My parents love their home. They wouldn't sell it at 30% above market value. Should their property taxes be based on what it's worth to them, or what it's worth on the market? What it's worth on the market is a semi-objective measure, while worth to the owner is highly subjective.
Calculating the tax basis value based on what the owner would sell it for has numerous problems even outside that subjectivity. It penalizes businesses for success in a way that promotes looting the company to artificially lower the business value. Aside from the deadweight loss involved, it artificially promotes the type of behavior firms like Bain are already criticized for.
Also, it's highly subject to system-gaming. What is the incentive of a firm to actually accurately value it at what they would sell for while it was open? The only way it works is to enforce some draconian policy that requires them to sell if someone ponies the cash (a la Posner and Weyl's proposition in Radical Markets).
the fa makes the point that what makes a store successful it's location in the flow of a city's life and so the boarded up ones are going to be least productive junctions. The property is worth more because it's the property that is there and NOT the one that is 5 miles further in the under occupied suburbs.
It's not that big a problem. You can let everyone designate one primary residence, and exempt the first $X of asserted value from taxation. People are entitled some sentimentality exemption, but (like today) not an unbounded one.
Calculating the tax basis value based on what the owner would sell it for has numerous problems even outside that subjectivity. It penalizes businesses for success in a way that promotes looting the company to artificially lower the business value. Aside from the deadweight loss involved, it artificially promotes the type of behavior firms like Bain are already criticized for. Also, it's highly subject to system-gaming. What is the incentive of a firm to actually accurately value it at what they would sell for while it was open? The only way it works is to enforce some draconian policy that requires them to sell if someone ponies the cash (a la Posner and Weyl's proposition in Radical Markets).