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The Georgist Blindspots


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2011 Aug 22, 10:14pm   26,687 views  130 comments

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The so-called "geolib" position has been long refuted many years ago:

http://mises.org/rothbard/georgism.pdf

Bob/Troy's pet link article written by Dan Sullivan makes several rudimentary errors:

1. It's a farce to make a distinction between "community" and "government" when the so-called "community" has the power to tax. "Communitarianism" is a just a new-age name for "communism" when the latter went out of fashion. A plantation owner is the government of the plantation regardless what he euphemistically calls his rule.

2. Arden is a corporation just like most towns in the US are incorporated. The fact that even the only alleged working example of "one-tax" in the entire article can only collect 1/4 of what it allegedly is entitled to goes to show just how absurd it is to try to tax the entire land rent. Incidentally, 1/4 of alleged land rent is comparable to 1-2.5% property tax, assuming properties are 10x-20x rent income and land accounting for about half of property value. It should be no surprise that most towns in the country pay for all their expenses out of property tax . . . so the whole Arden experiment is a farce, and little different from most other incorporated town that collect property tax or a giant trailer park, where the incorporated landlord rents out land and provide "community" service . . . and more importantly makes rules.

3. Land can certainly be created by human effort: land filling, for example. Half of Holland wouldn't exist if not for land making. Many city land plots on the two coasts would be under water too if not for man-made land.

4. Land is not a limiting factor in modern economic growth. Agriculture has ceased to be the primary economic engine since just about Henry George's time. High cost of rent in population centers has little to do with alleged land monopoly but everything to do with people's desire to be in those locations running up against zoning laws restricting housing supply. The most recent housing bubble was an experiment in bypassing the "landlords" altogether, and guess what happened? the cost of housing did not go down but went up instead! It's the competitive supply vs. demand that set price. "Landlords" with numerous others nearby to compete against do not collect a monopolist Rent.

5. The proposed "one-tax" "land tax" however would be monopolistic Rent imposed on the rest of the economy by the bureaucratic class. It's ironic that Dan Sullivan would use the term "royal libertarian" to describe his critics. Most land titles in the US have little to do with old feudal land titles. OTOH, his proposed land taxation to the full economic value of the land would concentrate land ownership into the hands of the government thereby creating a new land-based royalty. In other words, the so-called "geolibs" are the "royal libs" . . . in the same way that "communists" are often effectively feudalists/monarchists as their policy proposals would lead to feudal dark ages with a new class of royalty on top, like in North Korea, which incidentally does have all land owned by the government

6. Georgists are dealing with mythical concepts when they talk about "land" as separate from improvement, just like their use of terms "community" / "government" / "the public." There is not a "community" / "government" / "the public" separate from concrete actions by individuals on the ground. Likewise, "land," as nice as an abstract concept, can not be separated from improvement. Most land plots were reshaped by developers before selling to the current owners (or their predecessors) along with infrastructure that was part of the sale. Government had little to do with that.

7. Where the government does have a role, one which really confuses the Georgists, is that it maintains a record of deeds and titles that make future land disputes easier to settle in court. Having that record does not mean that the government owns all the land or is entitled to collect all rent on that land . . . any more than the registrar of motor vehicles has the right to collect the entire use value of your car! or on all the iron in your car! Iron as an element is actually finite on the planet and not made by human. Your exclusive right to the iron content in your car before the car is recycled is your property right, despite the title paper playing a significant role in settling disputes should any arise. Likewise, it would be silly to talk about the value of the iron in a car as separate from the car's manufacturing before the car is ready for recycling and reduced to components. Georgists are obviously not talking about the trash/recycling value of land (say, how much a plot is worth if the entire area is wiped clean by fire or flood) but trying to have the government monopoly collect rent on land with improvements just like steel as part of a working car's value. Land value is inseparable from improvement. Henry George eventually had to draw an arbitrary line that improvements lasting longer than the life span of the improver should be deemed part of "land." In other words, a policy of discouraging long term land improvement and management.

8. Why is this topic important to renters? Because it is important to understand that "rent" would become much higher in a monopolistic land management system. The term "Rent" originally refers to monopolistic market positions. The use-fees that owners of properties collect in competition against other property owners are not monopolistic rent. The Georgist one-tax (much higher tax) on land value would actually create a monopoly Rent to be imposed on the rest of the economy. While the property owners can and do compete on their own margins of operation, they do not compete on the tax portion, which all "landlords" have to collect on behalf of their Landlord, the government. The Georgist aim to collect the entire land rent means land would have zero value, and negative value during economic down turns. That means eventual government take-over of all land ownership. Just like what a nightmare things turned out in countries where "capitalists" were cut out and the government became the only employer (i.e. the soviet system where "they pretend to pay and we pretend to work"), letting the government become the only landlord without any sub-divided and competitive land and property maintenance/management services on the ground would be disasterous to renters seeking good housing at reasonable prices. It is another competitive capitalist employer's ability and willingness to pay just a little more to hire you away that keeps your real wage up; likewise, it is another competitive landlord's offer of better housing at lower price that lets you get the bang for your buck on housing.

#housing

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1   Reality   2011 Aug 22, 11:27pm  

Nomograph says

Reality says

http://mises.org

Pretty much everything from mises.org is ideological bullshit, and evidenced by the above post.

HINT: When you think you have all the answers before the questions have even been asked, you're full of shit.

"Bullshit" seems to be the sum total of arguments made by Bob/Troy/Nomograph

Care to show some fruit of your intellectual process instead of the results of mere bowel movement?

2   tatupu70   2011 Aug 23, 1:29am  

"Land value is inseparable from improvement"

Funny. My property tax bill seems to do a pretty good job separating them...

3   Â¥   2011 Aug 23, 2:34am  

"The so-called "geolib" position has been long refuted many years ago"

This "refutation" was replied to many years ago.

http://www.nolanchart.com/article6921_A_Critique_of_Murray_Rothbards_Critique_of_the_Georgist_Argument.html

and

http://findarticles.com/p/articles/mi_m0254/is_2_63/ai_n6141845/?tag=mantle_skin;content

and

http://fraggle.wordpress.com/rothbard-v-georgism/

Calling a dishonest hack's hack job on something a "refutation" is committing the logical fallacy of http://en.wikipedia.org/wiki/Argument_from_authority.

Seriously, Rothbard is so off-base with this I have to suspect the entire Austrian school is bullshit -- ie. apologia for wealth -- at some deep level too. Which is sad, since I find their arguments are generally better than the neo-classical crap of consensus economics (and one of the few Georgists economists around -- http://en.wikipedia.org/wiki/Fred_E._Foldvary -- is operating with a Georgist-Austrian synthesis).

4   Reality   2011 Aug 23, 2:41am  

tatupu70 says

"Land value is inseparable from improvement"

Funny. My property tax bill seems to do a pretty good job separating them...

That's just arbitrary bureaucratic assignment. I'm sure you are aware that many towns are taxing houses at a higher value than the houses are worth. Don't tell me you believe that tax bill value instead of market clearing price.

5   Â¥   2011 Aug 23, 2:53am  

tatupu70 says

My property tax bill seems to do a pretty good job separating them...

Probably not. Though it is rather trivial to estimate the replacement cost of construction, the tax assessor does not do this. I often see ridiculous splits here.

6   tatupu70   2011 Aug 23, 3:08am  

Bellingham Bob says

Probably not. Though it is rather trivial to estimate the replacement cost of construction, the tax assessor does not do this. I often see ridiculous splits here.

Agreed--my point was only that it can be done very easily.

7   Reality   2011 Aug 23, 3:11am  

Bellingham Bob says

This refutation was replied to many years ago.

http://www.nolanchart.com/article6921_A_Critique_of_Murray_Rothbards_Critique_of_the_Georgist_Argument.html

Article is a mere rehash of the points that Georgists made while Rothbard was still alive, and already rebutted in the follow-up "critque to the critique" in the link that I provided. Murray Rothbard being dead before 2009, therefore did not reply to this specific article dated 2009, but the points were all adderssed already.

The most obvious problem in this article that you cite is obviously the classic unicorn that Georgists and Socialists/communists all believe in: somehow there is a valid price determination and priority setting when the market process itself outlawed or severely taxed. When land is taxed at 100% or close to it, why should a developer care where to build? Any difference between rent collected from a house in a prime location vs. an identical house in a shitty location is automatically attributed to the location value (i.e. "land value") of the property . . . therefore it would make very little difference for the builder indeed where he builds. As indeed in countries where all land is controlled by the government, the location of buildings are indeed quite random and uneconomic.

The idea in the article you cite that the poor would be better off if they had access to rural unused land is quite laughable. Even the poorest of poor in this country are far better off than scratching a living on raw land. A homeless beggar can get more money in a day begging in the streets than a person can possibly produce on unlimited amount of land without serious capital equipment investment. We live in a world where a corn dog weighing 1/3 of a pound in New York City is worth more than 60lbs (a bushel) of corn in Iowa. Most of the urban poor have government provided housing, food stamps and medicine, not to mention cell phones and game boxes, a living condition that is far superior to trying to scratch a living out of raw land hundreds of miles from cities.

Calling a dishonest hack's hack job on something a "refutation" is committing the logical fallacy of http://en.wikipedia.org/wiki/Argument_from_authority.

You should know something about that, as you bring up the Dan Sullivan article at every opportunity despite its obvious errors as pointed out.

You are still engaging in "Argument from authority" even now, as you have not even presented any substantive argument that represent your own thinking at all. Heck, do you even read those articles that you cite and digest them?

Seriously, Rothbard is so off-base with this I have to suspect the entire Austrian school is bullshit -- ie. apologia for wealth -- at some deep level too. Which is sad, since I find their arguments are generally better than the neo-classical crap of consensus economics.

