I’ve always been Georgism curious, but didn’t know how to handle some of the more obvious challenges so I really want to thank the author for the work here!
I’m curious about how to think about the dynamics of a LVT:
- I can imagine urbanism creating a flocking behavior that ruins neighborhoods in 5-10 year cycles. Coffee shop draws more commence drawing more affluent people pushing up LVT driving out residents faster than even the spectre of “gentrification”, only to collapse when a nearby area is cheaper for a cool coffee shop to start. (The problem specifically is that you’ve both driven out people and caused an inefficient overbuild in each area)
- Similarly how do you think about new uses for land emerging? If I lease desert land for a data center because it’s so perfect for it, instead of buying it … how (and when) does it show up in LTV increases? What if I trade you some other benefit to keep it out of LVT impacting records?
- Are you just costing the world coordination surplus by forcing high value enterprises to distribute themselves (inefficiently) just far enough apart that they don’t drive up each other’s LVT? That’s a deadweight loss.
I’m a fan of the idea - these are just some of the tricky challenges I don’t have a good answer to yet.
I would think that lag, combined with the general public legibility of LVT, combined with the inertia of property transactions, would damp oscillations.
Gentrification and decay are already cycles, and maybe those cycles would accelerate somewhat; but a prediction that they would drop to below decade level would be a bold assertion.
The challenge is that LVT as advocated here pushes for annual updates of the tax based on available information. That easily can move rates up (and down) by “drive people out” amounts in 5-10 years in urban areas.
I agree that's a concern. I don't know the answer.
Of course any government can jack up taxes, and some may use LVT as an excuse. That's already a problem. But the _ideal_ LVT replaces property tax. So I'm skeptical that LVT will be a large exacerbating factor.
The real problem is that gentrification drives up demand, and that's baked into the premise - and necessarily precedes any LVT uprating. I expect LVT's contribution to the problem to be marginal. More data needed.
I'm no expert on Georgism but I think there are reasonable answers to your questions.
1. "Coffee shop draws more commence drawing more affluent people pushing up LVT driving out residents faster than even the spectre of “gentrification”"
This is an impossible premise. The relationship between the cost of the LVT and the popularity are directly and inseparably linked. LVT only goes up (and stays higher) when the neighbourhood is popular. It drops (and stays lower) if the neighbourhood falls out of popularity. In real life it would reach an equilibrium, but it might encounter some volatility along the way.
This is overshadowed by many more factors than a small increase in taxes, and I would propose that an LVT is a minor factor in the popularity of neighbourhoods.
2. Similarly how do you think about new uses for land emerging? If I lease desert land for a data center because it’s so perfect for it, instead of buying it … how (and when) does it show up in LTV increases? What if I trade you some other benefit to keep it out of LVT impacting records?
The tricky part about LVT is that it requires an assessment of value prior to realisation. Popular methods include using a combination of average of realised land prices in the area, against a velocity coefficient (the general gain/loss over a period of time), modified by negatively and positively correlated correlates like proximity to public transport and parks. There are countless ways proposed to do just this so I won't retread worn ground.
In the case of the desert data centre, it is likely that the land will not increase much in value. This is by design, because we want data centres (and similar industry) to move into the middle of nowhere so that scarce land is instead used for more productive enterprise like housing for workers so they can get to work easily.
3. Are you just costing the world coordination surplus by forcing high value enterprises to distribute themselves (inefficiently) just far enough apart that they don’t drive up each other’s LVT? That’s a deadweight loss.
This is the brilliant part of Georgism, and the reason I "converted." A well designed LVT imputes the social costs (implied by their economic costs) of the use of land. It then gives the businesses the fully informed choice of how to deploy their capital. It could be that the efficiency you allude to is real, and is worth remaining on high value land. So be it. The business is the best actor to make that decision. On the other hand, if the deadweight loss is lower than the LVT, then the land should be better utilised by another company which would have better utility for its location.
Georgism aligns social costs with business interests in a way no other tax currently does. Meaning that businesses act in their best interests, and in doing so, act in the best interests of society.
Imagine that there's somebody who wants to build unpleasant things. Let's say there's a group "association of people for ugly and genuinely unpleasant buildings" who build their collections of ugly buildings, buying up the cheap land that becomes available as people who no longer want to live near them move out.
Well, that group is rewarded by this system.
I think the problem is really: LVT makes sense, there's no reason to tax buildings, but if it is to be fair, it must actually tax the unimproved land, and this means it can't punish people who buy things next to someone building something attractive and then not doing anything useful with it, so that particular goal, sometimes held up as one of the points of a pure LVT is not achieved.
I don’t see how the people building ugly things would benefit really. If the goal is a factory or something that necessarily has to be ugly building it on low value land makes more sense then lowering the value of high value land. If the goal is just to be a dick, well people already do that by leaving these lots vacant.
Well, if ugliness weren't enough, imagine if they instead did everything to make things unpleasant for people living nearby.
Since that would reduce demand in the area, there's a real risk that we'd infer that the neighbourhood is more inherently undesirable and drop the rates there, even though we shouldn't.
