Letting rates go up for the rich
by Linda Beale
crossposted with Ataxingmatter
Letting rates go up for the rich
When I was asked by the New York Times to write a brief op-ed to counter arguments made in the Washington Post that the economy would be helped by cutting taxes for the rich (so that they stay the same as they were under the Bush temporary provision), I jumped at the chance. See Extending the Tax Cuts for the Wealthy–the discussion continues (ataxingmatter, with link to the New York Times Open Forum). It seems quite clear that the “trickle-down” theory that assumes that if you help the rich, the world will be better off for all the rest of us has been clearly proven wrong by the four decades that it has held sway over economic, tax and social policy in the United States, starting with the presidency of Ronald Reagan. We have not had the stellar growth in jobs and opportunities for the middle class workers that the “reaganomics revolution” promised for good reason–those policies simply give more to big business and the rich, and do nothing to assure that any growth that does occur is shared with the vast majority of ordinary Americans.
Some of the comments to that post were from people who made more than $250,000 a year, complaining that they were not rich and why should their taxes increase. As I noted in a comment on the Times website, this is a common occurrence. We humans measure ourselves by those around us. If you make $300,000 a year, you probably know lots of other people who make about $300,000 a year and then a few who are clearly even better off than you are, making a half a million or a million or more a year. Certainly, many of the partners at the law firms in New York make a million or so a year, so that associates who made $200 thousand or so a year may have felt that they were “not rich” in comparison to the rich partners with whom they worked. But the fact is, anyone making that much is in the very privileged set–just not necessarily in the absolutely most privileged set. Being privileged to decide whether to buy private horsebacking riding lessons in Manhattan or whether to have a private in-ground pool in your back yard or whether to send your children to one of the ritziest colleges in the northeast is to be rich. For those with average incomes, sending their children to any college at all is often an impossible dream, and all those “extras” that the well-to-do think of as “must haves” are pipedreams.
The New York Times article on the Definition of Rich Now A Tax Issue, New York Times (Sept. 30, 2010) spends a lot of time before it gets to that key point. Sure, some families that make more than $250,000 may think they identify more with people who make less than with multimillionaires. But odds are they haven’t really ever focused on what life is like for the majority of Americans who make less than half what they do. As Brad DeLong says in the article, those in the top 5% are comparing themselves to those in the top 2% rather than looking down at multitudes with less assets than they have. To quote DeLong:
It is pathetic and embarrassing that somebody with five times the median household income, someone in the top 2 or 3 percent of the population, thinks of himself as just another ‘average Joe.’ Why don’t you ask someone who makes $40,000 or $50,000 a year if they have a lot in common with a family making $250,000.
Prof. Beale, I believe, works for Wayne State University.
I can guarantee the University, and perhaps specifically the law school, have fund raisers begging the evil rich for contributions and endowments.
Economic policy debates, particularly tax debates, have been couched in terms of “rich” and “poor” for so long that it may be hard to think in other terms. The reasons for taxing higher incomes at a higher rate don’t rely on defining “rich” and “poor”, and those terms seem pretty easy to manipulate to derail discussion. So perhaps, in service of having a useful discussion, we should try to avoid those terms.
A family earning $250k a year (oh, hell, let’s make it $150k) will, under normal circustances, be able to feed, house, educate and insure itself, and will at the same time be able to save money or build equity (remember, I specified normal times). Families making lesser amounts will have a harder time. If we have, as a social goal, that taxation not be a great burden (or put otherwise, that we not shove those just getting by into poverty, those in poverty into worse poverty), then taxing those most who are furthest from poverty is a sensible thing to do, and we don’t need to fight over who is rich and who is not in order to make sensible decisions.
One of the simple principles of taxation is to tax things that cannot scamper away, and won’t be reduced to nothing in response to the tax – if you tax something, you want to get revenue from it and not prevent it happening. That is generally the case with taxes on income at tax rates which prevail in the US. In that sense, and at US rates, taxing income makes sense. Once can argue for other forms of taxation, but we would still want a tax which does not impoverish those getting by or drive those in poverty into worse poverty. So any other form of taxation that we might adopt should still fall more on those who are better off, most on those who are best off. And we don’t need to argue over who is rich in order to do that.
