I've long advocated a land value tax. I would suggest that any reform of this nature, that eliminates private capture of economic rent, accompany one-time compensation to the parties that lose that economic rent, so in this case, compensation to make up for the loss in property value that a LVT would incur.
The same should apply to any other repeal of rent-seeking institutions: anti-labor-competitive laws privileging labor unions, licensure barriers privileging taxi medallion holders, etc.
The British used this method to end slavery throughout their empire, which meant: 1. much more rapid end to slavery, due to less political opposition to its abolition, 2. no costly civil war and enduring sociopolitical grievances that emanated from it.
Economic analyses indicate that compensating rent-seekers at an amount equal to the expected loss of economic utility over their lifetime from the elimination of their rent-seeking opportunity, as part of a reformation to end the institutions that enable their rent-seeking, leads to net economic gains, because the economic efficiency gains from expedited abolition of the rent-seeking far outweighs the cost of the compensation.
Local governments, which have been granted near unchecked authority by state governments, are entirely captured by homeowners.
I'm not fully clear on this statement. Is it putting forth that local governments shouldn't be controlled by the people who are local, or is it saying that homeowners hold more power than renters? If the former, that's just silly. If the latter, renters get the same one vote per person as everybody else. If they don't care enough to vote that's their problem.
Homeowners, like everybody else, vote in their own best interest. If you want higher-density housing figure out a way that it makes a place better for its inhabitants, not worse. Personally I've never lived in a city that got better as it got bigger and I vote accordingly.
This attitude here is precisely why local zoning is ineffective. The people who are negatively impacted by anti-development policies are the ones that don't get the privilege of living in economically powerful population centers in the first place. Sure, the home-owners might grumble about an apartment blocking their view, more crowded restaurants, or "neighborhood character as a city grows. The people who are negatively impacted by anti-growth policy are people struggling to afford rent in increasingly subdivided units, and the people who can't even afford to move there in the first place.
> Is it putting forth that local governments shouldn't be controlled by the people who are local, or is it saying that homeowners hold more power than renters?
It's that the NIMBY subset of homeowners has disproportionate power in local government over other residents.
> If the former, that's just silly. If the latter, renters get the same one vote per person as everybody else. If they don't care enough to vote that's their problem.
This is facile -- zoning decisions are essentially never put up to a democratic vote. The outsized NIMBY power doesn't come from voting; it's from activities like attending local government functions, filing complaints, advocating to their representatives, etc. These are not things everyone has time or know-how to do.
If there is a place where there should be more homes if you were looking at it from a regional perspective, it is in the interest of the people who live there to block those new homes from being built to limit supply of the asset they own. The people who would vote in favor of the new homes don't actually get to vote, since they don't live there yet.
Not really stated in the article are three caveats:
1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends.
2) The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land. A homeowner sitting on a million dollar piece of property in California taxed at ~1% is still unlikely to build an apartment complex if they like their single family home just fine and are making $200k+/year in income.
3) It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing, which I don't really agree with. Personally, I'd rather see 2nd homes taxed into absolute oblivion, and I say that as someone who was a landlord for several years. Affordable housing to me means "affordable housing you can actually buy" as much as it means "affordable rent". The two do not go hand-in-hand if rental income is incentivized enough that people buy as many properties as they can get loans for (California today).
> 1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends.
This is addressed to some extent, with the argument that zoning reforms are more practical because existing property owners are incentivized to support rather than fight zoning updates that allow more development, so they can fully maximize the ratio of their revenue against the tax. (“It turns NIMBYs into YIMBYs,” she quotes a researcher as saying.)
>3) It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing
The house you 'own', in fact is nothing more than tenancy. Just a different kind of tenancy. Stop paying property taxes and find out you still have a landlord.
I think far bigger issue is how to apply LVT. a cookie-cutter approach is guaranteed to fail. an overly complex system is just another byzantine labyrinth of a tax code that'll be gamed.
California needs a constitutional convention that gets rid of the stupid proposition law. Every random suburban town has a market worse than Manhattan because there is a fundamentally inequitable tax system.
2) "Think on the margin" - a LVT might not make Bill Gates turn his mansion into condos, but down the bell curve there are likely plenty of people right on the fence who may be swayed.
3) LVT would (theoretically) equally encourage the development of condos as it would rental units.
> It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing, which I don't really agree with.
This is a personal bias because you are trying to prevent other people from making their own decision on how they want to live. An uncharitable interpretation of your comment could be that you are forcing your will upon other people against their will.
The fact that an LVT increases personal freedom is usually ignored because personal freedom counts for nothing these days. I find it particularly amusing that we have this group of people called liberals wanting their fake freedom.
The average single-family dwelling landlord is subsidizing someone; rents are usually below actual carrying costs (maintenance, etc) and most landlords would be better off selling.
It’s one of the reasons banks and companies aren’t in the single family rental business.
The main thing that covers for it is property appreciation - the rent is used to just offset carrying costs while you wait for the property to go up in value.
"The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land"
The author likely isn't aware of that. If the author made that argument then it would undermine their argument about affecting people's choices minimally or not at all.
"The big question land value taxes help answer is: How can a government raise funds without distorting choices and possibly leaving people worse off? If you tax income, it provides a disincentive to work. If you tax property, it provides a disincentive to improve the physical buildings on top of the land."
