7 ms·

They should implement a blight tax or a vacant land tax instead. I don't see how this helps Detroit's problems - unless they arbitrarily set high values on lan

They should implement a blight tax or a vacant land tax instead. I don't see how this helps Detroit's problems - unless they arbitrarily set high values on land where land is possibly already worthless. The areas with the most blight have the lowest land values already. The city already owns 75k out of 380k lots (~20% of the city - most of it vacant) - and instead of trying to sell the lots - the Detroit Land Bank holds onto them to arbitrarily inflate land values. This seems like another recipe for a negative feedback loop that makes bad areas even worse. Just tax blight outright. Give away the damn land to anyone that will build something on it and live there - or get someone else to live there, pay taxes, and be a valuable part of the community - rather than a vacant lot that's a breeding ground for crime.

kaibee 3y ago
> They should implement a blight tax or a vacant land tax instead. A land value tax is a much more elegant solution. For one, it doesn't introduce the problem of needing to define 'vacant land'. Is a parking lot vacant land? etc
- jrockway 3y ago
  I don't think tax law fears complexity. You make a table and there is an entry for "parcel of land with grass taller than 6 inches and containing one or more 1980s automobile with 3 or more tires" right alongside "parking lot" or "hospital".
  - chongli 3y ago
    I don't think tax law fears complexity Of course it does. Complexity in the tax law is regressive. It lets wealthier people and businesses take advantage of more deductions and writeoffs to lower their tax burden, due to the ability to hire accountants full time to work on it. Simple taxes that are difficult to avoid (such as LVT) are best if you want a progressive tax regime. One of the best features of LVT is that it taxes unearned increases in the value of land. While you can do any improvements you want to the property without increasing the LVT, improvements made by the city or other private interests to the area around your land absolutely will increase its value, thus increasing your tax burden.
    - eru 3y ago
      Simpler is not only less regressive, but also more efficient. Those lawyers and accountants freed up by simplicity can then go on to contribute to the economy in meaningful ways.
    - jjav 3y ago
      > Simple taxes that are difficult to avoid (such as LVT) Can you explain how is it simple? Who gets to set the theoretical value of a plot of land, disconnected from all current uses? Since it's theoretical, it's very subjective. Who do we give this power to make or destroy the owners based on purely subjective speculation on what it might be worth? How do we guarantee that this entity won't abuse the power to set arbitrary tax valuations?
      - reaperman 3y ago
        > How do we guarantee that this entity won't abuse the power to set arbitrary tax valuations? We don't. They already do that with "normal" property taxes. This wouldn't change that. Soon-to-be gentrified neighborhoods are often ignored by property tax assessors and code enforcement for many years, then one day a developer reaches out to the tax assessors and says "hey the taxable assessment values in this neighborhood should really be higher". Then the people living there have taxes raised 10-20% every year until they are forced to sell for low prices because they can't afford to hold onto their property until the gentrification is actually well underway when they'd finally see their property value actually go up. At least, that's how it goes in Texas. I don't think this system would be worse in that sense, probably roughly equivalent. But it makes sense to at least attempt to tax undeveloped and under-developed land at high enough rates to encourage at least some healthy amount of development. It won't be perfect, but it shouldn't be worse either.
        jjav 3y ago
