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The classic example is the lot that sits empty or has a parking structure on it in Manhattan. Today, you pay very little tax on the empty land or parking lot be

by ok_dad 3y ago

The classic example is the lot that sits empty or has a parking structure on it in Manhattan. Today, you pay very little tax on the empty land or parking lot because you’re taxed on that total value of the land and improvements. This discourages building stuff sometimes. With land value tax, you’d be taxed on what someone would pay you for that land with improvements similar to surrounding, so it’s advantageous to build something there instead of nothing, since you’re paying the same tax as the sky scraper next door. In other words, the taxable value of the land is what it would be if it had similar improvements to surrounding lands, rather than taxing it based on actual improvements.

RandomLensman 3y ago
So if the most valuable use is luxury apartments and stores that would be what everything needs to converge to? Feels like a tax always looking towards the most valuable use could actually be very regressive and push anything but the richest out of economically attractive cities. Maybe I am missing something?
- ok_dad 3y ago
  I mean, it might be that there’s an empty lot outside your own home that could use some houses built on it but no one does because it’s easier to pay a pittance for taxes and leave it sit until it’s worth more. There are many cases where land could be put to better use but it’s not. A few people might get priced out of an area, but they’ll be able to sell their land and buy something elsewhere easily. The downside is certainly there but I think the upsides outweigh those.
  - RandomLensman 3y ago
    Maybe. I'd like to see something like that run as a simulation over a city to see effects for varying high value uses.
- Aunche 3y ago
  Luxury apartments will depreciate into regular apartments over time. Allowing demand for luxury apartments to be pent up just means that rich people will capture more regular apartments instead.
  - RandomLensman 3y ago
    Why would that happen? Demand will be satisfied as that would be the most high value thing to do, driving the land tax wherever the process starts.
    - Aunche 3y ago
      You mean why luxury apartments will become regular apartments? Most of the "luxury" apartments these days aren't really that special besides being newer and trendier. Of course, the truly iconic buildings will always be considered luxurious, but even the above average ones depreciate. In Manhattan, you can see a lot of buildings from a century ago with degraded ornamentation that would have been beautiful in their heyday, but they're actually more affordable than their neighbors that are plainer, but more renovated.
      - krisoft 3y ago
        It is clear that ornamentation is not what makes a luxury apartment. I would say the biggest component of a luxury apartment is the layout. A huge open space is amazing if you want to throw large parties, and can easily use up as much space as 3 studio flats. But the one huge luxury apartment will never realistically degrade into 3 studio flats.
toast0 3y ago
> Today, you pay very little tax on the empty land or parking lot because you’re taxed on that total value of the land and improvements. This discourages building stuff sometimes. With land value tax, you’d be taxed on what someone would pay you for that land with improvements similar to surrounding, so it’s advantageous to build something there instead of nothing, since you’re paying the same tax as the sky scraper next door. If you're being taxed on hypothetical improvements and not just the value of the land, why is it called a Land Value Tax, rather than a Hypothetical Best Use Tax? People assume the name means what it says and get confused.
- ok_dad 3y ago
  I don’t know why they name stuff what they do, but it’s dumb to simply read the name of something and then make assumptions based on no further information about that thing. Maybe you should have read the Wikipedia about it before assuming stuff?
  - toast0 3y ago
    Well, that doesn't really help, because Wikipedia says > A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it. In my mind, the value of the land without regard to buildings, etc, is what you would pay for an empty lot. But you said the value is what you would pay for the lot with improvements. Theoretically, real estate property taxes I've paid have been divided into the land value and the improvements value (although it's mostly conjecture; the total value is all that matters and that generally approximates market value of the lot with the improvements, at least in CA and WA, where I've paid property taxes; although CA has Prop 13 that distorts assessments over time). Washington even states the land portion is assessed based on the best use, not the current use, unless it's in some special categories like farm, forestry, and open space. Now I'm even more confused. Which speaks to the GP's confusion. > I have yet to understand why people have made land value tax a thing. If the whole concept is so confusing, starting with the name, it's no wonder advocacy isn't effective.
  - AnimalMuppet 3y ago
    Not everybody does a half-hour of research before every HN comment. Nor should they be expected to. LVT was named (I presume) by the advocates of it. If their name is misleading, don't blame the people reading it who are getting confused.
oh_sigh 3y ago
That's a classic example used by proponents of LVT. But what is another example? Terry buys a house in a run down, blighted, poor/cheap neighborhood, and along with other neighbors, starts to revitalize it. 15 years later, the formerly blighted neighborhood has become hip, due to the work and care Terry and others put in to it. Property prices increase as rich people want to move to the cool neighborhood, and now Terry has a hard time affording the taxes, and is forced to sell and essentially evicted from the neighborhood he helped build, because a rich person would rather live there.
- idontpost 3y ago
  [dead]
- Aunche 3y ago
  First of all, LVT are designed to be replacement for property taxes, which already have the problem you describe. Also, Terry isn't forced to sell to a rich person. He is a rich person. The type of people who like to live in hip neighborhoods tends to be recent graduates starting their high paying career. While they may have more income than Terry, Terry is significantly wealthier than most of them. If he really wants to stay on there, he can easily pay off any property/land taxes with the equity of his home.
  - oh_sigh 3y ago
    They have that problem, but there are frequently programs or legislation designed to reduce that burden. Eg, >10% of Americans are (theoretically) covered by Prop 13. Other municipalities may have laws on the books limiting property tax increases to a certain percent per year. Many other places offer property tax relief programs for people with low income, or the disabled, or the elderly, or generally by increasing exemptions. As I understand it though, you wouldn't want these programs with a LVT system, because they would just distort the market in a similar manner that it is now? Yes, because of the property appreciation, Terry can say that on paper, he is rich-ish, but a weird kind of rich where he has nothing but a house in a nice neighborhood, and otherwise has very little money. How does he pay off the taxes with the equity of his home? A HELOC could work, but he already can't afford the increased taxes with his income alone, so a HELOC would just delay the inevitable and based on his income he probably wouldn't qualify for one. Or he could do a reverse mortgage, be able to pay the taxes, but put himself at a major risk of losing his home entirely if he lives long enough. Also, reverse mortgages are only available to people over 62.

