[TimPC]

Georgism and Distributism is interesting but short of a plan to actually transition the tax infrastructure in that direction this article reduces to an unactionable history lesson. Still worth reading, but not powerful enough for those who want economic change.

I'd argue that transitioning is an extremely hard problem. The Georgist system taxes property at extreme rates. In particular, the taxes on property ownership are supposed to capture the entire value of renting the property. This means that people owning property with a mortgage would suddenly be forced to sell their property at the near zero prices that Georgism is designed to foster. This is likely to lead to many unhappy homeowners as well as significant loss of capital for all the entities banks sell mortgages to. I think this problem is severe enough that in order to transition to a Georgist society a government might need to absorb every mortgage in the country.

Mortgage debt in the US is currently estimated at 17.6 trillion dollars, slightly more than half of the 30.5 trillion US national debt. Such an expense would be vaguely possible, but extremely sizeable.

[clairity]

> "In particular, the taxes on property ownership are supposed to capture the entire value of renting the property."

No. once again, invariably, multiple people make this mistake in every thread about the land value tax.

'economic rents' are not the colloquial 'rent' we pay for housing we don't own. economic rents are UNproductive, meaning simply income produced by ownership itself, rather than in the productive delivery of service (in this case, housing). LVT only seeks to tax away that unproductive part (economic rents). the productive part would include the costs of mortgage(s), insurance, utilities, upkeep, and a small profit (aka risk premium).

[TimPC]

Agreed. This is an oversimplification. We'd attempt to tax away the value of the rent of the unimproved land which is less than the value of the improved land.

Of course, taxes will actually be set in accordance with what the government needs for revenue since this is supposed to be a single tax. Elsewhere in the thread I've tried to estimate Georgist land taxes based on current revenue needs and found them to be quite high.

[clairity]

LVT has nothing to do with improved vs. unimproved land. both improved and unimproved land have productive and unproductive aspects.

LVT is solely targeted at economic rents. this is the key to understanding LVT. otherwise, the idea that it's the most economically efficient tax will not make sense, and the tax itself will not seem to make sense.

on the other hand, what the government will do tax-wise is political, not economic. constitutionally, the tax cat is out of the budget bag, so we have little hope of restraint there. politicians will always try to expand government because it benefits them, no matter what rhetoric they spout.

(i.e., taxes are high because politics, not LVT.)

[geocon]

One of the nice things about LVT is that it aligns those incentives though, since what increases tax revenue the most is investment in public infrastructure and services. It's the Henry George Theorem at work: https://en.wikipedia.org/wiki/Henry_George_theorem

[clairity]

that's assuming politicians are compelled at least a little bit by the public good. unfortunately, our politico-economic systems have become more and more captured by moneyed interests, insulating politicians from those wider incentives.

but to be fair, that's not unique to georgism. we need to solve for that problem generally.

[imtringued]

When politicians want more money they often raise taxes because passing good policies is difficult and the relationship between their policy and tax revenue is not obvious. With a land value tax politicians have a very easy way of increasing tax revenue, do something productive.

The countless times a government has cut important services and investments to get a short term cash influx have always lead to misery. Greece ended its public healthcare for the sake of austerity and now they are further in debt. Operating a hospital should be something that is a revenue stream for the government (through land value taxes), not a burden to be distributed across people through taxes.

[brightly-salty]

I think it would be at least partially solved by reorganizing government to be based upon subsidiarity :) but yes, this isn’t necessarily a question which political economy can or should solve

[hushpuppy]

> 'economic rents' are not the colloquial 'rent' we pay for housing we don't own. economic rents are UNproductive, meaning simply income produced by ownership itself, rather than in the productive delivery of service (in this case, housing). LVT only seeks to tax away that unproductive part (economic rents). the productive part would include the costs of mortgage(s), insurance, utilities, upkeep, and a small profit (aka risk premium).

Except the LVT premise is bullshit.

Lets say I have a house I rent out for 1800 dollars a month. About 500 dollars of that will go to taxes (income, property, etc).

Out of the rest I take 600 dollars and am in the process of fixing up two more houses that I bought from a tax sale that were made unlivable through crackhead squatters.

So that leaves me about 700 dollars more. Out of that I need to save probably about 300 dollars a month to cover costs associated with owning homes. Such as the need to replace roofs or water heaters or hire arborist to take down dying trees before they destroy my neighbor's property, etc.

Then that leaves me with 400 dollars that I reinvest in other companies. So it goes to doing thing like buying bonds, etc.

The only thing that is "unproductive" here is the money being paid to the federal governemnt to go murder brown people half way around the world.

The entire intellectual basis of this "Georgian" stuff is completely bogus. The theories about monopolies are wrong. The theories about how to solve the tragedy of the commons is wrong as well. The economic efficiency theories are wrong, etc etc etc.

[TimPC]

So you say you have $1000/month out of $1800 that are unrelated to providing rent in the unit being rented and you feel there is no possibility that you're capturing some sort of economic rent when you have more than 50% profit margin on the rent you charge. I think something is bullshit but it's not the economic theory.

[smeeth]

You appear to be arguing that if you spend income in a productive way then the income was productive income.

That's simply incorrect, it's not how economics works. For example, if I stole $2000 from you and used it to fix houses/invest it would not magically become productive income.

