patrick.net

If it is as you say that the tax is deferred until the land is sold, then it is the same as the system we currently have.

There is a small exclusion for primary residences whereby a gain of $250k/$500k per couple is excluded from the capital gains tax. Depending on the holding period it reflects the rate of inflation.

From what I understand the cost basis is stepped up upon death for the heirs and the value is added to the other assets owned for estate tax purposes.

Overall, except for a few small exclusions from our tax code it would be the same as it currently is.

cisTits says

Misc says

Example" Let's say some schmuck under this proposed Georgianism tax scheme bought a piece of property for $ 1 million when the interest rate was 5%. Let's say interest rates went down to roughly 2%. That would increase the value of the property by about $1 million so resulting in the tax of about $1 million. The schmuck would loose everything he ever owned due to this crap tax system.

If true, it's no different than how current property taxes are reassessed for most localities.

No, I was under the impression that the tax would be imposed as the price of the land went up without a sale being needed.

Patrick says

The point is that no one created land, therefore no one should be able to extract wealth from people who actually work simply by virtue of land ownership. All hereditary aristocracy is based on a class of people who don't have to work because they own the land and everyone else is therefore forced to work for them. Land ownership produces nothing at all.

Please read the good explanations at:

https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty
https://astralcodexten.substack.com/p/does-georgism-work-is-land-really
https://astralcodexten.substack.com/p/does-georgism-work-part-2-can-landlords
https://astralcodexten.substack.com/p/does-georgism-work-part-3-can-unimproved

The reading list is very helpful, and illustrates several problems with applying Georgism in today's world:

1. Henry George's "land" is a concept that is not just the physical land but all naturally occurring goods that brings the exclusive owner some kind of economic advantage. In today's world, a doctor's license to practice, a lawyer's license to practice, a bar or restaurant's license to carry liquor, a restaurant's license to operate, etc., are much more valuable as Georgist "land" than the physical land the size of a typical SFH building lot. In today's world, land ownership is little more than a financial instrument with a piece of land attached. It's a little like if Bitcoin became the new currency, the limited total supply of BitCoin (25 million or thereabouts) make Bitcoin into a speculation Georgist "land" the same way licenses for hospital building, Medallion for NYC Taxi (before Uber) are. In fact, the chart of historical components of personal wealth, the residential building component took off first at the end of WWII, and then mushroomed after around 1971; why? first was when international gold standard was abolished, then 1971 brought the end of international gold settlement via the USD under Brettonwoods. Residential real estate became a hedge against fiat currency inflation, much like Bitcoin would be according to Bitcoin believers. That does not mean however rent would go up at the same pace as residential real estate capitalized value: the 40yr interest decline made capitalized present value grow much faster than revenue stream itself. The revenue stream itself is very much the result of government rent subsidies (and restrictions on new construction). Given the fiat money system, speculation on something to be a reliable store of value is bound to happen even without private land ownership: it can be Bitcoins (which also would be "land" in Georgist lingo), or collectible art pieces . Comes to think of it, even stock ownership (owning a piece of an existing corporation) is also "land" if we want to apply Henry George's definition consistently, and most certainly any patents and licenses the corporations might have.

2. How to evaluate and tax the policeman's right to bear arms in a city that bans private gun ownership? That is obviously also "land" in Henry George's definition, the license to have a good that is exclusive and denied to others. How much should Biden be taxed for the ability to commit corruption? and that of his son Hunter? 100% is about right, but how is that going to be collected? Nobody having gun in the city? Seems to me, the founding fathers had the right idea: instead of letting some imaginary government-god having exclusive right (and inevitably assigning it to someone without collecting the 100% "rent"), everyone should just have the right! Instead of collecting tax on the license to build hospitals or practicing medicine, given how badly those exclusive rights have been abused, everyone should just be able to order meds on his/her own without prescription (can't be any worse than the denying of Ivermectin while insisting on toxic injections, as practiced by the licensed authorities). In the case of actual land, the closest thing to "letting everyone have the right" is having laws preventing concentrated ownership: e.g. nobody should be allowed to own more than 10% of any block, so that all landlords are forced by market to competing against each other.

