Georgism is very interesting but how would its principles help a city like Detroit where there is almost free land begging for developers? From a Georgism perspective, the land would be taxed as being worthless and still the developers won't line up because so very few want to live or do business there.
While land in Detroit is cheap, it's still certainly worth quite a bit of money compared to say, cattle land in Wyoming. The major benefits in this case would come from incentivizing more people to sell their land to developers, from removing penalties to development imposed by other taxes (like property taxes), and by creating a value capture mechanism for the City of Detroit- value capture meaning direct returns on infrastructure investments, which have the immediate effect of increasing land values significantly wherever they are done. Normally this actually impedes infrastructure creation, by making it more expensive to build, but with LVT infrastructure directly increases city tax revenue instead of fattening landowners' wallets.
I suppose then in theory LVT would allow the reduction of other taxes thus providing more disposable income for wage earners. However, how does LVT actually create wealth? To me wealth creation is good; however, the problem is that too few people benefit from wealth creation. Taxes can redistribute wealth, but government taxation may at best encourage wealth creation while not actually creating wealth.
In two ways: by reducing speculation (see that feature image!) and by removing the deadweight loss of existing taxes. Speculation in land checks economic activity by holding productive land either out of use, or in very subpar uses- think a large parking lot in the middle of a commercial center. The speculator does not care to risk capital in a productive venture, so he buys the parking lot, makes a few dollars on the side from parking charges, and then sells the lot ten years later for 150% the original price. Many slums are this kind of speculation- they would make much more money if they were cleaned, maintained, and updated, but it is easy enough to hold them in subpar use and then sell them off later. An LVT makes this very difficult by charging the same amount of tax no matter what the land is used for, prompting people to develop rather than sit and face holding costs.
The other major gain comes from eliminating the economic inefficiencies caused by other taxes, called deadweight loss. Whatever you tax you get less of- tax buildings, fewer buildings are built; tax sales, less is sold, and so forth. An LVT is perfectly efficient, because the supply of land is fixed. Moving from taxes on labor and capital to taxes on land means that all of these inefficiencies disappear and this boosts growth rates.
How is land valued in a changing environment? For example, South Carolina, where I now live, has undergone rapid development and industrialization over the last 25 years. Land once farmed (or government owned) is now large industrial sites or housing developments. A farmer may take an opportunity to sell farm land to a developer; however, taxing that land because of development opportunity could force the land out of farming prematurely and into the hands of speculators. A farmer farming 40 acres alongside Interstate 26 in South Carolina is different than a parking lot owner with a prime parcel in downtown Chicago although both may eventually sell at a large profit.
Well, the best answer I can give you is that it depends on how the jurisdiction putting in place the policy decides to implement it! The key here is frequency of assessments- the more frequent the assessments are completed, the better the land value capture will be. There are lots of different methods of assessments which are quite accurate; I can't go into them all here, but Lars Doucet has written an excellent post on the subject: https://gameofrent.com/content/can-land-be-accurately-assessed
By the theory expounded here, how did we ever get from the Gilded Age of fabulously-wealthy landowners and starving proletariats to today's affluent society?
This is a very good question! I would consider there to be two basic reasons. The first is the advent of the welfare state, which has ameliorated the very worst effects of landlordism without getting to the root cause of most poverty. The welfare state is actually largely funded by taxing land values, just very indirectly. Most taxes eventually are incident on land. You can understand this by imagining two identical cities, one with a 50% income tax and the other with no income tax- the city with no income tax will have higher land values, even if they are otherwise the same in every way. However, because these taxes go through labor and capital rather than being levied on the land directly, they are extremely inefficient- we could revolutionize our economy by simply placing them on the land directly, spurring huge gains in productivity and economic growth.
The second factor, which is not really replicable, is the automobile revolution, which opened up a new frontier of cheap and accessible land outside of cities. The postwar economic boom was fueled by this new frontier, where families could move to acquire land and invest at low expense. However, the US has long since run out of available land for new suburbias, and housing costs have suffered accordingly. That is part of why, in my opinion, Georgism is again rising to salience; the automobile boom could alleviate the worst of the economic pressures, but it didn't change the fundamental dynamic of private land monopoly.
Prop 13 would probably need to be repealed in order to pass such a reform, unfortunately. California has certainly managed to implement a revived feudalism very effectively there.
