
Faster Growth Begins with a Land Tax in U.S. Cities - pdog
https://www.bloomberg.com/view/articles/2017-10-24/faster-growth-begins-with-a-land-tax-in-u-s-cities
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tabeth
This is a nice idea, but I'm skeptical it would ever work for most places, and
for the cases it would work, e.g. the cities are already developed enough to
warrant its existence -- it will be politically killed.

Case A: \------- Undeveloped, small city. LVT kills any incentive for
developers to purchase and build.

Case B: \------- Developed, large city. LVT hurts existing landowners, they
become politically active and shut it down.

Also, land is already taxed as a part of property taxes.

~~~
no_protocol
> Case A: ------- Undeveloped, small city. LVT kills any incentive for
> developers to purchase and build.

I'm not sure this is right.

There would be an incentive to purchase unused or underused land -- the price
will be lower! Relatively high taxes will encourage the landowner to sell the
underperforming property rather than hold onto it for years waiting for its
value to increase (speculation).

There would also be an incentive to build -- the developer can build as
extravagantly as he wishes without dramatically increasing taxes. Want to
build a giant tower? Tax is almost the same as if you built a parking lot.

~~~
tabeth
Given the current zoning laws, LVT would disincentivize as the most profitable
options, as you've pointed out, are extremely tall buildings with similarly
high construction costs.

At least now you could buy a large lot and put, say a laundry building, there.
With LVT, assuming minimum lot sizes remains a thing, simply disincentivizes
small scale developments which is exactly what a undeveloped small city needs.

\---

TLDR: large scale development isn't going to happen in a small city, therefore
the cost to even develop at all is now increased with LVT as there are minimum
lot size requirements per zoning (for things like side walks and parking)

~~~
klipt
A small undeveloped city has less valuable land so the LVT would have
negligible effect until it develops more.

~~~
tabeth
This is true, but without a sufficiently high floor for a LVT it's meaningless
as property tax already covers things. Also, I would imagine a LVT to be
decided by the state and not the city or town. If that's the case you wouldn't
expect drastically different LVTs for a given region.

Regardless, you need not a small undeveloped city, just take an abandoned part
of any city. The same thing applies.

~~~
klipt
> If that's the case you wouldn't expect drastically different LVTs for a
> given region.

The LVT may be the same percentage statewide, but the absolute amount of tax
depends on the value of the land which is drastically different across
regions. Cf downtown San Francisco vs farmland in the central valley.

> just take an abandoned part of any city

If it's abandoned (bad crime, fewer services etc) the land will be worth less
than elsewhere in the city.

~~~
tabeth
If it's that arbitrary then I see no difference between this and the existing
property tax. Why even implement it?

Property tax already takes into account both the improvements and the land.
Property tax is also different depending on region.

The main purpose of LVT, I thought, was simply to abandon property tax and tax
solely on the land, which would be assed on a square feet basis, with little
consideration to the area. What you're already exists with property tax
(albeit California AFAIK implemented something where your property isn't
reassesed).

~~~
klipt
> If it's that arbitrary

It's arbitrary that land in a desert is worth less than land in a major city?

> I see no difference between this and the existing property tax

Property tax: your parking lot in the middle of downtown San Francisco isn't
worth much so we won't tax it much.

LVT: You could build a condo building on that parking lot, so we will tax you
the same amount for the land as if you had.

LVT creates strong incentives to build useful things on the land.

~~~
tabeth
Again, property tax is implemented by the assessment. Your example is a
failure in assessing. It has nothing to do with LVT.

Also, your desert example doesn't make sense. If the land is usable it will be
taxed. If it is not usable it wouldn't be taxed heavily under the current
scheme, nor would it be with LVT.

I think you're underestimating how much people are already taxed for their
property.

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seanalltogether
Can someone explain how current property taxes don't cover this already?
Aren't you taxed relative to the value of the property which is both the land
and buildings combined? When my parents owned undeveloped land they still paid
taxes. They were still disincentived from holding land indefinitely without
using it.

~~~
o_nate
The problem is if you tax both the land & the buildings, you are discouraging
development on the land. A pure land tax avoids that problem. It may be a
subtle difference but if you are looking to increase land tax rates above
current levels you want to minimize disruption to economic activity.

