I think the point of how the city center is totally disconnected from the value of the property is super spot on, for example in my hometown, Santiago de Chile I have seen or it is my impression that although when the city was founded the city center, it had the highest value, and it is where aristocratic families lived today the reality is quite the opposite, the price of the properties has moved even towards the periphery of the city in comunas (boroughs) such as Barnechea and Vitacura and the city center of the city is perceived as a place of low status; On the contrary in the city where I live now, Berlin, the center of the city Mitte is in my perception where the most expensive properties are, so it’s difficult for me, to understand what is the connection between the city center and the value of the properties. In the case of Santiago the neighborhoods that are most appreciated, they are really super far from everything and require a road trip to go to the airport or any other central place, then perhaps I imagine that the value of the land, is very subjective and very based on the culture of the city. Despite the fact that the center of Santiago I find it a beautiful and quite interesting place, it is perceived by being perceived under status in a culture where status is important, that seems to be the most important factor more than any other type of deterministic formula.
Perhaps it could also be argued that because the resources received by neighbourhoods in Chile are based on the affluence of their residents, it follows that the comunas with more resources are, of course, more important and appreciated. This is because the people who live there are considered more valuable, even though I may be less important in other ways.
> This is because the people who live there are considered more valuable
I doubt the people are considered more valuable. Different locations become more or less desirable for any number of reasons. Competition will drive up prices for the more desirable locations, which will mean people with more to spend will get them.
I recognize that this goes a bit against the spirit of the article, but I struggle to even conceptualize what land value means and how it can possibly be independent of its use.
Land doesn’t really have inherent value, it comes from what you could do with it, but that depends a on a lot of factors including what it’s currently used for and who owns it.
One problem to illustrate is that land value is typically calculated per area, but the value obviously depends on how you subdivide a particular piece of land.
If I try sell a single sqft in my backyard it’s obviously pretty useless and so the value is low. But if I sell the entire plot the value of that backyard will be much higher, and a developer who manages to buy the whole neighborhood would probably value that even higher
In “Radical Markets” by Posner and Weyl they show that for any plot of land, if you run a continuous auction on it, meaning whoever pays the most tax on it gets to own it immediately, including all assets contained within, then you get both maximum tax revenue and maximum utility.
Is this accounting for path-dependent utility? The utility of getting enough land to build a house to live in, and then losing it as soon as the house is built is severely negative.
Does it also account for actors who aren't perfect economic calculators with infinite information processing capacity?
In other words, does that system work for grandma?
It also gives rich people way too much power over anyone they hate. Suppose I have a billion dollars, you don't, and I hate you - I can buy your house, your next house, your next next house, and your next next next house, and you can't say no.
Not just transaction cost, but also the whole point of Georgist theory which is that it's supposed to stimulate development. Putting a skyscraper on a piece of land costs a lot of money, paid for by the returns to development. If someone who hasn't paid the capital costs of building that skyscraper (and the admin costs of letting it out) then has the right to buy the land under the developers and charge them the highest possible ground rent, the thin profit making opportunity disappears, and it becomes less costly to relinquish landholdings than to develop them only to lose them to the first entity that wants to capture the value of your investment in the skyscraper in ground rent.
Probably the only stable state for that sort of market is for the government (which not only usually has the lowest costs of capital, but also sets the ratio of LVT to property prices) to end up owning all the land. That model can work (see Singapore) but it very much depends on the quality of the government and doesn't replace tax revenue...
That's still value that's inherent to the land, it's just that you destroy/create value when you change the boundaries of the property.
Land value is not supposed to be attached to what you use it for, but what you _could_ use it for. This is inherent to its location and the natural resources that are on/in it. (Plus, as I guess you have hinted, its shape and what it's adjacent to).
The idea of land value is to separate those inherent things, which weren't created by the owner, from the things they actually did create.
The main things we are interested in here are exactly what I mentioned:
- Land in NYC is valuable because it's in NYC. Landlords didn't create that value so we want to stop them capturing rent on it (while allowing/encouraging them to capture rent on the expensive buildings they fund)
- Some land has oil under it. Private individuals shouldn't be able to get rich just be owning that oil, they didn't create it (but they _should_ be able to get rich by funding drilling projects, if it satisfied a demand).
> Land doesn’t really have inherent value, it comes from what you could do with it
If that's true for land, isn't it true for almost everything? Ultimately you just end up with what other people will consistently pay for it.
