Speculation is less profitable than development. If you're getting speculation it's because the roi vs risk of development isn't justifiable.
You can't "tax magic carrot stick <buzzword1>, <buzzword2>, blah, blah, <dogwhistle>" your way around this fundamental economic reality. But you absolutely can screw it up more.
Now, in a low regulation environment you probably could just up the taxes and let owners make do. A bunch of random low end income earning crap (storage lots or whatever, heavy on the whatever) will pop up to pay the tax bill. But Baltimore is not that so you'll probably just get the city owning a bunch of that vacant property instead which is a lateral or a step backward due to increased friction of development.
Tangentially, the author forgets that the reason cities like Baltimore adopted such policy was to encourage the bulldozing of uninhabitable structures lest they become less than legally inhabited. I get that a certain type of people love to screech about tax intake being an unalloyed good here but what's really happening is that the city is amortizing the cost of bulldozing crack dens over time via tax incentive for owners of "teardown" quality structures to take that step (which up's adjacent property values).
I want to point out that this is not really about revenue generation but about fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed.
As for revenue, that's a political decision. The thing is that elected officials control the tax rate, not SDAT. SDAT only values the properties.
Rising property values don't have to mean rising taxes, the elected officials can lower the tax rate in response -- this what the term "no new revenue rate" is for.
It's also not just about pushing tax burden onto vacant lots. When property A is undervalued relative to property B, property B picks up more of the property taxes. So if a lot of vacant land is undervalued, that means a lot of improved land is paying more taxes proportionately. It seems sub-optimal that property where nobody lives is given a tax subsidy and the difference is realized in rising taxes for everyone else.
The main point is that the law requires that everyone be valued at market rate. That should be done first. Then any special case exemptions, write-downs, discounts, and the tax rate itself, should be handled at the political layer, where they are explicit and conscious rather than implicit.
We can debate what the relative impact of this is in the big picture, but this seems like something that is worth fixing.
> I want to point out that this is not really about revenue generation but about fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed.
Then you're saying it's not about fairness either. It's about following the law better, however it's written.
Ha ha, define similar. Real estate is the quintessential non fungible market. I guess my point is, look deeper than the surface at any aspect of this problem, and discover political decisions pretending to be objective ones.
> Speculation is less profitable than development, If you're getting speculation it's because the roi vs risk of development isn't justifiable.
Arguably, speculation should always be unprofitable and we should ideally regulate against it in every way, shape and form. I'd ask what purpose does holding onto a unproductive piece of land serve at all to society beyond an easy to grease financial vehicle?
There's tons of good speculation. Speculators are not buying and selling land, or corn futures, or what have you.
They're trading risk.
Sell to a speculator and you turn an uncertain future into cash right now.
Buy from a speculator and you get to enter the market at the moment of your choice.
It unlocks specialization - house builders can focus on building houses, and corn farmers can focus on growing corn. As soon as they're done with a house / harvest, either a consumer or a speculator buys it and they can focus on producing the next house/crop. Without speculators, they'd have to not only do their value-add, they'd also have to predict the market and hope enough customers show up in future. With speculators, this is significantly mitigated.
> As soon as they're done with a house / harvest, either a consumer or a speculator buys it and they can focus on producing the next house/crop. Without speculators, they'd have to not only do their value-add, they'd also have to predict the market and hope enough customers show up in future. With speculators, this is significantly mitigated.
Sounds like a great way to over or undershoot demand leading to market inefficiencies which the speculators have a perverse incentive to increase. It may be useful for a market like agriculture where production is variable and the produced goods are perishable - the loss from speculators may be less than the inefficiencies of noise. However, we've all seen how broken the real estate market has been despite the continued presence of land being one of the least variable things we encounter.
The real estate market got borked by the fact that municipal authorities answer to incumbent owners, who ~universally acted to limit new building. This breaks the mechanism by which some speculators go out of business.
If you can build anywhere, and a speculator is blocking development of a prime piece of land, you'll simply build elsewhere, making that land less prime with each passing moment, and eventually driving the speculator out of business.
Buy from a speculator and you get to enter the market at a price of their choice.
Vacant land is land that somebody could have built a home or a restaurant or a storefront or an apartment complex on, except it's being hoarded by speculators, who often refuse to sell at a loss.
In order to build a home / restaurant / storefront on that land, you first have to buy it. Buy it from whom? Ban speculators, and now you have to buy that land from the original owner, who is obligated to hold on to it even though he may want to use his capital for something else.
> refuse to sell at a loss
Speculators who won't sell at a cash loss are a real problem, but it's a problem that can easily solve itself. As the land value fluctuates up and down, the speculators' investment also goes up and down, whether he sells at that price or not. Carrying a piece of land on your books at a loss inflicts economic damage on the speculator.
In a free market, bad investors getting wiped out is just as important as useful ones getting rewarded.
Simply make the "default setting" to allow building things everywhere, and stupid speculators will go out of business more or less instantly. Useful ones will continue to quite literally make money for themselves and society.
> Buy it from whom? ... now you have to buy that land from the original owner, who is obligated to hold on to it even though he may want to use his capital for something else.
There's no obligation to "Own" land, if you want to put your capital elsewhere then either use your existing land as collateral for a loan or otherwise sell it. Technically everyone is actually leasing land from a government, it's not a commodity and it has a finite supply, so unlike corn or even housing, what is a speculator even speculating on?
I also want to be clear I think it would be very silly to ban speculators, the act of speculation is something that we all do when we own literally anything, but speculating on limited finite ground space that no one actually owns doesn't make any logical sense. Just properly tax speculation into a space that is unprofitable to hoard.
Ask yourself why and by what/who the incentives of living in society have been so thoroughly perverted that there is demand for "unproductive" (seriously, listen to yourself, this stuff is a liability) land for "finance bullshit magic" reasons? The perversions are what prevent "buy and do something to generate value" from outcompeting "buy and hold".
Oh, don't worry, we have some lovely storage facilities here. It's just that there's only so many that you can build.
I'm not sure that the city owning a lot of land is actually a bad thing, compared to the current situation where it just sits there and rots. It's not like Baltimore has the best results doing things, but the alternative is clearly very bad.
Other cities have established chartered “development corporations” to utilize underutilized assets and resources like land and make good uses for them.
They have been good for low income housing (often at the expense of lower income housing), low rent commercial spaces, low rent industrial spaces, amusement parks, real estate development, etc.
But this is gentrification and if you think it is necessary, then very quickly you will realize it is a problem. It homogenizes neighborhoods to support only a certain class of people while destroying other people.
Yes, they make it so difficult to develop that you must sell to the city so their development corporation can hand out contracts to city cronies with kickbacks. Tax dollars at work, lol.
I challenge you to find me an example of a city making that routine practice in any capacity. That would be a huge administrative PITA, say nothing of the perverse incentive it creates (regardless of if it's a forced sale).
> Tangentially, the author forgets that the reason cities like Baltimore adopted such policy was to encourage the bulldozing of uninhabitable structures lest they become less than legally inhabited.
This is interesting, do you have a source for this? Normally the assessors are tasked only with setting a value of a property and not with any type of policy related to rate or discount.
The tax upon land values is, therefore, the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by Nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill, and intelligence; and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, and capital its natural return.
— Henry George, Progress and Poverty, Book VIII, Chapter 3
>"EVERYBODY WORKS BUT THE VACANT LOT" I paid $3600, for this lot and will hold till I get $6000. The profit is unearned increment made possible by the presence of this community and enterprise of its people. I take the profit without earning it. For the remedy read "HENRY GEORGE"
Land Value Tax (one of the main theories pushed by Georgism proponents) is a favorite of online discussion forums, but becomes progressively less popular as the conversation turns from broad strokes to details.
Every time it comes up it seems many people are also unaware that taxing land value is already common practice. It’s common to have one tax for the assessed value of the land and another tax for the assessed value of the improvements. Policies might include exemptions for the first so many dollars of a person’s primary residence structure.
With a pure Land Value Tax you cover your eyes and pretend the value of the structures and improvements doesn’t count. If one wealthy neighbor builds a $2,000,000 house next to a retired grandma living out her final years in her small, old forever home, the LVT people don’t care. If their lots are the same then they must pay the same taxes because the land value is what matters.
This makes it a very regressive tax structure as the people or businesses with the least valuable structures now subdivide their neighbors with the most valuable structures. This can all be avoided by simply using our existing system of having a tax on land and a tax on structures each at their assessed value.
That's objectively false. Georgism is one of the few reliably progressive tax structures, ask any economist.
The "little old grandma in her forever home surrounded by incredibly valuable real estate" trope is a) fairly uncommon + a very small percentage of total real estate and b) very common in conservative billboards advocating for highly regressive cuts to property tax. At the end of the day, if your little old grandma owns $5M in prime real estate, she is very wealthy and can certainly afford the property taxes, and pretending otherwise is how we get policy disasters like San Francisco.
But of course, the overwhelming majority of unimproved property is not owned by little old grandmas, it is owned by real estate corporations. The half acre of Grandma's house pales in comparison to the literal _billions_ (!) of parking spaces in the US, or empty lots, or empty buildings. Drive around NYC and tell me the ratio of acreage owned by little old ladies to that of underutilized land owned by real estate corporations.
