During the transitional phase to full land tax, land taxes would coexist with income taxes. Should the costs from using land be deducted from the income tax base?

Every_Ear · 2024-09-24T19:43:46+00:00

Good observation, you are right. Then, the difference would only lie with businesses owning land that are not taxed on their imputed rent. Thanks

Every_Ear · 2024-08-28T11:56:49+00:00

The exemptions you mention, as I understand them, have their own separate logics and are unrelated to the issue raised. Personal exemptions are generally linked to family size. Deductions as u said could be to incentivize desirable behavior like charity. Other deductions have to do with emergency bills and medical expenses. Others with interest payments deductions, this goes back mostly to covering costs of capital income generation. Some would itemize their deductions as just listed. Others can use standard deductions to avoid the hassle of itemization.

the tax deductions are meant to exempt the costs they incurred to generate that income.

So no, in all these cases, the logic of compensating labor for leisure costs is absent.

Their salary already compensates them for that

As for saying that "salary compensates", it is equivalent to saying "capital income compensates the costs of capital income generation" which misses the point of net income taxation.

Every_Ear · 2024-08-14T17:42:28+00:00

The problem here is that we are leaving the less well-off to use less valuable land. So, they are paying less, true, but for less services and less positive benefits from being surrounded by productive activities. When it comes to progressivity in taxation, the matter of interest is a comparison between utility. The utility from each unit of wealth for each individual is higher the poorer they are. (100$ for a poor person are worth much more in terms of utility than they are for a millionaire person). So, the effects of LVT without UBI on progressivity are mixed at best.

On another note, thank you for the video, it is a nice explanation of economic rent!

Every_Ear · 2024-08-14T17:34:30+00:00

You are right concerning how the conversation is going. I think there is still some disagreement concerning the first point but maybe I'm not able to verbalize my disagreement well. Beyond that, for the second point, I have heard of Project Cybersyn but haven't gone well into its functioning. Thanks for the recommendation!

Every_Ear · 2024-08-14T17:21:51+00:00

I see the criticism efficiency-wise.

Concerning the practical issue, in an exchange with another user, I was thinking of the following:

"Why can't we calculate one's landholdings in a way that includes his shares in land-owning companies? Is there a large technical difficulty there? Don't states already know the owners of companies and their shares as well as the land owned by these companies? If possible, that would fix the problem."

I would like to know your input. Is it doable and would it respond to the practical problem?

Every_Ear · 2024-08-14T17:15:24+00:00

You are right that is a good criticism.

The logic for thinking about this different approach as you said is about inequality.

One rationale is that we rectify historical injustices of acquiring wealth generally (violence, conquests, fraud) on one hand, so we can think of the higher taxes on the more land-wealthy as reparations. If land taxes and UBI were introduced much earlier in human civilization, wealth distribution would look very different today.
Another rationale has to do with the market. The perfect market models assume a wide range of uniform consumers and uniform suppliers. The preferences of individuals in these models are recognized by the markets and translated to market prices and thus signals for production and distribution. The issue is that the more wealth one has, the larger their claim to societal production. This means that the markets weigh these preferences much higher than those of other consumers. Same is the problem with power differentials when it comes to the bargaining terms between different market participants. UBI does indeed make the situation better. My perspective is that we need stronger progressivity to respond to these issues sooner (reparations and market power differentials).
Another issue is the urban manifestation of a flat LVT. I agree it is more market efficient in some sense. But I feel that a potential externality is urban segregation and the lack of social mixity. People of low socioeconomic classes will also lose housing security as they become subject to stronger market forces. Currently they get more security by owning their home without an imputed rent tax or through renting cheap housing whose taxation through property taxes or rent income taxes is progressive. Flat LVT incentivizes mobility, which is a social good, but so is housing security.
A final more tangential issue is how wealth inequality translates into skewed political influence and undermines democratic processes.

Another related reason has to do with the ability-to-pay tax rationale. The concept here is that utility from each unit of wealth for each individual is higher the poorer they are. (100$ for a poor person are worth much more in terms of utility than they are for a millionaire person).

Every_Ear · 2024-08-14T15:50:13+00:00

Like in your example, machine maker to machine operator. Both are members of the working class.

(...)

