Re: Land, Labour and Capital Taxation....

From: The Trucker (mikcob_at_verizon.net)
Date: 12/16/04 

Date: Wed, 15 Dec 2004 21:31:53 -0800

Igor wrote:

> royls@telus.net wrote:
>
>> On Tue, 14 Dec 2004 06:50:35 GMT, Igor <jjweatherby@houston.rr.com>
>> wrote:
>>
>>
>>>lev_lafayette@yahoo.com.au wrote:
>>>
>>>
>>>>Igor wrote:
>>>>
>>>>
>>>>>Really try this one. HOW DO YOU EMPIRICAL MEASURE RENT? You have to
>>>>
>>>>know
>>>>
>>>>
>>>>>that before you can tax. Not theory only but solid empirical
>>>>>measurements.
>>>>
>>>>Presumably it is derived from market values. Land valuation is a pretty
>>>>exact science from my understanding.
>>>
>>>Land value is not rent. MArket value is not rent. Rent is determined by
>>>the difference in the intrinsic productivity of the land compared to the
>>>intrinsic productivity of other land. Yes the discounted stream of
>>>expected revenues due to the higher productivity is PART of price but
>>>not all.
>>
>>
>> In this case the rest does not matter, because the rent need only be
>> established relative to that of other land.
>>
>
> Yes but the argument all along has been this is difficult and costly. To
> measure rent you have to set a big bureaucracy that grades plots of
> lands and compares them. This means in depth study of EVERY parcel of
> land in the US.

This is ridiculous. You set the tax to 1% of market value or 2% or
20% or whatever and the free market determines the value. All that
is necessary is to estimate the value of the fixed improvements so as
to subtract these out of the equation.

> To set taxes to nearly or completely eliminate all rents
> would be MUCH too costly.

So why do it? Elimination of 80% is good enough.

> This does not mean a land tax on unimproved
> value would not be superior to current taxes, even if the methods meant
> some improvement was taxed due to data being a little off. It just
> simply says it is unlikely to lead to textbook efficency and it is
> unlikely we can actually extract all or nearly all rents without taxing
> higher than rent in some cases as George suggests. This does not say the
> land value tax may not still be better than a sales tax or a payroll
> tax. I am not sure about payroll. The Deadweight loss is HIGHLY
> dependent on the elasticity of labor supply. If you believe people how
> much people decide to work is not highly affect by taxes then the
> payroll tax has a small deadweight loss. If you believe they react
> strongly to wages then it is large. So I do not claim to know the size
> of the deadweight loss and it is a difficult question because different
> groups have different elasticities of labor supply. So the effects on
> labor George speaks of may be very small indeed or very large.

If taxes on labor are eliminated then there is NO loss.

>>
>>>To understand the problem you must understand George did not advocate
>>>just any land tax. He advocated one that made rents very small and close
>>>to zero.
>>
>>
>> That claim is completely false, and proves that whatever you have read
>> of Henry George, you have most certainly not _any_ understood of it
>> _at_all_.
>>
>
> No not quite. To eliminate speculation you have to eliminate rent. To
> eliminate all speculation you have to eliminate all rent.

But there are much better things on which to speculate if you eliminate
MOST of the rent. HG advocated leaving some rent so as to encourage
caretaker mentality.
 
>>
>>>To set taxes right and make sure you do not cause the market to
>>>halt, you have to calculate rent.
>>
>>
>> No, you do not. You just let the market calculate it, as it does now.
>>
>
> THE MARKET DOES NOT CALCULATE ECONOMIC RENT. ECONOMIC RENT IS INTRINSIC
> TO THE LAND. ECONOMIC RENT IS DETERMINED BY NATURAL FACTORS AND NOT THE
> MARKET. ECONOMIC RENT IS NOT DETERMINED BY SUPPLY AND DEMAND NOR DOES IT
> CHANGE WITH MARKET FORCES. MARKET RENT INCLUDES RETURNS TO CAPITAL.
> ECONOMIC RENT IS NOT EQUAL TO WHAT A LANDOWNER CHARGES A TENANT. YOU
> HAVE A VAST MISUNDERSTANDING OF WHAT ECONOMIC RENT IS.