~~~
jpao79
On the flip side, a large 20 story building consisting of apartments, office
space and retail places way more demand on terms of city services (i.e.
police, fire, transportation, education and other social services, etc.) than
an empty lot so it seems to make sense to tax both land value and building
value as it is currently done in many places (including California).

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AnimalMuppet
Many proponents are talking about LVT as if it were certain to work. They can
even cite some arguments to explain why it should work. But economics is full
of second- and third-order effects. Saying that this will produce faster
growth is far more certainty than we have at the moment.

The article cites a mixed bag of experience (failure in Altoona, success but
then abandoned in Pittsburgh). That's... not very much. It's _far_ too early
to talk about this as if the actual effects were certain. (And the article
doesn't mention _why_ Pittsburgh abandoned that approach, which I consider to
be important data.)

The article (and the proponents) talk about LVT as if it were going to be a
certain success and an unalloyed benefit. It may in fact be so, but it assumes
facts that are not yet in evidence.

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jpao79
A key component of implementing a land value tax would that it would need to
be coupled with reduced zoning restrictions. If a property owner decides to
build 20 story apartment next to my property which increases my property value
and property taxes, but the council blocks my proposals for apartment
development then that seems like it could get unfair pretty quickly.

~~~
mschuster91
> If a property owner decides to build 20 story apartment next to my property
> which increases my property value and property taxes

I'd bet that if your property has a single-family home on it and someone
builds a huge 20-story block next to it, it will kill the value of your
property, not rise it - shadow from the building, noise from construction,
traffic, kids...

IMHO "disruptive" buildings like this should not be allowed without careful
thought. In this case, for example, the infrastructure simply might not be
there to support a 20-story (or for what its worth even a small 4-story!)
building: electricity, telco, water and sewage feeds will need expansion which
means months of ripped-open roads, the roads themselves usually won't support
the amount of additional cars or public transportation.

------
IronWolve
Known a few people retired in Seattle, and now their home is worth a million
bucks, and gets tax'ed accordingly.

This was the problem california had, paid off homes property tax became the
same as renting an apartment, driving elderly out, and thus laws had to be
passed to protect them.

There was a new stop light put in near my work, it cost 750k. For a stop
light, the city waited years due to the cost. More expensive since it was on a
main road, and part of the cost was flagers and lane reduction.

Costs are too expensive, even maintain streets in some areas due to low income
homes and less property taxes, and the cure has been roundabouts instead of
stop lights (or over passes on urban highways.

Its crazy. Don't even get me started on waste of an impact studies for homes
but doesn't include roads.

And saw another report Vancover homes will be around 2.1 million average by
2030. Crazy.

~~~
TulliusCicero
> This was the problem california had, paid off homes property tax became the
> same as renting an apartment, driving elderly out, and thus laws had to be
> passed to protect them.

Oh, is that why Prop 13 also applies to commercial property, people who can
easily afford the increased property taxes, second homes, and heirs?

Prop 13 was a giant mistake. A narrow version to prevent grandma from getting
kicked out of her longtime home would be fine, but the real thing is insanely
broader than that.

~~~
JimboOmega
It was absolutely a giant mistake. Part of the original pitch was that
landlords would pass the savings on to tenants, which didn't happen for very
obvious reasons.

I think bringing back any form of property tax is a brilliant idea; it would
raise a ton of money for local governments, discourage people from holding
empty units, and also help fix the ridiculous reality that building
residential units hurts a municipality financially which causes all kinds of
stupidity.

Take my building; it's owned by some vague partnership, is a 14 story high-
rise with 100s of units, and for tax purposes it's worth something like $6M
for the entire thing. In downtown San Francisco!

~~~
r00fus
> Part of the original pitch was that landlords would pass the savings on to
> tenants

Trickle down fails again. Or succeeds wildly, depending on how much wealth you
have invested.

------
swendoog
Yet another "solution" that focusses on "affordable" housing, not market rate
housing.

The world needs affordable housing, so don't get me wrong. But what's
infuriating is how often the conversation stops there. It's always about
building more housing and creating affordability programs for the poor.
Meanwhile forgetting that even middle class workers are being priced out of
the market!

When your middle class can't afford (or can barely afford) the cost of
housing, your problem extends beyond just that class.

