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

#521

Post by paganel » Tue, Oct 17, 2023, 5:50 AM UTC

ab_goat wrote: post #258

chrisweekly wrote: post #179

Earlier quoted context omitted.

I'm a homeowner in MA interested to hear more.

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…

I've been saying this in relation to all the paving that is done throughout my Eastern-European country with EU money, that is that at some point having that many paved roads around becomes economically unproductive, especially when it comes to communities that are getting older and smaller (in terms of numbers).

I've been answered something on the lines of "but all those paved roads will create economic activity and we will all become richer and we will be able to afford their maintenance going forward", which is reportedly not true anymore (also because of demographics and of the ageing population). It might have been true some decades ago, when the demographics were different and the age pyramid was more "normal", but not anymore.

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

#522

Post by huytersd » Tue, Oct 17, 2023, 5:58 AM UTC

gred wrote: post #129

I hope they do try it. If they do, one of two thing will happen. Either it will fail dramatically, in which case the LVT muppets can finally shut up about it... or it will succeed, all of our cities will migrate to this new utopian taxation scheme, and the LVT muppets can finally shut up about it.

Or a third way which would be the most reasonable, if it succeeds only those cities that are derelict and need to turn things around would implement this.

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

#523

Post by avar » Tue, Oct 17, 2023, 6:04 AM UTC

lliamander wrote: post #505

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…

While I share your reservations, I do prefer this to imminent domain (a practice I am not a fan of). I think it's more likely for the seller to get the best value for their property, and incentivizes the seller to make good use of the property.

Is imminent domain when the government's in a real hurry to grab your land? :-)

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

#524

Post by ses1984 » Tue, Oct 17, 2023, 6:04 AM UTC

josnyder wrote: post #73

ses1984 wrote: post #52

Earlier quoted context omitted.

Don’t improvements in nearby plots change the value of a plot of land?

Yes, by design. One major goal is to prevent a landowner from squatting on an empty lot while their neighbors build prosperity around it. The "squatter" then cashes in, having done nothing themselves. "Everyone works but the empty lot" is the commonly used phrase. The goal of an LVT is to insulate a landowner's tax bill from being affected by their own improvements. Its anti-goal is to insulate a landowner from chang…

It’s just strange phrasing that improvements increase the value of adjacent land but not the land they’re on.

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

#525

Post by HDThoreaun » Tue, Oct 17, 2023, 6:13 AM UTC

hn_throwaway_99 wrote: post #418

waveBidder wrote: post #241

Earlier quoted context omitted.

Historically, whoever controls the land also tends to control political power. But also, assessment is a really tricky proposition.

> But also, assessment is a really tricky proposition. If anything it seems like it would be much easier than the current property tax assessment scheme.

Well no, because people sell entire houses so you can use that to anchor valuations. LVT is only taxing part of the purchase, much harder to disentangle.

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

#526

Post by brutusborn » Tue, Oct 17, 2023, 6:22 AM UTC

Stevvo wrote: post #475

r721 wrote: post #2

https://en.wikipedia.org/wiki/Georgism

I remember high-school economics class, every lesson the teacher would relate how georgism was a solution to the problem at hand. It sounded like a panacea for all society's economic woes.

Once you understand George's complaints about rent seeking you begin to see it everywhere. I don't think his proposals are a panacea but they would help with most problems in our society (e.g. housing affordability, income inequality). His theory is accepted by both heterodox and orthodox economists but unfortunately hasn't had enough mainstream political interest to prove its utility.

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

#527

Post by brutusborn » Tue, Oct 17, 2023, 6:25 AM UTC

waveBidder wrote: post #241

rconti wrote: post #5

Earlier quoted context omitted.

Fascinating. First I've heard of this. I can see the obvious advantages, though I'm sure there are disadvantages I'm missing.

Historically, whoever controls the land also tends to control political power. But also, assessment is a really tricky proposition.

Assessment definitely isn't easy, but some fairly simple solutions exist.

For example, people could self-assess their land's value. To stop people low-balling the assessment, the Government could have an option to purchase the land at some % above the assessed price and then on-sell it. This way all valuations are linked to a market price rather than a bureaucratic process.

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

#528

Post by dllthomas » Tue, Oct 17, 2023, 6:31 AM UTC

LVTfan wrote: post #347

dllthomas wrote: post #47

Earlier quoted context omitted.

