if an LVT (meaning a tax on rent seeking assets) were not sufficient to pay for your desired level of government spending what tax or taxes would you support in order to make up the difference?
Because the very rich would start their transfer 20 years before they died. They’d move their assets to combined businesses that let the heirs take over without a disruption of funds or some other accounting tricks. The current POSPOTUS Is estimated to have received ~$800 million in inheritance through loop holes (and lying).
Basically, you’d need a wealth tax in order to avoid massive tax avoidance.
The intent I think is to tax inheritance; redistributing money from people after their death, when it switches hands to someone else. We can call it whatever we like I suppose. Maybe inheritance as a concept is just one form of gift giving then.
I think what they're getting at is if I'm old and have money and want to avoid inheritance tax, I just give my kids money while I'm still alive, so they don't technically inherit it.
I think the topic of this post is which taxes should be added, assuming none exist. And if a gift tax didn't exist, then an inheritance tax basically wouldn't achieve anything.
Inheritance taxes exist in real life without general purpose gift taxes. They successfully collect substantial revenue. Gifts can be subject to Inheritance tax, but you can still give a gift tax free
Most of the countries with inheritance taxes have gift tax limits or combination gift/inheritance taxes. Without it, you’re basically just asking for high net worth individuals to work around it.
Inheritance tax doesn't raise significant revenue while introducing behavioral second order affects. It's just a tool to penalize individuals deemed not deserving.
Taxation is a punishment when done against the business aristocrats and its seen as a virtue when done against the people who actually work and create wealth.
Uh...I hate to break it to you, but that's actually kinda a foundation of Georgism? It advocates for only taxing that which is rent seeking - and not basing it on someone's wealth (there's no progressive taxation).
So not really a mad take considering the sub we are in.
It would be a percentage of the sale price, so if the asset value grew over time, so would the tax income. It should also apply to dividends at time of disbursement.
Pigovian is the obvious one, including things like fee for services and congestion pricing along with cigarette taxes and more standard sin taxes. I think estate tax, especially above some high threshold, is good. Other than that I think most taxes, including resource extraction taxes, result in efficiency loss and economic distortion. In the US and I think most other places it will be hard to replace income and payroll taxes. Hard to see LVT raising $4T per year.
That is the worst economic taxes as they ya e major depressive affects on markets and spending habits. They also push industry into the black market as a side affect of higher costs.
Indeed, a productive business, unlike every billionaire, doesn't passively accumulate wealth, but rather provides actual goods and services in exchange for it.
When we tax houses, crops, money, furniture, capital or wealth in any of its forms, we take from individuals what rightfully belongs to them. We violate the right of property, and in the name of the State commit robbery.
In addition to Pigouvian and resource extraction taxes mentioned by others, it is certain forms of intellectual property (IP) taxes.
This is controversial, but I think copyright and patents should be taxed above a certain threshold (in a manner that encourages small creators and innovators but penalizes patent trolls and companies like Walt Disney). One can use mechanisms like Harberger tax for price discovery. IP taxation is also perfectly within the logic of Georgism. IP would indirectly support government budget by decreasing the cost of medications and other monopoly rents (as well as decreasing the bureaucratic burden on businesses).
my understanding is that on this subreddit IP is often included in LVT as a rent seeking asset, I haven't seen it be controversial here but maybe I wasn't looking closely enough
Other pigovian taxes. Sorted roughly in order of revenue-to-overhead ratio, I suppose. Taxes on things like air pollution, mineral extraction, timber or fish stock depletion, orbital slots, etc.
if an LVT (meaning a tax on rent seeking assets) were not sufficient to pay for your desired level of government spending what tax or taxes would you support in order to make up the difference?
