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It's an accounting measure, to help people evaluate the use of land and whether it makes sense or not. For example, if a public surface parking lot in a downto

It's an accounting measure, to help people evaluate the use of land and whether it makes sense or not. For example, if a public surface parking lot in a downtown area is owned by a city, and brings in $1M in revenue, but is taxed at $3M for its land values it's very clear what the subisidt is and who the beneficiaries are. And perhaps that might motivate the city to make better use of the lot, decide that there would be more public value as a park, or to build offices or housing on it.

AnthonyMouse 3y ago
The ability for land value tax to even generate estimates like that still seems counterintuitive to me. Suppose you pass a law prohibiting anyone from constructing buildings with more than two stories. Well then you've just made the land artificially scarce because you need more of it to build the same amount of indoor space. Land value tax is useless in that situation because then all the land will end up with a two story building on it, they'll all be valued about the same (or someone would buy the cheapest one for the land and build a more expensive one), and you've effectively just reinvented property tax. And aren't really achieving the benefits a land value tax is supposed to bring, e.g. reduce housing scarcity by increasing the incentive to build housing, because it can't do that when building more housing is still separately prohibited by law. Now suppose you don't do that. Anybody can build a ten or twenty story building anywhere, and there would be enough indoor space to satisfy local demand if every lot had a three story building on it. Since there is no additional tax on a tall building, people start putting them up until local rents fall to no longer cover the construction cost. Okay, working as intended. But that happens well before all the lots have a 10+ story building on them, so there are still plenty of lots available. The question is, what happens to the other lots? Their value would be negative. You can't profitably put up a building there now that local rents are too low to cover the construction cost, but you'd still be paying the land value tax. Unless that's the endgame. Negligible land value, and therefore negligible land value tax?
- IG_Semmelweiss 3y ago
  Solid idea. Have you considered the additional carrying cost of treating two tracts of land thr same despite having massively different structures on top? For example, higher capacity for roads congestion, sewage, electricity connection etc. At some point it almost seems like the tall building is freeriding on taxpayers. Curious how you would address that?
  - epistasis 3y ago
    I would think that the vacant lots are the ones freeloading, keeping people from living in, working in, or otherwise being able to access an extremely high value area. The expenses of running roads and sewer are completely dwarfed by the gain in economic activity. Dense, high land value areas are the tax bases that subsidize the far less utilized and more-expensive-per-connection sprawl.
  - AnthonyMouse 3y ago
    > For example, higher capacity for roads congestion, sewage, electricity connection etc. But what does this have to do with property tax? Roads can be funded by fuel taxes or car taxes, if not income taxes. Sewage and electrical systems are billed monthly to their users. Presumably a larger building will have a higher electric bill and if it doesn't it will be from devising a way of not using more electricity.
- epistasis 3y ago
  Yes, a well functioning land value tax will drive down land values and make land far more liquid, maximizing the best possible use of a finite resource. There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized. When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset.
  - AnthonyMouse 3y ago
    > When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset. This kind of comes back to the issue with valuing the land when the government is using it. Suppose they pass a law zoning that piece of land for use as a parking lot. The land value is then only going to reflect its value for use as a parking lot, since the law prohibits it from being used for anything else. Not taking into account zoning would produce a wildly inaccurate assessment of the practical value of the land, but taking it into account means that you're not taking into account the cost of the zoning restriction. And the accounting for that is pretty weird. If you change to relaxed zoning on only a small section of land, the value of that land will be quite high because it's the only place you can build tall buildings. The reduction in regional scarcity from having a tiny number of tall buildings isn't going to outweigh the ability to build 10+ times more housing on those lots in particular. Whereas if you relax zoning over a sufficiently large area then it's the opposite. The increase in permissible density makes land in general less scarce, even in places that allow that higher density, because they're now common. > There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized. The thing that worries me is that these are the opposite for the government. Creating artificial scarcity increases their tax revenue and also ingratiates them with local land owners unless the government is capturing all of the value of artificially scarce land. Which is supposed to be the theory with land value tax, but all they have to do is be off by as little as 10% and you're back to landlords lobbying the government for zoning restrictions. And even if they get that right, when the government wants to spend money on things and they only get money when land is artificially scarce, what are they going to do?
bobthepanda 3y ago
Combined with the cash-strapped bean-counting tendencies of local governments this sounds like a recipe for suburbanizing services into cheaper land, at great cost to municipal inhabitants. As a general example, there are one million public schoolchildren in New York City, many who attend schools in some of the hottest real estate in the country. Requiring cities to put that on their balance sheet would mean that governments are highly incentivized to make children commute an hour into cheaper suburbs to get schooling.
- AnthonyMouse 3y ago
  > Requiring cities to put that on their balance sheet would mean that governments are highly incentivized to make children commute an hour into cheaper suburbs to get schooling. Or move the school into a floor of a multi-story building which would significantly reduce its proportion of land value tax and in so doing consume less of that hot real estate and contribute less to housing scarcity.

