"The big question land value taxes help answer is: How can a government raise funds without distorting choices and possibly leaving people worse off? If you tax income, it provides a disincentive to work. If you tax property, it provides a disincentive to improve the physical buildings on top of the land."
Of course it will distort choices and leave some people worse off. If the author can't see that, then they have a serious bias problem. The whole point of the land value tax is to tax land to encourage higher density and higher cost use. This is especially damaging to people who hold land that is developed around. If I have .75 acres with a single family home and 30 years later the area around me is developed, them I will be financially forced off of my land because I could theoretically put an apartment building on it. We already see standard property tax forcing the elderly out of their homes in many areas.
Please, show me how an appropriately set income tax disincentivizes work. I'm guessing they can't and are equally uneducated on that subject. Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive. Which doesn't seem to be the case. The people at that lowest level of income aren't paying (or gets refunded) income tax. Most of the tax at that level on income is for programs like social security and Medicare.
> Of course it will distort choices and leave some people worse off. If the author can't see that, then they have a serious bias problem. The whole point of the land value tax is to tax land to encourage higher density and higher cost use.
Under our current system we subsidize low value land uses by subsidizing the crap out of infrastructure to expansions of suburban areas zoned for single family homes.
The only revenue positive portion of nearly any modern american city/town are the few sparse walkable mixed use neighbourhoods and the dense urban core. Policies like a land value tax that push for higher value land uses are necessary to stave off the oncoming wave of municipal bankruptcies America faces.
> Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive.
You are thinking in absolute terms and not on the margins. If the marginal income tax beyond a threshold jumps by %10, then even discounting the increasingly marginal value of each additional dollar earned I will value the return on work less when I hit that tax threshold.
"The only revenue positive portion of nearly any modern american city/town is the dense urban core."
Even then most places rely on state and federal grants to make ends meet. Do you have have any examples of cities actually net positive without outside funds?
"You are thinking in absolute terms and not on the margins."
I think my position still stands. The claim was that people would not work because income is taxed. What you describe is reduction in work incentive when you hit the next bracket. I'm saying that in order to not work you would have to value the support systems more than making any income.
And of course, most people are no where near the level income that they don't want to make more. We're pretty talking about the 1% ($600k), or maybe the top 5% ($240k). So not particularly useful for designing policy for the other 95-99%. In fact, it could be beneficial for those high earners to drop out and allow new people to take their place.
> Even then most places rely on state and federal grants to make ends meet. Do you have have any examples of cities actually net positive without outside funds?
Did you watch the video? It's short and demonstrates incredibly well through data the problems with our model of urban development.
> I think my position still stands. The claim was that people would not work because income is taxed. What you describe is reduction in work incentive when you hit the next bracket. I'm saying that in order to not work you would have to value the support systems more than making any income.
On the margins, income taxes lower the incentive to work more hours.
> You are thinking in absolute terms and not on the margins. If the marginal income tax beyond a threshold jumps by %10, then even discounting the increasingly marginal value of each additional dollar earned I will value the return on work less when I hit that tax threshold.
And given you don't want that dollar, and given the dollar is still on offer (the work's still gotta get done) someone else will earn it instead. This is probably a net gain because you got to do something else with your time and the other person got money they (probably) needed more than you.
> and given the dollar is still on offer (the work's still gotta get done) someone else will earn it instead
Maybe, maybe not. The supply of work to be done isn't static. It might well be that the work is unpleasant, and everyone qualified to do it would now earn less than they did before because of the increased taxes, and it's now no longer worth it to any of them, so you can only get anyone to do it by paying more... but maybe now whatever the work product is isn't worth the higher cost, and you decide to just not offer the service or make the widget anymore, or it becomes worth it to automate it and not employ anyone, etc. etc.
Getting that 0.75 acres to turn over is exactly the point. Incentivizing them to leave (or better yet: subdivide and sell the land) is good for society.
This policy only makes sense where zoning is also loosened enough to actually build on the land though...if zoning doesn't allow you to do anything with the land to make more money (building apartments, subdividing, etc.), this just becomes a tax on poor landowners.
"Getting that 0.75 acres to turn over is exactly the point. Incentivizing them to leave (or better yet: subdivide and sell the land) is good for society."
I doubt the affected person feels it's good. Quite frankly, the land value tax ideas seem absurd to me. It's just another redistribution scheme - work hard, retire, get forced off your land via tax. It seems it's the government's and everyone else's desire to just drain people until they have nothing. Make other's lives harder to make your own easier, seems to be the motto of today. It feels like mob rule to me.
You seem to be overlooking that in that scenario, your land has appreciated considerably. If you sell, you'll net a gain; if you don't want to sell despite the gain, you can borrow against the property to pay the tax.