One concern I have is that once an area is built up, it's not clear that there will ever be transactions of unimproved land in the area, so I don't know how we keep "unimproved value" from being anything but a fiction.

As housing fads change, some styles will go out of favor. Great rooms replace lots of small rooms. Technology changes, too, will make some houses obsolete; older roof technology, plumbing, HVAC, inefficient systems, too little insulation and no space for more. Houses that are obsolete for their location will sell as teardowns. In that situation, the land value is measured by the selling price plus the cost of removin…

Maybe? I'm not going to firmly claim it can't work, but I remain concerned.

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

#529

Post by brutusborn » Tue, Oct 17, 2023, 6:33 AM UTC

dheera wrote: post #273

Gigachad wrote: post #253

Earlier quoted context omitted.

>I shouldn't have to pay rent for owning land That land is provided ongoing services, security, and utilities which cost money each year to maintain. Ownership is not some fundamental law of physics. It's a made up concept which is defined however the society you live in wants to define it.

> That land is provided ongoing services, security, and utilities which cost money each year to maintain Yeah, and I already pay PG&E, Comcrap, and whoever else is maintaining those services, I don't need to pay it again to the IRS. The IRS wouldn't do jack shit on land I own.

If the Federal government builds a highway that increases your land value, why should you get the windfall from any capital gains?

In this case the IRS collecting LVT is just recouping the investment they have made improving your land for you.

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

#530

Post by BoiledCabbage » Tue, Oct 17, 2023, 6:33 AM UTC

injeolmi_love wrote: post #482

BoiledCabbage wrote: post #450

Earlier quoted context omitted.

First, most places in the US at least already have a form of property tax. So you should be comparing LVT to property tax, not LVT to no tax. So most the above doesn't apply. But even if you did use your example above. Imagine as well there is someone else trying to open a fancy large bookstore containing as well hangouts like cafe, a bar and lecture halls for reading and book discussion. Their main draw is foot traf…

Remember when reviewing the impacts of a new policy, they are always at the margin. So the appropriate situation to imagine for your bookstore is one where the benefits of land in the core are slightly greater than benefits from land in the periphery. Since LVT makes land in the core more expensive due to taxes, on the margin all businesses and residences would migrate towards the periphery. Property tax creates its…

You're still muddling two distinct concepts together. Let's start with a simpler case where it is easier for people to reason about.

There is a single lot in the urban core. There are two proposed businesses vying for the lot. The first is an empty parking lot, the second is a two story parking garage. Under a property tax, the second group would be taxed for the improvements of building the above ground garage they would be taxed on economic activity - that is a bad disincentive for society. Under an LVT they would not be taxed for improving the property, there would be 0 marginal tax on economic improvement of the land. Now where it may not have been profitable previously to add the garage it now is. That is what you want. You have a market for this property, and it is now beneficial to be sold to the buyer with plans for the best economic use of the property.

A second example. Imaging a single city block split into lots. The city changes from a property tax to a LVT. The amount of money they collect from this block stays the same - but to change they will reduce the taxes on improved lots and raise the taxes on unimproved lots. Now those who improve their lots are no longer subsidising the free riders who are sitting on unimproved lots. Again you are supporting beneficial economic improvements and their activty instead of penalizing it via a property tax.

The case you are thinking of, you are using the phrase "marginal" but you are not applying marginal reasoning. Marginal implies a small change with all else being equal. You cannot apply marginal analysis to land as land is not substitutible - there is not "margin" between being in a dense urban center and in the exurbs.

There can be more buyers for a single plot of land. Enough buyers that they can be though of as substitutible. There are not more sellers for a single plot of land - you can't create more land, or produce more land with those characteristics of that dense urban center. Marginal analysis from the perspective of the buyer fails here and that's the mistake.

> no matter where they locate the property tax changes less than a land value tax, meaning the decision on where to locate is based on efficiency rather than taxes.

Again this is thinking that second order effects are first order. The first order effect here is the price of the property. The price of the property in the urban center will at least 2x-3x the price of that same property in the exurbs. It will dwarf any differnece in method of taxes. Even if LVT were 3x the property tax most property taxes are roughly 1% of the purchase price per year. Price not tax is the dominant factor and the reason why that comparison you made isn't valid. Within a price band yes tax will impact decision making, across price bands price obviously dominates. And tax dominating within a priceband is a good thing because we have now changed the policy to no longer tax economic improvements to land - so the tax policy is actually better. It's improving behavior at the margin.