[throwaway092323]

If tax is based on land improvement, a flat parking lot in a busy area is profitable, even if it doesn't provide optimal value to the community. The owner may wish to add some buildings to the lot, but land improvement tax means they have to pay extra to have and keep those buildings, even if a recession keeps them empty.

Land value tax flips this, removing some of the risk of adding value to a property while discouraging hoarding.

[jjav]

> If tax is based on land improvement

I don't see how this can work in practice. You grant the government infinite power to come in and say that your land could surely be used to build a 50 story luxury apartment building and therefore you now have to pay tax on a $50M imagined value. Even though the land might actually only be worth far less on the open market.

This is basically just a way to arbitrarily take away land from owners without any controls, since nobody can afford to pay taxes on imaginary buildings that don't exist.

[jjk166]

The government isn't coming in and saying what you could build and taxing you based on the value of the building. It's just taxing the value of the land without any improvements at all. The developer is going to pay the same taxes no matter what they build, so they rationally should make as efficient use of the land as possible, but that most efficient use is determined entirely by the free market, and they are free to make less efficient use so long as they are comfortable leaving money on the table. If you're not going to do something with the land that generates more value than it being left alone, then you just leave it alone.

[jjav]

> It's just taxing the value of the land without any improvements at all

> rationally should make as efficient use of the land as possible

These two statements are contradictory.

The value of the bare land (just pure dirt) is low no matter where it is.

But the second statement is where the consequences show up. The LVT idea isn't really to tax the bare land, it is to tax it as if it was being used by the most financially productive way possible.

So, tell me how is that not a tax that is based on something that doesn't actually exist today? The assessor can say: Sure, it's just bare dirt, worth nothing right now, but you could have a skyscraper there and if you did, it'd be worth a lot. So we'll pretend it's worth a lot and tax based on that.

The other bad consequence of LVT is that it's supposed to force every bit of land to the most financially productive use. Do you want to live in such a society? Something like a free playground is never the most income-generating use for a patch of land, but it's a wonderful thing to have in towns.

[jjk166]

> The LVT idea isn't really to tax the bare land, it is to tax it as if it was being used by the most financially productive way possible.

This is fundamentally incorrect. It is a tax on the bare land. While the value of bare land is substantially less than the value of both the land and improvements, the land is by no means free. It is a scarce resource. Just try getting someone with an acre lot of beachfront property in a resort town to trade you for an acre of remote and barren tundra.

Let's say you have a vacant lot that you purchased for $25k. You want to build a $300k home on it. Let's say there is a standard property tax of 1%. Before you build your home, your property taxes would be $21 per month. After you build your home and your property gets re-appraised, your property taxes would go up to $270 per month, more than a 10x increase. While this is small compared to the cost of a mortgage, it is owed in perpetuity, even long after the house has been paid off. By leaving the land undeveloped, a landowner can keep their tax burden low.

Conversely with a LVT of say 5% you are paying $104 per month for the vacant plot of land. Build a $300k home on it and your taxes remain $104 per month. Thus there is no tax benefit to leaving the land undeveloped. Note that at no point did the potential use of the land get assessed, other than the free market value of the bare land.

Further, an LVT does not force every bit of land to be optimally financially productive, it just doesn't incentivize unproductive uses. Under the current system, it's better to have an empty lot full of garbage than a free playground, because by cleaning it up and putting in basic amenities you have increased its tax burden. Under an LVT, the land being a public park is the default, and the public gets just compensation for giving up any such spaces to other uses.

[jjav]

> This is fundamentally incorrect. It is a tax on the bare land.

A tax on bare land based on what?

I find these LVT discussions fascinating because we seem to be using same words to mean different things; while I see the LVT proponents truly believe what they say, I can't wrap my head around how that meaning comes from the statements.

Let me try a different thought experiment.

Let's say I own that acre of beachfront property in a resort town. Completely undeveloped. For some historical reason, there are restrictions on that land which prohibit any development of any kind in perpetuity. It must be left as-is forever, untouched by human hand.

