[krschultz]

That the value of land is substantially based on the environment around it, one that is largely driven by societal factors. 1 acre of land in Manhattan is extremely expensive. 1 acre of land 20 miles north of Manhattan is not expensive. The difference is everything surrounding the land.

If the people in a community have decided to spend a lot of their money to reduce crime, improve transit, improve schools, and improve the economy, every land owner benefits. Yet the way that we do taxes (based on the improved value of the land), means that those that sit on the sidelines and do nothing gain quite a bit of value by freeloading on those around them.

If we figured out the taxes based on the underlying value of the land, then the vacant lot owner would be paying as much as the person that just invested in building a new business next store. That seems fairer to me considering that the vacant lot is now worth more due to its proximity to a shiny new building.

[logfromblammo]

I suggest that the underlying value of the land is zero, or so close to it as to be statistically insignificant. The market value of land is overwhelmingly dominated by proximity to improvements. If you subtract the value of improvements on the land itself from the market value, you are still left with the value of being near the improvements on all surrounding properties.

The true underlying value is the value it would have if you picked up the land with a god's hand and plopped it down in the middle of nowhere, in a land devoid of people and far from roads or rivers. Does it have valuable natural or mineral resources on or under it? Does it have energy production potential? Fresh water? Historical significance?

No? It's worth zero. People drive the economy. Land only has value to the extent that it does not present barriers between you and your trade partners. No one wants to live atop the mountain if the funicular is not built. No one wants to live across the lake if there are no boats, docks, and piers. No one wants to live deep in the forest if the road into it has not yet been cleared.

How then do you calculate a land tax fairly? Surface area alone? Population density data from the census?

[staybailey]

Actually it isn't that hard. The land value is simply the property value minus the value of the depreciated physical capital (buildings etc.) on it (LV = PV - K). This calculation is already done in the market in order to determine the size of a home owners insurance policy. Property tax values aren't ideally precise, but are already common enough that replacing them with and land value tax wouldn't greatly impact tax code precision.

To address your more general critique, it might be better said that you are paying a location tax as opposed to a land tax. Specific locations have particular value and until we develop hand of god technology, putting multiple units of land in a given location will be impossible. So land vs. location is really just a semantic difference.

[logfromblammo]

You either didn't read my entire comment or chose to talk past it. I said that the result of your calculation (LV = PV - K) actually still includes the value of improvements adjacent to or near the property. The value of some improvements bleed across property lines.

As such, that result still represents the improved value of land.

Roads increase the value of lands adjacent to the road, even if they are not on the land itself. Parks and greenways increase the value of land within a certain distance. Schools increase value. Shopping centers increase value. Police stations, fire protection stations, restaurants, theaters, museums, public transportation, and other improvements all affect the value of living near those improvements. There is even some value in living next door to an expensive-looking house rather than a shabby one, or an abandoned, empty lot.

I contend that if you factor out all those improvements-by-proximity--if you erect a magical barrier that prevents all human influence from passing it--the inherent value of a hectare in a city or suburb is about the same, or perhaps less, than a hectare in the middle of a cornfield--a field without an irrigation system, and far from any roads.

For the most part, the inherent value in land is as a place to put the improvements.

A location tax does not encourage efficient land use (by discouraging inefficient use). It discourages living closer to other people, which itself is a more efficient use of land. When home is where you hang your hat, people gather around the hatracks. As long as you are taxing desirable location rather than land area, you are addressing the movement of the people rather than the use of the limited resource.

If high-density housing is a more efficient use of land than low-density housing (a rhetorical conditional), then it is counterproductive to tax people for being closer together in more efficient cities, rather than less-efficient suburbs.

[jes]

Thank you for your comment, and for obviously being concerned with issues of fairness.

If a person makes an investment, and that investment goes up in value, even substantially, and even with no additional effort on the part of the investor, does that justify others taking some or all of the resulting value?

If I bought stock in Apple years ago, because I thought it was a smart thing to do, and I simply held the stock, should other people get a cut of my gains when I sell?

What if the stock goes down? Am I then entitled to someone else's gains?

[jschwartzi]

Stock is different. Your stock certificates in Apple don't increase or reduce the value of other stock certificates you own just by their proximity and configuration.

