4 ms·

It seems like the root problem is that the way property taxes are assessed doesn’t actually line up with how much demand a given development puts on the city fo

It seems like the root problem is that the way property taxes are assessed doesn’t actually line up with how much demand a given development puts on the city for services/infrastructure. Property taxes are based on, “how much would someone else pay for this”, which isn’t the relevant metric from the city’s perspective, it should be, “approximately how expensive is this property to service year by year, including eventual replacement of infrastructure?” If you did it that way, low density developments would pay their true costs, and would become more expensive to the ‘end user’ and thus less popular. And if they didn’t, well, they're paying their true costs anyway, so problem solved.

netcan 5y ago
Partially, but only partially if you take this sentence literally: "our town is essentially a corporation where the citizens are the investors and stakeholders.. We are a real estate development company that also provides services... with holdings totaling $1.29 billion," Apple is essentially the stakeholder in the Apple ecosystem. Some decisions are made as you suggest. Apple price phones and laptops such that costs are covered and profits are made. Some decisions are "strategic." There's no direct revenue from their photo app, but a photo app helps sell phones and (more importantly) if Apple doesn't provide one then FB or Google will. A lot of Apple's decisions are like this. Some, currently very important decisions are all about leveraging power to extract revenue. Apple charge Google $15bn to be safari's default search option. They apply similar logic to all activity on iphones. As in-app purchases emerge, subscriptions, digital goods, physical goods or any other category emerges... Apple study that market and determine how much they can charge. It has nothing to do with how much these cost apple to support. IDK if this applies to Galesburg, but I think most towns/governments/municipalities have the power to generate a lot more revenue than they do... certainly during a building boom. What Apple would be doing in this position is (a) determining where real estate profits are being made (b) moving to claim the majority of those profits as revenue. I'm not saying they should do this, but the point of difference is worth noting.
- sokoloff 5y ago
  Maybe banning the import of anything from the outside and charging a 30% sales tax is the answer?
  - netcan 5y ago
    Possibly, depending on what the question is. My point wasn't that an analogy to commercial businesses should be made, but that since an analogy is being made...
- mellavora 5y ago
  Please, this idea that business is universally better at producing value than any other form of social organization has to die. I'm pro business. I founded my first money-making venture when I was 4 years old (selling "art" to strangers on the street-- the business was quickly closed by the regulators-- Mom). But business is best when the value created by an investment can be (mostly) captured by a single entity, and also generally when the ROI is short term. Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education. NOTING that the diffuse value created by government is often many orders of magnitude greater than the value which can be captured by a single organization. Another example: value of the internet vs value of Google. Google is an insanely valuable organization, but a) it wouldn't exist without the internet, and b) the other FANGS also derive their value from the internet. So clearly the internet's value is many times greater than that of any internet-based company.
  - acdha 5y ago
    > Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education. The charter school industry is the textbook example of this: what usually happens is that some school will have a good couple of years, and we’ll get some Slate piece about how they’ve discovered the secret of cost-effective education. Unfortunately, over time regression to the mean usually sets in and results start to look statistically similar to public school students of similar socioeconomic status while the few which maintain a performance edge inevitably turn out to have found a way to cherry-pick higher SES students and exclude the most expensive students because that’s what they’re incentivized to do.
ajmurmann 5y ago
I've always found it weird and funny that in many parts of Europe taxes used to be based on the width of the front of houses. That's why you'll find extremely narrow houses in some older downtown areas. Cologne is an example of this. As soon as the author started doing the math on street maintenance per lot, this medieval taxation system made instant sense to me (although I believe there also were taxes on windows...). Maybe something like this would be more beneficial. In general zoning that encourages density rather than discouraged it is definitely more in the interest of cities. Yet, most people get angry with me when I mention this.
- rebuilder 5y ago
  Historic taxes like the window tax etc. were as much a result of the government having very limited access to economic data at the time as anything. You couldn't say how much someone was earning, but the size of their domicile was a pretty good indicator, and one they couldn't hide. Well, until the unexpected consequences, like fake windows, kicked in, anyway.
  - ajmurmann 5y ago
    That's an interesting point! I just listened to an interview with the founder of Give Directly on the Rationally Speaking podcast where he explained that they used to look at houses to identify if someone should get the direct cash donations. So again proxy for wealth
macinjosh 5y ago
In my area all new housing developments have their own “metro tax district” that residents pay. It funds the infrastructure for their neighborhood. Some people don’t pay attention to it when budgeting for and buying a new house. I know that has caused many families to lose their homes. Usually those districts have a sunset built in though once they have covered the building costs.
analog31 5y ago
An issue with the present system is that the status quo is virtually immutable. How cities can tax is rigidly constrained by state laws. Attempts to change those laws run into every possible obstacle, especially if it's perceived that someone is getting more goodies, and someone else less. Often, divided along urban / rural lines. Now, it's not entirely rigid. In my state, each city sets its budget, then your tax bill is simply the budget weighted by the value of your property. Some kinds of extra expenditures such as bond issues can be approved through referendum. Others can be tacked onto the homeowners whose goodies are getting fixed, through special assessments. When the street in front of my house was rebuilt, I got a bill from the city for X amount based on Y feet of frontage. It's a tiny bit complex because you also live in a county which is doing the same thing. But the fundamental of assessing real estate and using it as the foundation of your tax bill is practically carved into stone. And it does have the advantage of being relatively straightforward to compute. In a town with a relatively brisk market, your assessment is going to be pretty close to what you paid for the house plus an inflation factor based on your neighborhood. And you know that your neighbor isn't somehow wriggling out of their tax obligation. That's overlooking the exceptions of course, but it captures the gist of it.

