According to the article, taxing the land at one rate and the property built on it at another rate is exactly what Detroit is proposing.

The idea is that you tax the land only as if it was being used for best use - so that every property is encouraged to develop to maximum density.

I suspect that in actual use it would end up having a small to no effect.

In actual use it would, in most cases, ensure that people would not, could not have long-term ownership of land passed down from generation to generation. There would be significant social downstream effects & likely upheaval caused by this, & that would be compounded by the deleterious results of forcing more & more people to live shoulder to shoulder in the name of that maximum density you mention. No system of taxation is going to be perfect, or even nearly so, but some significantly increase the likelihood of abuse & unintended consequences of bad ideas allowed to run wild. All this without the need for malicious or corrupt action on the part of those in charge of the system, though it strikes me that a system such as the one proposed here would treble the power of officials to strike at groups & ways of life with which they disagree.

Detroit is a city. They already try to encourage high-density living through the types of zoning they have. I don't see a fundamental issue with aligning their taxes to better facilitate their development goals.

Similar arguments would go for rural municipalities that might want to encourage multi-generational agricultural living, for example, if that's what you're getting at.

Someone once remarked that American society is anti-Georgist, in that land speculation is actually seen as the only honorable engagement with real estate.

Having un-utilized land in your family generation after generation codes as noble, but economically this is much worse than owning an AirBnb or a vacation home or being a Chinese investor who collects vacant luxury condos, or any of the other boogeymen of housing discourse. These people hold one unit off the market, and in the meantime they maintain it or finance its construction. The landowner builds and holds wealth for nothing but parasitism.

So you're against someone who gets 100 acres, plants a house in the middle of it, & lives there simply because they want to, & they don't want to have to put up with the existence of neighbors? That's not parasitism — that's doing with one's property what one wishes to do. The economy is not the universe.

They are welcome to do so, but it would probably be cost prohibitive to do that in a highly desirable area. I’m not sure what the hangup is.

You are amazingly blasé about that fact that this would be using taxation to prevent people from using their own property as they see fit. This is utilitarianism run amok.

We prevent people from using their property as they see fit all the time via zoning. It is in fact mostly those with generational wealth that use this power.

Most people don't care about zoning, but they really do care about zoning changes that affect them.

Being told you can't live in your house anymore because it is now zoned commercial gets people riled up, and being told the same because it's now too expensive does the same.

It's a hot-button issue but you can defuse it by putting safeguards in, though they're not always successful - see eminent domain scandals.

Actually this entire construction is wrong: currently people who improve their land get penalized by higher taxes. If there are only land value and not property taxes, we are in fact increasing your freedom to make changes to your land without penalty.

Your argument ignores that changes to neighbors' property would then cause an increased burden to a land owner. This would not seem to be an improvement for freedom

It’s a finite resource. 100 acres of land being barely used should certainly come with a cost. Of all of the things that could be taxed, this one actually makes the most sense.

People aren't objecting to taxing 100 acres of Manhattan at rates that are associated with the value of the land there, people are upset about the idea that they could buy something, and then through no fault of their own, it becomes worth more and they have to sell because they can't afford to pay. Sure you get a ball of money as a consolation price, but you still had to move on.

But this is more of a straw man than a real objection; as there are various and sundry ways to resolve this (for fixed income, you can have property tax deferral until sale-after-death, you can have homestead exemptions, etc etc).

> buy something, and then through no fault of their own, it becomes worth more and they have to sell because they can't afford to pay

I fail to see why that’s a problem. Those taxes go to fund local services (like schools, police, fire, etc.) whose costs likely scale when the local cost of living and land values scale. Buying land doesn’t mean you should get to lock in the price you pay for these services for perpetuity.

Huh? You have to pay property taxes now and those could end up being too high for subsequent generations to afford. That happens all the time and is a common reason why property gets subdivided. This is simply a question of whether the value of structures on that land should be included.

If anything a pure land value tax should be more predictable than a property tax, I got hit with a major property tax increase and looked into it, the town had calculated the new property tax based on an incorrect square footage and number of bedrooms for my house. After filing an appeal and going to court I got it fixed, but that was a more capricious process than if it was simply based on the value of the land under the house.

