LVT advocates / geoists should be pleased that people from other disciplines are taking sufficient notice to at least do some research and write pieces like the above, even if they mostly get it wrong (it's not an easy paradigm shift for those coming to it for the first time). What it shows is that we're getting attention, finally making headway. We had Norway's Finance Minister in a G20 summit crediting Henry George for their success story wrt hydro-power and oil. We have Peter Thiel (of all people!) singing George's praises and the Georgism sub-reddit passed 10k members last year.
Some critics will be out-and-ought deniers of LVT having any merit e.g Richard Murphy (https://www.youtube.com/watch?v=BzAIpya15H0) but that's a mighty-hard position to defend therefore most, as this one, will try to sell it as 'just another tax' whilst painting advocates as naïve idealists who believe it is a panacea to all societal ills.
The problem is that such critics, from within and without the economics profession, spectacularly fail to understand how the shift in incentives by the comprehensive payment of rent on land (including natural resources) has the potential to create vast impacts on an economy. Instead, they tend to jump on weak and previously strongly-rebutted criticisms. Richard Galloway addresses a bunch of the weaknesses in this piece but those privileged enough to have known Mark Wadsworth will have been thoroughly entertained by his cutting rebuttals for so many so-called 'killer arguments against LVT'. It was a hobby of his to collect them and fortunately for posterity, he published over 400 of them on https://kaalvtn.blogspot.com/p/index.html.
I will limit my rebuttal to a response to the author's assertion that wealth comes from labour, not from "the inherent value of natural or undeveloped land" and his analogy of an uninhabited Earth. The first problem with this is he's responding to a supposed claim LVT advocates don't actually make. Whilst the land was here before us and part of its value comes from the relative natural advantages of some locations v. others, it is not only acknowledged but pointed out at length that the vast majority of land value these days is generated jointly by society (all private and public activities that increase the relative attractiveness of valued locations).The point is that a plot's value is no more created by a land owner than it is a neighbouring renter; it may be created by an owner (such as the oft-rolled-out Disneyland example) but not by virtue of being an owner.
The bigger point, however - and the author shouldn't feel bad because this is the first hurdle professional economist Richard Murphy also falls at in the video linked to above - is the claim that wealth is created by labour, not land. This displays their failure to get the basic Classical Economics model that wealth is the product of labour applied to land. Contrast Barnett's uninhabited Earth analogy with a person stood on a square foot of land in space. They can have all the labour and innovativeness they like but without land, it's worth nothing. All that we make and do of value ultimately requires applying labour to land (or depends on others doing so). Smith, Ricardo, Mill, Say and others - and of course, Henry George - got that land is a distinct and separate factor of production than labour and capital. Without grasping that basic concept and at least the beginnings of an understanding of what that implies, there's no chance in being able to make a reasoned and reasonable case for or against LVT.
From what I could gather by a quick search, Matthew Barnett is involved with Less Wrong, which at first glance, appears to have a great ethos; and he himself is producing some great work. I'll leave he and readers with the following thought:
In twenty years' time, I strongly believe if you ask a twelve-year-old how come it took so long for humanity to solve poverty, end the era of unemployment, reverse the increasing inequality of opportunity and resolve environmental sustainability, they'll say it's because we'd failed to recognise that there is a fundamental difference between land (and all that nature provides) and the things we make and do ourselves; that until we really got that and incorporated it into the core of how our economies and societies work, we were limited at best to sticking-plaster solutions.
There's a fair bit to rebut here, and I'll just quote subsection headings or pertinent sections then respond more generally- this is for brevity, not to strip away context; I have read the entire article and I am posting in good faith. Since I'm not sure of your nationality- I'm in the UK, and so to some extent my thoughts reflect the system we currently have here. So:
"An LVT discourages searching for new uses of land"
In much of the world, and certainly most of the first world, this argument is simply not relevant. For a start the vast majority of resource exploration is financed by mining and O&G companies, not private landowners, because they're the ones who are good at it. And for a second, we already have a pretty good idea of where the resources are thanks to centuries of work by geologists. Despite the fact that I'd apparently be entitled to keep much of the proceeds under the current system, I am not about to wildcat drill in the back garden of my London semi, for pretty obvious reasons.