By the way, I’m fine with a property constructed VAT, with one hitch. Since those who earn most have greater ability to choose between consumption and savings, they are more likely to shift to saving more in response to a consumption tax. That is, of course, one of the arguments for a consumption tax. (Knowing that one is well-off seems to provide utility on a continuing basis, so is a substitute for consumption. For those who have enough, utility may not be lowered much by saving more.) As long as there is a sizable inheritance tax, so that a VAT doesn’t create a society of even greater hereditary wealth, okey dokey with me. If we don’t have a big inheritance tax, then a VAT would tend to erode our society even more than is already the case.
Which has what, exactly, to do with the point that she is making?
Linda,
The rich don’t pay higher taxes, they move. Either literally or figuratively.
When you have the top 1% paying 40% of income taxes…… that’s just 1,4 million payers out of 350M population……. Then whatcha gonna do?
http://www.taxfoundation.org/news/show/250.html
This perception issue is very real. My friend is constantly upset that she is making what she makes instead of 30% more. She is comparing herself against friends who have six or seven more years in the industry, and believes that is the going rate for her as well.
Pointing out the actual median income for a household is can be a shocking blow for people. It’s something like 60% of what she already makes for this area. More in the suburbs, but far less than she considers a comfortable level to live on.
Privately paid for navies will increase prices…need subsidy.
sammy
get the poor people a raise so they can pay a larger share of the tax.
kharris
what exactly, is the concept of “the evil rich.” Beale doesn’t use the expression, but lots and lots of people hear it anyway.
and the answer is… as you suggest below… to be very careful you are not implying, or thinking in your heart… because it leaks out in your (generic your) words… of them as “evil.”
it’s hard enough that you have to put up with them arguing that they are “not rich.”
the point needs to remain that you tax incomes not people. and you do it progressively on the idea that the more people have the easier it is for them to bear the burden. Tax rates are not that high. for most peple the income tax burden is well under ten percent, and for the people with taxable incomes over 200 k it is never much over 20%
The place for them to complain about their taxes, is not that they pay more than poor people, but that they pay for stuff they don’t want… and they can make that argument with their congressman more effectively than someone who doesn’t have much money.
But where I think you and Linda go wrong for now is that ALL of the Bush tax cuts should be allowed to end. This is not the time to fight over “you pay. no, you pay.” A 3% increase on nothing is not very much. And right now paying down the deficit might be the smartest thing to do. Let the rich show their patriotism by paying an extra 3% of their 200k, and let the poor show their credibility by paying an extra 3% on their 20k…. though I would strongly urge that 3% be directed to their medical insurance through Medicare, or their old age insurance through SS.
For me the bottom line is you cannor run a country for long if everyone is convinced someone else should be paying the bills.
I blame the TV show “Lifestyles of the Rich and Famous”.
Now if they would show clips of Frenchmen operating their guillotines, lighting bolts from heaven striking golfers on $200 greens fees golf courses, XXX rated clips of what Bernie Madoff has been up to lately, and the Titanic getting sunk by an iceberg, then maybe people would think there is some downside to being rich.
i don’t see the rich giving up consuming. after all, what’s the point in being rich.
but in any case i think it is foolish to base tax policy on “incentives.” just tax the money where it’s easiest to collect it. pay the bills, and work for a just and efficient society without playing games with the taxes. all you incentivize is smart tax lawyers.
The looting of the gov’t in the Bush tax cut plan did include the $500 increase in the child tax credit.
Losing that is a bit more than 3%.
But, yeah, what people utterly fail to understand is that all taxes come out of rents in the end. We could double income taxes on everyone and eventually find that the only difference would be lower rents and home prices. Theoretically.
I’ll still bet my money that the US Navy beats the Grand Cayman Navy.
Plus, moving somewhere else in the world doesn’t mean you still don’t have to do US taxes. You have to change citizenship. I think Grand Cayman says they will consider requests for citizenship after you live there for about 8 years mingling with the native folk. I suggest taking up scuba diving. That’s all there is to do there.
You could try getting citizenship in a developed country, but I don’t think you get to your low tax goal that way. Maybe in Monte Carlo, but there you may have to worry about NATO someday.
it’s funny how taxing land titles never enters into the debate.
