5 ms·

We already tax revenue and/or profits in various ways anyway. If land is in a city, that gives it a high value and revenue earning potential due to no work or

by simonh 3y ago

We already tax revenue and/or profits in various ways anyway. If land is in a city, that gives it a high value and revenue earning potential due to no work or expenditure from the land owner, but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential. Roads, schools, hospitals, etc. these are very costly to the public but increase the value of nearby land. The land value tax gives the owner an incentive to invest in improvements and get the maximum economic return on the land, and dissincentivising sitting on land in order to benefit 'for free' from it's improving value. So it's about making sure the public gets the maximum benefit from it's investments that improve the value of the land. Taxing improvements directly would have the opposite effect.

theamk 3y ago
Always wondered how this works on modern times, where income per square foot varies wildly per industry. Let's say because of rising taxes, a bakery or a shop has closed and a lawyers office has opened in that spot. Who exactly us "the public" in this case and what are the "maximum benefits" that they are getting from that change? Because if I actually lived nearby, I sure wouldn't be happy about my favorite vakery/shop being closed. And don't say "increased tax base" - for that, you can tweak existing system and increase income taxes so you collect more from the lawyers while still keeping bakeries alive.
- BowBun 3y ago
  In your example, bakeries usually don't own land in highly desirable cities, they lease it from the owner. I think that's fine. The incentives here are against huge capital behemoths that can buy land and afford not to develop it, costing the cities in potential consumer revenue, population growth, broken windows theory, etc. Lawyers might own the building and be able to afford the tax. I think it's fine to expect bakers cannot afford buildings in very expensive cities (unless you're some luxury brand). If owners are incentivized to develop and lease their properties, there should be more supply for a cheaper rental market.
- kgermino 3y ago
  Density. The current property tax system makes it more likely that (in your example) the law firm will push out the bakery. Because improvements are taxed adding more commercial space means paying more taxes, which makes it less likely to happen. With an LVT, expanding the building (up or out) to add a second store/office is cheaper so you’re more incentivized to provide space for both
- pxx 3y ago
  Income per square foot in _rent_. The important thing isn't that the lawyer's office makes more money. That's just correlated with the important thing, which is that the lawyer's office is willing to pay more rent. Note the lawyer isn't operating a charity for property owners here; they're only going to pay as much for rent as required for the market. If prevailing rent is high enough such that only lawyers get retail square footage, then clearly property should be taxed as such. That's the value of the land. But then more development will happen, eventually reaching an equilibrium.
  - giantg2 3y ago
    Saying rent isn't quite right. These land value taxes are usually taxed on potential as zoned. Empty land isn't bringing in rent. The whole point of these land value tax schemes is to tax it based on its highest zoned value so you force (re)development of the highest use case.
- engineer_22 3y ago
  > Let's say because of rising taxes, a bakery or a shop has closed and a lawyers office has opened in that spot. Taxes will rise in neighborhoods where improvements have happened. To determine the neighborhood is improving, we need a metric, for instance traffic. We expect the donut shop in an improved neighborhood to see increased traffic and more sales. If traffic doesn't increase then land value hasn't actually increased and the taxes have been applied inappropriately. Maybe we can come up with a better indicating mechanism for land value, I admit I have not read Henry George's work.
giantg2 3y ago
"but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential" Empty land isn't using any of those things. Any future improvement would use those things and be taxed accordingly. If you're concerned about infrastructure costs, the. You want to use a per capita tax or the current property tax that taxes the improvements (where people work or live) since they are using the infrastructure.
- jrno639 3y ago
  We already tax utility users based on “usage”, but the cost to provide service is more like y=mx+b with a very large b and small m. Charging based on usage is just a way to allocate the large fixed costs amongst your users. (Electricity may be the exception with higher variable costs, but still significant fixed costs.) But even if you’re not using them, the utility services (water, power, sewer) still have to pass by the property. Power lines and poles are there, they have to be maintained, your water main can’t be leaking, etc. There are real costs to do all that.
- ndsipa_pomu 3y ago
  > Empty land isn't using any of those things It doesn't have to use them to benefit from their proximity. Land in the middle of a barren desert is usually worth far less than a similar piece of land near a populous city.
  - giantg2 3y ago
    Sure, your point? The government benefits on the higher sale tax revenue too. It's only a true benefit when something is realized. The densest areas of many cities are seeing decreases in population, so maybe that infrastructure isn't the main driver of value.
    - simonh 3y ago
      The point of a land value tax is to incentivise that realisation. In prosperous cities the reduction is inner city population is due to land being used commercially, and maybe up to a point that's fine. You can always adjust the value tax based on type of actual usage. The important thing is that it's used efficiently in a way that benefits the community.

