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Perhaps someone who has thought about this more can explain how a 'land value tax' differs from existing property tax regimes that explicitly examine the value

Perhaps someone who has thought about this more can explain how a 'land value tax' differs from existing property tax regimes that explicitly examine the value of improvements and the value of land... This Detroit case is interesting because there are different rates of taxation on the land, but the difference in rate could also be obtained by increasing the land component of a parcel's value.

TulliusCicero 3y ago
Land value taxes don't factor in improvements. Improving the land results in no property tax change, so they incentivize doing more useful things with the land.
- ses1984 3y ago
  Don’t improvements in nearby plots change the value of a plot of land?
  - josnyder 3y ago
    Yes, by design. One major goal is to prevent a landowner from squatting on an empty lot while their neighbors build prosperity around it. The "squatter" then cashes in, having done nothing themselves. "Everyone works but the empty lot" is the commonly used phrase. The goal of an LVT is to insulate a landowner's tax bill from being affected by their own improvements. Its anti-goal is to insulate a landowner from changes in land use around them.
    - Gigachad 3y ago
      Another benefit is that it encourages more efficient use of land. Existing taxes mean that if you demolish a high density retail strip and replace it with a McDonald’s or Walmart with large parking lot/drive thru, the tax income plummets while the cost to maintain the roads and plumbing remains the same.
      - eru 3y ago
        Just to be clear: land value taxes by themselves don't encourage more efficient use of land. Removing taxes on improvements (and on capital and labour) encourages more efficient use of land, and a land value tax can help finance those other tax reductions.
    - ses1984 3y ago
      It’s just strange phrasing that improvements increase the value of adjacent land but not the land they’re on.
      - enragedcacti 3y ago
        It increases the value of both equally
      - mikecoles 3y ago
        Think of it as part of a communist plan and you'll see the why and who start to make sense.
  - TulliusCicero 3y ago
    True enough. It doesn't factor in land improvements directly into the calculations, but it could be affected indirectly by whatever the market seems something to be improving the neighborhood in general.
- phkahler 3y ago
  Land in Detroit is cheap already. This sounds like a way for investors to build big things and not increase their tax bill.
  - lalaland1125 3y ago
    Giving investors a greater incentive to build big things is the exact point
  - lbarrow 3y ago
    Yes, that's exactly the idea. We have a problem in the US where many metro areas do not have enough housing, in part because building big things is penalized by the tax code. By changing the tax code to not penalize construction, we hope to get more construction.
    - brianwawok 3y ago
      Detroit still has more houses than people wanting to live there.
      - epistasis 3y ago
        This is a great situation in which to use an LVT. Shifting the tax burden from homeowners and productive businesses onto idle land holders means that those that drive the community will penalize investment less and use limited resources in more effective ways. Efficiency helps the wealthy, but it can help those with less even more, as it matters more.
      - Qwertious 3y ago
        How many of those houses are on the fringes, and how many are in the CBD? If there's a vacant plot next to the town hall then it doesn't really matter how many vacant houses are a 1-hour drive out, that town-hall adjacent plot is being wasted.
        xienze 3y ago
- oh_sigh 3y ago
  They don't directly factor in improvements, but the improvements are generally why land value increases/decreases.
  - LVTfan 3y ago
    As the community grows in population, it behooves people to establish businesses to serve their various needs. This creates prosperity for all those business owners and employees who provide services to maintain and improve their homes, provide them with groceries and entertainment and restaurants and pharmacies. The provision of good transit increases the land value close to its stations; the provision of a highway to higher paying jobs increases the land value close to its exits. The provision of good emergency services and hospitals and libraries and other amenities raises the land values within their service areas. (They don't raise the value of the buildings.)
- s1artibartfast 3y ago
  They factor in both your improvements and all the improvements around you. If if someone in your neighborhood repaints their house, your land becomes more desirable. This is true for you and others!
- lend000 3y ago
