Re: Income from a tax on land.

From: Igor (jjweatherby_at_houston.rr.com)
Date: 12/14/04 

Date: Tue, 14 Dec 2004 13:40:52 GMT

frisbieinstein@yahoo.com wrote:

> Rent of an acre of Indiana cropland is $90, which is 4.5% of $2000.
> So if all undeveloped land in the US became public the rent could be
> $45 billion a year. A more moderate plan of private title and a 1%
> land tax would bring in $10 billion.
>

Which is:

a. much less than current taxes
b. a flawed number because a tax on land would reduce market prices and
a tax on market rents reduces market rents.

Economic rents are not market rents.

> Developed land is the joker in the deck. There are 80 million acres of
> that. The four borough NY generates about $7.7 billion in property
> tax. This is 15 million people, most of them not very well off. So
> we can guess that all property tax for the urban US is about ten times
> that which would be $77 billion. I would guess the total price of
> developed land would be about $8 trillion, or $100,000 an acre.
>

Taxing improvements gives disincentive to improve land. The land tax on
unimproved land is efficient because it can not be avoided so it does
not affect decisions. It would be similar to taxing every land owner $X,
the only way to avoid the tax is to sell the land. This is a short run
argument. It must be noted that such a tax WOULD cause marginal firms
those barely making profit to exit in the long run as there profits
became zero or below. I do not know how many firms this would affect but
someone barely making now would go under if fixed cost increase too
much. On the other hand, if SS taxes were eliminated then they would not
have to match employees contributions. I am not sure if only a land tax
would cover current federal budgets. I would love to think implementing
this would reduce the size of government but history shows governments
would just impose other taxes to make up the difference.

> Income from a federal land value tax of 1% would be roughly $90
> billion.
>

Again TAXES AFFECT MARKET PRICES. It is seriously flawed to think adding
a tax will not change prices and therefore yield %X * current market value.

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