Here's the thing to understand: anyone buying property now in a popular area, where prices have been increasing rapidly for the last two or three decades, is effectively paying an LVT. The thing is, they're not paying it to the locality, which could use it for infrastructure and services; they're paying it to the previous owner, because the higher purchase price means a higher mortgage payment. That's redistribution too.
It's not solely a redistribution scheme. It's based on the fundamental principle that the government is the ultimate owner of all land, and private individuals are simply renters. If you accept this to be true and good, then it makes perfect sense. If you are the type that wants to be non dependent on the government, it is deeply grating.
"If you accept this to be true and good oh, then it makes perfect sense."
One can accept that the government owns the land while simultaneously believing that the government can abuse that power, just like a bad landlord can.
I don't disagree, But I do think the idea that the government, not individuals, is the ultimate owner of the land is a fundamental assumption of LVT. Not all people believe this.
The fundamental assumption of LVT is that society should be the owner of the land - i.e. that the land is commons. Government can be a manager of that land, but it only has such powers because the shareholders (everyone) vest that power in it.
The basis for this assertion is that land supply is fundamentally very scarce, so this is zero-sum game. If some have too much, others have little, and the former can extract substantial economic rent from the latter.
"ultimate owner" is too broad a brush. Long and detailed debates went on for generations over this. The origin of the USA is in the right of States to determine quite a lot of the details. Federal taxation is only a hundred years old here. Texas and the mid-west are different than California which is different than Florida.
Your "fundamental principle" is fundamentally illegal in the US, at least according to the Fifth Amendment (leaving aside the fact that the Constitution is a dead letter).
I don't think you can avoid the government ownership of land, at least within the US.
If its not the governments, it still belongs to the natives the government stole it from. The individual's legitimacy comes from the government's claims over the land
Even that could be debated. Some tribes also subscribed to the right of conquest, such as the Lakota. Not a pretty thought but just thought it was worth mentioning.
More starkly, it seems to me that it's a redistribution scheme that exists primarily to enrich those who already have abundant capital. Who's going to be building and owning those high density structures afterwards? Not the people who are getting displaced from their homes, I suspect.
In short, it feels as though we're being told that it is right and just that you should be driven from your own home, so long as there exists some millionaire who would like to tear it down and build an apartment building in its place.
People who own single family homes at the kinds of locations where developers are eager to build apartment buildings are among the wealthiest and most powerful ever to have lived. They are pretty successfully standing athwart capitalism’s most powerful firms, going toe to toe with people who have hundreds of billions of dollars on the line (in terms of Silicon Valley’s capacity grow and add headcount, not just the real estate firms who would participate in that) and conceding a battle here or there but largely winning the war. At the same time their wealth increases tax free year over much more than a FAANG senior engineer or middle manager makes pre tax. These are not sympathetic underdogs.
> People who own single family homes at the kinds of locations where developers are eager to build apartment buildings are among the wealthiest and most powerful ever to have lived.
This is about as far from true as it can get.
Ordinary working class people who just happened to buy a cheap house in a place that many decades later became a hot-spot of real estate development.. are still ordinary working class people. Often very poor, even.
I’m sympathetic to the view that having millions of dollars “doesn’t count” when they’re all tied up in living in an ordinary home. But then we would have to apply the same cost of living adjustment to tech workers, which most people think is ridiculous. (“I’m not rich, you see, there is no money left after I have spent it all.”) They have the option to walk away with millions. They choose not to. That is a form of spending. These millions are both absolutely larger than what “high income” workers can accumulate, and from a higher-class source (investment and politics vs. labor).
I don't agree. If you own an asset worth a million dollars you are not working class. You may choose to work, but you are not forced to. IMO working class means you need to work to live. Choosing not to sell you home is not being forced to work in order to afford necessities.
I hope they do. They're great. I make sure to work with these firms and not local families for my own residential needs because I don't want to put money in the pockets of evil people playing anti-social strategies. It is stomach-churning to know that many of the same people who line up at the microphone on Wednesday night to block development would then call me back on Thursday morning to respond to my inquiries on their rental listings. With the corporates I am at least paying someone to fight against entropy to bring homes into existence, not just to maximize what they can extract from what they bought in the 70s.
> People who own single family homes at the kinds of locations where developers are eager to build apartment buildings are among the wealthiest and most powerful ever to have lived.
If you imply "all" then I simply need to find one counter example to prove your statement wrong. I know people who have sold their homes in the middle of a city to make way for high density housing and they are not "the wealthiest and most powerful ever to have lived".
The end game of these LVT policies is that we will all be living in apartments and paying rent in perpetuity. When we die our kids will take on the burden of that rent. This is how it works in Switzerland today. All apartment buildings are owned by private investment firms. A key feature of the USA is the ability to build generational wealth through land ownership.
