The Only Efficient Form of Taxation

Sedrox · Mar 24, 2009

is a tax on land value. Popularized in the late 19th century by political economist Henry George, the theory of a land value tax (LVT) is mostly ignored by mainstream economics. However, it has yet to be disproven, and garners recognition from well-known economists from across the political spectrum.

As a political and economic philosophy, the LVT is two fold; it is both a moral and an economic argument.

Moral: Land treated as private property is unjustifiable. Any and all forms of land ownership - even if currently distributed based on market interaction - must at some point originate from land appropriation. Whether it was appropriated through a "finders-keepers" policy (also known as "mixing your labor") or state distribution is irrelevant; it is completely illegitimate. The use of land is a fundamental necessity to human existence, and to claim exclusive ownership to land is to claim the ability to deny someone the right to gain sustenance from said land. On an individual level, this sounds ludicrous, but from a social standpoint it becomes clearer; if all land is privately owned, then you have no means of sustaining your existence. You must sell your labor and effectively your life to a land owner in return for a petty compensation. This is where the Robinson Crusoe analogy becomes relevant.

Economic: The LVT is the most efficient form of taxation, and the only form which should (ideally) be utilized. It encourages the utilization of land, abolishes the landowner privilege of charging rent, and encourages social progress and welfare. Because the supply of land is inelastic, and the demand is elastic, any increase in the cost of holding land could not be passed on to rent seekers. This means landowners pay the entire burden of the LVT. Because of this, anyone who owns unused land will be encouraged to either utilize and develop that land, or sell it. It would be a tax on the value of land itself, not necessarily the improvements upon it; meaning production would not be discouraged, the development of land would be encouraged.

How? If the LVT were to be implemented, all other various forms of taxation (personal income tax, corporate income tax, payroll tax, etc.) will be abolished. This would create an influx of wealth into the economy, and would remove much of the burden that is currently placed on lower and middle income earners.

Unfortunately, I can’t paraphrase over a century’s worth of political economic theory in one post on an internet forum, so I can’t give you the entire description and justification for this proposition. That would take days to compose and to read. If you want to further investigate the matter, visit this fantastic website devoted to Georgist political economy: Wealth and Want: an inquiry into the cause of the increase of poverty with the increase of wealth ... the Remedy

This is my long term economic proposal. I believe it would greatly improve economic conditions for those across all income quintiles, and would stimulate sustainable and responsible economic growth. In addition, I’ve yet to hear an argument against the theory that disproves it, or that can’t be answered with previous scholarship on the issue. I welcome your criticism.

Goshin · Mar 24, 2009

Lovely. That should really help out the much-endangered, nearly-extinct family farm.

(/irony)

G.

Jerry · Mar 25, 2009

Sedrox said:
The Only Efficient Form of Taxation....

...is a consumption tax.

Sedrox said:
is a tax on land value. .

If it's your land then why should you have to pay rent to the government to live on it?

If you make the land turn a profit then you will pay a proportionate tax in what you consume.

donsutherland1 · Mar 25, 2009

Sedrox said:
is a tax on land value.

Aside from subjectivity in determining land valuations separate and distinct from fixtures on the land, the notion of taxing something that is not related to a stream of cashflow whether measured by income or consumption is anything but efficient.

Land treated as private property is unjustifiable.

John Locke, among others, have provided robust commentary to the contrary. In fact, Locke's philosophy is one of the philosophical foundations of modern societies. At the heart of property rights is the broader concept of private ownership. Without private ownership, no modern economy can function. A utopian notion of doing away with property rights would be economically disastrous. One need only look to the former Soviet bloc for an idea of how a society without strong property rights fares.

It encourages the utilization of land, abolishes the landowner privilege of charging rent, and encourages social progress and welfare.

This argument might be stronger were society still agrarian in nature. It is not. A LVT would constitute a cost of business that has little to do with its economic activity. It would be a barrier to entrepreneurship.