> If I try sell a single sqft in my backyard it’s obviously pretty useless and so the value is low. But if I sell the entire plot the value of that backyard will be much higher
This is true of a bag of a single pea from a bag of frozen peas too. I don't think is anything specific to land.
no one can sell 1 sq ft, they can sell the minimum zoned lot size for which the price would be maximum per sq ft price which would decrease as lot size increased.
The 'simplest' method is to allow landowners to declare the value of the land they own. Tax based on this value and let governments buy at the stated land value. Everything else is fluff.
Only allowing government repurchase makes the system vulnerable to corruption - make a backroom deal with a government official and extract a promise not to buy, then declare at $1. A system where anyone can purchase the property at the declared value is more robust.
Any kind of "theoretical valuation for tax purposes" is just fundamentally going to be flawed. They're mixing one concept of value - market price - with an artificial concept they use to try and guess what the market price ought to be, but without any buyers or sellers involved. Valuing assets is a hard problem, it's why we have such a giant financial sector.
Yeah exactly. Wouldn't it be easier to make it self reported but use a mechanism to incentivize accurate market prices. Like enforce that the owner can't sell for more than x% the reported amount and rents are capped based on the reported amount. Use of the property as collateral has to match the reported value. You can only be insured for value up to that reported number. Lots of things the state can do to create that incentive.
The author lists out 4 testable statements that a property tax should meet (which are valid IMO), yet doesn't recognize that an LVT fails to meet them!
There is an inherent relationship between what is built on a parcel and its surrounding parcels and the desirability (which greatly influences the value) of that parcel. That relationship makes an LVT fundamentally untenable.
On top of that, people with expensive improvements to their parcel should pay more in property tax, as at least some of that tax goes to fund what is effectively insurance for your improvements (emergency services at a minimum, and you could argue that high quality local government services in general are a form of insurance for the value of those assets).
I always assumed something like PageRank would be a good proxy for value - how closely linked your acre of land is to other square acres of land that other people think are valuable - the simple version just measures road or rail access but the more sophisticated would measure journeys between, or tonnage or value of goods travelling etc.
>Side-by-side owners of physically/legally identical land will pay the same taxes regardless of what is built on their properties
Do we really want this? It is pretty established that higher valued assets incur higher property taxes. Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense. Old beat up Corolla owner to pay the same tax as a Lamborghini owner. (It reeks of perverse socialism - dividing everything, in this case tax burden, equally in the most simplistic way, and not surprisingly that LVT is usually pushed for by leftist "progressives" while there is nothing progressive in it really).
I believe the idea is to avoid punishing people for improving the land.
Landowners should be taxed in a way that factors in opportunity cost. If the city has a massive housing shortage, and the bodega owner refuses to sell to a developer (thus exacerbating the shortage), that may be their right -- but there's also no reason why it shouldn't be reflected in their tax bill.
Remember also that the skyscraper can be taxed in other ways, e.g. corporate income tax or sales tax. But a traditional property tax incentivizes keeping a lot empty, because as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
>But a traditional property tax incentivizes keeping a lot empty,
Looking around, i think you're incorrect.
>as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
you're paying your fair share for the police, fire protection, etc. as building something increases the need for such services even when you don't gneerate revenue.
>Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity.
That is patently false. The taxes in no way disincentivize me going to work, and they don't affect my desire to make even more money and to start my own business.
There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
>There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
How about an 85% income tax? 80%? 75%? Where do you draw the line? The truth is, it's a matter of degree. Even a 10% tax disincentivizes work a little bit.
"New York City alone has more than 77,000 lots that are either vacant or have a building that is less than half the size of what zoning allows"
add to that that those lots/buildings may have already sold their "air rights" and thus aren't allowed to build more.
>Altus, which is a real-estate analytics and advisory firm, counted private lots larger than 3,000 square feet that are likely suitable for development.
no mentioning of air rights. That is how you distinguish real analytics from a propaganda job.
And even with totally vacant and still having their air rights lots, that 77000 would still be a pretty healthy rate of 7%.
>How about an 85% income tax? 80%? 75%? Where do you draw the line? The truth is, it's a matter of degree. Even a 10% tax disincentivizes work a little bit.
the lines are well known. Across the world taxes less than 20% are called "low", higher than 40% - "high". People understand that they need to pay their share to maintain commons.
>Even a 10% tax disincentivizes work a little bit.
I never heard/seen/read about such a phenomenon in real life. That seems like you're doing a pure theoretical stretch of the 90% model.