Of course it will distort choices and leave some people worse off. If the author can't see that, then they have a serious bias problem. The whole point of the land value tax is to tax land to encourage higher density and higher cost use. This is especially damaging to people who hold land that is developed around. If I have .75 acres with a single family home and 30 years later the area around me is developed, them I will be financially forced off of my land because I could theoretically put an apartment building on it. We already see standard property tax forcing the elderly out of their homes in many areas.
Please, show me how an appropriately set income tax disincentivizes work. I'm guessing they can't and are equally uneducated on that subject. Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive. Which doesn't seem to be the case. The people at that lowest level of income aren't paying (or gets refunded) income tax. Most of the tax at that level on income is for programs like social security and Medicare.
> Of course it will distort choices and leave some people worse off. If the author can't see that, then they have a serious bias problem. The whole point of the land value tax is to tax land to encourage higher density and higher cost use.
Under our current system we subsidize low value land uses by subsidizing the crap out of infrastructure to expansions of suburban areas zoned for single family homes.
The only revenue positive portion of nearly any modern american city/town are the few sparse walkable mixed use neighbourhoods and the dense urban core. Policies like a land value tax that push for higher value land uses are necessary to stave off the oncoming wave of municipal bankruptcies America faces.
> Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive.
You are thinking in absolute terms and not on the margins. If the marginal income tax beyond a threshold jumps by %10, then even discounting the increasingly marginal value of each additional dollar earned I will value the return on work less when I hit that tax threshold.
Getting that 0.75 acres to turn over is exactly the point. Incentivizing them to leave (or better yet: subdivide and sell the land) is good for society.
This policy only makes sense where zoning is also loosened enough to actually build on the land though...if zoning doesn't allow you to do anything with the land to make more money (building apartments, subdividing, etc.), this just becomes a tax on poor landowners.
> We already see standard property tax forcing the elderly out of their homes in many areas.
It's reasonable to offer options to low-income retirees, for example allowing them to defer property tax payments until death. Texas does this, it works alright.
Note that a single family dewlling on .75 acres likely costs the government a lot of money to provide services (plumbing, sewer, electric etc) and is likely already a net debtor to the city/county. This style of development is why American (and Canadian) cities are going broke.
>If I have .75 acres with a single family home and 30 years later the area around me is developed
I think this is exactly the framework. The idea is that that person right now is benefitting from increased community wealth (which would be realized in actual moneys upon sale of their property), and hence, should be taxed more.
Maybe there are some sophisticated ways to strike a balance, to avoid the situation you are describing. For example, people could pay less tax, but then they (or their estate) cannot pocket the capital gain upon sale of their property.
In any case, I think a land tax is much more equitable, because it punishes landholding, rather than punishes improving land. It's the poor use of land right now that I believe is the main driver of poor affordability of housing.
Ownership of land is damaging to those who don’t. Not owning land is a tax to be paid to those who do. There is no perfect solution but incentivising people to sell their tennis court filled country castle pad so that 1k people have somewhere to live (and knock on effect would be fewer homeless people) sounds like a balanced compromise.
Income tax definitely disincentives work. Source: my life. In the current economic situation I could easily take on another 40/hour a week job. If I do that I only get to keep just over half of the additional pay my extra job would supply. It's not worth my time to work for half my 'hourly rate'. So now there's an extra job vacancy.
What might be confusing is that relatively few people are incentivized by an income tax to do no work at all, but many people may be incentivized to do less paid work than they otherwise would. (In fact, under idealizing assumptions which don't quite apply in all cases, you would expect every person facing an income tax to do at least very slightly less paid work than without the tax.)
> Please, show me how an appropriately set income tax disincentivizes work.
Here's a proof that income tax disincentivizes work:
Would you work an extra hour a week if it were paid at 1000x your normal rate? I confidently assert that you would.
Would you work it for 100x your normal rate? Almost certainly.
10x? Probably.
0.5x? Probably not.
0.01? Almost certainly not!
So, earning more or less than some threshold hourly amount incentivizes or disincentivizes that hour to be worked. This is exactly the effect of income taxation.
Now, I sympathise with people who have worked hard, paid tax on income and bought property. They don't want to, in addition, be charged to own that property. I myself am in the same boat.
But I also sympathise with people who have studied hard and learned skills. They don't want to, in addition, be charged to use those skills!
The only argument I can see for income tax over property tax is "I expected the former but not the latter, so you've violated my expectations". I don't find that argument very convincing.
> Please, show me how an appropriately set income tax disincentivizes work. I'm guessing they can't and are equally uneducated on that subject. Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive. Which doesn't seem to be the case.
It's almost tautological that taxing income disincentivizes work. Of course, it does not mean that a 30% income tax will disincentivizes work so much as to completely stop it (the "optimal" point in the Laffer curve is around the 30% point), but it is obvious that on the margin people will start dedicating less to work if their returns are lowered due to taxes.
>We already see standard property tax forcing the elderly out of their homes in many areas.
This was exactly the narrative that led to Prop 13, and what it has led to is the most inflated property market in the entire world because there is nearly no carrying costs for a first (LA), second (Palm Springs), third (Atherton), or fourth (Tahoe) home!
Sure, a random subset of boomers can die in their empty 6 bedroom houses now, but countless people are moving to places like Texas where land value/property taxes have keep real estate prices relatively low (due to huge carrying costs).
