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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

#361

Post by LapsangGuzzler »

dheera wrote: post #217
friend_and_foe wrote: post #205

Oh man, I was hoping that this would be one of those things where they tax land to encourage new building, but it's just another city hurting for revenue looking to squeeze it's population a little more. Not that it won't spur development. It will. But not as much as anyone hopes. They have to eliminate taxes on all improvements to the land and tax the land itself only. Also remove code and zoning restrictions on it.…

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'll just keep renting, I guess, since it makes no difference.

There’s no way that the tax burden offsets the equity you would build by owning property vs renting.

95% of my mortgage payment goes toward paying down principal on the loan, which is essentially value I get to keep. Not to mention that my housing costs are much more fixed compared to rent.

Paying rent provides zero value retention in the long run, its only real benefit is flexibility.

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

#362

Post by shiroiuma »

saxonww wrote: post #152
harimau777 wrote: post #128

Earlier quoted context omitted.

The difference is that someone created the products that I own and I payed them for it. However, no one (at least no one human depending on your religious beliefs) created the land.

Someone created the improvements on it, though. Which is most of what you're paying for when you buy or rent a place to live. This isn't going to change much about landlords. If anything, it will increase the amount of housing rented through landlords, because the land value tax will make it uneconomical for more people to own their own homes. In a high value area, the only people who would be able to do so are the v…

>If anything, it will increase the amount of housing rented through landlords, because the land value tax will make it uneconomical for more people to own their own homes.

You do realize condominiums exist, right? You don't need to own an entire parcel of land to own your own home.

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

#363

Post by bitshiftfaced »

lmm wrote: post #320
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,…

I'm from the younger generation who's been economically forced to move every couple of years because the older generation made it too hard to build houses. So I'll shed few tears for boomers being forced to move once after 20 or 30 years.

The point was that with the parent poster's method, every generation is potentially forced to move at all times.

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

#364

Post by eru »

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…

About (1): that's no different from existing property taxes, isn't it? How does an LVT increase the likelihood here?

About (2): LVT has no incentives or disincentives for how you use your land. It's entirely up to you, your tax is the same no matter what you do with the land. That's why an LVT is economically efficient: it doesn't mess with market allocation or land use.

Why would green space be reduced? If green space is the best use of a given plot of land right now, an LVT doesn't change any of the incentives nor opportunity costs at all. (Also keep in mind that many green spaces are zoned exclusively as such. LVT doesn't influence zoning.)

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

#365

Post by lmm »

Nathanba wrote: post #302
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;…

>No man is an island; land should be seen as something rented from the people right but if this is my only piece of land where I live on, I am "the people". I need to live somewhere, I have no choice. It's like asking a prisoner to pay weekly tax for the cell he lives on: He has no choice, he has to live in some cell. Instead tax it intelligently so that I'm exempt for my first and only house on a moderately sized pi…

> right but if this is my only piece of land where I live on, I am "the people". I need to live somewhere, I have no choice. It's like asking a prisoner to pay weekly tax for the cell he lives on: He has no choice, he has to live in some cell. Instead tax it intelligently so that I'm exempt for my first and only house on a moderately sized piece of land.

We all need to live somewhere bruh, you're not special. If you pick a piece of land that no-one else wants, you'll be paying zero or very close to it. But if you want your "first and only house" in the middle of Manhattan, either you pay a fair tax to compensate the rest of us for the valuable land you're taking out of public circulation, or you let someone else have their go.

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

#366

Post by simonsarris »

quasse wrote: post #306
simonsarris wrote: post #280

Earlier quoted context omitted.

> 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?

In case you're not joking, government entities in the US are not allowed to build road structures that will collapse the first time a farmer drives a loaded grain hauler over them.

I'm being a little facetious but I really would like to know how 700K actually gets spent line by the line, here.

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

#367

Post by SoftTalker »

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…

And in fact your mortgage would almost certainly be less than the rent for the same property, since the landlord will be using commercial financing which costs more, and will be paying taxes as a non-resident owner, which are higher. The landlord will also need to buy commercial property and liability insurance, which costs more.

Your residential mortgage will be at a lower rate and you will have property tax exemptions if the property is your primary residence and your insurance will be cheaper.

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

#368

Post by eru »

s1artibartfast wrote: post #325
ItsMonkk wrote: post #314

Earlier quoted context omitted.

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.

If the land of Joe's neighbours has no restrictions at all, it will be valuable. But if Joe's land has a weird zoning that says 'can only be used by Joe' that land would be nearly worthless on the market, but good for Joe.

Less extreme, if you have a neighbourhood with plots that allow unlimited building and a few plots that only allow single family homes, the latter would be a lot cheaper.

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

#369

Post by jncfhnb »

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…

Vacant lot tax? Oh no, as you can see I put a shed there.

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

#370

Post by eru »

s1artibartfast wrote: post #111
salmonellaeater wrote: post #66

Earlier quoted context omitted.

> It also assumes that NIMBYism remains at the same level, which is challenging, as every new build or development nearby increases your own taxes. It would also encourage the childless to fight things like schools, as they would pay extra tax having them nearby. This is the same as the existing tax system, where tax is proportional to (land value + buildings' value). > High levels of displacement and instability. Ta…

The Current system has property tax as one revenue stream of many. Income tax brings in by far the most funds, and there are sales taxes ect. If you retire, or loose income, people currently pay less income taxes. You can also live frugally to cut down on sales taxes. With LVT, taxes are detached from income and spending. Your taxes are also based on the whims of others. If your neighborhood gets trendy, you tax bill…

Well, your LVT only goes up if your property becomes more valuable. So that's your compensation right there.
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