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Tax the Land

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Re: Tax the Land

#571

Post by syspec »

imtringued wrote: post #510
jjav wrote: post #363

Earlier quoted context omitted.

> existing property owners are incentivized to support rather than fight zoning updates that allow more development Regular people who own some land are not going to have the capital or skillset to tear down their house and build a highrise on the plot of land. So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen. Consolidat…

>So what a LVT does, is to force individual landowners to sell land off to giant developer corporations who do have the resources to make it happen. Now those giant corporations are finally paying their damn taxes.

And how does that specifically help a family?

Re: Tax the Land

#572

Post by solidsnack9000 »

devilbunny wrote: post #561
solidsnack9000 wrote: post #487

Earlier quoted context omitted.

I don't think you're representing the situation fairly, because profiting 60% to 75% is definitely not a loss -- it's not taking a "big hit" -- and the problem there has nothing to do with LVTs, anyways. If your property doubles in value in and you sell it and pay 25% to 40% of the increase: the gross profit is: 200 - 100 = 100 the tax is: 25% to 40% of 100 which is 25 to 40 the profit post tax is: 100 minus 25 to 40…

It's a big hit, not a complete erasure of profit (setting aside simple inflation, because that's a big elephant in the room here). When you rewrite the tax laws so that I can effectively be forced to sell because other people would make more productive use of my land, well, regardless of how I feel about the idea, that's a reasonable argument. But if you tax me for the increase in the value of my land while I still o…

There are several problems with your line of argument here. The biggest one is that you don't pay capital gains tax on the sale of your primary home.

Some other problems with your thinking:

* Property tax is, in general, much lower than capital gains.

* Taxes paid to a state can not cover your federal tax bill (the lion's share of capital gains taxes are federal). In other words, it's not the same "you" in all cases listed above.

Re: Tax the Land

#573

Post by solidsnack9000 »

gameman144 wrote: post #545
solidsnack9000 wrote: post #464

Earlier quoted context omitted.

It seems like you overlooked the obvious -- when your LVT went up, your land went up in value. You sold your land and moved to some other, cheaper, place and thus realized a profit from that increase in value. If, in the other place, you make things better and the land goes up in value so much that you can no longer afford the LVT, then you can sell your land and realize, again, a significant profit. These profits ar…

Totally, the ability to move is definitely present. The incentive to move if one chooses is a great benefit of increasing land value, we're absolutely agreed on that front. The problem that I'm trying to point out is the converse disincentive to stay which these policies can introduce. For instance, my family, friends, social and professional networks, and history are all within the region I currently live. If I'm pr…

The point is not to force people to move, the point is to cover the state's revenue by land tax instead of income tax or sales tax.

The average Californian (could not find median) pays about 6945 USD to the state in income tax (using 106916 USD as the income figure). The median California home was about 650000 USD in 2020; it is projected to be 800000 USD in 2022. Assuming an LVT of 1% (the actual property tax rate is somewhat lower in California), the taxes would be 6500 USD in 2020 or 8000 USD in 2022. These are of the same order as the income tax they would replace.

This is remarkable, given that we are considering an LVT in the context of a badly overheated housing market -- the situation an LVT is designed to prevent.

In California, there is not only high income tax but high sales tax, capital gains tax, and many other miscellaneous costs. If the government is too expensive, it's too expensive; you may be forced to move because of that, but it's not because of a particular tax strategy. Any tax strategy can be used to charge you too much money. This is one of many reasons that a dysfunctional property tax regime does not support a good and stable life.

Re: Tax the Land

#574

Post by ItsMonkk »

imtringued wrote: post #501
inter_netuser wrote: post #218

Earlier quoted context omitted.

I like Georgist taxes, but it's unclear that tax incidence will fall entirely on the rentier class. Important land is always unique, and therefore taxation would be have be incredibly dialed-in, no? A busy major international port would need to be taxed very differently than a sparsely attended beach just a mile away. This seems very difficult to get right. Have there been practical applications that show that's not…

The biggest problem with an LVT isn't when it's too low. Even a low LVT can prevent empty parking lots and abandoned properties. The problem with LVTs start when the LVT is too high as everyone abandons the land and nobody wants to acquire it. That is a real nightmare because of the extremely high valuations of land fueled by low land value and property taxes. Transitioning to a steep LVT is difficult because the ass…

There's several ways to look at figuring out the correct value. You can look at the value of the surrounding land, or you can look at the value of the improvements.

