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I find I really struggle to believe that a land value tax is progressive. It seems to me that if you are ten times as rich as me then you will use less than ten

I find I really struggle to believe that a land value tax is progressive. It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do, making the tax regressive rather than progressive (the case if you would use more than ten times the land value.) While big farms may pay a lot of the tax, that gets pushed to food prices which will have a proportionally larger affect on the poor, even if wealthier people eat more land-intensive foods. A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. It seems the only way for the rich to pay a lot more land tax is for them to go back to having large country estates (that mostly aren’t farmed) which doesn’t seem to be the way the rich are going—most people get and stay rich through businesses which, in western countries, tend to provide services and operate out of a small amount of land rather than farms or mines which exploit their monopoly on land.

harbergertaxguy 6y ago
Harberger tax gets around this problem.
brutusborn 6y ago
Where I am from the majority of rich people are heavily invested in high value land. There have been many studies asssessing the question you describe. I will try to find them when I get some time, I think you will be surprised.
bawolff 6y ago
Does land value mean a flat fee based on number of square foot, or does it include fair market value of the property. Because that penthouse downtown apt definitely cost more than a house in the middle of nowhere, even if its technically smaller.
- corneliusphi2 6y ago
  It's taxing fair market value of the land. So, if you erased a skyscraper in downtown, how much would that barren plot of land be worth? Tax all of the value there. It's one of the only known taxes that doesn't negatively distort the economy
- dan-robertson 6y ago
  It corresponds to the value of the unimproved land. So the tax paid by a skyscraper would be roughly the same as that paid by an empty lot of the same size next to it. (You can imagine a system where a tall building would have to pay more tax for blocking out the shared light). If the burden of the tax were shared equally than the penthouse would contribute the same amount as each of the floors below it—some small fraction of the total for a tall building.
- ScottBurson 6y ago
  I believe the original intention was to tax the market value of the land a structure sits on, not the structure itself. So in the case of apartments, presumably local density would have to be fairly high to make it a good place to build an apartment building there in the first place, and so the market value of the land would also be high; but the units would not be taxed directly at all, though their occupants would have to pay some fraction of the overall LVT. (Presumably that fraction would be higher for the penthouse.) You can see why the LVT is relatively density-friendly: the taller the building, the less tax paid by each resident.
- clairity 6y ago
  in many taxing jurisdictions, property tax is actually a combo tax on (unimproved) land (square footage/acreage) and on the value of the structure. sometimes these are the same rate and sometimes not. in other jurisdictions, market value dominates, though they often consider land value and structural value separately as well. once upon a time i managed a product to help assessors determine building values so they could do the necessary discrimination for property taxes.
caturopath 6y ago
Transfer payments don't need to be in the tax code. You can e.g. tax land at a higher rate and write all people a check for the same number. Sweden and Denmark and the Netherlands have less progressive income taxes than the US. Rather than encoding transfers in the tax code, they perform them via programs, leaving them with a more redistributive system. > A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. Sounds like pro-social behavior. Today the rich buy shops in Manhattan and turn them into garages, lowering the value of the property and thus the tax revenue that New York gets. Rather than being rewarded for squandering, folks should be incentivized to make good use of the space they're taking up. If someone wants to turn a productive business into storage for their toys, that's fine, but we shouldn't be giving them a discount for doing it.
- dan-robertson 6y ago
  > Sounds like pro-social behaviour I don’t want to get sidetracked on whether or not the incentives are good, or even whether a regressive tax is bad. (Though I admit I sidetracked with my comment above.) The question is why a land value tax is progressive in a modern industrialised country with a services-based economy?
  - caturopath 6y ago
    Who cares if a tax is progressive? There's no reason to care if a tax is progressive. The thing to care about is whether the government is redistributing wealth in a desired way. Progressive taxes are one way to redistribute wealth to the less wealthy. Payments are another. If you want a more progressive system in a LVT world, double the tax rate and then send people checks.
    - marcosdumay 6y ago
      Regressive taxes coupled with payments are a very powerful way to squeeze the lower ranks of the middle class, while preserving the rich and the higher middle class.
hahaxdxd123 6y ago
