Your "Answers to Various Questions" section could be its own post. Eloquent answers to questions I often face. If it were its own post, I would share it with anyone who has even the most remote interest in a land tax shift.
This was great except it did not answer every single concern that I can possible think of. Very sad.
But seriously, very well done, you kind of got it all into one place, and in such an engaging way, it's impressive. I'm jealous. Funnily enough, before your Play-Doh example, I had been thinking of doing something similar with peanut butter (or regular butter) on toast. But then you did it so now I don't have to!
> Texans do not want to replace all property taxes with 20% state-imposed inflation on goods and services.
A one-time 20% increase in prices is not the same as 20% inflation. 20% inflation would mean a 20% increase *every year*. The former is not a big deal economically, people just don't like it emotionally. The latter would be much worse, but I can't see how it would be caused by an increase in sales tax.
Wouldn't a tax deferral incentivize widows to stay in family housing instead of downsizing similar to prop 13? Making that behavior painfully unaffordable might be the stick legislators need to legalize more housing options.
Is anyone else wondering why THAT 3 bedroom house without central AC & a chain link fence is FIFTEEN MILLION dollars???? I understand that it's New York City but still? I know of much newer & similar in room # houses on the coast of CA in wealthy areas that are only 1-4 million.
Ill-informed in regards to CA's Prop 13. Per-capita student expenditure has surpassed inflation in CA and rivals most other states. Prop 13 is the only thing keeping hundreds of thousands of middle-class residents and fixed-income residents in their homes over the past 25 years in CA. The decline in CA's public education system can more accurately be blamed on poor administration, a drastic decline in enrollment, and to a small degree, over-powerful teachers' unions.
> The decline in CA's public education system can more accurately be blamed on poor administration, a drastic decline in enrollment, and to a small degree, over-powerful teachers' unions.
I'm not actually sure what part of the piece you're referring to, because in the case of California, I didn't say a single word about the decline of it's public education system.
My chief critique was about the massively unequal taxation system. Do you think it's fair that side-by-side neighbors pay extremely unequal tax bills?
Thank you, Lars! Apologies if my comment was tangential.
Your reference was a pointed attack on how Prop 13 appears 40 years in. It does look wacky to outsiders, I concede. But, Yes, I do think that the disparity is preferable to the realistic imminent alternative, which is for all properties to skyrocket to a market-value tax rate. Many of our residential communities have dual-income millionaires living next to formerly-blue-collar Social Security recipients. While LVT may in theory balance rates and still allow some of the long-term population to remain, it's hard to imagine it not displacing a huge number of residents.
California is a one-armed person hanging off the side of a cliff, and LVT might be a hand reaching down to help, but...
(And I truly enjoyed and learned from the piece, this was my one area of disagreement.)
What about Texas' system of property tax deferral for seniors? Someone in my state who gets stuck in that exact same situation can stay in their house for the rest of their life and not pay a dime of extra property tax. The bill gets settled when they sell the house, or if they live out their lives without moving, the estate settles it.
Yes, that would help. Though a bit like a county's version of a reverse mortgage. An aspect to these homes is that they were a wealth stabilizer for the emerging middle-class. In any case it feels like the era of the abundant, affordable single-family home in urban CA, and urban America, is fast coming to an end. LVT might be the way, but if I'm understanding the rudiments, in an LVT schema, density will rise. I consider myself a progressive, but most progressive solutions seem to only imagine a reality owned by big-money interests in which the rest of us can only afford to be tenants. I appreciate your time and considerate answers. I swear I won't reply to any coming response. XD
I appreciate it Bill, we're all trying to figure our way out of this mess. Couple of thoughts here:
> LVT might be the way, but if I'm understanding the rudiments, in an LVT schema, density will rise.
Density *will* definitely rise, but it won't necessarily rise *everywhere*. The key place it will rise first is in urban downtown cores. If that's sufficient to meet demand, you would expect it to pull development pressure *off* of outlying areas.
