![[Henry_George.jpg]](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdBlgRCXf8qegLRynK504zXqJySqsqMh7s6WDw-EteidkYq2jhqH17dZT-nunZNdHgvdqkKBD1ZjbwMJoPabW0-rboVmdyn-dcJ7AggC4pMq89KIBNytiCf-PqgmBz_HB1cwx08A/s400/Henry_George.jpg)
In Quartz, I call for a Henry George Tax (or land value tax) as part of a solution to San Francisco's class war:
George’s key insight was simple: The value of land is more than just the value of the things on the land...After all, landlords don’t create land; a location will be there no matter who collects rent on it. By getting paid just for being in the right place at the right time, he reasoned, landlords suck value out of the productive economy. George suggested that the fair thing to do would be to tax the value of the land—not the structures built on top of it, but only the land itself—and distribute the proceeds to the poor, or use them for infrastructure and other public improvements...
The Henry George Tax has many good points and few downsides. Unlike income taxes, sales taxes, or corporate taxes, the Henry George Tax has no chance of choking off economic activity; after all, the amount of land is fixed, so you can’t tax it out of existence. Also, unlike the property taxes we have now, a Henry George Tax actually encourages landlords to build useful, valuable stuff on top of the land they own. Conventional property tax pays people not to build things on their land, since doing so will mean having to pay more tax. But the Henry George Tax—which would replace conventional property taxes—makes buildings and other productive structures tax-free, thus encouraging landowners to build more of them...
And, as Henry George himself pointed out, the tax redistributes wealth from the rich to the poor without punishing rich people for creating wealth...It appeals to our principles of fairness.
What San Francisco needs now is a Henry George Tax. The policy would bring rents down, and thus encourage tech companies and their brilliant employees to keep moving into the city, to keep interacting and mixing and generating the ideas that make the tech world go. At the same time, it would raise the money the city needs to build better trains, run more bus lines, and build more public housing that will benefit the poor and middle class of San Francisco. And it would do it all in a way that seems much more fair than other kinds of taxation...
[I]if tech companies and San Francisco citizen and activist groups end their battles and team up for mutual benefit, they just might be able to get a Henry George Tax passed.Read the whole thing here!
Updates:
Of course Matt Yglesias is right that restrictive zoning policies heavily blunt the impact of a Henry George Tax. That is why zoning liberalization and the HGT are complements. But also realize that the revenue offered by the HGT is an incentive for city governments to liberalize zoning.
Maybe the Stiglitz and Krugman work goes into it, but how do we define and differentiate between the land and everything on the land?
ReplyDeleteIf I smooth out the land or improve it in someway for building, is that truly the "land" in the way the economic theory talks i.e. given by nature?
The tax is an interesting idea, especially for San Fran.
This is a great question. A true Henry George Tax would tax only the value of the location, because the land itself can actually be improved with technology. This is tricky to implement, and is in fact the main challenge of a HGT.
DeleteThe "the value of the location" could also depend upon work done by the occupiers.
DeleteLand around Las Vegas is more valuable than other bits of desert largely because of human endeavor to develop it. Would people who own land in Ls Vegas pay more tax because of this ?
Yes, I think that's the way the tax works. As more people develop the adjacent parcels, the location value of your undeveloped parcel goes up by virtue of the fact that you're close to them, and you pay more tax. A parcel in Manhattan has more location value than a parcel in southeastern Wyoming. It's a cluster effect.
Delete"Would people who own land in Ls [sic] Vegas pay more tax because of this?"
DeleteYes, people would pay more tax, but that is offset by two things:
1. If you are a landlord or commercial owner, the population and development growth offers greater revenue potential as more customers come into the area. If you were a new landlord, then the price of land would have been higher post-growth to obtain, so the HGT merely puts new markets on the same level as existing entrants.
2. If you are a homeowner, then the increased growth will cause an increase in taxes. This is fair because new entrants will be paying higher land prices/HGTs for the same benefits of being in the same location. Also, an increase in land prices for existing homeowners can be leveraged into a capital gain that is an unearned windfall; the tax makes sure that the windfall is never realized.
Finally, most of us who advocate a HGT also argue that the proceeds of a HGT will exceed government outlays and provide for a Citizen's Dividend. If more people are moving in and building more developments, the CD will increase to offset some of the increase in taxes. If the rise in property value is entirely due to non-government investments/population growth, then the net effect on citizens would be zero from a land value perspective, since citizens will either move down to a less expensive property with a higher CD, or choose to remain in their current property and consume their higher CD as increased land benefits.
