Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
But a lot of places that do charge land tax aim it at investors, eg you get an exemption for your primary home. Thus, using rules in my state here in Australia (see post #30 on this thread) the people who live in single family homes in your fictitious town would not pay the land tax but the investors who owned the land with the apartments on them would. And if it is just one person owning all those blocks of apartments, they would have to pay the landtax on the accummulated value. However, if they are owned by separate owners and the value of the land is less than the threshold (which in our state is $406,000), then those owners who own just one block of apartments might not have to pay much tax at all. So small investors pay much less land tax than big investors. Farmland used for primary production would be exempt as well.
I could actually support this variant of a land tax. Why? Because it does not penalize people who choose to live in single family homes and it also sounds fair to smaller investors.
Oh, here we go again. The basic problem with the land value tax is actually one of the desired results. It pretty much requires (by ruinous taxation) that land owners put their land to a very high-income use. Surface parking lots can do quite well in some places... the big losers are vacant lots and single family homes.
Consider a fictitious town which has a mixture of 1/4 acre parcels. Half have 60-unit apartment buildings on them, half have single family homes. A property tax which taxes land and improvements is going to result in the lion's share of the taxes coming from the apartments, obviously. However, a land value tax will result in the building owners and the homeowners paying the same tax. Assuming revenue-neutrality, that's going to be a massive increase in the tax on the homeowners.
That would never happen because in this fictitious town no one would build a single-family house on a 1/4 lot with high taxes unless it was to sell to a wealthy buyer who could afford the taxes. single-family homes would be built further out where the taxes are lower.
LVT taxes aren't a uniform tax per square foot regardless of location. The tax per s/f varies on proximity to amenities and infrastructure. For instance, if I own a 1/4 lot across the street from the main train station in town that sees 50,000 passengers a day my taxes are going to be a lot higher than if I own 1/4 lot a mile away from any train station. Or if my house overlooks Central Park my taxes are going to be a lot higher than if I'm not near a park at all.
This isn't really much different from how taxes work now. Big townhouses/mansions around Rittenhouse Square get chopped up into 3, 4, 6 apartments because the property taxes dictate that for all but the wealthiest. You don't see anyone in Boston assembling a 1/2 acre worth of parcels so they can build a center hall colonial - the taxes would be astronomical.
Quote:
Now consider the expenses to the town. Schools and municipal salaries for things like police and fire departments are the big ones. All of these are much more closely related to the number of people served, not the amount of land. So the land value tax ends up transferring the burden caused by all those people in the apartments, onto the single-family homeowners.
No. The closer you are to a fire department the more you would pay.
So, in our fictitious town, let's say the town is divided into North/South/East/West/Center. Let's say you have one square foot of property. Let's say the average assessment for the fire department is $0.10 s/f. If you lived 400m from a hook & ladder crew you might pay $0.12 and if you lived a mile from the nearest engine you might pay $.07. Obviously a place like Manhattan will have more/bigger fire crews than Philly because it's more dense but these things are usually measure in response time which is a combination of the number of average calls in a given day and the time it takes them to get to your house. When a fire call goes out the team that is covering it has any other calls that might come in covered by neighboring stations.
If you lived across the street from a large park you might pay $0.15 s/f for that luxury while someone else a mile away might only pay $0.06 for it - and why wouldn't you pay higher taxes? You'll probably use it a lot more often and you'd be deriving most of the benefits.
Again, go to New York and you'll find buildings right on Central Park will pay taxes a good deal higher than an identical building 6 blocks off. Take a 10 story office building with 3 blocks of South Station in Boston and compare it to a 10 story office building and you'll find the rents to be $10-$15 more per s/f than the same office building in Cambridge.
Quote:
The more intense a use a land owner puts his property to, the more everyone else in the town has to pay. So low-intensity uses are taxed out.
No, it's quite the opposite. You can't build a high rise if you don't have the appropriate fire crews stationed nearby, if you don't have a big enough water main, or if you don't have the right transportation infrastructure. These things are expensive to build and maintain so you pay more to be close to these things, not less.
Quote:
As I said, this is considered a desirable result by land-value taxation proponents. To me, it appears to make a mockery of the concept of property ownership in the first place.
One could say that about property taxes in general but on the larger issue, if your premise doesn't hold (it doesn't) then your conclusion can't follow. Allentown, PA introduced the LVT and phased it in over the course of a decade. Like most towns in PA that use it they still use a two rate system.
