A land value tax is a much more elegant solution. For one, it doesn't introduce the problem of needing to define 'vacant land'. Is a parking lot vacant land? etc

Of course it does. Complexity in the tax law is regressive. It lets wealthier people and businesses take advantage of more deductions and writeoffs to lower their tax burden, due to the ability to hire accountants full time to work on it. Simple taxes that are difficult to avoid (such as LVT) are best if you want a progressive tax regime.

One of the best features of LVT is that it taxes unearned increases in the value of land. While you can do any improvements you want to the property without increasing the LVT, improvements made by the city or other private interests to the area around your land absolutely will increase its value, thus increasing your tax burden.

Can you explain how is it simple? Who gets to set the theoretical value of a plot of land, disconnected from all current uses? Since it's theoretical, it's very subjective. Who do we give this power to make or destroy the owners based on purely subjective speculation on what it might be worth? How do we guarantee that this entity won't abuse the power to set arbitrary tax valuations?

We don't. They already do that with "normal" property taxes. This wouldn't change that.

Soon-to-be gentrified neighborhoods are often ignored by property tax assessors and code enforcement for many years, then one day a developer reaches out to the tax assessors and says "hey the taxable assessment values in this neighborhood should really be higher". Then the people living there have taxes raised 10-20% every year until they are forced to sell for low prices because they can't afford to hold onto their property until the gentrification is actually well underway when they'd finally see their property value actually go up.

At least, that's how it goes in Texas.

I don't think this system would be worse in that sense, probably roughly equivalent. But it makes sense to at least attempt to tax undeveloped and under-developed land at high enough rates to encourage at least some healthy amount of development. It won't be perfect, but it shouldn't be worse either.

I don't see how it can't not be much worse.

If the tax is based on the actual value of the property, there are two important factors:

1- You can easily prove or disprove whether the valuation makes sense. Just look at comparable sales nearby. If in a neighborhood of similar houses, ten have been sold in the past year for 200K and your very similar house receives a tax bill saying it's worth 2M, you can easily protest and win since the sales records show it's only worth +/- 200K.

2- If it really is worth 2M based on comparable sales, in worst case you can then sell it for 2M. While it's terrible to kick people out of their homes via property taxes, at least the consolation is that it's actually worth that. So you don't go bankrupt, you can sell it for that price.

With LVT the tax is supposed to be based on some theoretical projection of what it might be worth if a non-existing structure were to be there. What prevents the county from telling you that if only you built a ten story highrise there, it would be worth 10M? So now you have to pay tax on 10M.

You can't easily disprove it because, well perhaps maybe it's true that if the highrise was there it might be worth 10M. But of course the building doesn't exist so it's all speculation. Also, since the building doesn't actually exist, you can't sell the property for 10M to pay the tax bill.

In the Houston area the appraisal board just doesn’t care. They raise taxes across the board for the whole neighborhood by the same amount every year and appealing has limited effect. You cant really argue comparables because the whole neighborhood raises in lockstep by a shocking amount every year (since well before the big housing bubble)

Comparables refers to actual sales of similar homes nearby. If all sales in the neighborhood have been +/- $200K over the last year, they should not be able to claim the property is worth 500K. Or they could, but should be easy to disprove.

When you get a mortgage, it's based on a theoretical value of the property as determined by an assessment.

The bank will lend you up to, for example, 90% of the assessed value. Thats how you get a morthgage on a property that maybe you already own for 20 years.

This looks more like a way to destroy society than prudent tax policy.

It would raise the value of your land.

Perhaps that's the point - in order for cities to stay dynamic and fair, we need to make everyone pay something close to market value for their land - even those who bought it a long time ago. But doing so is unlikely to make those people very happy.

If LVT helps to loosen up some undeveloped/underdeveloped land and get it into the hands of a willing developer then that is a big win for the fight against the housing crisis.

It's also a false dichotomy. We don't need LVT to solve housing. We don't even know if LVT would solve housing. On the other hand, we know exactly how to solve housing. People just don't want to.

We'll just have to wait and see then. Detroit is going to try it out and we'll see how it works for them.

we know exactly how to solve housing. People just don't want to.

It's a collective action problem. One of the ways we usually solve those is through government action. LVT is a candidate for exactly that!

Well that's a problem with those people if they think their most valuable capital asset is irrelevant.

It is relevant, because without LVT, the tax code is literally encouraging inefficient use of land. Housing prices consistently rising five times faster than salaries is a huge problem, and it is caused by inefficient land use.

If only that were so! Then the American real estate market wouldn't have been artificially stacked in favor of homeowners for the last eighty years.

