Made sure to call my Ohio State senator, District 9's Sen. Cathy Ingram, and ask her to work with District 8's Blessing on LVT. While they aren't meeting any more this year, and I'm probably the only person who had *any* input on this from her constituency, I really hope she hears and takes my input. LVT is the rare policy which can be bipartisan, urbanist, progressive, and conservative all at the same time. As a wheelchair user who has to live in a condo with a ramp instead of a house with stairs, it's frustrating that our tax system punishes me for being in a multi family dwelling... in a city of apartments!
Calls to abolish property taxes without replacing them read to me as “I see how Prop 13 has absolutely devastated California over the last half century, and I want that times infinity for my state!”
I'm a big fan of your work Lars, and this is yet another well written article - but I think you might be mischaracterizing Marx's actual positions on LVT. For one, Marx was not against an LVT in principle. He believed his position already included it (the first bullet point in the 10 point program from the Manifesto of the Communist Party is 'Abolition of property in land and application of all rents of land to public purposes.'). In Das Capital he also makes the same arguments about land that all the other classical political economists did. His disagreement with Henry George was that an LVT would not solve the problem of exploitation, which Marx thought was a bigger issue. Marx and George were also not rivals, Marx wrote a scathing review of Progress and Poverty in a private letter to a friend. He published entire books against Proudhon and Bakunin - those were his actual ideological rivals. I get that you might not agree with Marx (I personally don't, at least not on everything) or that you are trying to hammer home that LVT is in no way associated with communism/socialism - but Marx is not the ideological enemy of LVT/Georgism that many portray him to be.
I do understand where you're coming from, but I would push back on three specific points. Would you or would you not you agree that:
- Marx didn't just want to just tax the land, but also to socialize it, as in put it directly under state ownership?
- Marx's theory of value is very much at odds with George's
- Marx did not see land and capital as two distinct categories in nearly as distinct a way as George did
If we can agree on these points, they seem like very big distinctions to me.
That all said, I will be the first to say that I am more than happy to pitch a big tent of coalition partners coming from both the right and the left, while at the same time making the distinction that simply being pro LVT does not make one a Georgist. That goes for allies on the left as well as the right.
In any case, I do appreciate comments like this and let me know what you think.
Thanks for the response. Yes, I agree that Marx’s theories are distinct and in many ways incompatible with George’s. I’m just talking about his position on a LVT. Some people reference the 1881 letter and present Marx as being completely against an LVT, but here is a direct quote from Marx (translated to English):
“We ourselves, as I have already mentioned, adopted this appropriation of ground rent by the state among numerous other transitional measures, which, as we also remarked in the _Manifesto_, are and must be contradictory in themselves.”.
I think BritMonkey captured the nuance well when he said ‘Even commie Karl Marx … could not deny the efficiency of a land value tax’. I think that’s closer to the truth, and is a stronger endorsement of LVT.
While I am a strong proponent of LVT, I also believe that a strong progressive income tax, combined with an inheritance tax, can prevent the formation of a generational aristocracy that inevitably bends government policy to its will. Thomas Jefferson, in a 1785 letter to James Madison, argued for a tax on property that rises in 'geometric proportion' to its value (count ol' TJ as another proponent for LVT), he was arguing in this context for a tax on property, though the motivation for this argument was also my own; the prevention of generational aristocracy that invariably threatens Democracy.
Your are dead wrong about this and a propagandistic demagogue.
The old don't pay property taxes. They have had assessments caped at 3% for thirty years. Their property taxes are half what the young family in a house identical to their right next to them is.
Even when there is no law, assessments always trail home values. And 65+ get tons of tax breaks in every single state I've lived.
Property tax burdens fall on new (young) buyers who have to accept market rate assessments. I pay twice the property taxes on my home I just bought that my neighbors in their 70s.
Any property tax cut is going to help young families more then olds.
DeSantis has even made this clear and said he rejects any property tax relief bill that targets the elderly.
The place in the country with the highest property taxes in the Northeast, and they have the least affordable homes. This doesn't work.
And no, property taxes don't "pay for local schools and services". All school districts in every state get topped off by state funds to equalize, no matter how high your property taxes are. You basically taxing yourself for nothing. It's Civil Rights Law.
Proof your statement. You're assuming that property tax reductions would favor the old, but that's not my assessment of the data.
Beyond that, there are tons of property tax reductions that could satisfy your questions. For instance in Florida the debate is mostly over the homestead exemption (owner occupied). You could easily double the homestead exemption for being married and multiply it by the number of child dependents in your household (this would be like a child tax credit).
