If you just tax land, people will have to actually generate revenue from the land they own instead of letting it rot a city from the inside out.
Don't change the incentives (very much) for this particular behavior, and watch the behavior not change.
Taxing the land value is a major change to the incentive structure.
The assessor determines the approximate value. That value is theoretically the same whether occupied or not and is already taxed.
I don’t follow what this “land value tax” is proposing to change.
Land value tax flips this, removing some of the risk of adding value to a property while discouraging hoarding.
I don't see how this can work in practice. You grant the government infinite power to come in and say that your land could surely be used to build a 50 story luxury apartment building and therefore you now have to pay tax on a $50M imagined value. Even though the land might actually only be worth far less on the open market.
This is basically just a way to arbitrarily take away land from owners without any controls, since nobody can afford to pay taxes on imaginary buildings that don't exist.
> rationally should make as efficient use of the land as possible
These two statements are contradictory.
The value of the bare land (just pure dirt) is low no matter where it is.
But the second statement is where the consequences show up. The LVT idea isn't really to tax the bare land, it is to tax it as if it was being used by the most financially productive way possible.
So, tell me how is that not a tax that is based on something that doesn't actually exist today? The assessor can say: Sure, it's just bare dirt, worth nothing right now, but you could have a skyscraper there and if you did, it'd be worth a lot. So we'll pretend it's worth a lot and tax based on that.
The other bad consequence of LVT is that it's supposed to force every bit of land to the most financially productive use. Do you want to live in such a society? Something like a free playground is never the most income-generating use for a patch of land, but it's a wonderful thing to have in towns.
This is fundamentally incorrect. It is a tax on the bare land. While the value of bare land is substantially less than the value of both the land and improvements, the land is by no means free. It is a scarce resource. Just try getting someone with an acre lot of beachfront property in a resort town to trade you for an acre of remote and barren tundra.
Let's say you have a vacant lot that you purchased for $25k. You want to build a $300k home on it. Let's say there is a standard property tax of 1%. Before you build your home, your property taxes would be $21 per month. After you build your home and your property gets re-appraised, your property taxes would go up to $270 per month, more than a 10x increase. While this is small compared to the cost of a mortgage, it is owed in perpetuity, even long after the house has been paid off. By leaving the land undeveloped, a landowner can keep their tax burden low.
Conversely with a LVT of say 5% you are paying $104 per month for the vacant plot of land. Build a $300k home on it and your taxes remain $104 per month. Thus there is no tax benefit to leaving the land undeveloped. Note that at no point did the potential use of the land get assessed, other than the free market value of the bare land.
Further, an LVT does not force every bit of land to be optimally financially productive, it just doesn't incentivize unproductive uses. Under the current system, it's better to have an empty lot full of garbage than a free playground, because by cleaning it up and putting in basic amenities you have increased its tax burden. Under an LVT, the land being a public park is the default, and the public gets just compensation for giving up any such spaces to other uses.
A tax on bare land based on what?
I find these LVT discussions fascinating because we seem to be using same words to mean different things; while I see the LVT proponents truly believe what they say, I can't wrap my head around how that meaning comes from the statements.
Let me try a different thought experiment.
Let's say I own that acre of beachfront property in a resort town. Completely undeveloped. For some historical reason, there are restrictions on that land which prohibit any development of any kind in perpetuity. It must be left as-is forever, untouched by human hand.
All the surrounding acre lots are valued at $100M (those lots don't have any restrictions, so they are built up with luxury condos owned by celebrities).
Under LVT, is the tax on that acre very high or very low?
Later something happens, let's say a constitutional amendment is passed which outlaws and overrules all such land restrictions. My bare plot of land is still bare, nothing on it. Under LVT, does the tax skyrocket overnight due to the constitutional amendment?
Yes and no. You're not taxing the land as if it was bare or as if it was full; you're taxing it based on the perceived value to a developer.
> So, tell me how is that not a tax that is based on something that doesn't actually exist today? The assessor can say: Sure, it's just bare dirt, worth nothing right now, but you could have a skyscraper there and if you did, it'd be worth a lot. So we'll pretend it's worth a lot and tax based on that.
The value of an empty lot is approximately equal to the value of the developed lot right next to it. This is already being done.
> The other bad consequence of LVT is that it's supposed to force every bit of land to the most financially productive use. Do you want to live in such a society? Something like a free playground is never the most income-generating use for a patch of land, but it's a wonderful thing to have in towns.
Government-owned land could be tax-free since (in theory) it's being used for public good.
So I feel like you just agreed with my premise, no?
The value (and thus the tax) on my empty lot with nothing but dirt is going to be set by the tax of the developed lot right next to it, which might contain a highrise apartment building.
So you're saying I will be taxed on the value of an imaginary building I don't actually have, just because the neighboring lot has one. So there's no way I can afford to pay that since the bare dirt doesn't give me any income. So I will lose this land due to the tax.
Am I wrong?
Maybe. I can't tell if we're talking past each other.
> The value (and thus the tax) on my empty lot with nothing but dirt is going to be set by the tax of the developed lot right next to it, which might contain a highrise apartment building.
Yes, the empty lot will be higher because of the highrise apartment next to it, BUT...
> So you're saying I will be taxed on the value of an imaginary building I don't actually have, just because the neighboring lot has one.
