Land tax -- success stories? (Re: better tax code: no income tax, head tax (&| ppty t)

On Mon, 10 Mar 2008 15:28:47 +0100, ask@xxxxxx (PeterBP) wrote:

RogerDodger <none@xxxxxxxxxxxx> wrote:
.....

More like it is quicksand upon which the Gerogists' church is built
... unless they can explain how land values can be successfully hidden
today when they can't be in their scheme.

Then please explain the positive outcome of cities and states where land
taxation in some form, has been enacted? The examples are few,

Indeed, they are -- few to fewer to vanishing. ;-)

One state, Pennsylvania. In which 21 little communities tried it at
some point since 1913, now down to 16.

And one city, Pittsburgh, where the program self-immolated in most
dramatic fashion and was repealed.

(And yeah, also one town in NYS that abandoned it after one year -- if
you want to make it "states" plural).

but you can't just sweep them off the table.

Like you snip away Hudson's observations about how much land value is
hidden? ;-)

I wouldn't do that. As to the little Penn communities...

None have a "Georgist" tax. They have a split-rate system that taxes
land at a modestly higher rate than improvements.....

[] The rate difference in dollars is so small that its value to owners
of improvements and its economic effect, even in theory, is dwarfed by
a one point change in interest rates -- as Michael Hudson points out,
explaining why they've produced *no* significant measurable results
and shouldn't be expected to.

Hudson is very *pro*-land tax you know, but feel free to ignore his
observations as often as you want. You can find the same ones made by
a host of other economists who've done studies on the subject.

[] The rate difference's effect in dollars is also so small that the
communities couldn't impose the costly extra assessment processes
needed to separate the value of buildings from land.
So the split-rate systems they adopted overwhelmingly just
mechanically assign a given % of total real estate value to buildings
and the rest of the % to land, and keep that relationship going
forward year-to-year, with reassessments even of buildings coming on
average only once every several years.
Which, if you think about it for a moment, sort of defeats the
whole purpose of land tax, even in theory.
That being the case, how much can one credibly claim for this
incarnation of it?

[] The split-rate difference is effectively wiped out by larger
standard property taxes imposed by counties, school districts, etc. on
the same properties.

In fact, several surveys of the residents in these communities have
found that most property owners in them don't even know the split-rate
system exists. That's how big an impact it has.

So, specifically, what have been those great effects from them that
you are talking about?

How about Pittsburgh, with the
cheapest housing and some of the highest imporovement values in the US,
by far?

Ah, Pittsburgh...

In 1980 Pittsburgh raised its tax rate on land to 4x that on
improvements, and by the late 1990s increased it to near 6x. The
Georgists are fond of claiming that this promptly converted Pittsburgh
from a collection of falling-down steel factories to a modern city.

But there's an intellectual puzzle for Georgists who claim such great
results for Pittsburgh to answer....

The Georgist claim is that by raising land tax and using the proceeds
to *lower taxes on improvements*, the lowering of the tax on
improvements will spur more improvements, construction, etc. That goes
right back to Henry himself, of course.

But Pittsburgh never lowered its property tax on improvements. ;-(

Which leaves the position of the Georgists who make all these claims
for Pittsburgh being:
"We can tax land heavily without fear of reducing improvements on
it, because land tax is *neutral* as to improvements on taxed land --
except in Pittsburgh, where increasing land tax was *not* neutral to
improvements and spurred all kinds of new development right away!"

You're going to have to square that circle before claiming land tax
incentivized all kinds of construction in Pittsburgh.

The major study on Pittsburgh land tax results (Oates and Schwab,
1997) noted this contradiction in Georgist thought while concluding
from the empricial evidence that the Pittsbugh development boom (1)
started before the land tax increase and was caused by other normal
economic factors; supplemented by (2) a moratorium on taxes on
improvements enacted *before and apart from* the land tax; and (3) a
new large Federal urban development program for Pittsburgh.

They did throw the land taxers a bone though -- they said that if
Pittsburgh had raised the same amount of revenue that it did through
the land tax increase instead through a tax increase on improvements,
that increase on improvemetns might have dampened the development boom
that was already underway. Sort of weak tea, but maybe it's enough to
make you happy?

Georgists love the "post hoc ergo propter hoc" fallacy when a good
thing happens to some place with a split-rate property tax -- it must
have happened because of the split rate! Even if the scale of the tax
to the benefit is so small as to be absurd, and even if they must
suspend their own most basic beliefs (tax on land is *not* neutral!).

And, of course, *bad* things never happen with a land tax.

Which gets us to the Pittsburgh Part II - -the land tax's flaming
self-destruction.

After the 1980 tax changes bringing in the higher land tax, Pittsburgh
let most basic assessments remain unchanged for many years -- keeping
the same buidiling-to-land value property ratios year-in and year-out,
like the other Pennsy spit-rate communities mostly do. Most of
Pittsburgh didn't have a land value reassessment for 20 years.

Of course that largely defeats the purpose of the land tax -- hey,
there's another circle for the Georgists to square, how did land tax
create such great benefits in spite of that?

