patrick.net

Sounds like a variation of 'wealth taxes' or LVT 'land value tax'.

en.wikipedia.org/wiki/Wealth_tax

en.wikipedia.org/wiki/Land_value_tax

It does sound like a pretty good idea, although some exemptions may be needed for agricultural land.

One outcome of taxing land but not structures will be an increase in multi-family housing in order to maximize utility per sqft of land, not necessarily a bad thing.

I thought i liked the "Fair Tax" - flat tax on consumption.

but someone i know that's much older than me claimed it's not fair to him because he would be taxed twice on the money.

what do you say to that?

I can only imagine how convoluted that tax code would eventually get, based on the interest of all the land-owners that wanted special treatment of *their* kind of land.

You want to discourage lazy rent-seeking.

Why? It involves the commitment of investment and it enables others to use the land productively.

I thought i liked the “Fair Tax” - flat tax on consumption.

I thought I did too... but there was before I found out the rate would be 23%!!

I would support it only if the rate is more like 5%.

but someone i know that’s much older than me claimed it’s not fair to him because he would be taxed twice on the money.

Life is not fair. However, older men have more political clout, so they will have their ways.

Wall ST is up today, supposedly in part because Warren Buffett is doing some bottom-fishing.

It also struck me that Bernanke and another Fed officials have been strangely quiet for the last 10 days or so, and the market has been crawling upwards lately, I don't know if that is a causal relationship on way or the other, or maybe just a big coincidence. But I found it interesting nonetheless.

We should tax consumption, not ownership.

One of the immediate advantages I see is that you only have (1) taxing body. With multiple layers of taxing authorities, well they all have their own staff, office, budgets (and don't forget the benefits...!)

Whether we make it land, consumption or income just having (1) will be a huge benefit. We looked at something similar in the 90's in OR. We called it "The Total Tax" and it almost by default would have dealt w/ our out of control "under the table economy".

The authors pointed out that some agencies were as bad as 35%, the balance collected went to just servicing their own overheads. Terribly inefficient. But... since the largest employer IN the state of OR, IS... the state of OR we just couldn't have it!

t also struck me that Bernanke and another Fed officials have been strangely quiet for the last 10 days or so, and the market has been crawling upwards lately, I don’t know if that is a causal relationship on way or the other, or maybe just a big coincidence.

It is also partly astrological.

Someone wrote:

> A while ago a reader told me about Henry George
> and his idea of a single tax on land. I’ve now read
> an abridged version of Henry George’s book “Progress
> and Poverty” and it makes a lot of sense to me.

George was one of the founders of San Francisco’s Bohemian Club (back before the corporate types took over the club).

Back in the late 1800’s companies and individuals with connections basically got to take public land (and timber and minerals) without paying any tax.

Today we don’t have that problems of the late 1800’s since we not only assess annual taxes on all land but companies now pay the government for the right to take from public land.
http://www.msnbc.msn.com/id/23051078/

Taxing just land is a bad idea since for a democracy to function properly you need all men to be treated equally. As soon as some voters don’t have to pay any tax they don’t have any problem voting for higher taxes.

What we really need is a flat tax on all income with no exceptions for anyone…

BTW, I never believe that we should actively pursue equality as a society. There are greater goods than that.

Remember, life is never fair to the bottom half. So long as there are more wants than things, we will have issues.

As soon as some voters don’t have to pay any tax they don’t have any problem voting for higher taxes.

Well said!

What we really need is a flat tax on all income with no exceptions for anyone…

I hate taxes, but this is very acceptable. I use the strict definition of flat tax, which means no tax breaks for ANY income group.

justme,

I'm not ready to call WB's actions "bottom-fishing" just yet. BofA (which hadn't wrote a subprime loan since 2001) all of a sudden is interested in the biggest purveyor of financial filth and a man who's been warning about all the derivatives since 2002 gets involved in THIS!?

Sounds more like a personal favor to me?