I have read about this before and agree wholeheartedly. This is THE fair tax nationally (rather than income) - after all, the primary role of government is defending the land, and the origin of land ownership generally derives from an original sin of violence. Practically its somewhat questionable how to allocate value to land in an abstract way stripped of the value of buildings.
ReplyDeleteHow would zoning regulations affect the viability of a Henry George tax? Could there be situations where zoning is too restrictive making both developing and holding onto the land unenviable positions?
ReplyDeleteIt seems that implementation of such a tax would need to happen along side master planning, and/or more liberal zoning, and that seems like an almost impossible task. But perhaps I am misunderstanding the specifics of the tax.
It seems like the assessment of the value of the land would take into account the zoning restrictions. So implementing the tax shouldn't require any changes in zoning per se.
DeleteYep, obviously zoning will probably have to be changed too, but a HGT will give the city a financial incentive to change zoning.
DeleteZoning would affect how much revenue a city could get, but it would not matter to the landowner if zoning remained. For example, if a piece of land was zoned for being only a wildlife preserve for cute bunnies, then the tax would be zero, as the demand for holding land that one could not use would be nil. If it were re-assessed to residential or commercial use, then the tax would go up accordingly.
DeleteZoning has the perverse effect pre-HGT of speculators buying down-zoned properties at low prices and then, after a number of years, lobbying for up-zoning at the precise moment that they want to sell. The HGT would prevent that because once a property is up-zoned, the tax would go up and the price sought by the seller would have to go down to match the buyer's ability to pay.
Not sure if HGT gives city governments more of an incentive to change zoning than they already have. After all, under a property tax regime not only can you tax the increased value of up-zoned land you can also tax the value of the presumably more valuable buildings you can build on it.
DeleteIn an area like SF, property taxes are close to a land tax as property values are in excess of 80% land (probably more like 90%), although this is heavily distorted by Prop 13 limits. If you think removing those would lower rents, you must be living on a different planet. It would greatly diminish the existing value of real property which would largely fall on current owners as much of this is expectations of future capital increases. One problem is the value of land changes dramatically with use, so the building of high rise with its increased density will greatly increase the value of land nearby. Zoning fights would be even more intense as developers would want to increase value even if taxed while occupants would want to keep it and taxes down, so it is unlikely to increase supply without other changes.
ReplyDeleteYep, Prop 13 will have to go.
DeleteThe only politically feasible hope is to REFORM Prop 13. There are extremely powerful interests that can launch huge FUD campaigns against it. Prop 13 is brilliant in that it concentrates the benefits into the hands of large landholding families while spreading around tiny nibbles to people who own their homes.
DeleteIf you try to repeal Prop 13 there are too many people who get a tiny benefit who will vote against repeal.
REFORM could include keeping Prop 13 for primary residences while phasing out the arbitrary 2% annual cap for other properties. The cap could also be changed for all properties from the arbitrary 2% cap to an inflation index. But you've got to be careful - the more complicated you make it, the more opportunity for FUD mongers to kill the whole thing.
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ReplyDeleteNoah, the problem in SF seems to be zoning and that you can't expand the housing supply because of it. How would the tax you describe bring down rents?
ReplyDeleteBy increasing supply. Obviously zoning will probably have to be changed too, but a HGT will give the city a financial incentive to change zoning.
DeleteLand value taxes — or community land rents, as I call them — tend to decrease the selling price of land in relationship to its pure rental value; the land’s actual rental value remains unchanged, at least over the short term. However, the efficiencies gained from land rents can create so much wealth in any given area, and thus increase the rental value of land, that the selling price of land can even increase, but still decrease in relationship to the rental value of land and to the total amount of new wealth that has been created. People’s paying capacity for central locations will actually increase, and this can boost land prices in well-serviced neighborhoods overall.
DeleteSince the size of the LVT payment is a fraction of the land’s rental value, the absolute size of the payment will always approximate the rental value of land; if LVT payments were greater than the rental value of land, people wouldn’t buy land (in fact, you’d have to pay them an incentive to buy land), which is why LVT payments (or community land rents) are always less than the rental value of land. Therefore, since LVT lowers the selling price of land and simultaneously increase its holding cost — up to but never greater than its rental value — LVT can help people move from a monopoly model on land toward a rental model in such a way that the private use of land is retained.
