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I’ve heard economists champion the idea, but I’ve heard little talk about what the tradeoffs are. What are the downsides?

ntonozzi 3y ago
> Residents interested in adding vacant lots or side lots to their properties objected that those additions would have increased their tax bills as if there were a house on the added land, even if it was just an empty lot. From https://www.washingtonexaminer.com/the-short-life-of-pennsylvanias-radical-tax-reform https://www.washingtonexaminer.com/the-short-life-of-pennsyl....
- groby_b 3y ago
  That's an upside, not a downside.
  - caminante 3y ago
    Yes, LOL. It's a "local" downside, but if you subscribe to the land tax idea, it's part of the process. These same people could just build "up" on their property, instead. But they want to cut grass. FTA: > The bigger immediate benefit, though, comes from reducing taxes on most [Detroit] residents. The city argues that 97% of homeowners will get a tax cut. Lower tax rates on improvements ought to encourage people to invest in properties
MattGaiser 3y ago
High levels of displacement and instability. The proponents of this I have met are generally wanting to use it force seniors with paid off homes out of them so they can live in them instead (or often build on them, as they are property developers). It also assumes that NIMBYism remains at the same level, which is challenging, as every new build or development nearby increases your own taxes. It would also encourage the childless to fight things like schools, as they would pay extra tax having them nearby.
- r00fus 3y ago
  Do you have examples of LVT causing displacement & instability that's greater than what you get with astronomical housing costs in our normal property tax regime?
  - eru 3y ago
    An LVT is good, but conventional property taxes are still much better than most other forms of taxation. Conventional property taxes don't cause astronomical housing costs. California for example is partially so dysfunctional because they don't have enough conventional property taxes. Yes, conventional property taxes disincentise building, but not more than capital gains taxes or income taxes do. And in large parts of eg California houses only cost a small fraction of the land they sit on at the moment.
- BirdieNZ 3y ago
  I don't think it's been shown to actually increase displacement and instability, in municipalities with a land value tax. It's theoretically the case, because now everyone is renting from either a landlord or the city/government, and if rents rise you might not be able to afford them. In practice, land value taxes increase home ownership, so the actual displacement rate of a population might be the same or even less with LVT implemented. > It would also encourage the childless to fight things like schools, as they would pay extra tax having them nearby. Note that any existing property tax or council rates regime already theoretically has this effect too, but I don't really see this behaviour. It's a theoretical strategy that certain demographics could utilise, but not one that plays out in practice in any city I've ever seen.
- salmonellaeater 3y ago
  > It also assumes that NIMBYism remains at the same level, which is challenging, as every new build or development nearby increases your own taxes. It would also encourage the childless to fight things like schools, as they would pay extra tax having them nearby. This is the same as the existing tax system, where tax is proportional to (land value + buildings' value). > High levels of displacement and instability. Taxes would rise on undeveloped or underdeveloped properties, and fall on developed properties. The net effect would be an increase in total housing stock, as the relative cost of building and owning more units goes down. > The proponents of this I have met are generally wanting to use it force seniors with paid off homes out of them so they can live in them instead (or often build on them, as they are property developers). An LVT wouldn't have to work this way. The transition could be something like, set the LVT for each property the same as its current tax under the old system. But any future change in the value of buildings on the property don't affect its tax. This would mean seniors could continue paying the same tax they used to, while developers wouldn't get penalized for building more housing.
scoofy 3y ago
You can’t just buy a house young and live there forever. It requires successful people in real real estate investing to develop in order to maintain property, which could piss off neighbors.
BirdieNZ 3y ago
Gentrification, which displaces renters (rents become too expensive for existing tenants so they need to leave the area), will start displacing some land owners as well. LVT would increase due to land value increasing, and the current land owners may not be able to afford the increased tax. If you don't allow deferment of the tax, pensioners might have to move unwillingly (low income that may not cover the tax). Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue. In general, if your circumstances change unexpectedly then you might be unable to pay the tax and thus lose ownership of your property. This already is the case for renters, but it does mean a somewhat reduced sense of security for home owners too. Mind you, this is already the case for any existing property tax or council rates, which exist in many/most places, so it's also kinda a non-issue.
