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Land Value Tax. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax This is distinct from a property tax in that it only

Land Value Tax. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax This is distinct from a property tax in that it only measures the value of the soil it sits on, so doesn't punish the landlord for improvements. The value of the land itself is almost entirely outside of the landlord's control, it's determined by the community around it. As a result, this is one of the least distortive taxes.

to3m 9y ago
Blog rebutting many common arguments against a land value tax: http://kaalvtn.blogspot.co.uk/p/index.html http://kaalvtn.blogspot.co.uk/p/index.html
chimeracoder 9y ago
> This is distinct from a property tax in that it only measures the value of the soil it sits on, so doesn't punish the landlord for improvements. The value of the land itself is almost entirely outside of the landlord's control, it's determined by the community around it. As a result, this is one of the least distortive taxes. When land value is taxed at a higher rate than property value, it creates a perverse incentive for landlords - especially those who don't live in the area in which they own property - to encourage blighting and sabotage the value of the land, while instead reinvesting this money into improvements on the property itself. That concentrates wealth even further in the hands of people who can afford to own these insular properties in otherwise "undesirable" areas. Actively blighting a neighborhood to depress values and make it easier to purchase land for new properties (either on the market or via eminent domain) is already a problem, and one that significantly skews power towards the extremely wealthy and massively-capitalized institutions. Taxing the value of the land separately from the property that sits on it (and at a higher rate) would exacerbate this unbelievably.
- gowld 9y ago
  How have all the economists missed this obvious point? Murder also hurts property values. Fortunately, we have the ability to create laws to punish destructive behavior. Why would a landlord destroy the value of their own property, harming their own ability to draw rent?
  - chimeracoder 9y ago
    > How have all the economists missed this obvious point? They haven't. That's why taxing land value at a higher rate than property values doesn't have support from mainstream economists. > Murder also hurts property values. Fortunately, we have the ability to create laws to punish destructive behavior. Murder is a lot easier to identify and prosecute than blighting. We already have laws against blighting. They don't seem to work. Increasing the incentive to blight is unlikely to make blighting less attractive. > Why would a landlord destroy the value of their own property, harming their own ability to draw rent? You're missing the point. They wouldn't destroy the value of their property; they'd extract value from the land (and neighboring land) to build up the value of their property. Land-value taxes encourage consolidating wealth in improvements to private property that have zero impact on anybody other than the property owner (or tenant). That's the exact opposite of the desired outcome, because it clearly works against the public benefit. There are plenty of areas where this already happens, because there's enough of an incentive for property owners to do this even without skewing the tax code specifically to reward them for this behavior.
  - amigoingtodie 9y ago
    In some areas , it is much easier (profitable) to stuff a bunch of people into Section 8 housing, instead of trying to rent to doctors, lawyers, or software developers (i.e. people that can afford attorneys). I admire the cashflow of trailer parks, and the ease to remove and replace distressed properties.
- nostrademons 9y ago
  What are some concrete activities that would constitute blighting of the land value?
- moultano 9y ago
  How would a landlord go about blighting a community that they don't control?
jpao79 9y ago
In California at least , the property tax bill is already split into two components: 1.) Tax on land value 2.) Tax on improvements (building, landscaping) http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-1... Here's a brief description of how the increase in land value is calculated: "Under this system, when real property is purchased, the county assessor assigns it an assessed value that is equal to its purchase price, or “acquisition value.” Each year thereafter, the property’s assessed value increases by 2 percent or the rate of inflation, whichever is lower." I think what the 2% appreciation cap is attempting to mitigate is if all your tech millionaire IPO neighbors decide to remodel their houses at once, you won't be stuck with a huge tax bill and have to move.
- yonran 9y ago
  What you describe is California’s Proposition 13. It does essentially the opposite of the Land Value Tax that the parent is advocating. The acquisition value system and 1% cap ensure that land investors (rather than local governments) capture the windfalls from the appreciation while they own the property. The split roll for land vs. new construction taxes new construction at a higher rate (rather than the lower 0% under the Land Value Tax) so Proposition 13 discourages (rather than encourages) investing in improvements.
  - jpao79 9y ago
