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\title[Hacking rent]{Hacking the economic system: How to fix high rent in your municipality and what does it
have to do with german colonial history?}
\author{rfl}
\institute{flipdot}
\date{2024-10-26}
\logo{\large \LaTeX{}}

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\begin{document}

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  \centering
  slides at \url{https://code.flipdot.org/rfl/talks}
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\begin{frame}
  \centering
  \begin{figure}
    \includegraphics[width=0.8\textwidth]{the-rent-is-too-damn-high}
  \end{figure}
  \footnotesize{source: \url{http://www.quickmeme.com/meme/3td09l}}
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\begin{frame}
  \begin{figure}
    \centering
    \includegraphics[width=\textwidth]{woods_trees.jpg}
  \end{figure}
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% Outline frame
\begin{frame}{Outline}
  \tableofcontents[hideallsubsections]
\end{frame}

\section{Short Story}
\begin{frame}{Short Story\footnote{source: \url{https://www.youtube.com/watch?v=MOmz2KRH15w}}}
  % doesnt work
  % \movie[width=3cm,height=2cm,poster,autostart,externalviewer]{}{stop-paying-twice.mp4}
\end{frame}

\section{Basic Argument}
\begin{frame}{Basic Argument\footnote{inspired by this discussion:
      \url{https://old.reddit.com/r/georgism/comments/1esw8l9/where_do_you_start_when_introducing_georgism_to/}}}
  \begin{small}
    \vspace{-0.3cm}
  \begin{itemize}
  \item Nobody likes taxes, but we gotta pay for some stuff, so we should tax in
    the least destructive way we can.
  \item Turns out, land has this neat property where we can't really create it
    or destroy it, so it's almost immune to distortionary taxes.
  \item Plus, land has this ugly tendency to get hoarded and milked as a source
    of income for people who don't actually contribute anything to society.
  \item Plus plus, because of the eccentricities of how land works, you can tax
    land a fair amount before landlords can pass those costs on to land users.
  \item So, we can cut a bunch of bad taxes, like income tax and sales tax,
    replace them with a tax on unearned income from land, and make almost
    everybody better off!
  \end{itemize}
  \end{small}
\end{frame}

\subsection{Why taxes are necessary}
\begin{frame}{We gotta pay for some stuff}
  ``a government that issues its own fiat money:
  \begin{itemize}
  \item Can pay for goods, services, and financial assets without a need to
    first collect money in the form of taxes or debt issuance in advance of such
    purchases
  % \item Cannot be forced to default on debt denominated in its own currency
  \item Is limited in its money creation and purchases only by inflation, which
    accelerates once the real resources (labour, capital and natural resources)
    of the economy are utilized at full employment
  %\item Should strengthen automatic stabilisers to control demand-pull
  %  inflation,[10] rather than relying upon discretionary tax changes
  % \item Issues bonds as a monetary policy device, rather than as a funding device
  \item Uses taxation to provide the fiscal space to spend without causing
    inflation and also to give a value to the currency. Taxation is often said
    in MMT not to fund the spending of a currency-issuing government, but
    without it no real spending is of course possible''\footnote{\url{https://en.wikipedia.org/wiki/Modern_monetary_theory}}
  \end{itemize}
\end{frame}

\subsection{What we mean by (some) taxes being destructive}
\begin{frame}{Destructive Taxes - An Example}
  \begin{itemize}
  \item Imagine there will be a 10\% tax on apple sauce starting next year.
  \item Producers are allowed to pass them to the consumer (as usual, and it
    can not be prevented really)
  \item Prices will increase by almost exactly 10\% (all things being equal)
  \item Less people will buy apple sauce, even though the underlying demand does
    not change
  \item In a year's time, there will be around 10\% less apple sauce, because
    here supply follows demand
  \item Now imagine this for other, more important goods, like medicine and
    income taxes that affect prices indirectly
  \end{itemize}
\end{frame}

\subsection{Why land is different}
\begin{frame}{The few different ways to make money in the economy}
  \begin{itemize}
  \item Labor: You can sell your time to produce more of a valuable good or
    service.
  \item Capital: You can lend someone else your money, allowing them to make
    investments that will produce more valuable stuff.
  \item Information: You can do research, developing and selling knowledge of
    ways to create more valuable stuff.
  \item Entrepreneurship: You can take on personal risk and leverage the labor,
    capital, and information of others to create new valuable stuff.
  \end{itemize}
  And then there's land ownership. You can buy land, and then you collect rent
  from people who want to use your land.
\end{frame}