The affected person doesn't feel it's good when an apartment building gets built next door to their single family if the land isn't theirs either. NIMBYism around density gives us the situation that we're in now - where low density can't support city services and no one wants to allow higher density.
"Do you have an argument against redistribution that isn't "I disagree with what the public wants"?"
I'm a part of the public, and I don't want it. I imagine there is a sizable number of others that don't want it too.
We could just force people to do whatever we want because a majority wants it, but that's no different than mob rule.
So far I haven't heard a compelling argument that this approach would solve more issues than it causes. The precise implementation would influence this greatly, but it isn't well defined. If we want to control housing prices in specific locations, I think a better approach is to cap the number of jobs in an area based on its carrying capacity. This would also provide more even distribution thorough out the state/country, reduce infrastructure concerns, and reduce property prices. But good luck convincing the politicians - they already like attracting jobs/companies by offering tax breaks, zoning variances, etc.
> We could just force people to do whatever we want because a majority wants it, but that's no different than mob rule.
That's not mob rule, that's simple majority rule. We have access to other forms of consensus algorithms, but so far simple-majority seems to be the most anyone can stomach. That is very unfortunate.
> would solve more issues than it causes.
That's not the metric though, right? The metric is: are things better under that system vs this one? We want to measure whether B(enefits)2 - C(osts)2 >= B1 - C1, not whether B2 - C2 >= 0.
I strongly agree with what I think you're implying, which is that we need more metropolitan areas, but I think we are not going to get very far with limits. You will get a lot more participation and a lot less tumult (not to mention orders of magnitude less bureaucratic overhead) if you offer carrots rather than sticks. People management is a real consideration: people are not identical particles subject to the continuum hypothesis.
I am having trouble finding statistics on the proportion of homeowners in any given country. The available statistics I can find are based on "owner-occupied homes" which is not comparable.
What do homeowners want? Well, they don't want higher home prices if no one is around to support the local economy. So clearly they want some level of distribution of access.
Looks like about 86M owner occupied homes out of 141M total housing units. So likely more than half depending on the distribution of household members.
"What do homeowners want? Well, they don't want higher home prices if no one is around to support the local economy. So clearly they want some level of distribution of access."
I'd imagine that only applies for a small area (SV, NYC). Outside of that area, it's not a real issue (people don't talk about that in the areas I have lived).
I mean in a literal sense, hoarding all the goods means no one will be able to produce anything for your consumption. Unless you set up a serfdom, that is.
> We shouldn’t just do things because the most people want it.
I actually agree. "Should" is such a terrible word that I don't think we should use it at all. But we do do the things that most people want, because that is by construction the primary desire on a societal scale. You are part of a bigger machine, whether you like it or not.
> Thats called tyranny by the majority.
Really funny that American neo-con reactionaries have introduced such a concept. Anywhere else, it's just called "democracy".
>Really funny that American neo-con reactionaries have introduced such a concept. Anywhere else, it's just called "democracy".
Your bias is showing... "Neo-con reactionaries" didn't introduce the concept. John Quincy Adams first did in 1788. It was popularized by John Stuart Mill in 1859.
Most democracies have some mechanism in place to prevent majorities to change too much at one and prevent abuse of minorities. One example many share is a constitution that needs more than a majority to change.
I personally believe it'd be great if people like you could completely divest themselves from nation-states. You don't want to contribute to a commonwealth, that's fine, you can rough it over there and live a sad, cold, hungry existence.
The vast majority of the comforts of modern life are afforded specifically and only because other people contribute to the common cause. You reject your responsibility to contribute to same but gleefully consume the benefits which are allocated to you. What an ass.
Everyone wants to believe they'd be great survivalists. Very few appreciate the level of knowledge and skill needed to do it alone. Even fewer can ever gain all that knowledge and all those skills. There's a reason humans organize into packs: division of labor is nothing less than a paradigm shift in productivity for groups of people. Civilization today is that same basic concept scaled up to support your consumptive ass along with the rest of humanity.
I personally feel it’d be great if people like you could stop thinking that all property is inherently society’s property and that I should be thankful society allows me to reside on it.
We are all in it together, but we will all be better off when others stop trying to appropriate everything from me and give it to others just because they want it.
I work hard for what I have. I shouldn’t have to have it taken away if I don’t continue to work (add value) into perpetuity.
Land cannot actually be personal property. Why should it be? You didn't make it. Is it fair that whoever got there first gets to use this limited resource in perpetuity? Even under feudalism you got to keep your land under certain conditions like sharing some of your crop in taxes and contributing to the common defense. Unless you're strong enough to be a sovereign state, land ownership has always been more like a license than something you actually own.
