> The government has incentives to inflate their estimates of the value of unimproved land
In fact, the opposite is the case. In the few US cities--historically and present--with an LVT, the political pressure was and is to consistently undervalue the land. Because the quickest way for your administration to get voted out of office is for your tax assessors to be hard-asses about applying the LVT formula, let alone inflate assessments. As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Yet underassessing has its own problems--it erodes legitimacy of the government. Prior to Prop 13 property assessors were consistently underassessing the property of senior citizen homeowners. But this engendered a sense of capriciousness that was felt most acutely by, ironically, senior citizen homeowners.
None of which is to say LVT could never work, but it requires a tremendous shift in the political culture. The legitimacy of the existing property tax structure and its relationship to our conception of property rights is baked into our political culture; shifting to a new system will necessarily be incredibly difficult and destabilizing.
>As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Isn't that an issue with all property tax regimes that don't have the prop 13 carveout, regardless of whether it's LVT or not?
Yes, and in fact underassessment and smoothing assessment increases over time is the norm, AFAIU, for the current system(s), both de jure and de facto, depending on locality. But pathological underassessment and related political issues are a much bigger problem with LVT. The swings can be much bigger (especially from the perspective of a property owner that hasn't done anything), which means managing underassessment to keep taxpayers from revolting requires more discretion, something governments have difficulty doing while maintaining a sense of fairness. Even theoretical application of LVT requires significant individualized assessments which in practice require much greater discretion. Also, LVT is intended to displace most if not all other forms of taxation, so managing the stability of your budget in light of the need to smooth out assessments becomes more problematic relative to the status quo.
Some localities have tried mixed schemes, e.g. only applying LVT to commercial zones. Businesses are savvier and are more comfortable engaging with government on assessments as well as forecasting and managing swings in assessments. But that cuts both ways; in at least one municipality I studied (a town in the southwest, IIRC), this engagement turned into straight-up corruption.
Same as for current property tax assessments. Outside of CA/prop 13-land, my experience was that assessments could be for as little as half the market value (remember, in 2007 the market was bananas and didn't reflect a well-grounded worth) and almost never more than market value.
The dirty secret is that assessments don’t matter overall - just proportionally.
The county or city or whatever has a tax budget of $500 million, and divides it by whatever percentage your house’s assessment is of the assessed whole, and allocates it to you. My property taxes vary without assessment variations, and have gone down on years my assessment has gone up.
No mention that Pennsylvania implemented LVT decades ago and was highly successful. Their version is a split rate tax system (land taxed much higher than the property on it) and it is city by city.
I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
But my main argument is practical. I content that it is simply not possible to evaluate the "unimproved value" of a given parcel. Any discussion of a practical LVT has to start with the fact that it is an approximation to a theoretical ideal, and define exactly what the basis for "land value" estimation is, because it's really a tax on that process. While some of these may have overlap with the benefits and detriments of a theoretical LVT, they have to be looked at from first principles rather than by comparison with the LVT because the fundamental assumptions are often broken.
> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
How familiar are you with existing property taxes?
It might surprise you that land value estimation is literally already happening at scale.
Also, you don't need to be 100% accurate with the estimation. Even a 50% lvt would be a huge improvement and would mean that you could literally be off by 100% which is extremely unlikely. How many houses do you see selling for twice the listing price?
Indeed. When I see these discussions, I am always struck by two things:
1) that many people don't seem to realize that a tax on land value is not novel, but is one of the oldest ways to fund government, with tons of experience behind it (past and present); and
2) that whatever the problems associated with figuring out land value, they pale in comparison to figuring out an individual's real income, which obviously didn't stop us from taxing that.
But the difference is that assessing total property value can appeal to recent sales, so you have actual objective data to bound the realism of your assessment. What somebody would pay for the land without the improvement is stuck in imagination land.
> especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.
Grandma's problem has been historically solved with a homestead exemption. Of course the value could rise above the exemption, but that just means it should be set high enough to ensure that the proceeds of selling will give Grandma a lot of options.
Well, if grandma's home is surrounded by apartment complexes already, then even without LVT some property developer would definitely make an offer to buy her house for a ton of money, and even throw in some relocation package, for example by gifting her an apartment in one of those neighborhood complexes. Happens in my country all the time - your neighborhood being converted from single family homes to apartment complexes usually means a windfall for you.
>The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
The only claim here is that if you own land which makes you $1000 in income and pay $2000 in taxes for that underutilized land you'd probably prefer to sell up.
Which has to be the least controversial part of LVT.
>Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Personally I think I preferred it when retirees were given tax incentives to sell up and downgrade to a smaller property, because even though moving day is stressful, not easy and costs money, it's not worth sacrificing an entire society over trying to avoid it.
This is already part of property tax assessment - I get a separate price estimate for the land and the structure. I also own some undeveloped land and pay property taxes on that. All a LVT does is get rid of the structure part and raise the rate on the land part.
Saying that they assess the value tells me nothing. How, specifically, do they arrive at these assessments.
In my experience there is often an assessment process that is essentially just made up. And when properties do sell, the sale price is always a "surprise" relative to the assessed combined value of the property.
In a sense the question is "What in particular makes you confident that the estimate accurately reflects the price of the land" but in a deeper sense what does the concept of "price of the land" even mean in practical terms? How would you know that the answer is right even if you were omniscient? And given the practical divergence from whatever theoretical standpoint, does then this value serve the same objectives as a "true" LVT?
>> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel
There's a decent discussion on that topic here [1], as a starting point. Not saying it's absolutely conclusive, but gives some food for thought. I suppose where determining an accurate value might be most difficult is parcels that rarely turn over, so have little direct or nearby sales data.
It is an interesting discussion, but I don't see anything in there about how to assess the accuracy of any of the methods against some sort of objective truth. I would have to read the underlying papers I think to get at this, but I don't feel a strong need because I feel like the larger epistemic point is unaddressed in any of the summaries.
The closest I saw was one study that compared the model to a human generated data set, which is just kicking the can down the road. The article semi-concludes
> I think it's quite plausible but not a slam dunk. That said, if the objection is, "valuing land separately from improvements is fundamentally impossible, and we can never get better at it, so we shouldn't try," I think that's plainly ruled out.
I do not agree with this assessment -- you can create a bunch of models and show that the models have good intra-model agreement, but the fundamental point has not been touched.
>>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
That's a feature not a bug.
The whole argument is that it's good to tax wealth that you didn't work for. It's surely more just than taxing labor or the improvement you have made yourself.
Do you believe you can determine the true value of improved land, given how illiquid a market it is? Obviously, the last sale price provides some true information about the value, but it could literally be a decades old number. Do you believe states and municipalities shouldn't update property taxes for a parcel of real estate unless it's sold? I think we've seen from CA's experience with Prop 13 that this creates pretty distortionary incentives.
> Do you believe you can determine the true value of improved land
It is at least theoretically answerable. In the extreme, yes. We can simply force the sale of the land. Practically speaking, no, we cannot answer that question in a deeply illiquid market.
For the unimproved value I'm not certain that there is a consistent and useful theoretical definition that can be translated to practice. Even in the extreme the question of the unimproved value of the land becomes difficult. Were we to raze all improvements and force the sale would that give us an answer? Do we include the cost of razing? What counts an unimproved? Can we leave trees or grass?
Real estate is liquid enough. I cannot sell my house this afternoon, so it isn't fully liquid, but a real estate agent can give me a number to list my house at this afternoon and be within a few % of what I get in a few months in most cases so that is close enough to liquid.
>>>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
I think there's a perfectly fine way; you estimate it the way we currently estimate properly values for tax purposes. If they owner doesn't like that value, you allow them to contest it, and we immediately accept any contested claim and value it as the owner desires, with two small caveats:
a) they pay tax on the claimed value, to ensure they don't over value and
b) they are required to sell to anyone at claimed value + 10%, to ensure they don't under value.
edit: two points to address some responses. First, it can be claimed land value + assessed/claimed improvement value + 10%, that's fine. Second, I'd only require they sell at that value if the owner contests the original appraisal. If they accept it, nobody can buy their stuff out from under them for any price.
But the point of LVT is that it doesn't include the value of the stuff on the land. A house can easily be worth more than 10% of the land it's on, my house is valued at about twice that of the land, or 20x what your plan would require me to accept for the house.
>they are required to sell to anyone at claimed value + 10%
I like the goal here, but I think a less intrusive way to achieve it would be to charge back taxes at the time of a future sale if the sales price is in excess of the valuation. To ensure the back taxes are paid, they would encumber the title of the new owner, so that in practice the buyer would require them to be paid at closing.
>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land"
Which is more of a feature than a bug.
The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money.
The idea mooted in the article that developers would be unwilling to build 20 houses on a plot of land because having 10 houses would jack the LVT up for the other 10 is entirely backward. The value of those houses will be predicated almost entirely on infrastructure (roads, rail, schools, etc.) or services (shops) provided by the community you're paying taxes to.
>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
Did you read the wikipedia page about LVT which describes how? Which part is impossible?
> The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money
Or indeed that a headteacher works long and hard to improve their school and all they get for it is a reduction in their real income because the plot of land their house sits on costs 20% more.