That's content-free ad hominin attack. You have not presented much of anything at all of your own understanding. Frankly, your repeated assertion that Georgism advocates no tax on any result of human labor (and the same assertion in that article now you bring up) seem to indicate that you have not even read much of what Henry George wrote yourself. Henry George eventually came to the conclusion that land improvements lasting beyond the life time of the original improver is part of "land"! That's arbitrary line that he had to draw when he realized that improvement and land are indeed inseparable.

I doubt you understand much of neoclassical economics or Austrian school, when you accuse the former as "crap" and the latter as "apologia for wealth" . . . or for that matter you understand much about economics at all, outside of Marxist class struggle. Economics do not apologize for wealth; there is no need for economics to be ashamed of wealth. Wealth is what improves the standards of living for all. A fundamental tenet of Austrian school, vs. say the Marxist school economics, is that the former recognize that the society is better off when wealth and capital are diversely owned and put in competition through the market price discovery process . . . whereas Marxists believes in a Government-God that centralizes all wealth and capital. It should not be a surprise that the latter system is where wealth is destroyed and people are reduced to servitude as all market power is centralized into the state bureaucracy, the ultimate monopolistic Rent seeker.

8   Reality   2011 Aug 23, 3:25am  

tatupu70 says

Bellingham Bob says

Probably not. Though it is rather trivial to estimate the replacement cost of construction, the tax assessor does not do this. I often see ridiculous splits here.

Agreed--my point was only that it can be done very easily.

No it is not, as Bob pointed out. I agree with Bob on this specific point. The split you see on property tax bills are arbitrary bureaucratic assignment, just like the US government currently count its gold reserve at $42/oz whereas the real market clearing price is close to $1900!

Even the method of subtracting replacement structure cost would not arrive at a valid land price, as many houses (with land) are sold at below the cost for replacing the structure nowadays. i.e. land price component would be negative in that case; obviously can not be right (except for in a few areas like Detroit and Baltimore, where taxes are so high that land having negative value may well be correct pricing. LOL).

The arbitrary bureaucratic assignment on structure value vs. land value is tolerated nowadays because the combined value come somewhat close to market clearing price (although that point is coming increasingly under disputes) and the tax rates are very low anyway. If land taxes were substantially raised (as in "One Tax") based on those arbitrary assignments, you'd immediately end up with millions of tax disputes and tax revolts.

9   Â¥   2011 Aug 23, 3:33am  

1. "Communitarianism" is a just a new-age name for "communism" when the latter went out of fashion. A plantation owner is the government of the plantation regardless what he euphemistically calls his rule.

This is just vague name-calling and not an actual argument but whatever.

The LVT is the opposite of "communism". It attempts to remove landlording from its pride of place in today's capitalism, thereby reducing their parasitical drag on the true capitalists that create wealth in the economy.

For landlords qua landlords do not create wealth. They just profit from existing wealth (the land), taking from the community that is actually creating the wealth.

"A lot and the house which stands upon it are alike property, alike have a tangible value, and are alike classed as real estate. But there are between them the most essential differences. The one is the free gift of Nature, the other the result of human exertion; the one exists from generation to generation, while men come and go; the other is constantly tending to decay, and can only be preserved by continual exertion. To the one, the right of exclusive possession, which makes it individual property, can, like the right of property in slaves, be traced to nothing but municipal law; to the other, the right of exclusive property springs clearly from those natural relations which are among the primary perceptions of the human mind. Nor are these mere abstract distinctions. They are distinctions of the first importance in determining what should and what should not be taxed." -- HG

2. Arden is a corporation just like most towns in the US are incorporated. The fact that even the only alleged working example of "one-tax" in the entire article can only collect 1/4 of what it allegedly is entitled to

? This is a good thing. There's no moral law that requires 100% rent collection on *everyone* via the LVT. The point of the LVT is to just to preserve opportunity by preventing specuvestors and wanna-be land barons from capturing land rents, and shift the tax burden off of labor and capital and onto land, for, as Milton Friedman accurately said, "The land value tax is the least-worst tax".

Land can certainly be created by human effort: land filling, for example. Half of Holland wouldn't exist if not for land making.

No, all that is just improving land. Land is all natural opportunity, not dry land as is the common term. One of the benefits of the Georgist definition was the clear implication that the electromagnetic spectrum is also a form of land (and those who profit from its ownership are engaging in rent-seeking).

Land is not a limiting factor in modern economic growth.

Its rent is still is a suck on the productive members of society by the unproductive.

How much is debatable of course. Tokyo suffered horribly in the recent past, but now is running into oversupply of construction and rents are rather reasonable.

But here in the US, there are 50 million households. With a $800/mo rent, that's a $500B/yr rent flow. Section 8 alone is around a $30B/yr gift to landlords, more than ag subsidies IIRC.

The rent is still an immense flow from poor to the rich and is one of our core economic imbalances. It does not need to be this bad.

The most recent housing bubble was an experiment in bypassing the "landlords" altogether, and guess what happened? the cost of housing did not go down but went up instead!

Land prices went up largely because interest rates went down & lending standards disappeared. Plus the 2001-2003 tax cuts didn't hurt.

"Landlords" with numerous others nearby to compete against do not collect a monopolist Rent.

Be that as it may, they are still getting something for nothing. Getting something for nothing is the gradual death of any economy.

The proposed "one-tax" "land tax" however would be monopolistic Rent imposed on the rest of the economy by the bureaucratic class.

Not necessarily. LVT can simply operate on the "make me move" principle -- highest tax payer gets the land. But I don't want to get into the typical libertarian anti-government BS since it's such a joke.

Most land titles in the US have little to do with old feudal land titles.

"To prove a legal title to land one must trace it back to the man who stole it."

North Korea, which incidentally does have all land owned by the government

As does Hong Kong and Singapore. Taiwan also operates under the LVT of some strength, as did Japan before they wrecked themselves. LVT is not the communist BS you assert it is -- quite the opposite, it liberates the capitalists as demonstrated in these Asian economies.

There is not a "community" / "government" / "the public" separate from concrete actions by individuals on the ground.

Whatevs.

land," as nice as an abstract concept, can not be separated from improvement.

This is a very curious assertion. What's wrong with subtracting the replacement cost of the improvements from the sale price of the land+improvements?

Of course, the unimproved value of land is immediately accessible whenever bare lots or tear downs /scrapers are sold. Land value is also rather continuous in space.

And it is immense in California and other wealthy and populated areas. Which is why you must obfuscate and basically lie about how hard it is to determine it.

Because it is important to understand that "rent" would become much higher in a monopolistic land management system.

Landlords wheel this out in defense of Prop 13 too.

You calling the LVT a "Monopolistic land management system" kinda gives your game away here though. GIGO.

it is another competitive landlord's offer of better housing at lower price that lets you get the bang for your buck on housing

They are still getting something for nothing in profiting from site value. This year I was paying $1700/month to live in Sunnyvale. The property was built in the late 1980s and the unit had not been refurbished. What my rent represented was the price of being top bidder for the unit, and given area wages, the top bid had to be that high.

The LL was laughing all the way to the bank. His only investment was buying this cash cow from the previous owner.

If land (and zoning) weren't the limiting factor, I'd fully expect the free market to solve supply issues and reduce the unearned increment of land ownership. To some extent I do see some new multifamily development in Sunnyvale, this will help the supply somewhat but this does not change both the imbalance of demand vs supply, the free money landlords are getting from the mere ownership of land, and the immense untapped potential of land rents as a taxable flow.

10   Reality   2011 Aug 23, 4:42am  

Bellingham Bob says

The LVT is the opposite of "communism". It attempts to remove landlording from its pride of place in today's capitalism, thereby reducing their parasitical drag on the true capitalists that create wealth in the economy.

For landlords qua landlords do not create wealth. They just profit from existing wealth (the land), taking from the community that is actually creating the wealth.

That's just classical Marxist and Smith-Ricardian Labor Theory of Value. What's your view on owners of capital machinery and factories? How about shops? How about office managers? Are they all "parasites"? Competitive landlords provide a very important service to the wealth creation: they help decide the use of land and ensure the long-term maintenance and management of land. Take for example, myself saved hundreds of thousands of dollars renting from 2004 instead of buying a house. My land lord by providing an alternative supply of housing to buying indeed contributed to the creation of wealth, to the tune of hundreds of thousands of dollars. Considering that the only alternative to renting would be buying (one has to have a roof over the head), taking out mortgage from banks to buy a house would indeed be dealing with parasites. The banks are parasites because they get bailed out when their risk assessment function is proven wrong (they wouldn't be parasites if they take their own risks). The last time I checked, most competitive small time landlords do not get bailed out at all, so they very much earn their own keep by contributing to the market exchange.

This is a good thing. There's no moral law that requires 100% rent collection on *everyone* via the LVT. The point of the LVT is to just to preserve opportunity by preventing specuvestors and wanna-be land barons from capturing land rents, and shift the tax burden off of labor and capital and onto land, for, as Milton Friedman accurately said, "The land value tax is the least-worst tax".

Aren't you the expert on "Argument Through Authority" ?
You are missing the point that the Arden experiment does not reflect anything that is different from any other town or a large trailer park. What it collects is just a different name for the 1-2.5% property tax that all towns collect to pay all their bills. It does not reflect anything on what would happen if the land tax were to be raised to a level that it would replace income tax, payroll tax and etc..

No, all that is just improving land. Land is all natural opportunity, not dry land as is the common term.

So what's the tax amount on an acre of land under the water in a marsh? Why should it be raised just because someone put forth the effort turn it into dry land?

