TL;DW: This video goes into how a broken property tax assessment system has resulted in systemic over-assessment and over-taxing of properties in poor neighborhoods and under-assessment and under-taxing of properties in wealthy neighborhoods.

cross-posted from: https://lemmy.world/post/3982249

The housing market is a prime example of poor management and a huge driver of Canadians’ inability to get rewarded for their work, he said.

Yan said in Canada, social mobility is becoming stagnant due to these factors, and that’s making the country a less desirable place to live.

Many experts agree, saying Canada is in a full-on housing affordability crisis. A recent Rental Housing Index report found that 18 per cent of renters in Vancouver and Toronto are spending at least half their income on rent and utilities, while about 40 per cent are spending more than 30 per cent of their income on it.

Canada has now surpassed the U.S. with higher levels of household debt to GDP, with the figures dropping south of the border over the last decade. But as housing unaffordability continues its march in Canada, and as the country already has the worst household debt load in the G7, such debt levels are expected to continue to climb further and income inequality to further increase.

A classic video from Mr. Beat

Let the rant begin:

I think it's an absurd idea that things like labor are taxed at all (via income taxes), when labor is a productive activity. Meanwhile there are so many unproductive or outright harmful activities that don't get taxed nearly enough! Land speculation, carbon emissions, other forms of pollution, monopolistic control of finite natural resources, etc.

Further, even from a solely economic point of view, taxing things discourages them and distorts the market. Taxing carbon is a known way to reduce carbon emissions. Why don't we choose to distort the things we want to be distorted anyways, like pollution and rent-seeking behaviors?

Further, there is ample evidence to suggest we genuinely don't need income taxes to fully fund our government. I (and many others) are in favor of 3 main types of taxes:

1. Land value taxes
2. Pigouvian (or externality) taxes
3. Severance taxes

Land Value Taxes

A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements.[1] It is also known as a location value tax, a point valuation tax, a site valuation tax, split rate tax, or a site-value rating.

Land value taxes are generally favored by economists as they do not cause economic inefficiency, and reduce inequality.[2] A land value tax is a progressive tax, in that the tax burden falls on land owners, because land ownership is correlated with wealth and income.[3][4] The land value tax has been referred to as "the perfect tax" and the economic efficiency of a land value tax has been accepted since the eighteenth century.[1][5][6] Economists since Adam Smith and David Ricardo have advocated this tax because it does not hurt economic activity, and encourages development without subsidies.

LVT is associated with Henry George, whose ideology became known as Georgism. George argued that taxing the land value is most logical source of public revenue because the supply of land is fixed and because public infrastructure improvements would be reflected in (and thus paid for by) increased land values.[7]

https://en.wikipedia.org/wiki/Land_value_tax

In 1977, [Nobel prize-winning economist] Joseph Stiglitz showed that under certain conditions, beneficial investments in public goods will increase aggregate land rents by at least as much as the investments' cost.[1] This proposition was dubbed the "Henry George theorem", as it characterizes a situation where Henry George's 'single tax' on land values, is not only efficient, it is also the only tax necessary to finance public expenditures.[2] Henry George had famously advocated for the replacement of all other taxes with a land value tax, arguing that as the location value of land was improved by public works, its economic rent was the most logical source of public revenue.[3]

Subsequent studies generalized the principle and found that the theorem holds even after relaxing assumptions.[4] Studies indicate that even existing land prices, which are depressed due to the existing burden of taxation on labor and investment, are great enough to replace taxes at all levels of government.[5][6][7]

Pigouvian Taxes

A Pigouvian tax (also spelled Pigovian tax) is a tax on any market activity that generates negative externalities (i.e., external costs incurred by the producer that are not included in the market price). The tax is normally set by the government to correct an undesirable or inefficient market outcome (a market failure) and does so by being set equal to the external marginal cost of the negative externalities. In the presence of negative externalities, social cost includes private cost and external cost caused by negative externalities. This means the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product.[1] Often-cited examples of negative externalities are environmental pollution and increased public healthcare costs associated with tobacco and sugary drink consumption.[2]

https://en.wikipedia.org/wiki/Pigouvian_tax

A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.

