Let the rant begin:

I think it’s an absurd idea that things like labor are taxed at all (via income taxes), when labor is a productive activity. Meanwhile there are so many unproductive or outright harmful activities that don’t get taxed nearly enough! Land speculation, carbon emissions, other forms of pollution, monopolistic control of finite natural resources, etc.

Further, even from a solely economic point of view, taxing things discourages them and distorts the market. Taxing carbon is a known way to reduce carbon emissions. Why don’t we choose to distort the things we want to be distorted anyways, like pollution and rent-seeking behaviors?

Further, there is ample evidence to suggest we genuinely don’t need income taxes to fully fund our government. I (and many others) are in favor of 3 main types of taxes:

  1. Land value taxes
  2. Pigouvian (or externality) taxes
  3. Severance taxes

Land Value Taxes

A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements.[1] It is also known as a location value tax, a point valuation tax, a site valuation tax, split rate tax, or a site-value rating.

Land value taxes are generally favored by economists as they do not cause economic inefficiency, and reduce inequality.[2] A land value tax is a progressive tax, in that the tax burden falls on land owners, because land ownership is correlated with wealth and income.[3][4] The land value tax has been referred to as “the perfect tax” and the economic efficiency of a land value tax has been accepted since the eighteenth century.[1][5][6] Economists since Adam Smith and David Ricardo have advocated this tax because it does not hurt economic activity, and encourages development without subsidies.

LVT is associated with Henry George, whose ideology became known as Georgism. George argued that taxing the land value is most logical source of public revenue because the supply of land is fixed and because public infrastructure improvements would be reflected in (and thus paid for by) increased land values.[7]

https://en.wikipedia.org/wiki/Land_value_tax

In 1977, [Nobel prize-winning economist] Joseph Stiglitz showed that under certain conditions, beneficial investments in public goods will increase aggregate land rents by at least as much as the investments’ cost.[1] This proposition was dubbed the “Henry George theorem”, as it characterizes a situation where Henry George’s ‘single tax’ on land values, is not only efficient, it is also the only tax necessary to finance public expenditures.[2] Henry George had famously advocated for the replacement of all other taxes with a land value tax, arguing that as the location value of land was improved by public works, its economic rent was the most logical source of public revenue.[3]

Subsequent studies generalized the principle and found that the theorem holds even after relaxing assumptions.[4] Studies indicate that even existing land prices, which are depressed due to the existing burden of taxation on labor and investment, are great enough to replace taxes at all levels of government.[5][6][7]

Pigouvian Taxes

A Pigouvian tax (also spelled Pigovian tax) is a tax on any market activity that generates negative externalities (i.e., external costs incurred by the producer that are not included in the market price). The tax is normally set by the government to correct an undesirable or inefficient market outcome (a market failure) and does so by being set equal to the external marginal cost of the negative externalities. In the presence of negative externalities, social cost includes private cost and external cost caused by negative externalities. This means the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product.[1] Often-cited examples of negative externalities are environmental pollution and increased public healthcare costs associated with tobacco and sugary drink consumption.[2]

https://en.wikipedia.org/wiki/Pigouvian_tax

A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.

https://archive.is/TYVWT#selection-2043.3-2043.318

Severance Taxes

Severance taxes are taxes imposed on the removal of natural resources within a taxing jurisdiction. Severance taxes are most commonly imposed in oil producing states within the United States. Resources that typically incur severance taxes when extracted include oil, natural gas, coal, uranium, and timber. Some jurisdictions use other terms like gross production tax.

https://en.wikipedia.org/wiki/Severance_tax

The key to Norway’s success in oil exploitation has been the special regime of ownership rights which apply to extraction: the severance tax takes most of those rents, meaning that the people of Norway are the primary beneficiaries of the country’s petroleum wealth. Instead of privatizing the resource rents provided by access to oil, companies make their returns off of the extraction and transportation of the oil, incentivizing them to develop the most efficient technologies and processes rather than simply collecting the resource rents. Exploration and development is subsidized by the Norwegian government in order to maximize the amount of resource rents that can be taxed by the state, while also promoting a highly competitive environment free of the corruption and stagnation that afflicts state-controlled oil companies.

https://progressandpoverty.substack.com/p/norways-sovereign-wealth-fund

Inequality

Specifically, I suggest that much of the increase in inequality is associated with the growth in rents — including land and exploitation rents (e.g., arising from monopoly power and political influence).

https://academiccommons.columbia.edu/doi/10.7916/d8-t92w-f529

  • Fried_out_Kombi@lemmy.worldOP
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    1 year ago

    You’re right; the infrastructure in the US is very car-based, which is unfortunate. In Europe (where I live), we can walk from place to place and the public transport is generally sufficient to move around (at least, for me). However, to make the switch from car-dependent infrastructure to dense, walkable infrastructure does cost a lot of money and how would that be financed? Could everything be financed by the LVT, pigouvian and severance taxes? Also, to add to your idea, I think more comprehensive and free public transport would also be a huge way to convince people to use a train instead of a car. Also add more bicycle lanes as well, for the shorter distances (< 20km).

    Yes, according to the Henry George Theorem, public goods can be funded entirely by their resulting increase in LVT revenues. This paper extended the results of the HGT to congestible local public goods as well, e.g., roads, transit, education, healthcare, eldercare, childcare, museums, etc.

    What if someone, who owns a house and lives in it, becomes unemployed? I mean, every landowner will have to pay land value taxes, and I assume these taxes won’t be temporarily cancelled. If someone suddenly becomes unemployed (maybe a recession or an accident which resulted in a lost limb?), they won’t have a stable income anymore and if they don’t have any saved money, they will be unable to pay LVT. What’s going to happen in this situation? While the LVT certainly does have advantages to distribute wealth more equally across society, this does seem like a problem for the poor, right? I mean, a rich person has plenty of saved money and will be able to pay LVT, but a poor person doesn’t.

    I think there are two main scenarios to consider here: 1) the short-term transition period, and 2) the long-term equilibrium. In the short term, yes, there are definitely some owners of single-family detached homes who would need to move, but I think that’s an unavoidable part of solving the housing crisis anyways. I don’t know the situation in the Netherland, but in the US and Canada we have the issue of almost all our urban land being zoned for SFHs, and simply there is no fixing the housing crisis here without many of those being redeveloped into missing middle housing or denser. However, the beauty of LVT is it’s meant to target the full rental value of the land, i.e., how much you could rent the land for on the open market. So if you find yourself unable to pay the LVT due to unfortunate circumstances, because you still possess the land, you have the option of renting out the land to pay it, and yourself renting someplace cheaper that you can afford off of UBI/citizen’s dividend. After all, the LVT due is supposed to be the rental value of the land, i.e., if you can rent it for $100 a month, you pay $100 a month in taxes. Realistically, though, due to difficulty in appraising with such high degree of accuracy, I’ve generally seen it recommended you shoot for 85% to 100% of the rental value of land. 'Tis better to slightly under-appraise than to over-appraise.

    In the long-term, I think the housing market would be vastly more affordable and people economically better off, with very few SFHs on high-value land (basically only mansions owned by the rich who can afford to bleed money on LVT payments). The reduction in evictions due to failure to pay rent would be vastly greater than the increase in evictions because of LVT, I would imagine. After all, our current system evicts you if you are no longer capable of paying, but we don’t even have a UBI/citizen’s dividend to help you meet those payments under extenuating circumstances such as sudden disability.

    Something else that came to mind was when will the LVT be paid? Is it paid annually, monthly, or is it paid when the landowner dies? If it’s paid annually or monthly, then it could be very hard for poor people with small plots of land to pay the LVT. Also, what kind of percentage of the land value would the tax be? 10%? 20%?

    This is actually an open question. I’d personally be fine with annually or monthly. I’ve seen proposals for paying it when the landowner dies as an option to protect pensioners. Perhaps a land value transfer tax that is applicable for certain people who qualify? Downside is any conditions like that 1) introduce significant bureaucracy, and 2) introduce an avenue by which to potentially evade the LVT. As for percentage, the idea would be to target the full rental value of the land, but even smaller land value taxes can still have benefits, just not as many. If we did a revenue-neutral shift from property to land value taxes, for instance, we’d still need income taxes, but we could still cool upward speculative pressure on land prices such as seen in the Australian Capital Territory (which has a pretty milquetoast LVT, nowhere near the full-LVT system I’m arguing for).