3. Even today, the separation of land value vs. structure value in property tax assessment is little more than a convenient fiction: most homes are sold for less than structure replacement value except for at the peak of bubbles. Besides, land value even for the same piece of land is dependent on usage: most towns have lower assessment for agriculture use than residential use; identical lots directly across the street from each other would have different values depending on its zoning.

4. Henry George is wrong on rent being the cause of wars. Wars are not waged between private neighbors but between governments. Governments are bought off by banksters to wage wars in order to kill depositors and pension account holders, since at least the time of the Crusades in the 11-12th century, if not as far back as the Peloponesian War in 5th century BC. If we want to look for a Georgist "land" in that context, it's the banking license and central-banking privilege to defraud people (banking is by its own definition a fraud / con game: steady interest and on-demand withdrawal are not mutually compatible; that's why they argue it's necessary to have a central bank, which has no meaningful reserve whatsoever). Private land ownership, whether it's in the New World, in Siberia, or someday on Mars, is only a way to bring new land/resources into development quickly so as to delay the following round of "reset" killing depositors and pension account holders. By Henry George's definition, an oil well would be land because the oil/gas in the well is natural resources, not giving much credit to the highly speculative effort of prospecting. If anything, private entrepreneurs prospecting for oil, minerals and even real estate, so long as they are taking on the risks on their own books not subsidized by government, are actually less of a burden on the rest of the society than governments undertaking the projects. Why? because governments is almost literally in the business of hiring people paying them wages to hammer break fine china vases (one of the examples in the reading list on why wage comes from production not from capital). Wages do come from production not from capital for private competitive businesses, but not for the governments: governments literally destroy capital to pay wages (pretend-wages) to government workers and nominal beneficiaries/supporters; those government endeavors lose money consistently and government not going out business are the real reasons why progress doesn't solve poverty, and also wars (as governments and their officials seek to be bought off by banksters, or are placed into nexus of power by banksters to begin with).

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3954888

The post-Corona economic environment puts a premium on finding fiscal means to stimulate the economy while continuing to finance current levels of expenditures and debt. We develop and carefully calibrate a model of the US economy to show that an increase in the tax rate on the value of land, balanced by decreases in the tax rates on the incomes of capital and labor, can meet this need. We find that the US share of land in total nonfinancial assets is more than 50%, so that the tax base is very large. This is corroborated by very high quality OECD data for other industrialized economies that, almost without exception, find land shares of between 40% and 60%. Our baseline proposed tax reform is an increase in the tax rate on the asset value of land from its current 0.55% to 5.55%, accompanied by reductions in tax rates on capital and labor incomes of 28 and 10 percentage points, respectively. In a representative household model, this increases welfare by 3.4% of steady state consumption, and increases output by almost 15% relative to trend. In an economy with separate groups of workers, capitalists and landlords, the output gain is the same, while the welfare gain increases to 6.4% on average across the three groups. Welfare and output gains for a wealth tax that raises the same revenue, and which increases the tax rates on capital and land equally, are only half as large as the baseline. Welfare and output gains for an optimal tax reform, under the assumption that the tax rate on the value of land is capped at 20%, are approximately twice as large as the baseline. This reform raises 55% of all tax revenue through land taxes, with the remaining 45% raised through consumption taxes, while all income taxes are abolished.

