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> At the top of an economic cycle, governments are collecting their peak tax revenues — yet even so, many are still running large fiscal deficits and have large

> At the top of an economic cycle, governments are collecting their peak tax revenues — yet even so, many are still running large fiscal deficits and have large existing public debts. They’re also spending more than they ever have before in history. > The LVT is not the same as a property tax, as it does not punish those who put the land to use; it taxes only the land, not the structure built on top of it. I’m not convinced this is that different than what’s happening now. For a $1m house in the Bay Area, only a quarter or a third of that value is the structure. > However, most of all, it is one of the rare taxes that does not diminish economic activity, and in fact stimulates it. How do they arrive at this conclusion? A bakery that’s been around for 100 years finds itself in a hip part of town (which maybe it helped foster), and then has to move out because the only type of business that can support the LVT in the area is luxury apartments. The higher the LVT, the more risk of a monoculture in land usage, not the other way around.

solidsnack9000 6y ago
Governments do, indeed, spend significantly more than they used to. The problem in the Bay Area is simply that taxable value assessed only at sale.
- dragonwriter 6y ago
  > The problem in the Bay Area is simply that tax is not reassessed regularly. No, tax-basis value is assessed annually. However, increases in assessed value are limited to a maximum of 2% per year outside of certain events qualifying for full-value assessment of the property or particular improvements. (And this is statewide, not Bay Area specific).
- fortran77 6y ago
  That's not true. Every year it can be raised 2%.
  - solidsnack9000 6y ago
    Ah, okay -- that I did not know. The effect of the policy over the past decades has still been to allow the value to dramatically increase relative to the taxation.
    - fortran77 6y ago
      > The effect of the policy over the past decades has still been to allow the value to dramatically increase relative to the taxation. No. The problem is they're not building enough housing. Not that taxes aren't high enough.
      - solidsnack9000 6y ago
        No, that's not right. Poor tax policy leads to poor land use.
Ericson2314 6y ago
> For a $1m house in the Bay Area, only a quarter or a third of that value is the structure. So the first problem is zoning, but imagine if zoning is fixed. Now the taller the building is, the smaller the portion of the taxable value derives from the land itself. The fact of the matter is single family suburbia is a scourge, and we need redevelopment not more development. We can subsidize affordable housing, or we can structure the taxes such that the only economical thing to do is massively denser buildings immediately. The latter is better because it is simpler and less subject to regulatory capture.
- AnthonyMouse 6y ago
  > So the first problem is zoning, but imagine if zoning is fixed. Now the taller the building is, the smaller the portion of the taxable value derives from the land itself. Which is sort of the problem, right? You have an area which is, say, two story buildings, in an area where you really need an average of three story buildings to satisfy local demand. Implement LVT and everyone gets the bright idea to build twelve story buildings, because why wouldn't they? Three story buildings would have four times the tax per unit. But then you get the opposite problem. Real estate prices crash, because there are suddenly twelve story buildings going up everywhere and the prices need to fall to the level that building more of them isn't viable even against the tax advantage. Which is well before you're saturated with tall buildings. But now you have a thousand plots of land and 10% of them have new tall buildings while 90% have existing single family homes. Now the owners of the single family homes are paying a disproportionate amount of the taxes. They abandon their properties, which have already declined in value, because the tax is more than the newly lowered cost of buying space in one of the tall buildings. The government is now receiving no tax from 90% of the lots because they've been abandoned, so the land tax amount has to increase by ten fold per plot. But that makes it profitable to build 25 story buildings instead of twelve story ones, to amortize the tax over more units, and the cycle repeats. It seems obvious that this only works if the amount of the land tax isn't large enough to cause these behavioral changes.
  - CyberDildonics 6y ago
    What are you basing your predictions here on? Do you have an example where this has happened?
kevinpet 6y ago
A charming bakery in a now expensive part of town is in fact an economic inefficiency. You can argue against it on non-economic grounds, but living in a luxury apartment is a good that people consume, just like madeleines.
- paconbork 6y ago
  Charming bakery with five stories of apartments above it > charming bakery by itself
  - throwaway201103 6y ago
    Bakery in a retail slot in the ground floor of a 5-story apartment building is by definition not charming. It's cookie-cutter (pardon the pun). It's the sort of place that opens, struggles for nine months, and goes bankrupt. We see so much about wanting "walkable" neighborhoods where we have shops and markets all steps away from our door. Well, if the land is so valuable that it will only support dense apartment towers, small businesses like that will not be able to afford to be close by.
    - Ericson2314 6y ago
      77 Rue Galande, 75005 Paris, France Tell me that's not charming as hell.
    - OldHand2018 6y ago
      The idea behind the LVT is that the tax is based on the best and highest use of the land. But zoning is a component. If the market is begging for a 100-floor tower on a piece of land, but the zoning says you can only build a single house, the LVT would be based on a house sitting there. So, if you had a historic or otherwise significant structure, you’re going to have to downzone the land to prevent the loss of the structure. Naturally, that’s going to be abused. Connected people are going to get their property zoned for smaller structures, while unconnected people will get their property zoned for huge structures.
    - paconbork 6y ago
paconbork 6y ago
It's not too different to what's happening now in low density neighborhoods because single-family houses are not an efficient use of million-dollar lots. In the current system, an empty lot is taxed less than a house, which is taxed less than say a small apartment building. IMO this is completely backwards: the tax code should reward productive usage of limited resources.

