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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

#821

Post by mactrey »

TimPC wrote: post #740
dfxm12 wrote: post #716

Earlier quoted context omitted.

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 ha…

But property tax already exists, so apparently that regressive nature is fine. And middle class people mostly own land that’s been improved. It’s unimproved land that would be taxed much more with a land value tax. I don’t think it’s obvious which land owners would pay more or less - it depends on the structure of the tax and the relative value of their land vs the improvements on it.

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

#822

Post by mactrey »

bluGill wrote: post #784
cultureswitch wrote: post #759

Earlier quoted context omitted.

Does little old lady own her house? If yes, what's the problem with taxing the increase in value of her property caused by the environment becoming more desirable? All in all she's neither losing nor gaining anything.

She probably doesn't have much money. She might, but she might only have social security which wouldn't provide enough to pay those taxes. Edit: by money I mean income. She owns her house because years ago she (with her now dead husband) at one time had enough income to buy and pay off the house. Now that she is retired she has much less income despite having assets like a house that are in theory worth a lot of mone…

As others have mentioned, it’s quite easy to structure a land value tax to avoid kicking little old ladies out of their homes. You are arguing against a strawman.

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

#823

Post by mactrey »

nonethewiser wrote: post #666
pketh wrote: post #660

Earlier quoted context omitted.

Anecdotally, I live in corktown (a neighborhood right next to downtown), and while it’s overall a nice place to live and somewhat walkable. There are vacant lots everywhere. Some are totally fenced off and some used as free parking. I’m new to town but everyone else tells me that the area has massively improved in the last 5 years. Those lots are wasted potential.

What’s currently stopping people from developing them though? Detroit is a huge city and its population has largely vacated to the suburbs. Maybe they havent been developed because the current demand is already being met.

Sure, that's possible. Or maybe Mr. Parking Lot Owner just likes the look of parking lots. But the key point is that today, improving the land is disincentivized because it would increase the owner's tax burden. So we don't know exactly what people would do with all those empty lots if improving them wasn't disincentivized.

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

#824

Post by mactrey »

ajsnigrutin wrote: post #607
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.

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…

Detroit and most places in the US already have property tax. Little old grandma already has to pay more every year when her property becomes more valuable. And homestead exemptions already exist to prevent kicking grandma to the street.

A LVT would just shift property tax burden more toward empty lots or less-developed parcels and away from more-developed parcels. It wouldn't result in killing little old ladies.

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

#825

Post by mactrey »

robertlagrant wrote: post #676
fastball wrote: post #635

Earlier quoted context omitted.

Again, property taxes already exist. This is simpler .

As I understand it, property tax is simple when there's been a recent sale. The complexity comes from a similar issue to land value: no recent sale. In this case it's worse because valuing the land outside of what it's used for is a mess.

But this problem already exists. Many people live in homes for 30+ years and pay property tax on the land + improvement (physical home) value. Why would it be so much harder to hypothetically value the land without a recent sale (required for a LVT) than to hypothetically value the land + improvements without a recent sale (required for property taxes which currently exist in almost every city in America)?

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

#826

Post by mactrey »

nonethewiser wrote: post #681
fastball wrote: post #635

Earlier quoted context omitted.

Again, property taxes already exist. This is simpler .

Do you think taxing by sub components of land would be simpler yet? Maybe we should tax by rock content. Or maybe a tax based on more things has nothing to do with complexity. The largest market is for land and structures. That makes it the simplest to value.

There's not an argument from economic efficiency to tax by rock content.

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

#827

Post by rmason »

If you want an in depth on why this is a bad idea look up Charlie LeDuff's videos on his No BS News Hour show on YouTube. No one covers both Detroit and Michigan politics any better. He has done several hour long shows on this tax scheme. In short the only big city to ever try it was Pittsburgh and they abandoned it after a few short years.

https://www.youtube.com/@NoBSNewshour

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

#828

Post by mmsimanga »

jlhawn wrote: post #807
swsdsailor wrote: post #805

When will people learn that more taxes make things more expensive? It's like people actually want to have world of obscenely rich and obscenely poor people... with nothing in the middle.

Land Value Taxes are different. Nobody produces land so taxing it doesn't add to production costs and there is no deadweight loss. The economic burden of the tax falls only upon the land owner (in their role as a land owner) and cannot effectively be passed onto tenants. Land value is an economic rent which is arguably what we should tax more of and reduce taxes on consumption and income.

Can you explain how the landlord will be prevented from passing on the land tax to the tenant?

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

#829

Post by mactrey »

bagels wrote: post #566
epistasis wrote: post #425

Earlier quoted context omitted.

Imagine a scenario where land purchase prices hover very close to $0. This is the end result of an effective LVT. It means that you only pay for the structures, or the cost to remove a blighted structure, etc. It makes real estate more liquid, and allows more people to try their hand at development without having a massive land bank worth millions of dollars. It decentralizes these decisions and lets more local playe…

The land is nearly free now. You can't build things in Detroit and make a profit, construction costs outweigh sale price or possible rents.

The point is, currently if you build things then you pay higher tax. The current tax structure disincentivizes building things. We don't know what people would build without that disincentive - maybe still nothing, as you are suggesting.

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

#830

Post by mactrey »

oneshtein wrote: post #551
rrrrrrrrrrrryan wrote: post #544

Earlier quoted context omitted.

LVT doesn't encourage infinite development on all land - it encourages the efficient use of land. If you replaced property taxes with land value taxes and held revenue equal: For rural areas, not much would change. Land is cheap and taxes would remain low. For suburban areas, there would be a moderate shift in tax burden. People with homes on large plots of land would pay more; people with homes on smaller plots of l…

With %100 LVT, city will be owner of most land in 1 year. With 10% LVT - in 10 years. Value based tax means that value is transferred from owner to a new owner no matter what. Owner is just working for a new owner.

Well, property taxes in my city are around 1% currently. Does that mean the city will own 100% of land in 100 years? Probably not. For lots of reasons.
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