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Comment by sackofmugs | Hacker News Reader

I don't understand why they divide the appraised value by three, then compute 1.5% property tax from it and say they can't raise it any higher. Where I live, our property tax rate is higher even with a homestead exemption AND we don't divide by three. Simply removing the division would fix the revenue problem according to the article's math.

More specifically, right now I just checked and I pay 1.6% of my home's appraised market value each year as property tax. Galesburg pays 0.5%. So there's an easy fix.

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Yeah... I'm in the UK and my council tax (nearest equivalent) is currently about 1.7% of my house's value p/a, although council tax is fairly regressive and has a hard cap. Whenever I hear Americans complaining about how terrible their infrastructure is (and it is compared to every other developed country I've ever been to) I can't help but wonder why you don't do the obvious thing and just pay to fix it.

edit 1.7% not 2.7%!

Interesting, our council tax here in Fife in Scotland is about 1% of our house valuation and that includes water supply and waste water.

Should have been 1.7% not 2.7%! Fat fingers. Combination of being in band C while living in a small flat that's not worth much.

UK has population density of 280 people per km2, most of Europe has over 100, USA has 36. It's ok if you put everybody in densely populated areas, but when you spread them around you either pay 10 times the taxes or get 10 times worse infrastructure. There's no cheating math.

Most Americans live in areas far more dense, though. Even the least dense US states have far higher density in the areas housing the vast majority of their populations.

Averaging over a country the size of the US is not particularly useful for variables like population density that most likely follow an exponential distribution.

In the context of this article, the difference is not as much as you’d think. Basically every road in the UK is paved. That isn’t true of the sparsely populated parts of the US.

The US has 4.3m km of paved road for a population of 331m. That's $287bn per year upkeep (at the $20/ft rate), so each resident needs to pay $864/year for road upkeep.

The UK has 0.4m km of paved road for a population of 67m. That's $28bn per year, so each resident needs to pay $421/year for road upkeep.

In other words, Americans should only need to pay 2x the tax, not 10x the tax.

This analysis is worthless. A good place to start would be with comparison of road design standards which would show that American roads are built much wider and with more additional features, which is stuff like curbs and not necessarily sidewalks or bike paths. If Americans started building roads to British standards then there would be an uproar.

Unless you are paving the Nevada Desert, that comparison is basically useless - it includes areas where nobody lives so they need no maintenance.

There are such areas in every country. USA might have more of them but not so much more that it cancels out the low population density entirely. You still have to have a road going through these areas.

There aren't - look at slovakia, Czechia, Germany, France. In fact, where EU is one such area?

The other post here has done a total length of road network, which is actually a good metric.

Mountains are one example. There are still people living there, but not nearly as much as in the densely populated parts. That's how it looks in Slovakia: https://govisity.com/wp-content/uploads/2018/04/Jahnaci_stit...

North of UK is almost empty. North-Eastern Germany has population density similar to USA which is pretty low compared to the rest of the country. France and Spain especially are sparsely populated outside of the big metro areas.

That road comes out of state or federal taxes though. It's still a coat but not relevant to the math about city budgets. And yes, there is so much more space in the US even without leaving populated areas.

The lower density in urban areas is still real though.

A substantial fraction of the US's land area is locked up in Alaska, where there isn't "a road going through [the low-density] areas." What little long-distance infrastructure exists there is almost entirely driven by the existence of extractive industries (notably, but not exclusively, oil) that are lucrative enough to put in that infrastructure.

Rural Europe tends to be as lightly populated as, say, rural eastern US, not rural High Plains, let alone rural Alaska.

I suspect it's not as bad as that as it's not like people are spread evenly across the USA, they're concentrated in the coastal States and then further concentrated in urban areas. I agree the USA's low housing density makes some infrastructure more expensive to maintain though. One of the other differences is that in the UK taxation raised by central government pays for services that in the USA are paid for out of local taxation. Education is the most obvious one - schools are paid for largely out of the main pool in the UK rather than being paid for via council tax. There are also various redistribution mechanisms intended to move money from richer to poorer areas, urban to rural and England to the other nations to compensate for geographic inequalities.

The city tax isn't the only tax, they also pay county (and other?) taxes raising the total well beyond 0.5%?

Yes, but that's also an argument why "tripling the tax" isn't something impossible, since tripling the tax that goes to the city would mean a relatively small increase to the total property tax someone is paying.