From the same paper:

Hudson (2012, 2018) has shown that most land rent is paid out as interest to banks and that bank credit is a major driver of increases in housing prices (“real estate is worth whatever the bank will lend against it”). Further empirical support is offered by Favara and Imbs (2015), and La Cava (2015) finds that this can explain the increase in the share of housing in capital income studied by Rognlie (2015). Ryan-Collins et al. (2017) and Turner (2017) argue that a self-reinforcing cycle between bank lending and land value increases has caused a shift in bank lending from business loans to mortgages and the inflation of land prices, and this has impaired financial stability, as also argued in Keen (2017).

https://www.indybay.org/newsitems/2023/07/06/18857230.php

Put the Moxi, not Puny, in MUNI
by David Giesen (info [at] TheCommonsSF.org)
Thu, Jul 6, 2023 11:27PM
The progressive left hobbles itself in not believing the advocacy of socializing land values is worth the energy expended. Without a clear, principled aspiration articulated, a larger, wider, transformative social justice program is unlikely to emerge in public discourse, much less at the ballot.
When one reads the editor-in-chief dismissing the value of San Francisco self-described left liberals taking the case for reforming the property tax to the public--and this is substantially what Tim Redmond said in a 48 Hills editorial Thursday, July 6--a cold gray city of defeatism and smug elitism guts the hopes and expectations of 3rd Street. I say smug elitism because not a few of those with a media or institutional platform in this city are sitting on Prop 13 suppressed land valuations that were they to take a principled position, would substantially raise their own taxes.

Consuming the Earth affects everyone else's opportunity to use the Earth in making a livelihood. When I and a large cadre of fellow Americans hold title to a piece of land in the USA, that means a substantial cadre of fellow Americans have access to land for a home or a business or, for that matter, for recreation, only if the landless first pay my sort--the landowning--for access. Now it's true that commercial real estate titleholders hold sway over the huger part of land values in the US, but it's disingenuous for Redmond and others with thought-shaping platforms to pretend that when they, too, are titleholders of land, that their monopoly hold on the material universe doesn't skew towards a degree of desperation the lives of the whole population, but especially of the largely unlanded folk of 3rd Street (and their peers). The liberal democratic socialists (and the multi-astral constellation of other do-gooders) who hurrah revising Prop 13 so that commercial real estate would pay tax at MARKET valuation, but who conveniently excuse the home landowner from the equation, are simply not being principled in their thought. Consuming land, whether commercial real estate or not, alienates the rest of society from land. A principled position would be to require anyone enabled by land title to exclude others from use of that piece of the Earth, to pay the value of that exclusionary power to society.

Turning to a related social question, the thought-swayers of self-professed Left persuasion do a poor job of making the case for small business when, in principle, they argue for taxes on productive activity, including doing business. To be sure, most Left voices specify that small businesses should be excused from tax levels meant to level incomes. Still, there is an implicit conviction amongst so many on the Left that the act of being productive in meeting consumer demand is suspicious. That conviction tries to hide behind the vague, dissembling mumble that there is an acceptable level of reward for meeting consumer demand, but that large aggregations of people into a corporation are, by dint of their scales of economy, receiving unjust amounts of reward for their efficiency. Yes, regulatory fees on doing business fall disproportionately heavily on small businesses than on large, but there is in the "Eat the Rich" sentiment a gross, careless understanding of from whence larger businesses gain their advantage over small businesses. It has to do with monopoly. Large businesses tend to own their real estate, and thus they internalize as income the differential in what they pay to use land and the location rent most small businesses must pay.

Similarly, large businesses dependent upon natural resources are more often than small such businesses to own or control the price and access to such resources, whereas small businesses must pay the full market price for coal, petroleum, forest, coltan, and other resources. Redmond and fellow pundits (and these thought-shapers are mere pundits so long as they fail to rigorously explore first principles) take little if any account of the financial advantages of land value ownership that, I argue, account for so much bigger businesses' so-called profits. Socialize land values and then we can begin to discern whether doing business is ipso facto suspicious, or whether it is the customary monopoly on land access and land values that is what society should "eat."

