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A Modest House Goes For $1.1 Million

That $1.1 million isn't for the house. It is for the location.

Absolutely. The buyer will most likely tear it down and build a bigger and better one on the same property.

I saw a building lot for sale near Pismo Beach, CA once for over 3 mil. No house, just a lot right on the ocean and in a neighborhood of multi million dollar houses, mostly vacation homes.

It must be nice to be among the 1%. I wish I had bought a house in Palo Alto years ago, or better yet, several.
 
You don't have to look to hard to find appartments in Manhattan of similar proportions (~1100 sq/ft, 2 bedroom, 1 or 2 bath) that go for two to three times that.

And you don't even get a postage stamp sized lot in the bargain on which to set up you BBQ grill, hot tub, and lounge chairs and chill outdoors.
 
Those exist? My uncle lives in Manhattan. His parking garage cost more money than my college apartment (in Berkeley) cost.

We took a GrayLine tour of Lower, Midtown, and Upper Manhattan a few years ago. The tour guide made a point of showing us a garage below a townhome in Midtown. That was the only one we saw. So, yeah, they do exist. :lol:
 
We took a GrayLine tour of Lower, Midtown, and Upper Manhattan a few years ago. The tour guide made a point of showing us a garage below a townhome in Midtown. That was the only one we saw. So, yeah, they do exist. :lol:

Hah. Yeah, my father's family is from Manhattan, and I have tons of friends there (mostly theatre people), so I've been there a bunch of times. I don't think I've ever seen a garage. It'd be like spotting a giraffe on the plains of South Dakota. I can see why the tour guide would point it out. ;)
 
I do like how the recent posts, this and the "Tax wealth the new Battleground" are basically just people seeing other people with money, and devising ways to take it from them. Really Geoist, at some level you have to know that's just naughty.

I have not read the other thread, but you should know by now that I am not opposed to wealth. I believe that what you earn through your work belongs to you (hence I oppose most other taxes). If wanting to reform tax policy is naughty well then I'm naughty.

Geoist. Whoever invested in that property took all the risk. If you then wait until each of those investments that did well, to then swoop in and reap the rewards without having assumed that risk, you are cheating them, cheating the system.

I disagree. The system itself is flawed and I think I want it fixed, not cheated. Hold an empty piece of land and do nothing with it. Then watch as others build schools, hospitals, factories, parks, etc around it and watch the land values go up. He gains wealth without lifting a finger.



I would much rather see govt taxing unearned wealth rather than earned wealth. Don't you agree?

You would dramatically decrease real estate investment. The community would suffer, and you'd be claiming it was anyone but you who caused the issue.

On the contrary, communities would experience great economic wealth as landholders actually improve the land instead of speculating on it.

Risk gets factored in Geoist. Use a less biased analogy. If a person takes a contract job overseas in Iraq, they may know every well, as warned in writing, that there is a significant chance of death or injury, and that they may cause irreparable harm to their family and at the very least miss out on years with the family. They weigh the cost, vs the risk, and they make the call. Now let's say they did really well that year, $400K for a contract job that might pay $80K in the U.S. If we punished them for that after the fact, that would have let them take all the risk, and you'd get to reap the reward. If you told them before they went that they'd have to fork over much of it to you, they simply would not have gone. You'd have essentially, artificially, increased the price for anyone trying to get labor to Iraq, and you'd have cheated that individual out of a great paying job. Of course, you'd probably come in with a big contract firm with a government deal and provide it all, effectively having shut out all individuals from competing with you...that would be typical big government corruption yes?

Are you saying people would stop owning land?
 
Ok. And the "community" will still share in the property taxes collected.

The community recovers a small percent of the value it creates. But not nearly enough to discourage speculation which hurts economies.

Although, it's California, so what that means is debatable.

No argument here.
 
Seems to me with that price the community has benefiting quite nicely.

The landholder pockets most of it. The community reclaims a small percentage through current property taxes. And our system continues to encourage unproductive speculation. I don't really see the benefit. :shrug:
 
We tax individual work and products while we allow community-generated wealth to be enjoyed by a few.

On the other hand, if you guess wrong and the value of your land goes down, the government doesn't make up the difference.

Come to think of it, the same applies to owning stocks, gold, futures, practically anything. Should the government take the gamble out of owning property?
 