> But a traditional property tax incentivizes keeping a lot empty, because as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
I know this is what LVT advocates say, but it's not true in practice. An unimproved lot is a liability from a cash flow perspective unless the tax rate is 0%. That's an incentive to improve the lot and derive value from it (which can be income, or some sort of personal benefit like shelter).
> Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
This claim is largely theoretical, as the LVT has very limited adoption worldwide (I believe Denmark is the only country that uses it without broad exemptions for residential real estate and other common uses, though feel free to correct me) and does not seem to have produced a radical transformation in those limited applications within some countries and a few depressed US cities.
A skyscraper can be built practically everywhere. Thus the same tax for everybody everywhere. Everybody can hang a Van Gogh painting on their wall, thus every wall to be taxed the same.
Someone now has to make a subjective decision about the theoretical highest and best use of the land at a given point in time, and the last people I want making that decision are local bureaucrats.
<Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense>
I kind of agree, just tax the land as to the utility value of the land (not what is built on it). If you want to tax what’s on the land (or what it’s being used for) then that’s a different tax basis (perhaps more of a wealth tax or social benefit tax)
Both a farmer and I have 500 acres (his farm, my golf course). There is a basic land tax perhaps but I might get taxed for the golf course but he might get benefits for the socially beneficial food production.
Good point, this leads to current issue in the UK (and other countries).
In a general sense, UK car owners would pay a relatively small amount tax in road tax and then tax on petrol/diesel purchased to drive the car (the amount would vary on use). Trucks etc would pay more as they would have more maintenance impact on the roads.
So the money raised would be collected by government and distributed locally to maintain the road network.
But now more vehicles are electric so the fuel tax is decreasing so how’s the government going to fund the roads?
Perhaps to a “pay per mile” tax. With different rates depending on where and when. Taxing the utility of a mile driven in your vehicle.
Doesn’t have to force you to drive for uber, as it’s defined on the utility to you of a mile driven in your car. No miles, very little tax ( at peak times in the city rush, the bus might be better)
People and goods aren't part of the car. Refrigeration equipment for example is part of the taxable value of the refrigeration truck, ie. basic truck + refrigeration equipment would be taxed higher than just the same basic truck. Similarly scyscraper is a part of that piece of real estate consisting of land + scyscraper.
If the goal is to maximize tax or tax fairness, then richer people should be taxed more. If the goal is to minimise wasted utilisation then it should be a flat tax so that everyone is trying to get the most value out of the same land. A variable tax allows grandma to keep living in her bungalow next to the skyscraper, while a flat tax forces her to sell the bungalow to someone who wants to build a skyscraper, and then she can rent an apartment in the skyscraper (maybe), which is sad for grandma but is objectively a much more efficient use of space. Both are quite reasonable goals, so the balance depends on how we feel about each as a society.
This taxation rant misses the point. What prevents development isn't the prospective taxes. It's all the other regulations that limit what you can do and make what you can more expensive pushing the payoff time out into the realm of "f this I'll buy stocks instead".
I think it speaks volumes about the LVT crowd (kind of hard to fault the author personally when he exists in that filter bubble) that the author's entire section on land use restrictions speaks only to deed restrictions and not government imposed ones.
The point of that section was not about the effect of land use restrictions on overall value but on local differences. If you are comparing the value of two different pieces of land with the same land use restrictions then they don't affect the value calculation. Deed restrictions are called out because they can affect the comparative value of two different pieces of land within the same zone.
The process is interesting but just to make the point - I
often see Americans obsessing over the implementability of land valuation processes as if its entirely new and needs to be invented when other states and countries have established systems that have been working for in many cases over a century.
You're aware that you're citing the policies of the province that contains the second most expensive place in the world to own a home, right? Sydney is worse than the Bay Area when adjusted for incomes, and most other cities in Australia are almost as bad.
Most Americans spend about 0 seconds of their lives thinking about land valuation methods, unless you count complaining about how their property taxes are too high (which is a global phenomenon in my experience).
And every municipality in the US is able to assess property currently, though how good of a job they do varies of course.
This site, as does reddit and a couple other similar places online, has a very vocal portion of the userbase that spends a significant amount of time obsessing over socialist policies that are wildly unpopular overall and largely impossible to implement at this time.
Don't take it as a representation of Americans overall.
The goal of an assessor's office is to set the value of property to it's fair market value - the price it would command if sold fairly on that day.
