Here in NJ we're getting screwed by property taxes. 2-3% per year! Try doing that when you're out of work or on social security. Its one of the main reasons people leave.
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.
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.
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.
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.
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...
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!