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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

#861

Post by AlbertCory »

AlbertCory wrote: post #516
Brycee wrote: post #502

Earlier quoted context omitted.

If you dramatically reduce taxes to labour and capital, it quickly becomes a very attractive place to move your business or earn an income. And that's the start of a development flywheel. Instead of taxing productivity, land taxes reabsorb the value generated by the community (positive externalities), which would otherwise flow into the pocket of the guy who owns a parcel of land in proximity to the public good. You…

Doesn't it seem to you like ~50 years of decline are too much to erase with one tax law? Have you ever been to Detroit?

I take it the lack of response means No?

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

#862

Post by bart_spoon »

sagarm wrote: post #855
delecti wrote: post #712

Earlier quoted context omitted.

The current situation can punish the owner for improving the property, because you pay based on the overall value of your house. A new roof and siding could make your home more valuable, increasing your tax. Land value tax would make your individual changes a non-factor. It could instead leave you on the hook for increases in the desirability of the neighborhood which you have no say in. So it would mean that homeown…

> screwed even harder if their neighborhood gets gentrified. Meaning, their land value and therefore wealth has gone up. Many people would love to be "screwed" like this, and in fact very hard at getting into the position amenable to "screwing."

Their wealth goes up but they can only access that wealth by selling. And in the meantime, if they don’t sell, simply living on the property becomes increasingly expensive. So yes, they won’t be walking away with nothing, but no, I can’t imagine the too many people enthused about the idea that a home that was affordable when they bought it is no longer affordable because the neighborhood is nicer.

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

#863

Post by tuatoru »

delecti wrote: post #712
rgblambda wrote: post #685

Earlier quoted context omitted.

Wouldn't that effectively punish the owner for improving the property? A tax purely on the land has the same justification as a windfall tax. The value goes up or down independently of any action of the owner. i.e. They didn't do anything to deserve the increase in their wealth. The value comes from what the land is surrounded by.

The current situation can punish the owner for improving the property, because you pay based on the overall value of your house. A new roof and siding could make your home more valuable, increasing your tax. Land value tax would make your individual changes a non-factor. It could instead leave you on the hook for increases in the desirability of the neighborhood which you have no say in. So it would mean that homeown…

> society should incentivize denser development of more desirable land, by disincentivizing maintaining sparse development of it.

That is exactly what a land value tax does, in a negative way. It disincentivizes buying land in a desirable neighborhood and then doing nothing with it, waiting for prices to rise.

With capital value taxation (the other alternative), a person doing that pays less tax than someone providing buildings for people to live in or businesses to operate in. So they can do it for longer.

Because any buildings on the land are not taxed, construction is not disincentivized. Well, it wouldn't be, if permitting were not insane...

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

#864

Post by lend000 »

mactrey wrote: post #848
lend000 wrote: post #817

Earlier quoted context omitted.

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…

No, you are wrong. The two cases are analogous. Under a LVT, if their tax goes up, it's because their land became more valuable. So when they sell they get more money. And under a LVT, if they spend money to build or improve a house, then they also get a benefit when they sell for a corresponding higher price. It's just that those improvements would not be reflected in a higher tax bill.

Sell what to who? Isn't everyone a lessor under Georgism?

I don't see how having regular auctions to determine what the land is actually worth is compatible with true land ownership. You auction the land to determine the tax, someone pays more than the current lessor, then that highest bidder gets to lease the land from the government and kick out the old lessor. Where does ownership of land and ability to sell it and profit from improvements come into play?

Unless you are in the Georgism-lite camp that says no auctions, just let government appraisers put value on the land as they do today and base the property tax on that exclusively instead of the current combined property tax. In this case you still have property ownership/buying/selling, which is far superior. I think the pros could outweigh the cons in limited situations, specifically downtown metro areas. But you have to accept a lot of bad pricing in this scenario, because these are the same assessors who allow all of those single story parking lots to profitably exist in downtown metros throughout the country.

These appraisers would all of a sudden wield huge influence, and one appraiser's opinion of the value of being near trendy shops or a park or a waterfront could vary significantly from another's. At least now they can use market data from similar properties to come to a tax assessment, since the tax is being assessed on the full value of the property.

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

#865

Post by lmm »

s1artibartfast wrote: post #493
epistasis wrote: post #407

Earlier quoted context omitted.

Exactly. And that's why taxing the land itself—and therefore access to all those improvements and amenities—is a good way to allocate it. If somebody is sitting on a prime seat in the hot tub, and they don't really care very much about it, and there's a line of 20 people waiting to get in, we have a wasted resource. Revealing true preferences by having people put some skin in the game means that more people are happy…

That is a great argument for never building a hot tub, or participating in a project to build one. Why bother making a tub, a neighborhood, or a community if it can simply be taken from you. Id rather burn mine to the ground than have it taken away just because someone else wants it more. They might not even want it more, but they just have more money.

