I was once a fan of the land value tax. Then, when discussing the idea over beers with a major Libertarian Party official, I got schooled bigly. Then, I started running use cases.
Kudos to you for limiting your LVT to 2%, -- unperturbed value. Using your formula that ends up being a 3.3% tax on market value. (I need to check your math on whether this would perturb market value further.)
Initial objections:
1. Most land value improvement government services are at the state and local level. A federal LVT on land next to Interstate interchanges would be fee for service government. Federally taxing Manhattan real estate would not.
2. Your proposal would likely destroy what's left of the family farm. Thanks to giant tractors and combines, the economies of scale for commodity crop farming require thousands of acres. Many family farms continue to exist by renting out to bigger operations which have the big equipment. Your proposal is a giveaway to bigger farming operations at the expense of smaller farm landholders.
3. Protecting property in general is a core function of government. Indeed, an apartment building requires more government per resident*value than independent home ownership. You have the extra contract layer between apartment building owner and residents.
4. The LVT performs genocide lite on those who own farms in the growth boundary of towns and cities. (genocide lite = forced displacement vs. outright killing) It's eminent domain without adequate compensation. Use case: a small southern fishing village and a farm outside the village that has been in the family since before the US was an independent nation. Thanks to air conditioning, FEMA, and a bridge to the beach, and a massive influx of damn yankees, the farm now has a hugely appreciated value. An LVT pushes the family off the farm AND greatly reduces their compensation for handing it to come-heres. (I'm not objective here. I just described my family's situation on my father's side.)
5. The LVT makes it enormously expensive to have private nature preserves. Unless you are super duper rich, if you have beachfront property, you must put high rise condos on it. Only the government gets to own pristine beaches. I consider the arrangement to be fragile. I like a mix of government and private nature preserves. (I can point to examples in a private message if you want.) (I'm not objective here. The other side of my family owns a fair bit of private nature preserve.) This was my first bit of resistance to Murray Rothbard when I first read him. He argued against any property rights without "improving" the land.
6. What about a plot of land with oil underneath? An LVT says pump it or lose it. This is short sighted, even if global warming proves to be a hoax. Oil hoarded today is oil for future generations.
7. What about land which is less valueable then its state of nature? What do you do when cleared land is worth less than virgin forest? How about toxic waste sites?
I'm cool with government taxing property. Government protects property. However, the more indirect the ownership is, the greater dependence on government. A dangerous hillbilly protecting his holler is consuming far less government per dollar of value than a trustafarian collecting an income from a trust which holds stocks and bonds of international corporations which have intellectual property.
Patents, copyrights, and corporations would not exist without government. Tax them.
I'll likely have clarifications and more objections after I sleep on this.
1. Most land value improvement government services are at the state and local level. A federal LVT on land next to Interstate interchanges would be fee for service government. Federally taxing Manhattan real estate would not.
TREE: For purposes these articles, I'm attempting to replace the entire tax edifice. If you review the poll tax, you'll note I included the cost of all state and local fire and police, etc. So this is intended to replace all taxation.
2. Your proposal would likely destroy what's left of the family farm. Thanks to giant tractors and combines, the economies of scale for commodity crop farming require thousands of acres. Many family farms continue to exist by renting out to bigger operations which have the big equipment. Your proposal is a giveaway to bigger farming operations at the expense of smaller farm landholders.
TREE: The value of agricultural land in the United States is relatively low compared to the value of the rest of the land. I think we could actually exempt ALL agricultural land and still make the system work. Or we could exempt all agricultural land that is family owned, or at least privately owned (e.g. not owned by a public company), since some farmers have set up LLCs.
3. Protecting property in general is a core function of government. Indeed, an apartment building requires more government per resident*value than independent home ownership. You have the extra contract layer between apartment building owner and residents.
TREE: Right. And that's an argument for a Property Tax rather than a Land Value Tax. The only / real advantage of the LVT is that the tax cannot be passed on to renters. A Property Tax can be, because each "use" of property varies; the special cases of demand and supply don't apply.
4. The LVT performs genocide lite on those who own farms in the growth boundary of towns and cities. (genocide lite = forced displacement vs. outright killing) It's eminent domain without adequate compensation. Use case: a small southern fishing village and a farm outside the village that has been in the family since before the US was an independent nation. Thanks to air conditioning, FEMA, and a bridge to the beach, and a massive influx of damn yankees, the farm now has a hugely appreciated value. An LVT pushes the family off the farm AND greatly reduces their compensation for handing it to come-heres. (I'm not objective here. I just described my family's situation on my father's side.)
TREE: I agree that's a terrible outcome and it's clear that I ought to have spent some time in the article discussing agriculture.
5. The LVT makes it enormously expensive to have private nature preserves. Unless you are super duper rich, if you have beachfront property, you must put high rise condos on it. Only the government gets to own pristine beaches. I consider the arrangement to be fragile. I like a mix of government and private nature preserves. (I can point to examples in a private message if you want.) (I'm not objective here. The other side of my family owns a fair bit of private nature preserve.) This was my first bit of resistance to Murray Rothbard when I first read him. He argued against any property rights without "improving" the land.
TREE: I concur this is a problem. However, the same problem arises with Property Tax. If you have incredibly valuable land, then you need to use it for something, or you die on the taxes. Nobody leaves huge plots in Malibu Beach empty. One possibility here would be to exempt not-for-profit foundations that own land with the purpose of being stewards from paying LVT. This is worth further thought. My goal is not Georgist; my only reason for favoring LVT over Property Tax is that LVT is harder to pass on to others.
6. What about a plot of land with oil underneath? An LVT says pump it or lose it. This is short sighted, even if global warming proves to be a hoax. Oil hoarded today is oil for future generations.