To consider one dishonest framing, one of the dozens of property tax bills in Florida is specific to age 65+. Propagandist make hey of this but the proposal has no support from Ron DeSantis.
“Age-specific property tax relief is a non-starter,” DeSantis declared. “Making homestead properties tax-free would be a major boon to young families who will be better able to make ends meet.”
The governor added, “Why saddle anyone — but particularly young people — will rising local taxes based on increased assessments, which are nothing more than an unrealized gain? So far, state lawmakers have already put forward at least a dozen amendment proposals touching on property tax exemptions or assessed value caps.”
---
Look, Florida has a budget surplus. Some people want to give property tax relief. Others want to lower the sales tax. I think taxing consumption is a good thing. Everyone pays (even illegal immigrants and tourists).
More broadly, property rises in value when you and your neighbors engage in pro-social behavior. You're building community equity. I don't think such actions should be punished by the tax code.
We know what high property tax states look like. You end up with NY spending $40k per student per year and having failing schools. I think property taxes were just a way for states to use the SALT tax to fleece the federal government, which is another thing I hate.
> Beyond that, there are tons of property tax reductions that could satisfy your questions. For instance in Florida the debate is mostly over the homestead exemption (owner occupied). You could easily double the homestead exemption for being married and multiply it by the number of child dependents in your household (this would be like a child tax credit).
I have my own property tax relief program that I recommend here, the Universal Building Exemption. I think it would be much better than conventional property tax!
> Look, Florida has a budget surplus. Some people want to give property tax relief. Others want to lower the sales tax. I think taxing consumption is a good thing. Everyone pays (even illegal immigrants and tourists).
Let's make a testable prediction. Let's say Florida removes property taxes and raises sales taxes. Do you expect housing prices to rise or lower as a result of that? If it happens and we check back in five years and housing prices go up in Florida, whereas states that made the opposite decision have housing prices go down, will you change your mind? If not, what level of evidence would be strong enough to get you to consider that you might be wrong?
> We know what high property tax states look like.
Why then does Texas, which has among the highest property taxes in the nation, have much cheaper real estate than other states? Why do California and Hawaii, which have among the lowest property taxes in the nation, have much more expensive real estate?
In any case, thank you for engaging with the material and sharing your views. I sincerely hope you have a wonderful day!
2) tons of undeveloped greenfield land where DR Horton can slap down a massive HOA development where they assembly line houses on small lots.
There is literally no natural barrier blocking ever wider development in central Texas. No ocean. No river. No mountain. It’s just desert. If the sprawl gets dense enough you literally get another city center, like Fort Worth to Dallas.
Our country knows how to slap down mass housing developments in undeveloped land. My community in Florida was just empty land 15 minutes from the beach 15 years ago. Now it’s a huge HOA with thousands of houses.
In the parts of Florida that aren’t full of empty land, like Miami today, prices are on the higher side.
California is only desirable on a narrow slice near the coast, and there are a lot of natural barriers. New York is an island and getting into that island serves as a choke point on commuters.
In the 1950s when my dad grew up in NJ it was just farmland. They were slapping down HOA communities the way they do in Florida and Texas today. And housing was cheap. But eventually they ran out of empty land. And you can only go one direction (away from the ocean). It’s already an hour to get over the bridge, try adding an hour to get to the bridge in top of that. Not going to work.
Low property taxes tend to be about 1.x% and high property taxes tend to be 2.x%. This is like the difference between a 7% interest rate and 8% interest rate in terms of monthly payment buying power. That will have some impact on home prices but is kind of a rounding error. And keep in mind for most of my lifetime the SALT deduction reduced the impact of property taxes by like 40%.
Anyway, having less buying power sloshing around combined with lots of empty land to slap down houses on is why the sunbelt is cheaper. Property taxes are just another tax to help fund bloated and ineffective public schools. You might as well light the money on fire.
I think that there exists examples outside of Texas and California that are worth reflecting on.
More broadly, I'm a statistician by trade. As such, I'm skeptical of "studies". They are commissioned to get a result and they get that result.
"lies, damned lies, and statistics"
This doesn't mean that I don't think they are useful, but that one literally had to spend a lot of time directing every study they see in depth. Which can't be done in all instances.
And so we often have to pattern match on other known facts and other studies we have reviewed. I'm from the Northeast, where high property taxes have had none of the effects you're touting. I have a lot of experience in this area that makes me skeptical of the claims.