Or the schoolteachers get driven away by a horde of NIMBYs who really don't want to be forced to move because the schools are good...
> Did you read the wikipedia page about LVT which describes how? Which part is impossible?
The wikipedia article describes some processes, including assessments, regressions, and interpolation from fixed landmarks.
Those are all means of estimating something, which you can call the "unimproved land value" if you are so inclined, but what exactly is the thing that they are estimating? How do you know if they are accurate?
You can implement a framework based on any of those measures, but crucially as above they are not an LVT, they are a "proportionate tax on total value based on extrapolating previous sales minus human estimates of improvement value according to a rubric" for example, and have different advantages and disadvantages than an LVT even theoretically, so every time you make an argument that "LVTs have such-and-such a property" you have to expand the definition of LVT to be the specific case and verify whether that property makes sense in the context of that particular methodology. As a shorthand it becomes useless.
My point is not that there are attempts to have an LVT that are approximations of the ideal reality; my point is that this ideal simply does not exist in any sort of cogent way so you might as well tax based on how much God loves the property or how many potatoes you could grow on the land.
I lose confidence in the writing early on when it says this:
> Instead, the government essentially "seizes" the added value by taxing its rental value away, eliminating the incentive to discover the oil in the first place.
If the tax is 100% of the value, sure. But left unstated is whether taxes are 100% of value. If taxes are 100% of value, there is no incentive to own the land in the first place, my $400,000 house costs me $400,000 in land tax to own... yearly?
Yes, it's a straw man argument. It may be possible to tax the rental value away, but in practice, no jurisdiction levies a rate that high, because the officials that enacted it would be thrown out of office in the next election. It certainly shouldn't be presumed the standard case. It's like saying we shouldn't use electricity because it's possible to be electrocuted.
My biggest criticism of LVT is that the name is confusing :)
The idea is that you're taxing 100% of land rents, not 100% of the total value. So if there's a 5% cap rate on your property, and the land value is $300k, then the annual tax bill would be $15k.
LVT should be incorporated with an occupancy tax, it's the only fair way to fund government services. If I own a farm, and my neighbor sells their farm to turn into a housing estate with 99 single family homes, then it is fair to say that my land is now more valuable and I should pay more to keep you it, but it isn't fair to say that my taxes should rise to cover half of the local budget just because I own half of the land in region
This is how every argument about LVT goes once people start thinking about the details: They start thinking of various edge cases and exceptions that highlight how it's not as fair as proponents claim, until eventually we're back to the current taxation systems where land value is part of the tax, but other factors are also considered.
An LVT would need relatively few exceptions and rules in order to function well and is unavoidable by design. What we have right now for most taxes is the exact opposite of that - e.g. with sales, income taxes, etc.
Mostly there are just pearl clutchers complaining about how elderly cash poor people sitting in large old houses on expensive land they've lived in for 20 years would be financially nudged into downgrading.
The real roadblock for LVT is not in the slightest bit technical, but simply that it would undermine a lot of privately held oligarchic wealth.
In this scenario your property value would go up and with higher taxes you'd be incentivized to sell for a profit and move your farm farther away in a different zoning.
The incentives you've presented are correct. However, my friends from rural areas always complain about rich outsiders moving in, buying everyone else out, and raising the cost of living. If LVT is just a way to "[incentivize farmers] to sell for a profit", why would people in these areas support LVT? I'm afraid it would just turn into another partisan issue, regardless of merits. And I like LVT!
Let's be real: if this scenario unfolded today, your land would be worth more as housing/infrastructure/commercial/etc. than as farmland, some real estate developer would buy it from you, and you'd make a lot of money without having to do anything. If there was a 75% LVT then you'd just make less money.
The reason I brought up this argument is because this exact scenario is happening all over the UK and Ireland right now. One of the houses my wife and I looked at purchasing was built about 20 minutes outside Belfast on old farmland that was converted into a new housing estate. The farms surrounding this housing estate have been incorporated into a new village.
This goes back to my top-level comment: the assessment of your property should not be based on sales of nearby property but on observed rental values. Just because your neighbor has sold their plot and the new owner has the intent to build 99 houses on is so far inconsequential ... we have yet to observe any actual rent increases and likely will not until those houses are actually constructed and rented/sold themselves. Only then can we accurately observe the potential rental value of your adjacent land.
It's a good point.
Usually farms are on land classified as agricultural and residential buildings are on residential land. It's easy to design a system that values residential land higher (because it's in fact more valuable if you can build residences on it). You wouldn't pay half the taxes until you convert it to residential at which point you should in fact be paying half the LVT (maybe with a few years leeway).
Isn't this case just revealing the opportunity cost of keeping the land as a farm in that location? For example, what incentive is there to buy an acre of downtown Miami and convert it to farm land? Should we lower that acre's property tax now?
> ... These assessments would require intricate and subjective valuations that are very difficult to quantify accurately.
I continue to believe that "full cash value" assessments which try to ascertain the market purchase price of real estate are very foolish. And there are so many inputs and methods of formulating an assessment. What all of them have in common though, is that they consider the rental value of the property. It would be so much simpler if the tax was only assessed on the rental value. It eliminates things that effect the sale price estimates like interest rates, subjective risk tolerances, speculative premiums, and even the tax itself. The tax rate on the rental value would of course be much higher than the tax rate on the purchase price (25% compared to 1% for example) but it's a much more stable assessment with a lot more reliable data backing it up.
disclosure: I am a Georgist and former president of Common Ground California.
I found some more to nitpick, from the section on "LVT implicitly taxes improvements on nearby land":
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
This analysis misses the point. It doesn't make development less financially appealing, it makes owning land you're not planning on using any time soon less appealing. It disrupts (in a good way) the current land development model where one entity buys a large tract of land and develops and sells it off one piece at a time. That's a model based on land speculation. They may see it as the development of the first 20% of land increases the value of the remaining 80% (which they feel justified in profiting from) but that is neither guaranteed nor is it an accurate description of what causes the remaining 80% of land to increase in value. It's more accurate to say that the agglomeration effects of the people who moved into that first 20% (and their interaction with the existing local economy) are more responsible for it.
> it inherently discourages landowners from searching for new and innovative uses for their land
That seems like a feature to me, as long as the tax enough less than the increased value of the land, and using up a funite resource, lime oil, correspondingly decreases the evaluated value of the land. If you discover oil on your land, I think you should be taxed more. And I think that adding a reasonable dicencentive to things like drilling for oil isn't a bad thing.
Also, for non-renewable resources found on a property that are sold, not rented, I think it could make sense to tax them differently, such as based on the sold value, when it is sold, rather than increasing the taxes on the land itself.
> Another issue with the LVT is that it acts as an implicit tax on nearby land development.
This is the case for property taxes, regardless of whether it includes "improvements".
Also, it doesn't remove the incentive. If an improvement on one parcel increases the value of a nearby parcel, that means you can rent or sell that property for more, and the ducentive isn't really any worse than a tax on that increased income being a disencincentive to increase the value of nearby land.
There is a related problem where increased value can result in families no longer being able to afford taxes on their residence. Although its not like gentrification isn't already a problem, and I'm not sure it's any worse than the problems with other tax systems. It could also be combatted somewhat by lower tax rates or deductions on primary residences (possibly with a limit on the area that qualifies).
> On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
I see Georgism and LVT brought up on HN fairly frequently, at least a few times a year. It's a niche economic outlook and set of policy recommendations that many in HN seem to be intrigued by. As someone else pointed out, that definitionally makes it HN material.
W/r/t oil: suppose before you survey there is a 25% chance that there is oil under your property. So the unimproved value of your land is surface_value + 0.25 * oil. After you drill, 75% of the time you receive a reduction in value of 0.25 since you have good evidence of the absence of reserves, 25% of the time you increase the value by 0.75. It seems to me that the LVT has no impact at all on the expected value of surveying for oil.
Of course if you believe the estimate to be incorrect, the incentives can shift, and there is some opportunity for mafiscence by falsely showing the 'absence' of oil that you know exists for a temporary tax break.
The first two arguments he makes here miss the point of a LVT entirely
> An LVT discourages searching for new uses of land
> An LVT implicitly taxes improvements to nearby land
If I find oil on my land, or if someone builds a park across the street from me, then I should be taxed more. The land is more valuable to me! At a 100% LVT I essentially break even. Anything less then that, and I still come out on top.
The only valid arguments in here are the last two. If people buy a piece of property with certain assumptions and the government turns around implements a 100% LVT, then I can understand why they would be upset.
So sure, there are some practical considerations to implementing a 100% LVT immediately tomorrow with no exemptions, and it probably wouldn't raise enough revenue to eliminate all other taxes. But the government could still raise a ton of tax revenue with minimal deadweight loss by phasing in a 75% LVT over 30 years with a handful of common sense exemptions.
That's assuming you actually own the mineral rights, which are not necessarily the same as the land ownership itself. These are quite often separated and held by different entities. In practice, the extraction of oil under a parcel of land has almost no relation to what the land is being used for.
What's the societal value in trying to financially engineer land development? Is it to better utilize existing infrastructure? Charge each property proportionally for the road system and fallow land will naturally be developed to handle the taxes.