TREE: My sense is that the value of minerals and oil should *not* be taxed. Minerals and oils are useless without the intense development investment to extract them. The land value in the US I quoted does not include the value of America's natural resources. I think an LVT on resources is a very bad idea for the reason you stated.
7. What about land which is less valueable then its state of nature? What do you do when cleared land is worth less than virgin forest? How about toxic waste sites?
TREE: Great question. I don't have an immediate answer to this one because we don't want to encourage people to damage the value of their land with toxic waste.
I'm cool with government taxing property. Government protects property. However, the more indirect the ownership is, the greater dependence on government. A dangerous hillbilly protecting his holler is consuming far less government per dollar of value than a trustafarian collecting an income from a trust which holds stocks and bonds of international corporations which have intellectual property.
Patents, copyrights, and corporations would not exist without government. Tax them.
TREE: I agree. I should look up the value of all patents, copyrights, and so on and estimate their value as such.
2. Even regular property taxes are a serious burden on farms, especially those which include a lot of timber land. And the road edges of farms are valueable for development. The state of Virginia passed anti-Georgist laws years ago to preserve the landed aristocracy. Farm owners can get a super low property tax rate if they agree not to develop. Drive from North Carolina into Virginia and you can see the effect from the highways and farm roads.
2b. If you graduate the LVT for non-corporate land, the market price comes much closer to the inherent price, since you now have market makers. And you have a fuzzy tool to keep billionaires and foreign corporations from pushing people off the land.
3. Should apartment dwellers avoid the tax? My thoughts are mixed. Yes, apartments save space, which in some areas is a Very Good Thing. On the other hand detached homes are better for raising children, even if they are shacks or mobile homes. Kids need space. And living in apartments turns people Blue. (What they used to call Red. This country took positive measures to encourage home ownership in order to fight communism. It worked! The main problem is that the subsidy was in the form of encouraging debt. Having a deductible for your homestead's property tax encourages home ownership while still encouraging people to pay off their mortgages.)
Regarding patents and copyrights: we don't want to tax away all the value. We need to encourage the arts and practical sciences. However, the durations keep getting stretched, especially for copyrights. I'd keep copyrights free for the first 15-20 years, and some shorter amount for patents. For copyrights, at some point you would need to actively register to keep your work out of the public domain. And you would need to provide an archival copy. The tax should be there, but small, based on a self-assessed value. Anyone who pays you that value gets to put it in the public domain. Anyone who pays twice the value gets to own the copyright. As the decades move on, the tax rate inches up. Disney must pay.
8. I forgot a couple other areas where a sort of Georgist tax makes sense: radio spectrum and Internet domain names. For the former, I'd make the tax progressive to give local broadcasters and startup networks a chance against I Heart Radio and the big TV networks. In the old days, networks were limited to owning five stations and had to convince independents to subscribe to their content. This was overly restrictive and kept the Dumont network from being able to get full traction. Today's arrangement swings too far in the other direction, and the airwaves are filled with oldies stations and AutoTuned crappe.
As for Internet domains, I just want to make it hard for sploggers and domain hoarders. A flat per domain per year tax of 20-50 bucks would be acceptable and still exert some pain on the parasites.
Reading this has me convinced on homestead. I have thought of the housing-exemption for a while, but this deals with the issues associated with house-exemption.
Thanks very much for this, it's the part of the taxation series I've been looking forward to the most since encountering George's ideas for the first time a couple years ago, and finding much that was appealing, while suspecting there was something wrong with it I couldn't quite put my finger on, and you nicely explained that.
The main sticking point that is left for me is your discussion of the valuation mechanism. I think Curtis Yarvin proposed something similar in one of his even more extreme reform proposals (maybe on trying to make the dollar sound?), and your solution does a better job of addressing what bothers me about it, but doesn't quite eliminate it.
Basically, being forced to offer your property for sale any time the government doesn't trust the valuation seems like a failure point, both in terms of exploitability and in terms of "actually owning" your land. The second point is easier for me to articulate: pricing things is hard, so even if you make a good faith effort to price the property *just* above what anyone else would pay, such that you get to keep it, but have to pay a higher tax for that privilege, if someone decides that works for them, whelp, you don't own your land any more, whoops. Having the two options you presented helps some, as would a homestead exemption, but none of those fundamentally address the problem that you can be forced into a position where whether or not to keep something that's supposed to be yours isn't up to you anymore.
Which gets to the exploitability problem. I haven't thought about this carefully enough to actually game it out, but my gamer sense of "this could be used against its intended purpose in unfair ways" is tingling. Maybe a tax agent could force the auction out of spite, or it would become best practice to periodically force auctions to induce owners to over-bid in order to hold onto their property, which could have a ratchet effect. Or maybe investors and the tax agency collude, bidding up property values so that the official taxes collected look good, but the investors get kickbacks. I'm sure there's even more underhanded stuff that could be done, but the (near) sanctity of property rights seems like one of those pillars of stable societies that monkeying with might have unforeseen second or third order effects, and so I'm suspicious even without coming up with a definite "this is a problem" scenario.
Anyhow, I'd still likely take the physiocratic platform over what we have now, but I figured I'd share these niggling thoughts.
My gamer sense is tingling too but I haven't got any better ideas to offer yet! Lots of good feedback in the comments here though suggests there are ways we could tighten things up.
It's also possible that ultimately the LVT is *not* the way to go for the physiocratic platform.
I also have some doubts about the valuation process. If the owner is forced to auction off the land and not the home and is then forced to pay rent to the landowner, who sets the rents? The landowner now has a monopoly, as the homeowner cannot move the house to a lower rent piece of land. If the homeowner defaults on land rent, does the landowner now gain the home? I've known people who lived on a parcel of tribal land within a city, and though they owned their home had to lease the land. The homes were difficult to sell and had far lower values than comparable homes. People did not want to risk an increase in land lease prices, which at the time was $600 per month per home. The rate increase guidelines were set forth in a covenant, but there was enough leeway to cause hesitation. When land lease rates were increased, both parties felt they were being cheated - the tribe felt they were not getting fair value and the homeowners felt they were being overcharged.
