131–140 of 910 posts
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I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?
(I'm a big proponent of LVT) The two downsides I'm aware of are difficulty in transitioning to an LVT and difficulty in valuing the land. Transitioning to an LVT means that landowners no longer capture land rents for themselves, which is a massive overnight loss in the value they hold. The solutions there typically tax only the difference in land value versus a baseline assessment. So if a lot is worth $100 before LV…
- LVT encourages building tall and is hostile to lowrise development and unbuilt/green spaces. Those policy preferences may not be shared by everyone.
>> Of course, most present systems of property taxation are subject to the exact same issue.
This is not really true. There are constant sales of building+land in cities and estimating building+land values can reasonably be done.
In a city bare land almost never trades.So you have to extract land values from building+land sales, which is much much harder and possibly impossible to do fairly.
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It is based on 1800's economics where primary production (using raw materials) was the primary source of value creation. It doesn't make much sense for a modern service based economy. Your typical service sector worker, programmers, doctors, CEOs, would have essentially no taxes as long as they have a small geographic footprint. Of course it sounds good to tech b
How does this interact with the fact that housing is maybe the biggest economic issue that America is currently dealing with? That suggests to me that land is still pretty important. This doesn't apply to what Detroit is doing, but you could probably also take the underlying logic of land taxes (rent seeking should not be protected from taxation) and apply it to other more modern forms of property.
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> difficulty in valuing the land This seems by _far_ the biggest difficulty, and I find it strange that this rarely comes up in LVT discussions. Even for nominally 'liquid' land it's not clear who values it or how.
Is it? I can tell you now, I have no difficulty asserting that the value is near zero for the depreciating, crumbling houses on top of most of the land in the Mission in San Francisco. All the appreciation, which means nearly all of the sales price, of a typical home here, is the land. BuT rEnNoVaTiOnS. Listen, I’m not trying to give you a comprehensive answer. I’m just trying to show that it’s not by far the biggest…
If some land developer wants to build a new arena next to your plot of land - boom you're value just skyrocketed.
If the same land developer backs out of the deal - boom your land is worth less (or is actually worthless).
Your taxes depend on exactly when the assessment was made... and even professionals cannot agree on valuation (as we're seeing in some high profile cases right now).
Even for the same plot of land two people can value it radically differently.
> extremely high vacancies like San Francisco
This is a relatively new phenomenon.
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Given that it was never "your" land to begin with (what, did you create it?), that's not an unreasonable approach.
The government didn't create it either. The only reasonable recipient of the 2%/year tax is God.
Since you are relying on the government and surrounding society to defend the land, it’s up to society to define how that ownership works.
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Which, from some points of view, is the point. The government wants money to be going toward investments (real, productive kinds), not sitting around as an inflation hedge.
It's not the governments job to care about that.
Turns out the majority of voters are not all that interested in defending the piles of unproductive wealth.
Pufff, Brazil does that since forever. By paying some tax over your land, basically your government is taking it from you every generation or two. Roughly, 2% each year and in 50 years and it's gone.
Given that it was never "your" land to begin with (what, did you create it?), that's not an unreasonable approach.
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So if your neighborhood gets popular you get kicked out? Sounds like a healthy policy. Have you ever thought more than 2 minutes about it?
That is already how property tax works, except in California. I think most people agree that the California system is a disaster.
Either current residents are protected from property tax increases, or property taxes can be deferred until sale or death and the estate pays them (common in many jurisdictions).
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It's the same in Australia. It seems like a pretty sensible way to encourage the best use of high value land.
But who gets to decide the best use? It seems like everyone but the owner.
Edit: Was the stress on "decides" or "best"?
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I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?
Sometimes people want to sit on underdeveloped-for-the-location land not because it's a low-effort way to ride capital gains but for non-economic reasons. Examples include conservation projects and urban farms, but the big one is empty-nesters ageing in place (while the city has grown around them). If you've seen the start of the movie Up you'll recall that Mr. Carl Fredrickson owns a detached home which now has apar…
Until you realize the reality writ large: The current tax scheme enables drives supply down and value endlessly up. So much so that most homeowners end up selling for more than the total lifetime cost of ownership. So the old man from 'Up' would be able to sell and recoup a lifetime of housing costs. Personal homeownership is just abstract landlording in that way.
We have a myth in the western world that we own our homes. You can argue it's a natural right, but that won't matter to the government if you don't pay your taxes. So ownership is a social construct, just like copyright; we've decided as a society that it's most beneficial to let people "own" land. But the current system has, by destroying housing supply, increased housing costs by double (in HCOL areas) over what they would be if supply met demand. So renters and first time homeowners are subsidizing homeowners in a huge way. As a result, people are putting off having kids, or not having them at all, and taking a job they hate just to exist. It's abstract, but it's still feudalism; land owners extracting value from land merely from holding the social contract to it.
So no, my empathy does not extend to sympathy for Mr. Carl Fredrickson. I'll save it for the people laboring to pay his fair share.