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High property taxes are good

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Re: High property taxes are good

#611

Post by TheMechanist »

brigandish wrote: post #540
TheMechanist wrote: post #527

Earlier quoted context omitted.

> One way to organise it is to ask people how much tax they're willing to pay, from which the land value can be derived (as that's the real point of assessing land value for someone who isn't willing to sell that's the real order of things). However, if someone bids on the land for that price you must sell. Some people have very strange misconceptions about LVT & Georgism.

Go on, I'm happy to be corrected, less so for people to make unhelpful asides.

I think you should start by reading Progress and Poverty - here is a short review: https://astralcodexten.substack.com/p/your-book-review-progr...

The land with the highest value is city land. Most of city land and the buildings on that land are private property so they cannot be auctioned “every year”.

Singapore and Taiwan lease blocks of state-owned land for (high-rise) residence buildings for a duration of 99 years. This land is auctioned to developers, who then build houses and high rises, then sell them to individuals. The land lease ends after 99 years, so the land can be reused. This obviously does not capture the increase in the value of land over 99 years, but the value of land at the time of the sale.

So both states have taxes on land - a property tax in Singapore and a tax on the increment in the value of land in Taiwan, showing that it’s feasible to estimate the value of land and tax that (value of land = total value - value of improvements).

Re: High property taxes are good

#612

Post by justinzollars »

honkycat wrote: post #270
mdcds wrote: post #223

Earlier quoted context omitted.

What was the original mandate for the US Fed Gov? Focus on international affairs and waging war, and let states handle the rest?

You realize that was almost 250 years ago at this point. Constitutionaliam is a grift run by conservatives to smoke screen their agendas. Nobody argues it in good faith.

> Constitutionaliam is a grift run by conservatives to smoke screen their agendas. Nobody argues it in good faith.

I argue it in good faith. I want government to shrink. The constitution should be used as a tool to constrain the size and scope of Government. And with the New Supreme Court it's chipping away at the concept the State can rule by edict. It's an exciting restoration of Democracy.

Today Government spending is 44% of GDP - which is colossal by most measures. In fact It's much larger than the CCP. Government size will shrink either through inflation or default because its debt burden is 130% of GDP. In research done by Hirschmann capital, 51 out of 52 times a country’s debt-to-GDP ratio reached 130%, the country eventually defaulted. The one exception is Japan - whose trajectory doesn't look great today.

Like it or not, you are either fighting constitutionalism or the mathematical force of Gravity. But there is no way Government will continue to expand.

Re: High property taxes are good

#613

Post by Dracophoenix »

yellowapple wrote: post #551
Dracophoenix wrote: post #522

Earlier quoted context omitted.

> No, because that's already subtracted out of the total property value to produce the land value. On paper yes, but in practice there will be a de facto tax on improvement due to higher demand caused by what an physical improvement of one's own property signals. > The exodus from city centers stems from farther-out places being cheaper - i.e. having lower land value. Lower cost is not necessarily lower value . It's…

> On paper yes, but in practice there will be a de facto tax on improvement due to higher demand caused by what an physical improvement of one's own property signals. ...which is already subtracted out along with the rest of the improvements' contribution to land values. You could argue that it ain't a perfectly accurate subtraction - and that'd be a valid and reasonable argument - but that margin of error cuts both…

> You could argue that it ain't a perfectly accurate subtraction - and that'd be a valid and reasonable argument - but that margin of error cuts both ways (i.e. overestimating improvement value instead of underestimating it).

I did allude to that in a previous comment regarding the "propping up "and "weighing down" of values

> Lower cost is not necessarily lower value. Land cost is land rental value times some amount of time (usually based on the expected cap rate).

Cap rate/land rental value is difficult to assess on land

> There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit Are the two parcels the same size? Are they representative of surrounding parcels and not outliers? Are they the same distance (in transit time/cost) as the nearest town/city center?

I'll admit that I don't have the exact values under the constraints you've listed. And given different geographies, that's going to be difficult to accomplish. However, there have been several reports of prices in Idaho increasing due to now-former residents of the Bay Area fleeing into state and buying up land and houses.

https://www.krem.com/amp/article/news/local/out-of-state-hom...

Re: High property taxes are good

#614

Post by TimPC »

Retric wrote: post #493
dntrkv wrote: post #490

Earlier quoted context omitted.

And if you built even a conservative 5 story building, it would generate significantly more value.