- koolba 3y ago
  > Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue. Ah more carve outs for boomers. I knew it had to be in there somewhere.
  - aldonius 3y ago
    I think deferment is reasonable. Especially if it makes the difference in getting real LVT over the line, politically.
  - ensignavenger 3y ago
    A deferment should be allowed for anyone on one primary residence. Then it isn't a carve out just for boomers. Also, the deferment doesn't mean the taxes don't get paid- they just don't have to be paid until the person moves out or transfers the property (or dies, which triggers a transfer).
    - eru 3y ago
      A deferment isn't necessary. Banks are happy to do that kind of financial transformation for you via a reverse mortgage. (However, it might still be a vote winner. Voters aren't exactly the brightest.)
TulliusCicero 3y ago
The main downside is that you end up essentially kicking people out if their land gets too valuable. You can always provide an exception though, for a primary residence where the increase in taxes would be burdensome on the owner's income.
- caminante 3y ago
  Doesn't that happen already at the margins, albeit not quite as fast if someone's "land rich"? On the flipside, I bet there are locales where the buildings have a lot of improvements with multi-story dwellings and the land tax could be worse. The article goes into detail about why this tentatively works for Detroit where the majority of tax bills will decrease.
- notatoad 3y ago
  the exceptions essentially nullify the point of the land value tax though. the whole point of an LVT is to aknowledge that land is a valuable resource to the community at large, and using it ineffectively is a harm to the community and should be discouraged through taxation. every exception you make not only removes the incentive, but then creates an incentive to not change the usage of that land to something more beneficial, because the people who've received the exception don't want to give it up.
  - TulliusCicero 3y ago
    It reduces the impact of the land tax, it doesn't nullify it, because it would apply only to a minority of the land owning population -- likely a small minority.
  - tzs 3y ago
    > the exceptions essentially nullify the point of the land value tax though Or they just time shift it until the person receiving the exception moves away and the property goes to someone without the exception.
- waveBidder 3y ago
  why are homeowners special in that regard? Why not guarantee renters a certain rent level? are they too poor?
dllthomas 3y ago
One concern I have is that once an area is built up, it's not clear that there will ever be transactions of unimproved land in the area, so I don't know how we keep "unimproved value" from being anything but a fiction.
- LVTfan 3y ago
  As housing fads change, some styles will go out of favor. Great rooms replace lots of small rooms. Technology changes, too, will make some houses obsolete; older roof technology, plumbing, HVAC, inefficient systems, too little insulation and no space for more. Houses that are obsolete for their location will sell as teardowns. In that situation, the land value is measured by the selling price plus the cost of removing the old house from the site. Assessors can work with those figures very well. Connect the dots from one to the next to the next, and the land value map shapes up.
  - dllthomas 3y ago
    Maybe? I'm not going to firmly claim it can't work, but I remain concerned.
josnyder 3y ago
(I'm a big proponent of LVT) The two downsides I'm aware of are difficulty in transitioning to an LVT and difficulty in valuing the land. Transitioning to an LVT means that landowners no longer capture land rents for themselves, which is a massive overnight loss in the value they hold. The solutions there typically tax only the difference in land value versus a baseline assessment. So if a lot is worth $100 before LVT and $105 after, the tax is calculated only on the $5 difference. Valuing the land is tricky because the whole point of LVT is to tax only the location itself. So the value of any structures should be excluded from taxation, and even improvements in soil quality (e.g. on a farm) should be excluded. This is problematic because the market for bare land is significant less liquid than improved land, especially in suburbs and cities. So there isn't always good data on comparable land, and there isn't a way to hold a straightforward auction to value a given lot. Of course, most present systems of property taxation are subject to the exact same issue.
- hhmc 3y ago
  > difficulty in valuing the land This seems by _far_ the biggest difficulty, and I find it strange that this rarely comes up in LVT discussions. Even for nominally 'liquid' land it's not clear who values it or how.
  - BirdieNZ 3y ago
    Lots of countries value land and improvements separately (e.g. New Zealand, Australia, Denmark) for council rates (property tax essentially). Here in New Zealand, there are several companies that provide valuation services to local councils (and private individuals if you want to value your property). You can dispute the valuation if you think you're being unfairly valued (usually because you want to pay less property tax).
