5 ms·

The problem is, what if it doesn't produce that much? What if it doesn't produce anything? Imagine someone buying a house somewhere cheap. Then some gentrifica

The problem is, what if it doesn't produce that much? What if it doesn't produce anything? Imagine someone buying a house somewhere cheap. Then some gentrification, a new microsoft campus built nearby, etc., and the price of the house jumps 10x+. You're on a fixed income, and your taxes are now higher then you can afford. If you have multiple houses, sure, tax the second, third, etc. one (evn though the taxes are then charged as higher rents if you lease those properties), but the first, primary residence should not be taxed as a "profit maker". Maybe it's a cultural difference, but here in the balkans, people rarely move, and telling a 75yo grandma that she'll have to move, since her socialist built apartment is now worth 500k eur+, because "investors" want it for airbnb, and she cannot afford taxes on it, is just evil.

nisegami 3y ago
One way you could look at it is that this person's inability to afford the land value tax signals that they are not making effective use of the land and that it would be in society's best interest if the land were to change hands to someone who could use it in a way that lets them afford the taxes on it.
- ajsnigrutin 3y ago
  You're looking at a persons home as an economic investment and not as a social thing. It's a home. Someone will live in that house. You just want to replace a poor grandma with someone who can pay more taxes, while the use of the land/house/apartment will stay the same, even with airbnb, someone will just use that apartment to sleep in. It's the society's best interest that people can afford places to live and not live under threat that some new fad will make something they already own (and need to survive) unaffordable.
  - screye 3y ago
    Land value tax often goes hand in hand with lax zoning. In your example, if the grandma's house went from 200k to a 1million, then she isn't poor anymore. She is very rich. She doesn't have to leave the neighborhood. She can give her house away for redevelopment into a condo. Get the nice penthouse flat and a pretty penny on the same land. Now, she has enough liquidity to pay the land value tax, which is also lower per person because it's distributed over the whole condo. This is happening in India right now. Apartments are redeveloped into towers. Old residents get 2x the floor space and decent relocation $$ for the construction period. No one is being kicked out of their house. Most people move to another spot within a 10 minutes walk from their home for 3 years and then come back when the building is done.
    - ajsnigrutin 3y ago
      In my country, a previously ~100k condo apartment now costs 500k+... sometimes even less than that before (city center, no easy parking, lots of noise) and more now (airbnb).
  - cultureswitch 3y ago
    If grandma owns a house in a place where people want to build an apartment block, she's not poor. By definition.
    - ajsnigrutin 3y ago
      In my country, the apartment block is already there, but the previously shitty apartment (noise, no easy parking) just became expensive because of stuff like airbnb and speculative investmnts.
- Draiken 3y ago
  What? I must be misunderstanding your comment. Are we seriously saying that if someone can no longer afford tax on a land they already own because the rich need to get richer, you should sell? Basically you're asking for normal people to work, get raises forever and hope nothing crazy happens that can raise land value in their neighborhood in order to keep the land they already own. No, this is not in "society's best interest". This is in the capitalist's best interests. Those are very different. Comments like these make me not want to live in this world anymore. I really hope I misunderstood the comment. Edit: removed some unnecessary harsh words.
  - edgyquant 3y ago
    The entire Georgist argument is that you can’t own land, you simply rent it from society via a land tax. It’s also worth noting that George’s land value tax was devised as a way to pay a citizens dividend (the profit gets distributed evenly among all citizens) not to fund a bureaucracy as will happen here.
  - diffeomorphism 3y ago
    > Are we seriously saying that if someone can no longer afford tax on a land they already own because the rich need to get richer, you should sell? devil's advocate: No, not because of the rich but because of the poor. Buying a house decades ago was very possible on an average single person's salary. Nowadays, even upper income range couples have large troubles financing a house. So the situation is that you have lots of old people living in houses that they could never, ever afford at today's prices. The claim (no comment on whether it is correct or not) is that this causes massive distortion and that this proposal would fix it (doubt it, but that is the discussion). > What the f*. That is not helpful for a discussion. There is a problem stated and a (probably bad) proposal to address it. Instead of just saying "f*", address the problem and make a different proposal.
    - treis 3y ago
      Homeownership rate has not changed much over the last 60 years. Housing is still affordable overall in the US. It's only some regions that have gone nuts.
diffeomorphism 3y ago
The 10x seems very unrealistic. But assuming that were the case, the taxes would be the least of your worries because things like supermarkets, electricity, phone, water, heating... would also go up heavily. The more realistic picture is that grandma living alone in a rather large, old house, whose price, heating etc. went up quite drastically. That is already happening, in particular the heating part. Just have a look at Europe and the UK. The question then is, and I am not picking a side here, whether you spend public money so she can afford to stay in that large house or you make changes.