Doesn't Illinois have pretty high taxes to begin with? I'm not a tax expert but I've heard this repeatedly stated while living in Chicago.

Illinois calculates property taxes off of 1/3 assessed value. Apparently it allows the rates to not have to go out to an insane number of digits.

But it gets weirder. The city/county/ whatever determines their budget and uses property taxes to determine how that cost is allocated across residents. What happens when housing prices fall? Simple! They take a multiplier, and increase all assessments by some factor.

People think property taxes set the budget, when in fact the budget sets properly taxes

Yeah just charge the working families just scraping by that make up a town like this 3 times more. Jobs done! /s

I don’t get that part either. OTOH, an effective property tax rate of 3.2% or so seems much more reasonable that the 9.8% percent implied by his table. Assuming people but anywhere close to as much house as they can afford, the city taking 10% per year seems just confiscatory.

See the pie chart in the post again -- citizens of Galesburg are paying 9.89% property tax on their home, not 0.5%. There are a lot of other taxes that make up the total property tax. Your 1.6% is incredibly low, in my experience.

I don't believe their property taxes are 10%. $50,000 per year on a $500,000 home? Come on

According to the article, most houses are more like $50-$100k, but 10% would still be a very high property tax rate.

You’re right, I looked it up— it’s only 1.41%, I must have misread that chart myself.

My state, they can go up to 7.5% so I didn’t really think too hard about it, but I think I’m desensitized to how crazy high that is…

It would let the revenues pay for the cost of the roads in the city, but not the rest.

Don't people think it's just crazy having to pay the overlords a wealth tax? One thing is to pay for capital gains or new income, but you already paid taxes when you bought the house/property.

There are people (free market people, not communists) who'd argue the idea of owning land as a private person and extracting rent/speculation is folly itself and who'd argue you should either pay much higher taxes (Georgism) or they you should only be able to lease land from the community around you.

Free market capitalism doesn't work well (in terms of social welfare) with natural monopolies, and land could be called the ultimate natural monopoly.

Eh, that's an extreme position. Mostly we say that property taxes should be around half the land rent value, i.e. around half the value the property generates without taking into account what's built on it.

This has the rather obvious difficulty of having to estimate the yearly value generated by the land itself, which is a topic too large for me (but solvable), while having a large number of advantages. It aligns incentives very very well, and that's hella important. If a municipality develops an area with proper regulation, infrastructure and various services, the land value grows which gives them extra income. It has a much more direct invest->income dynamic.

It also incentivizes owners to be a lot more aligned to the interests of the community around them. You want to have a home with a large yard in the middle of the city, instead of developing it more in line with the location? You can, but you'll pay for it.

It also forces owners to align to the community around them continuously. If currently you own a piece of land which is way underdeveloped, the only moment when anybody even cares about this is when it's being sold. As opposed to having to adjust each year to current land value and land taxes - you're not forced to do something about it, but it's surely on your mind a lot more when you see taxes grow.

Ah, and it fixes NIMBY, and dramatically lowers rent. Apartment buildings are very efficient, so they'll be favored exactly where they make sense - in crowded, high-value land areas.

Why half? Is that just an arbitrary number?

Theory says 100%, half is just a realistic target.

Baden Würtemberg doesn't give a damn about the complexity of the assessment, they already have to assess land value for estate taxes. The assessment argument is actually complete rubbish. The assessment rules for the rest of Germany are significantly more bureaucratic. Assessing building value is an even bigger nightmare because you cannot automate the majority of assessment work. You also don't have to asess every single building. You can asess the value of bigger plots of land spanning multiple properties and allow an appeal process for special circumstances.

> There are people (free market people, not communists) who'd argue [...] you should only be able to lease land from the community around you.

At first this sounded like an extreme point of view to me - then I realised how often I've heard people saying there's nothing wrong or exploitative about being a landlord. We, as a society, see nothing wrong with people spending their entire lives living on rented property.

The landlord can't exploit you, only the land owner can. It just turns out that they are usually the same person. In the case of the homeowner they are not.

Also, if we consider taxation exploitative then we should limit it to resource based taxes like land value tax.

But isn't it that you also need repair stuff with your house? The same for public property - it's never "finished" and needs repairing, etc.

Money spent on taxes doesn't go to fix your own property.

No it goes to fix the shared infrastructure. People would definitely like it less if they were billed for the infrastructure costs directly. For example it’s clear here that the downtown subsidises the sprawl.

But why take it out of property tax?

Are you going to tax income so landowners become richer at the expense of others?

