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I've long advocated a land value tax. I would suggest that any reform of this nature, that eliminates private capture of economic rent, accompany one-time compe

I've long advocated a land value tax. I would suggest that any reform of this nature, that eliminates private capture of economic rent, accompany one-time compensation to the parties that lose that economic rent, so in this case, compensation to make up for the loss in property value that a LVT would incur. The same should apply to any other repeal of rent-seeking institutions: anti-labor-competitive laws privileging labor unions, licensure barriers privileging taxi medallion holders, etc. The British used this method to end slavery throughout their empire, which meant: 1. much more rapid end to slavery, due to less political opposition to its abolition, 2. no costly civil war and enduring sociopolitical grievances that emanated from it. Economic analyses indicate that compensating rent-seekers at an amount equal to the expected loss of economic utility over their lifetime from the elimination of their rent-seeking opportunity, as part of a reformation to end the institutions that enable their rent-seeking, leads to net economic gains, because the economic efficiency gains from expedited abolition of the rent-seeking far outweighs the cost of the compensation.

deleted 4y ago
[deleted]
inter_netuser 4y ago
I like Georgist taxes, but it's unclear that tax incidence will fall entirely on the rentier class. Important land is always unique, and therefore taxation would be have be incredibly dialed-in, no? A busy major international port would need to be taxed very differently than a sparsely attended beach just a mile away. This seems very difficult to get right. Have there been practical applications that show that's not a concern?
- chii 4y ago
  > A busy major international port would need to be taxed very differently than a sparsely attended beach just a mile away. This seems very difficult to get right. you could imagine that the taxation is tied to the value of the land, which can be calculated as the rent income, minus the value of improvements upon the land (such as any buildings, which can be estimated by the cost of construction and maintenance over the useful life time, which is already a figure that is needed for depreciation purposes). This is the reason why LVT cannot be passed onto the renter, because if you increase the rent, you would pay more taxes as the value of the land must have increased if the renter accepts this higher rent without any changes to the building.
  - inter_netuser 4y ago
    valuations are always subjective. you pretend it's like some sort of precise science, but it is not, never was, and never will be. ffs, the example is a major international port, not a cookie-cutter shoebox-sized condo. The very first thing that will happen upon implementation of LVT is simple "rebranding" of "renting" into "mortgages". What tax do you charge then? some LLC "owns" the port. some bank provides it a "mortgage". What's the tax due on such mortgaged property? Previous rent? What if such rent was never charged and it was mortgaged from day zero? What then? What if there is no comparable entity to compare to? Just some half-ass guess? What's the LVT tax on the Suez Canal? Panama Canal? It's FAR from trivial.
    - ajb 4y ago
      The Romans had a solution to this. You self declare a value, the government gets a right to purchase your property at that value, which they exercise if they think you declared too low. Otherwise you are taxed. Not everyone will likes that idea, but it shows that a non subjective solution exists, it and where there is one, there may be more.
- caf 4y ago
  Land taxes are certainly in use around the world. My "rates" which fund the local government are based on the "unimproved land value". If you are unhappy with the land value determination (presumably because you feel it is too high) you can object and present evidence - for residential property that isn't too hard because area sales records are available and the replacement cost of the improvements on the land are reasonably easy to estimate and subtract from the sale price. No doubt unique businesses like airports get professional appraisals that painstakingly put an estimate together.
- imtringued 4y ago