        > I don't think this system would be worse in that sense, probably roughly equivalent. But it makes sense to at least attempt to tax undeveloped and under-developed land at high enough rates to encourage at least some healthy amount of development. It won't be perfect, but it shouldn't be worse either. I don't see how it can't not be much worse. If the tax is based on the actual value of the property, there are two important factors: 1- You can easily prove or disprove whether the valuation makes sense. Just look at comparable sales nearby. If in a neighborhood of similar houses, ten have been sold in the past year for 200K and your very similar house receives a tax bill saying it's worth 2M, you can easily protest and win since the sales records show it's only worth +/- 200K. 2- If it really is worth 2M based on comparable sales, in worst case you can then sell it for 2M. While it's terrible to kick people out of their homes via property taxes, at least the consolation is that it's actually worth that. So you don't go bankrupt, you can sell it for that price. With LVT the tax is supposed to be based on some theoretical projection of what it might be worth if a non-existing structure were to be there. What prevents the county from telling you that if only you built a ten story highrise there, it would be worth 10M? So now you have to pay tax on 10M. You can't easily disprove it because, well perhaps maybe it's true that if the highrise was there it might be worth 10M. But of course the building doesn't exist so it's all speculation. Also, since the building doesn't actually exist, you can't sell the property for 10M to pay the tax bill.
  - rtkwe 3y ago
    Complexity introduces additional chances of creating loopholes and allowing people with enough resources to game the definitions to avoid the LVT. More basic implementations are also preferable because they're easier to administer, with your definition (or any that depends on the current year to year usage of the lot) you have to create a whole cadre of inspectors to check on the lots to ensure compliance and check people aren't just lying on their taxes.
  - adhesive_wombat 3y ago
    BRB setting up dewheelr.io, which will help you, a landowner besieged by toxic regulations threatening your eyesore vacant landbank, sorry, useful and beautiful community recycling zone. For a small monthly fee, we'll connect you with local freelance tax compliance consultants who will happily remove tyres from the vehicles until they slip through the gaps in the table in your local jurisdiction. We'll keep on top of the regulatory complexity (in fact, we lobbied to ensure that only we are allowed to, so you can trust that we know the rules), deal with the grotty human workers (we've never actually met or talked to any of them person-to-person, so we don't feel bad paying them below a living wage and withholding payment when we can get away with it) leaving you to focus on what matters most: letting that dead possum stuck in the frayed chainlink fence grow a really interesting plant in an eyesocket.
    - jrockway 3y ago
      Love it. Possum plants are the best improvement you can make to your neighborhood.
- conductr 3y ago
  I agree simply on the fact my head filled with half a dozen loopholes within seconds of reading "blight" and "vacant" as measures for tax.
- jjav 3y ago
  > For one, it doesn't introduce the problem of needing to define 'vacant land'. But it introduces, unless I'm completely misunderstanding, the need to establish a theoretical value for a plot of land that's unrelated to any sale or use value we can objectively measure today. At best, it seems the assesment will be very wrong often. At worst, it'll be a political tool for local government to drive out whoever they want by overvaluing plots on purpose. A lot of the land around Detroit is nearly worthless given the blight. Will it be taxed at $0 or will they say that in an alternate universe someone could build a skyscraper there so it's worth millions? Even though nobody would actually fund that work. Taxing based on sale price isn't perfect, but at least it is much harder to game since it's based on a concrete market-clearing price that isn't up for debate.
  - fastball 3y ago
    How is an assessment which includes improvements (the status quo) less complicated than one which does not? Distinguishing between lot value and property value is already a very common exercise in the real estate business.
    - robertlagrant 3y ago
      In real estate property value is constantly being corrected by an actual market. Prices aren't set by bureaucrats; they're paid by people for whom that price is worth it.
      - fastball 3y ago
        And bureaucrats are unable to use the market itself to help value land because?