I love CA, but the income vs. wealth/property tax split is what will kill it (at least in its current form).
Income taxes in California + US Federal are high enough that I don't really think it's worth it to try to get my income above, say, $500k a year. So, for me, income taxes absolutely disincentivize work. I actually had a second job for a while and quit it because of this.
> If I have .75 acres with a single family home and 30 years later the area around me is developed, them I will be financially forced off of my land because I could theoretically put an apartment building on it. We already see standard property tax forcing the elderly out of their homes in many areas.
This is one of my current issues with land value tax: pricing out existing residents. One mitigation I think that would help would be only adjusting the LVT of a plot on sale / ownership transfer. It would likely need a bit more nuance than that, as it doesn't quite work with company owned land (doesn't really switch owners like a sfh owner dying).
The land will eventually get more efficient use, but there isn't the recurring threat of being priced out of your home.
The effect of income taxes is not simply to disincentivize work like one would imagine. Top talents who are able to afford the cost choose their tax residence due to income tax. Even in the US, it would influence people's career decisions about where to live/work. Businesses also take the taxes into account when choosing countries/states to invest or build facilities.
> The whole point of the land value tax is to tax land to encourage higher density and higher cost use.
This is why I disagree so strongly with the idea. Do I want to live in a society where every square meter of land is forced to be used for the highest possible ROI? No, absolutely not. There is already far too much drive to maximize profit on everything. We need less of that, not more.
Just a small sampling of land uses which are economically suboptimal: parks, playgrounds, bike trails, dog parks, community sport areas, nature conservation areas/greenbelts. And so many more.
I want to live in a town which has a lot more of all of the above, not less.
If the only thing that mattered was maximizing profit per square foot, it would be optimal to raze all the above and build them up with high-density housing towers.
Obviously we shouldn't just "turn on" a LVT for land that previously didn't have the tax until now. The idea would be that whenever the government is selling land to private individuals / corporations, instead of setting a property tax of a few % on the land, it sets a land value tax of about 70%. That means that less revenue is made from the immediate sale, but the land will bring in additional revenue over time. So most land would continue to use the original system, while a slowly increasing amount would be "LVT" tagged when it passes through the government's hands. To avoid the "being forced out" situation you describe, there would be a few options:
1. Live in a rural area that is very unlikely to be developed.
2. Make sure to buy a piece of land that is "original system" tagged instead of "LVT" tagged.
3. Buy "property tax increase" insurance. If your land's value goes up, the insurance pays the difference, and you don't notice the cost change.
If those 3 options don't turn out to be sufficient, then probably there's some hacky provision that could be tacked on, like LVT doesn't go up for individuals until they sell their land, or something along those lines. But of course that should only apply to people who are actually living in their own homes, not to landlords.
Anyway, the question is, why go to all this trouble? Why have an LVT at all? The answer is the following: No one created the land. When you're renting from a landlord, some of your rent is for the building, and all the effort the landlord puts into maintaining it. It makes sense that the landlord should be paid for that. Under the current system, though, some of your rent is for the land. That makes a lot less sense. Why pay the landlord for the land, even though the landlord didn't create the land?
Imagine some travellers find an oasis in the desert surrounding a fresh water spring. They (for some reason) decide to settle there, and need to decide how to split up the daily 10 000 gallons of water that the spring produces. I think that probably the travellers would decide to split the water evenly: 100 travellers means that each gets 100 gallons per day. It would be weird if they decided that some of them should be considered "waterlords" and get 2000 gallons per day, and the rest should get 0, and would have to pay the waterlords for their daily water.
Splitting the water evenly wouldn't be communism or anything. If Alice uses her share of the water to grow food, she wouldn't be obliged to share that food with anyone else, since she's the one who laboured to produce it. Everyone still gets to keep or sell whatever they produce, but the spring gushes whether anyone works or not, so the water gets split evenly.
Objection: Maybe some settlers will specialize in farming, and some won't. Obviously the farmers will need to use more water, so shouldn't they get a higher fraction of the water?
Answer: Yes, the farmers will use more water, but they can get it by trading the food they produce with their neighbours in exchange for water to put on their crops. The farmers would essentially be selling their ability to convert water into crops.
Objection: Wouldn't it be an equally good system if instead of trading in water people could trade shares in fractions of the water produced? So 10 000 shares are split equally among all the initial settlers, and each share is worth 1 gallon per day.
Answer: This has a few issues. The main one is that as new people are born and grow up, they would get an equal fraction of the water to everyone else in the "divide up the daily water production" scheme, but they would get nothing in the "divide up the shares" scheme, since all the shares would have been distributed already.
I totally get the appeal of land taxes and restriction of land-use regulation at the local level, and by and large they seem like a reasonable approach to poor resource allocation and unequal ownership opportunities. One thing I've not seen addressed, though, is the apparent disincentive to improve communities in meaningful ways.
For instance, say I live in a very expensive city and I can no longer afford the land tax. I decide to move to a less expensive city and set up roots there. This new city is crummier: the city government is inefficient, there are fewer amenities available, and local institutions are poorly organized and executed.
I spend some time petitioning the local government to make reforms, I work with local groups to improve city amenities, and I vote for policies to revive local institutions. As I do this, the city becomes much nicer. However, it also becomes more attractive for other folks from the expensive city who can afford to buy up local property and drive up the value/taxes of my land. If this goes on, I'll once again be in a situation where I can't afford to live in my home because others want to live there too.
