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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

#371

Post by mortify »

friend_and_foe wrote: post #308
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…

I used to agree with you, then I read Falkvinge's proposal of a taxless state and it changed my mind. I'm now convinced that property tax (or more accurately, land tax) is the only justified tax, or more generally, that all taxes paid must be tied explicitly and characteristic to a service rendered, and that the only services a state should be allowed to render must be administration of a commons. You cannot defend y…

Land ownership must be enforced by court of law, and that's true of all property. Yet land ownership is the easiest to maintain. While my neighbor might take my lawnmower and claim it as his own and the courts would have difficulty proving otherwise. Land is difficult to walk off with. Maintaining ownership is simply a matter of maintaining accurate and secure records.

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

#372

Post by jrockway »

kaibee wrote: post #332
onlyrealcuzzo wrote: post #268

Earlier quoted context omitted.

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

I don't think tax law fears complexity. You make a table and there is an entry for "parcel of land with grass taller than 6 inches and containing one or more 1980s automobile with 3 or more tires" right alongside "parking lot" or "hospital".

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

#373

Post by eru »

r00fus wrote: post #54
MattGaiser wrote: post #26

Earlier quoted context omitted.

High levels of displacement and instability. The proponents of this I have met are generally wanting to use it force seniors with paid off homes out of them so they can live in them instead (or often build on them, as they are property developers). 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 t…

Do you have examples of LVT causing displacement & instability that's greater than what you get with astronomical housing costs in our normal property tax regime?

An LVT is good, but conventional property taxes are still much better than most other forms of taxation. Conventional property taxes don't cause astronomical housing costs.

California for example is partially so dysfunctional because they don't have enough conventional property taxes.

Yes, conventional property taxes disincentise building, but not more than capital gains taxes or income taxes do. And in large parts of eg California houses only cost a small fraction of the land they sit on at the moment.

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

#374

Post by maxerickson »

ab_goat wrote: post #338
maxerickson wrote: post #315

Earlier quoted context omitted.

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 se…

Yes, it's very convenient to have someone else pay for stuff.

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

#375

Post by ensignavenger »

eru wrote: post #333
ensignavenger wrote: post #74

Earlier quoted context omitted.

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.)

Reverse mortgages are generally only available in the US after you reach a certain age.

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

#376

Post by injeolmi_love »

BoiledCabbage wrote: post #144
injeolmi_love wrote: post #113

Earlier quoted context omitted.

Whenever something is taxed, less of it is produced. In the case of LVT, the tax is on land that is in a desirable location with lots of nearby amenities. LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. LVT means less walkable cities and more LA style sprawl.

> LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. Can you explain more? I don't see it. If a place already has high property taxes, and they are currently assessed on the land and the improvements then improved land in an area will receive a relative "tax reduction" compared to a full encompasing property tax. This means it is benefic…

First order effects are usually stronger than second order effects.

Imagine you are considering to start a small manufactory, say for artisanal socks. You can purchase land anywhere, since the bank will lend to you at a cheap rate backed by the land as collateral. You consider two options; option 1 is in a dense urban area, close to your workers and walkable with lots of public transit. The land is expensive due to nearby amenities. Option 2 is some exurbian land that is accessible via commute. The land is cheap. Assume without LVT that option 1 is preferred because it provides a better lifestyle for your workers. Now add LVT; the tax rate on the urban land is set based on rents, so the fact that a bank would lend cheaply against good collateral no longer matters; you cannot afford the land because local rents are too high.

It’s just a thought experiment to demonstrate a simple principle; society gets less of whatever is taxed.

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

#377

Post by photonbeam »

surge wrote: post #340
onlyrealcuzzo wrote: post #268

Earlier quoted context omitted.

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.

Im curious why depreciation has tax implications, what was the intention

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

#378

Post by caminante »

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.

You're skipping a few steps. Tax lien/default sale would reset the land value.

> This is why so many properties are vacant now.

In Detroit...?

People don't walk away because they can't afford taxes. It's because any dollar spent is negative NPV!

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

#379

Post by eru »

lbarrow wrote: post #344
eru wrote: post #331

Earlier quoted context omitted.

> 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…

I think you might be missing the context. The scenario we're discussing is a parking lot surrounded by skyscrapers in the middle of a major city. Under a property tax regime, the owner pays little taxes because the structures on the lot are not valuable. Under an LVT, the owner pays the same (high) taxes as the skyscrapers next to it, which would be obvious uneconomical. So under property taxes, the parking lot owner…

Yes, a property tax system disincentivises developing compared to not having a property tax.

The LVT has no influence on building.

If you draw a two-by-two matrix where the columns are property tax yes/no and the rows are LVT yes/no, you will find that the rows have no influence at all, and it's all about which column you are in.

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

#380

Post by xmprt »

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.

The way I see it, taxes are disincentives on bad behavior. So if you tax high value property more then it hurts people who want to improve their properties.
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