“Guys like you I would dispatch with my roofing axe.” -- BootsywannabeACretin
You also still avoid the most important part of my concern: how do you value the land? You say "demand for land in the area". Sure, in my neck of the woods you can get a decent data sample of vacant land sales to gauge value, but how do you do that in neighborhoods where they aren't plowed over areas? No one buys the building separate of the land or vice versa.
Yeah, they are pure land assets, but such a tax doesn't only affect vacant land. It affects everyone.But the purpose of a true "single tax" system is to tax only unearned value, that is, value that comes to the owner of an asset that itself cannot be increased in value through applied labor or capital. The only asset that produces such an increase in value is land, if rising demand for it in a general area makes individual parcels more valuable. The reason for focusing on vacant lots is because those are pure land assets.
The other side effect is that it penalizes people with historically designated buildings. They are restricted from fully realizing the value of their land, yet would have to still pay taxes on the value of it as demand created by people who can build modern structures. Not an all too insignificant problem in Philadelphia.
I'm sorry, but that seems ridiculous. How do you separate the sale price of land from the building? When someone goes to buy a house they don't go "the price of the house was right, but we walked because they were asking too much for the land." And if you are taxing based on land, what then stops people from selling the land for $1 and the structure for 100% of the value?Were this discussion taking place in New York City (where Henry George ran for mayor in 1888 on a single-tax platform, btw), we wouldn't need to "infer" the value of vacant land, for most real estate transactions there involve two sales: the sale of the building and the sale of the ground beneath it (what is called the "fee" in industry parlance). The value of empty lots in a given area, however, can in all likelihood be used to infer the value of improved lots around it, just as sales of improved properties in an area often cause the assessed value of similar nearby properties that have not changed hands recently to rise as well.
So, instead of him being taxed similar to other 1 story buildings in the neighborhood, he is being taxed at the level of 3 story condos + retail.
And yes the redevelop is "penalized" for the redevelopment, but he is also creating a more valuable asset by choice. He determined he can make money in that category. The one story guy is now paying more taxes because of the actions of another individual. He is essentially being taxed on someone else's labor and capital.
1) Except most land owners aren't speculating. The land is currently developed for use.The "penalty" hits the landowner who is just sitting on the land, waiting for IT to rise to the price he wants while others build around it. A higher tax on land alone would likely push that landowner to either build or sell.
2) Either build, sell or have the City take it over because it currently isn't that profitable to build. Let's take the argument ad absurdum. What would happen to a random, privately owned, vacant lot in Strawberry Mansion if you made the property tax on it $10,000 a year? Do you think the owner would:
a) Start looking at plans to build
b) Pay the tax
c) Be able to find someone else who would buy it
d) Not pay and let the City take it?
I'd go for option D. We have that now situation now in many parts of the City. Another false assumption is that all the vacant land in Philly is vacant simply because a bunch of landowners are waiting for a windfall.
I understand that. I don't agree with what would take place to do that. I don't understand how you can assess land separate from the building without tax appraisers arbitrarily determining the value in areas where there isn't a glut of vacant land changing hands. I don't think it is fair that non-comparable properties have to pay equal amounts.The point of a single-tax regime is to tax only "unearned" income, that is, income that is not the product of applied labor or capital invested in some productive activity.
Except plenty of areas in Philly don't have enough vacant land turnover to objectively assess the value of land for taxation.The reason for the focus on vacant land is because it is the benchmark for determining land values in an area. If demand for land in an area rises, so will the value of the vacant lot, and that lot's value can be used to infer the land portion of the value of adjacent properties, just as the value of an improved property that has not changed hands in a while is often inferred from the sales prices of similar properties in an area.
I see my original reply got posted before my housemate's router went squirrelly again. I'm leaving this up anyway because it contains an additional parallel for understanding what a land tax would and would not do.
The idea of taxing land only is based on very clear principles, which MarketStEl lays out very clearly. The idea of also taxing the improvements based on size or "similarity" or whatever method you seem to be advocating, rather confusedly, is not based on a clear, simple logical economic principle.
