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I'm a big proponent of Land Value Tax. In theory it is one of the healthiest forms of taxation since supply is fixed. It encourages efficient use of land and discourages owners from squatting on undeveloped land just to reap value from its location. https://en.wikipedia.org/wiki/Land_value_tax
I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?
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.
So arguing that it's effectively the government stealing your property is only a valid argument if you are arguing that all taxation is theft. If that's what you believe then that's fine, but it would be better to be upfront about what argument you are making.
Since Detroit's population has been declining, from 1.5 million to under 700k, revenue will keep falling. What would they do if they lost more people? Increase taxes?
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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?
Whenever something is taxed, less of it is produced. In the case of LVT, the tax is on land that is in a desirable location with lots of nearby amenities. LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. LVT means less walkable cities and more LA style sprawl.
Can you explain more? I don't see it.
If a place already has high property taxes, and they are currently assessed on the land and the improvements then improved land in an area will receive a relative "tax reduction" compared to a full encompasing property tax. This means it is beneficial to improve land (the opposite of urban sprawl). The more the improvements the more the gains. Or thought another way improvements are "tax free" so it's easier to gain profit from improvements and is incentiviced.
If the location has low or no property taxes, then LVT will introduce a tax to the area and usually the plan is for this this tax is replace / offset other forms of tax (ex sales taxes). So enterprise would be taxed less and the land would be taxed instead. So again doing more commercial activity compared to a similarly sized lot doing less would be rewarded.
I'm not seeing any method that benefits sprawl for LVT compared to property taxes.
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Land value taxes don't factor in improvements. Improving the land results in no property tax change, so they incentivize doing more useful things with the land.
Land in Detroit is cheap already. This sounds like a way for investors to build big things and not increase their tax bill.
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Where does the land go when no one buys it or pays taxes?
Presumably to the government, who might use it -- or sell it -- later.
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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.
It would be like a flat tax (in dollars, not percent) on every homeowner. Currently the top 5% of income earners pay 65% of taxes, and the bottom %50 pay %2.
Instead of this, every homeowner would pay basically the same. Bezos and Musk would pay more, but they don't own a million houses each, so it wouldn't be much more.
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Sounds like a way to convert single family homes into multiplexes as population rises so everyone can be closer to amenities. I’m very for that, especially if the former owner could find a guaranteed way to get one of the units on their land so they can stay.
I always thought this sounded like a good idea too (let the original owner stay, just in a new apartment-amongst-many) but (at least in the US) this doesn't seem reasonable. Besides any legal hiccups (how common are such contracts? Is this well-understood law or are we trailblazing this?) there's the practical concern that if I sell my place and it takes a year or two to build the housing complex, well, I still need…
If there are more people like you, maybe I’ll become a developer.
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> Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue. Ah more carve outs for boomers. I knew it had to be in there somewhere .
My grandmother (greatest generation) built her house in the 50s and lives on a fixed income. Should she be forced to sell (assuming she couldn’t afford LVT) for an investment she took all the risk to develop? We’re so addicted to spending that anything that leads to generational wealth is fair game for governments to loot?
It came from renters and first time home owners putting money into the housing market.
Your grandma is doing the looting.
Perhaps someone who has thought about this more can explain how a 'land value tax' differs from existing property tax regimes that explicitly examine the value of improvements and the value of land... This Detroit case is interesting because there are different rates of taxation on the land, but the difference in rate could also be obtained by increasing the land component of a parcel's value.
I happen to think it's interesting, but for reasons unrelated to the article-- it's kinda goofy for the state to tax personal property that happens to be fixed to a location, like a fireplace, stained glass window or chandelier. Tax a house on a foundation; no tax for a house on wheels? This "LVT" scheme does away with those issues so folks can fix whatever they want to the location, so it makes more sense logically even if the connection to Detroit's problems is very unclear.