> The government has incentives to inflate their estimates of the value of unimproved land
In fact, the opposite is the case. In the few US cities--historically and present--with an LVT, the political pressure was and is to consistently undervalue the land. Because the quickest way for your administration to get voted out of office is for your tax assessors to be hard-asses about applying the LVT formula, let alone inflate assessments. As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Yet underassessing has its own problems--it erodes legitimacy of the government. Prior to Prop 13 property assessors were consistently underassessing the property of senior citizen homeowners. But this engendered a sense of capriciousness that was felt most acutely by, ironically, senior citizen homeowners.
None of which is to say LVT could never work, but it requires a tremendous shift in the political culture. The legitimacy of the existing property tax structure and its relationship to our conception of property rights is baked into our political culture; shifting to a new system will necessarily be incredibly difficult and destabilizing.
>As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Isn't that an issue with all property tax regimes that don't have the prop 13 carveout, regardless of whether it's LVT or not?
Yes, and in fact underassessment and smoothing assessment increases over time is the norm, AFAIU, for the current system(s), both de jure and de facto, depending on locality. But pathological underassessment and related political issues are a much bigger problem with LVT. The swings can be much bigger (especially from the perspective of a property owner that hasn't done anything), which means managing underassessment to keep taxpayers from revolting requires more discretion, something governments have difficulty doing while maintaining a sense of fairness. Even theoretical application of LVT requires significant individualized assessments which in practice require much greater discretion. Also, LVT is intended to displace most if not all other forms of taxation, so managing the stability of your budget in light of the need to smooth out assessments becomes more problematic relative to the status quo.
Some localities have tried mixed schemes, e.g. only applying LVT to commercial zones. Businesses are savvier and are more comfortable engaging with government on assessments as well as forecasting and managing swings in assessments. But that cuts both ways; in at least one municipality I studied (a town in the southwest, IIRC), this engagement turned into straight-up corruption.
Same as for current property tax assessments. Outside of CA/prop 13-land, my experience was that assessments could be for as little as half the market value (remember, in 2007 the market was bananas and didn't reflect a well-grounded worth) and almost never more than market value.
The dirty secret is that assessments don’t matter overall - just proportionally.
The county or city or whatever has a tax budget of $500 million, and divides it by whatever percentage your house’s assessment is of the assessed whole, and allocates it to you. My property taxes vary without assessment variations, and have gone down on years my assessment has gone up.
A lot of people seem to think that the property tax is set at a certain percentage, and if property values rise, the government just dances around in a fountain of dollar bills.
Everywhere I've looked, it's as you say: the local government sets a budget first, then that year's property tax rate is set at a level which brings in that much money.
There is a somewhat delayed and simplified version of what people think there is - as property values climb, the city will notice and budget more (or less if severe drops) and try to stay within some standard percentage.
No mention that Pennsylvania implemented LVT decades ago and was highly successful. Their version is a split rate tax system (land taxed much higher than the property on it) and it is city by city.
I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
But my main argument is practical. I content that it is simply not possible to evaluate the "unimproved value" of a given parcel. Any discussion of a practical LVT has to start with the fact that it is an approximation to a theoretical ideal, and define exactly what the basis for "land value" estimation is, because it's really a tax on that process. While some of these may have overlap with the benefits and detriments of a theoretical LVT, they have to be looked at from first principles rather than by comparison with the LVT because the fundamental assumptions are often broken.
> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
How familiar are you with existing property taxes?
It might surprise you that land value estimation is literally already happening at scale.
Also, you don't need to be 100% accurate with the estimation. Even a 50% lvt would be a huge improvement and would mean that you could literally be off by 100% which is extremely unlikely. How many houses do you see selling for twice the listing price?
Indeed. When I see these discussions, I am always struck by two things:
1) that many people don't seem to realize that a tax on land value is not novel, but is one of the oldest ways to fund government, with tons of experience behind it (past and present); and
2) that whatever the problems associated with figuring out land value, they pale in comparison to figuring out an individual's real income, which obviously didn't stop us from taxing that.
Right. So frustrating to hear people speak of LVT as some pie in the sky concept when it's the most original and basic form of tax, for centuries, worldwide.
It's equivalent to a modern day person talking about how cooking food over an open fire is never going to work.
The valuation issue is also a non-issue. You just have people self-assess the value, but any stated value is an option for the state to buy at that price. Also an ancient and well known mechanism.
But the difference is that assessing total property value can appeal to recent sales, so you have actual objective data to bound the realism of your assessment. What somebody would pay for the land without the improvement is stuck in imagination land.
> especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.
>The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
The only claim here is that if you own land which makes you $1000 in income and pay $2000 in taxes for that underutilized land you'd probably prefer to sell up.
Which has to be the least controversial part of LVT.
>Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Personally I think I preferred it when retirees were given tax incentives to sell up and downgrade to a smaller property, because even though moving day is stressful, not easy and costs money, it's not worth sacrificing an entire society over trying to avoid it.
Retirees have been doing this for as long as humans have owned property. Then they die and the house moves on. There is good reason someone will want to live in a house that is larger than they need.
If there are not enough houses don't blame that on existing houses.
> Retirees have been doing this for as long as humans have owned property.
Absolutely not. Extended families lived under the same roof for most of human history. This is a Nuclear Family problem, which only emerged in the 20th century.
more than just that. the very concept of "retirees" is a modern phenomenon. for most of human history you'd have to keep working on the farm or whatever until you were no longer physically able
Multigenerational households were the norm until recently. The eldest son gradually took over the household and raised his family there, or something like that. Both because it would have been terrible waste to have an entire house for some old people, and because household chores were hard work before modern amenities.
The less wealthy the family, the more likely you'll see it.
So your aggressive taxes will hit those people - displacing additional generations, not just the land-owning-but-otherwise-fairly-poor retiree - before it will hit the stereotypical middle class boomer retiree.
Outside of CA's Prop-13 territory, the multi-generational shabby-old-home-owners pay less taxes currently than their richer neighbors who moved more recently and renovated or expanded. The land value of both is going up, but the improvement value is lower for the poorer family. So now you'll get rid of the improvement value and even it out for both, which will hit the poorer land owners the hardest.
But land is a scarce resource, at least desirable land.
Blaming existing houses is exactly what you should do because instead of them you could build higher density.
There are plenty of houses for sale at any time. If building densely is the goal then any one of them can be used to build. Speculators buy houses in hopes that in the future the house next door will sell and then they can combine the lots to a larger building - where this is allowed.
If you're concerned with "it's underutilized because the population density is low and other people need more housing" than it would be much easier and more effective to directly pursue building housing on low-population-density non-residential land. Direct construction driven by the government, vs a multi-step strategy of "make people miserable with tax payments until they sell, hope the people they sell too will be deep-pocketed developers who will build super-high-density stuff instead of just fancier homes for richer families, and hope all this happens quickly."
Cause a tax amount that goes up based on what people with more money than you do on other pieces of property simply gives more power to the wealthy. "Underutilized" as far as tax implications go then means "people with more money than you would like there to be something else there."
And, of course, this already happens with US property taxes in many jurisdictions. And people absolutely hate it.
"Tax incentives to downgrade to a smaller property" sounds great in theory for retirees sitting in huge properties, but I think is limited in practice. The people with the really big places are wealthy and politically influential, so you'll get Prop 13s, or you'll get the recent cuts to property tax in Texas. "Make housing more affordable by cutting the taxes!" And the people impacted by more aggressive taxes will less be the boomers in giant houses and more be the poorer retirees in multi-generational living situations, or ones in fairly small condos.
How would LVT be easier or quicker? In what states are you going to be able to campaign on this?
"Change commercial and industrial under-utilized areas to allow residential, then aggressively subsidize developers or build directly there" sounds much easier to me than "pass a property tax increase that people will fight tooth and nail." Your LVT is gonna need to come with zoning changes too, after all.
California has Prop 13. Texas lowered property taxes recently. Florida is considering property tax rebates. You're gonna have a hard time convincing people to increase property taxes when housing is expensive already. Big overlap between "property owners" and "highly motivated voters" already.
Incentivizing density in single-family areas is quite hard, I'm not convinced it would do much even if it passed! Even in CA where neighborhoods can now have ADUs, sales prices for 5bd big-as-box-as-possible single family units are generally higher than prices for 3bd or 4bd + an ADU properties with separate units. Because the people who can afford those would rather have a giant-ass house than be a small-time landlord on the side. So maybe you just displace the old retirees and a bunch of high-income DINKS move from their condos to those SFHs. Sales price goes down a bit to compensate for the now-higher tax burden; remains unreachable for many but reachable enough for enough that it doesn't spur massive change.
> We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Some of this is due to tax policy, at least in the US. If you own an oversized house that you’ve had for long enough, then most of the value is a capital gain. If you sell it, you pay taxes on all but $500k of that gain, even if you promptly buy a new, smaller house that costs almost as much. If, instead, you hold the house until you die, the tax is waived completely.
California has additional perverse incentives due to property taxes.
Some states are allowing you to “carry around” your assessed value, perhaps the $500k cap gains exclusion should be made similar - you can carry your basis similar to a 1039 exchange if you sell and rebuy in the same area soon enough.
The reusable $500k cap gains exclusion is a huge huge thing, bigger than some realize. (Though it is interesting that you can exclude gains from a house sale but not losses, but you if you own a rental you can claim losses but not exclude gains (though you can 1039).)
The reusable $500k exclusion is great in some markets. In the markets with serious housing cost problems, it’s nowhere near adequate. If you have a house that you’ve owned for 30 years in a market where the cheapest houses cost $3 million, and you want to downsize and move into a nice $2 million condo (sigh), and you live in a high-tax state like CA, you will owe long term capital gains tax on nearly $2.5 million, which comes out to around $750k. Real estate agent fees can easily eat up most of the remaining profit, and you probably end up with much higher HOA fees. And these expenses are basically a complete loss to your heirs. And, in CA, your property taxes increase from near zero to $20k/year.
So you probably don’t make the trade, and those spare bedrooms remain unavailable to anyone who would want them for the rest of your life.
Grandma's problem has been historically solved with a homestead exemption. Of course the value could rise above the exemption, but that just means it should be set high enough to ensure that the proceeds of selling will give Grandma a lot of options.
Well, if grandma's home is surrounded by apartment complexes already, then even without LVT some property developer would definitely make an offer to buy her house for a ton of money, and even throw in some relocation package, for example by gifting her an apartment in one of those neighborhood complexes. Happens in my country all the time - your neighborhood being converted from single family homes to apartment complexes usually means a windfall for you.
This is already part of property tax assessment - I get a separate price estimate for the land and the structure. I also own some undeveloped land and pay property taxes on that. All a LVT does is get rid of the structure part and raise the rate on the land part.
Saying that they assess the value tells me nothing. How, specifically, do they arrive at these assessments.
In my experience there is often an assessment process that is essentially just made up. And when properties do sell, the sale price is always a "surprise" relative to the assessed combined value of the property.
In a sense the question is "What in particular makes you confident that the estimate accurately reflects the price of the land" but in a deeper sense what does the concept of "price of the land" even mean in practical terms? How would you know that the answer is right even if you were omniscient? And given the practical divergence from whatever theoretical standpoint, does then this value serve the same objectives as a "true" LVT?
The assessments are roughly based on the sale price of similar lots and the approximate rebuild value of the structures; usually erring on the low side in my experience (though that is probably more about the direction of the housing market than inherent to the process). I agree there is a qualitative element that strikes me as icky compared to pure quant taxes like wages, but it's already happening so LVT doesn't materially change things.
> How, specifically, do they arrive at these assessments.
So is your argument that you don't understand something and so it must be wrong?
There's an extremely large amount of existing material that is used by property assessors available for you to look up to research how they do this. It is a well-established field.
Property assessments have been done across a huge number of countries for decades probably billions of times at this point. There are probably trillions of dollars of capital that flows according to these assessments.
No, my point is that two things both calling themselves a "land value tax" based on a putative "unimproved land value" can be wildly different in terms of incentives and results based on the specific mechanism used for computing that value, because there is a lack of any sort of objective reality underlying the assumptions that go in to computing that number.
At least for an entire value tax, we have the benchmark of "when a house is sold, how closely does the price hew to the imputed value for tax purposes" to determine if the tax is, in some sense, fair. Some municipalities do better than others by this benchmark, but many of them continue their totally broken methodologies (by the standard of predicting sale prices) for a variety of political and bureaucratic reasons.
For a specific attempted implementation of a land value tax, how do you go about measuring whether you are doing it well? You can sometimes get sparse data points when vacant lots go up for sale, but otherwise you're just benchmarking against other models.
>> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel
There's a decent discussion on that topic here [1], as a starting point. Not saying it's absolutely conclusive, but gives some food for thought. I suppose where determining an accurate value might be most difficult is parcels that rarely turn over, so have little direct or nearby sales data.
It is an interesting discussion, but I don't see anything in there about how to assess the accuracy of any of the methods against some sort of objective truth. I would have to read the underlying papers I think to get at this, but I don't feel a strong need because I feel like the larger epistemic point is unaddressed in any of the summaries.
The closest I saw was one study that compared the model to a human generated data set, which is just kicking the can down the road. The article semi-concludes
> I think it's quite plausible but not a slam dunk. That said, if the objection is, "valuing land separately from improvements is fundamentally impossible, and we can never get better at it, so we shouldn't try," I think that's plainly ruled out.
I do not agree with this assessment -- you can create a bunch of models and show that the models have good intra-model agreement, but the fundamental point has not been touched.
Maybe but at some point, isn't your problem the same valuing a single dollar? We can compare the USD against other fiat currency, but they're all valued against the USD or some other bucket of fiat currencies. Or, you could try to tie the value of the dollar against a bucket of goods, but that's also just moving the goalposts around.
Now we're wandering a bit far afield, but estimates and measurements like this are fine if they are designed for an operational purpose. If I want to know the unimproved value of my land so that I can evaluate whether to buy a similar property and build a similar house on it, then it's fine for me to use whatever estimation protocol is going to help me make a decision. If my protocol is bad then my estimates will be bad then <shrug emoji> it's my problem.
Similarly trying to measure the value of the dollar -- what is the operational purpose of that measurement? This is a real problem in any sort of macroeconomic analysis, and Goodhart's law makes it far far far worse when trying to apply it for practical purposes. Mostly you have to accept that there is not going to be a quantitative metric that captures the underlying squishy concept so better not to think about the problem of, say, inflation, in purely quantitative terms.
No man is an island, unless you're Robinson Crusoe, who was a character in a story.
No parcel of land is an island in this sense, not even an island, because what makes an island is its being independent of a landmass or continental shelf. But in the sense of being moored, all land values are grounded in discrete monetary terms. Even if they are subjectively determined, the land value is an idea space that has limits on what concerns are common, and thus are typically already priced in, and concerns that are less common, and may have already been sold, such as mineral rights.
Unimproved land value is value relative to comparable[0] plots in that same market if possible, because it's meant to be as close to apples-to-apples, all-else-being-equal as it can be. The basis for comparison is whether it's improved or not, as you seem to be specifying, so the relation of land value to improvements seems to be the only independent variable that a potential or actual landowner or anyone else could even manipulate, even in a hypothetical where we aren't bound by real-world factors or limits.
Do you believe you can determine the true value of improved land, given how illiquid a market it is? Obviously, the last sale price provides some true information about the value, but it could literally be a decades old number. Do you believe states and municipalities shouldn't update property taxes for a parcel of real estate unless it's sold? I think we've seen from CA's experience with Prop 13 that this creates pretty distortionary incentives.
> Do you believe you can determine the true value of improved land
It is at least theoretically answerable. In the extreme, yes. We can simply force the sale of the land. Practically speaking, no, we cannot answer that question in a deeply illiquid market.
For the unimproved value I'm not certain that there is a consistent and useful theoretical definition that can be translated to practice. Even in the extreme the question of the unimproved value of the land becomes difficult. Were we to raze all improvements and force the sale would that give us an answer? Do we include the cost of razing? What counts an unimproved? Can we leave trees or grass?
To expand on this differently -- if we have a model that produces estimates of the "true value of improved land", then we can validate that model whenever property sells. It would be a slow process but if we have a model and the model parameters capture a significant portion of the variance, then we would expect the model to converge over time.
