Killer Arguments Against LVT, Not (285)

James James has submitted this bit of Faux Lib nonsense:

George was right that other taxes may have stronger disincentives, but economists now recognize that the single land tax is not innocent, either. Site values are created, not intrinsic. Why else would land in Tokyo be worth so much more than land in Mississippi? A tax on the value of a site is really a tax on productive potential, which is a result of improvements to land in the area. Henry George's proposed tax on one piece of land is, in effect, based on the improvements made to the neighboring land...

Broadly agreed so far. Apart from the fact that the 'neighbour's improvements' are only a small part of what drives land values: you need to have those improvements in the right place at the right time (for counter-example see Humber Bridge or all those spare airports in Spain), and you need people and businesses to take advantage of them; that creates the wealth that goes partly to those same people and businesses; partly to pay for the improvements; and the remainder accrues to the ultimate monopoly, the rental value of land.

And what if you are your "neighbor"? What if you buy a large expanse of land and raise the value of one portion of it by improving the surrounding land. Then you are taxed based on your improvements. This is not far-fetched. It is precisely what the Disney Corporation did in Florida. Disney bought up large amounts of land around the area where it planned to build Disney World, and then made this surrounding land more valuable by building Disney World. Had George's single tax on land been in existence, Disney might never have made the investment. So, contrary to George's reasoning, even a tax on unimproved land reduces incentives.
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Without any background knowledge we can say this: any theme park's profits and the wages of their employees are all currently taxed at the rate of 40% - 50%. We don't know how much of their total income relates to the rental value of land, but it's maybe a tenth of the total - the bulk of what visitors are paying for are services, be that entertainers, creatives, maintenance men, cooks, chambermaids or car park attendants.

So instead of paying 40% - 50% on all their income, the theme park as a whole (lumping together the land owner, the employees and the shareholders/finance providers) would be paying tax on one tenth of its income at a much higher rate.

Not only does that look like a decent tax cut to me, the incentive to make a profit by providing more and better 'services' using labour (new rides, more entertainers, better menus, whatever) would be nearly doubled. For sure, some of this additional profit might, just might, flow through into higher rental values, but this is still no particular disincentive to continuing to provide them if it turns our that they have paid off. And it they don't pay off in this way, well at least there's no tax on that income.
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However, Disneyworld Florida is probably the worst example he could have chosen. If you take the time and trouble to read the most interesting Wiki entry, you learn this:

In 1959, Walt Disney Productions began looking for land for a second park to supplement Disneyland, which opened in Anaheim, California, in 1955. Market surveys revealed that only 5% of Disneyland's visitors came from east of the Mississippi River, where 75% of the population of the United States lived.

Additionally, Walt Disney disliked the businesses that had sprung up around Disneyland and wanted control of a much larger area of land for the new project.

Walt Disney flew over the Orlando site (one of many) in November 1963. Seeing the well-developed network of roads, including the planned Interstate 4 and Florida's Turnpike, with McCoy Air Force Base (later Orlando International Airport) to the east, Disney selected a centrally-located site near Bay Lake.

So there's your rental income right there: the extra income which Disney can earn by being closer to its customers; by being easily accessible by road/air; by having its theme park in the 'Sunshine State' (they could be even closer to even more people if they'd sited it in Pennsylvania, but the weather isn't as nice up there).

And Disney was wise to the spillover effect, that their parks increase the rental value of surrounding land. Of course this is what has happened anyway; all the major theme parks are now in Florida as well, it's called 'agglomeration'. But these other theme parks are not taking business from Disney, they are driving customers to them - people now go to Florida with the sole intention of visiting theme parks, and Disneyworld is always near the top of their list.
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If you read on, you learn that Disneyworld is effectively its own city-state. Remember: the total tax paid less benefit received by an entire state is of course $nil: it all nets off. So with one hand, Disney (the landowning corporation) would be paying tax (and it does pay US property taxes anyway, as a matter of real-life fact), but all its employees would be receiving their Citizen's LVT Rebate and Disney (as the quasi-government) would be receiving 'public' money to spend on improving roads and airports, public schools for the children of its employees etc.

Disney know what they are doing, they'd always reinvest the spare cash they receive as the quasi-government in doing stuff which further enhances rental values in a virtuous circle; if they make sure that schools in their precinct have a good reputation, then it will be easier to attract staff, so all things being equal they can pay lower wages, and so on.

The only small net amount of $ tax money which would leave that city-state is the extra value it receives from being sited close to its customers in a state with nice weather, which is exactly where we started (and it pays property taxes to the county and state anyway). All the internally-generated wealth would stay in the city-state.
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Or we can summarise the Faux Lib argument thusly:

"We accept the logic for making small landowners pay LVT rather than broad based income tax, but large landowners should be exempt", which is surely complete bollocks?

In any event, while Disneyworld is huge (39 square miles), that is still tiny compared to the surface area of the whole USA (3.7 million square miles). Those 3.7 million square miles and the three hundred million potential visitors who live on it are Disney's hinterland, so to speak, if they'd built their theme park on an island in the middle of the Pacific, how successful would it have been?