On the other hand, if you guess wrong and the value of your land goes down, the government doesn't make up the difference.

Under an LVT system, there would be no incentive to speculate. If you buy a piece of land then you improve upon it. No taxes added for your improvements.
 
Are you arguing for replacing the property tax with a LVT? Or are you implying a federal tax on top of the property tax which means a second tax on land value?
 
Are you arguing for replacing the property tax with a LVT? Or are you implying a federal tax on top of the property tax which means a second tax on land value?

I believe in replacing the two-tiered property taxes with land value taxes. Ideally, I believe LVT (and certain pigouvian taxes like those on pollution) should be the only taxes.
 
The landholder pockets most of it. The community reclaims a small percentage through current property taxes. And our system continues to encourage unproductive speculation. I don't really see the benefit. :shrug:

Really? Do you seriously want to go there?

Landholders don't pocket anything until they sell. Under the current system you pay property taxes yearly (and LVT). So if you have a property (home and the land) valued at $250,000, and a property tax rate of 1%. You'll be paying $2,500. Over 10 years that's $25,000 to the coffers and over 30 years that's $75,000, which is 30% of the property value.

With LVT it doesn't matter what you have on it. You pay a "flat rate". That's actually gonna be lower returns. Is it working in Altoona, PA who adopted out right LVT?

LVT was tried during the Reconstruction Era. It resulted in lower tax incomes and confiscation of land. Probably what you want. But cities in PA are hurting with land value plus improvement value system already. Case in point Harrisburg. Pittsburgh dropped the two tier system in 2001 and for good reason why should PNC pay the same as a middle class home owner in property taxes for the same amount of land? Home owner has 2 story home, PNC has a 26 story skyscraper..

The real truth of LVT.

I despise taxes on most things but I actually have no problem with property taxes based on improvements as it funds the basic functions of towns. You can levy me a 5% property tax and pay it without complaint. What you will find me complaining about is getting taxed at 5% on property I have that I don't develop because I use it for hunting or camping or fishing.
 
I believe in replacing the two-tiered property taxes with land value taxes. Ultimately, I believe LVT (and certain pigouvian taxes like those on pollution) should be the only taxes.

This may not be a bad idea when in contest with property taxes. However, do you think it is justifiable to effectively evict poorer landowners because civilization has sprung around them? Merely holding a house of high value does not necessary give one the disposable income to pay taxes on it. It seems that property taxes (and the LVT as I understand it) serve to segregate society by pushing lower income individuals into poorer neighborhoods.
 
I believe in replacing the two-tiered property taxes with land value taxes. Ideally, I believe LVT (and certain pigouvian taxes like those on pollution) should be the only taxes.

Have you ever lived in a pure LVT community? Say like Hyattsville, MD or Arden, DE? They are small town communities that rely on other towns for providing basic services.
 
I believe in replacing the two-tiered property taxes with land value taxes. Ideally, I believe LVT (and certain pigouvian taxes like those on pollution) should be the only taxes.

So LVT which forces people into cities then tax the population the people create in those cities? So you want an agrarian society?
 
This may not be a bad idea when in contest with property taxes. However, do you think it is justifiable to effectively evict poorer landowners because civilization has sprung around them? Merely holding a house of high value does not necessary give one the disposable income to pay taxes on it. It seems that property taxes (and the LVT as I understand it) serve to segregate society by pushing lower income individuals into poorer neighborhoods.

While I don't agree with some of George's ideas (as he wasn't too far from Austrian Economics) but LVT was one of his worse ideas.
 
Really? Do you seriously want to go there?

I hope I didn't offend the Austrian. ;)

Landholders don't pocket anything until they sell.

Not true. Landholders frequently rent out the land.

Under the current system you pay property taxes yearly (and LVT). So if you have a property (home and the land) valued at $250,000, and a property tax rate of 1%. You'll be paying $2,500. Over 10 years that's $25,000 to the coffers and over 30 years that's $75,000, which is 30% of the property value.

And as a fellow libertarian I ask: why should anyone have to pay a tax on a house or a commercial building that provides jobs?

With LVT it doesn't matter what you have on it. You pay a "flat rate".