Nobody does this, of course; it is not usually politically expedient to do so for a number of reasons, not least of which is the predictability of taxes for a given parcel. But at least it is theoretically asymptotically achievable. Not so for unimproved land value because the value you are trying to estimate is not an actual quantity.
Tear downs, sites with existing structures which are demolished to make way for building something else, are sold all the time. The value of the land in those instances is pretty much exactly the purchase price minus the demolition costs.
Real estate is liquid enough. I cannot sell my house this afternoon, so it isn't fully liquid, but a real estate agent can give me a number to list my house at this afternoon and be within a few % of what I get in a few months in most cases so that is close enough to liquid.
>>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
That's a feature not a bug.
The whole argument is that it's good to tax wealth that you didn't work for. It's surely more just than taxing labor or the improvement you have made yourself.
>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land"
Which is more of a feature than a bug.
The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money.
The idea mooted in the article that developers would be unwilling to build 20 houses on a plot of land because having 10 houses would jack the LVT up for the other 10 is entirely backward. The value of those houses will be predicated almost entirely on infrastructure (roads, rail, schools, etc.) or services (shops) provided by the community you're paying taxes to.
>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
Did you read the wikipedia page about LVT which describes how? Which part is impossible?
> The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money
Or indeed that a headteacher works long and hard to improve their school and all they get for it is a reduction in their real income because the plot of land their house sits on costs 20% more.
Or the schoolteachers get driven away by a horde of NIMBYs who really don't want to be forced to move because the schools are good...
And that headteacher's salary can increase too because the tax base went up.
No such luck for the poor schoolteacher whose rent went up. All she will contribute to is her landlord's vacation fund.
>Or the schoolteachers get driven away by a horde of NIMBYs
Really??? You think NIMBYs will protest a good school?
If you want NIMBYs go visit San Francisco. Theyve detaxed land there to such an absurd extent that the locals with $1.5 million mortgages will flock to town council meetings to try to declare a launderette historic to prevent it from being turned into apartments (because if any more apartments are built they will go underwater on their absurdly sized mortgage).
> Really??? You think NIMBYs will protest a good school?
I mean NIMBYs protest educational facilities and transit links all the time, even when on paper at least they reap benefits in terms of house price appreciation.
Imagine arguing with a straight face they wouldn't protest such improvements more actively when someone else's kids getting a good education pushes them below the poverty line or forces them to leave the area. If you align any improvements to an area with increases in costs, you get incentives to ensure an area doesn't improve.
> Did you read the wikipedia page about LVT which describes how? Which part is impossible?
The wikipedia article describes some processes, including assessments, regressions, and interpolation from fixed landmarks.
Those are all means of estimating something, which you can call the "unimproved land value" if you are so inclined, but what exactly is the thing that they are estimating? How do you know if they are accurate?
You can implement a framework based on any of those measures, but crucially as above they are not an LVT, they are a "proportionate tax on total value based on extrapolating previous sales minus human estimates of improvement value according to a rubric" for example, and have different advantages and disadvantages than an LVT even theoretically, so every time you make an argument that "LVTs have such-and-such a property" you have to expand the definition of LVT to be the specific case and verify whether that property makes sense in the context of that particular methodology. As a shorthand it becomes useless.
My point is not that there are attempts to have an LVT that are approximations of the ideal reality; my point is that this ideal simply does not exist in any sort of cogent way so you might as well tax based on how much God loves the property or how many potatoes you could grow on the land.
>You can implement a framework based on any of those measures, but crucially as above they are not an LVT, they are a "proportionate tax on total value based on extrapolating previous sales minus human estimates of improvement value according to a rubric"
>>>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
I think there's a perfectly fine way; you estimate it the way we currently estimate properly values for tax purposes. If they owner doesn't like that value, you allow them to contest it, and we immediately accept any contested claim and value it as the owner desires, with two small caveats:
a) they pay tax on the claimed value, to ensure they don't over value and
b) they are required to sell to anyone at claimed value + 10%, to ensure they don't under value.
edit: two points to address some responses. First, it can be claimed land value + assessed/claimed improvement value + 10%, that's fine. Second, I'd only require they sell at that value if the owner contests the original appraisal. If they accept it, nobody can buy their stuff out from under them for any price.
But the point of LVT is that it doesn't include the value of the stuff on the land. A house can easily be worth more than 10% of the land it's on, my house is valued at about twice that of the land, or 20x what your plan would require me to accept for the house.
>they are required to sell to anyone at claimed value + 10%
I like the goal here, but I think a less intrusive way to achieve it would be to charge back taxes at the time of a future sale if the sales price is in excess of the valuation. To ensure the back taxes are paid, they would encumber the title of the new owner, so that in practice the buyer would require them to be paid at closing.
I lose confidence in the writing early on when it says this:
> Instead, the government essentially "seizes" the added value by taxing its rental value away, eliminating the incentive to discover the oil in the first place.
If the tax is 100% of the value, sure. But left unstated is whether taxes are 100% of value. If taxes are 100% of value, there is no incentive to own the land in the first place, my $400,000 house costs me $400,000 in land tax to own... yearly?
It's a very weird system to own anything underneath the land anyway. That's how you get the weird oil race areas where people will be drilling from the same source next to each other. The same goes for the water underneath the land.
In some countries the property rights only go like 10 meters deep and even then if there is a need for plumbing underneath there are exceptions. Maybe the issue then becomes that you're not free to do what you want on your own property but it's not like this is a thing in home owners association single family home areas anyway.
My biggest criticism of LVT is that the name is confusing :)
The idea is that you're taxing 100% of land rents, not 100% of the total value. So if there's a 5% cap rate on your property, and the land value is $300k, then the annual tax bill would be $15k.
Yes, it's a straw man argument. It may be possible to tax the rental value away, but in practice, no jurisdiction levies a rate that high, because the officials that enacted it would be thrown out of office in the next election. It certainly shouldn't be presumed the standard case. It's like saying we shouldn't use electricity because it's possible to be electrocuted.
LVT should be incorporated with an occupancy tax, it's the only fair way to fund government services. If I own a farm, and my neighbor sells their farm to turn into a housing estate with 99 single family homes, then it is fair to say that my land is now more valuable and I should pay more to keep you it, but it isn't fair to say that my taxes should rise to cover half of the local budget just because I own half of the land in region
This is how every argument about LVT goes once people start thinking about the details: They start thinking of various edge cases and exceptions that highlight how it's not as fair as proponents claim, until eventually we're back to the current taxation systems where land value is part of the tax, but other factors are also considered.
An LVT would need relatively few exceptions and rules in order to function well and is unavoidable by design. What we have right now for most taxes is the exact opposite of that - e.g. with sales, income taxes, etc.
Mostly there are just pearl clutchers complaining about how elderly cash poor people sitting in large old houses on expensive land they've lived in for 20 years would be financially nudged into downgrading.
The real roadblock for LVT is not in the slightest bit technical, but simply that it would undermine a lot of privately held oligarchic wealth.
Land owners make up a plurality of voters. In some cases those land owners are retirees living in a house they bought 45 years ago others are people who own 500 houses.
The land value tax “equally” punishes them for their inefficient land usage. But at some point we need to pay our fair share on taxes and the later group hiding behind the former group is how you end up with California’s dumpster fire of a housing crisis.
I agree with this. I really do not know why in the hell one person or entity owning 500 houses wouldn't pay more in taxes for the 500th house than the 1st house. You pay more income tax on the 500,000th dollar than the first dollar. Land is taxed regressively in favor of oligarchs.
First house is claimed as homestead and gains on sale aren't taxed, but the yearly property tax should work similarly.
Where I live homestead status affects yearly taxes as well.
This is a negative for anyone who is renting since they now have to pay more rent to cover those taxes. (taxes set a floor on rent long term, though of course tax is only one factor in rental prices)
"Mostly there are just pearl clutchers complaining about how elderly cash poor people sitting in large old houses on expensive land they've lived in for 20 years would be financially nudged into downgrading"
I wonder if you wouldn't be clutching your pearls if you were being forced (sorry, "financially nudged") out of your home of 20 years?
These cash poor elderly folks aren't exactly "oligarchic".
“Beat it, grandma! We have better ideas on how to use the land and house you raised a family in!” is unlikely to be a winning campaign platform. (Thankfully.)
You may be happy running an economy on vibes, but it makes no sense for old people who have a house intended for them and kids close to their work to remain there when their kids have moved out and they've retired. The fact that you can't afford to live somewhere isn't some crime. They can go move somewhere nicer and more suitable for them, freeing up that land for densification (or just proper occupancy).
Why do you think it's up to you to decide what's more suitable for someone else? Where do you get that right?
The problem you're running into is that it doesn't matter if it makes sense to you what these people want to do with their private property. What you think is "proper occupancy" doesn't matter, because we have private property rights.
You advocating for policies that infringe on that right is an attempt to exercise power over these people that you have no right to, whether or not you hide behind some collective sense of what's best.
Currently renting retirees are forced out already if they dont pay their rent.
Can you confirm that you wish to see this practice completely banned (i.e. no payment of rent) to prove that you're not taking a two faced stance on this issue?
What we are talking about is different - a tax incentive to move to somebody who has benefitted from a large capital gain.
I’m fine with (and in support of) market forces to let grandma decide that it’s worth selling her home; I’m not okay with using government mechanisms with no market reference points to price her out of it. (Raise everyone’s property tax rate and reference appraisals to market sales? Fine. Determine that her specific piece of land is worth $X despite no comparison of open-market land-only transactions? Not fine.)
From that, it’s fair to conclude that I’m ok with renters having to pay market rent, regardless of their age or matriarchal status.
>I’m fine with (and in support of) market forces to let grandma decide that it’s worth selling her home
Ok. Sounds like you are in favor of market forces driving grandma on to the street when she rents but not in favor of market forces driving grandma to sell up and move to a smaller cheaper property.
Maybe the pearl clutching about poor grandmas was a little overstated.
>Determine that her specific piece of land is worth $X despite no comparison of open-market land-only transactions? Not fine.)
LVT is calculated and imputed using open market transactions. If unimproved property values all jump in an area thats coz the land value went up.
Show me a way that LVT can applied referencing open market transactions for unimproved land in a developed area and I’m interested to learn more about it.
Grandma can decide to sell her house on the market if the property taxes get too high. That’s good. She shouldn’t be able to be targeted by the city for her land value alone increasing despite no or weak supporting comps.
LVT is theoretically good. My problems with it are practical ones.
What a lot of jurisdiction do to deal with this situation is to allow elderly folks to accrue what is essentially a lien on their house for the property taxes going up more than a certain amount.
This way these folks don't have to pay much more than before, can stay in their house and the county gets its share when these people die or move out.
In this scenario your property value would go up and with higher taxes you'd be incentivized to sell for a profit and move your farm farther away in a different zoning.
The incentives you've presented are correct. However, my friends from rural areas always complain about rich outsiders moving in, buying everyone else out, and raising the cost of living. If LVT is just a way to "[incentivize farmers] to sell for a profit", why would people in these areas support LVT? I'm afraid it would just turn into another partisan issue, regardless of merits. And I like LVT!
Perhaps a solution is to create "LVT Zones" in metro areas, and perhaps replace current residential / commercial / agriculture / industrial zoning with them?
And LVT that replaces zoning basically just lets the highest bidder do whatever they want with the land. An LVT that augments zoning could perhaps be tenable but I would argue that in VHCOL areas there's already something of an LVT in place. My SFH in San Jose is assessed as having equal value for the 8800sqft as it is for the house built on it. What I wonder is how the actuaries and policy makers responsible for assessing property values for county taxation actually do that, and how much of the formula is already based on land value.
Let's be real: if this scenario unfolded today, your land would be worth more as housing/infrastructure/commercial/etc. than as farmland, some real estate developer would buy it from you, and you'd make a lot of money without having to do anything. If there was a 75% LVT then you'd just make less money.
The reason I brought up this argument is because this exact scenario is happening all over the UK and Ireland right now. One of the houses my wife and I looked at purchasing was built about 20 minutes outside Belfast on old farmland that was converted into a new housing estate. The farms surrounding this housing estate have been incorporated into a new village.
Isn't this covered by zoning? But it also just proves a point that you can't smart regulate the market to do everything. Sometimes communities just have to make decisions about what they want the land to be used for and create the according rules and do the investment themselves.
Isn't this case just revealing the opportunity cost of keeping the land as a farm in that location? For example, what incentive is there to buy an acre of downtown Miami and convert it to farm land? Should we lower that acre's property tax now?
This goes back to my top-level comment: the assessment of your property should not be based on sales of nearby property but on observed rental values. Just because your neighbor has sold their plot and the new owner has the intent to build 99 houses on is so far inconsequential ... we have yet to observe any actual rent increases and likely will not until those houses are actually constructed and rented/sold themselves. Only then can we accurately observe the potential rental value of your adjacent land.
It's a good point.
Usually farms are on land classified as agricultural and residential buildings are on residential land. It's easy to design a system that values residential land higher (because it's in fact more valuable if you can build residences on it). You wouldn't pay half the taxes until you convert it to residential at which point you should in fact be paying half the LVT (maybe with a few years leeway).
What's the societal value in trying to financially engineer land development? Is it to better utilize existing infrastructure? Charge each property proportionally for the road system and fallow land will naturally be developed to handle the taxes.
Property taxes are attractive because land doesn't move (unlike other forms of wealth) and it's easy to account for by tax collectors. There's also zero dead weight loss as you can't create more land. Taxes on land improvements are unattractive because they disincentivize owners from investing in their property. This leaves us with taxes on unimproved land being a very attractive option funding the government.
Good overview. What's the imperative for a government to incentivize owners to invest in their property? Seems like it's fine if the owner invests in their property or not.
The imperative for the government is to reduce the deadweight loss of under-improved land. Whether or not the owner chooses to improve should be their choice, but there is an opportunity cost to not improving.
Absent a LVT, that opportunity cost is mostly born by the people who don't own the land, i.e. the coffee shop that _could_ have been there instead of whatever lower value use is there now. With a LVT, that opportunity cost falls more on the person who owns the land, i.e. the owner wants to keep their SFH in the urban neighborhood, but now pays a higher tax which reflects that under-improvement.
> ... These assessments would require intricate and subjective valuations that are very difficult to quantify accurately.
I continue to believe that "full cash value" assessments which try to ascertain the market purchase price of real estate are very foolish. And there are so many inputs and methods of formulating an assessment. What all of them have in common though, is that they consider the rental value of the property. It would be so much simpler if the tax was only assessed on the rental value. It eliminates things that effect the sale price estimates like interest rates, subjective risk tolerances, speculative premiums, and even the tax itself. The tax rate on the rental value would of course be much higher than the tax rate on the purchase price (25% compared to 1% for example) but it's a much more stable assessment with a lot more reliable data backing it up.
disclosure: I am a Georgist and former president of Common Ground California.
I found some more to nitpick, from the section on "LVT implicitly taxes improvements on nearby land":
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
This analysis misses the point. It doesn't make development less financially appealing, it makes owning land you're not planning on using any time soon less appealing. It disrupts (in a good way) the current land development model where one entity buys a large tract of land and develops and sells it off one piece at a time. That's a model based on land speculation. They may see it as the development of the first 20% of land increases the value of the remaining 80% (which they feel justified in profiting from) but that is neither guaranteed nor is it an accurate description of what causes the remaining 80% of land to increase in value. It's more accurate to say that the agglomeration effects of the people who moved into that first 20% (and their interaction with the existing local economy) are more responsible for it.
>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves.
LVT is for building property or occupying land. Mineral rights are under many if not most legal systems treated separately from land ownership (e.g. they are auctioned off) because unlike land, oil wells eventually run dry.
This does not seem like an honest criticism of LVT, because it deliberately blurs land and mineral rights.
>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
That's the kind of market discipline we are currently lacking which the author of this piece apparently does not want.
On the other hand, a developer who builds 10 houses on one plot of land is not going to magically make 10 houses on another plot of land double in price.
>Even in its simplest "naive" form, the LVT has a narrow tax base. The reality is that the vast majority of global wealth is created through human labor and innovation
This last criticism is A) wrong and B) only applies to single taxers, not proponents of LVT.