I think a lot of the feasibility of abolishing property taxes is contingent on the state in which it's being proposed. In states that get the bulk of their revenue from income and sales tax, eliminating property taxes and bumping up the sales tax a point or two would be pretty feasible (plus lead to some cost savings by making revenue collection more efficient). In states where property taxes are the largest source of revenue, abolition is a no go, but not every state is in this category.
I mean, Marx was happy to collect land rent, but he wanted to go much further and also socialize *control* over land. That's a key distinction between Marx and George; George wanted private individuals to still be able to hold land title and do whatever they wanted with land so long as they paid LVT on it. Marx wanted to collect the land rent, and then go further and collective land, doing away with any semblance of individual ownership, and then to go even further and repeat that with the rest of the entire economy.
Marx saw George as basically a defender/stooge of Capitalism, and that Georgist reforms were an attempt to rehabilitate Capitalism by fixing one of its flaws.
Thank you for the clarification! I appreciate the distinction so Marx was essentially any attempt to rehabilate capitalism is not addressing the root problem that he saw which is capitalism, so something that actually fixed one of capitalism flaws was very bad for him because capitalism would be harder to uproot?
Yes, it was a "good idea but doesn't go nearly far enough" kind of objection for him. If I want to be absolutely technically correct it's more proper to say that he was opposed to Georgism as a philosophy than LVT itself. He was happy to collect land rent (which is what LVT does), but he didn't like the idea of leaving the decision of what to do with land in private hands.
I hear this about LTV but I don't see how it happens.
"
A tax on the land, and not on any of the buildings, transforms the property tax into a much fairer tax that is directly tied to the value of the local services you receive.
"
If my grandma stays in her house of 50 years, she's taxed on the value of the land. What services does she need? Keep in mind she pays for the ambulance ride.
On the other hand, the property next door get converted into a triplex, one with a couple that is constantly having domestics and the police called, another with some young roommates doing the same, only in their partying.
What is the mechanism in the LTV that prevents this?
I guess I should be clearer. What I really mean to say is that local services -- anything that makes an area more desirable, really -- tend to capitalize into land prices. Good schools, nicer parks, better policing, better public safety, more jobs, more transportation -- everything that everyone wants and is willing to pay more for, will cause the value of the location--that is the land--to rise.
Crucially, the same pattern is *also* true in reverse. If the area becomes a hotbed for crime, or drugs, or illicit activities, the location will tend to drop in value. If the police stop policing, if firefighter response time goes down, if water pipes and electrical wires are not sufficiently maintained, the area will become less desirable to live in. Detroit used to be one of the most desirable (and therefore expensive) places in the entire US to live at its peak, now it's a much less desirable place to live and the land values have plummeted.
Now, it's true that not each and every individual consumes each and every available service provided by local government in perfectly equal amounts. For instance, I homeschool my children, so I don't "use" the local schools. However, the fact that there is a nice local school in my neighborhood is a key part of why my house is valuable in the first place, and why I'm happy to pay my property taxes to maintain them.
The way I always think about this is in terms of the meme that "you have to go out and shoot in the air now and then, to make the neighborhood seem scary so gentrifiers don't drive up rents."
Sure, in theory, keeping your own neighborhood a shithole with needles in the park, gunshots every few nights, and terrible schools, will keep the rent down. But what are we trying to accomplish here? The goal should be for _everyone_, including the least among us, to have neighborhoods that are nice! We're a rich society, we _can_ afford to make sure we all get that! But we have a highly dysfunctional system of local governance where cities are incentivized to try to "attract jobs" without building any housing for the workers who hold those jobs, because if people actually _live_ in your jurisdiction, they cost you money (schools, public health, etc), whereas if they just _commute_ into your jurisdiction, they end up giving you sales taxes, and their employers give you property taxes, but they cost you very little money.
In and of itself it doesn't. But it does incentivize building more dwelling units on valuable land, in order to spread out the tax on that land across more people. You _don't_ pay any marginal tax on the newer, bigger structure, because only the land is taxed.
Gentrification and displacement is what happens to a neighborhood when rich people are willing to bid up the price to live there, and nobody is building enough new units.
If instead, you _do_ build a lot of new units, and collect sales taxes from those new residents, and you're collecting land taxes on the rise in value of the neighborhood; then you can hire enough beat cops to address crime, invest in your schools, build some nice parks, and so on.
This is an extremely thoroughly-researched topic, there's been a _ton_ of data collection over the last twenty years. A new market-rate apartment building _lowers_ the rents of nearby units, down to the hyper-local level, helping to reduce pressure towards displacement from nearby older units.
