land value tax is a regressive tax on middle class homeowners that would ultimately benefit the wealthy. bc middle class single family homeowners would not be able to afford the tax increase or afford the construction to fully utilize the property, which would force them to sell to investors who could afford it.
terrible idea.
not to mention the political debates/decisions over what constitutes "fully utilized". what about public parks? urban agriculture? so many exceptions.
this would be a nightmare policy to retrofit. maybe a good idea if we had started there first, but we didn't.
it's also an ignorant diagnosis of the issue. land values and speculation is not the issue in my location (burlington, vermont) where we have a housing crisis. there are not many vacant lots (i'm guessing maybe a dozen in the entire municipality).
it's just an overly simplified solution to a complex problem.
I agree with many of the arguments here about the theoretical impacts of a land value tax, especially the section "an LVT implicitly taxes improvements to nearby land" which is often overlooked or glossed over in these discussions.
But my main argument is practical. I content that it is simply not possible to evaluate the "unimproved value" of a given parcel. Any discussion of a practical LVT has to start with the fact that it is an approximation to a theoretical ideal, and define exactly what the basis for "land value" estimation is, because it's really a tax on that process. While some of these may have overlap with the benefits and detriments of a theoretical LVT, they have to be looked at from first principles rather than by comparison with the LVT because the fundamental assumptions are often broken.
The most obvious argument for me is that I don't even think that developing land as much as possible should be a desired outcome. I'd rather have some billionaire sitting on a huge plot of wilderness than turn it into another shopping center.
LVT should be incorporated with an occupancy tax, it's the only fair way to fund government services. If I own a farm, and my neighbor sells their farm to turn into a housing estate with 99 single family homes, then it is fair to say that my land is now more valuable and I should pay more to keep you it, but it isn't fair to say that my taxes should rise to cover half of the local budget just because I own half of the land in region
Isn't this covered by zoning? But it also just proves a point that you can't smart regulate the market to do everything. Sometimes communities just have to make decisions about what they want the land to be used for and create the according rules and do the investment themselves.
Why are we pretending like LVT doesn't exist already? I pay taxes on my land. Those taxes are calculated based on size and location. The Disney example is particularly egregious. They pay taxes on the land AND the structures they built but the article acts as though they would be disincentivized from building if we _removed_ taxes on the structures? Huh?
What's the societal value in trying to financially engineer land development? Is it to better utilize existing infrastructure? Charge each property proportionally for the road system and fallow land will naturally be developed to handle the taxes.
>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves.
LVT is for building property or occupying land. Mineral rights are under many if not most legal systems treated separately from land ownership (e.g. they are auctioned off) because unlike land, oil wells eventually run dry.
This does not seem like an honest criticism of LVT, because it deliberately blurs land and mineral rights.
>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.
A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.
That's the kind of market discipline we are currently lacking which the author of this piece apparently does not want.
On the other hand, a developer who builds 10 houses on one plot of land is not going to magically make 10 houses on another plot of land double in price.
>Even in its simplest "naive" form, the LVT has a narrow tax base. The reality is that the vast majority of global wealth is created through human labor and innovation
This last criticism is A) wrong and B) only applies to single taxers, not proponents of LVT.
You should always be wary of arguments from people who name themselves "The correct people". Less wrong, and the "rationalists" generally, are engaged in magical cult-like thinking.
Do LVT proponents believe economic activity that requires minimal land ownership relative to the profit should be untaxed?
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.
every tax discussion i've ever read treats taxes in the abstract without spending. The assumption is "how do we raise as much tax as possible".
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.
LVT is envy written into law — "how dare someone use what belongs to them in a way which doesn't benefit me?!?", whether individuals or groups are speaking. It also puts a wonderful tool into the hands of decision-makers to reward friends & punish enemies. No.
> The government has incentives to inflate their estimates of the value of unimproved land
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.
Happy to answer anyone's questions on LVT if they have them!
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.
@patio11's podcast, Complex Systems has two great episodes that discuss much of the context about land value tax and property tax systems in general (from a US perspective).
