Would a Georgian Land Value Tax harm conservation?

[🐒Gods of Prosperity🔱🐲💸]

Would a Georgian Land Value Tax harm conservation and limit the presence of green space?

It seems to me that it very well could, if I am understanding it right, at least if it is a major source of tax revenue.  Since the tax is on the value of unimproved land, it would mean that a green space, or a wetlands or other natural habitat, would be taxed just as much as an industrial park in the same place.   So there is just that much more incentive for a landowner to convert the space to economically productive uses. Indeed, it may even be necessary in order for the landowner to pay the tax.

[Antonio the Sixth]

Yeah, I've never got the love for Georgism on this forum and other weird segments of the internet.

Modern taxation should very obviously be primarily based on income.

[muon2]

I thought that the Georgist Land Tax was a mechanism still talked about by conservationists who wanted create disincentives to urban sprawl. I presumed that by only taxing unimproved land it was more economical to build more densely on land that is privately owned and leave the rest for the public sector.

[🐒Gods of Prosperity🔱🐲💸]

I thought that the Georgist Land Tax was a mechanism still talked about by conservationists who wanted create disincentives to urban sprawl. I presumed that by only taxing unimproved land it was more economical to build more densely on land that is privately owned and leave the rest for the public sector.

Doesn't that assume a blank slate in terms of land ownership?

[The world will shine with light in our nightmare]

I believe some Georgists support special exemptions for nature preservations and the like, but I'm not sure.  It's been a while since I read on the topic.

[🐒Gods of Prosperity🔱🐲💸]

If we are talking about an isolated and unproductive property, the land itself would not be worth much in the first place, and the market value would decrease depending on the extent of the tax burden. If the tax on the land were high enough, the land would be completely worthless either way.

Moreover, there are all kinds of factors other than property taxes that limit the extent of development.

trying to wrap my head around what you are saying here: It could be influential in terms of encouraging development if it were not isolated, correct?  Or maybe in a desirable location for other reasons?   

You raise another issue I hadn't considered: If a large tax burden makes the land so undesirable as to be worthless, wouldn't that mean you could never have this as a major source of revenue?  It seems to suggest a sort of paradox where as soon as the value of a place increases it decreases simultaneously due to the higher tax burden.  Would people keep seeking out less valued, more isolated locations in order to avoid the tax burden and prevent any concentration of value?

I realize there are other factors that limit the extent of development, I'm asking whether there would be an effect, and how large it might be, if you had a tax large enough to replace other revenue sources, as has been proposed.

[Foucaulf]

Okay, hold on, I believe the thinking is a bit confused here.

Suppose someone holds unimproved land before any tax has been implemented, so the fixed cost of holding land is zero.
- Why has the landowner not invested in improved land up to this point? It would be because the marginal cost of building that investment is greater is greater than the marginal revenue of that investment.
- Why has the landowner not sold this unimproved land yet? Because the current utility provided by the land, plus the option value of holding the land and selling it later, exceeds the current price for the land.

Now suppose a property tax is changed into a land value tax, so there is now a fixed cost of holding the unimproved land.
- The landowner could still face the same marginal cost and revenue schedules for investment, so the tax does not offer any extra incentive to invest.
- The landowner may be induced to sell this land, because the fixed cost of holding the land is subtracted from the current utility provided by the land. The problem is to whom? The added tax does  crowd out people who derive utility from the land alone, but it also could crowd out people who want to buy the land and invest in it, since now there's an added fixed cost to their investment.

So the question is a matter of price elasticities of demand; if the demand for unimproved land is more elastic than the demand for land from capitalists who use land, the surplus of land will be sold to the capitalists, and vice versa.

This doesn't exclude a very simple strategy the state can do: buy up the surplus of land themselves at a competitive price. How much this strategy digs into tax revenues depends on the ratio of improved land to unimproved land.

This also has nothing to do with the "efficiency" of a land value tax in the usual sense. A land tax is efficient because it is a tax on a fixed factor of production, so a firm cannot substitute away from usage of the land, therefore creating less land than the market equilibrium and producing "deadweight loss."

This also has nothing to do with general equilibrium effects, where the loss of the property tax induces more investment in property on the margin. In a supply and demand framework, this leads to a fall in the price of property, so the downward pressure of demand for land from capitalists is amplified even further.

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The confusion in this passage arises out of the confusion between the utility of land in itself and the utility of land as a factor of production.