7 ms·

> difficulty in valuing the land. It's rather easy to value the land: Have the owner decide what it's worth, then they pay a tax as a percentage of that valuat

by avar 3y ago

> difficulty in valuing the land. It's rather easy to value the land: Have the owner decide what it's worth, then they pay a tax as a percentage of that valuation. Now, obviously given that system everyone's going to value their land at $0. To adjust for that land owners must be obligated to sell their land to anyone willing to buy it at the declared valuation. Such a mechanism doesn't only keep the current owners honest, but leads to more accurate price discovery, as the land might have a higher "real" valuation than the current owner is aware of.

sideshowb 3y ago
Given the friction (inconvenience) in having to move house/business etc, that hardly seems fair. It also defeats the object of land ownership if you can be kicked off it at any time.
- avar 3y ago
  You can trivially structure such a tax in such a way that going through a "forced sale" is going to be very lucrative (edit: elaborated in a sibling comment: https://news.ycombinator.com/item?id=37909570 https://news.ycombinator.com/item?id=37909570). > It also defeats the object of land ownership[...] So no, most people could keep land they'd like to keep in practice. The entire notion of any sort of property tax is also predicated on the idea that individual land ownership is a tradeoff between the interest of the individual and society at large.
  - sideshowb 3y ago
    > The entire notion of any sort of property tax is also predicated on the idea that individual land ownership is a tradeoff between the interest of the individual and society at large. Indeed, and I like this concept, I don't think we should ever "own" land in the same way as I own, say, my phone. All we ever do is borrow it from society (or even nature). However, some aspects of land ownership are a net positive for society at large. In particular, the incentive to look after it better if it's really yours until you sell it or you die. With this in mind I like some proposals I've heard whereby unpaid land value tax can be accrued to be paid at death or on sale. That way the stewardship aspect of ownership is reinforced without the freeloading on land value increases. Returning to the valuation question. I think you're assuming an efficient market when it clearly isn't one. It would be like having to reapply for your own job, except it's rebidding for your own house. Not a kind thing to do to anyone.
- eru 3y ago
  Well, you can also use whatever mechanism is currently in use for people who don't pay their property taxes.
  - sideshowb 3y ago
    So you want people to bid for their own homes? Glad you're not dictator mate
bitshiftfaced 3y ago
I don't love this idea, and I suspect many others wouldn't either. If you raised your family in a house and have lived there for decades, it has intangible value to you, but not others. Yet because of this value, you must pay potentially much much more than your neighbor, who objectively speaking may have a lot of equal value. What's more, even if you pay more than you ought to, you'll never feel secure in your home, knowing that at any time you may be forced to sell.
- avar 3y ago
  You can pull on those heartstrings in either direction, as it were. In economic terms what you're arguing is that investment efficiency should always outweigh allocative efficiency. > pay [...] much more than your neighbor, who objectively speaking may have a lot of equal value. All land is unique, so I don't think adjacent land of equal value exists. The difference may be trivial, or it may be substantial. But yes, it's all a tradeoff. Some might prefer a centralized government authority decreeing a given value, others might prefer market-based price discovery. I'm not trying to convince you or anyone else either way, just pointing out that fair price discovery for a self-assessment LVT isn't an unsolved problem.
  - bitshiftfaced 3y ago
    > All land is unique, so I don't think adjacent land of equal value exists. The difference may be trivial, or it may be substantial. I don't understand how this relates. My point would stand even if the neighboring lots were slightly different in value. > just pointing out that fair price discovery for a self-assessment LVT isn't an unsolved problem. Yeah okay I'll give you that. It's just that we can't ignore how tax policy must match a society's values in a democratic society, else it'll be voted out. I'm saying this probably wouldn't work out since voters put value on the idea that at least some people will be able to get a good enough job to afford to bring up their kids in a stable home.
    - avar 3y ago
