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The easiest way to set up such a tax is figure out how much it costs to build a building. Let's say in SF currently there is a house that sells at $1M dollars.

The easiest way to set up such a tax is figure out how much it costs to build a building. Let's say in SF currently there is a house that sells at $1M dollars. But that house didn't cost $1M to build, it might have cost $200k in materials and labor. Once you have that number, you just keep raising the tax on that building until the new market cost is equivalent, or $200k. You now have a Land Value Tax. If the owner of the building then puts in a $200k addition, you adjust that number for $400k. If next year a technology is created such that you can make that same house for $150k, the replacement costs change and that might mean a tax raise. If a train station is built next door, the demand would go up, which would cause taxes to go up. If nearby a bunch of housing was built, this would cause supply to raise and thus move the supply and demand curve which would cause the price to drop, and therefore taxes would lower. What's the best thing to do with this tax money? Give it back equally to all as a dividend(similar to [0])! Thus the people who use less than the average amount of housing would actually receive money when this goes into effect. We need to systematically identify all externalities, and tax according to the externality, and just give the money back to the population. This fixes the incentives. Figuring out where that money is going to go, fighting between political parties as to which company is going to benefit, the corrupting effect of centralization of decision making. Just give it back. Tax externalities and return as a dividend. [0]: https://en.wikipedia.org/wiki/Carbon_fee_and_dividend https://en.wikipedia.org/wiki/Carbon_fee_and_dividend

salawat 5y ago
>The easiest way to set up such a tax is figure out how much it costs to build a building. Let's say in SF currently there is a house that sells at $1M dollars. But that house didn't cost $1M to build, it might have cost $200k in materials and labor. Mmmmkay. So you've established a materials acquisition set point for the area, or is this a derived value? Do you have a process for tracking this over time as markets aren't static? We've now got in addition to a land valuation assessment, we've got workmanship/material/ labor value assessment; let's handwave this for now, because I'm pretty sure this is old hat for tax assessors/actuaries, etc... >Once you have that number, you just keep raising the tax on that building until the new market cost is equivalent, or $200k. I get lost here. At T=0, Market value for land+building was $1M, right? Cool. We do our magic valuation of the material/labor cost of the building, and determine the building represents a value of 200k. Cool. Let's implement our tax. Pre-tax (T=0), Market value-wise, you're waiting around for someone with a cool million burning a hole in their pocket. Post-tax(T=1) you're still waiting on somebody with a cool million to come along. The State wants market value and tax basis to converge. So you bought at 1M, they take 800k leaving 200k on your property sale? Seems like you may have shot yourself in the foot, because now only someone better off than you were would be in a position to buy the building at whatever you're selling at for break even or profit, but also to pay the tax liability on the land you now have of 800k based on the hypothetical statute? (This is the buy scenario, not necessarily what we're talking about, because it's a one time thing, but as I understand it, property taxes have something weird going on in Cali in the sense tax rates only change when the property changes hands in a transaction.) Market value, either way, has changed: the set buyers now encompasses only those people with your cool million plus the capability to weather the tax liability? This sounds like a property transfer to the rich. Let's talk rent. You aren't selling, but you own the land since before the tax is implemented at T=0. Your change in LVT... means nothing, til the next buyer? Let's say we hand wave that. Let's follow the 1% rule. Market Value is $1M, x.01 = 10k a month (ouch!) Current SF average yearly property tax liability is .55% (approximately 4.5k on $785000 value), or 5500 per million. Cool. T=1. Tax implemented. Your accountant sits down. Land +building previously was $1M. Building was assessed at 200k. By statute, the rest is LVT. 800k. Property tax has just gone from .55% on land + building (1M) to 800k based on the statutory definition of LVT being (value at time of purchase - assessed structure value = 800k... per year? Over a period time?). Screw it, we need a number that makes sense for rent. Say we stick at 10k a month. Pre LVT, that's 4500 a month you're clearing. 54000 a year. But you're taxing the building on the difference of purchase price and actual material labor cost... Like, I'm failing to see how your tax actually changes Market value. No one is selling a million dollar property for 200k except to avoid a greater expenditure over time in which case the State becomes the questionable actor here because they are essentially levying an excise on your sale price if too high because they want it lower? What if you charge less than 200k? Forget the fact that we've got a mismatch between how the tax is collected (LVT implies excise over time, while assessment procedure seems to imply a one time). This feels like a word problem with half the info missing. Either that or I'm missing some painfully obvious piece of context to the initiated.
- ItsMonkk 5y ago
  Let's go to an extreme, let's say taxes are 100% of the house value per year. 1 million dollar house is 1 million dollar taxes. 10k house is 10k taxes. It's obvious what would happen, the house price would drop. What would it stabilize at? Roughly the annual rent price for that type of house. Moving back to my original example: T=0, where taxes are .55% and market value is 1M, paying taxes of $5500. T=1, we raise taxes to 1.55%, market auction comes in and offers $800k, where they would pay taxes of $12400. T=2, we raise taxes to 5.55%, market auction comes in and offers $500k, where they would pay taxes of $27750. T=3, we raise taxes to 15.55%, market auction comes in and offer $200k, where they would pay taxes of $31100. STOP. Balance as necessary. Those numbers are not real numbers. The numbers will be different, and they will never be perfect. It's likely that you wouldn't have per-house figures, but city averages setting city-wide taxes. Since so much of our current system's people networth are invested into something, this is not a change that can possibly happen over-night, and would likely take upwards of 50 years to phase in.