  I've gone back and forth on LVT, but don't currently support it. The problem is determining what the land is worth. If you use a periodic market-based auction system (the only known way that could possibly yield accurate prices), then you give the government and the wealthy extraordinary power to kick people out of their residences, even ones in which the tenants built the house. Good for the collective perhaps, but terrible for individual autonomy. This could be mitigated by auctioning off longer length (~say 30 year) leases, but you can end up with huge value mismatches after 30 years of change, just like today, and I suspect there would be other unintended consequences. For example, things wouldn't be built to last, they'd be built to generate as much value as possible before the lease is auctioned off again. And even then, you haven't really determined what the land is worth, since any rational auction participant is considering how much money can be made with the existing improvements on the property. That being said, I hope they do try it in Detroit, since I have no stake in the city and it seems like it has more to gain than to lose from such an experiment.
  - shawabawa3 3y ago
    > If you use a periodic market-based auction system (the only known way that could possibly yield accurate prices) This system wouldn't work, because you would be measuring the property value not land value
    - lend000 3y ago
      Exactly, there's no way to separate the value of the land from the value of existing improvements.
  - gr__or 3y ago
    Implementation is also the only aspect that makes me question LVT, otherwise I'm pretty much sold (not an unimportant aspect it is). Wrt "even ones in which the tenants built the house": For me the baseline of implementing LVT is that ppl don't have to pay it for their primary housing (or a much lowered version of it). Is that controversial?
    - 3y ago
unyttigfjelltol 3y ago
They are loading the tax burden on the land rather than on structures. So, you can build the Taj Mahal or leave the lot a burned out wreck-- either way you pay the same tax. Many comments on the thread overstate what this is. I happen to think it's interesting, but for reasons unrelated to the article-- it's kinda goofy for the state to tax personal property that happens to be fixed to a location, like a fireplace, stained glass window or chandelier. Tax a house on a foundation; no tax for a house on wheels? This "LVT" scheme does away with those issues so folks can fix whatever they want to the location, so it makes more sense logically even if the connection to Detroit's problems is very unclear.
- marcell 3y ago
  Property taxes can apply to all types of property. The idea is the more valuable the property, the more expensive it is for the state to defend it for you (via police, etc.) In practice, real estate is the 20x more valuable than any other personal property, so it doesn't make sense to tax anything else. Cars are subject to a registration fee. If you own expensive business machinery, that may be subject to tax in some states. My county also taxes boats and airplanes.
  - Loughla 3y ago
    You have to pay personal property tax on pretty much anything with a motor in Missouri. It's how they sell the population on low land property taxes.
  - tyingq 3y ago
    My state levies taxes on businesses for the address they are leasing/renting, based on some estimation of the value of the "stuff" in it.
- tzs 3y ago
  What's the tax used for, though? In many places a large part of what property tax is for is things like roads, water, sewer, police, fire, and schools. For most of those how much money is needed for them depends a lot more on what is on the land than on the land itself. E.g., the amount of sewer capacity needed for a lot is proportional to the number of people who live on the lot. It thus seems sensible to have a tax that includes as a factor what is built on the lot.
somethoughts 3y ago
Agreed - the many counties in the US already have a portion of the property tax bill coming from a land value tax/Georgianism. California property tax bills have two components [1][2]: - structure/improvement assessed value - land value assessed value The land value component is re-accessed frequently and changes based on comparables (presumably but its mostly black box). The question is to what degree/portion of Georgianism to apply and what to do when the land value component starts going up infinitely that its starts hurting the electorate. Do you introduce alternative tax sources (i.e. income)? Do you introduce caps on annual land value increases or add a bunch of waivers for specific use cases (i.e. primary homes, day cares)? Or do you just stick with the unrelenting assessed value increases and go free market/no pain no gain/survival of the fittest on the electorate? Basically Texas is basically the US experiment closest to pure Georgianism. [1] https://www.propertytax.lacounty.gov/Home/AnnualSecuredProperty https://www.propertytax.lacounty.gov/Home/AnnualSecuredPrope...
- ethanbond 3y ago
  Why would the land value spiral upwards? At some point the land becomes not worth buying/developing, so there’s still downward pressure on price. Or are you suggesting the tax rate will spiral upward infinitely? Again, at some point that just means it’s not worth buying the land unless the productivity possible on it is through the roof as well.
  - somethoughts 3y ago
