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Saturday, December 31, 2011

Gary Johnson and Land Value Taxation

2011/12/28 at 1:54 pm
Eric gets it @8.

Given GJ’s likely set of opponents, the only thing between him and a first-ballot win in Vegas is the Fair Tax “prebate” issue.

A better tax position for him would be to advocate that the federal government have only 50 taxpayers: the states, paying in proportion to their population.

Even better would be to reinstate Article 8 of the Articles of Confederation, which said states should pay in proportion to the value of their land(*). However, advocating this variation would require asking people to understand the top 7 reasons why land value taxation is the least bad “tax”.

(*) “All charges of war, and all other expenses that shall be incurred for the common defense or general welfare, and allowed by the United States in Congress assembled, shall be defrayed out of a common treasury, which shall be supplied by the several States in proportion to the value of all land within each State”.

2011/12/29 at 1:04 pm
A land value tax has long been recognized by classical liberals as the least bad tax — from Adam Smith to Milton Friedman to LP founder David Nolan.

Economists recognize that a land value tax has no deadweight loss, unlike taxes on income, production, consumption, transactions, or material wealth. When you tax land you don’t get less of it.
LVT is the least intrusive tax, with no need to audit anyone and or to police black markets. As David Nolan proposed, landholders would decide “their own valuation; you’d state the price at which you’d be willing to sell your land, and pay taxes on that amount. Anyone (including the tax collector) who wanted to buy it at that price could do so. This is simple, fair, and minimizes government snooping into our lives and business.”

Land value taxes need not even be strictly mandatory. If you don’t think the benefits of public goods near your parcel are worth the LVT on your parcel, then you should be free to opt out. We would simply disconnect you from our wires and pipes, and while you’re in arrears we would publish your name, address, and photo as someone whose property and person are excluded from the protections of our LVT-financed police and courts.

Libertarians should oppose all taxes on things that aren’t aggression, such as:
  • income (wages, interest, dividends, profits, gifts, and inheritance)
  • production (including value added)
  • consensual transactions (e.g. the sale, import, or export of goods and services)
  • fairly-acquired wealth (e.g. real estate improvements, capital, or other produced assets)
Libertarians should tolerate taxes/fines only on aggression — e.g. polluting, depleting, congesting, or monopolizing the Earth’s natural resources.

2011/12/29 at 2:03 pm

Tom @17, land value is indeed subjective, and that’s why I agree with David Nolan that landholders should assess their own values. Each community would set its own LVT rate, but that rate wouldn’t be per-acre. It would be a percentage of the parcel’s landholder-assessed value. Then for a given parcel either 1) the market will push it towards its highest-valued use, or 2) the landholder will take the land off the grid and occupy it forager-style.

BR @18 includes a lot of

For a long list of living Libertarians and Nobel-prize-winning economists who defend LVT, see

There’s no “mandatory monopoly services” built into LVT. If you don’t like the pipes or wires that the community is willing to connect at the edge of the parcel you hold, you’re free to make other arrangements — as long as you don’t trespass or commit any other form of aggression.
You’re apparently confusing land value taxes with property taxes, which are indeed evil and indeed have caused massive injustice and malinvestment. You should read We Don’t Need Any Stinking Taxes, by Libertarian economist Fred Foldvary. If you have more time, read his policy study here comparing LVT to all other government revenue options.

2011/12/29 at 2:17 pm

BR @23, if you don’t understand the difference between owning yourself and owning something that is neither you nor created by you, then you simply don’t understand libertarianism.

MW @22, LVT revenues could of course be spent the same way that other libertarians say they’d spend the revenues from their preferred tax scheme — such as Be Rational’s evil slavery-like 10% sales tax.

In economic terms, my personal view is that the purpose of government is to police aggression (including to protect common goods i.e. natural resources) and to provide the public and club goods that the local community demands. (Public/club/common goods are economic terms; for definitions see

2011/12/29 at 2:33 pm

To be clear, geoism is the belief that
  • All persons have an equal right of access to the natural commons of the Earth, which is air, water, land, minerals, wildlife, spectrum — everything that is not created by persons.
  • When you deplete, pollute, congest, or monopolize the natural commons, you must compensate those persons whose access to it you have impaired.
Not unlike the stages of grief, there is a typical progression of response for libertarians who encounter geoism.
  1. Name-calling dismissal
  2. Angry denunciation
  3. Disagreement with strawman misconstruals
  4. Denial of political/practical viability
  5. Acceptance
It took me years to get out of stage 3, so we should cut BR some slack if he’s temporarily stuck in stage 2.

