How so? It seems like it would lead people to asses things at the "correct" value (eg the value at which you would actually sell the asset). So if you buy an asset for less than it is worth to you then you still have a valuable asset, you just need to pay a tax on that asset. Where this would obviously break down is with personal property that has some sentimental value. It would be unjust for people to either have to sell a treasured family heirloom or else pay an exorbitant tax to avoid selling it, but if restricted to domains where that is not a consideration (like patents or other corporate assets) it seems like a good system to me.
The price you would be willing to sell at is not the same thing as the value of the property. I might only be willing to sell my house for $500k, but that's not the value of my house because there are no buyers at that price. The value is supposed to represent the price at which you could actually find a buyer for, so any listed valuations that people _aren't_ buying the property for are too high.
So say you wouldn't sell your house for less than 500k but similar houses in your area are only selling for 350k. You would probably declare the value at $350k to minimize your taxes. If someone comes along and offers you $400k then you can either:
1. Sell to them, which you won't because 400 < 500
2. Update the declared value to 400k (and payer a higher tax)
It might additionally have the opposite effect of _discouraging_ anybody from attempting to buy your home at the low price, because they'll know it will likely be a waste of their time and you'll just update the number (and then lower it again at some point in the future). In that way it may have the opposite effect of making declared valuations significantly lower than they should be because everybody knows they're fake.
> You would probably declare the value at $350k to minimize your taxes.
Why wouldn't I just declare it to be $1? Everybody would know that's not a serious valuation, so in the best case they don't bother making any offers and I pay zero taxes. In the worst case I receive an offer and simply update the value to be slightly higher than that, which presumably would be close to the valuation an assessment would determine anyway.
You can but them someone will immediately offer to buy it and you would have to raise the declared value until they stopped trying to buy it (ie to the actual market value). Presumably you would also not be allowed to just immediately lower the declared value again after. Or maybe buyers can make "standing" offers that are valid for 1 year so you can't change the declared value while there is an outstanding offer for more than that.
> The whole point of the idea is that you're required to sell it for the listed price
I would phrase it differently. The point is create conditions such that the equilibrium declared value is aligned with the market value. And more generally, to try and ensure assets are allocated to their highest value uses.
However, I actually don't think this is a workable system for owner-occupied housing for all sorts of practical and political reasons. I brought it up in the context of patents because I think it does make sense for intangible, yet hard to value corporate assets like patents. Ideally you want patents and other IP to be owned by whoever can get the most value out of them.
Will they? Making actual offers isn't a free process, if they know I'm not serious about selling and will obviously just bump the price instead, then setting such a low price can deter them from attempting to buy it at all. Effectively it just becomes the "I'm not selling" signal and encourages them to not waste their time. It's also not like they care about the number I'm listing since it's not a price they'll get to pay anyway, they obviously know that if they offer $1 they're going to be turned down.
Additionally, like I mentioned the worst thing that happens is I have to bump the price up when I get an offer, there's still no real disadvantage to putting down $1 as the price. There's no incentive for me to put down a real assessment of value because there's always the chance nobody will try to buy it anyway, and if I get lucky then I don't pay any tax.
> The point is create conditions such that the equilibrium declared value is aligned with the market value. And more generally, to try and ensure assets are allocated to their highest value uses.
Sure, I'm saying your system doesn't work if there's no risk of your thing being bought for the price you declare.
> you would have to raise the declared value until they stopped trying to buy it (ie to the actual market value)
Going back to the original point, that's not market value, that's above market value.
The other thing you can say about that is that it's guaranteed to assess property at values that are too high. You buy things when their market price is less than the amount you'd be willing to sell them for. This is a scheme to simultaneously tax the market value of the property and the gains from trade that made someone willing to buy it at all.