You may be confusing LVT with property transfer tax? LVT is a tax on ownership of land - driving down land value, not up.

In practice it disincentivises investment in land (rent-seeking and speculative land hoarding) while incentivising land development. In cities this manifests as more, cheaper, homes, and lower rents, and is highly progressive.

I say in practice because we have over a century of explicit and implicit LVT implementations in the real world to demonstrate this. Most implementations of LVT have gone down as described. Estonia is a pretty fantastic case study - 90% of property is owner-occupier! And you might find this new study of implicit LVT in the US interesting - LVT correlates with higher earnings and demographic diversity: https://www.sciencedirect.com/science/article/pii/S004727272...

The challenges for LVT are really about how to transition the tax in for areas that are occupied, but severely underdeveloped. If a low-density inner-city area ought to be high-density, the owners are being charged accordingly. Long term, it stimulates development and the new housing surplus (splitting the tax burden of LVT across a much greater number of owners) balances things out. But that's no consolation to the people being told they have to pay tax on their backyard as if it's already a block of flats.

>LVT is a tax on ownership of land - driving down land value, not up.

This is comment is an exercise in lying with definitions. The N year carrying cost of the land is the same or higher even if the entry cost is lower.

It's like a low down payment loan.

The "value" of the land does not change. Only who captures it does.

Whether carrying cost is higher or lower depends on the taxation LVT is substituting and the counterfactual utilisation of the land. In practice it is usually lower in rural and suburban and highly developed urban areas and (where substituted property taxes are higher or there are more properties to tax per unit of land), and higher in underdeveloped urban areas (with fewer properties to tax per unit of land).

This is, of course, the point. The carrying costs properly incentivise appropriate land use and development, and the land value is reduced, freeing up the capital locked into ownership (i.e. thin air) for productive use.

The better developed land also ends up with more properties per unit of land, so the carrying cost of property decreases universally.

Well, I (and most economists) disagree.

I think you just have a misunderstanding of how taxes work. The person or company that "pays" the tax does not bear the full burden of the tax. That burden is usually widely distributed throughout the economy. In the example of LVT, a landlord would pass on the LVT in the form of increased rents to their tenants. A power company that pays a carbon tax charge more their electricity. An income tax makes it more expensive to give people jobs, so even if the earner pays it, that burden is also bore by the unemployed. Whoever pays the tax, they just pass it on to the rest of the economy.

But that's ok, because taxes can be paired with other methods like cash transfers or social programs that can effectively redistribute wealth. We should try to raise taxes with methods that have good side effects (LVT, carbon taxes), and then redistribute as necessary.

Reducing the insane wealth concentration at the top has positive side effects if it prevents whatever's been happening in politics the last decade.

> The person or company that "pays" the tax does not bear the full burden of the tax.

As a homeowner, who else bears my tax?

The whole economy.

If your cost of living is higher (due to LVT), the minimum wage you will work for is higher. The amount of discretionary spending (someone else's income) or investment you can make is lower. Obviously these effects on an individual level are small, but when aggregated across the entire economy are very large.

In a world of LVT, everyone pays LVT because everyone lives somewhere. You either pay it as an owner or its passed through to you in rent prices. It will be passed onto you in the food you eat (which was grown on land), in the products you use (which were manufactured in a physical place), in the internet services you use (which are run on data centers on physical land), and so on.

In this way, it is much like all other taxes. What is special about LVT, and not other taxes, is that LVT create a disincentive against land speculation (using land as an investment rather than for living or productive use).

What prevents this system from resource exploitation for more taxable profits? I want to have systems in place that encourage nature and long term sustainability.

Does LVT create a moral hazard? I don't think so. Have we seen municipal governments with liquor taxes rush to run pro-alcohol ad campaigns and relax night life restrictions in order to maximize tax revenues? No. Have carbon taxes motivated governments to promote carbon use? Again, we have no evidence of that. Indeed, for pretty much ever tax ever studied, we find the relationship you would imagine: increasing taxes on X, reduces X.

So in that way, since LVT just adds to the cost to exploit any resource, it will reduce exploitation of nature.

But more importantly, LVT is in no way incompatible with other regulations or restrictions on land use. i.e. you can have LVT and a law against strip mining.

Potentially anyone you pass it on to, such as a tenant.

"get a roommate or move"?

The topic of this sub-thread is whether a "land value tax would fix rich people from parking money in real estate".

You have the option to pass on such a tax burden, as do any other home/land-owner(s), which is relevant to the conversation.

What point are you making relevant to that?

I am wondering what protects normal people. I hear a proposal what prevents the ultra wealthy from hoarding, but I am not seeing how this doesn't negatively impact normal, single family residences.

