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Like all progressive taxation, the property tax is not solely a fee for government benefits received by the taxpayer. The property tax is a tool to reduce inequ

by yonran 7y ago

Like all progressive taxation, the property tax is not solely a fee for government benefits received by the taxpayer. The property tax is a tool to reduce inequality—especially when it is applied to gains in land value. If we did not have property taxes (or when we protect existing landowners regardless of land rent increases under Proposition 13), then increases in land value from increased population would be entirely a zero-sum transfer from the new renters or buyers to the old owner, resulting in greater wealth inequality, since unlike capital the supply of land at a particular location is purely inelastic (see the first 4 chapters of Rethinking the Economics of Land and Housing for more https://www.amazon.com/Rethinking-Economics-Land-Housing-Ryan-Collins/dp/1786991187 https://www.amazon.com/Rethinking-Economics-Land-Housing-Rya...).

ericmay 7y ago
You’ll have to summarize any key points from the book, since I don’t own a copy. You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go. Maybe some small portion goes to the state, but I believe all go directly toward local projects, firefighters, police, and schools. Further, I’m not sure what I’m supposed to do if my home value doubles just because of natural reasons. The fact that the property has increased in value is an unrealized gain, are we sure it makes sense to increase property taxes? If my income stays the same, and as you say, property taxes is a progressive tax to reduce inequality, what more income do I have to give?
- yonran 7y ago
  > You’ll have to summarize any key points from the book, since I don’t own a copy. The first few chapters of Rethinking the Economics of Land and Housing describe the distinction between competitive capital (whose price signals the economy to create more) and land (which cannot be created) and thus why they should be taxed differently. I think it is mostly based on this essay by Mason Gaffney: “Neo-classical Economics as a Stratagem against Henry George” (http://masongaffney.org/publications/K1Neo-classical_Stratagem.CV.pdf http://masongaffney.org/publications/K1Neo-classical_Stratag...) > You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go Broadly speaking, progressive taxation is all about taxing any income that is above and beyond what the average wage-earner earns from wages and competitive capital, and using it to fund services that are used by everybody. Virtually everyone has their own labor, whereas income from ownership of natural resources and monopolies is concentrated, so taxation of income above and beyond wages and interest reduces inequality. Increases in land rent are unearned income that are not due to the owner’s wages and do not incentivize the creation of capital, so it is fair game to tax it as part of a progressive income tax system. If we don’t tax it using property taxes, then land value increases only become a windfall to the owner, leading to greater wealth inequality. > Further, I’m not sure what I’m supposed to do if my home value doubles just because of natural reasons The subject of this article is California’s ”severe shortage of houses.” What you are supposed to do in response to the price signal is expand the building so that more people can live on your lot.
- cactus2093 7y ago
  > if my home value doubles just because of natural reasons. There's a lot to unpack with just that. Decades of aggressive downzoning and increasing regulatory hurdles to make building more difficult & costly, is not a natural reason (even if it is the status quo). Just as an analogy, that would be kind of like saying the tens of thousands of automobile deaths per year in the US are deaths from natural causes, since it's a status quo that we don't even blink twice at anymore. You're arguing that your lifestyle has not increased just because your home value increased. It definitely has, basically by definition, now you live in a more expensive house and more desireable location. If we were to itemize the additional value you're getting, the big line item is the cost of keeping other people out of the neighborhood and keeping the density low. 30 years ago that was pretty cheap, now that is an extreme luxury that you are getting. Not to mention other tangible benefits, like access to home equity credit or the ability to sell and move to a much bigger or fancier house almost anywhere else in the country. Just because you aren't going to exercise your ability to do that doesn't mean you aren't getting the value from having that flexibility. This seems to really get at one of the most fundamental things driving NIMBYism, that people's expectation is if they buy a house they have also bought the right to freeze time in their immediate vicinity and remove themselves from the continually evolving outside world. So if they don't perceive that their lifestyle has doubled in value, they're free to just decide that it hasn't and carry on living and paying property tax as if it hasn't.
  - ericmay 7y ago
    To be clear (and this is probably my fault) when I said natural reasons I was thinking along the lines of naturally occurring economic reasons. For example, if people move to my town that will drive property prices. On an individual level there isn’t too much I can do. Maybe I vote to restrict immigration or enact anti-growth policies such as a maximum limit on children. Maybe I sell my home to a developer who turns it into a mall or a 5 story apartment building. Many reasonable courses of action here. By the way, we don’t seem to have much of a problem with prices decreasing, even if that causes a larger financial impact (if you buy a home for $300,000 and policies out of your voting control cause you to lose value, you’re just screwed with no recourse). I don’t buy for a second though, that if your home value doubles that your lifestyle doubles. My mortgage payment and neighborhood are exactly the same. It can certainly have a positive impact, but it’s unrealized. Largely I think people are too quick to focus on demonizing the NIMBY, without really considering the full scope. What if people in the state legislatures vote for something that increases my home value and I vote, write reps, and do anything a person has a reasonable capacity to do. Now my taxes should double or triple? And if I can’t afford it you force me out of my house, away from friends and family? Life isn’t fair I guess? But then people can’t get upset if people go and vote themselves Prop 13 or to defund affordable housing. It’s in their self-interest. Economics is hard. I don’t know the right answer, but as a homeowner in the Great Lakes Region, I feel more sympathy toward other home owners than some here may do.