Say if, after moving to my cheaper city, I had instead decided to keep the city as crummy as possible while meeting my own needs. I drive a car, so I vote against bike lanes. I don't have young kids, so I lobby against school levies. I don't swim, so I vote against a public pool. This is objectively worse for the city as a whole, but if I want to be able to afford to live in a city that meets my needs these are the actions I should take.
There are always going to be tradeoffs between the opportunities of people who live in places and those who want to live in those places. Stringent local regulations weigh heavily in favor of those who currently live in places, and this is widely recognized (e.g. the term NIMBY is widely known). Land taxes and deregulated local zoning seem to weigh heavily in the opposite direction, but I rarely see this addressed or acknowledged. Moreover, land taxes in particular seem like they actively disincentivize pro-social or civically minded policies for existing residents (whereas local regulations allow communities to improve themselves without being priced out through other means).
If I'm missing some context here let me know, but it's one of my main critiques when these proposals pop up that I've never seen satisfactorily addressed.
I'd recommend reading "Taxation: The Lost History" for a deeper dive into why rent as public revenue is the most logical, ethical, and efficient tax base. It is book length, but worth it if you want to understand some of the deeper/intricate concepts. Some useful sections include:
I would add that while zoning reform is something that all Georgists should get behind, land rent as public revenue is really a separate issue. It is worth doing even with the present zoning in place. Consider a scenario where society is at a technological level where the only type of development possible is a single-family home. Rent as public revenue is still the most efficient and ethical tax base for society. Land assessment is based upon the highest and best legally-permitted use. If it is -only- possible to build single-family homes, this does not diminish the case for land rent as the tax base.
Massive tax hikes please, for houses owned by people who don’t live there. Landlordism is out of control.
Land value tax doesnt feel like a fair solution. The value of your land is what you sell it for, not what a realtor guesses it is worth.
If you “buy a house in San Francisco before the tech boom” and never sell it, you shouldn’t have to pay some extra sour-grapes tax because everyone else is jealous of the perceived value of your land. How do they know you don’t have dry rot / radon / ghosts? Do you have to allow home inspections to “value” your property?
Conversely, if you cash out at 20x the value you paid then we already have a tax for that: Capital Gains.
All bets are off if you own land that isn’t the place where you live. If you own more than one home, neither is your permanent home, so enjoy being taxed on both.
> The LVT also has an appealing underlying moral framework: The luck to own a piece of land that happens to appreciate — say, you bought a house in San Francisco before the tech boom — should not come with it the ability to extract rents without providing value.
It seems a bit presumptious to say it is all luck - that somebody couldn't have predicted that the land would appreciate and thus bought early as a strategic move.
"It's the poor use of land right now that I believe is the main driver of poor affordability of housing."
The assumption that everyone who wants to live in {place} should be able to do so is interesting.
It's quite likely that {place} is a good place to live because there aren't too many people who live there. If that's true, we either come up with some way to limit the number of people or we destroy {place}.
As to the "but what about the poor people who provide services?" - sorry - I don't have have any sympathy for rich people who don't pay the help enough. Said rich people can do without.
I feel what's missing from this article is there needs to be a tax free threshold for landtax, much the same how income tax tends to be organised so the first $X earnings are untaxed.
Ideally a typical person shouldn't have to pay land tax on their home, otherwise they are effectively renting their own property.
Morally I feel government shouldn't tax a home and generally should aim tax to be as small as possible on life essentials. E.g Things like the home, food goods and medical treatment should have as little tax placed on them as possible.
Land tax would be best done at a cumulative value. Add up everything you own and apply a progressive rate against that. So a normal personal would be below the threshold while someone owning 100+ properties is at a rate likely to encourage them to divest to other asset classes or as the article suggests, extract more value.
There'd need to be some rules about trust/company ownership at top value to reduce people obvfuscating ownership. And separate rules for residential, rural and industrial/commercial zones.
Something like land tax isn't good or bad until you know the detail.
in india,it has been a tradition of "you sold a piece of land and this happens: you get capital gains and there is not a lot of exemptions (another house, agri land) so you pay your taxes at indexed cost of acquisition. the "price" set between buyer and seller at the time of registration is added 5-7% "stamp duty". so $ 1 mil + 5 % to govt= paid by buyer.
this is true for all subsequent sales so when the next buyer wants to see it at 1.5 mil, 5% is taken on 1.5 with no adjustment. this increases the cost of property but the government gets a huge chunk of tax revenue.
then there is area wise "property tax" which is an annual tax paid to local municipalities, small but it adds up.
when you are building a house, you pay "GST" or indirect tax on all consumables, wood, steel, cement, sand, bricks, glass, appliances, tiling, roofing, electricals, every darn thing and you cannot "claim" this tax as input so the government gets this.
> A land tax can’t disincentivize anything — land will continue to exist regardless of any taxation scheme.
It could and would disincetivize keeping lands in their natural state, since one is compelled to build in order to have the land not be a financial burden. Unless there is some kind of exclusion for that, it could result in sprawl.
I don't think the issue is taxing land per se, or even property, it's making illegal and taxing practices that are seen as immoral or not in societys best interest. This gets dangerously vague, but it has always been puzzling to me why actually blighted properties, essentially abandoned by owners not living anywhere near the area, werent taxed at ridiculously high rates.