I lose confidence in the writing early on when it says this:
> Instead, the government essentially "seizes" the added value by taxing its rental value away, eliminating the incentive to discover the oil in the first place.
If the tax is 100% of the value, sure. But left unstated is whether taxes are 100% of value. If taxes are 100% of value, there is no incentive to own the land in the first place, my $400,000 house costs me $400,000 in land tax to own... yearly?
It's a very weird system to own anything underneath the land anyway. That's how you get the weird oil race areas where people will be drilling from the same source next to each other. The same goes for the water underneath the land.
In some countries the property rights only go like 10 meters deep and even then if there is a need for plumbing underneath there are exceptions. Maybe the issue then becomes that you're not free to do what you want on your own property but it's not like this is a thing in home owners association single family home areas anyway.
This stems from the fact that if a landowner successfully discovers a
valuable resource or identifies a creative way to utilize their land more
productively, the government will increase their tax burden accordingly.
One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.
As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.
To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.
The first two arguments he makes here miss the point of a LVT entirely
> An LVT discourages searching for new uses of land
> An LVT implicitly taxes improvements to nearby land
If I find oil on my land, or if someone builds a park across the street from me, then I should be taxed more. The land is more valuable to me! At a 100% LVT I essentially break even. Anything less then that, and I still come out on top.
The only valid arguments in here are the last two. If people buy a piece of property with certain assumptions and the government turns around implements a 100% LVT, then I can understand why they would be upset.
So sure, there are some practical considerations to implementing a 100% LVT immediately tomorrow with no exemptions, and it probably wouldn't raise enough revenue to eliminate all other taxes. But the government could still raise a ton of tax revenue with minimal deadweight loss by phasing in a 75% LVT over 30 years with a handful of common sense exemptions.
No mention that Pennsylvania implemented LVT decades ago and was highly successful. Their version is a split rate tax system (land taxed much higher than the property on it) and it is city by city.
>>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves. If they do find oil, the value of their land would skyrocket because the presence of oil dramatically increases its economic potential.
Is the author aware that in many countries the owner of the land doesn't own the resources if they are discovered there? Is the author seriously claiming discovering oil is not profitable under LVT? Does he prefer making people who happen to stumble on oil not pay % of the value of it as tax? (and thus presumably prefers taxing other things).
It seems so unlikely to me that someone reasonable would make that argument that I have trouble taking it seriously.
>>An LVT implicitly taxes improvements to nearby land
That's one of the two major points behind it: tax wealth that you got without building it yourself. In other words it limits land speculation.
>>An LVT is unlikely to replace many existing taxes
The argument the author is making here ("government will not get rid of other taxes") applies to any tax discussion and kills it before it even starts.
>>Another major issue is that a full or near-full land value tax would likely establish a troubling precedent by signaling that the government has the appetite to effectively confiscate an additional category of assets that people have already acquired long ago through their labor and purchases.
Yeah but we need to tax something. The alternative is to tax the very labor which must certainly be worse. Land owners are benefiting from work done by others without contributing to it and thus should be taxes accordingly.
>>The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%)
Amazing, 100% rate for LVT doesn't make sense!
>>For instance, individuals buy stocks, businesses invest in capital goods like machinery, and developers improve real estate—all with the expectation that they will retain most of the value of their assets and any future returns from them. This confidence in the protection of property rights encourages entrepreneurship, innovation, and economic growth.
And yet all of those are taxed in the current system!
The author seems to be assuming the proposed LVT rates are very high (when in practice they would be in low single digits). Remove that assumption and the whole article makes no sense at all.
> ... These assessments would require intricate and subjective valuations that are very difficult to quantify accurately.