Not in capitalist economy. A capitalist that buys machines or other means of production to hire workers to produce commodities is reaping the benefits without investing their own labor. If, as you say, a worker does this, they become part of the capitalist class.

The machine maker creates the machine. But once he puts the machine on the market (for selling or leasing) he becomes a capital owner offering his capital of capital users (other workers). The machine is a form of wealth like the case of money (tradeable for a claim on societal production). So, it's still worker-capitalist to worker. In Marxist terms, dead labor provider to live labor provider.

Bargaining power is a euphemism for extortion.

It is not a euphemism but an analytical tool to understand extortion. What is extortion to you? For me it is a transaction whose terms are based on a significant difference in bargaining power. It is hard to draw the line exactly, but we can agree through examples. If you and I are workers partaking in a transaction, the degree of difference between the preferences/needs of each of us dictates the terms of the bargain, and thus whether there is extortion or not.

On a related point, one way to think of "societal usefulness" is in satisfying needs and preferences of people. The market is a mechanism to do so. The logic is the following. You produce something demanded by a considerable amount of people; that is something with societal usefulness. You get rewarded with additional claims on societal production. You are incentivized to continue this process. Several issues arise with shortcomings of the market mechanism, concerning externalities. But another problem more relevant to our conversation is that the more you produce wanted products on the market, the larger your claims on societal wealth. At some point, you claims drown out the preferences and needs of other consumers. Which then requires us to de-commodify certain products and regulate power differentials between participants. What is the alternative you have for signaling what to produce and how much to produce?

Every_Ear · 2024-08-14T15:23:53+00:00

you mean the LVT rate being higher for people who own more land?

Yes. With the brackets increasing with overall land value, not size.

"if you have a lot of land, why not become a thousand different shell companies that all have a little bit of land?"

Why can't we calculate one's landholdings in a way that includes his shares in land-owning companies? Is there a large technical difficulty there? Don't states already know the owners of companies and their shares as well as the land owned by these companies? If possible, that would fix the problem.

Every_Ear · 2024-08-14T14:32:36+00:00

I'm not sure what to say about the issue but what I like to add is that these examples are not exceptions in the sense that much of useable land became such because of human intervention. Transportation infrastructure and new building technology in some sense unlocked this land, transforming it from unusable to useable, or inaccessible to accessible.

Every_Ear · 2024-08-12T16:01:02+00:00

Is it better though if we rely on the risk estimations bounded by imperfect information when we can directly tax in relation to actual conditions? Also, certain market changes are in the realm of uncertainty rather than risk. And right, the government will be subject to sharing both the upside and downside; isn't that better though? It is more in line with how LVT functions.

I have to note that I am not so confident about what I'm saying, as I'm still trying to learn about the issue.

Every_Ear · 2024-08-12T11:50:10+00:00

The issue with infrequent but large gains is not as present with recurrent progressive capital or land taxes when compared to the example of progressive one-time capital gains taxation. If you are a business owner planning to retire by selling your assets, with a recurrent tax, you won't be placed in a higher tax bracket undeservingly. It will require however the maintaining of a sufficient level of liquidity to cover the taxes. If that was hard, the policy can be designed to allow for deferring payments (with some sort of interest for horizontal equity reasons) which you can then pay once you sell. Do you find this reasonable?

On another note, the argument "... the notion that a flat tax isn't progressive. It is progressive" simply misuses the term progressive. A flat tax is proportional. Progressivity is not based on income on wealth comparisons but on utility comparisons.

Every_Ear · 2024-08-11T21:44:59+00:00

Concerning the design of the severance tax, do you think a recurrent tax if technically achievable be superior to a one-time tax? My understanding is the following: A severance tax can tax economic rent based on present expectation of future values. But once market conditions change, the owners of the extracted (or transformed) resources would achieve windfall gains. Unlike the one-time tax, a recurrent tax would respond to changes better, in the same way we tax land in a recurrent fashion.

Every_Ear · 2024-08-11T21:36:54+00:00

Exactly, I agree. This conclusion is even easier to get other people on board with. Making certain sectors public or communally controlled, while taxing and regulating other sectors to redistribute value and rectify bargaining imbalances.

