6 ms·

I totally get the appeal of land taxes and restriction of land-use regulation at the local level, and by and large they seem like a reasonable approach to poor

I totally get the appeal of land taxes and restriction of land-use regulation at the local level, and by and large they seem like a reasonable approach to poor resource allocation and unequal ownership opportunities. One thing I've not seen addressed, though, is the apparent disincentive to improve communities in meaningful ways. For instance, say I live in a very expensive city and I can no longer afford the land tax. I decide to move to a less expensive city and set up roots there. This new city is crummier: the city government is inefficient, there are fewer amenities available, and local institutions are poorly organized and executed. I spend some time petitioning the local government to make reforms, I work with local groups to improve city amenities, and I vote for policies to revive local institutions. As I do this, the city becomes much nicer. However, it also becomes more attractive for other folks from the expensive city who can afford to buy up local property and drive up the value/taxes of my land. If this goes on, I'll once again be in a situation where I can't afford to live in my home because others want to live there too. Say if, after moving to my cheaper city, I had instead decided to keep the city as crummy as possible while meeting my own needs. I drive a car, so I vote against bike lanes. I don't have young kids, so I lobby against school levies. I don't swim, so I vote against a public pool. This is objectively worse for the city as a whole, but if I want to be able to afford to live in a city that meets my needs these are the actions I should take. There are always going to be tradeoffs between the opportunities of people who live in places and those who want to live in those places. Stringent local regulations weigh heavily in favor of those who currently live in places, and this is widely recognized (e.g. the term NIMBY is widely known). Land taxes and deregulated local zoning seem to weigh heavily in the opposite direction, but I rarely see this addressed or acknowledged. Moreover, land taxes in particular seem like they actively disincentivize pro-social or civically minded policies for existing residents (whereas local regulations allow communities to improve themselves without being priced out through other means). If I'm missing some context here let me know, but it's one of my main critiques when these proposals pop up that I've never seen satisfactorily addressed.

