>You can borrow against unrealised gains. That's a key part of the 'buy, borrow, die' tax strategy.
Borrowing and taxation are completely different concepts. Unless I am the only idiot who hasn't asked for their tax back with interest. Possible.
>People who sit on hugely appreciated land ain't 'poor'.
They aren't poor in that they have at least one valuable asset. The kind of asset that helps people stay afloat when they have issues with income or domestic violence. Regressive taxes are regressive because they simply do not look at income. Someone can be retired, living on nearly no income, and have a single valuable asset. It is not the role of government to significantly disrupt peoples lives because they have 1 good thing going. IIRC home ownership is the single best indicator of mental health.
My memory (going on 10 years I have been having this conversation with Georgists) is that George was largely enraged with Private US railways. From memory they would be automatically granted the land immediately adjacent the track they laid. Sometimes they would develop this land, sometimes they would sell it, but largely they banked it. Because that land was adjacent to, the railway, it was quite valuable, but often underused.
The problem with Georgists, is that the context their ideas were formed under is no longer relevant. The people who will be punished by these ideas are not the railways, but people who are just holding on to their property, people who bought cheaply (ie made an intelligent forward thinking decision for their future) and find themselves surrounded by new services that raise their properties value. Thats what gets me, is that property value is not something you can consent to or plan for. Its arbitrary subjective market valuation, and asking people to lose their homes (homes are houses that humans have a relationship with) because of a subjective market valuation is bad. Its bad when variable mortgages do it, and its bad when georgists roll up and propose the same.
> Borrowing and taxation are completely different concepts. Unless I am the only idiot who hasn't asked for their tax back with interest. Possible.
I get the impression that maybe you are not aware of what is implied by the 'buy, borrow, die' tax strategy that parent is referring to: in effect it completely eliminates taxes on capital gains (in the US). [0] and [1] below are first two Google hits.
I mentioned the tax strategy just to point out that borrowing against unrealised gains is common. (You can also do it in jurisdictions that don't have capital gains taxes. But there you do it for reasons other than optimising your taxes. Eg you might want to mortgage your house (without selling it) to buy a car.)
Ok but why mention borrowing at all. We are talking about taxation.
They are almost completely opposite concepts.
Borrowing literally defers payment to the future. Taxation on your now land value occurs now.
Why does the ability to borrow against unrealised gains (with the lender speculating on the return on those gains) matter compared to paying a tax on unrealised gains (which is due now, not deferred and barely speculative)
> Why does the ability to borrow against unrealised gains (with the lender speculating on the return on those gains) matter compared to paying a tax on unrealised gains (which is due now, not deferred and barely speculative)
You can borrow to pay the taxes. Or you can 'realise' your gains via a sale to pay the taxes. That avoids the leverage that you point out.
>You can borrow to pay the taxes. Or you can 'realise' your gains via a sale to pay the taxes. That avoids the leverage that you point out.
Thats insane, you know that right? You may have invented a worse financial instrument than the subprime mortgage crisis.
Taxation is an ongoing cost. you pay it every year.
Under LVT, the LVT price is entirely subjective.
If I am a bank, and joe blo has a 200k tax bill, and 20k income, I am already disinclined to lend him money to cover that tax bill because of his income. I think this is where you fall over, and the rest of this is just making fun of your nonsense.
The great thing about joe is he is going to get another tax bill next year, even if he parts with 95% of his land portfolio, I have no idea what the value of the remainder is going to be, subjectively, next year. Its an open ended liability. If I was a good banker who wanted to be nice to Joe I would ask him to leave.
However a normal bank might lend him the money just to receive his land as collateral to take it on when he inevitably defaults. But I thought LVT was about the reduction of land banking, not shifting ownership of land to the banks?
> Taxation is an ongoing cost. you pay it every year.
Yes, just like you gain the land rent from the land you own every year.
> If I am a bank, and joe blo has a 200k tax bill, and 20k income, [...]