A set rate however, is not a market rate. If the rates are set too low, there might be a problem finding buyers for the land. Perhaps it should be like a bond that pays interest to the landowner, paid for by the renting homeowner. In this case the bond can be set to come due after a reasonable length of time, giving the homeowner another chance to set the tax rate and reobtain the land.
Reading this makes it more clear what you where talking about with Georgism. I think my largest objection to his land value tax, at this point, would be the moat it creates around home ownership. Especially when I read so many wealthy people supporting his plans - I'm very suspicious of their seeing a way to lobby, buy up, and figure a way out how to make the LVT work for them to weaponize it against the common man.
As far as exceptions - I don't see why the government has to pick one. I think that they're all good, for different people. Why not put all of them up, and simply legislate that those that are contradictory can't be chosen in tandem? For instance, if Nanna is living in a house in a 1/2 acre plot in Florida, it makes no sense for her to fall under the Homestead exception. Or, if she lives on a farm in Kansas, the homesteader obviously applies. In the latter, passing it down obviously makes sense due to raising children in skills, traditions, and cultural/social aspects as you've said. I think it does in the former too, to build up the civitas of the Polity. However, I haven't thought through the long term implications of either a special class of people that have exceptions or those that have come to own their housing having exceptions, and then not paying taxes. It seems the latter would force the state to raise taxes, eventually, in other areas as it's citizens came to own a greater deal of their land.
This is not a bad thing! It gives the state more social and cultural cohesion. It likely moves some of the economy away from home building, to repairs, and then investing the extra wealth in other ventures (or better homes!). I don't know. But, an interesting though experiment either way, and I don't see much downside in my initial thoughts.
One thing I'd like to say - while it's nice and easy to have the subjects broken down the way you have them, and rhetorically an easier sell... I'm not sure that you can ever ACTUALLY have the taxes go towards things that the people paying them will be using.
For instance, your land tax. You will get higher land taxes in places like LA, NYC, San Diego, Las Vegas, etc. But your infrastructure spending on interstate highways is most likely going to be largely spent in rural areas, where there is much less land tax collected. Is this a bad thing? No, I'd say not - it's a public good for those to be there. The rural areas need it, they'll use it more, yes. But it's also there for trucking, for road trips, for connecting the Empire, etc. The common good needs it.
In the same way, though, as the Land Tax lowers over the long term, I would imagine that the Industrialization of the Empire increases. Purchasing inside the Empire would thus generate more income. This could make up the short fall as I imagine the incentivizing of the localities will generate more stable purchasing and industry, as well as exports.
Another source - I see no reason why immigrants could not be put an additional tax upon their labor as well. Encouraging hiring local, rather than immigration, or hiring overseas if it is a location independent job (such as a call center). Figuring out how to protect labor, rather than simply consumer goods, is another way that the state can fund itself. The allowance of remittances, especially by illegal immigrants, to send money outside of our economy has always seemed absurd to me. While I'd be in favor of outright seizing them or stopping them altogether, a less drastic case could be made of taxing the legal ones.
"If no buyer is found, then the owner’s submitted price is used to calculate the taxable value of the land."
Surely if no buyer is found, then the value of the land has been established as Zero! This is not an imaginary scenario -- a very large ranch in my area was recently put up for auction in a very well-organized professional way; there were no bids. Now, what value should the property assessor put on that ranch?
Huge problem with LVT is that it would require a massive FedGov bureaucracy, which would inevitably become politicized and spend most of its time collecting kickbacks and arguing with State-level property assessors. The excessive administrative costs doom the LVT proposal -- especially at the Federal level. The only way it might work is if the LVT is collected by the States, in a system in which ALL taxation is levied only by the State; then the States contribute part of their revenues to a limited FedGov which is prohibited from any form of taxation (except tariffs) and is prohibited from borrowing money.
I'm not sure if a value is zero just because no buyer is found. I have items I've put up on ebay that haven't sold, then I've re-listed with a slightly different picture or write-up and they've sold. The market is imperfect!
Agreed with regard to LVT requiring bureaucracy, though I don't think the bureaucracy would be larger than the apparatus we have now of the IRS etc.
For purposes of these articles, I've been assuming the federal and state governments are "one" in my dictatorial regime.
Yes, markets are imperfect. But if there is no buyer following a sincere effort to sell, then realistically the land has no value which could be taxed. What is the thwarted seller to do when faced with a demand for cash tax payment he cannot afford on land that he cannot sell? Quitclaim the land to the State?
Let's be cautious about devising a tax system for a de-federalized "Unitary State of America". It is an interesting exercise, but probably about as capable of implementation as a plan to cut the spending of that government to match its income.
Based on your comment, I think I failed to explain the intent of the system. The government can only bring the property to auction if they think the property is *underpriced.* If the auction fails, then all that means is that the property owner correctly estimated the price. It's up to him to say "I think it's worth X" and then he's just paying taxes for what he thinks it's worth.
If the property actually has no value, then the landowner can submit hat it has no value. If it has value to someone who buys, he'll get to sell it and is better off than he thought. If no one buys it, then he pays no taxes because the value is 0. There is no circumstance under the system I have proposed where a seller is forced to pay a tax he cannot afford on land he cannot sell, unless he (for some reason) tells the government that his worthless land is worth a lot. But why would he do that?