All the surrounding acre lots are valued at $100M (those lots don't have any restrictions, so they are built up with luxury condos owned by celebrities).

Under LVT, is the tax on that acre very high or very low?

Later something happens, let's say a constitutional amendment is passed which outlaws and overrules all such land restrictions. My bare plot of land is still bare, nothing on it. Under LVT, does the tax skyrocket overnight due to the constitutional amendment?

[throwaway092323]

> The LVT idea isn't really to tax the bare land, it is to tax it as if it was being used by the most financially productive way possible.

Yes and no. You're not taxing the land as if it was bare or as if it was full; you're taxing it based on the perceived value to a developer.

> So, tell me how is that not a tax that is based on something that doesn't actually exist today? The assessor can say: Sure, it's just bare dirt, worth nothing right now, but you could have a skyscraper there and if you did, it'd be worth a lot. So we'll pretend it's worth a lot and tax based on that.

The value of an empty lot is approximately equal to the value of the developed lot right next to it. This is already being done.

> The other bad consequence of LVT is that it's supposed to force every bit of land to the most financially productive use. Do you want to live in such a society? Something like a free playground is never the most income-generating use for a patch of land, but it's a wonderful thing to have in towns.

Government-owned land could be tax-free since (in theory) it's being used for public good.

[jjav]

> The value of an empty lot is approximately equal to the value of the developed lot right next to it. This is already being done.

So I feel like you just agreed with my premise, no?

The value (and thus the tax) on my empty lot with nothing but dirt is going to be set by the tax of the developed lot right next to it, which might contain a highrise apartment building.

So you're saying I will be taxed on the value of an imaginary building I don't actually have, just because the neighboring lot has one. So there's no way I can afford to pay that since the bare dirt doesn't give me any income. So I will lose this land due to the tax.

Am I wrong?

[throwaway092323]

> So I feel like you just agreed with my premise, no?

Maybe. I can't tell if we're talking past each other.

> The value (and thus the tax) on my empty lot with nothing but dirt is going to be set by the tax of the developed lot right next to it, which might contain a highrise apartment building.

Yes, the empty lot will be higher because of the highrise apartment next to it, BUT...

> So you're saying I will be taxed on the value of an imaginary building I don't actually have, just because the neighboring lot has one.

No, because the appraiser wouldn't include the building's value; they'd only be appraising the average value of land in the area.

> So there's no way I can afford to pay that since the bare dirt doesn't give me any income. So I will lose this land due to the tax.

That's intentional. If the land is only profitable for highrise apartments, then you should sell it to someone who can afford to build some. Note that this would help with the housing crisis.

[bequanna]

Uh huh, so you’re taxing land based on some theoretical “highest and best use”?

This will only serve to punish small businesses who will see a huge jump in taxes, forcing some of them to sell to some large developer.

Pure academic nonsense. Punishing people for not doing what YOU want with THEIR land.

[Kbelicius]

> Uh huh, so you’re taxing land based on some theoretical “highest and best use”?

No, they tax based on the value of the land... I mean, it's in the name.

[bequanna]

We’re talking in circles then.

Land value + improvements is already taxed pretty much everywhere I am aware of.

[jjk166]

Yeah, and the goal is to remove the "+ improvements" part of the tax.

[throwaway092323]

> Uh huh, so you’re taxing land based on some theoretical “highest and best use”?

Someone has to eat the opportunity cost of sub-optimally used land. Would you rather it be corporations and house-flippers, or renters and homeowners?

> Pure academic nonsense.

Several places have implemented LVT (eg Pennsylvania). What's nonsense is treating it like idle theory-crafting when there's evidence to judge.

> Punishing people for not doing what YOU want with THEIR land.

Not all societies believe in land ownership to begin with. Owning land keeps other people from using it, so it should come with a sense of duty.

Also, no one under either system is arbitrating the correctness of land use to pick winners and losers. The free-market still decides what is or isn't effective land use; it's just that under LVT people are disincentivized from speculating on empty land.