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What is the downside to a land value tax? Or put another way, how can you fairly assess taxes based on the value of the land? It seems absurd that a vacant par

What is the downside to a land value tax? Or put another way, how can you fairly assess taxes based on the value of the land? It seems absurd that a vacant parking lot pays basically nothing in property taxes while a hotel of the same size pays tens of thousand a month, but both take up the same amount of space and have the same potential. This kind of tax would certainly lead to better utilization.

zzzzzzzza 8y ago
most straight forward way is to buy a lot demolish everything on it, then sell it on the open market; voila you have a price point, do it a couple time and you can create a gradient Actual valuation methods used in real world by countries like Taiwan, Estonia, and Singapore to levy lvt (all countries with 90% plus home ownership) are more sophisticated than that though
closeparen 8y ago
Land value tax is all about driving each parcel towards its highest-value, most economically rational use. City planning is all about cultivating low-value, (locally) irrational uses. So think about all the stuff that exists because planners kneecap its better-funded competition: art galleries, theaters, cute mom & pop retail, auto service & repair, manufacturing jobs, etc. Would you miss it? Could the city council get away with losing it? LVT says the state should not only stop protecting these things, it should do a 180 and actively kill the uses by levying taxes they can't afford. Rather than slowing/blocking the transition to condos and formula retail, accelerate it. In principle, the new denser buildings could have space for the old low-value uses, but new construction is expensive. The new buildings would have to age a while before those marginal uses could afford them, and in the meantime the tenant organizations would all die. Maybe this could be averted using some central-planning scheme, maybe not. But you can imagine how the electorate might not want to risk it. The trends LVT would tend to accelerate are the ones most residents lament. I think we should allow sites that are already dead or are transitioning voluntarily to drastically increase density. Letting owners do this forces tenants' hands, which is a sad tradeoff (and to the left-NIMBYs, a dealbreaker). LVT goes even further and forces owners' hands, which I'm less wild about.
- klipt 8y ago
  > art galleries, theaters, cute mom & pop retail, auto service & repair, manufacturing jobs > LVT says the state should not only stop protecting these things, it should do a 180 and actively kill the uses by levying taxes they can't afford. Do all of those things have to be at ground level? Remember space is not taxed (the marginal tax on building up more space vertically is 0), only land. If a theater is on the 5th floor of a larger building, does it stop being a theater?
  - closeparen 8y ago
    Over the long run, densification should result in more and cheaper space, but it is not clear whether or how the theater would get that new lease at a rate it can afford (new-construction premium counteracting land efficiency) and how it would survive the transition period. The risk might be worth the reward, but reasonable people could also believe that it isn’t. So little is known about how to create these nice little small-business districts, or whether it’s even possible in this day and age, that there is a strong current towards preserving the ones we have.
    - klipt 8y ago
      > but it is not clear whether or how the theater would get that new lease at a rate it can afford Can any theater afford a ground level space at current San Francisco prices? If a theater can only afford to be in San Francisco because of Prop 13 then we should recognize that as a form of taxpayer subsidy for the theater. If there is the political will for taxpayers to subsidize theaters (why not, art is nice), then why not subsidize a theater's lease on the 5th floor of some building, instead of preventing building up by subsidizing a one storey theater on the ground floor? But I think there's a good argument to be made that the taxpayer subsidy process should be more transparent and less arbitrary than "whichever theater bought its land longer ago gets a bigger subsidy".
- Mark-Wadsworth 8y ago
  Wrong! http://markwadsworth.blogspot.com/2019/05/killer-arguments-against-lvt-not-456.html http://markwadsworth.blogspot.com/2019/05/killer-arguments-a...
cascom 8y ago
Emotionally loaded example: woman buys a modest home in the 1970’s in a poor neighborhood from her savings working at the local packaging plant, fast forward to today she is living on a fixed income in a neighborhood that has gentrified around her, with many developers and yuppies moving in and building new homes and apartments. Your proposal would force this woman from her home as her land value tax rose (As she has no ability to pay for this increasing tax burden)
- snarf21 8y ago
  Genuinely curious, I thought the purpose of LVT was to split the current valuation into land and improvements and move most of it to the land. It is not intended to increase taxes on land that is already being used effectively. I think the bigger issue with LVT is figuring out what the right values are for taxing land vs improvements. As a first pass, I would aim to keep taxes the same just split it more like 80 (land) and 20 (improvements). This at least forces undeveloped property to be turned into a money making project very quickly.
- bunderbunder 8y ago
  There was a proposal in Chicago to put a cap on how quickly your taxes could go up relative to what you originally paid for your house. The motive was explicitly to protect homeowners in rapidly gentrifying neighborhoods. I assume there would be limited capacity for abuse just so long as the break only applies to your primary residence.
  - pcwalton 8y ago
    That's Prop 13, and it's one of the worst public policies in the United States. The tax break wouldn't be so bad if it only applied to primary residence, was means-tested, and couldn't be passed down to children. Regardless, though, homeowners tend to be more well-off than tenants; they shouldn't be receiving tax breaks in the first place.
  - klipt 8y ago
    California did that 40 years ago and just look at how affordable California housing is now. Also public schools' ratings have tanked due to shrinking property tax revenue. Prop 13 empowers NIMBYs to vote to kill new construction, strangling supply and pushing prices up, without facing any of the consequences of those rising prices.
Spooky23 8y ago
The downside is that evaluating potential versus using sales history or economic revenue is inherently subjective and ultimately disrespects property rights. Ultimately, why should the owner of a vacant lot be compelled to sell or develop on the basis of the potential value? And who decides the potential value? Should a 10 story hotel be taxed like a 100 story office tower? Should my $200k home be taxed like half of a 30 unit apartment block?
- cletus 8y ago
  Simple: unused land and unoccupied buildings ultimately kills the cities that make that land valuable in the first place. This is a classic case of a series of short-term logical decisions ultimately benefitting no one. Cities are (or should be) for the people in them. Not simply a vehicle for the ultra-wealthy to park wealth.
  - Spooky23 8y ago
    That's not compatible with how the law or principles of American governance work. Your home is your castle. Ultra-wealthy aren't laundering money in real estate because property taxes are too low. The situation we have today is a obvious result of fiscal policy made in the 80s, that was predicted then.
- kthejoker2 8y ago
  I mean, Henry George worked most of this out 150 years ago. There are entire economics programs dedicated to property and land value. Highly recommend you read Progress and Poverty, it's still very relevant today.
- speedplane 8y ago
  > The downside is that evaluating potential versus using sales history or economic revenue is inherently subjective and ultimately disrespects property rights. Ultimately, why should the owner of a vacant lot be compelled to sell or develop on the basis of the potential value? Property rights are important, but they aren't the end-all-be-all. Eminent domain, blight laws, zoning laws, tenant rights, and a variety of other property-related laws arguably disrespect property rights, but they have been a staple for hundreds of years. Property rights were never some sacred ground.