As to your second point, I get where you are coming from; but there are a lot of people on the Right focused on what they believe can currently be implemented. Politics being the art of the possible, they are focusing on politics. I'm not attempting to do that. Bluntly, it is my belief that the ideas that can be implemented won't save us; the ideas that will save us can't be implemented. Therefore, things will get worse before they get better, and by the time they get worse, the ideas that seemed impossible to implement might be possible. So that's what I'm focusing on -- in hockey terms, I'm running way ahead of the puck.
I could be totally wrong; things might get better through gradualist reform; things might get so bad that nothing on Substack matters at all. But that's what I am doing here. If I were focusing on what was possible it would look more like e.g. what Project 2025 is doing.
The homestead exemption seems the best option for me; however one thing I don't like (aside from the issue of who owns the property) is that I think too often these kinds of models harm "unproductive" uses of land. If your city house has a big garden included, then (a) you will pay a higher LVT, and (b) you will be encouraged to build on that garden, because it's very likely that the profits from building there will more than make up for any increases in LVT (etc). But I'm not at all sure that losing that bit of green land in the city is a good thing. The same issue also applies to park owners and the like, and it's not like local governments are immune to the lure of money. If nothing else, I'd be tempted to try and tweak the way a LVT is applied to encourage things like parks or larger gardens in cities.
I agree. That is a major problem I didn't discuss. So far the best solution I've found ("solution") is to allow not-for-profits to be tax exempt stewards of certain land, but that doesn't help e.g. the garden.
In defence of Nanna, I propose that land taxes are an archaic holdover from agrarian times when economic productivity and thus income was roughly proportional to the area owned—and thus their rates on a per-sqft basis should reflect historic norms by which Nannas were not harmed. Would not a hefty capital gains tax serve better? It would encourage the holding of land by hereditary freehold owners, fostering nation-building, and discourage sale to outsiders that inevitably upend communities.
My next tax proposal is a transaction tax, and it actually is so lucrative that it can almost make all other taxes irrelevant. So it may well be that the LVT proves unnecessary.
> Let’s build a toy model of a land and property market to understand this. Imagine a property in Manhattan with a land value of $5M developed with a $5M office building, for a total property value of $10M. Let us imagine that the market return on capital is 5%, such that the market rent the office building generates is $500,000 annually. Of this $500,000, $250,000 is the economic rent that arises from the capital value of the land, not the building.
> Now imagine the same office building located in a bad part of Jersey City, NJ. The land value there is just $1M while the office building is still $5M. The total property value is $6M and the market rent generated at 5% is now $300,000 annually. Of this, just $50,000 is the economic rent attributed to the land.
This example nicely illustrates an additional paradox of the LVT. While you aren't taxed on improvements you made to your land, you are taxed on improvements your neighbors made to theirs.
Suppose you have two adjacent businesses that increase each other's land value, they could reduce their collective tax by combining their properties into a single parcel.
Thinking about it, it seems like you could apply the LVT fractally to end up with a feudal form of subsidiary capitalism.
The city pays taxes to the state on the unimproved value the land it sits on; then the various landlords in the city pay the city a tax on the unimproved value of their land, taking into account the value provided by the location of the land within the city (thus the city will receive more in taxes than it has to pay to the state), then the landlords rent out portions of their land or apartments to tenants at the market rate, i.e., the unimproved or unfurnished value of the land or apartment relative to the neighborhood.
At the very least this idea would make an interesting "feudal future" setting.
This is a great breakdown of the Land Value Tax. While the idea doesn't sit quite right with me, for the exact reason of being unable to outright own land you mentioned, it does seem better than the current property tax.
I think the homestead exemption seems the most fair way to solve the "Nanna issue". Though, that may be the part of me that wants to own land outright speaking. Regardless, you've given me much to contemplate. I look forward to the fourth part of this series.
The miserable process of putting your land up for auction periodically and not knowing if it will be forcibly bought from you seems awful. We are humans, not interchangeable widgets that should be set aside anytime some rich bastard wants to take what we have. I can’t put my finger on how to describe how I hate this proposal, regardless of any other logic to it, other than it seems inhuman, cold, and tyrannical in a way reminiscent of a revolutionary that would destroy any amount of culture in order to realize their pet theories and impose them on everyone else on pain of death. (Which is what taxes ultimately are)
We have had Land tax in Australia for ever (or so it seems). The threshold and exemptions has ensured it is mostly reserved for those with larger investment portfolios. Here is the list of who does and doesn't pay Land Tax. The valuation is also used by the Local Councils for their rate calculations. All based on unimproved valuation.
You may have to pay land tax if you own, or jointly own:
- vacant land, including rural land
- land where a house, residential unit or flat has been built
- a holiday home
- an investment property or properties
- company title units
- residential, commercial or industrial units, including car spaces
- commercial properties, including factories, shops and warehouses
- land leased from state or local government.
Additionally, you may have to pay land tax if:
- You are deemed a foreign owner for land tax purposes (this includes properties opted into property tax).
- You are a not-included owner for a property opted into property tax and your aggregated land value of all properties owned is above the land tax threshold. For further information regarding land tax implications for properties opted into property tax, please refer to the property tax page.
Land tax applies regardless of whether income is earned from the land.
Generally, you do not pay land tax on:
- your home, known as your principal place of residence
- your farm, known as primary production land
- any land you own with total taxable value below the land tax threshold.
I was once a fan of the land value tax. Then, when discussing the idea over beers with a major Libertarian Party official, I got schooled bigly. Then, I started running use cases.
Kudos to you for limiting your LVT to 2%, -- unperturbed value. Using your formula that ends up being a 3.3% tax on market value. (I need to check your math on whether this would perturb market value further.)
Initial objections:
1. Most land value improvement government services are at the state and local level. A federal LVT on land next to Interstate interchanges would be fee for service government. Federally taxing Manhattan real estate would not.