What's nice about looking at the improvements is we should always be able to figure out the cost to build the building initially, we can look at the repair costs.

Say we have a house that was just built. We know for sure that this cost $500k to construct. We have the bills. Make the market price of the lot and house cost $500k and the tax is perfect. Done. If the tax is above the correct value, the auction bid will be under $500k, that's bad! Lower the tax.

Now let's say it's 10 years later. There has been depreciation on the house. It's no longer worth the $500k. If we still tax the building as if its worth $500k, what happens? It turns out we under-tax the 100% LVT. But as we know, under-taxing is okay, not perfect, but okay. It's over-taxing that is harmful!

What happens if someone bids $600k for it? Now we know we are significantly under-taxing the area and have good reason to increase the tax, and send out an appraiser to look at it.

Lastly I just need to point out that in a LVT world, it is kinda going to be like the "Don't fight the Fed" line. If you know that bidding $600k on a $500k house is going to force a tax inspection, you might not be so happy to lose $100k, so you might bid less. You might even bid $500k simply because that's what the home is worth, you might fund the appraisal yourself so that you don't risk your $100k. As the speculation is driven out of the market, the values of homes will be much more steady than they are today, and land appraisal will therefore become much easier and uniform. Even Zillow could do appraisal's with a LVT.

Re: Tax the Land

#575

Post by clairity »

CryptoPunk wrote: post #547
clairity wrote: post #536

Earlier quoted context omitted.

no, investors need no additional incentive to invest. they squarely chose to take the risk, and will do so regardless of boondoggles like this, because they have no better alternative (i.e., opportunity cost impels them). it's the same fallacious argument used to keep progressive taxes at bay (oh noes, the rich people will leave america for... ???). let them fail. it's not a social problem in the slightest. the socia…

>>no, investors need no additional incentive to invest. That is not true. Greater incentives translates to more investment, and more investment is socially beneficial. >>it's the same fallacious argument used to keep progressive taxes at bay (oh noes, the rich people will leave america for... ???). There is nothing fallacious about this argument. Disincentives to investment lead to less investment. Less investment me…

no, investment may move, but it doesn't simply vanish. wealth managers would be fired for holding investible funds in cash (which is what withholding investment means--that's the opportunity cost mentioned earlier).

historically, disenfranchised masses revolt, violently.

bonus point: a more equitable distribution of wealth would lead to smarter investment overall and a more productive economy.

Re: Tax the Land

#576

Post by clairity »

closeparen wrote: post #556
clairity wrote: post #519

Earlier quoted context omitted.

i disagree that we should make landowners "whole" in some sense, as they went into their investment knowing that the value of their investment could go down. it's not up to the rest of us to bail out wealthy landowners in that way, which creates a perverse incentive to seek government bailout for any and all risk-taking. enact the tax gradually, say over 5 years, and the property market will adjust accordingly.

One reason the West is prosperous is we have the rule of law. This obviously doesn't free investors from all risks but it does reduce political risks, i.e. being arbitrarily dispossessed by the government is mostly not something you factor in. In poorer countries it does get factored in: people take less risk and demand a higher premium for doing so, since why bother if it's just going to get seized? This goes a dece…

this isn't about seizing property, but about not giving away tax money to wealthy landowners every time our laws change against their interest toward the broader public interest.

Re: Tax the Land

#577

Post by jjav »

alar44 wrote: post #564
jjav wrote: post #546

Earlier quoted context omitted.

> We should not have a scarce natural resource sitting idle or under-utilized. Does it make sense to always optimize for nothing but maximum ROI for each plot of land? For example: imagine how many untold billions of extra value and tax revenue could be generated in Manhattan by tearing down Central Park and building it all full of dense housing towers. But would Manhattan be a better place to live as a result?

That's an absurd example. Central Park isn't undeveloped land. It's a freaking historical site and national treasure.

Why specifically is it absurd, in the context of what LVT tries to achieve?

LVT isn't about whether the land is developed or undeveloped. The idea is to tax it based on its maximally productive usage. So for example if a plot of land has a single house but it could fit an apartment building, it should have an apartment building.

