frontpage.
newsnewestaskshowjobs

Made with ♥ by @iamnishanth

Open Source @Github

Open in hackernews

Some arguments against a land value tax (2024)

https://www.lesswrong.com/posts/CCuJotfcaoXf8FYcy/some-arguments-against-a-land-value-tax
30•danny00•3h ago

Comments

greenie_beans•2h ago
land value tax is a regressive tax on middle class homeowners that would ultimately benefit the wealthy. bc middle class single family homeowners would not be able to afford the tax increase or afford the construction to fully utilize the property, which would force them to sell to investors who could afford it.

terrible idea.

not to mention the political debates/decisions over what constitutes "fully utilized". what about public parks? urban agriculture? so many exceptions.

this would be a nightmare policy to retrofit. maybe a good idea if we had started there first, but we didn't.

it's also an ignorant diagnosis of the issue. land values and speculation is not the issue in my location (burlington, vermont) where we have a housing crisis. there are not many vacant lots (i'm guessing maybe a dozen in the entire municipality).

it's just an overly simplified solution to a complex problem.

here is what i believe to be the superior solution: https://www.npr.org/2024/10/07/nx-s1-5119633/housing-crisis-...

jimlawruk•2h ago
> land value tax is a regressive tax on middle class homeowner

Not if you make the tax progressive. The first 200K could be tax free, for example. Primary residences pay a lower % of the value than 2nd and 3rd homes. I bet there are a ton empty vacation homes in Vermont. It can be applied gradually not to shock the system.

nerdsniper•2h ago
That would somewhat defeat the purpose of the LVT. The point is to force landowners to develop their land. A "fix" would be to make access to capital easier.

Optimum development in many areas isn't necessarily a large mid-rise or high-rise. For most areas, the maximum that the roads and other utilities could support would be dense townhomes, triplexes or quadplexes. Outside of the very highest-demand areas, the LVT would mainly encourage land owners to build additional units on under-utilized square footage or build up a bit. Increasing housing in an area necessarily requires access to capital - so that's what should be provided.

It's not perfectly fair to everyone; it would enrich current landowners. But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.

jimlawruk•1h ago
> The point is to force landowners to develop their land.

The point is to ensure landowners don't sit on land. If taxes go up on your vacation home that you spend two weeks a year in, you will be incentivized to sell it or rent it out more. Both of which benefits the public at large. Not to mention it is a fairer tax than an income tax or wealth tax.

greenie_beans•1h ago
most of the vacation homes in vermont are in rural areas. so they wouldn't get penalized by the tax if the purpose of LVT is to increase taxes in urban areas.
greenie_beans•1h ago
> But lower-income/wealth individuals would also benefit because they'd get access to more affordable housing in the areas that they need to live.

how does this create affordable housing? taxes are only one piece of why housing is so expensive. the landowners would need a return on their investment, which they would get by raising rent. this is the core problem imo -- costs for construction and labor and permitting and taxes requiring higher rent in order to make the investment worthwhile.

the offset of lower taxes will absolutely not pay for the cost to "fully utilize" the property.

ljlolel•2h ago
It’s not application of the tax but (relatively) sudden increases in land value that would price out force out neighborhoods
sokoloff•1h ago
I don’t think a land value tax is a good idea, because I’ve never heard a satisfactory way to objectively value the land as-if unimproved.

But making you and I pay a different amount of LVT on the same exact piece of land definitely makes it a worse idea in my view.

eitally•1h ago
Afaict, Prop 13 does this in California. Property tax is based on assessed value, and that assessed value isn't just for the improvements, but also the underlying land. So the fact that I pay about $20k/yr in property tax and my back-fence neighbor pays about $3500 (because we purchased in 2016 and they inherited the 1954 home from original owner parents) must indicate that it's not just the improvements that are covered by Prop 13. I had never thought about this before, but at least in California a potential compromise around LVT would be the modify Prop 13 to allow land values to appreciate at market rates while keeping appreciating of improvements capped.
greenie_beans•1h ago
like i said, terrible idea with a million exceptions
Aurornis•1h ago
> Primary residences pay a lower % of the value than 2nd and 3rd homes.

I think it's funny how every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions, which starts to defeat the claimed purpose of a Land Value Tax.

