It seems to me the idea is sound but the specific implementation very difficult to get exactly right. Tax it too much and no one will want the land. But unless you tax it enough to really spur development it won't have an effect. Finding that sweet spot is the key, but is also going to be a moving target.
Detroit wants to be the first big American city to tax land value
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Re: Detroit wants to be the first big American city to tax land value
#732Earlier quoted context omitted.
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.
They are welcome to do so, but it would probably be cost prohibitive to do that in a highly desirable area. I’m not sure what the hangup is.
Re: Detroit wants to be the first big American city to tax land value
#733Earlier quoted context omitted.
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 teard…
The thing about land is that there are a million reasons why one lot might be worth a different amount than one next door. A single lot selling in a neighborhood tells you little about the rest of the land prices in the area because of that. Maybe that lot is on a hill or next to a busy street or everyone knows the neighbor is a giant asshole. All these things change the price on a micro level and are impossible to disentangle.
Re: Detroit wants to be the first big American city to tax land value
#734Earlier quoted context omitted.
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 the…
Every tax jurisdiction I've lived in has some sort of homestead exemption to protect people from the situation where the taxes in the house they own and live in go up to where they can't afford it.
Re: Detroit wants to be the first big American city to tax land value
#735Perhaps 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 m…
> 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).
The problem with this analysis of a land value tax is that the value of the lot next to the skyscraper depends on the improvements of the skyscraper lot. This is in addition to the 'inherent' value of being downtown.
If we assume the skyscraper is the highest and best use of the land, it would then appear that both the skyscraper land owner and the parking lot land owner are being charged based on the investments made on the skyscraper lot.
Now, how are market prices determined? Overall, investors and lenders wish to maximize a return on investment. Indeed, property appraisals explicitly consider the highest and best use of a property in determining its market value.
So I am unclear how the explicit taxation of land value and improvement value that exists currently causes differences in behavior from the land value tax system you outlined.
Re: Detroit wants to be the first big American city to tax land value
#736Earlier quoted context omitted.
It isn't an extra tax. It is a rebalancing tax. The rich have nothing to do with this. It is purely about how much land you sit on and where. That's it. > Basically you're asking for normal people to work, get raises forever Nope, it mostly incentivizes real estate hoarders to start making productive use of there land. It allows normal people to buy houses because this system inventivizes the increase of supply. > la…
> It isn't an extra tax. It is a rebalancing tax. The rich have nothing to do with this. So effectively normal people that don't own empty land will not pay this or pay an equivalent of the previous taxes? > If your lad value tax increases enough to be unpayable, then your house has likely appreciated 3x+. I guess you could try to argue that but I still feel like that's going to hurt folks. Imagine a scenario where I…
> I guess you could try to argue that but I still feel like that's going to hurt folks. Imagine a scenario where I live somewhere for decades. Suddenly there's a new subway or some other factor that increases the value of the land enough that I can't pay for it.
I can imagine it.
That is exactly what happened to my neighborhood in India. Small residential condo community where Dad and I grew up. Everyone knows everyone sort of place. Our neighborhood suddenly turned into the hipster capital of India and began gentrifying and taxes started becoming unaffordable.
You know what people did ?
Took a deal to have their 5-storey condo redeveloped into a 30 storey one over 3 years. Everyone gets decent upfront cash, a huge rental allowance for the duration of the construction, 2x larger houses and more luxurious amenities.
Everyone is falling over themselves to have these deals signed. Yes, people waited till the last generation passed away, since they didn't want huge changes for those in their 80s. But, as those in their 50s-60s are heading into retirement, they are delighted to be able to retire wealthier, in a bigger house for 'free'.
The community has not been displaced, since everyone who lives here will still live here. Young families can buy apartments in one of the most accessible parts of town. Quality of life is better for everyone.
Re: Detroit wants to be the first big American city to tax land value
#737Earlier quoted context omitted.
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.
They are welcome to do so, but it would probably be cost prohibitive to do that in a highly desirable area. I’m not sure what the hangup is.
You are amazingly blasé about that fact that this would be using taxation to prevent people from using their own property as they see fit. This is utilitarianism run amok.
Re: Detroit wants to be the first big American city to tax land value
#738It seems to me the idea is sound but the specific implementation very difficult to get exactly right. Tax it too much and no one will want the land. But unless you tax it enough to really spur development it won't have an effect. Finding that sweet spot is the key, but is also going to be a moving target.
I think the specific implementation isn't that hard. The main idea is to provide an incentive to build by not taxing structure value. If you're taxing a territory that is currently half structure value and half land value you can set the land tax that replaces the property tax to double the current rates. Then your city revenue is unchanged. If plenty of land is blighted or empty then the average increased tax on land should be less than the tax of a reasonable structure (SFH for example). Townhouses and condos save by having less land per unit.
Re: Detroit wants to be the first big American city to tax land value
#739Earlier quoted context omitted.
If you want to tax properties, why not taxing both the land and what is build upon it? And wardrobes, tables, books or computers (every year) but that's another story.
We already tax revenue and/or profits in various ways anyway. If land is in a city, that gives it a high value and revenue earning potential due to no work or expenditure from the land owner, but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential. Roads, schools, hospitals, etc. these are very costly to the public but increase the value of nearby land. The l…
"but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential"
Empty land isn't using any of those things. Any future improvement would use those things and be taxed accordingly. If you're concerned about infrastructure costs, the. You want to use a per capita tax or the current property tax that taxes the improvements (where people work or live) since they are using the infrastructure.
Re: Detroit wants to be the first big American city to tax land value
#740Earlier quoted context omitted.
If you want to tax properties, why not taxing both the land and what is build upon it? And wardrobes, tables, books or computers (every year) but that's another story.
Don't threaten me with a good time :) Cheekiness aside, you'll find the overlap of people who support both a land value tax and a wealth tax to almost be a circle.
This isn't true. Land Value Tax is more regressive than wealth tax. There is a large contingent of Georgists who call themselves geolibertarians who basically support land value tax as the only tax that has a moral basis. They are fine with the inequality that comes from such a class (Middle class people often have 400% of their net worth in land/real estate at certain points in their lives, but high wealth people have portfolio's that are roughly 13% real estate). If you're taxing one person on 400% of their net worth and one person on 13% of their net worth that functions very differently to a wealth tax.