The lunatics now have control of the asylum.

Hi, Donald. Hi, Elon.

Meanwhile, the left runs lengthening lists of our mounting social problems whilst denouncing the leaders. They have no real solutions, though: Maybe if we taxed billionaires?

Meanwhile, the only effective fiscal remedy for the upcoming financial collapse sits lonely in the wings.

This is a good rundown, except that for well over 100 years Australia has proven that it’s not terribly difficult to value land or separate the value of buildings from the land value. That’s simply an argument promoted by those who don’t want LVT. Qualified valuers do it very well.

Technically, it isn’t a tax: it’s a rent.

James Galbraith

Testimony on Sensible Tax Reform

Statement by James K. Galbraith, Lloyd M. Bentsen, Jr. Chair in Government/Business Relations and Professor of Government, The University of Texas at Austin, and Senior Scholar, Levy Economics Institute, before the Senate Finance Committee, March 8, 2011, hearing on Principles of Efficient Tax Reform.

Cross-posted from New Deal 2.0 on 8 March 2011 01:04 PM

Chairman Baucus, Senator Hatch, Members of the Committee, it is an honor for me to appear before you this morning, to discuss the fundamental principles of an efficient tax reform.

[snip]

6. Should we tax capital, labor — or rent? Is it a good idea to shift the tax burden from high-income to low-income Americans, in the guise of shifting the tax burden from capital to labor, in order to promote “saving and investment”? In particular, will this create new jobs? History says not: we have been shifting this burden for decades with no appreciable effect on savings, investment or jobs.

And there is also no shortage of capital in our economy. As the economist Mason Gaffney wrote in a paper delivered to the National Tax Association in 1978: “The key to making jobs is changing the use and form of capital we already have. Tax preferences for property income, in their present and proposed forms, bias investors against using capital to make jobs, doing more harm than good.”

Economists from Smith to Ricardo to Mill understood that fixed investments, however useful, do not generate many permanent jobs. What creates jobs is the revolving capital that supports payrolls. A tax policy aimed at supporting employment would shift the tax burden away from labor, and off of short-term capital, and place it instead on long-term capital accumulations. If this reduces the investment in fixed capital that is desired for other reasons — in particular, investment with broad public benefits — then that sort of investment should be done by public authority, funded by an infrastructure bank.

Thus as a general rule fixed assets — notably land — should be taxed more heavily than income. The tax on property is a good tax, provided it is designed to fall as heavily as possible on economic rents. This basic argument, going back to Ricardo, remains sensible, for it aims to not-interfere where there is, in fact, no public purpose to interfere with private decision-taking. Payroll taxes and profits taxes do interfere directly with current business decisions. Taxes effectively aimed at economic rent, including land rent and mineral rents, and at “absentee landlords” as Veblen called them, do not.
An important question is how best to treat the “quasi-rents” due to new technology and thus the incentives for innovation. These are presently held as long-term capital gains and they tend to escape tax to a very large degree, with the consequence that a small number of successful innovators (and patent holders) have become an oligarchy of never-before-equaled wealth.

The incentive for innovation is an important public policy objective. But it does not require the vast prizes presently available. And it does not require that those prizes escape tax indefinitely. A sensible approach is to tax unrealized capital gains after a certain amount of time has elapsed — perhaps at fates that rise with time — and again subject to a full charitable deduction. In the final analysis — that is to say at death — once again setting the estate tax at a high rate with a high exemption encourages the early transfer of large quasi-rents to independent foundations or other non-profit institutions (universities, hospitals, churches), and into activities consistent with public purpose. I would also favor raising required foundation payout rates, so as to assure that foundations do not last in perpetuity unless they find new donors.

[snip]

CATHERINE CASHMORE AND WARREN MOSLER

Surely, public capture of economic rents is the best way to avoid inflation, whereas taxes on incomes and purchases are inflationary? A secondary source of inflation is the pumping of land prices, land having no cost of construction, but we still believe government bonds which create so-called ‘national debt’ is the best way to manage inflation. CPI seems to be an insignificant measure of inflation in comparison to taxes and land prices?

You’ve raised some thought-provoking points regarding inflation and economic policy. Here’s a deeper dive into these concepts:

1. Public Capture of Economic Rents: Economic rents are earnings that exceed the normal return on investment, often derived from the ownership of natural resources, land, or monopolistic practices. Capturing these rents through land value taxes, as advocated by Henry George, could indeed help prevent land speculation and reduce inequality, potentially curbing inflation. By taxing the unimproved value of land, it could discourage the hoarding of land and promote its efficient use.
2. Taxes on Incomes and Purchases: Traditional taxes on income and consumption can indeed have inflationary effects, particularly if they reduce disposable income and overall demand in the economy. Some argue that these taxes can distort economic behavior and investment decisions.
3. Pumping of Land Prices: Land prices often reflect speculative activity rather than intrinsic value, leading to inflationary pressures, especially in the housing market. Since land is a finite resource, its price can be driven up by demand and speculation, contributing to economic instability.
4. Government Bonds and National Debt: Government bonds are a tool for managing public finances and can help control the money supply. However, relying on bonds and incurring national debt requires careful management to avoid long-term financial burdens. Modern Monetary Theory (MMT) suggests that sovereign governments with their own currencies are not constrained by traditional debt limits, but this view remains controversial.
5. Consumer Price Index (CPI): The CPI is a widely used measure of inflation, but it has limitations. It primarily tracks changes in the prices of a basket of goods and services, which may not fully capture the impact of taxes or speculative land price increases. Alternative measures, such as the Producer Price Index (PPI) or the GDP deflator, can provide additional insights into inflationary pressures.

Your perspective on the importance of capturing economic rents and managing land prices is a valid and interesting approach to addressing inflation and promoting economic stability. It’s a complex issue with multiple facets, and different economic theories offer various solutions.

If you’d like to delve deeper into any of these topics or explore alternative economic theories, let me know! 😊