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.
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.
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.
Some of this is due to tax policy, at least in the US. If you own an oversized house that you’ve had for long enough, then most of the value is a capital gain. If you sell it, you pay taxes on all but $500k of that gain, even if you promptly buy a new, smaller house that costs almost as much. If, instead, you hold the house until you die, the tax is waived completely.
California has additional perverse incentives due to property taxes.
If there are not enough houses don't blame that on existing houses.
Absolutely not. Extended families lived under the same roof for most of human history. This is a Nuclear Family problem, which only emerged in the 20th century.
The less wealthy the family, the more likely you'll see it.
So your aggressive taxes will hit those people - displacing additional generations, not just the land-owning-but-otherwise-fairly-poor retiree - before it will hit the stereotypical middle class boomer retiree.
Outside of CA's Prop-13 territory, the multi-generational shabby-old-home-owners pay less taxes currently than their richer neighbors who moved more recently and renovated or expanded. The land value of both is going up, but the improvement value is lower for the poorer family. So now you'll get rid of the improvement value and even it out for both, which will hit the poorer land owners the hardest.
Cause a tax amount that goes up based on what people with more money than you do on other pieces of property simply gives more power to the wealthy. "Underutilized" as far as tax implications go then means "people with more money than you would like there to be something else there."
And, of course, this already happens with US property taxes in many jurisdictions. And people absolutely hate it.
"Tax incentives to downgrade to a smaller property" sounds great in theory for retirees sitting in huge properties, but I think is limited in practice. The people with the really big places are wealthy and politically influential, so you'll get Prop 13s, or you'll get the recent cuts to property tax in Texas. "Make housing more affordable by cutting the taxes!" And the people impacted by more aggressive taxes will less be the boomers in giant houses and more be the poorer retirees in multi-generational living situations, or ones in fairly small condos.
Here is an article arguing that yes, it can be done well enough: https://www.astralcodexten.com/p/does-georgism-work-part-3-c...
It is at least theoretically answerable. In the extreme, yes. We can simply force the sale of the land. Practically speaking, no, we cannot answer that question in a deeply illiquid market.
For the unimproved value I'm not certain that there is a consistent and useful theoretical definition that can be translated to practice. Even in the extreme the question of the unimproved value of the land becomes difficult. Were we to raze all improvements and force the sale would that give us an answer? Do we include the cost of razing? What counts an unimproved? Can we leave trees or grass?
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?
So is your argument that you don't understand something and so it must be wrong?
There's an extremely large amount of existing material that is used by property assessors available for you to look up to research how they do this. It is a well-established field.
Property assessments have been done across a huge number of countries for decades probably billions of times at this point. There are probably trillions of dollars of capital that flows according to these assessments.
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?
The wikipedia article describes some processes, including assessments, regressions, and interpolation from fixed landmarks.
Those are all means of estimating something, which you can call the "unimproved land value" if you are so inclined, but what exactly is the thing that they are estimating? How do you know if they are accurate?
You can implement a framework based on any of those measures, but crucially as above they are not an LVT, they are a "proportionate tax on total value based on extrapolating previous sales minus human estimates of improvement value according to a rubric" for example, and have different advantages and disadvantages than an LVT even theoretically, so every time you make an argument that "LVTs have such-and-such a property" you have to expand the definition of LVT to be the specific case and verify whether that property makes sense in the context of that particular methodology. As a shorthand it becomes useless.
My point is not that there are attempts to have an LVT that are approximations of the ideal reality; my point is that this ideal simply does not exist in any sort of cogent way so you might as well tax based on how much God loves the property or how many potatoes you could grow on the land.
Or indeed that a headteacher works long and hard to improve their school and all they get for it is a reduction in their real income because the plot of land their house sits on costs 20% more.
Or the schoolteachers get driven away by a horde of NIMBYs who really don't want to be forced to move because the schools are good...
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...
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.
