4 ms·

A wealth tax is inherently limited; for example, you can't tax 100% of wealth-- that would be pure confiscation. However, a land value tax can scale up to 100%

A wealth tax is inherently limited; for example, you can't tax 100% of wealth-- that would be pure confiscation. However, a land value tax can scale up to 100%, because you're taxing rent, and not wealth that is bought/created by any individual. An estate that has its rent taxed 100% will eventually dissolve, unless it's constantly generating new value aside from rent (which is in general not the case).

mac01021 10y ago
This seems like an interesting idea but, every time I read about a land value tax (LVT), the description is very high-level and leaves me with more questions than it answers: - How do you measure the basic value of the land? Is is it the amount of rent collected minus maintenance-and-improvement expenses? Does this mean it is impossible to turn a profit as a landlord? - Is the tax also applied to land that is not rented? Is it harder to assess the value of that land? - Does this system discourage conservation by incentivizing everyone to sell their unused land to someone who is going to develop it? - A common type of investment in today's no-LVT world: I buy an undeveloped plot of land that noone would pay anything to live on in a town just outside of Worcester, MA. I spend $100k building a house on the premises, and then I proceed to rent out that house for $1k per month. Under an LVT system, do I still have any reason to buy that land and build a house on it? How much money can I make? Thank you for your time.
- bufordsharkley 10y ago
  I agree that a lot of the questions it raises need to answered (in practice, LVT has run into issues because of poor practices by the assessors office). To answer your questions to the best of my abilities: - A landlord should be able to make a profit because the building itself would not be taxed. The only kind of landlord would which not see a profit is the kind that rents out land use, but does not actually develop or perform maintenance. - Land that nobody wants wouldn't get taxed. (A few square feet of land in Alaska, for instance) But if there's any demand to own the land, it would have a rental value. - It highly discourages sprawl, so it's good for conservation in that sense. However, I recognize that greenlands near city centers need special consideration. For instance, the Muir Redwoods in Marin absolutely would have needed intervention to be saved; the LVT would have been an incentive to develop so close to SF. - In a LVT system, undeveloped land would always sell for $0. The tax on the land is equal to the return on the land itself. So in the current system, you pay $100k for the land, $100k on the house, get taxed $2k/yr in property taxes, get taxed on the rental income, etc. In a LVT system, the land would be free, but would be taxed at $5k a year. (Assuming 5% rate of return). You're not going to get $5k for that land unless you do something with it, so you absolutely have the incentive to build a $100k house and rent it out for $1k per month. But let's say that the land was worth $500k instead of $100k. Now the LVT would be $25k a year; you'd have an incentive to build much more than a $100k house; you'd want to develop it even more to generate even more return. This is how the LVT aligns the incentives for land use better than the current system (where property tax on improvements leads as a discentive to develop, and encourages restrict zoning laws). I think the valuation of the land is the hard part, but active markets and self-valuation may have secrets to accurate and convenient pricing. I think it merits more research on this field, at any rate.

mac01021 10y ago

This seems like an interesting idea but, every time I read about a land value tax (LVT), the description is very high-level and leaves me with more questions than it answers: - How do you measure the basic value of the land? Is is it the amount of rent collected minus maintenance-and-improvement expenses? Does this mean it is impossible to turn a profit as a landlord? - Is the tax also applied to land that is not rented? Is it harder to assess the value of that land? - Does this system discourage conservation by incentivizing everyone to sell their unused land to someone who is going to develop it? - A common type of investment in today's no-LVT world: I buy an undeveloped plot of land that noone would pay anything to live on in a town just outside of Worcester, MA. I spend $100k building a house on the premises, and then I proceed to rent out that house for $1k per month. Under an LVT system, do I still have any reason to buy that land and build a house on it? How much money can I make? Thank you for your time.

bufordsharkley 10y ago
I agree that a lot of the questions it raises need to answered (in practice, LVT has run into issues because of poor practices by the assessors office). To answer your questions to the best of my abilities: - A landlord should be able to make a profit because the building itself would not be taxed. The only kind of landlord would which not see a profit is the kind that rents out land use, but does not actually develop or perform maintenance. - Land that nobody wants wouldn't get taxed. (A few square feet of land in Alaska, for instance) But if there's any demand to own the land, it would have a rental value. - It highly discourages sprawl, so it's good for conservation in that sense. However, I recognize that greenlands near city centers need special consideration. For instance, the Muir Redwoods in Marin absolutely would have needed intervention to be saved; the LVT would have been an incentive to develop so close to SF. - In a LVT system, undeveloped land would always sell for $0. The tax on the land is equal to the return on the land itself. So in the current system, you pay $100k for the land, $100k on the house, get taxed $2k/yr in property taxes, get taxed on the rental income, etc. In a LVT system, the land would be free, but would be taxed at $5k a year. (Assuming 5% rate of return). You're not going to get $5k for that land unless you do something with it, so you absolutely have the incentive to build a $100k house and rent it out for $1k per month. But let's say that the land was worth $500k instead of $100k. Now the LVT would be $25k a year; you'd have an incentive to build much more than a $100k house; you'd want to develop it even more to generate even more return. This is how the LVT aligns the incentives for land use better than the current system (where property tax on improvements leads as a discentive to develop, and encourages restrict zoning laws). I think the valuation of the land is the hard part, but active markets and self-valuation may have secrets to accurate and convenient pricing. I think it merits more research on this field, at any rate.