So, occasionally I come across a subset of libertarianism known as georgism, aka, geolibertarianism. These guys are an odd bunch. They often come off as the most annoyingly fanatical fanboys for their ideology I've ever come across, and I often find they are a waste of time to debate. At the same time, I don't think their views are totally invalid. So today, I'm going to be looking at this ideology, why I find it so objectionable, and where it is occasionally valid as my opinion of it isn't completely 100% negative.
What is georgism?
Georgism is an ideology based on Henry George's book "Progress and Poverty", a 19th century book describing how excessive land ownership can screw over those without land. Essentially, he's the Karl Marx of land ownership. Rather than discussing labor and the means of production, George discusses land ownership, rent, and landlords. Ultimately, his solution to these problems is to have a land value tax, which is a lot like a property tax, but rather than taxing all of property on land like a house, he supports taxing the unimproved value of the underlying land. Many georgists are so called "single taxers", meaning they believe that they believe the only tax that should exist is this massive land value tax. Some of them also support using this tax to fund a basic income, which is why I run into these guys relatively often on basic income oriented libertarian forums.
The moral justifications for this tax are vast from their perspective. Being a form of libertarianism, these guys often believe that people are entitled to the fruits of their labor and are often relatively tax shy, but at the same time, they believe that no one made land, and that it is moral to tax land to ensure everyone can get some. They believe a massive land value tax would heavily discourage speculation, encourage landlords to develop their buildings efficiently, and essentially solve the housing crisis in America by ensuring land remains available and affordable for all. They believe that the land value tax is an economically efficient tax in that it does not discourage labor or economic activity, and has few disincentives of deadweight loss attached to it.
This sounds all well and good, but is this too good to be true?
Overrated snake oil
While there are many valid applications of this ideology as a lens applied to a specific set of problems, its adherents are, shall we say, overzealous. This, being a 19th century ideology, feels a bit dated now in the 21st century, and it tends to simplify a lot. Clearly there is a lot more wrong with the economy than just land ownership, speculation, and greedy landlords. This is a problem, but it's not the only problem or even the primary problem.
But, zealots be zealots. Georgists are some of the most obnoxiously pushy and overzealous people I've had the displeasure of encountering on the internet. They're like Marxists, or right libertarians, but worse. All the world's problems can be boiled down to land ownership, and all solutions boiled down to the land value tax. I admit this is a problem, but I'm not sold on the land value tax in the way these guys want to use it.
How much money can be derived from a land value tax?
You know, in my UBI proposal I toyed with a land value tax, which I obviously shelved to fund it. First of all, land assessment is tricky, and often subjective. How much is all the land of the US worth? Well, it varies. The estimate I previously used said $14.488 trillion for all privately held land, but other estimates say as high as $23 trillion, with 21.2 trillion being privately owned. It's iffy, no one really seems to know, which is a problem in itself. I'll go with the higher number for this estimate.
Well, how much would it take to fund the full $4.4 trillion of the federal budget as it existed in 2019 before the pandemic made us spend like drunken sailors? Well, it would take a 20% tax. Not even including a UBI. What would this actually do to people? Well, the median household income is just short of $69,000, and the median home value is $281,000. Roughly 30% of a home's value is land, meaning $84,300 is land and therefore taxable. At 20% tax, this would amount to $16,860 in federal taxes, which is 24.4%. Currently the middle quintile currently pays 14%, which would be a horrible replacement of federal taxes as they exist. And while LVT advocates might claim this would reduce home values making them more affordable, the other 70% of a property value is the stuff on top of the land, so it would only reduce the value by a 3rd. Isn't the MORE expensive for the average joe? People claim this would encourage more efficient building, but let's talk about what that means, more high rise, densely packed property buildings. This sounds great for like, New York City, but for much of the country, not so much.
And don't get me going about a UBI. To fund my entire $3.6 trillion UBI, you would need a 17% land value tax, amounting to $14,300 in taxes, more than my UBI is worth for one person. This would be on top of the above budget, minus some cuts. Assuming $800 billion in cuts you would still need $2.8 trillion, which would require a 13% LVT. This would be nearly $11,000 in taxes. Admittedly, the tax burden under my income tax would be higher, around $13,800, but it varies, doesn't it? If the lower assumption is used at $14.5 trillion for land value, it's a 19% tax, which makes people pay more. And this isn't even including variability in income, which is another elephant in the room.
UBI is supposed to provide security and stability. It's supposed to give everyone a floor they can rely on no matter what. By taxing income, I tax based on what can afford to pay. But LVT taxes on assets, regardless of liquidity. That's also the secret to its "economic efficiency". Basically, the tax is there whether you work or not, and if you don't work, well, you're screwed. So you can earn all you want with no consequence, but if you choose not to, you might be in a bind. And given income varies across a person's lifetime, LVT seems like a particularly cruel way to tax. Say you're on social security. Limited income. You're old. You can't work any more. You wanna live in the home you spent the last 15-30 years paying off. Well, tough luck. Can't pay the tax? You're out on the street. While UBI offsets this somewhat, it doesn't change the fact it could be cruel to people on limited incomes who can't or won't work. Say you lost your job, well, tax still comes in, and now your safety net is paying back the tax. Or say you just choose not to. Say you worked your house off, and now you choose not to work any more. Well, you still got taxes to pay, so tough luck.
