This Detroit case is interesting because there are different rates of taxation on the land, but the difference in rate could also be obtained by increasing the land component of a parcel's value.

For a more detailed overview, I recommend Lars Doucet's review of George's Progress and Poverty, which won the Astral Codex Ten book review contest a year ago: https://www.astralcodexten.com/p/your-book-review-progress-a...

I really like the style, but you need to put an hour or so aside to read the whole thing. For me, it was definitely worth the time!

And wardrobes, tables, books or computers (every year) but that's another story.

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).

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.

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.

"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.

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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).

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

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.

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.

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).

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.

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.

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.

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

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.

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

Maximum value, not maximum density.

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

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.

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.

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

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.

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.

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...

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."

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.

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.

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.

That's Detroit's plan.

Thank God we are far from reaching that point.

That said, "everybody works but the vacant lot" is a Georgist slogan that has been seen on billboards before now: https://digitalcollections.nypl.org/items/510d47de-036a-a3d9...

You decide if the above is good or bad.

Edit: by money I mean income. She owns her house because years ago she (with her now dead husband) at one time had enough income to buy and pay off the house. Now that she is retired she has much less income despite having assets like a house that are in theory worth a lot of money that cannot be accessed.

Something like 90% of boomers want to age in place (as opposed to moving in with family, or moving into some assisted living arrangement). This is a problem when that effectively locks up 40% of the housing stock.

Does this "little old lady" need a 1-acre lot for her gardening when she can barely walk to the end of it and back? Or could that lot be parceled up into 4 single-family homes, or dozens of apartment units?

Also: that small house will grow in value (along with the property taxes) until the value of the land almost entirely dominates. My parents are in one such situation -- anyone who would buy their house would assuredly tear it down to build something bigger.

However it’s just not compatible with any concept of freedom, as understood by those people themselves. A lot of people have an expectation of fairness that they ought to be able to own a home of their choosing and stay in it until they’re ready to move (or dead). And they are sentimentally attached to their homes where they raised their children.

We in the West have a society whose framework is roughly aligned with that idea. We could change it, but it would require lots of other “the government knows best” policies, and ultimately the massive empowerment of police to enforce those “best practices” when people object. Even one would agree with the outcomes in housing policy, it would be pretty risky to create that kind of totalitarian situation in general, because we might not like the other “most efficient best practices.”

It always seemed crazy to me that nothing was done on that very valuable corner for so long.

There are other examples.

I’m new to town but everyone else tells me that the area has massively improved in the last 5 years. Those lots are wasted potential.

E.g. where I live it's just assumed that all your assets produce a yield of 4% yearly, and that is taxed as regular income. Makes the tax declaration also a lot easier, since people don't have to list all exact dividends and profits they might have gotten from investments.

Put another way:

If I have $1B, and I buy $1B of land, that creates no value, and raises prices for everyone.

If I have $1B and I start or fund a company which produces a new medical device, computer, or car, I've created massive economic value, both in the inputs (hiring people) and outputs (new technology).

Land is also a scarce resource we all need to share fairly (for whatever 'fairly' means). If you have more, everyone else has less. On the other hand, if you're investing in making movies, I can make my own movies too. There is no fundamental limit to that sort of economic growth.

Most people won't care about some Rolex that someone around the world is willing to pay $100K for.

Land has purposeful value rather than just 'worth'

Historical Georgists were also called "single taxers" because of the idea to abolish all other taxes, but make up for this by a tax on land ownership that leaves the state with the same income stream as before. Apart from being (in their view) socially good, this would also have the advantage that landowners couldn't just move their land to the Cayman Islands to evade the tax.

I don't think modern Georgists are quite that single-minded, but I do get the argument that, for example, VAT is a tax on the poor in the sense that even people whose income is low enough that they're not paying income tax in the usual sense have to pay it every time they buy something (unless it's exempt), but taxing land would truly be a tax on the more affluent only, at least in a country where most poor people rent their accommodation.

Imagine someone buying a house somewhere cheap. Then some gentrification, a new microsoft campus built nearby, etc., and the price of the house jumps 10x+. You're on a fixed income, and your taxes are now higher then you can afford.

