You don't get it. Imagine owning the entire subway. Then the subway system is an improvement on your land, not something adjacent to it, and should not be counted. (Yes, this would require buying most of all the five boroughs.)
You would not be taxed on the tunnels, the trains, and the stations. You would presumably be taxed on the value of the land occupied by those things, but not the things themself.
Land value tax does not need to pretend that none of the improvements exist, just that the improvements are not directly taxed.
> Land value tax does need not pretend that none of the improvements exist
That's precisely what land value tax must do. That is the definition of the tax. That is its only characteristic.
Imagine that things happen in the other order. You buy a bunch of undeveloped land somewhere. It has some assessed land value.
Now you build a city and a subway system on your land. Fifteen million people live on your land, work on your land, and commute by the subway that you dug on your land. Your land now has tremendous value. But, by definition, the land value is still the same as it was before there was anything there. The subway system didn't add to the land value. It added to the developed value.
If you believe the land under a city of 15M people has the same value as that same amount of undeveloped land, I'm not sure how to begin with an explanation.
You even slipped into your own reply: "Your land now has tremendous value."
The land of a 15M people city has huge value but low unimproved value.
Georgist believe that if you buy a piece of land and build value on it you should not be punished. Georgist taxation is meant to encourage individuals to develop their own land.
In practice likely the taxation would apply on a lot by lot basis, so you would have to count your huge land ownership as 150 thousand small lots each with significant unimproved value.
Another way to look at this is that you should tax a piece of land exactly the market value of renting that piece of land. So that the only value in owning land is the corresponding control and not the value extraction of ownership.
In this formulation you would pay a lot of taxes on the thousand of hectars the city is build on but no more and no less than you can get your tenants to pay you.
My main criticism of georgism is that it aggregate owneship to the rich, as you might not have the capital to make your land productive enough to cover its rent value.
E.g a small bed and breakfast in a scenic location could easily be developed into a 10 story hotel has an unclear undevaloped value.
A lot of Boston is built on old swampland. Would Georgists say that the 2023 tax value of all of Back Bay is $0?
> no more and no less than you can get your tenants to pay you
Tenants will pay you for both the use of the land and the use of the improvements, though, so if you're going to pin the tax to the rent value, the tax must be the lease value only of the use of the land. You are allowed to profit, untaxed, from the rent of buildings on the land.
> A lot of Boston is built on old swampland. Would Georgists say that the 2023 tax value of all of Back Bay is $0?
This is exactly what I was addressing in:
> In practice likely the taxation would apply on a lot by lot basis, so you would have to count your huge land ownership as 150 thousand small lots each with significant unimproved value.
Let's play an experiment: in the middle of nowhere Alice and Bob each own two closeby land lots. Each lot by itself is worth essentially 0 dollars so neither Alice nor Bob pay any taxes on it.
One year Alice builds an hotel on her lot, her unimproved landvalue remains unchanged but Bob's increases to X dollars.
Another year Bob builds a restaurant on his lot, his unimproved landvalue remains unchanged at X but Alice's increases to Y dollars.
Honestly I am not sure how this would handle infrastructure development like a road or a railroad
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For georgist taxation to work you need to set a sensible limit to how big or small a lot can be: an entire city is too big and a square foot is to small.
The possible failure mode of this taxation is that all but the most efficient use of land can become impossible, but right now I believe that the problem of excessive rent-seeking and "parked land" are more critical
Here's where I think you're going wrong: the unimproved land value of Alice's land does kinda change? If you try to do it specifically at the lot level, you go crazy. Do it at the neighborhood or block level on a per square foot basis, and you'll be able to levelize the value of two lots next to each other. And this handles someone building a private road or a subway or something: them building it increases the land value of the entire neighborhood, including the property the improvement is on, but the value of the improvement isn't included.
It's having access to a subway, or having a hotel nearby, or a restaurant nearby that improves values, and they stack. There might be some adjustments on a lot level, but that's due to things like: water access might increase the value of the lots that have it, but not on the other side of the street that doesn't have access.
