That's all we need to fix the 21st century. Simple as hell so basically immune to regulatory capture, and will usher in a rate of progress we haven't seen in 100 years, if ever.
There was a convincing op-ed in WSJ a few years ago about how in all the states that are facing public sector defaults, the ultimate payer of these debts will be homeowners. Since basically the only place left for most governments to go is property value (unless they have huge businesses they can tax).
And it is worse in the poorer states, because they don't have high home values to cushion the blow to the individual taxpayer.
The problem with this op-ed is that it's based on an entirely false premise, it completely ignores how much revenues governments need.
Clinton was able to run a federal government spending less than 20% of GDP, since George Walker Bush federal spending has exploded to the 25 to 30% range. The reality is that 20% is plenty, and can solve all the problems government has the ability to solve.
Need to start by NOT
1) serving as the worlds policeman
2) building double the aircraft carrier tonnage of the rest of the world combined.
3) spending a trillion dollars on newest latest fighters not ready for service when we aren't at war
4) staging US troops and ships in the Middle East or Europe when both are immensely wealthy and able to defend themselves.
5) pouring $40B into a launch system design based on obsolete technologies and an overweight deep space capsule that needs a year to replace a single bad power unit.
6) subsidizing professional sports leagues paying millions a year per employee. etc, etc.
A good start would be requiring senators and congresspeople to recuse themselves from any legislation that specifically allocates funds for any projects in their states/districts. Get away from the thousand page earmarked pork funding bills and focus their responsibilities on legitimate national interests.
I think this has been implemented already in Finland. The tax administration evaluates the property's value (both land and infrastructure) and taxes it accordingly, eg 0.5%. For unused land the municipality can set an extra tax to coerce the land owner to develop the land, for example 1 to 3 percent. But I wouldn't say it is a miracle maker, just a part of an effective taxation system.
What I personally would do, if I could, is to target the unscrupulous rich by banning companies located in tax havens from operating in the country, unless they can prove that they have proportionally high enough of employees working full-time in the said tax haven compared to their assets. That, I would say, is very achievable goal that would affect mostly just tax-dodgers and give a strong signal that those practices should come to an end.
I think it is just unfair that normal people have pay taxes up to 50% on their earnings (depending on the country of course) while millionaires and billionaires can just bypass the whole system by incorporating a holding company in Cayman Islands. Or mega corporations that can even negotiate special tax privileges.
> The tax administration evaluates the property's value (both land and infrastructure)
That's not what the article is proposing; it specifies a tax only on the land, not on whatever is built on the land. The point is to incentivize transferring ownership of the land to whoever can get the highest value use out of it; that only works if the tax itself is only on the land, so it makes sense to build higher value infrastructure on it since that raises the income from the land without raising the tax.
Land-value tax doesn't have huge inefficiencies like some other taxes. But the hard part is assessing "value". How should land value be decided? The book "Radical Markets" has some good insights on how to find the value of every plot of land by using markets.
One of the funner ones I've heard of is that the owner and payer of the property tax performs the valuation of the land: it makes implementation pretty much free and uncontroversial! The only caveat is that whatever value the owner lists as the value is an amount they must accept for the land in a sale (plus some meaningful fee to drive off trolls).
So, sure, you can list the value of the land of your Pac Heights mansion as $1 and pay a commensurate tax on that. If you do, though, someone can purchase it for $1 and start charging you a hefty use fee.
Most societies already levy property taxes on real estate, including on unimproved land. I don't know how they assess the value of that land, but they must have a working method for it.
Plainly not inevitable. Crises can continue to get worse instead, and surely that's much more likely.
However, I'd love to be pleasantly surprised, and occasionally am, e.g., apparently Baden-Wurttemburg (the German state that includes Stuttgart) has recently passed a LVT scheduled to be implemented in 2025 https://libdemsalter.org.uk/en/article/2020/1382897/germany-...
There are so many ways to tax the wealthy that would "work". But as long as the rich have way more influence on how society is organized than than the poor or middle class, it's just very difficult to do anything about it.