> I shouldn’t have to have it taken away if I don’t continue to work (add value) into perpetuity.
You continue to derive value in perpetuity (from living in a society where we collectively pitch in to make it nice); why should you not continue to contribute to it?
If you want to stop working, save enough to cover your future obligations.
You are honestly arguing that the concept of private property is a mistake?
Serious question. How do you envision things working when everything is communal? What motivates productivity and overcomes the tragedy of the commons?
Yes. Many have argued the same. If you wish to be informed, I recommend doing some reading. In particular, there is a difference between personal property and private property, and that difference is expounded in great detail in the literature.
Are you saying selfishness motivates productivity today? I think you would be hard-pressed to justify that claim.
Are you saying that we do not experience tragedy of the commons today? In today's economy, everyone having the same access to unregulated markets can be seen as a tragedy: this turns people into either suckers or grifters, and nothing in between. Sounds pretty fucked up to me.
I see a tragedy of the commons in the ubiquity of the belief that "I own this" and "I don't own that". Everyone believes this to the point it is an ideological underpinning of contemporary society. But it is not true a priori, so I am not really seeing how you justify it in the first place, especially without empirical counterfactuals. And obviously it has some serious drawbacks, such as people dying needlessly. Those people could contribute to your wellbeing but they are dead and can no longer do that. A tragedy, indeed.
Think about LVT as the occupier paying the community for the right to exclude them from a common resource. The price of that exclusion is set by the community. The occupier gets most of the benefits of private property rights without actually having private property.
This concept can be extended to all natural resources (and in some cases already is to some extent). The radio spectrum, mineral resources, etc.
I find this to be an attractive concept because I am philosophically opposed to the current situation where a new life is born into a world where all resources are already 'claimed'. That new life has just as much right to the world's resources as any other that already exists. This doesn't mean that someone can't make use of more resources than anybody else. They just have to do it in a justifiable way.
Over where? Organizations (gov, corp, etc) always grow and want more power. There is no place free of it or opt-in only.
"Everyone wants to believe they'd be great survivalists."
I think this is a gross misconception. I doubt most people want to be survivalist. It's possible they just want less government telling them what to do, especially in their private life. You could have a minarchist government where people want to contribute to their government/community. We see this to an extent in rural areas.
Not OP, but speaking for myself: I want to contribute to a commonwealth, but any modern nation-state is a very perverse construct that doesn't really deserve that word. There's no commonwealth without a true democracy, and voting for people who supposedly represent you every few years isn't that.
No, I think the affected person is happy making a killing on their real estate investment. Property taxes are linked to property values, if the value of your home goes up so high that property taxes are unaffordable then their must have seen significant gains in their real estate values.
> We already see standard property tax forcing the elderly out of their homes in many areas.
It's reasonable to offer options to low-income retirees, for example allowing them to defer property tax payments until death. Texas does this, it works alright.
Note that a single family dewlling on .75 acres likely costs the government a lot of money to provide services (plumbing, sewer, electric etc) and is likely already a net debtor to the city/county. This style of development is why American (and Canadian) cities are going broke.
>Note that a single family dewlling on .75 acres likely costs the government a lot of money to provide services (plumbing, sewer, electric etc) and is likely already a net debtor to the city/county. This style of development is why American (and Canadian) cities are going broke.
Maybe in a dying city nobody wants to live in anyway.
Most costs aren't spending the entire budget on plumbing/sewer/electric. All of those are often billed separately, with surcharges for infra development. RE developers are on the hook for those in new developments.
Largest costs usually are: education, police, fire, roads. Except roads, these are orthogonal to density.
So in short, your argument: people are net debtors because we have roads. Plainly false.
When I built my house I paid full price to have those utilities brought to my house. We’re talking over $100,000. And I continue to pay service charges for maintenance of all utilities.
I think that depends. Many places have private companies providing those services. The hookup costs are usually high. Then they make money on the bills too. It can be 50+ years before it needs to be replaced and another large fee charged.
Also, many places could have well and septic, so that's all private costs. Off grid solar is also being a (small) option, where allowed.
The claim that most American towns are going to go broke is a tricky one. The towns became dependent on federal grants raised via income taxes, the towns are not directly capable of raising income tax dollars today. It's possible that the suburban communities are financially viable with income based taxation policies rather than property tax based policies.
I think it's safe to assume that federal taxes aren't going anywhere. Likewise, I think it's very unlikely that suburban communities receive income taxing authority. Given those, I think the general prediction of American towns "going broke" in the sense of being unsustainable is true.
Yeah, suburbs are developed and on city water. Only in suburbs of rural areas do you find developments where everyone's on septic - the minimum here is 5 acres if you have a septic system, so every development with lots smaller than that is at least on shared septic (at what point shared septic becomes a sewer system is up for debate).
