Taxes are an annoying and tendentious, yet they are ultimately needed to run government as we know it. However, as most Americans seemingly believe, our current tax system is broken. There has to be better alternatives right? I mean nearly every presidential candidate has proposed some sort of tax reform (that is pretty meaningless because congress ultimately levies and collects taxes per the Constitution), so are/were any of their ideas good? Without going into details, nope.
I think there is a pretty revolutionary system of taxation that can help accomplish a plethora of societal ills from economic disincentives from progressive income and corporate taxes, disincentives to build from property taxes, suppressed wages from payroll taxes, economic inequality, urban revitalization, and urban sprawl.
Sounds crazy, but this is the sales pitch for the Land Value Tax (LVT), a tax theorized by capitalism’s forefathers such as Adam Smith and David Ricardo and later popularized for a short time by economist/social critic Henry George in his book, Progress and Poverty. It’s a variant of a property tax that just taxes the value of a plot’s unimproved value. In other terms, the tax doesn’t factor in buildings and other improvements and rather just taxes the land.
So in theory the LVT does not “punish” people who make investments onto their own property or those who make more income. If someone doubles their income, but the value of their land stays the same then their taxes do not increase. However, the LVT is widely regarded as a measure to fight economic inequality, as its tax burden falls mostly upon the richest in society as they tend to own much more land on average and more land in prime locations. Unlike a progressive income tax, an LVT almost impossible to avoid through overseas tax havens by the rich and powerful such as the ones exposed recently with the Panama Papers. This sorta means that the LVT combines conservative and liberal tax ideals of promoting growth and having the most well-off pay the their share. Or at least something like that. I don’t know what cons and libs really want with taxes. They don’t really make sense most of the time so its hard to know what they want.
Suboptimal land use is another issue that the LVT tries to tackle. In urban areas, vacant lots and low-income areas would be built up and revitalized. Vacant lots would be a drain to the owners and would likely want to either develop the lot or sell it to someone who would, this would improve the area’s overall wealth. In lower income areas, lower tax rates for land would incentivize businesses to move into the area and in theory hire local workers and thus spurring growth. This would also occur in other lower income regions around the US, such as the rust-belt which has a much reduced land value per acre than the rest of the US. With the elimination of corporate taxes in the US and the implementation of an LVT would likely bring companies into the United States and in the regions that need them the most without costly regulations and harmful protectionist policies.
Optimal use of urban areas would also lead to more high density residential areas and would cut back on urban sprawl. Urban sprawl is a major source of habitat destruction in America, and cutting back on sprawl would enlarge and protect America’s countrysides and wildlife. Another benefit of this reduction in sprawl would mean a reduction in distances needed to travel and an increased use on mass transit, which would lead to a reduced use in fossil fuels for transportation. Pollution in general though would decrease land values and provide an an incentive to pollute, to combat this Pigouvian taxes are likely needed in conjunction with an LVT.
Land values also seem to be a realistic tax base as well, as the overall value of privately owned land in the lower 48 seems to be greater than the GDP by a decent degree, and that’s without Hawaiian beachfront resorts and Alaskan oil fields. A 15-20% LVT should be enough to completely replace all current federal taxes. Errors in land value assessments don't seem to be too much of a problem in relation with modern property taxes either, and assessments should get more accurate overtime with better analytics being developed all the time. Applications of the LVT and similar taxes in localities in Australia, Denmark, and Pennsylvania and elsewhere have been on the large part beneficial to those communities. Removal of zoning laws, similar to Houston's zoning laws, may also be needed to fully take advantage of an LVT.
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| This is before the big oil boom in North Dakota too. |
There could be some legitimate arguments around the feasibility of such as system wouldn’t work or not work as well as LVT proponents suggest, but I’ve never found anything to convince me that the reforming the tax system to be based off of an LVT would be bad. And I’ve looked. A lot. Probably for too long to be honest. I guess people who live in fancy mansions that have no income and golf courses would be the ultimate losers of an LVT, but I’ll assume that the mansion dwelling recluses aren’t a big portion of the population. I also don’t like golf. It's boring.
The LVT was once a widely known and popular idea with supporters from a wide variety of political leanings around the turn of the 20th century. It slowly faded out of the public conscious after WWII though and today the idea of an LVT is fairly obscure. I don’t seem why this has to be the case though as it is just as relevant today as it was during the time of Henry George. I'm realistic though, and that's why this is on a blog that has a severely small viewership and not on a letter to our congressmen.
