LVT applies to all land, but not to the improvements on the land.
We do not care about disincentivizing an investment in land (by which I mean, just buying land). We do care about disincentivizing investments in improvements on the land (by which I include buying the improvement on the land, as well as building such improvements). A signal of LVT intent will not have negative consequences unless it is interpreted as a signal of broader confiscation.
Yeah, I understand the theory—I haven’t seen an implementation plan that unbundles land and improvements in practice, so it ends up as “normal property tax, secured by land and improvements, just calculated based on land-rent-value”.
If you have a proposal where failing to pay the LVT doesn’t result in loss of use of the improvements, let me know.
If you fail to pay the LVT you can presumably sell the improvements. I don’t think there’s an inefficiency here—you shouldn’t invest in improving land if you’re not going to extract enough value from it to pay the LVT, and this is a feature, not a bug (that investment would be inefficient).
You can’t sell the improvements if they’re tied to land that is taxed higher than the improvements bring in (due to mistakes in improvement or changed environment that has increased the land value and the improvements haven’t stayed optimal). The land is taxed at it’s full theoretical value, less than the improvements bring in, and the improvements are literally connected to it.
The value extractable is rent on both the land and the improvement. LVT taxes only the former. E.g. if land can earn $10k/month after an improvement of $1mm, and if interest is 4.5%, and if that improvement is optimal, a 100% LVT is not $10k/mo but $10k/mo minus $1mm*0.045/12=$3,750. So 100% LVT would be merely $6,250.
If your improvement can’t extract $6.3k from the land, preventing you from investing in that improvement is a feature, not a bug.
If your improvement can’t extract $6.3k from the land, preventing you from investing in that improvement is a feature, not a bug.
OK. I hate that feature. Especially since it doesn’t prevent imperfect investments, it only punishes the ones that turn out suboptimal, often many years later.
LVT applies to all land, but not to the improvements on the land.
We do not care about disincentivizing an investment in land (by which I mean, just buying land). We do care about disincentivizing investments in improvements on the land (by which I include buying the improvement on the land, as well as building such improvements). A signal of LVT intent will not have negative consequences unless it is interpreted as a signal of broader confiscation.
Yeah, I understand the theory—I haven’t seen an implementation plan that unbundles land and improvements in practice, so it ends up as “normal property tax, secured by land and improvements, just calculated based on land-rent-value”.
If you have a proposal where failing to pay the LVT doesn’t result in loss of use of the improvements, let me know.
If you fail to pay the LVT you can presumably sell the improvements. I don’t think there’s an inefficiency here—you shouldn’t invest in improving land if you’re not going to extract enough value from it to pay the LVT, and this is a feature, not a bug (that investment would be inefficient).
You can’t sell the improvements if they’re tied to land that is taxed higher than the improvements bring in (due to mistakes in improvement or changed environment that has increased the land value and the improvements haven’t stayed optimal). The land is taxed at it’s full theoretical value, less than the improvements bring in, and the improvements are literally connected to it.
The value extractable is rent on both the land and the improvement. LVT taxes only the former. E.g. if land can earn $10k/month after an improvement of $1mm, and if interest is 4.5%, and if that improvement is optimal, a 100% LVT is not $10k/mo but $10k/mo minus $1mm*0.045/12=$3,750. So 100% LVT would be merely $6,250.
If your improvement can’t extract $6.3k from the land, preventing you from investing in that improvement is a feature, not a bug.
OK. I hate that feature. Especially since it doesn’t prevent imperfect investments, it only punishes the ones that turn out suboptimal, often many years later.