    Here would be an example: North Texas homeowners getting 'sticker shock' with new property tax appraisals https://www.youtube.com/watch?v=Nu5jAqB88tc https://www.youtube.com/watch?v=Nu5jAqB88tc
    - eru 3y ago
      That's an increase, but is it a spiral?
      - somethoughts 3y ago
gnopgnip 3y ago
Existing tax policies focus on the current market value of the land. Compared to a land value tax, existing tax policies under assess poorly used land or vacant land and the owners pay much less in taxes. This encourages speculation and discourages productive use. The assessor can't the change the share of land vs structure unfairly any more than they can increase the assessed value unfairly. A homeowner can protest the assessment and provide comparable sales and other estimates that show a more objective split of value. Michigan property taxes are interesting in another way, they have had issues with "dark store" restrictive covenants for commercial and industrial real estate. Basically the owner of a large commercial building argues the land/building has very little value on the open market, it is a single use building with restrictive covenants that prevent an alternative use. These restrictive covenants prevent the land from being sold to their main competitors, and these restrictive covenants are self imposed.
xmprt 3y ago
The way I see it, taxes are disincentives on bad behavior. So if you tax high value property more then it hurts people who want to improve their properties.
hn_throwaway_99 3y ago
I think the Wikipedia entry, https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax, actually does a pretty good job explaining land value taxes, and specifically in explaining the benefits compared to property taxes.
acchow 3y ago
Taxing the structure on the land is a negative incentive on developing the land
fergie 3y ago
https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism
red_admiral 3y ago
Land value tax is an idea by Henry George - the guy who coined the phrase "the rent is too damn high". His idea is among other things that a property tax discourages investment - one way to make money as an investor is to hold a plot of empty land in a desirable city centre location, watch it go up in value, and neither pay tax on any development on it nor bother with messy things such as tenants. Taxing the land value, according to George, removes that perverse incentive. For a more detailed overview, I recommend Lars Doucet's review of George's Progress and Poverty, which won the Astral Codex Ten book review contest a year ago: https://www.astralcodexten.com/p/your-book-review-progress-and-poverty https://www.astralcodexten.com/p/your-book-review-progress-a... I really like the style, but you need to put an hour or so aside to read the whole thing. For me, it was definitely worth the time!
- malta_kano 3y ago
  Is that the problem though? Empty land held by speculators?
  - red_admiral 3y ago
    Georgist thinking, as far as I understand, is that taxing total property value disincentivises investment in a way that is worse for society overall. Empty land is just a subcase of that. That said, "everybody works but the vacant lot" is a Georgist slogan that has been seen on billboards before now: https://digitalcollections.nypl.org/items/510d47de-036a-a3d9-e040-e00a18064a99 https://digitalcollections.nypl.org/items/510d47de-036a-a3d9...
    - fullarr 3y ago
      I look forward to starving to death as I try to eat a luxury apartment complex
      - 0xParlay 3y ago
        If you were hungry I’d show you compassion and feed you an empty parking lot.
rpastuszak 3y ago
Since other comments already mention Georgism, here's a related piece of trivia: The game Monopoly was originally called The Landlord's Game and meant to demonstrated the issues of land monopolism. It was created by Lizzie Magie, a designer and political activist: https://en.wikipedia.org/wiki/Lizzie_Magie https://en.wikipedia.org/wiki/Lizzie_Magie Another (somewhat more niche) piece of trivia: (80s-90s) Poland had its own version of Monopoly called Eurobiznes/Eurobusiness: https://pl.wikipedia.org/wiki/Eurobusiness https://pl.wikipedia.org/wiki/Eurobusiness
- developer93 3y ago
  I've heard tell of a parallel set of rules where the game is cooperative instead of competative, I would love to play that.
inglor_cz 3y ago
Unlike property tax, land value tax punishes you for leaving valuable land (e.g surrounded by lively business buildings) intentionally undeveloped or underdeveloped. The only problem that I can see with this approach is landscaping. It is valuable to have a nice park in the center of a city, if only for the cooling down that it provides, but parks don't make money and land value tax would incentivize people who own them to bulldoze the park and build something in its place. Perhaps this could be solved with certain exemptions. But these are subject to the usual corruption, e.g. someone leaves a really bad parking lot in place and his friends in the town hall simply categorize it as a park.
- bombcar 3y ago
  Most things like that are owned by the city itself, and so they are exempt from the taxes (because it would just slosh the money in a circle).
mattgibson 3y ago