The problem with that is that would displace virtually everyone from many cities in the US. There are plenty of cities with single family housing near the metro area. It was built before the city expanded. Nowadays the city engulfs it. Obviously the best use for most of that is medium density housing or some commercial use. The idea of taxing a house with a backyard like it's a $3 million quad-plex of town homes isn't very appealing.

That claim isn’t true. The book goes into details like this and taxes would go down for ~97% of parcels. It would go up a lot for parking lots in city centers and certain segments of commercial real estate.

Taxes never really go down. That's always the ploy - say the tax is a limited time, or only a specific low rate, then extend it. In this case, the people in power can play with the tax rates, but even more so in the zoning. An added avenue of getting screwed is not very appealing when taxes are already high. Let's not forget rhat if the goal is to utilize more space, that means more infrastructure and services costs. If we actually make a big impact on the space front, those infrastructure costs will go up and require substantially more revenue. I'm skeptical of the claim that most taxes will go down.

So limiting Georgism LVT to only commercial real estate would get you all of the benefit without affecting residential properties?

Then simply enact that, and the voters won't care because their taxes will stay the same (they probably will never actually decrease).

That isn't quite what I said, but I really suggest Lars's book, if you have a genuine interest in this!

You won't get an absolutely black and white one sentence solution from it, but it is thought-provoking and contains some really useful ideas, IMO.

On the contrary, that's exactly what most cities need in order for property prices to drop from insane to less insane.

LVT would exclusively take from people and corporations who own land. This in turn will allow more people to own their home.

So people will be paying a higher tax than they ought to be if they aren't trend-chasing the economy to always be engaging in that "best use" from year to year?

That sounds perverse in itself, especially since an economy needs diversity to function, and if everyone is incentivized to chase a single thing per region you end up with overproduction of that and underproduction of everything else.

Is a city full of pet stores valuable?

I don't see why this would encourage economic homogenization.

Go look at the most valuable real-estate in the USA that is still commercial, it's almost always banks and Starbucks.

It would because anyone who isn't in the best-paying part of the economy would be taxed higher than their actual income could support, leading them to either switch businesses or go broke.

Land that’s already been improved would pay less in taxes. Empty lots, parking lots, and other unimproved land would pay more tax. Calling an economic incentive to do something with your empty lot in an urban area “perverse” seems.. extreme.

But the post I responded to implied that if you weren't in the most-profitable economic sector, you'd be taxed as if you were, causing excessive loss, leading to people switching businesses to be in that one Golden Sector regardless of what the economy needs and can support.

Besides:

> Empty lots, parking lots, and other unimproved land would pay more tax.

Believe it or not, we need ranches and farms. Taxing them out of existence would be bad.

> The idea is that you tax the land only as if it was being used for best use - so that every property is encouraged to develop to maximum density.

Maximum value, not maximum density.

They may tend to be the same thing, but that's not necessarily the case.

What a nightmare that would be! (unironically)

Thank God we are far from reaching that point.

We already tax revenue and/or profits in various ways anyway.

If land is in a city, that gives it a high value and revenue earning potential due to no work or expenditure from the land owner, but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential. Roads, schools, hospitals, etc. these are very costly to the public but increase the value of nearby land.

The land value tax gives the owner an incentive to invest in improvements and get the maximum economic return on the land, and dissincentivising sitting on land in order to benefit 'for free' from it's improving value. So it's about making sure the public gets the maximum benefit from it's investments that improve the value of the land. Taxing improvements directly would have the opposite effect.

Always wondered how this works on modern times, where income per square foot varies wildly per industry.

Let's say because of rising taxes, a bakery or a shop has closed and a lawyers office has opened in that spot. Who exactly us "the public" in this case and what are the "maximum benefits" that they are getting from that change? Because if I actually lived nearby, I sure wouldn't be happy about my favorite vakery/shop being closed.

And don't say "increased tax base" - for that, you can tweak existing system and increase income taxes so you collect more from the lawyers while still keeping bakeries alive.

Density.

