[asokoloski]

Exactly. Taxing property encourages speculation and under-development.

Showing an alternative, Pennsylvania has several towns and cities with a split-rate tax, which means that there's a higher tax on the assessed land value than on the assessed value of the property. Taking this to an extreme, you can tax only the land value, not the property, providing a very strong incentive to make the best use of desirable land. A split rate tax just lets you turn the dial between typical property taxes and a land tax.

Many arguments in favor of the land value tax are based in concepts of economic rent and fairness. While I'm sympathetic to these arguments, I think the best argument is that it seems to work, both in theory and practice. Places that implement a split rate or land value tax tend to have fewer empty lots, parking lots, single-family homes in the middle of downtown, etc.

And not just that, but typical property taxes provide a disincentive to even improve your own property, since you'll pay more tax. They encourage blight.

It's not just California, it's everywhere. Tax policy isn't the only thing stopping us from avoiding sprawl by "thickening up" valuable areas of towns and cities, but it's a big one. Parking minimums are another, and of course zoning is yet another. All of them are important in terms of making our cities walkable, amenable to public transit, and sustainable environmentally.

*edit -- I should clarify that Prop-13 makes this effect worse in California than many places, though.

[thaumasiotes]

Under Proposition 13, you are not taxed on the land value or the property value. Instead, you're taxed on the land+property value at the time you bought the property.

If you make a "substantial change" to the property, the tax is reassessed. That's what generates the "empty lots, parking lots, single-family homes in the middle of downtown, etc." -- if you replace your empty lot with a useful building, your property taxes immediately spike.

Extending Prop 13 to cover property redevelopment would do as much to solve the undeveloped-land problem as repealing Prop 13 would. (Obviously, those two policies would differ in other ways.)

I think it's a mistake to focus too heavily on "should we tax land value" vs "should we tax property value". You're correct that taxing property value disincentivizes development, and that is bad. But we're talking here about cases like someone's small personal residence in the middle of downtown San Jose with $4,000,000 of land value and $200,000 of property value. (Numbers completely invented.) If they were taxed on assessed value, land+property, which is the default in most places, that immense land value would quickly make it prohibitive not to redevelop. The tiny property value is a rounding error.

[asokoloski]

Oh, yeah. Prop 13 is like an order of magnitude worse than just taxing property + land vs a higher rate on land.

[thatfrenchguy]

> And not just that, but typical property taxes provide a disincentive to even improve your own property, since you'll pay more tax. They encourage blight.

A good old wealth tax on everything would fix that.

[onlyrealcuzzo]

Not really. If a wealth tax is implemented, you'll be amazed at how soon everyone moves their wealth outside of the US. You'd be very hard pressed to tax wealth outside the US.

Distributing the tax across property, a progressive capital gains tax, a progressive corporate tax, and a small wealth tax is a much better option than a flat and high wealth tax.

[alasdair_]

>Not really. If a wealth tax is implemented, you'll be amazed at how soon everyone moves their wealth outside of the US. You'd be very hard pressed to tax wealth outside the US.

Taxing income outside the USA already happens. Taxing wealth would also happen.

There has been a huge push in the last decade to tighten up "anti-money laundering" (but usually anti-tax) laws. The cliche of the swiss bank account offering secrecy for Americans no longer exists - the Swiss now report holdings directly to the US and similar locales do likewise.

[briandear]

Most OECD countries have dropped wealth taxes. They don’t work. In 1990, 12 OECD countries had wealth taxes, now, only 4. A wealth tax has a lot of unintended consequences and while it sounds good as a populist sound bite, reality isn’t so simplistic.

[pjc50]

Do you have a history of this - was it just that the ownership was moved offshore? Did they "not work" or was it just lobbied against?

[sokoloff]

I see that list of 4 (Switzerland, Spain, France, and Norway), yet I know that the Netherlands is in OECD and also has a wealth tax: https://en.m.wikipedia.org/wiki/Taxation_in_the_Netherlands#...

[coldtea]

Did they dropped them because they "don't work" or because the wealthy lobbied against them?

[starfallg]

> And not just that, but typical property taxes provide a disincentive to even improve your own property, since you'll pay more tax. They encourage blight.

A land value tax still does this, albeit indirectly. If you improve your property, the area gets marginally more desirable and land value rises.

The solution for this in UK is to remove capital gains tax for the main home of owner-occupiers, and a transaction tax (stamp duty) paid by the purchaser.

[asokoloski]

You're correct, but it's a completely different incentive. If you hold out and everyone around you improves their property, your taxes go up almost as much anyway! It punishes speculation and rewards productive use.

So a virtuous feedback cycle is created, where everyone is incentivized to improve and develop their property to the point where they're best taking advantage of the land it sits on -- or to sell it to someone who will.

I'm familiar with stamp duty -- it has a lot of problems, mainly around the fact that it discourages people from moving. It seems significantly worse than a land tax, to me.