Note that these sorts of situations are perfectly foreseeable from the perspective of owners. They know precisely what they will pay each year in taxes based on their bid. It’s prudent to re-value the home every once in a while if taxes drift too much, but the owner can keep the same schedule if they want. They can also use the public listing of local bids, so they know what to bid and can feel pretty safe that they will keep their home. They truly have the highest valuation of all the bidders in most cases.
The thing is, every system of land ownership faces a tradeoff between investment efficiency and allocative efficiency. This is a topic in the next post, where I’ll discuss why the best growth rate of taxes closely follows the true growth rate of land values. Essentially, you want people to pay their fair share. Unfortunately, any system that has taxes move along with land values will risk “taxing people out of their homes”, there are legitimate ways to do land policy on either end of the spectrum.
The neat thing about this system is that you can choose where on the spectrum you want to be! If you want high investment efficiency (i.e. people can securely hold their homes and don’t have to worry about re-auctioning) then just set the tax growth rate to zero; that way the owner pays a fixed amount each year indefinitely. In net present value terms, the indefinite taxes will be finite and the tax rate can be set to adjust this amount up or down.
If for some reason you want allocative efficiency, you can crank the growth rate high enough to trigger annual auctions. This is bad for physical land, but this could be valuable for other types of economic land like broadband spectrum.
Note that these sorts of situations are perfectly foreseeable from the perspective of owners. They know precisely what they will pay each year in taxes based on their bid. It’s prudent to re-value the home every once in a while if taxes drift too much, but the owner can keep the same schedule if they want. They can also use the public listing of local bids, so they know what to bid and can feel pretty safe that they will keep their home. They truly have the highest valuation of all the bidders in most cases.
The thing is, every system of land ownership faces a tradeoff between investment efficiency and allocative efficiency. This is a topic in the next post, where I’ll discuss why the best growth rate of taxes closely follows the true growth rate of land values. Essentially, you want people to pay their fair share. Unfortunately, any system that has taxes move along with land values will risk “taxing people out of their homes”, there are legitimate ways to do land policy on either end of the spectrum.
The neat thing about this system is that you can choose where on the spectrum you want to be! If you want high investment efficiency (i.e. people can securely hold their homes and don’t have to worry about re-auctioning) then just set the tax growth rate to zero; that way the owner pays a fixed amount each year indefinitely. In net present value terms, the indefinite taxes will be finite and the tax rate can be set to adjust this amount up or down.
If for some reason you want allocative efficiency, you can crank the growth rate high enough to trigger annual auctions. This is bad for physical land, but this could be valuable for other types of economic land like broadband spectrum.
Death is foreseeable?
(Well, okay, yes, but the timing often isn’t.)