As I said up thread, when you're bringing it in to an existing urban area the transition needs to be handled carefully but, as was brought up earlier, all the big cities in PA have flirted with bankruptcy whether they were using a two-tiered tax or not. It's not going to save you from the rest of the economy or from being poorly managed. Pittsburgh didn't ditch the tax because it didn't work - they ditched it because a county-wide reassessment was poorly handled and wealthy taxpayers revolted. They then ditched the LVT portion and reverted to a single tier tax (improvements) at which point most of the tax burden was shifted on to the middle and working class homeowners.
Philadelphia has never had an LVT, is also undergoing a county-wide reassessment that was only slightly better handled and the response from homeowners has only been slightly less hostile. The tax burden is shifting away from taxpayers in the Northeast and Northwest (read: suburban areas of the city) and away from Center City high rises and on to the backs of the mostly blue collar and middle-class owners (people who typically paid $125k-$300k for their houses) in the neighborhoods that surround Center City. The only thing that has stopped a full on revolt are significant revisions and loopholes that are supposed to "protect" long-time homeowners.
Why do you think parking lots are not the best use of land? A paid parking lot can produce quite a bit of income if it is in the right area.
The only winner is the owner of the lot. Surface parking lots discourage activity on the streets and sidewalks. Blocks with surface parking do not encourage pedestrian activity.
A surface lot in the middle of downtown is terrible. A surface lot in a walkable Main Street area sucks too.
A surface lot blocks the space to people not in a car.
Raise you hand if you feel safe walking past an dark empty parking lot at night.
But a lot of places that do charge land tax aim it at investors, eg you get an exemption for your primary home. Thus, using rules in my state here in Australia (see post #30 on this thread) the people who live in single family homes in your fictitious town would not pay the land tax but the investors who owned the land with the apartments on them would. And if it is just one person owning all those blocks of apartments, they would have to pay the landtax on the accummulated value. However, if they are owned by separate owners and the value of the land is less than the threshold (which in our state is $406,000), then those owners who own just one block of apartments might not have to pay much tax at all. So small investors pay much less land tax than big investors. Farmland used for primary production would be exempt as well.
I'm glad you chimed in.
While I'm not a fan of the 10% GST the rest of the tax system in Australia seems to be so much more straightforward and generally more progressive than the system in most US states.
For instance, here in Brisbane it's a pure LVT with exemptions for individuals with values below $350k. From what I can tell most people here who own a typical 3 or 4 bedroom suburban house on 1/4 acre seem to pay around $2200-$2500 a year. That's far lower than what most people in the larger metros in the Northeast, Midwest or West Coast US would be used to. I've lived around the US and for comparable levels of municipal services I would expect to be 3-4x as much per year.
The land tax is also the city's only source of revenue (aside from parking meters) as there are no other local taxes. Part of that is, because unlike those parts of the US, education, police and fire are solely the domain of the State. The city doesn't have to worry about any of it . . . but then there is no state income tax. Just a payroll tax for employers (small biz exempted), mining royalties, and I guess the state gets back a small portion of the GST from the federal government.
The federal taxes here are high if you earn a good salary but when you add up things like property taxes, sales taxes, local and state income taxes, etc I'm thinking the overall tax burden in a major city here is less than living in most big cities in the US.
I think the fact that it sold at $16.5M is proof that the value of the parking lot is related to development potential and not parking revenue. Interest rates on the $16.5M only need to be 3% to erase any parking revenue, and that's not including the property tax, and maintenance. I guess ticket vending is automated?
Of course. That's why it sold for $16.5 million. The value in development potential became higher than the value of the parking. If they offered them $2 million, the parking would have been a better bet.
Downtown lots aren't commodities like a house. They don't come up for sale very often and there aren't really any comps. The value is very much dependent on the buyer and the intended use.
There's a brief history. Bought for $30 million in 2007, foreclosed, listed for 7.5 million, bought for 16.5 million. The bank probably had no interest in holding it for capital appreciation, so 7.5 was the number where it made more sense to sell than operate it as a parking lot. But that's my point, $24 million an acre isn't chump change. Good money in parking. That doesn't mean there isn't better money in hotels. It's a fantastic location, right across from Westlake Center. A couple blocks away there's just an ocean of parking lots. That's the site that Amazon is looking at for its campus. They've been buying up that area a block a time for the past couple years.