Yes, it angers me that California is ground zero for “anti racist” policy bullshit and even an investigation into California’s racist past and we have property laws that established feudalism just barely after civil rights laws were passed. Yet I hear nothing about the racial injustice of prop 13. Crickets.
"A modern LVT would replace inefficient sales, property, income, and capital gains taxes, eliminating the penalties that the state levies on people who create a successful business or build a home."
Not even close to true.
It should be obvious, but the numbers don't add up. The total value of all land in the US is roughly equal to US GDP. A 3% tax would yield (roughly) 3% of GDP. Social security and Medicare are roughly 8% of GDP. Of course, there is also defense, interest on the national debt, transportation, etc.
So the whole underlying premise of Georgism is that the purpose of land is to be exploited and taxed? And the writer proposes this as a model for us to emulate in today's world whose very survival is threatened by the results of hundreds of years of man's thoughtless environmental exploitation? Can one be any more out of touch than that?
Quite the opposite. The premise is not that land exists to be exploited and taxed, but that the free gifts of nature are the common property of man. The tax is just the method by which that benefit is distributed. The environmentalist implications of Georgist thought are something I would have liked to include in the article, but for limitations of space was not able to accomplish.
The environment is an intrinsic part of the commons, and no one can damage it without harming all of us. Currently, many industries are essentially subsidized by environmental destruction: they reduce production costs by polluting, the penalty of which is born by everyone, in order to sell their products cheaper. Georgists advocate for what in the environmental movement are called ecotaxes, in which the costs of pollution must be paid to the public. This both prevents businesses from destroying the commons for personal gain, and provides funds with which to reclaim and rejuvenate the environment.
As for the ecological effects of land value taxes themselves, LVT is very environmentally friendly. It reduces development footprint by combatting sprawl, the major factor in environmental destruction, through pushing land use into a smaller area which is developed more intensely. It's also highly ecologically beneficial for farmland, because it incentivizes a shift from labor-efficient but land-wasteful and soil-destructive mass monoculture to land-efficient and labor intensive small permaculture.
Georgism is very interesting but how would its principles help a city like Detroit where there is almost free land begging for developers? From a Georgism perspective, the land would be taxed as being worthless and still the developers won't line up because so very few want to live or do business there.
While land in Detroit is cheap, it's still certainly worth quite a bit of money compared to say, cattle land in Wyoming. The major benefits in this case would come from incentivizing more people to sell their land to developers, from removing penalties to development imposed by other taxes (like property taxes), and by creating a value capture mechanism for the City of Detroit- value capture meaning direct returns on infrastructure investments, which have the immediate effect of increasing land values significantly wherever they are done. Normally this actually impedes infrastructure creation, by making it more expensive to build, but with LVT infrastructure directly increases city tax revenue instead of fattening landowners' wallets.
The Lincoln Institute of Land Policy actually already released a report on the effects and benefits of a partial LVT implementation in Detroit based on data from cities in similar situations in PA- I recommend checking it out if you are interested: https://www.lincolninst.edu/publications/other/split-rate-property-taxation-in-detroit
I suppose then in theory LVT would allow the reduction of other taxes thus providing more disposable income for wage earners. However, how does LVT actually create wealth? To me wealth creation is good; however, the problem is that too few people benefit from wealth creation. Taxes can redistribute wealth, but government taxation may at best encourage wealth creation while not actually creating wealth.
In two ways: by reducing speculation (see that feature image!) and by removing the deadweight loss of existing taxes. Speculation in land checks economic activity by holding productive land either out of use, or in very subpar uses- think a large parking lot in the middle of a commercial center. The speculator does not care to risk capital in a productive venture, so he buys the parking lot, makes a few dollars on the side from parking charges, and then sells the lot ten years later for 150% the original price. Many slums are this kind of speculation- they would make much more money if they were cleaned, maintained, and updated, but it is easy enough to hold them in subpar use and then sell them off later. An LVT makes this very difficult by charging the same amount of tax no matter what the land is used for, prompting people to develop rather than sit and face holding costs.
The other major gain comes from eliminating the economic inefficiencies caused by other taxes, called deadweight loss. Whatever you tax you get less of- tax buildings, fewer buildings are built; tax sales, less is sold, and so forth. An LVT is perfectly efficient, because the supply of land is fixed. Moving from taxes on labor and capital to taxes on land means that all of these inefficiencies disappear and this boosts growth rates.