beambot 5y ago
How is this concern not equally-relevant in the current status quo? At least for our locale: property taxes are still based on assessed value, sales tax is collected on purchases, and income tax & business permits still apply. All of these get more expensive if the community improves...
- djokkataja 5y ago
  Yeah, this was already happening with people moving from the bay area to Phoenix.
- gameman144 5y ago
  Property taxes are definitely in the same vein, and I'd be curious about the same aspect there. Currently, local government regulation seems to be the main mechanism to deter this today (e.g. rent control, senior citizen exemptions, single-family zoning), but the "current residents" vs "newcomers" tradeoff is absolutely strong here. One differentiating factor between land tax and property tax, though, is that if I'm taxed on all the additional private developments I make to my property, public development becomes a more attractive option (which I'd expect would make the disincentive weaker with property taxes). For instance, if I would have to pay $2k more a year in tax if I built a pool on my property, I might be more inclined to support the public pool. This would not apply with land value taxes. For sales tax and income tax, these would apply regardless of location, and apply at the individual level instead of cross-pollinating between individuals. If my neighbor makes twice as much, or buys twice as much, it's easy to rationalize that they pay twice as much tax as me. If my neighbor just bought an identical house to mine for twice what I paid five years ago, though, it is harder to stomach that my tax bill should be twice was it was five years ago as well.
ScottBurson 5y ago
If you buy property in the second city, then as values rise, yes your taxes will go up but so will the value of your property. Worst case, you have to take out a home equity loan to pay the taxes, but you'll probably still come out ahead. I've long advocated for an arrangement whereby if the value of a property increases by more than some small amount, say 2%, the excess wouldn't come due until the property was sold; the locality would hold a lien on the balance. This, IMO, is how Prop. 13 should have worked -- seniors on fixed incomes facing rising property values aren't really poor; they just have a cash flow problem, which could and should have been solved without taking money from the localities. Anyway, such a provision would make it unnecessary, in many cases, to take out a home equity loan to pay an LVT. Of course, renters wouldn't benefit directly from property value gains, but as an LVT would incentivize construction, it would help bring rents down.
- vladvasiliu 5y ago
  > If you buy property in the second city, then as values rise, yes your taxes will go up but so will the value of your property. Worst case, you have to take out a home equity loan to pay the taxes, but you'll probably still come out ahead. Wouldn't this rise in your property's value only matter when you sell? Home equity loans aren't a thing in France as far as I know, so maybe I'm completely off here, but wouldn't you need to pay back that loan anyway? So if you're intending to sell the property (which I assume is the case, since OP's main complaint was being forced to move), how do you come out ahead?
  - pbhjpbhj 5y ago
    You don't need a house after you die. So, you borrow money against the increase in value of the house. The OP is saying that when the estate (wealth of dead person) is concluded the balance will be such that loans against the property (aka 'equity release') will ask be paid easily by the sale of the property. Ergo, no loss to the hypothetical improver of the locality. I'd say also, anyone who is capable of producing all those improvements should be able to make a good living, and their wage should improve with the monetary value of land in the area. Meaning the land tax shouldn't, on average, be harmful.
Mizza 5y ago
Surely this is going to be a problem as long as housing is just another market commodity? I remember living in a pretty shabby student ghetto district of Boston, and you'd regularly see graffiti saying "Keep Allston Shitty". In Philadelphia, I heard similar rumors of locals occasionally firing off a few gunshots every month, just to keep the white people scared and the rents down. Renters everywhere are basically incentivized to keep their neighborhoods as shabby as unsafe as they can handle.
- psyc 5y ago
  I knew you were talking about Allston before I got to the Allston part. Also a running subplot in the show Shameless.
- eli_gottlieb 5y ago
  For once someone actually makes a decent point about the contradictory class interests of renters!
- imtringued 5y ago
  The same is true of people who are trying to make themselves unfireable by writing difficult to maintain software to gain job security. They do this because they think they would be abandoned by society immediately the moment they are fired. It's kind of ironic. People want power not because they need it but instead to shield themselves from the bad side effects that not having power entails. In other words, people want to have power to protect themselves from those in power.
djokkataja 5y ago
> For instance, say I live in a very expensive city and I can no longer afford the land tax. One of the major reasons that our cities become expensive in our "modern" society is that we don't have land value taxes. If we have a land value tax, then when someone decides they can't afford to keep paying the tax, they sell it to someone who can OR they find a way to make the things built on that property much more valuable so that the tax is affordable. It provides a very strong incentive for property owners to do things like tearing down single family homes and building multi-unit condos in their place. Because there are multiple units where there was previously only one, the cost of living actually goes down. This is why it's considered a very beneficial tax: it promotes efficient use of land from economic perspectives. (This also applies to businesses: if a business isn't able to afford the land value tax for their property, they have strong incentives to find a way to make the use of their land more valuable or to sell it to someone who can. And if the value of their land is going up more than they can afford, that implies that there likely are potential buyers who could make better use of it.) For us to go from where we currently are to a land value tax would require a transition period, because it takes time to tear things down and build new things. But a society that was implementing a land value tax would see new properties opening up like I described above on a regular basis. So if you couldn't afford the land value tax, you would still be able to stay in the same city (and probably more cheaply and in a nicer, newer condo) unless you absolutely required a single family home or similar low-density housing.
- valenterry 5y ago
  All you say is interesting and probably true, but you did not address OP's specific point at all.
  - djokkataja 5y ago
    The OP's specific point was based on a misunderstanding: that being unable to pay the land value tax would mean they would have to move to a different city because the cost of living in their original city would be too high. This might be a reasonable concern during a transition to a land value tax system, but once the land value tax has been in place long enough to see more efficient use of land actually happening, the cost of living would be going down. So the premise of their argument doesn't hold. Put another way, their concern was based on them specifically paying more taxes on land while society stays the same in regards to use of land. But that doesn't make sense because they're not the only person who would be paying land taxes; everyone who owns land would be, and that changes everyone's incentives for how they use land. If you mean the part about "how could this ever overcome NIMBY" / tradeoffs between people who already live somewhere and people who want to live somewhere, then yeah, that wasn't what I was talking about.
solidsnack9000 5y ago
It seems like you overlooked the obvious -- when your LVT went up, your land went up in value. You sold your land and moved to some other, cheaper, place and thus realized a profit from that increase in value. If, in the other place, you make things better and the land goes up in value so much that you can no longer afford the LVT, then you can sell your land and realize, again, a significant profit. These profits are a strong incentive.
- devilbunny 5y ago
  So what about capital gains/income tax? AIUI - and I have not really studied LVT's closely, but since they have been bandied about quite a bit, I know only enough to be dangerous - LVT's are supposed to pretty much eliminate other taxes, correct? If your property doubles in value, and you sell to get out from under the tax, but you lose 25-40% of that increase to income tax, you just took a big hit. Or am I completely off-base here?
  - solidsnack9000 5y ago
    I don't think you're representing the situation fairly, because profiting 60% to 75% is definitely not a loss -- it's not taking a "big hit" -- and the problem there has nothing to do with LVTs, anyways. If your property doubles in value in and you sell it and pay 25% to 40% of the increase: the gross profit is: 200 - 100 = 100 the tax is: 25% to 40% of 100 which is 25 to 40 the profit post tax is: 100 minus 25 to 40 or, in other words, 75 to 60
    - devilbunny 5y ago
      It's a big hit, not a complete erasure of profit (setting aside simple inflation, because that's a big elephant in the room here). When you rewrite the tax laws so that I can effectively be forced to sell because other people would make more productive use of my land, well, regardless of how I feel about the idea, that's a reasonable argument. But if you tax me for the increase in the value of my land while I still own it, and then tax me on the profit I made from selling it when I decided I didn't want to pay those taxes anymore, that just seems like double-dipping. Isn't the whole point of the LVT that it makes buy-and-hold speculation unprofitable via the LVT itself? So if someone pays their LVT until it becomes so high that the expense of moving is less than the expense of saving, haven't they already effectively paid for their share of the increased value? I think LVT's are interesting, but the practical considerations involved are enormous.

