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I'm not a huge fan of how deadweight loss is defined in the article: > virtually all economists agree that land value tax has zero "deadweight loss"–a fancy wo

I'm not a huge fan of how deadweight loss is defined in the article: > virtually all economists agree that land value tax has zero "deadweight loss"–a fancy word for a drag on the economy that makes certain activities no longer profitable Property taxes tax the land + the building. Building taxes are complicated to assess. They require tax assessments, appraisers, tax code, accountants to compute depreciation schedules, etc. The deadweight loss of property taxes is the economic loss of having resources devoted to filling out property tax filings. Appraisers and accountants would do other productive economic activities if they didn't spend all their time filling out tax forms. Property taxes also distort incentives. If you improve your property, then you pay more tax. Property taxes can discourage you from using your land to its highest and best use. Land taxes offer the opposite incentives. They encourage you to make your property better. Land taxes would arguably help a lot of the housing crises. Landowners have to pay a lot more taxes if they want to convert a lot with a single family home to a 4-plex. A land tax wouldn't impose an additional tax to the landowner for improving the value of their land.

bradleyjg 5y ago
Land taxes are far far more difficult to calculate than property taxes. Impossible to do well in some cases. To know what land and the buildings on it are worth you can look to what people are willing to pay to buy them. There’s no similarly straightforward way to value the separate parts. So you’ll end up with a lot more wasted expert time for a less accurate result.
- MrPowers 5y ago
  Nah, it's really easy to calculate the value of the land. Once you calculate the value of the land, then it's pretty much applicable to the whole neighborhood too. It's a one-and-done analysis. This isn't my opinion. There's lots of economic research to back this up. EDIT: some support: https://www.progress.org/articles/the-implementation-of-land-value-taxation https://www.progress.org/articles/the-implementation-of-land...
  - AnimalMuppet 5y ago
    Some evidence would be more convincing than a glib "nah, I'm right"...
    - deleted 5y ago
      [deleted]
    - epistasis 5y ago
      Oddly enough there was no evidence provided for the original claim, either. This despite there being many sources of this estimattioj laid out directly in the original article. The comment didn't mention why the original articles' various methods do not work.
      - AnimalMuppet 5y ago
        Fair point. But to me, I hold the reply to a higher standard. Why? Because a claim can be interesting (in the HN sense), even without evidence. A "no it's not" is less interesting, even though it's also a claim. Maybe that's just me...
  - aeternum 5y ago
    This really doesn't make sense. Views matter for example, land with a blocked view should be worth less than land without the blocked view. Land immediately adjacent to a golf course or park is often valued higher. Land immediately next to railroad tracks or industry, not so much while the discount drops off steeply just a few blocks away. Water rights, drainage, soil quality, contamination, roadway access all matter a great deal for more commercial land.
    - MrPowers 5y ago
      I agree that different factors cause some land to be more valuable than others. I'd argue that the factors you've listed are relatively easy to factor into an appraisal. Property taxes, in comparison, are really hard to compute. Each jurisdiction has different rules. There are different valuation methodologies. If you add a 2 car garage, what the useful life. What depreciation schedule should be used. How should inflation be accounted for. I agree with your comment generally and am not sure what part of the original comment doesn't make sense to you. EDIT: Reread my original comment and see your point now. I phrased the "easy" part too strongly. I mean "easy" in relative terms... compared to what's being done currently, but agree the wording wasn't great.
- TulliusCicero 5y ago
  Property taxes are already commonly broken down into the value of the land vs buildings, IIRC.
  - entangledqubit 5y ago
    At least for Seattle, the assessor's office has a breakdown but it turns out to be fairly bogus unless there's been a remodel or new building -- resulting in a new assessment. Quite a few cities also seem to have pretty bogus values on the books.
    - skt5 5y ago
      The building value by the county assessor's office is considered a standard for depreciation schedules. While it might not be useful for selling the property or building it - it does have value for accounting purposes.
  - dsizzle 5y ago
    FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. That said, it is done for property insurance, so I think your point that it's already done stands.
    - lelanthran 5y ago
      > FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. > > That said, it is done for property insurance, so I think your point that it's already done stands. I dunno how useful that will be - my insurance is based on how much it would cost to rebuild the house if it burned down. This lead to the comedic result that what I paid for the house at the time was about half what the insured value was. My property tax is calculated on the selling price, though.
      - DarylZero 5y ago
        That comedic situation is exactly the reason your insurance works like that. The insurance company knows it's in your interest to burn it down and sell the empty plot so they only insure it in a way that prevents that.
- dsizzle 5y ago
  Isn't this already done as part of property insurance?
- larsiusprime 5y ago
  Part III, concerning assessments, will post in a few days. Interested in your thoughts when that one goes up.
- ineptech 5y ago
  Inaccuracy isn't a very big component of this; assessing the value of land and structures isn't perfect but there's no obvious reason to think we're way better at one or the other. The point of this is that taxing the land only would lead to land being used differently, which would benefit society. Suppose there is a plot of land which (from some omniscient point of view) would offer maximal benefit to society if a four-plex were developed on it. The point of a LVT is that, under a LVT, a four-plex would be developed on it, not because anyone forces it but just because that's what's in the landowner's best interest; whereas under the current system (in which the structure is also taxed) the landowner might find it more profitable to build a duplex instead. The deadweight loss is the loss to society when the landowner builds something that's in their best interests but not society's. That's hard to prove for any specific piece of land, since we don't know what the omniscient-view "right" use of the land is. But if you accept the idea that there is an optimal use, and you you trust the whole idea of free market price discovery, it's reasonable.
  - dnautics 5y ago
    Inaccuracy in the end is a HUGE component of this. If you can't have an accurate value for the land, the long-run incentives converge to a system where the land value assessors have a lot of power, and could use that power to screw you over.
  - bradleyjg 5y ago
    > but there's no obvious reason to think we're way better at one or the other. There’s a very good reason. Sales of buildings plus land happen all the time, whereas sales of just land are virtually non-existent in a lot of the places with the most valuable property (e.g. Manhattan). Without real sales to tether the analysis you are just guessing.
    - DarylZero 5y ago
      Buildings are demolished in Manhattan on a regular basis, granted not that often. There are real sales of empty plots. Also if you know a building would cost $X to replace, but the plot with it sells for $X+$Y, you have some real information, not just guesses!
- ukoki 5y ago
  What if you had a system where anyone can bid any amount on any piece of land. Whether the owner refuses the bid or not, the land is now valued at the price of the bid for tax purposes. To avoid frivolous bids, bidders must place funds in escrow before making a bid which is then returned to the bidder if the owner refuses the bid or fails to respond within some number of days. All bids are reported to the public although bidders can be anonymous.
  - bradleyjg 5y ago
    Buying land that has buildings on it but not the buildings is an awkward situation that requires a further negotiation of a lease transaction to the building owner. Even if you could set something super complicated up with this bidding system I don’t think it would accurately value what the land would be worth empty.
- DarylZero 5y ago
  Actually there are empty plots bought and sold all the time.
mindslight 5y ago
> Property taxes can discourage you from using your land to its highest and best use I agree. > Land taxes offer the opposite incentives. They encourage you to make your property better. But it doesn't make the converse true. At most, you can say that high enough land value taxes encourage making real estate generate more revenue, to pay the tax. But given the current economy's tendency to optimize everything legible and whisk away the surplus upwards, it's dubious whether being pushed harder into the economic grindstone is "better". For a rural example, well separated houses on a few acres are much nicer than ticky-tack suburban panopticon developments (or even worse an HOA). It's hard to prevent the latter from occurring over time due to the economic gradient (eg parents die and kids want the most money possible, so they subdivide), but we shouldn't be pushing it through policy.
