Related was the discussion in https://news.ycombinator.com/item?id=26994175 the other dya of land appreciation underwriting fast food and small businesses. Very nice to see.
EDIT: while Denmark and Singapore are considered very expensive places to live, the rent in Denmark is actually cheaper (while Singapore could be forgiven to some degree due to the country's high density).
I hear this complaint a lot about Singapore, especially from Australians, who seem to forget that most of SG's 99-year leases are until the 2070's.
Meanwhile nearly every single property in the Australian Capital Territory has its 99 year lease finalised in the next decade. Most Australians generally don't want to have an honest conversation about those people returning their homes to the government and seem to pretend the leasehold system doesn't even exist.
I get the feeling that leasehold and the returning of property to their rightful owners won't stand up well in a democratic society where the majority decides.
As you said, it's going to be interesting when these start to "expire" in large quantities. What the conversation has been in Singapore so far:
- the gov't will "buy out" the remaining lease for some developments and put up new housing. Existing owners will get a payment and a new subsidized house. However, the gov't has said this will be rare (the problem was when this started is people assumed all owners would get this deal so housing prices jumped, even on properties with little lease life left).
- if you do an NPV analysis of the value of a 99-year lease, it's pretty much worth the same as a freehold lease for the first couple of decades, then it starts to be priced as a true lease - e.g. what would the NPV of renting it be for X years? that's the purchase price. So if a home rents for $3k per month and has 2 years of lease left, the purchase price would be $72k (minus any time value of money)
- the Singapore gov't has also said that it will be proactively initiating the lease-end process 5-10 years prior to avoid masses of people dealing with expired leases at the same time.
What that allows you to do is more aggressively tax the land--faster readjustments, and with a much higher tax rate. To the extent you do this, you incentive more efficient land use. But in practice jurisdictions don't do this. If you read the literature on Pennsylvania and Mexicali it becomes clear that this isn't politically viable, and so LVTs there are watered down w/ tons of exemptions and a very skittish assessor's office, and don't actually behave much different than regular property taxes.
Lo and behold, when I dig up the details on Estonia I find the same thing. AFAICT, 1) principles residential homes are exempt (specifically, the land the principal residence sits on). 2) The tax rate is capped at 2.5%, but can be as low as 0.1%. I'll bet that property reassessments in Estonia aren't particularly aggressive; but even if they were, 2.5% isn't very much for just the land value. The median rate in the U.S. is 1%, but that includes land value and improvements; and is as high as 2% in some places.
LVTs just aren't politically viable. When a property assessor's office is faced with reassessing the value of land in a way that forces existing homeowners to sell, they're just not going to do it. And even if they tried, a pro-Georgist LVT assessment tends to be much more speculative because they need to guess what could be built on that land, not what is actually being built nearby. Where they've tried to do that, you either see corruption, a "reluctance" to reassess (see Mexicali and elsewhere), or voter revolts. This is very much how California got Prop 13--the fear of reassessments forcing people out of their homes.
Don't forget, a regular property tax can also be used to promote densification. In theory it's not as efficient, but in most cities vast swaths of land have uniform density, so this efficiency concern isn't implicated nearly as much. And yet, predictably, attempting to use property taxes for social engineering always falls flat. Threaten the [perceived] security of family and retiree homeowners and see how well you do in the next election. All the promises of a better, more equitable future won't save you.
I bet if you look at how LVTs are implemented in all those other countries given by Wikipedia, you'd see the same thing: an LVT in name only, a pliable assessor's office, giant loopholes, etc.
The cost of housing would have to infinitely keep growing if we expect every generation of homeowners are guaranteed a lucrative ROI when they retire. I don't understand how that would be sustainable other than a "Après moi, le déluge" mindset expecting the later generations to pay the bill (yeah, literally our pensions included). This problem is even compounded when considering the consequence of the HGT (the Henry George Theorem).
I am already getting a bit struggling to afford a home that is not as good my parents' even though I have a much higher-paying job. But I can't imagine how my children are going to afford it without my financial aid or they have to move to somewhere cheaper.
That said, I somehow agree with you regarding the political aspect, which probably needs a profound wisdom to figure it out.
Heavily incentivizing new construction.