Of course Central Park is a treasure! But based on LVT, open fields in the middle of Manhattan is not the maximally productive economic use for that land. Filling it with high rise apartments would yield far more economic value.

Clearly I'm not promoting that it would be a good idea. It would be a disaster. But it's a great example of why blindly applying LVT to everything is not a good idea.

Re: Tax the Land

#578

Post by closeparen »

clairity wrote: post #576
closeparen wrote: post #556

Earlier quoted context omitted.

One reason the West is prosperous is we have the rule of law. This obviously doesn't free investors from all risks but it does reduce political risks, i.e. being arbitrarily dispossessed by the government is mostly not something you factor in. In poorer countries it does get factored in: people take less risk and demand a higher premium for doing so, since why bother if it's just going to get seized? This goes a dece…

this isn't about seizing property, but about not giving away tax money to wealthy landowners every time our laws change against their interest toward the broader public interest.

Henry George’s LVT is a 100% tax on land rents. A 100% tax is also known as a seizure. Maybe there is some tax rate that would make this more in line with existing corporate or income taxes but setting it so low would also undermine its key benefits.

Re: Tax the Land

#579

Post by jjav »

ItsMonkk wrote: post #568
jjav wrote: post #347

Earlier quoted context omitted.

> The whole point of the land value tax is to tax land to encourage higher density and higher cost use. This is why I disagree so strongly with the idea. Do I want to live in a society where every square meter of land is forced to be used for the highest possible ROI? No, absolutely not. There is already far too much drive to maximize profit on everything. We need less of that, not more. Just a small sampling of land…

Not true. It's not each piece of land that you are optimizing, but the community as a whole. If you were to build up Central Park, yes, you could get more income for that space. Because people get less access to things that they want, everyone would move out to CT or NJ. Less tourists would come. The surrounding land would all drop, it would hurt NYC land values as a whole. In fact, with proper zoning in place that d…

> It's not each piece of land that you are optimizing, but the community as a whole. If you were to build up Central Park, yes, you could get more income for that space. Because people get less access to things that they want, everyone would move out to CT or NJ. Less tourists would come. The surrounding land would all drop, it would hurt NYC land values as a whole.

How do you propose finding the optimal balance, and even tricker, to encode that into the tax code for computing LVT for each lot?

Let's say paving over all of Central Park with highrise apartments makes NYC less attractive (I'll agree) and that leads to people moving out and housing prices collapsing (I'm not so sure about that, people might tolerate less nice living in exchange of economic opportunity of NYC).

What if only 50% of the Central Park land area is built up? Or 64%? Where exactly is the sweet spot that will extract as much value as possible while still not driving too many people away?

That's all going to be very speculative, there's no way to know exactly. And to encode the optimal answer into tax law? Seems impossible.

Also when you say:

> It's not each piece of land that you are optimizing, but the community as a whole.

Every proponent of LVT I've heard, always says that every plot of land should be taxed based on its maximum economic potential. I had not heard arguments about trying to balance it over the community as a whole. And how do you encode that balancing goal into tax law?

Re: Tax the Land

#580

Post by rsync »

CryptoPunk wrote: post #432
neilwilson wrote: post #429

Earlier quoted context omitted.

Land value taxes fail on the basics. Tax has nothing to do with raising money. It’s about releasing real resources for the public good - largely people to provide public services. Ideally the tax needs to be incident on the private sector entities that would otherwise hire the people the public sector needs to hire instead - military, judiciary, police, healthcare, education, etc. Government has no need of land, ther…

>>Tax has nothing to do with raising money. Taxation is entirely about raising money. >>It’s about releasing real resources for the public good - largely people to provide public services. What does "releasing real resources" mean, and how does taxation achieve that? And how does a land value tax fail to achieve that? >>It’s about releasing real resources for the public good - largely people to provide public service…

"Taxation is entirely about raising money."

I hope that it is interesting and noteworthy for you to learn that many, many smart and thoughtful economists do not agree with that. In fact, they strongly disagree.

Current thinking in modern economics - specifically in MMT[1] - is that money is created by loans and destroyed by taxes.

Which is to say, the government (provided it is a sovereign issuer of its own debts, like the US or the EU) has no particular use for revenues since they can just create whatever money they need. What is actually happening when money is taxed is that it is, effectively, destroyed.

[1] https://en.wikipedia.org/wiki/Modern_Monetary_Theory

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