The current property tax system makes it more likely that (in your example) the law firm will push out the bakery. Because improvements are taxed adding more commercial space means paying more taxes, which makes it less likely to happen.

With an LVT, expanding the building (up or out) to add a second store/office) is cheaper so you’re more incentivized to provide space for both

Income per square foot in _rent_.

The important thing isn't that the lawyer's office makes more money. That's just correlated with the important thing, which is that the lawyer's office is willing to pay more rent. Note the lawyer isn't operating a charity for property owners here; they're only going to pay as much for rent as required for the market.

If prevailing rent is high enough such that only lawyers get retail square footage, then clearly property should be taxed as such. That's the value of the land. But then more development will happen, eventually reaching an equilibrium.

Saying rent isn't quite right. These land value taxes are usually taxed on potential as zoned. Empty land isn't bringing in rent. The whole point of these land value tax schemes is to tax it based on its highest zoned value so you force (re)development of the highest use case.

> Let's say because of rising taxes, a bakery or a shop has closed and a lawyers office has opened in that spot.

Taxes will rise in neighborhoods where improvements have happened. To determine the neighborhood is improving, we need a metric, for instance traffic. We expect the donut shop in an improved neighborhood to see increased traffic and more sales. If traffic doesn't increase then land value hasn't actually increased and the taxes have been applied inappropriately. Maybe we can come up with a better indicating mechanism for land value, I admit I have not read Henry George's work.

In your example, bakeries usually don't own land in highly desirable cities, they lease it from the owner. I think that's fine. The incentives here are against huge capital behemoths that can buy land and afford not to develop it, costing the cities in potential consumer revenue, population growth, broken windows theory, etc. Lawyers might own the building and be able to afford the tax. I think it's fine to expect bakers cannot afford buildings in very expensive cities (unless you're some luxury brand). If owners are incentivized to develop and lease their properties, there should be more supply for a cheaper rental market.

"but ongoing costs to the taxpayer to provide the infrastructure and services that give it this value and potential"

Empty land isn't using any of those things. Any future improvement would use those things and be taxed accordingly. If you're concerned about infrastructure costs, the. You want to use a per capita tax or the current property tax that taxes the improvements (where people work or live) since they are using the infrastructure.

We already tax utility users based on “usage”, but the cost to provide service is more like y=mx+b with a very large b and small m. Charging based on usage is just a way to allocate the large fixed costs amongst your users. (Electricity may be the exception with higher variable costs, but still significant fixed costs.)

But even if you’re not using them, the utility services (water, power, sewer) still have to pass by the property. Power lines and poles are there, they have to be maintained, your water main can’t be leaking, etc. There are real costs to do all that.

> Empty land isn't using any of those things

It doesn't have to use them to benefit from their proximity. Land in the middle of a barren desert is usually worth far less than a similar piece of land near a populous city.

Sure, your point? The government benefits on the higher sale tax revenue too. It's only a true benefit when something is realized. The densest areas of many cities are seeing decreases in population, so maybe that infrastructure isn't the main driver of value.

The point of a land value tax is to incentivise that realisation. In prosperous cities the reduction is inner city population is due to land being used commercially, and maybe up to a point that's fine. You can always adjust the value tax based on type of actual usage. The important thing is that it's used efficiently in a way that benefits the community.

"In prosperous cities"

Yeah, but we are seeing that many cities are not prosperous and are seeing population reductions. You can't will the creation of value. Just because it gets taxed like the land will create value doesn't mean it actually will.

"in a way that benefits the community."

These taxes don't guarantee this at all. There could be any number of uses, many of which could be detrimental or wasteful (and this will vary based on perspective as not everyone wants the same thing).

So we're paying for all those facilities, infrastructure and so on, and it's going to waste. That's inefficient. We want that land being used productively, contributing to the economy, making profits which pay taxes, to pay for these services.

You're leaving out the usage/ capacity side. If you actually fill all the empty spaces, you'll need to add additional facilities. Current facility usage is usually near capacity already.

That's not universally true. The sewer system in my town was overbuilt in anticipation of a development that fell through. That's why sewer / water bonds are typically up for vote separately from property taxes because there's such an interplay with development.

