The idea of land-value tax strongly reminds me of the often cited, and much maligned, so-called fiduciary duty to shareholders which CEOs and/or board members reportedly have. This duty creates, it is said, an incentive towards naked short-term greed, which is often described as a bad thing. Now, even though this duty is also usually derided as fictional, the argument, if this duty did exist, would be reasonable. But does not a LVT create the same incentives in landowners – in essence forcing landowners to always use the land in a way which extracts the maximum amount of money from it? Why then is a LVT a good thing while the duty thing would be bad (if it did exist)?
Note: I am making an analogy not with what fiduciary duty actually is, but instead with the idea of it which people usually argue against. People usually say that fiduciary duty creates and even enforces thoughtless short-term greed, and argue that is bad for society and also the company in the long run. Regardless of what fiduciary duty actually is in reality, how is then LVT any different from creating the same short-term enforced greed?
A LVT would tax a plot of land by what use it could theoretically be put to in order to make the most money. And this is evaluated individually for each plot of land, with no regard for what would actually happen in reality if every single plot of land would actually be put to use in the most money-making way. Would a LVT not force a monoculture of, say, only lofts, where previously each landowner might have opted to allow things like nightclubs or the occasional park or other forms of variation and whimsy? If you tax every land owner as if they have the maximum possible income, do you not essentially force every landowner to implement that way in order to acquire it?
The Georgist land tax taxed the unimproved value of the land. The tax remains the same whatever you build on it.
Sale price already nudges you to preserve, improve, or augment the value of the land.
So I think your concern either already would have happened, or if not, a Georgist land value tax makes it no more likely. Thanks for the opportunity to think this through this far; what am I missing?
The article seems to be a little loose with its terminology. It uses the term “land value tax”, but describes it the same as what you term a “Georgist land tax”. But then the article seems to imply that all efforts nationwide to implement a “land value tax” are good, which I doubt, since what people usually mean by “land value tax” is much closer to what I described, not what you wrote.
I don't see the difference between "land value tax" and "Georgist land tax". Surely they both exclude the value of improvements, and the tax that includes them is called "property tax"?
After some investigating, it seems that I was the one with the loose vocabulary. It seems that you are right and I was wrong in the use of the term “land-value tax”. What I argued against, and called “land-value tax”, should more properly be termed “real estate property tax”. I am sorry for the confusion.
I don't really buy the monoculture argument, for two reasons.
Firstly, the first nightclub to open in an area with demand for music and alcohol, or cafe with demand for coffee and croissants, is going to very profitable.
Secondly, most businesses rent. They rent from profit-seeking commercial landlords who charge them a market rate. A land value tax is loosely based on the same market rate, just not inclusive of improvements. To argue that commercial tenants will be charged more is to argue that commercial landlords are leaving money on the table, which I don't believe.
I believe that some things which are necessary for a healthy society are, are not, and cannot be made to be, profitable by themselves. Nightclubs was my guess as to what one of those things could be, parks was another. Other examples which are usually brought up are public transit and the postal service. These might never earn enough income to afford the space they take up in a city center, but it is still vital that they exist there.
> To argue that commercial tenants will be charged more is to argue that commercial landlords are leaving money on the table, which I don't believe.
Getting more money might involve tearing down and rebuilding (which is expensive) and forgoing income while the rebuilding is taking place. If one were cynical, one could assume that most landlords simply don’t have the capital on hand to do this, and/or can’t get rid of their current tenants easily enough. A more charitable view might be that the landlord likes having a nightclub where it is.
Hang on, what does loss-making public infrastructure paid for by taxes have to do with the taxation of the land it sits on? If the government already pays for railway stations and parks and post offices, why would it be a problem for the government to tax itself more?
I agree that there are things which have positive externalities that are not profitable in themselves. Those things already exist and the government pays for them using taxes.
> A more charitable view might be that the landlord likes having a nightclub where it is.
If the business owners were accepting below market rate because they wanted to keep a business there, then they're effectively spending money on charity. In that case, yes, raising taxes on them might cause them to give less. Suggesting that we leave the surplus value of land with landlords because they're going to use some of it on charitable giving, instead of to the government, is a coherent position.
I'm not sure I agree with it, though. I think a small fraction of landlords will give low rents to businesses they like, but most of them will just charge tenants close to market rate. I think in that case, I'd rather give most of the surplus value to governments instead.
> I'd rather give most of the surplus value to governments instead.
Sure. But are you arguing that all use of current buildings are already at their theoretical maximum profit limit, and therefore no real estate property tax could incentivize landlords to convert a building from a museum to, say, lofts? If so, I am doubtful, but I have no evidence to present against your position.
Note: My terminology was wrong: What I argued against, and called “land-value tax”, is more properly called “real estate property tax”. As the article did not advocate for this, my argument is irrelevant to the article, or possibly in agreement with it.
Note: I am making an analogy not with what fiduciary duty actually is, but instead with the idea of it which people usually argue against. People usually say that fiduciary duty creates and even enforces thoughtless short-term greed, and argue that is bad for society and also the company in the long run. Regardless of what fiduciary duty actually is in reality, how is then LVT any different from creating the same short-term enforced greed?
A LVT would tax a plot of land by what use it could theoretically be put to in order to make the most money. And this is evaluated individually for each plot of land, with no regard for what would actually happen in reality if every single plot of land would actually be put to use in the most money-making way. Would a LVT not force a monoculture of, say, only lofts, where previously each landowner might have opted to allow things like nightclubs or the occasional park or other forms of variation and whimsy? If you tax every land owner as if they have the maximum possible income, do you not essentially force every landowner to implement that way in order to acquire it?
(Adapted from texts originally written here:)
• https://news.ycombinator.com/item?id=25319095
• https://news.ycombinator.com/item?id=25324577
• https://news.ycombinator.com/item?id=25319594