It's not appropriate for an assessor's office to further a goal other than the above, particularly a public policy that tries to increase or decrease taxes based on a property's characteristics like how much land it contains or how many stories it has. That's for the legislative body.
If you want to create (dis)incentives for types of property, you do it AFTER fairly valuing property.
That's because, like most progressives, the author sees land use planning and policy as a tool for social justice because they see everything as a tool for social justice.
I would argue (not with you, as I think you and I agree) that most people do not agree with the author, and just want to see an assessment that reflects the market rate for their property (which is extremely simple to determine in the vast majority of cases) and a tax rate that results in adequate funding for government services when applied to assessed property in the jurisdiction.
Obviously the definition of "adequate funding for government services" is highly subjective, which is where the political debates lie.
Who to tax and how much is very much a political choice and how accurate assessment are very much political choices. You cannot pretend taxation policy is somehow a neutral proposition. Indeed, bad or good taxation policy have very real economic effect and impact on government finance.
If indeed you want adequate funding of government services, it's paramount that we find the most efficient way of funding government and Georgists believe that the most efficient way to tax people is the land value tax.
Social justice and economic efficiency need not be in conflict. Indeed, when a concept like the land value tax finds broad support from economists all over the political spectrum, it's time to sit up and pay attention.
The genius of georgism is it's just land communism where the government charges you rent for the land, disguised as a tax.
But don't take it from me, read George himself:
[LVT would] “accomplish the same thing [as land nationalization] in a simpler, easier, and quieter way." []
Of course George plays a little slight of hand game where he uses "tax" and capitalist mechanisms and only defends communism for land, which enables a lot of his supporter's arguments to play make believe about what it is. But George betrays this secret to those who actually reads his books.
Beyond that, there's serious inefficiencies in Georgism
- No incentive for efficient allocation of land (price is zero)
- The incredibly important role of land speculators, who help assign time preference to land by delaying its introduction in the market to when its value can be better captured, is basically destroyed
- People will all grab the "best" land as fast as they can with allocation basically left to favoritism or queueing
- Undeveloped land value can be impossible to separate from improvements
> Who to tax and how much is very much a political choice and how accurate assessment are very much political choices. You cannot pretend taxation policy is somehow a neutral proposition. Indeed, bad or good taxation policy have very real economic effect and impact on government finance.
Tax rates are political. Assessing the value of an asset should be apolitical. Georgism intertwines the two, which causes a lot of issues.
> If indeed you want adequate funding of government services, it's paramount that we find the most efficient way of funding government and Georgists believe that the most efficient way to tax people is the land value tax.
You are correct that Georgists believe that, but I don't think it's a widely held opinion. The definition of efficiency is highly subjective because the metrics used to determine it are subjective.
> Social justice and economic efficiency need not be in conflict. Indeed, when a concept like the land value tax finds broad support from economists all over the political spectrum, it's time to sit up and pay attention.
Again, this is only efficient under a very specific set of objectives.
LVT has gotten a lot of attention, and has not performed well in practice just like every other socialist concept. It also does not have broad support.
In my county they set them to values that seem proportionally roughly correct but they don't really attempt to figure out the market value.
It all works out because the county uses N appropriated dollars and everything flows from that (people that think they start at some percentage of property values and then work to what the county can spend have it backwards); you currently own $X assessed value out of $Y total assessed value in the whole county, the property taxes you pay are N * X / Y, and the property tax rate just deducted from that. Whether the actual amount assessed is accurate is immaterial to paying a proportional share.
I think the point of how the city center is totally disconnected from the value of the property is super spot on, for example in my hometown, Santiago de Chile I have seen or it is my impression that although when the city was founded the city center, it had the highest value, and it is where aristocratic families lived today the reality is quite the opposite, the price of the properties has moved even towards the periphery of the city in comunas (boroughs) such as Barnechea and Vitacura and the city center of the city is perceived as a place of low status; On the contrary in the city where I live now, Berlin, the center of the city Mitte is in my perception where the most expensive properties are, so it’s difficult for me, to understand what is the connection between the city center and the value of the properties. In the case of Santiago the neighborhoods that are most appreciated, they are really super far from everything and require a road trip to go to the airport or any other central place, then perhaps I imagine that the value of the land, is very subjective and very based on the culture of the city. Despite the fact that the center of Santiago I find it a beautiful and quite interesting place, it is perceived by being perceived under status in a culture where status is important, that seems to be the most important factor more than any other type of deterministic formula.