https://archive.is/TYVWT#selection-2043.3-2043.318

Severance Taxes

Severance taxes are taxes imposed on the removal of natural resources within a taxing jurisdiction. Severance taxes are most commonly imposed in oil producing states within the United States. Resources that typically incur severance taxes when extracted include oil, natural gas, coal, uranium, and timber. Some jurisdictions use other terms like gross production tax.

https://en.wikipedia.org/wiki/Severance_tax

The key to Norway’s success in oil exploitation has been the special regime of ownership rights which apply to extraction: the severance tax takes most of those rents, meaning that the people of Norway are the primary beneficiaries of the country’s petroleum wealth. Instead of privatizing the resource rents provided by access to oil, companies make their returns off of the extraction and transportation of the oil, incentivizing them to develop the most efficient technologies and processes rather than simply collecting the resource rents. Exploration and development is subsidized by the Norwegian government in order to maximize the amount of resource rents that can be taxed by the state, while also promoting a highly competitive environment free of the corruption and stagnation that afflicts state-controlled oil companies.

https://progressandpoverty.substack.com/p/norways-sovereign-wealth-fund

Inequality

Specifically, I suggest that much of the increase in inequality is associated with the growth in rents — including land and exploitation rents (e.g., arising from monopoly power and political influence).

https://academiccommons.columbia.edu/doi/10.7916/d8-t92w-f529

https://gutenberg.org/ebooks/55308

Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy is an 1879 book by social theorist and economist Henry George. It is a treatise on the questions of why poverty accompanies economic and technological progress and why economies exhibit a tendency toward cyclical boom and bust. George uses history and deductive logic to argue for a radical solution focusing on the capture of economic rent from natural resource and land titles.

Progress and Poverty, George's first book, sold several million copies,[1] becoming one of the highest selling books of the late 1800s.[2][3] It helped spark the Progressive Era and a worldwide social reform movement around an ideology now known as 'Georgism'. Jacob Riis, for example, explicitly marks the beginning of the Progressive Era awakening as 1879 because of the date of this publication.[4]

https://en.wikipedia.org/wiki/Progress_and_Poverty

Land’s share in economies’ nonfinancial assets equals between 40% and 60%, and in the US currently equals over 50%. This constitutes a very large base for a non-distortionary tax. This column suggests that a 5-percentage point or larger increase in the tax rate on the value of US land, excluding buildings and equipment situated on the land, balanced by decreases in the tax rates on incomes from labour and from buildings and equipment (and in the limit by their complete elimination), would increase output by 15% to 25%.

https://en.wikipedia.org/wiki/Land_value_tax

Specifically, I suggest that much of the increase in inequality is associated with the growth in rents — including land and exploitation rents (e.g., arising from monopoly power and political influence).

...

Finally, I want to link this discussion with the earlier analysis of increases in wealth inequality, which showed that the increases are closely related to increases in land prices. Piketty’s recent book noted the enormous increases in the wealth-output ratio in most capitalist countries in the last third of a century. But these increases have been partly, and in some cases largely, related to increases in the value of land. A tax on the return to land, and even more so, on the capital gains from land, would reduce inequality and, by encouraging more investment into real capital, actually enhance growth. This is, of course, an old idea, promoted most famously by Henry George (1879).

• Joseph Stiglitz, Nobel prize-winning economist, in his 2015 essay, The Origins of Inequality, and Policies to Contain It

TL;DW: Tom Nicholas details the history and origin of the board game Monopoly. It was a rip-off of a game, The Landlord's Game, by a Georgist named Elizabeth Magie. She created the game to feel miserable, to show how monopolization of Earth's finite, god-given land only led to miserable outcomes. It had a secondary rule set that implemented Georgism's signature policy: land value tax. The winning condition was when everyone reach a certain amount of money. A game of shared prosperity, just like Georgism envisions.