  - xboxnolifes 3y ago
    It doesn't seem that different from what normally is done for property tax. Property tax is already generally based on land and structure (Just look at property taxes on the million dollar tiny houses on prime real estate). LVT is just removing the structure portion.
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aldonius 3y ago
Sometimes people want to sit on underdeveloped-for-the-location land not because it's a low-effort way to ride capital gains but for non-economic reasons. Examples include conservation projects and urban farms, but the big one is empty-nesters ageing in place (while the city has grown around them). If you've seen the start of the movie Up you'll recall that Mr. Carl Fredrickson owns a detached home which now has apartment towers going up on all sides. As a widower his house holds extreme sentimental value to him; he isn't selling. Under an optimal land tax regime, he'd be paying quite a bit of land tax reflecting the increased desirability of his location, and would potentially be forced to sell up as a result.
- J_Shelby_J 3y ago
  That sounds sad! Until you realize the reality writ large: The current tax scheme enables drives supply down and value endlessly up. So much so that most homeowners end up selling for more than the total lifetime cost of ownership. So the old man from 'Up' would be able to sell and recoup a lifetime of housing costs. Personal homeownership is just abstract landlording in that way. We have a myth in the western world that we own our homes. You can argue it's a natural right, but that won't matter to the government if you don't pay your taxes. So ownership is a social construct, just like copyright; we've decided as a society that it's most beneficial to let people "own" land. But the current system has, by destroying housing supply, increased housing costs by double (in HCOL areas) over what they would be if supply met demand. So renters and first time homeowners are subsidizing homeowners in a huge way. As a result, people are putting off having kids, or not having them at all, and taking a job they hate just to exist. It's abstract, but it's still feudalism; land owners extracting value from land merely from holding the social contract to it. So no, my empathy does not extend to sympathy for Mr. Carl Fredrickson. I'll save it for the people laboring to pay his fair share.
- danShumway 3y ago
  It's been a while since I saw Up, but isn't the moral of that movie that Carl is holding onto the past too tightly and that doing so has separated him from the outside world and the people around him and colored his perception of them? The emotional climax of the film is Carl throwing away all of his antique furniture that is metaphorically and literally weighing him down, and then the film ends by Carl dropping his house off of a blimp. I do have sympathy, it's a understandable position for someone to be in, but I'm not sure that Up in specific is the best analogy?
s1artibartfast 3y ago
It is based on 1800's economics where primary production (using raw materials) was the primary source of value creation. It doesn't make much sense for a modern service based economy. Your typical service sector worker, programmers, doctors, CEOs, would have essentially no taxes as long as they have a small geographic footprint. Of course it sounds good to tech b
- harimau777 3y ago
  How does this interact with the fact that housing is maybe the biggest economic issue that America is currently dealing with? That suggests to me that land is still pretty important. This doesn't apply to what Detroit is doing, but you could probably also take the underlying logic of land taxes (rent seeking should not be protected from taxation) and apply it to other more modern forms of property.
  - jackcosgrove 3y ago
    The housing shortage is the result of under-building over the past fifteen years, exacerbated by labor shortages in the construction industry and trades. On the land side of the equation, the problem is zoning not bad tax incentives. LVTs could move the housing supply needle in some locales but if you want to increase the supply of housing there are bigger dragons to slay.
    - J_Shelby_J 3y ago
      Under building is caused by NIMBYISM which exists without opposition because we don't value and tax land fairly. Stop letting low tax paying SFHing leech off the system, and we will be incentivized to build more.
      - s1artibartfast 3y ago
        Lvt would just make nimbyism worse, it doesn't punish it. Up zoning and public infrastructure increases property value. The best way to keep your land value tax low is to ensure that zoning restricts its use and Light Rail never gets built.
injeolmi_love 3y ago
Whenever something is taxed, less of it is produced. In the case of LVT, the tax is on land that is in a desirable location with lots of nearby amenities. LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. LVT means less walkable cities and more LA style sprawl.
- BoiledCabbage 3y ago
  > LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. Can you explain more? I don't see it. If a place already has high property taxes, and they are currently assessed on the land and the improvements then improved land in an area will receive a relative "tax reduction" compared to a full encompasing property tax. This means it is beneficial to improve land (the opposite of urban sprawl). The more the improvements the more the gains. Or thought another way improvements are "tax free" so it's easier to gain profit from improvements and is incentiviced. If the location has low or no property taxes, then LVT will introduce a tax to the area and usually the plan is for this this tax is replace / offset other forms of tax (ex sales taxes). So enterprise would be taxed less and the land would be taxed instead. So again doing more commercial activity compared to a similarly sized lot doing less would be rewarded. I'm not seeing any method that benefits sprawl for LVT compared to property taxes.
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  - injeolmi_love 3y ago
    First order effects are usually stronger than second order effects. Imagine you are considering to start a small manufactory, say for artisanal socks. You can purchase land anywhere, since the bank will lend to you at a cheap rate backed by the land as collateral. You consider two options; option 1 is in a dense urban area, close to your workers and walkable with lots of public transit. The land is expensive due to nearby amenities. Option 2 is some exurbian land that is accessible via commute. The land is cheap. Assume without LVT that option 1 is preferred because it provides a better lifestyle for your workers. Now add LVT; the tax rate on the urban land is set based on rents, so the fact that a bank would lend cheaply against good collateral no longer matters; you cannot afford the land because local rents are too high. It’s just a thought experiment to demonstrate a simple principle; society gets less of whatever is taxed.
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balderdash 3y ago
1) it increases the likelihood of forced sales by owners (think a pensioner having to sell their long time home because property taxes have increased unaffordably due to the gentrification of their neighborhood 2) best use of land in this scheme is solely based on economic productiveness, it doesn’t take into consideration environmental and quality of life factors (to name a few) - think of all the local institutions that wouldn’t be around under this scheme, or the reduction of green space
- LVTfan 3y ago
  Those owners may still be living in the homes in which they raised a number of children, near schools they no longer need, near jobs they long ago retired from, with more house than they can afford to heat, cool, clean, maintain, and steps that no longer suit them. The increase in land value over 30 or 40 years has gifted them with lots of home equity (far more than their principle payments on their mortgage). That's enough funds to downsize from 3 or 4 bedrooms on a 10,000 or 20,000 sf lot to a very fine single-level apartment or condo in a building close to the center of things, a home they can take care of, feel safe in, and perhaps even have services to cater to their current needs, just as the nearness to schools and jobs catered to their needs 30 or 40 years ago. Meanwhile, young families, particularly those with only one earner, must drive further and further to qualify for a mortgage. They drive not just on their home-hunting trip, but twice a day to commute to jobs close to those family-size homes and well established schools. And if they do manage to afford a home in those older more central locations, they are paying (in California) multiples of what their neighbors are paying in property tax. Those neighbors raised their kids in a time when people of all ages were contributing to the costs of the schools. Today, the young families pay lots, while the comfortable older ones play little. And from an environmental POV, having those workers commuting 30 or 40 miles each way each days isn't such a great deal for the environment, or for their quality of life, or for the time they can spend with their children.
- eru 3y ago
  About (1): that's no different from existing property taxes, isn't it? How does an LVT increase the likelihood here? About (2): LVT has no incentives or disincentives for how you use your land. It's entirely up to you, your tax is the same no matter what you do with the land. That's why an LVT is economically efficient: it doesn't mess with market allocation or land use. Why would green space be reduced? If green space is the best use of a given plot of land right now, an LVT doesn't change any of the incentives nor opportunity costs at all. (Also keep in mind that many green spaces are zoned exclusively as such. LVT doesn't influence zoning.)
Tiktaalik 3y ago
In practice it’s a huge windfall for the very wealthy mansion owning class, as the tax on the improvements of their land (ie. Their mansion) fall to zero. In order to compensate, tax on land is increased, so the relatively poorer homeowner who owns land with a relatively worthless house sees little benefit but in fact a tax increase, as the taxes that we’re previously being paid by the mansion owners fall onto them.

