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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

#601

Post by Double_a_92 »

red_admiral wrote: post #561
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 tax is an idea by Henry George - the guy who coined the phrase "the rent is too damn high". His idea is among other things that a property tax discourages investment - one way to make money as an investor is to hold a plot of empty land in a desirable city centre location, watch it go up in value, and neither pay tax on any development on it nor bother with messy things such as tenants. Taxing the land val…

I don't understand how that needs a special tax though. Wouldn't the more obvious choice be to just tax all wealth/assets?

E.g. where I live it's just assumed that all your assets produce a yield of 4% yearly, and that is taxed as regular income. Makes the tax declaration also a lot easier, since people don't have to list all exact dividends and profits they might have gotten from investments.

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

#602

Post by shawabawa3 »

jjav wrote: post #548
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.

> If anything it seems like it would be much easier than the current property tax assessment scheme. Explain how it can be easier? If valuation is based on sale price of the property or nearby comparable properties, those are objective numbers. A sale actually happened, at that price. So it was worth that much to someone. No room for argument. A LVT gives power to the government to unilaterally declare that in some a…

Are empty plots not bought and sold? Are properties not bought and sold for demolition and redevelopment? Can you not compare the sale price of similar properties with similar plots in different locations to get estimates for the land value?

What about using insurance estimates for rebuilding costs? If my house is insured for a rebuilding cost of $500,000 and I bought it for $1,500,000, isn't $1,000,000 a reasonable estimate of the land value?

> A LVT gives power to the government to unilaterally declare that in some alternate universe, your plot of land might be worth a lot more

Only if the law for some bizarre reason gives unilateral power to the government to declare the land value for plots arbitrarily

You could say exactly the same thing about property taxes currently. Why could the government not unilaterally declare your property is worth 10x? Because that's not how it works

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

#603

Post by robertlagrant »

fastball wrote: post #594
robertlagrant wrote: post #581

Earlier quoted context omitted.

In real estate property value is constantly being corrected by an actual market. Prices aren't set by bureaucrats; they're paid by people for whom that price is worth it.

And bureaucrats are unable to use the market itself to help value land because?

This measure will be harmful. Not just due to the person being a bureaucrat who can be bad at their job and/or influenced to achieve certain outcomes; not just because the info is instantly out of date on purchasing decisions; not just because the pricing info is specific to that purchaser. But because everything like this adds more drag into systems that have enough drag already. People can't do anything useful if they're constantly coping with bad systems voted for and put in place by people who don't understand unintended consequences.

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

#604

Post by blagie »

Double_a_92 wrote: post #601
red_admiral wrote: post #561

Earlier quoted context omitted.

Land value tax is an idea by Henry George - the guy who coined the phrase "the rent is too damn high". His idea is among other things that a property tax discourages investment - one way to make money as an investor is to hold a plot of empty land in a desirable city centre location, watch it go up in value, and neither pay tax on any development on it nor bother with messy things such as tenants. Taxing the land val…

I don't understand how that needs a special tax though. Wouldn't the more obvious choice be to just tax all wealth/assets? E.g. where I live it's just assumed that all your assets produce a yield of 4% yearly, and that is taxed as regular income. Makes the tax declaration also a lot easier, since people don't have to list all exact dividends and profits they might have gotten from investments.

The idea is to change incentive structures around specific types of assets, not to raise money. The idea of rent-collecting landed gentry is economically devastating. Adam Smith wrote extensively about the outcomes, and that is a natural path for economies to take. Wealth consolidates, buys landed, and becomes an informal nobility who collects land and does no work. At some point, it spirals, as rents lets real estate investors buy more land.

Put another way:

If I have $1B, and I buy $1B of land, that creates no value, and raises prices for everyone.

If I have $1B and I start or fund a company which produces a new medical device, computer, or car, I've created massive economic value, both in the inputs (hiring people) and outputs (new technology).

Land is also a scarce resource we all need to share fairly (for whatever 'fairly' means). If you have more, everyone else has less. On the other hand, if you're investing in making movies, I can make my own movies too. There is no fundamental limit to that sort of economic growth.

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

#605

Post by s_dev »

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.

>LVT muppets

You're attacking the person rather than the idea.

Experiments are good, even if they fail to confirm a hypothesis because we can learn more. Sounds like your mind is made up before the experiment though.

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

#606

Post by tedk-42 »

Double_a_92 wrote: post #601
red_admiral wrote: post #561

Earlier quoted context omitted.

