Baron Georges-Eugène Haussmann … transformed Paris with dazzling avenues, parks and other lasting renovations between 1853 and 1870. … Haussmann… resolved early on to pay generous compensation to [Paris] property owners, and he did. … [He] hoped to repay the larger loans he obtained from the private sector by capturing some of the increased value of properties lining along the roads he built. … [He] did confiscate properties on both sides of his new thoroughfares, and he had their edifices rebuilt. … Council of State … forced him to return these beautifully renovated properties to their original owners, who thus captured all of their increased value. (
No, I'm not... I just think that harberger taxes without constraints create potential for 1) abuse, 2) unintended consequences i.e., disability tax. I have been working and researching some game implementations of the harberger tax, and so far a lot of them have reached broken states, mostly because of very wealthy actors who skew the game. I am already on board with the system to help mitigate existing housing and resource inefficiencies appeal but the *hard* problems seem to me to be how to migrate from an already deeply unequally resourced system.
Yeah it seems to me that this creates a snowball of attendant costs in the real world-- furnishing, family members, proximity to work. You are suggesting (i assume) that as an individual I am able to estimate that value and thus incorporate it into the price i pay in tax or insurance. But these economic shocks are shocks for a reason: my tax may be perfectly reasonable, but another entity wants me gone, Amazon opens HQ nearby... I have more money, because they bought the house, but how much does it cost me to move? It seems to me that this really interferes with people's ability to smooth income and expenses over time.
Huh? When you become unexpectedly poorer, and you didn't insure against this risk, then you must cut back on expenses, including the quality of your housing.
I think this could also be abused. You seem to be completely discounting that people furnish their homes, get homes with pets and kids in mind, buy homes for their proximity to other people...What if something happens to me (lose my job), and I suddenly have different income and can't afford to price my house higher to avoid moving? While I can see the benefit of paying "true" taxes, i agree there is room for harassment. Please explain or point to the basic economics in the post that accomodates this...
Yes, I thought I made that (textbook) equivalence clear in the numerical example.
I do think people will prefer the option where it is optimal to honestly report the market value for their house, but it will also have important behavioral implications.
Due to aversion to nominally overstating their property value, or due to using some sub-optimal but plausible sounding heuristic, people will tend to under-declare, which will lead to too low tax receipts and a too high level of hostile buying, if the alternative (and textbook but not real-life equivalent policy) is set to be optimal.
The policy of declare a sales price D(t) and paying a tax r*Int D(t)dt is equivalent to a policy where someone must pay k*D to buy a property, and the tax rate is changed to r*k. You might be right that many people might prefer the policy if framed that way.
(1) People will tend to be averse to overestimating their property value even if this is textbook optimal. If the tax is nominally a 1% tax on property value, they will be very annoyed if the textbook optimal [1] declaration of their property value is 120% of the market value, such that the tax is actually a 1.2% tax on property. They will tend to be both annoyed and under-declare, and hence face a direct welfare loss as well as one from bearing the high risk of being blackmailed or facing a hostile sale associated with a textbook sub-optimal declaration.
If you really want to impose a 1.2% tax you would be better off imposing a 1.2 % tax on the declared value but make hostile sales be possible only at a 20% premium over the declared value. Then the 'honest' declarer who simply reports their estimate of the market value will not be declaring a value too low as the price to hostile buy is still 120% of the market value - which we assumed above is the optimal declaration with a hostile buy premium.[2]
(2) The optimal declaration imposes a considerable risk if the tax is generally large. This leads to a direct efficiency loss, or an indirect one via transaction/information costs associated with providing insurance.
(3) Variable costs to move means that there is an additional loss associated with effort expended by blackmailers in identifying people with atypically high moving costs who can be profitably blackmailed by a threat of a hostile buy.
(4) Those with a generally higher cost of moving (i.e. the disabled, those with many dependents etc.) will optimally declare with a higher premium than others. Thus the property tax is also a disability tax. In this case the well known case for ability taxes runs in reverse.
[1] By textbook optimal I mean that we are ignoring the psychological costs associated with feelings of unfairness etc. resulting from a particular declaration strategy. [2] The 20% premium here is just to provide a numerical example, it is not an estimate of the optimal premium to apply.
Seems you are just repeating what I said in the post; beware posting a price below your value, as other will look for such cases and buy intending to sell it back to you.
The tax will raise more than it says on the label, as the optimal price to declare will be between the market price and the market price plus the total cost of moving.This will to many feel like exploitation, so it will be better to raise the nominal rate and make the hostile buyer pay a premium over the listed rate.