Value possibly, profit not necessarily. Put another way if building a 5 story building would be obviously more profitable then they would do that but the opportunity costs is now 1+ million per year you aren’t getting from the parking business.

Not clear. Plenty of people will forgo selling land to a developer who wants to build a five story building in order to wait for the premium that comes from the developer who wants to build a 50 story building.

Re: High property taxes are good

#615

Post by giaour »

simonh wrote: post #559
giaour wrote: post #404

Earlier quoted context omitted.

Sort of, but that would give you the "social value" of the land, which it only has because of its present use and its proximity to other land used for specific purposes. E.g., the land under my house is worth $X because it's in a residential area in a major metropolitan area. If I were to build a dense mixed use complex on a large plot of land, I would probably increase the land value (since density would make it a d…

The point of an LVT is to tax all those external factors that increase the value of the land, such as local amenities, zoning, etc. The idea is the only value added by owners of the property was the structure they built, that’s theirs, the rest of the value is in a sense un-earned. Much of it is due to government investment in infrastructure and facilities, for example. Taxing the social value is the intention.

But if a developer builds, say, an airport on some unattractive land outside of a city, they will create most of the value being taxed, right? The same is true to some extent for any structure.

Re: High property taxes are good

#616

Post by brigandish »

mlyle wrote: post #607
brigandish wrote: post #605

Earlier quoted context omitted.

> Yes, but... As I keep trying to make clear: It takes two to tango. Perhaps you'd be better off keeping your frustrations to yourself and improving the clarity of your writing. > The real value of land has appreciated >60x over that term. What is the "real value"? It's what someone is willing to pay for it. If the returns on the land are not that much, as you contend, then it's not worth >60x what it was. If the pro…

I'm sorry that I'm frustrated, but the end result doesn't really make sense. No, the amount agreed to pay 60 years ago does not necessarily match current market value of the land right. The amount agreed to pay -now- doesn't necessarily equal market value. E.g. say I have a piece of land, and I agree to lease building rights on it for 99 years to my buddy (or son, or..) for $1/year. The value anyone is willing to bid…

Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because

a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods

b) As I pointed out at the start, someone else can buy the land at at a very low price.

> However, if someone bids on the land for that price you must sell.

So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.

Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.

Still, I think this a digression, it's hardly a steel man, which would be more interesting. We may as well say that income tax is rubbish because people can lie to the tax man about their income.

[1] https://resources.realestate.co.jp/buy/leasehold-rights-in-j...

Re: High property taxes are good

#617

Post by mlyle »

brigandish wrote: post #616
mlyle wrote: post #607

Earlier quoted context omitted.

I'm sorry that I'm frustrated, but the end result doesn't really make sense. No, the amount agreed to pay 60 years ago does not necessarily match current market value of the land right. The amount agreed to pay -now- doesn't necessarily equal market value. E.g. say I have a piece of land, and I agree to lease building rights on it for 99 years to my buddy (or son, or..) for $1/year. The value anyone is willing to bid…

Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods b) As I pointed out at the start, someone else can buy the land at at a very low price. > However, if someone bids on the land for that price you must se…

> a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods

Your source effectively says the opposite-- some leases are limited, but "With an ordinary land lease right, the lease contract period is fixed but in practice can be renewed almost in perpetuity." and "The lease contract period under the Old Land Lease law is fixed, but the lease can be renewed almost in perpetuity."

Even the fixed terms for non-commercial use are generally very long-- "Land leased out to be used for single-family homes and condominiums can be leased out with a fixed-term land lease. The contract period is 50 years or more. "

> So even if you follow that avoidance strategy, I'm going to buy your land on the cheap.

I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.

E.g. say a sane discount rate is 5% per year. Lease is 50 years. Lease payment is $1/year. True value of the underlying land is $500k. Value of land in 50 years is estimated to be $1M. Tax rate 1%.

NPV of the lease payments is $19. NPV of the land is $92,000. I bid $200k and pay $2k in tax (compared to $5k).

Sure, you could bid $200,001 and get the land, to get an asset with a net present value of $92,019. This is not a favorable transaction-- even if there's some building residual value at the end.

In the end, the only way to value the independent value of the land is going to be from some kind of assessment process. A bidding based scheme is not practical: separating the value of the land and building is really hard. (And if we start having people judge whether the pricing of leases, etc, is fair-- that's effectively assessment).