  The biggest problem with an LVT isn't when it's too low. Even a low LVT can prevent empty parking lots and abandoned properties. The problem with LVTs start when the LVT is too high as everyone abandons the land and nobody wants to acquire it. That is a real nightmare because of the extremely high valuations of land fueled by low land value and property taxes. Transitioning to a steep LVT is difficult because the assumption is that the LVT drops the value of the land if the yearly tax payment is too high. A $1 million dollar plot of land isn't supposed to pay $50k in taxes. The payment you are willing to make is say $10k per year which means the value of the land drops to $200k. Making that jump is extremely difficult. It's only really viable if you started with the LVT from the beginning. The reason why Germany can transition to an LVT is because the property taxes it charges are laughably low to begin with. Around 200€ to 1000€ per year. There is no plan to increase taxes to lower the value of land and put pressure to solving the housing problem.
  - ItsMonkk 4y ago
    There's several ways to look at figuring out the correct value. You can look at the value of the surrounding land, or you can look at the value of the improvements. What's nice about looking at the improvements is we should always be able to figure out the cost to build the building initially, we can look at the repair costs. Say we have a house that was just built. We know for sure that this cost $500k to construct. We have the bills. Make the market price of the lot and house cost $500k and the tax is perfect. Done. If the tax is above the correct value, the auction bid will be under $500k, that's bad! Lower the tax. Now let's say it's 10 years later. There has been depreciation on the house. It's no longer worth the $500k. If we still tax the building as if its worth $500k, what happens? It turns out we under-tax the 100% LVT. But as we know, under-taxing is okay, not perfect, but okay. It's over-taxing that is harmful! What happens if someone bids $600k for it? Now we know we are significantly under-taxing the area and have good reason to increase the tax, and send out an appraiser to look at it. Lastly I just need to point out that in a LVT world, it is kinda going to be like the "Don't fight the Fed" line. If you know that bidding $600k on a $500k house is going to force a tax inspection, you might not be so happy to lose $100k, so you might bid less. You might even bid $500k simply because that's what the home is worth, you might fund the appraisal yourself so that you don't risk your $100k. As the speculation is driven out of the market, the values of homes will be much more steady than they are today, and land appraisal will therefore become much easier and uniform. Even Zillow could do appraisal's with a LVT.
belorn 4y ago
I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sales. The main argument that I see against land value taxes is that land doesn't generate any income by itself, which forces people to pay money in situation where they might not have any income to do so. One could bypass this problem by putting in limitations, like an requirement to be high-income before the tax is applicable. One could also limit land tax to specific zones outside of low density residential areas so it doesn't go into effect when the land owner and the person living there is the same person.
- CryptoPunk 4y ago
  >>I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sales. The article goes into the advantages of a land value tax over other types of tax, including a property tax: The big question land value taxes help answer is: How can a government raise funds without distorting choices and possibly leaving people worse off? If you tax income, it provides a disincentive to work. If you tax property, it provides a disincentive to improve the physical buildings on top of the land. Sometimes the tax is intentionally disincentivizing an activity — think carbon taxes to reduce greenhouse gas emissions or so-called “sin taxes” on tobacco. But there are also taxes governments want to levy to pay for valuable services without changing behaviors too much (or at all). >>The main argument that I see against land value taxes is that land doesn't generate any income by itself, which forces people to pay money in situation where they might not have any income to do so. Those people should be selling their land. We should not have a scarce natural resource sitting idle or under-utilized. From the article as well: In small towns, vacant lots contribute to decline — and if there’s no valuable structure on a property, its delinquent landlords likely only pay a nominal property tax. This both lowers tax revenue and hurts neighborhood quality for everyone else. ** In Allentown, Pennsylvania, the system worked! According to a 2019 Strong Towns article, after the city adopted an LVT (through a split-rate system that still kept some property taxes in place) in 1996, “construction returned to the city: the number of taxable building permits surged past neighboring Bethlehem, market investment returned and capital improvement reappeared in city budgets. ... The losers in this trade were absentee owners of vacant lots, who had to shoulder much more of the burden.” Sen. Pat Toomey (R-PA) is quoted touting the benefits of the tax: “The number of building permits in Allentown has increased by 32 percent from before we had a land tax.”*