- TulliusCicero 5y ago
  > But it doesn't make the converse true. It does work that way, though. Except it's not exactly 'better', but rather 'more economically productive', which may or may not be better depending on your value system and the specific cases that arise. > For a rural example, a single house on several acres is much nicer than a ticky-tack suburban panopticon (or even worse a HOA). Arguably nicer, yes, but the suburban hellscape is definitely a lot more economically productive. > Economically it's hard to prevent the latter from occurring over time (eg parents die and kids want the most money possible, so they subdivide), but we shouldn't be encouraging it through policy. This feels like an orthogonal issue to me, that US-style suburbia is bad. Though honestly the rural living you describe is probably no better. Oh sure, it's nice in some ways, but there's problems a plenty there too: it's more destructive for the environment per capita, and it causes problems with the intersection of the social contract and social services. For an example of that last bit, look at the struggle with rural high speed internet. Arguably necessary for economic activity as well as educational purposes, but it's much more expensive to wire up and service super low density areas, and yet people in those areas have less money, not more. So you end up with either a) left to the free market, they have shit internet access, or b) people in urban and suburban areas subsidize them getting better internet, even though for most people there it's an explicit choice to have that lifestyle (as opposed to, say, the urban poor). And it's not just internet: most infrastructure and services are harder to deliver in rural areas, and you can end up in shitty situations because of that. Even if you accept that it's fine for adults consenting to it, what about kids who grow up with fewer opportunities?
AnimalMuppet 5y ago
But if we go to a land tax, don't you have similar problems? Can you really say that land that has a 20-story highrise condo on it has the same value as the same land with a house on it? Because if you're going to buy the land - no matter what you intend to do with it - you get the land with the existing building. So, if you want to disentangle the price of the land from the price of the building, then you're back to appraisers and accountants... and deadweight loss. And: > A land tax wouldn't impose an additional tax to the landowner for improving the value of their land. How would it not? Do you just keep the land price from 1874 as the "value"? Or do you use the current price of raw land? What's the current price of raw land in Manhattan?
- TulliusCicero 5y ago
  > But if we go to a land tax, don't you have similar problems? Can you really say that land that has a 20-story highrise condo on it has the same value as the same land with a house on it? Yes, because we're talking about the land -- really, more like the geographic space than the literal land -- and not the buildings. > Because if you're going to buy the land - no matter what you intend to do with it - you get the land with the existing building. Okay. And? > So, if you want to disentangle the price of the land from the price of the building For property tax purposes I think it's already common to value both the land and the buildings and then sum them up for the total property value.
  - sokoloff 5y ago
    The last paragraph is how it appears on the property tax statement, but I think the assessment isn’t created ground-up, but rather more from a market price down, starting with a likely sale price as an input rather than an output and deriving land and improvements prices so as to sum the input figure.
  - AnimalMuppet 5y ago
    Yes, they do that, or at least they claim to. Out where I live, they can probably come close, because there is still some vacant land out here. When it sells, you get an idea of what nearby land would sell for if it were vacant. But here's a building across the street from Central Park in Manhattan. What's the land price? When was the last time that a vacant lot sold in Manhattan? I mean, I guess you can go by the cost of the last place that sold with a building on it, and the buyer tore down the building. (Subtracting out the cost of the teardown.) When was the last time that happened across the street from Central Park? So in the places that the land is already heavily used, this is not all that easy to do.
lalaithion 5y ago
That's not quite what deadweight loss is; deadweight loss is when you can produce apples for $1, but a tax induces you to have to sell them for $1.10, preventing everyone who would be able to buy them at $1.05 from getting apples.
- MrPowers 5y ago
  I'm using the textbook definition of deadweight loss: https://en.wikipedia.org/wiki/Deadweight_loss https://en.wikipedia.org/wiki/Deadweight_loss
- alisonkisk 5y ago
  Both are deadweight loss.
whakim 5y ago