\begin{frame}{Problems with land ownership}
  \begin{itemize}
  \item (scarcity) there's a fixed supply of land. Realistically you can't
    create or destroy land (surface, which a mathematical area).
  \item (inelasticity) the demand for land is very stable. You can't decide to
    just not take up any physical space tomorrow.
  \end{itemize}
  This means
  \begin{itemize}
  \item landowners are effectively always running an auction for land use
  \item the rent for land use keeps rising to the highest rate someone is willing to pay.
  \item because you can't make more land, land owners get to capture more and
    more value as the economy grows, without the land owners actually doing
    anything valuable.
  \end{itemize}
\end{frame}

\begin{frame}{A tax on land value has no dead weight}
  \begin{minipage}{0.45\textwidth}
    \begin{figure}
      \centering
      \includegraphics[width=\textwidth]{dead-weight}
    \end{figure}
  \end{minipage}
  \begin{minipage}{0.45\textwidth}
    \begin{figure}
      \centering
      \includegraphics[width=\textwidth]{no-dead-weight}
    \end{figure}
  \end{minipage}
  \vspace{0.1cm}\\
  \footnotesize{
  \textit{price ceiling} means \textit{price before tax} in this context\\
  source (left): \url{https://en.wikipedia.org/wiki/Deadweight_loss}\\
  source (right): \url{https://en.wikipedia.org/wiki/Land_value_tax}
  }
\end{frame}

\begin{frame}{Actually, there are a few other things like land}
  \begin{itemize}
  \item domains
  \item patents
  \item electromagnetic frequencies
  \item satellite orbits
  \end{itemize}
  (my) rule of thumb: if the thing you pay for is more like a right of usage
  than an actual item, then the market for it is economically similar to the
  land market
\end{frame}

\subsection{The land value tax can not be passed to tenants}
\begin{frame}{The land value tax can not be passed to tenants}
  \begin{itemize}
  \item The tenant is already paying the maximum price they're willing to pay
    for housing.
  \item If the landlord could increase the price further without negative
    consequences, they would've already done so.
  \item If taxes are passed onto the tenant, the tenant can no longer afford to
    live there, and the landlord will lose all revenue.
  \end{itemize}
\end{frame}

\subsection{Where does land value come from}
\begin{frame}{Land value is (mostly) the value of society}
  \small{
  \begin{itemize}
  \item Close to essential services like schools, hospitals, shopping centers,
    and recreational facilities
  \item Easy access to public transportation and major highways
  \item Near cultural amenities like theaters, museums, and restaurants
  \item Safe area with low crime rates
  \item Well-maintained public spaces and active community organizations
  \item Strong sense of community with local events and activities
  \item Located in an area with job opportunities and economic stability
  \item Presence of thriving businesses and a flourishing local economy
  \item Upcoming infrastructure projects or public improvements planned
  \item Zoning changes that allow for increased development potential
  \item Scenic views or natural beauty
  \end{itemize}}
\end{frame}

\subsection{Where do the wealth inequality really comes from}
\begin{frame}{Land has the ugly tendency to get hoarded}
  \begin{minipage}{0.4\textwidth}
    \begin{figure}
      \centering
      \includegraphics[height=0.9\textheight]{wealth-types-distribution}
    \end{figure}
  \end{minipage}
  \hspace{0.01\textwidth}
  \begin{minipage}{0.4\textwidth}
    \begin{figure}
      \centering
      \includegraphics[height=0.3\textheight]{wealth-types-distribution-legend}
    \end{figure}
    source: \url{https://www.bpb.de/kurz-knapp/zahlen-und-fakten/datenreport-2021/private-haushalte-einkommen-und-konsum/329964/zusammensetzung-des-vermoegens/}
  \end{minipage}
\end{frame}

\section{How would I do it in a (german) municipality}
\subsection{Background}
\begin{frame}{In General}
  \vspace{-0.26cm}
  \begin{figure}
    \centering
    \includegraphics[width=\textwidth]{property-tax}
  \end{figure}
  \vspace{-0.3cm}
  source: \url{https://leg.colorado.gov/sites/default/files/images/land_value_tax.pdf}
\end{frame}