2011/12/29 at 2:50 pm

A libertarian LVT would be 100% voluntary: you’re free to labor and transact as you please, you just can’t use LVT-financed services.

Having a sales tax that is only 10% is like being a little bit pregnant. If you give government a taxing power with the dial set to 10%, we all know which direction the dial will turn. By contrast, LVT imposes a built-in ceiling on government revenue. Critics of land value taxation claim it wouldn’t raise enough revenue because ground rent is allegedly only a small fraction of GDP. That sounds like a good thing to me. If government revenue is restricted by definition to ground rent and fees for polluting/congesting/depleting the commons, then government cannot be nearly as big as when it is allowed to tax labor or production or exchanges.

Land value taxes are naturally local, and so encourage Tiebout Sorting. If the the local mix of government services is too high (or too low) for your taste, or if they aren’t a good value for the LVT rate financing them, then you can vote with your feet. By contrast, income and sales taxes tend to get centralized at the state or even national level, because (unlike land) income and sales can flee to lower-tax jurisdictions. (New Hampshire is among the most free states, and gets the highest percentage of government revenue from property taxes. California finances its high government spending with high centralized state income taxes that rose after Prop 13 restricted local property taxes in 1978.)

2011/12/30 at 12:55 am

Don, that Libertarians debate each other too much about optimal libertarian policy is only the second biggest problem Libertarians have. The biggest problem Libertarian activists have is that they spend too much effort trying to convince each other about what’s the best use of Libertarian activist effort.

“Winning power” is an important thing, but it’s not the only thing. Libertarians can walk and chew gum at the same time. I’ve served on the LP Platform Committee for the last six years, but I’ve also served in elective office on my town’s water board for the last three years. I was instrumental in the 2008 rewrite of the LP Platform, and I led the effort to make sure our town avoided 20 pages of bureaucratic water-conservation mandates from Sacramento. I’m all about Getting It Done.

The biggest practical question around a Gary Johnson LP nomination is: who to run for VP? I’d love to get David Friedman, Jim Gray, or Mary Ruwart. Outside the LP, John Stossel would be great for either P or VP.

BR brought up land value taxes @6, probably in response to my discussion in another Gary Johnson thread. In that thread, I said that the Fair Tax prebate will be GJ’s weak spot in seeking the LP nomination, and that a better position would be to have the 50 states be the only federal taxpayers. It was only as an aside that I mentioned that the Articles of Confederation apportioned such a tax by land value, and that prompted this “BR” person to start ranting and calling me names.

BR, it’s an standard result in the economics literature that a tax on an inelastically-supplied good like land has no allocative inefficiency — i.e. no deadweight loss. You can call me all the names you want, but it won’t change the state of economic science.

The ethics of land value taxation is an open question in the libertarian movement, because different libertarians have different theories about the various kinds of property — especially “intellectual property” and spatial property. However, one doesn’t have to endorse geolibertarian ethics to defend LVT as the least bad kind of tax. Part IV of Professor Foldvary’s paper lays out the five ways in which LVT is not as bad as the alternatives. Can you answer his arguments, or not?

BR) “The LP should take a stand for a single tax on sales, at all levels of government, to be capped constitutionally at 10%.” (BR

No, the LP should not say that Libertarians want to create a national sales tax. Individual Libertarian candidates can chart their own course to the Platform’s goals of repealing income taxes and banishing force and fraud from human relationships. My advice is for candidates to say that it’s never acceptable to tax peaceful consensual behavior (like sales) — whether it’s at 10%, 1% or 100%. My advice is that candidates instead say that any government taxes should fall only on aggression.

2011/12/30 at 12:30 pm

Don, any pressure on GJ’s positions will come via debating his nomination opponents at state conventions. LP presidential candidates have very little influence on the LP Platform, a living document that is usually not changed very much at any given convention. I see zero chance of the requisite 2/3 majority of delegates adding to the Platform anything like a Fair Tax or consumption tax or even a pollution tax. At our recent PlatCom meeting, we rejected by 5-7 some language advocating the 50 states be the only federal taxpayers. I love the idea but wouldn’t want to impose it on all our candidates, so I voted against it.

2011/12/30 at 12:32 pm

There is still no evidence here that “Be Rational” understands the difference between current property taxes and geolibertarian land value taxes. Geolibertarians in fact bitterly criticize the way current government policy subsidizes landholders and encourages inefficient land use.

Landholders are massively subsidized because the benefits of nearby government projects (roads, rail, bridges, tunnels, air and water ports, parks, schools, flood control, etc.) get capitalized into land values, but are financed mostly through taxes on income and sales.