But it does incentivize building more dwelling units on valuable land,
"
I appreciate that. I hear that claim. But what is the mechanism?
I can't find the mechanism. If I'm the CEO of Widget Corp and I need a million square feet of office space for my headquarters, I'm facing paying more taxes the more the land costs. Why wouldn't that, if anything, encourage me to build on cheaper land?
Like I'm looking to sort out the building blocks for the actual land value tax itself compared to the property tax. Cheers.
Well, there's a balance there -- more central land is going to carry a higher tax rate, yes, but if you're in a business that is extremely high value-add, with a lot of knowledge workers who might want short / non-car commutes, it may well make sense for you to carry that cost in order to locate centrally. To the extent you're talking about building offices, it will make sense to build taller, for the exact same reason it will make sense to build residences taller, so you spread the tax burden out among more people. High-value land _should_ be used more intensively. Check out stuff like the Value Per Acre graphs from Urban3, which Strong Towns has popularized, which show that it's dense, walkable "old downtown" type areas that produce most tax revenue, while areas that are sprawly, with big box stores and enormous parking lots, are often costing cities money on net -- infrastructure costs more than associated revenue: https://archive.strongtowns.org/journal/2022/12/15/2022-the-year-in-maps-and-charts-from-urban3
Now, if you're in a commodity manufacturing / material processing business, where you need a LOT of space and you have relatively low value-add, yes, you absolutely _should_ move out to the fringes on lower-value land. Often there are also health and environment reasons why we might want to push heavy industry away from the residential / commercial center. This is a feature, not a bug!
There's a good primer on the logic of how landlords over time tend to extract all value production, in the absence of a frontier into which people can expand:
The Progress and Poverty blog also has a number of good posts about the pragmatic details of how LVT can be implemented, how it has successfully been implemented in a few places in the past, and what the likely net effects would be in modern cities. (The TL;DR is that if you move from a flat-rate standard property tax, to a flat-rate land value tax, while holding the total tax take constant, most small landowners, like operators of one or two commercial buildings, or homeowners, or "mom and pop" landlords with a small number of residential properties, see their tax burden go down. The big losers tend to be very large landowners who have been able to game the system by keeping their valuations artificially low, and speculators who are intentionally holding properties vacant, rather than investing in fixing things up immediately for a sale in months as opposed to years.)
I appreciate that. I realize this may not be answerable now + I don't mean to bust your balls over this, just an angle. I've dipped my toes a few times and I can find lots of articles but nothing that sorts this out for my wee lil brain.
Again, I'm going to be straight forward.
That's an argument for the current system of property tax, where the land and improvements are taxes. The triplex built next to my grandma, that building will have more value largely based on the revenue ( the rent ) it generates. Which makes sense since there are far more people using far more services.
What mechanism does LTV that is clearly better than this? Like I get some people love it. But I haven't ran across anything laying that part out. Just little clips like "oh it'll end speculation" or "no more vacant lots" which some people don't like but they're not big problems facing cities. Cheers.
Well, here's another angle: there's a decent chance that your grandma's net tax burden would go down after the shift, if she's got a typical home in the suburbs.
And another one is, the increased tax on land is going to hit one class of land the hardest in the city center, which is parking lots. That's the most valuable place to put apartments--the city center, and next to transit corridors. So if more apartments are actually getting built there and satisfying demand properly, it would be less likely for apartment demand to spill over into the suburbs in the first place.
Made sure to call my Ohio State senator, District 9's Sen. Cathy Ingram, and ask her to work with District 8's Blessing on LVT. While they aren't meeting any more this year, and I'm probably the only person who had *any* input on this from her constituency, I really hope she hears and takes my input. LVT is the rare policy which can be bipartisan, urbanist, progressive, and conservative all at the same time. As a wheelchair user who has to live in a condo with a ramp instead of a house with stairs, it's frustrating that our tax system punishes me for being in a multi family dwelling... in a city of apartments!
I've long thought libertarians could win with LVT. It finally gives them an answer to the question, "So how do you fund the government?"
I was first introduced to the idea of LVT by a self-described "geolibertarian" single taxer.
My man Fred Foldvary called himself such. I learned much from that vato. RIP
I always found Marx calling LVT "Capitalism's last ditch" a bit of a backhanded insult.
Calls to abolish property taxes without replacing them read to me as “I see how Prop 13 has absolutely devastated California over the last half century, and I want that times infinity for my state!”
Many people are saying!
