Where would the revenue come from to replace income tax with the LVT? Isn’t it just an unimproved property tax? In that case, wouldn’t taxpayers be paying less on the land they own or would this be on top of property taxes?
It is an unimproved property tax (land). Property tax would be replaced with land value tax, not in addition to it. The rates would be higher and because there is no deadweight loss, the revenue generated would be higher; enough to abolish income taxes.
Just replied on another note, but I think this answers the question I asked there. So this calls for higher rates on unimproved property taxes essentially?
“Progressive” does not mean proportional to income it means the rathe is an increasing functions of the base.
“Unlike property taxes, however, an LVT does not need to account for the nuances of the building that sits on top of it, so there is no need to individually assess each property.”
This seems exactly backwards. Assess in the total value of a property land + structures is relatively straightforward (sales of similar properties) Figuring out how much of the total value is just from the land “requires” on to “to account for the nuances of the building that sits on top of it”
“With an LVT, it would no longer be rational to hold land tracts in idle speculation.”
No, the conditions may not be ripe for “development” to be worthwhile. I will wait to put up a service station along the lonely country road until it is widened and traffic increases whether the county has an LVT or a property tax.
“Lastly, because the supply of land is fixed, taxing it doesn’t alter the supply. Thus, there is negligible economic deadweight loss from an LVT.” This looks to me like about fourth level of importance. The DWL is, comparing the two tax scenarios, the delay between while the tax on the rising value of the land + improvement property is greater than the income from the land + improvements. But in GE the amounts collected by LVT and property tax will be the same, will there BE a delay?
I get advantage of funding infrastructure from the increase in value the infrastructure generates. I do not see how whether that value is taxes with a LVT or a property tax makes any difference?
I still am in the dark about how it work in practice.
First, if a county wanted to go over to LVT how does it do so? How does it extract the land value form the current assessment of total value?
But more important I’d like to understand over time how it would work by tracing through a fictionalized example.
Once upon a time Mr. Tyson had a trading post at the intersection of two roads ,one leading from Georgetown on the NE bank of the Potomac going south into Virginia and the other going from Alexandria on the SW bank of the Potomac going West into Virginia. He also owned many acres of land all around this crossroads.
At first the location of the new nation’s capital just downstream from Georgetown made little difference to the taxes he paid on his property. But eventually the area boomed and became Tyson’s Corner one of the most valuable real estate properties in the nation, making the Tyson family, who had the good sense never to sell any of the land holdings of Tyson Pere, fabulously wealthy.
The question is, how does this story differ if Fairfax County politicians had read to Henry George in 1879 and started using a LVT instead of the conventional tax on total property value?
Hope my 7day free trial does not lead to an attempt to initiate a paid subscription. I would be unhappy with that right now (although I did just cancel one Substack that sought automatic renewal rather than a specific renewal request; and that process worked well). [I came here from your link at Michael Magoo's 11/17/23 Substack. ]
I came across the Henry George idea years ago and thought it was interesting. Now I have found two articles skeptical of this Land Tax approach, although I am not sure I fully understand either it or these two criticisms well enough to result in a final firm conclusion either way. They may not be news to you? Providing specific examples of the land tax implementation with various (5 to 10?) situations and dollar amounts might help the explanation, too?
But also a lot of nonsense can be exclaimed about taxes. I don't see taxes as a "punishment", but (per Justice Holmes?) the cost of civilization*. And the government supplies different types of services/ needs, so the type of service supplied might not align with the type of tax revenue? Why would it need to? I might prefer a fee based scheme for governmental services, but this runs up against issues involving law enforcement, that everyone benefits from educating other people's children, etc. The end result is that I don't "own" my property but am only allowed to control it within certain bounds as long as I pay my prop. taxes.
One question on valuations vs. infrastructure impacts/ needs: bare land vs. farm land vs. residences vs. small business vs. large high rise each have escalating needs for infrastructure - the land rates reflect this? What about privately supplied / owned infrastructure (toll highways, etc.)?
2nd question: Large corp. employer has 50 acre campus and pays taxes on it and this supports associated infrastructural needs. Move to more remote working and he needs only a 100 person central office somewhere. The rest of his employees work from home. Do they then need to be taxed on some prorate basis on their residence to reflect the dual use as residence and place of work?
