5 ms·

Housing is a euphemism for land. The value of locations is determined by the quality of the surrounding community and the environment. This value winds up in l

by nwah1 12y ago

Housing is a euphemism for land. The value of locations is determined by the quality of the surrounding community and the environment. This value winds up in land because it is claimed for exclusive use by individuals, enforced by government. Yet, claiming ownership over any part of the surface of this ball of space rock is arbitrary, and no principle of justice can truly legitimize it. Instead of Piketty's blunt "wealth tax" we should be taxing land value, which as the cited MIT/Brookings report shows, is responsible for nearly all the new growth in inequality.

matwood 12y ago
Who isn't paying taxes on their land value? Maybe there are some states that do not, but every year I pay a pretty large tax bill based on the value of my land/house.
- ForHackernews 12y ago
  Arguably, we should be taxing based on the value of only the land itself, and not considering improvements (buildings, etc.) made to the land, in order to not (mildly) disincentivize making improvements to land one owns.
  - nwah1 12y ago
    Yes, and since raw land can have a hefty unearned price tag, we already know that most of the value is left to the titleholders. It is very much like the patent debates, except even worse. At least a patentholder, in theory, might have had something to do with thinking up the idea. And at least the patent doesn't last forever Land titles are permanent, yet the titleholder had nothing whatsoever to do with the manifestation of the space and matter contained at the location.
  - Symmetry 12y ago
    The problem is that a large fraction of our land value is in cities and most of them have zoning restrictions that don't match classic notions of owning land. It's easy for otherwise identical pieces of land in the same neighborhood to differ in price by a factor of ten depending on whether it comes with the right to build a house on it. Well, I suppose that means that the land tax just has to incorporate different gradients of "owning" land but that's probably still simpler than trying to determine the value of improvements.
    - whomonk 12y ago
      You are right that assessments are based on the highest and best allowable use, but actually land assessments are the easiest part. Pennsylvanian mayors are on record that assessment changes (both technical and legal) almost completely evaporate from shifting from buildings to land.
    - whomonk 12y ago
      You are right that assessments are based on the highest and best allowable use, but actually land assessments are the easiest part. Pennsylvanian mayors are on record that assessment challenges (both technical and legal) almost completely evaporate from shifting from buildings to land.
  - whomonk 12y ago
    The main problem is much greater than that builders are discouraged from improving because of a tax on buildings. The main reason we see slums, vacant buildings, fenced lots, parking lots, and single story buildings from 1900 next to new skyscrapers is that not taxing the annual rental value actually encourages hoarding land, since the value of land increases faster than anything else and the less an owner invests in improvements, the higher rate of return from "capital" (land) appreciation will be.
- timclark 12y ago
  Not every country taxes land in that way. I own no land but pay tax for occupying a property, my landlord pays no tax on this property - he may pay some tax on his rental income and will be taxed if the property is sold.
  - jerf 12y ago
    That's just accounting. In the end, the renter either effectively pays the tax or the property becomes unavailable for renting, because the rental income either covers the taxes and other expenses or it doesn't. This is important to understand because "well let's just raise taxes on rental properties" can sound really emotionally appealing to stick it to those nasty landlords, but the landlords aren't the ones who end up with the real bill in the real world. Oh, you might also as a side-effect reduce the landlord's wealth by essentially raising transaction costs, but, well, that's a plan firmly from the stupid quadrant: http://harmful.cat-v.org/people/basic-laws-of-human-stupidity/ http://harmful.cat-v.org/people/basic-laws-of-human-stupidit... Unfortunately, rather a lot of plans for addressing inequality strike me as coming from the "stupid" quadrant in practice... which is basically another way of saying this is a really hard problem, not that it isn't a problem. If too many of the golden goose's eggs are going to too few people it is still imperative that the goose not be killed, or, ideally, even all that slowed down by any plan to fix that. And I fear many people grossly overestimate the power of the modern economy to sustain social engineering schemes... the difference between even 1% growth and 1% contraction in a given quarter is very small, pretty much below a Just-Noticable-Difference everywhere, yet over the long term compounds quite frightfully... we have less buffer for playing around than it may initially seem when you first look at trillions here and trillions there.
