Does LVT look at a piece of land's productive value instead (i.e., how much food you could grow on it or how many minerals you could mine out of it)?

Usually the assessment and sale price are not far off.

Georgism[1], which I'm fascinated by. One way to organise it is to ask people how much tax they're willing to pay, from which the land value can be derived (as that's the real point of assessing land value for someone who isn't willing to sell that's the real order of things). However, if someone bids on the land for that price you must sell.

> Are there any good examples of governments that use LVT in practice?

I thought there were only one or two places using LVT but it appears there are quite a few[2], but it's rarely pure LVT.

[1] https://en.wikipedia.org/wiki/Georgism

[2] https://en.wikipedia.org/wiki/Land_value_tax#Implementation

Some people have very strange misconceptions about LVT & Georgism.

The land with the highest value is city land. Most of city land and the buildings on that land are private property so they cannot be auctioned “every year”.

Singapore and Taiwan lease blocks of state-owned land for (high-rise) residence buildings for a duration of 99 years. This land is auctioned to developers, who then build houses and high rises, then sell them to individuals. The land lease ends after 99 years, so the land can be reused. This obviously does not capture the increase in the value of land over 99 years, but the value of land at the time of the sale.

So both states have taxes on land - a property tax in Singapore and a tax on the increment in the value of land in Taiwan, showing that it’s feasible to estimate the value of land and tax that (value of land = total value - value of improvements).

But surely you have improvements on the land and friction from moving...

I like LVTs, but there's some significant devils in the implementation details.

For the improvements on the land bit, you could project at the beginning of the year what you think the land will be worth by the end of the year, due to planned improvements. That locks in the value for the year.

I can see problems with that too, but the real question is would those problems be worse or better than the problems we have now?

If the land is worth $100, and your house is worth $200-- it's worth $300 to you. But a LVT should just be taxing that $100.

So with either kind of improvement the tax can go up, but LVT still encourages development compared to property tax as undeveloped land will still attract a greater proportion of tax than it would under a property tax.

If you set the tax rate by having owners bid a price they're bound to sell their property for... that's going to include improvements like dwellings, since the owner can't take their dwelling with them and doesn't want to just sell the property with their dwelling for the land value alone.

In turn, this fails at setting the rate for a LVT, because it captures the value of improvements like houses in the taxed amount.

Flats in the UK are leasehold, which means you can buy (part of) a property and still not own the land.

It's entirely possible to separate the two.

That is, that leaseholder you can't turf is enjoying a lot of the value of the land, and it may not be correlated to past payments or transactions.

In turn, lots of the benefits of a LVT evaporate if the taxable value (of landowner's eventual rights) is so decorrelated from the present value of land uses.

That's the problem here: valuing the land alone is hard. Separating rights, adding more owners and options and preferences --- doesn't make valuing the land alone easier.

The tenant knows how much value they are getting from being there, at least relatively, because they pay the rent. If you're paying twice as much rent for half the space as your mate, unless there's some reason like being closer to the centre of the city or something, you know you're getting a bad deal.

Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.

Yes, but... As I keep trying to make clear:

* Anyone improving the property requires some kind of protection of this investment, usually in the form of a durable ownership interest or a very long term lease, with a value chosen based on both parties' estimates of the utility of the land over that lease term.

* In turn, the rents that the landlord receives from the property can be not-too-closely related to the present value of the land. They may be higher or lower.

* In turn, the land value tax doesn't succeed in capturing the true market rent of the land when it is based upon bidding by landowners, whether we're dealing with separate owners for improvements or not.

Imagine the case of someone who entered into a long term lease (60 years? 99 years?) in 1975 to build a house surrounded by orchards in San Jose. The real value of land has appreciated >60x over that term. A land value tax would capture a tiny fraction of that value if the landowner was bidding based upon the lease returns + the present value of the land being returned in 40 years.

> Pricing can be difficult but it doesn't exist in a vacuum, there's a whole market to compare to.

The level of friction is so high that you can't solve this one with bidding; you're going to have to rely upon comparable sales and assessed/appraised values.

It takes two to tango. Perhaps you'd be better off keeping your frustrations to yourself and improving the clarity of your writing.

