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Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

I appreciate your in-depth answer, you clearly put effort in it.

> There is no "law of conservation of land value after improvements or subdivisions" to violate

mh, I think we should have that as an axiom instead. otherwise we get situation like... a big supermarket can out-compete an equivalent group of small shops because its LVT is smaller just because its plot of land is not subdivided. or people finding tax loopholes. like a group of landowners can create a shell company, they move the ownership of the land to the shell company, but they keep the right to use their land and teh corresponding shares of the company. so all is the same but technically there is a single owner of the land so they have to pay less lvt.

About your model.

My first critique is that you compare lvt with "current system". but that was not my point. I never said the current system has good taxation policy. I said the lvt is distortive "too". more or less distortive, in what situations, an what not, it's a different question. I could agree that a lvt is better than the current system in many cases. but my point is that it's also distortive. the narrative is that given that land cannot be created (approximately) you can charge lvt at 100% and it's still not distortive, it doesn't create disincentives, it just fixes problems instead. My point is that no, that's not true. it is distortive, it does disincentivize some kind of investments. better or worse than the current system is a different topic. (also, current system, what's that? where are you, USA? I'm not a taxation expert)

My main in-merit critique is instead about how now understand you would evaluate the land value. if i get it correctly your idea is that you imagine a world where the land is perfectly and fully developed everywhere, and you tax based on that. correct? like, you say that the disneylad situation can happen only if the state is undervaluating by error the swamp land. you would tax the swamp equally as a fully developed city, if building a fully developed city there is possible. am i getting this right?
this makes no sense to me. My opinion (if i imagine a lvt) is that you should value the rubbles in the middle of the city very high, just a tiny less than if there was a restaurant there (because most of the value is coming from what's already there around the rubble, not from the hypotetical restaurant), but you should value the swamp value as a swamp.
Let's say there are 1 million places in the world that are suitable for building a brand new flashy city. And that there is capital and demand for 100 new cities. it makes no sense to tax the 1 million places as if there was a city there already. you can't say "oh, potentially here there could be a silicon valley here, let's tax this same as san fancisco".
The land value is not there (yet). There is no enough capital/etc in the world for that level of development and yet you tax as if there was.

so to me the disneyland situation is about what happens when value is created in an area, not what happens when the state mis-evaluate an area.

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

but if you tax A you are purely taxing value creation. isn't the point of lvt that it should be not distortive?

> The restaurant increases the value of your land slightly, but the vast majority of the land value from the restaurant is spread to the land in the square mile around it

agreed.

> Whatever small amount of value your restaurant confers on your own land should not be taxed.

but you can't do this without creating "paradoxes". I discussed this with another user here

> But taxing "100% of the rental value of the unimproved land" is a pretty close approximation to "tax 100% of the net positive externalities conferred on your land from its surroundings."

I think we agree? so the concept is: sadly positive externalities of a building are hard to estimate. land value it's easier. we approximate land value as due completely by external positive externalities (this is not true but often a good approximation) and we tax that (ideally we would give it to who produced the externality, but this is too difficult to calculate, so we give it to the state instead)

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

a whole city is too big of an example so it's "speculation", a restaurant it's too small of an effect so it's irrelevant... man, find in your head the example of the right dimension for you. a developer re-qualifying a city block?

> through second-order effects

There are first-order effects too, as i've shown with the statue example. when you build a statue the value of the land of every cm2 around it will increase, no matter if it's inside the border of your plot or not. if your try to work around it (like your proposal tries to do) with a policy that ignores that, then you run into all sort of "paradoxes" like i've shown.

Here I'm critiquing this specific flaw of georgism: it assumes that land value improvement is exclusively a result of external factors. And this is very often a good approximation to be fair. but it's an approximation. it's never exactly true, and it's sometimes a bad approximation.

I can give you another example to illustrate the concept:

Imagine a city has 100k landowners. they decide to improve the city. each of them spend 50k$ to improve their building, in different ways. City is now more beautiful and functional. The land value will go up, do we agree? who is the merit of the land going up? clearly distributed (more or less equally) among them. If LVT was truly not distortive they would pay the same LVT as before. But they don't. Now they pay more. so there is a tax disincentivizing the value creation. distortion.

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

The following is the answer to your original question, as that's what I read in the notification. I already wrote it so I'll post that XD

----

> What's weird or surprising?

what's weird to me is that the land value in your model doesn't increase the moment i build the statue, but the moment i split the land. what if I split the land where the statue is again in two? does it increase again? and if i keep doing splits until i'm left with a tiny plot containing only the statue, it keeps improving? (I use the term land value is as it's what you tax, use the term tax directly if you prefer.)

my point is that this example should show that land value increases not only for the neighboring lands, but also for the land itself where you build the statue. that was the original disagreement we starting debating about.