    - nwah1 12y ago
      According to David Ricardo's Law of Rent, a tax on land cannot be passed on to renters, because landlords are locational monopolists who are already charging as much as the market will bear. "A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground." - Adam Smith, Wealth of Nations "A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality." - David Ricardo, On the Principles of Political Economy and Taxation
- _delirium 12y ago
  One way it happens: In much of the U.S., agricultural land is either exempted, or taxed at a very low rate. The stated rationale (besides openly being an agriculture subsidy) is as a kind of anti-gentrification measure for farmers. Farmers complain that rising land values, due to e.g. expanding cities, would "price them out" if they had to pay taxes on the full (non-agricultural) market value of the land. In practice it's common for large-scale property investors to use this as a way to accumulate and hold land tax-free or nearly tax-free. At least in Texas almost all large land holdings are held as agricultural land for that reason. Investors keep the land classed "agricultural" until such time as they want to actually develop it. Sometimes this is really agricultural land in addition to being an investment; other times a few gratuitous cows are thrown on some land purely for tax reasons (this is why the city of Houston has a surprising number of tiny cattle ranches within the city limits). The end result either way is that you can accumulate land over long periods of time without paying much in the way of taxes.
  - xaqfox 12y ago
    This loophole was closed in Texas....right around the time that Nolan Ryan brand beef started appearing in the grocery stores.
    - _delirium 12y ago
      As far as I know, the basic provision still exists, though some bits have been tightened. There is now a "roll-back" provision that requires agricultural land later taken out of agricultural use to pay back the tax reduction for the past 5 years. That makes it harder to game the exemption for short-term investment. But it leaves longer-term investment plays reasonably intact; you can speculate with land investment in the Houston exurbs as long as you aren't planning to actually develop in the near term. If your investment horizon is 30 years, e.g. because you're betting on population expansion and eventual new freeway construction, you'd still get 25 of those tax-advantaged.
  - bryanlarsen 12y ago
    This is really only a problem for land close to cities. Outside of the cities, agricultural land is taxed at appropriate rates. To be more specific, both a house in the city and 100 acres of agricultural land in the boonies are worth roughly a quarter of a million dollars and pay roughly the same amount of land taxes.
- khuey 12y ago
  Anyone who owns property in the State of California, for one. Thanks Prop 13!
mixmastamyk 12y ago
This sounds like Henry George, a guy I never heard about in school, but had some quite interesting ideas. http://en.wikipedia.org/wiki/Henry_George http://en.wikipedia.org/wiki/Henry_George http://en.wikipedia.org/wiki/Georgism http://en.wikipedia.org/wiki/Georgism ... in short capitalism for work, but collective use of land to recognize its unique ability in compounding inequity.
- nwah1 12y ago
  Good spot. One small nitpick. Georgists would contend that they do not support collectivized land, but rather support "common" rights to land. http://geolib.com/sullivan.dan/commonrights.html http://geolib.com/sullivan.dan/commonrights.html
  - mixmastamyk 12y ago
    IC... the article makes the distinction, I think, where common is that any individual can decide to use land to the extent not interfering with others, where collective requires the majority to decide. Is that correct?
    - nwah1 12y ago
      Yep
JoshTriplett 12y ago
> Yet, claiming ownership over any part of the surface of this ball of space rock is arbitrary, and no principle of justice can truly legitimize it. One very easy principle can: the value of land goes down dramatically if you can't kick other people off of it. Exclusive use is critically important. Unless you'd like other people traipsing through your house.
- nwah1 12y ago
  Exclusive use is important, but who gets it is currently arbitrary. To make it non-arbitrary, the titleholder should pay rent for the privilege. http://libertythinkers.com/education/a-landlord-is-a-government-the-libertarian-basis-for-land-rights/ http://libertythinkers.com/education/a-landlord-is-a-governm...
  - JoshTriplett 12y ago
    Philosophical justifications for land use rights are highly debatable and contentious, even among those who nominally consider themselves part of the same political label. Let's not go there. It suffices to recognize that whoever controls a given bit of land needs exclusive use of it; non-exclusive use is insufficient for many practical applications of land, most notably residence.

by nwah1 12y ago

matwood 12y ago

Who isn't paying taxes on their land value? Maybe there are some states that do not, but every year I pay a pretty large tax bill based on the value of my land/house.

