I believe that much of the difficulties with valuation for LVT is due to using selling price rather than annual rental values. George proposed a tax on rents. Selling prices are a proxy for rental values but the relationship between the two can be tenuous.
The British property tax system is based on rental values, with land and buildings being valued separately and the two being added together. There is plenty of current rental evidence available to a fine grained local level. The assessments are done by the Valuation Office Agency.
There is a discussion of valuation methodology in the Whitstable Land Value Surveys 1964 and 1973. These are available in pdf format on landvaluetax.org.
It would be very nice if such detailed fine-grained public rental data was available in the USA, but sadly it is not in most jurisdictions. This is why I have been advocating for a "RealPage for the people."
I want to add a thought experiment. Throw away a world of LVT, lets imagine something different.
Imagine a world with a 100% FMV allocation tax. What's an FMV allocation tax?
Take the assessed full market value of all properties. Then take 20% of those full market values, and smooth them across parcels using an averaging approach. Precisely what Lars defines in this post.
If you taxed 100% of that smoothed value, that definitely brings down sales price compared to a world with no property/land tax. But, incentive will always be to develop more such that you pay less tax per unit of development. As a parcel develops more, then 20% of its FMV increases and increases as folks would pay more to buy that building, and then increases the tax rate of parcels around.
The above is an extreme, and I am not entirely sure where the thought experiment leads long term, but short term it means that existing assessment practices (so long as smoothed and hitting Lars criteria) may be sufficient to create the incentives we want to see until we start mandating rental data.
This actually seems super promising. It generally makes sense that land value and private investment are largely lined up, after all (even with zoning mucking it all up). I also like the averaging approach since it makes the tax system much fairer for properties at the valuation edges. Some comments on unique situations at the end of the article:
Land size - I'd argue that you should keep the assessment flat here. While the lot size does impact individual value, is that such a bad thing? For large lots in low demand areas, the tax implication is miniscule. For large lots in high demand areas, you really want to be encouraging lot splitting anyway, so the non-linarity is kinda a feature, not a bug.
Land use restrictions - In a way, this proposal just encourages zoning reform, since the problems of a lot of our land use restrictions just become more obvious. That being said, it wouldn't be too hard to apply a ratio to the neighborhood value based on zoning classification.
Shape - Similar to land size above, a proposal like this might just actually encourage land owners to create more sensible parcels more than anything. The only reason the land value is lower is because the parcel is silly. We're better off de-sillying things in the long run.
Topography - This could be fixed by simply discounting or outright not taxing the square footage of non-buildable land. If part of your property is a steep hillside, it's not really useful so there's no reason to want to encourage building there. If anything, it's a burden to the landowner as is, since they have to maintain it without any real return. Just let it lie fallow, which means not taxing it to begin with.
Flood plains - Since flood plain land is already well defined, you could just apply a discounted tax rate on the square footage of the flood plain. Easy peasy.
Hyper-local effects - This is definitely the hardest to handle, since there are too many small things affecting it, leaving lots of room for judgmental biases and inconsistency and the like. If you let some folks get too many exemptions or something, it kinda removes the fairness I mentioned at the beginning of my comment. But these would likely be fairly small kinks to be worked out.
I also imagine that because it depends on chopping segments of a city up, there might be some odd LVT jumps for properties at the borders between valuation districts, though maybe that's overthinking things. Something that's super simple and easy to understand and implement intuitively seems like it would have better political survivability characteristics than something complex but somewhat more optimal.
One thing that helps somewhat is the borders tend to be natural dividers like roads, across which you could expect to see more of a change than between, say, two houses on the same block
Unless we’re talking about agricultural land, once you get excess land past a certain point doesn’t increase the utility of a building you might put there. You would naturally expect a minimum amount of land that makes the lot “viable” for the prevailing land use of the area (and which is surely anchored to local land use restrictions), and some threshold beyond that at which any additional land becomes merely “nice to have.”
...echoes my comment about pricing flag lots under the Somers System, noting that some chunk of the total value of a claim on land is just having the minimum viable footprint to live / work / do commerce in that location.
So, how would this be taxed ideally? Is it a percentage of the total land value, or is it a percentage of the change in the land value upon re-evaluation? I'm still fairly new to Georgism but I immediately found more sense in it than what we have to deal with currently. I'm aware that my country, the UK, tried it before, but they didn't have resources like this to pull it off properly. Great work!