The other side of the coin is municipalities abusing power to disenfranchise legitimate landowners. It seems like rules around all of this could be made clearer.
Sometimes it seems like you can go so far in avoiding a slippery slope that you're nowhere near one, but also nowhere near where you need to be.
This is a worthy idea, although hardly groundbreaking.
Over a hundred years ago[1] economist Henry George was advocating for a “single tax” on economic rents, from land to intellectual property. The idea being that those who own monopolistic rent extractors (only the owners of the land can use it to make money, etc) tend to be wealthier, and taxes on economic activity like income and sales tend to fall disproportionately on the poor.
In my mind, LVT only works properly when you've ripped out every other tax: income, sales, capital, you name it. Absolutely no more friction and warped incentives. Divide the government budget by the weighted land values and tax accordingly. But that could never work in our world. There would be too much temptation to add a small tax here for this other thing, and then it snowballs, and then we're back to where we started but this time LVT plus numerous other taxes.
I like the “land doesn’t disappear” quote. Here in the Great Lakes region the lakes have been up and there are absolutely people paying taxes on land that’s underwater. So sure, it may not disappear, but there are any number of ways for it to become useless. Unless zoning allows building on stilts and letting utilities run there.
That being said, I think we want to do something to avoid becoming a nation of land barons
[+] [-] CryptoPunk|4 years ago|reply
The same should apply to any other repeal of rent-seeking institutions: anti-labor-competitive laws privileging labor unions, licensure barriers privileging taxi medallion holders, etc.
The British used this method to end slavery throughout their empire, which meant: 1. much more rapid end to slavery, due to less political opposition to its abolition, 2. no costly civil war and enduring sociopolitical grievances that emanated from it.
Economic analyses indicate that compensating rent-seekers at an amount equal to the expected loss of economic utility over their lifetime from the elimination of their rent-seeking opportunity, as part of a reformation to end the institutions that enable their rent-seeking, leads to net economic gains, because the economic efficiency gains from expedited abolition of the rent-seeking far outweighs the cost of the compensation.
[+] [-] causality0|4 years ago|reply
I'm not fully clear on this statement. Is it putting forth that local governments shouldn't be controlled by the people who are local, or is it saying that homeowners hold more power than renters? If the former, that's just silly. If the latter, renters get the same one vote per person as everybody else. If they don't care enough to vote that's their problem.
Homeowners, like everybody else, vote in their own best interest. If you want higher-density housing figure out a way that it makes a place better for its inhabitants, not worse. Personally I've never lived in a city that got better as it got bigger and I vote accordingly.
[+] [-] Manuel_D|4 years ago|reply
[+] [-] loeg|4 years ago|reply
It's that the NIMBY subset of homeowners has disproportionate power in local government over other residents.
> If the former, that's just silly. If the latter, renters get the same one vote per person as everybody else. If they don't care enough to vote that's their problem.
This is facile -- zoning decisions are essentially never put up to a democratic vote. The outsized NIMBY power doesn't come from voting; it's from activities like attending local government functions, filing complaints, advocating to their representatives, etc. These are not things everyone has time or know-how to do.
[+] [-] wan23|4 years ago|reply
[+] [-] mdorazio|4 years ago|reply
1) Zoning laws have to change as well to actually allow development of the land being taxed toward more productive ends.
2) The land tax amount needs to be high enough that the pain of the tax effectively forces owners to improve what's on the land. A homeowner sitting on a million dollar piece of property in California taxed at ~1% is still unlikely to build an apartment complex if they like their single family home just fine and are making $200k+/year in income.
3) It could be personal bias, but a lot of LVT arguments seem to implicitly assume that more rental units is a good thing, which I don't really agree with. Personally, I'd rather see 2nd homes taxed into absolute oblivion, and I say that as someone who was a landlord for several years. Affordable housing to me means "affordable housing you can actually buy" as much as it means "affordable rent". The two do not go hand-in-hand if rental income is incentivized enough that people buy as many properties as they can get loans for (California today).
[+] [-] apendleton|4 years ago|reply
This is addressed to some extent, with the argument that zoning reforms are more practical because existing property owners are incentivized to support rather than fight zoning updates that allow more development, so they can fully maximize the ratio of their revenue against the tax. (“It turns NIMBYs into YIMBYs,” she quotes a researcher as saying.)
[+] [-] inter_netuser|4 years ago|reply
The house you 'own', in fact is nothing more than tenancy. Just a different kind of tenancy. Stop paying property taxes and find out you still have a landlord.
I think far bigger issue is how to apply LVT. a cookie-cutter approach is guaranteed to fail. an overly complex system is just another byzantine labyrinth of a tax code that'll be gamed.
[+] [-] Spooky23|4 years ago|reply
California needs a constitutional convention that gets rid of the stupid proposition law. Every random suburban town has a market worse than Manhattan because there is a fundamentally inequitable tax system.
[+] [-] legitster|4 years ago|reply
3) LVT would (theoretically) equally encourage the development of condos as it would rental units.
[+] [-] imtringued|4 years ago|reply
This is a personal bias because you are trying to prevent other people from making their own decision on how they want to live. An uncharitable interpretation of your comment could be that you are forcing your will upon other people against their will.
The fact that an LVT increases personal freedom is usually ignored because personal freedom counts for nothing these days. I find it particularly amusing that we have this group of people called liberals wanting their fake freedom.