        atlantic 3y ago
        Because the market price is only fixed at the moment of sale. Until then, setting the market value of a property is fairly speculative.
        3y ago
surge 3y ago
I think the same tax should be on vacant rental properties. If you're still sitting on a rental property after 6 months to a year, you're charging too much for it since its apparently above market rate. At the very least you shouldn't be able to claim write off the loss on your taxes past a certain period. Maybe depreciation is another thing that should be fixed.
- photonbeam 3y ago
  Im curious why depreciation has tax implications, what was the intention
  - friendzis 3y ago
    Equalization of tax burden and transparency in reporting. To put it very simply: when you buy a thing you spend money and gain value. No change in books. Then after some time you sell said thing for generally less and experience sharp loss. Think of P&L report of a public company. Such maneuver will artificially increase profits during ownership and deflate, potentially up to incurring book loss, them in period of sale. Depreciation/amortization simply spreads this loss of value over the period of ownership. Tax implications are mostly incidental and come from reporting.
  - nprateem 3y ago
    It's because the 'value' of something (eg a machine) is 'used up' over time until eg the machine eventually wears out and needs replacing. Depreciation reflects that the asset's value is used up over time by allowing the owner to deduct part of its value each period to reflect the reduction in asset value in their financial statements.
- epistasis 3y ago
  Pretty sure you can't write off missing rent as a business loss. Depreciation definitely needs to be fixed. You shouldn't be able to claim 3% of a structures value as business loss every year, without some sort of evidence that you will actually tear down the structure in 33 years. And perhaps after it has been counted as depreciated once, future owners shouldn't be allowed to deduct the depreciation either.
jncfhnb 3y ago
Vacant lot tax? Oh no, as you can see I put a shed there.
flagrant_taco 3y ago
Land value taxes are generally set arbitrarily high. Localities are incentivized to set values as high as they can attempt to justify. They end up modeling what they think could be the most profitable or valuable development on the land then tax you as if that were already done. Eventually the land ends up in the hands of the few willing and able to abuse the land to that level, prioritizing profit above all else.
- snapplebobapple 3y ago
  your first paragraph applies pretty much equally to taxing land+developments. Also, in the context of a city building to the maximum of the zoning is a good thing in nearly all instances because higher density means you need less land to provide shelter for the inhabitants and it's way, way easier to provide most services to higher density.
  - flagrant_taco 3y ago
    Property taxes that factor in existing improvements doesn't leave the owner as far behind chasing potential value that they are already being taxed for. When your tax burden is a factor of expected market value of the land plus permanent improvements they're taxing you on what you already have. When it's based on an expected optimal value of the lad they're taxing you on what *they* think your land *should* be worth if fully developed. Assuming that higher density is always better ignores the externalities required to maintain such a system. Higher density cities require more outside inputs brought in from outside the city. Those inputs strip resources from other lands, require input to process the raw materials, and require fuel and vehicles to transport the goods into the city frequently. The city's waste must be transported and processed somewhere, again adding impacts to the environment even if those impacts aren't directly felt within city limits. If the goal is to minimize impact, cities would only be as large and as dense as they can reasonably be self sufficient. That doesn't preclude trade between cities, states, and countries, but it does mean the city isn't entirely dependent on a constant churn of bringing in resources from elsewhere and shipping out waste.
    - 3y ago
WalterBright 3y ago
Such a tax may result in the land having a negative value, meaning you cannot even give it away.