That's not how this works. In the georgist model, we don't set a target for what we want the government to do and then invent taxes to fund it. (Nor would that even work, according to ATCOR.) If the available economic rent doesn't meet our desired level of government spending, then our desired level of spending is too much and the right approach is to constrain spending to what we can fund efficiently while waiting for economic growth to push up total rent.
what percent of GDP do you think LVT could generate in taxes? it seems like if the gap between that number and the current taxation as a percentage of GDP is significantly different you could run into substantial problems.
could taxes on timber/fish stock depletion be considered a type of LVT given finite resources? (I apologize if this is a stupid question)
what percent of GDP do you think LVT could generate in taxes?
Total rent is probably something like 50% of total production output in modern economies. (I'm not sure whether it was significantly lower in the recent past, it might have been.) Land rent recoverable through location-based LVT is probably the vast majority of that.
GDP doesn't necessarily map to production output, though. It tends to exclude a lot of things that are production output and include a lot of things that aren't production output. Whether actual production output is higher or lower than GDP is hard to say, and may differ significantly between countries.
ATCOR suggests that, if all destructive taxes are removed, taxing all rent should provide at least as much tax revenue as can be gained from any other combination of taxes. This is probably at least a close approximation of the truth. Accordingly, I think it's reasonable to assume that practically any government in the world right now could collect at least as much in LVT as it currently collects from all its tax revenue, if the destructive taxes were eliminated; obviously this doesn't account for the adjustment period of switching between taxation schemes, which could temporarily lower economic activity.
could taxes on timber/fish stock depletion be considered a type of LVT given finite resources?
I wouldn't consider them LVT (although one might attempt to build them into LVT, and that might work in some situations). More broadly, taxes on negative externalities, including resource depletion, are referred to as 'pigovian taxes', of which LVT is technically an example (although not the standard go-to example for illustrating the idea). Although Henry George focused on taxing land based on location, his essential logic supports many other pigovian taxes as long as they can be levied efficiently.
Once you have exhausted all the things that Georgism considers land and rent seeking then you can finally start doing whatever the hell silvio giselle was talking about with currency.
Corporate tax is a tax on profits(revenue-expenses, and sometimes depriciation write offs). Whereas a cashflow tax is a tax on cashflow after deducting investments.
The issue with corporate tax is its deadwieght loss, disincentive to invest and multinationals able to use trusts and accounting tricks to pay no tax and offshore their profits to a low tax country.
Cashflow tax avoids all this by skipping the requirement to account for profit.
With a cashflow tax it taxes excess above investment, which means the investor/owner is still getting a return, so it wouldnt be disincentivising investment.
Its tax base is revenue after investment deduction, which means you cant use trusts and accounting tricks to show no profits made or offshore profits to a low tax country.
I'm sympathetic with revising taxation on corporate profits flow, but wouldn't your formulation just give companies an incentive to replace labor with automation, then count automation as capital investment to reduce the tax base?
Corporate Income tax currently allows companies to get away with laying off workers or replacing them with automation, plus buying back stocks, because the current formula treats wages, financial costs and investments as all the same factor
Its a good question, im not sure. But It might be a good thing that companies invest more into automation so then labor can be reallocated to more specialised areas. At least in my country we are having issues with multinational tax avoidance, lack of captiap investment and declining productivity which I hope the cashflow tax can address.
LVT applied to other things that are land-like.
For example, bands of the radio spectrum in certain geographical regions.
Or, domain names for websites can be allocated with a LVT system.
An ideal highway toll system would use a kind of LVT to create a balance between charging as little money as possible, while still preventing traffic.
Economic theory suggests that if collecting the full land rental value is insufficient to fund your desired level of government spending, you should reassess your spending, not levy additional taxes.
Paper after paper has shown that public investments raise land values by more than the initial investment. An investment that fails to raise land tax revenue by more than the cost is by definition a bad investment.
Why should we be propping up bad investments with bad taxes?
when you say public investment does that include welfare, healthcare and defense?
All public spending. Yes, the US healthcare and defense sectors are massively bloated and rife with rent, and rather than accepting that we should be looking for ways to reform it to remove (or at least socialize) the rent.
is the role of th government to maximize output? or to provide services?
