9 ms·

How do you suggest we modulate land price if not via the current system? How is land tax going to make things any easier? The US already has property tax - you

How do you suggest we modulate land price if not via the current system? How is land tax going to make things any easier? The US already has property tax - you want to raise it?

branchless 11y ago
I've put that in my reply above. We need to have taxes to regress speculation which will see land prices fall and will replace much of income tax. Have a read of the link or many other sites on LVT. I think we also need to deal with money creation by private banks. This has been an absolute disaster since it became effectively unconstrained with the end of the gold standard. (not that I'm a gold bug). It's the issue facing our generation, and the next. Just look at SF where land prices have made it very expensive to live there as ultimately all productivity gains flow to land prices rather than to workers. And to the guy who replied below you need to put some effort in I'm afraid: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Basically you can't pass on LVT via rent.
- douche 11y ago
  Every time this comes up, the answer I see trotted out is that increased land taxes will cause land prices to fall and rents will get cheaper. I don't understand how this makes any sense, at all. If the town raises the property taxes on my rental, guess what, the rent is going to go up at least as much as the tax increase.
  - TulliusCicero 11y ago
    > I don't understand how this makes any sense, at all. If the town raises the property taxes on my rental, guess what, the rent is going to go up at least as much as the tax increase. This is only true if the rent is based on the cost of the unit in terms of purchase price and upkeep. That's true in lower cost-of-living areas, but in expensive areas, the rent is high primarily because demand is outstripping supply, not because the cost of landlording has gone up. And if rent prices are not based on cost, then an increase in cost (which is what a property tax increase is) will mostly not be passed onto renters.
    - zepto 11y ago
      This doesn't add up. If rent is so much higher than purchase plus upkeep, people will borrow money and buy, safe in the knowledge that they can just become a landlord and be cash-flow positive at any time. Or investors will simply buy the cheap properties and rent them. The demand for investment properties will drive up the purchase price and parity will be reached. This is why house prices are just as insane in Silicon Valley as rents.
      - branchless 11y ago
        No rents typically lag house prices significantly. Prices are set by credit. Rents by wages. You have to pay your rent from your wage. Prices are via fiat created ex nihilo by private banks. Rents do go up when wages go up (SF) and when there is speculation they rise but it's capped by wages.
      - ericd 11y ago
        How about increasingly higher property tax rates for 2nd, 3rd, etc. properties? Also, getting rid of the CA law that sets property tax assessment value at time of purchase would help increase liquidity a lot, as it no longer makes sense to let land sit unproductively as you wait for it to appreciate.
        deleted 11y ago
        [deleted]
      - usaar333 11y ago
        That's not what GP is claiming. He's claiming that a land tax would not be passed on to renters if instituted, because rent is being driven demand-side (what renters are willing to pay) not supply-side (cost to provide a house to people). Any attempt to increase rent would result in a lower demand by renters, meaning the market would fail to clear -- the rent would then need to be re-lowered. But you are correct, that rent shouldn't be higher than purchase plus upkeep. In the event of a land tax, rent holds constant but upkeep increases (taxes); consequently, for the equation to hold, purchases prices (and thus land values) will fall. And that's why this is so politically impossible to pass, even though it is considered the "least bad" tax economically. Land owners would see their assets sufficiently fall in value if a land tax were enacted.
  - ryandrake 11y ago
    If you could just raise your rent tomorrow, why don't you? Will the market bear the new price or won't it? Taxes should have no effect on what renters will bear.
    - branchless 11y ago
      You know it. This man knows how things are priced. Isn't it amazing, all these capitalist landlords who could be taking a greater cut of their tenant's labour but somehow are not.
      - antimagic 11y ago
        Rental demand is fairly inelastic though - everyone needs a roof over their head. The main force keeping prices down is competition, not the fact that landlords are being kind. If land taxes are increased, then all landlords will raise their prices, and the market will bear it - the other choice is to end up living in the street. The advantage of the LVT is that in theory the market could bear the price increase because there will be a corresponding drop in the salary tax that most renters are paying. The idea is that the government effectively takes a large slice of the profit from rent, instead of it all going to landlords. The problem of course is that this creates a disincentive for landlords to invest in property, reducing supply, and now we go back to high prices because of market forces. There is no simple solution to the high price of land, except by increasing supply or reducing demand. In other words, building more housing (which requires us to encourage landlords, not discourage them), or reduce the population. Just think, in a world with half the population of today, we would drastically reduce the percentage of salary devoted to housing. Not bad really.
        branchless 11y ago
        This all agrees with what I said. You are preaching to the converted :-)
- deleted 11y ago
  [deleted]