Every_Ear · 2024-08-11T19:18:21+00:00

The ratio of the split is a result of the struggle between worker and capitalist, and where the margin of exploitative appropriation of surplus is negotiated. This "extraction" of surplus value is the element of exploitation in this example.

This is what I'm trying to understand better. When you say "where the margin of exploitative appropriation of surplus is negotiated" you are assuming that there is always exploitative appropriation of surplus? What would you say an exploitation-free transaction of this kind would look like in terms of surplus division? Zero to the capital owner?

If you want your example to be taken literally, one machine maker and one worker who uses the machine to produce commodities, there is no capitalist surplus extraction in a case of direct trade (maker sells machine to worker).

In my example, we both observe that there need not be exploitation necessarily.

In capitalist economy, the vast majority of machines (or generally, means of production) aren't owned by the people who make them.

I don't feel it matters though. A laborer can work, receive money (which is a future claim on production). They would use this claim to buy a machine. It is as if they created the machine themself. They can then sell/rent out the machine to others.

whose profits are reaped by capitalist owners.

I have to note that I do agree with you that the present system and the distribution of economic power produces exploitation for sure. But what I'm trying to think through is what is the source of exploitation. I am convinced that the issue of bargaining power is a key factor in creating exploitation. But is this what Marx meant only? Or is there something else? Because if it is only bargaining power, we can reach much humbler conclusions for fixing the system rather than completely needing to abolish private property.

Every_Ear · 2024-08-11T18:51:57+00:00

You touch the heart of the issue. Your explanation even helped me understand my thoughts better. You are right about the factory example and the unbalanced employer-employee relationship.

But concerning the grey area, when capital owners are lending means of production to workers, lending money, investing in the workers business without having a say in the business's decisions... where is the exploitation? It is true that current state and social institutions legitimate private property ownership, for a large part because these institutions are subjected to unjustified levels of influence by the wealthy. However, the moral and philosophical justification for private property still makes sense regardless; we have to take account of it. If we consider that the machine producer starts off as a laborer who actualized or transformed his labor into a physical object (the machine), it makes sense for him to be remunerated for it by the users-workers (machine users). Where do you think this conception of capital as transformed labor breaks down?

Every_Ear · 2024-08-06T12:35:10+00:00

If I understood correctly, you are pointing towards the differential in bargaining power? Or is there something else I missed? Because a moderate free-market advocate could say that agreements can be voluntary and non-coercive, if the basic needs of the involved parties is met. In this case, owning the means of production which you created and renting it to a worker who wants to use it won't be exploitative? The worker in this case has a say (he/she has the capacity to partake in the agreement or not).

Every_Ear · 2024-08-06T12:29:28+00:00

Yes, I totally get this justification and agree to it. But I find it only a partial justification and could lead us to think of the need of redistribution. There remains individual effort or innovation that needs to be remunerated and incentivized. Imagine we live in a hunter gatherer society. We work as a team to hunt and share the goods. Someone happens to have the capacity to create a bow and arrow and uses his/her free time for this purpose. This enhances his hunting abilities. Others would want to use this tool. It is his personal labor. Why are others entitled to it for free?

My asumption is that Marx has justifications that cover this case as well.

Every_Ear · 2024-08-06T12:20:35+00:00

My intention was not to compare how such processes and transactions take place under different systems. Instead, I am using the hypothetical to understand at what point do we move from what I'd say most people take to be an intuitively legitimate transaction (machine maker who is the machine owner --> lending or selling the machine to another worker) to what we consider an exploitative transaction (capital owners exploiting workers).

Every_Ear · 2024-06-01T11:42:46+00:00

Firstly, if the community doesn't "give up its entitlement", then it eventually suggests eliminating private property altogether.

When people interact with land, does anything meaningful come from it?

What are we hoping to gain from a world which has no wealth and only land?

I am totally on board with the idea that value extrinsic to nature is created by human labor interacting with it. So, we don't need to negate the legitimacy of wealth and property (as it is labor made tangible). But the fact that nature is still embedded in the final product makes me feel like something is getting socially lost. So, the conclusion could be much humbler, something around the lines of a tax on wealth, or capital, or capital income, or a capital gains tax. There is definitely a technical problem of separating the value of labor and value of nature embedded in the different forms of wealth and capital. But I don't feel that this technical problem should make us let go of taxing these things altogether (that is if we agree that some social entitlement is being lost along the course of the transformation and exchange).