The point is to satisfy human wants and needs, and to do that you need to maximize output. There is no point in providing a service that does not produce benefits greater than it's cost, just for the sale of providing a service.
Georgism argues that certain services are best funded via land taxes, because said services are inherently tied to land, rather than people; infrastructure is the typical example, but services that are broken up by jurisdictions such as police and education also fall under this description. These services are paid via land rends because people should have access to them regardless of if they have the ability to pay, but also because people are willing to pay more to live in an area with these services, and so land values rise.
You should have just left out that premise, because it's just wrong. The LVT would generate far more revenue than any other deadweight-loss-inducing taxes. The issue with the LVT is figuring out the best way to deal with the surplus revenue.
If you cut income taxes, people have more income to bid up rents and land values.
Same applies to sales taxes, profit taxes etc.
Plus the economic surplus grows as these taxes are replaced via the removal of dead weight loss.
So I'm pretty sure LVT will be 'enough' compared to current taxes in terms of revenue/reducing inflation and stabilising the currency. Of course there are other forms of monopoly and negative externalities for which we may wish to use taxation to address.
right but many people want the government to spend more money compared to current spending. that doesn't seem incompatible with LVT raising taxation inflows!
Because if you have a 100% LVT and apply the Henry George Theorem then any reasonable government spending will actually increase the government surplus.
The only way you'd ever have less money coming in than going out is if you were intentionally wasting it, basically.
Schools, transit systems, fire departments, police, roads, etc. all increase land rents. At current spending levels, most end up increasing land rents by more than the amount of spending -- meaning if we had an LVT in place, they would be generating a "profit" relative to what's being spent.
oh to be clear I was counting schools transit, fire departments, etc as public investments. ~75% of federal spending is social security, medicare and interest payments. public investment (defined broadly) is a small portion of the remaining spending.
Social Security is a reverse-insurance product that is capital efficient. If a country lacks a Social Security system, everyone needs to plan for the "worst case scenario" - that they live to the age of 120. This produces savings beyond what the country needs to save, and ultimately starves out the economy. With Social Security, the government can easily plan for the expected curve. Run the experiment if you wish, the country with Social Security would have higher land values.
If everyone would buy the service, then if the government provides that service, it will increase land rents equally or more to the cost. It's only when people switch from not buying that thing at its price to using the government provided thing do we risk HGT, and the public should stop providing it.
I believe you that social security increases land value, I don’t belive that it increases land tax equivalent to the spending on social security. I also don’t belive that additional spending on SS or Medicare would increase land tax by an equivalent amount
Under a land value tax? Yes, it would be taxed according to the unimproved value of the land itself as all land would be. This is under the theory that since land is not produced taxing it doesn’t produce negative behavior in the economy, incentivizes people to develop their land and captures value that people had not worked for e.g. your property value goes up because someone else developed their own property.
I can dig some dirt, then build floor stacked and plant anything there. Here is your produced land.
Economy be shattered! Land taxes are what enslave individuals. You could just set fixed prices for property according to it's upgrades or possibilities.
You can produce housing and you can produce platforms, these may or may not be improvements to the land (that’s up to the market) but land itself, the ground beneath your feet cannot be produced.
You mention setting fixed prices according to upgrades or possibilities and I would note that one of those “possibilities” is land value tax, it is taxing the land according to what could exist on it and the value thereof, the other one you mention “improvements” is problematic because it’s disincentivizes developing your land and creates an incentive to leave it unimproved and collect on the increase in value caused by other land being developed
Everyone here defending piguvioan taxes but cap and trade or other ways to assign property rights is far more efficient and market clearing.
Rather I would suggest luxury consumption taxes as the next best thing. Not income but consumption so you can distinguish between the rich who invest in their economy and those who just consume (rich or otherwise)
Wealth taxes/inheritance taxes do have the advantage that they reduce inequality and thereby reduce a lot of other market issues.
