Detroit wants to be the first big American city to tax land value • Hacker News Board

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

#321

Post by seanmcdirmid » Tue, Oct 17, 2023, 2:14 AM UTC

senkora wrote: post #304

seanmcdirmid wrote: post #278

Earlier quoted context omitted.

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.

Surely more housing also means more working adults and more taxable income, so this could be handled with a local income tax.

Are any school districts outside of Prop 13 California funded by primarily income or sales tax? But ya, you would need to do something like that if you were to tax land rather than improvements given schools, police, and lots of infrastructure needs scale up with improvements.

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

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Post by pfannkuchen » Tue, Oct 17, 2023, 2:14 AM UTC

Detroit is an interesting example of a North American disposable city. Conditions changed and everyone left. Could this even happen somewhere like Europe where land is more scarce?

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

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Post by ethanbond » Tue, Oct 17, 2023, 2:14 AM UTC

somethoughts wrote: post #255

eru wrote: post #215

Earlier quoted context omitted.

That's an increase, but is it a spiral?

Agree - for most people its an increase, but for a homeowner on a fixed income it can feel the equivalent to a spiral.

The “spiral” question is because I’m looking for a positive feedback loop. Just an increase (even a substantial one) is way less alarming.

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

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Post by xyzzy123 » Tue, Oct 17, 2023, 2:15 AM UTC

TapWaterBandit wrote: post #245

bagels wrote: post #238

Can you legally relinquish ownership of a parcel to no longer have the tax burden of the empty land in a dying city?

Interesting question. I think in this scenario there'd be a couple of options: 1. The land is worth a lot. If that is the case, you should be able to sell it reasonably easily. 2. The land is worth very little. In that case the tax would be insignificant because the land has so little value.

The problem is if the state doesn't see eye to eye with you on the value.

This can happen for all sorts of reasons, they might be using a simple algorithm that takes into account nearby values / recent sales as comparables. Those lots might have subtle features which makes them much more valuable than yours. Etc.

You get hit twice if over-assessed, first of all because you have to pay more, secondly because the high taxes act as a drag on what you can sell it for.

In theory this can result in "negative value", ie, the land generates less income under any plausible use than the property taxes cost.

Then you're stuck! What idiot will buy your white elephant now? How can you stop paying the taxes if no one will buy it? Which is why any fair lvt proposal needs at least an out where landowners can hand stuff back to the state.

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

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Post by s1artibartfast » Tue, Oct 17, 2023, 2:15 AM UTC

ItsMonkk wrote: post #314

s1artibartfast wrote: post #175

Earlier quoted context omitted.

Lvt would just make nimbyism worse, it doesn't punish it. Up zoning and public infrastructure increases property value. The best way to keep your land value tax low is to ensure that zoning restricts its use and Light Rail never gets built.

Under the existing system you are incentivized for your own land to be zoned as highly as possible while your neighbors land is restricted as possible to keep supply low. Since everyone votes against you and you vote against everyone, zoning is low just about everywhere. Under a land value tax this flips, and the majority vote would go to up-zoning.

No, I think it is the opposite. The more options available for your land and that of your neighbors, the higher your land is valued.

This means you want the maximum restrictions to keep the value low, for both you and your neighbors.

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

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Post by jmyeet » Tue, Oct 17, 2023, 2:15 AM UTC

Whehter you property value or land value pales in comparison to other aspects of your taxation system. Basically, do the complete opposite of what California has done. A summary:

1. Prop 13 in the 1970s was the incumbent homeowners voting in a massive generational tax break. It capped annual property tax raises for really no reason. Worse, it allowed your children to inherit those tax rates (as well as inherit your property on a stepped up basis so you didn't pay any CGT either). Only in recent years did this get cut back slightly. If you own multiple properties, only one (the primary residence) gets to have its beneficial tax rate inherited. And that measure only passed by (IIRC) 51%;

2. Corporations get the same capped tax increases and don't have to worry about inheritance. Disney World had its tax rate set in the 1960s so it paying a pittance. The LLCs can get bought and sold without resetting the property tax rate to assessed value as would happen if the property was sold;

3. For old people who may be sitting on massive land value that you may not want to evict straight away, just do what Texas does: accrue property tax but defer it to their death with a lien on the property. This gives people a choice between staying and paying later or downsizing.