- gosub100 3y ago
  groceries may be a bit more expensive, but "phone, water, and heating" go up with a real estate boom? not in my experience. Price per kilowatt/water meter is the same if you're in the ghetto or "affluent" neighborhood.
- ajsnigrutin 3y ago
  Not unrealistic at all. After the fall of socialism, we had a law, where current tennats could buy apartments from the government for very very cheap.. we're talking about a mid-range new car prices back then (to avoid having to calculate inflation), and quite a few years after that the prices were very low. If we're talking the attractive parts of the city center, a one bedroom apartment can easily cost 500keur now. For comparison, even ~15-20 years ago, that would cost maybe 100keur (with some inflation until now), especially if it didn't have parking options nearby (but airbnb investors don't really care about that that much, they can rent a parking spot a few 100 meters away in a parking garage. We had a law, that somehow got repelled by some lobbyist, where all the public money given to help was then taken out of inheritance (so the kids had to either pay it back, or property got sold at an auction, government took the money and the kids got the rest). This would solve the help-money issue.
invalidOrTaken 3y ago
While moving is certainly not costless, keep in mind that this grandma moving and selling has just had a huge windfall.
dfxm12 3y ago
Every tax jurisdiction I've lived in has some sort of homestead exemption to protect people from the situation where the taxes in the house they own and live in go up to where they can't afford it.
- GenerWork 3y ago
  I see homestead as completely, 100% incompatible with a LVT. Not because there's any law of man or nature that says the 2 can't work together, but because as soon as an area becomes "hot", that land will spike in value and the government will want its revenue to increase, and at that point they'll fight tooth and nail to overturn any homestead protection that exists.
  - dfxm12 3y ago
    The outcome Detroit wants from this is for the land to be developed. Governments are likely to get directly involved with empty lots, not already developed land. This is also setting aside that kicking pensioners to the streets is generally political suicide, and one of the reasons these homestead exemptions exist in the first place.
cultureswitch 3y ago
Why is it evil? She's richer than she used to be, through no fault of her own. Just a little less richer because of the tax.
dwallin 3y ago
This is like looking at an algorithm, thinking of the worse case scenario, running a single step, and deciding that it's not worth it from that alone. This is not a one-and-done rule, and the same dynamics that might push an old lady to move in one situation, might make things much better for her in another, and more importantly, over time might lead to a better situation for her grandchildren when they grow up. In practice, that grandma is stuck in a city where her children and grandchildren can no longer afford to buy real estate in. Friends and neighbors who rent are priced out and have to move regardless. The local goods and services rise in price and taxes go up, all under the current system. Her support network and community evaporate and soon she finds nothing left but to sell to a corporation, who is the only entity left that can afford the prices her house demands. The first order effect of a Land Value Tax is that it shifts who pays the biggest burden of taxes. Grandma A who owns a big house in the center of a vibrant city where lots of young families are looking for homes near their jobs might see an increase in her taxes, but the Grandma B who owns a Condo in a larger complex will likely see her taxes drop. Grandma C who lives in a nice well-maintained house way out in the burbs will likely see a drop as well, most of her value is in the nice home she has been tenderly caring for her whole life. A second order effect of LVT is it creates a suppressive effect on real estate prices. When prices in an area are going up across the board, this is entirely in the value of the land, which means LVT taxes are going to rise correspondingly. This additional tax liability significantly helps counteract a speculative rise in prices, leading to a lower and more stable pricing, and pushing out those who are just looking to speculate on trends. The value that a government creates for its citizens is recaptured and able to be reinvested, instead of going directly in the pockets of land speculators. The third order effect is that this shifts the incentives around value creation vs value capturing. Perhaps the house next door to Grandma's is currently owned by a deadbeat landlord, Pennybags, who lets the house fall into disrepair, hoping to turn around and sell it as the market rises. Now all of a sudden Pennybag's plan is quickly becoming a bad investment. With LVT his property value is more heavily correlated with the actual quality of the house and less with value of the land. He is finding that despite an increasing demand in the area, his property is actually dropping in price. Meanwhile good ole Grandma has been diligently been taking care of her home, and adding value and the price of her home has actually gone up faster than the rise in taxes. She's able to use to use the increase in value to take out a loan to build an accessory unit she uses to now help her cover her increased taxes, which further increases her property value. Despite all of that, her taxes have not gone up at all!
mactrey 3y ago
Detroit and most places in the US already have property tax. Little old grandma already has to pay more every year when her property becomes more valuable. And homestead exemptions already exist to prevent kicking grandma to the street. A LVT would just shift property tax burden more toward empty lots or less-developed parcels and away from more-developed parcels. It wouldn't result in killing little old ladies.