Property taxes are attractive because land doesn't move (unlike other forms of wealth) and it's easy to account for by tax collectors. There's also zero dead weight loss as you can't create more land. Taxes on land improvements are unattractive because they disincentivize owners from investing in their property. This leaves us with taxes on unimproved land being a very attractive option funding the government.
Good overview. What's the imperative for a government to incentivize owners to invest in their property? Seems like it's fine if the owner invests in their property or not.
You should always be wary of arguments from people who name themselves "The correct people". Less wrong, and the "rationalists" generally, are engaged in magical cult-like thinking.
All human epistemology is trying to be "less wrong", just like all cereal is "all natural". The rationalists aren't even the first to recognize the value of printing it on the box.
The rat-adjacent types are not a monolith and are not of the same worldview. The distribution between left and right, politically, approximately matches the general population. What they're about is approaching the best data we have in good faith and being open to updating perspectives.
All taxes that generate revenue are taxes on good things. This is a fundamental rule of economics. Using this as an argument against LVT just means that you are opposed to taxation generally as a way to generate revenue. This essay doesn't defend that position though, because it is engaged in magical thinking.
Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
Do LVT proponents believe economic activity that requires minimal land ownership relative to the profit should be untaxed?
E.g.
* Offshore oil drilling
* Tech companies
* Fully remote CPAs
* Electricians
* etc
It seems very weird large sections of the economy become virtually untaxed, requiring a MASSIVE tax burden on the others. The simplicity of the LVT plan kinda hides that it implies a huge restructuring of the economy.
I don't think very many LVT supporters think it should be the sole or even primary source of taxation. The main point I see being made is that property taxes as designed today discourage development, whereas a LVT would encourage it. Property taxes are only about 10% of overall US taxation, and a switch to LVT would have its intended effect even if they became a smaller piece of the pie.
The LVT would get rolled into rent, which would propagate through the economy. I think the chief effect of a fixed LVT would be discouraging passive land investment (since you've got to collect rent to pay your LVT). IMO, while this might be beneficial for increasing the housing supply, a progressive LVT would be even better. A progressive LVT would put larger landowners at a disadvantage in the rental market, because their tax would be higher on an equivalent parcel than a smaller landowner. By ensuring a larger number of smaller landlords, I think you'd see a more diverse and competitive rental market.
I think we can't make LVT the only tax. Other good taxes are consumption taxes, pollution taxes, resource usage taxes. You can also add some business revenue taxes like recently popular idea in EU of a digital tax. I would also tax IP protection (if you want to sell your stuff here and have IP/copyright protected we will take % of your sells).
I think the worst possible taxes are capital gain tax an corporate income tax. Those should be 0. They only create incentives for various shenanigans and have a lot of other negative consequences.
LVT proponents also typically advocate for pigovian taxes (tax things you want less of to disincentivize it) and taxes on rent-seeking activities. So, offshore drilling would probably be hit with something like a carbon tax (directly or indirectly) and tech companies might get hit with a tax regarding their monopolies or IP. The CPAs and the electricians would get off easy, though.
Those are the "land" of the modern economy. Land value tax arguably may have made sense for a 19th century economy; I think it's completely missing the point for a 21st century one. Land isn't the major source of wealth any more.
every tax discussion i've ever read treats taxes in the abstract without spending. The assumption is "how do we raise as much tax as possible".
When you actually learn about public agency spending, you'll see that 2/3 of it is completely unnecessary.
I'm not saying companies are any better, but they generally don't have the mandate to take your house from you if you are not a customer.
Focus on the spending first, and make sure it's essential. Then figure out how to fund it.
If you can get spending scope reduced by 90% (where it was before FDR) , you'll find the tax situation solves itself. You won't have to invent taxes on every activity.
if spending is 90% lower than today, coming up with revenue is trivial.
Until 16th amendment, Federal revenue was from excise tax. Income, fees, capital gains were not necessary.
So degree matters. Of course you're going to have to keep inventing new tax revenue streams if spending is 6-10x more than it should be.
We may keep the property tax, but talking about tax revenue absent of spending is like talking about how to deal with a headache caused by a nail in the head, without addressing the nail.
As though every single dollar of public spending didn't return about 30x in ultimate value vs the best you can get from those same dollars in your pocket, even with the waste.
As though everyone agrees which bits are even the waste.
What research did you have in mind that would suggest anything like a 30X fiscal multiplier?
Public spending efficiency is generally understood to range not that far from 1.00, depending on current economic conditions: Better in a recession, worse in an expansion.
This article is a frustrating read because it appears the author has not researched the history of taxation much before writing it.
It reads like someone saying that cooking with fire is an absurd idea that's never going to work, and we should stick to microwaves.
Again, LVT is one of the oldest and most widely historically practiced forms of tax, through various forms like taking a cut of rice produced through to levying corvee.
Valuation is also a straightforward issue: you have the landowners self-assess value, but that value also acts as an option for the state to buy at that price. This bakes in honesty and market price based accuracy.
As for the "not enough" argument, maybe it's not enough for a government looking to squeeze every last drop and piss it away, which appears the norm sadly. But the point is that all economic activity a state has the right and ability to tax happens on its land, and in the process raises the market value of that land. So all economic output is taxable indirectly via it.
On the claimed disincentive to improve land value, like the oil discovery example: where the value is based on market price, no one is harmed by an increase in their properties value. They can just sell it to an oil developer if they don't want to develop it themselves, and walk away with a fat untaxed capital gain. This is simply a non-issue, on par with someone worrying their salary raise will increase their taxes - missing the point that it's a nice problem to have.
And if they just hated the idea of having more money, they could just self-assess at the old price and have the state take on the burden of developing it if they think it's worth more.
The only actual issue and complexity with LVT is a political one - how to move from the current farce to that. Similar issue with gold standard etc. These systems are tried and true and obviously better, but not to certain powerful minority interests, who benefit from farces continuing.
Why are we pretending like LVT doesn't exist already? I pay taxes on my land. Those taxes are calculated based on size and location. The Disney example is particularly egregious. They pay taxes on the land AND the structures they built but the article acts as though they would be disincentivized from building if we _removed_ taxes on the structures? Huh?
The idea is not to disincentivize developing on the land. To me, it only really works when you remove the friction/gaming of all the other taxes and put it all into LVT, but that will never happen of course.
If your land can be treated as an asset, then we don't really have LVT yet. The goal of LVT is to tax land to the point where it is no longer an appreciating asset (and, not too much that it becomes a liability)
Happy to answer anyone's questions on LVT if they have them!
It sort of breaks your head the first time you try to think about it because we are just not used to thinking about supply and demand in cases where supply is actually fixed, and that's where all the magic benefits come from. Happy to answer any questions people have.
Full disclosure though I'm a huge proponent!
As with any policy, there are some advantages and disadvantages but I think on the whole LVT is probably the single best policy change we could make as a society.
How would you respond to the critique that it makes that tax associated with a property dependent on the improvements to adjacent properties? I could see a situation where a single family home owner would deliberately oppose improvements (i.e. parks/bike lanes), because their derived utility from those improvements is less than the potential increase in taxes.
I would say that this is largely a feature not a bug :)
Let's look at what the author said about this:
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
> This creates a counterproductive dynamic: developers may hesitate to improve their land or invest in new projects because they know that any improvements will increase their tax burden on adjacent parcels.
This is exactly correct analysis, but this is good not bad! LVT is preventing hoarding land during development. Of course someone who acts according to the old system's incentives will lose in that model!
First, let's talk about why the existing model is bad though: right now, developers make a huge part of their money not directly from actually building, but from the increase in the land value that happens during construction. This means that developers need to acquire huge sections of land and then only build one house at a time. This is insanely inefficient! It literally prevents anyone else from building in parallel or at lower cost! There is zero competition!
In a world with LVT, a developer would be incentivized to acquire and start work in smaller increments, leaving the door open top more competition and for more companies to enter the space - lowering costs and increasing the speed of construction.
The most obvious argument for me is that I don't even think that developing land as much as possible should be a desired outcome. I'd rather have some billionaire sitting on a huge plot of wilderness than turn it into another shopping center.
Many states have adopted various sorts of watershed protection or conservation laws that make many areas undevelopable in any profitable way. The cost of the hoops one must jump through to prove some small project will not run afoul of these laws is a non starter....unless the developer is professional capital fueled operation looking to put in a chain store, strip mall or 5-over-N. That drags up adjacent values enough that the suburban subdivision developers show up and start buying the farms, etc, etc.
So in a perverse sort of way you basically get what you want, wide swaths of low/no development wilderness, but it's paid for by the everyman not the billionares.
> I'd rather have some billionaire sitting on a huge plot of wilderness
I'd rather not have a billionaire sitting on a huge plot of land. If we as a society want that wilderness to be preserved, it should be a state park or national park, that should be relinquished to our government.
>>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves. If they do find oil, the value of their land would skyrocket because the presence of oil dramatically increases its economic potential.
Is the author aware that in many countries the owner of the land doesn't own the resources if they are discovered there? Is the author seriously claiming discovering oil is not profitable under LVT? Does he prefer making people who happen to stumble on oil not pay % of the value of it as tax? (and thus presumably prefers taxing other things).