Land prices go up when poeple have more mooney and go down when people have less. The root cause is that land is unique in the economy because it both cannot be manufactured and cannot be moved. Each piece of land is therefore unique and no one can increase supply in response to demand. Renting or purchasing land is essentially an auction and the price is set by the highest bidder. Economists call this a "monopoly price" because it's the same effect you would get if someone has a monopoly and can raise prices at will. This is in contrast to competitive prices which sink lower and lower until they bump up against the actual cost of getting the work done to provide that product or service. Land value is therefore a really weird part of the economy that allows people to charge money without doing any work or providing any value in return. If we confiscate all the money people charge to rent or buy land, nothing changes because no work was ever happening. The land is still there and still just as useful. Contrast that with anything where work is actually done - the industry would collapse if you confiscate the money. Taxing land value therefore allows the government to reclaim the money which those people should not be able to charge in the first place (if there was free market competition). When this happens, counter-intuitively, land prices do not rise (because the highest bid in the auction doesn't change) and there is no negative affect on production or jobs (because no one is employed to manufacture or maintain land). We know this because economic theory predicts it and various countries have already tried it. Instead, other taxes can be cut or eliminated due to the enourmous boost in government income, which has very positive effects on the rest of the economy. Understanding how this works is deeply counter-intuitive and so people usually think that a shortage of buildings is driving property/land values because it's easy to make sense of. To directly answer your question: if you tax the land value as set by the current market, you don't have to worry about assessing other factors that SHOULD lead to higher taxes because the people trying to buy the land have already done that. That's why they are offering a higher price. It's simple and therefore cheap and easy to administer. Also essentially immune to tax dodging because you can't hide the asset.
- nonethewiser 3y ago
  > Land value is therefore a really weird part of the economy that allows people to charge money without doing any work or providing any value in return. If we confiscate all the money people charge to rent or buy land, nothing changes because no work was ever happening. The land is still there and still just as useful. Contrast that with anything where work is actually done - the industry would collapse if you confiscate the money. Taxing land value therefore allows the government to reclaim the money which those people should not be able to charge in the first place You say they shouldn’t be able to charge for it, but instead of disallowing it you just change the beneficiary?
BariumBlue 3y ago
Property tax: The more of your money you invest into your property, the more you pay for taxes (punishing investment) Land value tax: Your tax is unchanged on how much you invest in your properties. A rundown parking lot pays the same amount of tax as the next door skyscraper (encouraging development of limited, high value land, and punishing lazy speculation). Land value tax is a simple, elegant way to incentivize more (and more efficient) economic development.
- ejstronge 3y ago
  > Property tax: The more of your money you invest into your property, the more you pay for taxes (punishing investment) > Land value tax: Your tax is unchanged on how much you invest in your properties. A rundown parking lot pays the same amount of tax as the next door skyscraper (encouraging development of limited, high value land, and punishing lazy speculation). The problem with this analysis of a land value tax is that the value of the lot next to the skyscraper depends on the improvements of the skyscraper lot. This is in addition to the 'inherent' value of being downtown. If we assume the skyscraper is the highest and best use of the land, it would then appear that both the skyscraper land owner and the parking lot land owner are being charged based on the investments made on the skyscraper lot. Now, how are market prices determined? Overall, investors and lenders wish to maximize a return on investment. Indeed, property appraisals explicitly consider the highest and best use of a property in determining its market value. So I am unclear how the explicit taxation of land value and improvement value that exists currently causes differences in behavior from the land value tax system you outlined.
  - deleted 3y ago
    [deleted]
  - enragedcacti 3y ago
    > So I am unclear how the explicit taxation of land value and improvement value that exists currently causes differences in behavior from the land value tax system you outlined. Land with a skyscraper already on it and land next to a skyscraper have related but not equal market values. Switching from a tax on market value to a tax on land value rewards the the owner who developed their land and punishes the owner who didn't.