If one declares a price somewhat below the market price plus the total cost of moving, then they will not want to be forced to sell, but at the same time this will be rare as the price will be at some premium over the market price. The surety of some tax evasion will be worth bearing the risk of losing out in a hostile buy.
In this case, it will be possible for people with sufficient resources to threaten to buy on pain of being paid a fee. Quite a few people will make some mistake in their calculation and mistakenly under-declare, and get burned severely. Or perhaps someone will make a honest and optimal declaration, but some potential buyer will find out they have exceptional high costs of moving (maybe they or their child just became severely ill etc.) and can then exploit the situation.
I would usually assume the proposer would intend to make these sorts of practices illegal, which would make the proposal more palatable, though in this case I am unsure.
You don't seem to have thought about the power differential at stake between a billion dollar individual/company and an individual or small startup. Forcing a regular person or small business to set a high enough price to avoid having their property bought by a competitor or abuser is a win condition for the competitor or abuser. The target/victim now has to pay that much higher price, and given the power differential, for it to be high enough to end the abuse, it has to be high enough to potentially put the victim out of business.
You're smart enough that you should be able to imagine the abuse potential, rather than just dismissing it as irrelevant.
You can't make them move unless you are willing to pay more for their property then they are. If they set high enough prices you'll go broke buying all their properties.
I suppose that given the political will CHT could be tested in various dilutions (e.g. by multiplying the tax rate on the excess of CHT over standard valuation, and perhaps also the 1% repurchase penalty, by 0 < x < 1) and compared with full CHT (x=1) and with current state (x=0) to see what people prefer.
This is going to be a tremendously fun world to be part of a wealthy company in. As a large company, say, Amazon, or Google, I can shut down my competition pretty trivially. It's tremendously disruptive to have to move on a frequent basis, and I can just buy my competition's buildings, whether that's their office, or their home, every 2 months or so. Sure, they make some tiny amount of profit on that, but I can force them to move. Moving is expensive in both money, and, more importantly, in attention. Even hiring movers won't prevent disruption to their attention, especially if I'm targeting a small company.
If I do my job well, I can use this as a way to make more money than I spend by then purchasing those competitors when they're ready to be done playing this game with me.
Security of current owner comes at the cost of value of the next owner, who has clearly demonstrated they have a higher value for it. The efficiency argument is very clear and direct, just like at an ordinary auction. The person who is willing to pay more for it should get it.
No, I'm not... I just think that harberger taxes without constraints create potential for 1) abuse, 2) unintended consequences i.e., disability tax. I have been working and researching some game implementations of the harberger tax, and so far a lot of them have reached broken states, mostly because of very wealthy actors who skew the game. I am already on board with the system to help mitigate existing housing and resource inefficiencies appeal but the *hard* problems seem to me to be how to migrate from an already deeply unequally resourced system.
It seems you are just arguing against change, any change. Yes of course change is costly, but it should still happen sometimes.
Yeah it seems to me that this creates a snowball of attendant costs in the real world-- furnishing, family members, proximity to work. You are suggesting (i assume) that as an individual I am able to estimate that value and thus incorporate it into the price i pay in tax or insurance. But these economic shocks are shocks for a reason: my tax may be perfectly reasonable, but another entity wants me gone, Amazon opens HQ nearby... I have more money, because they bought the house, but how much does it cost me to move? It seems to me that this really interferes with people's ability to smooth income and expenses over time.
Huh? When you become unexpectedly poorer, and you didn't insure against this risk, then you must cut back on expenses, including the quality of your housing.
I think this could also be abused. You seem to be completely discounting that people furnish their homes, get homes with pets and kids in mind, buy homes for their proximity to other people...What if something happens to me (lose my job), and I suddenly have different income and can't afford to price my house higher to avoid moving? While I can see the benefit of paying "true" taxes, i agree there is room for harassment. Please explain or point to the basic economics in the post that accomodates this...
Yes, I thought I made that (textbook) equivalence clear in the numerical example.
I do think people will prefer the option where it is optimal to honestly report the market value for their house, but it will also have important behavioral implications.
Due to aversion to nominally overstating their property value, or due to using some sub-optimal but plausible sounding heuristic, people will tend to under-declare, which will lead to too low tax receipts and a too high level of hostile buying, if the alternative (and textbook but not real-life equivalent policy) is set to be optimal.
The policy of declare a sales price D(t) and paying a tax r*Int D(t)dt is equivalent to a policy where someone must pay k*D to buy a property, and the tax rate is changed to r*k. You might be right that many people might prefer the policy if framed that way.
