This is actually what makes land special compared to almost every other good. The supply of land is perfectly inelastic, i.e., you cannot create nor destroy land
Don’t say that to the Netherlands lol (they’ve created an entire province from the sea)
while the demand for land is merely regularly inelastic. If land prices are high, people can do things like move back in with their parents, move in with roommates, sell their car to not need to pay for parking (parking takes up land), etc. Because the supply is perfectly inelastic and the demand not perfectly inelastic is why, in theory, land value taxes cannot be passed on to tenants. This is borne out in practice, as well. This site describes far better than I can about the empirical evidence for this: gameofrent.com/…/can-lvt-be-passed-on-to-tenants.
This does sound very intriguing, and I think you (and your source!) are right. The tenants / property owners are already applying the highest possible prices on their renters, and can therefore not afford to increase prices (because it leads to customer loss). Simultaneously, the property owners can’t afford to NOT have any renters, because they will lose money. (This only applies if the LVT is higher than the increase of their land’s value). This therefore ensures that the land owner will have affordable prices :D.
I’d be hesitant towards some of these because capital investments are still productive.
All capital investments? If I buy Apple stock from you, I wait for the market price to increase and then sell it again. What have I contributed by doing this? I have not invested directly into a company (I bought the share from you, not from Apple itself) nor have I solved world hunger. I simply spent money, waited a bit and then earned more money. I feel like these kind of useless profits should be taxed; additionally, any dividend should be taxed as well, because in an ideal world, the profits would be invested back into the company, which leads to more innovation and an increase in wages.
One example of a capital investment is my education. My degrees cost quite a bit of time and money and opportunity cost, and the higher wages I now earn because of my higher labor productivity are the reward for spending time and money and forgoing income investing in my own education.
I think you’re talking about (human capital)[en.wikipedia.org/wiki/Human_capital], and I agree with this. This is also the reason why public education is free (despite being quite expensive). Additionally, I feel like all student loans should be with 0% interest, for this specific reason.
As a general principle, I think people ought to either be doing productive labor themselves, or at least investing their money into generating new wealth.
Do people always have to generate more wealth? Can’t they just be content with having some wealth and live happily ever after with their wealth, without the perpetuating need to create more? I feel like this is the kind of mindset billionaires have; when they have 100 billion dollars, they aren’t satisfied, because they could have 101 billion dollars. And when they got 101 billion, they’ll go for the 102 billion, etc.
I’d rather see investments in factories and education than in land speculation. My inclination would generally be to tax land, externalities, and severance first, and then see if more is necessary beyond that.
What other things wuold you tax besides land, negative external effects and severances?
Part of why is, as Stiglitz showed, LVT is the only tax necessary to fund all government expenditures, and LVT is a uniquely elegant tax: it’s basically impossible to evade, remarkably easy to calculate and administer, and requires only tracking who owns what land (something we already do) as opposed to tracking every single individual’s private financials (much more complex and invasive, imo).
I just spent some time thinking on how to evade land taxes, and I can’t think of anything. However, I’m pretty sure that somewhere out there, there’s a genius tax evader who will think of some way to cheat their way out of paying taxes; even the land value taxes.
In a perfect world, yes, all externalities would be taxed, but practically it would be incredibly hard to tax all. Like I’m sure the engagement-driven algorithms of most mainstream social media have some bad externalities, but those are extremely hard to quantify and tax without having unintended side effect. Carbon is easier to quantify and tax, however, Same with nitrogen fertilizers (nitrogen pollution), PFAS pollutants, plastic pollution, etc. Regarding addictive behaviors/substances like tobacco and sugar, I probably would want a Pigouvian tax on them. However, the addictive nature of them means that more complex policy would likely be necessary to actually dissuade smoking. An added sugars tax might be a good way to combat the epidemic of adding sugars (in all their forms) to anything and everything. Part of the reason manufacturers add them is because they’re a dirt cheap way to easily make junk food taste better to the average person.
It may be difficult, but with enough bureaucracy and a functioning IRS, it should be possible. But besides that, I guess you have a point there and to combat addictive behaviors, people will certainly need more than a new tax policy.
Yes, this would be borne out in significantly higher prices paid at the pump for their fuel. It would, however, incentivize people to find more carbon-efficient ways to live their lives. Car-dependent suburban sprawl is both environmentally and fiscally unsustainable as it is, and our economy would be improved by using more micromobility, walking, and transit. Of course, a big part of enabling this would be by abolishing restrictive zoning and parking minimums. At least in North America, it’s literally illegal to build dense, walkable, mixed-use neighborhoods on the vast majority of urban land, and nearly every single city has outdated, pseudoscientific parking minimum laws that dictate arbitrary minimum amounts of parking for businesses and housing. If we simply made it actually legal to make denser communities, people simply wouldn’t need an expensive, polluting car and tons of city real estate wasted on car storage just to do things like get groceries or go to school/work. Also considering the average annual cost of car ownership (including depreciation) is something like $10k, car-dependency creates a huge barrier to entry for people trying to access good jobs and schools to escape poverty.
You’re right; the infrastructure in the US is very car-based, which is unfortunate. In Europe (where I live), we can walk from place to place and the public transport is generally sufficient to move around (at least, for me). However, to make the switch from car-dependent infrastructure to dense, walkable infrastructure does cost a lot of money and how would that be financed? Could everything be financed by the LVT, pigouvian and severance taxes? Also, to add to your idea, I think more comprehensive and free public transport would also be a huge way to convince people to use a train instead of a car. Also add more bicycle lanes as well, for the shorter distances (< 20km).
Yes, but it depends on the goods. Land value taxes (and lifting onerous land use regulations like parking minimums and exclusionary zoning) have been shown to reduce stabilize and reduce housing costs. LVT by incentivizing more development and cooling speculative pressure on land prices and the others by allowing more supply to be, well, supplied. Reducing land prices can vastly reduce the barriers to entry for many businesses, who could help increase overall supply in other sectors of the economy. Plus, if overall purchasing power goes up, who’s to say supply for ordinary goods won’t go up as well? In the short term there may be an adjustment period, but it’s not like I’d recommend switching to all LVT, no income taxes overnight; I’d want a phase-in period to give society time to adjust and plan around the coming changes.
I’ve spent 10min staring at this, to come up with something that can debunk this, but I can’t come up with anything hahaha. I think you’re right here, yeah.
While replying to this comment, I came up with another thing: What if someone, who owns a house and lives in it, becomes unemployed? I mean, every landowner will have to pay land value taxes, and I assume these taxes won’t be temporarily cancelled. If someone suddenly becomes unemployed (maybe a recession or an accident which resulted in a lost limb?), they won’t have a stable income anymore and if they don’t have any saved money, they will be unable to pay LVT. What’s going to happen in this situation? While the LVT certainly does have advantages to distribute wealth more equally across society, this does seem like a problem for the poor, right? I mean, a rich person has plenty of saved money and will be able to pay LVT, but a poor person doesn’t.
Something else that came to mind was when will the LVT be paid? Is it paid annually, monthly, or is it paid when the landowner dies? If it’s paid annually or monthly, then it could be very hard for poor people with small plots of land to pay the LVT. Also, what kind of percentage of the land value would the tax be? 10%? 20%?
P.S. I love this interaction lol, because it forces me to think about economics and market mechanics, which is always pretty interesting to analyze and think about. Thank you for this :D