In a perhaps-not-weird coincidence, the villains in both of the children’s programs I saw today were land developers.
So I was thinking yesterday about the need for coherent ownership to ensure that countries remain nice places that serve the interests of their inhabitants, (the potential implications of which you can probably work out for yourself, especially if you’ve eve had to actually deal with a divided-ownership situation like an HOA,) and I got to thinking about the possibilities of the Land Value Tax (LVT) as a force for civilization and long-term efficient land management.
The LVT differs in important ways from a property tax, and should be the basis for our American tax system, rather than income tax + everything else under the sun, so I’m going to go into a bit of detail.
The LVT is a tax on the unimproved value of the land–not the value of the buildings, gardens, or other things you might build there.
By contrast, a property tax is assessed against the value of the whole property, including all of the stuff on it.
What this means:
Let’s say that you and your neighbor both own a chunk of land. Like most adjoining pieces of land, they’re basically identical–you have a few more trees, he has a few more rocks, but nothing major. Under an LVT, you each owe the same amount in taxes–a percent based on the sale value of the land itself, which is of course identical for the two pieces. If you build a nice house on your land, and your neighbor leaves his as weeds, you still get taxed the same. If you let your house become a decrepit ruin while your neighbor builds an apartment complex, you still get taxed the same.
When you are making better use of your land than your neighbor, you make more money than he does. When he makes better use of his land than you do, he makes more money.
Now, let’s suppose we have a property tax (as we currently do.) You and your neighbor start out with identical plots of land, and so equal taxes. But when you build a house and he leaves his as weeds, the value of the house is added to your taxes–and you now pay more taxes. If you let your house become a decrepit ruin while the neighbor builds an apartment complex, you now pay less in taxes and he pays more.
In other words, under a property tax, making better use of your land results in higher taxes, while making worse use of the land results in lower taxes.
The LVT lines up the landowner’s and society’s interests to incentivize efficient land use. The property tax puts land owners and society in conflict, by punishing landowners for making improvements to their properties.
America’s inner cities are a disgrace. I cringe to think of foreign tourists visiting DC and wandering into Anacostia, or one of its other slums. I cringe to think of anyone living in these places. (After you read that, go watch “Holes in my Shoes”–it’s available on Netflix–and consider the important differences.)
There is no reason why real estate in the heart of American cities should look like this. The value of the land is high–virtually identical to the value of land with mansions, skyscrapers, or factories–but these properties have been left, instead, to fall apart.
And while gentrification is generally supposed to be bad for the people involved, long term, I suspect that coherent land-use strategies would lead to greater general prosperity, benefiting the community’s poorer members by providing jobs and nicer housing.
If society wishes, certain tracts of land may be set aside for nature parks (as they currently are) or for use by people who may not wish to live in cities, like, say, the Pygmies or the San.
I have often commented that after centuries of decay, the only way to get a nice city is to bomb it to the ground and then rebuild from scratch:
Obviously it would have been superior for the people if someone had moved all of them out of the way, first.
At least an LVT would help incentivize individuals to keep their own parcels nice. To keep an entire city nice, to deal with problems that emerge after centuries of use, like streets that can no longer handle the amount of traffic trying to use them or antiquated sewer systems, probably requires something else, like some form of coherent ownership that can step in and take control of whole neighborhoods, at least once a century.
Perhaps a workable system would be for one individual or small collection of individuals to “own” a city, but to lease individual chunks of it for one year, ten year, or longer chunks of time. During that time, the leasee would be free to modify the property however they saw fit, and the terms of the lease would mirror those of the LVT. When large chunks of the city eventually need updating, the owner could decline to lease out relevant parcels until they have had a chance to make the necessary changes.
Speculative ideas are speculative.