I don't believe in "trickle down" economies, where consolidation of wealth
into the hands of a few "lifts everyone up". What I do believe is important -
for everyone - is a healthy, educated, middle class. In a way, the health and
success of your middle class is like a barometer for the health of your
society as a whole. When your middle class cannot afford to buy a home, cannot
afford to begin a family, and cannot afford to live at or above the quality of
life of the generation before them something is wrong.

Yes, we need to help the poor. Yes, we SHOULD have programs for that. But the
conversation all too often stops there, and market rates are taken for
granted.

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jpao79
A key point is taxation rules need to put in place a priori of significant
development/investments or implemented over an extended phase in timeframes of
decades so developers/investors can plan/adapt appropriately.

What you don't want to become is city (or county, state or country for that
matter) known for changing the rules of the game when its convenient.

Investors make what can be transformational improvements to a city. However
the payback periods for a building can be on the order of decades (think
Salesforce Tower - cost to build $1.1B, Salesforce lease will pay $560M but
over 15 years).

The developer or investor takes on the risk and will by definition be in the
red for the first decade or two (historically a 7% cap rate is expected -
which is about a 15 year payback period). And that doesn't even including the
planning period before the building gets built.

If a city suddenly changes the rules on a populist whim because suddenly the
city is popular with the tech industry, future investors will definitely take
notice and it will absolutely stifle any future investments in the city.

------
PatientTrades
> a land-value tax is an efficient and fair way to take a city that now works
> only for lucky prosperous landowners

And what happens if you cannot afford the land tax? Does your home get taken
away? The idea that only rich people own land is baseless. There are many poor
people that own moderate/cheap homes on prime real estate in places like LA
and San Diego. Most of these homes were built several decades and their
property taxes were capped allowing them to stay in their homes. There needs
to be a provision that certain individuals can avoid this land tax based on
their income otherwise many people will lose their home because they can't pay
the tax.

~~~
civilian
I'm excited that you're stumbled into "taxation is theft" :) Yup, taxation is
inherently immoral, and they will _lock you in a cage_ if you don't pay.

But. As long as we're comfortable taxing people, then why is it unjust to tax
in this way? We're taxing in a way that allows the land to be better utilized
for _everyone_.

Additionally, this person who bought this property decades can probably sell
the property for a pretty penny, and move to a cheaper area, and have plenty
of cash leftover.

~~~
klipt
> I'm excited that you're stumbled into "taxation is theft" :) Yup, taxation
> is inherently immoral, and they will lock you in a cage if you don't pay.

Okay, let's reframe it this way: the people collectively own all land through
a corporation called The Government, where each person of voting age gets one
voting share. The Government rents out land to individuals for a fee equal to
the Land Value Tax...

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IncRnd
What is the methodology that concluded increased land taxes lower land costs?

~~~
jjoonathan
Reducing the attractiveness of land-the-speculation-and-investment-instrument
increases the supply of land-for-living.

~~~
IncRnd
That's one train of thought, but LVTs are also rarely used. There's a reason
for that, too.

The view you related may hold where there are caps on rental increases, but
why would that hold anywhere else? In other words, what is the mechanism that
forces a landlord to absorb the tax increase? If a-particular-piece-of-land is
to be transitioned from land-the-speculation-and-investment-instrument to
land-for-living, then the increase from taxation will already be included in
the base rental rate.

Unless, the argument is that everyone is poor, so the landowner will not pass
the tax onto renters. But, dependence upon large numbers of poor people is an
odd way to structure places for renters to live.

Continuing with the same economics as what you posted: once some pieces of
land are transitioned to land-for-living, then demand will increase for land-
the-speculation-and-investment-instrument. Supply and demand isn't static. It
fluctuates.

If the true goal is to have a place for people to live, then it is far cheaper
for people if the government just rezones the area, assuming their employer
didn't just lose a building.

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theBuess
What happens when landlords just pass the cost off to the tenants?

~~~
iaw
In numerous cities there are foreign investors who buy mansions and let them
sit empty as investment properties. You can stroll through these "rich"
neighborhoods and see how sparsely populated they are.

Investments like that would look a lot less desirable if the land was taxed in
the proposed fashion.