TulliusCicero 3y ago

Land value taxes don't factor in improvements. Improving the land results in no property tax change, so they incentivize doing more useful things with the land.

ses1984 3y ago
Don’t improvements in nearby plots change the value of a plot of land?
- josnyder 3y ago
  Yes, by design. One major goal is to prevent a landowner from squatting on an empty lot while their neighbors build prosperity around it. The "squatter" then cashes in, having done nothing themselves. "Everyone works but the empty lot" is the commonly used phrase. The goal of an LVT is to insulate a landowner's tax bill from being affected by their own improvements. Its anti-goal is to insulate a landowner from changes in land use around them.
  - Gigachad 3y ago
    Another benefit is that it encourages more efficient use of land. Existing taxes mean that if you demolish a high density retail strip and replace it with a McDonald’s or Walmart with large parking lot/drive thru, the tax income plummets while the cost to maintain the roads and plumbing remains the same.
    - eru 3y ago
      Just to be clear: land value taxes by themselves don't encourage more efficient use of land. Removing taxes on improvements (and on capital and labour) encourages more efficient use of land, and a land value tax can help finance those other tax reductions.
  - ses1984 3y ago
    It’s just strange phrasing that improvements increase the value of adjacent land but not the land they’re on.
    - enragedcacti 3y ago
      It increases the value of both equally
    - mikecoles 3y ago
      Think of it as part of a communist plan and you'll see the why and who start to make sense.
- TulliusCicero 3y ago
  True enough. It doesn't factor in land improvements directly into the calculations, but it could be affected indirectly by whatever the market seems something to be improving the neighborhood in general.
phkahler 3y ago
Land in Detroit is cheap already. This sounds like a way for investors to build big things and not increase their tax bill.
- lalaland1125 3y ago
  Giving investors a greater incentive to build big things is the exact point
- lbarrow 3y ago
  Yes, that's exactly the idea. We have a problem in the US where many metro areas do not have enough housing, in part because building big things is penalized by the tax code. By changing the tax code to not penalize construction, we hope to get more construction.
  - brianwawok 3y ago
    Detroit still has more houses than people wanting to live there.
    - epistasis 3y ago
      This is a great situation in which to use an LVT. Shifting the tax burden from homeowners and productive businesses onto idle land holders means that those that drive the community will penalize investment less and use limited resources in more effective ways. Efficiency helps the wealthy, but it can help those with less even more, as it matters more.
    - Qwertious 3y ago
      How many of those houses are on the fringes, and how many are in the CBD? If there's a vacant plot next to the town hall then it doesn't really matter how many vacant houses are a 1-hour drive out, that town-hall adjacent plot is being wasted.
      - xienze 3y ago
oh_sigh 3y ago
They don't directly factor in improvements, but the improvements are generally why land value increases/decreases.
- LVTfan 3y ago
  As the community grows in population, it behooves people to establish businesses to serve their various needs. This creates prosperity for all those business owners and employees who provide services to maintain and improve their homes, provide them with groceries and entertainment and restaurants and pharmacies. The provision of good transit increases the land value close to its stations; the provision of a highway to higher paying jobs increases the land value close to its exits. The provision of good emergency services and hospitals and libraries and other amenities raises the land values within their service areas. (They don't raise the value of the buildings.)
s1artibartfast 3y ago
They factor in both your improvements and all the improvements around you. If if someone in your neighborhood repaints their house, your land becomes more desirable. This is true for you and others!
lend000 3y ago
I've gone back and forth on LVT, but don't currently support it. The problem is determining what the land is worth. If you use a periodic market-based auction system (the only known way that could possibly yield accurate prices), then you give the government and the wealthy extraordinary power to kick people out of their residences, even ones in which the tenants built the house. Good for the collective perhaps, but terrible for individual autonomy. This could be mitigated by auctioning off longer length (~say 30 year) leases, but you can end up with huge value mismatches after 30 years of change, just like today, and I suspect there would be other unintended consequences. For example, things wouldn't be built to last, they'd be built to generate as much value as possible before the lease is auctioned off again. And even then, you haven't really determined what the land is worth, since any rational auction participant is considering how much money can be made with the existing improvements on the property. That being said, I hope they do try it in Detroit, since I have no stake in the city and it seems like it has more to gain than to lose from such an experiment.
- shawabawa3 3y ago
  > If you use a periodic market-based auction system (the only known way that could possibly yield accurate prices) This system wouldn't work, because you would be measuring the property value not land value
  - lend000 3y ago
    Exactly, there's no way to separate the value of the land from the value of existing improvements.
- gr__or 3y ago
  Implementation is also the only aspect that makes me question LVT, otherwise I'm pretty much sold (not an unimportant aspect it is). Wrt "even ones in which the tenants built the house": For me the baseline of implementing LVT is that ppl don't have to pay it for their primary housing (or a much lowered version of it). Is that controversial?
  - 3y ago

