Hong Kong has a much too small supply of land relative to their population. It makes sense that this would drive up the cost of land.
I wasn't talking about permanently elevated real estate prices on account of a demand imbalance. I was referring to a speculative bubble that sent real estate prices up more than 50% on an inflation-adjusted basis in the 1995-97 period. Afterward, like all bubbles, it popped. Real estate prices then fell by more than 50% before bottoming out.
The supply of land is completely inelastic; meaning its cost is borne completely by the landlord.
The idea that the landlord would completely bear the cost of a LVT runs counter to classical economic principles. Every business--landlords included--pass costs on to their customers. If they could not earn an economic profit over the long-term, they would simply not be in business. Hence, they need to pass along their costs and charge an excess over those costs to earn the economic profits necessary to stay in business.
But in some form or another all industries need land to function. Even if it's just office buildings etc.
If the LVT is sufficiently large--and it would be if it were to supplant all existing taxes--companies would measure the costs-benefits of continuing operations in the U.S. or moving overseas. If there is a net benefit to moving their operations overseas to cut exposure to the LVT, they would do so. In the long-run, the U.S. economy would suffer from such a development (reduced jobs, reduced income growth, reduced tax revenue as a meaningful share of land would sit idle).
I'm not just proposing a land tax. I'm proposing an end to all income, payroll, and sales taxes, in addition to a universal insurance system for health care; all of which would drive down the cost of doing business in the U.S.
Universal coverage would cost money. There would be an added cost for eliminating the current incidence of uninsurance. If you are talking about a government-financed single-payer system as I think you are, the government would need to raise revenue to pay for such a system. While such a system might reduce the costs employers pay for private coverage for their employees, the costs associated with universal coverage (to cover employees and practically eliminate the incidence of uninsured persons) would then be passed back onto them via your suggested LVT. There is no free lunch so to speak.
In short, a LVT is little more than a 19th century solution that would have little relevance in a 21st century society. It is not a superior alternative to the present system. If anything, it could be quite destructive.
Any near- or medium-term tax reform will likely be incremental in nature. Some of the tax rates will be revised, loopholes closed, existing system simplified. There is a smaller prospect that the existing income tax system could be replaced with a consumption tax (either designed as an income tax as a flat tax was, or a retail sales tax or value-added tax). The conceptual sell for a consumption tax would be more difficult even as regressivity could be addressed through a large personal exemption. Given the nation's long-term financing challenges, there is also a chance that a VAT would eventually be adopted to coexist with present system.
Prospects for a LVT are extremely remote. A LVT would not be a clearly superior alternative (and could be far worse), would be highly regressive, would require a constitutional amendment, and it would bring about a dramatic shift away from private property rights, a fundamental tenet on which the nation's founders built their republic. For economic, policy, and historic reasons, such a tax has virtually no prospect of replacing the existing system, even with the existing system's shortcomings.
I clearly understand some will cling to the idealistic assumptions behind a LVT. However, practical considerations such as those I noted in the preceding paragraph essentially preclude replacing the existing system with a LVT. It is practical reasons, not utopian ideals, that will drive public policy.