Maybe they've been quiet b/c Hank had to deliver "the turd" this morning?

Flat tax will not cause much trouble to the poor because they can demand higher wages. A new equilibrium will be quickly established by Free Market.

but someone i know that’s much older than me claimed it’s not fair to him because he would be taxed twice on the money.

This is my problem with going to a US version of VAT. All of my savings has already been taxed once as "income". Now you want me to pay taxes on those same dollars a second time when I spend it? The "fair tax" would only be fair in a parallel universe where nobody had previously paid income tax on their money.

The idea behind "The Total Tax" was to levy it on transactions.

If you sold your home, there would be 1% due to the state coffers. Sold your car for a grand? You'll owe ten bucks when you go to have the title switched over.

One of the main sticking points was from the Assoc. of OR Industries and their point was... valid. How about value-added mfrs. that take raw materials and have several stages of processing? If I'm a toothpick mfr. that's a lot of intermediate steps from raw logs! Will it be taxed every step along the way?

The “fair tax” would only be fair in a parallel universe where nobody had previously paid income tax on their money.

When they call it FairTax, we can be sure it is anything but.

I think WB is doing his country a favor. Even the fund may not come from him, it is his name and influence that Hank and Ben alikes are interested in.

I remember him re-iterating his lack of interest in this filth just a few days ago. So I won't be surprised if this is purely political and has nothing to do with the economics of things. Buffet is the JP Morgan of this upcoming depression.

However, if FairTax is only 5%, the effects on retirees should be minimal. Don't forget that all those deferred capital gains tax will be forgiven.

Buffet is the JP Morgan of this upcoming depression.

Then who is Buffett's astrologer? I want to talk to this modern day Evangeline Adams. :)

How many ways will we ask the same question:

What is the best way to steal money from people and distribute it to other who did nothing to deserve it?

The only taxes I would consider fair are utilitarian ones and most of those would go to local city or county.

We do need strong military though. The world is a dangerous place. Who knows, perhaps Europe will become hostile in a few decades.

DinOR,

You mean that 30-day-freeze-option Project Lifeline thing? Yeah, that sounds like a real winner.

Scary thought: I just looked at the marketwatch.com front page, and Hank Paulson's photo makes him look like Rudy Giulani's twin brother. You decide which is the evil one, it may take some coin tosses :-).

OT, I have to claim some credit in this:

http://www.latimes.com/business/la-fi-tj12feb12,1,1079460.story

There have been more than a dozen times that I personally sent letter to TJ's management pointing out the issues of their China-sourced food, particularly the China-farmed fish that is loaded with carcinogenic chemicals that long have been banned in the US. I even took the trouble of translating some Chinese articles into English highlighting the health risk.

Not that I am a great fan of food from Vietnam or Thailand either, that whole area is massively polluted. India has only a few major sewage systems so shrimps farmed in India is a disaster as well.

I think the last thing we should outsource is food. We should grow locally and eat locally.

I think the last thing we should outsource is food. We should grow locally and eat locally.

I disagree. We need food varieties so we need to import food from all over the world.

The problem is that US consumers demand cheap food. We should encourage the consumption of premium food.

For varieties, I can accept some risks.

As usual I'll have to disagree with Peter P on anything that has to do with taxes.

Flat taxes of any kid are a terrible idea because they are regressive. Taxes must be progressive and balanced. To be balanced, taxes must apply to property, wealth, income (any kind) and consumption and sins. There should be no exceptions or deductions of ANYTHING. All kinds of income must be taxed the same way, no special deals for paper shufflers (aka. capital gains and dividend taxes).

If someone wants to propose the "no-exceptions tax", I could get behind that.

The "Flat Tax" sounds tempting to many people, but it is hugely regressive, VAT is even worse on the regression scale. By regressive, I mean "rich people contribute a smaller share of their wealth,while poor people pay a larger share", in case that was not clear.

