
Rewarding Neglect and Punishing Investment in Struggling Neighborhoods - oftenwrong
https://www.strongtowns.org/journal/2019/3/7/rewarding-neglect-and-punishing-investment-in-struggling-neighborhoods
======
tomohawk
Big fan of land value taxes. They apply pressure to make the best use of the
land rather than sitting on it. However, I'm not sure it will help cities like
Baltimore, where they were unable to turn things around even by giving away
houses for $1 and no taxes for a few years.

In a city, you're more dependent on the government to take care of things, and
in most US cities, with single party control, it does not happen. They don't
take care of crime. They let infrastructure decay. The schools are crap
(despite high per-pupil spending). They make crony deals with the unions on
pensions and benefits that are not possible to fund.

Not feeling safe and with a bleak future for their kids, people move out. I've
seen this happen over and over again with coworkers who initially were big on
city living, but eventually moved out when they got mugged or had kids.

The result is insane taxes as population leaves, and subsidies from the
surrounding areas to try to keep the failed city afloat.

The high taxes and obvious government incompetence then act as a moat to keep
people out.

~~~
maxsilver
> Big fan of land value taxes. They apply pressure to make the best use of the
> land rather than sitting on it.

I like that Land Value Taxes hurt anyone hoarding land to ride the rising
assessments (which is a major problem today). But I don't like that LVT
punishes people for productively using land. Land Value Taxes apply pressure
to make the _highest capital return_ on every piece of land, which is not the
same thing as the best use of the land, and would hurt many good uses of land
that are not profitable.

> In a city, you're more dependent on the government to take care of things,
> and in most US cities, with single party control, it does not happen.

Yep. And what's worse, most cities intentionally want to make all of these
things worse.

Cities are often intentionally destroying their infrastructure (tearing down
useful-but-unloved infrastructure for useless-but-pretty replacements) and
intentionally destroying their affordable housing (purposefully gentrifying
areas of their cities, to drive out residents deemed undesirable)

The cycle of driving people out of the city by attacking
housing/transportation/services is not an accident, it's not happenstance.
This is an intentional design goal baked into how they frame every problem and
how they approach every change. It's not something anyone will admit to
upfront, but if you travel through Urbanist circles long enough, you can get
into the behind-doors conversations they have and see this in action.

> I've seen this happen over and over again with coworkers who initially were
> big on city living, but eventually moved out when they got mugged or had
> kids.

Yep. And if you escape the crime or the school problem, they'll hit you on
housing or transportation instead. There's no escaping the never-ending list
of problems forced upon residents.

Suburbs are the place for affordable housing. Suburbs are for functional
schools. Suburbs are for sustainable living. Suburbs are for decent
infrastructure. Suburbs are for diversity, especially on the low-
income/working-class side of things. Suburbs are the place you begin your
startup in a garage, because Suburbs are the only place cheap enough that a
regular person could have a garage at all.

Cities aren't for people. Cities are for the conglomeration of capital, and
capital alone. Humans need not apply.

~~~
clairity
> "Land Value Taxes apply pressure to make the _highest capital return_ on
> every piece of land, which is not the same thing as the best use of the
> land, and would hurt many good uses of land that are not profitable."

(highest and) best use [0] is generally understood as maximizing economic
return, so you're essentially arguing semantics here.

with that said, i agree with the underlying sentiment that it's not the only
"return" we should consider. maximizing economic return fails to capture the
richness of the human experience in often obvious but not easily quantifiable
ways, which is why we let economists get away with such unrealistic models.

but your position on suburbs (vs. urbs) is baffling (and idealistic). suburbs
externalize their costs to achieve that cheap living. implementing an LVT
would (presumably) take that advantage away.

[0]
[https://wikipedia.org/wiki/Highest_and_best_use](https://wikipedia.org/wiki/Highest_and_best_use)

------
patio11
"At the same time, the city's infrastructure is aging and requires more
maintenance than it once did."

The thing which is aging is more likely the base of city employees and
retirees who were promised defined benefit pensions which were underreserved
for and routinely looted, over a period of decades.

