Calculating the tax basis value based on what the owner would sell it for has numerous problems even outside that subjectivity. It penalizes businesses for success in a way that promotes looting the company to artificially lower the business value. Aside from the deadweight loss involved, it artificially promotes the type of behavior firms like Bain are already criticized for. Also, it's highly subject to system-gaming. What is the incentive of a firm to actually accurately value it at what they would sell for while it was open? The only way it works is to enforce some draconian policy that requires them to sell if someone ponies the cash (a la Posner and Weyl's proposition in Radical Markets).
If a business is sold as a going concern, it's still priced as property (or lease) + inventory + the business itself.
If you want to tax a business based on its sales, income, inventory, or whatever, then pass legislation to impose that tax, don't try to call it part of the assessed value of the property.
As a thought experiment, consider a custom-made many-billion dollar chemical factory that (due to IP or somesuch) can only be utilized by the current owner. Should the town be required to charge property tax as if it was unimproved land, or worse, as an unsaleable cleanup site?
It's not that "nothing but resale" is obviously the wrong approach, but I don't see why "value to current owner" couldn't also play a role. Property tax on businesses feels like a negotiation to me, and I don't see why a town shouldn't be allowed to use whatever rules it wants.
We're not. The buyer values the property at $120,000 but has to pay $20,000 to relocate, so won't pay more than $100,000. The seller values the property at $80,000 but has to pay $20,000 to relocate, so won't accept less than $100,000. The market value is the $100,000 that actually gets paid. This also has the extremely strong virtue of being a known quantity.
> As a thought experiment, consider a custom-made many-billion dollar chemical factory that (due to IP or somesuch) can only be utilized by the current owner. Should the town be required to charge property tax as if it was unimproved land, or worse, as an unsaleable cleanup site?
What the state is obviously going to try to do in that case is use the market value of the property as it would be if it were alienable.
Try a different one. Suppose a communications company has built ground stations for a global communications network. The initial locations were somewhat arbitrary but had to be chosen specifically with respect to the other stations, so that once the network is built none of the locations can change. The value of each individual station is a million dollars but there are ten thousand stations and the overall network is worth billions. Selling off individual stations would compromise the entire network. Does that mean the operator has to pay property taxes on billions of dollars for every station across thousands of jurisdictions, because they wouldn't sell any of them individually?
You also get all the trouble with having to distinguish between having this property and having a property. A company might be able to make a billion dollars as long as they have somewhere to operate, even if it's not anywhere in particular. That doesn't make any particular property especially valuable if there are a large number to choose from and not a lot of competing buyers.
Suppose in your example that the billion dollar facility can operate out of the back of a large truck. The truck needs to be somewhere, but it doesn't need to be somewhere specific. And if you say the value inside the truck gets taxed, it's going to move down the road to where it isn't (or at least where the rate is lower). Which isn't what you wanted, because then you don't get anything.
> Property tax on businesses feels like a negotiation to me, and I don't see why a town shouldn't be allowed to use whatever rules it wants.
It seems like what you're after isn't really property tax. If you want to tax based on factory output or number of employees or sales within the jurisdiction, you can do that, but there is no need to pretend it's property tax.
The actual problem is that everybody wants tax revenue and nobody wants to discourage any specific activity by taxing it, but that's how it works. People will try to move the thing you tax out of your jurisdiction. This is why the better taxes are the really broad ones, like VAT, because the broader the base the lower the rate for the same revenue.
Imagine two lots right next to each other going for a million, but it takes another $100k to set up the store and move in everything.
Walmart moves into one of the lots, then someone offers them 1 million and $1. They could switch lots and make $1, but the switch would cost $100k.