That's still cheap when you're looking at the whole picture. Sewer is much cheaper than police, EMS, road construction/maintenance, schools, etc.

Sure, to some extent, but overall it's clearly in our interests to have that land be used productively. If we want some land to be fallow, as policy, again there are better options than it just being underdeveloped, such as park land or gardens.

"but overall it's clearly in our interests to have that land be used productively."

Sure, but the real question is what does one consider productive enough? Should we tax a single family home at the rate of an apartment building just because the zoning changed? My opinion is that this type of scheme will be abused to force some people out of their homes in the name of benefiting society. My guess is developers and apartment companies can "persuade" politicians in many areas to change zoning to force people out, possibly the "wrong" kinds of people.

If you want productive uses, then you'd be better off charging a vacancy tax to already developed property. You wouldn't be able to fill all those spaces because the physical economy has shrunk, or people don't want to live/work in a rundown area, etc. There's plenty of open commercial real estate around me. The problem is you don't have customers to support the businesses that already exist.

If you really want to micromanage property types you could always adjust the land value tax based on actual usage.

Wouldn't that effectively punish the owner for improving the property?

A tax purely on the land has the same justification as a windfall tax. The value goes up or down independently of any action of the owner. i.e. They didn't do anything to deserve the increase in their wealth. The value comes from what the land is surrounded by.

The current situation can punish the owner for improving the property, because you pay based on the overall value of your house. A new roof and siding could make your home more valuable, increasing your tax. Land value tax would make your individual changes a non-factor.

It could instead leave you on the hook for increases in the desirability of the neighborhood which you have no say in. So it would mean that homeowners get screwed even harder if their neighborhood gets gentrified.

The steelman for it is that society should incentivize denser development of more desirable land, by disincentivizing maintaining sparse development of it.

> screwed even harder if their neighborhood gets gentrified.

Meaning, their land value and therefore wealth has gone up. Many people would love to be "screwed" like this, and in fact very hard at getting into the position amenable to "screwing."

Their wealth goes up but they can only access that wealth by selling. And in the meantime, if they don’t sell, simply living on the property becomes increasingly expensive. So yes, they won’t be walking away with nothing, but no, I can’t imagine the too many people enthused about the idea that a home that was affordable when they bought it is no longer affordable because the neighborhood is nicer.

If the property has gone up in value, the area has clearly changed. Either they don't like the changes and can cash out their unearned windfall, or they do like the changes and can spend it.

As a class, real property owners are wealthier and have means relative to people who don't own real property. The idea that they're some oppressed underclass is ridiculous.

> society should incentivize denser development of more desirable land, by disincentivizing maintaining sparse development of it.

That is exactly what a land value tax does, in a negative way. It disincentivizes buying land in a desirable neighborhood and then doing nothing with it, waiting for prices to rise.

With capital value taxation (the other alternative), a person doing that pays less tax than someone providing buildings for people to live in or businesses to operate in. So they can do it for longer.

Because any buildings on the land are not taxed, construction is not disincentivized. Well, it wouldn't be, if permitting were not insane...

So basically own nothing and be happy? What then drives people to create any meaningful value to the economy?

Own nothing and be happy, but pay taxes on all the things you don’t own, or else.

Don't threaten me with a good time :)

Cheekiness aside, you'll find the overlap of people who support both a land value tax and a wealth tax to almost be a circle.

I don't think that's true. There's a reason many LVT'ers are called (and consider themselves) "single-taxers."

This isn't true. Land Value Tax is more regressive than wealth tax. There is a large contingent of Georgists who call themselves geolibertarians who basically support land value tax as the only tax that has a moral basis. They are fine with the inequality that comes from such a class (Middle class people often have 400% of their net worth in land/real estate at certain points in their lives, but high wealth people have portfolio's that are roughly 13% real estate). If you're taxing one person on 400% of their net worth and one person on 13% of their net worth that functions very differently to a wealth tax.

But property tax already exists, so apparently that regressive nature is fine. And middle class people mostly own land that’s been improved. It’s unimproved land that would be taxed much more with a land value tax. I don’t think it’s obvious which land owners would pay more or less - it depends on the structure of the tax and the relative value of their land vs the improvements on it.

