Comment by ejstronge | Hacker News Reader

Comment by ejstronge | Hacker News Reader

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> Land with a skyscraper already on it and land next to a skyscraper have related but not equal market values.

I agree! But in appraisals that I have seen, there is an effort to assess the highest and best use of a parcel as well as a break-out of the value of the land associated with a parcel.

If the highest and best use of a parcel is a skyscraper, a sale of the parcel should occur near the valuation of skyscrapers in that area. If there is no skyscraper on the parcel, the sale should occur near the valuation of land that has the possibility to be turned into a skyscraper.

> Switching from a tax on market value to a tax on land value rewards the the owner who developed their land and punishes the owner who didn't.

I agree that the owner who built the skyscraper is being penalized (but also, the owner would not have created a sksyscraper if the underwriting did not show the endeavor would be profitable).

However, both land owners are being taxed on land value; one is also being taxed on the improvements on the land. It would seem that the land value of both parcels should be the same.

> It would seem that the land value of both parcels should be the same.

Yes, the land value is the same. lets say the Land value is $1 million each and the skyscraper is worth $1 million. Lets say property taxes are 1% under the current system:

0.01 * 2,000,000 = $20,000/year for skyscraper plot

0.01 * 1,000,000 = $10,000/year for vacant plot

There's a total of $30,000 per year in income so we have to equalize our LVT to match. a 1.5% LVT gives us:

0.015 * 1,000,000 = $15,000/year for skyscraper plot

0.015 * 1,000,000 = $15,000/year for vacant plot

The owner will evaluate building a skyscraper against investing in some other venture unrelated to the land. Under Property Tax, investing that $1 million into his property adds a -1% to his projected yearly returns that isn't present for other investments that $1 million is competing for. That discourages development even if the skyscraper would have been profitable.

Yes, we are on the same page the whole way.

My question is why we need to reframe our extant system as a 'land value tax.' This proposition suggests that we should give concessions to developers in areas where there is a need for more development. But this already happens!

I guess I don't know why we should avoid taxing the value of revenue-generating assets if they are fixed. Buying a truck for a landscaping business is an taxable purchase. Why should this be different when the asset is fixed?

Ahh, I think I get what you're saying now.

For "This proposition suggests that we should give concessions to developers in areas where there is a need for more development."

Development is a good thing. Maintaining your house or property, improving it, developing businesses are all good things. I'm not sure we should restrict these things to "areas where there is a need for more development". I don't want to live next to someone who has a rotting ruin of a house, who didn't maintain their place in order to pay less in taxes.

Someone maintaining their roof isn't a developer, and isn't going to be making money from their investment but they still pay more in taxes because they do it. They always won't get any government concessions or subsidies to do it (in general).

Similarly, a small business owner usually does not get concessions for starting their business. Usually they instead have to pay extra for permitting and such.

The parking lot owner next the skyscraper, however, gets FREE value from the skyscraper construction - essentially leaching off of another's productivity.

As for the argument how we SHOULD be taxing assets ... every tax takes money from the economy, and some ways of doing that are "better" than others, in that they result in more desired outcomes. LVT seems to provide better outcomes than other ways of taxation.

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