4 ms·

> LVT encourages urban sprawl by punishing retail, industrial, and residential concerns that choose to agglomerate with higher taxes. Can you explain more? I d

> 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.

deleted 3y ago
[deleted]
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.
- BoiledCabbage 3y ago
  First, most places in the US at least already have a form of property tax. So you should be comparing LVT to property tax, not LVT to no tax. So most the above doesn't apply. But even if you did use your example above. Imagine as well there is someone else trying to open a fancy large bookstore containing as well hangouts like cafe, a bar and lecture halls for reading and book discussion. Their main draw is foot traffic and to be a neighborhood lounge where people will stroll by and stop in to pass some time about a subject they like. They also want use of the same land, and for them the downtown location will also benefit their employees but critically it is also extremely important for their expected customers. For them, they would profit more from their location downtown and wouldn't likely be able to stay in business in the exurban location. So they would be willing to pay more for that dense urban location because it largely benefits the greater economic activity and better use of the locaiton - they would correctly outbid the manufacturer who can open a manufacturing plant just about anywhere and only marginally benefits from being in the dense urban location. So in result if the LVT means less manufacturing in downtown (where it really isn't needed), and more businesses can operate where they benefit from the density then that's a plus for society and LVT working as is should. And even all of tht said, neither of these are really the main examples to show the true benefit of LVT.
  - injeolmi_love 3y ago
    Remember when reviewing the impacts of a new policy, they are always at the margin. So the appropriate situation to imagine for your bookstore is one where the benefits of land in the core are slightly greater than benefits from land in the periphery. Since LVT makes land in the core more expensive due to taxes, on the margin all businesses and residences would migrate towards the periphery. Property tax creates its own distortions, just like all taxes. But it is less distortive since going back to the example of a manufactury or a bookstore, no matter where they locate the property tax changes less than a land value tax, meaning the decision on where to locate is based on efficiency rather than taxes.
    - BoiledCabbage 3y ago

deleted 3y ago

[deleted]

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.

BoiledCabbage 3y ago
First, most places in the US at least already have a form of property tax. So you should be comparing LVT to property tax, not LVT to no tax. So most the above doesn't apply. But even if you did use your example above. Imagine as well there is someone else trying to open a fancy large bookstore containing as well hangouts like cafe, a bar and lecture halls for reading and book discussion. Their main draw is foot traffic and to be a neighborhood lounge where people will stroll by and stop in to pass some time about a subject they like. They also want use of the same land, and for them the downtown location will also benefit their employees but critically it is also extremely important for their expected customers. For them, they would profit more from their location downtown and wouldn't likely be able to stay in business in the exurban location. So they would be willing to pay more for that dense urban location because it largely benefits the greater economic activity and better use of the locaiton - they would correctly outbid the manufacturer who can open a manufacturing plant just about anywhere and only marginally benefits from being in the dense urban location. So in result if the LVT means less manufacturing in downtown (where it really isn't needed), and more businesses can operate where they benefit from the density then that's a plus for society and LVT working as is should. And even all of tht said, neither of these are really the main examples to show the true benefit of LVT.
- injeolmi_love 3y ago
  Remember when reviewing the impacts of a new policy, they are always at the margin. So the appropriate situation to imagine for your bookstore is one where the benefits of land in the core are slightly greater than benefits from land in the periphery. Since LVT makes land in the core more expensive due to taxes, on the margin all businesses and residences would migrate towards the periphery. Property tax creates its own distortions, just like all taxes. But it is less distortive since going back to the example of a manufactury or a bookstore, no matter where they locate the property tax changes less than a land value tax, meaning the decision on where to locate is based on efficiency rather than taxes.
  - BoiledCabbage 3y ago