>>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
>A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
You're missing the point entirely. When your small business, single family home, little ranch, whatever, becomes in increasing proximity to improvements your tax goes up. If you own a big ranch and decide to split some of it off, build housing or whatever and sell, then your tax on everything goes up per LVT.
I see Georgism and LVT brought up on HN fairly frequently, at least a few times a year. It's a niche economic outlook and set of policy recommendations that many in HN seem to be intrigued by. As someone else pointed out, that definitionally makes it HN material.
> On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
> it inherently discourages landowners from searching for new and innovative uses for their land
That seems like a feature to me, as long as the tax enough less than the increased value of the land, and using up a funite resource, lime oil, correspondingly decreases the evaluated value of the land. If you discover oil on your land, I think you should be taxed more. And I think that adding a reasonable dicencentive to things like drilling for oil isn't a bad thing.
Also, for non-renewable resources found on a property that are sold, not rented, I think it could make sense to tax them differently, such as based on the sold value, when it is sold, rather than increasing the taxes on the land itself.
> Another issue with the LVT is that it acts as an implicit tax on nearby land development.
This is the case for property taxes, regardless of whether it includes "improvements".
Also, it doesn't remove the incentive. If an improvement on one parcel increases the value of a nearby parcel, that means you can rent or sell that property for more, and the ducentive isn't really any worse than a tax on that increased income being a disencincentive to increase the value of nearby land.
There is a related problem where increased value can result in families no longer being able to afford taxes on their residence. Although its not like gentrification isn't already a problem, and I'm not sure it's any worse than the problems with other tax systems. It could also be combatted somewhat by lower tax rates or deductions on primary residences (possibly with a limit on the area that qualifies).
The first two arguments he makes here miss the point of a LVT entirely
> An LVT discourages searching for new uses of land
> An LVT implicitly taxes improvements to nearby land
If I find oil on my land, or if someone builds a park across the street from me, then I should be taxed more. The land is more valuable to me! At a 100% LVT I essentially break even. Anything less then that, and I still come out on top.
The only valid arguments in here are the last two. If people buy a piece of property with certain assumptions and the government turns around implements a 100% LVT, then I can understand why they would be upset.
So sure, there are some practical considerations to implementing a 100% LVT immediately tomorrow with no exemptions, and it probably wouldn't raise enough revenue to eliminate all other taxes. But the government could still raise a ton of tax revenue with minimal deadweight loss by phasing in a 75% LVT over 30 years with a handful of common sense exemptions.
That's assuming you actually own the mineral rights, which are not necessarily the same as the land ownership itself. These are quite often separated and held by different entities. In practice, the extraction of oil under a parcel of land has almost no relation to what the land is being used for.
The author's assertion was that LVT disincentivizes one from using the land productively, and used oil specifically as an example. This example is basically completely divorced from the realities of oil extraction. Nevermind that nobody is building wells in the middle of cities, where LVT matters.
So, that argument seems to rely on a contrived, unrealistic example. I can't see how LVT disincentivizes productive use of lands.
This stems from the fact that if a landowner successfully discovers a
valuable resource or identifies a creative way to utilize their land more
productively, the government will increase their tax burden accordingly.
One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.
As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.
To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.
W/r/t oil: suppose before you survey there is a 25% chance that there is oil under your property. So the unimproved value of your land is surface_value + 0.25 * oil. After you drill, 75% of the time you receive a reduction in value of 0.25 since you have good evidence of the absence of reserves, 25% of the time you increase the value by 0.75. It seems to me that the LVT has no impact at all on the expected value of surveying for oil.
Of course if you believe the estimate to be incorrect, the incentives can shift, and there is some opportunity for mafiscence by falsely showing the 'absence' of oil that you know exists for a temporary tax break.
@patio11's podcast, Complex Systems has two great episodes that discuss much of the context about land value tax and property tax systems in general (from a US perspective).
every tax discussion i've ever read treats taxes in the abstract without spending. The assumption is "how do we raise as much tax as possible".
When you actually learn about public agency spending, you'll see that 2/3 of it is completely unnecessary.
I'm not saying companies are any better, but they generally don't have the mandate to take your house from you if you are not a customer.
Focus on the spending first, and make sure it's essential. Then figure out how to fund it.
If you can get spending scope reduced by 90% (where it was before FDR) , you'll find the tax situation solves itself. You won't have to invent taxes on every activity.
if spending is 90% lower than today, coming up with revenue is trivial.
Until 16th amendment, Federal revenue was from excise tax. Income, fees, capital gains were not necessary.
So degree matters. Of course you're going to have to keep inventing new tax revenue streams if spending is 6-10x more than it should be.
We may keep the property tax, but talking about tax revenue absent of spending is like talking about how to deal with a headache caused by a nail in the head, without addressing the nail.
> Focus on the spending first, and make sure it's essential. Then figure out how to fund it.
Which is what I disagreed with. There is no "sequence" to this where one comes first. You need to look at both in parallel. Its entirely possible that one could be more troublesome than another, but you still need to look at both!
sure but here's what happens in practice. The agency raises the revenue, and raises the spending to meet the new revenue.
I'll give an example. My local city proposed creating a separate taxing authority for the fire department . The new authority would get an additional share of the property tax. Meanwhile the city would keep the share they were getting beforehand, and spend it on other things.
My point is that abstract / theoretical approaches to taxing don't account for the human factor. The human factor is that people just want to make their job easy, and if they get more money, they will spend it.
As though every single dollar of public spending didn't return about 30x in ultimate value vs the best you can get from those same dollars in your pocket, even with the waste.
As though everyone agrees which bits are even the waste.
What research did you have in mind that would suggest anything like a 30X fiscal multiplier?
Public spending efficiency is generally understood to range not that far from 1.00, depending on current economic conditions: Better in a recession, worse in an expansion.
You should always be wary of arguments from people who name themselves "The correct people". Less wrong, and the "rationalists" generally, are engaged in magical cult-like thinking.
The rat-adjacent types are not a monolith and are not of the same worldview. The distribution between left and right, politically, approximately matches the general population. What they're about is approaching the best data we have in good faith and being open to updating perspectives.
All human epistemology is trying to be "less wrong", just like all cereal is "all natural". The rationalists aren't even the first to recognize the value of printing it on the box.
All taxes that generate revenue are taxes on good things. This is a fundamental rule of economics. Using this as an argument against LVT just means that you are opposed to taxation generally as a way to generate revenue. This essay doesn't defend that position though, because it is engaged in magical thinking.
Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
taxing tobacco is not to generate revenue. That is, in fact, exactly the point. Taxing tobacco is to discourage tobacco use. The point is to have close to zero tobacco use, which results in close to zero revenue.
The author is quite clear that they are just pointing out that the LVT has some downsides, and are not trying to make any case about its overall value. It's good for LVT supporters to understand the counterarguments and be able to weigh them and rebut them (or change their mind! but hopefully not in this case because the counterarguments are very weak).
I don't understand your "fundamental rule of economics" claim - carbon taxes are a clear counterexample, I would think.
The whole point is to tax the bad externality rather than tax the good thing (energy production, or whatever). That doesn't make carbon production good, it just means that you aren't taxing the externality enough to discourage the underlying good activity.
That is an absolutely hilarious argument, made even funnier by accusing other people of magical thinking. I don't even know where to start with it, "All taxes that generate revenue are taxes on good things"? A fundamental rule of economics? Is your argument that LVT generates revenue therefore you can't criticize that it could suppress development in some cases?
> Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
It seems like you are equating self-labeling of this sort with claiming to be a paragon of that ideology.
Do you think someone who labels themselves as "Christian" inherently believes they are pure of soul and perfect, and sins less than non-Christians? Certainly there are plenty of self-righteous people out there, but "Christian" does not imply "Christ-like".
The same goes for rationalists - "rationalist" does not imply "rational". I don't know the proportion of self-described rationalists that would consider themselves truly rational, but I think a good portion of them would consider anyone who made that claim to be full of crap. The whole movement is predicated on studying and maintaining awareness of the mountains of cognitive bias humans carry. If you can study that and still think you are ultra-rational, you've got a special kind of hubris.
> Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
Consider, are you exceptional in the sense that you would not place yourself in any camp whatsoever, ascribe to any ideology? You're neither left or right? Actions dictate identity.
Having an interest in something is not the same as having a superiority complex.
That is a projection. The right analogy would be "trying to be better". If your ideology was about helping others does that necessitate it implies those in the outgroup do not help others?
Do LVT proponents believe economic activity that requires minimal land ownership relative to the profit should be untaxed?
E.g.
* Offshore oil drilling
* Tech companies
* Fully remote CPAs
* Electricians
* etc
It seems very weird large sections of the economy become virtually untaxed, requiring a MASSIVE tax burden on the others. The simplicity of the LVT plan kinda hides that it implies a huge restructuring of the economy.
I don't think very many LVT supporters think it should be the sole or even primary source of taxation. The main point I see being made is that property taxes as designed today discourage development, whereas a LVT would encourage it. Property taxes are only about 10% of overall US taxation, and a switch to LVT would have its intended effect even if they became a smaller piece of the pie.
The LVT would get rolled into rent, which would propagate through the economy. I think the chief effect of a fixed LVT would be discouraging passive land investment (since you've got to collect rent to pay your LVT). IMO, while this might be beneficial for increasing the housing supply, a progressive LVT would be even better. A progressive LVT would put larger landowners at a disadvantage in the rental market, because their tax would be higher on an equivalent parcel than a smaller landowner. By ensuring a larger number of smaller landlords, I think you'd see a more diverse and competitive rental market.
I think we can't make LVT the only tax. Other good taxes are consumption taxes, pollution taxes, resource usage taxes. You can also add some business revenue taxes like recently popular idea in EU of a digital tax. I would also tax IP protection (if you want to sell your stuff here and have IP/copyright protected we will take % of your sells).
I think the worst possible taxes are capital gain tax an corporate income tax. Those should be 0. They only create incentives for various shenanigans and have a lot of other negative consequences.
LVT proponents also typically advocate for pigovian taxes (tax things you want less of to disincentivize it) and taxes on rent-seeking activities. So, offshore drilling would probably be hit with something like a carbon tax (directly or indirectly) and tech companies might get hit with a tax regarding their monopolies or IP. The CPAs and the electricians would get off easy, though.
Google's productive activity mostly accrues to NIMBY homeowners in the Bay Area rather than the material living standards of anyone connected with Google.
That statement seems clearly wrong to me. Google's productive activity is benefiting NIMBY homeowners rather than, say, the owners of Alphabet stock? I'm going to need to see some evidence before I believe that.
Those are the "land" of the modern economy. Land value tax arguably may have made sense for a 19th century economy; I think it's completely missing the point for a 21st century one. Land isn't the major source of wealth any more.
I feel like someone watched a Gundam series (reader's choice!) and saw space colonies and endless space war as aspirational. How the heck are you supposed to assess and collect taxes on O'Neill cylinders or moon bases?
Why are we pretending like LVT doesn't exist already? I pay taxes on my land. Those taxes are calculated based on size and location. The Disney example is particularly egregious. They pay taxes on the land AND the structures they built but the article acts as though they would be disincentivized from building if we _removed_ taxes on the structures? Huh?
The idea is not to disincentivize developing on the land. To me, it only really works when you remove the friction/gaming of all the other taxes and put it all into LVT, but that will never happen of course.
If your land can be treated as an asset, then we don't really have LVT yet. The goal of LVT is to tax land to the point where it is no longer an appreciating asset (and, not too much that it becomes a liability)
This article is a frustrating read because it appears the author has not researched the history of taxation much before writing it.
It reads like someone saying that cooking with fire is an absurd idea that's never going to work, and we should stick to microwaves.
Again, LVT is one of the oldest and most widely historically practiced forms of tax, through various forms like taking a cut of rice produced through to levying corvee.
Valuation is also a straightforward issue: you have the landowners self-assess value, but that value also acts as an option for the state to buy at that price. This bakes in honesty and market price based accuracy.
As for the "not enough" argument, maybe it's not enough for a government looking to squeeze every last drop and piss it away, which appears the norm sadly. But the point is that all economic activity a state has the right and ability to tax happens on its land, and in the process raises the market value of that land. So all economic output is taxable indirectly via it.
On the claimed disincentive to improve land value, like the oil discovery example: where the value is based on market price, no one is harmed by an increase in their properties value. They can just sell it to an oil developer if they don't want to develop it themselves, and walk away with a fat untaxed capital gain. This is simply a non-issue, on par with someone worrying their salary raise will increase their taxes - missing the point that it's a nice problem to have.
And if they just hated the idea of having more money, they could just self-assess at the old price and have the state take on the burden of developing it if they think it's worth more.
The only actual issue and complexity with LVT is a political one - how to move from the current farce to that. Similar issue with gold standard etc. These systems are tried and true and obviously better, but not to certain powerful minority interests, who benefit from farces continuing.
The most obvious argument for me is that I don't even think that developing land as much as possible should be a desired outcome. I'd rather have some billionaire sitting on a huge plot of wilderness than turn it into another shopping center.
Many states have adopted various sorts of watershed protection or conservation laws that make many areas undevelopable in any profitable way. The cost of the hoops one must jump through to prove some small project will not run afoul of these laws is a non starter....unless the developer is professional capital fueled operation looking to put in a chain store, strip mall or 5-over-N. That drags up adjacent values enough that the suburban subdivision developers show up and start buying the farms, etc, etc.
So in a perverse sort of way you basically get what you want, wide swaths of low/no development wilderness, but it's paid for by the everyman not the billionares.
> I'd rather have some billionaire sitting on a huge plot of wilderness
I'd rather not have a billionaire sitting on a huge plot of land. If we as a society want that wilderness to be preserved, it should be a state park or national park, that should be relinquished to our government.
Happy to answer anyone's questions on LVT if they have them!
It sort of breaks your head the first time you try to think about it because we are just not used to thinking about supply and demand in cases where supply is actually fixed, and that's where all the magic benefits come from. Happy to answer any questions people have.
Full disclosure though I'm a huge proponent!
As with any policy, there are some advantages and disadvantages but I think on the whole LVT is probably the single best policy change we could make as a society.
How would you respond to the critique that it makes that tax associated with a property dependent on the improvements to adjacent properties? I could see a situation where a single family home owner would deliberately oppose improvements (i.e. parks/bike lanes), because their derived utility from those improvements is less than the potential increase in taxes.
I would say that this is largely a feature not a bug :)
Let's look at what the author said about this:
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
> This creates a counterproductive dynamic: developers may hesitate to improve their land or invest in new projects because they know that any improvements will increase their tax burden on adjacent parcels.
This is exactly correct analysis, but this is good not bad! LVT is preventing hoarding land during development. Of course someone who acts according to the old system's incentives will lose in that model!
First, let's talk about why the existing model is bad though: right now, developers make a huge part of their money not directly from actually building, but from the increase in the land value that happens during construction. This means that developers need to acquire huge sections of land and then only build one house at a time. This is insanely inefficient! It literally prevents anyone else from building in parallel or at lower cost! There is zero competition!
In a world with LVT, a developer would be incentivized to acquire and start work in smaller increments, leaving the door open top more competition and for more companies to enter the space - lowering costs and increasing the speed of construction.
Under an LVT, almost all of the value of the surrounding improvements would be considered part of your land value, since even an empty lot in their vicinity would benefit from the surrounding improvements. Thus, a 100% LVT would capture 100% of the value someone might gain from the presence of those surrounding improvements. In the worst case, you personally benefit far less from those improvements than a typical renter would (e.g., bike lanes if you don't own a bike), so their presence is a net negative to you.
That's why income taxes are less than 100%. But some people advocate for a 100% LVT very seriously.
A) that's an argument against a 100% LVT, not against LVT. Some people (communists) also advocate very seriously for what is effectively a 100% income tax. That doesn't provide a good argument against income tax in general.
B) a 100% LVT would theoretically be equal to the rental value of the property each year. You as the owner would still be seeing your net worth increase. It's not like you're paying the entire value of the land as a tax each year. Such a scheme would essentially just undo all real property ownership.
>>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves. If they do find oil, the value of their land would skyrocket because the presence of oil dramatically increases its economic potential.
