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Georgists are also in favor of a citizen's dividend or UBI. The idea being that profits from the scarcity of land can be captured via taxes instead of privately captured, and thus these revenues can be used for public benefit via public works, citizen's dividend, welfare payments, infrastructure, etc. After all, the inherent profits from the land and natural resources belong to society at large, not any single person, so we as a society can choose to use these revenues to benefit all, including those physically unable to work. That is to say, welfare needn't be paid out of others' labor, but rather out of the inherent value of the commons that collectively belongs to all of us.
A benefit of citizen's dividend or UBI is it also lowers the barrier to entry for creation of new capital. For example, if you don't have to worry about having a roof over your head and food on the table, you're much more able to go back to school to improve your human capital, or to start a startup in the hope of doing something new and innovative.
And if you're wondering if land value taxes are really enough to fund all our whole government, well, it has been shown that a land value tax alone is capable of funding a government at all levels.
Thanks. This is all super interesting! After reading the wiki, I'm still not sure I understand how the land value tax is supposed to solve everything. Several countries already have something like that but they're still mostly capitalist.
If you don't mind a few more questions: Let's say you want to start a business. You buy some land (you'd still need to already have capital to do that). Are you allowed to have employees? Seems like no, since you would be profiting off their labor. So then, how do most people accumulate capital if they all have to work for themselves? You can't just get a job.
How do you pay for the land tax before your business is profitable? Seems like you'd just be passing your UBI back and forth between you and the gov. to pay your taxes. And then what happens if the city builds a huge park next to your business, causing your land tax to go up to the point you can't afford it? Couldn't that be detrimental to commerce? Seems like the public improvements would drive inflation, and the wiki didn't really mention inflation.
Sure, no problem! One big area where socialist and Georgist thought diverge is on the nature of paid labor, i.e., employment. Socialists often tend to view it through a lens of it being inherently exploitative, whereas Georgists tend to view it through the lens that it often is exploitative currently, but that it doesn't have to be. Perhaps this is best explained with an example.
I'm an engineer in a niche field. I work for my employer, and in return they pay me good money, treat me well, respect me, give me a good work-life balance, etc. The reason why they pay me well is not out of the goodness of their heart; rather, it's because they have to. If they don't pay me well and treat me right, I have other options. I'm not easily replaceable, but my employer is replaceable to me.
The reasons I have this negotiating power is for several reasons:
The result of all of this is I don't think my labor is being exploited by my employer. And the Georgist vision is to empower all labor to the same kind of negotiating power enjoyed by the professional class.
In general, Georgists want a system free of rent-seeking. For reference, here's a snippet from Wikipedia about rent-seeking:
As for acquiring land, the key idea of a land value tax is to make possession of land just as much an obligation as it is an asset. How we can measure that is the rental value of land:
Imagine you have a 1-acre parcel of unimproved land. Suppose you could rent that parcel out to someone on the free market for 1k per month. Thus, the rental value of your land is 1k per month.
Now suppose someone wishes to buy your land from you. How much would you be willing to sell for? Remember, they're essentially buying an income stream. You might decide 10 or 15k is a fair price, as you could use the liquid cash to invest in something else, and they could recoup their investment in 10 or 15 years from renting out the land to someone else.
But now imagine we had a "full" LVT as imagined by Georgists. The idea is to try to tax the full rental value of land, because why should you make profit for simply possessing god-given land that nobody made? In this case, the tax would be 1k per month.
So now you can rent out your land for 1k, but you gotta pay all that to the government in tax. Even if you don't rent it out, you still gotta pay 1k in tax per month. That is, possessing that land is now just as much an obligation as it is an asset.
So if someone wants to buy it now, sure they'd be acquring an income stream, but they're also now acquiring an equal tax obligation. Thus, the fair market price of the land should approach zero as the land tax approaches the full rental value of land.
In essence, what has happened in this scenario is we went from privately owning land to simply leasing land from the government, and "selling" land becomes basically just a lease transfer. Of course, if you have improvements upon the land, those can fetch a price still, just the underlying land price should be zero (or close to it).
This effect of LVT lowering land prices has been shown in practice. For example, the Australian Capital Territory passed a pretty milquetoast LVT (nowhere near the full rental value of land), and it still improved the affordability of land, particularly by deterring land speculation.
And if you think of this from the perspective of starting a business or building a home, this is actually great. Instead of having to pay a huge upfront price for land (or taking on a massive amount of debt), you can just lease the land from society via taxes. It means the barriers to entry for starting businesses or building housing are significantly lower, because you don't have to pay upfront for the land value.
As for the city building infrastructure or services near you that improve the land value, how it plays out depends on context. Imagine two adjacent and identical parcels of land in city. On one, Bob runs a grocery store. On the other, Jane runs a paid parking lot.
One day, the city builds a new light rail station with frequent service just a block away from the two parcels of land. This, as you can imagine, significantly boosts the land values of both these parcels, increasing the tax burdens for both Bob and Jane.
Bob doesn't like that his tax burden is 3x as much, but he consoles himself with the fact that he now attracts 3x the customers. Remember, the land only gets taxed more now because the location provides more value.
Jane, on the other hand, faces the same 3x tax burden, but oer parking lot was already full, so she can't scale up her revenue 3x. After all, parking lots are a very low value-per-acre type of land use. Thus, she decides to either sell her property to a developer to make housing or shopping or offices, or maybe she considers developing it herself.
Oh, and for countries that have LVT, while it is true that a number of places have LVT, there aren't any fully Georgist countries. Taiwan has a relatively strong LVT, but even they only derive something like 8% of their tax revenues from it, and the tax rate is nowhere near the full rental value of land. Several Australian states (as well as their capital territory) have LVT, but they're even more milquetoast.
Unfortunately, while LVT is a particularly elegant tax -- I mean, economists call it the "perfect tax" -- I think the problem for implementing a Georgist system is that rent-seeking behaviors are incredibly embedded in society. For instance, in North America, homeowners expect their home to appreciate in perpetuity, even basing their retirements off of that. Likewise, negative externalities are extremely lucrative, and fighting oil companies to pass meaningful carbon taxes is an uphill battle.
Meanwhile, the harms of income taxes are very diffuse. Sure, all the working class pays the price of income taxes, but landlords and real estate speculators and homeowners are a more select group that has a very straightforward way to benefit from rent-seeking.
If you're interested in reading more, here's really good essay on how Georgism fits in within a broader libleft tradition:
https://progressandpoverty.substack.com/p/geoism-as-part-of-the-left-libertarian?utm_source=post-email-title&publication_id=672686&post_id=137855299&utm_campaign=email-post-title&isFreemail=true&r=xknmg&utm_medium=email