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Detroit wants to be the first big American city to tax land value

economist.com

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Re: Detroit wants to be the first big American city to tax land value

#271

Post by AmericanChopper »

lmm wrote: post #246
AmericanChopper wrote: post #187

Earlier quoted context omitted.

Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity. Your use of the phrase…

> Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity. No man is an island;…

> There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource.

Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody.

> Rent seeking is an economic concept that occurs when an entity seeks to gain wealth without any reciprocal contribution of productivity. An example of rent seeking is when a company lobbies the government for grants, subsidies, or tariff protection.

https://www.investopedia.com/terms/r/rentseeking.asp

Renting an asset to somebody has a very obvious reciprocal consideration of value.

Re: Detroit wants to be the first big American city to tax land value

#272

Post by caminante »

PaulDavisThe1st wrote: post #244
zip1234 wrote: post #214

Earlier quoted context omitted.

Detroit has blight. LVT addresses property speculators that buy land to sit on it for 10 years and do nothing with it. With LVT they have to either pay up, develop it, or sell it. All options good for the city.

> With LVT they have to either pay up, develop it, or sell it Not quite. They have to pay up while they own the land. They can develop it in ways that may generate revenue sufficient to cover the tax (e.g. a landlord-developer) They can develop it in ways that won't generate revenue, but that satisfies their own goals, and pay the tax from some other source (e.g. a homeowner) They can sell it to drop the tax liabilit…

You just agreed with the parent.

The carry cost has gone up, forcing action!

Re: Detroit wants to be the first big American city to tax land value

#273

Post by dheera »

Gigachad wrote: post #253
dheera wrote: post #217

Earlier quoted context omitted.

Yep, if I own something I'd better own it. I shouldn't have to pay rent for owning land, or pay rent for owning a house. I'll just keep renting, I guess, since it makes no difference.

>I shouldn't have to pay rent for owning land That land is provided ongoing services, security, and utilities which cost money each year to maintain. Ownership is not some fundamental law of physics. It's a made up concept which is defined however the society you live in wants to define it.

> That land is provided ongoing services, security, and utilities which cost money each year to maintain

Yeah, and I already pay PG&E, Comcrap, and whoever else is maintaining those services, I don't need to pay it again to the IRS. The IRS wouldn't do jack shit on land I own.

Re: Detroit wants to be the first big American city to tax land value

#274

Post by waveBidder »

bitshiftfaced wrote: post #190
avar wrote: post #163

Earlier quoted context omitted.

> difficulty in valuing the land. It's rather easy to value the land: Have the owner decide what it's worth, then they pay a tax as a percentage of that valuation. Now, obviously given that system everyone's going to value their land at $0. To adjust for that land owners must be obligated to sell their land to anyone willing to buy it at the declared valuation. Such a mechanism doesn't only keep the current owners ho…

I don't love this idea, and I suspect many others wouldn't either. If you raised your family in a house and have lived there for decades, it has intangible value to you, but not others. Yet because of this value, you must pay potentially much much more than your neighbor, who objectively speaking may have a lot of equal value. What's more, even if you pay more than you ought to, you'll never feel secure in your home,…

lots of discussion about the topic in Radical markets if you're interested. I forget how exactly they address that concern, but they do talk about it.

https://press.princeton.edu/books/hardcover/9780691177502/ra...

Re: Detroit wants to be the first big American city to tax land value

#275

Post by eru »

lbwtaylor wrote: post #132
josnyder wrote: post #53

Earlier quoted context omitted.

(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…

- There are deeper problems with valuing land. Land values in cities are directly related to approved zoning (i.e. what you are allowed to build), so the city government can rezone neighborhoods and unilaterally alter the land values the residents pay tax on. This may not agree with everyone's view of fairness. - LVT encourages building tall and is hostile to lowrise development and unbuilt/green spaces. Those policy…

> - There are deeper problems with valuing land. Land values in cities are directly related to approved zoning (i.e. what you are allowed to build), so the city government can rezone neighborhoods and unilaterally alter the land values the residents pay tax on. This may not agree with everyone's view of fairness.

That's actually a feature, especially if you make sure that the authority who can do the zoning also gets the revenue (or at least shares in it). That way aligns incentives.

