks". I notice that the monetary and non-monetary requirements are positively rather than negatively correlated and I claim that yes, in practice there is "just one dial to turn" of Cities Are Entitled To Make New Construction Jump Through Hoops.
I think I have an objection to Georgism that actually falls under the #1 umbrella - viz., I think you can't in principle tax the unimproved value of land.
Specifically, the maximum amount I'd be willing to bit on a piece of unimproved land is the NPV of its *as-improved* value -- as YIMBYs themselves point out, land on which you can build an apartment building is generally worth more than land you can only build an SFH on. This also means that as construction or zoning improvements occur, the more-intensive potential use of the same plot increases its (unimproved) value (and under a 100% LVT as a property owner/developer I actually see no gains, merely transaction costs at best if I undertake the improvements to its maximally-intensive use).
Essentially, because my maximum bid for the unimproved land would be epsilon less than the NPV of (Expected rents in as-improved state - market-clearing RoR - cost of capital), any value *not* allocated (to cost of capital + market-clearing RoR) is implicitly capitalized into the bid price for the unimproved land value.
In brief: I don't think you can tax land value but not tax improvements even in principle.
This would be less true under a highly idiosyncratic improvement market in which some combination of uniquely low building costs (seems extremely unlikely in general and especially under typical construction contractor arrangements) and/or uniquely high above-market rents following improvement (not characteristic of the urban apartment market, which is dominated by basically commoditized rectangular prisms where price, square footage, and location rather than improvement-unique amenities dominate price) was a big consideration, but in general I don't think that urban apartment construction is characterized by high alpha. Disneyworld is the exception rather than the rule when it comes to improvements.
I think the dynamic you bring up is the point - if it *could be* a high rise, you're taxed as if it *were* a high rise, so your incentives are to build a high rise. This contrasts with the current model of "property tax", where your empty field is taxed far far less than the same lot with a high rise on it.
Now, construction is far from free so one needs to be careful to make land tax under rather than over shoot, but it's basically strictly better than property tax. The comparisons to other taxes like eg. income taxes are less obvious, but there's solid argument that LVT has no deadweight loss at all, and that's not true of most extant taxes
My understanding is that you’re correct with respect to the idea that Georgism punishes land speculation by forcing development to keep up with the tax burden* but that Georgism is also very big on the idea that you’re supposed to tax the unimproved value of land separately from its improvements — but under this model there seems to be no actual term for the value of the improvements, because any increase in potential (not even realized) improvement value immediately gets taxed away.
As you say, as soon as you prove that an apartment building is a viable investment, you’re taxed as if there’s an apartment building there. But this seems conceptually indistinguishable from a (maximal, prospective) property tax and one of the big Georgist critiques of a property tax is that it disincentivizes or punishes improvements. Proving that an apartment building or a mall is viable seems like it faces the same hurdle: the only thing you’ve accomplished by doing so is increasing your own tax burden such that you realize at most a market-clearing RoR rather than 100% of the value of the improvement.
(Lars Doucet’s big ACX discussion of this had a whole section on this, although unfortunately I think it’s the weakest one and unresponsive to this particular concern - https://www.astralcodexten.com/p/does-georgism-work-part-3-can-unimproved )
A guy I was discussing this with on Noah Smith’s substack suggested valuation “freezes” for like some period as a potential solution so that the incentive for R&D in improvements was retained instead of taxed away, although obviously this knowingly sacrifices assessment accuracy during that period. Perhaps one could think of this as “patents for improvements.”
*I actually think this can be a bug rather than a feature inasmuch as I think that slack in economic systems is imortant and there’s some value in not mandating maximum exploitation of all land, and also as I’ve seen observed in some other places, a surfeit of vacant lots isn’t actually a problem high-demand metros face.
A lot of the problems disappear if you set the LVT at less than 100%; something like 50% nominal would be very unlikely to ever accidentally exceed 100% actual, while still being a large source of revenue and a disincentive to sitting on valuable land (which is more of a problem in some areas than others).
Re: "But this seems conceptually indistinguishable from a (maximal, prospective) property tax and one of the big Georgist critiques of a property tax is that it disincentivizes or punishes improvements", the word "prospective" is key there. The big reason it's different form a property tax is that actually building the big apartment block doesn't increase your tax bill, so it doesn't disincentivize it. You do get some thorns re "does it de facto tax getting a planning permit approved?", and so forth, but something like valuation "freezes" as you mentioned or other comparatively minor tweaks seem like they'd solve this kind of issue.
Overall I agree with this and I think you're right about this being mitigated with sub-100% LVT.