Perhaps it could also be argued that because the resources received by neighbourhoods in Chile are based on the affluence of their residents, it follows that the comunas with more resources are, of course, more important and appreciated. This is because the people who live there are considered more valuable, even though I may be less important in other ways.
> This is because the people who live there are considered more valuable
I doubt the people are considered more valuable. Different locations become more or less desirable for any number of reasons. Competition will drive up prices for the more desirable locations, which will mean people with more to spend will get them.
I recognize that this goes a bit against the spirit of the article, but I struggle to even conceptualize what land value means and how it can possibly be independent of its use. Land doesn’t really have inherent value, it comes from what you could do with it, but that depends a on a lot of factors including what it’s currently used for and who owns it. One problem to illustrate is that land value is typically calculated per area, but the value obviously depends on how you subdivide a particular piece of land. If I try sell a single sqft in my backyard it’s obviously pretty useless and so the value is low. But if I sell the entire plot the value of that backyard will be much higher, and a developer who manages to buy the whole neighborhood would probably value that even higher
In “Radical Markets” by Posner and Weyl they show that for any plot of land, if you run a continuous auction on it, meaning whoever pays the most tax on it gets to own it immediately, including all assets contained within, then you get both maximum tax revenue and maximum utility.
Is this accounting for path-dependent utility? The utility of getting enough land to build a house to live in, and then losing it as soon as the house is built is severely negative.
Does it also account for actors who aren't perfect economic calculators with infinite information processing capacity?
In other words, does that system work for grandma?
A realistic system would definitely need to tack on an extra fee say 10% to account for real world friction.
So the selling price would be 110% the highest bid.
It also gives rich people way too much power over anyone they hate. Suppose I have a billion dollars, you don't, and I hate you - I can buy your house, your next house, your next next house, and your next next next house, and you can't say no.
Isn’t already covered under other laws against harassment and so on?
They're not really enforced very well AFAIK, and if they were, they'd only help you after you'd already been made homeless several times.
I think that model will fall apart when you include transactional costs
Not just transaction cost, but also the whole point of Georgist theory which is that it's supposed to stimulate development. Putting a skyscraper on a piece of land costs a lot of money, paid for by the returns to development. If someone who hasn't paid the capital costs of building that skyscraper (and the admin costs of letting it out) then has the right to buy the land under the developers and charge them the highest possible ground rent, the thin profit making opportunity disappears, and it becomes less costly to relinquish landholdings than to develop them only to lose them to the first entity that wants to capture the value of your investment in the skyscraper in ground rent.
Probably the only stable state for that sort of market is for the government (which not only usually has the lowest costs of capital, but also sets the ratio of LVT to property prices) to end up owning all the land. That model can work (see Singapore) but it very much depends on the quality of the government and doesn't replace tax revenue...
That's still value that's inherent to the land, it's just that you destroy/create value when you change the boundaries of the property.
Land value is not supposed to be attached to what you use it for, but what you _could_ use it for. This is inherent to its location and the natural resources that are on/in it. (Plus, as I guess you have hinted, its shape and what it's adjacent to).
The idea of land value is to separate those inherent things, which weren't created by the owner, from the things they actually did create.
The main things we are interested in here are exactly what I mentioned:
- Land in NYC is valuable because it's in NYC. Landlords didn't create that value so we want to stop them capturing rent on it (while allowing/encouraging them to capture rent on the expensive buildings they fund)
- Some land has oil under it. Private individuals shouldn't be able to get rich just be owning that oil, they didn't create it (but they _should_ be able to get rich by funding drilling projects, if it satisfied a demand).
> Land doesn’t really have inherent value, it comes from what you could do with it
If that's true for land, isn't it true for almost everything? Ultimately you just end up with what other people will consistently pay for it.
> If I try sell a single sqft in my backyard it’s obviously pretty useless and so the value is low. But if I sell the entire plot the value of that backyard will be much higher
This is true of a bag of a single pea from a bag of frozen peas too. I don't think is anything specific to land.
no one can sell 1 sq ft, they can sell the minimum zoned lot size for which the price would be maximum per sq ft price which would decrease as lot size increased.
The 'simplest' method is to allow landowners to declare the value of the land they own. Tax based on this value and let governments buy at the stated land value. Everything else is fluff.
