Thoughts on Land Value Taxation (LVT), Georgism, and "Good Greens"
I have recently been reading literature on Georgism. Georgists believe that everything an individual creates is their own personal property and the government has no right to take possession of it. Separating Georgists from anarchocapitalists, however, is the georgist belief that land cannot be truly owned, only "rented" from the community. As a result, georgist assert that all forms of taxation, whether they be on labor, capital, or improved property, are unjust. Taxation on the unimproved value of land, i.e. the value of a piece of land if there were no improvements on it, is taxable.
Georgists assert that this land-value tax (LVT) is merely rent paid back to the community. As a result of a tax on only a piece of property's land, the growth of communities will be natural (no urban sprawl), and wilderness will be preserved without the coercive power of government.
While reading up on georgism, I couldn't help but think about Ward Republicanism, a "Confederation of Confederacies", and Direct Democracy. I began to think about what could be achieved if local governments in a "confederation of confederacies" exercised a pure LVT, with 100% of tax revenue being raised from land and 0% from labor, capital, and improvements.
The fusion of ward republicanism and georgism also negates the primary criticism of georgism, which is that land values cannot be accurately valued and are arbitrary.
In a ward republic that practices total direct democracy, an accurate land value can be determined by a bidding process:
All citizens would enter an undisclosed bid on the per acre price of land in the ward, with the median bid being chosen as the land valuation price.
- Since land prices should be quite similar throughout the ward, the median bid should be very close to the true, self-assessed value of the land
- By picking the median bid, extreme bidders on either end of the spectrum will be marginalized. large landowners who wish to avoid paying taxes will be cancelled out by small landowners or renters who covet their neighbors' wealth
- For example, an agrarian community a low per acre valuation would be chosen, while a high valuation would be chosen in urban areas
- The valuation will remain in effect until a majority of the polis elects to re-cast bids; however, individual citizens can change their bid price every year, generating a new land value
After all bids are cast, the bid will be revealed. After the community is made aware of the land prices, citizens will again cast bids, this time to determine the tax rate, anywhere between 0% and 100%, with the median rate chosen. The rate will remain in effect until a majority of the polis elects to re-cast bids; however, individual citizens can change their bid price every year, generating a new tax rate.
If for some reason a rate too high or too low was chosen, the misappropriation of revenue will be reflected in dropping property values. As property values fall, citizens can elect to re-cast bids to lower their tax burden. If the ward limited its scope to basic record-keeping, sewage, water, etc., property values would rise accordingly.
Over time, however, land valuations and tax rates would fall:
- If land prices fall, citizens will move away; new owners will not want to pay the high yield (LVT/market land price) and will change their bid accordingly. If the government is mismanaged to a large enough extent and there is a severe drop in land prices, a majority of the polis will elect to lower their land valuation and/or tax rate
- If land prices rise, new citizens who buy in will enjoy their new, low tax yield; word of low tax yields will encourage further immigration into the community and even higher land prices. Current owners, if they are happy with the status quo, will leave values and rates unchanged.
Under a georgist system of taxation, market prices for property will act as a self-regulating mechanism for the local governing authority.
What surprised me most about my readings is the discovery that not all Greens are neo-pagan statists. On the contrary, some of them have a deep suspicion of government and a respect for individual rights to life, liberty, and property. Green opposition to government subsidization of urban sprawl and automobile-centric lifestyles and the state-sponsored destruction of rural agrarian life is no different than conservative opposition to government subsidization of illegal immigration and the state-sponsored destruction of the traditional family and religious life through cultural marxism.
10 comments:
the original articles of confederation were to be funded by a land value tax.
the original classical liberals (french physiocrats) wanted to shift all taxation onto land values.
Dupont was a good friend of Jefferson
see "l'impot unique"
http://www.angelfire.com/az/physiocrat/
BeGreener,
The Articles of Confederation DID NOT call for a LVT. Look at article VIII, section I:
"All charges of war, and all other expenses that shall be incurred for the common defense or general welfare, and allowed by the United States in Congress assembled, shall be defrayed out of a common treasury, which shall be supplied by the several States in proportion to the value of all land within each State, granted or surveyed for any person, as such land and the buildings and improvements thereon shall be estimated according to such mode as the United States in Congress assembled, shall from time to time direct and appoint."
So you see, they actually called for a traditional property tax. It may have been a 2-tiered tax, but it was still a property tax.
OK, granted that this is a new idea for me, and it definitely is, I'm a bit skeptical. First of all, land ownership is the easiest property ownership to define in the strictest sense, being that you can clearly set up boundaries and such to protect your land as well as enforce law on your land. If land and were treated as if it were "owned" by the community, then no one would have a direct stake in keeping it kept-up. You would end up with overgrazing and underproduction, IMO. On the other hand, it would be fascinating to see how this might possibly work, especially since revenues would be guaranteed. Second, how does this account for forms of rent other than land rent? Land rent is regarded as "economic rent" because (a) it is a factor of production and (b) it can be used for anything, thus the cost of using it is its opportunity cost. How, then, would this take into account the fact that pharmaceutical companies make economic rents, at least in the short run or that certain professional athletes make economic rents? I do like this kind of radical thinking, however, and I'll be sure to keep this blog in my bookmarks.
