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Can someone explain how current property taxes don't cover this already? Aren't you taxed relative to the value of the property which is both the land and build

Can someone explain how current property taxes don't cover this already? Aren't you taxed relative to the value of the property which is both the land and buildings combined? When my parents owned undeveloped land they still paid taxes. They were still disincentived from holding land indefinitely without using it.

Simon_says 9y ago
Property taxes tax the value of land plus buildings. I think the argument is that taxing only the value of the land aligns incentives a bit better, since it encourages the most profitable use of the land.
o_nate 9y ago
The problem is if you tax both the land & the buildings, you are discouraging development on the land. A pure land tax avoids that problem. It may be a subtle difference but if you are looking to increase land tax rates above current levels you want to minimize disruption to economic activity.
- jpao79 9y ago
  On the flip side, a large 20 story building consisting of apartments, office space and retail places way more demand on terms of city services (i.e. police, fire, transportation, education and other social services, etc.) than an empty lot so it seems to make sense to tax both land value and building value as it is currently done in many places (including California).
ashark 9y ago
Property taxes also tax improvements to (and structures on) the land itself. Land value tax does not. So, an empty acre of land across the street from Central Park (I know, I know, but pretend it exists) is taxed the same, under an LVT, as that same acre sitting under a big mixed-use apartment/retail building. The building itself isn't taxed (though its presence will likely have a small effect on the overall rate in the area, provided it acts to increase the value of surrounding land).
jellicle 9y ago
The driving force behind this idea is a tax cut for people who own large buildings. "No, my land at 5th Avenue and 42nd St in Manhattan is not valuable; all the value is in the building, you see." "Okay, we accept your argument - your property taxes are now $12.94. We accept cash." Introduces confusion into a system that otherwise can't get too out of whack; after all, any arms-length sale of a property gets you a darn good idea of how much it is worth for taxation purposes. But since land is not usually sold separate from the buildings on it, an LVT allows perpetual divergence, and in the end you'll have ultra-valuable properties whose worth is, supposedly, all in the building and thus not taxed at all.
- xyzzyz 9y ago
  You can easily estimate the value of the land by using current methods of estimating the value of land + improvements, and subtracting costs of building improvements. Estimating costs of building is not very hard — building companies’ business often depends on getting an estimate right.
  - EddieRingle 9y ago
    Not to mention that in most (all?) places, such as my house here in Arkansas, the property is regularly assessed by the county and broken down between the land assessment and the improvements assessment.
  - jellicle 9y ago
    Of course it's possible. No one said it wasn't. I said it will be gamed. Which it will. Sell the land under your 90-story building to an offshore trust in the Caymans for $1, now you have a firm data point that the land is worth exactly 1 dollar. What's the taxation authority going to do with that? The point is to lower property taxes on the rich, raise them on the poor. LVT will have that effect, and that's the primary intent of most backers. In developed cities, the taxable property base will shift heavily from the city center toward the outskirts of the city. Easy way to approach thinking about it: "large commercial buildings should be exempted from property tax, but as the city still needs funding, that lost revenue will be made up by raising everyone else's property taxes". It's a straight subsidy from the edges of the city to the center.
natrius 9y ago
The part that people tiptoe around is the goal: a tax rate high enough that owning land leads to near-zero returns. Only the structures would be an investment. Land ownership would be biased towards the owners who can serve the most of our needs with the land, which would end our urban crisis.

Simon_says 9y ago

Property taxes tax the value of land plus buildings. I think the argument is that taxing only the value of the land aligns incentives a bit better, since it encourages the most profitable use of the land.

o_nate 9y ago

The problem is if you tax both the land & the buildings, you are discouraging development on the land. A pure land tax avoids that problem. It may be a subtle difference but if you are looking to increase land tax rates above current levels you want to minimize disruption to economic activity.

jpao79 9y ago
On the flip side, a large 20 story building consisting of apartments, office space and retail places way more demand on terms of city services (i.e. police, fire, transportation, education and other social services, etc.) than an empty lot so it seems to make sense to tax both land value and building value as it is currently done in many places (including California).

ashark 9y ago

Property taxes also tax improvements to (and structures on) the land itself. Land value tax does not. So, an empty acre of land across the street from Central Park (I know, I know, but pretend it exists) is taxed the same, under an LVT, as that same acre sitting under a big mixed-use apartment/retail building. The building itself isn't taxed (though its presence will likely have a small effect on the overall rate in the area, provided it acts to increase the value of surrounding land).

jellicle 9y ago

The driving force behind this idea is a tax cut for people who own large buildings. "No, my land at 5th Avenue and 42nd St in Manhattan is not valuable; all the value is in the building, you see." "Okay, we accept your argument - your property taxes are now $12.94. We accept cash." Introduces confusion into a system that otherwise can't get too out of whack; after all, any arms-length sale of a property gets you a darn good idea of how much it is worth for taxation purposes. But since land is not usually sold separate from the buildings on it, an LVT allows perpetual divergence, and in the end you'll have ultra-valuable properties whose worth is, supposedly, all in the building and thus not taxed at all.

xyzzyz 9y ago
You can easily estimate the value of the land by using current methods of estimating the value of land + improvements, and subtracting costs of building improvements. Estimating costs of building is not very hard — building companies’ business often depends on getting an estimate right.
- EddieRingle 9y ago
  Not to mention that in most (all?) places, such as my house here in Arkansas, the property is regularly assessed by the county and broken down between the land assessment and the improvements assessment.
- jellicle 9y ago
  Of course it's possible. No one said it wasn't. I said it will be gamed. Which it will. Sell the land under your 90-story building to an offshore trust in the Caymans for $1, now you have a firm data point that the land is worth exactly 1 dollar. What's the taxation authority going to do with that? The point is to lower property taxes on the rich, raise them on the poor. LVT will have that effect, and that's the primary intent of most backers. In developed cities, the taxable property base will shift heavily from the city center toward the outskirts of the city. Easy way to approach thinking about it: "large commercial buildings should be exempted from property tax, but as the city still needs funding, that lost revenue will be made up by raising everyone else's property taxes". It's a straight subsidy from the edges of the city to the center.

natrius 9y ago

The part that people tiptoe around is the goal: a tax rate high enough that owning land leads to near-zero returns. Only the structures would be an investment. Land ownership would be biased towards the owners who can serve the most of our needs with the land, which would end our urban crisis.