One of the above articles did say the devil was in the details on this scheme. :-)
*And on his Substack, Lorenzo from Oz suggests the benefits of governmental supplied order is under appreciated, even as it has to be balanced against the potential for overreach leading to tyranny, etc. https://www.notonyourteam.co.uk/p/the-paradox-of-polities
The remote work question is an interesting one. I will have to chew on it, but I think the Georgist answer is that it doesn't change anything. The land value and tax rate is what it is, so the tax remains the same. To the extent that an employer is able to minimize its tax burden and increase its value for shareholders, employees, suppliers...etc that is still a good thing and will raise land rents in the long term. Interesting question though.
As per the 7 day free subscription, I am not sure how it works. I don't have control over what it does at the end of the 7 days. Let me know.
The most legitimate concern I have seen about LVT is "searching costs" whereby LVT must discourage people from finding the best use of land. Not an unsurmountable problem, but a concern nonetheless.
I am confused on that reply. I thought I understood the Henry George intent was to force (or at least encourage) land owners to use their land in the most productive role possible, I suppose for the "benefit of society". Some property was still only useful as farmland, some not even that. But if you had a pizza restaurant on a location that could "better serve" the community (not clear who gets to decide this?) with a 6 story office complex, then instead of being taxed at (say) $10K for the restaurant value, you would be taxed at (say) $50K for the (projected or locally assessed?) office bldg value. With that added tax burden you might well decide to change to a new type of business on that location, or sell to someone who could/ would do so.
But if tax assessors are the ones establishing these projected values (before hand, possibly based on their assessment of the value of other facilities nearby???) rather than the marketplace establishing the value as a successful business venture, when does a land owner know it is a bad decision to put up the 7th office complex in a row along Main St. because it will be excess and not turn a profit???
Oh, and just because the assessor thinks a new building is a good idea, that does not necessarily mean there is capital available to make the change over.
What am I missing?
Might as well ask as many questions as possible during the next 7 days :-)
Where would the revenue come from to replace income tax with the LVT? Isn’t it just an unimproved property tax? In that case, wouldn’t taxpayers be paying less on the land they own or would this be on top of property taxes?
It is an unimproved property tax (land). Property tax would be replaced with land value tax, not in addition to it. The rates would be higher and because there is no deadweight loss, the revenue generated would be higher; enough to abolish income taxes.
Just replied on another note, but I think this answers the question I asked there. So this calls for higher rates on unimproved property taxes essentially?
Correct. The rates are higher because they can be without damaging economic growth.
Interesting. I hadn't realized that the land tax meets all four criteria of Smith's good taxation policy.
Some comments:
“Progressive” does not mean proportional to income it means the rathe is an increasing functions of the base.
“Unlike property taxes, however, an LVT does not need to account for the nuances of the building that sits on top of it, so there is no need to individually assess each property.”
This seems exactly backwards. Assess in the total value of a property land + structures is relatively straightforward (sales of similar properties) Figuring out how much of the total value is just from the land “requires” on to “to account for the nuances of the building that sits on top of it”
“With an LVT, it would no longer be rational to hold land tracts in idle speculation.”
No, the conditions may not be ripe for “development” to be worthwhile. I will wait to put up a service station along the lonely country road until it is widened and traffic increases whether the county has an LVT or a property tax.
“Lastly, because the supply of land is fixed, taxing it doesn’t alter the supply. Thus, there is negligible economic deadweight loss from an LVT.” This looks to me like about fourth level of importance. The DWL is, comparing the two tax scenarios, the delay between while the tax on the rising value of the land + improvement property is greater than the income from the land + improvements. But in GE the amounts collected by LVT and property tax will be the same, will there BE a delay?
I get advantage of funding infrastructure from the increase in value the infrastructure generates. I do not see how whether that value is taxes with a LVT or a property tax makes any difference?
I still am in the dark about how it work in practice.
First, if a county wanted to go over to LVT how does it do so? How does it extract the land value form the current assessment of total value?
But more important I’d like to understand over time how it would work by tracing through a fictionalized example.
Once upon a time Mr. Tyson had a trading post at the intersection of two roads ,one leading from Georgetown on the NE bank of the Potomac going south into Virginia and the other going from Alexandria on the SW bank of the Potomac going West into Virginia. He also owned many acres of land all around this crossroads.
At first the location of the new nation’s capital just downstream from Georgetown made little difference to the taxes he paid on his property. But eventually the area boomed and became Tyson’s Corner one of the most valuable real estate properties in the nation, making the Tyson family, who had the good sense never to sell any of the land holdings of Tyson Pere, fabulously wealthy.
