Land Value Tax

[Clay Shentrup]

I know this isn't exactly a social choice theory issue, but social choice has a lot of overlap with economics, and I'm particularly interested in the feedback I'd get from the kinds of thinkers we have here. So here's an initial draft of an evolving post I'm writing about LVT.

https://medium.com/@ClayShentrup/land-value-tax-1ce8c743a248

So far, I'm pretty sure it's snake oil.

[William Waugh]

I favor a somewhat related idea: tax the uptake of raw resources into private industry (provided that private industry continues to be permitted). This would have to be accompanied with a subsidy for each member of each family that conforms to nationally decided limitations on human fertility. The tax rates on different types of resource would differ.

[Clay Shentrup]

Just make sure you're doing it for a rational reason.

https://medium.com/@ClayShentrup/what-to-tax-or-subsidize-42cd7dc5c726

[Frank Martinez]

I like the first part but don't understand the purpose of the second part. Why a subsidy? Why fertility?

On Thursday, February 4, 2016, William Waugh <2knuw...@snkmail.com> wrote:

I favor a somewhat related idea: tax the uptake of raw resources into private industry (provided that private industry continues to be permitted). This would have to be accompanied with a subsidy for each member of each family that conforms to nationally decided limitations on human fertility. The tax rates on different types of resource would differ.

--
You received this message because you are subscribed to the Google Groups "The Center for Election Science" group.
To unsubscribe from this group and stop receiving emails from it, send an email to electionscien...@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.

--
P.S.: I prefer to be reached on BitMessage at BM-2D8txNiU7b84d2tgqvJQdgBog6A69oDAx6

[William Waugh]

Response to Clay Shentrup's response:

You refer to the Wikipedia definition of "externality", "the cost or benefit that affects a party who did not choose to incur that cost or benefit." The vast majority of families are interested in survival of their descendants or I suppose at least they are interested that some human beings survive in the future. Exhaustion of raw resources for frivolous purposes tends to shift matters in a direction that reduces the chances for human survival. Whatever reduces the chance of human survival amounts to a cost to all families, and the families did not necessarily voluntarily incur that cost. It comes about by a kind of prisoner's dilemma, where it appears to economic decision makers that it is in their interest to consume as much as possible, but where it is against the interest of the whole aggregate of families to do so. Therefore, the consumption of scarce raw resources should be taxed. Along with that, I say eliminate all tax on the exchange of labor, so no more income or payroll tax. Note in particular that the capacity of the ocean/atmosphere system to absorb carbonic acid or carbon dioxide without pushing conditions into a place where farming and fishing become impossible is a limited resource, and that carbon fuels are raw resources and so would be covered by what I'm advocating. So, I think my rationale falls within the framework you describe when you say the decision about what to tax should be justified in terms of externalities.

Response to Frank Martinez's response:

So that the net effect of the combination of taxes (i. e. the positive taxes on the uptake of raw resources combined with the negative tax on being human) will be progressive, and so as to lead other nations by example toward preventing or reversing human overpopulation.

On Monday, February 1, 2016 at 12:30:49 AM UTC-5, Clay Shentrup started https://groups.google.com/forum/?fromgroups#!topic/electionscience/BevmlevtUcw

[Clay Shentrup]

On Thursday, February 4, 2016 at 9:07:17 AM UTC-8, William Waugh wrote:

the consumption of scarce raw resources should be taxed.

Nope. This is a common economic fallacy. If you make it more expensive than it actually should be, then you'll discourage people from gaining utility by consuming it.

Maybe this thought experiment will help. You have a tube of "utility juice". Ultimately, you want to use 100% of it, because it's useless just sitting in the tube. It certainly doesn't make sense to distort its price by taxing it.

Again, this isn't an externality.

 

Along with that, I say eliminate all tax on the exchange of labor, so no more income or payroll tax.

That probably makes sense, since I can't think of an externality there.

 

carbon fuels are raw resources and so would be covered by what I'm advocating.

Whatever that meant.

So, I think my rationale falls within the framework you describe when you say the decision about what to tax should be justified in terms of externalities.