This is exactly what I was aiming for in terms of my question, so thank you! I've heard snippets about what Wales are doing but the knowledge needs to be more widespread on it honestly.
This is a question to both Lars Doucet and Greg Miller, Do you guys agree with Mason Gaffney about using the income tax as another option for capturing land rents? He explains in this article here about the JFK tax cuts of the 1960s. https://georgistjournal.org/2016/08/01/tax-treatment-of-land-income/
This is an excerpt from the article from above:
"One bright, or at least light gray spot in this dark history was the relief of new investment from taxation under JFK, in a compact known as “business Keynesianism.” CEA chair Walter Heller sold the idea of offsetting the effect of high income tax rates by allowing fast write-off of most new investments, plus an investment tax credit (ITC). The high tax rate applies in full force to land rents; new investment gets major relief. Net result: an income tax that achieves nationally the same goal property tax reformers have to chip at laboriously from town to town. It was not a golden age, but neither was it an age of rust. It was a time when the economy refused to take its expected dive. Investors who responded to the lures of accelerated depreciation, and lawyers who worked on intricate moves to exploit them, never dreamed they were responding to ideas originating with a radical reformer from the 19th century.
The provenance of Heller’s idea shows the influence of a Georgist academic, John R. Commons (1862-1945), a leading “Institutionalist” thinker at The University of Wisconsin. Commons’s views on taxing land and exempting capital and wages are set forth strongly in his Institutional Economics: “…the man who gets his wealth by mere rise in site-values should pay proportionately higher taxes than the one who gets his wealth by industry or agriculture. In the one case he extracts wealth from the commonwealth without adding to it. In the other case he contributes directly to an increase in both private wealth and commonwealth.”
Commons favored the fast write-off of new investments, the very idea Walter Heller put across in Washington. His purpose was explicitly to make the income tax bear heavier on land rents than on the returns to capital. When the purpose of Congress is really to encourage new investment, fast write-off of new capital is the obvious tool."
This is an idea I've heard of obliquely but haven't investigated at length. Proposals I've heard are often styled as a "LIT" or "Land Income Tax" that tries to reshape the existing income tax such that rental income ascribed to land, as well as imputed rent ascribed to land, are taxed under the income tax statutes, and conventional income is excluded. That sounds interesting, but I'm not sure how you practically go about implementing it. It's something I would need to read more about. Is this more or less Gaffney's idea, or does he have something different in mind?
I've read Chris England's history of the Georgist movement, which includes a lot about the New Deal coalition and the history of the income tax, but I haven't read this specific article. Thanks for sharing it!
I typed in the Yahoo Search engine "Why the South was hostile to Georgism" and this was the Artificial Intelligence written response:
The South was often hostile to Georgism due to several key factors.
Economic Interests
Many Southern landowners were concerned that Georgism, which advocates for a land value tax, would undermine their property rights and reduce their wealth. The agrarian economy relied heavily on land ownership, and a tax on land value could threaten their financial stability.
Cultural Values
The South had a strong tradition of individualism and property rights. Georgism's emphasis on taxing land rather than labor or capital was seen as a challenge to these values, leading to resistance among those who viewed land as a personal asset.
Political Landscape
Southern politics were often dominated by conservative ideologies that favored minimal government intervention. Georgism's proposals for land taxation were perceived as a form of government overreach, further fueling opposition.
Racial Dynamics
In the post-Civil War South, land ownership was closely tied to racial hierarchies. Georgism's principles could have disrupted the existing social order, leading to hostility from those who benefited from the status quo.
Another thing I have noticed over the years is that a lot of Georgist economic policies that were implemented were usually in the Northern and Western states of the US. I noticed that the South pretty much never had LVT policies with the exception of the Hispanic assessor in Houston and the Fairhope colony in Alabama, Georgism has never been popular in the region.
Fairhope colony was started by Midwestern progressive whites so they were not naive to the region's culture. Here are two articles that discuss it:
I typed in the Yahoo Search engine as a question to AI and this was the response, I want to know do you agree with it? I see you are from Texas so you should have some insight; but I read that you are originally from Australia is that true?
The South's hostility to land value taxation stemmed from several key factors.
Economic Interests
Southern economies were heavily reliant on agriculture, particularly plantation farming. Land value taxation could threaten the wealth of landowners by increasing their tax burden, which was seen as detrimental to their economic interests.