> In any case it feels like the era of the abundant, affordable single-family home in urban CA, and urban America, is fast coming to an end.
Indeed. One of the problems is that the wave of automobile suburb expansion that started in the 1900's was effectively a sort of "second frontier", in which cheap productive land was available for the taking. The trouble is, that frontier closed around 2006, and ever since then prices have just been skyrocketing. America's challenge is that it is a frontier nation that no longer has a frontier -- first we had westward expansion, then the automobile, and now we're just stuck where we're at, and we've got hard choices to make.
I spoke about this a bit longer in this piece here:
> I consider myself a progressive, but most progressive solutions seem to only imagine a reality owned by big-money interests in which the rest of us can only afford to be tenants.
I share this frustration too. I get frustrated with the progressives who don't understand why people like single family suburban homes in the first place, but I likewise get frustrated with the ardent anti-tax conservatives in my own backyard that surround me that don't want to answer hard budgetary questions.
There's a phenomenon you might be interested in called "Gordon Tullock's transitional gains trap." I feel it describes our current situation quite well.
In any case, thanks very much for engaging, and best of luck.
A huge number of residents have already been displaced. I grew up in California. I would like to be close to my parents, but housing prices make that impossible. None of my High School friends live in state either. Every change in policy, tax or otherwise, helps some and hurts others. The idea that we should be taxing labor so heavily to keep people in houses that are bigger than their current needs seems to me to be unspeakably cruel.
Do you know if the Gallup polling had other cross tabs? I’m curious how popular/not the property tax is amongst the demographically currently existing median republican voter. (Who I assume to skew older homeowners, but I’d need to look that up, been a while)
In my experience, politicians are more avatars of their constructs than agents in their own right, but perhaps the Vivek R’s, RDS, and Marjories Taylor Greene are just out there saying what comes to mind more than I give them credit for.
The results surprised even me. I would have expected that if we look at Republicans alone property tax would be much more hated, but, well, see for yourself:
Republicans:
2005:
- Federal income: 16
- Social security: 15
- State income: 16
- State sales: 14
- Local property: 35
2023:
- Federal income: 41
- Social security: 6
- State income: 12
- State sales: 7
- Local property: 32
Federal income tax grew as the most hated by +25 percentage points, and local property tax actually went DOWN as most hated by 3 percentage points, for a net -28 percentage point swing between property taxes and federal income taxes in the last two decades, solely among Republicans.
If we aggregate the three income taxes into "any income tax" we get this:
Fascinating, whelp time to update my priors on the electorate I suppose.
I’m still curious about the turn amongst some specific MAGA politicians, but maybe it’s just a general anti-tax taking point (VR talks about cutting income taxes in the same breath as killing the property tax)
Yeah, it's curious. I bet if we dig into state polling we'll find some interesting stories, but I think if you look at the heat coming from these grassroots uprisings, and compare that to what actually inevitably happens in the legislature, it make sense.
Also, if you look at the actual plans the property tax abolitionists put forward, they never have a real plan. They make very ambitious assumptions about "increased growth" and handwave the rest.
It's easy to get high polling numbers on "Low taxes, high city/county services!" as long as nobody looks behind the curtain.
I just discovered your Substack through Reddit, I am amazed.
I am part of a small party in my homeland with a lot of Georgist influence, these kinds of articles are so helpful when thinking and designing program.
Your are dead wrong about this and a propagandistic demagogue.
The old don't pay property taxes. They have had assessments caped at 3% for thirty years. Their property taxes are half what the young family in a house identical to their right next to them is.
Even when there is no law, assessments always trail home values. And 65+ get tons of tax breaks in every single state I've lived.
Property tax burdens fall on new (young) buyers who have to accept market rate assessments. I pay twice the property taxes on my home I just bought that my neighbors in their 70s.
Any property tax cut is going to help young families more then olds.
DeSantis has even made this clear and said he rejects any property tax relief bill that targets the elderly.
The place in the country with the highest property taxes in the Northeast, and they have the least affordable homes. This doesn't work.
