Ah thanks for this criticism, the amount of loop holes would be pretty staggering/annoying.
> Tax the net proceeds of rental properties at 90% and slap a 100% capital gains tax on any property that is not owner-occupied. Also, simply rule out renting for huge swathes of property (especially single family homes).
LGTM, ship it.
The many changes that you are proposing, and the tax evasion that will occur, and the modifications to stop those evasions, and the changed behaviors to those modifications are where the complexity lies. A Land Value Tax isn't a complicated thing. In fact, in a single land tax + carbon tax world, many things would be drastically simpler.
The beautiful thing about a Land Value Tax is that it is incredibly hard to evade. You own the land, you pay the tax. You don't want to pay the tax? Sell the land.
> Tax the net proceeds of rental properties at 90% and slap a 100% capital gains tax on any property that is not owner-occupied.
This disincentives building, and would harm rent prices over the long run. The land value tax does not have this downside.
Can you point out the timestamp, I don't see it in the transcript and I just listened and I don't hear any discussion of speicfically heavily taxing non-primary residences.
I listened to this same economist making the rounds (another really good indication they're talking their book) on Odd Lots[0][1].
Just as on Odd Lots, the entire conversation was tilted -- they jumped right past the simple solutions and right to the hard-to-understand, change-the-paradigm solution. Of course Redfin wants this solution -- they don't care about the land tax (and they don't have to pay it), but they do want more units to broker.
They bang on NIMBYism and zoning problems that could open up space for new housing, and that's great, but this is a different problem right under our noses -- and that's rampant speculation and rent-seeking activity in the housing market.
I don't want to be unduly critical here, but the odd lots interview was slightly better. There is so much nuance being lost (a throw away allegory to stopping littering with PR, when the real problem was companies not being taxed for the externality that is plastic/styrofoam packaging).
> The many changes that you are proposing, and the tax evasion that will occur, and the modifications to stop those evasions, and the changed behaviors to those modifications are where the complexity lies. A Land Value Tax isn't a complicated thing. In fact, in a single land tax + carbon tax world, many things would be drastically simpler.
My initial proposal was a bad one -- someone pointed this out and made a better suggestion, an even more direct tax, right on the capital gains. That's a much better proposal.
A land value tax is more complicated than simply increasing capital gains tax (or even my previous suggestion) on rental property.
We do not need to create new tax machinery (which is what a land value tax would require) for this, and in the end a land value tax is a proxy for what we really want. What we want is to disincentivize speculative and profit-via-rent-seeking purchasing of homes. The easiest, most straight forward way to do that is to tax that specific activity.
Fairweather did this as well -- I don't think it's a good idea to mix in carbon taxes, equity & equality, and other things with this issue. Just stick to the one issue. In practice those issues are related, but that doesn't mean we must solve them all at once.
> The beautiful thing about a Land Value Tax is that it is incredibly hard to evade. You own the land, you pay the tax. You don't want to pay the tax? Sell the land.
This is stated simply, but implementation will not be simple, vary from state to state, and likely contain lots of the tax evasions/loopholes as well.
The refinement on my original suggestion (increasing capital gains on rent-seeking activity) is simpler.
> This disincentives building, and would harm rent prices over the long run. The land value tax does not have this downside.
It's a market -- building will be disincentivized until supply is constrained enough to raise prices. It will balance out, and this time the speculative turbulent forces will be gone, meaning housing will be easier to predict and plan out.
The land value tax is a way for the same circus we have to keep going, and the government to collect more taxes from the circus, but the circus is the problem. It's better to attack the problem directly than indirectly.
The land value tax encourages building bigger structures to juice the ROI on a single plot of land. That is not what I want, at least right now, and it is an indirect way of reducing demand. Remove the 2nd, 3rd, 4th, 100th home buyers from the market, and demand will plunge. Maybe our goals are different, but I mean what I said -- I want to disincentivize rent-seeking behavior.
In fact, the land value tax is probably actually harmful to my stated goals -- making land more expensive without reducing property tax much would actually make land ownership less affordable for the common homebuyer, and a cost of doing business for professionals who can pass along land ownership taxes to the 1st level tenants (with renters becoming the 2nd level tenants).
[0]: https://www.bloomberg.com/news/articles/2022-06-13/transcrip...
[1]: https://podcasts.google.com/feed/aHR0cHM6Ly93d3cub21ueWNvbnR...
45:03
> right past the simple solutions and right to the hard-to-understand, change-the-paradigm solution
Rich Hickey's 'Simple made Easy' talk[0](don't need to watch this, but I figure most on HN have already seen this) goes into this, and I would argue that the 'simple' solutions that you mention are complected, whereas the LVT really truly is 'simple'. Simple does not mean easy. It can be hard to understand and yet still simple. It can inevitably change the fabric of society and still be simple.
> The refinement on my original suggestion (increasing capital gains on rent-seeking activity) is simpler.
In addition to stopping building, in much the same way that Prop 13 does, this would result in no one selling property for just about any reason unless they couldn't come up with money in any other way. Transactions are good, as a transaction implies that both sides are better off. They would sit on it until the building rotted, build a house on it, live in for 2 years, and then sell it for full price. LVT is simpler.
This has been studied, and it does not help.
>> Can a Transaction Tax or Capital Gains Tax smooth House Prices? Nicole Aregger, Martin Brown* and Enzo Rossi**[1]
>> Our results suggest that higher taxes on capital gains exacerbate house price dynamics while transaction taxes have no impact on house price growth. These findings support the existence of a lock-in effect of capital gains taxes on housing supply. They further suggest that taxes on real estate capital gains and transaction values are not suitable measures to prevent excessive house price growth. ... Taxes on capital gains, and in particular penalty taxes on short-term gains, seem to fuel price growth by making house owners more reluctant to sell their property. The lock-in effect is strongest in tourist destinations where we expect to find more real estate transactions motivated by pure investment considerations.
> government to collect more taxes from the circus, but the circus is the problem.
I'll open this by saying that I think we both agree with a lot of fundamentals here. By far the most important aspect of the LVT to me is that it eliminates speculation and rent-seeking activity. In many ways it would be fine to implement the LVT and then simply burn the money. Maybe you could do that at the federal level. The key aspect is that the incentives are set-up properly. One of the things I think we could do with the LVT money is IP reform, but that's another story.
We're probably going to have to agree to disagree here, but this point might help us see how we're getting to such a large difference. I see government spending as it is today as fairly bad, and you might agree. But the reason that it is horrible is that when government spends, it is local homeowners that reap the benefits(good short video explaining this here[2]). And it is that wrongful capture of value that makes public spending look so terrible. It seems obvious that there is a ton of waste going on, and with such waste comes the ability for corruption to hide. But many projects do provide great value, and it's projects that largely could not be done through individuals or corporations alone.
If like in that video explains, that one enhancement to the city provides five times the value in land, they can take the profits from that and build more projects, or if they have run out of projects that provide positive returns, they can simply give it back as a UBI. If the returns are as large as they claim, it should be obvious when we miss.
> making land more expensive without reducing property tax much
Under a perfect Land Value Tax, we would remove the property tax and raise the land tax such that the price of land will fall to zero. You would transact the value of simply the building above it. A $250k house to build, both in middle of nowhere and in Manhattan, would trade for $250k.
[0]: https://www.youtube.com/watch?v=SxdOUGdseq4
[1]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1780826
