> This is distinct from a property tax in that it only measures the value of the soil it sits on, so doesn't punish the landlord for improvements. The value of the land itself is almost entirely outside of the landlord's control, it's determined by the community around it. As a result, this is one of the least distortive taxes.

When land value is taxed at a higher rate than property value, it creates a perverse incentive for landlords - especially those who don't live in the area in which they own property - to encourage blighting and sabotage the value of the land, while instead reinvesting this money into improvements on the property itself. That concentrates wealth even further in the hands of people who can afford to own these insular properties in otherwise "undesirable" areas.

Actively blighting a neighborhood to depress values and make it easier to purchase land for new properties (either on the market or via eminent domain) is already a problem, and one that significantly skews power towards the extremely wealthy and massively-capitalized institutions. Taxing the value of the land separately from the property that sits on it (and at a higher rate) would exacerbate this unbelievably.

How have all the economists missed this obvious point?

Murder also hurts property values. Fortunately, we have the ability to create laws to punish destructive behavior.

Why would a landlord destroy the value of their own property, harming their own ability to draw rent?

> How have all the economists missed this obvious point?

They haven't. That's why taxing land value at a higher rate than property values doesn't have support from mainstream economists.

> Murder also hurts property values. Fortunately, we have the ability to create laws to punish destructive behavior.

Murder is a lot easier to identify and prosecute than blighting. We already have laws against blighting. They don't seem to work. Increasing the incentive to blight is unlikely to make blighting less attractive.

> Why would a landlord destroy the value of their own property, harming their own ability to draw rent?

You're missing the point. They wouldn't destroy the value of their property; they'd extract value from the land (and neighboring land) to build up the value of their property. Land-value taxes encourage consolidating wealth in improvements to private property that have zero impact on anybody other than the property owner (or tenant). That's the exact opposite of the desired outcome, because it clearly works against the public benefit.

There are plenty of areas where this already happens, because there's enough of an incentive for property owners to do this even without skewing the tax code specifically to reward them for this behavior.

In some areas , it is much easier (profitable) to stuff a bunch of people into Section 8 housing, instead of trying to rent to doctors, lawyers, or software developers (i.e. people that can afford attorneys).

I admire the cashflow of trailer parks, and the ease to remove and replace distressed properties.

What are some concrete activities that would constitute blighting of the land value?

How would a landlord go about blighting a community that they don't control?

I would rather find some mechanism that separates everyone who wants to just earn towards a shelter that they can stick around in when they reach their old age, all into one market, and ring-fence everyone else with a profit motive into their own market where they can duke it out among themselves the real estate game.

For example, the capitalization and sophistication of commercial players lets them efficiently and systematically harangue tax assessors into lowering property taxes far below what normal individuals with just their own residential property can accomplish. Those kinds of advantages accrue in many other areas, and are out of reach of individuals due to sheer scaling differences. But it's the individuals that incur lots of collateral damage over the course of a long period.

LVT is part of a solution, but I'm still looking for a way to address that scaling differential. I think housing co-ops are onto the start of such a solution, but I'm not convinced in their current form that they are appropriate to use for addressing the scaling issue.

Blog rebutting many common arguments against a land value tax: http://kaalvtn.blogspot.co.uk/p/index.html

So, where exactly does the wealthy landlord get the money to pay the land-value tax? From their own labor? From their savings? From after-tax interest earned on their other investments? Of course not! They're going to raise the rent to cover the additional tax, and if the renter can't afford it screw them; they'll be kicked out and replaced with someone who can.

This comes up a lot in discussions involving income inequality. If the proposed solution is "tax the rich", you have to be really careful to tax them in a way that's not trivially easy to pass back onto the less-rich.

The effect of a tax on land works differently than other taxes do. Because the land value tax will free up supply (which was previously held for speculation), the result could just as easily be that rents drop. This is the entire reason that this tax is attractive, and you are right that without this feature, the tax would not make sense.

https://en.m.wikipedia.org/wiki/Land_value_tax#Real_estate_v...

That link is talking about the effects an LVT would have on unused land that's being held for appreciation, and land that's being held as an investment. I'm talking about landlords renting property to tenants. Increasing the taxes on the landlord increases their cost, which would force them to raise the rent they charge. This is just like anything else that would raise their costs: higher insurance rates, increased maintenance costs, increased homeowners fees, etc.

Those other increases in cost do not simultaneously open up supply, though. When there can be more landlords renting out their properties, prices will fall in response. I agree it is counter-intuitive.

"Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay, rather than on landlord expenses, preventing landlords from passing LVT to tenants."

https://en.wikipedia.org/wiki/Land_value_tax#Efficiency

Landlords do not set market rents. Renters and their employers do. Tax changes do not raise or lower rents. They make it more or less likely that new housing will be built, which affects future rents.

Land value taxes are so attractive because they avoid changing the incentives to build.

Of course landlords set the rent they're going to charge for their property. They're free to do so, within certain bounds established by the market and based upon the value of the property they are renting. A land value tax, which would be applied to ALL landlords in the area, increases ALL of their costs at the same time, which forces ALL of them to raise their rents at the same time. It would shift the entire market up, raising the cost of living for everyone who lives there.

Some employers might try to raise compensation accordingly, but they're going to have higher rental costs too since most employers have to rent their office space. So it's more likely that they'd be forced to reduce the size of their workforce to reduce costs and spread compensation among fewer, somewhat better-paid employees.

The impact on landlords would be immediate, and the impact on renters would be as soon as they get or renew a lease. Employers and employees would see an impact somewhat later, since it takes a while before a business is forced to downsize. Any new housing would be a long way off, well after all of the negative impacts have occurred. New housing may never come, if businesses and workers are forced out of the area to someplace that doesn't have an LVT.

Your premise doesn’t make sense. A land value tax would not “increase all of their costs at the same time”, unless the tax was implemented in such a way. More realistic would be that the tax would be revenue neutral, such that taxes would increase per unit dwelling on land with poor utilization, but decrease on land with better utilization (i.e denser). This would be reflected in rents and would encourage people to move to denser neighborhoods because the rents would be cheaper.

I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute.

As a landlord, I have a mortgage of $X and taxes of $Y, and insurances, maintenance and other liabilities that total up to $Z, for operating costs on a piece of property.

For this to make any sense at all, $Rent >= $X + Y$ + $Z.

If you increase the taxes $Y (and this would, realistically, be done more or less uniformly across a town or municipal region, so all properties are going to be in the same boat), all you've done is make me have to charge a correspondingly higher rent. Rounded up to the nearest $25 or $50, because that's how it is always done. Meanwhile all the other owners of rental properties are in the same position.

Hooray!

> I don't understand how a land value tax is supposed to make rents lower. It doesn't really compute

It is an incentive to build. Furthermore, it is an incentive build with higher density.

More density and more houses reduces the cost of rent. It also reduces the building and maintaining infrastructure.

I think this is "Landlords will pass on all the tax to their tenants": http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-ri...

In California at least , the property tax bill is already split into two components:

1.) Tax on land value

2.) Tax on improvements (building, landscaping)

http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-1...

Here's a brief description of how the increase in land value is calculated: "Under this system, when real property is purchased, the county assessor assigns it an assessed value that is equal to its purchase price, or “acquisition value.” Each year thereafter, the property’s assessed value increases by 2 percent or the rate of inflation, whichever is lower."

I think what the 2% appreciation cap is attempting to mitigate is if all your tech millionaire IPO neighbors decide to remodel their houses at once, you won't be stuck with a huge tax bill and have to move.

What you describe is California’s Proposition 13. It does essentially the opposite of the Land Value Tax that the parent is advocating. The acquisition value system and 1% cap ensure that land investors (rather than local governments) capture the windfalls from the appreciation while they own the property. The split roll for land vs. new construction taxes new construction at a higher rate (rather than the lower 0% under the Land Value Tax) so Proposition 13 discourages (rather than encourages) investing in improvements.

Agreed. Just highlighting to some degree it exists already and as not a novel untested concept. It just needs refinement.

A phased, gradual raising of the 2% cap probably would make sense over a couple of decades. That way homeowners and developers can adequately prepare and build in that rate increase into their economic models. Building lifetimes span multi-decades.

Please explain how this additional tax isn't immediately (at the next least signing) passed on to renters. If I rent out a property and the taxes go up $X, I will raise rent at least 1x.

Econ 101 supply and demand. Why haven't you _already_ raised rent $X? Because you love your tenants? If landlords kept down rents out of _charity_, we wouldn't have a rent problem in the first place.

Except all rental properties in the region would have to pay similar amount of land tax, so they would all raise the rent and the renter would have to choose either pay the higher rent or move to a cheaper area.

If all landlords could suddenly raise the rent, why wouldn't they already, regardless of the existence of the land tax?

No ability or incentive to coordinate - but a land value tax could facilitate it.