LVT is a concept that sounds amazing and novel in a vacuum, but starts to look less ideal in the real world. The people who think about it enough start to include factors like structure value and different exceptions for how the land is being used, which starts to look a lot like existing tax code in most places.

webstrand•2h ago
Yeah, no LVT proponent has successfully explained to me how it does not cause the erasure of urban or even suburban green spaces, be they public parks, private parks, gardens, etc. If a park increases neighboring land values, then the taxes incurred by the park go up without recompense to the owner (assuming the park is not held by the government).
Nasrudith•1h ago
I think you might be slightly confused. Wouldn't the issue be not that the parks themselves are expensive to the owner tax (not only is thr landscaping not that expensive, as LVT excludes your own improvements), but instead that they are effectively discouraged by increasing the tax on everyone adjacent and thus peversely encouraging NIMBYism of towards a common good by imposing a negative externality which does not exist otherwise? The issue wouldn’t be that it would add a tax burden upon the park owner, but that it turns operating a common good into a 'sadistic' act that pushes costs onto others.

A LVT could thus accidentally wind up like a window tax in that it could wind up discouraging efficient improvements to human conditions out of a misguided attempt at improving perceived fairness.

kfajdsl•1h ago
How many private parks are there? Pretty much every one I've been to has been government run, other than small outdoor spaces next to private buildings and large pay for admission gardens that are usually way out in the boonies on the grounds of an old plantation or manor.

I can't think of how a private, but still public-access, park survives without a rich benefactor eating the losses, even today.

greenie_beans•1h ago
all of my favorite hiking areas in the birmingham, alabama area were privately owned. churches have public areas that you can enjoy as a non-member of the church. i'm sure we could think of more

edit: oh i just realized a huge one in my daily life: the intervale in burlington is owned by the intervale center but the community garden is managed by the city's parks & rec. also there are a ton of public trails on that private property.

tetromino_•47m ago
In New York, you sometimes find unofficial community parks / third spaces on unused plots of land which for whatever reason (such as a strange shape) are difficult to develop. These are maintained by enthusiastic local residents, and the land owners turn a blind eye to it as long as there are no complaints.

If LVT is implemented, land owners will have a financial incentive to sell off the plots, and the spaces will be gone.

renewiltord•1h ago
Parks built for the public benefit as 501c3 don’t pay property taxes.
highwayman47•2h ago
https://en.m.wikipedia.org/wiki/Georgism
andrewla•2h ago
I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.

But my main argument is practical. I content that it is simply not possible to evaluate the "unimproved value" of a given parcel. Any discussion of a practical LVT has to start with the fact that it is an approximation to a theoretical ideal, and define exactly what the basis for "land value" estimation is, because it's really a tax on that process. While some of these may have overlap with the benefits and detriments of a theoretical LVT, they have to be looked at from first principles rather than by comparison with the LVT because the fundamental assumptions are often broken.

Aurornis•1h ago
> especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.

The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.

Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.

It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.

pydry•37m ago
>The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.

The only claim here is that if you own land which makes you $1000 in income and pay $2000 in taxes for that underutilized land you'd probably prefer to sell up.

Which has to be the least controversial part of LVT.

>Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.

We're seeing the net result of your desired policy right now where retired boomers sit on 4 bedroom houses with 3 empty bedrooms while anything resembling this type of family home is unaffordable for actual families.

Personally I think I preferred it when retirees were given tax incentives to sell up and downgrade to a smaller property, because even though moving day is stressful, not easy and costs money, it's not worth sacrificing an entire society over trying to avoid it.

sapal•1h ago
> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.

Here is an article arguing that yes, it can be done well enough: https://www.astralcodexten.com/p/does-georgism-work-part-3-c...

derektank•1h ago
Do you believe you can determine the true value of improved land, given how illiquid a market it is? Obviously, the last sale price provides some true information about the value, but it could literally be a decades old number. Do you believe states and municipalities shouldn't update property taxes for a parcel of real estate unless it's sold? I think we've seen from CA's experience with Prop 13 that this creates pretty distortionary incentives.
itsdrewmiller•1h ago
This is already part of property tax assessment - I get a separate price estimate for the land and the structure. I also own some undeveloped land and pay property taxes on that. All a LVT does is get rid of the structure part and raise the rate on the land part.
andrewla•15m ago
Saying that they assess the value tells me nothing. How, specifically, do they arrive at these assessments.

In my experience there is often an assessment process that is essentially just made up. And when properties do sell, the sale price is always a "surprise" relative to the assessed combined value of the property.

In a sense the question is "What in particular makes you confident that the estimate accurately reflects the price of the land" but in a deeper sense what does the concept of "price of the land" even mean in practical terms? How would you know that the answer is right even if you were omniscient? And given the practical divergence from whatever theoretical standpoint, does then this value serve the same objectives as a "true" LVT?

pydry•1h ago
>I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land"

Which is more of a feature than a bug.

The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money.

The idea mooted in the article that developers would be unwilling to build 20 houses on a plot of land because having 10 houses would jack the LVT up for the other 10 is entirely backward. The value of those houses will be predicated almost entirely on infrastructure (roads, rail, schools, etc.) or services (shops) provided by the community you're paying taxes to.

