Re: Land, Labour and Capital Taxation....
From: Igor (jjweatherby_at_houston.rr.com)
Date: 12/15/04
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Date: Wed, 15 Dec 2004 15:09:34 GMT
royls@telus.net wrote:
> On Mon, 13 Dec 2004 11:49:23 GMT, Igor <jjweatherby@houston.rr.com>
> wrote:
>
>
>>Even
>>George stated that if you tax 100% of rents then the land market would
>>cease to exist.
>
>
> Either provide a verbatim, in-context quote where George says that, or
> admit you are a liar.
>
It is a sign of intellectual weakness to call anyone who contradicts you
a liar. First,
http://www.econlib.org/library/YPDBooks/George/grgPP.html
"Taxes levied upon the value of land cannot check production in the
slightest degree, until they exceed rent, or the value of land taken
annually for unlike taxes upon commodities, or exchange, or capital, or
any of the tools or processes of production, they do not bear upon
production."
NOTICE IT SAYS UNTIL THEY EXCEED RENT. IF LAND TAXES ARE GREATER THAN
RENT IT AFFECTS PRODUCTION. Can you read the text?
"Taxes may be imposed upon the value of land until all rent is taken by
the State, without reducing the wages of labor or the reward of capital
one iota; without increasing the price of a single commodity, or making
production in any way more difficult.'
If the tax goes above rent it starts effecting production and shuts down
markets. There would be no market for land. George asserts, although it
is true, that land prices would fall. A sufficently high tax pushs the
price of land to 0 and stops the market.
>>If you set the LVT to high it is no longer efficent and will
>>start to affect decisions of land owners.
>
>
> It affects decisions of landowners at any level: the higher the tax,
> the more it makes them decide in favor of productive use over idle
> speculation.
>
IF YOU DO NOT TAX MORE THAN RENT. EVEN GEORGE SAYS THIS READ IT AGAIN. A
tax greater than rent is distortive SO YOU HAVE TO MEASURE ECONOMIC RENT
TO MAKE SURE YOU DO NOT TAX TOO HIGH. THIS IS DIFFICULT AT BEST
IMPOSSIBLE AT WORST.
>
>>George advocated 5% of rents
>>which of course is a number pulled out of a hat.
>
>
> No, it's approximately the discount rate.
>
By whose calculation. I do not believe ANYONE calculated it in George's
time. BTW THE DISCOUNT IS ABOUT 2% WHICH IS WHAT IT TAKES TO GET SOME TO
LOAN MONEY.
>
>>THE PROBLEM STILL
>>REMAINS HOW DO YOU CALCULATE RENT SO YOU FIND A TAX RATE THAT WILL NOT
>>TAKE AWAY ALL RENTS OR MAKE RENTS NEGATIVE? Empirically this is tough
>>because George nor Ricardo have a good idea of what a baseline land is.
>
>
> Gibberish.
>
Only if you do not understand ECONOMIC rent.
>
>>If Ricardo is right and different land has different productive
>>value, which is likely, this means an LVT would not BE UNIFORM.
>
>
> Stupidity.
>
You can argue with Ricardo and George if you want but if REREAD George
you will find 2 things. First, he uses the Ricardian notion of rents.
Second, THE TAX CAN NOT EXCEED RENT! If you understand rents then you
know EVERY GRADE OF LAND HAS A DIFFERENT RENT THE LOWEST GRADE HAVING
ZERO RENT. Here is the link from the Henry George institute tha explains
it simply since you OBVIOUSLY do not understand Ricardo.
http://www.henrygeorge.org/rent1.htm
>
>>More
>>productive mines, for instance, could obtain MORE rent than a slightly
>>less productive mine. To tax that rent at the same rate as the rent of
>>the slightly next productive mine is taxed MEANS A HIGHER TAX RATE ON
>>THE PROPERTY VALUE.
>
>
> The same rate is a higher rate??? Do tell...
>
The same rate on the VALUE of the land means DIFFERING percentages of
ECONOMIC rents taxed. ECONOMIC RENT IS NOT THE ONLY PART OF THE VALUE OF
UNIMPROVED LAND.
>
>>Yes the lost lowest productivite land would have the
>>lowest value BUT WOULD ALSO OBTAIN ZERO RENT and therefore should not be
>>taxed.
