In fact, the opposite is the case. In the few US cities--historically and present--with an LVT, the political pressure was and is to consistently undervalue the land. Because the quickest way for your administration to get voted out of office is for your tax assessors to be hard-asses about applying the LVT formula, let alone inflate assessments. As the article highlights, one of the problems with LVT is that your assessment can rise preciptiously through no "fault" of your own, which engenders a strong sense of insecurity wrt your property. That has tax-payer revolt written all over it.

Yet underassessing has its own problems--it erodes legitimacy of the government. Prior to Prop 13 property assessors were consistently underassessing the property of senior citizen homeowners. But this engendered a sense of capriciousness that was felt most acutely by, ironically, senior citizen homeowners.

None of which is to say LVT could never work, but it requires a tremendous shift in the political culture. The legitimacy of the existing property tax structure and its relationship to our conception of property rights is baked into our political culture; shifting to a new system will necessarily be incredibly difficult and destabilizing.

https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...

But my main argument is practical. I content that it is simply not possible to evaluate the "unimproved value" of a given parcel. Any discussion of a practical LVT has to start with the fact that it is an approximation to a theoretical ideal, and define exactly what the basis for "land value" estimation is, because it's really a tax on that process. While some of these may have overlap with the benefits and detriments of a theoretical LVT, they have to be looked at from first principles rather than by comparison with the LVT because the fundamental assumptions are often broken.

If the tax is 100% of the value, sure. But left unstated is whether taxes are 100% of value. If taxes are 100% of value, there is no incentive to own the land in the first place, my $400,000 house costs me $400,000 in land tax to own... yearly?

I continue to believe that "full cash value" assessments which try to ascertain the market purchase price of real estate are very foolish. And there are so many inputs and methods of formulating an assessment. What all of them have in common though, is that they consider the rental value of the property. It would be so much simpler if the tax was only assessed on the rental value. It eliminates things that effect the sale price estimates like interest rates, subjective risk tolerances, speculative premiums, and even the tax itself. The tax rate on the rental value would of course be much higher than the tax rate on the purchase price (25% compared to 1% for example) but it's a much more stable assessment with a lot more reliable data backing it up.

disclosure: I am a Georgist and former president of Common Ground California.

LVT is for building property or occupying land. Mineral rights are under many if not most legal systems treated separately from land ownership (e.g. they are auctioned off) because unlike land, oil wells eventually run dry.

This does not seem like an honest criticism of LVT, because it deliberately blurs land and mineral rights.

>This is important because it implies that, under an LVT, landowners with large plots of land are disincentivized to create any improvements they make to one part of their property, as it could trigger higher taxes on nearby land that they own. For instance, if a developer owns multiple adjacent parcels and decides to build housing or infrastructure on one of them, the value of the undeveloped parcels will rise due to their proximity to the improvements.

A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.

That's the kind of market discipline we are currently lacking which the author of this piece apparently does not want.

On the other hand, a developer who builds 10 houses on one plot of land is not going to magically make 10 houses on another plot of land double in price.

>Even in its simplest "naive" form, the LVT has a narrow tax base. The reality is that the vast majority of global wealth is created through human labor and innovation

This last criticism is A) wrong and B) only applies to single taxers, not proponents of LVT.

That seems like a feature to me, as long as the tax enough less than the increased value of the land, and using up a funite resource, lime oil, correspondingly decreases the evaluated value of the land. If you discover oil on your land, I think you should be taxed more. And I think that adding a reasonable dicencentive to things like drilling for oil isn't a bad thing.

Also, for non-renewable resources found on a property that are sold, not rented, I think it could make sense to tax them differently, such as based on the sold value, when it is sold, rather than increasing the taxes on the land itself.

> Another issue with the LVT is that it acts as an implicit tax on nearby land development.

This is the case for property taxes, regardless of whether it includes "improvements".

Also, it doesn't remove the incentive. If an improvement on one parcel increases the value of a nearby parcel, that means you can rent or sell that property for more, and the ducentive isn't really any worse than a tax on that increased income being a disencincentive to increase the value of nearby land.

There is a related problem where increased value can result in families no longer being able to afford taxes on their residence. Although its not like gentrification isn't already a problem, and I'm not sure it's any worse than the problems with other tax systems. It could also be combatted somewhat by lower tax rates or deductions on primary residences (possibly with a limit on the area that qualifies).