Because that's what LVT would do. If you pay the same, high, tax no matter what then you might as well build skyscrapers until rents fall below the construction cost.
At which point the "land value" would trend asymptotically to zero because rents would equal construction costs and the value of the land is only what you can collect from it as rent.
It kind of implies that LVT wouldn't generate a lot of revenue if it was implemented faithfully, because land values would crash and with it the "tax base."
But in that environment you don't need that much tax revenue. How much social assistance is necessary if an apartment is $100/month and overall cost of living is correspondingly lower because all local businesses are paying similar rents and it's that much easier to start a small business?
Which implies that you could get to the same, good, place by heavily incentivizing construction/densification on its own, and in general doing everything possible to reduce market rate rents.
Though "stop taxing the building component of real property" is perhaps still a necessary component of that, at which point the argument is maybe only over whether LVT should be the tax we use instead of property tax vs. the tax we use to the exclusion of all others.
I'm not sure that's not what happens regardless, except for the two things preventing it right now.
The first is the existing property tax. If increasing the size of the building on your property increases your property tax, you have to recover that in addition to the construction cost from rents or it isn't worth it.
The second is, of course, zoning. Even if it would be cost effective to build a 20 story building on your lot, you can't do it if it's prohibited by law. If you can't build upwards then you have to build outwards, which requires land, which transfers the scarcity of land into a scarcity of housing and prevents rents from falling to the construction cost.
And you need to fix that for LVT to do what you want it to do. Otherwise the artificial housing scarcity persists and the money just goes to the government instead of the landlord, and gives the government a direct rather than indirect incentive to maintain (or increase) housing scarcity through restrictive zoning.
For example, instead of a cap on a neighborhood of three stories, the cap could be 33% more than the tallest structure in the adjacent two blocks. Or 50% more than the median height of the adjacent two blocks. Or maybe the max or min of those two values. The key would be to have it be not subject to delayed political approval, but rather responsive to what's going on in the neighborhood.
The other thing that's necessary is something like the Greek polikatikia model where the owner of a house can easily have a larger structure built and get a new place in the larger structure:
https://www.bloomberg.com/news/features/2020-07-15/the-desig...
I was just thinking about this a little more and I think this is actually quite bad.
Because rents falling to construction costs is relativistic. Suppose it costs a given amount to build a 20 story building and you can recover at least that much in net present value from it in rent. Then you're going to do it if it's permitted and you have an empty lot. But not if you have an existing 10 story building. Then it would have to generate double the construction cost in rents, because you're getting half that amount of rent from the status quo.
Which means that to minimize that inefficiency, you don't want to be replacing 10 story buildings with 20 story buildings. What you want is to be replacing 4 story buildings with 20 story buildings. Because then you only have to beat the construction cost by 20%. Which doesn't work well if you have to wait until the median building is 10 stories tall before you can build a 20 story building.
But it's not completely wrong if you use different numbers. Say, have three classes of zoning. One allows buildings up to 4 stories, the next buildings up to 20 stories, the last unlimited. You automatically transition from the first to the second when the median building height reaches 3 stories, and from the second to the third when it reaches 6 stories.
The part I believe more strongly in is decoupling the political process from geographic-specific height restrictions. We need to have a political process to derive the general rules for automatically allowing increased density, but any specific site should not have special rules except perhaps for geographic or environmental reasons, and that should be decided at the same time as the general zoning rules.
The real error in California and most of the US has been to downzone everything to current structure levels, then only allow additional building through a political process of granting exceptions. This leads to massive corruption (see LA's city council, for example), as well as increased land speculation.
The other way of looking at this is imputed rent, the amount of money that somebody would be willing to pay to rent out their own home. Well, in theory it would be that amount. In high-demand areas, homeowners' actual imputed rent is higher than they would be willing to pay, because the act of buying property and paying low taxes let's then live in their place for far less than somebody else would pay for the same privilege. Which is how opportunity get hoarded, and how rentiers take over local governance structures.
(I suspect that residential property ownership and use will also break the math here a bit, where the primary purpose of the purchase is not as a money-making investment, but instead as a place to live, so competition for that will also push up the floor of land prices.)
