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Reply to your edit. Yes, If something that is untaxed previously is now taxed then it's value will probably go down. There are winners and losers with every ta

by slyall 4y ago

Reply to your edit. Yes, If something that is untaxed previously is now taxed then it's value will probably go down. There are winners and losers with every tax change. The rate of a Land Tax is usually proposed to be around 1% of the value of the land. So if you own a $1m block of land in a prime area thats just $10,000/year.

robocat 4y ago
The issue is that 1% sounds deceptively low. If you have built on the property and are getting a rental of 5%, you are now getting 4%. That is a 20% decrease in property valuation, ignoring expenses (which make the figures much much worse). And the few articles I have read don’t talk about anything nearly as low as 1%. That is why I called it “communist” (I shouldn’t have been so inflammatory), because the government is taking money from a long term investment. Maybe it would be possible to introduce it slowly and fairly, but I can’t see how a government could actually do it and stay elected. The simple mechanics of “just 1%” are usually just glossed over in the articles I have read.
- slyall 4y ago
  Remember the Tax is just on the Land Value. You should be getting rent proportional to the builds and other improvement on the property. Thats half the point of a Land tax. It encourages you to build. 1% is typically the value most people talk about for a land tax. If anything often it is less. This makes it similar to other property taxes that are already out there. I have no idea where you live but in many countries it is common for taxes to be introduced, raised and lowered as different political parties get in power. Also the assumption is that income and other taxes will be reduced as land taxes are introduced to the amount the government makes would be about the same. It would just mean those with property would pay more while those earning wages would pay less.
  - robocat 4y ago
    The average home price in New Zealand is nearly $1 million. Let’s say that $500k of that is land. So you are proposing to increase average taxes by $5000, and you appear to talk about that as though that is some trivial amount the average New Zealander can afford. A land tax as you propose is an absolutely massive taxation increase. Say that a land tax takes 50% of all rental income (a large amount) in New Zealand and puts that into the government - how can you believe that is equitable for renters or owners? The point of a land tax is to take the land profits from private owners, and put it into government coffers. Note that it doesn’t change the amount that renters pay. You think that it would correct rent prices in New Zealand? $1 million of land is not extreme wealth - it is only 2 or 3 times an average home. Where do you live that $10000 after tax is not a huge amount of money annually? Edit: I mean, people talk about land tax as though: 1: empty land is abundant and a problem that needs fixing. Ummmm, empty valuable land is rare because there is already a massive holding cost - either a mortgage or the opportunity cost of what you could invest the money in, if you sold. The point of a land tax is to penalise the owner, but owners are already very significantly penalised! 2: a LVT will fix the problem that developers are just sitting on properties without densification. That is a NIMBY problem, or a zoning problem. LVT doesn’t fix 1 or 2 above. QED.
    - 988747 4y ago
      Maybe I'm misunderstanding something but I think the point of Land Value Tax is that it is set based on the value of the things that could be built on that land, not ones that currently are located there. So, you have a lot of land with a single family home, but you are taxed for it as if 20-unit apartment building was standing there. Which, in the long run, incentivizes you to sell your home to some developer that would actually build such building. Now you can discuss if that's fair approach, or just a way to force people out of their homes.
      - robocat 4y ago
        > Land Value Tax is that it is set based on the value of the things that could be built on that land, not ones that currently are located there Everything I have read just uses nearby property prices. Very similar to GV valuations as we currently do in New Zealand with our council rates (just use that figure rather than another). As market prices shift, your Capital Value remains relatively constant (maybe inflation less depreciation), and the Land Value shifts to meet market value (usually upwards, whenever your property rating is updated). In New Zealand we currently have a partial land-value-tax called rates, although they are usually far below LVT suggested taxation rates. Rates are low, but still a significant drain. Mortgages are also similar to a LVT - your mortgage has to pay the land value - and that