The big moral problem I have with a recurrent tax on assets like land or improvements on land (buildings) is that it erodes the fundamental right to private ownership. What does it mean to own anything if policies can retroactively apply taxes to it or continually extract taxes and ultimately take that asset away from you? That’s simply not compatible with a free society and it amounts to theft in my opinion.
Seeing as land is limited, it's logical for governments to charge a rent on the most productive plots in order to maintain itself. I don't see how that erodes the fundamental right to private ownership. You can certainly find land with very low or no property or land taxes on it. You won't be anywhere near infrastructure, culture, food, or higher education, but your taxes will be very, very low. You are paying to participate in all the value-adding parts of society. It would only follow that improvements to the public common increases the value of your privately owned asset, and you should continue to pay your share of the upkeep based on the productive value of the land.
The only thing inevitable will be that eventually Land-Value taxes will not be enough (if implemented) and then what? There is no end or limit to the amount of money a Government can squander.
I think the problem with land-value taxes is that objective valuation of raw land value is actually difficult and even arbitrary. If you say a parcel of land is valuable because there's a building on it, you wind-up with just a real estate tax. If you value all land the same, people will just abandon ownership of large parcels, probably with paradoxical results.
Almost automatically, the assessment of just land has to be harder than the assessment of land plus the property that's there. And assessing land for taxes tends to be politically hard. For example, the overall process of real estate taxation in California was politicized into a disastrous mess years ago with proposition 13. Just undo prop 13 would be a simpler matter and even that likely isn't going to happen.
Further consider, the objective land value of a parcel in Mountain View is probably less than the assessed value a lot of homeowners pay their taxes based on. I'd be in favor of measures that force more intensives use of that land but taking on home-owners with vast political influence is going to be a challenge.
> At the top of an economic cycle, governments are collecting their peak tax revenues — yet even so, many are still running large fiscal deficits and have large existing public debts.
They’re also spending more than they ever have before in history.
> The LVT is not the same as a property tax, as it does not punish those who put the land to use; it taxes only the land, not the structure built on top of it.
I’m not convinced this is that different than what’s happening now. For a $1m house in the Bay Area, only a quarter or a third of that value is the structure.
> However, most of all, it is one of the rare taxes that does not diminish economic activity, and in fact stimulates it.
How do they arrive at this conclusion? A bakery that’s been around for 100 years finds itself in a hip part of town (which maybe it helped foster), and then has to move out because the only type of business that can support the LVT in the area is luxury apartments. The higher the LVT, the more risk of a monoculture in land usage, not the other way around.
The idea of land-value tax strongly reminds me of the often cited, and much maligned, so-called fiduciary duty to shareholders which CEOs and/or board members reportedly have. This duty creates, it is said, an incentive towards naked short-term greed, which is often described as a bad thing. Now, even though this duty is also usually derided as fictional, the argument, if this duty did exist, is reasonable. But does not a LVT create the same incentives in landowners – in essence forcing landowners to always use the land in a way which extracts the maximum amount of money from it? Why then is a LVT a good thing while the duty thing would be bad?
> ... in essence forcing landowners to always use the land in a way which extracts the maximum amount of money from it ...
That incentive already exists, landholders typically use their land in a high-value way. If you cast your eye on Europe there are a large contingent of undeserving people who have generations of wealth that they secure through owning land, which does not degrade over time. The big win of a land tax is about breaking ultra-low-risk inter-generational wealth transfer. If wealth is transferred between generations there at least has to be some level of competent management demonstrated by each new layer of the family tree.
This makes a lot of unsubstantiated claims. Like the bond market is saturated that seems the opposite of true. This also claims theres been a high inflation but that doesn't seem to be true either based on any metric.
I think the one thing is clear and I agree with is taxes increases capital outflow. But my biggest issue is with the central premise that is taken at face value. That the government needs more money. I don't think it does. The US government especially has far to much money and waste most of it.