You're still gonna potentially need a lot of tax revenue for stuff like advanced healthcare assistance, so in terms of flattening out cost of living why not just go with a straight wealth tax?
So that was assuming that "construction costs" includes the opportunity cost of any existing use of the property. Obviously for a vacant lot this is negligible. But even for e.g. an existing single family home, the value of one unit of housing isn't much of a loss when you're replacing it with 50 units on the same land. But you're right that this could be non-negligible.
And this is another place where zoning is a bane, because you have a place that has a bunch of single family homes and reaches saturation (no more empty lots) so you have to start building taller buildings. That means land values start to go up, which means developers have the incentive to start rationing land. No sense in building five 4-story buildings when you can build one 20-story building for roughly the same total construction cost and a fifth of the land cost. Except that 20-story buildings are prohibited by zoning, and by the time they're allowed you're already thick with 10-story buildings whose opportunity cost of replacement is much higher. High enough to justify replacing them with 50-story buildings, except that zoning still prohibits those. Restrictive zoning sucks.
> I suspect that residential property ownership and use will also break the math here a bit, where the primary purpose of the purchase is not as a money-making investment, but instead as a place to live, so competition for that will also push up the floor of land prices.
Not really. If you can build a high rise condominium tower and sell units for $50,000, who is going to pay $400,000 for the same number of square feet from a detached single family home two blocks away? Most people would take the $350,000 profit, move into the condo and sell their existing home to the developer to make into more condos.
> You're still gonna potentially need a lot of tax revenue for stuff like advanced healthcare assistance
A lot of these costs really do go down significantly with rents. Hospitals for reasons of emergency response time have to be located in high density areas and take up a lot of real estate. Those costs fall. The cost of living in the area declines, which allows the hospital to attract workers without paying such high wages. Everything gets less expensive, even healthcare.
> so in terms of flattening out cost of living why not just go with a straight wealth tax?
Wealth taxes are crazy inefficient. You have a company which is trying to invest all its profits into R&D, which is what we want, and here comes the government to say that's not a deduction. You have a company which is just scraping by in an efficient competitive industry with high capital costs and low consumer prices, owes the same in taxes as those guys who monopolize healthcare products and raise the price 10,000%; goes out of business and causes the industry to consolidate and raise prices. You have a company which is still owned by the founder, who understands the industry and cares about the customers, but now has to sell shares to pay the tax and control of the company falls to MBAs focused on quarterly profits.
It's basically an attack on efficient capital-intensive businesses with low margins in favor of bloated monopolistic rent-seeking businesses that can produce yields in excess of the wealth tax rate.
Plus, perverse incentive to move wealth into anything the wealth tax doesn't count, or capital flight into other jurisdictions. And promotes consumption over savings for the middle class, increasing wealth inequality (higher shift from savings to consumption for the working class than the rich) and financial vulnerability to e.g. job loss, which suppresses wages by making it harder to quit or hold out for a better offer when unemployed.
The correct way to deal with r > g is to do nearly the opposite of this -- give every regulatory and tax advantage to upstarts, efficient competitors and small businesses so they can unseat incumbents and create new wealth not in the hands of old money, only to be themselves defeated in the next generation if they don't stay lean and competitive. There is no Mark Zuckerberg if there is no single social network with a billion users under the control of a single company, no Steve Ballmer or Bill Gates without the Windows desktop monopoly. They'll fall to competition, not taxes.
But if you really need tax revenue, try taxing rents. Promotes home ownership.
While there are many spots where this may make sense, I'm sure glad this hasn't been a universal approach. There are many neighborhoods with wonderful centuries-old homes, these are often the most desirable areas to life because the areas have character. Not everything has to be constantly torn up to build cheap apartments.
> Most people would take the $350,000 profit, move into the condo and sell their existing home to the developer to make into more condos.
Most people seems like a stretch. I'd imagine most people who have opted into a house have zero interest in going back to a condo.
Economics changed however. Land is no longer a factor of production like it used to in classical economics. Real estate market, despite its size and 99% people involved with 50% of their salary in it, is just an afterthough for a modern economist.