How is land valued in a changing environment? For example, South Carolina, where I now live, has undergone rapid development and industrialization over the last 25 years. Land once farmed (or government owned) is now large industrial sites or housing developments. A farmer may take an opportunity to sell farm land to a developer; however, taxing that land because of development opportunity could force the land out of farming prematurely and into the hands of speculators. A farmer farming 40 acres alongside Interstate 26 in South Carolina is different than a parking lot owner with a prime parcel in downtown Chicago although both may eventually sell at a large profit.
Well, the best answer I can give you is that it depends on how the jurisdiction putting in place the policy decides to implement it! The key here is frequency of assessments- the more frequent the assessments are completed, the better the land value capture will be. There are lots of different methods of assessments which are quite accurate; I can't go into them all here, but Lars Doucet has written an excellent post on the subject: https://gameofrent.com/content/can-land-be-accurately-assessed
By the theory expounded here, how did we ever get from the Gilded Age of fabulously-wealthy landowners and starving proletariats to today's affluent society?
This is a very good question! I would consider there to be two basic reasons. The first is the advent of the welfare state, which has ameliorated the very worst effects of landlordism without getting to the root cause of most poverty. The welfare state is actually largely funded by taxing land values, just very indirectly. Most taxes eventually are incident on land. You can understand this by imagining two identical cities, one with a 50% income tax and the other with no income tax- the city with no income tax will have higher land values, even if they are otherwise the same in every way. However, because these taxes go through labor and capital rather than being levied on the land directly, they are extremely inefficient- we could revolutionize our economy by simply placing them on the land directly, spurring huge gains in productivity and economic growth.
The second factor, which is not really replicable, is the automobile revolution, which opened up a new frontier of cheap and accessible land outside of cities. The postwar economic boom was fueled by this new frontier, where families could move to acquire land and invest at low expense. However, the US has long since run out of available land for new suburbias, and housing costs have suffered accordingly. That is part of why, in my opinion, Georgism is again rising to salience; the automobile boom could alleviate the worst of the economic pressures, but it didn't change the fundamental dynamic of private land monopoly.
And how will this affect prop 13? The landed gentry in California would like to know.
Prop 13 would probably need to be repealed in order to pass such a reform, unfortunately. California has certainly managed to implement a revived feudalism very effectively there.
Yes, it angers me that California is ground zero for “anti racist” policy bullshit and even an investigation into California’s racist past and we have property laws that established feudalism just barely after civil rights laws were passed. Yet I hear nothing about the racial injustice of prop 13. Crickets.
"A modern LVT would replace inefficient sales, property, income, and capital gains taxes, eliminating the penalties that the state levies on people who create a successful business or build a home."
Not even close to true.
It should be obvious, but the numbers don't add up. The total value of all land in the US is roughly equal to US GDP. A 3% tax would yield (roughly) 3% of GDP. Social security and Medicare are roughly 8% of GDP. Of course, there is also defense, interest on the national debt, transportation, etc.
So the whole underlying premise of Georgism is that the purpose of land is to be exploited and taxed? And the writer proposes this as a model for us to emulate in today's world whose very survival is threatened by the results of hundreds of years of man's thoughtless environmental exploitation? Can one be any more out of touch than that?
Quite the opposite. The premise is not that land exists to be exploited and taxed, but that the free gifts of nature are the common property of man. The tax is just the method by which that benefit is distributed. The environmentalist implications of Georgist thought are something I would have liked to include in the article, but for limitations of space was not able to accomplish.
The environment is an intrinsic part of the commons, and no one can damage it without harming all of us. Currently, many industries are essentially subsidized by environmental destruction: they reduce production costs by polluting, the penalty of which is born by everyone, in order to sell their products cheaper. Georgists advocate for what in the environmental movement are called ecotaxes, in which the costs of pollution must be paid to the public. This both prevents businesses from destroying the commons for personal gain, and provides funds with which to reclaim and rejuvenate the environment.
As for the ecological effects of land value taxes themselves, LVT is very environmentally friendly. It reduces development footprint by combatting sprawl, the major factor in environmental destruction, through pushing land use into a smaller area which is developed more intensely. It's also highly ecologically beneficial for farmland, because it incentivizes a shift from labor-efficient but land-wasteful and soil-destructive mass monoculture to land-efficient and labor intensive small permaculture.