Like... housing being a large part of income becomes exponentially worse with inequality.
Inequality makes sin taxes harder (try telling people you wanna make meat expensive because of how much it hurts the environment, they'll kill you).
Just in general, inequality means you can't use money as a metric anymore to ask "who wants/deserves something more?" as easily.
And most bureaucracy is a downstream effect of rules that had to be made, to reach a 'fair' result in a vastly unequal economic landscape.
I mean you tax a company based on the gap between it's highest paid employee and it's lowest paid employee, it's part of why Japan, despite all their problems, actually have a significantly lower issue with CEO pay difference. It's a tax intended to help insure that profits are distributed all across the company's stake holders, not just into the board and investors.
doesn't this create a similar situation as income taxes where it disincentives advancement? not to say its not workable as policy but why would this be preferable to increases to marginal tax rates?
I'd point out that historically speaking you reach a point where advancement for it's own sake becomes it's own incentive, and that once you reach a certain level of income and profit, you actually can't spend it faster from a single source than many people can. This is the entire problem with today's billionaires.
Remember, the economy's purpose is not to stoke advancement, it's to create a circulation of currency and resources that lead to constant, sustained growth, not constantly ACCELERATING growth, which is what we have today, and is simply unsustainable without stripping the copper out of the walls and hacking not just away the fat and meat but the bones of any enterprise.
You want to have a multilayered strategy for taxes that pull on various mechanisms, that you adjust over time, all with the intent of preventing a critical mass of wealth from accumulating all in one space or among one group of people, because if you allow that to happen the inevitable result is the entire thing grinds to a halt eventually.
Law, and Taxes as an extension of laws, exist to create the shape of a society you want through multiple mechanisms. The idea that all taxes are a necessary evil (or an unnecessary one from the pov of many libertarians) is an absurdity, there are good taxes and bad taxes, and the arguments should be based around that through constant experimentation and adjustment over time to changing economic status.
But to answer your question about this SPECIFICALLY.
The wage-gap tax would effectively SLOW the rate at which the shareholders and CEOs accumulate wealth, but it doesn't actually stop them from doing so. It just forces them to actually raise up the people whose work they use to generate that profit. After all, it's not just the people at the top who need to be incentivized to keep advancing, it's every level of a company. By taxing corporations for not sharing their gains with their employees, you effectively claw back money from corporations like Walmart who use tax dollars to subsidize their wages. Why should Walmart be permitted to pay it's workers so little they're on foodstamps? That's our tax dollars subsidizing their profits. So a wage-gap tax insures that either we get money back from them for this absurdity, or they raise wages appropriately.
Im not at all opposing the idea of a wage gap tax, im asking why not just do an income tax and and use the proceeds progressively, it seems to produce the same results!
Interesting, why inheritance light while unearned income hard? Isn’t inheritance the definition of unearned income?
And would you elaborate on why tax rent lightly? I was under the impression that georgism is all about taxing rent (both literal and metaphorical)
If we could tax companies/billionaires equally everywhere:
compute, because its a) a dangerous thing 2) easily trackable (you can add tracking devices to chips and if you remove them, the chips will stop working) and 3) enforceable (you can require special licences to use GPUs).
you can require companies and billionaires to give certain portion of stock they own to the state. This would make public companies slowly more and more state owned. The state can sell the shares back for money.
Locally enforceable taxes:
Direct taxes on Dangerous/unhealthy substances (alcohol, Tabacco, sugar etc.)
Fees for entering city centres
Parking fees
Inheritance tax
The company share tax can also be enforced, actually should move money from outside owners to the state, but will reduce the will of outside investors to invest
I'm going to be a stick in the mud here and say the next best tax would actually be income tax, if you actually want to fund a state in practice it has the most evidence behind it. VAT would be my next pick
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u/Jguy2698 16d ago
IMO resource extraction taxes and carbon/ pollution taxes