ntonozzi 3y ago

> Residents interested in adding vacant lots or side lots to their properties objected that those additions would have increased their tax bills as if there were a house on the added land, even if it was just an empty lot. From https://www.washingtonexaminer.com/the-short-life-of-pennsylvanias-radical-tax-reform https://www.washingtonexaminer.com/the-short-life-of-pennsyl....

groby_b 3y ago
That's an upside, not a downside.
- caminante 3y ago
  Yes, LOL. It's a "local" downside, but if you subscribe to the land tax idea, it's part of the process. These same people could just build "up" on their property, instead. But they want to cut grass. FTA: > The bigger immediate benefit, though, comes from reducing taxes on most [Detroit] residents. The city argues that 97% of homeowners will get a tax cut. Lower tax rates on improvements ought to encourage people to invest in properties

MattGaiser 3y ago

High levels of displacement and instability. The proponents of this I have met are generally wanting to use it force seniors with paid off homes out of them so they can live in them instead (or often build on them, as they are property developers). It also assumes that NIMBYism remains at the same level, which is challenging, as every new build or development nearby increases your own taxes. It would also encourage the childless to fight things like schools, as they would pay extra tax having them nearby.

r00fus 3y ago
Do you have examples of LVT causing displacement & instability that's greater than what you get with astronomical housing costs in our normal property tax regime?
- eru 3y ago
  An LVT is good, but conventional property taxes are still much better than most other forms of taxation. Conventional property taxes don't cause astronomical housing costs. California for example is partially so dysfunctional because they don't have enough conventional property taxes. Yes, conventional property taxes disincentise building, but not more than capital gains taxes or income taxes do. And in large parts of eg California houses only cost a small fraction of the land they sit on at the moment.
BirdieNZ 3y ago
I don't think it's been shown to actually increase displacement and instability, in municipalities with a land value tax. It's theoretically the case, because now everyone is renting from either a landlord or the city/government, and if rents rise you might not be able to afford them. In practice, land value taxes increase home ownership, so the actual displacement rate of a population might be the same or even less with LVT implemented. > It would also encourage the childless to fight things like schools, as they would pay extra tax having them nearby. Note that any existing property tax or council rates regime already theoretically has this effect too, but I don't really see this behaviour. It's a theoretical strategy that certain demographics could utilise, but not one that plays out in practice in any city I've ever seen.
salmonellaeater 3y ago
> It also assumes that NIMBYism remains at the same level, which is challenging, as every new build or development nearby increases your own taxes. It would also encourage the childless to fight things like schools, as they would pay extra tax having them nearby. This is the same as the existing tax system, where tax is proportional to (land value + buildings' value). > High levels of displacement and instability. Taxes would rise on undeveloped or underdeveloped properties, and fall on developed properties. The net effect would be an increase in total housing stock, as the relative cost of building and owning more units goes down. > The proponents of this I have met are generally wanting to use it force seniors with paid off homes out of them so they can live in them instead (or often build on them, as they are property developers). An LVT wouldn't have to work this way. The transition could be something like, set the LVT for each property the same as its current tax under the old system. But any future change in the value of buildings on the property don't affect its tax. This would mean seniors could continue paying the same tax they used to, while developers wouldn't get penalized for building more housing.

scoofy 3y ago

You can’t just buy a house young and live there forever. It requires successful people in real real estate investing to develop in order to maintain property, which could piss off neighbors.

BirdieNZ 3y ago

Gentrification, which displaces renters (rents become too expensive for existing tenants so they need to leave the area), will start displacing some land owners as well. LVT would increase due to land value increasing, and the current land owners may not be able to afford the increased tax. If you don't allow deferment of the tax, pensioners might have to move unwillingly (low income that may not cover the tax). Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue. In general, if your circumstances change unexpectedly then you might be unable to pay the tax and thus lose ownership of your property. This already is the case for renters, but it does mean a somewhat reduced sense of security for home owners too. Mind you, this is already the case for any existing property tax or council rates, which exist in many/most places, so it's also kinda a non-issue.

