Land > Property?

[bahua]

I know that I have mentioned it at almost every opportunity, but I have never made a specific topic about it. Does anyone agree, disagree with the idea of forsaking property tax(at least), in favor of a municipal tax on land value instead? I could write a long attempt to explain it, but I think the regulars on this board are familiar enough to have an opinion on it.

Would it work?

Would it turn the city around?

Would it make Kansas City the world-class city we all want it to be?

I think so, but what do you think?

[tat2kc]

Could this be done locally, or would it require state approval?

[mean]

I could write a long attempt to explain it, but I think the regulars on this board are familiar enough to have an opinion on it.

I am only peripherally familar with the work of Henry George, et al, and I think they (the land tax crowd) are spot on in almost everything I've read. However, I think there is a lot of prejudice and misconception out there.

A short 'intro to land tax philosophy' might be helpful.

[KCPowercat]

yeah we know your agenda but I've never seen anything really about it.

[bahua]

I wish I had read this a couple of hours before bedtime...:/


Expect a lengthy explanation tonight.

[bahua]

Okay, that was a long sleep, and it'll probably screw up my weekend.

Land tax, at its simplest, is a tax that is drawn from the value of a parcel of land, upon which someone may or may not have property(a house, a business, a park, a playground, a hospital, a fire station, whatever), collected at regular intervals(monthly or annually, for example). If the owner of the property on that piece of land decides to improve his/her property, their hard work has a dramatic effect on the selling value of the property, and only a marginal effect on the value of the land. The taxes they pay might go up, but not in the amount that they would under a property/real estate tax condition.

Because of this, People aren't discouraged from making improvements to their property. Land value increases with the overall value and viability of a neighborhood, and not from the increase in property value on a single piece of land. So, under a land tax scheme, as a neighborhood improves, the amount paid in taxes does go up, but much more slowly that the rate at which the neighborhood becomes healthy and wealthy. This ensures that everyone is capable of paying their taxes easily.

The overall effect that a land tax would have is that blighted neighborhoods, which are now full of properties mostly owned by people who don't live there, and have the prospect of higher taxes to go with the idea of improving any of the property they own, improve. The property owners(now often called "slum landlords"), under the property tax system, have no reason to do anything in the way of maintenance to their properties, except keep them just a hair above condemnation status. In a land tax system, they can fix the elevator, repair the faulty wiring, and re-cement the stairs, all without their tax liability increasing.

In addition, businesses in these blighted areas can make capital investments in their business, making vast improvements to their property, without the prospect of higher tax liability. The land tax model not only discourages businesses from being spendthrifts, it encourages them to make improvements, and increase their value. More valuable businesses equal more and better paying jobs for the people in the neighborhood, which in turn, causes the people in the neighborhood to grow wealthier, and start owning their homes instead of renting from someone, not to mention the fact that people with money spend it, on new cars, college educations, mortgages, computers, and paddle-ball games.

Now we come to homeowners. They, just like rental property and business owners, have every reason to make their home as valuable as possible because it will increase the selling value of the home, and it will beautify it, making it a more pleasant place to live. Under this system, neighborhoods turn themselves around. Crime and poverty are reduced to eliminated.

How does this translate to suburban land? It has the same effect, but suburban land isn't worth as much as urban land. It's because of this that businesses like the big box stores operate mostly in suburban places. Land is cheap, so they build properties that match it. Under a land tax, the big box stores get priced out of urban places outright, and they have a hard enough time in suburban places, as they are suddenly accountable for operating single businesses that occupy vast swaths of land. Their taxes are much higher than suburban homes, because of the amount of land they occupy. Their business models don't work in a land tax scheme. Land tax encourages businesses to make good, profitable use of the land they occupy, and big box stores simply do not. Because of this, they are unable to turn a profit in the face of their tax liability, and go out of business, never to return.