If the LVT were to be implemented, all other various forms of taxation (personal income tax, corporate income tax, payroll tax, etc.) will be abolished.

Separating revenue (taxation) from a cash stream (be it income or consumption) would not necessarily produce anything close to the tax revenue currently generated. Without a stream of cashflow, tax revenue cannot be generated. Should a LVT impair economic activity, the tax revenue would fall not increase.

Sedrox · Mar 25, 2009

Jerry said:
...is a consumption tax.

if you're a fan of regressive taxation.

If it's your land then why should you have to pay rent to the government to live on it?

because all land value is derived from outside influences; not from individual labor or investment. the value is determined by the land's topographical features, the natural resources it produces, its fertility, and the area immediately around it. the former three are static and don't change regardless who owns the land, while the fourth factor is determinant on the actions of the rest of society.

if you have an empty lot in the middle of nowhere, its value will be minimal. however, if great economic growth occurs in the area surrounding the lot (new businesses, public schools/libraries, new neighborhoods) then the value of the lot will go up. this increase in value of the land - which allows the owner to bring in profit from either selling the lot or renting it out - comes as a result from the rest of society's actions. therefore the profit it generates should belong to society.

Sedrox · Mar 25, 2009

donsutherland1 said:
Aside from subjectivity in determining land valuations separate and distinct from fixtures on the land, the notion of taxing something that is not related to a stream of cashflow whether measured by income or consumption is anything but efficient.

It's already done with property taxes.

here's a good resource on assessment: Wealth and Want theme: Assessment

John Locke, among others, have provided robust commentary to the contrary. In fact, Locke's philosophy is one of the philosophical foundations of modern societies. At the heart of property rights is the broader concept of private ownership. Without private ownership, no modern economy can function. A utopian notion of doing away with property rights would be economically disastrous. One need only look to the former Soviet bloc for an idea of how a society without strong property rights fares.

this is simply a distinction between products that are a directly a result of human labor and land.

This argument might be stronger were society still agrarian in nature. It is not.

land still plays an integral role in modern economies. there has to be a distinction between capital and land, and there consequently has to be a distinction between how we handle the two.

A LVT would constitute a cost of business that has little to do with its economic activity. It would be a barrier to entrepreneurship.

a common argument. what people misunderstand is that entrepreneurs are already paying this cost. the only difference is that the profit from rent goes to private hands rather than society as a whole.

Separating revenue (taxation) from a cash stream (be it income or consumption) would not necessarily produce anything close to the tax revenue currently generated. Without a stream of cashflow, tax revenue cannot be generated. Should a LVT impair economic activity, the tax revenue would fall not increase.

again, they already do this with property taxes.

donsutherland1 · Mar 25, 2009

Sedrox said:
It's already done with property taxes.

The rates required to supplant all other taxes would be exorbitant. It would make property ownership highly unattractive. The consequences of excessive property or land taxation would cascade through a broader range of economic activity.

Sedrox · Mar 25, 2009

donsutherland1 said:
The rates required to supplant all other taxes would be exorbitant. It would make property ownership highly unattractive. The consequences of excessive property or land taxation would cascade through a broader range of economic activity.

first of all, you would only tax land. any improvements on land would be completely untaxed.

and yes it would discourage sitting on or under-utilizing land. but that's good. it would help put an end to things like urban sprawl and inefficient city planning.

second of all, much has been written about the sufficiency of the revenue generated from this tax. Wealthandwant theme: Sufficiency of LVT

here ya go:

Tideman et al. (2002, 17) “estimate that the net gain (measured in real dollars of 2000), from shifting as much taxation to land as could be financed by collecting 90% of the land rent, would be $1308 billion or 14% of NDP in 2002

granted, it is difficult to determine the exact value of land in the U.S. another estimate i have seen several places was about one-fifth of GDP.

also, if you consider the effect of efficient public spending on land values, the LVT could almost pay for itself. since govt spending on public works projects (schools, bridges, roads, buildings, new housing structures, etc.) adds to the value of the surrounding land, taxing that land would provide the govt with at least a portion of its money back on the investment.

