[1] In practice and as a primary means of property taxation. For example, proponents of wealth taxes talk about Switzerland, but the percentage of wealth that gets taxed there is quite small and nowhere near what proposals for wealth taxes in the US are aiming for. In other words, what's a good country to look at to see LVT used effectively?
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
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.
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.
It might in theory make a difference when considering replacing a 40 story building with a 42 story one, but in practice you really don’t see that kind of construction project. In that context pushing for larger jumps before replacement might actually be economically and environmentally beneficial.
Low property tax (because it's unimproved) plus real estate speculation.
The problem, just like the source says, is that the tax is too low, not mention the absolute disaster that is Prop 13 in California.
I could get on board with this if cost to build and demolish were considered. We have a lot of SFHs that don't make sense to turn into town homes yet because the value of the home on property + demolition costs + cost to build new townhomes on property is greater than what those townhomes could sell for.
More to the point, a blind land value tax could create a lot of waste through otherwise unproductive land repurposing (only productive because the tax makes it so).
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.
It seems to me to be the opposite. The mortgage interest tax deduction is a massive regressive government subsidy for homeowners, and penalizes younger people who rent or cannot afford to buy a home.
So I’m curious what suggests to you that renters have political power. To me it seems the opposite - tax policy massively prefers owners over renters.
Zoning usually dictates what's allowed and is indifferent to tax rates
All zoning is exclusionary to my knowledge. That's the entire point. It's not necessary but it exists because it exists. And, it's sticky. It was established most likely when the entire city was raw land and undeveloped; so it served as a plan for development. There was no NIMBY because people were building their BY. Because there was a plan, you could decide where you wanted to build that BY.
Once you have developed the land, raised family, lived in a house for decade(s), and the city around you develops and changes. Now, your property maybe better utilized as a multifamily complex or a nuclear reactor, or anything really. But, it's your home and you shouldn't be taxed out of it. Rezoning as a process is may difficult and probably should be. There's a lot of stakeholders/neighbors who are impacted by a change. They should have some say. It just so happens that those people who bought a single family house in a single family neighborhood tend to prefer it to stay that way so they get called NIMBY but it's a completely rational perspective to have if you were in their shoes. Thus, an introduction of this tax only serves to displace the current owners who can not afford the new tax bill and does nothing to change the actual zoning. So the result is, richer people with bigger tax-bill budgets move in and your even further into the NIMBYism trap not even realizing you're in a zoning trap.
If you open up the zoning (and perhaps the building restrictions), the best and highest uses can actually prevail.
Japanese-style inclusionary zoning splits the difference nicely between making sure people don't live next to loud, potentially dangerous industry and allowing lots of mixed-use, human scale developments of varying density.
http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
Japan home ownership: 61%
Yet there is such a housing crisis in the states due to the "zoning" bogeyman
A mortgage acts like this too and if the tax was insignificant by comparison it would seem so fair but at least a mortgage can eventually be paid off in full. Then the bank no longer has an interest but the taxman never stops.
Taxes always go up but economic fortunes do not, when these become out-of-phase the original purpose is fulfilled.
This is what makes people demolish perfectly good buildings to reduce the taxable value of their property while they try to hold on to the land during a downturn.
Mortgages don't make people act like this.
For the greatest prosperity of the average citizens in a sustainable system, you tax nothing but commerce.
The purpose of taxing the income or property of average citizens is to repress opportunity for the majority.
This is by design.
We pay high property taxes (which are split value taxes, by the way) relative to other rural areas in the region. That is, we are taxed for the virtue of owning relatively large plots of land (for our area) that come with the protections afforded by the zoning laws--even though our sparsely-developed properties and the characteristics thereof provide benefit to all in our area, including city dwellers (e.g. readily available and clean drinking water, maintaining a healthy ecosystem), for which a value could be assessed that would result in lowering our taxes.
That said, I purchased the property specifically for the Resource Conservation zoning protections, as did my neighbors--and we'd have the zoning laws set no other way regardless of the cost of doing so.
Trying to jam more people into the same finite amount of space is not a sustainable solution (here's looking at you, Bay Area). A byproduct of the recent pandemic was that a significant number of people beta tested relying on technology to get their job done independent of where they were physically located. I would argue it generally worked quite well (though not in all cases).
Though a more ambitious plan than merely increasing taxes and hoping that more housing is developed, why not incentivize people to move to less populated area with the intent of promoting a more-even distribution of population density over time; incentivize medium and large businesses to either permit remote work or establish and maintain local/regional offices if remote work is not conducive to their lines of business or their corporate culture; and fund timely development of new and improvement of existing infrastructure that would make previous two goals achievable?
USA has about 2.5 billion acres. 1/4 acre per person in an average area tax free is reasonable.
Electricity and gas and internet are private companies using an easement.
Police and fire can easily be funded by sales tax, just like the public transit. Alternatively, land owners can voluntarily pay yearly for police and fire, or opt-out just like people are not forced by government to buy homeowner insurance.
For state an local governments this is mostly true but even there the federal government helps out.
What you want is for the wealthy to pay for the poor and old and those without much wealth or income.
You're still giving the "it's property" framing waaay more credit than it's due. Remember, granting someone exclusivity to a contested resource means preventing other people who would like to use the resource from using the resource. It's entirely reasonable for those people, represented in aggregate by the government, to ask for compensation in return, even if the government provided the landowner no additional services beyond the exclusivity.
The entire concept of "owning" land is just a hustle to argue against paying taxes on it.
I don't see how that's relevant, not all land is equally well suited for housing, especially among the elderly who are likely to need some sort of living assistance and regular access to healthcare.
property taxes are terrible for old people. you should be able to buy a reasonable amount of land tax free.
I think something like California's Prop 13 that puts a cap on property tax increases is a better idea -- but it should only apply to owner occupied primary residences, not second homes or investment properties.
Prop 13 is one of the worst ideas in taxation ever. It would be better just to let the aged and disabled freely defer property taxes beyond a certain, income-based level (and maybe also to let other people do the same with certain limits on total deferred amount relative to assessed value for time-unlimited deferrals, and total time for value-unlimited deferrals.)
