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Comments on Friday 8 October 2004:
Tsk, more political foo. Nothing else in my brain has been interesting for the general public recently. You don't care that Robobeasts does more clever things now but still isn't released, or that IE's Javascript behaves insanely if you have clicked yes on a "stop running this slow javascript" dialog-box at some point earlier in the session, so I'll not talk about those.

Today's political ponderings are purely abstract, on the subject of taxes. Nobody likes income tax or sales tax. There doesn't seem to be any reasonable excuse for the government mandatorily taking a percentage of everything you do. Conversely, relying on people paying willingly would obviously be a mistake. Hardcore Libertarians want the government to essentially butt out of everything, with everything owned by individuals, which I believe would rapidly result in irredeemable poverty for the non-landowners, swiftly followed by violent revolution.

While I like the idea of owning your own 'stuff', the idea of owning space, be it land or sea, seems a flawed one. If all the land is owned, and the population increases by one, where does that new person live? They have no choice but to rent from a landowner. What gives the landowner claim to the land? Nothing really. They might have bought it. Probably an ancestor bought it. Who did they buy it from? What gave that person claim? In the end, individual land ownership boils down to violence. That's probably not the best basis for a harmonious society.

Thus we come to my idea for an alternative system. Instead of taxing income or expenditure, and instead of individual land ownership, what would be the effect of a government assuming title over all the land, and leasing it out? I envision a system such that land is 'zoned'; more expensive to lease near population centers, less expensive in the boondocks. The zoning, ideally, would be calculated automatically - land lease prices settling for an area as whatever people will pay for that area. Areas would have zoning laws similar to how they do now - multistorey buildings generally limited to city centers, good arable land being ineligible for being built upon, national parks being ineligible for any sort of lease.

As I envision it, you would be allowed to build on your land (within zoning laws), and you would own the building, but you would still have to lease the land. Multistorey buildings would increase the land lease value. If you don't keep up the lease payments on the land, you would also lose ownership of the building, such that the government (and the next leaseholder) gets free 'value' from defaulted payments. If you own a building and are the valid leaseholder of that land, you can let out your building to others, for any price you want; however, if the price you set is higher than the land lease value, the land lease value is increased proportional to the difference. So you can make a profit, but the more you do so, the more the government collects by it.

Also convenient with such a system is that the requisite amount of socialism to prevent crimes of desperation (including violent revolution) is relatively easy to justify. You don't have to take anything off anyone to support the people who are unable to support themselves, which is a thing that most taxpayers object to. Instead, you have an amount of lease-free unleasable land (like the national parks) dedicated to people who can't or won't lease land for themselves. Minimal living conditions provided at no cost to them, and no cost to anyone else. Not comfort, of course - we're talking shared bunkrooms and DIY food from the 'Social Security' farmland. Mostly anyone who can afford to lease some land of their own would rather do so than live in the Social Security zones.

Normal taxation systems make poor people cross ("those people have much more than me, they can afford to pay five times as much tax proportional to their income and they'd still have more, so they should have to") and they make rich people cross ("why should I pay more when I don't get as much more in the way of benefits?") There is no inequity in a land-lease alternative. If a rich person is living in the same conditions as a poor person, there's no reason they should have to pay more. But why would they? They'll live in nicer conditions, and they'll pay the greater charges for it - living better is the whole point of having more money.

The only other thing in such a system that would be 'taxed' would be the usage of non-leasable land. Tagged vehicles usage being tracked to cover road-usage tolls, for example, to cover road maintenance. What's the hypothetical government spending all this money on? Eh, who knows. Same stuff as usual.

Obviously this wouldn't work as a change from an existing system - the landowners would be very angry, and non-landowners would be freaked out by their rent suddenly going from $500 to $2000, even though their take-home pay would be going up by $1800 over the same period (not $1500 because the landowner's profit has been largely cut off the rent). What I'm interested in is people's takes on what's wrong (or right) with this system, if it were implemented in a magically created new land. What do you think?

Edit, addendum: How are land-lease prices set? When you secure a lease on a land, your price is locked in for one year. After that, if someone is willing to lease the land for at least 20% more than you are paying (and give you money to cover the cost of improvements you've made to the land (for which you have documentary evidence) minus depreciation), you have the choice of either raising your lease price to 83.3% of what they would pay, or moving elsewhere and transferring the lease. When land is not being leased (because the previous leaseholder is deceased or defaulted on payment) the lease for that land goes up for auction, so the starting one-year-term price is set to whatever someone is willing to pay. This way the government has no say in what the lease price of land is - it's whatever the market will bear. This also deals with subleasing to tenants - you can't charge them more than 20% above the base land rate, or they can just take on the lease for themself (assuming they can also afford to cover whatever you've put into construction). It's very self-correcting. [15:54]

Vincent Povirk
I'm uncomfortable with the idea of someone being able to force someone else to move or pay exorbitant prices on housing by paying a large enough price himself.

