To be clear, NOBODY is suggesting women in the workforce is a bad thing, I am merely saying that HCOL's housing cost just suck almost all the regional income gain back out of the market leaving households little better off overall. The best thing we could do as a society is more full-remote jobs, to break up HCOLs and revitalize more rural areas.
Is there a way to do it so that rents become lower?
The reasoning is that land's profit stems from its location and the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value.
Its not the same with property taxes because builders/buyers can choose not to build, so there is some distortion.
The origin of rent in land - beware it is not the same for buildings - is the difference in value from one land to the least valuable land. (roughly, David Ricardo). A land tax is about taxing this rent, not about nominal land taxes on everything.
If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away.
Adam smith, David Ricardo, Henry George, Milton Friedman and even Stiglitz have all lauded that land taxes are less distortive than any other tax and would be great as a local tax policy. (In the us, for cities and states).
They totally can. Go to any marketplace and see for yourself: sellers set prices. Buyers can negotiate, accept or refuse, but the seller setting the price (ask) is completely unilateral and happens billions of time every day.
>If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away.
If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices.
>land taxes are less distortive than any other tax
Might be true or false, is orthogonal to the fact that land taxes, like any other taxes will be paid by the end consumer through increased prices.
There is some subtlety about talking about prices conceptually. Both sellers and buyers can make an offer or a bid at any price, but market prices are the result of sellers and buyers meeting - about making the actual exchange.
In this context, saying "sets prices" would mean that the buyer takes the price, not that the seller has made a listing at an arbitrary number. Offering 1$ for a car and not buying a car is not setting a price - neither is Asking 1000000$ and not getting an offer.
Rent prices are paid at all because there is a benefit to the land. If the Ask for the land is higher than the value, it will meet demand and validate the price.
> If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices.
Thats not true - economic incidence requires evaluation in a case by case basis. It depends on the relative market strength or demand/supply elasticity. For example, a tax on life saving medication is borne by the consumer, but a tax on skittles is born on the skittles manufacturer (as consumers replace skittles with other candy).
The point is that the economic incidence on unimproved land is very much against the landlord - he can't do anything with the unimproved land but rent it.
For longer, wider and more interesting historical analysis of LVT I recommend reading from source - Henry George and Provery and Progress, a book denouncing homelessness and land speculation in...San Francisco, 100 years ago.
But that is not the point of my argument, your original assertion was that "the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value." Now you are saying seller and buyer negotiate? Why would they do if the seller has no bargaining power?
> but a tax on skittles is born on the skittles manufacturer (as consumers replace skittles with other candy)
Why then a 1kg of Skittles on Amazon.co.uk costs more than 50 oz (1.5kg) of the same on Amazon.com (GBP 9.43 vs USD 9.98)? Is it really because British people want to taste the rainbow so much more than Americans?
To make sure I understand - you say that because each land is as unique as an NFT, the market for every single piece of land has supply of 1, and the classical supply/demand curves don't make sense/apply.
I have multiple answers to that concept:
1- From a mathematical abstraction, the key to riches would be to get one land and split it into as many sub-pieces of land as possible and sell them all at the same price as the larger one!
2- There are differences between fungibles and non-fungibles, crypto has taught us, but overall most properties are similar and allow for the exchange of a non-fungible for another. Each land NFT is unique, but there are many land NFTs, and they compete against each other as if they were fungible. Each wine is unique too, even each bottle of wine is unique! but albeit this does affect demand, it doesn't turn supply to perfect inelasticity. There are subsitutions!
> But that is not the point of my argument, your original assertion was that "the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value." Now you are saying seller and buyer negotiate? Why would they do if the seller has no bargaining power?
Bargaining power to increase rents to cover the land value tax - he cant change the supply of land, or repurpose it for something else.
> Why then a 1kg of Skittles on Amazon.co.uk costs more than 50 oz (1.5kg) of the same on Amazon.com (GBP 9.43 vs USD 9.98)? Is it really because British people want to taste the rainbow so much more than Americans?
I've waited all my life to a microeconomics conversation about skittles. The bigger question, sir, is why do blue skittles sell at the same price as all the other skittles, when they are clearly the worst.
Many equal goods have different prices in different parts of the world for cost of labor, supply, taxes, etc etc. I have no idea in this particular case why it would be so, but relevant to economic incidence of taxes, sales taxes do change supply/demand curves of skittles bought on amazon. Because skittles are a unique product, but also substitutable for other non-sales taxable foods, its very likely both producer and purchaser eat part of the tax hike - they both lose.
The market model of fungible goods is based on maximizing the product number of items and price. It means that sellers will be increasing price as long the number of items sold also increases and will decrease price when the number of item sold drops, since the supply and demand is monotonic (someone willing to sell at $X will also sell at $X + anu positive number and someone willing to buy at $X will also buy at $X - any positive number) there is naturally a point where the number and price product is at the maximum. It still is affected by taxation and adding taxes moves prices up but this is besides the point.
None of the above applies to the land lease. The number of items to sell is 1, the value that the seller is maximizing is the lease value. If the price is too high then the land will stay unleased for longer time than acceptable to the particular seller and that may cause him to lower the price. The land will stay unleased longer because the prospective buyers will be choosing cheaper land elsewhere even if they otherwise would have chosen this particular parcel. But if all land owners are hit with the same tax then all of them can raise price and that will not affect unleased time because there won't be a price advantage for the buyer to go elsewhere.
>I have no idea in this particular case why it would be so, but relevant to economic incidence of taxes, sales taxes do change supply/demand curves of skittles bought on amazon.
Okay, we agree then. I was under impression you said they don't. Or you meant just sales taxes? What about VAT? What if there had been special Skittles tax in UK, would the manufacturer eat that since it's not a sales tax and the sellers are very inclined to just take a loss according to you?