So I'd say instead of trying to find sneaky ways of taking more of the citizen money maybe incentive it to be use to create more opportunities. Instead of taking from some to give to other incentive opportunities so those who have will willingly give opportunities to those who don't
I’m struggling to envision how this would impact homeowners differently than the current property tax paradigm. If I have a house and the value of the property goes up, my property taxes increase. If I were to sell a house at market rate, theoretically it would be reflective of what rate it was being taxed at.
How would this same situation play out with a land-value tax?
Anecdotally, I’ve been surprised by how Washington DC’s aggressive, punitive taxing of vacant properties has done little (in my observation) to free up these plots. $MM properties that just sit there.
I'd also like to see more general resource use taxes (i.e taxes on raw materials like water, oil, aluminum etc.). They could be adjusted based on economic conditions (instead of playing shell games with interest rates) and adjusted for external effects. Make it formulaic. Open source, everyone can see how it works and who adjusted and how and it's not a closed door XX party with input from lobbyists.
Among other good effects I see this encouraging efficient use and recycling.
> The LVT is not the same as a property tax, as it does not punish those who put the land to use; it taxes only the land, not the structure built on top of it.
This sounds regressive. So someone with a bungalow on their property pays the same tax as someone with a 40 story apartment building?
If the bungalow is out in the suburbs and the apartment building is downtown next to the transit station, the apartment will pay MUCH more tax as that land is much more valuable.
It's only sounds that we because there is so much yeoman farmer -> suburban everyman stuff in our heads.
The land is our collective inheritence, so someone with 1 story bungalow on highly desireable land is actually extremely selfish and decedent in their misuse of the commons.
To get less moral and more mathematical, developers can lessen their tax only to the extent that the flood the market with floors pace, devaluing the good they are selling (floor space, not land space). This forces and equilibrium where the vast majority of people do better than today.
Another way to put it: the person who owns a vacant lot in Manhattan (worth many millions) pays the same tax as the person who owns an equivalent lot in Manhattan with an apartment building built on it. They would also pay the same tax as the person who owns that same lot with a bungalow sitting on it.
It's not regressive at all. You pay tax based on the value of the land. If you're not utilizing the full value of the land (by leaving it vacant or otherwise under built compared to the demand) then you're going to pay more in taxes than you get out of it. The whole purpose of LVT is to nudge you toward either improving the land so you can utilize its value or sell it to someone who will.
We can't make that determination without knowing how much profit a rented bungalow can receive versus the apartment building. A bungalow in midtown Manhattan might very well house one of the world's richest families.
Fundamentally, LVT is a wealth tax. If you hold a large amount of wealth (land) but have no income then the tax would seem regressive from an income-based perspective. But from a wealth-based perspective, its a perfectly reasonable thing to expect those that own to pay taxes not just those who labor.
The idea is to tax the opportunity cost of the land. If Jeff Bezos decides he wants to build a bungalow in the middle of Manhattan that is his prerogative, but he shouldn’t get to pay less taxes than someone who put the land to more economical use as a 40 story apartment building.
I detest property taxes. What ends up happening is that people who are on the brink of poverty keep losing their (inherited) land because the government deems it an income generating asset, even though it is not (it's either their home or some dilapidated piece of land without much actual income generation prospects).
Often they also get screwed on the selling because they are under pressure and because they are not experienced in selling property, and end up losing money in the process.
So it's like crabs on the brim of the bucket being kicked back to the bottom.
Indeed, the biggest problem with LVT is who exactly gets to value the land and how. It's an extraordinarily difficult issue which would require a very precise implementation.
Once you start assessing peoples property in such a wholesale fashion, you almost end up in a classic "managed economy" situation. "From each according to his ability, to each according to his needs" failed due to the combined difficulty of assessment + corruption of the assessors. LVT is the same principle applied to land.
I think that LVT will end up as one of those ideas that is great in theory but doesn't work in practice.
Do you have a viable alternative to property taxes for raising municipal revenues? Additionally, certain acts like California Prop 13 of 1978 attempt to solve the problem you’re addressing but, in my opinion, ended up causing much more harm than good.
Only that doesn’t happen in real life. People on the brink of poverty don’t inherit property. And if they do, they can always sell it and put that money to better use.
