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Comment by jjav | Hacker News Reader

> For one, it doesn't introduce the problem of needing to define 'vacant land'.

But it introduces, unless I'm completely misunderstanding, the need to establish a theoretical value for a plot of land that's unrelated to any sale or use value we can objectively measure today.

At best, it seems the assesment will be very wrong often. At worst, it'll be a political tool for local government to drive out whoever they want by overvaluing plots on purpose.

A lot of the land around Detroit is nearly worthless given the blight. Will it be taxed at $0 or will they say that in an alternate universe someone could build a skyscraper there so it's worth millions? Even though nobody would actually fund that work.

Taxing based on sale price isn't perfect, but at least it is much harder to game since it's based on a concrete market-clearing price that isn't up for debate.

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While it's not trivial, assessing un-improved land value does not seem too different from other complicated accounting tasks that both governments and private organisations have been performing for a long time. Cost segregation studies are already a thing.

A good starting point can be the relevant part of the Georgist primer published on ACX:

https://www.astralcodexten.com/p/does-georgism-work-part-3-c...

There are theoretical difficulties, yes. The elegant way out is to have the person owning the land self-assess its value, set the LVT at x% of that value, and be legally bound to sell it to anyone who comes up to them offering that price.

Now how do we determine that x%? That's a good question. I think there's no way out of some empiricism even if someone did try this approach. But you can always start it low and raise it incrementally to see how it affects the land economy of an area.

> and be legally bound to sell it to anyone who comes up to them offering that price

Why? This just seems to create yet another perverse incentive structure that people have to invest time into understanding (and some into exploiting), rather than adding any actual value. Taxes mean nothing if everyone is too busy figuring out this sort of scheme to do anything valuable.

It's not a complicated scheme: there's a semi-fixed price you pay to the public for removing land from its use, and you can do whatever you want in order to overcome that fixed price and keep whatever profit you achieve.

I'm glad you ask. There's a whole 100-or-so page paper on this form of taxation with enforced sale on the books which explains why this approach is in fact far less perverse than our current system (which might be degenerately modeled as a 0% system, where every good has a forced sale point of $∞.∞∞).

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2818494

I'm only a few pages in, and perhaps this paper redeems itself later, but here's my problem:

> To put this problem starkly: allocative efficiency and thus an efficient market economy is impossible in the presence of private ownership.

What the paper's early pages are saying is that study A found that things could be allocated more efficiently, and study B found that sometimes people hold out from selling things now to gain more later, therefore to increase the efficiency of global (literally) allocation of resources, people should be forced to sell things or pay more taxes to keep them.

This seems to have several problems on its face, that might be dealt with later, but still:

- This is all theory. There is no global optimum to observe, no matter how many papers might be written. Only to theorise about.

- This is relative, and time-sensitive. I might value a property at X because at that moment it's worth that much to me. It might change in the future, or depend on how markets are doing. Should I instantly sell because I have an ice cream shop and people are all eating gelato, and I can't afford the tax so I reduce the valuation to a point where some shark can grab the building?

- Perfect is the enemy of good, particularly when perfect is so poorly defined. This can get a lot worse much more easily than it can get a bit better.

> I might value a property at X because at that moment it's worth that much to me. It might change in the future, or depend on how markets are doing. Should I instantly sell because I have an ice cream shop and people are all eating gelato?

Think at the margin here. You're not saying you should instantly sell because the gelato/ice cream enthusiast ratio has increased slightly. You're saying everyone all at once decided en masse to start eating gelato instead of ice cream. Yes, as an entrepreneur you need to respond to that. That's an enormous and sudden change in not just the long- but even the short-term viability of your endeavor.

Indeed the forced price mechanic improves the short term responsivity of the local economy to such a change, because your scenario suggests a recent total upset in the established order of things. I would rather see you walk away today, from a venture that you realized yesterday was doomed to fail, with an extra $X in your pocket from the shark who bought you out than to see you driven to bankruptcy because you were the last ice cream boy in this mad, gelato crazed new world. Who knows -- maybe you'll start an ice cream stand in a cheaper, more sane part of the world with it.

I like this subthread; both of you seem respectful and clear and I'm doing my best to follow the arguments.

But I'm having trouble as a result of the choice of icecream/gelato words.

I interpreted @robertlagrant to be in the "gelato is icecream" camp (which seems reasonable to me in a "baguettes are bread" sense).

But @hiAndrewQuinn, you seem to be in the "gelato is not icecream" camp. I would call this is an arguably correct position similar to "chicken tikka masala is not Indian food," but I doubt most people holding either of these positions would consider these kinds of small differences likely to be the trigger for a business becoming unviable. So perhaps you didn't know what gelato was?