Is the author aware that in many countries the owner of the land doesn't own the resources if they are discovered there? Is the author seriously claiming discovering oil is not profitable under LVT? Does he prefer making people who happen to stumble on oil not pay % of the value of it as tax? (and thus presumably prefers taxing other things).
It seems so unlikely to me that someone reasonable would make that argument that I have trouble taking it seriously.
>>An LVT implicitly taxes improvements to nearby land
That's one of the two major points behind it: tax wealth that you got without building it yourself. In other words it limits land speculation.
>>An LVT is unlikely to replace many existing taxes
The argument the author is making here ("government will not get rid of other taxes") applies to any tax discussion and kills it before it even starts.
>>Another major issue is that a full or near-full land value tax would likely establish a troubling precedent by signaling that the government has the appetite to effectively confiscate an additional category of assets that people have already acquired long ago through their labor and purchases.
Yeah but we need to tax something. The alternative is to tax the very labor which must certainly be worse. Land owners are benefiting from work done by others without contributing to it and thus should be taxes accordingly.
>>The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%)
Amazing, 100% rate for LVT doesn't make sense!
>>For instance, individuals buy stocks, businesses invest in capital goods like machinery, and developers improve real estate—all with the expectation that they will retain most of the value of their assets and any future returns from them. This confidence in the protection of property rights encourages entrepreneurship, innovation, and economic growth.
And yet all of those are taxed in the current system!
The author seems to be assuming the proposed LVT rates are very high (when in practice they would be in low single digits). Remove that assumption and the whole article makes no sense at all.
They're a lot like the modern-day version of Ayn Rand's Objectivism, which is also libertarian. I remember people getting involved in that at university in the '80s and thinking how cult-like it all was - people feeling they had "found the truth" and wanting to recruit new members.
Rationalism seems to be playing a similar role for a certain type of person in Silicon Valley today, fulfilling an emotional/religious need.
Another way to look at it: Scientology, but replace Xenu with Yudkowsky and volcanoes with Harry Potter, or something.
It will never cease to amuse me that people calling themselves "rationalists" wound up recreating Pascal's Wager from first principles, just with time travelling robots, and drove themselves to sometimes murderous insanity over it. And that their Bible is essentially a Harry Potter fanfic.
These are the dipshits conspiring to shape our future, control our destiny and create the Machine God in their image. They make the billionaires messing around the big owl at Bohemian Grove look positively tame and... rational.
LVT is envy written into law — "how dare someone use what belongs to them in a way which doesn't benefit me?!?", whether individuals or groups are speaking. It also puts a wonderful tool into the hands of decision-makers to reward friends & punish enemies. No.
land value tax is a regressive tax on middle class homeowners that would ultimately benefit the wealthy. bc middle class single family homeowners would not be able to afford the tax increase or afford the construction to fully utilize the property, which would force them to sell to investors who could afford it.
terrible idea.
not to mention the political debates/decisions over what constitutes "fully utilized". what about public parks? urban agriculture? so many exceptions.
this would be a nightmare policy to retrofit. maybe a good idea if we had started there first, but we didn't.
it's also an ignorant diagnosis of the issue. land values and speculation is not the issue in my location (burlington, vermont) where we have a housing crisis. there are not many vacant lots (i'm guessing maybe a dozen in the entire municipality).
it's just an overly simplified solution to a complex problem.
> land value tax is a regressive tax on middle class homeowner
Not if you make the tax progressive. The first 200K could be tax free, for example. Primary residences pay a lower % of the value than 2nd and 3rd homes. I bet there are a ton empty vacation homes in Vermont. It can be applied gradually not to shock the system.
> Primary residences pay a lower % of the value than 2nd and 3rd homes.
I think it's funny how every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions, which starts to defeat the claimed purpose of a Land Value Tax.
LVT is a concept that sounds amazing and novel in a vacuum, but starts to look less ideal in the real world. The people who think about it enough start to include factors like structure value and different exceptions for how the land is being used, which starts to look a lot like existing tax code in most places.
> which starts to defeat the claimed purpose of a Land Value Tax.
What do you think others claim the purpose of an LVT is?
> every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions
This argument seems only to follow from a belief that carving exceptions out of policy here is either: inherently bad, lends to a slippery slope towards badness, or is fundamentally incompatible with the professed aims of an LVT (hence my asking).
I don't believe any of those are true, so this sounds to me an unfair indictment against the otherwise legitimate strategy of "keep what's good; change what's bad", which is practical and works for other policy all the time. While I'd scorn the complexity of our current tax code, I wouldn't do so on principle of exemptions being bad, but rather that we've made poor tradeoffs or struck a bad balance.
LVT sounds really smart when you exclusively talk about car parks in downtown NYC or whatever, it's not actually a good tax framework as soon as the conversation shifts from talking about low perceived social value commercial endeavors.
That would somewhat defeat the purpose of the LVT. The point is to force landowners to develop their land. A "fix" would be to make access to capital easier.
Optimum development in many areas isn't necessarily a large mid-rise or high-rise. For most areas, the maximum that the roads and other utilities could support would be dense townhomes, triplexes or quadplexes. Outside of the very highest-demand areas, the LVT would mainly encourage land owners to build additional units on under-utilized square footage or build up a bit. Increasing housing in an area necessarily requires access to capital - so that's what should be provided.
It's not perfectly fair to everyone; it would enrich current landowners. But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.
> But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.
how does this create affordable housing? taxes are only one piece of why housing is so expensive. the landowners would need a return on their investment, which they would get by raising rent. this is the core problem imo -- costs for construction and labor and permitting and taxes requiring higher rent in order to make the investment worthwhile.
the offset of lower taxes will absolutely not pay for the cost to "fully utilize" the property.
The theory here is that people who aren't getting "enough value" out of the land will be forced to sell to developers who will turn them into, among other things, houses.
yes i know, that is the "theory" in a logical vacuum. that just reinforces my original point that it will hurt the middle class and only benefit wealthy people. especially since the tax would make the land cheaper (in LVT theory), so when you are forced to sell it you're gonna have to sell at a lower price than you'd like (that is the entire logic of LVT: make land cheaper to encourage more building).
you can't just wave a wand to build housing if the taxes change to LVT. we all know that developers don't build affordable housing. the margins are much more attractive to build luxury housing...it's the incentive structure. housing is expensive to build, and those investors will require an ROI.
terrible idea! the more you look at it, the worse and worse it sounds.
> The point is to force landowners to develop their land.
The point is to ensure landowners don't sit on land. If taxes go up on your vacation home that you spend two weeks a year in, you will be incentivized to sell it or rent it out more. Both of which benefits the public at large. Not to mention it is a fairer tax than an income tax or wealth tax.
most of the vacation homes in vermont are in rural areas. so they wouldn't get penalized by the tax if the purpose of LVT is to increase taxes in urban areas.
Afaict, Prop 13 does this in California. Property tax is based on assessed value, and that assessed value isn't just for the improvements, but also the underlying land. So the fact that I pay about $20k/yr in property tax and my back-fence neighbor pays about $3500 (because we purchased in 2016 and they inherited the 1954 home from original owner parents) must indicate that it's not just the improvements that are covered by Prop 13. I had never thought about this before, but at least in California a potential compromise around LVT would be the modify Prop 13 to allow land values to appreciate at market rates while keeping appreciating of improvements capped.
There is a market for land plus improvements. What you actually paid in 2016 is presumably the market value of that combination. You probably referred to other similar parcels that had recently sold when contemplating your offer as well.
It’s trying to figure out “what is the land alone under these improvements worth?” that has no market signal to use as a reference (or an extremely weak signal in areas where unimproved lots do sell on the open market).
If you paid $1.5M in 2016, was the land alone $500K, $1M, or $1.25M? If you disagreed with the city’s assessment of just your land, how would you find comps to argue your case?
I think you're missing my specific point that this is a Prop 13 issue.
My land is valued at X and my neighbor's identical rectangular plot is valued at Y, why should that be the case if the land's objective value is identical (which it is, and neither X nor Y are close to current market value Z because Prop 13 caps appreciation at 2%/yr).
No land value or improvements are revalued at market rate until they're sold, obviously, but two things are also true: 1) tax assessors almost never lower assessment values (anywhere), and 2) assessed values are completely detached from reality of the majority of properties in the state of California because of Prop 13.
To answer your question, if I wanted to argue that the assessment of my land is too high, I'd likely not have a case because the assessor could just look at any comps that trades hands in the last few years and those would show assessments far higher than mine. But I absolutely could show that the assessment of others' properties are "too low" relative to my own (or mine to current) just by similarly looking back in time at homes that haven't traded hands in decades, if ever.
Yeah, no LVT proponent has successfully explained to me how it does not cause the erasure of urban or even suburban green spaces, be they public parks, private parks, gardens, etc. If a park increases neighboring land values, then the taxes incurred by the park go up without recompense to the owner (assuming the park is not held by the government).
How many private parks are there? Pretty much every one I've been to has been government run, other than small outdoor spaces next to private buildings and large pay for admission gardens that are usually way out in the boonies on the grounds of an old plantation or manor.
I can't think of how a private, but still public-access, park survives without a rich benefactor eating the losses, even today.
all of my favorite hiking areas in the birmingham, alabama area were privately owned. churches have public areas that you can enjoy as a non-member of the church. i'm sure we could think of more
edit: oh i just realized a huge one in my daily life: the intervale in burlington is owned by the intervale center but the community garden is managed by the city's parks & rec. also there are a ton of public trails on that private property.
In New York, you sometimes find unofficial community parks / third spaces on unused plots of land which for whatever reason (such as a strange shape) are difficult to develop. These are maintained by enthusiastic local residents, and the land owners turn a blind eye to it as long as there are no complaints.
If LVT is implemented, land owners will have a financial incentive to sell off the plots, and the spaces will be gone.
What incentive to sell off the plot does LVT create that doesn't already exist, maybe with a marginally lower degree? I'm guessing the reason they can't sell a tiny weirdly shaped lot is that no one wants it. If they didn't want it and they could sell it, they already have ample financial incentive to sell.
Around here, there are a bunch of private parks in that you pay a fee to enter the park or you can purchase a membership. The fee is minimal and mostly just serves to maintain the park. These are privately held parks, too, not owned by local or state government.
As far as I am aware, they are able to survive on their membership or visitor fees. But major improvements do take larger donation.
Private park, where you can’t even walk without paying an upright fee? Sounds like dystopian late stage capitalism. If it’s a well maintained garden I understand, but a sqare lawn should be free put your foot on.
I think you might be slightly confused. Wouldn't the issue be not that the parks themselves are expensive to the owner tax (not only is thr landscaping not that expensive, as LVT excludes your own improvements), but instead that they are effectively discouraged by increasing the tax on everyone adjacent and thus peversely encouraging NIMBYism of towards a common good by imposing a negative externality which does not exist otherwise? The issue wouldn’t be that it would add a tax burden upon the park owner, but that it turns operating a common good into a 'sadistic' act that pushes costs onto others.
A LVT could thus accidentally wind up like a window tax in that it could wind up discouraging efficient improvements to human conditions out of a misguided attempt at improving perceived fairness.
I guess if everywhere's zoned for max density. If it's zoned as a public park, so no ability to develop it and generate revenue, or close it off for private use, then its rated value would be close to zero. Possibly negative if ownership imposes some maintenance obligations on the owner.
I'm not really sure that's a complete solution. Couldn't you just spin up a 501 c3 org to hold onto properties until you want to do something with them, bypassing the LVT?
I wasn't suggesting a solution. I was just describing it as it is today. Presumably if you don't show 501c3 activities, you'd lose the status.
Any LVT would just involve scaling up land portion and setting building portion to zero in our current regimen. It wouldn't require anything novel. The 501c3 exemption is not something new I'm suggesting.
The bottom 50% in terms of wealth in the US only own 10% of the land. How on earth is this a regressive tax? The top 10% own over 40% of the land. https://fred.stlouisfed.org/graph/?g=1KsUt
i was responding to the "how on earth?" rudeness that i was given first. farmland, forests, etc owned by the top 10% isn't relevant to this debate. rural land (which is most of america) has nothing to do with urban housing policy.
further, in my original comment that you responded to, i described succinctly the market dynamics that make this regressive to the middle class. the data you shared supports that.
are you suggesting that the middle class doesn't own single family homes so it doesn't matter to them? because that is the point you are making if you don't realize that.
> The government has incentives to inflate their estimates of the value of unimproved land
In fact, the opposite is the case. In the few US cities--historically and present--with an LVT, the political pressure was and is to consistently undervalue the land. Because the quickest way for your administration to get voted out of office is for your tax assessors to be hard-asses about applying the LVT formula, let alone inflate assessments. As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Yet underassessing has its own problems--it erodes legitimacy of the government. Prior to Prop 13 property assessors were consistently underassessing the property of senior citizen homeowners. But this engendered a sense of capriciousness that was felt most acutely by, ironically, senior citizen homeowners.
None of which is to say LVT could never work, but it requires a tremendous shift in the political culture. The legitimacy of the existing property tax structure and its relationship to our conception of property rights is baked into our political culture; shifting to a new system will necessarily be incredibly difficult and destabilizing.
>As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Isn't that an issue with all property tax regimes that don't have the prop 13 carveout, regardless of whether it's LVT or not?
Yes, and in fact underassessment and smoothing assessment increases over time is the norm, AFAIU, for the current system(s), both de jure and de facto, depending on locality. But pathological underassessment and related political issues are a much bigger problem with LVT. The swings can be much bigger (especially from the perspective of a property owner that hasn't done anything), which means managing underassessment to keep taxpayers from revolting requires more discretion, something governments have difficulty doing while maintaining a sense of fairness. Even theoretical application of LVT requires significant individualized assessments which in practice require much greater discretion. Also, LVT is intended to displace most if not all other forms of taxation, so managing the stability of your budget in light of the need to smooth out assessments becomes more problematic relative to the status quo.
Some localities have tried mixed schemes, e.g. only applying LVT to commercial zones. Businesses are savvier and are more comfortable engaging with government on assessments as well as forecasting and managing swings in assessments. But that cuts both ways; in at least one municipality I studied (a town in the southwest, IIRC), this engagement turned into straight-up corruption.
Same as for current property tax assessments. Outside of CA/prop 13-land, my experience was that assessments could be for as little as half the market value (remember, in 2007 the market was bananas and didn't reflect a well-grounded worth) and almost never more than market value.
The dirty secret is that assessments don’t matter overall - just proportionally.
The county or city or whatever has a tax budget of $500 million, and divides it by whatever percentage your house’s assessment is of the assessed whole, and allocates it to you. My property taxes vary without assessment variations, and have gone down on years my assessment has gone up.
Barring anything weird like prop 13.
A lot of people seem to think that the property tax is set at a certain percentage, and if property values rise, the government just dances around in a fountain of dollar bills.
Everywhere I've looked, it's as you say: the local government sets a budget first, then that year's property tax rate is set at a level which brings in that much money.
There is a somewhat delayed and simplified version of what people think there is - as property values climb, the city will notice and budget more (or less if severe drops) and try to stay within some standard percentage.
No mention that Pennsylvania implemented LVT decades ago and was highly successful. Their version is a split rate tax system (land taxed much higher than the property on it) and it is city by city.
https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
But my main argument is practical. I content that it is simply not possible to evaluate the "unimproved value" of a given parcel. Any discussion of a practical LVT has to start with the fact that it is an approximation to a theoretical ideal, and define exactly what the basis for "land value" estimation is, because it's really a tax on that process. While some of these may have overlap with the benefits and detriments of a theoretical LVT, they have to be looked at from first principles rather than by comparison with the LVT because the fundamental assumptions are often broken.
> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
How familiar are you with existing property taxes?
It might surprise you that land value estimation is literally already happening at scale.
Also, you don't need to be 100% accurate with the estimation. Even a 50% lvt would be a huge improvement and would mean that you could literally be off by 100% which is extremely unlikely. How many houses do you see selling for twice the listing price?
Indeed. When I see these discussions, I am always struck by two things:
1) that many people don't seem to realize that a tax on land value is not novel, but is one of the oldest ways to fund government, with tons of experience behind it (past and present); and
2) that whatever the problems associated with figuring out land value, they pale in comparison to figuring out an individual's real income, which obviously didn't stop us from taxing that.