2. Your proposal would likely destroy what's left of the family farm. Thanks to giant tractors and combines, the economies of scale for commodity crop farming require thousands of acres. Many family farms continue to exist by renting out to bigger operations which have the big equipment. Your proposal is a giveaway to bigger farming operations at the expense of smaller farm landholders.
3. Protecting property in general is a core function of government. Indeed, an apartment building requires more government per resident*value than independent home ownership. You have the extra contract layer between apartment building owner and residents.
4. The LVT performs genocide lite on those who own farms in the growth boundary of towns and cities. (genocide lite = forced displacement vs. outright killing) It's eminent domain without adequate compensation. Use case: a small southern fishing village and a farm outside the village that has been in the family since before the US was an independent nation. Thanks to air conditioning, FEMA, and a bridge to the beach, and a massive influx of damn yankees, the farm now has a hugely appreciated value. An LVT pushes the family off the farm AND greatly reduces their compensation for handing it to come-heres. (I'm not objective here. I just described my family's situation on my father's side.)
5. The LVT makes it enormously expensive to have private nature preserves. Unless you are super duper rich, if you have beachfront property, you must put high rise condos on it. Only the government gets to own pristine beaches. I consider the arrangement to be fragile. I like a mix of government and private nature preserves. (I can point to examples in a private message if you want.) (I'm not objective here. The other side of my family owns a fair bit of private nature preserve.) This was my first bit of resistance to Murray Rothbard when I first read him. He argued against any property rights without "improving" the land.
6. What about a plot of land with oil underneath? An LVT says pump it or lose it. This is short sighted, even if global warming proves to be a hoax. Oil hoarded today is oil for future generations.
7. What about land which is less valueable then its state of nature? What do you do when cleared land is worth less than virgin forest? How about toxic waste sites?
I'm cool with government taxing property. Government protects property. However, the more indirect the ownership is, the greater dependence on government. A dangerous hillbilly protecting his holler is consuming far less government per dollar of value than a trustafarian collecting an income from a trust which holds stocks and bonds of international corporations which have intellectual property.
Patents, copyrights, and corporations would not exist without government. Tax them.
I'll likely have clarifications and more objections after I sleep on this.
These are great comments.
1. Most land value improvement government services are at the state and local level. A federal LVT on land next to Interstate interchanges would be fee for service government. Federally taxing Manhattan real estate would not.
TREE: For purposes these articles, I'm attempting to replace the entire tax edifice. If you review the poll tax, you'll note I included the cost of all state and local fire and police, etc. So this is intended to replace all taxation.
2. Your proposal would likely destroy what's left of the family farm. Thanks to giant tractors and combines, the economies of scale for commodity crop farming require thousands of acres. Many family farms continue to exist by renting out to bigger operations which have the big equipment. Your proposal is a giveaway to bigger farming operations at the expense of smaller farm landholders.
TREE: The value of agricultural land in the United States is relatively low compared to the value of the rest of the land. I think we could actually exempt ALL agricultural land and still make the system work. Or we could exempt all agricultural land that is family owned, or at least privately owned (e.g. not owned by a public company), since some farmers have set up LLCs.
3. Protecting property in general is a core function of government. Indeed, an apartment building requires more government per resident*value than independent home ownership. You have the extra contract layer between apartment building owner and residents.
TREE: Right. And that's an argument for a Property Tax rather than a Land Value Tax. The only / real advantage of the LVT is that the tax cannot be passed on to renters. A Property Tax can be, because each "use" of property varies; the special cases of demand and supply don't apply.
4. The LVT performs genocide lite on those who own farms in the growth boundary of towns and cities. (genocide lite = forced displacement vs. outright killing) It's eminent domain without adequate compensation. Use case: a small southern fishing village and a farm outside the village that has been in the family since before the US was an independent nation. Thanks to air conditioning, FEMA, and a bridge to the beach, and a massive influx of damn yankees, the farm now has a hugely appreciated value. An LVT pushes the family off the farm AND greatly reduces their compensation for handing it to come-heres. (I'm not objective here. I just described my family's situation on my father's side.)
TREE: I agree that's a terrible outcome and it's clear that I ought to have spent some time in the article discussing agriculture.
5. The LVT makes it enormously expensive to have private nature preserves. Unless you are super duper rich, if you have beachfront property, you must put high rise condos on it. Only the government gets to own pristine beaches. I consider the arrangement to be fragile. I like a mix of government and private nature preserves. (I can point to examples in a private message if you want.) (I'm not objective here. The other side of my family owns a fair bit of private nature preserve.) This was my first bit of resistance to Murray Rothbard when I first read him. He argued against any property rights without "improving" the land.
TREE: I concur this is a problem. However, the same problem arises with Property Tax. If you have incredibly valuable land, then you need to use it for something, or you die on the taxes. Nobody leaves huge plots in Malibu Beach empty. One possibility here would be to exempt not-for-profit foundations that own land with the purpose of being stewards from paying LVT. This is worth further thought. My goal is not Georgist; my only reason for favoring LVT over Property Tax is that LVT is harder to pass on to others.
6. What about a plot of land with oil underneath? An LVT says pump it or lose it. This is short sighted, even if global warming proves to be a hoax. Oil hoarded today is oil for future generations.
TREE: My sense is that the value of minerals and oil should *not* be taxed. Minerals and oils are useless without the intense development investment to extract them. The land value in the US I quoted does not include the value of America's natural resources. I think an LVT on resources is a very bad idea for the reason you stated.
7. What about land which is less valueable then its state of nature? What do you do when cleared land is worth less than virgin forest? How about toxic waste sites?
TREE: Great question. I don't have an immediate answer to this one because we don't want to encourage people to damage the value of their land with toxic waste.
