Detroit wants to be the first big American city to tax land value • Hacker News Board

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

#741

Post by [deleted] » Tue, Oct 17, 2023, 2:52 PM UTC

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…

[deleted]

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

#742

Post by GenerWork » Tue, Oct 17, 2023, 2:52 PM UTC

dfxm12 wrote: post #734

ajsnigrutin wrote: post #607

Earlier quoted context omitted.

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.

I see homestead as completely, 100% incompatible with a LVT. Not because there's any law of man or nature that says the 2 can't work together, but because as soon as an area becomes "hot", that land will spike in value and the government will want its revenue to increase, and at that point they'll fight tooth and nail to overturn any homestead protection that exists.

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

#743

Post by nostrademons » Tue, Oct 17, 2023, 2:52 PM UTC

pmontra wrote: post #613

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…

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.

Because people choose to build upon it, but the land itself was always there regardless of human action.

The arguments for an LVT fall into both economic & moral categories. The economic argument is that the elasticity for land is zero. It's always there, always will be there, and no human action is going to change that (barring things like landfill, which are a literal edge case that doesn't matter much in the grand scheme of land area). The only economic questions are "Who owns the land?", "What kind of returns can be generated from it?" and "How is it distributed?" As a result, a tax on land has zero deadweight loss. Most taxes reduce economic activity by disincentivizing the transaction they're taxing; as a result, productive activity that would've occurred without the tax never occurs. Land is different. The land will still be owned, just by different people, regardless of how high it is taxed. That means that the government can raise revenue without curtailing economic activity.

The moral argument is that nobody built the land out of their own labor, they only conquered it. And so what right do they have to monopoly returns from its ownership? Land was commons that existed before humanity, and so returns from ownership of it should go back to the commons, in the form of funding (presumably democratically elected) government and public-sector improvements that raise the value of the land for all.

Property on the land is different, in that it is built through human labor & ingenuity, and the returns to doing that should accrue to the people who actually do it (or compensate them for creating the built infrastructure).

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

#744

Post by giantg2 » Tue, Oct 17, 2023, 2:53 PM UTC

pxx wrote: post #707

theamk wrote: post #691

Earlier quoted context omitted.

Always wondered how this works on modern times, where income per square foot varies wildly per industry. Let's say because of rising taxes, a bakery or a shop has closed and a lawyers office has opened in that spot. Who exactly us "the public" in this case and what are the "maximum benefits" that they are getting from that change? Because if I actually lived nearby, I sure wouldn't be happy about my favorite vakery/s…

Income per square foot in _rent_. The important thing isn't that the lawyer's office makes more money. That's just correlated with the important thing, which is that the lawyer's office is willing to pay more rent. Note the lawyer isn't operating a charity for property owners here; they're only going to pay as much for rent as required for the market. If prevailing rent is high enough such that only lawyers get retai…

Saying rent isn't quite right. These land value taxes are usually taxed on potential as zoned. Empty land isn't bringing in rent. The whole point of these land value tax schemes is to tax it based on its highest zoned value so you force (re)development of the highest use case.

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

#745

Post by overrun11 » Tue, Oct 17, 2023, 2:53 PM UTC

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 is unique because it's a productive asset with fixed supply. The problem with most taxes on assets is that they decrease the amount of productive assets in service by making the economics less favorable. A tax levied against land however, will (obviously) not change the total amount available and therefore have no negative effect on total wealth created.

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

#746

Post by hiAndrewQuinn » Tue, Oct 17, 2023, 2:54 PM UTC

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.

I'm glad you ask. There's a whole 100-or-so page paper on this form of taxation with enforced sale on the books which explains why this approach is in fact far less perverse than our current system (which might be degenerately modeled as a 0% system, where every good has a forced sale point of $∞.∞∞).

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2818494

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

#747

Post by mrits » Tue, Oct 17, 2023, 2:55 PM UTC

dfxm12 wrote: post #716

pmontra wrote: post #613

Earlier 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.

The overlap vd of people with no wealth and those that want to be taxed on it would be more of a circle.

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

#748

Post by Draiken » Tue, Oct 17, 2023, 2:55 PM UTC

screye wrote: post #736

Draiken wrote: post #695

Earlier quoted context omitted.

> 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 everyo…

That's very interesting. Never heard of this!

Who offers these deals? Is it the government or private corporations? I'm struggling to see how one profits from this (which is normally the only reason companies do anything) so I'm very curious.

This really does sound like a win/win situation if it's like you described it! Here I only hear/read stories about people losing their homes without any other option other than selling.

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

#749

Post by TimPC » Tue, Oct 17, 2023, 2:58 PM UTC

dfxm12 wrote: post #726

Double_a_92 wrote: post #601

Earlier 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.

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.

I'm not sure about this. I think soaking the rich is likely more viable (at least in popular vote terms) than a regressive tax like land value. Middle class people will at certain points in their life have over 100% of their net worth in land (perhaps even 1000% if they can barely afford a 5% down mortgage for a property that is half structure half land). Meanwhile profiles for the ultra-wealthy are typically 13% real estate. Taxing one person on 1000% of their wealth and one person on 13% of their wealth is nothing like a wealth tax.

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

#750

Post by jrno639 » Tue, Oct 17, 2023, 2:58 PM UTC

giantg2 wrote: post #739

simonh wrote: post #658

Earlier quoted context omitted.

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 us…

We already tax utility users based on “usage”, but the cost to provide service is more like y=mx+b with a very large b and small m. Charging based on usage is just a way to allocate the large fixed costs amongst your users. (Electricity may be the exception with higher variable costs, but still significant fixed costs.)

But even if you’re not using them, the utility services (water, power, sewer) still have to pass by the property. Power lines and poles are there, they have to be maintained, your water main can’t be leaking, etc. There are real costs to do all that.