A pet crusade of mine: California can pass a 100% (or close to that) land appreciation tax (capital gains tax on land), and that wouldn't violate Prop 13. High land appreciation taxes are essentially indistinguishable from Georgist LVT. China taxes land appreciation between 30-60%.
> High land appreciation taxes are essentially indistinguishable from Georgist LVT
A capital gains tax is not “essentially indistinguishable” from a land value tax if rents rise and the owner never sells the property. The owner gets to collect increased rents for as long as his family owns it, and even his heirs don’t have to pay the tax on transfer (since capital gains are untaxed on inheritance in America due to the step-up basis and apparently also for the Chinese Land Appreciation Tax). Kevin Erdmann has written a good series of articles on focusing on the rental value of land rather than only sales prices:
“A Conceptual Starting Point for Housing Affordability and Public Policy” <https://www.mercatus.org/bridge/commentary/conceptual-starti...>
Not quite relevant, because we already tax land appreciation in the US today, it's just the capital gains tax. The capital gains tax is also low because (in theory) we want to incentivize investment in the name of growth. There's no reason why we ought to apply the same incentive in favor of investment in real asset growth. A Land Appreciation Tax is just a capital gains tax just on real estate.
In fact, LVT would be unconstitutional at the Federal level today, but a Land Appreciation Tax would not.
[..] The justification for a lower tax rate on capital gains relative to ordinary income is threefold: it is not indexed for inflation, it is a double tax, and it encourages present consumption over future consumption. ... Finally, a capital gains tax, like nearly all of the federal tax code, is a tax on future consumption.[..]
Yup, that too. It’s another consideration that I don’t think ought to be made for land appreciation. In fact, because it doesn’t account for inflation, for the longest holders of land, a high LAT functions like a very mild LVT in practice, while also neutralizing the attractiveness of land as an investment vehicle in general.
A transaction tax does not reduce the demand. It reduces the quantity of transactions that matches the demand and supply. That means it adds friction to the reallocation of resources for more efficient use. It literally encourages hoarding. That is even worse than speculation.
I am not sure what you mean by "doesn't function as a traction tax". It does create the same incentive for hoarding. I don't see any advantage of it compared with LVT.
It would just become another variable in pricing land. It would actually slow down appreciation because taxes would have to be priced into every transaction. You can't borrow against collateral you don't have, so lenders would obviously calculate the appreciation taxes due if they need to foreclose.
That’s not true, because appreciation isn’t uniform in a housing market. Not everyone experienced the same value gain, so your tax bill might be hundreds of thousands of dollars while your neighbor’s tax bill might just be thousands of dollars.
This is also why capital gains taxes don’t get priced into equities and securities.
Markets don't move by magic. They move by the aggregation of thousands and millions of transactions. And yeah, sellers and lenders absolutely incorporate their taxes into prices.
I see what you are trying to say about capital gains taxes not being in the "price" of securities. But they are in aggregate because taxes inevitably have to be paid. The whole market can't go up without transactions pushing it higher. And all transactions that make profit get a portion pulled out for taxes. They quite literally act as a damper on how fast a market can move.
I don't follow that. Suppose the tax was 100%. Real estate would effectively never appreciate, so no one would hoard it. If the tax is 0%, then it's a completely "free" market. Anything between the two just reduces the ROI.
Since a high ROI in the short term promotes speculation (and not development), it seems like this would reduce speculation and the likelihood of bubbles forming.
Of course that's a ridiculously oversimplified view. There are a zillion different ways to stack this, which is what would happen in any case. To spur development and not just buy-and-hold, the law might be written to exempt certain kinds of improvement costs.
China does absolutely scare the crap out of both it’s own people and people abroad, but economically it’s clear they’ve done a lot of things right over the last 40 years. The US could learn a thing or two from the communists when it comes to Capitalism.
I don’t think they’ve done things right; they were granted access to the global trade network and had wages at pennies on the dollar from other countries. It would be almost impossible not to grow under those circumstances. Let’s see if their decisions are as effective when wages are more on parity and they are competing as peer economic levels.
> I don’t think they’ve done things right; they were granted access to the global trade network and had wages at pennies on the dollar from other countries. It would be almost impossible not to grow under those circumstances.
I’m guessing you don’t know that this was also true of America in the 18th and 19th centuries and a large part of how it became so wealthy. Especially when they kept using slaves long after it was banned elsewhere.
I think it's fair that comparing something to China doesn't win adherents, but just because China does it, doesn't mean that it's "communist". China has shopping malls — does that make shopping malls communist?
Also, a Land Appreciation Tax isn't really radically different from the status quo in the US today. Land appreciation is already taxed as capital gains, it's just that the capital gains tax is intentionally set to be low to incentivize investment. The argument here is that we should not only NOT incentivize speculation on land, we should deter it by carving out a "special" capital gains tax on land.