Then why is the paper about Baltimore? If you want to argue your own local politics, you can do it without crossing the Rockies, I am sure. I am even more sure that you should.
> That's objectively false. Georgism is one of the few reliably progressive tax structures, ask any economist.
It’s not false at all. Georgism via a LVT purposefully ignores all forms of wealth except land.
Let me simplify it for you: Two neighbors live next door to each other on identical lots. One has $10m in stocks and earns $500k/year. The other is early career and earns $100k/year while trying to build their retirement savings. Under Georgist LVT, you ignore all of this and make them pay the same taxes.
The person who earns less pays a higher percent of their income. This is the definition of regressive.
Where does the average person have most of their wealth stored by retirement? Their house and the land it’s on. Georgist LVT argues that we should tax them out of that land and give it to a business, who should be able to profit from it without paying any taxes on the profits. This is regressive.
The LVT argument holds that we should ignore everything else: Their business ownership, their 401k, their stocks, bonds, cash, and even the house itself. Ignore all of that, tax people based on land.
The 10 story apartment complex and the single family house both might occupy the same land, so they’re taxed the same. Georgists love this in theory because they want those people priced out of their houses and the developers to come in and build those apartment complexes, which those displaced people can come rent.
Efficiency! Sorry typical homeowner, we need to price you out of affording the home you bought and lived in. Our policy needs to force you to sell to this developer who will construct apartment complexes, reap the profits (tax-free now, because it’s not land!) but they’d be happy to rent an apartment to you for a monthly fee.
> Drive around NYC and tell me the ratio of acreage owned by little old ladies to that of underutilized land owned by real estate corporations.
NYC is an outlier. If you’re basing your understanding on economic theories from one of the single most dense and developed cities in the US you’re missing a lot.
Do you think the average person is closer to an NYC parking lot operator? Or closer to the typical homeowner? Why would we pick an entire taxation structure to punish some NYC parking lot owners instead of looking at the typical person? The entire premise is an example of out of touch academic thinking that forgets to even look at what the real world looks like.
Finally, your “ask any economist” appeal to authority does not hold any water. Much has been written about the severe flaws with a Georgist style 100% LVT.
Even the lay discussions on LVT are starting to admit it’s not a panacea. Previously you’d find rationalists championing as the perfect economic format, but even they are waking up to the fact that it’s not so simple. A recently shared HN link: https://www.lesswrong.com/posts/CCuJotfcaoXf8FYcy/some-argum...
Yes. The whole point is to prevent land from being an unproductive store of wealth.
Also, there's no reason we can't retain an income tax or some other tax alongside a LVT.
As noted, it's common to have partial LVT - in my county, the property tax is a combo of building and land. IIRC, my little lot of valued at ~$200k and the building at ~$400 (on a house I could sell tomorrow for $700k+). On my 1500sqft lot, that's $133sqft.
Which, looking at recent listings, is about 1/3 the value of infill lots in the area. It's not a perfect comparison - the infill lots are much larger and have different zoning.
> The LVT argument holds that we should ignore everything else: Their business ownership, their 401k, their stocks, bonds, cash, and even the house itself. Ignore all of that, tax people based on land.
Land Value Tax is specifically concerned with how property taxes are calculated. You're conflating implementing LVT with the concept of a Single Tax, which aims at replacing all taxes in a nation with LVT and is really only advocated for by pure Georgists. The LVT is a viable tax policy on it's own, and shouldn't be dismissed because of grander aims by a very small group of people.
> The 10 story apartment complex and the single family house both might occupy the same land, so they’re taxed the same.
Yes? They're both in the same area, which means they have access to the same utilities, same services, same amenities, etc. The presence of the apartment building doesn't inherently increase or decrease the value of the land, it's the other way around; higher land values see denser housing to better offset the cost of owning and operating the land. Neighborhoods are not static, unchanging islands immune to the developments that surround them. If a neighborhood solely made up of single family homes was 20+ blocks away from downtown 40 years ago, but is now directly bordering downtown because they city has grown and expanded, there is no reason for that neighborhood to still solely consist of single family homes (unless those homeowners want to pay to have a house right next to downtown).
> Sorry typical homeowner, we need to price you out of affording the home you bought and lived in. Our policy needs to force you to sell to this developer who will construct apartment complexes, reap the profits (tax-free now, because it’s not land!) but they’d be happy to rent an apartment to you for a monthly fee.
This is pure FUD. The "typical" homeowner in an urban-sprawled city would probably see their taxes decrease with LVT, depending on how close they are to high value areas. If your home is on the edge of downtown, you might be priced out because that land is a hell of a lot more valuable than what a single family home can capture. If you live in the "typical" suburban community that is 20+ minutes away from downtown? Negligible change, if not a decrease as most suburban lands have very little value compared to more urban communities. It's been shown time and time again that downtown business districts and other centralized urban communities overwhelmingly subsidize suburban communities.
> Finally, your “ask any economist” appeal to authority does not hold any water. Much has been written about the severe flaws with a Georgist style 100% LVT.
Again, LVT is not entrenched in it's Georgist implementation. No one worth listening too says that LVT solves everything and gives us Utopia. It's simply the least worst way to go about land taxation, and absolutely has its hurdles and flaws that will present themselves.
Georgism is a nice idea in theory, but will never work in practice (a characteristic it shares with communism, not coincidentally).
If someone comes along and overimproves their land near me (or overpays for a lot), does that mean the entire area should be compelled to pay taxes as if all landowners made the same incorrect decision?
Wouldn't this scenario also apply under conventional property tax regimes? Is or isn't this already happening in high property tax states? What is the specific bad effect you are invoking, and is it having the effects you predict in places where the effective tax rate on land is already fairly high?
The purpose of a LVT is to capture as much property value for the government as possible. Anyone advocating for it is unlikely to recommend exemptions that would interfere with that purpose.
As I understand it (having it explained to me by Georgists and doing a fair amount of research myself), the value of the land is determined by "best and highest use".
That is such a nebulous term that can be manipulated in so many ways (e.g. the example I provided above or zoning changes) that it doesn't seem feasible to use as the basis for any government policy.
And to answer your questions, no this wouldn't apply under conventional property tax regimes because overimprovements have no impact on the value of neighboring lots or existing improvements, no this is not already happening in high tax states because the value of the land is (supposed to be) set by market rates and the land value and improvement values are decoupled in the assessment.
In practice, assessors do a poor job of this (see the article in question), which is why I have no interest in giving them even more control.
> the value of the land is determined by "best and highest use"
Absolutely valid to say that "best and highest use" is vague and untrustworthy at best, but it's said this way to avoid getting trapped in the weeds of what exactly it means. Broadly speaking, "best and highest use" is entirely contextual to the land in question. The "best" use for 40 acres of nutrient-rich soil an hour away from the nearest city is going to be agriculture. While a plot of land smack dab in the middle of mainstreet in a rural town would probably be a commercial building or a mixed use building offering an apartment(s) above a shop or restaurant of some kind. Downtown in a metropolis would be some multi-storied residential or business/commercial building, while the middle of nowhere filled with trees is forestry and maybe mining. Everything is contextual.
Who determines the "best" use case is usually delegated to a free market of land value appraisers. It seems counter-intuitive to leave so much leeway at this part, but consider that land value taxation is attempting to best capture the true value of the land. Meaning that land owners want the lowest possible valuation of their land to pay less taxes, but since land can't be hidden, it's (in theory) hard to fake the value of your land. I can't argue my house in an urban community is relatively worthless when A) every neighboring piece of land will have more or less the same value, and B) everyone can see where the land my house is located and what's around it.
This plays into your first comment, if your neighbor adds a bunch of improvements to his land, if you and your other neighbors gain benefit from those improvements (they opened a store, or a school, or installed a modern sewer system or clean drinking water system, or created a private land reserve, and you and your property have access to these), then yes your land would see an increase in value as a result. However, these types of improvements are rarely the case, and are mostly handled by some form of government. The same with a neighbor "overpaying", since in theory they wouldn't "overpay", they'd just be paying the value that the land is assessed at.
Alternatively, if your neighborhood is run down compared to something brand new and shiny, and all of your neighbors decide to clean things up and do renovations and increase the overall perceived value of the neighborhood, then yes you'd see your property value increase as a result of others actions. But this is no different than when communities go through "urban renewal" and other programs that artificially increase the communities' value as a result of private and public funding.
> Absolutely valid to say that "best and highest use" is vague and untrustworthy at best, but it's said this way to avoid getting trapped in the weeds of what exactly it means.
I mean.. if there was to be a law established to do it this way, it better go into very precise detail of exactly what it means and a verifiable mechanism and formula of how it is calculated.
Anything else would be a wide open door for corruption where assessors can do whatever they want to benefit various groups and harm others.
> Absolutely valid to say that "best and highest use" is vague and untrustworthy at best, but it's said this way to avoid getting trapped in the weeds of what exactly it means.
