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Land Value Taxation: Rebuttals to Common Objections

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A Tax that Would Solve the Housing Crisis

Eliminate all taxes but a levy on land, said Henry George. Here?s why it would work.

By Patrick Condon
June 04, 2018

In Vancouver, responses to the housing crisis fall into two camps: there are those who would increase supply and those who would limit demand. Both points of view have merit and both are needed.

But mostly overlooked in this debate is the real problem. It's not that houses cost a lot. They don't. Building a house in Vancouver costs roughly the same per square foot as in 100 Mile House.

It's the land under homes that cost a lot. And land, because they are not making any more of it, is particularly susceptible to speculative pressures.

This isn't the first time that the cost of urban land has spiralled beyond the reach of average wage earners. During the last Gilded Age, between 1870 and the advent of the First World War, land prices also rose dramatically. A bold solution came out of that time, championed by a popular political economist.

His name was Henry George.

George and the Single Tax movement

Henry George was born in Philadelphia in 1839. He was the second of 10 children in a lower-middle-class family. George started off as a journalist, working mostly in California, but with a brief stint in Victoria during his 20s.

One day in 1871 on a horseback ride, he stopped to rest while overlooking San Francisco Bay. He met a teamster, and to make small talk, he asked how much land nearby was worth. The teamster didn?t know how much exactly, but said there was a local who was willing to sell his property for a $1,000 an acre.

It was an epiphany for George.

"Like a flash it came over me that there was the reason of advancing poverty with advancing wealth," George later wrote. "With the growth of population, land grows in value, and the men who work it must pay more for the privilege."

George would champion the Single Tax movement, which has renewed relevance today given how urban land values are pushing housing costs more and more out of reach. George argued for the elimination of income taxes, taxes on sales and taxes on productive capital like machinery or buildings.

There should only be one tax, George said, and that would be on land. To our modern ears this sounds irrational and our skepticism is largely a testament to how savagely his ideas were attacked at the time ? an attack that endures to this day.

George's hypothesis was this: land, since it gains its value passively (just by sitting there without adding anything to production), should be very heavily taxed. This would reduce or eliminate the tax burden on the labour of wage earners, the profit of owners and the buildings and machinery that makes production possible.

Reader, if you have a bit of exposure to political economy, you might recognize something unique about this formulation. While Marx pitted workers against owners, Henry George united them. To George, workers and owners were on the same side. By working together, both made the world a better and richer place.

The real drag on culture, George argued, were people whose gains came passively by just sitting on a resource, doing nothing to it as its value rose.

What George found most outrageous was that the value of any piece of urban land didn?t come from the effort of its owner; its value reflected past labour and enterprise performed on surrounding lands. Yet most of the gains from all this creative effort went to the land owner/speculator with very little to the people who actually created that value.

In the case of Vancouver, current land prices are high because of all the good work done and taxes paid by previous generations of citizens. But are these citizens or their children reaping any reward?

Most outrageously, land owners/speculators often gained the most by leaving their urban land empty and thus useless. Being useless, the land was often not taxed, even though its value steadily increased by the growth of the surrounding city.

George argued that taxes should be shifted to land and away from labour and productive capital. With land heavily taxed, it would be in the interests of land owners to find the most productive use for it. It would also mean that inflation of land prices would be mitigated, as land purchasers would know that heavy taxes came with owning land. Thus, the tax shift would both reduce taxes on productive activities and make land cheaper to put to productive use.






--- Quote from: Geolibertarian on March 17, 2018, 10:48:43 am ---And there's nothing in the Republican tax plan that will reverse this trend. In fact all the evidence I've seen indicates it will make the rent-wage gap even wider. So get used to seeing more news stories about the "retail apocalypse," because extortionate rent-gouging is making it extremely difficult, if not impossible, for increasing numbers of Americans to go shopping. "Great again" my ass!


Peter Thiel: The vast majority of the capital I give companies is just going to landlords

Julia La Roche
Yahoo Finance
March 16, 2018

Billionaire venture capitalist and entrepreneur Peter Thiel believes the high cost of living is stifling entrepreneurship in Silicon Valley.

“One thing I’ve been thinking about as a venture capitalist in Silicon Valley is the vast majority of the capital I give to the companies is just going to landlords. It’s going to commercial real estate and even more to urban slumlords of one sort or another. And that’s an odd thing to be doing as a venture capitalist. That’s so disproportionate,” Thiel said at an event on Thursday hosted by the Economic Club of New York.

He explained that when a one-bedroom apartment goes for $2,000 in San Francisco versus a one-bedroom in Austin for $1,000 that suggests that San Francisco is a better place to live. However, when the rent on that one-bedroom in San Francisco reaches $4,000, perhaps it’s time to be open to other areas.


--- End quote ---

As soon as more companies allow telecommuting, land values around Silicon Valley and major hubs will start to slow their acceleration. It's interesting, though, as soon as Yahoo started the trend of limiting telecommuting, many companies followed suit. You've got to wonder if there's some ulterior motivation for this coordinated change of policy.  One thing's for sure, it's easier to control a tight, dependent urban population than those spread out over the countryside.
Jefferson was for an agrarian set of communities and I think foresaw the difficulties we would face being in a more dependent, urban-based and manufacturing-dependent economy.


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