Re: Land, Labour and Capital Taxation....

imouttahere_at_mac.com
Date: 01/04/05 

Date: 3 Jan 2005 22:20:38 -0800

royls@telus.net wrote:
> On 2 Jan 2005 14:15:53 -0800, imouttahere@mac.com wrote:
>
> >royls@telus.net wrote:
> >> On 1 Jan 2005 18:33:43 -0800, imouttahere@mac.com wrote:
> >>
> >> >I can see the LVT work wonderfully well for lease, commercial,
and
> >> >unimproved properties, but much less well for non-income
properties
> >> >since people understandably don't want to lose the current
stability
> >of
> >> >proprerty ownership.
> >>
> >> Tenants of private landlords do just fine (net of the extravagant
> >> subsidy to landownership, of course). Why not tenants of a public
> >> landlord?
> >
> >I'm coming from my personal experiences in Califonia, where in
mid-2000
> >there was simply not enough housing stock in the silicon valley,
> >causing rents to move up $100 or more a month.
>
> You can thank Proposition 13 for that. Lack of housing stock is
> rarely an issue where significant land rent is being recovered, but
is
> almost always an issue where it isn't.

yes, taxing improvements does make people not want to replace fully
amortized buildings. (I'm not up on residential tax stuff but I assume
buildings are like any other capital asset that depreciates).

> >> tenant of a private landlord, who is _already_ in a _worse_
situation
> >> than Old Widow Jones would be in after a shift to LVT??
> >
> >Those who can't or won't buy are seen as listless, profligate, and
> >unsuccessful.
>
> IOW, only landowners are real human beings who have rights and
deserve
> our regard and compassion, while non-landowners are vermin, or at
best
> untermenschen, who deserve no better than oppression, injustice and
> enslavement. OK. I kinda figured it'd be something like that.

No, it's just people judging others by their own experiences. 1/5 of
the population has no problem moving into a livable home, 1/5 can do it
with some saving, 1/5 wins the lottery or something and gets in,
leaving 2/5s still outside. This is to be expected, as we are all
bidding up prices on a relatively scarce commodity (at least in CA).
Winners and losers. Human nature does not hold much sympathy for the
losers, alas, and by the way the voting process works the winners
generally outvote the losers on local matters.

> >People are /supposed/ to sacrifice everything for a
> >house. It's the centerpiece of the American Dream.
>
> It shouldn't take a genius -- but apparently does -- to figure out
> whose dream that really is: the folks all those home buyers are
> sacrificing everything _to_.

Well, for the most part the theft has been made a LONG time ago and the
middle-class is dealing with itself. Exceptions exist were landholders
are holding land off the market like in Irvine and Valencia, but even
in growing enclaves new development can only be supported so fast. The
other major exception is buy-to-let of SFH. This is a great evil that
is almost akin to monopolizing the air supply.

> >Though if the affordability gap remains (median price vs median
income)
> >we will probably see new morgage products from the banking industry.
>
> Right. 20% of GDP in land rent is not enough unearned income to
> appease all the soulless, amoral greed robots who want to profit from
> the violation of others rights, so more and more unproductive debt
> must be created.

I think 40 years ago the 15 year mortgage was common. Makes sense,
again, as we are bidding up the land prices among ourselves, and once
the 40 or 50 year mortgage comes online home prices will rise some
more.

> >> >Zoning protections for residential areas should remain, which
> >lessens
> >> >the rationale for free-marketism on owner-occupied residential
> >> >properties.
> >>
> >> Not really.
> >
> >People don't want the 'progress' of redevelopment in their
> >neighborhoods.
>
> Unless they get to pocket the land rent increases themselves, of
> course...

No, they'd rather put development in someone else's neighborhood, or
leverage their existing property by renting it out and moving on up the
ladder to a better neighborhood.

> >NIMBYism is a 'market failure' of democracy itself.
>
> No, just of poorly designed institutions. NIMBYism comes from
private
> capture and retention of publicly created land rents. If people own
> only the depreciating improvements, they have much less reason to
care
> about future local land use decisions than if they own the
> appreciating land.

OK, very true as far as it goes, but Prop 13 and zoning is all
democratic stuff.

> As it stands, redevelopment transfers a large
> amount of land rent out of the pockets of the local resident-owners
> and into the pockets of the developers. If all the land rent went to
> the public, the developers would have little reason to disrupt
> existing land use patterns, and the resident owners little reason to
> oppose such redevelopment as occurred naturally.

Plus the added recompense that if development happpened to lower land
rents for some reason they'd be paying less ground-rent.

> >> >Watered-down split-rate regimes might be all we can or should do.
> >>
> >> Nonsense.
> >
> >It's not nonsense to the voting public who are quite happy with
> >long-term security of their homestead.
>
> They wouldn't be so happy if they understood the actual costs they
are
> bearing as a result.

I'd like to see a simulation of the LVT regime. What sort of recoveries
would actual neighborhoods be paying? I used to live in Santa Cruz,
where the median home price is over $500,000, and maybe half the
population is long-term sitting on $400,000 or so in equity.