~~~
theBuess
It is, its called property tax.

~~~
damnyou
You can break up American-style property taxes into two components:

1\. A tax on the unimproved value of land, also called a land value tax.

2\. A tax on improvements (buildings etc).

Currently the rate of tax 1 (LVT) is the same as the rate of tax 2. The
assertion here is that it would be better for society if tax 1 were higher
than tax 2, or even that tax 2 is zero and tax 1 is raised accordingly.

~~~
strictnein
If thats the case I feel like most of the people supporting this don't live
outside of urban settings.

Getting rid of #2 would be really harmful and would be an absolute gift to the
upper classes. Or, if it didn't cut taxes for the wealthy, it would
significantly raise taxes on a lot of the middle class, forcing them out of
smaller homes in good school districts.

~~~
EddieRingle
I live in a small suburban city within the Little Rock metro area and have run
the numbers before. You could replace income and sales taxes with a straight
land value tax (also replacing the tax on improvements to the land) and a
household's tax burden would be roughly the same, if not less.

Granted, mine is just one sample point, but it was enough to keep me
interested and wanting to see further (and better) studies done.

~~~
seanalltogether
The biggest problem I can spot with a solution like that is that it doesn't
provide wiggle room for people that need to downscale rapidly. Say I lose my
job and have to find something that pays half as much. With the current tax
structure I can reduce spending and my income tax will automatically be
lowered, so I can continue to afford my house. In an LVT only situation, I'm
screwed.

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jrochkind1
> The money raised with a land-value tax can be spent building affordable
> housing for the poor.

Presumably rental, not ownership, cause the poor won't be able to pay the land
tax!

I suppose there could be a homestead and/or income based exemption/reduction.

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unabridged
I think we should also be looking into progressive property/land taxes. Let's
say everyone's first $100-200k in property is untaxed. Or you could make even
more brackets.

Another problem is super dense developments not paying their fair share. A
skyscraper's residents are using way more of the city's resources than the
small building next door, but with the same footprint they are paying the city
the same amount. I suppose this would have to be fixed with some kind of
income tax.

~~~
virmundi
On the skyscrapers, aren’t they using less resources per square foot?

~~~
unabridged
The land is being used efficiently. But per person they are using nearly the
same amount of police, fire, sanitation, roads, schools, ... All of which is
currently funded by property tax. I feel the tax burden will end up shifting
away from rich people who can afford to live in brand new very tall luxury
condos.

~~~
klipt
If living in towers is more affordable than living in single family homes,
what's to stop poor people from living in towers too?

If anything, it should only be rich people who live in single family homes in
the middle of dense cities, and they should pay taxes out the nose for the
privilege.

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trhway
>Therefore, a land-value tax is an efficient and fair way to take a city that
now works only for lucky prosperous landowners, and turn it into a place where
the working class can afford to make a decent life.

basically a mild version of Lenin's "the main issue of revolution is the issue
of land". Was very popular at the time.

~~~
not_that_noob
False equivalence - Lenin would have said all land is to be owned by the
state.

This is arguing for increased taxation of idle assets. Society writ large
benefits. Think about the people who can't think of starting a company now
because it's too expensive to live here in Silicon Valley. Never mind the
teachers and nurses and firefighters who are needed to make for a well-rounded
society.

~~~
trhway
>False equivalence - Lenin would have said all land is to be owned by the
state.

A major point of "Das Kapital" is the extraction of value by property owners
due to mere fact of being an owner of that property when somebody else's use
of the said property produces the said value. Lenin in the phrase i cited
states his view that land is the main domain where conflict of interests
between such rent-seeking owners and efficient users of the land leads to and
must be addressed by revolution.

State ownership of land, by the virtue of outright elimination of rentiers and
making everybody a renter from state, is obviously the ultimate approach to
whatever issues are [perceived to be] stemming from such rent-seeking. LVT is
a mild version of that approach as it doesn't eliminates rentiers, it just
makes them into renters of their land from state - "economic rent of land" :

[https://en.wikipedia.org/wiki/Land_value_tax](https://en.wikipedia.org/wiki/Land_value_tax)

[https://en.wikipedia.org/wiki/Economic_rent](https://en.wikipedia.org/wiki/Economic_rent)

~~~
not_that_noob
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