It seems so unlikely to me that someone reasonable would make that argument that I have trouble taking it seriously.
>>An LVT implicitly taxes improvements to nearby land
That's one of the two major points behind it: tax wealth that you got without building it yourself. In other words it limits land speculation.
>>An LVT is unlikely to replace many existing taxes
The argument the author is making here ("government will not get rid of other taxes") applies to any tax discussion and kills it before it even starts.
>>Another major issue is that a full or near-full land value tax would likely establish a troubling precedent by signaling that the government has the appetite to effectively confiscate an additional category of assets that people have already acquired long ago through their labor and purchases.
Yeah but we need to tax something. The alternative is to tax the very labor which must certainly be worse. Land owners are benefiting from work done by others without contributing to it and thus should be taxes accordingly.
>>The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%)
Amazing, 100% rate for LVT doesn't make sense!
>>For instance, individuals buy stocks, businesses invest in capital goods like machinery, and developers improve real estate—all with the expectation that they will retain most of the value of their assets and any future returns from them. This confidence in the protection of property rights encourages entrepreneurship, innovation, and economic growth.
And yet all of those are taxed in the current system!
The author seems to be assuming the proposed LVT rates are very high (when in practice they would be in low single digits). Remove that assumption and the whole article makes no sense at all.
This stems from the fact that if a landowner successfully discovers a
valuable resource or identifies a creative way to utilize their land more
productively, the government will increase their tax burden accordingly.
One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.
As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.
To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.
>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves.
LVT is for building property or occupying land. Mineral rights are under many if not most legal systems treated separately from land ownership (e.g. they are auctioned off) because unlike land, oil wells eventually run dry.
This does not seem like an honest criticism of LVT, because it deliberately blurs land and mineral rights.
>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
That's the kind of market discipline we are currently lacking which the author of this piece apparently does not want.
On the other hand, a developer who builds 10 houses on one plot of land is not going to magically make 10 houses on another plot of land double in price.
>Even in its simplest "naive" form, the LVT has a narrow tax base. The reality is that the vast majority of global wealth is created through human labor and innovation
This last criticism is A) wrong and B) only applies to single taxers, not proponents of LVT.
>>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
>A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
You're missing the point entirely. When your small business, single family home, little ranch, whatever, becomes in increasing proximity to improvements your tax goes up. If you own a big ranch and decide to split some of it off, build housing or whatever and sell, then your tax on everything goes up per LVT.
@patio11's podcast, Complex Systems has two great episodes that discuss much of the context about land value tax and property tax systems in general (from a US perspective).
They're a lot like the modern-day version of Ayn Rand's Objectivism, which is also libertarian. I remember people getting involved in that at university in the '80s and thinking how cult-like it all was - people feeling they had "found the truth" and wanting to recruit new members.
Rationalism seems to be playing a similar role for a certain type of person in Silicon Valley today, fulfilling an emotional/religious need.
Another way to look at it: Scientology, but replace Xenu with Yudkowsky and volcanoes with Harry Potter, or something.
It will never cease to amuse me that people calling themselves "rationalists" wound up recreating Pascal's Wager from first principles, just with time travelling robots, and drove themselves to sometimes murderous insanity over it. And that their Bible is essentially a Harry Potter fanfic.
These are the dipshits conspiring to shape our future, control our destiny and create the Machine God in their image. They make the billionaires messing around the big owl at Bohemian Grove look positively tame and... rational.
LVT is envy written into law — "how dare someone use what belongs to them in a way which doesn't benefit me?!?", whether individuals or groups are speaking. It also puts a wonderful tool into the hands of decision-makers to reward friends & punish enemies. No.
land value tax is a regressive tax on middle class homeowners that would ultimately benefit the wealthy. bc middle class single family homeowners would not be able to afford the tax increase or afford the construction to fully utilize the property, which would force them to sell to investors who could afford it.
terrible idea.
not to mention the political debates/decisions over what constitutes "fully utilized". what about public parks? urban agriculture? so many exceptions.
this would be a nightmare policy to retrofit. maybe a good idea if we had started there first, but we didn't.
it's also an ignorant diagnosis of the issue. land values and speculation is not the issue in my location (burlington, vermont) where we have a housing crisis. there are not many vacant lots (i'm guessing maybe a dozen in the entire municipality).
it's just an overly simplified solution to a complex problem.
> land value tax is a regressive tax on middle class homeowner
Not if you make the tax progressive. The first 200K could be tax free, for example. Primary residences pay a lower % of the value than 2nd and 3rd homes. I bet there are a ton empty vacation homes in Vermont. It can be applied gradually not to shock the system.
> Primary residences pay a lower % of the value than 2nd and 3rd homes.
I think it's funny how every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions, which starts to defeat the claimed purpose of a Land Value Tax.
LVT is a concept that sounds amazing and novel in a vacuum, but starts to look less ideal in the real world. The people who think about it enough start to include factors like structure value and different exceptions for how the land is being used, which starts to look a lot like existing tax code in most places.
That would somewhat defeat the purpose of the LVT. The point is to force landowners to develop their land. A "fix" would be to make access to capital easier.
Optimum development in many areas isn't necessarily a large mid-rise or high-rise. For most areas, the maximum that the roads and other utilities could support would be dense townhomes, triplexes or quadplexes. Outside of the very highest-demand areas, the LVT would mainly encourage land owners to build additional units on under-utilized square footage or build up a bit. Increasing housing in an area necessarily requires access to capital - so that's what should be provided.
It's not perfectly fair to everyone; it would enrich current landowners. But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.
Yeah, no LVT proponent has successfully explained to me how it does not cause the erasure of urban or even suburban green spaces, be they public parks, private parks, gardens, etc. If a park increases neighboring land values, then the taxes incurred by the park go up without recompense to the owner (assuming the park is not held by the government).
How many private parks are there? Pretty much every one I've been to has been government run, other than small outdoor spaces next to private buildings and large pay for admission gardens that are usually way out in the boonies on the grounds of an old plantation or manor.
I can't think of how a private, but still public-access, park survives without a rich benefactor eating the losses, even today.
I guess if everywhere's zoned for max density. If it's zoned as a public park, so no ability to develop it and generate revenue, or close it off for private use, then its rated value would be close to zero. Possibly negative if ownership imposes some maintenance obligations on the owner.
I think you might be slightly confused. Wouldn't the issue be not that the parks themselves are expensive to the owner tax (not only is thr landscaping not that expensive, as LVT excludes your own improvements), but instead that they are effectively discouraged by increasing the tax on everyone adjacent and thus peversely encouraging NIMBYism of towards a common good by imposing a negative externality which does not exist otherwise? The issue wouldn’t be that it would add a tax burden upon the park owner, but that it turns operating a common good into a 'sadistic' act that pushes costs onto others.
A LVT could thus accidentally wind up like a window tax in that it could wind up discouraging efficient improvements to human conditions out of a misguided attempt at improving perceived fairness.
The bottom 50% in terms of wealth in the US only own 10% of the land. How on earth is this a regressive tax? The top 10% own over 40% of the land. https://fred.stlouisfed.org/graph/?g=1KsUt
> The government has incentives to inflate their estimates of the value of unimproved land
In fact, the opposite is the case. In the few US cities--historically and present--with an LVT, the political pressure was and is to consistently undervalue the land. Because the quickest way for your administration to get voted out of office is for your tax assessors to be hard-asses about applying the LVT formula, let alone inflate assessments. As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Yet underassessing has its own problems--it erodes legitimacy of the government. Prior to Prop 13 property assessors were consistently underassessing the property of senior citizen homeowners. But this engendered a sense of capriciousness that was felt most acutely by, ironically, senior citizen homeowners.
None of which is to say LVT could never work, but it requires a tremendous shift in the political culture. The legitimacy of the existing property tax structure and its relationship to our conception of property rights is baked into our political culture; shifting to a new system will necessarily be incredibly difficult and destabilizing.
>As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Isn't that an issue with all property tax regimes that don't have the prop 13 carveout, regardless of whether it's LVT or not?
Yes, and in fact underassessment and smoothing assessment increases over time is the norm, AFAIU, for the current system(s), both de jure and de facto, depending on locality. But pathological underassessment and related political issues are a much bigger problem with LVT. The swings can be much bigger (especially from the perspective of a property owner that hasn't done anything), which means managing underassessment to keep taxpayers from revolting requires more discretion, something governments have difficulty doing while maintaining a sense of fairness. Even theoretical application of LVT requires significant individualized assessments which in practice require much greater discretion. Also, LVT is intended to displace most if not all other forms of taxation, so managing the stability of your budget in light of the need to smooth out assessments becomes more problematic relative to the status quo.
Some localities have tried mixed schemes, e.g. only applying LVT to commercial zones. Businesses are savvier and are more comfortable engaging with government on assessments as well as forecasting and managing swings in assessments. But that cuts both ways; in at least one municipality I studied (a town in the southwest, IIRC), this engagement turned into straight-up corruption.
Same as for current property tax assessments. Outside of CA/prop 13-land, my experience was that assessments could be for as little as half the market value (remember, in 2007 the market was bananas and didn't reflect a well-grounded worth) and almost never more than market value.
The dirty secret is that assessments don’t matter overall - just proportionally.