> - LVT encourages building tall and is hostile to lowrise development and unbuilt/green spaces. Those policy preferences may not be shared by everyone.

LVT doesn't do anything like that. The whole point of LVT is that it has no influence on land use choices: you literally pay the same LVT no matter how you use the land. It doesn't encourage or discourage anything. That's why it is economically efficient.

(However, alternative taxation schemes like income tax or capital gains tax or taxes on improvements do discourage building tall. And if you lower those taxes, people will build taller.

Btw, I think that for all its faults a conventional property tax that doesn't distinguish between land and improvements is still miles better than income tax or capital gains tax or sales tax etc.)

> 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.

Often land changes hands and the new owner tears down the structure and build a new one. You can reasonably assume that the old building was valued at zero, or even negative because tearing down costs money and time. So that gives a lower limit on the price of the bare land.

Re: Detroit wants to be the first big American city to tax land value

#276

Post by lbarrow »

AnimalMuppet wrote: post #196
mjamesaustin wrote: post #9

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

Why is it one of the "healthiest" forms of taxation? And, why does the fixed supply make it healthy? That sounds completely unrelated. Can you explain?

When you tax something, you get less of it. By reducing the supply of a good, taxes deter otherwise mutually beneficial transactions from happening; the loss of mutual benefit from a tax (or other policy) is called "deadweight loss".

Land value taxes have a special property in that land owners cannot respond to the tax by producing less land; the supply of land is fixed. This means LVTs do not generate deadweight loss, which makes them very efficient: https://en.wikipedia.org/wiki/Land_value_tax#Efficiency

Re: Detroit wants to be the first big American city to tax land value

#277

Post by AmericanChopper »

nickik wrote: post #227
AmericanChopper wrote: post #187

Earlier quoted context omitted.

Property taxes and wealth taxes undermine property rights in ways that normal income taxes don’t. If I earn $100 and pay tax on it, whatever’s left over is mine forever, and I never have to pay tax on that income again. If I buy $100 worth of property, I have to pay tax on it again every year forever, which basically means I’m only buying the right to rent it from the government in perpetuity. Your use of the phrase…

Much of the lands values comes from public infrastructure and services provided. A piece of land somewhere in the desert is gone be worth very little. A house in a city has lots of resources deployed there and land value tax pays for those things. This tax makes better for people who invest locally and hurts people who don't.

I’m not saying it’s necessarily a bad way to run a city specifically, I’m just pointing out the different compromises that are made in regards to property rights with these different forms of taxation.

I would really only object to property taxes (as a concept) in situations where intensified high density infrastructure doesn’t exist (or isn’t required to exist).

Re: Detroit wants to be the first big American city to tax land value

#278

Post by seanmcdirmid »

tantalor wrote: post #224
lbarrow wrote: post #145

Earlier quoted context omitted.

Yes, that's exactly the idea. We have a problem in the US where many metro areas do not have enough housing, in part because building big things is penalized by the tax code. By changing the tax code to not penalize construction, we hope to get more construction.

Maybe property tax should be inversely related to improvements, considering that improved land generates tax revenue in other ways, e.g. wage tax, sales tax, etc.

A lot of property taxes go to funding schools, so...more housing = more kids = more money need to educate them. It is nice that they use property taxes from businesses as well, but to completely detach the education need formulas from tax formulas sounds really dangerous.

Re: Detroit wants to be the first big American city to tax land value

#280

Post by simonsarris »

ab_goat wrote: post #258
chrisweekly wrote: post #179

Earlier quoted context omitted.

I'm a homeowner in MA interested to hear more.

I come from Western Massachusetts, which is characterized by smaller populations and lower budgetary allocations. The most significant budget item in most municipalities here is education, followed by road maintenance, which is often extremely costly. In Massachusetts, the basic cost estimate for repaving a standard road is approximately $1 million per mile, and this investment typically only lasts about a decade bef…

> Bridges are even more financially burdensome. Recently, we replaced a culvert that was so small I could easily jump over it, and yet it set us back $700,000.

Why? Why didn't you all agree to go down to Home Depot and load up on one big short metal pipe and some cement if that's the case? How was 700K spent?

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