I could argue against a car by saying that it costs money to buy it, and more money to run it, but that’s not actually an argument unless it’s more expensive than other cars. All cars cost money to buy and run. Similarly, all taxes are disruptive, distortive, require paperwork, and raise money. Of course there’s room for a car review that just tells me the car costs $23,000, without comparing it to every other car on the market. But it would be odd to title a car review “some arguments against the Ford Fusion”.
My point is simply that its limitations and practical challenges mean that it is far from the panacea its strongest advocates make it out to be.
Who are these “strongest advocates”? You link to Lars Doucet on Astral Codex Ten, who seems to me like a strong advocate. Lars Doucet does not claim that LVT is a panacea. For example here on corruption:
Some people agreed to all of the points raised in theory, but pointed out that human beings are wicked sinners, and LVT will be bent towards the malevolent will of our overlords, just like the old policies. And they’re not wrong!
Tentatively this article seems a bit like a straw man, but perhaps you have someone in mind?
The rest of this comment is on the section “An LVT is unlikely to replace many existing taxes”.
Given the political incentives involved, and the fact that a land value tax has an inherently small tax base, the LVT is unlikely to fully replace existing taxes, such as income, sales, or property taxes. Instead, it would likely be added on top of these existing revenue streams. Governments are typically reluctant to eliminate major sources of revenue, especially those that have been entrenched for decades. As a result, the introduction of an LVT would likely not represent a clean substitution but rather an additional layer of taxation.
Certainly I agree that LVT will not and should not fully replace existing taxes. But I disagree that it would be simply added on top of the existing revenue streams, as a mainline prediction. I think the historical evidence points in the other direction. When a government adds a new tax of some form, it normally reduces or removes older taxes, particularly older taxes on roughly the same thing. Some examples that come to mind:
When countries introduce Value Added Tax, they typically get rid of less efficient sales taxes at the same time.
When the UK introduced the Poll Tax (aka Community Charge) it replaced property rates. When the UK ditched the Poll Tax a few years later, a new property tax system (Council Tax) replaced it.
Before that the UK had a Window Tax, based on the number of windows a property had, which was replaced by a tax on the rental value of property. The window tax lasted from 1696 to 1851, so “entrenched for decades” and more.
I concede that it’s a messy effect, and it’s possible that LVT would be an exception to these trends, but I’d still predict some substitution effects from the introduction of an LVT. In the US context perhaps it kills estate taxes, for example. But the other option is that the offset is lower rates of other taxes. Which brings us to:
This significantly undermines one of the core arguments in favor of the LVT: its potential to increase economic efficiency. 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, if they even exist at all. Businesses and individuals would still face the distortions caused by income and sales taxes, while also shouldering the added burden of the LVT. In such a scenario, the tax system as a whole could become more complex and less efficient, negating many of the theoretical advantages proponents claim for the LVT.
Deadweight losses generally go up quadratically in the tax rate, such that a 20% tax rate has 4x the deadweight losses of a 10% tax rate. So if LVT supplements existing taxes and thereby allows them to be set at a lower rate, there are still substantial efficiency gains.
There is also a paperwork cost based on the overall complexity of the tax system. But that complexity is rarely about how many types of tax there are, and is much more about how complicated each tax has become. The US federal income tax is absurdly complicated, and that’s just one tax. Adding a simple LVT would not make the situation noticeably worse, and could make it better if it reduces the income tax rate and thus the incentive to lobby for carveouts.
The case where LVT is simply added on top of existing revenue streams is where a country suddenly needs a lot more revenue and cannot raise it using its existing tax sources. For example, in a fiscally imprudent country with runaway debt, or in a war situation. But this isn’t the fault of LVT, it’s the fault of the country failing to keep deficit spending under control. If LVT isn’t on the table, some other new tax source would be used instead.
I agree it’s strange to see a lot of writing effort put into something with such basic argumentation mistakes… it really seems disturbingly similar to lightly edited LLM output.
Though to be fair many posts on LW nowadays seem to make really weird assumptions and/or jumping intermediate steps.
It would be helpful if you could clearly specify the “basic argumentation mistakes” you see in the original article. The parent comment mentioned two main points: (1) the claim that I’m being misleading by listing costs of an LVT without comparing them to benefits, and (2) the claim that an LVT would likely replace existing taxes rather than add to them.
If I’m wrong on point (2), that would likely stem from complex empirical issues, not from a basic argumentation mistake. So I’ll focus on point (1) here.
Regarding (1), my article explicitly stated that its purpose was not to offer a balanced evaluation, but to highlight potential costs of an LVT that I believe are often overlooked or poorly understood. This is unlike the analogy given, where someone reviews a car only by noting its price while ignoring its features. The disanalogy is that, in the case of a car review, the price is already transparent and easily verifiable. However, with an LVT, the costs are often unclear, downplayed, or poorly communicated in public discourse, at least in my experience on twitter.
By pointing out these underdiscussed costs, I’m aiming to provide readers with information they may not have encountered, helping them make a more informed overall judgment. Moreover, I explicitly and prominently linked to a positive case for an LVT and encouraged readers to compare both perspectives to reach a final conclusion.
A better analogy would be a Reddit post warning that although a car is advertised at $30,000, the true cost is closer to $60,000 after hidden fees are included. That post would still add value, even if it doesn’t review the car in full, because it would provide readers valuable information they might not be familiar with. Likewise, my article aimed to contribute by highlighting costs of an LVT that might otherwise go unnoticed.
I wouldn’t say your article was misleading, just oddly framed, for me. To me it is obvious that taxes introduce distortions (with rare exceptions like carbon taxes that are addressing negative externalities). So “an LVT (can) discourage searching for new uses of land” is a true fact but not yet an “argument against”—to become an argument it needs to be supplemented with ”… and this distortion is more damaging than existing taxes for the same revenue”.