Amusingly enough I knew a guy who lived in a suburb of a major CA city, but since his house had been built when it was rural, he was unknowingly on a septic system even though everyone else on his block was on city sewer.
What are you talking about? The city/county charges for those services - us municipalities are going broke for two simple reasons 1) public pensions 2) mismanagement
>If I have .75 acres with a single family home and 30 years later the area around me is developed
I think this is exactly the framework. The idea is that that person right now is benefitting from increased community wealth (which would be realized in actual moneys upon sale of their property), and hence, should be taxed more.
Maybe there are some sophisticated ways to strike a balance, to avoid the situation you are describing. For example, people could pay less tax, but then they (or their estate) cannot pocket the capital gain upon sale of their property.
In any case, I think a land tax is much more equitable, because it punishes landholding, rather than punishes improving land. It's the poor use of land right now that I believe is the main driver of poor affordability of housing.
"(which would be realized in actual moneys upon sale of their property), and hence, should be taxed more."
If it were taxed only when realized, that would make sense.
"It's the poor use of land right now that I believe is the main driver of poor affordability of housing."
It's the preference of a large number of people to live in a small area. You could fix this by capping the number of jobs so that increases in population would be forced to distribute more evenly through the country. This would also address issues like retrofitting existing infrastructure. Otherwise, prices/salaries will increase to make the scheme moot for the upper working class. That's basically how the mess got here in the first place, otherwise competition and property tax would have made a dent. It's all futile if you have FAANG paying absurd money with the capability and will to pay even more.
> If it were taxed only when realized, that would make sense.
The tax man does not like this. They like wealthy people to always pay something, each year. Hence, property taxes, so it can siphon off something at least. Also, why we have the alternative minimum tax schedule to prevent stock compensation to be used as a means to avoid taxes.
The little old lady _is_ wealthy, a speculator effectively. She owns a valuable asset, the land her home sits on. The fact that she moved there 30 years ago, in your scenario, gives her an inherent claim to that asset. It's because of that same view we basically have Prop 13.
Land value tax is a radical statement, in that people should not be able to profit from the value created by the community, of speculation basically.
Your scenario highlights nicely how that causes friction with some of our innate sense of right and wrong. Deferring taxes to sale, may be a way to address this, but if history is a guide, it will instead create avenues for tax dodging.
Your solutions seem hacky and off-the-cuff, when we could solve the problem by addressing it directly: if a large number of people want to live in a small area, make that area support a large number of people! High-density housing with walkable neighborhoods, and excluding cars from walkable spaces, makes all of the typical pains of city-dweller life melt away.
Aside from a small group, the people that want to live there don't want that though. There's a preference for SFH and larger footage. It's generally easier to control commercial activity than personal activity/choice.
I see the real problem as too many people wanting to live in one spot. To me, my solution is addressing the root problem.
This is the exact problem. People do NOT, in general, want to live in high density housing, they want to live in these desirable areas without them changing.
There is simply no way to solve that equation without something breaking.
> You could fix this by capping the number of jobs so that increases in population would be forced to distribute more evenly through the country
Interesting idea. But wondering how this would work in practice.
The Federal government often does this when they distribute their own facilities across the country.
Businesses already flock to places were cost of labor is low, but can only that in industries that require less specialization.
> otherwise competition and property tax would have made a dent
You said it. There is no competition, because housing supply is constrained (zoning), and property tax does not make a dent, because it favors speculation over improvements (further inhibiting competition).
What I mean by no competition is that the high earners from FAANG etc are able to muscle out any "normal" people. So there is some competition driving up prices, but most people lost before the game even started. Essentially the wealthy have no incentive to keep costs/bids down.
> It's the poor use of land right now that I believe is the main driver of poor affordability of housing.
If someone has their property for 30 years and decides not to sell, isn’t that a reflection of the market not sufficiently valuing their property? Everyone has their price in a free market, exorbitant as it may seem to others.
Ownership of land is damaging to those who don’t. Not owning land is a tax to be paid to those who do. There is no perfect solution but incentivising people to sell their tennis court filled country castle pad so that 1k people have somewhere to live (and knock on effect would be fewer homeless people) sounds like a balanced compromise.
Income tax definitely disincentives work. Source: my life. In the current economic situation I could easily take on another 40/hour a week job. If I do that I only get to keep just over half of the additional pay my extra job would supply. It's not worth my time to work for half my 'hourly rate'. So now there's an extra job vacancy.
Is it really the tax though? It sounds like you have enough money where the utility of extra money is reduced and you would rather do other things with your time. Can you honestly say that you would work 80 hr per week even at full rate? Now let's also consider that your first 40 your job would be full rate too, also providing less incentive for more needing more money.