Erie, for example, has an unfunded liability of about $90 million against a
total annual budget of ~$115 million. (As is typical, the lion's share is
police/firefighters.)

~~~
omegaworks
Can we close the book on this "unfunded pension liability" nonsense? The
government can create the raw dollars needed to fund the pensions. Just listen
to Alan Greenspan himself shut down Paul Ryan's perverse anti-social security
zealotry:

[https://www.youtube.com/watch?v=DNCZHAQnfGU](https://www.youtube.com/watch?v=DNCZHAQnfGU)

~~~
thaumasiotes
> The government can create the raw dollars needed to fund the pensions.

Having the ability to mint fiat money doesn't mean you can pay for whatever
you want. Costs adjust to the amount of money there is.

In the limit case, printing a very large amount of money is the same thing as
imposing a 100% wealth tax. It will get you all the purchasing power there is
to be gotten... but not more than that. (It will also pretty sharply reduce
the absolute amount of purchasing power that "all the purchasing power there
is" represents.)

~~~
dragonwriter
> Having the ability to mint fiat money doesn't mean you can pay for whatever
> you want.

It actually does when talking about pre-existing obligations denominated in
the currency. It doesn't when talking about most other things, but existing
pension obligations are pre-existing dollar-denominated obligations.

Now, the feds monetizing all the underfunded state and local pensions would
effectively devalue the dollar, so those pensioners (and everyone else on a
fixed dollar-denominated income) would be getting far less than they expect
for it, and taxing extra money out of the system to counteract the
inflationary effect negates the whole idea of monetizing the obligation in the
first place—you might as well just leave monetary policy alone and tax money
out of the system to pay for the pensions.

~~~
thaumasiotes
>> Having the ability to mint fiat money doesn't mean you can pay for whatever
you want.

> It actually does when talking about pre-existing obligations denominated in
> the currency.

It still doesn't. It means you can default while calling the default
"inflation". Doing so wipes out all other currency holders in addition to you,
but it doesn't mean you met your obligations.

(This is basically the same thing as you're saying, but let's be clear about
what it means.)

~~~
dragonwriter
You're simply wrong: if the obligation is denominated in your currency, you
absolutely do meet it: it's not any kind of default. Yes, the creditor gets
less than they would have without the monetization, but that's not default,
because currency value is expected to change over time and an obligation
denominated in a currency accepts that variability by definition.

------
js2
Similar piece from The Economist a few years back, but looking at the opposite
side of the coin, wildly successful cities with ridiculous housing costs due
to poor land use, but still prescribing LVT as part of the solution:

[https://www.economist.com/leaders/2015/04/04/space-and-
the-c...](https://www.economist.com/leaders/2015/04/04/space-and-the-city)

Related article on LVT:

[https://www.economist.com/free-exchange/2015/04/01/why-
henry...](https://www.economist.com/free-exchange/2015/04/01/why-henry-george-
had-a-point)

"But if LVTs are so great, why are they so rare?"

 _LVTs would impose concentrated costs on today’s landowners, who face a new
tax bill and a reduced sale price. The benefit, by contrast, is spread equally
over today’s population and future generations. This problem is unlikely to be
overcome. Economists will continue to advocate LVTs, and politicians will
continue to ignore them._

[https://www.economist.com/the-economist-
explains/2014/11/10/...](https://www.economist.com/the-economist-
explains/2014/11/10/why-land-value-taxes-are-so-popular-yet-so-rare)

------
huffmsa
Taxation based on the value of the edifice is such a dumb idea it could only
have come from the government.

It does precisely what this article says, disincentives improvements, because
"the government" is just going to take more of your money.

Seems illegal to boot (although I imagine there's plenty of precedent).

Taxing the land at least has some logic to it. "This land is serviced by this
government, you pay for those services".

As well having a high land tax means you're going to build high revenue
generating structures to meet your burden.

~~~
tchaffee
It's not just the land that is serviced though.

Aren't the infrastructure and service needs (fire department for example)
different for no building vs. a one story building vs. a forty story building?

~~~
huffmsa
That should be covered in the land zoning code. Land where you're allowed to
build a 40 story building should be more valuable than one where you can only
build single story.

As well, the taxes on sales in the increased number of stores / sales of
leases / income tax revenue from the increased number of residents should
cover the increase in service costs.

If they don't, you're not running an efficient government. (Ha. Efficient
government).