As for the Caplan argument that "Take a real estate developer. One of his main functions is to find valuable new ways to use existing land."...what? A developer's main function is development, and to suggest that the question of what to develop makes up more than a trivial fraction of their overall workload is daft- because there are very clear market price signals to demonstrate existing demand. In the UK, most of the pent-up demand is for housing, though we also need more datacentres, laboratory space etc.
"An LVT implicitly taxes improvements to nearby land"
Yes it does, and this is a feature of LVT, not a bug. At the moment, if central government and by extension the entire taxbase of a country fund infrastructure improvements in an area, the resulting benefit of land value appreciation accrues only to the landowners in that area, which is obviously inequitable.
"This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own."
...and in reality this again almost entirely irrelevant, for the simple reason that governments very tightly regulate the uses that land can be put to. In the UK we have a system of acquiring "planning permission", other countries call it "zoning" or "permitting" I believe.
And so if the owner of, say, 1000 hectares of farmland gets permission to build housing on 100 hectares of it, the remaining 900 hectares gain no uplift in value (save possibly for a small amount based on the speculative expectation that having allowed development on one parcel of the land, the authorities might be more willing to allow more in future).
I do get of course that it is efficient, and indeed normal practice, to apply for permission for one large site and then build it out over a period of several years, but phasing in the liability for the new, higher rate of LVT that results is really not beyond the wit of man. And in the UK, developers are not currently expected to pay the full lump of their Section 106 obligations as soon as PP is granted.
"To get more quantitative, the World Bank estimated1 that about 13% of the world's total wealth comes from natural capital and urban land: the specific type of wealth that the LVT is designed to target."
Worldwide maybe, but in the UK particularly (since we're a small country), and certainly much of the rest of Europe, that is demonstrably not the case:
UK housing "wealth" is 2.6x UK GDP...and that's just housing, which constitutes something like 2% of the total land area of the UK.
Now obviously the sale value of a house is a largish multiple of its annual rental value, but even so that doesn't look like a narrow tax base to me.
"The theoretical benefit that an LVT could reduce deadweight losses is contingent on it replacing less efficient taxes that distort economic activity. However, if the LVT mostly just supplements existing taxes, its efficiency gains would be muted"
This is entirely true, but so what? Every Georgist I know argues explicitly that LVT must replace or at the very least greatly reduce existing taxes that cause deadweight losses; we are under no illusions on that point; it is central to our position. 'We shouldn't try something new because the government would only cock it up' doesn't strike me as a strong argument.
"The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%) would likely erode confidence in property rights, discouraging individuals and businesses from engaging in wealth creation and long-term investment, as they think their wealth could one day be seized, just as easily as the LVT was imposed."
Well OK, but I and I think most other Georgists are very strongly in favour of individual property rights for literally everything other than land, and we make that case when arguing for LVT. We want to see the material wealth of the world increase.
Meanwhile in the UK the government increased corporate taxes in the form of increased NI contributions just over two months ago, and that is already feeding through into sharply reduced hiring activity:
...just to contrast a *potential* negative effect of LVT with an *actual* negative effect of other taxes that is being demonstrated in real time right now.
"An LVT would massively disrupt millions of people's long-term plans"
Yes it would, if you implemented a 100% LVT overnight. It would be demonstrably unfair to someone who had bought a house and paid off their mortgage with their taxed income from working in the expectation that they could then live rent-free in it on their reduced income in retirement. So you'd have to phase LVT in gradually over a decade or two, and, notwithstanding your objections to "carve outs", you could also give some relief to people in that specific situation. But as you yourself point out, there are always winners and losers; Georgists think there would be far more winners in the long run with LVT.
It seems like you're arguing that the optimal LVT is less than 100% of the rental value. I can get onboard with that. But if we set it to 5% of the rental value then people can find productive new uses of their land and still capture 95% of the benefit. We wouldn't need a lot of exceptions and exemptions for this reason. People would have time to slowly divest of valuable land being used as a store of value but not a means of production without too much financial diruption. And land would continue to be an asset, like housing, that's taxed but not to the point of confiscation.