Jerry · Mar 25, 2009

Sedrox said:
if you're a fan of regressive taxation.

Aren't you also, though?

The current tax system regresses as you go down the tax brackets from richest to poorest.

Rich people consume more, therefore a consumption tax is a progressive tax.

Sedrox said:
because all land value is derived from outside influences; not from individual labor or investment. the value is determined by the land's topographical features, the natural resources it produces, its fertility, and the area immediately around it. the former three are static and don't change regardless who owns the land, while the fourth factor is determinant on the actions of the rest of society.

This is why the total sticker price of the land should go up, but I asked you something different.

Sedrox said:
if you have an empty lot in the middle of nowhere, its value will be minimal. however, if great economic growth occurs in the area surrounding the lot (new businesses, public schools/libraries, new neighborhoods) then the value of the lot will go up. this increase in value of the land - which allows the owner to bring in profit from either selling the lot or renting it out - comes as a result from the rest of society's actions. therefore the profit it generates should belong to society.

Sure, society, not the government, but society, so we agree.

I thought you said you supported a land tax. I'm sorry for misreading your post.

donsutherland1 · Mar 26, 2009

Sedrox said:
and yes it would discourage sitting on or under-utilizing land. but that's good. it would help put an end to things like urban sprawl and inefficient city planning.

second of all, much has been written about the sufficiency of the revenue generated from this tax.

At best, the theory might sound attractive superficially, the reality would be very ugly. "LVT Land" would be a place. For example:

- Exorbitant rates of taxation required to be revenue neutral with the same system (federal, states, localities) would lead to very little land ownership.

- Companies would comprise the main share of private landowners, but the major landowner would be the government. Economic downturns would have a more severe impact on firms given the high fixed cost resulting from the LVT. Individuals and businesses eager to escape excessive taxation that is disconnected from cashflow (whether measured by income or consumption) would prefer to rent.

- The government has done a poor job as a landlord. That responsibility is not the government's area of expertise. Maintenance of buildings, etc., would suffer from underinvestment.

- A land tax would be extremely regressive. The effective tax rate would be highest for low-income people and also senior citizens living on limited fixed incomes.

- If rents reflected anything close to the land tax, it would lead to a segregated society based not on race, but on economic status. As capital and economic clusters are important in the overall economy, it would risk putting lower-income people into areas with lower land values (lower rents for them) where job opportunities might be more scarce (lack of development).

- In a bid to broaden the base of land available for taxation, policy makers might be tempted to develop areas presently off limits to development i.e., state and national parks.

- The land tax might discourage urban sprawl but it would incentivize upward sprawl. It would encourage the construction of sky scrapers to reduce the effective cost per square foot imposed by the land tax.

- High costs of land would act as a barrier to entrepreneurs who might be trying to start firms with only a small amount of capital necessary to pursue an idea. Reduced business formation would ultimately lead to reduced economic growth in the long-term.

- Assessed land values would probably amount to government decrees rather than market realities in a bid to try to capture sufficient tax revenue to make the system revenue neutral with the present system.

In the end, because it is so deficient (lack of a viable tax revenue base, tax equity issues, lack of efficiency, etc.), it is extremely unlikely that any national or state government will replace its current tax system with the LVT. The LVT will remain locked up in theory where it can do no harm to society.

Sedrox · Mar 26, 2009

- Exorbitant rates of taxation required to be revenue neutral with the same system (federal, states, localities) would lead to very little land ownership.

okay. so taxing a certain action discourages that action.

which is why we should abolish all taxes on production and consumption.