I'm cool with government taxing property. Government protects property. However, the more indirect the ownership is, the greater dependence on government. A dangerous hillbilly protecting his holler is consuming far less government per dollar of value than a trustafarian collecting an income from a trust which holds stocks and bonds of international corporations which have intellectual property.
Patents, copyrights, and corporations would not exist without government. Tax them.
TREE: I agree. I should look up the value of all patents, copyrights, and so on and estimate their value as such.
A few further thoughts:
2. Even regular property taxes are a serious burden on farms, especially those which include a lot of timber land. And the road edges of farms are valueable for development. The state of Virginia passed anti-Georgist laws years ago to preserve the landed aristocracy. Farm owners can get a super low property tax rate if they agree not to develop. Drive from North Carolina into Virginia and you can see the effect from the highways and farm roads.
2b. If you graduate the LVT for non-corporate land, the market price comes much closer to the inherent price, since you now have market makers. And you have a fuzzy tool to keep billionaires and foreign corporations from pushing people off the land.
3. Should apartment dwellers avoid the tax? My thoughts are mixed. Yes, apartments save space, which in some areas is a Very Good Thing. On the other hand detached homes are better for raising children, even if they are shacks or mobile homes. Kids need space. And living in apartments turns people Blue. (What they used to call Red. This country took positive measures to encourage home ownership in order to fight communism. It worked! The main problem is that the subsidy was in the form of encouraging debt. Having a deductible for your homestead's property tax encourages home ownership while still encouraging people to pay off their mortgages.)
Regarding patents and copyrights: we don't want to tax away all the value. We need to encourage the arts and practical sciences. However, the durations keep getting stretched, especially for copyrights. I'd keep copyrights free for the first 15-20 years, and some shorter amount for patents. For copyrights, at some point you would need to actively register to keep your work out of the public domain. And you would need to provide an archival copy. The tax should be there, but small, based on a self-assessed value. Anyone who pays you that value gets to put it in the public domain. Anyone who pays twice the value gets to own the copyright. As the decades move on, the tax rate inches up. Disney must pay.
8. I forgot a couple other areas where a sort of Georgist tax makes sense: radio spectrum and Internet domain names. For the former, I'd make the tax progressive to give local broadcasters and startup networks a chance against I Heart Radio and the big TV networks. In the old days, networks were limited to owning five stations and had to convince independents to subscribe to their content. This was overly restrictive and kept the Dumont network from being able to get full traction. Today's arrangement swings too far in the other direction, and the airwaves are filled with oldies stations and AutoTuned crappe.
As for Internet domains, I just want to make it hard for sploggers and domain hoarders. A flat per domain per year tax of 20-50 bucks would be acceptable and still exert some pain on the parasites.
Reading this has me convinced on homestead. I have thought of the housing-exemption for a while, but this deals with the issues associated with house-exemption.
Same. I really like the homestead concept.
Thanks very much for this, it's the part of the taxation series I've been looking forward to the most since encountering George's ideas for the first time a couple years ago, and finding much that was appealing, while suspecting there was something wrong with it I couldn't quite put my finger on, and you nicely explained that.
The main sticking point that is left for me is your discussion of the valuation mechanism. I think Curtis Yarvin proposed something similar in one of his even more extreme reform proposals (maybe on trying to make the dollar sound?), and your solution does a better job of addressing what bothers me about it, but doesn't quite eliminate it.
Basically, being forced to offer your property for sale any time the government doesn't trust the valuation seems like a failure point, both in terms of exploitability and in terms of "actually owning" your land. The second point is easier for me to articulate: pricing things is hard, so even if you make a good faith effort to price the property *just* above what anyone else would pay, such that you get to keep it, but have to pay a higher tax for that privilege, if someone decides that works for them, whelp, you don't own your land any more, whoops. Having the two options you presented helps some, as would a homestead exemption, but none of those fundamentally address the problem that you can be forced into a position where whether or not to keep something that's supposed to be yours isn't up to you anymore.
Which gets to the exploitability problem. I haven't thought about this carefully enough to actually game it out, but my gamer sense of "this could be used against its intended purpose in unfair ways" is tingling. Maybe a tax agent could force the auction out of spite, or it would become best practice to periodically force auctions to induce owners to over-bid in order to hold onto their property, which could have a ratchet effect. Or maybe investors and the tax agency collude, bidding up property values so that the official taxes collected look good, but the investors get kickbacks. I'm sure there's even more underhanded stuff that could be done, but the (near) sanctity of property rights seems like one of those pillars of stable societies that monkeying with might have unforeseen second or third order effects, and so I'm suspicious even without coming up with a definite "this is a problem" scenario.
Anyhow, I'd still likely take the physiocratic platform over what we have now, but I figured I'd share these niggling thoughts.
My gamer sense is tingling too but I haven't got any better ideas to offer yet! Lots of good feedback in the comments here though suggests there are ways we could tighten things up.
It's also possible that ultimately the LVT is *not* the way to go for the physiocratic platform.
I also have some doubts about the valuation process. If the owner is forced to auction off the land and not the home and is then forced to pay rent to the landowner, who sets the rents? The landowner now has a monopoly, as the homeowner cannot move the house to a lower rent piece of land. If the homeowner defaults on land rent, does the landowner now gain the home? I've known people who lived on a parcel of tribal land within a city, and though they owned their home had to lease the land. The homes were difficult to sell and had far lower values than comparable homes. People did not want to risk an increase in land lease prices, which at the time was $600 per month per home. The rate increase guidelines were set forth in a covenant, but there was enough leeway to cause hesitation. When land lease rates were increased, both parties felt they were being cheated - the tribe felt they were not getting fair value and the homeowners felt they were being overcharged.
My sense is that the rate would be based on the land value by some formula, which addresses your first point but not your second or third.