drekk 4y ago
We did economically recompense some former slaveowners. Not the slaves or their descendants, of course. https://today.uconn.edu/2021/03/there-was-a-time-reparations-were-actually-paid-out-just-not-to-formerly-enslaved-people/ https://today.uconn.edu/2021/03/there-was-a-time-reparations...
- gizmo686 4y ago
  Assuming by "we" you mean the United States, then we only ever compensated slaveowners in DC [0]. Notably, abolishing slavery in DC did not require going through a costly civil war as it did in (almost) all of the slave states. Granted, it is hard to decide how to read this history. Specifically, the civil war did not start because the federal government tried freeing slaves; but because the eventual confederacy states feared it would. Abolition wouldn't become union policy until well into the civil war (largely due to the sunk cost of fighting the far). And, the 4 union slave states would eventually abolish slavery as well. Still, given how costly the civil war was (both in terms of money, lives, and politics), it is worth considering the counterfactual where did a compensated abolition, which seems to have worked out better when it was attempted. [0] The act to search for is District of Columbia Compensated Emancipation Act
  - lern_too_spel 4y ago
    Lincoln had always planned to compensate slaveowners in order to abolish slavery and drafted his first compensated emancipation plan in 1849. This was rejected by the southern states. http://www.mrlincolnandfreedom.org/civil-war/congressional-action-inaction/compensated-emancipation/ http://www.mrlincolnandfreedom.org/civil-war/congressional-a...
- Jensson 4y ago
  How much would you pay to save 600 000 lives? Because that is what you sacrificed instead. If you forced slave owners to compensate their slaves the death toll would likely be a lot higher as they would struggle harder, would that be worth it?
clairity 4y ago
i disagree that we should make landowners "whole" in some sense, as they went into their investment knowing that the value of their investment could go down. it's not up to the rest of us to bail out wealthy landowners in that way, which creates a perverse incentive to seek government bailout for any and all risk-taking. enact the tax gradually, say over 5 years, and the property market will adjust accordingly.
- CryptoPunk 4y ago
  I think when we change the laws, we should compensate those who lose out from the change. By giving people the assurance that the laws will either remain the same, or they will be compensated if a change in the law incurs for them losses in their investment, people will be encouraged to invest more of their time and money in endeavors in our society. Regulatory/institutional stability is a related concept and widely considered by economists to be an important contributor to economic development. As for the moral argument, I find it hard to believe that individuals should know that the laws that society collectively agreed on and implemented, are unjust. To some extent we rely on society to inform us of right and wrong, and there is no clearer example of that expression than the laws and policies the government institutes through at the behest of elected representatives. So I think the fault of unjust laws, where they exist, should fall on society as a whole, as opposed to those who as a matter of circumstance, just happened to make investments of time or money that depended on those laws. Finally, not compensating landowners means far more political opposition to instituting such a tax, and therefore delays in doing so, and that in itself is costly. Consequently, insisting on landowners being punished for benefiting from the legal status of land ownership will be harmful to society. It would be a case of prioritizing vengeance over society's wellbeing.
  - clairity 4y ago
    no, investors need no additional incentive to invest. they squarely chose to take the risk, and will do so regardless of boondoggles like this, because they have no better alternative (i.e., opportunity cost impels them). it's the same fallacious argument used to keep progressive taxes at bay (oh noes, the rich people will leave america for... ???). let them fail. it's not a social problem in the slightest. the social safety net should cushion those at the bottom, certainly not those at the top, or in most cases, not even those in the middle. certainly it means more political opposition in the form of money, but not in votes, which is the more pertinent metric.

