Comment by andrewla
1 day ago
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.
Right. So frustrating to hear people speak of LVT as some pie in the sky concept when it's the most original and basic form of tax, for centuries, worldwide.
It's equivalent to a modern day person talking about how cooking food over an open fire is never going to work.
The valuation issue is also a non-issue. You just have people self-assess the value, but any stated value is an option for the state to buy at that price. Also an ancient and well known mechanism.
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.
We know construction costs so its not really hard to do without going to more imagination land than estimating property value.
> 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.
>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.
Retirees have been doing this for as long as humans have owned property. Then they die and the house moves on. There is good reason someone will want to live in a house that is larger than they need.
If there are not enough houses don't blame that on existing houses.
7 replies →
If you're concerned with "it's underutilized because the population density is low and other people need more housing" than it would be much easier and more effective to directly pursue building housing on low-population-density non-residential land. Direct construction driven by the government, vs a multi-step strategy of "make people miserable with tax payments until they sell, hope the people they sell too will be deep-pocketed developers who will build super-high-density stuff instead of just fancier homes for richer families, and hope all this happens quickly."
Cause a tax amount that goes up based on what people with more money than you do on other pieces of property simply gives more power to the wealthy. "Underutilized" as far as tax implications go then means "people with more money than you would like there to be something else there."
And, of course, this already happens with US property taxes in many jurisdictions. And people absolutely hate it.
"Tax incentives to downgrade to a smaller property" sounds great in theory for retirees sitting in huge properties, but I think is limited in practice. The people with the really big places are wealthy and politically influential, so you'll get Prop 13s, or you'll get the recent cuts to property tax in Texas. "Make housing more affordable by cutting the taxes!" And the people impacted by more aggressive taxes will less be the boomers in giant houses and more be the poorer retirees in multi-generational living situations, or ones in fairly small condos.
2 replies →
> 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.
Some of this is due to tax policy, at least in the US. If you own an oversized house that you’ve had for long enough, then most of the value is a capital gain. If you sell it, you pay taxes on all but $500k of that gain, even if you promptly buy a new, smaller house that costs almost as much. If, instead, you hold the house until you die, the tax is waived completely.
California has additional perverse incentives due to property taxes.
4 replies →
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.
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?
The assessments are roughly based on the sale price of similar lots and the approximate rebuild value of the structures; usually erring on the low side in my experience (though that is probably more about the direction of the housing market than inherent to the process). I agree there is a qualitative element that strikes me as icky compared to pure quant taxes like wages, but it's already happening so LVT doesn't materially change things.
> How, specifically, do they arrive at these assessments.
So is your argument that you don't understand something and so it must be wrong?
There's an extremely large amount of existing material that is used by property assessors available for you to look up to research how they do this. It is a well-established field.
Property assessments have been done across a huge number of countries for decades probably billions of times at this point. There are probably trillions of dollars of capital that flows according to these assessments.
1 reply →
>> 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.
Maybe but at some point, isn't your problem the same valuing a single dollar? We can compare the USD against other fiat currency, but they're all valued against the USD or some other bucket of fiat currencies. Or, you could try to tie the value of the dollar against a bucket of goods, but that's also just moving the goalposts around.
2 replies →
> 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?
To expand on this differently -- if we have a model that produces estimates of the "true value of improved land", then we can validate that model whenever property sells. It would be a slow process but if we have a model and the model parameters capture a significant portion of the variance, then we would expect the model to converge over time.
Nobody does this, of course; it is not usually politically expedient to do so for a number of reasons, not least of which is the predictability of taxes for a given parcel. But at least it is theoretically asymptotically achievable. Not so for unimproved land value because the value you are trying to estimate is not an actual quantity.
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.
Imagine the uproar when Elon would buy the house of anyone he got into a twitter spat with!
1 reply →
>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...
> all they get for it is a reduction in their real income because the plot of land their house sits on costs 20% more
And, y'know, the value of something they own goes up by 20%...
And that headteacher's salary can increase too because the tax base went up.
No such luck for the poor schoolteacher whose rent went up. All she will contribute to is her landlord's vacation fund.
>Or the schoolteachers get driven away by a horde of NIMBYs
Really??? You think NIMBYs will protest a good school?
If you want NIMBYs go visit San Francisco. Theyve detaxed land there to such an absurd extent that the locals with $1.5 million mortgages will flock to town council meetings to try to declare a launderette historic to prevent it from being turned into apartments (because if any more apartments are built they will go underwater on their absurdly sized mortgage).
1 reply →
> 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.
>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"
In other words an accurate imputed land value.
I still dont see a problem with this.