What's getting traction is Henry George's idea of a land value tax. Miles Kimball follows his student Noah Smith in advancing consideration of it.
Talk of taxing away economic rent can only be good. It's a discussion that needs to be had.
Miles Kimball | Professor of Economics and Survey Research at the University of Michigan
5 comments:
Land taxes don't necessarily come out of profits. Instead, they may simply be passed on to renters like any other cost of doing business.
And as I keep pointing out to no avail, we ALREADY have a land tax.
Land-price-based inequality can also be addressed by loosening restrictions on building.
Those restrictions are there for a reason -- because people want them. They're what MMT calls the "public purpose."
zoning and other regulations that limit housing density enrich landowners.
Not unless demand increases. Are land values going up in Detroit? How 'bout the Pine Ridge Indian reservation?
The author ignores the elephant in the living room -- population. Land prices don't go up when population declines. Rather than advocating development, I advocate a one child policy, and strict limits on immigration.
The author's main argument rests on a chart that has no obvious meaning. What is "capital income?" What is "labor income." Is a CEO's salary and bonus "labor income" or "capital income?" The fact is that income inequality has increased as measured by the GINI. The author's chart does not change that.
Most of the rich's wealth is not in real estate but in financial assets and business equity. I.e., Bill Gates is not rich due to housing. Warren Mosler is not rich due to housing. The Walton heirs are not rich due to housing. The Koch brothers are not rich due to housing (tho they have been buying ranch property, more as a shelter than as a source of income). And so forth.
The other problem I had with Noahs post was that he acted as if the guys getting the rents and the guys earning the exorbitant wages and bonuses were different guys. Sometimes thats true I guess but often its the same guys.
I haven't read Pikettys book but I doubt that he was implying that a the only policy change he would make is higher taxes on high incomes.
All these critiques that act as if they have found the fatal flaw in Pikettys thesis don't actually dispute the exorbitant inequality, they are just quibbling about the source of it.
They aren't actually addressing the real Piketty as Dan Kervick has pointed out at his place.
What I find interesting is the growing interest in Henry George and a land value tax on economic rent as means of addressing inequality.
Addressing inequality effectively absolutely requires addressing economic rent in order to undermine the just deserts narrative, which is effective propaganda for neoliberalism as a political theory, as well as dismissing marginalism in which all factors and by implication individuals are supposedly rewarded economically in accordance with their respective contribution, which is neoliberalism's economic underpinning.
@Tom, agree about economic rent and "just desserts," but remain skeptical of the underlying assumptions of Georgeism -- namely that wealth is concentrated in land, and that taxes come out of profits rather than being passed onto consumers.
@Tom, agree about economic rent and "just desserts," but remain skeptical of the underlying assumptions of Georgeism -- namely that wealth is concentrated in land, and that taxes come out of profits rather than being passed onto consumers.
I think in George's day wealth was probably concentrated in land. Down known the proportions of wealth now.
Profit is the bottom line. It contributes to the stock of retained earnings until allocated to investment or is distributed to owners. Profit is the residual of revenue after expense and income taxes are considered an expense.
But there is a line on the income statement, net operating profit after taxes, so in this sense taxes do "come out of" net operating profit.
Since firms maximize profit share expenses are "passed on" through price to the degree that the market will bear. That degree determines the profit margin.
But I don't think that many today other than the Geologists are looking to resurrect Henry George. Rather he is being mentioned again, along with Minsky, for instance, as economists look for previous accounts of issues similar to contemporary ones.
Economic rent was a central issue in classical economics, but it was more or less brushed aside in neoclassical economics. Now interest is turning in that direction owing to rising inequality, just as interest in Minsky rose as a result of the financial crisis.
Post a Comment