Re: Laffer Curve
- From: royls@xxxxxxxxx
- Date: Tue, 05 Dec 2006 19:51:28 GMT
On Tue, 05 Dec 2006 08:35:49 -0500, Bob Kolker <nowhere@xxxxxxxxxxx>
wrote:
So, as a policy guide, the Laffer Curve, while
mathematically correct, can be safely ignored.
Right.
The LVT has one outstanding virtue. Its simplicity. Also
taxing unimproved land provides only minimal revenues to government
which will necessarily keep the government limited in scope and power.
I estimate that land rent is currently about 20% of GDP in most
industrialized countries. Dr Michael Hudson has claimed that some
putatively Georgist libertarians actually oppose 100% land rent
recovery because it could raise as much as 40% of GDP in revenue,
leading to the feared and hated "big government." Certainly there are
sparsely populated resource extraction economies where the resource
rent is over half of GDP. It is difficult to say (IOW, I don't know
;^) what the long-term GDP fraction of land rent would be in a pure
LVT industrial economy, as there are opposing factors at work, and
both positive and negative feedbacks involved.
The example of Kiaochow, a German colony in China before WW I, is
perhaps the closest anyone has come to it. Kiaochow experienced
extremely rapid growth in both GDP and land rent fraction, as its
population and economic activity boomed under a 6% annual LVT. LVT is
a magnet for both immigration and investment, and Kiaochow saw massive
inlows of both; but with a larger-scale implementation, the intensity
of this attraction would presumably be attenuated. Economic theory
predicts that because the burden of most taxes is largely shifted onto
land rent, abolishing all other taxes would increase taxable land
rents, perhaps very substantially.
It is a matter of some puzzlement to me why certain people oppose big
government so ferociously -- apparently even more than they oppose bad
government. The empirical record is clear: since the fall of
socialism in the former USSR and China, size of government is if
anything positively correlated with societal well-being. Recent
international research found that the Danes, with one of the biggest
governments in the world as a fraction of GDP, are the happiest people
in the world, while people in other wealthy, advanced countries with
substantially smaller governments, like Japan and the USA, are notably
less content.
This may be related to the fact that people's life satisfaction is
strongly related to the quality of their social and family
relationships. The chronic economic stress and insecurity that
results from governments doing little to mitigate the injustice their
issuance and enforcement of rent collection privileges creates fosters
a dog-eat-dog economic and social environment where the principal form
of competition is not to be more productive, but to be less troubled
by conscience, and business reaps maximum profits not by serving the
public, but by robbing it.
-- Roy L
.
- References:
- Laffer Curve
- From: Bob Kolker
- Laffer Curve
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