is certainly more than suggested LVT. Apparently the point of an LVT is not to get revenues, so I don’t quite understand how that works. An incentive that is less than a mortgage already is - hmmmmmm - how can that help? Ironically house prices are set by people bidding against each other for how big their mortgage can be - See: https://news.ycombinator.com/item?id=34097478 https://news.ycombinator.com/item?id=34097478 Because of the above, a LVT perhaps won’t shift house prices, just shift money from private equity to government? The arguments I have read are usually so vague and seem to always miss critical details. I am not a property or economics specialist, yet I see glaring problems and omissions in well received blogs: that doesn’t bode well for the idea IMHO.
- em500 4y ago
  > If you have built on the property and are getting a rental of 5%, you are now getting 4%. That is a 20% decrease in property valuation, ignoring expenses (which make the figures much much worse). In developed countries the government takes around 30%-40% of your labor income if you work. In that sense taking 20% of capital income (rent, dividends, capital gains) is still on the low side.
  - robocat 4y ago
    Your “capital income” sounds like revenue - flagrantly ignoring expenses. In New Zealand, income on a property is what you get after expenses, and then you are taxed on your income (I think profits-before-taxes and income almost mean the same thing in businesses). Apparently I just don’t understand what you are saying.
- BirdieNZ 4y ago
  > Maybe it would be possible to introduce it slowly and fairly, but I can’t see how a government could actually do it and stay elected. Australia's ACT is in the middle of introducing a land value tax to replace stamp duty over 20 years; it's perhaps not the largest land value tax that could exist but they're ~10 years in and it's having a good effect on increasing home ownership rates and decreasing rents. You can read about it here: https://www.prosper.org.au/campaigns/stamp-duty-to-land-tax/a-c-t-land-tax-transition/ https://www.prosper.org.au/campaigns/stamp-duty-to-land-tax/...
  - robocat 4y ago
    Interesting. [The ACT Government] also promised that the reforms would be revenue neutral, reassuring residents that this was not a tax grab. But hardly relevant to the point of how to introduce a new tax without being grossly unfair to people and businesses who have made long-term life decisions based on the current system in New Zealand. If we had a stamp-tax, then relevant.
    - BirdieNZ 4y ago
      The only land tax proposal we have in New Zealand currently is from The Opportunities Party, which proposes a revenue-neutral tax shift away from income tax and onto land tax (0.75% land tax per year, with a shifting of the income tax brackets to reduce those significantly for everyone). In terms of fairness, the reality is that it's actually really fair for those who have owned land for a long time, because they currently benefit disproportionately from land values going up (they don't cause the land values to rise much, but society as a whole does). The current system is grossly unfair for renters, because they contribute to society just like everyone else but don't benefit from land value increases. Land only goes up in value because of the improvements that society makes around it, which is why land in cities is very expensive. It isn't fair for landowners to benefit from this and renters to not benefit. Of course the biggest beneficiaries of all this are the banks, but most landowners didn't work for the value of their land, so losing the value of their land is fair. Recent buyers are the most screwed over by land values dropping, because they did work very hard for their deposit and mortgage but then without working less they suddenly lose out a lot.
Brigand 4y ago
That means over the course of a lifetime you have to pay twice and then perhaps a third time depending on how inheritance works in your country. That seems too much for any long term planning or investment.
- slyall 4y ago
  You obviously plan to live a long time. I'm unsure as to how this would prevent long term planning or investment. A one million dollar piece of land presumably has buildings on it worth at least as much. If it is bringing in something like $100,000 per year how would a $10,000/year tax completely make it impossible to build or invest. Land Taxes and Property taxes exist the world over. They rarely prevent development from happening and a pure land tax is designed to encourage development.
  - avar 4y ago
    > You obviously plan to live a long time. Per [1] if you're paying $10000 in tax/yr, being able to invest the same money would take 41 years at 5% interest (long term S&P 500 has been just shy of 10%) to reach $1m, 29 years with 8% interest (compounded annually). 1. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator https://www.investor.gov/financial-tools-calculators/calcula...