I think you're really basically just saying "but no one would do this". People would absolutely do this. People even do this today in inter-group conflict about who is to live in specific neighbourhoods.
What's the end goal of this "build ugly things and depress land values" strategy? If it's to drive out current residents and buy cheap, to what goal? If, once you have bought cheap, you stop building ugly things and start doing high value things.....then land values go back up and you have defeated your own purpose.
Yes and no. You can even do this as a group, to other groups for the group's benefit.
Imagine a group that chucks rocks at everyone else who lives in the place where they want to live, then try to buy the people living there out. It's the same strategy.
Yeah sure the taxes would go back to normal later, but the people left with deflated property values and a worse neighborhood and potentially leave because of decreasing property values aren't going to feel very good about it.
Also the asshole still saves on the purchase. The taxes go back up, but the sale price of the land was artificially low still. Which benefits the asshole and hurts the original owners.
The only way it doesn't benefit the asshole is if the property is worth zero dollars to sell.
I'm not an LVT expert but I think you are still conflating it with property values and market rates.
The LVT assessment doesn't have to consider whether it is a "desirable place to live" or what the neighbors are like. Only the potential for the land.
A key factor in LVT is the local control of the process. That is the part that can be more easily swung by coalitions with money/power.
Yea on second thought I see it. One of the gentrifying neighborhoods in my city has a large group of longtime residents who are doing everything they can to slow down gentrification by making the area a worse place to live. They’d probably be working even harder if there was an lvt.
They don't need to build anything at all. Just leave the lot unoccupied and uncared for, and it'll turn into blight. The city will reward them for this by reducing their property taxes.
Something I think most people miss is that LVT doesn’t increase directly because of the improvements. If you build a coffee house, the building and equipment are excluded from the tax. It just applies to the underlying land value.
But a popular coffee house can make the surrounding area more desirable. If that increases what people will pay for locations there, land values rise. At the same tax rate, that means higher LVT for nearby sites, and, potentially the coffee house’s own site. Gentrification by other means.
In a lot of ways, it depends on what the comparative LVT base is. If its just blocks or streets nearby -- a single happening place can push the value up. Spread out to the census tract, the city, the county, and now you can toss more and more of hot coffee shops in the same place with minor impact to the tax base.
LVT is just another form of attempted centralized control of the market and it will be just as susceptible to government corruption, cronyism, lobbying, etc.
Well right now it happens on 20-30yr cycles which is enough for the people who implement the bad policy that stops the music to get paid and screw off to Idaho or Florida filthy rich leaving the next guy holding the bag.
Maybe if the tempo were increased the cycle would be so flagrantly visible that possible for the general populace to say "no screw you you and the ideas you peddle are bad"
> drawing more affluent people pushing up LVT driving out residents
Land value taxes only go up if the land value (and thus the demand) is overall going up. The taxes lower desirability, but are also proportional to desirability. So, it's more like a frictional force: inherently counter-cyclical, able to slow down a property value increase but not to reverse it.
So the theory says "nobody goes to the ballpark, it's too crowded" shouldn't happen. And even imagining weird time-delays, mismodeling, etc that could cause it, everything in your scenario is directionally the same with normal property taxes. If it happened, we'd see it today.
rao-v · · focus · HN ↗
I’m curious about how to think about the dynamics of a LVT:
- I can imagine urbanism creating a flocking behavior that ruins neighborhoods in 5-10 year cycles. Coffee shop draws more commence drawing more affluent people pushing up LVT driving out residents faster than even the spectre of “gentrification”, only to collapse when a nearby area is cheaper for a cool coffee shop to start. (The problem specifically is that you’ve both driven out people and caused an inefficient overbuild in each area)
- Similarly how do you think about new uses for land emerging? If I lease desert land for a data center because it’s so perfect for it, instead of buying it … how (and when) does it show up in LTV increases? What if I trade you some other benefit to keep it out of LVT impacting records?
- Are you just costing the world coordination surplus by forcing high value enterprises to distribute themselves (inefficiently) just far enough apart that they don’t drive up each other’s LVT? That’s a deadweight loss.
I’m a fan of the idea - these are just some of the tricky challenges I don’t have a good answer to yet.
psd1 · · focus · HN ↗
Gentrification and decay are already cycles, and maybe those cycles would accelerate somewhat; but a prediction that they would drop to below decade level would be a bold assertion.
rao-v · · focus · HN ↗
psd1 · · focus · HN ↗
Of course any government can jack up taxes, and some may use LVT as an excuse. That's already a problem. But the _ideal_ LVT replaces property tax. So I'm skeptical that LVT will be a large exacerbating factor.
The real problem is that gentrification drives up demand, and that's baked into the premise - and necessarily precedes any LVT uprating. I expect LVT's contribution to the problem to be marginal. More data needed.
Gareth321 · · focus · HN ↗
1. "Coffee shop draws more commence drawing more affluent people pushing up LVT driving out residents faster than even the spectre of “gentrification”"
This is an impossible premise. The relationship between the cost of the LVT and the popularity are directly and inseparably linked. LVT only goes up (and stays higher) when the neighbourhood is popular. It drops (and stays lower) if the neighbourhood falls out of popularity. In real life it would reach an equilibrium, but it might encounter some volatility along the way.