My broker doesn't care about my income one bit when they lend me money: they lend against my stock portfolio. Similar, here you could lend against the real estate. Why would the lender care about income?
> However a normal bank might lend him the money just to receive his land as collateral to take it on when he inevitably defaults. But I thought LVT was about the reduction of land banking, not shifting ownership of land to the banks?
No, not at all. That's a common misconception, especially prevalent amongst fans of LVT.
As I said earlier, the LVT changes no opportunity costs between land uses at all. So if for some reason it's a good idea to 'land bank' without an LVT, then it'll still be a good reason to 'land bank' with an LVT.
However, being able to finance the government with an LVT might have second order effects on other taxes and regulations, that might make land banking less (or even more?) appealing. I don't know, it depends on what else is happening.
>Yes, just like you gain the land rent from the land you own every year.
But we arent discussing a renter, right? You know that? The example was som
If your "solution" is for the land owner who cant afford his massive tax bill on his land (a tax bill that he incurred because of a subjective valuation) your solution is that he moves off his land, somehow pays to make it suitable for the rental market and then rent it out? And then what? Rents a place himself? How is this desirable?
>My broker doesn't care about my income one bit when they lend me money: they lend against my stock portfolio. Similar, here you could lend against the real estate. Why would the lender care about income?
No one lends money without an expectation of a return. Yes you can lend on collateral. That works once unless it is paid back. That "paid back" needs to be accounted for in your analysis.
>No, not at all. That's a common misconception, especially prevalent amongst fans of LVT.
So we have struck down at least one of the touted benefits of LVT. Thats something. Thats a small amount of progress.
Why do you want to punish anyone? What's that strange obsession.
Land Value Tax is simply an efficient tax system that minimalises dead weight losses. Yes, Henry George was a big fan of them, but he was just one proponent. LVT does not live and fall with Henry George.
> Borrowing and taxation are completely different concepts. Unless I am the only idiot who hasn't asked for their tax back with interest. Possible.
I am saying that your specific objections to taxing unrealised gains do not apply.
> They aren't poor in that they have at least one valuable asset. The kind of asset that helps people stay afloat when they have issues with income or domestic violence. Regressive taxes are regressive because they simply do not look at income. Someone can be retired, living on nearly no income, and have a single valuable asset. It is not the role of government to significantly disrupt peoples lives because they have 1 good thing going. IIRC home ownership is the single best indicator of mental health.
You are proving too much. Holding down a steady job is also a great indicator of mental health. So the government shouldn't tax your job either? Ie income tax bad?
You have to tax something to run the government.
Btw, you could run a land value tax but give everyone a universal basic income equivalent to the LVT paid by the median person. That means only people who sit on more than the median amount of land (by value) would pay a net tax. Everyone else would see a net income from the system. That would immediately knock out all of your arguments about those poor widows and orphans.
(In taxation and income, medians tend to be lower than averages, so the above system would leave money left over to use for general government revenue. If you want more of that, instead of paying the median amount, you could pay UBI at eg the 20%-ile level. That would still protect those people who only 'have 1 good thing going' from net outflowing payments.)
>I am saying that your specific objections to taxing unrealised gains do not apply.
I dont see how referencing borrowing is relevant to taxation.
>Ie income tax bad?
Yes its horrible. But if you tax 10% on income, you are left with 90% of your income on an ongoing basis, and that can accrue. People can become wealthier. People without income dont pay the tax so arent negatively affected. If you tax someone with 5 bucks in their bank account and no job, 10% of their 200K property, they arent going to accrue 90% of their property on an ongoing basis. Their wealth will shrink. Which is bad on average.
>Btw, you could run a land value tax but give everyone a universal basic income equivalent to the LVT paid by the median person.
I often see these joined but IIRC I did some math on this, and UBI would make your LVT extremely punishing. I wouldnt group them together as proposals.
> If you tax someone with 5 bucks in their bank account and no job, 10% of their 200K property, they arent going to accrue 90% of their property on an ongoing basis. Their wealth will shrink. Which is bad on average.