- Companies would comprise the main share of private landowners, but the major landowner would be the government. Economic downturns would have a more severe impact on firms given the high fixed cost resulting from the LVT. Individuals and businesses eager to escape excessive taxation that is disconnected from cashflow (whether measured by income or consumption) would prefer to rent.

companies and individuals rushing to sell unused land would drive down prices, but after land was distributed more evenly (through market forces) it would reach equilibrium.

and what does it matter whether or not someone is renting or actually owns the land they occupy. at some point down the line that money is being paid in taxes.

- The government has done a poor job as a landlord. That responsibility is not the government's area of expertise. Maintenance of buildings, etc., would suffer from underinvestment.

hong kong already does it wonderfully.

- A land tax would be extremely regressive. The effective tax rate would be highest for low-income people and also senior citizens living on limited fixed incomes.

no. why couldn't they receive tax credits just as they do now?

- If rents reflected anything close to the land tax, it would lead to a segregated society based not on race, but on economic status.

how is this not already the case?

As capital and economic clusters are important in the overall economy, it would risk putting lower-income people into areas with lower land values (lower rents for them) where job opportunities might be more scarce (lack of development).

you're ignoring what causes varying land values. the high land values of those affluent neighborhoods is mostly due to speculation on real estate which drives up prices. if all that land was taxed, speculation would end, as it would be undesirable to not utilize or gain profit from land. developers and builders are encouraged to expand on cultivation due to the promise of high values, and they consequently leave behind the older neighborhoods decrepit and decaying.

- The land tax might discourage urban sprawl but it would incentivize upward sprawl. It would encourage the construction of sky scrapers to reduce the effective cost per square foot imposed by the land tax.

yeah. it would encourage more efficient city planning.

- High costs of land would act as a barrier to entrepreneurs who might be trying to start firms with only a small amount of capital necessary to pursue an idea. Reduced business formation would ultimately lead to reduced economic growth in the long-term.

the cost of land would drop upon immediate implementation. people who are currently sitting on unused properties would rush to sell them, causing the market for land to expand and causing prices to drop. which makes it more appealing to those who want to start new businesses.

besides these entrepreneurs are already paying the start up costs for land; they pay it to the private owners of the land they wish to utilize. only now they would pay it in taxes where the govt can inject it back into the economy.

Sedrox · Mar 26, 2009

Jerry said:
Sure, society, not the government, but society, so we agree.

I thought you said you supported a land tax. I'm sorry for misreading your post.

at the end of the day the government is the construct meant to represent the society as a whole - fighting for its interests, protecting its members, promoting its welfare. and the money the government receives in revenue is in one way or another put back into society.

donsutherland1 · Mar 26, 2009

Sedrox said:
hong kong already does it wonderfully...

if all that land was taxed, speculation would end

Several quick points:

1. Hong Kong does not rely on a LVT for all of its tax revenue.
2. Consistent with what would be expected, the arrangement under which all land is leased from Hong Kong's government has led to artificially high rents. In fact, Hong Kong has witnessed a situation where a significant number of flats remain empty even as land that has been made available by the government is not idle.
3. Hong Kong's arrangement has not prevented the appearance of destructive speculative real estate bubbles.
4. Hong Kong faces an acute housing shortage.

All in all, it is difficult to suggest that Hong Kong's arrangment works "wonderfully."

A good paper from Hong Kong University on the subject can be found at: http://sunzi1.lib.hku.hk/hkjo/view/34/3400217.pdf

Jerry · Mar 26, 2009

Sedrox said:
at the end of the day

Buzzword Bingo anyone?

Sedrox said:
at the end of the day the government is the construct meant to represent the society as a whole - fighting for its interests, protecting its members, promoting its welfare. and the money the government receives in revenue is in one way or another put back into society.

....in the form of foreign debt.

Well, looking at how well the government has handled social security, and given the historical track record of large governments across the globe to never, ever oppress their populations, I guess I have no choice but to concede the argument here.

emdash · Mar 27, 2009

Jerry said:
Buzzword Bingo anyone?

....in the form of foreign debt.