Only allowing government repurchase makes the system vulnerable to corruption - make a backroom deal with a government official and extract a promise not to buy, then declare at $1. A system where anyone can purchase the property at the declared value is more robust.
https://en.wikipedia.org/wiki/Harberger_Tax
Why are generally forced land sales to the government a desirable thing?
In the UK we allow it for various national infrastructure projects. This approach would allow for far better estimates of costs.
Won't that lead to suspiciously low valuations, very strong eminent domain laws, and a black market of sales at higher than valued prices?
"Government can buy it at the stated value" does not lead to very low valuations, no.
Even simpler is to not have property taxes and forget the rigmarole of assessing or self-assessing values.
Any kind of "theoretical valuation for tax purposes" is just fundamentally going to be flawed. They're mixing one concept of value - market price - with an artificial concept they use to try and guess what the market price ought to be, but without any buyers or sellers involved. Valuing assets is a hard problem, it's why we have such a giant financial sector.
Yeah exactly. Wouldn't it be easier to make it self reported but use a mechanism to incentivize accurate market prices. Like enforce that the owner can't sell for more than x% the reported amount and rents are capped based on the reported amount. Use of the property as collateral has to match the reported value. You can only be insured for value up to that reported number. Lots of things the state can do to create that incentive.
LVT advocates just don't get it.
The author lists out 4 testable statements that a property tax should meet (which are valid IMO), yet doesn't recognize that an LVT fails to meet them!
There is an inherent relationship between what is built on a parcel and its surrounding parcels and the desirability (which greatly influences the value) of that parcel. That relationship makes an LVT fundamentally untenable.
On top of that, people with expensive improvements to their parcel should pay more in property tax, as at least some of that tax goes to fund what is effectively insurance for your improvements (emergency services at a minimum, and you could argue that high quality local government services in general are a form of insurance for the value of those assets).
I always assumed something like PageRank would be a good proxy for value - how closely linked your acre of land is to other square acres of land that other people think are valuable - the simple version just measures road or rail access but the more sophisticated would measure journeys between, or tonnage or value of goods travelling etc.
I think
>Side-by-side owners of physically/legally identical land will pay the same taxes regardless of what is built on their properties
Do we really want this? It is pretty established that higher valued assets incur higher property taxes. Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense. Old beat up Corolla owner to pay the same tax as a Lamborghini owner. (It reeks of perverse socialism - dividing everything, in this case tax burden, equally in the most simplistic way, and not surprisingly that LVT is usually pushed for by leftist "progressives" while there is nothing progressive in it really).
I believe the idea is to avoid punishing people for improving the land.
Landowners should be taxed in a way that factors in opportunity cost. If the city has a massive housing shortage, and the bodega owner refuses to sell to a developer (thus exacerbating the shortage), that may be their right -- but there's also no reason why it shouldn't be reflected in their tax bill.
Remember also that the skyscraper can be taxed in other ways, e.g. corporate income tax or sales tax. But a traditional property tax incentivizes keeping a lot empty, because as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
>But a traditional property tax incentivizes keeping a lot empty,
Looking around, i think you're incorrect.
>as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
you're paying your fair share for the police, fire protection, etc. as building something increases the need for such services even when you don't gneerate revenue.
>Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity.
That is patently false. The taxes in no way disincentivize me going to work, and they don't affect my desire to make even more money and to start my own business.
There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
>Looking around, i think you're incorrect.
77,000 vacant lots in NYC: https://commongroundorwa.org/3019-2/
>There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
How about an 85% income tax? 80%? 75%? Where do you draw the line? The truth is, it's a matter of degree. Even a 10% tax disincentivizes work a little bit.
>77,000 vacant lots in NYC: https://commongroundorwa.org/3019-2/
Not "vacant":
"New York City alone has more than 77,000 lots that are either vacant or have a building that is less than half the size of what zoning allows"
add to that that those lots/buildings may have already sold their "air rights" and thus aren't allowed to build more.
>Altus, which is a real-estate analytics and advisory firm, counted private lots larger than 3,000 square feet that are likely suitable for development.
no mentioning of air rights. That is how you distinguish real analytics from a propaganda job.
And even with totally vacant and still having their air rights lots, that 77000 would still be a pretty healthy rate of 7%.
>How about an 85% income tax? 80%? 75%? Where do you draw the line? The truth is, it's a matter of degree. Even a 10% tax disincentivizes work a little bit.
the lines are well known. Across the world taxes less than 20% are called "low", higher than 40% - "high". People understand that they need to pay their share to maintain commons.