IMO the biggest issue with property taxes, land taxes, or any other similar idea, is that they arbitrarily tax one kind of wealth over others. Why should a person who owns a house worth $500k (and perhaps has a mortgage on it) pay not only the exact same tax rate, but also the amount of tax as a person who owns a house worth $500k (and doesn't have a mortgage on it), but also has $5 million in other assets? (This isn't even getting into the fact that the wealthier you are, the less of your total wealth is likely to consist of land/property/etc.)
- yaacov 5y ago
  Georgism makes a distinction between Capital (value produced by labor) and Land (value that existed before humans showed up). Rewarding owners of capital incentives people to make more, but rewarding owners of land benefits nobody other than the landowner.
  - whakim 5y ago
    That seems like a bit of a murky distinction, though, right? Taxing land disincentives economic activity a large component of which is in the land value (running a parking garage or hotel in downtown Manhattan, or a farm in a fertile region, etc.) but incentivizes other types of economic activity.
    - awakeasleep 5y ago
      Do you think its murkier than things in life are, usually? Or are you comparing it to an abstraction in code.
    - sooheon 5y ago
      Read this to understand the distinction: https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr... George goes to great lengths to distinguish these factors of production. They are fundamentally different.
    - abathur 5y ago
AnthonyMouse 5y ago
> The deadweight loss of property taxes is the economic loss of having resources devoted to filling out property tax filings. This is true, but it's minor. The main one is this: > Property taxes also distort incentives. If you improve your property, then you pay more tax. Property taxes can discourage you from using your land to its highest and best use. In particular, it's what happens after the incentives are distorted. It becomes unprofitable to increase the housing stock, so housing becomes more expensive, so people have to pay more for it. This can be a huge amount of money and it's deadweight loss. > Land taxes offer the opposite incentives. They encourage you to make your property better. It's not that they encourage it so much as that they stop discouraging it. You don't pay any less LVT if you develop your land, but you also don't pay any more. > Land taxes would arguably help a lot of the housing crises. This still depends on zoning. It doesn't matter how profitable it would be to have a 4-plex on your lot when building one is prohibited by zoning. And fixing the zoning would have the larger benefit, because in the places that matter, that's already the constraint, which LVT on its own can't get you out of. Of course, we could do both.
- midasuni 5y ago
  Encourages in the sense that leaving land empty while it gains value is easy and free. Once you are paying for that land you have to do something with it otherwise it costs more than the inflation of the value.
- dragonwriter 5y ago
  > It becomes unprofitable to increase the housing stock, so housing becomes more expensive There's no way that this occurs with actual property taxes at the levels they are in the US. Sure, an improvement may result in higher property taxes which go into effect before the value of the improvement begins being realized, but overall effective property tax rates in the US range between 0.37% and 2.22% per year; this plausibly could make uses where the value would be realized entirely in direct-use by the owner unviable, but there is no way it makes any use where the value is realized through commercial exploitation (whether productive or rent) unviable, even with something of a delay in realization. Including things like densifying housing for rent or sale. Yes, abstractly it might be a problem with property taxes, if you had a system where property taxes were the principal tax in society. Of course, the only people who even propose real estate taxes as the primary tax are…Georgists arguing for a heavy LVT replacing other taxes. > It’s not that they encourage it so much as that they stop discouraging it No, especially if they are heavy (as LVT proponents often propose), they don’t merely “stop discouraging” improvements, they make them necessary, because land uses that don’t provide a substantial fraction of the income potential of the land become unviable. In fact, land ownership by people who don’t have capital for both improvements and to stay afloat until those improvements bear fruit becomes unviable; a heavy LVT is an efficient way to assure acceleration of the concentration of land ownership.
Kaotique 5y ago
I was recently in Egypt and they have a tax on finished buildings. So naturally no building is ever finished. It is a very weird sight that 90% of the buildings don't have windows and uncompleted roofs.
- CRConrad 5y ago
  Used to be the same in Greece, AFAIK.