Back in the city, things are looking vertical. The land value gets higher and higher, the closer you get to the central business district, where the land is so expensive, the big buildings are big vertically, not horizontally. This magnifies their profitability, and grouped with a bunch of other tall buildings, the land value. Downtown becomes the place to be, and where the greatest concentrations of wealth are. Outside the ever-expanding downtown, the neighborhoods, wealthy and vital, are also a bit choked for space, and as a result, public transportation is the only viable way to get around.

Meanwhile, the city's coffers are overflowing with tax revenue, and other taxes that punish people for doing things that help the city(working, buying things) are repealed, as they just don't seem to bring in the kind of money that the land tax does. Kaboom! With no city income tax or sales tax, employment and commerce both explode, and the economic engine adds a few horsepower.

This is Kansas City's future, but only if land tax is adopted, in lieu of the incumbent property tax.

[eliphar17]

Damn you make it sound amazing...

I'm sure you are exaggerating at least a little about the effects, but it seems the basic theory is very intact. I would vote for such a change if I could (I'm only 17).

[mean]

The principle seems reasonable. I can see how it would encourage verticaliy, too. Clever.

But I have a couple questions.

How can the city expect to make so much more from a land tax? I guess it depends on how much the tax is, but landowners will simply pass the tax along to their tenants. We'll all pay the piper in the form of increased rent and higher retail prices, except those on worthless land. It seems like everyone living above a certain standard will have to pay significantly more (directly or indirectly through rent / inflation) in taxes in order to drastically increase the city's revenue, especially since we'll have to cover the working poor's current share. I fear this could put folks me right out into the suburbs.

How can we get a land tax, which is even "harder" on the rich than the current system, passed -- or even considered -- when the very people who must pass such legislation are those (and are close buddies with those) who would suffer the heaviest tax burden? This is not how to get big campaign donations. Indeed, the path to powerful friends is strewn with tax abatements.

[bahua]

One effect of it, it's true, is that people with low income are naturally pushed out to the periphery, where land is cheap. That's how cities were up until a hundred year ago, or so.

I will use an example to illustrate how the system wouldn't hurt people as much as our current system does. Let's say that I own a building at 31st and Cleveland that's worth $300,000. It's not a very good neighborhood. The surroundings could be best described as urban blight. Empty lots and buildings. A payday loan/pawn shop is down the street, next to a tavern with steel bars on the windows. The area is alive with the sound of sirens and screeching tires at night.

So, the only time I ever really go there is to collect rent, or to make the necessary repairs to the building that the city/state requires me to make. There are 18 one-bedroom units in the building, each of which pays me $300 a month in rent. With an(ideal) income of $5400, I am able to pay $1500 a month in mortgage, $300 in taxes, and $1500 in upkeep, damages, repair, insurance, and security, for a total profit to me of $2100(which later gets taxed as income) per month. That's my bottom line, and, of course, it fluctuates from month to month. That's a nice little chunk for me, for providing a really crappy housing opportunity to relatively poor people.

Let's say I decide to rewire the building, which winds up costing me $5000(on the low end, I'd guess), and it raises the assessment of the building from $300,000 to $340,000. My taxes just went from $3600 on the year to $4000. So, in addition to the expense of rewiring the building, I am also paying more in taxes. So, being in a position of debt, I raise rent, and pass the taxes on to the renters, which usually doesn't work out, because people will leave, boycott the payment, or maybe vandalize the building, all of which just cost me more. With all this in mind, there is no reason to rewire the building, in the interest of improving life for the tenants, or raising the property's value. The best idea, for my bottom line, is just to do the bare minimum.

Along comes the land tax passage, in a test area, which happens to include my building. The property taxes I was paying are gone, and instead, I pay $500 a year for the land I am using. I just increased my bottom line, and if I want to rewire the building, my taxes aren't going up.

Five years later, I have made numerous improvements to the building, and am now drawing $800 a month from each unit, and the building is worth $950,000. The neighborhood has changed too. There's a hopping nightlife over near the corner of 31st and Indiana, a new grocery store across the street, and a half dozen 3 or 4-story office buildings within sight of the front door. There are laundromats, corner markets, music stores, bookstores, dry cleaners, and dive pubs within easy walking distance. I am now paying $2000 a year in land taxes, and so is everyone else in the neighborhood that occupies a comparable plot of land.