I want the government to be "trapped in the weeds" of specific definitions of terms, not free to define them as whomever is in charge at the moment sees fit.
> Broadly speaking, "best and highest use" is entirely contextual to the land in question. The "best" use for 40 acres of nutrient-rich soil an hour away from the nearest city is going to be agriculture. While a plot of land smack dab in the middle of mainstreet in a rural town would probably be a commercial building or a mixed use building offering an apartment(s) above a shop or restaurant of some kind. Downtown in a metropolis would be some multi-storied residential or business/commercial building, while the middle of nowhere filled with trees is forestry and maybe mining. Everything is contextual.
Absolutely, and I believe the landowner (influenced by the market of potential alternative landowners) is the person to make that decision, not the taxing agency.
> Who determines the "best" use case is usually delegated to a free market of land value appraisers. It seems counter-intuitive to leave so much leeway at this part, but consider that land value taxation is attempting to best capture the true value of the land. Meaning that land owners want the lowest possible valuation of their land to pay less taxes, but since land can't be hidden, it's (in theory) hard to fake the value of your land. I can't argue my house in an urban community is relatively worthless when A) every neighboring piece of land will have more or less the same value, and B) everyone can see where the land my house is located and what's around it.
It seems like zoning and other restrictions are also very important here, which provides yet another conflict of interest.
> This plays into your first comment, if your neighbor adds a bunch of improvements to his land, if you and your other neighbors gain benefit from those improvements (they opened a store, or a school, or installed a modern sewer system or clean drinking water system, or created a private land reserve, and you and your property have access to these), then yes your land would see an increase in value as a result. However, these types of improvements are rarely the case, and are mostly handled by some form of government. The same with a neighbor "overpaying", since in theory they wouldn't "overpay", they'd just be paying the value that the land is assessed at.
> Alternatively, if your neighborhood is run down compared to something brand new and shiny, and all of your neighbors decide to clean things up and do renovations and increase the overall perceived value of the neighborhood, then yes you'd see your property value increase as a result of others actions. But this is no different than when communities go through "urban renewal" and other programs that artificially increase the communities' value as a result of private and public funding.
No argument from me here. In both these cases, I would think that the land value would increase independent from any improvements made, which can be addressed through the current assessment methods based on fair market value instead of highest and best use.
Improvements are not considered in a land value tax; it's kind of the point. Land is also more fungible and easier to model the value of than improvements.
Why would you prefer an income tax -- by definition, taking earned income -- to a land value tax, which is constructed specifically to target unearned windfalls and the time value of access to public infrastructure and community benefits?
> Improvements are not considered in a land value tax; it's kind of the point.
The potential improvements to a parcel are a key factor in the land value, so they are relevant.
> Land is also more fungible and easier to model the value of than improvements.
Land is more fungible, but not easier to value IMO. Input costs for improvements are easily calculated, the value of being in a nice neighborhood, having good schools nearby, being close (or not) to public transit, etc. are much harder to calculate.
> Why would you prefer an income tax -- by definition, taking earned income -- to a land value tax, which is constructed specifically to target unearned windfalls and the time value of access to public infrastructure and community benefits?
Taxes need to be paid somehow, and I think having some diversity in revenue sources is a good strategy.
Also, given how bad of a job governments do in assessing property under the current scheme (see the article here as an example), I don't think giving them more power to arbitrarily decide the "true" value of the property based on the fairly arbitrary metrics you described is a good idea.
Lastly, one person's "unearned windfall" is another person's wise investment.
This article highlights something that’s an issue almost everywhere, albeit maybe not as egregious.
If I do nothing to my property, my taxes stay the same. If I add a shed, deck, pool, or whatever external feature to my property then the tax man comes and wants more money. The lesson? Don’t improve your property.
The solution is to tax the land value rather than property improvement value. Any particular improvement from a property owner isn't taxed ... though implicitly the whole neighborhood getting more expensive (via the aggregate of all improvements and increased demand) does raise your tax.
If I'm meant to treat a rise in property tax in response to positive change in value as a disincentive to improvement, what difference how the tax increase is computed? It isn't even clear LVT does not create a massive incentive to consolidation, as property tax increasing without connection to improvement kicks off a "Red Queen's race" where anyone unable to capture revenue from improvement, or unable to increase that capture, ends up facing a permanent structural bar to any ownership. It seems as though designed to annihilate even any possibility of an American-style middle class, in favor of an ever narrowing landlord gerousia enriching itself through rent farming.
Well, it makes sense if you hope to be among the winners. But I don't see any Georgists here seeming very interested in addressing anything like that, just a couple who handwaved past it. [1] I'm not an economist, though, nor even very smart. I'm just a Baltimore homeowner who's heard a time or two before of such alternative tax scams. I mean schemes.
[1] And the ones responding at https://news.ycombinator.com/item?id=44826168, who seem thus far to present one argument each and retire discouraged by its failure. One hopes someone might come along willing to actually espouse this heterodoxy, rather than just try to feel "based" for namedropping around it.
An LVT specifically targets land rents, yes including imputed rents. Implied is an end to income and sales tax. The effects of this will be to discourage things like a surface parking lot or low rise motel in the dense part of a city.
Suburbs and rural areas nobody really cares about.
I'm very confused about the idea that taxing land ownership more heavily will somehow lead to more consolidation and _favor_ landlords, and simultaneously harm existing homeowners. It's just incoherent. Perhaps I too am not smart.
Perhaps you are motivated not to reason. Forecasting growth rates of revenue from improvement, versus property tax apparently aka "land rent," and observing the possibility exists that one will grow faster than the other especially since many improvements generate no revenue at all, requires not all that much effort. But I had no idea you people were mad enough to argue seriously this should be the only tax of any kind anywhere. Excuse me.
It's worse than that. If you sit on the property, but your neighbours improve it, make it a better place to live, create businesses that attract people, OR the public treasury builds a park, or a metro stop, or a new road, your property value increases, letting you capture the value that others worked for!
Every time I see a single level parking lot, which is basically wasting half a city block by just covering it in asphalt and painting a few lines on it, in the middle of downtown, next to skyscrapers, I am painfully reminded of this fact.
Whenever you see something seemingly silly and inefficient/wasteful ask yourself what is preventing the more efficient solution. The answer is almost always that someone is paying more to deal with government in a slightly different way that reduces risk to them
1ac parking lot = easy and definite, just buy land, simple permits, etc.
.25ac parking garage = difficult permits with many more places for various parties to whimsically drag their dick all over it at great expense to you, etc.
Investing in a commercial structure carries massive financial risk because there are all sorts of steps along the way where the government has reserved the right to balloon your cost so 1mil of land, 2.5mil of structure and $100k of bullshit could potentially be 1mil,5mil,500k once everyone is done screwing you.
The parking lot on $4mil of land and $100k of construction and $100k of bullshit can only balloon to $4mil, 200k, 200k in the worst case.
Now, I pulled those numbers out of my ass but it's the basic workflow that underpins most of the "stupid" things we see being built.
Still cheaper to get screwed out of 25% capacity on a $ per space parking lot than on a $$$$$ per space parking garage. So the parking lot gets built anyway. Oh, and it winds up taking more land than it would have 50yr ago specifically because of those setbacks and planters and other garbage.
> If I do nothing to my property, my taxes stay the same.
I wish that was the case, but in both counties I've owned houses, the tax appraisal increases every year regardless. They don't even drive by, they just use automation to increase it. I protest every year and "win" which means the increase is reduced or eliminated, but it's a fight to keep your taxes the same regardless.
The unintended consequence is that cities get much more in taxes from businesses tban residents. California has therefore overbuilt its business base while underbuilding housing. The result is a severe housing shortage and sky high rents.
But that's because the calculated value of the land+building is increasing, right? The method of calculation might be wrong, but the tax going up isn't because the calculation is being arbitrarily changed - it's because one of the inputs is more valuable.
At least that's the way it generally works where I live.
You are somewhat correct, even though I’ve never heard anyone say that or allow it to affect their decision in a major way. I do also suspect you may be in a place that is under rather oppressive government regulation.
The problem is a far more fundamental one, because just as I’m trying to get people to understand related to this movement or initiative to do away with property taxes, certain government and asset holder support for that is likely more about personal enrichment and/or expanding total tax receipts by other means, i.e., ulterior motives.
The fundamental issue here is the very premise of how the tax system functions not what kind of taxes are stolen and extracted where; and then redistribute to whom, usually for corrupted reasons and purposes.
The effectively unlimited and unbounded, detached, and inconsequential nature of the tax system now is really the core problem. It’s currently other people’s money and mostly even future people’s money, squandered without any meaningful limits, barriers, or even rules regarding conflicts of interests; and there are virtually zero actual and real, immediate consequences for malfeasance by people charged with the duty of responsible allocation of funds. It’s a corrupt and rotten system from the very top to the very bottom.
Unfortunately not enough people care, understand, or might even like it because they benefit from it and think they will die before the music stops. That’s how we get $37 trillion in national realized debt, another $74 trillion in unfunded liabilities, and another $9 trillion in state and local debt for a total national debt of $120 trillion in America’s public debt burden as of today.
