Comment by adverbly
15 hours ago
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.
Under an LVT, almost all of the value of the surrounding improvements would be considered part of your land value, since even an empty lot in their vicinity would benefit from the surrounding improvements. Thus, a 100% LVT would capture 100% of the value someone might gain from the presence of those surrounding improvements. In the worst case, you personally benefit far less from those improvements than a typical renter would (e.g., bike lanes if you don't own a bike), so their presence is a net negative to you.
That's why income taxes are less than 100%. But some people advocate for a 100% LVT very seriously.
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