And no, property taxes don't "pay for local schools and services". All school districts in every state get topped off by state funds to equalize, no matter how high your property taxes are. You basically taxing yourself for nothing. It's Civil Rights Law.
An advantage of property taxes is that valuations can be (though I admit rarely in practice are) set in a game theoretic fashion so that I'm incentivized to be truthful and no bureaucrat can decide arbitrarily to fuck me over bc he thinks my house is worth more. (I believe either mechanism works here: either the government sets valuations arbitrarily but must accept payment in kind, or I do and I must sell to any buyer.) To my knowledge no such mechanism exists for LVT.
What stops a bureaucrat with no skin in the game from arbitrarily deciding that 95% of my property's value is in the land? Or for that matter that my property is worth $20m because fuck me in particular? There's not even sale markets to refer to; both because buyers purchase improvements, and because LVT by design is supposed to reduce the net present value of the land's cashflow to zero.
I'm curious if you've considered these issues in the book.
I get this criticism but in practice appraisal theory is not as arbitrary as you might think. I've written some pieces on this blog on the subject that you might find interesting, and I'm currently in the middle of editing a new upcoming piece that is a detailed interview with a land appraiser.
For one, historical Georgists used a radically different method to value land than is currently in practice today, essentially relying on communal "wisdom of the crowds" assessment. It's very counterintuitive but it was deployed in big cities for many decades. We could always bring this back if we felt like it:
For two, we have evidence from actually existing land value tax experiments that had the predicted outcomes, even using fairly crude valuation mechanisms (including some variants of the mechanisms you're likely hinting at):
For three, given that you're comfortable at least in theory with conventional property tax valuations, there are ways to take those property tax valuations (which can be tested directly against sales evidence), and then simply change the structure of how we assign the tax bills themselves in a way that gives us many of the same incentives as LVT, without having to deduce and defend a "platonic" land value directly. In a scenario where we grant your claims in the strongest terms, we could use this method and likely still gain most of the benefits of LVT:
For four, and this will be published in an upcoming piece (the interview I'm still editing), conventional modern mass appraisal has many mechanisms in it that safeguard land valuations from being completely arbitrary. I would strongly encourage you to learn more about appraisal theory, how it's actually practiced, and the mechanisms and evidentiary standards behind it. I agree that there are certainly many places where the practice is below the standard I would be comfortable with, but when you encounter people who are good at what they do it gives you an appreciation for what is possible if we were to promulgate best practices more widely.
If those vacant lot and parking lot owners in the urban core are holding onto property with very high assessed values, their owners already have a tremendous incentive to sell: they would make lots of money!
But they don't. I think it's important to understand the reasons why they don't. What's really blocking a sale? Are there opposing incentives?
Maybe it's something that can't be solved by making the incentives to sell even more steep?
This is an interesting line of thinking, but I think you're missing some variables in the equation.
The two variables are 1) there are very low holding costs to these lots, and 2) the owner knows the property will likely be worth *even more tomorrow*. Those two forces combine to countervail the incentive you mention. Even more money can be had by holding onto it for longer.
We can resolve this with a testable hypothesis -- if we enact the reforms I'm talking about (or look at cases where similar policies have already been implemented), will we see increased turnover in vacant land? What standard of evidence would possibly change your mind on this question?
Hey, I'm not taking a position here. I think of it more as satisfying my curiosity about how property owners think than proving things. So what would satisfy my curiosity? Journalism. Somebody goes and talks to the property owners about their motivations, to see if it's mostly about speculation, or are there other factors involved that we didn't think of?
(Though of course, the trouble is getting people to talk.)
I do think that there's some pretty strong evidence that these reforms lead directly to increased vacant lot turnover, but if I ever do any interviews with people holding onto land, I'll post them on this blog.