I'm a big fan of your work Lars, and this is yet another well written article - but I think you might be mischaracterizing Marx's actual positions on LVT. For one, Marx was not against an LVT in principle. He believed his position already included it (the first bullet point in the 10 point program from the Manifesto of the Communist Party is 'Abolition of property in land and application of all rents of land to public purposes.'). In Das Capital he also makes the same arguments about land that all the other classical political economists did. His disagreement with Henry George was that an LVT would not solve the problem of exploitation, which Marx thought was a bigger issue. Marx and George were also not rivals, Marx wrote a scathing review of Progress and Poverty in a private letter to a friend. He published entire books against Proudhon and Bakunin - those were his actual ideological rivals. I get that you might not agree with Marx (I personally don't, at least not on everything) or that you are trying to hammer home that LVT is in no way associated with communism/socialism - but Marx is not the ideological enemy of LVT/Georgism that many portray him to be.
I do understand where you're coming from, but I would push back on three specific points. Would you or would you not you agree that:
- Marx didn't just want to just tax the land, but also to socialize it, as in put it directly under state ownership?
- Marx's theory of value is very much at odds with George's
- Marx did not see land and capital as two distinct categories in nearly as distinct a way as George did
If we can agree on these points, they seem like very big distinctions to me.
That all said, I will be the first to say that I am more than happy to pitch a big tent of coalition partners coming from both the right and the left, while at the same time making the distinction that simply being pro LVT does not make one a Georgist. That goes for allies on the left as well as the right.
In any case, I do appreciate comments like this and let me know what you think.
Thanks for the response. Yes, I agree that Marx’s theories are distinct and in many ways incompatible with George’s. I’m just talking about his position on a LVT. Some people reference the 1881 letter and present Marx as being completely against an LVT, but here is a direct quote from Marx (translated to English):
“We ourselves, as I have already mentioned, adopted this appropriation of ground rent by the state among numerous other transitional measures, which, as we also remarked in the _Manifesto_, are and must be contradictory in themselves.”.
I think BritMonkey captured the nuance well when he said ‘Even commie Karl Marx … could not deny the efficiency of a land value tax’. I think that’s closer to the truth, and is a stronger endorsement of LVT.
“simply being pro LVT does not make one a Georgist”
Thanks for emphasizing this. It needs to be said.
While I am a strong proponent of LVT, I also believe that a strong progressive income tax, combined with an inheritance tax, can prevent the formation of a generational aristocracy that inevitably bends government policy to its will. Thomas Jefferson, in a 1785 letter to James Madison, argued for a tax on property that rises in 'geometric proportion' to its value (count ol' TJ as another proponent for LVT), he was arguing in this context for a tax on property, though the motivation for this argument was also my own; the prevention of generational aristocracy that invariably threatens Democracy.
Your are dead wrong about this and a propagandistic demagogue.
The old don't pay property taxes. They have had assessments caped at 3% for thirty years. Their property taxes are half what the young family in a house identical to their right next to them is.
Even when there is no law, assessments always trail home values. And 65+ get tons of tax breaks in every single state I've lived.
Property tax burdens fall on new (young) buyers who have to accept market rate assessments. I pay twice the property taxes on my home I just bought that my neighbors in their 70s.
Any property tax cut is going to help young families more then olds.
DeSantis has even made this clear and said he rejects any property tax relief bill that targets the elderly.
The place in the country with the highest property taxes in the Northeast, and they have the least affordable homes. This doesn't work.
And no, property taxes don't "pay for local schools and services". All school districts in every state get topped off by state funds to equalize, no matter how high your property taxes are. You basically taxing yourself for nothing. It's Civil Rights Law.
https://i0.wp.com/conduitstreet.mdcounties.org/wp-content/uploads/2016/04/screenshot-2016-04-26-10-42-31.png?fit=1317%2C838&ssl=1
But yes, channel all your efforts into making sure sales taxes get cut instead of property taxes. Consumer, never own. That's what young people want.
Thanks for sharing your opinion!
What would possibly change your mind on the subject?
Proof your statement. You're assuming that property tax reductions would favor the old, but that's not my assessment of the data.
Beyond that, there are tons of property tax reductions that could satisfy your questions. For instance in Florida the debate is mostly over the homestead exemption (owner occupied). You could easily double the homestead exemption for being married and multiply it by the number of child dependents in your household (this would be like a child tax credit).