>I’ve never heard anyone say that or allow it to affect their decision in a major way.
It happens all the time.
Half the time you see a facility that's using "temporary" tarp shelters and/or containers and/or trailers for some amount of it's covered area it's doing it for the taxes. The other half the time is for the expediency and flexibility (a sub component of which is fewer government approvals and government mandated steps, so basically taxes of another form).
Any time you have a commercial development across multiple lots they run the numbers both ways and/or they'll subdivide a big lot or they'll buy adjacent parcels crossing a jurisdiction boundary to minimize expense (not just taxes, construction as well).
I think this person explained a lot about how things get done in the real world. They just don’t like it. What’s not to like about society spending itself into oblivion?
In a place like Baltimore, the city ends up owning the blight, and are generally not capable of effectively cleaning it up (due to their general mismanagement that causes an environment where blight is the norm in the first place).
So this is all about getting the town to assess lots at higher valuations and this way raise tax revenue which in turn will raise town’s ability to spend for itself.
Sounds more like the Substack is trying to raise poverty by raising cost of living and prices.
Rising property values don't necessarily mean higher tax bills if the property tax rate falls to match. You will see terms like "no new revenue rate" that reflect this.
The point of the article is not "Baltimore should raise more taxes" -- raising more revenue is a political decision, and that is not actually under SDAT's purview. SDAT's job is simply to assess property at market value. What to do with that value is for the elected officials (and the voters who elect them) to decide.
If property A is undervalued relative to property B, property B faces an unfair burden of taxes, and property A receives an unfair tax break. That's all this report is trying to say -- all property should be assessed at its market value, as the law requires.
Any exemptions, discounts, write-offs, and the tax rate itself, are political decisions. Those should be made explicitly by elected officials, not implicitly by unequal valuations.
I don't know about that. We live in a city where people are complaining about housing costs and availability, but the city has absolutely vast amounts of housing. We've lost close to 40% of our population since 1970.
It's just that a lot of that housing is in awful shape, and the places where it exist aren't desirable neighborhoods (although let's be clear, many of them are right next to expensive and desirable neighborhoods, it's really bad.) This should be a situation that rights itself automatically, but it's not.
Not sure where you are, but the demographics have likely shifted significantly - you have to normalize the population changes with the average household population. For example, a 40% drop in population would about equal out with the change in average household size from ~4 to ~2.5
> So this is all about getting the town to assess lots at higher valuations and this way raise tax revenue which in turn will raise town’s ability to spend for itself.
That is one angle of view. Alternatively, you could be encouraging vacant lot (or equivalent structure) owners to sell if neighbors are improving properties while they are not.
Which gets us into a whole other debate about zoning in (most of) the US.
Why shouldn't a land owner be able to use that land in the most profitable way possible (within reason)?
Example: In my area, there's an intersection about 1/4 mile away. I think it would be a great place to have a corner shop/cafe/bodega. It's close to the schools, the other shopping options are another mile away. It's walking distance to several thousand housing units.
But, I can't build such a shop because the entire area is zoned residential (and also covered by HOAs, which are yet another debate).
Quite a few blogs and articles out there comparing US zoning to typical Japanese zoning, if you're interested. Cliffs: Japan often has mixed-use zoning by default (ie, anything from detached homes to small apartments to small office/shops is ok in the same zone)
How do you connect the policy with the intended effect without magic or lying?
Time is money and taxes are already amortized into any potential developer's math, regardless of what the rate nominally is. If the properties aren't economically developable in a "it costs us pennies to sit on them so we'll take our sweet time" paradigm then they're sure as shit not developable in a "I'm paying the same tax rate no matter what so I gotta put something up ASAP so I can a)get income b) sell" paradigm.
Not everyone who owns a vacant or condemned lot is a developer or has the capital to develop it.
Those people are potentially treating it like an investment. If the cost to hold onto it for longer is very low, why not sit and wait until the value appreciates and a developer offers you more money in the future?
Increasing the cost to hold the investment might encourage sales at today's prices instead of waiting for years.
I'm not sure that helping developers buy land cheaper is the right solution or a complete one, but I do think increasing the cost of holding property as an investment would have an effect.
>Increasing the cost to hold the investment might encourage sales at today's prices instead of waiting for years.
Or they double down and hold longer to "make it back" later when conditions are more favorable.
>I'm not sure that helping developers buy land cheaper is the right solution or a complete one, but I do think increasing the cost of holding property as an investment would have an effect.
We are all developers, comrade.
The more you increase costs the more you'll squeeze out the little guys leaving BigCos that DGAF and are copy pasting the same things everywhere with no regard because they're operating at the statistical level.
People don’t hold land to just wait it out. The holding costs are high and there is really only one time when this works well (when a city is expanding and you get some land in that path).
When you own land, you have taxes, insurance, mortgage perhaps, upkeep etc. Easier to invest in stocks.
Anyhow, you have land with the idea that when the conditions warrant you can develop. Hopefully soon. But conditions may not develop quickly and you have to bear high holding costs.
I know many people in high tax states that forgo upgrades on the outside of a house to avoid higher taxes. Hence the neighborhoods do not look as good as they do in the south.
Home(town - there often) for me yet I did buy up into Southern York County PA. It's more peaceful, there's access to a 30 mile bike/railroad trail and buying a single family home (with nice amenities) is a 100 to 200k less. Yet in time York county's school taxes make up the difference.
This isn't really meaningful if the area is "subsidzed" by having a powerful economic engine nearby (baltimore, harrisburg). Suburbs aren't really sustainable in isolation for the most part
The fix to all your city problems: Raises taxes on the greedy landowners who are sitting on empty lots and watch all your problems go away and your city boom with this one simple trick.
That's what happens when you have absolutely no ideas to innovate or bring new businesses. Or you ignore other realities, like Baltimore is a really dangerous city.
Cities are not revenue generators as some politicians or people assume. Cities capture and manage value created somewhere else. If there is no value to capture, the city die. People move on to other places to capture value and it is totally fine.
Considering that there is a fixed amount of land, I do want to raise taxes for those who choose to sit on undeveloped or underutilized land within urban areas rather than either selling it to someone who will develop or developing it themselves. Although it's a bit disingenuous to refer to only refer to it as "raising taxes" since it's taxing based on land value rather than improvement value. It's probable that there would be a significant amount of land plots that would see their taxes decreased as well, especially those along the peripheries of cities since they wouldn't have access or proximity to the same services as a downtown or business district would.
I'd also like to think that a lot of land being developed leads to new businesses appearing and more economic development when compared to just leaving the same lot empty and unused.
Baltimore is a terrible example if you want to talk about underutilized land. The city literally can't give away vacant homes because of how badly the city is run.
If supply exceeds demand so much that the equilibrium price is below $0, there is no underutilized land.
> But what if the government’s own policies were quietly making the problem worse?
That is usually the case, outside of the very few core competencies and purposes of government which simply are not what our governments in the West focus on at all anymore. In many, if not all cases western governments even actively undermine the beneficial things they should be engaged in because they are all corrupt, captured, and at the very least borderline illegitimate.
Yes, usually big systemic problems happen because someone in government did something unexpected, and they did it to grift money. The big systemic problem will therefore continue as long as the root cause has utility for grift.
Speculation is less profitable than development. If you're getting speculation it's because the roi vs risk of development isn't justifiable.
You can't "tax magic carrot stick <buzzword1>, <buzzword2>, blah, blah, <dogwhistle>" your way around this fundamental economic reality. But you absolutely can screw it up more.
Now, in a low regulation environment you probably could just up the taxes and let owners make do. A bunch of random low end income earning crap (storage lots or whatever, heavy on the whatever) will pop up to pay the tax bill. But Baltimore is not that so you'll probably just get the city owning a bunch of that vacant property instead which is a lateral or a step backward due to increased friction of development.
Tangentially, the author forgets that the reason cities like Baltimore adopted such policy was to encourage the bulldozing of uninhabitable structures lest they become less than legally inhabited. I get that a certain type of people love to screech about tax intake being an unalloyed good here but what's really happening is that the city is amortizing the cost of bulldozing crack dens over time via tax incentive for owners of "teardown" quality structures to take that step (which up's adjacent property values).
I want to point out that this is not really about revenue generation but about fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed.
As for revenue, that's a political decision. The thing is that elected officials control the tax rate, not SDAT. SDAT only values the properties.
Rising property values don't have to mean rising taxes, the elected officials can lower the tax rate in response -- this what the term "no new revenue rate" is for.
It's also not just about pushing tax burden onto vacant lots. When property A is undervalued relative to property B, property B picks up more of the property taxes. So if a lot of vacant land is undervalued, that means a lot of improved land is paying more taxes proportionately. It seems sub-optimal that property where nobody lives is given a tax subsidy and the difference is realized in rising taxes for everyone else.
The main point is that the law requires that everyone be valued at market rate. That should be done first. Then any special case exemptions, write-downs, discounts, and the tax rate itself, should be handled at the political layer, where they are explicit and conscious rather than implicit.
We can debate what the relative impact of this is in the big picture, but this seems like something that is worth fixing.
> I want to point out that this is not really about revenue generation but about fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed.
