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Comment by ichbinwiederda | Hacker News Reader

I detest property taxes. What ends up happening is that people who are on the brink of poverty keep losing their (inherited) land because the government deems it an income generating asset, even though it is not (it's either their home or some dilapidated piece of land without much actual income generation prospects). Often they also get screwed on the selling because they are under pressure and because they are not experienced in selling property, and end up losing money in the process. So it's like crabs on the brim of the bucket being kicked back to the bottom.

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Indeed, the biggest problem with LVT is who exactly gets to value the land and how. It's an extraordinarily difficult issue which would require a very precise implementation.

Once you start assessing peoples property in such a wholesale fashion, you almost end up in a classic "managed economy" situation. "From each according to his ability, to each according to his needs" failed due to the combined difficulty of assessment + corruption of the assessors. LVT is the same principle applied to land.

I think that LVT will end up as one of those ideas that is great in theory but doesn't work in practice.

Except that it appears to have already been implemented in many places and it seems to work just fine. See the Wikipedia article on it.

Seems to be either standard property taxes listed (with a bit of variation) or minor deployments as experiments?

That's the gist of why I was comparing it to communist economics - it works great in small communities, but when either the scale is large, and/or the stakes are high, it will be subject to inefficiency and corruption.

LVT experiments on the small scale have people highly invested in making it work. On the large scale, this will just be a matter of everyday bureaucracy and any competence will revert to the mean.

On the large scale, it will be subject to the exact same corruption seen elsewhere. Certain industries will carve out exceptions to the tax, certain people with influence will get their historical properties excluded, etc.

By and large I've heard of LVT being a replacement for Sales/VAT style taxes. Whilst those are often regressive, at least they are relatively simple, 20% VAT is 20% VAT.

There have been some interesting market driven pricing schemes mentioned in this thread where your property tax is set based on an auction model, though that seems to have the opposite problem where the person with the largest bank can steamroll everyone else. High capital efficiency though.

Do you have a viable alternative to property taxes for raising municipal revenues? Additionally, certain acts like California Prop 13 of 1978 attempt to solve the problem you’re addressing but, in my opinion, ended up causing much more harm than good.

https://en.m.wikipedia.org/wiki/1978_California_Proposition_...

> Do you have a viable alternative to property taxes for raising municipal revenues?

Income and/or sales tax.

This isn't an argument against funding government on sales and income tax alone, but income from those is more volatile in recessions that property tax, so it takes a fiscally responsible government for that to work.

Yes but it is like a complete rewrite of the tax code if you are American. In my country we just don't have municipal taxes. Municipalities have reduced responsibility. All the important services are funded directly from central governments. So you don't get problems like underfunded schools and such. Municipalities get pocket money also from the central government and are only in charge of less important infrastructure and service.

There is no property tax, but we have capital gains taxes based on transfers of assets.

Only that doesn’t happen in real life. People on the brink of poverty don’t inherit property. And if they do, they can always sell it and put that money to better use.

I am talking from experience. You are wrong on both counts.

What makes you think that poor people don't inherit property? There are lots of people with very low incomes but who own a house. And no they don't just sell it. Why sell the only house you have? Or maybe it is not their house but it is a piece of property that they have always owned and which they use as a garden or a yard or storage.

They don't sell it because they'd rather have a piece of land to enjoy then some money in the bank. It might be their only luxury in an otherwise frugal life.

This only happens because our terrible land use is inflating the real estate market + terrible policy like prop 13.

In an LVT world, the value of land (overall-inflation-adjusted) should basically track the population, and virtually no one will own land they could no longer afford to buy.

That’s why LVT will never happen and is a dumb idea.

If a freeway exit gets built a block away from my house, my taxes will reflect the value of a Walmart or whatever instead of my house.

In which case you should sell your property and make bank on what Walmart would be willing to pay for it. (If you wouldn't make bank then your taxes wouldn't be prohibitively high)

Why would Walmart make a deal when they could just wait for or lobby the county to valuate your land at some excessive value and force a sale in distress?

LVT is just bad policy that sounds ok in concept. In my city, inner city residential property is near worthless once it falls below section 8 standards. The taxes are low too as result. With a LVT scheme, someone would cook up some “true” value subjectively, which has obvious potential for abuse.

Can't Walmart already do this? Property assessors already estimate the value of your property and the value of the land plays a part.

Or the very questionable use of eminent domain that some municipalities engage in.

It's really the same as eminent domain. Wal-Mart wants your property for a store? They just need to offer to pay enough that the LVT is unaffordable to you. You'll have no choice but to sell, even if you don't want the money and would rather keep the property.

Generally no. Values are usually based on sales history.

Value is whatever someone will pay. If Wal-Mart offers $1MM for your land, that is what it is worth, even if the next-best offer is $500K.

Only if you sell.

LVT serves a few different interests and is sold as a cure all. Kinda like the “gold bug” of tax policy.

Source?

What is a better use than property? I though property was the best investment one could make. The government taking property because of a lack of income to pay taxes is heinous.

I just don’t see this happening. Maybe I live in a different place.

Who are these people inheriting land who are too poor to use it, too dumb to sell it and losing it to the county?

I live in a high tax state and have served on nonprofit boards that have exposure to housing issues. This didn’t happen.

The common problems of this ilk were usually frauds where caregivers, relatives, powers of attorney or others squander or steal proceeds of reverse mortgages or borrow money against property without telling the family. The other issue that would come up is Medicaid recapture when money is given away.

Usually if there is a tax sale there is some bigger story why the property is worthless. You can borrow against the equity of anything.

It happens outside of your bubble. It's not about being dumb. It's about having a certain way of life that values frugality and simple living. But you need land to live on. Go tell the Amish to sell their land and move into a condo because it makes more financial sense.

Sorry, they should sell. Truely cash-poor land-rich people are an insignificant class that's been held up as the boogieman for 100+ years.

You're not a "temporarily embarrassed billionaire", and if owning land one can no longer afford seems commonplace, it is entirely because the current real estate speculation scheme we prop up (CA especially).

Any realistic LVT would be phases in slowly, and give the prop 13 petit gentry plenty of time to sell and live a fine remainder of their life in a very fashionable condo.

The solution is clear: an, ummm, income-based land value tax

Under LVT, if this house is on useless land in the middle of nowhere they wouldn't owe hardly anything. If they inherited empty land downtown they'd have to sell, but no one is well served by someone destitute hanging on to such land and doing nothing with it.

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