by yonran 7y ago

ericmay 7y ago

You’ll have to summarize any key points from the book, since I don’t own a copy. You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go. Maybe some small portion goes to the state, but I believe all go directly toward local projects, firefighters, police, and schools. Further, I’m not sure what I’m supposed to do if my home value doubles just because of natural reasons. The fact that the property has increased in value is an unrealized gain, are we sure it makes sense to increase property taxes? If my income stays the same, and as you say, property taxes is a progressive tax to reduce inequality, what more income do I have to give?

yonran 7y ago
> You’ll have to summarize any key points from the book, since I don’t own a copy. The first few chapters of Rethinking the Economics of Land and Housing describe the distinction between competitive capital (whose price signals the economy to create more) and land (which cannot be created) and thus why they should be taxed differently. I think it is mostly based on this essay by Mason Gaffney: “Neo-classical Economics as a Stratagem against Henry George” (http://masongaffney.org/publications/K1Neo-classical_Stratagem.CV.pdf http://masongaffney.org/publications/K1Neo-classical_Stratag...) > You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go Broadly speaking, progressive taxation is all about taxing any income that is above and beyond what the average wage-earner earns from wages and competitive capital, and using it to fund services that are used by everybody. Virtually everyone has their own labor, whereas income from ownership of natural resources and monopolies is concentrated, so taxation of income above and beyond wages and interest reduces inequality. Increases in land rent are unearned income that are not due to the owner’s wages and do not incentivize the creation of capital, so it is fair game to tax it as part of a progressive income tax system. If we don’t tax it using property taxes, then land value increases only become a windfall to the owner, leading to greater wealth inequality. > Further, I’m not sure what I’m supposed to do if my home value doubles just because of natural reasons The subject of this article is California’s ”severe shortage of houses.” What you are supposed to do in response to the price signal is expand the building so that more people can live on your lot.
cactus2093 7y ago
> if my home value doubles just because of natural reasons. There's a lot to unpack with just that. Decades of aggressive downzoning and increasing regulatory hurdles to make building more difficult & costly, is not a natural reason (even if it is the status quo). Just as an analogy, that would be kind of like saying the tens of thousands of automobile deaths per year in the US are deaths from natural causes, since it's a status quo that we don't even blink twice at anymore. You're arguing that your lifestyle has not increased just because your home value increased. It definitely has, basically by definition, now you live in a more expensive house and more desireable location. If we were to itemize the additional value you're getting, the big line item is the cost of keeping other people out of the neighborhood and keeping the density low. 30 years ago that was pretty cheap, now that is an extreme luxury that you are getting. Not to mention other tangible benefits, like access to home equity credit or the ability to sell and move to a much bigger or fancier house almost anywhere else in the country. Just because you aren't going to exercise your ability to do that doesn't mean you aren't getting the value from having that flexibility. This seems to really get at one of the most fundamental things driving NIMBYism, that people's expectation is if they buy a house they have also bought the right to freeze time in their immediate vicinity and remove themselves from the continually evolving outside world. So if they don't perceive that their lifestyle has doubled in value, they're free to just decide that it hasn't and carry on living and paying property tax as if it hasn't.
- ericmay 7y ago
  To be clear (and this is probably my fault) when I said natural reasons I was thinking along the lines of naturally occurring economic reasons. For example, if people move to my town that will drive property prices. On an individual level there isn’t too much I can do. Maybe I vote to restrict immigration or enact anti-growth policies such as a maximum limit on children. Maybe I sell my home to a developer who turns it into a mall or a 5 story apartment building. Many reasonable courses of action here. By the way, we don’t seem to have much of a problem with prices decreasing, even if that causes a larger financial impact (if you buy a home for $300,000 and policies out of your voting control cause you to lose value, you’re just screwed with no recourse). I don’t buy for a second though, that if your home value doubles that your lifestyle doubles. My mortgage payment and neighborhood are exactly the same. It can certainly have a positive impact, but it’s unrealized. Largely I think people are too quick to focus on demonizing the NIMBY, without really considering the full scope. What if people in the state legislatures vote for something that increases my home value and I vote, write reps, and do anything a person has a reasonable capacity to do. Now my taxes should double or triple? And if I can’t afford it you force me out of my house, away from friends and family? Life isn’t fair I guess? But then people can’t get upset if people go and vote themselves Prop 13 or to defund affordable housing. It’s in their self-interest. Economics is hard. I don’t know the right answer, but as a homeowner in the Great Lakes Region, I feel more sympathy toward other home owners than some here may do.