\begin{frame}{Background}
  \begin{block}{Grundsteuer (property tax in Germany)}
    $T=b_{federal}(type, A_{total}, A_{useable}, A_{net dwelling}, N_{floors},
    N_{garages}, $
    $R_{rentlevel}, Y_{building},\dots) * B(L) * H_{munincipality}$
  \end{block}
  \begin{block}{weighted location value $B(L)$}
    $B(L) = (\frac{B_L}{\frac{1}{|\mathcal{L}|}\sum_{L'\in \mathcal{L}}
      B_{L'}})^{0.3}$
  \end{block}
  \begin{block}{Hessian Model (type B, most buildings), Example Kassel
      \footnote{avg found here: \url{https://finanzamt.hessen.de/sites/finanzamt.hessen.de/files/2022-06/2022_06_13_stanz_ausgabe_24_s691_durchschnittliche_brw.pdf}}}
    $T=(A_{net dwelling} * 0.5 * 0.7 + A_{usable} * 0.5 + A_{total} * 0.04) *
    (\frac{280}{214})^{0.3} * 490$
   \end{block}
\end{frame}

\begin{frame}{Constraints}
  \begin{itemize}
  \item city recalculates location value for a city quarter almost regularly (2y)
  \item city (Stadtverordnetenversammlung) can \emph{only} change $H$
  \item city has to set corporation tax factor (Gewerbesteuerhebesatz) to 200
    or more
  \item depending on tax distribution in the federal state and the whole nation
    the city budget is (relatively) lowered or increased (Länderfinanzausgleich,
    kommunaler Finanzausgleich)
  \item people still have to pay those taxes
  \item city is only allowed to see aggregated statistics not individual tax statements
  \end{itemize}
\end{frame}

\subsection{Proposal}
\begin{frame}{Proposal Outline}
  \begin{itemize}
  \item provide a online platform where citizens of the municipality can upload
    their tax statements
  \item increase $H$
  \item repay registered amounts equally
  \item probably easiest to first focus on income, corporate, property sales
    taxes first
  \item in addition: because the property tax includes a tax on non-land-value,
    these amounts should be payed back as well
  \end{itemize}
\end{frame}

\begin{frame}{Proposal Open Questions}
  \begin{itemize}
  \item how to mitigate value added tax (Mehrwertsteuer)? (arguably one of the
    most unfair taxes on the poor)
  \item how to include people that do not work (kids, elders, refugees)?
  \item can it be explained easier?
  \end{itemize}
\end{frame}

\begin{frame}{Detailed Handbook}
  \vspace{-0.3cm}
  \begin{itemize}
  \item explain proposal $\leftarrow$ we are here
  \item ...
  \item get political majority, set current $H_0:=H$
  \item simplify building codes (bebauungspläne) \tikz[remember picture] \node[coordinate] (top) {};
  \item add priority property sale order (vorkaufssatzung)
  \item add city property lease order (erbbausatzung) \tikz[remember picture] \node[coordinate] (bottom) {};
  \item activate tax portal
  \item make citizen council on distribution mechanism
  \item every year $n=1,2$ until ``optimality''\footnote{total property tax
      revenue is at least the same as other tax revenue}
    \begin{itemize}
    \item increase $H$ by adding base rate $H_0$, eg $H_n= (n+1)H_0$
    \item distribute $\frac{N}{N+1}$ of total property tax revenue to citizens
      according to distribution based on tax statements
    \end{itemize}
  \end{itemize}

  \begin{tikzpicture}[overlay,remember picture]
    \draw[decorate,decoration={brace,amplitude=10pt,raise=4pt},thick]
    ($(top)+(0.8,0.25)$) -- ($(bottom)+(0.2,-0.25)$)
    node[midway,right=12pt] {\footnotesize{more or less optional}};
  \end{tikzpicture}
\end{frame}

\section{Positive Effects}
\subsection{Good things that will happen}
\begin{frame}
  \begin{itemize}
  \item empty houses/flats will be put on the market because it is financially
    reasonable to do so
  \item additionally there is now incentive to building new houses on vacant
    lots or add floors to existing buildings in high demand locations
  \item the rent distribution will shift downwards
  \item (small) businesses will have an easier time finding locations or
    operating in the existing ones
  \end{itemize}
\end{frame}

\subsection{More positive Effects}
\begin{frame}
  \begin{itemize}
  \item people will move into the city
  \item the base property tax revenue $H_0$ will increase, thus public infrastructure
    can be funded better
  \item if land value is faithfully reflected in parking tickets, people will
    park cars on their own property or get rid of it
  \item tax evasion will become impossible
  \end{itemize}
\end{frame}

\subsection{Even more positive Effects}
\begin{frame}
  \begin{figure}
    \centering
    \vspace{-0.25cm}
    \includegraphics[height=0.8\textheight]{figures/lvt-outcomes}
    \vspace{-0.5cm}
    \label{fig:lvt-outcomes}
  \end{figure}
  \footnotesize{source: \url{https://old.reddit.com/r/georgism/comments/qp69t9/upgraded_graphs_of_lvt_outcomes/}}
\end{frame}