    Agreed. Just highlighting to some degree it exists already and as not a novel untested concept. It just needs refinement. A phased, gradual raising of the 2% cap probably would make sense over a couple of decades. That way homeowners and developers can adequately prepare and build in that rate increase into their economic models. Building lifetimes span multi-decades.
DougWebb 9y ago
So, where exactly does the wealthy landlord get the money to pay the land-value tax? From their own labor? From their savings? From after-tax interest earned on their other investments? Of course not! They're going to raise the rent to cover the additional tax, and if the renter can't afford it screw them; they'll be kicked out and replaced with someone who can. This comes up a lot in discussions involving income inequality. If the proposed solution is "tax the rich", you have to be really careful to tax them in a way that's not trivially easy to pass back onto the less-rich.
- xvedejas 9y ago
  The effect of a tax on land works differently than other taxes do. Because the land value tax will free up supply (which was previously held for speculation), the result could just as easily be that rents drop. This is the entire reason that this tax is attractive, and you are right that without this feature, the tax would not make sense. https://en.m.wikipedia.org/wiki/Land_value_tax#Real_estate_values https://en.m.wikipedia.org/wiki/Land_value_tax#Real_estate_v...
  - DougWebb 9y ago
    That link is talking about the effects an LVT would have on unused land that's being held for appreciation, and land that's being held as an investment. I'm talking about landlords renting property to tenants. Increasing the taxes on the landlord increases their cost, which would force them to raise the rent they charge. This is just like anything else that would raise their costs: higher insurance rates, increased maintenance costs, increased homeowners fees, etc.
    - xvedejas 9y ago
      Those other increases in cost do not simultaneously open up supply, though. When there can be more landlords renting out their properties, prices will fall in response. I agree it is counter-intuitive. "Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay, rather than on landlord expenses, preventing landlords from passing LVT to tenants." https://en.wikipedia.org/wiki/Land_value_tax#Efficiency https://en.wikipedia.org/wiki/Land_value_tax#Efficiency
megaman22 9y ago
I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute. As a landlord, I have a mortgage of $X and taxes of $Y, and insurances, maintenance and other liabilities that total up to $Z, for operating costs on a piece of property. For this to make any sense at all, $Rent >= $X + Y$ + $Z. If you increase the taxes $Y (and this would, realistically, be done more or less uniformly across a town or municipal region, so all properties are going to be in the same boat), all you've done is make me have to charge a correspondingly higher rent. Rounded up to the nearest $25 or $50, because that's how it is always done. Meanwhile all the other owners of rental properties are in the same position. Hooray!
- corpMaverick 9y ago
  > I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute It is an incentive to build. Furthermore, it is an incentive build with higher density. More density and more houses reduces the cost of rent. It also reduces the building and maintaining infrastructure.
- to3m 9y ago
  I think this is "Landlords will pass on all the tax to their tenants": http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-rich-and-hurt-poor.html#1 http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-ri...
yourapostasy 9y ago
I would rather find some mechanism that separates everyone who wants to just earn towards a shelter that they can stick around in when they reach their old age, all into one market, and ring-fence everyone else with a profit motive into their own market where they can duke it out among themselves the real estate game. For example, the capitalization and sophistication of commercial players lets them efficiently and systematically harangue tax assessors into lowering property taxes far below what normal individuals with just their own residential property can accomplish. Those kinds of advantages accrue in many other areas, and are out of reach of individuals due to sheer scaling differences. But it's the individuals that incur lots of collateral damage over the course of a long period. LVT is part of a solution, but I'm still looking for a way to address that scaling differential. I think housing co-ops are onto the start of such a solution, but I'm not convinced in their current form that they are appropriate to use for addressing the scaling issue.
pc86 9y ago
Please explain how this additional tax isn't immediately (at the next least signing) passed on to renters. If I rent out a property and the taxes go up $X, I will raise rent at least 1x.
- gowld 9y ago
  Econ 101 supply and demand. Why haven't you _already_ raised rent $X? Because you love your tenants? If landlords kept down rents out of _charity_, we wouldn't have a rent problem in the first place.
  - panda88888 9y ago
    Except all rental properties in the region would have to pay similar amount of land tax, so they would all raise the rent and the renter would have to choose either pay the higher rent or move to a cheaper area.
    - ryandrake 9y ago
      If all landlords could suddenly raise the rent, why wouldn't they already, regardless of the existence of the land tax?
      - WillPostForFood 9y ago
        No ability or incentive to coordinate - but a land value tax could facilitate it.