Similarly trying to measure the value of the dollar -- what is the operational purpose of that measurement? This is a real problem in any sort of macroeconomic analysis, and Goodhart's law makes it far far far worse when trying to apply it for practical purposes. Mostly you have to accept that there is not going to be a quantitative metric that captures the underlying squishy concept so better not to think about the problem of, say, inflation, in purely quantitative terms.
How familiar are you with existing property taxes?
It might surprise you that land value estimation is literally already happening at scale.
Also, you don't need to be 100% accurate with the estimation. Even a 50% lvt would be a huge improvement and would mean that you could literally be off by 100% which is extremely unlikely. How many houses do you see selling for twice the listing price?
I think there's a perfectly fine way; you estimate it the way we currently estimate properly values for tax purposes. If they owner doesn't like that value, you allow them to contest it, and we immediately accept any contested claim and value it as the owner desires, with two small caveats: a) they pay tax on the claimed value, to ensure they don't over value and b) they are required to sell to anyone at claimed value + 10%, to ensure they don't under value.
But the point of LVT is that it doesn't include the value of the stuff on the land. A house can easily be worth more than 10% of the land it's on, my house is valued at about twice that of the land, or 20x what your plan would require me to accept for the house.
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.
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.
"They paved paradise
And put up a parking lot"
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.
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.
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.
First house is claimed as homestead and gains on sale aren't taxed, but the yearly property tax should work similarly.
This is a negative for anyone who is renting since they now have to pay more rent to cover those taxes. (taxes set a floor on rent long term, though of course tax is only one factor in rental prices)
I wonder if you wouldn't be clutching your pearls if you were being forced (sorry, "financially nudged") out of your home of 20 years?
These cash poor elderly folks aren't exactly "oligarchic".
This way these folks don't have to pay much more than before, can stay in their house and the county gets its share when these people die or move out.
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.
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.
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?
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.
>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.
You're missing the point entirely. When your small business, single family home, little ranch, whatever, becomes in increasing proximity to improvements your tax goes up. If you own a big ranch and decide to split some of it off, build housing or whatever and sell, then your tax on everything goes up per LVT.
All taxes that generate revenue are taxes on good things. This is a fundamental rule of economics. Using this as an argument against LVT just means that you are opposed to taxation generally as a way to generate revenue. This essay doesn't defend that position though, because it is engaged in magical thinking.
Calling yourself a rationalist is just branding. It means that your opponents aren't rationalists. It's dishonest.
No.
This frankly comes across as projection.
Please elaborate. I do not know what you could possibly mean.
Consider, are you exceptional in the sense that you would not place yourself in any camp whatsoever, ascribe to any ideology? You're neither left or right? Actions dictate identity.
Having an interest in something is not the same as having a superiority complex.
I think a majority would agree tobacco is not a good thing and yet we tax it.
I don't understand your "fundamental rule of economics" claim - carbon taxes are a clear counterexample, I would think.
Sounds like you wouldn't fit in.
E.g.
* Offshore oil drilling
* Tech companies
* Fully remote CPAs
* Electricians
* etc
It seems very weird large sections of the economy become virtually untaxed, requiring a MASSIVE tax burden on the others. The simplicity of the LVT plan kinda hides that it implies a huge restructuring of the economy.
Proponents of the Land Value Tax, but not as a single tax would probably be more mixed.
Restructuring of the economy isn't a hidden part of the Land Value Tax, it's the point.
When you actually learn about public agency spending, you'll see that 2/3 of it is completely unnecessary.
I'm not saying companies are any better, but they generally don't have the mandate to take your house from you if you are not a customer.
Focus on the spending first, and make sure it's essential. Then figure out how to fund it.
If you can get spending scope reduced by 90% (where it was before FDR) , you'll find the tax situation solves itself. You won't have to invent taxes on every activity.
From pragmatic standpoint there needs to be some spending and it obviously makes sense to think about how best to raise revenue.
Does that make sense?
Until 16th amendment, Federal revenue was from excise tax. Income, fees, capital gains were not necessary.