[+] [-] bombcar|4 years ago|reply
It’s one of the reasons banks and companies aren’t in the single family rental business.
The main thing that covers for it is property appreciation - the rent is used to just offset carrying costs while you wait for the property to go up in value.
[+] [-] giantg2|4 years ago|reply
The author likely isn't aware of that. If the author made that argument then it would undermine their argument about affecting people's choices minimally or not at all.
[+] [-] twoxproblematic|4 years ago|reply
[+] [-] giantg2|4 years ago|reply
Of course it will distort choices and leave some people worse off. If the author can't see that, then they have a serious bias problem. The whole point of the land value tax is to tax land to encourage higher density and higher cost use. This is especially damaging to people who hold land that is developed around. If I have .75 acres with a single family home and 30 years later the area around me is developed, them I will be financially forced off of my land because I could theoretically put an apartment building on it. We already see standard property tax forcing the elderly out of their homes in many areas.
Please, show me how an appropriately set income tax disincentivizes work. I'm guessing they can't and are equally uneducated on that subject. Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive. Which doesn't seem to be the case. The people at that lowest level of income aren't paying (or gets refunded) income tax. Most of the tax at that level on income is for programs like social security and Medicare.
[+] [-] Hammershaft|4 years ago|reply
Under our current system we subsidize low value land uses by subsidizing the crap out of infrastructure to expansions of suburban areas zoned for single family homes.
https://www.youtube.com/watch?v=7Nw6qyyrTeI
The only revenue positive portion of nearly any modern american city/town are the few sparse walkable mixed use neighbourhoods and the dense urban core. Policies like a land value tax that push for higher value land uses are necessary to stave off the oncoming wave of municipal bankruptcies America faces.
> Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive.
You are thinking in absolute terms and not on the margins. If the marginal income tax beyond a threshold jumps by %10, then even discounting the increasingly marginal value of each additional dollar earned I will value the return on work less when I hit that tax threshold.
[+] [-] aperson_hello|4 years ago|reply
This policy only makes sense where zoning is also loosened enough to actually build on the land though...if zoning doesn't allow you to do anything with the land to make more money (building apartments, subdividing, etc.), this just becomes a tax on poor landowners.
[+] [-] diebeforei485|4 years ago|reply
It's reasonable to offer options to low-income retirees, for example allowing them to defer property tax payments until death. Texas does this, it works alright.
Note that a single family dewlling on .75 acres likely costs the government a lot of money to provide services (plumbing, sewer, electric etc) and is likely already a net debtor to the city/county. This style of development is why American (and Canadian) cities are going broke.
[+] [-] trgn|4 years ago|reply
I think this is exactly the framework. The idea is that that person right now is benefitting from increased community wealth (which would be realized in actual moneys upon sale of their property), and hence, should be taxed more.
Maybe there are some sophisticated ways to strike a balance, to avoid the situation you are describing. For example, people could pay less tax, but then they (or their estate) cannot pocket the capital gain upon sale of their property.
In any case, I think a land tax is much more equitable, because it punishes landholding, rather than punishes improving land. It's the poor use of land right now that I believe is the main driver of poor affordability of housing.
[+] [-] quickthrower2|4 years ago|reply
[+] [-] powerslacker|4 years ago|reply
[+] [-] schoen|4 years ago|reply
The most relevant phenomenon is
https://en.wikipedia.org/wiki/Deadweight_loss#Deadweight_los...
What might be confusing is that relatively few people are incentivized by an income tax to do no work at all, but many people may be incentivized to do less paid work than they otherwise would. (In fact, under idealizing assumptions which don't quite apply in all cases, you would expect every person facing an income tax to do at least very slightly less paid work than without the tax.)
[+] [-] tome|4 years ago|reply
Here's a proof that income tax disincentivizes work:
Would you work an extra hour a week if it were paid at 1000x your normal rate? I confidently assert that you would.
Would you work it for 100x your normal rate? Almost certainly.
10x? Probably.
0.5x? Probably not.
0.01? Almost certainly not!
So, earning more or less than some threshold hourly amount incentivizes or disincentivizes that hour to be worked. This is exactly the effect of income taxation.
Now, I sympathise with people who have worked hard, paid tax on income and bought property. They don't want to, in addition, be charged to own that property. I myself am in the same boat.
But I also sympathise with people who have studied hard and learned skills. They don't want to, in addition, be charged to use those skills!
The only argument I can see for income tax over property tax is "I expected the former but not the latter, so you've violated my expectations". I don't find that argument very convincing.
[+] [-] drewcoo|4 years ago|reply
This can only lead to no appropriately set Scotsmen.
[+] [-] yes_really|4 years ago|reply
It's almost tautological that taxing income disincentivizes work. Of course, it does not mean that a 30% income tax will disincentivizes work so much as to completely stop it (the "optimal" point in the Laffer curve is around the 30% point), but it is obvious that on the margin people will start dedicating less to work if their returns are lowered due to taxes.
[+] [-] RC_ITR|4 years ago|reply
This was exactly the narrative that led to Prop 13, and what it has led to is the most inflated property market in the entire world because there is nearly no carrying costs for a first (LA), second (Palm Springs), third (Atherton), or fourth (Tahoe) home!
Sure, a random subset of boomers can die in their empty 6 bedroom houses now, but countless people are moving to places like Texas where land value/property taxes have keep real estate prices relatively low (due to huge carrying costs).