by ok_dad 3y ago

RandomLensman 3y ago

So if the most valuable use is luxury apartments and stores that would be what everything needs to converge to? Feels like a tax always looking towards the most valuable use could actually be very regressive and push anything but the richest out of economically attractive cities. Maybe I am missing something?

ok_dad 3y ago
I mean, it might be that there’s an empty lot outside your own home that could use some houses built on it but no one does because it’s easier to pay a pittance for taxes and leave it sit until it’s worth more. There are many cases where land could be put to better use but it’s not. A few people might get priced out of an area, but they’ll be able to sell their land and buy something elsewhere easily. The downside is certainly there but I think the upsides outweigh those.
- RandomLensman 3y ago
  Maybe. I'd like to see something like that run as a simulation over a city to see effects for varying high value uses.
Aunche 3y ago
Luxury apartments will depreciate into regular apartments over time. Allowing demand for luxury apartments to be pent up just means that rich people will capture more regular apartments instead.
- RandomLensman 3y ago
  Why would that happen? Demand will be satisfied as that would be the most high value thing to do, driving the land tax wherever the process starts.
  - Aunche 3y ago
    You mean why luxury apartments will become regular apartments? Most of the "luxury" apartments these days aren't really that special besides being newer and trendier. Of course, the truly iconic buildings will always be considered luxurious, but even the above average ones depreciate. In Manhattan, you can see a lot of buildings from a century ago with degraded ornamentation that would have been beautiful in their heyday, but they're actually more affordable than their neighbors that are plainer, but more renovated.
    - krisoft 3y ago
      It is clear that ornamentation is not what makes a luxury apartment. I would say the biggest component of a luxury apartment is the layout. A huge open space is amazing if you want to throw large parties, and can easily use up as much space as 3 studio flats. But the one huge luxury apartment will never realistically degrade into 3 studio flats.