Don't take my word for it. Go yourself to five or six small business owners and ask them, "Do you find business taxes burdensome? Would you be better off and more able to compete with larger businesses if taxes fell not upon your earnings, but simply upon the location value your business occupies?" Many will say, "A tax on my location? I'm already paying my landlord for that." To which the principled response is, "That's right, and wouldn't it be desirable to have that portion of the rent you pay that pertains to location (as opposed to pertaining to the value of improvements) be the end of your tax due, with it collected by the landlord, but then passed along by him to the various government jurisdictions?"

This is but a brief treatment of the unconsidered thinking of so many on the Left who would right significant social troubles with specious economic analysis. In the absence of rigorous reflection on the land question, we can expect the earnest voices of thought-swayers to accomplish near nothing in liberating the nation's 3rd Streets from alienation from place.

By way of supplying one example of the power of correctly addressing the land question, I'll explain the title of this article. The United States, no doubt much to the surprise of most readers, has one of the most efficient public transport systems in the world. Tens of millions of people are safely and speedily conveyed to their destinations every year, and without a fare having to be paid! I refer to elevators in commercial buildings. The owners of buildings have a great incentive to make their piece of the Earth the site of an attractive destination. Whether its an apartment or condominium building, an office building, a retail store, etc., the commercial user of a piece of land seeks to optimize their income by making getting to destinations within their building easy. They do so by providing elevator service. Lay that elevator model perpendicular. Oblige the owners of land to pay in full for the annual value of that land, and they'll desire Euro or Asian quality public transportation to get consumers of the land owners' productive activity to their business sites. In other words, taxing away the full annual value of land will enable society to build horizontal fare-free public transportation with the same predictability that consumers expect to find vertical transportation in buildings.

Socialized land values put moxi in MUNI. Sabe?
For more information: http://www.thecommonssf.org/

richwicks says

Why can't I own a nuclear bomb?

Because you might set it off.

Misc says

People would own nothing.

And be happy!

richwicks says

Why can't I own a nuclear bomb?

"You'll shoot your eye out."

richwicks says

Why can't I own a nuclear bomb?

Maybe just stick with pitbulls?

Onvacation says

richwicks says

Why can't I own a nuclear bomb?

Because you might set it off.

Yes, and I might shoot my eye out, but the Federal government doesn't have any right to prevent me.

Our federal government is completely illegal and they used to treat it seriously. Did you know murder is NOT a federal offense?

richwicks says

Federal government doesn't have any right to prevent me.

So the state should do it. I don't think an individual should possess nuclear weapons. Too much can go wrong.

richwicks says

murder is NOT a federal offense

That explains a lot.

Onvacation says

richwicks says

Federal government doesn't have any right to prevent me.

So the state should do it. I don't think an individual should possess nuclear weapons. Too much can go wrong.

I'm not in disagreement, I'm saying the Federal government has no authority from preventing you from owning a nuclear weapon.

There's PLENTY of people I would not want to have controlling a nuclear weapon, me included.

Which variant do you propose?

Replacing all taxes with a tax on land assessed at the unimproved value.

or

The state owns all the land and charges rent for use of each parcel.

The first, though it's essentially the same as the second.

I also think the land value tax should be set by the market and not the government. That is, whenever land is for sale, the land gets sold to whomever agrees to pay the highest annual land value tax for it.

Patrick says

Only if he took the lump sum payment.

Patrick says

That is, whenever land is for sale, the land gets sold to whomever agrees to pay the highest annual land value tax for it.

So if a quarter acre lot in Campbell is worth $1.2 million but I bid 50 cents plus the highest amount willing to pay the LTV, the seller has to take that offer?

For the land, yes.

Patrick says

For the land, yes.

So nobody has any incentive to build improvements on the land that can't be sold?

You always have incentive to build improvements on land under Georgism because improvements never raise your taxes, unlike under the current "property tax" system which does penalize you for improvements.