That said, and to your point, I can certainly imagine scenarios where you would need more than tax incentives to change. For instance, if you're literally not allowed to build anything in the area, then tax incentives won't move the needle. Additionally, financial burdens that trigger on transfer of the property (such as real estate transfer taxes), or "impact fees" that trigger when you try to build something, could also be holding back development and keeping land idle. Obviously, I'm in favor of reforming all of the above.
A Universal Building Exemption is an interesting means to get to a Land Value tax. Does it differ in any fundamental way from a pure Land Value tax?
And I had realized that property tax rates are calculated backwards from the desired budget. That is shall we say quite convenient for local governments. That turns property taxes into a money printing machine.
> A Universal Building Exemption is an interesting means to get to a Land Value tax. Does it differ in any fundamental way from a pure Land Value tax?
Universal Building Exemption is mostly just a way to get to LVT; the most important feature is that it requires that you already have a property tax to start with. But yes, if you apply U.B.E. to an existing property tax, what's left is LVT.
> And I had realized that property tax rates are calculated backwards from the desired budget. That is shall we say quite convenient for local governments. That turns property taxes into a money printing machine.
It also creates an interesting political dynamic where elected officials (who control the tax rate) are able to shift all blame for rising tax bills onto the property assessor (who has no control of the tax rate and will get fired by law if they don't assess at full market value)!
"Don't get mad at me! I haven't raised the millage rate in ten years!"
Yes, Universal Building Exemption is a genius means to market an LVT. It sounds like a reasonable, incremental reform, while “abolish property taxes and implement a land value tax” sounds far more radical. Plus you don’t have to explain what a land value tax is. The fact that the rate is calculated from the desired budget guarantees revenue neutrality, which make it far more feasible politically.
Not sure if I would sum up the various income taxes. The question they asked is weird and answer is nonsensical. Really, the poll should just ask "income tax", "sale tax", and "property tax".
I would go a step farther and not allow these wealthy land owners (often urbanites, but should apply to everyone) to defer. They could live for quite some time … another 20-30 years. Multiply that by the number of similar deferrals, then multiply that again by the number of affected (displaced) workers/families/others, then multiply that again by the number of miles being displaced, then multiply that again by the number of commutes … then look at the resulting impact on time loss, resource loss, pollution, and other health impacts from sitting in traffic breathing exhaust and stressing out over all the things which would have otherwise resolved themselves if each of these people could’ve been around more often to support their loved ones (like behavior problems with their children, affairs, elder care, etc.) and I find it very difficult to justify the privilege of a handful of people, no matter what kind of stolen goods they were able to pay for, at such a great expense to everyone else.
What's interesting is that there's a 5% interest in Texas attached to the lien.
If one's one and only concern is staying in their home perpetually--ie, it really *is* all about "poor widows" at risk of being thrown on the street--then this is a great option for them to stay in their homes.
That said, if what you're really after is just to maximize your net worth, from what I've read a lot of financial and estate planners will advise people to just go ahead and pay their property taxes already rather than taking the deferral.
Your "Answers to Various Questions" section could be its own post. Eloquent answers to questions I often face. If it were its own post, I would share it with anyone who has even the most remote interest in a land tax shift.
You can click on any header and get a direct link to just that section!
https://progressandpoverty.substack.com/i/164752398/answers-to-various-objections
This piece is a great blend of research, elucidation and advocacy! The reworking of our property tax regime into LVT is so near and yet so far.
This was great except it did not answer every single concern that I can possible think of. Very sad.
But seriously, very well done, you kind of got it all into one place, and in such an engaging way, it's impressive. I'm jealous. Funnily enough, before your Play-Doh example, I had been thinking of doing something similar with peanut butter (or regular butter) on toast. But then you did it so now I don't have to!
Brilliant as always.
> Texans do not want to replace all property taxes with 20% state-imposed inflation on goods and services.
A one-time 20% increase in prices is not the same as 20% inflation. 20% inflation would mean a 20% increase *every year*. The former is not a big deal economically, people just don't like it emotionally. The latter would be much worse, but I can't see how it would be caused by an increase in sales tax.
You are technically correct. What I meant to say is it would be equivalent to a one-time 20% inflation in sale prices.
