What's the difference between the two in reality? Theoretically, with a land value tax, "improvements" (however that's defined) aren't added to the final tax calculation. However better-looking homes are then a signal that drive up demand for (and therefore price of) land so ultimately it seems LVT does punish improvements if only indirectly.
Instead, I see LVT incentivizing the production and purchase of mobile homes, RVs, and hotels. You could live tax free if you don't have a permanent abode.
If everyone on the block turns their homes into multiplexes or high rises, this would attract businesses/restaurants to cater to the new residents which would ultimately increase the value of the land and the corresponding taxes, so I'm confused how it's different than property taxes in that regard
> this would attract businesses/restaurants to cater to the new residents which would ultimately increase the value of the land and the corresponding taxes
Lot more steps. Developing a property is risky. The double whammy of eating the development cost in addition to increased property tax bill dissuades homeowners from taking the risk. (Yes, theoretically, prices should go down as easily as they go up. In reality, obviously, no, no city does that.)
By the time your land value has increased, you’ve already made money. (Or ridden on your neighbours’ investments.)
Unless every property in the area is owned by the same person each individual owner will want to build a more expensive building because their individual action has minimal effect on land value. Basically if you don’t build big someone else will and you r lvt will go up either way.
> What's the difference between the two in reality?
One taxes the land and the building(s) on it. The other only taxes the former.
In practice, this means that while property taxes and land value taxes both penalize speculation, LVTs more precisely do so, without the side effect property taxes have of penalizing construction.
> However better-looking homes are then a signal that drive up demand for (and therefore price of) land so ultimately it seems LVT does punish improvements if only indirectly.
Even assuming that effect does happen, it'd be considerably worse under a property tax.
> Even assuming that effect does happen, it'd be considerably worse under a property tax.
So your answer is to dismiss my position without evidence? Your point that property tax is worse than LVT isn't justified by your claim. If land values are determined by government assessment like property values are, then you're still paying property tax, albeit with an obfuscated input for improvement in the calculation which may be higher or lower or just the same as a regular property tax.
> So your answer is to dismiss my position without evidence?
My evidence is your evidence. If you're arguing that a parcel of land increases in value due to the existence of improvements on neighboring parcels, then so, too, would improvements on the parcel in question be more valuable (since they're already built in a desirable location). Hence: the impact for land tax + improvement tax would be worse under your premise than the impact for land tax alone.
In reality, the "niceness" of surrounding homes is hardly a factor; proximity to economic centers (be it directly or by proximity to rapid transit) is typically one of the two primary drivers of land values (the other being geography).
Not just neighboring parcels. Any improvements on one's own property (separate from the land itself) would be factored into LVT through an indirect tax on improvements via a higher assessment value. While certains areas can be "nice", not all homes in a given area are equally "nice". Some parcels of land will have their values "propped up" by the home that is sitting on it as well as proximate homes while others are "weighed down" in the same manner. This would result in unequal LVT assessments even for parcels of the same acreage and quality within a given area. As a result, It's difficult to assess the "actual" land value seperatley. From this, one can conclude that an LVT on a parcel with less valuable property or (a property proximate to less desirable property) plus an improvement tax can be lower in cost than an LVT in on a parcel with property that is more in demand.
> In reality, the niceness of surrounding homes is hardly a factor; proximity to economic centers (be it directly or by proximity to rapid transit) ...
Homes can be valuable precisely because they're located away from economic centers. That too is geography in action. And if COVID telecommuting is an indication of market preferences, home-owning adults prefer small, out-of-the-way towns with plenty of space, low property taxes, and good internet connections. So I'd hardly think that proximity to economic centers (usually cities) is as relevant it used to be.
> Any improvements on one's own property (separate from the land itself) would be factored into LVT through an indirect tax on improvements via a higher assessment value.
No, because that's already subtracted out of the total property value to produce the land value.
> And if COVID telecommuting is an indication of market preferences, home-owning adults prefer small, out-of-the-way towns with plenty of space, low property taxes, and good internet connections.
The exodus from city centers stems from farther-out places being cheaper - i.e. having lower land value.
> No, because that's already subtracted out of the total property value to produce the land value.
On paper yes, but in practice there will be a de facto tax on improvement due to higher demand caused by what an physical improvement of one's own property signals.
> The exodus from city centers stems from farther-out places being cheaper - i.e. having lower land value.
Lower cost is not necessarily lower value. It's possible for areas out of the way to cost more, even if they start cheap, simply due to a short-term spurt of high demand. There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit there despite the city being the automotive capital of the United States where one had historically seen the opposite trend.
> On paper yes, but in practice there will be a de facto tax on improvement due to higher demand caused by what an physical improvement of one's own property signals.
...which is already subtracted out along with the rest of the improvements' contribution to land values. You could argue that it ain't a perfectly accurate subtraction - and that'd be a valid and reasonable argument - but that margin of error cuts both ways (i.e. overestimating improvement value instead of underestimating it).
> Lower cost is not necessarily lower value.
Land cost is land rental value times some amount of time (usually based on the expected cap rate).
> There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit
Are the two parcels the same size? Are they representative of surrounding parcels and not outliers? Are they the same distance (in transit time/cost) as the nearest town/city center?
> You could argue that it ain't a perfectly accurate subtraction - and that'd be a valid and reasonable argument - but that margin of error cuts both ways (i.e. overestimating improvement value instead of underestimating it).
I did allude to that in a previous comment regarding the "propping up "and "weighing down" of values
> Lower cost is not necessarily lower value.
Land cost is land rental value times some amount of time (usually based on the expected cap rate).
Cap rate/land rental value is difficult to assess on land
> There are, for instance, empty parcels of land in Idaho that now go for more than whole apartment buildings in Detroit
Are the two parcels the same size? Are they representative of surrounding parcels and not outliers? Are they the same distance (in transit time/cost) as the nearest town/city center?
I'll admit that I don't have the exact values under the constraints you've listed. And given different geographies, that's going to be difficult to accomplish. However, there have been several reports of prices in Idaho increasing due to now-former residents of the Bay Area fleeing into state and buying up land and houses.