Taxes on most things change prices by adjusting both supply and demand, it’s the adjustment to supply that can pass on part or most of the tax to the customer. If supply doesn’t adjust you can’t do that.
Beautifully correct. Can you imagine peddling in politics a tax on renters claiming it is in their benefit?
Yes. Same as the demand curve goes to 0 if price is high enough.
>If you believe in supply and demand curves at all, this example is straight forward
I believe in supply and demand curves for fungible items. It's easy to observe that you can acquire less of a particular item at a lower price than at a higher price and also true that you can sell more at at a lower price than at a higher price. I don't see how, say, a particular painting becomes bigger or adds detail with price increase or how one can sell two Mona Lisas by cutting down the price.
There are also no individual demand curves. The whole idea of supply/demand curves is statistical and does not apply to a single individual (as same as unique items). I have no more questions about the "land tax won't be passed to the end consumer" though so here is some result from this exchange :)
There are a host of regulatory issues that made building anything expensive that arose just as women joined the workforce. The largest source of increase in COL over the last is housing. Rents have nearly doubled in constant dollars in most large cities.
This doesn't mean women working is the problem, rather we should've thought harder about what measurements should've been taken when introducing women into the workforce. Several countries are now "fixing" this retroactively, though more so to give women a fighting chance rather than actually helping out workers as a whole (e.g. forced paternity leave).
I'm not sure that's correct. I don't have the statistics off hand, but I believe the average home prices were much smaller multiples of household income when most households had a single income.
Lots of people, and not just religious conservatives, are arguing th as that, because the exact effect you point out makes it hard not to either say that or that capitalism is a bad thing or that people working more for less is a good thing.
It's always been an unspoken truth behind the "the people with really high student debt have huge earning potential" counterargument for student-debt cancellation: yup, they do, those are your doctors (in particular). They go into tons of debt to get there, they forego many years of income due to an extended educational/credentialing period. And generally, so few people are willing to take that risk that we already have a massive shortage of them.
And unless you reform the educational system, the cost of that student-loan debt all gets rolled into the cost of their services and we all pay it. And it does show up as income in this fashion. It's one of the reasons that fixing the problem is so tough - it's really at the nexus of several broken systems that have complex problems with many stakeholders who are all reticent to reform.
Where do you get $200k from? The average student loan debt for a bachelors degree is $26-36k, depending on type of institution: https://nces.ed.gov/fastfacts/display.asp?id=900
https://educationdata.org/average-graduate-student-loan-debt....
This doesn't include people who get graduate degrees paid for by their parents or by the company they work for. I got a Masters and didn't take on any debt because the company paid for most of it and I only needed to pay a few hundred in fees each semester.
Now is a good time for me to say that it was still a waste of money and time. It was no benefit to me and didn't increase my comp. It would have been better to just work 2 extra hours at my job every day instead.
Both the share of the population with any student loan debt and the average student loan debt to income ratio consistently goes down with increasing income (even though the average student loan debt itself goes up with income until you reach the top decile, which has lower average student loan debt than the next highest decile.)
* There are more subsidies for the poor. It sounds funny to type, but the $250k families might have a harder time to make ends meet than the $60k ones. Childcare being a big example. This is specific to a HCOL city like NYC where subsidized child care starts at 6 weeks old, but a $250k family will probably be spending $3k+ per child per month
Yeah it sounds funny to type because it's not true
I make 235k in the bay area and just rent + daycare for 2 kids would be 10k a month - on a net income of 12k a month.
Most likely they live quite far from where you are eating and with more roommates than you had in college. Or they still live at home, outside of the city in the suburbs they grew up in.
You don't even have to ask servers, go ahead talk to non-engineers/PMs at your company. They all likely both don't live in the city you work in and have an uncomfortable amount of roommates.
And maybe you can write off "living without roommates in your 30s" as a "lifestyle choice", but it certainly represents a decline in the standard of living from my expectations growing up.
For instance, I teach high school English. Cost of living in my city is 40% below SF, but I still couldn’t afford to live in the community where I teach. I commute from a cheaper area. Even then, I am actively planning an exit from teaching after this year because my wages aren’t keeping up with rising costs (10 yoe, TC 52k).
You can spend an awful lot on rent at $250k and still have plenty of money left.
I live in the D.C. metro, considered a "HCOL area." I'm less than an hour from downtown DC. Our house (almost 3,000 square feet) was under $500k in 2016, and there's still plenty of similar houses between here and D.C. that are still under $500k. But most folks making $250k would rather live an hour on the other side of DC, in the expensive Virginia suburbs where similar houses cost twice as much, but they can be surrounded by college educated professionals with similar complexions to themselves...
I used to work in Manhattan and had a great, 30 minute commute from New Rochelle. Looking at Redfin are plenty of 3BR homes in the $500s and $600s within a mile or so of the New Rochelle Metro North Station. That's not cheap, but the PITI on that is a couple of thousand dollars less per month than what the 28% rule gives you for a $250k/year income.
This is an example of my point. That's a choice one makes. One might claim, and I'd agree, that it's a shitty choice to have to make and it's better to bite the bullet of high housing costs, but it's still a choice.
How do you enjoy the city life when half of your disposable income goes to shelter? And you haven't eaten yet??
But as long as enough people are willing to chase that dream rents will be high. That is, they will reflect what the market can bear.
You could live far away from the city and spend 3-4 hours commuting every time you wanted to enjoy the city life or your employer asked you to come in. Or you could move away and risk getting fired or "salary adjusted"
The article kind of ignores the fact the high salary is directly tied to office location. You can save more by moving away from HCOL areas, but you most likely won't be part of the $250k article anymore