The question is, how does this story differ if Fairfax County politicians had read to Henry George in 1879 and started using a LVT instead of the conventional tax on total property value?
Hope my 7day free trial does not lead to an attempt to initiate a paid subscription. I would be unhappy with that right now (although I did just cancel one Substack that sought automatic renewal rather than a specific renewal request; and that process worked well). [I came here from your link at Michael Magoo's 11/17/23 Substack. ]
I came across the Henry George idea years ago and thought it was interesting. Now I have found two articles skeptical of this Land Tax approach, although I am not sure I fully understand either it or these two criticisms well enough to result in a final firm conclusion either way. They may not be news to you? Providing specific examples of the land tax implementation with various (5 to 10?) situations and dollar amounts might help the explanation, too?
1) https://lawliberty.org/book-review/georgism-revisited/ Georgism Revisited; A nineteenth-century activist built an influential movement on an arcane theory about land taxes. Brian Domitrovic September 11, 2023.
2) https://www.city-journal.org/article/what-is-wrong-with-henry-george-type-taxation What Is Wrong with Henry George–Type Taxation? Imposing taxes on “unearned” land value would stifle a vital mechanism for cities to adapt to changing economic conditions. Alain Bertaud Oct 06 2023.
But also a lot of nonsense can be exclaimed about taxes. I don't see taxes as a "punishment", but (per Justice Holmes?) the cost of civilization*. And the government supplies different types of services/ needs, so the type of service supplied might not align with the type of tax revenue? Why would it need to? I might prefer a fee based scheme for governmental services, but this runs up against issues involving law enforcement, that everyone benefits from educating other people's children, etc. The end result is that I don't "own" my property but am only allowed to control it within certain bounds as long as I pay my prop. taxes.
[continued]
One question on valuations vs. infrastructure impacts/ needs: bare land vs. farm land vs. residences vs. small business vs. large high rise each have escalating needs for infrastructure - the land rates reflect this? What about privately supplied / owned infrastructure (toll highways, etc.)?
2nd question: Large corp. employer has 50 acre campus and pays taxes on it and this supports associated infrastructural needs. Move to more remote working and he needs only a 100 person central office somewhere. The rest of his employees work from home. Do they then need to be taxed on some prorate basis on their residence to reflect the dual use as residence and place of work?
One of the above articles did say the devil was in the details on this scheme. :-)
*And on his Substack, Lorenzo from Oz suggests the benefits of governmental supplied order is under appreciated, even as it has to be balanced against the potential for overreach leading to tyranny, etc. https://www.notonyourteam.co.uk/p/the-paradox-of-polities
The remote work question is an interesting one. I will have to chew on it, but I think the Georgist answer is that it doesn't change anything. The land value and tax rate is what it is, so the tax remains the same. To the extent that an employer is able to minimize its tax burden and increase its value for shareholders, employees, suppliers...etc that is still a good thing and will raise land rents in the long term. Interesting question though.
WFH clearly has reduced the income earning potential of commercial real estate in many places.
As per the 7 day free subscription, I am not sure how it works. I don't have control over what it does at the end of the 7 days. Let me know.
The most legitimate concern I have seen about LVT is "searching costs" whereby LVT must discourage people from finding the best use of land. Not an unsurmountable problem, but a concern nonetheless.
I am confused on that reply. I thought I understood the Henry George intent was to force (or at least encourage) land owners to use their land in the most productive role possible, I suppose for the "benefit of society". Some property was still only useful as farmland, some not even that. But if you had a pizza restaurant on a location that could "better serve" the community (not clear who gets to decide this?) with a 6 story office complex, then instead of being taxed at (say) $10K for the restaurant value, you would be taxed at (say) $50K for the (projected or locally assessed?) office bldg value. With that added tax burden you might well decide to change to a new type of business on that location, or sell to someone who could/ would do so.
But if tax assessors are the ones establishing these projected values (before hand, possibly based on their assessment of the value of other facilities nearby???) rather than the marketplace establishing the value as a successful business venture, when does a land owner know it is a bad decision to put up the 7th office complex in a row along Main St. because it will be excess and not turn a profit???
Oh, and just because the assessor thinks a new building is a good idea, that does not necessarily mean there is capital available to make the change over.
What am I missing?
Might as well ask as many questions as possible during the next 7 days :-)