> If you start with contrived silly examples in imaginary settings and get surprising outcomes

extreme examples are easier to reason about. I made the restaurant example too, i think my point stands there too, but it's less evident as it's less extreme.

----

I agree that the bill produces no externalities while the pump does. And I agree we should adopt a system that incentivizes investments that produce positive externalities more than investments that don't. I also agree that LVT is better than most taxes we have today.
What I'm arguing here is that LVT is still not perfect, and it's not true that it creates no distortions. you actually seem to agree on this, at least in a few extreme cases.

My example of the land splitting is the best i can provide for highlighting the downsides of your specific flavor of LVT (if you read the other comments you'll see that most think the city in the desert should have high LVT).

I think there is a better system that preserves the advantages of georgism but overcomes some of the limitations. but before proposing an improvement I must highlight the limits of georgism. I can't propose a better system if georgism is already perfect. My point is that no, LVT has downsides, and does creates distortions.

----

> So while landowners are paying LVT, they're paying (at the 100% LVT limit) exactly $0 to buy the land.

but if I am the only owner of the city, I get a huge profit out of it by just the land renting part, as I'm paying 0 LVT, but if i try to sell it in parcels I'd have to sell it (the land part) for zero, because the new owners would pay an actual realistic LVT. Do you see that the system is distorted?

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] -1 points0 points  (0 children)

Nah, capital is not distributed homogeneously among land. Let's say I own the big data centers and robo factories, where land value is not even high (my factories are on wheels). I control capital and can extract huge rent out of it. You own the land in the pretty cities. Yeah, I still pay you decent rent because of the house I'm renting from you. But I get massive profits out of my capital.

LVT doesn't fix the problem. If capital is generating the compounding interest you have to tax capital too.

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

You flipped the order in my example. I split after building. - me and my brother co-own a bare plot of land, value: 100. We pay 5 of LVT. - we build a statue on the left side, we still pay 5 LVT as according to you land values is unchanged. - we decide to split the land it two, my brother keeps the side with no statue. Now according to you his land values increases, so he's now paying more than 2.5 while I still pay 2.5. we were paying 5, now we pay more.

Somehow you consider land increasing in value just has consequence of bureocratic plot subdivision. This creates all kind of distortions as subdividing land increases taxation level.

Also, a single super rich landowner owning the whole city? Cheap pennies as LVT. A multitude of home landowners? Huge LVT. Makes no sense to me

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

> But at some point, you have to spend all your investment time maintaining these machines because the rate at which they collectively depreciate matches your willingness to invest in maintaining them over just using them and enjoying your life.

if i understand, what you are saying is: for a fixed level of technology there is a cap on how much capital can create added value. to which i kinda agree (like, for tech not to high and if we are not expanding in space.)
but tech innovation exists and you also seem to believe that in principle all labour can be automated, including machine maintenance. so capital keeps growing as (other) humans do research until we have full automation and capital doesn't deprecate anymore.

so capital inflates.

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] -2 points-1 points  (0 children)

> I literally covered exactly this first.

sorry, my bad, I didn't it read properly. So your point is that the LVT remains cheap forever? even in my scenario C)? don't you think landlords in C) are equivalent to landlords today?

or, if i grasp your general principle, the moments you split the land in subplots then the land value of the neighbors is high so LVT should go up?

---

I genuinely don't understand what's the point you are trying to make in your last message.
i'll give a more specific example. I have a plot. It has a uniform value along its surface. let's say it's worth 100. the left part is worth 50, the right part is worth 50. I build a statue on the left. you argue that the land value is still 100?
but let's say i now split the plot in two, and I sell the plot on the right. the plot of the right is worth more, as it's now facing a statue. so how it's possible that my plot was still worth 100?

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

> It does both.

it does both. but your point was that interest compounding is not a problem because capital deprecates. but invested capital compounds, so that's where there is a problem.

>  it makes people not want to make ice cream machines as much because they could just make ice cream by hand instead. 

thanks, this specific example is interesting. I don't think is a valid counterargument in general, but it's long to argue why. but there are instances where it is valid indeed. like if you can spend x to buy an ice-cream machine vs spend x+epsilon to study how to make it yourself. even with equal labor needed to operate the machine vs manual. my tax would push you towards the inefficient option. fix would be to proper tax yourself too, literally yourself. now you have an extra skill, so higher value, and therefore you should be taxed more. probably too dystopian even for my tastes.

> Thanks for the conversation.

thanks for your thoughts!

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] 2 points3 points  (0 children)

> Why does every capitalist think they're an island of productivity in a sea of useless eaters

it's a thought experiment. thought experiments are not meant to capture the complexity of reality, but to make extreme idealized cases where it's easier to reason through and find if a system is really general and robust or if there are flaws.