Social Structure
The South had a rigid social hierarchy, where land ownership was closely tied to social status. Land value taxation could disrupt this structure by imposing taxes based on land value rather than income, potentially redistributing wealth and power.
Political Resistance
Many Southern politicians and landowners opposed land value taxation as it was viewed as a progressive reform that could undermine their political influence. They often rallied against it, framing it as an attack on property rights.
Historical Context
The legacy of the Civil War and Reconstruction fostered a distrust of taxation in general, particularly among those who felt that taxes were used to fund policies that did not benefit them. This historical context contributed to a broader resistance to new tax systems, including land value taxation.
> I see you are from Texas so you should have some insight; but I read that you are originally from Australia is that true?
You might have me confused with someone else; I was born in raised in Texas, though I am a dual American-Norwegian citizen; my mother is Norwegian and Norwegian is technically my first language. I don't have any particular connection to Australia. The closest I can think here is you might be thinking of Stephen Hoskins from the Progress & Poverty Institute, who is from New Zealand originally.
As for Texas/the South's current vibe on Georgism -- it's weird. It's very anti-tax in general, and there's tons of energy to abolish property taxes, but at the same time, Texas has some of the highest property taxes in the nation, and for that and other reasons is actually among the most "proto-Georgist" states in the Union, even if it is somewhat by "accident". I talk about the distinction between *stated* preferences and *revealed* preferences in this other article:
The irony is that despite their anti-tax rhetoric, because they have eliminated so many other forms of taxation, property tax is mostly all that's left, so it's hard to reduce. Meanwhile blue states are the ones that have succeeded the most in going in explicitly anti-Georgist directions, with California's Prop 13 and Hawaii's rock-bottom property tax rates.
I don't understand why you view it as a bad thing to have progressive land taxes.
For example: a 1mm house pays more taxes than the 1/2mm house next door. If the argument is that the 1/2mm dollar house would be rebuilt as a 1mm house if not for the increased taxes, I do not buy the argument. At some point in the luxury market property taxes become irrelevant to the buyer. If they are irrelevant, and therefore do not change behavior, why should they not pay?
From the graphic, I think it is going to be impossible to ever convince the public that the Old $100k house should pay the same taxes as the Nice $200k house. It seems like the majority of the negative issues come from the land bankers/speculators who don't build anything on the land. Something like a minimum value seems like it would make them pay for their speculation while also allowing those with opulent houses to pay more.
In "The Next Simplest, Dumbest Method" section, it's not clear why it's true that it fulfils the third criteria, "Vacant/underutilized land pays more than property tax"
As always you need to compare incentives to the status quo, because the question is how does behavior change on the margin before and after the change. Otherwise you can always imagine a scenario in which someone has some incentive somewhere to do something, but the real question is what is the overall balance of choices.
The status quo is that if you build, your taxes go up. If you don't build, or if you demolish a property, your taxes go down. That's a very powerful *individual* incentive not to build. LVT completely flips this incentive.
What you're describing is a loose incentive for an entire group not to build. Under LVT this would require strong *group* coordination to enforce, while at the same time competing against the new strong *individual* incentive to build unleashed by LVT.
Now, group coordination is certainly a thing; the status quo of America is that we have pervasive land use restrictions in many neighborhoods. But what's ironic about land use restrictions is that in many ways these land use restrictions have the long-term effect of *raising* land prices, because housing winds up undersupplied. How else to explain sprawling single family neighborhoods in prime areas worth millions of dollars?
This is a quote which I think is also a good explanation of the building residual method from Gaffney on his essay "George in the 21st Century Part 2":
George observed land speculation in California when it was young and raw. Today, an equally or more baneful aspect of underusing land is found in older blighted slums, where underuse takes the form of non-renewal. Thus, land of high capacity is providing only minimal service and employment.
Why do we not get timely renewal? The most obvious reason is that the sites under old buildings bear low tax valuations, because assessors mistake the building for the site and overlook its reuse value, or opportunity cost. Let the owner renew the site, and taxes shoot up: not only on the new building, but often on the site as well. Result: nonrenewal. So capital that should go to renew these sites of high potential migrates outward instead, to where tax rates are lower and subsidies are higher, wasting capital in duplicating the infrastructure, and of course also wasting land.