bradleyjg 5y ago

Land taxes are far far more difficult to calculate than property taxes. Impossible to do well in some cases. To know what land and the buildings on it are worth you can look to what people are willing to pay to buy them. There’s no similarly straightforward way to value the separate parts. So you’ll end up with a lot more wasted expert time for a less accurate result.

MrPowers 5y ago
Nah, it's really easy to calculate the value of the land. Once you calculate the value of the land, then it's pretty much applicable to the whole neighborhood too. It's a one-and-done analysis. This isn't my opinion. There's lots of economic research to back this up. EDIT: some support: https://www.progress.org/articles/the-implementation-of-land-value-taxation https://www.progress.org/articles/the-implementation-of-land...
- AnimalMuppet 5y ago
  Some evidence would be more convincing than a glib "nah, I'm right"...
  - deleted 5y ago
    [deleted]
  - epistasis 5y ago
    Oddly enough there was no evidence provided for the original claim, either. This despite there being many sources of this estimattioj laid out directly in the original article. The comment didn't mention why the original articles' various methods do not work.
    - AnimalMuppet 5y ago
      Fair point. But to me, I hold the reply to a higher standard. Why? Because a claim can be interesting (in the HN sense), even without evidence. A "no it's not" is less interesting, even though it's also a claim. Maybe that's just me...
- aeternum 5y ago
  This really doesn't make sense. Views matter for example, land with a blocked view should be worth less than land without the blocked view. Land immediately adjacent to a golf course or park is often valued higher. Land immediately next to railroad tracks or industry, not so much while the discount drops off steeply just a few blocks away. Water rights, drainage, soil quality, contamination, roadway access all matter a great deal for more commercial land.
  - MrPowers 5y ago
    I agree that different factors cause some land to be more valuable than others. I'd argue that the factors you've listed are relatively easy to factor into an appraisal. Property taxes, in comparison, are really hard to compute. Each jurisdiction has different rules. There are different valuation methodologies. If you add a 2 car garage, what the useful life. What depreciation schedule should be used. How should inflation be accounted for. I agree with your comment generally and am not sure what part of the original comment doesn't make sense to you. EDIT: Reread my original comment and see your point now. I phrased the "easy" part too strongly. I mean "easy" in relative terms... compared to what's being done currently, but agree the wording wasn't great.
TulliusCicero 5y ago
Property taxes are already commonly broken down into the value of the land vs buildings, IIRC.
- entangledqubit 5y ago
  At least for Seattle, the assessor's office has a breakdown but it turns out to be fairly bogus unless there's been a remodel or new building -- resulting in a new assessment. Quite a few cities also seem to have pretty bogus values on the books.
  - skt5 5y ago
    The building value by the county assessor's office is considered a standard for depreciation schedules. While it might not be useful for selling the property or building it - it does have value for accounting purposes.
- dsizzle 5y ago
  FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. That said, it is done for property insurance, so I think your point that it's already done stands.
  - lelanthran 5y ago
    > FWIW, I just looked up my own property tax records and there's no breakdown, so not sure how common that is. > > That said, it is done for property insurance, so I think your point that it's already done stands. I dunno how useful that will be - my insurance is based on how much it would cost to rebuild the house if it burned down. This lead to the comedic result that what I paid for the house at the time was about half what the insured value was. My property tax is calculated on the selling price, though.
    - DarylZero 5y ago
      That comedic situation is exactly the reason your insurance works like that. The insurance company knows it's in your interest to burn it down and sell the empty plot so they only insure it in a way that prevents that.
dsizzle 5y ago
Isn't this already done as part of property insurance?
larsiusprime 5y ago
Part III, concerning assessments, will post in a few days. Interested in your thoughts when that one goes up.
ineptech 5y ago
Inaccuracy isn't a very big component of this; assessing the value of land and structures isn't perfect but there's no obvious reason to think we're way better at one or the other. The point of this is that taxing the land only would lead to land being used differently, which would benefit society. Suppose there is a plot of land which (from some omniscient point of view) would offer maximal benefit to society if a four-plex were developed on it. The point of a LVT is that, under a LVT, a four-plex would be developed on it, not because anyone forces it but just because that's what's in the landowner's best interest; whereas under the current system (in which the structure is also taxed) the landowner might find it more profitable to build a duplex instead. The deadweight loss is the loss to society when the landowner builds something that's in their best interests but not society's. That's hard to prove for any specific piece of land, since we don't know what the omniscient-view "right" use of the land is. But if you accept the idea that there is an optimal use, and you you trust the whole idea of free market price discovery, it's reasonable.
- dnautics 5y ago
  Inaccuracy in the end is a HUGE component of this. If you can't have an accurate value for the land, the long-run incentives converge to a system where the land value assessors have a lot of power, and could use that power to screw you over.
- bradleyjg 5y ago
  > but there's no obvious reason to think we're way better at one or the other. There’s a very good reason. Sales of buildings plus land happen all the time, whereas sales of just land are virtually non-existent in a lot of the places with the most valuable property (e.g. Manhattan). Without real sales to tether the analysis you are just guessing.
  - DarylZero 5y ago
    Buildings are demolished in Manhattan on a regular basis, granted not that often. There are real sales of empty plots. Also if you know a building would cost $X to replace, but the plot with it sells for $X+$Y, you have some real information, not just guesses!
ukoki 5y ago
What if you had a system where anyone can bid any amount on any piece of land. Whether the owner refuses the bid or not, the land is now valued at the price of the bid for tax purposes. To avoid frivolous bids, bidders must place funds in escrow before making a bid which is then returned to the bidder if the owner refuses the bid or fails to respond within some number of days. All bids are reported to the public although bidders can be anonymous.
- bradleyjg 5y ago
  Buying land that has buildings on it but not the buildings is an awkward situation that requires a further negotiation of a lease transaction to the building owner. Even if you could set something super complicated up with this bidding system I don’t think it would accurately value what the land would be worth empty.
DarylZero 5y ago
Actually there are empty plots bought and sold all the time.