I love CA, but the income vs. wealth/property tax split is what will kill it (at least in its current form).
[+] [-] sfblah|4 years ago|reply
[+] [-] xboxnolifes|4 years ago|reply
This is one of my current issues with land value tax: pricing out existing residents. One mitigation I think that would help would be only adjusting the LVT of a plot on sale / ownership transfer. It would likely need a bit more nuance than that, as it doesn't quite work with company owned land (doesn't really switch owners like a sfh owner dying).
The land will eventually get more efficient use, but there isn't the recurring threat of being priced out of your home.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] typ|4 years ago|reply
[+] [-] jjav|4 years ago|reply
This is why I disagree so strongly with the idea. Do I want to live in a society where every square meter of land is forced to be used for the highest possible ROI? No, absolutely not. There is already far too much drive to maximize profit on everything. We need less of that, not more.
Just a small sampling of land uses which are economically suboptimal: parks, playgrounds, bike trails, dog parks, community sport areas, nature conservation areas/greenbelts. And so many more.
I want to live in a town which has a lot more of all of the above, not less.
If the only thing that mattered was maximizing profit per square foot, it would be optimal to raze all the above and build them up with high-density housing towers.
[+] [-] woah|4 years ago|reply
[+] [-] c1ccccc1|4 years ago|reply
1. Live in a rural area that is very unlikely to be developed.
2. Make sure to buy a piece of land that is "original system" tagged instead of "LVT" tagged.
3. Buy "property tax increase" insurance. If your land's value goes up, the insurance pays the difference, and you don't notice the cost change.
If those 3 options don't turn out to be sufficient, then probably there's some hacky provision that could be tacked on, like LVT doesn't go up for individuals until they sell their land, or something along those lines. But of course that should only apply to people who are actually living in their own homes, not to landlords.
Anyway, the question is, why go to all this trouble? Why have an LVT at all? The answer is the following: No one created the land. When you're renting from a landlord, some of your rent is for the building, and all the effort the landlord puts into maintaining it. It makes sense that the landlord should be paid for that. Under the current system, though, some of your rent is for the land. That makes a lot less sense. Why pay the landlord for the land, even though the landlord didn't create the land?
Imagine some travellers find an oasis in the desert surrounding a fresh water spring. They (for some reason) decide to settle there, and need to decide how to split up the daily 10 000 gallons of water that the spring produces. I think that probably the travellers would decide to split the water evenly: 100 travellers means that each gets 100 gallons per day. It would be weird if they decided that some of them should be considered "waterlords" and get 2000 gallons per day, and the rest should get 0, and would have to pay the waterlords for their daily water.
Splitting the water evenly wouldn't be communism or anything. If Alice uses her share of the water to grow food, she wouldn't be obliged to share that food with anyone else, since she's the one who laboured to produce it. Everyone still gets to keep or sell whatever they produce, but the spring gushes whether anyone works or not, so the water gets split evenly.
Objection: Maybe some settlers will specialize in farming, and some won't. Obviously the farmers will need to use more water, so shouldn't they get a higher fraction of the water?
Answer: Yes, the farmers will use more water, but they can get it by trading the food they produce with their neighbours in exchange for water to put on their crops. The farmers would essentially be selling their ability to convert water into crops.
Objection: Wouldn't it be an equally good system if instead of trading in water people could trade shares in fractions of the water produced? So 10 000 shares are split equally among all the initial settlers, and each share is worth 1 gallon per day.
Answer: This has a few issues. The main one is that as new people are born and grow up, they would get an equal fraction of the water to everyone else in the "divide up the daily water production" scheme, but they would get nothing in the "divide up the shares" scheme, since all the shares would have been distributed already.
[+] [-] gameman144|4 years ago|reply
For instance, say I live in a very expensive city and I can no longer afford the land tax. I decide to move to a less expensive city and set up roots there. This new city is crummier: the city government is inefficient, there are fewer amenities available, and local institutions are poorly organized and executed.
I spend some time petitioning the local government to make reforms, I work with local groups to improve city amenities, and I vote for policies to revive local institutions. As I do this, the city becomes much nicer. However, it also becomes more attractive for other folks from the expensive city who can afford to buy up local property and drive up the value/taxes of my land. If this goes on, I'll once again be in a situation where I can't afford to live in my home because others want to live there too.
Say if, after moving to my cheaper city, I had instead decided to keep the city as crummy as possible while meeting my own needs. I drive a car, so I vote against bike lanes. I don't have young kids, so I lobby against school levies. I don't swim, so I vote against a public pool. This is objectively worse for the city as a whole, but if I want to be able to afford to live in a city that meets my needs these are the actions I should take.
There are always going to be tradeoffs between the opportunities of people who live in places and those who want to live in those places. Stringent local regulations weigh heavily in favor of those who currently live in places, and this is widely recognized (e.g. the term NIMBY is widely known). Land taxes and deregulated local zoning seem to weigh heavily in the opposite direction, but I rarely see this addressed or acknowledged. Moreover, land taxes in particular seem like they actively disincentivize pro-social or civically minded policies for existing residents (whereas local regulations allow communities to improve themselves without being priced out through other means).
If I'm missing some context here let me know, but it's one of my main critiques when these proposals pop up that I've never seen satisfactorily addressed.