Since the rental price of land on the open market is never greater than what people are willing to pay in order to generate a profit from their productive use of land, land value taxes will always be lower than the amount at which an entity that puts land to good use can still turn a profit, which is why the LVT model represents a smart approach to land use, both from a societal as well as from an individual perspective.
Noah,
DeleteThere is already great interest in developing properties (increasing supply). Simply lighting a little more fire under the feet of longtime landholders won't change the regulatory environment or the NIMBYism that prevents development.
Just because a land tax is a good idea generally, doesn't mean it addresses the primary root causes of San Francisco's housing issues.
Let's talk about one jurisdiction -- say, the City of San Francisco. About 47 square miles. Of course only a limited number of people can live there, and zoning restrictions are a way of reducing that number.
DeleteWhat is another way? I can think of a perfect one: Allow private entities to freehold land. Such an owner is not capable of putting his site to better use (more housing and/or employment) than land users themselves; his is the role of gatekeeper, and he is ONLY capable of forcing it to worse use.
If we assume that all freeholders -- or rather, all owners not paying the site's full rental value to the community -- are magically putting their sites to full use (an assumption that ignores the reality of speculative incentives), then you'd be right to say that full-LVT leasehold ownership would not increase housing supply.
But you'd still be ignoring the issue of economic justice. What if the million-or-so residents of San Francisco rented land from each other instead of from a few hundred privileged rich? Well, you'd eliminate poverty in the city, for one. And the list goes on ...
Eliminate property and land tax, instead tax the income, including unrealized gains (that will wake up many here!).
ReplyDeleteI don't understand how improvements would be encouraged and not discouraged. How do we decide how much value is the land and not the improvements, and how do the collective improvements that my neighbors and I make not increase the value of my land?
ReplyDeleteProperty taxes are used to pay for local services: roads, sewer, transit etc. More intense use of land in the form of high rise residential and commercial buildings increases density and public use. Moving to an HGT tax would divorce the taxes on a development from the public costs imposed by that development. Repealing proposition 13 and reforming zoning seem more productive approaches.
ReplyDeleteThe basic idea is sound, although Yglesias is probably correct that land use restrictions in SF will make the postive effects be small. Paul Samuelson also supported it along with Stiglitz and Krugman, and Adam Smith for that matter, as well as Ricardo, and going further back, the physiocrats such as Quesnay. Given all this high powered support, and some empirical evidence that it does operate at least somewhat as predicted to increase construction when implemented, why is it not more common? Indeed, some places that have used it have stopped doing so.
ReplyDeleteSo, some history and data. The natiions that currently have a pure land value tax are Estonia, Singapore, and Taiwan. More common than pure land taxes are differential tax rates for land versus structures, with higher rate on land. Some places that have this system are Denmark, Russia, Hong Kong, New South Wales in Australia, Mexicali in Mexico, with it also being allowed in the states of Pennsylvania, Maryland, and Connecticut, In these latter no municipalities in CT have done it, but one in MD, Fairhope, has a full pure LVT.
The PA case is interesting, with 20 communities having instituted it, with Altoona like Fairhope going all the way to a pure LVT. Others have done a differential, usually twice the rate on land as on structures, with Pittsburgh and Harisburg the largest. Pittsburgh had it from 1913 until 2001, when they abanidoned it. Studies of that city by Richman in the 1960s and more recently by Wallace Oates have confirmed at least some construction effects as predicted. But why has Pittsburgh gotten rid of it and why is it so rare?
The main reason is that it is very hard in central urban areas to get accurate data on land values. The reason is that the market for vacant land in such areas is very thin and the prices of vacant lots as a result can vary wildly and nearly arbitrrarily. Thus some decades ago I looked at the data on sales of vacant lots over time in Madison, Wisconsin. On the edge of the city there was a thick market in vacant lots and the prices were pretty well defined. But in the central city I would find lots not that different from each other that would be selling for as much as a tenfold difference in price. The market is not at all orderly, which means that assessments become very arbitrary.
There is also a revenue problem if one is going to go to full LVT. This is probably why George could never get anybody to follow his proposaals, although they did so in BC in Canada early in the 1900s, only to retreat from it later. If you have high spending, you can end up with land abandonment rather than construction, which may be why only small places like Altoona and Fairhope have done it in the US, although clearly Singapore is not small.