Then you're saying it's not about fairness either. It's about following the law better, however it's written.
> fairness -- the law requires that property be valued at market value, and so that's the policy that should be followed
True but the law can’t bend physics on this: what is fair market value? One interpretation is, whenever FMV appears in policy, something is broken.
One way to measure fair market value is too look at similar recently sold properties, which they did in the article.
That is a fairly weak proxy. People buy and sell for different reasons; they can achieve pretty different prices accordingly.
Ha ha, define similar. Real estate is the quintessential non fungible market. I guess my point is, look deeper than the surface at any aspect of this problem, and discover political decisions pretending to be objective ones.
> Speculation is less profitable than development, If you're getting speculation it's because the roi vs risk of development isn't justifiable.
Arguably, speculation should always be unprofitable and we should ideally regulate against it in every way, shape and form. I'd ask what purpose does holding onto a unproductive piece of land serve at all to society beyond an easy to grease financial vehicle?
There's tons of good speculation. Speculators are not buying and selling land, or corn futures, or what have you.
They're trading risk.
Sell to a speculator and you turn an uncertain future into cash right now.
Buy from a speculator and you get to enter the market at the moment of your choice.
It unlocks specialization - house builders can focus on building houses, and corn farmers can focus on growing corn. As soon as they're done with a house / harvest, either a consumer or a speculator buys it and they can focus on producing the next house/crop. Without speculators, they'd have to not only do their value-add, they'd also have to predict the market and hope enough customers show up in future. With speculators, this is significantly mitigated.
> As soon as they're done with a house / harvest, either a consumer or a speculator buys it and they can focus on producing the next house/crop. Without speculators, they'd have to not only do their value-add, they'd also have to predict the market and hope enough customers show up in future. With speculators, this is significantly mitigated.
Sounds like a great way to over or undershoot demand leading to market inefficiencies which the speculators have a perverse incentive to increase. It may be useful for a market like agriculture where production is variable and the produced goods are perishable - the loss from speculators may be less than the inefficiencies of noise. However, we've all seen how broken the real estate market has been despite the continued presence of land being one of the least variable things we encounter.
The real estate market got borked by the fact that municipal authorities answer to incumbent owners, who ~universally acted to limit new building. This breaks the mechanism by which some speculators go out of business.
If you can build anywhere, and a speculator is blocking development of a prime piece of land, you'll simply build elsewhere, making that land less prime with each passing moment, and eventually driving the speculator out of business.
Buy from a speculator and you get to enter the market at a price of their choice.
Vacant land is land that somebody could have built a home or a restaurant or a storefront or an apartment complex on, except it's being hoarded by speculators, who often refuse to sell at a loss.
> could have built [something] on
In order to build a home / restaurant / storefront on that land, you first have to buy it. Buy it from whom? Ban speculators, and now you have to buy that land from the original owner, who is obligated to hold on to it even though he may want to use his capital for something else.
> refuse to sell at a loss
Speculators who won't sell at a cash loss are a real problem, but it's a problem that can easily solve itself. As the land value fluctuates up and down, the speculators' investment also goes up and down, whether he sells at that price or not. Carrying a piece of land on your books at a loss inflicts economic damage on the speculator.
In a free market, bad investors getting wiped out is just as important as useful ones getting rewarded.
Simply make the "default setting" to allow building things everywhere, and stupid speculators will go out of business more or less instantly. Useful ones will continue to quite literally make money for themselves and society.
> Buy it from whom? ... now you have to buy that land from the original owner, who is obligated to hold on to it even though he may want to use his capital for something else.
There's no obligation to "Own" land, if you want to put your capital elsewhere then either use your existing land as collateral for a loan or otherwise sell it. Technically everyone is actually leasing land from a government, it's not a commodity and it has a finite supply, so unlike corn or even housing, what is a speculator even speculating on?
I also want to be clear I think it would be very silly to ban speculators, the act of speculation is something that we all do when we own literally anything, but speculating on limited finite ground space that no one actually owns doesn't make any logical sense. Just properly tax speculation into a space that is unprofitable to hoard.
No need to ban speculators, just tax them fairly as the article suggests.
Ask yourself why and by what/who the incentives of living in society have been so thoroughly perverted that there is demand for "unproductive" (seriously, listen to yourself, this stuff is a liability) land for "finance bullshit magic" reasons? The perversions are what prevent "buy and do something to generate value" from outcompeting "buy and hold".
Oh, don't worry, we have some lovely storage facilities here. It's just that there's only so many that you can build.
I'm not sure that the city owning a lot of land is actually a bad thing, compared to the current situation where it just sits there and rots. It's not like Baltimore has the best results doing things, but the alternative is clearly very bad.
Other cities have established chartered “development corporations” to utilize underutilized assets and resources like land and make good uses for them.
They have been good for low income housing (often at the expense of lower income housing), low rent commercial spaces, low rent industrial spaces, amusement parks, real estate development, etc.
But this is gentrification and if you think it is necessary, then very quickly you will realize it is a problem. It homogenizes neighborhoods to support only a certain class of people while destroying other people.
Yes, they make it so difficult to develop that you must sell to the city so their development corporation can hand out contracts to city cronies with kickbacks. Tax dollars at work, lol.
The city doesn't have to own the lots long-term. They could divide them among neighboring lots.
I challenge you to find me an example of a city making that routine practice in any capacity. That would be a huge administrative PITA, say nothing of the perverse incentive it creates (regardless of if it's a forced sale).
> Tangentially, the author forgets that the reason cities like Baltimore adopted such policy was to encourage the bulldozing of uninhabitable structures lest they become less than legally inhabited.
This is interesting, do you have a source for this? Normally the assessors are tasked only with setting a value of a property and not with any type of policy related to rate or discount.
Anyone here for Georgism? https://en.wikipedia.org/wiki/Georgism
The tax upon land values is, therefore, the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by Nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill, and intelligence; and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, and capital its natural return. — Henry George, Progress and Poverty, Book VIII, Chapter 3
Very relevant to this particular article: https://en.wikipedia.org/wiki/Georgism#/media/File:Everybody...
>"EVERYBODY WORKS BUT THE VACANT LOT" I paid $3600, for this lot and will hold till I get $6000. The profit is unearned increment made possible by the presence of this community and enterprise of its people. I take the profit without earning it. For the remedy read "HENRY GEORGE"
Land Value Tax (one of the main theories pushed by Georgism proponents) is a favorite of online discussion forums, but becomes progressively less popular as the conversation turns from broad strokes to details.
Every time it comes up it seems many people are also unaware that taxing land value is already common practice. It’s common to have one tax for the assessed value of the land and another tax for the assessed value of the improvements. Policies might include exemptions for the first so many dollars of a person’s primary residence structure.
With a pure Land Value Tax you cover your eyes and pretend the value of the structures and improvements doesn’t count. If one wealthy neighbor builds a $2,000,000 house next to a retired grandma living out her final years in her small, old forever home, the LVT people don’t care. If their lots are the same then they must pay the same taxes because the land value is what matters.
This makes it a very regressive tax structure as the people or businesses with the least valuable structures now subdivide their neighbors with the most valuable structures. This can all be avoided by simply using our existing system of having a tax on land and a tax on structures each at their assessed value.
>This makes it a very regressive tax structure
That's objectively false. Georgism is one of the few reliably progressive tax structures, ask any economist.
The "little old grandma in her forever home surrounded by incredibly valuable real estate" trope is a) fairly uncommon + a very small percentage of total real estate and b) very common in conservative billboards advocating for highly regressive cuts to property tax. At the end of the day, if your little old grandma owns $5M in prime real estate, she is very wealthy and can certainly afford the property taxes, and pretending otherwise is how we get policy disasters like San Francisco.
But of course, the overwhelming majority of unimproved property is not owned by little old grandmas, it is owned by real estate corporations. The half acre of Grandma's house pales in comparison to the literal _billions_ (!) of parking spaces in the US, or empty lots, or empty buildings. Drive around NYC and tell me the ratio of acreage owned by little old ladies to that of underutilized land owned by real estate corporations.
> policy disasters like San Francisco
Then why is the paper about Baltimore? If you want to argue your own local politics, you can do it without crossing the Rockies, I am sure. I am even more sure that you should.
> b) very common in conservative billboards advocating for highly regressive cuts to property tax
It being common on conservative billboards is not an indication of it being wrong.
> That's objectively false. Georgism is one of the few reliably progressive tax structures, ask any economist.
It’s not false at all. Georgism via a LVT purposefully ignores all forms of wealth except land.
Let me simplify it for you: Two neighbors live next door to each other on identical lots. One has $10m in stocks and earns $500k/year. The other is early career and earns $100k/year while trying to build their retirement savings. Under Georgist LVT, you ignore all of this and make them pay the same taxes.
The person who earns less pays a higher percent of their income. This is the definition of regressive.
Where does the average person have most of their wealth stored by retirement? Their house and the land it’s on. Georgist LVT argues that we should tax them out of that land and give it to a business, who should be able to profit from it without paying any taxes on the profits. This is regressive.