Right. So frustrating to hear people speak of LVT as some pie in the sky concept when it's the most original and basic form of tax, for centuries, worldwide.
It's equivalent to a modern day person talking about how cooking food over an open fire is never going to work.
The valuation issue is also a non-issue. You just have people self-assess the value, but any stated value is an option for the state to buy at that price. Also an ancient and well known mechanism.
But the difference is that assessing total property value can appeal to recent sales, so you have actual objective data to bound the realism of your assessment. What somebody would pay for the land without the improvement is stuck in imagination land.
We know construction costs so its not really hard to do without going to more imagination land than estimating property value.
> especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.
>The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
The only claim here is that if you own land which makes you $1000 in income and pay $2000 in taxes for that underutilized land you'd probably prefer to sell up.
Which has to be the least controversial part of LVT.
>Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Personally I think I preferred it when retirees were given tax incentives to sell up and downgrade to a smaller property, because even though moving day is stressful, not easy and costs money, it's not worth sacrificing an entire society over trying to avoid it.
Retirees have been doing this for as long as humans have owned property. Then they die and the house moves on. There is good reason someone will want to live in a house that is larger than they need.
If there are not enough houses don't blame that on existing houses.
> Retirees have been doing this for as long as humans have owned property.
Absolutely not. Extended families lived under the same roof for most of human history. This is a Nuclear Family problem, which only emerged in the 20th century.
more than just that. the very concept of "retirees" is a modern phenomenon. for most of human history you'd have to keep working on the farm or whatever until you were no longer physically able
The poor widow living alone is in many stories from old. If there is land to inheirit then someone will but otherwise it isn't assured
In many stories, sure. The norm? No.
Most people who survived to old age had kids, and those kids lived with them and also had kids. Most households were multigenerational.
Multigenerational households were the norm until recently. The eldest son gradually took over the household and raised his family there, or something like that. Both because it would have been terrible waste to have an entire house for some old people, and because household chores were hard work before modern amenities.
It still happens.
The less wealthy the family, the more likely you'll see it.
So your aggressive taxes will hit those people - displacing additional generations, not just the land-owning-but-otherwise-fairly-poor retiree - before it will hit the stereotypical middle class boomer retiree.
Outside of CA's Prop-13 territory, the multi-generational shabby-old-home-owners pay less taxes currently than their richer neighbors who moved more recently and renovated or expanded. The land value of both is going up, but the improvement value is lower for the poorer family. So now you'll get rid of the improvement value and even it out for both, which will hit the poorer land owners the hardest.
But land is a scarce resource, at least desirable land. Blaming existing houses is exactly what you should do because instead of them you could build higher density.
There are plenty of houses for sale at any time. If building densely is the goal then any one of them can be used to build. Speculators buy houses in hopes that in the future the house next door will sell and then they can combine the lots to a larger building - where this is allowed.
If you're concerned with "it's underutilized because the population density is low and other people need more housing" than it would be much easier and more effective to directly pursue building housing on low-population-density non-residential land. Direct construction driven by the government, vs a multi-step strategy of "make people miserable with tax payments until they sell, hope the people they sell too will be deep-pocketed developers who will build super-high-density stuff instead of just fancier homes for richer families, and hope all this happens quickly."
Cause a tax amount that goes up based on what people with more money than you do on other pieces of property simply gives more power to the wealthy. "Underutilized" as far as tax implications go then means "people with more money than you would like there to be something else there."
And, of course, this already happens with US property taxes in many jurisdictions. And people absolutely hate it.
"Tax incentives to downgrade to a smaller property" sounds great in theory for retirees sitting in huge properties, but I think is limited in practice. The people with the really big places are wealthy and politically influential, so you'll get Prop 13s, or you'll get the recent cuts to property tax in Texas. "Make housing more affordable by cutting the taxes!" And the people impacted by more aggressive taxes will less be the boomers in giant houses and more be the poorer retirees in multi-generational living situations, or ones in fairly small condos.
Im very pro building more homes as well but to call it quick OR easy is wrongheaded.
An LVT is an excellent stopgap and a way to incentivize the creation of higher density housing where it is needed.
How would LVT be easier or quicker? In what states are you going to be able to campaign on this?
"Change commercial and industrial under-utilized areas to allow residential, then aggressively subsidize developers or build directly there" sounds much easier to me than "pass a property tax increase that people will fight tooth and nail." Your LVT is gonna need to come with zoning changes too, after all.
California has Prop 13. Texas lowered property taxes recently. Florida is considering property tax rebates. You're gonna have a hard time convincing people to increase property taxes when housing is expensive already. Big overlap between "property owners" and "highly motivated voters" already.
Incentivizing density in single-family areas is quite hard, I'm not convinced it would do much even if it passed! Even in CA where neighborhoods can now have ADUs, sales prices for 5bd big-as-box-as-possible single family units are generally higher than prices for 3bd or 4bd + an ADU properties with separate units. Because the people who can afford those would rather have a giant-ass house than be a small-time landlord on the side. So maybe you just displace the old retirees and a bunch of high-income DINKS move from their condos to those SFHs. Sales price goes down a bit to compensate for the now-higher tax burden; remains unreachable for many but reachable enough for enough that it doesn't spur massive change.
> We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Some of this is due to tax policy, at least in the US. If you own an oversized house that you’ve had for long enough, then most of the value is a capital gain. If you sell it, you pay taxes on all but $500k of that gain, even if you promptly buy a new, smaller house that costs almost as much. If, instead, you hold the house until you die, the tax is waived completely.
California has additional perverse incentives due to property taxes.
Some states are allowing you to “carry around” your assessed value, perhaps the $500k cap gains exclusion should be made similar - you can carry your basis similar to a 1039 exchange if you sell and rebuy in the same area soon enough.
There used to be a “1034 exchange” in which you exchanged one personal residence for another. I don’t know why it was repealed.
The reusable $500k cap gains exclusion is a huge huge thing, bigger than some realize. (Though it is interesting that you can exclude gains from a house sale but not losses, but you if you own a rental you can claim losses but not exclude gains (though you can 1039).)
The reusable $500k exclusion is great in some markets. In the markets with serious housing cost problems, it’s nowhere near adequate. If you have a house that you’ve owned for 30 years in a market where the cheapest houses cost $3 million, and you want to downsize and move into a nice $2 million condo (sigh), and you live in a high-tax state like CA, you will owe long term capital gains tax on nearly $2.5 million, which comes out to around $750k. Real estate agent fees can easily eat up most of the remaining profit, and you probably end up with much higher HOA fees. And these expenses are basically a complete loss to your heirs. And, in CA, your property taxes increase from near zero to $20k/year.
So you probably don’t make the trade, and those spare bedrooms remain unavailable to anyone who would want them for the rest of your life.
What is a §1039 exchange? That code section was repealed over 30 years ago. Maybe you mean §1031 exchange?
Yeah that’s the one. I get the number wrong all the time (I’m qualified to be an LLM!)
Grandma's problem has been historically solved with a homestead exemption. Of course the value could rise above the exemption, but that just means it should be set high enough to ensure that the proceeds of selling will give Grandma a lot of options.
Well, if grandma's home is surrounded by apartment complexes already, then even without LVT some property developer would definitely make an offer to buy her house for a ton of money, and even throw in some relocation package, for example by gifting her an apartment in one of those neighborhood complexes. Happens in my country all the time - your neighborhood being converted from single family homes to apartment complexes usually means a windfall for you.
This is already part of property tax assessment - I get a separate price estimate for the land and the structure. I also own some undeveloped land and pay property taxes on that. All a LVT does is get rid of the structure part and raise the rate on the land part.
Saying that they assess the value tells me nothing. How, specifically, do they arrive at these assessments.
In my experience there is often an assessment process that is essentially just made up. And when properties do sell, the sale price is always a "surprise" relative to the assessed combined value of the property.
In a sense the question is "What in particular makes you confident that the estimate accurately reflects the price of the land" but in a deeper sense what does the concept of "price of the land" even mean in practical terms? How would you know that the answer is right even if you were omniscient? And given the practical divergence from whatever theoretical standpoint, does then this value serve the same objectives as a "true" LVT?
The assessments are roughly based on the sale price of similar lots and the approximate rebuild value of the structures; usually erring on the low side in my experience (though that is probably more about the direction of the housing market than inherent to the process). I agree there is a qualitative element that strikes me as icky compared to pure quant taxes like wages, but it's already happening so LVT doesn't materially change things.
> How, specifically, do they arrive at these assessments.
So is your argument that you don't understand something and so it must be wrong?
There's an extremely large amount of existing material that is used by property assessors available for you to look up to research how they do this. It is a well-established field.
Property assessments have been done across a huge number of countries for decades probably billions of times at this point. There are probably trillions of dollars of capital that flows according to these assessments.
No, my point is that two things both calling themselves a "land value tax" based on a putative "unimproved land value" can be wildly different in terms of incentives and results based on the specific mechanism used for computing that value, because there is a lack of any sort of objective reality underlying the assumptions that go in to computing that number.
At least for an entire value tax, we have the benchmark of "when a house is sold, how closely does the price hew to the imputed value for tax purposes" to determine if the tax is, in some sense, fair. Some municipalities do better than others by this benchmark, but many of them continue their totally broken methodologies (by the standard of predicting sale prices) for a variety of political and bureaucratic reasons.
For a specific attempted implementation of a land value tax, how do you go about measuring whether you are doing it well? You can sometimes get sparse data points when vacant lots go up for sale, but otherwise you're just benchmarking against other models.
>> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel
There's a decent discussion on that topic here [1], as a starting point. Not saying it's absolutely conclusive, but gives some food for thought. I suppose where determining an accurate value might be most difficult is parcels that rarely turn over, so have little direct or nearby sales data.
[1] https://www.astralcodexten.com/p/does-georgism-work-part-3-c...
It is an interesting discussion, but I don't see anything in there about how to assess the accuracy of any of the methods against some sort of objective truth. I would have to read the underlying papers I think to get at this, but I don't feel a strong need because I feel like the larger epistemic point is unaddressed in any of the summaries.
The closest I saw was one study that compared the model to a human generated data set, which is just kicking the can down the road. The article semi-concludes
> I think it's quite plausible but not a slam dunk. That said, if the objection is, "valuing land separately from improvements is fundamentally impossible, and we can never get better at it, so we shouldn't try," I think that's plainly ruled out.
I do not agree with this assessment -- you can create a bunch of models and show that the models have good intra-model agreement, but the fundamental point has not been touched.
Maybe but at some point, isn't your problem the same valuing a single dollar? We can compare the USD against other fiat currency, but they're all valued against the USD or some other bucket of fiat currencies. Or, you could try to tie the value of the dollar against a bucket of goods, but that's also just moving the goalposts around.
Now we're wandering a bit far afield, but estimates and measurements like this are fine if they are designed for an operational purpose. If I want to know the unimproved value of my land so that I can evaluate whether to buy a similar property and build a similar house on it, then it's fine for me to use whatever estimation protocol is going to help me make a decision. If my protocol is bad then my estimates will be bad then <shrug emoji> it's my problem.
Similarly trying to measure the value of the dollar -- what is the operational purpose of that measurement? This is a real problem in any sort of macroeconomic analysis, and Goodhart's law makes it far far far worse when trying to apply it for practical purposes. Mostly you have to accept that there is not going to be a quantitative metric that captures the underlying squishy concept so better not to think about the problem of, say, inflation, in purely quantitative terms.
No man is an island, unless you're Robinson Crusoe, who was a character in a story.
No parcel of land is an island in this sense, not even an island, because what makes an island is its being independent of a landmass or continental shelf. But in the sense of being moored, all land values are grounded in discrete monetary terms. Even if they are subjectively determined, the land value is an idea space that has limits on what concerns are common, and thus are typically already priced in, and concerns that are less common, and may have already been sold, such as mineral rights.
Unimproved land value is value relative to comparable[0] plots in that same market if possible, because it's meant to be as close to apples-to-apples, all-else-being-equal as it can be. The basis for comparison is whether it's improved or not, as you seem to be specifying, so the relation of land value to improvements seems to be the only independent variable that a potential or actual landowner or anyone else could even manipulate, even in a hypothetical where we aren't bound by real-world factors or limits.
[0] https://en.wikipedia.org/wiki/Comparables
> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
Here is an article arguing that yes, it can be done well enough: https://www.astralcodexten.com/p/does-georgism-work-part-3-c...
Do you believe you can determine the true value of improved land, given how illiquid a market it is? Obviously, the last sale price provides some true information about the value, but it could literally be a decades old number. Do you believe states and municipalities shouldn't update property taxes for a parcel of real estate unless it's sold? I think we've seen from CA's experience with Prop 13 that this creates pretty distortionary incentives.
> Do you believe you can determine the true value of improved land
It is at least theoretically answerable. In the extreme, yes. We can simply force the sale of the land. Practically speaking, no, we cannot answer that question in a deeply illiquid market.
For the unimproved value I'm not certain that there is a consistent and useful theoretical definition that can be translated to practice. Even in the extreme the question of the unimproved value of the land becomes difficult. Were we to raze all improvements and force the sale would that give us an answer? Do we include the cost of razing? What counts an unimproved? Can we leave trees or grass?
To expand on this differently -- if we have a model that produces estimates of the "true value of improved land", then we can validate that model whenever property sells. It would be a slow process but if we have a model and the model parameters capture a significant portion of the variance, then we would expect the model to converge over time.
Nobody does this, of course; it is not usually politically expedient to do so for a number of reasons, not least of which is the predictability of taxes for a given parcel. But at least it is theoretically asymptotically achievable. Not so for unimproved land value because the value you are trying to estimate is not an actual quantity.
Tear downs, sites with existing structures which are demolished to make way for building something else, are sold all the time. The value of the land in those instances is pretty much exactly the purchase price minus the demolition costs.
Real estate is liquid enough. I cannot sell my house this afternoon, so it isn't fully liquid, but a real estate agent can give me a number to list my house at this afternoon and be within a few % of what I get in a few months in most cases so that is close enough to liquid.
>>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
That's a feature not a bug. The whole argument is that it's good to tax wealth that you didn't work for. It's surely more just than taxing labor or the improvement you have made yourself.
>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land"
Which is more of a feature than a bug.
The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money.
The idea mooted in the article that developers would be unwilling to build 20 houses on a plot of land because having 10 houses would jack the LVT up for the other 10 is entirely backward. The value of those houses will be predicated almost entirely on infrastructure (roads, rail, schools, etc.) or services (shops) provided by the community you're paying taxes to.
>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
Did you read the wikipedia page about LVT which describes how? Which part is impossible?
> The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money
Or indeed that a headteacher works long and hard to improve their school and all they get for it is a reduction in their real income because the plot of land their house sits on costs 20% more.
Or the schoolteachers get driven away by a horde of NIMBYs who really don't want to be forced to move because the schools are good...
> all they get for it is a reduction in their real income because the plot of land their house sits on costs 20% more
And, y'know, the value of something they own goes up by 20%...
And that headteacher's salary can increase too because the tax base went up.
No such luck for the poor schoolteacher whose rent went up. All she will contribute to is her landlord's vacation fund.
>Or the schoolteachers get driven away by a horde of NIMBYs
Really??? You think NIMBYs will protest a good school?
If you want NIMBYs go visit San Francisco. Theyve detaxed land there to such an absurd extent that the locals with $1.5 million mortgages will flock to town council meetings to try to declare a launderette historic to prevent it from being turned into apartments (because if any more apartments are built they will go underwater on their absurdly sized mortgage).
> Really??? You think NIMBYs will protest a good school?
I mean NIMBYs protest educational facilities and transit links all the time, even when on paper at least they reap benefits in terms of house price appreciation.
Imagine arguing with a straight face they wouldn't protest such improvements more actively when someone else's kids getting a good education pushes them below the poverty line or forces them to leave the area. If you align any improvements to an area with increases in costs, you get incentives to ensure an area doesn't improve.
> Did you read the wikipedia page about LVT which describes how? Which part is impossible?
The wikipedia article describes some processes, including assessments, regressions, and interpolation from fixed landmarks.
Those are all means of estimating something, which you can call the "unimproved land value" if you are so inclined, but what exactly is the thing that they are estimating? How do you know if they are accurate?