>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.

Did you read the wikipedia page about LVT which describes how? Which part is impossible?

mNovak•53m ago
>> I content that it is simply not possible to evaluate the "unimproved value" of a given parcel

There's a decent discussion on that topic here [1], as a starting point. Not saying it's absolutely conclusive, but gives some food for thought. I suppose where determining an accurate value might be most difficult is parcels that rarely turn over, so have little direct or nearby sales data.

[1] https://www.astralcodexten.com/p/does-georgism-work-part-3-c...

andrewla•2m ago
It is an interesting discussion, but I don't see anything in there about how to assess the accuracy of any of the methods against some sort of objective truth. I would have to read the underlying papers I think to get at this, but I don't feel a strong need because I feel like the larger epistemic point is unaddressed in any of the summaries.

The closest I saw was one study that compared the model to a human generated data set, which is just kicking the can down the road. The article semi-concludes

> I think it's quite plausible but not a slam dunk. That said, if the objection is, "valuing land separately from improvements is fundamentally impossible, and we can never get better at it, so we shouldn't try," I think that's plainly ruled out.

I do not agree with this assessment -- you can create a bunch of models and show that the models have good intra-model agreement, but the fundamental point has not been touched.

spjt•2h ago
The most obvious argument for me is that I don't even think that developing land as much as possible should be a desired outcome. I'd rather have some billionaire sitting on a huge plot of wilderness than turn it into another shopping center.
potato3732842•1h ago
Many states have adopted various sorts of watershed protection or conservation laws that make many areas undevelopable in any profitable way. The cost of the hoops one must jump through to prove some small project will not run afoul of these laws is a non starter....unless the developer is professional capital fueled operation looking to put in a chain store, strip mall or 5-over-N. That drags up adjacent values enough that the suburban subdivision developers show up and start buying the farms, etc, etc.

So in a perverse sort of way you basically get what you want, wide swaths of low/no development wilderness, but it's paid for by the everyman not the billionares.

sc68cal•1h ago
> I'd rather have some billionaire sitting on a huge plot of wilderness

I'd rather not have a billionaire sitting on a huge plot of land. If we as a society want that wilderness to be preserved, it should be a state park or national park, that should be relinquished to our government.

rufus_foreman•1h ago
They tried a land value tax in Hawaii. The results are described in the lyrics of the Joni Mitchell song "Big Yellow Taxi":

"They paved paradise

And put up a parking lot"

seanalltogether•1h ago
LVT should be incorporated with an occupancy tax, it's the only fair way to fund government services. If I own a farm, and my neighbor sells their farm to turn into a housing estate with 99 single family homes, then it is fair to say that my land is now more valuable and I should pay more to keep you it, but it isn't fair to say that my taxes should rise to cover half of the local budget just because I own half of the land in region
tartoran•1h ago
In this scenario your property value would go up and with higher taxes you'd be incentivized to sell for a profit and move your farm farther away in a different zoning.
thow58406•1h ago
The incentives you've presented are correct. However, my friends from rural areas always complain about rich outsiders moving in, buying everyone else out, and raising the cost of living. If LVT is just a way to "[incentivize farmers] to sell for a profit", why would people in these areas support LVT? I'm afraid it would just turn into another partisan issue, regardless of merits. And I like LVT!
eitally•1h ago
Perhaps a solution is to create "LVT Zones" in metro areas, and perhaps replace current residential / commercial / agriculture / industrial zoning with them?

And LVT that replaces zoning basically just lets the highest bidder do whatever they want with the land. An LVT that augments zoning could perhaps be tenable but I would argue that in VHCOL areas there's already something of an LVT in place. My SFH in San Jose is assessed as having equal value for the 8800sqft as it is for the house built on it. What I wonder is how the actuaries and policy makers responsible for assessing property values for county taxation actually do that, and how much of the formula is already based on land value.

Aurornis•1h ago
This is how every argument about LVT goes once people start thinking about the details: They start thinking of various edge cases and exceptions that highlight how it's not as fair as proponents claim, until eventually we're back to the current taxation systems where land value is part of the tax, but other factors are also considered.
pydry•1h ago
An LVT would need relatively few exceptions and rules in order to function well and is unavoidable by design. What we have right now for most taxes is the exact opposite of that - e.g. with sales, income taxes, etc.

Mostly there are just pearl clutchers complaining about how elderly cash poor people sitting in large old houses on expensive land they've lived in for 20 years would be financially nudged into downgrading.