> An LVT discourages searching for new uses of land

> An LVT implicitly taxes improvements to nearby land

If I find oil on my land, or if someone builds a park across the street from me, then I should be taxed more. The land is more valuable to me! At a 100% LVT I essentially break even. Anything less then that, and I still come out on top.

The only valid arguments in here are the last two. If people buy a piece of property with certain assumptions and the government turns around implements a 100% LVT, then I can understand why they would be upset.

So sure, there are some practical considerations to implementing a 100% LVT immediately tomorrow with no exemptions, and it probably wouldn't raise enough revenue to eliminate all other taxes. But the government could still raise a ton of tax revenue with minimal deadweight loss by phasing in a 75% LVT over 30 years with a handful of common sense exemptions.

One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.

As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.

To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.

How we tax property, with Lars Doucet: https://www.complexsystemspodcast.com/episodes/property-asse...

Tax the dirt, with Lars Doucet & Greg Miller: https://www.complexsystemspodcast.com/episodes/tax-the-dirt-...

Of course if you believe the estimate to be incorrect, the incentives can shift, and there is some opportunity for mafiscence by falsely showing the 'absence' of oil that you know exists for a temporary tax break.

When you actually learn about public agency spending, you'll see that 2/3 of it is completely unnecessary.

I'm not saying companies are any better, but they generally don't have the mandate to take your house from you if you are not a customer.

Focus on the spending first, and make sure it's essential. Then figure out how to fund it.

If you can get spending scope reduced by 90% (where it was before FDR) , you'll find the tax situation solves itself. You won't have to invent taxes on every activity.

E.g.

* Offshore oil drilling

* Tech companies

* Fully remote CPAs

* Electricians

* etc

It seems very weird large sections of the economy become virtually untaxed, requiring a MASSIVE tax burden on the others. The simplicity of the LVT plan kinda hides that it implies a huge restructuring of the economy.

It reads like someone saying that cooking with fire is an absurd idea that's never going to work, and we should stick to microwaves.

Again, LVT is one of the oldest and most widely historically practiced forms of tax, through various forms like taking a cut of rice produced through to levying corvee.

Valuation is also a straightforward issue: you have the landowners self-assess value, but that value also acts as an option for the state to buy at that price. This bakes in honesty and market price based accuracy.

As for the "not enough" argument, maybe it's not enough for a government looking to squeeze every last drop and piss it away, which appears the norm sadly. But the point is that all economic activity a state has the right and ability to tax happens on its land, and in the process raises the market value of that land. So all economic output is taxable indirectly via it.

On the claimed disincentive to improve land value, like the oil discovery example: where the value is based on market price, no one is harmed by an increase in their properties value. They can just sell it to an oil developer if they don't want to develop it themselves, and walk away with a fat untaxed capital gain. This is simply a non-issue, on par with someone worrying their salary raise will increase their taxes - missing the point that it's a nice problem to have.

And if they just hated the idea of having more money, they could just self-assess at the old price and have the state take on the burden of developing it if they think it's worth more.

The only actual issue and complexity with LVT is a political one - how to move from the current farce to that. Similar issue with gold standard etc. These systems are tried and true and obviously better, but not to certain powerful minority interests, who benefit from farces continuing.

It sort of breaks your head the first time you try to think about it because we are just not used to thinking about supply and demand in cases where supply is actually fixed, and that's where all the magic benefits come from. Happy to answer any questions people have.

Full disclosure though I'm a huge proponent!

As with any policy, there are some advantages and disadvantages but I think on the whole LVT is probably the single best policy change we could make as a society.

>>Take, for example, the case of surveying land for oil. Imagine a landowner invests significant time, money, and effort into exploring their property to determine whether it contains untapped oil reserves. If they do find oil, the value of their land would skyrocket because the presence of oil dramatically increases its economic potential.

Is the author aware that in many countries the owner of the land doesn't own the resources if they are discovered there? Is the author seriously claiming discovering oil is not profitable under LVT? Does he prefer making people who happen to stumble on oil not pay % of the value of it as tax? (and thus presumably prefers taxing other things). It seems so unlikely to me that someone reasonable would make that argument that I have trouble taking it seriously.

>>An LVT implicitly taxes improvements to nearby land

That's one of the two major points behind it: tax wealth that you got without building it yourself. In other words it limits land speculation.

>>An LVT is unlikely to replace many existing taxes

The argument the author is making here ("government will not get rid of other taxes") applies to any tax discussion and kills it before it even starts.