~~~
tchaffee
So if I want to maintain a one story building on land that is zoned for a 40
story building, I have to pay extra taxes even though I'm not using extra
services? Seems to me like the best policy would be taking both into
consideration.

~~~
zeveb
Yes, because that's the land's actual value.

This is why land-value taxes are unpopular: small landowners (e.g. Mom & Dad)
want to be able to hold onto their small single-family homes instead of being
forced to sell to a developer who would build a multi-family dwelling.

Cf. Prop 13 in California.

~~~
tchaffee
But why the insistence on taxing land at it's full value while ignoring what's
on the land? High taxes on just the land force me to sell and to improve the
property. High taxes on just the house can force me to not improve. Neither
seems ideal. What would be ideal to me is a good balance that rewards
improvements without punishing those who don't want improvements. Especially
if the owner lives there.

------
JamesBarney
I always wonder why these articles about growing infrastructure costs and
shrinking tax bases are about cities and not the suburbs. You would think the
issues would be worse in the suburbs because the lower density would drive up
the amount of required infrastructure per house.

~~~
maxsilver
Infrastructure costs don't scale up linearly with distance, they scale up
exponentially with complexity.

Suburban infrastructure, while spread further apart than city infrastructure,
is usually far simpler to build and simpler to maintain and simpler to
replace.

Costs go up a little bit in raw resources (longer wires, longer pipes, etc).
But costs drop dramatically in amount of labour, length of time, installation
costs, and so on. So usually, it's net-cheaper overall.

~~~
magduf
But it externalizes its costs: it requires people to have cars, which not only
costs a lot of money in direct costs (car payments, maintenance/repairs,
fuel), but also has a steep environmental penalty, plus a cost in lives lost
due to crashes.

------
jelliclesfarm
I find the idea of taxing one’s primary residence utterly distasteful. People
live and work and buy things..all of which is taxable.

A house sits and does nothing. It doesn’t ‘consume’ anything and if it does
consume or it’s residents consume, that’s taxed. We should have consumption
tax..not property taxes for one’s primary residence.

We have road tax, gas tax, sales tax, income tax ..we pay for utilities,
essential services, schools. But why should we pay taxes for living under a
roof and getting married and giving birth and I guess when we die. That’s
being taxed for existing.

~~~
Scaevolus
Property consumes limited space. If anything, property taxes are too low! Look
at all the underdeveloped lots that provide a few parking spots next to tall
apartment buildings.

~~~
jelliclesfarm
So are precious metals and top soil and fossil fuels. They are taxed as ad
valorem.

Here is a thought experiment:

No one is taxed again and again every year after they buy ..say(and this is
hypothetical)..a pace maker that is made with a very rare and precious metal
that is a limited resource.

Of course, once the metal is depleted then others can’t avail it to make new
pace makers that would help others live. Does it mean that the original
recipients of a life saving device must be taxed every year as their
particular illness start affecting new patients.

Think of that chronic illness as lack of access to property. And the pacemaker
as the home. And the precious metal used to make the pace maker as the limited
resource or commodity that is land.

Early adopters have an advantage. There is nothing morally or ethically wrong
with it.

What is truly wrong is the punitive financial burden brought about by the mere
possession of said asset. It’s incredibly perverse and unfair.

It can be argued that even a nominal property tax is unfair unless it is
ploughed back as essential services. Using it for public education is for the
greater good and is a mark of a egalitarian society. To use it to funnel money
into unfunded pension liabilities of public sector employees under the
guidance of unions is unacceptable. To claim it as a right with entitlement is
borderline thuggery.

~~~
michaelt

      No one is taxed again and again every
      year after they buy ..say(and this is
      hypothetical)..a pace maker
    

A pacemaker doesn't need weekly trash pickups forever.

~~~
dsfyu404ed
So send a bill for trash pickup the same way a bill is sent for water/sewer
usage.

