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> 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. |
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?