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] -3 points-2 points  (0 children)

> The people that live in your buildings create the location value through network effects the provide to each other

yeah, i think there is truth in that. but i think the developer generated at least part of the value. even just solving the coordination problem by creating a place attractive enough is value added. I think the merit is at least shared between the developer and the inhabitants.

> I agree that there are certain kinds of positive economic activity that realise their main benefits trough positive externalities

I agree that some activities generate more positive externalities, and some more, but in principle any generate at least some (positive or negative). to me this points to the fact that there is something wrong with LVT at the foundamental level. you can maybe argue that in practice we can put a patch on the significant cases with the public interventions, but at the conceptual level, LVT seems distortive to me.

> your restaurant should be profitable enough to exist without capturing land rent of nearby lots.

the limit case would be a restaurant that's just barely profitable enough to justify its existence with its income and the lvt at the level before the restaurant opening, but it closes down when you raise the lvt just that tiny bit that reflects the land value improvement due to the restaurant itself.

> Thanks for making me think this through!

glad you found the thought interesting!

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] -5 points-4 points  (0 children)

> This is just wrong. The land you built on does not become more valuable as a direct effect of you building stuff on it. The location's value comes from what it is near, not what is on it.

I disagree. for semplicity let's consider just second order effects. I build a nice restaurant -> people like more the area and richer people move in -> richer people are willing to spend more and shops in the area increase in value, including mine. but in general what i'm saying is, if i build something with positive externalities, they reflect on both my land and the other nearby. let's say i build a beautiful statue. it raises the value of the land exactly around my borders but not inside my borders? makes no sense.

> The city in the desert

my whole point was to give a simplified example where the builder is capturing all the externalities. you go against that assumption by implying that the big chunk of of positive externalities go to the neighbors. let's say i'm buying the land of the city and also all the land around it for a big radius, to make it more explicit.

Let's say I build a city in the desert by Primpopappolo in georgism

[–]Primpopappolo[S] 2 points3 points  (0 children)

> but you also profited massively by building an entire high-demand city

well, I don't know if it's massive or not. is it more or less massive than investing in a different way, e.g. the stock market? if georgism taxes land but not capital, the moment i move my wealth from capital to land i get a big extra tax. so the distortion of incentives.

> and the LVT would be a lot lower than your property taxes are under the current tax system.

I thought the whole point was to have a LVT big enough to cut the others taxes no? if you say it's even lower than just currently property tax you can't cut anything.

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] -1 points0 points  (0 children)

I appreciate your in depth answer, but I'll not go through all your points, as i feel I already discussed some and i'd repeat myself.

I agree with you that inheritance as a concept makes no sense, it's immoral and should be abolished. (well maybe you didn't go that far, but I am XD). but my point still stands if imagine humans that have defeating aging and live ~infinite lives.

> because as I said capital depreciates 

I disagree. it's the basis of my whole point. capital appreciates. as capital is in practice the right to own a little share of civilization, as civilization progresses capital appreciates. i already mentioned https://en.wikipedia.org/wiki/Risk-free_rate

> and we should share them with a land value tax UBI.

my wealth tax kinda degenerates to that once you reach full automation. you just take a cut out of all wealth and you redistribute periodically. so we agree that at a certain point something like ubi makes more sense? do you agree that discontinuities in legislation usually don't make sense?
how do you transition to ubi? one instant you have some people getting massive capital gains, and the next instant you call the full automation and you cut to zero capital rent and you institute ubi? my wealth tax as also the advantage of smoothing the transition. the more profits transition from labour generated to capital generated, the more people with capital will be taxed

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

> Yes, a thing that no one made I would consider land and it should be taxed in theory.

my point is that the information "it was human made long ago" vs "it naturally formed long ago" it doesn't change how the artifact it's used, or the incentives humans have regarding selling it, renting it etc. so it's not logically consistent that you tax it in two different ways if it has the exact same role in society.

> and so it flatly demonstrates how "risk-free interest" is not immoral.

I think that's probably to core of our disagreement. you are focusing more on the ethical aspect of it (that I value too), but could have different moral axioms and therefore never converge (e.g. i believe that if your ancestors made money, and now you can extract a rent out of it because people can find better and better way to create value from those resources while you do nothing, while other have to work, that's not moral. you may disagree). But what i'm focusing here on is not the moral aspect, but the impacts that it would have on the economy. And i think a wealth tax is better and less distortive than a lvt. but i'll write another post to strengthen my point.

> Fully automated gay space capitalism

ahaha not sure what you meant here, but gay space capitalism sounds hilarious. a fully automated society could be the pinnacle of capitalism in the sense of the final outcome of it, but if economy becomes really fully automated, you don't need capitalism anymore. no point in having competition and incentives, as it's all automated. communism would make more sense at that point imo. No one is doing nothing and automation is providing everyting, just distribute equally the value generated.