As another practical matter, I note that it is rare for there to be different owners of sites and structures on a site (or subsoil rights), although this does happen, with a great pecuriliarity regarding this to be found in St. Louis where surface rights follow the Northwest Territory and US tenure system whereas the sub-surface ones follow the French pattern dating from French rule. One can see the French system in parts of Wisconsin along the Fox River near Green Bay and the Wisconsin River near Prairie du Chien, with lots being long strips all bordering on the river dating from when water transport was what there was, whereas the NW Territory system is a bunch of embedded squares, with the occasional rectangle.
Bottom line is that if zoning regs relaxed there might be some positive construction effect, but probably not all that great, and certainly not enough to make much of a dent in the income inequality situation in SF..
Barkley Rosser
Let me add that it is not just Prop 13 that needs to go if SF wants to do this, but there needs to be a major change in state law. Again, only CT, PA, and MD even allow differential site taxation for municipalities. In all other states it is a matter of state law that rates across different kinds of properties must be equal, whether vacant land, sites with residential or industrial or mercantile structures, or whatever. So, a state law repealing that would be needed, not just a repeal of Prop 13. It is simply illegal at tthe current time for SF to do any form of this.
DeleteThis is a good point. The HGT does present some difficult methodological issues. Perhaps it would be easier just to keep the property tax system but with incentives to development, such as tax abatements to developers, as many municipalities do. In any case, it seems there's a good case to be made that in many cases property taxes are more efficient than sales or income taxes,
Delete"....but one in MD, Fairhope, has a full pure LVT."
DeleteI think you must mean Fairhope , Alabama.
Thanks for the correction, Anonymous. Fairhope, AL and Arden, DE were consciously founded to bre Georgist land tax colonies. The first town in the country to have a pure LVT was Hyattsville, MD in 1896. Attempts were made to implement variations of it in parts of the reconstructionist South after the Civil War. The state of state laws on this varies a lot, with more states than I listed making some allowance for it, although not CA. Thus in Virginia where I live the jurisdictions of Fairfax County and the City of Roanoke have been granted the authority to have some sort of differential taxation on land, although it has not been implemented.
DeleteJBR
Thanks for all the history, JBR!
DeleteIt's really not difficult. It's only "difficult" because of the way the current real estate market is structured -- that is, to treat land as a commodity instead of something that has a rental value.
DeleteThere are lots of potential ways to structure a real-estate market so that government assessments of HGT (LVT) are not necessary. Self-assessment is one idea (link below describes the basics). Having land acquired based on rental bids -- "I bid $x/month" -- with separate conditions existing for the sale of the manmade property is another. If you stop using a fraudulent real estate market that conflates land with manmade structures, it's pretty easy, actually.
http://blog.paul-lockett.co.uk/2008/10/land-value-taxation-without-valuation.html
As far as it inducing zoning changes, cities already have a far greater incentive from the zoning changes themselves, so this would not be a large effect.
ReplyDeleteNoah,
ReplyDeleteSuppose someone goes to a bad/depressed neighbourhood. He then proceeds to build a museum and an arts centre there. Over a couple of years, artists, professors and other upwardly mobile people transform the area. Real estate values (land values) skyrocket.
Should that person, whose efforts were the catalyst, be taxed on the valuable land he now owns? After all he is not the recipient of a windfall is he?
Can I just give people who raise minor administrative challenges as somehow a massive problem. Just think about income taxes and the administrative framework necessary to monitor and enforce this tax system.
ReplyDeleteNow consider land, where all parcels are recorded, ownership is well known etc. They can't be hidden, chopped up into trusts and other tax-dodging accounting structures. The government body in charge simply sends the bill to the owning entity each year.
Regarding Barkley's point about abandonment, that is a problem property law, of some inadequacy in the process for reclamation of land by the State for unpaid taxes.
For those concerned about the size of rents available, I would direct you to Gaffney's principle that All Taxes Come Out of Rents.
Meaning that increasing land taxes would involve decreasing other taxes, such that land values would rise in nominal terms, increasing the land tax revenue as other tax revenues decline. Remember the current value of land is conditional on the current tax regime. This value will change as the tax regime changes.
Hence, there is a never a problem of revenue inadequacy - you can always get tax revenues at least equal to current revenues via land taxes.
