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

#351

Post by LVTfan » Tue, Oct 17, 2023, 2:29 AM UTC

s1artibartfast wrote: post #70

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?

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

It isn't the size of their geographical footprint. Rather, it is the location. Actually, locations, for the individual practitioner: their business and their home. They want to be in a good school district that educates all its students well and sends them to good colleges? They pay for the privilege.

They want to be close to high-paying jobs? They want to be close to highly-paid homeowners? They want to be close to their own workplace? Location, location, location!

But instead of paying the previous owner, who didn't create the land value, they pay the community, year in and year out, for those services.

Makes sense to me.

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

#352

Post by exabrial » Tue, Oct 17, 2023, 2:29 AM UTC

If I were a resident of Detroit I would figure out how to fire literally everyone that runs the local government and return assets to the people.

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

#353

Post by bitshiftfaced » Tue, Oct 17, 2023, 2:30 AM UTC

avar wrote: post #254

bitshiftfaced wrote: post #190

Earlier quoted context omitted.

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,…

You can pull on those heartstrings in either direction, as it were. In economic terms what you're arguing is that investment efficiency should always outweigh allocative efficiency. > pay [...] much more than your neighbor, who objectively speaking may have a lot of equal value. All land is unique, so I don't think adjacent land of equal value exists. The difference may be trivial, or it may be substantial. But yes,…

> All land is unique, so I don't think adjacent land of equal value exists. The difference may be trivial, or it may be substantial.

I don't understand how this relates. My point would stand even if the neighboring lots were slightly different in value.

> just pointing out that fair price discovery for a self-assessment LVT isn't an unsolved problem.

Yeah okay I'll give you that. It's just that we can't ignore how tax policy must match a society's values in a democratic society, else it'll be voted out. I'm saying this probably wouldn't work out since voters put value on the idea that at least some people will be able to get a good enough job to afford to bring up their kids in a stable home.

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

#354

Post by jandrewrogers » Tue, Oct 17, 2023, 2:30 AM UTC

eru wrote: post #267

lelandbatey wrote: post #200

Earlier quoted context omitted.

In high value land areas, the only people who own their own homes are those who are either very rich, or who were very lucky in the past and who are now very rich due to having bought a home in the past.

I appreciate the sentiment, but that's not really true. If you can afford the rent for your home, you can afford to own it via a mortgage. (Assuming functioning capital markets and assuming low enough transaction costs.) Something like this has to be true, because that's how landlords pay for their cost of capital and maintenance etc. If rent couldn't cover that, but for some reason home prices still stayed high, and…

> If you can afford the rent for your home, you can afford to own it via a mortgage.

This does not follow. It assumes the landlord has the same cost basis and cashflow requirements as the person with the mortgage, which is almost never the case. Your mortgage interest payments alone can be higher than a rent that allows a landlord to make a profit. This is not uncommon. Rents in Seattle, for example, are far lower than the equivalent mortgage if you bought the place.

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

#355

Post by ab_goat » Tue, Oct 17, 2023, 2:30 AM UTC

LapsangGuzzler wrote: post #341

ab_goat wrote: post #258

Earlier quoted context omitted.

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…

The Strong Towns YouTube channel makes many similar points. Suburban construction in the US is terribly inefficient and wasteful in the long run by maximizing the convenience auto accessibility at the expense of everything else. If infrastructure had a technical debt equivalent, it would be suburban planning.

I haven't watched many of their YouTube, but I concur that Strong Towns knows what's up.

For anyone that doesn't know what a "stroad" is, I hope you look into it. You'll never see the world the same again.

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

#356

Post by tmnvix » Tue, Oct 17, 2023, 2:31 AM UTC

SoftTalker wrote: post #328

caminante wrote: post #272

Earlier quoted context omitted.

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.

...the land value then drops. That drop is reflected in the cost of the LVT. A value is found that works for someone.

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

#357

Post by ab_goat » Tue, Oct 17, 2023, 2:32 AM UTC

nukeman wrote: post #286

ab_goat wrote: post #176

I've been thinking about local taxes a lot recently (I've been a locally elected selectman for a tiny town in MA) and realized that the automobile ruined the way we value land, which ultimate ruined the way that municipalities are able to control costs and spend their taxes to add value. I'd write more, but only if someone responds to this.

I’d be interested to hear your thoughts, this jibes with mine on the subject to an extent.

Commented on other reply first... please see there.

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

#358

Post by eru » Tue, Oct 17, 2023, 2:33 AM UTC

TulliusCicero wrote: post #45

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?

The main downside is that you end up essentially kicking people out if their land gets too valuable. You can always provide an exception though, for a primary residence where the increase in taxes would be burdensome on the owner's income.

So you would like to give tax breaks for those who put their home on especially valuable plots of land? The more valuable, the more of a break they get. If they manage to reduce their assessed income more, they get more of a break, too.

Sounds a bit silly.

You could give people a UBI equivalent to the median's persons LVT tax take (or first quartile from the bottom etc). That way the poorer people get a net payment from the LVT system. And you don't need to sniff in people's personal lives to determine which residence is their primary residence (if any) nor what would be burdensome.

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

#359

Post by tmnvix » Tue, Oct 17, 2023, 2:33 AM UTC

RhysU wrote: post #335

unyttigfjelltol wrote: post #150

Earlier quoted context omitted.

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.

> The land is ruined

And so the value of the land is less and the LVT drops along with it.

Of course for someone planning on putting another service station there maybe not...

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

#360

Post by lmm » Tue, Oct 17, 2023, 2:33 AM UTC

AmericanChopper wrote: post #271

lmm wrote: post #246

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. 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 enti…

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

It's called rent seeking because the thing you're seeking is rent ( https://en.wikipedia.org/wiki/Economic_rent - your link claims a false definition of the term).

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

You could make the same argument for any of the classic examples of economic rents. A doctor's license or a taxi medallion is obviously economically valuable; that doesn't make it not a rent. The thing that makes it a rent is when you're able to rent it out for more than it cost you to produce, or when you don't produce it at all.