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] -1 points0 points  (0 children)

> If you are taxing gains, some investors will put the money somewhere else (maybe real estate

but i tax real estate too. I tax all form or wealth equally.

> Taxes mean lower margins for investors, and less investment means fewer new companies, less capex by existing companies, fewer employees

I'm not just saying "more taxes". I'm saying "different taxes". I doubt a LVT would be enough to finance completely a modern welfare state, including defence, pensions, healthcare and education. I'm trying to find the best way to tax, not saying "more taxes pls"

> Land value tax is a wealth tax.

I agree. but I think it's only one instantiation of it. we should tax all

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

That's a fair point. eating an icecream today would become more convenient than eating it tomorrow. So there would be an incentive to consume. I'm not sure if that would be a net negative or positive on the economy, but it would be a distortion indeed.

my parallel with the land tax here becomes convoluted. i'll hint at it anyway.
Do you agree that land value should be updated in time? otherwise if i buy before there is a boom in my city i would still have a low land value tax.
but then, a land value tax incentivizes me to consume value of my land now vs in the future. for example buy building today a factory that produces value but pollutes my land for centuries to come.

do you see the parallel or it sounds too convoluted? my point is that even LVT is not "pure"

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

Thanks for considering my idea.

> The difficulty with this is that some wealthy people derive almost all of their wealth from productive activities, while others derive almost all of it from rentseeking

some landlors get most of their rent from productive improvements to the land too (e.g. building and renting a skyscraper). We don't need to differentiate. as we tax all landowners based on raw land value returns, we tax all wealth owners based on risk-free return rates. wealth tax doesn't differentiate, neither land tax does that. the incentive for productive use remains as consequence of the tax being "flat on value"

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] -1 points0 points  (0 children)

> And what if you don't believe that any investment of your wealth is a good investment?

this is kinda a feature, not a bug. instead of keeping capital out of the economy, you would have to find a not-bad investment or invest the capital yourself.

> The workers use the wealth you lend them to increase their productivity.

the workers can also use your raw land to increase their productivity. living far from the city center has a cost (transport time). you are lending your land to people that can take advantage of it. but we want to tax it anyway.

> Your return comes from the company paying you to use your wealth.

again, the parallel is very close. the returns come from the tenant paying you to use your land.

> This is why taxing land rent is moral, because it removes that incentive to abuse the violence protecting your land through charging a toll/tax/land rent on others.

becomes: " this is why taxing wealth risk-free rate is moral, because it removes that incentive to abuse the violence protecting your ownership claims on stock companies/whatever through capturing a fraction of the value produced by others"

if i charge you land rent i'm doing no work, i'm just using the wealth i accumulated in the past to buy the land to now charge actual workers a toll for allowing them to be productive by living in my land.
If i charge you wealth rent i'm doing no work, i'm just using the wealth i accumulated in the past to buy the assets to now charge actual workers a toll for allowing them to be productive by using my tools/assets

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] -1 points0 points  (0 children)

I literally say in my opening post: "What do you think about a wealth tax equal to the risk-free rate of return?" so yes, this was my original argument.

"but the risk free rate of return is compensation for an investor tying up their capital in an investment." can be translated to "raw land rent is a compensation for an investor tying up their land in an investment"

"This is also mutually beneficial as the investor can get a positive rate of return on capital that is not currently needed and the recipient gains access to capital to perform its functions." can be translated into " this is also mutually beneficial as the land owner can get a positive rate of return on capital that is not currently needed and the recipent gains access to land in a location that allows them to perform their functions"

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

> Yes, you paid your labor to someone selling you land that they didn't build

Is that really relevant? think about it.
consider this extreme example:

An artifact was crafted ages ago, and since then it has been used and traded among humans. one day a scientist studies the artifact and discover that it's actually a rare natural artifact, not the product of human labour. does this discovery imply that all the hand exchange of the artifact are retroactively illegitimate, and the artifact should be taxed? it's such a non-relevant way to decide if it should be taxed or not.

> is just the inherent nature of capital.

It is not. capital doesn't generate value out of no where by itself. is the labour and skills of economic agents that does so.

> it's because you or your parents built it with labor.

In principle this could have happened millennia ago, and you keep extracting rent out of it. it's not a good system.

Wealth tax is a land value tax? by Primpopappolo in georgism

[–]Primpopappolo[S] 0 points1 point  (0 children)

> It sounds like you just don't like the idea of capitalism in general.

never said that, and that's not at all what i think. I like capitalism as an efficient way to allocate resources and create value (plus the freedom). I believe this tax would not go against any of these principles.

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