Mike Jensvold asks about the Land Value Tax.
For folks who don't know about it, the Land Value Tax movement argues that we should assess property taxes based on solely the value of land and not on land plus the buildings on the land. Understand that there is no free lunch here - you have to raise the exact same amount of money under both systems - just the basis for calculating how much each individual pays would be different. Some of the LVT folks claim that this method of divvying up taxes will reduce taxes but it is not true. Without getting into an exhaustive discussion, one of the major arguments for the land value tax is the argument that Mr. Jensvold cites - that improvements to properties would not be penalized. Likewise, LVT proponents argue that open land would be taxed at a much higher rate under LVT than it is currently, reducing speculation and providing an incentive for the development of underutilized vacant land. Also, in theory, it is supposed to reduce the burden on the poor because the poor live on lower value land although in my mind this may not be true because that depends on how progressive your current tax system is. Although no major city in the United States has gone to a sole LVT system, Pittsburgh is probably closest. It had a system where land was essentially land carries a six to one weighting over property. Now we have three distinct desires with any tax system. a.. We want it to be easy to administer and easy to understand. b.. We want to decide whether we want everyone to pay the same or we want people who can afford to pay more to pay more. This usually comes out as talking about how progressive (the richer pay more) or regressive (the poor pay more) a tax is. c.. We want to further social goals. (i.e. mini-donuts are tax free while regular donuts are taxable, providing an incentive for people to buy more mini-donuts) Taking these one at a time, LVT is very hard to administer because almost no transactions involve just the sale of just land. Almost every sale involves land plus buildings so it is very hard to come up with comparable figures to see whether or not your own particular assessment is fair. This results in fights about how much of a sale actually was for land. This has been a huge issue in Pittsburgh, which (when I last read about it - I haven't kept up recently) is close to junking their system in part because of this. People fight saying that a smaller percentage of their total sale was for land while the assessor argues higher. They've proposed setting the value of land at a fixed percentage of sale (15%), but this ends up defeating the whole purpose of a system based on land by calculating value on both the land and property. But when you have no actual land sales to measure your system against, what else can you do? You can come down on one side or the other whether taxes should be progressive or everyone should pay the same. The property tax system is our oldest tax, dating back to when property was equivalent to wealth. Back then, it was a pretty progressive tax. But over time, with the advent of the wage system, property ownership has been come a less and less useful measure of wealth. The question is whether property or property + land is a better proxy for wealth. In reviewing the Pittsburgh case, there is a perception there that their system is a poorer proxy for wealth than property + land like we use here. I haven't looked at detailed studies on this but it seems intuitive. Now maybe you are on the end of everyone paying the same regardless of income and think that is good. But I come down on the side progressive taxes, because the value of a dollar to a person who doesn't have one is much higher than the value of a dollar to a millionaire and government needs to take that into account in its taxation system. The question about furthering social goals with the tax system is one that we could debate for a long time. Minnesota's tax system is complex because we are trying to encourage certain social goals. We believe that homeownership is one of the best ways of an individual building wealth so give a break for that. We don't want to burden those least able to pay so we provide a break to persons with disabilities. We want to encourage agriculture so we provide a break for that. Businesses are the center of the creation of wealth and so we tax them more. We could argue all day if these are good things or not but under a strict LVT, this goes away. Every person is treated the same and every usage is treated the same. So what is my quick read on LVT? There are substantive implementation issues, there is a question of whether you really end up with a more progressive tax system, and you lose the ability to further social goals. And there is no free lunch regardless of the system you use. Carol Becker Longfellow Future Member, Board of Estimate and Taxation Geek REMINDERS: 1. Be civil! Please read the NEW RULES at http://www.e-democracy.org/rules. If you think a member is in violation, contact the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. For state and national discussions see: http://e-democracy.org/discuss.html For external forums, see: http://e-democracy.org/mninteract ________________________________ Minneapolis Issues Forum - A Civil City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:mpls@mnforum.org Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