The comment above you is pointing out that excess income a landlord makes because people are willing to pay a premium to lease a scarce or rare good they own doesn't contribute to the rest of the economy in the same way selling a hotdog does. Ergo, unproductive income.

[imtringued]

One of the absurd things about our modern economy (it's actually a recurring problem) is that we keep spending more and more on the same on already existing values. People complain about ever increasing debt and borrowing but most of that money isn't even being spent "into" the economy, it's just used to buy land from rich individuals.

The reason why this is not "productive", is pretty straight forward. It's unproductive because nothing is being produced. We are selling what's already there long before humans existed.

[geocon]

Really? Care to tell that to the various Nobel laureate economists who have endorsed land value taxation? Do you really think you understand economics better than Paul Samuelson, Milton Friedman, Joseph Stiglitz, William Vickrey?

[klyrs]

Regardless of my vehement disagreement with GP, you're attempting an [appeal to authority](https://en.m.wikipedia.org/wiki/Argument_from_authority) which is utterly unconvincing.

[User23]

Compounded by the fact that there are no Nobel Laureate economists.

And that those supposed authorities have been teaching absolute nonsense like loanable funds.

If you want to learn about the economy, the only useful option is to look to working market participants. Some rando at the fixed income desk has forgotten more about how the economy works than those pompous frauds.

[imtringued]

Hey, I like loanable funds in a 100% reserve system with demurrage but that is not the world we live in

[8note]

By comparison to alternative housing, hotels, the housing rent is unproductive other than repairs and getting contracts.

Once you have a lease, it's unproductive as it comes, purely getting money for owning something

[larsiusprime]

Two things:

1) "In particular, the taxes on property ownership are supposed to capture the entire value of renting the property."

Not true. Only the unimproved value of land is meant to be taxed. This amounts to a complete exemption on taxes on buildings.

The current proposal that is often on the table is not to go for classical 100% Georgist LVT, but to simply collect the exact same amount of property taxes we do now, but to shift the burden off of buildings and onto land. This can be done right now with existing property tax regimes. The burden would fall mostly on underutilized land, parking lots, and vacant lots in city centers, where the lion's share of land value is concentrated. Proposals for this sort of reform are in the works right now in various US cities.

If you'd like to see a practical policy paper on the subject see here by Tideman, Kumhof, Hudson, and Goodhart (the Goodhart of Goodhart's Law, by the way): https://voxeu.org/article/post-corona-balanced-budget-fiscal...

2) Georgism is not just about real estate. It's about properly dealing with scarce economic assets that can't be created and which invite speculation

Norway's sovereign wealth fund is an extremely successful example of applying Georgist principles to natural resources, for just one example:

https://progressandpoverty.substack.com/p/norways-sovereign-...

[TimPC]

My default reaction to 1) is that I dislike it. I feel like the incentive to labour to accept the tax of unimproved land value instead of property tax is the removal of income and sales taxes that accompany it. Taxing unimproved land value instead of improved land value in a system as close as possible to the current one feels like a massive wealth transfer from homeowners to condo developers. As it is, condos represent a problem for many communities in that they are often taxed at lower percentage rates and have a lower market value than houses. This means communities consisting of more condos have lower tax revenue per capita compared to communities consisting of more houses. Suburbs resist densification because the decreased revenue per capita generally means declining services. I think this a fundamental cause of NIMBY that largely gets ignored.

[geocon]

I think you have a mistaken view of who is actually making money in this equation. Developers do not make all that much money from building housing, which is actually a productive contribution to society. Homeowners, on the other hand, make hand over fist by simply sitting on land absorbing rents: https://pbs.twimg.com/media/EyJN_g3UUAIW0f0?format=jpg&name=...

https://www.wsj.com/articles/homes-earned-more-for-owners-th...

Secondly, suburbs are drastically subsidized by denser development. They resist densification because they don't want to pay their fair share. https://www.strongtowns.org/journal/2020/4/16/when-apartment...

[TimPC]

I think it's misleading to measure things in revenue per square foot. Most government services aren't provided based on the number of square feet but rather based on the number of people. The per capita revenue for denser developments is lower than the per capita revenue for single family housing. When you get to rural densities you have issues of providing services because of the lack of scale of communities but suburbs are generally dense enough to afford services like police, fire, community centres and hospitals.

[adgjlsfhk1]

the counter examples are things like roads, pipes, wires, and Public transit which make to up a high percent of city and state budgets and scale with density.

[TimPC]

These examples are fair. At the provincial level Transport, Pipes and Wires all are small enough expenditures to not warrant their own category breakdown in the budget and are lumped into a 14.6% of budget other category.

At the city level it's tricky because the breakdown my city provides in the budget separates into capital and operating rather than other categories. From what I can tell from the 50 page report, water pipes cost approximately 25% of budget and transport costs approximately 5%. Wires aren't listed in enough details to get an estimate.

My best sense from the numbers in the breakdown is the expenses for my suburb breakdown into roughly 60% per capita items, and 40% per area items. So 60% of our budget gets more expensive as you add people with low per capita taxation and 40% gets cheaper as you add more density.