Georgists need to see that a major part of the problem is underassessment of the land. Land is underassessed when tax-valuers lapse into using the “building-first, land-residual” method of separating land from building values. This results in land valuations so absurdly low that one observes, in many cities and neighborhoods, most of the joint value of land/building being assigned to the building in the very year that the owner chooses to demolish the building, i.e. when the building really no longer has any value at all. Then the assessor raises the land valuation under the new, or replacement building -- making the land tax in effect an additional tax on the new building.
The correct method is the “land-first, building-residual” method: value the land as though vacant, and give the old building the excess, if any, of the joint value over the land value. Then the land value remains fixed when a new building arises, and the land tax serves, as it should, as a stimulus to rebuilding
Hey there, I'm quite familiar with Mason Gaffney, I cite him in my book at many points, though I confess I haven't read all his work. As for the cost approach/land residual method, I'm well aware of its various deficiencies.
Does Gaffney cite any specific method for "value the land as though vacant?" The closest method I'm aware of to what he seems to be proposing is the Somers system:
No, you are too focused on taxes. The rational actor wants to maximize wealth, not minimize taxes. An increase in land value is greater than the cost of the taxes so you would still want the land value to go up.
Additionally, each individual has an incentive to build because it has essentially no impact on his taxes, but it raises the value of the house.
I believe that much of the difficulties with valuation for LVT is due to using selling price rather than annual rental values. George proposed a tax on rents. Selling prices are a proxy for rental values but the relationship between the two can be tenuous.
The British property tax system is based on rental values, with land and buildings being valued separately and the two being added together. There is plenty of current rental evidence available to a fine grained local level. The assessments are done by the Valuation Office Agency.
There is a discussion of valuation methodology in the Whitstable Land Value Surveys 1964 and 1973. These are available in pdf format on landvaluetax.org.
It would be very nice if such detailed fine-grained public rental data was available in the USA, but sadly it is not in most jurisdictions. This is why I have been advocating for a "RealPage for the people."
I agree with your comment.
I want to add a thought experiment. Throw away a world of LVT, lets imagine something different.
Imagine a world with a 100% FMV allocation tax. What's an FMV allocation tax?
Take the assessed full market value of all properties. Then take 20% of those full market values, and smooth them across parcels using an averaging approach. Precisely what Lars defines in this post.
If you taxed 100% of that smoothed value, that definitely brings down sales price compared to a world with no property/land tax. But, incentive will always be to develop more such that you pay less tax per unit of development. As a parcel develops more, then 20% of its FMV increases and increases as folks would pay more to buy that building, and then increases the tax rate of parcels around.
The above is an extreme, and I am not entirely sure where the thought experiment leads long term, but short term it means that existing assessment practices (so long as smoothed and hitting Lars criteria) may be sufficient to create the incentives we want to see until we start mandating rental data.
This actually seems super promising. It generally makes sense that land value and private investment are largely lined up, after all (even with zoning mucking it all up). I also like the averaging approach since it makes the tax system much fairer for properties at the valuation edges. Some comments on unique situations at the end of the article:
Land size - I'd argue that you should keep the assessment flat here. While the lot size does impact individual value, is that such a bad thing? For large lots in low demand areas, the tax implication is miniscule. For large lots in high demand areas, you really want to be encouraging lot splitting anyway, so the non-linarity is kinda a feature, not a bug.
Land use restrictions - In a way, this proposal just encourages zoning reform, since the problems of a lot of our land use restrictions just become more obvious. That being said, it wouldn't be too hard to apply a ratio to the neighborhood value based on zoning classification.
Shape - Similar to land size above, a proposal like this might just actually encourage land owners to create more sensible parcels more than anything. The only reason the land value is lower is because the parcel is silly. We're better off de-sillying things in the long run.
Topography - This could be fixed by simply discounting or outright not taxing the square footage of non-buildable land. If part of your property is a steep hillside, it's not really useful so there's no reason to want to encourage building there. If anything, it's a burden to the landowner as is, since they have to maintain it without any real return. Just let it lie fallow, which means not taxing it to begin with.
Flood plains - Since flood plain land is already well defined, you could just apply a discounted tax rate on the square footage of the flood plain. Easy peasy.
Hyper-local effects - This is definitely the hardest to handle, since there are too many small things affecting it, leaving lots of room for judgmental biases and inconsistency and the like. If you let some folks get too many exemptions or something, it kinda removes the fairness I mentioned at the beginning of my comment. But these would likely be fairly small kinks to be worked out.