So degree matters. Of course you're going to have to keep inventing new tax revenue streams if spending is 6-10x more than it should be.
We may keep the property tax, but talking about tax revenue absent of spending is like talking about how to deal with a headache caused by a nail in the head, without addressing the nail.
In fact, the opposite is the case. In the few US cities--historically and present--with an LVT, the political pressure was and is to consistently undervalue the land. Because the quickest way for your administration to get voted out of office is for your tax assessors to be hard-asses about applying the LVT formula, let alone inflate assessments. As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.
Yet underassessing has its own problems--it erodes legitimacy of the government. Prior to Prop 13 property assessors were consistently underassessing the property of senior citizen homeowners. But this engendered a sense of capriciousness that was felt most acutely by, ironically, senior citizen homeowners.
None of which is to say LVT could never work, but it requires a tremendous shift in the political culture. The legitimacy of the existing property tax structure and its relationship to our conception of property rights is baked into our political culture; shifting to a new system will necessarily be incredibly difficult and destabilizing.
Isn't that an issue with all property tax regimes that don't have the prop 13 carveout, regardless of whether it's LVT or not?
It sort of breaks your head the first time you try to think about it because we are just not used to thinking about supply and demand in cases where supply is actually fixed, and that's where all the magic benefits come from. Happy to answer any questions people have.
Full disclosure though I'm a huge proponent!
As with any policy, there are some advantages and disadvantages but I think on the whole LVT is probably the single best policy change we could make as a society.
How we tax property, with Lars Doucet: https://www.complexsystemspodcast.com/episodes/property-asse...
Tax the dirt, with Lars Doucet & Greg Miller: https://www.complexsystemspodcast.com/episodes/tax-the-dirt-...
greenie_beans•4h ago
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•4h ago
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•4h ago
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•4h ago
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•3h ago
greenie_beans•3h ago
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.
some_random•2h ago
greenie_beans•32m ago
you can't just wave a wand to build housing if the taxes change to LVT. we all know that developers don't build affordable housing. the margins are much more attractive to build luxury housing...it's the incentive structure. housing is expensive to build, and those investors will require an ROI.
terrible idea! the more you look at it, the worse and worse it sounds.
ljlolel•4h ago
sokoloff•3h ago
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•3h ago
sokoloff•1h ago
It’s trying to figure out “what is the land alone under these improvements worth?” that has no market signal to use as a reference (or an extremely weak signal in areas where unimproved lots do sell on the open market).
If you paid $1.5M in 2016, was the land alone $500K, $1M, or $1.25M? If you disagreed with the city’s assessment of just your land, how would you find comps to argue your case?
greenie_beans•3h ago
Aurornis•3h ago
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.
some_random•2h ago
niam•27m ago
What do you think others claim the purpose of an LVT is?
> every LVT discussion eventually comes back to some inclusion of other factors to adjust the taxes or provide exemptions
This argument seems only to follow from a belief that carving exceptions out of policy here is either: inherently bad, lends to a slippery slope towards badness, or is fundamentally incompatible with the professed aims of an LVT (hence my asking).
I don't believe any of those are true, so this sounds to me an unfair indictment against the otherwise legitimate strategy of "keep what's good; change what's bad", which is practical and works for other policy all the time. While I'd scorn the complexity of our current tax code, I wouldn't do so on principle of exemptions being bad, but rather that we've made poor tradeoffs or struck a bad balance.
webstrand•4h ago
Nasrudith•4h ago
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•4h ago
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•3h ago
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_•2h ago
If LVT is implemented, land owners will have a financial incentive to sell off the plots, and the spaces will be gone.
ta1243•1h ago
If someone else can develop the land, why doesn't the current land owner
kfajdsl•51m ago
webstrand•9m ago
As far as I am aware, they are able to survive on their membership or visitor fees. But major improvements do take larger donation.
renewiltord•3h ago
webstrand•6m ago