[pyradius]

Yep the suburbs are a money-loser for governments as noted in https://www.youtube.com/watch?v=7Nw6qyyrTeI

[TimPC]

Suburbs are a money-loser for governments if you allocate income tax revenue at the location of the job. That isn't really a fair allocation though, as suburbs are part of the reason professionals take jobs in big cities. If you either average the income tax revenue between where someone lives and where someone works or put it entirely where someone lives suburbs easily pay for themselves.

[pyradius]

Alas there is no relationship between an income tax and personal consumption of spatial services. There is absolutely no coherent reason to do as you suggest, and every reason for the land to pay the cost of delivering those services, along with the rest of the rental value of land.

[imtringued]

That's a recipe for corruption. If a politician receives no strings attached income taxes even if those are intended to be spent to improve location and pay for infrastructure, he is sure to spend them as if they have none of those strings attached.

[bombcar]

The density difference between many suburbs and many so-called urban areas isn’t that great sometimes. The main defining aspect of suburbs is the lack of much besides housing.

[anamax]

A shopping center without parking is almost always less valuable than one with parking.

Yet, Georgists think that a shopping center without parking, one with parking, and a parking lot should all be taxed the same.

[colinmhayes]

Taxing people for doing good things disincentivizes people from doing good things. Taxes shouldn't be a punishment for being successful. Georgists think real estate should be taxes based off the unimproved value of the land, what the owners do with the land is up to them, but if they don't use it well their taxes will put them underwater and someone else will make better use of it.

[anamax]

My point is that parking lots can easily be the best use.

[imtringued]

Okay, let's assume land is expensive and you do need the parking lots. Georgism just tells you, please use the land more efficiently. Underground parking or a multi story garage become profitable as they reduce the amount of land being used and therefore reduces land value taxes you have to pay. Ethical tax avoidance!

[anamax]

You do know that you're substituting expensive parking for cheap, right?

However, you are demonstrating that Georgist "efficient land use" is not particularly desirable. (Moreover, "efficient" land use is rarely that important.)

Georgism does push towards a monoculture and a particularly horrible one at that.

For example, Georgism punishes someone who puts some open space between buildings, even though open-space is clearly a good thing.

As I wrote previous, Georgists confuse having an equation that they can "optimize" with having a useful idea on how to allocate resources in the real world.

Yes, Georgism lets you do some calculations, but that doesn't imply that doing those calculations is worthwhile. (This is a problem with economics as a field.)

And, no, the "witticisms" don't make your case. They actually argue that Georgists are dangerous fools.

[colinmhayes]

If parking lots are the best use the LVT will be low enough to be negligible. If the LVT is causing the owner to not be able to afford parking lots the area needs more buildings and less parking lots, even if that's just a parking structure.

[anamax]

> If the LVT is causing the owner to not be able to afford parking lots the area needs more buildings and less parking lots, even if that's just a parking structure.

In what universe is "fewer parking lots" the solution to "not enough parking lots"?

As Orwell wrote, “There are some ideas so absurd that only an intellectual could believe them.”

[imtringued]

You mean Georgists think that taxes on all of those should be $0? Yes, that is the entire point of Georgism, only the land is taxed because land can be used for anything and if the land value is higher than the shopping center can afford, then it means people want something more valuable than a shopping center there.

[throwaway4aday]

> the land value

I think this is the key issue that gets glossed over. Who decides the land value? How is that decision arrived at? Is it a purely bureaucratic process where the community has no say? Is it set at a federal level where it will likely be completely disconnected from the reality of a particular municipality?

A lot would hinge on the answers to these questions and I'd take a bet that if this were ever implemented it would be done wrong and would result in many unforeseen negative outcomes.

I think we should stop trying to revive outdated 19th century economic theory and actually put in some work to create a modern one that accounts for the age we live in.

[brightly-salty]

Common solutions include appraisal (like property taxes are today) or a Vickrey auction, where we auction off the land, and the first place bidder gets it at the price of the second bid.

[throwaway4aday]

Ok, but my question was for more detail on how such an appraisal would work and then what the second order effects would be. For something this big we need to think through several generations worth of downstream consequences. We already have many examples of how such revolutionary economic changes can lead to disaster and mass death when people get caught up with the spirit of the idea and don't sit down and do the hard math to work out all of the details ahead of time.

[lukifer]

> I'd argue that transitioning is an extremely hard problem.

While you're completely correct, I don't think this is a reason to abandon the enterprise (other extremely hard problems: sending a human safely to the moon; democratic rule of law; the elimination of slavery).

While I ideologically support the so-called "Single Tax" model, it is indeed extremely difficult to imagine how this would be implemented at the federal level (especially in our current gridlock climate). I'd instead advocate going the other direction, and implementing it locally: property taxes already exist at the level of states and municipalities. These local taxes can gradually migrate to being calculated based on unimproved value, rather than including improvements. This can include whatever necessary carve-outs to reduce unintended side effects (grandfathering existing owners, partial exemptions for owner-occupancy and retirees, etc).

Under any model, the real tension is the zero-sum game between existing owners, and aspiring owners: the former want property values to go up, the latter want property values to go down. (We see the same dynamics at play in zoning laws, NIMBYism, etc.) As with any perverse incentive, or institutionalized rent-seeking, reform is extremely difficult, but by no means impossible.