LVT advocates / geoists should be pleased that people from other disciplines are taking sufficient notice to at least do some research and write pieces like the above, even if they mostly get it wrong (it's not an easy paradigm shift for those coming to it for the first time). What it shows is that we're getting attention, finally making headway. We had Norway's Finance Minister in a G20 summit crediting Henry George for their success story wrt hydro-power and oil. We have Peter Thiel (of all people!) singing George's praises and the Georgism sub-reddit passed 10k members last year.
Some critics will be out-and-ought deniers of LVT having any merit e.g Richard Murphy (https://www.youtube.com/watch?v=BzAIpya15H0) but that's a mighty-hard position to defend therefore most, as this one, will try to sell it as 'just another tax' whilst painting advocates as naïve idealists who believe it is a panacea to all societal ills.
The problem is that such critics, from within and without the economics profession, spectacularly fail to understand how the shift in incentives by the comprehensive payment of rent on land (including natural resources) has the potential to create vast impacts on an economy. Instead, they tend to jump on weak and previously strongly-rebutted criticisms. Richard Galloway addresses a bunch of the weaknesses in this piece but those privileged enough to have known Mark Wadsworth will have been thoroughly entertained by his cutting rebuttals for so many so-called 'killer arguments against LVT'. It was a hobby of his to collect them and fortunately for posterity, he published over 400 of them on https://kaalvtn.blogspot.com/p/index.html.
I will limit my rebuttal to a response to the author's assertion that wealth comes from labour, not from "the inherent value of natural or undeveloped land" and his analogy of an uninhabited Earth. The first problem with this is he's responding to a supposed claim LVT advocates don't actually make. Whilst the land was here before us and part of its value comes from the relative natural advantages of some locations v. others, it is not only acknowledged but pointed out at length that the vast majority of land value these days is generated jointly by society (all private and public activities that increase the relative attractiveness of valued locations).The point is that a plot's value is no more created by a land owner than it is a neighbouring renter; it may be created by an owner (such as the oft-rolled-out Disneyland example) but not by virtue of being an owner.
The bigger point, however - and the author shouldn't feel bad because this is the first hurdle professional economist Richard Murphy also falls at in the video linked to above - is the claim that wealth is created by labour, not land. This displays their failure to get the basic Classical Economics model that wealth is the product of labour applied to land. Contrast Barnett's uninhabited Earth analogy with a person stood on a square foot of land in space. They can have all the labour and innovativeness they like but without land, it's worth nothing. All that we make and do of value ultimately requires applying labour to land (or depends on others doing so). Smith, Ricardo, Mill, Say and others - and of course, Henry George - got that land is a distinct and separate factor of production than labour and capital. Without grasping that basic concept and at least the beginnings of an understanding of what that implies, there's no chance in being able to make a reasoned and reasonable case for or against LVT.
From what I could gather by a quick search, Matthew Barnett is involved with Less Wrong, which at first glance, appears to have a great ethos; and he himself is producing some great work. I'll leave he and readers with the following thought:
In twenty years' time, I strongly believe if you ask a twelve-year-old how come it took so long for humanity to solve poverty, end the era of unemployment, reverse the increasing inequality of opportunity and resolve environmental sustainability, they'll say it's because we'd failed to recognise that there is a fundamental difference between land (and all that nature provides) and the things we make and do ourselves; that until we really got that and incorporated it into the core of how our economies and societies work, we were limited at best to sticking-plaster solutions.
There's a fair bit to rebut here, and I'll just quote subsection headings or pertinent sections then respond more generally- this is for brevity, not to strip away context; I have read the entire article and I am posting in good faith. Since I'm not sure of your nationality- I'm in the UK, and so to some extent my thoughts reflect the system we currently have here. So:
"An LVT discourages searching for new uses of land"
In much of the world, and certainly most of the first world, this argument is simply not relevant. For a start the vast majority of resource exploration is financed by mining and O&G companies, not private landowners, because they're the ones who are good at it. And for a second, we already have a pretty good idea of where the resources are thanks to centuries of work by geologists. Despite the fact that I'd apparently be entitled to keep much of the proceeds under the current system, I am not about to wildcat drill in the back garden of my London semi, for pretty obvious reasons.
