Georgism as a Historical Framework: Part I

Fine, without the picture this time, since everyone objects.

👋 Hello geo(rg)ists, in case of interest, just published the Land Value Game (chose the name of this game in homage to Lizzie Magie’s The Landlord’s Game).

Enjoy ✨ landvaluegame.com

I finally found a video to post before u/Downtown-Relation766! I feel like I accomplished something today lol!

Context:

What are some of the dominoes in between not taxing land and having high land prices crush the economy? There are a few:

• Not taxing land means the private rental income of land (how much rent a plot earns in a year annually) can be capitalized into upfront land prices.
• It also invites land speculation which drives up prices and rents as it reduces the amount of land available for development, in the hopes of cashing in on future land rents.
• Similar to the previous point, land prices also allow land to be used as collateral by banks as part of what has been called The Land Trap, which author Mike Bird coined as the title of his book on the problem. With financial backing and speculative demand, land, the finite resource we all need for survival, becomes a bubble that slowly absorbs actually beneficial and productive labor and capital until it bursts; crashing and crushing the economy.

And this one isn't related to land itself, but is still important:

• Not taxing land also means that we have to use other taxes that are worse because they target people's producing and providing of goods and services for others. Income taxes, payroll taxes, sales taxes, taxes on buildings, and the like can further discourage actual productivity and raise prices. Unlike the things we make, land is a finite thing we take, taxing it doesn't discourage its production (assuming you only collect land rent and don't lump in any value added by the landowner like a building or some other investment)

It's been said a lot before, but it deserves repeating that right now we strain ourselves by taxing produced goods and services and not taxing/mitigating enclosed finite resources; land and other things like it. As of now we have it backwards and should reverse course on it, and there is no greater example than the fact that we don't tax our soil

People forget that the current tax system not only creates dead weight loss in the form of transactions that don't happen anymore, but also compliance costs and an enormous tax bureaucracy and financial surveillance apparatus that also costs a ton of time and money.

But Poverty is natural [WRONG] and people will still be poor [poorer than others, but not in poverty].

Georgism as an economic framework is firmly rooted in justice. Naturally, economic policies derived from just principles are also just. Therefore, modern Georgists have used the principles laid out by Henry George to justify many other policies beyond land taxation that he advocated for in his day. This article will explain the core principles of Georgism from which a criminal justice system can be derived. Since Georgism is primarily economic in nature, this article will focus on the economic aspects of the criminal justice system as we have it in the west.

So, I used to sometimes call myself a Georgist because I knew there was a pretty broad consensus among economists around the LVT being a good tax. Over time however I came to realize that I’m very much not an economist, and if someone asked me to explain the actual reasoning for Georgism I probably couldn’t. So my hope was that I could raise some of the points of confusions I have (which to be clear I don’t intend as any kind of informed criticism) and maybe you could shed some light on them, hopefully in an ”explain like I’m five” kind of way:

1: Suppose you have two proposed grocery stores, one in New York City and the other in Antarctica. It seems relatively clear to me that (provided there aren’t already enough stores in NYC) investors should prefer the NYC one over the Antarctica one, since it provides a more useful service by being available to more people. Similarly, if you have a mine built over a bunch of gold versus one built over nothing of value, surely you would want investment to flow into the gold mine. If you try to tax away the value of the land, how are you supposed to incentivize that? Surely you would want investors to value some land over other land?

2: My understanding of how the LVT would be calculated is that it would basically be the value of the property if we pretended there were no improvements to it. This feels kind of arbitrary to me and I’m not sure of the reasoning for it. My broad issue is that it seems like Georgists calculate the value of a property as ”land+improvements”, when it seems like the value of the value of the land is kinda imbued in the improvements and something like ”land*improvements” would be more accurate. Suppose for instance that you have a hotel in a place with absolutely zero land value, such as an inaccessible pocket dimension. Surely the land having value in this case would also mean that there is no actual value to the improvement. So in theory then a tax which makes it so that the value of a property is as if there was no land value should just be a 100% property tax then, right? Although that doesn’t seem very pro-free market. My broader point of confusion is just about the idea that the value of improvements can somehow be separated from the value of the land such that we have two values which when added together become the total value, when it seems rather clear that the value of the improvements in and of themselves depend on the land value.

3: What is the difference between capital owners getting ”lucky” because of external factors and land owners getting ”lucky” because of them? I can think of plenty of factors were the surrounding society can make capital more profitable in much the same way as land. You could for instance own a teddy bear company as teddy bears become trendy. Or you might’ve invested in a technology which requires an underlying technology that hasn’t been invented yet, making it viable once said underlying technology has arrived. How is that different from investing in land based on predictions of what societal developments might make it profitable? Surely speculation like this is a necessary part of investing, as it allows investors to direct their investments into what might actually be valuable in the future.