One of the benefits of the Georgist definition was the clear implication that the electromagnetic spectrum is also a form of land (and those who profit from its ownership are engaging in rent-seeking).

The theory is actually providing the intellectual basis for rent-seeking by government bureaucrats. When the spectrums were auctioned to the highest bidder in 2000, the giant sucking of capital from the industry promptly led to the implosion of many telecom companies. Contrast that to the simple low-cost registration when vast land was opened up to Americans (and immigrants from Europe) in the late 19th century. If there had been an auction to get the full economic value of all the land in the West, the West would have been developed much more slowly.

Rent-seeking only exists when there is monopolistic market power. Charging an extremely high tax or auction price merely transfers rent-seeking from private holders to the government bureaucrats. If we really care about reducing the use fee that end users have to pay, the solution is not raising tax (which is also a form of Rent) but reducing tax on land and relaxing zoning codes, so more competition will drive down use fees.

Its rent is still is a suck on the productive members of society by the unproductive.

Do you hold that view for all managers and all owners of capital assets at risk?

But here in the US, there are 50 million households. With a $800/mo rent, that's a $500B/yr rent flow. Section 8 alone is around a $30B/yr gift to landlords, more than ag subsidies IIRC.

Much of that money go to the town as taxes and the banks as mortgage. I'm not sure what your point is. If the landlords had not been there, would-be renters would just bid each other to whatever the price is to own the property. I have to ask this for a third time:

WHAT DO YOU THINK HAPPENED DURING THE RECENT HOUSING BUBBLE WHEN THE LANDLORD WAS SIDELINED?

The rent is still an immense flow from poor to the rich.

Then forcibly make that money go to the even more egregious rent-seekers, the monopolistic government bureaucrats, would make the situation even worse.

Land prices went up largely because interest rates went down & lending standards disappeared. Plus the 2001-2003 tax cuts didn't hurt.

Some pretend-libertarian you are, with that snipe at the tax cuts. It should be quite obvious by now that your obsession with Georgism is not about eliminating other taxes but all about finding another revenue source for the big monopolistic rent-seekers (i.e. government bureaucrats).

Interest going down should help reduce monthly payment . . . yet that did not at all lower monthly housing cost as buyers simply bid each other into the price range that is even higher than the rent amount they'd pay for the house. That should make it amply clear to you that the high cost of housing is not due to small time landlords driving prices up but simply due to supply and demand.

Also, the case of Prop-13 should make it quite clear: when tax is low for long-term property owners/landlords, the landlord does pass along the savings to the tenants through the competitive market price mechanism. That should make the case crystal clear that if you raise property tax and land tax, the tenants are the ones who will suffer even more . . . should be intuitively obviously, as higher taxes just means the ultimate monopolistic Rent-seeker (the government) taking a bigger bite.

Be that as it may, they are still getting something for nothing. Getting something for nothing is the gradual death of any economy.

Is this some kind of joke? What do you think the buying-to-let craze and negative cash flow was about? They were LOSING something for nothing! The literally lost money to subsidize renters! and eventually had the houses foreclosed.

Just like any other capital asset management, business acumen is important to profitability. Do you have something against grocery stores that sell you a pound of meat or fruit for more per pound than what they pay for at wholesale when they buying by the thousands of pounds? Should the grocery stores be eliminated for being "parasitic"?

Think of the small time landlords as whole-sale buyers of housing (bigger package in both space and time), and selling to renters at retail (units within buildings and shorter time commitment).

Not necessarily. LVT can simply operate on the "make me move" principle -- highest tax payer gets the land. But I don't want to get into the typical libertarian anti-government BS since it's such a joke.

In other words, the whole exercise is about maximizing Monopolistic Rent-Seeking By Government Bureaucrats. So much for all your earlier pretense to be a libertarian. I have concluded quite a while back that "geolibs" are not libertarian at all but very much the typical statists suffering from the unicorn delusions (or willfully pretending to be suffering from that delusion).

"To prove a legal title to land one must trace it back to the man who stole it."

Not in the case of the US. Most land plots derived from homesteading.

As does Hong Kong and Singapore. Taiwan also operates under the LVT of some strength, as did Japan before they wrecked themselves. LVT is not the communist BS you assert it is -- quite the opposite, it liberates the capitalists as demonstrated in these Asian economies.

They have 99-year leases that are paid in one time at the beginning. Effectively the government gets to sell the land every 99 years (although not a single plot has gone through a full 99-yr cycle yet, as this system is not even close to 99 years old). They do not have annual property tax or land tax. If you think what they have is Georgism in practice, then the Georgist promise of reducing bubble volatility is proven false. All of them have suffered from massive bubbles, some are on-going.

What's wrong with subtracting the replacement cost of the improvements from the sale price of the land+improvements?

Because many houses with land are being sold for less than the replacement cost of the improvements. If you are content with zero land value and zero LVT, then I'd be fine with that.

Of course, the unimproved value of land is immediately accessible whenever bare lots or tear downs /scrapers are sold. Land value is also rather continuous in space.

Not true at all. Even bare lots and tear-downs have plenty improvements under the ground. Developers level hills and fill ravines, not to mention laying down utility pipes and build the roads in the development. All that is sold in the lot price. If you want to tax the raw land value, you'd have to go back to the original purchasing price of the developer assuming he bought raw land to begin with. That number would be much much lower than what he sells the individual lots for after all the improvement.

On top of that the introduction of high LVT itself would severely impacts land value.

And it is immense in California and other wealthy and populated areas. Which is why you must obfuscate and basically lie about how hard it is to determine it.

You must have not been paying attention to the impact of tax rate on property value. Go find two neighboring towns, one with property tax rate of 1% while the other has 1.6-2%. The tow towns would have drastically different price for comparable houses. At 2.5% or 3% property tax rate, you'd find only slums with utterly destroyed property value. It's absurd to think that you'd still have the high land value tax base to get your tax money from if you ever try to raise the LVT high enough to make "One-Tax" scheme work.

Landlords wheel this out in defense of Prop 13 too.

You calling the LVT a "Monopolistic land management system" kinda gives your game away here though. GIGO.

Because government by definition is a monopoly. The very fact that landlords enjoying Prop-13 protection have been passing along their savings to renters so that renters can get roofs over their heads for 30-50% lower monthly payment than non-amortizing loans on comparable houses . . . that should tell you that small time landlords do not actually have monopolistic "rent-seeking" power. Raising taxes would indeed drive up rent, because the government bureaucracy is the ultimate Rent-Seeker, as it indeed has the monopolistic power.

11   bob2356   2011 Aug 23, 4:56am  

Can any of the Georgists point to any actual working examples of Georgism in any economy that is large enough to see how it would all work in real life. Millions of people thought communism was a terrific theory for a long time. It took 50 years to show what a bad idea it really was. How do the Georgist know that their theory isn't equally flawed.

12   Reality   2011 Aug 23, 4:58am  

Bellingham Bob says

They are still getting something for nothing in profiting from site value. This year I was paying $1700/month to live in Sunnyvale. The property was built in the late 1980s and the unit had not been refurbished. What my rent represented was the price of being top bidder for the unit, and given area wages, the top bid had to be that high.

So you agree that the price is due to other people wanting to be in that house and willing to pay, not the alleged greed of the landlord. That's a good start. How would a government managing the houses help reduce rent at all? At least your landlord has to compete against other local landlords and respond to economic reality and affordability in a timely fashion. The government bureaucrats would be much more tardy and keep houses empty instead of cutting prices in down turns, just like what the bureaucrats in the government bailed out banking system is doing on foreclosed houses.

I do not agree at all that your landlord could have rented out the house for 20+ years without rennovation. Houses and fixtures are depreciated over 35/17 years for a good reason. Another poster was complaining that his house had something broken every day and landlord was tardy to fix them. So the landlord must be doing fixes somehow.

The LL was laughing all the way to the bank. His only investment was buying this cash cow from the previous owner.

Do you have something against farmers who buy cows and sell milk? If buying cows and selling milk is so easy, and buying houses and renting them out were so easy, why wouldn't everyone else do that and bid the capital cost so high that the return on capital is reduced to average ROI expectations? Oh wait! They did exactly that in the Buy-to-Let craze, and the investors lost their shirts. So buying a house and becoming a landlord is not as easy as you think. There is actual entreprenurial risk taking involved . . . therefore justifiable returns for the effort and risk.

If land (and zoning) weren't the limiting factor, I'd fully expect the free market to solve supply issues and reduce the unearned increment of land ownership. To some extent I do see some new multifamily development in Sunnyvale, this will help the supply somewhat but this does not change both the imbalance of demand vs supply, the free money landlords are getting from the mere ownership of land, and the immense untapped potential of land rents as a taxable flow.

You are just being jealous now. At the same time, you are not thinking through the ramifications on rent if the taxes were to be raised. The tax would just be passed to the tenants! especially if you believe the landlords have some degree of market power. If landlording were as easy as you think it is, why aren't you doing it? Like-minded people would be bidding house prices sky high so as to reduce the ROI to low levels . . and find out to their regret that building maintenance, finding good tenants, paying mortgage and insurance, etc. etc. are very time consuming. . . and if paid too much at the of acquisition can be really hazardous to one's financial health . . . just like many a foreclosed wannabe landlords found out in recent years.

13   Â¥   2011 Aug 23, 5:12am  

> working examples of Georgism

Hong Kong, Singapore, Taiwan, Denmark, California (the Water Improvement Districts were funded from LVT) . . .

>How do the Georgist know that their theory isn't equally flawed.

LVT is an idea, not a religion. The Nordic countries get much of its effect by just taxing the shit out of incomes, though high-tax states like Denmark are finding that this approach is driving out mobile labor to other countries with more favorable tax regimes.