A set rate however, is not a market rate. If the rates are set too low, there might be a problem finding buyers for the land. Perhaps it should be like a bond that pays interest to the landowner, paid for by the renting homeowner. In this case the bond can be set to come due after a reasonable length of time, giving the homeowner another chance to set the tax rate and reobtain the land.
That is a very interesting suggestion!
Reading this makes it more clear what you where talking about with Georgism. I think my largest objection to his land value tax, at this point, would be the moat it creates around home ownership. Especially when I read so many wealthy people supporting his plans - I'm very suspicious of their seeing a way to lobby, buy up, and figure a way out how to make the LVT work for them to weaponize it against the common man.
As far as exceptions - I don't see why the government has to pick one. I think that they're all good, for different people. Why not put all of them up, and simply legislate that those that are contradictory can't be chosen in tandem? For instance, if Nanna is living in a house in a 1/2 acre plot in Florida, it makes no sense for her to fall under the Homestead exception. Or, if she lives on a farm in Kansas, the homesteader obviously applies. In the latter, passing it down obviously makes sense due to raising children in skills, traditions, and cultural/social aspects as you've said. I think it does in the former too, to build up the civitas of the Polity. However, I haven't thought through the long term implications of either a special class of people that have exceptions or those that have come to own their housing having exceptions, and then not paying taxes. It seems the latter would force the state to raise taxes, eventually, in other areas as it's citizens came to own a greater deal of their land.
This is not a bad thing! It gives the state more social and cultural cohesion. It likely moves some of the economy away from home building, to repairs, and then investing the extra wealth in other ventures (or better homes!). I don't know. But, an interesting though experiment either way, and I don't see much downside in my initial thoughts.
That's a good point. I'd have to crunch the numbers on whether the narrower tax base would then force the tax rate to be higher.
One thing I'd like to say - while it's nice and easy to have the subjects broken down the way you have them, and rhetorically an easier sell... I'm not sure that you can ever ACTUALLY have the taxes go towards things that the people paying them will be using.
For instance, your land tax. You will get higher land taxes in places like LA, NYC, San Diego, Las Vegas, etc. But your infrastructure spending on interstate highways is most likely going to be largely spent in rural areas, where there is much less land tax collected. Is this a bad thing? No, I'd say not - it's a public good for those to be there. The rural areas need it, they'll use it more, yes. But it's also there for trucking, for road trips, for connecting the Empire, etc. The common good needs it.
In the same way, though, as the Land Tax lowers over the long term, I would imagine that the Industrialization of the Empire increases. Purchasing inside the Empire would thus generate more income. This could make up the short fall as I imagine the incentivizing of the localities will generate more stable purchasing and industry, as well as exports.
Another source - I see no reason why immigrants could not be put an additional tax upon their labor as well. Encouraging hiring local, rather than immigration, or hiring overseas if it is a location independent job (such as a call center). Figuring out how to protect labor, rather than simply consumer goods, is another way that the state can fund itself. The allowance of remittances, especially by illegal immigrants, to send money outside of our economy has always seemed absurd to me. While I'd be in favor of outright seizing them or stopping them altogether, a less drastic case could be made of taxing the legal ones.
"If no buyer is found, then the owner’s submitted price is used to calculate the taxable value of the land."
Surely if no buyer is found, then the value of the land has been established as Zero! This is not an imaginary scenario -- a very large ranch in my area was recently put up for auction in a very well-organized professional way; there were no bids. Now, what value should the property assessor put on that ranch?
Huge problem with LVT is that it would require a massive FedGov bureaucracy, which would inevitably become politicized and spend most of its time collecting kickbacks and arguing with State-level property assessors. The excessive administrative costs doom the LVT proposal -- especially at the Federal level. The only way it might work is if the LVT is collected by the States, in a system in which ALL taxation is levied only by the State; then the States contribute part of their revenues to a limited FedGov which is prohibited from any form of taxation (except tariffs) and is prohibited from borrowing money.
I'm not sure if a value is zero just because no buyer is found. I have items I've put up on ebay that haven't sold, then I've re-listed with a slightly different picture or write-up and they've sold. The market is imperfect!
Agreed with regard to LVT requiring bureaucracy, though I don't think the bureaucracy would be larger than the apparatus we have now of the IRS etc.
For purposes of these articles, I've been assuming the federal and state governments are "one" in my dictatorial regime.
Yes, markets are imperfect. But if there is no buyer following a sincere effort to sell, then realistically the land has no value which could be taxed. What is the thwarted seller to do when faced with a demand for cash tax payment he cannot afford on land that he cannot sell? Quitclaim the land to the State?
Let's be cautious about devising a tax system for a de-federalized "Unitary State of America". It is an interesting exercise, but probably about as capable of implementation as a plan to cut the spending of that government to match its income.
Based on your comment, I think I failed to explain the intent of the system. The government can only bring the property to auction if they think the property is *underpriced.* If the auction fails, then all that means is that the property owner correctly estimated the price. It's up to him to say "I think it's worth X" and then he's just paying taxes for what he thinks it's worth.
If the property actually has no value, then the landowner can submit hat it has no value. If it has value to someone who buys, he'll get to sell it and is better off than he thought. If no one buys it, then he pays no taxes because the value is 0. There is no circumstance under the system I have proposed where a seller is forced to pay a tax he cannot afford on land he cannot sell, unless he (for some reason) tells the government that his worthless land is worth a lot. But why would he do that?
As to your second point, I get where you are coming from; but there are a lot of people on the Right focused on what they believe can currently be implemented. Politics being the art of the possible, they are focusing on politics. I'm not attempting to do that. Bluntly, it is my belief that the ideas that can be implemented won't save us; the ideas that will save us can't be implemented. Therefore, things will get worse before they get better, and by the time they get worse, the ideas that seemed impossible to implement might be possible. So that's what I'm focusing on -- in hockey terms, I'm running way ahead of the puck.