koolba 3y ago
> Most proposals allow deferment for retirees until sale of the property, though, so it's kinda a non-issue. Ah more carve outs for boomers. I knew it had to be in there somewhere.
- aldonius 3y ago
  I think deferment is reasonable. Especially if it makes the difference in getting real LVT over the line, politically.
- ensignavenger 3y ago
  A deferment should be allowed for anyone on one primary residence. Then it isn't a carve out just for boomers. Also, the deferment doesn't mean the taxes don't get paid- they just don't have to be paid until the person moves out or transfers the property (or dies, which triggers a transfer).
  - eru 3y ago
    A deferment isn't necessary. Banks are happy to do that kind of financial transformation for you via a reverse mortgage. (However, it might still be a vote winner. Voters aren't exactly the brightest.)

TulliusCicero 3y ago

The main downside is that you end up essentially kicking people out if their land gets too valuable. You can always provide an exception though, for a primary residence where the increase in taxes would be burdensome on the owner's income.

caminante 3y ago
Doesn't that happen already at the margins, albeit not quite as fast if someone's "land rich"? On the flipside, I bet there are locales where the buildings have a lot of improvements with multi-story dwellings and the land tax could be worse. The article goes into detail about why this tentatively works for Detroit where the majority of tax bills will decrease.
notatoad 3y ago
the exceptions essentially nullify the point of the land value tax though. the whole point of an LVT is to aknowledge that land is a valuable resource to the community at large, and using it ineffectively is a harm to the community and should be discouraged through taxation. every exception you make not only removes the incentive, but then creates an incentive to not change the usage of that land to something more beneficial, because the people who've received the exception don't want to give it up.
- TulliusCicero 3y ago
  It reduces the impact of the land tax, it doesn't nullify it, because it would apply only to a minority of the land owning population -- likely a small minority.
- tzs 3y ago
  > the exceptions essentially nullify the point of the land value tax though Or they just time shift it until the person receiving the exception moves away and the property goes to someone without the exception.
waveBidder 3y ago
why are homeowners special in that regard? Why not guarantee renters a certain rent level? are they too poor?

dllthomas 3y ago

One concern I have is that once an area is built up, it's not clear that there will ever be transactions of unimproved land in the area, so I don't know how we keep "unimproved value" from being anything but a fiction.

LVTfan 3y ago
As housing fads change, some styles will go out of favor. Great rooms replace lots of small rooms. Technology changes, too, will make some houses obsolete; older roof technology, plumbing, HVAC, inefficient systems, too little insulation and no space for more. Houses that are obsolete for their location will sell as teardowns. In that situation, the land value is measured by the selling price plus the cost of removing the old house from the site. Assessors can work with those figures very well. Connect the dots from one to the next to the next, and the land value map shapes up.
- dllthomas 3y ago
  Maybe? I'm not going to firmly claim it can't work, but I remain concerned.

josnyder 3y ago

(I'm a big proponent of LVT) The two downsides I'm aware of are difficulty in transitioning to an LVT and difficulty in valuing the land. Transitioning to an LVT means that landowners no longer capture land rents for themselves, which is a massive overnight loss in the value they hold. The solutions there typically tax only the difference in land value versus a baseline assessment. So if a lot is worth $100 before LVT and $105 after, the tax is calculated only on the $5 difference. Valuing the land is tricky because the whole point of LVT is to tax only the location itself. So the value of any structures should be excluded from taxation, and even improvements in soil quality (e.g. on a farm) should be excluded. This is problematic because the market for bare land is significant less liquid than improved land, especially in suburbs and cities. So there isn't always good data on comparable land, and there isn't a way to hold a straightforward auction to value a given lot. Of course, most present systems of property taxation are subject to the exact same issue.

hhmc 3y ago
> difficulty in valuing the land This seems by _far_ the biggest difficulty, and I find it strange that this rarely comes up in LVT discussions. Even for nominally 'liquid' land it's not clear who values it or how.
- BirdieNZ 3y ago
  Lots of countries value land and improvements separately (e.g. New Zealand, Australia, Denmark) for council rates (property tax essentially). Here in New Zealand, there are several companies that provide valuation services to local councils (and private individuals if you want to value your property). You can dispute the valuation if you think you're being unfairly valued (usually because you want to pay less property tax).
- xboxnolifes 3y ago
  It doesn't seem that different from what normally is done for property tax. Property tax is already generally based on land and structure (Just look at property taxes on the million dollar tiny houses on prime real estate). LVT is just removing the structure portion.