Do you want landlords to charge for public services that they did not provide?

I don't know. I don't like paying any tax. Maybe you could have the government start companies to make money instead of taxing others.

>Do you want landlords to charge for public services that they did not provide

I'm not quite sure what you mean by this, but it's not legal to sell an item or service and then not give them that item / service.

Do you think that it costs the government more to protect a homeless person or a person with a house? Do you think it costs the government more to protect a person with a house, or a person with a mansion?

Piles of wealth require protection. Without government protection, they would be expropriated without considerable expenses on private security.

Income tax is the tax that is hard to justify. Wealth taxes are taxes to protect wealth, and sales/transaction taxes are taxes to enforce sales and transaction agreements.

Libertarians believe those should be the only functions of government. If you don't even believe in those, you're an anarchist, or maybe even a Mad Maxist.

edit: imagine the absurdity of people sharing a rented shed paying as much for fire and police protection as a person in a mansion.

Yeah, income tax is the real evil.

I live in Scandinavia, and the high income tax (and no property or inheritance tax) keeps the class system intact for generations. You can't work your way up when the government is taking almost 60% of your income.

That said, I'd still prioritise abolishing sales tax on groceries and electricity here. Both are incredibly expensive and make life a struggle for a lot of working people.

Most countries have more of a scaled income tax, but Sweden has 57% if you earn 1.5x the average. Why is that?

To keep the class system intact. The ultra-wealthy don't pay much more tax (and don't pay property or inheritance tax, and capital gains tax is also lower than income tax (wtf?)). It's a far less progressive country than the marketing would have you believe.

And unfortunately all the political parties are just focussed on giving more money to the boomers or liberalising the housing market, so it won't change any time soon.

I think inheritance tax differs across Scandinavia, just a small point really not detracting from your message. In Denmark there's definitely one, Sweden it's none or much lower, not sure.

You can even chose to pay 0.375% on your assets p/a, instead of the capital gains tax. Pretty good. But you’re exaggerating the income tax situation. ~60% is the marginal tax rate, you only pay that for a part of your income over a certain level.

Can you choose year by year? I’d think most years 37.5bps on assets would be way cheaper than capital gains, but in a down year, you might choose to pay capital gains. (Or you could “bunch” realized gains into every other or every third year and take the wealth tax option only that year.)

It’s a special kind of account, you can sell everything and withdraw the proceeds, then buy new assets outside that account. So you can choose, but not retroactively (unfortunately!)

Consumption taxes are regressive and bad, but at least they're justifiable. Without government protection, the poor/weak have no rights that the rich/strong have to respect; they end up enslaved, serfs. So they pay a poverty/weakness tax.

Imagine the effort that a government has to put in to offset racist discrimination, as an example. While we might say that racism is a problem caused by the racist, we can't say that racism is a problem for the racist. It's a problem for the race being discriminated against. Levying a tax to pay for that expense makes sense in a purely payment-for-services model of government. Lots of Europe used to charge Jewish taxes, and the Islamic world both Jewish and Christian taxes.

I see it more as a reasonable way of shaping behaviour. Like taxing diesel, cigarettes, alcohol, etc. is fair enough if it helps create a better society.

Taxing electricity whilst trying to encourage people to switch their homes from gas and their cars from diesel, is just crazy.

You then run into the question of whose vision of a better society you're enforcing. But aside from that you can really look at those taxes as something to offset the additional costs of commerce in those things. We've agreed that emissions are a danger, cigarettes raise health care expenditure, and alcohol raises police expenditure. We use those to justify the specific amounts of the taxes.

If this weren't the justification, there's no reason not to just ban the things you don't approve of altogether, rather than just taxing them.

"Without government protection, the poor/weak have no rights"

Without government protection the poor start cutting off heads, see the French revolution. Every time there is civil unrest, from peasant uprising in medieval Russia, to Occupy Wallstreet to Anonymous DDOSing websites, the government is out in force to out it down.

Having a few limits on power, like "you cant discriminate by race, but discriminating by class is cool" does not mean thay the state is suddenly protecting the poor.

>Do you think it costs the government more to protect a person with a house, or a person with a mansion?

These are the same. If someone were to trespass onto your property it's going to be up to you to defend it. The police are too far away to come save you. There's no difference from the police's perspective since the size of your property doesn't matter to them. Whatever work they do upstream to protect you does not depend on the size of your property.