It is VERY clear that taxing improvements discourages improvement and encourages speculation. The land tax is conceived to counter that dynamic. This is clear and simple. That's what I mean by something being based on a principle.
You seem viscerally, personally incapable of describing a simple, economically sound principle for the all-in property value tax. This makes sense, I suppose, albeit indirectly, because there really is no sound economic basis for the method you advocate. The only simple argument you come up with is "this is how it's done and it's not going to change and it's not up for debate". But then you go on to debate it. I think you are confused about it. And I think it must irritate you personally to imagine that someone with a more valuable house than you on an identically valued piece of land would warrant an equal tax.
You also go on in detail to argue that it is impossible to separate land value from the structure built on it. This is complete, utter, and total nonsense. Any qualified economist could tell you this. There is so much data available - thousands of parcel sales across most jurisdictions and millions of parcels across the country, ensuring far beyond sufficiently sized sample sizes - for regression analysis that could take into account almost any conceivable value-related variable - date of sale, location, acreage, building square footage, condition, structure type, use, zoning, jurisdiction, environmental factors, etc. - and very accurately discern land value from improvement value over time. To suggest otherwise is silly.
A rational basis for taxing the improvements on land is that unimproved land does not cause a use of city services to nearly the extent that improved land does. That vacant land does not have a building to protect from fire, a business/residence to protect from breakin, residents to protect from crime, children to educate, etc. Of course, these costes are not necessarily directly related to the value of the improvements, either. Overall, $500k mansion and its residents probably burdens the city services LESS than a $50k "affordable" house.
Also, in this debate keep in mind it is not all or nothing, vacant lot or fully developed to its highest use. The land only tax discourages not only speculating with undeveloped or dilapidated land, it also discourages underutilization of the land such as a single family where there could be apartments.
you don't need land sales alone to determine land value. a large enough sample size of property sales, with or without buildings on them, will be sufficient to accurately estimate land vs. improvement value in a given area. the math is routine and is done all the time, perhaps you are just unaware of it.
assuming that one can estimate land value separate from improvement value (which one can), then perhaps you can concede that a land tax might work better than the typical property tax.
Last edited by Cro Burnham; 12-27-2012 at 04:38 AM.
I used New York as an example because property sales in that city ARE routinely split into their two separate components: buildings and land. The land sale is referred to as the "fee" - which, I suspect, is where the term "fee simple" to describe the other type of property sale where the two are bundled together comes from.
Cro Burnham explains the method for determining the land value separate from the value of improvements.
sharkey: the beauty of the system is that while it does discourage underutilization of the land, if a landowner with an underutilized parcel can manage the land taxes on the property as it is, he or she need no more abandon than improve it, for the improvements do not increase the value of the land itself - the taxes go up only if that goes up. Large-scale improvements, for instance, replacing a block of attached single-family rowhouses with a block of 12-story apartment buildings, will likely have an effect on land values, for developers will bid up the price of the multiple parcels they will need to assemble to make those apartment houses possible, but replacing a single old 2-story rowhouse with a new 3-story one is not likely to have that effect, for no more land is needed to make the improvement.
Sandy Smith, Wanderer in Germantown, Philadelphia
Editor-in-Chief, Philly Living Blog - but all opinions expressed here are mine and mine alone.
""Jazz and blogging are both intimate, improvisational, and individual -- but also inherently collective. And the audience talks over both." --Andrew Sullivan, "Why I Blog," The Atlantic, November 2008
Under AVI, property owners will benefit from a simple, clear formula. They will receive the market value of their property in mid-February. Then, by simply multiplying that assessment by the tax rate, they will know what their tax bill will be.
At this point, it is simply too early to tell what the 2014 tax rate will be set at, though we know it will be much lower than the current tax rate. Our administration will work with City Council to set a new, much lower tax rate sometime this spring. That rate is what we will use in connection with the new assessments - and anything prior to that is simply speculation. For that reason, we would ask that everyone resist the urge to wildly guess at this point in time.
