> Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Because the supermarket is using more land compared to the hotel. Every bit of land the supermarket owns is land you and I can't use. It's only fair that the supermarket compensate the community for this, since the land could have been used for something else instead (like an apartment building, or an office building).
It's also not a given that the ultra-luxury hotel will pay less tax. It's likely that a luxury hotel will be in a more desirable area of town, where land values are higher, and so tax there will be higher.
It's not an argument for why we should rely solely on a land tax in lieu of e.g. taxes on corporate profits, income taxes, or sales tax.
I'd say there's a moral reason not to!
Is there a practical reason to tax those things? Not if the goal is to maximize government revenue!
If you tax land as high as possible -- at 100% of rent -- then it's not usually possible to increase revenues by taxing the stuff you mentioned. Doing so would almost invariably decrease the revenue the LVT raises by more than the revenue your proposed taxes would raise.
There are exceptions.
1) Certain non-traditional land like radio spectrum, minerals, pollution rights, parking, space on a congested highway, etc can and should be taxed.
2) Some luxury goods could be taxed. Whether or not they should probably depends on the situation and opinion. (By luxury goods, I mean goods that are valuable in part because other people don't have them. A cell phone is thus not a luxury good, for example, because the more people have cell phones the more useful your phone is. Luxury goods in the sense I mean are not merely "expensive" or "for rich people," though most luxury goods are.)
Currently most federal tax revenue comes from wage/payroll taxes (65%). There is nothing less arbitrary about taxing wages than land value. In fact, taxing wages is more harmful as I will explain.
In general the more you tax something, the less of it you get. So by increasing income taxes, we discourage working - something that is presumably beneficial to society, while also encouraging more people to evade the law to avoid the taxes (working under the table). Land value however doesn't have any of these distortions because land supply is fixed and nobody creates it. Unlike income or sales taxes, land value tax is impossible to evade.
The reason to tax land value is because nobody is more entitled to the land and commons than anyone else, land value gains are pure unearned income, and taxing land has no negative distortions. By not taxing land value, we give a free ride to the landowning rentier class, and encourage the zero sum economic waste of playing land speculation, leading to housing booms/busts like the 2008 Great Recession and 1986-91 Japan housing bubble.
> Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Land value is largely determined by location. That supermarket may have a lower tax bill than that boutique hotel in the city center if the supermarket is located in an area with lower land values. LVT promotes denser and more efficient development, and thus a supermarket could be located in the basement of a residential apartment complex or mall and pay less in land value taxes by sharing the tax burden with the rest of the land property.
We all need clean air. We all need clean water. Those who use lots of water are usually charged by their local utility for what they take. Some farms and water bottlers deplete the local resource, and they ought to be charged for what they take from the commons, if the carrying capacity can't handle it.
Supermarkets in Manhattan are amazingly inventive in providing a lot of groceries in a space whose smallness would be unimaginable in suburbia -- and is difficult to "social distance" in today.
In the city, that supermarket woudl not be a single-story building; it would have a 20- or 40- or more story building overhead, and all those users would share the land value tax.
And the building would not be taxed, so no downside to fully developing, and regularly redeveloping, the lot to serve human needs.
But proposing to replace income and sales taxes with land value taxes, making it the primary tax -- which would necessarily skyrocket the land value tax to produce the same tax revenue at the end of the day -- would be extremely distortionary.
Thanks for giving your off the cuff opinion against a consensus of people studying the question
> which would necessarily skyrocket the land value tax to produce the same tax revenue at the end of the day -- would be extremely distortionary.
It's distortionary against the existing distortions, by reducing them.
Anything reducing tax distortions is "distortionary" by your argument's logic
Why don't you educate yourself? Starting here:
https://en.wikipedia.org/wiki/Optimal_tax
As you can plainly see, land value tax is hardly the centerpiece of strategies to minimize distortion. In fact, it's left for the end of the last section of the article. Because while it's a proposal for sure, it's certainly anything but a consensus, in reality.
That said your opinion is clearly not gathered by expert reading, because I've done that reading and it comes to a different conclusion.
If you're interested in optimal taxation, I'd skip reading Wikipedia page and just go read the 2008 Mankiw literature review on "optimal taxation in theory and practice" instead. It doesn't touch land value taxation (which is a niche topic) but is very accessible and a good read.
Second, when metropolitan LVT is studied, the theoretical social benefits are large bordering on the absurd. Here's a study by the NY fed:
https://www.newyorkfed.org/medialibrary/media/research/econo...
It massively reduces income and wealth inequality (lots of inequality is tied up in urban real estate ownership).
But that has nothing to do with land value tax being the distortion-minimizing solution for optimal taxation -- which it isn't -- and is what I was originally responding to.
So then I'm not sure you're even disagreeing with me.
Why not a radio spectrum tax as the primary tax instead? Or an oxygen tax proportional to your lung size? Or a clean water tax, or a tax on the weight of your grocery consumption, or a tax on the weight of the garbage you produce, or the carbon you consume?
All of those are valuable resources.
That's why it's not found in the political dialog, because it's super-arbitrary and would therefore have grossly distorting effects. Why should a low-margin supermarket which people need, occupying tons of space, pay huge taxes, while a tiny very profitable ultra-luxury boutique hotel pays only 5% of the taxes?
Taxation needs to be applied with some combination of minimizing distortion and achieving some level of progressivism. A land value tax is absolutely terrible at both of those.