You can implement a framework based on any of those measures, but crucially as above they are not an LVT, they are a "proportionate tax on total value based on extrapolating previous sales minus human estimates of improvement value according to a rubric" for example, and have different advantages and disadvantages than an LVT even theoretically, so every time you make an argument that "LVTs have such-and-such a property" you have to expand the definition of LVT to be the specific case and verify whether that property makes sense in the context of that particular methodology. As a shorthand it becomes useless.
My point is not that there are attempts to have an LVT that are approximations of the ideal reality; my point is that this ideal simply does not exist in any sort of cogent way so you might as well tax based on how much God loves the property or how many potatoes you could grow on the land.
>You can implement a framework based on any of those measures, but crucially as above they are not an LVT, they are a "proportionate tax on total value based on extrapolating previous sales minus human estimates of improvement value according to a rubric"
In other words an accurate imputed land value.
I still dont see a problem with this.
>>>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
I think there's a perfectly fine way; you estimate it the way we currently estimate properly values for tax purposes. If they owner doesn't like that value, you allow them to contest it, and we immediately accept any contested claim and value it as the owner desires, with two small caveats: a) they pay tax on the claimed value, to ensure they don't over value and b) they are required to sell to anyone at claimed value + 10%, to ensure they don't under value.
edit: two points to address some responses. First, it can be claimed land value + assessed/claimed improvement value + 10%, that's fine. Second, I'd only require they sell at that value if the owner contests the original appraisal. If they accept it, nobody can buy their stuff out from under them for any price.
> sell to anyone at claimed value + 10%
But the point of LVT is that it doesn't include the value of the stuff on the land. A house can easily be worth more than 10% of the land it's on, my house is valued at about twice that of the land, or 20x what your plan would require me to accept for the house.
>they are required to sell to anyone at claimed value + 10%
I like the goal here, but I think a less intrusive way to achieve it would be to charge back taxes at the time of a future sale if the sales price is in excess of the valuation. To ensure the back taxes are paid, they would encumber the title of the new owner, so that in practice the buyer would require them to be paid at closing.
What a terrible way to live that would be.
Imagine the uproar when Elon would buy the house of anyone he got into a twitter spat with!
Land value tax is a post-facto claim-jumping wolf in submarine-patented sheepskin.
I lose confidence in the writing early on when it says this: > Instead, the government essentially "seizes" the added value by taxing its rental value away, eliminating the incentive to discover the oil in the first place.
If the tax is 100% of the value, sure. But left unstated is whether taxes are 100% of value. If taxes are 100% of value, there is no incentive to own the land in the first place, my $400,000 house costs me $400,000 in land tax to own... yearly?
It's a very weird system to own anything underneath the land anyway. That's how you get the weird oil race areas where people will be drilling from the same source next to each other. The same goes for the water underneath the land.
In some countries the property rights only go like 10 meters deep and even then if there is a need for plumbing underneath there are exceptions. Maybe the issue then becomes that you're not free to do what you want on your own property but it's not like this is a thing in home owners association single family home areas anyway.
My biggest criticism of LVT is that the name is confusing :)
The idea is that you're taxing 100% of land rents, not 100% of the total value. So if there's a 5% cap rate on your property, and the land value is $300k, then the annual tax bill would be $15k.
Yes, it's a straw man argument. It may be possible to tax the rental value away, but in practice, no jurisdiction levies a rate that high, because the officials that enacted it would be thrown out of office in the next election. It certainly shouldn't be presumed the standard case. It's like saying we shouldn't use electricity because it's possible to be electrocuted.
LVT should be incorporated with an occupancy tax, it's the only fair way to fund government services. If I own a farm, and my neighbor sells their farm to turn into a housing estate with 99 single family homes, then it is fair to say that my land is now more valuable and I should pay more to keep you it, but it isn't fair to say that my taxes should rise to cover half of the local budget just because I own half of the land in region
This is how every argument about LVT goes once people start thinking about the details: They start thinking of various edge cases and exceptions that highlight how it's not as fair as proponents claim, until eventually we're back to the current taxation systems where land value is part of the tax, but other factors are also considered.
An LVT would need relatively few exceptions and rules in order to function well and is unavoidable by design. What we have right now for most taxes is the exact opposite of that - e.g. with sales, income taxes, etc.
Mostly there are just pearl clutchers complaining about how elderly cash poor people sitting in large old houses on expensive land they've lived in for 20 years would be financially nudged into downgrading.
The real roadblock for LVT is not in the slightest bit technical, but simply that it would undermine a lot of privately held oligarchic wealth.
Land owners make up a plurality of voters. In some cases those land owners are retirees living in a house they bought 45 years ago others are people who own 500 houses.
The land value tax “equally” punishes them for their inefficient land usage. But at some point we need to pay our fair share on taxes and the later group hiding behind the former group is how you end up with California’s dumpster fire of a housing crisis.
I agree with this. I really do not know why in the hell one person or entity owning 500 houses wouldn't pay more in taxes for the 500th house than the 1st house. You pay more income tax on the 500,000th dollar than the first dollar. Land is taxed regressively in favor of oligarchs.
First house is claimed as homestead and gains on sale aren't taxed, but the yearly property tax should work similarly.
Where I live homestead status affects yearly taxes as well.
This is a negative for anyone who is renting since they now have to pay more rent to cover those taxes. (taxes set a floor on rent long term, though of course tax is only one factor in rental prices)
"Mostly there are just pearl clutchers complaining about how elderly cash poor people sitting in large old houses on expensive land they've lived in for 20 years would be financially nudged into downgrading"
I wonder if you wouldn't be clutching your pearls if you were being forced (sorry, "financially nudged") out of your home of 20 years?
These cash poor elderly folks aren't exactly "oligarchic".
They can move somewhere cheaper? And then the high value land can be used more productively (e.g. higher density occupancy).
“Beat it, grandma! We have better ideas on how to use the land and house you raised a family in!” is unlikely to be a winning campaign platform. (Thankfully.)
You may be happy running an economy on vibes, but it makes no sense for old people who have a house intended for them and kids close to their work to remain there when their kids have moved out and they've retired. The fact that you can't afford to live somewhere isn't some crime. They can go move somewhere nicer and more suitable for them, freeing up that land for densification (or just proper occupancy).
Why do you think it's up to you to decide what's more suitable for someone else? Where do you get that right?
The problem you're running into is that it doesn't matter if it makes sense to you what these people want to do with their private property. What you think is "proper occupancy" doesn't matter, because we have private property rights.
You advocating for policies that infringe on that right is an attempt to exercise power over these people that you have no right to, whether or not you hide behind some collective sense of what's best.
All my homies like to let perfect be the enemy of the good.
Is forcing grandma out of her house economically the perfect or the good in this story?
Currently renting retirees are forced out already if they dont pay their rent.
Can you confirm that you wish to see this practice completely banned (i.e. no payment of rent) to prove that you're not taking a two faced stance on this issue?
What we are talking about is different - a tax incentive to move to somebody who has benefitted from a large capital gain.
I’m fine with (and in support of) market forces to let grandma decide that it’s worth selling her home; I’m not okay with using government mechanisms with no market reference points to price her out of it. (Raise everyone’s property tax rate and reference appraisals to market sales? Fine. Determine that her specific piece of land is worth $X despite no comparison of open-market land-only transactions? Not fine.)
From that, it’s fair to conclude that I’m ok with renters having to pay market rent, regardless of their age or matriarchal status.
>I’m fine with (and in support of) market forces to let grandma decide that it’s worth selling her home
Ok. Sounds like you are in favor of market forces driving grandma on to the street when she rents but not in favor of market forces driving grandma to sell up and move to a smaller cheaper property.
Maybe the pearl clutching about poor grandmas was a little overstated.
>Determine that her specific piece of land is worth $X despite no comparison of open-market land-only transactions? Not fine.)
LVT is calculated and imputed using open market transactions. If unimproved property values all jump in an area thats coz the land value went up.
I’m in favor of market forces in both cases.
Show me a way that LVT can applied referencing open market transactions for unimproved land in a developed area and I’m interested to learn more about it.
Grandma can decide to sell her house on the market if the property taxes get too high. That’s good. She shouldn’t be able to be targeted by the city for her land value alone increasing despite no or weak supporting comps.
LVT is theoretically good. My problems with it are practical ones.
It would be the thing keeping a good system from being perfect, I believe. Are you not familiar with the idiom?
What a lot of jurisdiction do to deal with this situation is to allow elderly folks to accrue what is essentially a lien on their house for the property taxes going up more than a certain amount.
This way these folks don't have to pay much more than before, can stay in their house and the county gets its share when these people die or move out.
In this scenario your property value would go up and with higher taxes you'd be incentivized to sell for a profit and move your farm farther away in a different zoning.
The incentives you've presented are correct. However, my friends from rural areas always complain about rich outsiders moving in, buying everyone else out, and raising the cost of living. If LVT is just a way to "[incentivize farmers] to sell for a profit", why would people in these areas support LVT? I'm afraid it would just turn into another partisan issue, regardless of merits. And I like LVT!
Perhaps a solution is to create "LVT Zones" in metro areas, and perhaps replace current residential / commercial / agriculture / industrial zoning with them?
And LVT that replaces zoning basically just lets the highest bidder do whatever they want with the land. An LVT that augments zoning could perhaps be tenable but I would argue that in VHCOL areas there's already something of an LVT in place. My SFH in San Jose is assessed as having equal value for the 8800sqft as it is for the house built on it. What I wonder is how the actuaries and policy makers responsible for assessing property values for county taxation actually do that, and how much of the formula is already based on land value.
Let's be real: if this scenario unfolded today, your land would be worth more as housing/infrastructure/commercial/etc. than as farmland, some real estate developer would buy it from you, and you'd make a lot of money without having to do anything. If there was a 75% LVT then you'd just make less money.
The reason I brought up this argument is because this exact scenario is happening all over the UK and Ireland right now. One of the houses my wife and I looked at purchasing was built about 20 minutes outside Belfast on old farmland that was converted into a new housing estate. The farms surrounding this housing estate have been incorporated into a new village.
Isn't this covered by zoning? But it also just proves a point that you can't smart regulate the market to do everything. Sometimes communities just have to make decisions about what they want the land to be used for and create the according rules and do the investment themselves.
Isn't this case just revealing the opportunity cost of keeping the land as a farm in that location? For example, what incentive is there to buy an acre of downtown Miami and convert it to farm land? Should we lower that acre's property tax now?
This goes back to my top-level comment: the assessment of your property should not be based on sales of nearby property but on observed rental values. Just because your neighbor has sold their plot and the new owner has the intent to build 99 houses on is so far inconsequential ... we have yet to observe any actual rent increases and likely will not until those houses are actually constructed and rented/sold themselves. Only then can we accurately observe the potential rental value of your adjacent land.
It's a good point. Usually farms are on land classified as agricultural and residential buildings are on residential land. It's easy to design a system that values residential land higher (because it's in fact more valuable if you can build residences on it). You wouldn't pay half the taxes until you convert it to residential at which point you should in fact be paying half the LVT (maybe with a few years leeway).
Why would the cost of local services be related to the tax on the value of the land?
Would it be even more fair to assess taxes based on services allocated?
What's the societal value in trying to financially engineer land development? Is it to better utilize existing infrastructure? Charge each property proportionally for the road system and fallow land will naturally be developed to handle the taxes.
Property taxes are attractive because land doesn't move (unlike other forms of wealth) and it's easy to account for by tax collectors. There's also zero dead weight loss as you can't create more land. Taxes on land improvements are unattractive because they disincentivize owners from investing in their property. This leaves us with taxes on unimproved land being a very attractive option funding the government.
Good overview. What's the imperative for a government to incentivize owners to invest in their property? Seems like it's fine if the owner invests in their property or not.
The imperative for the government is to reduce the deadweight loss of under-improved land. Whether or not the owner chooses to improve should be their choice, but there is an opportunity cost to not improving.
Absent a LVT, that opportunity cost is mostly born by the people who don't own the land, i.e. the coffee shop that _could_ have been there instead of whatever lower value use is there now. With a LVT, that opportunity cost falls more on the person who owns the land, i.e. the owner wants to keep their SFH in the urban neighborhood, but now pays a higher tax which reflects that under-improvement.
Thanks for using that term "deadweight loss". That gives me a concept to learn more about.
It makes GDP go up
> ... These assessments would require intricate and subjective valuations that are very difficult to quantify accurately.
I continue to believe that "full cash value" assessments which try to ascertain the market purchase price of real estate are very foolish. And there are so many inputs and methods of formulating an assessment. What all of them have in common though, is that they consider the rental value of the property. It would be so much simpler if the tax was only assessed on the rental value. It eliminates things that effect the sale price estimates like interest rates, subjective risk tolerances, speculative premiums, and even the tax itself. The tax rate on the rental value would of course be much higher than the tax rate on the purchase price (25% compared to 1% for example) but it's a much more stable assessment with a lot more reliable data backing it up.
disclosure: I am a Georgist and former president of Common Ground California.
I found some more to nitpick, from the section on "LVT implicitly taxes improvements on nearby land":
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
This analysis misses the point. It doesn't make development less financially appealing, it makes owning land you're not planning on using any time soon less appealing. It disrupts (in a good way) the current land development model where one entity buys a large tract of land and develops and sells it off one piece at a time. That's a model based on land speculation. They may see it as the development of the first 20% of land increases the value of the remaining 80% (which they feel justified in profiting from) but that is neither guaranteed nor is it an accurate description of what causes the remaining 80% of land to increase in value. It's more accurate to say that the agglomeration effects of the people who moved into that first 20% (and their interaction with the existing local economy) are more responsible for it.
>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves.
LVT is for building property or occupying land. Mineral rights are under many if not most legal systems treated separately from land ownership (e.g. they are auctioned off) because unlike land, oil wells eventually run dry.
This does not seem like an honest criticism of LVT, because it deliberately blurs land and mineral rights.
>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
That's the kind of market discipline we are currently lacking which the author of this piece apparently does not want.
On the other hand, a developer who builds 10 houses on one plot of land is not going to magically make 10 houses on another plot of land double in price.
>Even in its simplest "naive" form, the LVT has a narrow tax base. The reality is that the vast majority of global wealth is created through human labor and innovation
This last criticism is A) wrong and B) only applies to single taxers, not proponents of LVT.
>>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
>A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
You're missing the point entirely. When your small business, single family home, little ranch, whatever, becomes in increasing proximity to improvements your tax goes up. If you own a big ranch and decide to split some of it off, build housing or whatever and sell, then your tax on everything goes up per LVT.
and?
when the value of your land goes up it is because it brings benefits. you can capitalize upon those benefits or you can sell up.
neither are bad options.
How is this relevant to HN at all outside of being written by "rationalists" that are predominately techies?
I see Georgism and LVT brought up on HN fairly frequently, at least a few times a year. It's a niche economic outlook and set of policy recommendations that many in HN seem to be intrigued by. As someone else pointed out, that definitionally makes it HN material.
> On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
- HN News Guidelines
I would counter with:
> Off-Topic: Most stories about politics, or crime, or sports, or celebrities, unless they're evidence of some interesting new phenomenon
This is a story about politics, not related to tech in any way, and is not some new phenomenon
> it inherently discourages landowners from searching for new and innovative uses for their land
That seems like a feature to me, as long as the tax enough less than the increased value of the land, and using up a funite resource, lime oil, correspondingly decreases the evaluated value of the land. If you discover oil on your land, I think you should be taxed more. And I think that adding a reasonable dicencentive to things like drilling for oil isn't a bad thing.
Also, for non-renewable resources found on a property that are sold, not rented, I think it could make sense to tax them differently, such as based on the sold value, when it is sold, rather than increasing the taxes on the land itself.
> Another issue with the LVT is that it acts as an implicit tax on nearby land development.
This is the case for property taxes, regardless of whether it includes "improvements".
Also, it doesn't remove the incentive. If an improvement on one parcel increases the value of a nearby parcel, that means you can rent or sell that property for more, and the ducentive isn't really any worse than a tax on that increased income being a disencincentive to increase the value of nearby land.