The LVT argument holds that we should ignore everything else: Their business ownership, their 401k, their stocks, bonds, cash, and even the house itself. Ignore all of that, tax people based on land.
The 10 story apartment complex and the single family house both might occupy the same land, so they’re taxed the same. Georgists love this in theory because they want those people priced out of their houses and the developers to come in and build those apartment complexes, which those displaced people can come rent.
Efficiency! Sorry typical homeowner, we need to price you out of affording the home you bought and lived in. Our policy needs to force you to sell to this developer who will construct apartment complexes, reap the profits (tax-free now, because it’s not land!) but they’d be happy to rent an apartment to you for a monthly fee.
> Drive around NYC and tell me the ratio of acreage owned by little old ladies to that of underutilized land owned by real estate corporations.
NYC is an outlier. If you’re basing your understanding on economic theories from one of the single most dense and developed cities in the US you’re missing a lot.
Do you think the average person is closer to an NYC parking lot operator? Or closer to the typical homeowner? Why would we pick an entire taxation structure to punish some NYC parking lot owners instead of looking at the typical person? The entire premise is an example of out of touch academic thinking that forgets to even look at what the real world looks like.
Finally, your “ask any economist” appeal to authority does not hold any water. Much has been written about the severe flaws with a Georgist style 100% LVT.
Even the lay discussions on LVT are starting to admit it’s not a panacea. Previously you’d find rationalists championing as the perfect economic format, but even they are waking up to the fact that it’s not so simple. A recently shared HN link: https://www.lesswrong.com/posts/CCuJotfcaoXf8FYcy/some-argum...
> Where does the average person have most of their wealth stored by retirement? Their house and the land it’s on.
Wouldn’t this be expected to change if LVT were to be implemented?
Yes. The whole point is to prevent land from being an unproductive store of wealth.
Also, there's no reason we can't retain an income tax or some other tax alongside a LVT.
As noted, it's common to have partial LVT - in my county, the property tax is a combo of building and land. IIRC, my little lot of valued at ~$200k and the building at ~$400 (on a house I could sell tomorrow for $700k+). On my 1500sqft lot, that's $133sqft.
Which, looking at recent listings, is about 1/3 the value of infill lots in the area. It's not a perfect comparison - the infill lots are much larger and have different zoning.
> The LVT argument holds that we should ignore everything else: Their business ownership, their 401k, their stocks, bonds, cash, and even the house itself. Ignore all of that, tax people based on land.
Land Value Tax is specifically concerned with how property taxes are calculated. You're conflating implementing LVT with the concept of a Single Tax, which aims at replacing all taxes in a nation with LVT and is really only advocated for by pure Georgists. The LVT is a viable tax policy on it's own, and shouldn't be dismissed because of grander aims by a very small group of people.
> The 10 story apartment complex and the single family house both might occupy the same land, so they’re taxed the same.
Yes? They're both in the same area, which means they have access to the same utilities, same services, same amenities, etc. The presence of the apartment building doesn't inherently increase or decrease the value of the land, it's the other way around; higher land values see denser housing to better offset the cost of owning and operating the land. Neighborhoods are not static, unchanging islands immune to the developments that surround them. If a neighborhood solely made up of single family homes was 20+ blocks away from downtown 40 years ago, but is now directly bordering downtown because they city has grown and expanded, there is no reason for that neighborhood to still solely consist of single family homes (unless those homeowners want to pay to have a house right next to downtown).
> Sorry typical homeowner, we need to price you out of affording the home you bought and lived in. Our policy needs to force you to sell to this developer who will construct apartment complexes, reap the profits (tax-free now, because it’s not land!) but they’d be happy to rent an apartment to you for a monthly fee.
This is pure FUD. The "typical" homeowner in an urban-sprawled city would probably see their taxes decrease with LVT, depending on how close they are to high value areas. If your home is on the edge of downtown, you might be priced out because that land is a hell of a lot more valuable than what a single family home can capture. If you live in the "typical" suburban community that is 20+ minutes away from downtown? Negligible change, if not a decrease as most suburban lands have very little value compared to more urban communities. It's been shown time and time again that downtown business districts and other centralized urban communities overwhelmingly subsidize suburban communities.
> Finally, your “ask any economist” appeal to authority does not hold any water. Much has been written about the severe flaws with a Georgist style 100% LVT.
Again, LVT is not entrenched in it's Georgist implementation. No one worth listening too says that LVT solves everything and gives us Utopia. It's simply the least worst way to go about land taxation, and absolutely has its hurdles and flaws that will present themselves.
> The tax upon land values is, therefore, the most just and equal of all taxes
It is definitely not an equal tax. A poll tax is an equal tax.
Georgism is a nice idea in theory, but will never work in practice (a characteristic it shares with communism, not coincidentally).
If someone comes along and overimproves their land near me (or overpays for a lot), does that mean the entire area should be compelled to pay taxes as if all landowners made the same incorrect decision?
Wouldn't this scenario also apply under conventional property tax regimes? Is or isn't this already happening in high property tax states? What is the specific bad effect you are invoking, and is it having the effects you predict in places where the effective tax rate on land is already fairly high?
It typically won't apply under conventional property tax regimes. Two common protection are:
1: your rate is based on a sampling of similar houses, not the newest most expensive neighboring house.
2: your rate of increase is capped, so you are insulated (not immune) from rapid change
I mean couldn't you do the same thing in a property tax where the buildings are exempted (ie, a Land value tax)?
Sure, it's possible in theory.
The purpose of a LVT is to capture as much property value for the government as possible. Anyone advocating for it is unlikely to recommend exemptions that would interfere with that purpose.
As I understand it (having it explained to me by Georgists and doing a fair amount of research myself), the value of the land is determined by "best and highest use".
That is such a nebulous term that can be manipulated in so many ways (e.g. the example I provided above or zoning changes) that it doesn't seem feasible to use as the basis for any government policy.
And to answer your questions, no this wouldn't apply under conventional property tax regimes because overimprovements have no impact on the value of neighboring lots or existing improvements, no this is not already happening in high tax states because the value of the land is (supposed to be) set by market rates and the land value and improvement values are decoupled in the assessment.
In practice, assessors do a poor job of this (see the article in question), which is why I have no interest in giving them even more control.
> the value of the land is determined by "best and highest use"
Absolutely valid to say that "best and highest use" is vague and untrustworthy at best, but it's said this way to avoid getting trapped in the weeds of what exactly it means. Broadly speaking, "best and highest use" is entirely contextual to the land in question. The "best" use for 40 acres of nutrient-rich soil an hour away from the nearest city is going to be agriculture. While a plot of land smack dab in the middle of mainstreet in a rural town would probably be a commercial building or a mixed use building offering an apartment(s) above a shop or restaurant of some kind. Downtown in a metropolis would be some multi-storied residential or business/commercial building, while the middle of nowhere filled with trees is forestry and maybe mining. Everything is contextual.
Who determines the "best" use case is usually delegated to a free market of land value appraisers. It seems counter-intuitive to leave so much leeway at this part, but consider that land value taxation is attempting to best capture the true value of the land. Meaning that land owners want the lowest possible valuation of their land to pay less taxes, but since land can't be hidden, it's (in theory) hard to fake the value of your land. I can't argue my house in an urban community is relatively worthless when A) every neighboring piece of land will have more or less the same value, and B) everyone can see where the land my house is located and what's around it.
This plays into your first comment, if your neighbor adds a bunch of improvements to his land, if you and your other neighbors gain benefit from those improvements (they opened a store, or a school, or installed a modern sewer system or clean drinking water system, or created a private land reserve, and you and your property have access to these), then yes your land would see an increase in value as a result. However, these types of improvements are rarely the case, and are mostly handled by some form of government. The same with a neighbor "overpaying", since in theory they wouldn't "overpay", they'd just be paying the value that the land is assessed at.
Alternatively, if your neighborhood is run down compared to something brand new and shiny, and all of your neighbors decide to clean things up and do renovations and increase the overall perceived value of the neighborhood, then yes you'd see your property value increase as a result of others actions. But this is no different than when communities go through "urban renewal" and other programs that artificially increase the communities' value as a result of private and public funding.
> Absolutely valid to say that "best and highest use" is vague and untrustworthy at best, but it's said this way to avoid getting trapped in the weeds of what exactly it means.
I mean.. if there was to be a law established to do it this way, it better go into very precise detail of exactly what it means and a verifiable mechanism and formula of how it is calculated.
Anything else would be a wide open door for corruption where assessors can do whatever they want to benefit various groups and harm others.
> Absolutely valid to say that "best and highest use" is vague and untrustworthy at best, but it's said this way to avoid getting trapped in the weeds of what exactly it means.
I want the government to be "trapped in the weeds" of specific definitions of terms, not free to define them as whomever is in charge at the moment sees fit.
> Broadly speaking, "best and highest use" is entirely contextual to the land in question. The "best" use for 40 acres of nutrient-rich soil an hour away from the nearest city is going to be agriculture. While a plot of land smack dab in the middle of mainstreet in a rural town would probably be a commercial building or a mixed use building offering an apartment(s) above a shop or restaurant of some kind. Downtown in a metropolis would be some multi-storied residential or business/commercial building, while the middle of nowhere filled with trees is forestry and maybe mining. Everything is contextual.
