Matt Yglesias has a post on land taxes:
Subtract and we conclude that there’s $1.758 trillion* worth of land in the corporate sector.
Last we turn to noncorporate business, which owns $9.704 trillion in real estate and has a replacement cost of structures of $4.786 trillion, giving us $4.918 trillion in land.
Add it all up and you get $14.488 trillion in land value.*
. . .
So who cares? Well, you should care. This number is high enough that it tends to confirm that view that taxation of land and other natural resources, supplemented by pollution fees and things like congestion charges could replace all taxes on labor and investment and still fund an ample welfare state and public sector.
I am pretty sure that Yglesias is confusing stocks and flows, but I’d also like to hear your views. Let’s assume that total taxes in America are at least $5 trillion (Federal, state, local). That would imply a 35% land tax. But let’s assume the various environmental taxes cut that to something like 25%, the rest would be pollution and congestion charges. I don’t know that Matt had these figures in mind, but I’m just trying to get orders of magnitude here.
Now imagine a retired schoolteacher living in a $600,000 house in Pasadena, with a replacement value of $200,000. The land is worth $400,000. Her tax is $100,000. That’s a lot for a retired schoolteacher!
Perhaps the problem is that a 25% tax rate doesn’t sound that bad, until you consider that it must be paid every year, and it applies to the total capitalized value of the flow of services from the land. After all, the “guvment” doesn’t just need $5 trillion, they need $5 trillion every single year, year after year. The retired schoolteacher could probably pay $100,000 in taxes spread out over a lifetime, but not every year.
Alternatively, the tax would exceed the annual flow of rent on land (likely to be far below 25% of capitalized value) and thus landowners might just walk away from the land in disgust. The government ends up owning all the land, and then whom are they going to tax? I’ve never read Atlas Shrugged, but isn’t that the theme of the novel?
Having said that, I like all of these tax ideas. I am merely suggesting that Yglesias is too optimistic about the revenue one could collect. (Or too pessimistic if you are a starve the beast conservative.)
Here’s Greg Mankiw:
This NY Times story on the middle class’s struggle with the new healthcare law is generally pretty good, but this sentence struck me as comically meaningless:
Experts consider health insurance unaffordable once it exceeds 10 percent of annual income.
What the heck does this mean? The typical American spends more than a third of income on housing. Does that make housing unaffordable? Presumably not.
I agree with Mankiw, but see an additional implication as well. Health care is 18% of GDP in America. I believe that’s about 22% of national income, perhaps a bit more. So the sort of single-payer tax system supported by liberals would require taxes of about 22% of income on average, just for health care! This makes a single-payer system completely unaffordable, according to the NYT.