As a property owner, I would be considered one of the rich that this system would affect. But, as has been shown, I am paying less in taxes than I was before, making more money than I ever was, and my only responsibility, as taxes go, is to cover my expenses with the rent I collect, which is all too easy with this system. I charge more for the units, but that is simply because it's a nicer place to live, in what has become a great location. That isn't the renters getting screwed. That's capitalism. Also, they can afford it just fine, with the jobs they have in the newly successful neighborhood.

The thing about land tax is that is doesn't work against anyone or anything, except bad use of land. The folks who owned the properties in the area saw that it would behoove them to make their properties valuable, as they could only benefit from it. It's a tax that works with success, not against it.

Previously, the neighborhood having been basically worthless, was contributing next to nothing in property taxes. With almost every piece of land performing valuable functions, there's suddenly a revenue source now where there previously wasn't one.

As for you(mean) being chased out to the suburbs, that isn't necessarily true. There's nothing about the system that would pass you by. If you want to work in a hardware store, an auto shop, or try your hand at any of the numerous new bars, taverns, and theatres at making it as a local musician, you would have ample opportunity to create wealth for yourself that way.

But yes, the way that a city works, when it works, dictates that the land value houses people whose income/wealth match its value.


by the way, the numbers I used, while I can't imagine them being that far off, were 100% conjectural

[QueSi2Opie]

Along comes the land tax passage, in a test area

I wouldn't mind designating a test area for this type of tax (Historic Northeast for example). And if indeed it does work, give it a chance in other urban neighborhoods and business districts.

[bahua]

Ah, so you picked up on my smarmy little hint?

It would make sense to me for the whole city, but I think this would be a lot more palatable to voters and city council members alike, especially in areas that don't really contribute much, in the way of tax revenue, anyway.

[mean]

I like your example, but I'm still not 100% clear. Are you saying that the city's tax revenue will increase solely because bad neighborhoods will get better and more people will move in? If so, where will the people come from?

The theory behind neighborhood revitalization seems pretty solid, but I want to know what will happen to existing "good" neighborhoods, and neighborhoods in transition like Hyde Park. Especially the good neighborhoods of single-family homes, which would seem to become prohibitively expensive under this scheme, since land is a LOT more useful per sq ft as highrise apartment towers. Would homeowners in Coleman Highlands, for example, be subject to hefty taxation since their land is not being used optimally?

[bahua]

The land in Hyde Park isn't worth enough to necessitate anything like that yet, and with the current properties being houses, it's clearly a residential area, but the property values aren't due to exactly skyrocket under the new system, since the neighborhood is already doing well.

The result is that the city will make slightly less from the neighborhood than it currently does, with each owner paying slightly less in taxes. That's initial. The other side of the sword is that the people there, who currently pay a lot in taxes, are also generally wealthier than people in the surrounding areas. The new system would would raise their property values, because they are the sort of people, financially, to make improvements to their houses very readily.

But, if it does come to Hyde Park being surrounded by booming urbanity, then yes, it would become too expensive for the single-family houses to be there, unless they are inhabited by people who have the means and inclination to keep the houses that way. By holding on to their houses, they stand to make a lot of money from selling them, too.

But yeah, the scheme isn't great for preserving historical buildings, but that's not an inherent trait of the property tax system, either. The only difference here is that success is happening.

[mean]

Ok bahua, me and you, city council. Anyone else? If we can contest a majority of the seats, we'll actually be a threat they'll have to take seriously.

[bahua]

I think I'll have to wait until at least February(3 years residence) before I can seek any city office.