[TimPC]

I'm hesitant to implement locally without changes at larger levels. I feel like the system depends in a fundamental way on the removal of sales and income taxes on individuals to account for the increase in taxation for less improved land. Without the changes in the other forms of taxation I feel the change in property tax amounts to a wealth transfer from homeowners to condo developers.

[geocon]

I think you have a mistaken view of who is actually making money in this equation. Developers do not make all that much money from building housing, which is actually a productive contribution to society. Homeowners, on the other hand, make hand over fist by simply sitting on land absorbing rents: https://pbs.twimg.com/media/EyJN_g3UUAIW0f0?format=jpg&name=...

https://www.wsj.com/articles/homes-earned-more-for-owners-th...

[TimPC]

The top five developers in my area have seen their market value rise over 30% in the last five years. Most of the development in my area is one of the top five. I’d like a better source for saying developers aren’t making money in big markets where land value goes up quickly.

[brightly-salty]

I think you might misunderstand Georgism, or maybe I did a poor job explaining it. Georgism does not propose taxing improvements (buildings etc), only the actual land. So many peoples tax burden would be decreased, and if the bank owns the land as in a mortgage, they are the ones paying the tax, not the people taking out the mortgages.

[TimPC]

I get that Georgism doesn't tax the improvements. I think we have a fundamental disagreements about how mortgages work. A mortgage doesn't make the bank the owner of the land. Even if we strangely ruled that it did, that would lead to strange situations where as long as people were paying a mortgage they could live tax free on their land. But the minute that mortgage disappeared they'd be on the hook for the tax value.

I don't see a good way to get to Georgism without government absorbing the mortgages as the fallout to the economy of all that debt suddenly having little in the way of assets underlying it is a huge problem. I do agree I exaggerated with my claims of $0 since the improvements on the property would have some non-zero value, but land represents the majority value of most houses and the land value would be effectively reduced to zero by the change in value from the taxation. That would be enough to put most mortgages underwater and the asset would no longer sell for the cost of the mortgage. I don't see government doing this and just saying "too bad, investors absorb the loss".

[pydry]

The government already backstops most residential mortgages through freddie/fannie. Absorbing the losses and taking in LVT instead of mortgage payments will be nothing more than an accounting difference for many mortgages (e.g. say, some pension funds).

Some land owners should have to eat losses. Thats the whole point. If you live on a portfolio of land inherited through your 15th century duke great grand uncle you should be getting a job at McDonalds rather than living off the labor of others.

The problem is less technical and more political. Try to deprive large scale land holders of their property and they will bankroll a fascist uprising and launch a coup while foreign leaders in hock to property owners elsewhere will back the coup and enact punishing sanctions to prevent it from being seen to work.

It'll happen one day probably but the transition will be bloody and violent as it always has been when land is redistributed.

[TimPC]

I think the portion of land owners in the US who inherited their land once is smaller than you might think. The portion who own property through a chain of inheritances going back to the 15th century is small enough to be virtually non-existent.

It’s all well and good to say some land owners will have to eat losses. Which land owners? How severe losses? The fact of the matter is that expensive housing in major cities has forced a substantial portion of the middle class to misallocate their portfolios and put far too large a percentage of their funds into real estate in order to have a primary residence. If you feel this group should eat losses without compensation you’re basically saying the government should financially doom them. More broadly it’s not uncommon to see a house in many neighborhoods become 50+% of a retirement plan. Cratering the value of homes without compensation dooms many people to less than half the standard of living they were expecting in retirement.

I agree with you that the transition you want would have to be bloody and violent. It would also have to be authoritarian. Simply put the groups you want to impose huge financial penalties on will oppose you and without them you lack the votes to pass this democratically.

[pyradius]

These are not show-stoppers, nor are they something that Georgists have failed to consider.

"Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse. It is true that many properties have mortgages that would exceed the value of the property if land taxes were increased significantly. This makes it necessary to think carefully about who should absorb the decline in aggregate asset value that would accompany a significant shift toward taxing land. Nevertheless, it is possible to plan for a restructured financial system that would have shed its dependence on land as collateral." http://www.wealthandwant.com/docs/Tideman_CTL.html#I._Taxing...

"Furthermore, as we discuss in more detail in our paper, the number of net winners from this reform would far exceed the number of net losers, who, if necessary, could be exempted or compensated at little budgetary cost. The winners would even include almost all of the very rich, who not only hold the vast majority of US land but who as a rule are also very well diversified, with land only accounting for a small share of their portfolios. They would benefit greatly from the countervailing cuts in labour and capital income taxes." https://voxeu.org/article/post-corona-balanced-budget-fiscal...

"It came as a quite natural development that also the question of incorporating these ideas into Danish Law was raised. From the very beginning, Jakob E. Lange was convinced that the problem of indebtedness, especially the mortgage debts, must be solved when the full Land Rent, or Ground Duty (in Danish "Grundskyld") were to be collected for a public revenue.

When in 1889 Henry George was on a speaking tour in England, Jakob E. Lange made use of the opportunity and went to England to meet him and to discuss the problem with him. The memoirs of Jakob E. Lange relate that Henry George completely accepted his standpoint; an eventual full Ground Rent which were to exceed the present property taxes ought to be proportioned between the title owner and the mortgage holder. This agreement between Henry George and Jacob E. Lange is also found expressed in the later correspondance between the two." https://cooperative-individualism.org/bille-frank_danish-ame...