The county or city or whatever has a tax budget of $500 million, and divides it by whatever percentage your house’s assessment is of the assessed whole, and allocates it to you. My property taxes vary without assessment variations, and have gone down on years my assessment has gone up.
Barring anything weird like prop 13.
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No mention that Pennsylvania implemented LVT decades ago and was highly successful. Their version is a split rate tax system (land taxed much higher than the property on it) and it is city by city.
https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
But my main argument is practical. I content that it is simply not possible to evaluate the "unimproved value" of a given parcel. Any discussion of a practical LVT has to start with the fact that it is an approximation to a theoretical ideal, and define exactly what the basis for "land value" estimation is, because it's really a tax on that process. While some of these may have overlap with the benefits and detriments of a theoretical LVT, they have to be looked at from first principles rather than by comparison with the LVT because the fundamental assumptions are often broken.
> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
How familiar are you with existing property taxes?
It might surprise you that land value estimation is literally already happening at scale.
Also, you don't need to be 100% accurate with the estimation. Even a 50% lvt would be a huge improvement and would mean that you could literally be off by 100% which is extremely unlikely. How many houses do you see selling for twice the listing price?
Indeed. When I see these discussions, I am always struck by two things:
1) that many people don't seem to realize that a tax on land value is not novel, but is one of the oldest ways to fund government, with tons of experience behind it (past and present); and
2) that whatever the problems associated with figuring out land value, they pale in comparison to figuring out an individual's real income, which obviously didn't stop us from taxing that.
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But the difference is that assessing total property value can appeal to recent sales, so you have actual objective data to bound the realism of your assessment. What somebody would pay for the land without the improvement is stuck in imagination land.
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> especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.
Grandma's problem has been historically solved with a homestead exemption. Of course the value could rise above the exemption, but that just means it should be set high enough to ensure that the proceeds of selling will give Grandma a lot of options.
Well, if grandma's home is surrounded by apartment complexes already, then even without LVT some property developer would definitely make an offer to buy her house for a ton of money, and even throw in some relocation package, for example by gifting her an apartment in one of those neighborhood complexes. Happens in my country all the time - your neighborhood being converted from single family homes to apartment complexes usually means a windfall for you.
>The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.
The only claim here is that if you own land which makes you $1000 in income and pay $2000 in taxes for that underutilized land you'd probably prefer to sell up.
Which has to be the least controversial part of LVT.
>Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.
We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.
Personally I think I preferred it when retirees were given tax incentives to sell up and downgrade to a smaller property, because even though moving day is stressful, not easy and costs money, it's not worth sacrificing an entire society over trying to avoid it.
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This is already part of property tax assessment - I get a separate price estimate for the land and the structure. I also own some undeveloped land and pay property taxes on that. All a LVT does is get rid of the structure part and raise the rate on the land part.
Saying that they assess the value tells me nothing. How, specifically, do they arrive at these assessments.
In my experience there is often an assessment process that is essentially just made up. And when properties do sell, the sale price is always a "surprise" relative to the assessed combined value of the property.
In a sense the question is "What in particular makes you confident that the estimate accurately reflects the price of the land" but in a deeper sense what does the concept of "price of the land" even mean in practical terms? How would you know that the answer is right even if you were omniscient? And given the practical divergence from whatever theoretical standpoint, does then this value serve the same objectives as a "true" LVT?
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>> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel
There's a decent discussion on that topic here [1], as a starting point. Not saying it's absolutely conclusive, but gives some food for thought. I suppose where determining an accurate value might be most difficult is parcels that rarely turn over, so have little direct or nearby sales data.
[1] https://www.astralcodexten.com/p/does-georgism-work-part-3-c...
It is an interesting discussion, but I don't see anything in there about how to assess the accuracy of any of the methods against some sort of objective truth. I would have to read the underlying papers I think to get at this, but I don't feel a strong need because I feel like the larger epistemic point is unaddressed in any of the summaries.
The closest I saw was one study that compared the model to a human generated data set, which is just kicking the can down the road. The article semi-concludes
> I think it's quite plausible but not a slam dunk. That said, if the objection is, "valuing land separately from improvements is fundamentally impossible, and we can never get better at it, so we shouldn't try," I think that's plainly ruled out.
I do not agree with this assessment -- you can create a bunch of models and show that the models have good intra-model agreement, but the fundamental point has not been touched.
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> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
Here is an article arguing that yes, it can be done well enough: https://www.astralcodexten.com/p/does-georgism-work-part-3-c...
>>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
That's a feature not a bug. The whole argument is that it's good to tax wealth that you didn't work for. It's surely more just than taxing labor or the improvement you have made yourself.
Do you believe you can determine the true value of improved land, given how illiquid a market it is? Obviously, the last sale price provides some true information about the value, but it could literally be a decades old number. Do you believe states and municipalities shouldn't update property taxes for a parcel of real estate unless it's sold? I think we've seen from CA's experience with Prop 13 that this creates pretty distortionary incentives.
> Do you believe you can determine the true value of improved land
It is at least theoretically answerable. In the extreme, yes. We can simply force the sale of the land. Practically speaking, no, we cannot answer that question in a deeply illiquid market.
For the unimproved value I'm not certain that there is a consistent and useful theoretical definition that can be translated to practice. Even in the extreme the question of the unimproved value of the land becomes difficult. Were we to raze all improvements and force the sale would that give us an answer? Do we include the cost of razing? What counts an unimproved? Can we leave trees or grass?
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Real estate is liquid enough. I cannot sell my house this afternoon, so it isn't fully liquid, but a real estate agent can give me a number to list my house at this afternoon and be within a few % of what I get in a few months in most cases so that is close enough to liquid.
>>>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
I think there's a perfectly fine way; you estimate it the way we currently estimate properly values for tax purposes. If they owner doesn't like that value, you allow them to contest it, and we immediately accept any contested claim and value it as the owner desires, with two small caveats: a) they pay tax on the claimed value, to ensure they don't over value and b) they are required to sell to anyone at claimed value + 10%, to ensure they don't under value.
edit: two points to address some responses. First, it can be claimed land value + assessed/claimed improvement value + 10%, that's fine. Second, I'd only require they sell at that value if the owner contests the original appraisal. If they accept it, nobody can buy their stuff out from under them for any price.
> sell to anyone at claimed value + 10%
But the point of LVT is that it doesn't include the value of the stuff on the land. A house can easily be worth more than 10% of the land it's on, my house is valued at about twice that of the land, or 20x what your plan would require me to accept for the house.
>they are required to sell to anyone at claimed value + 10%
I like the goal here, but I think a less intrusive way to achieve it would be to charge back taxes at the time of a future sale if the sales price is in excess of the valuation. To ensure the back taxes are paid, they would encumber the title of the new owner, so that in practice the buyer would require them to be paid at closing.
What a terrible way to live that would be.
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>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land"
Which is more of a feature than a bug.
The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money.
The idea mooted in the article that developers would be unwilling to build 20 houses on a plot of land because having 10 houses would jack the LVT up for the other 10 is entirely backward. The value of those houses will be predicated almost entirely on infrastructure (roads, rail, schools, etc.) or services (shops) provided by the community you're paying taxes to.
>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.
Did you read the wikipedia page about LVT which describes how? Which part is impossible?
> The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money
Or indeed that a headteacher works long and hard to improve their school and all they get for it is a reduction in their real income because the plot of land their house sits on costs 20% more.
Or the schoolteachers get driven away by a horde of NIMBYs who really don't want to be forced to move because the schools are good...
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> Did you read the wikipedia page about LVT which describes how? Which part is impossible?
The wikipedia article describes some processes, including assessments, regressions, and interpolation from fixed landmarks.
Those are all means of estimating something, which you can call the "unimproved land value" if you are so inclined, but what exactly is the thing that they are estimating? How do you know if they are accurate?
You can implement a framework based on any of those measures, but crucially as above they are not an LVT, they are a "proportionate tax on total value based on extrapolating previous sales minus human estimates of improvement value according to a rubric" for example, and have different advantages and disadvantages than an LVT even theoretically, so every time you make an argument that "LVTs have such-and-such a property" you have to expand the definition of LVT to be the specific case and verify whether that property makes sense in the context of that particular methodology. As a shorthand it becomes useless.
My point is not that there are attempts to have an LVT that are approximations of the ideal reality; my point is that this ideal simply does not exist in any sort of cogent way so you might as well tax based on how much God loves the property or how many potatoes you could grow on the land.
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I lose confidence in the writing early on when it says this: > Instead, the government essentially "seizes" the added value by taxing its rental value away, eliminating the incentive to discover the oil in the first place.
If the tax is 100% of the value, sure. But left unstated is whether taxes are 100% of value. If taxes are 100% of value, there is no incentive to own the land in the first place, my $400,000 house costs me $400,000 in land tax to own... yearly?
Yes, it's a straw man argument. It may be possible to tax the rental value away, but in practice, no jurisdiction levies a rate that high, because the officials that enacted it would be thrown out of office in the next election. It certainly shouldn't be presumed the standard case. It's like saying we shouldn't use electricity because it's possible to be electrocuted.
