Re: [LandCafe] Re: Misc taxation Gesell & Johansen
- Yes the amount of land is fixed. But the amount of land for sale is not fixed.
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On Oct 25, 2012, at 4:32 PM, "roy_langston" <roy_langston@...> wrote:
--- In LandCafe@yahoogroups.com, John David Kromkowski <jdkromkowski@...> wrote:
> The analysis thus far presumes that LVT will make _all_ land prices fall.
> I'm not sure that is theoretically or empirically supported.
It depends on the relationship of the ad valorem LVT rate with the discount rate and the economic growth rate.
> Isn't the theory actually that only marginal land prices will fall and the
> salubrious effects on economy will have different effect on non-marginal land.
That's one theory. IMO it will have different effects in different jurisdictions in the transitional period, depending on a number of factors, but in the long run full rent recovery will remove effectively all land value.
> Think also that, if a state like CA uses LVT, won't that all
> be deductible from federal income tax? Which might mean more net income to
> individuals although less revenue to federal government.
Hehe. Bingo. Which shows just how dishonest the Prop 13 "tax revolt" campaign was, and how stupid the people who voted for it were.
> So, I think we
> have to honest that the theory has a whole lot of moving parts. The
> "capitalization" formula so often cited presumes to know the "Interest
> rate" (more appropriately the rate of return for LAND)
No, it's the discount rate, and it's an exogenous fact of the market.
> and it says nothing
> about the supply and demand mechanism when one would presume to affect sales prices.
There is no supply mechanism, as supply is fixed. The demand mechanism is discounted after-tax rent. That's all.
> Second, what, if any thing does the data actually show? Do we actually see
> land sale prices going DOWN, after there has been an increase in LVT? Just
> a quick look at PA cities doesn't seem to bear this presumption out. We
> "may" see evidence that land prices stabilize, but that is not the same
> thing as "falling". What about in Australia (or Hong Kong)? At a minimum,
> wouldn't some rigorous study of the facts be in order?
We need to remember the "g" in the capitalization equation. As long as a marginal increase in LVT rate causes a comparable or even larger marginal increase in economic growth rate, land prices won't fall. To guarantee declining land prices, the ad valorem LVT rate has to be so high -- well into double digit percentages -- that comparable economic growth rates are impossible.
-- Roy Langston
- --- In LandCafe@yahoogroups.com, Scott Bergeson <scottb@...> wrote:
>Sorry for the late response. What do you mean by collateral then? Land/buildings can be handed over to the lender as well, can't it? Both loans secured on a physical object that can redeem the debt by reposession, and personal debts, should be entirely legal. I'm not sure if you mean that any specific institutional aspect of mortgage collateral should be abolished, or the idea, which is kind of the basis of risk-taking and economic growth IMO. If anything, the american model is better than what I know as mortgages. AFAIU you can hand over your property and "walk away". No such thing exists here. Even if you hand back the property, you are personally liable for the redemption of the debt, and a creditor sale of a property (moveable objects as well), can only be done through the courts.
> Quoting k_r_johansen on Thu, 25 Oct 2012 20:45:37 -0000:
> Interesting concept. In most cases, owners servicing mortgages would just
> use their UIEs as an offset to the LVT and continue making the payments.
> If we are talking about a straight swap from income tax to
> LVT, most people would theoretically still have the ability to
> pay. The problem is, and I admit I'm looking at this from the
> Bankster's side, that the collateral just isn't there any more
> (assuming capital values do fall, which I believe they will),
> and the change in risk has implications. Imagine that the country
> suddenly changed systems, and (by the figures I gave), a debt load
> of somewhere around 50% of GDP changed from being collateralized
> to more or less personal loans, but at an interest of 4%.
> Govt. would have to step in as a guarantee in either scheme.
> Abolish collateral. Even more than land privilege, that
> bankster concept keeps people enslaved. If it isn't
> outright security; i.e., something that can be handed over
> to the lender, thus entirely discharging the debt; the
> debt is unconscionable, and ought to be nullified outright.
> Obviously, this also requires concomitant abolition of
> Glass-Steagall (FDIC). Write down all deposits in any given
> institution proportionate to nullification of its assets.