salawat 5y ago

>The easiest way to set up such a tax is figure out how much it costs to build a building. Let's say in SF currently there is a house that sells at $1M dollars. But that house didn't cost $1M to build, it might have cost $200k in materials and labor. Mmmmkay. So you've established a materials acquisition set point for the area, or is this a derived value? Do you have a process for tracking this over time as markets aren't static? We've now got in addition to a land valuation assessment, we've got workmanship/material/ labor value assessment; let's handwave this for now, because I'm pretty sure this is old hat for tax assessors/actuaries, etc... >Once you have that number, you just keep raising the tax on that building until the new market cost is equivalent, or $200k. I get lost here. At T=0, Market value for land+building was $1M, right? Cool. We do our magic valuation of the material/labor cost of the building, and determine the building represents a value of 200k. Cool. Let's implement our tax. Pre-tax (T=0), Market value-wise, you're waiting around for someone with a cool million burning a hole in their pocket. Post-tax(T=1) you're still waiting on somebody with a cool million to come along. The State wants market value and tax basis to converge. So you bought at 1M, they take 800k leaving 200k on your property sale? Seems like you may have shot yourself in the foot, because now only someone better off than you were would be in a position to buy the building at whatever you're selling at for break even or profit, but also to pay the tax liability on the land you now have of 800k based on the hypothetical statute? (This is the buy scenario, not necessarily what we're talking about, because it's a one time thing, but as I understand it, property taxes have something weird going on in Cali in the sense tax rates only change when the property changes hands in a transaction.) Market value, either way, has changed: the set buyers now encompasses only those people with your cool million plus the capability to weather the tax liability? This sounds like a property transfer to the rich. Let's talk rent. You aren't selling, but you own the land since before the tax is implemented at T=0. Your change in LVT... means nothing, til the next buyer? Let's say we hand wave that. Let's follow the 1% rule. Market Value is $1M, x.01 = 10k a month (ouch!) Current SF average yearly property tax liability is .55% (approximately 4.5k on $785000 value), or 5500 per million. Cool. T=1. Tax implemented. Your accountant sits down. Land +building previously was $1M. Building was assessed at 200k. By statute, the rest is LVT. 800k. Property tax has just gone from .55% on land + building (1M) to 800k based on the statutory definition of LVT being (value at time of purchase - assessed structure value = 800k... per year? Over a period time?). Screw it, we need a number that makes sense for rent. Say we stick at 10k a month. Pre LVT, that's 4500 a month you're clearing. 54000 a year. But you're taxing the building on the difference of purchase price and actual material labor cost... Like, I'm failing to see how your tax actually changes Market value. No one is selling a million dollar property for 200k except to avoid a greater expenditure over time in which case the State becomes the questionable actor here because they are essentially levying an excise on your sale price if too high because they want it lower? What if you charge less than 200k? Forget the fact that we've got a mismatch between how the tax is collected (LVT implies excise over time, while assessment procedure seems to imply a one time). This feels like a word problem with half the info missing. Either that or I'm missing some painfully obvious piece of context to the initiated.

ItsMonkk 5y ago
Let's go to an extreme, let's say taxes are 100% of the house value per year. 1 million dollar house is 1 million dollar taxes. 10k house is 10k taxes. It's obvious what would happen, the house price would drop. What would it stabilize at? Roughly the annual rent price for that type of house. Moving back to my original example: T=0, where taxes are .55% and market value is 1M, paying taxes of $5500. T=1, we raise taxes to 1.55%, market auction comes in and offers $800k, where they would pay taxes of $12400. T=2, we raise taxes to 5.55%, market auction comes in and offers $500k, where they would pay taxes of $27750. T=3, we raise taxes to 15.55%, market auction comes in and offer $200k, where they would pay taxes of $31100. STOP. Balance as necessary. Those numbers are not real numbers. The numbers will be different, and they will never be perfect. It's likely that you wouldn't have per-house figures, but city averages setting city-wide taxes. Since so much of our current system's people networth are invested into something, this is not a change that can possibly happen over-night, and would likely take upwards of 50 years to phase in.