As for the Caplan argument that "Take a real estate developer. One of his main functions is to find valuable new ways to use existing land."...what? A developer's main function is development, and to suggest that the question of what to develop makes up more than a trivial fraction of their overall workload is daft- because there are very clear market price signals to demonstrate existing demand. In the UK, most of the pent-up demand is for housing, though we also need more datacentres, laboratory space etc.
"An LVT implicitly taxes improvements to nearby land"
Yes it does, and this is a feature of LVT, not a bug. At the moment, if central government and by extension the entire taxbase of a country fund infrastructure improvements in an area, the resulting benefit of land value appreciation accrues only to the landowners in that area, which is obviously inequitable.
"This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own."
...and in reality this again almost entirely irrelevant, for the simple reason that governments very tightly regulate the uses that land can be put to. In the UK we have a system of acquiring "planning permission", other countries call it "zoning" or "permitting" I believe.
And so if the owner of, say, 1000 hectares of farmland gets permission to build housing on 100 hectares of it, the remaining 900 hectares gain no uplift in value (save possibly for a small amount based on the speculative expectation that having allowed development on one parcel of the land, the authorities might be more willing to allow more in future).
I do get of course that it is efficient, and indeed normal practice, to apply for permission for one large site and then build it out over a period of several years, but phasing in the liability for the new, higher rate of LVT that results is really not beyond the wit of man. And in the UK, developers are not currently expected to pay the full lump of their Section 106 obligations as soon as PP is granted.
"To get more quantitative, the World Bank estimated1 that about 13% of the world's total wealth comes from natural capital and urban land: the specific type of wealth that the LVT is designed to target."
Worldwide maybe, but in the UK particularly (since we're a small country), and certainly much of the rest of Europe, that is demonstrably not the case:
https://www.ftadviser.com/property/2024/02/27/value-of-housing-stock-hits-8-6trn/
UK housing "wealth" is 2.6x UK GDP...and that's just housing, which constitutes something like 2% of the total land area of the UK.
Now obviously the sale value of a house is a largish multiple of its annual rental value, but even so that doesn't look like a narrow tax base to me.
"The theoretical benefit that an LVT could reduce deadweight losses is contingent on it replacing less efficient taxes that distort economic activity. However, if the LVT mostly just supplements existing taxes, its efficiency gains would be muted"
This is entirely true, but so what? Every Georgist I know argues explicitly that LVT must replace or at the very least greatly reduce existing taxes that cause deadweight losses; we are under no illusions on that point; it is central to our position. 'We shouldn't try something new because the government would only cock it up' doesn't strike me as a strong argument.
"The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%) would likely erode confidence in property rights, discouraging individuals and businesses from engaging in wealth creation and long-term investment, as they think their wealth could one day be seized, just as easily as the LVT was imposed."
Well OK, but I and I think most other Georgists are very strongly in favour of individual property rights for literally everything other than land, and we make that case when arguing for LVT. We want to see the material wealth of the world increase.
Meanwhile in the UK the government increased corporate taxes in the form of increased NI contributions just over two months ago, and that is already feeding through into sharply reduced hiring activity:
https://www.theguardian.com/business/2024/dec/16/uk-businesses-cut-staff-budget-national-insurance-pmi-survey
...just to contrast a *potential* negative effect of LVT with an *actual* negative effect of other taxes that is being demonstrated in real time right now.
"An LVT would massively disrupt millions of people's long-term plans"
Yes it would, if you implemented a 100% LVT overnight. It would be demonstrably unfair to someone who had bought a house and paid off their mortgage with their taxed income from working in the expectation that they could then live rent-free in it on their reduced income in retirement. So you'd have to phase LVT in gradually over a decade or two, and, notwithstanding your objections to "carve outs", you could also give some relief to people in that specific situation. But as you yourself point out, there are always winners and losers; Georgists think there would be far more winners in the long run with LVT.
It seems like you're arguing that the optimal LVT is less than 100% of the rental value. I can get onboard with that. But if we set it to 5% of the rental value then people can find productive new uses of their land and still capture 95% of the benefit. We wouldn't need a lot of exceptions and exemptions for this reason. People would have time to slowly divest of valuable land being used as a store of value but not a means of production without too much financial diruption. And land would continue to be an asset, like housing, that's taxed but not to the point of confiscation.