deleted 3y ago

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aldonius 3y ago

Sometimes people want to sit on underdeveloped-for-the-location land not because it's a low-effort way to ride capital gains but for non-economic reasons. Examples include conservation projects and urban farms, but the big one is empty-nesters ageing in place (while the city has grown around them). If you've seen the start of the movie Up you'll recall that Mr. Carl Fredrickson owns a detached home which now has apartment towers going up on all sides. As a widower his house holds extreme sentimental value to him; he isn't selling. Under an optimal land tax regime, he'd be paying quite a bit of land tax reflecting the increased desirability of his location, and would potentially be forced to sell up as a result.

J_Shelby_J 3y ago
That sounds sad! Until you realize the reality writ large: The current tax scheme enables drives supply down and value endlessly up. So much so that most homeowners end up selling for more than the total lifetime cost of ownership. So the old man from 'Up' would be able to sell and recoup a lifetime of housing costs. Personal homeownership is just abstract landlording in that way. We have a myth in the western world that we own our homes. You can argue it's a natural right, but that won't matter to the government if you don't pay your taxes. So ownership is a social construct, just like copyright; we've decided as a society that it's most beneficial to let people "own" land. But the current system has, by destroying housing supply, increased housing costs by double (in HCOL areas) over what they would be if supply met demand. So renters and first time homeowners are subsidizing homeowners in a huge way. As a result, people are putting off having kids, or not having them at all, and taking a job they hate just to exist. It's abstract, but it's still feudalism; land owners extracting value from land merely from holding the social contract to it. So no, my empathy does not extend to sympathy for Mr. Carl Fredrickson. I'll save it for the people laboring to pay his fair share.
danShumway 3y ago
It's been a while since I saw Up, but isn't the moral of that movie that Carl is holding onto the past too tightly and that doing so has separated him from the outside world and the people around him and colored his perception of them? The emotional climax of the film is Carl throwing away all of his antique furniture that is metaphorically and literally weighing him down, and then the film ends by Carl dropping his house off of a blimp. I do have sympathy, it's a understandable position for someone to be in, but I'm not sure that Up in specific is the best analogy?

s1artibartfast 3y ago

It is based on 1800's economics where primary production (using raw materials) was the primary source of value creation. It doesn't make much sense for a modern service based economy. Your typical service sector worker, programmers, doctors, CEOs, would have essentially no taxes as long as they have a small geographic footprint. Of course it sounds good to tech b

harimau777 3y ago
How does this interact with the fact that housing is maybe the biggest economic issue that America is currently dealing with? That suggests to me that land is still pretty important. This doesn't apply to what Detroit is doing, but you could probably also take the underlying logic of land taxes (rent seeking should not be protected from taxation) and apply it to other more modern forms of property.
- jackcosgrove 3y ago
  The housing shortage is the result of under-building over the past fifteen years, exacerbated by labor shortages in the construction industry and trades. On the land side of the equation, the problem is zoning not bad tax incentives. LVTs could move the housing supply needle in some locales but if you want to increase the supply of housing there are bigger dragons to slay.
  - J_Shelby_J 3y ago
    Under building is caused by NIMBYISM which exists without opposition because we don't value and tax land fairly. Stop letting low tax paying SFHing leech off the system, and we will be incentivized to build more.
    - s1artibartfast 3y ago
      Lvt would just make nimbyism worse, it doesn't punish it. Up zoning and public infrastructure increases property value. The best way to keep your land value tax low is to ensure that zoning restricts its use and Light Rail never gets built.

injeolmi_love 3y ago

Whenever something is taxed, less of it is produced. In the case of LVT, the tax is on land that is in a desirable location with lots of nearby amenities. LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. LVT means less walkable cities and more LA style sprawl.