>>>Because we need more people employed as opposed to one person with 2x income
To me that just suggests we have a massive over-supply of labor. Whether labor is employed or not, it comes with a non-zero resource maintenance cost, which exacerbates things like climate risk, etc. Setting tax policies in such a way to maximize the number of meatbags assembling widgets strikes me as directing us towards an erroneous local maximum. Feeding fewer mouths, but doubling the resource allocations to each would be preferred.
What might be confusing is that relatively few people are incentivized by an income tax to do no work at all, but many people may be incentivized to do less paid work than they otherwise would. (In fact, under idealizing assumptions which don't quite apply in all cases, you would expect every person facing an income tax to do at least very slightly less paid work than without the tax.)
> Please, show me how an appropriately set income tax disincentivizes work.
Here's a proof that income tax disincentivizes work:
Would you work an extra hour a week if it were paid at 1000x your normal rate? I confidently assert that you would.
Would you work it for 100x your normal rate? Almost certainly.
10x? Probably.
0.5x? Probably not.
0.01? Almost certainly not!
So, earning more or less than some threshold hourly amount incentivizes or disincentivizes that hour to be worked. This is exactly the effect of income taxation.
Now, I sympathise with people who have worked hard, paid tax on income and bought property. They don't want to, in addition, be charged to own that property. I myself am in the same boat.
But I also sympathise with people who have studied hard and learned skills. They don't want to, in addition, be charged to use those skills!
The only argument I can see for income tax over property tax is "I expected the former but not the latter, so you've violated my expectations". I don't find that argument very convincing.
This only obviously holds locally. If we imagine a world where the only use for money was to bid in an auction for a single good against others subject to the same taxes (and without pre-existing savings), changing these rates shouldn't affect how much I want to work.
I expect that our world does not sufficiently resemble that one for your conclusion to be wrong, but I think we don't get it for free.
> Please, show me how an appropriately set income tax disincentivizes work. I'm guessing they can't and are equally uneducated on that subject. Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive. Which doesn't seem to be the case.
It's almost tautological that taxing income disincentivizes work. Of course, it does not mean that a 30% income tax will disincentivizes work so much as to completely stop it (the "optimal" point in the Laffer curve is around the 30% point), but it is obvious that on the margin people will start dedicating less to work if their returns are lowered due to taxes.
>We already see standard property tax forcing the elderly out of their homes in many areas.
This was exactly the narrative that led to Prop 13, and what it has led to is the most inflated property market in the entire world because there is nearly no carrying costs for a first (LA), second (Palm Springs), third (Atherton), or fourth (Tahoe) home!
Sure, a random subset of boomers can die in their empty 6 bedroom houses now, but countless people are moving to places like Texas where land value/property taxes have keep real estate prices relatively low (due to huge carrying costs).
I love CA, but the income vs. wealth/property tax split is what will kill it (at least in its current form).
Proposition 13 needs to end. An obvious reason is that property can be owned by a corporation or LLC somehow and you can sell that to someone, effectively selling the house and avoid the proposition 13 tax reset. Proposition 13 has become just yet another way for wealthy people to avoid paying their fair share of taxes.
The thing I was getting at is in other states, maybe all states, they calculate the estimated value and you pay property taxes for land based on that. But with california's special prop 13 system, you don't have to pay more as a property increases in value. Thus the tremendous value of these systems that transfer ownership but avoid that 'tax re-value'. In other places, you can't avoid paying higher taxes as places increase in value, generally.
Yes, ofc You are still paying property tax, just way less than you would in nearly any other jurisdiction. It’s capped at 1% of total assessed value and that value can only go up 2% a year (i.e. way less than market).
That was the meaning of the word “nearly.”
EDIT: Just to contextualize this a bit, let’s assume those four houses were bought ten years ago for a total of $4m at the time. They are now worth $10m, but the owner pays $50k a year in tax to carry that “investment” that has gained on average $600k a year. Not exactly a meaningful carrying cost.
Sort of. The California property tax bill has many line items, one of which is "General tax rate". That's the one everyone talks about and it is 1% of the assessed value. However, all applicable jurisdictions can (and thus, will) add all kinds of add-on percentage fees to the property taxes and those are not subject to any limitations.
My property tax bill (California) which I just paid two weeks ago, was actually 1.4% of the assessed value.
> that value can only go up 2% a year (i.e. way less than market)
True on average over long term. Good to keep in mind though that it goes up 2% every year regardless of market. So when the market is up double percentages like 2020-2021, it only goes up 2%. But when the housing market crashes, it also goes up 2%. Which is fine, it's basically a damping function so that instead of having the taxes swing wildly up and down year to year, they just go steadily up.
