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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

#41

Post by BirdieNZ »

slashdev wrote: post #13
mjamesaustin wrote: post #9

I'm a big proponent of Land Value Tax. In theory it is one of the healthiest forms of taxation since supply is fixed. It encourages efficient use of land and discourages owners from squatting on undeveloped land just to reap value from its location. https://en.wikipedia.org/wiki/Land_value_tax

I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

Gentrification, which displaces renters (rents become too expensive for existing tenants so they need to leave the area), will start displacing some land owners as well. LVT would increase due to land value increasing, and the current land owners may not be able to afford the increased tax.

If you don't allow deferment of the tax, pensioners might have to move unwillingly (low income that may not cover the tax). Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue.

In general, if your circumstances change unexpectedly then you might be unable to pay the tax and thus lose ownership of your property. This already is the case for renters, but it does mean a somewhat reduced sense of security for home owners too. Mind you, this is already the case for any existing property tax or council rates, which exist in many/most places, so it's also kinda a non-issue.

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

#42

Post by thatguysaguy »

alexfromapex wrote: post #21

Since people can barely afford land and homes as it is, I’d love to hear how this will help make land more affordable or available.

The idea is that it penalizes speculators for just holding onto property without putting it to work. I am not an economist so I don't know which of the pressures would win out.

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

#43

Post by groby_b »

woliveirajr wrote: post #37

Pufff, Brazil does that since forever. By paying some tax over your land, basically your government is taking it from you every generation or two. Roughly, 2% each year and in 50 years and it's gone.

Given that it was never "your" land to begin with (what, did you create it?), that's not an unreasonable approach.

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

#44

Post by t-writescode »

ekianjo wrote: post #30
mjamesaustin wrote: post #9

I'm a big proponent of Land Value Tax. In theory it is one of the healthiest forms of taxation since supply is fixed. It encourages efficient use of land and discourages owners from squatting on undeveloped land just to reap value from its location. https://en.wikipedia.org/wiki/Land_value_tax

So if your neighborhood gets popular you get kicked out? Sounds like a healthy policy. Have you ever thought more than 2 minutes about it?

Sounds like a way to convert single family homes into multiplexes as population rises so everyone can be closer to amenities. I’m very for that, especially if the former owner could find a guaranteed way to get one of the units on their land so they can stay.

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

#45

Post by TulliusCicero »

slashdev wrote: post #13
mjamesaustin wrote: post #9

I'm a big proponent of Land Value Tax. In theory it is one of the healthiest forms of taxation since supply is fixed. It encourages efficient use of land and discourages owners from squatting on undeveloped land just to reap value from its location. https://en.wikipedia.org/wiki/Land_value_tax

I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

The main downside is that you end up essentially kicking people out if their land gets too valuable.

You can always provide an exception though, for a primary residence where the increase in taxes would be burdensome on the owner's income.

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

#46

Post by TulliusCicero »

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 taxes don't factor in improvements. Improving the land results in no property tax change, so they incentivize doing more useful things with the land.

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

#47

Post by dllthomas »

slashdev wrote: post #13
mjamesaustin wrote: post #9

I'm a big proponent of Land Value Tax. In theory it is one of the healthiest forms of taxation since supply is fixed. It encourages efficient use of land and discourages owners from squatting on undeveloped land just to reap value from its location. https://en.wikipedia.org/wiki/Land_value_tax

I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

One concern I have is that once an area is built up, it's not clear that there will ever be transactions of unimproved land in the area, so I don't know how we keep "unimproved value" from being anything but a fiction.

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

#50

Post by tomrod »

jameshart wrote: post #11
thinkerswell wrote: post #6

I thought Detroit has been in decline for decades. If anything, you’d think they’d want to attract people back with _less_ taxes.

A land value tax, in theory, discourages the mere holding of unproductive land. Encouraging the land to go into the hands of people who will actually use it could, in theory, have some regenerative value to a declining city.

Where does the land go when no one buys it or pays taxes?
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