I just don’t see this happening. Maybe I live in a different place.
Who are these people inheriting land who are too poor to use it, too dumb to sell it and losing it to the county?
I live in a high tax state and have served on nonprofit boards that have exposure to housing issues. This didn’t happen.
The common problems of this ilk were usually frauds where caregivers, relatives, powers of attorney or others squander or steal proceeds of reverse mortgages or borrow money against property without telling the family. The other issue that would come up is Medicaid recapture when money is given away.
Usually if there is a tax sale there is some bigger story why the property is worthless. You can borrow against the equity of anything.
Sorry, they should sell. Truely cash-poor land-rich people are an insignificant class that's been held up as the boogieman for 100+ years.
You're not a "temporarily embarrassed billionaire", and if owning land one can no longer afford seems commonplace, it is entirely because the current real estate speculation scheme we prop up (CA especially).
Any realistic LVT would be phases in slowly, and give the prop 13 petit gentry plenty of time to sell and live a fine remainder of their life in a very fashionable condo.
Under LVT, if this house is on useless land in the middle of nowhere they wouldn't owe hardly anything. If they inherited empty land downtown they'd have to sell, but no one is well served by someone destitute hanging on to such land and doing nothing with it.
[+] [-] Ericson2314|5 years ago|reply
2. LVT
3. Environmental externality taxes
That's all we need to fix the 21st century. Simple as hell so basically immune to regulatory capture, and will usher in a rate of progress we haven't seen in 100 years, if ever.
[+] [-] supernova87a|5 years ago|reply
And it is worse in the poorer states, because they don't have high home values to cushion the blow to the individual taxpayer.
[+] [-] Ericson2314|5 years ago|reply
[+] [-] ocdtrekkie|5 years ago|reply
When your sector makes up like three of the five most valuable companies on the planet, we probably should be taxing it more.
And Jeff Bezos does not need more money.
[+] [-] valuearb|5 years ago|reply
Clinton was able to run a federal government spending less than 20% of GDP, since George Walker Bush federal spending has exploded to the 25 to 30% range. The reality is that 20% is plenty, and can solve all the problems government has the ability to solve.
Need to start by NOT
1) serving as the worlds policeman
2) building double the aircraft carrier tonnage of the rest of the world combined.
3) spending a trillion dollars on newest latest fighters not ready for service when we aren't at war
4) staging US troops and ships in the Middle East or Europe when both are immensely wealthy and able to defend themselves.
5) pouring $40B into a launch system design based on obsolete technologies and an overweight deep space capsule that needs a year to replace a single bad power unit.
6) subsidizing professional sports leagues paying millions a year per employee. etc, etc.
A good start would be requiring senators and congresspeople to recuse themselves from any legislation that specifically allocates funds for any projects in their states/districts. Get away from the thousand page earmarked pork funding bills and focus their responsibilities on legitimate national interests.
[+] [-] tekkk|5 years ago|reply
What I personally would do, if I could, is to target the unscrupulous rich by banning companies located in tax havens from operating in the country, unless they can prove that they have proportionally high enough of employees working full-time in the said tax haven compared to their assets. That, I would say, is very achievable goal that would affect mostly just tax-dodgers and give a strong signal that those practices should come to an end.
I think it is just unfair that normal people have pay taxes up to 50% on their earnings (depending on the country of course) while millionaires and billionaires can just bypass the whole system by incorporating a holding company in Cayman Islands. Or mega corporations that can even negotiate special tax privileges.
[+] [-] pdonis|5 years ago|reply
That's not what the article is proposing; it specifies a tax only on the land, not on whatever is built on the land. The point is to incentivize transferring ownership of the land to whoever can get the highest value use out of it; that only works if the tax itself is only on the land, so it makes sense to build higher value infrastructure on it since that raises the income from the land without raising the tax.
[+] [-] Rickvst|5 years ago|reply
[+] [-] mullingitover|5 years ago|reply
Insurers have no problems assessing land value and have been doing it for centuries.