How do you suggest we modulate land price if not via the current system? How is land tax going to make things any easier? The US already has property tax - you want to raise it?

branchless 11y ago

I've put that in my reply above. We need to have taxes to regress speculation which will see land prices fall and will replace much of income tax. Have a read of the link or many other sites on LVT. I think we also need to deal with money creation by private banks. This has been an absolute disaster since it became effectively unconstrained with the end of the gold standard. (not that I'm a gold bug). It's the issue facing our generation, and the next. Just look at SF where land prices have made it very expensive to live there as ultimately all productivity gains flow to land prices rather than to workers. And to the guy who replied below you need to put some effort in I'm afraid: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Basically you can't pass on LVT via rent.

douche 11y ago
Every time this comes up, the answer I see trotted out is that increased land taxes will cause land prices to fall and rents will get cheaper. I don't understand how this makes any sense, at all. If the town raises the property taxes on my rental, guess what, the rent is going to go up at least as much as the tax increase.
- TulliusCicero 11y ago
  > I don't understand how this makes any sense, at all. If the town raises the property taxes on my rental, guess what, the rent is going to go up at least as much as the tax increase. This is only true if the rent is based on the cost of the unit in terms of purchase price and upkeep. That's true in lower cost-of-living areas, but in expensive areas, the rent is high primarily because demand is outstripping supply, not because the cost of landlording has gone up. And if rent prices are not based on cost, then an increase in cost (which is what a property tax increase is) will mostly not be passed onto renters.
  - zepto 11y ago
    This doesn't add up. If rent is so much higher than purchase plus upkeep, people will borrow money and buy, safe in the knowledge that they can just become a landlord and be cash-flow positive at any time. Or investors will simply buy the cheap properties and rent them. The demand for investment properties will drive up the purchase price and parity will be reached. This is why house prices are just as insane in Silicon Valley as rents.
    - branchless 11y ago
      No rents typically lag house prices significantly. Prices are set by credit. Rents by wages. You have to pay your rent from your wage. Prices are via fiat created ex nihilo by private banks. Rents do go up when wages go up (SF) and when there is speculation they rise but it's capped by wages.
    - ericd 11y ago
      How about increasingly higher property tax rates for 2nd, 3rd, etc. properties? Also, getting rid of the CA law that sets property tax assessment value at time of purchase would help increase liquidity a lot, as it no longer makes sense to let land sit unproductively as you wait for it to appreciate.
      - deleted 11y ago
        [deleted]
    - usaar333 11y ago
      That's not what GP is claiming. He's claiming that a land tax would not be passed on to renters if instituted, because rent is being driven demand-side (what renters are willing to pay) not supply-side (cost to provide a house to people). Any attempt to increase rent would result in a lower demand by renters, meaning the market would fail to clear -- the rent would then need to be re-lowered. But you are correct, that rent shouldn't be higher than purchase plus upkeep. In the event of a land tax, rent holds constant but upkeep increases (taxes); consequently, for the equation to hold, purchases prices (and thus land values) will fall. And that's why this is so politically impossible to pass, even though it is considered the "least bad" tax economically. Land owners would see their assets sufficiently fall in value if a land tax were enacted.
- ryandrake 11y ago
  If you could just raise your rent tomorrow, why don't you? Will the market bear the new price or won't it? Taxes should have no effect on what renters will bear.
  - branchless 11y ago
    You know it. This man knows how things are priced. Isn't it amazing, all these capitalist landlords who could be taking a greater cut of their tenant's labour but somehow are not.
    - antimagic 11y ago
      Rental demand is fairly inelastic though - everyone needs a roof over their head. The main force keeping prices down is competition, not the fact that landlords are being kind. If land taxes are increased, then all landlords will raise their prices, and the market will bear it - the other choice is to end up living in the street. The advantage of the LVT is that in theory the market could bear the price increase because there will be a corresponding drop in the salary tax that most renters are paying. The idea is that the government effectively takes a large slice of the profit from rent, instead of it all going to landlords. The problem of course is that this creates a disincentive for landlords to invest in property, reducing supply, and now we go back to high prices because of market forces. There is no simple solution to the high price of land, except by increasing supply or reducing demand. In other words, building more housing (which requires us to encourage landlords, not discourage them), or reduce the population. Just think, in a world with half the population of today, we would drastically reduce the percentage of salary devoted to housing. Not bad really.
      - branchless 11y ago
        This all agrees with what I said. You are preaching to the converted :-)
deleted 11y ago
[deleted]