The basics of the LVT are indeed basic -- tax unimproved land more and everything else less. The implications and implementation problems are something to be thought about.

I leave it to the reader to figure this stuff out on their own, should they want to waste their time doing so.

The deal with LVT now is that it's not even in the discussion. We're being presented with a false dichotomy -- raise income taxes or cut services. This is the way the wealthy on this planet want it.

14   Reality   2011 Aug 23, 5:33am  

Bellingham Bob says

Hong Kong, Singapore, Taiwan, Denmark, California (the Water Improvement Districts were funded from LVT) . . .

No they are not. Hong Kong, Singapore and Taiwan sold land leases at horrendously high prices as a way of funding their government until recently only because they had very little in the way of social safety net. They have introduced income taxes and raised them in recent years after introducing social safety net.

More importantly, the government land lease sales scheme grossly skewed wealth distribution from the poor and middle class to the super rich . . . as only the super rich mega developers could afford to bid on those land parcel sales. Average people were crowded into pigeon-hole sized homes (or even stacked beds rental spaces) while the handful developers became the richest people in the world . . . and here you were decrying the polarization of rich and poor in the US. LOL. I have noticed for some time that many advocates for government intervention to level the society actually embrace policies that further concentrate wealth into the hands of a even smaller group of government-owning elite.

Denmark is primarily funded by tax on income. California is primarily funded on tax on income, on sales and on flow back of federal taxes collected in California. They are not at all One-Tax examples.

LVT is an idea, not a religion. The Nordic countries get much of its effect by just taxing the shit out of incomes, though high-tax states like Denmark are finding that this approach is driving out mobile labor to other countries with more favorable tax regimes.

What a laugh. So you are not talking about LVT tax at all, but a justification for government to tax the shit out of people for being alive!

The basics of the LVT basic -- tax unimproved land more and everything else less. The implications and implementation problems are something to be thought about.

More like: raise tax now, and cut tax elsewhere never.

I leave it to the reader to figure this stuff out on their own, should they want to waste their time doing so.

The deal with LVT now is that it's not even in the discussion. We're being presented with a false dichotomy. This is the way the wealthy on this planet want

Nope. The super wealthy of this planet actually periodically float brain dead unicorn worshipping ideas to justify further concentrate wealth into the governments, which they own. Communism and Fascism movements were both heavily subsidized by the super wealthy. It would not surprise me if Georgism is receiving the same promotion now.

15   Â¥   2011 Aug 23, 5:34am  

So you agree that the price is due to other people wanting to be in that house and willing to pay, not the alleged greed of the landlord.

These two things are not mutually exclusive. Rent-seekers always find areas of the economy with inelastic demand -- medicine and energy are two other great sectors of greed.

How would a government managing the houses help reduce rent at all?

You're beginning to waste my time by intentionally misstating the Georgist position. I'm just going to skip over these bullshitting attempts and respond to what I can.

I do not agree at all that your landlord could have rented out the house for 20+ years without renovation.

There was new(er) carpet, paint, closet furniture. I paid for all that with the first month's rent. The sticker on the microwave said 1988 IIRC.

Houses and fixtures are depreciated over 35/17 years for a good reason.

No there's not, one glance at the housing stock in the SF Bay would make this clear. There's more stock from before I was born, and I was born a long time ago. EVERY rental home I've ever lived in -- from El Sobrante to El Cerrito, Salinas (1970s), Los Angeles (1980s & 90s) is still in service.

So the landlord must be doing fixes somehow.

Landlords provide some services, yes. The problem is their return is not just from these services.

Do you have something against farmers who buy cows and sell milk?

Yes when their cows are feeding at public-paid troughs.

So buying a house and becoming a landlord is not as easy as you think. There is actual entreprenurial risk taking involved . . . therefore justifiable returns for the effort and risk.

This is a common canard, that risk demands reward. As I like saying, bank robbers take risks, too. The proper analysis for entrepreneurial effort is looking at the new wealth created (& old wealth preserved from loss, too).

To the extent landlords are profiting from wealth creation and preservation, they are not leeches.

But, historically, as inflation pushes up the cost of land, all landlords become greater and greater leeches as their sunk costs fall compared to the rents they collect.

You are just being jealous now.

Still another fallacy http://en.wikipedia.org/wiki/Ad_hominem

Which all attackers of the status quo are inured to receiving from the defenders of it.

At the same time, you are not thinking through the ramifications on rent if the taxes were to be raised. The tax would just be passed to the tenants!

Only if the landlords are being nice guys and not charging the current market rent now. This is certainly present, but not dominant, since markets do not work that way.

It is a rather consensus position among economists that the tax incidence of nearly everything falls on land rents in the end anyway.

http://www.wealthandwant.com/themes/ATCOR.html

If landlording were as easy as you think it is, why aren't you doing it?

I didn't say it was easy, I said it is an element of imbalance in the system. Perhaps a central element, given the massive rental flows of land.

And if I had the capital, I would love to create a quality MFH complex on the model I enjoyed in Sunnyvale. The Sunnyvale place was built when the valley had more open land, so the density there was quite low, and the grounds had had time to fill in with trees and shit.

I couldn't build this MFH in Sunnyvale, but the SJ Valley certainly has the land for it. For just $2M I could get enough land for 100 units, e.g.:

http://www.zillow.com/homedetails/7800-N-Van-Ness-Blvd-Fresno-CA-93711/18694895_zpid

though rezoning it would be an issue probably.

And I fully expect dealing with tenants would totally suck.

The general deal with LVT/Georgism is to remove the predation in the sector and let the market become more liquid. LVT also eliminates rents from the acquisition cost, which greatly increases liquidity by lowering this acquisition cost to basically/theoretically the replacement cost of the improvements.

16   Reality   2011 Aug 23, 6:27am  

Bellingham Bob says

These two things are not mutually exclusive. Rent-seekers always find areas of the economy with inelastic demand -- medicine and energy are two other great sectors of greed.

Yet property ownership is about as competitive as it gets in urban areas. There is only one hospital in most towns; there are hundreds if not thousands of houses and apartments for rent in the same area. "Inelastic demand" actually argues for more renting instead of buying because rent is less affected by the fluctuations in interest rate.

ou're beginning to waste my time by intentionally misstating the Georgist position. I'm just going to skip over these bullshitting attempts and respond to what I can.

That's only because you never read Henry George's writings in detail and can not think for yourself (or at least pretend to fail at both). Even Henry George explicitly admitted that his One-Tax Land-Tax idea is a "quieter" way of taking landownership out of private hands and give it to the government. Land value would fall to zero if the entire land rent is taxed.

There was new carpet, paint, closet furniture. I paid for all that with the first months' rent. The sticker on the microwave said 1988 IIRC.

Change your microwave now. A microwave that old is prone to leaks and not safe. Much of your first month's rent goes to the interest expense or opportunity cost of the landlord's money in the property. You are not checking the roof and the floor, both of which must have been redone in 20+ years. In any case, how exactly would land tax change anything if dumb tenants are willing to pay top dollars for dilapidated structure? If the landlord truly has market power as you allege, he would just raise your rent if his tax go up, or cut back even more on maintenance and updates.

No there's not, one glance at the housing stock in the SF Bay would make this clear. There's more stock from before I was born, and I was born a long time ago. EVERY rental home I've ever lived in -- from El Sobrante to El Cerrito, Salinas (1970s), Los Angeles (1980s & 90s) is still in service.

The original build date is irrelevant. In areas where zoning and licensing rules are so strict that they do not allow tear-down and rebuilding, the building maintenance cost is actually higher as more and more "patches" are applied to existing buildings. Often times, tearing down and re-building in those areas would require very expensive local labor. That's what makes those houses much more expensive to replace than new tract homes in AZ or NV. It would not surprise me at all if your landlord's insurance value (for structure only) is more than the house with land is going for on the market, thereby reducing land value to below zero even if you use the subraction method. That's how things are in those high price old stock towns: high price and old stock are the result of very strict building codes regarding how the proposed construction would take place.

Landlords provide some services, yes. The problem is their return is not just from these services.

Of course they are. You validated your landlord's price for his service when you signed on the dotted line on the lease agreement. If you are not happy with your current landlord, find another down the street . . . that's a luxury that you will not have when the government bureaucrats are the only landlords.

Yes when their cows are feeding at public-paid troughs.

Private landlords feed their cows at their own expense; they do not get bailed out. Government bureaucrats collecting land rent (LVT) however do indeed feed at the public trough . . . as there is no competition.

This is a common canard, that risk demands reward. Bank robbers take risks, too. The proper analysis for entrepreneurial effort is looking at the new wealth created (& old wealth preserved from loss, too).

Of course your landlord is creating wealth even after his fee: to the tune of your savings over having to rent from someone else. He enables your freedom to choose . . . and wealth is generated when you can put that roof over your head to good use and be a productive member of the society. His management regarding the building is no much different from an office manager or a executive deciding which employee does what. . . . or the hotel manager deciding what the staff members are to do and how much to charge customers. Do you consider hotel managers and office managers parasites too? Somehow government bureaucrats without competition (i.e. you can not choose among them) are less parasitic therefore necessitating a transfer of wealth from the managers to the monopolistic bureaucrats?

The bank-robbery comparison is silly. The problem with bank-robbery is the violence and threat of violence involved, and more importantly the fact the party getting robbed is not entering a voluntary transaction.

To the extent landlords are profiting from wealth creation and preservation, they are not leeches.

"leeches," I see, another Marxist favorite term. Have you ever thought perhaps the monopolistic government bureaucrats facing no competition whatsoever are the biggest "leaches"? and "parasites" and "rent-seekers"?