Some property owners will ultimately experience an increase, as their tax bill will, for the first time, reflect the actual market value of their property. Others will see very little change, and still more property owners will see their taxes lower from the current level to one that is reflective of the true value of their home. But our plan is to collect the same amount of tax revenue under the new AVI system that we will collect during Fiscal Year 2013.
Again, please don't calculate your 2014 property taxes with the current tax rate used on the 2013 tax bills many of you have already received. As a part of the system overhaul, your new property taxes will be calculated using a new tax rate that will be set in late spring 2013.
Now, being transparent does not mean that the process is painless. However, I will work shoulder to shoulder with City Council to put in place relief measures to alleviate some of the impact for those who will see their property taxes go up. We truly are in this together. ---> (Like a worm in a rotten Apple) <----
Nutter and City Council to bring Big Tax Hikes to The City
Propaganda and Rhetoric from Mayor Mike Nutter as he continues his huge Tax Increases to Local Philly Residents.
I am a pissed off Old Dinosaur.
[QUOTE=MarketStEl;559810]I used New York as an example because property sales in that city ARE routinely split into their two separate components: buildings and land. The land sale is referred to as the "fee" - which, I suspect, is where the term "fee simple" to describe the other type of property sale where the two are bundled together comes from.
Cro Burnham explains the method for determining the land value separate from the value of improvements.
sharkey: the beauty of the system is that while it does discourage underutilization of the land, if a landowner with an underutilized parcel can manage the land taxes on the property as it is, he or she need no more abandon than improve it, for the improvements do not increase the value of the land itself - the taxes go up only if that goes up. Large-scale improvements, for instance, replacing a block of attached single-family rowhouses with a block of 12-story apartment buildings, will likely have an effect on land values, for developers will bid up the price of the multiple parcels they will need to assemble to make those apartment houses possible, but replacing a single old 2-story rowhouse with a new 3-story one is not likely to have that effect, for no more land is needed to make the improvement.[/QUOTE
I disagree that replacing a dilapidated 2-story single family residence (SFR) with a new 3-story SFR would not have an effect on the value of the land of neighboring properties. I believe that is what you are describing above, right. Any improvement in the neighborhood is going to make the land in that neighborhood more valuable, so if the neighbors on either side build newer, better structures or renovate, the value of all nearbye parcels would increase. There would also be an incrimental effect if the property owner himself renovated---albeit indirectly. The owner renovates/rebuilds, doing so improves the neighborhood, which increases land values, which raises his taxes along with everyone else's (granted, less of an effect than the current system which directly considers improvements in setting tax assessments.)
Land value alone tax sounds common sense. I'm decamping and writing a book which will scare people across the nation to NOT move here. Philadelphia City Planning and Zoning and City Council and the NW political cronyism , especially EMAN, WMAN, Mt Airy USA , 9th Ward Democratic Committee dug up a contaminated site next to my house in illegal manner and have displaced me form my home for years form haz mat dangers and many hate crimes designed to cover up their crimes. Plus the promised all of East Sydney Street No taxes because the new project was getting the 10 years tax abatement and they totally shafted the neighbors, making life miserable with years of dust and drunk construction crew. Put me in hospital several times and hid the contamination problem from the neighbors. Not a single person ever helped me. That is who Philadelphians are. It was so simple to help me right at the start in 2006 and the politicians and leaders of the community attacked me instead , committing crime after crime against me. What they did is an inverse taking. The city made a decision that cause my home to be unlivable and put me in hospital and launched years of hate crimes and civil rights violations even up to today. I've been displaced for years. Not one person ever did anything to help and allowed more and more crimes and physical, mental and property harm. Harm to family. This governing body and NW coalition has nearly killed me more than once to hide their crimes. I wanted to be a new Philadelphia and I wanted to save the city from being criminal and stop a project that went bankrupt and the revived project still has some serious problems and caused another haz mat evacuation. Philadelphia politics and community groups in the NW will kill you for greed and never try to help their neighbors unless you are in the crony circle.
I'm sure your book will be a masterpiece of literature.
Here are my problems with a land tax. In order for a land tax to be accurately assessed many assumptions need to be made.