I could be totally wrong; things might get better through gradualist reform; things might get so bad that nothing on Substack matters at all. But that's what I am doing here. If I were focusing on what was possible it would look more like e.g. what Project 2025 is doing.
The homestead exemption seems the best option for me; however one thing I don't like (aside from the issue of who owns the property) is that I think too often these kinds of models harm "unproductive" uses of land. If your city house has a big garden included, then (a) you will pay a higher LVT, and (b) you will be encouraged to build on that garden, because it's very likely that the profits from building there will more than make up for any increases in LVT (etc). But I'm not at all sure that losing that bit of green land in the city is a good thing. The same issue also applies to park owners and the like, and it's not like local governments are immune to the lure of money. If nothing else, I'd be tempted to try and tweak the way a LVT is applied to encourage things like parks or larger gardens in cities.
I agree. That is a major problem I didn't discuss. So far the best solution I've found ("solution") is to allow not-for-profits to be tax exempt stewards of certain land, but that doesn't help e.g. the garden.
In defence of Nanna, I propose that land taxes are an archaic holdover from agrarian times when economic productivity and thus income was roughly proportional to the area owned—and thus their rates on a per-sqft basis should reflect historic norms by which Nannas were not harmed. Would not a hefty capital gains tax serve better? It would encourage the holding of land by hereditary freehold owners, fostering nation-building, and discourage sale to outsiders that inevitably upend communities.
My next tax proposal is a transaction tax, and it actually is so lucrative that it can almost make all other taxes irrelevant. So it may well be that the LVT proves unnecessary.
I'll volunteer as a camp guard under the Treereich.
I like leek-spin polka.
Oh, and also total homeowner and agricultural use exemptions for natural born citizen persons. IE not for corporations of any kind.
> Let’s build a toy model of a land and property market to understand this. Imagine a property in Manhattan with a land value of $5M developed with a $5M office building, for a total property value of $10M. Let us imagine that the market return on capital is 5%, such that the market rent the office building generates is $500,000 annually. Of this $500,000, $250,000 is the economic rent that arises from the capital value of the land, not the building.
> Now imagine the same office building located in a bad part of Jersey City, NJ. The land value there is just $1M while the office building is still $5M. The total property value is $6M and the market rent generated at 5% is now $300,000 annually. Of this, just $50,000 is the economic rent attributed to the land.
This example nicely illustrates an additional paradox of the LVT. While you aren't taxed on improvements you made to your land, you are taxed on improvements your neighbors made to theirs.
Good point! How strange.
Suppose you have two adjacent businesses that increase each other's land value, they could reduce their collective tax by combining their properties into a single parcel.
Thinking about it, it seems like you could apply the LVT fractally to end up with a feudal form of subsidiary capitalism.
The city pays taxes to the state on the unimproved value the land it sits on; then the various landlords in the city pay the city a tax on the unimproved value of their land, taking into account the value provided by the location of the land within the city (thus the city will receive more in taxes than it has to pay to the state), then the landlords rent out portions of their land or apartments to tenants at the market rate, i.e., the unimproved or unfurnished value of the land or apartment relative to the neighborhood.
At the very least this idea would make an interesting "feudal future" setting.
A very interesting essay. Thank you.
This is a great breakdown of the Land Value Tax. While the idea doesn't sit quite right with me, for the exact reason of being unable to outright own land you mentioned, it does seem better than the current property tax.
I think the homestead exemption seems the most fair way to solve the "Nanna issue". Though, that may be the part of me that wants to own land outright speaking. Regardless, you've given me much to contemplate. I look forward to the fourth part of this series.
It doesn't *quite* sit right with me either, but it's good to think through.
Georgism...
The miserable process of putting your land up for auction periodically and not knowing if it will be forcibly bought from you seems awful. We are humans, not interchangeable widgets that should be set aside anytime some rich bastard wants to take what we have. I can’t put my finger on how to describe how I hate this proposal, regardless of any other logic to it, other than it seems inhuman, cold, and tyrannical in a way reminiscent of a revolutionary that would destroy any amount of culture in order to realize their pet theories and impose them on everyone else on pain of death. (Which is what taxes ultimately are)
Excellent content. Love this series and so do my tax lawyer friends! Thank you
It might be a good idea to see where a Land Tax is actually used.
In Australia, land it taxed by the states, based on the valuation determined by the "Valuer General"
https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/land-tax
https://www.nsw.gov.au/housing-and-construction/land-values-nsw/why-land-values/how-land-valued-nsw
There is a threshold which applies so if your property is under the threshold inot tax is payable. This covers most homes and small land owners.
Great suggestion - thank you.
We have had Land tax in Australia for ever (or so it seems). The threshold and exemptions has ensured it is mostly reserved for those with larger investment portfolios. Here is the list of who does and doesn't pay Land Tax. The valuation is also used by the Local Councils for their rate calculations. All based on unimproved valuation.
You may have to pay land tax if you own, or jointly own:
- vacant land, including rural land
- land where a house, residential unit or flat has been built
- a holiday home
- an investment property or properties
- company title units
- residential, commercial or industrial units, including car spaces
- commercial properties, including factories, shops and warehouses
- land leased from state or local government.
Additionally, you may have to pay land tax if:
- You are deemed a foreign owner for land tax purposes (this includes properties opted into property tax).
- You are a not-included owner for a property opted into property tax and your aggregated land value of all properties owned is above the land tax threshold. For further information regarding land tax implications for properties opted into property tax, please refer to the property tax page.
Land tax applies regardless of whether income is earned from the land.
Generally, you do not pay land tax on:
- your home, known as your principal place of residence
- your farm, known as primary production land
- any land you own with total taxable value below the land tax threshold.