There is a related problem where increased value can result in families no longer being able to afford taxes on their residence. Although its not like gentrification isn't already a problem, and I'm not sure it's any worse than the problems with other tax systems. It could also be combatted somewhat by lower tax rates or deductions on primary residences (possibly with a limit on the area that qualifies).
The first two arguments he makes here miss the point of a LVT entirely
> An LVT discourages searching for new uses of land
> An LVT implicitly taxes improvements to nearby land
If I find oil on my land, or if someone builds a park across the street from me, then I should be taxed more. The land is more valuable to me! At a 100% LVT I essentially break even. Anything less then that, and I still come out on top.
The only valid arguments in here are the last two. If people buy a piece of property with certain assumptions and the government turns around implements a 100% LVT, then I can understand why they would be upset.
So sure, there are some practical considerations to implementing a 100% LVT immediately tomorrow with no exemptions, and it probably wouldn't raise enough revenue to eliminate all other taxes. But the government could still raise a ton of tax revenue with minimal deadweight loss by phasing in a 75% LVT over 30 years with a handful of common sense exemptions.
That's assuming you actually own the mineral rights, which are not necessarily the same as the land ownership itself. These are quite often separated and held by different entities. In practice, the extraction of oil under a parcel of land has almost no relation to what the land is being used for.
Sure, so I guess if the owner of the land doesn't own the mineral rights then they have no incentive to look for oil with or without a LVT.
The author's assertion was that LVT disincentivizes one from using the land productively, and used oil specifically as an example. This example is basically completely divorced from the realities of oil extraction. Nevermind that nobody is building wells in the middle of cities, where LVT matters.
So, that argument seems to rely on a contrived, unrealistic example. I can't see how LVT disincentivizes productive use of lands.
This stems from the fact that if a landowner successfully discovers a valuable resource or identifies a creative way to utilize their land more productively, the government will increase their tax burden accordingly.
One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.
As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.
To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.
W/r/t oil: suppose before you survey there is a 25% chance that there is oil under your property. So the unimproved value of your land is surface_value + 0.25 * oil. After you drill, 75% of the time you receive a reduction in value of 0.25 since you have good evidence of the absence of reserves, 25% of the time you increase the value by 0.75. It seems to me that the LVT has no impact at all on the expected value of surveying for oil.
Of course if you believe the estimate to be incorrect, the incentives can shift, and there is some opportunity for mafiscence by falsely showing the 'absence' of oil that you know exists for a temporary tax break.
@patio11's podcast, Complex Systems has two great episodes that discuss much of the context about land value tax and property tax systems in general (from a US perspective).
How we tax property, with Lars Doucet: https://www.complexsystemspodcast.com/episodes/property-asse...
Tax the dirt, with Lars Doucet & Greg Miller: https://www.complexsystemspodcast.com/episodes/tax-the-dirt-...
every tax discussion i've ever read treats taxes in the abstract without spending. The assumption is "how do we raise as much tax as possible".
When you actually learn about public agency spending, you'll see that 2/3 of it is completely unnecessary.
I'm not saying companies are any better, but they generally don't have the mandate to take your house from you if you are not a customer.
Focus on the spending first, and make sure it's essential. Then figure out how to fund it.
If you can get spending scope reduced by 90% (where it was before FDR) , you'll find the tax situation solves itself. You won't have to invent taxes on every activity.
I think I disagree with this?
From pragmatic standpoint there needs to be some spending and it obviously makes sense to think about how best to raise revenue.
Does that make sense?
if spending is 90% lower than today, coming up with revenue is trivial.
Until 16th amendment, Federal revenue was from excise tax. Income, fees, capital gains were not necessary.
So degree matters. Of course you're going to have to keep inventing new tax revenue streams if spending is 6-10x more than it should be.
We may keep the property tax, but talking about tax revenue absent of spending is like talking about how to deal with a headache caused by a nail in the head, without addressing the nail.
Sounds like we agree. Parent said this:
> Focus on the spending first, and make sure it's essential. Then figure out how to fund it.
Which is what I disagreed with. There is no "sequence" to this where one comes first. You need to look at both in parallel. Its entirely possible that one could be more troublesome than another, but you still need to look at both!
sure but here's what happens in practice. The agency raises the revenue, and raises the spending to meet the new revenue.
I'll give an example. My local city proposed creating a separate taxing authority for the fire department . The new authority would get an additional share of the property tax. Meanwhile the city would keep the share they were getting beforehand, and spend it on other things.
My point is that abstract / theoretical approaches to taxing don't account for the human factor. The human factor is that people just want to make their job easy, and if they get more money, they will spend it.
As though every single dollar of public spending didn't return about 30x in ultimate value vs the best you can get from those same dollars in your pocket, even with the waste.
As though everyone agrees which bits are even the waste.
What research did you have in mind that would suggest anything like a 30X fiscal multiplier?
Public spending efficiency is generally understood to range not that far from 1.00, depending on current economic conditions: Better in a recession, worse in an expansion.
You should always be wary of arguments from people who name themselves "The correct people". Less wrong, and the "rationalists" generally, are engaged in magical cult-like thinking.
The rat-adjacent types are not a monolith and are not of the same worldview. The distribution between left and right, politically, approximately matches the general population. What they're about is approaching the best data we have in good faith and being open to updating perspectives.
Sounds like you wouldn't fit in.
You can try to be rational without naming yourself a "rationalist".
If only there was a coinage for "trying to be rational" that any sane person would use if they ascribe to the idea.
Rationality (not "rationalism") does not present anything like such a mindset. The entire point of the name "less wrong" is that one is still wrong.
In fact commenters on Less Wrong are often _more wrong_!
The name Less Wrong was at least intended to be aspirational. From the about page:
> LessWrong is an online forum and community dedicated to improving human reasoning and decision-making.
The goal is to be less wrong. It isn't intended as a claim that Yudkowksy is less wrong than others.
Whether that actually reflects the attitudes of members of those communities today is doubtful, though.
All human epistemology is trying to be "less wrong", just like all cereal is "all natural". The rationalists aren't even the first to recognize the value of printing it on the box.
So they're unoriginal? Okay. What's your point?
You honestly have to be really trying to misunderstand me that hard.
Could you go ahead and cite an example of such thinking from this article?
Sure, but my point stands regardless.
All taxes that generate revenue are taxes on good things. This is a fundamental rule of economics. Using this as an argument against LVT just means that you are opposed to taxation generally as a way to generate revenue. This essay doesn't defend that position though, because it is engaged in magical thinking.
Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
> All taxes that generate revenue are taxes on good things
I think a majority would agree tobacco is not a good thing and yet we tax it.
taxing tobacco is not to generate revenue. That is, in fact, exactly the point. Taxing tobacco is to discourage tobacco use. The point is to have close to zero tobacco use, which results in close to zero revenue.
Taxing tobacco is for both purposes.
The author is quite clear that they are just pointing out that the LVT has some downsides, and are not trying to make any case about its overall value. It's good for LVT supporters to understand the counterarguments and be able to weigh them and rebut them (or change their mind! but hopefully not in this case because the counterarguments are very weak).
I don't understand your "fundamental rule of economics" claim - carbon taxes are a clear counterexample, I would think.
If the tax equals the externalized costs of burning carbon, and people continue to burn carbon, burning carbon is "good".
The whole point is to tax the bad externality rather than tax the good thing (energy production, or whatever). That doesn't make carbon production good, it just means that you aren't taxing the externality enough to discourage the underlying good activity.
That is an absolutely hilarious argument, made even funnier by accusing other people of magical thinking. I don't even know where to start with it, "All taxes that generate revenue are taxes on good things"? A fundamental rule of economics? Is your argument that LVT generates revenue therefore you can't criticize that it could suppress development in some cases?
>Is your argument that LVT generates revenue therefore you can't criticize that it could suppress development in some cases?
No.
> Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
It seems like you are equating self-labeling of this sort with claiming to be a paragon of that ideology.
Do you think someone who labels themselves as "Christian" inherently believes they are pure of soul and perfect, and sins less than non-Christians? Certainly there are plenty of self-righteous people out there, but "Christian" does not imply "Christ-like".
The same goes for rationalists - "rationalist" does not imply "rational". I don't know the proportion of self-described rationalists that would consider themselves truly rational, but I think a good portion of them would consider anyone who made that claim to be full of crap. The whole movement is predicated on studying and maintaining awareness of the mountains of cognitive bias humans carry. If you can study that and still think you are ultra-rational, you've got a special kind of hubris.
>Do you think someone who labels themselves as "Christian" inherently believes they are pure of soul and perfect, and sins less than non-Christians?
I have known a lot of Christians. I can answer with an unequivocal yes.
C'mon, that's obviously generalizing and unfair.
Your core stance really just seems to be "people suck and groups of people also suck".
> Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
Consider, are you exceptional in the sense that you would not place yourself in any camp whatsoever, ascribe to any ideology? You're neither left or right? Actions dictate identity.
Having an interest in something is not the same as having a superiority complex.
If your name for your "ideology" is "better than yours", then yes, I consider this to be a superiority complex.
That is a projection. The right analogy would be "trying to be better". If your ideology was about helping others does that necessitate it implies those in the outgroup do not help others?
At this point I think you're trolling.
> Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
This frankly comes across as projection.
>projection
Please elaborate. I do not know what you could possibly mean.
person 1: "i am a rational person."
person 2: "how dare you call me an irrational person!"
What do you imagine the purpose of naming the movement "pro-life" to be?
https://en.m.wikipedia.org/wiki/Georgism
Do LVT proponents believe economic activity that requires minimal land ownership relative to the profit should be untaxed?
E.g.
* Offshore oil drilling
* Tech companies
* Fully remote CPAs
* Electricians
* etc
It seems very weird large sections of the economy become virtually untaxed, requiring a MASSIVE tax burden on the others. The simplicity of the LVT plan kinda hides that it implies a huge restructuring of the economy.
Proponents of the Land Value Tax as a single tax would probably say that those activities should be untaxed.
Proponents of the Land Value Tax, but not as a single tax would probably be more mixed.
Restructuring of the economy isn't a hidden part of the Land Value Tax, it's the point.
I don't think very many LVT supporters think it should be the sole or even primary source of taxation. The main point I see being made is that property taxes as designed today discourage development, whereas a LVT would encourage it. Property taxes are only about 10% of overall US taxation, and a switch to LVT would have its intended effect even if they became a smaller piece of the pie.
The LVT would get rolled into rent, which would propagate through the economy. I think the chief effect of a fixed LVT would be discouraging passive land investment (since you've got to collect rent to pay your LVT). IMO, while this might be beneficial for increasing the housing supply, a progressive LVT would be even better. A progressive LVT would put larger landowners at a disadvantage in the rental market, because their tax would be higher on an equivalent parcel than a smaller landowner. By ensuring a larger number of smaller landlords, I think you'd see a more diverse and competitive rental market.
I think we can't make LVT the only tax. Other good taxes are consumption taxes, pollution taxes, resource usage taxes. You can also add some business revenue taxes like recently popular idea in EU of a digital tax. I would also tax IP protection (if you want to sell your stuff here and have IP/copyright protected we will take % of your sells). I think the worst possible taxes are capital gain tax an corporate income tax. Those should be 0. They only create incentives for various shenanigans and have a lot of other negative consequences.
LVT proponents also typically advocate for pigovian taxes (tax things you want less of to disincentivize it) and taxes on rent-seeking activities. So, offshore drilling would probably be hit with something like a carbon tax (directly or indirectly) and tech companies might get hit with a tax regarding their monopolies or IP. The CPAs and the electricians would get off easy, though.
Georgism holds that productive economic activity gets absorbed into land value.
Georgism was designed in a completely different economy. Google's productive activity has very little to do with the land it owns.
Google's productive activity mostly accrues to NIMBY homeowners in the Bay Area rather than the material living standards of anyone connected with Google.
That statement seems clearly wrong to me. Google's productive activity is benefiting NIMBY homeowners rather than, say, the owners of Alphabet stock? I'm going to need to see some evidence before I believe that.
Copyrights.
Domain names.
Patents.
Huge amounts of data.
Those are the "land" of the modern economy. Land value tax arguably may have made sense for a 19th century economy; I think it's completely missing the point for a 21st century one. Land isn't the major source of wealth any more.
I feel like someone watched a Gundam series (reader's choice!) and saw space colonies and endless space war as aspirational. How the heck are you supposed to assess and collect taxes on O'Neill cylinders or moon bases?
Why are we pretending like LVT doesn't exist already? I pay taxes on my land. Those taxes are calculated based on size and location. The Disney example is particularly egregious. They pay taxes on the land AND the structures they built but the article acts as though they would be disincentivized from building if we _removed_ taxes on the structures? Huh?
The idea is not to disincentivize developing on the land. To me, it only really works when you remove the friction/gaming of all the other taxes and put it all into LVT, but that will never happen of course.
If your land can be treated as an asset, then we don't really have LVT yet. The goal of LVT is to tax land to the point where it is no longer an appreciating asset (and, not too much that it becomes a liability)
Wealth tax on holdings over a billion. Let capital “flight”.
This article is a frustrating read because it appears the author has not researched the history of taxation much before writing it.
It reads like someone saying that cooking with fire is an absurd idea that's never going to work, and we should stick to microwaves.
Again, LVT is one of the oldest and most widely historically practiced forms of tax, through various forms like taking a cut of rice produced through to levying corvee.
Valuation is also a straightforward issue: you have the landowners self-assess value, but that value also acts as an option for the state to buy at that price. This bakes in honesty and market price based accuracy.
As for the "not enough" argument, maybe it's not enough for a government looking to squeeze every last drop and piss it away, which appears the norm sadly. But the point is that all economic activity a state has the right and ability to tax happens on its land, and in the process raises the market value of that land. So all economic output is taxable indirectly via it.
On the claimed disincentive to improve land value, like the oil discovery example: where the value is based on market price, no one is harmed by an increase in their properties value. They can just sell it to an oil developer if they don't want to develop it themselves, and walk away with a fat untaxed capital gain. This is simply a non-issue, on par with someone worrying their salary raise will increase their taxes - missing the point that it's a nice problem to have.
And if they just hated the idea of having more money, they could just self-assess at the old price and have the state take on the burden of developing it if they think it's worth more.
The only actual issue and complexity with LVT is a political one - how to move from the current farce to that. Similar issue with gold standard etc. These systems are tried and true and obviously better, but not to certain powerful minority interests, who benefit from farces continuing.
The most obvious argument for me is that I don't even think that developing land as much as possible should be a desired outcome. I'd rather have some billionaire sitting on a huge plot of wilderness than turn it into another shopping center.
Many states have adopted various sorts of watershed protection or conservation laws that make many areas undevelopable in any profitable way. The cost of the hoops one must jump through to prove some small project will not run afoul of these laws is a non starter....unless the developer is professional capital fueled operation looking to put in a chain store, strip mall or 5-over-N. That drags up adjacent values enough that the suburban subdivision developers show up and start buying the farms, etc, etc.
So in a perverse sort of way you basically get what you want, wide swaths of low/no development wilderness, but it's paid for by the everyman not the billionares.
I'd rather the plot be a national park be yes, no need to pave the entire country in the name of efficiency.
They tried a land value tax in Hawaii. The results are described in the lyrics of the Joni Mitchell song "Big Yellow Taxi":
"They paved paradise
And put up a parking lot"
> I'd rather have some billionaire sitting on a huge plot of wilderness
I'd rather not have a billionaire sitting on a huge plot of land. If we as a society want that wilderness to be preserved, it should be a state park or national park, that should be relinquished to our government.
Happy to answer anyone's questions on LVT if they have them!
It sort of breaks your head the first time you try to think about it because we are just not used to thinking about supply and demand in cases where supply is actually fixed, and that's where all the magic benefits come from. Happy to answer any questions people have.
Full disclosure though I'm a huge proponent!
As with any policy, there are some advantages and disadvantages but I think on the whole LVT is probably the single best policy change we could make as a society.
How would you respond to the critique that it makes that tax associated with a property dependent on the improvements to adjacent properties? I could see a situation where a single family home owner would deliberately oppose improvements (i.e. parks/bike lanes), because their derived utility from those improvements is less than the potential increase in taxes.