Again, that's the whole idea behind LVT: it minimizes non-productive use of land, like housing.
No, LVT does not minimise non-productive use of land at all.
I like LVT just as much as the next guy, but we can't have it both ways: _either_ LVT has no deadweight losses, because it doesn't change any opportunity costs for land use and thus has no (direct) influence on land use. _Or_ LVT does have an influence, and you want to argue that it's the 'correct' one.
However: with or without LVT, the opportunity cost differences in different land uses are exactly the same. The same amount of LVT is due no matter what you do with the land or who owns it.
LVT might have an indirect influence on land use, because financing your government via LVT means you can potentially lower other less efficient taxes. Removing these other more distorting taxes can have an influence on land uses.
They probably means something like some poor single person sitting on a very valuable plot of land and not doing much with it. Maybe? I'm not exactly sure.
> I often see these joined but IIRC I did some math on this, and UBI would make your LVT extremely punishing. I wouldnt group them together as proposals.
What's with you and punishment?
LVT should be set to approximately tax all land rents. Given current prevailing interest rates, setting LVT to, say, a yearly 10% of land value should accomplish that. (But the exact value doesn't matter too much, because of arbitrage. I can explain that, if you want to. Basically, as LVT goes up, market prices for land go down. So even setting an LVT of 50% per year won't get you more of a tax take then saner values.)
Just to be clear, I don't propose the UBI above as something anyone could live off. I proposed to mechanically set it to eg the 20%-ile of LVT payments, so that the land-poorest 20% of the population have no net LVT payments to make. Thus forestalling only your very specific objection.
That suggestion was not meant to pay for any specific living standard on its own.
> Yes its horrible. But if you tax 10% on income, you are left with 90% of your income on an ongoing basis, and that can accrue.
Why are you so obsessed with income that's measured in money? There's also plenty of in-kind income. Eg when you have an apple tree, you get apples. If you have a house, you get housing.
It's generally good, if the tax system doesn't care, if you rent his house and she rents yours, or if both of you live in your own home. (Neither scenario has any net flows of money, but the first one has gross flows of money.)
Interestingly, in Switzerland people actually pay taxes on the imputed rental income they get from being owner-occupiers.
I really cant hit a moving target. I cant explain the economic flaws in your arguments faster than you can generate flawed arguments.
>LVT should be set to approximately tax all land rents.
What does this even mean?
>so that the land-poorest 20% of the population have no net LVT payments to make.
Right but you just added a huge cost that you have to tax from somewhere. So the LVT rate goes up again.
(Very common experience discussing LVT - New taxes, regulations and handouts that will randomly make criticism go away)
>Why are you so obsessed with income that's measured in money?
Why are you against it lmao?
>There's also plenty of in-kind income. Eg when you have an apple tree, you get apples. If you have a house, you get housing.
How is this relevant to anything being discussed?
And under an LVT, having a house or apple tree gets you a tax bill, measured in money. Of course economic calculation is relevant.
>What's with you and punishment?
I don't have a better description for what you want to happen to people with income lower than their LVT bill. Feel free to suggest something. "Economic Defenstration" maybe.
> Right but you just added a huge cost that you have to tax from somewhere. So the LVT rate goes up again.
No, it doesn't.
>> LVT should be set to approximately tax all land rents.
> What does this even mean?
A sketch: suppose a piece of land gives a land-rent of $100 a year. At 5% prevailing interest rates, that piece of land would trade for about $100/5% = $2,000. That's because arbitrage will roughly make it trade at the same price as a bond that pays $100 a year. (For simplicity of illustration assume no taxes, no risk, etc.)
Now if you add a 15%-a-year LVT, you get the following no-arbitrage condition:
Solving for the new land price gives you (land price) = $100 / (15% + 5%) = $500. That market price gives you a $75 LVT bill. That's 75% of our land rent.