nisegami 3y ago

One way you could look at it is that this person's inability to afford the land value tax signals that they are not making effective use of the land and that it would be in society's best interest if the land were to change hands to someone who could use it in a way that lets them afford the taxes on it.

ajsnigrutin 3y ago
You're looking at a persons home as an economic investment and not as a social thing. It's a home. Someone will live in that house. You just want to replace a poor grandma with someone who can pay more taxes, while the use of the land/house/apartment will stay the same, even with airbnb, someone will just use that apartment to sleep in. It's the society's best interest that people can afford places to live and not live under threat that some new fad will make something they already own (and need to survive) unaffordable.
- screye 3y ago
  Land value tax often goes hand in hand with lax zoning. In your example, if the grandma's house went from 200k to a 1million, then she isn't poor anymore. She is very rich. She doesn't have to leave the neighborhood. She can give her house away for redevelopment into a condo. Get the nice penthouse flat and a pretty penny on the same land. Now, she has enough liquidity to pay the land value tax, which is also lower per person because it's distributed over the whole condo. This is happening in India right now. Apartments are redeveloped into towers. Old residents get 2x the floor space and decent relocation $$ for the construction period. No one is being kicked out of their house. Most people move to another spot within a 10 minutes walk from their home for 3 years and then come back when the building is done.
  - ajsnigrutin 3y ago
    In my country, a previously ~100k condo apartment now costs 500k+... sometimes even less than that before (city center, no easy parking, lots of noise) and more now (airbnb).
- cultureswitch 3y ago
  If grandma owns a house in a place where people want to build an apartment block, she's not poor. By definition.
  - ajsnigrutin 3y ago
    In my country, the apartment block is already there, but the previously shitty apartment (noise, no easy parking) just became expensive because of stuff like airbnb and speculative investmnts.
Draiken 3y ago
What? I must be misunderstanding your comment. Are we seriously saying that if someone can no longer afford tax on a land they already own because the rich need to get richer, you should sell? Basically you're asking for normal people to work, get raises forever and hope nothing crazy happens that can raise land value in their neighborhood in order to keep the land they already own. No, this is not in "society's best interest". This is in the capitalist's best interests. Those are very different. Comments like these make me not want to live in this world anymore. I really hope I misunderstood the comment. Edit: removed some unnecessary harsh words.
- edgyquant 3y ago
  The entire Georgist argument is that you can’t own land, you simply rent it from society via a land tax. It’s also worth noting that George’s land value tax was devised as a way to pay a citizens dividend (the profit gets distributed evenly among all citizens) not to fund a bureaucracy as will happen here.
- diffeomorphism 3y ago
  > Are we seriously saying that if someone can no longer afford tax on a land they already own because the rich need to get richer, you should sell? devil's advocate: No, not because of the rich but because of the poor. Buying a house decades ago was very possible on an average single person's salary. Nowadays, even upper income range couples have large troubles financing a house. So the situation is that you have lots of old people living in houses that they could never, ever afford at today's prices. The claim (no comment on whether it is correct or not) is that this causes massive distortion and that this proposal would fix it (doubt it, but that is the discussion). > What the f*. That is not helpful for a discussion. There is a problem stated and a (probably bad) proposal to address it. Instead of just saying "f*", address the problem and make a different proposal.
  - treis 3y ago
    Homeownership rate has not changed much over the last 60 years. Housing is still affordable overall in the US. It's only some regions that have gone nuts.

diffeomorphism 3y ago

The 10x seems very unrealistic. But assuming that were the case, the taxes would be the least of your worries because things like supermarkets, electricity, phone, water, heating... would also go up heavily. The more realistic picture is that grandma living alone in a rather large, old house, whose price, heating etc. went up quite drastically. That is already happening, in particular the heating part. Just have a look at Europe and the UK. The question then is, and I am not picking a side here, whether you spend public money so she can afford to stay in that large house or you make changes.