[TimPC]

Tideman's proposal is for the costs to the system to be absorbed by the current holders of property.

As a first approximation, people would continue to hold title to the land to which they now hold title, and would continue to owe whatever money they now owe. But compensation could be sought on a case-by-case basis, by individuals who stood to bear the costs of the moral accident disproportionately and did not have substantial assets. Any financial institutional whose continued existence was threatened by the transition would be bailed out in exchange for a significant fraction of its equity. The costs of the compensation would be paid by a capital levy.

I don't think this proposal is feasible. Many people owe more than their entire net worth on their primary residence. The plan is to tax land to the point that the value of land for that residence goes to zero leaving only the value of the structure on that land. The structure value is often a small fraction of the total current value of the home. This puts people sizeably underwater and would result in a fair number of people forcibly vacated from their homes as banks sold the structures to pay the mortgages.

The bailouts of various financial institutions would be expensive, as would the system shocks from the various losers on the mortgage debt. Lastly, many people in old age sell their homes to pay for living in a nursing home until they die. This option would become infeasible if we drastically reduce the value of their homes and given their old age they would have no viable alternative to generate alternate capital.

His proposed solution to this is a vague and nebulous "case-by-case" compensation for disproportionate costs without adequate assets. Depending on your definition of inadequate assets and disproportionate costs the total cost of this compensation can range from nearly $0 to the vast majority of all current property values. Keep in mind that a sizeable percentage of the population owns a single family residence that is a disproportionate portion of their net worth and generally factors into their retirement plans. I'd argue that every such individual is disproportionately impacted and does not have adequate assets.

Zillow estimates the total residential property market in the US at $33.6 trillion dollars. I can't find good statistics for single family owners vs landlords but it's easy to assume that close to 50% of the market will be situations I described. This makes it quite possible for the homeowner compensation to be in the area of $16.8 trillion dollars.

Similarly, mortgage debt is often held by pension funds that would struggle to pay their pensions out if that wealth suddenly evaporated or was vastly reduced due to people abandoning their homes. The current US residential mortgage market is $17.6 trillion dollars. Assuming half of this qualified for hardship we'd have $8.8 trillion dollars of subsidies.

There are other institutions and individuals adversely effected and a program to adequately compensate them all may well cost as much as the current US debt which is currently $30.5 trillion dollars.

I think Tideman vastly understates the problem. The introduction of LVT would arguably be the largest wealth transfer within a nation in human history and by his own admission mostly transfers wealth from the old to the young. It has sizeable risk of transferring wealth people can't spare, particularly transferring wealth away from those no longer work and cannot easily generate new wealth.

[imtringued]

You are absolutely correct, this may be a multi generational project and as far as we know politicians don't think beyond their term. Future generations, even those born today, count for nothing.

Perhaps we should just convert all inherited land into 20 year leases with a land value tax being introduced after the lease expires?

[pyradius]

The problem isn’t vastly understated, and the retirees have largely been subsidized by the current system, they aren’t losing anything. That said, I’m just as favorable to a writedown of the asset and liability. The banks can now invest in productive enterprise.

Fred Foldvary also discusses the transition and who would ultimately need compensation in https://www.progress.org/articles/the-transition-to-land-val...

I see no evidence that it would be difficult in the slightest to disentangle such things but I’m willing to be convinced otherwise by those who have done an actual analysis of the issue.

Of course, as Foldvary notes, “First of all, compensation for the loss of land value is not morally required. The typical landowner has been receiving an implicit subsidy from the government, as public goods generate higher rent and land value. One could argue that justice requires the title holder to pay back the past subsidies.”

What you see as a problem is not an ethical or economic problem merely a potentially political problem.

[throwaway4aday]

> compensation for the loss of land value is not morally required. The typical landowner has been receiving an implicit subsidy from the government, as public goods generate higher rent and land value. One could argue that justice requires the title holder to pay back the past subsidies

This is an absurd standpoint. You're going to ask 64.8% of the population that own homes, a quarter of who are nearing retirement age, to pay back what for all intents and purposes is their retirement fund? If you want to talk about morals and ethics this is clearly an immoral position. Even if we consider the assumption that the increase in value of their property is some form of subsidy, they entered into this contract in good faith as a way to provide for themselves and their families as they age and eventually retire or are no longer able to do productive work from which they can earn a living. To strip them of this and say with a hand wave that they were in the wrong for thinking that a system of ownership, that has existed for hundreds of years and was generally agreed upon by the vast majority of society, would continue to exist and that they would benefit from by lawfully participating in it... I honestly can't imagine you or anyone saying this to someones face, it's just baffling. It's on par with demanding collectivization at the expense of landowners and it would probably have the same consequences.

[TimPC]

I disagree strongly with his fundamental premise. Even if you acknowledge and accept the full moral premise of Georgism you have to assess the degree to which people are morally culpable. Slavery was a heinous violation of human rights and choosing to participate in it justified heavy financial penalties from its abolishment. Participation in slavery was far from mandatory as evidenced by businesses in the north that competed with those in the south despite not having slaves.

The current real estate system on the other hand is a fundamentally different beast. Everyone who doesn’t want to be homeless has to participate as either a renter or purchaser. Years and years of government policy have made the former decision ill advised as the financial benefits to ownership are quite large. Despite this I’d agree with the proposal if all that was being done was the removal of a subsidy.