But, historically, as inflation pushes up the cost of land, all landlords become greater and greater leeches as their sunk costs fall compared to the rents they collect.

Their sunk cost was paid with old dollars before inflation. So the worse the inflation the worse the prospect is for the landlord. For landlords paid cash for buildings, inflation is terrible: as wages and rents usually lag during high inflation periods. What you meant to say perhaps was that mortgage payment would become small compared to rent over time. That's only the case if the bank loaning the money under-estimated inflation, and the landlord taking out mortgage is astute enough to take advantage of that and bet accordingly. How is that any different from people who buy long-term CD's or bonds when they forsee dropping interest rates?

You are suffering from sampling bias. You are only looking at the successful landlord who has had their property for a long time and managed reasonably well for all those years. Along the way, numerous other landlords had been foreclosed just like the recent foreclosed wannabe landlords, bet wrong on interest rate, had problem tenant or have other problems that force them out of the rental business. By looking at the success only, you are indeed being jealous at their success.

Only if the landlords are being nice guys and not charging the current market rent now. This is certainly present, but not dominant, since markets do not work that way.

You are entirely wrong on that. When states increase sales tax a certain percentage , do you see merchants drop their prices by the same percentage? Of course not. The tax portion of revenue is where suppliers do not have to compete against each other. If the business has real market power (as you allege landlords do, which I dispute), it would even add its own margin to the tax raise as tax is just another business expense. The fact that landlords under Prop-13 protection are renting their houses for much lower price than monthly interest payment on comparable houses goes to show that landlords do pass tax savings to tenants, and consequently would pass tax raises to tenants too.

I didn't say it was easy, I said it is an element of imbalance in the system. Perhaps a central element, given the massive rental flows of land.

Buying a house to rent out is something numerous people can do in any given area. The imbalance that you are alleging is even sillier than saying that there is an imbalance just because the local grocery store is charging $1.50 per lettuce to the customer when it's buying 10,000 lettuce for $5,000 on truck delivery at its back gate (i.e. $0.50 a head) . . . when there are other grocery stores around nearby. There are certainly far more competing landlords in any given area than the number of grocery stores. Most landlords do not see the kind lf positive cash flow that you are alleging until they have managed to maintain the place for decades, if ever. All along the way, many wannabes drop out due to all sorts of problems and risks.

17   Reality   2011 Aug 23, 6:46am  

Bellingham Bob says

And if I had the capital, I would love to create a quality MFH complex on the model I enjoyed in Sunnyvale. The Sunnyvale place was built when the valley had more open land, so the density there was quite low, and the grounds had had time to fill in with trees and shit.

I couldn't build this MFH in Sunnyvale, but the SJ Valley certainly has the land for it. For just $2M I could get enough land for 100 units, e.g.:

http://www.zillow.com/homedetails/7800-N-Van-Ness-Blvd-Fresno-CA-93711/18694895_zpid

though rezoning it would be an issue probably.

And I fully expect dealing with tenants would totally suck.

Capital and confidence from investors have to be earned in a free market place. The recent housing bubble taught us that handing out credit to just about anyone without qualification is a terrible idea. The good news is that, in a relatively free market place, you have the opportunity to accummulate capital one small bit at a time . . . as opposed to the centralized statist places where everything gets political and nepotistic.

The general deal with LVT/Georgism is to remove the predation in the sector and let the market become more liquid. LVT also eliminates rents from the acquisition cost, which greatly increases liquidity by lowering this acquisition cost to basically/theoretically the replacement cost of the improvements.

The market clearing price on most multi-families across the country are already below replacement cost. That's a pre-condition for buying multi-family investment properties if you want to survive through the economic cycles. The land value in that case using subtraction method would be negative. So are you willing to have the government paying out to the landlords in "negative tax"?

Having an addtional LVT on the property would indeed drive price even lower . . . however that would not at all help your future cash flow as the money would be taken away from you. If your idea is to try to become a landlord (kinda ironic, considering you insist that's somehow monopolistic rent-seeking), LVT is a terrible idea: taxing land to the full economic value may well result in negative return for you. The result is not making the market more liquid or more stable but far more volatile and far more dependent on the whims of the political overlords who arbitrarily assign land value. The eventual outcome will indeed be government bureaucrats owning all the land, just as Henry George predicted would happen "more quietly."

Just to illustrate how detached from reality the unicorn idea of "land value" is: Since most multi-families, and even residential towers, across the country are selling for less than replacement cost, the subtraction method obviously wouldn't work if you try to collect positive LVT (much less replacing all other taxes). So the standards would have to be how much price premium the building commands compared to a similar building to a non-desirable location. Since the ultimate undesirable location is something like a swamp or a wasteland in the middle of nowhere, so how much rent would an identical house command? ZERO! So the entire rent of the house is Land Value! Goes to show just how arbitrary the determination of land value is: it can be negative and the entire value of the house+land all at the same time just by using different logic!

18   marcus   2011 Aug 23, 6:52am  

I have been intrigued by the idea, and have questioned Troy in the past, and I still have questions.

In real estate, there is a concept of "highest and best use" (which usually refers to the most profitable use of land).

Would a lvt be based on this? If so, it would require people who chose less profitable uses to sell, give up their location and disrupt their lives or business ? I don't expect an answer to this question as much as I am trying to make a point that implementation or execution of an lvt by the govt would be very tricky. I guess that's my question. Could it have worked (not the question could we switch to it now)?

As it is now, a long standing business that is owned, including the land, can benefit from the land even though at this point there are more profitable uses for that location. Would it only be when the owner sells to someone who wants to use the land more profitably that the govt collects the higher tax on the land?

Generally there is a question of whether there could be a fair way, that the government could execute a tax on land ownership correctly and efficiently.

As a thought experiment, rather than an actual possible proposal, what if the government owned all land and charged rent for it ? Would this be similar in effect to a lvt ? And if so, what would prevent government corruption and waste of those rents and ever increasing rents ? Why would that not just make the government in essence the greedy monopolistic landowner?

In other words we still need a functioning government. With a properly functioning government maybe our current system would work fine. That is, maybe that is really a far bigger and mostly unrelated problem.

I understand and can appreciate the theory that with growing populations there is growing requirement for services, and it would seem that that a lvt would be an efficient and very proportional way to fund that. Also, in the abstract, the idea that those with capital have for centuries obtained free equity only because they had capital to invest in land does seem unfair at times.

As an observation, it is only the last couple hundred years that it really went crazy here in the US. There were other eras in Europe and elsewhere where land values had their sharpest swings commensurate with the development and growth of cities.

We may be close to a point where populations stabilize. They have in many developed countries, making it a moot point if people now own the land, only getting okay returns without the expected kind of growth potential of the past.

At this point land ownership is more about protecting capital, rather than seeing the absurd profits that can be obtained as govt services to the land and adjacent growth and use of properties increase their value.

Then again, who knows. Maybe new energy sources, or modes of transportation could change that. And in the developing world, I'm sure there are still opportunities for those with capital and connections to build fortunes off of land ownership as people did here in the past.

19   Â¥   2011 Aug 23, 6:52am  

"Inelastic demand" actually argues for more renting instead of buying because rent is less affected by the fluctuations in interest rate.

Thing is, land and zoning restricts supply. There is no real free market in housing, it's a restricted market.

This is all just tap-dancing around the fact that rents do not have anything to do with the underlying capital cost of the housing stock.

Landlords can charge what the market will bear, and landlords, even in competition with each other, enjoy local monopolies since housing is immobile and density is limited by law.

This is the heart of all rent-seeking.

That's only because you never read Henry George's writings in detail

No I haven't and no I don't need to. HG was not some prophet coming down from heaven. He had some arguments and interesting ideas. And I like some of them.

Land value would fall to zero if the entire land rent is taxed.

This is a bad thing? Free stuff is a good! Zero land values mean investors and (owner-occupiers) can put more money into the actual improvements, the part of real estate that we actually live in.

If the landlord truly has market power as you allege, he would just raise your rent if his tax go up, or cut back even more on maintenance and updates.

Stating that landlords are presently charging the maximum of what the market will bear should not be a controversial "allegation". If you want to die on this hill, we can go there.

In a Georgist system, "maintenance and updates" would be capital costs and a way for landlords to keep more of the rent from their properties.

If I were king, landlords would be saving their Home Depot receipts, since I would not tax their improvements.

This should be inarguably superior to the present system, where if you improve your property too much the taxman stops by and penalizes you for your efforts!

You validated your landlord's price for his service when you signed on the dotted line on the lease agreement.

Ah, all economic rents are justified. What a great argument.

that's a luxury that you will not have when the government bureaucrats are the only landlords.

again with the bullshit red-baiting.

Private landlords feed their cows at their own expense; they do not get bailed out. Government bureaucrats collecting land rent (LVT) however do indeed feed at the public trough . . . as there is no competition.

too much bullshit. We're done here.

20   Reality   2011 Aug 23, 7:24am  

Bellingham Bob says

Thing is, land and zoning restricts supply. There is no real free market in housing, it's a restricted market.

I can certainly agree that the rental market is less than entirely free market due to the zoning restricitons. I have mentioned that myself several times. However, due to the sheer number of landlords in any given area, the competition is far more fierce than say hospitals, or government becoming the sole landlord.

This is all just tap-dancing around the fact that rents do not have anything to do with the underlying capital cost of the housing stock.

Depending on what you mean by capital cost. The capital cost of landlord having owned and managed the building for 20+ years is not his original acquisition cost but the opportunity cost that he can sell the building now! Should we force the stock holder of Google sell now to you for only what he bought the stock half a decade ago? What about all the duds that he bought and other stock investors bought that went to zero? Would you pay for their acquisition cost too?

