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Not true, but I'm a Georgist so would be against the GP's targeting non-owner tax. Tax everyone according to the value of the unimproved value of their land. I

Not true, but I'm a Georgist so would be against the GP's targeting non-owner tax. Tax everyone according to the value of the unimproved value of their land. I can show you plenty of places with $3k+ rents in SF with prop 13 property taxes that have not changed their tax meaningfully in decades. Taxes have absolutely no effect on what the renter pays. The tenant is always paying the land value. It's just going straight to the landlord if you don't have a land value tax, and it goes to society if you do. If you are going to buy a valuable property, why do you need to pay twice[0]? If you adjust the land tax such that it equals the accruing land value, the price of land becomes zero. The local government can then use that tax money to do all sorts of things[1]. They can also use that as a way to reduce other taxes. Get rid of sales and income taxes. The Henry George Theorem states that a land tax should be able to solely fund governmental services. After all, all taxes come out of rents, so if you tax income, then that disincentives work, so you get less work. If you tax buildings, you get less buildings. If you tax land, there's always a set amount, so there is no harmful effects. [0]: https://www.youtube.com/watch?v=kxvXzM1mBWo https://www.youtube.com/watch?v=kxvXzM1mBWo [1]: https://www.youtube.com/watch?v=KVMGzkSgGXI https://www.youtube.com/watch?v=KVMGzkSgGXI

nrmitchi 4y ago
"Taxes have no effect on what the renter pays"; by this I assume you mean "market rate is market rate regardless of cost". Sure, to a point. The tax situation of my individual property does not impact the market rate. Just like how the market rate does not change if there is a mortgage on a property, or paid-in-full. If the entire market is faced by a new tax all at once, you will see rents rise. Costs across the board went up, and every property owner isn't going to operate at a loss. > Tax everyone according to the value of the unimproved value of their land. Sure. This is the exact opposite of what the parent post was suggesting, where they suggested taxing people different based on the use of the same land improvements.
- ItsMonkk 4y ago
  No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another place. If there are no places they will go homeless. Since landlords are already charging for this value, an increase of taxes does not increase the rents. > every property owner isn't going to operate at a loss So they will then sell. But who would buy at current prices? The main effect of a change in tax rate is a one-time change in the market price of the property. Someone won't be under water if the property was $1. The market will find a new clearing price. I'm sympathetic to current owners, and this is why I prefer to combine the implementation of the Land Value Tax with a Land Tax credit equal to the existing value of the land to the deed owner. This will allow everyone to be net neutral over the transition period, and would even be net positive as the risk of ones property value dropping in recessions would go away.
  - ethbr0 4y ago
    Well said and interesting. Part of the problem with change is that there are always negative effects somewhere, but the answer should be to address those negative effects... not to postpone change until a mythical no-negative version is found.
    - ruined 4y ago
      probably the main negative consequence of any real estate regime change would be the destruction of incredible amounts of (paper) wealth. if you're going to reduce the market price of real estate, you're going to devalue one of the most foundational assets in the economy. but, that's the point. you can't reduce real estate prices without reducing real estate prices.
      - x86x87 4y ago
        Destruction of wealth would be bad since that would impact everyone (homeowner or not). I would opt for wealth transfer. Build more housing! Once the demand decreases the price will decrease. This also solves another fundamental problem: we pretend that there are X houses and X people that need a place to live. In reality there are more people than houses. Way more. Build more houses. Build high density housing. Stop treating housing like some sort of holy grail investment.
  - carom 4y ago
    >No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another place. Then why are investors a problem?
    - ItsMonkk 4y ago
      If investors are investing in apartments for people to live in there is no problem. If investors are investing in land and leaving it empty waiting for the local city to build valuable infrastructure around them before they sell it, that's a major problem. A land value tax will see the former do better and the later to do much worse.