How would the value of improvements made to the land and depreciation be determined? This isn't necessairily the same as what the leaseholder paid for it.

I aso don't see how this can be applied to parts of a building.

RavenBlack
The *value* of improvements doesn't matter, and is not determined. If it were, it leads to the same problems as land ownership - DisneyWorld is worth a heck of a lot of money, much more than the land it was built on, and nobody would be able to increase the lease value on it if the Building Value was taken to be the actual value of the building. If it's instead taken to be what was spent to build it minus depreciation (plus upkeep improvements minus their own depreciation), it becomes possible and likely that the lease cost of DisneyWorld will increase, once it's depreciated far enough. That may seem horrifying, but bear in mind that a lot of money changes hands in Disneyworld, and every time it does so that money is taxed under the current system. The increasing lease value would approximately reflect those taxes.

I am also uncomfortable with the idea of someone being able to force someone else to move or pay exhorbitant prices, but that happens already in existing society. Once your one-year renting-an-apartment lease expires, your landlord can, and usually does, raise the price. If you're not willing to pay the new price you have to move. The landlord, in that situation, wins either way - if he increases his price by 20%, either you pay it or someone else does. In my proposed system, if someone else is willing to pay 20% more than you are *you don't have to pay more or move out*. If they're willing to pay 30% more than you are, you only have to pay about 10% more to keep the place. So while I sympathise with your discomfort, my system would actually be better than leasing from a landlord in that very respect.

I strongly doubt there are many landlords who, if someone came to them and said "I'll pay you 30% more than you're getting for that property whose lease is almost up" would be willing to settle for a 10% increase from the existing tenant.

Vincent Povirk
When you say depreciation, do you mean that the effective value of improvements would decrease exponentially? If so, how is the rate of this decrease determined?

This would have to be done in such a way that it is possible to invest in a venture like DisneyWorld, and I suppose it could, if the money the investors expected to make on the investment even in a year were less than the depreciation on the money spent.

Also, this means that if you work to improve land you've leased yourself, you recieve no compensation for your labor, only materials.

I don't understand how this can even apply to apartments. If different people lease parts of the same building (and no one owns it), how is maintenance of the building handled? Who takes care of the wiring and such? The person who does this would have to be compensated by those who use the service, but leaseholders can't go to anyone else for the same service. He certainly can't charge whatever he wants because the charge would apply to anyone who lived there (I suppose if you used the place for storage and consumed no electricity, you could get on without it). Or would the government have to handle that sort of thing when the building has multiple leaseholders?

*concedes on the "forcing someone out of land" point* On the whole, I think this is a pretty nice system (at least in theory, no one can really say what it would be like in practice), and that's a minor objection.

RavenBlack
The rate of depreciation is arbitrary. I don't think it has to be exponential - there could be a grace period in which there is no depreciation, for example. I'm not really proposing it so I haven't hammered out specific details.

Investment would generally be possible as you say - you're supported first by the guaranteed year's title (essentially you're running DisneyWorld tax-free for that period, if you've got it built quick enough), then if anyone wants to claim it within the next year they'll be having to buy it off you for essentially the same as you paid, very little depreciation having taken place by then (in my notes file I've modified this so that for hostile takeover of a lease you have to pay 20% above the current Building Value, thus giving a couple of years 'free' depreciation even if it is standard exponential depreciation). Assuming they're willing and able to do that, you then have the option of matching (minus 20%) whatever they're willing to pay on the lease. They have no reason to buy the whole thing off you and lease it at a loss level, so in the absolute worst case silly scenario you've still got 20% of your profit if you get the lease price kicked up to an unlikely level. The only real risk I see along those lines is the possibility of companies pulling the turf out from under their competitors, but as I see it every time they do so they end up with an ongoing loss-property.

Apartments - Perhaps you pay for maintenance and that gets recorded as Building Value, so if someone wants to take your lease from you you'll get back your maintenance costs (though they will depreciate, so that's not great). That's how it works if the required maintenance is in your apartment specifically, anyway.