I also imagine that because it depends on chopping segments of a city up, there might be some odd LVT jumps for properties at the borders between valuation districts, though maybe that's overthinking things. Something that's super simple and easy to understand and implement intuitively seems like it would have better political survivability characteristics than something complex but somewhat more optimal.
One thing that helps somewhat is the borders tend to be natural dividers like roads, across which you could expect to see more of a change than between, say, two houses on the same block
Heh, this bit...
Unless we’re talking about agricultural land, once you get excess land past a certain point doesn’t increase the utility of a building you might put there. You would naturally expect a minimum amount of land that makes the lot “viable” for the prevailing land use of the area (and which is surely anchored to local land use restrictions), and some threshold beyond that at which any additional land becomes merely “nice to have.”
...echoes my comment about pricing flag lots under the Somers System, noting that some chunk of the total value of a claim on land is just having the minimum viable footprint to live / work / do commerce in that location.
https://progressandpoverty.substack.com/p/how-georgists-valued-land-in-the/comment/118591543
I found someone that thinks about land value tax and how this works more than I do. God the internet can be good sometimes.
I think you found the person who thinks about LVT the most 😄
Amazing work! Thanks a lot.
So, how would this be taxed ideally? Is it a percentage of the total land value, or is it a percentage of the change in the land value upon re-evaluation? I'm still fairly new to Georgism but I immediately found more sense in it than what we have to deal with currently. I'm aware that my country, the UK, tried it before, but they didn't have resources like this to pull it off properly. Great work!
If I understand you correctly, you're asking whether we would do which of these scenarios:
1) The base value of the land itself, times some rate
2) Incremental uplift in value between two time points
The first is classic Land *Value* Tax, the second is Land *Increment* Tax. Both have been tried before, but the first is the recommended solution.
> I'm aware that my country, the UK, tried it before, but they didn't have resources like this to pull it off properly.
One thing you might be interested to know is that Wales is currently hard at work laying the foundations for a modern LVT within their own borders.
This is exactly what I was aiming for in terms of my question, so thank you! I've heard snippets about what Wales are doing but the knowledge needs to be more widespread on it honestly.
We'll probably do some writing about it when more details emerge! I should probably just interview some of the key people, honestly.
This is a question to both Lars Doucet and Greg Miller, Do you guys agree with Mason Gaffney about using the income tax as another option for capturing land rents? He explains in this article here about the JFK tax cuts of the 1960s. https://georgistjournal.org/2016/08/01/tax-treatment-of-land-income/
This is an excerpt from the article from above:
"One bright, or at least light gray spot in this dark history was the relief of new investment from taxation under JFK, in a compact known as “business Keynesianism.” CEA chair Walter Heller sold the idea of offsetting the effect of high income tax rates by allowing fast write-off of most new investments, plus an investment tax credit (ITC). The high tax rate applies in full force to land rents; new investment gets major relief. Net result: an income tax that achieves nationally the same goal property tax reformers have to chip at laboriously from town to town. It was not a golden age, but neither was it an age of rust. It was a time when the economy refused to take its expected dive. Investors who responded to the lures of accelerated depreciation, and lawyers who worked on intricate moves to exploit them, never dreamed they were responding to ideas originating with a radical reformer from the 19th century.
The provenance of Heller’s idea shows the influence of a Georgist academic, John R. Commons (1862-1945), a leading “Institutionalist” thinker at The University of Wisconsin. Commons’s views on taxing land and exempting capital and wages are set forth strongly in his Institutional Economics: “…the man who gets his wealth by mere rise in site-values should pay proportionately higher taxes than the one who gets his wealth by industry or agriculture. In the one case he extracts wealth from the commonwealth without adding to it. In the other case he contributes directly to an increase in both private wealth and commonwealth.”
Commons favored the fast write-off of new investments, the very idea Walter Heller put across in Washington. His purpose was explicitly to make the income tax bear heavier on land rents than on the returns to capital. When the purpose of Congress is really to encourage new investment, fast write-off of new capital is the obvious tool."
This is an idea I've heard of obliquely but haven't investigated at length. Proposals I've heard are often styled as a "LIT" or "Land Income Tax" that tries to reshape the existing income tax such that rental income ascribed to land, as well as imputed rent ascribed to land, are taxed under the income tax statutes, and conventional income is excluded. That sounds interesting, but I'm not sure how you practically go about implementing it. It's something I would need to read more about. Is this more or less Gaffney's idea, or does he have something different in mind?