As it stands, it is literally illegal to build enough housing on the vast majority of urban land in this country. (And in the US, too.)

Any new housing, even market-rate housing, reduces prices:

New buildings decrease rents in nearby units by about 6% relative to units slightly farther away or near sites developed later, and they increase in-migration from low-income areas. We show that new buildings absorb many high-income households and increase the local housing stock substantially.

And eliminating onerous zoning and development restrictions can do a lot to stabilize and reduce prices:

But in four jurisdictions—Minneapolis; New Rochelle, New York; Portland, Oregon; and Tysons, Virginia—new zoning rules to allow more housing have helped curtail rent growth, saving tenants thousands of dollars annually.

...

In all four places studied, the vast majority of new housing has been market rate, meaning rents are based on factors such as demand and prevailing construction and operating costs.

Further, housing supply constraints have had a deep debilitating effect on the economy:

In a follow-up paper, based on surveying 220 metropolitan areas, they revised the figure upwards – claiming that housing constraints lowered aggregate US growth by more than 50 per cent between 1964 and 2009. In other words, they estimate that the US economy would have been 74 per cent larger in 2009, if enough housing had been built in the right places.

How does that damage happen? It’s simple. The parts of the country with the highest productivity, like New York and San Francisco, also had stringent restrictions on building more homes. That limited the number of homes and workers who could move to the best job opportunities; it limited their output and the growth of the companies who would have employed them. Plus, the same restrictions meant that it was more expensive to run an office or open a factory, because the land and buildings cost more.

...

There is, in other words, a prima facie case that the housing crisis has caused more damage to [the UK's] GDP than any single event since the Black Death – when two-fifths of the population died.

In addition to abolishing our over-the-top restrictions on development, we should tax land:

A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements.[1] It is also known as a location value tax, a point valuation tax, a site valuation tax, split rate tax, or a site-value rating.

Land value taxes are generally favored by economists as they do not cause economic inefficiency, and reduce inequality.[2] A land value tax is a progressive tax, in that the tax burden falls on land owners, because land ownership is correlated with wealth and income.[3][4] The land value tax has been referred to as "the perfect tax" and the economic efficiency of a land value tax has been accepted since the eighteenth century.[1][5][6]

...

Most taxes distort economic decisions and discourage beneficial economic activity.[14] For example, property taxes discourage construction, maintenance, and repair because taxes increase with improvements. LVT is not based on how land is used. Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay, rather than on landlord expenses. Thus landlords cannot pass LVT to tenants, who would move or rent smaller spaces before absorbing increased rent.[15]

...

LVT's efficiency has been observed in practice.[18] Fred Foldvary stated that LVT discourages speculative land holding because the tax reflects changes in land value (up and down), encouraging landowners to develop or sell vacant/underused plots in high demand. Foldvary claimed that LVT increases investment in dilapidated inner city areas because improvements don't cause tax increases. This in turn reduces the incentive to build on remote sites and so reduces urban sprawl.[19] For example, Harrisburg, Pennsylvania's LVT has operated since 1975. This policy was credited by mayor Stephen R. Reed with reducing the number of vacant downtown structures from around 4,200 in 1982 to fewer than 500.[20]

LVT is arguably an ecotax because it discourages the waste of prime locations, which are a finite resource.[21][22][23] Many urban planners claim that LVT is an effective method to promote transit-oriented development.[24][25]

Even a pretty low LVT can still have benefits:

It reveals that much of the anticipated future tax obligations appear to have been already capitalised into lower land prices. Additionally, the tax transition may have also deterred speculative buyers from the housing market, adding even further to the recent pattern of low and stable property prices in the Territory. Because of the price effect of the land tax, a typical new home buyer in the Territory will save between $1,000 and $2,200 per year on mortgage repayments.

And no, land value taxes cannot be passed on to tenants.