You can directly calculate the proportion of land rent that goes to LVT as a function of the tax rate and interest rate as (tax rate) / (tax rate + interest rate). As you can see, assuming non-negative interest rates, this can get arbitrary close to but will never reach 100% of land lent. There are some practical limits to how high you can set the LVT per year. But you can get pretty close to 100% of the land rent. And the limits are of a practical nature, they don't have anything to do with what you are doing with the revenue (ie UBI or whatever).
I know, it's a bit confusing: we are charging a specific rate on the price of the land, but what we are actually interested in is the proportion of land rent we are capturing.
Land prices adjust to the taxes we are charging. So jacking up the LVT rates won't really give you an increase in the tax take.
(That's one way to implement LVT. You could also instead auction off leases to use plots of land for eg 20 years at a time to the highest bidder. There it's also clear that you take approximately 100% of the land rent as a tax, and it's also clear that there's not much the government can do to jack up the rates: they are already getting the whole proceeds of the auction.)
> And under an LVT, having a house or apple tree gets you a tax bill, measured in money. Of course economic calculation is relevant.
Yes, the tax bill is measured in money. But that doesn't mean the only thing that's admissible to be taxed should be income measured in money.
> I don't have a better description for what you want to happen to people with income lower than their LVT bill.
You have to sit on a lot of valuable land to have a high LVT bill. Those are rich people.
In any case, you are right that changing the tax system will always create winners and losers, even if you create many more winners than losers.
So you could do what the British did when they freed the slaves in the Empire without causing a civil war: you could pay out the old landowners. (The British paid off the previous slave owners.)
By itself, acquiring all the land will be fiscally neutral, so the government hasn't gained anything. (In reality, there will be some inefficiencies and friction, so you'll actually lose money.) However, once you start lowering other taxes, land rents will go up and thus the LVT take with it.
You have to make sure to pay for what the land traded _before_ the market started pricing-in the anticipation of lowering other taxes later.
Instead of paying off the old owners, you could also gradually introduce the LVT to soften the blow of the impact a bit.
Lmao, so you either collect less money, or you collect enough money to pay for your new dividend + other government services. you cant have it both ways.
You must account for the cost of the random new UBI you addressed to cover your other arguments.
>You have to sit on a lot of valuable land to have a high LVT bill. Those are rich people.
This is one of my favourite parts of LVT, the magically tiny tax.
If you take <national budget> and apply it proportionally across land as it is valued, the most <national budget> is extracted from inner city residential and commercial land. This is literally the stated intention.
You have stopped caring about a persons income, and started caring only about the value of the land beneath their house. By design and intention.
That value will rise and fall based on subjective third party determinations. By design and intention.
Its highly likely that people will end up with a significantly increased tax bill, especially if they had low/no income previously. Again this is stated intention, its just the flip side of encouraging more efficient use, is discouraging people from living within their means on a block of land they own that's near things property evaluators value.
Rich people with high incomes and expensive property wont give a shit. People who fall outside of your hypothetical, plenty of whom exist lots of them former income tax payers, will be significantly worse off.
>By itself, acquiring all the land will be fiscally neutral
Land value as it stands is fucked in large part because the government holds so much of it. The solution is to release more land, not lock more of it up in state ownership.
>I know, it's a bit confusing: we are charging a specific rate on the price of the land, but what we are actually interested in is the proportion of land rent we are capturing.
You need to solve for the entire budget, not a number you made up.
The market cap of the US housing market is 50 trillion. That includes developments on the land, and it excludes all the commercial and agricultural land. Lets assume it averages out to 60 trillion.
US government spent 6.8 trillion last year.
You aren't going to be able to tax rents 10%, you will need to tax value 10% to reach that number.
If someone lives in a caravan sitting on a 200k valued piece of land that they own outright (hoping to develop one day), making minimum wage, and they get a tax bill for 20k, or even 10 or 5k their life just ended. If you want them to borrow with no income to offset their tax, they wont get that loan.