by slyall 4y ago

robocat 4y ago

The issue is that 1% sounds deceptively low. If you have built on the property and are getting a rental of 5%, you are now getting 4%. That is a 20% decrease in property valuation, ignoring expenses (which make the figures much much worse). And the few articles I have read don’t talk about anything nearly as low as 1%. That is why I called it “communist” (I shouldn’t have been so inflammatory), because the government is taking money from a long term investment. Maybe it would be possible to introduce it slowly and fairly, but I can’t see how a government could actually do it and stay elected. The simple mechanics of “just 1%” are usually just glossed over in the articles I have read.

slyall 4y ago
Remember the Tax is just on the Land Value. You should be getting rent proportional to the builds and other improvement on the property. Thats half the point of a Land tax. It encourages you to build. 1% is typically the value most people talk about for a land tax. If anything often it is less. This makes it similar to other property taxes that are already out there. I have no idea where you live but in many countries it is common for taxes to be introduced, raised and lowered as different political parties get in power. Also the assumption is that income and other taxes will be reduced as land taxes are introduced to the amount the government makes would be about the same. It would just mean those with property would pay more while those earning wages would pay less.
- robocat 4y ago
  The average home price in New Zealand is nearly $1 million. Let’s say that $500k of that is land. So you are proposing to increase average taxes by $5000, and you appear to talk about that as though that is some trivial amount the average New Zealander can afford. A land tax as you propose is an absolutely massive taxation increase. Say that a land tax takes 50% of all rental income (a large amount) in New Zealand and puts that into the government - how can you believe that is equitable for renters or owners? The point of a land tax is to take the land profits from private owners, and put it into government coffers. Note that it doesn’t change the amount that renters pay. You think that it would correct rent prices in New Zealand? $1 million of land is not extreme wealth - it is only 2 or 3 times an average home. Where do you live that $10000 after tax is not a huge amount of money annually? Edit: I mean, people talk about land tax as though: 1: empty land is abundant and a problem that needs fixing. Ummmm, empty valuable land is rare because there is already a massive holding cost - either a mortgage or the opportunity cost of what you could invest the money in, if you sold. The point of a land tax is to penalise the owner, but owners are already very significantly penalised! 2: a LVT will fix the problem that developers are just sitting on properties without densification. That is a NIMBY problem, or a zoning problem. LVT doesn’t fix 1 or 2 above. QED.
  - 988747 4y ago
    Maybe I'm misunderstanding something but I think the point of Land Value Tax is that it is set based on the value of the things that could be built on that land, not ones that currently are located there. So, you have a lot of land with a single family home, but you are taxed for it as if 20-unit apartment building was standing there. Which, in the long run, incentivizes you to sell your home to some developer that would actually build such building. Now you can discuss if that's fair approach, or just a way to force people out of their homes.
    - robocat 4y ago
      > Land Value Tax is that it is set based on the value of the things that could be built on that land, not ones that currently are located there Everything I have read just uses nearby property prices. Very similar to GV valuations as we currently do in New Zealand with our council rates (just use that figure rather than another). As market prices shift, your Capital Value remains relatively constant (maybe inflation less depreciation), and the Land Value shifts to meet market value (usually upwards, whenever your property rating is updated). In New Zealand we currently have a partial land-value-tax called rates, although they are usually far below LVT suggested taxation rates. Rates are low, but still a significant drain. Mortgages are also similar to a LVT - your mortgage has to pay the land value - and that is certainly more than suggested LVT. Apparently the point of an LVT is not to get revenues, so I don’t quite understand how that works. An incentive that is less than a mortgage already is - hmmmmmm - how can that help? Ironically house prices are set by people bidding against each other for how big their mortgage can be - See: https://news.ycombinator.com/item?id=34097478 https://news.ycombinator.com/item?id=34097478 Because of the above, a LVT perhaps won’t shift house prices, just shift money from private equity to government? The arguments I have read are usually so vague and seem to always miss critical details. I am not a property or economics specialist, yet I see glaring problems and omissions in well received blogs: that doesn’t bode well for the idea IMHO.
em500 4y ago
> If you have built on the property and are getting a rental of 5%, you are now getting 4%. That is a 20% decrease in property valuation, ignoring expenses (which make the figures much much worse). In developed countries the government takes around 30%-40% of your labor income if you work. In that sense taking 20% of capital income (rent, dividends, capital gains) is still on the low side.
- robocat 4y ago
  Your “capital income” sounds like revenue - flagrantly ignoring expenses. In New Zealand, income on a property is what you get after expenses, and then you are taxed on your income (I think profits-before-taxes and income almost mean the same thing in businesses). Apparently I just don’t understand what you are saying.
BirdieNZ 4y ago
> Maybe it would be possible to introduce it slowly and fairly, but I can’t see how a government could actually do it and stay elected. Australia's ACT is in the middle of introducing a land value tax to replace stamp duty over 20 years; it's perhaps not the largest land value tax that could exist but they're ~10 years in and it's having a good effect on increasing home ownership rates and decreasing rents. You can read about it here: https://www.prosper.org.au/campaigns/stamp-duty-to-land-tax/a-c-t-land-tax-transition/ https://www.prosper.org.au/campaigns/stamp-duty-to-land-tax/...
- robocat 4y ago
  Interesting. [The ACT Government] also promised that the reforms would be revenue neutral, reassuring residents that this was not a tax grab. But hardly relevant to the point of how to introduce a new tax without being grossly unfair to people and businesses who have made long-term life decisions based on the current system in New Zealand. If we had a stamp-tax, then relevant.
  - BirdieNZ 4y ago
    The only land tax proposal we have in New Zealand currently is from The Opportunities Party, which proposes a revenue-neutral tax shift away from income tax and onto land tax (0.75% land tax per year, with a shifting of the income tax brackets to reduce those significantly for everyone). In terms of fairness, the reality is that it's actually really fair for those who have owned land for a long time, because they currently benefit disproportionately from land values going up (they don't cause the land values to rise much, but society as a whole does). The current system is grossly unfair for renters, because they contribute to society just like everyone else but don't benefit from land value increases. Land only goes up in value because of the improvements that society makes around it, which is why land in cities is very expensive. It isn't fair for landowners to benefit from this and renters to not benefit. Of course the biggest beneficiaries of all this are the banks, but most landowners didn't work for the value of their land, so losing the value of their land is fair. Recent buyers are the most screwed over by land values dropping, because they did work very hard for their deposit and mortgage but then without working less they suddenly lose out a lot.

Brigand 4y ago

That means over the course of a lifetime you have to pay twice and then perhaps a third time depending on how inheritance works in your country. That seems too much for any long term planning or investment.

slyall 4y ago
You obviously plan to live a long time. I'm unsure as to how this would prevent long term planning or investment. A one million dollar piece of land presumably has buildings on it worth at least as much. If it is bringing in something like $100,000 per year how would a $10,000/year tax completely make it impossible to build or invest. Land Taxes and Property taxes exist the world over. They rarely prevent development from happening and a pure land tax is designed to encourage development.
- avar 4y ago
  > You obviously plan to live a long time. Per [1] if you're paying $10000 in tax/yr, being able to invest the same money would take 41 years at 5% interest (long term S&P 500 has been just shy of 10%) to reach $1m, 29 years with 8% interest (compounded annually). 1. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator https://www.investor.gov/financial-tools-calculators/calcula...