I continue to believe that "full cash value" assessments which try to ascertain the market purchase price of real estate are very foolish. And there are so many inputs and methods of formulating an assessment. What all of them have in common though, is that they consider the rental value of the property. It would be so much simpler if the tax was only assessed on the rental value. It eliminates things that effect the sale price estimates like interest rates, subjective risk tolerances, speculative premiums, and even the tax itself. The tax rate on the rental value would of course be much higher than the tax rate on the purchase price (25% compared to 1% for example) but it's a much more stable assessment with a lot more reliable data backing it up.
disclosure: I am a Georgist and former president of Common Ground California.
30 comments
[ 0.48 ms ] story [ 59.9 ms ] threadterrible 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-...
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.
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.
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.
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.
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.
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-...
If the tax is 100% of the value, sure. But left unstated is whether taxes are 100% of value. If taxes are 100% of value, there is no incentive to own the land in the first place, my $400,000 house costs me $400,000 in land tax to own... yearly?
In some countries the property rights only go like 10 meters deep and even then if there is a need for plumbing underneath there are exceptions. Maybe the issue then becomes that you're not free to do what you want on your own property but it's not like this is a thing in home owners association single family home areas anyway.
One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.
As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.
To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.
> An LVT discourages searching for new uses of land
> An LVT implicitly taxes improvements to nearby land
If I find oil on my land, or if someone builds a park across the street from me, then I should be taxed more. The land is more valuable to me! At a 100% LVT I essentially break even. Anything less then that, and I still come out on top.
The only valid arguments in here are the last two. If people buy a piece of property with certain assumptions and the government turns around implements a 100% LVT, then I can understand why they would be upset.
So sure, there are some practical considerations to implementing a 100% LVT immediately tomorrow with no exemptions, and it probably wouldn't raise enough revenue to eliminate all other taxes. But the government could still raise a ton of tax revenue with minimal deadweight loss by phasing in a 75% LVT over 30 years with a handful of common sense exemptions.
https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...
>>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves. If they do find oil, the value of their land would skyrocket because the presence of oil dramatically increases its economic potential.
Is the author aware that in many countries the owner of the land doesn't own the resources if they are discovered there? Is the author seriously claiming discovering oil is not profitable under LVT? Does he prefer making people who happen to stumble on oil not pay % of the value of it as tax? (and thus presumably prefers taxing other things). It seems so unlikely to me that someone reasonable would make that argument that I have trouble taking it seriously.
>>An LVT implicitly taxes improvements to nearby land
That's one of the two major points behind it: tax wealth that you got without building it yourself. In other words it limits land speculation.
>>An LVT is unlikely to replace many existing taxes
The argument the author is making here ("government will not get rid of other taxes") applies to any tax discussion and kills it before it even starts.
>>Another major issue is that a full or near-full land value tax would likely establish a troubling precedent by signaling that the government has the appetite to effectively confiscate an additional category of assets that people have already acquired long ago through their labor and purchases.
Yeah but we need to tax something. The alternative is to tax the very labor which must certainly be worse. Land owners are benefiting from work done by others without contributing to it and thus should be taxes accordingly.
>>The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%)
Amazing, 100% rate for LVT doesn't make sense!
>>For instance, individuals buy stocks, businesses invest in capital goods like machinery, and developers improve real estate—all with the expectation that they will retain most of the value of their assets and any future returns from them. This confidence in the protection of property rights encourages entrepreneurship, innovation, and economic growth.
And yet all of those are taxed in the current system!
The author seems to be assuming the proposed LVT rates are very high (when in practice they would be in low single digits). Remove that assumption and the whole article makes no sense at all.
I continue to believe that "full cash value" assessments which try to ascertain the market purchase price of real estate are very foolish. And there are so many inputs and methods of formulating an assessment. What all of them have in common though, is that they consider the rental value of the property. It would be so much simpler if the tax was only assessed on the rental value. It eliminates things that effect the sale price estimates like interest rates, subjective risk tolerances, speculative premiums, and even the tax itself. The tax rate on the rental value would of course be much higher than the tax rate on the purchase price (25% compared to 1% for example) but it's a much more stable assessment with a lot more reliable data backing it up.
disclosure: I am a Georgist and former president of Common Ground California.