So, up to the point where you would actually sell your land, LVT is simply a liability. Even if eventually you sell are not guranteed to actually make the amount implied by the LVT you have been paying.

Let's think about what structures and incentives and ways of thinking we would foster here. Everyone a property speculator! That worked out so well with housing.

Meanwhile the people who just want to raise a family in peace and stability can now be priced out of their homes because their neighborhood got too "good". And that's just the goldilocks analysis.

In grim reality, city councils can use this to soft-evict anyone, anywhere without giving a reason by simply raising the estimated land value. The corruption is going to be off the charts.

Which is also why I don't think it helps Detroit today as they don't have the problem problem of land that someone else would build up on

This already happens just with more economic inefficiency under a property-tax regime. People already vote against improvements that would cause their taxes to go up.

But it introduces, unless I'm completely misunderstanding, the need to establish a theoretical value for a plot of land that's unrelated to any sale or use value we can objectively measure today.

At best, it seems the assesment will be very wrong often. At worst, it'll be a political tool for local government to drive out whoever they want by overvaluing plots on purpose.

A lot of the land around Detroit is nearly worthless given the blight. Will it be taxed at $0 or will they say that in an alternate universe someone could build a skyscraper there so it's worth millions? Even though nobody would actually fund that work.

Taxing based on sale price isn't perfect, but at least it is much harder to game since it's based on a concrete market-clearing price that isn't up for debate.

A good starting point can be the relevant part of the Georgist primer published on ACX:

https://www.astralcodexten.com/p/does-georgism-work-part-3-c...

Distinguishing between lot value and property value is already a very common exercise in the real estate business.

Basically all of your data points are the built-up prices. So it is going to be easier to estimate the built-up value than the raw property value. Maybe not much easier, but definitely not harder.

Or maybe a tax based on more things has nothing to do with complexity. The largest market is for land and structures. That makes it the simplest to value.

This is a nightmare. Can you elaborate?

Now how do we determine that x%? That's a good question. I think there's no way out of some empiricism even if someone did try this approach. But you can always start it low and raise it incrementally to see how it affects the land economy of an area.

Why? This just seems to create yet another perverse incentive structure that people have to invest time into understanding (and some into exploiting), rather than adding any actual value. Taxes mean nothing if everyone is too busy figuring out this sort of scheme to do anything valuable.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2818494

> To put this problem starkly: allocative efficiency and thus an efficient market economy is impossible in the presence of private ownership.

What the paper's early pages are saying is that study A found that things could be allocated more efficiently, and study B found that sometimes people hold out from selling things now to gain more later, therefore to increase the efficiency of global (literally) allocation of resources, people should be forced to sell things or pay more taxes to keep them.

This seems to have several problems on its face, that might be dealt with later, but still:

- This is all theory. There is no global optimum to observe, no matter how many papers might be written. Only to theorise about.

- This is relative, and time-sensitive. I might value a property at X because at that moment it's worth that much to me. It might change in the future, or depend on how markets are doing. Should I instantly sell because I have an ice cream shop and people are all eating gelato, and I can't afford the tax so I reduce the valuation to a point where some shark can grab the building?

- Perfect is the enemy of good, particularly when perfect is so poorly defined. This can get a lot worse much more easily than it can get a bit better.

Think at the margin here. You're not saying you should instantly sell because the gelato/ice cream enthusiast ratio has increased slightly. You're saying everyone all at once decided en masse to start eating gelato instead of ice cream. Yes, as an entrepreneur you need to respond to that. That's an enormous and sudden change in not just the long- but even the short-term viability of your endeavor.

Indeed the forced price mechanic improves the short term responsivity of the local economy to such a change, because your scenario suggests a recent total upset in the established order of things. I would rather see you walk away today, from a venture that you realized yesterday was doomed to fail, with an extra $X in your pocket from the shark who bought you out than to see you driven to bankruptcy because you were the last ice cream boy in this mad, gelato crazed new world. Who knows -- maybe you'll start an ice cream stand in a cheaper, more sane part of the world with it.

But I'm having trouble as a result of the choice of icecream/gelato words.

I interpreted @robertlagrant to be in the "gelato is icecream" camp (which seems reasonable to me in a "baguettes are bread" sense).

But @hiAndrewQuinn, you seem to be in the "gelato is not icecream" camp. I would call this is an arguably correct position similar to "chicken tikka masala is not Indian food," but I doubt most people holding either of these positions would consider these kinds of small differences likely to be the trigger for a business becoming unviable. So perhaps you didn't know what gelato was?

In either case, I think you two need to be using the same definitions for your illustrations to make sense. And I really want them to make sense because I want to understand :)

That doesn't make any sense in the context of a land value tax.

