4 ms·

Land speculation is less taxed than, say, equities gains because of 1031 exchanges and forgiveness of the first $X of capital gains on a home sale. I don't see

by RhysU 5y ago

Land speculation is less taxed than, say, equities gains because of 1031 exchanges and forgiveness of the first $X of capital gains on a home sale. I don't see how "rent extraction" is less taxed relative to other activities aside from depreciation, net income, etc. which is not unique to renting. Why is rent extraction favored in the tax code? Actual work has little risk. If I don't show up in the office today they won't pay me for today. If I own property, in contrast, it can go down in value. Also, I probably have to pay to maintain it.

tryptophan 5y ago
>Why is rent extraction favored in the tax code? Renting is considered a business. You can deduct interest, maintenance expenses, etc... Individuals cannot do that. >Actual work has little risk. So does waiting for prices to go up in a city. And this is the key - you just wait. You don't do any work whatsoever. You just wait for economic conditions nearby to improve and then take your share of it by charging higher and higher rents just because you have monopolized the usage of your land. You don't have to contribute literally anything to the nearby economy, but can still benefit from it. >If I own property, in contrast, it can go down in value. Property = land + buildings. This is a tax on the land, not the building value. In a LVT scheme, the value of the land goes towards 0, and the share of the property value due to the building increases. > Also, I probably have to pay to maintain it. You maintain the building, not the land. Making profits on building would not change. https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr... Is a good review of these ideas.
- Dracophoenix 5y ago
  As I've said quite a few times before, with no straight answer given: How does one assess the value of land? Was is the basis or seed value for a given figure?
  - erentz 5y ago
    This already happens. Look into how cities and states both in the US and around the world already value land separately from capital (or improvements) value as part of property tax.
    - erichocean 5y ago
      Yeah, but GP thought his question was a killer retort that would end the argument in his favor, while simultaneously demonstrating brilliance to the Hacker News crowd. Did you really have to take away all that with a pithy explanation of reality? Why not just let him have his day in the sun?
      - Dracophoenix 5y ago
        I'm here to get an answer. Not to win an imaginary argument. But I guess it takes one to know one if you think the latter is what I'm here for.
    - Dracophoenix 5y ago
      I already have. Most of them are black boxes. For example, the county assessor will put the assessed value of a house at $2,000,000 when it was $800,000 five years ago. Where are they pulling this number from? All of this seems like speculation. Another thing to point out is that some states/localities use a mill rate. They'll set tax at x dollars per thousand of assessed value on the house. Where are they getting the x from? What's the difference between the assessed value and the purchase price and why should there be a difference? With land, the issue is the same. Even though improvements aren't factored in to the value the same way they are with property tax, what makes one parcel land more valuable than the other? Such a value isn't determined by a linear relationship. So where would one get the number from? Here is the last conversation I had about the topic. https://news.ycombinator.com/item?id=27032163 https://news.ycombinator.com/item?id=27032163
      - rsj_hn 5y ago
        You can get estimates on the price of land in one of two ways: - look at comparable empty lots that are sold. Even in big cities there are empty lots sold. - look at the purchase price of buildings + land and subtract out the construction cost of the building You can also combine the above, e.g. look at two similar buildings with similar construction costs built in two different places to infer the relative price of land in each. You can get a pretty good estimate from the above techniques. OFHEO supplies such estimates. > what makes someone's land more valuable than the other? Like any other good, people bid on it and so a price is set. Having land allows you to build a building or store so things like zoning laws, demographics, income of people, foot traffic, nearby amenities, these all contribute to the value of land. Land in sunny Miami Beach is worth more than land sitting atop a superfund site somewhere in frozen Michigan. Downtown land in San Francisco is worth more than farm land in Iowa. The reason for this is you can make more money with land in one place than another, even if you need to invest in structure to make that income stream a reality.
  - imtringued 5y ago
    One solution would be to have desired levels of zoning and base taxes on desired level of zoning of the plot. Each level of zoning would have a per m^2 value and is assessed for the entire neighborhood. For example, you start with detached single family home zoning. As it is not very dense the rate will be very low so that it is affordable. Once house prices go up in value and row houses and duplexes become viable you raise the desired level of zoning so that duplexes and row houses have the minimal tax burden. Next step would be x stories of apartments. Again the tax is set so that x story apartment buildings have the smallest tax burden per unit. There would be a tax burden per unit (2 different rates for houses and apartments) for the neighborhood on which the actual zoning prices are based on. E.g. One apartment pays 5k means zoning for 10 apartments will charge $50k. You can still build a single family home if you can afford that tax. Most won't. This forces popular neighborhoods to provide more housing and punishes land owners that do not improve the value of the property built on top of the land.
- RhysU 5y ago
  > Renting is considered a business. So, renting is not favored over other businesses in the tax code? Cool, then people will invest in renting to the extent that they can make a better profit there relative to other business endeavors. This seems sane to me. >> Actual work has little risk. > So does waiting for prices to go up in a city. Have you ever watched NYC unilaterally and without warning do massive homeless shelter relocations into your neighborhood in the middle of a pandemic? Or noticed that sometimes there are chemical contaminants discovered under towns and the drinking water can be full of lead? Or seen the quality of the local public schools drop over time? Or read that hurricanes and earthquakes and riots sometimes level everything? There is risk in owning property. Sure, some of that risk can be offloaded to insurance. But witness half of Napa is trying to rebuild at the same time on account of widespread wildfires. The insurance only somewhat addresses systemic risk. Thank you for responding. I will read the introduction that you suggested. I will echo the peer responses that I don't see how one values abstract plots of land independent of their current usage. But I am content to watch that discussion unfold instead of continuing on that topic in this thread.
8note 5y ago
Is there much risk of it going down? There's a fair amount of effort on the part of the government to ensure that the price continues to rise
- erichocean 5y ago
  Rising asset prices are literally Federal policy. I think the official goal recommended by the IMF is 3% annually.