>Even a 10% tax disincentivizes work a little bit.
I never heard/seen/read about such a phenomenon in real life. That seems like you're doing a pure theoretical stretch of the 90% model.
If a 10% tax doesn't affect you, how about you give me 10% of your earnings for this year?
> But a traditional property tax incentivizes keeping a lot empty, because as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
I know this is what LVT advocates say, but it's not true in practice. An unimproved lot is a liability from a cash flow perspective unless the tax rate is 0%. That's an incentive to improve the lot and derive value from it (which can be income, or some sort of personal benefit like shelter).
> Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
This claim is largely theoretical, as the LVT has very limited adoption worldwide (I believe Denmark is the only country that uses it without broad exemptions for residential real estate and other common uses, though feel free to correct me) and does not seem to have produced a radical transformation in those limited applications within some countries and a few depressed US cities.
You can fit a bodega inside a skyscraper. The bodega owner wouldn’t be paying the land value tax.
But if there were a free-standing bodega on land where you could build a skyscraper, you don’t think it should be taxed the same as a skyscraper?
A skyscraper can be built practically everywhere. Thus the same tax for everybody everywhere. Everybody can hang a Van Gogh painting on their wall, thus every wall to be taxed the same.
Right. This is one of the many flaws in the LVT.
Someone now has to make a subjective decision about the theoretical highest and best use of the land at a given point in time, and the last people I want making that decision are local bureaucrats.
Why would tax forcing towards maximum efficiency or value creation from land use be the right objective?
<Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense>
I kind of agree, just tax the land as to the utility value of the land (not what is built on it). If you want to tax what’s on the land (or what it’s being used for) then that’s a different tax basis (perhaps more of a wealth tax or social benefit tax)
Both a farmer and I have 500 acres (his farm, my golf course). There is a basic land tax perhaps but I might get taxed for the golf course but he might get benefits for the socially beneficial food production.
> just tax the land as to the utility value of the land
tax the car to the utility value of the car - force you to drive for Uber instead of the car sitting in the garage and you posting here :)
Good point, this leads to current issue in the UK (and other countries).
In a general sense, UK car owners would pay a relatively small amount tax in road tax and then tax on petrol/diesel purchased to drive the car (the amount would vary on use). Trucks etc would pay more as they would have more maintenance impact on the roads.
So the money raised would be collected by government and distributed locally to maintain the road network.
But now more vehicles are electric so the fuel tax is decreasing so how’s the government going to fund the roads?
Perhaps to a “pay per mile” tax. With different rates depending on where and when. Taxing the utility of a mile driven in your vehicle.
Doesn’t have to force you to drive for uber, as it’s defined on the utility to you of a mile driven in your car. No miles, very little tax ( at peak times in the city rush, the bus might be better)
The analogy would be taxing the car based on its value, not based on the value of the people and goods it carries.
Which is what we do!
People and goods aren't part of the car. Refrigeration equipment for example is part of the taxable value of the refrigeration truck, ie. basic truck + refrigeration equipment would be taxed higher than just the same basic truck. Similarly scyscraper is a part of that piece of real estate consisting of land + scyscraper.
If the goal is to maximize tax or tax fairness, then richer people should be taxed more. If the goal is to minimise wasted utilisation then it should be a flat tax so that everyone is trying to get the most value out of the same land. A variable tax allows grandma to keep living in her bungalow next to the skyscraper, while a flat tax forces her to sell the bungalow to someone who wants to build a skyscraper, and then she can rent an apartment in the skyscraper (maybe), which is sad for grandma but is objectively a much more efficient use of space. Both are quite reasonable goals, so the balance depends on how we feel about each as a society.
This taxation rant misses the point. What prevents development isn't the prospective taxes. It's all the other regulations that limit what you can do and make what you can more expensive pushing the payoff time out into the realm of "f this I'll buy stocks instead".
I think it speaks volumes about the LVT crowd (kind of hard to fault the author personally when he exists in that filter bubble) that the author's entire section on land use restrictions speaks only to deed restrictions and not government imposed ones.
The point of that section was not about the effect of land use restrictions on overall value but on local differences. If you are comparing the value of two different pieces of land with the same land use restrictions then they don't affect the value calculation. Deed restrictions are called out because they can affect the comparative value of two different pieces of land within the same zone.
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The process is interesting but just to make the point - I often see Americans obsessing over the implementability of land valuation processes as if its entirely new and needs to be invented when other states and countries have established systems that have been working for in many cases over a century.
