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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

#531

Post by friendzis »

photonbeam wrote: post #377
surge wrote: post #340

Earlier quoted context omitted.

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

Equalization of tax burden and transparency in reporting. To put it very simply: when you buy a thing you spend money and gain value. No change in books. Then after some time you sell said thing for generally less and experience sharp loss. Think of P&L report of a public company. Such maneuver will artificially increase profits during ownership and deflate, potentially up to incurring book loss, them in period of sale. Depreciation/amortization simply spreads this loss of value over the period of ownership. Tax implications are mostly incidental and come from reporting.

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

#532

Post by gnopgnip »

xienze wrote: post #465
gnopgnip wrote: post #232

Earlier quoted context omitted.

The economy is not a zero sum game. If a land tax leads to increased economic activity it can actually result in a lower tax rate and generate more than enough tax to pay for the services the government provides.

Do you think this would actually happen in a place with as inefficient and corrupt local government as Detroit? Be honest.

Detroit probably has more to gain from more efficient land use from a property tax perspective because of it's history of corruption and inefficiency

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

#533

Post by jjav »

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

> For one, it doesn't introduce the problem of needing to define 'vacant land'.

But it introduces, unless I'm completely misunderstanding, the need to establish a theoretical value for a plot of land that's unrelated to any sale or use value we can objectively measure today.

At best, it seems the assesment will be very wrong often. At worst, it'll be a political tool for local government to drive out whoever they want by overvaluing plots on purpose.

A lot of the land around Detroit is nearly worthless given the blight. Will it be taxed at $0 or will they say that in an alternate universe someone could build a skyscraper there so it's worth millions? Even though nobody would actually fund that work.

Taxing based on sale price isn't perfect, but at least it is much harder to game since it's based on a concrete market-clearing price that isn't up for debate.

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

#534

Post by Proziam »

causality0 wrote: post #97
Proziam wrote: post #85

If a person's primary residence isn't given an exception this will guarantee that people get kicked out of their homes once the land value increases too much. Similarly, if the tax on a rental property becomes too great the rent will rise to meet it. And again, people will be priced out of their homes.

Right. If this is aimed squarely at blighted and/or unused lots I fully and completely support it. If this applies to retired people living in family homes it can fuck off.

The history of property tax involves quite a bit of taxing "intangible property" such as corporate stock. It has obviously evolved dramatically from its original purpose.

Similarly, the income tax in the US was started to pay for the Civil War. It wasn't until the early 1900s that income (both corporate and individual) got federally instituted.

In essence, the tax history of the US reads "At first there were only excise/consumption taxes, and then the government granted itself powers it never gave back. And now here we are."

As such, my expectation is that the notoriously-super-high-integrity government of Detroit won't do anything that isn't in the best interest of the people. Surely.

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

#535

Post by hn_throwaway_99 »

HDThoreaun wrote: post #525
hn_throwaway_99 wrote: post #418

Earlier quoted context omitted.

> 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.

Not at all, and any property assessor will tell you this (e.g. property assessments usually already separate land vs improvements). Nearly all houses are insured, so it's easy to calculate land value as sales price - insured value, basically because insurance only covers the cost of the house.

Plus, nearly all locales either have empty lots that are sold, or if there is no more room have houses that are sold as teardowns, and in either case that gives you an unambiguous land value.

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

#536

Post by brigandish »

aldonius wrote: post #58
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?

Sometimes people want to sit on underdeveloped-for-the-location land not because it's a low-effort way to ride capital gains but for non-economic reasons. Examples include conservation projects and urban farms, but the big one is empty-nesters ageing in place (while the city has grown around them). If you've seen the start of the movie Up you'll recall that Mr. Carl Fredrickson owns a detached home which now has apar…

Other people value the land too, if he values it more than them he should pay for it, right?

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

#537

Post by jjav »

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…

> Simple taxes that are difficult to avoid (such as LVT)

Can you explain how is it simple? Who gets to set the theoretical value of a plot of land, disconnected from all current uses? Since it's theoretical, it's very subjective. Who do we give this power to make or destroy the owners based on purely subjective speculation on what it might be worth? How do we guarantee that this entity won't abuse the power to set arbitrary tax valuations?

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

#538

Post by vidarh »

flagrant_taco wrote: post #454
dionidium wrote: post #437

Earlier quoted context omitted.

Human beings have to live somewhere and gathering them together in a small urban footprint is better for the climate, not worse.

How do those small urban footprints survive though? They bring in outside resources, external zing the impact elsewhere and adding in the cost of transporting goods into and waste out of the urban centers. There isn't a magic answer to it, but simply saying dense areas use less footprint for shelter ignores all the other necessities and conveniences consumed by the people living there.

Spread out rural housing does not mean less transport to bring in outside resources, but vastly more because most goods are still "outside resources" even if you literally live on a farm, and most people don't.

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

#539

Post by lukas099 »

AmericanChopper wrote: post #187
harimau777 wrote: post #142

Earlier quoted context omitted.

You are already paying taxes, Land Value Taxes just seek to be a more efficient (since they try to target rent seeking rather than profitable labor) and more just (since they target land that the owner didn't create) form of taxation. So arguing that it's effectively the government stealing your property is only a valid argument if you are arguing that all taxation is theft. If that's what you believe then that's fin…

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…

If you use your land for something useful it will be providing rental income (or equivalent utility) to you year over year, which wouldn’t be taxed under Georgism.

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

#540

Post by jimnotgym »

flagrant_taco wrote: post #421
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…

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.

Like some other comments, I am intrigued to hear other examples where LVTs have been set arbitrarily high.
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