No there are important welfare implications:
(1) People will tend to be averse to overestimating their property value even if this is textbook optimal. If the tax is nominally a 1% tax on property value, they will be very annoyed if the textbook optimal [1] declaration of their property value is 120% of the market value, such that the tax is actually a 1.2% tax on property. They will tend to be both annoyed and under-declare, and hence face a direct welfare loss as well as one from bearing the high risk of being blackmailed or facing a hostile sale associated with a textbook sub-optimal declaration.
If you really want to impose a 1.2% tax you would be better off imposing a 1.2 % tax on the declared value but make hostile sales be possible only at a 20% premium over the declared value. Then the 'honest' declarer who simply reports their estimate of the market value will not be declaring a value too low as the price to hostile buy is still 120% of the market value - which we assumed above is the optimal declaration with a hostile buy premium.[2]
(2) The optimal declaration imposes a considerable risk if the tax is generally large. This leads to a direct efficiency loss, or an indirect one via transaction/information costs associated with providing insurance.
(3) Variable costs to move means that there is an additional loss associated with effort expended by blackmailers in identifying people with atypically high moving costs who can be profitably blackmailed by a threat of a hostile buy.
(4) Those with a generally higher cost of moving (i.e. the disabled, those with many dependents etc.) will optimally declare with a higher premium than others. Thus the property tax is also a disability tax. In this case the well known case for ability taxes runs in reverse.
[1] By textbook optimal I mean that we are ignoring the psychological costs associated with feelings of unfairness etc. resulting from a particular declaration strategy. [2] The 20% premium here is just to provide a numerical example, it is not an estimate of the optimal premium to apply.
Seems you are just repeating what I said in the post; beware posting a price below your value, as other will look for such cases and buy intending to sell it back to you.
The tax will raise more than it says on the label, as the optimal price to declare will be between the market price and the market price plus the total cost of moving.This will to many feel like exploitation, so it will be better to raise the nominal rate and make the hostile buyer pay a premium over the listed rate.
If one declares a price somewhat below the market price plus the total cost of moving, then they will not want to be forced to sell, but at the same time this will be rare as the price will be at some premium over the market price. The surety of some tax evasion will be worth bearing the risk of losing out in a hostile buy.
In this case, it will be possible for people with sufficient resources to threaten to buy on pain of being paid a fee. Quite a few people will make some mistake in their calculation and mistakenly under-declare, and get burned severely. Or perhaps someone will make a honest and optimal declaration, but some potential buyer will find out they have exceptional high costs of moving (maybe they or their child just became severely ill etc.) and can then exploit the situation.
I would usually assume the proposer would intend to make these sorts of practices illegal, which would make the proposal more palatable, though in this case I am unsure.
You do not understand the basic economics here.
You don't seem to have thought about the power differential at stake between a billion dollar individual/company and an individual or small startup. Forcing a regular person or small business to set a high enough price to avoid having their property bought by a competitor or abuser is a win condition for the competitor or abuser. The target/victim now has to pay that much higher price, and given the power differential, for it to be high enough to end the abuse, it has to be high enough to potentially put the victim out of business.
You're smart enough that you should be able to imagine the abuse potential, rather than just dismissing it as irrelevant.
You can't make them move unless you are willing to pay more for their property then they are. If they set high enough prices you'll go broke buying all their properties.
I suppose that given the political will CHT could be tested in various dilutions (e.g. by multiplying the tax rate on the excess of CHT over standard valuation, and perhaps also the 1% repurchase penalty, by 0 < x < 1) and compared with full CHT (x=1) and with current state (x=0) to see what people prefer.
This is going to be a tremendously fun world to be part of a wealthy company in. As a large company, say, Amazon, or Google, I can shut down my competition pretty trivially. It's tremendously disruptive to have to move on a frequent basis, and I can just buy my competition's buildings, whether that's their office, or their home, every 2 months or so. Sure, they make some tiny amount of profit on that, but I can force them to move. Moving is expensive in both money, and, more importantly, in attention. Even hiring movers won't prevent disruption to their attention, especially if I'm targeting a small company.
If I do my job well, I can use this as a way to make more money than I spend by then purchasing those competitors when they're ready to be done playing this game with me.
Security of current owner comes at the cost of value of the next owner, who has clearly demonstrated they have a higher value for it. The efficiency argument is very clear and direct, just like at an ordinary auction. The person who is willing to pay more for it should get it.