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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

#571

Post by cpursley »

zip1234 wrote: post #214
unyttigfjelltol wrote: post #150

Earlier quoted context omitted.

They are loading the tax burden on the land rather than on structures. So, you can build the Taj Mahal or leave the lot a burned out wreck-- either way you pay the same tax. Many comments on the thread overstate what this is. 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, s…

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.

Or default in it and burden the city further. I’ve got a small plot of land (not Detroit) that I can’t seem to give away.

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

#572

Post by konschubert »

lend000 wrote: post #520
TulliusCicero wrote: post #46

Earlier quoted context omitted.

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…

You have the same problem with property taxes, no?

Usually that is solved by various measure to slow down the tax increases for existing homeowners - which can be good or bad, depending on whether you're a homeowner or somebody looking for a home.

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

#573

Post by mathgeek »

bagels wrote: post #565
jjav wrote: post #533

Earlier quoted context omitted.

> 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 wan…

Or the city just says taxes are $x per square foot of land. Desired tax revenue / total parcel area.

I'm no economist, but it seems like such a flat tax would result in a lot of defaults on land the further you get from popular areas.

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

#574

Post by Beached »

jjav wrote: post #533
kaibee wrote: post #332

Earlier quoted context omitted.

> 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 wan…

you can use equivalents in the are. burned out abandoned building on the lot? what could that lot be worth reasonably? oh, there are 9 houses down the street or 1 block over that are all worth 200k...

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

#575

Post by hiAndrewQuinn »

jjav wrote: post #533
kaibee wrote: post #332

Earlier quoted context omitted.

> 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 wan…

There are theoretical difficulties, yes. The elegant way out is to have the person owning the land self-assess its value, set the LVT at x% of that value, and be legally bound to sell it to anyone who comes up to them offering that price.

Now how do we determine that x%? That's a good question. I think there's no way out of some empiricism even if someone did try this approach. But you can always start it low and raise it incrementally to see how it affects the land economy of an area.

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

#576

Post by leoedin »

Kbelicius wrote: post #557
orwell_bruh wrote: post #547

Earlier quoted context omitted.

One implication of what you write seems to be that every property owner is incentevized to NIMBY any improvements to the area that they don't care about. For example, if I am "child free" I will now oppose the building of schools and playgrounds on the basis that they make my LVT go up with no benefit to me. This looks more like a way to destroy society than prudent tax policy.

> For example, if I am "child free" I will now oppose the building of schools and playgrounds on the basis that they make my LVT go up with no benefit to me. It would raise the value of your land.

I think the problem is, for many people, the value of their land is kind of irrelevant. If you are using land by living on it, and want to live on it because it's near your friends, family, community, place of work etc, then the value of that land to someone else doesn't really matter. Maybe when you die and pass it to your kids, it would be great if it was valuable. But in the mean time (which for most people is many decades), an increase in value only really means an increase in monthly outgoings with no financial benefit to you.

Perhaps that's the point - in order for cities to stay dynamic and fair, we need to make everyone pay something close to market value for their land - even those who bought it a long time ago. But doing so is unlikely to make those people very happy.

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

#577

Post by [deleted] »

piaste wrote: post #555
jjav wrote: post #533

Earlier quoted context omitted.

> 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 wan…

While it's not trivial, assessing un-improved land value does not seem too different from other complicated accounting tasks that both governments and private organisations have been performing for a long time. Cost segregation studies are already a thing. A good starting point can be the relevant part of the Georgist primer published on ACX: https://www.astralcodexten.com/p/does-georgism-work-part-3-c...

[deleted]

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

#578

Post by AmericanChopper »

lmm wrote: post #360
AmericanChopper wrote: post #271

Earlier quoted context omitted.

> There's a reason "rents" are called "rents"; land rent is the most classic example of them. The "owner" of a piece of land does nothing to produce its value, they just take money for nothing because they hold a scarce resource. Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody. > Rent seeking is an economic concept that occurs when an enti…

> Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody. It's called rent seeking because the thing you're seeking is rent ( https://en.wikipedia.org/wiki/Economic_rent - your link claims a false definition of the term). > Renting an asset to somebody has a very obvious reciprocal consideration of value. You could make the same argument for any…

You’ve linked to a Wikipedia page that describes dozens of different definitions for what rent is. The category of rent that this thread is broadly discussing is rent in the form of value extracted from capital and land. The much broader term “economic rent” includes things like wage increases negotiated by labor unions, which I presume you’re not objecting to, and certainly isn’t the topic of this thread.

Rent seeking describes a specific case of “economic rent” where the reciprocal value either doesn’t exist or is highly contrived. As I’ve said, it’s fine to be against a persons right to seek “economic rent” from their capital or land. But this isn’t an “anti-rent-seeking” position. That’s an economically Marxist anti-capitalist position, as that is the most fundamental component of Marx’s economic model.

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

#579

Post by robertlagrant »

hiAndrewQuinn wrote: post #575
jjav wrote: post #533

Earlier quoted context omitted.

> 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 wan…

There are theoretical difficulties, yes. The elegant way out is to have the person owning the land self-assess its value, set the LVT at x% of that value, and be legally bound to sell it to anyone who comes up to them offering that price. Now how do we determine that x%? That's a good question. I think there's no way out of some empiricism even if someone did try this approach. But you can always start it low and rai…

> and be legally bound to sell it to anyone who comes up to them offering that price

Why? This just seems to create yet another perverse incentive structure that people have to invest time into understanding (and some into exploiting), rather than adding any actual value. Taxes mean nothing if everyone is too busy figuring out this sort of scheme to do anything valuable.

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

#580

Post by dukeyukey »

orwell_bruh wrote: post #547
chongli wrote: post #392

Earlier quoted context omitted.

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…

One implication of what you write seems to be that every property owner is incentevized to NIMBY any improvements to the area that they don't care about. For example, if I am "child free" I will now oppose the building of schools and playgrounds on the basis that they make my LVT go up with no benefit to me. This looks more like a way to destroy society than prudent tax policy.

The benefit is the land you own is now more valuable.
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