The overlap vd of people with no wealth and those that want to be taxed on it would be more of a circle.

I do not support Wealth taxes. I would heartily support a land value tax.

Though popularised by George it was first rigourously analysed by Adam Smith in the Wealth of Nations.

We are, ultimately, all tenants of our sovereign. Our sovereign protects us from enemies both foreign and domestic. They do not protect our incomes, or our assets but by and large most societies do agree that it is a matter of fact that can be arbitrated in a dispute as to who owns which piece of land.

Because people choose to build upon it, but the land itself was always there regardless of human action.

The arguments for an LVT fall into both economic & moral categories. The economic argument is that the elasticity for land is zero. It's always there, always will be there, and no human action is going to change that (barring things like landfill, which are a literal edge case that doesn't matter much in the grand scheme of land area). The only economic questions are "Who owns the land?", "What kind of returns can be generated from it?" and "How is it distributed?" As a result, a tax on land has zero deadweight loss. Most taxes reduce economic activity by disincentivizing the transaction they're taxing; as a result, productive activity that would've occurred without the tax never occurs. Land is different. The land will still be owned, just by different people, regardless of how high it is taxed. That means that the government can raise revenue without curtailing economic activity.

The moral argument is that nobody built the land out of their own labor, they only conquered it. And so what right do they have to monopoly returns from its ownership? Land was commons that existed before humanity, and so returns from ownership of it should go back to the commons, in the form of funding (presumably democratically elected) government and public-sector improvements that raise the value of the land for all.

Property on the land is different, in that it is built through human labor & ingenuity, and the returns to doing that should accrue to the people who actually do it (or compensate them for creating the built infrastructure).

> The land will still be owned, just by different people, regardless of how high it is taxed. That means that the government can raise revenue without curtailing economic activity.

And this is a fantasy. Some land is marginal: Taxing it more would reduce the profit anyone could make from it to nothing, leading to empty lots that aren't owned by anyone because the last owners were delinquent on taxes to the point the local government took the land from them and is now trying to auction it off. Look at houses in Detroit being sold for a dollar for an example of this. The city makes no money from those.

https://99wfmk.com/detroits-one-dollar-houses/

> It sounds like a good deal...a dollar for an old decrepit house – but then what? Then you have to pay for all the repairs, renovations, excavation (if needed), property taxes, lawn work.....so you fork out just one whole dollar but you wind up spending no less than six figures getting it in shape. Whether you plan to keep it or sell it is a moot point. You're still out that money.

Plus:

> The moral argument is that nobody built the land out of their own labor, they only conquered it.

Turn a piece of land into a farm and say that.

That's why the tax is in proportion to the unimproved value of the land. Marginal land has almost zero value; therefore it will have almost zero tax. The landowner gets to keep rent due from any improvements (like structures) on the land.

> That's why the tax is in proportion to the unimproved value of the land.

https://news.ycombinator.com/item?id=37913341

> The idea is that you tax the land only as if it was being used for best use - so that every property is encouraged to develop to maximum density.

>Marginal land is land that has little or no agricultural or industrial value.

So by definition, the "best use" isn't very valuable. I suppose the definition doesn't strictly include residential usage, but it's not hard to see that some land is inherently less valuable for residential as well, because location matters.

In practice a LVT is usually applied statistically. You run a regression on the features of the buildings across all parcels, determine a coefficient of value for various structures and usages (eg. multifamily is worth $X in cash flow for a certain size apartment, extra bedroom in a SFH is worth $Y, pool is worth $Z), subtract out the computed value of the structure, and then smooth across all properties in a given local area to compute the value of the land alone. That's what you're taxed on.

"Tax the land as if was being used for best use" is an oversimplification. The government can't realistically know what the best use of land is, or what value that would command. That's for the market to decide. But the point of an LVT is that you're taxed on the base value of the land (as measured by how much profit your neighbors are making off it), and so only usages of the land that are better than average remain profitable. If none of your neighbors can turn a profit on it either, tax will be negligible.

> If you want to tax properties, why not taxing both the land and what is build upon it?

That's Detroit's plan.