> It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do Why? Someone living in Manhattan or Queens is certainly using 10x the land value of someone living in rural Idaho. If I were to magically teleport a $3m brownstone from NYC to Idaho Falls, it would be worth perhaps $200k at most (it is old and crumbling). > While big farms may pay a lot of the tax As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes. > A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. Why is this bad? They are now being very efficient with the use of their land. They have taken less of a rivalrous resource from the rest of society but have managed to shape it to their satisfaction.
- unishark 6y ago
  > Why is this bad? They are now being very efficient with the use of their land. They have taken less of a rivalrous resource from the rest of society but have managed to shape it to their satisfaction. Their point of contention was in it not also being a progressive tax. So I guess they want the rich to pay more tax even if they use less of the taxed resource.
  - dan-robertson 6y ago
    I don’t really want to argue about whether or not a progressive tax is good (the dual meaning of the word can make that difficult.) There is a claim that a land value tax is progressive, that is, the effective tax rate increases as one’s means increase, and I don’t really believe that claim. So “this is good [even though it is a case of the tax being regressive]” is irrelevant to the question.
- notahacker 6y ago
  >> It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do > Why? The world's richest man own $500m of real estate. Sounds like a lot until you realise it's 0.25% of his net worth (and the unimproved land value's possibly sub 0.1%) What percentage of the average American's net worth is tied up in the footprint of their home? Guess it's two orders of magnitude more than Jeff's, and potentially >90% of the value of the average farm. Hence not remotely progressive, even if it's less worse than a pure property tax in most circumstances and other even more regressive taxes. > As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes. It takes a lot of land to make a farm. (Sure, per acre it's less than the city, but city dwellers don't own many acres and unlike the farmer have a realistic proposition of selling their limited acreage to a condo developer when the tax makes it unaffordable). c.f. It takes zero land to make a much higher margin SaaS startup.
didibus 6y ago
Read these to understand: http://www.ntanet.org/NTJ/63/1/ntj-v63n01p63-92-evidence-distributional-effects-land.pdf http://www.ntanet.org/NTJ/63/1/ntj-v63n01p63-92-evidence-dis... Here's the abstract summary: > This study examines how replacing a uniform property tax with a land value tax (LVT) would shift the tax burden for single-family residential properties in Tarrant County, Texas, over the period 1997–2006. Results suggest that a LVT would shift the tax burden away from single-family properties and on to other property classes. For the more recent years in the sample, the average tax liability for single-family properties would decrease about 30 percent, regardless of household income, and SuitsIndices suggest that, within residential properties, a LVT would be slightly more progressive than a property tax. Horizontal equity problems would be greatest for the lowest-valued properties relative to other properties. This study also examines how a LVT would change property values due to the effects of tax capitalization. https://openknowledge.worldbank.org/handle/10986/2653 https://openknowledge.worldbank.org/handle/10986/2653 In this one the book says: > A land tax is considered a progressive tax in that wealthy landowners normally should be paying relatively more than poorer landowners and tenants. Conversely, a tax on buildings can be said to be regressive, falling heavily on tenants who generally are poorer than the landlords So in general the idea is you tax the market value of the land, but not the value of what was done out of it. So an apartment building with 10 units would be taxed approximately the same as a single family home if their land is in the same area and of the same size. But since there are 10 units, each tenant of the apartment building would pay only 1/10 of the tax. Same thing if it's a Condo building. It also means that if someone wants to live near some "hot market" they'd pay higher tax for being there than if they were to move further away, since the tax is based on land market value.
- dan-robertson 6y ago
  I understand what a land value tax is. I just think that for it to be progressive requires the rich to behave like turn-of-the-century aristocrats with large estates, whereas I think today rich people are more likely to not use a proportionally large amount of land, and to own shares in companies (which themselves don’t need much land) instead. Thank you for the link to the study around Fort Worth (my first guess was that this was some rural country which wouldn’t be very representative but that’s wrong. Most people in that county live in Fort Worth)
Spooky23 6y ago
It’s not. It’s a spin on property taxes favored by people on the internet and some libertarians. Instead of taxing your property based in market value, you tax it based on what your neighbors value is. It’s basically a scheme to transfer wealth in a arbitrary and confusing way. IMO it gets traction here because California has an outsized influence on HN for obvious reasons and California’s tax regime is bizarre and unjust. On the flip side, the economic influence of that tax policy makes it very obvious to some people that unjust tax policy can make you rich.
- epistasis 6y ago
  I'd be very surprised if many true libertarians supported Georgist principles. Georgists are all about socializing land, and other efforts include Community Land Trusts, social housing, and other ways to make sure that markets result in fair outcomes. The difference is in prioritizing the well-being of people rather than the primacy of markets or "freedom from government" style libertarianism.