Landlords can charge what the market will bear, and landlords, even in competition with each other, enjoy local monopolies since housing is immobile and density is limited by law.

Of course the landlords have the right to charge what the market can bear. Should you be required to limit your daily wage to only the cost of food that you eat every day? Of course you would charge your service for what the market will bear. For the sake of stability, landlords and you as an employee may choose to long-term prospects over temporary high pays. That's just your pererogative. The numerous landlords in any given area insure that they are competitive in pricing, to the extent that is allowed by zoning codes set by governments.

This is the heart of all rent-seekin

You are entirely wrong in asserting that there is monopolistic rent-seeking power for today's small time landlords that have numerous competitors nearby.

"That's only because you never read Henry George's writings in detail"

No I haven't and no I don't need to. HG was not some prophet coming down from heaven. He had some arguments and interesting ideas. And I like some of them.

Now I see, you don't even really know the details of Georgism, and the intellectual process that Henry George had to go through. No wonder you are lost.

This is a bad thing? Free stuff is a good! Zero land values mean investors and (owner-occupiers) can put more money into the actual improvements, the part of real estate that we actually live in.

Then you don't understand the function of money either. Land is not unlimited resource, especially prime land in good locations. Forcibly assigning zero value to limited resources would lead to waste and resource misallocation. If government mandated that the rent on the apartment where you are in should be zero, do you honestly think you will be able to enjoy it free of cost? No! The result would be two possibilities:

(1) if the place is truly well located with a good view, some government bureaucrats and their cronies would occupy it . . . because your money wouldn't mean squat;

(2) If the place is not all that fantastic, the landlord would refuse to rent to anyone.

In either case, you will be homeless! It is your ability to pay with money that gives you housing over someone else who wants the same housing unit just as much as you do!

Stating that landlords are presently charging the maximum of what the market will bear should not be a controversial "allegation". If you want to die on this hill, we can go there.

What the market will bear will change promptly after the imposition of tax on all rental units. As fiearce as airlines ticket sales are, they do not eat the fees imposed the government across board themselves, but pass onto the customers instead.

In a Georgist system, "maintenance and updates" would be capital costs and a way for landlords to keep more of the rent from their properties.

You should stop referring to your own pet theory as "Georgist system" or Georgist anything now. You don't know the details of Georgism because you never really read much of Henry George's writings. If you think landlords can capitalize all maintenance and repairs as structure value against rent income, your pet theory is even sillier than I thought: how long do you think it will be before the remaining of land value is reduced to zero as capitalized structure value increase against stagnant rent?

If I were king,

Yes, I have noticed, many people with socialists leanings are really monarchists and dictator-wannabes. If you were a King, you'd join Louise XVI quite quickly.

Ah, all economic rents are justified. What a great argument.

Economic rents refers to monopolistic market power. There is no monopolistic market power in most housing markets among so numerous competing landlords. The fact that so many of them got foreclosed is proof that they do not have monopolistic market power and do not enjoy much economic rent.

21   Reality   2011 Aug 23, 7:30am  

Bellingham Bob says

too much bullshit. We're done here.

You think it's "bullshit" only because you never even read what Henry George wrote. As appealing as the unicorn idea of "land value" (separate from improvement) is, he eventually realized that the two are not separable, and had to draw artificial lines defining Georgist "land" as land plus all improvements that last beyond the improver's life (good luck tracking whether the men sold the house to the men who sold you the house is still alive). Even George himself admitted that his scheme in effect is a way of transferring all land ownership to the state in a "more quiet" way.

22   Â¥   2011 Aug 23, 8:07am  

marcus says

If so, it would require people who chose less profitable uses to sell, give up their location and disrupt their lives or business ?

zoning limits would drive the highest-and-best use.

Would it only be when the owner sells to someone who wants to use the land more profitably that the govt collects the higher tax on the land?

whatever works best. There can be a continuum of policies with this.

And if so, what would prevent government corruption and waste of those rents and ever increasing rents ? Why would that not just make the government in essence the greedy monopolistic landowner?

Reality or whatever his name was was mining this vein. My response is a shrug and "people get the government they deserve".

LVT has the signal benefit of working best at the most local of granularities. Of course, local government is also the worst government, so there's that.

But local governments would in fact be in competition with each other in attracting wealth-creating business, and punishing wealth-taking rent-seekers. So Reality's "oh noes Pol Pot is coming!" is really just bullshit red-baiting.

t is only the last couple hundred years that it really went crazy here in the US

I just discovered this recently:

http://en.wikipedia.org/wiki/Frontier_Thesis

which lays out what I'd read and thought about.

They have in many developed countries, making it a moot point if people now own the land, only getting okay returns without the expected kind of growth potential of the past.

It's not just the returns though, it is the rent losses and the inefficiencies of income taxes vs. land taxes. It's easy to hide income, it's impossible to hide land titles!

Maybe new energy sources, or modes of transportation could change that.

Dubious. California should have a beach tax. How many miles of developed coastline do we have? 500? An acre is 200' on a side so that's 13,200 acres of beachfront property. Each acre is worth what, $5M? That's $66B of land value right there, a 3% tax level would yield $2B. And that's just the first 200' from the shoreline.

The land value of California is simply immense. And the rich own most of it, and they've also invested well in the institutional defenses of intergenerational wealth to hide all this in plain sight, and also via Prop 13 tether Grannie's 3B tract home in Visalia to their million (and even billion) dollar real estate empires.

23   Reality   2011 Aug 23, 8:27am  

Bellingham Bob says

LVT has the signal benefit of working best at the most local of granularities. Of course, local government is also the worst government, so there's that.

But local governments would in fact be in competition with each other in attracting wealth-creating business, and punishing wealth-taking rent-seekers. So Reality's "oh noes Pol Pot is coming!" is really just bullshit red-baiting.

However, Georgist Single Tax is meant to replace income tax and payroll tax at the federal level! If some localities decide to experiment with their own Georgist Single Tax, they will find out the infeasibility soon enough . . . just like Arden found out and kept it to a level that is comparable to property tax in most other towns in this country.

The real danger of Georgist Single Tax is that theory providing another excuse to a new source of tax revenue at the federal level.

California should have a beach tax. How many miles of developed coastline do we have? 500? An acre is 200' on a side so that's 13,200 acres of beachfront property. Each acre is worth what, $5M? That's $66B of land value right there, a 3% tax level would yield $2B. And that's just the first 200' from the shoreline.

In other words, you are talking about additional tax generation . . . nothing to do with Henry George's core purpose of Single Tax: getting rid of other taxes. It's silly to expect the land value to stay the same $5mil if you raise the carry cost by $150,000 a year. Look up what towns and cities with 3% property tax look like. They are almost all run-down high crime cities. $150k would be about the value of the entire property (house+land) in those cities/towns.

24   Â¥   2011 Aug 23, 11:27am  

Nomograph says

mere bowel movement?

looks like I got out of that thread just in time . . . I've had "Reality" on ignore for a while now but if he's going to take on Georgism directly I was game for an honest discussion of its benefits/problems.

But IME people invested in the current system are far from desiring an honest discussion about this stuff. That's Rothbard's thing too. If you can read the rebuttals I gave above and still think Rothbard was a straight-shooter on this topic, man.

25   swebb   2011 Aug 23, 11:49am  

I have followed this thread with interest. A few months back Troy (B. Bob) and I had a similar back-and-forth (though I was less firm in my position because it wasn't really something I had thought about). I left the thread with an appreciation for a different perspective, which is about all I can ask for.

So Troy presents some interesting ideas and perspectives, and does a pretty good job of advocating for them (and would be even more effective if he were less dismissive), however...one of the basic assertions is that landlords don't add (much) value. They just buy land with a building on it and rent it out...wait for it to increase in value.

I get the concept, but it doesn't jibe with what I have observed during my life. Certainly it happens that a landlord buys land, rents it out, and sits on his duff profiting all the while from the creeping improvement around him. But in my experience it happens the other way more often.

An example:

The office I sit in now used to be an old taxi dispatch and repair depot from the 50s or something. It is located in a rather run down industrial section north east of downtown Denver. The developer bought the site, kept what he could keep of the structure, and renovated the whole building. He built a new building (mixed retail, offices, residential) behind it, and just got done renovating a freight warehouse on the the same site. The neighbors? A rail yard, the city bus garage / repair facility, and a concrete factory. The improvements that will make the land more valuable? Nothing to speak of. The landlord/developer is the force behind all of it.

http://www.taxibyzeppelin.com/

This is the most concrete (and referenceable) example I have, though I have many others.

Is it possible that this "buy property and wait for the neighborhood to increase in value" strategy doesn't really play out in most communities? Could it be a coastal / ultra-high land value thing?

Also, in the cases where I have seen the landlord benefit from the improvements around him...it has typically been from what other individuals have done, not some public improvement / investment.

Again, it's an interesting and appealing concept/theory, but the "hook" doesn't hold up in my experience.

26   Â¥   2011 Aug 23, 12:05pm  

swebb says

.one of the basic assertions is that landlords don't add (much) value.

Landlords just own land. It's the building owner/managers that add the value.

Often these hats are worn by the same entity.

And it is the source of much confusion. Georgism would basically like to remove one of these hats, that's all.

Well, the profits that come from wearing one of them at least.

There are a multitude of issues with community collection of ground rent, leasing vs. owning, etc. I don't pretend to have any answers to these things.

I just look at what we have now and see a very clear cause of some of the poverty around today. Henry George saw the same thing 150 years ago in California's pioneer time, which is why his book is called "Progress and Poverty".