> The former is not a big deal economically, people just don't like it emotionally.
I dispute this assertion, but to each his own.
Wouldn't a tax deferral incentivize widows to stay in family housing instead of downsizing similar to prop 13? Making that behavior painfully unaffordable might be the stick legislators need to legalize more housing options.
Is anyone else wondering why THAT 3 bedroom house without central AC & a chain link fence is FIFTEEN MILLION dollars???? I understand that it's New York City but still? I know of much newer & similar in room # houses on the coast of CA in wealthy areas that are only 1-4 million.
Ill-informed in regards to CA's Prop 13. Per-capita student expenditure has surpassed inflation in CA and rivals most other states. Prop 13 is the only thing keeping hundreds of thousands of middle-class residents and fixed-income residents in their homes over the past 25 years in CA. The decline in CA's public education system can more accurately be blamed on poor administration, a drastic decline in enrollment, and to a small degree, over-powerful teachers' unions.
Hi Bill! Thanks for your comment.
> The decline in CA's public education system can more accurately be blamed on poor administration, a drastic decline in enrollment, and to a small degree, over-powerful teachers' unions.
I'm not actually sure what part of the piece you're referring to, because in the case of California, I didn't say a single word about the decline of it's public education system.
My chief critique was about the massively unequal taxation system. Do you think it's fair that side-by-side neighbors pay extremely unequal tax bills?
Thank you, Lars! Apologies if my comment was tangential.
Your reference was a pointed attack on how Prop 13 appears 40 years in. It does look wacky to outsiders, I concede. But, Yes, I do think that the disparity is preferable to the realistic imminent alternative, which is for all properties to skyrocket to a market-value tax rate. Many of our residential communities have dual-income millionaires living next to formerly-blue-collar Social Security recipients. While LVT may in theory balance rates and still allow some of the long-term population to remain, it's hard to imagine it not displacing a huge number of residents.
California is a one-armed person hanging off the side of a cliff, and LVT might be a hand reaching down to help, but...
(And I truly enjoyed and learned from the piece, this was my one area of disagreement.)
Appreciate it, Bill!
What about Texas' system of property tax deferral for seniors? Someone in my state who gets stuck in that exact same situation can stay in their house for the rest of their life and not pay a dime of extra property tax. The bill gets settled when they sell the house, or if they live out their lives without moving, the estate settles it.
Yes, that would help. Though a bit like a county's version of a reverse mortgage. An aspect to these homes is that they were a wealth stabilizer for the emerging middle-class. In any case it feels like the era of the abundant, affordable single-family home in urban CA, and urban America, is fast coming to an end. LVT might be the way, but if I'm understanding the rudiments, in an LVT schema, density will rise. I consider myself a progressive, but most progressive solutions seem to only imagine a reality owned by big-money interests in which the rest of us can only afford to be tenants. I appreciate your time and considerate answers. I swear I won't reply to any coming response. XD
I appreciate it Bill, we're all trying to figure our way out of this mess. Couple of thoughts here:
> LVT might be the way, but if I'm understanding the rudiments, in an LVT schema, density will rise.
Density *will* definitely rise, but it won't necessarily rise *everywhere*. The key place it will rise first is in urban downtown cores. If that's sufficient to meet demand, you would expect it to pull development pressure *off* of outlying areas.
> In any case it feels like the era of the abundant, affordable single-family home in urban CA, and urban America, is fast coming to an end.
Indeed. One of the problems is that the wave of automobile suburb expansion that started in the 1900's was effectively a sort of "second frontier", in which cheap productive land was available for the taking. The trouble is, that frontier closed around 2006, and ever since then prices have just been skyrocketing. America's challenge is that it is a frontier nation that no longer has a frontier -- first we had westward expansion, then the automobile, and now we're just stuck where we're at, and we've got hard choices to make.
