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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

#811

Post by ejstronge »

enragedcacti wrote: post #778
ejstronge wrote: post #735

Earlier quoted context omitted.

> 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 i…

> 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. Land with a skyscraper already on it and land next to a skyscraper have related but not equal market values. Switching from a tax on market value to a tax on land value rewards the the owner who developed their land and punishes the owner who…

> Land with a skyscraper already on it and land next to a skyscraper have related but not equal market values.

I agree! But in appraisals that I have seen, there is an effort to assess the highest and best use of a parcel as well as a break-out of the value of the land associated with a parcel.

If the highest and best use of a parcel is a skyscraper, a sale of the parcel should occur near the valuation of skyscrapers in that area. If there is no skyscraper on the parcel, the sale should occur near the valuation of land that has the possibility to be turned into a skyscraper.

> Switching from a tax on market value to a tax on land value rewards the the owner who developed their land and punishes the owner who didn't.

I agree that the owner who built the skyscraper is being penalized (but also, the owner would not have created a sksyscraper if the underwriting did not show the endeavor would be profitable).

However, both land owners are being taxed on land value; one is also being taxed on the improvements on the land. It would seem that the land value of both parcels should be the same.

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

#812

Post by seanmcdirmid »

bombcar wrote: post #791
seanmcdirmid wrote: post #783

Earlier quoted context omitted.

Most schools receive very little funding from the federal government. Maybe the poorest school districts this makes up a significant part of their funding, but for most school districts it doesn't.

> In 2021, state and local governments in the United States collected about 630.21 billion U.S. dollars via property taxes. > In FY 2023, the Department of Education (ED) had $271.01 Billion distributed among its 10 sub-components. Maybe they just burn that quarter trillion, but I suspect it ends up in the districts eventually.

Here is a good breakdown of funding in CA:

https://peecs.net/2021/03/10/how-are-california-school-budge...

So federal is...7%?

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

#813

Post by jlhawn »

adverbly wrote: post #801
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.

Muppet here :D It has been tried previously and had success. https://m.youtube.com/watch?v=h59se33UCK4

Hey! Have you met Ted Gwartney? He's great. I have the pleasure of serving with him on the board of Common Ground California.

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

#814

Post by jrockway »

adhesive_wombat wrote: post #564
jrockway wrote: post #372

Earlier quoted context omitted.

I don't think tax law fears complexity. You make a table and there is an entry for "parcel of land with grass taller than 6 inches and containing one or more 1980s automobile with 3 or more tires" right alongside "parking lot" or "hospital".

BRB setting up dewheelr.io, which will help you, a landowner besieged by toxic regulations threatening your eyesore vacant landbank, sorry, useful and beautiful community recycling zone. For a small monthly fee, we'll connect you with local freelance tax compliance consultants who will happily remove tyres from the vehicles until they slip through the gaps in the table in your local jurisdiction. We'll keep on top of…

Love it. Possum plants are the best improvement you can make to your neighborhood.

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

#815

Post by lend000 »

shawabawa3 wrote: post #598
lend000 wrote: post #520

Earlier quoted context omitted.

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…

> If you use a periodic market-based auction system (the only known way that could possibly yield accurate prices) This system wouldn't work, because you would be measuring the property value not land value

Exactly, there's no way to separate the value of the land from the value of existing improvements.

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

#816

Post by wolverine876 »

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.

> If you want to tax properties, why not taxing both the land and what is build upon it?

That's Detroit's plan.

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

#817

Post by lend000 »

konschubert wrote: post #572
lend000 wrote: post #520

Earlier quoted context omitted.

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.

No, there's a big difference. If someone bought a house and gets priced out of the house due to massive increases in value in the neighborhood and overall market, they reap the rewards of selling the house, because they owned the property. I don't believe tax increases should be slowed like they are in California -- that's a big part of the housing problem IMO.

Whereas in an LVT system, a person just gets priced out as the neighborhood increases in value with nothing to show for it, even if they spent money to build or improve the house.

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

#818

Post by lend000 »

gr__or wrote: post #563
lend000 wrote: post #520

Earlier quoted context omitted.

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…

Implementation is also the only aspect that makes me question LVT, otherwise I'm pretty much sold (not an unimportant aspect it is). Wrt "even ones in which the tenants built the house": For me the baseline of implementing LVT is that ppl don't have to pay it for their primary housing (or a much lowered version of it). Is that controversial?

That addresses one issue, but I think you end up with similar (or worse) problems we have now w.r.t. housing density, where someone keeps their dingy old single story house in a valuable up and coming downtown neighborhood because they gain nothing by leaving it. At least in our current system, they can sell the property for a big profit if they aren't stubborn. This might even slow down densification more, since the only way rational people will leave land of increasing value is dying.

Overall, I think there are so many impracticalities and second-order problems with implementing LVT that it seems like nothing more than a fantasy mental exercise.

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

#819

Post by VirusNewbie »

krupan wrote: post #686
VirusNewbie wrote: post #518

Earlier quoted context omitted.

There are already laws that are written referencing primary residence. It’s not hard to imagine exempting that and just making sure grandma only pays for her 8 vacation homes.

Why does she need to pay more taxes because she owns vacation homes? If they are generating income for her then income tax would make sure she's paying her fair share. Certainly whatever income she used to buy those homes was also taxed.

Because land use is an externality, and plenty of people own land without generating much income as a way to store wealth and for asset speculation.

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

#820

Post by mactrey »

msla wrote: post #694
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.

So people will be paying a higher tax than they ought to be if they aren't trend-chasing the economy to always be engaging in that "best use" from year to year? That sounds perverse in itself, especially since an economy needs diversity to function, and if everyone is incentivized to chase a single thing per region you end up with overproduction of that and underproduction of everything else.

Land that’s already been improved would pay less in taxes. Empty lots, parking lots, and other unimproved land would pay more tax. Calling an economic incentive to do something with your empty lot in an urban area “perverse” seems.. extreme.
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