      > I don't understand how this relates. I'm agreeing with you (along with the "heartstrings" comment) that all land is going to have both objective and intangible value, e.g. the view, and that someone grew up in that house. But I think you're imagining that any intangible interests in the land are going to favor the incumbent. I think for residential lots that's probably more true than not on average. But we can easily come up with examples where a prospective buyer has a stronger intangible interest. E.g. maybe you own it, and don't really care about the land or house per-se, but it saves you 1 minute on your commute v.s. the next lot. Whereas I used to live there, and was forced to sell the house during the last recession. I've got a deep emotional connection to the lot and house, and my dog's buried in the backyard. I'd like to buy the house back. You don't want to sell. Does my interest outweigh yours? Maybe, maybe not. All I'm saying is that a self-assessed LVT with an auction mechanism (see https://news.ycombinator.com/item?id=37909570 https://news.ycombinator.com/item?id=37909570) will enable both of us to set a price on those intangibles. I agree that probably nobody's willing to try this out any time soon, for what it's worth the authors of "Radical Markets" suggest phasing in such a system by starting with commercial lots (and perhaps it would never go beyond that).
balderdash 3y ago
That’s a horrible idea - that means you value is only what you can afford to pay in taxes - effectively meaning the poor would be required to sell to the rich at below market rates if they can’t afford the taxes
- eru 3y ago
  Are you suggesting the rich people form a cartel? Otherwise, if there's more than one rich person they would outbid each other until market rates are reached. That's basically how market rates are defined. Btw, none of the problems here are specific to LVT. You see exactly the same problems in conventional property taxes: if your land is suddenly worth a lot more, your tax bill goes up.
jandrewrogers 3y ago
This does not pass basic scrutiny unless the plan is to ruin average homeowners that valued their assets at fair market value. Essentially, you want to force asset owners to write an at-the-money call option against their assets, and then adding insult to injury by not paying them an offsetting risk premium. I don't know how any moral person could be a proponent of the kinds of abuse and profitable exploitation of average people this proposal would trivially enable.
- eru 3y ago
  You are being overly dramatic. Yes, you would be forcing people to write a call option. It doesn't have to be at-the-money. Owners just pick a price that they'd be happy to sell at. Not some mystical 'fair market value' that would ruin them. Of course, land owners would want to keep their tax bill low, so picking the right price to declare is a trade-off. > [...] and then adding insult to injury by not paying them an offsetting risk premium. Please be more careful in your reasoning! You are right that the call option is worth a premium. But that obligation to write the call option comes with ownership of the land, so we can just treat it as another (small) tax on the land. The market price of the land adjusts so that the yearly benefit from owning the land is pretty close to the yearly cost of capital plus sum of all taxes. To simplify: the option premium is automatically offset by lower LVT payments. > I don't know how any moral person could be a proponent of the kinds of abuse and profitable exploitation of average people this proposal would trivially enable. Please elaborate. But please refrain from assuming that landowners are morons.
- avar 3y ago
  I'm not proposing anything novel, just describing the Harberger Tax (https://en.wikipedia.org/wiki/Harberger_Tax https://en.wikipedia.org/wiki/Harberger_Tax), or a variant thereof. In particular the book by Glen Weyl mentioned in that article describes how it could work in more detail, and in a way that address the concerns you have. A relevant except from that book (which I've got a Kindle copy of): > For any tax rate below the turnover rate, the possessor will always set a price above the amount she is willing to accept[43]. When the tax rate is zero, the possessor is free to set any price she wishes at no cost and thus would set the monopoly price. When the tax rate equals the turnover rate, she has to reveal her true value. For intermediate tax rates, she will still be discouraged by the tax from setting a very high price, but she will not have a full incentive to report her exact value. Instead, she will set a price intermediate between her true value and the monopoly price that she expects a buyer to be willing to pay. As the tax rises from zero to the turnover rate, the price she quotes will gradually fall from the monopoly price to her true value. That 43rd footnote in particular further addresses your exact concern (the mentioned "COST" stands for "common ownership self-assessed tax"): > 43.: This fact helps allay two potential objections to a COST: that possessors may wish to “sabotage” the appeal of their goods to others to avoid their interest in taking the good, and that predatory outsiders may maliciously take goods just to harm a possessor. Notice that neither of these are possible if possessors always set prices above the minimum they would be willing to accept, because in this case the possessor is happy when her possessions are taken: she still profits, just not as much as if she set a monopoly price. Thus “predation” will be nearly as welcome as would be the “predation” of someone offering you out of the blue an extravagant sum for your home and you would never wish to sabotage your possessions as this would reduce the chance of such an exceptional opportunity. Only individuals who fraudulently report extremely low values and try to dramatically sabotage their goods would be open to predation, but so they should, and such individuals are likely to be caught by others before too much sabotage is possible.

