[skybrian]

It seems like the idea is to increase property taxes so much that the land value is zero. However, the tax isn't zero. You are effectively paying rent, but to the government. In desirable areas like cities, the rent on the land may be quite high, because the land is desirable.

A Manhattan where the property owners pay huge taxes to the government (because that's what it would take the drive the land value to zero) would still be an extremely expensive place to own property. This might be a good way for the government to raise revenue, but it's not really a "cheap land" situation. It's one where the government is effectively the landlord and everyone pays high "rents" to the government.

It's plausible that such a scheme would lower the cost of living in some places when it's due to speculation, by popping the bubble. But it doesn't lower the cost of living when it's due to the fundamental value of owning property there.

[brightly-salty]

Yes, I agree with you on what will happen in big cities where the land value is already high. The idea is more that in the Montana's and the Kansas's - where they already give land away free to people who promise to build improvements - there will be even more of an economic incentive to move to underdeveloped states, giving more families economic opportunities, which will then cause network effects as more families move out, causing housing prices to fall in the big cities. Housing prices will become more equal across the nation, and vertical development will be incentivized over urban sprawl.

[skybrian]

If people move out of bigger cities to rural areas, why isn't that increasing sprawl? (That is, there is more low-density development in those places.)

To some extent this already happening. Many people moved out of the city during the pandemic. The people in desirable rural areas aren't necessarily happy about it. They are often upset about all the outsiders with more money moving in.

They probably wouldn't be very happy with their property taxes going up either? When there's increased demand for land in a certain town from newcomers, there should be higher land taxes for everyone according to Georgist theory, to keep the price of land zero.

[snidane]

Urban sprawl is an expansion of a single city as the land in its center rises. It applies to both small and large cities and it doesn't mean people moving from a larger city to a smaller one, unless the smaller city's area overlaps with commuting radius of the bigger city.

Under a georgist system there is no such thing as real estate speculation. Real estate there doesn't cost multiples of peoples' net worth and increase of land tax rate is hardly noticed because the base value of land is a number hovering close to zero. Price for land and tax rate in that system is just an allocation mechanism of geographical area to the most productive use, preventing hoarding. In other assets where hoarding is risky, since inventory can expire (groceries) or go bust (stocks, bonds), speculation by holding inventory is valuable because it provides liquidity to other market participants. Speculation in land is pointless The land is always there and will not run away. The speculators are just pocketing private taxes that otherwise government could've collected and reallocated elsewhere.

[skybrian]

Seems like if the increase in the tax rate is hardly noticeable then it isn't going to lower land prices very much? You'd need a hefty tax to make desirable locations not worth spending money on.

[brightly-salty]

Land prices decrease proportionally with the level of LVT implemented: 0% of today gives a 100% sales price; 25% LVT gives a 75% sales price; etc; 100% LVT as I propose gives a 0% sales price. Of course the prices increase in a particular transaction more than the exact amount if the buyer wants to live on the land for a long time, though.

[bombcar]

The theory goes that as those new rural communities develop the land value will begin to increase - which will in turn encourage densification to keep up.

We see this historically in frontier towns that had absolutely no limits on sprawl (as land on the outskirts was available to anyone willing to stead it) but still had city centers develop and usually to the construction limits of the time.

[skybrian]

"Encourage densification" is kind of bloodless, abstract language.

How does this mechanism work in concrete terms? My understanding is that Georgism advocates raising taxes on people with property in desirable locations. They decide they can't afford the taxes, so they sell to a developer, who tears down the house and builds a bigger building.

Another name for this process is "gentrification."

The difference is that with the way gentrification works currently, the developer pays the previous property owner lots of money, which isn't so bad. With Georgism, the previous property owner doesn't get anything, because the property tax is so high that the land isn't worth anything. It's similar to being a tenant in a rapidly gentrifying area where rents go up but there's no upside for you.

I guess if you're pro-density and don't own property, that might seem appealing, but this mechanism seems likely to be very unappealing to home owners.

[geocon]

Gentrification is a boogeyman- all gentrification means is that land has become more desirable to live on (that's why its value increases). That's good. We want to improve quality of life. If you follow the logic of gentrification to its end, we should be destroying improvements in vulnerable locations in order to keep them affordable. It is the rationality of the slumlord.

[imtringued]

People think gentrification is "evil" but they don't seem to think why people leave their old communities to begin with. By stopping gentrification you are unknowingly abandoning far more people by forcing them to stay in a bad area.

Gentrification is primarily a problem with the current system. I can easily imagine an economic system that decentralizes economic activity akin to Distributism which will make it easier to rebuild and improve run down communities without having to move somewhere else.

[imtringued]

>How does this mechanism work in concrete terms? My understanding is that Georgism advocates raising taxes on people with property in desirable locations. They decide they can't afford the taxes, so they sell to a developer, who tears down the house and builds a bigger building.

You have a 500m^2 plot of land. This plot pays $50k land value taxes. If one person lives on the land that person pays the full tax. If 10 people live on the property they each pay $5k taxes per year. If 50 live there then the tax is $1k.

Property taxes scale with the building so housing more people means higher taxes. That is being avoided by only taxing the land.

Alternatively, people hate taxes, they want to avoid paying taxes. If you want to avoid land value taxes, the only way to do that is to use less land more efficiently.