> The real value of land has appreciated >60x over that term.

What is the "real value"? It's what someone is willing to pay for it. If the returns on the land are not that much, as you contend, then it's not worth >60x what it was. If the property owner has some protection than means they can't be shifted off the land for 99 years, then that land is not worth as much as you contend because it can't be used for something else. If someone else thinks the land is undervalued then they can bid on it and make more money, but they'll have to pay the tax and find a way to extract that value. If the land really is that valuable then the landowner can say so and pay the tax on it now because they think they'll get the return in future.

In short, you're assuming that the "real" value and the actual value are different and erroneously so. This assumption makes the reasoning self-contradictory - the value is determined by people's bids, not some Pythagorean value floating around somewhere waiting to be happened upon by some perfect system.

No, the amount agreed to pay 60 years ago does not necessarily match current market value of the land right.

The amount agreed to pay -now- doesn't necessarily equal market value.

E.g. say I have a piece of land, and I agree to lease building rights on it for 99 years to my buddy (or son, or..) for $1/year. The value anyone is willing to bid on the land should be the NPV of the remaining $99-n plus the NPV of the estimated land value in 99-n years. The tax is nearly completely escaped. All of the land value has been smuggled into the lease right, which isn't taxable.

When there's lots of degenerate cases like this, it become pretty clear the way of assessing LVTs you propose doesn't capture current market values of the land itself, since the value of each piece of land can be artificially impaired or captured by a leaseholder.

Indeed, even in the absence of avoidant lease schemes, the very fact that your scheme encourages capturing a past lease value undoes one of the cited advantages of LVTs: it no logner incents land to quickly turn over to more efficient uses. Instead, the scheme you propose explicitly incentivizes ownership structures that maintain inefficient uses, even worse than the current property tax regime that includes improvements.

a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods

b) As I pointed out at the start, someone else can buy the land at at a very low price.

> However, if someone bids on the land for that price you must sell.

So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.

Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.

Still, I think this a digression, it's hardly a steel man, which would be more interesting. We may as well say that income tax is rubbish because people can lie to the tax man about their income.

[1] https://resources.realestate.co.jp/buy/leasehold-rights-in-j...

Your source effectively says the opposite-- some leases are limited, but "With an ordinary land lease right, the lease contract period is fixed but in practice can be renewed almost in perpetuity." and "The lease contract period under the Old Land Lease law is fixed, but the lease can be renewed almost in perpetuity."

Even the fixed terms for non-commercial use are generally very long-- "Land leased out to be used for single-family homes and condominiums can be leased out with a fixed-term land lease. The contract period is 50 years or more. "

> So even if you follow that avoidance strategy, I'm going to buy your land on the cheap.

I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.

E.g. say a sane discount rate is 5% per year. Lease is 50 years. Lease payment is $1/year. True value of the underlying land is $500k. Value of land in 50 years is estimated to be $1M. Tax rate 1%.

NPV of the lease payments is $19. NPV of the land is $92,000. I bid $200k and pay $2k in tax (compared to $5k).

Sure, you could bid $200,001 and get the land, to get an asset with a net present value of $92,019. This is not a favorable transaction-- even if there's some building residual value at the end.

In the end, the only way to value the independent value of the land is going to be from some kind of assessment process. A bidding based scheme is not practical: separating the value of the land and building is really hard. (And if we start having people judge whether the pricing of leases, etc, is fair-- that's effectively assessment).

It's saying what is customary and possible. The landlord does not have to renew, I think that is quite clear from what was written in that article.

> Even the fixed terms for non-commercial use are generally very long

Because they have a land tax and a property tax. I didn't suggest to use Japan's law verbatim, nor would I, their system has a lot of unwanted side effects but it does encourage a lot of building.

> I bid the NPV of the lease + the NPV of the land after the lease. If you outbid me, you're taking an economic loss. I can even afford to overbid a little, because I'm just paying a small percentage of my bid.