\section{History}
\subsection{Adam Smith and David Ricardo and the law of rent}
\begin{frame}{Law of Rent}
  \centering
  \begin{figure}
    \includegraphics[height=0.7\textheight]{rlof-0}
  \end{figure}
  \footnotesize{source: \url{https://sciolizer.github.io/ricardo-law-of-rent/}}
\end{frame}
\begin{frame}{Law of Rent}
  \centering
  \begin{figure}
    \includegraphics[height=0.7\textheight]{rlof-1}
  \end{figure}
  \footnotesize{source: \url{https://sciolizer.github.io/ricardo-law-of-rent/}}
\end{frame}
\begin{frame}{Law of Rent}
  \begin{block}{Law of Rent - your perspective}
    To some extent, it doesn't matter what location you chose for your coffee
    shop. Any excess profits you would have gained from a better location just
    go to the landlord there, and so your \textit{kept income} stays the same.
  \end{block}
\end{frame}

\subsection{Henry George}
\begin{frame}
  \begin{minipage}{0.4\textwidth}
    \centering
    \begin{figure}
      \centering
      % \includegraphics[width=0.8\textwidth]{henry-george}
      \includegraphics[height=0.6\textheight]{henry-george}
    \end{figure}
  \end{minipage}
  \hspace{0.01\textwidth}
  \begin{minipage}{0.4\textwidth}
    \centering
    \begin{figure}
      \centering
      % \includegraphics[width=0.8\textwidth]{progress-and-poverty}
      \includegraphics[height=0.6\textheight]{progress-and-poverty}
    \end{figure}
  \end{minipage}

  \begin{block}{Fundamental Insight}
    Progress is a wedge that increases the divide in wealth between the land
    owners and the landless. Progress is the cause of poverty!
  \end{block}
  \footnotesize{
  source (left): \url{https://en.wikipedia.org/wiki/Henry_George}\\
  source (right): \url{https://en.wikipedia.org/wiki/Progress_and_Poverty}
  }
\end{frame}

\subsection{Cutting all destructive taxes does not mean less budget}
\begin{frame}{Henry George theorem\footnote{\url{https://en.wikipedia.org/wiki/Henry_George_theorem}}}
  \vspace{-0.3cm}
  \begin{figure}
    \centering
    \includegraphics[width=0.3\textwidth]{h-g-theorem}
  \end{figure}
  \vspace{-0.3cm}
  \begin{itemize}
  \item maximize utility of public goods wrt population size
  \item land rents would be just sufficient to finance a provision of local
    public goods
  \item is also that land rents equals government expenditures on local public
    goods
  \end{itemize}
  Work done by Joseph Stiglitz, who later won the Prize in Economic Sciences in
  Memory of Alfred Nobel 2001, although for a different
  topic\footnote{\url{https://www.nobelprize.org/prizes/economic-sciences/2001/stiglitz/facts/}}
\end{frame}

\subsection{Connection to german colonialism}
\begin{frame}
  \centering
  \begin{figure}
    \includegraphics[width=\textwidth]{german-colonial-empire}
  \end{figure}
  \footnotesize{source: \url{https://en.wikipedia.org/wiki/File:GermanColonialEmpire(UPT3).jpg}}
\end{frame}

\begin{frame}{Or how that one point in time we almost got the (economic) solution right}
  ``The territory fully implemented Georgist policy. Its sole source of government
revenue was the land value tax of six percent which it levied in its territory.
The German colonial empire had previously had economic problems with its African
colonies caused by land speculation. One of the main reasons for using the land
value tax in Jiaozhou Bay was to eliminate such speculation, which the policy
achieved.''\footnote{\url{https://en.wikipedia.org/wiki/Kiautschou_Bay_Leased_Territory}}
\end{frame}

\begin{frame}
  \begin{figure}
    \centering
    \includegraphics[width=\textwidth]{kiaochow-report}
  \end{figure}
  \begin{figure}
    \centering
    \includegraphics[width=\textwidth]{kiaochow-paper}
  \end{figure}
\end{frame}

\section{Final words}
\begin{frame}{Final words}
  \begin{itemize}
  \item ``taxation is theft, but unmitigated negative externalities is
    thefter'' - reddit user nivlac22
  \item ``[Georgism] is the best idea that will never happen. '' -
    BritMonkey\footnote{in \url{https://www.youtube.com/watch?v=smi_iIoKybg}}
  \item ``There isn’t a single person in power that doesn’t own a lot of land.''
    - youtube user @tc3884 \footnote{as a comment to the video above}
  \end{itemize}
\end{frame}
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