In either case, I think you two need to be using the same definitions for your illustrations to make sense. And I really want them to make sense because I want to understand :)

> The elegant way out is to have the person owning the land self-assess its value, set the LVT at x% of that value, and be legally bound to sell it to anyone who comes up to them offering that price.

That doesn't make any sense in the context of a land value tax.

The whole point of a land value tax is that a parcel of city center land is taxed at the same rate whether it's got a parking lot on it or an apartment block.

But the owner of an apartment block would self-assess their land as much more valuable than a parking lot, not wanting to be forced to sell their apartment block for the price of a parking lot. So you'd be back to having a property tax, not a land value tax.

They’d argue that the price is for the land only, not improvements but now you’re back to non-forced sale.

The x% does not value with the use of the land. An apartment block owner would self assess their land as much more valuable, and then also pay back x% of that much higher land assessment in taxes each year, yes. And if someone came by and decided that e.g. that $5 million apartment land unit would be better as a $5 million parking lot, they could certainly pay them $5 million to do so.

But they may later find out that the parking lot isn't really worth $5 million, because it's harder to make the money to justify the x% of $5 million tax you're paying on it with a parking lot than with an apartment complex. They may then drop their valuation to $3 million, or $2 million, to reduce the total amount they pay in tax each year. But then of course they may run a greater risk of being forced to sell themselves -- perhaps even back to the original apartment runner they paid $5 million to before.

How is an assessment which includes improvements (the status quo) less complicated than one which does not?

Distinguishing between lot value and property value is already a very common exercise in the real estate business.

In real estate property value is constantly being corrected by an actual market. Prices aren't set by bureaucrats; they're paid by people for whom that price is worth it.

And bureaucrats are unable to use the market itself to help value land because?

Because the market price is only fixed at the moment of sale. Until then, setting the market value of a property is fairly speculative.

This measure will be harmful. Not just due to the person being a bureaucrat who can be bad at their job and/or influenced to achieve certain outcomes; not just because the info is instantly out of date on purchasing decisions; not just because the pricing info is specific to that purchaser. But because everything like this adds more drag into systems that have enough drag already. People can't do anything useful if they're constantly coping with bad systems voted for and put in place by people who don't understand unintended consequences.

Again, property taxes already exist. This is simpler.

As I understand it, property tax is simple when there's been a recent sale. The complexity comes from a similar issue to land value: no recent sale. In this case it's worse because valuing the land outside of what it's used for is a mess.

But this problem already exists. Many people live in homes for 30+ years and pay property tax on the land + improvement (physical home) value. Why would it be so much harder to hypothetically value the land without a recent sale (required for a LVT) than to hypothetically value the land + improvements without a recent sale (required for property taxes which currently exist in almost every city in America)?

Because their neighbours have sold their houses recently. So using similar sales as a baseline and then factoring in a few differences between those properties and the one that is being assessed is much easier than doing that and then subtracting the built-up value.

Basically all of your data points are the built-up prices. So it is going to be easier to estimate the built-up value than the raw property value. Maybe not much easier, but definitely not harder.

Then yes, I’ll agree with that. Both can be difficult but valuing just the underlying land is harder.

Do you think taxing by sub components of land would be simpler yet? Maybe we should tax by rock content.

Or maybe a tax based on more things has nothing to do with complexity. The largest market is for land and structures. That makes it the simplest to value.

There's not an argument from economic efficiency to tax by rock content.

> pricing info is specific to that purchaser

This is a nightmare. Can you elaborate?

Often the market isn't for land, but for land + property. It might help, but overall there is more room for subjectivity/untethered valuations.

Is it common to sell the land without selling the improvements located on top of it? If that's common, it's straightforward to use that market to value the land.

At worst the assesment will be dysfunctional often and at best this can empower local governance (ideally, "the people") to decide, as you say, on what businesses they'd like to host.

That sounds ripe for abuse. “Yeah sorry we don’t really want a donut shop” but secretly they just hate the family because they’re gingers.

Or the city just says taxes are $x per square foot of land. Desired tax revenue / total parcel area.

I'm no economist, but it seems like such a flat tax would result in a lot of defaults on land the further you get from popular areas.

Maybe that's a sign that the "city" is too big? Much of what we call Dallas is not in Dallas, they are a different city. It makes sense to have a flat rate for all of Frisco and that tax rate will be different from that of Waxahachie.

Assessing the value of unimproved land is much easier than assessing built structures.

you can use equivalents in the are. burned out abandoned building on the lot? what could that lot be worth reasonably? oh, there are 9 houses down the street or 1 block over that are all worth 200k...

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