Real Estate 4 Ransom, good video about rent and ownership
By Patrick Follow Sat, 9 Jun 2012, 1:56pm 2,711 views 29 comments
In Menlo Park CA 94025
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Awesome video! The best ever posted!
There are so many good points in this video, but I'll just point out two that really strike me.
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Proud this video came out of Melbourne! Well done to Karl Fitzgerald and Co.
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This is truly an excellent film. If everyone watched it and decided to support these sound economic principles, we wouldn't be in the financial mess we find ourselves in.
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Boca Raton, FL
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Should be required viewing for Congress.
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46 male
Menlo Park, CA
I agree, it's well worth watching.
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Dan8267 says
Yeah they will get it!
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46 male
Menlo Park, CA
In fact, I think it's so well done I added it to the top of the "Essential Reading" below the home page newslinks.
Even though everyone would definitely love to eliminate the income tax and sales tax, maybe the single tax on land values would make old people feel insecure -- and they vote more than anyone else does. If their land becomes more valuable, and they have to pay 6% of the land value annually in retirement, they would worry about being forced to sell by the land value tax.
That worry about old people being forced out by rising land values is exactly what got California to commit financial suicide via Prop 13.
I suppose you could argue that there could be no large land bubbles with a 6% land value tax, but is it provably true?
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Yes, Churchill noted and barons always cry crocodile tears for "the poor widow" anytime a land tax was mooted in the UK too, Patrick. But the exception should not be allowed to make the rule, as in the case also of California's Proposition 13.
A switch to land tax for revenue can look after the genuine poor widow with exemptions, at least until she departs this mortal coil, or she could eventually pay it out of the universal basic income of which a land tax is capable of providing. Surface land rent alone is 30% of the economy; it could replace all taxation, but the economics textbooks lie to us that land rent is only 1% of GDP. http://thedepression.org.au/?p=10799 Add mineral, fishing, forestry and spectrum rent to this 30% and there's your universal basic income.
BTW, there are rarely tears from the uber-wealthy for the poor widow when she is hit with indirect taxation. Why not?
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Excellent video. Good economic lesson for most bloggers here.
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Reston, VA
Good video. @Patrick how do you 'like' a post topic? The like links are only for the subsequent comments.
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This film brilliantly (if a little frenetically) drives home one of the two roots of our economic problems. The other is debt money, which is equally worthy of reform. I believe the taproot is privilege, but what greater privileges are there than the privilege of claiming the earth and renting it out to the landless, and the privilege of creating money out of thin air and lending it to people?
This is not a new problem, either. Dominating people by dominating the land on which they must depend is as old as civilization itself. As superficial liberals flit from one trendy cause to another, this film takes us "back to basics."
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San Leandro, CA
Jacob says
I admit I am old school and admire the concept of "Enjoyment of Appreciation" from the land. Population growth, policy changes (easing of credit) and greed (competition), has destroyed that appreciation for generations to come.
Two problems; Switching taxes would NOT eliminate the greed of either the politicians or private land owners. We are still left with values established by the highest bidder.
EXAMPLE(s): Capitol gains treatments being totally eliminated, and all appreciation is handed over to the government. Other than market value rents, WHAT is my incentive to provide housing for tenants ?
As a single family home owner, would I be building a nest egg for retirement ? So much for that reverse mortgage industry.
That video's system provides some interesting changes but omits our anamalistic, competitive nature.
http://www.imdb.com/title/tt0116705/
A percentage of windfalls should be held in escrow for a period of years and utilized during slowdowns.
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Our only hope is a critical mass of survivors of cannibal anarchy to resurrect some kind of working civilization. Likely, any survivors however will be ultrapsychopaths who believe murder is a sacrament, worship cannibal gods and reproduce by rape. We're one thousand miles away from any opportunity for reform and 2 miles away from the cannibal anarchy exit.
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Menlo Park, CA
YesYNot says
True, I don't have a like link for a whole topic. I will add it, and change "flag" for a topic to "dislike" to make it symmetric.
TMAC54 says
Switching taxes would make the economy much more efficient, because taxes would no longer punish work and commerce, but instead would punish only non-productive rent-seeking.
But I see your point. We really don't have any chance of switching to a land value tax with the current campaign finance system, where you can just buy the laws you want if you have enough money. And the people with enough money are the ones who do NOT want a tax on land values.
So some kind of campaign finance reform has to come first. Unfortunately, we have the supreme court siding with the ultra-wealthy in the Citizens United decision, so we've even taken a huge step backwards.
I like this idea for a consitutional amendment explicitly stating that corporations are not people and money is not speech:
http://movetoamend.org/amendment
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Oakland, CA
The premise is ridiculous
why should land owners be taxed for no reason?
It's like saying we're going to tax your bank account so use it or lose it.
If you want squatters to sell then how about eliminating the capital gains tax?
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toothfairy says
I'm glad you asked! There are many very good reasons to tax land:
* No one created land. There is absolutely zero harm to the economy from taxing land, but there is big harm to the economy in taxing actual work and commerce.
* It allows us to eliminate all income tax and sales tax, hugely stimulating the economy. The land tax is the secret to Hong Kong's very low income and sales tax, and its booming economy.
* Land cannot be hidden. Those taxes are public record, so there will be zero tax evasion, though there could be corruption in land valuation.
* Unearned profit is derived from renting out land where the infrastructure was created by public funding. This means that without a land tax, the rest of us fund the profits of landowners.
