Jumping straight from one tax regimen to another is a recipe for suffering, sure.
Instead, we might imagine a State shifting from 10% income tax to N% land value tax, by lowering the income tax 1% per year, and raising the LVT 1 * (N/10)% per year, until a decade later, the State's income is land value tax, not income tax.
That should give everyone the opportunity to make plans, and adjust over time.
Re:High property taxes are good
by seanmcdirmid on Wednesday July 20, 2022 @08:32PM
(#32174317)
Isn't that the case already? Property taxes are already weighted between land value and property improvements. But shifting to too much land value, even if done gradually, can lead to unwanted consequences.
is it a problem that some people are losers in the new scheme? there are losers in the current scheme too
Re:High property taxes are good
by seanmcdirmid on Wednesday July 20, 2022 @10:26PM
(#32175085)
It will hit people at the bottom the most, they are most likely to own under value structures, they are least likely to have funds to redevelop, and are least likely to have funds to sit things out until they can sell at a break even point. A land value tax would benefit corporations more, since they can throw up a bunch of luxury apartments to maximize value utilization to pay the land value tax. Corporations would also be able to buy out at a discount individual owners who are squeezed by the tax.
It will still force density eventually as the home's structure value depreciates (demo costs are the same no matter how much the home is worth). Any new structures will be pushed into higher value uses.
BUT let's say we instituted a blind land value tax tomorrow: many people would be forced out of their homes AND could not sell the home for what it was worth: a buyer would still have to either live in the house and pay the higher land value tax or tear down the structure and build something more profitable...the haircut they would otherwise have to take in either case would be reflected in just paying less for the house in the first place (assuming they've done their homework).
This could even happen after the land tax is implemented. That the land value rises above the point of its use but below the point of where the land could be re-developed into the higher value use case. Then....you are kind of stuck in a bad spot until your situation changes or you go bankrupt.
We actually already see this in the market: land with a tear down will cost less than land that is completely clear. The costs to develop are just less in the latter case. Also, people are forced by the construction market to settle for less valuable structures on high value land because there is just a shortage of material and talent to redevelop everything that we want redeveloped already.