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Property-value taxes discourage people from building anything valuable on land and instead encourages them to hoard it hoping the value will go up, or to sprawl
by larsiusprime 10y ago
Property-value taxes discourage people from building anything valuable on land and instead encourages them to hoard it hoping the value will go up, or to sprawl development outwards. Land-value taxes (tax on the unimproved value of the land, ignoring whatever's built on it) help to capture the ground rent -- the value that's gone up because of what everyone around it is doing (ie, the positive externalities generated by the community rather than the landowner) -- without discouraging the land owner from building densely on it, which is precisely what we should be encouraging people to do if we want to solve the housing crisis.
- adrianratnapala 10y agoGood point. As a technical matter. Once a property is built on, how do you distinguish between land value and the building value-add without some arbitrary valuation?
- smallnamespace 10y agoHopefully there are still unoccupied lots that are comparable. Otherwise it's pretty much whatever number the tax man decides. Note that in many jurisdictions property tax values are only assessed periodically.
- clairity 10y agomy opinion is that valuation is always subjective, but there's a whole industry and a whole field of economics dedicated to answering that question. conceptually, land value is just market price of the property minus building cost. building cost is a little more objective to estimate than market price but it's not an exact science either (i formerly product managed the cost estimator used by most US taxing jurisdictions and many international ones).