Comment by trhway
1 year ago
>Side-by-side owners of physically/legally identical land will pay the same taxes regardless of what is built on their properties
Do we really want this? It is pretty established that higher valued assets incur higher property taxes. Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense. Old beat up Corolla owner to pay the same tax as a Lamborghini owner. (It reeks of perverse socialism - dividing everything, in this case tax burden, equally in the most simplistic way, and not surprisingly that LVT is usually pushed for by leftist "progressives" while there is nothing progressive in it really).
I believe the idea is to avoid punishing people for improving the land.
Landowners should be taxed in a way that factors in opportunity cost. If the city has a massive housing shortage, and the bodega owner refuses to sell to a developer (thus exacerbating the shortage), that may be their right -- but there's also no reason why it shouldn't be reflected in their tax bill.
Remember also that the skyscraper can be taxed in other ways, e.g. corporate income tax or sales tax. But a traditional property tax incentivizes keeping a lot empty, because as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
>But a traditional property tax incentivizes keeping a lot empty,
Looking around, i think you're incorrect.
>as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
you're paying your fair share for the police, fire protection, etc. as building something increases the need for such services even when you don't gneerate revenue.
>Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity.
That is patently false. The taxes in no way disincentivize me going to work, and they don't affect my desire to make even more money and to start my own business.
There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
>Looking around, i think you're incorrect.
77,000 vacant lots in NYC: https://commongroundorwa.org/3019-2/
>There are taxes designed to decrease activity, like 90% income tax, yet they pretty rare, far from the "most".
How about an 85% income tax? 80%? 75%? Where do you draw the line? The truth is, it's a matter of degree. Even a 10% tax disincentivizes work a little bit.
2 replies →
> But a traditional property tax incentivizes keeping a lot empty, because as soon as you create something on it, you start having to pay more tax -- regardless of whether the thing you created is generating revenue.
I know this is what LVT advocates say, but it's not true in practice. An unimproved lot is a liability from a cash flow perspective unless the tax rate is 0%. That's an incentive to improve the lot and derive value from it (which can be income, or some sort of personal benefit like shelter).
> Another way of thinking about it is: most taxes, including income and property taxes, disincentivize productive economic activity. Land value taxes improve allocation and reduce commute times, so instead of acting as a drag on the economy they act as an accelerant -- while also helping fund the government, just as other taxes do. A neat trick.
This claim is largely theoretical, as the LVT has very limited adoption worldwide (I believe Denmark is the only country that uses it without broad exemptions for residential real estate and other common uses, though feel free to correct me) and does not seem to have produced a radical transformation in those limited applications within some countries and a few depressed US cities.
You can fit a bodega inside a skyscraper. The bodega owner wouldn’t be paying the land value tax.
But if there were a free-standing bodega on land where you could build a skyscraper, you don’t think it should be taxed the same as a skyscraper?
A skyscraper can be built practically everywhere. Thus the same tax for everybody everywhere. Everybody can hang a Van Gogh painting on their wall, thus every wall to be taxed the same.
Right. This is one of the many flaws in the LVT.
Someone now has to make a subjective decision about the theoretical highest and best use of the land at a given point in time, and the last people I want making that decision are local bureaucrats.
Why would tax forcing towards maximum efficiency or value creation from land use be the right objective?
<Making skyscraper owner pay the same tax as the next door owner of a small bodega just doesn't make sense>
I kind of agree, just tax the land as to the utility value of the land (not what is built on it). If you want to tax what’s on the land (or what it’s being used for) then that’s a different tax basis (perhaps more of a wealth tax or social benefit tax)
Both a farmer and I have 500 acres (his farm, my golf course). There is a basic land tax perhaps but I might get taxed for the golf course but he might get benefits for the socially beneficial food production.
> just tax the land as to the utility value of the land
tax the car to the utility value of the car - force you to drive for Uber instead of the car sitting in the garage and you posting here :)
Good point, this leads to current issue in the UK (and other countries).
In a general sense, UK car owners would pay a relatively small amount tax in road tax and then tax on petrol/diesel purchased to drive the car (the amount would vary on use). Trucks etc would pay more as they would have more maintenance impact on the roads.
So the money raised would be collected by government and distributed locally to maintain the road network.
But now more vehicles are electric so the fuel tax is decreasing so how’s the government going to fund the roads?
Perhaps to a “pay per mile” tax. With different rates depending on where and when. Taxing the utility of a mile driven in your vehicle.
Doesn’t have to force you to drive for uber, as it’s defined on the utility to you of a mile driven in your car. No miles, very little tax ( at peak times in the city rush, the bus might be better)
The analogy would be taxing the car based on its value, not based on the value of the people and goods it carries.
Which is what we do!
1 reply →
If the goal is to maximize tax or tax fairness, then richer people should be taxed more. If the goal is to minimise wasted utilisation then it should be a flat tax so that everyone is trying to get the most value out of the same land. A variable tax allows grandma to keep living in her bungalow next to the skyscraper, while a flat tax forces her to sell the bungalow to someone who wants to build a skyscraper, and then she can rent an apartment in the skyscraper (maybe), which is sad for grandma but is objectively a much more efficient use of space. Both are quite reasonable goals, so the balance depends on how we feel about each as a society.