“Government will make better resource decisions than profit-motivated private entities”
I think you landed on the crux of it—under the Georgist model, individuals (or firms) still make the decisions about what to do with the resources. What the government does is set a singular huge incentive, strongly in the direction of “add value to the land.”
I don’t have an answer to this question, but I would register a prediction:
Georgism believers < communism believers
Georgism popularity > communism popularity
The latter is mostly because there are a bunch of people who really hate communism and will prefer almost literally anything else in a survey.
Georgist model, individuals (or firms) still make the decisions about what to do with the resources.
Kind of. They can only make decisions that generate enough income to pay the taxes, which are calculated as the theoretical value (maximum rent attainable by any use), not the actual choice.
That isn’t how the taxes are assessed, as a practical matter. The value of the land and the value of buildings are assessed, mostly using market data, and then the applied tax is the ratio of the land value to the property value, so for example in an apartment building that fraction is taxed out of the rent payments, and when a property is sold that fraction is taxed from the sale price.
I do notice that we don’t have any recent examples of the realistically-full land tax interacting with individual home ownership; everywhere we see it is treated the same as a regular property tax. While it seems reasonable to me that non-income-producing properties should not require regular payments and instead only be taxed at point of sale, this is an adaptation rather than a strict application of the theory.
They can only make decisions that generate enough income to pay the taxes
Out of curiosity, how is this different from current property taxes, or from mortgages for that matter?
They can only make decisions that generate enough income to pay the taxes
Out of curiosity, how is this different from current property taxes, or from mortgages for that matter?
Most of my objection (and confusion that it gets handwaved away so often) is NOT that the unimproved theoretical value of land could be taxed. It seems complex and unnecessary, but that’s not a unique problem with tax proposals.
My objection is to the core of the proposal that it’s taxed at extremely high levels, based on theoretical calculations rather than actual use value.
I have plenty of other concerns (like how it ACTUALLY works, for improved properties—do we split all deeds in two, one for the land and one for the improvements, and allow people to sell them separately? How does that work?), but they weren’t the crux of THIS discussion, and I suspect the answer is just “no—this is just regular property taxes, just calculated differently (and much higher), we still take the improvements if the tax is unpaid”.
My objection is to the core of the proposal that it’s taxed at extremely high levels, based on theoretical calculations rather than actual use value.
I’m a little confused by what the theoretical calculations are in your description. The way I understand it—which is scarcely authoritative but does not confuse me—is that we have several steps:
Theory: a lot of the value of a piece of property is not because of work done by the owner, but instead because of other people being nearby.
Theory: this is bad. We should remove all the value provided by other people who aren’t the owner.
Practical: we need to calculate what fraction of the value is provided just by other people.
Practical: we tax that fraction of the price, and of the income from the property.
Practical: we adjust the fraction to allow for measurement errors or whatever other consideration.
So my understanding is there are no calculations until you get to the practical considerations of applying the tax.
Your suspected answer is how current implementations of the system work, but they are also regular property taxes in the sense of being a very tiny fraction of the value which means the payments are manageable under normal circumstances, and don’t take aim at eliminating the economic rent.
Just scaling up property taxes the way they work now with the new values would be an epically bad move, in the same vein as the taxing unrealized capital gains at a high rate is.
The way I understand it, once we agree the focus is on the economic rent problem, we shift to taxing the sale price and the income from the property because these are how economic rents are captured, rather than an impossibly high annual payment. A homeowner doesn’t capture economic rent just by living on the property, as I see it.
So for myself I would not vote for a measure that just scaled up property taxes, but would vote for one that did the sale/revenue taxation.
[I have bad self-control, so my statements that I’m bowing out of this don’t seem to have stuck. Apologies.]
3. Practical: we need to calculate what fraction of the value is provided just by other people.
4. Practical: we tax that fraction of the price, and of the income from the property.
The theoretical calculation problem is in what you call “practical”. There’s no actual price signal or ground truth for that portion of the value. The use of the property combines land and improvement values in a way that’s idiosyncratic and inseparable. That calculation is going to be made up, and wildly inaccurate and unsupportable even in the ideal world where it’s not politically adjusted.
I’m not sure how to interpret
Your suspected answer is how current implementations of the system work, but
I know that. I don’t know how the proposal differs from “run it the same way, just with higher values framed as land-value tax”. If the amounts are low, it’s workable. If the amounts are high, it’s not. I don’t know if the proposal is to somehow separate the ownership of land and improvements, or if there’s something else that makes it practically different from “much higher normal property taxes”. If it’s NOT just using a land-value justification to raise the dollar amounts greatly, please educate me.
I acknowledge the bow-out intention, and I’ll just answer what look like the cruxy bits and then leave it.
There’s no actual price signal or ground truth for that portion of the value.
Fortunately we have solved this problem! Slightly simplified: what a vacant lot sells for is the land value, and how much more a developed lot next to it sells for is the value of the improvements. Using the prices from properties recently sold is how they usually calculate this.
If it’s NOT just using a land-value justification to raise the dollar amounts greatly, please educate me.
Let the record reflect that I totally expect someone to do this. But as for doing it in a non-insane fashion, we take what used to be a property tax and turn it into a sales tax, which is levied on sales of property.
There’s a good guest blog post over at AstralCodexTen which digs into the value assessment problem which I think you would like. That whole series of guest blog posts was fascinating.
Take what used to be a property tax and turn it into a sales tax, which is levied on sales of property.