To put it another way, if you own common stock, and later develop some of it into preferred stock, does the value of your remaining common stock also go up? If you have shares of Microsoft also, and those certificates are next to the Apple stock in your safe, does your Microsoft stock benefit from its proximity to Apple stock certificates rather than, say, Hewlett Packard? Suppose someone else places some of their Facebook stock in a safe next to your own. Do they benefit from their proximity to existing Apple stock? Do safes full of penny stock drag the value of your Apple stock down?

The fact that something is real property means that it has a direct impact on other peoples' property around it, especially in how it is developed(or not). I would say that there is an argument to be made for deincentivizing sitting on land as a "real estate investment" without using it to benefit the neighborhood it sits in.

[jes]

Thank you.

You write that there is an argument to be made for discouraging sitting on land as a real estate investment, without using it to benefit the neighborhood that it sits in.

Let's say that you are right, that there is such an argument to be made. In other words, the neighborhood in which the property resides would benefit from some improvements to the property in question.

In this case, why should the affected parties not try to work together to accomplish it?

For example, if I own a vacant lot in the middle of a neighborhood, and my neighbors want to use the land for a park, I'd be happy to discuss selling some or all of it to a neighborhood association.

On the other hand, if the neighbors are going to get together and petition the local city council to confiscate my property, say through eminent domain, that seems like an unreasonable intrusion on property rights.

I understand that people want things. However, I think we'd all be better off it we sought to work things out through voluntary cooperation and free trade – in an environment where individual rights are respected – rather than empowering politicians to pass laws that grant special favors to certain groups.

[krschultz]

You're basically arguing against property taxes or capital gain taxes entirely. Our existing property taxes are measured against the improved (built-up) value of the land. An alternative would be property taxes against the unimproved value of the land. The latter are often called "land taxes".

I personally think land taxes are better than as-built property taxes because they encourage investment. If you assume that lower taxes are an incentive, we currently are giving land owners an incentive not to invest in their property. Society as large actually wants land owners to invest in their properties.

If you want to argue that land owners shouldn't be taxed at all, fine, but they are currently being taxed.

[jes]

Yes, I am arguing against taxes. I'm against taking things by force from other people, which is what taxation appears to be, as I understand it.

You are correct, of course, that land owners are taxed.

I don't expect to live to see the day when most people realize that initiating force against others is counterproductive. But I do think it's helpful to look into the essentials of things.

Thank you for a good discussion. It has helped me to clarify my own thinking.

[UVB-76]

Your argument conveniently overlooks the role of force in the establishment and maintenance of property rights.

Without the state (or society, if you prefer) exercising, or threatening, the use of force against people who would otherwise infringe on your property rights, your 'ownership' of your land is worthless.

So it follows the state (or society) expects something in return, as your exclusive use of your land is necessarily a cost to the rest of society.

[jes]

Thank you for your reply.

Yes, I understand that people look to the state to protect property rights.

Unfortunately, it seems like we have not yet avoided the situation where the state itself becomes a frequent and massive violator of property rights, and people's individual rights in general.

Perhaps we will someday discover other ways in which the protection of individual rights can be accomplished.

[Apes]

I went into a Burger King and asked for a Burger. They generously provided said burger, but then asked that I provide them with money. I told them that I appreciated their burger, but that I would not be providing them with any money at this time. When they told me that I didn't have a choice, I was outraged and offended! How dare they try to take something from me unwillingly! I immediately called the police and informed them of the harassment that I was undergoing. But the police also demanded that I give up my money! This is why the government is corrupt! It should be _MY CHOICE_ as to when and how I give out my money!

[afarrell]

If I buy something from a criminal gang that took it from another person by force, do I have a natural right to own it? What if I buy it from a shopkeeper who got it from such a criminal gang?

Does my right to it outweigh society's interest in using a portion of its' value to repair the effects of the gang's activities?

[mikeklaas]

1. Yes, that's what capital gains taxes are

2. No, but you can use the losses to offset future gains without paying tax (you aren't penalized for an asset depreciating then re-appreciating)

[eqdw]

> If I bought stock in Apple years ago, because I thought it was a smart thing to do, and I simply held the stock, should other people get a cut of my gains when I sell?

They already do, indirectly, through cap gains taxes