That said, in the last six months the tariff discussions have been eye-opening. The quality of debate has been very low, and basic facts like “tariffs are taxes”, “tariffs raise revenue”, “tariffs increase prices”, and “tariffs reduce trade” apparently need to be explained at length. This aligns with your description of parts of pro-LVT Twitter, so I understand better where you are coming from than when I wrote my comment above.
I could argue against a car by saying that it costs money to buy it, and more money to run it, but that’s not actually an argument unless it’s more expensive than other cars. All cars cost money to buy and run. Similarly, all taxes are disruptive, distortive, require paperwork, and raise money. Of course there’s room for a car review that just tells me the car costs $23,000, without comparing it to every other car on the market. But it would be odd to title a car review “some arguments against the Ford Fusion”.
Who are these “strongest advocates”? You link to Lars Doucet on Astral Codex Ten, who seems to me like a strong advocate. Lars Doucet does not claim that LVT is a panacea. For example here on corruption:
Tentatively this article seems a bit like a straw man, but perhaps you have someone in mind?
The rest of this comment is on the section “An LVT is unlikely to replace many existing taxes”.
Certainly I agree that LVT will not and should not fully replace existing taxes. But I disagree that it would be simply added on top of the existing revenue streams, as a mainline prediction. I think the historical evidence points in the other direction. When a government adds a new tax of some form, it normally reduces or removes older taxes, particularly older taxes on roughly the same thing. Some examples that come to mind:
When countries introduce Value Added Tax, they typically get rid of less efficient sales taxes at the same time.
When the UK introduced the Poll Tax (aka Community Charge) it replaced property rates. When the UK ditched the Poll Tax a few years later, a new property tax system (Council Tax) replaced it.
Before that the UK had a Window Tax, based on the number of windows a property had, which was replaced by a tax on the rental value of property. The window tax lasted from 1696 to 1851, so “entrenched for decades” and more.
I concede that it’s a messy effect, and it’s possible that LVT would be an exception to these trends, but I’d still predict some substitution effects from the introduction of an LVT. In the US context perhaps it kills estate taxes, for example. But the other option is that the offset is lower rates of other taxes. Which brings us to:
Deadweight losses generally go up quadratically in the tax rate, such that a 20% tax rate has 4x the deadweight losses of a 10% tax rate. So if LVT supplements existing taxes and thereby allows them to be set at a lower rate, there are still substantial efficiency gains.
There is also a paperwork cost based on the overall complexity of the tax system. But that complexity is rarely about how many types of tax there are, and is much more about how complicated each tax has become. The US federal income tax is absurdly complicated, and that’s just one tax. Adding a simple LVT would not make the situation noticeably worse, and could make it better if it reduces the income tax rate and thus the incentive to lobby for carveouts.
The case where LVT is simply added on top of existing revenue streams is where a country suddenly needs a lot more revenue and cannot raise it using its existing tax sources. For example, in a fiscally imprudent country with runaway debt, or in a war situation. But this isn’t the fault of LVT, it’s the fault of the country failing to keep deficit spending under control. If LVT isn’t on the table, some other new tax source would be used instead.
I agree it’s strange to see a lot of writing effort put into something with such basic argumentation mistakes… it really seems disturbingly similar to lightly edited LLM output.
Though to be fair many posts on LW nowadays seem to make really weird assumptions and/or jumping intermediate steps.
It would be helpful if you could clearly specify the “basic argumentation mistakes” you see in the original article. The parent comment mentioned two main points: (1) the claim that I’m being misleading by listing costs of an LVT without comparing them to benefits, and (2) the claim that an LVT would likely replace existing taxes rather than add to them.
If I’m wrong on point (2), that would likely stem from complex empirical issues, not from a basic argumentation mistake. So I’ll focus on point (1) here.
Regarding (1), my article explicitly stated that its purpose was not to offer a balanced evaluation, but to highlight potential costs of an LVT that I believe are often overlooked or poorly understood. This is unlike the analogy given, where someone reviews a car only by noting its price while ignoring its features. The disanalogy is that, in the case of a car review, the price is already transparent and easily verifiable. However, with an LVT, the costs are often unclear, downplayed, or poorly communicated in public discourse, at least in my experience on twitter.
By pointing out these underdiscussed costs, I’m aiming to provide readers with information they may not have encountered, helping them make a more informed overall judgment. Moreover, I explicitly and prominently linked to a positive case for an LVT and encouraged readers to compare both perspectives to reach a final conclusion.
A better analogy would be a Reddit post warning that although a car is advertised at $30,000, the true cost is closer to $60,000 after hidden fees are included. That post would still add value, even if it doesn’t review the car in full, because it would provide readers valuable information they might not be familiar with. Likewise, my article aimed to contribute by highlighting costs of an LVT that might otherwise go unnoticed.
I wouldn’t say your article was misleading, just oddly framed, for me. To me it is obvious that taxes introduce distortions (with rare exceptions like carbon taxes that are addressing negative externalities). So “an LVT (can) discourage searching for new uses of land” is a true fact but not yet an “argument against”—to become an argument it needs to be supplemented with ”… and this distortion is more damaging than existing taxes for the same revenue”.
That said, in the last six months the tariff discussions have been eye-opening. The quality of debate has been very low, and basic facts like “tariffs are taxes”, “tariffs raise revenue”, “tariffs increase prices”, and “tariffs reduce trade” apparently need to be explained at length. This aligns with your description of parts of pro-LVT Twitter, so I understand better where you are coming from than when I wrote my comment above.