Hi
ReplyDeleteHi, I was simply checking out this blog and I really admire the premise of the article this is regarding and this is really informative. I will for sure refer my friends the same. Thanks
Wouldn't a tax on unimproved land cause people to build inefficiently tall structures? Something like this happened in Holland in the past when they taxed properties based on street frontage. The result was very narrow buildings.
ReplyDeleteOne final note on this. There actually is a journal that is dedicated to a Georgist perspective, or was when it was founded and continues to retain some of that orientation. It is the American Journal of Economics and Sociology. Anybody wanting to publish an academic paper advocating Georgism might want to consider submitting there...
ReplyDeleteI'm happy to see Henry George highlighted here. I think Noah does a good job explaining how land tax can be fairer and more efficient that many other kinds of taxes.
ReplyDeleteBut... Come On! San Francisco's high rents are caused by some obvious factors.
First, it has barely increased housing stock during the past 50 years. The state and regional populations have boomed and San Francisco sat on its hands. There is so much selfish NIMBYism that sensible developments are nearly impossible. There are huge swaths from SoMA south that could be beautifully developed with 5-15 story condos.
The longtime residents of San Francisco are selfish and want the city (the land) to themselves.
Second, rent control. This also causes so much class friction, since landlords with longtime tenants have huge incentives to try to push them out or convert to condos. There is a huge outrage industry and tenants advocacy machine built around protecting a sizable minority of tenants who extract economic rent from the land and public improvements.
The bottom line is that San Francisco has happily grabbed a disproportionate share of the nation's pie, including output due to its population growth, while refusing to increase housing stock. At the same time it has powerful, narrow-minded political groups that are concerned only with keeping their entitlements.
[Also, Prop 13 does need to be reformed, but it will be difficult enough to reform it without introducing a "Henry George Tax".]
You're right that rent control is a problem. But can't you see that a freehold land title is the most extreme form of rent control? It allows the title owner to take the rent away from the rightful owners, the residents of the community (each equally). HGT (LVT) puts an end to this trickle-up mechanism.
DeleteIt's weird to me when people complain about some tenants getting land privilege through rent control but never complain about the fact that the city's million residents are paying their land rent, underneath it all, to a few hundred rich freeholders. The problem is indeed rent control; land rent should be an equal residents' right, not a freeholder privilege.
I think that the land value tax is a good idea but I have to raise an eyebrow at the idea that it would be a progressive, rather then a regressive tax at least in the immediate future of San Francisco.
ReplyDeleteWe don't live in a world of symmetrical residential landlords and asymetric geographic values. We live in a very very skewed world of marginal residential construction that underutilizes land and super dense corporate construction that overutilizes land relative to it's geographic scarcity.
Look at the recently constructed Trade Tower 1 in NYC, completed for a record breaking four billion dollars. Although it's located on some of the world's most expensive real estate the vast majority of the value comes from the fact that it's a massive 100 story plus construction (not to mention underground amenities). There is no where in the country you could make a tower like that and save much on the cost. Compare that to the rental markets in New York or San Francisco. There we see huge geographic premiums with housing costs doubled or more what rentals cost in some other cities. Any proper valuation of the land to construction costs is going to see that the most expensive real estate has the most construction cost for land cost.
So in the short term a land value tax will mean jacking up the burden on the low end renters and giving breaks to the high value corporate renters and luxury high rises. If you try to offset these costs within the property tax system then you are completely undermining the whole point of the land value tax. It's a feature not a bug because we need to look in the long term. In the long term it makes sense to make new, denser, taller constructions if there is a land value tax. High density means better use of land, reducing demand for land and lowering the price point of the geographic scarcity premium. So after a land tax gets made we eventually see a new generation of construction that is much, much better for the working class renters. A working class stiff that couldn't earn enough to stay in a six story building appartment pre-land tax will probably be able to afford to stay in a 20 story building apartment post-land tax. Not only has the tax burden on their home fallen by 1/3rd, the geographic scarcity has declined because there isn't a long term tax burden from building higher. But who knows how long it will take for the trickle down to actually reach the working poor? San Francisco will probably have worked out it's class problems and forgetten them before the high density housing is complete.