ForHackernews 12y ago
Arguably, we should be taxing based on the value of only the land itself, and not considering improvements (buildings, etc.) made to the land, in order to not (mildly) disincentivize making improvements to land one owns.
- nwah1 12y ago
  Yes, and since raw land can have a hefty unearned price tag, we already know that most of the value is left to the titleholders. It is very much like the patent debates, except even worse. At least a patentholder, in theory, might have had something to do with thinking up the idea. And at least the patent doesn't last forever Land titles are permanent, yet the titleholder had nothing whatsoever to do with the manifestation of the space and matter contained at the location.
- Symmetry 12y ago
  The problem is that a large fraction of our land value is in cities and most of them have zoning restrictions that don't match classic notions of owning land. It's easy for otherwise identical pieces of land in the same neighborhood to differ in price by a factor of ten depending on whether it comes with the right to build a house on it. Well, I suppose that means that the land tax just has to incorporate different gradients of "owning" land but that's probably still simpler than trying to determine the value of improvements.
  - whomonk 12y ago
    You are right that assessments are based on the highest and best allowable use, but actually land assessments are the easiest part. Pennsylvanian mayors are on record that assessment changes (both technical and legal) almost completely evaporate from shifting from buildings to land.
  - whomonk 12y ago
    You are right that assessments are based on the highest and best allowable use, but actually land assessments are the easiest part. Pennsylvanian mayors are on record that assessment challenges (both technical and legal) almost completely evaporate from shifting from buildings to land.
- whomonk 12y ago
  The main problem is much greater than that builders are discouraged from improving because of a tax on buildings. The main reason we see slums, vacant buildings, fenced lots, parking lots, and single story buildings from 1900 next to new skyscrapers is that not taxing the annual rental value actually encourages hoarding land, since the value of land increases faster than anything else and the less an owner invests in improvements, the higher rate of return from "capital" (land) appreciation will be.
timclark 12y ago
Not every country taxes land in that way. I own no land but pay tax for occupying a property, my landlord pays no tax on this property - he may pay some tax on his rental income and will be taxed if the property is sold.
- jerf 12y ago
  That's just accounting. In the end, the renter either effectively pays the tax or the property becomes unavailable for renting, because the rental income either covers the taxes and other expenses or it doesn't. This is important to understand because "well let's just raise taxes on rental properties" can sound really emotionally appealing to stick it to those nasty landlords, but the landlords aren't the ones who end up with the real bill in the real world. Oh, you might also as a side-effect reduce the landlord's wealth by essentially raising transaction costs, but, well, that's a plan firmly from the stupid quadrant: http://harmful.cat-v.org/people/basic-laws-of-human-stupidity/ http://harmful.cat-v.org/people/basic-laws-of-human-stupidit... Unfortunately, rather a lot of plans for addressing inequality strike me as coming from the "stupid" quadrant in practice... which is basically another way of saying this is a really hard problem, not that it isn't a problem. If too many of the golden goose's eggs are going to too few people it is still imperative that the goose not be killed, or, ideally, even all that slowed down by any plan to fix that. And I fear many people grossly overestimate the power of the modern economy to sustain social engineering schemes... the difference between even 1% growth and 1% contraction in a given quarter is very small, pretty much below a Just-Noticable-Difference everywhere, yet over the long term compounds quite frightfully... we have less buffer for playing around than it may initially seem when you first look at trillions here and trillions there.
  - nwah1 12y ago
    According to David Ricardo's Law of Rent, a tax on land cannot be passed on to renters, because landlords are locational monopolists who are already charging as much as the market will bear. "A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground." - Adam Smith, Wealth of Nations "A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality." - David Ricardo, On the Principles of Political Economy and Taxation
_delirium 12y ago
One way it happens: In much of the U.S., agricultural land is either exempted, or taxed at a very low rate. The stated rationale (besides openly being an agriculture subsidy) is as a kind of anti-gentrification measure for farmers. Farmers complain that rising land values, due to e.g. expanding cities, would "price them out" if they had to pay taxes on the full (non-agricultural) market value of the land. In practice it's common for large-scale property investors to use this as a way to accumulate and hold land tax-free or nearly tax-free. At least in Texas almost all large land holdings are held as agricultural land for that reason. Investors keep the land classed "agricultural" until such time as they want to actually develop it. Sometimes this is really agricultural land in addition to being an investment; other times a few gratuitous cows are thrown on some land purely for tax reasons (this is why the city of Houston has a surprising number of tiny cattle ranches within the city limits). The end result either way is that you can accumulate land over long periods of time without paying much in the way of taxes.
- xaqfox 12y ago
  This loophole was closed in Texas....right around the time that Nolan Ryan brand beef started appearing in the grocery stores.
  - _delirium 12y ago
    As far as I know, the basic provision still exists, though some bits have been tightened. There is now a "roll-back" provision that requires agricultural land later taken out of agricultural use to pay back the tax reduction for the past 5 years. That makes it harder to game the exemption for short-term investment. But it leaves longer-term investment plays reasonably intact; you can speculate with land investment in the Houston exurbs as long as you aren't planning to actually develop in the near term. If your investment horizon is 30 years, e.g. because you're betting on population expansion and eventual new freeway construction, you'd still get 25 of those tax-advantaged.
- bryanlarsen 12y ago
  This is really only a problem for land close to cities. Outside of the cities, agricultural land is taxed at appropriate rates. To be more specific, both a house in the city and 100 acres of agricultural land in the boonies are worth roughly a quarter of a million dollars and pay roughly the same amount of land taxes.
khuey 12y ago
Anyone who owns property in the State of California, for one. Thanks Prop 13!