Well, looking at how well the government has handled social security, and given the historical track record of large governments across the globe to never, ever oppress their populations, I guess I have no choice but to concede the argument here.

Sedrox · Mar 27, 2009

Jerry said:
Well, looking at how well the government has handled social security, and given the historical track record of large governments across the globe to never, ever oppress their populations, I guess I have no choice but to concede the argument here.

are you arguing against my proposition or the government?

donsutherland1 · Mar 27, 2009

Sedrox,

You asked Jerry, "are you arguing against my proposition or the government"

From the commentary in this thread, it is fairly clear that he is arguing against both. Jerry opposes the LVT, as well as the kind of expanded role for government that would be present under a LVT.

Jerry acknowledges the role society plays in increasing land values, generating profits, etc. However, he distinguishes between society and government. (http://www.debatepolitics.com/economics/45813-only-efficient-form-taxation.html#post1057972386

If land appreciation, profits, or other gains result from the actions of the individuals and firms that comprise society, then those whose actions produce such benefits have first claim to those rewards. Such a framework argues for limited government. It is consistent with the principle expressed by James Madison in Federalist No. 39 that “we may define a republic to be, or at least may bestow that name on, a government which derives all its powers directly or indirectly from the great body of the people…”

Property rights are consistent with that Madisonian framework. Government ownership of the nation’s land, as opposed to private ownership, is inconsistent with that philosophy. Hence, government's taxation of land would represent a “taking.”

Another one of Jerry’s replies shows that he believes that the individual is the best means for safeguarding the welfare of society. That understanding is clear precisely because, as he explains, expansive government has led to some bad outcomes e.g., oppression of its citizens. (http://www.debatepolitics.com/economics/45813-only-efficient-form-taxation-2.html#post1057973703

ALiberalModerate · Mar 27, 2009

Progressive income taxation is a perfectly efficient form of taxation if one does away with many of the deductions and credits that encourage economically inefficient actions.

The problem with our current progressive income tax is that there is a big difference in stated rates and effective rates. The closer you can get those two together, the more efficient the tax. This is especially true on the corporate income side. We have a high stated corporate tax rates, but a low effective corporate tax rate. This results in businesses doing a lot of inefficient things just to lower their tax burden.

Harry Guerrilla · Mar 27, 2009

SouthernDemocrat said:
Progressive income taxation is a perfectly efficient form of taxation if one does away with many of the deductions and credits that encourage economically inefficient actions.

The problem with our current progressive income tax is that there is a big difference in stated rates and effective rates. The closer you can get those two together, the more efficient the tax. This is especially true on the corporate income side. We have a high stated corporate tax rates, but a low effective corporate tax rate. This results in businesses doing a lot of inefficient things just to lower their tax burden.

I think that a progressive tax should be introduced at a low level.

In my particular way I would favor:

0% tax for low wage earners with a gradual increase until you reach a maximum of 10% for people who earn roughly 50,000 or more.
That would be tied to inflation.

After that point it would continue at 10% forever up.
With that I would rid ourselves of all other forms of taxation if we were to stick to an income tax.

I don't agree with an income tax though.

Sedrox · Mar 28, 2009

You asked Jerry, "are you arguing against my proposition or the government"

From the commentary in this thread, it is fairly clear that he is arguing against both. Jerry opposes the LVT, as well as the kind of expanded role for government that would be present under a LVT.

his more recent posts have been directed at how poorly the government currently goes about spending money. that has nothing to do with my proposition.

Jerry acknowledges the role society plays in increasing land values, generating profits, etc. However, he distinguishes between society and government. (http://www.debatepolitics.com/economics/45813-only-efficient-form-taxation.html#post1057972386

mmk. but i maintain that the govt is the construct we create to represent every individual of society and society as a whole.