Drew, thanks for your comments.
You are absolutely correct in your assertion that land is the most easily divisible, and definable, form of property.
However, the land is not "owned" by the community. Each piece of land is owned by the individual owner, unless is is unowned vacant/abandoned/donated land (commons).
As a result, a "tragedy of the commons" scenario would not arise except perhaps on the common land, such as an unowned "park". But even with a park, the upkeep would be better than under current government-controlled private property. After all, if the park is kept in good condition the land values surrounding it will continue to increase.
I'm not sure what you're getting at with "economic rent". As far as the Pharma Company goes, they are "rent-seeking" in economic terms. Pharmas reap high short-to-medium term profits because of unjust intellectual property laws. How can you own an idea? What if cavemen patented fire? Or had a copyright on language?
In a free market, Pharmas would reap an even shorter profit window; with the absence of intellectual monopoly grants by the government, Pharmas would only see high profit margins for being the first to market, and would only retain those profits by reputation for safe, reliable products.
As far as the athlete goes, he does not earn "rent", but rather wages. Now, these wages may be artificially high due to Intellectual property laws as well, since the bulk of the income for the sports industry comes from TV and Radio. This phenomenon is even more pronounced for entertainers, who more directly benefit from an intellectual monopoly grant (Movie and TV stars in particular, as they don't do live performances).
Some Georgists believe that there should be common ownership over natural resources and the EM Specturm, but I do not disagree.
The first reason is that it would merely create a government to mismanage the resources.
Second, natural resource extraction can be taxed through the same land-rent system. Since property with natural resources on them tend to be far larger and undeveloped, they would pay a higher porportion of the tax; owners of developed property have far more residents on them, which makes their tax burden per capita much lower. Natural resource extractors would secede in most cases and decide to provide their own services.
The EM Spectrum shouldn't be managed by the community AT ALL; the market can delineate what frequencies are used and technological devlopments help prevent interference.
I think that the only issue to consider here is "can land be owned?"
If you say no, then the "community" has no right to the land and a larger entity can come and take rent payments from the community since the community cannot own the land.
So, the obvious conclusion is that land can be owned.
Furthermore, the money the "community" collects to purchase goods and services will distort market forces. It is no different from government intervention into the market.
Lastly, under anarcho-capitalism, "urban sprawlers" would not be subsidized by public roads and gasoline which does not reflect the cost of pollution cleanup. Urban sprawl would not be a problem under anarcho-capitalism.
OF course the "community" has no right to the land; The community would only collect voluntary rent payments from its citizens.
As stated, all members of the community would have to unanimously agree to pay a uniform rent rate to the community.
By giving rent payments, that asserts that the "community" owns the land.
No; It's no different than a Homeowner's association. Property owners are merely pooling resources to purchase community goods and services.
I entered the Georgist camp a few years ago, I guess I'm a left-leaning libertarian.
I don't see that the community has to own the land, or that land ownership is necessary to create wealth. There are two ways land can be useful - use it, or block others from accessing it and charge them money. It is the latter I am against, however, without the power of exclusion, we get the tragedy of the commons problem which reduces wealth creation in the long run.
I agree with the bidding model, it's the most accurate way to price people's value judgements. I just see the bid as being a return to the providers of benefits to your land (nice roads, etc.) and to simulate recovery of lost freedoms for those that are excluded (citizen's dividend).
Improvements done on the land should create a lien on it that depreciates over time. If a farmer tills the first foot of soil on a farm, it becomes wealth (labor mixed with land) and he needs to be compensated for that if someone else bids out the farm. However, his work on that first foot, doesn't give him the right to prevent others from getting minerals under it, nor capturing the locational value - this is why bidding for exclusion rights is the best way.
Thanks for the Comments GeoPorcupine.
Although I consider myself quite libertarian, I believe that an LVT can be levied in the current statist model to make public services far more efficient.
In most areas, property taxes (on land + structure) are assessed by the county based on market value. All that a county would have to do is subtract the value of all improvements to the property from the market value to determine the site location tax.
For example. let's say that the fair market value in a midwestern city is $200,000, and the replacement cost of the structure and all landscaping is $160,000. The taxable amount would then be $40,000.
The tax rate would be the amount of spending in the municipality divided by the total amount of taxable "site value". So if the county spend 1$10m and the total amount of taxable land was $100m, a 10% tax on the site value would be assessed.
What such a tax system does is tie government services to taxes paid. In areas where government services are positive -- good policing, good schools, good roads, sewage, power, water, etc. -- the site value of properties increases. In areas where such services are poor, the opposite happens. And as a result, residents get exactly what they pay for -- wealth redistribution is minimized.
Furthermore, a government could maximize its revenue by improving services in problem areas or reallocating coverage in order to increase total site value. A map of site values would also serve as a map of where government services are the best (or most efficient).
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