Comment by sliverstorm | Hacker News Reader

Comment by sliverstorm | Hacker News Reader

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Does it really make sense for property owners to receive such a large fraction of the value being created?

Well, from the right angle, sure it does. Google opens an office in town XYZ. To be close to the office to do good work, engineers move to town XYZ. They pay lots of money to the residents of the town to "buy them out", because what the residents hold (land) is now very valuable by proximity to Google. We're fine with this in many cases. Oil discovered on your land, and you hold the mineral rights? Yes, you get a big chunk of the profit.

It just seems especially bad here because SF is landlocked and heavily restricts development. But at the end of the day there is only so much land, and you & everybody else want a piece.

If I understand the LVT, applied to this scenario, instead the residents are forced out because they cannot pay the LVT. The result is perhaps the same (old residents leaving), but as a society we don't generally like actually forcing people out of their homes on grounds of, the land is getting to valuable to allow them keep it. That can still happen with today's real estate taxes, but if I understand right it would be more extreme with LVT because the potential of the land is the chief asset being valued, instead of the combination of the land and the building that stands on it.

I'm still learning about the LVT, of course.

> We're fine with this in many cases. Oil discovered on your land, and you hold the mineral rights? Yes, you get a big chunk of the profit.

We're fine with that, I think, because assigning the rights to the landowner (and not taxing away essentially all of the value of those rights) helps ensure that the well gets developed. As a city grows in population because of the economic opportunities it presents, no corresponding incentive is necessary. (At least in the case of Silicon Valley, people are moving here despite a massive disincentive in the form of property values.)

> If I understand the LVT, applied to this scenario, instead the residents are forced out because they cannot pay the LVT.

Well, again, my proposal for modifying Prop. 13 could also apply to the LVT: to limit the payments due while someone is living in the house, and allow the balance of the tax owed to be collected when it is sold. That's a modification to the LVT as it is usually considered, but would allow us to make it easier for homeowners to ride out periods of rapid price appreciation. (The poor dears. [0])

I think part of the point of taxing only land value, as the LVT does, rather than taxing improvements as well, is to encourage density. It's true that the modification I propose works somewhat against that; but I'm also inclined to agree with those here saying that a complete repeal of Prop. 13 is not in the cards.

[0] I couldn't resist this crack once I wrote the previous sentence. I think it's often forgotten by Prop. 13 proponents that, prior to Prop. 13, the people with big property tax increases also had big paper gains that could, in principle, cover those taxes. What Prop. 13 really is is a massive wealth transfer from newcomers to people already here. That's understandably popular with existing residents.

It would be simpler if property taxes where capped to the relative value at purchase by the nation's inflation level, not the retail inflation of a given property... If they want to offset that have it applied as a property sales tax that isn't allowed to be more than N% of the home's sale price.

> That can still happen with today's real estate taxes

Not in California. The maximum annual increase in assessed property value is 2%, and property tax is limited to 1% of assessed value. This only changes when the home is sold.

It's pretty unlikely for anyone to be forced out of their homes because of property tax increases.

Mella-roos can increase property taxes in California too. For example in oakland it adds 0.35% to the tax rate for a total of 1.35%

There's Mello-Roos, there's special assessment, there are parcel taxes. As long as you don't call them "taxes", you can exceed the 2% and 1%.

> Yes, you get a big chunk of the profit.

Not as much as you think.

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