harbergertaxguy 6y ago

Harberger tax gets around this problem.

brutusborn 6y ago

Where I am from the majority of rich people are heavily invested in high value land. There have been many studies asssessing the question you describe. I will try to find them when I get some time, I think you will be surprised.

bawolff 6y ago

Does land value mean a flat fee based on number of square foot, or does it include fair market value of the property. Because that penthouse downtown apt definitely cost more than a house in the middle of nowhere, even if its technically smaller.

corneliusphi2 6y ago
It's taxing fair market value of the land. So, if you erased a skyscraper in downtown, how much would that barren plot of land be worth? Tax all of the value there. It's one of the only known taxes that doesn't negatively distort the economy
dan-robertson 6y ago
It corresponds to the value of the unimproved land. So the tax paid by a skyscraper would be roughly the same as that paid by an empty lot of the same size next to it. (You can imagine a system where a tall building would have to pay more tax for blocking out the shared light). If the burden of the tax were shared equally than the penthouse would contribute the same amount as each of the floors below it—some small fraction of the total for a tall building.
ScottBurson 6y ago
I believe the original intention was to tax the market value of the land a structure sits on, not the structure itself. So in the case of apartments, presumably local density would have to be fairly high to make it a good place to build an apartment building there in the first place, and so the market value of the land would also be high; but the units would not be taxed directly at all, though their occupants would have to pay some fraction of the overall LVT. (Presumably that fraction would be higher for the penthouse.) You can see why the LVT is relatively density-friendly: the taller the building, the less tax paid by each resident.
clairity 6y ago
in many taxing jurisdictions, property tax is actually a combo tax on (unimproved) land (square footage/acreage) and on the value of the structure. sometimes these are the same rate and sometimes not. in other jurisdictions, market value dominates, though they often consider land value and structural value separately as well. once upon a time i managed a product to help assessors determine building values so they could do the necessary discrimination for property taxes.

caturopath 6y ago

Transfer payments don't need to be in the tax code. You can e.g. tax land at a higher rate and write all people a check for the same number. Sweden and Denmark and the Netherlands have less progressive income taxes than the US. Rather than encoding transfers in the tax code, they perform them via programs, leaving them with a more redistributive system. > A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. Sounds like pro-social behavior. Today the rich buy shops in Manhattan and turn them into garages, lowering the value of the property and thus the tax revenue that New York gets. Rather than being rewarded for squandering, folks should be incentivized to make good use of the space they're taking up. If someone wants to turn a productive business into storage for their toys, that's fine, but we shouldn't be giving them a discount for doing it.

dan-robertson 6y ago
> Sounds like pro-social behaviour I don’t want to get sidetracked on whether or not the incentives are good, or even whether a regressive tax is bad. (Though I admit I sidetracked with my comment above.) The question is why a land value tax is progressive in a modern industrialised country with a services-based economy?
- caturopath 6y ago
  Who cares if a tax is progressive? There's no reason to care if a tax is progressive. The thing to care about is whether the government is redistributing wealth in a desired way. Progressive taxes are one way to redistribute wealth to the less wealthy. Payments are another. If you want a more progressive system in a LVT world, double the tax rate and then send people checks.
  - marcosdumay 6y ago
    Regressive taxes coupled with payments are a very powerful way to squeeze the lower ranks of the middle class, while preserving the rich and the higher middle class.

hahaxdxd123 6y ago

> It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do Why? Someone living in Manhattan or Queens is certainly using 10x the land value of someone living in rural Idaho. If I were to magically teleport a $3m brownstone from NYC to Idaho Falls, it would be worth perhaps $200k at most (it is old and crumbling). > While big farms may pay a lot of the tax As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes. > A wealthier person in a city could pay for an expensive skyscraper apartment or a taller or higher quality home on a narrow footprint and not pay significantly more tax than someone in a shorter house or lower apartment. Why is this bad? They are now being very efficient with the use of their land. They have taken less of a rivalrous resource from the rest of society but have managed to shape it to their satisfaction.