kaibee 3y ago

> They should implement a blight tax or a vacant land tax instead. A land value tax is a much more elegant solution. For one, it doesn't introduce the problem of needing to define 'vacant land'. Is a parking lot vacant land? etc

jrockway 3y ago
I don't think tax law fears complexity. You make a table and there is an entry for "parcel of land with grass taller than 6 inches and containing one or more 1980s automobile with 3 or more tires" right alongside "parking lot" or "hospital".
- chongli 3y ago
  I don't think tax law fears complexity Of course it does. Complexity in the tax law is regressive. It lets wealthier people and businesses take advantage of more deductions and writeoffs to lower their tax burden, due to the ability to hire accountants full time to work on it. Simple taxes that are difficult to avoid (such as LVT) are best if you want a progressive tax regime. One of the best features of LVT is that it taxes unearned increases in the value of land. While you can do any improvements you want to the property without increasing the LVT, improvements made by the city or other private interests to the area around your land absolutely will increase its value, thus increasing your tax burden.
  - eru 3y ago
    Simpler is not only less regressive, but also more efficient. Those lawyers and accountants freed up by simplicity can then go on to contribute to the economy in meaningful ways.
  - jjav 3y ago
    > Simple taxes that are difficult to avoid (such as LVT) Can you explain how is it simple? Who gets to set the theoretical value of a plot of land, disconnected from all current uses? Since it's theoretical, it's very subjective. Who do we give this power to make or destroy the owners based on purely subjective speculation on what it might be worth? How do we guarantee that this entity won't abuse the power to set arbitrary tax valuations?
    - reaperman 3y ago
      > How do we guarantee that this entity won't abuse the power to set arbitrary tax valuations? We don't. They already do that with "normal" property taxes. This wouldn't change that. Soon-to-be gentrified neighborhoods are often ignored by property tax assessors and code enforcement for many years, then one day a developer reaches out to the tax assessors and says "hey the taxable assessment values in this neighborhood should really be higher". Then the people living there have taxes raised 10-20% every year until they are forced to sell for low prices because they can't afford to hold onto their property until the gentrification is actually well underway when they'd finally see their property value actually go up. At least, that's how it goes in Texas. I don't think this system would be worse in that sense, probably roughly equivalent. But it makes sense to at least attempt to tax undeveloped and under-developed land at high enough rates to encourage at least some healthy amount of development. It won't be perfect, but it shouldn't be worse either.
      - jjav 3y ago
        > I don't think this system would be worse in that sense, probably roughly equivalent. But it makes sense to at least attempt to tax undeveloped and under-developed land at high enough rates to encourage at least some healthy amount of development. It won't be perfect, but it shouldn't be worse either. I don't see how it can't not be much worse. If the tax is based on the actual value of the property, there are two important factors: 1- You can easily prove or disprove whether the valuation makes sense. Just look at comparable sales nearby. If in a neighborhood of similar houses, ten have been sold in the past year for 200K and your very similar house receives a tax bill saying it's worth 2M, you can easily protest and win since the sales records show it's only worth +/- 200K. 2- If it really is worth 2M based on comparable sales, in worst case you can then sell it for 2M. While it's terrible to kick people out of their homes via property taxes, at least the consolation is that it's actually worth that. So you don't go bankrupt, you can sell it for that price. With LVT the tax is supposed to be based on some theoretical projection of what it might be worth if a non-existing structure were to be there. What prevents the county from telling you that if only you built a ten story highrise there, it would be worth 10M? So now you have to pay tax on 10M. You can't easily disprove it because, well perhaps maybe it's true that if the highrise was there it might be worth 10M. But of course the building doesn't exist so it's all speculation. Also, since the building doesn't actually exist, you can't sell the property for 10M to pay the tax bill.
- rtkwe 3y ago
  Complexity introduces additional chances of creating loopholes and allowing people with enough resources to game the definitions to avoid the LVT. More basic implementations are also preferable because they're easier to administer, with your definition (or any that depends on the current year to year usage of the lot) you have to create a whole cadre of inspectors to check on the lots to ensure compliance and check people aren't just lying on their taxes.
- adhesive_wombat 3y ago
  BRB setting up dewheelr.io, which will help you, a landowner besieged by toxic regulations threatening your eyesore vacant landbank, sorry, useful and beautiful community recycling zone. For a small monthly fee, we'll connect you with local freelance tax compliance consultants who will happily remove tyres from the vehicles until they slip through the gaps in the table in your local jurisdiction. We'll keep on top of the regulatory complexity (in fact, we lobbied to ensure that only we are allowed to, so you can trust that we know the rules), deal with the grotty human workers (we've never actually met or talked to any of them person-to-person, so we don't feel bad paying them below a living wage and withholding payment when we can get away with it) leaving you to focus on what matters most: letting that dead possum stuck in the frayed chainlink fence grow a really interesting plant in an eyesocket.
  - jrockway 3y ago
    Love it. Possum plants are the best improvement you can make to your neighborhood.
conductr 3y ago
I agree simply on the fact my head filled with half a dozen loopholes within seconds of reading "blight" and "vacant" as measures for tax.
jjav 3y ago
> For one, it doesn't introduce the problem of needing to define 'vacant land'. But it introduces, unless I'm completely misunderstanding, the need to establish a theoretical value for a plot of land that's unrelated to any sale or use value we can objectively measure today. At best, it seems the assesment will be very wrong often. At worst, it'll be a political tool for local government to drive out whoever they want by overvaluing plots on purpose. A lot of the land around Detroit is nearly worthless given the blight. Will it be taxed at $0 or will they say that in an alternate universe someone could build a skyscraper there so it's worth millions? Even though nobody would actually fund that work. Taxing based on sale price isn't perfect, but at least it is much harder to game since it's based on a concrete market-clearing price that isn't up for debate.
- fastball 3y ago
  How is an assessment which includes improvements (the status quo) less complicated than one which does not? Distinguishing between lot value and property value is already a very common exercise in the real estate business.
  - robertlagrant 3y ago
    In real estate property value is constantly being corrected by an actual market. Prices aren't set by bureaucrats; they're paid by people for whom that price is worth it.
    - fastball 3y ago
      And bureaucrats are unable to use the market itself to help value land because?
      - atlantic 3y ago
        Because the market price is only fixed at the moment of sale. Until then, setting the market value of a property is fairly speculative.
      - 3y ago