This would alleviate a lot of my concerns. Sales taxes (on actual sales, as long as it’s not imputed or assumed-sale where no money is actually changing hands) have a ton of advantages, not least of which is that the money is ALWAYS there to pay the taxes. I suspect it won’t satisfy the Georgists, though, as it doesn’t capture appreciation in value if there’s no sale for decades or longer. Maybe—it does remove the incentive for empty-land speculation.
I think you landed on the crux of it—under the Georgist model, individuals (or firms) still make the decisions about what to do with the resources. What the government does is set a singular huge incentive, strongly in the direction of “add value to the land.”
I don’t have an answer to this question, but I would register a prediction:
Georgism believers < communism believers
Georgism popularity > communism popularity
The latter is mostly because there are a bunch of people who really hate communism and will prefer almost literally anything else in a survey.
Kind of. They can only make decisions that generate enough income to pay the taxes, which are calculated as the theoretical value (maximum rent attainable by any use), not the actual choice.
That isn’t how the taxes are assessed, as a practical matter. The value of the land and the value of buildings are assessed, mostly using market data, and then the applied tax is the ratio of the land value to the property value, so for example in an apartment building that fraction is taxed out of the rent payments, and when a property is sold that fraction is taxed from the sale price.
I do notice that we don’t have any recent examples of the realistically-full land tax interacting with individual home ownership; everywhere we see it is treated the same as a regular property tax. While it seems reasonable to me that non-income-producing properties should not require regular payments and instead only be taxed at point of sale, this is an adaptation rather than a strict application of the theory.
Out of curiosity, how is this different from current property taxes, or from mortgages for that matter?
Most of my objection (and confusion that it gets handwaved away so often) is NOT that the unimproved theoretical value of land could be taxed. It seems complex and unnecessary, but that’s not a unique problem with tax proposals.
My objection is to the core of the proposal that it’s taxed at extremely high levels, based on theoretical calculations rather than actual use value.
I have plenty of other concerns (like how it ACTUALLY works, for improved properties—do we split all deeds in two, one for the land and one for the improvements, and allow people to sell them separately? How does that work?), but they weren’t the crux of THIS discussion, and I suspect the answer is just “no—this is just regular property taxes, just calculated differently (and much higher), we still take the improvements if the tax is unpaid”.
I’m a little confused by what the theoretical calculations are in your description. The way I understand it—which is scarcely authoritative but does not confuse me—is that we have several steps:
Theory: a lot of the value of a piece of property is not because of work done by the owner, but instead because of other people being nearby.
Theory: this is bad. We should remove all the value provided by other people who aren’t the owner.
Practical: we need to calculate what fraction of the value is provided just by other people.
Practical: we tax that fraction of the price, and of the income from the property.
Practical: we adjust the fraction to allow for measurement errors or whatever other consideration.
So my understanding is there are no calculations until you get to the practical considerations of applying the tax.
Your suspected answer is how current implementations of the system work, but they are also regular property taxes in the sense of being a very tiny fraction of the value which means the payments are manageable under normal circumstances, and don’t take aim at eliminating the economic rent.
Just scaling up property taxes the way they work now with the new values would be an epically bad move, in the same vein as the taxing unrealized capital gains at a high rate is.
The way I understand it, once we agree the focus is on the economic rent problem, we shift to taxing the sale price and the income from the property because these are how economic rents are captured, rather than an impossibly high annual payment. A homeowner doesn’t capture economic rent just by living on the property, as I see it.
So for myself I would not vote for a measure that just scaled up property taxes, but would vote for one that did the sale/revenue taxation.
[I have bad self-control, so my statements that I’m bowing out of this don’t seem to have stuck. Apologies.]
The theoretical calculation problem is in what you call “practical”. There’s no actual price signal or ground truth for that portion of the value. The use of the property combines land and improvement values in a way that’s idiosyncratic and inseparable. That calculation is going to be made up, and wildly inaccurate and unsupportable even in the ideal world where it’s not politically adjusted.
I’m not sure how to interpret
I know that. I don’t know how the proposal differs from “run it the same way, just with higher values framed as land-value tax”. If the amounts are low, it’s workable. If the amounts are high, it’s not. I don’t know if the proposal is to somehow separate the ownership of land and improvements, or if there’s something else that makes it practically different from “much higher normal property taxes”. If it’s NOT just using a land-value justification to raise the dollar amounts greatly, please educate me.
I acknowledge the bow-out intention, and I’ll just answer what look like the cruxy bits and then leave it.
Fortunately we have solved this problem! Slightly simplified: what a vacant lot sells for is the land value, and how much more a developed lot next to it sells for is the value of the improvements. Using the prices from properties recently sold is how they usually calculate this.
Let the record reflect that I totally expect someone to do this. But as for doing it in a non-insane fashion, we take what used to be a property tax and turn it into a sales tax, which is levied on sales of property.
There’s a good guest blog post over at AstralCodexTen which digs into the value assessment problem which I think you would like. That whole series of guest blog posts was fascinating.
And with that, we’ll call it!
This would alleviate a lot of my concerns. Sales taxes (on actual sales, as long as it’s not imputed or assumed-sale where no money is actually changing hands) have a ton of advantages, not least of which is that the money is ALWAYS there to pay the taxes. I suspect it won’t satisfy the Georgists, though, as it doesn’t capture appreciation in value if there’s no sale for decades or longer. Maybe—it does remove the incentive for empty-land speculation.