[eru]

Ignore capital gains taxes.

I mentioned the tax strategy just to point out that borrowing against unrealised gains is common. (You can also do it in jurisdictions that don't have capital gains taxes. But there you do it for reasons other than optimising your taxes. Eg you might want to mortgage your house (without selling it) to buy a car.)

[protocolture]

Ok but why mention borrowing at all. We are talking about taxation.

They are almost completely opposite concepts.

Borrowing literally defers payment to the future. Taxation on your now land value occurs now.

Why does the ability to borrow against unrealised gains (with the lender speculating on the return on those gains) matter compared to paying a tax on unrealised gains (which is due now, not deferred and barely speculative)

[eru]

> Why does the ability to borrow against unrealised gains (with the lender speculating on the return on those gains) matter compared to paying a tax on unrealised gains (which is due now, not deferred and barely speculative)

You can borrow to pay the taxes. Or you can 'realise' your gains via a sale to pay the taxes. That avoids the leverage that you point out.

[protocolture]

>You can borrow to pay the taxes. Or you can 'realise' your gains via a sale to pay the taxes. That avoids the leverage that you point out.

Thats insane, you know that right? You may have invented a worse financial instrument than the subprime mortgage crisis.

Taxation is an ongoing cost. you pay it every year.

Under LVT, the LVT price is entirely subjective.

If I am a bank, and joe blo has a 200k tax bill, and 20k income, I am already disinclined to lend him money to cover that tax bill because of his income. I think this is where you fall over, and the rest of this is just making fun of your nonsense.

The great thing about joe is he is going to get another tax bill next year, even if he parts with 95% of his land portfolio, I have no idea what the value of the remainder is going to be, subjectively, next year. Its an open ended liability. If I was a good banker who wanted to be nice to Joe I would ask him to leave.

However a normal bank might lend him the money just to receive his land as collateral to take it on when he inevitably defaults. But I thought LVT was about the reduction of land banking, not shifting ownership of land to the banks?

[eru]

> Taxation is an ongoing cost. you pay it every year.

Yes, just like you gain the land rent from the land you own every year.

> If I am a bank, and joe blo has a 200k tax bill, and 20k income, [...]

My broker doesn't care about my income one bit when they lend me money: they lend against my stock portfolio. Similar, here you could lend against the real estate. Why would the lender care about income?

> However a normal bank might lend him the money just to receive his land as collateral to take it on when he inevitably defaults. But I thought LVT was about the reduction of land banking, not shifting ownership of land to the banks?

No, not at all. That's a common misconception, especially prevalent amongst fans of LVT.

As I said earlier, the LVT changes no opportunity costs between land uses at all. So if for some reason it's a good idea to 'land bank' without an LVT, then it'll still be a good reason to 'land bank' with an LVT.

However, being able to finance the government with an LVT might have second order effects on other taxes and regulations, that might make land banking less (or even more?) appealing. I don't know, it depends on what else is happening.

[protocolture]

>Yes, just like you gain the land rent from the land you own every year.

But we arent discussing a renter, right? You know that? The example was som

If your "solution" is for the land owner who cant afford his massive tax bill on his land (a tax bill that he incurred because of a subjective valuation) your solution is that he moves off his land, somehow pays to make it suitable for the rental market and then rent it out? And then what? Rents a place himself? How is this desirable?

>My broker doesn't care about my income one bit when they lend me money: they lend against my stock portfolio. Similar, here you could lend against the real estate. Why would the lender care about income?

No one lends money without an expectation of a return. Yes you can lend on collateral. That works once unless it is paid back. That "paid back" needs to be accounted for in your analysis.

>No, not at all. That's a common misconception, especially prevalent amongst fans of LVT.

So we have struck down at least one of the touted benefits of LVT. Thats something. Thats a small amount of progress.