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Apparently the UK's entire net worth was £10.7 trillions in 2020 according to the ONS, their chief statistic agency. What's remarkable is that a whopping 60% of that is "non-produced, non-financial assets".
That's a fancy way of saying land. Why isn't this fact more well known? Should we expect it to be different for other countries? And why aren't more people talking about Georgism?
I don't have a strong opinion about Georgism, but my one area of confusion is that there are ways to live a decadent life without owning a lot of land. In the extreme, a very wealthy person could buy a nine-figure yacht and basically live on it, enjoying a life of luxury beyond avarice without owning a single square foot of land, and hence I suppose without paying any tax. Short of that, an upper middle class person could live in a small but luxurious house and spend lavishly on staff, deliveries, elaborate vacations, etc., and be taxed like his middle class neighbors. Is it a goal of Georgism to encourage that sort of land-lean lifestyle? If so -- why? And if not, how much dead weight loss does it cause to distort people's consumption in that manner?
The explicit goal of Georgism is to encourage productive use of land, and prevent idle land speculation (I.e. someone owning a second property they live in 10% of the year, or holding a vacant lot because they think the price will go up.)
I think this is highly unlikely, unless you go for the idea of 100% LVT and getting rid of all other taxes, which some Georgists believe but to me seems an extreme position.
Wikipedia makes it sound like that is the definition of Georgism: "Georgism, also called in modern times Geoism,[2] and known historically as the single tax movement, is an economic ideology holding that, although people should own the value they produce themselves, the economic rent derived from land—including from all natural resources, the commons, and urban locations—should belong equally to all members of society."
But agree that these discussions are best on the margins, i.e. would we be better off shifting some of our tax incidence from income to land.
Isn't that already the incentive? If you own a giant lot of land that you plan to hold for 50 years for speculative purposes, you already have an incentive to lease it to developers to build houses or commercial real estate and rent it out for those fifty years. On what basis do we believe that those incentives are too low? Will we be made better off as a society if the rich guy who currently lives on 5 acres in Atherton with one housekeeper moves into a 1-acre lot in Redwood City but has a staff of ten people? Is there a reason we should want to encourage people to divert consumption from residential lot size to goods and services?
I acknowledge, by the way, that income tax is also distortive. I think the argument needs to be in the form that a tax on acreage is less distortive than income tax, on the margin. I don't think it's totally implausible, but I'm not familiar with an argument along those lines.
As with any ideologically label, there will be changes and dissent within the ranks. Wikipedia is also not the most accurate source when it comes to these social movements.
I would say most self-proclaimed Georgists I have talked to seem to think that:
LVT is a great way to tax things and is hard to avoid - we should have a relatively large one
Housing/Land markets are fundamentally broken and unfair, something should be done to change that
I don't speak for Georgism as a whole of course, but similar to any -ism there is a large umbrella that it covers.
If you are in a market where the land value is going up, you do not have an incentive to build on it, you have an incentive to hold it. What if you build something on the land and can't recoup your investment? Also, which is easier - holding land to sell it for a profit later, or trying to make use of the land?
I believe those incentives are too low by the fact that land speculation exists in the first place, I think it should be extremely rare and/or nonexistant for someone to sit on a vacant lot. I also think that people owning property they almost never use or rent out is a huge waste of resources and opportunities. (I.e. the lakehouse that gets used twice a year.)
I don't really follow the argument you're making here. Also in terms of diverting consumption from residential lot size to goods and services, Georgism is actually widely believed to encourage high density housing, as renting property units is usually one of the most profitable things you can do with land. With regards to goods and services, yes I think we should incentivize there to be less 'empty' parking lots and roads, and more land directly used for exchanging goods and services.
Land value tax is largely believed to be the only tax that doesn't suffer from deadweight loss, or in other words it does not reduce economic activity. This is because deadweight cost comes from the difference between production price and sale price, and land has no production price.
Also, another major benefit is that land value taxes are extremely difficult to avoid in practice, unlike income tax.
Every year that the land sits idle imposes the opportunity cost of the rent you could have charged by leasing it out. If you think the value of land is going to go up, then if anything that reduces your worry that you may not recoup your costs of developing the land, because higher land value implies higher demand, which implies that you'll be able to rent it once it's developed.
In areas with high land values, this is pretty rare. Apartments rent quickly, houses sell quickly, and vacancy rates are low. Undeveloped lots get developed quickly, because each month they sit undeveloped carries a high opportunity cost in the form of lost rent.
Rents will have to rise too, though, since in a competitive housing market all of the incidence of the land tax will fall on the renter in the form of higher rents. I'm not sure why Georgism would result in more renting. The distortion seems to be in the direction of less land usage. I agree that it's likely to result in densification, at least in high demand areas. In low demand areas, it may just result in more abandoned lots.
Deadweight loss comes from any distortion of behavior from its efficient allocation. For example, some companies are well suited to have a remote workforce, and others are well suited to have employees gather in person. Raising taxes on land will encourage those in the latter camp to try to force themselves into the former camp, which will make those companies less effective. We'd probably end up with a lot fewer restaurants, since they are famously low margin businesses where a big proportion of the cost is in their real estate, and raising their menu prices will result in people dining out less. Do we want fewer restaurants? I don't know why we would, but that's a distortion that Georgism would create.
They're easy to avoid in practice if you're able to shift your consumption away from land and toward goods and services.
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