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0 pointsItsMonkk4y ago0 comments

> Can you point out the timestamp

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

[2]: https://youtu.be/KVMGzkSgGXI

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3 comments · 1 top-level

hardwaresofton4y ago· 2 in thread

> 45:03

The host mentions "ban second ownership" and a "vacant lot tax", and "ban corporate buying of homes", neither of which are what I'm discussing (increasing existing capital tax rates). These are the worst ways to represent the question of "should taxes be higher on rent seeking behavior".

She goes on to state that she "doesn't have patience for solutions that aren't going to help". It's a terrible shallow dismissal of even that flawed suggestion.

> 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.

Simple vs Easy is exactly what I meant, and I stand by what I said -- none of the solutions are easy, we can only realistically talk about what is simple. Changing a percentage in an existing statute/law is simpler than introducing a new kind of tax. If we disagree here we probably must agree to disagree.

I think we may be drawing our lines in different spots. The concept of LVT is simple, but the implementation of it, in the current landscape with our current political system is not simple in the least.

We are discussing attempting to introduce a new (to many) kind of tax, versus increasing a percentage that already exists. LVT may work simpler in theory, but we do not live there.

> 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.

This would not "stop building". It is a market -- and unless you are implying that all builders would instantly stop building, that's hyperbolic phrasing.

I'm not sure I understand your connection with Prop 13 here -- that is a measure to limit property taxation. What I am proposing is an increase on capital gains taxes for people with multiple properties.

> 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.

We're talking about different things here. It's different in at least these ways:

- They are talking about taxes levied upon sale, I originally proposed higher and more numerous taxes. We can tax the purchase, ongoing renting and time of sale.

- They are discussing house price growth, not reducing demand for homes. Some amount of price growth is reasonable if people choose not to sell (and this is actually a reasonable outcome -- people can/should be able to buy a house for 60-100 years!)

I guess the wording of capital gains is causing an unintended association here. I am advocating increasing existing taxes on behavior that is rent-seeking.

Whether this is increasing taxes upon home purchase for those (for a home that you do not live in), or levying taxes on single/multi family homes that are rented out, or it is taxing capital gains, these are measures to support the same goal.

Also, this is directly in conflict with your statement about builders stopping building -- if we get price growth due to lack of sellers, this will encourage builders to build.

> 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.

Same, I think we agree on the fundamentals, just the approach.

My problem with LVT is that it is not direct enough. If you want to reduce demand for homes, remove the people buying 2-5 from the market by increasing taxes specifically on their use case.

That is the most expedient solution, in comparison to introducing a new taxing mechanism which will take years if not decades to roll out, be studied, and see the effects of.

> 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.

I agree with you that government spending is often bad (unintelligent/mis-allocated/etc). I do also agree that government can make investments that are beyond individual or corporations!

I agree on both of those points, and the wrongful capture of value point.

I think where we're talking about is that attempting to reform the laws around land value is not the quickest way to lower demand.

> 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.

Again, this is a great idea, and might be better than our current system, but it's just too heavy a lift, I think.

> 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.

This I have to say don't understand at all. The value of living in Manhattan and the middle of nowhere must differ greatly, I don't know where the extra cost is going, but it must go somewhere. Just on a basic economics 101 level this doesn't make sense, but I will continue reading and see if I can square the circle.

That said, all of this is besides the point I was hoping to make -- LVT may be a great long term solution, but I'm not interested in reworking the taxation system (introducing a LVT and removing property taxes are LARGE changes), I'm interested in removing marginal buyers from the equation, with an eye on ease-of-implementation. The mechanics are simple -- make the practice of rent-extraction unprofitable and people will find their yield elsewhere.

ItsMonkkOP4y ago

> kind of tax, versus increasing a percentage that already exists

I mean, most places currently have a Land Value Tax, it's just included within the Property Tax that we pay. Conceptually all we are looking to do is raise this percentage and lower the building percentage. This has been done already in Pennsylvania[0]. We're just looking to continue this process. You can do it all at once, and that would be better, but I think most LVT advocates are fine with phasing it in, and trying to find out the best way to phase it in.

Once we get that change then we can look to change other things, and the podcast rightfully points out that in places like Texas that has no income tax and has a property tax, if they went to a LVT system they would start to out-produce the rest of the country. Other states and cities would then quickly try to catch up.

> We can tax the purchase, ongoing renting and time of sale.

If we move to just ongoing renting, that's all you need. And that's a Land Value Tax. See the annuity point below.

> if we get price growth due to lack of sellers, this will encourage builders to build.

When you have an elastic good and the supply of it goes down, the price goes up. We get price increases BECAUSE there is less supply. This is not a contradiction. Builders will not build more when you discourage trading. Liquid goods are worth more.

> LVT is that it is not direct enough. If you want to reduce demand for homes, remove the people buying 2-5 from the market

The LVT directly taxes the misuse of land at a just rate. We don't want to remove the demand for homes, we want to remove speculation. We want to make it unprofitable to waste land. We want the supply of homes to meet demand. We want people to be forced to pay to the community for being a NIMBY, and we want the community to be able to take those funds and build elsewhere to be able to meet demand.

Under a LVT, we want and like landlords. Landlords who need to compete on the quality of the homes that they have, that have to compete on the quality of services that they give, that's what we want. The issue now is that they are fat bloodsuckers who don't have to do those things because as the city grows around them they accrue value for doing nothing. You see this now in how even mobile home land is being bought up and rents are increasing, as brought up in the podcast.

> see if I can square the circle.

