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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

#421

Post by flagrant_taco »

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…

Land value taxes are generally set arbitrarily high. Localities are incentivized to set values as high as they can attempt to justify. They end up modeling what they think could be the most profitable or valuable development on the land then tax you as if that were already done.

Eventually the land ends up in the hands of the few willing and able to abuse the land to that level, prioritizing profit above all else.

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

#422

Post by somethoughts »

yumbaya wrote: post #339
somethoughts wrote: post #160

Earlier quoted context omitted.

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.

Agreed - its not pure Georgism. It is however the closest experiment to Georgism in the US as far as I can tell having looked at their tax revenue sources (mostly property taxes with some petroleum production tax and no income tax) and the fact that they will attempt to increase the property taxes to market value on an empty lot. For now at least...

[1] https://www.dallasnews.com/news/watchdog/2022/04/20/property...

"What we're trying to do is value that land as if it were vacant — or that lot — and ready to be put to its highest and best use, which is to build a single-family home on, And we do that by looking at lot sales of what would be a competitive or a substitute product."

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

#423

Post by lbwtaylor »

eru wrote: post #275
lbwtaylor wrote: post #132

Earlier quoted context omitted.

- There are deeper problems with valuing land. Land values in cities are directly related to approved zoning (i.e. what you are allowed to build), so the city government can rezone neighborhoods and unilaterally alter the land values the residents pay tax on. This may not agree with everyone's view of fairness. - LVT encourages building tall and is hostile to lowrise development and unbuilt/green spaces. Those policy…

> - There are deeper problems with valuing land. Land values in cities are directly related to approved zoning (i.e. what you are allowed to build), so the city government can rezone neighborhoods and unilaterally alter the land values the residents pay tax on. This may not agree with everyone's view of fairness. That's actually a feature, especially if you make sure that the authority who can do the zoning also gets…

>> That's actually a feature, especially if you make sure that the authority who can do the zoning also gets the revenue (or at least shares in it). That way aligns incentives.

This is only a positive if your goal is to upzone everything. If you think cities should be a mix of zoning and zoning shouldn't be driven by tax considerations, then this is very negative, since the land management department has an incentive to increase zoning and taxes.

>> LVT doesn't do anything like that. The whole point of LVT is that it has no influence on land use choices: you literally pay the same LVT no matter how you use the land.

I don't agree that's how the incentives work.

If you don't tax structures you absolutely incentivize building structures, because they earn money but pay no tax.

In a land+building tax structure, there is less incentive to build a structure because they pay tax.

If I have a lot of green space and few structures, and we convert to LVT, I will be taxed proportionally higher than before, or than my neighbor with less land and more structures. By taxing me more you are dis-incentivising my approach.

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

#424

Post by acchow »

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.

Taxing the structure on the land is a negative incentive on developing the land

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

#425

Post by epistasis »

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.

Imagine a scenario where land purchase prices hover very close to $0. This is the end result of an effective LVT.

It means that you only pay for the structures, or the cost to remove a blighted structure, etc. It makes real estate more liquid, and allows more people to try their hand at development without having a massive land bank worth millions of dollars.

It decentralizes these decisions and lets more local players get involved. It rewards those who are productive, and encourages those who are squatting on resources to let somebody else give it a shot.

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

#426

Post by londons_explore »

France does this.

End result is that french people go to great lengths to make their house look un-valuable.

For example, they never paint anything and never do repairs. Some even have holes in the roof so they can claim buildings are worthless when in fact there is some 2nd roof underneath keeping the inside dry.

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

#427

Post by telotortium »

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.

One thing I think Strong Towns would do better to emphasize is that their argument that suburbs are financially unsustainable applies more to those suburbs of struggling towns or small cities. I don't believe suburbs of large, economically healthy cities are running into unsustainable infrastructure costs nearly as much. They may run into funding difficulties if the suburb becomes an undesirable area, or if the pension fund bankrupts the city, but they don't seem to be running into the issue that their property taxes can't fund them.

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

#428

Post by jmatthews »

xboxnolifes wrote: post #108
jmatthews wrote: post #20

Virtually every effective hedge against inflation is taxed heavily. There is no respite from dilution. When you look at it from that perspective you see a systematic attack against any safe harbor.

Which, from some points of view, is the point. The government wants money to be going toward investments (real, productive kinds), not sitting around as an inflation hedge.

Real estate is the most durable investment. A plurality of wealthy people became so via real estate.

It is also reasonably resilient to inflationary dilution.

I'm fortunate to be still earning. You could spend your life building a small nest egg and paying off a home to retire in and have it just litigated right out from under you.

Your argument is "time marches on" but then what value in saving and accruing capital? It's all short sighted transactional consumerism or bust. That's no way to live.

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

#430

Post by gavinsyancey »

flagrant_taco wrote: post #416
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.

This argument has often confused me when so many people are concerned with global warming. Why should a city incentive land owners to develop and commoditize their land? If we want to reduce human impacts on the planet, why not incentive the opposite and incentive leaving the land natural? Land value taxes prioritize GDP and profit above all else. Isn't that how we got into this mess in the first place?

Generally, land is valuable (and therefore under this scheme highly taxed) because people want to live there. And if they can't live there, they'll live somewhere else, likely involving a longer commute that is worse for the environment.
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