Most old do not live in assisted care. ANd healthcare is independent of land ownership.
CA is extremely screwed up on how it taxes. I used to live in Cupertino where some people were paying taxes on 2 million dollar lots valued at 100k.
The more reasonable approach to this would be discounts for the primary residence, and possibly discounts for populated units, depending on if you are targeting home owners / overall population and housing cost.
Quarter acre per family might make sense across the US as a whole with large swathes of empty land across the middle, but it makes no sense if you look at the average individual given the percentage of the country living in urban areas.
A fixed mille-rate results in taxes going up as value goes up. This might be difficult to plan for and manage. However, many cities will simply put a lien on the property and collect when the property is sold/transferred/person dies.
However, this isn't necessarily how things need to be done. In New Zealand, the mille-rate is set to clear the budget. That way, the mille-rate changes with the city's budget, not valuations.
If the city wants to do more, they put it into the budget and say "do you want to pay for it?". Then the mille-rate is changed and everyone's taxes change.
If your house changes value, your taxes don't change! Unless your neighborhood changes its relative valuation, then it might go up or down.
They mostly cater to the existing residents that own homes and partake in municipal voting.
They'll stop creating new housing developments and put massive permitting fees on proposals for new construction.
In fact, my current area (Cobb county, GA) nimbys keep trying to block assisted living residences. The argument is that old people move in, don’t pay into local funds, but the burden is hoisted on other younger families instead.
The lack of property/land value taxes hurts anyone who isn't retired. I care much more about poor young people who get priced out of moving to a better job in the city than an old person who is "forced" to sell their multi-million dollar single family home. If an old person insists on living in a place where they can't afford property taxes, there are plenty of people willing to pay their property taxes until they pass in exchange for a stake in equity of their home.
When LVT is used to fund UBI, that ability is automatic: the "break even" point (where your taxes minus dividends are zero) would represent you owning a "reasonable amount of land" (as measured by value). If you own more than that, you pay for it; if you own less than that, you're paid for it.
A quarter acre in Palo Alto, though?
Examples are California Tax Postponement Program and New Jersey senior freeze.
Land value tax incentivises turning a single-family home into a multi-unit building. Property tax explicitly discourages that.
One taxes the land and the building(s) on it. The other only taxes the former.
In practice, this means that while property taxes and land value taxes both penalize speculation, LVTs more precisely do so, without the side effect property taxes have of penalizing construction.
> However better-looking homes are then a signal that drive up demand for (and therefore price of) land so ultimately it seems LVT does punish improvements if only indirectly.
Even assuming that effect does happen, it'd be considerably worse under a property tax.
So your answer is to dismiss my position without evidence? Your point that property tax is worse than LVT isn't justified by your claim. If land values are determined by government assessment like property values are, then you're still paying property tax, albeit with an obfuscated input for improvement in the calculation which may be higher or lower or just the same as a regular property tax.
Edit: As a weird example, subtracting what it would cost to build my California house from its current market value gives a value for the lot far lower than the actual market price of an empty lot in this location. This isn't just due to the depreciation of the construction (2012) but to market inefficiencies. It's actually the norm in our town. Only developers with economies of scale can really afford to build here, modulo a few wealthy families who are building their dream home without concern for ROI.
is routinely done in countries in which variants of land value tax are implemented.
Retrofitting or tearing down a house in California is expensive. Particularly if it's an old house where there could be e.g. lead or asbestos. Clean lots (presuming it wasn't previously a laundromat) command a value from the baggage they clearly don't bring.
Isn't that like saying income tax disincentives people from making more money.
"The high cost of property taxes have long pushed away speculative investors as it has pushed the carrying cost beyond what is profitable to hold as a passive investment long-term."
Alright, so now the speculative buyers are gone and we're dealing with ordinary home buyers that actually occupy their home. These genuine owners are paying high property taxes. Next:
"This has led to is a glut of high quality housing at very low prices. The amount of money one needs to save up for a downpayment in Chicago on a 2BR in the city center is 5x lower than in San Francisco or New York."
How does specifically a high property tax for genuine buyers lead to lower prices? Because of less demand from speculators? If so, why not just get rid of speculative buying (simply make it illegal)? What does it have to do with property tax for ordinary citizens?
And what on earth does Chicago have to do with San Francisco or New York?
Speculators are forced to sell, because the cost of keeping too many houses locked down is high and starts to show on their books, so they have to explain it to the investors, that go away unsatisfied, and so on.
Of course, that only makes a difference if there are many unused houses.
Also the idea is that as prices fall, the absolute value of the tax falls, but speculators still do not have a motivation to buy them, because the price isn't expected to rise.
> If so, why not just get rid of speculative buying (simply make it illegal)?
Because you will need an entire book of rules, that lawyers will use to get a lot of money, and rich people will use to make the tax not apply to them. (But there are some simple rules that can only be gamed a bit. Maybe those are enough.)
Nobody is willing to pay as much up front for housing that has higher ongoing costs.
So how come there's ample low cost high quality housing in Chicago?
The same remark applies to home owners. Your property won't rise in value, so why buy it? You must really want to live in the area, I guess.
And yes, I know the point of a house is to live in it, but almost everywhere it has a double function in also being an appreciating retirement fund.
For now my theory is that a lot of speculative supply got dumped, leading to a one time effect.
Obama should have let the bankers twist in the wind when the citizenry was out for blood in 2008. They repaid him by channeling money to Republicans. Put them all in jail.
In general, as costs go up, the more there is incentive to try to cater to wealthier customers.
Homeowners are concerned with the size of the deposit required, the size of the loan needed, and ongoing costs (inc taxes). This tax will likely mean a smaller deposit and loan than would otherwise be the case. This could be offset by higher ongoing costs by the property tax.
For a speculator, they have the same concerns as a homeowner, but most significantly the potential for capital gains. Yield also comes into it, but let's face it - without strong capital gains no one would be paying these prices (homeowners included).