No, because the appraiser wouldn't include the building's value; they'd only be appraising the average value of land in the area.
> So there's no way I can afford to pay that since the bare dirt doesn't give me any income. So I will lose this land due to the tax.
That's intentional. If the land is only profitable for highrise apartments, then you should sell it to someone who can afford to build some. Note that this would help with the housing crisis.
> That's intentional.
Ok so it's true and intentional. Thus my statement at the top of the thread, LVT is a way to take land away from people.
The problem goes away if you don't treat land ownership as a right. What is the advantage of letting people possess empty lots?
Earlier you said it is intentional, which to me is the same as saying it is a goal.
> What is the advantage of letting people possess empty lots?
Maybe not too bad if it is truly an empty lot. I've been using empty lot in the thread as it is the minimum possible value, but LVT hurts people particularly when the lot isn't empty.
Imagine that lot contains your home, one you've lived and loved for decades and raised your family in and you're rather fond of it. Just because an 8-plex goes up next door, shouldn't mean now you are forced out because they start taxing your little house as if it was an 8 unit building.
LVT is based on the cold clinical idea that land is nothing but an investment that must be squeezed to it's maximum possible profit at all times, without any consideration given to what would be nicer to have there. I would hate to live in a society like that.
Taken to it's logical conclusion, LVT means we should bulldoze Central Park in NYC and fill it with tall apartment buildings. Just imagine the trillions of dollars of increased value!
Except your house wouldn't be taxed like it was an 8-unit building. The tax would only go up if the 8-plex increased demand for the land itself. If it's a poorly-placed 8-plex, the opposite could actually happen; but if the land value does go up, it would only go up a little bit unless they started developing a lot in your area, at which point you'd have the same sorts of problems either way.
> LVT is based on the cold clinical idea that land is nothing but an investment...
No. LVT discourages land investment. LVT is based on the idea that land belongs to everyone, so no one should profit just off of owning land.
You left out the main gist of my sentence:
> nothing but an investment that must be squeezed to it's maximum possible profit at all times
Sounds like that is exactly what LVT is. It becomes unaffordable (due to taxes) to do anything other than squeezing the maximum profit out of every square meter of land.
The result would be every lot in town is built to the same profit-maximization potential and the moment something more profitable comes along everyone is encouraged (due to increasing taxes) to tear all down and build the new thing that squeezes even more profit out of it.
It sounds like a terrible dystopia, I still haven't heard any argument that makes LVT sound like it would lead to building a nice town to live in. The US is already far too concerned about profit above all else to the detriment of mental health, imagine LVT on top of this squeezing maximum profit from land at all times.
This will only serve to punish small businesses who will see a huge jump in taxes, forcing some of them to sell to some large developer.
Pure academic nonsense. Punishing people for not doing what YOU want with THEIR land.
No, they tax based on the value of the land... I mean, it's in the name.
Land value + improvements is already taxed pretty much everywhere I am aware of.
Someone has to eat the opportunity cost of sub-optimally used land. Would you rather it be corporations and house-flippers, or renters and homeowners?
> Pure academic nonsense.
Several places have implemented LVT (eg Pennsylvania). What's nonsense is treating it like idle theory-crafting when there's evidence to judge.
> Punishing people for not doing what YOU want with THEIR land.
Not all societies believe in land ownership to begin with. Owning land keeps other people from using it, so it should come with a sense of duty.
Also, no one under either system is arbitrating the correctness of land use to pick winners and losers. The free-market still decides what is or isn't effective land use; it's just that under LVT people are disincentivized from speculating on empty land.
A good example is the Additional Buyer's Stamp Duty (ABSD) in Singapore. It's an additional tax on foreigners or Singaporeans who buy multiple homes. There is a normal stamp duty when you buy a home, which is 5%.
In order to "tamp down" the housing market, the ABSD in Singapore is now 60% for foreigners. Yeah, the tax on a home is 60% of the purchase price. So a $1M home would have a $650,000 tax when you purchase it ($50,000 BSD + $600,000 ABSD).
Does that stop rich foreigners from buying multi-million dollar properties as investments? Nope. In fact, one wealthy Chinese guy bought a whole building for $293M and had to pay $60M in ASSD (it was only 20% back then).
https://coconuts.co/singapore/news/mystery-chinese-family-dr...
So the argument that a Georgist land tax will magically fix the "unproductive land" problem is a bit naive.
There is enough demand for housing that developers keep building.
This is one of the core principle of Georgism, that the value and usefulness of a piece of land is tied to the infrastructure that the government has built around it. Therefore the titleholder should pay for the upkeep of that government and infrastructure, hence the idea of the land tax as a single tax.
If you have two identical lots, one that’s developed into apartments, a restaurant, and some office space, and the other that’s left as dirt surrounded by a chain link fence, which one has the lower tax bill?
If you have a 20+ year investment horizon, which approach allows you to more easily capture the appreciation created by all your neighbors who are working their asses off to build restaurants and offices and attractions?
That's not an oversight either, the original game was made to demonstrate that landlords were bad and with gobble everything up to become despots if not stopped.
Even if those factors did exist, the rules still don't allow players to arbitrarily raise rent, otherwise you could just demand infinity money from another player and it would be a short game indeed.
Being as succinct as possible, land taxes merely adds a new landlord: the government.