gosub100 3y ago
groceries may be a bit more expensive, but "phone, water, and heating" go up with a real estate boom? not in my experience. Price per kilowatt/water meter is the same if you're in the ghetto or "affluent" neighborhood.
ajsnigrutin 3y ago
Not unrealistic at all. After the fall of socialism, we had a law, where current tennats could buy apartments from the government for very very cheap.. we're talking about a mid-range new car prices back then (to avoid having to calculate inflation), and quite a few years after that the prices were very low. If we're talking the attractive parts of the city center, a one bedroom apartment can easily cost 500keur now. For comparison, even ~15-20 years ago, that would cost maybe 100keur (with some inflation until now), especially if it didn't have parking options nearby (but airbnb investors don't really care about that that much, they can rent a parking spot a few 100 meters away in a parking garage. We had a law, that somehow got repelled by some lobbyist, where all the public money given to help was then taken out of inheritance (so the kids had to either pay it back, or property got sold at an auction, government took the money and the kids got the rest). This would solve the help-money issue.

invalidOrTaken 3y ago

While moving is certainly not costless, keep in mind that this grandma moving and selling has just had a huge windfall.

dfxm12 3y ago

Every tax jurisdiction I've lived in has some sort of homestead exemption to protect people from the situation where the taxes in the house they own and live in go up to where they can't afford it.

GenerWork 3y ago
I see homestead as completely, 100% incompatible with a LVT. Not because there's any law of man or nature that says the 2 can't work together, but because as soon as an area becomes "hot", that land will spike in value and the government will want its revenue to increase, and at that point they'll fight tooth and nail to overturn any homestead protection that exists.
- dfxm12 3y ago
  The outcome Detroit wants from this is for the land to be developed. Governments are likely to get directly involved with empty lots, not already developed land. This is also setting aside that kicking pensioners to the streets is generally political suicide, and one of the reasons these homestead exemptions exist in the first place.

cultureswitch 3y ago

Why is it evil? She's richer than she used to be, through no fault of her own. Just a little less richer because of the tax.

dwallin 3y ago

This is like looking at an algorithm, thinking of the worse case scenario, running a single step, and deciding that it's not worth it from that alone. This is not a one-and-done rule, and the same dynamics that might push an old lady to move in one situation, might make things much better for her in another, and more importantly, over time might lead to a better situation for her grandchildren when they grow up. In practice, that grandma is stuck in a city where her children and grandchildren can no longer afford to buy real estate in. Friends and neighbors who rent are priced out and have to move regardless. The local goods and services rise in price and taxes go up, all under the current system. Her support network and community evaporate and soon she finds nothing left but to sell to a corporation, who is the only entity left that can afford the prices her house demands. The first order effect of a Land Value Tax is that it shifts who pays the biggest burden of taxes. Grandma A who owns a big house in the center of a vibrant city where lots of young families are looking for homes near their jobs might see an increase in her taxes, but the Grandma B who owns a Condo in a larger complex will likely see her taxes drop. Grandma C who lives in a nice well-maintained house way out in the burbs will likely see a drop as well, most of her value is in the nice home she has been tenderly caring for her whole life. A second order effect of LVT is it creates a suppressive effect on real estate prices. When prices in an area are going up across the board, this is entirely in the value of the land, which means LVT taxes are going to rise correspondingly. This additional tax liability significantly helps counteract a speculative rise in prices, leading to a lower and more stable pricing, and pushing out those who are just looking to speculate on trends. The value that a government creates for its citizens is recaptured and able to be reinvested, instead of going directly in the pockets of land speculators. The third order effect is that this shifts the incentives around value creation vs value capturing. Perhaps the house next door to Grandma's is currently owned by a deadbeat landlord, Pennybags, who lets the house fall into disrepair, hoping to turn around and sell it as the market rises. Now all of a sudden Pennybag's plan is quickly becoming a bad investment. With LVT his property value is more heavily correlated with the actual quality of the house and less with value of the land. He is finding that despite an increasing demand in the area, his property is actually dropping in price. Meanwhile good ole Grandma has been diligently been taking care of her home, and adding value and the price of her home has actually gone up faster than the rise in taxes. She's able to use to use the increase in value to take out a loan to build an accessory unit she uses to now help her cover her increased taxes, which further increases her property value. Despite all of that, her taxes have not gone up at all!

mactrey 3y ago

Detroit and most places in the US already have property tax. Little old grandma already has to pay more every year when her property becomes more valuable. And homestead exemptions already exist to prevent kicking grandma to the street. A LVT would just shift property tax burden more toward empty lots or less-developed parcels and away from more-developed parcels. It wouldn't result in killing little old ladies.