Re: Obvious Question From Peter & Dan Snow's "Who Owns Britain?"

On 12 Mar mjt wrote:
Maths For Fun And Insight writes:

[...]
From an economics point of view, taxing the land would help to ensure
that it was either put to efficient use, or used for the common good.

Having read the URLs presented later in this thread, it is clear that
the LVT Campaign is misguided.

In short, if the landed gentry needed cash to fund taxes, they would put
rents up. The LVTC is wrong when claiming that it would be impossible
to pass the tax onto tenants. The market rate of anything always moves.
The land tax would need to apply universally, tenants will find the
market rent rise by almost exactly the same magnitude as the tax! The
so-called analysis on its website is flawed: tenants will *not* face the
choice that the author assumes.
[...]

Here's (some of) what you purport to have read:

Why Land Value Tax Cannot be Passed On
http://www.landvaluetax.org/nopasson.htm

Economists agree that the form of Land Value Taxation
(LVT) proposed by the Campaign cannot be passed on.
The following note is intended as clarification.
-------------------------------------------------

As far as the user of land is concerned, in practice there is no
difference between land value tax and rents paid today for the use of a
site. The rental value of a site is determined by its productive
capacity over that of a similar size site at the margin. Marginal sites
are those that are on the verge of going out of business with average
labour and entrepreneural effort because of their position or natural
resources. The rent that can be commanded by the landlord or owner of
the site is this differential productive capacity (over the marginal
site), reckoned as termly (weekly, quarterly, yearly or multi-year term)
paid money amount.

Under a LVT system, part of the rent would be claimed as public revenue.
It is sometimes argued that the landlord would simply put up the rent to
cover this tax. This could not succeed for the reasons developed by
examining the following examples.

Suppose a producer on a high value site put up prices in an attempt to
recoup the amount paid as LVT. If the effect of his increased prices
could be sustained, then other producers would quickly follow suit and
raise their own prices until they were at the new higher level
throughout the market for those products. The producer at the marginal
site, paying no tax, would find a windfall return from these higher
prices and his site would no longer be marginal. Thus, if the higher
prices persisted, the value of all the sites would rise by that
cumulative increase in prices and the result would be higher land values
and higher rents and LVT.

But it is more likely that the marginal producer would keep his original
prices and take a larger market share. Thus the turnover on the higher
value sites would decrease, and the attempt to pass on the tax would
fail. In either case the intention to pass on the tax to the consumer
would be defeated by normal market forces.

If the tax is paid by a landlord who then tries to pass this levy on to
a tenant, again the attempt would be negated. Assuming that, as commonly
applies, landlords have pressed their claim to the maximum that the
rental market will bear, they will simply force the tenants to find
alternative sites from which to operate. Because the tenant is already
paying the maximum rent that the site can sustain, any attempt to
increase it beyond this point would put the business in jeopardy; the
tenant would either have to take less in wages, salary or profit, or
find a more viable site.

Since, under LVT many more sites would become available, the threat of
the tenant to vacate would leave the landlord with a hard choice: either
to attempt to find a tenant who was prepared to take a lesser return -
to work for less, or to risk having to pay the LVT on the unused site,
which would still bear the full tax. Thus the landlord's attempt to
offset the LVT would fail.

What prevents the LVT from being passed on are:

* market forces that determine the differential site values in the
first place,
* market forces that determine that occupiers pay the maximum rent
(or equivalent sale price or mortgage) that the site will bear,
* market forces that ensure that product prices are kept
competitive, i.e. absence of monopoly,
* the fact that alternative sites will be available to tenants
because vacant and unused sites will become more available by
the operation of LVT.

NOTE: LVT would be paid by the "beneficial owner", which may be
shared between the freeholder and a tenant, but which in any case
would be due whether the site was used or not.

See also: http://homepage.ntlworld.com/janusg/hgh/shift.htm

Most devasting of all would be that the tax would impact upon cumulative
investments, most notably pension funds (institutional investors, who
generally rely on land as a key plank in its investment strategy). The
tax would reduce the gain on that land, thus reducing the available
pension fund to the pensioner.

See: http://www.progress.org/dividend/index.shtml

As for the LVTC's claim that taxing land would encourage landowners to
develop brownfield sites, I cannot see how a rational landowner would do
that. The most fundamental block to any land development is *not* a
lack of tax (enforced liquidity), but a lack of planning permission.
[...]

Here you may have a point - see Don Riley's article at:
http://www.libertarian.co.uk/lapubs/econn/econn089.pdf

LVTC's claim that valuation is a relatively simple exercise: the value
of land depends upon its potential use, and potential use depends upon
planning permission, so if planning permission is haphardly implemented
(as it is), then how is land valuation simple?

Presence or absence of PP does not affect the ability to value land
apart from improvements: it only affects the current land value.

So, in short, a land tax would actually fail to meet any of its
objectives. Worse, it would undermine the base of nearly all
investments. After all, we all need land, so if it's for the common
good, why arbitrarily raise its price?

The effect of LVT would be to /lower/ the selling price of land. In
discussing these issues it is vital to understand the meaning of the
term 'rent' (in the sense that the classical economists used it) or
'economic rent' - see http://www.landvaluetax.org/econrent.htm

Other useful docs:
http://tinyurl.com/oxz9l
http://tinyurl.com/o974s
http://www.progress.org/archive/chester201.htm
http://homepage.ntlworld.com/janusg/scieco/ch03.htm
http://members.aol.com/_ht_a/tma68/geo-faq.htm
http://tinyurl.com/qkg9y

--
http://www.janus.freeserve.co.uk/
.

Relevant Pages

  • Re: What the LVT is, and what its advantages are - must read
    ... tax systems being by far *the worst* at this, ... you are simply calling what is not LVT LVT. ... public land. ... LVT in Hong Kong is a constantly told huge Georgist success ...
    (sci.econ)
  • Re: Relative poverty, a problem?
    ... traders because it is a tax on income. ... LVT would reduce the tax burden on farming ... Use 100 acre of land in countryside. ...
    (sci.econ)
  • Latvia Advised to Tax Land Values
    ... Can Soaring Land Values Serve as Riga's tax base? ... the city of Riga has been experiencing a real estate boom that has multiplied prices for many apartments as much as ten-fold and more. ... Most cities and states throughout history have financed their public spending by a property tax. ...
    (sci.econ)
  • Re: Latvia Advised to Tax Land Values
    ... > Can Soaring Land Values Serve as Riga's tax base? ... > estate boom that has multiplied prices for many apartments ... > it is channeled into the real estate market, ...
    (sci.econ)
  • Re: Relative poverty, a problem?
    ... The tax land value is not a bad idea. ... fundamentalism of the Georgists supporters that regard this as a panacea. ... by LVT opponents. ...
    (sci.econ)
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