How is land value tax not just "your land could potentially produce a lot of value, therefore you can obviously afford to pay a lot of tax"?
From the perspective of the retired person on a fixed income who's lived on the same plot for 50 years while a city sprang up around them, the result is functionally the same.
Sibling comments have provided responses to other aspects, which all also seem right to me.
The proposed land tax in my state has land tax for seniors accrue against the property and is paid upon sale or death.
The objection to this is that it's a "death duty", to which the response is that you did absolutely nothing to help increase that land value. In fact, you worked against increasing efficiency by holding on when the land could be used for more productive purposes.
That's why the Georgist land tax is such a good idea; it taxes you based on the gains that the rest of society generated for you. Whereas a property tax also taxes you for your own investments.
I'd be fine with paying a tax "on the gains that the rest of society generated for you" upon me selling that land to someone else.
Just like capital gains on equities. I don't pay until I realize. I'm happy to pay some property tax in the meantime to keep gov't services running in the area.
But any other method is terrifying to me and makes me start thinking "What super rural state can I move to in retirement to buy a nice parcel and be seriously left alone these days?"
With equities you're helping the economy by keeping your money invested in our companies. We need investors capital to remain competitive and we should incentivze you to stay invested as long as possible.
With land you're continually depriving the local community of the space they need to live and work. Every hour spent commuting past your yard is an hour wasted. You should continually pay for the privilege of exclusive access to an in demand part of the nation.
> I'm happy to pay some property tax in the meantime to keep gov't services running in the area.
That's precisely what this is though? Do keep in mind that the for land tax proposals suggest it replace at least a portion of income tax.
> upon me selling that land to someone else. Just like capital gains on equities.
But with your equities investments you don't get any personal gain until you sell. When you hold land, you're benefiting from it the whole time. We're not talking about only the financial benefits from value appreciation, but rather in the main the benefits that you get from society from having the land.
> you did absolutely nothing to help increase that land value
That's pretty unfair. People who lived a lifetime in that house did contribute their bit to making the area thrive and become more valuable by keeping the place nice, being good neighbors etc.
If you think that doesn't contribute at all, consider the opposite. If they lived there for decades and let the house go to ruin and were belligerently antisocial all the time, that drives away nicer people and helps turn the neighborhood into a bad place.
Land value tax doesn't punish development the way that property tax does.
>From the perspective of the retired person on a fixed income who's lived on the same plot for 50 years while a city sprang up around them, the result is functionally the same.
> Land value tax doesn't punish development the way that property tax does.
If you can afford to pay 100% upfront for the cost of doing an addition to your house, then you can almost surely afford the ~1% per year additional taxes. This is technically a 'punishment' but it is a really minor one, and I doubt it actually impacts many people's decisions
Property tax itself is not the issue. The issue is caps on property tax increases that are meant to protect those poor fixed income people. Essentially, people do not make any change that would require the property to be reassessed, which may massively increase the taxes to where they should be. Hence people not doing some minor addition.
But those rules are specific to California? I'm confused why people seem to be suggesting that a land value tax is the only possible solution, when an alternative would be to just make taxes in that state work the same as elsewhere.
California is not unique in capping property tax increases in that way. Other states do it. California has a uniquely bad law though since the capped prices can be passed on to family. I agree that LVT is not the only way to fix those issues but LVT has some other benefits as well (such as discouraging empty lots).
Can you really call the results of Proposition 13 "property taxes"? If an owner is currently paying next to nothing in taxes on their O($10M) plot of land, then practically any sane tax scheme is going to be better.
I'd argue actually charging the owner of the shack $100,000/year in property taxes (~1%) wouldn't have a radically different effect than charging them a 2% land value tax.
Under the property tax, they'd be penalized for developing the land. Their fallowing of the land would be effectively subsidized.
Under an LVT, the landowner contributes the same amount to their community regardless of their use of the land -- empty plot, slum, or well maintained building. This is good for the community overall.
So in your example the speculator sitting on an empty plot would see their carrying costs double. How could that not affect their behavior?
I'm arguing that a 10x increase in property taxes (or whatever 100k/year works out to) would already be enough to trigger the current owner to sell.
Once the property is sold, a developer will find that their profit from constructing a building is roughly proportional to the floor area regardless of whether there is a 1% property tax or not. This is because the profit they earn per-sqft is more than the resulting net present value of future property taxes on it. Therefore they maximize the density as allowed under zoning and we end up with an efficient use of the land.
(Of course dumb zoning laws messes everything up, but that's a whole separate topic...)
Unless the new development is writing premiums as well, I suspect you mean to say that the new development would ensure that there are cheap apartments to move to.
Yes. Henry George basically said it's too hard (utopian?) to just switch to everyone leasing their land, so a land value tax is a pragmatic approximation that still allows for the traditional sense of property ownership.
land value tax is not assessed on the basis of who is presumed able to afford it. it's assessed against the use of a public good --- the ability of more people to live and work in the city that perhaps makes the land more valuable than when the owner bought it.
also observe that the purpose of the tax is not strictly to raise revenue, but to address what would otherwise be an externalized cost and make the housing market more efficient.
> also observe that the purpose of the tax is not strictly to raise revenue, but to address what would otherwise be an externalized cost and make the housing market more efficient.
In a time and place where we can deficit spend well, and more demand unlocks more growth, this should be the primary purpose of most taxation.
California's property tax system is completely messed up to prevent that person from ever having to move or be impacted in any way. Why does that person get to be exempt from change when everyone else has to deal with it?
I don't think "perpetual growth," is really what people complain about. what they really mean is that they want to shortchange everyone who does not already have housing.
There are a finite number of people with finite needs. Growing the housing stock to house this finite number of people is not "perpetual growth" and it's downright offensive to say that when we camps of homeless people, camps of people in RVs without other housing, camps of people in their cars, people working full time but only able to afford overcrowded housing, and at the same time enormous wealth within miles.
A society that allows such destitution while others have enormous wealth is not one that is running well. It shortchanges us all, economically.
They could just file for postponement or use a reverse mortgage/HELOC to pay their societal obligations. This idea that people should get to keep the entire windfall while shortchanging their communities is ridiculous.
If a retiree was sitting on highly valuable land, why couldn't they just get a reverse mortgage? High home equity plus short remaining life expectancy will support high monthly payments.
LVT should be quite high to make that not work: you should have to sell your land to someone that will develop it to cash in, otherwise your cashing in isn't worth it to society.
They actually are. As LVT goes up, the price of ownership goes down as land becomes a bit of a "hot potato". That's actually fine: what we are left with in the extreme is all land is rented from the state, and there is no permanent ownership. That's great!
You don't have to go that far, but it's good to know it's "safe" to do so. Land isn't produced so there's no "100 Laffer curve is 0" type problem in the slightest.
Even if you capture 100% of the increase in land value with land rents, that's only been about 5%-10% per year in hot markets. And even as you're taking out loans for last year, there's additional increases you can borrow more money from. So people that truly don't care about profiting from their land can handle it pretty much indefinitely.
However, once you can no longer gain money from speculating on its increase in value, that also means that there's going to be a ton more land available for increased use. The coercive effect of a land value tax is balanced by the a reduction in people speculating.
From the perspective of the retired person on a fixed income who's lived on the same plot for 50 years while a city sprang up around them, the result is functionally the same.