A misunderstanding exists when two or more people have a different
definition (perception) of a term. For me it gets back to asking
"how much will you _pay_ for the right of exclusive use of this land?".
That is what land rent _IS_ and it matters not as to WHY the market
rent is what it is.

>>
>>>Market value is easy to calculate rent is not.
>>
>>
>> False. Market value is based on rent.
>>
>
> BASED ON BUT NOT ENTIRELY. ECONOMIC RENT IS ONLY PART OF THE VALUE.
> Market value will include improvements and things that do not
> intrinsicly effect production like distance from roads, railroads, or
> population centers. These things affect unimproved MARKET VALUES but
> have NOTHING TO DO WITH ECONOMIC RENT.

That terminology thing again.... The distance from roads, etc. most
certainly will effect production.

>>>The other problem is a bit easier to fix but still not easy. You have to
>>>seperate the part intrinsic value of the land from improvements.
>>
>>
>> That is trivially easy: any competent appraiser does it several times
>> a day.
>>
>
> NO HE DOES NOT. He has an estimate for unimproved value but that is not
> really unimporved value. THAT ESTIMATE INCLUDES THINGS THAT HAVE NO
> BEARING ON PRODUCTIVITY LIKE DISTANCE FROM THE CITY CENTER, DISTANCE
> FROM DISTRIBUTION CHANNELS, QUALITY OF ROADS, ETC. THIS IS NOT ONLY
> INTINSIC VALUE. What a real estate agent or an accountant calculates is
> not always what an economist is interested in nor is it complete.

How much are you willing to pay to use this location? That is the
rent.

>>
>>>So two things must be done. Tax ONLY UNIMPROVED LAND VALUES. This is not
>>>impossible but it could be difficult.
>>
>>
>> I see. What is now done easily and routinely would somehow become
>> "difficult" under land value taxation.
>>
>
> The way it is measured now serves the current purpose IT IS NO WHERE
> NEAR EXACT ENOUGH TO ACHIEVE TEXTBOOK EFFICENCY THOUGH.

It is a better deal than the current mess.

>> You see, the "objections" Igor, Peter Lawrence, Murray Rothbard, etc.,
>> etc. and all the other anti-land tax propagandists raise all come down
>> to just one:
>
> I am not against a land tax. If you have been reading what I wrote you
> will see this. I am pointing out we will not get the perfect result
> George hypothsized. Would it be better than the current system? Very
> likely. But, it can not be the perfect system you have concocted. To get
> it to texbook Georgian standards would be EXTEREMELY COSTLY. This tax is
> going to have a high administrative burden. You have to have a large
> bureaucy to calculate and track values much larger than the IRS.

This speculation about "administrative burden" is quite wrong IMHO.
It is because you refuse to use free market value to do the work.

> land taxation can't possibly work, because.
>
> That is not what I said. I said it will not be the pancea that is
> completely costless to society that you say it is. It is not as easy to
> implement as you protray it to be. Your preconceived notions are getting
> the best of you and blinding you to what is being said.

Unlike Roy I do not see this as the holy grail. My holey grail is
representation for the people of our nation in government and the absolute
need to then educate them as a means of self protection. But land
taxation is much better than income or wage taxation.

> >That's all.
>> Just, _because_. It can't work. No, no. They won't hear of it.
>
> That is not what is being said. A land tax can work but will not be the
> textbook example George gave. You will not reach exactly what George
> hypothesized.

OK. Still wins.

>>>Secondly calculate rent for each
>>>category of land.
>>
>>
>> It is each parcel that the market calculates the rent of,
>
> LEARN WHAT ECONOMIC RENT MEANS FOR THE LAST TIME THE MARKET DOES NOT
> CALCULATE ECONOMIC RENT. THE MARKET HAS NOTHING TO DO WITH ECONOMIC
> RENT. ECONOMIC RENT IS DETERMINED BY INTRINSIC FACTORS TO THE LAND NOT
> MARKET FORCES, NOT IMPROVEMENTS, NOT ANYTHING ELSE. A parcel of land in
> the valley gains economic rent SOLELY because it is more prodcutive than
> a rocky boulder strewn slope on a mountain. THIS HAS NOTHING TO DO WITH
> MARKETS OR ANYTHING ELSE ONLY THE ENDOWMENT NATURE HAS GIVEN THE LAND.
> MARKETS DO NOT DETERMINE ECONOMIC RENT.

