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Comment by smallnamespace | Hacker News Reader

> I misunderstood the LVT as something that is levied against the landowner every year?

Yes, but it still doesn't affect the (rational) landowner's decision. Imagine an improvement that can net the owner $Y a year in profit. A rational owner should always make that improvement, regardless of whether the government is also taxing them $X a year on the land.

If they doesn't have the money/capital to do so, they should sell the land to someone else. Obviously not every landowner acts fully rationally, but in the aggregate, landowners should act pretty closely to that model.

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>Yes, but it still doesn't affect the (rational) landowner's decision. Imagine an improvement that can net the owner $Y a year in profit. A rational owner should always make that improvement, regardless of whether the government is also taxing them $X a year on the land.

It's not just about whether return is positive, it's about the highest ROI considering opportunity cost.

Consider a simple case where two lots with one story of development each can produce as much as a single lot with two stories of development. With a tax on land+improvements, a landlord does not prefer one over the other. With a tax on land value only, the single lot with two stories is preferred.

>If they doesn't have the money/capital to do so, they should sell the land to someone else.

Indeed. If the neighbors have ten stories of development, a landlord with a one-story building will not be able to afford the LVT and will sell to someone who can afford to build ten stories.

> With a tax on land value only, the single lot with two stories is preferred.

Yes, but that's because tax on land + improved value distorts incentives (by discouraging improvements).

Usually when we say the LVT doesn't affect incentives, the baseline of comparison is against no land taxes of any form. In that world, you would prefer to develop the single lot because you need to buy less land, so the result is the same as with LVT.

> Usually when we say the LVT doesn't affect incentives, the baseline of comparison is against no land taxes of any form.

That really confused the whole discussion as the current situation is tax on land + improved value, making it look like you were arguing from the other side. No tax at all is anyway taking it to the extreme as the government need money, so it becomes merely an academic exercise.

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