I dont understand how you dont understand the actual cost of an LVT or how it is likely to affect people.
> (In taxation and income, medians tend to be lower than averages, so the above system would leave money left over to use for general government revenue. If you want more of that, instead of paying the median amount, you could pay UBI at eg the 20%-ile level. That would still protect those people who only 'have 1 good thing going' from net outflowing payments.)
The less UBI you pay, the more you have left over for general government revenue. The more UBI you pay, the less you have left over for general government revenue.
> Land value as it stands is fucked in large part because the government holds so much of it. The solution is to release more land, not lock more of it up in state ownership.
It doesn't really matter, as long as they lease it out to the highest bidder.
> Its highly likely that people will end up with a significantly increased tax bill, especially if they had low/no income previously. Again this is stated intention, its just the flip side of encouraging more efficient use, is discouraging people from living within their means on a block of land they own that's near things property evaluators value.
LVT does not encourage (or discourage) any land use, efficient or otherwise. It makes no change to opportunity costs between different uses.
> You need to solve for the entire budget, not a number you made up.
I have no clue what you are on about?
If you want a clear suggestion of what I would prefer:
Auction off all the plots of land for eg 30 years at a time. Do the auction for the next lease 5 years before the old lease ends. Stagger the auctions to have around 0.28% of plots being auctioned off every month.
(Don't bother with UBI etc, unless you want UBI for other reasons anyway. Those were just suggestions to solve specific concerns about orphans and widows you brought up. I would suggest to just use the regular, existing means-tested social safety net for them, instead of spinning up something bespoke.)
Singapore does something reasonably similar, but I think 99 year leases are too long, especially since the country is young enough that the giving back at the end of leases has essentially never been tested.
I'm not sure why you bring up the US government spending? I don't know how much LVT could raise in the US. But some people have tried to figure that one out.
> If someone lives in a caravan sitting on a 200k valued piece of land that they own outright (hoping to develop one day), making minimum wage, and they get a tax bill for 20k, or even 10 or 5k their life just ended. If you want them to borrow with no income to offset their tax, they wont get that loan.
That's fine. They can sell the land to get rid of those hopes and dreams and tax obligations.
You can write similar sob stories about any tax at all. And most are worse than what you get with LVT.
With an established LVT, your caravan dweller would never get this weird idea in the first place.
And I admit that whenever you make an adjustment to the tax system, the people who made plans based on the previous system will have those plans torpedoed. Them's the breaks.
So we have to decide what we want to discuss: how an LVT system would work in the steady state, or how we could (or could not) transition to one.
Borrowing and taxation are completely different concepts. Unless I am the only idiot who hasn't asked for their tax back with interest. Possible.
>People who sit on hugely appreciated land ain't 'poor'.
They aren't poor in that they have at least one valuable asset. The kind of asset that helps people stay afloat when they have issues with income or domestic violence. Regressive taxes are regressive because they simply do not look at income. Someone can be retired, living on nearly no income, and have a single valuable asset. It is not the role of government to significantly disrupt peoples lives because they have 1 good thing going. IIRC home ownership is the single best indicator of mental health.
My memory (going on 10 years I have been having this conversation with Georgists) is that George was largely enraged with Private US railways. From memory they would be automatically granted the land immediately adjacent the track they laid. Sometimes they would develop this land, sometimes they would sell it, but largely they banked it. Because that land was adjacent to, the railway, it was quite valuable, but often underused.
The problem with Georgists, is that the context their ideas were formed under is no longer relevant. The people who will be punished by these ideas are not the railways, but people who are just holding on to their property, people who bought cheaply (ie made an intelligent forward thinking decision for their future) and find themselves surrounded by new services that raise their properties value. Thats what gets me, is that property value is not something you can consent to or plan for. Its arbitrary subjective market valuation, and asking people to lose their homes (homes are houses that humans have a relationship with) because of a subjective market valuation is bad. Its bad when variable mortgages do it, and its bad when georgists roll up and propose the same.