But back to the original premise, let's say you're Microsoft and building your campus. Are you going to build it in Seattle where the land is $50 million an acre, or go out to Redmond where it's 1% of that? They already chose Redmond, so that's not really even a real question. But let's say you're Amazon who is considering downtown Seattle. Given that property tax rates would obviously have to be much higher, maybe 10 or 20x as high since there's no improvements being taxed, do you put your campus in Seattle with astronomical property taxes? Or Do you go out and spend a couple hundred thousand and put your multi-billion dollar campus there? As it is now, not a huge difference. The value is in the improvements more than the land. With a land value tax you'd pay peanuts in the suburbs. Most businesses already choose to locate in the suburbs as it is, and this would just drastically stack the cards further in the suburbs favor. Of course, since so much would be driven out to where the land is cheap the prices in the center would fall. You'd reach some sort of equilibrium. Regardless, the point is its an absolutely horrible public policy. It works great if you just look at the micro view of one lot, but as soon as you realize that there's nothing from stopping the hotel from being built near the airport where property values are much, much, much lower, it goes out the window. It's a great policy if you want more airport hotels and exurban business parks since they'd see a huge tax advantage.
The value is in the improvements more than the land. With a land value tax you'd pay peanuts in the suburbs. Most businesses already choose to locate in the suburbs as it is, and this would just drastically stack the cards further in the suburbs favor. Of course, since so much would be driven out to where the land is cheap the prices in the center would fall.
Again, the LVT is not a tax of concentric rings where price is determined strictly by distance from the center of the city. What drives the value of the land is the infrastructure and amenities that it has - not the geographical location.
Philadelphia has unusually low property taxes at present because it has been relying heavily on it's 3.9% wage tax and business privilege tax. Those 3 taxes make up 85% of revenue. Property taxes bring in 29% of revenue.
In a revenue neutral scenario a pure LVT would mean that the land tax would need to bring in 3.3x the revenue of the current property tax. But if you're a business that means that your BPT disappears and you save 3.9% on payroll expenses. I say "save" but this is really all theoretical because half the office buildings in the city are exempt from state and local taxes and even had their construction subsidized.
I'm having a hard time understanding why the current regime is better or less costly to taxpayers.
Anyway, If you're Amazon and you're building a huge campus out in the Seattle suburbs you're going to need to tie into the rest of the infrastructure in the region. You'll need something along the lines of a major arterial at the very least. You'll need sewer and water, police and fire protection, probably some type of transit service, etc. All of these things will dramatically increase the value of the land you want to build your campus on. You would move out there because you need the space not to save money.
But back to the original premise, let's say you're Microsoft and building your campus. Are you going to build it in Seattle where the land is $50 million an acre, or go out to Redmond where it's 1% of that? They already chose Redmond, so that's not really even a real question. But let's say you're Amazon who is considering downtown Seattle. Given that property tax rates would obviously have to be much higher, maybe 10 or 20x as high since there's no improvements being taxed, do you put your campus in Seattle with astronomical property taxes? Or Do you go out and spend a couple hundred thousand and put your multi-billion dollar campus there? As it is now, not a huge difference. The value is in the improvements more than the land. With a land value tax you'd pay peanuts in the suburbs.
Except a building that Microsoft would build be built on a highrise on a relatively smaller footprint of land, and it's likely that its parcel would be more improved than your average Seattle parcel. A downtown parcel that's as improved as an average downtown parcel won't see higher rates, it'd see no change. The losers would be besides surface lots but smaller, typically older buildings.
"Property taxes today generally consider both land and the buildings on them. But George understood something important: that taxing buildings to some degree discourages new building. Under a land tax, in contrast, a developer pays the same amount if the land is used for a parking lot, a single-family house, or a soaring skyscraper."
Re-reading the OP, it occurs to me-taxing something always discourages it to a degree.
"Property taxes today generally consider both land and the buildings on them. But George understood something important: that taxing buildings to some degree discourages new building. Under a land tax, in contrast, a developer pays the same amount if the land is used for a parking lot, a single-family house, or a soaring skyscraper."
It sounds like a Tea Party plan for the rich to get out of paying taxes. While we are at it, lets have a flat tax, and make the guy working at McD's for $7.00 an hour pay the same tax rate as a billionaire. Because that is "fair".
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