If you have multiple houses, sure, tax the second, third, etc. one (evn though the taxes are then charged as higher rents if you lease those properties), but the first, primary residence should not be taxed as a "profit maker".

Maybe it's a cultural difference, but here in the balkans, people rarely move, and telling a 75yo grandma that she'll have to move, since her socialist built apartment is now worth 500k eur+, because "investors" want it for airbnb, and she cannot afford taxes on it, is just evil.

The more realistic picture is that grandma living alone in a rather large, old house, whose price, heating etc. went up quite drastically. That is already happening, in particular the heating part. Just have a look at Europe and the UK. The question then is, and I am not picking a side here, whether you spend public money so she can afford to stay in that large house or you make changes.

We had a law, that somehow got repelled by some lobbyist, where all the public money given to help was then taken out of inheritance (so the kids had to either pay it back, or property got sold at an auction, government took the money and the kids got the rest). This would solve the help-money issue.

A LVT would just shift property tax burden more toward empty lots or less-developed parcels and away from more-developed parcels. It wouldn't result in killing little old ladies.

In practice, that grandma is stuck in a city where her children and grandchildren can no longer afford to buy real estate in. Friends and neighbors who rent are priced out and have to move regardless. The local goods and services rise in price and taxes go up, all under the current system. Her support network and community evaporate and soon she finds nothing left but to sell to a corporation, who is the only entity left that can afford the prices her house demands.

The first order effect of a Land Value Tax is that it shifts who pays the biggest burden of taxes. Grandma A who owns a big house in the center of a vibrant city where lots of young families are looking for homes near their jobs might see an increase in her taxes, but the Grandma B who owns a Condo in a larger complex will likely see her taxes drop. Grandma C who lives in a nice well-maintained house way out in the burbs will likely see a drop as well, most of her value is in the nice home she has been tenderly caring for her whole life.

A second order effect of LVT is it creates a suppressive effect on real estate prices. When prices in an area are going up across the board, this is entirely in the value of the land, which means LVT taxes are going to rise correspondingly. This additional tax liability significantly helps counteract a speculative rise in prices, leading to a lower and more stable pricing, and pushing out those who are just looking to speculate on trends. The value that a government creates for its citizens is recaptured and able to be reinvested, instead of going directly in the pockets of land speculators.

The third order effect is that this shifts the incentives around value creation vs value capturing. Perhaps the house next door to Grandma's is currently owned by a deadbeat landlord, Pennybags, who lets the house fall into disrepair, hoping to turn around and sell it as the market rises. Now all of a sudden Pennybag's plan is quickly becoming a bad investment. With LVT his property value is more heavily correlated with the actual quality of the house and less with value of the land. He is finding that despite an increasing demand in the area, his property is actually dropping in price. Meanwhile good ole Grandma has been diligently been taking care of her home, and adding value and the price of her home has actually gone up faster than the rise in taxes. She's able to use to use the increase in value to take out a loan to build an accessory unit she uses to now help her cover her increased taxes, which further increases her property value. Despite all of that, her taxes have not gone up at all!

It's the society's best interest that people can afford places to live and not live under threat that some new fad will make something they already own (and need to survive) unaffordable.

In your example, if the grandma's house went from 200k to a 1million, then she isn't poor anymore. She is very rich.

She doesn't have to leave the neighborhood. She can give her house away for redevelopment into a condo. Get the nice penthouse flat and a pretty penny on the same land. Now, she has enough liquidity to pay the land value tax, which is also lower per person because it's distributed over the whole condo.

This is happening in India right now. Apartments are redeveloped into towers. Old residents get 2x the floor space and decent relocation $$ for the construction period. No one is being kicked out of their house. Most people move to another spot within a 10 minutes walk from their home for 3 years and then come back when the building is done.

Are we seriously saying that if someone can no longer afford tax on a land they already own because the rich need to get richer, you should sell?

Basically you're asking for normal people to work, get raises forever and hope nothing crazy happens that can raise land value in their neighborhood in order to keep the land they already own.

No, this is not in "society's best interest". This is in the capitalist's best interests. Those are very different.

Comments like these make me not want to live in this world anymore. I really hope I misunderstood the comment.

Edit: removed some unnecessary harsh words.

It is purely about how much land you sit on and where. That's it.