"his lack of interest in this filth"

Totally agree. They're saying this is for Muni's? I'm sorry, I just find that hard to believe. How do you 'ef up a Muni?

This had *nothing to do w/ MBS whatsoever?

If you live in Minnesota, perhaps you should advocate importing food from all over the world. If you are living in California, I see no reason why you want imported food so much.

I actually wrote a letter to TJ pointing out how ridiculous they are to import garlic from China while the Norcal operations are so close to our garlic capital of the US, Gilroy. Fresh garlic tastes so much better than stale garlic from a product origin that I don't trust.

I eat fish for almost every meal. Fish cannot be frozen, you can easily taste the difference of frozen seafood vs. fresh seafood. If you want variety, buy a ticket and fly there to taste the real local food, fresh. I care much more about the freshness of food than just variety.

Flat taxes of any kid are a terrible idea because they are regressive. Taxes must be progressive and balanced.

Perhaps we should just agree to disagree. Regressive tax rate is arguably even more productive than flat tax rate.

I am against all form of progressive taxation. Why would you want to discourage production?

If you are living in California, I see no reason why you want imported food so much.

I remember having huge sea prawns (8 inches long) in Singapore. I still cannot find them here.

Fish cannot be frozen, you can easily taste the difference of frozen seafood vs. fresh seafood.

Of course there are ways to ship fresh fish without freezing them.

Dorade tastes just fine here. So are imported Australian "lobsters."

>Why would you want to discourage production?

Regressive taxes do not encourage production. Regressive tax encourages one class of people to sit on their fat asses while another class of people do the production for them.
That's the difference.

DinOR,

I also noticed the Muni angle. It looks like WB is buying the good stuff, and the other insurers are taking him up on it to get cash to shore up the bad stuff. Vintage WB, I would say,

Regressive tax encourages one class of people to sit on their fat asses while another class of people do the production for them.

Yes. Progressive tax is just the reverse.

Land value taxation is perhaps the most logical, just and desirable tax yet devised. That's probably why it hasn't caught on: it doesn't privilege any special interest, it doesn't burden anyone who works, it doesn't burden the economy. It is, perhaps, the antithesis of California's Proposition 13: it treats everyone equally, shares the burden across the entire community equitably, and avoids sales taxes and wage taxes. It doesn't burden production or commerce. It helps make existing housing affordable, and promotes the construction of more housing where housing is most needed, and commercial buildings where commercial buildings are needed, and, best of all, discourages urban sprawl, because it nourishes the density that allows many more of us to live closer to our work if we choose. And because it creates jobs, it tends to drive wages up: jobs chasing people, rather than people chasing jobs.

Other than those benefits, it has little to recommend it.

For those who think that tenants don't pay any tax under land value taxation, and therefore have no incentive to seek less government spending, I must disagree on 2 counts. Tenants DO pay land tax, through their monthly rent. As things work now, the landlord passes only a tiny fraction of it through to the commons -- the community -- in the form of his property tax, and pockets the rest. This forces the community to tax both the landlord's and the tenants' purchases and wages in order to provide the services that allow the landlord to charge the tenant more rent next year for exactly the same house or apartment! Neat trick for the landlord, isn't it? Not so good for the tenant.

Oh -- you say -- any tenant worth his "salt" will save up his extra pennies to buy his own place from some other landholder, and get out of that trap. Yup -- and this forces him to pay large amounts of money to the previous landholder, who didn't create that land value. The community created it, through its presence and our common spending. So the buyer is paying the wrong party -- the seller, in the form of a lump sum, financed by a 30 year mortgage, most of which actually is paying not for the building, which depreciates 1.5% per year, but for the land, which is what gains in value. Not only is the buyer paying the wrong party, then he has to turn around and pay again for those services, through sales, wage and property taxes.

Henry George had it right. I commend Progress and Poverty to your attention, unless you really really like income, sales and building taxes, and would prefer to hang on to all the perverse effects they produce.

justme Says:

> Flat taxes of any kid are a terrible idea because
> they are regressive.