Anyhow, that of course caused lawsuits, which *finally* caused a
general reassessment of land value for 2000, which found a general 80%
increase in land value. (Land price is highly volatile, as is the
price of all things in inelastic supply, as anyone familiar with econ
101 knows, and 2000 was a boom year.)

That in turn lead to the filing of 170,000+ land valuation appeals in
a city of 500,000 properties, which of course caused more law suits,
and politicians damning the assessors, and the entire tax being put on
hold, until the courts upheld the assessors in general, but let all
170,000+ appeals proceed individually on the merits. Which collapsed
the entire system, and caused its repeal.

Ah, LVT, it is so *simple* and inexpensive. ;-)

Pittsburgh ... there you have it's great American success story.

Let's see, are there any others elsewhere?

Hey, Hong Kong!! Roy's favorite.

Honest Georgists admit this, and say that with a rent-confiscating tax
the Government Land Rental Adminstration will be the effective owner
of all land and be the party leasing it out under Georgism.

As has worked so brilliantly in Hong Kong.

Land taxers love to invoke Hong Kong as the great international
example of the "brilliant" glory that land tax produces.

Except Hong Kong doesn't have any land tax at all.

So much for that example -- so it's just as well you didn't cite it.

Hong Kong does charge a symbolic 3% of property rental value as "land
rent", with rental value determined including the value of
improvements.

That 3% is not of property value, but of rental value. So if rental
value, including improvements, is 8% of total property value, then
"land rent" = 0.0024 of improved property value annually. That's
about 90% less than in most of the US.

Of course the Hong Kong government does make money off of land in a
*big* way by hoarding it as the monopoly owner.

It "reclaims" land when cheap (hence the symbolic land rent, to keep
people from believing they own their land in fee simple) ... holds
great tracts off the market to *explicitly* manipulate its price ....
then sells it when dear, and repeats the process.

The government enriches itself not only in the obvious way by doing
this, but also through its infamous crony relationships with the
island's notoriously corrupt developers.

Restricting the amount of land in the market does *what* to the prices
developers get?

Well, it leaves the citizenry with the most costly housing in the
world for starters. And the most costly office space, etc., too. Which
the gov't collects a share of both through its 15% tax on cash rents
and its infamous crony kickbacks and backroom political deals with the
billioniare developers.

Then of course the great volatility of land prices can play havoc with
its economy when land prices either go down -- as in the 1997 Asian
crisis -- or up too far, pricing non-crony businesses and the
citizenry out of the market, etc.

Hoarded land ... highest prices anyhwere ... politicians extorting
through gov't monopoly .... endemic crony corruption with billionare
developers -- what else do you expect from politicians having monopoly
power over a country's most valuable asset??

There's no shortage of news reports and studies on all this to be
googled up in a minute if any Georgist actually wants to verify if his
Hong Kong dreams are true (but how many do?) E.g:

"A Dangerous Miscalculation: Hong Kong's fixation on property

"It is a myth that Hong Kong is a low-tax haven, as there is a steep
implicit tax in the form of artificially high land prices that the
government engineers ...
"It has nurtured a system in which a few developers are given the
privilege of underwriting, directly and indirectly, the 40% of
government revenue that derives from real estate. The developers serve
as both de facto tax collectors and as a construction arm for the
government, for which they receive profit margins and privileges few
monopolists dare dream of... "
http://www.time.com/time/asia/asia/magazine/1999/990215/shaw1.html

"Re-examining the Role of Land Policy:
A Decade of Misaligned Land Policy "
http://www.tdctrade.com/econforum/bea/bea050401.htm#


"A Broken System: Hong Kong Property development"

"...although the government boasts that as much as 72 percent of Hong
Kong is in parkland or remains undeveloped, its urban areas mostly
feature only a handful of ?sitting out areas? and patches of concrete
for sports rather than any real parks..."
http://www.asiasentinel.com/index.php?option=com_content&task=view&id=18&Itemid=32

Wow! 72% undeleveloped! Nobody hoards land like a government! Eh?

Etc. etc. etc.

Yup, government monopoly owning and administering all land...

As has worked so brilliantly in Hong Kong.

... well, some of us have different definitions of "brilliant". ;-)


OK does anybody have any *other* great examples of Georgism working in
practice???

Look, nobody doubts that land tax is theoretically attractive, *if*
one can make it work in practice.

But LVTers then go on to WAY overclaim for it:

It's the simplest! ... It's *easy* to administer! ... It costs the
least! ... Land value can't be hidden, under it alone! ... What else
could possibly have rejuvinated Pittsburgh??? ... Tax assessment
methods improve greatly -- even though they stay the same! ... Hidden
land value becomes visible! ... Assessment costs plunge! ... Appeals
and litigation over assessed values -- which now cost 20x as much as
with other taxes -- go away! ... Corrupt assessors become honest! ...
Everybody gets a pony!!

If you want to make the theoretical advantages of land tax become
*real*, then admit its real problems, and try to find ways to
eliminate them.

Don't live the Georgists' delusion that they have found the formula
for Tax Utopia that is so simple that a few usenet posters can be its
champions -- with the only problem being that *everyone else in the
entire world* is too stupid, corrupt or dishonest to admit it.

Occam's razor as to that.



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