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Comment by prostoalex | Hacker News Reader

Extrapolating the data from the US http://taxes.about.com/od/statetaxes/a/property-taxes-best-a... the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply. (The rates there are on "property value", so the rate for land value would be higher than indicated.)

> A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else.

For one, he took the opportunity risk of locking his liquid capital into a piece of land, which only accumulates property taxes, as opposed to owning a bond or a stock that pays dividend or interest. When you calculate the IRR, land doesn't necessarily come out ahead of S&P 500 over longer periods of time.

For two, he took on the appreciation risk - the land is not guaranteed to go up in value all the time.

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>the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply

These are property taxes, not land taxes, unless the article is lumping them. A property tax doesn't provide incentives for more efficient use of land, on the contrary actually.

Even if they were land taxes, they would be way too small for a meaningful difference. Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most, and presumably invest the gain in whatever productive thing they're doing.

>For one, he took the opportunity risk of locking his liquid capital into a piece of land

>For two, he took on the appreciation risk

There's nothing valuable in risk. Your argument works even better for buying a piece of a rock for a million dollars and expecting profits, as the opportunity risk and appreciation risk are way higher than buying a piece of land.

> These are property taxes, not land taxes, unless the article is lumping them.

I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both.

> Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most

How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose?

> There's nothing valuable in risk.

He provided liquidity to the market when somebody was willing to sell that piece of land. If you're taxing someone for providing liquidity, the price of the underlying good will plummet, as that removes incentives for current buyers, and then you're back to square one - low tax revenues collected from land owners.

> Your argument works even better for buying a piece of a rock for a million dollars and expecting profits

People do invest in gold and silver.

>I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both.

Land tax is a tax on a value of unimproved land only [0]

>How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose?

Why would it change anything? The land prices would just fall so that the net result would be neutral for average farmer.

>He provided liquidity to the market when somebody was willing to sell that piece of land

Land tax increases liquidity drastically by making it much more expensive to hoard it.

>and then you're back to square one - low tax revenues collected from land owners.

It's not back to square one - it's a situation in which people with more productive use of land can get it much more cheaply. Think of a situation in which a prime residential city land costs one average annual wage.

>People do invest in gold and silver.

People do many weird things. https://images.angelpub.com/2014/17/24245/returns-on-stocks-...

[0] http://en.wikipedia.org/wiki/Land_value_tax

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