by avar 3y ago

sideshowb 3y ago

Given the friction (inconvenience) in having to move house/business etc, that hardly seems fair. It also defeats the object of land ownership if you can be kicked off it at any time.

avar 3y ago
You can trivially structure such a tax in such a way that going through a "forced sale" is going to be very lucrative (edit: elaborated in a sibling comment: https://news.ycombinator.com/item?id=37909570 https://news.ycombinator.com/item?id=37909570). > It also defeats the object of land ownership[...] So no, most people could keep land they'd like to keep in practice. The entire notion of any sort of property tax is also predicated on the idea that individual land ownership is a tradeoff between the interest of the individual and society at large.
- sideshowb 3y ago
  > The entire notion of any sort of property tax is also predicated on the idea that individual land ownership is a tradeoff between the interest of the individual and society at large. Indeed, and I like this concept, I don't think we should ever "own" land in the same way as I own, say, my phone. All we ever do is borrow it from society (or even nature). However, some aspects of land ownership are a net positive for society at large. In particular, the incentive to look after it better if it's really yours until you sell it or you die. With this in mind I like some proposals I've heard whereby unpaid land value tax can be accrued to be paid at death or on sale. That way the stewardship aspect of ownership is reinforced without the freeloading on land value increases. Returning to the valuation question. I think you're assuming an efficient market when it clearly isn't one. It would be like having to reapply for your own job, except it's rebidding for your own house. Not a kind thing to do to anyone.
eru 3y ago
Well, you can also use whatever mechanism is currently in use for people who don't pay their property taxes.
- sideshowb 3y ago
  So you want people to bid for their own homes? Glad you're not dictator mate

bitshiftfaced 3y ago

I don't love this idea, and I suspect many others wouldn't either. If you raised your family in a house and have lived there for decades, it has intangible value to you, but not others. Yet because of this value, you must pay potentially much much more than your neighbor, who objectively speaking may have a lot of equal value. What's more, even if you pay more than you ought to, you'll never feel secure in your home, knowing that at any time you may be forced to sell.

avar 3y ago
You can pull on those heartstrings in either direction, as it were. In economic terms what you're arguing is that investment efficiency should always outweigh allocative efficiency. > pay [...] much more than your neighbor, who objectively speaking may have a lot of equal value. All land is unique, so I don't think adjacent land of equal value exists. The difference may be trivial, or it may be substantial. But yes, it's all a tradeoff. Some might prefer a centralized government authority decreeing a given value, others might prefer market-based price discovery. I'm not trying to convince you or anyone else either way, just pointing out that fair price discovery for a self-assessment LVT isn't an unsolved problem.
- bitshiftfaced 3y ago
  > All land is unique, so I don't think adjacent land of equal value exists. The difference may be trivial, or it may be substantial. I don't understand how this relates. My point would stand even if the neighboring lots were slightly different in value. > just pointing out that fair price discovery for a self-assessment LVT isn't an unsolved problem. Yeah okay I'll give you that. It's just that we can't ignore how tax policy must match a society's values in a democratic society, else it'll be voted out. I'm saying this probably wouldn't work out since voters put value on the idea that at least some people will be able to get a good enough job to afford to bring up their kids in a stable home.
  - avar 3y ago
    > I don't understand how this relates. I'm agreeing with you (along with the "heartstrings" comment) that all land is going to have both objective and intangible value, e.g. the view, and that someone grew up in that house. But I think you're imagining that any intangible interests in the land are going to favor the incumbent. I think for residential lots that's probably more true than not on average. But we can easily come up with examples where a prospective buyer has a stronger intangible interest. E.g. maybe you own it, and don't really care about the land or house per-se, but it saves you 1 minute on your commute v.s. the next lot. Whereas I used to live there, and was forced to sell the house during the last recession. I've got a deep emotional connection to the lot and house, and my dog's buried in the backyard. I'd like to buy the house back. You don't want to sell. Does my interest outweigh yours? Maybe, maybe not. All I'm saying is that a self-assessed LVT with an auction mechanism (see https://news.ycombinator.com/item?id=37909570 https://news.ycombinator.com/item?id=37909570) will enable both of us to set a price on those intangibles. I agree that probably nobody's willing to try this out any time soon, for what it's worth the authors of "Radical Markets" suggest phasing in such a system by starting with commercial lots (and perhaps it would never go beyond that).