Yes, but you didn't get to sign over that lease because I outbid you and it's now my land and the lease will not go forward because, to quote myself:

> 1 point by brigandish 21 hours ago | parent | context | favorite | on: High property taxes are good

Any law will need provisions to prevent corrupt practices. Whether that is easy or difficult should be taken into account, but in this case I don't see the difficulty, because

a) Like Japan's lease law[1], it would be possible (and preferable) to limit lease periods

b) As I pointed out at the start, someone else can buy the land at at a very low price.

> However, if someone bids on the land for that price you must sell.

So even if you follow that avoidance strategy, I'm going to buy your land on the cheap. Perhaps I'll have to raise the tax in the meantime without the comparable rent coming in because of the lease agreement you set, but I get your buildings at the end so that's basically become a mortgage.

Of course, that possibility could be removed by a rule like having a period where a lease is in the offing where prospective buyers can buy and cancel the lease, punishing those setting low rates.

Your calculations are moot.

The source you provided is clear on this for the non-fixed term variants. Here is another source:

https://resourcehub.bakermckenzie.com/en/resources/global-co...

> What are the usual forms of leases?

> Ordinary leases (with statutory right of renewal except in certain instances)

> Fixed-term leases (with no right of renewal)

Note that you also characterized the law as providing an upper bound on lease terms, when actually it's the opposite:

> such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more

I disagree with most everything you say, and I am not sure further discussion would be productive.

Aside from the minutiae: I do not think there is any reasonable way except assessment to disentangle the value of land and improvements in a way that tracks land value in the short term, which is required for a land value tax to yield its substantial benefits.

> > such as ground leases must be 30 years or more except a fixed-term ground lease, which must be 50 years or more

I quote from the article I shared with you:

> The initial period is 30 years, regardless of the building structure. The lease can then be renewed for 20 years at the first renewal, then ten years thereafter. This differs from the the Old Land Lease in that under the old law, the initial lease period is different depending on the building structure.

and this for fixed-term ground lease:

> The lease contract period is ten years or more and less than 50 years.

Which means we have two articles that are in disagreement but that is irrelevant because again, I am not proposing to use Japanese law verbatim.

> I disagree with most everything you say, and I am not sure further discussion would be productive.

Yes, constantly defending straw man positions or needing to answer how many angels can dance on a pin is not productive for me either.

> Aside from the minutiae:…

Thanks for selling me all your land and making my descendants incredibly wealthy because you thought it was better to avoid taxes.

Had a good summary of land valuation problems

There is a risk that the government will increase taxes such that people can't declare high land prices, which allows the government to buy up land for cheap. I haven't found a mechanism for that yet.

It'll also allow the government to bully anyone they want by evicting them, even if the price were fair. Local reporter digs up dirt on city council? Well, the city council just reviewed property tax claims, and decided that the reporter's house is "undervalued".

Fight over increased property taxes in Texas becoming political https://www.youtube.com/watch?v=gzUwoFVUc_I

Texas voters to decide on 2 propositions that could impact property taxes https://www.youtube.com/watch?v=Nz67VXkjRfg

It seems like the Texas Homestead Exemption Act is starting to morph into something analogous to Prop 13. Perhaps if there's enough growth in tech jobs (and more billionaires start hiding out there) they'll end up with an income tax like California and New York.

I moved from an ostensibly low tax state, Texas, to one with an income tax but my overall burden for state costs is pretty much the same or slightly lower as property taxes are low and there is no sales tax (8%+ in Texas).

I was paying over $1500 month in property taxes in Houston burbs.

They’ll get you somehow!

It also requires property owners to do EXTENSIVE research and information gathering CONSTANTLY to ensure that the number they put down is reasonable.

Many of them literally can't (ex: my 87 year old Neighbor Phylis doesn't care what her house is worth, because she plans to die in it, and isn't seeking to maximize utility. Instead she wants to pass peacefully in the house she remembers raising her kids in, and has lived in for the last 50 years. She has no car, is in a wheelchair, and uses basically no online services - how is she going to go evaluate the right value for her house?).

---

Basically - this plan sounds great for 5 seconds and then you realize people would literally revolt the second you pass it.

Every year in Chicago.

My house has been, and still is, assessed for 600K over what I paid in Nov. 2021. It had been on the market since 2016, until I bought it. The price I paid is the value of the house.