Markets determine the AMOUNT of rent. What will the user of the land
pay for the use of the land? Whoever bids the most will get to use
the land. Why is this concept so difficult for you? You think I need
you to TELL me how much to bid?

> not each
>> category. There is absolutely no reason to calculate land rent by
>> category, so of course you immediately insist that it is absolutely
>> necessary.
>>
>
> YES THERE IS THAT IS THE DEFINITION OF RENT. READ GEORGE. READ RICARDO.
> CLASSICAL ECONOMIST ARE NOT REFERING TO MARKET RENTS THEY REFER TO
> ECONOMIC RENTS. YOU HAVE TO UNDERSTAND THE CONCEPT BEFORE YOU CAN
> UNDERSTAND WHY CLASSIFICATION IS NEcESSARY. IT IS THE DIFFERENT GRADES
> OF LAND THAT CREATES RENT. People settled on the best land first. As
> population grew people were forced to inferior land this allowed land
> owners of the beter land to GAIN AN ECONOMIC RENT. The rent is derived
> from the better natural productivity. NO ONE IS WILLING TO PAY TO USE
> THE WORST LAND. THEY HAVE BETER OR EQUAL LAND. They will pay to use the
> best land because after rent profit is higher BECAUSE THE LAND IS
> NATURALLY MORE PRODUCTIVE. THIS HAS NOTHING TO DO WITH MARKERS ONLY THE
> INTRINSIC VALUE OF THE LAND.

How much will you pay for exclusive use of this site? It may be because
it makes more corn or because it is next to a rail line to ship the
corn, or because there is more rain here, or, or, or. It all gets
taken care of by the free market.

>>>Different land will have different rents. Those with
>>>higher rents will need high tax rates to extract the same percentage of
>>>rent that low rent lands are taxed at.
>>
>>
>> That is of course false.
>
> In Roy's Bizarro world where Ricardo and George say RENT is the amount a
> landlord charges a tenant and NOT ECONOMIC RENT. I am will not discuss
> more until you learn the terms.

You, sir, need to learn the terms.

>> In order to discuss this issue
>> intelligently, one must be familiar with high-school level mathematics
>> and logic, which Igor is unfortunately not. The same rate of taxation
>> would apply to all land, and would result in the same fraction of rent
>> being recovered from all land.
>>
>
> I am very familar with high school mathematics to understand what I AM
> SAYING YOU HAVE TO KNOW WHAT ECONOMIC RENT MEANS. If you understand
> that then the rest of the argument falls into place. If you tax 10% of
> unimproved value then land with NO rent will STILL BE TAXED.

10% of zero will be zero. -- no tax

> THE
> PERCENTAGE OF RENT TAXATION THEREFORE APPROACHES INFINITY. High rent
> land ECONOMICS RENTS will be taxed at a rate much less than approaching
> infinity.

Progressive taxation of land is not necessary. Progressive income tax
is necessary because income tax is not a tax on rent but at the higher
incomes.

>>
>>>To achieve George's idea fully
>>>the tax code becomes complex and could be a beauracratic mess rife with
>>>special interest lobbying to make sure their land is calculated to be
>>>low rent.
>>
>>
>> No, in fact the exact opposite is the case.
>>
>> As a general rule, if you just take the opposite of whatever Igor
>> claims, you will have the truth.
>>
>
> In Roy's bizarro world where the terms are what he wants them to be.

Roy seems to have the same understanding of these terms as most of the
rest of us. That normally means that the lone dissenter is in error.
But maybe not. Did you get your definitions from George Bush, or
Ashcroft, or direct from God?

>>
>>>That being said a tax on unimproved land would be better than labor and
>>>capital gains taxes. So are corporate profit taxes. These are none
>>>distorting. The problem lies again in congress. Land taxes decrease the
>>>selling price of land and therefore tax revenue from sales.
>>
>>
>> Silliness. The land tax _replaces_ the tax on sales.
>>
>
> SALES OF LAND.

????? 

-- 
"I know no safe depository of the ultimate powers of society but
the people themselves; and if we think them not enlightened enough
to exercise their control with a wholesome discretion, the remedy
is not to take it from them, but to inform their discretion by
education." - Thomas Jefferson.  http://GreaterVoice.org

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