To consider one dishonest framing, one of the dozens of property tax bills in Florida is specific to age 65+. Propagandist make hey of this but the proposal has no support from Ron DeSantis.
https://wrenews.com/gov-desantis-age-specific-property-tax-relief-is-a-non-starter/
----
“Age-specific property tax relief is a non-starter,” DeSantis declared. “Making homestead properties tax-free would be a major boon to young families who will be better able to make ends meet.”
The governor added, “Why saddle anyone — but particularly young people — will rising local taxes based on increased assessments, which are nothing more than an unrealized gain? So far, state lawmakers have already put forward at least a dozen amendment proposals touching on property tax exemptions or assessed value caps.”
---
Look, Florida has a budget surplus. Some people want to give property tax relief. Others want to lower the sales tax. I think taxing consumption is a good thing. Everyone pays (even illegal immigrants and tourists).
More broadly, property rises in value when you and your neighbors engage in pro-social behavior. You're building community equity. I don't think such actions should be punished by the tax code.
We know what high property tax states look like. You end up with NY spending $40k per student per year and having failing schools. I think property taxes were just a way for states to use the SALT tax to fleece the federal government, which is another thing I hate.
> Beyond that, there are tons of property tax reductions that could satisfy your questions. For instance in Florida the debate is mostly over the homestead exemption (owner occupied). You could easily double the homestead exemption for being married and multiply it by the number of child dependents in your household (this would be like a child tax credit).
I have my own property tax relief program that I recommend here, the Universal Building Exemption. I think it would be much better than conventional property tax!
https://progressandpoverty.substack.com/p/so-you-want-to-abolish-property-taxes
> Look, Florida has a budget surplus. Some people want to give property tax relief. Others want to lower the sales tax. I think taxing consumption is a good thing. Everyone pays (even illegal immigrants and tourists).
Let's make a testable prediction. Let's say Florida removes property taxes and raises sales taxes. Do you expect housing prices to rise or lower as a result of that? If it happens and we check back in five years and housing prices go up in Florida, whereas states that made the opposite decision have housing prices go down, will you change your mind? If not, what level of evidence would be strong enough to get you to consider that you might be wrong?
> We know what high property tax states look like.
Why then does Texas, which has among the highest property taxes in the nation, have much cheaper real estate than other states? Why do California and Hawaii, which have among the lowest property taxes in the nation, have much more expensive real estate?
In any case, thank you for engaging with the material and sharing your views. I sincerely hope you have a wonderful day!
The sunbelt has:
1) lower incomes
2) tons of undeveloped greenfield land where DR Horton can slap down a massive HOA development where they assembly line houses on small lots.
There is literally no natural barrier blocking ever wider development in central Texas. No ocean. No river. No mountain. It’s just desert. If the sprawl gets dense enough you literally get another city center, like Fort Worth to Dallas.
Our country knows how to slap down mass housing developments in undeveloped land. My community in Florida was just empty land 15 minutes from the beach 15 years ago. Now it’s a huge HOA with thousands of houses.
In the parts of Florida that aren’t full of empty land, like Miami today, prices are on the higher side.
California is only desirable on a narrow slice near the coast, and there are a lot of natural barriers. New York is an island and getting into that island serves as a choke point on commuters.
In the 1950s when my dad grew up in NJ it was just farmland. They were slapping down HOA communities the way they do in Florida and Texas today. And housing was cheap. But eventually they ran out of empty land. And you can only go one direction (away from the ocean). It’s already an hour to get over the bridge, try adding an hour to get to the bridge in top of that. Not going to work.
Low property taxes tend to be about 1.x% and high property taxes tend to be 2.x%. This is like the difference between a 7% interest rate and 8% interest rate in terms of monthly payment buying power. That will have some impact on home prices but is kind of a rounding error. And keep in mind for most of my lifetime the SALT deduction reduced the impact of property taxes by like 40%.
Anyway, having less buying power sloshing around combined with lots of empty land to slap down houses on is why the sunbelt is cheaper. Property taxes are just another tax to help fund bloated and ineffective public schools. You might as well light the money on fire.
I see, thanks for sharing your perspective. What do you think about the findings of this research paper?
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4880480
I think that there exists examples outside of Texas and California that are worth reflecting on.
More broadly, I'm a statistician by trade. As such, I'm skeptical of "studies". They are commissioned to get a result and they get that result.
"lies, damned lies, and statistics"
This doesn't mean that I don't think they are useful, but that one literally had to spend a lot of time directing every study they see in depth. Which can't be done in all instances.
And so we often have to pattern match on other known facts and other studies we have reviewed. I'm from the Northeast, where high property taxes have had none of the effects you're touting. I have a lot of experience in this area that makes me skeptical of the claims.