> Basically you're asking for normal people to work, get raises forever

Nope, it mostly incentivizes real estate hoarders to start making productive use of there land. It allows normal people to buy houses because this system inventivizes the increase of supply.

> land they already own because the rich need to get richer, you should sell?

If your lad value tax increases enough to be unpayable, then your house has likely appreciated 3x+. This makes you one of the rich.

There are no new houses in the neighborhood so the normal person can't afford a house. With land value tax, you can sell the land, make bank, and allow access to greater housing through upzoning. The normal person benefits greatly.

Either housing is an investment or an essential commodity. It can't be both.

So effectively normal people that don't own empty land will not pay this or pay an equivalent of the previous taxes?

> If your lad value tax increases enough to be unpayable, then your house has likely appreciated 3x+.

I guess you could try to argue that but I still feel like that's going to hurt folks. Imagine a scenario where I live somewhere for decades. Suddenly there's a new subway or some other factor that increases the value of the land enough that I can't pay for it.

Now I'm forced to leave this place when it finally becomes better to live in. In theory if I sold it, it would make me some money, but that's not the same as saying I'm a rich person now.

It's also not free in the sense that I still have to move somewhere else, which will probably be worse than the current place I live, since I will be required to buy a house with a lower tax (less valuable).

I can see the benefits if this was part of a bigger set of changes that would overall benefit everyone. But in isolation it seems like it will hurt normal folks and companies will just turn their empty plots into useless parking lots (or some other loophole they will find) to say it's "valuable".

I can imagine it.

That is exactly what happened to my neighborhood in India. Small residential condo community where Dad and I grew up. Everyone knows everyone sort of place. Our neighborhood suddenly turned into the hipster capital of India and began gentrifying and taxes started becoming unaffordable.

You know what people did ?

Took a deal to have their 5-storey condo redeveloped into a 30 storey one over 3 years. Everyone gets decent upfront cash, a huge rental allowance for the duration of the construction, 2x larger houses and more luxurious amenities.

Everyone is falling over themselves to have these deals signed. Yes, people waited till the last generation passed away, since they didn't want huge changes for those in their 80s. But, as those in their 50s-60s are heading into retirement, they are delighted to be able to retire wealthier, in a bigger house for 'free'.

The community has not been displaced, since everyone who lives here will still live here. Young families can buy apartments in one of the most accessible parts of town. Quality of life is better for everyone.

Who offers these deals? Is it the government or private corporations? I'm struggling to see how one profits from this (which is normally the only reason companies do anything) so I'm very curious.

This really does sound like a win/win situation if it's like you described it! Here I only hear/read stories about people losing their homes without any other option other than selling.

The 5 floor condo gets converted into a 30 floor tower. The residents gets 2x space and the first 10-ish floors. The rest goes to the private builder to sell to whoever they want as profits. It often involves demolition of 3-4 buildings into 1 large building. So a lot of wasted space also gets brought into building floorspace.

Skipping past your other points, I just wanted to reply to this sentence, since it seems to show a deep confusion/misunderstanding (perhaps on my behalf!).

- Land owners won't get to "say" how valuable their land is; that's determined by the market, assessors, etc.

- Given the chance, land owners would try to say their land's less valuable; since higher value means a higher tax bill.

- Land value tax is (as the name suggests) based on the value of the land; not what's on it. The tax for an empty lot is the same as a parking lot (or a skyscraper, for that matter).

- If anything, turning an empty lot into a car park may increase the company's tax bill. For example, if a lack of parking bottlenecked the area's economic growth, the new lot would allow more development nearby, increasing the area's land value, and hence increasing the company's tax bill.

- Turning an empty lot into a parking lot has construction costs (I'm assuming our company doesn't care about ongoing maintenance). Since the land value tax is unaffected (or even increased!), the only reason to construct a car park is when its predicted revenue is higher than its construction cost. The predicted revenue of a purposefully-useless parking lot is low, so there's no incentive to pay its construction cost: better to leave the plot empty!

- If the company can't use the land to bring in revenue that (a) pays off any initial capital/construction costs, and (b) exceeds the ongoing costs (including the constant land value tax!), then it should sell the land to avoid having to pay the tax.