toast0 3y ago

> Today, you pay very little tax on the empty land or parking lot because you’re taxed on that total value of the land and improvements. This discourages building stuff sometimes. With land value tax, you’d be taxed on what someone would pay you for that land with improvements similar to surrounding, so it’s advantageous to build something there instead of nothing, since you’re paying the same tax as the sky scraper next door. If you're being taxed on hypothetical improvements and not just the value of the land, why is it called a Land Value Tax, rather than a Hypothetical Best Use Tax? People assume the name means what it says and get confused.

ok_dad 3y ago
I don’t know why they name stuff what they do, but it’s dumb to simply read the name of something and then make assumptions based on no further information about that thing. Maybe you should have read the Wikipedia about it before assuming stuff?
- toast0 3y ago
  Well, that doesn't really help, because Wikipedia says > A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it. In my mind, the value of the land without regard to buildings, etc, is what you would pay for an empty lot. But you said the value is what you would pay for the lot with improvements. Theoretically, real estate property taxes I've paid have been divided into the land value and the improvements value (although it's mostly conjecture; the total value is all that matters and that generally approximates market value of the lot with the improvements, at least in CA and WA, where I've paid property taxes; although CA has Prop 13 that distorts assessments over time). Washington even states the land portion is assessed based on the best use, not the current use, unless it's in some special categories like farm, forestry, and open space. Now I'm even more confused. Which speaks to the GP's confusion. > I have yet to understand why people have made land value tax a thing. If the whole concept is so confusing, starting with the name, it's no wonder advocacy isn't effective.
- AnimalMuppet 3y ago
  Not everybody does a half-hour of research before every HN comment. Nor should they be expected to. LVT was named (I presume) by the advocates of it. If their name is misleading, don't blame the people reading it who are getting confused.

oh_sigh 3y ago

That's a classic example used by proponents of LVT. But what is another example? Terry buys a house in a run down, blighted, poor/cheap neighborhood, and along with other neighbors, starts to revitalize it. 15 years later, the formerly blighted neighborhood has become hip, due to the work and care Terry and others put in to it. Property prices increase as rich people want to move to the cool neighborhood, and now Terry has a hard time affording the taxes, and is forced to sell and essentially evicted from the neighborhood he helped build, because a rich person would rather live there.

idontpost 3y ago
[dead]
Aunche 3y ago
First of all, LVT are designed to be replacement for property taxes, which already have the problem you describe. Also, Terry isn't forced to sell to a rich person. He is a rich person. The type of people who like to live in hip neighborhoods tends to be recent graduates starting their high paying career. While they may have more income than Terry, Terry is significantly wealthier than most of them. If he really wants to stay on there, he can easily pay off any property/land taxes with the equity of his home.
- oh_sigh 3y ago
  They have that problem, but there are frequently programs or legislation designed to reduce that burden. Eg, >10% of Americans are (theoretically) covered by Prop 13. Other municipalities may have laws on the books limiting property tax increases to a certain percent per year. Many other places offer property tax relief programs for people with low income, or the disabled, or the elderly, or generally by increasing exemptions. As I understand it though, you wouldn't want these programs with a LVT system, because they would just distort the market in a similar manner that it is now? Yes, because of the property appreciation, Terry can say that on paper, he is rich-ish, but a weird kind of rich where he has nothing but a house in a nice neighborhood, and otherwise has very little money. How does he pay off the taxes with the equity of his home? A HELOC could work, but he already can't afford the increased taxes with his income alone, so a HELOC would just delay the inevitable and based on his income he probably wouldn't qualify for one. Or he could do a reverse mortgage, be able to pay the taxes, but put himself at a major risk of losing his home entirely if he lives long enough. Also, reverse mortgages are only available to people over 62.