My biggest criticism of LVT is that the name is confusing :)
The idea is that you're taxing 100% of land rents, not 100% of the total value. So if there's a 5% cap rate on your property, and the land value is $300k, then the annual tax bill would be $15k.
LVT should be incorporated with an occupancy tax, it's the only fair way to fund government services. If I own a farm, and my neighbor sells their farm to turn into a housing estate with 99 single family homes, then it is fair to say that my land is now more valuable and I should pay more to keep you it, but it isn't fair to say that my taxes should rise to cover half of the local budget just because I own half of the land in region
This is how every argument about LVT goes once people start thinking about the details: They start thinking of various edge cases and exceptions that highlight how it's not as fair as proponents claim, until eventually we're back to the current taxation systems where land value is part of the tax, but other factors are also considered.
An LVT would need relatively few exceptions and rules in order to function well and is unavoidable by design. What we have right now for most taxes is the exact opposite of that - e.g. with sales, income taxes, etc.
Mostly there are just pearl clutchers complaining about how elderly cash poor people sitting in large old houses on expensive land they've lived in for 20 years would be financially nudged into downgrading.
The real roadblock for LVT is not in the slightest bit technical, but simply that it would undermine a lot of privately held oligarchic wealth.
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In this scenario your property value would go up and with higher taxes you'd be incentivized to sell for a profit and move your farm farther away in a different zoning.
The incentives you've presented are correct. However, my friends from rural areas always complain about rich outsiders moving in, buying everyone else out, and raising the cost of living. If LVT is just a way to "[incentivize farmers] to sell for a profit", why would people in these areas support LVT? I'm afraid it would just turn into another partisan issue, regardless of merits. And I like LVT!
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Let's be real: if this scenario unfolded today, your land would be worth more as housing/infrastructure/commercial/etc. than as farmland, some real estate developer would buy it from you, and you'd make a lot of money without having to do anything. If there was a 75% LVT then you'd just make less money.
The reason I brought up this argument is because this exact scenario is happening all over the UK and Ireland right now. One of the houses my wife and I looked at purchasing was built about 20 minutes outside Belfast on old farmland that was converted into a new housing estate. The farms surrounding this housing estate have been incorporated into a new village.
This goes back to my top-level comment: the assessment of your property should not be based on sales of nearby property but on observed rental values. Just because your neighbor has sold their plot and the new owner has the intent to build 99 houses on is so far inconsequential ... we have yet to observe any actual rent increases and likely will not until those houses are actually constructed and rented/sold themselves. Only then can we accurately observe the potential rental value of your adjacent land.
It's a good point. Usually farms are on land classified as agricultural and residential buildings are on residential land. It's easy to design a system that values residential land higher (because it's in fact more valuable if you can build residences on it). You wouldn't pay half the taxes until you convert it to residential at which point you should in fact be paying half the LVT (maybe with a few years leeway).
Isn't this case just revealing the opportunity cost of keeping the land as a farm in that location? For example, what incentive is there to buy an acre of downtown Miami and convert it to farm land? Should we lower that acre's property tax now?
Would it be even more fair to assess taxes based on services allocated?
Why would the cost of local services be related to the tax on the value of the land?
> ... These assessments would require intricate and subjective valuations that are very difficult to quantify accurately.
I continue to believe that "full cash value" assessments which try to ascertain the market purchase price of real estate are very foolish. And there are so many inputs and methods of formulating an assessment. What all of them have in common though, is that they consider the rental value of the property. It would be so much simpler if the tax was only assessed on the rental value. It eliminates things that effect the sale price estimates like interest rates, subjective risk tolerances, speculative premiums, and even the tax itself. The tax rate on the rental value would of course be much higher than the tax rate on the purchase price (25% compared to 1% for example) but it's a much more stable assessment with a lot more reliable data backing it up.
disclosure: I am a Georgist and former president of Common Ground California.
I found some more to nitpick, from the section on "LVT implicitly taxes improvements on nearby land":
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
This analysis misses the point. It doesn't make development less financially appealing, it makes owning land you're not planning on using any time soon less appealing. It disrupts (in a good way) the current land development model where one entity buys a large tract of land and develops and sells it off one piece at a time. That's a model based on land speculation. They may see it as the development of the first 20% of land increases the value of the remaining 80% (which they feel justified in profiting from) but that is neither guaranteed nor is it an accurate description of what causes the remaining 80% of land to increase in value. It's more accurate to say that the agglomeration effects of the people who moved into that first 20% (and their interaction with the existing local economy) are more responsible for it.
> it inherently discourages landowners from searching for new and innovative uses for their land
That seems like a feature to me, as long as the tax enough less than the increased value of the land, and using up a funite resource, lime oil, correspondingly decreases the evaluated value of the land. If you discover oil on your land, I think you should be taxed more. And I think that adding a reasonable dicencentive to things like drilling for oil isn't a bad thing.
Also, for non-renewable resources found on a property that are sold, not rented, I think it could make sense to tax them differently, such as based on the sold value, when it is sold, rather than increasing the taxes on the land itself.
> Another issue with the LVT is that it acts as an implicit tax on nearby land development.
This is the case for property taxes, regardless of whether it includes "improvements".
Also, it doesn't remove the incentive. If an improvement on one parcel increases the value of a nearby parcel, that means you can rent or sell that property for more, and the ducentive isn't really any worse than a tax on that increased income being a disencincentive to increase the value of nearby land.
There is a related problem where increased value can result in families no longer being able to afford taxes on their residence. Although its not like gentrification isn't already a problem, and I'm not sure it's any worse than the problems with other tax systems. It could also be combatted somewhat by lower tax rates or deductions on primary residences (possibly with a limit on the area that qualifies).
How is this relevant to HN at all outside of being written by "rationalists" that are predominately techies?
> On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
- HN News Guidelines
I would counter with:
> Off-Topic: Most stories about politics, or crime, or sports, or celebrities, unless they're evidence of some interesting new phenomenon
This is a story about politics, not related to tech in any way, and is not some new phenomenon
I see Georgism and LVT brought up on HN fairly frequently, at least a few times a year. It's a niche economic outlook and set of policy recommendations that many in HN seem to be intrigued by. As someone else pointed out, that definitionally makes it HN material.
W/r/t oil: suppose before you survey there is a 25% chance that there is oil under your property. So the unimproved value of your land is surface_value + 0.25 * oil. After you drill, 75% of the time you receive a reduction in value of 0.25 since you have good evidence of the absence of reserves, 25% of the time you increase the value by 0.75. It seems to me that the LVT has no impact at all on the expected value of surveying for oil.
Of course if you believe the estimate to be incorrect, the incentives can shift, and there is some opportunity for mafiscence by falsely showing the 'absence' of oil that you know exists for a temporary tax break.
The first two arguments he makes here miss the point of a LVT entirely
> An LVT discourages searching for new uses of land
> An LVT implicitly taxes improvements to nearby land
If I find oil on my land, or if someone builds a park across the street from me, then I should be taxed more. The land is more valuable to me! At a 100% LVT I essentially break even. Anything less then that, and I still come out on top.
The only valid arguments in here are the last two. If people buy a piece of property with certain assumptions and the government turns around implements a 100% LVT, then I can understand why they would be upset.
So sure, there are some practical considerations to implementing a 100% LVT immediately tomorrow with no exemptions, and it probably wouldn't raise enough revenue to eliminate all other taxes. But the government could still raise a ton of tax revenue with minimal deadweight loss by phasing in a 75% LVT over 30 years with a handful of common sense exemptions.
That's assuming you actually own the mineral rights, which are not necessarily the same as the land ownership itself. These are quite often separated and held by different entities. In practice, the extraction of oil under a parcel of land has almost no relation to what the land is being used for.
Sure, so I guess if the owner of the land doesn't own the mineral rights then they have no incentive to look for oil with or without a LVT.
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What's the societal value in trying to financially engineer land development? Is it to better utilize existing infrastructure? Charge each property proportionally for the road system and fallow land will naturally be developed to handle the taxes.
Property taxes are attractive because land doesn't move (unlike other forms of wealth) and it's easy to account for by tax collectors. There's also zero dead weight loss as you can't create more land. Taxes on land improvements are unattractive because they disincentivize owners from investing in their property. This leaves us with taxes on unimproved land being a very attractive option funding the government.
Good overview. What's the imperative for a government to incentivize owners to invest in their property? Seems like it's fine if the owner invests in their property or not.
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You should always be wary of arguments from people who name themselves "The correct people". Less wrong, and the "rationalists" generally, are engaged in magical cult-like thinking.
The name Less Wrong was at least intended to be aspirational. From the about page:
> LessWrong is an online forum and community dedicated to improving human reasoning and decision-making.
The goal is to be less wrong. It isn't intended as a claim that Yudkowksy is less wrong than others.
Whether that actually reflects the attitudes of members of those communities today is doubtful, though.
All human epistemology is trying to be "less wrong", just like all cereal is "all natural". The rationalists aren't even the first to recognize the value of printing it on the box.
Rationality (not "rationalism") does not present anything like such a mindset. The entire point of the name "less wrong" is that one is still wrong.
In fact commenters on Less Wrong are often _more wrong_!
The rat-adjacent types are not a monolith and are not of the same worldview. The distribution between left and right, politically, approximately matches the general population. What they're about is approaching the best data we have in good faith and being open to updating perspectives.