And it shouldn't matter what is on that land. If I build a house why should I pay more in property taxes than my neighbor absentee landlord who merely speculates on the land?

That's actually gonna be lower returns.

I never met an Austrian concerned about a lack of govt revenue. Anyways, while tax on capital would decrease, tax on the site itself would increase for some areas. Even if revenue was overall less for the government, it would mean more money in the pockets of working citizens.


Oh how horrible! 72% of parcels got a cut! :lol:

And this:
Most of the "screaming" came from those with vacant lots, according to Baldner.


Sounds good to me.

LVT was tried during the Reconstruction Era. It resulted in lower tax incomes and confiscation of land.
Please provide sources.

But cities in PA are hurting with land value plus improvement value system already. Case in point Harrisburg.

Yes. Harrisburg:
[Harrisburg] twice won the top United States community honor as All-American City, along with the top state recognition from the state Chamber of Business and Industry as Outstanding Community in Pennsylvania, all because of Harrisburg's development initiatives and progress.

Mayor Stephen Reed of Harrisburg sent the following letter to Patrick Toomey, businessman, civic activist, and member of the Home Rule Commission of Allentown (10/5/94):

"The City of Harrisburg continues in the view that a land value taxation system, which places a much higher tax rate on land than on improvements, is an important incentive for the highest and best use of land in already developed communities, such as cities.

In our central business district, for example, our two-tiered tax rate policy has specifically encouraged vertical development, meaning highrise construction, as opposed to lowrise or horizontal development that seems to permeate suburban communities and which utilizes much more land than is necessary.

With over 90% of the property owners in the City of Harrisburg, the two-tiered tax rate system actually saves money over what would otherwise be a single tax system that is currently in use in nearly all municipalities in Pennsylvania.

We therefore continue to regard the two-tiered tax rate system as an important ingredient in our overall economic development activities.

I should note that the City of Harrisburg was considered the second most distressed in the United States twelve years ago under the Federal distress criteria. Since then, over $1.2 billion in new investment has occurred here, reversing nearly three decades of very serious previous decline. None of this happened by accident and a variety of economic development initiatives and policies were created and utilized. The two-rate system has been and continues to be one of the key local policies that has been factored into this initial economic success here."


Earth Rights Institute - Pennsylvania's Success with Local Property Tax Reform: The Split Rate Tax

Pittsburgh dropped the two tier system in 2001 and for good reason

Pittsburgh's LVT had helped it tremendously, especially through rough economic times:

Pittsburgh was highlighted in a Fortune magazine story (8/8/83) entitled "Higher Taxes that Promote Development." Research conducted by Fortune's real estate editor on the first four cities to go to the two-rate system independently verified that this approach does indeed encourage economic regeneration in the urban centers.

A recent study (Table 3) by University of Maryland economists, Wallace Oates and Robert Schwab, compared average annual building permit values in Pittsburgh and 14 other eastern cities during the decade before and the decade after Pittsburgh greatly expanded its two-rate tax. Pittsburgh had a 70.4% increase in building permits while the 15 city average decreased by 14.4% of building permits issued. These findings about Pittsburgh's far superior showing are especially remarkable when it is recalled that this city's traditional basic industry - steel - was undergoing a severe crisis throughout the latter decade.

A Wall Street Journal article (3/12/85) was entitled "It's the Land Tax, by George, That Sets Pennsylvania Apart."
Earth Rights Institute - Pennsylvania's Success with Local Property Tax Reform: The Split Rate Tax

But why would it be abandoned if it was so successful? A bit of history:

Undoing the graded tax

Support for taxing land values more than buildings remained so strong in the City of Pittsburgh that efforts to repeal the policy consistently failed.[32] many years, the chief city assessor was also the head of the Henry George Foundation of America, which championed LVT throughout North America [33]

In 1942, however, responsibility to assess land values was shifted to the county, where opposition to LVT was stronger and support weaker.[34] A provision of Pennsylvania law was added to the second-class county code requiring Allegheny County to assess the value of land and improvements separately. Although the law reflects preferred assessment practices anyhow, it was put in place to protect the city's LVT.

County assessors gradually came to ignore land values, keeping those the city assessor had put in place and putting subsequent changes onto building values whenever possible. 1980 assessments were a fairly accurate reflection of 1950 land values.