unyttigfjelltol 3y ago

They are loading the tax burden on the land rather than on structures. So, you can build the Taj Mahal or leave the lot a burned out wreck-- either way you pay the same tax. Many comments on the thread overstate what this is. I happen to think it's interesting, but for reasons unrelated to the article-- it's kinda goofy for the state to tax personal property that happens to be fixed to a location, like a fireplace, stained glass window or chandelier. Tax a house on a foundation; no tax for a house on wheels? This "LVT" scheme does away with those issues so folks can fix whatever they want to the location, so it makes more sense logically even if the connection to Detroit's problems is very unclear.

marcell 3y ago
Property taxes can apply to all types of property. The idea is the more valuable the property, the more expensive it is for the state to defend it for you (via police, etc.) In practice, real estate is the 20x more valuable than any other personal property, so it doesn't make sense to tax anything else. Cars are subject to a registration fee. If you own expensive business machinery, that may be subject to tax in some states. My county also taxes boats and airplanes.
- Loughla 3y ago
  You have to pay personal property tax on pretty much anything with a motor in Missouri. It's how they sell the population on low land property taxes.
- tyingq 3y ago
  My state levies taxes on businesses for the address they are leasing/renting, based on some estimation of the value of the "stuff" in it.
tzs 3y ago
What's the tax used for, though? In many places a large part of what property tax is for is things like roads, water, sewer, police, fire, and schools. For most of those how much money is needed for them depends a lot more on what is on the land than on the land itself. E.g., the amount of sewer capacity needed for a lot is proportional to the number of people who live on the lot. It thus seems sensible to have a tax that includes as a factor what is built on the lot.

somethoughts 3y ago

Agreed - the many counties in the US already have a portion of the property tax bill coming from a land value tax/Georgianism. California property tax bills have two components [1][2]: - structure/improvement assessed value - land value assessed value The land value component is re-accessed frequently and changes based on comparables (presumably but its mostly black box). The question is to what degree/portion of Georgianism to apply and what to do when the land value component starts going up infinitely that its starts hurting the electorate. Do you introduce alternative tax sources (i.e. income)? Do you introduce caps on annual land value increases or add a bunch of waivers for specific use cases (i.e. primary homes, day cares)? Or do you just stick with the unrelenting assessed value increases and go free market/no pain no gain/survival of the fittest on the electorate? Basically Texas is basically the US experiment closest to pure Georgianism. [1] https://www.propertytax.lacounty.gov/Home/AnnualSecuredProperty https://www.propertytax.lacounty.gov/Home/AnnualSecuredPrope...