I spoke about this a bit longer in this piece here:
https://progressandpoverty.substack.com/p/why-georgists-use-the-mark
> I consider myself a progressive, but most progressive solutions seem to only imagine a reality owned by big-money interests in which the rest of us can only afford to be tenants.
I share this frustration too. I get frustrated with the progressives who don't understand why people like single family suburban homes in the first place, but I likewise get frustrated with the ardent anti-tax conservatives in my own backyard that surround me that don't want to answer hard budgetary questions.
There's a phenomenon you might be interested in called "Gordon Tullock's transitional gains trap." I feel it describes our current situation quite well.
In any case, thanks very much for engaging, and best of luck.
A huge number of residents have already been displaced. I grew up in California. I would like to be close to my parents, but housing prices make that impossible. None of my High School friends live in state either. Every change in policy, tax or otherwise, helps some and hurts others. The idea that we should be taxing labor so heavily to keep people in houses that are bigger than their current needs seems to me to be unspeakably cruel.
Do you know if the Gallup polling had other cross tabs? I’m curious how popular/not the property tax is amongst the demographically currently existing median republican voter. (Who I assume to skew older homeowners, but I’d need to look that up, been a while)
In my experience, politicians are more avatars of their constructs than agents in their own right, but perhaps the Vivek R’s, RDS, and Marjories Taylor Greene are just out there saying what comes to mind more than I give them credit for.
Interestingly enough, the article I linked includes a graph of party breakdown:
https://news.gallup.com/poll/505970/americans-views-federal-income-taxes-worsen.aspx?utm_source=chatgpt.com
Here's a direct link:
https://datawrapper.dwcdn.net/fer3C/5/#
The results surprised even me. I would have expected that if we look at Republicans alone property tax would be much more hated, but, well, see for yourself:
Republicans:
2005:
- Federal income: 16
- Social security: 15
- State income: 16
- State sales: 14
- Local property: 35
2023:
- Federal income: 41
- Social security: 6
- State income: 12
- State sales: 7
- Local property: 32
Federal income tax grew as the most hated by +25 percentage points, and local property tax actually went DOWN as most hated by 3 percentage points, for a net -28 percentage point swing between property taxes and federal income taxes in the last two decades, solely among Republicans.
If we aggregate the three income taxes into "any income tax" we get this:
Republicans:
2005:
- Any income: 47
- State sales: 14
- Local property: 35
2023:
- Any income: 59
- State sales: 7
- Local property: 32
Fascinating, whelp time to update my priors on the electorate I suppose.
I’m still curious about the turn amongst some specific MAGA politicians, but maybe it’s just a general anti-tax taking point (VR talks about cutting income taxes in the same breath as killing the property tax)
Yeah, it's curious. I bet if we dig into state polling we'll find some interesting stories, but I think if you look at the heat coming from these grassroots uprisings, and compare that to what actually inevitably happens in the legislature, it make sense.
Also, if you look at the actual plans the property tax abolitionists put forward, they never have a real plan. They make very ambitious assumptions about "increased growth" and handwave the rest.
It's easy to get high polling numbers on "Low taxes, high city/county services!" as long as nobody looks behind the curtain.
I just discovered your Substack through Reddit, I am amazed.
I am part of a small party in my homeland with a lot of Georgist influence, these kinds of articles are so helpful when thinking and designing program.
Which country? Please reach out to me at lars@landeconomics.org and let's talk!
I just dropped an email with an introduction. Let's definitely talk!
Your are dead wrong about this and a propagandistic demagogue.
The old don't pay property taxes. They have had assessments caped at 3% for thirty years. Their property taxes are half what the young family in a house identical to their right next to them is.
Even when there is no law, assessments always trail home values. And 65+ get tons of tax breaks in every single state I've lived.
Property tax burdens fall on new (young) buyers who have to accept market rate assessments. I pay twice the property taxes on my home I just bought that my neighbors in their 70s.
Any property tax cut is going to help young families more then olds.
DeSantis has even made this clear and said he rejects any property tax relief bill that targets the elderly.