Also be aware that the 2% increase is on the "general tax rate". The additional fees which are included in the property taxes, those have no cap on increase rates.
There have been many years when my property taxes have gone up quite a bit more than 2%.
I feel that because the housing market has been on such a long bull run, people have either forgotten, or are too young to have experienced, that housing markets can also crash hard. Having an increased zestimate value of your home is not actual wealth unless you sell it, and the valuation on paper can evaporate any moment when the next housing crash comes. I've been through three market crashes in my current house, two of which left me underwater for a few years.
Income taxes in California + US Federal are high enough that I don't really think it's worth it to try to get my income above, say, $500k a year. So, for me, income taxes absolutely disincentivize work. I actually had a second job for a while and quit it because of this.
Really? Who doesn't want more money? Also, you're not necessarily working that much harder to make a million instead of 500k. Thousands of people who read headline news are making 500k a year in the software industry. The year I made a million dollars, a lot of it in stock from a fang company, I wasn't working twice as hard as the years I made 500k.
> If I have .75 acres with a single family home and 30 years later the area around me is developed, them I will be financially forced off of my land because I could theoretically put an apartment building on it. We already see standard property tax forcing the elderly out of their homes in many areas.
This is one of my current issues with land value tax: pricing out existing residents. One mitigation I think that would help would be only adjusting the LVT of a plot on sale / ownership transfer. It would likely need a bit more nuance than that, as it doesn't quite work with company owned land (doesn't really switch owners like a sfh owner dying).
The land will eventually get more efficient use, but there isn't the recurring threat of being priced out of your home.
I guess it's not universal that they don't reduce tax rates for people that are unable to pay, retired elderly? In the Seattle area that's a thing. I want people to be able to pass on their businesses to their kids. But in the US we have this fantasy of inheritance taxes wiping out farm owners. It really only affects giant farms, 11 million is the federal threshold.
I don't think society will be bettered by creating evermore trust fund babies. I'm generally in favor of making it hard to pass on wealth that is so high your offspring's families never have to work. I think one of the major challenges of the US in the future is the accumulation of wealth in smaller group of people over time, and the vast amount of income difference between the masses in the US.
The effect of income taxes is not simply to disincentivize work like one would imagine. Top talents who are able to afford the cost choose their tax residence due to income tax. Even in the US, it would influence people's career decisions about where to live/work. Businesses also take the taxes into account when choosing countries/states to invest or build facilities.
> The whole point of the land value tax is to tax land to encourage higher density and higher cost use.
This is why I disagree so strongly with the idea. Do I want to live in a society where every square meter of land is forced to be used for the highest possible ROI? No, absolutely not. There is already far too much drive to maximize profit on everything. We need less of that, not more.
Just a small sampling of land uses which are economically suboptimal: parks, playgrounds, bike trails, dog parks, community sport areas, nature conservation areas/greenbelts. And so many more.
I want to live in a town which has a lot more of all of the above, not less.
If the only thing that mattered was maximizing profit per square foot, it would be optimal to raze all the above and build them up with high-density housing towers.
It's not each piece of land that you are optimizing, but the community as a whole. If you were to build up Central Park, yes, you could get more income for that space. Because people get less access to things that they want, everyone would move out to CT or NJ. Less tourists would come. The surrounding land would all drop, it would hurt NYC land values as a whole.
In fact, with proper zoning in place that does not incentivize scarcity, one thing we would quickly find is that middle housing would finally be able to be built, and that middle housing would then lead to less skyscrapers in all but the biggest cities and central-most downtowns.
> It's not each piece of land that you are optimizing, but the community as a whole. If you were to build up Central Park, yes, you could get more income for that space. Because people get less access to things that they want, everyone would move out to CT or NJ. Less tourists would come. The surrounding land would all drop, it would hurt NYC land values as a whole.
How do you propose finding the optimal balance, and even tricker, to encode that into the tax code for computing LVT for each lot?
Let's say paving over all of Central Park with highrise apartments makes NYC less attractive (I'll agree) and that leads to people moving out and housing prices collapsing (I'm not so sure about that, people might tolerate less nice living in exchange of economic opportunity of NYC).
What if only 50% of the Central Park land area is built up? Or 64%? Where exactly is the sweet spot that will extract as much value as possible while still not driving too many people away?
That's all going to be very speculative, there's no way to know exactly. And to encode the optimal answer into tax law? Seems impossible.
Also when you say:
> It's not each piece of land that you are optimizing, but the community as a whole.
Every proponent of LVT I've heard, always says that every plot of land should be taxed based on its maximum economic potential. I had not heard arguments about trying to balance it over the community as a whole. And how do you encode that balancing goal into tax law?
