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I agree, I often think about such things and wonder if they'd work as this hasn't been tried. I'm wary of taking the road to Hell with my "good" intentions/idea

I agree, I often think about such things and wonder if they'd work as this hasn't been tried. I'm wary of taking the road to Hell with my "good" intentions/ideas. For the improvements on the land bit, you could project at the beginning of the year what you think the land will be worth by the end of the year, due to planned improvements. That locks in the value for the year. I can see problems with that too, but the real question is would those problems be worse or better than the problems we have now?

mlyle 4y ago
But the idea with a land value tax is you tax the value of the land, and not any property on it. So it's not just improvements added in a year, but any improvements residing on the property. If the land is worth $100, and your house is worth $200-- it's worth $300 to you. But a LVT should just be taxing that $100.
- brigandish 4y ago
  There are two kinds of improvements, those of the land itself (like a new road or a water pipe etc) and those like houses or businesses. LVT directly includes the former, as they would be included in anyone's assessment of value (whether that be a government assessor or the owner). However, the value of the land is also indirectly linked to the improvements like houses. If you make a piece of land more productive by building on it then the land itself becomes more valuable, as will nearby land. So with either kind of improvement the tax can go up, but LVT still encourages development compared to property tax as undeveloped land will still attract a greater proportion of tax than it would under a property tax.
  - mlyle 4y ago
    I think you're missing my point. We're in a subthread where you floated the idea of a bidding-based scheme as a way to set LVT land values. If you set the tax rate by having owners bid a price they're bound to sell their property for... that's going to include improvements like dwellings, since the owner can't take their dwelling with them and doesn't want to just sell the property with their dwelling for the land value alone. In turn, this fails at setting the rate for a LVT, because it captures the value of improvements like houses in the taxed amount.
    - brigandish 4y ago
      In Japan it's reasonably common for someone to own the land while someone else (e.g. a homeowner) owns the buildings on the land and has certain rights to live there that the landlord can't ignore (and hence can't just turf them out suddenly). Flats in the UK are leasehold, which means you can buy (part of) a property and still not own the land. It's entirely possible to separate the two.
      - mlyle 4y ago
        It's possible to separate the two, but not in a way that gives a meaningful true market value for land alone in the short term-- rather just values for land in long-term option value after other rights are considered. That is, that leaseholder you can't turf is enjoying a lot of the value of the land, and it may not be correlated to past payments or transactions. In turn, lots of the benefits of a LVT evaporate if the taxable value (of landowner's eventual rights) is so decorrelated from the present value of land uses. That's the problem here: valuing the land alone is hard. Separating rights, adding more owners and options and preferences --- doesn't make valuing the land alone easier.
        brigandish 4y ago
        In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). The tenant knows how much value they are getting from being there, at least relatively, because they pay the rent. If you're paying twice as much rent for half the space as your mate, unless there's some reason like being closer to the centre of the city or something, you know you're getting a bad deal. Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.
        mlyle 4y ago
        > In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). Yes, but... As I keep trying to make clear: * Anyone improving the property requires some kind of protection of this investment, usually in the form of a durable ownership interest or a very long term lease, with a value chosen based on both parties' estimates of the utility of the land over that lease term. * In turn, the rents that the landlord receives from the property can be not-too-closely related to the present value of the land. They may be higher or lower. * In turn, the land value tax doesn't succeed in capturing the true market rent of the land when it is based upon bidding by landowners, whether we're dealing with separate owners for improvements or not. Imagine the case of someone who entered into a long term lease (60 years? 99 years?) in 1975 to build a house surrounded by orchards in San Jose. The real value of land has appreciated >60x over that term. A land value tax would capture a tiny fraction of that value if the landowner was bidding based upon the lease returns + the present value of the land being returned in 40 years. > Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to. The level of friction is so high that you can't solve this one with bidding; you're going to have to rely upon comparable sales and assessed/appraised values.

mlyle 4y ago

But the idea with a land value tax is you tax the value of the land, and not any property on it. So it's not just improvements added in a year, but any improvements residing on the property. If the land is worth $100, and your house is worth $200-- it's worth $300 to you. But a LVT should just be taxing that $100.

brigandish 4y ago
There are two kinds of improvements, those of the land itself (like a new road or a water pipe etc) and those like houses or businesses. LVT directly includes the former, as they would be included in anyone's assessment of value (whether that be a government assessor or the owner). However, the value of the land is also indirectly linked to the improvements like houses. If you make a piece of land more productive by building on it then the land itself becomes more valuable, as will nearby land. So with either kind of improvement the tax can go up, but LVT still encourages development compared to property tax as undeveloped land will still attract a greater proportion of tax than it would under a property tax.
- mlyle 4y ago
  I think you're missing my point. We're in a subthread where you floated the idea of a bidding-based scheme as a way to set LVT land values. If you set the tax rate by having owners bid a price they're bound to sell their property for... that's going to include improvements like dwellings, since the owner can't take their dwelling with them and doesn't want to just sell the property with their dwelling for the land value alone. In turn, this fails at setting the rate for a LVT, because it captures the value of improvements like houses in the taxed amount.
  - brigandish 4y ago
    In Japan it's reasonably common for someone to own the land while someone else (e.g. a homeowner) owns the buildings on the land and has certain rights to live there that the landlord can't ignore (and hence can't just turf them out suddenly). Flats in the UK are leasehold, which means you can buy (part of) a property and still not own the land. It's entirely possible to separate the two.
    - mlyle 4y ago
      It's possible to separate the two, but not in a way that gives a meaningful true market value for land alone in the short term-- rather just values for land in long-term option value after other rights are considered. That is, that leaseholder you can't turf is enjoying a lot of the value of the land, and it may not be correlated to past payments or transactions. In turn, lots of the benefits of a LVT evaporate if the taxable value (of landowner's eventual rights) is so decorrelated from the present value of land uses. That's the problem here: valuing the land alone is hard. Separating rights, adding more owners and options and preferences --- doesn't make valuing the land alone easier.
      - brigandish 4y ago
        In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). The tenant knows how much value they are getting from being there, at least relatively, because they pay the rent. If you're paying twice as much rent for half the space as your mate, unless there's some reason like being closer to the centre of the city or something, you know you're getting a bad deal. Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.
        mlyle 4y ago
        > In the example where a landlord has a tenant with a building that that tenant owns, the landlord knows how much they are charging the tenant, which is the primary signal of the value they can extract from that land in that situation. Hence, they can calculate a tax level they're comfortable with paying (and I posit that it would indicate the value of the land to the owner). Yes, but... As I keep trying to make clear: * Anyone improving the property requires some kind of protection of this investment, usually in the form of a durable ownership interest or a very long term lease, with a value chosen based on both parties' estimates of the utility of the land over that lease term. * In turn, the rents that the landlord receives from the property can be not-too-closely related to the present value of the land. They may be higher or lower. * In turn, the land value tax doesn't succeed in capturing the true market rent of the land when it is based upon bidding by landowners, whether we're dealing with separate owners for improvements or not. Imagine the case of someone who entered into a long term lease (60 years? 99 years?) in 1975 to build a house surrounded by orchards in San Jose. The real value of land has appreciated >60x over that term. A land value tax would capture a tiny fraction of that value if the landowner was bidding based upon the lease returns + the present value of the land being returned in 40 years. > Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to. The level of friction is so high that you can't solve this one with bidding; you're going to have to rely upon comparable sales and assessed/appraised values.