>>Another major issue is that a full or near-full land value tax would likely establish a troubling precedent by signaling that the government has the appetite to effectively confiscate an additional category of assets that people have already acquired long ago through their labor and purchases.

Yeah but we need to tax something. The alternative is to tax the very labor which must certainly be worse. Land owners are benefiting from work done by others without contributing to it and thus should be taxes accordingly.

>>The concern here—which, to be clear, is not unique to the LVT—is that the introduction of an LVT set at a high rate (especially near 100%)

Amazing, 100% rate for LVT doesn't make sense!

>>For instance, individuals buy stocks, businesses invest in capital goods like machinery, and developers improve real estate—all with the expectation that they will retain most of the value of their assets and any future returns from them. This confidence in the protection of property rights encourages entrepreneurship, innovation, and economic growth.

And yet all of those are taxed in the current system!

The author seems to be assuming the proposed LVT rates are very high (when in practice they would be in low single digits). Remove that assumption and the whole article makes no sense at all.

How familiar are you with existing property taxes?

It might surprise you that land value estimation is literally already happening at scale.

Also, you don't need to be 100% accurate with the estimation. Even a 50% lvt would be a huge improvement and would mean that you could literally be off by 100% which is extremely unlikely. How many houses do you see selling for twice the listing price?

The claim, which I disagree with, is that spreading those taxes across nearby land incentivizes those property owners to sell their land to someone else who will improve it.

Which gets at another LVT problem that is glossed over in discussions: Everything assumes that selling properties and moving is cheap and easy. If grandma's forever home is surrounded by apartment complexes when she's 85 years old, her taxes would become unaffordable because she's paying her share of those apartment complex value taxes. She would just pick up and move, which we're supposed to assume is cheap and easy.

It can all be fixed by making the tax structure a combination of land value and structure value, which happens to be how existing property taxes are constructed in most places.

There's a decent discussion on that topic here [1], as a starting point. Not saying it's absolutely conclusive, but gives some food for thought. I suppose where determining an accurate value might be most difficult is parcels that rarely turn over, so have little direct or nearby sales data.

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

Here is an article arguing that yes, it can be done well enough: https://www.astralcodexten.com/p/does-georgism-work-part-3-c...

That's a feature not a bug. The whole argument is that it's good to tax wealth that you didn't work for. It's surely more just than taxing labor or the improvement you have made yourself.

Which is more of a feature than a bug.

The alternative to "local land value improvements feed the local tax base" is that schoolteachers who make the local schools good make the local landlords more money.

The idea mooted in the article that developers would be unwilling to build 20 houses on a plot of land because having 10 houses would jack the LVT up for the other 10 is entirely backward. The value of those houses will be predicated almost entirely on infrastructure (roads, rail, schools, etc.) or services (shops) provided by the community you're paying taxes to.

>I content that it is simply not possible to evaluate the "unimproved value" of a given parcel.

Did you read the wikipedia page about LVT which describes how? Which part is impossible?

I think there's a perfectly fine way; you estimate it the way we currently estimate properly values for tax purposes. If they owner doesn't like that value, you allow them to contest it, and we immediately accept any contested claim and value it as the owner desires, with two small caveats: a) they pay tax on the claimed value, to ensure they don't over value and b) they are required to sell to anyone at claimed value + 10%, to ensure they don't under value.

edit: two points to address some responses. First, it can be claimed land value + assessed/claimed improvement value + 10%, that's fine. Second, I'd only require they sell at that value if the owner contests the original appraisal. If they accept it, nobody can buy their stuff out from under them for any price.

>A problem with not having LVT is that you aren't incentivized to make improvements to land that you own. Without LVT if I'm lazy I can just build a car park on highly valuable city center land I inherited and collect fees, still making a tidy profit. With LVT I need to A) develop it to its actual potential, B) sell it to somebody who will or C) eat losses.

You're missing the point entirely. When your small business, single family home, little ranch, whatever, becomes in increasing proximity to improvements your tax goes up. If you own a big ranch and decide to split some of it off, build housing or whatever and sell, then your tax on everything goes up per LVT.

Proponents of the Land Value Tax, but not as a single tax would probably be more mixed.

Restructuring of the economy isn't a hidden part of the Land Value Tax, it's the point.

Domain names.

Patents.

Huge amounts of data.

Those are the "land" of the modern economy. Land value tax arguably may have made sense for a 19th century economy; I think it's completely missing the point for a 21st century one. Land isn't the major source of wealth any more.