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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

#511

Post by eru »

s1artibartfast wrote: post #490
ItsMonkk wrote: post #417

Earlier quoted context omitted.

And what is your take on when Minneapolis voted to allow multi-family units[0] and rents dropped[1] relative to other cities? Shouldn't those new units have brought higher land values, and with it higher rents? [0]: https://archive.ph/7oCO6 [1]: https://archive.ph/lO8xY

rents =/= land value. you can put a duplex or quad-plex on a parcel and have much lower rent, but higher parcel land value. If you are a homeowner who wants lower land value tax, you should fight tooth and nail to prevent higher density zoning,

You would want higher density zoning in all the other neighbourhoods across town, I guess?

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

#512

Post by eru »

tprice7 wrote: post #508
eru wrote: post #198

Earlier quoted context omitted.

> 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, stained glass window or chandelier. The 'goofiness' is on purpose: you tend to get less of what you tax. Most taxes are taxes on some kind of economic activity. The supply of land is fixed, so you can tax it all you want with…

I think that unyttigfjelltol was saying that taxing the value of improvements is goofy, not LVT. The comment was in favor of LVT.

Thanks, that makes sense!

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

#513

Post by calgarymicro »

10g1k wrote: post #507

Google image search: Detroit abandoned neighbourhoods A city run completely by Democrats. Every policy they have is destructive.

So if Detroit's economic collapse is the fault of local Democrats (and not, say, the death of large parts of the US auto industry), then does that mean we also have to credit local Democrats for Detroit's rapid economic recovery[0][1][2] over the past decade or so?

[0]https://detroitmi.gov/news/u-m-economic-forecast-shows-detro...

[1]https://www.detroitnews.com/story/business/2023/02/08/michig...

[2]https://www.chicagofed.org/publications/chicago-fed-letter/2...

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

#514

Post by eru »

chongli wrote: post #392
jrockway wrote: post #372

Earlier quoted context omitted.

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".

I don't think tax law fears complexity Of course it does. Complexity in the tax law is regressive. It lets wealthier people and businesses take advantage of more deductions and writeoffs to lower their tax burden, due to the ability to hire accountants full time to work on it. Simple taxes that are difficult to avoid (such as LVT) are best if you want a progressive tax regime. One of the best features of LVT is that…

Simpler is not only less regressive, but also more efficient. Those lawyers and accountants freed up by simplicity can then go on to contribute to the economy in meaningful ways.

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

#515

Post by calgarymicro »

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.…

> the city’s property tax will be reduced from 2% for every $1 of assessed value (which is less than market value) to 0.6%. To make up for the revenues lost, land will be taxed at a new rate of 11.8%

This sounds like it's revenue neutral, so it doesn't seem like they're squeezing more. Also, they didn't eliminate all taxes on improvements, but cutting them by two thirds is still pretty good.

If the city is to be believed, most of Detroit's residents and business will actually be unsqueezed.[0]

> The city estimates that the LVT plan would reduce property taxes for 97 percent of Detroit homeowners and 70 percent of small businesses

[0]https://www.taxpolicycenter.org/taxvox/detroit-considers-shi...

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

#516

Post by AlbertCory »

Brycee wrote: post #502
AlbertCory wrote: post #414

(I lived in the Detroit area for nine months) "Getting rid of the speculators" sounds good and might even BE good. But you know, Detroit's been in decline since the 1967 riots. No conceivable LVT is going to be a game changer. If the land isn't worth anything because no one wants to live there, that's the end of the story.

If you dramatically reduce taxes to labour and capital, it quickly becomes a very attractive place to move your business or earn an income. And that's the start of a development flywheel. Instead of taxing productivity, land taxes reabsorb the value generated by the community (positive externalities), which would otherwise flow into the pocket of the guy who owns a parcel of land in proximity to the public good. You…

Doesn't it seem to you like ~50 years of decline are too much to erase with one tax law? Have you ever been to Detroit?

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

#517

Post by robocat »

Do you see the cat: https://www.henrygeorge.org/catsup.htm

I mostly agree with the goal of Georgism: I've seen the wasteland that occurs when everyone is an investor waiting for the area to take off (New Brighton, Christchurch which has been slowly rotting over many decades because of investors IMHO).

However an 11% tax on land value is completely whacko.

There is already a holding cost for undeveloped land: either a mortgage or the opportunity cost (of not investing in say the stock market). (Albeit balanced somewhat by the benefits of using land as collateral for loans when interest rates are low).

The clichéd story of Georgism is an undeveloped plot amidst developed land. I suspect that situation is not common: developers usually will develop if land is surrounded by valuable property! How much of central New York is blank property?

Detroit: what happens when a whole area is blighted? The tax is just a way to steal the land value over time from the owners. 11% less CPI means devaluing at say 6% per annum so property has zero value after a couple of decades. That is definitely not capitslism and is not so far distant from communism (state owns private property over time, it just takes longer than a revolution to do so).

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

#518

Post by VirusNewbie »

krupan wrote: post #497

It's so weird to me that with our income tax laws we to try and make sure they are fair and taxing people according to their means. You make more income, you pay more taxes, you make less income, you pay less taxes. But then we layer on property/land taxes that absolutely do not follow that principle. Retired Grandma living off social security has land that she bought 50 years ago is now worth 50 times what it was? T…

There are already laws that are written referencing primary residence. It’s not hard to imagine exempting that and just making sure grandma only pays for her 8 vacation homes.

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

#519

Post by Kbelicius »

flagrant_taco wrote: post #462
gavinsyancey wrote: post #430

Earlier quoted context omitted.

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.

Wanting to live somewhere and reducing climate impact are different though. If you build a city full of dense housing, where does all the food and water come from? Or the electricity, furniture, and clothing? Costs can be externalized, but at the environment level they still exist even if outside the city of consumers. It's also often the case that externalizing those costs adds even more impact as the product has to…

> If you build a city full of dense housing, where does all the food and water come from? Or the electricity, furniture, and clothing?

I don't understand your argument. Are you saying that people that don't live in cities don't consume, or consume less of, food, water, electricity, furniture and clothing?

> It's also often the case that externalizing those costs adds even more impact as the product has to be shipped in and the waste shipped back out.

They have to be shipped to fewer places and thus save resources. The only way what you are saying makes any sense is either if shipping things to more places somehow save resources or if people that don't live in cities don't need anything shipped.

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

#520

Post by lend000 »

TulliusCicero wrote: post #46
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.

Land value taxes don't factor in improvements. Improving the land results in no property tax change, so they incentivize doing more useful things with the land.

I've gone back and forth on LVT, but don't currently support it.

The problem is determining what the land is worth. If you use a periodic market-based auction system (the only known way that could possibly yield accurate prices), then you give the government and the wealthy extraordinary power to kick people out of their residences, even ones in which the tenants built the house. Good for the collective perhaps, but terrible for individual autonomy. This could be mitigated by auctioning off longer length (~say 30 year) leases, but you can end up with huge value mismatches after 30 years of change, just like today, and I suspect there would be other unintended consequences. For example, things wouldn't be built to last, they'd be built to generate as much value as possible before the lease is auctioned off again.

And even then, you haven't really determined what the land is worth, since any rational auction participant is considering how much money can be made with the existing improvements on the property.

That being said, I hope they do try it in Detroit, since I have no stake in the city and it seems like it has more to gain than to lose from such an experiment.

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