When it's in the infrastructure that no individual owns, the government dealing with it would probably work - same as it would be doing for roads. Infrastructure maintenance is why it's getting money in the first place, after all.

carl
The system you describe is known as "Feudalism" Where the governmental body owns that land. As you are already aware, much boils down to who owns the land and how they value it.
One very very big mistake you appear to be making in many of you calculations is that you are extrapolating using a system based on a "benefical government" (or even an ideal one.)
A government of any kind is run by a group of Alpha males/females out to see to there own agenda. Very few government people deliberately reduce their own standard of living or survive long as altruists.
Top that off by how absolutely inefficienct government systems are and your land-monitoring and proportionment system would be incredibly expense with lots of overpaid supervisors and overworked minions.
It would also give the individual person no protection against the whims of the politicos ("no man's liberty or property is safe while parliment is in session") so what if you spent a lifetime building a farm or supermarket if the government decides they have to many <insert produce here>. Then they buldoze the lot. Are governments known for there forethought in such matters?

carl
Buying land is based on "surrender value" What I disagree with is a political and economic structure that forces people into having to sell and taxing land in a manner which forces inflationary practices on any land owner. (which comes to inflate the rent or go broke)
At least in a private sale situation the value of the land is set by the interested parties.
Part of the "future generations" difficulty is brought about by the economics theories pursued by certain governments. It creates an artifical inflation (which devalues all assets and incomes) to make it appear like some business are profitable (whereas they may actually be unsustainable were market-gain/inflation influences removed. ie borrowing@8% trading at 7% and betting that inflation will provide the margin at the end.)

This GOVERNMENT driven system means that the wages for the unskilled are entry level low, and all the profit providing assets available to the young are miniscule unless they can (a) gear well or (b) find a mentor/angel investor. The danger is that to th GOVERNMENT this all still looks OK. The big "well setup" companies provide for the needs of the people, and provide wages to population. so at the GOVERNMENT level that all looks good. Ideally the business will become a corporate body and all the humans become tenured servants. Then the corporation that owns the land pays much tax for income and rates to the government but that doesn't matter because again its just a corporate entity owning the land that has no individual needs or responsibility so it passes the land cost on to the business corporate, which passes its cost onto its controllable revenue streams (the inflating of trade prices, the reduction in the one major easily controlable cost centre - wages.)

The lower the wages the less likely
the people learn to build wealth generating systems and the less ability they have to invest the pitance they receive from their labours.

RavenBlack
No, not feudalism, because the governmental body *doesn't* own the land. The government also doesn't set the lease-prices, the market does, through auction. The government decides how the lease money is spent, but NOBODY owns the land. The very premise of the system is that land can't be owned. The government also doesn't own the money from the lease payments, it merely apportions it on behalf of the people.

Look at it in this alternative way - people bid to get an area of land to live on, bidding against other people. The winning bid pays the winning amount into a central pot, which is then spent on things which benefit all the bidders. You're essentially leasing it from the other people who would have liked to live on the same piece of land, not from an 'owner'. Paying a fee to others to have them recognise your right to be there.

carl
The quick question then:
Why do you think your landlord increases his rent price at the end of the lease period?

...carl (who hasn't increased the rent to his tenants in over 5 yrs)

RavenBlack
Because someone else is willing to pay the higher price.

Anet
You capitalist, you. ;)

RavenBlack
Heh. Sort of, but I'm not as capitalist as a libertarian - land ownership is a staple of normal capitalism and, I think, its big flaw. Simply argued, if land can be owned, it will rapidly all be owned. If the population then increases by one, where is that new person going to live? Someone else's land. There is no way capitalism in that form can fail to result in a "rich get richer, poor get poorer" economy. (Model simplified in explanation, of course.)

carl
With regard to the "land ownership" aspect - the government of my country controls allocation of things like radio frequency bands and "natural resources." These are licensed. The government says "no-one has ownership" therefore "the crown" ons them and oversees their fair distribution. The effect is exactly the same, except a law had to be passed so said "unownable assets" could get sold to big government-friendly businesses. The only difference that "no-ownership" made was that smaller bribes couldn't get a shot at influencing policy regarding those "assets."
We also have native lands which is group owned. They have a big problem trying to get improvements (drains, buildings, planting etc) because few people will lend on insecurity property, the group seldom reaches concensus on more than minor things, and final ownership of improvements is always contrested.

Nameless
poor get poorer is right. The whole "drift upwards" of capitalism depends on the higher ups being able to take a skim from the low downs. If a low down gets enough capital, they can then skim from lower downs - and if they don't take that skim the system (inflation if nothing else) will eat away at their capital base.

To avoid this the rich must keep their income rising at more than the rate of inflation (to keep the real value of their capital) and who then gets to consumer goods to pay for that rise? Everyone - but those not above the inflation line get sucked down.

carl
Sorry for the repeats but the other part just came to me.

If the People receive money for the rent paid by the Tenants - who administers this process?

A land owner already pays rates to the council (or land taxes), presumably for Public Services for use by The People.

Anyone who administrates this process (rental collection. payments of property costs for the public good) would be a Landlord!
Unless all labour and consumables in this process are provided for free (by whom?) it means an administration fee will have to be levied. If the labour is free then how do the administrators make a living?

We haven't covered another important part of property ownership : repairs and maintenance. Tenants regularly damage things, especially if they can't be held responsibile for them. Land often needs maintenance (keeping up to codes, access and utilities, lawns or cleaning) who is responsibile for managing this process (if not the Landlord?)