If the police were close to you, the value of that plot would be higher, or at least its associated costs would be.

> Do you think that it costs the government more to...

These are trick questions, it costs the same amount. The cost to arrest a criminal is the same no matter who they are robbing. Ditto the fire & police protection - those emergency services protect lives that are equally valuable.

And it is obviously cheaper if wealthy people take on private protection - they already pay the vast bulk of government services which are mostly rich -> poor transfer payments. If it were a reasonable option, the billionaires of a country would take their own private army over a government funded one. It would cost them half as much as the taxes they pay if they live in the US (because transfer payments make up around half of US government spending).

If there is something of higher value to steal, thieves are willing to take larger risks to get it, so you have to expend more effort if you want to prevent that.

Plus supervillains. They're notoriously expensive to arrest.

"If it were a reasonable option, the billionaires of a country would take their own private army over a government funded one"

We already ran this experiment, it was called Feudalism. We don't have Barons and Lords because they got obliterated by unified nation states in wars, every time.

There are people who'd give their life for America/Freedom/ etc, have you ever met anyone who would for Mark Zukerberg?

Under current system police enjoys mahor privilidges - qualified immunity, resisting arrest is a crime, etc. Since such multiple private army/police's might come into conflict, those privilidges have to go. We'll be back at feudal warfare

> We don't have Barons and Lords because they got obliterated by unified nation states in wars, every time.

Arguably the most militarily successful empire in history [0] has Barons and Lords and is nearly contemporary with this conversation (Elizabeth II isn't even dead yet). I agree democracy is better, but "we're better organised and we'll whack you if you don't pay protection money" is a weak justification for taxes. The counterargument is that bullying is a decent tactic but a bad strategy - it is hard to get people to seriously buy in to bullying and relatively unstable when the situation changes.

[0] https://en.wikipedia.org/wiki/British_Empire

I don't think British Empire is considered feudal society, the English civil war probably marks the end of anything you could call feudalism.

The argument is diffetent - feudalism gives you multiple warring rackets, its even worse and more expensive

Houses need roads and plumbing and a fire dept and electrical and all kinds of stuff, dog catchers and such.

These things aren't a buy once product, they require maintenance fees.

Civilization costs money, and its worth it.

No, because the services you expect from living there do need to be paid some way or other.

> One thing is to pay for capital gains or new income, but you already paid taxes when you bought the house/property.

Servicing the property obviously costs ongoing money, so why wouldn't the taxes be ongoing?

> Take for example the taxes I pay on my home. I pay $260.17 to the city every year in property taxes. I live on a 60 ft wide lot. If you take the $20/ft/year road maintenance metric, cut it in half because I’m just on one side of the street, and then multiply it by the width of my lot you get $600. I would need to contribute $600 a year through my property taxes to just pay for the maintenance of the portion of the street in front of my house. But I’m not, I’m contributing less than half. Almost no single family houses are contributing enough in property tax to support basic necessary maintenance of the street in front of their house.

> The smallest lot width you can have in Galesburg with the current zoning code is 50ft in R3 districts. With that 50 ft lot you would need a house worth $98,500 just for the city to break even on the maintenance of your portion of the street. If you have a 100ft wide lot you need an assessed value of $197,000 to break even. While wide lots may be nice to have and historically how we’ve built housing, they have a tough time paying the city back for the services they consume.

> Is every house and building going to pay for all the infrastructure it uses? No. There will be plenty that do not. Does that mean that corner lots have to be twice as valuable to pay for both the streets? Also no. Another way to look at properties in an apples to apples comparison is to use the metric of total property taxes paid per acre. Why is that? The greater the area the further road and water infrastructure needs to extend and the further away police and fire services need to travel. So comparing on a per acre basis is a good proxy for how productive it is for the city.

I pay over $4,000, for a 75-foot-square lot. People marvel at how low my taxes are. The average around here, is three times as much.

It doesn't bother me that much. I live in a fairly affluent area, with good services and infrastructure. The schools are also excellent.

No, I think property (or better, land value) taxes are probably the most justifiable of all taxes.

You are occupying land, which is scarce. Noone else can use it, but except for some accident of history or geography you have no more right to one there than anyone else. It makes total sense that you compensate society for your use of the land.

There is a lot to like about Georgism.

It is crazy to have private ownership over publicly funded services. The government built the infrastructure that made your plot of land valuable so it is only fair to pay a land value tax. If you don't do that then the rich will become your overlord instead and they charge as much as they can get away with.

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