Bowman is right. Because Land is everything not supplied by human effort, a tax on it’s rental value has zero deadweight losses. In fact because rents are the most efficient way of allocating scarce resources, an LVT, whereby we all pay rent to exclude others from valuable land, is better than neutral.
Therefore, points 1,2 and 3 are wrong and based on a misunderstanding of what an LVT is, and how it would work.
- Yes, more “productive” is always good. Only first, you have to define what you mean by “productive”. i)While owner occupiers may have an incentive to do something with their land, an LVT puts a real time market cost on any decision made. Something that cannot happen while owner occupiers impute their rent. http://markwadsworth.blogspot.co.uk/2014/10/capitalists-landlords-and-owner.html ii) The aggregate rental value of land comes from the efficient exploitation of agglomeration effects on one hand(development) and a preference for locational amenity over spending on alternative goods and services on the other(preservation, enhancement). So, in order to maximise aggregate land rents, “productive” means the correct balance of development and rules, property rights and planning regualtions. Just like as if we wanted to maximised our stock of wealth and economic welfare, the taxation of not working would end up lowering it, and thus lower “productivity”, because we value our time not working. An LVT thus aligns the incentives of land users, and those who collect the rents and set the rules. http://markwadsworth.blogspot.co.uk/2016/06/laffer-curve-of-planning.html
- If land users paid full market based compensation for their right to exclude others from a resource supplied by nature, the selling price of a title deed(land part) would be worthless. So, today a title deeds exchange value is based purely on the fact just compensation does not have to be paid in perpetuity. A very special and unfair privilege. The cost of exclusive rights to natural resources are only internalised when everyone pays rent for that privilage, just as renters do now. Imagine slaves were not a depreciating asset. According to Bowmans logic, once they were sold, any income derived from them would be legitimatised and forever, despite the selling price from their “free labour” being correctly priced by the market.
- Yes, LVT can be seen as a lump sum tax, attached to a land title rather than an individual. Because of this, it’s taxable base is vast, fair, efficient and only ever increases with time. That cannot be said of other lump sum taxes. They will only bring in limited one off tax. And will damage the confidence of producers they will not reoccur. They are therefore a tax on capital and a disincentive to produce it. ii) Under a LVT, we have not just redistributed from current landowners to those in the future. Because land by value is so evenly distributed, we are ensuring a fair distribution now. So the majority of current landowners would be better off under a LVT tomorrow. That’s what happens when we equally share the value nature supplies for free. Good for producers, bad for economic parasites and Socialist control freaks.