- The only ones willing to buy the land off them (and hence take on its tax burden) are those who can make use of that land (either a company able to make a profit despite the tax liability; or people wanting to live there who are fine with paying the tax). In which case, the sale is incentivised and the land is put to better use.

PS: "From the outside" I'm sure there will be loopholes in theory, and in practice in Detroit. However, your example is pointing in the complete opposite direction of all the incentives, which looks "from the inside" like a lack of understanding.

They do need to make sure the tax is higher than the land value growth otherwise it wouldn't really work. Maybe it's not that hard, but with some of the price hikes I've seen, it could happen.

Honestly, I am very curious to see how this will pan out. Hopefully there isn't a giant loophole that will backfire as it happens with so many bills.

devil's advocate: No, not because of the rich but because of the poor. Buying a house decades ago was very possible on an average single person's salary. Nowadays, even upper income range couples have large troubles financing a house. So the situation is that you have lots of old people living in houses that they could never, ever afford at today's prices. The claim (no comment on whether it is correct or not) is that this causes massive distortion and that this proposal would fix it (doubt it, but that is the discussion).

> What the f*.

That is not helpful for a discussion. There is a problem stated and a (probably bad) proposal to address it. Instead of just saying "f*", address the problem and make a different proposal.

Fair enough. Edited that part off. I was simply extremely shocked at the implications, if I understood it correctly.

> So the situation is that you have lots of old people living in houses that they could never, ever afford at today's prices.

I don't think punishing people for what companies have done to inflate house prices is a good move though.

Screwing over people that bought houses that they live in instead of fixing the root causes for all these insane price hikes seems completely backwards to me.

Remember that companies or rich folks might have to pay some extra taxes but, in general, they can freaking afford it. Normal folks more often than not, can't.

The first is that if someone suddenly became wealthy because their house went up 3x in value and they want to continue living there then they can get a reverse mortgage. Assign that new found wealth in the equity to the bank in exchange for getting a monthly payment to pay the tax. If you're arguing they both should be able to stay, and keep the increase in equity that they contributed to them you're arguing housing should be a speculative investment (which leads to bad incentives).

> Screwing over people that bought houses that they live in instead of fixing the root causes for all these insane price hikes seems completely backwards to me.

The whole point is it's not. It's incentivising someone to move so they stop screwing over the 10-20 families they would like to buy a house but can't afford to because the supply is so low. By replacing the single story home with multi floor condos, more people can now afford homes in the area.

The point of the proposal is that it is not an either or. In order to fix things you will have to also "screw over" people that have bought houses or people that currently can't buy houses. Long running problems are not quick and easy to fix and a fix will have collateral damage, not just "companies or rich folk".

Again: I am not taking a position on either side, but you are currently attacking a straw man.

Also, importantly, you can't "hide" land (from taxation) by moving it out of the country.

Taxing land only disincentivizes land from being hoarded and being used inefficiently. It's not going to prevent the creation of new land.

Theres also the issue of fairness. Land owners didn't create the land or make it valuable. They just use it to extract rents. Asset creators did make their assets valuable and if they do rent them the value of the rents will be in proportion to the value of the work they put into them.

I happen to think it's interesting, but for reasons unrelated to the article-- it's kinda goofy for the state to tax personal property that happens to be fixed to a location, like a fireplace, stained glass window or chandelier. Tax a house on a foundation; no tax for a house on wheels? This "LVT" scheme does away with those issues so folks can fix whatever they want to the location, so it makes more sense logically even if the connection to Detroit's problems is very unclear.

I don't see how this helps Detroit's problems - unless they arbitrarily set high values on land where land is possibly already worthless. The areas with the most blight have the lowest land values already.

The city already owns 75k out of 380k lots (~20% of the city - most of it vacant) - and instead of trying to sell the lots - the Detroit Land Bank holds onto them to arbitrarily inflate land values.

This seems like another recipe for a negative feedback loop that makes bad areas even worse.

Just tax blight outright.

Give away the damn land to anyone that will build something on it and live there - or get someone else to live there, pay taxes, and be a valuable part of the community - rather than a vacant lot that's a breeding ground for crime.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This is a nightmare. Can you elaborate?

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

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

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

It would raise the value of your land.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Let alone things just getting dated.

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

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

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