It seems the goal is maximizing tax revenue, punishing hoarders of land, and pushing for communal living. The exact case I think it is imperative to avoid is removing the elderly (cough, less useful) from their forever home in the guise of progress.

The obvious way would be tax relief on land used for primary residences up to some limit. But the point is the tax wouldn't dis-incentivise land acquisition so long as it wasn't left vacant.

I'd refine your opener to:

- economists have a good idea of how economies have worked _to date_ - they posit new policy to achieve goals - these policies introduce second-order effects that they failed to predict

I mean, Friedman's criticism of Keynes was excellent, and forsooth, his policies made stonks go up. But i don't think there economy is any better for them; i think we are, broadly, worse off.

I support LVT, but there will be second-order effects. I guess we are doomed to lurch from crisis to crisis, at a higher level than economic boom-and-bust.

What if a first owned property is not taxed, but additional properties are?

That's probably somewhat better than the current status quo but one of the obvious side effects would be screwing smaller landlords out of the market and replacing them with typical "faceless corp gives no shits about you or anything beyond the legal minimum" type property management companies. Worth it? IDK.

Taxes are not just money taken from people in the abstract. They are, quite concretely, used for specific purposes. In the US (because the OP is about the US), property taxes in particular are used to fund local services like schools.

So if you eliminate taxes on primary homes, you will cripple the public schools.

I disagree with your analysis, but putting that aside, you are ignoring the fact that LVT has been applied in the real world. Denmark, Estonia, Singapore, Taiwan...

Obviously disentangling effects is hard, but there is no evidence that suggests it has the deleterious effects you mention.

I thought in Singapore it was all termed leases? That the government always owns the land?

It's not exactly the same, but pretty close.

LVT: You own the land, you just have to pay these taxes on it every year or we will force you to sell it so we can collect our taxes.

Leaseshold: We own the land, but you can buy a 99-year leasehold, and you can use the land (or sell your leasehold on the open market) as long as you continue to pay the rent. You might also be able to extend your leasehold when it expires, but that is up to the government.

So the expiration part is different, but "taxes" vs "lease rent" is just semantics.

Property tax is already ubiquitous. LVT is almost the same, it just doesn't tax the value of structures on the land. Why would LVT be worse for this?

But the second order effect is that if real estate is no longer treated as an investment, then it becomes less necessary to own a house.

LVT can be deferred to the time of sale.

Unfortunately that doesn't really help. It has the effect of eroding the asset value such that it quickly means the owner can't sell.

In other words, if selling removes much of your capital, you then don't gave capital to spend on the next place.

Conversely investors become even more motivated not to ever sell. They can defer the LVT forever, and just use the property as collateral for loans (ie getting liquidity without selling.)

And LVT just becomes an expense built into the cost of rent. The investor never pays it anyway, the tenant ultimately pays it.

How will they use it as collateral if it has no value upon sale?

Similarly, why would the next place be expensive if it couldn't be used as a speculative asset?

I guess that it can be rented or built upon. It's easy to imagine renting a field to a farmer but money is money, so why not letting somebody else build flats over one's land?

The tennant pays now anyway. Of a landlord could charge more rent they would.

Two identical properties, one under mortgage and one that isn’t, have identical rental prices. The costs to the landlord are irrelevant.

I understand where you are coming from here. And there are multiple levers in play here.

The cost of a mortgage underpins the rental value. If there are multiple units for rent then there will be a "going rate" and that's certainly a part of the equation. In that sense some landlords get more cream than others, but that's capitalism in action.

There are however other costs that go into rental calculations. Perhaps the building has a supervisor, or rental agent. Perhaps utilities are included. There are typically property rates and taxes. There may be sectional title levies. That's before we talk about insurance, maintainence and so on. For a group of similar dwellings these costs will tend to be similar, and so the floor is set not just by the mortgage, but by including these costs as well.

If a extra cost comes along, which affects all the properties together, then that will just become part of the rental-floor equation. And yes, it's possible for that to be higher than people will pay, but that tends not to be the driving factor. People have to live somewhere and ultimately will pay whatever keeps them off the streets.

Of course people who own their own home will simply have an extra cost burden every year. There's no upside at all, and will result in more people not purchasing, but rather staying on the rental ladder. Indeed making purchase less attractive allows rents to get higher.

This is the problem with all economics. There are butterfly effects all over the place so "simple solutions" tend to have lots of unwelcome consequences. Trying to solve problems with taxes seldom ends well.

Wealthy people would never sell their houses. Keep them in the family or rent them out.

Anyone who had to move for a job or wanted to downsize their house for retirement years would be screwed, though.