From: Rafal Smigrodzki (rafal@smigrodzki.org)
Date: Wed Sep 10 2003 - 05:33:37 MDT
Alex Bokov wrote:
>
> [quote from: matt@essentialgoods.com on 2003-08-23 at 20:10:38]
> Carried to its inevitable consequence all the land is owned by a few
> very rich people who literally can deny life to the remaining
> population. For an in-depth exploration of one way to solve this pop
> over to www.henrygeorge.org and do some reading.
>
>
> Wow! Never thought I'd see tax scheme I don't find completely
> abhorrent.
### Yes, georgism has a lot to offer. Still, I have the feeling it doesn't
hit the mark. Consider e.g. rental property. In many situations, such
property is bought and sold relatively frequently, depending on the
availability of other investments. The rent collected by the owner is quite
limited, usually not appreciably greater than the gains from the stock
market, in most cases lower. Some long-term owners of real estate which
appreciated in value due to societal change may collect high rents, in
relation to the initial investment, but then such long-term investments are
risky, there were uncounted numbers of people who bought land which didn't
appreciate as much, and there is also the missed opportunity cost - one
could have invested in Berkshire-Hathaway instead of land in Alaska. In
fact, since true productivity comes from manufacturing and services, most
importantly production of scientific discoveries, investors in these
activities gained most, while investors in land are like collectors of
moonlight - they get the second-hand effects of real enrichment.
I think that George correctly identified rent-seeking as one of the
activities which can be taxed with the least damage to the economy, but
rent-seeking should be identified not so much with land-ownership per se, as
with monopoly or oligopoly control of limited resources, including, but not
limited to, land. Vast landholdings in some countries, especially where
agriculture is the pillar of the economy, indeed might limit growth, but the
same could be said, perhaps to a lesser degree, about some industrial
concentrations of power, such as the Societe Generale of Belgium, and other
industrial organizations with close ties to state power.
It makes more sense, IMO, to tax (assuming taxation is desirable in the
first place) entities according to size, perhaps adjusted for the percentage
of market penetration in a sliding window of human mobility matrix (sorry
for the cryptic language in invented here, expl. follows). Human mobility
matrix would be a description of the ability of humans to change the
entities they interact with in a particular aspect of their life. Certain
interactions are highly constrained by location, like buying of sewage
removal services through the use of a sewer system. Competition in this
system is difficult to implement incrementally, and every service provider
might require an investment equal to the investments of the most successful
competitor. Other interactions, such as buying of groceries or dictation
transcription services, are less constrained by location, due to the ease of
transport of the goods and services, as well as the ability to have
competitors with lower total investment (lower barriers to entry). A window
of the mobility matrix covers a number of consumers (e.g. 5 000), multiplied
by the number of providers of a service. A small number of suppliers reduces
the number of the consumers in the window. If a supplier covers more than a
window of adjacent customers of constant size (the actual size would need to
be optimized in simulations and in practical experiments), a tax would be
assessed, depending on the percentage of customers the supplier has in the
window. So a sewer company would be taxed if it had more than 5 000
customers in an area where it is an exclusive provider, or 10 000 customers
if it has one competitor. There would be an incentive to either keep the
company small, or to build parallel sewage systems, so users could easily
switch, reaping both the benefits of competition directly, and the increased
reliability of double systems. Same reasoning applies to cable, land-line
telephone, etc. On the other hand, providing a radio station service to a
million people would still escape taxes - since there are dozens of
competitors supplying similar services. Land ownership would be taxed based
on a sliding window counting tenants. An additional level of adjustment
could be a factor of the total economic impact of the supplier/landlord in a
window - the percentage of total economic activity flowing through the
supplier (this would need more details than I have the time to describe
here).
Please note that at no point do I suggest state provision of services, or
regulation of business practices, with the exception of size, which I treat
as a proxy measure of the ability to constrain individual choices of
consumers. The aim of the program is to increase economic growth by limiting
limits on competition, and provide funds for certain limited,
non-redistributive state services. Considerations of justice, fairness,
natural law and common decency do not apply.
How abhorrent is this tax scheme?
Rafal
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