The place in the country with the highest property taxes in the Northeast, and they have the least affordable homes. This doesn't work.
And no, property taxes don't "pay for local schools and services". All school districts in every state get topped off by state funds to equalize, no matter how high your property taxes are. You basically taxing yourself for nothing. It's Civil Rights Law.
https://i0.wp.com/conduitstreet.mdcounties.org/wp-content/uploads/2016/04/screenshot-2016-04-26-10-42-31.png?fit=1317%2C838&ssl=1
But yes, channel all your efforts into making sure sales taxes get cut instead of property taxes. Consumer, never own. That's what young people want.
An advantage of property taxes is that valuations can be (though I admit rarely in practice are) set in a game theoretic fashion so that I'm incentivized to be truthful and no bureaucrat can decide arbitrarily to fuck me over bc he thinks my house is worth more. (I believe either mechanism works here: either the government sets valuations arbitrarily but must accept payment in kind, or I do and I must sell to any buyer.) To my knowledge no such mechanism exists for LVT.
What stops a bureaucrat with no skin in the game from arbitrarily deciding that 95% of my property's value is in the land? Or for that matter that my property is worth $20m because fuck me in particular? There's not even sale markets to refer to; both because buyers purchase improvements, and because LVT by design is supposed to reduce the net present value of the land's cashflow to zero.
I'm curious if you've considered these issues in the book.
I get this criticism but in practice appraisal theory is not as arbitrary as you might think. I've written some pieces on this blog on the subject that you might find interesting, and I'm currently in the middle of editing a new upcoming piece that is a detailed interview with a land appraiser.
For one, historical Georgists used a radically different method to value land than is currently in practice today, essentially relying on communal "wisdom of the crowds" assessment. It's very counterintuitive but it was deployed in big cities for many decades. We could always bring this back if we felt like it:
https://progressandpoverty.substack.com/p/how-georgists-valued-land-in-the
For two, we have evidence from actually existing land value tax experiments that had the predicted outcomes, even using fairly crude valuation mechanisms (including some variants of the mechanisms you're likely hinting at):
https://progressandpoverty.substack.com/p/the-curious-case-of-qingdao-chinas
For three, given that you're comfortable at least in theory with conventional property tax valuations, there are ways to take those property tax valuations (which can be tested directly against sales evidence), and then simply change the structure of how we assign the tax bills themselves in a way that gives us many of the same incentives as LVT, without having to deduce and defend a "platonic" land value directly. In a scenario where we grant your claims in the strongest terms, we could use this method and likely still gain most of the benefits of LVT:
https://progressandpoverty.substack.com/p/valuing-land-the-simplest-viable
For four, and this will be published in an upcoming piece (the interview I'm still editing), conventional modern mass appraisal has many mechanisms in it that safeguard land valuations from being completely arbitrary. I would strongly encourage you to learn more about appraisal theory, how it's actually practiced, and the mechanisms and evidentiary standards behind it. I agree that there are certainly many places where the practice is below the standard I would be comfortable with, but when you encounter people who are good at what they do it gives you an appreciation for what is possible if we were to promulgate best practices more widely.
If those vacant lot and parking lot owners in the urban core are holding onto property with very high assessed values, their owners already have a tremendous incentive to sell: they would make lots of money!
But they don't. I think it's important to understand the reasons why they don't. What's really blocking a sale? Are there opposing incentives?
Maybe it's something that can't be solved by making the incentives to sell even more steep?
> they would make lots of money!
This is an interesting line of thinking, but I think you're missing some variables in the equation.
The two variables are 1) there are very low holding costs to these lots, and 2) the owner knows the property will likely be worth *even more tomorrow*. Those two forces combine to countervail the incentive you mention. Even more money can be had by holding onto it for longer.
We can resolve this with a testable hypothesis -- if we enact the reforms I'm talking about (or look at cases where similar policies have already been implemented), will we see increased turnover in vacant land? What standard of evidence would possibly change your mind on this question?