You're just making the common confused mistake in thinking that use of scarce resources equates to an externality. I made this mistake myself not long ago, debating with a water policy expert about whether we should "tax" water to reduce consumption.

[Frank Martinez]

Maybe I'm just not thinking clearly but I don't see how the combination is progressive. Also, the idea there is global Human overpopulation is (a) beyond the scope of this group and (b) not an accepted and established fact anyway.

On Thursday, February 4, 2016, William Waugh <2knuw...@snkmail.com> wrote:

--

You received this message because you are subscribed to the Google Groups "The Center for Election Science" group.
To unsubscribe from this group and stop receiving emails from it, send an email to electionscien...@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.

[Toby Pereira]

I think it might be an idea to go a bit slower and have a step-by-step mathematical explanation of this bit:

"That’s precisely right. For example, suppose a 1% yearly LVT is enacted on a parcel of land. Given a risk free rate of return of 3% (the current rate of return for a 30-year T-bill), that’s a present value of 33%. In other words, that tax is economically equivalent to a one-time tax assessment of 33% of the value of the parcel.

But notice that this assessment has no impact on the relative financial benefit of developing the land vs. speculating and holding out for the opportunity to sell it for a higher price in the future. In other words, suppose the estimated net present value of developed land (including the cost to develop it) is X, and the estimated net present value of leaving it vacant in order to sell it in two years’ time is Y. If X is greater than Y, you want to develop it. If Y is greater than X, then you want to speculate.

If a LVT is assessed, it reduces the present value of X and Y by exactly the same amount. So it has no impact on which decision is perceived to be more profitable."

It's not intuitively obvious to me what's going on after reading this. 

[Toby Pereira]

On Thursday, 4 February 2016 16:08:12 UTC, Clay Shentrup wrote:

Just make sure you're doing it for a rational reason.

https://medium.com/@ClayShentrup/what-to-tax-or-subsidize-42cd7dc5c726

"There are precisely two reasons for any tax or subsidy. They are:

1. To directly affect the welfare of the recipient.

2. To address an externality."

Do you consider this to be self-evident? Might it be worth giving some of the other reasons people might use for a tax or subsidy and explaining why it is flawed?

[Clay Shentrup]

Suppose you can have X or Y, and you decide X is worth more.

Then we offer you the chance to take X+Z or Y+Z. Your decision should not change regardless of the value of X or Y.

[Clay Shentrup]

On Sunday, February 7, 2016 at 10:55:21 AM UTC-8, Toby Pereira wrote:

Do you consider this to be self-evident? Might it be worth giving some of the other reasons people might use for a tax or subsidy and explaining why it is flawed?

I don't know if anything is self-evident. It depends on what concepts you've been introduced to. But I do think that anyone who's spent time formally studying economics should have this basic understanding.

As an example, take the corporate tax. It should be obvious that it's a bad policy. Because it's not specifically targeted to either reduce a particular externality (it applies regardless of whether the corporation is building car engines or solar panels), and it's not specifically targeted based on the recipient's wealth.

Sadly, I think virtually no elected officials understand this. Hence you have proposals for things like minimum wage laws and rent control.

[Clay Shentrup]

I want to be clear that I'm not criticizing minimum wage in some kind of politically libertarian way. I'm not getting at the underlying "morality of wealth redistribution". I'm simply referring to the arbitrariness of the tax component of it. (A price control is a bundled tax and subsidy.)

[William Waugh]

https://www.washingtonpost.com/news/energy-environment/wp/2016/02/08/why-many-economists-support-obamas-idea-of-a-tax-on-oil/?tid=a_inl

[Clay Shentrup]

On Wednesday, February 24, 2016 at 8:44:17 PM UTC-8, William Waugh wrote:

https://www.washingtonpost.com/news/energy-environment/wp/2016/02/08/why-many-economists-support-obamas-idea-of-a-tax-on-oil/?tid=a_inl

Yes, fossil fuels have a negative externality called "climate change". What externality is a Land Value Tax addressing?

> President Obama would pursue a $10-a-barrel tax on oil to fund major transportation system reform

That bolded part is the "naive bundling fallacy". Whether to adopt an oil tax and whether to fund major transportation system reform are two separate issues that should be voted on independently.