Land value tax is an idea by Henry George - the guy who coined the phrase "the rent is too damn high". His idea is among other things that a property tax discourages investment - one way to make money as an investor is to hold a plot of empty land in a desirable city centre location, watch it go up in value, and neither pay tax on any development on it nor bother with messy things such as tenants. Taxing the land val…

I don't understand how that needs a special tax though. Wouldn't the more obvious choice be to just tax all wealth/assets? E.g. where I live it's just assumed that all your assets produce a yield of 4% yearly, and that is taxed as regular income. Makes the tax declaration also a lot easier, since people don't have to list all exact dividends and profits they might have gotten from investments.

Land specifically has uses (people live there, grow stuff, build a business on top of, have community things like a park etc).

Most people won't care about some Rolex that someone around the world is willing to pay $100K for.

Land has purposeful value rather than just 'worth'

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

#607

Post by ajsnigrutin »

Double_a_92 wrote: post #601
red_admiral wrote: post #561

Earlier quoted context omitted.

Land value tax is an idea by Henry George - the guy who coined the phrase "the rent is too damn high". His idea is among other things that a property tax discourages investment - one way to make money as an investor is to hold a plot of empty land in a desirable city centre location, watch it go up in value, and neither pay tax on any development on it nor bother with messy things such as tenants. Taxing the land val…

I don't understand how that needs a special tax though. Wouldn't the more obvious choice be to just tax all wealth/assets? E.g. where I live it's just assumed that all your assets produce a yield of 4% yearly, and that is taxed as regular income. Makes the tax declaration also a lot easier, since people don't have to list all exact dividends and profits they might have gotten from investments.

The problem is, what if it doesn't produce that much? What if it doesn't produce anything?

Imagine someone buying a house somewhere cheap. Then some gentrification, a new microsoft campus built nearby, etc., and the price of the house jumps 10x+. You're on a fixed income, and your taxes are now higher then you can afford.

If you have multiple houses, sure, tax the second, third, etc. one (evn though the taxes are then charged as higher rents if you lease those properties), but the first, primary residence should not be taxed as a "profit maker".

Maybe it's a cultural difference, but here in the balkans, people rarely move, and telling a 75yo grandma that she'll have to move, since her socialist built apartment is now worth 500k eur+, because "investors" want it for airbnb, and she cannot afford taxes on it, is just evil.

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

#608

Post by BoiledCabbage »

injeolmi_love wrote: post #556
BoiledCabbage wrote: post #530

Earlier quoted context omitted.

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…

> land is not substitutable Then why do realtors do showings for multiple locations? It’s because the locations are substitutable, with buyers balancing price and amenities. Land is substitutable. > confusing second and first order Prices are a second order effect, not a first order effect (unless there’s price fixing). LVT makes land with amenities relatively less attractive, which lowers demand. Lower demand then m…

> Aassuming constant revenue, a move from property to land value tax would create a relative migration from city cores to a highly developed exurbia

At this point it appears you're just ignoring basic economics price sensitivity. Lowering overall taxes on a lot will not cause a migration from that lot.

I mean you can just keep repeating that phrase, but it doesn't then make it true. If you continue your argument that eliminating a tax on economic activity in an area will reduce the amount of activity in that area then there likely is little left for us to discuss.

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

#609

Post by joncrocks »

fastball wrote: post #594
robertlagrant wrote: post #581

Earlier quoted context omitted.

In real estate property value is constantly being corrected by an actual market. Prices aren't set by bureaucrats; they're paid by people for whom that price is worth it.

And bureaucrats are unable to use the market itself to help value land because?

Often the market isn't for land, but for land + property. It might help, but overall there is more room for subjectivity/untethered valuations.

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

#610

Post by bluGill »

malta_kano wrote: post #595
red_admiral wrote: post #561

Earlier quoted context omitted.

Land value tax is an idea by Henry George - the guy who coined the phrase "the rent is too damn high". His idea is among other things that a property tax discourages investment - one way to make money as an investor is to hold a plot of empty land in a desirable city centre location, watch it go up in value, and neither pay tax on any development on it nor bother with messy things such as tenants. Taxing the land val…

Is that the problem though? Empty land held by speculators?

Not just empty land. The 'little old Lady' who lived happily in her small house for decades, while everything else developed bigger. At one time her house fit in, but now the rest of the block is bigger buildings worth a lot more.

You decide if the above is good or bad.

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