Absolutely, and I believe the landowner (influenced by the market of potential alternative landowners) is the person to make that decision, not the taxing agency.
> Who determines the "best" use case is usually delegated to a free market of land value appraisers. It seems counter-intuitive to leave so much leeway at this part, but consider that land value taxation is attempting to best capture the true value of the land. Meaning that land owners want the lowest possible valuation of their land to pay less taxes, but since land can't be hidden, it's (in theory) hard to fake the value of your land. I can't argue my house in an urban community is relatively worthless when A) every neighboring piece of land will have more or less the same value, and B) everyone can see where the land my house is located and what's around it.
It seems like zoning and other restrictions are also very important here, which provides yet another conflict of interest.
> This plays into your first comment, if your neighbor adds a bunch of improvements to his land, if you and your other neighbors gain benefit from those improvements (they opened a store, or a school, or installed a modern sewer system or clean drinking water system, or created a private land reserve, and you and your property have access to these), then yes your land would see an increase in value as a result. However, these types of improvements are rarely the case, and are mostly handled by some form of government. The same with a neighbor "overpaying", since in theory they wouldn't "overpay", they'd just be paying the value that the land is assessed at.
> Alternatively, if your neighborhood is run down compared to something brand new and shiny, and all of your neighbors decide to clean things up and do renovations and increase the overall perceived value of the neighborhood, then yes you'd see your property value increase as a result of others actions. But this is no different than when communities go through "urban renewal" and other programs that artificially increase the communities' value as a result of private and public funding.
No argument from me here. In both these cases, I would think that the land value would increase independent from any improvements made, which can be addressed through the current assessment methods based on fair market value instead of highest and best use.
Improvements are not considered in a land value tax; it's kind of the point. Land is also more fungible and easier to model the value of than improvements.
Why would you prefer an income tax -- by definition, taking earned income -- to a land value tax, which is constructed specifically to target unearned windfalls and the time value of access to public infrastructure and community benefits?
> Improvements are not considered in a land value tax; it's kind of the point.
The potential improvements to a parcel are a key factor in the land value, so they are relevant.
> Land is also more fungible and easier to model the value of than improvements.
Land is more fungible, but not easier to value IMO. Input costs for improvements are easily calculated, the value of being in a nice neighborhood, having good schools nearby, being close (or not) to public transit, etc. are much harder to calculate.
> Why would you prefer an income tax -- by definition, taking earned income -- to a land value tax, which is constructed specifically to target unearned windfalls and the time value of access to public infrastructure and community benefits?
Taxes need to be paid somehow, and I think having some diversity in revenue sources is a good strategy.
Also, given how bad of a job governments do in assessing property under the current scheme (see the article here as an example), I don't think giving them more power to arbitrarily decide the "true" value of the property based on the fairly arbitrary metrics you described is a good idea.
Lastly, one person's "unearned windfall" is another person's wise investment.
This article highlights something that’s an issue almost everywhere, albeit maybe not as egregious.
If I do nothing to my property, my taxes stay the same. If I add a shed, deck, pool, or whatever external feature to my property then the tax man comes and wants more money. The lesson? Don’t improve your property.
The solution is to tax the land value rather than property improvement value. Any particular improvement from a property owner isn't taxed ... though implicitly the whole neighborhood getting more expensive (via the aggregate of all improvements and increased demand) does raise your tax.
That sounds like the same as now but with many extra steps.
Now being where you are disincentivized from making improvements?
If I'm meant to treat a rise in property tax in response to positive change in value as a disincentive to improvement, what difference how the tax increase is computed? It isn't even clear LVT does not create a massive incentive to consolidation, as property tax increasing without connection to improvement kicks off a "Red Queen's race" where anyone unable to capture revenue from improvement, or unable to increase that capture, ends up facing a permanent structural bar to any ownership. It seems as though designed to annihilate even any possibility of an American-style middle class, in favor of an ever narrowing landlord gerousia enriching itself through rent farming.
Well, it makes sense if you hope to be among the winners. But I don't see any Georgists here seeming very interested in addressing anything like that, just a couple who handwaved past it. [1] I'm not an economist, though, nor even very smart. I'm just a Baltimore homeowner who's heard a time or two before of such alternative tax scams. I mean schemes.
[1] And the ones responding at https://news.ycombinator.com/item?id=44826168, who seem thus far to present one argument each and retire discouraged by its failure. One hopes someone might come along willing to actually espouse this heterodoxy, rather than just try to feel "based" for namedropping around it.
An LVT specifically targets land rents, yes including imputed rents. Implied is an end to income and sales tax. The effects of this will be to discourage things like a surface parking lot or low rise motel in the dense part of a city.
Suburbs and rural areas nobody really cares about.
I'm very confused about the idea that taxing land ownership more heavily will somehow lead to more consolidation and _favor_ landlords, and simultaneously harm existing homeowners. It's just incoherent. Perhaps I too am not smart.
Perhaps you are motivated not to reason. Forecasting growth rates of revenue from improvement, versus property tax apparently aka "land rent," and observing the possibility exists that one will grow faster than the other especially since many improvements generate no revenue at all, requires not all that much effort. But I had no idea you people were mad enough to argue seriously this should be the only tax of any kind anywhere. Excuse me.
Henry George has a fix for this issue.
Based and Georgism-pilled.
It's worse than that. If you sit on the property, but your neighbours improve it, make it a better place to live, create businesses that attract people, OR the public treasury builds a park, or a metro stop, or a new road, your property value increases, letting you capture the value that others worked for!
Every time I see a single level parking lot, which is basically wasting half a city block by just covering it in asphalt and painting a few lines on it, in the middle of downtown, next to skyscrapers, I am painfully reminded of this fact.
Whenever you see something seemingly silly and inefficient/wasteful ask yourself what is preventing the more efficient solution. The answer is almost always that someone is paying more to deal with government in a slightly different way that reduces risk to them
1ac parking lot = easy and definite, just buy land, simple permits, etc.
.25ac parking garage = difficult permits with many more places for various parties to whimsically drag their dick all over it at great expense to you, etc.
Investing in a commercial structure carries massive financial risk because there are all sorts of steps along the way where the government has reserved the right to balloon your cost so 1mil of land, 2.5mil of structure and $100k of bullshit could potentially be 1mil,5mil,500k once everyone is done screwing you.
The parking lot on $4mil of land and $100k of construction and $100k of bullshit can only balloon to $4mil, 200k, 200k in the worst case.
Now, I pulled those numbers out of my ass but it's the basic workflow that underpins most of the "stupid" things we see being built.
In many places it's parking minimums that are preventing a more efficient use of space.
there are many, many, many, many straws on the camel.
Must be grandfathered in. Could never do that now… city would want setbacks, planters, etc and reduced effective usable area by 25%.
Still cheaper to get screwed out of 25% capacity on a $ per space parking lot than on a $$$$$ per space parking garage. So the parking lot gets built anyway. Oh, and it winds up taking more land than it would have 50yr ago specifically because of those setbacks and planters and other garbage.
Improvements around your property can also raise your property taxes, the next time they get re-assessed.
The increase is spread between land and improvement assessment, so the vacant lot owner’s taxes don’t increase in proportion.
> If I do nothing to my property, my taxes stay the same.
I wish that was the case, but in both counties I've owned houses, the tax appraisal increases every year regardless. They don't even drive by, they just use automation to increase it. I protest every year and "win" which means the increase is reduced or eliminated, but it's a fight to keep your taxes the same regardless.
This basically doesn't happen in California due to https://en.m.wikipedia.org/wiki/1978_California_Proposition_....
The unintended consequence is that cities get much more in taxes from businesses tban residents. California has therefore overbuilt its business base while underbuilding housing. The result is a severe housing shortage and sky high rents.
But that's because the calculated value of the land+building is increasing, right? The method of calculation might be wrong, but the tax going up isn't because the calculation is being arbitrarily changed - it's because one of the inputs is more valuable.
At least that's the way it generally works where I live.
You are somewhat correct, even though I’ve never heard anyone say that or allow it to affect their decision in a major way. I do also suspect you may be in a place that is under rather oppressive government regulation.
The problem is a far more fundamental one, because just as I’m trying to get people to understand related to this movement or initiative to do away with property taxes, certain government and asset holder support for that is likely more about personal enrichment and/or expanding total tax receipts by other means, i.e., ulterior motives.
The fundamental issue here is the very premise of how the tax system functions not what kind of taxes are stolen and extracted where; and then redistribute to whom, usually for corrupted reasons and purposes.
The effectively unlimited and unbounded, detached, and inconsequential nature of the tax system now is really the core problem. It’s currently other people’s money and mostly even future people’s money, squandered without any meaningful limits, barriers, or even rules regarding conflicts of interests; and there are virtually zero actual and real, immediate consequences for malfeasance by people charged with the duty of responsible allocation of funds. It’s a corrupt and rotten system from the very top to the very bottom.