Lower potential for capital gains effects speculator demand more than homeowner demand.
Not if the tax base goes down. Which is the point.
> If so, why not just get rid of speculative buying (simply make it illegal)?
This makes the lawyer rich too. It’s not a smash-and-grab at a Walgreens. You can’t put real estate cops on every deal. If price is expected to go up, people will speculate.
I also doubt that developers would bother with a market like the one described. Why not go to some other state/city where construction costs are low and property taxes are also low?
General contractors don't just do general contracting, and it's not like tech where you can pick up and move anywhere there's internet.
Why not make property tax cumulative with the amount of property owned and impose a progressive tax here? It would have an equalizing effect on ownership and speculation would be less attractive for those that already own o lot of properties.
Sure, you have to fix a lot of holes to circumvent taxes so that not every company creates a large amount of holdings, but such strategies are a problem with every tax.
To now say a high property tax would scare away investors doesn't sound workable at all.
This was such a laughable comparison because BOTH of these cities have high property taxes compared with more affordable cities in other states.
I rented a house once in West Portal where the landlord was paying property taxes on the 1970 value of the home, which was something like $70k. The owner was gifted this house and taxes basis from their parents, who originally bought it. The tax bill came out to just a few thousand dollars as of 2020.
Meanwhile my neighbor at the time bought their house for $3m and was paying something like $35k.
I thought about writing the property taxes in front of each house on the sidewalk with sidewalk chalk to make a point how messed up this tax policy is, but I opted instead to keep the peace and do nothing.
This loophole is used by families in CA as a way to pass assets to their heirs. The worst part is the tax rate also gets passed down, but one generation tops.
As a result, my neighbor has a house with an effective tax rate of <0.1% ($3,000/yr on a single family house worth >$3M).
I'm less familiar with San Francisco, but I wouldn't be surprised if they had low property taxes due to Prop 13.
For instance, there's loads of large family houses being occupied by empty-nesters, while those trying to raise a young family are squashed into undersized townhouses.
Shifting the cost-base from "pay a huge mortgage and a tiny property tax" to "pay a moderate mortgage and an moderate property tax" means it's more likely to be worth the hassle of moving to a smaller house when you no longer need the space.
If the tax is high in a location where they think they can flip the house for a 50% gain in a few years that's still better profit than a lower tax in a place where they'll gain 5% in a few years. So the property tax doesn't, all by itself, matter to the speculator. It's just a cost of doing business.
A high property tax does, however, hurt the person who just wants a house to live in it and doesn't care about being a speculator.
How do you propose to do that in the US?
A tremendous amount of our problems, from high rent to gridlock, can be traced back to this decision.
Low mortgage rates cause house values to go up because value is based on what an affordable monthly payment for that house.
Low rates means value goes up to equalize payments which is mostly superfluous for people with only one home and good for anyone with investment property but it causes a 20% down payment to be an unsurmountable barrier to entry for those looking to enter the market.
Home ownership is one if not the best way for families to generationally escape poverty.
Not any more.
Ok you've forced a bunch of house painters and restaurant owners to sell and move out. More tech workers buy the houses, more large chains buy the retail space, now what?
No, it didn't. California just kept adding taxes everywhere else to make up the difference and still had an annual deficit most of the 13 years I lived there.
> It saved seniors from losing their houses
Why are seniors magically allowed to be immune to basic market forces when no one else is?
Angry voters wanted a "tax revolt". Jerry Brown's Prop 8, on the same ballot, would have given homeowners a specific break but they wanted blood.
As a result, cities have an incentive to build commercial property over residential homes. The result is that the people working in those offices are competing for limited residential space (leading to high prices) and often have to settle for long commutes (leading to gridlock).
When people say that the US is a "low tax economy" they seem to forget property taxes, which make the effective rate in almost _all_ US states higher than the UK (and much of the rest of Europe) if you own a home. It's just a "poor value for money" economy instead.
Unlike first-time buyers, though, for whom asset inflation is itself strictly a tax (paid by them, to seniors, but far more so, banks and investors), price inflation of an asset you already hold is free money.
It's highly distortionary.
> Property taxes discourage construction, maintenance, and repair because taxes increase with improvements. LVT is not based on how land is used.
From https://www.strongtowns.org/journal/2019/3/8/if-the-land-tax...
> The problem is that the land tax component of a traditional property tax is too small to deter land speculation. Although property taxes vary from place to place, they are typically between 1% and 2% of the property's total value paid annually. If inflation is low, then for longtime property owners, this amounts to roughly the same cost as if they paid a one-time sales tax on the property of between 10% and 20%. Thus, the property tax applied to building values inflates their price by between 10% and 20%. And the property tax applied to land value allows 80% to 90% of publicly-created land value to accrue as a windfall to landowners. Thus, typical land taxes are too weak to discourage land speculation.
Etc. https://duckduckgo.com/?q=economist+land+use+vs+property+tax...
Land value tax discourages holding vacant or under-built property, at the expense of lowering the cost of the land. This means existing homeowners won’t be able to sell their old homes for as much as they could if fewer surrounding properties are developed (more modern, better built, larger, with more units), because their old home is closer to being worth the raw value of the land.
If you want to sell a $50,000 home for $500,000 because it sits on land that grew from being worth $10,000 to $450,000, then a LVT is terrible for you: you need to put in actual work improving your property rather than just sitting on a decrepit old building and selling it for a profit. The problem in the US is that the voters who mostly own their home can’t stomach their home value decreasing: that reduces their paper wealth as well as their ability to take out loans and second mortgages for things like college or car payments. So politically it’s a hard solution to push for (even if, on net, it would help the community be stronger).
Check out all the different tax rates that Wellington, New Zealand applies to a property [1]. I count 50!
[1] https://wellington.govt.nz/property-rates-and-building/rates...