[+] [-] pyradius|4 years ago|reply
Excess Burden https://www.jstor.org/stable/43817496?read-now=1&refreqid=ex...
The Incidence of Taxation https://www.jstor.org/stable/43817496?read-now=1&refreqid=ex...
Neutrality and Super-Neutrality https://www.jstor.org/stable/43817496?read-now=1&refreqid=ex...
Can Land Value Taxation Prevent Monopolistic Behavior? https://www.jstor.org/stable/43817496?read-now=1&refreqid=ex...
Capital Formation https://www.jstor.org/stable/43817496?read-now=1&refreqid=ex...
I would add that while zoning reform is something that all Georgists should get behind, land rent as public revenue is really a separate issue. It is worth doing even with the present zoning in place. Consider a scenario where society is at a technological level where the only type of development possible is a single-family home. Rent as public revenue is still the most efficient and ethical tax base for society. Land assessment is based upon the highest and best legally-permitted use. If it is -only- possible to build single-family homes, this does not diminish the case for land rent as the tax base.
[+] [-] gorgoiler|4 years ago|reply
Land value tax doesnt feel like a fair solution. The value of your land is what you sell it for, not what a realtor guesses it is worth.
If you “buy a house in San Francisco before the tech boom” and never sell it, you shouldn’t have to pay some extra sour-grapes tax because everyone else is jealous of the perceived value of your land. How do they know you don’t have dry rot / radon / ghosts? Do you have to allow home inspections to “value” your property?
Conversely, if you cash out at 20x the value you paid then we already have a tax for that: Capital Gains.
All bets are off if you own land that isn’t the place where you live. If you own more than one home, neither is your permanent home, so enjoy being taxed on both.
[+] [-] woojoo666|4 years ago|reply
> The LVT also has an appealing underlying moral framework: The luck to own a piece of land that happens to appreciate — say, you bought a house in San Francisco before the tech boom — should not come with it the ability to extract rents without providing value.
It seems a bit presumptious to say it is all luck - that somebody couldn't have predicted that the land would appreciate and thus bought early as a strategic move.
[+] [-] Mave83|4 years ago|reply
It's sometimes that absurde, that nearby lots have 3 times the building capacity.
We already have a land tax called "Grundsteuer", but it's useless in the way it is.
[+] [-] boredumb|4 years ago|reply
Vox is a dumpster fire and the owners have been hyperbolic rage bait farmers for over a decade.
[+] [-] anamax|4 years ago|reply
The assumption that everyone who wants to live in {place} should be able to do so is interesting.
It's quite likely that {place} is a good place to live because there aren't too many people who live there. If that's true, we either come up with some way to limit the number of people or we destroy {place}.
As to the "but what about the poor people who provide services?" - sorry - I don't have have any sympathy for rich people who don't pay the help enough. Said rich people can do without.
[+] [-] Gustomaximus|4 years ago|reply
Ideally a typical person shouldn't have to pay land tax on their home, otherwise they are effectively renting their own property.
Morally I feel government shouldn't tax a home and generally should aim tax to be as small as possible on life essentials. E.g Things like the home, food goods and medical treatment should have as little tax placed on them as possible.
Land tax would be best done at a cumulative value. Add up everything you own and apply a progressive rate against that. So a normal personal would be below the threshold while someone owning 100+ properties is at a rate likely to encourage them to divest to other asset classes or as the article suggests, extract more value.
There'd need to be some rules about trust/company ownership at top value to reduce people obvfuscating ownership. And separate rules for residential, rural and industrial/commercial zones.
Something like land tax isn't good or bad until you know the detail.
[+] [-] 2Gkashmiri|4 years ago|reply
then there is area wise "property tax" which is an annual tax paid to local municipalities, small but it adds up.
when you are building a house, you pay "GST" or indirect tax on all consumables, wood, steel, cement, sand, bricks, glass, appliances, tiling, roofing, electricals, every darn thing and you cannot "claim" this tax as input so the government gets this.
what more do you want them to impose?
[+] [-] tome|4 years ago|reply
The point of land value tax is to remove all those other taxes (at least, I wouldn't support introduction unless it did).
[+] [-] murphyslab|4 years ago|reply
It could and would disincetivize keeping lands in their natural state, since one is compelled to build in order to have the land not be a financial burden. Unless there is some kind of exclusion for that, it could result in sprawl.
[+] [-] derbOac|4 years ago|reply
The other side of the coin is municipalities abusing power to disenfranchise legitimate landowners. It seems like rules around all of this could be made clearer.
Sometimes it seems like you can go so far in avoiding a slippery slope that you're nowhere near one, but also nowhere near where you need to be.
[+] [-] rm_-rf_slash|4 years ago|reply
Over a hundred years ago[1] economist Henry George was advocating for a “single tax” on economic rents, from land to intellectual property. The idea being that those who own monopolistic rent extractors (only the owners of the land can use it to make money, etc) tend to be wealthier, and taxes on economic activity like income and sales tend to fall disproportionately on the poor.
[1] https://en.m.wikipedia.org/wiki/Henry_George
[+] [-] bennysomething|4 years ago|reply
So this is all based on the assumption that the government knows what the best use of your land is.
[+] [-] bitshiftfaced|4 years ago|reply
[+] [-] feistypharit|4 years ago|reply
That being said, I think we want to do something to avoid becoming a nation of land barons
[+] [-] endtime|4 years ago|reply