Another thing to consider here is if instead of putting skyscrapers into Central Park, what would happen if it was instead paved over into a single massive parking lot? I think one way to handle this is to treat each 'scope'(local, state, federal) of government as its own land value tax, and your taxes would go to your local community, but a piece of which would then need to pay the state tax, etc... It would be in the interests of NYC to use their land to the best use that they determine. If they choose poorly and paved over Central Park, this would meaningfully impact their finances.
And what of the privately owned Bryant Park, would they need to pay the Land Value Tax despite the fact that they are just as positive externality driving as Central Park? Grand Central Station was another case of this, where the city disallowed the company that owned it to knock it down and build a skyscraper, as renting out the skyscraper would earn the company more money.
Georgists care very deeply about tracking the capturing of positive externalities, but this is the opposite. This is attempting to value the release of positive externalities. I don't have a perfect answer for this, but it's clear there are 'privately-owned' places that act as publicly-owned, and thus if we exempt from taxes public, they deserve to as well. I don't like exemption, - it will surely breed corruption - but I see no real way to find out what that value really is.
Obviously we shouldn't just "turn on" a LVT for land that previously didn't have the tax until now. The idea would be that whenever the government is selling land to private individuals / corporations, instead of setting a property tax of a few % on the land, it sets a land value tax of about 70%. That means that less revenue is made from the immediate sale, but the land will bring in additional revenue over time. So most land would continue to use the original system, while a slowly increasing amount would be "LVT" tagged when it passes through the government's hands. To avoid the "being forced out" situation you describe, there would be a few options:
1. Live in a rural area that is very unlikely to be developed.
2. Make sure to buy a piece of land that is "original system" tagged instead of "LVT" tagged.
3. Buy "property tax increase" insurance. If your land's value goes up, the insurance pays the difference, and you don't notice the cost change.
If those 3 options don't turn out to be sufficient, then probably there's some hacky provision that could be tacked on, like LVT doesn't go up for individuals until they sell their land, or something along those lines. But of course that should only apply to people who are actually living in their own homes, not to landlords.
Anyway, the question is, why go to all this trouble? Why have an LVT at all? The answer is the following: No one created the land. When you're renting from a landlord, some of your rent is for the building, and all the effort the landlord puts into maintaining it. It makes sense that the landlord should be paid for that. Under the current system, though, some of your rent is for the land. That makes a lot less sense. Why pay the landlord for the land, even though the landlord didn't create the land?
Imagine some travellers find an oasis in the desert surrounding a fresh water spring. They (for some reason) decide to settle there, and need to decide how to split up the daily 10 000 gallons of water that the spring produces. I think that probably the travellers would decide to split the water evenly: 100 travellers means that each gets 100 gallons per day. It would be weird if they decided that some of them should be considered "waterlords" and get 2000 gallons per day, and the rest should get 0, and would have to pay the waterlords for their daily water.
Splitting the water evenly wouldn't be communism or anything. If Alice uses her share of the water to grow food, she wouldn't be obliged to share that food with anyone else, since she's the one who laboured to produce it. Everyone still gets to keep or sell whatever they produce, but the spring gushes whether anyone works or not, so the water gets split evenly.
Objection: Maybe some settlers will specialize in farming, and some won't. Obviously the farmers will need to use more water, so shouldn't they get a higher fraction of the water?
Answer: Yes, the farmers will use more water, but they can get it by trading the food they produce with their neighbours in exchange for water to put on their crops. The farmers would essentially be selling their ability to convert water into crops.
Objection: Wouldn't it be an equally good system if instead of trading in water people could trade shares in fractions of the water produced? So 10 000 shares are split equally among all the initial settlers, and each share is worth 1 gallon per day.
Answer: This has a few issues. The main one is that as new people are born and grow up, they would get an equal fraction of the water to everyone else in the "divide up the daily water production" scheme, but they would get nothing in the "divide up the shares" scheme, since all the shares would have been distributed already.
Of course it will distort choices and leave some people worse off. If the author can't see that, then they have a serious bias problem. The whole point of the land value tax is to tax land to encourage higher density and higher cost use. This is especially damaging to people who hold land that is developed around. If I have .75 acres with a single family home and 30 years later the area around me is developed, them I will be financially forced off of my land because I could theoretically put an apartment building on it. We already see standard property tax forcing the elderly out of their homes in many areas.
Please, show me how an appropriately set income tax disincentivizes work. I'm guessing they can't and are equally uneducated on that subject. Income tax would only provide a disincentive to work if the alternative (assistance programs) is more attractive. Which doesn't seem to be the case. The people at that lowest level of income aren't paying (or gets refunded) income tax. Most of the tax at that level on income is for programs like social security and Medicare.