BoiledCabbage 3y ago
> LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. Can you explain more? I don't see it. If a place already has high property taxes, and they are currently assessed on the land and the improvements then improved land in an area will receive a relative "tax reduction" compared to a full encompasing property tax. This means it is beneficial to improve land (the opposite of urban sprawl). The more the improvements the more the gains. Or thought another way improvements are "tax free" so it's easier to gain profit from improvements and is incentiviced. If the location has low or no property taxes, then LVT will introduce a tax to the area and usually the plan is for this this tax is replace / offset other forms of tax (ex sales taxes). So enterprise would be taxed less and the land would be taxed instead. So again doing more commercial activity compared to a similarly sized lot doing less would be rewarded. I'm not seeing any method that benefits sprawl for LVT compared to property taxes.
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- injeolmi_love 3y ago
  First order effects are usually stronger than second order effects. Imagine you are considering to start a small manufactory, say for artisanal socks. You can purchase land anywhere, since the bank will lend to you at a cheap rate backed by the land as collateral. You consider two options; option 1 is in a dense urban area, close to your workers and walkable with lots of public transit. The land is expensive due to nearby amenities. Option 2 is some exurbian land that is accessible via commute. The land is cheap. Assume without LVT that option 1 is preferred because it provides a better lifestyle for your workers. Now add LVT; the tax rate on the urban land is set based on rents, so the fact that a bank would lend cheaply against good collateral no longer matters; you cannot afford the land because local rents are too high. It’s just a thought experiment to demonstrate a simple principle; society gets less of whatever is taxed.

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balderdash 3y ago

1) it increases the likelihood of forced sales by owners (think a pensioner having to sell their long time home because property taxes have increased unaffordably due to the gentrification of their neighborhood 2) best use of land in this scheme is solely based on economic productiveness, it doesn’t take into consideration environmental and quality of life factors (to name a few) - think of all the local institutions that wouldn’t be around under this scheme, or the reduction of green space

LVTfan 3y ago
Those owners may still be living in the homes in which they raised a number of children, near schools they no longer need, near jobs they long ago retired from, with more house than they can afford to heat, cool, clean, maintain, and steps that no longer suit them. The increase in land value over 30 or 40 years has gifted them with lots of home equity (far more than their principle payments on their mortgage). That's enough funds to downsize from 3 or 4 bedrooms on a 10,000 or 20,000 sf lot to a very fine single-level apartment or condo in a building close to the center of things, a home they can take care of, feel safe in, and perhaps even have services to cater to their current needs, just as the nearness to schools and jobs catered to their needs 30 or 40 years ago. Meanwhile, young families, particularly those with only one earner, must drive further and further to qualify for a mortgage. They drive not just on their home-hunting trip, but twice a day to commute to jobs close to those family-size homes and well established schools. And if they do manage to afford a home in those older more central locations, they are paying (in California) multiples of what their neighbors are paying in property tax. Those neighbors raised their kids in a time when people of all ages were contributing to the costs of the schools. Today, the young families pay lots, while the comfortable older ones play little. And from an environmental POV, having those workers commuting 30 or 40 miles each way each days isn't such a great deal for the environment, or for their quality of life, or for the time they can spend with their children.
eru 3y ago
About (1): that's no different from existing property taxes, isn't it? How does an LVT increase the likelihood here? About (2): LVT has no incentives or disincentives for how you use your land. It's entirely up to you, your tax is the same no matter what you do with the land. That's why an LVT is economically efficient: it doesn't mess with market allocation or land use. Why would green space be reduced? If green space is the best use of a given plot of land right now, an LVT doesn't change any of the incentives nor opportunity costs at all. (Also keep in mind that many green spaces are zoned exclusively as such. LVT doesn't influence zoning.)

Tiktaalik 3y ago

In practice it’s a huge windfall for the very wealthy mansion owning class, as the tax on the improvements of their land (ie. Their mansion) fall to zero. In order to compensate, tax on land is increased, so the relatively poorer homeowner who owns land with a relatively worthless house sees little benefit but in fact a tax increase, as the taxes that we’re previously being paid by the mansion owners fall onto them.