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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

#331

Post by eru »

lbarrow wrote: post #288
balderdash wrote: post #264

Earlier quoted context omitted.

You realize all those parking lots are owned by big developers who want to develop the land, but are waiting for the right conditions…

And right now they can afford to wait forever! But with an LVT they have a big incentive to either develop it immediately or sell to someone else who will. It's no coincidence that people who support LVTs are typically YIMBYs -- we want to reform urban planning and land use to make it easier to build things.

> But with an LVT they have a big incentive to either develop it immediately or sell to someone else who will.

An LVT gives no such incentives. LVT is explicitly agnostic about how the land is being used. You pay the same, no matter how the land is being used. That's why it's economically efficient.

However, a conventional property tax (and also income tax and capital gains tax etc) disincentivise developing. An LVT can help raise enough revenue to be able to lower or eliminate those other taxes, and thus indirectly help remove disincentives to developing.

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

#332

Post by kaibee »

onlyrealcuzzo wrote: post #268
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.

They should implement a blight tax or a vacant land tax instead. I don't see how this helps Detroit's problems - unless they arbitrarily set high values on land where land is possibly already worthless. The areas with the most blight have the lowest land values already. The city already owns 75k out of 380k lots (~20% of the city - most of it vacant) - and instead of trying to sell the lots - the Detroit Land Bank ho…

> They should implement a blight tax or a vacant land tax instead.

A land value tax is a much more elegant solution. For one, it doesn't introduce the problem of needing to define 'vacant land'. Is a parking lot vacant land? etc

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

#333

Post by eru »

ensignavenger wrote: post #74
koolba wrote: post #51

Earlier quoted context omitted.

> 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 .

A deferment should be allowed for anyone on one primary residence. Then it isn't a carve out just for boomers. Also, the deferment doesn't mean the taxes don't get paid- they just don't have to be paid until the person moves out or transfers the property (or dies, which triggers a transfer).

A deferment isn't necessary. Banks are happy to do that kind of financial transformation for you via a reverse mortgage.

(However, it might still be a vote winner. Voters aren't exactly the brightest.)

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

#335

Post by RhysU »

unyttigfjelltol wrote: post #150
ejstronge wrote: post #39

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.

They are loading the tax burden on the land rather than on structures. So, you can build the Taj Mahal or leave the lot a burned out wreck-- either way you pay the same tax. Many comments on the thread overstate what this is. 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, s…

What happens to a lot with an old gas station with leaky tanks? The land is ruined. Land is not fungible.

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

#336

Post by jackson1442 »

Proziam wrote: post #85

If a person's primary residence isn't given an exception this will guarantee that people get kicked out of their homes once the land value increases too much. Similarly, if the tax on a rental property becomes too great the rent will rise to meet it. And again, people will be priced out of their homes.

> people get kicked out of their homes once the land value increases too much

This is already possible with property taxes.

FTA the city claims that 97% of homeowners will see a reduction in taxes. Typically, LVT is highest in areas more central to the city (think downtown) and lowers as you move outwards.

This means that, for example, a multitenant strip mall neighboring an Arby’s on a plot of the same size will pay similar amounts of tax. With property tax, the strip mall would be paying significantly more in taxes even though it is a more productive use of land because the development has more value to its owner.

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

#337

Post by LVTfan »

balderdash wrote: post #236
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?

1) it increases the likelihood of forced sales by owners (think a pensioner having to sell their long time home because property taxes have increased unaffordably due to the gentrification of their neighborhood 2) best use of land in this scheme is solely based on economic productiveness, it doesn’t take into consideration environmental and quality of life factors (to name a few) - think of all the local institutions…

Those owners may still be living in the homes in which they raised a number of children, near schools they no longer need, near jobs they long ago retired from, with more house than they can afford to heat, cool, clean, maintain, and steps that no longer suit them.

The increase in land value over 30 or 40 years has gifted them with lots of home equity (far more than their principle payments on their mortgage). That's enough funds to downsize from 3 or 4 bedrooms on a 10,000 or 20,000 sf lot to a very fine single-level apartment or condo in a building close to the center of things, a home they can take care of, feel safe in, and perhaps even have services to cater to their current needs, just as the nearness to schools and jobs catered to their needs 30 or 40 years ago.

Meanwhile, young families, particularly those with only one earner, must drive further and further to qualify for a mortgage. They drive not just on their home-hunting trip, but twice a day to commute to jobs close to those family-size homes and well established schools.

And if they do manage to afford a home in those older more central locations, they are paying (in California) multiples of what their neighbors are paying in property tax. Those neighbors raised their kids in a time when people of all ages were contributing to the costs of the schools. Today, the young families pay lots, while the comfortable older ones play little.

And from an environmental POV, having those workers commuting 30 or 40 miles each way each days isn't such a great deal for the environment, or for their quality of life, or for the time they can spend with their children.

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

#338

Post by ab_goat »

maxerickson wrote: post #315
ab_goat wrote: post #266

Earlier quoted context omitted.

Underfunded pensions are a problem only because tax revenue must be spent on maintaining unsustainable infrastructure that was originally built on an expectation of never-ending growth. If that infrastructure costs were not so high, there would be sufficient money to pay people what they deserved.

pay people what they deserved. Yeah, that's not the point. The point is that taxpayers receiving services should pay for what it costs to pay people what they deserve, not saddle the future with those costs.

I don't necessarily disagree.

But the issue has been that municipal taxes are a zero-sum game. People expect taxes to stay at a constant level unless they are getting additional services. So allocating more taxes in one place pulls taxes from another.

By not funding retirement immediately, you can keep taxes constant and not diminish current services.

But most importantly, the single-most-explanative reason why we services have gotten more expensive is because of this ignored tsunami of additional costs caused by the proliferation of the automobile.

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

#339

Post by yumbaya »

somethoughts wrote: post #160
ejstronge wrote: post #39

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.

Agreed - the many counties in the US already have a portion of the property tax bill coming from a land value tax/Georgianism. California property tax bills have two components [1][2]: - structure/improvement assessed value - land value assessed value The land value component is re-accessed frequently and changes based on comparables (presumably but its mostly black box). The question is to what degree/portion of Geo…

Texas is not Georgist. Property tax is assessed on the full market value of property, not on land. And Texas’s land speculation and sprawling, inefficient land use reflects this.

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

#340

Post by surge »

onlyrealcuzzo wrote: post #268
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.

They should implement a blight tax or a vacant land tax instead. I don't see how this helps Detroit's problems - unless they arbitrarily set high values on land where land is possibly already worthless. The areas with the most blight have the lowest land values already. The city already owns 75k out of 380k lots (~20% of the city - most of it vacant) - and instead of trying to sell the lots - the Detroit Land Bank ho…

I think the same tax should be on vacant rental properties. If you're still sitting on a rental property after 6 months to a year, you're charging too much for it since its apparently above market rate. At the very least you shouldn't be able to claim write off the loss on your taxes past a certain period. Maybe depreciation is another thing that should be fixed.
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