Always incomes or consumption.
This is by design, btw.
http://homepage.ntlworld.com/janusg/coe/cofe00.htm
The rich are welcome to sell up and sail. Bon voyage!
There is S. America, but the Right Wing governments want YOU to pay for the Army, and if a Left Wing government overthrows them anyway, then they will want YOU to pay for the Little Peoples.
It’s tough being rich in the ROW. They just take it for granted here.
Troy
i pay a pretty big property tax. it goes to local goverment mostly. can’t say i enjoy it any more than the income tax. and at least the income tax is money from money. it’s not always easy to find the money to pay the property tax. no doubt it i put up slum houses on the land i could collect rents,
cedric
actually it was the folks in steerage who went to the bottom. the rich got the life boats.
and all that guillotine stuff did was make people pity the rich, and even the poor rightly leery of revolution.
the rich are totally incapable of understanding that what led to the revolution was the ability of the rich to avoid taxes. while collecting rents.
probably shouldn’t emphasize the guillotine so much. today’s rich are pretty sure they can avoid the guillotine.
but mme guillotine was just a symptom of the fact that the economy had collapsed. today’s rich might not be able to avoid the consequences of an economy that fails because they are too dumb to pay the taxes that make it work.
One guy’s guess about behavior is as good as another, until somebody shows up with data. Data on increases in income taxes suggest a one-time response by those who hold stock options, and not much else. I haven’t paid much attention to data on VAT rates, but I do know of instances in which a rise in VAT-like taxes (Japan’s consumption tax, for instance) has caused a one-time response. One-time responses are great for political bragging rights, but shouldn’t determine policy.
My point was that it doesn’t much matter what the well-paid people (who may or may not be rich) do in response to the imposition of a VAT tax. If they consume less under a VAT tax, so are taxed less, that’s dandy by me, as long as we catch them back up when they die.
The link shows who pays, but not that anybody moves away from taxes. That’s just the assertion made by anti-tax types.
What does make sense, though, is that as incentives grow larger, they have more effect. We have allowed the indisputably rich to grow very rich, which means they have a bigger incentive to run away from taxes. (“Going Galt” is, in some cases, just running away. Brave, brave Galts!) So the reasonable thing to do is make sure that incentives to run away, because one (say one Koch brother or the other) can pay for all the benefits of US society while living in a tax haven. Lean against lord-like wealth, and you raise the value of US residence over residence in tax havens.
well, i always thought the solution was a flat tax: 30% across the board for all income.
then a 10 thousand dollar “filing rebate”: The government sends you a ten thousand dollar check just for filing your taxes.
Sammy
i was thinking about you the other day, wishing there was a way i could explain to you that “greed” was not a crime, nor even a sin in the way most people think of sin, it isn’t even “socially unacceptable.”
what it is is an error. and if the error is persisted in it becomes a sickness like drug addiction. the sickness is not in wanting ordinary wants. or even in wanting and working to get “more.” it’s when the desire for “more” overwhelms ordinary decency and craps up your life… but like an alcoholic you won’t even realize that its the greed that has done the harm. you will think that it’s the lack of money that causes all your trouble, or the greedy government, or all those greedy people trying to take what you have.
and, to be sure, plenty of “liberals” are just as greedy as “the rich.”
of course “rich” means someone who makes more than I do.
God…I hope the idiot Democrats choose to raise taxes on the upper percents. The economy will get way worse, and forces Democrats to take the blame especially Obama, and he won’t be able to rely on blaming Republicans….you know….the usual game.
It could mean Conservatives could get back the Republican party again, could mean Republican control till 2016.
I encourage all Democrats and Democrat voters to keep this Class War going, please raise taxes, please keep spending….I encourage the suicide of your Party…..It’s fun to watch!
“But ’tis a common proof
That lowliness is young ambition’s ladder,
Whereto the climber-upward turns his face;
But when he once attains the upmost round,
He then unto the ladder turns his back,
Looks in the clouds, scorning the base degrees
By which he did ascend.”
— Shakespeare, “Julius Caesar”
Min
ol Julius Shakespeare knew a thing or two. But i don’t think it’s so much “the uppermost round” that is causing all the trouble. it’s the lowlifes making big money that don’t want to let go of a dime of it, and the idiot harvard graduates they hire to think up clever sounding reasons for them.