to3m 9y ago

Blog rebutting many common arguments against a land value tax: http://kaalvtn.blogspot.co.uk/p/index.html http://kaalvtn.blogspot.co.uk/p/index.html

chimeracoder 9y ago

> This is distinct from a property tax in that it only measures the value of the soil it sits on, so doesn't punish the landlord for improvements. The value of the land itself is almost entirely outside of the landlord's control, it's determined by the community around it. As a result, this is one of the least distortive taxes. When land value is taxed at a higher rate than property value, it creates a perverse incentive for landlords - especially those who don't live in the area in which they own property - to encourage blighting and sabotage the value of the land, while instead reinvesting this money into improvements on the property itself. That concentrates wealth even further in the hands of people who can afford to own these insular properties in otherwise "undesirable" areas. Actively blighting a neighborhood to depress values and make it easier to purchase land for new properties (either on the market or via eminent domain) is already a problem, and one that significantly skews power towards the extremely wealthy and massively-capitalized institutions. Taxing the value of the land separately from the property that sits on it (and at a higher rate) would exacerbate this unbelievably.

gowld 9y ago
How have all the economists missed this obvious point? Murder also hurts property values. Fortunately, we have the ability to create laws to punish destructive behavior. Why would a landlord destroy the value of their own property, harming their own ability to draw rent?
- chimeracoder 9y ago
  > How have all the economists missed this obvious point? They haven't. That's why taxing land value at a higher rate than property values doesn't have support from mainstream economists. > Murder also hurts property values. Fortunately, we have the ability to create laws to punish destructive behavior. Murder is a lot easier to identify and prosecute than blighting. We already have laws against blighting. They don't seem to work. Increasing the incentive to blight is unlikely to make blighting less attractive. > Why would a landlord destroy the value of their own property, harming their own ability to draw rent? You're missing the point. They wouldn't destroy the value of their property; they'd extract value from the land (and neighboring land) to build up the value of their property. Land-value taxes encourage consolidating wealth in improvements to private property that have zero impact on anybody other than the property owner (or tenant). That's the exact opposite of the desired outcome, because it clearly works against the public benefit. There are plenty of areas where this already happens, because there's enough of an incentive for property owners to do this even without skewing the tax code specifically to reward them for this behavior.
- amigoingtodie 9y ago
  In some areas , it is much easier (profitable) to stuff a bunch of people into Section 8 housing, instead of trying to rent to doctors, lawyers, or software developers (i.e. people that can afford attorneys). I admire the cashflow of trailer parks, and the ease to remove and replace distressed properties.
nostrademons 9y ago
What are some concrete activities that would constitute blighting of the land value?
moultano 9y ago
How would a landlord go about blighting a community that they don't control?

jpao79 9y ago

In California at least , the property tax bill is already split into two components: 1.) Tax on land value 2.) Tax on improvements (building, landscaping) http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-1... Here's a brief description of how the increase in land value is calculated: "Under this system, when real property is purchased, the county assessor assigns it an assessed value that is equal to its purchase price, or “acquisition value.” Each year thereafter, the property’s assessed value increases by 2 percent or the rate of inflation, whichever is lower." I think what the 2% appreciation cap is attempting to mitigate is if all your tech millionaire IPO neighbors decide to remodel their houses at once, you won't be stuck with a huge tax bill and have to move.

yonran 9y ago
What you describe is California’s Proposition 13. It does essentially the opposite of the Land Value Tax that the parent is advocating. The acquisition value system and 1% cap ensure that land investors (rather than local governments) capture the windfalls from the appreciation while they own the property. The split roll for land vs. new construction taxes new construction at a higher rate (rather than the lower 0% under the Land Value Tax) so Proposition 13 discourages (rather than encourages) investing in improvements.
- jpao79 9y ago
  Agreed. Just highlighting to some degree it exists already and as not a novel untested concept. It just needs refinement. A phased, gradual raising of the 2% cap probably would make sense over a couple of decades. That way homeowners and developers can adequately prepare and build in that rate increase into their economic models. Building lifetimes span multi-decades.