A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. It seems the only way for the rich to pay a lot more land tax is for them to go back to having large country estates (that mostly aren’t farmed) which doesn’t seem to be the way the rich are going—most people get and stay rich through businesses which, in western countries, tend to provide services and operate out of a small amount of land rather than farms or mines which exploit their monopoly on land.
Because that penthouse downtown apt definitely cost more than a house in the middle of nowhere, even if its technically smaller.
If the burden of the tax were shared equally than the penthouse would contribute the same amount as each of the floors below it—some small fraction of the total for a tall building.
You can see why the LVT is relatively density-friendly: the taller the building, the less tax paid by each resident.
Sweden and Denmark and the Netherlands have less progressive income taxes than the US. Rather than encoding transfers in the tax code, they perform them via programs, leaving them with a more redistributive system.
> A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment.
Sounds like pro-social behavior.
Today the rich buy shops in Manhattan and turn them into garages, lowering the value of the property and thus the tax revenue that New York gets. Rather than being rewarded for squandering, folks should be incentivized to make good use of the space they're taking up. If someone wants to turn a productive business into storage for their toys, that's fine, but we shouldn't be giving them a discount for doing it.
I don’t want to get sidetracked on whether or not the incentives are good, or even whether a regressive tax is bad. (Though I admit I sidetracked with my comment above.) The question is why a land value tax is progressive in a modern industrialised country with a services-based economy?
There's no reason to care if a tax is progressive.
The thing to care about is whether the government is redistributing wealth in a desired way.
Progressive taxes are one way to redistribute wealth to the less wealthy. Payments are another.
If you want a more progressive system in a LVT world, double the tax rate and then send people checks.
Whether those transfer payments are via taxes, payments, or services is not essential for the goal.
If you encode it in tax rates, you are subsidizing behavior that you are trying to deincentivize via taxes, which is unfortunate.
The idea of LVT or other taxes on externalities is to tax behavior you want to prevent. That's why we should tax the capture of land, the pollution of the environment, adding traffic to a transportation system, etc. That's why it's unfortunate to tax things like "making your house nicer" or "converting a parking lot to a veterinarian office" or "hiring another employee". You wouldn't sent checks to someone because they let their house decay or they fired someone, so why would you give them a tax break?
The point of the transfer system is to help people who need help, right? Not to discourage things we want to happen.
Why? Someone living in Manhattan or Queens is certainly using 10x the land value of someone living in rural Idaho. If I were to magically teleport a $3m brownstone from NYC to Idaho Falls, it would be worth perhaps $200k at most (it is old and crumbling).
> While big farms may pay a lot of the tax
As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes.
> A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment.
Why is this bad? They are now being very efficient with the use of their land. They have taken less of a rivalrous resource from the rest of society but have managed to shape it to their satisfaction.
Their point of contention was in it not also being a progressive tax. So I guess they want the rich to pay more tax even if they use less of the taxed resource.
The world's richest man own $500m of real estate. Sounds like a lot until you realise it's 0.25% of his net worth (and the unimproved land value's possibly sub 0.1%)
What percentage of the average American's net worth is tied up in the footprint of their home? Guess it's two orders of magnitude more than Jeff's, and potentially >90% of the value of the average farm. Hence not remotely progressive, even if it's less worse than a pure property tax in most circumstances and other even more regressive taxes.
> As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes.
It takes a lot of land to make a farm. (Sure, per acre it's less than the city, but city dwellers don't own many acres and unlike the farmer have a realistic proposition of selling their limited acreage to a condo developer when the tax makes it unaffordable).
c.f. It takes zero land to make a much higher margin SaaS startup.
I think a better question is what percent of the average person's net worth is tied up in the unimproved value of their land? I posit that unless they are pretty wealthy, it is nearly nothing.
This is a good representation of how housing (and therefore land) is valued: https://twitter.com/bufordsharkley/status/138799739507868467...
The tax incidence from a land value tax on someone living in a 300k home in rural California is nearly nothing, while it will be massive on a wealthy person living on a $5m home in Palo Alto. Their actual physical homes are fairly similar - the 4.7m difference is land value. I don't see why it isn't progressive. You give an unrepresentative example of literally the wealthiest person in the world - what about for 99.9% of people? Sure, it isn't literally the most progressive tax possible, but you can apply your argument to the progressive income tax we have today. Jeff pays literally 0 income tax, but that doesn't mean in general the income tax is not progressive.