This meant that land values became relatively over-assessed in declining neighborhoods and under-assessed in advancing neighborhoods. However, the city's shifts to LVT in the 1980s were followed by substantial land-assessment reductions in Shadyside, the trendiest neighborhood in the city, and smaller reductions in Oakland and Squirrel Hill, the city's two most prosperous and politically prominent neighborhoods after Shadyside. This marks the point when county assessors crossed the line from neglect to overt malfeasance. Even so, home owners in the poorest neighborhoods still saved under LVT, and many in the richest neighborhoods paid more. Middle-income neighbourhoods saved the most.

However, opponents of LVT dominated the county board of assessors. They hired a private assessment firm, Sabre Systems, which assessed land values with such a terrible lack of uniformity that the city was forced to abandon the tax in 2001. Sabre Systems assessed lots with buildings on them six to ten times as high as identical, adjacent vacant lots. They did this only in Pittsburgh, even though there were three smaller cities in the county, Clairton, Duquesne and McKeesport, that also relied on LVT.

Wildly erratic land-value assessments forced Pittsburgh City Council to abandon LVT in 2001. The increased cost to home owners was partly offset by special exemptions, but this was done at the expense of renters and business properties, who have had to pay higher taxes into a shrinking budget. Many council members blamed the assessments and said the tax change was temporary. Only one council member blamed the LVT itself.

After losing a long series of court cases and appeals, the county is today finally addressing assessment irregularities under court order. The city controller and several city council members have expressed interest in returning to LVT if realistic land assessments are made because, if Pittsburgh is to be protected from the next recession, it must end these abuses and reinstate LVT before the next boom era.

Pittsburgh Never Crashes: Dan Sullivan: Saving Communities

why should PNC pay the same as a middle class home owner in property taxes for the same amount of land? Home owner has 2 story home, PNC has a 26 story skyscraper..

The tax rate isn't based on the amount of land but on the value of the land. Skyscrapers are located in cities where the land values are much higher than in suburbs with 2 story homes.


Ah yes, Mr. Hayllar. The unyielding crusader against the LVT. Already read this article a while back. His 'study' was seriously flawed.

A study by the Pennsylvania Economy League (Weir and Peters, 1986) alleged that a consensus of experts claimed land value tax did not aid development and hurt home owners in poor neighborhoods. However, this study was so tortuously contrived and so easily refuted that city council ignored it and continued shifting the tax burden to land values. Statements from development experts who had contradicted the PEL's desired conclusions were either twisted or ignored by the researchers. For example, former director of economic development Ed DeLuca had said land value tax did encourage development, but thought that further shifts would be necessary to have a sufficient effect. They claimed there was a consensus that the tax had no effect and that further shifts would also have no effect. Donald Stone, professor of economic development at Carnegie-Mellon University's School of Urban and Public Affairs said that interviewers responded to his positive comments about land value tax by changing the subject. Also, a check of the poor neighborhoods cited in the PEL study showed that most properties paying more were absentee-owned, and that owner occupants actually saved in those neighborhoods. A subsequent study by city finance director Ben Hayllar suffered from exactly the same failure to distinguish owner-occupied from absentee-owned properties. Owner-occupied properties in Hayllar's own sample also saved in poor districts where he alleged land value tax was punitive.
Pittsburgh Never Crashes: Dan Sullivan: Saving Communities


I despise taxes on most things but I actually have no problem with property taxes based on improvements as it funds the basic functions of towns.

The improvements themselves have a function: They improve the local economy. Why should a land speculator pay less than the man who builds a business and creates jobs?


What you will find me complaining about is getting taxed at 5% on property I have that I don't develop because I use it for hunting or camping or fishing.

Rural areas tend to have lower land values so what you would pay for your hunting/fishing land would be most likely far less than the owner of a plot in the middle of the city. Unless you plan on hunting in the city?
 
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That house is a POS. So. THey buy it for $1.1M and build a $2.2 McMansion on top of the property, which is probably the size of a postage stamp.
The $1.1 million is probably a $1.07 million piece of property with a house.

These days, the land value is quite often much more than what's built on it.
 
That $1.1 million isn't for the house. It is for the location.

Yep, I agree. It might be a $1.5 million piece of property devalued by the trash built on it!
 
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