- colinmhayes 4y ago
  Landlords are price takers. Rental supply is completely fixed in the short to medium run. Landlords can’t change supply when faced with a price shock, which means that rental demand is the only factor that effects prices.a landlords goal is to rent all of their properties at the highest rent they can get, a tax hike doesn’t change that.
foogazi 4y ago
> Tax everyone according to the value of the unimproved value of their land. Why ? How do you figure the unimproved value of land ? There is so much land in this country why do we have to fight over the coastal regions ? Why not incentivize building out other areas and creating population hubs ?
- ItsMonkk 4y ago
  If I sent you a picture of a home, and I asked you what it was worth, you wouldn't be able to answer me until I first mentioned it was in the middle of SF or if it was in the middle of the Arizona desert. The majority of urban values are not the value of the improvements but the value of the land. The value of the unimproved value of land comes from your neighbors. It comes from your city. When roads and sewers and train stations are built, the value of being close to that infrastructure is given to the existing landowner. By properly returning this value to the city that created it, it gives them funding that they can use to build more infrastructure. Eventually with a Land Value Tax is in place, what you propose of building new cities will happen. If you treat a city like a company, we might even see investment companies funding new cities. They make an investment of an infrastructure, get a profit, then they can use those profits and give back to their shareholders - the citizens. Or they could use those profits to build another city. The existing paradigm doesn't allow proper investment. Right now they only charge for their costs and let the landowners take their share while the renters don't see a dime. Imagine if a company was not allowed to make a profit, and could only sell for a cost. That's exactly what happens with real estate today. They let landowners sit on empty lots that appreciate while they do nothing. They incentivize minimum parking requirements and single family zoned cities.
  - tharkun__ 4y ago
    If I sent you a picture of a vacant piece of land in the middle of New York City's best neighborhood and asked you what it was worth, could you answer me? You wouldn't be able to until I told you what kind of home you are allowed to build. If I only allow you to build a shack or make it a park you won't be able to extract any money by renting it out and thus you wouldn't buy it at any price, even though the neighborhood should command a steep price. If on the other hand I allow you to build a sky scraper of n storeys high, you will now be able to given other information on rents in the area that people are willing to pay.
deleted 4y ago
[deleted]
onos 4y ago
Are there any canonical examples / cities you can point us to where this approach is being taken successfully?
- ItsMonkk 4y ago
  A full land value tax has never been tried. Currently the closest example is Singapore[0], but they have much more central control than what a Georgist would find ideal. 99 year leases are far to long, and shorter leases would have much more beneficial effects. Detroit was an example of a city that massively expanded[1] because of it, but eventually lost it's way. Harrison, PA[2] is an example of a city that 'recently' used a revenue neutral split-rate system to keep from going bankrupt. [0]: https://progressandpoverty.substack.com/p/singapore-economic-prosperity-through https://progressandpoverty.substack.com/p/singapore-economic... [1]: https://www.dollarsandsense.org/archives/2013/0813clevelandgaffney.html https://www.dollarsandsense.org/archives/2013/0813clevelandg... [2]: https://www.strongtowns.org/journal/2019/3/6/non-glamorous-gains-the-pennsylvania-land-tax-experiment https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
jjav 4y ago
> Taxes have absolutely no effect on what the renter pays. Of course taxes have an effect on the rent price. If the property tax is very low and the market price rent for that unit is very high, you're right, the owner will charge the high price and pocket the difference. But the reverse is obviously not true. If the property tax is quadrupled (as per OP proposal) and now the rent no longer covers the ownership costs there are only two possible outcomes: the rent goes up to cover the costs, or, if nobody is willing to pay the new higher rent the owner sells the property off to someone who wants to live in it instead of renting. The latter is good if we want to incentivize home ownership for everyone. But it does take a former rental unit off the rental market, so if there are people hoping to rent a place, it's bad.