If you are that concerned about it being progressive - and not the efficiency benefits of the tax - you can literally just make it progressive. 0% on the first $X/ft value of the land, 10% on the next $Y/ft, etc. This would solve your problem with farms as well (if you are not convinced by the graphic that 1000sqft in SF is worth more than 100 acres in Idaho anyway).
http://www.ntanet.org/NTJ/63/1/ntj-v63n01p63-92-evidence-dis...
Here's the abstract summary:
> This study examines how replacing a uniform property tax with a land value tax (LVT) would shift the tax burden for single-family residential properties in Tarrant County, Texas, over the period 1997–2006. Results suggest that a LVT would shift the tax burden away from single-family properties and on to other property classes. For the more recent years in the sample, the average tax liability for single-family properties would decrease about 30 percent, regardless of household income, and SuitsIndices suggest that, within residential properties, a LVT would be slightly more progressive than a property tax. Horizontal equity problems would be greatest for the lowest-valued properties relative to other properties. This study also examines how a LVT would change property values due to the effects of tax capitalization.
https://openknowledge.worldbank.org/handle/10986/2653
In this one the book says:
> A land tax is considered a progressive tax in that wealthy landowners normally should be paying relatively more than poorer landowners and tenants. Conversely, a tax on buildings can be said to be regressive, falling heavily on tenants who generally are poorer than the landlords
So in general the idea is you tax the market value of the land, but not the value of what was done out of it. So an apartment building with 10 units would be taxed approximately the same as a single family home if their land is in the same area and of the same size. But since there are 10 units, each tenant of the apartment building would pay only 1/10 of the tax. Same thing if it's a Condo building. It also means that if someone wants to live near some "hot market" they'd pay higher tax for being there than if they were to move further away, since the tax is based on land market value.
Thank you for the link to the study around Fort Worth (my first guess was that this was some rural country which wouldn’t be very representative but that’s wrong. Most people in that county live in Fort Worth)
What this does is make the Ricardo/Georgist of land more relevant in the current times than it was for agricultural land hundreds of years ago. The difference between good and bad land is amplified, not reduced.
Check out this map of the US, that switches from pixels proportional to acres to pixels proportional to real estate value. Georgism applies most extremely to these areas that metastasize:
https://twitter.com/bufordsharkley/status/138799739507868467...
It's also worth pointing out that the primary "critique" of Piketty's analysis of wealth inequality, with wealth increasing towards capital owners, by Matthew Ronglie, was two fold 1) depreciation wasn't properly analyzed, and 2) most of the wealth transfer went to capital in the form of real estate rather than other forms of capital. And the part of real estate that doesn't depreciate is the land, not the structure. So I view Ronglie not as a refutation of Piketty, but an addition that points the way to the real problem with capital: land.
For George, land was not capital, it had to be separated out because it behave differently than a set of tools. And for George, land doesn't refer just to the dirt on which we build structures, it also applies to things like patents and other monopolies that the HN crowd understands to sap wealth from society.
Georgism is a very unintuitive understanding of political economy, but I think that the HN crowd is far more likely to find it a natue thing to understand, since our "capital" in the form of computers are cheap and plentiful, most of us live in places where real estate demonstrates George's insights dramatically (the Bay Area), and we also encounter other forms of economics land like patents/IPv4 addresses/domain names.
Instead of taxing your property based in market value, you tax it based on what your neighbors value is. It’s basically a scheme to transfer wealth in a arbitrary and confusing way.
IMO it gets traction here because California has an outsized influence on HN for obvious reasons and California’s tax regime is bizarre and unjust. On the flip side, the economic influence of that tax policy makes it very obvious to some people that unjust tax policy can make you rich.
Build a nice house on your lot, pay a ton every year.
Stay in a shack on that same lot, save a ton every year.
Becoming a landlord while renting out something new may be a good option though. Or moving to a low cost of living area.
That’s not what’s going on here.
$700k is half what I'd need to buy a place and still end up with an hour long freeway commute.
Also our schools are a joke compared to NJ.
But at least taxes are low here. Wait...