When you say “regressive” it make them sound bad, how about saying they are “equal” (in that all taxpayers pay the same tax rate on every dollar they earn).

> Taxes must be progressive and balanced. To be
> balanced, taxes must apply to property, wealth,
> income (any kind) and consumption and sins.

It is only fair to tax income since you can easily take a portion of it. Taxing wealth is wrong since many people have wealth tied up in assets that do not generate any income to pay taxes. As far as taxing sins who gets to decide what is a “sin”?? For a Mormon it is drinking alcohol, for a Hindu it is eating beef, for a Muslim it is not praying to Mecca and for me it would be thinking that “Progressive” ideas like Housing Projects, Affirmative Action and Unfair taxes are a good idea…

> The “Flat Tax” sounds tempting to many people, but
> it is hugely regressive, VAT is even worse on the
> regression scale. By regressive, I mean “rich people
> contribute a smaller share of their wealth, while poor
> people pay a larger share”, in case that was not clear.

The flat tax on income is fair since everyone pays the same exact rate on any and all of their income…

To your original question -- would land value taxation create sprawl? -- the answer is no. Just the opposite.

While there are a few of us who would, all other things being equal, prefer to commute long distances from the house with the lawn and picket fence on the fringe to the decent interesting job in the central business district, I suspect that there are many people who, given the option of comfortable, affordable housing in a decent school district much closer to their work would choose the latter, at least for major portions of their lives.

Land value taxation will tend to produce density, but only in the places where people already prefer to be. Where land is valuable, LVT will nudge its owners to put it to more intense use. If it is a commercial neighborhood, a single-story building might be replaced by a three- or four-story building, with retail on the first floor and housing or office space on the upper levels -- accommodating many more users than the former one-story building did. If it is a residential neighborhood, single family homes might give way to townhouses, or to condos -- low rise at first, and decades later, perhaps, by midrises or high rises. This wouldn't occur on the fringe; not enough people want to be there to make such construction viable. (The Empire State Building would never have been built in central NJ!)

So a smaller amount of land will accommodate more people, both for residences and for commercial applications. This density produces the conditions where public transportation is viable, which will get at least some of us and perhaps many of us out of our cars for some or all of our day to day transportation needs, reduce fuel usage and the resulting pollution.

I think it is quite possible that in some places the fringe will draw back, which could create some unpleasant results. (The image that comes to mind is of a ghost town, but that's probably not going to happen). But certainly the fringe will not keep advancing quickly into agricultural land or wilderness. "Drive until you qualify" will be a much shorter distance. And it might be "ride until you qualify" in many more places.

lvtfan Says:

> Land value taxation is perhaps the most logical,
> just and desirable tax yet devised. That’s probably
> why it hasn’t caught on: it doesn’t privilege any
> special interest, it doesn’t burden anyone who works,
> it doesn’t burden the economy.

What it will do (if we adopt it today) is destroy the banking system in the US since when you increase the tax on anything the value goes down (just like giving a tax deduction on an item will make the value of the item go up). If the value of all the land in the United States were to drop the FDIC would fail…

> It helps make existing housing affordable, and promotes
> the construction of more housing where housing is most
> needed, and commercial buildings where commercial
> buildings are needed, and, best of all, discourages urban
> sprawl, because it nourishes the density that allows many
> more of us to live closer to our work if we choose. And because
> it creates jobs, it tends to drive wages up: jobs chasing
> people, rather than people chasing jobs.

The current tax (or lack of tax) on land does not discourage the construction of housing and sprawl it is the NIMBY crowd and the crazy land use laws. I would love to buy some land and build a nice water view apartment building in Marin, but I can’t and I don’t see how any changes to the tax laws would change that…

justme,

Right, they know Warren is no fool so the negotiations centered on what is more plausible. Muni's are probably a good value right about now anyway. My point is that it's STILL charity any way you slice it.