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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

#721

Post by closeparen »

flenserboy wrote: post #659
bombcar wrote: post #620

Earlier quoted context omitted.

The idea is that you tax the land only as if it was being used for best use - so that every property is encouraged to develop to maximum density. I suspect that in actual use it would end up having a small to no effect.

In actual use it would, in most cases, ensure that people would not, could not have long-term ownership of land passed down from generation to generation. There would be significant social downstream effects & likely upheaval caused by this, & that would be compounded by the deleterious results of forcing more & more people to live shoulder to shoulder in the name of that maximum density you mention. No system of tax…

Someone once remarked that American society is anti-Georgist, in that land speculation is actually seen as the only honorable engagement with real estate.

Having un-utilized land in your family generation after generation codes as noble, but economically this is much worse than owning an AirBnb or a vacation home or being a Chinese investor who collects vacant luxury condos, or any of the other boogeymen of housing discourse. These people hold one unit off the market, and in the meantime they maintain it or finance its construction. The landowner builds and holds wealth for nothing but parasitism.

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

#724

Post by ethanbond »

robertlagrant wrote: post #579
hiAndrewQuinn wrote: post #575

Earlier quoted context omitted.

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.

It's not a complicated scheme: there's a semi-fixed price you pay to the public for removing land from its use, and you can do whatever you want in order to overcome that fixed price and keep whatever profit you achieve.

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

#725

Post by BariumBlue »

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.

Property tax: The more of your money you invest into your property, the more you pay for taxes (punishing investment)

Land value tax: Your tax is unchanged on how much you invest in your properties. A rundown parking lot pays the same amount of tax as the next door skyscraper (encouraging development of limited, high value land, and punishing lazy speculation).

Land value tax is a simple, elegant way to incentivize more (and more efficient) economic development.

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

#726

Post by dfxm12 »

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.

In addition to the idea that this tax is designed to make better use of land, the best tax is one that will pass. I think most people who support a land value tax would also support a wealth tax. A land value tax is more politically viable.

Also, importantly, you can't "hide" land (from taxation) by moving it out of the country.

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

#727

Post by xp84 »

vitus wrote: post #645
bluGill wrote: post #610

Earlier quoted context omitted.

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.

I'm sure your intent was to express a hypothetical that this might not be a net good, but... Something like 90% of boomers want to age in place (as opposed to moving in with family, or moving into some assisted living arrangement). This is a problem when that effectively locks up 40% of the housing stock. Does this "little old lady" need a 1-acre lot for her gardening when she can barely walk to the end of it and bac…

I get that you’re basically right in technical terms. A nice condo development could meet all their physical needs in far less space. And we would all be better off as a society if that is what happened, if it could just spontaneously, voluntarily happen.

However it’s just not compatible with any concept of freedom, as understood by those people themselves. A lot of people have an expectation of fairness that they ought to be able to own a home of their choosing and stay in it until they’re ready to move (or dead). And they are sentimentally attached to their homes where they raised their children.

We in the West have a society whose framework is roughly aligned with that idea. We could change it, but it would require lots of other “the government knows best” policies, and ultimately the massive empowerment of police to enforce those “best practices” when people object. Even one would agree with the outcomes in housing policy, it would be pretty risky to create that kind of totalitarian situation in general, because we might not like the other “most efficient best practices.”

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

#728

Post by diffeomorphism »

Draiken wrote: post #697
diffeomorphism wrote: post #650

Earlier quoted context omitted.

> Are we seriously saying that if someone can no longer afford tax on a land they already own because the rich need to get richer, you should sell? devil's advocate: No, not because of the rich but because of the poor. Buying a house decades ago was very possible on an average single person's salary. Nowadays, even upper income range couples have large troubles financing a house. So the situation is that you have lot…

> That is not helpful for a discussion. Fair enough. Edited that part off. I was simply extremely shocked at the implications, if I understood it correctly. > So the situation is that you have lots of old people living in houses that they could never, ever afford at today's prices. I don't think punishing people for what companies have done to inflate house prices is a good move though. Screwing over people that boug…

> Screwing over people that bought houses that they live in instead of fixing the root causes

The point of the proposal is that it is not an either or. In order to fix things you will have to also "screw over" people that have bought houses or people that currently can't buy houses. Long running problems are not quick and easy to fix and a fix will have collateral damage, not just "companies or rich folk".

Again: I am not taking a position on either side, but you are currently attacking a straw man.

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

#729

Post by flenserboy »

closeparen wrote: post #721
flenserboy wrote: post #659

Earlier quoted context omitted.

In actual use it would, in most cases, ensure that people would not, could not have long-term ownership of land passed down from generation to generation. There would be significant social downstream effects & likely upheaval caused by this, & that would be compounded by the deleterious results of forcing more & more people to live shoulder to shoulder in the name of that maximum density you mention. No system of tax…

Someone once remarked that American society is anti-Georgist, in that land speculation is actually seen as the only honorable engagement with real estate. Having un-utilized land in your family generation after generation codes as noble, but economically this is much worse than owning an AirBnb or a vacation home or being a Chinese investor who collects vacant luxury condos, or any of the other boogeymen of housing d…

So you're against someone who gets 100 acres, plants a house in the middle of it, & lives there simply because they want to, & they don't want to have to put up with the existence of neighbors? That's not parasitism — that's doing with one's property what one wishes to do. The economy is not the universe.

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

#730

Post by senkora »

seanmcdirmid wrote: post #321
senkora wrote: post #304

Earlier quoted context omitted.

Surely more housing also means more working adults and more taxable income, so this could be handled with a local income tax.

Are any school districts outside of Prop 13 California funded by primarily income or sales tax? But ya, you would need to do something like that if you were to tax land rather than improvements given schools, police, and lots of infrastructure needs scale up with improvements.

Agreed. I’m only familiar with Texas and Texas schools are funded with property tax with some redistribution to poorer districts.

I think a local income tax is the correct way to handle it theoretically but I don’t know any specific examples.

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