Sounds like you wouldn't fit in.
You can try to be rational without naming yourself a "rationalist".
Could you go ahead and cite an example of such thinking from this article?
Sure, but my point stands regardless.
All taxes that generate revenue are taxes on good things. This is a fundamental rule of economics. Using this as an argument against LVT just means that you are opposed to taxation generally as a way to generate revenue. This essay doesn't defend that position though, because it is engaged in magical thinking.
Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
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Do LVT proponents believe economic activity that requires minimal land ownership relative to the profit should be untaxed?
E.g.
* Offshore oil drilling
* Tech companies
* Fully remote CPAs
* Electricians
* etc
It seems very weird large sections of the economy become virtually untaxed, requiring a MASSIVE tax burden on the others. The simplicity of the LVT plan kinda hides that it implies a huge restructuring of the economy.
Proponents of the Land Value Tax as a single tax would probably say that those activities should be untaxed.
Proponents of the Land Value Tax, but not as a single tax would probably be more mixed.
Restructuring of the economy isn't a hidden part of the Land Value Tax, it's the point.
I don't think very many LVT supporters think it should be the sole or even primary source of taxation. The main point I see being made is that property taxes as designed today discourage development, whereas a LVT would encourage it. Property taxes are only about 10% of overall US taxation, and a switch to LVT would have its intended effect even if they became a smaller piece of the pie.
The LVT would get rolled into rent, which would propagate through the economy. I think the chief effect of a fixed LVT would be discouraging passive land investment (since you've got to collect rent to pay your LVT). IMO, while this might be beneficial for increasing the housing supply, a progressive LVT would be even better. A progressive LVT would put larger landowners at a disadvantage in the rental market, because their tax would be higher on an equivalent parcel than a smaller landowner. By ensuring a larger number of smaller landlords, I think you'd see a more diverse and competitive rental market.
I think we can't make LVT the only tax. Other good taxes are consumption taxes, pollution taxes, resource usage taxes. You can also add some business revenue taxes like recently popular idea in EU of a digital tax. I would also tax IP protection (if you want to sell your stuff here and have IP/copyright protected we will take % of your sells). I think the worst possible taxes are capital gain tax an corporate income tax. Those should be 0. They only create incentives for various shenanigans and have a lot of other negative consequences.
LVT proponents also typically advocate for pigovian taxes (tax things you want less of to disincentivize it) and taxes on rent-seeking activities. So, offshore drilling would probably be hit with something like a carbon tax (directly or indirectly) and tech companies might get hit with a tax regarding their monopolies or IP. The CPAs and the electricians would get off easy, though.
Georgism holds that productive economic activity gets absorbed into land value.
Georgism was designed in a completely different economy. Google's productive activity has very little to do with the land it owns.
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Copyrights.
Domain names.
Patents.
Huge amounts of data.
Those are the "land" of the modern economy. Land value tax arguably may have made sense for a 19th century economy; I think it's completely missing the point for a 21st century one. Land isn't the major source of wealth any more.
every tax discussion i've ever read treats taxes in the abstract without spending. The assumption is "how do we raise as much tax as possible".
When you actually learn about public agency spending, you'll see that 2/3 of it is completely unnecessary.
I'm not saying companies are any better, but they generally don't have the mandate to take your house from you if you are not a customer.
Focus on the spending first, and make sure it's essential. Then figure out how to fund it.
If you can get spending scope reduced by 90% (where it was before FDR) , you'll find the tax situation solves itself. You won't have to invent taxes on every activity.
I think I disagree with this?
From pragmatic standpoint there needs to be some spending and it obviously makes sense to think about how best to raise revenue.
Does that make sense?
if spending is 90% lower than today, coming up with revenue is trivial.
Until 16th amendment, Federal revenue was from excise tax. Income, fees, capital gains were not necessary.
So degree matters. Of course you're going to have to keep inventing new tax revenue streams if spending is 6-10x more than it should be.
We may keep the property tax, but talking about tax revenue absent of spending is like talking about how to deal with a headache caused by a nail in the head, without addressing the nail.
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As though every single dollar of public spending didn't return about 30x in ultimate value vs the best you can get from those same dollars in your pocket, even with the waste.
As though everyone agrees which bits are even the waste.
What research did you have in mind that would suggest anything like a 30X fiscal multiplier?
Public spending efficiency is generally understood to range not that far from 1.00, depending on current economic conditions: Better in a recession, worse in an expansion.
This article is a frustrating read because it appears the author has not researched the history of taxation much before writing it.
It reads like someone saying that cooking with fire is an absurd idea that's never going to work, and we should stick to microwaves.
Again, LVT is one of the oldest and most widely historically practiced forms of tax, through various forms like taking a cut of rice produced through to levying corvee.
Valuation is also a straightforward issue: you have the landowners self-assess value, but that value also acts as an option for the state to buy at that price. This bakes in honesty and market price based accuracy.
As for the "not enough" argument, maybe it's not enough for a government looking to squeeze every last drop and piss it away, which appears the norm sadly. But the point is that all economic activity a state has the right and ability to tax happens on its land, and in the process raises the market value of that land. So all economic output is taxable indirectly via it.
On the claimed disincentive to improve land value, like the oil discovery example: where the value is based on market price, no one is harmed by an increase in their properties value. They can just sell it to an oil developer if they don't want to develop it themselves, and walk away with a fat untaxed capital gain. This is simply a non-issue, on par with someone worrying their salary raise will increase their taxes - missing the point that it's a nice problem to have.
And if they just hated the idea of having more money, they could just self-assess at the old price and have the state take on the burden of developing it if they think it's worth more.
The only actual issue and complexity with LVT is a political one - how to move from the current farce to that. Similar issue with gold standard etc. These systems are tried and true and obviously better, but not to certain powerful minority interests, who benefit from farces continuing.
Why are we pretending like LVT doesn't exist already? I pay taxes on my land. Those taxes are calculated based on size and location. The Disney example is particularly egregious. They pay taxes on the land AND the structures they built but the article acts as though they would be disincentivized from building if we _removed_ taxes on the structures? Huh?
The idea is not to disincentivize developing on the land. To me, it only really works when you remove the friction/gaming of all the other taxes and put it all into LVT, but that will never happen of course.
If your land can be treated as an asset, then we don't really have LVT yet. The goal of LVT is to tax land to the point where it is no longer an appreciating asset (and, not too much that it becomes a liability)
https://en.m.wikipedia.org/wiki/Georgism
Wealth tax on holdings over a billion. Let capital “flight”.
Happy to answer anyone's questions on LVT if they have them!
It sort of breaks your head the first time you try to think about it because we are just not used to thinking about supply and demand in cases where supply is actually fixed, and that's where all the magic benefits come from. Happy to answer any questions people have.
Full disclosure though I'm a huge proponent!
As with any policy, there are some advantages and disadvantages but I think on the whole LVT is probably the single best policy change we could make as a society.
How would you respond to the critique that it makes that tax associated with a property dependent on the improvements to adjacent properties? I could see a situation where a single family home owner would deliberately oppose improvements (i.e. parks/bike lanes), because their derived utility from those improvements is less than the potential increase in taxes.
I would say that this is largely a feature not a bug :)
Let's look at what the author said about this:
> For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements. As a result, the developer faces higher taxes on the remaining undeveloped land, making development less financially appealing in the first place.
> This creates a counterproductive dynamic: developers may hesitate to improve their land or invest in new projects because they know that any improvements will increase their tax burden on adjacent parcels.
This is exactly correct analysis, but this is good not bad! LVT is preventing hoarding land during development. Of course someone who acts according to the old system's incentives will lose in that model!
First, let's talk about why the existing model is bad though: right now, developers make a huge part of their money not directly from actually building, but from the increase in the land value that happens during construction. This means that developers need to acquire huge sections of land and then only build one house at a time. This is insanely inefficient! It literally prevents anyone else from building in parallel or at lower cost! There is zero competition!
In a world with LVT, a developer would be incentivized to acquire and start work in smaller increments, leaving the door open top more competition and for more companies to enter the space - lowering costs and increasing the speed of construction.
Wouldn't this same argument suggest nobody would want to increase their income because it will increase the amount of income tax they pay?
The property you own is going up in value! That would almost certainly outweigh the increase in LVT.
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The most obvious argument for me is that I don't even think that developing land as much as possible should be a desired outcome. I'd rather have some billionaire sitting on a huge plot of wilderness than turn it into another shopping center.
Many states have adopted various sorts of watershed protection or conservation laws that make many areas undevelopable in any profitable way. The cost of the hoops one must jump through to prove some small project will not run afoul of these laws is a non starter....unless the developer is professional capital fueled operation looking to put in a chain store, strip mall or 5-over-N. That drags up adjacent values enough that the suburban subdivision developers show up and start buying the farms, etc, etc.
So in a perverse sort of way you basically get what you want, wide swaths of low/no development wilderness, but it's paid for by the everyman not the billionares.
I'd rather the plot be a national park be yes, no need to pave the entire country in the name of efficiency.
