5 ms·

This wouldn't change landlord's incentives and therefore unlikely to change the outcome.

by samastur 10y ago

kiba 10y ago
You would need to explain that to me.
- smallnamespace 10y ago
  https://en.wikipedia.org/wiki/Land_value_tax#Efficiency https://en.wikipedia.org/wiki/Land_value_tax#Efficiency A landlord's decision to improve or not improve the property only depends on 1) the cost of the improvements and 2) the expected revenue stream from that improvement, neither of which are affected by an LVT, since the LVT only cares about the unimproved value of the lot.
  - kiba 10y ago
    I can't follow the technical arguments you're making.
    - smallnamespace 10y ago
      You are a landlord. You need to decide whether to make an improvement to your property. There are only two things you care about: 1. How much money does that improvement bring in? 2. How much does that improvement cost? Neither of those two inputs are affected by a land value tax. Therefore the landlord must reach the same decision, regardless of whether there is an LVT or not, and so LVTs have no effect on whether landlords improve their property. You might think that they'll be motivated to improve the lot in order to be able to pay the LVT, but that rationally doesn't factor in to the decision to improve the land or not. It only affects the price of the land (Imposing an LVT makes land prices fall by the discounted future cost of the tax). And not to be rude, but it seems strange to jump into discussions recommending LVTs as a solution to an economic problem without first understanding basic economic theory.
      - kiba 10y ago
        You might think that they'll be motivated to improve the lot in order to be able to pay the LVT, but that rationally doesn't factor in to the decision to improve the land or not. It only affects the price at which the land is bought or sold. I misunderstood the LVT as something that is levied against the landowner every year? And not to be rude, but it seems strange to jump into discussions recommending LVTs as a solution to an economic problem without understanding basic economic theory. I read an economist article on it, and I thought that I understood it. Apparently I don't. I won't be recommending it in the future until I fully understand the consequences.
        smallnamespace 10y ago
        > I misunderstood the LVT as something that is levied against the landowner every year? Yes, but it still doesn't affect the (rational) landowner's decision. Imagine an improvement that can net the owner $Y a year in profit. A rational owner should always make that improvement, regardless of whether the government is also taxing them $X a year on the land. If they doesn't have the money/capital to do so, they should sell the land to someone else. Obviously not every landowner acts fully rationally, but in the aggregate, landowners should act pretty closely to that model.
        ohwello 10y ago
        >Yes, but it still doesn't affect the (rational) landowner's decision. Imagine an improvement that can net the owner $Y a year in profit. A rational owner should always make that improvement, regardless of whether the government is also taxing them $X a year on the land. It's not just about whether return is positive, it's about the highest ROI considering opportunity cost. Consider a simple case where two lots with one story of development each can produce as much as a single lot with two stories of development. With a tax on land+improvements, a landlord does not prefer one over the other. With a tax on land value only, the single lot with two stories is preferred. >If they doesn't have the money/capital to do so, they should sell the land to someone else. Indeed. If the neighbors have ten stories of development, a landlord with a one-story building will not be able to afford the LVT and will sell to someone who can afford to build ten stories.
  - crdoconnor 10y ago
    I doubt this very much. They'd be incentivized to make more improvements. Under our current regime what is currently a smaller profit would translate into losses under LVT. Theoretically there's no difference between a smaller profit than is possible and a loss for rational profit maximizing agents but the psychological difference is huge.

This wouldn't change landlord's incentives and therefore unlikely to change the outcome.

kiba 10y ago

You would need to explain that to me.

smallnamespace 10y ago
https://en.wikipedia.org/wiki/Land_value_tax#Efficiency https://en.wikipedia.org/wiki/Land_value_tax#Efficiency A landlord's decision to improve or not improve the property only depends on 1) the cost of the improvements and 2) the expected revenue stream from that improvement, neither of which are affected by an LVT, since the LVT only cares about the unimproved value of the lot.
- kiba 10y ago
  I can't follow the technical arguments you're making.
  - smallnamespace 10y ago
    You are a landlord. You need to decide whether to make an improvement to your property. There are only two things you care about: 1. How much money does that improvement bring in? 2. How much does that improvement cost? Neither of those two inputs are affected by a land value tax. Therefore the landlord must reach the same decision, regardless of whether there is an LVT or not, and so LVTs have no effect on whether landlords improve their property. You might think that they'll be motivated to improve the lot in order to be able to pay the LVT, but that rationally doesn't factor in to the decision to improve the land or not. It only affects the price of the land (Imposing an LVT makes land prices fall by the discounted future cost of the tax). And not to be rude, but it seems strange to jump into discussions recommending LVTs as a solution to an economic problem without first understanding basic economic theory.
    - kiba 10y ago
      You might think that they'll be motivated to improve the lot in order to be able to pay the LVT, but that rationally doesn't factor in to the decision to improve the land or not. It only affects the price at which the land is bought or sold. I misunderstood the LVT as something that is levied against the landowner every year? And not to be rude, but it seems strange to jump into discussions recommending LVTs as a solution to an economic problem without understanding basic economic theory. I read an economist article on it, and I thought that I understood it. Apparently I don't. I won't be recommending it in the future until I fully understand the consequences.
      - smallnamespace 10y ago
        > I misunderstood the LVT as something that is levied against the landowner every year? Yes, but it still doesn't affect the (rational) landowner's decision. Imagine an improvement that can net the owner $Y a year in profit. A rational owner should always make that improvement, regardless of whether the government is also taxing them $X a year on the land. If they doesn't have the money/capital to do so, they should sell the land to someone else. Obviously not every landowner acts fully rationally, but in the aggregate, landowners should act pretty closely to that model.
        ohwello 10y ago
        >Yes, but it still doesn't affect the (rational) landowner's decision. Imagine an improvement that can net the owner $Y a year in profit. A rational owner should always make that improvement, regardless of whether the government is also taxing them $X a year on the land. It's not just about whether return is positive, it's about the highest ROI considering opportunity cost. Consider a simple case where two lots with one story of development each can produce as much as a single lot with two stories of development. With a tax on land+improvements, a landlord does not prefer one over the other. With a tax on land value only, the single lot with two stories is preferred. >If they doesn't have the money/capital to do so, they should sell the land to someone else. Indeed. If the neighbors have ten stories of development, a landlord with a one-story building will not be able to afford the LVT and will sell to someone who can afford to build ten stories.
- crdoconnor 10y ago
  I doubt this very much. They'd be incentivized to make more improvements. Under our current regime what is currently a smaller profit would translate into losses under LVT. Theoretically there's no difference between a smaller profit than is possible and a loss for rational profit maximizing agents but the psychological difference is huge.