Valuing Land: The Simplest Viable Method
progressandpoverty.substack.com
progressandpoverty.substack.com
Perhaps it could also be argued that because the resources received by neighbourhoods in Chile are based on the affluence of their residents, it follows that the comunas with more resources are, of course, more important and appreciated. This is because the people who live there are considered more valuable, even though I may be less important in other ways.
I doubt the people are considered more valuable. Different locations become more or less desirable for any number of reasons. Competition will drive up prices for the more desirable locations, which will mean people with more to spend will get them.
If that's true for land, isn't it true for almost everything? Ultimately you just end up with what other people will consistently pay for it.
> If I try sell a single sqft in my backyard it’s obviously pretty useless and so the value is low. But if I sell the entire plot the value of that backyard will be much higher
This is true of a bag of a single pea from a bag of frozen peas too. I don't think is anything specific to land.
Does it also account for actors who aren't perfect economic calculators with infinite information processing capacity?
In other words, does that system work for grandma?
So the selling price would be 110% the highest bid.
Probably the only stable state for that sort of market is for the government (which not only usually has the lowest costs of capital, but also sets the ratio of LVT to property prices) to end up owning all the land. That model can work (see Singapore) but it very much depends on the quality of the government and doesn't replace tax revenue...
Land value is not supposed to be attached to what you use it for, but what you _could_ use it for. This is inherent to its location and the natural resources that are on/in it. (Plus, as I guess you have hinted, its shape and what it's adjacent to).
The idea of land value is to separate those inherent things, which weren't created by the owner, from the things they actually did create.
The main things we are interested in here are exactly what I mentioned:
- Land in NYC is valuable because it's in NYC. Landlords didn't create that value so we want to stop them capturing rent on it (while allowing/encouraging them to capture rent on the expensive buildings they fund)
- Some land has oil under it. Private individuals shouldn't be able to get rich just be owning that oil, they didn't create it (but they _should_ be able to get rich by funding drilling projects, if it satisfied a demand).
The author lists out 4 testable statements that a property tax should meet (which are valid IMO), yet doesn't recognize that an LVT fails to meet them!
There is an inherent relationship between what is built on a parcel and its surrounding parcels and the desirability (which greatly influences the value) of that parcel. That relationship makes an LVT fundamentally untenable.
On top of that, people with expensive improvements to their parcel should pay more in property tax, as at least some of that tax goes to fund what is effectively insurance for your improvements (emergency services at a minimum, and you could argue that high quality local government services in general are a form of insurance for the value of those assets).
I think
Do we really want this? It is pretty established that higher valued assets incur higher property taxes. Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense. Old beat up Corolla owner to pay the same tax as a Lamborghini owner. (It reeks of perverse socialism - dividing everything, in this case tax burden, equally in the most simplistic way, and not surprisingly that LVT is usually pushed for by leftist "progressives" while there is nothing progressive in it really).
But if there were a free-standing bodega on land where you could build a skyscraper, you don’t think it should be taxed the same as a skyscraper?
Someone now has to make a subjective decision about the theoretical highest and best use of the land at a given point in time, and the last people I want making that decision are local bureaucrats.
I kind of agree, just tax the land as to the utility value of the land (not what is built on it). If you want to tax what’s on the land (or what it’s being used for) then that’s a different tax basis (perhaps more of a wealth tax or social benefit tax)
Both a farmer and I have 500 acres (his farm, my golf course). There is a basic land tax perhaps but I might get taxed for the golf course but he might get benefits for the socially beneficial food production.
tax the car to the utility value of the car - force you to drive for Uber instead of the car sitting in the garage and you posting here :)
Which is what we do!
In a general sense, UK car owners would pay a relatively small amount tax in road tax and then tax on petrol/diesel purchased to drive the car (the amount would vary on use). Trucks etc would pay more as they would have more maintenance impact on the roads.
So the money raised would be collected by government and distributed locally to maintain the road network.
But now more vehicles are electric so the fuel tax is decreasing so how’s the government going to fund the roads?
Perhaps to a “pay per mile” tax. With different rates depending on where and when. Taxing the utility of a mile driven in your vehicle.
Doesn’t have to force you to drive for uber, as it’s defined on the utility to you of a mile driven in your car. No miles, very little tax ( at peak times in the city rush, the bus might be better)
Landowners should be taxed in a way that factors in opportunity cost. If the city has a massive housing shortage, and the bodega owner refuses to sell to a developer (thus exacerbating the shortage), that may be their right -- but there's also no reason why it shouldn't be reflected in their tax bill.
Remember also that the skyscraper can be taxed in other ways, e.g. corporate income tax or sales tax. But a traditional property tax incentivizes keeping a lot empty, because as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
Looking around, i think you're incorrect.
>as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
you're paying your fair share for the police, fire protection, etc. as building something increases the need for such services even when you don't gneerate revenue.
>Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity.
That is patently false. The taxes in no way disincentivize me going to work, and they don't affect my desire to make even more money and to start my own business.
