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this post was submitted on 03 Oct 2023
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We could achieve the same thing by just jacking up taxes until the land is worth almost nothing (and everyone is essentially just renting land from the government at prices the government sets based on desirability of that area)
All the profit from simply holding land disappears from the market, and all that money instead of going to private pockets now goes to government coffers. The amount would likely be high enough we could get rid of income taxes almost completely (which makes working a more lucrative choice for people)
It's not politically feasible until home ownership rates drop more significantly though, it would hurt far too many voters right now to pass.
Why would the landowners sacrifice profit for the workers?
Let's say, for the sake of discussion, a parcel of land generates $1,000,000 in revenue. Assume $500,000 is kept by the landowner as profit and $500,000 is distributed as wages to the workers who utilized the land to produce value. You proposed a plan to see property taxes rise to claw the $500,000 away from the landowner and into government coffers. That leaves the $500,000 that was previously paid out to workers.
Why wouldn't the landowner then, say, keep $250,000 of the remaining $500,000 as profit and squeeze the workers into accepting only $250,000 in aggregate wages, leaving the workers in a much less lucrative position, even if that income is tax free?
You don't tax land based on how much revenue it generates, you tax it based on its value.
Those aren't even close to similar things, which makes your example completely useless since that's not how any of this works.
The goal is for the land owner to not make any profit off the land going up in value over time. They can still make money other ways (like running a company)
It's the appreciation that needs to go away, otherwise all you have is the current pyramid scheme.
No, they are quite related. Take a closer look and you will see that the value of the land is some multiple of its income generating potential.
Over the past decade or so ~2% was were land generally landed. In other words, if a property could generate $1,000,000 in profit in a year, the land would be worth $50,000,000.
That's still largely the case, but I expect you will see that start to change as we keep moving forward. There is a lot of stickiness in real estate, but now that you can get 5% just by leaving your money in the bank, it's a tough pill to see only 2% from your land investments. These will eventually start to converge.
As long as we can produce more and more value from land, the equation from above will see appreciation happen. The last decade or two have been quite notable for changes in productivity and profitability, including the tech boom, and the US changing their agricultural programs which, in turn, made farming more profitable in Canada.
You can tax the land to death such that the activities on the land can no longer grow, and thus appreciation of the land will halt, but that also impacts the workers. Land is the foundation for all work activity. The land is what produces the revenue, from which the workers take a cut. You cannot treat them as if they are independent things.
The greater question is: How likely are we to see such a big change in how profitable businesses can be again any time soon? I expect that situation was a bit of an outlier, not something we can expect every single decade going forward. Historically, such shifts have been rare.
My home generates 0 revenue, and still has tremendous value. Even when it is being used commercially the value of that land varies dramatically based on what type of commercial activity is possible there. Farms and tree harvesting land can be purchased as low as a few thousand dollars an acre.
So no, they aren't the same thing at all.
If there's a business that sells hot dogs, and it makes more money off the land appreciation than the selling of the food, then it's not a hot dog business, it's a real estate business. If it undercuts it's competitors simply because it can charge less by outright owning the land it operates on and having paid less for that land because it bought it a while ago, that's anti-competitive.
Simply put, nobody should be making money on real estate appreciation. If you want to make a profit, make it selling hot dogs. Real estate appreciation adds nothing of value to the economy, preparing and selling hot dogs does.
What mechanism do you propose to determine the value of land? Based on what criteria?
The same criteria we currently use, since we already value land in our property assessments.
Maybe some tweaks here and there to better account for various new factors, but this is a solved problem.
I mean, that is effectively what's happening to workers now, in a sense - worker wages have stagnated to the point that they are receiving much less of a share of overall profit than they were in the 70s and 80s, while executive compensation has skyrocketed.
The reason executives can't do what you're suggesting is because workers are already just scraping by. The wages as they are now are unlivable, if they're reduced any more, people will walk off in droves. I suspect if by some miracle it passed through both houses and the executive desk without a billionaire yanking it, and land were taxed to hell and back, they'd probably just eat it because it would still be more profitable than letting it sit fallow.