First we came into battle with the school district. They would not allow us to build apartments on the mall site because "renters don't contribute to property taxes for the school", even though the citizens of this town need rentals because not everyone can afford a home. It then came to light that the city had been paying the school district out of their operating budget... which is illegal, schools can only be funded by property taxes. But would any politician want to go to war with the school district because they had accidentally been paying them illegally with taxpayer dollars? No way, they'd be voted out for attacking schools. So the school district continues draining the operating budget from the city to this day, while also getting their share of property taxes.
Enter the county assessor. We went back through all the assessment records and discovered that the county assessor had not re-assessed the commercial properties in the area for 8 years... meanwhile jacking taxes up on single family homes annually. Essentially they were giving businesses a freeze on property taxes while shifting the burden onto homeowners. If the county wasn't reassessing commercial real estate, than our TIF development couldn't demonstrate growth as the taxes would not change! So we tried to shake the hornets nest and let the county and city know that their taxpayers were being taken advantage of...
What was the end result? Why had they not been reassessing commercial properties? Incompetence, the assessor was some idiot who was voted in because he had the "D" next to his name and did not know anything about assessing property taxes and argued that he was simply "too understaffed" to assess commercial properties for the last 10 years.
Now imagine a whole country where massive, expensive errors like this can play out without anyone noticing for nearly a decade... it's frightening how broken, corrupt, or incompetent our government is in the United States.
If anything, this sounds like a system working, and you doing a bit of whining. Yeah, there's political game playing, that's called the price of localism and democracy.
It's the exact opposite of the system working. It's people being given power because of their party rather than their qualification and it indicates a greater sickness in politics in which we have become binary sports fans rooting for our team no matter the cost or quality of the candidate.
To be fair I have no clue how broken property taxes are in Europe or Japan or other first world places, but this ordeal was eye opening to me having grown up assuming our local governments were held to a higher standard.
(Property taxes are a real problem where I live; we're an upper-middle-class enclave directly adjacent to the roughest part of Chicago, and affordability issues prevent people in Chicago from moving across the border to get our services. In the world we actually live in, annexing the Village I live in would make more public policy sense than raising property taxes, which gives you a sense of how clumsy those taxes are as an intervention.)
Take Texas as an example. Up until this last year at least, Texas had relatively low property values but high property taxes. But high property taxes on a $200,000 house aren't the end of the world.
But here's a big one: in Texas, seniors (65+) can defer their property taxes to be settled upon their death. This allows seniors to stay in their house if they really want but incentivizes seniors to downsize to avoid passing on that liability onto their children.
This is exactly what you want.
Compare that to California, for example. "But what about the Seniors?" led to Prop 13, which was a massive tax giveaway to Disney and affluent property holders. Capping property taxes deprives the state of taxes to fund services for no good reason.
Even worse, when your children inherit that house, they inherit the house on a stepped up basis (meaning they pay no capital gains tax and the capital tax base gets reset to the market value so if you sell immediately you won't pay any CG tax) and children and grandchildren can inherit the artifically low property tax rates.
New York has a different set of problems. A big one is that single family homes are subsidized. A $1m SFH will pay less than half the property tax of an equal value condo. And there's all sorts of caps on property taxes on SFHs too.
Additionally a $100m condo only pays about 10-15x the property tax of a $1m condo in NYC.
I'm a big fan of making property speculation less lucrative. High property taxes are a good thing. We need to stop giving away money under the auspices of "but what about the Seniors?"
Grandchild -> child is readjusted to market rate property taxes. Only parent -> child IFF both are and continue to be primary homes, does it receive the previous tax treatment.
Oh yeah, and the higher tax gets passed to the renter/leasee in higher rents and is a further disincentive to usage and investment.
However, don’t understand how you are linking constitutional protection of property ownership with tax rates… it is obviously not an absolute because we do pay property taxes… so this is a matter of degrees.
Free society chooses to find the right level. It does not imply negation of bill of rights…
Taxing and taxing higher on property is an assault on our ability or “own” property which is a freedom. Free societies have property ownership. Higher taxes whilst monetary devaluation seems like the system now wants to take away our ability to own things.
https://en.m.wikipedia.org/wiki/End_the_Fed
https://thehill.com/opinion/finance/570895-the-debate-we-sho...
The Georgist proposal is that you should own all the fruit of your personal labour (no income tax) but that the proceeds of the labour of society should be returned to society at large, through a land value tax that captures the rental value of the land.
The current status quo in most countries is that you can own a piece of land in the middle of a metropolis and do no labour, and yet reap significant reward. This is in essence a theft from society, as the citizens of the metropolis are labouring and building capital that creates value for the piece of land, yet the land-owner proportionally does very little to create value for their land. If you want to discourage theft and encourage keeping the fruits of your labour, the Georgist proposal is fantastic.
By taxing it, it provides disincentive for people to use it as an income generating or speculative asset.
We shouldn't view housing as a way to "get rich" but housing actually provides much better utility if it's price is stable and not prone to boom bust cycles. Since more people would be able to buy at any given time for their budget if prices stay low.
Yes, local politics is inherently more tailored, but it's also more vulnerable to conflicts of interest. Most local town councils are controlled by an oligopoly of the loudest homeowners who will vote down anything that is perceived to impact their home prices. The people who want affordable housing are not part of the voting quorum because they do not live or own the neighborhood.
In other words, don't say the quiet part out loud!
The point of this "margin" you mention gets rather deterministically and uniformily raised across the board.
I don't understand this. The owners have pay mortgage, taxes, insurance, and repairs. How can it be decoupled? The landlords I know would have to sell if they lost their renters, or if the rental income fell below a certain amount.
"x% LVT, y% Improvements tax on all properties with 50% reduction for your primary residence"
Would be great.
Especially if you were lured here by some VC who sold you a metric ton of variance and went to the bank with the drift. But hey, they're on your side with the whole zoning thing.
When you strip away the politics and bogus economics, house pricing is just the adult version of lunch table drama. That drama is actually a microcosm -- everyone in the cafeteria was selected at the real estate level.
You may have been raised to think you could be elite, but only a small minority can be. And if you're downvoting comments because they imply you're not...
It is cruel, but changing it would require far more drastic measures than proposed here.
