4 ms·

How is that different than property taxes?

• loeg 3y ago
  Property taxes are assessed on land value + "improvements" (i.e., structures) value. A land value tax doesn't tax the imps. This generally encourages doing more productive things with the same parcel of land.
  • Detrytus 3y ago
    I think it's a bit different: property tax taxes the actual property that is located on the piece of land, i.e. single family home, for its current value. Land value tax works differently: tax authorities ask themselves a question: "what is the most profitable thing one could possibly build on that land?", and they tax you based on that. Which means that if you build a single family home in the neighborhood of 7-stories apartment buildings you will be taxed as if you owned an apartment building. And the only way for you to be able to afford those taxes is to actually build 7-stories apartment building there. EDIT: I know I'm simplifying a bit. The actual tax laws might not be worded the way I described it, but the net effect is exactly this: you are taxed on the potential resale value of your land, which is highly dependent on "what's the most valuable thing that can be built here?" question.
    • loeg 3y ago
      No, you've completely invented a system that is not how land value taxes work.
      • firejake308 3y ago
        The problem is that it could work that way, or it might not. It depends on what tax rate the government sets, which could change depending on the time, the economy, and the current administration. If the government guesses the magic rate that discourages speculation without discouraging other relatively low-value businesses that society still needs to function, then yes, that's a great system. However, I'd the government overshoots or undershoots, then the land value tax doesn actually fix anything.
        • pishpash 3y ago
          Property tax = you do not own the land, the government does and leases it to you. Setting the rate to the highest rate is stupid because it means the government confiscates all the land and leases it only to e.g. casinos and you get nothing but casinos.
    • pishpash 3y ago
      Where does the tax money go? If it's redistributed back to everyone including those who rent then that's just land redistribution.
  • smallmancontrov 3y ago
    Also, the idea is to make it heavy enough to neutralize the incentive to just hold the land, which is clearly not productive yet still lucratively "compensated." It's a highly regressive tax. The original highly regressive tax, as can be seen in some of the terminology (landlord) even if the details have drifted since. I think there's far too much wiggle room in the analysis of land-value vs improvement and would strongly prefer a solution that moves away from perpetual ownership and towards revolving leases instead. The way to do this non-coercively would be to gate the enormous tax benefits we bestow to real estate windfalls (1031 exchanges, the $500k exclusion, the 15% and 20% capital gains rates) behind conversion to a 99 year lease. We won't see the shade beneath those trees but our grandkids will.
    • JumpCrisscross 3y ago
      > the idea is to make it heavy enough to neutralize the incentive to just hold the land This isn't really a problem in downtown Brooklyn or Austin, though.
      • kaibee 3y ago
        Anytime you see a plot that is just a parking lot with an attendant in a dense city, that is just a land speculation play. That parcel is still extremely underused, but putting a parking lot on it lets the owner extract some rent in the mean time. A land value tax would ideally be high enough that the owner of that plot would be losing significant amounts of money even with that parking lot there, and would be incentivized to sell it to someone who wants to actually develop it immediately.
        • brewdad 3y ago
          The suburban version of this phenomenon is the self-storage place. Build cheap steel structure(s) that can generate a little income now while holding land that will presumably be more valuable in the future.
      • smallmancontrov 3y ago
        Isn't NY notorious for having a "paradoxically" huge vacancy rate due to the strong incentive to never show a decrease in rent, even if it comes at the expense of a vacancy? It's the same problem, just with different clothes: a blighted building in the middle of an expensive city rather than a vacant field in the middle of an expensive suburb. I can't speak to Austin, but I would expect to see the same thing in the form of low-value land use. It happens whenever appreciation competes with or outstrips productive activity. Which is extremely common. Investors should pay the collective for exclusive use of a scarce resource, they should not get paid for holding exclusive access to a scarce resource. That's bad and backwards. Unless you're an investor, of course ;)