Monday, December 26, 2011

Beowulf on a land value tax — promoted from the comments

"nonetheless, a land value tax would be much better than an income tax."

You're probably right but there are two problems with a federal LVT, one legal and the other political.

There's a constitutional restriction on direct taxation of property that would kneecap a federal LVT. A workaround here would be to use the income tax to levy annually the imputed rental value of land (It would take a brave congressman to sponsor that bill).

However even with a workaround, any effort to levy federal taxes on land would lead to the state governments waging Jihad on Congress. Regardless of party, state governors will line up shoulder to shoulder to keep the Feds from stepping on their monopoly on taxing real property.

So what can be done?
Federal taxpayers are already given an income tax credit for foreign taxes paid (and the estate tax used to credit state inheritance tax paid).
If Congress understood MMT, there'd be no reason not to create a federal income/payroll tax credit for any state LVT paid (as with the foreign tax credit, phased out for higher incomes).

It would take state governors and legislators about 10 seconds to figure out that every dollar of tax burden they shifted onto land was a dollar their residents could legally avoid paying those suckers in Washington. (link)

A federal credit for LTV paid that phases out with higher income (remember a 100% tax credit is worth more than an at most 35% tax deduction) would divide the economic interests of the vast majority of property owners-- middle class homeowners who'd pay dramatically lower federal taxes -- from the tiny minority of very wealthy land barons who'd still be paying full freight on their federal incomes as well as their new state LTV.

The purpose of the LTV tax credit isn't to replace the federal income tax with a federal LTV (which is impossible in any event for the reasons I mentioned above) but to bribe state governments into shifting their tax burden off of sales, incomes and property improvements and onto land value.

I would like to think that furthers the purposes of the LTV admirably. (link)


Anonymous said...

Th result would be shifting of deeds to children with no income.

beowulf said...

"The result would be shifting of deeds to children with no income."

What would that accomplish? state LVT would be paid regardless of who the owner is. What a land owner would gain from sharing tax credits with adult children (minor children couldn't claim tax credits independent of parent's tax return) would be lost by capital gains taxes suddenly coming due. "shifting of deeds" is a taxable of event.

beowulf said...

A couple of years ago there was a attempted ballot initiative (I don't think it garnered enough signatures) to replace most of California's tax code with a Land Value Tax. The "Prosper California" website is pretty awesome in its attention to detail.

stone said...

I've just been told about beowulf's asset tax proposal in a discussion about whether if the entire tax burden was an asset tax then that would allow full employment even with a balanced budget and so no asset price inflation (asset price inflation transfers power to the rich).