There is a big gap between theory vs. reality under Georgism: the total land tax for the piece of land that is DC today obviously can not be the same as when it was a swamp before the city was built. So improvements absolutely would have to raise land value and therefore tax under Georgism. How exactly would the evolution of Georgist land tax on that piece of land have evolved in the last 200 years if it had been under Georgism? If all the value of using a piece of land is taxed away (or 85% of it), why would any private person want to pay any price to buy a piece of land? What happens when disaster happens and the land becomes unusable? or having its use value significantly reduced? How would bureaucrats be able to tell the changing use value when there isn't an active market buying and selling land? When central bank changes interest rate, land value fluctuates dramatically, due to the change in discounted present value of future stream of cash using different interest rate; in that case, would bureaucrats' salaries fluctuate drastically too?

BTW, I agree on the sin of income tax, which was unconstitutional (and may still be). The only logical federal tax is import tax: making the importers pay for the social cost of removing domestic jobs. Property tax only makes sense when it is local and tied to the right of voting: making sure voters are vested in the continued prosperity of the location.

To me it comes back to this: Small flat tax on any type of income. Done.

mell says

To me it comes back to this: Small flat tax on any type of income. Done.

How about an even smaller tax of lets say 2% based on net wealth????

It's just anti-american...

Framers wanted to say we have the right to Life, Liberty and Property but people were property back in that day and there was a squabble so they settled on Life, Liberty and Pursuit of Happiness. Property rights were still the foundation though.

The first draft was "Life, Liberty, and Property" I believe.

Misc says

mell says

To me it comes back to this: Small flat tax on any type of income. Done.

How about an even smaller tax of lets say 2% based on net wealth????

Once it has been taxed as income it should never be taxed again. Wealth tax also incentivizes people to move their wealth abroad and then the money will be propelling other countries/governments. I can see a temporary wealth tax to balance budget in a crisis, but only with enough guardrails that it doesn't become permanent (e.g. max limit and can only be impose once every x years and needs legit fiscal emegency etc.)

$2.00 flat or 2% on financial transactions, whichever is higher, the Tobin Tax. Looking at broker fees, people could hardly bitch about this. Applies to everybody, including quants and millisecond trading - no exceptions.

Also a federal rule banning states or localities from paying Federal Taxes of any kind - income, SSI withholds, tariffs, etc. on behalf of corporations.

mell says

I can see a temporary wealth tax to balance budget in a crisis, but only with enough guardrails that it doesn't become permanent (e.g. max limit and can only be impose once every x years and needs legit fiscal emegency etc.)

Yes, like for war. No use of American troops to fight overseas without a congressional Declaration of War and a wealth tax to pay for it.

Misc says

How about an even smaller tax of lets say 2% based on net wealth????

I'm opposed.

Wealth that anyone worked to create should always be taxed at 0%.

Land value is the only appropriate object of taxation, penalizing neither work nor commerce.

mell says

Once it has been taxed as income it should never be taxed again.

I'd say income should never be taxed even once.

AmericanKulak says

The first draft was "Life, Liberty, and Property" I believe.

That makes sense, because the founding fathers based the US Constitution heavily on Locke's work, and "life, liberty, and property" is a phrase Locke commonly used.

Reality says

There is a big gap between theory vs. reality under Georgism: the total land tax for the piece of land that is DC today obviously can not be the same as when it was a swamp before the city was built. So improvements absolutely would have to raise land value and therefore tax under Georgism.

@Reality Under Georgism the assessor is forbidden from considering anything you have done to the land when he sends you the tax bill.

The only thing the land is taxed on is what others are willing to pay for the land, and that depends mostly on how many other people live nearby.

I don't understand all the details yet, but these are on my reading list:

https://www.strongtowns.org/journal/2019/3/8/if-the-land-tax-is-such-a-good-idea-why-isnt-it-being-implemented
https://astralcodexten.substack.com/p/does-georgism-work-part-3-can-unimproved

Reality says

How exactly would the evolution of Georgist land tax on that piece of land have evolved in the last 200 years if it had been under Georgism?

The tax would have risen exactly as the value of the land rose, that unearned value increase being primarily a result of increased population density.