zzzzzzzza 8y ago

most straight forward way is to buy a lot demolish everything on it, then sell it on the open market; voila you have a price point, do it a couple time and you can create a gradient Actual valuation methods used in real world by countries like Taiwan, Estonia, and Singapore to levy lvt (all countries with 90% plus home ownership) are more sophisticated than that though

closeparen 8y ago

Land value tax is all about driving each parcel towards its highest-value, most economically rational use. City planning is all about cultivating low-value, (locally) irrational uses. So think about all the stuff that exists because planners kneecap its better-funded competition: art galleries, theaters, cute mom & pop retail, auto service & repair, manufacturing jobs, etc. Would you miss it? Could the city council get away with losing it? LVT says the state should not only stop protecting these things, it should do a 180 and actively kill the uses by levying taxes they can't afford. Rather than slowing/blocking the transition to condos and formula retail, accelerate it. In principle, the new denser buildings could have space for the old low-value uses, but new construction is expensive. The new buildings would have to age a while before those marginal uses could afford them, and in the meantime the tenant organizations would all die. Maybe this could be averted using some central-planning scheme, maybe not. But you can imagine how the electorate might not want to risk it. The trends LVT would tend to accelerate are the ones most residents lament. I think we should allow sites that are already dead or are transitioning voluntarily to drastically increase density. Letting owners do this forces tenants' hands, which is a sad tradeoff (and to the left-NIMBYs, a dealbreaker). LVT goes even further and forces owners' hands, which I'm less wild about.