The original income tax was strong inspired by Georgists. Did you read the article above Lars? Here is another article about the original income tax: https://progressandpovertyinstitute.org/wp-content/uploads/How-The-Income-Tax-Became-A-Tax-On-Labor-4.pdf
I've read Chris England's history of the Georgist movement, which includes a lot about the New Deal coalition and the history of the income tax, but I haven't read this specific article. Thanks for sharing it!
I typed in the Yahoo Search engine "Why the South was hostile to Georgism" and this was the Artificial Intelligence written response:
The South was often hostile to Georgism due to several key factors.
Economic Interests
Many Southern landowners were concerned that Georgism, which advocates for a land value tax, would undermine their property rights and reduce their wealth. The agrarian economy relied heavily on land ownership, and a tax on land value could threaten their financial stability.
Cultural Values
The South had a strong tradition of individualism and property rights. Georgism's emphasis on taxing land rather than labor or capital was seen as a challenge to these values, leading to resistance among those who viewed land as a personal asset.
Political Landscape
Southern politics were often dominated by conservative ideologies that favored minimal government intervention. Georgism's proposals for land taxation were perceived as a form of government overreach, further fueling opposition.
Racial Dynamics
In the post-Civil War South, land ownership was closely tied to racial hierarchies. Georgism's principles could have disrupted the existing social order, leading to hostility from those who benefited from the status quo.
Another thing I have noticed over the years is that a lot of Georgist economic policies that were implemented were usually in the Northern and Western states of the US. I noticed that the South pretty much never had LVT policies with the exception of the Hispanic assessor in Houston and the Fairhope colony in Alabama, Georgism has never been popular in the region.
Fairhope colony was started by Midwestern progressive whites so they were not naive to the region's culture. Here are two articles that discuss it:
https://slate.com/news-and-politics/2015/05/the-land-tax-what-happened-to-towns-like-fairhope-alabama-that-tried-georgism.html
https://mobile.aaacwildliferemoval.com/blog/history-fairhope/
I typed in the Yahoo Search engine as a question to AI and this was the response, I want to know do you agree with it? I see you are from Texas so you should have some insight; but I read that you are originally from Australia is that true?
The South's hostility to land value taxation stemmed from several key factors.
Economic Interests
Southern economies were heavily reliant on agriculture, particularly plantation farming. Land value taxation could threaten the wealth of landowners by increasing their tax burden, which was seen as detrimental to their economic interests.
Social Structure
The South had a rigid social hierarchy, where land ownership was closely tied to social status. Land value taxation could disrupt this structure by imposing taxes based on land value rather than income, potentially redistributing wealth and power.
Political Resistance
Many Southern politicians and landowners opposed land value taxation as it was viewed as a progressive reform that could undermine their political influence. They often rallied against it, framing it as an attack on property rights.
Historical Context
The legacy of the Civil War and Reconstruction fostered a distrust of taxation in general, particularly among those who felt that taxes were used to fund policies that did not benefit them. This historical context contributed to a broader resistance to new tax systems, including land value taxation.
> I see you are from Texas so you should have some insight; but I read that you are originally from Australia is that true?
You might have me confused with someone else; I was born in raised in Texas, though I am a dual American-Norwegian citizen; my mother is Norwegian and Norwegian is technically my first language. I don't have any particular connection to Australia. The closest I can think here is you might be thinking of Stephen Hoskins from the Progress & Poverty Institute, who is from New Zealand originally.
As for Texas/the South's current vibe on Georgism -- it's weird. It's very anti-tax in general, and there's tons of energy to abolish property taxes, but at the same time, Texas has some of the highest property taxes in the nation, and for that and other reasons is actually among the most "proto-Georgist" states in the Union, even if it is somewhat by "accident". I talk about the distinction between *stated* preferences and *revealed* preferences in this other article:
https://progressandpoverty.substack.com/p/so-you-want-to-abolish-property-taxes
The irony is that despite their anti-tax rhetoric, because they have eliminated so many other forms of taxation, property tax is mostly all that's left, so it's hard to reduce. Meanwhile blue states are the ones that have succeeded the most in going in explicitly anti-Georgist directions, with California's Prop 13 and Hawaii's rock-bottom property tax rates.
I don't understand why you view it as a bad thing to have progressive land taxes.