The whole point of a land value tax is that a parcel of city center land is taxed at the same rate whether it's got a parking lot on it or an apartment block.

But the owner of an apartment block would self-assess their land as much more valuable than a parking lot, not wanting to be forced to sell their apartment block for the price of a parking lot. So you'd be back to having a property tax, not a land value tax.

But they may later find out that the parking lot isn't really worth $5 million, because it's harder to make the money to justify the x% of $5 million tax you're paying on it with a parking lot than with an apartment complex. They may then drop their valuation to $3 million, or $2 million, to reduce the total amount they pay in tax each year. But then of course they may run a greater risk of being forced to sell themselves -- perhaps even back to the original apartment runner they paid $5 million to before.

Depreciation reflects that the asset's value is used up over time by allowing the owner to deduct part of its value each period to reflect the reduction in asset value in their financial statements.

Depreciation definitely needs to be fixed. You shouldn't be able to claim 3% of a structures value as business loss every year, without some sort of evidence that you will actually tear down the structure in 33 years. And perhaps after it has been counted as depreciated once, future owners shouldn't be allowed to deduct the depreciation either.

Let alone things just getting dated.

If you look at typical house most of the labor and expense for materials is in the finishing not the rough structure like the framing. Look at the price of 8 ft 1x4 trim piece compared to just 8' 2x4 despite the 2x4 having twice the amount of wood. Then look at what generally needs to be replaced its not the framing unless the building was neglected or poorly built.

It might appear they are, but if you properly account for everything it’s not tremendously advantageous.

And it reduces your cost basis also, which means you pay more tax when selling unless you have other ways of avoiding that.

Eventually the land ends up in the hands of the few willing and able to abuse the land to that level, prioritizing profit above all else.

Assuming that higher density is always better ignores the externalities required to maintain such a system. Higher density cities require more outside inputs brought in from outside the city. Those inputs strip resources from other lands, require input to process the raw materials, and require fuel and vehicles to transport the goods into the city frequently. The city's waste must be transported and processed somewhere, again adding impacts to the environment even if those impacts aren't directly felt within city limits.

If the goal is to minimize impact, cities would only be as large and as dense as they can reasonably be self sufficient. That doesn't preclude trade between cities, states, and countries, but it does mean the city isn't entirely dependent on a constant churn of bringing in resources from elsewhere and shipping out waste.

Now for the first paragraph: This is kind of the point because maximizing use generally means more density, which means more opportunity to minimize use elsewhere. I did outline one situation that I thought was unfair and should be addressed, which is the situation where you buy land zoned one way with a much lower value only to have it zoned another way on you that makes it a lot more valuable. Other than that specific situation, I don't agree with you that your first paragraph is a problem, it's a positive feature.

As far as shipping goes, it can definitely be comparably affordable to ship in products. Though you still have to factor in costs of everything from making and maintaining those vehicles, the oil and gas that moves them, and the costs on the area that actually produced the products.

My point isn't that everything should be magically fixed with more rural living or a perfect balance of density in cities. I'm simply trying to raise the other side to point out that things aren't simple or clean enough to actually run the math on whether dense cities are better or worse at reducing impact on the environment. There are simply too many factors and hidden costs along the way to calculate accurately.

Surely, it can't possibly be that simple. Sometimes that's true, sometimes it is not. If I want fiber to my house in the country I might be paying $30k to get that line all the way to my one house whether I want 100MB/sec or 10GB/sec. In the city it might be shared with hundreds and only need to run a few yards. Same for sewage. Same for police and fire.

Your examples only really touch on one relevant example though, sewage. Sewage isn't really an issue in rural areas, off grid seltic systems process waste on site and more compelling systems can even compost human waste with very little effort. Modern central sewage system only exist because of dense cities, they weren't needed before that.

High speed internet is purely a convenience and really shouldn't be a concern if there's any meaningful environmental impact from it. Police and fire similarly are conveniences that may turn into necessities in highs density areas. I live in a rural area where police may show up tomorrow if I call them now and our fire is mostly volunteer.

I've never heard of anyone having real issues from either. Volunteer fire still respond quickly enough and it's amazing how much less import policing is when people are more spread out and the expectation of turning to police for every problem isn't the norm.

However if all you ever do is drive to the big city I can see how that would take more time and distance.

These resources can be transported to high density living, or spread out across 100x - 1000x area. Which do you think is more efficient?

Building roads, water, electricity costs millions/mile. All this must be built before you even think about shipping resources to support. Then services (schools, hospitals, dentist) -- all of these and services only make sense at scale.