mindslight 5y ago

> Property taxes can discourage you from using your land to its highest and best use I agree. > Land taxes offer the opposite incentives. They encourage you to make your property better. But it doesn't make the converse true. At most, you can say that high enough land value taxes encourage making real estate generate more revenue, to pay the tax. But given the current economy's tendency to optimize everything legible and whisk away the surplus upwards, it's dubious whether being pushed harder into the economic grindstone is "better". For a rural example, well separated houses on a few acres are much nicer than ticky-tack suburban panopticon developments (or even worse an HOA). It's hard to prevent the latter from occurring over time due to the economic gradient (eg parents die and kids want the most money possible, so they subdivide), but we shouldn't be pushing it through policy.

TulliusCicero 5y ago
> But it doesn't make the converse true. It does work that way, though. Except it's not exactly 'better', but rather 'more economically productive', which may or may not be better depending on your value system and the specific cases that arise. > For a rural example, a single house on several acres is much nicer than a ticky-tack suburban panopticon (or even worse a HOA). Arguably nicer, yes, but the suburban hellscape is definitely a lot more economically productive. > Economically it's hard to prevent the latter from occurring over time (eg parents die and kids want the most money possible, so they subdivide), but we shouldn't be encouraging it through policy. This feels like an orthogonal issue to me, that US-style suburbia is bad. Though honestly the rural living you describe is probably no better. Oh sure, it's nice in some ways, but there's problems a plenty there too: it's more destructive for the environment per capita, and it causes problems with the intersection of the social contract and social services. For an example of that last bit, look at the struggle with rural high speed internet. Arguably necessary for economic activity as well as educational purposes, but it's much more expensive to wire up and service super low density areas, and yet people in those areas have less money, not more. So you end up with either a) left to the free market, they have shit internet access, or b) people in urban and suburban areas subsidize them getting better internet, even though for most people there it's an explicit choice to have that lifestyle (as opposed to, say, the urban poor). And it's not just internet: most infrastructure and services are harder to deliver in rural areas, and you can end up in shitty situations because of that. Even if you accept that it's fine for adults consenting to it, what about kids who grow up with fewer opportunities?

AnimalMuppet 5y ago

But if we go to a land tax, don't you have similar problems? Can you really say that land that has a 20-story highrise condo on it has the same value as the same land with a house on it? Because if you're going to buy the land - no matter what you intend to do with it - you get the land with the existing building. So, if you want to disentangle the price of the land from the price of the building, then you're back to appraisers and accountants... and deadweight loss. And: > A land tax wouldn't impose an additional tax to the landowner for improving the value of their land. How would it not? Do you just keep the land price from 1874 as the "value"? Or do you use the current price of raw land? What's the current price of raw land in Manhattan?

TulliusCicero 5y ago
> But if we go to a land tax, don't you have similar problems? Can you really say that land that has a 20-story highrise condo on it has the same value as the same land with a house on it? Yes, because we're talking about the land -- really, more like the geographic space than the literal land -- and not the buildings. > Because if you're going to buy the land - no matter what you intend to do with it - you get the land with the existing building. Okay. And? > So, if you want to disentangle the price of the land from the price of the building For property tax purposes I think it's already common to value both the land and the buildings and then sum them up for the total property value.
- sokoloff 5y ago
  The last paragraph is how it appears on the property tax statement, but I think the assessment isn’t created ground-up, but rather more from a market price down, starting with a likely sale price as an input rather than an output and deriving land and improvements prices so as to sum the input figure.
- AnimalMuppet 5y ago
  Yes, they do that, or at least they claim to. Out where I live, they can probably come close, because there is still some vacant land out here. When it sells, you get an idea of what nearby land would sell for if it were vacant. But here's a building across the street from Central Park in Manhattan. What's the land price? When was the last time that a vacant lot sold in Manhattan? I mean, I guess you can go by the cost of the last place that sold with a building on it, and the buyer tore down the building. (Subtracting out the cost of the teardown.) When was the last time that happened across the street from Central Park? So in the places that the land is already heavily used, this is not all that easy to do.

lalaithion 5y ago

That's not quite what deadweight loss is; deadweight loss is when you can produce apples for $1, but a tax induces you to have to sell them for $1.10, preventing everyone who would be able to buy them at $1.05 from getting apples.