Yeah, but that’s because you live and work in a place that is ridiculously expensive by California standards. (I'm guessing SFBA.)
Not initially. When you pay off the mortgage around the time you retire and have no more steady income, it's night and day difference.
If the entire area is equally high density, then congratulations, it sounds like you live in a very desirable location in the middle of a lot of public and private infrastructure: if that's the case, you should be taxed, to encourage even higher density development and even more productive use of the land you're on.
How do we take the average density? Is it the average height weighted by land area, or floor area?
"average height of building on a piece of land" vs "average height of building a piece of floor is in"
Well, unless all buildings are the same height, the second average will always be higher, because taller buildings have more floor!
Most people would go with the former for the average. And it does make sense in general to average over the fixed thing. But that mean building will pay a greater portion of the total tax revenue than before.
Then a LVT is definitely in your interest as the others say. More stories => less taxes!
From the perspective of the retired person on a fixed income who's lived on the same plot for 50 years while a city sprang up around them, the result is functionally the same.
also observe that the purpose of the tax is not strictly to raise revenue, but to address what would otherwise be an externalized cost and make the housing market more efficient.
In a time and place where we can deficit spend well, and more demand unlocks more growth, this should be the primary purpose of most taxation.
>From the perspective of the retired person on a fixed income who's lived on the same plot for 50 years while a city sprang up around them, the result is functionally the same.
They can sell the land and move
If you can afford to pay 100% upfront for the cost of doing an addition to your house, then you can almost surely afford the ~1% per year additional taxes. This is technically a 'punishment' but it is a really minor one, and I doubt it actually impacts many people's decisions
My desk is right across the street. Used to see that shack every day before covid.
Can't see to find it on http://www.taxfairnessproject.org though
I'd argue actually charging the owner of the shack $100,000/year in property taxes (~1%) wouldn't have a radically different effect than charging them a 2% land value tax.
Under an LVT, the landowner contributes the same amount to their community regardless of their use of the land -- empty plot, slum, or well maintained building. This is good for the community overall.
So in your example the speculator sitting on an empty plot would see their carrying costs double. How could that not affect their behavior?
Once the property is sold, a developer will find that their profit from constructing a building is roughly proportional to the floor area regardless of whether there is a 1% property tax or not. This is because the profit they earn per-sqft is more than the resulting net present value of future property taxes on it. Therefore they maximize the density as allowed under zoning and we end up with an efficient use of the land.
(Of course dumb zoning laws messes everything up, but that's a whole separate topic...)
You don't have to go that far, but it's good to know it's "safe" to do so. Land isn't produced so there's no "100 Laffer curve is 0" type problem in the slightest.
However, once you can no longer gain money from speculating on its increase in value, that also means that there's going to be a ton more land available for increased use. The coercive effect of a land value tax is balanced by the a reduction in people speculating.
The proposed land tax in my state has land tax for seniors accrue against the property and is paid upon sale or death.
The objection to this is that it's a "death duty", to which the response is that you did absolutely nothing to help increase that land value. In fact, you worked against increasing efficiency by holding on when the land could be used for more productive purposes.
That's why the Georgist land tax is such a good idea; it taxes you based on the gains that the rest of society generated for you. Whereas a property tax also taxes you for your own investments.
Just like capital gains on equities. I don't pay until I realize. I'm happy to pay some property tax in the meantime to keep gov't services running in the area.
But any other method is terrifying to me and makes me start thinking "What super rural state can I move to in retirement to buy a nice parcel and be seriously left alone these days?"
With land you're continually depriving the local community of the space they need to live and work. Every hour spent commuting past your yard is an hour wasted. You should continually pay for the privilege of exclusive access to an in demand part of the nation.
That's precisely what this is though? Do keep in mind that the for land tax proposals suggest it replace at least a portion of income tax.
> upon me selling that land to someone else. Just like capital gains on equities.
But with your equities investments you don't get any personal gain until you sell. When you hold land, you're benefiting from it the whole time. We're not talking about only the financial benefits from value appreciation, but rather in the main the benefits that you get from society from having the land.
That's pretty unfair. People who lived a lifetime in that house did contribute their bit to making the area thrive and become more valuable by keeping the place nice, being good neighbors etc.