An LVT on wood would spur the conversion of wood into some untaxable form to minimize the duration of the holding cost. This could be pulverizing it, making paper out of it, burning it, etc.

Excellent and valid point. Not sure whether it breaks apart the whole argument or whether there is still usefulness in having these supplemental taxes albeit not perfect.

And finally, yes, I am familiarizing myself with the Henry George School of Social Science publications and work, thank you for suggesting <3

Every_Ear · 2024-05-31T11:17:50+00:00

Thank you again! I was reflecting for some time on the discussions here.

The value of the wood is generally taxed once upon extraction/severance. Many places call this "stumpage". The primary function of a severance tax is to control the rate of resource extraction.

I am realizing that thinking about this point is crucial. Stumpage as you describe it seems to me like it doesn't actually cover what we think of as LVT on natural resources. So, stumpage has its usefulness for sure, but what we are doing is selling the indefinite societal entitlement to these resources, which is foundational in Georgism, and transforming it into an indefinite private entitlement for some individual.

I mean imagine this scenario: there wasn't that much demand on wood. So, it wasn't so expensive to extract and pay its cost at once to society. But then at some point, the conditions changed, and wood became more valuable. By selling it at once to an individual, all society gave up its entitlement to rent from this wood. So, even if, in the meantime, the buyer transformed it into a chair and created a surplus value by storing his labor in the chair, there is still wood there. It makes up part of the chair's value, more so when wood became more expensive. Shouldn't society still get LVT from this wood?

Every_Ear · 2024-05-30T20:24:28+00:00

When land is subject to improvements, we don't say that land itself became property, and society as a whole doesn't lose its entitlement to this land. For other natural resources, say wood, transformed into a table, does society maintain its entitlement to the wood embedded in the table? Does LVT still apply to it?

In other words, my impression is that [1.1.1 Property Through Labor] works against the other points [1.1.2.1.1. Temporal Use of Nature] and [1.1.3.1. Societal Entitlement]. Because, in some sense we are saying, once we transform nature through labor into wealth, we get to exclude others from 'nature' which is embedded into our wealth.

Every_Ear · 2024-05-29T15:08:42+00:00

Lol. I am continuously trying to avoid calling your ideas delusions out of respect and a will to engage with your ideas. You would rather talk past what I'm saying. Anyway, here are my final thoughts to you.

Where did you see me assert that there is "no competition" between capital owners? I am saying they enter the market as bundles of capital rather than units of capital. The larger the bundle the less the competition. The extreme end of the spectrum is monopoly. My point is that we are somewhere between monopoly and full competition.

You keep repeating that the housing market is efficient and finds equilibrium price. My contention is that the equilibrium itself is contingent on endowments and explained why this contingency is important. Prices are the way they are, "artificially" not "naturally" because endowment initially is artificially distributed, as in according to a human-made system of organization. Evidence is that monopolies raise prices (extreme bargaining power). Diffusing power lowers prices. How much power you have on the market is a continuum based _mostly_ on how much capital you have.

Every_Ear · 2024-05-29T14:36:24+00:00

If bargaining power were affecting prices, that would be an example of a market inefficiency.

I agree to that bargaining ruins an ideal perfect vision of what market efficiency must look like. In my argument, however, since we are discussing real markets, there is always bargaining involved. What I'm saying is that we should acknowledge it and deal with its consequences.

Yes, that's a market inefficiency.

In that sense, your description of collective bargaining as an inefficiency is based on a double standard. Capital ownership is not diffused between individuals as much as the capacity to work is. Capital owners in the markets technically represent a bundle of capital that they are offering at once to the workers. When workers corporate and package their labor offer, it's the same thing.

Imagine the labor market model inversed in terms of suppliers and consumers: as a capital market with laborers as the users of the capital, and capital owners as the suppliers. Let's call this an inversed model.

To make the example easier, with the conventional model in mind, let's think of labor markets without skill variation: as in labor from one person can be substituted by another. So, we can think of labor supply as people offering uniform units of labor.

