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There's an ongoing discussion in Poland about land-value tax. The problem here is that such tax is seen as a form of asset forfeiture. Why? Because of the commu

by mamon 11y ago

There's an ongoing discussion in Poland about land-value tax. The problem here is that such tax is seen as a form of asset forfeiture. Why? Because of the communist times legacy. In 1970s and 1980s there were a lot of apartments built by communist government, most of which were given to average citizens either for free, or for some insignificant amount of money. Now almost 40 years passed and we ended up with millions of people still living in those apartments, which they got back then, or inherited. Now, especially after Poland joined EU, market price of those apartments skyrocketed, while owners income levels stayed pretty low. So, if government introduced land-value tax most of those people would not be able to afford paying it, effectively forcing them to sell their apartments. I don't know how such tax would work in different setting, but here in Poland only visible effect would be rich people taking over properties for discount prices.

tomp 11y ago
I don't see the problem here. It's pretty simple to legislate that the primary property is exempt from land value tax.
- deleted 11y ago
  [deleted]
- eru 11y ago
  But that's also a silly exemption, and would pull most of the teeth from such a tax.
tehwalrus 11y ago
If the value of the apartment is high, then it wouldn't be sold for a discount price, would it? The value might be affected by the tax, I suppose, but the person buying it would be affected by that too when they came to sell. Land value tax is based on the premise that if you are land-rich, you should also be "more productive" to earn the right to keep the land. Final point; apartment buildings generally have a lower land value than you might expect given the sale price (see my other comment), with a small square footage spread over many apartments in high-rise, the tax may well be less than you expect (i.e. much of the value may be in the rebuild cost.)
- mrow84 11y ago
  If the people who currently own the apartments have to sell because they are unable to afford the taxes then they would be in a poor bargaining position - they would pay for their "desire" for immediacy. Those who purchase the apartments would, therefore, be paying below the market rate (defining the market rate based solely on people's desires, without including their financial position).
  - tehwalrus 11y ago
    Immediacy is a problem, yes. That's why at the start of a LVT people must be allowed a grace period of a couple of years to pay. Some argue for deferring such taxes until the property is sold or inherited, but that could lead to even worse situations like the one described.
    - mrow84 11y ago
      Mightn't the deferral of tax payments until newly-taxed properties are sold or inherited remove (or at least reduce) the time correlation, thus improving the market position of the sellers? Avoiding any adjustment in ownership patterns seems impossible to achieve without strong legislation, but attempting to provide adequate compensation through the market (rather than the government) seems like it might work? (question mark because I really have no idea...)
- lukasm 11y ago
  mamon wasn't correct. Quite large number of people don't own the properties. Only 3-6% of people in Poland rent apartments. Others own the place or rent from a cooperative. During communist times local factory provided flats for the workers. After factories were closed, government formed cooperatives to manage real estate. Currently, buildings are in complicated legal state. There was one period when current tenant could purchase the property for 10% of market value, but it was blocked (possibly by developers lobby). On top of that, some buildings and land have unknown owners because of WW2. I'd love see an experiment when income tax is replaced by land and property tax.
aembleton 11y ago
Just require that your primary properties taxes are handed over to the state on the death of those who hold the title deeds. That way, people get to live out their lives in their properties and the state still collects their money.
bryanlarsen 11y ago
In the western world it's a quite common situation for retirees to own valuable property that they cannot afford to keep up and pay taxes on. They typically take out a "reverse mortgage" to handle these expenses. The bank pays them $X per month as a loan secured against the property that comes due only when the property changes owners.
- JoeAltmaier 11y ago
  But that system impoverishes the elderly, and drains any legacy they might have left to their children. I see 'reverse mortgages' as a scam played on vulnerable retirees. Far more effective for them, would be to sell the valuable property and buy something they CAN afford the taxes on. Better than bleeding them dry by a large margin.
  - bryanlarsen 11y ago
    What impoverishes the elderly is that silly notion of leaving a legacy to their children. Such a concept makes sense when you die at the age of 40, but it makes no sense for an 85 year old. You're right that selling the big house and buying a small house makes sense for a lot of seniors, but taking away their ability to choose something like a reverse mortgage is just patronizing them.
    - JoeAltmaier 11y ago
      Nobody is taking anything; they are operating in a free market and making their best choice, which may be to sell the big house and buy a smaller one in a cheaper neighborhood. If they choose instead to impoverish themselves, and they had all the information in front of them, then ok I guess. But I imagine nobody in their right mind would deliberately go broke when other options were available. I imagine that folks that work hard to convince them to do such things, are not working in their favor. Patronizing them would be, deciding that a reverse mortgage is always in their best interest.
JoeAltmaier 11y ago
Last sentence makes no sense. Not discount prices; you called them 'skyrocket' prices. So the rich folks would get the properties by paying market rate for them. I would call it, an undeserved prize for the working class. Undeserved, because they had nothing (directly) to do with the rise in prices.
MarkWadsworth 11y ago
"So, if government introduced land-value tax most of those people would not be able to afford paying it, effectively forcing them to sell their apartments." That is a laughably stupid argument. What if the LVT were set very low at 1% of rental values, they would all be able to afford to pay it. If LVT - however high - were used to replace other taxes which low earners have to pay, then nearly all of them would still be able to afford it. Further, as you say yourself, those people got given those apartments for free or for cheap and have lived there rent free ever since. A younger person wanting to live there would have to pay a large amount of money - you said so yourself. So LVT levels the playing field, which must be a good thing.