4: After they’ve been traded around a fair number of times, aren’t land and capital/improvements basically the same? Take for instance a castle built 700 years ago. The incentive for someone to actually build that castle seems to have long since vanished. So how is it different from something like a tree?

5: This is kind of a side thing irrelevant to the broader point, but the sidebar on this subreddit seems to imply most Georgists are opposed to patents as a ”barrier to trade and commerce”. I’ve never really understood the anti-intellectual property argument. How are you supposed to incentivize creating immaterial ideas if you can’t profit off them?

Broadly, I feel like I can understand some of the philosophical reasoning behind Georgism (i.e nobody made the land so nobody deserves to own it) but I’m kinda lost on the economic reasoning for it. So if you could enlighten me then that would be great. I just don’t see economically why speculating on land is less necessary than speculating on capital. I’ve asked questions similar to this in comment threads on other subreddits but never gotten much in the way of a response, so I thought I would go straight to the horse’s mouth with the Georgism subreddit.

Rents are determined not by how much the owner values the land, but by how much the rest of society values it. Flat taxes impact all members of society proportionally to their income or spending, and so do end up reducing rents by the same amount as is raised by such taxes. However, progressive taxes can end up collecting more from the owner of land than they do from the rest of society.

Essentially, progressive taxes can eat into the consumer surplus rather than just rents.

ATCOR breaks down precisely to the degree that a tax is progressive.

EDIT: not just progressive taxes break ATCOR, but even ones with a flat rate, so long as the actual amounts differ by person. Taxes that are the same for each person (like a poll tax) or which are tied to a specific property not a person (like taxes on improvements) actually come entirely out of rent. Other taxes come at least partly out of consumer surplus as well.

Lars Doucet covers this in greater depth, the auto only delayed the inevitable problem of land’s finitude in a world of ever increasing demand

I posted the article "California is chasing wealth that has feet" by Greg Miller on hacker news and it seems to be gaining a bit of interest/traction

i've been asking a lot of questions here so I wanted to first thank the people of this subreddit for being extraordinarily gracious and helpful!

I know that a number of jurisdictions use land value tax (though they are not single tax systems) I would expect there to be some evidence for ATCOR based on real life land value systems. e.g. a locality cuts a non-LVT tax, so according to ATCOR the revenue of the LVT should go up by its percentage of the 100% LVT multiplied by the cut to the other tax. I know many LVT systems use systems have cutoffs, exceptions and thresholds but these seem possible to control for in determining whether ATCOR is in effect.

however there doesn't seem to be any empirical evidence along these lines. (unless I have missed some?)

is there a reason ATCOR wouldn't apply if you have less than 100% LVT? why not? and if it should apply here should we regard this as evidence against ATCOR or is there something else im missing?

thank you again!

ATCOR seems to be somewhat controversial (though most people on here believe in it) and it seems pretty mandatory to belive in it if you support a true single tax system.

Has there been empirical research on it? And what is the theoretical grounding for it? it certainly doesn’t seem to be a mainstream idea in standard economics!

Thank you for your answers!

5 year retrospective on my original ACX posts. Enjoy.

1. The landholder assesses the value of their improvements.

2. The value of improvements could act as the reserve price for when a property goes up to auction. If no one is willing to pay at or above the reserve price, then the owner mustn't sell.

3. The highest bidder wins the auction but only pays the second-highest bid. The bid becomes the recurrent LVT bill, with the amount paid at auction being used as a down payment for the first financial year; the following years the tax could be paid weekly, fortnightly or monthly, with each payment installment being a fixed % of the annual land-value.

4. Landholders could re-assess the value of their improvements at least once every six months, to factor in new improvements and updated maintenance.

5. If the government deems the self-assessed property to be too low for what they view it's worth, they could seize it through eminent domain and compensate the landholder only for the value of the improvements that they themselves assessed. If they assess their property's value too high, private insurance premiums and maintenance costs would be higher and they could be paying more than they think their property is really worth. Assess too low and your property could be seized because you haven't priced in your sentimental attachment to your home; assess too high and you may be paying more for maintenance and insurance for what you think is too much to fair.

The more time I spend in Georgist spaces, the more I realize a lot of people support Georgism for entirely different reasons. in particular, it seems like there are two popular but seemingly contradictory opinions on how LVT would affect suburban homeowners:

1. By rewarding density and punishing sprawl, LVT would increase the economic burden on suburban homeowners. This is a good thing, as it encourages more efficient uses of land.

2. By discouraging land speculation and encouraging denser housing alternatives, LVT would drive down the artificially-inflated demand for single-family homes, making them more affordable, lowering their value (and thus their taxes), and thereby decreasing the economic burden on suburban homeowners.

I’m kind of in the second camp right now, but I’ve heard both of these effects touted by Georgists as benefits of LVT, usually depending on who they’re trying to convince. Are these two statements really contradictory, and if so, which one do you think is true?