* A land value tax discourages leaving vacant lots in cities.
There are probably more reasons too. The land value tax is very fair and simple.
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Oakland, CA
I dont see how there's zero harm to the economy like that highly subsidized rental you are currently living in suddenly the owner needs to make it profitable, either the rent will go up or the owner will convert it into an alternate use that is more profitable.
If You want to eliminate every form of affordable housing then by all means impose additional taxes on land owners.
If you shift the tax burden from production to land. effective wages will go up, rents will go up, property prices will go up.
so it may not have the exact effect you're hoping for.
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toothfairy says
You're right that wages should go up (the amount you keep anyway, because there will be no income tax) but rents and property prices will both fall.
With a land value tax, all land will be put to use as effectively as possible rather than held off the market, so there will be more property available to rent, and rent will fall. Anyway, rents are limited by what people can pay. Landlords do not have the power to raise rents beyond that.
Land will no longer profide an unfair profit at public expense, so land prices will fall as well.
The whole economy will benefit. Only people who are sucking money from other people's pockets without working will lose.
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San Leandro, CA
Patrick says
Respectively speculative. Humans do things for two reasons. Moral reward or Financial reward. Patrick, please construct a list of Landlords that are NOT benefiting financially and you may still never find those acting out of righteousness.
Normally, 50% of the economists are boom & 50% are bust. But a couple decades ago, when "Rent Control" was front page fodder, an overwhelming majority of economists showed that rent control will fail, simply due to lack of investors.
Don't get me wrong. I love the idea of taxing easy money. But the good intentioned purpose of capitol gains treatment is to benefit society. ie. Provide rental units, Invest in business's etc. When those capitol gains treatment laws were created, times were NOT exactly BOOMING.
If Gubmint building restrictions were eliminated, there would be NO housing shortage. BUT ! Bumper stickers would read "Blight Happens"
We should strive for a happy balance. But we CAN'T get gubmint to move fast enough.
I met with Santa Clara county planners in the early eighties when their rules just changed from 160 to 20 acre minimum with a slope density factor. I suggested their children would be forced to move to San Joaquin valley. Their slow growth attitude was solidified and 30 years later, remains steadfast. I was enlightened that the eventual increase in demand for housing would cause those gubmint restrictions to ease. But their hand is forced by the present environmental slow growth attitude. We are kinda boinkin ourselves.
Bottom line; We demand that gubmint protect us from others with bad intentions. At what cost ? We need more housing, but we are telling gubmint to stop growth.
If the land tax were instituted, would we be allowed to build mobile home parks in San Jose ? Would manufacturing firms still be forced to pay a high % of their construction costs to beautification requirements ?
I am 100% behind your intent of shearing campaign contributions. This would hopefully return us to a system "OF THE PEOPLE" from the existing
"FO THE CORPORATION" oligarchy.
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Oakland, CA
Im not certain hat rents would fall. I dont know about other landlords but when my tenants wages go up and my expenses go up the rent also goes up.
And as you well know property prices are tied to rents so when the rent goes up the property value does too.
I dont see a whole lot of property being help off the rental market in the first place so not sure how much additional rental inventory will come online when you increase taxes for land owners.
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TMAC54 says
I hope so. Mobile home parks are pretty efficient housing actually.
toothfairy says
Only wages determine rents, not landlord expenses. Landlords charge whatever they can get. What they can get depends only on wages.
toothfairy says
But there is a huge amount of land that is being very inefficiently used.
Remember that the land tax would replace the income tax and sales tax. It would not be a tax increase at all, only a change in what exactly gets taxed.
So if you have income from a job, your taxes on that would go down.
Tenants would also not pay income tax, so they'd have more cash on hand to pay rent.
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Los Angeles, CA
Theres probably a small country somewhere that has this system right? no?
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Hong Kong has a top tax rate of 17% because it captures its land rents in various forms. But it still probably doesn't get enough land tax/rent because it's still experiencing a property bubble.
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Taiwan has a weak implementation of a land value tax, but they are improving it:
http://www.tax-news.com/news/Taiwan_To_Close_Land_Tax_Loophole____45858.html
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Isn't this land tax and no income tax true in Texas where their property tax is high and not have income tax?
What about in Florida? Isn't it true there also?
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It's no coincidence that the higher US property-taxing states are also the better economic performers. A few years back, I saw the states listed from highest property-taxer to lowest, and the correlation with healthy to unhealthy economies was incredible. That list should be updated to see if it holds true - and I'll bet it still does.
Property taxes act to keep a lid on speculation, whereas taxing goods and incomes adds to costs and prices.
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Patrick says
There would be massive corruption in land valuation. It happens all around the world now. In places that have a wealth/asset tax value of the land (in addition to property taxes), like Argentina as one example, everyone lies through their teeth about the sale price until the value on the books has no relation to the price paid at all.
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We already have that. Nothing new.
The fix is simple: very public tax payment records and a big reward for catching cheaters. Everyone should be able to view all supposed sale prices and tax payments with no login, and no restrictions on usage of the tax data at all.
Anyone exposing corruption should be entitled to the entire underpayment amount, and the same amount again should be levied to recover the lost taxes. All valuation fraud would end instantly.
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We regularly update pretty good site values on every property in Australia. There's no valuation corruption here or in New Zealand or South Africa.
On the other hand, I hear the value of improvements is often kept high and land valuations low in the US, so greater building depreciation may be claimed by investors. This sort of corruption might be rooted out if land values, not improved values, became the tax base.