[phxcat]

I like the concept, but, like every other economic model, I think it may confuse economics with God. Communism only works properly if God is there to guide it- which is made difficult when you are, as a system, atheist. Capitalism only works correctly if God is guiding it- making sure that people actually make the best decissions for everyone, and that the economical decissions will always be the most humane. However, we know that if God were that involved in things, KU would never have gone to a final four, much less won a championship. I think that, however sound the land tax may be, it assumes that things will work out. If an arena is the right way to go, will it ever work under a land tax? And don't say that if it does not work with a land tax, it is because it is not a worthy project. What about schools? hospitals and parks?

My concern is that we would lose a lot of nice architecture if a land tax were to reach its full potential- and the value of that can't be measured in dollars and cents. What you need to do is move to KCK- try to set up a land tax zone inside 635. They may be more likely to embrace something like that, since they need to get something to work now, in the short term. There is also less architecture that would be put at risk there. The short term effects may not be good in KCMO, and they may not want to take the risk- especially in this economic climate. In fact, I'm sure they wouldn't- they don;t like risks.

[bahua]

I wholly disagree. Capitalism is not immoral, and further requires no divine influence to be carried out successfully. Where bad things happen is when bodies(governments) try to impede and control the system. However, that is neither here nor there. The same could be argued for or against any system, except communism and socialism, which quash creativity, innovation, and freedom.

I agree that there is a lot of nice architecture in Kansas City, and if people care enough about it, it will either be made successful, or preserved. In any case, I personally would prefer economic prosperity(which is inherently a moral positive) along with the unfortunate loss of a few architecturally significant buildings, to what we currently have: a city with a few architecturally significant buildings that few people want to live in, including many of its residents.

Arenas, hospitals, schools, ballparks, police stations, fire depots, parks and zoos are all civic improvements, and would follow the prosperity, regardless of the cost of build their buildings. Every city in America has all these things in high-density areas, and it isn't because anyone is "biting the bullet," and it certainly isn't because God said so. it's because they are necessary, and their financiers and benefactors make do, to ensure their existence.

Out of curiosity, why do you say KCK inside 635, which is often described as the "poverty border?" You don't seem to think it would work at all, and would rather try it out on a city you don't particularly care about. I have no problem with KCK becoming exceptionally successful, but it sure would be embarassing for KCMO.

[phxcat]

Capitalism isn't inheritantly immoral, but it isn;t inheritantly moral either. It is what it is, and unfettered capitalism wouldn't be any more successful than completely fettered socialism, except that you would end up with most of the wealth in the hands of a small minority.

I do care greatly about KCK. I am a Kansan, and I have worked in the KCK school district, so I know the city pretty well. The reason I give KCK as a possible laboratory is that, to be honest, I would love to see KCK become successful, inside 635. I would like to see KC become a place with two vibrant urban centers. Also, when it comes to issues like the arena, I think the competition between the two cities would make it more likely that we got a quality arena built.

Putting by bias aside, there are two major reasons I suggest KCK. The first is that I think that you will have a hard time convincing the city leaders in KCMO to put current tax dollars at risk by embracing a new system. This is why it would need to be a special tax district used as a laboratory. Actually, I meant to ask- has this been tried anywhere in the US recently? The second is that KCK does not have the businesses and architecture that KCMO has. They would not be risking as much by trying it, and would potentially have more to gain. I just think that when you are looking at things realisticly, the chances of KCMO going for something that revolutionary is remote. The chances of convincing KCK is much better. If KCK were to do it successfully, then it would be much easier to take the results, go to KCMO and say "look what happened in Kansas!" The reason I say inside 635 is that most of the major large land area facilities are outside 635. I would like to see if the Plaza Azteca can save Indian Springs- and you know they aren't going to do anything to jeopardize the Speedaway district.

[mean]

I just think that when you are looking at things realisticly, the chances of KCMO going for something that revolutionary is remote.

If we do the research, get the numbers, and determine beyond reasonable doubt that this approach will work, screw what the current elected officials think. If this land tax idea is all it's cracked up to be, I have no qualms about attempting to take control of city hall.

[phxcat]

By force?



A question I have is, are there numbers? Has this been tried in a comparable situation? Has it been tried at all? We may be in the position of creating the numbers now.