netcan 5y ago

Partially, but only partially if you take this sentence literally: "our town is essentially a corporation where the citizens are the investors and stakeholders.. We are a real estate development company that also provides services... with holdings totaling $1.29 billion," Apple is essentially the stakeholder in the Apple ecosystem. Some decisions are made as you suggest. Apple price phones and laptops such that costs are covered and profits are made. Some decisions are "strategic." There's no direct revenue from their photo app, but a photo app helps sell phones and (more importantly) if Apple doesn't provide one then FB or Google will. A lot of Apple's decisions are like this. Some, currently very important decisions are all about leveraging power to extract revenue. Apple charge Google $15bn to be safari's default search option. They apply similar logic to all activity on iphones. As in-app purchases emerge, subscriptions, digital goods, physical goods or any other category emerges... Apple study that market and determine how much they can charge. It has nothing to do with how much these cost apple to support. IDK if this applies to Galesburg, but I think most towns/governments/municipalities have the power to generate a lot more revenue than they do... certainly during a building boom. What Apple would be doing in this position is (a) determining where real estate profits are being made (b) moving to claim the majority of those profits as revenue. I'm not saying they should do this, but the point of difference is worth noting.

sokoloff 5y ago
Maybe banning the import of anything from the outside and charging a 30% sales tax is the answer?
- netcan 5y ago
  Possibly, depending on what the question is. My point wasn't that an analogy to commercial businesses should be made, but that since an analogy is being made...
mellavora 5y ago
Please, this idea that business is universally better at producing value than any other form of social organization has to die. I'm pro business. I founded my first money-making venture when I was 4 years old (selling "art" to strangers on the street-- the business was quickly closed by the regulators-- Mom). But business is best when the value created by an investment can be (mostly) captured by a single entity, and also generally when the ROI is short term. Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education. NOTING that the diffuse value created by government is often many orders of magnitude greater than the value which can be captured by a single organization. Another example: value of the internet vs value of Google. Google is an insanely valuable organization, but a) it wouldn't exist without the internet, and b) the other FANGS also derive their value from the internet. So clearly the internet's value is many times greater than that of any internet-based company.
- acdha 5y ago
  > Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education. The charter school industry is the textbook example of this: what usually happens is that some school will have a good couple of years, and we’ll get some Slate piece about how they’ve discovered the secret of cost-effective education. Unfortunately, over time regression to the mean usually sets in and results start to look statistically similar to public school students of similar socioeconomic status while the few which maintain a performance edge inevitably turn out to have found a way to cherry-pick higher SES students and exclude the most expensive students because that’s what they’re incentivized to do.

ajmurmann 5y ago

I've always found it weird and funny that in many parts of Europe taxes used to be based on the width of the front of houses. That's why you'll find extremely narrow houses in some older downtown areas. Cologne is an example of this. As soon as the author started doing the math on street maintenance per lot, this medieval taxation system made instant sense to me (although I believe there also were taxes on windows...). Maybe something like this would be more beneficial. In general zoning that encourages density rather than discouraged it is definitely more in the interest of cities. Yet, most people get angry with me when I mention this.

rebuilder 5y ago
Historic taxes like the window tax etc. were as much a result of the government having very limited access to economic data at the time as anything. You couldn't say how much someone was earning, but the size of their domicile was a pretty good indicator, and one they couldn't hide. Well, until the unexpected consequences, like fake windows, kicked in, anyway.
- ajmurmann 5y ago
  That's an interesting point! I just listened to an interview with the founder of Give Directly on the Rationally Speaking podcast where he explained that they used to look at houses to identify if someone should get the direct cash donations. So again proxy for wealth

macinjosh 5y ago

In my area all new housing developments have their own “metro tax district” that residents pay. It funds the infrastructure for their neighborhood. Some people don’t pay attention to it when budgeting for and buying a new house. I know that has caused many families to lose their homes. Usually those districts have a sunset built in though once they have covered the building costs.

analog31 5y ago

An issue with the present system is that the status quo is virtually immutable. How cities can tax is rigidly constrained by state laws. Attempts to change those laws run into every possible obstacle, especially if it's perceived that someone is getting more goodies, and someone else less. Often, divided along urban / rural lines. Now, it's not entirely rigid. In my state, each city sets its budget, then your tax bill is simply the budget weighted by the value of your property. Some kinds of extra expenditures such as bond issues can be approved through referendum. Others can be tacked onto the homeowners whose goodies are getting fixed, through special assessments. When the street in front of my house was rebuilt, I got a bill from the city for X amount based on Y feet of frontage. It's a tiny bit complex because you also live in a county which is doing the same thing. But the fundamental of assessing real estate and using it as the foundation of your tax bill is practically carved into stone. And it does have the advantage of being relatively straightforward to compute. In a town with a relatively brisk market, your assessment is going to be pretty close to what you paid for the house plus an inflation factor based on your neighborhood. And you know that your neighbor isn't somehow wriggling out of their tax obligation. That's overlooking the exceptions of course, but it captures the gist of it.