First assessment appeal denied.

Second appeal lost in the system.

We have to fight against an unfair and arbitrary tax system EVERY year.

Now they are going to index the tax rate to inflation.

Maybe other communities are under-taxed, but mine is not.

AFAICT, hiring an attorney is the way to go. Then you still have to pay, but much less overall. I’m about 80% convinced that the tax assessors are in it with the appeal attorneys to almost literally write themselves checks. Not that such misdeeds would ever occur in Chicago/Cook…

what you paid for it is irrelevant if people are buying the neighboring places for double or triple the price.

if it's worth so much more than you think, sell it

This is how free markets work.

Guaranteeing that people can take up the same space that they did when the population was half its current level is a great way to ensure that future generations have nowhere to live.

Money is a medium of exchange. There are items that are literally not for sale, and the excuse of "but they got money!!!!" is completely unacceptable as a replacement.

How are you going to value the writing on the walls of the home my neighbor from her now-deceased son?

How are you going to value the 6 (six!) graves of the dogs she's buried in her back yard, Each with a custom stone statue.

How are you going to value that she's memorized her current home layout, so that large cataract in her right eye doesn't bug her as much when she's in the familiar layout?

How do you value the extra time and expense it would take her to find a new home, given she's wheelchair bound?

----

and your "new plan" is devolving into trying to add all sort of extra conditions and rules around this - which gets us right back to: implement this and people will literally try to kill you.

> and they decline by raising their declared valuation to match the neighborhood average.

First - this is not in line with the previous posts. What stops me from simply declaring my value is 0 until someone makes an offer and then suddenly it's the right value. Until next year when it's 0 again because that buyer has gone away. If I only have to declare at time of potential sale, the declaration is useless.

Second - having lived in a transitional neighborhood, if your house is valued at the neighborhood average, it will be bought in 30 seconds, sight unseen, usually by a corporation that plans to rehab it (because it was last updated in the 70s) and then rent it forever.

And that second point isn't a hypothetical, it's literally already happening: https://www.cbs46.com/2022/06/03/its-an-everyday-occurrence-...

Basically - money isn't everything, and maximizing utility in a purely capitalistic sense is not a set of values shared by enough people to make this work.

If you limited this to only commercially zoned land, then maybe - but you have a social contract with all those people who bought their houses, and violating that social contract, especially in a way like this, is a recipe for disaster.

> Until next year when it's 0 again because that buyer has gone away.

Why would the buyer go away? The state itself could maintain offers on any properties lowballing their property taxes. But that wouldn't be necessary, because at any time, there would always be ample interest in purchasing real estate for discount prices. You say this yourself:

> if your house is valued at the neighborhood average, it will be bought in 30 seconds

...but again, it sounds like you misunderstand my proposal. In 30 seconds, someone would offer to buy, and then the current property owner would have the choice of either selling, or keeping their property but raising their property-tax assessment to either that amount, or the local average, whichever is lower.

There is no such thing as a "standing offer" to buy a house. They're a contract with very clear start and end dates (most offers are good for between 72 hours and two weeks).

This is because both parties have to agree at time of exchange on the value of the good, and the person making the offer usually needs to have financing lined up - They literally cannot make an offer that will be good for long periods, because the financier won't agree to that.

As for this...

> ...but again, it sounds like you misunderstand my proposal. In 30 seconds, someone would offer to buy, and then the current property owner would have the choice of either selling, or keeping their property but raising their property-tax assessment to either that amount, or the local average, whichever is lower.

Ok - follow along... now the next offer comes in 2 days later at the current value. The owner STILL has zero desire to sell. What now? Do they get to raise again?

Dude - this whole thing is ending up with more rules and regulations that the current market, which is exactly why pushing this kind of thing simply doesn't work.

In theory you're optimizing land efficiency, but you're fucking with other efficiencies ALL along the chain, and the net result is that people hate you.

----

Also - taking you at face value: "raising their property-tax assessment to either that amount, or the local average, whichever is lower."

This is fucking already how taxes work. At least in my area, every house is taxed at the local average (fulton county does average assessed value tax for land). So you're literally gaining nothing for all this additional complexity.

