It may be worth elaborating on how you think auctions work to mitigate the issues I’ve identified. If you are referring to either a Vickrey auction or a Harberger tax system, Bryan Caplan has provided arguments for why these proposals do not seem to solve the issue regarding the disincentive to discover new uses for land:
I can explain our argument with a simple example. Clever Georgists propose a regime where property owners self-assess the value of their property, subject to the constraint that owners must sell their property to anyone who offers that self-assessed value. Now suppose you own a vacant lot with oil underneath; the present value of the oil minus the cost of extraction equals $1M. How will you self-assess? As long as the value of your land is public information, you cannot safely self-assess at anything less than its full value of $1M. So you self-assess at $1M, pay the Georgist tax (say 99%), and pump the oil anyway, right?
There’s just one problem: While the Georgist tax has no effect on the incentive to pump discovered oil, it has a devastating effect on the incentive to discover oil in the first place. Suppose you could find a $1M well by spending $900k on exploration. With a 99% Georgist tax, your expected profits are negative $890k. (.01*$1M-$900k=-$890k)
I think Harberger taxes are inherently incompatible with Georgian taxes as Georgian taxes want to tax only the land and Harberger taxes inherently have to tax everything.
It’s common for Georgists to propose a near-100% tax on unimproved land. One can propose a smaller tax to mitigate these disincentives, but that simultaneously shrinks the revenue one would get from the tax, making the proposal less meaningful.
I’ve read/listened about LVT many times and I don’t remember “auctions are a key aspect of this” ever coming up. E.g. the four posts by Lars Doucet on ACX only mention the word twice, in one paragraph that doesn’t make that claim:
Land Price or Land Value is how much it costs to buy a piece of land. Full Market Value, however, is specifically the land price under “fair” and open market conditions. What are “unfair” conditions? I mean, your dad could sell you a valuable property for $1 as an obvious gift, but if he put it on the open market, it would go for much more than that. Likewise, it’s not uncommon for a property that’s been foreclosed on and hastily auctioned off to be re-listed publicly by the auction winner for a higher price.
Post does not include the word auction, which is a key aspect of how LVT works to not have some of these downsides.
It may be worth elaborating on how you think auctions work to mitigate the issues I’ve identified. If you are referring to either a Vickrey auction or a Harberger tax system, Bryan Caplan has provided arguments for why these proposals do not seem to solve the issue regarding the disincentive to discover new uses for land:
I think Harberger taxes are inherently incompatible with Georgian taxes as Georgian taxes want to tax only the land and Harberger taxes inherently have to tax everything.
That said see my somewhat maverickal attempt to combine them here: https://www.lesswrong.com/posts/MjBQ8S5tLNGLizACB/combining-the-best-of-georgian-and-harberger-taxes. Under that proposal we would deal with this case by saying that if anyone outbid me for the land they would not be allowed to extract the oil until the arranged a separate deal with me, but could use the land for any other purpose.
I am very confused why the tax is 99% in this example.
It’s common for Georgists to propose a near-100% tax on unimproved land. One can propose a smaller tax to mitigate these disincentives, but that simultaneously shrinks the revenue one would get from the tax, making the proposal less meaningful.
I’ve read/listened about LVT many times and I don’t remember “auctions are a key aspect of this” ever coming up. E.g. the four posts by Lars Doucet on ACX only mention the word twice, in one paragraph that doesn’t make that claim: