What do you think of Land Value Tax (LVT)

[jascott]

Rights are in principle empirically discoverable: they are the constraints on individual action that foster the healthiest and most prosperous society -- i.e., the society that will out-compete all others in the arena of evolution.

Suppose that communism, with no individual legal right to property in the fruit of one's labor, actually resulted in healthier people, more material prosperity, and greater evolutionary competitive advantage than a free market with individual legal right to such property does; in that case, would you say that individuals don't have the natural right to such property?

 

[jascott]

No, that's correct.

Ok, let's change the scenario slightly. Instead of bidding for two plots of land, I only bid for one plot, and its size is ten miles square. The LVT is something trivial, maybe even still just $1/year. Then I build the town in the center of the land. I collect and pocket all the rent. I even sublease unimproved land within my plot, and pocket the rent money, which will be a lot, due to the proximity to the town. The LVT never goes above my initial token bid, because none of the wilderness outside my plot of land is ever improved, because the only people who want to develop anything in this area want to be within my town, or at least within a mile or two of it (which is still on my plot of land). My town is the magnet; without it, nobody wanted to build in this wilderness.
Now it's true that I had to make an initial investment to build the town, so it's reasonable that the created value belongs to me. But that was just seed money; now I'm pocketing rent money which is due to land values caused by the work of other people, including their improvement of unimproved land which I'm subleasing to them. Other than my token LVT payments, haven't I effectively become the parasitic landlord and land speculator which your system is supposed to prevent?

 

[jascott]

He robs them of their property just as surely as the bandit does. It makes absolutely no difference to them that he has a piece of paper legally entitling him to take the loot

Consider a mountain pass which is occasionally used by caravans, within a single country (to avoid international complications). There are no man-made improvements. Nobody has requested privilege of exclusive use, so nobody pays LVT for it. Caravans pass for free, though they would be willing to pay a large amount of money if necessary.
Now, I offer the government $1/year for exclusive privilege. Of course, assuming the government accepts my bid, it'll open an auction, and grant privilege to the highest bidder. But how does the government decide whether to do the auction, or to reject my bid and leave the land open to public use for free? Does some bureaucrat or judge make the decision? Or is all public land (or at least all public unimproved land, so man-made roads are excluded) unconditionally up for auction?
Assuming the auction proceeds, the land will be bid up nearly to the price which the bidders expect the caravans are willing to pay for passage, i.e. so the annual LVT will be slightly under the annual caravan payments, with the difference going to pay for toll collection costs, and some profit for bothering with the whole enterprise. This could be done with any unimproved public land anywhere, which any entrepreneuring wannabe-landlord thinks anybody would be willing to pay to access.

What do you do about this? Do you allow me, as the winning bidder, to be a perpetual leech, profiting by fleecing the caravans? Suppose I don't publish the price for passage, and before telling approaching caravans what the price is, I require their signature on a nondisclosure agreement. I also announce that I'll refuse passage to anybody who has ever publicly announced, or revealed directly or indirectly to the government, what he would be willing to pay for passage, and prior to passage I require a signed oath that no such disclosure has ever been made (he could merely decide deliberately to lie about it, but let's be optimistic and assume he won't). I set the price to maximize my profits. Some approaching caravans will turn back rather than pay, after learning what my price is, but I earn money from the rest. Now the government knows only how much I initially guessed the mountain pass is worth, but doesn't know how much I've experimentally determined it to actually be worth. Since the government doesn't tax my sales or income, it can't learn the value of the pass that way either. The next time the government reassesses the value, how does it do it? It doesn't have the necessary information. Yet if it leaves the assessed value unchanged, then I get to remain a permanent parasite. If the assessor decides that my business model is parasitic, and raises the assessed value extremely high so that the LVT will be far beyond what I could possibly be earning, so that I'll be forced to relinquish my exclusive privilege and go out of business, then that causes a chilling effect throughout the economy; how will even legitimate business owners, especially ones who publicly speak against the assessor's judgment, know that they'll be safe from the assessor's wrath?

Suppose that the assessor somehow gets the valuation exactly right, so that my profit is exactly zero. Even in this case, I would still choose to keep the privilege, even though I'm earning no money from it, because I'm causing an increase in government revenue, and it doesn't cost me anything. Since there's no need for government services at the mountain pass, the increased revenue is spent on improved government services elsewhere, including the town where I live. Thus, I'm benefiting for free at the expense of the caravans, who would be able to use the pass for free if I weren't interfering.

 

[Steven Douglas]

It is the landowner who is guilty of theft, as already proved...

I saw a lot of passionate assertions, and the rationale for those assertions, but I must have missed the part where "guilt" and "theft" were actually proved.

One thing I have noticed, Roy, in reading through your responses throughout this entire thread, is that you are answering in earnest, quite honestly - albeit using your own set of definitions for nearly every word, every concept, every term employed.

Here is but one example:

"...whenever humans are intelligent, they understand that the rights of generations unborn cannot rightly be divvied up among those currently alive."

From that I can get a rough idea of your definition of the word intelligent (and its implied opposite by contrast, based on a specific understanding, as outlined by you).

I can only understand and interpret your definitions, the intending meanings of which seem to be unique to you (i.e., "free market", "good", "honest", "wise", "theft", etc.,) only by weighing them as circular references within the contexts in which you have used them. Likewise, when you "refute" what someone else is saying, you are weighing their words, not by their definitions or intended meanings, but by those same definitions which seem to be unique to you.

As such, your responses seem more like edicts than arguments; not "normative" (stating the way you believe things should/ought to be), but positive assertions, as you argue from your own premises, as if your understanding of things is the way things actually are (and they really are, albeit in your own mind, as you have decided and declared), all deviations from which are the abnormalities, the lies, etc.,.

I don't know how we "get there from here", or how any of these discussions can have any meaning whatsoever, without at least a common definition of terms - without circular references of any kind.

 

[helmuth_hubener]

By the way, Matt, I wish that when you popped in you would reply to the actually interesting posts, instead of nitpicking about boring stuff.

This post in particular was a reply to you, and I am still waiting for a response to it:
http://www.ronpaulforums.com/showth...ue-Tax-(LVT)&p=3698271&viewfull=1#post3698271

Particularly this part:

I think it is wrong of you to call it pressure. Incentive maybe, yes, but not pressure. As for calling it theft, I think that is unfair.

I think that land is a legitimate subject of ownership, so it is unavoidable for me to believe taxing it would be theft. Just so, you would believe that taxing me for using a computer would be theft, I think.

This is not an uncompensated taking of land.

I have lower standard of theft than that: involuntary taking is theft, compensated or not. One man's "need" doesn't cancel another man's right. I don't agree with so-called eminent domain. Do you?

If the tax is high and the farmer can’t afford it there is good reason. We can assume there are a number of buyers waiting in line to pay the higher price for the land. The owner is lucky to be in such a position! With the money earned he can double his acreage at a different site and farm even more.

True. It wouldn't be the worst thing in the world. But neither would it be the worst thing if you had this same set-up for capital goods. You charge a CVT (capital value tax) on capital goods, determined based on assessors, market prices, and some sophisticated computer model Roy L. has. Just like LVT. The owners of injection molds and CNC lathes would then pay an annual tax. Normally, as long as they were putting them to reasonably good use they'd be able to afford the tax. If the tax is high and the factory can't afford the tax, there is some reason. We can assume there are many buyers waiting in line to pay the higher price of the machines. Perhaps society needs every available unit of a specialized machine the factory has, in order to produce the new iPhone which is in a desperate shortage. The owner is lucky to be in such a position! With the money, he can buy even better machines and twice as many, and manufacture to his heart's delight.

But if you believe in an absolute property right in capital goods, such a CVT would still be theft.

 

[heavenlyboy34]

LoL

+10000 lololololololol!!!!

 

[Steven Douglas]

If the tax is high and the farmer can’t afford it there is good reason. We can assume there are a number of buyers waiting in line to pay the higher price for the land. The owner is lucky to be in such a position! With the money earned he can double his acreage at a different site and farm even more.

Regardless of the size of the tax, without such a tax "a number of buyers waiting in line to pay the higher price" - that would have been the same position the farmer was in anyway. And if he's not selling, despite this long, wonderful line of buyers willing to pay more (a position someone standing on the outside might insist he should feel lucky about!), there must also be good reason for that as well -- a reason that isn't even speculated, let alone regarded as somehow important.

A similar problem shows up here:

We can assume there are many buyers waiting in line to pay the higher price of the machines. Perhaps society needs every available unit of a specialized machine the factory has, in order to produce the new iPhone which is in a desperate shortage.

This is a good example, actually, because when Apple releases any of its iPhones, nobody really knows the answer to the real-world demand - including Apple or any other megacorp with its geniuses making market projections - until the consumers actual vote. With their pocketbooks only. Individually. That is the only way we can know, which also makes the concept of "aggregate demand", and all projections based on such, worse than a very bad joke.

And I also agree: LVT or CVT, when levied on individuals, it's all a form of theft. Where I differ in principle, and agree completely with Roy, is on how it could apply to collectives only (as a matter of privilege and not right). An LVT or CVT on corporations and other strictly commercial collectives - that's a check and balance and potentially huge advantage for individuals, should any collective be taxed out of existence. Which they can be. I wouldn't consider that theft at all. All collectives should consider themselves lucky and privileged to be in the position to operate alongside individuals, who exist and produce as a matter of absolute right.

 

[helmuth_hubener]

Regardless of the size of the tax, without such a tax "a number of buyers waiting in line to pay the higher price" - that would have been the same position the farmer was in anyway. And if he's not selling, despite this long, wonderful line of buyers willing to pay more (a position someone standing on the outside might insist he should feel lucky about!), there must also be good reason for that as well -- a reason that isn't even speculated, let alone regarded as somehow important.

On the practical end, it's the double-whammy I was talking about in post #650. As you say, Steven, they already have incentive to sell, because they could make a lot of money doing so. Giving them further incentive to sell by taxing them just throws things out of balance.

On the moral end, yes, you've got it here too, Steven: he doesn't want to sell. That should be the end of the argument. For whatever reason, it does not matter: he does not want to sell. We need to respect other people's wishes when it comes to their property. That desire not to sell is part of the market. By thwarting it, we thwart the market, and we then no longer have a free market.

This is a good example, actually, because when Apple releases any of its iPhones, nobody really knows the answer to the real-world demand - including Apple or any other megacorp with its geniuses making market projections - until the consumers actual vote. With their pocketbooks only. Individually. That is the only way we can know, which also makes the concept of "aggregate demand", and all projections based on such, worse than a very bad joke.

Right. The factory owner's dissenting opinion is also part of the market. He may think iPhones are a passing fad and he'd rather keep making Beanie Baby accessories because he's convinced they're going to make a comeback and make him a fortune to dwarf what he could get by selling out to Apple. The CVT says, "Nope, give it. Society knows what's best. Our assessors know what's best. And what's best ain't you, pal. It ain't you." The LVT says the same thing, but with natural resources.

And I also agree: LVT or CVT, when levied on individuals, it's all a form of theft. Where I differ in principle, and agree completely with Roy, is on how it could apply to collectives only (as a matter of privilege and not right). An LVT or CVT on corporations and other strictly commercial collectives - that's a check and balance and potentially huge advantage for individuals, should any collective be taxed out of existence. Which they can be. I wouldn't consider that theft at all. All collectives should consider themselves lucky and privileged to be in the position to operate alongside individuals, who exist and produce as a matter of absolute right.

OK, what if I form a partnership with another man (no, not that kind!)? Is that a collective? I guess it is, but my question is: do you think it's alright to tax this partnership which our contract has formed? We are still two individuals, after all. What about if we make a three-person partnership, 33% ownership each. Is it OK to tax it then? What if we have a one-million-person partnership? You see what I'm saying?

So if corporations were just very large partnerships with ownership shares publicly traded, would you be OK with joining me in saying that to tax such a collection of individuals would be to rob them?

 

[No Free Beer]

I don't like a tax where if unpaid, they can take your land. It's my land, and they should have no power over any of it. All property taxes should be abandoned.

How do you propose to support your local schools, police officers, fire fighters?

 

[Steven Douglas]

OK, what if I form a partnership with another man (no, not that kind!)? Is that a collective? I guess it is, but my question is: do you think it's alright to tax this partnership which our contract has formed? We are still two individuals, after all. What about if we make a three-person partnership, 33% ownership each. Is it OK to tax it then? What if we have a one-million-person partnership? You see what I'm saying?

So if corporations were just very large partnerships with ownership shares publicly traded, would you be OK with joining me in saying that to tax such a collection of individuals would be to rob them?

The real difference is whether or not a veil is involved, and whether individual liability is transparent. A collective of individuals, like a limited partnership, each with a name on the line, all retain their rights as individuals, regardless of their pooled resources. However, any collective that is owned and controlled by individuals, but viewed as a single artificial "person" in eyes of the law (i.e., a corporation with a corporate veil), with liability that is not tied to the personal liability of the owners/shareholders, is the "collective" I'm referring to. With a corporation, only criminal activity could cause a piercing of the veil (i.e., personal accountability and liability kicks in, with everyone's personal assets on the line) - otherwise, corporations operate as a fictitious "person" (immortal, no less) in the eyes of the law. So they exist as a matter of privilege, and not right.

However, as a matter of principle, there is NO collective - even a collective of two - which I believe should receive any kind of artificial advantage from the law. A perfect example of that is a marriage, and laws that give tax or any other artificial advantages to married people that two single individuals cannot enjoy alone. Collectives already have natural advantages over individuals. I don't deny them that. That is the power of association as a matter of right. However, no collective of more than one person should ever enjoy an ARTIFICIAL advantage that is not automatically enjoyed by any one person.

While I do not believe that collectives comprised of individuals (real persons facing real risks and individual consequences) should ever be penalized for pooling resources, neither should they be given artificial preference over individuals. Corporations, on the other hand, and other collectives which "shield" their owners, are fair game, as they do not/should not, exist as a matter of right, but privilege only.

 

[helmuth_hubener]

How do you propose to support your local schools, police officers, fire fighters?

The same way I support my local casinos, bars, and jewelry stores: I don't. Or my local grocery, hardware store, and thrift store: I give them money (some of them, sometimes). So I either would or would not give these things money, depending on my own preferences and judgement, relying upon my own reason, and not upon another man's gun (Ayn Rand would be proud). Local schools would get no support from me... though they might get money, in a way: I might be willing to pay to buy them just to blow them up, rip them down, and sow salt on the ruins. Police likewise would not get my support, not initially. Fire fighters might.

These things can be supported voluntarily, by anyone who wishes to support them, in the same way as any other human enterprise. There is no reason to believe that funding them by stealing from landowners is a superior method, that it will improve the results in any way.

 

[helmuth_hubener]

The real difference is whether or not a veil is involved, and whether individual liability is transparent. A collective of individuals, like a limited partnership, each with a name on the line, all retain their rights as individuals, regardless of their pooled resources. However, any collective that is owned and controlled by individuals, but viewed as a single artificial "person" in eyes of the law (i.e., a corporation with a corporate veil), with liability that is not tied to the personal liability of the owners/shareholders, is the "collective" I'm referring to. With a corporation, only criminal activity could cause a piercing of the veil (i.e., personal accountability and liability kicks in, with everyone's personal assets on the line) - otherwise, corporations operate as a fictitious "person" (immortal, no less) in the eyes of the law. So they exist as a matter of privilege, and not right.

However, as a matter of principle, there is NO collective - even a collective of two - which I believe should receive any kind of artificial advantage from the law. A perfect example of that is a marriage, and laws that give tax or any other artificial advantages to married people that two single individuals cannot enjoy alone. Collectives already have natural advantages over individuals. I don't deny them that. That is the power of association as a matter of right. However, no collective of more than one person should ever enjoy an ARTIFICIAL advantage that is not automatically enjoyed by any one person.

While I do not believe that collectives comprised of individuals (real persons facing real risks and individual consequences) should ever be penalized for pooling resources, neither should they be given artificial preference over individuals. Corporations, on the other hand, and other collectives which "shield" their owners, are fair game, as they do not/should not, exist as a matter of right, but privilege only.

We're definitely on the same page. So the ultimate solution would be to abolish the limited liability and the artificial personhood, not to tax it, right? In the mean time, OK, tax it, but in the end getting rid of the injustice would be the right thing to do, I would think, given these assumptions. Yes?

 

[Roy L]

Suppose that communism, with no individual legal right to property in the fruit of one's labor, actually resulted in healthier people, more material prosperity, and greater evolutionary competitive advantage than a free market with individual legal right to such property does; in that case, would you say that individuals don't have the natural right to such property?

Yes. Rights arise from human nature. If human beings were as you describe, as ants are, then like ants we would not have individual rights. It doesn't matter if an individual ant disagrees: evolution removes his opinion.

 

[Roy L]

Ok, let's change the scenario slightly. Instead of bidding for two plots of land, I only bid for one plot, and its size is ten miles square. The LVT is something trivial, maybe even still just $1/year. Then I build the town in the center of the land. I collect and pocket all the rent. I even sublease unimproved land within my plot, and pocket the rent money, which will be a lot, due to the proximity to the town. The LVT never goes above my initial token bid, because none of the wilderness outside my plot of land is ever improved, because the only people who want to develop anything in this area want to be within my town, or at least within a mile or two of it (which is still on my plot of land). My town is the magnet; without it, nobody wanted to build in this wilderness.
Now it's true that I had to make an initial investment to build the town, so it's reasonable that the created value belongs to me. But that was just seed money; now I'm pocketing rent money which is due to land values caused by the work of other people, including their improvement of unimproved land which I'm subleasing to them. Other than my token LVT payments, haven't I effectively become the parasitic landlord and land speculator which your system is supposed to prevent?

This is the issue of appropriate size of plots. Normally that will depend on expected use, local infrastructure such as road grids, etc. The initial ten mile square was pretty big, but let's go with it. Once the land use is so drastically changed, that's not the appropriate plot size any more, and the land use authority will start to look at subdivision to allow more flexible use.

 

[Steven Douglas]

We're definitely on the same page. So the ultimate solution would be to abolish the limited liability and the artificial personhood, not to tax it, right? In the mean time, OK, tax it, but in the end getting rid of the injustice would be the right thing to do, I would think, given these assumptions. Yes?

Yes, I'll answer that with a response I gave in a thread on Mises.org. I was asked:

“I agree with the idea of competing currencies and deplore fractional reserve banking. You mention not having taxes on commodities when used as money. I believe the taxes you speak of are “capital gains” taxes, is that right? I’m curious as to your rationale for not just abolishing capital gains taxes all together. Any thoughts on that?”

My answer, which might surprise you:

Yes, I am in favor of capital gains taxes. On corporations. Acting as a matter of privilege. That provides a needed check and balance on the power of the individual vs. the economic power of fictitious “persons” like corporations, ALL of whom I consider foreigners – guests in our land. That goes for ANY law that we both might otherwise find repugnant when applied to individuals who act as a matter of right, wherein personal risk and liability is transparent.

Labor unions vs. Corporations? Minimum wage against corporations? Bash it out, baby. Even if it destroys them. Make Roy L. the Senator in charge of them even, and whatever he imagines or concocts and passes, so let it be written, so let it be done. Just don’t EVER mistake a real person for a corporation – that includes not treating partnerships as fictitious, where real persons have merely pooled resources and are bound by mutual consent, but otherwise face liabilities and risks as individuals who are acting as a matter of right.

That’s one of the problems with conflating real and fictitious persons. It gets us arguing on THEIR BEHALF. That should never, ever have been, and is one of the original, heinous, even treasonous, crimes in this country.

There should be nothing “free market” about corporations, except as they serve, not threaten, our interests as individuals. Allowing the law to allow these fictitious persons to hold up individuals as human shields (i.e., you hurt us, we’ll hurt their jobs) looks like an act of terrorism to me. It should never be at issue under the law, nor should their existence ever be considered “necessary” to the trumping of individual rights. Free and natural persons should always enjoy fundamental, natural advantages (e.g., can NOT be taxed out of existence) over corporations and other fictitious persons, which are nothing more than shielded individuals, legally “veiled” shareholders that manipulate markets by collective proxy. You said it right – they really are, and always were, the original welfare queens.

Imminent Domain, LVT, CVT, minimum wage laws, labor union laws, and anything else you can think of - lay it on the backs of every fictitious person in the country that acts as a matter of privilege - and when they "ship the jobs overseas" - good. The individuals that remain here never faced the same constraints, and would be free and happy to fill the void. And if the labor unions that put too much weight on them long for their return - let it be a lesson to them, not to be too hard on "our foreign guests" (I view all corporations as foreign guests, regardless of ownership).

And with that one broad line drawn - that enormous check and balance in place - you even have a revenue source that can be tapped...if you're careful, and don't chase them away. But we are not "all in it together", and corporations are not "people", and do not have "rights", but privileges only.

 

[No Free Beer]

The same way I support my local casinos, bars, and jewelry stores: I don't. Or my local grocery, hardware store, and thrift store: I give them money (some of them, sometimes). So I either would or would not give these things money, depending on my own preferences and judgement, relying upon my own reason, and not upon another man's gun (Ayn Rand would be proud). Local schools would get no support from me... though they might get money, in a way: I might be willing to pay to buy them just to blow them up, rip them down, and sow salt on the ruins. Police likewise would not get my support, not initially. Fire fighters might.


These things can be supported voluntarily, by anyone who wishes to support them, in the same way as any other human enterprise. There is no reason to believe that funding them by stealing from landowners is a superior method, that it will improve the results in any way.

I must disagree with you. This is why I am not a libertarian.

 

[Steven Douglas]

I must disagree with you. This is why I am not a libertarian.

Read my response above re: corporations vs. individuals - all revenue coming from 'fictitious' persons acting as a matter of privilege in this country. Would that make any difference in your mind?

Remember, everything you listed existed and was funded prior to the establishment of personal income taxes in this country. That is not the only source of revenue possible - even if every single individual "opted out".

 

[jascott]

I have a question primarily for helmuth_hubener, but also for Roy L.

Suppose a man and woman colonize Mars. They're the first people there. They claim joint ownership of the entire planet. They carve giant "No trespassing" signs in the dirt at the poles and several places around the equator, visible from space, to stake their claim. All robots which people had sent there before have long since failed and been abandoned. The man and woman make a contract for how to manage their joint ownership of the planet. The contract says that all decisions regarding the jointly owned land are made democratically, by majority vote of all parties to the contract (hereafter called "citizens of Mars"), with ties broken by coin toss, except that no land may ever be sold or given away (and this rule may only be changed by unanimous vote), only leased for terms of 50 Earth-years, with 1/50 of the lease price due annually, payable to a democratically elected treasurer. The contract says that all citizens jointly own all the land, and that each citizen forfeits joint ownership when he dies, and while he lives allows his joint ownership to be diluted by the granting of citizenship to new people, and agrees to be subject to the jurisdiction of a government, the formation of which is mandated by the contract, and to be imprisoned if he commits the crime of murder, assault, theft, vandalism, or trespass, and to be judged in the government's courts.

The rent money pays for services provided by the government, including domestic police protection, and military defense against invasion by governments from Earth, and any surplus is distributed as a citizen's dividend. Government decisions are made democratically. The contract also says that all adult native-born Martian people have the option to become citizens, and immigrants and visitors are authorized to land on Mars only if they agree to become citizens or at least agree to be subject to the government's jurisdiction for the duration of their stay. All people, regardless of being citizens or not, have the right to rent land from the planetary landlord (which is the group of citizens), and sublease it as they want, if they agree to be subject to the government's jurisdiction. The terms of the contract also say that all citizens agree to allow the government to assert power over all criminals, even the ones who claim that the government has no jurisdiction over them (who can only be native-born Martians who refuse to become citizens, and foreigners who land on Mars without authorization).

All leases are done by auction, and re-auction is done one month prior to the expiration of a lease term. Before re-auction for a new term, the current lessee declares which buildings and other improvements, and which natural resources, are part of the land, and therefore already owned by or given for free to the planetary landlord and included in the new auction; everything else currently on the land, and everything which the lessee has already mined and removed from the land, is the lessee's private property. If he loses the new auction, then he may not remove or modify anything which is part of the land, and before the expiration of his current term (one month after the auction) he must remove everything which is not part of the land (and if he fails to remove it, then he not only forfeits it to the landlord, but also must pay the full 50-year land rent for the new lessee; this provides incentive to not declare mobility for things which he can't actually move). Plots of land may be auctioned only in sizes ranging from one acre to one square mile, square in shape except where overlapping preexisting plots, with the vertical dimension up to a quarter mile into the sky above the surface, and arbitrarily deep toward the center of the planet, as decided by the first bidder. If a lessee hasn't subleased his land, then he may terminate his lease from the planetary landlord at will (and forfeit to the landlord everything on the land), which subjects the land to re-auction one month later. He may also declare early termination for a date not less than two months in the future, and the re-auction will be held one month prior to the declared termination date; this makes it possible for a lessee to quickly split off parts of land which he no longer wants, or to combine adjacent parcels (to ensure all-or-nothing lease renewal), at the cost of having improvements on the land effectively incorporated into the rental value of the land early due to the early re-auction, while still allowing other bidders time to evaluate properties (but only by external observation) prior to upcoming auctions.

This seems to solve all of the moral and practical problems of geoism (including the problem of needing a bureaucrat to officially assess land values) while retaining its benefits, though the system is significantly different from what Roy proposes.

Note that neither morality nor practicality require the landlord to pay lessees for immobile improvements which they make and then declare to be part of the land and therefore property of the landlord, because prospective lessees know in advance that they'll have to donate such improvements, so in the preceding auction they'll reduce their bids to compensate. This does mean that people will only invest in improvements on which they can earn a full return within 50 years, but in practice this isn't a big limitation because it's most of a human lifetime, and human history has already shown that people generally only make investments on which they anticipate full return in significantly less than 50 years.

Now suppose that some generations pass, and Mars becomes terraformed, well-developed, and covered by people living under this system, most of whom chose to become citizens, some due to a sense of the system's righteousness, and some just to receive the citizen's dividend. My question to both of you is: at this point, what's evil or impractical about this system? Whose natural rights are violated? To Roy, how is your system more moral or practical?
To Helmuth, what substantial improvement (in morality or practicality) would be made by the landlord selling land rather than leasing it?

 

[MattButler]

I can't answer for Roy L.

In my system, we do not rent land from the govt or lease it. There's none of this going to the govt. every year and applying for a leasehold. No. We own the land and we trade it. The Govt. always taxes land based on the price at which it last changed hands, there are no govt. appraisers of the land value pining about to raise your LVT. If you want to own someone's land than you go to the owner and propose to buy it. If a prospective buyer wants the land and the owner refuses to sell except at a significant premium, there is a judicial mechanism available to force a sale. The buyer must post to bond equal to the next years anticipated higher tax amount. He must be willing to pay more above the current level than just a bare scintilla, otherwise the judicial mechanism would become subject to abuse. Of course the owner can offer to pay the higher tax and then keep the land, but that is the only way he can keep it once the judicial proceeding is initiated. Buyer pays all proceeding fees and court costs.

If land falls in value should we allow the owner to pay less tax even if he does not sell it or engage in transaction? Yes. The owner may initiate a judicial proceeding, and upon proper showing that the value has in fact fallen, he may be taxed at the lower rate.

So there is two ways land may be assessed a higher value (either free exchange or judicial procedure). And two ways it may be assessed lower (either free exchange or judicial procedure.)

No administrators. No assessors. We need a filing office to keep track of when land changes hands and at what price and who owns it. Everything else follows.

 

[Roy L]

Consider a mountain pass which is occasionally used by caravans, within a single country (to avoid international complications). There are no man-made improvements. Nobody has requested privilege of exclusive use, so nobody pays LVT for it. Caravans pass for free, though they would be willing to pay a large amount of money if necessary.
Now, I offer the government $1/year for exclusive privilege. Of course, assuming the government accepts my bid, it'll open an auction, and grant privilege to the highest bidder. But how does the government decide whether to do the auction, or to reject my bid and leave the land open to public use for free? Does some bureaucrat or judge make the decision? Or is all public land (or at least all public unimproved land, so man-made roads are excluded) unconditionally up for auction?

Presumably the land authority that runs the LVT system and is generally in charge of administering possession and use of land, as all governments do, has some procedure for deciding when exclusive tenure is in the public interest. Normally that would be if a more productive use than the current open use requires exclusive tenure. Unless there were some reason to think exclusive tenure in the pass would serve the public interest, it would be kept open, like navigable waterways, etc. Using the pass simply as a source of revenue is also possible, of course, but lack of open access to the pass might well reduce the rents of land the caravans pass through by even more than the rent of the pass.

What do you do about this? Do you allow me, as the winning bidder, to be a perpetual leech, profiting by fleecing the caravans?

The open market bidding should ensure that as you are functioning solely as a landowner -- not producing anything or providing any service of value -- you end up with no profit. You are essentially just functioning as a tax collector, collecting revenue from the caravans and remitting it to the government in LVT, less your collection costs.

The scenario you describe has a close parallel in some actual historical privileges. Some European monarchs (notoriously in France's ancien regime) issued toll privileges for public roads to their friends and supporters at court. The toll takers didn't do anything to build the roads (some of which were Roman, and nearly 2000 years old) and often did as little as possible to maintain them (that was done mainly by corvee labor in lieu of taxes). One of Turgot's reforms was to abolish as many of these toll taking privileges as he could. This naturally earned the enmity of the privilege holders, who agitated against him at court and eventually got him dismissed. One wonders if those evil, greedy, privileged parasites spared any thought for Turgot 20 years later, as they were led up the steps to the guillotine...

Suppose I don't publish the price for passage, and before telling approaching caravans what the price is, I require their signature on a nondisclosure agreement. I also announce that I'll refuse passage to anybody who has ever publicly announced, or revealed directly or indirectly to the government, what he would be willing to pay for passage, and prior to passage I require a signed oath that no such disclosure has ever been made (he could merely decide deliberately to lie about it, but let's be optimistic and assume he won't). I set the price to maximize my profits. Some approaching caravans will turn back rather than pay, after learning what my price is, but I earn money from the rest.

I doubt that such a system could recover as much rent as just charging the market rent openly. Merchants aren't stupid. They know that if you are preventing people from knowing how much you charge, there is only one possible reason: it is too much.

Now the government knows only how much I initially guessed the mountain pass is worth, but doesn't know how much I've experimentally determined it to actually be worth. Since the government doesn't tax my sales or income, it can't learn the value of the pass that way either. The next time the government reassesses the value, how does it do it? It doesn't have the necessary information.

It can ask the merchants who don't use the pass how much they are spending to circumvent your odd little racket. Remember, rent is determined by reference to the alternatives.

Yet if it leaves the assessed value unchanged, then I get to remain a permanent parasite. If the assessor decides that my business model is parasitic, and raises the assessed value extremely high so that the LVT will be far beyond what I could possibly be earning, so that I'll be forced to relinquish my exclusive privilege and go out of business, then that causes a chilling effect throughout the economy; how will even legitimate business owners, especially ones who publicly speak against the assessor's judgment, know that they'll be safe from the assessor's wrath?

The assessor's job is just to measure the market rent, not to set a rent. If he doesn't have enough information to measure it, he will have to find a way to get more information. There are always ways.

Suppose that the assessor somehow gets the valuation exactly right, so that my profit is exactly zero. Even in this case, I would still choose to keep the privilege, even though I'm earning no money from it, because I'm causing an increase in government revenue, and it doesn't cost me anything. Since there's no need for government services at the mountain pass, the increased revenue is spent on improved government services elsewhere, including the town where I live. Thus, I'm benefiting for free at the expense of the caravans, who would be able to use the pass for free if I weren't interfering.

All true. That's where government and ultimately voters have to exercise some judgment. Does charging tolls through the pass make the economy as a whole more prosperous or not? This is a complicated question and may be very difficult to resolve. But if questions were all easy, you wouldn't need me, would you?