That chart showing Direct Taxes vs Entitlement by Age is enough to make anyone under 55 get emotional.
To me it's about my kids future as Gen X we got a little screwed future gens are really getting jt bad
I think a lot of the feasibility of abolishing property taxes is contingent on the state in which it's being proposed. In states that get the bulk of their revenue from income and sales tax, eliminating property taxes and bumping up the sales tax a point or two would be pretty feasible (plus lead to some cost savings by making revenue collection more efficient). In states where property taxes are the largest source of revenue, abolition is a no go, but not every state is in this category.
The alt-right suddenly becoming georgist is one of the weirdest things I've ever seen.
Wait is there more to this?
Great article! Curious why Marx rejected LVT?
I mean, Marx was happy to collect land rent, but he wanted to go much further and also socialize *control* over land. That's a key distinction between Marx and George; George wanted private individuals to still be able to hold land title and do whatever they wanted with land so long as they paid LVT on it. Marx wanted to collect the land rent, and then go further and collective land, doing away with any semblance of individual ownership, and then to go even further and repeat that with the rest of the entire economy.
Marx saw George as basically a defender/stooge of Capitalism, and that Georgist reforms were an attempt to rehabilitate Capitalism by fixing one of its flaws.
Thank you for the clarification! I appreciate the distinction so Marx was essentially any attempt to rehabilate capitalism is not addressing the root problem that he saw which is capitalism, so something that actually fixed one of capitalism flaws was very bad for him because capitalism would be harder to uproot?
Yes, it was a "good idea but doesn't go nearly far enough" kind of objection for him. If I want to be absolutely technically correct it's more proper to say that he was opposed to Georgism as a philosophy than LVT itself. He was happy to collect land rent (which is what LVT does), but he didn't like the idea of leaving the decision of what to do with land in private hands.
Looks like some great reading Thanks Lars!
I hear this about LTV but I don't see how it happens.
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A tax on the land, and not on any of the buildings, transforms the property tax into a much fairer tax that is directly tied to the value of the local services you receive.
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If my grandma stays in her house of 50 years, she's taxed on the value of the land. What services does she need? Keep in mind she pays for the ambulance ride.
On the other hand, the property next door get converted into a triplex, one with a couple that is constantly having domestics and the police called, another with some young roommates doing the same, only in their partying.
What is the mechanism in the LTV that prevents this?
I guess I should be clearer. What I really mean to say is that local services -- anything that makes an area more desirable, really -- tend to capitalize into land prices. Good schools, nicer parks, better policing, better public safety, more jobs, more transportation -- everything that everyone wants and is willing to pay more for, will cause the value of the location--that is the land--to rise.
Crucially, the same pattern is *also* true in reverse. If the area becomes a hotbed for crime, or drugs, or illicit activities, the location will tend to drop in value. If the police stop policing, if firefighter response time goes down, if water pipes and electrical wires are not sufficiently maintained, the area will become less desirable to live in. Detroit used to be one of the most desirable (and therefore expensive) places in the entire US to live at its peak, now it's a much less desirable place to live and the land values have plummeted.
Now, it's true that not each and every individual consumes each and every available service provided by local government in perfectly equal amounts. For instance, I homeschool my children, so I don't "use" the local schools. However, the fact that there is a nice local school in my neighborhood is a key part of why my house is valuable in the first place, and why I'm happy to pay my property taxes to maintain them.
Does that answer your question?
The way I always think about this is in terms of the meme that "you have to go out and shoot in the air now and then, to make the neighborhood seem scary so gentrifiers don't drive up rents."
Sure, in theory, keeping your own neighborhood a shithole with needles in the park, gunshots every few nights, and terrible schools, will keep the rent down. But what are we trying to accomplish here? The goal should be for _everyone_, including the least among us, to have neighborhoods that are nice! We're a rich society, we _can_ afford to make sure we all get that! But we have a highly dysfunctional system of local governance where cities are incentivized to try to "attract jobs" without building any housing for the workers who hold those jobs, because if people actually _live_ in your jurisdiction, they cost you money (schools, public health, etc), whereas if they just _commute_ into your jurisdiction, they end up giving you sales taxes, and their employers give you property taxes, but they cost you very little money.
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The goal should be for _everyone_, including the least among us, to have neighborhoods that are nice!
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And there lies the rub. How does LVT end crime?
In and of itself it doesn't. But it does incentivize building more dwelling units on valuable land, in order to spread out the tax on that land across more people. You _don't_ pay any marginal tax on the newer, bigger structure, because only the land is taxed.