Hey, I'm not taking a position here. I think of it more as satisfying my curiosity about how property owners think than proving things. So what would satisfy my curiosity? Journalism. Somebody goes and talks to the property owners about their motivations, to see if it's mostly about speculation, or are there other factors involved that we didn't think of?
(Though of course, the trouble is getting people to talk.)
That's fair!
I do think that there's some pretty strong evidence that these reforms lead directly to increased vacant lot turnover, but if I ever do any interviews with people holding onto land, I'll post them on this blog.
That said, and to your point, I can certainly imagine scenarios where you would need more than tax incentives to change. For instance, if you're literally not allowed to build anything in the area, then tax incentives won't move the needle. Additionally, financial burdens that trigger on transfer of the property (such as real estate transfer taxes), or "impact fees" that trigger when you try to build something, could also be holding back development and keeping land idle. Obviously, I'm in favor of reforming all of the above.
Yeah, it's easy to imagine other scenarios. Another one: property owners are old or sick or distracted and not paying attention anymore.
Imagination is good for coming up with possibilities but not for finding out which ones are true.
A Universal Building Exemption is an interesting means to get to a Land Value tax. Does it differ in any fundamental way from a pure Land Value tax?
And I had realized that property tax rates are calculated backwards from the desired budget. That is shall we say quite convenient for local governments. That turns property taxes into a money printing machine.
> A Universal Building Exemption is an interesting means to get to a Land Value tax. Does it differ in any fundamental way from a pure Land Value tax?
Universal Building Exemption is mostly just a way to get to LVT; the most important feature is that it requires that you already have a property tax to start with. But yes, if you apply U.B.E. to an existing property tax, what's left is LVT.
> And I had realized that property tax rates are calculated backwards from the desired budget. That is shall we say quite convenient for local governments. That turns property taxes into a money printing machine.
It also creates an interesting political dynamic where elected officials (who control the tax rate) are able to shift all blame for rising tax bills onto the property assessor (who has no control of the tax rate and will get fired by law if they don't assess at full market value)!
"Don't get mad at me! I haven't raised the millage rate in ten years!"
Yes, Universal Building Exemption is a genius means to market an LVT. It sounds like a reasonable, incremental reform, while “abolish property taxes and implement a land value tax” sounds far more radical. Plus you don’t have to explain what a land value tax is. The fact that the rate is calculated from the desired budget guarantees revenue neutrality, which make it far more feasible politically.
Genius!
It certainly message tests a lot better, too. It's also just way clearer. You say "land value tax" and people immediately jump to two misconceptions:
1. That it's an *additional* tax *on top of* property tax
2. That it's a per-acre tax (when it's really about location value)
When you say "we're just going to exempt buildings from taxation in the existing property tax" they get it.
Not sure if I would sum up the various income taxes. The question they asked is weird and answer is nonsensical. Really, the poll should just ask "income tax", "sale tax", and "property tax".
I would go a step farther and not allow these wealthy land owners (often urbanites, but should apply to everyone) to defer. They could live for quite some time … another 20-30 years. Multiply that by the number of similar deferrals, then multiply that again by the number of affected (displaced) workers/families/others, then multiply that again by the number of miles being displaced, then multiply that again by the number of commutes … then look at the resulting impact on time loss, resource loss, pollution, and other health impacts from sitting in traffic breathing exhaust and stressing out over all the things which would have otherwise resolved themselves if each of these people could’ve been around more often to support their loved ones (like behavior problems with their children, affairs, elder care, etc.) and I find it very difficult to justify the privilege of a handful of people, no matter what kind of stolen goods they were able to pay for, at such a great expense to everyone else.
What's interesting is that there's a 5% interest in Texas attached to the lien.
If one's one and only concern is staying in their home perpetually--ie, it really *is* all about "poor widows" at risk of being thrown on the street--then this is a great option for them to stay in their homes.
That said, if what you're really after is just to maximize your net worth, from what I've read a lot of financial and estate planners will advise people to just go ahead and pay their property taxes already rather than taking the deferral.