It's the flows that are the problem now. Maybe a trillion from land (tenants to landowners or bankers). A trillion to the military machine. $600B via the trade deficit. A trillion in rents being taken in the health sector.

These rent-captures are why the top 1% is collecting so much of the national income today, and why a $5T+ total government expense is only employing twenty million people or so.

http://research.stlouisfed.org/fred2/series/USGOVT

The land issue isn't that big a deal in the scheme of things, just one more thing we could fix but will not. And like the other fundamental flaws, not fixing it means the system will remain unbalanced and eventually unsustainable.

27   pkowen   2011 Aug 23, 2:45pm  

Phew. Typing more words doesn't make you any less wrong.

Reality says

tatupu70 says

"Land value is inseparable from improvement"

Funny. My property tax bill seems to do a pretty good job separating them...

That's just arbitrary bureaucratic assignment. I'm sure you are aware that many towns are taxing houses at a higher value than the houses are worth. Don't tell me you believe that tax bill value instead of market clearing price.

It is not in the least bit arbitrary. You may not like it, but that doesn't make it "arbitrary".

Improvement values are based on very specific calculations. It is called "mass appraisal" and is done in most states. It is a formula based on characteristics such as square footage, construction materials and quality, number of rooms, bedrooms, bathrooms, age, etc. etc. I've been to professional conferences and heard presentations/papers on the subject of "what formula is best, most consistent, fair, etc.".

CA Prop 13 created an exception that only resets the value (mass appraisal is automatically recalculated periodically) when there is a transfer of ownership. This results in long time owners having suppressed property valuations, and new buyers often pay many times more.

Georgism simply recognizes that the earth / land is more permanent than we are; that we all take resources from it (water, food, fuel), and in exchange rather than "owning" the land and mineral rights, we "rent" them form the rest of society. It reduces "rent seeking" and therefore would lower rents. It also has been proposed along with a complete removal of "income" taxes, since income tax takes from the work of your hands and mind - things that are eminently more "yours" than a piece of land you happened to squat on first.

28   swebb   2011 Aug 23, 4:05pm  

Bellingham Bob says

And it is the source of much confusion. Georgism would basically like to remove one of these hats, that's all.

Well, the profits that come from wearing one of them at least.

Yeah, I understand that. Maybe I wasn't explicit enough, but in my example I was trying to show that, under a LVT scheme, the developer could end up paying higher taxes because of the improvements he made. The land he currently owns (or would rent (?) under LVT scheme) is certainly more valuable now because of his investment. Is the rail yard making his land more valuable, the cement factory? He did it, and to be taxed for it seems...unfair? Maybe it's not the normal way of things, but it's not a contrived example.

Similarly, the cement factory and bus repair depot also have "enjoyed" land value increases because of his work (not their own, not the governments)...but they don't want it. I'm guessing they'd be miffed to have to pay higher taxes because of the improvements that they don't enjoy. Hell, now they might have to move their business and sell their land, or rent their land out to someone who values the local improvements. (prop 13, anyone?)

It doesn't always happen the way it does in California, I guess. Buying in a ghetto that gets gentrified, especially "overnight", may be a rare occurrence. Developing a land use policy around it may not make sense for "everyone".

I do tend to agree that land seems to be different than other property (for the reasons Churchill enumerated), so it seems reasonable to at least have a conversation about how to fairly address the differences.

29   Reality   2011 Aug 23, 5:35pm  

Nomograph says

Sure, just as soon as you show me a successful example of a society governed by ideology.

Not sure what ideology you are talking about. I merely posited that:

1. Giving individual freedom of choice is a good thing; therefore:

2. Competition among counter-parties (to the individual's whatever needs) is better than monopoly.

I did not advocate any form of government at all. If you want to argue that slavery (ie. not giving individual any choice, but ordering him around) is a superior form of social organization, please come out with it.

Your little ideology might sound all neat-o and stuff, but like all ideologies it falls flat on it's face in the sunlight of reality. Reality doesn't care about neat-o stuff at all.

Once again, if you want to advocate the ideology of slavery, please be honest with it.

30   Reality   2011 Aug 23, 5:37pm  

Bellingham Bob says

But IME people invested in the current system are far from desiring an honest discussion about this stuff. That's Rothbard's thing too. If you can read the rebuttals I gave above and still think Rothbard was a straight-shooter on this topic, man.

You did not really give rebuttals. You gave a couple links that are rather poorly written in terms of basic economic logic, as I explained in detail in my previous posts.

31   Reality   2011 Aug 23, 5:44pm  

pkowen says

Improvement values are based on very specific calculations. It is called "mass appraisal" and is done in most states. It is a formula based on characteristics such as square footage, construction materials and quality, number of rooms, bedrooms, bathrooms, age, etc. etc. I've been to professional conferences and heard presentations/papers on the subject of "what formula is best, most consistent, fair, etc.".

Perhaps we have different definitions of the word "arbitrary." As we have witnessed in the last few years, real estate price can go up and down by significant amount in a short time span. How exactly do any of those bureaucratic formulae calculate structure value without actual transaction on structure (as separate from land under them)? Just because the bureaucracy assign a tax assessment value doesn't mean it has any relevance to the actual market clearing price for the item . . . just like excise tax on motor vehicles.

Comes to think of it, if those fancy "professional" formulae are so accurate, why don't we have them decide the price of a head of lettuce? a chicken? a piece of 2x4 wood? or a sheet of 4x8 dry wall? Why have market place with changing prices for these products at all? If the fancy formulae can't even reliably tell us the price for the most basic construction material, how can they accurrately tell us the far more complex result of putting thousands of those component pieces together with varying degrees of craftsmanship?

32   Reality   2011 Aug 23, 6:30pm  

pkowen says

CA Prop 13 created an exception that only resets the value (mass appraisal is automatically recalculated periodically) when there is a transfer of ownership. This results in long time owners having suppressed property valuations, and new buyers often pay many times more.

That's because the government can get away with taxing new owners more as they are on the rising income phase of their lives, so it does. It would be erroneous to think that somehow tax is artificially suppressed on a few long term owners; most residents in an established residential area benefit from Prop-13. Prop-13 is simply a way of getting away with taxing new owners more than can be born by people who already live in an area. If you want to talk about "rent-seeking," monopolistic government bureaucrats are the ultimate Rent seekers. It is only fair to assume that they charge as much as they can get away with (individual benevalence among young and inexperienced bureaucrats not withstanding).

Georgism simply recognizes that the earth / land is more permanent than we are;

Yet, just a few moments later, you were writing about a developer running up the value of his land due to his own improvements (a very accurate assessment, I should add). So it is quite obvious that land value is inseparable from human labor / improvement, contrary to the idealized unicorn idea about "land" as separate from improvements.

that we all take resources from it (water, food, fuel), and in exchange rather than "owning" the land and mineral rights, we "rent" them form the rest of society.

1. If it is renting from the rest of the society, why should the rent be paid to the bureaucrats? instead of say having the benefit paid to the renters through competitive rent reduction? This point was very well understood in the 19th century America: new land was Given to pioneering farmers, instead of being auctioned to them (with proceeds going to the government like today's wireless spectrums), so that farmers would be able to sell farm products to the rest of the society cheaper in the absence of debt to pay the auction proceeds.

2. Any mineral or material that you take from the earth is also made unavailable to others. All material, take for example all iron ore, on this planet is finite. What you take is made unavailable to others. So hold your cell phone in your hand, why do you own it at all? Why do you have private property ownership over any material object at all? Shouldn't you be paying a 100% use value tax on all the material going into your phone? That's the essence of Georgist logic. There is a rebuttal to this logical fallacy, but it requires you to see through the unicorn idea of government bureaucrats representing the society (it's the same as Europeans having to separate paying the Priesthood from paying homage to God before they could come out from under the sway of the monopolistic church).

It reduces "rent seeking" and therefore would lower rents.

That's just completely wrong. Any raise in taxes would raise rent not reducing them. We see that clearly in Prop-13 protected landlords being able to rent to tenants for much lower price than the monthly cost of buying the same house. Rental market is very competitive, but they only compete on the portion of rent that the "landlords" charge, not on the Rent (aka "tax")that their own Landlord the government charges them across board.

There is one scenario where LVT could drive down rent in theory: 100% LVT reducing land rent to zero! so LVT tax is Zero as well. However, that tax-free state of existence probably won't last long before government bureaucrats insist that land has some kind of taxable value even if the transaction value of land is zero as all income from land is taxed at 100%. In any case, both standard Georgist Single-Tax proposal and the bastardized version pushed by people who not even bothering to read him push for the tax on land to go up not to go down, and to go up substantially.

It also has been proposed along with a complete removal of "income" taxes, since income tax takes from the work of your hands and mind - things that are eminently more "yours" than a piece of land you happened to squat on first.

I do not want to come across as legitimizing income tax . . . however, I doubt you'd feel any better if the government takes what you have already owned for a long time instead of taking a cut from your new income. . . especially if you do not have the income means to replace what is to be taken. The "squat" description is silly considering you wrote a few moments later that the developer was increasing his own taxable land value through improvement. Improvement and land are inseparable, which utterly destroys the unicorn idea about land being God-given that started the entire Georgist argument to begin with.

To summarize, Georgism has two fundamental problems:

1. Unlike what many people intuitively feel about the subject, land is not God-given, but intricately intermixed with human effort improving what had been "raw land" (or swamp under water or cliff side before leveling, etc.). It's impossible to separate land value from past improvement even if the house is demolished. Henry George eventually had to re-define Georgist "Land" as "raw land" plus whatever improvements have been made by improvers who have already passed away. Once that point is understood (i.e. read and digested), many wannabe Georgists probably would have second thoughts about the whole Georgist idea.

