> Do you think that if there were no property taxes, all these speculators would suddenly decide to build things on the property?
I'm a bit confused by this. Do you mean to say if there were land taxes instead of building taxes? Assuming that is what you meant, I think realistically an lvt would be implemented by slowly changing tax rates over time. Large landowners would likely sell part of their portfolio to get the capital required to improve the most profitable lots. So there would be a gradual mix of selling and building.
So we're comparing "property taxes", which are on the value of the empty land + any improvements, against "land value taxes", which are just on the value of the empty land.
_naply asserted that one reason to favor LVT over property taxes is that property taxes discourage people from building on it; and gave "speculators" as an example. We didn't flesh out exactly what that meant, but I took it to mean people who bought some area of land which right now is close to worthless, in the hopes that in the future might be worth a lot more.
(One alleged example of this is in Detroit city proper: allegedly, people bought broken-down old houses near the city center for a song, but didn't actually repair the property; they were just hoping that in a couple of decades things might turn around -- based on the efforts of other people to make Detroit better, naturally -- at which point they could sell the land at a massive profit without having to invest anything themselves.)
At any rate, the argument is that such speculators would otherwise build something useful there, but had decided not to because then they'd be paying more property taxes.
I don't buy it: As long as whatever they built brought in more money than the property taxes, there's more money to be had from building than from not building. The hypothetical speculators in Detroit could certainly build a single-family dwelling and rent it out for 30 years, and extra property taxes would almost certainly be outweighed by the additional rental income.
But the value of speculation is that it's low-cost and low-effort, and low-income rental is distinctly neither. Why bother dealing with contractors and repairs and tenants and whatever before selling it for 20x what you bought it for, when you can just do absolutely nothing and get almost the same return?
Apologies if I'm not following entirely. I don't actually see where we disagree here. It sounds like we are both saying that speculation is undesirable, and that an LVT would decrease the reward and incentive of speculating. I suppose I do slightly disagree with the following though:
> At any rate, the argument is that such speculators would otherwise build something useful there, but had decided not to because then they'd be paying more property taxes....I don't buy it
Its very well researched that tax rates impact property values - so there are certainly marginal developers who are crunching the cost-benefit analyses here who would be swayed by the changes in the ROI(keep in mind, many of these developers are heavily loaded up with debt due to high land prices - meaning that banks need to manage their own risk and limit the amount of capital these developers can access). Even small changes in land/improvement tax rates have been shown to have an impact - a well-known change in boundaries in Denmark in 2007 provided excellent evidence of this[1]
> I don't buy it: As long as whatever they built brought in more money than the property taxes, there's more money to be had from building than from not building.
The lower the property tax - the lower "money brought in" needs to be for building to happen.
I'm a bit confused by this. Do you mean to say if there were land taxes instead of building taxes? Assuming that is what you meant, I think realistically an lvt would be implemented by slowly changing tax rates over time. Large landowners would likely sell part of their portfolio to get the capital required to improve the most profitable lots. So there would be a gradual mix of selling and building.