> I'd rather have some billionaire sitting on a huge plot of wilderness
I'd rather not have a billionaire sitting on a huge plot of land. If we as a society want that wilderness to be preserved, it should be a state park or national park, that should be relinquished to our government.
They tried a land value tax in Hawaii. The results are described in the lyrics of the Joni Mitchell song "Big Yellow Taxi":
"They paved paradise
And put up a parking lot"
Not a very convincing article in my view.
>>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves. If they do find oil, the value of their land would skyrocket because the presence of oil dramatically increases its economic potential.
Is the author aware that in many countries the owner of the land doesn't own the resources if they are discovered there? Is the author seriously claiming discovering oil is not profitable under LVT? Does he prefer making people who happen to stumble on oil not pay % of the value of it as tax? (and thus presumably prefers taxing other things). It seems so unlikely to me that someone reasonable would make that argument that I have trouble taking it seriously.
>>An LVT implicitly taxes improvements to nearby land
That's one of the two major points behind it: tax wealth that you got without building it yourself. In other words it limits land speculation.
>>An LVT is unlikely to replace many existing taxes
The argument the author is making here ("government will not get rid of other taxes") applies to any tax discussion and kills it before it even starts.
>>Another major issue is that a full or near-full land value tax would likely establish a troubling precedent by signaling that the government has the appetite to effectively confiscate an additional category of assets that people have already acquired long ago through their labor and purchases.
Yeah but we need to tax something. The alternative is to tax the very labor which must certainly be worse. Land owners are benefiting from work done by others without contributing to it and thus should be taxes accordingly.
>>The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%)
Amazing, 100% rate for LVT doesn't make sense!
>>For instance, individuals buy stocks, businesses invest in capital goods like machinery, and developers improve real estate—all with the expectation that they will retain most of the value of their assets and any future returns from them. This confidence in the protection of property rights encourages entrepreneurship, innovation, and economic growth.
And yet all of those are taxed in the current system!
The author seems to be assuming the proposed LVT rates are very high (when in practice they would be in low single digits). Remove that assumption and the whole article makes no sense at all.
This stems from the fact that if a landowner successfully discovers a valuable resource or identifies a creative way to utilize their land more productively, the government will increase their tax burden accordingly.
One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.
As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.
To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.
>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves.
LVT is for building property or occupying land. Mineral rights are under many if not most legal systems treated separately from land ownership (e.g. they are auctioned off) because unlike land, oil wells eventually run dry.
This does not seem like an honest criticism of LVT, because it deliberately blurs land and mineral rights.
>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
That's the kind of market discipline we are currently lacking which the author of this piece apparently does not want.
On the other hand, a developer who builds 10 houses on one plot of land is not going to magically make 10 houses on another plot of land double in price.
>Even in its simplest "naive" form, the LVT has a narrow tax base. The reality is that the vast majority of global wealth is created through human labor and innovation
This last criticism is A) wrong and B) only applies to single taxers, not proponents of LVT.
>>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
>A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
You're missing the point entirely. When your small business, single family home, little ranch, whatever, becomes in increasing proximity to improvements your tax goes up. If you own a big ranch and decide to split some of it off, build housing or whatever and sell, then your tax on everything goes up per LVT.
and?
when the value of your land goes up it is because it brings benefits. you can capitalize upon those benefits or you can sell up.
neither are bad options.
@patio11's podcast, Complex Systems has two great episodes that discuss much of the context about land value tax and property tax systems in general (from a US perspective).
How we tax property, with Lars Doucet: https://www.complexsystemspodcast.com/episodes/property-asse...
Tax the dirt, with Lars Doucet & Greg Miller: https://www.complexsystemspodcast.com/episodes/tax-the-dirt-...
"Ratinalists" are basically libertarians that are coy about it.
They're more culty than libertarians.
They're a lot like the modern-day version of Ayn Rand's Objectivism, which is also libertarian. I remember people getting involved in that at university in the '80s and thinking how cult-like it all was - people feeling they had "found the truth" and wanting to recruit new members.
Rationalism seems to be playing a similar role for a certain type of person in Silicon Valley today, fulfilling an emotional/religious need.
Another way to look at it: Scientology, but replace Xenu with Yudkowsky and volcanoes with Harry Potter, or something.
It will never cease to amuse me that people calling themselves "rationalists" wound up recreating Pascal's Wager from first principles, just with time travelling robots, and drove themselves to sometimes murderous insanity over it. And that their Bible is essentially a Harry Potter fanfic.
These are the dipshits conspiring to shape our future, control our destiny and create the Machine God in their image. They make the billionaires messing around the big owl at Bohemian Grove look positively tame and... rational.
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You don't know what you're talking about. There are just as many socialists among them.
See also, perhaps, Killer Arguments Against Land Value Tax... Not: https://kaalvtn.blogspot.com/p/index.html
LVT is envy written into law — "how dare someone use what belongs to them in a way which doesn't benefit me?!?", whether individuals or groups are speaking. It also puts a wonderful tool into the hands of decision-makers to reward friends & punish enemies. No.
land value tax is a regressive tax on middle class homeowners that would ultimately benefit the wealthy. bc middle class single family homeowners would not be able to afford the tax increase or afford the construction to fully utilize the property, which would force them to sell to investors who could afford it.
terrible idea.
not to mention the political debates/decisions over what constitutes "fully utilized". what about public parks? urban agriculture? so many exceptions.
this would be a nightmare policy to retrofit. maybe a good idea if we had started there first, but we didn't.
it's also an ignorant diagnosis of the issue. land values and speculation is not the issue in my location (burlington, vermont) where we have a housing crisis. there are not many vacant lots (i'm guessing maybe a dozen in the entire municipality).
it's just an overly simplified solution to a complex problem.
here is what i believe to be the superior solution: https://www.npr.org/2024/10/07/nx-s1-5119633/housing-crisis-...
> land value tax is a regressive tax on middle class homeowner
Not if you make the tax progressive. The first 200K could be tax free, for example. Primary residences pay a lower % of the value than 2nd and 3rd homes. I bet there are a ton empty vacation homes in Vermont. It can be applied gradually not to shock the system.
> Primary residences pay a lower % of the value than 2nd and 3rd homes.
I think it's funny how every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions, which starts to defeat the claimed purpose of a Land Value Tax.
LVT is a concept that sounds amazing and novel in a vacuum, but starts to look less ideal in the real world. The people who think about it enough start to include factors like structure value and different exceptions for how the land is being used, which starts to look a lot like existing tax code in most places.
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That would somewhat defeat the purpose of the LVT. The point is to force landowners to develop their land. A "fix" would be to make access to capital easier.
Optimum development in many areas isn't necessarily a large mid-rise or high-rise. For most areas, the maximum that the roads and other utilities could support would be dense townhomes, triplexes or quadplexes. Outside of the very highest-demand areas, the LVT would mainly encourage land owners to build additional units on under-utilized square footage or build up a bit. Increasing housing in an area necessarily requires access to capital - so that's what should be provided.
It's not perfectly fair to everyone; it would enrich current landowners. But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.
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I don’t think a land value tax is a good idea, because I’ve never heard a satisfactory way to objectively value the land as-if unimproved.
But making you and I pay a different amount of LVT on the same exact piece of land definitely makes it a worse idea in my view.
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It’s not application of the tax but (relatively) sudden increases in land value that would price out force out neighborhoods
like i said, terrible idea with a million exceptions
Yeah, no LVT proponent has successfully explained to me how it does not cause the erasure of urban or even suburban green spaces, be they public parks, private parks, gardens, etc. If a park increases neighboring land values, then the taxes incurred by the park go up without recompense to the owner (assuming the park is not held by the government).
How many private parks are there? Pretty much every one I've been to has been government run, other than small outdoor spaces next to private buildings and large pay for admission gardens that are usually way out in the boonies on the grounds of an old plantation or manor.
I can't think of how a private, but still public-access, park survives without a rich benefactor eating the losses, even today.
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I guess if everywhere's zoned for max density. If it's zoned as a public park, so no ability to develop it and generate revenue, or close it off for private use, then its rated value would be close to zero. Possibly negative if ownership imposes some maintenance obligations on the owner.
> taxes incurred by the park go up without recompense to the owner
The value of the park is going up, is that not recompense?
Parks built for the public benefit as 501c3 don’t pay property taxes.
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I think you might be slightly confused. Wouldn't the issue be not that the parks themselves are expensive to the owner tax (not only is thr landscaping not that expensive, as LVT excludes your own improvements), but instead that they are effectively discouraged by increasing the tax on everyone adjacent and thus peversely encouraging NIMBYism of towards a common good by imposing a negative externality which does not exist otherwise? The issue wouldn’t be that it would add a tax burden upon the park owner, but that it turns operating a common good into a 'sadistic' act that pushes costs onto others.
A LVT could thus accidentally wind up like a window tax in that it could wind up discouraging efficient improvements to human conditions out of a misguided attempt at improving perceived fairness.
The bottom 50% in terms of wealth in the US only own 10% of the land. How on earth is this a regressive tax? The top 10% own over 40% of the land. https://fred.stlouisfed.org/graph/?g=1KsUt
how much of US land is housing? probably much less than 10%
edit: yep https://www.visualcapitalist.com/america-land-use/
amusing attempt at using data for an argument