And the next round will be spurred on by avoiding taxation by claiming income as carried interest. Any idea how much it cost the treasury?
Always interesting to listen to the “poor” talk about the “rich.”
“Money for nothing and the chicks for free.”
Personal responsibility and consequences for the lack thereof would result in a much more fiscally equal society.
The use of force always ends badly.
@coberly,
What Troy is referring to is not a run of the mill property tax.
http://www.dollarsandsense.org/archives/2006/0306gluckman.html
Tao
if you can explain it in your own words on a 3 by 5 blog comment box i’ll try to understand the difference, but i don’t do links without incentive.
CWI
i don’t know what you meant. but allow me to speculate that you are an idiot.
the use of force must not always end badly or people wouldn’t resort to it so much. and in this world it seems a bit hard to avoid. let us say we avoid “forcing” people to pay taxes. then some other country forces us to work for them. or some folks in our own country force us to put up with their crimes against us.
and what exactly is your point about the poor talking about the rich. must the poor get rich before they can have an opinion about the rich. or should the rich get poor before they can have an opinion about the poor?
Ain’t poor, and personally responsible, unlike some CEOs I hear about. So what?
Neo-classical economics intentionally conflates land with capital, but land — by definition — is not a product of labor so has a different supply curve.
The ugly truth with this is that many of us have to pay rent, either to a landlord, or to pay the bank for the pre-paid rent we call a mortgage.
30% of the population owns with no mortgage, so the majority of us are stuck on this treadmill, many of us permanently as rent-slaves.
The general idea with the land value tax is to capture the rent the rent slaves (and commercial tenants) pay to landowners, since landowning qua landowning is basically idle wealth engaged in predation thanks to the location monopoly that our settlement patterns create.
LVT reform does not seek to tap the value of the average owner-occupied single-family homes, it’s more intended to restore everyone’s opportunity of access to natural resources. Theoretically, if you’re an average user there will be no premium exacted or royalty paid to you.
greed is not a problem as long as it results in productive enterprise. Greed + rentierism is the “error”.
(But of course I conveniently define rentierism as everything evil in capitalism.)
Heywood
thanks. i think i would still object. the money i paid for my property came from my labor. and the labor i put into my property to make it useful to the tenant is “labor.” i imagine the guy who conqured the place and took it away from the indigenous population probably thought he worked like hell.
i think your objection is to rents that are extortive. different problem with a different solution.
now, as it happens i have no tenants because i couldn’t stand watching them ruin the property. on the other hand i have no mortgage because i used my money to pay it off quickly instead of living on borrowed money. and then crying about “pre paid rent.”
i still do have to pay property taxes, and i can feel quite sorry for myself about that. extortive, don’t you see.
heywood
i am trying to define “greed” as what it is when it is a problem.
dan
personal responsibiity is what the guy that’s been mugged lacks, lying there in the ditch without the money to get himself to the hospital…. or, actually, to several hospitals so he can do some comparison shopping and hard bargaining with “the providers,”
Troy
five hundred dollars is 3% of 16,000 dollars. If you have more than one child and don’t make any more than that you are doing something wrong.
i am not interested in making the really poor destitute. i just get a little tired of the professor class who only make 100k yelling for tax increases on the rich but not on them if you please.
and this is as good a place as any to mention that you don’t cross a magic line in the tax code and suddenly get taxed twice as much as the guy just below you. everyone pays the same rate on the first ten thousand and a higher rate on each dollar over the line (wherever it is), so your average tax climbs gradually and seemlessly. this message is for sammy mostly.
I don’t understand the concept either. I pay rent because I don’t want to be exposed to the elements all the time, or wake up in the morning and find out another smelly bum crawled into my cardboard box.
But maybe things were better in the old days, when you could just pitch your Teepee anywhere? But even the happy hunting grounds were not so happy if the tribe over the horizon got hungry for any reason.
>the money i paid for my property came from my labor
Stolen goods are stolen goods regardless of how proper the form of payment, and the injustice comes from you paying for the legal privilege from the state to exclude my access to “your” land.