Re: High property taxes are good

#618

Post by brigandish »

mlyle wrote: post #617
brigandish wrote: post #616

Earlier quoted context omitted.

Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods b) As I pointed out at the start, someone else can buy the land at at a very low price. > However, if someone bids on the land for that price you must se…

> a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods Your source effectively says the opposite-- some leases are limited, but "With an ordinary land lease right, the lease contract period is fixed but in practice can be renewed almost in perpetuity." and "The lease contract period under the Old Land Lease law is fixed, but the lease can be renewed almost in perpetuity." Even th…

> Your source effectively says the opposite

It's saying what is customary and possible. The landlord does not have to renew, I think that is quite clear from what was written in that article.

> Even the fixed terms for non-commercial use are generally very long

Because they have a land tax and a property tax. I didn't suggest to use Japan's law verbatim, nor would I, their system has a lot of unwanted side effects but it does encourage a lot of building.

> I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.

Yes, but you didn't get to sign over that lease because I outbid you and it's now my land and the lease will not go forward because, to quote myself:

> 1 point by brigandish 21 hours ago | parent | context | favorite | on: High property taxes are good

Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because

a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods

b) As I pointed out at the start, someone else can buy the land at at a very low price.

> However, if someone bids on the land for that price you must sell.

So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.

Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.

Your calculations are moot.

Re: High property taxes are good

#619

Post by mlyle »

brigandish wrote: post #618
mlyle wrote: post #617

Earlier quoted context omitted.

> a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods Your source effectively says the opposite-- some leases are limited, but "With an ordinary land lease right, the lease contract period is fixed but in practice can be renewed almost in perpetuity." and "The lease contract period under the Old Land Lease law is fixed, but the lease can be renewed almost in perpetuity." Even th…

> Your source effectively says the opposite It's saying what is customary and possible . The landlord does not have to renew, I think that is quite clear from what was written in that article. > Even the fixed terms for non-commercial use are generally very long Because they have a land tax and a property tax. I didn't suggest to use Japan's law verbatim, nor would I, their system has a lot of unwanted side effects b…

> The landlord does not have to renew

The source you provided is clear on this for the non-fixed term variants. Here is another source:

https://resourcehub.bakermckenzie.com/en/resources/global-co...

> What are the usual forms of leases?

> Ordinary leases (with statutory right of renewal except in certain instances)

> Fixed-term leases (with no right of renewal)

Note that you also characterized the law as providing an upper bound on lease terms, when actually it's the opposite:

> such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more

I disagree with most everything you say, and I am not sure further discussion would be productive.

Aside from the minutiae: I do not think there is any reasonable way except assessment to disentangle the value of land and improvements in a way that tracks land value in the short term, which is required for a land value tax to yield its substantial benefits.

Re: High property taxes are good

#620

Post by brigandish »

mlyle wrote: post #619
brigandish wrote: post #618

Earlier quoted context omitted.

> Your source effectively says the opposite It's saying what is customary and possible . The landlord does not have to renew, I think that is quite clear from what was written in that article. > Even the fixed terms for non-commercial use are generally very long Because they have a land tax and a property tax. I didn't suggest to use Japan's law verbatim, nor would I, their system has a lot of unwanted side effects b…

> The landlord does not have to renew The source you provided is clear on this for the non-fixed term variants. Here is another source: https://resourcehub.bakermckenzie.com/en/resources/global-co... > What are the usual forms of leases? > Ordinary leases ( with statutory right of renewal except in certain instances ) > Fixed-term leases (with no right of renewal) Note that you also characterized the law as providing…

> Note that you also characterized the law as providing an upper bound on lease terms, when actually it's the opposite:

> > such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more

I quote from the article I shared with you:

> The initial period is 30 years, regardless of the building structure. The lease can then be renewed for 20 years at the first renewal, then ten years thereafter. This differs from the the Old Land Lease in that under the old law, the initial lease period is different depending on the building structure.

and this for fixed-term ground lease:

> The lease contract period is ten years or more and less than 50 years.

Which means we have two articles that are in disagreement but that is irrelevant because again, I am not proposing to use Japanese law verbatim.

> I disagree with most everything you say, and I am not sure further discussion would be productive.

Yes, constantly defending straw man positions or needing to answer how many angels can dance on a pin is not productive for me either.

> Aside from the minutiae:…

Thanks for selling me all your land and making my descendants incredibly wealthy because you thought it was better to avoid taxes.

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