Something like, if 10 or 20-year US Treasury bond pays more than you'd make being a landlord and you expect little to zero asset appreciation, then there is no incentive getting into real estate.
And it's possible to discourage house flipping by introducing some sort of friction. Like a high tax of some sort that is applied only if you sell sooner than X number of years (let's say 5)
Not necessarily. I've learned that at least in Toronto, the property tax rate is derived from the budget instead of the other way around. Let this article explain: https://torontoist.com/2016/12/how-property-taxes-work-toron...
> With sales and income taxes (which can only be levied provincially and federally) governments establish a tax rate, and then see how much money that brings in.
> Each year municipalities decide how much money they need to bring in, and then set their property tax rates accordingly, to ensure they collect the requisite sum. They start from the total they need to raise, in other words, and work backwards to figure out what tax rate will yield that amount.
Because of this "backward" system of tax calculation, if every single building doubled in value, the tax rate will be halved, and the city will receive the exact same revenue.
So if you raise the property tax rate more than what it should "naturally" be, what will you do with the budget surplus? What will you spend it on?
This a foundational industry that pitted the upstate New Yorkers and the agrarian Virginians against Alexander Hamilton at almost every corner of his life in the establishment of free markets disruptions with the Bank of New York and later the Department of Treasury.
Disruption can be seen in vertical markets of big cities and land creation like that of China in the South China Sea with man-made islands and expansion of territorial rights, but outside of that it's golden age is gone and the taxation will only become more intrusive for programs as our populous grows and the need to extract support for the expansion from the adult working class is through taxation.
Hopefully this isn't rambling, but rather insight into how perverse the market has become because of no more land, and way more people.
Any market will run into this fundamental problem. The issue is apriori to market facillitated resource allocation systems. Whatever unit you use to represent value or as the unit of transaction; it will inevitably centralize once demand starts outstripping supply, and rent extraction becomes an effective capital amplifier.
It's the magic of power laws. Everybody without capital assets pays everyone who has it. Those with it lift the prices by virtue of the fact they too are factored into average buying power amongst the potential set of transactors. That justifies higher asks, which decreases your non-capital owning members supply of transaction medium to devote to acquiring more capital which increases your rent extractors capability to diversify, rinse, repeat.
There. Is. No. Escape. Except estate taxes, assuming no immortal legal fictions. In the presence of such, you're hosed for recreating a level playing field for latecomers.
no matter how much your home is worth today or in ten years you and other in the community want a standard level of education, safety, and services from your local governments. this should be priced as a service based on the cost to provide it to the members of the community and not based on dynamically changing home values
property taxes should have a baseline cost to cover the essential services (schools, critical infrastructure, safety, etc.) that is the same for everyone (no exemptions) and a variable cost for the non-essential services (parks, beautification projects, etc.) (very limited exemptions) that can be based on the value of your home or land
this way the essential services are always funded and not impacted by economic downturns or property appraisal disputes/challenges and local governments don't have to play the game of increase the millage rate to make up costs for essential services
Also the claim that Chicago even has high property taxes for housing isn't really true. See here: https://www.rosenfeldinjurylawyers.com/news/chicago-property... and here: https://www.lincolninst.edu/sites/default/files/pubfiles/50-...
Currently trapped renting in a high property tax area because the monthly tax bill would be as high as the mortgage payment. This rent trap is starting to feel real permanent because any raise in the property tax just gets passed through to the renter when they raise the rent each year.
* https://taxfoundation.org/how-high-are-property-taxes-in-you... ** https://resources.oxfordeconomics.com/hubfs/Housing_affordab...
Yes, but this (obviously) doesn't mean this housing is more affordable. It's not. Sure the razor is less but the blades (i.e., taxes) count as well. Both come out of the same pocket, so to speak.
Housing prices are a function of affordability, and that is the collective sum of all associated payments, not just mortgage.
So while we're on the topic, this is why the "college loan debt means more people can't afford to buy" logic (?) doesn't work. Eliminate that debt and prices will go up. Why? Simple! Because the market can bear higher prices.
Roughly the same can be said for raising the minimum wage. Eventually, housing will eat that up as well. It just takes longer because leases are one-year cycles (and perhaps other local rent-increase limits).
What we need is more supply. The only way to truly lower prices is to increase supply. Anything else is smoke & mirrors.
- Some cities are already getting into vacancy taxes; here the problem seems to be enforcement. No one's going door to door in luxury condo buildings looking for empty ones.
- Can a tax due when a property is sold be based on how long the seller owned the property? If you lived there for 20 years and now you're moving to downsize, you pay a low rate. If you held it for 9 months to renovate and flip it, pay a high rate.
- Can a tax rate due when a property is sold be based on the number of homes the seller has been purchased in the past 5 years? If you've been a resident homeowner, low rate. If you're a development company bought subdivision land and is now able to sell dozens of houses, low rate. If you're a speculator who has bought several homes, and are flipping them, high rate.
Like you pointed out vacancy taxes are very difficult to actually enforce.
If taxes are based on how long you have owned the property maybe instead of selling the property I give you a transferable 20 year rent to own lease or create a corporation that owns the property and sell you that corporation so that the ownership never changes.
If taxes are based on how many properties you purchase in a year then maybe you create a separate corporation that purchases each property. No single entity has purchased more than one home.
I am not a lawyer and these examples probably aren't that good, but I think you get the point. The simpler the rules are the harder they are to work around.
I agree that simpler rules are generally harder to work around.
_However_, I notice that argument is almost always made to claim that governments shouldn't try to change behavior in line with the preferences of their electorate. Tax laws have loopholes, regulations have loopholes and push jobs and industries overseas, etc. The logical end point seems to be that democratic processes are doomed to be ineffective and we should just trust everything to the invisible hand of the market.
What if the real problem is that the mindset that improving policy is so hard that governments shouldn't even try, itself dooms us to bad policies?
What if 20 years ago we had all said, "making complex rules to identify and block spam emails is too hard; there will always be some way for the spammers to get through. So let's not waste resources on it."