For all practical purposes, property taxes are land taxes in dense urban areas. What distinguishes it is not being based on land but property, but being based on zoning. I can't imagine it not being based on zoning (alright I can, and it is Houston sprawl), but it is zoning that creates dense vertical cities in the first place. Infrastructure is more economically provided for which increases land values. Where taxing on land and not improvements makes a difference is in smaller cities and rural areas, but those are just the areas where infrastructure is more expensive to provide and property taxes are a higher percentage of value as result. Overall, the effect of a land tax is to thwart the creation of dense cities in the first place and favor sprawl, smaller cities, and the countryside. It is because property taxes approach being land taxes in dense urban environments that limits the growth of cities, so the idea this would unleash cities has it backwards.
ReplyDeleteSorry, Lord, it is not zoning that creates density in central city areas. It is lower transportation costs to the Central Business District. With land values thus higher, one substitutes capital (structures) for the higher cost land, and the easiest way to do that is to build taller structures. And, yes indeed, zoningless Houston does have a more densely built center than outer areas, although there has been a trend to "edge cities," as Joel Garreau calls them, smaller dense clusters in outer areas, although these are usually near the intersections of interstate highways, including outer highways, which themselves become mini-CBDs, thus just creating mult-centers in a polycentric metro area, with standard location theory still holding that the closer one is to one of these, the higher the land values and thus the denser the building, including with taller buildings.
DeleteBarkley Rosser
The creation of public transportation investment is also a form of zoning. It isn't the market creating it anyway.
DeleteDon't be silly, Lord. Infrastructure investment is not "a form of zoning." Sorry. Might as well say hiring of public sector employees "is a form of zoning" because where they live will be favored by their being hired.
DeleteThe process by which a particular location becomes either a truly central or a sub-CBD is not a straightforward matter and can involve many aspects, many of them somewhat unpredictaby stochastic. Some may be a result of policy, such as siting a railroad station somewhere or the intersection of major highways somewhere. But in many places it also reflects to some extent local geographical features that are not subject to policy. Furthermore, what was a CBD in a particular metro area can change over time, again due to a variety of factors.
On this latter point let me provide a deep historical example, the largest city in Africa, Cairo, Egypt, although Lagos, Nigeria will probably pass it soon in population, at least for the metro area. There has been some sort of conurbation in the area of Cairo continuously for about 5,000 years, given that we are talking about the lowest point on Nile River downstream before it splits into the delta where one can cross the river in just one crossing. Five thousand years ago the center was in Memphis, now a ruin south of the current city, but across the Nile from the pyramid of Zoser, first pharaoh of a unified Upper and Lower Egypt, the boundary between which is basically at this location. By three thousand years ago the center was west of the Nile near the great pyramids, in what is now the suburb of Giza. By 2000 years ago during the Roman era, it was at what is now called "Old Cairo," in the southern part of the city proper, which still has its ancient wall, but was then called "Babylon," a location where the remaining synagogue and many of the Christian churches are still located. About 800 BCE after the Arab/Muslim conquest, the center was in an area in the eastern part of the city, now in ruins, called "al Qahira," from which the modern name came. By about 1200 the center had moved west closer to the Nile, an area with many famous old mosques and old markets, but now somewhat poor and slummy. By a half century ago the center had moved even further west, much closer to the Nile, to Tahrir Square, center of most demonstrations in recent years, this move made possible by technological improvements that allowed for better flood and water control. While this is still probably the center, a major new area of major tall buildings is on Zamaleka Island in the Nile itself, showing again the role of technological change as well as public infrastructure investment in this process, which, I would contend, never involved zoning at all at any stage, although perhaps very near its end.
Barkley Rosser
Regarding the founding of al Qahira, that was in CE, not BCE, and happened a bit before 700 CE, to be more precise, following the Arab/Muslim conquest.
DeleteOh, and just to further emphasize that what may be involved can be the private market rather than public sector activity, in many cities the location with the highest land value is under the tallest building in the city, with most of those being built by private sector interests, at least in the US. None of the ten tallest buildings in the US were built by the public sector at any levela, although some with the largest floor space were, e.g. the Pentagon and NSA HQ at Fort Meade, MD.
DeleteActually, the way one avoids having taller buldings more densely packed together in central urban areas is by using zoning, as in DC, which has height restrictions on buildings. So, one finds taller buildings just across the Potomac in Rosslyn, VA, part of Arlington, where there is not zoning for height of buildings.