deleted 4y ago

[deleted]

inter_netuser 4y ago

I like Georgist taxes, but it's unclear that tax incidence will fall entirely on the rentier class. Important land is always unique, and therefore taxation would be have be incredibly dialed-in, no? A busy major international port would need to be taxed very differently than a sparsely attended beach just a mile away. This seems very difficult to get right. Have there been practical applications that show that's not a concern?

chii 4y ago
> A busy major international port would need to be taxed very differently than a sparsely attended beach just a mile away. This seems very difficult to get right. you could imagine that the taxation is tied to the value of the land, which can be calculated as the rent income, minus the value of improvements upon the land (such as any buildings, which can be estimated by the cost of construction and maintenance over the useful life time, which is already a figure that is needed for depreciation purposes). This is the reason why LVT cannot be passed onto the renter, because if you increase the rent, you would pay more taxes as the value of the land must have increased if the renter accepts this higher rent without any changes to the building.
- inter_netuser 4y ago
  valuations are always subjective. you pretend it's like some sort of precise science, but it is not, never was, and never will be. ffs, the example is a major international port, not a cookie-cutter shoebox-sized condo. The very first thing that will happen upon implementation of LVT is simple "rebranding" of "renting" into "mortgages". What tax do you charge then? some LLC "owns" the port. some bank provides it a "mortgage". What's the tax due on such mortgaged property? Previous rent? What if such rent was never charged and it was mortgaged from day zero? What then? What if there is no comparable entity to compare to? Just some half-ass guess? What's the LVT tax on the Suez Canal? Panama Canal? It's FAR from trivial.
  - ajb 4y ago
    The Romans had a solution to this. You self declare a value, the government gets a right to purchase your property at that value, which they exercise if they think you declared too low. Otherwise you are taxed. Not everyone will likes that idea, but it shows that a non subjective solution exists, it and where there is one, there may be more.
caf 4y ago
Land taxes are certainly in use around the world. My "rates" which fund the local government are based on the "unimproved land value". If you are unhappy with the land value determination (presumably because you feel it is too high) you can object and present evidence - for residential property that isn't too hard because area sales records are available and the replacement cost of the improvements on the land are reasonably easy to estimate and subtract from the sale price. No doubt unique businesses like airports get professional appraisals that painstakingly put an estimate together.
imtringued 4y ago
The biggest problem with an LVT isn't when it's too low. Even a low LVT can prevent empty parking lots and abandoned properties. The problem with LVTs start when the LVT is too high as everyone abandons the land and nobody wants to acquire it. That is a real nightmare because of the extremely high valuations of land fueled by low land value and property taxes. Transitioning to a steep LVT is difficult because the assumption is that the LVT drops the value of the land if the yearly tax payment is too high. A $1 million dollar plot of land isn't supposed to pay $50k in taxes. The payment you are willing to make is say $10k per year which means the value of the land drops to $200k. Making that jump is extremely difficult. It's only really viable if you started with the LVT from the beginning. The reason why Germany can transition to an LVT is because the property taxes it charges are laughably low to begin with. Around 200€ to 1000€ per year. There is no plan to increase taxes to lower the value of land and put pressure to solving the housing problem.
- ItsMonkk 4y ago
  There's several ways to look at figuring out the correct value. You can look at the value of the surrounding land, or you can look at the value of the improvements. What's nice about looking at the improvements is we should always be able to figure out the cost to build the building initially, we can look at the repair costs. Say we have a house that was just built. We know for sure that this cost $500k to construct. We have the bills. Make the market price of the lot and house cost $500k and the tax is perfect. Done. If the tax is above the correct value, the auction bid will be under $500k, that's bad! Lower the tax. Now let's say it's 10 years later. There has been depreciation on the house. It's no longer worth the $500k. If we still tax the building as if its worth $500k, what happens? It turns out we under-tax the 100% LVT. But as we know, under-taxing is okay, not perfect, but okay. It's over-taxing that is harmful! What happens if someone bids $600k for it? Now we know we are significantly under-taxing the area and have good reason to increase the tax, and send out an appraiser to look at it. Lastly I just need to point out that in a LVT world, it is kinda going to be like the "Don't fight the Fed" line. If you know that bidding $600k on a $500k house is going to force a tax inspection, you might not be so happy to lose $100k, so you might bid less. You might even bid $500k simply because that's what the home is worth, you might fund the appraisal yourself so that you don't risk your $100k. As the speculation is driven out of the market, the values of homes will be much more steady than they are today, and land appraisal will therefore become much easier and uniform. Even Zillow could do appraisal's with a LVT.

belorn 4y ago

I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sales. The main argument that I see against land value taxes is that land doesn't generate any income by itself, which forces people to pay money in situation where they might not have any income to do so. One could bypass this problem by putting in limitations, like an requirement to be high-income before the tax is applicable. One could also limit land tax to specific zones outside of low density residential areas so it doesn't go into effect when the land owner and the person living there is the same person.

CryptoPunk 4y ago
>>I am rather skeptic of land value taxes, but I would like to hear your view of why land value tax is better than simply raising the tax on rent and property sales. The article goes into the advantages of a land value tax over other types of tax, including a property tax: The big question land value taxes help answer is: How can a government raise funds without distorting choices and possibly leaving people worse off? If you tax income, it provides a disincentive to work. If you tax property, it provides a disincentive to improve the physical buildings on top of the land. Sometimes the tax is intentionally disincentivizing an activity — think carbon taxes to reduce greenhouse gas emissions or so-called “sin taxes” on tobacco. But there are also taxes governments want to levy to pay for valuable services without changing behaviors too much (or at all). >>The main argument that I see against land value taxes is that land doesn't generate any income by itself, which forces people to pay money in situation where they might not have any income to do so. Those people should be selling their land. We should not have a scarce natural resource sitting idle or under-utilized. From the article as well: In small towns, vacant lots contribute to decline — and if there’s no valuable structure on a property, its delinquent landlords likely only pay a nominal property tax. This both lowers tax revenue and hurts neighborhood quality for everyone else. ** In Allentown, Pennsylvania, the system worked! According to a 2019 Strong Towns article, after the city adopted an LVT (through a split-rate system that still kept some property taxes in place) in 1996, “construction returned to the city: the number of taxable building permits surged past neighboring Bethlehem, market investment returned and capital improvement reappeared in city budgets. ... The losers in this trade were absentee owners of vacant lots, who had to shoulder much more of the burden.” Sen. Pat Toomey (R-PA) is quoted touting the benefits of the tax: “The number of building permits in Allentown has increased by 32 percent from before we had a land tax.”*