If we're going to pick a means of collecting the same amount, encouraging good use of land and discouraging excess consumption seem like nice side effects.
https://tax.custhelp.com/app/answers/detail/a_id/571/~/i-don...
Economic mechanisms like this, which don't change anything in the physical world, almost never have any long-term impact, positive or negative, since the economy is a densely-connected network. Findings of large effects depend on stopping accounting somewhere, and you can get positive or negative findings depending on where you stop.
Money juggling is a great distraction from what really matters: physical quantities and actions.
Unless you're paying cash, most people think in terms of what their monthly payment will be. So driving down the price may not make any particular house any more affordable.
At maximum I agree about taxing homes depending on their energy consumption (all sources) to encourage modern house development. But definitively not high taxes on properties. I'm Italian and I've seen the effect of them destroying the market AND pushing people toward crappier and crappier homes. It's not just a personal idea.
In other words, the assetless classes support taxing those with earned fixed assets.
When reframed this way, the article reads to me as a high falutin petty and bitter whine.
All taxes are theft. The only justifiable tax is a tax on consumption and perhaps a tax on children because population increases exponentially. That would take care of all the bundle of taxes and simplify the tax code.
However the arguments feels defective because it uses Chicago as an example. Surely the reason housing is plentiful and affordable in that city is because it has been slowly depopulating for decades and it currently only 75% as populous as it was at its peak.
1. The absolutely staggering incomes at the top top end in NYC make income taxes a more effective revenue source.
2. In addition to property taxes, if you own an apartment in a building, there are a lot of other monthly costs. As I’m writing to this, it occurs to me that they may be completely equivalent to the maintenance costs on a house, but I suspect that condo and co-op boards are not nearly that efficient.
Keeps the riffraff away...and me...but they can afford their roads so...
My in-laws spend more than that but their home is worth more. They've owned it free and clear for like 20 years but they are getting out this year.
Their city used to be full of families, much higher values, lots of great local businesses and some big business headquarters. That's all gone and it's not desirable at all.
The prices are like that due to the labor market and that we've been a blue collar city for the longest time.
https://web.archive.org/web/20200822170417/https://brooock.c...
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FWIW: Chicago has high property tax rate and it does seem to correlate to relatively steady median price movements.
But that is just one example…
There are likely other factors at play in Chicago as well: number of units of supply per capita and quality of public transportation come to mind as two that might have some bearing on housing prices.
I don't own any property myself and am sympathetic to the idea of raising property tax, but many arguments for LVT/raising property taxes don't paint a convincing argument for why property owners should vote against their self interests.
In the United States, people have long seen real estate as a path to wealth (unlike Japan, for example), so it's difficult to reason that people's primary homes shouldn't be their escape hatch into retirement (e.g. the dream of someone buying a house in 1980s Palo Alto and selling it in 2022).
Try living in NY, where effective tax is between 3.5% and 5% (mine is 3.8 in the city of Rochester). It’s really hard for people to become homeowners at that rate, especially when the market goes up and an appraiser can show up at any time and re-assess your value and raise your taxes.
Also this is all of NY, not just Rochester, that has rates such as these.
The only way to actually make a good cheaper is to produce more of it.
But home owners don't want their homes to stop increasing in value.
If their was a bill in Congress to magically double the housing supply, I guarantee you it wouldn't pass.
Plus passing a property tax hike won't get you re elected.
With a citizen's dividend the opposite is true, private land ownership is forcing people into homelessness and taking away their contributions to their local community.
That same contract is also in force in the absence of a government monopoly on violence, with the difference that the "and die" part gets implemented far more frequently.
That's why anarchists (of any stripe - left or right) shouldn't be trusted, since what they are really aiming for is to destroy democratic institutions and replace them with an authoritarianism that enforces only their preferences.
In my view the govt necessarily has a monopoly on the use of force which is unavoidable. The important part of the "social contract" is when is it valid for the govt to use that force. The US Constitution originally laid out when the use of that force was moral. Using force to extract tax payment from property owners is not on that list and turns the govt into criminals operating under the color of the law which is terrible situation.
That is because it is Chicago and not SF. Not because of taxes.
The median income, the population density relative to the housing inventory, the weather, the demand, etc.
High property taxes will make housing cheaper, but it wouldn't make housing affordable. Sure that house might only costs 100k but with a 2k per month property tax, no one can afford it.
Property tax is possibly the worst way to fund the government. The only thing it's really good at is imposing a market force. It's largely regressive. In fact it's almost identical to gas tax.
All flat taxes are regressive.
Property tax can be regressive within a community, but can often be progressive within a county/state. Different towns can have different property tax rates. Rich people would actually prefer a higher property tax to a certain degree to keep the poor out. If the avg property tax is 2k a month, then everyone living there needs to make at least 6 figures.
The problem with it though is that it is a very regressive tax, especially in states that get the majority of their income from property tax as compared to income taxes (I'm looking at you Texas).
> They can be adjusted annually based off the needs of a local market
Or, in the case of Texas, a very large portion of property taxes in urban centers ends up as recapture and goes into a state-controlled slush fund. These portions (school taxes) are not actually adjusted at all.
> the money collected from property taxes doesn't evaporate from a local area
See above statement again. This may be true for city-level property taxes though.
> Retirees and low income individuals are often able to make cases to reduce their tax burden
I would disagree with this. There are exceptions written into the law that provide exemptions for some of these groups (which are often abused and disincentivise "good" use), but overall lower-end properties have many more comparables to set value based off of, and tends to be much closer to "market". These residents also don't tend to have the funds to many these arguments, and commission-based tax-appealers don't stand to make much money taking on these cases (the absolute dollar value is relatively low). Further, high-value properties without many comparables are the easiest ones to argue for lower tax burden on.
Finally, when property values actually do decrease (due to central bank action on interest rates, etc) it can be difficult to get the assessed value lowered without an actual sale.
Tldr, the current implementation of property taxes in many locations is extremely regressive.
This much is demonstrably false, at least where I live. I don't even pay property taxes to the city, I pay them to the county. There's no tie between those funds and my neighborhood. Then, a lot of the taxes are passed from the county up to the state as well, where it's further spread out.