unishark 6y ago
> Why is this bad? They are now being very efficient with the use of their land. They have taken less of a rivalrous resource from the rest of society but have managed to shape it to their satisfaction. Their point of contention was in it not also being a progressive tax. So I guess they want the rich to pay more tax even if they use less of the taxed resource.
- dan-robertson 6y ago
  I don’t really want to argue about whether or not a progressive tax is good (the dual meaning of the word can make that difficult.) There is a claim that a land value tax is progressive, that is, the effective tax rate increases as one’s means increase, and I don’t really believe that claim. So “this is good [even though it is a case of the tax being regressive]” is irrelevant to the question.
notahacker 6y ago
>> It seems to me that if you are ten times as rich as me then you will use less than ten times the land value I do > Why? The world's richest man own $500m of real estate. Sounds like a lot until you realise it's 0.25% of his net worth (and the unimproved land value's possibly sub 0.1%) What percentage of the average American's net worth is tied up in the footprint of their home? Guess it's two orders of magnitude more than Jeff's, and potentially >90% of the value of the average farm. Hence not remotely progressive, even if it's less worse than a pure property tax in most circumstances and other even more regressive taxes. > As far as I understand, the vast majority of the farms are on rural land that has an unimproved value of close to zero. I don't see how they would pay much taxes. It takes a lot of land to make a farm. (Sure, per acre it's less than the city, but city dwellers don't own many acres and unlike the farmer have a realistic proposition of selling their limited acreage to a condo developer when the tax makes it unaffordable). c.f. It takes zero land to make a much higher margin SaaS startup.

didibus 6y ago

Read these to understand: http://www.ntanet.org/NTJ/63/1/ntj-v63n01p63-92-evidence-distributional-effects-land.pdf http://www.ntanet.org/NTJ/63/1/ntj-v63n01p63-92-evidence-dis... Here's the abstract summary: > This study examines how replacing a uniform property tax with a land value tax (LVT) would shift the tax burden for single-family residential properties in Tarrant County, Texas, over the period 1997–2006. Results suggest that a LVT would shift the tax burden away from single-family properties and on to other property classes. For the more recent years in the sample, the average tax liability for single-family properties would decrease about 30 percent, regardless of household income, and SuitsIndices suggest that, within residential properties, a LVT would be slightly more progressive than a property tax. Horizontal equity problems would be greatest for the lowest-valued properties relative to other properties. This study also examines how a LVT would change property values due to the effects of tax capitalization. https://openknowledge.worldbank.org/handle/10986/2653 https://openknowledge.worldbank.org/handle/10986/2653 In this one the book says: > A land tax is considered a progressive tax in that wealthy landowners normally should be paying relatively more than poorer landowners and tenants. Conversely, a tax on buildings can be said to be regressive, falling heavily on tenants who generally are poorer than the landlords So in general the idea is you tax the market value of the land, but not the value of what was done out of it. So an apartment building with 10 units would be taxed approximately the same as a single family home if their land is in the same area and of the same size. But since there are 10 units, each tenant of the apartment building would pay only 1/10 of the tax. Same thing if it's a Condo building. It also means that if someone wants to live near some "hot market" they'd pay higher tax for being there than if they were to move further away, since the tax is based on land market value.

dan-robertson 6y ago
I understand what a land value tax is. I just think that for it to be progressive requires the rich to behave like turn-of-the-century aristocrats with large estates, whereas I think today rich people are more likely to not use a proportionally large amount of land, and to own shares in companies (which themselves don’t need much land) instead. Thank you for the link to the study around Fort Worth (my first guess was that this was some rural country which wouldn’t be very representative but that’s wrong. Most people in that county live in Fort Worth)

Spooky23 6y ago

It’s not. It’s a spin on property taxes favored by people on the internet and some libertarians. Instead of taxing your property based in market value, you tax it based on what your neighbors value is. It’s basically a scheme to transfer wealth in a arbitrary and confusing way. IMO it gets traction here because California has an outsized influence on HN for obvious reasons and California’s tax regime is bizarre and unjust. On the flip side, the economic influence of that tax policy makes it very obvious to some people that unjust tax policy can make you rich.

epistasis 6y ago
I'd be very surprised if many true libertarians supported Georgist principles. Georgists are all about socializing land, and other efforts include Community Land Trusts, social housing, and other ways to make sure that markets result in fair outcomes. The difference is in prioritizing the well-being of people rather than the primacy of markets or "freedom from government" style libertarianism.