For example: a 1mm house pays more taxes than the 1/2mm house next door. If the argument is that the 1/2mm dollar house would be rebuilt as a 1mm house if not for the increased taxes, I do not buy the argument. At some point in the luxury market property taxes become irrelevant to the buyer. If they are irrelevant, and therefore do not change behavior, why should they not pay?
From the graphic, I think it is going to be impossible to ever convince the public that the Old $100k house should pay the same taxes as the Nice $200k house. It seems like the majority of the negative issues come from the land bankers/speculators who don't build anything on the land. Something like a minimum value seems like it would make them pay for their speculation while also allowing those with opulent houses to pay more.
In "The Next Simplest, Dumbest Method" section, it's not clear why it's true that it fulfils the third criteria, "Vacant/underutilized land pays more than property tax"
Does LVT create a disincentive to build, in that the more my neighbors build, the more valuable my land becomes, so I hope they don’t build anything?
As always you need to compare incentives to the status quo, because the question is how does behavior change on the margin before and after the change. Otherwise you can always imagine a scenario in which someone has some incentive somewhere to do something, but the real question is what is the overall balance of choices.
The status quo is that if you build, your taxes go up. If you don't build, or if you demolish a property, your taxes go down. That's a very powerful *individual* incentive not to build. LVT completely flips this incentive.
What you're describing is a loose incentive for an entire group not to build. Under LVT this would require strong *group* coordination to enforce, while at the same time competing against the new strong *individual* incentive to build unleashed by LVT.
Now, group coordination is certainly a thing; the status quo of America is that we have pervasive land use restrictions in many neighborhoods. But what's ironic about land use restrictions is that in many ways these land use restrictions have the long-term effect of *raising* land prices, because housing winds up undersupplied. How else to explain sprawling single family neighborhoods in prime areas worth millions of dollars?
Hey Lars, have you heard of Mason Gaffney? He was the most prolific Georgist writer and researcher and he backed the building residual method; have you heard of it before? This is an explanation: https://paulbeard.org/files/wealthandwant.com/themes/Building_Residual_Method.html
This is a quote which I think is also a good explanation of the building residual method from Gaffney on his essay "George in the 21st Century Part 2":
George observed land speculation in California when it was young and raw. Today, an equally or more baneful aspect of underusing land is found in older blighted slums, where underuse takes the form of non-renewal. Thus, land of high capacity is providing only minimal service and employment.
Why do we not get timely renewal? The most obvious reason is that the sites under old buildings bear low tax valuations, because assessors mistake the building for the site and overlook its reuse value, or opportunity cost. Let the owner renew the site, and taxes shoot up: not only on the new building, but often on the site as well. Result: nonrenewal. So capital that should go to renew these sites of high potential migrates outward instead, to where tax rates are lower and subsidies are higher, wasting capital in duplicating the infrastructure, and of course also wasting land.
Georgists need to see that a major part of the problem is underassessment of the land. Land is underassessed when tax-valuers lapse into using the “building-first, land-residual” method of separating land from building values. This results in land valuations so absurdly low that one observes, in many cities and neighborhoods, most of the joint value of land/building being assigned to the building in the very year that the owner chooses to demolish the building, i.e. when the building really no longer has any value at all. Then the assessor raises the land valuation under the new, or replacement building -- making the land tax in effect an additional tax on the new building.
The correct method is the “land-first, building-residual” method: value the land as though vacant, and give the old building the excess, if any, of the joint value over the land value. Then the land value remains fixed when a new building arises, and the land tax serves, as it should, as a stimulus to rebuilding
Hey there, I'm quite familiar with Mason Gaffney, I cite him in my book at many points, though I confess I haven't read all his work. As for the cost approach/land residual method, I'm well aware of its various deficiencies.
Does Gaffney cite any specific method for "value the land as though vacant?" The closest method I'm aware of to what he seems to be proposing is the Somers system:
https://progressandpoverty.substack.com/p/how-georgists-valued-land-in-the
He strong favored the building residual method. https://www.henrygeorge.org/taxable_capacity.htm
https://cooperative-individualism.org/gaffney-mason_defining-consumption-2005.htm
No, you are too focused on taxes. The rational actor wants to maximize wealth, not minimize taxes. An increase in land value is greater than the cost of the taxes so you would still want the land value to go up.
Additionally, each individual has an incentive to build because it has essentially no impact on his taxes, but it raises the value of the house.