RavenBlack
The government administers the process. That's what I said - they're the 'pot' of the deal. It is, after all, functioning like taxes. Taxes are supposed to pay for things for the people, and they do.

Landowners do already pay land taxes, but those are paltry in comparison to the money they get from tenants. So there's a rich person getting more money, and the people (via the government) getting very little.

The labour isn't free. I'm not proposing a system in which there is no tax - the land-leases *are* tax. The money isn't 100% distributed to the people, but the majority of it is (or should be), like any tax system.

With respect to maintenance, the leaseholder is responsible for keeping the property up to any required specifications. Any money they spend on repairs and improvements counts as 'owned value', which depreciates over time. Any 'owned value' (especially relevant for if you build a home on an empty spot) depreciates; anyone trying to take the land from you has to give you the current owned value plus a percentage, in addition to signing up for a higher lease-rate.

Anyone who administrates the process would not be a landlord, because landlords set prices. The administrators would be more like taxmen.

Anet
Are you not the least bit worried that a central government would have nearly total control in your life with this plan...?

RavenBlack
What extra control is that? They don't set the prices. The government of now takes what they feel they can get away with. In my system they'd have less control of my life than they do now. I don't understand what makes you think "taxing based on land" gives the government more control of your life than "taxing based on income". Either way they're taking your money; my way you have some control over how much they take, other people have some control, and the government have none.

carl
Sorry RavenBlack. I'll drop it now.
I think you're missing a few rather important aspects of the property game that would probably require land ownership to understand.
Here's one: The land prices are already heavily influenced by government pressure. Something that business owners become uncomfortably aware of.
Another: Often landlords use negative gearing (or just gearing) to make property purchases. The price paid for the land is irrelevant as it will be recovered on disposal/re-sale. The actually cost of land ownership is (1) the property tax/rates to the government + (2) Interest cost of servicing the property loan using to a banking institution + (3) maintainence.
Your system increases (1) ignores (2) and encourages (3) to be reduced.
Finally: All land is valuable, just because today humans cant settle on it or work i does not mean its unusable. Conservation and run-off areas have a value that must be protected from humans - especially areas like the alaskain oil fields. In your system someone has to decide which areas are "unusable" to remove them from the bidding. And before you nominate any government agency I suggest you get on shanks' pony and look at how the government manages what it already has (and how it blows other peoples cash like a wino at an open bar wedding)

RavenBlack
oh and rising property price bubbles are caused by over eager wannabe landlords over bidding for their properties. The same bidding insanity that you are recommended.

PPS the land ownership technique you are recommending is called "Leasehold ownership" FYI.

RavenBlack
"The land prices are already heavily influenced by government pressure."

Er, yes? What does that have to do with my system?

"Often landlords use negative gearing (or just gearing) to make property purchases. The price paid for the land is irrelevant as it will be recovered on disposal/re-sale."

Again, er, yes? I don't understand why you're pointing out things that are stupid *now* which would not be the same under the proposed system as if they are flaws in my system. My system doesn't allow for negative gearing because encouraging landlords to exist at all encourages the have/have-not divide, and encourages it to actually make a destructive differerence to the lives of the have-nots.

I realise my system increases (1). It only encourages (3) to be reduced if the tenant doesn't mind living in a hovel. It doesn't ignore (2) - in most cases it *prevents* (2). You don't take out a loan for a property which has very little up-front cost.

Someone deciding which areas are to be removed from the bidding is a silly objection - it's one of the many "no different from how it works now" objections. Such things are already controlled by government agencies.

*Not* the same bidding insanity that I am recommending - if someone overbids on a property in my system, they have to keep paying whatever over-the-odds price they bid, over and over again until they relinquish the property. That very much encourages not overbidding.

And yes, it is nominally the same as Leasehold ownership, but differs in that the contract length is much shorter, and there is no Landlord. (Again, the government is not the same as a Landlord because it has no profit motive. The gap between the rich and the poor is *narrowed* by large payments to the 'Landlord' rather than widened.)

lostdazed&confused
Recently discovered your amazing sites & decided to read all your entires.
Just one question. There is no difference made for the physically unable to work VS too lazydon't give a damn to work? They are both treated as "poor" & stuck in the Social Security zones? As a taxpayer, I do not object to helping those who are elderly, ailing or diabled. I strongly object to those that decide to live off the taxes instead of working and continue to reproduce to get more "free money".

RavenBlack
Hm, that's an interesting point - I don't mind people who don't want to work living in the social security zone, since it's not like it's a life of luxury or anything, but I was thinking of it as requiring residents to at least do simple things to look after themselves - cooking, food-gathering - which is a bit tricky when dealing with the actually incapable.

I don't like the idea of drawing a distinction in treatment for lazy versus incapable though - it doesn't seem right to give people better prizes for being useless.
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