DougWebb 9y ago

So, where exactly does the wealthy landlord get the money to pay the land-value tax? From their own labor? From their savings? From after-tax interest earned on their other investments? Of course not! They're going to raise the rent to cover the additional tax, and if the renter can't afford it screw them; they'll be kicked out and replaced with someone who can. This comes up a lot in discussions involving income inequality. If the proposed solution is "tax the rich", you have to be really careful to tax them in a way that's not trivially easy to pass back onto the less-rich.

xvedejas 9y ago
The effect of a tax on land works differently than other taxes do. Because the land value tax will free up supply (which was previously held for speculation), the result could just as easily be that rents drop. This is the entire reason that this tax is attractive, and you are right that without this feature, the tax would not make sense. https://en.m.wikipedia.org/wiki/Land_value_tax#Real_estate_values https://en.m.wikipedia.org/wiki/Land_value_tax#Real_estate_v...
- DougWebb 9y ago
  That link is talking about the effects an LVT would have on unused land that's being held for appreciation, and land that's being held as an investment. I'm talking about landlords renting property to tenants. Increasing the taxes on the landlord increases their cost, which would force them to raise the rent they charge. This is just like anything else that would raise their costs: higher insurance rates, increased maintenance costs, increased homeowners fees, etc.
  - xvedejas 9y ago
    Those other increases in cost do not simultaneously open up supply, though. When there can be more landlords renting out their properties, prices will fall in response. I agree it is counter-intuitive. "Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay, rather than on landlord expenses, preventing landlords from passing LVT to tenants." https://en.wikipedia.org/wiki/Land_value_tax#Efficiency https://en.wikipedia.org/wiki/Land_value_tax#Efficiency

megaman22 9y ago

I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute. As a landlord, I have a mortgage of $X and taxes of $Y, and insurances, maintenance and other liabilities that total up to $Z, for operating costs on a piece of property. For this to make any sense at all, $Rent >= $X + Y$ + $Z. If you increase the taxes $Y (and this would, realistically, be done more or less uniformly across a town or municipal region, so all properties are going to be in the same boat), all you've done is make me have to charge a correspondingly higher rent. Rounded up to the nearest $25 or $50, because that's how it is always done. Meanwhile all the other owners of rental properties are in the same position. Hooray!

corpMaverick 9y ago
> I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute It is an incentive to build. Furthermore, it is an incentive build with higher density. More density and more houses reduces the cost of rent. It also reduces the building and maintaining infrastructure.
to3m 9y ago
I think this is "Landlords will pass on all the tax to their tenants": http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-rich-and-hurt-poor.html#1 http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-ri...

yourapostasy 9y ago

I would rather find some mechanism that separates everyone who wants to just earn towards a shelter that they can stick around in when they reach their old age, all into one market, and ring-fence everyone else with a profit motive into their own market where they can duke it out among themselves the real estate game. For example, the capitalization and sophistication of commercial players lets them efficiently and systematically harangue tax assessors into lowering property taxes far below what normal individuals with just their own residential property can accomplish. Those kinds of advantages accrue in many other areas, and are out of reach of individuals due to sheer scaling differences. But it's the individuals that incur lots of collateral damage over the course of a long period. LVT is part of a solution, but I'm still looking for a way to address that scaling differential. I think housing co-ops are onto the start of such a solution, but I'm not convinced in their current form that they are appropriate to use for addressing the scaling issue.

pc86 9y ago

Please explain how this additional tax isn't immediately (at the next least signing) passed on to renters. If I rent out a property and the taxes go up $X, I will raise rent at least 1x.

gowld 9y ago
Econ 101 supply and demand. Why haven't you _already_ raised rent $X? Because you love your tenants? If landlords kept down rents out of _charity_, we wouldn't have a rent problem in the first place.
- panda88888 9y ago
  Except all rental properties in the region would have to pay similar amount of land tax, so they would all raise the rent and the renter would have to choose either pay the higher rent or move to a cheaper area.
  - ryandrake 9y ago
    If all landlords could suddenly raise the rent, why wouldn't they already, regardless of the existence of the land tax?
    - WillPostForFood 9y ago
      No ability or incentive to coordinate - but a land value tax could facilitate it.