mixmastamyk 12y ago

This sounds like Henry George, a guy I never heard about in school, but had some quite interesting ideas. http://en.wikipedia.org/wiki/Henry_George http://en.wikipedia.org/wiki/Henry_George http://en.wikipedia.org/wiki/Georgism http://en.wikipedia.org/wiki/Georgism ... in short capitalism for work, but collective use of land to recognize its unique ability in compounding inequity.

nwah1 12y ago
Good spot. One small nitpick. Georgists would contend that they do not support collectivized land, but rather support "common" rights to land. http://geolib.com/sullivan.dan/commonrights.html http://geolib.com/sullivan.dan/commonrights.html
- mixmastamyk 12y ago
  IC... the article makes the distinction, I think, where common is that any individual can decide to use land to the extent not interfering with others, where collective requires the majority to decide. Is that correct?
  - nwah1 12y ago
    Yep

JoshTriplett 12y ago

> Yet, claiming ownership over any part of the surface of this ball of space rock is arbitrary, and no principle of justice can truly legitimize it. One very easy principle can: the value of land goes down dramatically if you can't kick other people off of it. Exclusive use is critically important. Unless you'd like other people traipsing through your house.

nwah1 12y ago
Exclusive use is important, but who gets it is currently arbitrary. To make it non-arbitrary, the titleholder should pay rent for the privilege. http://libertythinkers.com/education/a-landlord-is-a-government-the-libertarian-basis-for-land-rights/ http://libertythinkers.com/education/a-landlord-is-a-governm...
- JoshTriplett 12y ago
  Philosophical justifications for land use rights are highly debatable and contentious, even among those who nominally consider themselves part of the same political label. Let's not go there. It suffices to recognize that whoever controls a given bit of land needs exclusive use of it; non-exclusive use is insufficient for many practical applications of land, most notably residence.