>
>
> Only land that more than one person is willing to pay to use yields
> rent.
>
NO WILLINGNESS TO PAY HAS NOTHING TO DO WITH ECONOMIC RENT. READ GEORGE.
READ RICARDO. ECONOMIC RENT IS NOT MARKET RENT.
>>The
>>sheer cost of implementing the tax would be extermely high.
>
>
> Lie. Even ancient societies used land rent recovery. The rent of
> public lands constituted a significant fraction of the public revenues
> of the Roman republic.
>
YOU STILL DO NOT UNDERSTAND THE DIFFERNCE BETWEEN ECONOMIC AND MARKET
RENT. TO TAX LAND TO ZERO RENT OR CLOSE TO IT YOU NEED DIFFERENT
PERCENTAGES ON EACH PIECE OF LAND. EACH GRADE WILL HAVE A DIFFERENT
RENT. A FLAT LAND TAX TAXES RENTS UNEQUALLY AND VALUE EQUALLY.
> Now, granted, the ancient Romans understood all this business far
> better than Igor does, which is why he considers the problems that
> they solved impossible for modern economists and real estate
> appraisers to solve.
>
No I know what George said and you do not. A land tax is not impossible
to produce. TO ACHEIVE EXACTLY WHAT GEORGE SAID IS IMPOSSIBLE BECUASE WE
DO NOT HAVE ENOUGH DATA TO MEASURE RENT. Each piece of land will have
different rents that are NOT OBSERVABLE DIRECTLY. The tax rates have to
be set differently to get 0 rents or small rents. In the example at the
Henry George institute grad 4 land has 0 rent and therefore should be
taxed. Grade I land has higher rents and should be taxed more heavily. A
GEORGIAN TAX IS NOT A FLAT TAX SMACKED ON THE MARKET VALUE OF LAND.
AGAIN REREAD GEORGE. He is arguing that ONLY THE UNIMPROVED VALUE OF
LAND should be taxed. The market value has as much to do with population
centers, capital improvements and infrastructure as it does with the
INTRINSIC productivity of the land. YOU STILL DO NOT UNDERSTAND LAND HAS
AN INTRISIC VALUE AND A MARKET VALUE, which includes improvements. TO
TAX IMPROVEMENTS SUCH AS INFRASTRUCTURE AROUND IT GIVES DISINCENTIVE TO
DEVELOP THE LAND. Read George again.
>
>>Once the
>>cost of calculating rent and possibly setting a different tax rate FOR
>>EACH landowner is factored in there would little money left over for the
>>government to spend. The majority would go into paying the cost of
>>setting the tax and administering the tax.
>
>
> Property taxes in fact have lower administration and compliance costs
> per dollar of revenue than any other commonly used tax.
>
CURRENT PROPERTY TAXES DO. However, current property taxes are NOT
GEORGIAN LAND TAXES. They tax intrinsic value and improvement. The
distance from a railroad or town center is what is measured in CURRENT
property taxes as the unimproved value BUT IS NOT PART OF THE INTRINSIC
VALUE. A Georgian property tax SEPERATES INTRINISIC VALUE FROM THE VALUE
OF IMPROVEMENTS. CURRENT PROPERTY TAXES DO NOT THIS. THEY SIMPLY TAX THE
SELLING PRICE WHICH INCLUDES IMPROVEMENTS. CURRENT PROPERTY TAXES ARE
NOT SET WITH THE INTENT TO FULLY ELIMINATE RENT.
> As usual, the truth is the diametric opposite of whatever Igor claims.
>
>
In Roy's Bizarro world where George says somehting entirely different
from what is written this is true. In Roy's bizarro world where CURRENT
property tax system adqueately seperate intrinsic from market value and
tax only intrinsic value this is true. IN THE REAL WORLD ROY IS VERY WRONG.
>>It is a fixed cost that most
>>be paid and will not effect production decisions. Both profit and land
>>taxes do this. This is the static analysis only.
>
>
> A tax on profits is of course not a fixed cost.
>
> As usual, the truth is the diametric opposite of whatever Igor claims.
>
IT ACTS AS A FIXED COST. THE FIRM WILL STILL TRY TO MAXIMIZE PROFITS.