And here's the thing: cities already calculate the value of the land separately from the stuff on top. I do look at my property taxes, and they break it into the two values.
By "lot by lot" I mean that for each lot of land you determine how much that land is worth considering everything around it. I believe that we are sort of saying the same thing.
The question here is "what's the unimproved land condition?" not "how many lots is Back Bay?"
When left as swampland, Back Bay is essentially valueless, both in aggregate and lot-by-lot. Someone in the past came along and improved that condition to the current relatively firm earth.
> A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it.
So if you were to own the lan under the Shamrock Pub in 501 E 8th St, Boston, MA 02127, United States you would pay taxes on that piece of land as if the Shamrock Pub was not there but obviously still considering the city around it.
Georgism asks you to not consider the improvements UPON your land, not to ignore those AROUND it.
The question of what that value is is quite easy to answer, it is the price of a similar empty lot in the same area, with the same developments around it.
>But, by definition, the land value is still the same as it was before there was anything there.
No, it's massively higher. Just go look at the value of an empty lot in the middle of nowhere in Nebraska vs the value of a lot in Manhattan. Land in Manhattan is more valuable because more people want land in Manhattan. This is only incidentally related to the cost to build all the physical infrastructure, which is the only part that land value tax ignores.
No, the land value tax ignores the value created by the physical infrastructure. The cost of building the physical infrastructure is ignored by... every tax system. (Well, except for VAT.) It's not relevant to anything.
> land value tax ignores the value created by the physical infrastructure
LVT ignores the value created by the improvements on that piece of property. It does not ignore the value created by other land/improvements. If my neighbor makes an improvement to their land that makes my land have more value, that increase in value is subject to tax on my land. (Otherwise, the taxable value of land in a city would never increase.)
If I own the only subway station in a city, that's not particularly valuable. If someone else builds a second subway station and connects theirs to mine, the value of my land and the value of the land of my immediate abutters increases. If 40 other stations are built, that effect is further magnified. These physical improvements on other properties result in increases in the value of the land near subway stations, which in turn increases the value of the land of the subway station.
It ignores the value of the physical infrastructure on that property. It's not ignoring the value of the physical infrastructure around it. And this discussion ignores the most likely method of determining the value, which isn't by individual determination of the lot, but by determining the price per sq ft for a block or neighborhood, then multiplying by the size of the lot. Which is a roundabout saying that it may in fact incorporate the existence of the physical infrastructure, but only in so far as it makes the land of the neighborhood more valuable.
This would mean that subdividing an existing lot while making no other changes would immediately crater the value of the lot by spiking its tax liabilities. Is that a sensible policy?
And when I complain "why are we so excited about a system with such fine dependence on the exact ownership structure of land?", is "the dependence on the exact ownership structure is so sensitive that we don't even plan to look at it; we'll legislate a fictitious ownership structure instead" a convincing response?
Why is one division of lots less arbitrary than some other division of lots?
Finally, under the system you describe, let's say you own property that has been, in the government's wisdom, registered as two "tax lots", A and B.
You put a building on tax lot A and pay property taxes on it that get assessed against tax lot B.
Then you put a building on tax lot B and pay property taxes on it that get assessed against tax lot A.
How is this tax regime different from a bog-standard property tax regime in which, when you put a building on tax lot A, its property taxes are assessed against tax lot A, and when you put a building on tax lot B, its property taxes are assessed against tax lot B? You develop the land, and then you pay taxes on the developed value.
What happened to the concept of "if you buy a piece of land and build value on it you should not be punished"?
It produces a very different dynamic overall as in almost every cases nearby lots have different owners.
This means that it is very expensive to own a piece of land in manhattan and do nothing with it while you just wait for the price to raise, while it is significantly cheaper to start new developments in "less desirable" parts of town.
I agree with you that a 4 paragraph explanation is not a good practical tax policy, but overall georgism creates better incentives than property taxes.
> What happened to the concept of "if you buy a piece of land and build value on it you should not be punished"?
Yep, it is not perfect, or at the very least the way I understand it has some holes, I still think it is more fair than what we have now and less exploitable.
This is a highly unrealistic scenario though.