The landlord, as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord, should earn no profit based on that difference, because that difference would exist regardless of who – if anyone – is the landlord.
If the landlord makes some particular investment in addition to the "natural" or community-driven component of the land's value, she will keep all of the upside from that investment.
To repeat: All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord.
That is sufficient incentive for landlords to productively develop on valuable land. More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use). This is of course a behavior you see all over high value areas.
They provide access to their land, which is the same thing. This debate is not about who (or what) created the physical dirt. It is about the economic value of the property, which only exists as a result of human action.
> as evidenced by the fact that you are calling the land good or bad prior to having been developed by the landlord
You misread. The land is known to be good or bad in retrospect. At the time it was developed that classification was only speculative. This particular landlord thought the land would be good and thus worth developing. Others disagreed and didn't bid as highly for it. The landlord is rewarded not for others' efforts but for the fact that they were right when they predicted that this would be a good location for their development.
> All the gains generated by improvements upon the land – or enhancements in the "usability" of the land – will be retained by the landlord.
To the best approximation either of us will be able to come up with that is 100% of the market value of the land. However, you are speaking in terms of ideals. In practice only the cost of building physical structures on the land will be counted as "improvement". There is no need to guess; this is the legal standard which is already applied in the rare situations where improvements must be valued separately from the land. However, it severely understates the property owners' contributions to the overall value.
> More importantly, it is a disincentive to speculating on that land (or withholding it from the market/withholding it from productive use).
The fact that you fail to see the economic value of speculation is a depressingly common failing among LVT supporters. Putting land to a lower-value use now prevents it from being put to a higher-value use later, which destroys wealth. Speculation holds the land ready for the higher-value use, which is why it is rewarded.
Here's a hypothetical example: Say there's a plot of land which could be used for either warehousing or family homes. If you simply put it up for auction right now for a term of perhaps 50 years you'll get $100M from the warehouse representatives or $80M from family home developers. Whichever way you go you'll be locked in to that use for at least 50 years. However, trends show that the warehouse industry is in a decline, whereas demand for family homes in that area will likely increase to $150M within ten years—meaning that if you just take the highest offer now then you will be losing out on $50M of value and those families won't have enough homes. In the best case there will be a significant cost incurred to demolish the warehouses and rebuild. The correct answer here is to speculate based on the trends that a higher-value use will come along and allow only short-term, non-destructive uses of the property in the interim rather than auctioning it off immediately. Or even leave it vacant for a few years if there are no such uses.
They neither made the land nor made it valuable, so they're not "providing" it in any meaningful sense. They're relinquishing their state provided entitlement to expel users of the land with state-backed violence. In exchange for resources.
what turns iron ore into a car is labor, which you should pay the laborer for.
that is, unless you think you should have a greater share of mineral rights than somebody else for some reason.
What would you call money which accumulates in your bank account which you didn't have to work for?
(I could the portion of rent which would be left over after a rentier paying management fees here. Managing a property is work. Owning is not.)
To rent out property you must first own property. To own property you must buy property. Buying property requires resources. Accumulating enough resources to buy property requires a great deal of work, to say nothing of the effort which goes in to deciding which properties to buy or sell or the opportunity cost of deferring consumption. All of that work occurs before the first rent check is paid or any property management fees are accrued (assuming you hired someone else to manage the property).
The concept may seem alien to someone accustomed to a weekly or biweekly paycheck from their employer, but in many fields, including investment (in real estate or anything else), the majority of the work occurs long before any income is received. The income is no less earned merely because it does not occur in close proximity to the work.
Or inherit. Mayfair is rented out by the Duke of Westminster not because him or any or his ancestors did anything as crass as buying it but because he traces his lineage back to a mate of William the conqueror (note : not William the buyer. Conqueror. The distinction is important you see) in 1066.
Broadly speaking, all land wealth is derived this way, no matter how many hands it passes through on the way to its current owner.
You no doubt believe that the act of buying and selling land and working with it somehow "morally sterilizes" it. It does not. If Mayfair was sold it would still be conquered wealth.
I am very well aware that investments do not necessarily pay off immediately and you know very well that that is not what I am talking about at all.
Nonsense. If that particular plot of land was stolen then the people it was stolen from are welcome to assert their claim. If they can prove that they have one, that is. A thief ("conqueror") does not through their theft obtain the rights to the property which is stolen, and cannot rightfully sell what they do not own. The buyer acquires nothing, and (if innocent) is welcome to sue the thief for fraud to recover what they paid.
However, leaving the ownership uncontested for this long would certainly dilute any claim based on ancestral rights. If there comes a point where no one else is claiming rightful ownership of the land then any prior claim can be considered abandoned, and whoever happens to be using it at that point holds the rights to it by default. Even if it was originally stolen. So the question becomes, has someone maintained their claim to the land and passed it down to their descendents from 1066 until now? Or was that claim permitted to lapse?
The duke of westminster doesn't use the land, though, he rents it out. If use of land begets ownership, why does the claim originally stem from william the conqueror murdering a bunch of peasants rather than me renting a flat since 2005?
This idea of yours makes no sense.
Then it should become obvious that some part of the profit is due to "work" i.e. investing money in an area by building upgrading, and some part is due to other people doing the same. So in a hot new area, a bunch of people moving in, opening hip restaurants, renovating old buildings, improving parks contributes to the landlords profit, because an empty lots value will rise as well.
Let's look at a hypothetical case for a moment. Say I buy some otherwise nice property for cheap because it's in the middle of nowhere and there is no easy way to get to it. Trees, lakes, etc. but no nearby roads. The LVT would be low, right? If you auctioned it off in that state as unimproved property you wouldn't get many takers. But say I build a private road to that area at my own expense, and then rent out the now-accessible land in family-size lots. The land hasn't changed, but its value is much higher now because of something I did. How would the "unimproved" value of those lots be assessed, and who receives the LVT? If the answer to that last question isn't "me" (and it won't be) then someone is receiving an unearned benefit from my work.
Even if you think it's somehow "unfair" for property owners to benefit financially from general improvements in their communities, LVT doesn't change the fact that someone is still getting an unearned external benefit. It takes from the property owner without doing much at all to ensure that the LVT goes to the parties actually responsible for the improvement.
Of course in reality it's not a private road or private sewer system or private fire service or private police force, it's all provided by government via taxes.
Taxes that people pay based on how much they earn, a far more obvious source of people being penalised for doing the right thing.
If you have an empty lot and you improve the district you can get your reward by selling the plot or opening your own business on it. Under LVT what you can't do is just sit on it for years at no cost to yourself, but great costs to others just in case it turns out to be a lottery ticket.
One assumes that the people I'm renting the lots to are permitted to use the road as part of their contract. But let's make this simple and say that I offer a perpetual agreement to let anyone use this road at cost, whether they rent from me or not. The road is a loss-leader; I intend to make my money by renting out the land, not by operating a toll road.
There are plenty of examples of communities with their own private roads and other services. Not everything of value to a community is provided by the government.
> you can get your reward by selling the plot
That won't work. Whoever buys it would be taking over the LVT payments, so that expense will come out of the resale value of the property.
> Under LVT what you can't do is just sit on it for years at no cost to yourself, but great costs to others just in case it turns out to be a lottery ticket.
And here we once again have someone failing to see the economic value of speculation.
The only reason to "sit on" the land and not use it would be that any use you could put the land to now would interfere with taking advantage of an even more valuable opportunity which you anticipate in the future. Not holding the land in readiness for that more valuable future use under such circumstances would be destructive.
(Edit: Fixed typo.)