The real roadblock for LVT is not in the slightest bit technical, but simply that it would undermine a lot of privately held oligarchic wealth.

kemotep•47m ago
Land owners make up a plurality of voters. In some cases those land owners are retirees living in a house they bought 45 years ago others are people who own 500 houses.

The land value tax “equally” punishes them for their inefficient land usage. But at some point we need to pay our fair share on taxes and the later group hiding behind the former group is how you end up with California’s dumpster fire of a housing crisis.

daveguy•9m ago
I agree with this. I really do not know why in the hell one person or entity owning 500 houses wouldn't pay more in taxes for the 500th house than the 1st house. You pay more of income tax on the 500,000th dollar than the first dollar. Land is taxed regressively in favor of oligarchs.

First house is claimed as homestead and gains on sale aren't taxed, but the yearly property tax should work similarly.

xnx•1h ago
Would it be even more fair to assess taxes based on services allocated?
bitshiftfaced•1h ago
Isn't this case just revealing the opportunity cost of keeping the land as a farm in that location? For example, what incentive is there to buy an acre of downtown Miami and convert it to farm land? Should we lower that acre's property tax now?
cma256•1h ago
Why are we pretending like LVT doesn't exist already? I pay taxes on my land. Those taxes are calculated based on size and location. The Disney example is particularly egregious. They pay taxes on the land AND the structures they built but the article acts as though they would be disincentivized from building if we _removed_ taxes on the structures? Huh?
bitshiftfaced•1h ago
The idea is not to disincentivize developing on the land. To me, it only really works when you remove the friction/gaming of all the other taxes and put it all into LVT, but that will never happen of course.
xnx•1h ago
What's the societal value in trying to financially engineer land development? Is it to better utilize existing infrastructure? Charge each property proportionally for the road system and fallow land will naturally be developed to handle the taxes.
derektank•1h ago
Property taxes are attractive because land doesn't move (unlike other forms of wealth) and it's easy to account for by tax collectors. There's also zero dead weight loss as you can't create more land. Taxes on land improvements are unattractive because they disincentivize owners from investing in their property. This leaves us with taxes on unimproved land being a very attractive option funding the government.
xnx•1h ago
Good overview. What's the imperative for a government to incentivize owners to invest in their property? Seems like it's fine if the owner invests in their property or not.
Mikhail_K•1h ago
"Ratinalists" are basically libertarians that are coy about it.
antonvs•1h ago
They're more culty than libertarians.

They're a lot like the modern-day version of Ayn Rand's Objectivism, which is also libertarian. I remember people getting involved in that at university in the '80s and thinking how cult-like it all was - people feeling they had "found the truth" and wanting to recruit new members.

Rationalism seems to be playing a similar role for a certain type of person in Silicon Valley today, fulfilling an emotional/religious need.

Another way to look at it: Scientology, but replace Xenu with Yudkowsky and volcanoes with Harry Potter, or something.

krapp•1h ago
It will never cease to amuse me that people calling themselves "rationalists" wound up recreating Pascal's Wager from first principles, just with time travelling robots, and drove themselves to sometimes murderous insanity over it. And that their Bible is essentially a Harry Potter fanfic.

These are the dipshits conspiring to shape our future, control our destiny and create the Machine God in their image. They make the billionaires messing around the big owl at Bohemian Grove look positively tame and... rational.

antonvs•47m ago
In my more benevolent moments, despite not being religious, I take a Jesus-like attitude: "Forgive them, they know not what they do."

It all seems to have been a very predictable consequence of the de-emphasis of teaching any humanities at all in favor of STEM uber alles.

It's like the line from "Kung Pow: Enter the Fist": "Pay no attention to Wimp Lo, we purposely trained him wrong... as a joke."

Except it wasn't a joke, it was an economic strategy.

> time traveling robots

Won't someone think of the children, I mean, future simulated me?

pydry•1h ago
>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves.

LVT is for building property or occupying land. Mineral rights are under many if not most legal systems treated separately from land ownership (e.g. they are auctioned off) because unlike land, oil wells eventually run dry.

This does not seem like an honest criticism of LVT, because it deliberately blurs land and mineral rights.

>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.

A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.

That's the kind of market discipline we are currently lacking which the author of this piece apparently does not want.

On the other hand, a developer who builds 10 houses on one plot of land is not going to magically make 10 houses on another plot of land double in price.

>Even in its simplest "naive" form, the LVT has a narrow tax base. The reality is that the vast majority of global wealth is created through human labor and innovation

This last criticism is A) wrong and B) only applies to single taxers, not proponents of LVT.

tom_•1h ago
See also, perhaps, Killer Arguments Against Land Value Tax... Not: https://kaalvtn.blogspot.com/p/index.html