Also false. Maybe stop with the ad hominems?

> There is no such thing as a "standing offer" to buy a house.

There is in my proposal. Go back and reread it.

> This is fucking already how taxes work.

Not in California.

People will revolt anyway. For instance, in California they revolted when we attempted to remove Prop 13 for businesses.

People who are hoarding a huge house in a desirable area to do nothing but slowly die in need to be fucked over. They're worse than speculators.

> Many of them literally can't (ex: my 87 year old Neighbor Phylis doesn't care what her house is worth, because she plans to die in it, and isn't seeking to maximize utility. Instead she wants to pass peacefully in the house she remembers raising her kids in, and has lived in for the last 50 years. She has no car, is in a wheelchair, and uses basically no online services - how is she going to go evaluate the right value for her house?).

She should quote how much someone would have to pay to make it worth her moving out - that's something she should be able to figure out for herself. If she wouldn't move for less than 3 million, quote it at 3 million.

I don't even think the author is fully behind it, seemed more like a thought experiment as a reply to grandparent.

Regarding grandma: I don't want to kick her out of the house. But there is a real issue here: young families can't find affordable places, while old families live in places, that are too big for them because the kids left. If they rent, they also pay significantly less than the younger family, since they are on older contracts. Once new people move in, rent is raised to the new level. The older people don't want to move out, because they would have to pay more for their new, smaller place, than the old, bigger place. Meanwhile the young family also has to finance the pensions for that old family.

Noone is being evil here, but ... it sucks. And every idea to work on it is shut down as being unfair to the people who already own houses. Even building new houses is usually opposed by the people who already have houses in the area. If I never get the chance ever to own one, I don't really feel like I have to protect the interest of house owners.

Maybe this will force the governments to spend some of our accumulated tax dollars to actually improve public transport and efficiently network cities and towns.

Zoning rules exist for a reason. People need infrastructure and water and services and power grids to live well. High density is not desirable nor will it be affordable. It behooves the govt to encourage high density where there are jobs to create artificial scarcity and inflate housing value.

Because higher the home value, more property tax can be extracted. This is the oldest con in the world. This is also why all high density cities are all expensive and housing is unaffordable and everything from water to power is expensive and public services are woefully inadequate.

No, they aren't. I live in Tokyo; it's very high-density, quite affordable compared to anything in America, and public services are all excellent. High density is how you get high efficiency.

>Shouldn’t every American city deserve top notch infrastructure that the states only reserves for high density unaffordable cities where jobs are concentrated.

No, because spreading everyone out means your infrastructure cost per capita balloons, and it's unaffordable for the government. If you want "top notch" infrastructure, you need to live near other people, not out in the boonies.

>Zoning rules exist for a reason.

No, they don't: they just make everything far away from everything else and prevent density. Here in Japan, schools, light industrial, residential, and commercial all coexist in mostly the same spaces. So it's not that hard to live within walking distance of work.

Maybe you should try traveling outside America sometime.

Right now, NIMBY tries to prevent taller buildings.

A land value tax incentivizes more effective land uses-- as opposed to property taxes that include improvements, which reduce the incentive to build high density.

It's simple: eliminate NIMBYism. It only exists because local governments and laws allow it. Don't do that.

Housing shortage is due to unions and govts that refuse to establish public infrastructure for everyone. This is done on purpose to create UTism .. Us VS Them..between property owners and those who don’t own property. Divide and Rule strategy. It has never failed over centuries.

Marginally shorter cycles before property becomes more useful in exchange for completely fucking over the elderly, marginalized groups, and those without free capital.

It's a bonkers bad idea.

As others point out, most LVT schemes have significantly improved treatment for owner-occupied housing.

The big idea here: land value is something that is established publicly and collectively rather than by any individual owner. It makes sense to tax use of this public good to reduce deadweight losses .... instead of primarily taxing improvements which disincents investment and increasing DWL.

A land value tax can be expected to reduce the cost of housing. That is, it incentivizes more effective land uses-- as opposed to property taxes that include improvements, which reduce the incentive to build higher densities.