The county is still a lot more local than a bank that might have an HQ across the country and is barely accountable even there. Also, most people's property taxes do go to their town or city, so your sample-of-one is not really a basis for a policy statement.
As such, there's a lot of discussion around lowering property taxes to help these retirees.
In my opinion? Fuck 'em. Property taxes are a brilliant method of perfectly progressive taxation: you can always choose to live in a cheaper home. If your home is so expensive that you can't afford the property tax, downgrade. Those of us who can't afford property will shed no tears.
Sure, the "fuck 'em" attitude has been used by NIMBYs forever. But now we're using it to deprioritise the existing residents that might've sculpted the community. E.g. "Artists who can't the 200% rent increase? Fuck 'em."
Most folks like some sense of stability with their housing. Not everyone's a 20 y/o digital nomad.
The problem is the zoning laws: we don’t allow people to let out part of their property, so they’re forced either to attempt to downsize into a non-existent market, or get evicted for not being able to afford their taxes.
>you can always choose to live in a cheaper home
Here also - you're oversimplifying. Yes, you can always choose to engage in all manner of frustrating, saddening, and burdensome life changes. But it's unfair to imply it is easy. You may cite the burdens of others as justification for forcing such a change, but it's a complicated, emotional, difficult, subjective argument that you do no justice by abbreviating into hostile quips. You sound like you're sure this group of people you're imagining is the enemy, and not simply equal human beings, some of whom may have voted in a selfish way on some policy that arguably increased the strain of the situation. It's simply not enough to justify your tone. It's unrealistic to attack every individual who does not always act in perfect unselfish harmony with the greater society, especially when such balance is impossible to objectively define. I.e. it is reasonable to expect individuals to make various concessions for society, but it is not reasonable to expect people not to fight as hard as they can to keep their home (even though it may ultimately be that they must lose it).
There are multiple ways to reduce the impact of the problem. All of them would reduce property values and some might displace existing homeowners. All redistribution is painful and surely people will lose out, the same way that savers lose purchasing power to inflation. Nevertheless, I think it is a necessary rebalance of a system that has been favoring owning over renting for too long.
(1) Tax on imputed rent when owning (imputed rent should not be pre-tax)
(2) Land Value Tax
(3) Remove the mortgage interest deduction
A caveat here is that many of these people vote against denser zoning in their neighborhood. So, in a way, the appreciation of their primary home is due to factors that they do control.
on balance, the housing price appreciation, and therefore tax burden, on "these people" is functionally entirely due to external macroeconomic factors, which you can clearly see on the Zillow Housing price index by typing in "New Hampshire" or any relevant zip code: https://www.zillow.com/home-values/
The average NH home increased $7k-$10k in value per year linearly for the last 10 years!
Then it increased $25k Jan '20 -> Jan '21.
Then it increased *$53k* Jan '21 -> Jan '22.
10 years worth of price appreciation, and therefore tax appreciation, occurred in a 2 year window.
I understand many people have a pet housing policy issue they care about, but trying to attribute this step-function change in tax burden to "New Hampshire zoning laws" and "these people" as opposed to the massive increase in demand caused by Covid urban flight/WFH & relaxed monetary policy is completely unreasonable.
So your 90 year old grandpa has been living in a two bedroom apartment on the lower east side for 65 years. When he moved in at age 25, it was considered a crummy but affordable neighborhood, but now it's expensive and desirable. You want a 90 year old to have to move? I agree that maybe a 65 year old couple no longer needs to be in a 3,000 square foot home, but there are a lot of cases that make this complicated.
It's cruel, but that same cruelty is deemed acceptable towards 'have nots'.
If he owns, you'd think that he could sell the two bedroom and downgrade to a one bedroom to keep the monthly cost down. Or even a studio. But at some point it's an incredibly desirable, expensive neighborhood and I'm not sure anyone deserves the privilege to live where they want as long as they want.
He bought the house by working for a living. The "fuck 'em, give me his house" argument isn't convincing me.
Maybe 65 is too young for retirement age, but I certainly feel that there is an age at which old people should start getting special privileges, like the right to not have to move. And the rest of us can wait our turns and hope that we get to take advantage of those privileges some day.
For instance suppose when Grandpa was a young man in 1950 he bought a used 1940 Martin D-45 guitar for a little under $400. That's equivalent to around $4800 in today's money.
He's still got that guitar and has kept it in good shape. Vintage D-45s from 1942 and earlier go for insane amounts on the collector market, and he could sell that for over $100k, probably over $150k.
Why should Grandpa have the privilege of owning a vintage 1940 Martin D-45 as long as he wants when so many other people who would like to play a vintage D-45 cannot afford too despite being working musicians?
Should we therefore have a periodic instrument value tax on musical instruments to keep people from keeping their instruments too long? Grandpa can sell the vintage D-45 and use a fraction of the proceeds to buy a new acoustic guitar or even hire a luthier to build him a custom guitar so its not like having to give up his 1940 D-45 would keep him from having a guitar.
You'll grow older and possibly understand. There are things that must be experienced, they can't be learned in any other way.
Move somewhere cheaper.
I'm not sure if you've looked around northern New England recently, but there are practically no cheaper homes left.
The problem comes when a given home goes up in value more then their neighbors, or when one neighborhood increases more than other ones.
This prevents the generational wealth transfer of subsidized senior housing tax rates with the benefits going to next of kin, who sells the asset and receives the proceeds.
The local budget shouldn't change much from year to year, but when values go up, they are quick to reassess high on, many times, artificially inflated values. When values go down, then they aren't too quick to reassess accurately downward.
In this situation, you just end up displacing retirees which is not good.
I'm not talking about having special rules for retirees, just saying the politicians feast when home values skyrocket and cities need to have a reasonable balanced approach to be able to have great services and departments for the community, but not try to optimize for their budget.
So many great cities have been destroyed from high property taxes. They jack up prop taxes, then lose families and are left with mostly older citizens, and there's a breaking point and they leave.