ethanbond 3y ago
Why would the land value spiral upwards? At some point the land becomes not worth buying/developing, so there’s still downward pressure on price. Or are you suggesting the tax rate will spiral upward infinitely? Again, at some point that just means it’s not worth buying the land unless the productivity possible on it is through the roof as well.
- somethoughts 3y ago
  Here would be an example: North Texas homeowners getting 'sticker shock' with new property tax appraisals https://www.youtube.com/watch?v=Nu5jAqB88tc https://www.youtube.com/watch?v=Nu5jAqB88tc
  - eru 3y ago
    That's an increase, but is it a spiral?
    - somethoughts 3y ago

gnopgnip 3y ago

Existing tax policies focus on the current market value of the land. Compared to a land value tax, existing tax policies under assess poorly used land or vacant land and the owners pay much less in taxes. This encourages speculation and discourages productive use. The assessor can't the change the share of land vs structure unfairly any more than they can increase the assessed value unfairly. A homeowner can protest the assessment and provide comparable sales and other estimates that show a more objective split of value. Michigan property taxes are interesting in another way, they have had issues with "dark store" restrictive covenants for commercial and industrial real estate. Basically the owner of a large commercial building argues the land/building has very little value on the open market, it is a single use building with restrictive covenants that prevent an alternative use. These restrictive covenants prevent the land from being sold to their main competitors, and these restrictive covenants are self imposed.

xmprt 3y ago

The way I see it, taxes are disincentives on bad behavior. So if you tax high value property more then it hurts people who want to improve their properties.

hn_throwaway_99 3y ago

I think the Wikipedia entry, https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax, actually does a pretty good job explaining land value taxes, and specifically in explaining the benefits compared to property taxes.

acchow 3y ago

Taxing the structure on the land is a negative incentive on developing the land

fergie 3y ago

https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism

red_admiral 3y ago

Land value tax is an idea by Henry George - the guy who coined the phrase "the rent is too damn high". His idea is among other things that a property tax discourages investment - one way to make money as an investor is to hold a plot of empty land in a desirable city centre location, watch it go up in value, and neither pay tax on any development on it nor bother with messy things such as tenants. Taxing the land value, according to George, removes that perverse incentive. For a more detailed overview, I recommend Lars Doucet's review of George's Progress and Poverty, which won the Astral Codex Ten book review contest a year ago: https://www.astralcodexten.com/p/your-book-review-progress-and-poverty https://www.astralcodexten.com/p/your-book-review-progress-a... I really like the style, but you need to put an hour or so aside to read the whole thing. For me, it was definitely worth the time!

malta_kano 3y ago
Is that the problem though? Empty land held by speculators?
- red_admiral 3y ago
  Georgist thinking, as far as I understand, is that taxing total property value disincentivises investment in a way that is worse for society overall. Empty land is just a subcase of that. That said, "everybody works but the vacant lot" is a Georgist slogan that has been seen on billboards before now: https://digitalcollections.nypl.org/items/510d47de-036a-a3d9-e040-e00a18064a99 https://digitalcollections.nypl.org/items/510d47de-036a-a3d9...
  - fullarr 3y ago
    I look forward to starving to death as I try to eat a luxury apartment complex
    - 0xParlay 3y ago
      If you were hungry I’d show you compassion and feed you an empty parking lot.

rpastuszak 3y ago

Since other comments already mention Georgism, here's a related piece of trivia: The game Monopoly was originally called The Landlord's Game and meant to demonstrated the issues of land monopolism. It was created by Lizzie Magie, a designer and political activist: https://en.wikipedia.org/wiki/Lizzie_Magie https://en.wikipedia.org/wiki/Lizzie_Magie Another (somewhat more niche) piece of trivia: (80s-90s) Poland had its own version of Monopoly called Eurobiznes/Eurobusiness: https://pl.wikipedia.org/wiki/Eurobusiness https://pl.wikipedia.org/wiki/Eurobusiness

developer93 3y ago
I've heard tell of a parallel set of rules where the game is cooperative instead of competative, I would love to play that.

inglor_cz 3y ago

Unlike property tax, land value tax punishes you for leaving valuable land (e.g surrounded by lively business buildings) intentionally undeveloped or underdeveloped. The only problem that I can see with this approach is landscaping. It is valuable to have a nice park in the center of a city, if only for the cooling down that it provides, but parks don't make money and land value tax would incentivize people who own them to bulldoze the park and build something in its place. Perhaps this could be solved with certain exemptions. But these are subject to the usual corruption, e.g. someone leaves a really bad parking lot in place and his friends in the town hall simply categorize it as a park.