This is overshadowed by many more factors than a small increase in taxes, and I would propose that an LVT is a minor factor in the popularity of neighbourhoods.
2. Similarly how do you think about new uses for land emerging? If I lease desert land for a data center because it’s so perfect for it, instead of buying it … how (and when) does it show up in LTV increases? What if I trade you some other benefit to keep it out of LVT impacting records?
The tricky part about LVT is that it requires an assessment of value prior to realisation. Popular methods include using a combination of average of realised land prices in the area, against a velocity coefficient (the general gain/loss over a period of time), modified by negatively and positively correlated correlates like proximity to public transport and parks. There are countless ways proposed to do just this so I won't retread worn ground.
In the case of the desert data centre, it is likely that the land will not increase much in value. This is by design, because we want data centres (and similar industry) to move into the middle of nowhere so that scarce land is instead used for more productive enterprise like housing for workers so they can get to work easily.
3. Are you just costing the world coordination surplus by forcing high value enterprises to distribute themselves (inefficiently) just far enough apart that they don’t drive up each other’s LVT? That’s a deadweight loss.
This is the brilliant part of Georgism, and the reason I "converted." A well designed LVT imputes the social costs (implied by their economic costs) of the use of land. It then gives the businesses the fully informed choice of how to deploy their capital. It could be that the efficiency you allude to is real, and is worth remaining on high value land. So be it. The business is the best actor to make that decision. On the other hand, if the deadweight loss is lower than the LVT, then the land should be better utilised by another company which would have better utility for its location.
Georgism aligns social costs with business interests in a way no other tax currently does. Meaning that businesses act in their best interests, and in doing so, act in the best interests of society.
impossiblefork · · focus · HN ↗
Imagine that there's somebody who wants to build unpleasant things. Let's say there's a group "association of people for ugly and genuinely unpleasant buildings" who build their collections of ugly buildings, buying up the cheap land that becomes available as people who no longer want to live near them move out.
Well, that group is rewarded by this system.
I think the problem is really: LVT makes sense, there's no reason to tax buildings, but if it is to be fair, it must actually tax the unimproved land, and this means it can't punish people who buy things next to someone building something attractive and then not doing anything useful with it, so that particular goal, sometimes held up as one of the points of a pure LVT is not achieved.
HDThoreaun · · focus · HN ↗
impossiblefork · · focus · HN ↗
Since that would reduce demand in the area, there's a real risk that we'd infer that the neighbourhood is more inherently undesirable and drop the rates there, even though we shouldn't.
I think you're really basically just saying "but no one would do this". People would absolutely do this. People even do this today in inter-group conflict about who is to live in specific neighbourhoods.
MostlyStable · · focus · HN ↗
impossiblefork · · focus · HN ↗
Imagine a group that chucks rocks at everyone else who lives in the place where they want to live, then try to buy the people living there out. It's the same strategy.
AngryData · · focus · HN ↗
Also the asshole still saves on the purchase. The taxes go back up, but the sale price of the land was artificially low still. Which benefits the asshole and hurts the original owners.
The only way it doesn't benefit the asshole is if the property is worth zero dollars to sell.
anon84873628 · · focus · HN ↗
The LVT assessment doesn't have to consider whether it is a "desirable place to live" or what the neighbors are like. Only the potential for the land.
A key factor in LVT is the local control of the process. That is the part that can be more easily swung by coalitions with money/power.
HDThoreaun · · focus · HN ↗
sagarm · · focus · HN ↗
tomrod · · focus · HN ↗
But a popular coffee house can make the surrounding area more desirable. If that increases what people will pay for locations there, land values rise. At the same tax rate, that means higher LVT for nearby sites, and, potentially the coffee house’s own site. Gentrification by other means.
In a lot of ways, it depends on what the comparative LVT base is. If its just blocks or streets nearby -- a single happening place can push the value up. Spread out to the census tract, the city, the county, and now you can toss more and more of hot coffee shops in the same place with minor impact to the tax base.
krupan · · focus · HN ↗
iririririr · · focus · HN ↗
georgism doesn't solve gentrification. neither does anything else solve N people desiring limited things.
it solves many other issues around it though. the focus of the linked author is fixing the freeriders with lots of capital.
cucumber3732842 · · focus · HN ↗
Maybe if the tempo were increased the cycle would be so flagrantly visible that possible for the general populace to say "no screw you you and the ideas you peddle are bad"
unholiness · · focus · HN ↗
Land value taxes only go up if the land value (and thus the demand) is overall going up. The taxes lower desirability, but are also proportional to desirability. So, it's more like a frictional force: inherently counter-cyclical, able to slow down a property value increase but not to reverse it.
So the theory says "nobody goes to the ballpark, it's too crowded" shouldn't happen. And even imagining weird time-delays, mismodeling, etc that could cause it, everything in your scenario is directionally the same with normal property taxes. If it happened, we'd see it today.