Home values plummet along with property taxes. So what they thought might be good for the community ended up being a poor decision.
Also property taxes are not perfectly progressive. Only areas with nice homes have good schools.
You seem to believe the fallacy that not being able to afford a home is other homeowners fault, and not due to poor government planning (likely by the same politicians you willingly vote for.)
I am uninformed in this game, so this is not a statement by me: However i've been told that one issue is squatters, land being used purely as investment and with low costs you can easily afford to buy land and squat it till a time when you later sell it in the market.
As someone looking to buy land to build a home on, i've noticed quite a lot of property seemingly being used purely for investment. Flipped through the years for profit with no real added value, in an area of the country (PNW) that is very, very expensive due to limited supply. It is very cheap to keep land, tens of dollars a year for 10 acres (the lot size i'm familiar with) iirc.
Inhibiting this behavior seems beneficial.
Though i imagine more interesting (than simply "high") taxes could help more. Ie something like a higher tax on unimproved and uninhabited land. Encourage usage, not squatting.
But.. i don't know anything here. I just have experience looking to buy land, and watching what goes up for sale.
Yes agreed, though I do think people conflate things and vilify wrong targets, which sounds a lot like the OP.
E.g. in California it's en vogue to rail against "Prop 13" without considering why it was passed, or how it helps people on fixed incomes remain in their homes. , or more importantly how the financialization of homes has made things bad globally.
The "system" and governments frequently prefer angry people direct their rage at other citizens instead of them! QED
So if they collected $10m last year, and will collect $10.1m this year, it doesn't matter if the houses have tripled in value, you'll pay roughly the same dollar amount.
People think doubling house value doubles property tax, but the bill could go down if double is less than the average increase for the area.
At least you’re honest about how you want to wield the cudgel.
If there are cheaper homes for these privileged retirees to move into, why don't you buy those homes yourself?
I’m where I live it costs $40-$50k / acre up to $150k / acre. 30 min away it’s $3-4k / acre.
I personally am opposed to property taxes. I think it basically implies rent of the land. Then again, I’m basically opposed to all taxes except tariffs and perhaps licensing fees.
For instance, you could implement a licensing fee to use the public roads. Or add a tax on import / export of goods across the protected border(s). But beyond that I view all taxes as far too intrusive. Why should my land be assessed? Why should I provide any details to the government so they can tax me? The “government” is infact my “neighbors” and I simply don’t think it’s their business what my assets are.
That's already implied from the existence of land deeds and the enforcement thereof: you're renting a subset of a nation-state's sovereign territory.
a) NH (like CA) didn't revalue land for property tax purposes as long as you continue to own it.
b) NH had a generous homestead exemption based on the median of the area in which you live.
If the area was underutilized when they bought in cheap, they earned their windfall. I hope they didn't prevent apartment buildings from being built in their area.
Imagine you bought a house and worked diligently for 30 years to pay it off. Now in retirement your cost of living skyrockets, through no fault of your own, such that you can no longer afford to live there in your 70s and 80s. How is that in any way fair or just?
What about the people who couldn't get a loan in the 1940s-70s because of redlining and ended up having to rent for the same amount of time?
All of this "empathy" talk hides real wealth redistribution towards property owners. Just holding on to a piece of property should not increase your share of real productive capital disproportionately.
Hard to take stuff like this seriously.
Wouldn't you also consider anyone buying a "starter home" a speculator? Their goal is to continuously flip their house.
50% of US GDP is about to become US gov't expenditure.
Any houses or value after that should be taxed.
I think that the government constantly threatening to take your basic shelter that that you PAYED FOR already and put you out on the street... even though.. I repeat.. you PAYED FOR THE PROPERTY ALREADY..is outright fascism.
Housing only becomes a good investment if supply is sufficiently limited such that demand can't be met. NIMBYism and decades of artificially low interest rates are mostly to blame here, although I agree that in the short-term, penalties on speculation can help keep costs in line.
> In a better system, property taxes should be relegated to the dustbin because it turns property ownership into property leasing which is antithetical to the idea of private property.
I disagree 100%. Protecting property costs money, and the government is in charge of protecting your property rights. It seems perfectly reasonable that you should have to pay a fee proportional to the value of the property as an "insurance" against its loss.
You mean artificially high interest rates propped up by QE.
The last place I want my money is in a politicians pocket. But this community overwhelmingly supports this concept.
If a slave is taxed at 100% and an indentured servant is taxed at 20% - what does that make you?
These people think the market exists, but really we just have a fucked-up version of socialism that privatizes the profits while subsidizing the risk. It supports toxic industries while fucking everyone else over.
In this case, particularly talking about agriculture and the prison industrial complex... or the huge scam with the covid loans where they just used the money for stock buybacks.
This community is "Hacker News" not "Socialist News" or "Red State".
Government should be able to function much better with much less. And it is no Hackers interest for its footprint to continue its endless expansion.
1. https://www.sfchronicle.com/sf/article/San-Francisco-drug-ov...
Running to the right and embracing authoritarianism is much preferable to the politicians than, say, a general strike and a unionization movement. Which would actually harm the people in power instead of squishing those at the bottom.
Constitutionaliam is a grift run by conservatives to smoke screen their agendas. Nobody argues it in good faith.
I argue it in good faith. I want government to shrink. The constitution should be used as a tool to constrain the size and scope of Government. And with the New Supreme Court it's chipping away at the concept the State can rule by edict. It's an exciting restoration of Democracy.
Today Government spending is 44% of GDP - which is colossal by most measures. In fact It's much larger than the CCP. Government size will shrink either through inflation or default because its debt burden is 130% of GDP. In research done by Hirschmann capital, 51 out of 52 times a country’s debt-to-GDP ratio reached 130%, the country eventually defaulted. The one exception is Japan - whose trajectory doesn't look great today.
Like it or not, you are either fighting constitutionalism or the mathematical force of Gravity. But there is no way Government will continue to expand.
So what the mandate of Fed Gov should be and how long TTL?