beambot 5y ago

How is this concern not equally-relevant in the current status quo? At least for our locale: property taxes are still based on assessed value, sales tax is collected on purchases, and income tax & business permits still apply. All of these get more expensive if the community improves...

djokkataja 5y ago
Yeah, this was already happening with people moving from the bay area to Phoenix.
gameman144 5y ago
Property taxes are definitely in the same vein, and I'd be curious about the same aspect there. Currently, local government regulation seems to be the main mechanism to deter this today (e.g. rent control, senior citizen exemptions, single-family zoning), but the "current residents" vs "newcomers" tradeoff is absolutely strong here. One differentiating factor between land tax and property tax, though, is that if I'm taxed on all the additional private developments I make to my property, public development becomes a more attractive option (which I'd expect would make the disincentive weaker with property taxes). For instance, if I would have to pay $2k more a year in tax if I built a pool on my property, I might be more inclined to support the public pool. This would not apply with land value taxes. For sales tax and income tax, these would apply regardless of location, and apply at the individual level instead of cross-pollinating between individuals. If my neighbor makes twice as much, or buys twice as much, it's easy to rationalize that they pay twice as much tax as me. If my neighbor just bought an identical house to mine for twice what I paid five years ago, though, it is harder to stomach that my tax bill should be twice was it was five years ago as well.

ScottBurson 5y ago

If you buy property in the second city, then as values rise, yes your taxes will go up but so will the value of your property. Worst case, you have to take out a home equity loan to pay the taxes, but you'll probably still come out ahead. I've long advocated for an arrangement whereby if the value of a property increases by more than some small amount, say 2%, the excess wouldn't come due until the property was sold; the locality would hold a lien on the balance. This, IMO, is how Prop. 13 should have worked -- seniors on fixed incomes facing rising property values aren't really poor; they just have a cash flow problem, which could and should have been solved without taking money from the localities. Anyway, such a provision would make it unnecessary, in many cases, to take out a home equity loan to pay an LVT. Of course, renters wouldn't benefit directly from property value gains, but as an LVT would incentivize construction, it would help bring rents down.

vladvasiliu 5y ago
> If you buy property in the second city, then as values rise, yes your taxes will go up but so will the value of your property. Worst case, you have to take out a home equity loan to pay the taxes, but you'll probably still come out ahead. Wouldn't this rise in your property's value only matter when you sell? Home equity loans aren't a thing in France as far as I know, so maybe I'm completely off here, but wouldn't you need to pay back that loan anyway? So if you're intending to sell the property (which I assume is the case, since OP's main complaint was being forced to move), how do you come out ahead?
- pbhjpbhj 5y ago
  You don't need a house after you die. So, you borrow money against the increase in value of the house. The OP is saying that when the estate (wealth of dead person) is concluded the balance will be such that loans against the property (aka 'equity release') will ask be paid easily by the sale of the property. Ergo, no loss to the hypothetical improver of the locality. I'd say also, anyone who is capable of producing all those improvements should be able to make a good living, and their wage should improve with the monetary value of land in the area. Meaning the land tax shouldn't, on average, be harmful.