[+] [-] scarmig|5 years ago|reply
One of the funner ones I've heard of is that the owner and payer of the property tax performs the valuation of the land: it makes implementation pretty much free and uncontroversial! The only caveat is that whatever value the owner lists as the value is an amount they must accept for the land in a sale (plus some meaningful fee to drive off trolls).
So, sure, you can list the value of the land of your Pac Heights mansion as $1 and pay a commensurate tax on that. If you do, though, someone can purchase it for $1 and start charging you a hefty use fee.
[+] [-] yenwodyah|5 years ago|reply
[+] [-] nine_k|5 years ago|reply
A captain could declare the value of the cargo whatever he sees fit, and pay the tax on that amount.
The customs reserved the right to buy the entire cargo at the declared price, at their discretion.
It's a bit harder to implement with large parcels of land, but should work well with home-sized lots.
[+] [-] Ericson2314|5 years ago|reply
It's only in trying to resist the above that the difficulties arise.
[+] [-] pyuser583|5 years ago|reply
[+] [-] mlinksva|5 years ago|reply
However, I'd love to be pleasantly surprised, and occasionally am, e.g., apparently Baden-Wurttemburg (the German state that includes Stuttgart) has recently passed a LVT scheduled to be implemented in 2025 https://libdemsalter.org.uk/en/article/2020/1382897/germany-...
[+] [-] bjarneh|5 years ago|reply
[+] [-] throwawaysea|5 years ago|reply
[+] [-] arrosenberg|5 years ago|reply
[+] [-] dbcurtis|5 years ago|reply
[+] [-] hourislate|5 years ago|reply
[+] [-] kart23|5 years ago|reply
http://savingcommunities.org/issues/taxes/landvalue/
[+] [-] cleansy|5 years ago|reply
[+] [-] joe_the_user|5 years ago|reply
Almost automatically, the assessment of just land has to be harder than the assessment of land plus the property that's there. And assessing land for taxes tends to be politically hard. For example, the overall process of real estate taxation in California was politicized into a disastrous mess years ago with proposition 13. Just undo prop 13 would be a simpler matter and even that likely isn't going to happen.
Further consider, the objective land value of a parcel in Mountain View is probably less than the assessed value a lot of homeowners pay their taxes based on. I'd be in favor of measures that force more intensives use of that land but taking on home-owners with vast political influence is going to be a challenge.
[+] [-] ed25519FUUU|5 years ago|reply
They’re also spending more than they ever have before in history.
> The LVT is not the same as a property tax, as it does not punish those who put the land to use; it taxes only the land, not the structure built on top of it.
I’m not convinced this is that different than what’s happening now. For a $1m house in the Bay Area, only a quarter or a third of that value is the structure.
> However, most of all, it is one of the rare taxes that does not diminish economic activity, and in fact stimulates it.
How do they arrive at this conclusion? A bakery that’s been around for 100 years finds itself in a hip part of town (which maybe it helped foster), and then has to move out because the only type of business that can support the LVT in the area is luxury apartments. The higher the LVT, the more risk of a monoculture in land usage, not the other way around.
[+] [-] teddyh|5 years ago|reply
[+] [-] roenxi|5 years ago|reply
That incentive already exists, landholders typically use their land in a high-value way. If you cast your eye on Europe there are a large contingent of undeserving people who have generations of wealth that they secure through owning land, which does not degrade over time. The big win of a land tax is about breaking ultra-low-risk inter-generational wealth transfer. If wealth is transferred between generations there at least has to be some level of competent management demonstrated by each new layer of the family tree.
[+] [-] DeonPenny|5 years ago|reply
I think the one thing is clear and I agree with is taxes increases capital outflow. But my biggest issue is with the central premise that is taken at face value. That the government needs more money. I don't think it does. The US government especially has far to much money and waste most of it.
So I'd say instead of trying to find sneaky ways of taking more of the citizen money maybe incentive it to be use to create more opportunities. Instead of taking from some to give to other incentive opportunities so those who have will willingly give opportunities to those who don't
[+] [-] mr_cyborg|5 years ago|reply
How would this same situation play out with a land-value tax?