LVT is unattractive to me because it's essentially a tax on existence. We are three dimensional beings in a three dimensional space, and land is the two dimensional space we live on. Since we need to occupy space, we need to pay taxes under this scheme. Rather than UBI giving people money compensating them for being born into a system of property rights that forces them into the labor force, UBI in this case is paying people back for land ownership. And given the UBI payment will be $1100 a month, but the median LVT is like $900, that kind of eats up most of the UBI does it not? The UBI under georgist regime is not a true LVT. It's just a citizen's dividend. I tax people too, but I tax them on labor, in accordance with their ability to pay.
Here's the thing. Broken down by month, LVT amounts to the equivalent of $900 a month in rent for the typical homeowner. Meanwhile, the typical rent is is $1,100, and the median mortgage payment is $1,500. LVT is almost as much as rent. And that's not even including the fact that rent and mortgages would still exist in an LVT based society, they'd just be cheaper. Say prices dropped 30%. Okay, that's still $770 for rent and $1050 for a mortgage. You would only see rent go down if we saw everyone tear down entire neighborhoods to minimize land usage so that they would build more efficiently. Which brings us to another problem...
Implementing a full on LVT like this would be apocalyptically bad
Okay, remember the 2008 recession? What was it caused by? A HOUSING CRISIS! Basically, home values dropped dramatically, causing the entire economy to crash. What would this do? Oh, 2008 on steroids. It would implode the entire housing market overnight, causing mass disruption all over the place. People would suddenly see massive increases in taxation causing their home values to plummet. People might even be forced out of them and they would be foreclosed upon. Because the taxes are so extreme, no one would want to buy these homes, causing the values to implode. This could, theoretically reduce the tax burden when reassessed, but, you gotta keep in mind, you would be throwing millions out onto the street in the process, because the taxes are so high. We would have homeless people, and tons of homes that no one can afford to pay taxes on. At best, with the UBI, it would be a wash in a lot of cases because the UBI would refund the taxes, but at the same time, this UBI is NOT a safety net. It's just a tax refund to protect people from these insane taxes. That's the issue with georgism on UBI. UBI is secondary to their crazy tax scheme. To be fair, UBI might benefit some, if they have a middle class job, with multiple household members, but it would likely destroy the underprivileged in society just trying to get by on more limited means. This is very much a right wing pro capitalism version of UBI.
It might even destroy the housing market so hard it has the opposite effect. Last I looked, and I hate to defend banks and landlords by the way, but landlords don't make tons of profit on homes. Maybe a few hundred a month. You need to own several properties to make a living off of it. While perhaps we can argue landlords aren't an occupation that should exist on a large scale, it still doesn't change that housing is expensive. Same with banks, who typically make a 0.5-1% profit on homes. The vast majority of the costs come from supply and demand. And people still need places to live, regardless of LVT. So all this arguably does is drive up housing costs if anything, potentially making them unprofitable, and causing the system to potentially collapse.
We might a period where no one even makes homes, because considering how much it costs they might be unprofitable. Again, the argument that LVT doesn't get passed along to renters and buyers comes from the fact that George seems to assume people will just build these tall, massively dense apartment complexes to compensate. But is that really a solution? George seems to make the same mistake Marx does. In hating the bourgeoisie and their perceived laziness, he wants to make everyone workers with his labor theory of value. In this sense George is similar to this in that his solution to the problem with high rents and skyrocketing housing costs is to...make everyone renters, with the government being the landlord.
Unlike Marxism, I want to make everyone a shareholder and a member of the bourgeoisie, and UBI is basically your dividend. Ideally, I would also like to make everyone a homeowner, and make it more able to be done.
In fairness to georgism
I'm going to be honest. I admit housing market problems exist, and George is even right about them. I say this with the same conviction when I say that Marx is right when he talked about the exploitation of the working class. I mean, it's true, the system sucks, exploitation does happen, and it's unjust to some extent and should be fixed.
My main issue comes from 2 particular things.
1) Single taxers wanting ALL taxation to be LVT
2) UBI advocates who want UBI to be funded via LVT when it seems to defeat the purpose of the UBI in my opinion.
Would I support a more limited LVT? Sure. Which is why I toyed with the idea of a 1% LVT to help fund UBI. Although in all honesty though, perhaps that money would be better spent on a housing program. You tax housing slightly, then use the revenues to build more housing, alleviating supply gaps without radically changing the free market system. That might be fair.
I would support an LVT at local levels to replace property taxes, as this would actually shift tax burden toward the rich and away from the little guy.
Also, I'm going to be honest, some people just own way too much land. Perhaps land should be taxed like wealth. Where you pay a percentage of land held, but only over a certain value. That would stop people from hoarding scarce resources at the expense of others. Remember, I have nothing against normal people owning homes. My beef is with rich people hoarding stuff. And likewise with landlords. Maybe there should be a tax on land owned outside of your primary residence, or if your primary residence is over a certain value. I would be for all of these things.
Conclusion
I don't want to completely hate on georgism. I believe it has some valid concepts. I just think that its loudest proponents and defenders are quite frankly, batcrap insane. I don't believe a LVT funded UBI is the best way to go as it ignores the liquidity of individual peoples' situations and forces them into the labor market simply for having a place to live. And I think single tax LVT would be ridiculously destructive to the economy and peoples' lives. That doesn't mean some more limited form of LVT wouldn't be helpful. Georgism really is like marxism. One of those ideas that conceptually sounds great on paper, but its ideological fanboys are some of its greatest problems with it. Because they are so rigid and so extreme, they end up ruining the idea as it wouldn't work as well as they think it would in practice.
No comments:
Post a Comment