The government is not merely removing a subsidy in this case though. They are intentionally cratering the housing market. Years of government policy has encouraged over-participation in that market. For those who want to change things to argue the government is 0% morally culpable and the individuals are 100% morally culpable is disingenuous. His argument seems to be that the financial culpability follows from the moral culpability.

He even argues that individuals participating in a system owe backwards subsidies because the government did the morally wrong thing. This amounts to intentionally bankrupting most home owners, including depriving them of funds needed for retirement. This is done in a single sentence hand waving fashion without any sort of impact analysis.

I’d argue there is a substantial problem here that spans the ethical, economic and political categories. But you seem to believe the government is 0% culpable and the individuals responding to incentives are 100% culpable. I’d argue it seems more likely you don’t actually believe that just don’t want to pay for the costs of a fair transition.

[geocon]

This is a good point but it's not a problem with georgism per se so much as the transition to get there. There are a multitude of policies that can be used to ameliorate the change from a system based on taxation of labor and capital to that of land; a common one is giving tax credits equivalent to mortgages so that lendees are not underwater. But any shift to land value taxation will be gradual anyways, so it would be less dramatic than people imagine.

[TimPC]

Total Federal US Tax Revenues in 2021: $4.05 trillion Total US Mortgages in 2021: $17.1 trillion

Once you add the taxes for other jurisdictions of government I can see taxes reaching 30% of total mortgage value. It's fairly clear to me that owning land is extremely expensive in a Georgist society that needs to generate the levels of taxation that fund current government. If land value tax replaces income tax it needs to be fairly large, taking over 20% of mortgage value for just federal costs.

Some number of homes are owned outright and no longer have mortgages so the mortgage number may be a bit misleading. If we account for this we might get to a level that suggests 10% of mortgage value in taxes federally, raising to 15% of mortgage value when accounting for other levels of government. Such numbers suggest you'd need to be able to pay for your current property with an 8-year mortgage in order to pay the Georgist taxes on it.

I think a modern society that kept existing levels of government spending would see widespread downgrades in housing quality in a Georgist society.

[imtringued]

You are ignoring that income taxes and other taxes reduce land rents. You can't tax the same dollar twice after all. The entire reasoning behind a single tax system is that every dollar is taxed through land value taxes in this case.

Yes this does mean that renting/owning low density housing will be more expensive but your income will be much higher to begin with as it isn't taxed.

For example 20% VAT and 30% income tax mean 56% of your money can be spent on housing. Without those taxes you will have almost twice as much money to spend which means you can afford higher land value taxes and if you decrease the amount of land you use, your effective tax burden will go down but so do the costs to maintain infrastructure and other public services.

[TimPC]

To be clear I'm not saying that Georgist taxes are based on the mortgage value I know they are not. I'm comparing the two quantities to establish a rough estimation of how expensive property in a Georgist society that provided a similar level of services would be. If government needed to generate a certain amount of tax revenue comparable to current tax revenue they likely need to charge homeowners an average tax on their unimproved land value that would roughly amount to 15+% of the value of the mortgage, across all levels of government.

[geocon]

Except that's not how Georgist tax structure is decided, it is 100% of the land's rental value. If you want a good overview I recommend this exhaustive and data-heavy series of articles: https://gameofrent.com/content/progress-and-poverty-review

[TimPC]

Okay some things don't add up. You can't have a Georgist tax as a single revenue source for the government and calculate it off something other than what the government needs for revenue. Either you calculate the Georgist tax rate on the unimproved land value, you add other taxes to government or you slash and burn through government spending to deal with the capped revenue. It's living in fantasy land to say Georgist land value taxes, calculated in precise accordance with this metric and not adjusted upward or downward by revenue needs will be a single source of revenue for all levels of government.

[geocon]

Well, while Georgism is most famous for advocating for land value taxation the LVT itself is not the only Georgist tax. All forms of economic land, including such things as natural resources and intellectual property, also generate economic rents and are candidates for taxation. Furthermore, cutting taxes on labor and capital increases the value of land significantly, so much of the revenue "lost" by cutting income taxes, sales taxes, corporate taxes etc would flow directly back into land values and return via the LVT.

In any case, there is lots of room for experimentation at the margins and any Georgist reform won't be complete or overnight. Any shift from taxing labor and capital will result in a better and more efficient economy, so don't get too caught up in the abstract end state.

[TimPC]

I think it's extremely important to undertake a cost benefit analysis of the end state to decide if we want to transform society in that direction. So I disagree strongly with any comment of the form "don't get too caught up in the end state".

I agree there are some other things you can tax. I presume those are also taxed at precisely the economic rents they create? My point is that government needs some sort of tax with a knob that they have the ability to tweak upwards or downwards based on shifting revenue needs. It seems to me the only things in a Georgist system are taxed at precise values and fail to give government that knob. Do all Georgist societies have some sort of services cap because their tax revenues are capped?

[brightly-salty]

Well other taxes are not precluded by Georgism. See for instance Piguovian taxes and IP taxes. But additionally, I don’t think it can be assumed that the government will continue to need its current amount of revenue. Under subsidiary, the size of the federal government would drastically be reduced as power moves downward to local governments.