by mamon 11y ago

tomp 11y ago

I don't see the problem here. It's pretty simple to legislate that the primary property is exempt from land value tax.

deleted 11y ago
[deleted]
eru 11y ago
But that's also a silly exemption, and would pull most of the teeth from such a tax.

tehwalrus 11y ago

If the value of the apartment is high, then it wouldn't be sold for a discount price, would it? The value might be affected by the tax, I suppose, but the person buying it would be affected by that too when they came to sell. Land value tax is based on the premise that if you are land-rich, you should also be "more productive" to earn the right to keep the land. Final point; apartment buildings generally have a lower land value than you might expect given the sale price (see my other comment), with a small square footage spread over many apartments in high-rise, the tax may well be less than you expect (i.e. much of the value may be in the rebuild cost.)

mrow84 11y ago
If the people who currently own the apartments have to sell because they are unable to afford the taxes then they would be in a poor bargaining position - they would pay for their "desire" for immediacy. Those who purchase the apartments would, therefore, be paying below the market rate (defining the market rate based solely on people's desires, without including their financial position).
- tehwalrus 11y ago
  Immediacy is a problem, yes. That's why at the start of a LVT people must be allowed a grace period of a couple of years to pay. Some argue for deferring such taxes until the property is sold or inherited, but that could lead to even worse situations like the one described.
  - mrow84 11y ago
    Mightn't the deferral of tax payments until newly-taxed properties are sold or inherited remove (or at least reduce) the time correlation, thus improving the market position of the sellers? Avoiding any adjustment in ownership patterns seems impossible to achieve without strong legislation, but attempting to provide adequate compensation through the market (rather than the government) seems like it might work? (question mark because I really have no idea...)
lukasm 11y ago
mamon wasn't correct. Quite large number of people don't own the properties. Only 3-6% of people in Poland rent apartments. Others own the place or rent from a cooperative. During communist times local factory provided flats for the workers. After factories were closed, government formed cooperatives to manage real estate. Currently, buildings are in complicated legal state. There was one period when current tenant could purchase the property for 10% of market value, but it was blocked (possibly by developers lobby). On top of that, some buildings and land have unknown owners because of WW2. I'd love see an experiment when income tax is replaced by land and property tax.

aembleton 11y ago

Just require that your primary properties taxes are handed over to the state on the death of those who hold the title deeds. That way, people get to live out their lives in their properties and the state still collects their money.

bryanlarsen 11y ago

In the western world it's a quite common situation for retirees to own valuable property that they cannot afford to keep up and pay taxes on. They typically take out a "reverse mortgage" to handle these expenses. The bank pays them $X per month as a loan secured against the property that comes due only when the property changes owners.

JoeAltmaier 11y ago
But that system impoverishes the elderly, and drains any legacy they might have left to their children. I see 'reverse mortgages' as a scam played on vulnerable retirees. Far more effective for them, would be to sell the valuable property and buy something they CAN afford the taxes on. Better than bleeding them dry by a large margin.
- bryanlarsen 11y ago
  What impoverishes the elderly is that silly notion of leaving a legacy to their children. Such a concept makes sense when you die at the age of 40, but it makes no sense for an 85 year old. You're right that selling the big house and buying a small house makes sense for a lot of seniors, but taking away their ability to choose something like a reverse mortgage is just patronizing them.
  - JoeAltmaier 11y ago
    Nobody is taking anything; they are operating in a free market and making their best choice, which may be to sell the big house and buy a smaller one in a cheaper neighborhood. If they choose instead to impoverish themselves, and they had all the information in front of them, then ok I guess. But I imagine nobody in their right mind would deliberately go broke when other options were available. I imagine that folks that work hard to convince them to do such things, are not working in their favor. Patronizing them would be, deciding that a reverse mortgage is always in their best interest.

JoeAltmaier 11y ago

Last sentence makes no sense. Not discount prices; you called them 'skyrocket' prices. So the rich folks would get the properties by paying market rate for them. I would call it, an undeserved prize for the working class. Undeserved, because they had nothing (directly) to do with the rise in prices.

MarkWadsworth 11y ago

"So, if government introduced land-value tax most of those people would not be able to afford paying it, effectively forcing them to sell their apartments." That is a laughably stupid argument. What if the LVT were set very low at 1% of rental values, they would all be able to afford to pay it. If LVT - however high - were used to replace other taxes which low earners have to pay, then nearly all of them would still be able to afford it. Further, as you say yourself, those people got given those apartments for free or for cheap and have lived there rent free ever since. A younger person wanting to live there would have to pay a large amount of money - you said so yourself. So LVT levels the playing field, which must be a good thing.