The economic ideas of Henry George

[Angel of Death]

It seems that if anyone got close to reconciling the aims of the economic Left and Right, it was this guy.
The classic mistake that is made all over the known political spectrum is to conflate natural resources (called "land" in economics) and human labor as well as their resulting income, respectively rent and wages.
If one were to only and fully tax the rent of the land, then we might get the advantage that on one hand, efficient production isn't penalized through taxes, while on the other hand, no one would be at an advantage simply by owning land.

http://www.henrygeorge.org/rent1.htm
http://members.aol.com/_ht_a/tma68/geolib.htm

[Beet]

A wealth tax? That is the most abhorrent thing to the Right possible.

[A18]

A land tax is not the same thing as a wealth tax.

You get taxed only on the value of the land itself, not what you place on it. And even if it was the latter, it wouldn't amount to a wealth tax, just a property tax.

[Beet]

A land tax is not the same thing as a wealth tax.

You get taxed only on the value of the land itself, not what you place on it. And even if it was the latter, it wouldn't amount to a wealth tax, just a property tax.

A property tax is a form of wealth tax, and so is a land tax, since they are both wealth. Just like a cigarette tax is a form of consumption tax even though it doesn't tax all consumption.

[A18]

Oh okay, I see what you mean.

[migrendel]

The central idea of Progress and Poverty might have been mildly effective at its birth, but even then, the old economic order of land-based wealth was being replaced with one based upon more diverse financial holdings. Today, I think the single tax would fall hardly on middle-class people who hold most of their wealth in equity but would scarcely affect those who hoarde more than their correct share of the wealth.

[Beet]

The central idea of Progress and Poverty might have been mildly effective at its birth, but even then, the old economic order of land-based wealth was being replaced with one based upon more diverse financial holdings. Today, I think the single tax would fall hardly on middle-class people who hold most of their wealth in equity but would scarcely affect those who hoarde more than their correct share of the wealth.

Yep, it would fall mostly on the middle class and families.

[Angel of Death]

Can you back this up? After all, improvements on land including housing wouldn't be taxed.

[muon2]

Can you back this up? After all, improvements on land including housing wouldn't be taxed.

Consider a municipality consisting of businesses sitting on 2 acres with buildings assessed at 8 M$ and modest residential areas on the another 2 acres assessed 2 M$. The residents are middle-class families and senior citizens. The numbers approximate real values on a couple of adjacent blocks in an older section of my city.

A typical property tax would place 80% of the burden on business and 20% on the residents. A pure land tax would place the burden equal on both the businesses and residents. The residents would clearly bear more of the burden, without the benefit of additional rent to compensate for the taxable value.

Retirees on fixed income would be hard-pressed to support the taxes from any property they acquired in previous years. The larger the resident's yard, the greater their share of the burden. A tax like this would tend to encourage very small yards and high-density development. Open space would be a costly luxury.

[Angel of Death]

The land tax is not just proportional to the area; externalities can affect the rental value, so I don't understand what you're getting at.
See http://www.henrygeorge.org/rent6.htm and onwards and notice how land can have a different value depending on how productive the direct surroundings are. In your example, land with businesses would be expensive, residential land would be less expensive and unproductive open space would be cheap.

[A18]

Business operations shouldn't be taxed, since obviously the cost of business just gets passed on to consumers and/or employees.

[Angel of Death]

Business operations shouldn't be taxed, since obviously the cost of business just gets passed on to consumers and/or employees.

Why are you misrepresenting the issue? It it too subtle for you? "Business operations" as such wouldn't be taxed, only the land on which it takes place (of which the rental value may be subject to changes as the result of its strategic location).

[muon2]

The land tax is not just proportional to the area; externalities can affect the rental value, so I don't understand what you're getting at.
See http://www.henrygeorge.org/rent6.htm and onwards and notice how land can have a different value depending on how productive the direct surroundings are. In your example, land with businesses would be expensive, residential land would be less expensive and unproductive open space would be cheap.

I specifically took an example from real data on adjacent blocks. Both blocks have identical surroundings, including nearby uses, traffic, age of infrastructure ... . If the claim is to the use of the land itself, for example, the zoning classification, then there would be some difference, but not enough to change my conclusions. If we start looking at the use on the land, then that is exactly what current property tax assessment does.

[Angel of Death]

Both blocks have identical surroundings

But they do NOT have identical surroundings exactly by virtue of the fact that you're surrounded by businesses in one area and by normal housing in the other and this is what causes the difference in land assessment!

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That would be a kludge as it also take the improvements into account.

[muon2]

Both blocks have identical surroundings

But they do NOT have identical surroundings exactly by virtue of the fact that you're surrounded by businesses in one area and by normal housing in the other and this is what causes the difference in land assessment!

Neither area I selected is surrounded by the other, they are relatively small compared to the developed areas that surround both of them.

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That would be a kludge as it also take the improvements into account.
[/quote]

So then I return to my original question. If the surroundings are the same, and use on the property doesn't count, what can differentiate the land other than its area?

[Angel of Death]

I think I understand what you're getting at. The way I see it, whoever is assessing the land would have to be free to divide the area up in any possible way such that the total price a total group of buyers is willing to pay for access to each respective subarea is maximized. This, I believe, would in turn allow one to find out the price per area on every point of land. Imagine, if you will, a continuous function which takes two coordinate parameters as input and returns the price per area for that point.

[muon2]

I think I understand what you're getting at. The way I see it, whoever is assessing the land would have to be free to divide the area up in any possible way such that the total price a total group of buyers is willing to pay for access to each respective subarea is maximized. This, I believe, would in turn allow one to find out the price per area on every point of land. Imagine, if you will, a continuous function which takes two coordinate parameters as input and returns the price per area for that point.

If we started with empty, undeveloped land then a reasonable function might be found. However, historical uses confuse the value of the underlying land, and lots have sharp boundaries. The result is a highly discontinuous function for any real area.

To make a sensible land-tax one needs users of the land who have high enough mobility to let market forces act in a reasonable time period. The problem is that many who use the land have constraints that are barriers to easy relocation. This applies to both commercial and residential users. I suspect that the time scale for efficient relocation is greater than the time scale associated for revaulation based on other market factors. The result is a tax system that fails to properly reflect fair value.

[Angel of Death]

The tax value could be fixed for a sufficiently long time period, say five or ten years, as long as it isn't too long such that it makes land speculation significantly lucrative.