[pwinnski]

You're saying that land taxes should supply 100% of federal tax revenue, but 0% of state/local revenue?

Currently most property taxes are local, not federal. You're also missing the bit about a citizen's dividend which seeks to offset some of this.

[skybrian]

Uh, you might want to learn about tax incidence.

If the bank pays the tax, why wouldn't they pass it on to the mortgage holder in the form of higher interest rates or other fees?

There are exceptions when businesses are investing for growth and expenses are paid by investors, but normally no business is going to agree to a contract where they lose money. The money to pay expenses comes from customers.

[brightly-salty]

Yeah, I think I misunderstood both the above point and who owns the property in a mortgage. Essentially I think that the land value of the property, which is used in calculation of the property, would go to zero no matter who is paying the tax, reducing mortgages by an equivalent amount if the individual is in charge of paying it, or raising mortgage rates by an equivalent amount if the bank is responsible. Either way it does come out of the individual’s pocket, but mortgages don’t necessarily raise their prices.

[yellowapple]

> If the bank pays the tax, why wouldn't they pass it on to the mortgage holder in the form of higher interest rates or other fees?

Because land has an inelastic supply, and therefore its value is driven entirely by demand. Banks already charge as high an interest rate as they can get away with (i.e. one commensurate with the buyer's credit rating and the value of the land); trying to raise it to account for LVT would immediately backfire due to the resulting profit loss (in this case, from people being less willing to take out such mortgages).

[skybrian]

This is confused. If expenses are higher than revenue then there is no profit in the deal. And then, not making the loan is the bank's best choice.

[TimPC]

I think the problem is not with new loans though. As property value is reduced to structure value in the new system, many individuals will be able to own property without mortgages at all given the far lower cost of doing so. Some may still need mortgages and banks will have to provide a viable vehicle for doing so for the fraction of the population that needs them.

The bigger issue is what happens to current mortgages. If I paid 25% down on a 1.5 million property and have paid my mortgage down further so that it's now sitting at $1 million and the value of my land is $1.25 million and the value of my house is $250,000 when the government adopts Georgist policies the value of my land goes to $0 which means my property is now worth $250,000 and I owe $1 million on it. I'm obviously going to walk away from the loan so the debt holder for my mortgage gets an asset worth $250,000 instead of the $1 million of money they were owed, a loss of $750,000. I also lose the $500,000 I had build up in my home since I walked away entirely.

[skybrian]

Yes, the transition would be pretty horrific both for property owners and banks, and therefore for the entire economy (see 2008).

I think that would be true for any reform that's actually effective in driving property values down.

[anamax]

> if the bank owns the land as in a mortgage

In the US at least, mortgages are on both the land and the buildings.

Getting easy details like this wrong suggest that you don't actually understand how property works.

I get that you have a theory with properties that you and some equations, but that doesn't imply that your equations accurately reflect reality.

As the saying goes, reality has a surprising amount of detail.

[brightly-salty]

I do understand that mortgages are on both the land and the buildings. We were talking about land only though. It is irrelevant to the question of who pays the land value tax that the mortgage also includes the buildings.

[anamax]

"Who pays" was relevant when the claim was that banks holding mortgages would pay.

Let's review: "if the bank owns the land as in a mortgage, they are the ones paying the tax, not the people taking out the mortgages."

You don't understand mortgages in a way that is essential to your argument. Banks holding mortgages don't own the property. At most, they own the right to grab the property if they're not paid, which is a very different thing.

[brightly-salty]

I will admit that I misunderstand TimPC’s point about people having to pay the land value tax in addition to the mortgage; I misunderstood mortgages in terms of who really owns the land.

But the point still stands. If the land value tax is paid by the homeowner, the sales price of the land is zero (under a 100% LVT), so the mortgage rates are lowered by an equivalent amount. So there is no additional burden upon the homeowner. If we flip the model and say the bank owns the land, they will pay the land value tax until it is paid off. In this case also, the sales price also drops to zero so the mortgage just incorporates the land value tax and the building payment. In all possible arrangements, there is no additional burden on the homeowner until the mortgage is paid off.

[TimPC]

Existing contracts don't magically change just because the government changes how the system of taxation works. I'm not saying it's impossible to have a fair system of mortgages with LVT. I'm saying there are a lot of existing mortgages with specific terms already outlined and no legal basis for changing them. Those mortgages will suddenly be far larger than the new value of the property underlying them. Chances are the homeowners will mostly vacate the property instead of paying those mortgages off and the mortgage holder will then sell the property for a small fraction of the mortgage.

In this system, the homeowner loses any value they had accumulated in their house and the mortgage holder loses a large portion of the mortgage. This is what I'm saying the problem is.

[anamax]

> If the land value tax is paid by the homeowner, the sales price of the land is zero (under a 100% LVT)

I let that bit of bogosity slip by me.

The sales price of valuable land will never be 0.

Govt may not see the price, but it will be paid.

You've convinced me that Georgists don't have any experience with actual people or economies. They just have a theory unmoored to reality.

[goodpoint]

> I'd argue that transitioning is an extremely hard problem. The Georgist system taxes property at extreme rates.

Forgive the naive suggestion, but tax rates on property can be be introduced progressively - few percentage points per year - for many decades.