surge 3y ago

I think the same tax should be on vacant rental properties. If you're still sitting on a rental property after 6 months to a year, you're charging too much for it since its apparently above market rate. At the very least you shouldn't be able to claim write off the loss on your taxes past a certain period. Maybe depreciation is another thing that should be fixed.

photonbeam 3y ago
Im curious why depreciation has tax implications, what was the intention
- friendzis 3y ago
  Equalization of tax burden and transparency in reporting. To put it very simply: when you buy a thing you spend money and gain value. No change in books. Then after some time you sell said thing for generally less and experience sharp loss. Think of P&L report of a public company. Such maneuver will artificially increase profits during ownership and deflate, potentially up to incurring book loss, them in period of sale. Depreciation/amortization simply spreads this loss of value over the period of ownership. Tax implications are mostly incidental and come from reporting.
- nprateem 3y ago
  It's because the 'value' of something (eg a machine) is 'used up' over time until eg the machine eventually wears out and needs replacing. Depreciation reflects that the asset's value is used up over time by allowing the owner to deduct part of its value each period to reflect the reduction in asset value in their financial statements.
epistasis 3y ago
Pretty sure you can't write off missing rent as a business loss. Depreciation definitely needs to be fixed. You shouldn't be able to claim 3% of a structures value as business loss every year, without some sort of evidence that you will actually tear down the structure in 33 years. And perhaps after it has been counted as depreciated once, future owners shouldn't be allowed to deduct the depreciation either.

jncfhnb 3y ago

Vacant lot tax? Oh no, as you can see I put a shed there.

flagrant_taco 3y ago

Land value taxes are generally set arbitrarily high. Localities are incentivized to set values as high as they can attempt to justify. They end up modeling what they think could be the most profitable or valuable development on the land then tax you as if that were already done. Eventually the land ends up in the hands of the few willing and able to abuse the land to that level, prioritizing profit above all else.

snapplebobapple 3y ago
your first paragraph applies pretty much equally to taxing land+developments. Also, in the context of a city building to the maximum of the zoning is a good thing in nearly all instances because higher density means you need less land to provide shelter for the inhabitants and it's way, way easier to provide most services to higher density.
- flagrant_taco 3y ago
  Property taxes that factor in existing improvements doesn't leave the owner as far behind chasing potential value that they are already being taxed for. When your tax burden is a factor of expected market value of the land plus permanent improvements they're taxing you on what you already have. When it's based on an expected optimal value of the lad they're taxing you on what *they* think your land *should* be worth if fully developed. Assuming that higher density is always better ignores the externalities required to maintain such a system. Higher density cities require more outside inputs brought in from outside the city. Those inputs strip resources from other lands, require input to process the raw materials, and require fuel and vehicles to transport the goods into the city frequently. The city's waste must be transported and processed somewhere, again adding impacts to the environment even if those impacts aren't directly felt within city limits. If the goal is to minimize impact, cities would only be as large and as dense as they can reasonably be self sufficient. That doesn't preclude trade between cities, states, and countries, but it does mean the city isn't entirely dependent on a constant churn of bringing in resources from elsewhere and shipping out waste.
  - 3y ago

WalterBright 3y ago

Such a tax may result in the land having a negative value, meaning you cannot even give it away.