There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
77,000 vacant lots in NYC: https://commongroundorwa.org/3019-2/
>There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
How about an 85% income tax? 80%? 75%? Where do you draw the line? The truth is, it's a matter of degree. Even a 10% tax disincentivizes work a little bit.
Not "vacant":
"New York City alone has more than 77,000 lots that are either vacant or have a building that is less than half the size of what zoning allows"
add to that that those lots/buildings may have already sold their "air rights" and thus aren't allowed to build more.
>Altus, which is a real-estate analytics and advisory firm, counted private lots larger than 3,000 square feet that are likely suitable for development.
no mentioning of air rights. That is how you distinguish real analytics from a propaganda job.
And even with totally vacant and still having their air rights lots, that 77000 would still be a pretty healthy rate of 7%.
>How about an 85% income tax? 80%? 75%? Where do you draw the line? The truth is, it's a matter of degree. Even a 10% tax disincentivizes work a little bit.
the lines are well known. Across the world taxes less than 20% are called "low", higher than 40% - "high". People understand that they need to pay their share to maintain commons.
>Even a 10% tax disincentivizes work a little bit.
I never heard/seen/read about such a phenomenon in real life. That seems like you're doing a pure theoretical stretch of the 90% model.
I know this is what LVT advocates say, but it's not true in practice. An unimproved lot is a liability from a cash flow perspective unless the tax rate is 0%. That's an incentive to improve the lot and derive value from it (which can be income, or some sort of personal benefit like shelter).
> Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
This claim is largely theoretical, as the LVT has very limited adoption worldwide (I believe Denmark is the only country that uses it without broad exemptions for residential real estate and other common uses, though feel free to correct me) and does not seem to have produced a radical transformation in those limited applications within some countries and a few depressed US cities.
I think it speaks volumes about the LVT crowd (kind of hard to fault the author personally when he exists in that filter bubble) that the author's entire section on land use restrictions speaks only to deed restrictions and not government imposed ones.
For instance below from Australia
https://www.nsw.gov.au/housing-and-construction/land-values-...
And every municipality in the US is able to assess property currently, though how good of a job they do varies of course.
This site, as does reddit and a couple other similar places online, has a very vocal portion of the userbase that spends a significant amount of time obsessing over socialist policies that are wildly unpopular overall and largely impossible to implement at this time.
Don't take it as a representation of Americans overall.
It's not appropriate for an assessor's office to further a goal other than the above, particularly a public policy that tries to increase or decrease taxes based on a property's characteristics like how much land it contains or how many stories it has. That's for the legislative body.
If you want to create (dis)incentives for types of property, you do it AFTER fairly valuing property.
TFA conflates the two ideas.
I would argue (not with you, as I think you and I agree) that most people do not agree with the author, and just want to see an assessment that reflects the market rate for their property (which is extremely simple to determine in the vast majority of cases) and a tax rate that results in adequate funding for government services when applied to assessed property in the jurisdiction.
Obviously the definition of "adequate funding for government services" is highly subjective, which is where the political debates lie.
If indeed you want adequate funding of government services, it's paramount that we find the most efficient way of funding government and Georgists believe that the most efficient way to tax people is the land value tax.
Social justice and economic efficiency need not be in conflict. Indeed, when a concept like the land value tax finds broad support from economists all over the political spectrum, it's time to sit up and pay attention.
But don't take it from me, read George himself:
[LVT would] “accomplish the same thing [as land nationalization] in a simpler, easier, and quieter way." []
Beyond that, there's serious inefficiencies in Georgism
- No incentive for efficient allocation of land (price is zero)
- The incredibly important role of land speculators, who help assign time preference to land by delaying its introduction in the market to when its value can be better captured, is basically destroyed
- People will all grab the "best" land as fast as they can with allocation basically left to favoritism or queueing
- Undeveloped land value can be impossible to separate from improvements
[] Henry George, Progress and Poverty p. 404.
Tax rates are political. Assessing the value of an asset should be apolitical. Georgism intertwines the two, which causes a lot of issues.
> If indeed you want adequate funding of government services, it's paramount that we find the most efficient way of funding government and Georgists believe that the most efficient way to tax people is the land value tax.
You are correct that Georgists believe that, but I don't think it's a widely held opinion. The definition of efficiency is highly subjective because the metrics used to determine it are subjective.
> Social justice and economic efficiency need not be in conflict. Indeed, when a concept like the land value tax finds broad support from economists all over the political spectrum, it's time to sit up and pay attention.
Again, this is only efficient under a very specific set of objectives.
LVT has gotten a lot of attention, and has not performed well in practice just like every other socialist concept. It also does not have broad support.
It all works out because the county uses N appropriated dollars and everything flows from that (people that think they start at some percentage of property values and then work to what the county can spend have it backwards); you currently own $X assessed value out of $Y total assessed value in the whole county, the property taxes you pay are N * X / Y, and the property tax rate just deducted from that. Whether the actual amount assessed is accurate is immaterial to paying a proportional share.