Unfortunately not enough people care, understand, or might even like it because they benefit from it and think they will die before the music stops. That’s how we get $37 trillion in national realized debt, another $74 trillion in unfunded liabilities, and another $9 trillion in state and local debt for a total national debt of $120 trillion in America’s public debt burden as of today.
>I’ve never heard anyone say that or allow it to affect their decision in a major way.
It happens all the time.
Half the time you see a facility that's using "temporary" tarp shelters and/or containers and/or trailers for some amount of it's covered area it's doing it for the taxes. The other half the time is for the expediency and flexibility (a sub component of which is fewer government approvals and government mandated steps, so basically taxes of another form).
Any time you have a commercial development across multiple lots they run the numbers both ways and/or they'll subdivide a big lot or they'll buy adjacent parcels crossing a jurisdiction boundary to minimize expense (not just taxes, construction as well).
I'm convinced that only people who have no idea how things get done in the real world can go on rants like this.
I think this person explained a lot about how things get done in the real world. They just don’t like it. What’s not to like about society spending itself into oblivion?
I'm not sure paying an extra $500 per year is going to do much for land owners.
Every empty lot in my neighborhood had valuations of 50k and they just sat for 20 years until cov.
Maybe pass a law that makes blight (boarded up windows, tall grass, messy yards) have an extra fee
Why not incentivise positively instead of negatively?
That works in a functioning community.
In a place like Baltimore, the city ends up owning the blight, and are generally not capable of effectively cleaning it up (due to their general mismanagement that causes an environment where blight is the norm in the first place).
So this is all about getting the town to assess lots at higher valuations and this way raise tax revenue which in turn will raise town’s ability to spend for itself.
Sounds more like the Substack is trying to raise poverty by raising cost of living and prices.
Rising property values don't necessarily mean higher tax bills if the property tax rate falls to match. You will see terms like "no new revenue rate" that reflect this.
The point of the article is not "Baltimore should raise more taxes" -- raising more revenue is a political decision, and that is not actually under SDAT's purview. SDAT's job is simply to assess property at market value. What to do with that value is for the elected officials (and the voters who elect them) to decide.
If property A is undervalued relative to property B, property B faces an unfair burden of taxes, and property A receives an unfair tax break. That's all this report is trying to say -- all property should be assessed at its market value, as the law requires.
Any exemptions, discounts, write-offs, and the tax rate itself, are political decisions. Those should be made explicitly by elected officials, not implicitly by unequal valuations.
I don't know about that. We live in a city where people are complaining about housing costs and availability, but the city has absolutely vast amounts of housing. We've lost close to 40% of our population since 1970.
It's just that a lot of that housing is in awful shape, and the places where it exist aren't desirable neighborhoods (although let's be clear, many of them are right next to expensive and desirable neighborhoods, it's really bad.) This should be a situation that rights itself automatically, but it's not.
Not sure where you are, but the demographics have likely shifted significantly - you have to normalize the population changes with the average household population. For example, a 40% drop in population would about equal out with the change in average household size from ~4 to ~2.5
I'm in Baltimore. And I promise you that there are acres of empty houses out here. Come buy one and fix it up!
> So this is all about getting the town to assess lots at higher valuations and this way raise tax revenue which in turn will raise town’s ability to spend for itself.
That is one angle of view. Alternatively, you could be encouraging vacant lot (or equivalent structure) owners to sell if neighbors are improving properties while they are not.
That’s an interesting condition—that the market indicates the land can be improved profitably.
However, it depends. An area might have enough demand for a single improvement, like a 7-11 or something, but no prospects for any more.
Punishing neighbor properties for not getting that one deal is an interesting but not ideal solution.
> Punishing neighbor properties for not getting that one deal is an interesting but not ideal solution.
It could very well be that it is less than optimal to compare lots intended for residential with lots you would develop a convenience store on.
Which gets us into a whole other debate about zoning in (most of) the US.
Why shouldn't a land owner be able to use that land in the most profitable way possible (within reason)?
Example: In my area, there's an intersection about 1/4 mile away. I think it would be a great place to have a corner shop/cafe/bodega. It's close to the schools, the other shopping options are another mile away. It's walking distance to several thousand housing units.
But, I can't build such a shop because the entire area is zoned residential (and also covered by HOAs, which are yet another debate).
Quite a few blogs and articles out there comparing US zoning to typical Japanese zoning, if you're interested. Cliffs: Japan often has mixed-use zoning by default (ie, anything from detached homes to small apartments to small office/shops is ok in the same zone)
If the taxes on a vacant or condemned lot increase, but stay the same on a livable residential structure, how does that increase the cost of living?
Alternatively raise taxes on empty lots and reduce them on occupied lots.
How do you connect the policy with the intended effect without magic or lying?
Time is money and taxes are already amortized into any potential developer's math, regardless of what the rate nominally is. If the properties aren't economically developable in a "it costs us pennies to sit on them so we'll take our sweet time" paradigm then they're sure as shit not developable in a "I'm paying the same tax rate no matter what so I gotta put something up ASAP so I can a)get income b) sell" paradigm.
Not everyone who owns a vacant or condemned lot is a developer or has the capital to develop it.
Those people are potentially treating it like an investment. If the cost to hold onto it for longer is very low, why not sit and wait until the value appreciates and a developer offers you more money in the future?
Increasing the cost to hold the investment might encourage sales at today's prices instead of waiting for years.
I'm not sure that helping developers buy land cheaper is the right solution or a complete one, but I do think increasing the cost of holding property as an investment would have an effect.
>Increasing the cost to hold the investment might encourage sales at today's prices instead of waiting for years.
Or they double down and hold longer to "make it back" later when conditions are more favorable.
>I'm not sure that helping developers buy land cheaper is the right solution or a complete one, but I do think increasing the cost of holding property as an investment would have an effect.
We are all developers, comrade.
The more you increase costs the more you'll squeeze out the little guys leaving BigCos that DGAF and are copy pasting the same things everywhere with no regard because they're operating at the statistical level.
> The more you increase costs the more you'll squeeze out the little guys leaving BigCos that DGAF
I don't mind taxing the BigCos more and more money to hold land.
BigCos can offset things against taxes; regular people can't, and will just sell.
You missed the important part of the sentence you quoted.
People don’t hold land to just wait it out. The holding costs are high and there is really only one time when this works well (when a city is expanding and you get some land in that path).
When you own land, you have taxes, insurance, mortgage perhaps, upkeep etc. Easier to invest in stocks.
Anyhow, you have land with the idea that when the conditions warrant you can develop. Hopefully soon. But conditions may not develop quickly and you have to bear high holding costs.
> How do you connect the policy with the intended effect without magic or lying?
Assess the empty properties to their actual value, and then lower the overall rate.
I dont think that is necessarily true. a disuse tax is effectively lowering the property value/price.
At some point, it becomes free land for anyone willing to use it.
I know many people in high tax states that forgo upgrades on the outside of a house to avoid higher taxes. Hence the neighborhoods do not look as good as they do in the south.
> But what if the government’s own policies were quietly making the problem worse?
What a surprise that would be.
Home(town - there often) for me yet I did buy up into Southern York County PA. It's more peaceful, there's access to a 30 mile bike/railroad trail and buying a single family home (with nice amenities) is a 100 to 200k less. Yet in time York county's school taxes make up the difference.
This isn't really meaningful if the area is "subsidzed" by having a powerful economic engine nearby (baltimore, harrisburg). Suburbs aren't really sustainable in isolation for the most part
The fix to all your city problems: Raises taxes on the greedy landowners who are sitting on empty lots and watch all your problems go away and your city boom with this one simple trick.
That's what happens when you have absolutely no ideas to innovate or bring new businesses. Or you ignore other realities, like Baltimore is a really dangerous city.
Cities are not revenue generators as some politicians or people assume. Cities capture and manage value created somewhere else. If there is no value to capture, the city die. People move on to other places to capture value and it is totally fine.
Considering that there is a fixed amount of land, I do want to raise taxes for those who choose to sit on undeveloped or underutilized land within urban areas rather than either selling it to someone who will develop or developing it themselves. Although it's a bit disingenuous to refer to only refer to it as "raising taxes" since it's taxing based on land value rather than improvement value. It's probable that there would be a significant amount of land plots that would see their taxes decreased as well, especially those along the peripheries of cities since they wouldn't have access or proximity to the same services as a downtown or business district would.
I'd also like to think that a lot of land being developed leads to new businesses appearing and more economic development when compared to just leaving the same lot empty and unused.
Baltimore is a terrible example if you want to talk about underutilized land. The city literally can't give away vacant homes because of how badly the city is run.
If supply exceeds demand so much that the equilibrium price is below $0, there is no underutilized land.
> But what if the government’s own policies were quietly making the problem worse?
That is usually the case, outside of the very few core competencies and purposes of government which simply are not what our governments in the West focus on at all anymore. In many, if not all cases western governments even actively undermine the beneficial things they should be engaged in because they are all corrupt, captured, and at the very least borderline illegitimate.
Yes, usually big systemic problems happen because someone in government did something unexpected, and they did it to grift money. The big systemic problem will therefore continue as long as the root cause has utility for grift.