For every $100,000 in land valuation, what's the tax per year?
Currently it's just over 1%.

Now, Santa Cruz could use some more medium-density building no doubt,
but the present residents like the current density fine thank you, and
really the existing transportation infrastructure can't support more
density anyway...

Basically every city within 15 miles of the ocean or 50 miles from a
major center is like this. Perhaps CCR should be tried on a /county/
basis first, though Prop-13 stands in the way of that I guess.

> >I don't see the problem of going after the low-hanging fruit of
leased
> >properties and unimproved land.
>
> Distortion. You'll just eliminate leases, further tightening supply,
> and stimulate wasteful "improvements" for tax purposes.

but what's the difference just excluding owner-occupied residential
property from the LVT?

> >Let following generations figure out
> >how to transition the rest.
>
> It's already been figured out.

How to have your cake (low,fixed property tax rates) and eat it too (no
capital gains taxes on home sales)?

Granted, the state is $10B/yr in the red, and its bond rating is
falling like a rock, so maybe some day people will begin waking up.

> >> >Plus coming from the ethical side there are more cans of worms
wrt
> >the
> >> >right to live in a given community. I don't think we're going to
be
> >> >able to convince anyone that the entire state or nation has an
equal
> >> >right to live in one's given community as the current residents.
> >>
> >> ?? Don't they _now_?? All they have to do is outbid the current
> >> landholders, exactly as under LVT.
> >
> >No, only if they can find a motivated seller in the current system.
>
> Garbage. "Motivated seller" is just real-estate-agent-speak. Even
> with private landowners, an owner who doesn't want to sell can often
> be motivated to move out of the place and rent to a tenant for the
> right price.

yes but this is voluntary. LVT will bring the free market to people's
very door repeatedly, if not 24/7.

> And under LVT, you'd most likely still have to find
> someone willing to sell the improvements, unlike the current
> situation.

That's an interesting point. In pure libertarian land, does the right
to ownership of housing capital weakly imply a right to keep one's
capital where it is? The redistributive version of the LVT solves half
of the problem by making those under the median valuation cash-positive
on the deal.

> >One
> >ad on TV of a family getting pushed out of their home onto the
street
> >by a fatcat speculator would kill the LVT initiative dead in
> >California.
>
> Well, if people are just automatically going to believe whichever
lies
> are the most evil and implausible, there's not much hope for
> democracy, is there?

Not when there's an element of truth in them. What /would/ happen to
Californians under the LVT, where 1/3 of the population is sitting on
hundreds of thousands of dollars in equity but only paying a 1% tax on
valuations not far from when they bought in, and probably most people
are land rich but cash poor and/or leveraged to the eyeballs.

These are real-world issues that need to be addressed.

> >> >Human brains just don't work like that.
> >>
> >> Some don't, anyway....
> >
> >You agree that there's enough homeowners bought into the system to
> >totally block any move to a floating tax regime on their residences?
>
> Certainly. The task is to show them how their own greed and
ignorance
> is shoveling their own money into the pockets of idle landowners.

I only see this shovelling occuring on leased properties, and
owner-occupied commercial properties to some great extent too.

> >> >Everybody always wants to be 'the
> >> >last person in'. I think a lot more work has to be done outlining
> >what
> >> >exactly LVT wants to do with residential housing.
> >>
> >> Like what?
> >
> >Do we want the free market to forceably raise the density of
existing
> >neighborhoods?
>
> Yes, we most certainly do in _some_ neighborhoods, as it would
improve
> efficiency of land use and permit enormous savings on infrastructure,
> and because ultimately, the alternative is something like China's
> one-child policy.

No, the alternative is the free market deciding there's enough people
in California and it's time to build elsewhere. There's plenty of open
land in this country, and we're only growing via foreign immigration
anyway. The relative changes in the electoral college each decade show
the internal immigration.

For the most part in California, everyone likes the density as and
where it is, and most built-up areas can't handle any more traffic
anyway.

Starting from scratch out in the sticks, LVT can maybe function as a
regulator on growth, but I think it's too late for California ... can't
get there from here.

> >This will be a strong dynamic of a totally laissez faire
> >application of the LVT, since obviously residential housing is very
> >inefficient ground-rent wise.
>
> No, it usually isn't, which is why private landlords usually _prefer_
> to own housing rather than commercial or industrial land.

By residential housing I meant single-family. I don't think
single-family can bring more ground-rent than condo or medium-density
apartment in areas with a housing shortage, since people are willing to
pay more for an extra bedroom than a garden or front lawn.

Though now that the job bubble crashed in the bay area single-family
does probably bring more rent than apartments, due to the relative
scarcities.

> >Will there be an exclusion for the below-median housing stock?
>
> I've suggested a uniform per-capita land rent rebate. Policy
measures
> should be based on assumptions of equality, not picking who gets the
> benefits.

What does this look like?

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