bombcar 3y ago
Most things like that are owned by the city itself, and so they are exempt from the taxes (because it would just slosh the money in a circle).

mattgibson 3y ago

Land prices go up when poeple have more mooney and go down when people have less. The root cause is that land is unique in the economy because it both cannot be manufactured and cannot be moved. Each piece of land is therefore unique and no one can increase supply in response to demand. Renting or purchasing land is essentially an auction and the price is set by the highest bidder. Economists call this a "monopoly price" because it's the same effect you would get if someone has a monopoly and can raise prices at will. This is in contrast to competitive prices which sink lower and lower until they bump up against the actual cost of getting the work done to provide that product or service. Land value is therefore a really weird part of the economy that allows people to charge money without doing any work or providing any value in return. If we confiscate all the money people charge to rent or buy land, nothing changes because no work was ever happening. The land is still there and still just as useful. Contrast that with anything where work is actually done - the industry would collapse if you confiscate the money. Taxing land value therefore allows the government to reclaim the money which those people should not be able to charge in the first place (if there was free market competition). When this happens, counter-intuitively, land prices do not rise (because the highest bid in the auction doesn't change) and there is no negative affect on production or jobs (because no one is employed to manufacture or maintain land). We know this because economic theory predicts it and various countries have already tried it. Instead, other taxes can be cut or eliminated due to the enourmous boost in government income, which has very positive effects on the rest of the economy. Understanding how this works is deeply counter-intuitive and so people usually think that a shortage of buildings is driving property/land values because it's easy to make sense of. To directly answer your question: if you tax the land value as set by the current market, you don't have to worry about assessing other factors that SHOULD lead to higher taxes because the people trying to buy the land have already done that. That's why they are offering a higher price. It's simple and therefore cheap and easy to administer. Also essentially immune to tax dodging because you can't hide the asset.

nonethewiser 3y ago
> Land value is therefore a really weird part of the economy that allows people to charge money without doing any work or providing any value in return. If we confiscate all the money people charge to rent or buy land, nothing changes because no work was ever happening. The land is still there and still just as useful. Contrast that with anything where work is actually done - the industry would collapse if you confiscate the money. Taxing land value therefore allows the government to reclaim the money which those people should not be able to charge in the first place You say they shouldn’t be able to charge for it, but instead of disallowing it you just change the beneficiary?

BariumBlue 3y ago

Property tax: The more of your money you invest into your property, the more you pay for taxes (punishing investment) Land value tax: Your tax is unchanged on how much you invest in your properties. A rundown parking lot pays the same amount of tax as the next door skyscraper (encouraging development of limited, high value land, and punishing lazy speculation). Land value tax is a simple, elegant way to incentivize more (and more efficient) economic development.

ejstronge 3y ago
> Property tax: The more of your money you invest into your property, the more you pay for taxes (punishing investment) > Land value tax: Your tax is unchanged on how much you invest in your properties. A rundown parking lot pays the same amount of tax as the next door skyscraper (encouraging development of limited, high value land, and punishing lazy speculation). The problem with this analysis of a land value tax is that the value of the lot next to the skyscraper depends on the improvements of the skyscraper lot. This is in addition to the 'inherent' value of being downtown. If we assume the skyscraper is the highest and best use of the land, it would then appear that both the skyscraper land owner and the parking lot land owner are being charged based on the investments made on the skyscraper lot. Now, how are market prices determined? Overall, investors and lenders wish to maximize a return on investment. Indeed, property appraisals explicitly consider the highest and best use of a property in determining its market value. So I am unclear how the explicit taxation of land value and improvement value that exists currently causes differences in behavior from the land value tax system you outlined.
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- enragedcacti 3y ago
  > So I am unclear how the explicit taxation of land value and improvement value that exists currently causes differences in behavior from the land value tax system you outlined. Land with a skyscraper already on it and land next to a skyscraper have related but not equal market values. Switching from a tax on market value to a tax on land value rewards the the owner who developed their land and punishes the owner who didn't.