2. Henry George lived during a time when modern interventionist government was just starting to emerge. People confused "the government" with "the people" or "the society." The rise of even more virulent statist ideologies were soon to follow after Henry George's death. It's a logical fallacy to assume that accruing all economic advantages to the monopolistic government bureaucracy would be beneficial to the society. It is far better off to let Apple and HP own all the material content that go into their electronic devices, and let consumers make choice between them (and among many other competitors), than say requiring all the device makers and owners to pay the government a tax amounting to the entire use value of all the material content . . . despite the fact that all the material and mineral are finite; what you "own" can not be owned by someone else at the same time.

So why is private ownership better than "public" ownership (paying a substantial rent/tax to government is "public" ownership) on limited resources? Because limited resources has to be allocated efficiently . . . and the competitive market process is much more efficient in sending the limited resources to where it is most urgently needed than monopolistic bureaucratic political machination. A far better way to contribute to the society than paying additional taxes is to provide a useful service to other members of the society that the recipient value more than the input factors (i.e. you can turn a profit from providing that service). Taxes only get in the way of this efficient market exchange process. e.g. having a $100 annual "material use tax" on the iPad would only cause the cost of using iPad to go up and hinder the public accessibility to the valuable device; after taking out $90 to feed the bureaucracy, the government may well give the remaining $10 to HP's WebOS tablet despite clear consumer choice in favor of iPad.

33   Reality   2011 Aug 23, 11:36pm  

Bellingham Bob says

I just look at what we have now and see a very clear cause of some of the poverty around today. Henry George saw the same thing 150 years ago in California's pioneer time, which is why his book is called "Progress and Poverty".

Yet, you refuse to read the book, at least not in detail. Otherwise, you would have noticed that even Henry George ran into the problem of separating land from improvement, and had to draw the arbitrary line that improvements lasting beyond the life of the improver is defined as "Land" in Georgism. i.e. good luck trying to figure out whether the person who did improvement and sold the property to the man who sold you the property is still alive! If you find the guy, will you try to keep him "alive" like "Bernie" in order to prevent tax from going up dramatically? LOL. When put that way, I doubt even you would want to call yourself Georgist.

There are a multitude of issues with community collection of ground rent, leasing vs. owning, etc. I don't pretend to have any answers to these things.

The most straightforward way to benefit the community is actually let the landlord pass the benefit of landownership onto tenants via competitive rent pricing. . . just like the private ownership of material without "material use tax" allow manufacturers compete on the price of their bundled goods, bidding prices downward and making goods and services available to consumers. Almost all raw material that go into manufactured goods are finite on this planet and "God-given," just like the abstract concept "land," and they are inseparably intermixed with human labor "improvement" just like typical rentable houses sitting on improved land.

It's the flows that are the problem now. Maybe a trillion from land (tenants to landowners or bankers). A trillion to the military machine. $600B via the trade deficit. A trillion in rents being taken in the health sector.

These rent-captures are why the top 1% is collecting so much of the national income today, and why a $5T+ total government expense is only employing twenty million people or so.

Then why are you advocating even more concentration of wealth into the hands of the same Rend-seeking monopoly that is called the government, owned and controlled by the ultra rich?

If you want to reduce rent-seeking, the proper solution should be reducing tax and licensing/regulatory burdens, so more new entrants can enter the market and bid prices down and make goods and services more readily available to consumers.

34   tatupu70   2011 Aug 23, 11:48pm  

Reality says

Then why are you advocating even more concentration of wealth into the hands of the same Rend-seeking monopoly that is called the government, owned and controlled by the ultra rich?
If you want to reduce rent-seeking, the proper solution should be reducing tax and licensing/regulatory burdens, so more new entrants can enter the market and bid prices down and make goods and services more readily available to consumers.

It seems to me that you are confusing two separate issues:

1. The size of government
2. The proper method of collecting taxes

Given that taxes are necessary to fund the government (whatever the size), the question is what is the best way to collect taxes that will facilitate a healthy economy.

I'm not necessarily a true believer in Georgism like Troy/Bob, but I think the idea is interesting. Your main argument appears to be that it's not perfect (it's difficult to separate land and improvements). This may come as a shock, but no tax plan is perfect. Is it better than the alternatives?

35   Reality   2011 Aug 23, 11:58pm  

tatupu70 says

It seems to me that you are confusing two separate issues:

1. The size of government
2. The proper method of collecting taxes

Given that taxes are necessary to fund the government (whatever the size), the question is what is the best way to collect taxes that will facilitate a healthy economy.

Be honest, are you really talking about holding total tax amount steady or finding another tax revenue? What will you do with all the IRS agents already trained to collect an entirely different form of tax?

Besides, any substantial LVT would crash land value, and reduce LVT tax value dramatically . . . will you really be content with that? as opposed to then having to bureaucratically assign land value without much reference to market price? leading to chaos in the land market place as many plots would be abandoned due to too high tax just like houses in Detroit and Baltimore.

I'm not necessarily a true believer in Georgism like Troy/Bob, but I think the idea is interesting. Your main argument appears to be that it's not perfect (it's difficult to separate land and improvements). This may come as a shock, but no tax plan is perfect. Is it better than the alternatives?

It's far worse than being imperfect. It's akin to jumping out of the frying pan into the fire itself. Troy/Bob's primary motive has nothing to do with fairness or equitability, but everything to do with the gutteral feeling that his landlord is charging him too much. Heck, he has no qualms about becoming a rent-seeking landlord if only he had the money (I don't think small time landlords really enjoy monopolistic economic Rent, but he does). Talk about amoralistic hypocracy! What I'm trying to point out is that a higher tax on land+house (as any Single Tax to replace other taxes must be) would only drive up rent cost not reducing it. In other words, it would be jumping out of the frying pan into the fire itself!

Just like doctors enjoy a "rent" as licensed practioner, Levvying a special high tax on the income difference between a doctor vs. a minimum wage burger flipper would not reduce the cost of seeing the doctor but only increase it!

36   tatupu70   2011 Aug 24, 12:08am  

Reality says

Besides, any substantial LVT would crash land value

Reality says

What I'm trying to point out is that a higher tax on land+house (as any Single Tax to replace other taxes must be) would only drive up rent cost not reducing it

Which is it?

I'm not sure it would have much effect on rents or home prices. If, as Troy/Bob says, all excess money goes into rents and land values, then it's really the total tax bill that matters. Whether it's income tax or LVT or Fair tax or whatever. It's take home pays that matters.

And you make the same mistake that I see here all the time. Just because Troy would like to profit from the current rules doesn't mean that he wouldn't like them to change. That's not hypocritical.

37   tatupu70   2011 Aug 24, 12:10am  

Reality says

Just like doctors enjoy a "rent" as licensed practioner, Levvying a special high tax on the income difference between a doctor vs. a minimum wage burger flipper would not reduce the cost of seeing the doctor but only increase it!

That's just wrong.

38   Reality   2011 Aug 24, 12:22am  

tatupu70 says

Which is it?

Both! Land value would crash as the landlord's after-tax income will decrease after paying the substantial tax . . . and rent will go up as the tenants will have to pay the landlords what will get passed onto the bigger Landlord the government. What do you think a 50% sales tax would do? Merchants would be devastated, and the customers would be paying much more out of pocket. That's what all Taxes do: put a "negative bridge" and "negative railroad" between the two parties.

I'm not sure it would have much effect on rents or home prices. If, as Troy/Bob says, all excess money goes into rents and land values, then it's really the total tax bill that matters. Whether it's income tax or LVT or Fair tax or whatever. It's take home pays that matters.

The assumption is wrong, as usual. Not all excess money go into rents or land values. How else would renters pay for vacations, toys and eventually down payment for houses? Not everyone lives paycheck to paycheck . . . in fact, for the crowd that lives paycheck to paycheck, there's an even stronger rationale for having a landlord when the roof leaks!

LVT as Single Tax would have a huge impact on the value of improvement vs. "land," and the exact impact would depend on how the arbitrary formula is put together in assigning value. It's a fallacy to argue that substantial LVT won't have much of an effect on life and argue that it would be economic positive for producers (as Georgists do) at the same time.

And you make the same mistake that I see here all the time. Just because Troy would like to profit from the current rules doesn't mean that he wouldn't like them to change. That's not hypocritical.

Of course that's hypocritical when he considers what landlords do as immoral. He is not merely making an economic argument against landlords, but also a moral diatribe.

39   Reality   2011 Aug 24, 12:29am  

tatupu70 says

Reality says

Just like doctors enjoy a "rent" as licensed practioner, Levvying a special high tax on the income difference between a doctor vs. a minimum wage burger flipper would not reduce the cost of seeing the doctor but only increase it!

That's just wrong.

What's wrong? Is basic economic literacy really that hard to come by nowadays? If sales tax is raised to 50%, do you think merchants would drop price on all merchandise by 50%?

40   tatupu70   2011 Aug 24, 12:35am  

Reality says

Not all excess money go into rents or land values. How else would renters pay for vacations, toys and eventually down payment for houses?

Of course people take vacations and buy toys and save. But the theory is that there is a certain fixed percentage of income that goes towards housing. If you look at housing prices over time-they follow wage inflation pretty closely. Of course it's not exact--but it's a decent rule.

And I see no reason to think that would change just becuase you are shifting where the taxes are coming from.

Reality says

It's a fallacy to argue that substantial LVT won't have much of an effect on life and argue that it would be economic positive for producers (as Georgists do) at the same time.

I think the argument is that it would have a an effect on life--but that it would be a positive one.

I'll get out of the way now. I'm not an expert by any means on this topic.

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