balderdash 3y ago

That’s a horrible idea - that means you value is only what you can afford to pay in taxes - effectively meaning the poor would be required to sell to the rich at below market rates if they can’t afford the taxes

eru 3y ago
Are you suggesting the rich people form a cartel? Otherwise, if there's more than one rich person they would outbid each other until market rates are reached. That's basically how market rates are defined. Btw, none of the problems here are specific to LVT. You see exactly the same problems in conventional property taxes: if your land is suddenly worth a lot more, your tax bill goes up.

jandrewrogers 3y ago

This does not pass basic scrutiny unless the plan is to ruin average homeowners that valued their assets at fair market value. Essentially, you want to force asset owners to write an at-the-money call option against their assets, and then adding insult to injury by not paying them an offsetting risk premium. I don't know how any moral person could be a proponent of the kinds of abuse and profitable exploitation of average people this proposal would trivially enable.

eru 3y ago
You are being overly dramatic. Yes, you would be forcing people to write a call option. It doesn't have to be at-the-money. Owners just pick a price that they'd be happy to sell at. Not some mystical 'fair market value' that would ruin them. Of course, land owners would want to keep their tax bill low, so picking the right price to declare is a trade-off. > [...] and then adding insult to injury by not paying them an offsetting risk premium. Please be more careful in your reasoning! You are right that the call option is worth a premium. But that obligation to write the call option comes with ownership of the land, so we can just treat it as another (small) tax on the land. The market price of the land adjusts so that the yearly benefit from owning the land is pretty close to the yearly cost of capital plus sum of all taxes. To simplify: the option premium is automatically offset by lower LVT payments. > I don't know how any moral person could be a proponent of the kinds of abuse and profitable exploitation of average people this proposal would trivially enable. Please elaborate. But please refrain from assuming that landowners are morons.
avar 3y ago
I'm not proposing anything novel, just describing the Harberger Tax (https://en.wikipedia.org/wiki/Harberger_Tax https://en.wikipedia.org/wiki/Harberger_Tax), or a variant thereof. In particular the book by Glen Weyl mentioned in that article describes how it could work in more detail, and in a way that address the concerns you have. A relevant except from that book (which I've got a Kindle copy of): > For any tax rate below the turnover rate, the possessor will always set a price above the amount she is willing to accept[43]. When the tax rate is zero, the possessor is free to set any price she wishes at no cost and thus would set the monopoly price. When the tax rate equals the turnover rate, she has to reveal her true value. For intermediate tax rates, she will still be discouraged by the tax from setting a very high price, but she will not have a full incentive to report her exact value. Instead, she will set a price intermediate between her true value and the monopoly price that she expects a buyer to be willing to pay. As the tax rises from zero to the turnover rate, the price she quotes will gradually fall from the monopoly price to her true value. That 43rd footnote in particular further addresses your exact concern (the mentioned "COST" stands for "common ownership self-assessed tax"): > 43.: This fact helps allay two potential objections to a COST: that possessors may wish to “sabotage” the appeal of their goods to others to avoid their interest in taking the good, and that predatory outsiders may maliciously take goods just to harm a possessor. Notice that neither of these are possible if possessors always set prices above the minimum they would be willing to accept, because in this case the possessor is happy when her possessions are taken: she still profits, just not as much as if she set a monopoly price. Thus “predation” will be nearly as welcome as would be the “predation” of someone offering you out of the blue an extravagant sum for your home and you would never wish to sabotage your possessions as this would reduce the chance of such an exceptional opportunity. Only individuals who fraudulently report extremely low values and try to dramatically sabotage their goods would be open to predation, but so they should, and such individuals are likely to be caught by others before too much sabotage is possible.