Now, like I said above, on the single family home level there would be no net property tax owed by those claiming the median amount of land value. The point of the LVT is to incent the market to use the limited land resource more efficiently, and redirect the profits of land rentierism — the rake they get from their property’s site value — from the predator wealthy to the state which creates and maintains this site value.
The end result would be to end this plague of “income properties” the poor of this nation have to subject to, encourage better land management by untaxing the fixed improvements and uptaxing underused plots, redirect commercial rents from idle landlords to the community (easily replacing other forms of taxation like the sales tax), establish “luxury” taxes on above-median properties, redirecting the rents of natural beauty and other site value bonuses from whoever stole the land* to the taxation district that manages this land.
I fail to see the downside with this. Much better than talking about other taxes. As Milton Friedman said, the LVT is the least bad tax.
* “To prove a legal title to land one must first trace it back to the man who stole it” — Lloyd George.
Greed can readily be found in any violation of the Lockean Proviso and also the exercise of the pricing power that comes from monopoly and monopsony of life’s necessities.
I think ‘trickle down’ should be called ‘tinkle down.’ That at least would be more than a trickle, which is a very small rate of flow. How being trickled down on was ever considered a desirable state of affairs is beyond me.
Well people conflate land with capital because:
1. the two are easily convertible. Anybody with the capital can buy land, and the most common form of title is “fee simple” where once the land is bought, the purchaser has no further obligation to the former owner. All this is in stark contrast to the middle ages where lant was intrinsicly linked to political power, and the idea of simply buying and selling it would have been regarded with the same repugnance that we regard the buying and selling of political offices and trial outcomes.
2. We’re no longer an agricultural economy. Land simply isn’t the major input to most of GDP that it was 100 years ago. Sure it IS an input, after all the steel that your car was made of came out of the ground, as did the fuel that was turned into the electrical power for the computer I’m using. But labor and capital (and if you scratch the capital, you find that it represents the labor, capital and land of previous generations) are the major inputs.
Separating out land as a special commodity apart makes as much sense as separating out, say hours of machine tooling, or kilowathours. Except that it’s 19th century thinking and we’re currently in the 21st century. The real problem is the tendency of wealth to concentrate over time. And that’s just the capitalist special case of the nearly universal tendency of power to concentrate over time. In military dictatorships, the officer class tends to become a class apart from others, and in communist countries, the aparatchiks tend to be the children of the previous generation fo aparatchiks.
heywood
of course if you trace title back you’ll come to the man who stole it. so, you wanna give it back to the neanderthal. i’m sure that if you put an ad in the paper claimant’s will come forward.
or do you just to declare it open range and share it with the “smelly bums” who will come by the millions?
i quite agree that there is great injustice in the way the owners of some land gouge the poorer people whose ancestors either did not steal or did not hold sufficient land for their needs, but i don’t see that your remedy is likely to be either just or beneficial.
i sure don’t want to see a committee of the formerly abused or newly enthused deciding what to do with all the land in this country. but that’s probably only because i am trying to protect a few acres of elk..and yes, cougar… habitat from my neighbors who would turn it into a pig factory.
i keep hoping to find a way that avoids both the greed of the rich and the greed of the poor, not to say the greed of the intellectuals.
You should read higher up. Heywood has already pointed out the economic justification for treating land and capital differently. Land is not the product of labor (though improvements of land are). Capital is the product of labor.
If land is easily convertible to capital, well so is labor, if you’ve stored up enough of it as savings or are seen as reliable enough in your labor to borrow on it.
Now, further analysis may show that Heywood’s point is the same sort of sleight of hand argument as is arguing for treating land as capital because fo the convertibility of land to capital, but the point has been made. Can’t be ignored just because it is inconvenient.
and maybe there is a justice in that.
i certainly never wanted to be an officer or an aparatchick. or even a landlord.
but i don’t like much having to do what those people say, no more would i like having to do what “the government” says.
so, if anyone comes up with an answer that at least minimizes the evil of either extreme i will be an eager listener.
i would disagree about land not being special. i rather like having my bit of land to steward, it’s fighting off the poachers and trespassers and government regulators that spoils my little eden.
of course i’m all in favor of government regulators keeping my neighbor from turning his property into a slum division or a pig factory.
And here the intellectual meets the philosopher and neither understands the other.