ReplyDeleteLocal government in Queensland in Australia, where I live, can only raise tax from the "Unimproved Capital Value" of the land. Last time I checked, Australia has some of the highest real estate prices in the world. Without doing any sophisticated analysis, even if Krugman and Stiglitz are correct, it would seem that other factors are much more powerful than tax in determining the relative value of land.
ReplyDeleteI also think that your analysis has a naive view of the value that a developer or investor brings to a piece of land. It is often not the result of dumb good luck that they make money, but considerable foresight or imagination - often buying when others are rushing to sell. In that sense the increase in value in the land can represent a return for a valuable market making exercise.
And just because the barriers to online "real estate" are much lower than they are to offline real estate doesn't mean that Zuckerberg is less innovative to say Donald Trump, nor that he ought to have a lower tax rate just because none of his inputs involve land. The idea that real estate is somehow special is as much a relic as the idea that gold is.
I doubt that there is any room for my opinion on this blog, but if you are willing to print it, you would humor me greatly...
ReplyDeleteTwo words: socialist utopia.
Would it surprise you to know that most of flyover-America thinks that California in general, and San Fran in particular - is populated by a bunch of left-wing loonies?
San Fran is a geographic anomaly. It is a tiny speck - on a peninsula with virtually no undeveloped parcels - in a highly desireable area.
Hell, yes! Everybody would like to live there... no wonder that the prices are so high. Since you have such a bunch of high income individuals there, it is to be expected that all costs are beyond the pale of rural Arkansas, south Louisiana, or even Afghanistan.
With a cluster of citizens that can be plucked, it's expected that the pluckers will come up with new ways to separate the citizens from their cash to spend on ever-increasing programs.
Ahhh... the anticipation of new cash for a liberal to use for new social programs.
Forgive me for pointing out the obvious, but the US - and particularly California - has been speeding along that merry highway since the War on Poverty began fifty years ago.
Memo to Liberals: that war is over - taxpayers lost. California's balance sheet is a disaster. It is a matter of time until your bills come due. MoonBeam seems to have paid notice to this recently.
Rather than dream up ways to separate the citizen from his money, how about calculating ways to decrease government spending and waste?
This proposal is heading down the highway of fools. Prop 13 was enacted for a valid reason. At the end of this highway, you will find,,, your bullet train. All Aboard !
Sorry to bother you with facts. They are troublesome things.
Well Anonymous, it does help to be certain of one's worldview when you comfortably ignore facts. My guess from your spiel above is that you get much of your news from Faux sources. For if you did bother to investigate any of what you purport to know, you would find that the finances of CA are greatly improved--since the return of Gov Moonbeam. After the failed policies of the Governator, Brown has not only balanced the books but is dealing with surpluses. For which he is trying to restrain spending increases and pay down some of our bond debt.
ReplyDeleteI share your concern about the wisdom of the bullet train experiment, but if you wish to base your other conclusions on facts, I suggest you do a good deal more research first. What shines through most loudly in your posting is the anti-liberal bias which selectively allows in only facts (or supposed facts) that support your bias.
It would be interesting to see the PoV of a civil engineer or urban planner on this subject--it seems to me the ability of a LVT to raise money would depend in part on technical and geologic factors.
ReplyDeleteTake San Fransisco, where earthquake vulnerability is a big problem. Depending on the soil under the property, a low-rise building might be safer than a high-rise or vice-versa. When building on fill, a deeper foundation is needed than on dry land--the cost is further increased. Add these and other factors up and development to minimize tax/profit would potentially work better in some areas than others.
The infrastructure improvements needed to support the development could also be an issue. An increased population requires more water, electricity and transport links to sustain it; ditto increased retail traffic, heavy industry, etc. As long as these and other types of infrastructure can be paid for out of the LVT with leftover cash afterward, there will be funds for other programs to help poorer residents above and beyond any benefit they get from the developments themselves (housing, jobs, whatever). What happens when the costs of building and maintaining that infrastructure equals tax revenue, though? No more development on that property and no more programs for the poor.
Hi Noah. I'm a history prof interested in Henry George, and am wondering how much if any traction your article from 2014 got. I've had the exact same thought that Henry George foresaw San Francisco's current economic crisis. Am also wondering what you think of Enrico Moretti's the New Geography of Jobs, which seeks to explain the rationality of hyperconcentration of Silicon Valley. He doesn't invoke George explicitly, but I think it works well. I'll take my answer off the air-- or at jacobsdorman AT google's mail service. Thanks! Jake, UNR
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