by RhysU 5y ago

tryptophan 5y ago

>Why is rent extraction favored in the tax code? Renting is considered a business. You can deduct interest, maintenance expenses, etc... Individuals cannot do that. >Actual work has little risk. So does waiting for prices to go up in a city. And this is the key - you just wait. You don't do any work whatsoever. You just wait for economic conditions nearby to improve and then take your share of it by charging higher and higher rents just because you have monopolized the usage of your land. You don't have to contribute literally anything to the nearby economy, but can still benefit from it. >If I own property, in contrast, it can go down in value. Property = land + buildings. This is a tax on the land, not the building value. In a LVT scheme, the value of the land goes towards 0, and the share of the property value due to the building increases. > Also, I probably have to pay to maintain it. You maintain the building, not the land. Making profits on building would not change. https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr... Is a good review of these ideas.

Dracophoenix 5y ago
As I've said quite a few times before, with no straight answer given: How does one assess the value of land? Was is the basis or seed value for a given figure?
- erentz 5y ago
  This already happens. Look into how cities and states both in the US and around the world already value land separately from capital (or improvements) value as part of property tax.
  - erichocean 5y ago
    Yeah, but GP thought his question was a killer retort that would end the argument in his favor, while simultaneously demonstrating brilliance to the Hacker News crowd. Did you really have to take away all that with a pithy explanation of reality? Why not just let him have his day in the sun?
    - Dracophoenix 5y ago
      I'm here to get an answer. Not to win an imaginary argument. But I guess it takes one to know one if you think the latter is what I'm here for.
  - Dracophoenix 5y ago
    I already have. Most of them are black boxes. For example, the county assessor will put the assessed value of a house at $2,000,000 when it was $800,000 five years ago. Where are they pulling this number from? All of this seems like speculation. Another thing to point out is that some states/localities use a mill rate. They'll set tax at x dollars per thousand of assessed value on the house. Where are they getting the x from? What's the difference between the assessed value and the purchase price and why should there be a difference? With land, the issue is the same. Even though improvements aren't factored in to the value the same way they are with property tax, what makes one parcel land more valuable than the other? Such a value isn't determined by a linear relationship. So where would one get the number from? Here is the last conversation I had about the topic. https://news.ycombinator.com/item?id=27032163 https://news.ycombinator.com/item?id=27032163
    - rsj_hn 5y ago
      You can get estimates on the price of land in one of two ways: - look at comparable empty lots that are sold. Even in big cities there are empty lots sold. - look at the purchase price of buildings + land and subtract out the construction cost of the building You can also combine the above, e.g. look at two similar buildings with similar construction costs built in two different places to infer the relative price of land in each. You can get a pretty good estimate from the above techniques. OFHEO supplies such estimates. > what makes someone's land more valuable than the other? Like any other good, people bid on it and so a price is set. Having land allows you to build a building or store so things like zoning laws, demographics, income of people, foot traffic, nearby amenities, these all contribute to the value of land. Land in sunny Miami Beach is worth more than land sitting atop a superfund site somewhere in frozen Michigan. Downtown land in San Francisco is worth more than farm land in Iowa. The reason for this is you can make more money with land in one place than another, even if you need to invest in structure to make that income stream a reality.
- imtringued 5y ago
  One solution would be to have desired levels of zoning and base taxes on desired level of zoning of the plot. Each level of zoning would have a per m^2 value and is assessed for the entire neighborhood. For example, you start with detached single family home zoning. As it is not very dense the rate will be very low so that it is affordable. Once house prices go up in value and row houses and duplexes become viable you raise the desired level of zoning so that duplexes and row houses have the minimal tax burden. Next step would be x stories of apartments. Again the tax is set so that x story apartment buildings have the smallest tax burden per unit. There would be a tax burden per unit (2 different rates for houses and apartments) for the neighborhood on which the actual zoning prices are based on. E.g. One apartment pays 5k means zoning for 10 apartments will charge $50k. You can still build a single family home if you can afford that tax. Most won't. This forces popular neighborhoods to provide more housing and punishes land owners that do not improve the value of the property built on top of the land.
RhysU 5y ago
> Renting is considered a business. So, renting is not favored over other businesses in the tax code? Cool, then people will invest in renting to the extent that they can make a better profit there relative to other business endeavors. This seems sane to me. >> Actual work has little risk. > So does waiting for prices to go up in a city. Have you ever watched NYC unilaterally and without warning do massive homeless shelter relocations into your neighborhood in the middle of a pandemic? Or noticed that sometimes there are chemical contaminants discovered under towns and the drinking water can be full of lead? Or seen the quality of the local public schools drop over time? Or read that hurricanes and earthquakes and riots sometimes level everything? There is risk in owning property. Sure, some of that risk can be offloaded to insurance. But witness half of Napa is trying to rebuild at the same time on account of widespread wildfires. The insurance only somewhat addresses systemic risk. Thank you for responding. I will read the introduction that you suggested. I will echo the peer responses that I don't see how one values abstract plots of land independent of their current usage. But I am content to watch that discussion unfold instead of continuing on that topic in this thread.

8note 5y ago

Is there much risk of it going down? There's a fair amount of effort on the part of the government to ensure that the price continues to rise

erichocean 5y ago
Rising asset prices are literally Federal policy. I think the official goal recommended by the IMF is 3% annually.