[+] [-] technotarek|5 years ago|reply
[+] [-] mythrwy|5 years ago|reply
I'd also like to see more general resource use taxes (i.e taxes on raw materials like water, oil, aluminum etc.). They could be adjusted based on economic conditions (instead of playing shell games with interest rates) and adjusted for external effects. Make it formulaic. Open source, everyone can see how it works and who adjusted and how and it's not a closed door XX party with input from lobbyists.
Among other good effects I see this encouraging efficient use and recycling.
[+] [-] nathanvanfleet|5 years ago|reply
This sounds regressive. So someone with a bungalow on their property pays the same tax as someone with a 40 story apartment building?
[+] [-] lostapathy|5 years ago|reply
If the bungalow is out in the suburbs and the apartment building is downtown next to the transit station, the apartment will pay MUCH more tax as that land is much more valuable.
[+] [-] Ericson2314|5 years ago|reply
The land is our collective inheritence, so someone with 1 story bungalow on highly desireable land is actually extremely selfish and decedent in their misuse of the commons.
To get less moral and more mathematical, developers can lessen their tax only to the extent that the flood the market with floors pace, devaluing the good they are selling (floor space, not land space). This forces and equilibrium where the vast majority of people do better than today.
[+] [-] chongli|5 years ago|reply
It's not regressive at all. You pay tax based on the value of the land. If you're not utilizing the full value of the land (by leaving it vacant or otherwise under built compared to the demand) then you're going to pay more in taxes than you get out of it. The whole purpose of LVT is to nudge you toward either improving the land so you can utilize its value or sell it to someone who will.
[+] [-] stickyricky|5 years ago|reply
We can't make that determination without knowing how much profit a rented bungalow can receive versus the apartment building. A bungalow in midtown Manhattan might very well house one of the world's richest families.
Fundamentally, LVT is a wealth tax. If you hold a large amount of wealth (land) but have no income then the tax would seem regressive from an income-based perspective. But from a wealth-based perspective, its a perfectly reasonable thing to expect those that own to pay taxes not just those who labor.
[+] [-] jonathanyc|5 years ago|reply
[+] [-] madsbuch|5 years ago|reply
This is exactly the point he is making: One should put the land to good use. Move the bungalows where land is cheap and tax is low.
[+] [-] paconbork|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] m463|5 years ago|reply
[+] [-] cortesoft|5 years ago|reply
[+] [-] ichbinwiederda|5 years ago|reply
[+] [-] adwf|5 years ago|reply
Once you start assessing peoples property in such a wholesale fashion, you almost end up in a classic "managed economy" situation. "From each according to his ability, to each according to his needs" failed due to the combined difficulty of assessment + corruption of the assessors. LVT is the same principle applied to land.
I think that LVT will end up as one of those ideas that is great in theory but doesn't work in practice.
[+] [-] ghayes|5 years ago|reply
https://en.m.wikipedia.org/wiki/1978_California_Proposition_...
[+] [-] jvvlimme|5 years ago|reply
[+] [-] Spooky23|5 years ago|reply
Who are these people inheriting land who are too poor to use it, too dumb to sell it and losing it to the county?
I live in a high tax state and have served on nonprofit boards that have exposure to housing issues. This didn’t happen.
The common problems of this ilk were usually frauds where caregivers, relatives, powers of attorney or others squander or steal proceeds of reverse mortgages or borrow money against property without telling the family. The other issue that would come up is Medicaid recapture when money is given away.
Usually if there is a tax sale there is some bigger story why the property is worthless. You can borrow against the equity of anything.
[+] [-] Ericson2314|5 years ago|reply
You're not a "temporarily embarrassed billionaire", and if owning land one can no longer afford seems commonplace, it is entirely because the current real estate speculation scheme we prop up (CA especially).
Any realistic LVT would be phases in slowly, and give the prop 13 petit gentry plenty of time to sell and live a fine remainder of their life in a very fashionable condo.
[+] [-] civilized|5 years ago|reply
[+] [-] ip26|5 years ago|reply