Land value tax in online games and virtual worlds (2022)

Original Article ↗ Hacker News Discussion ↗

LVT in Online Games and Virtual Worlds

  • Thread centers on whether land value tax (LVT) or Harberger-style taxes make sense for MMO housing and virtual land.
  • Examples: FFXIV housing (now lottery-based), Second Life’s per‑square‑meter fees, crypto metaverses like Decentraland, EVE’s high fees on “land‑like” ship factories.
  • Some propose simply leasing land or making land non‑scarce as simpler design choices than in‑game LVT.

Economic Rationale and Claimed Benefits

  • LVT is praised as highly efficient: land supply is fixed, so taxing its rental value is said to have zero deadweight loss and discourage speculation.
  • Even “vanity” housing confers real utility (status, social space); players will pay in money, time, or hassle.
  • Proponents argue LVT:
    • Pushes land to its “highest and best use.”
    • Reduces vacant lots and hoarding (in games and in cities).
    • Shifts tax away from labor and productive investment toward unearned land rents.

Critiques and Practical Obstacles

  • Skeptics question:
    • Whether LVT helps when land can’t be made more productive (strict zoning, single‑tenant housing).
    • Self‑defeating dynamics: a successful LVT lowers land values and thus its own base; governments then have incentives to recreate scarcity or add other taxes.
    • Political durability: landowners would have strong motives to weaken or repeal LVT once in place.
  • Concerns over distribution:
    • Fixed‑income homeowners being taxed out of long‑held properties.
    • Whether LVT increases or reduces wealth inequality is hotly disputed.
  • Implementation issues include valuation complexity, logistics of collection (in games and real life), and transition shocks.

Real‑World Parallels and Distributional Concerns

  • Real examples discussed: U.S. local property taxes, California’s Prop 13, partial land taxes in Australia and Germany, historical “single-tax” experiments, and Second Life’s system.
  • Debate over whether housing costs track tax regimes versus jobs, amenities, and zoning.
  • Strong disagreement on property as a “right” vs. land as a collective resource, and on whether inheritance and rentier income are morally earned.

Alternative or Complementary Approaches

  • Ideas raised: surplus‑land taxes on multiple properties, progressive LVT, citizen dividends funded by LVT, land value capture via development concessions, or simply deregulating density and dropping property taxes.
  • Some argue LVT is excellent in theory but politically and administratively hard; others see gradual, partial adoption as the realistic path.