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On the other hand, why should your tax bill go up simply because other people are willing to spend increasingly large amounts of money to buy a house like yours

On the other hand, why should your tax bill go up simply because other people are willing to spend increasingly large amounts of money to buy a house like yours? It's not like income tax where your tax bill only goes up when you get more money to pay it with.

mahyarm 11y ago
Because when their own bills go up, they have an incentive to vote for things that bring the cost of housing down. When they don't have to pay for the cost of housing, but instead personally benefit through increased housing value, they will of course vote for it.
greeneggs 11y ago
One can argue that it should be the opposite of an income tax. If the value of your house goes up because you remodel the kitchen, then it seems fair that you should be able to pocket that value. You did the work, so your taxes should not increase. If the value of your house goes up because the government opens a new light rail station nearby, then you did nothing to earn this, so it seems fair that society should be able to get higher taxes from you. In a speculative bubble, you did nothing to earn the extra value, but---arguably!---neither did the government, so it is less clear cut.
- carboncopy 11y ago
  Agreed. The current system is controversial because there is a dichotomy between what entrenched residents and newcomers pay to that government. I assert it's a problem with a non-trivial solution.
mseebach 11y ago
The thing is, when the tax burden is evenly spread out, it will rise more in step with the amount of money needed by the city (as decided by voters), not so much the price of the house. Indeed, in a (largely mythical, I know) well-run city, the property tax (in pct) should go down as prices rise. Right now, many California cities are broke, and their only way of raising revenues is to soak the newcomers.
yason 11y ago
The taxes should indeed go up to optimize land use in general. If you have a house built in 1902 in the middle of a big city, you're paying minimal taxes and find yourself surrounded by high-rises, it's very inefficient land use. Your lot could provide housing for hundreds if not thousands of people if another high-rise was built there. Thus, you should either pay for your privilege (in taxes) or sell the lot (for a lot of money, presumably) to let other people use the space more efficiently. However, I must say that a property tax itself is a wicked one and should be replaced by land value tax. Land is more valuable in the centre than in the outskirts of the city, so when properly taxed it creates the tendency to increase density of the highly taxed land and allows for more liberal land use where nobody else wants to build.
- webmaven 11y ago
  So, in what ways is land-value a better taxable asset than property-value?
  - yason 11y ago
    Property value goes up if you build a bigger, better building on your lot so you might as well stick with the old one. That promotes stagnation and under-use: it might not make sense for an individual or a business to give the lot to better use and move further away to enjoy lower taxes if the location is not particularly important. In contrast, land value goes up in the average if a lot of people keep building desirable buildings in what turns out to be a desirable district in the city. That promotes what people like. Consequently, inefficient land uses move further away from the desirable areas. Implementing neither property tax nor land-value tax is not straight-forward in general and there are corner-cases that need to be sorted, but in general land use is what ultimately provides its value. Often property tax codes already incorporate parts of land-value taxing, but the intrinsic value of property to be taxed is debatable: what is the value (to the community) of a small, low-taxed detached house in the downtown versus a huge, high-taxed mansion outside of the city? The opportunity cost of taxing property might be huge.
rayiner 11y ago
Your tax bill doesn't go up just because the value of your house goes up. Your municipality has to vote to spend that extra tax revenue instead of cutting property tax rates. If they do that (and remember old people are the dominant demographic of voters), why shouldn't people pay more?
rdlecler1 11y ago
Your tax value goes up with the value of your asset. There are no free lunches just because you showed up a generation or two earlier.

mahyarm 11y ago

Because when their own bills go up, they have an incentive to vote for things that bring the cost of housing down. When they don't have to pay for the cost of housing, but instead personally benefit through increased housing value, they will of course vote for it.

greeneggs 11y ago

One can argue that it should be the opposite of an income tax. If the value of your house goes up because you remodel the kitchen, then it seems fair that you should be able to pocket that value. You did the work, so your taxes should not increase. If the value of your house goes up because the government opens a new light rail station nearby, then you did nothing to earn this, so it seems fair that society should be able to get higher taxes from you. In a speculative bubble, you did nothing to earn the extra value, but---arguably!---neither did the government, so it is less clear cut.

carboncopy 11y ago
Agreed. The current system is controversial because there is a dichotomy between what entrenched residents and newcomers pay to that government. I assert it's a problem with a non-trivial solution.

mseebach 11y ago

The thing is, when the tax burden is evenly spread out, it will rise more in step with the amount of money needed by the city (as decided by voters), not so much the price of the house. Indeed, in a (largely mythical, I know) well-run city, the property tax (in pct) should go down as prices rise. Right now, many California cities are broke, and their only way of raising revenues is to soak the newcomers.

yason 11y ago

The taxes should indeed go up to optimize land use in general. If you have a house built in 1902 in the middle of a big city, you're paying minimal taxes and find yourself surrounded by high-rises, it's very inefficient land use. Your lot could provide housing for hundreds if not thousands of people if another high-rise was built there. Thus, you should either pay for your privilege (in taxes) or sell the lot (for a lot of money, presumably) to let other people use the space more efficiently. However, I must say that a property tax itself is a wicked one and should be replaced by land value tax. Land is more valuable in the centre than in the outskirts of the city, so when properly taxed it creates the tendency to increase density of the highly taxed land and allows for more liberal land use where nobody else wants to build.

webmaven 11y ago
So, in what ways is land-value a better taxable asset than property-value?
- yason 11y ago
  Property value goes up if you build a bigger, better building on your lot so you might as well stick with the old one. That promotes stagnation and under-use: it might not make sense for an individual or a business to give the lot to better use and move further away to enjoy lower taxes if the location is not particularly important. In contrast, land value goes up in the average if a lot of people keep building desirable buildings in what turns out to be a desirable district in the city. That promotes what people like. Consequently, inefficient land uses move further away from the desirable areas. Implementing neither property tax nor land-value tax is not straight-forward in general and there are corner-cases that need to be sorted, but in general land use is what ultimately provides its value. Often property tax codes already incorporate parts of land-value taxing, but the intrinsic value of property to be taxed is debatable: what is the value (to the community) of a small, low-taxed detached house in the downtown versus a huge, high-taxed mansion outside of the city? The opportunity cost of taxing property might be huge.

rayiner 11y ago

Your tax bill doesn't go up just because the value of your house goes up. Your municipality has to vote to spend that extra tax revenue instead of cutting property tax rates. If they do that (and remember old people are the dominant demographic of voters), why shouldn't people pay more?

rdlecler1 11y ago

Your tax value goes up with the value of your asset. There are no free lunches just because you showed up a generation or two earlier.