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Comment by neilwilson | Hacker News Reader

Land value taxes fail on the basics.

Tax has nothing to do with raising money. It’s about releasing real resources for the public good - largely people to provide public services. Ideally the tax needs to be incident on the private sector entities that would otherwise hire the people the public sector needs to hire instead - military, judiciary, police, healthcare, education, etc.

Government has no need of land, therefore it makes no sense to tax it. Expecting the incidence to end up in the correct place requires a faith in fungibility that just isn’t borne out in practice.

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>>Tax has nothing to do with raising money.

Taxation is entirely about raising money.

>>It’s about releasing real resources for the public good - largely people to provide public services.

What does "releasing real resources" mean, and how does taxation achieve that? And how does a land value tax fail to achieve that?

>>It’s about releasing real resources for the public good - largely people to provide public services.

I'm puzzled as to how you conceive of government not needing land, when many government services do in fact need it, or how you perceive other objects of taxation being needed by government in a way that land is not.

"Taxation is entirely about raising money."

It isn't. Government has no need of it. Taxes are essentially shredded and deleted.

All very simple when you realise there isn't a fixed amount of money and it grows and shrinks as required by the economy.

What is spent and what is taxed are inductively connected, not directly connected. That's how we have 'deficits'. It's a function of the accounting.

"What does "releasing real resources" mean, and how does taxation achieve that?"

If you tax employment directly, private firms offer fewer jobs because there would be insufficient money in circulation to employ everybody (wages are insufficient to purchase output due to the tax take). The public sector then hires those who can no longer get jobs in the private sector.

The LVT fails to target the areas required, and it lacks a countercyclical behaviour. An employment tax, for example, collects more when the economy is hot and less when it is cooler. That's part of the automatic stabilisation mechanism.

"I'm puzzled as to how you conceive of government not needing land, when many government services do in fact need it"

Government is largely service based rather than goods based. What it needs is people.

Georgism is based upon a view of money that isn't actually the case. So it doesn't work.

>>It isn't. Government has no need of it. Taxes are essentially shredded and deleted.

That is not what happens to tax revenue. I recommend you look at a government budget, and see the source of much of the money spent.

>>If you tax employment directly, private firms offer fewer jobs because there would be insufficient money in circulation to employ everybody (wages are insufficient to purchase output due to the tax take). The public sector then hires those who can no longer get jobs in the private sector.

Private firms don't offer fewer jobs when you tax employment. They offer less for the jobs they offer when you tax employment.

Government can hire people because it can offer wages competitive with those provided by the private sector, and it can offer those wages because of the funds it acquires through taxation.

Governments have no need to tax employment to hire workers. This is trivially shown by jurisdictions with no taxes on employment and many government workers.

>>Government is largely service based rather than goods based. What it needs is people.

Abstractly, people need land, so government can trade access to land for services rendered for the public, i.e. for employment with the government.

"Taxation is entirely about raising money."

I hope that it is interesting and noteworthy for you to learn that many, many smart and thoughtful economists do not agree with that. In fact, they strongly disagree.

Current thinking in modern economics - specifically in MMT[1] - is that money is created by loans and destroyed by taxes.

Which is to say, the government (provided it is a sovereign issuer of its own debts, like the US or the EU) has no particular use for revenues since they can just create whatever money they need. What is actually happening when money is taxed is that it is, effectively, destroyed.

[1] https://en.wikipedia.org/wiki/Modern_Monetary_Theory

> Current thinking in modern economics - specifically in MMT

Modern economists by and large do not subscribe to MMT. It has about as much support amongst academic economists as climate change denial.

While MMT holds that taxes can reduce the money supply, it does deny that taxes raise money for the state.

Income taxes fail on the basics.

Income tax has nothing to do with raising money. It’s about releasing real resources for the public good - largely people to provide public services. Ideally the tax needs to be incident on the private sector entities that would otherwise hire the people the public sector needs to hire instead - military, judiciary, police, healthcare, education, etc.

Government has no need of private income, therefore it makes no sense to tax it. Expecting the incidence to end up in the correct place requires a faith in fungibility that just isn’t borne out in practice.

When the government uses income taxes to fund public infrastructure like a subway, it improves the land that is incident to that subway which raises the value of that land. The government created a lot of private value that could be taxed to pay for the infrastructure it built. As it stands right now, the government just takes your income with no incentive to actually deliver as it does not benefit directly from its own investments. This allows corruption to creep in as politicians would rather fund massive boondoggles that line up their pockets rather than small incremental improvements that increase government revenue in proportion to how much value it provides.

This scene gets the point across very clearly: https://www.youtube.com/watch?v=XL3n59wC8kk&t=1803s

The government invests in the commons. Access to the commons (proximity to infrastructure) is owned by private individuals who benefit from the investment. The government does not benefit from the investment it made. It's effectively running a charity for a handful of people.

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