AnthonyMouse 3y ago

The ability for land value tax to even generate estimates like that still seems counterintuitive to me. Suppose you pass a law prohibiting anyone from constructing buildings with more than two stories. Well then you've just made the land artificially scarce because you need more of it to build the same amount of indoor space. Land value tax is useless in that situation because then all the land will end up with a two story building on it, they'll all be valued about the same (or someone would buy the cheapest one for the land and build a more expensive one), and you've effectively just reinvented property tax. And aren't really achieving the benefits a land value tax is supposed to bring, e.g. reduce housing scarcity by increasing the incentive to build housing, because it can't do that when building more housing is still separately prohibited by law. Now suppose you don't do that. Anybody can build a ten or twenty story building anywhere, and there would be enough indoor space to satisfy local demand if every lot had a three story building on it. Since there is no additional tax on a tall building, people start putting them up until local rents fall to no longer cover the construction cost. Okay, working as intended. But that happens well before all the lots have a 10+ story building on them, so there are still plenty of lots available. The question is, what happens to the other lots? Their value would be negative. You can't profitably put up a building there now that local rents are too low to cover the construction cost, but you'd still be paying the land value tax. Unless that's the endgame. Negligible land value, and therefore negligible land value tax?

IG_Semmelweiss 3y ago
Solid idea. Have you considered the additional carrying cost of treating two tracts of land thr same despite having massively different structures on top? For example, higher capacity for roads congestion, sewage, electricity connection etc. At some point it almost seems like the tall building is freeriding on taxpayers. Curious how you would address that?
- epistasis 3y ago
  I would think that the vacant lots are the ones freeloading, keeping people from living in, working in, or otherwise being able to access an extremely high value area. The expenses of running roads and sewer are completely dwarfed by the gain in economic activity. Dense, high land value areas are the tax bases that subsidize the far less utilized and more-expensive-per-connection sprawl.
- AnthonyMouse 3y ago
  > For example, higher capacity for roads congestion, sewage, electricity connection etc. But what does this have to do with property tax? Roads can be funded by fuel taxes or car taxes, if not income taxes. Sewage and electrical systems are billed monthly to their users. Presumably a larger building will have a higher electric bill and if it doesn't it will be from devising a way of not using more electricity.
epistasis 3y ago
Yes, a well functioning land value tax will drive down land values and make land far more liquid, maximizing the best possible use of a finite resource. There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized. When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset.
- AnthonyMouse 3y ago
  > When there are extreme restrictions on what you can build, such as a maximum of two stories, then that "ability to build" has itself been turned into a finite resource; at that point both the structures and the land are economic land: finite resources that are not easily expanded. This is in contrast to capital, for which a person could theoretically build more of that asset. This kind of comes back to the issue with valuing the land when the government is using it. Suppose they pass a law zoning that piece of land for use as a parking lot. The land value is then only going to reflect its value for use as a parking lot, since the law prohibits it from being used for anything else. Not taking into account zoning would produce a wildly inaccurate assessment of the practical value of the land, but taking it into account means that you're not taking into account the cost of the zoning restriction. And the accounting for that is pretty weird. If you change to relaxed zoning on only a small section of land, the value of that land will be quite high because it's the only place you can build tall buildings. The reduction in regional scarcity from having a tiny number of tall buildings isn't going to outweigh the ability to build 10+ times more housing on those lots in particular. Whereas if you relax zoning over a sufficiently large area then it's the opposite. The increase in permissible density makes land in general less scarce, even in places that allow that higher density, because they're now common. > There's the carrot of cheap purchase price of land, and the stick of high taxes if the land is being hoarded and underutilized. The thing that worries me is that these are the opposite for the government. Creating artificial scarcity increases their tax revenue and also ingratiates them with local land owners unless the government is capturing all of the value of artificially scarce land. Which is supposed to be the theory with land value tax, but all they have to do is be off by as little as 10% and you're back to landlords lobbying the government for zoning restrictions. And even if they get that right, when the government wants to spend money on things and they only get money when land is artificially scarce, what are they going to do?

bobthepanda 3y ago

Combined with the cash-strapped bean-counting tendencies of local governments this sounds like a recipe for suburbanizing services into cheaper land, at great cost to municipal inhabitants. As a general example, there are one million public schoolchildren in New York City, many who attend schools in some of the hottest real estate in the country. Requiring cities to put that on their balance sheet would mean that governments are highly incentivized to make children commute an hour into cheaper suburbs to get schooling.

AnthonyMouse 3y ago
> Requiring cities to put that on their balance sheet would mean that governments are highly incentivized to make children commute an hour into cheaper suburbs to get schooling. Or move the school into a floor of a multi-story building which would significantly reduce its proportion of land value tax and in so doing consume less of that hot real estate and contribute less to housing scarcity.