If you think that doesn't contribute at all, consider the opposite. If they lived there for decades and let the house go to ruin and were belligerently antisocial all the time, that drives away nicer people and helps turn the neighborhood into a bad place.
California's mistake may be ONLY protecting homeowners from newcomers bringing change, and leaving renters out to dry.
There are a finite number of people with finite needs. Growing the housing stock to house this finite number of people is not "perpetual growth" and it's downright offensive to say that when we camps of homeless people, camps of people in RVs without other housing, camps of people in their cars, people working full time but only able to afford overcrowded housing, and at the same time enormous wealth within miles.
A society that allows such destitution while others have enormous wealth is not one that is running well. It shortchanges us all, economically.
In the maximal form of LVT there is 0 value of owning land, the LVT becomes in effect rent to the state (which can be redistributed in a dividend to the people), and rather than assess at all land can be simply rented at at auction.
If I sell my land to someone for a dollar, does that mean the land is worth a dollar? Or is a county assessor pulling a magic number out of his hat that I would have to fight in court? I would say that so long as there isn't a dollar figure attached to the very atoms or molecules that make up the ground beneath one's feet, assessment will always be a blackbox.
>>In the maximal form of LVT there is 0 value of owning land, the LVT becomes in effect rent to the state (which can be redistributed in a dividend to the people), and rather than assess at all land can be simply rented at at auction.
In essence, this is Communism.
Or, you know, he can look at what the land around yours is going for to determine what the LVT should be.
> I would say that so long as there isn't a dollar figure attached to the very atoms or molecules that make up the ground beneath one's feet, assessment will always be a blackbox.
Considering that this is true for all atoms and molecules why is it a problem in this case and not in all the other cases where we figuratively attach dollar figures to atoms or molecules?
> In essence, this is Communism.
I would love to hear why you think that.
And who determines what the land around me is worth? Or the land around that land ad infinitum? In all cases, there is an assessor pulling a magic number out of his hat. The only fair assessment is an agreed upon flat percentage multiplied by the sale price (what one has already paid) with depreciation factored in. Not what a "reasonable person" would want to pay on the basis of what my next-door neighbor pays (property taxes as currently calculated) nor what the government expects to extract from the ideal "best person" (land value tax). These latter two taxes are speculative (that is if they aren't worked backwards as sneaky graduated taxes on top of paying for local services) and ultimately punitive to the people who rightly purchased their property but somehow live "economically wrong" to the county/government. It's the burden of a country club without any of the benefits.
>>Considering that this is true for all atoms and molecules why is it a problem in this case and not in all the other cases where we figuratively attach dollar figures to atoms or molecules?
LVT assumes that land has a tangible and intrinsic value and that ownership provides solely to its the owner opportunity to derive a monetary value that is upto and including its "best use". Does that assumption hold? If we are discussing fiefs and manors. Yes. Mines and riverways? Yes. 19th century factories? To a lesser degree, but still yes. Thus there would be a basis in multiplying a dollar amount by some base unit of hydrocarbon, nitrogenous compound, water, or metal ore. But these days what constitutes a "best use" of land is completely divorced from where people derive their monetary value. In one year, people can make more money with a laptop in a tiny cubicle in New York than they do running a corn farm in Idaho. Does one then come to the conclusion that corn farming is an inefficient use of the land compared to an office tower and ought to be taxed as such? If you do, you're being consistent (to the possible detriment of the national diet). But if you don't, the only way to settle the value of a corn farm is the price at which someone makes a voluntary real sale (by private contract or open market) or by fiat. And that brings us to your next point.
>In essence, this is Communism
>>I would love to hear why you think that.
If an LVT was administered by a private group of individuals and was backed by some sort of resource value table with reassessments made every 2-5 years reflecting market value, I wouldn't have as strong an opposition as I do (although I would still have reservations). However, the scenario posited by the previous poster is that (from what I understand) a maximal land tax allows for a de facto monopoly over the land by government while private individuals merely become renting stewards of the soil they supposedly own. Should the net value of owned land being zero be a good thing to achieve as a policy? If so, how is this any different than collectivization in results, if not means? My statement wasn't a remark on LVT per se but what the previous poster expected to see achieved with it.