By taxing both improvements and land value, property taxes currently push development away from urban centers, where property taxes are highest. A land value tax would only tax land value, and so would encourage density and infill by taxing developed sites the same as sites that are underdeveloped or held for speculation. Sprawl is also encouraged by
  • not charging automobile drivers for the pollution and congestion they cause, or for the full costs of the roads and parking space they use;
  • government lending subsidies that favor single-family suburban dwellings over multi-family urban units; and
  • mortgage interest deductions that favor suburban homeowners over urban renters.
Communities should decide locally what mix of club goods (highways, bridges, tunnels, pipes, wires, police/fire protection) and public goods (streets, flood control, parks) that government should provide. To the extent that these goods can’t be financed by user fees, then they should be financed by land value taxes that recover the extra value these services create in the free market for land. If these services aren’t worth their cost, then LVT won’t produce enough revenue to finance them. People can also vote with their feet by moving to a locality with their preferred level of government services.

2011/12/30 at 11:53 pm

BR @64) Those fascist-socialist “club goods” are the main problem. The government must not be allowed to provide them nor to raise money through any taxation scheme to finance them. That is the cause of the trillions of dollars in waste we see now. We have far too many roads, highways and bridges built in the wrong places (BR

Ah, so the trillions of dollars of government waste is due to roads and bridges having been built in the wrong places. Got it.

BR) The government must do nothing (BR
Well, there’s your problem. You’re an anarchist who bleats “fascist-socialist” when confronted with the textbook argument for government provision of club goods and public goods. Here is some remedial economics reading for you:
 2011/12/31 at 1:09 am

Tom @73, I didn’t say @72 that the presence in economics textbooks of a standard case for a non-zero-sized government proves that anarchism is wrong. I just said that if “Be Rational” is going to brag @44 about being “expert enough in economics to know …”, then s/he ought not to have a more cogent response to that textbook argument than to just chant “fascist-socialist”. (Note that the argument for under-production of public goods is so overwhelming that, as anarcholibertarian professor Walter Block admits about the resulting justification for state intervention, “virtually all economists accept this argument. There is not a single mainstream text dealing with the subject which demurs from it.”)

The fact remains that BR has offered no rebuttal to the standard arguments of economists about why a land value tax causes less distortion than BR’s own sales tax.

For example, here are some quotes from a 1990 open letter to Gorbachev signed by a long list of economists:

Your economists have learned much from the experience of nations with economies based in varying degrees on free markets. Your plans for freely convertible currency, free trade, and enterprises undertaken and managed by individuals who receive the profit or bear the losses that result from their decisions are all highly commendable. But there is a danger that you will adopt features of our economies that keep us from being as prosperous as we might be. In particular, there is a danger that you may follow us in allowing most of the rent of land to be collected privately. [...] While the governments of developed nations with market economies collect some of the rent of land in taxes, they do not collect nearly as much as they could, and they therefore make unnecessarily great use of taxes that impede their economies–taxes on such things as incomes, sales and the value of capital.

2011/12/31 at 1:26 am

Knapp nails it @231.

The best exposition of this idea was commissioned from Prof. Fred Foldvary by Knapp himself in 2008 when he edited Question Earthority. I can’t find QE online right now, but Fred’s article is available here. I still consider it the single best policy essay ever written.

2011/12/31 at 12:50 pm

BR) university campuses, giant shopping malls, and theme parks like Busch Gardens or Disney World (BR

It turns out that Be Rational is already a geolibertarian and just doesn’t know it yet. In fact, he may be a geoanarchist, which is what Prof. Foldvary is. BR should read Foldvary’s Geoanarchism essay at, and also his short paper The Private Provision of Public Goods.

Bob, one doesn’t need to subscribe to geoanarchist utopitanism to agree with Foldvary’s incrementalist prescription for moving in that direction. Within the current statist context, he advocates:
  • radical decentralization, in which all government revenue and services happen at the community/neighborhood level, and any larger units of government are just federations from which smaller units may secede.
  • a Green Tax Shift, in which community services are financed not by taxes on income or sales or produced wealth but by fines on negative externalities and by ground rents on sites.
Foldvary explains that land value taxes closely model how consensual private communities tend to govern themselves. Malls, business parks, hotels, condominiums, homeowners associations — all tend to “tax” their tenants not according to profits or revenues or inventory or improvements, but mostly by site value (for which square footage often serves as a proxy).

I suspect that if these policies were pursued far enough, the difference between local “governments” and private homeowner/condo associations would become blurred, and would hinge on the governance rules adopted as the public-goods assets of current governments get subdivided.