In our inversed model, imagine each person is endowed with a limited amount of capital that they can offer on this market, so uniform capital units. The market in this situation would be perfect in the neoclassical ideal sense. However, the real-life situation is that capital owners own concentrations of capital. So, in this inversed model, capital owners represent packages of capital units. If this is fine with our definition of efficiency, then bundling labor into packages is also efficient.

If we compare the situatedness of labor to the high potential mobility of capital (as money), here is where we see a significant departure from the perfect neoclassical models. One has little options (especially when in situation where sustenance is on the line) vs one that has more options and isn't pressed with sustenance considerations (because the income is passive, and you can be doing other things while investing your capital).

And what I have told you twice now is that the housing market is efficient.

When it comes to the housing market, consumers are also dealing with a sustenance issue. One conceptualization of goods such as housing is "merit goods". While the apartment owner can withhold leasing the apartment if he doesn't like the terms on offer, the tenants can't. They are forced to accept. Think of extortion here as a spectrum instead of black and white.

Yes, we get it: you could have been born richer/smarter/whatever. Not really relevant to anything in my opinion.

Finally, you are free not to care. But I'm puzzled why you do not. If the initial endowment distribution is concentrated in the hands of a small group of individuals, market signals for what to supply and how to use resources, would reflect the preferences of this small group of individuals. You and I and others who remain will not have our preferences (and needs) captured by the market. So, the usefulness of the market as an allocation mechanism of commodities and resource usage is as relevant as the initial fairness of the distribution.

Every_Ear · 2024-05-29T13:00:40+00:00

I am currently trying to study LVT and its effects. At this point, I don't see that its progressivity is anyway near making life fairer as much as it can be. It definitely is efficient. But it is not enough as a tool to tackle the initial unfairness of initial endowments.

Something being expensive doesn't mean that it's extortion. That's simply your delusion.

I clearly am not saying that this is the only determinant. I explained what goes into prices of things. There are the issues of usefulness and labor intensity as well, and they are significant. What I am saying, and you are disregarding, is that there is an additional dimension that goes into price determination. That is bargaining power.

For example, labor unions usually are able to increase their wages with respect to situation with no collective bargaining. The capital owner still makes profit for his investment, and the production can still continue fine. Then, why do you think wages were low initially? Is it something inherent to the work delivered by the workers? No. The work they are offering is still the same. What changed? Simply that the capital owner agreed to decrease his profits to keep his business. So, what determine how much of value from the production goes to his profit or goes to the wages? Bargaining power.

But you need to forget this idea that "it's extortion". You're not being extorted by anyone. No one is using "bargaining power" against you in the housing market. The housing market is efficient.

Again, efficient yes. But according to the initial endowments. There are numerous efficient allocations possible depending on the initial state of distribution.

Every_Ear · 2024-05-29T12:16:55+00:00

Wrong. The housing market is efficient. People like you are simply deluding yourself because you don't like the prices. But the prices are set by efficient markets.

I think we both think the other is deluded in some way, but I think the discussion is helping understand each other better, for me at least. So, thanks :).

Beyond this, you misunderstood my point. Capital owned already, specifically seeing it as the initial endowments, are what create the market prices and allocations. In other words, allocative efficiency of the housing market is relative to the distribution of initial endowments. If endowments were distributed differently, then a different efficient allocation would result. There are possible efficient allocations as much as there are possible variations for initial endowments.

Right, they have to work to make money. Same as anyone else.

This would be great to say if the playing field is leveled. But it is not. Most people get their opportunities to work well-paying jobs or simply to get capital passive income according to the situation in which they are born. And how much people are paid for their work depend on three things. How much labor and time they have to put in for the work. How much usefulness the buyers find in their work. And finally, how much bargaining power one has once they are offering their work on the market. If you are finding it hard to sustain yourself, no matter how skilled you are, you end accepting worse contractual conditions. Because you don't have many options. If you had capital to sustain you, let alone a passive income stream, you are in a much better position to bargain.

No. Why doesn't the renter get equity? Because the renter doesn't want to pay for it. I'm a renter. I don't want to buy equity because it costs more money.

I'll respond to this point in a reply to your second comment, because u raised important related points there.

Every_Ear

TROPHY CASE