The tax is taken off after all decisions are made. UNLIKE A LABOR TAX
FIRMS WILL NOT DECREASE PROFITS TO AVOID PAYING PROFIT TAX. It works
EXACTLY LIKE A FIXED COST. It is fixed because the firm will never
intentionally break form profit maximization. The profit maximizing
quantity still gives the most profit with or without tax. AGAIN YOU ARE
CLUELESS AS TO THE CONCEPTS AND NEED SERIOUS REMEDIAL ECONOMICS.
>
>>The problem becaomes if land is the only tax.
>
>
> Igor means the problem for idle landowners.
>
NO YOU MORON READ IT IS A PROBLEM FOR THE CURRENT SPEND MORE AND
EVENTUALLY TAX MORE GOVERNMENT. I do not advocate this behavior but it
is what we have.
>
>>There is no federal land taxes but States and localities do tax land.
>
>
> They tax property value, consisting of land value _and_ improvement
> value. It is worth noting that the states that have the highest
> property tax rates -- like New Hampshire, Connecticut, Wisconsin and
> Oregon -- tend to have the best economies, the highest incomes, the
> lowest welfare utilization rates, the least homelessness, the most
> affordable housing, etc., etc.,
CETERIS PARIBUS FALLACY.
while the states with the lowest
> property tax rates -- like Alabama, Arkansas and Wyoming --
YEAH WYOMING HAS A LOT OF PRODUCTIVE LAND AND CAPITAL.
> Of course, Igor refuses to know this fact, or what it implies.
>
No I realize correlation DOES NOT IMPLY CORRELATION. I REALIZE PROPERTY
TAXES ARE NOT THE ONLY FACTOR IN WHY ONE STATE IS RICHER THAN ANOTHER.
WISCONSIN COULD LOWER LAND TAXES BELOW ALABAMA AND STILL Be riCHER DUE
SOLELY TO THE BETTER LAND AVAILBALE.
>>There have been arguments about state land
>>taxes instead of local and redistribution between localities because the
>>land tax means local systems are unequally funded.
>
>
> No. That is of course a flat, outright lie. The inequality results
> primarily from the fact that _total_ property value is taxed, not land
> value. Land vale per resident is less than linearly related to
> income, while improvement value per resident is _more_ than linearly
> related to income.
>
Wrong again. If you have one city with GRADE I land and city with GRADE
IV land, the CITY WITH GRADE I LAND WILL GET MUCH HIGHER REVENUES
BECUASE THE INTRINSIC VALUE IS MUCH GREATER. IF ALL LAND WERE EQUAL
QUALITY THEY WOULD BE NO ECONOMIC RENT.
City I has Ukranian black soil it can grow 4 times the crops that desert
land can GIVEN THE SAME LEVEL OF IMPROVEMENTS. City II is desert land.
YOU ARE NOT REALLY SAYING CITY II PAYS LESS TAxES BECUASE IT HAS LESS
IMPROVEMENTS ARE YOU? EVEN WITH AN INTRINSIC VALUE TAX IT IS UNEQUAL TAX
REVENUE. CITY I WILL RAKE IN THE MONEY WHILE CITY II GETS LITTLE BECUASE
THEY HAVE CRAPPY LAND.
> Of course, Igor also refuses to know this fact, or what it implies.
>
It is not a fact but very misconstrued ideas full of flawed assumptions.
>
>>Localities with
>>higher property values and lower population, such as some industrial
>>localities, receive more money per student than say a inner city area
>>with low property values and high population. The local tax system has
>>led to a big inequality in the quality of schools in Texas. It is not
>>unheard for people to get a P.O. Box in a town close to where they live
>>so their children can enroll in the better funded school district.
>
>
> The explanation for this is given above. Igor refuses to know the
> relevant facts.
>
No the same happens when you have a region with LOW RENT LAND LIKE
WYOMING OR SOUTH DAKOTA. THEY WILL GENERATE LESS TAX REVENUES THAN
STATES SUCH IOWA OR WISCONSIN WHICH HAVE GOOD LAND. States such as TX
with land with more productive natural resources would pay a higher
percentage of taxes than say Alabama or NORTH DAKOTA. BECAUSE THEY HAVE
MORE INTINSIC VALUE IN THEIR LAND. ASSUMING YOU COULD ADEQUATELY
SEPERATE INTINSIC VALUE FROM IMPROvEMENTS.