If land appreciation, profits, or other gains result from the actions of the individuals and firms that comprise society, then those whose actions produce such benefits have first claim to those rewards.

okay. but private ownership of land does not do that. private ownership means the profit derived from land, which is created by society as a whole, accumulates in one person's hands. the alternative would be to have the revenue from land, which is created by society as a whole, used to benefits all of society - meaning it goes to building roads, bridges, and public schools, or to funding the military, or to providing affordable healthcare, etc.

the goal of the LVT is not to necessarily establish government control of land, but rather to make access to land public. what george wanted was every man woman and child having the same opportunity to occupy and use land, as it is a necessity for life. he believed the best way to do this was to tax someone whenever they excluded another person from a piece of land.

It is consistent with the principle expressed by James Madison in Federalist No. 39 that “we may define a republic to be, or at least may bestow that name on, a government which derives all its powers directly or indirectly from the great body of the people…”

Property rights are consistent with that Madisonian framework. Government ownership of the nation’s land, as opposed to private ownership, is inconsistent with that philosophy. Hence, government's taxation of land would represent a “taking.”

you are misconstruing the intention and the desired result of land taxation - equal access to land. it has nothing to do with state control or government oppression, it has to do with eliminating restrictions on who can or cannot use land.

donsutherland1 · Mar 30, 2009

Sedrox said:
you are misconstruing the intention and the desired result of land taxation - equal access to land. it has nothing to do with state control or government oppression, it has to do with eliminating restrictions on who can or cannot use land.

Although its advocates might argue for a LVT based on egalitarian grounds, the practical reality is that such a tax system would fall far short of the idealistic principles its advocates tout. It would lead to an enlarged government role and undermine basic principles on which the U.S. republican form of government was devised e.g., those argued by such philosphers as John Locke.

First, implementation of such a tax would raise serious constitutional issues. An amendment would be required to abolish the holding of private property. For historic, economic, and policy-related reasons, such an amendment would not be likely to be adopted.

Second, even if such an amendment were required, the costs of implementation would be staggering. Absent seizure of private property, government would need to compensate landowners by paying fair market value for the land. The costs involved would be huge.

Third, far from being equitable, a LVT would be the ultimate regressive tax. The amount of the tax would have no connection whatsoever to a person's income. Indirectly, its cost would be passed on to renters. Again, without any connection to income, the tax would be extremely regressive.

Fourth, a LVT would constitute an extra cost of doing business. Under the income tax, unprofitable firms enjoy relief as they pay no income tax and enjoy loss carrybacks and carryforwards. Under a LVT, no matter how badly a firm did, it would be taxed. Such a tax would give firms a powerful incentive to relocate operations overseas. Such a development would have a profound adverse impact on employment and incomes. Ultimately, far from allowing the nation to enjoy a growing standard of living, a LVT could wind up arresting the nation's ability to improve its standard of living vis-a-vis the rest of the world.

Fifth, a LVT would create an exceptionally narrow tax base that is completely disconnected from cashflow. Whether one taxes income or consumption, such a tax base is broader and it has some relationship to cashflow. Both an income tax and consumption tax are, in general, a function of production. A LVT is not. As a result, rather than being more efficient, a LVT would create greater distortions and would be less efficient than either the current arrangement or a consumption tax.

All said, its basic and substantial defects, not to mention its constitutional issues, make it very unlikely that the U.S. will seriously consider replacing its current tax system with a LVT. Furthermore, no other country with a large and complex economy is likely to replace its tax system with a LVT.

Sedrox · Mar 30, 2009

donsutherland1 said:
First, implementation of such a tax would raise serious constitutional issues. An amendment would be required to abolish the holding of private property. For historic, economic, and policy-related reasons, such an amendment would not be likely to be adopted.

mmk. but before we determine how it would come about or how we could work towards it, we need to determine whether or not it is the best course of action.

Second, even if such an amendment were required, the costs of implementation would be staggering. Absent seizure of private property, government would need to compensate landowners by paying fair market value for the land. The costs involved would be huge.

wha, what?