Since you don’t understand me I imagine you won’t care if I say your words are unlikely to mean anything to someone who hasn’t read your Catechism.
Homo sapiens did eventually successfully steal all property from neanderthals, even tho the neanderthals were europeans, and had bigger brains. But even back then, they did not make a big distinction between land and caves (improvements to land), so I don’t really see the big deal or necessity of separating the two concepts.
coberly
My guess is Heywood Mogroot got picked on a lot in high school.
The idea of taxing land is very 19th century, it was called the single tax back then, and was pushed by Henry George.
But outside of agriculture, and resource extraction, MOST of the value IS due to improvements, either on the land in question, OR the land owned by others around it. Yes, land in Manhattan is valued quite highly, but only because of the fact that people have build an entire city around it. Certainly a tax on the original 60 guilder price as adjusted for inflation would not yield much. We’ll ignore for a moment that the native Americans that the Dutch bought it from didn’t have land tenure in the European sense. So MOST of the value of land put to residential or commercial uses IS directly attributed to labor, and NOT simply expropriation by the powerful. The fact is, most of the rent that we pay either pays for the roof over our heads, or the fact that others have built infrastructure near it.
Can be ignored because it doesn’t say anything useful, however.
What Heywood is proposing is stealing land from the present “owners” justified by his belief that they aquired it from someone who stole it from the original owner. Ten thousand years of evolution in the concept of land ownership will be set aside so some intellectuals can feel better about the inequities of life. I understand the experiment has been tried recently in Rhodesia with not especially good results.
There are complicated problems of justice and decency that arise out of land ownership, but they are not going to be solved by a simple minded resort to an intellectual construct.
So true. Before moving into a cave, first the neanderthals had to kick a bear family out. Not an easy task. Then there is archaeological evidence that they re-modeled. Cave paintings and maybe a bear rug on the stone floor.
Charles G
I don’t think they call it trickle down when they are talking to the people who vote for them. They call it “jobs.” As in, if you tax me or regulate me I won’t be able to give you a job.
The poor are acutely aware they don’t know how to create their own jobs and they are profoundly grateful to those who do. And their own experience with the gummint is limited to traffic cops and perverse zoning laws, not to mention Paul Harvey.
You can’t explain to these people that in the long run it doesn’t work out that way, because the short run is all they know. will ever know. The dems had a chance during the depression when the short run was so bad and they had a spokesman who promised the poor hope.. and delivered. But a gneration later most of the poor have good jobs and think they got them “themselves.” And the dems keep blowing their natural advantage by talking over their heads… and failing to deliver.
THE COMMPLAINT IS NOT THAT PEOPLE ARE RICH. THE COMPLAINT IS THAT THERE ARE A MINUTE NUMBER OF PEOPLE THAT HAVE SEQUESTERED SO MUCH OF THE ECONOMMY’S ASSETS THAT THERE IS LITTLE LEFT FOR THE VAST MAJORITY TO SHARE AND AFFORD A REASONABLE LIFE. SECONDARY TO THAT COMPLAINT IS THE COMPLAINT THAT THE WEALTHIEST OF THE RICH HAVE BEEN EXCUSED FROM HAVING TO PAY A FAIR SHARE OF THE TAX BURDEN THAT IS NECESSARY TO SUPPORT A PRODUCTIVE ECONOMY. THIS TOPIC HAS BEEN HASHED AND REHASHED. THERE WILL BE NO RESOLUTION TO THESE COMPLAINTS UNTIL WORKERS BAND TOGETHER TO ASSERT THEIR NEEDS AS DEMANDS. THIS WILL REQUIRE THAT THEY BEBIN TO RECOGNIZE THAT THEIR INTERESTS ARE NOT SERVED BY GOVERNMENT REPRESENTATIVES WHO SERVE THE RICH. ALL PARTICIPANTS IN AN ECONOMY HAVE SHARED INTERESTS, BUT THE FRUITS OF THE ECONOMY ARE NOT BASED UPON THAT SHARED INTEREST. INSTEAD EACH PARTICIPANT’S INTERESTS IN THE FRUIT IS REALIZED ONLY BY THE COLLECTIVE ACTION OF THOSE WHO HAVE AN EQUAL PLACE IN THAT ECONOMY. THE UNITED ACTIONS OF WORKING PEOPLE NEED TO BE BASED UPON THEIR SHARED ECONOMIC SELF INTEREST RATHER THAN THEIR FEARS AND MORAL PRECEPTS.