>>The problem is if
>>ALL other taxes were eliminated would the increase in land taxes do
>>this? I do not think we have a political climate where governments would
>>cut spending due to lower revenues from land taxes. At some point the
>>revenues would drop as land prices lowered, if you by value you mean
>>market value.
>
>
> No, land tax revenue increases monotonically with rate.
>
Not always. The initial reaction to a land tax IS DECREASING MARKET
VALUE OF UNIMPROVED LAND. THAT IS WHY SPECULATION DECREASES. Governments
at some point will see a big drop in revenues. Later as demands increase
over time the prices would rise again BUT SLOWLY. There would be an
initial hit in revenue as Speculation drops and prices drop.
>
>>So the government may need another tax. That taxes would
>>be better as a profit tax. Which does not distort static decisions.
>
>
> Static analysis in economics is like describing the function of a
> bicycle whose wheels do not turn.
>
Not quite perhaps you should learn what comparitive statics means. Greg
Mankiw's priniciple of economics has a good explanation for the non
economist.
>
>>That being said. A land or a profit tax can have dynamic implications.
>>It does lead to less profits for the firm. Retained profits are
>>important in future capital accumulation and expanding the firm. These
>>are added to credit lines to finance expansion. So these taxes could
>>lower future investment and possibly get slower job growth in the future.
>
>
> Except that that is the record of profits taxes, while land taxes have
> always done the exact opposite...
>
>
Oh land taxes do not take away from profits. Owners who are capitialist
climb a magic bean stock and find a pile of money to pay the tax with.
Think before you write. Yes the land may be put to more productive boost
and INITIALLY cause more productivity but over time the tax means less
profits to businesses who own land because the tax comes out of profits.
This makes it harder to expand and would decrease investment. No this is
not as bad as a capital gains tax but it still happens. Let me emphasize
this is a not a distortion. The land tax will not change how a firm
spends its profits on capital only it will give less profits than with
no taxes. Granted this is much better than a distortive tax but it does
have some cost.
>>This has been a big argument the last couple of years in the Houston
>>area. Management of the Houston Astros has contending, and it seems
>>rightfully so, that they have an advantage in the free agent market
>>because Texas has no state income tax. So if they offer someone like
>>Carlos Beltran less money than the New York Yankees do, Beltran may
>>actually get more take home pay because New York has a state income tax.
>>So if the NY income tax is 10% then every dollar paid in Texas is equal
>>to $(1/.9) or $1.11 offered in New York. That is because every $1.1
>>earned in New York means the guy actually takes home roughly $1. It is
>>not exact here due to rounding. So a $15 million dollar contract in New
>>York would yield Carlos Beltran the same amount of take home pay as a
>>$13.64 million contract in Houston.
>
>
> Production can move to avoid taxation, and it can hide. Land can't.
>
The atgument had nothing to do with a land tax hiding. IT SHOWS WHY
ELIMINATING THE PAYROLL TAX WOULD NOT ONLY RAISE WAGES BUT INCREASE
EMPLOYMENT. Firms pay less, workers get more. As firms pay lower wages
they hire more. THIS IS THE ADVANTAGE OF GOING WITH LAND AND/OR PROFIT
TAX OVER WAGE AND CAPITAL TAXES.
I rally think you miss the point. It is simple. A tax on unimproved
portions of the value of land IS BETTER THAN CURRENT TAXES. It has
difficulties in implementation. DUE TO DATA CONSTRAINTS IT IS UNLIKELY
WE COULD ACHIEVE GEORGES IDEA OF TAXING ALL RENTS AND APPROPIATING TO
THE PUBLIC. That being said a flat tax on the unimporved value of land
is better than current tax systems. Just do not expect to be perfectly
efficent like the theory says. To gain efficency of the tax would be
complex and costly. However, the likely DEADWEIGHT LOSS WOULD BE SMALLER
THAN IT IS NOW. Just do not think there would be no deadweight loss. The
cost of the data and implementing the tax PERFECTLY is way too high.
In s world of second best, a land on unimproved values that taxes some
improvements would be preferable. I just do not think we would get the
first best outcome the theory SHOWS IS POSSIBLE IF THINGS ARE DONE JUST
RIGHT.
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