by simonh 3y ago

theamk 3y ago

Always wondered how this works on modern times, where income per square foot varies wildly per industry. Let's say because of rising taxes, a bakery or a shop has closed and a lawyers office has opened in that spot. Who exactly us "the public" in this case and what are the "maximum benefits" that they are getting from that change? Because if I actually lived nearby, I sure wouldn't be happy about my favorite vakery/shop being closed. And don't say "increased tax base" - for that, you can tweak existing system and increase income taxes so you collect more from the lawyers while still keeping bakeries alive.

BowBun 3y ago
In your example, bakeries usually don't own land in highly desirable cities, they lease it from the owner. I think that's fine. The incentives here are against huge capital behemoths that can buy land and afford not to develop it, costing the cities in potential consumer revenue, population growth, broken windows theory, etc. Lawyers might own the building and be able to afford the tax. I think it's fine to expect bakers cannot afford buildings in very expensive cities (unless you're some luxury brand). If owners are incentivized to develop and lease their properties, there should be more supply for a cheaper rental market.
kgermino 3y ago
Density. The current property tax system makes it more likely that (in your example) the law firm will push out the bakery. Because improvements are taxed adding more commercial space means paying more taxes, which makes it less likely to happen. With an LVT, expanding the building (up or out) to add a second store/office is cheaper so you’re more incentivized to provide space for both
pxx 3y ago
Income per square foot in _rent_. The important thing isn't that the lawyer's office makes more money. That's just correlated with the important thing, which is that the lawyer's office is willing to pay more rent. Note the lawyer isn't operating a charity for property owners here; they're only going to pay as much for rent as required for the market. If prevailing rent is high enough such that only lawyers get retail square footage, then clearly property should be taxed as such. That's the value of the land. But then more development will happen, eventually reaching an equilibrium.
- giantg2 3y ago
  Saying rent isn't quite right. These land value taxes are usually taxed on potential as zoned. Empty land isn't bringing in rent. The whole point of these land value tax schemes is to tax it based on its highest zoned value so you force (re)development of the highest use case.
engineer_22 3y ago
> Let's say because of rising taxes, a bakery or a shop has closed and a lawyers office has opened in that spot. Taxes will rise in neighborhoods where improvements have happened. To determine the neighborhood is improving, we need a metric, for instance traffic. We expect the donut shop in an improved neighborhood to see increased traffic and more sales. If traffic doesn't increase then land value hasn't actually increased and the taxes have been applied inappropriately. Maybe we can come up with a better indicating mechanism for land value, I admit I have not read Henry George's work.

giantg2 3y ago

"but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential" Empty land isn't using any of those things. Any future improvement would use those things and be taxed accordingly. If you're concerned about infrastructure costs, the. You want to use a per capita tax or the current property tax that taxes the improvements (where people work or live) since they are using the infrastructure.

jrno639 3y ago
We already tax utility users based on “usage”, but the cost to provide service is more like y=mx+b with a very large b and small m. Charging based on usage is just a way to allocate the large fixed costs amongst your users. (Electricity may be the exception with higher variable costs, but still significant fixed costs.) But even if you’re not using them, the utility services (water, power, sewer) still have to pass by the property. Power lines and poles are there, they have to be maintained, your water main can’t be leaking, etc. There are real costs to do all that.
ndsipa_pomu 3y ago
> Empty land isn't using any of those things It doesn't have to use them to benefit from their proximity. Land in the middle of a barren desert is usually worth far less than a similar piece of land near a populous city.
- giantg2 3y ago
  Sure, your point? The government benefits on the higher sale tax revenue too. It's only a true benefit when something is realized. The densest areas of many cities are seeing decreases in population, so maybe that infrastructure isn't the main driver of value.
  - simonh 3y ago
    The point of a land value tax is to incentivise that realisation. In prosperous cities the reduction is inner city population is due to land being used commercially, and maybe up to a point that's fine. You can always adjust the value tax based on type of actual usage. The important thing is that it's used efficiently in a way that benefits the community.