People should not have to pay tax on their primary residence. I'm fine with
taxes on every subsequent property and taxes on rental units on the same
property but you should not have to pay a tax for owning your own residence.

~~~
michaelt
As a rational asshole, I love the idea of optional billing for trash pickup,
because I can save money by dumping my trash in the nearby national park under
cover of darkness.

My neighbours don't feel the same way, so we have mandatory trash pickup,
a.k.a. a tax.

------
externalreality
Corruption and ultra high salaries of government officials and police drain
the life out of these cities. This is a story playing out in small piggy-
banks, ahem, cities all across the nation. I lived in a particularly egregious
one called Yonkers, NY for a while. This place is the only city in NY (other
than NYC) that goes after your income too in addition to ridiculously high
prop taxes.

~~~
selimthegrim
The Key and Peele Obama Meet and Greet sketch that became a huge meme platform
last year has a version where the people being greeted are various areas in
the Bronx and Yonkers is the person ignored at the end as Obama walks out.

------
Wyndtroy2012
Good article. The land tax is probably the preferred tax of libertarians, and
it does make sense in many cases. But in the case of cities with vastly higher
municipal costs than its neighboring jurisdictions, the land tax would still
be high enough to ward off new residents, which would just work to keep rents
too low, etc. The city will have to see where its costs are, get them under
control if possible, and grow its "brand." There are a lot of things that are
attractive to a city as opposed to the suburbs, but the negatives would need
to be dealt with, too.

~~~
rocqua
A land tax with the same total revenue of a property tax benefits those with
houses that are expensive w.r.t. the landvot sits on. This means some people
would be worse of, and some better of.

In general, it drives high density and quality development. I might speculate
that this will increase demand for housing, which would push up land value.

------
baroffoos
I wonder if higher density living could lower costs for councils/cities. With
more people living closer you would think less money needs to be spent on
footpaths and such, maybe less police because they are spread out less.

Also makes me wonder what the maintenance costs of rail are. I don't know much
about it but light rail tracks look like they would probably last a really
long time without being replaced where as it seems roads hardly last a few
years before needing to be resurfaced.

------
calineczka
How does the property tax work in the US? How big is it? There is a similar
concept in Poland but the values are relatively low and I don't think they
affect the economy of cities much. Also, it doesn't get bigger if you
renovate. It depends on the square meters of the building.

~~~
afarrell
> It depends on the square meters of the building

Is that the Sq meters of the ground floor, or sq meters when you add up the
space of all the floors?

If the former, that sounds like a land value tax—-something that lots of
people have suggested would improve construction incentives

~~~
Tade0
We have both in Poland - they're pretty minimal unless you're running a
business in there - then the latter shoots up roughly 30x[0].

[0] Provided you dedicate at least one whole room for commercial activity. If
you don't then apparently there's no additional taxation. I am not qualified
to give tax-related advice though, so don't quote me on that.

------
rocqua
How do you asses land value?

For property value, you at least have an active market to reffer to. Since
most land is sold witg property on it, there is much less of a market to
indicate the value of plain land.

~~~
oftenwrong
You compare the value of a given property to that of similar properties in
other locations. Let us say you have two _identical_ apartment buildings: one
in the city center, and one on the outskirts of the city. It is likely that
renting an apartment in the former is more expensive, despite both building
being exactly the same. The difference in rental rates between the two
buildings is due to the difference in value of the land they are built on.

Further reading: [http://kaalvtn.blogspot.com/p/valuations-and-potential-
lvt-r...](http://kaalvtn.blogspot.com/p/valuations-and-potential-lvt-
receipts.html#2)

------
intrasight
How it was explained to me in a business course in college is that capital
should be taxed based upon it's economic yield. How much it costs a
municipality to service a property shouldn't be taken into account. I've
always believed that to make sense, and this article didn't sway me. If I want
to sit on some empty land, then the government doesn't deserve any tax revenue
from me because I'm not getting any revenue from the land. The government
shouldn't be able to tax based upon "possible" revenue - because they are a
poor judge of what is possible (as are most people). But they should be able
to audit my books to find out what actual revenue is accruing from my
ownership of capital. Taxing the rewards of capital is the basis of
capitalism.

