Killer Arguments Against LVT, Not (206)

From Yahoo! Answers:

Would a federal land value tax be fairer than the current federal income tax? I was reading an article on Georgism,a 19th century idea of American philosopher Henry George, and was wondering what others thought of this.

The first comment is an onslaught of Home-Owner-Ism:

The first rule of taxation is this: Make sure that the taxpayer can AFFORD to pay the tax. The ONLY tax that universally adheres to that critical rule is a properly implemented graduated income tax.

Nope. The first rules of taxation are 'make sure the tax does not damage the economy' and 'make sure that there is some moral justification for the tax, ideally levying user charges for value received by the payer from society in general'.

Property taxes only have a loose association to ability to pay, assuming that you buy within your affordability range while you are earning and values don't go haywire and surge past wage growth.

In the real world, people do buy 'within their affordability range', with or without LVT. And in the real world, prices are set by first time buyers/tenants, so if they can afford it, so can older people who've climbed the job ladder a bit and who don't have young children to look after. Whether you commit to paying a big mortgage for 25 years or a smaller mortgage and LVT (but no income tax) is neither here nor. People will quite simply choose to live in a home (or carry out their business from premises) on which they can afford the tax (by definition), so the whole 'ability to pay' issue sorts itself out.

Once you retire on a fixed income, you are basically screwed as taxes will fairly quickly surge past your ability to pay.

If 'ability to pay' is all that matters, a mugger could argue in court that as he only took spare cash which his victims had in their pockets, it was well within their 'ability to pay' and therefore caused them no harm. The 'fixed incomes' to which he alludes are of course taxpayer-funded pensions, there's no natural reason why these can't be funded out of LVT or out of savings (people will pay less tax during their working lives). Failing that, the retired can ask their heirs to pay. They want to inherit the house, don't they? If the parent wants to 'pass on wealth to his children' then all he has to do is trade down; if he doesn't want to trade down and his children aren't interested in inheriting, then the problem solves itself.

There then follows a long rant about the difficulties with valuations, all of which are nonsense, and he rounds off with this:

19th century ideas won't necessarily work in the 21st century.

Yes they will. It's the same land as we had in the 19th century, site rental values are being generated in exactly the same way as ever, (the extremes are in fact even greater the more sophisticated the economy is), and this is throwing up exactly the same problems as ever (but worse).

Henry George published Progess and Poverty in the late 19th century against the backdrop of a land price bubble and the ensuing financial crisis, and this 18-year boom-bust pattern was already well established in the USA. The book could easily be re-written against the background of the 'financial crisis' which started in 2007.