For instance below from Australia
https://www.nsw.gov.au/housing-and-construction/land-values-...
You're aware that you're citing the policies of the province that contains the second most expensive place in the world to own a home, right? Sydney is worse than the Bay Area when adjusted for incomes, and most other cities in Australia are almost as bad.
Most Americans spend about 0 seconds of their lives thinking about land valuation methods, unless you count complaining about how their property taxes are too high (which is a global phenomenon in my experience).
And every municipality in the US is able to assess property currently, though how good of a job they do varies of course.
This site, as does reddit and a couple other similar places online, has a very vocal portion of the userbase that spends a significant amount of time obsessing over socialist policies that are wildly unpopular overall and largely impossible to implement at this time.
Don't take it as a representation of Americans overall.
The goal of an assessor's office is to set the value of property to it's fair market value - the price it would command if sold fairly on that day.
It's not appropriate for an assessor's office to further a goal other than the above, particularly a public policy that tries to increase or decrease taxes based on a property's characteristics like how much land it contains or how many stories it has. That's for the legislative body.
If you want to create (dis)incentives for types of property, you do it AFTER fairly valuing property.
TFA conflates the two ideas.
That's because, like most progressives, the author sees land use planning and policy as a tool for social justice because they see everything as a tool for social justice.
I would argue (not with you, as I think you and I agree) that most people do not agree with the author, and just want to see an assessment that reflects the market rate for their property (which is extremely simple to determine in the vast majority of cases) and a tax rate that results in adequate funding for government services when applied to assessed property in the jurisdiction.
Obviously the definition of "adequate funding for government services" is highly subjective, which is where the political debates lie.
Who to tax and how much is very much a political choice and how accurate assessment are very much political choices. You cannot pretend taxation policy is somehow a neutral proposition. Indeed, bad or good taxation policy have very real economic effect and impact on government finance.
If indeed you want adequate funding of government services, it's paramount that we find the most efficient way of funding government and Georgists believe that the most efficient way to tax people is the land value tax.
Social justice and economic efficiency need not be in conflict. Indeed, when a concept like the land value tax finds broad support from economists all over the political spectrum, it's time to sit up and pay attention.
The genius of georgism is it's just land communism where the government charges you rent for the land, disguised as a tax.
But don't take it from me, read George himself:
Of course George plays a little slight of hand game where he uses "tax" and capitalist mechanisms and only defends communism for land, which enables a lot of his supporter's arguments to play make believe about what it is. But George betrays this secret to those who actually reads his books.Beyond that, there's serious inefficiencies in Georgism
- No incentive for efficient allocation of land (price is zero)
- The incredibly important role of land speculators, who help assign time preference to land by delaying its introduction in the market to when its value can be better captured, is basically destroyed
- People will all grab the "best" land as fast as they can with allocation basically left to favoritism or queueing
- Undeveloped land value can be impossible to separate from improvements
[] Henry George, Progress and Poverty p. 404.
> Who to tax and how much is very much a political choice and how accurate assessment are very much political choices. You cannot pretend taxation policy is somehow a neutral proposition. Indeed, bad or good taxation policy have very real economic effect and impact on government finance.
Tax rates are political. Assessing the value of an asset should be apolitical. Georgism intertwines the two, which causes a lot of issues.
> If indeed you want adequate funding of government services, it's paramount that we find the most efficient way of funding government and Georgists believe that the most efficient way to tax people is the land value tax.
You are correct that Georgists believe that, but I don't think it's a widely held opinion. The definition of efficiency is highly subjective because the metrics used to determine it are subjective.
> Social justice and economic efficiency need not be in conflict. Indeed, when a concept like the land value tax finds broad support from economists all over the political spectrum, it's time to sit up and pay attention.
Again, this is only efficient under a very specific set of objectives.
LVT has gotten a lot of attention, and has not performed well in practice just like every other socialist concept. It also does not have broad support.
In my county they set them to values that seem proportionally roughly correct but they don't really attempt to figure out the market value.
It all works out because the county uses N appropriated dollars and everything flows from that (people that think they start at some percentage of property values and then work to what the county can spend have it backwards); you currently own $X assessed value out of $Y total assessed value in the whole county, the property taxes you pay are N * X / Y, and the property tax rate just deducted from that. Whether the actual amount assessed is accurate is immaterial to paying a proportional share.