drekk 4y ago

We did economically recompense some former slaveowners. Not the slaves or their descendants, of course. https://today.uconn.edu/2021/03/there-was-a-time-reparations-were-actually-paid-out-just-not-to-formerly-enslaved-people/ https://today.uconn.edu/2021/03/there-was-a-time-reparations...

gizmo686 4y ago
Assuming by "we" you mean the United States, then we only ever compensated slaveowners in DC [0]. Notably, abolishing slavery in DC did not require going through a costly civil war as it did in (almost) all of the slave states. Granted, it is hard to decide how to read this history. Specifically, the civil war did not start because the federal government tried freeing slaves; but because the eventual confederacy states feared it would. Abolition wouldn't become union policy until well into the civil war (largely due to the sunk cost of fighting the far). And, the 4 union slave states would eventually abolish slavery as well. Still, given how costly the civil war was (both in terms of money, lives, and politics), it is worth considering the counterfactual where did a compensated abolition, which seems to have worked out better when it was attempted. [0] The act to search for is District of Columbia Compensated Emancipation Act
- lern_too_spel 4y ago
  Lincoln had always planned to compensate slaveowners in order to abolish slavery and drafted his first compensated emancipation plan in 1849. This was rejected by the southern states. http://www.mrlincolnandfreedom.org/civil-war/congressional-action-inaction/compensated-emancipation/ http://www.mrlincolnandfreedom.org/civil-war/congressional-a...
Jensson 4y ago
How much would you pay to save 600 000 lives? Because that is what you sacrificed instead. If you forced slave owners to compensate their slaves the death toll would likely be a lot higher as they would struggle harder, would that be worth it?

clairity 4y ago

i disagree that we should make landowners "whole" in some sense, as they went into their investment knowing that the value of their investment could go down. it's not up to the rest of us to bail out wealthy landowners in that way, which creates a perverse incentive to seek government bailout for any and all risk-taking. enact the tax gradually, say over 5 years, and the property market will adjust accordingly.

CryptoPunk 4y ago
I think when we change the laws, we should compensate those who lose out from the change. By giving people the assurance that the laws will either remain the same, or they will be compensated if a change in the law incurs for them losses in their investment, people will be encouraged to invest more of their time and money in endeavors in our society. Regulatory/institutional stability is a related concept and widely considered by economists to be an important contributor to economic development. As for the moral argument, I find it hard to believe that individuals should know that the laws that society collectively agreed on and implemented, are unjust. To some extent we rely on society to inform us of right and wrong, and there is no clearer example of that expression than the laws and policies the government institutes through at the behest of elected representatives. So I think the fault of unjust laws, where they exist, should fall on society as a whole, as opposed to those who as a matter of circumstance, just happened to make investments of time or money that depended on those laws. Finally, not compensating landowners means far more political opposition to instituting such a tax, and therefore delays in doing so, and that in itself is costly. Consequently, insisting on landowners being punished for benefiting from the legal status of land ownership will be harmful to society. It would be a case of prioritizing vengeance over society's wellbeing.
- clairity 4y ago
  no, investors need no additional incentive to invest. they squarely chose to take the risk, and will do so regardless of boondoggles like this, because they have no better alternative (i.e., opportunity cost impels them). it's the same fallacious argument used to keep progressive taxes at bay (oh noes, the rich people will leave america for... ???). let them fail. it's not a social problem in the slightest. the social safety net should cushion those at the bottom, certainly not those at the top, or in most cases, not even those in the middle. certainly it means more political opposition in the form of money, but not in votes, which is the more pertinent metric.