LVT, while ostensibly fair if one only looks at the separation between land and real estate, possesses many of the same problems as regular property tax. Ultimately it's not a much of a difference so long as the government is both assessor and rentier. I'd rather have a verifiable and justifiable reason to pay a fee based on what I own and my usage of it rather than quibble over the kinds of financial weapons that government uses to extract value from its citizens as though owing taxes at all was a forgone conclusion. A motive behind the tax must justify itself on its terms before justifying it's means or ends.
It's a rough spot, but I don't think there's any tax policy that could prevent that sort of outcome when you're dealing with such a high debt burden.
[1] - https://www.forbes.com/sites/andrewdepietro/2020/11/23/state...
[2] https://www.illinoispolicy.org/illinois-again-ranks-no-2-in-...
https://www.truthinaccounting.org/news/detail/financial-stat...
NJ/CT/IL have $50k debt per taxpayer, and the next highest state is HI at $31k per taxpayer. And I assume those are understated amounts due to lack of laws requiring governments to perform proper calculation of present value of liabilities for deferred compensation.
Some of the cities are way out of the norm too:
https://www.truthinaccounting.org/news/detail/financial-stat...
NYC: $68k Chicago: $41k
The only way that works out for the average individual is if the economic growth in those places outpaces the alternatives to make up for all that debt, but I think there's a slim chance of that.
NJ charges 2-3% assessed at current market value.
> independent of property value
I think the word "value" is mis-used here. The potential sale price of my home has no value at all to me unless and until I decide to sell.
I pay taxes on my home based on the price I paid for it -- based on what I can afford. Neighbors coming in and paying 2x that for their houses will not change what I can afford. Is it right that my taxes should go up because of their wealth? It's not unlike changing the terms of a contract after I've signed it.
And should I decide to sell, the buyers will pay taxes based on the new sale price -- based on what _they_ can afford. This seems eminently more just than people being forced to sell due to rising taxes simply because their new neighbors can afford to pay more.
The reality is that you value the location, just as others value it, and you also value not having to move probably, but you don't want to pay for it.
I think that you should have a right to stay where you are. And more than that, I think that everybody should have that right, be they renter or owner, as housing should be a human right.
However, land is a limited resource. And by limiting its use, you stand to profit handsomely. You may not think of yourself as a land speculator, but if you profit not through your own labor but because you are manipulating access to a scarce resource, land, then that is actual speculation.
If you truly do not care about the speculation and profit, and just want to keep your place and the labor you put into it, then may I suggest a compromise: you can keep your low taxes, while others pay more to support the community, as long as the increase in the value of the land is taxed at 100% at sale. Because unless you are putting labor into improving your house, any increase in value comes only from the increase in value of the land, something that you did not create, and claim that you do not even want.
If you are willing to agree to this, full capture of the land value increase, then I think we can create a reasonable society. But if you insist on profiting without labor and also at the same time denying people access to something that lots of people want, I'm not sure that society can continue for much longer.
Buy. Borrow. Die.
Whatever small pain home owners feel from this, it's absolutely nothing, nothing, compared to the pain of renters. If you bought in 2010, and property taxes were 20% of your housing cost, and increased to 40% of your housing cost, your total housing costs only increased 20%, plus your home doubled in value, dwarfing any cost from an increase in taxes. In contrast, renters' housing costs increased 100%, and they saw zero equity gain.
Complaints about property tax should not be even entertained, IMHO, until there is a more fair way of distributing the massive economic gains that property owners enjoy through rentierism. If their gains were due to their labor, fine, but their gains are not, it's only through the suffering of others. It's from creating a zero sum gain where the homeowners profit and those with less starting money pay for it, regardless of who was more productive.
[1] https://www.oregonlive.com/business/2010/01/portland_home_pr...
[2] https://www.oregonlive.com/realestate/2020/11/portland-homes...
For (1), that's unfortunate, but doesn't garner a lot of sympathy.
For (2), we should do some rebranding where the house itself pays the taxes and no one feels pressured to take it out of their own pocket if they don't want to.
It should be expanded, state income tax ended, and prop 13 repealed.