Excuse the caps above, but I got half way through before realizing it and didn’t have the strength to rewrite the piece.
The idea of taxing land is very 19th century
Land values are still very 21st century, just look at the system crash in 2008 and what caused it.
And what killed Japan in the late 80s.
What Heywood is proposing is stealing land from the present “owners”
Not at all. I propose everyone pays for what they take from the commons. This will result in more capital investment in physical goods and less naked rentierism, by which the idle rich rack-rent trillions of dollars out of the productive economy.
This was obvious in 1909 when the British came to a Constitutional crisis over it and is still obvious today. High land costs are counter-productive. There is a fix for that, and it happens to be a tax that works better in real-world examples (and on the moral plane) than any other tax you can create.
MOST of the value IS due to improvements, either on the land in question, OR the land owned by others around it
And that is entirely the point. The landowner is capturing both values while only creating the former. And a great amount of the site value of land comes from public right of ways and other state-owned capital on public land.
The bottom line is that investment in mere rent-capture via land speculation is horribly counter-productive. Saving woods from pig-farms is a simple matter of zoning, something that the LVT is intimately tied up in since the highest use of land is both defined and restricted by the zoning applied to it.
In my world a 2 acre parking lot and a 45 story office tower on 2 acres would see the same tax bill. The median owner-occupied SFH would see no property tax per se, just Mello Roos. The below median use of land value might even see a royalty for this economizing.
it is a beautiful system 🙂 but one I know has zero chance of coming into reality in this Prop-13 protected world.
MOST of the value IS due to improvements, either on the land in question, OR the land owned by others around it
And that is entirely the point. The landowner is capturing both values while only creating the former. And a great amount of the site value of land comes from public right of ways and other state-owned capital on public land.
The bottom line is that investment in mere rent-capture via land speculation is horribly counter-productive. Saving woods from pig-farms is a simple matter of zoning, something that the LVT is intimately tied up in since the highest use of land is both defined and restricted by the zoning applied to it.
In my world a 2 acre parking lot and a 45 story office tower on 2 acres would see the same tax bill. The median owner-occupied SFH would see no property tax per se, just Mello Roos. The below median use of land value might even see a royalty for this economizing. Apartment block owners would receive income based on the value of their improvements and not merely the site-value of their location.
it is a beautiful system 🙂 but one I know has zero chance of coming into reality in this Prop-13 protected world, alas.
Caps are okay, and unions are okay, and government working to reduce the worst effects of poverty is okay… but that is sort of what we have had since 1932. Now if we can keep the Tea Party and the New Democrats and various intellectuals with a Beautiful Idea from destroying it we ought to be able ot muddle through to better and better ways to work out the problems that remain.
You have to admit arguing about Georgist economic theories from the 1800s makes an interesting change of pace from arguing about Laffer curve theories from the 1980s.
History shows otherwise. The general result of higher taxes on the rich and large corporations seems to be an economic boom in which everyone, including the rich get richer. Low tax environments let the rich get richer, but the money they don’t spend is effectively removed from the economy. We see both effects again and again. It’s like Galileo and the mountains on the moon. It just doesn’t fit with certain people’s theologies.
Troy
i’d agree that prop 13 was a boondoggle giveaway to the rich, but your system looks to me like a nightmare of a different order.
Some of the rich don’t actually care about being richer in terms of material wealth. They care about being aristocrats and maintaining aristocratic privelege. That requires a huge wealth gap, a yawning chasm that means that a commoner can’t cross the gulf.
For example, concentrations of wealth mean that its hard for the poor but brilliant man to get a good college education. That was the guy who was going to cure pancreatic cancer, but he doesn’t get that opportunity, so Mr. Rich Guy dies from pancreatic cancer.
But he’s died happy, because his heirs will maintain a huge wealth gap between themselves and the commoners. That’s worth dying for. That’s worth killing for, too.
Of course, to me, I’d rather that society got richer, and things got better for everyone including the relatively well off. That’s not the philosophy in the ascendancy now though.