Foundational Principles and Derivatives
We set out with some basic principles on what to tax or subsidize. https://medium.com/@ClayShentrup/what-to-tax-or-subsidize-42cd7dc5c726
Felix Sargent Thu 2 Nov 2017 7:32PM
You'd think - but Rent has an explicit definition in economics: https://en.wikipedia.org/wiki/Economic_rent
"The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give." -- Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter XI "Of the Rent of Land"
https://en.wikipedia.org/wiki/Law_of_rent
By definition, rent is far above the normal profit required to create a modest incentive for a person to have a place available to live.
Regarding Land Vs Improved Value: If I improve the land, I'm creating wealth by putting in time and money. This is a good and wholesome economic activity, and shouldn't be taxed anymore then sales or wages should be taxed. If I take a swamp and turn it into a useful highrise or factory I shouldn't be taxed more because I improved it more. I should only be taxed when I take something useful and make it useless.
Remember before how we computed that taxes on land wouldn't create dead weight loss? That's exactly because taxes on land won't reduce supply. If I've got one place to rent out, just because I'm taxed doesn't mean I won't rent it. I still want it to be on the market making money - it's just making less now. And I may even say that it's time to improve the property, putting more units on to the land, increasing the supply. A land value tax increases supply in the long run, not to mention the other economic efficiencies when other taxes are reduced.
Assessing unimproved land values is easy. It's called assessment. https://en.wikipedia.org/wiki/Real_estate_appraisal It's been done for ages and doesn't need to change to have an accurate valuation for tax purposes.
Clay Shentrup · Thu 2 Nov 2017 5:40AM
I don't see how rent can be immoral. The incentive to be able to profit from rent is what creates housing in the first place.
I'm not convinced about the land vs. "improved value" argument. The point is just to tax wealth, so taxing the whole package is fine. I guess the counterargument is then you're reducing the incentive for housing supply. But trying assess the unimproved value is a fool's errand I think.