The first one is that all land will and should be developed to the maximally productive use that zoning allows. Second is that the value of the land is based off of the most recent maximally productive use and the use and equal production can be repeated infinitely until zoning is maxed out.
What I mean by this is that in order to value the land the first thing that determines value is the zoning. This sets the standard extraordinary high because of the relative scarcity of vacant land in Philadelphia. For instance in a Super C-5X zone every lot is now going to be taxed at as if it is occupied by a 1500 FAR building with multiple levels of underground parking. In a residential zone you will be taxed as if you house was built to the maximum allowed or to the most recent sale. Because of the scarcity of vacant land when selling you will get a disproportionately high number of vacant land selling for the maximally productive use given unreal constants.
I think it would be like changing income taxes so that you pay based on your occupation and the highest earner in your neighbor with that same occupation is what your income tax liability is based off of. The set income rate is 15% and accountants living in Fishtown pay income tax not based off of what they earn but the salary of the highest paid accountant that lives in Fishtown. If you are not the highest paid you have an incentive to make more money. I see a land tax in the same way.
Last edited by Jelly Roll; 01-02-2013 at 07:35 PM.
Perhaps I am not understanding you correctly, but I think you are making things overly complex-sounding.
Because there is such a massive sample size, property sales data can be analyzed statistically to distinguish land value from improvement value in a given geographic area. Statistical analysis enables a reasonably accurate market value determination to be made that considers the impact of multiple relevant factors affecting the value of a property: land area, building area, zoning designation, environmental conditions, etc. In other words, if one has sample of, say, 2000 property sales in some given geographic region over some defined period of time, one can take the sale values and estimate with a good degree of accuracy the sale value as function of land area, building area, zoning, etc. The portion of the sale value attributable to land alone will present itself from these calculations. The math is sophisticated but routine, and though I am not a statistics expert, I know enough to know that this is done regularly by economists and analysts of various types. It is very standard.
So accurate assessment is not as complex as you seem to make out. An assessor need not make the assumptions you describe. Existing data will tell the assessor how the market values the land, regardless of such notions as "maximally productive use". An artificial (and, by the way, incorrect) calculation of value based on "maximally productive use" assumptions need not be made by an assessor.
Regardless of the assessment methodology, your general concern seems to be that property owners with less economically productive uses on potentially valuable land will be unfairly taxed at high rates and forced to sell or replace the existing use with a more productive one.
You cited the example of a (presumably low density) residential use in an area with a new very liberal, high density commercial zoning designation.
I think this is a bit of a "straw man": a municipality is unlikely to impose a high density development zoning regime in an area of primarily low density residences, unless the municipality has a major policy reason for doing so (e.g., a major targeted redevelopment initiative).
If the municipality was undertaking some major transformational initiative, then a land tax is exactly what would be needed to encourage existing owners of underutilized properties to sell (to avoid high tax on an unproductive property) or redevelop (to increase production to a level necessary to justify the land tax).
But if zoning is kept in line with the predominant historical use of a neighborhood, the scenario you describe would not arise.
obviously, similarly zoned land in different neighborhoods has different values.
as to your question, "why should the owners of the Comcast building pay the same rate per sf of land as every other property owner [in the immediate vicinity] that has same zoning" . . . it is a legitimate question. But it is equally legitimate to ask "why should the owners of the Comcast building pay a different rate per sf of land as every other nearby property owner that has same zoning?"
there is no "fairness" issue here: a bigger or more valuable building is not somehow inherently more deserving of higher taxes. if anything, one could easily argue the contrary: that a higher density use more efficiently utilizes public infrastructure and services (streets, transit, utilities, police patrols, sanitation collections, etc.*) per capita.
it depends on what you think the policy objectives should be. a land tax will certainly encourage improvement and denser development more than an all-in property tax. the standard all-in property tax will encourage lower density use and inhibit development.
so i suppose one's preference of tax structure depends on one's preferred vision for the future: development vs. status quo and population dispersion.
* not to mention more efficient use of one of the most precious of inherently "public" resources: land. regardless of what western philosophy preaches about private property, unimproved land and belongs equally to all human beings. so efficient private use of it is a fundamental public benefit.