Gentrification and displacement is what happens to a neighborhood when rich people are willing to bid up the price to live there, and nobody is building enough new units.
https://www.urban.org/urban-wire/understand-citys-pace-gentrification-look-its-housing-supply
If instead, you _do_ build a lot of new units, and collect sales taxes from those new residents, and you're collecting land taxes on the rise in value of the neighborhood; then you can hire enough beat cops to address crime, invest in your schools, build some nice parks, and so on.
This is an extremely thoroughly-researched topic, there's been a _ton_ of data collection over the last twenty years. A new market-rate apartment building _lowers_ the rents of nearby units, down to the hyper-local level, helping to reduce pressure towards displacement from nearby older units.
https://matrix.berkeley.edu/research-article/kate-pennington-on-gentrification-and-displacement-in-san-francisco/
https://www.youtube.com/watch?v=rQW4W1_SJmc&pp=2AYK
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But it does incentivize building more dwelling units on valuable land,
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I appreciate that. I hear that claim. But what is the mechanism?
I can't find the mechanism. If I'm the CEO of Widget Corp and I need a million square feet of office space for my headquarters, I'm facing paying more taxes the more the land costs. Why wouldn't that, if anything, encourage me to build on cheaper land?
Like I'm looking to sort out the building blocks for the actual land value tax itself compared to the property tax. Cheers.
Well, there's a balance there -- more central land is going to carry a higher tax rate, yes, but if you're in a business that is extremely high value-add, with a lot of knowledge workers who might want short / non-car commutes, it may well make sense for you to carry that cost in order to locate centrally. To the extent you're talking about building offices, it will make sense to build taller, for the exact same reason it will make sense to build residences taller, so you spread the tax burden out among more people. High-value land _should_ be used more intensively. Check out stuff like the Value Per Acre graphs from Urban3, which Strong Towns has popularized, which show that it's dense, walkable "old downtown" type areas that produce most tax revenue, while areas that are sprawly, with big box stores and enormous parking lots, are often costing cities money on net -- infrastructure costs more than associated revenue: https://archive.strongtowns.org/journal/2022/12/15/2022-the-year-in-maps-and-charts-from-urban3
Now, if you're in a commodity manufacturing / material processing business, where you need a LOT of space and you have relatively low value-add, yes, you absolutely _should_ move out to the fringes on lower-value land. Often there are also health and environment reasons why we might want to push heavy industry away from the residential / commercial center. This is a feature, not a bug!
There's a good primer on the logic of how landlords over time tend to extract all value production, in the absence of a frontier into which people can expand:
https://progressandpoverty.substack.com/p/what-happens-when-americas-monopoly
And a somewhat longer introduction here to George's theory:
https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty
The Progress and Poverty blog also has a number of good posts about the pragmatic details of how LVT can be implemented, how it has successfully been implemented in a few places in the past, and what the likely net effects would be in modern cities. (The TL;DR is that if you move from a flat-rate standard property tax, to a flat-rate land value tax, while holding the total tax take constant, most small landowners, like operators of one or two commercial buildings, or homeowners, or "mom and pop" landlords with a small number of residential properties, see their tax burden go down. The big losers tend to be very large landowners who have been able to game the system by keeping their valuations artificially low, and speculators who are intentionally holding properties vacant, rather than investing in fixing things up immediately for a sale in months as opposed to years.)
I appreciate that. I realize this may not be answerable now + I don't mean to bust your balls over this, just an angle. I've dipped my toes a few times and I can find lots of articles but nothing that sorts this out for my wee lil brain.
Again, I'm going to be straight forward.
That's an argument for the current system of property tax, where the land and improvements are taxes. The triplex built next to my grandma, that building will have more value largely based on the revenue ( the rent ) it generates. Which makes sense since there are far more people using far more services.
What mechanism does LTV that is clearly better than this? Like I get some people love it. But I haven't ran across anything laying that part out. Just little clips like "oh it'll end speculation" or "no more vacant lots" which some people don't like but they're not big problems facing cities. Cheers.
Well, here's another angle: there's a decent chance that your grandma's net tax burden would go down after the shift, if she's got a typical home in the suburbs.
And another one is, the increased tax on land is going to hit one class of land the hardest in the city center, which is parking lots. That's the most valuable place to put apartments--the city center, and next to transit corridors. So if more apartments are actually getting built there and satisfying demand properly, it would be less likely for apartment demand to spill over into the suburbs in the first place.