[TimPC]

Doing something progressive is probably the right way to go. I'm not sure how large a drop in property values merely announcing the policy would have. I'm also not sure how long a time window would be necessary. I think if the change is sufficiently gradual it might be possible to do so without compensation for either mortgage owners or property owners. Of course for that to be true it has to still make sense for current mortgage owners to pay their mortgages. I think that suggests a window size of larger than 25 years, but I'm not sure how much larger than that it would need to be.

[yellowapple]

> This means that people owning property with a mortgage would suddenly be forced to sell their property at the near zero prices that Georgism is designed to foster.

Not necessarily. Relatively few homeowners occupy all that much land value; it's probable that most homeowners' dividends would entirely offset their tax burdens, in which case they stand to benefit if anything.

[TimPC]

I think this is fundamentally untrue. It seems plausible for condo owners in large buildings where each unit represents a tiny portion of land. For single family residences consisting of detached or semi-detached homes on slices of valuable land in a city or suburb of a city that's almost certain not to be true.

Most of the people you're taxing in a land value tax are residential uses. Taxing the money doesn't magically multiply it and it's impossible to return nearly all of the tax money to constituents since governments have substantial other expenses.

My estimate is that a current home worth $1.5 million in a suburb of Toronto has land value of roughly $1.25 million and is likely to be taxed at 10% of land value. This suggests an LVT of $125,000. If the general trend of all residential real estate follows this government raises only 2.688 trillion dollars from residential property. To fund federal government we'd have to raise another 1.362 trillion and then we'd have additional amounts to raise for each other level of government. I'm not certain whether we can do this from the additional amounts on commercial and industrial property but it seems to be a close approximation.

The point is the funds leave very little left for the citizen's dividend unless we want to vastly reduce existing government programs.

[yellowapple]

Sorry for the late reply.

> Most of the people you're taxing in a land value tax are residential uses.

You're forgetting the sheer quantities of land (and land value) consumed by commercial and industrial use; this land, too, would be taxed. Such land is arguably far greater (in terms of value) than most residential land; consider every office building, every factory, every warehouse, every store, every parking lot/garage, every mine, every farm, and you'd see how that 1.362 trillion (and then some!) would be possible.

Another factor here is ATCOR (All Taxes Come Out of Rent), the idea that since non-LVT taxes suppress economic activity (because they tax things with elastic supply, artificially raising their prices), replacing all taxes with LVT would remove that suppression, spurring greater demand for land and therefore higher land values (and therefore higher LVT revenues). Basically: we're already taxing land indirectly and less efficiently, so we might as well just tax land directly.

Further:

> The point is the funds leave very little left for the citizen's dividend unless we want to vastly reduce existing government programs.

Which is very possible. A citizens' dividend, like any other sort of UBI, makes a lot of existing welfare programs redundant. Most Georgists/geolibertarians (myself included) frown upon the insane amounts of "defense" spending here in the US, so that'd be another thing we'd push to cut.

[Aunche]

I think to start with, we can end prop 13 and fix whatever loopholes that allow billionaire's row penthouses to be taxed a lower rate than regular apartments.

[geocon]

Yeah there are lots of small reforms that can be done: transitioning property taxes to land value taxes, ending property tax caps like prop 13 that just allow landowners to extract rents, putting in place land value capture for public transit, and so forth

[TimPC]

Can you make a strong case for transitioning just property taxes to land value taxes without transitioning other forms of taxation? I'd argue that this would result in a fairly sizeable wealth transfer from homeowners to condo developers. To me it feels like the decrease in sales and income taxes underpins the whole structure to make it feasible for the average American.

[geocon]

I think you have a mistaken view of who is actually making money in this equation. Developers do not make all that much money from building housing, which is actually a productive contribution to society. Homeowners, on the other hand, make hand over fist by simply sitting on land absorbing rents: https://pbs.twimg.com/media/EyJN_g3UUAIW0f0?format=jpg&name=...

https://www.wsj.com/articles/homes-earned-more-for-owners-th...

[TimPC]

There are a number of big developers in my province most of which have generated substantial returns to their investors. In the current environment where property values are high and increasing holding onto land is quite profitable. All developers do this. They also create proposals to develop land and that activity has some returns to it as well. I agree that building housing is productive, I just see large numbers of proposals and projects in my region to the point that many stakeholders in the community want to see less development not more. Economic theory says developers are making enough money to continue to propose developments so I don't see why we need to change taxation laws to make those developers generate even higher returns at the expense of homeowners. Property tax in my region is a sizeable expense for many homeowners and seeing it undergo a sizeable increase would be a hardship for many in the community.

[bombcar]

I think the argument is to switch it so things remain the same at first - 10% tax on 100k land is the same as 1% tax on 1m land+improvements. Coincide with an appropriate drop in income taxes and you could get something.

The key would be people agreeing in principle and then boiling the frog over a hundred years.

[imtringued]

It's a tough nut to crack. It only worked in Singapore. In my opinion the "homeopathic" land value tax in Baden-Württemberg is the only thing in recent history that was adopted without much violence or urgency.

The German property tax is very low, well under $1k for the vast majority of the country so the switch isn't that big of a deal but it also won't have much of an effect on anything other than abandoned buildings/land in city centers.

You gotta start small.