I would say that this is largely a feature not a bug :)
Let's look at what the author said about this:
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
> This creates a counterproductive dynamic: developers may hesitate to improve their land or invest in new projects because they know that any improvements will increase their tax burden on adjacent parcels.
This is exactly correct analysis, but this is good not bad! LVT is preventing hoarding land during development. Of course someone who acts according to the old system's incentives will lose in that model!
First, let's talk about why the existing model is bad though: right now, developers make a huge part of their money not directly from actually building, but from the increase in the land value that happens during construction. This means that developers need to acquire huge sections of land and then only build one house at a time. This is insanely inefficient! It literally prevents anyone else from building in parallel or at lower cost! There is zero competition!
In a world with LVT, a developer would be incentivized to acquire and start work in smaller increments, leaving the door open top more competition and for more companies to enter the space - lowering costs and increasing the speed of construction.
Wouldn't this same argument suggest nobody would want to increase their income because it will increase the amount of income tax they pay?
The property you own is going up in value! That would almost certainly outweigh the increase in LVT.
Under an LVT, almost all of the value of the surrounding improvements would be considered part of your land value, since even an empty lot in their vicinity would benefit from the surrounding improvements. Thus, a 100% LVT would capture 100% of the value someone might gain from the presence of those surrounding improvements. In the worst case, you personally benefit far less from those improvements than a typical renter would (e.g., bike lanes if you don't own a bike), so their presence is a net negative to you.
That's why income taxes are less than 100%. But some people advocate for a 100% LVT very seriously.
Sure, but
A) that's an argument against a 100% LVT, not against LVT. Some people (communists) also advocate very seriously for what is effectively a 100% income tax. That doesn't provide a good argument against income tax in general.
B) a 100% LVT would theoretically be equal to the rental value of the property each year. You as the owner would still be seeing your net worth increase. It's not like you're paying the entire value of the land as a tax each year. Such a scheme would essentially just undo all real property ownership.
Not a very convincing article in my view.
>>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves. If they do find oil, the value of their land would skyrocket because the presence of oil dramatically increases its economic potential.
Is the author aware that in many countries the owner of the land doesn't own the resources if they are discovered there? Is the author seriously claiming discovering oil is not profitable under LVT? Does he prefer making people who happen to stumble on oil not pay % of the value of it as tax? (and thus presumably prefers taxing other things). It seems so unlikely to me that someone reasonable would make that argument that I have trouble taking it seriously.
>>An LVT implicitly taxes improvements to nearby land
That's one of the two major points behind it: tax wealth that you got without building it yourself. In other words it limits land speculation.
>>An LVT is unlikely to replace many existing taxes
The argument the author is making here ("government will not get rid of other taxes") applies to any tax discussion and kills it before it even starts.
>>Another major issue is that a full or near-full land value tax would likely establish a troubling precedent by signaling that the government has the appetite to effectively confiscate an additional category of assets that people have already acquired long ago through their labor and purchases.
Yeah but we need to tax something. The alternative is to tax the very labor which must certainly be worse. Land owners are benefiting from work done by others without contributing to it and thus should be taxes accordingly.
>>The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%)
Amazing, 100% rate for LVT doesn't make sense!
>>For instance, individuals buy stocks, businesses invest in capital goods like machinery, and developers improve real estate—all with the expectation that they will retain most of the value of their assets and any future returns from them. This confidence in the protection of property rights encourages entrepreneurship, innovation, and economic growth.
And yet all of those are taxed in the current system!
The author seems to be assuming the proposed LVT rates are very high (when in practice they would be in low single digits). Remove that assumption and the whole article makes no sense at all.
"Ratinalists" are basically libertarians that are coy about it.
They're more culty than libertarians.
They're a lot like the modern-day version of Ayn Rand's Objectivism, which is also libertarian. I remember people getting involved in that at university in the '80s and thinking how cult-like it all was - people feeling they had "found the truth" and wanting to recruit new members.
Rationalism seems to be playing a similar role for a certain type of person in Silicon Valley today, fulfilling an emotional/religious need.
Another way to look at it: Scientology, but replace Xenu with Yudkowsky and volcanoes with Harry Potter, or something.
It will never cease to amuse me that people calling themselves "rationalists" wound up recreating Pascal's Wager from first principles, just with time travelling robots, and drove themselves to sometimes murderous insanity over it. And that their Bible is essentially a Harry Potter fanfic.
These are the dipshits conspiring to shape our future, control our destiny and create the Machine God in their image. They make the billionaires messing around the big owl at Bohemian Grove look positively tame and... rational.
In my more benevolent moments, despite not being religious, I take a Jesus-like attitude: "Forgive them, they know not what they do."
It all seems to have been a very predictable consequence of the de-emphasis of teaching any humanities at all in favor of STEM uber alles.
It's like the line from "Kung Pow: Enter the Fist": "Pay no attention to Wimp Lo, we purposely trained him wrong... as a joke."
Except it wasn't a joke, it was an economic strategy.
> time traveling robots
Won't someone think of the children, I mean, future simulated me?
You don't know what you're talking about. There are just as many socialists among them.
See also, perhaps, Killer Arguments Against Land Value Tax... Not: https://kaalvtn.blogspot.com/p/index.html
LVT is envy written into law — "how dare someone use what belongs to them in a way which doesn't benefit me?!?", whether individuals or groups are speaking. It also puts a wonderful tool into the hands of decision-makers to reward friends & punish enemies. No.
land value tax is a regressive tax on middle class homeowners that would ultimately benefit the wealthy. bc middle class single family homeowners would not be able to afford the tax increase or afford the construction to fully utilize the property, which would force them to sell to investors who could afford it.
terrible idea.
not to mention the political debates/decisions over what constitutes "fully utilized". what about public parks? urban agriculture? so many exceptions.
this would be a nightmare policy to retrofit. maybe a good idea if we had started there first, but we didn't.
it's also an ignorant diagnosis of the issue. land values and speculation is not the issue in my location (burlington, vermont) where we have a housing crisis. there are not many vacant lots (i'm guessing maybe a dozen in the entire municipality).
it's just an overly simplified solution to a complex problem.
here is what i believe to be the superior solution: https://www.npr.org/2024/10/07/nx-s1-5119633/housing-crisis-...
> land value tax is a regressive tax on middle class homeowner
Not if you make the tax progressive. The first 200K could be tax free, for example. Primary residences pay a lower % of the value than 2nd and 3rd homes. I bet there are a ton empty vacation homes in Vermont. It can be applied gradually not to shock the system.
> Primary residences pay a lower % of the value than 2nd and 3rd homes.
I think it's funny how every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions, which starts to defeat the claimed purpose of a Land Value Tax.
LVT is a concept that sounds amazing and novel in a vacuum, but starts to look less ideal in the real world. The people who think about it enough start to include factors like structure value and different exceptions for how the land is being used, which starts to look a lot like existing tax code in most places.
> which starts to defeat the claimed purpose of a Land Value Tax.
What do you think others claim the purpose of an LVT is?
> every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions
This argument seems only to follow from a belief that carving exceptions out of policy here is either: inherently bad, lends to a slippery slope towards badness, or is fundamentally incompatible with the professed aims of an LVT (hence my asking).
I don't believe any of those are true, so this sounds to me an unfair indictment against the otherwise legitimate strategy of "keep what's good; change what's bad", which is practical and works for other policy all the time. While I'd scorn the complexity of our current tax code, I wouldn't do so on principle of exemptions being bad, but rather that we've made poor tradeoffs or struck a bad balance.
LVT sounds really smart when you exclusively talk about car parks in downtown NYC or whatever, it's not actually a good tax framework as soon as the conversation shifts from talking about low perceived social value commercial endeavors.
That would somewhat defeat the purpose of the LVT. The point is to force landowners to develop their land. A "fix" would be to make access to capital easier.
Optimum development in many areas isn't necessarily a large mid-rise or high-rise. For most areas, the maximum that the roads and other utilities could support would be dense townhomes, triplexes or quadplexes. Outside of the very highest-demand areas, the LVT would mainly encourage land owners to build additional units on under-utilized square footage or build up a bit. Increasing housing in an area necessarily requires access to capital - so that's what should be provided.
It's not perfectly fair to everyone; it would enrich current landowners. But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.
> But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.
how does this create affordable housing? taxes are only one piece of why housing is so expensive. the landowners would need a return on their investment, which they would get by raising rent. this is the core problem imo -- costs for construction and labor and permitting and taxes requiring higher rent in order to make the investment worthwhile.
the offset of lower taxes will absolutely not pay for the cost to "fully utilize" the property.
The theory here is that people who aren't getting "enough value" out of the land will be forced to sell to developers who will turn them into, among other things, houses.
yes i know, that is the "theory" in a logical vacuum. that just reinforces my original point that it will hurt the middle class and only benefit wealthy people. especially since the tax would make the land cheaper (in LVT theory), so when you are forced to sell it you're gonna have to sell at a lower price than you'd like (that is the entire logic of LVT: make land cheaper to encourage more building).
you can't just wave a wand to build housing if the taxes change to LVT. we all know that developers don't build affordable housing. the margins are much more attractive to build luxury housing...it's the incentive structure. housing is expensive to build, and those investors will require an ROI.
terrible idea! the more you look at it, the worse and worse it sounds.
> The point is to force landowners to develop their land.
The point is to ensure landowners don't sit on land. If taxes go up on your vacation home that you spend two weeks a year in, you will be incentivized to sell it or rent it out more. Both of which benefits the public at large. Not to mention it is a fairer tax than an income tax or wealth tax.
most of the vacation homes in vermont are in rural areas. so they wouldn't get penalized by the tax if the purpose of LVT is to increase taxes in urban areas.
I don’t think a land value tax is a good idea, because I’ve never heard a satisfactory way to objectively value the land as-if unimproved.
But making you and I pay a different amount of LVT on the same exact piece of land definitely makes it a worse idea in my view.
Afaict, Prop 13 does this in California. Property tax is based on assessed value, and that assessed value isn't just for the improvements, but also the underlying land. So the fact that I pay about $20k/yr in property tax and my back-fence neighbor pays about $3500 (because we purchased in 2016 and they inherited the 1954 home from original owner parents) must indicate that it's not just the improvements that are covered by Prop 13. I had never thought about this before, but at least in California a potential compromise around LVT would be the modify Prop 13 to allow land values to appreciate at market rates while keeping appreciating of improvements capped.
There is a market for land plus improvements. What you actually paid in 2016 is presumably the market value of that combination. You probably referred to other similar parcels that had recently sold when contemplating your offer as well.
It’s trying to figure out “what is the land alone under these improvements worth?” that has no market signal to use as a reference (or an extremely weak signal in areas where unimproved lots do sell on the open market).
If you paid $1.5M in 2016, was the land alone $500K, $1M, or $1.25M? If you disagreed with the city’s assessment of just your land, how would you find comps to argue your case?
I think you're missing my specific point that this is a Prop 13 issue.
My land is valued at X and my neighbor's identical rectangular plot is valued at Y, why should that be the case if the land's objective value is identical (which it is, and neither X nor Y are close to current market value Z because Prop 13 caps appreciation at 2%/yr).
No land value or improvements are revalued at market rate until they're sold, obviously, but two things are also true: 1) tax assessors almost never lower assessment values (anywhere), and 2) assessed values are completely detached from reality of the majority of properties in the state of California because of Prop 13.
To answer your question, if I wanted to argue that the assessment of my land is too high, I'd likely not have a case because the assessor could just look at any comps that trades hands in the last few years and those would show assessments far higher than mine. But I absolutely could show that the assessment of others' properties are "too low" relative to my own (or mine to current) just by similarly looking back in time at homes that haven't traded hands in decades, if ever.
I originally misread your “Prop 13 does this” to mean the thing in the first paragraph, not the thing in the second paragraph.
It’s not application of the tax but (relatively) sudden increases in land value that would price out force out neighborhoods
like i said, terrible idea with a million exceptions
Yeah, no LVT proponent has successfully explained to me how it does not cause the erasure of urban or even suburban green spaces, be they public parks, private parks, gardens, etc. If a park increases neighboring land values, then the taxes incurred by the park go up without recompense to the owner (assuming the park is not held by the government).
How many private parks are there? Pretty much every one I've been to has been government run, other than small outdoor spaces next to private buildings and large pay for admission gardens that are usually way out in the boonies on the grounds of an old plantation or manor.
I can't think of how a private, but still public-access, park survives without a rich benefactor eating the losses, even today.
all of my favorite hiking areas in the birmingham, alabama area were privately owned. churches have public areas that you can enjoy as a non-member of the church. i'm sure we could think of more
edit: oh i just realized a huge one in my daily life: the intervale in burlington is owned by the intervale center but the community garden is managed by the city's parks & rec. also there are a ton of public trails on that private property.
In New York, you sometimes find unofficial community parks / third spaces on unused plots of land which for whatever reason (such as a strange shape) are difficult to develop. These are maintained by enthusiastic local residents, and the land owners turn a blind eye to it as long as there are no complaints.
If LVT is implemented, land owners will have a financial incentive to sell off the plots, and the spaces will be gone.
What incentive to sell off the plot does LVT create that doesn't already exist, maybe with a marginally lower degree? I'm guessing the reason they can't sell a tiny weirdly shaped lot is that no one wants it. If they didn't want it and they could sell it, they already have ample financial incentive to sell.
Sell them to who? How much would someone pay for land that's difficult to develop?
If someone else can develop the land, why doesn't the current land owner
Around here, there are a bunch of private parks in that you pay a fee to enter the park or you can purchase a membership. The fee is minimal and mostly just serves to maintain the park. These are privately held parks, too, not owned by local or state government.
As far as I am aware, they are able to survive on their membership or visitor fees. But major improvements do take larger donation.
Private park, where you can’t even walk without paying an upright fee? Sounds like dystopian late stage capitalism. If it’s a well maintained garden I understand, but a sqare lawn should be free put your foot on.
I think you might be slightly confused. Wouldn't the issue be not that the parks themselves are expensive to the owner tax (not only is thr landscaping not that expensive, as LVT excludes your own improvements), but instead that they are effectively discouraged by increasing the tax on everyone adjacent and thus peversely encouraging NIMBYism of towards a common good by imposing a negative externality which does not exist otherwise? The issue wouldn’t be that it would add a tax burden upon the park owner, but that it turns operating a common good into a 'sadistic' act that pushes costs onto others.
A LVT could thus accidentally wind up like a window tax in that it could wind up discouraging efficient improvements to human conditions out of a misguided attempt at improving perceived fairness.
I guess if everywhere's zoned for max density. If it's zoned as a public park, so no ability to develop it and generate revenue, or close it off for private use, then its rated value would be close to zero. Possibly negative if ownership imposes some maintenance obligations on the owner.
There will be more land for public parks if land use is more efficient due to a LVT
Parks built for the public benefit as 501c3 don’t pay property taxes.
I'm not really sure that's a complete solution. Couldn't you just spin up a 501 c3 org to hold onto properties until you want to do something with them, bypassing the LVT?
I wasn't suggesting a solution. I was just describing it as it is today. Presumably if you don't show 501c3 activities, you'd lose the status.
Any LVT would just involve scaling up land portion and setting building portion to zero in our current regimen. It wouldn't require anything novel. The 501c3 exemption is not something new I'm suggesting.
> taxes incurred by the park go up without recompense to the owner
The value of the park is going up, is that not recompense?
The bottom 50% in terms of wealth in the US only own 10% of the land. How on earth is this a regressive tax? The top 10% own over 40% of the land. https://fred.stlouisfed.org/graph/?g=1KsUt
how much of US land is housing? probably much less than 10%
edit: yep https://www.visualcapitalist.com/america-land-use/
amusing attempt at using data for an argument
What is the relevance of that? LVT is not exclusive to land with houses on it.
> amusing attempt at using data for an argument
Rude and unnecessary, and entertaining when your response seems to be a total non sequiter.
i was responding to the "how on earth?" rudeness that i was given first. farmland, forests, etc owned by the top 10% isn't relevant to this debate. rural land (which is most of america) has nothing to do with urban housing policy.
further, in my original comment that you responded to, i described succinctly the market dynamics that make this regressive to the middle class. the data you shared supports that.
are you suggesting that the middle class doesn't own single family homes so it doesn't matter to them? because that is the point you are making if you don't realize that.