When you win the lottery, you can choose to take the lump sum or you can choose to take the monthly check. There is a certain value in how that calculation gets done that we call the capitalization rate. In that same way, anyone at any time can choose to spend their million dollars and get something like a $50k/year annuity.

What the Land Value Tax really is to Georgists is seeing that the combined positive externalities of the city is worth say that $50k/year to the location. So what we want to do is to tax away that $50k. If we don't do this, then through the capitalization of that annuity on the land, the price of the land would be worth 1 million. Once we tax that value however, the land price drops from a million to zero. So in Manhattan(although I suspect Manhattan has higher than $1m land values, adjust accordingly) you would have a $250k house with a $50k/year tax, and in middle of nowhere you would have a $250k house with a $0/year tax.

What economists know is that taxes on elastic goods cause dead-weight losses. Similar to what I mentioned above, when you tax something you get less of it, and that less ends up raising the price. Land is a special case in that it is inelastic, and thus it is the best thing to tax.

When you tax income, that means you get less of it. By reducing the income tax, by reducing the sales tax, by reducing the capital gains tax, the economy will grow. We'll have more outputs. And that growth will then be captured by the land. So what this means is that for every $1 we reduce in other taxes, the value of the land value tax grows by more than $1. This is why we're called 'Single Taxers', and why we need to quickly mention that we are also for carbon taxes and the like. If you take this to its extremes, what you would find is that the vast majority - certainly greater than 90% of the population - would be better off under a LVT world.

[0]: https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...

hardwaresofton4y ago

> I mean, most places currently have a Land Value Tax, it's just included within the Property Tax that we pay. Conceptually all we are looking to do is raise this percentage and lower the building percentage. This has been done already in Pennsylvania[0]. We're just looking to continue this process. You can do it all at once, and that would be better, but I think most LVT advocates are fine with phasing it in, and trying to find out the best way to phase it in. > > Once we get that change then we can look to change other things, and the podcast rightfully points out that in places like Texas that has no income tax and has a property tax, if they went to a LVT system they would start to out-produce the rest of the country. Other states and cities would then quickly try to catch up.

These movements are going to take years and decades, where I think we could reasonably measure getting something through congress in months to years.

> When you have an elastic good and the supply of it goes down, the price goes up. We get price increases BECAUSE there is less supply. This is not a contradiction. Builders will not build more when you discourage trading. Liquid goods are worth more.

You get price increases, and then new people who want to make money become home builders. Builders will build to make money if the price is right, they will build taking into account the expense of trading. You're suggesting that builders will not start building under any price and we'll see price appreciation with no end. That doesn't make sense.

Also, this whole point is a bit off because the point is to tax homes after the first one. It's more likely that what I proposed leads to a frenzied search for new home buyers, and a boom in building and lending. If the only way to avoid the increased targeted taxes is to find new home owners, industries will start optimizing for that.

> If we move to just ongoing renting, that's all you need. And that's a Land Value Tax. See the annuity point below.

See this is the problem -- it feels like you're just focused on LVT! It's not the only solution.

There is value in taxing the purchase more heavily, or sale, or renting. These are all levers to be pulled. They may be inferior to a starting situation where LVT was adopted, but they are valuable right now, in the world we live in today.

> The LVT directly taxes the misuse of land at a just rate. We don't want to remove the demand for homes, we want to remove speculation. We want to make it unprofitable to waste land. We want the supply of homes to meet demand. We want people to be forced to pay to the community for being a NIMBY, and we want the community to be able to take those funds and build elsewhere to be able to meet demand. > > Under a LVT, we want and like landlords. Landlords who need to compete on the quality of the homes that they have, that have to compete on the quality of services that they give, that's what we want. The issue now is that they are fat bloodsuckers who don't have to do those things because as the city grows around them they accrue value for doing nothing. You see this now in how even mobile home land is being bought up and rents are increasing, as brought up in the podcast.

But I do want to remove the demand from homes. Specifically, I want to remove the demand from people buying a second, third or 100th home. I want it to be easy for first home buyers to get in a primary residence, and harder for someone to buy a second/third/100th home.

I want the supply of homes to meet demand, but LVT is not the only way to get there, and IMO it's not the most expedient way.

> What the Land Value Tax really is to Georgists is seeing that the combined positive externalities of the city is worth say that $50k/year to the location. So what we want to do is to tax away that $50k. If we don't do this, then through the capitalization of that annuity on the land, the price of the land would be worth 1 million. Once we tax that value however, the land price drops from a million to zero. So in Manhattan(although I suspect Manhattan has higher than $1m land values, adjust accordingly) you would have a $250k house with a $50k/year tax, and in middle of nowhere you would have a $250k house with a $0/year tax. > > What economists know is that taxes on elastic goods cause dead-weight losses. Similar to what I mentioned above, when you tax something you get less of it, and that less ends up raising the price. Land is a special case in that it is inelastic, and thus it is the best thing to tax.

Thanks for the in-depth explanation and example of LVT.

I want to point out that yes, when you tax something you get less of it, but that's sometimes exactly what we want. For example, if the share of corporate profits (and value retained in other parts of the economy) is out of control, then tax corporate profits how much you can safely tax corporate profits is hard to figure out, but it's not rocket science. We could juice growth by removing lots of regulation, but we as a society choose to restrain growth in exchange for clean waterways for example.

> ... would be better off under a LVT world.

I don't disagree, but I think where we differ is that I'm OK going with an incremental patch, but you'd like the patchset that includes LVT and I think it's too large!

We'll have to agree to disagree here!

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