MrPowers 5y ago
I'm using the textbook definition of deadweight loss: https://en.wikipedia.org/wiki/Deadweight_loss https://en.wikipedia.org/wiki/Deadweight_loss
alisonkisk 5y ago
Both are deadweight loss.

whakim 5y ago

IMO the biggest issue with property taxes, land taxes, or any other similar idea, is that they arbitrarily tax one kind of wealth over others. Why should a person who owns a house worth $500k (and perhaps has a mortgage on it) pay not only the exact same tax rate, but also the amount of tax as a person who owns a house worth $500k (and doesn't have a mortgage on it), but also has $5 million in other assets? (This isn't even getting into the fact that the wealthier you are, the less of your total wealth is likely to consist of land/property/etc.)

yaacov 5y ago
Georgism makes a distinction between Capital (value produced by labor) and Land (value that existed before humans showed up). Rewarding owners of capital incentives people to make more, but rewarding owners of land benefits nobody other than the landowner.
- whakim 5y ago
  That seems like a bit of a murky distinction, though, right? Taxing land disincentives economic activity a large component of which is in the land value (running a parking garage or hotel in downtown Manhattan, or a farm in a fertile region, etc.) but incentivizes other types of economic activity.
  - awakeasleep 5y ago
    Do you think its murkier than things in life are, usually? Or are you comparing it to an abstraction in code.
  - sooheon 5y ago
    Read this to understand the distinction: https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr... George goes to great lengths to distinguish these factors of production. They are fundamentally different.
  - abathur 5y ago

AnthonyMouse 5y ago

> The deadweight loss of property taxes is the economic loss of having resources devoted to filling out property tax filings. This is true, but it's minor. The main one is this: > Property taxes also distort incentives. If you improve your property, then you pay more tax. Property taxes can discourage you from using your land to its highest and best use. In particular, it's what happens after the incentives are distorted. It becomes unprofitable to increase the housing stock, so housing becomes more expensive, so people have to pay more for it. This can be a huge amount of money and it's deadweight loss. > Land taxes offer the opposite incentives. They encourage you to make your property better. It's not that they encourage it so much as that they stop discouraging it. You don't pay any less LVT if you develop your land, but you also don't pay any more. > Land taxes would arguably help a lot of the housing crises. This still depends on zoning. It doesn't matter how profitable it would be to have a 4-plex on your lot when building one is prohibited by zoning. And fixing the zoning would have the larger benefit, because in the places that matter, that's already the constraint, which LVT on its own can't get you out of. Of course, we could do both.

midasuni 5y ago
Encourages in the sense that leaving land empty while it gains value is easy and free. Once you are paying for that land you have to do something with it otherwise it costs more than the inflation of the value.
dragonwriter 5y ago
> It becomes unprofitable to increase the housing stock, so housing becomes more expensive There's no way that this occurs with actual property taxes at the levels they are in the US. Sure, an improvement may result in higher property taxes which go into effect before the value of the improvement begins being realized, but overall effective property tax rates in the US range between 0.37% and 2.22% per year; this plausibly could make uses where the value would be realized entirely in direct-use by the owner unviable, but there is no way it makes any use where the value is realized through commercial exploitation (whether productive or rent) unviable, even with something of a delay in realization. Including things like densifying housing for rent or sale. Yes, abstractly it might be a problem with property taxes, if you had a system where property taxes were the principal tax in society. Of course, the only people who even propose real estate taxes as the primary tax are…Georgists arguing for a heavy LVT replacing other taxes. > It’s not that they encourage it so much as that they stop discouraging it No, especially if they are heavy (as LVT proponents often propose), they don’t merely “stop discouraging” improvements, they make them necessary, because land uses that don’t provide a substantial fraction of the income potential of the land become unviable. In fact, land ownership by people who don’t have capital for both improvements and to stay afloat until those improvements bear fruit becomes unviable; a heavy LVT is an efficient way to assure acceleration of the concentration of land ownership.

Kaotique 5y ago

I was recently in Egypt and they have a tax on finished buildings. So naturally no building is ever finished. It is a very weird sight that 90% of the buildings don't have windows and uncompleted roofs.

CRConrad 5y ago
Used to be the same in Greece, AFAIK.