Prop 13 may seem great if you're a longstanding homeowner but the thing is, it's a trap. You can't move because if you sell your property you lose your beneficial tax status. People should have mobility and generational wealth isn't who we should be giving massive tax breaks to anyway.

If you get these things wrong property vs land value makes absolutely no difference.

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

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Post by eru » Tue, Oct 17, 2023, 2:16 AM UTC

BirdieNZ wrote: post #41

slashdev wrote: post #13

Earlier quoted context omitted.

I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

Gentrification, which displaces renters (rents become too expensive for existing tenants so they need to leave the area), will start displacing some land owners as well. LVT would increase due to land value increasing, and the current land owners may not be able to afford the increased tax. If you don't allow deferment of the tax, pensioners might have to move unwillingly (low income that may not cover the tax). Most…

Yes, gentrification replaces some existing tenants. But the new tenants might be renters as well?

> If you don't allow deferment of the tax, pensioners might have to move unwillingly (low income that may not cover the tax). Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue.

Otherwise, banks can do that kind of deferral for you with something called a reverse mortgage.

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

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Post by SoftTalker » Tue, Oct 17, 2023, 2:17 AM UTC

caminante wrote: post #272

PaulDavisThe1st wrote: post #244

Earlier quoted context omitted.

> 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!

If the carry cost is too high, who would buy the land?

The thing missing from the above scenarios is:

Owner can't afford the tax, can't find renters, can't find a buyer, so just walks away. This is why so many properties are vacant now. The owners just walked away.

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

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Post by yumbaya » Tue, Oct 17, 2023, 2:19 AM UTC

somethoughts wrote: post #249

eru wrote: post #212

Earlier quoted context omitted.

Exceptions are a bad idea, and as bad ideas tend to go, popular with voters. Exempting by use, like primary homes or day cares, now means that the government is in the business of snooping on you to make sure that the primary home you declare is also your actual primary home. You also give well-off people with a bigger primary home (or owning a home at all instead of renting) a big tax break. Welfare for the well-off…

I generally agree with LVT/Georgianism in principal. However in reality its a difficult ask to have all people purchasing single family homes to be able to build a 40 year financial model/projection of a regions growth prospects when the buy a home. Or have them move away from their family and friends support network. I think Georgianism works best: - when there's expansive flat land and slow growth and no zoning/res…

LVT would remove the disincentive to develop housing, so cost of living would drop as more is built. Even if a homeowner couldn’t keep up with the land tax, they’d be much more likely to be able to find housing in the same area.

Compare to right now, where every generation can’t afford to live in their own hometown, because there’s only upwards pressure on housing costs, so families and support networks are constantly being torn apart.

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

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Post by epistasis » Tue, Oct 17, 2023, 2:19 AM UTC

phkahler wrote: post #99

TulliusCicero wrote: post #46

Earlier quoted context omitted.

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.

It's a very important question to ask: how big should the investor's bill be? For labor, for durable goods, for energy, etc., the investor pays in proportion to what they have taken from others.

But what has the investor taken from the public when they build? The best possible answer, in my opinion, is the value of the land they occupy. This exclusive use of a portion of land deprived all others from using it. That is the value of the land, and there are roughly two sources of that value: proximity to all the other things that others have built, or access to natural resources. And importantly, the investor is not the source of that land value, that comes from society as a whole or from nature.

So that's why the land value is an appropriate object of taxation: it's a payment to us all for what we have been deprived of. A person who builds a massive structure of great value on a piece of land has built that structure, but they didn't build the land or the bounty that the land provides.