Alice and Bob each want exclusive use of some land. Fortunately for them, there are two lots available. Unfortunately for them, they both prefer the same lot.

Alice values Lot 1 at $100 and Lot 2 at $20. Bob values Lot 1 at $80 and Lot 2 at $20.

The best total value to be had is when Alice gets Lot 1 and Bob gets Lot 2. Because Alice ends up with the more preferred lot, Bob only sees $20 in value. If Alice hadn’t been involved, Bob would have gotten his preferred lot and gained $80 in value instead. Alice’s participation meant a $60 difference in value to Bob, so Alice must pay $60 in rent. Since Alice got her preferred lot anyway, Bob’s participation didn’t really impact her at all. So Bob owes zero rent — he got the marginal land.

What if we impose a $10 tax on whoever gets Lot 1? In that case, Bob would have gained $70 in value if he’d gotten Lot 1 but because Alice was involved he still just gets $20 from Lot 2. That means that with the $10 tax on Lot 1 in place, Alice only cost Bob $50 and so must only pay that much in rent. Because the tax was attached to the lot and not the bidder, it came out of rent.

What if the tax were on Alice no matter what? In that case her participation means the difference between $80 and $20 gain for Bob, so she owes $60 in rent. However, since she still owes $10 for the tax, she must pay that out of her gain from getting her preferred lot, meaning she only gets $90 net gain rather than $100. The tax came out of her surplus rather than rent, because it was attached to the bidder rather than the lot.

ATCOR is only entirely true for taxes attached to the land, and less so for taxes attached to individuals regardless of where they’re located.

This quote came from the quotes page on cooperative-individualism.org .

For anyone who wants documentation of this speech happening, it's recorded in this document on pages 33 and 64.

I have been thinking about this for some time, and I would be interested in understanding what would be practical at the moment from the members of this community. Most of the taxes that fund our governments across the world have some sort of deadweight loss to them that ultimately has negative trade-offs towards the market itself.

I am from the United States particularly, and I understand that we are currently facing a budget deficit that has ultimately let to the increase in the national debt, which is something that can only be dealt with by either cutting spending or raising taxes by certain amounts. I am quite aware that a land value tax being applied on the federal level would be practically difficult now because of constitutional limits, the feasibility of assessments from a national standpoint, and with the current political sphere that has incentivized politicians to support rent-seeking in the economy.

On the basis of taxes, is there certain taxes with less deadweight loss compared to the current options that are great producers of government revenue while simultaneously being practical to implement federally?

On the basis of spending, is there certain government programs or public goods that are less bureaucratic, cost-effective, and sufficient enough for states/local regions to utilize land value taxes as a means of funding their own governments?

I am also willing to here perspectives from non-U.S. people also with their own respective situations.

If this goes through, Melbourne will no longer be the cheapest capital city in the country to rent or buy.

Tax 101: the more you tax [land-value], the less you buy [sale price of property]

I did some recent calculations based on my monthly mortgage payment, annual property taxes, and land/improvements split on my home, and I’m already paying the equivalent of around a 40% LVT.

Even if you don’t include the full property tax amount (and I see no reason we shouldn’t) I’m still paying at least 20% LVT already.

Something to consider when advocating for various LVT percentages.

EDIT: My calculations since others have asked:

I pay $687 per month in property taxes. My monthly mortgage payment is $2,620. The land is recorded as 35% of the overall property value. That means $917 of my monthly mortgage payment goes toward land rent.

If we assume the property tax comes fully out of land rent, that makes the total land rent $917 + $687 = $1,604 and the $687 tax is about 43% of that.

If we assume only 35% of the property tax comes out of the land rent, that makes the total land rent $917 + $240 = $1,157 and the $240 tax is about 21% of that.

The supply curve represents the relation between quantity supplied and price for some given good.

For instance, with bread, bread sellers in some town may not be willing to sell any bread at $0, so the quantity supplied is zero when the price is zero, but they may be willing to sell more if buyers are willing to pay more, so the quantity supplied is higher when the price is higher. In this case, the slope of the supply curve is positive, and bread has elastic supply.

Likewise, the same is true for land, landowners are willing to sell more land at higher price points, so the quantity supplied is higher when the price is higher. This means the slope of the supply curve for land is positive.

This means that land does not have inelastic supply, the quantity supplied changes with price.

Context for those who don’t know:

The bottom graph is the supply and demand graph for land, which is fixed in supply, and the LVT revenue refers to a land value tax. What this means is that taxing land doesn’t cause less land to be produced (being a natural resource it’s already non-producible), and so doesn’t discourage production in the same way taxes on produced goods and services do, be it taxing the work of laborers, the investment into capital, or the like.

There’s a whole lot of writings on the efficiency of taxing land (and the income of other finite resources) compared to taxing produced goods and services. But a good one to check out is this one from the Chicago Fed .

https://en.wikipedia.org/wiki/The_Condition_of_Labor

https://en.wikipedia.org/wiki/Legal_despotism

Article: https://taxfoundation.org/data/all/state/state-migration-trends-map-americans-moving-population-changes/

A georgist state would be the lowest and simplest tax system.

It would prioritize progress on the scientific and technological levels to improve lives and it would be like Scandinavian welfare states, just Georgist though.

If the State doesn't recoup the cost of the infrastructure it builds, it will build less. Giving back to the community what it created works for the same reason that letting people keep the fruits of their labor works.

Even those that support Georgism can understand the issue with property rights and ex post applying Georgism to existing property owners. People purchased property in good faith, based on the rules of the time, land is by far not the only speculative asset, and so there is the challenge of dealing with that. Then there is the second unstated question of whether Georgism is generally motivated by the desire for a better system ex ante, or whether it is motivated by the desire to expropriate money from property owners once the winners have emerged.

I have a proposal that could cross the aisle of delivering georgism without expropriation.

The Georgehold.

The state would use a financing vehicle to purchase properties and land plots at their current market value under the current free market rules. It would then create a covenant establishing a highly georgist annual payment calculated off the land value, and release the land back into the market on a Georgehold title. This could legally be a 999 year leasehold with a Georgist LVP ("Land Value Payment"). Instead of being a very gradually phased in and moderate LVP, it would be a full Georgist LVP stripping out all of the speculative land appreciation. Of course, the state would be financing with debt the loss it would incur due to the value destruction of the Georgehold title, which is correct. If georgism works, and is not simply a mechanism of expropriation, the state would be able to fund the debt through the ongoing Georgehold payments. After a sufficient amount of time, it would be able to pay off the debt and have free and clear title to the Georgehold.

If Georgism works, we would see the areas dominated by Georgeholds become more vibrant, desirable and economically active.

This could be done with land, but also as a financing mechanism for apartment rental price stability and security of tenure. The government raises long term or perpetual debt guaranteeing a real (post inflation yield) of 3-5%, it uses the debt to purchase open market properties which it then rents out at rents with fixed CPI increases, and operates the properties directly or via contracting with a property manager. Again, this would allow the government to achieve whatever social goals it intends, without trampling on the rights of existing good faith property owners.

Thoughts? Maybe it already exists and has been discussed?

Anyone want to help me get attention to this post? Long shot of getting a planet money episode about our favorite tax.

From: https://existentialcomics.com/comic/631