nrmitchi 4y ago

"Taxes have no effect on what the renter pays"; by this I assume you mean "market rate is market rate regardless of cost". Sure, to a point. The tax situation of my individual property does not impact the market rate. Just like how the market rate does not change if there is a mortgage on a property, or paid-in-full. If the entire market is faced by a new tax all at once, you will see rents rise. Costs across the board went up, and every property owner isn't going to operate at a loss. > Tax everyone according to the value of the unimproved value of their land. Sure. This is the exact opposite of what the parent post was suggesting, where they suggested taxing people different based on the use of the same land improvements.

ItsMonkk 4y ago
No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another place. If there are no places they will go homeless. Since landlords are already charging for this value, an increase of taxes does not increase the rents. > every property owner isn't going to operate at a loss So they will then sell. But who would buy at current prices? The main effect of a change in tax rate is a one-time change in the market price of the property. Someone won't be under water if the property was $1. The market will find a new clearing price. I'm sympathetic to current owners, and this is why I prefer to combine the implementation of the Land Value Tax with a Land Tax credit equal to the existing value of the land to the deed owner. This will allow everyone to be net neutral over the transition period, and would even be net positive as the risk of ones property value dropping in recessions would go away.
- ethbr0 4y ago
  Well said and interesting. Part of the problem with change is that there are always negative effects somewhere, but the answer should be to address those negative effects... not to postpone change until a mythical no-negative version is found.
  - ruined 4y ago
    probably the main negative consequence of any real estate regime change would be the destruction of incredible amounts of (paper) wealth. if you're going to reduce the market price of real estate, you're going to devalue one of the most foundational assets in the economy. but, that's the point. you can't reduce real estate prices without reducing real estate prices.
    - x86x87 4y ago
      Destruction of wealth would be bad since that would impact everyone (homeowner or not). I would opt for wealth transfer. Build more housing! Once the demand decreases the price will decrease. This also solves another fundamental problem: we pretend that there are X houses and X people that need a place to live. In reality there are more people than houses. Way more. Build more houses. Build high density housing. Stop treating housing like some sort of holy grail investment.
- carom 4y ago
  >No. Renters are paying for the value of the land and the improvements. If the rental price of the apartment is above that, they won't pay it and find another place. Then why are investors a problem?
  - ItsMonkk 4y ago
    If investors are investing in apartments for people to live in there is no problem. If investors are investing in land and leaving it empty waiting for the local city to build valuable infrastructure around them before they sell it, that's a major problem. A land value tax will see the former do better and the later to do much worse.
colinmhayes 4y ago
Landlords are price takers. Rental supply is completely fixed in the short to medium run. Landlords can’t change supply when faced with a price shock, which means that rental demand is the only factor that effects prices.a landlords goal is to rent all of their properties at the highest rent they can get, a tax hike doesn’t change that.

foogazi 4y ago

> Tax everyone according to the value of the unimproved value of their land. Why ? How do you figure the unimproved value of land ? There is so much land in this country why do we have to fight over the coastal regions ? Why not incentivize building out other areas and creating population hubs ?

ItsMonkk 4y ago
If I sent you a picture of a home, and I asked you what it was worth, you wouldn't be able to answer me until I first mentioned it was in the middle of SF or if it was in the middle of the Arizona desert. The majority of urban values are not the value of the improvements but the value of the land. The value of the unimproved value of land comes from your neighbors. It comes from your city. When roads and sewers and train stations are built, the value of being close to that infrastructure is given to the existing landowner. By properly returning this value to the city that created it, it gives them funding that they can use to build more infrastructure. Eventually with a Land Value Tax is in place, what you propose of building new cities will happen. If you treat a city like a company, we might even see investment companies funding new cities. They make an investment of an infrastructure, get a profit, then they can use those profits and give back to their shareholders - the citizens. Or they could use those profits to build another city. The existing paradigm doesn't allow proper investment. Right now they only charge for their costs and let the landowners take their share while the renters don't see a dime. Imagine if a company was not allowed to make a profit, and could only sell for a cost. That's exactly what happens with real estate today. They let landowners sit on empty lots that appreciate while they do nothing. They incentivize minimum parking requirements and single family zoned cities.
- tharkun__ 4y ago
  If I sent you a picture of a vacant piece of land in the middle of New York City's best neighborhood and asked you what it was worth, could you answer me? You wouldn't be able to until I told you what kind of home you are allowed to build. If I only allow you to build a shack or make it a park you won't be able to extract any money by renting it out and thus you wouldn't buy it at any price, even though the neighborhood should command a steep price. If on the other hand I allow you to build a sky scraper of n storeys high, you will now be able to given other information on rents in the area that people are willing to pay.

deleted 4y ago

[deleted]

onos 4y ago

Are there any canonical examples / cities you can point us to where this approach is being taken successfully?

ItsMonkk 4y ago
A full land value tax has never been tried. Currently the closest example is Singapore[0], but they have much more central control than what a Georgist would find ideal. 99 year leases are far to long, and shorter leases would have much more beneficial effects. Detroit was an example of a city that massively expanded[1] because of it, but eventually lost it's way. Harrison, PA[2] is an example of a city that 'recently' used a revenue neutral split-rate system to keep from going bankrupt. [0]: https://progressandpoverty.substack.com/p/singapore-economic-prosperity-through https://progressandpoverty.substack.com/p/singapore-economic... [1]: https://www.dollarsandsense.org/archives/2013/0813clevelandgaffney.html https://www.dollarsandsense.org/archives/2013/0813clevelandg... [2]: https://www.strongtowns.org/journal/2019/3/6/non-glamorous-gains-the-pennsylvania-land-tax-experiment https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...

jjav 4y ago

> Taxes have absolutely no effect on what the renter pays. Of course taxes have an effect on the rent price. If the property tax is very low and the market price rent for that unit is very high, you're right, the owner will charge the high price and pocket the difference. But the reverse is obviously not true. If the property tax is quadrupled (as per OP proposal) and now the rent no longer covers the ownership costs there are only two possible outcomes: the rent goes up to cover the costs, or, if nobody is willing to pay the new higher rent the owner sells the property off to someone who wants to live in it instead of renting. The latter is good if we want to incentivize home ownership for everyone. But it does take a former rental unit off the rental market, so if there are people hoping to rent a place, it's bad.