klipt 8y ago
> art galleries, theaters, cute mom & pop retail, auto service & repair, manufacturing jobs > LVT says the state should not only stop protecting these things, it should do a 180 and actively kill the uses by levying taxes they can't afford. Do all of those things have to be at ground level? Remember space is not taxed (the marginal tax on building up more space vertically is 0), only land. If a theater is on the 5th floor of a larger building, does it stop being a theater?
- closeparen 8y ago
  Over the long run, densification should result in more and cheaper space, but it is not clear whether or how the theater would get that new lease at a rate it can afford (new-construction premium counteracting land efficiency) and how it would survive the transition period. The risk might be worth the reward, but reasonable people could also believe that it isn’t. So little is known about how to create these nice little small-business districts, or whether it’s even possible in this day and age, that there is a strong current towards preserving the ones we have.
  - klipt 8y ago
    > but it is not clear whether or how the theater would get that new lease at a rate it can afford Can any theater afford a ground level space at current San Francisco prices? If a theater can only afford to be in San Francisco because of Prop 13 then we should recognize that as a form of taxpayer subsidy for the theater. If there is the political will for taxpayers to subsidize theaters (why not, art is nice), then why not subsidize a theater's lease on the 5th floor of some building, instead of preventing building up by subsidizing a one storey theater on the ground floor? But I think there's a good argument to be made that the taxpayer subsidy process should be more transparent and less arbitrary than "whichever theater bought its land longer ago gets a bigger subsidy".
Mark-Wadsworth 8y ago
Wrong! http://markwadsworth.blogspot.com/2019/05/killer-arguments-against-lvt-not-456.html http://markwadsworth.blogspot.com/2019/05/killer-arguments-a...

cascom 8y ago

Emotionally loaded example: woman buys a modest home in the 1970’s in a poor neighborhood from her savings working at the local packaging plant, fast forward to today she is living on a fixed income in a neighborhood that has gentrified around her, with many developers and yuppies moving in and building new homes and apartments. Your proposal would force this woman from her home as her land value tax rose (As she has no ability to pay for this increasing tax burden)

snarf21 8y ago
Genuinely curious, I thought the purpose of LVT was to split the current valuation into land and improvements and move most of it to the land. It is not intended to increase taxes on land that is already being used effectively. I think the bigger issue with LVT is figuring out what the right values are for taxing land vs improvements. As a first pass, I would aim to keep taxes the same just split it more like 80 (land) and 20 (improvements). This at least forces undeveloped property to be turned into a money making project very quickly.
bunderbunder 8y ago
There was a proposal in Chicago to put a cap on how quickly your taxes could go up relative to what you originally paid for your house. The motive was explicitly to protect homeowners in rapidly gentrifying neighborhoods. I assume there would be limited capacity for abuse just so long as the break only applies to your primary residence.
- pcwalton 8y ago
  That's Prop 13, and it's one of the worst public policies in the United States. The tax break wouldn't be so bad if it only applied to primary residence, was means-tested, and couldn't be passed down to children. Regardless, though, homeowners tend to be more well-off than tenants; they shouldn't be receiving tax breaks in the first place.
- klipt 8y ago
  California did that 40 years ago and just look at how affordable California housing is now. Also public schools' ratings have tanked due to shrinking property tax revenue. Prop 13 empowers NIMBYs to vote to kill new construction, strangling supply and pushing prices up, without facing any of the consequences of those rising prices.

Spooky23 8y ago

The downside is that evaluating potential versus using sales history or economic revenue is inherently subjective and ultimately disrespects property rights. Ultimately, why should the owner of a vacant lot be compelled to sell or develop on the basis of the potential value? And who decides the potential value? Should a 10 story hotel be taxed like a 100 story office tower? Should my $200k home be taxed like half of a 30 unit apartment block?

cletus 8y ago
Simple: unused land and unoccupied buildings ultimately kills the cities that make that land valuable in the first place. This is a classic case of a series of short-term logical decisions ultimately benefitting no one. Cities are (or should be) for the people in them. Not simply a vehicle for the ultra-wealthy to park wealth.
- Spooky23 8y ago
  That's not compatible with how the law or principles of American governance work. Your home is your castle. Ultra-wealthy aren't laundering money in real estate because property taxes are too low. The situation we have today is a obvious result of fiscal policy made in the 80s, that was predicted then.
kthejoker2 8y ago
I mean, Henry George worked most of this out 150 years ago. There are entire economics programs dedicated to property and land value. Highly recommend you read Progress and Poverty, it's still very relevant today.
speedplane 8y ago
> The downside is that evaluating potential versus using sales history or economic revenue is inherently subjective and ultimately disrespects property rights. Ultimately, why should the owner of a vacant lot be compelled to sell or develop on the basis of the potential value? Property rights are important, but they aren't the end-all-be-all. Eminent domain, blight laws, zoning laws, tenant rights, and a variety of other property-related laws arguably disrespect property rights, but they have been a staple for hundreds of years. Property rights were never some sacred ground.