> That is a great argument for never building a hot tub, or participating in a project to build one.

The hot tub is the land in this metaphor, no-one builds it, someone just put their butt on it first.

> Why bother making a tub, a neighborhood, or a community if it can simply be taken from you.

Something the younger generation has been asking itself for decades, since things are set up so none of us ever gets to "own" a place to live.

> Id rather burn mine to the ground

That explains so much about how the older generation has been acting politically.

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

#866

Post by lmm »

s1artibartfast wrote: post #806
epistasis wrote: post #622

Earlier quoted context omitted.

I don't think you understand, it can't be taken from you, at least no more than now. Nearly every single person will pay less tax on their home under LVT than a property tax, too.

>Nearly every single person will pay less tax on their home under LVT than a property tax, too. How could that possibly be true. The lvt would have to be high enough to replace revenue from all current income taxes, sales taxes, corporate taxes, and current property taxes. It would also be based on land used, so Warren be buffet and someone working at Walmart would have the same tax bill if they both own houses in th…

> It would also be based on land used, so Warren be buffet and someone working at Walmart would have the same tax bill if they both own houses in the same neighborhood.

If they both live in the same size house in the same neighbourhood, sure. If a billionaire really wants to live in a closet to spite the taxman, that's fine, although I don't know why they'd bother having the billion. They aren't imposing on the community, they apparently made their billion without using any space (because it's not just homes, the whole point is that it applies to every kind of land use, good for them.

> It is incredibly regressive.

It's the opposite. Land ownership is the biggest thing separating the upper and lower classes.

> Elon Musk can live out of his small undesirable home in boca chia, so his total taxes would be close to zero

He'd still have to pay LVT on his giant factory and fashionable city-centre showrooms, so skimping on his home is not going to make a lot of difference.

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

#867

Post by barfingclouds »

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…

Makes sense. I didn’t know taxing didn’t already work that way

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

#868

Post by lmm »

AmericanChopper wrote: post #578
lmm wrote: post #360

Earlier quoted context omitted.

> Rent seeking is a clearly defined economic concept that is not related to the seperate concept of renting an asset to somebody. It's called rent seeking because the thing you're seeking is rent ( https://en.wikipedia.org/wiki/Economic_rent - your link claims a false definition of the term). > Renting an asset to somebody has a very obvious reciprocal consideration of value. You could make the same argument for any…

You’ve linked to a Wikipedia page that describes dozens of different definitions for what rent is. The category of rent that this thread is broadly discussing is rent in the form of value extracted from capital and land. The much broader term “economic rent” includes things like wage increases negotiated by labor unions, which I presume you’re not objecting to, and certainly isn’t the topic of this thread. Rent seeki…

There's a huge difference between saying that people shouldn't be able to rent out capital they've legitimately earned (by creating value through their own efforts), and saying people shouldn't be able to seek rent from things they didn't create but just squatted on - radio spectrum, land, IP addresses, fraudulent patents...

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

#869

Post by cycrutchfield »

bombcar wrote: post #796
cycrutchfield wrote: post #787

Earlier quoted context omitted.

It’s a finite resource. 100 acres of land being barely used should certainly come with a cost. Of all of the things that could be taxed, this one actually makes the most sense.

People aren't objecting to taxing 100 acres of Manhattan at rates that are associated with the value of the land there, people are upset about the idea that they could buy something, and then through no fault of their own, it becomes worth more and they have to sell because they can't afford to pay. Sure you get a ball of money as a consolation price, but you still had to move on. But this is more of a straw man than…

> buy something, and then through no fault of their own, it becomes worth more and they have to sell because they can't afford to pay

I fail to see why that’s a problem. Those taxes go to fund local services (like schools, police, fire, etc.) whose costs likely scale when the local cost of living and land values scale. Buying land doesn’t mean you should get to lock in the price you pay for these services for perpetuity.

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

#870

Post by giantg2 »

simonh wrote: post #851
giantg2 wrote: post #765

Earlier quoted context omitted.

Sure, your point? The government benefits on the higher sale tax revenue too. It's only a true benefit when something is realized. The densest areas of many cities are seeing decreases in population, so maybe that infrastructure isn't the main driver of value.

The point of a land value tax is to incentivise that realisation. In prosperous cities the reduction is inner city population is due to land being used commercially, and maybe up to a point that's fine. You can always adjust the value tax based on type of actual usage. The important thing is that it's used efficiently in a way that benefits the community.

"In prosperous cities"

Yeah, but we are seeing that many cities are not prosperous and are seeing population reductions. You can't will the creation of value. Just because it gets taxed like the land will create value doesn't mean it actually will.

"in a way that benefits the community."

These taxes don't guarantee this at all. There could be any number of uses, many of which could be detrimental or wasteful (and this will vary based on perspective as not everyone wants the same thing).

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