Third, far from being equitable, a LVT would be the ultimate regressive tax. The amount of the tax would have no connection whatsoever to a person's income. Indirectly, its cost would be passed on to renters. Again, without any connection to income, the tax would be extremely regressive.

How is this?

Fourth, a LVT would constitute an extra cost of doing business. Under the income tax, unprofitable firms enjoy relief as they pay no income tax and enjoy loss carrybacks and carryforwards. Under a LVT, no matter how badly a firm did, it would be taxed. Such a tax would give firms a powerful incentive to relocate operations overseas. Such a development would have a profound adverse impact on employment and incomes. Ultimately, far from allowing the nation to enjoy a growing standard of living, a LVT could wind up arresting the nation's ability to improve its standard of living vis-a-vis the rest of the world.

you keep ignoring this: businesses already have to pay for land. taxing the land would just change who that payment goes to and would most likely reduce speculation which would drive down land costs.

Fifth, a LVT would create an exceptionally narrow tax base that is completely disconnected from cashflow. Whether one taxes income or consumption, such a tax base is broader and it has some relationship to cashflow. Both an income tax and consumption tax are, in general, a function of production. A LVT is not. As a result, rather than being more efficient, a LVT would create greater distortions and would be less efficient than either the current arrangement or a consumption tax.

ummm what? land isn't a factor of production? what businesses don't need land in some form in order to operate?

donsutherland1 · Mar 30, 2009

Sedrox said:
...would most likely reduce speculation which would drive down land costs.

Hong Kong, which has a modest LVT, provides some evidence that a LVT would not necessarily curb real estate speculation. In fact, Hong Kong suffered from a significant real estate bubble that popped during the Asian Financial Crisis. In real terms, Hong Kong's real estate prices rose 50% in the 1995-97 period. The decline following the onset of the Asian financial crisis was even larger, although it extended over a longer period of time.

Perhaps if a LVT were at the kind of excessive rate that would crowd out economic activity, that might be a possibility. However, in such a case, its costs would greatly exceed the benefits reduced real estate speculation.

donsutherland1 · Mar 30, 2009

Sedrox said:
How is this?

A LVT of a size necessary to be tax neutral with the current tax system would discourage ownership of real estate due to the excessive land costs. People would still have a need for housing. Hence, even as homeownership would fall, a larger share of people would rent. Landlords would seek to pass on as much of their costs as possible to renters. Lower income people would suffer most under such an arrangement as the inflated rents--inflated on account of the huge LVT--would consume a much larger share of their income than that of higher income persons.

donsutherland1 · Mar 30, 2009

Sedrox said:
ummm what? land isn't a factor of production? what businesses don't need land in some form in order to operate?

My point, to be more specific, is that a consumption or income tax is a function of productive activity. It is a function of what is produced, whether only the slice of production that is sold, that constitutes value-added, or generates income serves as the tax base.

Not every business is involved in let's say mining or agriculture or other activities that directly rely on land exploitation. In fact, those sectors constitute only a small share of the economy. Aside from imposing an additional cost on businesses from their locating offices, plants, or other facilities on land, a LVT would also increase the costs of inputs from domestic sources, as industries extracting raw materials would likely seek to pass on their new land-related costs to their customers. As a result, a LVT would put make it relatively more expensive to conduct business in the U.S. relative to other countries than it would otherwise be. A cost disadvantage would not be beneficial to U.S. competitiveness. Firms would have a strong incentive to relocate their operations abroad.

The Only Efficient Form of Taxation

Sedrox

Member

Goshin

Burned Out Ex-Mod

Jerry

donsutherland1

Sedrox

Member

Sedrox

Member

donsutherland1

Sedrox

Member

Jerry

donsutherland1

Sedrox

Member

Sedrox

Member

donsutherland1

Jerry

emdash

Old Soul

Sedrox

Member

donsutherland1

ALiberalModerate

Pragmatist

Harry Guerrilla

Sedrox

Member

donsutherland1

Sedrox

Member

donsutherland1

donsutherland1

donsutherland1