solidsnack9000 6y ago

Governments do, indeed, spend significantly more than they used to. The problem in the Bay Area is simply that taxable value assessed only at sale.

dragonwriter 6y ago
> The problem in the Bay Area is simply that tax is not reassessed regularly. No, tax-basis value is assessed annually. However, increases in assessed value are limited to a maximum of 2% per year outside of certain events qualifying for full-value assessment of the property or particular improvements. (And this is statewide, not Bay Area specific).
fortran77 6y ago
That's not true. Every year it can be raised 2%.
- solidsnack9000 6y ago
  Ah, okay -- that I did not know. The effect of the policy over the past decades has still been to allow the value to dramatically increase relative to the taxation.
  - fortran77 6y ago
    > The effect of the policy over the past decades has still been to allow the value to dramatically increase relative to the taxation. No. The problem is they're not building enough housing. Not that taxes aren't high enough.
    - solidsnack9000 6y ago
      No, that's not right. Poor tax policy leads to poor land use.

Ericson2314 6y ago

> For a $1m house in the Bay Area, only a quarter or a third of that value is the structure. So the first problem is zoning, but imagine if zoning is fixed. Now the taller the building is, the smaller the portion of the taxable value derives from the land itself. The fact of the matter is single family suburbia is a scourge, and we need redevelopment not more development. We can subsidize affordable housing, or we can structure the taxes such that the only economical thing to do is massively denser buildings immediately. The latter is better because it is simpler and less subject to regulatory capture.

AnthonyMouse 6y ago
> So the first problem is zoning, but imagine if zoning is fixed. Now the taller the building is, the smaller the portion of the taxable value derives from the land itself. Which is sort of the problem, right? You have an area which is, say, two story buildings, in an area where you really need an average of three story buildings to satisfy local demand. Implement LVT and everyone gets the bright idea to build twelve story buildings, because why wouldn't they? Three story buildings would have four times the tax per unit. But then you get the opposite problem. Real estate prices crash, because there are suddenly twelve story buildings going up everywhere and the prices need to fall to the level that building more of them isn't viable even against the tax advantage. Which is well before you're saturated with tall buildings. But now you have a thousand plots of land and 10% of them have new tall buildings while 90% have existing single family homes. Now the owners of the single family homes are paying a disproportionate amount of the taxes. They abandon their properties, which have already declined in value, because the tax is more than the newly lowered cost of buying space in one of the tall buildings. The government is now receiving no tax from 90% of the lots because they've been abandoned, so the land tax amount has to increase by ten fold per plot. But that makes it profitable to build 25 story buildings instead of twelve story ones, to amortize the tax over more units, and the cycle repeats. It seems obvious that this only works if the amount of the land tax isn't large enough to cause these behavioral changes.
- CyberDildonics 6y ago
  What are you basing your predictions here on? Do you have an example where this has happened?

kevinpet 6y ago

A charming bakery in a now expensive part of town is in fact an economic inefficiency. You can argue against it on non-economic grounds, but living in a luxury apartment is a good that people consume, just like madeleines.

paconbork 6y ago
Charming bakery with five stories of apartments above it > charming bakery by itself
- throwaway201103 6y ago
  Bakery in a retail slot in the ground floor of a 5-story apartment building is by definition not charming. It's cookie-cutter (pardon the pun). It's the sort of place that opens, struggles for nine months, and goes bankrupt. We see so much about wanting "walkable" neighborhoods where we have shops and markets all steps away from our door. Well, if the land is so valuable that it will only support dense apartment towers, small businesses like that will not be able to afford to be close by.
  - Ericson2314 6y ago
    77 Rue Galande, 75005 Paris, France Tell me that's not charming as hell.
  - OldHand2018 6y ago
    The idea behind the LVT is that the tax is based on the best and highest use of the land. But zoning is a component. If the market is begging for a 100-floor tower on a piece of land, but the zoning says you can only build a single house, the LVT would be based on a house sitting there. So, if you had a historic or otherwise significant structure, you’re going to have to downzone the land to prevent the loss of the structure. Naturally, that’s going to be abused. Connected people are going to get their property zoned for smaller structures, while unconnected people will get their property zoned for huge structures.
  - paconbork 6y ago

paconbork 6y ago

It's not too different to what's happening now in low density neighborhoods because single-family houses are not an efficient use of million-dollar lots. In the current system, an empty lot is taxed less than a house, which is taxed less than say a small apartment building. IMO this is completely backwards: the tax code should reward productive usage of limited resources.