Mizza 5y ago

Surely this is going to be a problem as long as housing is just another market commodity? I remember living in a pretty shabby student ghetto district of Boston, and you'd regularly see graffiti saying "Keep Allston Shitty". In Philadelphia, I heard similar rumors of locals occasionally firing off a few gunshots every month, just to keep the white people scared and the rents down. Renters everywhere are basically incentivized to keep their neighborhoods as shabby as unsafe as they can handle.

psyc 5y ago
I knew you were talking about Allston before I got to the Allston part. Also a running subplot in the show Shameless.
eli_gottlieb 5y ago
For once someone actually makes a decent point about the contradictory class interests of renters!
imtringued 5y ago
The same is true of people who are trying to make themselves unfireable by writing difficult to maintain software to gain job security. They do this because they think they would be abandoned by society immediately the moment they are fired. It's kind of ironic. People want power not because they need it but instead to shield themselves from the bad side effects that not having power entails. In other words, people want to have power to protect themselves from those in power.

djokkataja 5y ago

> For instance, say I live in a very expensive city and I can no longer afford the land tax. One of the major reasons that our cities become expensive in our "modern" society is that we don't have land value taxes. If we have a land value tax, then when someone decides they can't afford to keep paying the tax, they sell it to someone who can OR they find a way to make the things built on that property much more valuable so that the tax is affordable. It provides a very strong incentive for property owners to do things like tearing down single family homes and building multi-unit condos in their place. Because there are multiple units where there was previously only one, the cost of living actually goes down. This is why it's considered a very beneficial tax: it promotes efficient use of land from economic perspectives. (This also applies to businesses: if a business isn't able to afford the land value tax for their property, they have strong incentives to find a way to make the use of their land more valuable or to sell it to someone who can. And if the value of their land is going up more than they can afford, that implies that there likely are potential buyers who could make better use of it.) For us to go from where we currently are to a land value tax would require a transition period, because it takes time to tear things down and build new things. But a society that was implementing a land value tax would see new properties opening up like I described above on a regular basis. So if you couldn't afford the land value tax, you would still be able to stay in the same city (and probably more cheaply and in a nicer, newer condo) unless you absolutely required a single family home or similar low-density housing.

valenterry 5y ago
All you say is interesting and probably true, but you did not address OP's specific point at all.
- djokkataja 5y ago
  The OP's specific point was based on a misunderstanding: that being unable to pay the land value tax would mean they would have to move to a different city because the cost of living in their original city would be too high. This might be a reasonable concern during a transition to a land value tax system, but once the land value tax has been in place long enough to see more efficient use of land actually happening, the cost of living would be going down. So the premise of their argument doesn't hold. Put another way, their concern was based on them specifically paying more taxes on land while society stays the same in regards to use of land. But that doesn't make sense because they're not the only person who would be paying land taxes; everyone who owns land would be, and that changes everyone's incentives for how they use land. If you mean the part about "how could this ever overcome NIMBY" / tradeoffs between people who already live somewhere and people who want to live somewhere, then yeah, that wasn't what I was talking about.

solidsnack9000 5y ago

It seems like you overlooked the obvious -- when your LVT went up, your land went up in value. You sold your land and moved to some other, cheaper, place and thus realized a profit from that increase in value. If, in the other place, you make things better and the land goes up in value so much that you can no longer afford the LVT, then you can sell your land and realize, again, a significant profit. These profits are a strong incentive.

devilbunny 5y ago
So what about capital gains/income tax? AIUI - and I have not really studied LVT's closely, but since they have been bandied about quite a bit, I know only enough to be dangerous - LVT's are supposed to pretty much eliminate other taxes, correct? If your property doubles in value, and you sell to get out from under the tax, but you lose 25-40% of that increase to income tax, you just took a big hit. Or am I completely off-base here?
- solidsnack9000 5y ago
  I don't think you're representing the situation fairly, because profiting 60% to 75% is definitely not a loss -- it's not taking a "big hit" -- and the problem there has nothing to do with LVTs, anyways. If your property doubles in value in and you sell it and pay 25% to 40% of the increase: the gross profit is: 200 - 100 = 100 the tax is: 25% to 40% of 100 which is 25 to 40 the profit post tax is: 100 minus 25 to 40 or, in other words, 75 to 60
  - devilbunny 5y ago
    It's a big hit, not a complete erasure of profit (setting aside simple inflation, because that's a big elephant in the room here). When you rewrite the tax laws so that I can effectively be forced to sell because other people would make more productive use of my land, well, regardless of how I feel about the idea, that's a reasonable argument. But if you tax me for the increase in the value of my land while I still own it, and then tax me on the profit I made from selling it when I decided I didn't want to pay those taxes anymore, that just seems like double-dipping. Isn't the whole point of the LVT that it makes buy-and-hold speculation unprofitable via the LVT itself? So if someone pays their LVT until it becomes so high that the expense of moving is less than the expense of saving, haven't they already effectively paid for their share of the increased value? I think LVT's are interesting, but the practical considerations involved are enormous.