Land-Value Tax: Why It’s Immoral and Destructive

July 14, 2012

I just had a conversation with an angry “geolibertarian”. This Physiocrat inspired approach to libertarianism apparently supports a special land-value tax, or a tax on land that is held and not developed.

The general argument is that undeveloped land should be developed as soon as possible without people sitting on vacant land as an investment. Of course, like all tax arguments, this completely misses the point, is based on bad assumptions, and is immoral theft.

Calling it “libertarian” is completely backwards. They reject what libertarians believe about property rights, and that’s the entire foundation of libertarianism. They are not libertarians. They are not capitalists.

1. Government Shouldn’t Force “Lower” Short-Term Prices

Lowering prices in the short run as much as possible isn’t the goal of government. Protecting rights is the goal of government. And just because I have food in my pantry and you’re hungry doesn’t mean you can rob me of it.

2. Delayed Consumption Can Be Productive

The entire purpose of capitalism and savings is to delay consumption for some other production and consumption later on. Increasing land prices, for example, make some project unachievable and other projects achievable. Which do we pick? “We” don’t. The market does. Otherwise, we’ll have malinvestment.

3. “Evil” Speculator Profits Are Also Productive

Third, speculators in land are often the very people who are raising money for other projects, so the increase in cost funds many other investments, including — here’s the kicker — many new real estate developments. And that’s a good thing.

4. There’s No Such Thing As a Free Lunch.

It never ceases to amaze me that people think some new sort of tax or regulation won’t have negative consequences, or costs. It’s insanity.

The profits made in selling undeveloped land eventually require the development of said land. You’re assuming that current demand is all that matters, which is ABSURD. That’s why we use capital in the first place and have savings — it allows us to delay some consumption for future consumption.

People who sit on undeveloped property until someone is willing to pay a profitable amount provide a service because some projects won’t occur and others will. That’s literally the point. It absolutely can be -productive- for me to sit on some land and not sell it for 10 years, because that project in 10 years could be absurdly more important than setting up whatever current demand is.

That’s literally the point. Real estate prices don’t just reflect instant demand — but also possible future rents and such. Time is an important variable geolibertarians are trying to ignore.

It’s the time gap that is being turned into profit, and it’s profitable for a reason. Not all price increases are bad. Some are market functions that allow better production over time.

In the end, “libertarians” will always be tempted to make a little exception for taxes and force. Just a little tax on the rich to “level” the playing field, or just a little tax on the poor to get skin in the game, or just a little tax on important to “help” producers.

But they’re always broken. The only economic system that makes sense is this: liberty. To learn more about the economic system that best protects liberty, read our introduction to capitalism article here.

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